The Simply Good Foods Company

Greetings and welcome to the Simply Good Foods Company's fiscal year 2025 second quarter conference call. This time all participants are in listening mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. At this time, it is now my pleasure to introduce Josh Levine, Vice President of Investor Relations. Thank you, Josh. You may now begin.

Thank you, operator. Good morning and welcome to the Simply Good Foods Company fiscal year 2025 second quarter earnings call for the 13-week period ended March 1st, 2025. Today, 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 accompanying presentation are available on 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 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 and business model, we evaluate our performance on an adjusted basis as it relates to EBITDA and diluted EPS. Please refer to today's press release for reconciliation of the historical non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. The acquisition of Only What You Need Inc., Owen, was completed on June 13, 2025. Therefore, the company's year-ago performance for the 13 weeks ended February 24, 2024, does not include results of the Owen business. The reference to organic or legacy Simply Good Foods refers to Simply Good Foods' business, excluding Owen. All retail takeaway data included in our discussion today, unless otherwise noted, is for the 13 weeks ended March 2, 2025, and reflects a combination of MULO++C performance and company estimates for unmeasured channels as compared to the prior year. Finally, please note that today's earnings release includes a new table summarizing net sales by geography and brand for the current and prior year periods. I will now turn the call over to Jeff Tanner, President and CEO.

