Group 1 - The Simply Good Foods Company (NASDAQ: SMPL) focuses on providing healthier snack options through well-known brands like Atkins and Quest [1] - Atkins is recognized for its low-carb lifestyle approach, while Quest offers a variety of protein-rich snacks [1] Group 2 - Grassroots Trading emphasizes objective and unbiased research, particularly targeting small- to mid-cap companies [1] - The company aims to identify overlooked investment opportunities and occasionally highlights potential in larger companies [1]

Financial Performance - Net sales increased to $341.3 million for the thirteen weeks ended November 30, 2024, compared to $308.7 million for the same period in 2023, representing a 10.4% increase in North America net sales [107]. - Gross profit rose by $15.4 million, or 13.3%, to $130.5 million, with a gross profit margin of 38.2%, up from 37.3% in the prior year [109]. - Net income for the thirteen weeks ended November 30, 2024, was $38.1 million, an increase of $2.6 million compared to $35.6 million in the prior year [114]. - Adjusted EBITDA increased by $8.1 million, or 13.1%, driven primarily by higher gross profit, reaching $70.1 million [115]. - EBITDA for the same period was $59.8 million, up 3.7% from $57.7 million year-over-year [118]. - Adjusted EBITDA increased to $70.1 million, compared to $62.0 million in the prior year, reflecting a growth of 12.5% [118]. - Income from operations increased by $2.8 million to $54.6 million for the thirteen weeks ended November 30, 2024, compared to $51.8 million in the prior year [138]. Expenses and Costs - Operating expenses increased by $12.6 million, or 19.8%, primarily due to higher general and administrative costs related to the OWYN Acquisition [110]. - Cost of goods sold increased by $17.2 million, or 8.9%, primarily due to higher sales volumes from the OWYN Acquisition [108]. - General and administrative expenses rose by 41.2%, largely due to integration costs associated with the OWYN Acquisition [116]. - Interest expense increased by $1.8 million due to incremental borrowing related to the OWYN Acquisition [111]. Acquisition Impact - The OWYN Acquisition contributed significantly to the overall sales growth and improved gross margins due to lower ingredient and packaging costs [101]. - The OWYN Acquisition was completed for approximately $281.9 million, funded through $250.0 million in incremental borrowings and cash on hand [133]. Cash Flow and Liquidity - Cash provided by operating activities decreased by $15.5 million to $32.0 million, primarily due to changes in working capital [138]. - The company had $121.8 million in cash as of November 30, 2024, indicating sufficient liquidity for operations and growth strategy for at least the next twelve months [120]. - The outstanding balance of the Term Facility was $350.0 million, with no principal payments required over the next twelve months [132]. - Net cash used in financing activities was $42.3 million, significantly higher than $13.1 million in the prior year, primarily due to principal payments on the Term Facility [140]. - The company did not repurchase any shares during the thirteen weeks ended November 30, 2024, with approximately $71.5 million remaining available under the stock repurchase program [136]. Future Outlook - The company expects continued growth in fiscal year 2025 driven by volume, advertising, marketing, and innovation strategies [101]. Market Risk - No material changes in market risk exposure during the thirteen-week period ended November 30, 2024 [143].

