What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-01-05 compared with 2021-07-08 · 122 added, 214 removed, 129 unchanged (72% of the section changed)

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These statements relate to future events or our future financial or operational performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements.

These statements include, but are not limited to, the effect of the COVID-19 pandemic on our business, financial condition and results of operations.

These statements include, but are not limited to, the effect of the COVID-19 pandemic on our business, financial condition and results of operations, our expectations regarding our supply chain, including but not limited to, raw materials and logistics costs, and the effect of price increases.

We disclaim any undertaking to publicly update or revise any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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Such risks and uncertainties include those related to our ability to sell our products.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K/A for the fiscal year ended August 29, 2020 (“Annual Report”) and our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Report.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended August 28, 2021 (“Annual Report”) and our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Report.

In addition to historical information, the following discussion contains forward-looking statements, including, but not limited to, statements regarding the Company’s expectation for future performance, liquidity and capital resources that involve risks, uncertainties and assumptions that could cause actual results to differ materially from the Company’s expectations.

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The Simply Good Foods Company is a consumer packaged food and beverage company that aims to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements.

Our nutritious snacking platform consists of the following core brands that specialize in providing products for consumers that follow certain nutritional philosophies, dietary approaches and/or health-and-wellness trends:

Atkins® for those following a low-carb lifestyle;

and Quest® for consumers seeking to partner with a brand that makes the foods they crave work for them, not against them, through a variety of protein-rich foods and beverages that also limit sugars and simple carbs.

The product portfolio we develop, market and sell consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Atkins Endulge®, and Quest® brand names.

We believe Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space.

Our nutritious snacking platform consists of brands that specialize in providing products for consumers that follow certain nutritional philosophies and health-and-wellness trends:

Atkins® for those following a low-carb lifestyle and Quest® for consumers seeking a variety of protein-rich foods and beverages that also limit sugars and simple carbs.

We distribute our products in major retail channels, primarily in North America, including grocery, club, and mass merchandise, as well as through e-commerce, convenience, specialty, and other channels.

Our portfolio of nutritious snacking brands gives us a strong platform with which to introduce new products, expand distribution, and attract new consumers to our products.

Our platform also positions us to continue to selectively pursue acquisition opportunities of brands in the nutritious snacking category.

To that end, in November 2019, we completed the acquisition of Quest Nutrition, LLC (“Quest”), a healthy lifestyle food company, for a cash purchase price of approximately $1.0 billion (subject to customary adjustments) (the “Acquisition of Quest”).

For more information, please see “Liquidity and Capital Resources—Acquisition of Quest.”

Effects of COVID-19

In December 2019, a novel coronavirus disease, or COVID-19, was reported and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern.

On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law.

The CARES Act provided a substantial stimulus and assistance package intended to address the effect of the COVID-19 pandemic, including tax relief and government loans, grants and investments.

Additionally, various federal, state and local government-imposed movement restrictions and initiatives have been implemented to reduce the global transmission of COVID-19, including reduced or eliminated food services, the closure of retailing establishments, the promotion of social distancing and the adoption of remote working policies.

Beginning in the third quarter of 2020, we actively engaged with the various elements of our value chain, including our customers, contract manufacturers, and logistics and transportation providers, to meet demand for our products and to remain informed of any challenges within our value chain.

Given the unpredictable nature of the COVID-19 pandemic and the initial surge in consumption, we increased finished goods inventory of some of our key products.

In the fourth quarter of 2020 and continuing into the second quarter of 2021, consumer consumption habits became more steady and inventory levels normalized.

Based on information available to us as of the

date of this Report, we believe we will be able to deliver our products to meet customer orders on a timely basis, and therefore, we expect our products will continue to be available for purchase to meet consumer meal replacement and snacking needs for the foreseeable future.

We continue to monitor customer and consumer demand, and intend to adapt our plans as needed to continue to drive our business and meet our obligations during the evolving COVID-19 situation.

Our consolidated results of operations for the thirteen and thirty-nine weeks ended May 29, 2021 continued to be affected by changes in consumer shopping and consumption behavior due to COVID-19.

However, for the thirteen and thirty-nine weeks ended May 29, 2021, our business improved, driven by increasing consumer mobility and improving shopper traffic in brick and mortar retailers versus the prior year period that was pressured by COVID-19 movement restrictions.

We believe there is a high correlation of consumer mobility to the consumption of our products.

As shopper traffic within brick and mortar retailers improves, particularly in the mass and convenience store channels, our business, particularly bars, performs well.

There is still uncertainty related to the duration of reduced consumer mobility and when shopping trips will fully return to pre-pandemic levels.

While our Quest brand has outperformed its portion of the nutritious snacking segment, the performance of our Atkins brand, which is part of the weight management portion of the market, has improved at a slower rate.

However, the Atkin’s performance for the thirteen weeks ended May 29, 2021 has improved sequentially, primarily due to increasing consumer mobility and improving shopper traffic in brick and mortar retailers.

For the thirteen weeks ended November 27, 2021, our business improved from the end of fiscal year 2021, driven in part by the increasing normalization of consumer mobility and shopper traffic patterns in brick and mortar retailers versus prior periods that were pressured by COVID-19 movement restrictions.

The improvement in consumer mobility and shopper traffic patterns however remains fragile and there continues to be uncertainty related to the sustainability and longevity of these trends.

In addition, these positive trends could be negatively affected by an increase in the number and rate of reported positive cases of COVID-19, especially resulting from new variants of the virus, along with any government actions to reimpose mobility restrictions.

During fiscal year 2022, we expect our business performance will continue to be affected by the level of consumer mobility, which includes the rate at which consumers return to working outside the home.

