Q1 2025 The Simply Good Foods Co Earnings Call
The top performing items are the 30 Gram Atkins strong protein shake and Atkins indulge gummies and travel well.
We know that innovation is critical for their brands and I'm pleased with the multiyear pipeline, we now have in place.
The new advertising campaign Atkins way has been in markets since September and most strongly positioned Atkins is a weight wellness brands.
The top performing spot specifically references the new G. L. P. One drugs and possessions Atkins as a sustainable and diet freeway for G. O P. One consumer and by extension anyone who has lost weight to hold onto their weight loss game.
These ads scored exceptionally well and while early we believe they are contributing to the improved results were staying in this quarter.
Other elements of the revitalization plan, including new packaging fiery formulation and enhance category management capabilities are tracking to plan.
However, despite the recent progress we continue to anticipate Atkins fiscal year 2025, retail takeaway to decline high single digit.
Recall, we are proactively eliminating a lot of our ally investment, including trade and marketing programs that don't make specific ROI hurdles.
The effect of these decisions were disproportionately affect retail takeaway over the balance of the fiscal year, particularly in calendar Q1, what P. O S could be down low double digits.
Additionally, during the new year and you see then we will not repaid a large volume driving promotion that Atkins largest customer.
These are difficult decisions, but necessary to ensure atkins is a long term sustainable business.
Also as mentioned last quarter and this space constrained club channel, we lost distribution in October and as expected we will see some further losses in this channel in the spring.
However, we are having very productive discussions with this customer the repurposed and optimize the space with others simply good foods brands in fall.
More to come here in the second half of the year.
In summary, we continue to believe in the long term vitality of Atkins.
And I'm pleased with the progress, we're making to revitalize and position the brand for a new era of weight wellness.
We believe the actions we are taking should improve the trajectory of the brand as we exit fiscal Q4 and into fiscal 'twenty six all in support of building, a healthy profitable and sustainable long term business.
However, as we have previously stated it will take time to get there.
Okay.
Turning to O N.
Retail takeaway of 67% and the combined measured and unmeasured channels was driven by both distribution and velocity increase it.
And the measure channel universe.
One is the third largest sports nutrition multipack brand in the U S and growing the fastest in dollar sale.
I imagine channel growth was a solid 39%.
We continue to be excited about the acquisition and the runway for sustained profitable growth.
Speaker Change: I wonder if the leading plant based or ready to drink protein shake in the market.
Speaker Change: The brand continues to outpace growth of both the plant and dairy based protein shakes segment because of its superior taste profile that also appeals to mainstream consumers.
Speaker Change: Conversations with retailers are universally unanimously positive and we expect both near term and long term distribution growth.
Speaker Change: Not just of the existing line, but also our new flavors and pack sizes.
Looking a little further out I'm excited by what I'm already seeing from our joint R&D team in terms of where we can further extend the brand.
Speaker Change: We continue to have confidence will double net sales and three to four years.
Speaker Change: The integration is progressing as planned.
Speaker Change: As a reminder to align with our fiscal year end 2025, we will achieve the majority of the synergy about 80% at the onset or first day of fiscal 2026.
Speaker Change: This should result in I went in fiscal 2026, adjusted EBITDA margin in the mid to high teens.
Speaker Change: To summarize simply good foods is uniquely positioned as a 1.4 billion dollar net sales leader and the nutritional snacking category with a diversified portfolio across brands and product form.
Speaker Change: We're pleased with our Q1 results and retail takeaway in all three brands.
Speaker Change: Additionally, while early Q2 is tracking to our expectations.
Speaker Change: Although as we discussed the proactive reduction of Atkins lot of Arrow, why investment and lost club distribution little pressure brand performance.
Speaker Change: However, as I stated earlier, we believe our category and our brands represent the future of food and beverage given the increased relevance and mainstreaming of consumer is taking high protein low sugar low carb foods and beverages.
Speaker Change: We have three brands that are aligned with consumer Megatrends and world class innovation and sales capabilities that we believe position us well to drive sustained growth and increased shareholder value now.
Speaker Change: Now I'll turn the call over to Sean who will provide you with some greater financial detail.
Sean: Thank you Jeff good morning, everyone.
Sean: I will begin with an overview of our net sales.
Sean: Total simply good foods first quarter net sales of 341 $3 million increased 10, 6% versus last year, primarily driven by the Odeon acquisition.
Sean: We're very pleased with Orange performance and given the strong <unk> growth Owens net sales increase was slightly greater than our plan.
Sean: Legacy Q1, net sales of $309 million was about the same as the year ago period.
<unk> was in line with our estimates and quest was less than planned due to the timing of shipments that occurred subsequent to the end of the first quarter.
Sean: We estimate the timing of shipments that slipped into the second quarter was about a three percentage point, Miss and non price display and promotion capture between gross and net sales was a one percentage point headwind to growth.
Sean: Importantly demand for our products is strong as evidenced by the Q1 legacy U S retail takeaway increase of about 4% as.
Sean: As we have said in the past quarterly net sales in U S Mi.
Sean: Your line due to the timing of shipments, but we are confident that it should be more in line by the end of Q2 and somewhat similar by year end.
Sean: Moving on to other P&L items for the quarter.
Sean: Gross profit was $135 million, an increase of $15 $4 million from the year ago period, driven by lower than anticipated legacy business ingredient and packaging costs as well as the inclusion of all of.
