The Simply Good Foods Company Reports Fiscal Fourth Quarter and Full Fiscal Year 2023 Financial Results and Provides Full Fiscal Year 2024 Outlook
Fourth Quarter Summary:(1)
- Net sales of
$320.4 million versus$274.2 million - Net income of
$36.6 million versus$30.1 million - Earnings per diluted share (“EPS”) of
$0.36 versus$0.30 - Adjusted Diluted EPS(3) of
$0.45 versus$0.36 - Adjusted EBITDA(4)
$67.3 million versus$51.0 million
Full Year Fiscal 2024 outlook:
- Net sales expected to increase at the high end of the Company’s long-term algorithm of 4-6%, including the benefit of a fifty- third week
- Adjusted EBITDA(4,6) anticipated to increase slightly greater than the net sales growth rate
"Fiscal 2023 was another successful year for our Company with solid retail takeaway and net sales growth,” said
Fourth quarter fiscal 2023 net sales growth of about 17% was in line with estimates. As expected, due to the retail customer inventory draw down in the year ago period, fourth quarter net sales growth outpaced
In fiscal 2024, the Company expects net sales growth, driven by volume, to be at the high end of its 4-6% long-term algorithm, including the benefit of a fifty-third week. The Company anticipates solid gross margin expansion during the year and that it will make meaningful investments in marketing and growth initiatives, as well as organizational capabilities. As a result, for the full year fiscal 2024, Adjusted EBITDA is expected to increase slightly higher than the net sales growth rate.
"In my nearly seven-month tenure at
Fiscal Fourth Quarter 2023 Results
Net sales increased
Gross profit was
In the fourth quarter of fiscal 2023, the Company reported net income of
Operating expenses of
Net interest income and interest expense was
Adjusted EBITDA(4), a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, was
In the fourth quarter of fiscal 2023, the Company reported earnings per diluted share (“Diluted EPS”) of
Adjusted Diluted EPS(3), a non-GAAP financial measure used by the Company that makes certain adjustments to Diluted EPS calculated under GAAP, was
Fifty-Two Weeks Ended
- Net sales were
$1,242.7 million versus$1,168.7 million - Net income(2) of
$133.6 million versus$108.6 million - Earnings per diluted share (“EPS”)(2) of
$1.32 versus$1.08 - Adjusted Diluted EPS(3) of
$1.63 versus$1.59 - Adjusted EBITDA(4) of
$245.6 million versus$234.0 million
Net sales increased
Gross profit was
Net income was
Operating expenses of
Net interest income and interest expense was
Adjusted EBITDA(4), a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, was
For the full fiscal year 2023, the Company reported Diluted EPS of
Adjusted Diluted EPS(3), a non-GAAP financial measure used by the Company that makes certain adjustments to Diluted EPS calculated under GAAP, was
Balance Sheet and Cash Flow
Full fiscal year 2023 cash flow from operations was
For the full fiscal year 2023, the Company repurchased
Outlook
In fiscal 2024,
Additionally, the Company expects lower supply chain costs in fiscal 2024 will result in strong gross margin expansion and provide it with flexibility to meaningfully invest in marketing and growth initiatives, as well as new organizational capabilities, and increase profitability. Therefore, the Company is announcing the following for the full fiscal year 2024:
- Net sales expected to increase at the high end of the Company's long-term algorithm of 4-6%, including the benefit of a fifty-third week; and
- Adjusted EBITDA(4,6) anticipated to increase slightly greater than the net sales growth rate.
___________________________________
(1) All comparisons for the fourth quarter ended
(2) Reflects, for the reporting period, the Company’s private warrants to purchase shares of common stock now being classified as a liability and measured at fair value, with changes in fair value each period reported in earnings in accordance with Accounting Standards Codification 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, which affected Net income and fully diluted shares outstanding.
(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) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") is a non-GAAP financial measure. Please refer to “Reconciliation of EBITDA and Adjusted EBITDA” in this press release for an explanation and reconciliation of this non-GAAP financial measure.
(5) 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.
(6) 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 2024, 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, 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.