We have actively engaged with the various elements of our value chain, including our retail customers, contract manufacturers, and logistics and transportation providers, to meet demand for our products and to remain informed of any challenges within our value chain.

Although consumer consumption habits have become steadier, inventory levels remain variable.

Based on information available to us as of the date of this Report, we believe we will be able to deliver products at acceptable levels to fulfil customer orders on a timely basis;

therefore, we expect our products will continue to be available for purchase to meet consumer meal replacement and snacking needs

for the foreseeable future.

We continue to monitor customer and consumer demand along with our logistics capabilities and intend to adapt our plans as needed to continue to drive our business and meet our obligations during the continuing and evolving COVID-19 situation.

We remain uncertain of the ultimate effect COVID-19 could have on our business notwithstanding the distribution of several U.S.

government approved vaccines and the easing of movement restrictions.

This uncertainty stems from the potential for, among other things, (i) the possibility for mutations of COVID-19 to result in increased rates of reported cases for which currently approved vaccines are not effective, (ii) unexpected supply chain disruptions, (iii) changes to customer operations, (iv) reversal in recently improving consumer purchasing and consumption behavior, and (v) the closure of customer establishments.

government approved vaccines, the availability of booster inoculations and the easing of movement restrictions relative to the onset of COVID-19.

This uncertainty stems from the potential for, among other things, (i) the rise of COVID-19 mutations that have resulted in increased rates of reported cases for which currently approved vaccines are or may not be as effective, (ii) unexpected supply chain disruptions, including disruptions resulting from labor shortages or other human capital challenges, (iii) changes to customer operations, (iv) a reversal in recently improving consumer purchasing and consumption behavior, and (v) the closure of or reduced access to customer establishments.

Restructuring and Related Charges

In May 2020, we announced certain restructuring activities in conjunction with the implementation of our future-state organization design, which created a fully integrated organization with our completed Acquisition of Quest.

The new organization design became effective on August 31, 2020.

These restructuring plans primarily include workforce reductions, changes in management structure, and the relocation of business activities from one location to another.

For the thirteen and thirty-nine weeks ended May 29, 2021, we incurred a total of $0.2 million and $4.0 million in restructuring and restructuring-related costs, respectively, which have been included within General and administrative on the Condensed Consolidated Statements of Operations and Comprehensive Income.

As of May 29, 2021, we have incurred aggregate restructuring and restructuring-related costs of $9.5 million since May 2020.

Overall, we expect to incur a total of approximately $9.9 million in restructuring and restructuring-related costs, which are to be paid throughout fiscal 2021 and the first quarter of fiscal 2022.

Total restructuring and restructuring-related costs incurred in the thirteen weeks ended November 27, 2021 were immaterial.

We incurred a total of $2.5 million in restructuring and restructuring-related costs in the thirteen weeks ended November 28, 2020.

The effect of these restructuring activities has been included within General and administrative on the Condensed Consolidated Statements of Operations and Comprehensive Income.

Since the restructuring activities were announced in May 2020, we have incurred aggregate restructuring and restructuring-related costs of $9.9 million.

Overall, we expect to incur a total of approximately $10.1 million in restructuring and restructuring-related costs, including the $9.9 million previously incurred, and the balance of which will be paid through the second quarter of fiscal year 2022.

As of November 27, 2021, the outstanding restructuring liability was $0.1 million.

Refer to Note 13, Restructuring and Related Charges, of our Notes to Unaudited Condensed Consolidated Financial Statements in this Report for additional information regarding restructuring activities.

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There was no gain or loss recognized as a result of the SimplyProtein Sale.

The transaction enables our management to focus its full time and our resources on our core Atkins® and Quest® branded businesses and other strategic initiatives.

Supply Chain Costs

As we expect higher raw material and freight costs starting in the fiscal fourth quarter of 2021 and in fiscal year 2022, in June 2021 management notified our customers of our plans to institute a price increase effective in September 2021, the first month of our fiscal year 2022.

Management believes the price increase will enable us to continue to invest in initiatives that drive growth.

The transaction has enabled our management to focus its full time and resources on our core Atkins® and Quest® branded businesses and other strategic initiatives.

We expect higher raw material and logistics costs in fiscal year 2022.

As a result, we instituted a price increase effective in September 2021, the first month of our fiscal year 2022.

Management believes the price increase and cost savings initiatives will enable us to continue to invest in projects that drive growth.

We have begun to see logistics challenges, which we believe have contributed to lower retail and e-commerce sales of our products due to out-of-stock situations, delayed recognition of sales and higher than historical inventory levels.

In addition, we could experience additional lost sale opportunities at our retail and e-commerce customers if our products are not available for purchase as a result of disruptions in our supply chain relating to an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products.

Key Financial Definitions

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• General and administrative.

General and administrative expenses comprise expenses associated with corporate and administrative functions that support our business, including employee salaries, professional services, integration costs, restructuring costs, insurance and other general corporate expenses.

General and administrative expenses comprise expenses associated with corporate and administrative functions that support our business, including employee compensation, stock-based compensation, professional services, integration costs, restructuring costs, insurance and other general corporate expenses.

• Depreciation and amortization.

Depreciation and amortization costs consist of costs associated with the depreciation of fixed assets and capitalized leasehold improvements and amortization of intangible assets.

• Business transaction costs.

Business transaction costs comprise legal, due diligence, consulting and accounting firm expenses associated with the process of actively pursuing potential and completed business combinations, including the Acquisition of Quest.

