What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-01-08 compared with 2024-06-27 · 93 added, 155 removed, 143 unchanged (63% of the section changed)

3 unchanged sentences

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, our expectations regarding our supply chain, including but not limited to, raw materials and logistics costs, the effect of price increases, inflationary pressure on us and our contract manufacturers, and the unforeseen business disruptions or other effects due to current global geopolitical tension.

These statements include, but are not limited to, our expectations regarding our supply chain, including but not limited to, raw materials and logistics costs, the effect of price increases, inflationary pressure on us and our contract manufacturers, our growth, our competitive position, and the unforeseen business disruptions or other effects due to current global geopolitical tension.

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, except as required by applicable law.

8 unchanged sentences

Unless the context requires otherwise in this Report, the terms “we,” “us,” “our,” the “Company” and “Simply Good Foods” refer to The Simply Good Foods Company and its subsidiaries.

In context, “Quest” may also refer to the Quest brand, “Atkins” may also refer to the Atkins brand, and “OWYN” may also refer to the OWYN brand.

Atkins, Quest, OWYN, and the Simply Good logo are either registered trademarks or trademarks of the Company’s wholly owned subsidiary Simply Good Foods USA, Inc.

or one of its affiliates in the United States and elsewhere.

All rights are reserved.

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, and other product offerings.

1 unchanged sentence

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.

On April 29, 2024, we entered into a stock purchase agreement (the “Purchase Agreement”) to acquire Only What You Need, Inc.

(“OWYN”), a plant-based protein food company (the “Acquisition”), for approximately $280.0 million.

On June 13, 2024, pursuant to the Purchase Agreement, we completed the acquisition of OWYN for approximately $280.0 million, subject to certain customary adjustments for levels of cash, indebtedness, net working capital, purchase price adjustments and transaction related expenses as of the closing date.

The addition of OWYN introduces a third complementary plant-based, ready-to-drink brand within our portfolio.

To that end, in June 2024, we completed the acquisition of Only What You Need, Inc., a plant-based protein food company, for a cash purchase price of approximately $280.0 million (subject to customary adjustments).

For more information, please see “ Liquidity and Capital Resources-OWYN Acquisition ”.

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

Quest® for consumers seeking a variety of protein-rich foods and beverages that also limit sugars and simple carbs, Atkins® for those following a low-carb lifestyle and OWYN ™ for those looking for a plant-based ready-to-drink protein shake offering.

Quest for consumers seeking a variety of protein-rich foods and beverages that also limit sugars and simple carbohydrates, Atkins for those following a low-carbohydrate lifestyle or seeking to manage weight or blood sugar levels, and OWYN for consumers seeking protein-rich beverages that are plant-based and tested for the top nine allergens that also limit sugars and simple carbohydrates.

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.

1 unchanged sentence

Business Trends

During fiscal 2023, the Company was affected by the unfavorable effects of higher raw material costs, higher co-manufacturing costs, and supply chain challenges, including supply chain disruptions resulting from labor shortages and disruptions in ingredients.

During the thirteen and thirty-nine weeks ended May 25, 2024, our business performance improved as strong Quest sales volume more than offset continued softness in Atkins.

The Company benefited from lower ingredient and packaging costs which resulted in gross margin expansion versus fiscal 2023.

The Company continues to engage and have discussions with its contract manufacturers and logistics and transportation providers to have its cost structure reflect lower market prices.

The Company is monitoring key ingredient inflation which may affect profitability, however we believe the Company's strategy and positioning will continue to drive profitable growth for our product offerings and growth within the growing nutritional snacking category.

During the thirteen weeks ended November 30, 2024, our business performance improved principally due to the OWYN Acquisition.

We benefited from lower ingredient and packaging costs which resulted in gross margin expansion versus the year ago period.

We expect fiscal year 2025 organic sales growth to be driven primarily by volume and have strong advertising and marketing plans in place, as well as innovation, merchandising and promotions that we believe should enable us to achieve our objectives.

We continue to engage and have discussions with our contract manufacturers and logistics and transportation providers to have our cost structure reflect lower market prices.

