The Simply Good Foods Company (Nasdaq: SMPL) (“Simply Good Foods,”
or the “Company”), a developer, marketer and seller of branded
nutritional foods and snacking products, today reported financial
results for the thirteen and thirty-nine weeks ended May 25,
2024. The Company completed the acquisition of Only What You Need,
Inc. ("OWYN") on June 13, 2024, therefore, fiscal third quarter
2024 results exclude the performance of this brand. The reference
to "legacy" Simply Good Foods in this press release encompasses
Simply Good Foods' business excluding OWYN.
Third Quarter
Summary:(1)
- Net sales of
$334.8 million versus
$324.8 million
- Net income of
$41.3 million versus
$35.4 million
- Earnings per diluted share
(“EPS”) of $0.41 versus
$0.35
- Adjusted Diluted
EPS(2) of
$0.50 versus
$0.44
- Adjusted
EBITDA(4) $71.9 million
versus $66.6 million
Full fiscal year 2024 Net Sales and
Adjusted EBITDA(3)
outlook(4):
- Reaffirm “legacy” Simply
Good Foods, excluding OWYN, net sales outlook for the full fiscal
year
- Net sales expected to
increase around the mid-point of the Company’s long-term algorithm
of 4-6%, including the benefit of a fifty-third week. OWYN net
sales are expected to be in the $25-30 million range
- Total Simply Good Foods
Adjusted EBITDA(3),
expected to increase about 8% versus a previous
6-8%
“Simply Good Foods third quarter results were
led by continued Quest growth, improving Atkins marketplace trends
as well as strong gross margin performance,” said Geoff Tanner,
President, and Chief Executive Officer of Simply Good Foods. “Third
quarter retail takeaway of 5.0%(5) was slightly greater than our
expectations and, as expected, outpaced net sales growth of 3.1%.
Gross margin improvement in the quarter, a 320 basis points
increase versus last year, enabled investments in our business and
solid earnings growth. Quest retail takeaway was on track with our
plans, driven by strong salty snacks growth. We are pleased with
the new Quest advertising that aired in March which we believe is a
lever to increase household penetration. The Atkins revitalization
plan is on track with some elements of the plan in market now and
all elements to be in market during the second half of fiscal year
2025.”
“I am very pleased we completed the acquisition
of OWYN on June 13, 2024. We believe this represents a strategic
win for the Company as it introduces a third complementary brand,
significantly strengthening our position in the rapidly expanding
RTD shake market, opens the door to a new consumer segment, and
solidifies our leading position with retail partners. We also
believe our scaled go-to-market capabilities will drive profitable
growth through enhanced distribution, greater household penetration
and a cost-efficient supply chain.”
“We are confident in our strategy and execution
and believe we are positioned to drive sustained profitable growth.
For the full fiscal year 2024, we continue to anticipate legacy
Simply Good Foods net sales will increase around the mid-point of
the Company’s long-term algorithm of 4-6%, including the benefit of
a fifty-third week. OWYN net sales are expected to be in the $25-30
million range for the balance of fiscal year 2024. Given our solid
year-to-date results, we expect total Simply Good Foods Adjusted
EBITDA, including OWYN, to increase about 8% versus our previous
estimate of 6-8%.”
Third Quarter 2024
Results
Net sales increased $10.0 million, or 3.1%, to
$334.8 million. As expected, sales performance was driven by Quest
volume. North America net sales increased 3.2% and International
net sales declined 2.4% versus the year ago period.
Total Simply Good Foods retail takeaway for the
thirteen weeks ended May 26, 2024, in the combined U.S. measured
and unmeasured channels increased about 5%.(5) Quest retail
takeaway in the combined U.S. measured and unmeasured channels
increased about 13% and Atkins was down about 5%.Gross profit was
$133.6 million for the third quarter of fiscal 2024, an increase of
$14.4 million from the year ago period. Gross margin was 39.9% in
the third quarter of fiscal 2024 versus 36.7% last year, an
increase of 320 basis points. The improvement in gross margin was
primarily due to lower ingredient and packaging costs.
In the third quarter of fiscal 2024, the Company
reported net income of $41.3 million compared to $35.4 million for
the comparable period of fiscal 2023.