Results of Operations

Sales and earnings growth improved during the third quarter, driven by increasing consumer mobility compared to the prior year which experienced COVID-19 movement restrictions.

As consumer foot traffic within brick and mortar retailers improved, particularly in the mass and convenience store channels, our business, particularly bars, did well.

Strong sales growth, cost controls around general and administrative costs, and Acquisition of Quest synergies more than offset higher marketing and employee-related costs.

Sales and earnings growth improved for both the Atkins® and Quest® brands during the thirteen weeks ended November 27, 2021, driven by improving consumer mobility and shopper trips compared to the thirteen weeks ended November 28, 2020, as well as increasing household penetration and innovation that continues to resonate with consumers.

As a result of the price increase effective in September 2021 as well as favorable product form and retail channel mix, we were able to more than offset the unfavorable effects of higher raw material costs, logistics costs, and supply chain challenges in the thirteen weeks ended November 27, 2021 and achieve gross margin expansion and earnings growth.

As previously discussed above in “Supply Chain,” we continue to expect to have higher raw material and logistics costs in fiscal year 2022 as compared to fiscal year 2021.

In assessing the performance of our business, we consider a number of key performance indicators used by management and typically used by our competitors, including the non-GAAP measures EBITDA and Adjusted EBITDA.

Because not all companies use identical calculations, the presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period.

Comparison of Unaudited Results for the Thirteen Weeks Ended May 29, 2021 and the Thirteen Weeks Ended May 30, 2020

Because not all companies use identical calculations, the presentation of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of EBITDA and Adjusted EBITDA to net income for each applicable period.

Comparison of Unaudited Results for the Thirteen Weeks Ended November 27, 2021 and the Thirteen Weeks Ended November 28, 2020

The following unaudited table presents, for the periods indicated, selected information from our Condensed Consolidated Statements of Operations and Comprehensive Income, including information presented as a percentage of net sales:

Thirteen Weeks Ended Thirteen Weeks Ended

(In thousands) May 29, 2021 % of Sales May 30, 2020 % of Sales

Net sales $ 284,001 100.0 % $ 215,101 100.0 %

Cost of goods sold 162,998 57.4 % 126,475 58.8 %

Gross profit 121,003 42.6 % 88,626 41.2 %

Operating expenses:

Selling and marketing 30,826 10.9 % 24,510 11.4 %

General and administrative 25,668 9.0 % 28,713 13.3 %

Depreciation and amortization 4,187 1.5 % 4,248 2.0 %

Business transaction costs — — % 47 — %

Total operating expenses 60,681 21.4 % 57,518 26.7 %

Income from operations 60,322 21.2 % 31,108 14.5 %

Other income (expense):

Interest income 1 — % 29 — %

Interest expense (7,985) (2.8) % (8,324) (3.9) %

(Loss) gain in fair value change of warrant liability (35,833) (12.6) % 31,703 14.7 %

Gain on legal settlement 5,000 1.8 % — — %

Loss on foreign currency transactions (272) (0.1) % (418) (0.2) %

Other income 70 — % 59 — %

Total other (expense) income (39,019) (13.7) % 23,049 10.7 %

Income before income taxes 21,303 7.5 % 54,157 25.2 %

Income tax expense 15,408 5.4 % 6,045 2.8 %

Net income $ 5,895 2.1 % $ 48,112 22.4 %

Other financial data:

Adjusted EBITDA (1)

$ 67,459 23.8 % $ 43,363 20.2 %

(1) Adjusted EBITDA is a non-GAAP financial metric.

See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period.

Net sales of $284.0 million represented an increase of $68.9 million, or 32.0%, for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020.

The increase was primarily driven by Quest brand net sales growth and solid e-commerce growth across both the Atkins brand and Quest brand.

The increase was partially offset by a 0.9% decrease in net sales due to the SimplyProtein Sale and the restructuring-related business activities in Europe in fiscal year 2021.

Additionally, net sales in the thirteen weeks ended May 29, 2021 were negatively affected by higher trade promotions.

Cost of goods sold .

Cost of goods sold increased $36.5 million, or 28.9%, for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020.

The cost of goods sold increase was driven by sales volume growth.

Gross profit.

Gross profit increased $32.4 million, or 36.5%, for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020.

Gross profit of $121.0 million, or 42.6% of net sales, for the thirteen weeks ended May 29, 2021 increased 140 basis points from 41.2% of net sales for the thirteen weeks ended May 30, 2020.

The increase in gross profit margin was primarily the result of favorable product form and retail channel mix given higher shopper traffic in brick and mortar channels.

Operating expenses .

Operating expenses increased $3.2 million, or 5.5%, for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020 due to the following:

• Selling and marketing.

Selling and marketing expenses increased $6.3 million, or 25.8%, for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020.

The increase was primarily related to higher marketing spend that was reinstated following a decline in the prior year period due to the impact of COVID 19.

• General and administrative.

General and administrative expenses decreased $3.0 million, or 10.6%, for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020.

The decrease was primarily attributable to a $3.9 million reduction in costs related to the integration of Quest and a decrease in restructuring charges of $1.2 million in the thirteen weeks ended May 29, 2021.

These decreases were partially offset by an increase in incentive compensation in the thirteen weeks ended May 29, 2021.

• Depreciation and amortization.

Depreciation and amortization expenses remained approximately flat at $4.2 million for the thirteen weeks ended May 29, 2021 and May 30, 2020.

• Business transaction costs .

Business transaction costs were nominal for the thirteen weeks ended May 30, 2020 and comprised expenses related to the Acquisition of Quest.

Interest income .

Interest income was nominal for each of the thirteen weeks ended May 29, 2021 and May 30, 2020.