We continue to monitor key ingredient inflation which may affect profitability;

however, we believe our strategy and positioning will continue to drive profitable growth for our product offerings and growth within the growing nutritional snacking category.

Key Financial Definitions

5 unchanged sentences

Operating expenses.

Operating expenses consist primarily of selling and marketing, general and administrative, and depreciation and amortization, and business transaction costs.

Operating expenses consist primarily of selling and marketing, general and administrative, depreciation and amortization, and business transaction costs.

The following is a brief description of the components of operating expenses:

• Selling and marketing.

Selling and marketing expenses comprise broker commissions, customer marketing, media and other marketing costs.

Selling and marketing expenses are comprised of broker commissions, customer marketing, media and other marketing costs.

• General and administrative.

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

General and administrative expenses are comprised of expenses associated with corporate and administrative functions that support our business, including employee compensation, stock-based compensation, professional services, executive transition costs, 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.

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

• Business Transaction Costs.

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

Business transaction costs are comprised of transaction advisory fees, non-deferrable debt issuance costs, legal, due diligence, consulting, and accounting expenses associated with the OWYN Acquisition.

Results of Operations

During the thirteen weeks ended May 25, 2024, our net sales increased to $334.8 million compared to $324.8 million for the thirteen weeks ended May 27, 2023, driven by Quest volume growth, which more than offset continued softness in Atkins net sales, resulting in a 3.2% increase in our aggregate North America net sales.

During the thirteen weeks ended November 30, 2024, our net sales increased to $341.3 million compared to $308.7 million for the thirteen weeks ended November 25, 2023, driven by the OWYN Acquisition, resulting in a 10.4% increase in our aggregate North America net sales.

Gross profit and gross profit margin improved driven by higher sales volumes and lower ingredient and packaging costs.

We expect to see continued growth during fiscal year 2025 by building on our existing capabilities and strengthening the position of our brands in the marketplace.

We will continue to invest in our business and improve our operating efficiencies as well as continuing the integration of OWYN.

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.

1 unchanged sentence

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 May 25, 2024, and the Thirteen Weeks Ended May 27, 2023

Comparison of Unaudited Results for the Thirteen Weeks Ended November 30, 2024, and the Thirteen Weeks Ended November 25, 2023

The following unaudited table presents, for the periods indicated, selected information from our 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 25, 2024 % of Net Sales May 27, 2023 % of Net Sales

Net sales $ 334,757 100.0 % $ 324,792 100.0 %

Cost of goods sold 201,131 60.1 % 205,546 63.3 %

Gross profit 133,626 39.9 % 119,246 36.7 %

Operating expenses:

Selling and marketing 36,464 10.9 % 30,168 9.3 %

General and administrative 31,543 9.4 % 30,510 9.4 %

Depreciation and amortization 4,142 1.2 % 4,363 1.3 %

Business transaction costs 2,703 0.8 % — — %

Total operating expenses 74,852 22.4 % 65,041 20.0 %

Income from operations 58,774 17.6 % 54,205 16.7 %

Other income (expense):

Interest income 881 0.3 % 407 0.1 %

Interest expense (5,028) (1.5) % (7,649) (2.4) %

(Loss) gain on foreign currency transactions (12) — % 180 0.1 %

Other income 102 — % 4 — %

Total other expense (4,057) (1.2) % (7,058) (2.2) %

Income before income taxes 54,717 16.3 % 47,147 14.5 %

Income tax expense 13,383 4.0 % 11,716 3.6 %

Net income $ 41,334 12.3 % $ 35,431 10.9 %

Other financial data:

Adjusted EBITDA (1)

$ 71,874 21.5 % $ 66,635 20.5 %

(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 were $334.8 million for the thirteen weeks ended May 25, 2024, compared to $324.8 million for the thirteen weeks ended May 27, 2023, representing an increase of $10.0 million, driven primarily by Quest volume growth which offset Atkins softness.

North America net sales increased 3.2% in the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023, and International net sales decreased 2.4% during the same period.

