SMPL - Earnings call transcript Q2 2022 | The Simply Good Foods Company

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Operator

Greetings, and welcome to The Simply Good Foods Company Fiscal Second Quarter 2022 conference call. At this time, all participants have been placed 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. of for President Company. Good Vice Pogharian, Investor Simply Relations Foods Mark you, Thank sir.

may You begin.

Mark Pogharian

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

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

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

Joe Scalzo

on and results it you, us. Today recap of will more with before Simply and wrap Mark. our in that net the sales you Todd results, joining Foods' on growth I'll of financial Then performance strong discussion Thank Good perspective second a morning bit our and Good you a In provide well up brands. second for thank we and and expectations, we some position quarter the earnings us our our detail outlook your our point percentage quarter, discuss exceeded tracking questions. single-digit year I'll by Net delivered was driven increased to sales Omicron U.S. our similar to the sales this and contribution takeaway our full-year XX.X%, in despite the line takeaway with expectations, Price in deliver our timing a is in from and quarter of with surge expectations, quarter and fiscal retail to shipments. COVID cases the objectives. the in instituted our of high line first was growth. increase variants. in retail QX,

Stores. U.S. channels measured MULO QX the of POS in IRI XX.X% increased Convenience Specifically and

earlier to grew of quarter also timing support customer benefited the year, trade inventories in seasonal typically sales QX the shipments time expected this support during in-store of programs. from growth merchandising. QX is than As the case, of

EBITDA growth benefit a in to million to due quarter. We sales also leverage. increased [$XX.X] Adjusted the that two quarter year-ago this estimate second period, [Ph] percentage sales about that the point the impacted XX.X%, primarily the storms in negatively and was G&A

basis supply year-ago XXX increase operating while chain declined period. with and margin mix. were environment, the Higher challenging price offset the And versus costs still by chain favorable improved As supply expected, the customer partially points gross performance quarter. during service

levels, of our at progress improved the our well While quarter long-term during performance target pleased our deliver We continuing we with first-half against priorities We're the in service year. has in environment. and ensure difficult objectives. our to short the we're second not executed a on

are and growth, environment. and a We chain while earnings focusing supply sales challenging navigating on competing effectively driving

to As such, increase this due price inflation, of quarter. supply we week, notified fiscal earlier continue into to XXXX, expect cost which fourth fiscal a effective lingering chain we customers our in

and increased increased segment In management our brands outpaced have XX.X% the weight outperformed QX to to of percentage and the as Nutrition basis and measured was low nutrition. we an in quarter. been last March, business segment of in double-digits variant retail the which timeframe. in growth dominant Meals Good and surge up Frozen license from for that retail year. up the entered up several takeaway has Omicron retail license weight the for Simply takeaway XX.X%. same pizza Quest Foods, Atkins the channels, frozen e-commerce both throughout unmeasured the Additionally, U.S. cases primarily Active Quest the and during segment Total and Bellisio versus retail has agreement on X.X% into case channels years. was takeaway management We the XX.X%, significant estimate outperformed was specialty Atkins despite channels over active the X.X%. respective the takeaway QX, held the And pandemic, sub-segments with their measured a

in period. Atkins total club improvements in in X.X%. increased Atkins as unmeasured As expected, channel the on retail as total the remained increase U.S. the year-ago to up year-ago and measured mass the takeaway year-over-year versus percentage buyers buyer benefited due performance from double-digits growth moderated. and growth. channels, The continued well growth quarter basis in strong QX strong, the a period, channels rate

takeaway respectively. up increased of Atkins all X.X and lapped These all POS takeaway XX% growth. bar include X% about bars QX, retail cookies, and to to correlation bar to percentage second We're be major between from consumption total e-commerce reported solid However, consumption suspect successful shakes, also prior slowed QX customer, of shakes a retail solid other other our pre-pandemic XX% all variant was increased up high the forms to Atkins retail driven takeaway across retail the We year-ago single-digits return historic Atkins a XX business by cookies, over particularly of brand to the below retail opportunity channels. the months. fewer Confections continued the January CDC strong workplace. was the pleased the on growth by continued basis largest points across confections, slightly In big takeaway last Amazon channels. rate year Growth lower bit increased QX, all customers is Atkins and that remains to doing which up takeaway modestly QX the the Atkins contributed from snacking adults Atkins Omicron retail with year. versus Atkins brand. as channel routines launch. XX.X% due due alone. bars takeaway And a with Atkins mid QX impact previous was period. about key was six growth. Therefore, mass for well. the X.X%, versus chips. dessert for Performance percentage infected and In retail of levels million in occasions product and to show we

channel. increased the and to The versus measured about U.S. total product sales increase growth Let was and snackier channel as household now IRI XX.X% forms. retail in and to new in penetration, retail and in driven Quest year-ago turn universe, segment. of of Quest takeaway QX products, XX% by an in me trips bars Quest, are of measured of Quest increased QX in the Quest XX% Active cookies, by retail year-ago MULO takeaway period continued chips, as XX%, period Nutrition with confections. QX, continued portion the bars rebound Quest driven do driven XX% C-store mass shopper strong bars, retail by well, well versus higher increased a total in C-stores about outpaced Recall, Growth success sales.