Interest expense .

Interest expense decreased $0.3 million for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020, primarily due to principal payments reducing the outstanding balance of the Term Facility (as defined below) to $506.5 million as of May 29, 2021 from $635.5 million as of May 30, 2020, offset by accelerated deferred financing fee amortization.

(Loss) gain in fair value change of warrant liability.

A non-cash loss of $35.8 million in fair value change of warrant liability was recorded for the thirteen weeks ended May 29, 2021 compared to a non-cash gain of $31.7 million for the thirteen weeks ended May 30, 2020.

The increase in loss relates to changes in the valuation of warrant liabilities primarily driven by changes in stock price and volatility.

Gain on legal settlement.

The Company recorded a $5.0 million gain on a legal settlement during the thirteen weeks ended May 29, 2021.

Loss on foreign currency transactions.

A loss of $0.3 million in foreign currency transactions was recorded for the thirteen weeks ended May 29, 2021 compared to a foreign currency loss of $0.4 million for the thirteen weeks ended May 30, 2020.

The change relates to changes in foreign currency rates related to international operations.

Income tax expense.

Income tax expense increased $9.4 million for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020.

The increase in our income tax expense is primarily driven by higher income from operations, partially offset by permanent differences.

Net income was $5.9 million for the thirteen weeks ended May 29, 2021, a decrease of $42.2 million compared to net income of $48.1 million for the thirteen weeks ended May 30, 2020.

The decrease was primarily related to an increase in loss in fair value change of the warrant liability.

Adjusted EBITDA.

Adjusted EBITDA increased $24.1 million, or 55.6% for the thirteen weeks ended May 29, 2021 compared to the thirteen weeks ended May 30, 2020.

For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see “Reconciliation of EBITDA and Adjusted EBITDA” below.

Comparison of Unaudited Results for the Thirty-Nine Weeks Ended May 29, 2021 and the Thirty-Nine Weeks Ended May 30, 2020

Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended

(In thousands) May 29, 2021 % of Sales May 30, 2020 % of Sales

(In thousands) November 27, 2021 % of Sales November 28, 2020 % of Sales

Net sales $ 281,265 100.0 % $ 231,152 100.0 %

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Depreciation and amortization 4,320 1.5 % 4,244 1.8 %

Business transaction costs — — % 26,900 4.5 %

Total operating expenses 58,549 20.8 % 54,854 23.7 %

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(Loss) gain in fair value change of warrant liability (17,317) (6.2) % 20,453 8.8 %

Gain on legal settlement 5,000 0.7 % — — %

Gain (loss) on foreign currency transactions 712 0.1 % (596) (0.1) %

(Loss) gain on foreign currency transactions (353) (0.1) % 9 — %

Other income 9 — % 47 — %

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See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period.

Net sales of $745.8 million represented an increase of $151.4 million, or 25.5%, for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020.

The increase was primarily attributable to the Quest brand, which increased net sales by 22.8%, due to Quest’s partial inclusion in our results of operations in fiscal year 2020 as compared to fiscal year 2021 as well as post-acquisition Quest brand sales volume growth.

These increases in net sales were partially offset by decreased sales volume of approximately 1.2% related to the SimplyProtein Sale and the restructuring-related business activities in Europe in fiscal year 2021.

Net sales of $281.3 million represented an increase of $50.1 million, or 21.7%, for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

The increase was primarily attributable to retail sales volume growth and e-commerce growth for both the Atkins® and Quest® brands, which increased our North America net sales by 24.5% in the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

Additionally, we instituted a price increase effective in September 2021, the first month of our fiscal year 2022.

The increase in net sales was partially offset by a 27.3% decline in our international business due to the European exit.

The European exit represented a 1.6% headwind to total Company net sales growth.

Cost of goods sold .

Cost of goods sold increased $82.3 million, or 23.0%, for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020.

The cost of goods sold increase was driven by sales volume growth primarily attributable to the Quest brand as discussed above, which was partially offset by the effect of the $7.5 million non-cash inventory step-up related to the Acquisition of Quest recorded in fiscal year 2020.

Cost of goods sold increased $27.6 million, or 20.1%, for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

The cost of goods sold increase was driven by the sales volume growth for both the Atkins® and Quest® brands, as discussed above.

Additionally, our cost of goods sold for the thirteen weeks ended November 27, 2021 was unfavorably affected by higher raw material costs, logistics costs, and supply chain challenges.

As previously discussed above in “Supply Chain,” we continue to expect to have higher raw material and logistics costs in fiscal year 2022 as compared to fiscal year 2021.

Gross profit.

Gross profit increased $69.1 million, or 29.2%, for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020.

Gross profit of $305.3 million, or 40.9% of net sales, for the thirty-nine weeks ended May 29, 2021 increased 120 basis points from 39.7% of net sales for the thirty-nine weeks ended May 30, 2020.

The increase in gross margin was primarily the result of the $7.5 million non-cash inventory step-up related to the Acquisition of Quest in fiscal year 2020.

Gross profit increased $22.5 million, or 23.9%, for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020, which was primarily driven by the sales volume growth for both the Quest® and Atkins®

brands as discussed above.

Gross profit of $116.6 million, or 41.4% of net sales, for the thirteen weeks ended November 27, 2021 increased 70 basis points from 40.7% of net sales for the thirteen weeks ended November 28, 2020.

The increase in gross profit margin was primarily the result of the price increase which became effective in September 2021 as well as favorable product form and retail channel mix given higher shopper traffic volume within brick and mortar retailers.