Sean: This was partially offset by a noncash 1 million dollar inventory purchase accounting step up adjustment related to the one acquisition.
Sean: As a result gross margin was 38, 2% a 90 basis point increase versus last year, the noncash inventory purchase accounting step up adversely affect the gross margin by 30 basis points.
Sean: Adjusted EBITDA was $71 million, an increase of $8 $1 million from the year ago period.
Sean: Selling and marketing expenses increased $1 million to $33 million, primarily due to the inclusion of <unk>.
Sean: GAAP G&A expenses were $38 $1 million, an increase of $11 $1 million versus last year.
Sean: The increase was primarily due to higher legacy employee related costs and corporate expenses, the inclusion of <unk> as well as the business combination and integration expenses, excluding stock based compensation as well as business combination or integration costs Q1, G&A increased $6 $8 million to 29.
Sean: $5 million.
Sean: Net interest income and interest expense was $7 $1 million, an increase of $2 $1 million versus Q1 of fiscal 2024.
Sean: The increase versus the year ago period is primarily driven by a higher debt balance due to the Aurora acquisition.
Our Q1 effective tax rate was about 20% lower than the year ago period due to equity compensation.
Sean: We continue to anticipate the fiscal year 2025 tax rate to be around 25%.
Sean: As a result, net income was $38 $1 million versus $35 $6 million last year.
Sean: The next slide provides you with a reconciliation of reported and adjusted diluted EPS first quarter reported EPS was <unk> 38 per share diluted compared to 35 per share diluted in 2024.
Sean: Adjusted diluted EPS was <unk> 49 cents compared to 43 in the year ago period.
Sean: Note that we calculated adjusted diluted EPS as adjusted EBITDA less interest income interest expense and income taxes.
Sean: Please refer to today's press release for an explanation and reconciliation of non-GAAP financial measures.
Moving to the balance sheet and cash flow as of November 32020 for work the company had cash of $121 $8 million cash.
Sean: Cash flow from operations in Q1 was about $32 million compared to 47, and a half million dollars last year.
Sean: Crime was primarily due to higher net working capital principally inventory, including growing.
Sean: During the quarter the company repaid $50 million of its term loan debt and at the end of the first quarter. The outstanding principal balance was $350 million.
Sean: Capital expenditures in Q1 were $300000. Despite this in fiscal year 2025, we continue to expect capex to be in a $10 million to $15 million range.
Sean: In fiscal year 2025, we anticipate net interest expense to be around $23 million to $25 million, including noncash amortization expense related to the deferred financing fees.
Sean: Now to wrap up with our outlook.
Sean: Due to solid retail takeaway visibility in the second quarter orders and strong adjusted EBITDA growth to start the year, we reaffirm our fiscal year 2025 outlook, we expect organic sales growth to be driven primarily by volume and have strong advertising and marketing plans in place as well as innovation merchandising and promotions.
Sean: That should enable us to achieve our objectives.
Sean: As discussed last quarter, the company expects input cost inflation in fiscal year 2025 with headwinds increasing beginning in the second quarter, there's no material.
Sean: A real change to the company's fiscal year 2025, gross margin outlook with productivity and cost savings initiatives expected to partially offset these higher costs.
Sean: Therefore in fiscal year 2025.
Sean: The company reported net sales are expected to increase eight 5% to 10, 5%.
Sean: Embedded in that we anticipate one in fiscal year 2025, net sales to be in the $135 million to $145 million range.
Sean: Total company adjusted EBITDA is expected to increase 4% to 6%.
Sean: The 50 <unk> week in fiscal year 2024 is about a two percentage point headwind to both net sales and adjusted EBITDA growth in fiscal year 2025.
Sean: Before we move to Q&A I want to take a moment and highlight this will be Mark Bulgarians last conference call as head of Investor Relations at simply good foods as he will be retiring later this spring.
Speaker Change: I've worked with Mark for many years and I want to thank him for his leadership across a number of functions in particular, what leading us through our D spec process multiple M&A transactions and building a strong IRR practice here at simply good foods on behalf of the management team and board of directors, we commend Mark on a great career and wish him well.
Speaker Change: As we move forward I am proud to announce that Josh Levine joined the company last month with a plan for him to succeed Mark beginning in February.
Speaker Change: Many of you know Josh from his prior roles on the sell and buy side as well as his time at Starbucks brands, Josh is a seasoned and experienced professional and given the overlap with Mark we know it will be a seamless transition.
We appreciate everybody's interest in our company and we're now available to take your questions.
Speaker Change: Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Information 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 for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
To allow for as many questions as possible we ask.
Speaker Change: Each keep to one question and one follow up thank you.
Speaker Change: Our first question comes from the line of Tom Palmer with Citi. Please proceed with your question.
Tom Palmer: Hi, good morning, Thanks for the questions and congratulations Paul market Josh.
Tom Palmer: I hope it works just fine tuned expectations I guess on the gross margin side I think you'd previously discussed.
Speaker Change: 200 basis points of gross margin compression in each of the next three quarters is this still the outlook or might there be.
Speaker Change: A bit more nuance to consider from quarter to quarter at this point.
Speaker Change: Yes, I mean, let's just take a step back on Q1 first of all so the headline for Q1 is our margin came in better than we thought that's largely due to more favorable commodities than we had forecasted. The main reason here is the fact that our co mans had slightly higher levels of lower priced raw materials on hand, and we expect it took a little longer for the <unk>.
