The Simply Good Foods Company (NASDAQ:SMPL) Q2 2020 Earnings Conference Call - Final Transcript

Apr 06, 2020 • 08:30 am ET


The Simply Good Foods Company (NASDAQ:SMPL) Q2 2020 Earnings Conference Call - Final Transcript


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Joseph E. Scalzo

integration is on track and our synergy plans are proceeding as expected. In March, overall retail foot traffic was extremely volatile with the [Indecipherable] in the beginning of the month followed by a significant slowdown in the second half of the month at most brick and mortar retailers. The retail takeaway trend of both our category and our brand followed a similar pattern. Given the likely continuing uncertainty around consumer purchasing behavior due to COVID-19 movement restrictions, we believe it's prudent to withdraw our fiscal 2020 full year guidance at this time. Our key priorities now are to safeguard the continued health of our employees and community, ensure the reliability of our supply chain and provide accurate and timely service to our retail customers and consumers.

We are in close communication with our key customers and suppliers. And to-date our supply chain remains robust and fully operational. Our contract manufacturers are taking extra measures to ensure that they're providing their workers with a safe environment and are committed to meet the consumer and customer requirements of our business in the coming weeks and months. Net, we will do what's right for the long-term health of our employees, brand and goods. Now, let's move on to slide 5 and discuss our fiscal second quarter results. Second quarter results were greater than our expectations and both Atkins and Quest delivered strong sales growth as well as growth and adjusted EBITDA margin expansion. Legacy Atkins retail takeaway in the second quarter was generally in line with our [Indecipherable].

Growth was driven by bars and confections across all channels. Additionally, Atkins e-commerce momentum continued with sales up double-digit. Quest Q2 results were strong across all metrics and are tracking to our acquisition model. Integration work continues and is progressing on schedule. In our fiscal second quarter and for the year-to-date period the nutritional snacking category had increased mid- to high-single-digit. The growth rate may move around a bit in the short-term due to changing shopping behavior related to COVID-19 moving restriction. But over the long term, we believe the mega-trends that have fueled nutritious snacking categories such as healthy snacking, convenience, meal replacement and on-the-go consumption will continue to be tailwinds for our business and brands

In Atkins and Quest, we have two trusted advantage lifestyle brands that target different consumer groups and position us to maintain our leadership role within the category. On a run rate apple-to-apple basis we have a scale business with net sales in excess of $900 million. And our offshore supply chain enables solid margins, low capex and results in strong cash generation. The Atkins and Quest brands are tightly aligned around the consumer mega trends such as more frequent snacking occasions and the desire for on-the-go meal replacement. In additions, our products are uniquely positioned to benefit from growing consumer interest at high-protein, low-carb and minimal sugar. This profile has broad appeal to consumers interested in better-for-you as well as weight management and active nutrition shoppers looking to