The Simply Good Foods Company Reports Fiscal Third Quarter 2024 Financial Results and Updates Full Fiscal Year 2024 Outlook
Third Quarter Summary:(1)
- Net sales of
$334.8 million versus$324.8 million - Net income of
$41.3 million versus$35.4 million - Earnings per diluted share (“EPS”) of
$0.41 versus$0.35 - Adjusted Diluted EPS(2) of
$0.50 versus$0.44 - Adjusted EBITDA(4)
$71.9 million versus$66.6 million
Full fiscal year 2024 Net Sales and Adjusted EBITDA(3) outlook(4):
- Reaffirm “legacy”
Simply Good Foods , excluding OWYN, net sales outlook for the full fiscal year- Net sales expected to increase around the mid-point of the Company’s long-term algorithm of 4-6%, including the benefit of a fifty-third week. OWYN net sales are expected to be in the
$25-30 million range
- Net sales expected to increase around the mid-point of the Company’s long-term algorithm of 4-6%, including the benefit of a fifty-third week. OWYN net sales are expected to be in the
- Total Simply Good Foods Adjusted EBITDA(3), expected to increase about 8% versus a previous 6-8%
“Simply Good Foods third quarter results were led by continued Quest growth, improving Atkins marketplace trends as well as strong gross margin performance,” said
“I am very pleased we completed the acquisition of OWYN on
“We are confident in our strategy and execution and believe we are positioned to drive sustained profitable growth. For the full fiscal year 2024, we continue to anticipate legacy
Third Quarter 2024 Results
Net sales increased
Gross profit was
In the third quarter of fiscal 2024, the Company reported net income of
Operating expenses of
In the third quarter of fiscal 2024, the Company incurred costs related to the OWYN acquisition of
Net interest income and interest expense was
Adjusted EBITDA(3), a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, was
In the third quarter of fiscal 2024, 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
Year-to-Date Third Quarter 2024 Highlights vs. Year-to-Date Third Quarter 2023(1)
- Net sales were
$955.6 million versus$922.3 million - Net income of
$110.0 million versus$96.9 million - Earnings per diluted share (“EPS”) of
$1.09 versus$0.96 - Adjusted Diluted EPS(2) of
$1.33 versus$1.18 - Adjusted EBITDA(4) of
$191.7 million versus$178.3 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, increased 7.5% to
For the year-to-date third quarter fiscal 2024, 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
At the end of the third quarter of fiscal 2024, the Company had cash of
Subsequent to the end of the third quarter, on
Outlook(4)
While early, fourth quarter fiscal 2024 retail takeaway for Quest and Atkins are tracking to the Company’s estimates. As such, the Company reaffirms "legacy"
The year-to-date strong gross margin expansion has provided the Company with flexibility to meaningfully invest in marketing and growth initiatives to drive earnings growth. Therefore, for the full year fiscal 2024, the Company expects Adjusted EBITDA(3), including OWYN, to increase about 8% compared to last year and versus a previous estimate of 6-8%.
___________________________________
(1) All comparisons for the third quarter ended
(2) 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.
(3) Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") is a non-GAAP financial measure. 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) 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.
