Simply Good Foods Co Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Results: Q4 net sales increased 17.2% to $375.7M, adjusted EBITDA was $77.5M (up 15% y-o-y). Gross margin improved. Full-year net sales were $1.33B (up 7.1% y-o-y), adjusted EBITDA $269.1M (up 9.6% y-o-y).
• Category Outlook: Nutritional snacking category growth was strong, driven by volume. Quest and OWYN outpaced the category, while Atkins was down.
• Innovation and Marketing: Quest accelerated the launch of the Overload Bar, Atkins rolled out new innovation, and OWYN integration progressed. Marketing spend was adjusted, especially for Atkins.
• Integration: OWYN integration was progressing as planned, with synergy benefits expected in fiscal 2026.

Segment Performance

• Quest: In Q4 2024, retail takeaway growth in measured and combined channels was 9% and 10%. Net sales growth was impacted by temporary chip supply constraints. Full-year POS was about 13%. For fiscal 2025, expected retail takeaway growth of 9%-10% driven by volume, chips recovery, and innovation.
• Atkins: Q4 retail takeaway in measured and combined channels was off 8% and 5%. Strong e-commerce growth continued, but overall performance was down. Full-year fiscal 2025 expected to decline high single digits due to optimized ROI and distribution losses.
• OWYN: Acquired on June 13, 2024. Q4 and full-year 2024 results included 11 weeks of performance. Retail takeaway strong with distribution and velocity growth. Fiscal 2025 expected net sales $135M-$145M, 20%-30% growth.

Guidance

• Fiscal 2025: Net sales growth expected in the 4%-6% range, adjusted EBITDA growth slightly greater than net sales. OWYN full-year net sales projected $135M-$145M (20%-30% growth). Atkins expected to decline high single digits. Quest expected 9%-10% retail takeaway growth.
• Input Costs: Anticipated gross margin contraction due to input cost inflation.

Risks

• Supply Chain: Temporary chip supply constraints impacted Quest.
• Competition: Competitive landscape in the nutritional snacking category, potential for competitor actions.
• Marketing ROI: Uncertainty on marketing ROI, especially for Atkins' new advertising.
• Integration Risks: Potential integration challenges with OWYN despite progress.

Question and Answer

Q: Recent innovation performance, especially Bake Shop and coffee drinks?

A: Encouraged by early read on Quest Bake Shop, chips recovery, and Atkins innovation replacing underperforming SKUs.

Q: New Year, New You season setup?

A: Pleased with fall shelf sets, strong merchandising plans, but competitive landscape still uncertain.

Q: Legacy business growth phasing in fiscal 2025?

A: Quest capacity improving, Atkins optimizing ROI, phasing of growth with quarterly expectations.

Q: OWYN POS assumptions and marketing spend?

A: OWYN growth from distribution and pack size, marketing spend adjusted with focus on ROI.

Q: Atkins outlook and inflection point?

A: High single-digit decline in 2025, phased improvement with innovation and plan elements in place for 2026.

Q: OWYN capacity and capital allocation?

A: No capacity issues, capital allocation includes debt paydown, share repurchases, M&A evaluation.