The Simply Good Foods Company

Greetings. Welcome to the Simply Good Foods Company's first quarter fiscal year 2026 earnings call. At this time, all participants will be in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Joshua Levine, Vice President of Investor Relations and Treasury. Thank you. You may now begin.

Thank you, Operator. Good morning and welcome to the Simply Good Foods Company's first quarter fiscal year 2026 earnings call for the period ended November 29, 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 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-like 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 a reconciliation of our non-GAAP financial measures to their most comparable measures prepared in accordance with GAAP. Finally, all retail takeaway data included in our discussion today, unless otherwise noted, reflects a combination of Cercana's MULO++C measured channel data and the company estimates for unmeasured channels for the 13 weeks ended November 30, 2025, as compared to the prior year. I will now turn the call over to Jeff Tanner, President and CEO.

Thank you, Josh, and thank you for joining us for our call. I'm pleased with our Q1 performance, and want to reiterate our confidence in our plans for the balance of the year. As a result, we are reaffirming our full-year outlook for net sales and adjusted EBITDA. Consumption in Q1 grew 2%, led by double-digit growth from Quest and Owen, which combined to generate 71% of our net sales. This was offset by expected declines on Atkins. Quest and Owen continue to benefit from expanded distribution and marketing. with added contribution from recent innovation. Growth was also supported by another robust quarter of the nutritional snacking category, which grew 10%. We are executing well on initiatives to drive the top line and to rebuild our growth margin. Specifically, with respect to our margin, recent pricing actions are now reflected on shelf, with elasticities to date in line with our expectations. albeit data remains limited. Our robust productivity program, which we started 18 months ago, is delivering results, taking costs out of the system and ensuring we have a multi-year pipeline of initiatives for the future. These gains, which will be easier to see in the second half once we're past the peak levels of inflation, is a testament to the hard work from everyone in our organization, particularly the supply chain and operations teams. Finally, we took advantage of the opportunity to extend supply coverage at attractive year-over-year prices on several key inputs, most notably COCO, where we have now locked in incremental supply at sequentially more favorable levels, which will begin to flow into the P&L late in Q4 and into fiscal 2027. We know our results for the first half of this fiscal year, the reasons we've discussed previously, are below our longer-term expectations. However, we remain confident that our top and bottom line performance will improve once we get beyond Q2, and as mentioned, we are reaffirming our full-year outlook. With this in mind, and with our stock at levels that we believe discounts our long-term growth opportunity, we borrowed an incremental $150 million during the quarter that allowed us to accelerate our share buyback program. Since the start of the year, we have repurchased over 7% of our common stock. And as you saw in our press release today, the board authorized a $200 million increase to our existing share repurchase program. Our decision to repurchase our stock reflects our continued confidence in a long-term runway, and we expect to continue with this program as long as the opportunity remains attractive. Simply Good Foods is well-positioned as a leader in the nutritional snacking category. The growth is being propelled by the mainstreaming of consumer demand for high-protein, low-sugar, and low-carb products. We have a strong foundation for sustainable top-line growth, which, coupled with our history of strong margins and a proven track record of successfully converting a significant percentage of adjusted EBITDA into free cash flow, I believe will create shareholder value for the long term. Turning to our brands, Quest had another solid quarter, delivering 12% consumption growth and nearly 10% growth in net sales. Key brand metrics are up nicely. Outdoor penetration reached nearly 20% this quarter, up 200 basis points year over year, and up 50 basis points versus last quarter, a continuation of sequential momentum observed for some time. Our Salties Max business once again performed very well in the quarter. with consumption up 40%, reflecting underlying distribution gains in velocity growth, as well as somewhat easier year-ago comp when we were supply constrained. As a result, household penetration for Quest Salty surpassed 10% this quarter, up 220 basis points over the last 12 months. Our Salty innovation strategy has been focused on developing and launching a full suite of exciting flavors, which continue to prove highly incremental. This is enabling us to build a highly visible brand block on shelf that enhances our leadership position. We're also introducing channel-specific packs, helping us attract new households and expand product usage occasions. To put this into perspective, ACV was up nearly five points in the quarter versus the prior year, and average items per store were up 34%. With visibility to further distribution gains and strong merchandising ahead, we remain confident in sustained growth for our salty business. Quest Bar's consumption is flat versus the prior year in Q1, with solid results from our Tasteboard Crispy Lines and new overload platforms. As I've said in the past, re-accelerating growth in our bar business is a critical imperative with overload the first step. Beginning in the second half, we expect to benefit from several additional initiatives which are already underway, including further platform innovation and improved in-store activations and merchandising to drive trial. We are hyper-focused on ensuring strong execution of these initiatives and improving performance of this important segment. Lastly, we continue to see solid performance of our new 45-gram protein milkshake, which during