The Simply Good Foods Company Reports Fiscal First Quarter 2021 Financial Results; Updates Fiscal First Half of Year 2021 Outlook
Highlights:(1)
- Net sales increased 51.9% driven by the Quest acquisition
- Net income of
$22.5 million versus a net loss of$4.8 million - Earnings (loss) per diluted share (“EPS”) of
$0.23 versus$(0.05) - Adjusted Diluted EPS (3) of
$0.29 versus$0.22 - Adjusted EBITDA(2) increased 53.2% to
$48.7 million - Outlook for the first half of fiscal 2021 updated:
Net Sales expected to be in the$455-465 million range, greater than the previous estimate of$425-435 million - Adjusted EBITDA(2) expected to be in the
$85-90 million , greater than the previous estimate of$77-82 million
“We are pleased that our fiscal first quarter performance exceeded our expectations despite the ongoing challenges of operating in the COVID-19 environment,” said
“Total Simply Good Foods retail takeaway for the thirteen weeks ending
Fiscal First Quarter 2021 Results
Net sales increased
Gross profit was
In the first quarter of fiscal 2021 the Company reported net income of
Interest expense was
Adjusted EBITDA(2), a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 53.2% to
In the first quarter of 2021, the Company reported Diluted EPS of
Balance Sheet and Cash Flow
In the first quarter of fiscal 2021, combined cash flow from operations and the proceeds from the previously mentioned sale of the SimplyProtein brand, were about
Outlook
“We are encouraged with our start to the year, the improved marketplace performance of our business during the quarter, and the progress we are making against our strategic initiatives. However, there is still uncertainty related to the duration of reduced consumer mobility and when shopping trips will return to pre-pandemic levels, particularly in the mass market retail channel. Therefore, it remains difficult to provide a full-year fiscal 2021 outlook at this time. We will continue to execute against our strategies, and we believe we are positioned for long-term sustainable net sales and earnings growth that we expect will create value for all shareholders,” Scalzo concluded.
The Company updated its outlook for the first half of fiscal 2021. Assuming
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(1) All comparisons for the first quarter ended
(2) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") is a non-GAAP financial measure. Please refer to “Reconciliation of Adjusted EBITDA” in this press release for an explanation and reconciliation of this non-GAAP financial measure.
(3) Adjusted Diluted Earnings Per Share is a non-GAAP financial measure. The Company excludes acquisition related costs, such as business transaction costs, integration expense and depreciation and amortization expense in calculating Adjusted Diluted Earnings Per Share. Please refer to “Reconciliation of Adjusted Diluted Earnings Per Share” in this press release for an explanation and reconciliation of this non-GAAP financial measure.
(4) Net Debt to Adjusted EBITDA is a non-GAAP financial measure. Please refer to “Reconciliation of Net Debt to Adjusted EBITDA” in this press release for an explanation and reconciliation of this non-GAAP financial measure.
(5) The Company does not provide a forward-looking reconciliation of Adjusted Diluted Earnings Per Share to Earnings Per Share or Adjusted EBITDA to Net Income, the most directly comparable GAAP financial measures, expected for 2021, because we are unable to provide such a reconciliation without unreasonable effort due to the unavailability of reliable estimates for certain components of consolidated net income and the respective reconciliations, including the timing of and amount of integration costs and restructuring charges associated with the Quest acquisition, and the inherent difficulty of predicting what the changes in these components will be throughout the fiscal year. As these items may vary greatly between periods, we are unable to address the probable significance of the unavailable information, which could significantly affect our future financial results.
