The Simply Good Foods pany(SMPL) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net sales of $340.2 million for Q1 2026, which was essentially flat compared to the previous year [18] - Adjusted EBITDA was $55.6 million, down 20.6% year-over-year due to margin pressures [22] - Gross profit declined 15.8% to $109.9 million, primarily driven by elevated inflationary costs [19] - Net income was $25.3 million, a decline of 34% compared to the previous year [22] - Diluted earnings per share decreased to $0.26 from $0.38 in the year-ago period [22] Business Line Data and Key Metrics Changes - Quest brand net sales grew nearly 10%, driven by robust consumption growth of 12% [18] - Atkins consumption declined 19%, largely due to lost distribution at key retailers [12] - OWYN's consumption increased by 18%, benefiting from distribution-led growth [15] - The salty snacks business saw a 40% increase in consumption, reflecting distribution gains and velocity growth [9] Market Data and Key Metrics Changes - The nutritional snacking category grew by 10% in Q1, supporting overall company growth [4] - Household penetration for Quest reached nearly 20%, up 200 basis points year-over-year [8] - OWYN's household penetration increased to 4.5%, up 100 basis points [15] Company Strategy and Development Direction - The company is focused on driving top-line growth through expanded distribution and marketing initiatives [4] - A robust productivity program initiated 18 months ago is expected to yield results in the second half of the fiscal year [5] - The company plans to continue investing in marketing and innovation to support growth, particularly for Quest and OWYN [17] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed confidence in the full-year outlook for net sales and Adjusted EBITDA despite challenges in the first half [4] - The second half of the fiscal year is expected to show stronger performance, with anticipated improvements in gross margins and profitability [27] - Management acknowledged risks related to pricing elasticities and lingering product quality issues impacting OWYN [16] Other Important Information - The company borrowed an additional $150 million to accelerate its share buyback program, repurchasing over 7% of its common stock since the start of the fiscal year [6][7] - The board authorized a $200 million increase to the existing share repurchase program, reflecting confidence in long-term growth [25] Q&A Session Summary Question: Can you elaborate on the confidence in the back half inflection and key risks? - Management indicated that the second half is expected to benefit from new distribution and merchandising gains, with confidence in improved gross margins and productivity [32][34] Question: What needs to be done on the legacy bar business? - Management acknowledged the need for a multi-pronged plan to re-accelerate the bar business, including innovation and improved merchandising [36][37] Question: How should we judge the step-up in marketing investment for OWYN? - Management emphasized the importance of increasing marketing, innovation, and distribution to drive household penetration for OWYN [39][40] Question: What is the current status of the Atkins business? - Management noted that two-thirds of Atkins' declines are due to lost distribution, but there is optimism about flowback and improving velocity in the future [52][53] Question: When will tariff relief be seen? - Management expects tariff benefits to start flowing in during the second half of the year, alongside cocoa cost benefits [55]