Cost of goods sold .

Cost of goods sold decreased $4.4 million, or 2.1%, for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023.

The cost of goods sold decrease was primarily driven by lower ingredient and packaging costs in the thirteen weeks ended May 25, 2024.

Gross profit.

Gross profit increased by $14.4 million, or 12.1%, for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023.

Additionally, gross profit of $133.6 million, or 39.9% of net sales, for the thirteen weeks ended May 25, 2024, increased 320 basis points from 36.7% of net sales for the thirteen weeks ended May 27, 2023.

The increase in gross profit margin was primarily driven by lower ingredient and packaging costs.

Operating expenses .

Operating expenses increased $9.8 million, or 15.1%, for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023 due to the following:

• Selling and marketing.

Selling and marketing expenses increased $6.3 million, or 20.9%, for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023, due to increased expenses related to growth initiatives and higher advertising costs.

• General and administrative.

General and administrative expenses increased $1.0 million, or 3.4%, for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023.

The increase in general and administrative expenses was primarily attributable to an increase of $1.9 million in employee-related costs, $0.3 million in stock-based compensation, and higher corporate expenses and other costs.

These increases were partially offset by $2.4 million in term loan transaction fees incurred in the prior year.

• Depreciation and amortization.

Depreciation and amortization expense was $4.1 million for the thirteen weeks ended May 25, 2024 and $4.4 million for the thirteen weeks ended May 27, 2023, respectively.

• Business transaction costs.

Business transaction costs were $2.7 million for the thirteen weeks ended May 25, 2024 and were comprised of expenses related to the Acquisition of OWYN.

Interest income.

Interest income increased by $0.5 million for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023, due to higher cash balances than the prior year period and the increase in interest rates.

Interest expense .

Interest expense decreased $2.6 million for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023, primarily due to the effect of principal payments reducing the outstanding balance of the Term Facility (as defined below) to $240.0 million as of May 25, 2024, from $325.0 million as of May 27, 2023.

Additionally, interest expense related to the amortization of deferred financing costs and debt discount decreased $0.6 million for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023.

(Loss) gain on foreign currency transactions.

Foreign currency transactions resulted in an immaterial loss and a gain of $0.2 million for the thirteen weeks ended May 25, 2024, and May 27, 2023, respectively.

The variance is attributable to changes in foreign currency rates related to our international operations.

Income tax expense.

Income tax expense increased $1.7 million for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023.

The increase in our income tax expense was primarily driven by changes in permanent differences.

Net income was $41.3 million for the thirteen weeks ended May 25, 2024, an increase of $5.9 million compared to net income of $35.4 million for the thirteen weeks ended May 27, 2023.

Net income was benefited by higher gross profit, higher interest income, and lower interest expense, partially offset by growth in marketing expenses, higher stock-based compensation expense, and recently incurred business transaction costs.

Adjusted EBITDA.

Adjusted EBITDA increased $5.2 million, or 7.9%, for the thirteen weeks ended May 25, 2024, compared to the thirteen weeks ended May 27, 2023, driven primarily by higher gross profit, partially offset by growth in marketing expenses.

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 25, 2024, and the Thirty-Nine Weeks Ended May 27, 2023

Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended

(In thousands) May 25, 2024 % of Net Sales May 27, 2023 % of Net Sales

(In thousands) November 30, 2024 % of Net Sales November 25, 2023 % of Net Sales

Net sales $ 341,268 100.0 % $ 308,678 100.0 %

13 unchanged sentences

Other income 15 — % 6 — %

Total other expense (13,464) (1.4) % (22,457) (2.4) %

Total other income (expense) (6,950) (2.0) % (4,712) (1.5) %

Income before income taxes 47,675 14.0 % 47,108 15.3 %

6 unchanged sentences

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 $955.6 million represented an increase of $33.4 million, or 3.6%, for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023.

The increase in sales was primarily driven by Quest volume growth which offset Atkins softness.

North America and International net sales increased 3.6% and 3.4%, respectively, versus last year.