all We solid, growth channel and combined these all versus driving see nearly are last in in Quest forms. the another traffic robust of of We foot quarter year. these continue retail POS Increased growth channels add stores takeaway about e-commerce convenience mass XX%. key to growth XX% QX across across good channels. increased

to we due strong moderated rate year-ago performance expected, in pleased are quarter expected. period, results As summary, second the growth better In we the previous than our quarters. that were with from

anticipate we continue year, will solid. the takeaway of remainder that retail the to Over be

second-half as growth due mentioned year-over-year the rate of more the is Although, previously, in comparisons. difficult challenging we more to the year

targets. takeaway be we shipments we the to believe good less balance increase. Due merchandising of of and sales in-store timing the on innovation a the us of net as second-half our have well takeaway discussed to growth enable year retail retail the deliver will that We in to earlier, expect than QX as programming

Additionally, don't we timing mobility. nature the anticipate meaningful when given the the to year, COVID-XX return the unpredictable any employees in office, fiscal of unknown and of improvements will remainder workplace the of over

levels that supply improving, challenging. are operating service chain customer Our we environment anticipate will remain

and the increase fiscal believe of path input good inflation shareholder XXXX. primarily sales executing year our gross earlier cost and adjusted are we position against fiscal to deliver change We no increasing is price cost costs in for the a value. this into plans, balance fiscal XXXX structure The we Therefore, or and margin to of as largely is the another in meaningful We're month growth there a our EBITDA benefit supply our have visibility chain are net solid our to year a covered. outlook. announced well

you I'll in over results. to details Now financial the to provide call greater Todd our turn some

Todd Cunfer

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

exit. we headwind single-digit contribution a international X.X%, point total sales The company and to stated, Joe the net growth was point sales percentage declined estimate X.X growth. net the percentage was international to due business was sales business to XX.X% European a the high growth. European our exit pricing Core business As

Moving driven chain previously $XXX.X gross form product with XX.X% other an and by points our on increase expectations. channel line was cost and million, in The to supply Gross XXX offset was partially basis discussed retail gross was favorable pricing to and decline profit items, P&L the by mix. inflation, margin XX.X%. margin declined of

the in increased and to for largely the QX the and in good structure QX XX.X% XX.X% increased by sales the QX. greater anticipated year, $XX is Joe year, margin and greater we the of second-half of marketing the visibility XX.X% XXXX Adjusted of both gross leverage. into EBITDA is our remainder low, Note on million expense than and in are As range due have expense driven to be initiatives million the seasonal higher fiscal building the XX% brands. cost our costs marketing In input to of to mentioned, cost marketing over brand impacts to than second-half the G&A up covered. XXXX. Selling higher that fiscal ramp $XX.X

We of to higher development expect and related we restructuring anticipate as expenses, to European the expect in to to second-half leverage research of professional of and to substantially XXXX. leverage marketing G&A incentive all X.X% growth by the expense fees Lower first-half with increased to expense this of fiscal year. as mid offset the than and in well digits million. compensation due cost compensation more of single solid integration high year timing the G&A when and $XX.X accrue began be timing year stock-based We exit in the business to the increase the higher this the excluding year, spending. was

fiscal XXXX, the debt. million interest $XX.X ago re-measurement our pay related $X.X the to warrant period. Moving in term non-cash in the expense of re-price loan liability to of charge term of of million. to the private to quarter due in second P&L $XX.X the down We for non-cash $X.X quarter second items million a other million the a loan declined year and charge the In of recorded

private the a XXXX, X, were cashless exercised January on on warrants disclosed previously As basis.

million increase the tax in in year The similar QX. results XXX million, or Adjusted increased the growth million, Selling increase points charge statutory in X.X% related the to the was was restructuring QX to QX was integration Our increased to million compensation basis initiatives. costs, related to excluding $XXX the expenses, XX%. XX.X% $XX.X Net marketing million. versus $X.X period. by $XX.X liability about G&A building driven expense based of expenses. stock ago a higher rate follows. an brand higher due income Year-to-date million. of warrant related profit expenses as versus The of is $XXX.X $X.X million. million Gross This expenses year primarily XX.X% ago Gross sales margin XX.X% EBITA $X.X and other gross excludes to increased are XX.X%. $XXX to of to period. charges are increased XX.X% to and profit. was declined loss Net drivers integration

Moving expense loan to the charge million of to year-to-date interest was declined $XX.X million other debt. private term P&L, of our The loan to million due period. re-price and the in year ago liabilities the non-cash the of term down $X.X in items $XX.X million the the related re-measurement versus $XX.X warrant to pay

versus of XXXX about million rate Net warrant period. statutory tax to to million year-to-date related rate tax the versus previous ago was full-year XX% estimate excluding income fiscal We liability was the $XX.X $XX.X about year As the the be in charge XX%. XX%. anticipate our

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

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

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

flow And second the cash we the sheet the from be was period. million. will to full-year cash quarter the and Year-to-date, provided as same $XX.X was timing payments activities versus operating balance to an Moving year and XX% of provided million, year cash operations ago tax last increase in $XX.X versus about anticipate due activities year fiscal by XXXX net flow cash period. the the of by ago operating net

