The Simply Good Foods Company

Greetings and welcome to the Simply Good Foods Company fiscal fourth quarter 2026 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the 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, Matt Siler, VP Investor Relations and Treasury. Thank you. You may begin.

Thank you, operator. Good morning and welcome to the Simply Good Foods Company's fourth quarter and fiscal year 2026 earnings call for the period ended August 29, 2026. I'm joined this morning by President and CEO Joe Scalzo and Chris Beeler, Chief Financial Officer. A copy of our earnings release and accompanying presentation is available on the Investors section of the company's website at thesimplygoodfoodscompany.com. This call is being webcast and an archive of today's remarks will be made available. During 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 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. All retail takeaway data included in our discussion today, unless otherwise noted, reflects a combination of Sercana's MUVO++C measured retail channel data and company estimates for unmeasured channels for the 13 and 52 weeks ended August 29, 2026, as compared to the prior year. I will now turn the call over to Joe Scalzo.

Thanks, Matt. Good morning, everyone, and thank you for joining us today. This morning, I'll explain how the actions we took in fiscal 26 have positioned Simply Good Foods to restore the economics of the business, rebuild consumers' connection with our brands, and improve performance as fiscal 27 progresses. I will then review our fourth quarter results and update you on the actions underway across our brands. Chris will then provide more detail on our financial performance and our fiscal year 2027 outlook. before we open the call to your questions. Before I summarize our quarterly financial results, let me step back and provide some perspective on our turnaround journey so far. Fiscal 26 was a year of taking decisive action to reset the business. By the end of our second quarter, we finished a thorough assessment of our business and concluded that our performance was simply not where we needed it to be. As we have said previously, our brands were not performing to their potential, consumer fundamentals had weakened, our margins were under pressure, and our financial results were falling short of our expectations. We were candid with our employees, our board, and our shareholders. We made it clear that we were unhappy with the performance of the business and that a meaningful turnaround was necessary. Rather than making incremental changes, We chose to act decisively. We reset our outlook, aligned the organization around a focused set of priorities, accelerated and implemented new projects to improve our cost structure, enhanced our financial flexibility, and fundamentally overhauled the marketing approach across Quest, Atkins, and Owen. While the financial commitments for the year we established following our second quarter reset were modest, we delivered them. At the same time, we completed much of the foundational work to improve the long-term trajectory of the business. As we enter fiscal 27, we are a leaner, more focused, and financially stronger company. Our priorities now are to restore the economics of the business, rebuild consumers' connection with our brands, and create a healthier foundation for sustainable growth. The actions we took in FY26 are expected to materially improve the economics of our business through stronger gross margins, lower selling costs and G&A, and improved cash generation. Rather than maximizing near-term earnings, we are deliberately reinvesting a meaningful portion of those improvements back into our brands. Let me provide some perspective on how we arrived at that decision. During fiscal 26, we completed a comprehensive overhaul of our brand strategies and marketing plans. Our recently completed marketing mix analysis confirmed that our past 18 month brand building investments generated returns well below industry benchmarks and our own expectations. That reinforced the need for meaningful change. We redesigned our strategy and plans across all three brands and launched new marketing programs in September. I will speak to those in more detail in just a moment. These programs are grounded in a deep understanding of our consumers and designed to strengthen brand connection, improve marketing effectiveness, and build consumer fundamentals over time. Given our confidence in these changes, we decided to increase investment behind our brands in fiscal We believe this investment will strengthen household penetration, deeper consumer engagement, and improve brand relevance, and in doing so, create greater long-term value for shareholders rather than maximizing near-term profit. Based on this investment, we expect fiscal 27 net sales and adjusted EVDA performance to improve as the year progresses, with the second half materially better than the first half. Please note that our first half performance will be challenging from a consumer demand viewpoint. For perspective, we're entering the year with weaker underlying consumer trends than we would like. In addition, our planned pricing actions are expected to create a meaningful near-term volume headwind as we absorb consumer response