Net sales were $341.3 million for the thirteen weeks ended November 30, 2024, compared to $308.7 million for the thirteen weeks ended November 25, 2023, representing an increase of $32.6 million, driven primarily by the OWYN Acquisition.

North America net sales increased 10.4% in the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023, and International net sales increased 15.4% during the same period.

Cost of goods sold .

Cost of goods sold increased $0.7 million, or 0.1%, for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023.

The cost of goods sold increase was primarily driven by higher sales volumes in the thirty-nine weeks ended May 25, 2024.

Cost of goods sold increased $17.2 million, or 8.9%, for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023.

The cost of goods sold increase was driven by higher sales volumes, primarily as a result of the OWYN Acquisition, the effect of the non-cash $1.0 million inventory step-up charge related to the OWYN Acquisition and was partially offset by lower ingredient and packaging costs.

Gross profit.

Gross profit increased $32.6 million, or 9.8%, for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023.

Additionally, gross profit of $365.6 million, or 38.3% of net sales, for the thirty-nine weeks ended May 25, 2024 increased 220 basis points from 36.1% of net sales for the thirty-nine weeks ended May 27, 2023, due primarily to lower ingredient and packaging costs.

Gross profit increased $15.4 million, or 13.3%, for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023.

Additionally, gross profit of $130.5 million, or 38.2% of net sales, for the thirteen weeks ended November 30, 2024, increased 90 basis points from 37.3% of net sales for the thirteen weeks ended November 25, 2023.

The increase in gross profit margin was primarily driven by lower ingredient and packaging costs and was partially offset by the effect of the non-cash $1.0 million inventory step-up charge related to the OWYN Acquisition.

Operating expenses .

Operating expenses increased $23.2 million, or 12.6%, for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023, due to the following:

Operating expenses increased $12.6 million, or 19.8%, for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023, due to the following:

• Selling and marketing.

Selling and marketing expenses increased $14.4 million, or 16.3%, for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023, primarily due to increased expenses related to growth initiatives and higher advertising costs.

Selling and marketing expenses increased $1.0 million, or 3.1%, for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023, primarily due to the OWYN Acquisition.

• General and administrative.

General and administrative expenses increased $6.3 million, or 7.7%, for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023.

The increase in general and administrative expense was primarily attributable to an increase to an increase of $4.3 million in employee-related costs, $2.5 million in stock-based compensation, and higher corporate expenses and other costs in the thirty-nine weeks ended May 25, 2024.

These increases were partially offset by $2.4 million in term loan transaction fees incurred in the prior year.

General and administrative expenses increased $11.1 million, or 41.2%, for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023.

The increase in general and administrative expenses was primarily attributable to an increase of $4.9 million in integration costs related to the OWYN Acquisition, an increase of $3.0 million in employee-related costs, and higher corporate expenses.

• Depreciation and amortization.

Depreciation and amortization expenses were $12.7 million and $13.0 million for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023, respectively.

Depreciation and amortization expense was $4.2 million for the thirteen weeks ended November 30, 2024, and $4.4 million for the thirteen weeks ended November 25, 2023, respectively.

• Business transaction costs.

Business transaction costs were $2.7 million for the thirty-nine weeks ended May 25, 2024 and were comprised of expenses related to the Acquisition of OWYN.

Business transaction costs were $0.6 million for the thirteen weeks ended November 30, 2024 and were comprised of expenses related to the OWYN Acquisition.

Interest income.

Interest income increased by $2.2 million for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023, due to higher cash balances, the increase in interest rates, and other sources of interest income.

Interest income decreased $0.3 million for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023.

Interest expense .

Interest expense decreased $6.5 million for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023, primarily due to the effect of principal payments reducing the outstanding balance of the Term Facility (as defined below) to $240.0 million as of May 25, 2024, from $325.0 million as of May 27, 2023.

Additionally, interest expense related to the amortization of deferred financing costs and debt discount decreased $0.8 million for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023.

