The Simply Good Foods Company

Greetings and welcome to the Simply Good Foods Company Fiscal Fourth Quarter 2025 Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Joshua Levine, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Operator. Good morning and welcome to the Simply Good Foods Company's fourth quarter and full fiscal year 2025 earnings call for the period ended August 30, 2025. Today, Jeff Tanner, President and CEO, and Chris Beeler, CFO, will provide you with an overview of our results, which were provided in our earnings release issued earlier this morning. Our prepared remarks will then be followed by a Q&A session. A copy of the release and accompanying presentation are available on the investors section of the company's website at the simplygoodfoodscompany.com. This call is being webcast and an archive of today's remarks will be made available. During the course of today's call, management will make forward-looking statements which 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. On today's call, we will refer to certain non-GAAP financial measures that we believe provide useful information for investors. Due to the company's asset-light, high-cash flow 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 our non-GAAP financial measures to their most comparable measures prepared in accordance with GAAP. The acquisition of Only What You Need, or OWIN, was completed on June 13, 2024. As we have now lapped the anniversary date of the OWIN acquisition, the use of organic refers to year-over-year growth for brands we have owned for more than 12 months on a comparable basis. For Q4, organic growth includes year-over-year growth for Simply Good Foods' business, excluding the period of time prior to the closing of the Owen acquisition, as well as the impact of lapping the extra week in the fourth quarter of fiscal year 2024. Finally, all retail takeaway data included in our discussion today, unless otherwise noted, reflects a combination of Circona's MULO++C measured channel data and company estimates for unmeasured channels for the 13 weeks ended August 31, 2025, as compared to the prior year. 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. Fiscal year 2025 was a solid year for Simply Good Foods. We delivered 9% reported net sales growth, including 3% on an organic basis, and grew adjusted EBITDA by 3%. On a pro forma basis, including Owen, but excluding the extra week from the prior year, net sales increased over 4% with adjusted EBITDA up approximately 6%. We largely completed the integration of Owen invested in our people and capabilities, and put our cash to work, paying off $150 million of debt and repurchasing more than $50 million of our stock. Our vision is clear, to be the scaled leader in high protein, low sugar, and low carb food and beverage. There is a generational shift towards these products that is quickly mainstreaming, one of the most impactful trends in food and beverage today. This is best highlighted by the continued strength of the nutritional snacking category, our traditional aisle, which includes on-trend high-protein performance nutrition, as well as adult nutrition and several other fast-growing subcategories. In aggregate, this broader category has grown at least high single digits for the past five years and grew plus 13% this year, reinforcing how relevant it is today and supporting studies that show more than 70% of Americans are actively seeking more protein and less sugar as well as fewer carbs in their diets. In support of our vision, we have been on a journey to rapidly evolve our organization to win in this exciting and dynamic space. In the last couple of years, we have rapidly shifted our portfolio. Quest and Owen now represent nearly three quarters of our net sales, with both growing double digits in fiscal year 2025. Quest, which generated almost two-thirds of the company's net sales in Q4, is the category disruptor, flipping the macros on large mainstream snacking categories. Over the past two years, we have accelerated the pace of product innovation while broadening our reach, with marketing up about 50% since fiscal 2023 and household penetration now approaching 20%. Our recent acquisition of OM enhanced our presence in the fast-growing ready-to-drink shake segment while positioning us to become a leader of the rapidly accelerating clean label movement. To support our fast-growing salty snacks business, we're expanding capacity for the second time in two years with construction on an additional production line now in progress. We increased our investment in innovation, strengthening R&D, and reducing time from concept to launch. We invested in new sales talent and selling capabilities, expanding our opportunity to drive distribution both within and beyond our core aisle and to deepen penetration within channels. And we ramped up productivity initiatives to combat inflation and free up funds to fuel our growth. Additionally, to compete and win in our space, we have consciously increased our organizational output across all facets of the company. We have challenged ourselves to reduce lead times in innovation and marketing, embrace agility in our supply chain, and evolve our marketing playbook to incorporate an insurgent mindset to compete against brands, large and small. The goal as an organization that combines the agility and speed of an insurgent challenger with the advantages of scaled R&D supply chain and selling capabilities. I am excited by the improvements we've made and how these actions position our company to win. In the near term, however, we must address two important challenges. We understand the magnitude of each, have plans against both, and are confident we will work through these headwinds as we continue to evolve the company. First, as we've discussed in the past, Atkins is losing shelf space in the highly competitive nutritional snacking aisle. Over the last several years, as sales for this category doubled in size with space