Thank you, Josh. Good morning, everyone, and thank you for joining us. I'll begin by reviewing our performance during the quarter. Then, Sean will discuss our financial results in more detail before we wrap it up with a discussion about fiscal year 2025 outlook and your question. Before I begin, I want to acknowledge the announcement we made back in January. that our CFO, Sean Mara, will be retiring this summer following a long and successful career. Sean has been with the company in multiple senior management roles for many years, including as CFO of Atkins Nutritionals prior to the IPO and as the leader of the highly successful integration of Quest. More recently, in addition to leading our finance organization since late 2022, Sean has been instrumental as a partner to me and as a strategic thinker and phenomenal financial executive. On behalf of everyone at Simply Good, I wish Sean continued success in retirement. I'm also thrilled to welcome Chris Beeler to Simply Good Foods. Chris joined us last week as Senior Vice President of Finance and is expected to succeed Sean upon his retirement in July. Chris brings almost 23 years of experience in consumer packaged goods and consumer durables in North America and global markets, and like Sean, has extensive financial, strategic, and operating experience. Chris is here with us today. However, given it's day seven for him, he won't be available for questions. Turning to our results. Our momentum continues with double-digit growth for Quest and Owen, more than offsetting declines for Atkins. Specifically, first half retail sales for Quest and Owen, which collectively represent approximately 70% of our net sales today, increased 12% and 57% respectively. Across the company, we are executing well, adding new doors, winning with innovation, and driving brand awareness and household penetration. Specific to the quarter, net sales increased 15% versus last year, with 4% organic growth, driven by Quest performance. Assuming Owen was included in the year-ago period, retail takeaway for total Simply Good Foods grew 7%, and adjusted EBITDA increased 18%. Sean will provide you with more details on our Q2 results shortly. Our growth and long-term strategy are underpinned by solid category fundamentals. We remain excited by the trajectory of the nutritional snaking category, as well as the interest and engagement from our retail partners. Total nutritional snaking category growth was 12% in Q2, marking the 16th consecutive quarter with category growth of at least high single digits. Category growth reflects the continued mainstreaming of consumer demand for high protein, low sugar, low carb food and beverage options. With a diversified portfolio of three uniquely positioned brands aligned with these consumer megatrends, we believe Simply Good is well positioned to lead this generational shift in food and beverage. Let me now turn to Quest. which delivered another quarter of strong double-digit retail takeaway in net sales growth. Quest now represents 60% of the company's net sales, is one of the leading brands in the nutritional snaking category, and is arguably the pioneer of the mainstreaming of this category. As Quest approaches $1 billion in net sales, we continue to see a long runway for growth, led by three key drivers. First, leading with innovation. By leveraging our world-class R&D and supply chain teams, we will build upon current platforms and enter new adjacent categories ripe for disruption. Our salty snacks platform is a great example where we've grown to a $300 million plus business in just the last few years. Second, expanding physical availability of our products. We continue to seek ways to grow our presence across the store and online. This includes continuing to expand distribution in our current aisle, introducing the Quest brand in mainline snacking aisles, and increasing displays and merchandising everywhere, as well as penetrating new channels. And third, increasing brand awareness. Quest's disruptive It's Basically Cheating campaign last year was a tremendous success driving both a short and long-term increase in net sales. Since we dropped the ads, household penetration is up over 100 basis points. However, at only 15% unaided brand awareness for the brand today, we have lots of room for further upside. Q2 retail takeaway for the brand was up 13%. There were several key drivers of Quest growth in the quarter. First, we saw continued broad-based growth from our Salty Snacks platform, which was up 45% in the quarter and which now represents approximately 35% of total Quest retail sales. Growth was enabled by the doubling of manufacturing capacity last fall that supported strong customer service levels and very strong merchandising and display support. An exciting element of our growth on Quest Salty was a successful national test at a key club customer, which was a nearly three-point benefit to our consumption growth in the quarter. We are in active dialogue about further opportunities with this customer, where we're confident we can build a robust business in the quarters and years to come. Considering the size of the broader salty snacks category, low household penetration and awareness, leading loyalty rates, strong velocities, and high incrementality, We remain very confident there is a long runway for growth for our salty snacks business. The second driver of Quest growth was the continued success of our Bakeshop platform, which has proven to be highly incremental to the brand and the category. We're excited about the future expansion we have coming on this platform in the fall. And third, as mentioned, the ongoing effect of our award-winning It's Basically Cheating advertising campaign. Turning to Quest Bars, we're particularly excited about the launch of our new overload bar platform, which you should have already begun to see show up on shelves and online. As a reminder, our delicious overload bars come in three highly indulgent flavors and are loaded with inclusions. Finally, as we announced last month, we recently launched a line of delicious ready-to-drink Quest milkshakes. Sticking to Quest's disruptive ethos of flipping the macros, each milkshake features 45 grams of complete protein from ultra-filtered milk with only 2 grams of sugar and 4 grams or less of net carbs. We have been encouraged by initial retail acceptances for our three flavors of vanilla, chocolate, and strawberry, and we're excited about the opportunity. Similar to our overload bars, you should expect ACV to build through the calendar year. To wrap it up on Quest, we're pleased with our Q2 performance and we've increased our retail takeaway assumptions for the year, with growth now expected to be in the low double digit range. We continue to be very excited about the momentum and continued runway for the brand. James Atkins, consumption declined 10% with combined January and February down low double digits. As we discussed on our Q1 conference call, Accelerated declines were expected due to not repeating significant year-ago volume driving displays and bonus pack programs at several key customers. Not repeating these events accounted for almost all of the incremental declines relative to negative 4% takeaway growth in Q1. Importantly for TotalSimply, we were able to successfully partner with retailers to shift display support into Quest and OWIN. which both saw expanded features and displays to begin the calendar year. Similarly, at a key club customer, where Atkins is losing significant distribution this year, we have partnered to replace lost SKUs with wins for more productive Quest and Owens SKUs. You will see those contributions build over the next year and be a benefit to growth for the total company. At roughly 30% of our net sales today, we know that Atkins' trends are a meaningful drag on growth. As discussed, our goal is to right-size investment levels on the brand in support of building a sustainable, healthy business. These decisions will create short- to medium-term headwinds. Specifically, the declines we've observed since January will continue through Q3 and into Q4. Again, these declines are due to lapping significant low ROI merchandising from the year-ago period and distribution losses at club. Again, to reiterate, we are partnering to offset those space declines with increases for Quest and OEM that will show up over the next six to 12 months. As a result of our first-half performance and modestly reduced retail takeaway expectations for the second half, we now expect full-year POS to decline in the low double-digits range. While we expect a smaller footprint for Atkins moving forward, our consumer research and customer conversations continue to reinforce a strong need for a brand to help consumers with their weight loss journey. An important subset are those on GLP-1 drugs, where our research clearly shows an opportunity to position Atkins as an ally to consumers using or coming off these drugs. we remain committed to supporting the brand with strong innovation, new packaging, a new website, and new advertising. This includes building upon our recently introduced Atkins Strong platform, which is resonating with new and existing households. All in, we believe the actions we are taking will improve the trajectory of the brand over time in support of building a healthier, more profitable, and sustainable long-term business. Moving on. Owen had another strong quarter, with retail takeaway up 52%. Ready-to-drink shakes grew 53% with distribution up 22%, helped by expanding into new doors and by adding more SKUs per store. Owen remains one of those rare gems that can grow distribution and velocity in parallel. Even as we lapped significant distribution gains at Club from a year ago, we continue to be very optimistic about the year. supported by ongoing velocity growth and some incremental distribution gains beginning this spring. Owen is one of the fastest growing brands of scale in the category. However, while we're very pleased with trends on the business today, there are several reasons why we believe we are still in the early innings of Owen's growth story. First, while Owen has emerged as the clear plant-based leader, with RTDs turning 50% faster than our nearest competitor in MULO channels, The brand's superior taste profile is increasingly attracting mainstream consumers, which make up the lion's share of the high-growth $8 billion category. Second, the brand has low single-digit household penetration and awareness. Third, despite such low awareness levels, Owens Velocities and Emulo Channels today are already among the industry leaders in its core four-pack subsegment, with continued double-digit momentum at many retailers. And fourth, we average about seven SKUs per store today, well below most competitors. And as we proved with Quest, our sales force is highly effective at driving distribution growth. With continued velocity increases and our plan to add new doors, channels, flavors, and pack sizes, we remain confident we can double net sales of the core business in the next three to four years. The integration is progressing well, and with synergy capture starting at the onset of fiscal 26, we are confident Owen will deliver on its adjusted EBITDA margin targets. To summarize, Simply Good is uniquely positioned as the leader in the fast-growing nutritional snaking category. Obviously, it's a dynamic time with a lot of uncertainty and pressure on consumer sentiment, but with that said, By far the majority of our products are made and sold in the United States. We have a very agile supply chain using code packets for all our products and our category over indexes with high income consumers with relatively low levels of private label and promoted volume. But despite today's uncertain backdrop, we plan to be at the forefront of the generational shift as demand for high-protein, low-sugar, and low-carbon food and beverage products continues to mainstream. We will do this by continuing to introduce innovative and delicious new products, expanding our physical availability across the store, and through our brand-building initiatives. And with approximately 70% of our portfolio through Quest and OM driving aggregate double-digit growth, we are confident in our ability to deliver sustainable growth and create meaningful shareholder value. I'll now turn the call over to Sean to provide you with details of our financial results.