The Simply Good Foods Company

Good morning and welcome to Simply Good Foods Company Fiscal Third Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would now like to hand the call over to Mark Pergarian, Vice President of Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning. I'm pleased to welcome you to Simply Good Foods Company earnings call for the fiscal third quarter ended May 27, 2023. Joe Scalzo, CEO, Jeff Tanner, President, COO, and CEO-elect, and Sean Mara, CFO, will provide you with an overview of results, which will then be followed by a Q&A session. The company issued its earnings release early this morning at approximately 7 a.m. Eastern time. A copy of the release and accompanying presentation are available under the investor section of the company's website at www.thesimplygoodfoodscompany.com. This call is being webcast and an archive of today's remarks will also be available. During the course of today's call, management will make forward-looking statements that are subject to various risks and uncertainties that may cause actual results to differ materially. The company undertakes no obligation to update these statements based on subsequent events. A detailed listing of such risks and uncertainties can be found in today's press release and the company's SEC filings. Note that on today's call, we refer to certain non-GAAP financial measures that we believe will provide useful information for investors. Due to the company's asset-light, strong cash flow business model, we evaluated our performance on an adjusted basis as it relates to EBITDA and diluted EPS. We have included a detailed reconciliation from GAAP to adjusted items in today's press release. We believe these adjusted measures are a key indicator of the underlying performance of the business. The presentation of this information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Please refer to today's press release for reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. With that, I'll now turn the call over to Joe Scalzo, Chief Executive Officer.

Thank you, Mark. Good morning, and thank all of you for joining us. Today I'll recap the company's third quarter results, and Jeff will provide you with some perspective on the performance of our brands. Then Sean will discuss our financial results in a little bit more detail before we wrap it up with a discussion of our outlook, as well as taking your questions. Moving on to the third quarter results, retail takeaway and our overall financial performance were greater than our expectations. Simply Good Foods' third quarter point of sale in the combined U.S. measured and unmeasured channels increased about 11%. As expected, retail takeaway growth outpaced Q3 net sales growth of 2.6%, principally due to the prior year retail customer inventory bill. Sean will provide more details on the difference between net sales and point of sale growth in a bit. Net sales growth was driven by North American performance or about the same as last year. Request momentum continued, resulting in net sales increase of about 9%. Third quarter gross margin was 36.7% and exceeded our estimate as input costs moderated versus our forecast. Gross margin declined 80 basis points compared to last year as ingredient and packaging costs were higher than the year-ago period. Encouragingly, And as we expected, the magnitude of these cost increases eased substantially from those in the first half of the year. Adjusted EBITDA in the third quarter was $66.6 million versus $63.3 million in the year-go period. The $3.3 million increase was greater than our forecast due to the better-than-expected net sales and gross margin performance, as well as good SG&A cost control. This provides us with some flexibility to make additional investments as we move into the fourth quarter. Now, I'd like to pause here to just say thank you. It's been a pleasure to lead the company. I'm so proud of our team and everything that we've accomplished during the past six years. I've always appreciated the insights and the questions that you provided in all of the various calls and meetings that I've participated with you. You've made me a better leader, and the Simply Good Foods company a better company, so thank you. As we announced in January, Jeff Tanner will become president and CEO on July 7th, and I'm pleased to be staying on as executive vice chair of the board. I know you have all heard me say more than a few times that I love this category, and I love the hand that I've gotten to play as CEO of Simply Good Foods. Well, I can think of no better person to take over this hand than Jeff. I've gotten to know him better over the past few months. He has an infectious enthusiasm for our company, for our brands, and for driving growth. He brings passion and ideas to the business that only make us a better company. I know many of you have met Jeff and know that he's an experienced leader with superb marketing and commercial capabilities. So now let me turn the call over to him to provide you a summary of third quarter brand performance and some of his initial observations of the company. Jeff.