from a close to a double-digit price increase. That said, these dynamics are well understood are embedded in our plan and do not change our conviction in the actions we're taking. The margin and cost benefits we expect from our turnaround initiatives are embedded in our fiscal 27 plan. While it's still too early to assess the impact of our new commercial initiatives on top line performance, we see several encouraging early indicators that give us confidence we are on the right track in our turnaround. We successfully executed price increases approaching double digits across much of our portfolio. While it remains early and we are closely monitoring consumer response, we expect pricing elasticities to be well above one, weighted more heavily to the first half of the year. That said, the pricing action is expected to materially improve the economics of the business, moving gross margins closer to our historic level of 40%, and providing the financial firepower to reinvest in our brands. Second, we have validated the need for change through rigorous analysis and successfully launched new marketing programs across all three brands. The work is now in the marketplace and no longer in development. We are cautiously optimistic about the top line impact we believe these programs can have on our business. Third, We have renewed our focus on grounding new product innovation in a deeper understanding of consumer needs. We are prioritizing fewer, bigger opportunities that translate those insights into more relevant products. While innovation takes time to develop and bring to the market, we are encouraged by the potential of the pipeline we expect to launch as we close fiscal 27 and move into fiscal 28. Finally, we have simplified our operating model, strengthened organizational alignment, and improved accountability across the business. The organization today has greater clarity around our priorities and greater focus on the actions we are taking to improve performance. Evidence of this increased focus is our delivery against our financial commitments over the last two quarters. We expect these actions to translate into consistent priorities and High Quality Execution. Our focus is now delivering the financial improvements embedded in our plan and translating our commercial initiatives into stronger consumer fundamentals and improved top-line performance. We expect performance to improve over the course of the year as our marketing investments take hold, the buying impact of pricing eases, and year-over-year comparisons become more favorable. Our objective for FY27 is straightforward. Restore the economics of the business, rebuild consumer connections with our brands, improve brand fundamentals while exiting FY27 with better momentum, stronger profitability, and a healthier foundation for long-term growth. With that context, let me turn to our fourth quarter FY26 results. Our fourth quarter results were modestly ahead of our expectations, reflecting consistent execution against a difficult operating backdrop. Retail consumption remained pressured, and our performance was well below our long-term expectations for this business. Fourth quarter net sales declined 9.7%, to $333.3 million. Gross margins were 34%, a decline of 30 basis points. and adjusted EVDA declined 13.2% to $57.5 million. Total company retail consumption, which we believe is the best indicator of the overall health of our business, declined 8.4% in the fourth quarter compared with the prior year. Before turning to our brands, let me emphasize a company-wide strategic priority. Since rejoining the company, I've become convinced that deepening our understanding of our target consumers, their needs and their motivations, must guide decisions across every brand and function. That priority underpins the brand strategies I'll discuss next. Turning first to Quest, our largest and most important brand. Quest's fourth quarter retail takeaway declined 2.1%, but performance across the portfolio was mixed. Salty continues to perform well with consumption growth of approximately 13% in the quarter, helped by the launch of Dill Pickle original chips. This launch exceeded our expectations, bringing new consumers into Quest and generating encouraging cross-purchase across the portfolio, especially on bars. Our ability to identify new and interesting flavor trends continues to be a core strength for Quest, especially in our Salty snack portfolio. Household penetration on the brand increased approximately 50 basis points to 20.2%, demonstrating the brand continues to recruit new consumers. The overall decline in retail takeaway was driven primarily by softness in bars, which were down approximately 6%, including an incremental club rotation, and the performance of non-core innovation, including baked snacks. Within bars, performance was also affected by a lack of compelling innovation at a time when newer competitive offerings were generating consumer interest in the category. Our diagnosis is that Quest's near-term issue is less about relevance and more about buy rate. The effectiveness of support behind the core and an innovation mix that was too broad and lacking consumer insights. In fiscal 27, we are addressing that diagnosis directly by focusing the Quest portfolio on its core bars and salty