The increase in gross profit margin was partially offset by the unfavorable effects of higher raw material costs, logistics costs, and supply chain challenges in the thirteen weeks ended November 27, 2021 as previously discussed.

Operating expenses .

Operating expenses decreased $10.4 million, or 5.7%, for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020 due to the following:

Operating expenses increased $3.7 million, or 6.7%, for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020 due to the following:

• Selling and marketing.

Selling and marketing expenses increased $12.2 million, or 17.4%, for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020.

The increase was primarily related to Quest’s partial inclusion in our results of operations in fiscal year 2020 as compared to fiscal year 2021, which was partially offset by decreased selling and marketing expenses related to the SimplyProtein Sale and the restructuring-related business activities in Europe.

Selling and marketing expenses increased $5.3 million, or 21.2%, for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

The increase was primarily related to additional brand building initiatives for both Atkins® and Quest® in the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

• General and administrative.

General and administrative expenses increased $2.7 million, or 3.6%, for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020.

The increase was primarily attributable to Quest’s partial inclusion in our results of operations in fiscal year 2020 as compared to fiscal year 2021 as well as restructuring charges of $4.0 million in fiscal year 2021.

These increases were partially offset by the reductions in costs related to the integration of Quest and stock-based compensation.

General and administrative expenses decreased $1.7 million, or 6.7%, for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

The decrease was primarily attributable to reductions in costs related to business integration activities of $1.2 million and restructuring charges of $2.5 million in the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

These decreases were partially offset by an increase in incentive compensation, including an increase of stock-based compensation of $1.5 million, in the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

• Depreciation and amortization.

Depreciation and amortization expenses increased $1.7 million, or 15.1%, for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020.

The increase was primarily due to the partial inclusion of amortization expense related to intangible assets recognized as part of the Acquisition of Quest in fiscal year 2020 as compared to fiscal year 2021.

• Business transaction costs .

Business transaction costs were $26.9 million for the thirty-nine weeks ended May 30, 2020 and comprised expenses related to the Acquisition of Quest.

Depreciation and amortization expenses remained approximately flat at $4.3 million for the thirteen weeks ended November 27, 2021 and $4.2 million for the November 28, 2020.

Interest income .

Interest income decreased $1.5 million for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020, primarily due to $195.3 million of cash on hand being utilized for the Acquisition of Quest in the first quarter of fiscal year 2020 and lower market rates.

Interest income was nominal for each of the thirteen weeks ended November 27, 2021 and November 28, 2020.

Interest expense .

Interest expense increased $0.5 million for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020, primarily due to the funding of the Term Facility in the amount of $460.0 million to partially finance the Acquisition of Quest in the first quarter of fiscal 2020.

Interest expense decreased $2.0 million for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020, primarily due to principal payments reducing the outstanding balance of the Term Facility (as defined below) to $431.5 million as of November 27, 2021 from $581.5 million as of November 28, 2020.

Additionally, interest expense related to the amortization of deferred financing costs and debt discount decreased $0.3 million for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

(Loss) gain in fair value change of warrant liability.

A non-cash loss of $60.7 million in fair value change of warrant liability was recorded for the thirty-nine weeks ended May 29, 2021 compared to a non-cash gain of $82.7 million for the thirty-nine weeks ended May 30, 2020.

The loss relates to changes in the valuation of warrant liabilities, primarily driven by changes in stock price and volatility.

Gain on legal settlement.

The Company recorded a $5.0 million gain on a legal settlement during the thirty-nine weeks ended May 29, 2021.

Gain (loss) on foreign currency transactions.

A gain of $0.7 million in foreign currency transactions was recorded for the thirty-nine weeks ended May 29, 2021 compared to a foreign currency loss of $0.6 million for the thirty-nine weeks ended May 30, 2020.

The change relates to changes in foreign currency rates related to international operations.

During thirteen weeks ended November 27, 2021 and November 28, 2020, we recorded a non-cash loss of $17.3 million and a non-cash gain of $20.5 million, respectively, related to changes in valuation of our liability-classified warrants issued through a private placement (“Private Warrants”), which is primarily driven by movements in our stock price.

(Loss) gain on foreign currency transactions.

A loss of $0.4 million in foreign currency transactions was recorded for the thirteen weeks ended November 27, 2021 compared to an immaterial foreign currency gain for the thirteen weeks ended November 28, 2020.

The variance primarily relates to changes in foreign currency rates related to our international operations.

Income tax expense.

Income tax expense increased $22.9 million for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020.

The increase in our income tax expense is primarily driven by higher income from operations, partially offset by permanent differences.

Net income was $22.6 million for the thirty-nine weeks ended May 29, 2021 a decrease of $82.3 million compared to net income of $104.9 million for the thirty-nine weeks ended May 30, 2020.

The decrease was primarily related to an increase in loss in fair value change of the warrant liability.

Income tax expense increased $4.4 million for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

The increase in our income tax expense is primarily driven by higher income from operations, partially offset by changes in permanent differences.

Net income was $21.2 million for the thirteen weeks ended November 27, 2021, a decrease of $21.8 million compared to net income of $43.0 million for the thirteen weeks ended November 28, 2020.

The decrease in net income was primarily driven by the non-cash fair value loss of $17.3 million in the thirteen weeks ended November 27, 2021 compared to a non-cash fair value gain of $20.5 million in the thirteen weeks ended November 28, 2020 related to the measurement of our liability-classified Private Warrants, which was partially offset by increased income from operations driven by the Atkins® and Quest® brand sales volume growth as discussed above.

Adjusted EBITDA.

Adjusted EBITDA increased $41.9 million, or 35.9% for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020, driven primarily by the Acquisition of Quest.

