Q4 2024 The Simply Good Foods Co Earnings Call
Operator: Ladies and gentlemen, good morning and welcome to the Simply Good Foods company fiscal fourth quarter 2024 conference call. At this time, all participant lines are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded.
Ladies and gentlemen, good morning, and welcome to the simply good Foods company fiscal fourth quarter of 'twenty 'twenty four conference calls.
Speaker Change: At this time all participant lines are in a listen only mode. A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please press star and see though on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded.
Mark Pogharian: It is now my pleasure to introduce your host, Mark Pogharian, Vice President of Investor Relations. Please go ahead, sir.
Speaker Change: It is now my pleasure to introduce your host Mark Bulgarian Vice President of Investor Relations. Please go ahead Sir.
Mark Pogharian: Thank you, Operator.
Mark Bulgarian: Thank you.
Mark Pogharian: Good morning. I'm pleased to welcome you to the Simply Good Foods Company fourth quarter earnings call. Note that fiscal Q4 and full year amounts reflect results for the 14 and 53 weeks ended August 31, 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. A copy of the release and presentation slides are available under the Investor section. You can also view the presentation on the website at www.TheSimplyGoodFoodsCompany.com.
Speaker Change: Good morning, I'm pleased to welcome you to the simply good Foods company fourth quarter earnings call note that fiscal Q4 and full year amounts reflect the results for the 14 and 53 weeks ended August 31, 2020 for Jeff Kantor, President and CEO and Sean Marett CFO will provide you with an overview of results, which will then be followed by a Q&A session.
Speaker Change: The company issued its earnings release. This morning at approximately seven a M. Eastern time, a copy of the release and presentation slides are available under the investors section of our website at www Dot the simply good foods company Dot Com. This call is being webcast an archive of today's remarks will also be available.
Mark Pogharian: 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 as 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. A detailed listing of such risks and uncertainties can be found in today's press release and the company's SEC filing. 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.
Speaker Change: During the course of today's call management will make forward looking statements are subject to various risks and uncertainties that may cause actual results to differ materially.
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.
Mark Pogharian: The acquisition of Owen was completed on June 13, 2024. Therefore, the company's fourth quarter and full year 2024 results include about 11 weeks of Owen performance. The reference to legacy Simply Good Food encompasses Simply Good Food's business excluding Owen.
Geoff Tanner: I'll now turn the call over to Geoff Tanner, President and CEO. Thank you, Mark. Good morning. Thank you for joining us. Today, I'll 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 2025 outlook and your questions. We're pleased with our fiscal fourth quarter financial results, with net sales increasing 17.2%. The Acquisition of Owen and the 53rd Week. are a 9 and 8 percentage point contributor to growth. On a like-for-like basis, North America Quest net sales increased about 5% and Atkins declined about 5%.
Speaker Change: Yeah.
Speaker Change: The acquisition of <unk>, and the 50 <unk> week.
Speaker Change: <unk> nine and eight percentage point contributor to growth.
Speaker Change: On a like for like basis, North America, net sales increased about 5% and Atkins declined about 5%.
Geoff Tanner: Quest performance was less than expected due to temporary chip supply constraints and Atkins was in line with our expectations. Our gross margin improvement continued in the fourth quarter and resulted in adjusted EBITDA of $77.5 million, an increase of 15% compared to the year ago period. Total Simply Good Foods retail takeaway, including Owen and the combined measured and unmeasured channels was about 8% for both the Q4 and full fiscal year 2024 period. Quest and Owen full year POS was about 13% and 80% and Atkins was off 5%. Importantly, nutritional snacking category growth remains strong, driven by volume.
Speaker Change: <unk> performance was less than expected due to temporary chip supply constraints and Atkins was in line with our estimate.
Unknown Executive: Our gross margin improvement continued in the fourth quarter and resulted in adjusted EBITDA of 77.5 million and increased a 15% compared to the year-ago period. Total Simply Good Foods retail take away, including Owen and he combined measures and unmeasure channels, was about 8% for both the Q4 and full fiscal year 2024 periods. Quest and Owen, full year POS, was about 13% and 80%, and Akins was off 5%. Importantly, nutritional snacking category gross remains strong, driven by volume. Key sub-signments of the category, including bars, shakes, and chips, all increased in fourth Q4 and full year fiscal 2024.
Speaker Change: Our gross margin improvement continued in the fourth quarter and resulted in adjusted EBITDA of $77 5 million, an increase of 15% compared to the year ago period.
Speaker Change: Total simply good foods retail takeaway, including <unk> and the combined measured and unmeasured channels was about 8% for both Q4 and full fiscal year 2024 periods.
Speaker Change: First an Owen full year, Pls was about 13% and 80% and Atkins was off 5%.
Speaker Change: Importantly, nutritional snacking category growth remains strong driven by volume.
Geoff Tanner: key sub-segments of the category, including bars, shakes, and chips, all increased in both Q4 and full-year fiscal 2024. We are category advisor at most retailers and will continue to work with our customers to develop and support initiatives in the aisle to further accelerate category growth. given the twin tailwinds of snacking and health and wellness. as well as low household penetration, the category is expected to maintain its momentum and its multi-year growth trajectory.
Speaker Change: Key sub segments of the category, including bars shakes and chips all increased in both Q4 and full year fiscal 2024.
Unknown Executive: We a category advisor at most retailers and will continue to work with our customers to develop and support initiatives in the aisle to further accelerate category gross. Given the twin tailwinds of snacking and health and wellness, as well as low income and its multi-year gross trajectory.
Speaker Change: We had category adviser at most retailers and will continue to work with our customers to develop and support initiatives in the aisle to further accelerate category growth.
Speaker Change: Given the twin tailwind of snacking and health and wellness.
Speaker Change: As well as low household penetration the category is expected to maintain its momentum and its multiyear growth trajectory.
Geoff Tanner: As we look to fiscal 2025, we're excited about the prospects for our category and our business. And we believe we are well positioned to deliver on our objectives. We'll execute against our strategic initiatives, focusing on innovation, marketing and increased physical availability that we expect will drive trial and increase household penetration. The Owen Acquisition closed early in Q4 and the integration work is progressing as planned. We continue to be very pleased with this brand and believe the combination of our two businesses will create future significant shareholder value through revenue growth, margin expansion and cost synergies. Shaun will provide you with the details of our fiscal 2025 outlook.
Unknown Executive: As we look to fiscal 2025, we're excited about the prospects for our category and our business, and we believe we are well positioned to deliver on our objectives. We'll execute against our strategic initiatives, focusing on innovation, marketing, and increased physical availability that we expect will drive trial and increase household penetration. The Owen acquisition closed early in Q4 and the integration versus progressing its plan. We continue to be very pleased with this brand and believe the combination of our two businesses will create future significant shareholder value through seven-year gross margin expansion and cost synergies. Sean will provide you with the details of our fiscal 2025 outlook, but assuming a comparable full year of Owen results are included in fiscal 2024, as well as the exclusion of the 53rd week in fiscal 2024.
Speaker Change: As we look to fiscal 2025, we're excited about the prospects for our category and our business and we believe we are well positioned to deliver on our objectives.
Speaker Change: We will execute against our strategic initiatives focusing on innovation marketing and increased physical availability that we expect will drive trial and increase household penetration.
Geoff Tanner: But assuming a comparable full year of Owen results are included in fiscal 2024, as well as the exclusion of the 53rd week in fiscal 2024. Fiscal 2025 is expected to be in line with the company's long term algorithm. Specifically, net sales growth in the 4% to 6% range and adjusted EBITDA growth slightly greater than the net sales increase.
Unknown Executive: Fiscal 2025 is expected to be in line with the company's long term algorithm. Specifically, net sales gross in the fourth to six percent range and adjusted EBITDA's gross slightly greater than the net sales increase. The next slide provides you with a perspective of nutritional snacking category gross, as well as our retail takeaways performance within the IRI, NULO, plus C-store universe and in the combined measured and unmeasured channels. Nutritional snacking category Q4 gross in the measured channels was 7.3 percent, driven primarily by volume. Repaltake away in the measured and unmeasure channels, it's strong with both distribution and velocity growth.
Geoff 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 Q4 growth in the measured channels was 7.3%, driven primarily by volume. The category continues to be a standout performer and is increasingly a focus of our retail partners as they look for growth opportunities. Quest and Owen Retail Takeaway and Measured Channels increased about 9% and 112% and outpaced the category. Atkins performance down about 8% in measured channels. was similar to last quarter.
Speaker Change: In measured channels was similar to last quarter.
Geoff Tanner: Our e-commerce business continues to do well. As a result, Retail Takeaway and Unmeasured Channels is nearly two percentage points additive to Total Simply Good Food's Measured Channel POS.
Speaker Change: Our E Commerce business continues to do well.
Speaker Change: As a result retail takeaway in unmeasured channels is nearly two percentage points additive to total simply good foods measured channel.
Speaker Change: Yes.
Geoff Tanner: Let me now turn to Quip. In Q4, retail takeaway growth in measured and combined measured and unmeasured channels was 9% and 10%. Consumption slowed versus Q3, primarily due to temporary chips capacity constraints that resulted in stockouts at retailers. Additionally, we saw some increased competitive distribution and promotions in the bar category. In Q4, we estimate total unmeasured channel retail takeaway increased about 16%, driven by strong e-commerce growth of 21%, that was nearly 450 basis points greater than Q3. E-commerce strength was partially offset by softness and specialty channels. Quest Snacks and Bars retail takeaway in the combined measured and unmeasured channels increased about 17% and 1% respectively.
Speaker Change: Let me now turn to quest.
Speaker Change: In Q4 retail takeaway growth in measured and combines in measured and unmeasured channels was 9% and 10%.
Speaker Change: Consumption slowed versus Q3.
Speaker Change: Primarily due to temporary chips capacity constraints that resulted in stock outs at retailers.
Speaker Change: Additionally, we saw some increased competitive distribution and promotions and the buyer category.
Speaker Change: In Q4, we estimate total unmeasured channel retail takeaway increased about 16% driven.
Speaker Change: Driven by strong e-commerce growth of 21% that was nearly 450 basis points greater than Q3.
Speaker Change: E Commerce strength was partially offset by softness in specialty channels.
Speaker Change: Quest snacks, and <unk> retail takeaway in the combined measured and unmeasured channels increased about 17% and 1% respectively.
Geoff Tanner: Despite the chip supply challenges, we continue to be pleased with our Salty Snacks POS growth of 34%, which is a standout in the category and represents about 25% of Quest retail sales. Chimp's retail takeaway slowed during the quarter due to temporary capacity constraints that impacted our ability to keep retail shelves fully stocked. We brought on a second chips manufacturing line during the quarter and it took some time to get up the learning curve. As we exit the first quarter in November, we anticipate supply will be back to normal with now two chips production lines. This positions us well for the upcoming New Year, New You season and any new distribution wins.
Speaker Change: Despite the chip supply challenges.
Speaker Change: We continue to be pleased with our salty snacks pls growth up 34%.
Speaker Change: Which is a standout in the category and represents about 25% of quest retail sales.
Speaker Change: Chimps retail takeaway, Florida during the quarter due to the temporary capacity constraints that impacted our ability to keep retail shelves fully stopped.
Speaker Change: We brought on a second chips manufacturing line during the quarter and it took some time to get up the learning curve.
Geoff Tanner: Bar segment competition increase driven by distribution of some new entrants into the measured channel universe. In response, we will increase promotional activity at select retailers starting in Q1 of fiscal 2025. and we have accelerated the launch of the Quest overload bar platform to February. These bars are loaded with inclusions and have a unique texture and mouthfeel that will bring variety, news and excitement to the bar segment. Therefore, in fiscal 2025, we expect that Quest will have another strong year driven by volume that should result in retail takeaway growth of nine to 10%. As I mentioned earlier, CHIPS recovery has already begun.