Operating expenses of $74.9 million increased
$9.8 million versus the comparable period of 2023. Selling and
marketing expenses increased $6.3 million to $36.5 million
primarily due to increased investments in marketing growth
initiatives. General and administrative ("G&A") expenses of
$31.5 million increased $1.0 million compared to the year ago
period primarily due to higher employee-related costs, stock-based
compensation, and corporate expenses. Excluding stock-based
compensation, as well as fees associated with last year's Term Loan
amendment and executive transition costs, third quarter fiscal year
2024 G&A increased $3.0 million to $26.5 million.
In the third quarter of fiscal 2024, the Company
incurred costs related to the OWYN acquisition of $2.7 million.
Net interest income and interest expense was
$4.1 million, a decline of $3.1 million versus the third quarter of
fiscal 2023. The interest expense component decline was due to a
lower term loan debt balance versus the year ago period.
Adjusted EBITDA(3), a non-GAAP financial measure
used by the Company that makes certain adjustments to net income
calculated under GAAP, was $71.9 million versus $66.6 million in
the year ago period.
In the third quarter of fiscal 2024, the Company
reported earnings per diluted share (“Diluted EPS”) of $0.41 versus
$0.35 in the year ago period. The diluted weighted average total
shares outstanding in the third quarter of fiscal 2024 was
approximately 101.3 million versus 100.9 million in the
year ago period.
Adjusted Diluted EPS(3), a non-GAAP financial
measure used by the Company that makes certain adjustments to
Diluted EPS calculated under GAAP, was $0.50 versus $0.44 in the
year ago period.
Year-to-Date
Third Quarter 2024 Highlights vs.
Year-to-Date Third Quarter
2023(1)
- Net sales were
$955.6 million versus
$922.3 million
- Net income of
$110.0 million versus
$96.9 million
- Earnings per diluted share
(“EPS”) of $1.09 versus
$0.96
- Adjusted Diluted
EPS(2) of
$1.33 versus
$1.18
- Adjusted
EBITDA(4) of
$191.7 million versus
$178.3 million
Net sales increased $33.4 million, or 3.6%, to
$955.6 million. The increase in sales was primarily driven by Quest
volume. North America and International net sales increased 3.6%
and 3.4%, respectively, versus last year.
Gross profit was $365.6 million for the
thirty-nine weeks ended May 25, 2024 compared to $333.0
million in the year ago period. Gross margin was 38.3% for the
year-to-date third quarter of fiscal 2024, an increase of 220 basis
points. The improvement in gross margin was primarily due to lower
ingredient and packaging costs.
Net income was $110.0 million compared to $96.9
million for the comparable period of 2023.
Operating expenses of $206.9 million increased
$23.2 million versus the comparable period of 2023. Selling and
marketing expenses were $103.1 million compared to $88.7 million in
the year ago period. G&A expenses of $88.4 million increased
$6.3 million during the period primarily due to higher employee
costs, stock-based compensation, and corporate expenses. For the
year to date third quarter of fiscal 2024, the Company incurred
costs related to the OWYN acquisition of $2.7 million.
Net interest income and interest expense was
$13.8 million, a decrease of $8.8 million versus the comparable
period of 2023. The interest expense component decline was due to a
lower term loan debt balance versus the year ago period.
Adjusted EBITDA(4), a non-GAAP financial measure
used by the Company that makes certain adjustments to net income
calculated under GAAP, increased 7.5% to $191.7 million.
For the year-to-date third quarter fiscal 2024,
the Company reported Diluted EPS of $1.09 versus $0.96 in the year
ago period. The diluted weighted average total shares outstanding
for the thirty-nine weeks ended May 25, 2024, was
approximately 101.2 million versus 100.8 million in the
year ago period.
Adjusted Diluted EPS(3), a non-GAAP financial
measure used by the Company that makes certain adjustments to
Diluted EPS calculated under GAAP, was $1.33 versus $1.18 in the
year ago period.
Balance Sheet and Cash Flow
At the end of the third quarter of fiscal 2024,
the Company had cash of $208.7 million. Year-to-date third quarter
fiscal 2024 cash provided by operating activities was $166.8
million, an increase of about 50% versus the year ago period. As of
May 25, 2024, term loan debt was $240.0 million.
Subsequent to the end of the third quarter, on
June 13, 2024, the Company completed the acquisition of OWYN.
Simply Good Foods funded the cash purchase price of $280 million,
excluding post-closing purchase price adjustments and before
transaction related fees, through a combination of cash on its
balance sheet and an incremental borrowing of $250 million under
its outstanding credit facility. The incremental $250 million term
loan and the then outstanding $240 million term loan balance have
an interest rate of SOFR plus a credit spread adjustment equal to
0.10% for one-month SOFR, 0.15% for up to three-month SOFR and
0.25% for up to six-month SOFR, subject to a floor of 0.50%, plus
2.50% margin. The incremental portion of the term loan was priced
to lenders at par. The Company expects to pay down a portion of the
$490 million in total term loan debt during the balance of fiscal
year 2024 and is targeting a net debt to Adjusted EBITDA ratio of
around 1.25x(6) by fiscal year-end August 2024.