(7) Combined
Conference Call and Webcast Information
The Company will host a conference call with members of the executive management team to discuss these results today,
About
Investor Contact
Vice President, Investor Relations,
(720) 768-2681
mpogharian@simplygoodfoodsco.com
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 statements relate to future events or our future financial or operational performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. We caution you that these forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. You should not place undue reliance on forward-looking statements. These statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. These forward looking statements include, among other things, statements regarding our operations being dependent on changes in consumer preferences and purchasing habits regarding our products, a global supply chain and effects of supply chain constraints and inflationary pressure on us and our contract manufacturers, our ability to continue to operate at a profit or to maintain our margins, the effect pandemics or other global disruptions on our business, financial condition and results of operations, the sufficiency of our sources of liquidity and capital, our ability to maintain current operation levels and implement our growth strategies, our ability to maintain and gain market acceptance for our products or new products, our ability to capitalize on attractive opportunities, our ability to respond to competition and changes in the economy including changes regarding inflation and increasing ingredient and packaging costs and labor challenges at our contract manufacturers and third party logistics providers, the amounts of or changes with respect to certain anticipated raw materials and other costs, difficulties and delays in achieving the synergies and cost savings in connection with acquisitions, changes in the business environment in which we operate including general financial, economic, capital market, regulatory and geopolitical conditions affecting us and the industry in which we operate, our 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 us or to expand our business, competitive product and pricing activity, difficulties of managing growth profitably, the loss of one or more members of our management team, potential for increased costs and harm to our business resulting from unauthorized access of the information technology systems we use in our business, expansion of our wellness platform and other risks and uncertainties indicated in the Company’s Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the
Consolidated Balance Sheets
(Unaudited, dollars in thousands, except share and per share data)
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 87,715 | $ | 67,494 | ||||
| Accounts receivable, net | 145,078 | 132,667 | ||||||
| Inventories | 116,591 | 125,479 | ||||||
| Prepaid expenses | 6,294 | 5,027 | ||||||
| Other current assets | 15,974 | 20,934 | ||||||
| Total current assets | 371,652 | 351,601 | ||||||
| Long-term assets: | ||||||||
| Property and equipment, net | 24,861 | 18,157 | ||||||
| Intangible assets, net | 1,108,119 | 1,123,258 | ||||||
| 543,134 | 543,134 | |||||||
| Other long-term assets | 49,318 | 58,099 | ||||||
| Total assets | $ | 2,097,084 | $ | 2,094,249 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 52,712 | $ | 62,149 | ||||
| Accrued interest | 1,940 | 160 | ||||||
| Accrued expenses and other current liabilities | 35,062 | 39,675 | ||||||
| Current maturities of long-term debt | 143 | 264 | ||||||
| Total current liabilities | 89,857 | 102,248 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt, less current maturities | 281,649 | 403,022 | ||||||
| Deferred income taxes | 116,133 | 105,676 | ||||||
| Other long-term liabilities | 38,346 | 44,639 | ||||||
| Total liabilities | 525,985 | 655,585 | ||||||
| See commitments and contingencies (Note 10) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, |
— | — | ||||||
| Common stock, |
1,019 | 1,013 | ||||||
| (78,451 | ) | (62,003 | ) | |||||
| Additional paid-in-capital | 1,303,168 | 1,287,224 | ||||||
| Retained earnings | 347,956 | 214,381 | ||||||
| Accumulated other comprehensive loss | (2,593 | ) | (1,951 | ) | ||||
| Total stockholders’ equity | 1,571,099 | 1,438,664 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,097,084 | $ | 2,094,249 | ||||
Consolidated Statements of Income and Comprehensive Income
(Unaudited, dollars in thousands, except share and per share data)
| 13-Weeks Ended | 52-Weeks Ended | |||||||||||||||
| Net sales | $ | 320,418 | $ | 274,164 | $ | 1,242,672 | $ | 1,168,678 | ||||||||