Geoff Tanner: With two production lines, we have the flexibility to meet increased demand for this fast-growing business. In the fourth quarter of fiscal 2024, we partnered with a large club customer on a small regional trial of Quest Chip.
Geoff Tanner: Due to the success in the second half of fiscal 2025, we'll have a broader nationwide test with this retailer that could lead to an expanded At the bottom of the slide, you'll note images of the key innovation items in fiscal year 2025 that I just discussed. Additionally, the rollout of the Bakeshop line began in late fiscal 2024. It is ongoing, and while early is progressing nicely, and in line with our Importantly, Quest core products and innovation will be supported with a full year marketing campaign. Recall the successful It's Basically Cheating advertising debuted in mid-March and drove an almost immediate lift in consumption.
Speaker Change: Your marketing campaign.
Speaker Change: Call. The successful it's basically cheating advertising debuted in mid March and drove an almost immediate lift in consumption.
Geoff Tanner: Particularly chips, as this is where a large portion of the advertising was focused. In fiscal 2025, we will have a full year benefit of the campaign at even higher media weights, which we expect will drive greater awareness and household penetration of all Quest products.
Speaker Change: Particularly chips as this is where a large portion of the advertising was focused.
Speaker Change: In fiscal 2025, we will have a full year benefit of the campaign at even higher media weights, which we expect will drive greater awareness and household penetration of all quest products.
Speaker Change: Yeah.
Geoff Tanner: Turning to action. Q4 Retail Takeaway in measured and combined measured and unmeasured channels was off 8% and 5%. Strong e-commerce growth continued, driven by Amazon, whose POS growth was 15%. In Q4, Actions Retail Dollar Sales were relatively consistent. Specifically, during the last 11 weeks of Q4, average weekly dollars in measured channels was $10.6 million, and very similar on a week-to-week basis. This was partially due to RTD shakes where retail takeaway improved and was about the same as a year ago period in the combined measured and unmeasured channels. We continue to believe in the long term vitality of the brand, given the renewed cultural relevance and conversation on weight, and we are confident we have the right plans in place to bring Atkins back to growth.
Speaker Change: Turning to action.
Speaker Change: Q4, retail takeaway and measured in combined measured and unmeasured channels was up 8% and 5%.
Speaker Change: Strong E Commerce growth continued driven by Amazon Who's Pls growth was 15%.
Speaker Change: In Q4 actions retail dollar sales were relatively consistent.
Speaker Change: Specifically during the last 11 weeks of Q4 average weekly dollars in measured channels was $10 6 million and very similar on a week to week basis.
Speaker Change: This was partially due to RTD shakes, where retail takeaway improved and was about the same as the year ago period, and the combined measured and unmeasured channels.
Speaker Change: We continue to believe in the long term vitality of the brand given the renewed cultural relevance and compensation on weight and we are confident we have the right plans in place to bring Atkins back to growth.
Geoff Tanner: I'm pleased with the execution of the Atkins Revitalization Plan that is progressing as scheduled. Some elements of the plan are in market now, and we expect all elements to be in the market as we exit fiscal year 2025. While early, the innovation rolling out in the marketplace, in conjunction with the fall shelf resets, is tracking to our estimates. We have a full suite of innovation across forms. including the Atkins Strong ready-to-drink 30g protein shake, a new wafer bar, and Atkins Indulge confectionery gummy bears and truffles. Our innovation enabled us to maintain distribution at key food and mass customers.
Speaker Change: I am pleased with the execution of the Atkins revitalization plan that is progressing as scheduled.
Speaker Change: Some elements of the plan are in market now and we expect all elements to be in the market as we exit fiscal year 2025.
Speaker Change: While early the innovation rolling out in the marketplace in conjunction with the full shelf resets is tracking to our estimates.
Geoff Tanner: However, we do anticipate that some items in the more space-constrained club channel could be at risk in the spring shelf reset. Product upgrades or reformulation work is progressing as well as new packaging. The Atkins Strong Shake packaging is an indication of what you'll see. Note the fresh new look, including a bold A in the middle as our new, more modern logo.
Geoff Tanner: More to come here soon.
Geoff Tanner: As we exited fiscal 2024, new Actons advertising was on air and the Actons.com website was refreshed. If you haven't seen it, the revised advertising, one, more clearly communicates and owns the benefit of weight management, two, more strongly communicates the brand's unique macronutrient profile focused on weight, and three, emphasizes Atkins as a sustainable and diet-free eating approach to weight wellness. We believe this messaging links better to the evolving consumer views and conversation on weight wellness. Notably, one of the spots specifically positioned Atkins is a diet-free and sustainable way for GLP-1 users or anyone who has lost weight to hold on to their gain.
Geoff Tanner: The RefreshedAtkins.com website has been contemporized and is user-friendly. As has always been the case, it is loaded with customisable tools to help consumers achieve their weight wellness goals.
Geoff Tanner: While we work on revitalising the brand, we also recognise the need to ensure Atkins is a long-term, sustainable business. As such, beginning in fiscal 2025, we will work to optimize ROI and investment levels, specifically eliminating trade and marketing investments that don't meet specific ROI hurdles. This will impact fiscal 2025 sales growth, as we expect some volume declines due to the reduction in spending, as well as some distribution loss. will also discontinue our Breakeven Canada export business. As such, we anticipate Atkins' full-year fiscal 2025 retail takeaway to decline high single digits, half of which is due to the aforementioned planned lower spend.
Speaker Change: We continue our breakeven Canada export business.
Speaker Change: As such we anticipate Atkins full year fiscal 2025 retail takeaway to decline high single digits half of which is due to the aforementioned planned lower spend.
Geoff Tanner: To conclude, we're making progress and positioning the brand to succeed in the future. However, as we have previously stated, it will take some time to get there.
Speaker Change: To conclude we're making progress and positioning the brand to succeed in the future.
Speaker Change: However, as we have previously stated.
Speaker Change: It will take some time to get there.
Geoff Tanner: Channing Owens This brand continues to deliver on the potential we envision. Retail takeaway in the measured and unmeasured channels is strong with both distribution and velocity growth. Assuming a full year of Owen operations. Q4 and full fiscal year 2024 net sales and retail takeaway are relatively in line with each other. and it's not one customer or channel. Owen Groves has significantly accelerated across all major retail customers. In the measured channel universe, Owen is the third largest sports nutrition multi-pack brand in the US and growing the fastest in dollar sales. We remain confident in our ability to effectively integrate Owen into our business and deliver on the acquisition model commitment.
Speaker Change: Turning to Owen.
Speaker Change: This brand continues to deliver on the potential we envisioned.
Speaker Change: Retail takeaway in the measured and unmeasured channels as strong with both distribution and velocity growth.
Unknown Executive: Assuming a full year of own operations, Q4 and full fiscal year 2024 net sales and retail takeaway are relatively in line with each other. And it's not one customer or channel. Owen Gross has significantly accelerated across all major retail customers. In the measured channel universe, Owen is the third largest sports nutrition multi-pack brand in the US and growing the fastest in dollar sales. We remain confident in our ability to effectively integrate Owen into our business and deliver on the acquisition model commitment. In 2024, Owen benefited from increased distribution and to new customers. With solid ACV in fiscal 2025, we expect POS gross of 20 to 30% driven by high velocities and increased items or skews at select retailers.
Speaker Change: Assuming a full year of own operations Q4, and full fiscal year 2024, net sales and retail takeaway are relatively in line with each other.
Speaker Change: And it's not one customer or channel.
Speaker Change: <unk> growth has significantly accelerated across all major retail customers.
Speaker Change: In the measured channel universe.
Speaker Change: <unk> is the third largest sports nutrition multipack brand in the U S and growing the fastest and dollar sales.
Speaker Change: We remain confident in our ability to effectively integrate <unk> into our business and deliver on the acquisition model commitment.
Geoff Tanner: In 2024, I want benefited from increased distribution and to new customers. With solid ACV in fiscal 2025, we expect POS growth of 20 to 30% driven by higher velocities and increased items or skews at select retailers. As such, in fiscal 2025, we expect Owen Net Sales to be in the $135 to $145 million range. Also, a 20 to 30% increase versus the last year. The integration work is underway and progressing as planned. As a reminder, to align with our fiscal year end 2025, we will achieve the majority of the synergies about 80% at the onset or first day of fiscal 2026.
Speaker Change: In 2024 hour benefitted from increased distribution and to new customers.
Speaker Change: With solid Adv in fiscal 2025, we expect pls growth of 20% to 30% driven by higher velocity and increase items or skus at select retailers.
Unknown Executive: As such, in fiscal 2025, we expect Owen net sales to be in the 135 to 145 million range, also a 20 to 30% increase versus the last year. The integration work is underway and progressing as planned. As a reminder to align with our fiscal year end 2025. We will achieve the majority of the synergies, about 80%, at the onset or first day of fiscal 2026. This should result in Owen's fiscal 2026 adjusted EBITDA margin of high to mid tier.
Speaker Change: As such in fiscal 2025, we expect <unk> net sales to be in the $1 $35 million to $145 million range also a 20% to 30% increase versus the last year.
Geoff Tanner: This should result in Owen fiscal 2026 adjusted EBITDA margin of high to mid.
Unknown Executive: To summarize, Simply Good Foods is uniquely positioned as a 1.4 billion net sales leader in the nutritional snacking category, where the Deserves Divide 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 cop, high sugar food, making high protein, low sugar, low cop 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 mega-trains. Consumers trust our brands to help them achieve their wellness goals.
Geoff Tanner: To summarize, Simply Good Foods is uniquely positioned as a $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 food, 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. 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 in their journey.
Unknown Executive: As such, we've focused on our innovation and marketing plans to provide consumers the products to help them in their journey. We will continue to execute after teacher priorities that we expect will enable us to deliver on a long-term growth objective that ultimately drives increased shareholder value. The work we're doing in fiscal 2025 positions us well for fiscal 2026, which should enable us to achieve results at the high end of our long-term algorithm.
Geoff Tanner: We will continue to execute our strategic priorities that we expect will enable us to deliver on our long-term growth objectives that ultimately drive increased shareholder value. The work we're doing in Fiscal 2025 positions us well for Fiscal 2026, which should enable us to achieve results at the high end of our long-term algorithm.
Shaun Mara: Now, I will turn the call over to Shaun, who will provide you with some greater financial details.
Unknown Executive: Now, I will turn the call over to Sean, who will provide you with some great financial data. House.
Shaun Mara: Thank you, Geoff, and good morning, everyone. I will begin with an overview of our net sales. Total Simply Good Food's fourth quarter net sales of $375.7 million increased 17.2% versus the a year ago period. The primary drivers of growth were the Owen Acquisition and the 53rd week that were about a 9 and 8 percentage point benefit, respectively, to net sales growth. Legacy Net Sales Growth, excluding the extra week, increased about 1%. Full year net sales of $1.33 billion increase 7.1% versus the year ago period. All in was a 2.4 percentage point contribution to net sales growth.
Sean Mara: Thank you, Geoff, and good morning, everyone. I will begin with an overview of our net sales. Total Simply Good Food, fourth quarter net sales of 375.7 million dollars increased 17.2% versus the year ago period. The primary drivers of growth were the Owen acquisition and the 50th week that were about a nine and eight percentage point benefit, respectively, to the net sales growth. Legacy net sales growth, excluding the extra week, increased about 1%. Four year net sales of $1.3 billion increased 7.1% versus the year ago period. Owen was a 2.4 percentage point contribution to net sales growth.
Shaun Mara: Legacy Net Sales increased 4.8%, including the benefit of the 53rd week that was slightly less than a 2 percentage point benefit. As we exited fiscal 2024, retail inventory returned to normal levels, but slightly below the fiscal 2023. Reduction in retail inventory levels combined with additional incremental trade investments resulted in full year legacy retail takeaway slightly greater than net sales.
Sean Mara: Legacy net sales increased 4.8%, including the benefit of the 53rd week that was slightly less than a 2 percentage point benefit.