Speaker Change: Cost raw material inventory to flow through the P&L our guidance for the full year holds around down 200, Q1, favorability, helping to offset greater than expected inflation, we're seeing in cocoa and way that'll happen towards the end of the year as it relates to Q2, we expect gross margin declined to be close to about 300 basis points versus the.
Speaker Change: Last year as the flow through of the higher commodity costs, we thought about in Q1 will hit us in Q2. In addition to the impact of one one which is about a third of the decline.
Speaker Change: You didn't ask the question, but overall from a coverage standpoint, we're covered through fiscal Q3 little longer with the flow through to the P&L I want to be cautious here as we consider the inflationary levels with some of the input costs, particularly cocoa and with all that said we're in a much better sense of where we are for our margin for the year in the April conference call at that point.
Speaker Change: And time off commodities largely locked up for the year.
Speaker Change: So I'll answer to your question or not.
Speaker Change: That answered it and more so thank you for that.
Speaker Change: Second you would notice the collaborative discussions with our club channel customer.
Speaker Change: Related to kind of offsetting that distribution losses for Atkins and Repurposing that.
Speaker Change: Just I know, it's still early but any details that I'd kind of what products.
Speaker Change: Really being focused on here.
Speaker Change: When that placement might take hold.
Speaker Change: It's a little early.
Speaker Change: We're probably midway through those conversations that have been very productive.
Speaker Change: If they are big fans of first class and O N.
Speaker Change: And <unk> brands have have opportunity there.
For five.
Speaker Change: April.
Speaker Change: We'll be able to share more details on where we see our.
Speaker Change: Opportunity across both of those businesses.
Speaker Change: Great. Thank you.
Speaker Change: Our next.
Speaker Change: Question comes from the line of Matt Smith with Stifel. Please proceed with your question.
Matt Smith: Hi, good morning, and before jumping in and Mark Thanks for the help over the years wish you well and what comes next.
Speaker Change: Jeff just to start at a high level. The overall category growth remains a standout in the store with volume growth accelerating on a sequential basis as you look at the category and in the sub segments that drove the sequential improvement is your expectation for the category growth changed over the remainder of fiscal 'twenty five.
Matt Smith: Not materially Matt.
Matt Smith: We continue to be.
Matt Smith: About the levels of growth, we are seeing which is high single digits on average.
Matt Smith: And as you noted it is materially greater than rest.
Matt Smith: The rest of food and beverage.
Matt Smith:
Matt Smith: Yeah.
Matt Smith: The reasons that nutritional snacking.
Matt Smith: Is a standout.
Matt Smith: Hi.
Matt Smith: Is that we continue to see a mainstreaming.
Matt Smith: Demand for nutritional food and beverage products or products that historically.
Matt Smith: Perhaps would have been more specialty.
Matt Smith: Or targeted towards athletes or.
Speaker Change: Yeah, Jim galleries, I know mainstreaming as consumers seek.
Matt Smith: High protein.
Speaker Change: Low sugar low carb.
Speaker Change: And this trend.
Speaker Change: Is accelerating.
Speaker Change: It's backed by science, it's amplified.
Speaker Change: Social media.
Speaker Change: One of the drivers of that growth.
Speaker Change: Underlying that is that we continue to bring new products to market.
Speaker Change: A more mainstream products slight shifts where they've built a $300 million business. We're very pleased with the early read on that bank shop platform.
Speaker Change: You know, we've got a practice business that.
Speaker Change: We're gonna be able to accelerate as we get additional supply.
Speaker Change: And as we bring more mainstream products to the market. What we're seeing is those products are bringing in more and more consumers and then they're highly incremental to the category.
Speaker Change: I think this represents a what we're saying is a long term trend.
Speaker Change: And very simply it consumed.
Speaker Change: Seeking high pricing versus high cost and seeking low sugar.
Speaker Change: And products, where we will continue to be the leader in offering them more choices and I will say that that trend is those wholesale obviously noticed very much by retirement.
With us very proactively on how we can expand the presence of those products in that store.
Speaker Change: Thank you for that Jeff and shown as a follow up to the comments on the shipment timing there were three points of timing impact in the first quarter can you clarify if that was entirely for the quest friend and is the comment that shipments and takeaway or more aligned into Q imply that.
Speaker Change: Headwind reverses in the second quarter, so that fiscal year to date consumption and shipments or aligned or was it shipments and consumption aligned going forward without that reversal.
Speaker Change: Okay Fair question I know, it's complicated so let me just start with the quarter to answer your specific question about quest, it's probably about two thirds of the three points that you want to call. It that so the driver here is really timing of shipments to a single customer for quest at the end of the quarter, where we think the focus for that customer was on Black Friday.
Speaker Change: And sabra money less so on the food side the balance of the changes basically gross to net adjustments.
Speaker Change: Just take a step back and look at consumption overall consumption continues to be solid we're essentially on plan through the first quarter up 4% of our combined legacy basis Quest is up around 10, a snacking and as Jeff said in particular chips continuing to grow nicely and even borrowers up again at the same time Atkins came in a little better than we were thinking help our performance and the two key customers.
Speaker Change: As Jeff mentioned with innovation and performance and RTD is encouraging for us as we look to Q2, we accept shipments and consumption to be much more in line with each other if you look at the buy brand.
Speaker Change: We continue to expect quest consumption to be high single digit low double digits shipments largely in line with consumption through the first half.
Speaker Change: I can do could showed high single digit declines in Q2.
