SMPL - Earnings call transcript Q2 2021 | The Simply Good Foods Company

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Operator

Greetings. Welcome to The Simply Good Foods Company’s Fiscal Second Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. is conference this note being recorded. Please now Vice President would turn the Pogharian, Mark to over of conference I Investor Relations. Mark, you begin. may now

Mark Pogharian

a followed operator. will quarter Financial copy session. provide overview its presentation Chief ended Executive am Officer today’s available. remarks I release release and Q&A at Investors XX, XXXX. The company will Company The earnings Good be site This and also then President welcome results, AM by will accompanying February call of you, Web the and www.thesimplygoodfoodscompany.com. Scalzo, earnings this second to issued webcast Foods X.XX Simply an approximately an call section archive Todd Eastern morning company’s being pleased the you made of are for and Officer; be with of Joe you which Good of at available Thank to under morning. Time. the Cunfer, A the Chief is

found such we believe in will today’s today’s of differ risks materially. make and obligation cause of subsequent that to non-GAAP results measures that can course we certain events. financial to based forward-looking investors. actual be statements uncertainties company that and company’s will uncertainties provide A release the call, listing information and undertakes risks SEC today’s press in these the subject on Note filings. refer are call, to The no for various During on that to useful may statements will update detailed management

adjusted basis EBITDA relates model, our strong business on we and an company’s to asset-light the Given it evaluate cash diluted EPS. flow as performance

with of a for indicator Chief call items a refer or information from press measures is GAAP. intended financial most isolation reconciliation release detailed these today’s We Officer. be financial over the measures of to now GAAP. non-GAAP The that, underlying today’s for the to and not to accordance turn Scalzo, a in press performance key reconciliation I’ll true adjusted in information presentation in of President in Executive business. release. measures with With the presented comparable a accordance included Please GAAP considered to as this Joe the the believe substitute have to adjusted prepared the are of We

Joe Scalzo

it Thank you in Good discussion discuss questions. bit results you joining will of with opening you, performance more morning Good a Mark. our and financial for to results we'll Today, Then, brands. and provide of on us. with details recap up a second wrap thank detail. up some I’ll quarter outlook Foods’ before Simply our the Todd your our And it

forms that performance. Second new X.X%. Core the solid sales in sales, net e-commerce and our increased exit, growth, business continued Quest quarter SimplyProtein excluding success increased X.X% of ongoing divestiture by driven net impact international European and

trade promotion greater As last and expense merchandising expected, year, higher display. than supporting was in-store levels of

last Additionally, inventory certain discussed lagged quarter, back QX built. consumption as shipments a QX retailers as from adjusted slightly

to throughout with digits Adjusted channels, Marketplace to of quarter for strong to X.X%, IRI were measured Total Simply unmeasured quarter. cost last increased our second for Good EBITDA the retailer retail the and channel due quarter, and the takeaway, including category synergies. second strong. similar primarily X.X%. brands Importantly, growth mid-single acquisition increased controls quarter Quest support Foods remained trends

challenging growth usage consumed primarily occasions. by the and driving was home. quarter, performance measured confections, in soft that and fewer driven sales In due on-the-go second channels at our remained temporarily Specifically, Bars for portion portfolio, marketplace. the executed mostly well snackier against in we both to are priorities our cookies of a brands earnings chips our

Good portion with year primarily the all our the that in we Foods total snackier financial place believe retail will results. second driven over We remainder Consistent Simply quarter well in across of by solid category measured have channels the of result outpaced first in positioned and timeframes, portfolio. the are initiatives takeaway quarter, the

sub-segments XX% Importantly, management weight digits fewer soft second would increased consumption. quarter, usage Atkins, note weight X active Atkins which I in gained brands C-store occasions. the on-the-go nutrition and and represents In the segment, of digits. to nutrition The of the management the nutrition. mid-single management segment, high-single MULO category. during the company market active category, segment share universe POS IRI second which remained respective weight due that in each total the to of The did includes X about of quarter active the continued outperformed includes outpace as Quest’s our Quest, to Quest nearly their declined quarter.

improving. marketplace our and Atkins’ are in low-single quarter the second digits. measured in early, takeaway retail trends channels quarter unmeasured third declined U.S. While

to and impacted And December store IRI growth, Atkins’ off mortar. and improved closures. sales, versus digits, about February’s Atkins’ U.S. solid winter in of traditional mid-single MULO the but offset by the measured Performance quarter. storm e-commerce identical January first softness first XX% declined brick by and in quarter, China retail was was takeaway sequentially X.X%, POS C-store

and in than was display year, retailer greater participation. merchandising Importantly, support last the quarter in-store was supporting consumer solid and seasonal

momentum similar home. on-the-go the a shakes digits quarter. outperforming were continued all channel was double growth fewer e-commerce growth shakes occasions. quarter, primarily usage shakes impacted POS confections, are first strong Bars representing up XX.X% by and strength continues the and and with in products quarter. to about as of about to Bars with the at increased and in E-commerce Atkins’ consumed XX% be performance XX% expected, consumption As sales to form the and last with few these trends similar quarters. of confections

interest COVID-XX growth into quarter see weight the to to reflecting the renewed from emerge buyer pleased consumers in second as the begin are movement first they management, continued restrictions. We from

in benchmarks. tracks buyers buyers pre-COVID-XX and to new We’re encouraged both among loyalty that growth similarly retained