Sean Mara: As we actually have fiscal 2024, we tell inventory returned to normal levels, but slightly below the fiscal 2023. The reduction in retail inventory levels combined with additional incremental trade investments resulted in full year. Legacy retail take away slightly greater than net sales.
Sean Mara: Moving on to other piano items for the quarter. Rose profit was $146 million and increased of $25.5 million from the year ago period driven by lower legacy business ingredient and packaging costs. Partially offset by a nine cash, $3.2 million inventory purchase accounting step-up adjustment related to the Owen acquisition. As a result, Rose margin was 38.8%, 120 basis point increase versus last year. The nine cash inventory purchase accounting step up adversely affect the gross margin by 90 basis points. Adjusted it with $77.5 million and an increase of $10.2 million from the year-ago period. Selling a marketing expenses increase $10 million to $40.8 million primarily due to increased investments of marketing growth initiatives and the inclusion of Owen.
Speaker Change: Yeah.
Shaun Mara: Moving on to other P&L items for the quarter. Gross profit was $146 million, an increase of $25.5 million from the year-ago period driven by lower legacy business ingredient and packaging costs, partially offset by a non-cash $3.2 million inventory purchase accounting step-up adjustment related to the Owen Acquisition. As a result, gross margin was 38.8%, 120 basis point increase versus last year. The Non-Cash Inventory Purchase Accounting Step-Up Adversely Affects the Gross Margin by 90 Bases. Jon said he bet it was $77.5 million, an increase of $10.2 million from the year-ago period. Selling and marketing expenses increased $10 million to $40.8 million, primarily due to increased investments in marketing growth initiatives and the inclusion of Owen.
Speaker Change: Moving on to other P&L items for the quarter.
Speaker Change: Gross profit was $146 million, an increase of $25 $5 million from the year ago period, driven by lower legacy business ingredient and packaging costs.
Speaker Change: Really offset by a noncash $3 2 million inventory purchase accounting step up adjustment related to the <unk> acquisition.
Speaker Change: As a result gross margin was 38, 8%, a 120 basis point increase versus last year.
Speaker Change: The noncash inventory purchase accounting step up adversely affected gross margin by 90 basis points.
Speaker Change: Adjusted EBITDA was $77 $5 million, an increase of $10 $2 million from the year ago period.
Speaker Change: Selling and marketing expenses increased $10 million to $40 8 million.
Speaker Change: Primarily due to increased investments in marketing growth initiatives and the inclusion of Oman.
Shaun Mara: GAAP G&A expenses were $41.3 million, an increase of $11.8 million versus last year. The increase was primarily due to higher employee-related costs, the inclusion of Owen, stock-based compensation, as well as executive transition and integration costs. Including stock-based compensation, as well as executive transition and integration costs, Q4 G&A increased $8.7 million to $32.1 million. Additionally, in the fourth quarter of fiscal 2024, the company incurred costs related to the own acquisition of $11.8 million. Finally, net interest income and interest expense was $8 million, an increase of $1.6 million versus the fourth quarter of fiscal 2023. The increase versus the year-ago period is primarily driven by a higher debt balance due to the Owen Acquisition Act.
Sean Mara: Gap GNA expenses were $41.3 million and increased of $11.8 million worth first last year. Increased with primarily due to higher employee related costs, inclusion of Owen, dock based compensation, as well as executive transition and integration across. Excluding stock-based compensation as well as executive transition and integration cost, Q4 GNA increased $8.7 million to $32.1 million. Additionally, in the fourth quarter of fiscal 2024, the company incurred costs related to the Owen acquisition of $11.8 million. Finally, net interest income and interest expense was $8 million and an increase of $1.6 million per quarter of fiscal 2023. The increase versus the year ago period is primarily driven by higher debt balance due to the Owen acquisition, and our Q4 effective tax rate was about 28.3%, slightly higher than a year ago period due to the Owen acquisition.
Speaker Change: GAAP G&A expenses were $41 3 million, an increase of 11 $8 million versus last year. The increase was primarily due to higher employee related costs inclusion of Owen.
Speaker Change: Stock based compensation as well as executive transition and integration costs.
Speaker Change: Excluding stock based compensation as well as the executive transition and integration costs Q4, G&A increased $8 $7 million.
Speaker Change: With $32 1 million.
Speaker Change: Additionally, in the fourth quarter of fiscal 2024, the company incurred costs related to the one acquisition of $11 8 million.
Speaker Change: Finally, net interest income and interest expense was $8 million, an increase of $1 $6 million versus the fourth quarter of fiscal 2023.
Speaker Change: The increase versus the year ago period is primarily driven by a higher debt balance due to the one acquisition.
Shaun Mara: And our Q4 effective tax rate was about 28.3%, slightly higher than a year ago period due to the Owen Act. As a result, net income was $29.3 million versus $36.6 million last year.
Speaker Change: And our Q4 effective tax rate was about 28, 3% slightly higher than a year ago period due to the <unk> acquisition.
Sean Mara: As a result, net income was $29.3 million versus $36.6 million less.
Speaker Change: As a result, net income was $29 3 million versus $36 $6 million last year.
Sean Mara: here. Moving on to four-year results, Rose Prophet was $511.6 million and an increase of $58.1 million compared to the year-ago period. The increase was driven by the legacy business due to lower ingredient and packaging costs, partially offset by a non-cash, $3.2 million inventory purchase accounting step-up adjustment related to the own acquisition. As a result, Rose Margin was 38.4%, a 190 basis point increase versus last year. The non-cash, inventory purchase accounting step-up adversely affected Rose Margin by 20 basis points. We're pleased with our Rose Margin progress in fiscal 2024.
Shaun Mara: Moving on to full year results, gross profit was $511.6 million, an increase of $58.1 million compared to the year ago period. The increase was driven by the legacy business, due to lower ingredient and packaging costs, partially offset by a non-cash, $3.2 million inventory purchase accounting step-up adjustment related to the ONAC request. As a result, gross margin was 38.4%, a 190 basis point increase versus last year. The Non-Cash Inventory Purchase Accounting Step-Up Adversely Affects the Gross Margin by 20 Billion. We're pleased with our gross margin progress in fiscal 2024. However, in fiscal 2025, we anticipate that input cost inflation will be a headwind and result in gross margin contraction of about 200 basis points.
Sean Mara: However, in fiscal 2025, we anticipate that input cost inflation will be a headwind and result in gross margin contraction of about 200 basis points. Note this includes owing as about a 50 basis point headwind to total company gross margin. Adjusted EBITO is $269.1 million and an increase of 9.6% versus last year. In addition, for the full fiscal year of 2024, the company incurred costs related to the own acquisition of $14.5 million. Net interest income and interest expense was $21.7 million, a decline of $7.2 million versus last year. The interest expense component decline was due to a lower term loan debt balance prior to the own acquisition versus the year ago period.
Shaun Mara: Note, this includes Owen as about a 50 basis point headwind to total company gross margin. The adjusted EBITDA was $269.1 million, an increase of 9.6% versus last year. In addition, for the full fiscal year 2024, the company incurred costs related to the own acquisition of $14.5 million. That interest income and interest expense was $21.7 million, a decline of $7.2 million versus last year. The interest expense component decline was due to a lower term loan debt balance prior to the Owen acquisition versus the year ago. Our fiscal 2024 tax rate was about 25% and we anticipate fiscal 2025 to be similar.
Sean Mara: Our fiscal 2024 tax rate was about 25%, and we anticipate fiscal 2025 to be similar. As a result, net income was 139.3 million dollars versus $133.6 million last year.
Shaun Mara: As a result, net income was $139.3 million versus $133.6 million last year.
Sean Mara: The next slide provides you with a reconciliation of reported and adjusted diluted EPS. Fourth quarter reported EPS was $0.29 per share diluted compared to $0.36 per share diluted in 2023. Adjusted deluded EPS was $0.50 per share compared to $0.45 in a year ago period. Note that we calculated adjusted deluded EPS as adjusted EBITO, less interest income, interest expense, and income taxes.
Shaun Mara: The next slide provides you with a reconciliation of reported and adjusted diluted EPS. Fourth quarter report EPS was $0.29 per share diluted compared to $0.36 per share diluted in 2023. Justice diluted EPS was $0.50 per share. $0.45 in a year-ago period. Note that we calculated Adjusted Diluted EPS as Adjusted EBITDA, Less Interest Income, Interest Expense, and Income.
Sean Mara: Please refer, say, press release for an explanation and reconciliation of non-GAAP financial measures. Moving to the balance sheet and cash flow, fourth quarter and four year cash provided by offer activities was about $49 million and $216 million. Strong cash generation is a hallmark of the company. As a result, at August 31, 2024, the company had cash of $103.5 million. In fiscal 2024, the company repaid $135 million of its term loan, and at the end of the year, the outstanding principal balance was $400 million, resulting in a trailing 12-month net debt to adjusted EBITO ratio of one times.
Shaun Mara: Please refer to today's press release for an explanation and reconciliation of non-GAAP financial measures.
Shaun Mara: Moving to the balance sheet and cash flow, fourth quarter and full year cash provided by Operating Activities was about $49 million and $216 million. Strong cash generation is a hallmark of the company. As a result, at August 31, 2024, the company had cash of $132.5 million. In fiscal 2024, the company repaid $135 million of its term loan, and at the end of the year, the outstanding principal balance was $400 million, resulting in a trailing 12-month net debt-to-adjusted EBITDA ratio of one time. Capital expenditures in 2024 were $5.7 million in fiscal 2025. CapEx is expected to be in the $10 to $15 million range.
Sean Mara: Capital expenditures in 2024 were $5.7 million.
Sean Mara: In fiscal 2025, capital expenditure is expected to be in the 10-15 million dollar range. In fiscal 2025, we anticipate net interest expense to be around $25-27 million, including non-cash amortization expense related to the deferred finance. We currently anticipate our net debt to adjust the EBITDA ratio to be about half a turn or better by year end fiscal 2025.
Shaun Mara: In fiscal 2025, we anticipate net interest expense to be around $25 to $27 million, including non-cash amortization expense related to the deferred financing. We currently anticipate our net debt to adjust the EBITDA ratio to be about half a term or better by year-end fiscal 2020.
Unknown Executive: Now to wrap up, while early retail take away is off to a good start and we believe we're on track to deliver our fiscal year 2025 plans. We continue to execute against our strategic initiatives and our making investments in the business that we expect will strengthen our brand in the marketplace. Our own integration work is well underway and progressing as planned. We expect strong quests and own net sales and retail take over growth in fiscal 2025, driven by greater velocity, increased distribution, innovation, and marketing investments. As Jeff discussed earlier in fiscal 2025, we're focusing on optimizing Akin's ROI related to brand investments.
Shaun Mara: That'll wrap up. While early, Retail Takeaway is off to a good start and we believe we're on track to deliver our fiscal year 2025 plan. We continue to execute against our strategic initiatives and our making investments in the business that we expect will strengthen our brands in the marketplace. Own integration work is well underway and progressing as planned. We expect strong Quest and Owen Net sales and retail takeaway growth in fiscal 2025, driven by greater velocity, increased distribution, innovation, and marketing investment. As Geoff discussed earlier, in fiscal 2025, we're focusing on optimizing Atkins ROIs related to brand investment.
Unknown Executive: This will affect Akin's net sales and retail take away in fiscal 2025, but we believe this is necessary to ensure Akin remains a sustainable and profitable business over the long term. In fiscal 2025, the company continues to expect input cost inflation. Solid productivity and cost savings initiatives are in place that partially offset these higher costs. However, given the unprecedented increase in the cost of select inputs, we anticipate close margin compression in fiscal 2025. Therefore, in fiscal 2025, total company reported net sales are expected to increase eight and a half to ten and a half percent.
