Operator
Operator
Greetings, thank you for joining our teleconference today. I will now turn the conference over to Katie Turner for opening remarks.
The Simply Good Foods Company (SMPL)
Q3 2017 Earnings Call· Thu, Jul 13, 2017
$13.72
+2.85%
Same-Day
-0.08%
1 Week
-1.67%
1 Month
-0.08%
vs S&P
-0.95%
Operator
Operator
Greetings, thank you for joining our teleconference today. I will now turn the conference over to Katie Turner for opening remarks.
Katie Turner
Management
Good morning. I’m pleased to welcome you to The Simply Good Foods Company’s fiscal third quarter earnings call for the 13 weeks ended May 27, 2017. Joining me on the call this morning are Joe Scalzo, President and Chief Executive Officer; and Shaun Mara, Chief Financial Officer. The Company issued its earnings press release at approximately 7:00 AM Eastern Time. A copy of the release and accompanying presentation are available under the investors section of the Company’s website at www.thesimplygoodfoodcompany.com. This call is being webcast live on the website and an archive of today’s remarks will also be available for 30 days. During the course of today’s call, management will make forward-looking statements that are subject to various risks and uncertainties and may cause actual results to differ materially. The Company undertakes no obligation to update these statements based on subsequent events. A detailed listing of such risks and uncertainties can be found in today’s press release and the Company’s filing with the SEC. In addition, management will make references to adjusted EBITDA, a non-GAAP financial measure that it believes provides investors with useful information with which we value the Company’s operating performance. Today’s earnings release includes a reconciliation of the more directly comparable GAAP measures to non-GAAP financial measures. And finally, the Company has included in today’s earnings release and presentation, un-audited pro forma of financial information for the 13 and 39 weeks ended May 28, 2016, that provides results that the Company had licensed its frozen meal business throughout fiscal 2016. And with that, it's now my pleasure to turn the call over to Joe Scalzo, Chief Executive Officer of The Simply Good Foods Company.
Joe Scalzo
Management
Thank you, Katie. Good morning and thank you for joining us today. I’m excited to be speaking with you on our first earnings call. As many of you know, The Simply Good Foods transaction became effective last week. I’ll begin today’s discussion with a brief overview of the Company, our key investments highlights and our growth opportunities and strategies. Shaun will then provide you greater details in the third quarter and year-to-date financial highlights. Following that we’ll open the call for your questions. We’re pleased to report of initial quarter as a public company with solid results and positive momentum across our business. We enjoyed speaking with many of you while out on the road show earlier this year. For those of you who are new to our story, I’d like to take a few minutes to discuss our business. Let me start by briefly describing the two companies that we’ll talk about today. The Simply Good Foods Company is the result of the merger of Atkins Nutritionals with Conyers Park Acquisition Incorporation. Conyers Park was a special purpose acquisition corporation founded by Jim Kilts and Dave West longtime business leaders within the consumer products industry. They raised over $400 million in an IPO last July, and Atkins is the first asset added to the portfolio. Atkins is a leader in the nutritionals snacking space, offering a way of premium price products with quality ingredients. We have a highly focused portfolio 60 SKUs comprise the bars, ready-to-drink shakes and other snacks. We have adjusted EBITDA margins approaching 20% and earned asset-light model that generates strong free cash flow with modest working capital requirements. We run our business completely outsourced in terms of supply chain and distribution, and we employ a lean operating philosophy. And as we’ll discuss today, we have…
Shaun Mara
Management
Thank you, Joe. Good morning, everyone. Let me start with two points as it relates to the numbers you see on the page the follow. First, the pro forma Q3 and year-to-date numbers will be discussing today are different than they appear in our GAAP results. With adjusted to the historical results to show them as we have licensed our frozen meal business throughout 2016. As disclose in our proxy, the frozen meals business was licensed at the beginning of fiscal 2017. However, our pro forma shown here exclude the frozen meals P&L during 2016 and replace it with licensing revenue that we would have receive, if we have license the business at the beginning of fiscal 20016. We think this provides an apples-to-apples comparison as it's more useful to investors. Second, we evaluated our performance on an adjusted EBITDA basis as opposed to net income due to our asset-light strong cash flow model. As there are a few charges that we backed out of EBITDA to arrive at adjusted EBITDA number, we’ve included a detailed reconsolidation for this in the appendix to our presentation. In addition, we’ve also included in the appendix P&L for each quarter in 2016 and year-to-date 2017 working by line item, our GAAP results to the pro forma results presented here. In terms of results, the third quarter pro forma results are fairly consistent with what we've seen for the first half of the year. First half, pro forma net sales were up 7% year-over-year that includes two points of growth or about $2 million that came with our fiscal 2017 acquisition of SimplyProtein. That was on top of 5% organic growth led by the U.S., which was up 6% for the quarter. Pro forma gross profit continued to improve, growing at 8% year-over-year with…
Joe Scalzo
Management
Thanks, Shaun. In summary, we’re very pleased with our solid POS growth and feel good about the prospects for extending that well into the future. We’re showing the compelling business opportunity with the very large consumer group that we’ve only begun to target and we are advancing what we think is a breakthrough marketing concepts and hit concept in hidden sugars. We’re executing on our four strategic initiatives as evidenced by the continued growth in pro forma net sales and pro forma adjusted EBITDA year-to-date. And as Shaun had said, we expect to deliver on our adjusted EBITDA forecast for 2017. Longer-term, we expect annual top line growth to be 4% to 6% with adjusted EBITDA growth in the high single digits. And finally, I’d like to thank all the members of our team for their efforts. We have a talented group of people who performed at a very high level day-in and day-out and are committed to growing the business and who are working together in a culture of continues improvement that's aimed to create the value for all of our stakeholders. And with that, I’ll open the call for questions. Operator?
Operator
Operator
Joe Scalzo
Management
We appreciate your participation on today’s call and your interest in Simply Good Foods. We continue to execute on our strategic initiatives and look forward to speaking with you again on our fourth quarter earnings call to this fall. Have a good day.
Operator
Operator
Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.