Simply Good Foods Co 10-Q

Item 1. Financial Statements (Unaudited) The Simply Good Foods Company and Subsidiaries Consolidated Balance Sheets (Unaudited, dollars in thousands, except share and per share data) March 1, 2025 August 31, 2024 Assets Current assets: Cash $ 103,682 $ 132,530 Accounts receivable, net 157,145 150,721 Inventories 163,734 142,107 Prepaid expenses 9,872 5,730 Other current assets 10,034 9,192 Total current assets 444,467 440,280 Long-term assets: Property and equipment, net 22,790 24,830 Intangible assets, net 1,329,451 1,336,466 Goodwill 589,974 591,687 Other long-term assets 40,498 42,881 Total assets $ 2,427,180 $ 2,436,144 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 75,065 $ 58,559 Accrued interest 59 265 Accrued expenses and other current liabilities 29,026 49,791 Total current liabilities 104,150 108,615 Long-term liabilities: Long-term debt, less current maturities 298,537 397,485 Deferred income taxes 172,452 166,012 Other long-term liabilities 34,284 36,546 Total liabilities 609,423 708,658 See commitments and contingencies (Note 10) Stockholders’ equity: Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued — — Common stock, $0.01 par value, 600,000,000 shares authorized, 103,415,302 and 102,515,315 shares issued at March 1, 2025, and August 31, 2024, respectively 1,034 1,025 Treasury stock, 2,365,100 shares and 2,365,100 shares at cost at March 1, 2025, and August 31, 2024, respectively ( 78,451 ) ( 78,451 ) Additional paid-in-capital 1,335,892 1,319,686 Retained earnings 562,134 487,265 Accumulated other comprehensive loss ( 2,852 ) ( 2,039 ) Total stockholders’ equity 1,817,757 1,727,486 Total liabilities and stockholders’ equity $ 2,427,180 $ 2,436,144 See accompanying notes to the unaudited consolidated financial statements. 3 Table of Contents The Simply Good Foods Company and Subsidiaries Consolidated Statements of Operations and Comprehensive Income (Unaudited, dollars in thousands, except share and per share data) Thirteen Weeks Ended Twenty-Six Weeks Ended March 1, 2025 February 24, 2024 March 1, 2025 February 24, 2024 Net sales $ 359,655 $ 312,199 $ 700,923 $ 620,877 Cost of goods sold 229,518 195,329 440,300 388,889 Gross profit 130,137 116,870 260,623 231,988 Operating expenses: Selling and marketing 35,078 34,643 68,072 66,633 General and administrative 36,013 29,933 74,077 56,883 Depreciation and amortization 4,148 4,211 8,308 8,569 Business transaction costs 177 — 820 — Total operating expenses 75,416 68,787 151,277 132,085 Income from operations 54,721 48,083 109,346 99,903 Other income (expense): Interest income 701 924 1,477 2,014 Interest expense ( 6,338 ) ( 5,596 ) ( 14,199 ) ( 11,630 ) (Loss) gain on foreign currency transactions ( 125 ) ( 23 ) ( 5 ) 203 Other income 19 — 34 6 Total other income (expense) ( 5,743 ) ( 4,695 ) ( 12,693 ) ( 9,407 ) Income before income taxes 48,978 43,388 96,653 90,496 Income tax expense 12,231 10,265 21,784 21,812 Net income $ 36,747 $ 33,123 $ 74,869 $ 68,684 Other comprehensive income: Foreign currency translation, net of reclassification adjustments ( 426 ) ( 15 ) ( 813 ) 257 Comprehensive income $ 36,321 $ 33,108 $ 74,056 $ 68,941 Earnings per share from net income: Basic $ 0.36 $ 0.33 $ 0.74 $ 0.69 Diluted $ 0.36 $ 0.33 $ 0.74 $ 0.68 Weighted average shares outstanding: Basic 101,040,501 99,905,643 100,724,155 99,767,769 Diluted 101,821,229 101,276,575 101,674,934 101,212,408 See accompanying notes to the unaudited consolidated financial statements. 4 Table of Contents The Simply Good Foods Company and Subsidiaries Consolidated Statements of Cash Flows (Unaudited, dollars in thousands) Twenty-Six Weeks Ended March 1, 2025 February 24, 2024 Operating activities Net income $ 74,869 $ 68,684 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,135 10,792 Amortization of deferred financing costs and debt discount 951 992 Stock compensation expense 8,792 8,736 Estimated credit losses (gains) 101 ( 140 ) Unrealized gain (loss) on foreign currency transactions 5 ( 203 ) Deferred income taxes 6,440 7,722 Amortization of operating lease right-of-use asset 3,369 3,489 Other 168 ( 552 ) Changes in operating assets and liabilities: Accounts receivable, net ( 7,028 ) ( 1,911 ) Inventories ( 22,445 ) 820 Prepaid expenses ( 4,189 ) ( 5,447 ) Other current assets ( 987 ) ( 9,220 ) Accounts payable 16,566 2,399 Accrued interest ( 206 ) ( 564 ) Accrued expenses and other current liabilities ( 19,470 ) 11,076 Other assets and liabilities ( 3,804 ) ( 2,682 ) Net cash provided by operating activities 63,267 93,991 Investing activities Purchases of property and equipment ( 802 ) ( 1,087 ) Acquisition of business, net of cash acquired 1,713 — Investments in intangible and other assets ( 911 ) ( 191 ) Net cash used in investing activities — ( 1,278 ) Financing activities Proceeds from option exercises 10,136 3,015 Tax payments related to issuance of restricted stock units and performance stock units ( 2,522 ) ( 3,750 ) Payments on finance lease obligations — ( 121 ) Cash received on repayment of note receivable — 1,200 Principal payments of long-term debt ( 100,000 ) ( 45,000 ) Net cash used in financing activities ( 92,386 ) ( 44,656 ) Cash and cash equivalents Net (decrease) increase in cash ( 29,119 ) 48,057 Effect of exchange rate on cash 271 104 Cash at beginning of period 132,530 87,715 Cash and cash equivalents at end of period $ 103,682 $ 135,876 5 Table of Contents Twenty-Six Weeks Ended March 1, 2025 February 24, 2024 Supplemental disclosures of cash flow information Cash paid for interest $ 13,454 $ 11,202 Cash paid for taxes $ 19,122 $ 14,884 Non-cash investing and financing transactions Non-cash credits for repayment of note receivable $ 353 $ 445 Non-cash additions to property and equipment $ — $ 21 Non-cash additions to intangible assets $ 32 $ 31 See accompanying notes to the unaudited consolidated financial statements. 