Shaun Mara: This will affect Atkins' net sales and retail takeaway in fiscal 2025, but we believe this is necessary to ensure Atkins remains a sustainable and profitable business over the long term. In fiscal 2025, the company continues to expect input cost inflation. Solid productivity and cost savings initiatives are in place that partially offset these higher costs. However, given the unprecedented increase in the cost of select inputs, we anticipate gross margin compression in fiscal 2025. Therefore fiscal 2025 total company reported net sales are expected to increase eight and a half to 10 and a half percent. And embedded in that, we anticipate our own full fiscal year 2025 net sales to be in the $135 to $145 million range.
Speaker Change: However, given the unprecedented increase in the cost of select inputs, we anticipate gross margin compression in fiscal 2025.
Speaker Change: Therefore in fiscal 2025 total company reported net sales are expected to increase eight five to 10, 5%.
Unknown Executive: Embedded in that, we anticipate all in full fiscal year 2025 net sales to be in the $135 to $145 million range. Total company reported adjusted EBITDA is expected to increase 4 to 6 percent. Note that the 53rd week in fiscal 2024 comparison year is about a 2 percentage point headwind that both net sales and adjusted EBITDA growth in full year fiscal 2025.
Speaker Change: Embedded in that we anticipate one full fiscal year 2025, net sales to be in the $135 million to $145 million range.
Shaun Mara: Total company reported adjusted EBITDA is expected to increase four to six percent. Note that the 53rd week in fiscal 2024 comparison year is about a two percentage point headwind to both net sales and adjusted EBITDA growth in full year fiscal 2024. Lastly, assuming a comparable full year of own results are included in fiscal 2024, as well as the exclusion of the 53rd week in fiscal 2024. Fiscal 2025 is expected to be in line with the company's long term algorithm, specifically net sales growth in the four or 6% range and adjusted EBITDA growth slightly greater than the net sales.
Speaker Change: Total company reported adjusted EBITDA is expected to increase 4% to 6%.
Speaker Change: Note that the 50 <unk> week in fiscal 2020 for comparison year is about a two percentage point headwind to both net sales and adjusted EBITDA growth and full year fiscal 2025.
Unknown Executive: Lastly, assuming a comparable full year of own results are included in fiscal 2024, as well as the exclusion of the 53rd week in fiscal 2024. Fiscal 2025 is expected to be in line with the company's long-term algorithm, specifically net sales growth in the 4 to 6 percent range and adjusted EBITDA growth slightly greater than the net sales increase.
Speaker Change: Lastly, assuming a comparable full year of one results are included in fiscal 2024 as well as the exclusion of the 50 <unk> week in fiscal 2020 for fiscal 2025 is expected to be in line with the company's long term algorithm, specifically net sales growth in the 4% to 6% range and adjusted EBITDA.
Speaker Change: Growth slightly greater than the net sales increase just as importantly, we believe the work we're doing in fiscal 2025 positions us very well for fiscal 2026, which should enable us to achieve top and bottom line results at the high end of our long term algorithm.
Unknown Executive: Just as importantly, we believe the work we're doing in fiscal 2025 positions us very well for fiscal 2026, which should enable us to achieve top and bottom line results at the high end of our long-term algorithm.
Shaun Mara: Just as importantly, we believe the work we're doing at Fiscal 2025 positions us very well for Fiscal 2026. which should enable us to achieve top and bottom line results at the high end of our long-term macro.
Unknown Executive: We appreciate everybody's interest in our company, and we're now available to take your questions.
Unknown Executive: We appreciate everybody's interest in our company, and we're now available to take your...
Speaker Change: We appreciate everybody's interest in our company and we're now available to take your questions.
Unknown Executive: Thank you.
Speaker Change: Yeah.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Unknown Executive: Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would 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. Ladies and gentlemen, we will wait for a moment while we poll for questions.
Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would 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 key. Ladies and gentlemen, we will wait for a moment while we poll for questions.
Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question. Please press star and one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if you'd like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stocky.
Brian Holland: Our first question comes from the line of Brian Holland with DA Davidson. Please go ahead. Yeah, thanks. Good morning. Maybe just starting with some of the recent innovation, you know, specifically looking at bake shop and some of the coffee drinks, we seem to be performing quite well. You've talked before about some of the struggles from an innovation standpoint, and then, you know, having gone quiet for a little while.
Brian Holland: Our first question comes from the line of Brian Holland with D.A. Davidson.
Brian Holland: Please go ahead. Yeah, thanks.
Geoff Tanner: Good morning. Maybe just starting with some of the recent innovation, you know, specifically looking at Bakeshop and some of the coffee drinks, which seem to be performing quite well. You've talked before about some of the struggles from an innovation standpoint and then, you know, having gone quiet for a little while. Any perspective that you can provide about the incrementality of these launches, what you're seeing so far vis-a-vis previous innovation cycles at the company?
Geoff Tanner: Any perspective that you can provide about the incrementality of these launches, what you're seeing so far, these are the previous innovation cycles at the company? Yeah, good morning. Let me start with innovation on quest and, you know, specifically bake shop. So it's a big platform launch for us. We're encouraged by the early read. If you recall, this was a month and a brownie, 10 grams of protein list, 1 gram of sugar. Whereas in distribution performance is on power or even better, some of our best performing innovation, certainly feedback from retailers is very encouraging. That platform is, it hits on flavor, taste, checked all the boxes, protein, low carbon sugar, it's also targeting a sizable, addressable market, just sweet baked goods.
Geoff Tanner: Good morning.
Geoff Tanner: Let me start with innovation on Quest and specifically Bake Shop. It's a big platform launch for us. We're encouraged by the early read. If you recall, this was a muffin and a brownie, 10 grams of protein, less than one gram of sugar. Where it's in distribution, performance is on par or even better than some of our best performing innovation. Certainly feedback from retailers is very encouraging. That platform, it hits on flavor, taste, checks all the boxes, protein, low carb, low sugar. It's also targeting a sizable, addressable market, which is sweet baked goods. So in the early innings still building distribution But but very encouraging Chips which I'm sure we'll probably talk about on the call as we recover supply.
Geoff Tanner: So in the early earnings, still building distribution, but very encouraging chips, which I'm sure we'll probably talk about on the call. As we recover supply, we continue to drive that. We've got new flavors coming out. It's about a $300 million business today, directly growing at 25 to 30%. Again, and it's a massive addressable market where we see the largest source of volume from mainstream salty facts. So, at a high level, very encouraged by what we're seeing on Quest innovation. What quest does it flips the macros on large addressable snacks and the inroads we've made into salty snacks.
Geoff Tanner: We continue to drive that We've got new flavors coming out. It's about a 300 million dollar business today Directly growing at 25 to 30 percent Again, and it's a massive addressable market where we see the largest source of volume from mainstream salty snacks So at a high level very encouraged by what we're seeing on quest innovation What quest does is it flips the macros on large addressable snacks?
Geoff Tanner: and The inroads we've made and to salty snacks now with faith you can you can believe we're looking around the store Identifying other spaces where we can disrupt And then just to close it out on Quest, we have accelerated the launch of the Overload Bar, which is chocked full of inclusions, it's delicious, and so we're also innovating on our core.
Geoff Tanner: Now with Bake, you can, you can believe we're looking around the store, identifying other spaces where we can disrupt. And then just to close out on Quest, we have accelerated the launch of the overload bar, which is charged full of inclusions; it's delicious. And so we're also innovating on our core.
Geoff Tanner: On Atkins, innovation is a key driver of this business performance. And as I've stated on previous calls, when I joined the organization, the state of the pipeline on Atkins was not where it needed to be; it had contributed to the slowdown we'd seen in the business. Create it to the team. We did jump start efforts there. The recent slate of innovation in the marketplace is performing well. In the case of Atkins, what we're doing is replacing under performing skis. They will not or large customer, one and a half units per week. And replacing it with items that these new innovation items that are doing two to two and a half.
Geoff Tanner: On Atkins, innovation is a key driver of this business performance, and as I've stated on previous calls, when I joined the organization, the state of the pipeline on Atkins was not where it needed to be, had contributed to the slowdown we've seen in the business. Credit to the team, we did jumpstart efforts there. The recent slate of innovation in the marketplace is performing well. In the case of Atkins, what we're doing is replacing underperforming SKUs. They at Walmart or a large, you know, customer, you know, one, one and a half units per week, and replacing it with items that these new innovation items that are doing two to two and a half.
Geoff Tanner: So whether that be the Atkins strong, the gummies, the truffles, they're the rule is that I'm going to double the velocity performance of the items that they're replacing, and it just underscores how critical innovation is on Atkins. And so, we have made sure that we're filling that pipeline so we can continue to bring items to market on Atkins, which is largely looking to replace underperforming items with better items. But it is now a key focus for the business. It just can maybe demand more than a little bit. Just on Atkins G, I'd say just an example.
Geoff Tanner: So whether that be the Acton Strong, the gummies, the truffles, their role of thumb kind of doubled the velocity performance of the items that they're replacing and it just underscores how critical innovation is on Atkins. And so we have made sure that we're filling that pipeline. that we can continue to bring items. to market on Atkins. We're largely looking to replace underperforming items with better items, but it is now a key focus for the business. I just kind of maybe dimension a little bit just on the Atkins piece, I'd say just an example, if you look at Walmart, I think we they took out 17 SKUs for the fall reset, they replaced them with about 18 or 19 SKUs of innovation, that innovation to dimensionalize what Jeff was saying is turning about two times a week as opposed to one time a week for the stuff they replaced.
Geoff Tanner: If you look at Walmart, I think they took out 17 SKUs for the fall reset. They replaced them with about 18 or 19 skews of innovation. That innovation to dimensionize what Jeff was saying is turning about two times a week at a post, one time a week for the stuff they replaced. So it's been a good early, early read on innovation for Atkins.
Geoff Tanner: So it's been a good, good, early, early read on innovation for Atkins.
Geoff Tanner: No, a great color. Appreciate that. And then just looking into New Year, New Year, New Year, maybe this falls on to the innovation point. I know historically that period can be volatile in both directions. You called out earlier the 24 resolution season impacted by, you know, another category participant and, you know, who didn't have adequate supply in 23 had adequate supply in 24. As you look at the setup into 2025, any sense whether we're kind of in a more stable backdrop or if there are any heightened competitive issues or somebody out of stock in stock, whatever.
Unknown Executive: No, great color. Appreciate that.
Geoff Tanner: And then just looking into New Year, New You, and maybe this follows on to the innovation point. I know historically that period can be volatile in both directions. You called out earlier the 24 resolution season impacted by another category participant who didn't have adequate supply in 23, had adequate supply in 24.
Geoff Tanner: As you look at the setup into 2025, any sense whether we're kind of in a more stable backdrop or if there are any heightened competitive issues or somebody out of stock, in stock, whatever? I know some of that we may not know until early 2025, but as we look at fall shelf sets, do we feel like we're in a more stable place than we have been the past couple of years? As I look at the four shelf sets, you know, I'm very pleased with how we performed on both businesses and Owen as well. To your point, last year it was somewhat of an anomaly because we were lapping, and you made this point, we were lapping a period where we had received outside support due to a large competitor being out of stock.
Geoff Tanner: I know some of that we may not know until early 25, but as we look at fall shelf sets, do we feel like we're in a more stable place than we have been the past couple of years? As I look at the four shelf sets, you know, I'm very pleased with how we performed on both businesses and Owen as well. To your point last year, it was somewhat evident on the Lee because we were laughing, and you made this point. We were laughing a period where we had received outside support due to a large competitor being out of stock.
Geoff Tanner: So that was a difficult lap for us. Looking forward to this upcoming New Year, new year. I'm encouraged by the plans we have in place. We have strong merchandising plans; every customer, you know, to your point. It's a competitive category. We don't know what the competition is going to do at this point. But I'm very pleased with how our teams built the plans, customer by customer, which should put us in a strong position. But again, you know, you said it will not much more, you know, stay very much. I'll give it a thanks. Thank you.
Geoff Tanner: So that was a difficult lap for us.
Geoff Tanner: looking I'm looking forward to this upcoming New Year. I'm encouraged by the plans we have in place. We have strong merchandising plans at every customer. To your point, it's a competitive category. We don't know what the competition is going to do at this point. But I'm very pleased with how our teams have built the plans customer by customer, which should put us in a strong position.