Adjusted EBITDA increased $16.9 million, or 34.7% for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020, driven primarily by sales volume growth for the Atkins® and Quest® brands as discussed above.

For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see “Reconciliation of EBITDA and Adjusted EBITDA” below.

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Simply Good Foods defines EBITDA as net income or loss before interest income, interest expense, income tax expense, depreciation and amortization, and Adjusted EBITDA as further adjusted to exclude the following items:

business transaction costs, stock-based compensation expense, inventory step-up, integration costs, restructuring costs, non-core legal costs, gain or loss in fair value change of warrant liability, gain or loss due to legal settlements, and other non-core expenses.

stock-based compensation expense, integration costs, restructuring costs, gain or loss in fair value change of warrant liability, and other non-core expenses.

The Company believes that EBITDA and Adjusted EBITDA, when used in conjunction with net income, are useful to provide additional information to investors.

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Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in the non-GAAP calculation.

The following unaudited tables below provide a reconciliation of EBITDA and Adjusted EBITDA to their most directly comparable GAAP measure, which is net income, for the thirteen and thirty-nine weeks ended May 29, 2021 and May 30, 2020:

(In thousands) Thirteen Weeks Ended Thirty-Nine Weeks Ended

May 29, 2021 May 30, 2020 May 29, 2021 May 30, 2020

The following unaudited table provides a reconciliation of EBITDA and Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the thirteen weeks ended November 27, 2021 and November 28, 2020:

(In thousands) Thirteen Weeks Ended

November 27, 2021 November 28, 2020

Net income $ 21,152 $ 42,953

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EBITDA 45,086 64,209

Business transaction costs — 47 — 26,900

Stock-based compensation expense 2,605 1,110

Inventory step-up — — — 7,522

Integration of Quest 55 1,246

Restructuring 42 2,519

Non-core legal costs — 48 — 603

Loss (gain) in fair value change of warrant liability 17,317 (20,453)

Gain on legal settlement (5,000) — (5,000) —

230 401 (715) 591

Adjusted EBITDA $ 65,615 $ 48,697

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Liquidity and Capital Resources

We have historically funded our operations with cash flow from operations and, when needed, with borrowings under our credit facilities.

Our principal uses of cash have been debt service, working capital and the Acquisition of Quest.

We had $90.2 million in cash and cash equivalents as of May 29, 2021.

We have historically funded our operations with cash flow from operations and, when needed, with borrowings under our Credit Agreement (as defined below).

Our principal uses of cash have been working capital, debt service, and acquisition opportunities.

We had $35.4 million in cash as of November 27, 2021.

We believe our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months.

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We make no assurance that we can issue and sell such securities on acceptable terms or at all.

Our material future cash requirements from contractual and other obligations relate primarily to our principal and interest payments for our Term Facility, as defined and discussed below, and our operating and finance leases.

Refer to Note 5, Long-Term Debt and Line of Credit, and Note 8, Leases, of the Notes to Unaudited Condensed Consolidated Financial Statements in this Report for additional information related to the expected timing and amount of payments related to our contractual and other obligations.

Debt and Credit Facilities

On July 7, 2017, we entered into a credit agreement with Barclays Bank PLC and other parties (as amended to date, the “Credit Agreement”).

The Credit Agreement provides for (i) a term facility of $200.0 million (“Term Facility”) with a seven-year maturity and (ii) a revolving credit facility of up to $75.0 million (the “Revolving Credit Facility”) with a five-year maturity.

Substantially concurrent with the consummation of the Acquisition of Atkins, the full $200.0 million of the Term Facility (the “Term Loan”) was drawn.

The Credit Agreement at that time provided for (i) a term facility of $200.0 million (“Term Facility”) with a seven-year maturity and (ii) a revolving credit facility of up to $75.0 million (the “Revolving Credit Facility”) with a five-year maturity.

Substantially

concurrent with the consummation of the business combination between Conyers Park Acquisition Corp.

and NCP-ATK Holdings, Inc.

on July 7, 2017, the full $200.0 million of the Term Facility (the “Term Loan”) was drawn.

The interest rate per annum is based on either (i) a base rate equaling the higher of (a) the “prime rate,” (b) the federal funds effective rate plus 0.50%, or (c) the Euro-currency rate applicable for an interest period of one month plus 1.00% plus (x) 3.00% margin for the Term Loan or (y) 2.00% margin for the Revolving Credit Facility, or (ii) London Interbank Offered Rate (“LIBOR”) adjusted for statutory reserve requirements plus (x) 4.00% margin for the Term Loan subject to a floor of 1.00% or (y) 3.00% margin for the Revolving Credit Facility.

As security for the payment or performance of its debt, we have pledged certain equity interests in its subsidiaries.

The Simply Good Foods Company is not a borrower under the Credit Agreement and has not provided a guarantee of the Credit Agreement.

Simply Good Foods USA, Inc., is the administrative borrower and certain other subsidiary holding companies are co-borrowers under the Credit Agreement.

Each of our domestic subsidiaries that is not a named borrower under the Credit Agreement has provided a guarantee on a secured basis.

As security for the payment or performance of the debt under the Credit Agreement, the borrowers and the guarantors have pledged certain equity interests in their respective subsidiaries and granted the lenders a security interest in substantially all of their domestic assets.

All guarantors other than Quest Nutrition, LLC are holding companies with no assets other than their investments in their respective subsidiaries.

On March 16, 2018 (the “Amendment Date”), we entered into an amendment (the “Repricing Amendment”) to the Credit Agreement.

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The incremental fees paid to the administrative agent are reflected as additional debt discount and are amortized over the terms of the long-term financing agreements using the effective-interest method.

