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DENVER, April 04, 2019 (GLOBE NEWSWIRE) -- The Simply Good Foods Company (NASDAQ:SMPL) ("Simply Good Foods," or the "Company"), a developer, marketer and seller of branded nutritional foods and snacking products, today reported financial results for the thirteen and twenty-six week periods ended February 23, 2019.
"Our strong second quarter and year-to-date results reflect the successful execution of our annual plan as well as our strategic initiatives," said Joseph E. Scalzo, President and Chief Executive Officer of Simply Good Foods. "We delivered double-digit sales, gross profit and adjusted EBITDA growth in both the second quarter and year-to-date periods. I'm particularly pleased that our U.S. retail takeaway, as measured by IRI for the thirteen week period ended February 23, 2019, continued to be strong and was up 22.1% versus the prior year. We continued to expand adjusted EBITDA margin while also making investments in marketing and organizational capabilities that we believe will benefit the company in the near and long term."
Second Quarter 2019 Financial Highlights vs. Second Quarter 2018
Net sales increased $14.5 million, or 13.2%, to $123.8 million, primarily driven by volume growth. As expected, net sales growth did benefit from lower frequency of bar promotions partially offset by a shift in non-price related customer activity, as discussed last quarter.
Gross profit was $57.6 million for the second quarter of 2019, an increase of $7.4 million or 14.7%. Gross profit margin was 46.6% compared to 46.0% for the thirteen weeks ended February 24, 2018 primarily driven by lower frequency of bar promotions, partially offset by the aforementioned non-price related customer activity. This shift in customer activity only impacts fiscal 2019 amounts, resulting in an unfavorable impact on 2019 year-to-date gross margin of about 110 basis points.
Net income for the second quarter of 2019 was $12.7 million, compared with $41.4 million for the comparable period of 2018. Recall, the second quarter of 2018 results include a $29.0 million one-time gain related to the re-measurement of deferred tax liabilities and a $4.7 million gain on the fair value of the Tax Receivable Agreement. Net income in the second quarter of 2019 was primarily driven by gross profit, partially offset by higher operating expenses and income tax expense. Specifically, marketing expense increased $2.1 million, driven by increased television media and e-commerce investments. General and administrative expenses increased $3.1 million as a result of higher professional fees, investments to enhance organizational capabilities in key functions, and greater incentive compensation. Selling expense was $2.4 million lower than last year; due to the aforementioned shift in non-price related customer activity.
Adjusted EBITDA, a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 22.1% to $23.0 million.
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(1) Adjusted EBITDA is a non-GAAP financial measure. Please refer to "Reconciliation of Adjusted EBITDA" in this press release for an explanation and reconciliations of this non-GAAP financial measure.
Year-to-Date Second Quarter 2019 Financial Highlights vs. Year-to-Date Second Quarter 2018
Net sales increased $28.8 million, or 13.3%, to $244.7 million, primarily driven by volume growth.
Gross profit was $116.7 million for the twenty-six weeks ended February 23, 2019, an increase of $13.7 million, or 13.3%. Gross profit margin was 47.7%, in-line with the prior year. As discussed last quarter, gross margin is impacted by a shift in non-price related customer activity that only affects fiscal 2019 amounts, resulting in an unfavorable impact in 2019 year-to-date gross margin of about 80 basis points.
Net income for the first six months of 2019 was $28.0 million, compared with $51.6 million for the comparable period of 2018. The year ago period was impacted by the aforementioned tax items and the gain related to the fair value of the Tax Receivable Agreement. Net income in 2019 was primarily driven by gross profit, partially offset by higher operating expenses and income tax expense. Specifically, marketing expense increased $3.8 million, driven by increased television media and e-commerce investments. General and administrative expenses increased $4.9 million as a result of higher professional fees and investments to enhance organizational capabilities in key functions and greater incentive compensation. Selling expense was $2.5 million lower than last year; due to the aforementioned shift in non-price related customer activity.
Adjusted EBITDA, a non-GAAP financial measure used by the Company that makes certain adjustments to net income calculated under GAAP, increased 16.8% to $49.7 million.
Balance Sheet and Cash Flow
As of February 23, 2019, the Company had cash and cash equivalents of $218.9 million and $197.5 million in outstanding principal of the term loan, resulting in a trailing twelve month combined Net Debt to Adjusted EBITDA ratio of (0.2)x. In the fiscal second quarter, the Company repurchased $0.1 million in common stock against the $50 million authorization announced last year.
