The Simply Good Foods Company

Greetings and welcome to the Simply Good Foods Company fiscal first quarter 2024 conference call. At this time, all participants are in the listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Pogren, Vice President of Investor Relations. Thank you, Mr. Pogren. You may begin.

Thank you, Operator. Good morning. I'm pleased to welcome you to the Simply Good Foods Company earnings call for the fiscal first quarter ended November 25, 2023. Jeff Tanner, President and CEO, 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 this morning at approximately 7 a.m. Eastern Time. A copy of the release and the accompanying presentation are available under the investor section of the company's website at www.simplygoodfoodscompany.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 will 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 evaluate 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 underlining performance of the business. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for a reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. I'll now turn the call over to Jeff Tanner, President and CEO.

Thank you, Mark. Good morning, and thank you for joining us. Today, I'll recap Simply Good Foods' financial results and the performance of our brand. Then Sean will discuss our financial results in more detail before we wrap it up with a discussion of our fiscal 2024 outlook, and we take your questions. We're pleased with our fiscal first quarter results that were in line with estimates. Retail takeaway in the combined measured and unmeasured channels was slightly more than 8%, and as expected, outpaced net sales growth primarily due to the timing of shipments versus the year-ago period. We anticipate that shipments and consumption should be largely in line by the end of Q2. Net sales increased 2.6% to $308.7 million, driven by continued quest momentum. First quarter gross margin was 37.3% and in line with our forecasts. The 40 basis point increase versus a year ago period was primarily due to lower ingredient and packaging costs. Adjusted EBITDA in the first quarter was $62 million, an increase of 2% versus last year. Higher gross profit was partially offset by higher SG&A versus a year ago period, reflecting investments in marketing growth initiatives and G&A capabilities. Cash flow generation continues to be strong and provides us with financial flexibility to invest in organic growth, pursue value-enhancing acquisitions, pay down debt, or opportunistically buy back our shares. Our Q1 results are a positive start to the year, and while early, Q2 is off to a good start. Additionally, we have strong marketing and promotional plans in place for the new year, new year season, which started this week and which will run through the second quarter of fiscal 2024. We're pleased with the progress we've made on the acceleration plan for Quest and the revitalization plan for Atkins. As such, we reaffirm our full-year fiscal 2024 outlook. The next slide provides you with a perspective of our retail takeaway performance within the IRI new low-cost C-store universe and in the combined measured and unmeasured channel. The nutritional snacking category growth in the measured channel universe was 12%, driven primarily by volume or unit growth. The category continues to be a standout performer within brick and mortar and e-commerce, and as a result, is increasingly a focus of our retail partners as they look for growth opportunities. We have category advisors at most major retailers and we're working closely with them on how to further capitalize on the growth potential of this category. Simply Good Foods retail takeaway in the measured channel increased 7.1% driven by Quest volume growth of 20%. Atkins' performance was similar to last quarter. And our e-commerce business continues to do well and resulted in total company combined measured and unmeasured channel POS growth slightly better than 8%. Now let me turn to Quest Q1 Retail Takeaway, where combined measured channel growth was 20%. Growth was driven by solid performance across all major forms in retail channels, driven by an increase in both household penetration and buy rates. Our retail customers view Quest as the pioneer of the category, and they're excited about our near and long-term innovation pipeline and growth initiatives that we have in place. A major focus for us is working with those retail partners to find additional space and merchandising opportunities for the brand. In Q1, we estimate total unmeasured channel retail takeaway increased about 14% as e-commerce strength was partially offset by softness and specialty channels. There is no denying Quest's momentum. With nearly $700 million in net sales in fiscal 2023, we have essentially doubled the business since we acquired it in November 2019. Quest's retail sales in U.S. measured and unmeasured channels this past year was $945 million, so we clearly expect it will be a $1 billion retail sales brand in fiscal 2024. with a footprint across multiple forms. It's no small feat for a brand that's barely a dozen years old. In Q1, Quest bar business retail takeaway increased 16%. The snackier portion of Quest products continued to do well, with Q1 measured channel retail takeaway up 24%. We're particularly pleased with our salty snacks performance that we believe has a long runway of growth, Quest snacks segment now represents nearly 45% of total Quest measured channel retail sales and is roughly equal to Quest bars and household penetration. We expect that Quest will have a strong year behind innovation, distribution gains, and a new marketing campaign. I'm particularly excited to announce that we will debut a new advertising campaign in February that will be supported by a reach-based media model Despite the size of the business, the brand awareness of Quest is significantly below several competitors, and this campaign has the potential to further accelerate growth. Turning to Atkins, Q1 retail takeaway in the IRI, MULO, Carcisto universe and the combined measured and unmeasured channels, as expected, was similar to last quarter, off about 6% and 4% respectively. As has been the case for a while, Atkins' heavy users migrate to e-commerce, where we continue to see good growth. Specifically, Atkins' Amazon POS increased 12%. As a result, e-commerce was additive to Atkins' measured channel POS. For perspective, in Q1, e-commerce was about 15% of total Atkins retail sales. In Q1, Atkins' retail takeaway trend stabilized from when we entered the quarter. October marketplace performance was somewhat better than September and November. Note that given the consumption seasonality in November and December, we were not on-air with advertising, and we had minimal in-store merchandising. Now that the calendar has turned to January, we will heavy up on advertising and merchandising for the new year, new year season. We continue to have tremendous faith in the long-term potential of the brand. and in support, we're making good progress against the five-point Atkins revitalization plan we talked about on our last conference call. However, as you may recall, it's going to take some time before all of the elements of the plan are collectively in the marketplace. As a reminder, the Atkins five-point revitalization plan includes enhanced merchandising and assortment of select customers, new advertising supported with a reach-based media model, greater focus on a near and longer-term robust innovation funnel, product upgrades on our bar portfolio and new packaging, and multiple work streams targeting GLP-1 weight loss drug users. Getting Atkins back to green is our focus, and we believe we have the plans in place to improve marketplace performance over the remainder of the year. In summary, we're pleased with our start to the year, particularly our first quarter marketplace results. The Simply Good Foods company competes in an attractive category and is uniquely positioned as the U.S. leader in the nutritional snacking category with two scaled lifestyle nutritional snacking brands that are well-developed across multiple forms of snacking occasions. Nutritional snacking category continues to be resilient with top-tier volume growth propelled by the consumer megatrends of healthy snacking with a nutritional profile that is protein rich, low in carbs and sugar. This profile has broad appeal to consumers across all generations, but particularly with Gen X, Gen Z and millennial consumers that look to our brand as a means of helping them achieve their goals. Given the future growth runway of the nutritional snacking category, we continue to work closely with our retail partners on how to optimize the category today and where to source additional space from in the store to support new and emerging formats. We're executing against our priorities, and we remain committed to delivering against our commitments while making the necessary investments in our business that should result in sustained long-term growth. Now, I'll turn the call over to Sean, who will provide you with some greater financial details.