Geoff Tanner: But again, you said it, we'll know much more February March.
Unknown Executive: I'll leave it there, thanks. Thank you.
Matthew Smith: The next question is from the line of Matt Smith with Stiefel. Please go ahead.
Matthew Smith: The next question is from the line of Matt Smith with Stiefel. Please go ahead. Good morning. I wanted to dig in a little bit about around the underlying growth outlook for the legacy business in fiscal 25. I think guidance implies like 3% underlying growth on a like-for-like basis. But there's a few moving parts here, including the quest capacity improving the first quarter. You get some distribution in the second half of the year. And on Atkins, you have lower or you're optimizing ROI or optimizing trade spend there. So can you help with the phasing of growth for each one of those brands due to the year given, given the moving parts here?
Geoff Tanner: Hi, good morning. I wanted to dig in a little bit about around the underlying growth outlook for the legacy business in fiscal 25. I think guidance implies like 3% underlying growth on a like for like basis. But there's a few moving parts here, including the quest capacity, improving the 1st quarter, you get some new distribution in the 2nd half of the year. And on Atkins, you have lower or you're optimizing ROI or optimizing trade spend there. So can you help with the phasing of growth for each 1 of those brands due to the year given given the moving parts here?
Speaker Change: Underlying growth outlook for the legacy business in fiscal 'twenty, five I think guidance implies like 3% underlying growth on a like for like basis, but there's a few moving parts here, including the quest capacity.
Speaker Change: Improving in the first quarter, you get some new distribution in the second half of the year and on Atkins, you have lower or you're optimizing ROI.
Speaker Change: Or optimizing trade spend there. So can you help with the phasing of growth for each one of those brands due to the year, giving given the moving parts here.
Matthew Smith: in terms of quarterly growth.
Geoff Tanner: phasing in terms of quarterly growth.
Speaker Change: Phasing in terms of quarterly growth.
Matthew Smith: If there's any unique consideration we should take into account, when we think about Addkins pulling back on trade and merchandising support, is that changing the shape of the decline through the year that we should be considering? Yeah, I mean, I think if you take a step back and look at the kind of quarters, just in general, I'll just kind of, you know, depending on where your guidance range is, net sales on a reported basis reported should be somewhat similar in Q1 to Q3, up low double digits to maybe low mid teens. Q4 will be flatish because the year ago period included the 50th or week and 11 weeks of Owen.
Geoff Tanner: Just if there's any unique consideration we should take into account, you know, when we think about Atkins pulling back on trade and merchandising support, is that changing the shape of the decline through the year that we should be considering? Yeah, I mean, I think if you take a step back and look at the kind of quarters, just in general, I'll just kind of, depending on where your guidance range is, net sales on a reported basis, reported, should be somewhat similar in Q1 to Q3, up low double digits to maybe low mid-teens. Q4 will be flattish because the year-ago period included the 50-per-week and 11-weeks of Owen.
Speaker Change: Just if if there's any unique considerations, we should take into account.
Speaker Change: When we think about Atkins pulling back on trade and merchandising support is that.
Speaker Change: Changing the shape of the decline through the year that we should be considering.
Speaker Change: Yeah, I mean, I think if you take a step back and look at the kind of quarters just in general I will just kind of.
Speaker Change: Depending on where your guidance range is net sales on a reported basis reported should be somewhat similar in Q1 to Q3 up low double digits to maybe low mid teens Q4 will be flattish because the year ago period included the 50 <unk> week at 11 weeks of Owen and then EBITDA, depending on where you are on guidance should be up mid to high single digit.
Matthew Smith: And then EBITDA, depending on where your guidance should be, up mid to high single digits on a reported basis to first three quarters and then down slightly in Q4. From a gross margin standpoint, we're going to benefit from lower input costs earlier in the year, so close to flat in the first quarter and then down about two and a quarter basis points the rest of the way. That excludes the impact of the one-time step up that we talked about on the call. So I don't know about what you're looking for. No, that's great. I appreciate that.
Shaun Mara: And then EBITDA, depending on where you are in guidance, should be up mid to high single digits on a reported basis the first three quarters, and then down slightly in Q4. From a gross margin standpoint, we're going to benefit from lower input costs earlier in the year, so close to flat in the first quarter, and then down about two and a quarter basis points the rest of the way. That excludes the impact of the one-time step-up that we talked about on the call. So I don't know if that's what you're looking for, Matt.
Speaker Change: On a reported basis the first three quarters, and then down slightly in Q4 from a gross margin standpoint, we're going to benefit from lower input costs earlier in the year. So close to flat in the first quarter and then down about two in a quarter basis points. The rest of the way that excludes the impact of the onetime step up that we talked about on the.
Speaker Change: On the call. So I don't know Thats, what youre looking for no.
Matthew Smith: No, that's great. I appreciate that.
Speaker Change: No that's great I appreciate that.
Geoff Tanner: And then as a follow-up- The added colour I would just give you is on Quest chip. which we talked about.
Matthew Smith: The added color I would just give you is on quest chips, which we talked about in the cryptid remarks. We had been trending. I'll just give you an idea of how this should flow. We've been trending in the 4.75 to 5 million per week range in measured channels because of the dark outs. We ended up closer to 4. And we expect to get that business back in the $5 million per week range starting in the end of October. We've got a great company, and part of the two sites operational. We've got a test with a large plus customer company.
Speaker Change: And then as it.
Speaker Change: The other color I would just give here is on quest chips.
Speaker Change: Which we which we've talked about.
Geoff Tanner: Scripted Remarks. We had been trending, I'll just give you an idea of how this should flow. We've been trending in the 4.75 to 5 million per week range in measured channels. Because of the stockouts, we ended up closer to four. And, you know, we expect to get that business back. In the $5 million per week range, starting the end of October, we've got a great command partner, we've got two sites operational, we've got a test with a large club customer coming up, so if you look at the consumption trends and you think how's that going to flow into the new year, you know, you should probably look at that as adding to perhaps three points to quest growth versus what you're seeing right now.
Scripted remarks.
Speaker Change: We had been trending I just gave you.
Speaker Change: How that should flow.
Speaker Change: <unk> been trending in the.
475% to $5 million per week range in measured channels because of the Doc adds.
Speaker Change: We ended up closer to four.
Speaker Change: We expect to get that business back.
Speaker Change: And the $5 million per week range.
Speaker Change: Starting at the end of October.
Speaker Change: We've got a great company and part of that two sites operational.
Speaker Change: A test with a large club customer.
Matthew Smith: If you look at the consumption trends and you think how's that going to flow into the new year, you know, you should probably look at that as adding two, perhaps three points to quest growth versus what you're seeing right now.
Speaker Change: If you look at the consumption trends anything how is that going to flow into the new year.
Speaker Change: Yeah, you should probably look at that is adding to.
Speaker Change: Two perhaps three points to quest growth versus what you are saying right now.
Matthew Smith: The other thing that I'll say is related to Actions POS. I think you were kind of poking around there. I think you're going to see that a little softer in January through August, where it's trending for the first six weeks of the fiscal year. We have not seen the cuts in the underlying investments, really, that starts in kind of October-ish and then it kind of continues through fiscal year. So you'll see softer as we go through the year versus where it is today.
Geoff Tanner: I think the other thing, Matt, I'll say is related to Atkins POS, I think you were kind of poking around there. I think you're going to see that a little softer in January through August where it's trending for the first six weeks of the fiscal year. We have not seen the cuts in the... The underlying investments really starts in kind of October-ish, and then it kind of continues through fiscal year. So you'll see softer as we go through the year versus where it is today.
Speaker Change: It Hasnt met I'll say as it related to Atkins Pos I think you were kind of poking around there I think you're going to see that a little softer in January through August with them, where it's trending for the first $6. So the fiscal year.
Speaker Change: We have not seen the cuts in the.
Matthew Smith: Okay, thank you for all the detail. I'll pass it on. Thanks, Beth.
Matthew Smith: Great, thank you for all the detail.
Unknown Executive: I'll pass it on. Thanks, Matt.
John Andersen: Thank you. The next question is from John Anderson from William Blair. Please go ahead. Hey, good morning, everybody. Thanks for the questions.
Unknown Executive: Thank you.
Jon Andersen: The next question is from Jon Andersen from William Blair.
Jon Andersen: Please go ahead. Hey, good morning, everybody. Thanks for the questions.
John Andersen: I wanted to ask, good morning, I wanted to ask about the point of sale assumptions for fiscal 25 by brand. It looks like the assumption that you communicated for both quests and actions are kind of in line with recent scans, but quite a bit lower for Owen. It looks to us like Owen's been running up closer to triple digits, and I know you've kind of communicated 20 to 30%. Can you just talk a little bit about the dynamic there for Owen in 2025? Is it more challenging comparisons, or is there certain element of conservatism baked in?
Geoff Tanner: I wanted to ask, good morning, I wanted to ask about the point of sale assumptions for fiscal 25 by brand. It looks like the assumption that you communicated for both Quest and Atkins are kind of in line with recent scans, but quite a bit lower for Owen. It looks to us like Owen's been running up, you know, closer to triple digits. And I know you've kind of communicated 20 to 30%. Can you just talk a little bit about the dynamic there for Owen in 2025? Is it more challenging comparisons? Or is there a certain element of conservatism baked in as it's a new brand, you know, for your business?
John Andersen: Is it a new brand for your business?
Geoff Tanner: Thanks. Yeah, and I appreciate the question. You know, we continue to be excited about this acquisition, expands our presence in the fast-growing shake category, fastest-growing multi-pack, protein shake, and measured channels, the last 13 and 26. You know, and we purchased this business because it reaches a new consumer, those looking for plant and clean label, and clear and obvious cost synergies. To your point, if you look at current performance, it's exceptionally strong. It's up around 80% full outlet. You know, Sam's Club is a big driver. You know, you're seeing significant growth in every customer, so it's not just one customer.
Geoff Tanner: Yeah, and I appreciate the question. We continue to be excited about this acquisition, expands our presence in the fast growing shake categories, fastest growing multi-packed protein shake and measured channels last 13 and 26. And we purchased this business because it reaches a new consumer, both looking for plant and clean label, and clear and obvious cost synergies. To your point, if you look at current performance, it's exceptionally strong. It's up around 80 percent full outlets. You know, BAMs Club is a big driver. You know, you see significant growth in every customer. So it's not just one customer.
Geoff Tanner: Our focus right now on this business is driving the core. So, you know, expanding the number of doors, perhaps adding a larger pack, and then integrating the business delivering on the synergies, which we'll hit in 26. In terms of why we have a lower growth number, in fiscal 20, in our fiscal 24, we saw significant growth in distribution as they got into new stores and channels. In fiscal 25, there's still distribution opportunities, but as I said, it's more around filling voids, pack sizes, and we're lapping some pipes. The recent growth is very much driven by a significant distribution push.
Geoff Tanner: Out focus right now on this business is driving the core. So, you know, expanding the number of doors, perhaps adding a larger pack, and then integrating the business delivering on the synergies, which will hit in 26. And in terms of why we're have a lower growth number, the in fiscal 20 and out fiscal 24, we saw significant growth in distribution as they got into new stores and channels. In fiscal 25, there's still distribution opportunities, but that's it's more around selling voids, pack sizes, and we're laughing some pipes. So the recent growth is very much driven by a significant distribution push.
John Andersen: We'll continue to look to fill voids, look to drive increased pack sizes, but it won't be at the same level that we have currently. I think, to benefit up. And I think in the first half of the year, you're going to see Owen consumption trends higher than they are for the full year. We really laughed at stuff in the second half of the year. Thanks. That's helpful. Thanks for that.
Geoff Tanner: We'll continue to look to fill voids, look to drive increased pack sizes, but it won't be at the same level that we have currently seen the benefits. And I think in the first half of the year, you're going to see Owen consumption trends higher than they are for the full year. We really lapped that stuff in the second half.