Conference Call and Webcast Information
The Company will host a conference call with members of the executive management team to discuss these results today,
In addition, the call and accompanying presentation slides will be broadcast live over the Internet hosted at the “Investor Relations” section of the Company's website at http://www.thesimplygoodfoodscompany.com. A telephone replay will be available approximately two hours after the call concludes and will be available through
About
Forward Looking Statements
Certain statements made herein are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by or include words such as “will”, “expect”, “intends” or other similar words, phrases or expressions. These forward-looking statements include the expected effects from the COVID-19 outbreak, statements regarding the integration of Quest, future plans for the Company, the estimated or anticipated future results and benefits of the Company’s future plans and operations, future capital structure, future opportunities for the Company, and other statements that are not historical facts. These statements are based on the current expectations of the Company’s management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties and the Company’s business and actual results may differ materially. These risks and uncertainties include, but are not limited to the effect of the COVID-19 outbreak on the Company's business, suppliers (including its contract manufacturing and logistics suppliers), customers, consumers and employees along with disruptions or inefficiencies in the supply chain resulting from any effects of the COVID-19 outbreak; achieving the anticipated benefits of the Quest acquisition; difficulties and delays in achieving the synergies and cost savings in connection with the Quest acquisition; changes in the business environment in which the Company operates including general financial, economic, capital market, regulatory and political conditions affecting the Company and the industry in which the Company operates; changes in consumer preferences and purchasing habits; the Company’s ability to maintain adequate product inventory levels to timely supply customer orders; changes in taxes, tariffs, duties, governmental laws and regulations; the availability of or competition for other brands, assets or other opportunities for investment by the Company or to expand the Company’s business; competitive product and pricing activity; difficulties of managing growth profitably; the loss of one or more members of the Company’s or Quest’s management team; and other risk factors described from time to time in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the
Investor Contact
Vice President, Investor Relations,
(720) 768-2681
mpogharian@simplygoodfoodsco.com
Condensed Consolidated Balance Sheets
(Unaudited, dollars in thousands, except share data)
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 91,476 | $ | 95,847 | ||||
| Accounts receivable, net | 97,887 | 89,740 | ||||||
| Inventories | 76,067 | 59,085 | ||||||
| Prepaid expenses | 4,345 | 3,644 | ||||||
| Other current assets | 9,178 | 11,947 | ||||||
| Total current assets | 278,953 | 260,263 | ||||||
| Long-term assets: | ||||||||
| Property and equipment, net | 11,344 | 11,850 | ||||||
| Intangible assets, net | 1,149,895 | 1,158,768 | ||||||
| 543,134 | 544,774 | |||||||
| Other long-term assets | 31,892 | 32,790 | ||||||
| Total assets | $ | 2,015,218 | $ | 2,008,445 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 41,409 | $ | 32,240 | ||||
| Accrued interest | 720 | 960 | ||||||
| Accrued expenses and other current liabilities | 32,972 | 38,007 | ||||||
| Current maturities of long-term debt | 275 | 271 | ||||||
| Total current liabilities | 75,376 | 71,478 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt, less current maturities | 572,923 | 596,879 | ||||||
| Deferred income taxes | 88,543 | 84,352 | ||||||
| Other long-term liabilities | 21,884 | 22,765 | ||||||
| Total liabilities | 758,726 | 775,474 | ||||||
| See commitments and contingencies (Note 10) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, |
— | — | ||||||
| Common stock, |
958 | 958 | ||||||
| (2,145 | ) | (2,145 | ||||||
| Additional paid-in-capital | 1,095,573 | 1,094,507 | ||||||
| Retained earnings | 163,030 | 140,530 | ||||||
| Accumulated other comprehensive loss | (924 | ) | (879 | ) | ||||