(5) Combined
(6) Net Debt to Adjusted EBITDA is a non-GAAP financial measure which
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 risks and uncertainties relate to, among other things, our ability to achieve our estimates of OWYN’s net sales and Adjusted EBITDA and our anticipated synergies from the acquisition of OWYN, our net leverage ratio post-acquisition, our Adjusted EPS post-acquisition, our ability to maintain OWYN personnel and effectively integrate OWYN, 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 | $ | 208,681 | $ | 87,715 | ||||
| Accounts receivable, net | 146,281 | 145,078 | ||||||
| Inventories | 105,921 | 116,591 | ||||||
| Prepaid expenses | 8,645 | 6,294 | ||||||
| Other current assets | 11,823 | 15,974 | ||||||
| Total current assets | 481,351 | 371,652 | ||||||
| Long-term assets: | ||||||||
| Property and equipment, net | 22,037 | 24,861 | ||||||
| Intangible assets, net | 1,096,538 | 1,108,119 | ||||||
| 543,134 | 543,134 | |||||||
| Other long-term assets | 42,570 | 49,318 | ||||||
| Total assets | $ | 2,185,630 | $ | 2,097,084 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 56,504 | $ | 52,712 | ||||
| Accrued interest | 1,372 | 1,940 | ||||||
| Accrued expenses and other current liabilities | 34,823 | 35,062 | ||||||
| Current maturities of long-term debt | 2 | 143 | ||||||
| Total current liabilities | 92,701 | 89,857 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt, less current maturities | 237,661 | 281,649 | ||||||
| Deferred income taxes | 128,549 | 116,133 | ||||||
| Other long-term liabilities | 33,407 | 38,346 | ||||||
| Total liabilities | 492,318 | 525,985 | ||||||
| See commitments and contingencies (Note 9) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, |
— | — | ||||||
| Common stock, |
1,025 | 1,019 | ||||||
| (78,451 | ) | (78,451 | ) | |||||
| Additional paid-in-capital | 1,315,005 | 1,303,168 | ||||||
| Retained earnings | 457,974 | 347,956 | ||||||
| Accumulated other comprehensive loss | (2,241 | ) | (2,593 | ) | ||||
| Total stockholders’ equity | 1,693,312 | 1,571,099 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,185,630 | $ | 2,097,084 | ||||
Consolidated Statements of Income and Comprehensive Income (Unaudited, dollars in thousands, except share and per share data) |
||||||||||||||||
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
| Net sales | $ | 334,757 | $ | 324,792 | $ | 955,634 | $ | 922,254 | ||||||||
| Cost of goods sold | 201,131 | 205,546 | 590,020 | 589,284 | ||||||||||||
| Gross profit | 133,626 | 119,246 | 365,614 | 332,970 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing | 36,464 | 30,168 | 103,097 | 88,650 | ||||||||||||
| General and administrative | 31,543 | 30,510 | 88,426 | 82,085 | ||||||||||||
| Depreciation and amortization | 4,142 | 4,363 | 12,711 | 13,035 | ||||||||||||
| Business transaction costs | 2,703 | — | 2,703 | — | ||||||||||||
| Total operating expenses | 74,852 | 65,041 | 206,937 | 183,770 | ||||||||||||
| Income from operations | 58,774 | 54,205 | 158,677 | 149,200 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 881 | 407 | 2,895 | 660 | ||||||||||||
| Interest expense | (5,028 | ) | (7,649 | ) | (16,658 | ) | (23,201 | ) | ||||||||
| (Loss) gain on foreign currency transactions | (12 | ) | 180 | 191 | 74 | |||||||||||
| Other income | 102 | 4 | 108 | 10 | ||||||||||||
| Total other expense | (4,057 | ) | (7,058 | ) | (13,464 | ) | (22,457 | ) | ||||||||
| Income before income taxes | 54,717 | 47,147 | 145,213 | 126,743 | ||||||||||||
| Income tax expense | 13,383 | 11,716 | 35,195 | 29,810 | ||||||||||||
| Net income | $ | 41,334 | $ | 35,431 | $ | 110,018 | $ | 96,933 | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency translation, net of reclassification adjustments | 95 | (262 | ) | 352 | (431 | ) | ||||||||||
| Comprehensive income | $ | 41,429 | $ | 35,169 | $ | 110,370 | $ | 96,502 | ||||||||
| Earnings per share from net income: | ||||||||||||||||
| Basic | $ | 0.41 | $ | 0.36 | $ | 1.10 | $ | 0.98 | ||||||||
| Diluted | $ | 0.41 | $ | 0.35 | $ | 1.09 | $ | 0.96 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 100,024,230 | 99,518,546 | 99,852,203 | 99,404,174 | ||||||||||||
| Diluted | 101,270,163 | 100,909,972 | 101,240,471 | 100,847,970 | ||||||||||||
Consolidated Statements of Cash Flows (Unaudited, dollars in thousands) |
||||||||