Interest expense increased $1.8 million for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023, primarily due to the effect of the incremental borrowing associated with the OWYN Acquisition on June 13, 2024, and principal payments reducing the outstanding balance of the Term Facility (as defined below) to $350.0 million subsequent to the borrowing as of November 30, 2024.

Gain on foreign currency transactions.

Foreign currency transactions resulted in a gain of $0.2 million and $0.1 million, respectively, for the thirty-nine weeks ended May 25, 2024, and May 27, 2023.

Foreign currency transactions resulted in a gain of $0.1 million and $0.2 million for the thirteen weeks ended November 30, 2024, and November 25, 2023, respectively.

The variance is attributable to changes in foreign currency rates related to our international operations.

Income tax expense.

Income tax expense increased $5.4 million for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023.

The increase in our income tax expense was primarily driven by higher income from operations and changes in permanent differences.

Net income was $110.0 million for the thirty-nine weeks ended May 25, 2024, an increase of $13.1 million compared to net income of $96.9 million for the thirty-nine weeks ended May 27, 2023.

Net income was benefited by higher gross profit, higher interest income, and lower interest expense, and was partially offset by growth in marketing expenses, higher stock-based compensation expenses, recently incurred business transaction costs.

and higher income tax expense.

Income tax expense decreased $2.0 million for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023.

The decrease in our income tax expense was primarily driven by changes in permanent differences, principally stock-based compensation.

Net income was $38.1 million for the thirteen weeks ended November 30, 2024, an increase of $2.6 million, compared to net income of $35.6 million for the thirteen weeks ended November 25, 2023.

Net income benefited from higher gross profit and a decrease in income tax expense of $2.0 million and was partially offset by $0.6 million of business transaction costs related to the OWYN Acquisition.

Adjusted EBITDA.

Adjusted EBITDA increased $13.4 million, or 7.5% for the thirty-nine weeks ended May 25, 2024, compared to the thirty-nine weeks ended May 27, 2023, driven primarily by higher net gross profit, partially offset by investments in growth initiatives and higher advertising costs.

Adjusted EBITDA increased $8.1 million, or 13.1%, for the thirteen weeks ended November 30, 2024, compared to the thirteen weeks ended November 25, 2023, driven primarily by higher gross profit.

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

2 unchanged sentences

The Company 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:

stock-based compensation expense, executive transition costs, business transaction costs, term loan transaction fees, and other non-core expenses.

stock-based compensation expense, executive transition costs, business transaction costs, purchase price accounting, inventory step-up, integration costs, 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.

2 unchanged sentences

EBITDA and 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 table provides a reconciliation of EBITDA and Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the thirteen and thirty-nine weeks ended May 25, 2024, and May 27, 2023:

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

May 25, 2024 May 27, 2023 May 25, 2024 May 27, 2023

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 30, 2024, and November 25, 2023:

(In thousands) Thirteen Weeks Ended

November 30, 2024 November 25, 2023

Net income $ 38,122 $ 35,561

7 unchanged sentences

Business transaction costs 643 —

Term loan transaction fees — 2,423 — 2,423

400 (178) 199 (64)

Inventory step-up 974 —

Integration of OWYN 4,931 —

Adjusted EBITDA $ 70,068 $ 61,965

3 unchanged sentences

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

We had $208.7 million in cash as of May 25, 2024.

We had $121.8 million in cash as of November 30, 2024.

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.

4 unchanged sentences

Debt and Credit Facilities

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

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 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.

8 unchanged sentences

The Extension Amendment provided 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 then-effective maturity date of the Initial Term Loans and (ii) December 16, 2026.

On January 21, 2022, the Company entered into the “2022 Repricing Amendment” to the Credit Agreement.

On January 21, 2022, we entered into the “2022 Repricing Amendment” to the Credit Agreement.

The 2022 Repricing Amendment, among other things, (i) reduced the interest rate per annum applicable to the Initial Term Loans outstanding under the Credit Agreement immediately prior to the effective date of the 2022 Repricing Amendment, (ii) reset the prepayment premium for the existing Initial Term Loans to apply to Repricing Transactions (as defined in the Credit Agreement) that occur within six months after the effective date of the 2022 Repricing Amendment, and (iii) implemented SOFR and related replacement provisions for LIBOR.