| Total stockholders’ equity | 1,256,492 | 1,232,971 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,015,218 | $ | 2,008,445 | ||||
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited, dollars in thousands, except share data)
| Thirteen Weeks Ended | ||||||||
| Net sales | $ | 231,152 | $ | 152,153 | ||||
| Cost of goods sold | 137,111 | 89,947 | ||||||
| Gross profit | 94,041 | 62,206 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing | 25,195 | 18,434 | ||||||
| General and administrative | 25,415 | 18,145 | ||||||
| Depreciation and amortization | 4,244 | 2,453 | ||||||
| Business transaction costs | — | 26,159 | ||||||
| Total operating expenses | 54,854 | 65,191 | ||||||
| Income (loss) from operations | 39,187 | (2,985 | ) | |||||
| Other income (expense): | ||||||||
| Interest income | 3 | 1,379 | ||||||
| Interest expense | (8,372 | ) | (4,969 | ) | ||||
| Gain on foreign currency transactions | 9 | 16 | ||||||
| Other income | 47 | 37 | ||||||
| Total other expense | (8,313 | ) | (3,537 | ) | ||||
| Income (loss) before income taxes | 30,874 | (6,522 | ) | |||||
| Income tax expense (benefit) | 8,374 | (1,729 | ) | |||||
| Net income (loss) | $ | 22,500 | $ | (4,793 | ) | |||
| Other comprehensive income (loss): | ||||||||
| Foreign currency translation adjustments | (45 | ) | — | |||||
| Comprehensive income (loss) | $ | 22,455 | $ | (4,793 | ) | |||
| Earnings (loss) per share from net income (loss): | ||||||||
| Basic | $ | 0.24 | $ | (0.05 | ) | |||
| Diluted | $ | 0.23 | $ | (0.05 | ) | |||
| Weighted average shares outstanding: | ||||||||
| Basic | 95,538,111 | 89,708,633 | ||||||
| Diluted | 99,763,119 | 89,708,633 | ||||||
Condensed Consolidated Statements of Cash Flows
(Unaudited, dollars in thousands)
| Thirteen Weeks Ended | ||||||||
| Operating activities | ||||||||
| Net income (loss) | $ | 22,500 | $ | (4,793 | ) | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 4,513 | 2,525 | ||||||
| Amortization of deferred financing costs and debt discount | 1,077 | 455 | ||||||
| Stock compensation expense | 1,110 | 1,673 | ||||||
| Unrealized loss (gain) on foreign currency transactions | 9 | (16 | ) | |||||
| Deferred income taxes | 4,400 | (1,853 | ) | |||||
| Amortization of operating lease right-of-use asset | 1,182 | 626 | ||||||
| Loss on operating lease right-of-use asset impairment | 354 | — | ||||||
| Other | 402 | 566 | ||||||
| Changes in operating assets and liabilities, net of acquisition: | ||||||||
| Accounts receivable, net | (8,604 | ) | 4,304 | |||||
| Inventories | (18,138 | ) | (9,740 | ) | ||||
| Prepaid expenses | (558 | ) | (3,513 | ) | ||||
| Other current assets | 2,874 | (1,416 | ) | |||||
| Accounts payable | 8,216 | (6,533 | ) | |||||
| Accrued interest | (240 | ) | 1,536 | |||||
| Accrued expenses and other current liabilities | (5,127 | ) | 8,556 | |||||
| Other assets and liabilities | 1,227 | (305 | ) | |||||
| Net cash provided by (used in) operating activities | 15,197 | (7,928 | ) | |||||
| Investing activities | ||||||||
| Purchases of property and equipment | (93 | ) | (280 | ) | ||||
| Issuance of note receivable | — | (1,250 | ) | |||||
| Acquisition of business, net of cash acquired | — | (984,201 | ) | |||||
| Proceeds from sale of business | 5,800 | — | ||||||
| Investments in intangible assets | (114 | ) | — | |||||
| Net cash provided by (used in) investing activities | 5,593 | (985,731 | ) | |||||
| Financing activities | ||||||||
| Proceeds from option exercises | 157 | 208 | ||||||
| Tax payments related to issuance of restricted stock units | (201 | ) | (70 | ) | ||||
| Payments on finance lease obligations | (78 | ) | (78 | ) | ||||
| Principal payments of long-term debt | (25,000 | ) | (1,000 | ) | ||||
| Proceeds from issuance of common stock | — | 352,542 | ||||||
| Equity issuance costs | — | (3,323 | ) | |||||
| Proceeds from issuance of long-term debt | — | 460,000 | ||||||
| Deferred financing costs | — | (8,208 | ) | |||||
| Net cash (used in) provided by financing activities | (25,122 | ) | 800,071 | |||||
| Cash and cash equivalents | ||||||||
| Net decrease in cash | (4,332 | ) | (193,588 | ) | ||||
| Effect of exchange rate on cash | (39 | ) | (42 | ) | ||||
| Cash at beginning of period | 95,847 | 266,341 | ||||||
| Cash and cash equivalents at end of period | $ | 91,476 | $ | 72,711 | ||||
Reconciliation of Adjusted EBITDA
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net (loss) income as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP).
