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The Simply Good Foods Company Reports Fourth Quarter
and Full Year 2019 Financial Results; Provides 2020 Outlook

Denver, CO, October 29, 2019 - The Simply Good Foods Company (Nasdaq: SMPL) (“Simply Good Foods,” or the “Company”), a developer, marketer and seller of branded nutritional foods and snacking products, today reported financial results for the fourteen week and fifty-three week periods ended August 31, 2019.

"In fiscal 2019 the Simply Good Foods team executed well against our strategic initiatives, driving retail takeaway gains that outpaced category growth, resulting in strong sales and earnings growth that exceeded our plan,” said Joseph E. Scalzo, President and Chief Executive Officer of the Company. “Additionally, we entered into an agreement to acquire Quest Nutrition, LLC, which strengthens Simply Good Foods’ position within the nutritional snacking category by expanding our portfolio of brands and product offerings while also providing us with greater consumer and channel diversification.”

“Fourth quarter financial and marketplace performance represented a strong finish to 2019 and validated our strategy and investments to evolve the Atkins® brand by targeting both programmatic and lifestyle consumers who are focused on the benefits of low carb, protein rich nutrition products. As expected, retail takeaway in the fourth quarter moderated, while still increasing a strong 14.1%. We generated double-digit net sales growth throughout fiscal 2019, resulting in full-year growth of 21.3%. Importantly, retail takeaway for the full-year increased 19.5% driven by velocity of core items. During the fiscal year, due to our strong performance, we were able to make investments that strengthened our organization and increased direct marketing that we expect will benefit the Company over the near and long term. I want to thank all of our employees for their efforts in delivering an outstanding year. We are committed to our vision of leading the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacement products. Importantly we remain confident in our ability to execute against our strategies and deliver on our long-term financial algorithm.”
   
Fourth Quarter 2019 Financial Performance vs. Fourth Quarter 2018 Financial Performance

Net sales increased 28.6%, or $30.9 million, to $139.2 million
Gross profit margin of 42.5%, a decrease of 20 basis points
Net income decreased $5.6 million to $6.1 million
Earnings per diluted share (“EPS”) of $0.07, a decrease of $0.08 per fully diluted share
Adjusted EBITDA(1) increased 33.0%, to $24.1 million.

Net sales increased $30.9 million, or 28.6%, to $139.2 million, primarily driven by volume growth due to increased consumption, or retail takeaway. The previously mentioned fifty-third week and sales in transit deferral, a headwind in the fourth quarter of 2018, were about a combined 16 percentage point contribution to fourth quarter sales growth. Net price realization was a benefit in the fourth quarter of 2019 but was more than offset by a shift in non-price related customer activity, as discussed last quarter.

Gross profit was $59.2 million for the fourth quarter of 2019, an increase of $12.9 million or 27.9%. Gross profit margin was 42.5% compared to 42.7% for the thirteen weeks ended August 25, 2018, a decline of 20 basis points versus last year. Note that distribution costs, which historically were not included in cost of goods sold are now included in this line item. As discussed previously, gross margin is affected by a shift in non-price related customer activity that negatively affected the fourth quarter of 2019 by 100 basis points. Savings from the strategic sourcing initiative in the fourth quarter of 2019 were in-line with estimates and, as expected, offset inflation.

Net income for the fourth quarter of 2019 was $6.1 million, compared with $11.7 million for the comparable period of 2018. The increase in gross profit growth was primarily offset by higher operating expenses and business transaction costs. Specifically, selling and marketing expense increased $5.6 million. Higher television media and e-commerce investments were partially offset by lower selling expenses due to the previously discussed shift in non-price related customer activity. General and administrative expenses increased $5.0 million primarily due to higher professional fees and greater employee related costs.

Adjusted EBITDA, a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 33.0% to $24.1 million.
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(1) Adjusted EBITDA is a non-GAAP financial measure. Please refer to “Reconciliation of Adjusted EBITDA” in this press release for an explanation and reconciliations of this non-GAAP financial measure.


1

The following information was filed by Simply Good Foods Co (SMPL) on Tuesday, October 29, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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