Outlook(4)
While early, fourth quarter fiscal 2024 retail
takeaway for Quest and Atkins are tracking to the Company’s
estimates. As such, the Company reaffirms "legacy" Simply Good
Foods, excluding OWYN, net sales outlook for the full fiscal year.
Specifically, legacy net sales are expected to increase around the
mid-point of the Company’s long-term algorithm of 4-6%, including
the benefit of a fifty-third week. OWYN net sales are expected to
be in the $25-30 million range for the balance of fiscal year
2024.
The year-to-date strong gross margin expansion
has provided the Company with flexibility to meaningfully invest in
marketing and growth initiatives to drive earnings growth.
Therefore, for the full year fiscal 2024, the Company expects
Adjusted EBITDA(3), including OWYN, to increase about 8% compared
to last year and versus a previous estimate of 6-8%.
___________________________________(1) All
comparisons for the third quarter ended May 25, 2024, versus
the third quarter ended May 27, 2023. (2) Adjusted Diluted
Earnings Per Share is a non-GAAP financial measure. The Company
excludes acquisition-related costs, such as business transaction
costs, integration expense and depreciation and amortization
expense in calculating Adjusted Diluted Earnings Per Share. Please
refer to "Reconciliation of Adjusted Diluted Earnings Per Share" in
this press release for an explanation and reconciliation of this
non-GAAP financial measure.(3) Adjusted Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA") is a non-GAAP
financial measure. Please refer to "Reconciliation of Adjusted
Diluted Earnings Per Share" in this press release for an
explanation and reconciliation of this non-GAAP financial
measure.(4) The Company does not provide a forward-looking
reconciliation of Adjusted Diluted Earnings Per Share to Earnings
Per Share or Adjusted EBITDA to Net Income, the most directly
comparable GAAP financial measures, expected for 2024, because we
are unable to provide such a reconciliation without unreasonable
effort due to the unavailability of reliable estimates for certain
components of consolidated net income and the respective
reconciliations, and the inherent difficulty of predicting what the
changes in these components will be throughout the fiscal year. As
these items may vary greatly between periods, we are unable to
address the probable significance of the unavailable information,
which could significantly affect our future financial results.(5)
Combined IRI MULO + C-store and Company unmeasured channel estimate
for the 13-weeks ending May 26, 2024.(6) Net Debt to Adjusted
EBITDA is a non-GAAP financial measure which Simply Good Foods
defines as the total debt outstanding under our credit agreement
with Barclays Bank PLC and other parties ("Credit Agreement"),
reduced by cash and cash equivalents, and divided by the Company's
estimated full fiscal year 2024 Adjusted EBITDA, as previously
defined. The Company does not provide a forward-looking
reconciliation of Net Debt to Adjusted EBITDA to Net Debt to
Consolidated Net Income, the most directly comparable GAAP
financial measures, expected for 2024, because we are unable to
provide such a reconciliation without unreasonable effort due to
the unavailability of reliable estimates for certain components of
consolidated net income and the respective reconciliations, and the
inherent difficulty of predicting what the changes in these
components will be throughout the fiscal year. As these items may
vary greatly between periods, we are unable to address the probable
significance of the unavailable information, which could
significantly affect our future financial results.
Conference Call and Webcast
InformationThe Company will host a conference call with
members of the executive management team to discuss these results
today, Thursday, June 27, 2024, at 7:00 a.m. Mountain time
(9:00 a.m. Eastern time). Investors interested in
participating in the live call can dial 877-407-0792 from the U.S.
and International callers can dial 201-689-8263. In addition, the
call and accompanying presentation slides will be broadcast live
over the Internet hosted at the “Investor Relations” section of the
Company's website at http://www.thesimplygoodfoodscompany.com. A
telephone replay will be available approximately two hours after
the call concludes and will be available through July 4, 2024, by
dialing 844-512-2921 from the U.S., or 412-317-6671 from
international locations, and entering confirmation code
13746996.