at a premium, Atkins' large distribution and merchandising footprint has come under pressure, with sales declines in recent periods mainly driven by distribution cuts at several retailers, especially at Club and Mass. Seventy-five percent of Atkins retail sales today come from approximately half of its SKUs, which turn in the top two quartiles of the category velocity rankings. As we enter fiscal 26, our tail SKUs that turn in the bottom of category velocity rankings have been trimmed back at some accounts. As we consider potential future distribution risk across our top accounts, it's important to note that only approximately 10 to 15% of Atkins SKUs on average are still in the bottom quartile today. While painful in the short term, this process will better align Atkins shelf space with sales in support of a sustainable business powered by a strong core assortment. Encouragingly, at a large retailer where we recently saw a double digit decline in distribution, our average velocities are up nicely across the reset. giving us confidence we're on the right track. To help strengthen the brand and attract new consumers, in September we began to flow into market several initiatives. These include new advertising that reorients Atkins from a more general lifestyle brand back towards weight management, as well as modernized packaging, innovation, and an updated website. We've also brought to market a smaller pack size within our bar portfolio, providing consumers a more attractive entry price point intended to stem declines in one of the more challenged parts of the business. Our strategy acknowledges the need to right-side the Atkins space rather than trying to prop up our underperforming tail. A key component of this approach is proactively working with senior teams at our key retailers to manage our assortment and flow back to support the continued expansion and prioritization of Quest and Owen. Again, while these decisions may be painful for the Atkins brand in the short term, we're taking the right decisions and the right actions for the brand, the category, and for Simply Good. Our second major challenge is inflation. In order to ensure we had adequate supply to meet consumer demand, We contracted for cocoa at historically high prices, which, in addition to tariffs, weighed heavily on our margins in the back half of fiscal 2025. This pressure will continue in the first half of fiscal year 2026. At this point, we're confident our gross margins will improve, beginning modestly in Q3 and more meaningfully into Q4, driven in part by the coverage we've already secured on cocoa through most of the second half at rates well below prior year. We continue to monitor the markets and note that current spot levels present further potential favorability as we exit this year and primarily into fiscal 2027. In addition, we've also responded to inflation with aggressive productivity actions and pricing, which we announced to the trade in August and which will be in market by the end of Q1 of fiscal 2026. I'm pleased with the significant progress our teams have made on productivity, a capability that we've significantly expanded over the past two years with benefits that will flow into our margins in the second half of fiscal 2026 and into 2027. Looking ahead, we're in a strong position. We operate in an on-trend high-growth category, benefiting from a generational shift towards high-protein, low-sugar, low-carb products. We will lead this shift and create value for our shareholders by accelerating innovation, expanding physical availability of our products, and from breakthrough marketing. Our world-class R&D team, asset-light model, category leadership role with retailers, and enhanced selling capabilities give us a competitive edge, and our strong balance sheet provides optionality for M&A. Turning to Quest, which represented almost two-thirds of our net sales in Q4. Quest delivered year-over-year consumption growth of 11% in the quarter and expanded household penetration to 19%, up 170 basis points versus prior year. For fiscal year 2025, Quest grew consumption 12% and net sales of 13% on a 52-week basis, hoping to deliver a five-year KGIF of nearly 20% under our ownership. As the brand approaches $1 billion in net sales, we're very pleased with its performance, and we remain confident in our ability to continue to disrupt the nutritional macros across many categories. Credit goes to the Quest team, a nimble and competitive culture, and a framework for growth based on disruptive innovation, expanding physical availability, and increasing brand awareness. Our Quest salty snacks portfolio continues to outperform. with consumption up 31% for the quarter and 34% for the full year. From representing 20% of Quest's retail sales three years ago, Salty is on target to be our largest platform by the end of fiscal year 2026. The size of the addressable market is large. We have a rich pipeline of innovation. We continue to gain shelf and merchandising space in and outside our aisle. And as mentioned, we've invested to expand capacity. Our Quest bar business grew 2% in Q4 and for the full year, driven by our Hero line and our new Overload bar platform. If you recall, our Hero or chocolate-covered crispy line of bars and our recently launched Overload bars with delicious inclusion-heavy offerings are part of the wave of more indulgent protein bars. These products amp up taste and texture while delivering the nutritional macros consumers are looking for. While we're moving in the right direction on bars, Our goal is to further accelerate our growth in this space. Over the past 18 months, we've built an impressive pipeline of exciting new bath forms, flavors, and textures that we'll bring to market in the coming years. Our Quest Bakeshop platform continues to perform, and I'm excited for the launch of our first Bakeshop line extension, a great-tasting, high-protein doughnut expected to hit shelves during Q1 of fiscal 2026. We're also encouraged