Speaker Change: Driven by a number of items, we've previously talked about you know Luke.
Reducing the low ROI trade events. Additionally, in Q2, we anticipate shipments will trail consumption due to expected club distribution losses. So for the first half will be largely in line with consumption overall for the full year, we expect assumption as shipments to be largely in line by the end of the year.
Speaker Change: So it helps you or Matt.
Speaker Change: Yes, thank you for that I'll leave it there in person.
Speaker Change: Thank you. Our next question comes from the line of John Baumgartner with Mizuho Securities. Please proceed with your question.
Speaker Change: Good morning, Jeff Good question.
Mark Bulgarian: Good morning, Mark all the best and many thanks for your.
Speaker Change: So over the years really appreciate it.
Speaker Change: Maybe first question I wanted to come back to the innovation that was launched at the end of the summer both for Atkins snacks in the quest bake shop.
Speaker Change: So run rate contributions are accretive over about two points to sales in Nielsen I know, it's still early but can you comment at all Jeff on what you're seeing how incremental are these products do you have a sense for return of lapsed users to the brand is it mostly new first time consumers just any high level thoughts there would be appreciated.
Jeff: Yes, let me.
Speaker Change: Start with Atkins, where we are very pleased with how the new items are performing.
Speaker Change: Recall, we launched around about 17, new items in the fall that essentially replaced.
Speaker Change: Items Atkins items on shelf does new items.
Outperforming the items they replaced by about two to one.
And as you look at the sequential improvement with <unk> been seeing in Atkins.
Speaker Change: Key driver.
Speaker Change: Of that improvement.
Speaker Change: And to drill down one more level.
Speaker Change: The top performing a new items are the Atkins strong 30, Gram shake, which is highly incremental to the Atkins brand and actually proven to be relatively incremental to the category.
Speaker Change: And then you have the gummies and truck hauls, all start performing very well gummies in particular is proving out to be highly incremental.
Speaker Change: Turning to quest.
Speaker Change: As I referenced I think it was Matt's question.
Speaker Change: Snakes shop platform.
Speaker Change: Is meeting our expectations.
Speaker Change: It's proven to be a 50% incremental to quest and 30% incremental to the category and this comes back to that.
Speaker Change: View that we have around how this category is mainstreaming. It when we bring more products that are beyond just five and shakes were reaching new consumers that are coming to the category and what we're seeing early is that that was consumers then that becomes a gateway into other <unk>.
Speaker Change: <unk> across the business and certainly that's what we saw on quest chips.
<unk> chips, which is now 300 million dollar business has become a gateway into the rest of the portfolio on quest. So.
It's it's an astute question because the judge innovation you want to look at how well it's performing in total, but importantly, how incremental is it incremental to the brand and how incremental is it to the category and I'm part of those measures I'm very pleased on both quest and and Atkins.
Speaker Change: Okay. Thanks for that and then on the O N.
Speaker Change: Q1 sales were better than expected you reiterated the guide for the full year in terms of the sales drivers youre looking at the Nielsen data it looks as though the multi packs are becoming a larger share of sales you got some new flavors and seeing a strong contribution and then distribution also building it looks like a bit in the drug channel as well are there any component.
Speaker Change: Over the next nine to 12 months.
Speaker Change: Tracking more broadly you know better than expected or areas, where you see potential risks at this point, whether it's supply chain shelf reset just your thoughts there in terms of the balance of upside versus downside.
Speaker Change: Yes, we look we continue to be really pleased with how O&M performing very pleased with the acquisition.
Speaker Change: Consumption nearly 70% in Q1 and.
Speaker Change: Notably Youre seeing growth in both distribution and velocity you don't normally say those two are trained in the same direction that we are with Owen.
Speaker Change: As you know the growth is coming from the court.
Speaker Change: And multi pack in particular has been a gap on the business that we have been working against.
Speaker Change: And we continue to drive additional doors on the business in.
Speaker Change: In recent customer meetings.
Speaker Change: Very positive and we have strong support for expanded distribution gains across 2025.
Speaker Change: I'd also highlight how it is it's a smaller part of the business right now, but it is rolling.
It's proving to be highly incremental.
Speaker Change: About <unk>.
Speaker Change: The average number of Skus at retail is about six okay.
Speaker Change: As significant.
Speaker Change: Headroom.
Speaker Change: For multi packs.
Speaker Change: T hours limited time offerings, and just expanding the number of doors.
Speaker Change: And in household penetration, obviously as low awareness is love.
Speaker Change: So you know that's why we're confident that we'll be able to deliver on our commitment for this business to double sales in the next three to four years.
Speaker Change: Thanks, Jeff Thanks, a lot.
Speaker Change: Thank you thanks, Jeff.
Speaker Change: Thank you. Our next question comes from the line of Steve Powers with Deutsche Bank. Please proceed with your questions.
Speaker Change: Hey, great good morning, everybody.
Speaker Change: Jeff I wanted to drill into some of your comments on on Atkins, If I could so you know why.
Speaker Change: <unk> <unk>.
Speaker Change: 100% appreciate the the the.
Speaker Change: The incremental headwinds that will build January forward on the brands. They are consistent with what you called out coming into the year, but as you also highlighted the consumption through December it has been our ahead of expectations and and then there are some consumer trends that you can as you talked about lean into a bit so I'm just trying to.
Speaker Change: Take your temperature a little bit on you know, whether you're feeling you know it all more optimistic on the trajectory of that brand and in kind of maintaining the full year, you know call of down high single digits more out of Prudence or you know if if the the January forward headwinds are really going to be as material.