businesses, which represent approximately 80% of the portfolio. We are concentrating resources behind those priorities and advancing fewer, bigger, and more differentiated new product innovation. At the center of that strategy is a clear understanding of our target consumer, a group we call performance maxers. These consumers see health and wellness as a path to becoming their best selves. They actively seek the best nutrition to fuel their progress and are unwilling to compromise on taste. For them, performance is about personal progress, not just athletic achievement. Our new Feed Your Athlete campaign brings that consumer mindset to life. The campaign began airing in September. and is designed to sharpen the Quest brand message while creating a more consistent platform across bars and salty. Supported by influencer and social campaigns, it reinforces Quest's differentiated combination of athlete-worthy nutrition and craveable taste and puts more marketing weight behind the two businesses at the center of our growth priorities. As an example of how this campaign comes to life in influencer marketing, consider our partnership with physician and creator Dr. Mike, who brings our nutrition message to consumers as part of our broader, expert-led campaign supporting our core bars. Early testing indicates that this creative is materially stronger than our prior two campaigns, which gives us confidence in the direction of this new strategy. While it's too soon to draw conclusions from in-market performance, we will continuously optimize investment across media, influencer, and social channels against household penetration, buy rate, and core product velocities. Turning to Atkins, fourth quarter retail takeaway declined 22.6%, roughly in line with the last quarter and our own expectations. Household penetration was 8.3%, down approximately 210 basis points year over year. Declining household penetration and the resulting distribution losses continue to be the primary drivers of the brand's performance. While we're clearly not satisfied with these results, our assessment is that Atkins' challenges are not the result of a broken consumer proposition. Atkins remains a highly recognized brand in weight management, with significant consumer awareness and equity built over decades. Our diagnosis is straightforward. Over several years, Atkins did not receive the level of marketing support required to drive sufficient consumer recruitment. Our message became less consistent and moved away from the brand's core weight management proposition, and our ability to attract new consumers weakened. as household penetration declined, velocity slowed, and distribution losses followed. Importantly, we believe the primary challenge is attracting new consumers to Atkins rather than a fundamental loss of relevance of the brand's weight management proposition. The brand continues to have a large and loyal consumer base that purchases Atkins products at consistently high rates. In fact, buy rate has remained relatively stable over the past year, despite the significant decline in household penetration. To us, that suggests the challenge is bringing new consumers into the franchise at an accelerated rate. We recognize that rebuilding household penetration will take time. However, improving consumer recruitment is exactly what our FY27 plans are designed to address. The emergence of GLP-1 therapies has reignited interest in weight loss, which is good news for the Atkins brand. As more consumers focus on weight management and metabolic health, we see a meaningful opportunity for Atkins among lapsed GLP-1 users. People have stopped taking these medications and want to maintain their weight loss. Research estimates that approximately 23 million U.S. adults are lapsed users are cycling on and off treatment. With decades of experience helping consumers manage their weight through nutrition, we believe Atkins is well positioned to serve this group. That insight is reflected in our new campaign, Atkins is Metabolism Changing Nutrition, which launched in September. The campaign features Rob Lowe as Atkins spokesperson, promises to help LAPS GLP-1 users keep the weight off and speaks directly to the anxiety many consumers feel about maintaining weight loss success over time. That can scientifically prove an ability to change metabolism through a nutritional approach that provides consumers the right balance of carbs, protein, and fiber is meaningful to this target. To support that strategy, we have overhauled our consumer communications, redesigned the Atkins website to provide more science-based content and education, and expanded investment across streaming, digital, social, and influencers like Tori Spelling. In addition, we increased marketing support in the first half to improve household recruitment. We are aligning innovation behind this opportunity. New products, including our whip bars, are designed to better serve consumers focused on long-term weight management and healthy nutrition. Consumer response to this idea was overwhelmingly favorable in our research. It is simply too early to draw conclusions from the new campaign's in-market performance. We will measure its effectiveness over time through household recruitment, buy rate, and core product velocities. Separately, we're