1 unchanged sentence

The 2023 Repricing Amendment, (i) reduced the interest rate per annum applicable to the Initial Term Loans outstanding under the Credit Agreement immediately prior to April 25, 2023, and (ii) provided for an extension of the maturity date of the Initial Term Loans from July 7, 2024, to March 17, 2027.

The 2023 Repricing Amendment did not change the interest rate on the Revolving Credit Facility, which continues to bear interest based upon the Company’s consolidated net leverage ratio as of the end of the fiscal quarter for which consolidated financial statements are delivered to the Administrative Agent under the Credit Agreement.

No additional debt was incurred, or any proceeds received by the Company in connection with the 2023 Repricing Amendment.

No amounts under the Term Facility were repaid as a result of the execution of the 2023 Repricing Amendment.

Effective as of the 2023 Repricing Amendment, the interest rate per annum for the Initial Term Loans is based on either:

On June 13, 2024, the Company entered into a sixth amendment (the “2024 Incremental Facility Amendment”) to the Credit Agreement to increase the principal borrowed on the Term Facility by $250.0 million.

The terms of the incremental borrowing are the same as the terms of the outstanding borrowings under the Term Facility.

The 2024 Incremental Facility Amendment was executed to partially finance the OWYN Acquisition.

No amounts under the Term Facility were repaid as a result of the execution of the 2024 Incremental Facility Amendment.

Effective as of the date of the 2024 Incremental Facility Amendment, the interest rate per annum for the Initial Term Loans is based on either:

A base rate equaling the higher of (a) the “prime rate,” (b) the federal funds effective rate plus 0.50%, or (c) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) applicable for an interest period of one month plus 2.50% plus (x) 1.50% margin for the Term Loan or (y) 2.00% margin for the Revolving Credit Facility;

SOFR plus a credit spread adjustment equal to 0.10% for one-month SOFR, 0.15% for up to three-month SOFR and 0.25% for up to six-month SOFR, subject to a floor of 0.50%, plus (x) 2.50% margin for the Term Loan or (y) 3.00% margin for the Revolving Credit Facility.

In connection with the closing of the 2023 Repricing Amendment, the Company expensed $2.4 million primarily for third-party fees and capitalized an additional $2.7 million primarily for the payment of upfront lender fees (original issue discount).

In connection with the closing of the 2024 Incremental Facility Amendment, the Company expensed $3.4 million of non-deferrable third-party costs through Business transaction costs and capitalized $1.2 million of third-party financing costs.

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 the Company’s domestic subsidiaries that is not a named borrower under the Credit Agreement has provided a guarantee on a secured basis.

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.

The Credit Agreement contains certain financial and other covenants that limit the Company’s 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.

All guarantors other than Quest Nutrition, LLC and Only What You Need, Inc.

are holding companies with no assets other than their investments in their respective subsidiaries.

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 6.00:1.00 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.

The Company was in compliance with all covenants as of May 25, 2024, and August 26, 2023, respectively.

At May 25, 2024, the outstanding balance of the Term Facility was $240.0 million.

We are not required to make principal payments on the Term Facility over the twelve months following the period ended May 25, 2024.

We were in compliance with all covenants as of November 30, 2024, and August 31, 2024, respectively.

At November 30, 2024, the outstanding balance of the Term Facility was $350.0 million.

We are not required to make principal payments on the Term Facility over the twelve months following the period ended November 30, 2024.

The outstanding balance of the Term Facility is due upon its maturity in March 2027.

As of May 25, 2024, there were no amounts drawn against the Revolving Credit Facility.

Acquisition Financing

On April 29, 2024, the Company entered into a Purchase Agreement to acquire OWYN, a plant-based protein food company, for approximately $280.0 million.

On June 13, 2024, pursuant to the Purchase Agreement, the Company completed the acquisition of OWYN for approximately $280.0 million, subject to certain customary adjustments for levels of cash, indebtedness, net working capital, purchase price adjustments and transaction related expenses as of the closing date.

