The Simply Good Foods Company Reports Fourth Quarter and Full Fiscal Year
2020 Financial Results; Provides Fiscal First Half of Year 2021 Outlook
Denver, CO, October 26, 2020 - 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 thirteen week and the fifty-two week period ended August 29, 2020. The Company’s fourth quarter results include thirteen weeks of Quest results and about 42 weeks for the full fiscal year. Additionally, note that the Company’s references to “legacy Atkins” in this press release encompasses Simply Goods Foods’ business excluding Quest.
“In an incredibly challenging, dynamic year, we executed well against our core business initiatives, gained market share in the nutritional snacking category and completed the acquisition of Quest as well as the majority of the integration,” said Joseph E. Scalzo, President and Chief Executive Officer of Simply Good Foods. “Key milestones achieved during the year included a new organization structure, implementation of a new ERP platform and realization of cost synergies in-line with our targets.”
“Since the third quarter, retail takeaway for our brands, as well as the nutritional snacking category, correlated to the easing of movement restrictions related to the COVID-19 pandemic. At the height of the restrictions in the third quarter, the nutritional snacking category declined about 30% and, as movement restrictions eased late in the third quarter and into the fourth quarter, performance improved. Consequently, our retail takeaway sequentially improved from the third quarter to the fourth quarter. Not surprisingly, as the easing of restrictions plateaued in late July, category and brand performance similarly plateaued.”
“Our retail takeaway for the thirteen weeks ending August 30, 2020, increased 3.9% in U.S. measured channels and outpaced the category. During that period Quest retail takeaway increased 28.4%, while Atkins declined 4.9% versus a difficult year ago comparison of a 14.1% increase. Within the active nutrition segment of the category, where Quest competes, growth was modest. The weight management segment that includes Atkins remained down high-single digits due to the temporary softer consumer interest of weight control during the pandemic.”
Total Simply Good Foods fourth quarter net sales increased 59.7% driven by the Quest acquisition. Legacy Atkins net sales declined 8.0%, better than our internal forecast. Excluding the fifty-third week in the year ago fourth quarter period, Atkins net sales were slightly lower versus last year. Atkins performance was driven by continued e-commerce momentum, improved retail takeaway versus our expectations and the timing of shipments related to promotional activity. Quest net sales in the fourth quarter of 2020 exceeded our expectations and is estimated to have increased mid-single digits on a percentage basis versus last year. Performance was driven by stronger than anticipated retail takeaway in measured channels and e-commerce, partially offset by softness in the convenience store and specialty classes-of-trade.
In the fourth quarter of 2020, the Company reported net income of $12.4 million, an increase of 104.0% versus $6.1 million in the comparable period of 2019. Adjusted EBITDA(1) for the fourth quarter increased 53.5%, exceeding our estimates, reflecting the inclusion of Quest, the greater than anticipated increase in net sales and strong cost controls. These net income and Adjusted EBITDA gains were partially offset by a $3.0 million impairment charge related to the SimplyProtein® brand that was subsequently sold on September 24, 2020.
“The improvement in category trends in the fiscal fourth quarter was encouraging, but there is still uncertainty related to when consumption behavior and shopping trips will return to normal levels, particularly in the mass market retail channel. The unknown duration of these challenges make it difficult to provide a full-year fiscal 2021 outlook at this time. Due to our variable business model, however, we anticipate full year gross margin to be about the same as last year and Adjusted EBITDA margin to increase. Additionally, we remain on track to achieve the Quest acquisition synergies and the divestiture of the SimplyProtein® brand will be a slight headwind to net sales growth. In the first half of fiscal 2021 we expect retail takeaway will be somewhat similar to current trends, therefore, we anticipate first half of fiscal 2021 net sales will be in the $425-435 million range and Adjusted EBITDA in the $77-82 million range.”
“We remain confident in our business model and long-term growth prospects. We also believe that when the reopening of the U.S. economy resumes and sustains, consumer shopping behavior will return to normal and consumption will improve and our brand benefits of active nutrition and weight management will drive more better-for-you snacking and meal replacement usage occasions. We are executing against our strategies and are positioned for long-term sustainable net sales and earnings growth that we expect will create value for all shareholders,” Scalzo concluded.