the quarter gained an additional eight ACV points. We are gaining trial-focused placements across the store, including a number of new opportunities we've secured, at several retailers this winter and spring. In addition, our high-protein donut launched this quarter, initially on e-commerce and more recently with a large mass retailer. We expect ACB to ramp in the coming months as more retailers reset their shelves, which will provide us with a better read on performance. As we look ahead in the short term, we have a robust new year merchandising program in place, including significant off-shelf displays both in and outside our aisle. I want to remind you, as we said last quarter, that consumption growth in Q2 will be below the full-year outlook, in large part due to business with a key CUB customer, shifting from Q2 focus last year to more balanced across the rest of the year. However, we remain confident that these strong in-store activations and trial driving activity will deliver continued household penetration gains, positioning the brand for a strong second half. As a result, Quest remains on track to deliver high single-digit consumption growth, consistent with our outlook from last quarter. The brand is our largest and highest margin business. Retailers view it as the innovation leader in the category, which is why we are benefiting from significant distribution and merchandising gains today with line of sight to further expansion in the spring. Finally, we continue to invest heavily in marketing, brand building, and new capacity and production capability to support ongoing demand. Shifting to Atkins. Consumption declined 19%, consistent with our outlook. Declines were largely driven by lost distribution at several key retailers, which accounted for two-thirds of the headwind. As was said previously, we continue to work strategically with our retail partners to find the proper breadth and assortment for the brand and to repurpose space that actions tail in favor of incremental gains, a more productive quest, and O&Q, all in an effort to get a core assortment with a clear, differentiated position in the category focused around weight. These actions are consistent with our fiscal year outlook for the brand, which continues to call for consumption declines around 20%, driven mostly by distribution losses. Over the last few months, many of our initiatives to modernize the Atkins brand have begun to hit the market. These include introducing a four-pack within our meal bar portfolio, offering consumers a more attractive entry price point, new packaging across nearly every SKU, an updated website, and refreshed marketing. Our shift to sharpen our opening price points with a four-pack and meal bars, is doing what was intended, with unit velocities on average up high single digits year over year, building trial and repeat rates, and a 300 basis point increase in the percentage of new buyers added to the brand. As we're only one quarter into this initiative, we will continue to assess the benefits at the lower price point versus the overall revenue that the business generates over time. I would highlight that improved brand health, including new buyers and repeat rates, is an important series of KPIs we will monitor and consider as we work to stabilize the business. The core promise of Atkins has always been to help consumers reach and maintain their weight goals, backed by science and proven results. As we continue to see a segment of consumers turn to GLP-1 drugs to help them with their weight loss, we recently concluded a pilot clinical study to assess the effectiveness of Atkins for consumers using GLP-1 drugs. The study showed several encouraging results, including positive data around muscle mass retention, digestive comfort, and certain metabolic markers important to consumers with diabetes. GLP-1 drugs are clearly a game changer for many people in how they lose weight, and we're excited in the coming months to share more information about our research into how Atkins' nutritional approach can help these consumers achieve their goals. Moving on, we were pleased to see Owens' performance in market this quarter, with consumption up 18%, benefiting from distribution-led growth for RTDs and powders, and an ongoing test in some club stores. Outside penetration was up 100 basis points to 4.5%. In the near term, consistent with our outlook from last quarter, we expect Q2 consumption growth to slow somewhat due to the impact of initial elasticities following the recent pricing actions. lapping elevated prior year promotional levels and a lingering impact on velocity from the product issues we talked about on our last call. I'm pleased with our team's effort to address the product quality issues. We've seen our ratings level improve versus the summer, helped by our new and improved formula, which has been shipping since August. But we also know we have work to do to rebuild the quality perception for some consumers. As we look ahead, we remain confident in the brand and will leverage the full scale and capabilities of Simply Good to drive growth of the business. This includes leveraging our sales force to fill ACV opportunities, narrowing the gap for leading peers, increasing marketing double digits this year with marketing as a percentage of sales expected to exceed 10%. Household penetration is only 4.5% and brand awareness is only 20%. pointing to a significant opportunity for more consumers to discover the brand. And lastly, launching both close-in and platform innovation, building upon the brand's strong position and authenticity in the fast-growing clean label movement. To summarize, with only one quarter of the year completed, we are reiterating our full-year outlook. We're on track and remain confident in our plan. I want to close by thanking our team. They have attacked marketplace challenges head-on with resilience and agility. Our nimble and flexible operating model, short and long-term growth opportunities for Quest and Owen, and strong margins and balance sheets position us well. We are taking the right actions for the business to enhance our growth factors and to position the company to win for the long term. I'll now hand the call over to Chris.