by the early performance of our new RTD milkshake platform, which is disrupting the category in a way only Quest can, with leading macros and great taste. With strong commercial execution and more platform expansion to come in the spring, we're confident we can win in the fast-growing competitive RTD category. Lastly, we're thrilled with the recent launch of the second generation of our It's Basically Cheating advertising campaign. Campaign of humorous ads highlights how Quest uniquely enables consumers to succumb to their food desires by resolving the inherent tension between food that tastes great and food with good nutrition. Ads have already begun on Thursday Night Football and will continue to be featured across a range of digital, social, and other media properties throughout the year. Quest is our largest and highest margin brand and the innovation leader in the category. As we rapidly evolve our organization, Quest will be at the forefront, continuing to deliver strong growth. Moving to Atkins, fiscal year 2025 was a challenging year. Consumption declined 12% for Q4 and 10% for the full year, largely driven by losing distribution at club and not repeating certain high volume, low ROI merchandising events principally in mass. Challenges continue to be concentrated primarily in bars and confections. whereas shakes were down 4% and a quarter and only 2% for the full year, supported by the success of the 30-gram Atkins Strong RTDs we launched a year ago. In the e-commerce channel, where space is not a constraint, we continue to drive solid growth with a key partner up mid-single digits. As mentioned, as we evolve our company, Atkins will be a more focused brand around a core assortment, and we are being proactive in our efforts to get there. We acknowledge that there will continue to be short-term pain for Atkins, with consumption expected to decline approximately 20% in fiscal year 2026. Consumer research continues to show that Atkins' core strength lies in its scientific credibility and proven history of helping consumers achieve their weight loss or maintenance goals. In short, Atkins works. This gives us confidence that even as we are partnering with key retailers to repurpose Atkins Space to accelerate growth for Quest and Owen, we're making the right investments and taking the correct action to stabilize and ultimately support the long-term sustainability and profitability of the brand. Turning to Owen, consumption grew 14% in the fourth quarter and 34% for the full year, with household penetration up 100 basis points to 4.2%. Double-digit RTD retail sales benefited from new distribution gains at a key mass customer and a tested club. I want to address the somewhat slower consumption growth we've observed over the last few months. The impact of lapping distribution, which I've discussed before, was exacerbated by a product quality issue related to a raw material sourcing decision for pea protein made prior to the closing of the acquisition. Specifically, this pea protein which was used in a portion of production during Q2, resulted in taste and texture issues on certain lots as the product aged. While the affected product made up only a small minority, I want to be clear that it was 100% safe and met all of our allergen testing protocols. However, the product experience was poor and showed up in ratings and reviews. Therefore, as we ran distribution and trial coming into Q4, our consumer response was not as robust as we would have liked, and as a result, velocity slowed. We have already mitigated the issue and began aggressive programming and trade and customer marketing aimed at re-accelerating trial and growth rates. In spite of the challenge, Owen still grew double digits in Q4, which is a testament to the unique positioning and strength of the brand. And early on here in Q1, Owens sustained a mid-teens growth rate in September, even as it lapped a big event at club last year. With the integration largely completed, we will now leverage the full scale and capabilities of Simply Good to drive growth of the business. In fiscal year 2026, this will include significantly stepped up trade and marketing investments I spoke about. In addition to leveraging our retail teams to drive displays, both distribution gaps and bring highly differentiated innovation to market. In addition to shakes, powders also represent a huge opportunity for us. At 12% of the brands mixed today, growing significantly. Owen's mission is to forge a new standard of clean. Its products are free from the top nine allergens and have a cleaner and simpler list of ingredients. Simply put, Owen is built for today's evolving consumer preferences. Recently completed research shows Owen has leading equities in clean, plant-based nutrition. Aided awareness is low at 20%, reflecting significant hedron with ACV for shakes in the mid-60s and only 26% for powders. This is why we must invest more to drive awareness and build household penetration. We're only scratching the surface for what this brand can be, and we're fully committed to unleash its full potential. To summarize, fiscal year 2025 was a solid year, but much work remains to evolve the company to win in this exciting category. I acknowledge our guidance for fiscal 26 is below our long-term algorithm. and we are committed and confident we're making the right investments and taking the right actions in fiscal 2026 to set up fiscal 2027 for success. Approximately three-quarters of our portfolio through Quest and Owen is driving strong top and bottom line growth. We're building a fast-paced agile culture backed with world-class capabilities necessary to win in this category. With Quest and Owen driving growth, Atkins being reshaped for the future, and productivity and pricing initiatives underway, we're confident in our ability to deliver sustained growth and value creation for years to come. I'll now hand the call over to Chris to provide you with details of our financial results and outlook.