Speaker Change: A setback as as implied.
Speaker Change: Yes.
Speaker Change: A very fair question.
Speaker Change: I remain confident in the long term trajectory of Atkins.
Speaker Change: And that's somewhat reinforced by the sequential improvement we have seen and as we mentioned earlier when you click underneath that.
With better innovation, that's outperforming the items that replaced.
Speaker Change: The advertising is performing well.
Speaker Change: You can see the impact it's having on the business.
Speaker Change: And I think the proof of that.
Speaker Change: Two of our most important customers that represent over 50% of the business we're growing.
Speaker Change: Now with that being said and as particularly as we look to Jan March.
There are some actions that we're taking.
Speaker Change: That will have a short term disproportionate negative impact on consumption.
Speaker Change: They are the right decisions for the business long term that we did want to call them out.
Because.
Speaker Change: For example, we're not repeating a large bonus pack program that was unprofitable.
Speaker Change: They drive a lot of volume.
Speaker Change: We are reducing our footprint and fans.
Speaker Change: Now, we hope and expect to offset that or gains from Ireland and quest that we'll certainly see the impact of that and as we've noted before we are pulling the RLI trade that has been subsidizing the base business. They are all the right decisions for the long term, but they will have a short term volume.
Speaker Change: Effects that we believe would be most pronounced January February march but that notwithstanding.
Speaker Change: I am very pleased with what I'm seeing.
Speaker Change: The demand for weight loss weight wellness is still high 60% of people looking to lose or maintain weight as we've talked about in the past the weight loss drugs have amplified the cultural conversation part of that.
Speaker Change: I think it's a.
Speaker Change: <unk> can work very well with people on the GOP, whether youre coming off the truck.
Speaker Change: I think there the long term future for this business is strong.
Speaker Change: What we have to do is without some short term decisions that will have a short term volume impact.
But I think as we look forward to particularly 'twenty six.
Speaker Change: This business expect to say this business.
Speaker Change: Come back can be a lot more stable.
Speaker Change: Okay.
Speaker Change: Built off of that Steve just.
Speaker Change: We entered the year I think we knew there were three time frame from a calendar standpoint, though it presents some challenges to the <unk>.
Speaker Change: <unk> one was the fall resets and how the innovation did in the last four new year, new year performance with less trade and the competitive activity and then fall 25 resets and what the innovation is to help offset that I think as we get through the first quarter were happy that we performed better than planned in Q1, as Jeff said innovation performed.
Speaker Change: Well and allowed us to secure distribution related to the fall resets, we're going to have a much better picture on new year, New you in the next couple of months and we will have fall 25 research sort of decided later this year. So you know as we look past this year as Jeff said, we expect expect philosophy is to stabilize and we shouldnt have further investments.
Speaker Change: Remove but we need to see where we are in new year, New you in the fall resets before we get a feel for 26 and beyond performance overall, it's going to be bumpy not linear as we go through this but we do think we need to do the right things longer term for the business. Despite the short term pain. So I just think that's how we're looking at it internally as we think about a calendar nationwide. So hope that helps you or not but.
That's just perspective, yeah, no that is very helpful and actually kind of dovetails into my next question on it.
Speaker Change: But because I think Jeff you, you called out and expectation that you'd you'd you'd enter 'twenty.
Speaker Change: 'twenty fiscal 'twenty six right with momentum you know kind of from the get go is the way I interpreted your your commentary and I I guess.
Speaker Change: You know if if there's these incremental headwinds building in the back half of 'twenty five they're going to carry over into 'twenty 'twenty six and you're gonna be lapping this better performance in the early part of 'twenty five so the call for improved performance to kick off 26 seems to put a lot of a lot of pressure on those.
Speaker Change: Those fall resets that Sean just mentioned it if I'm thinking about it correctly or but maybe I'm not so just wanted to clarify clarify that.
Speaker Change: What are the full resets are critical for us as they always are and.
Speaker Change: You know I'm I'm I'm really pleased with the innovation that we have in the pipeline.
Speaker Change: That will do what we did this year, which is replace lower performing items with better performing items.
As you think about fiscal 'twenty six I wouldn't sit here and say, we expect to France or attend to growth necessarily.
Speaker Change: But what we've done in 'twenty five.
Speaker Change: And sustainable investment.
Speaker Change: And.
That's why we thought that the high single digit decline.
Speaker Change: For 25 on the Atkins.
Speaker Change: As Sean noted when we get to 'twenty six it wont be repeating that.
Speaker Change: To your point.
Speaker Change: We will be likely lapping fan.
Speaker Change: But in that.
Speaker Change: That will be part of a lap in 'twenty six but that's in a very specific less profitable part of the business. So I don't know if that answers. Your question I wouldn't sit here and say Mato growth on Atkins for 'twenty FX.
Speaker Change: But what I would what I would do want to emphasize that we're using 25 to remove the unsustainable investment in the brand at Kraft and over the past few years and that is why 25.
Speaker Change: It will be a more challenging year for us.
Speaker Change: Okay very helpful discussion. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Robert Moskow with TD Cowen. Please proceed with your question.
Speaker Change: Hi, Thanks for the question and Mark Thanks for all the help over the years.
Speaker Change: Hi, I wanted to know, Jeff if you could kind of focus in on quest bars and.
Speaker Change: You know I think you see yourself into a little bit weaker than you thought can.
