The Simply Good Foods pany(SMPL) - 2025 Q1 - Quarterly Results

Financial Performance Overview This section summarizes the company's strong Q1 FY2025 financial performance, management insights, and future outlook First Quarter Fiscal 2025 Financial Highlights 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][2][3] Management Commentary 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] - The CEO emphasized the "mainstreaming" of nutritional snacking as a key tailwind for the company's growth[2] - Capacity for Quest chips has been optimized, which is expected to support increased merchandising, programming, and distribution going forward[2] Fiscal Year 2025 Outlook 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][12] - 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] Detailed Financial Results 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 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] - 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] - 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] - 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] Balance Sheet and Cash Flow 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] - 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] - The trailing twelve-month Net Debt to Adjusted EBITDA ratio was 0.8x as of November 30, 2024, indicating a strong leverage position[11] Financial Statements This section provides the company's consolidated balance sheets, income statements, and cash flow statements Consolidated Balance Sheets 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 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 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 This section details the reconciliation of key non-GAAP financial measures, including EBITDA and Adjusted Diluted EPS Reconciliation of EBITDA and Adjusted EBITDA 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 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 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 This section provides details on the company's conference call and an overview of its business operations Conference Call and Webcast Information 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] About The Simply Good Foods Company 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] - Its core product portfolio includes protein bars, ready-to-drink (RTD) shakes, and other snacks under the Atkins, Quest, and OWYN brands[17]