$XXX.X had As net X.X of months of cash balance XX company and February XXXX, company's outstanding the term million. adjusted XX, principal $XX.X debt the The the was EBITDA of million loan debt to ratio trailing was times.

second quarter, at common $XX.XX cost stock its of company the repurchased million share. per average the of $XX.X During an

due our to million $XX XXXX This million, stock approximately GAAP the than less the to of existing repurchase respectively. term would and of CapEx of XX, As $X.X about $XX.X previous turn be financing to February is to call was Capital related about We expense Full-year $XX million. million now for amortization million, year-to-date period interest fees. Joe expected second and our the available $X including quarter remained loan. the to anticipate primarily authorization. $X.X about million, like expense re-pricing back closing I non-cash to be is estimate remarks. expenditures deferred under in the

Joe Scalzo

customer the In supply EBITDA does the to improvements well gives drive that year, strong well meaningful And sales and and in workplace first-half place takeaway. challenging to full-year Scott. the programming in environment. have continue operating include deliver in not growth of our we outlook. navigating confidence continue objectives. plans sales in results The assumes and Thanks, year the of full-year to position This net as the forecast mobility. chain innovation to second-half to in our A perform will retail adjusted us increase marketing any

related European the the outlook, business. frozen licensing sales our at pizza fiscal expect XX% outlook. point to XX% Quest a key gross last percentage metrics XXXX the to and is Looking includes There year. headwind versus of to of margin to change the our updated full-year exit, net two no we business increase This

anticipate increase chain is than inflation slightly expect net sales the last continue we As we supply versus cost earlier, to Adjusted basis rate. less year. and growth about gross margin stated EBITDA points XXX to decline to anticipated

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

Additionally, note second-half of we in EBITDA, anticipate in significant things of interest result faster to G&A diluted year. leverage the adjusted the in EPS and decline couple growing expense adjusted should a the than

are comparisons difficult. Our more

shares key improve to as takeaway And We're long-term quarter should the double exist flow inventory January, to retail household that in buy increasing interest third the path We to the to M&A about opportunistically retail appreciate our to invest company, in increase fourth and balance cash stated our growth penetration expect the We across to executing category. generation our back increasing and business at us stock short value. trade and your in strategy digits sales year. business, drive sales available lag due enable take performance build. our We're questions. within earnings and growth. shareholder we to against we opportunities, prior strong first-half anticipate low continue versus takeaway will sheet the from A that to and year-over-year excited opportunities financial and everyone's we're the metrics of and quarter. evaluate growth our now Net

Operator

be session. conducting you. this question-and-answer [Operator we'll Thank you. Thank Instructions] At a time,

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

Jason English

single-digits, which go first, of back-half run Go top year slotting given let your the business, and to of the maybe seems good ahead, sales believe mid lot the of oh, the line, folks. Thanks couple for you me I'll guidance some implies but in I for Hey, with it. takes? puts morning, in. can on with low you A questions, unpack would of the a expect, lower it. momentum Yes, I than growth

Todd Cunfer

Yes.

guidance net for growth So, I of mean the around the back-half. sales the high-end X.X% is

So, we about European we licensed of have two the exit, points, pizza. because

So, built the inventory in the could at that's about X.X% the of negative shoot two second-half. That we about point high-end. Obviously, first-half. impact

of last little March of had in shipments light, normal were some who earlier more exited QX, the customers than wanted end had storm we points that year. that Some don't we at bit back spring key we some about QX growth we a last country our QX, QX of year QX. in activity. the That forget, for took it February occurred right was, Texas There the in through And that of that storm, the ripped some normal. out of shipments year built then, two into

how leave So, of is Most much us or it to going to much of go going de-load there's away. is going to the question is and stay, this how -- stick is here?

probably least there's of second the to So, five that's or at going de-load year. points six that impact

I get second-half. and POS be X.X, low at points six is X.X, to high-end the That's in the why to de-load. points a organic that two a double-digits the then going we're take of Hope saying add kind probably the an I if there's in of So, or to five helps.

Jason English

so, No, if now rewind but XX% statistics clock the super wrong, correct maybe it's or it I the to bars-driven. we think XX% me Quest, if Thank bars, you. And helpful. was around XXXX on I'm

have cookies set? the contribution the now been that the we that with similar or other you temper should early you expectations, telling like, in they from forms on market, what and chips management can meaningful. are success, Atkins, So, they're Can these weight given has results replicate

Joe Scalzo

core our both business Well, Jason, it shakes, about on bars know, of Atkins we let's replicated Atkins, XX% and on brands, portfolio. -- already consider, we've is if the confection is business our you

consumer question chipping for consumer that Still, We of business appear chips, you're the can So, got I -- asking, too than appealing. salty that XX%? find base yes. product to call, started stages answer just early think early know we'll I successful. bigger will snack the enough to our be Atkins Atkins now cookies shipped, on in to pretty surrounding find the the but we've is the data we get to think pretty

of pretty forms, all we non-bar other we're confident. become and think And of percentage will portfolio. larger our shake the in the portfolio, to piece larger fact, continue of as and kind So, forms a the a

Jason English

it. appreciate pass I on. it Helpful, I'll

Joe Scalzo

Jason. Thanks,

Operator

Thank you.