Atkins them to to a shakes. growth pre-COVID-XX benefits Buy buy reduced levels. achieve Importantly, bars help a impacting as levels consumers below recognize and to rate returned year prior back products goals. rate and lesser to brand their way Overall, the degree due to are coming is consumption our attributes and was the metric key among of a

Importantly, recent research between improving buyer rate. shake that Atkins X.X mobility buy belief bar work positively and correlation, consumption over consumer and our a indicates impact consumption, return reinforcing will and high to

the As would quarter, third related four we point to brand. enter we Atkins key the factors to

First, as are declines stages we consumption of easier the year COVID-XX last ago comparisons early year’s significant lapped lockdowns. from

measured see signs channels, to improvement traffic starting class-of-trade. early in we're especially in Second, shopper mass the in of

this Given growth buyer it both and should Atkins’ development in help channel, consumption.

in prior help of accelerate the continue enable expected be effective merchandising store shakes. bars as Third, And product buy shopping mobility to us to lastly, levels buyer consumption improve. and potential our on anticipate consumer and reduced and should rate greater improvement marketing and habits year’s should year-to-date retailers innovation build would consumer trends. than new will we display And

turn me Quest. let to Now

takeaway XX% C-store IRI measured universe. retail increased quarter the MULO in second Our

major the mass home. across channels. Similar improved driven to our trends snacks quarters, Importantly, consumed food, convenience at last few was and by performance

the This in the was year. first digits was the double quarter half versus sequentially the to first in improved bars X% X% of off As and by that the ready-to-drink this been ago off we declined and peanut quarter. start. shakes, segment performance the cup the good offset significantly low bar has of headwind about improving that’s launch better Quest than Quest butter a in launch lapped year of bar performance the

well to business up takeaway earlier, As I e-commerce stated continues retail Quest do with XX%.

POS will strong well habits in indicates weight with Amazon will were improve. consumer comparisons category was consumer that our indicate ago is Recall quarters in Combined that at half the year positive in-store and and encouraging, bar traffic confections increased channels. pullback with few retailers XXXX, quarter XX%. consumption than it brands. over merchandising second pleased our anticipate increasingly the And Chips year channels, we relevant. increases, mobility begin confections will the in The easier been the and management by the than with takeaway be expectations. fiscal improving in snacking we year display measured versus sequential measured period. as building. moderate measured line better as In trends more as we Chips third fiscal the is similar In is e-commerce bit our our in growth Quest to lap [ph] of in expected the growth in solid cookies Retail and the performance than growth, shopping second greater levels as second consumption correlates business channels to momentum half analysis Bars in of and summary, and largely fourth, and last a to strong in as strong. anticipate Our improvement and quarter of shopping more recover. comparisons driven that will and solid doubled. in has becoming more we're is expect ago prior reinstated nutritious year. e-commerce And to the continue Atkins of continue results slightly performance momentum buyers Atkins

our Our of we're that fiscal should year. the fast and over off the against growth quarter third plans earnings a well sales is start executing initiatives to drive and and remainder

detail. Now, some I’ll greater to Todd to with financial turn the provide call you over

Todd Cunfer

were begin North while driven a growth, Thank and both I X% net was net increase Good Simply company X.X%, sales X.X% and divestiture contributed and everyone. America morning, Total of the X.X%. international brand respectively, channels, non-measured strong The exit a combined declines second total measured headwind. you, North volume European in and will net good Foods core Atkins. by with sales. growth business and increased review the quarter Quest to performance in Joe, America SimplyProtein sales our and modest

and about by promotion of to e-commerce X% Specifically, the the period performance of solid first Atkins quarter to related ago higher increase a channels, year headwind. trade versus previously shipments in the the in merchandising declines in-store mentioned due levels an inventory of built was measured of retail seasonal expense timing offset

international X.X% the benefit headwind be year, about of gains initiatives we net exit full to these in began that growth anticipate Australia year second our sales combined Atkins sales will ago. SimplyProtein to European divestiture Our of fiscal versus half X%. a year in in will lap temper X.X% was about estimate We by region both that business 'XX for of Quest. growth one the this core The driven the growth previous as and and business a

profit Gross X.X review year related accounting by of the metrics. million other last was in non-cash Quest the affected of quarter adjustment or inventory up XX.X across Now for purchase X.X a major X.X% million increase step acquisition. profit a year. was Gross an versus million, results prior second to

was and COVID-XX. a up the and retail In gross XXXX. unfavorable mix. inventory 'XX channel lower margin gross lower be levels accounting to QX primarily last million The center. return inflation, gross the activity This higher in-store slightly to year year synergies points ago typical purchase of up, in-store decline in-store period, basis profit of and margin gross year. slightly Quest the due merchandising expect XX.X inventory fiscal compared to second due full step and is inbound to year period impacts. of related to XX resulted fiscal chain acquisition of Excluding reduction fiscal due in modest expected inflationary form margin, half in trade we the supply to product ago Productivity was Therefore, traffic our to to apart the XXXX, shopper modest from offset distribution year step in levels lower merchandising

fiscal pressure fiscal as be inflationary are While seeing needs. expected we costs XXXX in are meaningful a headwind input 'XX, not our some to examine we

to Our to primarily costs, strategy in X.X% mitigate measures stock-based due which Quest cost levers gross compensation assessing potential synergies. SG&A control Overall, Adjusted increased and and or and the to with is margin EBITDA our expenses line cost are XX.X available estimates. excludes integration inflation. input expenses restructuring were and million to we maintain acquisition million X.X Quest increase