About The Simply Good Foods
CompanyThe Simply Good Foods Company (Nasdaq: SMPL),
headquartered in Denver, Colorado, is a consumer packaged food and
beverage company that is bringing nutritious snacking with
ambitious goals to raise the bar on what food can be with trusted
brands and innovative products. Our product portfolio consists
primarily of protein bars, ready-to-drink (RTD) shakes, sweet and
salty snacks, and confectionery products marketed under the
Atkins™, Quest™, and OWYN™ brands. We are a company that aims to
lead the nutritious snacking movement and is poised to expand our
healthy lifestyle platform through innovation, organic growth, and
investment opportunities in the snacking space. To learn more,
visit http://www.thesimplygoodfoodscompany.com.
Investor ContactMark PogharianVice President,
Investor Relations, Treasury and Business Development The Simply
Good Foods Company (720)
768-2681mpogharian@simplygoodfoodsco.com
Forward Looking Statements
Certain statements made herein are not
historical facts but are forward-looking statements for purposes of
the safe harbor provisions under The Private Securities Litigation
Reform Act of 1995. Forward-looking statements generally are
accompanied by or include words such as “will”, “expect”, “intends”
or other similar words, phrases or expressions. These statements
relate to future events or our future financial or operational
performance and involve known and unknown risks, uncertainties and
other factors that could cause our actual results, levels of
activity, performance or achievement to differ materially from
those expressed or implied by these forward-looking statements. We
caution you that these forward-looking statements are not
guarantees of future performance and involve risks, uncertainties
and assumptions that are difficult to predict. You should not place
undue reliance on forward-looking statements. These statements
reflect our current views with respect to future events, are based
on assumptions and are subject to risks and uncertainties. These
risks and uncertainties relate to, among other things, our ability
to achieve our estimates of OWYN’s net sales and Adjusted EBITDA
and our anticipated synergies from the acquisition of OWYN, our net
leverage ratio post-acquisition, our Adjusted EPS post-acquisition,
our ability to maintain OWYN personnel and effectively integrate
OWYN, our operations being dependent on changes in consumer
preferences and purchasing habits regarding our products, a global
supply chain and effects of supply chain constraints and
inflationary pressure on us and our contract manufacturers, our
ability to continue to operate at a profit or to maintain our
margins, the effect pandemics or other global disruptions on our
business, financial condition and results of operations, the
sufficiency of our sources of liquidity and capital, our ability to
maintain current operation levels and implement our growth
strategies, our ability to maintain and gain market acceptance for
our products or new products, our ability to capitalize on
attractive opportunities, our ability to respond to competition and
changes in the economy including changes regarding inflation and
increasing ingredient and packaging costs and labor challenges at
our contract manufacturers and third party logistics providers, the
amounts of or changes with respect to certain anticipated raw
materials and other costs, difficulties and delays in achieving the
synergies and cost savings in connection with acquisitions, changes
in the business environment in which we operate including general
financial, economic, capital market, regulatory and geopolitical
conditions affecting us and the industry in which we operate, our
ability to maintain adequate product inventory levels to timely
supply customer orders, changes in taxes, tariffs, duties,
governmental laws and regulations, the availability of or
competition for other brands, assets or other opportunities for
investment by us or to expand our business, competitive product and
pricing activity, difficulties of managing growth profitably, the
loss of one or more members of our management team, potential for
increased costs and harm to our business resulting from
unauthorized access of the information technology systems we use in
our business, expansion of our wellness platform and other risks
and uncertainties indicated in the Company’s Form 10-K, Form 10-Q,
and Form 8-K reports (including all amendments to those reports)
filed with the U.S. Securities and Exchange Commission from time to
time. In addition, forward-looking statements provide the Company’s
expectations, plans or forecasts of future events and views as of
the date of this communication. Except as required by law, the
Company undertakes no obligation to update such statements to
reflect events or circumstances arising after such date and
cautions investors not to place undue reliance on any such
forward-looking statements. These forward-looking statements should
not be relied upon as representing the Company’s assessments as of
any date subsequent to the date of this communication.
|
The Simply Good Foods Company and
SubsidiariesConsolidated Balance Sheets
(Unaudited, dollars in thousands, except share and per share
data) |
| |
| |
|
May 25, 2024 |
|
August 26, 2023 |
| Assets |
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash |
|
$ |
208,681 |
|
|
$ |
87,715 |
|
|
Accounts receivable, net |
|
|
146,281 |
|
|
|
145,078 |
|
|
Inventories |
|
|
105,921 |
|
|
|
116,591 |
|
|
Prepaid expenses |
|
|
8,645 |
|
|
|
6,294 |
|
|
Other current assets |
|
|
11,823 |
|
|
|
15,974 |
|
|
Total current assets |
|
|
481,351 |
|
|
|
371,652 |
|
| |
|
|
|
|
| Long-term assets: |
|
|
|
|
|
Property and equipment, net |
|
|
22,037 |
|
|
|
24,861 |
|
|
Intangible assets, net |
|
|
1,096,538 |
|
|
|
1,108,119 |
|
|
Goodwill |
|
|
543,134 |
|
|
|
543,134 |
|
|
Other long-term assets |
|
|
42,570 |
|
|
|
49,318 |
|
|
Total assets |
|
$ |
2,185,630 |
|
|
$ |
2,097,084 |
|
| |
|
|
|
|
| Liabilities and stockholders’
equity |
|
|
|
|
| Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
56,504 |
|
|
$ |
52,712 |
|
|
Accrued interest |
|
|
1,372 |
|
|
|
1,940 |
|
|
Accrued expenses and other current liabilities |
|
|
34,823 |
|
|
|
35,062 |
|
|
Current maturities of long-term debt |
|
|
2 |
|
|
|
143 |
|
|
Total current liabilities |
|
|
92,701 |
|
|
|
89,857 |
|
| |
|
|
|
|
| Long-term liabilities: |
|
|
|
|
|
Long-term debt, less current maturities |
|
|
237,661 |
|
|
|
281,649 |
|
|
Deferred income taxes |
|
|
128,549 |
|
|
|
116,133 |
|
|
Other long-term liabilities |
|
|
33,407 |
|
|
|
38,346 |
|
|
Total liabilities |
|
|
492,318 |
|
|
|
525,985 |
|
| See commitments and
contingencies (Note 9) |
|
|
|
|
| |
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
|
Preferred stock, $0.01 par value, 100,000,000 shares authorized,
none issued |
|
|
— |
|
|
|
— |
|
|
Common stock, $0.01 par value, 600,000,000 shares authorized,
102,500,950 and 101,929,868 shares issued at May 25, 2024 and
August 26, 2023, respectively |
|
|
1,025 |
|
|
|
1,019 |
|
|
Treasury stock, 2,365,100 shares and 2,365,100 shares at cost at
May 25, 2024 and August 26, 2023, respectively |
|
|
(78,451 |
) |
|
|
(78,451 |
) |
|
Additional paid-in-capital |
|
|
1,315,005 |
|
|
|
1,303,168 |
|
|
Retained earnings |
|
|
457,974 |
|
|
|
347,956 |
|
|
Accumulated other comprehensive loss |
|
|
(2,241 |
) |
|
|
(2,593 |
) |
|
Total stockholders’ equity |
|
|
1,693,312 |
|
|
|
1,571,099 |
|
| Total liabilities and
stockholders’ equity |
|
$ |
2,185,630 |
|
|
$ |
2,097,084 |
|
|
The Simply Good Foods Company and
SubsidiariesConsolidated Statements of Income and
Comprehensive Income(Unaudited, dollars in thousands,
except share and per share data) |
| |
| |
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
| |
|
May 25, 2024 |
|
May 27, 2023 |
|
May 25, 2024 |
|
May 27, 2023 |
|
Net sales |
|
$ |
334,757 |
|
|
$ |
324,792 |
|
|
$ |
955,634 |
|
|
$ |
922,254 |
|
| Cost of goods sold |
|
|
201,131 |
|
|
|
205,546 |
|
|
|
590,020 |
|
|
|
589,284 |
|
| Gross profit |
|
|
133,626 |
|
|
|
119,246 |
|
|
|
365,614 |
|
|
|
332,970 |
|
| |
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
|
36,464 |
|
|
|
30,168 |
|
|
|
103,097 |
|
|
|
88,650 |
|
|
General and administrative |
|
|
31,543 |
|
|
|
30,510 |
|
|
|
88,426 |
|
|
|
82,085 |
|
|
Depreciation and amortization |
|
|
4,142 |
|
|
|
4,363 |
|
|
|
12,711 |
|
|
|
13,035 |
|
|
Business transaction costs |
|
|
2,703 |
|
|
|
— |
|
|
|
2,703 |
|
|
|
— |
|
| Total operating expenses |
|
|
74,852 |
|
|
|
65,041 |
|
|
|
206,937 |
|
|
|
183,770 |
|
| |
|
|
|
|
|
|
|
|
| Income from operations |
|
|
58,774 |
|
|
|
54,205 |
|
|
|
158,677 |
|
|
|
149,200 |
|
| |
|
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
881 |
|
|
|
407 |
|
|
|
2,895 |
|
|
|
660 |
|
|
Interest expense |
|
|
(5,028 |
) |
|
|
(7,649 |
) |
|
|
(16,658 |
) |
|
|
(23,201 |
) |
|
(Loss) gain on foreign currency transactions |
|
|
(12 |
) |
|
|
180 |
|
|
|
191 |
|
|
|
74 |
|
|
Other income |
|
|
102 |
|
|
|
4 |
|
|
|
108 |
|
|
|
10 |
|
| Total other expense |
|
|
(4,057 |
) |
|
|
(7,058 |
) |
|
|
(13,464 |
) |
|
|
(22,457 |
) |
| |
|
|
|
|
|
|
|
|
| Income before income
taxes |
|
|
54,717 |
|
|
|
47,147 |
|
|
|
145,213 |
|
|
|
126,743 |
|
| Income tax expense |
|
|
13,383 |
|
|
|
11,716 |
|
|
|
35,195 |
|
|
|
29,810 |
|
| Net income |
|
$ |
41,334 |
|
|
$ |
35,431 |
|
|
$ |
110,018 |
|
|
$ |
96,933 |
|
| |
|
|
|
|
|
|
|
|
| Other comprehensive
income: |
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of reclassification
adjustments |
|
|
95 |
|
|
|
(262 |
) |
|
|
352 |
|
|
|
(431 |
) |
| Comprehensive income |
|
$ |
41,429 |
|
|
$ |
35,169 |
|
|
$ |
110,370 |
|
|
$ |
96,502 |
|
| |
|
|
|
|
|
|
|
|
| Earnings per share from net
income: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.41 |
|
|
$ |
0.36 |
|
|
$ |
1.10 |
|
|
$ |
0.98 |
|
|
Diluted |
|
$ |
0.41 |
|
|
$ |
0.35 |
|
|
$ |
1.09 |
|
|
$ |
0.96 |
|
| Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
100,024,230 |
|
|
|
99,518,546 |
|
|
|
99,852,203 |
|
|
|
99,404,174 |
|
|
Diluted |
|
|
101,270,163 |
|
|
|
100,909,972 |
|
|
|
101,240,471 |
|
|
|
100,847,970 |
|
|
The Simply Good Foods Company and
SubsidiariesConsolidated Statements of
Cash Flows(Unaudited, dollars in thousands) |
| |
| |
|
Thirty-Nine Weeks Ended |
| |
|
May 25, 2024 |
|
May 27, 2023 |
| Operating activities |
|
|
|
|
|
Net income |
|
$ |
110,018 |
|
|
$ |
96,933 |
|
| Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
|
15,871 |
|
|
|
15,044 |
|
|
Amortization of deferred financing costs and debt discount |
|
|
1,213 |
|
|
|
2,011 |
|
|
Stock compensation expense |
|
|
13,209 |
|
|
|
10,456 |
|
|
Estimated credit (gains) losses |
|
|
(167 |
) |
|
|
206 |
|
|
Unrealized loss on foreign currency transactions |
|
|
(191 |
) |
|
|
(74 |
) |
|
Deferred income taxes |
|
|
12,416 |
|
|
|
11,696 |
|
|
Amortization of operating lease right-of-use asset |
|
|
5,265 |
|
|
|
5,018 |
|
|
Other |
|
|
2,329 |
|
|
|
759 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable, net |
|
|
(716 |
) |
|
|
(13,334 |
) |
|
Inventories |
|
|
9,423 |
|
|
|
19,444 |
|
|
Prepaid expenses |
|
|
(2,309 |
) |
|
|
(745 |
) |
|
Other current assets |
|
|
2,248 |
|
|
|
(1,595 |
) |
|
Accounts payable |
|
|
3,370 |
|
|
|
(16,115 |
) |
|
Accrued interest |
|
|
(568 |
) |
|
|
(117 |
) |
|
Accrued expenses and other current liabilities |
|
|
(705 |
) |
|
|
(15,030 |
) |
|
Other assets and liabilities |
|
|
(3,951 |
) |
|
|
(4,145 |
) |
| Net cash provided by operating
activities |
|
|
166,755 |
|
|
|
110,412 |
|
| Investing activities |
|
|
|
|
|
Purchases of property and equipment |
|
|
(1,838 |
) |
|
|
(10,108 |
) |
|
Investments in intangible and other assets |
|
|
(507 |
) |
|
|
(338 |
) |
| Net cash used in investing
activities |
|
|
(2,345 |
) |
|
|
(10,446 |
) |
| Financing activities |
|
|
|
|
|
Proceeds from option exercises |
|
|
4,292 |
|
|
|
5,035 |
|
|
Tax payments related to issuance of restricted stock units and
performance stock units |
|
|
(4,818 |
) |
|
|
(2,755 |
) |
|
Payments on finance lease obligations |
|
|
(143 |
) |
|
|
(217 |
) |
|
Cash received on repayment of note receivable |
|
|
2,100 |
|
|
|
— |
|
|
Repurchase of common stock |
|
|
— |
|
|
|
(16,448 |
) |
|
Principal payments of long-term debt |
|
|
(45,000 |
) |
|
|
(81,500 |
) |
|
Deferred financing costs |
|
|
— |
|
|
|
(2,694 |
) |
| Net cash used in financing
activities |
|
|
(43,569 |
) |
|
|
(98,579 |
) |
| |
|
|
|
|
| Cash and cash equivalents |
|
|
|
|
|
Net increase in cash |
|
|
120,841 |
|
|
|
1,387 |
|
|
Effect of exchange rate on cash |
|
|
125 |
|
|
|
(87 |
) |
|
Cash at beginning of period |
|
|
87,715 |
|
|
|
67,494 |
|
| Cash and cash equivalents at
end of period |
|
$ |
208,681 |
|
|
$ |
68,794 |
|
| |
Reconciliation of EBITDA and Adjusted
EBITDA
EBITDA and Adjusted EBITDA.
EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly
used in our industry and should not be construed as alternatives to
net income as an indicator of operating performance or as
alternatives to cash flow provided by operating activities as a
measure of liquidity (each as determined in accordance with GAAP).
Simply Good Foods defines EBITDA as net income or loss before
interest income, interest expense, income tax expense, depreciation
and amortization, and Adjusted EBITDA as further adjusted to
exclude the following items: stock-based compensation expense,
executive transition costs, business transaction costs, term loan
transaction fees, and other non-core expenses. The Company believes
that EBITDA and Adjusted EBITDA, when used in conjunction with net
income, are useful to provide additional information to investors.
Management of the Company uses EBITDA and Adjusted EBITDA to
supplement net income because these measures reflect operating
results of the on-going operations, eliminate items that are not
directly attributable to the Company’s underlying operating
performance, enhance the overall understanding of past financial
performance and future prospects, and allow for greater
transparency with respect to the key metrics the Company’s
management uses in its financial and operational decision making.
The Company also believes that EBITDA and Adjusted EBITDA are
frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in its industry.
EBITDA and Adjusted EBITDA may not be comparable to other similarly
titled captions of other companies due to differences in the
non-GAAP calculation.
The following unaudited table provides a
reconciliation of EBITDA and Adjusted EBITDA to its most directly
comparable GAAP measure, which is net income, for the thirty-nine
weeks ended May 25, 2024 and May 27, 2023:
| (In
thousands) |
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
| |
May 25, 2024 |
|
May 27, 2023 |
|
May 25, 2024 |
|
May 27, 2023 |
|
Net income |
|
$ |
41,334 |
|
|
$ |
35,431 |
|
|
$ |
110,018 |
|
|
$ |
96,933 |
|
| Interest income |
|
|
(881 |
) |
|
|
(407 |
) |
|
|
(2,895 |
) |
|
|
(660 |
) |
| Interest expense |
|
|
5,028 |
|
|
|
7,649 |
|
|
|
16,658 |
|
|
|
23,201 |
|
| Income tax expense |
|
|
13,383 |
|
|
|
11,716 |
|
|
|
35,195 |
|
|
|
29,810 |
|
| Depreciation and
amortization |
|
|
5,079 |
|
|
|
5,140 |
|
|
|
15,871 |
|
|
|
15,044 |
|
| EBITDA |
|
|
63,943 |
|
|
|
59,529 |
|
|
|
174,847 |
|
|
|
164,328 |
|
|
Stock-based compensation expense |
|
|
4,473 |
|
|
|
4,124 |
|
|
|
13,209 |
|
|
|
10,456 |
|
|
Executive transition costs |
|
|
355 |
|
|
|
737 |
|
|
|
721 |
|
|
|
1,158 |
|
|
Business transaction costs |
|
|
2,703 |
|
|
|
— |
|
|
|
2,703 |
|
|
|
— |
|
|
Term loan transaction fees |
|
|
— |
|
|
|
2,423 |
|
|
|
— |
|
|
|
2,423 |
|
|
Other (1) |
|
|
400 |
|
|
|
(178 |
) |
|
|
199 |
|
|
|
(64 |
) |
| Adjusted EBITDA |
|
$ |
71,874 |
|
|
$ |
66,635 |
|
|
$ |
191,679 |
|
|
$ |
178,301 |
|
|
(1) Other items consist principally of exchange impact of foreign
currency transactions and other expenses. |
|
|
Reconciliation of Adjusted Diluted
Earnings Per Share
Adjusted Diluted Earnings per
Share. Adjusted Diluted Earnings per Share is a non-GAAP
financial measure commonly used in our industry and should not be