The following unaudited tables below provide a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the thirteen weeks ended
| Thirteen Weeks Ended | ||||||||
| (In thousands) | ||||||||
| Net income (loss) | $ | 22,500 | $ | (4,793 | ) | |||
| Interest income | (3 | ) | (1,379 | ) | ||||
| Interest expense | 8,372 | 4,969 | ||||||
| Income tax expense | 8,374 | (1,729 | ) | |||||
| Depreciation and amortization | 4,513 | 2,525 | ||||||
| EBITDA | 43,756 | (407 | ) | |||||
| Business transaction costs | — | 26,159 | ||||||
| Stock-based compensation expense | 1,110 | 1,673 | ||||||
| Inventory step-up | — | 2,437 | ||||||
| Integration of Quest | 1,246 | 1,438 | ||||||
| Restructuring | 2,519 | — | ||||||
| Non-core legal costs | — | 479 | ||||||
| Other (1) | 66 | 16 | ||||||
| Adjusted EBITDA | $ | 48,697 | $ | 31,795 | ||||
(1) Other items consist principally of exchange impact of foreign currency transactions and other expenses.
Reconciliation of Adjusted Diluted Earnings Per Share
Adjusted Diluted Earnings per Share. Adjusted Diluted Earnings per Share is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to diluted earnings per share as an indicator of operating performance.
The following unaudited tables below provide a reconciliation of Adjusted Diluted Earnings Per Share to its most directly comparable GAAP measure, which is diluted earnings per share, for the thirteen weeks ended
| Thirteen Weeks Ended | ||||||||
| Diluted earnings (loss) per share | $ | 0.23 | $ | (0.05 | ) | |||
| Depreciation and amortization | 0.03 | 0.02 | ||||||
| Business transaction costs | — | 0.22 | ||||||
| Stock-based compensation expense | 0.01 | 0.01 | ||||||
| Inventory step-up | — | 0.02 | ||||||
| Integration of Quest | 0.01 | 0.01 | ||||||
| Restructuring | 0.02 | — | ||||||
| Non-core legal costs | — | — | ||||||
| Other (1) | — | — | ||||||
| Net loss impact on diluted earnings per share | — | (0.01 | ) | |||||
| Rounding (2) | (0.01 | ) | — | |||||
| Adjusted diluted earnings per share | $ | 0.29 | $ | 0.22 | ||||
(1) Other items consist principally of exchange impact of foreign currency transactions and other expenses
(2) Adjusted Diluted Earnings Per Share amounts are computed independently for each quarter. Therefore, the sum of the quarterly Adjusted Diluted Earnings Per Share amounts may not equal the year to date Adjusted Diluted Earnings Per Share amounts due to rounding.
Reconciliation of Net Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA. Net Debt to Adjusted EBITDA is a non-GAAP financial measure which
The following unaudited table below provides a reconciliation of Net Debt to Adjusted EBITDA as of
| (In thousands) | ||||
| Net Debt: | ||||
| Total debt outstanding under the Credit Agreement | $ | 581,500 | ||
| Less: cash and cash equivalents | (91,476 | ) | ||
| Net Debt as of |
$ | 490,024 | ||
| Trailing twelve months Adjusted EBITDA: | ||||
| Add: Adjusted EBITDA for the thirteen weeks ended |
$ | 48,697 | ||
| Add: Adjusted EBITDA for the fiscal year ended |
153,912 | |||
| Less: Adjusted EBITDA for the thirteen weeks ended |
(31,795 | ) | ||
| Trailing twelve months Adjusted EBITDA as of |
$ | 170,814 | ||
| Net Debt to Adjusted EBITDA | 2.9 | |||
Source: The Simply Good Foods Company