X.X Specifically, the selling to in company incentive expenses expense Quest QX offset the selling last was of million primarily the about result the divestiture of declined as than as higher marketing and costs X.X the and SimplyProtein more And as to control a lower brand. integration declined Note compensation. that expense elimination cost marketing synergies year, same of synergies SimplyProtein G&A brand. a million investments due due and

year. last However, North versus America marketing X% core and international increased expenses

For with sales in at to continues that the expense full line increase related the core its will anticipate marketing year, business organic least company growth. to

debt. declined to $X due pay of Moving expense million to Interest X.X P&L. items down million in loan other the to term the

or European follows. in year. Gross XX.X XX.X% the the rate ago to the XX.X%, in Net tax a combined effective Net last as year and XX.X%, about acquisition. of Our primarily in million exit inventory increased million sales versus quarter non-cash XXX were an or first half SimplyProtein headwind to by million, Year-to-date divestiture the acquisition. in driven million was in Quest headwind. profit XX.X the as was was income was acquisition. step QX related by point fiscal million business profit X.X% increase period. Quest non-cash XX.X Gross by step a are affected second accounting inventory the purchase $XX.X XXX.X The was XXX.X basis driven XXXX. accounting the of X.X up up same results purchase Quest million year million the prior a Recall the adjustment the

business. weeks basis in-store gross of Excluding This year. XXX.X merchandising of was amount, profit lower higher the of margin gross decline the Quest driven resulted levels last and inclusion this margin XX year-to-date a of XXX million in slightly full points by

increased expenses year the well XX as The due measures expenses synergies. results in to of the weeks primarily driven Quest Quest’s integration restructuring Quest. of costs, adjusted stock-based million, $XX.X current by and the compensation, inclusion inclusion increase cost were primarily Excluding of acquisition EBITDA XX.X% SG&A and in to control as

X.X or to the the Quest. XX% the increased was again, primarily expenses majority XX.X% of addition interest income due Income million an of Quest. in XX.X The Year-to-date, million full to net $XX.X million The increase of G&A year. to versus due net of Specifically, marketing to months debt. was last $X about year. and expense acquisition-related of income million, interest selling prior expense impact and due increased X.X the expenses inclusion X.X or the million. of million was was $XX.X six versus a tax million X.X increase million

EPS. Turning to

$X.XX million, as for was same stock-based expense the the EPS depreciation Second amortization In share the quarter with compared of share reported was $X period diluted XXXX. QX and $X.XX comparable per per and just were diluted Quest an year million, $X.XX, about $X.XX the ago XXXX, versus for the which well of adjusted increase that EPS ago due restructuring lower million associated mentioned versus Year-to-date EPS refer explanation with period. excludes and Note $X.X Year-to-date, income non-GAAP acquisition taxes. year. items diluted today's period. last financial Costs X.X Adjusted less year the interest integration-related $X.XX compensation per the press EPS lower to was increase versus we a primarily $X.XX costs. versus to interest inclusion adjusted was share period. and diluted $X.XX, of diluted an calculated of income, adjusted reported ago expense of $X.XX release Please as EBITDA, year an reconciliation measures. as was and EPS as Quest

company last the balance Moving the down $XX in of quarter, of the paid principal fiscal that cash generates flow the balance year typically about In generated half end of XXX.X to the And cash, cash Note XX.X Building from of quarter loan first operations company at and term first outstanding levels million of second half debt. the operating its million in flow the was cash the flow. second of the company second $XX million million. cash versus the the sheet flow half. on in in XXXX. resulting quarter’s of February the XXXX, from operations, higher

of We XX, the of of X.X still our million. ratio company XX.X debt for Capital and XXXX, of the warehouse. million XXXX, year EBITDA As primarily million first the $X the cash February CapEx in trailing to fiscal by $X million half expenditures new adjusted were driven XX-month to was had X.Xx. net equipment expect in

I to to this back remarks. approximately for outlook year the unchanged turn would $XX for at like closing Joe remains now interest million. Our expense call

Joe Scalzo

Thanks, Todd.

shopper despite to the mobility of over the brands. retail year in and the and improving related mass In due brick year buyer half takeaway anticipate on ago especially the easier to our we well both perform by the second consumer last to improving significant COVID. in reduce continues business strong driven trends our year, growth effects Our mortar, channel, business traffic comparisons,

million $XXX United lockdowns includes adjusted the European current sales not our net anticipate net of reimposed, we Assuming headwind and SimplyProtein $XXX business related States to That consumer levels growth and of to million the million. and mobility sales $XXX $XXX combined to year X.X remains exit. to a in EBITDA full at million are divestiture broad

As XXXX. gross than fiscal mentioned to year Todd given controls fiscal supply as full chain merchandising, is and margin to more lower inflation, The synergies offset acquisition modest performance, in-store company be adjusted XXXX gross reinstated to anticipate expected incentive are higher year-to-date earlier, than and margin expected slightly cost continues expansion margin compensation. EBITDA SG&A

in and around And range increasingly megatrends more The are normal relevant with EPS $X.XX and anticipates the XXXX. Atkins megatrends uniquely consumer the Additionally, in year diluted consumer will consumers replacement. be to return snacking, the provides school two company adjusted feedback that combination versus as to fiscal $X.XX more XXXX us convenience brands of aligned positioned these $X.XX to Quest meal of work, that become indicates wellness and of lives.

operations an model advantage strong in business cash enables that participate with and flow to and opportunities from us flexibility variable growth organic have in financial M&A. the invest provides asset-light We

And confident ability increasing over questions. in our growth shareholder to the on towards objectives our prospects we invest path available and business in to as the position appreciate your value time. in everyone's us a are against strategies deliver are interest We are We executing that to financial with now our our company. take

Operator

a Instructions]. question-and-answer you. now [Operator Thank conducting Thank you. We'll session. be

with Jason questions. Our coming proceed English your is first line Goldman question with Sachs. from of Please the

Jason English

for Good folks. Thank you stepping Hi. morning, me in.

Joe Scalzo

morning, Jason. Good

Jason English

the Atkins if the I growth this what organic brand missed but in the brands? us tell and you was Quest both questions, two apologize got I only prepared can remarks, I’ve sales for and

Todd Cunfer

due to kind had the -- the will QX. a shipments amount that in of shift we Texas, down about particularly the transit. That you'll due had got Atkins up was Also storms from some come quarter, to of back the held brand on the see in largely in Q XX%, For fair in Atkins QX. we

consumption, So other versus digits the of hand, low-single the timing on in high was shipments teens. on total was Quest, a a Atkins. bit off up

Jason English

about think I QX remarks heard pull heard out on prepared I Atkins I And Okay. in into -- points I the Todd, that was that of QX think mentioned -- you X

Todd Cunfer

Yes.

Jason English

Okay.

math that doing of an QX or point shipments benefit Am So be on properly into that? this X like Atkins? the implying may larger type deferral for actually I

Todd Cunfer

much. that not probably It's Yes.

business We Atkins also the a pullback we or with our North America affected well, there. lost as point new in for that model Canada business two

So will due that the And we lost little a a bit points storms few QX. we to then right go into as in Canada lost well.

Jason English

same helpful. your that's it, a quick sort And, the time guidance you improve. that Joe, Todd, or on In quick -- a expect at you sequentially remarks, mobility clarification outlook. on improving, rather predicated before question mentioned holding continue for current right consumer that you mentioned the mobility of levels question to for the is that prepared than Got to but steady

I your progress? or assumptions, and So question planning planning expecting From the on continued assuming you it? mobility are is, for you indeed are is stagnation guess which

Joe Scalzo

the -- our in assumptions of actually quo. assumes We're second the guidance status for year the half

Jason English

clarification. you the Thank for on. I'll so much Excellent. it pass

Operator

with is question Chris the your Growe line with of from Stifel. Please next The proceed questions.

Chris Growe

morning. Good Hi.

Joe Scalzo

Chris. Hi,

Chris Growe

for you. Just had question a

should it but and in I that kind easy to the comps we're third some of the comps in measured April prior current very the As to we and suggest of those momentum the I in your current so because e-commerce, the think seem sort not from of really in coming your want growth prior of world sales the a how of you think the going sales quarter, of distort around mobility just if that particular strong of a things I the channels And really year sales bit May against rate that, least movements of would realize strong very get the question, get that quarters? picture that's easy track, and in down don't about at again, creating inventory or about full it can business, state like revenue. hold to up like just in the general or from improve, expect there's timing, other but considerations sense rate to also a year. based could to the on Jason's current of in we any and where got now mobility promotional assumptions this little

Joe Scalzo

of think quarter it helpful on Probably to a basis.

bigger historically, for a quarter So is than third quarter us fourth.

of some it the Chris, see you're think, So right seasonality into the will of third because the which in in now expect And out of levels just that fourth be upon do pointed rightfully then the softening probably like right in more obviously the we we'll second I run rates would we And the quarter, we then seeing third kind of historically week-to-week. quarter business. see the kind based inventory flow quarter. of of kind transit quarter, just saw at you end higher the would

to question, probably standpoint. that's from a more bit we mobility. bit about specificity lesser but correlate -- at just run to just to not mobility, think general again, I mobility, around to just how And and assuming not specifically, about And correlate to in think work. So rate we're and degree work Jason's being little correlate little being helpful bars transit to our consumption, brands a learned particular in a

we're back you fair benefit, work. in and really think So a looking to traffic, get is that good of back amount about sense. makes for but a if shopper get particular in improves to mass, it it, general And normal and lives people mobility because to their

using shakes our particular to work products less start products in back for are bars While fewer eating we've meal when to and/or more replacement, and more snack and transit been probably used a at work, and meals meal meal sitting network. occasions, as we replacement we home, going in

year to get that quarter But for gets work. to we before at U.S. mobility need really really mobility least us seems it into going get to year, And cautious the like half the people that is we of us next means moved better. second back first felt So for like a state. little the back -- more as made bit to mobility quarter, what us fourth understanding because

Chris Growe

Thank you. color. good that’s Okay,

Todd Cunfer

when or One I their COVID all year from say if hit last you would remember off retailers really just out thing March, pulled in kicked other promotions.

normalized So kind now. promotional we for in We're QX. period are also and of QX lapping for that

you're to obviously, really if margin gross last but margins activity. for -- volume was not our see the which down and from going helpful both margin benefited that QX, pullback the EBITDA So in was way remember us, you at trade

the profit QX. nicely. a to So bit held We're very, a of of going in very reversal that see

I quarter QX. think we're to have strong going trade. as reinstating we some very also lap We're a volume

So that will have QX. QX, especially And on a a -- bit we of a as margin Quest very hit Quest quickly. for the started activity go we strong very normal to snapped the quarter. trade the pretty we had side, quarter. And into then back had They in as very,

the a be impact pretty will impact. trade should QX in nominal So but QX, be there

Chris Growe

it color. Todd, you. up just spending. a the quick you good into Thank kind of point that's because around Okay, And leads follow made there, promotional

curious promotional than of levels what even If more half And that. year. prompting more the normalized normalized said space, to that's therefore incremental a like look also second we just which just the level of shelf promotion? the innovation, if think for should I for the is called around what's I’m you degree

Todd Cunfer

low so. just was it really last don't year. Again, I artificially think

really we're And to spend normal kind incremental just levels. XXXX So there's to back getting then it it's but go unfortunately looks going back trade to like levels. of just year-over-year,

Chris Growe

you Thank for Okay. your time.

Todd Cunfer

Thank you.

Joe Scalzo

Chris. you, Thank

Operator

Deutsche with Please questions. with Bank. Our proceed next of Fiza your from question is line Ali the

Fiza Ali

Good morning. Hi. Yes.

Joe Scalzo

Hi, Fiza.

Fiza Ali

is My first around question Atkins.

one and there things two maybe have as two of the more side other weight back work drivers Atkins; levels. Because that in talked two all renewed about. and components that interest main impacted bringing reduced you is you the are mentioned how drivers? those the we think to weight mobility, Atkins sort you I'm just of you then is to mentioned I consumer as consumer management think know return And management about of wondering normal

think how those just two would more love So perspective about you forward? drivers going around

Joe Scalzo

well Yes, great a question.

in you a the Atkins, just off track we saw third if and fall on fourth COVID, since what's to quarter people coming dramatic First, brand. happened

half down historic Atkins. was starting new flow, COVID the on second fiscal going new our total through end loyalty the down coming that quarter, year Encouragingly we've of buyer growth seen buyer double So And second and buyers year among post retained dramatically, buyers obviously in our the fiscal impacted digits. the levels. volume September at in, in and through of

coming back our That the to back year. brand So weight much encouraging. of our been beginning with pretty management year. means people started timed strong since interest weight and has in brand That's of in interest start coming to fiscal fiscal the the the management,

So good working. is that is product our our pretty innovation working, marketing we feel

Atkins, the gap from just so And straight rate. think out you on in it volume buyer if of a standpoint, buy is

high at I'm snack much mentioned foods snack, what being eating driving it's regular us consuming? being I'm are correlation And because using of not understand meal how eating So a using I'm on there's home. meals in a out And So of as performance it how transit. snack people bars I people's of I more to a I'm much right? in home, the flat of much when less path interest work number how I and And and on as Fascinating, more might am as replacement? that meal and earlier, I where meals and right, led in around occasions kind less replacement, right? I'm I'm even bars the because Atkins' that trying a what driver then to Atkins, is. And what's and management, Quest is shakes we learned is weight

And been to to had less not more we whatsoever back transit. meal in snacking-oriented, snackier you portfolio, probably using shakes, more than work more can the important, well call location. our then replacement-oriented and have I and see what snacking and start I'm that the getting kids convenience to then work As And products my behavior to replacement. going confections, no form. tend Bars going which cookies of portion meal they goes at as back picking sports, up correlation people becomes and be and school to by chips and doing our and as so and a

consumed So rates and as to expect not work forms, school. at would to those and go they're in back return change kids and people we getting their jobs to any normal return

encouraging. go that. So see Consumers going they buy are to coming back very to for And we're confident get back. pretty us of the back work, brand. as rates We're to

Fiza Ali

Okay. about I was earlier was bar Joe, we versus the Quest Quest could you as -- like know super That's about helpful. wondering just Atkins, think pandemic talked for in if we this how on trends I the outperforming.

the evolved brand of form I'm why So is bar Atkins? wondering product within sort if on better have specifically you the Quest thoughts doing any than

Joe Scalzo

correlated. less Yes,

So data work less at have at We is. now it's transit correlated interesting. to and than Atkins the

interesting some distribution pretty in doing bars of two, that's the general, some then of so improving of So on well. the drivers really And distribution drivers some there. innovation Quest,

mobility being So job, to Quest slightly better done less has work. a correlated and at

And pretty some done have bars well. nice innovation, in particular

not has So we've we of Quest do from than but where period bit a little bar wanted seen little obviously, a time. standpoint, better better bit that doing a Atkins be, during to certainly

Fiza Ali

thanks. Great,

Todd Cunfer

last year you in to last Quest to well. that's the the factor, e-commerce. obviously, And they perform say exceptionally been indexed want would and it has is always Fiza, I over be continue the in channel

as reliant brick and And well. as that's so they on so that mortar, business have the part helped of not been

Fiza Ali

Great. Thank you.

Joe Scalzo

at Atkins brands is retailer Fiza, largest by Quest interesting Amazon exceptionally is is just on channel, doing COVID. the if well. retailer of very thing look Walmart, the the of challenged largest other of you The development the

to given each that two those businesses, has fact the overall. do the retailers the with of importance of to of alone, brands trajectory the a lot So

Fiza Ali

appreciate Really helpful. it. Great. Super

Operator

the Citi. questions. line proceed Our Nicholson your of next with question Please with from is Wendy

Wendy Nicholson

not everybody, to of to maybe and to questioning back it have was will Hi. every Fiza’s or soccer of to I is think because actually talked is, going up a Maybe quite kid won't just shifted from is My line but go a not everybody's or going maybe what being COVID. office the obviously back consumer about terms permanently in be behavior first lot follow pre-pandemic. play mobility there's question

make in it ton, the rethink the end assortment to a the of going in the terms in So home less to in forward? product trying appeal and or fact does to We from are do you messaging be sense context going about people they if think of all see Atkins staying messaging? terms that mobile the the up of ads to changing but ads

Joe Scalzo

Yes.

in of we've that lot a some conversation. obviously that say would participated -- I of First,

the as as soon a I’m business, work, efficiency people running of get Just organization. in loss can I of them back the work as CEO to because to back getting

various I of to that. some points So degree, on there's view think

overblown. -- I pretty conversation think the it's is

to more So than my the first same is it is different. pre-COVID, observation it's going be post-COVID

an Just observation.

adjust would we marketing. yes, Second, obviously,

on to would development already every everywhere, of see You're time what snacks. I starting call Quest

they back Xth and the of happen like work. have in the back pretty the that So companies confections But so feeling very at transit of that time to peanut cup dramatic becomes behave anyone's that work the and a do, work obviously second less that somewhere people the between site becomes will well. less to specific. I moving to say, snacks I strategy important in be less being upon back butter starting most got chips July the us to in kind pushing that – bars expect we're and confections, Labor specific, it when don't shakes development going Exactly But confections to the opportunity think has see tend Clearly, over I development to going Day, being it's the of differently performance. That's franchise see the in is than but office. and innovate at work cookies the strategy to get that's of Atkins start portion time. to you'll you're changes to when to dependence and have guess.

Wendy Nicholson

inflation, demand on of that and your all then called about sense the talking I a Atkins for demand the I the the the And Quest side? product Fair bit continues your inflation of little mix will of the that. to a willingness function sort you whether commodity side, to just out both prices, extent But what can raise and the about. think affect talk on And is are to elasticity product, up, you you creep lot the of know that's you products food other sell than of know which the of enough. less companies a and of

Todd Cunfer

Yes.

more to elasticity in ago been seeing realization obviously team price only the couple in seeing diesel. in some We're do than not inbound earlier that we have necessary strong would price, we on price what more nice really a taken we but has the taken very, the or both a our prepared models We're take impact a volumes, Where from we've year running the did months maintain increase deliver we freight proteins, So little we need. benefited we're very and some it. also confident see locking been we've -- we of are price and if can if kind soy, We're impact on looking we increase made be? that that. that -- higher we five about fortunate of to and and a with execute bets on where have we've talked in than not at and not Atkins locked four dairy constantly bit And about of opportunities -- thought commodities years.

if execute confident it's well. an pulling to fiscal where models. the that for levers anticipated, in If prices our now not the elasticity year, little bit something half that, are very luckily, we'll So stay we chose more impact look nominal. do pretty to right than just of go have we could work some into probably at very, it right second very, We're we do next as we're But doing year. on and very we but now, much they a this

Wendy Nicholson

much. you Fair enough. Thank very

Operator

is Our with Rob your the from Please questions. Dickerson of Jefferies. line proceed next question with

Rob Dickerson

much. so Thanks Great.

guess me. going around inflation at question Just of a more just if I couple levers, some of the And of and company, feel like pulled lever the buyers. attracted lot namely new but don’t a really it's attracting historically, pricing been you I obviously you've currently back just kind easy Atkins look to and buyers. much, of the I asked the from I about cost ones generally speaking, guess

been by driven impressively growth So volumes. has

year So as next equation, months some something consider to kind few a the cost changes you forward recovery, pricing sit of that as and about you vis-à-vis kind in think there start as think just you of is recovery to pricing that full through first or well, you're have as obviously to do a you the tiptoe sure be category as kind quick seems capturing make That's the as comes? it question. long this of to

Joe Scalzo

maintain Yes. Rob, margins marketplace. pretty is think first, simple, I our our the in gross strategy

make gross is we opportunities cost strategy. investments, it significant So maintaining margins savings our marketing improving slightly with and long-term our

when inflation priced to needed Atkins have an on We standpoint. from we've

it's pricing would increase so are there's we're now. based and was what's around you looks, going when to we've as fact justifying inflation the other obviously, we're neutral one people But right on, more do need inflation, price. seeing But easier on managing than So it. haven't justify to price customers, settle few of hesitate on had Todd's fiscal Exactly to of been always see wouldn't and some easier that's to clearly externally inflationary feels that. into that move inflation. years last significant the leading 'XX, we a environments comment over the we the we going upon if it We

own at line. make margins. we squeeze the any flat, order then of to kind movements retail to price in strategy a hold bottom of to make savings our need margins We retailers encouraging and would have have not cost and and we their gross We to margins take the be to holding fall

Rob Dickerson

the we it do sure to getting display sounds LTOs as And front then or kind back and they next year, essentially about anything to kind that what promotional like the of of walk year normalized this Is through rate. face center secondly, on start increases It it. you increase can you to sense. got trade get more maybe Walmart to mobility make Okay, you're of as think kind little again, makes you're run and more? of flow as into that just you strategically or bit either have consumers kind a just to there

Joe Scalzo

teams Yes. experienced Look, I confident benefit pretty in of we industry. the from sales one more the feel

real feel reduced a confident reemerging display ability activity, I to in So especially mobility. team sell as people from as in our are

third food, top get got I confident. an much was retailers then of one right we've display. we're doing team. quarter And a executing sales mass, pretty across confident in see a standpoint. did of good the quarter selling learned for foot is things the second where example. really categories, be job. locked. a And terrific the pretty excellent board, you you those COVID did display pretty feel We're brands make They're sure matter can executing So, and We well the across good drug sure quarter traffic plans planning and of We get third activity feel display notch the I display we'll quarter. in fourth a part still job drive from on now. But as the in big I the of at aisle. make into think brands to right, those really

taking and our customer advantage thinking, think I on evolution drive of we're And using both of that of changes so brands. we're and display to those

where third we the we through about good and quarter. pretty feel I So are will as move where we be

Rob Dickerson

of not as have looking of healthy pipeline maybe And historically of you've to good decent appetite, always said something in I then just still kind new asked question is for the for changed, snacking. maybe to I but of All terms continue it. we're that a my Is speak just lastly acquisition somebody the and kind right, Quest, there obviously probably great. -- pipeline’s as but just terms opportunistic guess can't [indiscernible] large buys? on on timing, That’s nothing's Thanks. any looking perspective in know assumption

Joe Scalzo

we’re long true. Quest we that we our debt encouraged for think that's by the debt from acquisition. took highlight buy down would I Yes, the And

to business model, we're the then for So brand. space that is important us assets looking is the pretty we've in this and quick. most deleverage what's we're And shown probably in,

target? and defined are. consumer that So made strong with brands who what progress Have their is they a the they consumer for brand strong look have a against promise? targets pipelines understanding innovation Do good of We target?

And so we of one next for found at constantly and the one. on those we're the Quest lookout

Rob Dickerson

right. appreciate All Thanks it. much, really so Joe. I

Joe Scalzo

good a All Have Rob. right. day,

Operator

questions. with Howard your Bernstein. is line proceed Alexia next The of Please with the question from

Alexia Howard

everyone. morning, Good

Todd Cunfer

morning. Good

Joe Scalzo

Alexia. Hi,

Alexia Howard

market deal particularly last the ability the potential year. of I I of outlets, the the to hopes remember the in of some that do your one that imagine So the was pandemic for that product Quest range to mass limited expand Walmart. kind

path channels. then where in up your those count you And on have up. follow are Just on a and wondering that I the get to Quest ability view

Joe Scalzo

and distribution question. it Yes, at challenge food in has shake impacted progress which some once a our a be target made you to loaded, by and the kind year, business. of resetting continues so of in a been you're certainly loss on of locked in Alexia, Walmart good bit And in We've Quest. little on Quest fall. get

So that. those gaps business success. we've in over pretty sales talented I as of there Walmart leadership. some to in food, of based where items size months. We're upon in of The And whitespace. And a Quest, against been shake board. and the innovating numbers distribution time, organization, previous going optimistic shake the confident stores performance through just is obviously, the on XX on progress drug we're We’ll the Quest we've close of the said declines seen we make mass, that across we before, have terrific incredible had I'm

value is example. on XX business best revenue significant in Six-month pipeline build in success. distribution. is good. to Quest Our probably million The already, time so the pretty to innovation business over would us pretty I is chip at expect continue

Alexia Howard

thank were dive the before full the then flat. saying down year, margins as for And gross follow you up, you. a Great, in

slightly you. I'm down. pass cost expected asking it are Now anticipated? environment this I'll and the the the I you at point. freight input more activity whether the you're up saying you'd Would on. is just And retailers step more having to more about curious Thank than than promotional for think or to mainly is in that attribute inflation that higher it retailer

Joe Scalzo

lower. all slightly language Sure. to but There's it they're flattish they from up pretty of three small, pieces to and add changing our

change going trade outlook, related. margin to that gross we It's be our in So lower planned. anticipating significant a it really originally was we not we're want bit call than out to but not a

back We the to merchandising We've had normal half. wanted Our to get levels second to knew strong We're We same. activity. that. wanted trade very are it. doing have expectations we in the

really nothing One, nothing components. input really pressure three on changed little significant, our view. but So higher costs, trade, which slightly a bit there. of It's the has

know, Second Quite lower is right slightly growing brand as has Quest faster gross Atkins is And you now. frankly, Quest much margin. mix. one than

E-comm impact there's of mix, has we has bit So impact and third the a as there. is little And channel a not brand product not than rebound had of anticipated. to mix brick bit originally an component, again, huge, or slowed but slower a been down. mortar

in In all small, That fact, will get will margin well. it has year. it individually are Again, second but for three the things impact we bit QX a strong be accelerated a the half. as an and in a hit of very little very, anticipate those bit of of together little

Alexia Howard

on. I'll Great. you very much. it Thank pass

Operator

you. Thank

Eric Seaport Please Your next proceed of line Global. your with questions. the is with question from Larson

Eric Larson

reacceleration brand. the pre-COVID? traffic how at mass quick it of big XX% question. and at the rate for bit level. you for was would is suspect change a Joe, cadence Thanks in little give your you guys. prepared Can a Thanks, traffic put channel into the then of positive you can of what mass of XX%, active is then us is Okay. about bit XX%, that? kind little some the that a And what channel historical the foot of perspective, be that talked comments, I'd if that

Joe Scalzo

helpful baskets, And consistently in they Yes, big limiting it digits. visited, But people foot the understand smaller traffic, moved pretty people people came were mass constrains formats. number and through behavior shopping to step they -- bigger stores context. double most part the for let up down probably the back, so to basket. by COVID me to down when of much making total obviously it's COVID

stores smaller to think did, So versus mass grocery more than safety it tended And benefit right? just So concerns. was I stores. bigger

people traffic pretty that basket meals, traffic through when were obviously, not year, because eating the the beginning throughout, of second people were didn't bigger. from this foot change in declines foot COVID the But saw of mass more quarter out, much down. So shopping were

from fewer Target, benefited bigger So trips baskets, Walmart and shopping but shoppers. fewer retailers like

obviously pretty it retailers expect see and declines without traffic, of just in starting the channel third those Atkins And improving year-on-year. easier we're comparables trends the continue. improvements into those of to both move but those brands, given that would our we importance benefits start to foot those anniversarying Atkins, I mass in business. benefits I trends over as certainly mobility, to improve. expect the So quarter, obviously significant trends would fourth and Even to

Eric Larson

makes to basket And will buy more better larger with opposed be a foot that traffic your if sense? rates size, as

Joe Scalzo

impacted flow. don't have historic correlate be great is had any data buyer as And being would going buyer a and more question. I to as importance. haven't since you that. tell to you to enough would brand a I think Atkins well given buyers, we And you, business. that, data So able tell would your to have rate to buyer the to work at plus back buy you Walmart I right? be would be tell in we Intuitively, XX% flow of But issue buy behaviors back don't the rates to think that quantitative September. transit. know That's

we and lot fact traffic and just merchant for that of should We to see the comparables, mass we that a got foot should do that's assume forecasted pointed better mobility But the based on I we the consumption improvement We help think So factors. same point. think easier traffic haven't improving this consumption. just is case. those at foot

Eric Larson

really Okay, in clarity. helpful your thanks. That's

patterns this been has like in control. the new little in learned brand form, Atkins, necessarily consumption for way or of and studies management does the a change that the it sounds patterns market Again, final your the work at about given needs different buying you Atkins something with someone sounds So weight already but behavior? you've Lowe asked a it question not Rob is, question driving work is like to bit? that

position brand learned differently. how change positioned there. Does something So you've you that But or it? it you've market the

Joe Scalzo

I data first, helpful brands. was Well, for say would that the very mobility both

to What transit, degree to really the school, back important So we belief on of shakes now us. our lesser brands. understood our in learned general was to -- work, to mobility data both and bars prior will back a to we've help

So that was an to important it. component

So leverage as understanding obviously, we that, insight. an consumer a that's will consumer to obviously, market insight as our Absolutely. brands, And a from that we look standpoint.

target changed loss we weight the we think that. from of weight diet audience simple. low target million and consumer the have audience. perfect that of X Rob, bigger bigger much fast And brand. positioning did about diet enjoyed loss brand management in a Your the million a of U.S. question we the the was brand management weight U.S., -- that around has the carb, consumers fast around size penetration And is interested improving in the quite about to audience, XX weight The so embodiment consumers the repositioning Atkins about reason the Rob in bigger

to to it. going we're Rob, continue like we So leverage

Eric Larson

perfect. Okay, Thanks, Joe.

Operator

Thank you.

of Our questions. Bell with with last Research. the Ryan proceed comes question from line your Consumer Edge Please

Ryan Bell

Hi, everyone.

Joe Scalzo

Good morning, Ryan.

Ryan Bell

due is portfolio, of expansion families and are Quest increased the confections who snacking, that is largely come or the on-the-go out brand expansion products, might degree of of move those that to deepening from incremental your to and calling going the benefit a you're it's Atkins some or kind With those consumer already as side pace outside snackier the to or seeing what some consuming if consumer of on which that we the of there's restrictions? existing

Joe Scalzo

question. great Yes,

snackier So on mobile at have to products, as It from everywhere, [indiscernible] we encouraging. really all don't correlate what start says time becoming at learned which and that would I we these of it I is is that to they right? consumption more all people every rebrand First, products. no impact

driving product, And pertains case people to most a good news the They're as brand good it really and So existing. as they're that's brand for new buy good us. among is right? little driving of and both, rate the to in things really it's at at

suggest they So the that we both, are see and them would as data both.

Ryan Bell

your to helpful. is that's But answered you as you'd add after useful arsenal? be is some add anything anything occasion, one some channel anytime or portfolio? the for that as you’ve that's plant-based more you I else question on there that deleveraged acquisitions looking there to you'd to medically something expertise find know of products, Maybe much to the have. [ph] Okay,

Joe Scalzo

consumer defined underpenetrated Strong defined consumer brands, brands, opportunities well grow. targets, well to consumer

a type we business is So that of great example the seek. Quest of

for from was a aided consumer had and well strong relatively Here's consumer was a Quest well low target was the it a brand growth that over shown and consistent It defined has unaided unknown, standpoint. brand time. It opportunity understood awareness. relatively

want consideration are to marketing to the anything So else. them, type of when and I more conversion, is brand to the this I this or as ability be brand you to they're to And from it then product. want prove think, drive our you awareness types standpoint, and segment It's those build find. about our than and in find use to consumer them. got trial And grab to I hard opposed expertise

on them good what's showing to get target its expand folks showing and and and protein on brand trial its and build that, our snacking best we're trajectory, promise, kind right was So a its good it to bars, beyond pretty rates, in category beyond the profile specialty food, other audience ability drug of expand and brand that made a the ability we penetration the the in the and target brand -- mass choice. to to was And products, ability possibly the was to now list. that that's channels, Quest its from growth hunting

than we're looking So particular or any more what segments that's for products.

Ryan Bell

it Great. the for That's context. for Thanks me.

Operator

back question-and-answer concludes for I'll And remarks. Joe our it to This you. Thank turn closing Scalzo session.

Joe Scalzo

again call. Thank participating you. Thanks for today's on

you all and a third to on Thank hope quarter updating continued in safe results have you. you of our forward we day. good We have to look We remain July.

Operator

today's This conclude conference. will

your this You participation. Thank lines time. disconnect may your at for you

The Simply Good Foods Company (SMPL) 7 Apr 212021 Q2 Earnings call transcript