| Cost of goods sold | 199,968 | 172,329 | 789,252 | 723,117 | ||||||||||||
| Gross profit | 120,450 | 101,835 | 453,420 | 445,561 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing | 30,839 | 26,869 | 119,489 | 121,685 | ||||||||||||
| General and administrative | 29,481 | 27,121 | 111,566 | 103,832 | ||||||||||||
| Depreciation and amortization | 4,381 | 4,319 | 17,416 | 17,285 | ||||||||||||
| Total operating expenses | 64,701 | 58,309 | 248,471 | 242,802 | ||||||||||||
| Income from operations | 55,749 | 43,526 | 204,949 | 202,759 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 484 | 14 | 1,144 | 15 | ||||||||||||
| Interest expense | (6,867 | ) | (5,353 | ) | (30,068 | ) | (21,881 | ) | ||||||||
| (Loss) in fair value change of warrant liability | — | — | — | (30,062 | ) | |||||||||||
| (Loss) gain on foreign currency transactions | (418 | ) | (312 | ) | (344 | ) | 191 | |||||||||
| Other income (expense) | 1 | (479 | ) | 11 | (453 | ) | ||||||||||
| Total other income (expense) | (6,800 | ) | (6,130 | ) | (29,257 | ) | (52,190 | ) | ||||||||
| Income before income taxes | 48,949 | 37,396 | 175,692 | 150,569 | ||||||||||||
| Income tax expense | 12,307 | 7,269 | 42,117 | 41,995 | ||||||||||||
| Net income | $ | 36,642 | $ | 30,127 | $ | 133,575 | $ | 108,574 | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency translation, net of reclassification adjustments | (211 | ) | (313 | ) | (642 | ) | (1,133 | ) | ||||||||
| Comprehensive income | $ | 36,431 | $ | 29,814 | $ | 132,933 | $ | 107,441 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.37 | $ | 0.30 | $ | 1.34 | $ | 1.10 | ||||||||
| Diluted | $ | 0.36 | $ | 0.30 | $ | 1.32 | $ | 1.08 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 99,556,078 | 100,137,308 | 99,442,046 | 98,754,913 | ||||||||||||
| Diluted | 100,943,710 | 101,759,791 | 100,880,079 | 100,589,156 | ||||||||||||
Consolidated Statements of Cash Flows
(Unaudited, dollars in thousands)
| 52-Weeks Ended | 52-Weeks Ended | |||||||
| Operating activities | ||||||||
| Net income | $ | 133,575 | $ | 108,574 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 20,253 | 19,299 | ||||||
| Amortization of deferred financing costs and debt discount | 2,763 | 2,559 | ||||||
| Stock compensation expense | 14,480 | 11,697 | ||||||
| Loss in fair value change of warrant liability | — | 30,062 | ||||||
| Estimated credit losses | 315 | 601 | ||||||
| Unrealized loss (gain) on foreign currency transactions | 344 | (191 | ) | |||||
| Deferred income taxes | 10,590 | 11,789 | ||||||
| Amortization of operating lease right-of-use asset | 6,729 | 6,620 | ||||||
| Loss on operating lease right-of-use asset impairment | — | — | ||||||
| Gain on lease termination | — | (30 | ) | |||||
| Other | 567 | 681 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (13,374 | ) | (21,796 | ) | ||||
| Inventories | 8,169 | (29,508 | ) | |||||
| Prepaid expenses | (1,306 | ) | (138 | ) | ||||
| Other current assets | 6,837 | (11,739 | ) | |||||
| Accounts payable | (9,510 | ) | 2,878 | |||||
| Accrued interest | 1,780 | 100 | ||||||
| Accrued expenses and other current liabilities | (5,223 | ) | (15,283 | ) | ||||
| Other assets and liabilities | (5,872 | ) | (5,536 | ) | ||||
| Net cash provided by operating activities | 171,117 | 110,639 | ||||||
| Investing activities | ||||||||
| Purchases of property and equipment | (11,585 | ) | (5,232 | ) | ||||
| Issuance of note receivable | — | (2,400 | ) | |||||
| Investments in intangible assets and other assets | (603 | ) | (524 | ) | ||||
| Net cash used in investing activities | (12,188 | ) | (8,156 | ) | ||||
| Financing activities | ||||||||
| Proceeds from option exercises | 5,247 | 4,343 | ||||||
| Tax payments related to issuance of restricted stock units | (2,859 | ) | (3,660 | ) | ||||
| Repurchase of common stock | (16,448 | ) | (59,858 | ) | ||||
| Payments on finance lease obligations | (278 | ) | (313 | ) | ||||
| Principal payments of long-term debt | (121,500 | ) | (50,000 | ) | ||||
| Deferred financing costs | (2,694 | ) | (544 | ) | ||||
| Net cash (used in) financing activities | (138,532 | ) | (110,032 | ) | ||||
| Net increase (decrease) in cash | 20,397 | (7,549 | ) | |||||
| Effect of exchange rate on cash | (176 | ) | (302 | ) | ||||
| Cash at beginning of period | 67,494 | 75,345 | ||||||
| Cash at end of period | $ | 87,715 | $ | 67,494 | ||||
Reconciliation of EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly used in our industry and should not be construed as alternatives to net income as an indicator of operating performance or as alternatives to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP).