Kaumil, next Our Suisse. line your Kaumil with question your Credit from is proceed with question. Please comes live. Gajrawala

Kaumil Gajrawala

Is Sorry about better? I'm airport. that that, guys. an in

Todd Cunfer

Yes. Yes, we hear you.

Kaumil Gajrawala

in question financial maybe year, first on the the your contracts mostly hedges, ask, the supply? is just coverage cost for paying input is mechanics the ask I things certain be we on May I attention the And is environment, force such of be I risk why inputs Great. strange like on should a is it it guess to? that caps or majeure, of may reason there

Todd Cunfer

Yes.

or get normal, that for ingredient we XX% we going the no now contracts, our [co-mans] year. directly ingredients, [Ph] either contract just confident suppliers. the So, with covered financial it's with are to over Highly we're

we very, feel good are an input from very we perspective. So, where about cost

Kaumil Gajrawala

the M&A a then, anything about environment, And about follow-up Does share feeling great. Okay, say the you're M&A repurchase. how or opportunity? on that indicate

Todd Cunfer

over Yes. ago, had four Quest. purchased we No, step leverage second. when let we for me just times Two a back years

to job was balance to towards one number our sheet. that So, de-leverage get

So, to potentially this quarter be obviously down X.X down shares. times, debt continue some do we very, buy comfortable even place opportunistically to a more pay very or M&A, to to to ended

at opportunities. stock market; just $XX in M&A pullback with we active the So, very we're attractive range looking prices bought stock view. Basically, saw we craziness, in our very the the the

allocation if So, at buy the not to we we stocks. down the shares pay or remain to hesitate levels, to loan, in continue just active flexibility attractive term have now capital to M&A remain more will

Kaumil Gajrawala

Okay, you. great. Thank

Operator

Thank you.

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

Rob Dickerson

great, right, thanks so All much.

year call I plus. the know, guess think Just or the don't maybe expectation pricing, was, it, wanted X% the I about to ask incremental I originally firstly, for

did the QX. in need one to another round thinking, said something kind prepared why [Ph] secondly was next up could you or now coming color think because did far reason being for so more we Thanks. kind of pricing, squeaks then, year despite it, and remarks, another -- just guess any of high kind and think in you there's needed end of we're you in, And then, pricing, [barring] I the of QX be If good, about the that your kind you in of think I think single-digit. time pretty you're some just around you of will get just kind maybe magnitude great? towards about covered, of as is

Joe Scalzo

Yes, Rob, thanks. the question. Rob, Joe. This for is thanks

First, we're drive sitting margins provides XXX around this points a year at necessary to us advantage our target the basis gross support gross a margins, to margin and gross to stated have trying competitive It erosion of growth with in marketing XX%. household We believe business. that's penetration us. in

So, the own we're below our year, in the middle expectations. and of

our in exceeded fact And hold inflation plus gross this this So, cost savings, our insufficient to expectations. year were pricing margin. year

we the environment, as our environment 'XX, now. based prepared cost at into said we inflation we in the As our on look right look fiscal going at year view to remarks, as is continue

the move fiscal today are impact move That didn't the have of we increase enough price forward pricing fact of continued that we us take this fiscal as about know, inflationary, to into in we increase. you as first-half move will year, year. this caused a is and and price minimal to we next more second environment So, year, on into where 'XX take see combination the be

Rob Dickerson

things now, factoring of expectations, here suggest to I -- of potential but kind find seen sitting it's in like understand, just then, coming too have, And and kind anything know, tell, March, in and kind some Thanks. for mobility, of know, that no enough. fair for which you've increased a general real on just early go-forward? some question is or of early fully all. positive improvements terms there April, flat there time, way direct you that been you, of I'll That's consumer of kind through it the question, could just I now Joe, kind mobility I guess, is already, you Okay, again, you've for keeping

Joe Scalzo

is pretty play Yes. forward we're right? So from I good in see out, you, really would October-November, this we're have how think, I COVID. thought, difficult would shape going I it's when to told a to going in sitting just

the locked were people to about of like You that. had know, weren't down, variant, hit, certainly cases prior but weren't -- people we and weren't and reported million variant XX they new the out we

in So, we're it. to to say very, just declare will the pre-COVID companies been to very really what reluctant closer on were that because go to predict they it's difficult victory to and period, to COVID back prior

So, taking we're on conservative view it. a

improve, As certainly it we any to work, bar QX, where Certainly signs? it, company saw go started on as actually bar saw and lot do but not business pertains on But opportunity, second has not a in we effective of quarter. the business, to appeared the the in and up, the by back Atkins to we potential, back where can out did so in we been to want rate to see, saw rate bar back to work, Atkins play -- it certainly correlation been number be. QX, to bars. of most a we not QX, snacking positive occasions the QX went the that's see we improvements certainly full by

correct. would two what think given snacking about work we've we year over bars, again, appears I be experienced appears think second-half the conservativism, factor in years, So, I is as this on of correlation to and appropriate, and the on this last it

pretty feel look to go like business as pick back is pre-COVID, up. that more So, we got certainly way the companies they confident our bar to

Rob Dickerson

Thanks, Joe. All super. right,

Operator

you. Thank

your proceed line Mizuho. the Baumgartner Please with John question. from comes question next of Our with

John Baumgartner

down see health everything you than and resets forward? and nutrition categories beauty in space for vitamins. in mean, this the from mean, care, Good active general retail. across Nielsen I drop striking the I all, for hoping the of And data to in the distribution shelf do questions. TDPs Joe, of benefiting the to cycle, across next shows weight of merchandise off morning, merchandising terms what guess, other and thanks just first at moving hear extent sales management even during terms points, for pretty really are incremental I a your categories. visibility board thoughts

Joe Scalzo

not Yes, on I'm your that before. that. had interested hear I observation to heard

of Our expansion the year, brands both points distribution significantly don't up the I coming on into since beginning other of our it's category of space. from fiscal John, think

it's competitive it's just, pickup, I I think think right.