Financial Data and Key Metrics - The company issued its earnings release at approximately 7 a m Eastern Time, with the release and accompanying presentation available on the Investor section of the company's website [3] Business Line Data and Key Metrics - No specific data or metrics related to individual business lines were provided in the content Market Data and Key Metrics - No specific data or metrics related to individual markets were provided in the content Company Strategy and Industry Competition - No specific information on company strategy or industry competition was provided in the content Management Commentary on Operating Environment and Future Outlook - Management will make forward-looking statements during the call, which are subject to various risks and uncertainties that may cause actual results to differ materially [4] Other Important Information - The call is being webcast, and an archive of today's remarks will be available on the company's website [3] Q&A Session Summary - No specific questions or answers from the Q&A session were provided in the content

Financial Performance - Net sales increased by 10.6% to $341.3 million, driven by the OWYN acquisition[10, 26] - Gross margin was 38.2%, exceeding estimates[10] - Adjusted EBITDA grew by 13.1%[10] - Net income was $38.1 million, compared to $35.6 million in the previous year[10] Brand Performance - Total Simply Good Foods Q1 retail takeaway increased approximately 8%[9] - Quest Q1 retail takeaway increased 10%, with Snacks and Bars increasing about 19% and 1% respectively[11] - Atkins Q1 retail takeaway declined 4%, an improvement from the previous quarter's 5% decline[14] - OWYN's retail takeaway increased by 67%, with measured channels growing by 39% and unmeasured channels by 81%[17] Outlook and Strategy - The company reaffirms its fiscal year 2025 outlook, expecting net sales growth in the 4-6% range and Adjusted EBITDA growth slightly greater than the net sales increase[10] - The company anticipates fiscal year 2025 combined interest income and GAAP interest expense of approximately $23-25 million[32] - The company expects higher ingredient and packaging costs to pressure gross margin in fiscal year 2025[35]

Company Performance - Simply Good Foods reported quarterly earnings of $0.49 per share, exceeding the Zacks Consensus Estimate of $0.46 per share, and up from $0.43 per share a year ago, representing an earnings surprise of 6.52% [1] - The company posted revenues of $341.27 million for the quarter ended November 2024, which missed the Zacks Consensus Estimate by 1.95%, compared to $308.68 million in the same quarter last year [2] - Over the last four quarters, Simply Good Foods has surpassed consensus EPS estimates four times but has topped consensus revenue estimates only once [2] Stock Performance and Outlook - Simply Good Foods shares have declined approximately 5.7% since the beginning of the year, while the S&P 500 has gained 0.5% [3] - The company's earnings outlook is mixed, with current consensus EPS estimates at $0.41 for the coming quarter and $1.90 for the current fiscal year, with revenues expected to be $353.07 million and $1.46 billion respectively [7] Industry Context - The Food - Confectionery industry, to which Simply Good Foods belongs, is currently ranked in the bottom 4% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Simply Good Foods' stock performance [5]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) This section summarizes the company's strong Q1 FY2025 financial performance, management insights, and future outlook [First Quarter Fiscal 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%20Fiscal%202025%20Financial%20Highlights) Simply Good Foods reported strong Q1 FY2025 results, with net sales and Adjusted EBITDA significantly increasing due to the OWYN acquisition | Financial Metric | Q1 FY2025 | Q1 FY2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $341.3 million | $308.7 million | +10.6% | | Net Income | $38.1 million | $35.6 million | +7.0% | | Earnings per Diluted Share (EPS) | $0.38 | $0.35 | +8.6% | | Adjusted Diluted EPS | $0.49 | $0.43 | +14.0% | | Adjusted EBITDA | $70.1 million | $62.0 million | +13.1% | - The acquisition of Only What You Need, Inc ("OWYN") on June 13, 2024, is a primary driver of the reported net sales growth, as its results are not included in the prior year's comparative period[1](index=1&type=chunk)[2](index=2&type=chunk)[3](index=3&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO