The Simply Good Foods pany(SMPL) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q4 increased by 53.5%, reflecting the inclusion of Quest and strong cost controls, despite a $3 million impairment charge related to the Simply Protein brand [17][26][51] - Total net sales for Q4 increased by 59.7%, driven primarily by the Quest acquisition, while legacy Atkins net sales declined by 8% [25][52] - Full year net sales increased by 56% to $816.1 million, with adjusted EBITDA rising by 55.9% to $153.9 million [52][53] Business Line Data and Key Metrics Changes - Legacy Atkins sales declined by 8% in Q4, with brick-and-mortar volume down 9.2%, while e-commerce sales surged by 55% [46][28] - Quest net sales for Q4 exceeded forecasts, increasing by mid-single digits, driven by strong retail takeaway and e-commerce performance [26][33] - Atkins confections saw retail takeaway up 17.3% in Q4, while bars and shakes faced pressure with declines of 11.1% and 8.3% respectively [27][28] Market Data and Key Metrics Changes - Total Simply Good Foods retail takeaway in Q4 increased by 3.9% in U.S. measured channels, outperforming the category which declined by about 3% [18][20] - The active nutrition segment, including Quest, plateaued with low single-digit growth since July, while the weight management segment, including Atkins, declined in the upper single digits [21][22] - E-commerce sales for the full year increased by 77%, representing nearly 9% of legacy Atkins total U.S. gross sales [28] Company Strategy and Development Direction - The company aims to increase market share in nutritional snacking and diversify its portfolio, achieving integration milestones and synergy targets from the Quest acquisition [11][40] - The focus remains on health and wellness snacking, with a strong innovation pipeline and marketing strategies aligned with consumer trends [39][42] - The company anticipates that as the economy reopens, consumer shopping behaviors will normalize, benefiting brands focused on active nutrition and weight management [70][138] Management's Comments on Operating Environment and Future Outlook - Management noted the uncertainty of the pandemic's duration and its impact on consumer behavior, making it difficult to provide a full-year outlook for fiscal 2021 [66][70] - The company expects first half net sales to be in the range of $425 million to $435 million, with adjusted EBITDA between $77 million and $82 million [67][68] - Management expressed confidence in long-term growth prospects, citing low household penetration in the health and wellness category as a significant opportunity [138] Other Important Information - The company recorded a $3 million impairment charge related to the Simply Protein brand and expects modest inflation in input costs for fiscal 2021 [50][91] - The integration of Quest is largely complete, with synergies expected to be recognized starting in January [40][125] - The company paid down $50 million of its term loan, with a year-end cash balance of $95.8 million [60][61] Q&A Session Summary Question: Strategy in current environment - Management indicated a focus on both Quest and Atkins brands, with increased marketing investments based on effective data from Q4 [76][77] Question: First half guidance and inventory - No significant shift in promotional timing is expected, and inventory levels are normal [80][82] Question: Input cost inflation - Modest inflation is anticipated, with good coverage for the first half of fiscal 2021 [89][91] Question: Future M&A opportunities - The company is open to exploring new deals as the balance sheet improves post-Quest integration [90][95] Question: Growth expectations for chocolate and salty snacks - High expectations for new product categories, with a focus on consumer use occasions and innovation [100][102] Question: Long-term health of the category - Management believes that consumer behavior will return to pre-pandemic patterns, supporting growth in the health and wellness category [138]