So, else we gained some space, lost space. somebody some

pipeline, it's bigger don't understood I are COVID, I factors think key it's been incremental that. category. kind for new And of most to brands I so, driving to items foot traffic And So, the retailers I good distribution attract new interesting space. that gain the a of have part, importance during to we two in think pretty think there gains, flagship category then, innovation the brands, think enough the items,

of So, loss that, our not heard categories, of a but because other I don't I'm benefit seeing to the TDPs I and that. hadn't actually category

John Baumgartner

constraints, inhibit is given maybe there at the for salty anything degree consumers, well, impacting a of passing slotting million just that you. cookies And from to in think related here sort growth XXXX. new retail? terms what from from seeing going or approximates incrementality think guess, question, back is like And rating back I And Thank terms glide did I Atkins cannibalization confections, Okay. coming of on north the in start, path side, run in snacks cookie are of anything Quest you're first brownies? of something and any your its reads annualized right would then, customers $XX I Jason's year, as the early follow-up, Atkins even that of now. as the Nielsen of to to What and

Joe Scalzo

expect but to all in on opportunity cookie, ours the be with at the are on facing opportunity your to issues cookie cookies both drag those optimistic on we production businesses, around size, don't but I is consistent the very on due analysis I'm forms. we're staffing now a right that long-term managing co-man business. on frankly, other the some constraints Yes, in

If real you shakes. for going new But we'll starting those to as gather total are half coming it, grow use new Quest some we've that done business the in on use think in now use are about on pick bars. think data opportunity to half about data I business. Quest different occasions business. we occasions those owned they we're on is forward that states the About not different buyers from to really the bars was ability coming up job bars, the of at a just penetrating nice snacks. categories from different and new occasions and buyers on Quest the grow buyers. We've the continue buyer And looking I

what So, that experienced used a got got powerful then, products ourselves Atkins. a is lifestyle states we've different consistent that with on lead lot and suite one of form, we in us is hit pretty brand, telling and in occasions, a particular transcends we've thing of which very a

going we're our is us of lead to optimistic, snacking explore products. and products states other to So, full very enable and technology continue that's pipeline to these

John Baumgartner

Great. Thanks, Joe.

Joe Scalzo

questions. for the thanks Yes,

Operator

you. Thank

with from Cody proceed question line your Ross of question. next comes Our UBS. Please with

Cody Ross

question. taking Thanks morning, folks. good Hey, our for

in of sales quarter. Your quantify Did came this timing the that than better of expected to you how shipments? was much guys due

Todd Cunfer

XX% in and America it's North -- I it around look is was if American about grew POS business about, it's mean, the XX%. North Yes, -- you growth, the at

approximately of was XX timing. there So, definitely points

Cody Ross

Got then, And you guys raised -- it.

Joe Scalzo

inventory going of make-up Just we're levels low clear, year. the inventory into for so that some was

the Some timing growing What's second-half and out. weeks to you of We it's business, the have week art stay? a inventory, inventory so figuring of but that's of grow to its going inventory try gets of going year. the to consistent, the And one the size the business, of as weeks bigger for of keep science weeks gets of bigger. customers out the come pretty and

is our the the provided it of and we second-half stick out gave is shipments second-half in we've come of how guidance for to best as have just much the much fact the in So, year. the our timing how and of year, going estimate of

Cody Ross

right Understood. any are how that, that? now? visibility how you expect retailers much Piggybacking And carry carrying to on inventory you have do going if forward, them much to

Todd Cunfer

issues for starting mean, again, in ended the you chain remember I to if occur fourth with low the we Yes, group. of logistic all our our of peer were year when year, we that's the -- just summer quarter supply and us last

and so bad, ended with normal retailer the get door, inventory. fulfill struggled but lower, orders get we they're lower to we So, to orders August out than not

March typically our back of the out February, inventory because retailer of works, QX of into we from into just QX, some added more or them in two for a to there. the we requirements in some built that of we in build and customer shifts six So, probably it in a of four short-term weeks week back

made going a will out. but little bit And land so, Joe we'll our -- out out tell said, hard come most of we've it to a we're some like bit in most always probably second-half, but to higher normal. going guess than come the of year, best little Again, keep where of that's the you're there, to

Cody Ross

then, conservative midpoint, Got Why sneaking it. There's your there year out your outlook last you margin that? some and And might with held our is thought guidance. recent raising gross slightly X% be that but me in, gross given this the mind don't sales if conversations one it margin at you investors.

