SMPL - Earnings call transcript Q1 2022 | The Simply Good Foods Company

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Operator

Greetings, and welcome to The Simply Good Foods Company Fiscal First Quarter 2022 call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Pogharian. Mark you. Thank

begin. You may

Mark Pogharian

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

performance that on strong cash to flow and in company's we an to company's EPS. EBITDA asset-light call, the press During to useful events. basis Due on will the and our A SEC adjusted forward-looking relates to no subsequent in obligation results subject filings. to statements statements be of non-GAAP today's based information we business will are actual company cause undertakes to that and may provide the on management course we uncertainties refer financial will today's today's update risks Note detailed as can certain of these and that The believe found such diluted that measures for materially. differ risks it release evaluate make various call, investors. listing uncertainties model,

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

Joe Scalzo

our Mark. you, you Thank some for us. and provide first and We with more quarter the results bit Simply Good as a momentum. I'll before of had it Good your and Todd wrap joining business morning financial details of discussion recap performance thank on good detail, in start a will questions. strong results continued quarter with our Today, our our outlook brands. discuss the we to results Then a first up year you our fiscal Foods'

on and and net XX.X%, primarily basis year a last slightly double-digits all sales, expectations. versus by quarter better gross increased were EBITDA, First sales than increased driven volume. our adjusted profit, percentage Net

mobility This to Stores. and percentage that year our Additionally, remainder retail quarter estimate estimates greater and contribution we net from Year retail distribution, sales COVID-XX of consumer shopper improvements a from increase XX takeaways mid-single-digit net growth that resulted new be investments, benefited total Good in IRI our Convenience growth. is first our versus increase sales than was year's Foods and takeaway product of the in XX.X% U.S. benefit increased measured Simply a point to about Note in penetration household channels Total MULO marketing the slightly growing over pricing to year. in improved innovation. traffic last impact of expected to the greater due price restrictions. the September the over

distribution the gains first points G&A typical XX greater than Quest, sales of and This the the to last acquisition EBITDA seasonal shipments of quarter ago year related offset sales more Year's growth, due timing versus New programming. the increased at due than net consumption quarter the $XX.X synergies, increased and was primarily to quarter retail Gross leverage. the basis and First growth in end slightly margin inventory solid period. Adjusted to million, higher to XX.X% marketing investment. build

As headwind, chain price but costs expected, and by increase were offset were favorable more supply a than our mix.

Additionally, in the service performance we improvement experienced steady during customer quarter.

in fiscal costs chain stated significant XXXX, expected in As largely supply price we we offset headwind our be previous increase. a conference to by calls,

over impact costs margin our than previous discuss now estimates. are said, to are chain to supply full manage this than year our prior net year Therefore, the and and ability growth outlook That in these We'll in line our EBITDA the projected confident are our strong increasing be of ingredient is mostly costs. the greater greater detail higher However, driven gross outlook. moment. remainder costs year we sales full and our in our higher adjusted just top a by

value XX.X% that over for our customers business, term doing Simply all growth navigating while earnings takeaway environment. We Foods supply well net our against retail our strategies on Good and create while and measured chain believe channels growth in deliver sales execute earnings to continue long will to for shareholders the a expect are we and we the and focused are driving and We'll consumers. sales positioned competing our increased things the to quarter. challenging effectively continue and right

well Atkins the up COVID the quarter weight consumption to continued outpaced and takeaway the year. remains of is year-over-year successful channels work. takeaway confections, takeaway in the shopper rate the the product business last up line we In of historic And XX.X% about Atkins was the as weight up ago X.X% launched In growth quarter quarter from and retail up POS correlation other perform retail well channel Total takeaway active XX%. retail as their similar other Atkins our cookies just as Protein U.S. driven been as X time. period takeaway outperformed our in the this segment bar strong being Atkins segment points well XX.X% Chips. up in cookies, same consumption growth. about by was versus segment management the contributed channels both all by recent lapped up to as X% Quest retail as the outperform in forms to about which X.X% retail channels, year XX.X%. and QX we active with shakes X.X%. and continue The were increased in a was was X.X% below over Atkins mobility Bar continues total at of nutrition measured restrictions the and last case quarter high in show Atkins even trends. all year's versus growth. include quarter bar measured there measured traffic of benefited In improvements channel These pandemic, consumer in Confections and last comparables. have has as percentage as improved strong particularly growth QX increased to strong levels mass bars sequentially launch. increase takeaway management increased buyer brand and of as the was fourth dessert Performance growth. brands segments to with ecommerce modestly was Atkins And Importantly, retail sub total nutrition. respective throughout anniversary particularly mass year's of

up growth traffic. about XX% in POS channels by across and quarter driven First was all increased increased particularly mass, strong

workplace. below remains total performance. takeaway levels Atkins opportunity remains in QX mid-single-digits measured the ecommerce low strong. pleased historic remains a Atkins' buyers POS year with Atkins customer the consumption teens increased growth Amazon, rate versus an Total the percentage are to Atkins second retail was in growth brand. ago Atkins We in Buy of buy the channels. the to largest period. for between Therefore, quarter on the improvement high ecommerce correlation of bars rate basis similar due

now total C-store success active and measured where takeaway bars Let year first improving Quest and quarter to segment. nutrition XX% continued are do and measured driven new first of retail turn increase strong shopper confections. chips, and measured year of by the the U.S. household performance and nearly cookies versus in increased of XX% at the sales retail ago bars' takeaway the product universe period of me Growth rebounded driven increased MULO of and snack penetration, traffic, retail Recall Quest XX.X%. to quarter, IRI The Quest was portion channel well products by Quest channel in increased the XXX% about bars retail in Quest forms. XX.X% quarter outpaced sales.