Speaker Change: Can you talk about the new product launch that you have planned and how it's differentiated from what what I perceive as a pretty crowded and low entry.
Speaker Change: Low barriers to entry are category.
Speaker Change: Thank you.
Speaker Change: Look at all these small players I think that it's very confusing to shop that area and so my next question would be no.
Speaker Change: Down the road.
Speaker Change: Bars business still need to grow in order to hit your targets for quest.
Speaker Change: Could you could you foresee.
Speaker Change: The growth of quest coming from other segments of the portfolio rather than bars, or just bars really need to grow in order to hit your numbers.
Speaker Change: Yes.
It's a good question.
Speaker Change: <unk> directly and then come back.
Speaker Change: For us to hit our forecast.
Speaker Change: Long range forecasts on a quest, we need buys low.
Speaker Change: Low single digit.
The majority of the growth of the class has got to come from chips, where we still we think we're still in the early innings, even with $300 million in retail sales.
Speaker Change: That platform is still growing 30% and now with doubled supply.
[noise] Bank shop represents another big platform opportunity for us.
Speaker Change: We have such an impressive pipeline.
Speaker Change: I'm excited to bring to market over the coming years that will prove to be very additive and incremental to that brand, yes bags as a more mature segment.
Speaker Change: <unk>.
Speaker Change: And so.
Speaker Change: So for us to hit our algorithm low single eliminated low single digit growth on path with that being said.
You know I am not satisfied with that.
And that's why over the last year, we have significantly ramped up our innovation and focus on that.
Speaker Change: And this is a category that does respond to juniors and excitement.
Speaker Change: And the new <unk> platform that we're bringing out in the spring.
Speaker Change: And my opinions best tasting Pricings I've had in my life. It is shocked full of inclusions, it's absolutely delicious and I think it's going to bring needed news and excitement not just quest, but to the category, but coming behind that we now have multi years of exciting here.
Speaker Change: Our innovation that will certainly breathed new life into quest, if not the category with turning on that more of a focus on advertising on baas stuff.
Speaker Change: We're certainly not giving up on path.
Speaker Change: All we need is low single digit, but I think we can do significantly better than that.
Speaker Change: That's very helpful. I'll follow up to that when you talk about the pipeline broadly.
Speaker Change: Are there is there a consistent or is there a considerable effort to come up with new categories to extend into as well.
Speaker Change: Or is most of the innovation you have in the pipeline just to build out chips more.
Speaker Change: Shop more etcetera.
Speaker Change: Well, yes, yes, and yes.
Speaker Change: Yeah.
Speaker Change: We must innovate on bass as we talked about.
Speaker Change: We're in the very early innings on chips think about the size of the addressable market of salty.
Speaker Change: We are a tiny fraction of that market.
Speaker Change: With a very small range of products.
Speaker Change: <unk>.
Speaker Change: Probably not a surprise that we have a very robust.
Speaker Change: <unk> line of products to come out over the coming years.
That being said.
Speaker Change: Quest that.
Speaker Change: Is it flips the macros.
Speaker Change: <unk>.
Speaker Change: Unhealthy high cap high sugar categories like we've just done on bank shop, So you should assume.
Speaker Change: That we're looking at large addressable categories, where we can go in and flip those macros and for me. That's all that is back to the mainstreaming.
Speaker Change: The demand for high protein low sugar and.
Speaker Change: And quest had pie and yet.
Speaker Change: The expansion product expansion.
Speaker Change: And to that trend and we will continue to do so and we will continue to look at where we can continue to bring products that flip those macros. So it's a it's an and it's yes and yes.
Speaker Change: Got it thank you.
Speaker Change: Thank you. Our next question comes from the line of Brian Holland with D. A Davidson. Please proceed with your question.
Brian Holland: Yeah, good morning, everyone.
Mark Bulgarian: And Mark Congrats and thanks and.
Speaker Change: Josh look forward to working with the great to have you back.
Mark Bulgarian: Maybe just.
Mark Bulgarian: As we step in here to new year, New you season.
Mark Bulgarian: Obviously, you've gone into great detail talking about.
Mark Bulgarian: Some of the forces at play within your own portfolio and the drivers and things to be mindful of just wondering you know.
What your perspective is with respect to the category. So retail activity competitive activity consumer behavior last year. Obviously, you were kind of set up and then were impacted by a competitor.
Mark Bulgarian: Bringing product back on shelf. So just curious if you could compare contrast, the broader setup into new year, New you in 2025 versus 2024.
Mark Bulgarian: Yes.
Mark Bulgarian: From what we can say.
Mark Bulgarian: Retailers are continuing to get behind <unk> in a bigger way year on year on year again. It comes back to Theyre staying the same trends that we're seeing which is consumers seeking out these products.
Mark Bulgarian: A total category level across the customer base, we're seeing increased support for the category, whether that merchandising displays promotions et cetera.
Mark Bulgarian: Drilling down we're very pleased with our implants.
Mark Bulgarian: As we've noted.
Mark Bulgarian: Atkins has a couple of areas, where we are pulling back.
Mark Bulgarian: By Quest.
Speaker Change: <unk> place, but the level of support we're getting.
Speaker Change: To drill down one level lower chips in particular is a part of the business, where we expect to significantly increase the port over the new year new year period.
Speaker Change: Now with that being said, it's too early to see the level of competitive activity. As you noted last year, a major competitor came back and we were negatively impacted by that.