6 Table of Contents The Simply Good Foods Company and Subsidiaries Consolidated Statements of Stockholders’ Equity (Unaudited, dollars in thousands, except share data) Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shares Amount Shares Amount Balance at August 31, 2024 102,515,315 $ 1,025 2,365,100 $ ( 78,451 ) $ 1,319,686 $ 487,265 $ ( 2,039 ) $ 1,727,486 Net income — — — — — 38,122 — 38,122 Stock-based compensation — — — — 3,654 — — 3,654 Foreign currency translation adjustments — — — — — — ( 387 ) ( 387 ) Shares issued upon vesting of restricted stock units and performance stock units 164,093 2 — — ( 2,317 ) — — ( 2,315 ) Exercise of options to purchase common stock 713,751 7 — — 9,977 — — 9,984 Balance at November 30, 2024 103,393,159 $ 1,034 2,365,100 $ ( 78,451 ) $ 1,331,000 $ 525,387 $ ( 2,426 ) $ 1,776,544 Net income — — — — — 36,747 — 36,747 Stock-based compensation — — — — 4,947 — — 4,947 Foreign currency translation adjustments — — — — — — ( 426 ) ( 426 ) Shares issued upon vesting of restricted stock units 18,229 — — — ( 207 ) — — ( 207 ) Exercise of options to purchase common stock 3,914 — — — 152 — — 152 Balance at March 1, 2025 103,415,302 $ 1,034 2,365,100 $ ( 78,451 ) $ 1,335,892 $ 562,134 $ ( 2,852 ) $ 1,817,757 Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shares Amount Shares Amount Balance at August 26, 2023 101,929,868 $ 1,019 2,365,100 $ ( 78,451 ) $ 1,303,168 $ 347,956 $ ( 2,593 ) $ 1,571,099 Net income — — — — — 35,561 — 35,561 Stock-based compensation — — — — 3,888 — — 3,888 Foreign currency translation adjustments — — — — — — 272 272 Shares issued upon vesting of restricted stock units and performance stock units 245,365 3 — — ( 3,645 ) — — ( 3,642 ) Balance at November 25, 2023 102,175,233 $ 1,022 2,365,100 $ ( 78,451 ) $ 1,303,411 $ 383,517 $ ( 2,321 ) $ 1,607,178 Net income — — — — — 33,123 — 33,123 Stock-based compensation — — — — 4,288 — — 4,288 Foreign currency translation adjustments — — — — — — ( 15 ) ( 15 ) Shares issued upon vesting of restricted stock units 5,285 — — — ( 107 ) — — ( 107 ) Exercise of options to purchase common stock 173,100 2 — — 3,013 — — 3,015 Balance at February 24, 2024 102,353,618 $ 1,024 2,365,100 $ ( 78,451 ) $ 1,310,605 $ 416,640 $ ( 2,336 ) $ 1,647,482 See accompanying notes to the unaudited consolidated financial statements. 7 Table of Contents Notes to Unaudited Consolidated Financial Statements (Unaudited, dollars in thousands, except for share and per share data) 1. Nature of Operations and Principles of Consolidation Description of Business The Simply Good Foods Company (“Simply Good Foods” or the “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. The product portfolio the Company develops, markets and sells consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the Quest, Atkins, and OWYN brand names. 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, the Company 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. 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 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. 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. The common stock of Simply Good Foods is listed on the Nasdaq Capital Market under the symbol “SMPL.” Unaudited Interim Consolidated Financial Statements The unaudited interim consolidated financial statements include the accounts of Simply Good Foods and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Simply Good Foods 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, Atkins Endulge, 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 Company maintains its accounting records on a 52/53-week fiscal year, ending on the last Saturday in August of each year. The interim consolidated financial statements and related notes of the Company and its subsidiaries are unaudited. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited interim consolidated financial statements reflect all adjustments and disclosures which are, in the Company’s opinion, necessary for a fair presentation of the results of operations, financial position and cash flows for the indicated periods. All such adjustments were of a normal and recurring nature unless otherwise disclosed. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by GAAP have been condensed or omitted. The results reported in these unaudited interim consolidated financial statements are not necessarily indicative of the results that may be reported for the entire fiscal year and should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended August 31, 2024, included in the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the SEC on October 29, 2024. 8 Table of Contents 2. Summary of Significant Accounting Policies Refer to Note 2, Summary of Significant Accounting Policies , to the consolidated financial statements included in the Annual Report for a description of significant accounting policies. Recently Issued and Adopted Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the provisions of the amendments and the effect on its future consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures (“ASU 2023-09”), which updates disclosures required in the footnotes to the financial statements to further aid investors in understanding how to analyze income tax reporting. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company is currently evaluating the provisions of the amendments and the effect on its future consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which will improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions such as cost of sales, SG&A, and R&D. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued or made available. The amendments should be applied on either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the provisions of the amendments and the effect on its future consolidated financial statements. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company’s consolidated financial statements. 3. Business Combination On April 29, 2024 , the Company’s wholly owned subsidiary, Simply Good Foods, USA, Inc. 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 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, as defined below, totaling $ 250.0 million and cash on hand. During the thirteen weeks ended March 1, 2025, the Company received a post-closing release from escrow of approximately $ 1.7 million related to net working capital adjustments, resulting in a total net consideration paid of $ 280.2 million as of March 1, 2025. Business transaction costs within the Consolidated Statements of Operations and Comprehensive Income for the twenty-six weeks ended March 1, 2025, were $ 0.8 million, which consisted of legal, accounting, and other costs. The OWYN Acquisition was accounted for as a business combination under ASC 805, Business Combinations (“ASC 805”), which requires, among other things, assets acquired and liabilities assumed to be measured at their acquisition date fair value. The following table sets forth the preliminary purchase price allocation of the OWYN Acquisition to the estimated fair value of the net assets acquired at the date of the Acquisition, in thousands. The preliminary purchase price allocation may be adjusted as a result of the finalization of the Company’s purchase price allocation procedures related to the assets acquired and liabilities assumed; including, but not limited to, certain customary post-closing adjustments such as the finalization of working capital, tax return finalization, and other adjustments. 9 Table of Contents The preliminary June 13, 2024, fair value is as follows: Assets acquired: Cash and cash equivalents $ 1,476 Accounts receivable, net 14,214 Inventories (1) 38,955 Prepaid assets 563 Property and equipment, net 136 Intangible assets, net (2) 243,626 Other long-term assets 6 Liabilities assumed: Accounts payable 20,378 Other current liabilities 3,753 Deferred tax liability (3) 41,513 Total identifiable net assets 233,332 Goodwill (4) 46,840 Total assets acquired and liabilities assumed $ 280,172 (1) Inventory was estimated using the comparative sales method, which quantifies the fair value of inventory based on the expected sales price of the subject inventory, reduced for: (i) all costs expected to be incurred in its completion/disposition efforts; and (ii) a profit on those costs. (2) Intangible assets were recorded at fair value consistent with ASC 820 as a result of the OWYN Acquisition. Intangible assets consisted of $ 223.0 million of brand and $ 20.5 million of customer relationships. The useful lives of the intangible assets are disclosed in Note 5 of the Consolidated Financial Statements. The fair value measurement of the assets and liabilities was based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows and market comparable data and companies. The fair value of the indefinite-lived brand asset was estimated using the multi-period excess earnings method of the income approach, wherein the net earnings attributable to the asset are isolated from other “contributory assets” in order to estimate the cash flows solely attributable to the asset over its remaining economic life. The fair value of the customer relationship intangible asset was estimated using the with/without method of the income approach, wherein the value is estimated by comparing the overall business cash flows with the customer relationships in place to the cash flows in a hypothetical scenario where the customer relationships are not in place. The significant assumptions used in estimating the fair value under the with/without method include the time to recreate the asset, profitability under both scenarios, and the estimated discount rate. (3) Primarily as a result of the fair value attributable to the identifiable intangible assets, the deferred income tax liability was $ 41.5 million. (4) Goodwill was recorded at fair value consistent with ASC 820 as a result of the OWYN Acquisition. Amounts recorded for goodwill created in an acquisition structured as a stock purchase for tax are generally not expected to be deductible for tax purposes. As such, the acquired goodwill is not expected to be deductible for tax purposes. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The final determination of the fair value of the assets acquired and liabilities assumed is expected to be completed in the fourth fiscal quarter of 2025. Measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed at the acquisition date. During the thirteen weeks ended March 1, 2025, a measurement period adjustment of $ 1.7 million was recorded to goodwill. The final fair value determination of the assets acquired and liabilities assumed will be completed prior to one year from the transaction completion, consistent with ASC 805. 10 Table of Contents The results of OWYN’s operations have been included in the Simply Good Foods’ Consolidated Financial Statements since the acquisition date. The Company has not disclosed earnings from the acquired OWYN business as they are immaterial. The following table provides net sales from the acquired OWYN business included in the Company’s results: Thirteen Weeks Ended Twenty-Six Weeks Ended (In thousands) March 1, 2025 March 1, 2025 Net sales $ 33,806 $ 66,060 Unaudited Pro Forma Financial Information Pro forma financial information is not intended to represent or be indicative of the actual results of operations of the combined business that would have been reported had the OWYN Acquisition been completed at the beginning of the fiscal year 2024, nor is it representative of future operating results of the Company. This unaudited pro forma combined financial information is prepared based on ASC 805 period end guidance. The Company and the legacy OWYN entity have different fiscal year ends, with Simply Good Foods’ fiscal year being the last Saturday of August while the legacy OWYN business fiscal year was December 31. Because the year ends differ by more than 93 days, OWYN’s financial information is required to be adjusted to a period within 93 days of Simply Good Foods’ fiscal period end. In addition to these period end adjustments, the pro forma results include certain nonrecurring adjustments that were directly related to the business combination, including business transaction costs, as disclosed above. The following unaudited pro forma combined financial information presents combined results of the Company assuming the OWYN Acquisition occurred at the beginning of fiscal year 2024: Thirteen Weeks Ended Twenty-Six Weeks Ended (In thousands) February 24, 2024 February 24, 2024 Net sales $ 338,851 $ 669,508 Net income $ 25,914 $ 57,172 4. Revenue Recognition Revenue from transactions with external customers for each of the Company’s products would be impracticable to disclose and management does not view its business by product line. The following is a summary of revenue disaggregated by geographic area and brands: Thirteen Weeks Ended Twenty-Six Weeks Ended (In thousands) March 1, 2025 February 24, 2024 March 1, 2025 February 24, 2024 North America (1) Atkins $ 108,650 $ 122,755 $ 216,818 $ 242,253 Quest 210,771 180,874 402,708 362,337 OWYN 33,806 — 66,060 — Total North America 353,227 303,629 685,586 604,590 International 6,428 8,570 15,337 16,287 Total net sales $ 359,655 $ 312,199 $ 700,923 $ 620,877 (1) The North America geographic area consists of net sales substantially related to the United States and there is no individual foreign country to which more than 10% of the Company’s net sales are attributed or that is otherwise deemed individually material. Charges related to credit losses on accounts receivable from transactions with external customers were $( 0.6 ) million and $ 0.1 million for the thirteen and twenty-six weeks ended March 1, 2025, respectively. Charges related to credit losses on accounts receivable from transactions with external customers were $( 0.2 ) million and $( 0.1 ) million for the thirteen and twenty-six weeks ended February 24, 2024, respectively. As of March 1, 2025, and August 31, 2024, the allowance for credit losses related to accounts receivable were $ 1.2 million and $ 0.7 million, respectively. 