convenience versus takeaway POS solid. in were up these increased and year. XX%, mass in stores traffic XX% XX% foot channels quarter and as added We come on continue chips track across another progresses. growth robust all We are of for to see channels. channel growth key the last Increased to demand were respectively. good Quest the ecommerce and supply about incremental about year QX retail online

As in period, expected, moderated growth rate due to strong year ago the performance somewhat. the

was comparables quarter results the half summary, remained of forms. than we solid half first the growth significantly challenging. all year growth across that better of takeaway than retail we're Amazon second become at be what That business said, year were in the Our strong, major stronger first our will pleased expected. and with In more the as

retail we balance good will a solid consumer year. the takeaway as drive and and sales customer have in place programming net We throughout innovation growth believe that of as well

Our more and are have performance. the quarter, approaching levels customer service normal improved during we

initiatives place Pricing chain and to the fiscal will in supply costs of year. be inflation. a mitigate headwind that expect significant impact We during savings the cost are

total supply earlier, them costs XXXX. points about chain throughout previous and into margins mentioned year expect fiscal are to updating to the remain I high and our decline expect and this now at XXXX as last linger we fiscal However, levels gross XXX elevated we versus basis view year. year fiscal Therefore,

our growth stated brands overhead we offer our to believe us in and structure have invest numerous the organization. ability on the we future margin occasions, As and cost of gross

impact of we structure, year consider to XXXX, all we supply us fiscal the protect cost of available will our the chain further pricing over assess cost and action. inflation this As to including balance into options lingering fiscal

QX, greater Todd, about outlook. deliver cases growth COVID into believe details. similar and details we the end to shareholder XX assumptions some executing Omnicron increasing now against As QX. value. work position another growth to path then financial to to we consumer our cautious takeaway remain provide due and the I'll revised surge we of as return call you over and expect to We're said, we plans EBITDA solid participation related our adjusted recent sales well prepared from variant. I'll move seasonal to a the That to turn in trends with with retail be remarks our and to year in who'll net we're

Todd Cunfer

and first North million. $XXX quarter American with a primarily volume. net sales. was you, everyone. morning XX.X% Good our Joe Simply sales XX.X% net net good Total driven will and by to of increased review Thank I Foods' begin sales increased

and timing price remainder percentage pricing declined growth increase, point percentage to of the will over European a growth. Core the of point the to sales sales the Therefore mid-single-digit implementation International greater growth. International due to company net contribution business a European As XX.X% previously was business X.X to due to year. pricing Joe be business was growth stated, benefit a we total estimate announced exit the exit. The was and sales X% net headwind total sales the

profit year increase P&L of points ago $XXX.X Moving gross Gross the basis period. of versus Margin XX.X%. on increased items, other XX.X% an to XX million, was

chain As inflation this expected, headwind quarter. a cost supply was

more lower and carryover price and raw select channel coverage the increase, of was promotion, previously mix, favorable it than materials. customer mentioned However, offset product by trade

to marketing inflation a chain on $XX.X increased logistics. fiscal higher to the offset the As million place majority other offset greater to in we increased XX.X% the packaging the first mentioned, sales in We leverage. to million G&A supply Selling cost stock Higher Joe are EBITDA of year, the significant Adjusted in Due XXXX. anticipate same incentive costs due by building brand initiatives savings in costs expense large Quest due half programs related integration leverage driven ramp of and expense, of lower materials, fiscal and was to $XX.X brands. marketing were timing period. and of these to of by help and the the began year to based increase anticipate this the fiscal solid the integration in incentive second costs. the Pricing XXXX raw accrual be higher to cost, expense of year. ago up G&A second XX.X% higher and to year corporate half the and leverage excluding occur expenses, G&A expense about will XXXX, XXXX both due half the will restructuring compensation accrue marketing and fiscal as in when compensation in synergies. expect compensation we

noncash Moving liabilities paydown the related In due warrants. we to the million a term interest of first ago XXXX, the $XX.X the to to expense other items of million. in of the $XX.X the million fiscal declined re-measurement was the to quarter million loan. P&L, recorded our warrant $X period, to gain the $X.X year private noncash In related charge

Our to was statutory related rate the charge tax in warrant excluding about QX the XX%. liability

Net We million versus anticipate tax $XX year ago $XX.X that was year XX%. be QX continue income approximately to million our rate full in will in period. the

Turning to for XXXX. EPS, the per quarter $X.XX per $X.XX share compared reported was diluted first share diluted of comparable EPS period to

associated these Quest In was million ago million versus Adjusted Stock liability that expense impact, year. depreciation with $X.X period. to expense, the versus $X.X and warrant income diluted interest compensation less $X.XX, and cost versus similar items was year last $X.X adjusted increased excludes $X.X to the EBITDA, was year, of of year previously restructuring ago interest amortization dollars addition million integration mentioned million we the Note income, EPS million diluted as an and and adjusted which and increase last EPS $X.X calculate $X.XX period. taxes. based

under sheet. non-GAAP being outstanding release today's refer reconciliation diluted GAAP difference the our private assumed an the the fully for warrants XXX.X on of a in The shares of of EPS liability and outstanding Additionally, to fully shares versus classified measures. private to diluted million million the under versus to diluted and adjusted due warrants press due calculation explanation financial XX.X as exclusion GAAP QX is of Please GAAP. balance

company the outstanding cash was and this increase operating term cash year $XXX.X to Moving to the XXXX operations of was working first net XXXX, incentive Note and paid its last cash in will In by in from flow down than the company was quarter, an $XX payments prior The principal used balance $X.X at continues million. timing that payments sheet versus anticipate the the full capital, in compensation November end of of million. affected tax flow, year. and million the greater first the the activities loan be balance quarter, fiscal the year.