Speaker Change: Like we're more eyes wide open to the competitive landscape this year, but it will play out.
Speaker Change: The retailers like Theyre looking across the store, they're staying the same growth. We are they are moving their assets to support that growth.
And.
Speaker Change: I think at a total company level, we will perform very well.
Speaker Change: I appreciate that and then forgive.
Speaker Change: Forgive me if this was addressed.
Speaker Change: Clearly and I just missed it but with respect to input cost and Directionally, where they're moving up.
Speaker Change: His views on if.
Speaker Change: Or when pricing action would need to be taken in response.
Speaker Change: But we did do some pricing actions as it relates to our Tvs, We announced a mid single digit price increase in that.
Speaker Change: Goldman effective in the spring.
Speaker Change: So we did do that we continue to evaluate our commodities and we really focus more on productivity at this point in time and with productivity, we'll should see some of that in this year in our pull back full impact of that really in 2006. So we'll continue to evaluate pricing, but we have not announced anything beyond the mid single digit increase for.
Speaker Change: Sure Rtd's.
Speaker Change: Great I'll leave it there thanks.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Jim Suva with Stephens Inc. Please proceed with your question.
Speaker Change: Hey, guys. Thanks for taking my question and Echo all the congrats for Mark and I look forward to working with you in the future Josh.
Speaker Change: I want to drill a little bit on the RTD shake growth at Atkins and I think.
Speaker Change: General items is a better than expected, but that was kind of a particular bright spot.
Speaker Change: RTD shakes consumers are you seeing.
Speaker Change: Hopkins consumers that maybe you've kind of gotten away from the brand re engaging or do you find that those are new consumers coming to the Atkins brand through that very popular RTD shakes format.
Speaker Change: It's both we're seeing.
Speaker Change: New users come into the brand more than we had forecast.
Speaker Change: We're also seeing Fireeye increase.
Speaker Change:
Speaker Change: There's a couple of drivers of that.
Speaker Change: John.
Speaker Change:
Speaker Change: Yes.
Speaker Change: Ali, but we think the new advertising.
Speaker Change: Forming exceptionally well.
Speaker Change: And then the other driver of that as we launched a 30 Gram shake action strong with fiber, which was positioned as a great.
<unk>, one, but certainly not limited to that and that has been an important driver of the growth we're seeing in shakes.
Speaker Change: And so if you look if you look at the overall performance of.
Speaker Change: Shakes that addition, SSAT Graham.
And we have right now is proving to be highly incremental.
Speaker Change: The Atkins shake business.
Speaker Change: And I know, it's still early days, but is there an opportunity if you're bringing new consumers to the Atkins brand through the streaming platform to convert them to some of the other innovations like gummies or was it troubles or do you find the day. If you were say consumer youre kind of siloed in that.
Speaker Change: <unk> format.
Speaker Change: 0.1.
Speaker Change: One of the strengths of Atkins is the breadth of the portfolio and we do say that when they come in on a shake out of it as a ready to eat or vice versa. So there's a lot of switching.
Speaker Change: Switching within the portfolio.
Speaker Change: And.
Speaker Change: It's too early to know if that is happening on strong for example, but certainly that's consistent with how the brand has grown in the past, which as I've come into the brand.
Speaker Change: They understand the brand promise I see the breadth of products and in the shop across those products. So that's what I would expect but it's a little early to tell right now whether that is having on strong for example.
Speaker Change: Great I appreciate the color I'll hop back in the queue.
Speaker Change: Thank you. Our next question comes from the line of Jon Andersen with William Blair. Please proceed with your question.
Jon Andersen: Yeah. Thanks for the question, operator, and Mark Shout out to you on retirement and thanks for your help over the years one question of Atkins in one on one.
Jon Andersen: On Atkins, you talked a lot about optimizing spend and eliminate low ROI spend can you give us a little bit more context.
Jon Andersen: What this means from a.
You know how much the historical spend has been what it might look like post optimization and the margin implications for the Atkins brand.
Jon Andersen: And then on Owen.
Speaker Change: Are you seeing or expecting any changes from a competitive standpoint Ian.
Speaker Change: In the category of this segment and are those kind of baked in.
Speaker Change: To your kind of expectations through the balance of the year ended the fiscal 'twenty six thank you.
I guess on the Atkins one.
Speaker Change: We don't really want to get into a lot of profitability by brand for competitive reasons. We don't really look at that I think we're trying to do is use the spending that we have overall in the most efficient and effective way, we do see a lot of the spend that we are reducing for atkins being reinvested in in quest.
Speaker Change: And a little bit more than one so I think overall, we're trying to get to a business that we think is a sustainable business longer term and thats. What we think we can get to for Atkins by eliminating some of the investments and the returns on those and aligning those more with expectations. So I don't really want to get more into the detail on that if that's okay.
Speaker Change: The only example, I'll give you is trade.
Speaker Change: Where over the years and I think driven perhaps by not having sufficiently robust innovation pipeline trade that creep into the business and when we.
Speaker Change: We reviewed every single trade event, what we found is that many of those events.
I'm very unprofitable.
Speaker Change: But perhaps even more importantly, we're subsidizing base business.
Speaker Change: And that debt.
Speaker Change: Looking at the business from that lens.
Speaker Change: The right decision to remove trade. It is not that is unprofitable and is generally to subsidize interface. So just to give you. One example.
Speaker Change: And on marketing.