construed as an alternative to diluted earnings per share as an
indicator of operating performance. Simply Good Foods defines
Adjusted Diluted Earnings Per Share as diluted earnings per share
before depreciation and amortization, stock-based compensation
expense, executive transition costs, business transaction costs,
and term loan transaction fees, and other non-core expenses on a
theoretical tax effected basis of such adjustments. The tax effect
of such adjustments to Adjusted Diluted Earnings Per Share is
calculated by applying an overall assumed statutory tax rate to
each gross adjustment as shown in the reconciliation to Adjusted
EBITDA, as previously defined. The assumed statutory tax rate
reflects a normalized effective tax rate estimated based on
assumptions regarding the Company's statutory and effective tax
rate for each respective reporting period, including the current
and deferred tax effects of each adjustment, and is adjusted for
the effects of tax reform, if any. The Company consistently applies
the overall assumed statutory tax rate to periods throughout each
fiscal year and reassesses the overall assumed statutory rate on
annual basis. The Company believes that the inclusion of these
supplementary adjustments in presenting Adjusted Diluted Earnings
per Share, when used in conjunction with diluted earnings per
share, are appropriate to provide additional information to
investors, reflects more accurately operating results of the
on-going operations, enhances the overall understanding of past
financial performance and future prospects and allows for greater
transparency with respect to the key metrics the Company uses in
its financial and operational decision making. The Company also
believes that Adjusted Diluted Earnings per Share is frequently
used by securities analysts, investors and other interested parties
in the evaluation of companies in its industry. Adjusted Diluted
Earnings per Share may not be comparable to other similarly titled
captions of other companies due to differences in the non-GAAP
calculation.
The following unaudited tables below provide a
reconciliation of Adjusted Diluted Earnings Per Share to its most
directly comparable GAAP measure, which is diluted earnings per
share, for the thirty-nine weeks ended May 25, 2024 and
May 27, 2023:
| |
|
|
|
|
|
|
|
|
| |
|
Thirteen Weeks Ended |
|
Thirty-Nine Weeks Ended |
| |
|
May 25, 2024 |
|
May 27, 2023 |
|
May 25, 2024 |
|
May 27, 2023 |
|
Diluted earnings per share |
|
$ |
0.41 |
|
|
$ |
0.35 |
|
|
$ |
1.09 |
|
|
$ |
0.96 |
|
| |
|
|
|
|
|
|
|
|
| Depreciation and
amortization |
|
|
0.05 |
|
|
|
0.05 |
|
|
|
0.16 |
|
|
|
0.15 |
|
| Stock-based compensation
expense |
|
|
0.04 |
|
|
|
0.04 |
|
|
|
0.13 |
|
|
|
0.10 |
|
| Executive transition
costs |
|
|
— |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
| Business transaction
costs |
|
|
0.03 |
|
|
|
— |
|
|
|
0.03 |
|
|
|
— |
|
| Term loan transaction
fees |
|
|
— |
|
|
|
0.02 |
|
|
|
— |
|
|
|
0.02 |
|
| Tax effects of adjustments
(1) |
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
(0.08 |
) |
|
|
(0.07 |
) |
| Rounding (5) |
|
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
|
|
0.01 |
|
| Adjusted diluted earnings per
share |
|
$ |
0.50 |
|
|
$ |
0.44 |
|
|
$ |
1.33 |
|
|
$ |
1.18 |
|
|
(1) Other items consist principally of exchange impact of foreign
currency transactions and other expenses. |
|
(5) Adjusted Diluted Earnings Per Share amounts are computed
independently for each quarter. Therefore, the sum of the quarterly
Adjusted Diluted Earnings Per Share amounts may not equal the year
to date Adjusted Diluted Earnings Per Share amounts due to
rounding. |