The Simply Good Foods pany(SMPL) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2025, reported net sales were $369 million, a decline of 1.8% year-over-year, while organic net sales grew 3.5% [26][27] - Adjusted EBITDA was $66.2 million, down 14.5% from the previous year, primarily due to inflationary pressures and the impact of lapping the 53rd week [28][30] - Gross profit was $126.6 million, a decline of 13.3%, with gross margin at 34.3%, down 450 basis points year-over-year [27][28] Business Line Data and Key Metrics Changes - Quest generated nearly two-thirds of the company's net sales in Q4, with consumption growth of 11% and net sales growth of over 13% for the full year [15][19] - Atkins experienced a consumption decline of 12% in Q4 and 10% for the full year, primarily due to distribution losses [19][20] - OWYN saw consumption growth of 14% in Q4 and 34% for the full year, with household penetration increasing to 4.2% [21][22] Market Data and Key Metrics Changes - The nutritional snacking category grew by 13% in fiscal 2025, with a significant shift towards high-protein, low-sugar, and low-carb products [6][14] - Quest and OWYN now represent nearly three-quarters of the company's net sales, both growing at double-digit rates [6][15] - The company is expanding its presence in mainstream aisles, indicating a shift in consumer purchasing behavior [66][67] Company Strategy and Development Direction - The company aims to be a leader in high-protein, low-sugar, and low-carb food and beverage, capitalizing on a generational shift in consumer preferences [5][14] - There is a focus on innovation, with increased investment in R&D and marketing to enhance product offerings and brand awareness [8][66] - The company is proactively managing the Atkins brand to align shelf space with sales, while prioritizing growth for Quest and OWYN [10][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges such as inflation and distribution losses for Atkins but expressed confidence in overcoming these headwinds [9][12] - The outlook for fiscal 2026 includes expected net sales growth in the range of -2% to +2%, with a focus on Quest and OWYN offsetting declines in Atkins [35][36] - Management emphasized the importance of maintaining long-term growth strategies despite short-term challenges [24][36] Other Important Information - The company repaid $150 million of its term loan debt in fiscal 2025 and has a strong balance sheet with low net debt levels [32][33] - A $150 million increase to the stock repurchase program was approved, reflecting management's confidence in the business [33] - The company plans to invest $30 to $40 million in capital expenditures in fiscal 2026 to support growth initiatives [40][41] Q&A Session Summary Question: Impact of OWYN's product quality issues on future sales - Management confirmed that the product quality issue related to pea protein has been addressed and expressed confidence in OWYN's growth trajectory moving forward [43][45] Question: Competition in the high-protein, low-sugar market - Management acknowledged the competitive landscape but emphasized the company's agility and robust supply chain as key advantages [50][52] Question: Top-line guidance and expected growth rates for Quest and OWYN - Management indicated that Quest is expected to grow in the high single digits, while OWYN is projected to grow in the double-digit range, with Atkins facing a decline [59][60]