Geoff Tanner highlighted strong Q1 performance, driven by consumer demand for high-protein, low-sugar snacks and strong brand growth - Total retail takeaway in U.S channels increased by about **8%**, driven by significant growth from Quest (**+10%**) and OWYN (**+67%**), while Atkins' takeaway declined by about **4%**[3](index=3&type=chunk) - The CEO emphasized the "mainstreaming" of nutritional snacking as a key tailwind for the company's growth[2](index=2&type=chunk) - Capacity for Quest chips has been optimized, which is expected to support increased merchandising, programming, and distribution going forward[2](index=2&type=chunk) [Fiscal Year 2025 Outlook](index=1&type=section&id=Fiscal%20Year%202025%20Outlook) The company reaffirmed its FY2025 guidance, anticipating continued growth in net sales and Adjusted EBITDA, despite a 53rd week headwind | Metric | FY 2025 Outlook | | :--- | :--- | | Net Sales Growth | 8.5% to 10.5% | | Adjusted EBITDA Growth | 4% to 6% | | OWYN Net Sales | $135 - $145 million | - The fiscal year 2025 growth outlook includes a **2-percentage point** headwind due to the comparison against a 53-week fiscal year in 2024[4](index=4&type=chunk)[12](index=12&type=chunk) - Excluding the 53rd week and assuming a full year of OWYN results in the prior year, the company's projected growth aligns with its long-term algorithm of **4-6%** net sales growth[12](index=12&type=chunk) [Detailed Financial Results](index=1&type=section&id=Detailed%20Financial%20Results) This section provides an in-depth analysis of the company's Q1 2025 financial performance, balance sheet, and cash flow dynamics [First Quarter 2025 Performance Analysis](index=1&type=section&id=First%20Quarter%202025%20Performance%20Analysis) Q1 2025 saw net sales increase due to the OWYN acquisition, gross margin expand, and operating expenses rise from OWYN inclusion - Net sales growth of **$32.6 million** was almost entirely driven by the **$32.3 million** contribution from the newly acquired OWYN business[3](index=3&type=chunk) - Gross margin improved to **38.2%**, a **90 basis point** increase year-over-year, even after absorbing a **30 basis point** headwind from a non-cash inventory purchase accounting step-up for OWYN[3](index=3&type=chunk) - Operating expenses rose to **$75.9 million**, with G&A expenses increasing by **$11.1 million** due to higher employee costs, corporate expenses, and the inclusion of OWYN[7](index=7&type=chunk) - Net interest expense increased by **$2.1 million** compared to the prior year, primarily due to a higher debt balance following the OWYN acquisition[8](index=8&type=chunk) [Balance Sheet and Cash Flow](index=3&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) The company maintained a healthy balance sheet, repaid significant debt, and managed cash flow, resulting in a low leverage ratio - Cash flow from operations decreased to **$32.0 million** from **$47.5 million** in the year-ago period, mainly due to higher net working capital related to the OWYN acquisition[10](index=10&type=chunk) - The company made a significant debt repayment of **$50.0 million** on its term loan, reducing the outstanding principal balance to **$350.0 million**[10](index=10&type=chunk) - The trailing twelve-month Net Debt to Adjusted EBITDA ratio was **0.8x** as of November 30, 2024, indicating a strong leverage position[11](index=11&type=chunk) [Financial Statements](index=8&type=section&id=Financial%20Statements) This section provides the company's consolidated balance sheets, income statements, and cash flow statements [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) As of November 30, 2024, the company reported total assets of **$2.43 billion**, with increased stockholders' equity and managed liabilities | Balance Sheet Item | Nov 30, 2024 (in thousands) | Aug 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $2,434,437 | $2,436,144 | | Total Liabilities | $657,893 | $708,658 | | Total Stockholders' Equity | $1,776,544 | $1,727,486 | | Cash | $121,759 | $132,530 | | Long-term debt | $347,990 | $397,485 | [Consolidated Statements of Income and Comprehensive Income](index=9&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) For Q1 FY2025, net sales and gross profit increased, leading to higher net income and diluted EPS despite rising expenses | Income Statement Item | Q1 FY2025 (in thousands) | Q1 FY2024 (in thousands) | | :--- | :--- | :--- | | Net sales | $341,268 | $308,678 | | Gross profit | $130,486 | $115,118 | | Income from operations | $54,625 | $51,820 | | Net income | $38,122 | $35,561 | | Diluted EPS | $0.38 | $0.35 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY2025 saw decreased operating cash flow due to working capital, with financing activities dominated by significant debt repayment | Cash Flow Item | Q1 FY2025 (in thousands) | Q1 FY2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $32,021 | $47,523 | | Net cash used in investing activities | $(669) | $(800) | | Net cash used in financing activities | $(42,331) | $(13,103) | | Net (decrease) increase in cash | $(10,979) | $33,620 | | Cash at end of period | $121,759 | $121,391 | [Non-GAAP Financial Measures](index=11&type=section&id=Non-GAAP%20Financial%20Measures) This section details the reconciliation of key non-GAAP financial measures, including EBITDA and Adjusted Diluted EPS [Reconciliation of EBITDA and Adjusted EBITDA](index=11&type=section&id=Reconciliation%20of%20EBITDA%20and%20Adjusted%20EBITDA) Adjusted EBITDA for Q1 FY2025 was **$70.1 million**, reconciled from GAAP Net Income with various non-cash and one-time adjustments | Reconciliation Item (in thousands) | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Net income | $38,122 | $35,561 | | EBITDA | $59,807 | $57,657 | | Stock-based compensation expense | $3,844 | $4,168 | | Integration of OWYN | $4,931 | — | | **Adjusted EBITDA** | **$70,068** | **$61,965** | [Reconciliation of Adjusted Diluted Earnings Per Share](index=12&type=section&id=Reconciliation%20of%20Adjusted%20Diluted%20Earnings%20Per%20Share) Adjusted Diluted EPS for Q1 FY2025 was **$0.49**, reflecting adjustments for depreciation, stock-based compensation, and OWYN integration costs | Reconciliation Item | Q1 FY2025 | Q1 FY2024 | | :--- | :--- | :--- | | Diluted earnings per share (GAAP) | $0.38 | $0.35 | | Adjustments (D&A, Stock Comp, etc) | +$0.15 | +$0.10 | | Tax effects of adjustments | ($0.04) | ($0.02) | | **Adjusted diluted earnings per share** | **$0.49** | **$0.43** | [Reconciliation of Net Debt to Adjusted EBITDA](index=13&type=section&id=Reconciliation%20of%20Net%20Debt%20to%20Adjusted%20EBITDA) As of November 30, 2024, the company's Net Debt to Adjusted EBITDA ratio stood at a strong **0.8x**, reflecting its low leverage | Calculation Component (in thousands) | Amount | | :--- | :--- | | Total debt outstanding | $350,000 | | Less: cash and cash equivalents | ($121,759) | | **Net Debt** | **$228,241** | | Trailing twelve months Adjusted EBITDA | $277,233 | | **Net Debt to Adjusted EBITDA Ratio** | **0.8x** | [Other Information](index=6&type=section&id=Other%20Information) This section provides details on the company's conference call and an overview of its business operations [Conference Call and Webcast Information](index=6&type=section&id=Conference%20Call%20and%20Webcast%20Information) The company scheduled a conference call and webcast for January 8, 2025, to discuss Q1 financial results with investors and analysts - A conference call to discuss the Q1 2025 results was scheduled for January 8, 2025, at 8:30 a.m Eastern time[16](index=16&type=chunk) [About The Simply Good Foods Company](index=6&type=section&id=About%20The%20Simply%20Good%20Foods%20Company) The Simply Good Foods Company is a consumer packaged goods firm specializing in nutritious snacking products under the Atkins, Quest, and OWYN brands - The company is a developer and marketer of branded nutritional foods and snacking products[1](index=1&type=chunk) - Its core product portfolio includes protein bars, ready-to-drink (RTD) shakes, and other snacks under the Atkins, Quest, and OWYN brands[17](index=17&type=chunk)

Core Insights - The Simply Good Foods Company reported a net sales increase of 10.6% to $341.3 million for the first quarter ended November 30, 2024, primarily driven by the acquisition of OWYN [3][7] - The company reaffirmed its fiscal year 2025 outlook, expecting net sales growth of 8.5% to 10.5% and adjusted EBITDA growth of 4% to 6% [14][15] Financial Performance - Net income for the first quarter was $38.1 million, up from $35.6 million in the same period last year [6][7] - Adjusted EBITDA increased by 13.1% to $70.1 million compared to $62.0 million in the prior year [10][7] - Gross profit rose to $130.5 million, reflecting a gross margin of 38.2%, a 90 basis points increase year-over-year [5][7] Sales and Market Trends - Retail takeaway for Simply Good Foods increased