11 Table of Contents 5. Goodwill and Intangibles Changes to Goodwill during the twenty-six weeks ended March 1, 2025, were as follows: (In thousands) Goodwill Balance as of August 31, 2024 $ 591,687 Acquisition of business ( 1,713 ) Balance as of March 1, 2025 $ 589,974 The change in the Company's Goodwill from August 31, 2024, to March 1, 2025, is the result of the acquisition method of accounting related to the OWYN Acquisition, as described in Note 3. There were no impairment charges related to goodwill during the thirteen and twenty-six weeks ended March 1, 2025, or since the inception of the Company. Intangible assets, net in the Consolidated Balance Sheets consists of the following: March 1, 2025 (In thousands) Useful life Gross carrying amount Accumulated amortization Net carrying amount Intangible assets with indefinite life: Brands and trademarks Indefinite life $ 1,197,000 $ — $ 1,197,000 Intangible assets with finite lives: Customer relationships 15 years 194,500 71,655 122,845 Licensing agreements 13 years 22,000 13,374 8,626 Proprietary recipes and formulas 7 years 7,000 7,000 — Software and website development costs 3 - 5 years 5,034 4,939 95 Intangible assets in progress 3 - 5 years 885 — 885 $ 1,426,419 $ 96,968 $ 1,329,451 August 31, 2024 (In thousands) Useful life Gross carrying amount Accumulated amortization Net carrying amount Intangible assets with indefinite life: Brands and trademarks Indefinite life $ 1,197,000 $ — $ 1,197,000 Intangible assets with finite lives: Customer relationships 15 years 194,500 65,171 129,329 Licensing agreements 13 years 22,000 12,415 9,585 Proprietary recipes and formulas 7 years 7,000 7,000 — Software and website development costs 3 - 5 years 5,034 4,921 113 Intangible assets in progress 3 - 5 years 439 — 439 $ 1,425,973 $ 89,507 $ 1,336,466 Changes in Intangible assets, net during the twenty-six weeks ended March 1, 2025, were primarily related to recurring amortization expense. Amortization expense related to intangible assets was $ 3.7 million and $ 3.8 million for the thirteen weeks ended March 1, 2025, and February 24, 2024, respectively, and $ 7.5 million and $ 7.7 million for the twenty-six weeks ended March 1, 2025, and February 24, 2024, respectively. There were no impairment charges related to its finite-lived intangible assets during the thirteen and twenty-six weeks ended March 1, 2025, and February 24, 2024. 12 Table of Contents Estimated future amortization for each of the next five fiscal years and thereafter is as follows: (In thousands) Amortization Remainder of 2025 $ 7,456 2026 14,891 2027 14,891 2028 14,891 2029 14,891 2030 and thereafter 64,546 Total $ 131,566 6. Long-Term Debt and Line of Credit On July 7, 2017, the Company (through certain of its subsidiaries) entered into 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. Substantially concurrent with the consummation of the business combination which formed the Company 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. On November 7, 2019, the Company 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). 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 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. 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. On April 25, 2023, the Company entered into the “2023 Repricing Amendment” to the Credit Agreement. 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. 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. On January 31, 2025, the Company entered into a seventh amendment (the “2025 Repricing Amendment”) to the Credit Agreement to reduce the interest rate per annum applicable to the Initial Term Loans outstanding under the Credit Agreement immediately prior to the effective date of the 2025 Repricing Amendment. Effective as of the 2025 Repricing Amendment, the interest rate per annum for the Initial Term Loans 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 Adjusted Term SOFR Rate (as defined in the Credit Agreement) applicable for an interest period of one month plus 1.00 % plus (x) 1.00 % margin for the Term Loan or (y) 2.00 % margin for the Revolving Credit Facility; or ii. SOFR, subject to a floor of 0.50 %, plus (x) 2.00 % margin for the Term Loan or (y) 3.00 % margin for the Revolving Credit Facility. 13 Table of Contents In connection with the closing of the 2025 Repricing Amendment, the Company expensed $ 0.7 million of non-deferrable third-party costs through General and administrative . 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. 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 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 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. 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 March 1, 2025, and August 31, 2024, respectively. Long-term debt consists of the following: (In thousands) March 1, 2025 August 31, 2024 Term Facility (effective rate of 6.3% at March 1, 2025) $ 300,000 $ 400,000 Less: Deferred financing fees 1,463 2,515 Long-term debt, net of deferred financing fees $ 298,537 $ 397,485 The Company is no t required to make principal payments on the Term Facility over the twelve months following the period ended March 1, 2025. The outstanding balance of the Term Facility is due upon its maturity in March 2027. As of March 1, 2025, the Company had letters of credit in the amount of $ 0.9 million outstanding. These letters of credit offset against the $ 75.0 million availability of the Revolving Credit Facility and exist to support two of the Company’s leased buildings. No amounts were drawn against these letters of credit as of March 1, 2025. The Company utilizes market approaches to estimate the fair value of certain outstanding borrowings by discounting anticipated future cash flows derived from the contractual terms of the obligations and observable market interest and foreign exchange rates. The Company carries debt at historical cost and discloses fair value. As of March 1, 2025, and August 31, 2024, the book value of the Company’s debt approximated fair value. The estimated fair value of the Term Loan is valued based on observable inputs and classified as Level 2 in the fair value hierarchy. 7. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measurements, a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is used: Level 1 – Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 – Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 – Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. Components of the balance sheet such as accounts receivable, cash and cash equivalents, and others approximate fair value as of March 1, 2025. 14 8. Income Taxes The tax expense and the effective tax rate resulting from operations were as follows: Twenty-Six Weeks Ended (In thousands) March 1, 2025 February 24, 2024 Income before income taxes $ 96,653 $ 90,496 Provision for income taxes $ 21,784 $ 21,812 Effective tax rate 22.5 % 24.1 % The effective tax rate for the twenty-six weeks ended March 1, 2025, was 1.6 % lower than the effective tax rate for the twenty-six weeks ended February 24, 2024, which was primarily driven by permanent differences, principally stock-based compensation. 9. Leases The components of lease expense were as follows: Thirteen Weeks Ended Twenty-Six Weeks Ended (In thousands) Statements of Operations Caption March 1, 2025 February 24, 2024 March 1, 2025 February 24, 2024 Operating lease cost: Lease cost Cost of goods sold and General and administrative $ 2,210 $ 2,255 $ 4,419 $ 4,514 Variable lease cost (1) Cost of goods sold and General and administrative 1,200 954 2,058 1,750 Total operating lease cost 3,410 3,209 6,477 6,264 Finance lease cost: Amortization of right-of-use assets Cost of goods sold — 52 — 105 Interest on lease liabilities Interest expense — 1 — 2 Total finance lease cost — 53 — 107 Total lease cost $ 3,410 $ 3,262 $ 6,477 $ 6,371 (1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs. The right-of-use assets and corresponding liabilities related to both operating and finance leases are as follows: (In thousands) Balance Sheets Caption March 1, 2025 August 31, 2024 Assets Operating lease right-of-use assets Other long-term assets $ 31,728 $ 35,097 Total lease assets $ 31,728 $ 35,097 Liabilities Current: Operating lease liabilities Accrued expenses and other current liabilities $ 4,432 $ 5,494 Long-term: Operating lease liabilities Other long-term liabilities 31,877 34,330 Total lease liabilities $ 36,309 $ 39,824 15 Table of Contents Future maturities of lease liabilities as of March 1, 2025, were as follows: (In thousands) Operating Leases Fiscal year ending: Remainder of 2025 $ 2,972 2026 6,783 2027 6,936 2028 6,267 2029 6,183 Thereafter 14,679 Total lease payments 43,820 Less: Interest ( 7,511 ) Present value of lease liabilities $ 36,309 The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases were as follows: March 1, 2025 August 31, 2024 Weighted-average remaining lease term (in years) Operating leases 6.45 6.50 Weighted-average discount rate Operating leases 5.4 % 5.1 % Supplemental and other information related to leases was as follows: Twenty-Six Weeks Ended (In thousands) March 1, 2025 February 24, 2024 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 5,101 $ 6,040 Operating cash flows from finance leases $ — $ 444 Financing cash flows from finance leases $ — $ 121 10. Commitments and Contingencies Litigation The Company is a party to certain litigation and claims that are considered normal to the operations of the business. From time to time, the Company has been and may again become involved in legal proceedings arising in the ordinary course of business. The Company is not presently a party to any litigation that it believes to be material, and the Company is not aware of any pending or threatened litigation against it that its management believes could have a material adverse effect on its business, operating results, financial condition or cash flows. Other The Company enters into endorsement contracts with certain celebrity figures and social media influencers to promote and endorse the Quest, Atkins, and OWYN brands and product lines. These contracts contain endorsement fees, which are expensed ratably over the life of the contract, and performance fees, that are recognized at the time of achievement. Based on the terms of contracts in place and achievement of performance conditions as of March 1, 2025, the Company will be required to make payments of $ 1.8 million over the next year. 16 Table of Contents 11. Stockholders’ Equity Stock Repurchase Program The Company adopted a $ 50.0 million stock repurchase program on November 13, 2018. On April 13, 2022, and October 21, 2022, the Company announced that its Board of Directors had approved the addition of $ 50.0 million and $ 50.0 million, respectively, to its stock repurchase program, resulting in authorized stock repurchases of up to an aggregate of $ 150.0 million. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions. The stock repurchase program does not obligate the Company to acquire any specific number of shares or acquire shares over any specific period of time. The stock repurchase program may be suspended or discontinued at any time by the Company and does not have an expiration date. The Company did not repurchase any shares of common stock during the twenty-six weeks ended March 1, 2025, or the twenty-six weeks ended February 24, 2024. As of March 1, 2025, approximately $ 71.5 million remained available under the stock repurchase program. 12. Earnings Per Share Basic earnings or loss per share is based on the weighted average number of common shares issued and outstanding. In computing diluted earnings per share, basic earnings per share is adjusted for the assumed issuance of all potentially dilutive securities, including the Company’s employee stock options and non-vested stock units. In periods in which the Company has a net loss, diluted loss per share is based on the weighted average number of common shares issued and outstanding as the effect of including common stock equivalents outstanding would be anti-dilutive. The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share: Thirteen Weeks Ended Twenty-Six Weeks Ended (In thousands, except per share data) March 1, 2025 February 24, 2024 March 1, 2025 February 24, 2024 Basic earnings per share computation: Numerator: Net income available to common stockholders $ 36,747 $ 33,123 $ 74,869 $ 68,684 Denominator: Weighted average common shares outstanding - basic 101,040,501 99,905,643 100,724,155 99,767,769 Basic earnings per share from net income $ 0.36 $ 0.33 $ 0.74 $ 0.69 Diluted earnings per share computation: Numerator: Net income available for common stockholders $ 36,747 $ 33,123 $ 74,869 $ 68,684 Numerator for diluted earnings per share $ 36,747 $ 33,123 $ 74,869 $ 68,684 Denominator: Weighted average common shares outstanding - basic 101,040,501 99,905,643 100,724,155 99,767,769 Employee stock options 643,584 1,185,131 777,751 1,189,346 Non-vested stock units 137,144 185,801 173,028 255,293 Weighted average common shares - diluted 101,821,229 101,276,575 101,674,934 101,212,408 Diluted earnings per share from net income $ 0.36 $ 0.33 $ 0.74 $ 0.68 Diluted earnings per share calculations for the thirteen and twenty-six week periods ended March 1, 2025, excluded 0.4 million and 0.7 million shares of common stock issuable upon exercise of stock options, respectively, that would have been anti-dilutive. Diluted earnings per share calculations for the thirteen and twenty-six week periods ended February 24, 2024, excluded 0.6 million and 0.8 million shares of common stock issuable upon exercise of stock options, respectively, that would have been anti-dilutive. Diluted earnings per share calculations for the thirteen and twenty-six week periods ended March 1, 2025, excluded an immaterial number of non-vested stock units that would have been anti-dilutive. Diluted earnings per share calculations for the thirteen and twenty-six week periods ended February 24, 2024, excluded an immaterial number of non-vested stock units that would have been anti-dilutive. 17 Table of Contents 13. Omnibus Incentive Plan Stock-based compensation includes stock options, restricted stock units, performance stock unit awards, and stock appreciation rights, which are awarded to employees, directors, and consultants of the Company. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award based on their grant date fair value. Stock-based compensation expense is included within General and administrative expense, which is the same financial statement caption where recipient’s other compensation is reported. The Company recorded stock-based compensation expense of $ 4.9 million and $ 4.6 million in the thirteen weeks ended March 1, 2025, and February 24, 2024, respectively, and $ 8.8 million and $ 8.7 million in the twenty-six weeks ended March 1, 2025, and February 24, 2024, respectively. Stock Options The following table summarizes stock option activity for the twenty-six weeks ended March 1, 2025: Shares underlying options Weighted average exercise price Weighted average remaining contractual life (years) Outstanding as of August 31, 2024 2,410,567 $ 20.75 4.39 Granted — — Exercised ( 717,665 ) 14.12 Forfeited ( 19,694 ) 40.07 Outstanding as of March 1, 2025 1,673,208 $ 23.36 4.66 Vested and expected to vest as of March 1, 2025 1,673,208 $ 23.36 4.66 Exercisable as of March 1, 2025 1,476,609 $ 21.55 4.21 As of March 1, 2025, the Company had $ 1.4 million of total unrecognized compensation cost related to stock options that will be recognized over a weighted average period of 1.1 years. During the twenty-six weeks ended March 1, 2025, and February 24, 2024, the Company received $ 10.1 million and $ 3.0 million in cash from stock option exercises, respectively. Restricted Stock Units The following table summarizes restricted stock unit activity for the twenty-six weeks ended March 1, 2025: Units Weighted average grant-date fair