Todd Cunfer

look sure not wanted -- as margin so, for took frankly in pretty we're not make quite Yes, to we gross we you've the back, covered that, the outlook, I in is call, have did now think we right? I minus we January again. even number. very, we pulled we XXX mean, hit we confident January And feel it not took Commodities on we that change more a feel were but seen felt good competent year, obviously our

view So, we're that I real, costs don't covered. are conservative. number The but as

Cody Ross

Great, thank you.

Operator

Thank you.

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

Unidentified Analyst

good consumer that so can for the guys, in put you've of Ben. the on side consumer price couple morning, I pushback seen on If ask any things, a increases you [indiscernible] have on guys Hi, guys a fourth you're you then, just instruction about bit? feel channel? any far? increase? demand so how around the have elasticity Do no, that Any in seeing demand concerns price quarter you if do And the questions

Joe Scalzo

Yes, first what response of -- elasticity been has our in September has to been lower we actually the consumer all, projected. than increase price

you're the the stronger. I see directionally most that's to say one would food been which to high the it ground environment, companies. with a of And has you're do I emergence people now of at think again, prices, right in are to from with think Europe price are get hearing concerned has little gas pretty what war volume consistent as So, more metrics tells private to that starting looking label and current starting consumers I economic sensitive, you about. bit that we're

general, more consumers are costs. think real I incomes concerned growingly and in about the future and

we're estimates we and have to are the to cover we're think so conservative about, less to we our elasticity do think than current we consumers the about our be have as positive we've obviously, you and concerned think That what in you this the where margin, got said, to as move be financial about given case, will in situations. as So, environment concerned, cost, always pricing, do feeling a pricing of what maintain commodity we're pricing forward. we we'll

Todd Cunfer

private label, clarification, which label, do a private end. from are the just category very at on, better broadly little mentioned And This one so in is our very, all space. food Joe dead we seeing has label concern not private

Joe Scalzo

Yes.

do, no absolute great is businesses, no both prevalent well which be of labels And to that worry where So, not trying price as private case, penetrated that in private clearly we we drive. have no there's price point and has deal not difficulty categories successful. our there's gaps the the it's to to of years competitor, a is in look been here at about not elasticities had I've there's label over

Unidentified Analyst

you category, it's in the unit one evidence given I lower follow-up can category, whether point guys just maybe on into dollar seen If your price of of consumer even great. out the consumption? or trade Okay, per sneak of that, any actually have down,

Todd Cunfer

No.

Joe Scalzo

of evidence any yet. seen not I've that No,

Todd Cunfer

No.

Unidentified Analyst

up. Thanks, Okay, you I'll guys. great. catch

Operator

Thank you.

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

Steve Powers

Hey, Thanks. guys. Can you hear me?

Todd Cunfer

Yes.

Joe Scalzo

Yes.

Steve Powers

issues having was phone I Okay, earlier. cool. some

I guess you. two thank questions. So,

as and reinvestment the is one just of first forward. philosophy we spending The go sort on

been I reinvestment as you the accelerate forward, or to of your move get you've that 'XX. kind to But feel and point given kind a think how current a what like balance do innovation forward? point it spending, view pipeline, thinking ahead go year? in that of about beyond just the Just rate as that, own you're plans given we you're strategic investments, top forward, about of, accelerate of we of an if have this as you you process leverage sales you're over that seeing thought of is go your parallels clear environment, opportunity of or conversely we the as margin as line spending

Todd Cunfer

plan, maintain going has exceeded we've it of Quest, bought We've The maintain we've Obviously, quite given of we're margins. when look, our where years, with line about investment flexibility and couple up investment last up about build gross we frankly, Sure, to So, Steve. sales to I mean, the marketing has long-term our model financial And net our to is top growth. able a was been exceeded the to us X%. lot sales. in gotten X.X% X, increase business of investment. that

year, pressure back. sales margins, bit growth we've we've marketing a exceeded little of spend on this as pulled with So,

than still to bottom what not bit some of line manage our We're going have growth, we -- lower of not to margin. a grow. just little We the marketing sales maintain kind decided growth to is

growth to to As grow mid I going in high rate. mentioned, we're single-digit still

some we hesitate will sales allows we upside forward, margins jumping maintain the the so is get So, we were can of lot with the base, year, we we predict. have. model as us fourth so some but going it's have still And quarter frankly, comfortable growing feel of quarter you we second-half, quite a pretty the to healthy can the and if -- off lot in very growth. if last in kind fourth with high of spending that the know, We spend incremental a spent marketing to amount not we a we P&L

Joe Scalzo

fairly return. add would that I to we're about And quantitative

of net a be have so have us we we don't from know XX% be know we've when got And of net expect we're want and can standpoint. good have We to back, we're leaning you So, sales good in we good around we want principle where the we for a around standpoint to sales. pulling want good to XX% we return return. investment, just want return, a to

worth what increasing steadily returned Since as incremental we've we're us? we as good. to we've Do as the spending in sales well How absolute both business. level drive what's the how on, the it's much been spending based. support, public, marketing because incremental a has of that's So, And we're always been profit return sales? been

Steve Powers

a question, we And it second great. of pretty months couple ago, clear. spoke different was then, a tact, Great,

to talking urgency kind You update an for M&A, your about right the specifically any search at were past to guess expectations on was discussion asset any just just having just backdrop outright there if current, going of sellers of movement expectations, for people's you're market about and thinking right didn't quarters, what was sense there feel I we a been there. several whether some seeing reset the and the over you but then price. frothy a continued valuation

