[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].

Core Insights - Quest has launched a new campaign titled "Sweet on Protein," which introduces its Bake Shop line of protein-rich baked goods, aimed at satisfying sweet cravings without compromising flavor [2][3][4]. Campaign Overview - The "Sweet on Protein" campaign is an extension of the previous "It's Basically Cheating" initiative and will be promoted across various platforms, including film, digital, social media, and out-of-home advertising [2][3]. - The campaign features new products such as protein-rich Blueberry Muffins, Chocolate Chip Muffins, and Chocolate Brownies, emphasizing nostalgic indulgence while maintaining a focus on protein content [3][4]. Strategic Partnerships - This campaign marks the first major initiative under Simply Good Foods' partnership with Publicis Groupe's SG1, which will handle creative development, media planning, public relations, and digital strategies for Quest and Atkins brands [4][5]. Product Availability - The Quest Bake Shop line is available nationally at major retailers, including Amazon, Walmart, Target, and Kroger, indicating a strong distribution strategy [5]. Company Background - Simply Good Foods Company, headquartered in Denver, Colorado, focuses on nutritious snacking and aims to lead the healthy lifestyle movement through innovation and investment opportunities in the snacking sector [5][6].

Core Viewpoint - The article emphasizes the investment philosophy focused on identifying mispriced securities through understanding the financial drivers of small cap companies, utilizing DCF model valuation to assess risk-to-reward dynamics [1]. Group 1 - The investment strategy is centered on small cap companies across US, Canadian, and European markets [1]. - The methodology allows for flexibility beyond traditional investment styles, incorporating value, dividend, and growth investing perspectives [1]. - The approach aims to uncover potential investment opportunities by analyzing a company's financials comprehensively [1].

Financial Data and Key Metrics Changes - The company reported Q4 net sales of $375.7 million, a 17.2% increase year-over-year, driven by the OWYN acquisition and the additional week in the fiscal calendar [21][22] - Full-year net sales reached $1.33 billion, up 7.1% from the previous year, with OWYN contributing 2.4 percentage points to this growth [22] - Adjusted EBITDA for Q4 was $77.5 million, a 15% increase compared to the same period last year [6][23] - Gross margin improved to 38.8%, a 120 basis point increase year-over-year, despite a non-cash inventory purchase accounting step-up adjustment related to the OWYN acquisition [23][25] Business Line Data and Key Metrics Changes - North America Quest net sales increased about 5%, while Atkins sales declined about 5% on a like-for-like basis [6] - OWYN's retail takeaway in measured channels was strong, with significant growth across all major retail customers, making it the third largest sports nutrition multi-pack brand in the U.S. [17][18] - Quest snacks and bars retail takeaway in combined channels increased about 17%, with salty snacks showing a standout growth of 34% [10][12] Market Data and Key Metrics Changes - The nutritional snacking category grew by 7.3% in measured channels, driven primarily by volume [9] - OWYN's growth was attributed to increased distribution and velocity, with expectations of 20% to 30% growth in fiscal 2025 [18] - The e-commerce business continued to perform well, contributing nearly 2 percentage points to total retail takeaway [9] Company Strategy and Development Direction - The company aims to focus on innovation, marketing, and increased physical availability to drive trial and household penetration in fiscal 2025 [7][19] - The integration of OWYN is progressing as planned, with expectations of significant shareholder value creation through revenue growth and cost synergies [8][18] - The company plans to optimize ROI on Atkins brand investments, which may lead to a decline in sales growth in fiscal 2025 [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the nutritional snacking category's growth trajectory, driven by health and wellness trends [7][19] - The company anticipates input cost inflation to impact gross margins in fiscal 2025, projecting a contraction of about 200 basis points [25][30] - Management expects fiscal 2025 net sales growth in the range of 8.5% to 10.5%, with adjusted EBITDA growth slightly greater than net sales [30][31] Other Important Information - The company repaid $135 million of its term loan in fiscal 2024, resulting in a net debt to adjusted EBITDA ratio of 1x [28] - Capital expenditures for fiscal 2025 are expected to be in the range of $10 million to $15 million [28] Q&A Session Summary Question: Insights on recent innovation performance - Management noted that the Bake Shop platform is performing well, with early distribution feedback being encouraging [32][33] Question: Competitive landscape for the upcoming New Year - Management is optimistic about their merchandising plans and believes they are well-positioned despite competitive pressures [37][38] Question: Growth outlook for legacy business - Management indicated that underlying growth for the legacy business is expected to be around 3% for fiscal 2025, with various moving parts affecting performance [39][43] Question: OWYN's growth assumptions - Management explained that OWYN's growth expectations are conservative due to the need to fill distribution voids and the impact of previous significant growth [45][47] Question: Marketing effectiveness and spending levels - Management highlighted the success of the "it's basically cheating" campaign for Quest and indicated a 20% increase in advertising spend for fiscal 2025 [50][53] Question: Expectations for Atkins brand performance - Management acknowledged that negative sales growth for Atkins is anticipated until fiscal 2026, due to strategic investment decisions [55][57] Question: Quest Bars competition and revenue expectations - Management recognized increased competition in the Quest Bars segment but remains focused on innovation and pricing strategies to maintain market leadership [61][63]

Core Viewpoint - Simply Good Foods (SMPL) reported quarterly earnings of $0.50 per share, exceeding the Zacks Consensus Estimate of $0.48 per share, and showing an increase from $0.45 per share a year ago [1] Financial Performance - The company achieved revenues of $375.69 million for the quarter ended August 2024, surpassing the Zacks Consensus Estimate by 0.24% and up from $320.42 million year-over-year [1] - Over the last four quarters, Simply Good Foods has exceeded consensus EPS estimates four times but has only topped consensus revenue estimates once [1] Stock Performance - Simply Good Foods shares have declined approximately 18.6% since the beginning of the year, contrasting with the S&P 500's gain of 21.5% [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.44 on revenues of $349.98 million, while for the current fiscal year, it is $1.91 on revenues of $1.47 billion [4] - The estimate revisions trend for Simply Good Foods is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [4] Industry Context - The Food - Confectionery industry, to which Simply Good Foods belongs, is currently ranked in the bottom 17% of over 250 Zacks industries, suggesting potential challenges for stock performance [5] - Hershey (HSY), another company in the same industry, is expected to report quarterly earnings of $2.62 per share, reflecting a year-over-year change of +0.8%, with revenues anticipated at $3.09 billion, up 2.1% from the previous year [5]

| --- | --- | |---------------------------------------------------------|-------| | | | | Fourth Quarter & Full Fiscal Year 2024 | | | Conference Call & Webcast Presentation October 24, 2024 | | Disclaimer Forward Looking Statements Certain statements made herein are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by or include words such as "wil ...