seeing some encouraging early signs in the Atkins bar business, including early evidence of key retailers that we are getting our core bar assortment right, with a better balance of entry price points and value sizes that reward loyal consumers, alongside more consumer-relevant innovation, such as our whipped and filled bars. These improvements will not immediately offset the distribution losses already embedded in the business, but they do provide some early evidence that we can improve the underlying fundamentals as we execute our fiscal 27 plans. Our objective is straightforward, improve recruitment, stabilize household penetration, and restore velocity in the core business. We believe our fiscal 27 plans give us a stronger foundation to improve those fundamentals over time. Moving next to Owen. As expected, fourth quarter retail takeaway declined 7% compared to a decline of 1.3% last quarter. Household penetration was 4% down approximately 30 basis points year over year. Importantly, our core ready-to-drink and powder chocolate and vanilla products outperformed the total brand, growing high single digits during the quarter. While overall brand performance was impacted by distribution pressures from non-core item velocities, we believe the performance of our core business reinforces the strength and relevance of the underlying consumer proposition. Our confidence in Owen is based on that proposition and the specific consumer segment we are targeting. Through our recent segmentation work, we have identified what we call passionate architects. Consumers are actively building a healthier lifestyle through deliberate choices around nutrition, ingredients, and wellness. These consumers place a premium on clean label products, plant-based protein, and allergy-friendly nutrition and represent a sizable opportunity for the brand. Our research indicates that approximately 18% of U.S. households actively seek functional benefits such as plant-based protein, and Clean Label Ingredients. That is a substantial, addressable consumer group relative to Owen's current household penetration. Having said that, we expect distribution-driven losses on underperforming non-core items over the next six to nine months, which is incorporated in the guidance we provided this morning. A go-forward focus is the core ready-to-drink and powder chocolate and vanilla products. We see opportunities to expand availability of core items in more stores with future distribution growth paced with household growth and supported by evidence of sustainable velocities. Marketing will be central to the Owen growth plan. Our new creative platform, Every Ingredient Earns Its Place, was developed specifically for these passionate architects. These consumers care deeply about what goes into their products they consume and are looking for brands that share their commitment to transparency, quality ingredients, and purposeful nutrition. Fresh Creative is now in market, reinforcing the brand's clean DNA. Refresh TV spots, retailer website content, and digital banner ads are live, complemented by an expanded streaming TV investment against our targeted consumer group. We have also re-engaged influencers with a new tiered strategy, including increased paid social advertising. Before I turn the call over to Chris, I'd like to leave you with why I remain confident in the future of Simply Good Foods, despite our current performance challenges. I believe our category remains attractive, and our brands remain relevant, and our challenges are fixable. We operate in an attractive category supported by long-term consumer trends around health, wellness, and convenient nutrition. These trends remain highly relevant, and retailers continue to view purposeful nutrition as an important source of growth. In the fruit and beverage sectors, where any type of growth is at a premium, this category continues to outperform. We have built a company with strong capabilities in marketing, sales, R&D, and managing an outsourced supply chain, which we believe remain important competitive advantages that can support future growth and value creation. Third, our asset-light operating model remains a competitive advantage. It provides flexibility, supports strong cash flow generation, and allows us to direct resources towards the areas where we see the greatest opportunities to create value, regardless of the consumer backdrop or economic environment. Finally, we have a portfolio of strong brands that connect with distinct consumer segments, and we are confident that we can grow these brands long term. Quest remains one of the leading brands in the category, catering to consumers who see health and wellness as a path to becoming their better selves. Atkins has a loyal consumer base and a long history in weight management, giving us a strong foundation to reach lapsed GLP-1 users looking to maintain their weight loss. It only gives us access to the growing plant-based and clean label protein segments. While the turnaround will take time, our focus is clear. Restore the economics of the business, rebuild consumer connection with our brands, and improve performance as the year progresses. Thank you for your time today. I'll now turn the call over to Chris to discuss our fourth quarter results in fiscal 27 outlook. Chris?