by approximately 8%, with Quest and OWYN brands showing growth rates of about 10% and 67%, respectively [4][2] - Legacy Simply Good Foods' net sales remained stable compared to the previous year, impacted by shipment timing [3] Operating Expenses - Operating expenses totaled $75.9 million, an increase of $12.6 million from the previous year, largely due to the inclusion of OWYN and higher employee-related costs [8][7] - Selling and marketing expenses rose to $33.0 million, while general and administrative expenses increased to $38.1 million [8] Balance Sheet and Cash Flow - As of November 30, 2024, the company had cash of $121.8 million and a net debt to adjusted EBITDA ratio of 0.8x [12][13] - Cash flow from operations was approximately $32.0 million, down from $47.5 million in the prior year, primarily due to higher working capital needs related to the OWYN acquisition [12] Outlook - The company anticipates continued organic sales growth driven by volume and has strong marketing plans in place for the upcoming year [14] - Input cost inflation is expected, but the company aims to offset these costs through productivity and cost-saving initiatives [14]

Core Insights - Simply Good Foods (SMPL) is positioned to continue its earnings-beat streak, having consistently surpassed earnings estimates in recent quarters [1][2] - The company reported earnings of $0.50 per share for the most recent quarter, exceeding the expected $0.48 per share, resulting in a surprise of 4.17% [2] - Analysts have become increasingly optimistic about Simply Good Foods' earnings prospects, as indicated by a positive Earnings ESP of +5.50% [6] Earnings Performance - The average surprise for Simply Good Foods over the last two quarters was 4.17%, with both quarters reporting earnings of $0.50 per share against an estimate of $0.48 [2][3] - The company's positive earnings surprise history has led to higher earnings estimates from analysts [3] Earnings ESP and Zacks Rank - Simply Good Foods has a Zacks Rank of 3 (Hold), which, when combined with a positive Earnings ESP, suggests a high likelihood of another earnings beat [6] - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 or better have a nearly 70% chance of producing a positive surprise [4] Future Outlook - The next earnings report for Simply Good Foods is expected to be released on January 9, 2025 [6] - The Earnings ESP metric is crucial for predicting earnings performance, as it compares the Most Accurate Estimate to the Zacks Consensus Estimate [5][7]

Group 1 - The Simply Good Foods Company (SMPL) has recently experienced a "golden cross" event, indicating a potential bullish breakout as its 50-day simple moving average has crossed above its 200-day simple moving average [1] - A successful golden cross event consists of three stages: the stock price bottoms out, the shorter moving average crosses above the longer moving average, and the stock maintains upward momentum [1] - SMPL has moved 17.7% higher over the last four weeks, suggesting it may be on the verge of a breakout [1] Group 2 - The earnings outlook for SMPL is positive, with one upward revision in earnings estimates over the past 60 days and no downward revisions [2] - The Zacks Consensus Estimate for SMPL has also increased, reinforcing the bullish case for the stock [2] - Given the positive technical factors and earnings estimate movements, investors may want to monitor SMPL for potential gains in the near future [2]

Financial Performance - The Simply Good Foods Company reported a significant increase in net sales, driven by strong performance across its brands, with a year-over-year growth of 15%[21]. - In fiscal year 2024, sales to Walmart Inc. represented approximately 31% of consolidated sales, while sales to Amazon accounted for approximately 18%[50]. - International net sales represented approximately 2.5% of total net sales for the fifty-three weeks ended August 31, 2024[68]. - OWYN products accounted for approximately 2.5% of total net sales for the fifty-three weeks ended August 31, 2024[68]. Growth Strategy - The OWYN brand, acquired in June 2024, is expected to contribute to the company's growth strategy, with anticipated synergies projected to enhance overall profitability[9]. - The acquisition of Quest Nutrition in November 2019 and OWYN in June 2024 is part of the company's strategy to strengthen its market position in the nutritional snacking category[24]. - The company is actively seeking acquisition