Speaker Change: Our marketing spend had gotten out of line with even our own guidelines.
Speaker Change: Marketing as a percentage of sales what.
Speaker Change: What I would note is that.
Speaker Change: The majority.
Speaker Change: The cuts in marketing we're at.
Speaker Change: Non working I would also note that through our new media partnership we have we're able to offset that working impacts, but there still is an impact as we bring that spend back into line.
Speaker Change: I think your question I just wanted to clarify was it on competitive response.
Speaker Change: A question, yes, yes, Owen and any changes to the competitive landscape in plant based segment.
Speaker Change: No. We are we haven't seen any.
Speaker Change: Oh.
Speaker Change: As the clear leader in plant based and as I think when we announced the deal.
The data point that really convinced me to make this acquisition.
Speaker Change: Oh and logistics sells on taste.
Speaker Change: The plant based offering that is now close enough to the dairy based alternative on Te.
Speaker Change: And that's why it is a clear leader in client base and it's not easy to get there.
Speaker Change: Figured it out and say, we're working with them on getting improved taste profile, but that taste profile is now close enough to dairy which is why we're saying the majority of new consumers come into that business from dairy.
Speaker Change: No.
Speaker Change: Yes.
Speaker Change: We're not hearing we are not seeing a plant based competitors.
Note to own it has emerged as the clear.
Speaker Change: What I would say is as we look at the future of the business.
Speaker Change: We want it in the rotation out of the mainstream consumer.
Speaker Change: That's where we're going with it.
Speaker Change: That's great. Thank you so much for the color.
Speaker Change: Thank you. Our final question today comes from the line of Alexia Howard with Bernstein. Please proceed with your question.
Speaker Change: Good morning, everyone.
Speaker Change: Good morning.
Speaker Change: Okay. So can I start with the G. L. P. One question you mentioned your plans to talking about G. L. P. One trends in your prepared remarks can you give us a little bit more color on that.
Speaker Change: What are you doing.
Speaker Change: And when is it messaging and marketing is it unpack labels.
Speaker Change: Dedicated new product just a little bit more color would be helpful. And then I have a follow up.
Speaker Change: Yeah.
Speaker Change: I mean, it's obviously still early innings with the <unk> drag spec.
Speaker Change: We do see this as a tailwind to our category.
Speaker Change: And the tailwind as far as our product set right right.
Speaker Change: Hannon when you're on the drug because what we found even in our own research is that consumers. When they are on the drugs are looking for propane and maintain muscle mass and.
Speaker Change: And fiber is very important because many of them have got health issues.
Speaker Change: And then the equal opportunity if not greater is as an off ramp.
Speaker Change: Which is a achieve their weight loss goals. They are looking to how they can sustainably hold onto the emotional and physical benefits of that weight loss, which is where atkins in particular has an important role to play. So then your question is what are we doing how are we tapping into that.
Speaker Change: On Atkins, our new advertising.
Specifically references GOP one.
Speaker Change: Use it and.
Speaker Change: And specifically the physician's Atkins as a sustainable offering to hold onto those gains that AD was the best at best scoring ablative ahead on Atkins and Wild Daily we believe that as part of the reason we're seeing.
Speaker Change: Improvement in consumption numbers.
Speaker Change: Now and as we as I mentioned just previously.
Speaker Change: <unk> launched a product that can strong that is positioned as a perfect companion high protein fiber and that product continues to do very well and then we obviously have supporting all of that which you have targeted advertising.
Speaker Change: Where we're positioning that product.
Speaker Change: Digital two <unk>.
Speaker Change: D L P. One companion.
It's not a primary focus on tapping into <unk> Atkins, but what I would say, it's a class will also benefit just from that demand that consumers have for <unk>.
Speaker Change: Healthy products lastly, we are working with customers at a category level to reinforce the importance of the category and it.
Speaker Change: How important it is to support consumers whether they are on the track to champion when consumers and.
Speaker Change: Retailers get it.
Speaker Change: It's a benefit to be located near the pharmacy section.
Speaker Change: Working on some tie ins with some pharmacies with some rates highlights we see that says.
Speaker Change: Significant tailwind and.
Speaker Change: We're pleased with the early response was saying to some of the tactics and initiatives we have in place.
Speaker Change: Perfect.
Speaker Change: Just to finish up here first of all Mark. Thank you so much for your help over the years and Josh Welcome do you have any data specifically on repeat rate O N E.
Speaker Change: How those are trending over time I'll leave at that thank you so much.
Speaker Change: Yes.
Speaker Change: <unk> repaid.
Speaker Change: Actually improved significantly over the last three years our guidance. This was another data point, we looked at class eight Jerry intelligence.
Speaker Change: And what's really interesting as you can.
Speaker Change: Tie the increase in our AP, right, which I think now around 40 ish percent.
Speaker Change: Two the product improvements that made over time.
Speaker Change: And that was another data point that gave us confidence that this was the right acquisition I've always if you have a repeat rate with a four in front of it Alexia youre in pretty good shape.
Speaker Change: Oh and as they are right now and I think as soon as we combine our two R&D organizations will get even though it will get even better.
Wonderful. Thank you very much I'll pass it on.
Speaker Change: Thank you that concludes our question and answer session I will turn the floor back to management for any final comments great.
Speaker Change: Great. Thank you so much for joining us for today's call, Josh and I will be around to answer any follow up questions. You may call and we'll speak to you again during our fiscal second quarter conference call in early April. Thank you.
Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.