The terms of the incremental borrowing are the same as the terms of the outstanding borrowing under the Term Facility.

The 2024 Incremental Facility Amendment was executed to partially finance the acquisition of OWYN on June 13, 2024.

No amounts under the Term Facility were repaid as a result of the execution of the 2024 Incremental Facility Amendment.

As of November 30, 2024, there were no amounts drawn against the Revolving Credit Facility.

OWYN Acquisition

On April 29, 2024, the Company’s wholly owned subsidiary, Simply Good Foods, USA, Inc.

entered into a stock purchase agreement (“the Purchase Agreement”) to acquire Only What You Need, Inc.

(“OWYN”), a plant-based protein food company (the “OWYN Acquisition”), for approximately $280.0 million.

On June 13, 2024, pursuant to the Purchase Agreement, the Company completed the OWYN Acquisition by acquiring 100% of the equity interests for a cash purchase price at closing of $281.9 million, subject to certain customary post-closing adjustments.

We acquired OWYN as a part of our vision 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 that will now offer plant-based products to a wider market of consumers.

The OWYN Acquisition was funded through a combination of incremental borrowings under our outstanding Term Facility, totaling $250.0 million, and cash on hand.

Business transaction costs associated with the OWYN Acquisition within the Consolidated Statements of Operations and Comprehensive Income for the thirteen weeks ended November 30, 2024, were $0.6 million, which consisted of legal, accounting, and other costs.

Stock Repurchase Program

On October 21, 2022, we announced that our Board of Directors approved the addition of $50.0 million to our stock repurchase program, resulting in authorized stock repurchases of up to an aggregate of $150.0 million.

The Company did not repurchase any shares of common stock during the thirty-nine weeks ended May 25, 2024.

During the thirty-nine weeks ended May 27, 2023, the Company repurchased 546,346 shares of common stock at an average share price of $30.11 per share.

As of May 25, 2024, approximately $71.5 million remained available for repurchases under our $150.0 million stock repurchase program.

The Company did not repurchase any shares of common stock during the thirteen weeks ended November 30, 2024, and November 25, 2023.

As of November 30, 2024, approximately $71.5 million remained available for repurchases under our $150.0 million stock repurchase program.

Refer to Note 11, Stockholders’ Equity, of the Notes to Unaudited Consolidated Financial Statements in this Report for additional information related to our stock repurchase program.

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 25, 2024 May 27, 2023

Thirteen Weeks Ended

November 30, 2024 November 25, 2023

Net cash provided by operating activities

5 unchanged sentences

Operating activities.

Our net cash provided by operating activities increased $56.3 million to $166.8 million for the thirty-nine weeks ended May 25, 2024, compared to $110.4 million for the thirty-nine weeks ended May 27, 2023.

The increase in cash provided by operating activities was primarily attributable to changes in working capital for the thirty-nine weeks ended May 25, 2024, as compared to the thirty-nine weeks ended May 27, 2023.

Changes in working capital, comprised of changes in accounts receivable, net, inventories, prepaid expenses, other current assets, accounts payable, accrued interest, accrued expenses and other current liabilities, and other assets and liabilities, which are driven by the timing of payments and receipts and seasonal building of inventory, generated cash of $6.8 million in the thirty-nine weeks ended May 25, 2024 compared to $31.6 million of cash consumed in the thirty-nine weeks ended May 27, 2023, an improvement of $38.4 million.

Income from operations increased by $9.5 million to $158.7 million for the thirty-nine weeks ended May 25, 2024, as compared to $149.2 million for the thirty-nine weeks ended May 27, 2023.

Additionally, cash paid for interest was $16.0 million in the thirty-nine weeks ended May 25, 2024, which was a decrease of $5.3 million as compared to the $21.3 million paid for interest in the thirty-nine weeks ended May 27, 2023.

Our net cash provided by operating activities decreased $15.5 million to $32.0 million for the thirteen weeks ended November 30, 2024, compared to $47.5 million for the thirteen weeks ended November 25, 2023.