On November 7, 2019, we entered into an amendment (the “Incremental Facility Amendment”) to the Credit Agreement to increase the principal borrowed on the Term Facility by $460.0 million.

On November 7, 2019, we entered into a second amendment (the “Incremental Facility Amendment”) to the Credit Agreement to increase the principal borrowed on the Term Facility by $460.0 million.

The Term Facility together with the incremental borrowing make up the Initial Term Loans (as defined in the Incremental Facility Amendment) and as of the Amendment No.

2 Effective Date (as defined in the Incremental Facility Amendment), the Initial Term Loans bear interest at a rate equal to, at our option, either LIBOR plus an applicable margin of 3.75% or a base rate plus an applicable margin of 2.75%.

The Incremental Facility Amendment was executed to partially finance the Acquisition of Quest.

The Incremental Facility Amendment was executed to partially finance the acquisition of Quest Nutrition, LLC on November 7, 2019.

No amounts under the Term Facility were repaid as a result of the execution of the Incremental Facility Amendment.

Effective as of December 16, 2021, the Company entered into a third amendment (the “Extension Amendment”) to the Credit Agreement.

The Extension Amendment provides for an extension of the stated maturity date of the Revolving Commitments and Revolving Loans (each as defined in the Credit Agreement) from July 7, 2022 to the earlier of (i) 91 days prior to the maturity date of the Initial Term Loans on July 7, 2024 and (ii) December 16, 2026.

The Applicable Rate per annum applicable to the loans under the Credit Agreement Amendment is, with respect to any Initial Term Loan that is an ABR Loan (as defined in the Credit Agreement), 2.75% per annum, and with respect to any Initial Term Loan that is a Eurodollar Loan, 3.75% per annum.

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The Credit Agreement contains certain financial and other covenants that limit our ability to, among other things, incur and/or undertake asset sales and other dispositions, liens, indebtedness, certain acquisitions and investments, consolidations, mergers, reorganizations and other fundamental changes, payment of dividends and other distributions to equity and warrant holders, and prepayments of material subordinated debt, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size.

The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than 6.25:1.00 (with a reduction to 6.00:1.00 on and after the third anniversary of the closing date of the Credit Agreement) contingent on credit extensions in excess of 30% of the total amount of commitments available under the Revolving Credit Facility.

The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than 6.00:1.00 contingent on credit extensions in excess of 30% of the total amount of commitments available under the Revolving Credit Facility.

Any failure to comply with the restrictions of the credit facilities may result in an event of default.

We were in compliance with all financial covenants as of May 29, 2021 and August 29, 2020, respectively.

At May 29, 2021, the outstanding balance of the Term Facility was $506.5 million.

We are not required to make principal payments on the Term Facility over the twelve months following the period ended May 29, 2021.

We were in compliance with all financial covenants as of November 27, 2021 and August 28, 2021, respectively.

At November 27, 2021, the outstanding balance of the Term Facility was $431.5 million.

We are not required to make principal payments on the Term Facility over the twelve months following the period ended November 27, 2021.

The outstanding balance of the Term Facility is due upon its maturity in July 2024.

As of May 29, 2021, there were no amounts drawn against the Revolving Credit Facility.

Public Equity Offering

On October 9, 2019, we completed an underwritten public offering of 13,379,205 shares of our common stock at a price to the public of $26.35 per share.

We paid underwriting discounts and commissions of $0.19 per share resulting in net proceeds to us of $26.16 per share, or approximately $350.0 million (the “Offering”).

We paid $0.8 million for legal, accounting and registrations fees related to the Offering.

The net proceeds were used to pay a portion of the purchase price and related fees and expenses for the Acquisition of Quest.

Acquisition of Quest

On August 21, 2019, our wholly-owned subsidiary Simply Good Foods USA, Inc., formerly known as Atkins Nutritionals, Inc.

(“Simply Good USA”) entered into a Stock and Unit Purchase Agreement with VMG Voyage Holdings, LLC, VMG Tax-Exempt II, L.P., Voyage Employee Holdings, LLC, and other sellers, as defined in the Purchase Agreement, to acquire Quest, a healthy lifestyle food company.

On November 7, 2019, pursuant to the Purchase Agreement, Simply Good USA completed the Acquisition of Quest, for a cash purchase price of approximately $1.0 billion, subject to customary post-closing adjustments.

The Acquisition of Quest was funded through a combination of cash, equity and debt financing.

Total consideration paid on the closing date was $988.9 million.

Cash sources of funding included $195.3 million of cash on hand, net proceeds of approximately $350.0 million from an underwritten public offering of common stock, and $443.6 million in new term loan debt.

In the third fiscal quarter of 2020, we received a post-closing release from escrow of approximately $2.1 million related to net working capital adjustments, resulting in a total net consideration paid of $986.8 million.

For the thirteen and thirty-nine weeks ended May 30, 2020, we incurred no business transaction costs and $26.9 million of business transaction costs, respectively.

As of November 27, 2021, there were no amounts drawn against the Revolving Credit Facility.

Private Warrants to Purchase Common Stock

The Company’s private placement warrants to purchase 6,700,000 shares of the common stock remain outstanding, are held by Conyers Park Sponsor, LLC, a related party, and remain liability-classified.

As of November 27, 2021, we have outstanding liability-classified Private Warrants that allow holders to purchase 6,700,000 shares of the Company’s common stock.

Such Private Warrants are held by Conyers Park Sponsor, LLC, a related party.

Each whole warrant entitles the holder to purchase one share of the Company’s common stock at a price of $11.50 per share.