Jon Andersen: Thanks. That's helpful. Thanks for that.
John Andersen: Just a follow-up on marketing. I know you've tweaked, I think, the messaging around some of the marketing campaigns for Actions. And then you have some, I guess, in market data on Quest in the, it's basically cheating messaging. Can you talk about the state of the marketing programs today and your sense of the ROI you're getting there? And then your overall level of marketing spending, or are you at the level now by brand? Thanks.
Geoff Tanner: Just to follow up on marketing, I know you've tweaked, I think, the messaging around some of the marketing campaigns for Atkins. And then you have some, I guess, in-market data on Quest, and it's basically cheating messaging.
Geoff Tanner: Can you talk about the kind of the state of the marketing programs today and your sense of the ROI you're getting there, and then your overall level of marketing spending? Are you at the right level now, you know, by brand? Thanks.
Geoff Tanner: Let me start with Quest. In fiscal 2025, we will have a full year of it's basically cheating campaigns. I've been doing marketing for over 20 years, and it's very rare to see a campaign drive a significant short- and long-term increase in sales. That's exactly what happened with the Quest campaign. And where we really saw that was on Chips, an almost instant significant left in consumption, candidly. That's what caused us to have to revisit the second site on chips. And so we're excited to see a full year benefit there. And in fiscal 2025, you'll see an over an increase in 20% increase in advertising on Quest and getting the Quest advertising levels up.
Geoff Tanner: Yeah, let me start with Chris. In fiscal 2025, we will have a full year of this basically cheating campaign. I've been doing marketing for 20, over 20 years, and it's very rare to see a campaign drive a significant short and long term increase in sales. That's exactly what happened with the Quest campaign. and where we really saw that was on chip. almost instant significant lift in consumption. Candidly, that's what caused us to have to revisit the second site on chips. And so we're excited to see a full year benefit of that. And in fiscal 2025, you'll see over an increase in 20% increase in advertising on Quest and getting the Quest advertising levels up.
Geoff Tanner: You know, that eight-ish range, which you know, probably a good zip code.
Geoff Tanner: to that 8-ish percent range, which is probably a good zip code.
Geoff Tanner: On Atkins, we've recently dropped new advertising into the market. It's still early that advertising hasn't really started until September. The advertising, more squarely positioned Atkins as a weight brand and emphasizes our unique macro nutrient profile to support that. What I will say is, now testing, Euro-testing. It was one of the top boring ads that Nielsen has seen, and particularly the spot that referenced the new weight loss drugs. So I'm encouraged and optimistic. It's a little early to tell, but I think what we've learned from this advertising is going back to the core promise of the brand, which is weight wellness, putting it in a culturally relevant context. For example, these new weight loss drugs, and being very clear that we are the solution to consumers, the 60% of consumers you want to lose weight.
Geoff Tanner: on Atkins. We've recently dropped new advertising into the market. It's still early, but advertising has didn't really start until September. The advertising more squarely positions Atkins as a weight brand and emphasizes our unique macro nutrient profile to support that. What I will say is in our testing, neurotesting, it was one of the top boring ads that Nielsen has seen. and particularly the spot that referenced the new weight loss drugs. So I'm encouraged and optimistic, it's a little early to tell, but I think what we're learning from this advertising is going back to the core promise of the brand, which is weight wellness, putting it in a culturally relevant context, for example, these new weight loss drugs and being very clear that we are the solution to consumers, the 60% of consumers who want to lose weight.
Sean Mara: So now I'll close by saying one of the areas that we are throttling back on Atkins is the level of marketing, which has gotten ahead of where we want it to be. Most of those cuts have come in non-working, but there will be some impact, probably mid-single-digit impact to the actual media impact. Yeah, and just in terms of level of spend, I think if you look at 24 results, we're probably known low-9s percentage of sales will probably be mid to low-8s overall as a company, but as Jeff said, a big chunk of that is actually non-working media that we are marketing that we cut back.
Shaun Mara: Now I'll close by saying One of the areas that we are throttling back on actions is the level of marketing which had gotten ahead of where we wanted it to be Most of those cuts have come in non-working, but there will be some impact You know probably mid single-digit impact to the actual market Yeah, and just in terms of level of spend, I think if you look at 24 results, we're probably no low nines percentage of sales will probably be mid to low eights overall as a company. But as Jeff said, a big chunk of that is actually non working media that we are marketing that we cut back.
Shaun Mara: So I think the level of spend we think is right for the business as of right now, we'll continue to evaluate that. And we'll probably look at that further as we get into 26.
Sean Mara: So I think the level of spend we think is right for the business as of right now, we'll continue to evaluate that and we'll probably look at that further as we get into 26.
Geoff Tanner: I just want to go back on the Owen thing, in terms of where we are for next year for growth rates, to 20 to 30% growth rate, just to dimensionalize it a little bit, if we grow 20 to 30%, over the next three years, we kind of double the business. So it's not like it's, you know, an insignificant growth on on the overall business. Absolutely.
Geoff Tanner: I just want to go back on the own thing in terms of where we are for next year for growth rates. It's a 20 to 30% growth rate, just to dimension a line that a little bit. If we grow 20 to 30% over the next three years, we kind of double the business. So it's not like it's in insignificant growth on the overall business. Absolutely. Thanks so much.
Speaker Change: To dimensionalize it a little bit if we grow 20% to 30% over the next three years with kind of double the business. So it's not like it's an insignificant growth on the overall business.
Unknown Executive: Thanks so much. Thank you.
Speaker Change: Absolutely. Thanks, so much.
Alexia Howard: Thank you. The next question is from Alexia Howard, some Bernstein. Please go ahead.
Speaker Change: Thanks, Ken.
Alexia Howard: The next question is from Alexia Howard from Bernstein. Please go ahead.
Speaker Change: Thank you. The next question is from Alexia Howard from Bernstein. Please go ahead.
Alexia Howard: Good morning, everyone. So just sticking with Atkins, it sounds to me as though given the top line headwinds that you've mentioned, the pullback in promotion, a bit of a pullback in marketing, the possibility of distribution losses, are we basically saying at this point we shouldn't expect an inflection and back to positive sales growth organically until fiscal 26? I mean, that's fair. So we've made these difficult but the right decisions to right-size investment. The focus has been on very low ROI. It's been on marketing; the predominance of the cuts have come in non-working, but there will be a small impact to media.
Geoff Tanner: Good morning, everyone. So, just sticking with Atkins, it sounds to me as though, given the top line headwinds that you've mentioned, the pullback in promotion, a bit of a pullback in marketing, the possibility of distribution losses, are we basically saying at this point, we shouldn't expect an inflection and back to positive sales growth organically until fiscal 26? I mean, that's fair.
Alexia Howard: Good morning, everyone.
Alexia Howard: Alexa.
Alexia Howard: So just sticking with Atkins.
Alexia Howard: Sounds to me as though.
Alexia Howard: Oh good.
Alexia Howard: Given the top line headwinds that you've mentioned the pullback in promotion a bit of a pullback in marketing them.
Speaker Change: The possibility of distribution losses are we basically saying at this point, we shouldn't expect an inflection and back to positive sales growth organically until fiscal 'twenty six.
Alexia Howard: Alright.
Speaker Change: That's fair.
Geoff Tanner: So, you know, we've made these difficult, but they're the right decisions to right size investment. You know, the focus has been on, you know, very low ROI spend on marketing, the predominant of the cuts have come in non-working, but there will be a small impact to media. And in more space-constrained channel like Club, you know, we certainly expect to lose a slot or two. That will have a volume impact in fiscal 2020. And that is despite the positive signals we're seeing from the revitalization plans, whether it be the new innovation that is performing well, new advertising, it's early but I'm encouraged.
Speaker Change: So we've made these difficult that they're the right decisions.
Speaker Change: To right size investment.
Speaker Change: The focus has been on very low ROI spend.
Speaker Change: Marketing predominant concept come and non working but it will be a small impact on media and more space constrained channels like club.
Geoff Tanner: And in more space constrained channel like Club, we certainly expect to lose a slot or two. That will have a volume impact in fiscal 20. 26. And that is despite the positive signals we're seeing from the revitalization plans, whether it be the new innovation that is performing well, your advertising. It's early, but I'm encouraged; it's got new packaging coming. But the net effect of that, Alexia, is that we should expect; we are expecting negative, salarated to coin on, on icons. But you have to remember that most of that, as choices we've made, including getting out of our break-even Canada business.
Speaker Change: We expect expect to lose a slot with too.
Speaker Change: That will have a volume impact in fiscal 2020.
Speaker Change: And that is despite the positive signals, we're seeing from the revitalization plan whether it be the.
Speaker Change: New innovation that is performing well you advertising, Italy, but I'm encouraged.
Geoff Tanner: We've got new packaging coming, but the net effect of that, Alexia, is that we should expect, we are expecting a negative accelerated decline on Atkins, but you have to remember that most of that is choices we've made, including getting out of our break-even Canada business.
Speaker Change: New packaging coming but the net effect of that Alexia is that we should expect we are expecting.
Speaker Change: Negative.
Speaker Change: <unk> decline on Atkins.
Speaker Change: But you have to remember that most of that choices, we've made including getting out about a breakeven Canada business looking forward.
Geoff Tanner: Looking forward, our thinking is that we'd like to see sequential improvement, but we have to address these issues and we've decided to do it. I think if you look at the guidance we gave on consumption, kind of high single digit decline on Atkins, basically, we break it down, we think base velocity declines are going to improve versus Q4, effectively, innovation is going to offset distribution losses effectively in the club channel. We're at the next phase where we assess the investment levels. We're eliminating, as Geoff said, unprofitable investments, discontinuing our breakeven business in Canada, and half of the expected decline is basically going to be decisions we make overall.
Geoff Tanner: Looking forward, you know, that thinking is just a continuous sequence. We like to see sequential improvement, that we have to address these issues, and we decided to do it now.
Speaker Change: The thinking is just to continue sequentially, we'd like to see sequential improvement that we have to address these issues and we decided to do it now.
Geoff Tanner: Yeah, I need to take a moment to mention a little bit. I think if you look at the guidance we gave on consumption, kind of high single digit decline on, Addkins. Basically, we break it down; we think, based velocity declines, are going to improve versus Q4. Effectively, innovation is going to offset distribution losses, effectively in the club channel. We're at the next phase; we'll reassess the investment levels. We're eliminating, as Jeff said, unprofitable investments, discontinuing our break-even business in Canada, and half of the expected decline is basically going to be decisions we make overall. I also point out that all elements of the plan are not in the market until the end of fiscal 25.
Speaker Change: Just I guess I'm not sure I'd mentioned, a little bit I think if you look at the guidance. We gave on consumption kind of high single digit decline on Atkins basically we break it down we think base philosophy declines are going to improve versus Q4, effectively innovations kind of offset distribution losses effectively in the club channel were up.
Speaker Change: Next phase will reassess the investment levels, we're eliminating as Jeff said unprofitable investments discontinuing on a breakeven business in Canada and half of the expected decline is basically going to be decision. We make overall I'd also point out that all elements of the plan or not in the market until the end of fiscal 'twenty five so as we continue to get more innovation like <unk>.
Geoff Tanner: I also point out that all elements of the plan are not in the market until the end of fiscal 25, so as we continue to get more innovation, like we said for Walmart as an example for this fall, we're going to replace lower performing SKUs, which should help the business overall. So I think it sets itself up nicely for 26, but there will be some impact in 25.
Geoff Tanner: So as we continue to give more innovation, like we said, for Walmart as an example for this fall, we're going to replace lower performing excuse, which should help the business overall. So I think it sets ourselves up nicely for 26, but there will be some impact on tomorrow. Yeah, they got the goal.
Speaker Change: Set for Walmart as an example for this fall where and replace lower performing Skus, which should help the business overall, so I think it sets us up nicely for 2006, but there will be some impact on the simple to call on Atkins is a relevant modern.