| Thirty-Nine Weeks Ended | ||||||||
| Operating activities | ||||||||
| Net income | $ | 110,018 | $ | 96,933 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 15,871 | 15,044 | ||||||
| Amortization of deferred financing costs and debt discount | 1,213 | 2,011 | ||||||
| Stock compensation expense | 13,209 | 10,456 | ||||||
| Estimated credit (gains) losses | (167 | ) | 206 | |||||
| Unrealized loss on foreign currency transactions | (191 | ) | (74 | ) | ||||
| Deferred income taxes | 12,416 | 11,696 | ||||||
| Amortization of operating lease right-of-use asset | 5,265 | 5,018 | ||||||
| Other | 2,329 | 759 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (716 | ) | (13,334 | ) | ||||
| Inventories | 9,423 | 19,444 | ||||||
| Prepaid expenses | (2,309 | ) | (745 | ) | ||||
| Other current assets | 2,248 | (1,595 | ) | |||||
| Accounts payable | 3,370 | (16,115 | ) | |||||
| Accrued interest | (568 | ) | (117 | ) | ||||
| Accrued expenses and other current liabilities | (705 | ) | (15,030 | ) | ||||
| Other assets and liabilities | (3,951 | ) | (4,145 | ) | ||||
| Net cash provided by operating activities | 166,755 | 110,412 | ||||||
| Investing activities | ||||||||
| Purchases of property and equipment | (1,838 | ) | (10,108 | ) | ||||
| Investments in intangible and other assets | (507 | ) | (338 | ) | ||||
| Net cash used in investing activities | (2,345 | ) | (10,446 | ) | ||||
| Financing activities | ||||||||
| Proceeds from option exercises | 4,292 | 5,035 | ||||||
| Tax payments related to issuance of restricted stock units and performance stock units | (4,818 | ) | (2,755 | ) | ||||
| Payments on finance lease obligations | (143 | ) | (217 | ) | ||||
| Cash received on repayment of note receivable | 2,100 | — | ||||||
| Repurchase of common stock | — | (16,448 | ) | |||||
| Principal payments of long-term debt | (45,000 | ) | (81,500 | ) | ||||
| Deferred financing costs | — | (2,694 | ) | |||||
| Net cash used in financing activities | (43,569 | ) | (98,579 | ) | ||||
| Cash and cash equivalents | ||||||||
| Net increase in cash | 120,841 | 1,387 | ||||||
| Effect of exchange rate on cash | 125 | (87 | ) | |||||
| Cash at beginning of period | 87,715 | 67,494 | ||||||
| Cash and cash equivalents at end of period | $ | 208,681 | $ | 68,794 | ||||
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 thirty-nine weeks ended
| (In thousands) | Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||
| Net income | $ | 41,334 | $ | 35,431 | $ | 110,018 | $ | 96,933 | ||||||||
| Interest income | (881 | ) | (407 | ) | (2,895 | ) | (660 | ) | ||||||||
| Interest expense | 5,028 | 7,649 | 16,658 | 23,201 | ||||||||||||
| Income tax expense | 13,383 | 11,716 | 35,195 | 29,810 | ||||||||||||
| Depreciation and amortization | 5,079 | 5,140 | 15,871 | 15,044 | ||||||||||||
| EBITDA | 63,943 | 59,529 | 174,847 | 164,328 | ||||||||||||
| Stock-based compensation expense | 4,473 | 4,124 | 13,209 | 10,456 | ||||||||||||
| Executive transition costs | 355 | 737 | 721 | 1,158 | ||||||||||||
| Business transaction costs | 2,703 | — | 2,703 | — | ||||||||||||
| Term loan transaction fees | — | 2,423 | — | 2,423 | ||||||||||||
| Other (1) | 400 | (178 | ) | 199 | (64 | ) | ||||||||||
| Adjusted EBITDA | $ | 71,874 | $ | 66,635 | $ | 191,679 | $ | 178,301 | ||||||||
| (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 thirty-nine weeks ended
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
| Diluted earnings per share | $ | 0.41 | $ | 0.35 | $ | 1.09 | $ | 0.96 | ||||||||
| Depreciation and amortization | 0.05 | 0.05 | 0.16 | 0.15 | ||||||||||||
| Stock-based compensation expense | 0.04 | 0.04 | 0.13 | 0.10 | ||||||||||||
| Executive transition costs | — | 0.01 | 0.01 | 0.01 | ||||||||||||
| Business transaction costs | 0.03 | — | 0.03 | — | ||||||||||||
| Term loan transaction fees | — | 0.02 | — | 0.02 | ||||||||||||
| Tax effects of adjustments (1) | (0.03 | ) | (0.03 | ) | (0.08 | ) | (0.07 | ) | ||||||||
| Rounding (5) | — | — | (0.01 | ) | 0.01 | |||||||||||
| Adjusted diluted earnings per share | $ | 0.50 | $ | 0.44 | $ | 1.33 | $ | 1.18 | ||||||||
| (1) Other items consist principally of exchange impact of foreign currency transactions and other expenses. | ||||||||||||||||
| (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. | ||||||||||||||||
Source: Simply Good Foods USA, Inc.