November XX, million, expense million be the trailing first company deferred to $XX.X anticipate was CapEx year would adjusted million. about the $X cash million, ratio be fees. expense is XX of including the to related and months Full We turn to Capital the in As quarter the EBITDA to amortization XXXX, to expected X.X non-cash for had of $X I $X.X Expenditures financing debt remarks. to times. million. net now interest GAAP to Joe about $XX like call back were closing

Joe Scalzo

Todd. Thanks,

us solid that EBITDA mobility. gives growth. full adjusted Note workplace continue first any year This we to strong trends to in customer results start meaningful confidence our changes takeaway estimate. net does are marketing, sales previous programming versus increase year. our and and quarter not a assume our drive the forecast in to product outlook new place Our remain and to good Retail plans have

expect X headwind our versus metrics and year last sales outlook, fiscal updated Looking related at European year point to we business XX% XXXX to percentage increase exit. XX% net full key to includes this the a the of

points third I with supply ingredients a chain impact versus about the year quarter. will contraction second full EBITDA in of increase As previous sales less gross mostly XXX in higher the rate. stated is our than anticipated outlook, net in earlier, XXXX the growth result costs basis headwind margin by and driven slightly to biggest and remains Adjusted

increase expect the to lower marketing than last a at versus that although sales net will We year, continue increase. rate expense

leverage. net the of growth diluted from significantly adjusted the in than EBITDA greater result should half we adjusted half are decline as benefiting We in And the interest the growth the increase sales in the significant proceed difficult of anticipate than anticipate will as the through second first the EPS year year. be an expense comparisons stronger more year-over-year SG&A rate. we Additionally,

the growth is of and category. retail strategies, business earnings than expect less due cost, excited the against be our sales net within We're to similar XXXX executing and be the to growth expect we growth. that household We're will first penetration in the Additionally, in growth solid resulting our growth EBITDA second exist our this rate adjusted that and takeaway QX quarter to higher fiscal sales quarter in opportunities rate. increasing about we

company value. Our flow as we're in strong questions. our balance We interest sheet in evaluate cash and us invest generation business increasing to available to everyone's and shareholder take to enable opportunities our path now a and M&A appreciate your

Operator

line your Stifel. question with [Operator you. proceed comes question. first Growe with Chris of Our from the Please Thank Instructions]

Chris Growe

Hi, guys. good morning,

Joe Scalzo

Chris. morning, Good

Todd Cunfer

Chris. morning, Good

Chris Growe

on I about pricing then it's topic prospects offsetting took companies' seems as you you morning. if on that. here the you look utilize where we're there's outlook totally just you at wonder And in to gross just had business or world cost to just the in me could but I for I you popular Good from many regard a forward year effect for to back and inflation inflation in some for this a a calls, expect? going business, margin the talk looking if particular, a limited gross result, give but level because you not guess, could the inflation reinvest question this for least, now keep gross now? and maybe you of the the of not are pricing, that margin here margin

Todd Cunfer

Yes, so one, I'll Chris. take that

with this the clear, chain ability just to very all, supply with navigate P&L, be cost. of we our first comfortable incremental to So are even

raised we bottom you've feel that. about heard, we our line terrific As guidance, and top both

was significant was the probably there digits, significant to Regarding increase digits that of we inflation low double single levels and kind of for increased business. year now high inflation our kind inflation, we total seeing the it's with going price yes, were of, a into

So the new that's invest our that's costs, commodity outlook in love business. it -- love We ability our significant. shape We of so for to the, P&L. our is

You can that count It this rate may done not same years. of on previous in year. we've us to at be increase level marketing growth the in the

substantially increased well marketing the we've know, ahead you sales As net of years. over several last

continue we're the in close our it. we've may we XX% the a marketing net be but investment, level feel about. sales to the of not We'll done in can and to past, expect great us rate increase from to So invest growth which business. at you It

Chris Growe

And Todd costs, allow visibility you more the city coverage input would comfort the do just have those question to is, guess, of that clear [ph] that? have be better on that on I you is of to

Todd Cunfer

Yes.

will so a we're have exposure, We're And do continues if do of about to the the little P&L our coverage to a this action. And levers pricing thing XX% little additional some year, to that. manage comfortable. linger, very very, have But we for we bit again, risk take not in of bit hesitate we so to this rest year. obviously,

Chris Growe

brand. mostly from more in buyers. measurable one had It's like on Is the Okay. just And any unchanged. up -- change buy sounds I follow that rate just fourth there sequentially was quick the is that It Atkins quarter?