Geoff Tanner: The goal on Atkins is a relevant, modern... Temporary Brain that is sustainable and profitable and one that we can bet on for the long term.
Alexia Howard: The goal on icons is a relevant, modern, contemporary brand that is sustainable and profitable and one that we can bet on for the long term. Perfect. And then, as a follow-up on quest, are you able to quantify the potential benefits from the club customer rollout? I think you said that was probably in the second half of the fiscal year. Any views as to how much distribution you'll gain as a percentage, or how many percentage points on sales that might give you on the Quest brand? Thank you, and I'll pass it on. Yeah, it's a little reluctant to share the specific growth numbers or the dollar numbers by customer.
Speaker Change: Contemporary brands.
Speaker Change: That is sustainable and profitable and one that we can bet on for the long term.
Geoff Tanner: Perfect. And then as a follow-up on Quest, are you able to quantify the potential benefits from the club customer rollout? I think you said that was probably in the second half of the fiscal year. Any views as to how much distribution you'll gain as a percentage or how many percentage points on sales that might give you on the Quest brand?
Speaker Change: Perfect and then as a follow up question.
Speaker Change: Are you able to quantify that.
Speaker Change: Potential benefit.
Speaker Change: From the the club customer rollout I think you said that was probably in the second half of the fiscal year.
Speaker Change: Any any views as to how much distribution gain as a percentage or how many percentage points on sales that might keep you on the question Bryan. Thank you and I'll pass it on.
Geoff Tanner: Thank you and I'll pass it on. Yeah, it's a little reluctant to share specific gross numbers or dollar numbers by by customer. You know, with this, we've had a small, very regional test with this customer, mostly on the West Coast, and we're very pleased with the performance. Based on that, based on that performance, we have a nationwide test. Now, it's a significant customer, so it's not an insignificant amount. But I still view it as a test and we still have to prove it out. But I'm sure you can appreciate if we perform in this test, the upside potential to our business, starting with chips is significant.
Speaker Change: Yeah, a little reluctant to share specific gross number or a dollar numbers by by customer.
Geoff Tanner: You know, with this, we've had a small, very regional test with this customer mostly on the West Coast, and we're very pleased with the performance based on that performance. We have a nationwide test; now it's a significant customer, so it's not an insignificant amount. But I still view it as a test, and we still have to prove it out. But I'm sure you can appreciate if we perform in this test, the upside potential to our business, starting with chips, is significant. Great. I'll pass it on. Thank you.
Speaker Change: With this we had a small a very.
Speaker Change: Very regional tests with this customer.
Speaker Change: Mostly on the West Coast and we're very pleased with the performance based on that based on our performance.
Speaker Change: We have an allied nationwide tests no significant customer so it's not an insignificant amount.
Speaker Change: But I still view it as a test and we still have to prove it out.
Speaker Change: But I'm sure you can appreciate if we perform in this test.
Speaker Change: Upside potential to our business.
Speaker Change: With chips is significant.
Unknown Executive: Great, I'll pass it on.
Speaker Change: Great I'll pass it on thank you.
Unknown Executive: Thank you.
Unknown Executive: Thanks for watching. Thank you.
James Salera: The next question is from the line of John Baumgartner with Mizuho Securities.
Speaker Change: Thanks, a lot Sir.
Isabella: The next question is from the line of John Baumgartner with Mizuo Securities. Please go ahead. Hi, this is Isabella on for John. Thank you for taking our question. So, in terms of the QuestBars business, it looks like the brand has recently faced some elevated competition from increased distribution and discounting from some smaller brands in the category. So from this competition, what have you learned about QuestBars? Has it given you any reason to think maybe differently about the relative demand drivers for the brand? And what are your expectations for QuestBars' revenue in fiscal year 25? For example, is it reasonable to think like a mix single-digit growth for the full year is achievable?
Speaker Change: Thank you.
Speaker Change: The next question is from the line of John Baumgartner with Mizuho Securities. Please go ahead.
Isabella: Please go ahead. Hi, this is Isabella on for John. Thank you for taking our question.
Speaker Change: Hi, This is Isabella on for John Thank you for taking our question. So in terms of the quest bars business. It looks like the brand has recently faced some elevated competition from increased distribution and discounting from some smaller brands in the category. So from the competition what have you learned about quest bars has it given you any.
Geoff Tanner: So, in terms of the QuestBars business, it looks like the brand has recently faced some elevated competition from increased distribution and discounting from some smaller brands in the category. So, from this competition, what have you learned about QuestBars? Has it given you any reason to think maybe differently about the relative demand drivers for the brand? And what are your expectations for QuestBars revenue in fiscal year 25? For example, is it reasonable to think like mixed single digit growth for the full year is achievable?
Speaker Change: The reason to think maybe differently about the relative demand drivers like a brand and what are your expectations for quest bars revenue in fiscal year 'twenty. Five for example is it reasonable to think like mid single digit growth for the full year is achievable. Thank you.
Geoff Tanner: Thank you. You know, as we look at Quest Bars, obviously, it's a significant part of the business, it's a, it is a more mature business versus say, chips or baked goods. But if you take a step back and look at the overall protein bar category, that category has increased around 4% to 5% in Q4. Quest bars were up, not quite at that level. And recall that when we think about the bar category, we focus on protein bars, not the better for you bars, but high protein bars. So the overall bar category is pretty healthy, up 4% or 5%.
Geoff Tanner: Thank you. You know, as we look at Quest Bars, obviously it's a significant part of the business. It's a more mature business versus chips or baked goods. But if you look, you take a step back and look at the overall protein bar category. That category has increased around 4% to 5% in Q4. Quest bars were up, not quite at that level. And recall that when we think about the bar category, we focus on protein bars. Not the better for you bars, but high protein bars. So the overall bar category is pretty healthy, up 4% to 5%.
Yeah.
Speaker Change: As we look at <unk>, obviously, it's a significant part of the business.
Yes.
Speaker Change: It is a more mature business.
Speaker Change: Say chip for baked goods.
Speaker Change: But if you look to take a step back and look at the overall protein bag category.
That category has increased around 4% to 5% in Q4.
Speaker Change: A quick pause we're not.
Speaker Change: At that level.
Speaker Change: And recall that when we think about the bag category, we're focused on protein, but not the better for you bonds. The high part of the same path.
Speaker Change: So the overall by category, it's pretty healthy up four 5%.
Geoff Tanner: We're not quite keeping pace with that.
Geoff Tanner: We're not quite keeping pace with that, as the leader in the category, that is unacceptable to me, it's unacceptable to Team Quack.
Speaker Change: We're not quite keeping pace with that as the leader in the category that is unacceptable to me unacceptable to team quest.
Geoff Tanner: As the leader and the category that is unacceptable to me, unacceptable to Team Quest. In response, we have firstly, we are accelerating the launch of the overload platforms I mentioned earlier, pulling that forward to February. This is a category that responds to new news. And this is an incredibly delicious platform, charcoal of inclusions. And we'll strongly support it with the basically cheating marketing campaign. We are, and we acknowledge that we have seen competition in the space that's not new in the context of the overall bar category. But we have seen some competitors come in, and we are going to also respond to that, as you would expect as the leader, by sharpening some price points and key channels.
Geoff Tanner: In response, we have, firstly, we are accelerating the launch of the Overload platform that I mentioned earlier, pulling that forward to February. This is a category that responds to new news, and this is an incredibly delicious platform, chock full of inclusions, and we'll strongly support it with, it's basically a cheating marketing campaign. We are and we did acknowledge that we have seen competition in this space that's not new in the context of the, you know, liberal bar category, but we have seen some competitors come in and we are going to also respond to that, as you would expect as the leader by sharpening some price points and key channels.
Speaker Change: In response, we have firstly, we are accelerating the launch of the other large platforms I mentioned earlier pulling that forward to February this is a category that responds to juniors.
Speaker Change: And this is a an incredibly delicious platform.
Speaker Change: Full of inclusions and will strongly support it with the it's basically cheating marketing campaigns.
Speaker Change: We are and we did acknowledge that we have seen competition in this space that's not new in the context of you know.
Speaker Change: A robot category, but we have seen some some competitors come in and.
Speaker Change: We are gonna also respond to that as you would expect as the latest by shortening some price points and key channels.
Geoff Tanner: And I would, I would contest also that we expect and probably are seeing some cannibalization form out of cannibalization as we launch bars, as we launch chips. Highly, highly incremental to the business, but like not 100% incremental. But rest assured, bars are a big part of the quest business where the market leader, and we're going to act that way. We are going to defend our house, and we're going to do what Quest does best, which is bringing world-class innovation and to step up our game there. Yeah, I think just as you think about the year, I think 25, the plan for bars right now is sort of low single digits to flatish for all four quests.
Geoff Tanner: And I would, I would contest also that We expect and probably are seeing some cannibalization, full amount of cannibalization as we launch bars, as we launch chips. Highly highly incremental to the business, but likely not 100% incremental. But rest assured, bars are a big part of the Quest business. We're the market leader and we're going to act that way. We are going to defend our house and we're going to do what Quest does best, which is bring world-class innovation and just step up our game there.
Speaker Change: And I would I would.
Speaker Change: Contest also.
We expect them probably are seeing some cannibalization small amount of cannibalization as we launch pads as we launch chips high.
Speaker Change: Highly highly incremental to the business, but likely not 100% incremental but rest assured by the big part of the quest business. We're the market leader and we're going to act that way.
Speaker Change: We're going to defend our house and we're going to do what it does best which is bring world class innovation and just step out game there yeah I think just.
Shaun Mara: Yeah, I think just as you think about the year, I think 25, the plan for bars right now is sort of low single digits to flattish overall for Quest as we kind of get into the year. I would say this, the headwind we're going to have in the first quarter would be the spend we're having on these sharpening the price points. However, when I look at consumption, quarter to days, the first six weeks of the quarter including all out, that we're up 3% in bars overall for Quest. So we're making some progress there. As Jeff said, not exactly where we want to be yet, but I feel like we're kind of bouncing back from where we were in Q4.
Speaker Change: Think about the year I think 25 the plan for borrowers right now is sort of low single digit to flattish.
Geoff Tanner: We kind of get into the year. I would say this the headwind we're going to have in the first quarter would be the spend we're having on these sharpening price points. However, I look at consumption in quarter to days, the first six weeks of the quarter, including all the out that we're up 3% in bars overall for Quest. So we're making some progress there, as Jeff said, not exactly where we want to be yet, but feel like we're kind of about to back from where we're Q4. Great. Thank you for the color. And then for the O and business, what are you learning about the business? Is it taking an appreciable amount of sales from the few other plant-based shakes?
Request as we kind of get into the year I would say this the headwind we're going to have in the first quarter would be the spend we're having on these sharpening the price point. However, when I look at consumption quarter to date in the first six weeks of the quarter.
Speaker Change: Including all outlet were up 3% in bars overall for quest. So we're making some progress there as Jeff said, not exactly where we want to be yet, but I feel like we're kind of bounce back from where we are in Q4.
Isabella: Great. Thank you for the color.
Speaker Change: Great. Thank you for the color and then pretty Owen business. What are you learning about that business is it taking him an appreciable amount of sounds from the few other plant based shakes in the category or is it sort of seemed more volume from dairy protein and how do you think about <unk> ability to breathe.
Geoff Tanner: And then for the Owen business, what are you learning about the business? Is it taking an appreciable amount of sales from the few other plant-based shakes in the category, or is it sourcing more volume from dairy protein? And how do you think about Owen's ability to bring incremental consumers to the category once you bring to market? Is there anything you can take away from the experience of other plant-based shakes brands that have already begun to scale ahead of Owen? Thank you. Yeah, so as I said earlier, we continue to be really excited about this acquisition.