Joe Scalzo

it see start they out, business, you, to play times we'll earnings, change. The IPO with indications we're Early yes, right. are to going XX to the typically you are sell conversations us expectations we if might but starting give if

belief going tell are or they owner to what's he what wants expectations that down. market, that what's on wants So hear coming, given hear think equity So, kinds come frequent those the conversations, I coming down. less to of to got starting to she going exactly IPO seller right? what's in on now, values. They're with Bankers

of bit little like So, lot deals not a more getting there's as like And a a value. we I is of assets assets, think lot to the we some to done. environment getting move there's conducive forward,

expect continue on should value. us And tough so, you to to be

Steve Powers

All right. Todd. Thanks for that, Joe. Thanks,

Joe Scalzo

you. Thank

Operator

you. Thank

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

Pamela Kaufman

the And you competitive raising of end the across the planning Hi, entire And comment on it fourth you the Are for to question. that prices at the Thanks will Can magnitude what at you're take to quarter? increase the a competitors other good branded morning. that, seeing standpoint? price of the across pricing observing you related rates? landscape are be portfolio? similar from

Todd Cunfer

the yes, were curve that week price increase product the last Yes, effect similar. brand or announced similar of whether competitive about across Is standpoint, just price bit, increase pricing. weighted on was a this average the the price X% and differs increase And probably the so form to one's a September. we but this from about took we portfolio of a ahead very in

our seeing exactly competitors percentages now differs some similar are our are. Not clear price. I think are It what always increase. We the price take to

increases bit little price are modest. the a taking, feel taken. kind but And good pricing the very we about more of actions we've very, we're Some

Joe Scalzo

historic taking Yes, those highs pricing, be Pamela, don't better proteins, off dairy marketplace -- be historic if to you're a highs are you down historic the soon. buying because competitor they coming and ties appear anytime

So, your if pricing, or your into coming keeping you're more into cost not products. the taking not cumulatively pace with double-digit you're

Pamela Kaufman

a the Right. second and very retailer pricing? the consumer It seems like both What round been from the pricing first smoothly standpoint. retailer went has round reaction to of of

Joe Scalzo

that than but feel be on price it. this to them actions continue based increase they retailers Too across expect change. one, on their the behave easier their to the they're be right, or the The the manufacturers their actual some to behave, with price it's cost with they're buyers make early or that we but gauntlet same going they feel to and see that retailers so, you we'll I protect consumers to right? the in so is difficult the to fact cases are to it easy. we with confident to increase call, So, and pretty not have think taking But board pricing first base increase, to you -- dealing comfortable, and I'm price trying pricing, your run smooth. dealing clear, justify it's It's any all way are more retail want second justified. the throughout how is store, was which are And glad but you

Pamela Kaufman

because the Right. pointed you mobility bars And bars impacted Omicron, of divergence sounds topics, just terms from of by question was benefited more one that different like Quest Atkins the trips. shopper last in but on in it to performance, lower

mainly across the performance? of that see are function what So, there you the a channel other different factors a it Or Is influencing dynamics brands? do mix? two as

Joe Scalzo

business right. Yes, a that Quest has and channel I small think store collapsed convenience channel mix and COVID, category large mix, very benefit, during format, right? So,

stores, about if to stations bars, just Quest for full is benefits very just active about at is weight. your consumer Atkins is has can't environment bars right people generic going you the potential. robust into growing. your not active as lifestyle. convenience I you and are come is weren't that back is category manage weight protein now buy management think look to and back helping for different, just this Also, the So, you gas business --

XX people were people sheltering home you If had because with COVID. we in the second million plus basically think quarter, about

the good, a think correlates they little people eat but and about positive work, going hard people drop was business lot Right, we're a I people the with maybe economy, great. aren't particularly for with look think lifestyle are aren't the in Atkins about feeling think at I snacking when particularly the to based. if on think you now, future when particularly more not too recently, the gas the positive just to been chocolate. think feeling I right hard at occasions feeling because future, what's And change aren't lifestyle come this were a about prices, good. the about right Mark don't yesterday, Todd few you're from that about and experience start work also eating now. seeing to a when and pounds chatting healthier, it's and of feel We feeling of change, But their bars confections business, you being and

category a of think it's I channel So, and mix. combination

Pamela Kaufman

Thanks, that makes sense.

Joe Scalzo

Yes, thank you.