The decrease in cash provided by operating activities was primarily attributable to changes in working capital for the thirteen weeks ended November 30, 2024, as compared to the thirteen weeks ended November 25, 2023.

Changes in working capital, comprised of changes in accounts receivable, net, inventories, prepaid expenses, other current assets, accounts payable, accrued interest, accrued expenses and other current liabilities, and other assets and liabilities, were driven by the timing of payments and receipts, the OWYN Acquisition, and the seasonal building of inventory, which consumed cash of $20.8 million in the thirteen weeks ended November 30, 2024 compared to $4.1 million of cash consumed in the thirteen weeks ended November 25, 2023, a difference of $16.6 million.

Income from operations increased by $2.8 million to $54.6 million for the thirteen weeks ended November 30, 2024, as compared to $51.8 million for the thirteen weeks ended November 25, 2023.

Additionally, cash paid for interest was $7.5 million in the thirteen weeks ended November 30, 2024, which was an increase of $5.4 million as compared to the $2.1 million paid for interest in the thirteen weeks ended November 25, 2023.

Investing activities .

Our net cash used in investing activities was $2.3 million for the thirty-nine weeks ended May 25, 2024 compared to $10.4 million for the thirty-nine weeks ended May 27, 2023.

Our net cash used in investing activities for the thirty-nine weeks ended May 25, 2024, primarily comprised $1.8 million of purchases of property and equipment.

The $10.4 million of net cash used in investing activities for the thirty-nine weeks ended May 27, 2023, primarily comprised $10.1 million of purchases of property and equipment.

Our net cash used in investing activities was $0.7 million for the thirteen weeks ended November 30, 2024, compared to $0.8 million for the thirteen weeks ended November 25, 2023.

Our net cash used in investing activities for the thirteen weeks ended November 30, 2024, was primarily comprised of $0.3 million of purchases of property and equipment and $0.4 million of investments in intangible and other assets.

The $0.8 million of net cash used in investing activities for the thirteen weeks ended November 25, 2023, was primarily comprised of $0.7 million of purchases of property and equipment.

Financing activities .

Our net cash used in financing activities was $43.6 million for the thirty-nine weeks ended May 25, 2024, compared to $98.6 million for the thirty-nine weeks ended May 27, 2023.

Net cash used in financing activities for the thirty-nine weeks ended May 25, 2024, primarily consisted of $45.0 million in principal payments on the Term Facility, and $4.8 million in tax payments related to issuance of restricted stock units and performance stock units, partially offset by $4.3 million of cash proceeds received from option exercises, and $2.1 million of cash proceeds received from the partial repayment of an outstanding note receivable.

Net cash used in financing activities for the thirty-nine weeks ended May 27, 2023, primarily consisted of $16.4 million in repurchases of common stock, $81.5 million in principal payments on the Term Facility, and $2.8 million in tax payments related to issuance of restricted stock units and performance stock units, partially offset by $5.0 million of cash proceeds received from option exercises.

Our net cash used in financing activities was $42.3 million for the thirteen weeks ended November 30, 2024, compared to $13.1 million for the thirteen weeks ended November 25, 2023.

Net cash used in financing activities for the thirteen weeks ended November 30, 2024, primarily consisted of $50.0 million in principal payments on the Term Facility, and $2.3 million in tax payments related to the issuance of restricted stock units and performance stock units, partially offset by $10.0 million of cash proceeds received from option exercises.

Net cash used in financing activities for the thirteen weeks ended November 25, 2023, primarily consisted of $10.0 million in principal payments on the Term Facility, and $3.6 million in tax payments related to issuance of restricted stock units and performance stock units, partially offset by $0.6 million of cash received on repayment of a note receivable.

New Accounting Pronouncements

2 unchanged sentences

Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in our market risk exposure during the thirteen-week period ended May 25, 2024.

There were no material changes in our market risk exposure during the thirteen-week period ended November 30, 2024.

For a discussion of our market risks, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report.

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