Joe Scalzo

in Now, is of being people form snacking is participating, in impacted occasions back -- we being negatively so we've of by evidence interest to seeing growth the Atkins, in we're for number experiencing, of at continue bars buyers number which in still the still the particular bar strong the we're And what Chris, not see buyers. work. been brand,

in less work from prepare a all up kind really rate starting buy businesses being highly well. are mentioned, pick consumption Now, are our slack news Those the comments, some occasions, to standpoint. and as other to is, of non-shake, that's the at of correlated non-bar forms incremental good doing we

Chris Growe

for your Okay, time. thanks much so

Operator

you. Thank

of question. Sachs. Our next Please Goldman proceed with Jason with English your line comes question from

Jason English

folks. Hey, A good quick couple morning questions. of

math, full gross your the are context of back looks B, in profit where quick and lower A, around it year like cutting And the actually by EBITDA profit forecast of X%. this offsets? the gross being moving First, correct? you're envelope higher with for is

Todd Cunfer

generally is your so Yes, correct. I math think

obviously the of first is, margin when do but from up, have basis, P&L. for kicker not profits year. leverage on only increase question, G&A at we volume So volume, as news in incremental we're look, our very you're a percentage And nice modestly G&A the flat all, with Chris a get taking good significant talked perspective, from get growing you The you marketing. EBITDA a going the I Growe’s to to line the about with margin then

ability increase depending where the have we're of as, on but it margin to toggle a this back the gross We we year, in, still level at come very an that healthy see be marketing. will

if ability have in more modest So some we the increases have necessary. marketing to

Jason English

hear a it you Todd, than put to on finer Did into initially your marketing coming sounds like spend point planning year. I the to So answer you're correctly? planned less that

Todd Cunfer

a implying sales of initial basically year when the growth guidance bit, depending to to be was that a in were to initially, probably having Probably little going we our kind out. net for line, XX% X% a on growth how plays that. so be digit it's bit Yes, lower than single high

Jason English

like margin Got by outlook but looking three on you your are spot and sideways. -- gross markets changed ingredient guard, last a later, so it. that the little over to confident envelope What like XX% now really -- it months? the here looks few we are it so And or the year. the little at your we months what raising back What's down forecast you for year, look so kind a outside started on last much full off just moving up and a are you caught of

Joe Scalzo

It’s Joe.

to the was it sustained at Our stay longer like into of experiencing moved what view we linger the And now our view we we as expected. of high it's that were original it is, going than that levels the year. marketplace looks not would

a pretty abating view of expected. that And up. recent a They're we are is So frankly, not view. costs going not just what matter it's as

second linger We going are them of are linger our starting year. stepping from into said, to So do we've year, XX%. beginning. half the of investment to marketing next the Right? expect we're the and a just costs been XX%, So what percent going the We our What as about to fiscal these P&L around of while of act we're be process we to this options and to say, starting comments. is we prepared the And -- kind back in okay, it. seem structure. Gross lingering, a to us is margins very competitive with in XX%, our you market clear shape a the EBITDA if think around advantage. order maintain our the over of expect to can sales margin pretty

Jason English

Got the it. the commitment Thank Understood, pass on it and congrats strong by you. on. way, I'll

Joe Scalzo

Thank you, Jason.

Operator

you. Thank

with next Our line your comes Nicholson Please question from with Wendy question. of Citi. proceed

Wendy Nicholson

my Hi, on just first supply question is the chain.

the shake In it's door? a in a about manufacturers, in specific you availability getting shakes any talk business. the strength terms because on product, off Atkins terms if base, seeing labor I any side, the you but of the you with that's product in new about in Obviously, can low talked of challenges? very challenges seeing you're you your have versus work know, are the coal bars

Joe Scalzo

Wendy question. good Yes,

we As said in our quarter. performance prepared comments, the improved during our

So we one it service on was -- expectations frankly, customer not below were and our thing. what

we're playing we So docks [indiscernible], to quarter quarter, addressing to basis. access ability exit supply you're much to first the That challenges, get improving when where ingredients, chain, the from service whack-a-mole throughout we [indiscernible], daily of customer to ability to pretty expect on products from a that get the first supply our challenges to we our those in to our particularly from chain products getting job and the the supply be. said, pretty performance done to service get into customers' get ability such team has chain, customer run a close outstanding

a we No, nothing team and daily it the we're on pretty that are has shown supply woods -- issues right continue But manage ability don't out I I expect standpoint? of with our from challenged look, to So will is a smooth be now. confident. chain to the basis through and

Wendy Nicholson

speaks Atkins itself brand the obviously, is that protein can just competitive. crowded growing, but you in and kind And on very obviously kind brand how shake carve but right you to niche in The for is now? category Atkins a of how shakes, what of of business, terms us very remind out also intend rapidly do category a positioned recognition, great

Joe Scalzo

category, not. let so that a dispel me it Yes, it's is

in this don't you nutrition So that very other. unusual category, with compete products forms got each and

and the So high simplest consumer Premier let different, benefit source you benefits interact different. me protein low example. Atkins consumer targets sugar, with and is little different. are and Ensure because Boost, very carbs give protein, Consumer are fundamentally the

about category. So anything if group how to sugar high and low to mistake that's a protein, you try making about actually together, carbs a shake, low you're that's think the