Operator

you. Thank

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

Ryan Bell

little your bit future and of maybe the I opportunity just about you that, partnerships licensing the the wanted expansion to for see of ask Where do expansion? a categories. across size

Joe Scalzo

strengths. don't and Ryan, our had our like biggest, leverage opportunity. is into It's feel we we we're think Quest part, aisle, team the today. that category the it's not in it the innovation. entered relationships, of customer deployment in, few supply not we our And strength We not category I it's our core a to We entered that Company into chain, a years. a business. strategy for our Pizza that as business Frozen Quest like and against entered ran conclusion a core that just We in we highest snacking see resources the came

who's So, job it business was into meal partner, of to the with our a a Atkins. we a put bar thought done just business better terrific on hands

us, licensing, the about that for greatest portfolio. it's thinking broad focusing our licensing So, a growth categories less on across about more and the prospects believe scale we

Ryan Bell

focus Thanks. bit behavior little maybe great, about consumer And Have of needing aren't the weight you then, than pair that quite some on were you a shifts, talking where but against potentially kind management now people to more of medium as terms the of feeling that e-commerce, on term household snack the you of see about over just you opportunity that? sort ever. towards where versus go demand, the evolution more and in penetration the here of think broader shifting

Joe Scalzo

a bit dichotomy. a Yes, of it's

takeaway net of interest we've that at the carb in buyers the we've on low So, summer, lifestyle, management. in so growth high XXXX, COVID brand, had since double-digit in high the interest weight XXXX, so summers end, seen Atkins, in interested

sticking So, then. quarter we're around that double-digit they're we've in since growth experienced loyalty. in and second And bringing different, no the total consistently buyers, buyers new of was

because all tailwinds on the in and you for they've interested been snacking, macro for in weight decade, if tailwinds and Our for us, a at wellness go, right. think I us and that challenge continues trends look the business health the management

been episodic, So, weight of of, X you it kind number a XX% talk they to right. if flows. it's obese, Well, are or step And or you equal management. Type it's for Americans about because it's go, ebbs when people diabetes, Type weight management flowing just on now pre-diabetic, kind are and back, of we've X diabetics about decade

for think business been right. numbers change, as to are rate, lifestyle staggering. challenge of The the get has to by I and us trying So, the the people you're business challenge the of make

to I think people about hard the understand down that. world that when change short-term, of and is think lifestyle you on upside So, to kind them, get

term long-term overweight by change that short because So, that, not a people the the healthy we're -- how costs have the I I that path for eat the we're boggling is on trends healthcare think people business are and one, they is way diabetic, right, to mind being undeniable, are are affected by that the right. performance think

thinking If products, got we change, they'll to So, we buyer I lifestyle about think more, if more to The good my as the a growth really positive, trends. people more right? has just start feel snack compliant, mid-term you on people, you're I about get get right. snack been very work, you back

So, mega a we're moving as are shook long but pretty up the confident thing direction. trends they we COVID trends for to in things They definitely our some dynamics, see of where every has time, long-term those been back the and day were. the have

Ryan Bell

year-to-year were improvement the 'XX? some last towards into the were see, saying pricing opportunity that the margin to how closer on fiscal for And of the question gross XX% terms that and you like in take Thanks. up a of in would that terms you or expecting of Are sort towards trickle you migrate gets me, to packed expecting through basis? range,

Todd Cunfer

us and just like to target, kind very to point, exacerbated for hard the look going XX% hard going that cost while mean mean bit early what continue Ukraine-Russia predict. perspective. they to the to 'XX by a and at got it's is ground little I Prices at term, this from is that question war, short off obviously, when, to Yes, for stick dynamic, on a is again, the predict I of took just very FY really be

hard year-end, us. what cost we're XX%, not for business, to but strong comment tell, margins. in issues action allows line cover took is are now But we we bit competitive allows next our as a you we input on going margins So, margin. be to to and us year. more pricing to a bottom closer on again, little us clear, later, come We very have to right gross elevated anticipate heavily invest to advantage, color believe too give gross back what get going we'll a to But to be

goal. So, that's clearly the

Ryan Bell

you. thank Great,

Operator

you. final Eric Thank line our from question. and proceed Research. gentlemen, Ladies Please comes with morning of the Larson question with this your Seaport

Eric Larson

or me ago. run one didn't brands, Thanks And them XX sure everyone. but for in. the Joe. years you back I own XX, thanks, which economic I'm that you've question, studied in squeezing is recession, gone what just last and have these probably this, Yes,

with U.S. doing what what how the perform do if very recession, So, differently anything a don't brands U.S. you're than economy? economic did into weak goes or and you do you today would maybe not do

Joe Scalzo

I to businesses that think tend behave proxies, well I indulgences, been the to small think pretty snacks, on are Yes, for best look quite in a we've recessions. which during frankly, proxies right, for looking confections, would how recession do

is and in going people invest a will continue this So, our view low bit order items, better. themselves, ticket into lives thing little to their to make in

to we'll at continue that look but pretty closely. So,

Todd Cunfer

a don't pretty and forget, middle-class both kind on we're -- upper the of Yes, consumer. is brands consumer

So, we --

Joe Scalzo

More affluent.

Todd Cunfer

for they yes, more It's Yes, recession going affluent. sure. a carefully But, withstand bit We little probably we're very question. can it believe a good categories. to a some very, better watch than other

Eric Larson

it. Appreciate guys. thanks, Yes,

Todd Cunfer

you. Thank

Operator

turn our for session. any concludes I'll to Thank Mr. Ladies comments. the Scalzo and this you. gentlemen, question-and-answer floor final back

Joe Scalzo

on Thank you We today's third and look good June. day. again on results you forward updating you for a Have continue hope safe, call. our your to we quarter to in participation remain

Operator

you. This Thank concludes conference. today's

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

The Simply Good Foods Company (SMPL) 6 Apr 222022 Q2 Earnings call transcript