Simply Good Foods Co Q1 FY2025 earnings call

• Nutritional Snacking Category: Momentum continued in the quarter with about 12% growth driven by volume. All major subsegments (bars, shakes, chips) increased. - Quest: Growth was strong despite chip stock out early in the quarter. Salty snacks business growing 26%, second production line up, new bakeshop items performing well, overload bar platform launched in February, and advertising campaign to drive brand awareness. - Atkins: Q1 performance slightly better than planned, driven by RTD shakes. Revitalization plan in place with new items outperforming replaced ones and advertising campaign positioned as a weight-wellness brand. - OWYN: Leading plant-based brand, expected near-term and long-term distribution growth, with joint R&D team working on extending the brand.

Quest: Q1 retail takeaway growth was 10%. Salty snacks POS growth was 26%. Chips retail takeaway in November and December was about 35%. Bar growth was about 1%. Net sales increased due to the OWYN acquisition. Atkins: Q1 retail takeaway was off 4%, slightly better than planned, driven by ready-to-drink shakes with about 5% retail takeaway growth. OWYN: Leading plant-based ready-to-drink protein shake, expected to double net sales in 3 to 4 years, with positive retailer conversations and integration progressing as planned.

• Reaffirmed fiscal year 2025 outlook: net sales growth in 4% to 6% range, adjusted EBITDA growth slightly greater than net sales. - OWYN fiscal year 2025 net sales expected to be in $135 million to $145 million range. - Total company adjusted EBITDA expected to increase 4% to 6%. - Quest fiscal year 2025 retail takeaway growth expected 9% to 10%, drivers include chips momentum, new bakeshop item, overload bar platform, and advertising campaign.

• Input cost inflation, particularly cocoa, impacting gross margin. - Proactive reduction of Atkins low ROI investments and lost club distribution pressuring brand performance. - Potential competitive activity in the plant-based segment impacting OWYN.

Q: Fine-tune expectations on gross margin side, previously discussed around 200 basis points of gross margin compression in each of next 3 quarters. Is this still the outlook?

A: Q1 margin came in better than expected due to favorable commodities, guidance for full year holds around down 200, Q2 expected gross margin decline close to above 300 basis points.

Q: Collaborative discussions with channel customer related to offsetting distribution losses for Atkins, any details on products and placement?

A: Conversations are midway, big fans of Quest and OWYN, hope to share more details by April.

Q: Overall category growth, has expectation changed?

A: Not materially, continue to be excited about high single-digit average growth, mainstreaming of nutritional snacking products.

Q: Shipment timing impact, clarify if entirely for Quest brand and alignment in 2Q?

A: About 2/3 of 3 points timing impact for Quest, Q2 expected shipments and consumption to be much more in line.

Q: Innovation for Atkins Snacks and Quest Bake Shop, how incremental are these products?

A: Atkins new items outperforming replaced ones by 2:1, Quest bakeshop platform 50% incremental to Quest and 30% incremental to category.

Q: OWYN Q1 sales better than expected, sales drivers and potential risks?

A: Q1 sales better than expected, growth from core and multipack, powders growing, significant headroom for distribution and LTO, no major risks noted yet.

Q: Atkins trajectory, more optimistic or January forward headwinds material?

A: Remain confident in long-term trajectory, but short-term actions like reducing low ROI trade will have volume impact, but long-term future strong.

Q: Quest bars, new product launch and differentiation?

A: Need low single-digit growth on bars, new overload platform launching, multiyear innovation pipeline, focus on advertising to drive growth.

Q: Input costs and pricing action, views?

A: Did pricing on RTDs, continue to evaluate commodities, focus on productivity now, no further pricing announced beyond mid-single-digit increase for RTDs.

Q: Atkins optimizing spend, margin implications? OWYN competitive landscape?

A: Reducing low ROI spend, margin implications tied to aligning spend with expectations; OWYN is clear plant-based leader, no major competitive changes noted.

Q: GLP-1 trend, how tapping into it?

A: Atkins advertising references GLP-1 users, launched Atkins Strong as companion, targeted advertising, Quest also benefits, working with customers on category support.

Q: OWYN repeat rate?

A: OWYN repeats improved significantly, tied to product improvements, expected to get better with combined R&D teams