Geoff Tanner: Is it making a category, or is it sourcing more volume from dairy protein? And how do you think about O and stability to bring incremental consumers to the category once you bring to market? Is there anything you can take away from the experience of other plant based shakes brands that have already begun to scale ahead of O and thank you. Yes, so as I said earlier, we continue to be really excited about this acquisition. It's delivering on everything we store in the business. As we said, when we announce the acquisition, obviously, this gets us into the plant's clean label statement, which is growing about double the rates of the total shake category, which is a very healthy category.
Speaker Change: <unk> incremental consumers to the category once you bring to market is there anything you can take away from the experience of other plant based shakes brands that I've already begun to scale ahead of Allen. Thank you.
Speaker Change: Yes, so as I said earlier, we continue to be really excited about this acquisition and it's delivering on everything we saw in the business.
Geoff Tanner: It's delivering on everything we saw in the business. As we said, when we announced the acquisition Obviously, this gets us into the plant clean label segment, which is growing about double the rate of the total shakes category, which is a very healthy category. What really excited us about this acquisition, though, was Owen is increasingly pulling in consumption from more mainstream consumers. And when we dug underneath that, we did our own research that showed that on this on Pura Taste study, and we did a comprehensive taste study, that Owen has separated from plant-based shakes and has gotten much closer to dairy-based shakes.
As we said when we announced the acquisition.
Speaker Change: Obviously this gets us into the plants clean label segment, which is growing about double the rate of the total shakes category.
Speaker Change: Which is very healthy category.
Geoff Tanner: What really excited us about this acquisition, though, was Owen is increasingly pulling in consumption from more mainstream consumers. When we dug underneath that, we did our own research that showed that on this, on pure taste study, we did a comprehensive taste study that Owen has separated from plant-based shakes and has gotten much closer to dairy-based shapes. And this explains why they're pulling in consumption from consumers who want to add a clean or plant-based option into the rotation. That total addressable market obviously is significant, and that we see as upsides, so become the clear leader in plants and increasingly grow through attracting consumption from more mainstream consumers.
Speaker Change: What really excited us about this acquisition.
Speaker Change: Was oh and is increasingly pulling in consumption from more mainstream consumers and when we dug underneath that we did our own research that shows that on just on pure taste study, we did a comprehensive study.
Speaker Change: Owen has separated from plant based shakes and it's gotten much closer to dairy body shape and this explains why they're pulling in consumption from consumers, who want to add a cleanup client base.
Geoff Tanner: And this explains why they're pulling in consumption from consumers who want to add a clean or plant-based option into the rotation. That total addressable market obviously is significant. and that we see as upside, so become the clear leader in plants and increasingly grow through attracting consumption from more mainstream consumers. So that's what we saw in our research, and we continue to see it in the results. That's why they're up 80%.
Speaker Change: [noise] option into the rotation that total addressable market, obviously, it's significant.
Speaker Change: And that we see as an upside so become the clear leader in plants and increasingly grow through attracting consumption from more mainstream consumers. So that's the that's what we saw in our research and we continue to see it in the results that's why they're up to 80%.
Geoff Tanner: So that's what we saw in our research, and we continue to see it in the results. That's why they're up to 80 percent. What I will say is, you know, you should expect us to. Right now we're focused on driving the core, but you should assume that we're going to look at the quest playbook on this business. And how can we extend Owen outside of shakes? We started work on that. Combining our R&D organizations creates a very powerful and very, very talented team. And so you should assume that we want to continue to grow this brand beyond just core shakes.
Geoff Tanner: What I will say is, you know, you should expect us to, right now we're focused on driving the core. But you should assume that we're going to look at the Quest playbook on this business. And how can we extend Owen outside of shakes? started work on that. Combining our R&D organizations creates a very powerful and very, very talented team and so you should assume that we want to continue to do that. grow this brand beyond just core shakes. More to come, but that's our thesis, and I'd look to the Quest playbook and say, yeah, there's some high derivative on how we're gonna run on.
Speaker Change: What I will say is.
Speaker Change: You should expect us to right now we're focused on driving the core.
Speaker Change: But you should assume that we haven't looked at the quest playbook on this business and how can we extend owen outside of shakes.
Speaker Change: We.
Speaker Change: We started work on that combining our R&D organizations creates a very powerful and very very talented team and so you should assume that we want to continue to.
Speaker Change: Grow this brand.
Speaker Change: Beyond just core shakes more to come.
Geoff Tanner: More to come, but that's our thesis, and I'd look to the quest playbook and say, yeah, it's some high derivative on how we're going to run on. Great. Thank you so much. Thank you.
Speaker Change: But that's out these sets and I'd look to the quest playbook can say, yeah that some high derivative on how we're going to run one.
Isabella: Great, thank you so much.
Speaker Change: Great. Thank you so much.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Jim Saleria: Ladies and gentlemen, we take the last question from the line of Jim Saleria from Stephens Inc.
James Salera: Ladies and gentlemen, we take the last question from the line of Jim Solaria from Stephen Sink. Please go ahead. Hey guys, thanks for a fitness in. Appreciate all the detail on Owen. Wanted to ask a follow-up there. If you continue to see, you know, household adoption and higher velocities, give us a sense for what the capacity is for 2025, especially in light of, you know, some of the success you saw with the Quest ships leading the capacity constraints there. Is there kind of an upper bound for Owen for what you guys can do for 2025?
Speaker Change: Ladies and gentlemen, we take the last question from the line of Jim <unk>.
Speaker Change: From Stephens Inc. Please go ahead.
Jim Saleria: Please go ahead. Hey guys, thanks for fitting us in. Appreciate all the detail on Owen. Wanted to ask a follow up there. If You continue to see, you know, household adoption and higher velocities. Can you give us a sense for what the capacity is for 2025, especially in light of, you know, some of the success you saw with the Quest ships leading to capacity constraints there? Is there kind of an upper bound for Owen for what you guys can do for 2025?
Hey, guys. Thanks for fitting us in.
Speaker Change: All the detail on Oh and wanted to ask a follow up there.
Speaker Change: You continue to see household adoption and higher velocities.
Speaker Change: Just a sense of what the capacity is for 2025, especially in light of some of the success you saw with with the quest ships, leaving the capacity constraints there or is there kind of an upper bound for Oh, and you guys can do for 2025.
James Salera: Yeah, I mean, short answer is no; we don't. There are no capacity issues near term or even medium long term for Owen. I will say one of the benefits of bringing them into Simply Network as we have significantly helped them expand their capacity. And in this industry, yes, capacity would be constrained, but a lot of new capacities either come online or are coming online. So capacity is not an issue at all. And I also say, if we look at it, we think there's an opportunity, and we're working on it right now, as we optimize the network for RQDs for the overall business for quest actions in Owen.
Geoff Tanner: Yeah, I mean, short answer is no, we don't. There are no, there are no capacity issues, near term or even medium long term for Owen. I will say one of the benefits of bringing them into Simply Network is we have significantly helped them expand their capacity. And in this industry, yes, capacity was constrained, but a lot of new capacities either come online or coming online. So capacity is not an issue at all. And I'd also say, as we look at it, we think there's an opportunity, and we're working on it right now, as we optimize that network for our kids, for the overall business, for Wes Atkins and Owen.
Speaker Change: Yes, I mean short answer is no. We don't there are no we're not they're not capacity issues near term or even medium long term for Owen I will say one of the benefits of bringing them into simply network as we have.
Speaker Change: Significantly help them expand their capacity and in this industry gas capacity was constrained, but a lot of new capacity to.
Speaker Change: Come online or coming online.
Speaker Change: So capacity is not an issue at all.
Speaker Change: And I'd also say if you look at it we think there's an opportunity and we're working on it right now as we optimize the network for <unk> for the overall business for Quest Atkins and Owen I think theres, an opportunity from a cost saving standpoint.
Geoff Tanner: I think there's an opportunity from a cost saving standpoint. We wouldn't see that in fiscal 25, but we are looking hard at that, and that could be a meaningful synergy for them.
James Salera: I think there's an opportunity from a cost saving standpoint that we wouldn't see at physical 25, but we are looking hard at that, and that could be a meaningful synergy. for us.
Speaker Change: We wouldn't see that in fiscal 'twenty five, but we are looking hard at that and that could be a meaningful synergy for us.
Geoff Tanner: Great.
James Salera: Great. And then one final question. Given that, you know, you guys have already levered the balance sheet back down to just one times, just any thoughts on capital allocations in FY25, given that it sounds like you guys have a pretty detailed plan on marketing, but I would expect there's going to be some cash up leftover. So, any thoughts on buybacks or anything there? I mean, let's take a step back. I think cash generation is a hallmark of the company. I mean, I think we had a fantastic year last year; cash from operating activities, $215 million, should be strong again this year.
Shaun Mara: And then one final question. Given that, you know, you guys have already levered the balance sheet back down to just one times. Just any thoughts on on capital allocation into FY 25, given that it sounds like you guys have a pretty detailed plan on marketing, but I would expect there's going to be some some cash left over. So any thoughts on buybacks or anything there?
Speaker Change: Great.
Speaker Change: One final question.
Speaker Change: Given that you guys are already levered, the balance sheet back down to just one times.
Speaker Change: Just any thoughts on capital allocation and the FY 'twenty five given that it sounds like you guys have a.
Speaker Change: A pretty detailed plan on marketing, but I would expect there's going to be some some cash up leftover. So give me thoughts on buybacks or anything there.
Shaun Mara: I mean, listen, take a step back. I think cash generation is a hallmark of the company. I mean, I think we had a fantastic year last year, cash from operating activities, $215 million, should be strong again this year. We have over $100 million in cash on the balance sheet right now. So we continue to evaluate what the best way to return cash to our shareholders is that look at that pay down, we look at share repurchases, look at M&A. So we'll continue to evaluate that. And we'll look at opportunities to buy back shares and really finalize and continue to fine tune our capital allocation strategy as we get into the year.
Speaker Change: I mean, let's just take a step back I think cash generation a hallmark of the company I mean, I think we had a fantastic year last year cash from operating activities $215 million should be strong again. This year, we have over $100 million in cash on the balance sheet right. Now. So we continue to evaluate what's the best way to return cash to our shareholders is that look at that.
James Salera: We have over $100 million in cash on the balance sheet right now. So we continue to evaluate what the best way to return cash to our shareholders is that look at that pay now, we look at share repurchases, look at M&A. So we'll continue to evaluate that, and we'll look at opportunities to buy back shares and really finalize and continue to fine-tune on our capital allocation strategies as we get into the year.
Speaker Change: Pay down we will look at share repurchases looking at M&A. So we will continue to evaluate that and we'll look at opportunities to buy back shares and really finalize and continue to fine tune our capital allocation strategy as we get into the year.
Unknown Executive: Great. Thank you.
Unknown Executive: Great.
Unknown Executive: Thanks, guys. Thank you.
Speaker Change: Great. Thanks, guys. Thank you.
Speaker Change: Thank you.
Unknown Executive: Ladies and gentlemen, this concludes our question-and-answer session. I would now hand the conference over to the management for closing comments. Thank you so much for joining us today. I'll be available for any follow-up call you may have, and we'll be looking forward to updating on our first quarter results in January. Thank you.
Unknown Executive: Ladies and gentlemen, this concludes our question and answer session.
Speaker Change: Ladies and gentlemen, this concludes our question and answer session I would now hand, the conference over to the management for closing comments.
Unknown Executive: I would now hand the conference over to the management for closing comments. Thank you so much for joining us today. I'll be available for any follow-up calls you may have and we'll look forward to updating on our first quarter results in January.
Speaker Change: Thank you so much for joining us today I'll be available for any follow up calls you may have and we'll look forward to updating on our first quarter results in January.
Unknown Executive: Thank you.
Speaker Change: Thank you <unk>.
Operator: The conference of Simply Good Foods Company has now concluded. Thank you for your participation. You may now disconnect your lines.
Unknown Executive: The conference of Simply Good Foods Company has now concluded. Thank you for your participation. You may now disconnect your line. Thank you.
Speaker Change: So I'll simply good Foods company has now concluded. Thank you for your participation you may now disconnect your line.
Speaker Change: [music].