Outlook
Given the strength and momentum of the business in the first half of the year, the Company is more optimistic than last quarter in its ability to exceed its long-term net sales growth target of 4% to 6%. Specifically, we anticipate full-year fiscal 2019 net sales and adjusted EBITDA to both increase double digits, on a percentage basis versus last year. This outlook reflects anticipated solid volume growth and the benefit of a fifty-third week, as well as incremental strategic investments in marketing and brand building initiatives that should continue to drive growth over the long term.
Conference Call and Webcast Information
The Company will host a conference call with members of the executive management team to discuss these results today, Thursday, April 4, 2019 at 6:30 a.m. Mountain time (8:30 a.m. Eastern time). Investors interested in participating in the live call can dial 877-407-0792 from the U.S. and International callers can dial 201-689-8263.
In addition, the call and accompanying presentation slides will be broadcast live over the Internet hosted at the "Investor Relations" section of the Company's website at http://www.thesimplygoodfoodscompany.com. The webcast will be archived for 30 days. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, April 18, 2019, by dialing 844-512-2921 from the U.S., or 412-317-6671 from international locations, and entering confirmation code 13688887.
About The Simply Good Foods Company
The Simply Good Foods Company (Nasdaq:SMPL), headquartered in Denver, Colorado, is a highly-focused food company with a product portfolio consisting primarily of nutrition bars, ready-to-drink shakes, snacks and confectionery products marketed under the Atkins®, SimplyProtein®, Atkins Endulge®, and Atkins Harvest Trail brand names. Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with investment opportunities in the snacking space and broader food category. Over time, Simply Good Foods aspires to become a portfolio of brands that bring simple goodness, happiness and positive experiences to consumers and their families. For more information, please visit http://www.thesimplygoodfoodscompany.com.
Forward Looking Statements
Certain statements made herein are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by or include words such as "will", "expect", "aspire", "outlook" or other similar words, phrases or expressions. These forward-looking statements include statements regarding future plans for the Company, the estimated or anticipated future results and benefits of the Company's future plans and operations, future opportunities for the Company, and other statements that are not historical facts. These statements are based on the current expectations of the Company's management and are not predictions of actual performance. These statements are subject to a number of risks and uncertainties and the Company's business and actual results may differ materially. These risks and uncertainties include, but are not limited to, changes in the business environment in which the Company operates including general financial, economic, regulatory and political conditions affecting the industry in which the Company operates; changes in consumer preferences and purchasing habits; the Company's ability to maintain adequate product inventory levels to timely supply customer orders; the impact of the Tax Act on the Company's business; changes in taxes, tariffs, duties, governmental laws and regulations; the availability of or competition for other brands, assets or other opportunities for investment by the Company or to expand the Company's business; competitive product and pricing activity; difficulties of managing growth profitably; the loss of one or more members of the Company's management team; and other risk factors described from time to time in the Company's Form 10-K, Form 10-Q, and Form 8-K reports (including all amendments to those reports) filed with the U.S. Securities and Exchange Commission from time to time. In addition, forward-looking statements provide the Company's expectations, plans or forecasts of future events and views as of the date of this communication. Except as required by law, the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date, and cautions investors not to place undue reliance on any such forward-looking statements. These forward-looking statements should not be relied upon as representing the Company's assessments as of any date subsequent to the date of this communication.
Investor Contact
Mark Pogharian
Vice President, Investor Relations, Treasury and Business Development
The Simply Good Foods Company
717-307-8197
mpogharian@thesimplygoodfoodscompany.com
Reconciliation of Adjusted EBITDA
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net income as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). Simply Good Foods defines Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) as net income before interest expense, income tax expense, depreciation and amortization with further adjustments to exclude the following items: stock-based compensation and warrant expense, business transaction costs, restructuring costs, management fees, frozen media licensing fees, transactional exchange impact, change in fair value of contingent consideration - TRA liability, and other non-core expenses. The Company believes that the inclusion of these supplementary adjustments in presenting Adjusted EBITDA are appropriate to provide additional information to investors and reflects more accurately operating results of the on-going operations. Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in calculation.
The following unaudited table below provides a reconciliation of adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the thirteen weeks and twenty-six weeks ended February 23, 2019 and February 24, 2018:
(1) Other items consist principally of exchange impact of foreign currency transactions, frozen licensing media and other expenses.
Source: The Simply Good Foods Company