The following unaudited table provides a reconciliation of EBITDA and Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the thirteen and fifty-two weeks ended
| (In thousands) |
13-Weeks Ended | 52-Weeks Ended | ||||||||||||||
| Net income | $ | 36,642 | $ | 30,127 | $ | 133,575 | $ | 108,574 | ||||||||
| Interest income | (484 | ) | (14 | ) | (1,144 | ) | (15 | ) | ||||||||
| Interest expense | 6,867 | 5,353 | 30,068 | 21,881 | ||||||||||||
| Income tax expense | 12,307 | 7,269 | 42,117 | 41,995 | ||||||||||||
| Depreciation and amortization | 5,209 | 4,901 | 20,253 | 19,299 | ||||||||||||
| EBITDA | 60,541 | 47,636 | 224,869 | 191,734 | ||||||||||||
| Stock-based compensation expense | 4,024 | 3,006 | 14,480 | 11,697 | ||||||||||||
| Executive transition costs | 2,232 | — | 3,390 | — | ||||||||||||
| Term loan transaction fees | — | — | 2,423 | — | ||||||||||||
| Integration of Quest | — | — | — | 468 | ||||||||||||
| Restructuring | — | — | — | 98 | ||||||||||||
| Loss in fair value change of warrant liability | — | — | — | 30,062 | ||||||||||||
| Other (1) | 457 | 315 | 393 | (16 | ) | |||||||||||
| Adjusted EBITDA | $ | 67,254 | $ | 50,957 | $ | 245,555 | $ | 234,043 | ||||||||
| (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 and fifty-two weeks ended
| 13-Weeks Ended | 52-Weeks Ended | |||||||||||||||
| Diluted earnings per share | $ | 0.36 | $ | 0.30 | $ | 1.32 | $ | 1.08 | ||||||||
| Depreciation and amortization | 0.05 | 0.05 | 0.20 | 0.19 | ||||||||||||
| Stock-based compensation expense | 0.04 | 0.03 | 0.14 | 0.12 | ||||||||||||
| Executive transition costs | 0.02 | — | 0.03 | — | ||||||||||||
| Term debt extension transaction costs | — | — | 0.02 | — | ||||||||||||
| Loss in fair value change of warrant liability (3) | — | — | — | 0.30 | ||||||||||||
| Tax effects of adjustments (2) | (0.03 | ) | (0.02 | ) | (0.09 | ) | (0.08 | ) | ||||||||
| Dilution impact from adjustments (3, 4) | — | — | — | (0.02 | ) | |||||||||||
| Rounding (5) | 0.01 | — | 0.01 | — | ||||||||||||
| Adjusted diluted earnings per share | $ | 0.45 | $ | 0.36 | $ | 1.63 | $ | 1.59 | ||||||||
| (1) Other items consist principally of exchange impact of foreign currency transactions and other expenses. | ||||||||||||||||
| (2) This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. The tax effect of each adjustment is computed (i) by dividing the gross amount of the adjustment, as shown in the Adjusted EBITDA reconciliation, by the number of diluted weighted average shares outstanding for the applicable fiscal period and (ii) applying an overall assumed statutory tax rate of 25% for the thirteen and fifty-two weeks ended |
||||||||||||||||
| (3) Diluted earnings per share includes the fair value loss and related exclusion of anti-dilutive shares related to the Private Warrants in accordance with GAAP. With respect to the Company's non-GAAP measure, the non-cash fair value loss is reversed. The fair value adjustments are a permanent tax difference and do not effect tax expense. Note, mark to market gain adjustments are already excluded from the numerator, and dilutive shares are included, in calculating diluted earnings per share in accordance with GAAP. | ||||||||||||||||
| (4) As noted above, the Company excludes the non-cash fair value loss related to its private warrant liabilities. The Company subsequently considers the dilutive share count effect of such adjustment such that the shares excluded in accordance with GAAP are included in this non-GAAP measure. | ||||||||||||||||
| (5) 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 | $ | 285,000 | ||
| Less: cash | (87,715 | ) | ||
| Net Debt as of |
$ | 197,285 | ||
| Adjusted EBITDA | $ | 245,555 | ||
| Net Debt to Adjusted EBITDA | 0.8x | |||
Source: Simply Good Foods USA, Inc.