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The Simply Good Foods pany(SMPL) - 2021 Q2 - Earnings Call Transcript
SMPLThe Simply Good Foods pany(SMPL)2021-04-07 19:01
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Financial Data and Key Metrics Changes - Second quarter net sales increased by 1.5%, with core ongoing net sales, excluding the impact of the SimplyProtein divestiture and European business exit, increasing by 2.7% driven by e-commerce growth and Quest's success in new forms [10][33] - Adjusted EBITDA for the second quarter increased by 2.2% due to strong cost controls and Quest acquisition synergies [12][40] - Gross profit was 90.3million,anincreaseof5.790.3 million, an increase of 5.7% compared to the previous year, with a gross margin decline of 70 basis points due to higher in-store merchandising and unfavorable product mix [36][60] Business Line Data and Key Metrics Changes - The active nutrition segment, including Quest, increased mid-single digits, with Quest's point of sale (POS) outperforming the segment nearly 3 to 1 [16][26] - The weight management segment, including Atkins, declined by high-single digits due to fewer on-the-go usage occasions, although Atkins outpaced the weight management category [17][18] - E-commerce growth was strong, with consumption up about 50% in the quarter, particularly in bars, shakes, and confections [21][22] Market Data and Key Metrics Changes - Simply Good Foods' second quarter retail takeaway in measured channels increased mid-single digits, with IRI measured channel growth of 1.7% [12][15] - Quest's second quarter retail takeaway increased by 16% in the measured IRI MULO C-store universe, driven by snacks consumed at home [26][30] - Atkins' U.S. retail takeaway in measured and unmeasured channels declined low-single digits, with solid e-commerce growth offset by softness in traditional brick-and-mortar [18][19] Company Strategy and Development Direction - The company aims to leverage its asset-light business model to maintain strong cash flow and invest in organic growth opportunities and M&A [62] - The combination of Atkins and Quest is positioned around consumer megatrends of wellness snacking, convenience, and meal replacement, with a focus on adapting marketing strategies to changing consumer behaviors post-COVID [61][100] - The company anticipates full-year net sales of 930 million to 940millionandadjustedEBITDAof940 million and adjusted EBITDA of 180 million to 185million,factoringinheadwindsfromdivestitures[58][60]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutimprovingretailtakeawaytrendsdrivenbyeasieryear−agocomparisonsandincreasingshoppertrafficinbrick−and−mortarstores[57][31]−Thecompanyexpectssolidgrowthinthesecondhalfofthefiscalyear,supportedbyimprovingconsumermobilityandrenewedinterestinweightmanagement[31][32]−Managementnotedthatthecorrelationbetweenconsumermobilityandbrandconsumptionissignificant,particularlyforbarsandshakes[24][78]OtherImportantInformation−Thecompanypaiddown185 million, factoring in headwinds from divestitures [58][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving retail takeaway trends driven by easier year-ago comparisons and increasing shopper traffic in brick-and-mortar stores [57][31] - The company expects solid growth in the second half of the fiscal year, supported by improving consumer mobility and renewed interest in weight management [31][32] - Management noted that the correlation between consumer mobility and brand consumption is significant, particularly for bars and shakes [24][78] Other Important Information - The company paid down 25 million of its term loan debt, with an outstanding principal balance of 556.5millionattheendofthesecondquarter[53]−Year−to−datenetincomewas556.5 million at the end of the second quarter [53] - Year-to-date net income was 41.6 million compared to 5.9millionintheprioryear,drivenbytheQuestacquisitionandlowerintegration−relatedcosts[49][52]−AdjusteddilutedEPSforthesecondquarterwas5.9 million in the prior year, driven by the Quest acquisition and lower integration-related costs [49][52] - Adjusted diluted EPS for the second quarter was 0.25, an increase of $0.02 compared to the previous year [51][60] Q&A Session Summary Question: What was the organic sales growth for Atkins and Quest brands? - Atkins was down about 10% due to shipment delays, while Quest was up in the high teens [67][68] Question: Is the guidance based on current consumer mobility levels or expecting improvement? - The guidance assumes status quo for consumer mobility [71] Question: How does the current mobility and sales momentum affect revenue expectations? - The third quarter is expected to show strong sales momentum, but a softening is anticipated in the fourth quarter due to seasonality [77][80] Question: How does the company plan to adjust marketing and product assortment in response to changing consumer behavior? - The company plans to innovate in snacks that are less dependent on being at work and adjust marketing strategies accordingly [100] Question: What is the company's stance on potential price increases due to inflation? - The company has not raised prices on Atkins in several years but is prepared to do so if necessary, with confidence in maintaining strong volumes [102] Question: What is the company's acquisition strategy moving forward? - The company remains on the lookout for strong consumer brands with good innovation pipelines, similar to the Quest acquisition [110]