value Non-vested as of August 31, 2024 546,271 $ 37.38 Granted 322,060 35.55 Vested ( 239,630 ) 37.52 Forfeited ( 15,865 ) 38.08 Non-vested as of March 1, 2025 612,836 $ 36.34 As of March 1, 2025, the Company had $ 16.7 million of total unrecognized compensation cost related to restricted stock units that will be recognized over a weighted average period of 1.9 years. Performance Stock Units During the twenty-six weeks ended March 1, 2025, the Board of Directors granted performance stock units under the Company’s 2017 Omnibus Incentive Plan. The number of shares issuable as a result of grants of performance stock units is determined based on market-based criteria, performance-based criteria, or a combination of market-based criteria and performance-based criteria. The number of shares may be increased or decreased based on the results of these metrics in accordance with the terms established at the date of grant. For market-based criteria awards, the Company’s relative total shareholder return, or relative TSR, is measured for the Company and each company in the Russell 3000 Food & Beverage index using the immediately preceding 30-day average share price at the beginning and end of the applicable three -year performance period. The percentile rank of the Company’s TSR relative to that of the peer group determines the percent of the target award earned, ranging between 0 % and 200 %. The related compensation expense is recognized ratably over the term regardless of whether or not the market condition is satisfied, provided the requisite service is rendered. These units are valued using a Monte Carlo simulation. 18 Table of Contents For Company financial performance-based criteria awards, we estimate the probability that the Company’s internally established performance criteria will be achieved at each reporting period and adjust compensation expense accordingly. The performance metrics achieved determines the percent of the target award earned, ranging between 0% and 200%. These units are valued using the closing market price of the Company’s common stock on the date of grant. For market-based criteria and Company financial performance-based criteria awards, the Company’s TSR within the peer group and the performance metrics achieved determines the percent of the target award earned, ranging between 0% and 275%. We estimate the probability that the performance criteria will be achieved at each reporting period and adjust compensation expense accordingly. Should the performance-based criteria not be probable of being achieved, the compensation expense for the value of the award incorporating the market-based criteria is recognized ratably over the term, provided the requisite service is rendered. These units are valued using a Monte Carlo simulation. The following table summarizes performance stock unit activity for the twenty-six weeks ended March 1, 2025: Units Weighted average grant-date fair value Non-vested as of August 31, 2024 179,791 $ 59.08 Granted 154,089 48.03 Vested ( 12,175 ) 63.42 Forfeited ( 41,604 ) 60.84 Non-vested as of March 1, 2025 280,101 $ 52.55 Performance stock units are generally granted to employees as a part of the annual grant in November of the associated fiscal year, although the Board of Directors reserves the right to administer mid-year grants from time to time as they see fit. The fair value of each performance stock unit grant with a market-based TSR component is estimated on the date of grant using a Monte-Carlo simulation based on the following assumptions presented below which are associated with each year’s annual grant: Twenty-Six Weeks Ended Twenty-Six Weeks Ended March 1, 2025 February 24, 2024 Expected volatility 31.38 % 33.96 % Expected dividend yield — % — % Expected performance term 2.93 2.93 Risk-free rate of return 4.14 % 4.62 % Fair value $ 54.41 $ 57.43 As of March 1, 2025, the Company had $ 7.8 million of total unrecognized compensation cost related to performance stock units that will be recognized over an expected weighted average period of 1.7 years. Stock Appreciation Rights Stock appreciation rights (“SARs”) permit the holder to participate in the appreciation of the Company’s common stock price and are awarded to non-employee consultants of the Company. The SARs settle in shares of its common stock once the applicable vesting criteria have been met. The SARs outstanding as of March 1, 2025, cliff vested two years from the date of grant and must be exercised within five years from the date of grant. 19 Table of Contents The following table summarizes SARs activity for the twenty-six weeks ended March 1, 2025: Shares underlying SARs Weighted average exercise price Outstanding as of August 31, 2024 150,000 $ 37.67 Granted — — Exercised — — Forfeited — — Outstanding as of March 1, 2025 150,000 $ 37.67 Vested as of March 1, 2025 150,000 $ 37.67 Exercisable as of March 1, 2025 150,000 $ 37.67 The SARs outstanding as of the twenty-six weeks ended March 1, 2025, are liability-classified; therefore, the related stock-based compensation expense is based on the vesting provisions and the fair value of the awards. 20 Table of Contents