The Simply Good Foods Co (SMPL, Financial) released its 8-K filing on October 24, 2024, reporting its fiscal fourth quarter and full fiscal year 2024 financial results. The company, known for its low-carbohydrate, high-protein products under the Atkins and Quest brands, has expanded its portfolio with the acquisition of Only What You Need, Inc. (OWYN), contributing significantly to its recent performance.
Quarterly Performance Overview
The Simply Good Foods Co reported net sales of $375.7 million for the fourth quarter, surpassing the analyst estimate of $374.06 million. This represents a 17.2% increase from the previous year's $320.4 million, largely driven by the OWYN acquisition, which contributed 9.1 percentage points to the net sales growth. However, the company's earnings per diluted share (EPS) fell to $0.29, missing the analyst estimate of $0.43 and down from $0.36 in the same quarter last year.
Financial Achievements and Challenges
The Simply Good Foods Co's adjusted diluted EPS, a non-GAAP measure, was $0.50, up from $0.45 in the previous year, indicating strong operational performance despite the EPS miss. Adjusted EBITDA also saw a significant increase to $77.5 million from $67.3 million, reflecting a 15% growth. The company's gross margin improved by 120 basis points to 38.8%, driven by lower ingredient and packaging costs and the inclusion of OWYN.
In fiscal 2024, the Simply Good Foods team delivered on our strategic initiatives driving solid retail takeaway gains that resulted in full year volume driven legacy net sales growth of about 5% and an increase of Adjusted EBITDA of nearly 10%," said Geoff Tanner, President and Chief Executive Officer of the Company.
Income Statement and Balance Sheet Highlights
For the full fiscal year 2024, net sales reached $1,331.3 million, slightly above the annual estimate of $1,329.62 million, marking a 7.1% increase from the previous year. Net income for the year was $139.3 million, up from $133.6 million, with a diluted EPS of $1.38, below the estimated $1.53. The company's balance sheet showed total assets of $2,436.1 million, with cash reserves of $132.5 million, reflecting a strong liquidity position.
Cash Flow and Debt Management
The Simply Good Foods Co generated $215.7 million in cash from operating activities, a 26% increase from the previous year. The company completed the OWYN acquisition for $280.0 million, funded through cash reserves and an incremental borrowing of $250.0 million. The company repaid $135.0 million of its term loan debt during the year, ending with an outstanding principal balance of $400.0 million.
Analysis and Outlook
The Simply Good Foods Co's strong revenue growth and improved adjusted EBITDA highlight its successful integration of OWYN and effective cost management. However, the decline in EPS indicates challenges in managing acquisition-related costs and interest expenses. The company's strategic focus on expanding its product offerings and increasing market penetration, particularly with the Quest and OWYN brands, positions it well for future growth.
Looking ahead, the company expects net sales to increase by 8.5% to 10.5% in fiscal 2025, with OWYN contributing significantly. Adjusted EBITDA is projected to grow by 4% to 6%, despite anticipated input cost inflation. The company's commitment to innovation and brand revitalization, particularly for the Atkins brand, will be crucial in maintaining its competitive edge in the nutritional snacking category.
Explore the complete 8-K earnings release (here) from The Simply Good Foods Co for further details.