I I think what's occasions happening benefits, targets people shakes the is, across more, you're think consumer those across usage because or they're of seeing are that. more home shakes consumer and are the

keep unusual. your stock. had can interaction. you can get a of Second, if and we're service among shelf not you that. can supply you get, not our business there's a benefiting But We've the little lot product, you're getting very preferential display again, shake issues from treatment retailers, and can with because you bit it, It's

and so fundamentally got You've different. benefits because are interact that identical consumer other their with not targets products the each do

Wendy Nicholson

I'm Fair bit you is it just my inventory guess of beginning was But question, wondering just the year then one be to in and last Year's question time whatever, about come. omicron so build there's in stores purchases, you inventory people means delay with store excess going of some there's and going seeing for the at shipments build the of made was the in New just my inventory to normal outpacing the comments two I sort promotions. enough. whatnot, and to very And shelves if that any know, anticipation a back you are the on of weeks inventory little first,

Joe Scalzo

than to level in Yes, at be side. it our our prepared that clear, two we do side on customers, comments the I inventory had a of expected. ended And lower customer to comments trade first, had with we what think have last year to to would our prepared factors and both products ability flow

the out, the up then makeup So at to to build do early New right. too merchandising consumption we in yet Years, had call retail second, quarter. New in Year's pointed And rightfully some you really for

of POS So haven't from first kind January that a we gotten standpoint. week of complete

is exactly So it's consumer take off in hard what be going the Year's. to to tell New

Wendy Nicholson

Fair enough. Thanks.

Todd Cunfer

Wendy. you, Thank

Wendy Nicholson

Yes.

Operator

Thank you.

Our Please next Credit question. proceed your with Gajrawala with line of Kaumil the question comes from Suisse.

Kaumil Gajrawala

Good guys. wanted made, sense simple it you had follow on wasn't just the or as up bit impact be? do can line Hi, idea the little If you you customer where on a supply on service a was an it commentary overall morning. chain might it or have the have top as to I just

Joe Scalzo

again, First your of ability comes out stock, in somebody the challenge stock, when the to of and you're that's out first miss service customer sale, because if are of We you the store, quarter. business. impacts had quarter, a a you the So stocks right? into out of revenue

progressed So quarter saw steadily get those we as the better.

So obviously, we're a optimistic. more little bit

shelf is out all ability are as the news. Our product smoother than good reduced, the That's stocks of being quarter. better, went the to is into to was service flow it we

Kaumil Gajrawala

the the outside nicely. share context terms on up as lot a you your on you a to to at any context where could the in on more in categories, little how context share brand Okay, would difficult they're or momentum from mobility, of from benefited Since brands? if color so in I where a but of many give of look recently, And benefited share, get good well. little of look, us for bit then, household sense sit in from penetration the you talk a trends more you're you great. anticipate market you've But it's

Joe Scalzo

look nutrition, like much bars, on. within that segmenting regardless on name like recommendation So benefit give It brand be because segments an view would Yes, which active has meal form. maybe of chips, Quest, Right? Quest management false at form brands protein, and Atkins segment active example, brands brand outperformed so than highest sub a the more shakes. the and therefore a we what's be our much sub of Atkins, form. it sounds Atkins both we it of you weight segment, the within regardless segments, within of interaction to for to management our get and a Atkins the you outperformed those sub segment be strong nutrition is has consumer brands cookies, by will trying weight of going shakes, There's And bars is include helpful, the really few. forms. track. that's you to you the Premier read would is of will may those, take what a interaction so accurate brand and view, It interact and To in so

communication, we're impact an we roll because merchandising, of business vice because on good So if a in meal shakes, see and of of because on our bar innovation, versa.

is the at segments. see those been active from brand you'll consumer of the sub segments. and look a steadily So brand And what total benefit, we've those against share management, both nutrition, weight evaluate in growing

Kaumil Gajrawala

you. Thank Useful.

Operator

you. Thank

comes next Alexia Our Please Howard question of question. the from your line with proceed with Bernstein.

Alexia Howard

Good morning, everyone.

Joe Scalzo

morning. Good

Todd Cunfer

Hi, Alexia.

Alexia Howard

given pandemic, moving unprecedented, Hi, given just the so of this know for going quarter chain disruption entering on. second we're and the supply is and the you inflation so other all year, the now, the cost uncertainty pieces, I into guys but input level this

key of from rank have from Thank know guidance what just up. visibility from If you, the I of that you here? you the you things you follow a terms don't rank have in are would you to uncertainties and risks or given how that sort seen and changing order had we've the don't here, opportunities, that order into

Joe Scalzo

be to think consumption That's shopping a the from would Right? beginning at We question saw and any up led a the that killer so the What keeps of of consumer me huge mobility night? to change volatility that levels standpoint. Alexia. Alright, first. I behavior, pandemic at

and mix If spiked, declined was and changed. it traffic down the stages channel shopper consumption you early then and remember,

variants were consumer or to been the you the the at least looking if is in be the business, one Omicron, Omicron the on of risks at their shopping would behaviors, impact first. mobility, similar about and post-COVID are that reasonably they this mobility out So kind it's people and life world,

until we is, increase business most to I the price September XX, start doesn't think in a hit part on early the for took second our shelves November. the really

price quickly. don't retailers So move that

really impact don't lot of increase. of on volume on we price a So data have the the

I of year So that's the second half think. the risk,

for little challenges in we up then know bit. third, chasing And the just one that think So I supply Right? general, to me So chain keeps going be to we're ability be a year. done are job, our they're challenges, deal And every with team phenomenal those flowing and has Nothing's chasing in a typically but you day. they to whack-a-mole steadily. year. our playing don't that responsive Right? issues a

has I working we steady. cost say make hard a the customer duck really we're the that in price on service significantly pretty happen. like gotten environment, to absolute -- but but been would looks I think has our the better, So, smooth, water

their said in comments. somebody I think that

we then it's as because less is So price have around be is, question it and concerned for it what to less to linger about fundamental long The do appears how us then about I'm address it? it plateaued. about, forward? how to to going So we do I'm do it concerned the want and going going how long now

Alexia Howard

sense perfect thank Makes thanks, much. and so you

quick real follow a Just up.

mix how press favorable that likely it attributable long the to in to continue? mentioned and What is You morning. release is this

Todd Cunfer

all balance Yes, I both the rebounded things And here Quest E-comm. suffered. particularly The consumer from the brick customer the COVID, you're and and for of are Quest positive tremendous getting the also side us. of now really a a a had normal on getting somewhat business last mean months during those COVID, and heights both behavior, that brands, bar perspective to back has on couple better has business mix really a business, standpoint, bar C-Store between -- from mortar nicely. on the during And we're side

Alexia Howard

pass it on. you much. Perfect, I'll thank so

Operator

Thank you.

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

Rob Dickerson

much. so thanks Great,

just deceleration year-over-year first and of First, kind bit, for implies off then some and would more of roll Joe, implied in the line slowly obviously, than of there's it and half, realize like the quick speak QX, you hedged second benefits. QX, relative the Todd terms have likely question, that given to also just in sounds half so elasticity then QX. guess, risk a I grow your top comments, too of to build the guide terms inventory just

there is just expectation implemented? there pricing QX, of on timing the that volume the And got the year-over-year followup. decelerate as given pricing then just could a an you inventory any benefits the I'm is of top say, outside in and for to kind two, built we So a anything bit QX? relative in side you've quick in there line Thanks. have QX already increase curious, I

Todd Cunfer

was XX% that's I yes, total going that which said to XX% I is mean, first growth you back in just QX, we about some inventory and consumption, little bit same so be shipped period comment And to POS in very think quarter, and range, the ahead of was shipped on was summer in the the saw going mean, of our what in a from we shelves obviously a bit we're consumption. really we about. consumption we getting of and So that the during pleased of on so obviously, ahead when is, the

high are, second where consistent. exactly shipments of a that points, a What are the Our be fall we're the you bit half where in year as then of XX% last will half, kind grew a where going little falls -- hard X%. feel we be within of rate very, get quarter, consumption to teens but inventory consumption comfortable tell as end -- of about. the to but comments kind we into card net of we couple about POS POS always And we it's depending on the wild the going to X% is is we're always It's same. -- think first to obviously sales very going

last grew XX%. of year, Second half we

numbers. consumer much still And last have we around as Joe out, lapping noise around then we're pointed mobility. So challenging the more question, with pricing elasticity,

here, a bit lap second are conservative assumptions half. of potentially a little playing difficult half much we have second but more the we in So,

Joe Scalzo

the programming business, down we Yes dollar the is, second marketing, manifestation it's grow step the top the at the ability sales to confident We're feel to thing in of very first our deceptive grow we're a a second we've comparison think little year half. not drive, that. half the our rate really sales. I to is to ability line, starts products, the the to year, to growth is, half absolute continue relative in dollar like ago strong And retail, draw, the to got the confident

that. So very we're in confident

Rob Dickerson

pricing but Fair commentary, retail just of the seem given that at enough. incremental as on it hits that into a fiscal year, when you is shelf, relative announcement XXXX, event incremental of probably needed, it of it XXXX to given fair? rolls the timing and would maybe the seem if to would kind probability the then if fiscal could like your And were be of that pricing if kind just quickly late higher just kind lag of kind implement of

Joe Scalzo

price four When to helpful, you, you customers. When the with you months be or will Rob. maybe make three this the decision, takes execute it

cost there's you to and shelf, few So previous the more options retailer months we're for right that. just a months the of now. one, And then evaluate so to I lingering reflect view it's it four the the to previous again, minute pull one questions, the as from on of is in our standpoint, mentioned starting recent our a three before a to so can at them delay you another execute trigger, to

Rob Dickerson

Got it. All right, lot. great. Thanks a

Joe Scalzo

Rob. Thanks,

Operator

Thank you.

Our of Stephens the Please comes next Inc. your Ben line Bienvenu with question. from question with proceed

Ben Bienvenu

the follow Hi, the thanks. Good on morning. to revenue of equation. side I up want

about think of control factors are When talked help among mitigate control, risks terms a being the how ability. one your your and external of price, within ability elements any thinking You your potential control? your that of which about outside are and you that feel those ability the risks to consumer in growth to associated your innovation out mitigate driver, about as of risk to comfortable do with you

Todd Cunfer

Yes, great question.

two to think. the home want think don't go I too, people into up I or two that Those Right? risks, lock are there's stores. at risks

So probably the when right? at has other growth for So been mitigator home, they change, up us, in forms. lock single occasions biggest all snacking their the

in we've that into the our the is at being and correlate with chips by we've launched location learned being correlate commentary noted mean transit. thing bars that both confections Right? us. work bar So and for highly and business at which especially Atkins we what for I that on they is we've a to The And Atkins as of business, and I nice all. center fairway as have to in business core cookies, a don't think shake brands is

hedge if to a those staying people and ability consumption the go bars risks out. against nice we grow at is home back in not kind to of that see going on our So would

behavior. shopping is factor second The

as behaviors, remember they people mean, the going earliest, the if to. and If were shopping been stopped you delivery. brick Best but been business, the ecommerce have and number retailers delivered outlets it major pickup having ordering two it's earliest has of so their remember I you years online hedge as and accelerated there well mortar business, the both and retail limited ecommerce

So hedge with changing. peoples they shopping behavior is natural and to Amazon a doors combined retail

at night, risk So though. there's those we've out still a transient, be challenges, had me some Probably to we offset like but feel to there. going natural up yes, keeps hedges

Ben Bienvenu

follow a up Okay, question thanks. great, that's My cost. second is on

most you're XX% I fourth fully would the several coverage? exposure about, And be that are quarters covered of of for buckets is the leases nature within next is would be, where your it versus the more exposed talked think across maybe then Could that coverage quarter? for covered. You you the that and uniform or year the discuss that of

Joe Scalzo

Yes, are to we commodities not get, so level a some difference the there are broadly, entire where for covered again, are of specificity. reasons I year. there question be some where the get commodities, that the are to that between competitive for we your covered commodities, but covered ingredients we'd on. year, XX% the year, huge it's more of some specifics. into don't want want to of uniform. don't I are not commodities XX% fully rather there's not But for But, are, answer we might XX% get only There into to There some and minor

Ben Bienvenu

the much, enough. so best Okay, and year. of luck Thanks the of fair with rest

Todd Cunfer

you. Thank

Operator

you. Thank

from Our proceed of question. Please the comes with Deutsche Bank. your Steve next question line powers with

Steve Powers

Good guys. Hey, morning, thanks. Yes.

Joe Scalzo

morning. Good

Todd Cunfer

Hi, Steve.

Steve Powers

where sure your to to seems expectations XXXX, exit versus about into perspective, better there's the and feel fiscal gross and XX% clear for I P&L next guess margin you you I'm hit versus gross there's be, rate think guess, forecasts as want from I your of couple of trying a It cadence because quarters. your XXXX. plus margin guess advantage. as current like margin I months of to have three you that you anticipated come prior big where get ago, gross XXXX the guidance in said less a a a I'm earlier is a But exiting on part

that next towards the couple that from year by of away to can step we we I that, make ambition back as progress end? towards So quarters, how expect guess, much

Todd Cunfer

Yes.

pretty toughest gross So comp expansion of of year, XXX as despite we you hit not kind significant to margin gross QX points a was the XXXX difficult in environment. perspective, mentioned margin will pretty just for had we see just remember QX obviously expansion, earlier, basis it's, to we're clicking be even start hit but QX. last the blowout here, everything going cost a a here only us, from if

that's still year So costs tough of saw lap. QX rise margin gross bit, a to expansion. to a last start We be going had in

really if for be in where things to severe want several commodities lot in will take less either start to a XXXX. any we times It months. are nine six go next rest we are depends QX. be, the impact not it should specific assured you be here call, as but will more better on where take things actions, if can whether some And impact we it we've on importantly QX it's, that very action obviously, So, it for on the see degradation bit covered as the we QX. But, be end year of should little change gross the we not can margin really again, to and completely the we year, start a to of into or depends are said

Steve Powers

given I guess okay. just to then and quarters kind step outlook, sequentially margin or But a, what's comps, in embedded year-over-year in the three are expect go for from to see big the XQ improvement dynamics of a the sideways because gross but down going you I next sequential in guess the of you a, take levers? Yes, your do

Todd Cunfer

-- be depends plays some and and the basis QX, but get an gross will we be It it will again, margins margins changes, be absolute will said, into relatively as be fairly everything QX, gross there how relatively those absolute the be just out. to year-over-year. equal obviously QX will QX. from we Yes, it same in

Steve Powers

of in in any fair your almost topic, if on about different And terms change as we've M&A entertain the you're opportunities just talking well to crossing uncertainty comments deals, desk, appetite I the hour? for totally given facing, as I is Okay, just last, enough. guess could been your the any landscape

Joe Scalzo

lot frothy The and environment a be a opportunity we've occasions, expectations pretty on as number sellers of have to aware. need with busy of stated and buyers

Steve Powers

Okay.

Joe Scalzo

brands to complementary and think as of buyers. like our So we continue evaluate portfolio value to to ourselves we

looking part brands you're could we're have to if for, to out of as can most a brand looking decent a continue to our consumer consumer organization portfolio you order brands to there complementary promise size, a we just, of And too grow understanding that size good consumer So Those chase strong that add decent the we see brand bag to value. given obviously, are effectively target are for who get synergies, our business But selling it. looking to you we're to you supply accelerate. in We the size ability more to chain have market and a of and part, at today. pretty of them assets that that, the of and have strong a to and of our target consumer for the is, the the number that the portfolio, those brands. need understand for

Steve Powers

I appreciate it, Joe. Thanks lot. a

Joe Scalzo

a right. good day. Have All

Operator

Thank you.

from Kaufman comes of next question. Morgan your Stanley. with line Pamela Please Our question with proceed

Pamela Kaufman

Hi, good morning.

Todd Cunfer

morning. Good

Pamela Kaufman

any consumer was what any recent factored that headwinds very observing And in but dynamic your short from COVID you mobility? And know term a from environment, expect curious have renewed you would from cases? changes changes if the Omicron? it's demand outlook in I I you're if rise in anything, into

Joe Scalzo

changes either remarks, Yes, prepared we've standpoint. first demand we've negative a not any positive from or not, factored

Omicron has is. it phenomenon. recent a where remains it is, view been our So

it it's United XX% about Africa, the last the in you in cases think of If was now it States. South month,

So dynamic it's and is a We're open this call. seeing thing or early in little have too dramatic behavior pretty consumption not to eyes seeing apparently movement, your changes. keep not changes you dramatic but traffic foot We're pretty volatile. to

Pamela Kaufman

I Okay. expansion, about as what would How years. a innovation? And you for the midterm and you have broader growth Quest are household on seen to over several question do growth has last brand versus Quest. then from How rates come see you distribution drivers? the the penetration thinking the increasing strong very expect key much

Joe Scalzo

Yes, well, let me it. define

Let about you to give it other household then a right? the you it be penetration. me some are is we derivative insights, from the standpoint key for marketing metric that. how might factors tell So think and factors us, help All

our from marketing, of voice of standpoint, whitespace accelerates drive distribution share innovation, to all penetration. ability So a household product

been has has bar the to improved has last in one recover business so or from has So a particular big benefited the the Quest and year confinement, factors. channel brand for number in started Factor from call Quest. big starting that two COVID kick the they small team has we bar starting a business, at business are brand traffic has format have phenomenal helped job the That could C-store as foot a business. kick done

So you're seeing the business. a bars, of rebound XX% Quest in is which

So us. a big that's for been factor

snackier has Mark snackier of portion the portion supply all rates Those of all done Cookies with kind second to well. the what of done has have demand The for been well. have grow. is RTD Quest the portfolio, constrained of done the Confections the of our other portfolio continue have extremely the growth all the business exception Quest, strong. oversized calls Chips, forms extremely we've in business. driven been so

in up our prepared remarks collectively XXX% think I year-on-year.

But the large [ph] category nutrition active the will outperform of they're the in sustainable on of the a would continue law sub eventually expect to we that basis. to numbers affect going to not growth rate. You're Quest segment category,

Pamela Kaufman

Thank question you. just then a on quick And pricing.

of benefit a the should that quarter, indicated the the you but So course in it continue to mid-single-digit pricing year. over build was

over about year? remainder contribution the we the should the from magnitude how of pricing So think of

Todd Cunfer

took we X%. get a X% timing QX the the that increase price didn't because benefit about to price we X%, the of in only, around of X.X% Yes, increase, full averaged and

pure we'll points will So pricing the we the question two now, get good news. of and a an pricing the year. that's points remainder from extra volume what's is, impact two for an perspective, The extra get elasticity on but from the is,

Pamela Kaufman

helpful. That's you. Thank

Operator

you. Thank

Our next Seaport your question. Please with question comes from Securities. Global proceed line of Eric with Larson

Eric Larson

Yes. a Thanks, guys and quarter. on good congrats

kind of peers, are perspective, total mean, Joe, maybe all ago, So segments, And growing it's back faster value I category? quarter, dial that -- important the at category segments folks from timing they the maybe one segments in this in how but than of nutritional what the are but what what just What proposition your want maybe it's faster actually growing maybe quarter are you? sustainable? not to I snacking year and the your sub and this a happened is looking these sub are you issue aren't numbers nutrition you are category whole a a, segments really first and to just outperforming and category, growth, the

Joe Scalzo

number very we pieces; the the weight growth. active nutritious three right is category Quest, comparables, it hit Atkins right KIND, as with Premier then now you see in easy and third segment. category That compete protein, with nutrition management CLIF, and don't bars a strong we nose. We experiencing on Yes, against the see of brands,

nutrition bars So it So comparables is active Right? COVID. got on in year-over-year will as really management challenging. moderate get weight That more along a outperforming with is the slammed basis.

other quarter, outperform But one to look the comfortable what's is can total you year. as you We're see pretty category, long some over half you So the any outperform ability They'll the some been total comfortable move outperformed in we're some our really total comps. the category get comfortable at difficult through segments. on category. in comping if year, term, easy on the going segments the nutritious COVID bar segment may we overall, we're given

Eric Larson

Yes, got it.

kind that and in comp of three lot next of to just noise it's will So issue way – quarters. work over fly and a quarter, its a the just it's two four or the will out that

the Joe. So appreciate comments. thanks I

Joe Scalzo

You're welcome.

now a useful your into very is stacks Looking exercise. right

yourself You ego. drive with your crazy

Eric Larson

Yes, I agree. Thank you.

Joe Scalzo

welcome. You're

Operator

to and Mr. now concludes Scalzo turn ladies you, time back gentlemen, I'll our final comments. any for questions. Thank floor allowed for the this

Joe Scalzo

for call we and you to to look Yes, participation thanks good a today's you in hope day. second terrific and questions. your safe forward April. updating continue quarter Have We on the on remain our results

Operator

concludes This today's you. Thank conference.

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

The Simply Good Foods Company (SMPL) 5 Jan 222022 Q1 Earnings call transcript