If all Private Warrants are exercised at the $11.50 exercise price per warrant, our cash would increase by $77.1 million.

The warrants expire on July 7, 2022 or earlier upon redemption or liquidation, as applicable.

The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):

Thirty-Nine Weeks Ended

May 29, 2021 May 30, 2020

Net cash provided by operating activities

Thirteen Weeks Ended

November 27, 2021 November 28, 2020

Net cash (used in) provided by operating activities

$ (7,329) $ 15,197

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

$ (4,377) $ 5,593

Net cash (used in) provided by financing activities

Net cash used in financing activities

$ (27,992) $ (25,122)

Operating activities.

Our net cash provided by operating activities increased $67.4 million to $91.5 million for the thirty-nine weeks ended May 29, 2021 compared to cash provided by operating activities of $24.1 million for the thirty-nine weeks ended May 30, 2020.

The increase in cash provided by operating activities was primarily attributable to higher operating income driven by (i) the Quest® brand sales volume growth, which increased net sales by 22.8% due to Quest’s partial inclusion in our results of operations in fiscal year 2020 as compared to fiscal year 2021, as well as post-acquisition Quest brand sales volume growth and (ii) significant reductions in cash outlays and changes in working capital related to the first quarter 2020 Acquisition of Quest, including decreases in business transaction costs of $26.9 million and integration costs of $7.0 million.

These increases were partially offset by $6.9 million of cash payments made for restructuring-related costs, predominately composed of termination benefits and severance payments, during the thirty-nine weeks ended May 29, 2021.

Additionally, cash paid for taxes increased $10.6 million for the thirty-nine weeks ended May 29, 2021 compared to the thirty-nine weeks ended May 30, 2020.

Our net cash (used in) provided by operating activities decreased $22.5 million to $7.3 million cash used in operating activities for the thirteen weeks ended November 27, 2021 compared to cash provided by operating activities of $15.2 million for the thirteen weeks ended November 28, 2020.

The decrease in cash provided by operating activities was primarily attributable to changes in working capital, including $14.0 million of accounts receivable, net, $14.2 million of accounts payable and $17.9 million of accrued expenses and other current liabilities due to timing of payments and receipts during the thirteen weeks ended November 27, 2021.

Additionally, seasonal building of inventory levels contributed to $15.3 million of negative working capital changes in inventory for the thirteen weeks ended November 27, 2021.

These decreases in cash provided by operating activities were partially offset by the $18.8 million increase in income from operations primarily attributable to retail sales volume growth and e-commerce growth for both the Atkins® and Quest® brands as discussed in “Results of Operations” above.

Investing activities .

Our net cash provided by investing activities was $2.5 million for the thirty-nine weeks ended May 29, 2021, which was primarily related to the $5.8 million of cash proceeds received from the SimplyProtein Sale, partially offset by purchases of property and equipment of $3.2 million.

The net cash used in investing activities of $984.3 million for the thirty-nine weeks ended May 30, 2020 was primarily related to the cash paid for the Acquisition of Quest, net of cash acquired, of $982.1 million.

Our net cash used in investing activities was $4.4 million for the thirteen weeks ended November 27, 2021 compared to net cash provided by investing activities of $5.6 million for the thirteen weeks ended November 28, 2020.

Our net cash used in investing activities for the thirteen weeks ended November 27, 2021 primarily comprised $2.7 million of purchases of property and equipment and the issuance of a $1.5 million note receivable.

The $5.6 million of net cash provided by investing activities for the thirteen weeks ended November 28, 2020 primarily comprised the $5.8 million of cash proceeds received from the SimplyProtein Sale.

Financing activities .

Our net cash used in financing activities was $99.9 million for the thirty-nine weeks ended May 29, 2021 compared to net cash provided by financing activities of $805.6 million for the thirty-nine weeks ended May 30, 2020.

Net cash used in financing activities for the thirty-nine weeks ended May 29, 2021 primarily consisted of $100.0 million in principal payments on the Term Facility.

For the thirty-nine weeks ended May 30, 2020, net cash provided by financing activities included gross proceeds of $352.5 million from the Offering partially offset by issuance costs of $3.3 million, proceeds of $460.0 million from the Term Facility

borrowing related to the Incremental Facility Amendment partially offset by issuance costs of $8.2 million, and a $21.0 million principal payment on the Term Facility.

Contractual Obligations

Our contractual obligations are related to our Credit Agreement and our finance and operating leases.

There have been no material changes to our contractual obligations from our Annual Report.

Off-Balance Sheet Arrangements

As of May 29, 2021, we had no material off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, income or expenses, results of operations, liquidity, capital expenditures or capital resources.

Our net cash used in financing activities was $28.0 million for the thirteen weeks ended November 27, 2021 compared to $25.1 million for the thirteen weeks ended November 28, 2020.

Net cash used in financing activities for the thirteen weeks ended November 27, 2021 primarily consisted of $25.0 million in principal payments on the Term Facility and $3.2 million of tax payments related to issuance of restricted stock units and performance stock units.

Net cash used in financing activities for the thirteen weeks ended November 28, 2020 primarily consisted of $25.0 million in principal payments on the Term Facility.

New Accounting Pronouncements

For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our consolidated financial statements, refer to our Annual Report on Form 10-K/A.

Refer to Note 2 of our unaudited interim consolidated financial statements in this Report for further information regarding recently issued accounting standards.

For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our consolidated financial statements, refer to our Annual Report.

Refer to Note 2, Summary of Significant Accounting Policies, of our unaudited interim consolidated financial statements in this Report for further information regarding recently issued accounting standards.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis