Q3 2024 The Simply Good Foods Co Earnings Call

Operator: Greetings, and welcome to the Simply Good Foods Company fiscal third quarter 2024 conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Greetings and welcome to the Simply Good Foods Company fiscal third quarter 2024 conference call. At this time all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keyboard. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Mark Pogharian, Vice President of Investment Relations for Simply Good Food. Thank you, sir. You may begin.

Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: I would now like to turn the conference over to your host, Mr. Mark Pogharian, Vice President of Investment Relations for Simply Good Foods Company. Thank you, sir. You may begin.

Mark Pogharian: Thank you, operator. Good morning. I'm pleased to welcome you to the Simply Good Foods Company earnings call for the fiscal third quarter ended May 25, 2024. Geoff Tanner, President and CEO, and Shaun Mara, CFO, will provide you with an overview of results, which will then be followed by a Q&A session. The company issued its earnings release this morning at approximately 7am Eastern Time.

Mark Pogharian: Thank you, operator. Good morning. I'm pleased to welcome you to the Simply Good Foods Company earnings call for the fiscal third quarter ended May 25th, 2024.

Mark Pogharian: Geoff Tanner, President and CEO , and Shaun Mara, CFO , will provide you with an overview of results, which will then be followed by a Q&A session. The company issued its earnings release this morning at approximately 7 a.m. Eastern Time. A copy of the release and accompanying presentation are available under the Investor section of the company's website at www.TheSimplyGoodFoodsCompany.com. This call is being webcast and an archive of today's remarks will also be available.

Mark Pogharian: A copy of the release and accompanying presentation is available in the investor section of the company's website at www.thesimplygoodfoodscompany.com. This call is being webcast, and an archive of today's remarks will also be available. During the course of today's call, management will make forward-looking statements that are subject to various risks and uncertainties that may cause actual results to differ materially. The company undertakes no obligation to update these statements based on subsequent events.

Mark Pogharian: A detailed listing of such risks and uncertainties can be found in today's press release and the company's SEC filings. Note that on today's call, we will refer to certain non-GAAP financial measures that we believe will provide useful information for investors. Due to the company's asset light, strong cash flow business model, we evaluate our performance on an adjusted basis as it relates to EBITDA and diluted EPS. Please refer to today's press release for a reconciliation of the historical non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. The company completed the acquisition of Owen in the fourth quarter of fiscal 24, and therefore results for the 13 and 39 weeks ended May 25, 2024 exclude Owen.

Mark Pogharian: During the course of today's call, management will make forward-looking statements that are subject to various risks and uncertainties that may cause actual results to differ materially. The company undertakes no obligation to update these statements based on subsequent events.

Mark Pogharian: A detailed listing of such risk and uncertainties can be found in today's press release and the company's FTC filings.

Mark Pogharian: Note that on today's call we will refer to certain non-GAAP financial measures that we believe will provide useful information for investors.

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

Mark Pogharian: Please refer to today's press release for a reconciliation of the historical, non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. The company completed the acquisition of Owen in the fourth quarter of fiscal 24. Therefore, results for the 13 and 39 weeks ended May 25, 2024 exclude Owen.

Mark Pogharian: Additionally, the reference to legacy Simply Good Foods during today's conference call encompasses all Simply Good Foods business excluding Owen. I'll now turn the call over to Jeff Tanner, President and CEO. Thank you, Mark. Good morning.

Mark Pogharian: Additionally, the reference to legacy Simply Good Foods during today's conference call encompasses Simply Good Foods' business, excluding Owen. I'll now turn the call over to Geoff Tanner, President and CEO .

Geoff E. Tanner: Thank you for joining us. Today, I will recap Simply Good Food's financial results and the performance of our brand. Then Shaun will discuss our financial results in more detail before we wrap it up with a discussion of our fiscal 2024 outlook and take your questions. We're pleased with our fiscal third quarter financial results, which were slightly better than our estimates. Simply Good Food's third quarter results were led by continued quest growth as well as strong growth margin improvement. Retail takeaway in the combined measured and unmeasured channels was about 5% and, as expected, outpaced net sales growth of 3.1%.

Geoff E. Tanner: Thank you, Mark. Good morning. Thank you for joining us.

Geoff E. Tanner: Today, I will recap Simply Good Food's financial results and the performance of our brand. Then Shaun will discuss our financial results in more detail before we wrap it up with a discussion of our fiscal 2024 outlook and take your questions.

Geoff E. Tanner: We're pleased with our fiscal third quarter financial results that were slightly better than our estimates.

Shaun P. Mara: Simply Good Food's third quarter results were led by continued quest growth as well as strong growth margin improvement.

Shaun P. Mara: Retail takeaway in the combined measured and unmeasured channels was about 5% and as expected outpaced net sales growth of 3.1%.

Geoff E. Tanner: Quest's retail takeaway was driven by strong salty snack growth, and Atkins' performance sequentially improved by a month during the quarter. Additionally, e-commerce growth for both Quest and Atkins continued to be solid. More on this in a bit.

Shaun P. Mara: Quest's retail takeaway was driven by strong salty snack growth, and Atkins' performance sequentially improved by a month during the quarter. Additionally, e-commerce growth for both Quest and Atkins continued to be solid. More on this in a bit.

Geoff E. Tanner: Q3 gross margin was 39.9%, a 320 basis point increase versus a year ago period, primarily due to lower ingredient and packaging costs. Higher gross profit enabled investments in growth initiatives, while also resulting in an increase in Q3 adjusted EBITDA of 7.9% to $71.9 million. The Owen acquisition closed earlier this month, and the business is tracking to the acquisition model and full calendar year 2024 net sales we initially outlined. I'm pleased to announce that Mark Olivieri, CEO of Owen, has joined Simply Good Food as the SVP and GM of Owen and is a member of our executive leadership team.

Shaun P. Mara: Q3 gross margin was 39.9%, a 320 basis point increase versus a year ago period, primarily due to lower ingredient and packaging costs.

Shaun P. Mara: Higher gross profit enabled investments in growth initiatives while also resulting in an increase in Q3 adjusted EBITDA of 7.9% to $71.9 million.

Shaun P. Mara: The Owen Acquisition closed earlier this month and the business is tracking to the acquisition model and full calendar year 2024 net sales we initially outlined.

Shaun P. Mara: I'm pleased to announce that Mark Olivieri, CEO of Owen, has joined Simply Good Food as the SVP and GM of Owen and is a member of our executive leadership team.

Geoff E. Tanner: Mark and I are excited to work together to unlock the value of our combined business and deliver shareholder value through both revenue growth, margin expansion, and cost synergy. We're very pleased with our execution in Q3. Quest Acceleration and Atkins Revitalization Plans are on track, and we reaffirm our full year fiscal 2024 Net Sales Outlook for the legacy business. Specifically, we expect net sales to increase around the midpoint of the company's long-term algorithm of 4 to 6 percent, including the benefit of a 53rd week.

Shaun P. Mara: Mark and I are excited to work together to unlock the value of our combined business and deliver shareholder value through both revenue growth, margin expansion, and cost synergy. We're very pleased with our execution in Q3.

Shaun P. Mara: Quest Acceleration and Atkins Revitalization plans are on track and we reaffirm our full year fiscal 2024 Net Sales Outlook for the legacy business.

Shaun P. Mara: Specifically, we expect net sales to increase around the midpoint of the company's long-term algorithm of 4-6%, including the benefit of a 53rd week.

Geoff E. Tanner: The Owen acquisition closed on June 13th, and we anticipate Q4 net sales to be in the $25 to $30 million range. Total company adjusted EBITDA growth is expected to increase about 8% compared to last year and versus our previous estimate of 6-8%. Shaun will provide greater detail on our performance in the following section.

Shaun P. Mara: The Owen Acquisition closed on June 13th and we anticipate Q4 net sales to be in the $25-$30 million range.

Shaun P. Mara: Total company adjusted EBITDA growth is expected to increase about 8% compared to last year and versus our previous estimate of 6-8%.

Shaun P. Mara: Shaun will provide greater detail on our performance in the subsequent sections.

Geoff E. Tanner: The next slide provides you with a perspective of nutritional snacking category growth, as well as our retail takeaway performance within the IRI MULO Plus C-Store universe and in the combined measured and unmeasured channels. Nutritional snacking category growth in the major channel universe was 6.4%, driven primarily by volume. This category continues to be a standout performer and is increasingly a focus of our retail partners as they look for growth opportunities. Legacy Simply Good Foods retail takeaway in measured channels increased 2.9%, driven by Quest volume growth. Atkins' performance improved compared to last quarter but was still off compared to last year.

Speaker Change: The next slide provides you with a perspective of nutritional snacking category growth, as well as our retail takeaway performance within the IRI MULO plus C-Store universe and in the combined measured and unmeasured channels.

Shaun P. Mara: Nutritional snacking category growth in the major channel universe was 6.4%, driven primarily by volume.

Shaun P. Mara: This category continues to be a standout performer and is increasingly a focus of our retail partners as they look for growth opportunities.

Shaun P. Mara: Legacy Simply Good Food's retail takeaway in measured channels increased 2.9% driven by Quest volume growth.

Shaun P. Mara: Atkins' performance improved compared to last quarter, but was still off versus last year.

Geoff E. Tanner: Our e-commerce business continues to do well and resulted in legacy combined measured and unmeasured channel POS growth of 5%. Note that if we had acquired Owen at the beginning of Q3, retail takeaway in measured channels and the combined measured and unmeasured universe would have been 6.4% and 8%, respectively. Let me now turn to questions.

Shaun P. Mara: Our e-commerce business continues to do well and resulted in legacy combined measured and unmeasured channel POS growth of 5%.

Shaun P. Mara: Note that if we had acquired Owen at the beginning of Q3, retail takeaway in measured channels in the combined measured and unmeasured universe would have been 6.4% and 8% respectively. Let me now turn to Quest.

Geoff E. Tanner: In Q3, retail takeaway in measured channels increased 13.5% driven by volume. Growth was solid across key retail channels, driven by an increase in both household penetration and buy rate. Quest Retail Takeaway improved sequentially from Q2 to Q3, with a key driver being the new Quest advertising campaign that began in March. We're pleased with the advertising, which we believe will continue to drive higher household penetration and overall brand growth. In Q3, we estimate total unmeasured channel retail takeaway increased about 12% as e-commerce strength was partially offset by softness and specialty channels. Quest Q3 e-commerce POS was solid and increased about 16%. For perspective, total unmeasured channels in Q3 were nearly 23% of total Quest retail sales.

Shaun P. Mara: In Q3, Retail Takeaway and Measured Channels increased 13.5% driven by volume.

Shaun P. Mara: Growth was solid across key retail channels, driven by an increase in both household penetration and buy rate.

Shaun P. Mara: Quest Retail Takeaway improved sequentially from Q2 to Q3, with a key driver being the new Quest advertising campaign that began in March.

Shaun P. Mara: We're pleased with the advertising that we believe will continue to drive higher household penetration and overall brand growth.

Shaun P. Mara: In Q3, we estimate total unmeasured channel retail takeaway increased about 12% as e-commerce strength was partially offset by softness and specialty channels.

Shaun P. Mara: Quest Q3 e-commerce POS was solid and increased about 16%.

Shaun P. Mara: For perspective, total unmeasured channels in Q3 were nearly 23% of total Quest retail sales. Quest Bar and Snacks retail takeaway in measured channels increased about 2% and 27% respectively.

Geoff E. Tanner: Quest Bar and Snacks Retail Takeaway in measured channels increased about 2% and 27% respectively. We're particularly pleased with our Salty Snacks POS growth of nearly 50%, which is a standout in the category and represents about 25% of Quest's measured channels retail sales. The new advertising debuted with a strong emphasis on Quest Chips, which is where we have seen the largest increase in household penetration.

Shaun P. Mara: We're particularly pleased with our Salty Snacks POS growth of nearly 50%, which is a standout in the category and represents about 25% of Quest's measured channels retail sales.

Shaun P. Mara: The new advertising debuted with a strong emphasis on Quest chips, which is where we have seen the largest increase in household penetration.

Geoff E. Tanner: As we witnessed the explosive growth of chips, the size of the total addressable salty snack market suggests a significant and continued upsize for this business. As a result, we are working on a multi-faceted acceleration plan that includes growth levers such as flavors, pack types, and channel expansion. In Q3, fast segment growth within the nutritional snacking category slowed to about 1%. This was primarily due to Better For You, or bars that have significantly less protein, if any, that declined by low single digits on a percentage basis versus last year. Sports performance bars, which primarily have higher levels of protein, increased by mid-single digits, driven by the increased distribution of some new entrants into the measured channel universe.

Shaun P. Mara: As we witness the explosive growth of chips, the size of the total addressable salty snack market suggests significant and continued upsize on this business.

Shaun P. Mara: As a result, we are working on a multi-faceted acceleration plan that includes growth levers such as flavours, fat types and channel expansion.

Shaun P. Mara: In Q3, bar segment growth within the nutritional snacking category slowed to about 1%.

Shaun P. Mara: This was primarily due to better-for-you, or bars that had significantly less protein, if any, that declined low single digits on a percentage basis versus last year.

Shaun P. Mara: Sports performance bars, which primarily have higher levels of protein, increase mid-single digits, driven by increased distribution of some new entrants into the measured channel universe.

Geoff E. Tanner: Quest bar growth is in line with the total bar segment, but it's not what we expect from the leading protein bar brand in the market. In response, we have accelerated our innovation, and we're very excited about these innovative products that are tracking to launch in the second half of fiscal 2025 and beyond. Over the remainder of the year, we expect low double-digit POS growth and continued household penetration and buy-rate grains, driven by innovation, distribution, and the new marketing campaign. Quest has been one of the most innovative brands in the category, supported by a world-class R&D team.

Shaun P. Mara: Quest bar growth is in line with the total bar segment, but it's not what we expect from the leading protein bar brand in the market.

Shaun P. Mara: In response, we have accelerated our bio-innovation and we're very excited about these innovative products that are tracking to launch in the second half of fiscal 2025 and beyond.

Shaun P. Mara: Over the remainder of the year, we expect low double-digit POS growth and continued household penetration and buy-rate grains driven by innovation, distribution, and the new marketing campaign.

Shaun P. Mara: Quest has been one of the most innovative brands in the category, supported by a world-class R&D team.

Geoff E. Tanner: The multi-year pipeline is strong, and we expect innovation to be a lever of growth for a long time. March new product launches such as strawberry frosted cookies and iced coffee are progressing nicely and are in line with our estimates. As we mentioned last quarter, I'm very excited for the upcoming Bake Shop platform, starting with high-protein muffins and brownies that launch in Fall 2024. Based on conversations with retail customers, we expect very strong support for the Bakeshop launch, which will also be underpinned by a comprehensive marketing plan as part of the It's Basically Cheating advertising campaign.

Shaun P. Mara: The multi-year pipeline is strong and we expect innovation to be a lever of growth for a long time.

Shaun P. Mara: March new product launches such as strawberry frosted cookies and iced coffee are progressing nicely and are in line with our estimates.

Shaun P. Mara: As we mentioned last quarter, I'm very excited for the upcoming Bakeshop platform, starting with high-protein muffins and brownies that launch in Fall 2024.

Shaun P. Mara: Based on conversations with retail customers, we expect very strong support for the Bakeshop launch that will also be underpinned by a comprehensive marketing plan as part of the It's Basically Cheating advertising campaign.

Geoff E. Tanner: Turning to Atkins, Q3 Retail Takeaway in the IRI MULO plus C-Store universe and the combined measured and unmeasured channels were off 9% and 5%, respectively. However, strong e-commerce growth continued, driven by Amazon, whose POS growth was 16%.

Shaun P. Mara: Turning to Atkins, Q3 Retail Takeaway in the IRI MULO plus C-Store universe and the combined measured and unmeasured channels were off 9% and 5% respectively.

Shaun P. Mara: Strong e-commerce growth continued, driven by Amazon, whose POS growth was 16%.

Geoff E. Tanner: In Q3, the competitive in-store merchandising and programming comp was more normalized versus Q2. And, as you'll note in the chart on the slide, Atkins POS trends sequentially improved during the quarter. The Atkins Revitalization Plan is progressing as scheduled.

Shaun P. Mara: In Q3, the Competitive In-Store Merchandising and Programming Comp was more normalized versus Q2. And, as you'll note in the chart on the slide, Atkins POS trends sequentially improved during the quarter.

Shaun P. Mara: The Atkins Revitalization Plan is progressing as scheduled.

Geoff E. Tanner: Some elements of the plan are in the market now, and we expect all elements to be in the market in the second half of fiscal year 2025. While early, the innovation we accelerated to market is performing well and is in line with our estimates. We're also pleased with the amount and quality of innovation we're bringing to market in the coming months, some of which you'll see in the middle of the slide.

Shaun P. Mara: Some elements of the plan are in the market now.

Shaun P. Mara: and we expect all elements to be in the market in the second half of fiscal year 2025.

Shaun P. Mara: While early, the innovation we accelerated to market is performing well and is in line with our estimates.

Shaun P. Mara: We're also pleased with the amount and quality of innovation we're bringing to market in the coming months, some of which you'll see in the middle of the slide.

Geoff E. Tanner: While full shelf set discussions continue, our fiscal 2025 innovation pipeline has helped us greatly during our discussions with retailers. Most retailers will be replacing non-performing items with these new products. As a result, we believe we'll maintain distribution at most brick-and-mortar retailers, with the exception of the Club Channel.

Shaun P. Mara: While full shelf set discussions continue, our Fiscal 2025 Innovation Pipeline has helped us greatly during our discussions with retailers.

Shaun P. Mara: Most retailers will be replacing non-performing items with these new products. As a result, we believe we'll maintain distribution at most brick-and-mortar retailers, with the exception of the Club Channel.

Geoff E. Tanner: Now, it's not uncommon for club customers to wait and decide on innovation after they analyze performance in other retail channels. The second major revitalization pillar is new advertising. Over the past year, the relevance and cultural conversation around weight have changed and significantly increased in volume, much of it driven by the new weight loss drug.

Shaun P. Mara: Now, it's not uncommon for club customers to wait and decide on innovation after they analyze performance in other retail channels.

Shaun P. Mara: The second major revitalization pillar is new advertising. Over the past year, the relevance and cultural conversation around weight has changed and significantly increased in volume, much of it driven by the new weight loss drugs.

Geoff E. Tanner: In response to this shift, earlier this month, we shot new advertising that will be on air in late summer. The revised advertising refocuses on weight management, more strongly communicates the benefit of the brand's unique macronutrient profile, and emphasizes Atkins as a sustainable and diet-free way to lose weight. We believe this messaging links better to the evolving consumer views and conversation on weight wellness. While still early, overall, we feel like we're tracking towards stabilizing the business, and we're somewhat encouraged by the consumption trends that have slightly improved each month this past quarter.

Shaun P. Mara: In response to this shift, earlier this month, we shot new advertising that will be on air in late summer.

Shaun P. Mara: The revised advertising refocuses on weight management, more strongly communicates the benefit of the brand's unique macronutrient profile, and emphasizes Atkins as a sustainable and diet-free way to weight management.

Shaun P. Mara: We believe this messaging links better to the evolving consumer views and conversation on weight wellness.

Shaun P. Mara: While still early, overall we feel like we're tracking towards stabilising the business and we're somewhat encouraged by the consumption trends that have slightly improved each month this past quarter.

Geoff E. Tanner: Given the strong execution of the revitalization plan, and as we looked at fiscal 2025, we're now in a position to move to the next phase of the Atkins journey. Specifically, we'll focus on Atkins ROI and optimize our investment levels in the brand as part of ensuring Atkins is a long-term sustainable and profitable business. Historically, we've always done this evaluation.

Shaun P. Mara: Given the strong execution of the revitalization plan, and as we look to fiscal 2025, we're now in a position to move to the next phase of the Atkins journey.

Shaun P. Mara: Specifically, we'll focus on Atkins ROI and optimizing our investment levels on the brand as part of ensuring Atkins is a long-term sustainable and profitable business.

Geoff E. Tanner: However, the COVID slowdown and the innovation outage that followed resulted in some low ROI investments to support short-term performance and preserve shelf space. As we look to fiscal 2025 and beyond, we'll work to eliminate trade and marketing investments that don't meet specific ROI hurdles. This will have a short-term impact on sales growth, but it's necessary to build Axons back to a sustainable brand for the long term. To conclude, I'm very pleased with how the team is executing.

Shaun P. Mara: I started, so we've always done this evaluation.

Shaun P. Mara: However, the COVID slowdown and the innovation outage that followed resulted in some low ROI investments to support short-term performance and preserve shelf space.

Shaun P. Mara: As we look to fiscal 2025 and beyond, we'll work to eliminate trade and marketing investments that don't meet specific ROI hurdles.

Shaun P. Mara: This will have a short-term impact on sales growth, but it's necessary to build Axons back to a sustainable brand for the long term.

Geoff E. Tanner: We're confident we have the right plans in place to bring Atkins back to growth. However, as we have previously stated, it will take some time to get there. Turning to Owen, the acquisition closed on June 13.

Shaun P. Mara: To conclude, I'm very pleased with how the team is executing. We're confident we have the right plans in place to bring Atkins back to growth.

Shaun P. Mara: However, as we have previously stated, it will take some time to get there.

Geoff E. Tanner: This is a strategically and financially compelling acquisition of a fast-growing, on-trend protein shake in our aisle. Owen increases our exposure in the shake segment by about 400 basis points to 23% of our total sales. Importantly, Owens growth is outpacing the category, and we expect the brand to benefit from continued distribution and velocity gains given our go-to-market scale, capabilities, and category advisor relationships with almost all top retailers. Owens reaches a new consumer segment for Simply Good, namely consumers thinking about plant-based, allergy-free, simple ingredient options.

Owen: Turning to Owen, the acquisition closed on June 13th.

Owen: This is a strategically and financially compelling acquisition of a fast-growing on-trend protein shake in our aisle.

Owen: Owen increases our exposure in the shake segment by about 400 basis points to 23% of our total sales.

Owen: Importantly, Owens Growth is outpacing the category, and we expect the brand to benefit from continued distribution and velocity gains given our go-to-market scale, capabilities, and category advisor relationships with almost all top retailers.

Owen: Owen reaches a new consumer segment for Simply Good, namely consumers thinking plant-based, allergy-free, simple ingredient options.

Geoff E. Tanner: However, as we have discussed, what's equally exciting is that Owen is increasingly crossing over to appeal to mainstream consumers. In a sense, Owen further strengthens our leadership position with retailers as we jointly work with them to accelerate category growth. We remain confident in our ability to effectively integrate Owen into our business and deliver on the acquisition model commitments. To align with our fiscal year-end 2025, we will achieve the majority of the synergies on the onset or first day of fiscal 2026.

Owen: However, as we have discussed, what's equally exciting is that Owen is increasingly crossing over to appeal to mainstream consumers.

Owen: In this sense, Owens further strengthens our leadership position with retailers as we jointly work with them to accelerate category growth.

Owen: We remain confident in our ability to effectively integrate Owen into our business and deliver on the acquisition model commitments. To align with our fiscal year-end 2025, we will achieve the majority of the synergies on the onset or first day of fiscal 2026.

Geoff E. Tanner: To summarise, Simply Good Foods is uniquely positioned as the $1.4 billion net sales leader in the nutritional snacking category, with a diversified portfolio across brands and product forms. The relevance of the category and demand for our products only continues to increase as more and more consumers turn away from high-carb, high-sugar foods, seeking high-protein, low-sugar, low-carb options. We believe our category and our brands represent the future of food and beverage, and we have three uniquely positioned brands that are aligned around these consumer megatrends.

Owen: To summarize, Simply Good Foods is uniquely positioned as the $1.4 billion net sales leader in the nutritional snacking category, with a diversified portfolio across brands and product forms.

Owen: The relevance of the category and demand for our products only continues to increase as more and more consumers turn away from high-carb, high-sugar foods seeking high-protein, low-sugar, low-carb options.

Owen: We believe our category and our brands represent the future of food and beverage and we have three uniquely positioned brands that are aligned around these consumer megatrends.

Geoff E. Tanner: Consumers trust our brands to help them achieve their wellness goals. As such, we're focused on our innovation and marketing plans to provide consumers with products to help them on their journey. I'm thankful every day for our talented employees.

Owen: Consumers trust our brands to help them achieve their wellness goals.

Owen: As such, we're focused on our innovation and marketing plans to provide consumers with products to help them in their journey.

Geoff E. Tanner: Our team is excited and passionate about our brands and helping consumers achieve their goals. We will continue to execute our strategic priorities that should enable us to deliver on our long-term growth objectives that ultimately drive increased shareholder value. Now I'll turn the call over to Shaun, who'll provide you with some greater financial details. Thank you, Geoff. Good morning, everyone.

Owen: I'm thankful every day for our talented employees. Our team is excited and passionate about our brands and helping consumers achieve their goals.

Owen: We will continue to execute our strategic priorities that should enable us to deliver on our long-term growth objectives that ultimately drive increased shareholder value.

Speaker Change: Now, I'll turn the call over to Shaun, who'll provide you with some greater financial details.

Shaun P. Mara: Total Simply Good Food's third quarter net sales of $334.8 million increased $10 million or 3.1% versus the year-ago period and was driven by Quest volume growth. North American net sales increased 3.2%, and international net sales declined 2.4% versus the year-ago period. As Geoff stated earlier, retail takeaway of 5% in combined measured and unmeasured channels was greater than net sales growth, and this was largely due to incremental trade investments supporting Atkins. Moving on to other P&L items for the quarter, gross profit was $133.6 million, an increase of $14.4 million from the year-ago period, resulting in a gross margin of 39.9%.

Shaun P. Mara: Thank you, Geoff. Good morning, everyone.

Shaun: Total Simply Good Food's third quarter net sales of $334.8 million increased $10 million or 3.1% versus the year ago period and was driven by Quest volume growth.

Shaun P. Mara: North American net sales increased 3.2% and international net sales declined 2.4% versus the year ago period.

Shaun P. Mara: As Geoff stated earlier, retail take away of 5% in combined measured and unmeasured channels was greater than the net sales growth. This was largely due to incremental trade investments supporting Atkins.

Shaun P. Mara: Moving on to other P&L items for the quarter, gross profit was $133.6 million, an increase of $14.4 million from the year ago period, resulting in gross margin of 39.9%.

Shaun P. Mara: 320 basis points versus the year-ago period was primarily due to lower ingredient and packaging costs as well as reduced freight costs. Including Owen, we expect total company Q4 gross margin to be around 38%, excluding the typical non-cash inventory step-up related to the acquisition. Adjusted EBITDA was $71.9 million, an increase of $5.2 million from the year-ago period. Selling and marketing expenses were $36.5 million versus $30.2 million, largely due to higher marketing investments and growth initiatives.

Shaun P. Mara: The 320 basis point increase versus the year ago period was primarily due to lower ingredient and packaging costs as well as reduced freight costs.

Shaun P. Mara: Including Owen, we expect total company Q4 gross margin to be around 38%, excluding the typical non-cash inventory step-up related to the acquisition.

Shaun P. Mara: Adjusted EBITDA was $71.9 million, an increase of $5.2 million from the year-ago period.

Shaun P. Mara: Selling and marketing expenses were $36.5 million versus $30.2 million, largely due to higher marketing investments and growth initiatives. Gap G&A expenses were $31.5 million, an increase of $1 million versus the year ago period.

Shaun P. Mara: Gap G&A expenses were $31.5 million, an increase of $1 million versus the year-ago period. The increase was primarily due to higher employer-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, Q3 G&A increased $3 million to $26.5 million, driven by higher employer-related costs. Finally, net interest income and interest expense was $4.1 million, a decline of $3.1 million versus Q3 last year; the decline was due to lower debt balances versus the year-ago period.

Shaun P. Mara: The increase was primarily due to higher employer-related costs, stock-based compensation, and corporate expenses.

Shaun P. Mara: Excluding stock-based compensation, as well as fees associated with last year's term loan amendment and executive transition costs, Q3 G&A increased $3 million to $26.5 million, driven by higher employer-related costs.

Shaun P. Mara: Finally, net interest income and interest expense was $4.1 million, a decline of $3.1 million versus Q3 last year. The decline was due to lower debt balances versus the year-ago period.

Shaun P. Mara: Our Q3 effective tax rate was 24.5%, about the same as the year-ago period. We continue to anticipate our full year fiscal 2024 effective tax rate to be around 25%. As a result, net income was $41.3 million versus $35.4 million last year.

Shaun P. Mara: Our Q3 effective tax rate was 24.5%, about the same as the year-ago period. We continue to anticipate our full-year fiscal 2024 effective tax rate to be around 25%.

Shaun P. Mara: As a result, net income was $41.3 million versus $35.4 million last year.

Shaun P. Mara: Moving on to year-to-date results, net sales of $955.6 million increased nearly 4% compared to last year. Gross profit was $365.6 million, resulting in a gross margin of 38.3%, a 220 basis point increase compared to the year-ago period. We're pleased with our gross margin progress in fiscal 2024. However, we anticipate that input cost inflation will be a headwind and most likely will result in gross margin compression in fiscal 2025, particularly in the second half. Adjusted EBITDA was $191.7 million, an increase of 7.5% from the year-ago period. Net interest income and interest expense were $13.8 million at the client, $8.7 million versus last year. The year-to-date tax rate was 24.2%.

Shaun P. Mara: Moving on to year-to-date results. Net sales of $955.6 million increased nearly 4% compared to last year. Gross profit was $365.6 million, resulting in gross margin of 38.3%.

Shaun P. Mara: A 220 basis point increase versus the year ago period.

Shaun P. Mara: We're pleased with our gross margin progress in fiscal 2024. However, we anticipate that input cost inflation will be a headwind and most likely will result in gross margin compression in fiscal 2025, particularly in the second half.

Shaun P. Mara: Adjusted EBITDA was $191.7 million, an increase of 7.5% from the year-ago period.

Shaun P. Mara: Net Interest Income and Interest Expense was $13.8 million, a decline of $8.7 million versus last year.

Shaun P. Mara: As a result, net income was $110 million versus $96.9 million last year. The next slide provides you with a reconciliation of reported and adjusted diluted EPS. Third quarter reported EPS was $0.41 per share diluted compared to $0.35 per share diluted for the comparable period in 2023. Adjusted diluted EPS was $0.50 compared to $0.44 in the year-ago period.

Shaun P. Mara: The year-to-date tax rate was 24.2%. As a result, net income was $110 million versus $96.9 million last year.

Shaun P. Mara: The next slide provides you with a reconciliation of reported and adjusted diluted EPS. Third quarter reported EPS was $0.41 per share diluted compared to $0.35 per share diluted for the comparable period in 2023.

Shaun P. Mara: Adjusted diluted EPS was $0.50 compared to $0.44 in the a year ago period.

Shaun P. Mara: Note that we calculated Adjusted Diluted EPS as Adjusted EBITDA, less Interest Income, Interest Expense, and Income Tax. Please refer to today's press release for explanation and reconciliation of non-GAAP financial measures. Moving to the balance sheet and cash flow, as of May 25, 2024, the company had cash of $208.7 million. Year-to-date cash flow from operations was $167 million, an increase of about 50%, or $56 million, principally due to adjusted EBITDA growth and improvements in working capital. Term loan debt at the end of the third quarter was $240 million.

Shaun P. Mara: Note that we calculated Adjusted Diluted EPS as Adjusted EBITDA, Less Interest Income, Interest Expense, and Income Taxes.

Shaun P. Mara: Please refer to today's press release for an explanation and reconciliation of non-GAAP financial measures.

Shaun P. Mara: Moving to the balance sheet and cash flow. As of May 25, 2024, the company had cash of $208.7 million.

Shaun P. Mara: Year-to-date cash flow from operations was $167 million, an increase of about 50% or $56 million, principally due to adjusted EBITDA growth and improvements in working capital.

Shaun P. Mara: Subsequent to the Q3 quarter end on June 13th, we completed the Owen acquisition. The cash purchase price of $280 million was funded through a combination of cash on our balance sheet and incremental borrowings under our outstanding credit facility of $250 million. The company expects to pay down a portion of the $490 million in total term loan debt during the balance of fiscal 2024 and is targeting a net debt to adjusted EBITDA ratio of around 1.25 times by fiscal year-end August 2024. Capital expenditures in Q3 and year-to-date were $0.7 million and $1.8 million, respectively.

Shaun P. Mara: Term loan debt at the end of the third quarter was $240 million. Subsequent to the Q3 quarter end on June 13th, we completed the Owen acquisition.

Shaun P. Mara: The cash purchase price of $280 million was funded through a combination of cash on our balance sheet and incremental borrowings under our outstanding credit facility of $250 million.

Shaun P. Mara: The company expects to pay down a portion of the $490 million in total term loan debt during the balance of fiscal 2024 and is targeting a net debt to adjusted EBITDA ratio of around 1.25 times by fiscal year-end August 2024

Shaun P. Mara: Capital expenditures in Q3 and year-to-date were $0.7 million and $1.8 million, respectively. In fiscal 2024, we continue to expect CapEx to be in the $8 to $10 million range.

Shaun P. Mara: In fiscal 2024, we continue to expect CapEx to be in the $8 to $10 million range. Additionally, in fiscal 2024, we anticipate net interest expense to be around $22 to $24 million, including non-cash amortization related to the deferred financing. Now to wrap up, as Geoff stated earlier, we're on track and feel good about the remainder of the year. We reaffirm our full year fiscal 2024 net sales outlook for the legacy business. Specifically, we expect net sales to increase around the midpoint of the company's long-term algorithm of 4 to 6%, including the benefit of the 53rd week. Owen's 11-week contribution to Q4 net sales is expected to be in the $25-$30 million range.

Shaun P. Mara: In fiscal 2024, we anticipate net interest expense to be around $22 to $24 million including non-cash amortization related to the deferred financing fees.

Shaun P. Mara: Now to wrap up, as Geoff stated earlier, we're on track and feel good about the remainder of the year.

Shaun P. Mara: We reaffirm our full-year fiscal 2024 net sales outlook for the legacy business. Specifically, we expect net sales to increase around the midpoint of the company's long-term algorithm of 4 to 6 percent, including the benefit of the 53rd week.

Shaun P. Mara: Owen's 11-week contribution to Q4 net sales is expected to be in the $25-$30 million range.

Shaun P. Mara: We continue to expect that ingredient packaging costs will be lower in Q4 versus last year. As I stated earlier, including Owen, we expect total company Q4 gross margin to be around 38%, excluding the non-cash inventory step-up related to the acquisition. In Q4, our one adjusted EBITDA contribution is negligible.

Shaun P. Mara: We continue to expect that ingredient packaging costs will be lower in Q4 versus last year. As I stated earlier, including Owen, we expect total company Q4 gross margin to be around 38%, excluding the non-cash inventory step-up related to the acquisition.

Shaun P. Mara: Given our solid year-to-date performance, we have narrowed our total Simply Good Food's adjusted EBITDA outlook. Specifically, we now expect adjusted EBITDA to increase about 8% compared to last year and versus our previous estimate of 6 to 8%. We appreciate everybody's interest in our company, and we're now available to take your questions. Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Shaun P. Mara: In Q4, R1 adjusted EBITDA contribution is negligible.

Shaun P. Mara: Given our solid year-to-date performance, we have narrowed our total Simply Good Food's adjusted EBITDA outlook. Specifically, we now expect adjusted EBITDA to increase about 8% compared to last year and versus our previous estimate of 6 to 8%.

Shaun P. Mara: We appreciate everybody's interest in our company, and we're now available to take your questions.

Speaker Change: Rock and roll, boys.

Speaker Change: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing this star key. Our first question comes from the line of Matt Smith with Steeple. Please proceed with your question. Hi, good morning.

Speaker Change: You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Our first question comes from the line of Matt Smith with Stiefel. Please proceed with your question.

Matthew Edward Smith: The category growth profile remains a standout for food at home, and you've talked about a successful shelf reset for Atkins. So, a couple questions here.

Matthew Edward Smith: Hi, good morning. The category growth profile remains a standout.

Matthew Edward Smith: for Food at Home. And you've talked about a successful shelf reset for Atkins. So a couple questions here. Can you provide more detail on why you're lowering investment spend behind the brand despite the strong category and scale Atkins has? And how are you thinking about the growth potential of Atkins next year given the lower investment spend?

Geoff E. Tanner: Can you provide more detail on why you're lowering investment spend behind the brand despite the strong category and scale Atkins has? And how are you thinking about the growth potential of Atkins next year given the lower investment spend? Morning. Yeah, no. You're right.

Speaker Change: Yeah, morning. Yeah, no, you're right. The nutritional snacking category continues to be a standout, especially versus the rest of the store. Most recent trends, plus six, plus seven, and almost all of that volume, obviously.

Geoff E. Tanner: The nutritional snacking category continues to be a standout, especially with the rest of the store. Most recent trends, plus six, plus seven, and almost all of that volume, obviously. Fueled by more and more consumers seeking the macro profiles that our products offer, high protein, low sugar, low carb, and obviously seeing an increase in demand for beverage and hydration. And we continue to believe the category has a long runway for growth. And as leaders, category captains at most retailers, you know, we believe we're uniquely positioned to continue to lead that growth. To your question on investment, and particularly Atkins.

Speaker Change: Fueled by more and more consumers seeking the macro profiles that our products offer, high protein, low sugar, low carb, and obviously seeing an increase in demand for beverage and hydration.

Speaker Change: And we continue to believe the category has a long runway for growth, and as leaders, category captains at most retailers, we believe we're uniquely positioned to continue to lead that growth.

Speaker Change: to your question on investment.

Geoff E. Tanner: We look across the portfolio, Matt, Quest is a scaled growth driver, and we now have Owen in the mix. So a component of the decision on Atkins is taking a step back and evaluating the investment through a portfolio lens.

Speaker Change: and particularly on Atkins.

Speaker Change: You know, we look at across the portfolio.

Matthew Edward Smith: Matt, you know, Quest is a scaled growth driver. We now have Owen in the mix, so a component of the decision on Atkins is taking a step back and evaluating investment through a portfolio lens.

Geoff E. Tanner: As we dive deeper into Atkins, it's clear that to some extent we've over-invested in marketing and trade as a percentage of sale, and we've looked with more of an ROI lens and identified some low-performing ROI trade events, and low-performing marketing events. And as we work to build Atkins to be a long-term sustainable business, we believe that we have an opportunity to take a harder look at some of these investments and Now, with that being said, we still believe in Atkins and are still very confident in the future growth of that business, especially given the increased focus on weight management.

Matthew Edward Smith: As we've dived deeper into Atkins, it's clear that to some extent we've overinvested in marketing and trade as a percentage of sales.

Matthew Edward Smith: and we've looked with more of an ROI lens.

Matthew Edward Smith: and identified some low-performing ROI trade events, low-performing marketing events. And as we work to build Atkins to be a long-term sustainable business, we believe that...

Matthew Edward Smith: We have an opportunity to take a harder look at some of these investments, and again as we think about investing across the portfolio, what is the best use of our investment as we think about now across three brands?

Matthew Edward Smith: Now with that being said, we still believe in Atkins.

Matthew Edward Smith: I'm still very confident in the future growth of that business, especially given the increased focus on weight management.

Geoff E. Tanner: We're fully committed to the revitalization plan. As we've noted before, it will take some time, but as we said in the scripted remarks, we do expect a one-time impact from just taking a harder look at some of those lower ROI events and investments in marketing. Thanks, Geoff.

Matthew Edward Smith: We're fully committed to the revitalization plan. As we've noted before, it will take some time.

Matthew Edward Smith: But, as we said in the scripted remarks, we do expect a one-time impact from just taking a harder look at some of those lower ROI events and investments in marketing and trade.

Shaun P. Mara: And Shaun, you called out some gross margin pressure in fiscal 25 due to inflation. Is that for the legacy business? Are you including the headwind from the mix of the Owen acquisition?

Speaker Change: Thanks Geoff and Shaun you called out some gross margin pressure in fiscal 25 due to inflation. Is that for the legacy business? Are you including the headwind from the mix of Owen acquisition? And how are you thinking about the pricing dynamic in the category? We've seen some large brands announce incremental pricing. Do you expect overall category growth to benefit from pricing or do you expect that to be more targeted kind of brand by brand?

Matthew Edward Smith: And how are you thinking about the pricing dynamic in the category? We've seen some large brands announce incremental pricing. Do you expect overall category growth to benefit from pricing? Or do you expect that to be more targeted, kind of brand by brand? A lot of questions there, Matt. I mean, they break them down a little bit.

Shaun P. Mara: So as it relates to inflation next year, there's going to be a little bit of an impact on Owen because obviously, with the RTD business, it's going to be a lower margin business than the rest of the portfolio. And we're certainly not at a fully synergized level at this point in time. However, the bigger impact really is going to be the inflation we see on ingredients. And let me just, bear with me here, I'm going to take a step back a little bit, because it's principally COCO and what we call CLI, or Codings, Layers, and Inclusions.

Speaker Change: A lot of questions there, Matt. I mean, they break them down a little bit. So as it relates to inflation next year, there's going to be a little bit of impact on Owen, obviously, with the RTD business. It's going to be a lower margin business than the rest of the portfolio, and we're certainly not at a fully synergized level at this point in time. However, the bigger impact really is going to be the inflation we see on ingredients.

Shaun P. Mara: So if you go back in time to the end of February, when we did our Q2 results, we basically, at that point in time, COCO was spot priced at about $6,000 a metric ton. The first couple of weeks in March, we closed the books, and updated our fiscal 24 outlook. COCO traded sideways, but we weren't too concerned because we were kind of covered through fiscal 24. Over the next two weeks, I mean, when we got to the conference call on April 4, the spot prices were now at $9,500 a metric ton, about a 60% increase in a month.

Speaker Change: Bear with me here. I'm going to take a step back a little bit because it's principally COCO and what we call CLI or Codings, Layers, and Inclusions. So, if you go back in time to the end of February, when we did our Q2 results, we basically...

Speaker Change: At that point in time, cocoa was priced at about $6,000 a metric ton.

Speaker Change: First couple of weeks in March, we closed the books, updated our fiscal 24 outlook.

Speaker Change: Cocoa traded sideways, but we weren't too concerned because we were kind of covered through fiscal 24. Over the next two weeks, I mean, when we got to the conference call on April 4th, the spot prices were now at $9,500 a metric ton, about a 60% increase in a month.

Shaun P. Mara: So at that point in time, it's on our radar for 25, but we're trying to determine whether the 60% price increase in one month is the new norm and what that means for 25. So we're kind of remembering, if you take a step back, we don't procure cocoa directly. We basically have that like we do with whey or casein. We work with our suppliers to procure that cocoa and turn it into what we call coatings, layers, and inclusions, which we use in our products.

Speaker Change: So, at that point in time, it's on our radar for 25.

Speaker Change: But we're trying to determine if the 60% price increase in one month is the new norm and what that means for 2025. So we're kind of remembering, if you take a step back, we don't procure cocoa directly. We basically have that, like we do with like a whey or a casein. We work with our suppliers to procure that cocoa and turn it into what we call coatings, layers, and inclusions, which we use in our products.

Shaun P. Mara: It's not a major ingredient in and of itself, but coatings, layers, and inclusions are about $125 million. So, you know, I think everybody's seen the news on cocoa and where it is right now. Spot prices have lingered particularly higher over the last four-plus months.

Speaker Change: It's not a major ingredient in and of itself, but coatings, layers, and inclusions are about $125 million.

Speaker Change: You know, I think everybody's seen the news on cocoa and where it is right now, spot prices have lingered particularly higher over the last four plus months.

Shaun P. Mara: Commentary from our ingredient suppliers kind of changed, and they're indicating that the pricing outlook for the second half of our fiscal 25, so beginning calendar year 25, is going to be significantly higher. We're typically covered about five to six months, so we have good visibility into the end of our calendar year. We're through the first half of the 2025 fiscal year. That said, I think inflation is going to be an issue in the second half of the year.

Speaker Change: Commentary from our ingredient suppliers has kind of changed, that they're indicating that the pricing outlook for the second half of our fiscal 25, so beginning calendar year 25, is going to be significantly higher.

Speaker Change: We're typically covered about five to six months. So we have good visibility into the end of our calendar year We're through the first half of 25 fiscal year

Speaker Change: That said, I think inflation is going to be an issue potentially in the second half of the year. So, the real impetus behind the push on what we think inflation is next year is really around the cocoa market.

Shaun P. Mara: So the real impetus behind the push on what we think inflation will be next year is really around the cocoa market. And we're going to look at all the levers we've got to pull. We typically try to get productivity as an offset for that. We will continue to work on that, and we are working on it. But we will look at pricing and look at pricing as a lever to pull. We've done that, obviously, in the past, and we'll continue to do that. So I don't know if I got all your questions, Matt, but hopefully, it gives you a flavor. You've got it. Thanks, Shaun. I'll pass it on.

Speaker Change: And we're going to look at all the levers we've got to pull. We typically try to get productivity as an offset for that. We will continue to work on that, and we are working on that. But we will look at pricing and look at pricing as a lever to pull. We've done that, obviously, in the past, and we'll continue to look at that.

Speaker Change: I don't know if I got all your questions, Matt, but hopefully it gives you a flavor.

Matthew Edward Smith: You got it. Thanks, Shaun. I'll pass it on.

Alexia Jane Burland Howard: Thank you. Our next question comes from the line of Alexia Howard with Alliance Bernstein. Please proceed with your question. Good morning, everyone. Good morning, Alexia.

Speaker Change: Thank you. Our next question comes from the line of Alexia Howard with Alliance Bernstein. Please proceed with your question.

Alexia Jane Burland Howard: Hi there, just a couple of quick ones. Actually, sticking with the puts and takes for Fiscal 25 for you. You've talked about inflation. Are there other things on the radar?

Speaker Change: Good morning everyone.

Alexia Jane Burland Howard: Hi there, just a couple of quick ones. Actually, sticking with the...

Alexia Jane Burland Howard: put some takes for Fiscal 25 for you. You've talked about the inflation. Are there other things on the radar? I know you're not going to give us guidance for this year, obviously, but just the list of the high-level levers for next year that we should be thinking about as we pull together our models.

Alexia Jane Burland Howard: I know you're not going to give us guidance for this year, obviously, but just a list of the high-level sort of levers for next year that we should be thinking about as we pull together our models. Maybe I'll start and I'll turn it over to Shaun. You know, I'd say, reiterating Matt's question, we continue to be very bullish on the category, up 6-7% and sustaining that level, which is impressive, which had almost an immediate impact on sales, so we'll continue to fuel that. We've got some exciting innovation coming to Quest. So I would say on Quest that we should continue to be very bullish about the growth we can deliver there. I've talked about Atkins before.

Speaker Change: Maybe I'll start and I'll turn it over to Shaun.

Shaun P. Mara: You know, I'd say, reiterating Matt's question, we continue to be very bullish on the category, up six or seven percent, and sustaining that level, which is impressive.

Shaun P. Mara: Quest continues to outperform double-digit consumption right now, and it's certainly seen by consumers and retailers as a disruptor in the category.

Shaun P. Mara: We will continue to fuel that business, Alexia, with advertising, which we debuted in March, which had almost an immediate impact on sales.

Shaun P. Mara: So we'll continue to fuel that. We've got some exciting innovation coming on Quest.

Shaun P. Mara: Particularly the Bakeshop platform launch, which is high-protein muffins and brownies, and we still see distribution opportunities. And I should probably circle chips, in particular, as a...

Shaun P. Mara: It's a phenomenon really, given the growth we're seeing there, nearly, run rating 300 million right now.

Shaun P. Mara: and we see nothing but upside given that.

Shaun P. Mara: Total addressable market there. So I would say on Quest Continue to be very bullish about the growth we can deliver there

Geoff E. Tanner: We remain confident in the long-term trajectory of that business, particularly given the increased conversation and cultural relevance around weight loss drugs. We'll continue to fuel the revitalization plan and all the elements within. As I mentioned in Matt's question, we're just taking a harder look at some of those lower ROI investments in trade and marketing, and then, of course, we closed on Owen a couple of weeks ago, and that shows tremendous momentum.

Shaun P. Mara: I've talked about Atkins. We remain confident in the long-term trajectory of that business, particularly given the increased conversation and cultural relevance around weight.

Shaun P. Mara: Driven by the Weight Loss Drugs

Shaun P. Mara: We'll continue to fuel the revitalization plan and all the elements within, as I mentioned to Matt's question, we're just taking a harder look at some of those lower ROI investments in trade and marketing. And then, of course, we closed on Owen.

Geoff E. Tanner: So there's a lot to be very positive about, and then, as Shaun talked about previously, we have to probably deal with inflation, COCO-driven inflation, in the back half, in particular, of our fiscal next year. So there's some puts and takes, but there's a lot to feel very positive about. We do expect a short-term impact on Atkins as we remove that lower ROI investment, and of course, as Shaun said, we'll pull the levers we need to to manage inflation. But Shaun, what would you add to that?

Speaker Change: a couple of weeks ago, and that shows, you know, tremendous momentum. So, you know, there's a lot to be very, very positive about. And then, as Shaun talked about previously, we just, we have to probably deal with inflation.

Speaker Change: Cocoa-Driven Inflation

Speaker Change: In the back half, in particular, of our fiscal next year, so there's some puts and takes. A lot to be, to feel very positive about, but we do expect a short-term impact to Atkins as we remove that lower ROI investment.

Shaun P. Mara: And, of course, as Shaun said, we'll pull the levers we need to to manage inflation. But, Shaun, what would you add to that? Yeah, I mean, I think a step back in terms of your modeling, I think, you know, we've had a long-term algorithm that we think is right for the business, 4 to 6 percent top-line growth, bottom line, a little better than that from a leverage standpoint. It's very early in our 25 planning process, so we're certainly not at a point to provide guidance. But as we kind of look at where we are right now, I'd say, you know, the headwinds we talked about for Atkins will impact the top line. The inflation issues we talked about will impact the bottom line. So we're probably organically more at the bottom end of that range for both top and bottom than we are for the top end.

Shaun P. Mara: Yeah, I mean, I think you should step back, and in terms of your modeling, I think we've got a long-term algorithm that we think is right for the business, 4% to 6% top-line growth, and bottom line, a little better than that from a leverage standpoint. It's very early in our 25 planning process, so we're certainly not at a point to provide guidance, but as we kind of look at where we are right now, I'd say the headwinds we talked about for Atkins will impact the top line, and the inflation issues we talked about will impact the bottom line, so we're probably organically more at the bottom end of that range for both top and bottom than we are for the top end. That said, it's probably better than most of the food segment overall.

Speaker Change: As I said, it's probably better than most of the food segment overall. The other thing I would say is, as you think about OIN, which is not in the numbers I just gave you, top and bottom line growth for fiscal 25 versus 24 should be strong. Now, obviously, a part of that is it's a full year versus about 11 weeks, give or take, but that'll add about high single-digit top-line growth, and it'll add about mid-single-digit bottom-line growth to the 24 numbers. The only other point I'll make, Alexia, as you guys are working through your models, just keep in mind that...

Shaun P. Mara: The other thing I would say is, as you think about OIN, which is not in the numbers I just gave you, top and bottom line growth for fiscal 25 versus 24 should be strong. Now, obviously, a part of that is it's a full year versus about 11 weeks, give or take, but that'll add about high single-digit top-line growth and it'll add about mid-single-digit bottom-line growth to The only other point I'll make, Alexis, you guys are working through your models. Just keep in mind that... 24, fiscal 24 is a 53-week year. Fiscal 25 is a 52-week year.

Speaker Change: 24, fiscal 24 is a 53-week year.

Shaun P. Mara: So that extra week's about a point and a half overall. So the numbers I gave you are all 52 to 52, so you gotta take about a point and a half off of that because you're gonna have a lapping impact from the year before. So I don't know if I answered your question, but that's directionally how I'd say we are right now. Great, thank you very much. I'll pass it on to them.

Speaker Change: Fiscal 25 is a 52-week year, so that extra week's about a point and a half overall. So the numbers I gave you are all 52 to 52, so you've got to take about a point and a half off of that because you're going to have a lapping impact from the year before. So I don't know if that answers your question, but that's directionally how I'd say we are right now.

Speaker Change: Great, thank you very much. I'll pass it on.

John Joseph Baumgartner: Thank you. Our next question comes from the line of John Baumgartner with Mizuho Securities. Please proceed with your question. Good morning, thanks for the question. Geoff, maybe first off, I wanted to ask about Atkins and sort of the go-forward look for that business. You know, when you look at the distribution points in the Nielsen data, they continue to decline. For the last couple of quads in the data, the volume velocities stabilized and are getting back to growth for bars, which is a good first step. But the distribution and the volume velocities are still, you know, pretty firmly negative for a huge swath of the rest of the subcategories.

Speaker Change: Thank you. Our next question comes from the line of John Baumgartner with Mizuho Securities. Please proceed with your question.

John Joseph Baumgartner: Good morning, thanks for the question.

John Joseph Baumgartner: Jeff, maybe first off, I wanted to ask about Atkins and sort of the go-forward look for that business.

John Joseph Baumgartner: as well.

John Joseph Baumgartner: And I'm curious, as you go through this revitalization, I'm trying to better understand the extent to which some of these subcategories, you know, just need to be eliminated, or whether they were just originally overdistributed, and there's a role in the portfolio, but just a much smaller role going forward. How are you thinking about the breadth of subcategories going forward? And maybe how far along they are in terms of distribution adjustments? Yeah. So, you know, as you said, when I came to Simply, I took a look at the True Health of Atkins.

Speaker Change: I'm curious, as you go through this revitalization,

Speaker Change: I'm trying to better understand the extent to which some of these subcategories

Speaker Change: You know, just need to be eliminated or whether they were just originally over distributed and there's a role in the portfolio, but just a much smaller role going forward. How are you thinking about the breadth of subcategories going forward? And maybe how far along they are in terms of distribution adjustments?

Geoff E. Tanner: You know, it's a great brand; in a sense, it pioneered the category. However, as we've discussed on previous calls, the brand was perceived as a little dated, recent innovation had been poor, and we had an opportunity to sharpen some of our commercial execution price points. So we developed the revitalization plan. Now, one of the issues that we were addressing at Atkins was that we'd had a weak pipeline in the business for a couple of years. And as a result of that weak pipeline, we have lost some distribution, to your point. Atkins. This is a business where innovation matters. It's a key driver.

Speaker Change: Yeah

Speaker Change: So, you know, as you said, when I came to Simply, I took a look at the true health of Atkins. You know, it's a great brand in a sense it pioneered this.

Speaker Change: category. However, as we've discussed on previous calls, the brand was perceived as a little dated, recent innovation had been poor, and we had an opportunity to sharpen some of our commercial execution price points. So we developed the revitalization plan.

Speaker Change: Now, one of the issues that we were addressing on Atkins was that we'd had a weak pipeline on the business for a couple of years.

Speaker Change: And as a result of that week's pipeline...

Speaker Change: We had lost some distribution, to your point.

Speaker Change: Atkins, this is a business where innovation matters, it's a key driver. The buy rate on Atkins is high, almost double most other brands in the category.

Geoff E. Tanner: The buy rate on Atkins is high, almost double the buy rate on most other brands in the category. Those consumers are looking for variety, and when we don't bring it, we can impact both velocity and distribution.

Speaker Change: Those consumers are looking for variety and when we don't bring it

Geoff E. Tanner: So one of the first things I did when I came was we tried to really jumpstart innovation on our, and I'm very pleased with how the team responded. We are bringing 17 new items to market, which will ship in the fall, which will largely hold our distribution flat, still waiting for a couple of customers to come in to finalize those modular decisions, but will largely hold flat other than the club channel.

Speaker Change: We can impact both velocity and distribution. So one of the first things I did when I came is we tried to really jumpstart innovation on Atkins.

Speaker Change: And I'm very pleased with how the team responded. We are bringing 17 new items to market, which will ship in the fall.

Speaker Change: Which will largely

Speaker Change: Hold our distribution flat still waiting for a couple of customers to come in to finalize those modular decisions But largely hold flat

Geoff E. Tanner: We're in the club channel there; they tend to wait on new products to make a decision. So I'm very pleased with how the team responded. I'm pleased with the quality of innovation, and the number of new items. And that has helped us largely hold distribution flat outside of clubs.

Speaker Change: Other than the Club Channel.

Speaker Change: We're in the club channel there. They tend to wait on new products to make a decision. So I'm very pleased with how the team responded.

Speaker Change: I'm pleased with the quality of innovation, the number of new items, and that has helped us largely hold distribution flat outside of clubs.

Speaker Change: As we go into fiscal 2025, as you've said, if you just go one click lower, our ready-to-drink business is performing pretty well, strongest.

Speaker Change: The strongest part of our portfolio, where we really needed the focus was on the bars, to your point. So I'm excited to see how these new products perform, which will start shipping in the fall. And as I said, they were absolutely critical to us.

Shaun P. Mara: As we go into fiscal 2025, As you've said, if you just go one click lower, the strongest part of our portfolio, where we really needed the focus was on the bars, to your point. So I'm excited to see how these new products, which will start shipping in the fall. And as I said, they were absolutely critical to us to hold on to. I think the other thing, Jon, keep in mind is that we have the fall reset and the spring reset. I'd say 75-80% of our customer base is in the fall reset, so holding on distribution in the fall is a pretty big win for us, and I think it actually talks to the innovation that Geoff mentioned, because I think it's a big part of those guys Those 17 new items, Jon, they're all swaps, so we're not gaining shelf space.

Speaker Change: to hold on to distribution.

John Joseph Baumgartner: Yeah, I think, Jon, keep in mind is if you look at our business, we have the fall reset and the spring reset, I'd say 75, 80% of our customer base is in the fall reset. So holding on distribution in the fall is a pretty big, pretty big win for us. And I think it holds actually.

Speaker Change: Talks to the innovation that Jeff mentioned because I think it's a big part of Those guys recognizing that there's opportunity for the brand to continue to grow and the stuff that we have coming in Especially some of the RTC strong stuff will be will be positive overall for the portfolio I mean those 17 new items John they were they're all swaps right so we're not gaining shelf space

Speaker Change: As a result of that innovation, we were able to hold on to it.

John Joseph Baumgartner: As a result of that innovation, it enables us to hold on to it. Okay, and then quickly on Owen, I'm just curious if you can discuss, you know, kind of the latest thoughts regarding the immediate growth plans, how you're thinking about building distribution out of the gate, any specific channels that are a focus for you. And then, in terms of investment, how are you thinking about any, you know, immediate needs for brand building or, you know, any tweaks to the product itself, new flavors, formulations, you know, any sort of, you know, reinvestment here and in the near future? Thank you.

Speaker Change: Okay, and then quickly on Owen, I'm just curious if you can discuss, you know, kind of the latest thoughts regarding the, you know, sort of the immediate growth plans, how you're thinking about building distribution out of the gate, any specific channels that are a focus for you. And then in terms of investment,

Speaker Change: How are you thinking about any, you know, immediate needs for brand building or, you know, any tweaks to the product itself, new flavors, formulations, you know, any sort of, you know, reinvestment here and in the near future. Thank you.

Geoff E. Tanner: You know, it's a word we're really excited about a line which we closed a couple of weeks ago. It's, you know, strategically and financially very compelling, increases our exposure in the shake segment by about 400 basis points. 23% of our total sales; it reaches a new consumer segment. As we've said on previous calls, I think what excites me most about Owen is the brand is starting to cross over to appeal to mainstream consumers, which represents, obviously, a much larger TAM. And then the ability of our scaled go-to-market capabilities is only going to help drive distribution and velocity. Owen is performing very well.

Speaker Change: You know, what we're really excited about, a loan which we closed a couple of weeks ago. It's, you know, strategically and financially very compelling. Increases our exposure in the shake segment by about 400 basis points.

Speaker Change: to 23% of our total sales. It reaches a new consumer segment.

Speaker Change: As we've said on previous calls, I think what excites me most about Owen is the brand is starting to cross over.

Speaker Change: to appeal to mainstream consumers, which represents, obviously, a much larger PAM.

Speaker Change: And then the ability of our scaled go-to-market capabilities are only going to help drive distribution and velocity.

Geoff E. Tanner: They're on track for calendar 2024 of $120 million, and consumption is very strong. It's around 120% in measured channels, a little lower online, and we expect the business to certainly at least double in the next four years. Now, in terms of the levers, I like to think about the growth of Owen in three concentric circles. The first is growth of the core, and that's largely driving distribution of existing products. 20-gram to 32-gram shake.

Speaker Change: Owen is performing very well, they're on track for calendar 2024 of 120 million, and consumption is very strong, it's around 120% in measured channels.

Speaker Change: a little while we're online.

Speaker Change: And we expect the business to certainly at least double in the next four years. Now, in terms of the levers, I like to think about O&M, the growth of O&M, in three concentric circles. The first is growth of the core.

Speaker Change: largely driving distribution of existing products.

Geoff E. Tanner: There's a lot of distribution upside, and the team, the Owen team, continues to... expand doors and get new accounts as the business continues to perform. The second circle would be continuing to appeal to mainstream consumers, again a much larger TAM, and given the formula improvements they've recently put into market, we're certainly seeing increased crossover to mainstream consumers, which is driving velocity. And then I'd say the last set circle would be expanding into new forms or formats, such as bars, and potentially chips.

Speaker Change: The 20-gram, the 32-gram shake, there's a lot of distribution upside, and the Owen team continues to expand doors and get new accounts as the business continues to perform.

Speaker Change: The second circle would be continuing to appeal to mainstream consumers, again a much larger TAM, and given the formula improvements they've recently put into market, we're certainly seeing

Speaker Change: Increased crossover to mainstream consumers, which is driving velocity. And then I'd say the last circle would be expanding into new forms or formats such as bars, potentially chips.

Geoff E. Tanner: Now, as you think about investment, our thesis for the first year has been that Owen will largely run somewhat independently for that first year while we focus on integration. Where there are opportunities to partner together, we'll certainly look at those, but the focus right now is letting Owen run their play; they're running it really well, while we work on integration, and then we'll be able to bring the full suite of capabilities of Simply to really accelerate that growth. Thanks, Geoff. Thanks, Shaun. Thanks, John.

Speaker Change: Now...

Speaker Change: As you think about investment, our thesis for the first year has been that Owen will largely run somewhat independent for that first year while we focus on integration.

Speaker Change: Where there are opportunities to partner together, we'll certainly look at those.

Speaker Change: But the focus right now is letting no one run, run their play, they're running it really well while we work on integration and then we'll be able to bring the full suite of capabilities of Simply to really accelerate that growth.

Speaker Change: Thanks, Geoff. Thanks, Shaun.

Jon Robert Andersen: Thank you. Our next question comes from the line of Jon Andersen with William Blair. Please proceed with your question. Good morning. Thank you for the questions. I want to ask you something about Quest...

Speaker Change: Thanks, John.

Speaker Change: Thank you. Our next question comes from the line of Jon Andersen with William Blair. Please proceed with your question.

Speaker Change: Good morning. Thank you for the questions.

Jon Robert Andersen: I think you mentioned chips have been very strong. I think you even mentioned a $300 million run rate at present. Could you comment? I think another platform or another launch in recent years was a cracker under Quest. I always kind of thought of that as another opportunity to demonstrate the..., the ability of the brand to travel. Can you update us on where you stand with respect to the Quest brand in that particular vertical?

Jon Robert Andersen: I think you mentioned, you know...

Speaker Change: Chips have been very strong. I think you even mentioned a 300 million dollar run rate at present.

Speaker Change: Could you comment, I think another platform or another launch in recent years was a cracker under Quest and I always kind of thought of that as another opportunity to demonstrate the

Speaker Change: the ability of the brain to travel. Can you update us on, you know, where you stand with respect to the Quest brand in that particular vertical?

Jon Robert Andersen: And then, if you could talk a little bit about the initial reception you've received from retailers. I assume at this point, you've presented Bakeshop and what your expectations are in terms of distribution for that new launch in the fall. Yeah, no, so I'll talk about chips and then address the crackers question and come back on bakes. So you're right, Quest is somewhat unique in that it has proven its ability to cross over to other categories.

Speaker Change: And then if you could talk a little bit about the initial reception.

Speaker Change: you've received from retailers. I assume at this point you've presented Bakeshop and what your expectations are in terms of distribution on that new launch in the fall. Thanks.

Speaker Change: Yeah, so I'll talk about chips and then address the crackers question and come back on bakes.

Speaker Change: So, you're right, Quest is somewhat unique in that it has proven its ability to cross over to other categories.

Geoff E. Tanner: Quest is seen as the disruptor in the category, and we are certainly disrupting the salty snacks category. As I mentioned, run rate just crossed 300 million, and in retail sales, it's growing at about 50%. CHIPS has certainly been. The big driver of the increase in household penetration on Quest is not only new to the brand but also new to the category, which is why retailers are getting behind it in a big way.

Speaker Change: Quest is seen as the disruptor in the category.

Speaker Change: And we are certainly disrupting the salty snacks category. As I mentioned, rum rate just crossed 300 million in retail sales, and it's growing at about 50%.

Speaker Change: And certainly CHIPS has been...

Speaker Change: The big driver of the increase in household penetration on Quest, not only new to the brand but also new to the category, which is why retailers are getting behind it in a big way.

Geoff E. Tanner: What excites me the most is the size of that addressable market. And as we continue to see the chip phenomenon, we continue to challenge ourselves on how big this could be. You know, we have a rallying cry internally that we call Think Like a Chip Company. And we're in the process of executing a multi-levered plan to really accelerate that growth. Now I view crackers as underneath that salty snack platform.

Speaker Change: What excites me the most is the size of that addressable market.

Speaker Change: And as we continue to see the chips phenomenon, we continue to challenge ourselves on how big could this be. We have a rallying cry internally we call Think Like a Chip Company and we're in the process of executing a multi.

Speaker Change: Levered plan to really accelerate that growth. Now I would, I view crackers as underneath that salty snack platform. It's one of my favorite products that we make.

Geoff E. Tanner: It's one of my favorite products that we make. We had some supply challenges with one of our co-packers, and we have just moved that over to a new one, which will free up capacity to be able to put support behind that. So in a sense, we had to throttle that demand down, couldn't promote it, throttled back on driving new points of distribution, didn't advertise it. And then to your question about bakes, I'm excited. My favorite product in the portfolio is the brownie, 10 grams of protein and barely any sugar.

Speaker Change: We got into some supply challenges with one of our co-packers.

Speaker Change: and we have just moved that over to a new one.

Speaker Change: which will free up.

Speaker Change: to be able to put support behind that.

Speaker Change: In a sense, we had to throttle that demand down, couldn't promote it.

Speaker Change: . . . throttled back on driving new points of distribution, didn't advertise it.

Speaker Change: But now that we've moved to the new Copaca, that will enable that.

Speaker Change: And then to your question on bakes, I'm excited. My favorite product in the portfolio is the brownie, 10 grams of protein, barely any sugar. And we have received tremendous support from customers.

Geoff E. Tanner: And we have received tremendous support from customers. This is a disruption to the large salty snacks category, and retailers have really, really got behind this launch. We're going to launch it in a big way. It'll be part of the It's Basically Cheating campaign.

Speaker Change: This is a disruption of the large salty snacks category.

Speaker Change: And retailers have really, really got behind this launch. We're going to launch it in a big way. It'll be part of the It's Basically Cheating campaign. And retailers look at this as just another example of expanding usage occasions.

Geoff E. Tanner: And retailers look at this as just another example of expanding usage occasions and likely bringing new consumers into the category, which is why they're really getting behind it in a big way. I'm excited for this launch in the fall. That's helpful. One quick housekeeping question on Owen: I was wondering if you could talk about any seasonality in the sales of that business and how we should be thinking about that going forward. And then just remind me of the cadence of synergies, you know, how much of the 10% I think you're targeting of Owen revenue will kick in at the start of fiscal 26 and how much will come later than that.

Speaker Change: and likely bringing new consumers into the category, which is why they're really getting behind it in a big way. I'm excited for this launch in the fall.

Jon Robert Andersen: Thanks. Yeah, I think on the synergy side, almost all synergies will basically hit in the first month of fiscal year 26. About 80%. Yeah, 80%. And then on seasonality, Owen performs like the rest of the category, right?

Speaker Change: That's helpful. One quick housekeeping on Owen. I was wondering if you could talk about any seasonality in the sales of that business.

Speaker Change: How we should be thinking about that going forward and then just remind remind me on that the cadence of synergies You know how much of the 10% I think you're targeting of own revenue Will kick in at the start of fiscal 26 and how much will will come later than that. Thanks

Speaker Change: Yeah, I think on the synergy side, almost all synergies will basically hit in the first month of fiscal year 26. About 80%. 80%. Yeah. 80%. 80%. And then on seasonality, it all informs like the rest of the category, right, so.

Speaker Change: The seasonality profile and the bump that we typically see, New Year, New Year, but there's nothing distinct in Owen in terms of it being different, seasonality being different than the shakes category.

Geoff E. Tanner: So the seasonality profile and the bump that we typically see, New Year, New Year, but there's nothing distinct in Owen in terms of it being different, seasonality being different than the shakes category. Great, thank you very much. Thank you. Our next question comes from the line of Steve Powers with Deutsche Bank. Hey, thanks. And good morning. I'm well.

Speaker Change: Great, thank you very much.

Speaker Change: Thank you. Our next question comes from the line of Steve Powers with Deutsche Bank. Please proceed with your question.

Stephen Robert R. Powers: Hey, thanks and good morning. Hi, Steve. How are you?

Stephen Robert R. Powers: So Geoff, you started off talking about some of the promising ROI you had seen on advertising and the March campaign around Quest. I couldn't quite glean from the commentary whether that was validation of your expectations or if the ROI was sort of ahead of expectations, and I'm just curious what the answer there is and if it's making you kind of think about leaning in further into kind of broad-based, Yeah, I know, I mean, the short answer is that the advertising performed ahead of my expectations. You know, it's, um... It's not normal to see a very short term impact on sales with advertising, which tends to be more of a medium term build medium to long. With Quest, it's very clear.

Stephen Robert R. Powers: I'm well, thank you.

Speaker Change: So Geoff you started off, you know talking about some of the

Speaker Change: The, you know, I guess...

Geoff: The promising ROI you had seen on advertising in the March campaign around Quest.

Speaker Change: I couldn't I couldn't quite

Speaker Change: Gleaned from the commentary whether that was

Speaker Change: validation of your expectations or if the ROI was sort of ahead of expectations? And I'm just curious if you know what the answer there is and if it's making you kind of think about leaning in further into kind of broad-based brand marketing, take advantage of the returns you're seeing.

Speaker Change: Yeah, no, I mean, the short answer is that the advertising's performed ahead of my expectations, you know.

Speaker Change: It's not normal to see a very short-term impact on sales with advertising, tends to be more of a medium-term build, medium to long.

Geoff E. Tanner: We've seen a short term effect and a long term effect on the business. It has clearly helped accelerate Quest versus our own internal forecast, and it's we're absolutely going to increase our investment as we as we head into fiscal 25 and this is part sort of ties back a little bit to the question on ACK and and thinking about the portfolio, you know, when you have a brand that's growing double digits like Kwik, turn on advertising and you see a result like we're seeing, you know, we have to, we have to increase our investment behind it.

Speaker Change: With Quest, it's very clear. We've seen a short-term effect and a long-term effect on the business.

Speaker Change: It has clearly helped accelerate Quest versus our own internal forecast.

Speaker Change: and we're absolutely going to increase our investment as we head into fiscal 25.

Speaker Change: And this is part, sort of ties back a little bit to the question on Atkins and thinking about the portfolio. You know, when you have a brand that's growing double digits like Quest,

Speaker Change: and you turn on advertising and you see a result like we're seeing.

Geoff E. Tanner: So we're excited to keep investing in it, and I also say that it's basically a cheating campaign idea, Steve, based on consumer reaction, social media monitoring, etc., has really resonated with me. Okay, perfect. That helps you. That helps.

Speaker Change: You know, we have to, we have to increase our investment behind that.

Speaker Change: So, we're excited to keep...

Speaker Change: Investing in it, and I also say that it's basically cheating campaign idea, Steve, based on consumer reaction, social media, monitoring, etc., has really resonated with consumers.

Stephen Robert R. Powers: And then, you know, I guess, and just kind of pivoting to Atkins. On the one hand, I hear you're broadly on track with the revitalization plan, which is good, but then it does seem like there's some incrementality in what you're saying around fiscal 25 and some emphasis on cutting out some of those ineffective trade efforts and the like. On the one hand, you're on track, but on the other hand, I'm kind of hearing that the timeline for stabilization might be a bit further out in the Horizon Base case, so I just want to play that back and see if that was fair. I think that's a fair assessment.

Speaker Change: Okay perfect that helps you that helps and then you know I guess and just kind of pivoting to Atkins

Speaker Change: On the one hand, I hear you're broadly on track with the revitalization plan, which is good, but then it does seem like there's some incrementality in what you're saying around fiscal 25 and some emphasis on

Speaker Change: You know, cutting out some of that, those ineffective trade efforts and the like. So, you know, while I, you know, on the one hand, you're on track, but on the other hand, I'm kind of hearing that the timeline of stabilization might be, you know, a bit further out in the horizon base case. So, I just want to play that back and see if that was fair.

Geoff E. Tanner: I mean, you know, coming in, the initial focus was to look at the health of the brand, as I said, we accelerated innovation, we've got new marketing that we're bringing to market that's coming out in the fall, and we focused on upgrading the products and packaging refresh. As we dive deeper into it, Steve, there there is, and we have, and we had an ROI put an ROI lens on across all of the trade investment across all of the marketing investment. There are just some investments that we don't think are the right investments.

Speaker Change: I think that's a fair assessment. I mean, you know, coming in...

Speaker Change: The initial focus was to look at the health of the brand, as I said we accelerated innovation.

Speaker Change: We've got new marketing that we're bringing to market that's coming out in the fall. Focus on upgrading the products and packaging refresh. As we dive deeper into it, Steve,

Geoff E. Tanner: As we think about building a long-term sustainable business, but this is in no way an assessment of the health of the brand. It's all in service of building a brand that is a sustainable, long-term, profitable business for us. And it's a necessary step we have to take in 2020.

Speaker Change: yep

Speaker Change: And we put an ROI lens across all of the trade investment, across all of the marketing investment. There are just some investments that we don't think are the right investments.

Speaker Change: as we think about building a long-term sustainable business. But this is in no way an assessment on the health of the brand.

Speaker Change: It's all in service of building a brand that is...

Speaker Change: sustainable long-term profitable business for us and it's a necessary step we have to take in fiscal 25 which is why we you know there probably will be a short-term sales impact from that and we wanted to call that out for you guys so I think your assessments right.

Speaker Change: Yeah, I would also say, I mean, I think we knew when we started the revitalization plan it was going to be a, you know, multi-quarter timeframe, so I'm not so sure it's particularly different than we thought it was going to be. It's just maybe expectations got a little ahead of that as we saw some progress there. So I think we're tracking pretty much what we thought we were going to be at this point in time, and certainly not what we think it is longer term.

Speaker Change: And I think all these investment decisions we're making are right for the portfolio and for the company overall. And honestly, I think it's the right aspect for us to take a look at now, because I think we know where we are in the revitalization plan, and now it's time to kind of relook at where the investments are and what the right return on those are.

Stephen Robert R. Powers: Steve, the one added point, perhaps on Atkins, is that the

Geoff E. Tanner: What does excite me about this business is the change in conversation, Cultural conversation, and relevance of waste, um, driven by these new weight loss drugs. I believe this does represent a new wave of relevance for Atkins, not only for consumers who are on the drugs but particularly for those that are coming off, that have achieved their goals, and you're starting to see a lot of media out there, which is, "I've achieved my goals. How do I hold on to these weight loss benefits?"

Speaker Change: What does excite me about this business is the change in conversation, cultural conversation and relevance of weight driven by these new weight loss drugs.

Speaker Change: Not only for consumers who are on the drugs, but...

Speaker Change: Particularly for those that are coming off, that have achieved their goals, and you're starting to see a lot of media out there, which is, I've achieved my goals, how do I hold on to these weight loss benefits?

Geoff E. Tanner: Which is why we just recently shot new advertising for Atkins, two weeks ago, to really position Atkins as being able to help consumers on that journey. So, you know, I'm pleased with the revitalization. I'm particularly pleased with the innovation and how it's largely enabled us to hold on to distribution. It's the right decision for the long term to take a harder look at lower ROI in trade investments, but at a macro level.

Speaker Change: Which is why we just recently shot, two weeks ago, new advertising for Atkins, to really position Atkins as being able to help consumers on that journey. So, you know, I'm pleased with the revitalization.

Speaker Change: I'm particularly pleased with innovation and how it's largely enabled us to hold on to distribution. It's the right decision for the long term.

Speaker Change: To take a harder look at lower ROI in trade investment

Geoff E. Tanner: There's an important role for Atkins to play in consumers' lives within a category, and we're committed to investing in the business. Great. Thank you both. And, Geoff, on that new advertising, did you... Sorry, did you say when that's likely to hit air?

Speaker Change: But at a macro level, there's an important role for Atkins to play in consumers' lives within the category, and we're committed to investing behind the business to get there.

Speaker Change: Great, thank you both. And Geoff, on that new advertising, did you, sorry, did you say when that's likely to hit air?

Geoff E. Tanner: You should see it in the fall, Steve. Okay, very good. Thank you very much.

Geoff: You should see that in the fall, Steve. Okay. Very good.

Stephen Robert R. Powers: Thank you. Our next question comes from the line of Brian Holland with D.A. Davidson.

Speaker Change: Thank you. Our next question comes from the line of Brian Holland with D.A. Davidson. Please proceed with your question.

Brian Holland: Please proceed with your question. Yeah, thanks. I'll just try to squeeze two questions into one here. First, on Quest, can you share whether, or excuse me, the timing and how material the sell-in for the baked launch might be? And then just on Atkins, most of my questions around this have been answered, but if we just try to put a bow on it, you know, consumption down for five consecutive quarters, now probably six in Q4.

Brian Holland: Yeah, thanks. I'll just try to squeeze two questions into one here. First on Quest, can you share whether, or excuse me,

Brian Holland: The timing and how material the sell-in for the baked launch might be. And then just on Atkins, most of my questions around this have been answered, but if we just try to put a bow on it.

Brian Holland: you know

Brian Holland: You talked about pulling back on some of the A and P, or maybe taking a more targeted approach, maybe some rationalization of SKUs, etc. Tying that all together, should we expect Atkins' revenue to be down in fiscal 25, year-on-year? Thanks. Yeah, I mean, I hit that one first.

Brian Holland: Consumption down year-on-year for five consecutive quarters, now probably six in Q4. You talked about pulling back on some of the A&P or maybe taking a more targeted approach, maybe some rationalization of SKUs, etc. Tying that all together, should we expect Atkins to be down in fiscal 25 year-on-year? Thanks.

Geoff E. Tanner: Yeah, our expectation is Atkins will continue to be down in Fiscal 25, driven by this harder look at trade and lower ROI trade, marketing, and investment. To your question about Quest and Bakeshop, the Bakeshop platform. Again, this is another space that Quest is going to disrupt, the large sweet baked goods category. We have two muffins and a brownie that we're launching, and with the retailer Reaction, we expect strong, very strong merchandising support, and we're very pleased with the selling and modular decisions that have been made by all customers, all channels. Thank you. Our next question comes from the line of Kaumil Gajrawala with Jefferies. Hi, good morning, everyone.

Speaker Change: I'll hit that one first. Our expectation is that Actions will continue to be down in fiscal 25, driven by this harder look at trade, lower ROI trade, marketing investments.

Speaker Change: to your question on Quest and Bakeshop, Bakeshop platform.

Speaker Change: Again, this is another space that Quest is going to disrupt, the large Sweet Baked Goods category. We have two muffins and a brownie that we're launching.

Speaker Change: and The Retailer Reaction.

Speaker Change: and support.

Speaker Change: for this platform has been absolutely terrific, as you would expect. This is a new to the category platform. They view it as...

Speaker Change: Another lever to drive household penetration, drive usage, and we, based on the commitments we've got from retailers, we expect strong, very strong merchandising support, and we're very pleased with the results.

Speaker Change: The Salon and modular decisions that have been made by all customers, all channels.

Speaker Change: Thank you. Our next question comes from the line of Kaumil Gajrawala with Jefferies. Please proceed with your question.

Kaumil S. Gajrawala: So as it relates to Quest, and you think about chips and how well they're doing, and now the rollout of Bakeshop, what is the sort of right cadence in terms of timing to sort of assure that you're not doing too many things at once? Obviously, chips are not new, but they very much seem to be, and have a lot of momentum, so maybe all the resources could be focused just on that piece of the business.

Speaker Change: Hi. Good morning, everyone.

Kaumil S. Gajrawala: As it relates to Quest, and you think about chips and how well it's doing and how the rollout of Bakeshop, what is the sort of...

Kaumil S. Gajrawala: Right cadence in terms of timing to sort of assure that you're not doing too many things at once Obviously chips are not new but they very much seem to be

Speaker Change: have a lot of momentum that maybe all the resources could be focused just on that piece of the business. So when we think about adding something new at this stage of the growth of something else, I'm just curious what sort of the logic or calculus is and how you think about it.

Kaumil S. Gajrawala: So when we think about adding something new at this stage of the growth of something else, I'm just curious what sort of logic or calculus this is and how you think about it. It's a really great question.

Geoff E. Tanner: It's the sort of thing we talk about a lot, reiterate that chip. We've been particularly excited about the performance of CHIPS, say, in the last 18 months, the most recent period growing 50%, as I said, run rate of 300 million. And we continue, we're going to raise, I say raise our sights on that business. I mentioned that think like a chip company strategy that we're developing. We have been working on Bakeshop for several years, and there's a balance here between wanting to be first to market.

Speaker Change: It's a really great question. It's the sort of thing we talk about a lot. I'll say that

Speaker Change: reiterate that ship

Speaker Change: We've been particularly excited about the performance of CHIPS in the last 18 months.

Speaker Change: in the most recent period, growing 50%, as I said, run rate of 300 million. And we continue... We're going to up, I say, up our sights on that business. I mentioned, I think, like a chip company strategy that we're developing.

Speaker Change: We have been working on Bakeshop for several years and, you know, there's a balance here between

Geoff E. Tanner: And to your point, making sure we have sufficient investment that we can put behind these platforms. Again, in part... The decision by Atkins to throttle back on some lower ROI investments does give us more fuel to invest behind QUEC, and you should expect a significant step up in advertising next year. In terms of a cadence, I, you know, through our number out there.

Speaker Change: Wanting to be first to market?

Speaker Change: And to your point, making sure we have sufficient investment that we can put behind these platforms. Again, in part,

Speaker Change: The decision on Atkins to throttle back on some lower ROI investments does give us more fuel to invest behind Quest.

Speaker Change: And you should expect a significant step up in advertising next year. In terms of a cadence...

Speaker Change: You know

Speaker Change: I'll throw a number out there, every couple, two or three years we could be bringing a new platform. But to your point, this is not something we would want to be bringing every year. We need to give these platforms the oxygen, the fuel they need. But part of our confidence...

Speaker Change: in the ability to support both CHIPS and Biteshop is that in our planning for next year.

Geoff E. Tanner: Every couple, two, or three years, we could be bringing out a new platform. But to your point, this is not something we would want to be bringing out every year. We need to give these platforms the oxygen, the fuel they need. But part of our confidence in the ability to support both Chips and Bakeshop is that in our planning for next year. There's a sizable step up in advertising and other investments in the Quest business.

Speaker Change: There's a sizable step up in advertising and other investments on the Quest business. And then I guess the last point is back to Steve's question, the performance of the advertising and how it has really accelerated chips.

Geoff E. Tanner: And then I guess the last point is back to Steve's question, the performance of the advertising and how it has really accelerated CHIP is also a point of encouragement that this advertising can support different aspects of our. Got it, and I guess you opened up the door for a follow-up, which was that some of the adjustments at Atkins open up some ability to invest more in Quest. Now that you have Owen... How do you think of it in that context?

Speaker Change: is also a point of encouragement that this advertising can support different aspects of our business.

Speaker Change: Got it and I guess you opened up the door for a follow-up which was that some of the adjustments at Atkins opens up some ability to invest higher in Quest.

Geoff E. Tanner: Is there more pressure under, do you have to sort of squeeze Atkins a little bit more because you have this, you know, entirely new business, growing even faster than the Quest business? Like, how are we thinking about the balance between the three?

Speaker Change: Now that you have Owen...

Speaker Change: How do you think of it in that context? Is there more pressure under, you have to sort of squeeze on Atkins a little bit more because you have this, you know, entirely new business?

Speaker Change: Growing even faster than the Quest business, like how are we thinking about the balance between the three?

Kaumil S. Gajrawala: You know, it's a good question. Not at this stage. So, you know, we're obviously two weeks into owning Owen. Our plan is to let them run for a year. Owen has.

Speaker Change: You know, it's a good question. Not at this stage. So, you know, we're obviously two weeks into owning Owen. Our plan is to let them run for a year. Owen has...

Geoff E. Tanner: A runway of growth in front of it for the next 12 to 18 months that will be very distribution driven, and that'll be our focus. And much like we did with Quick when we acquired Quick.

Speaker Change: A runway of growth in front of it for the next 12 to 18 months that it'll be very distribution-driven and that'll be our focus.

Speaker Change: And much like we did on Quest, when we acquired Quest, we focused on driving out distribution.

Geoff E. Tanner: We focused on driving out distribution and then fueling marketing when we had that broader distribution footprint, which increased the ROI on the marketing investment. And that's a similar playbook we'll run on Owen. So at some point, yes, we'll probably be sitting here having the discussions on how much marketing to move to Owen versus Quest versus Atkins, but at this point in Owen's life cycle.

Unknown Executive: and then fueling marketing when we had that broader distribution footprint, which increases our while on the marketing investment.

Speaker Change: And then fueling marketing when we had that broader distribution footprint, which increases the ROI on the marketing investment. And that's a similar playbook we'll run on Owen.

Unknown Executive: And that's a similar playable run on Owen.

Unknown Executive: So at some point, yes, we'll probably be sitting here having the discussions on how much marketing to move to Owen, but it's quest to us as actions, that at this point where Owen is in its life cycle, the growth trajectory, the runway of growth on Owen, there's a significant distribution runway that we're going to get after, just like we did on Quest.

Speaker Change: So at some point, yes, we'll probably be sitting here having the discussions on how much marketing to move to Owen versus Quest versus Atkins. But at this point where Owen is in its life cycle,

Kaumil S. Gajrawala: The growth trajectory, the runway of growth on Owen, there's a significant distribution runway that we're going to get after, just like we did on Quest. Okay, great, thank you guys. Thank you. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Tanner for any final comments. Thank you very much for joining us today for our third quarter conference call. We'll talk to you guys all again next time in October when we report fiscal fourth quarter and full year 2024 results.

Speaker Change: The growth trajectory, the runway of growth on Owen, there's a significant distribution runway that we're going to get after, just like we did on Quest.

Unknown Executive: Thank you, guys. Thank you.

Speaker Change: Got it. Okay, great, thank you guys.

Unknown Executive: Ladies and gentlemen, that concludes our question-and-answer session.

Speaker Change: Thank you.

Geoff Tanner: I'll turn the floor back to Mr. Tanner for any final comments.

Speaker Change: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Tanner for any final comments.

Geoff E. Tanner: Thank you. Thank you. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Geoff Tanner: Thank you very much for joining us today for a third quarter conference call.

Geoff E. Tanner: Thank you very much for joining us today for our third quarter conference call. We'll talk to you guys all again next time in October when we report fiscal fourth quarter and full year 2024 results. Thank you. Thank you.

Geoff Tanner: We'll talk to you guys all again next time in October when we report this go for the quarter full year 2024 results. Thank you.

Unknown Executive: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your.

Speaker Change: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: www.SimplyGoodFood.com www.SimplyGoodFood.com