opportunities to complement its existing portfolio and expand into adjacent snacking categories[57]. - The company aims to leverage its platform to expand in the fragmented nutritional snacking category, identifying significant growth opportunities through disciplined acquisitions[34]. Product Innovation - The company aims to innovate and expand its product portfolio to meet consumer demand for higher protein products and new product forms[33]. - Simply Good Foods plans to innovate and expand its product offerings, focusing on higher protein products and new flavors to meet changing consumer preferences[33]. - The company maintains in-house research and development capabilities, allowing for rapid product innovation and market introduction[55]. - The company is committed to ongoing product innovation, focusing on enhancing existing products and expanding into adjacent snacking categories[52]. Market Trends - The company emphasizes the rising trend of snacking occasions, with consumers increasingly seeking convenient and healthy options, which aligns with its product offerings[22]. - Consumer trends indicate a growing preference for protein-rich snacks, which the company aims to capitalize on through innovative product development[22]. - The nutritional snacking category is expected to grow due to rising consumer demand for convenient, healthy snacks, with trends favoring smaller, more frequent meals[22]. - The company’s brands are well-aligned with consumer mega trends, including a shift towards low-carb and low-sugar diets[27]. Distribution and Marketing - The company aims to expand its distribution channels, focusing on major retail outlets and e-commerce platforms to reach a broader customer base[23]. - Approximately 77% of Quest's gross sales and 83% of Atkins' gross sales in the U.S. were through mass retail, grocery, and convenience store channels for the fifty-three weeks ended August 31, 2024[35]. - E-commerce sales accounted for approximately 22% of Quest's gross sales and 17% of Atkins' gross sales for the same period, indicating a growing online presence[35]. - The company plans to enhance its marketing efforts to attract first-time buyers and expand household penetration beyond its core historic buyers[36]. Operational Challenges - The company faces risks related to supply chain constraints and inflationary pressures, which could impact its operational performance and margins[13]. - The company actively manages the cost of packaging supplies and sources ingredients through competitive bidding[62]. - The company relies on contract manufacturers for production, allowing for a flexible and asset-light business model[61]. Corporate Social Responsibility - The company completed a pay equity audit every fiscal year to evaluate pay practices[88]. - In 2023, the company provided four separate $20,000 grants through the Quest for Impact program[100]. - The company secured at least 500,000 meals for Feeding America through its participation in Walmart's campaign[101]. - Over 110 employees volunteered for Community Impact Day, focusing on nutrition security[102]. Employee Engagement and Diversity - As of August 31, 2024, the company employed 316 employees globally, with approximately 95% based in the United States[83]. - During fiscal year 2024, 99% of employees held career discussions with their managers for development and career progression[86]. - The company has established a Diversity, Equity, Inclusion and Belonging Council to oversee DEI&B initiatives and ensure a positive workplace culture[87]. - The overall representation of Black or African American employees is 8% among total employees, with 1 in the executive/senior officials and managers category[92]. Business Model - The company maintains an asset-light business model, focusing on innovation and marketing while generating consistent free cash flow driven by strong gross margins[31]. - The company emphasizes its asset-light business model, which allows for significant flexibility and robust free cash flow generation over time[31]. - The company holds an ISO 22000 certification for its U.S. operations, excluding OWYN, first obtained during fiscal year 2022[69]. Community Impact - The Spark and Spoon project will impact over 28,000 kids and teens across Denver, providing nutrition education and healthy lifestyle programs[103]. - The company advocates for more inclusive Dietary Guidelines to address health equity for underserved populations[91].