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May 30, 2020
Simply Good Foods Q3 2020 Earnings Report
Simply Good Foods' third quarter performance was significantly impacted by COVID-19 factors, resulting in changes in shopping and consumption behavior, with net sales increasing by 54.2% due to the Quest acquisition and legacy Atkins net sales declining by 8.3%.
Key Takeaways
Simply Good Foods reported a 54.2% increase in net sales for the third quarter, driven by the acquisition of Quest. However, Legacy Atkins net sales declined by 8.3%, offset by e-commerce growth. Adjusted EBITDA increased by 74.2% due to the inclusion of Quest.
Net sales increased 54.2%, reaching $215.1 million.
Gross profit margin increased by 60 basis points to 41.2%.
Net income was $16.4 million, compared to $13.5 million in the previous year.
Adjusted EBITDA increased 74.2% to $43.4 million, primarily due to the Quest acquisition.
Simply Good Foods
Simply Good Foods
Forward Guidance
Simply Good Foods anticipates full-year 2020 net sales of $790-800 million and Adjusted EBITDA of $145-150 million, assuming U.S. movement restrictions remain at the current levels. The Company anticipates 2020 Adjusted Diluted Earnings Per Share to be in the range of $0.86 to $0.90.
Positive Outlook
- Marketplace trends of products have improved sequentially as movement restrictions eased.
- Increase in consumption is due to increasing brand relevance among consumers.
- Increase in consumption is due to increased shopping trips.
- Increase in consumption is due to more on-the-go consumption.
- Company stepped-up marketing and merchandising investments in brands.
Challenges Ahead
- Full-year 2020 net sales of $790-800 million and Adjusted EBITDA of $145-150 million is assumed that U.S. movement restrictions remain at the current levels
- Legacy Atkins net sales and Adjusted EBITDA is expected to be about the same as the year ago period, including the headwind of a fifty-third week in fiscal year 2019.
- The company estimates that the extra week included in fiscal year 2019 is a headwind to year-over-year comparisons of reported legacy Atkins net sales growth in fiscal 2020 of about 2 percentage points.
- The Company anticipates 2020 Adjusted Diluted Earnings Per Share to be in the range of $0.86 to $0.90 versus $0.77 in 2019.
- ERP implementation costs ramp-up in the fourth quarter.