Overview of The Simply Good Foods Company (SMPL) 1st quarter 2022 earnings report
Category: Simply Good Foods (SMPL)
Date: 10 January 2022 Stock Price of Simply Good Foods Company (SMPL): $39.31 Market Capital of Simply Good Foods Company: $3.78 billion We take a look at the 1st quarter earnings report of their 2022 fiscal year of The Simply Good Foods Company, a company whose portfolio is largely made up by nutrition bars and ready to drink shakes. Sales for the quarter came in at $281 million and net income came in at $21.2 million.
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About The Simply Good Foods Company
The Simply Good Foods Company (Nasdaq: SMPL), headquartered in Denver, Colorado, is a highly-focused food company with a product portfolio consisting primarily of nutrition bars, ready-to-drink shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Quest®, SimplyProtein® and Atkins Endulge® brand names. Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with investment opportunities in the snacking space and broader food category. Simply Good Foods 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
Overview of Simply Good Foods' 1st quarter 2022 earnings report
First Quarter Highlights:
- Net sales increased 21.7% driven by strong Atkins and Quest performance
- Gross profit margin of 41.4%, an increase of 70 basis points
- Net income(2) of $21.2 million versus $43.0 million
- Earnings per diluted share (“EPS”)(2) of $0.22 versus $0.23
- Adjusted Diluted EPS(3) of $0.43 versus $0.29
- Adjusted EBITDA(4) increased 34.7% to $65.6 million
- Updates full fiscal year 2022 outlook:
- Net Sales expected to increase 12-14% versus fiscal year 2021
- Gross margin contraction of about 250 basis points versus last year
- Adjusted EBITDA(4,6) anticipated to increase slightly less than the net sales growth rate
- Adjusted Diluted EPS(3,6) expected to increase greater than the Adjusted EBITDA(4,6) growth rate
Simply Good Foods' management commentary on the results and earnings guidance
DENVER, Jan. 05, 2022 (GLOBE NEWSWIRE) -- The Simply Good Foods Company (Nasdaq: SMPL) (“Simply Good Foods,” or the “Company”), a developer, marketer and seller of branded nutritional foods and snacking products, today reported financial results for the thirteen weeks ended November 27, 2021.
“We are pleased with our fiscal first quarter results that were slightly greater than our expectations as our team continued to execute well in a challenging operating environment,” said Joseph E. Scalzo, President and Chief Executive Officer of Simply Good Foods. “The net sales increase was driven by improving consumer mobility and shopper traffic versus the year ago period, solid velocities of our products, increasing household penetration and innovation that continues to resonate with consumers. As expected, the mid-September price increase, favorable mix and cost savings initiatives, more than offset supply chain cost inflation in the quarter and resulted in gross margin expansion and earnings growth.”
Total Simply Good Foods retail takeaway for the thirteen weeks ended November 28, 2021, increased 18.7% in the U.S. measured channels of IRI MULO + Convenience Stores. The Company estimates that its U.S. retail takeaway growth rate in unmeasured channels was similar to measured channels. Atkins and Quest fiscal first quarter 2022 retail takeaway in measured channels increased 7.7% and 36.2%, respectively, and each brand gained market share in their respective subsegments of weight management and active nutrition.”
“Our strong first quarter results are a good start to the year. We are focused on driving sales and earnings growth and competing effectively while navigating a challenging supply chain environment. The greater than expected retail takeaway in the first quarter, operating leverage and a good start to the second quarter gives us confidence to increase our full year net sales and Adjusted EBITDA(4) outlook. As we stated previously, we expected supply chain cost inflation to be a significant headwind in fiscal 2022, largely offset by the price increase and cost savings initiatives. However, supply chain costs remain at elevated levels and over the remainder of the year we expect inflation, primarily due to higher ingredient costs, will result in gross margin contraction greater than our previous outlook. We will continue to execute against our strategies, and believe we are positioned well to manage through the high-cost environment and deliver on our short and long-term objectives,” Scalzo concluded.
“We are pleased with our fiscal first quarter results that were slightly greater than our expectations as our team continued to execute well in a challenging operating environment,” said Joseph E. Scalzo, President and Chief Executive Officer of Simply Good Foods. “The net sales increase was driven by improving consumer mobility and shopper traffic versus the year ago period, solid velocities of our products, increasing household penetration and innovation that continues to resonate with consumers. As expected, the mid-September price increase, favorable mix and cost savings initiatives, more than offset supply chain cost inflation in the quarter and resulted in gross margin expansion and earnings growth.”
Total Simply Good Foods retail takeaway for the thirteen weeks ended November 28, 2021, increased 18.7% in the U.S. measured channels of IRI MULO + Convenience Stores. The Company estimates that its U.S. retail takeaway growth rate in unmeasured channels was similar to measured channels. Atkins and Quest fiscal first quarter 2022 retail takeaway in measured channels increased 7.7% and 36.2%, respectively, and each brand gained market share in their respective subsegments of weight management and active nutrition.”
“Our strong first quarter results are a good start to the year. We are focused on driving sales and earnings growth and competing effectively while navigating a challenging supply chain environment. The greater than expected retail takeaway in the first quarter, operating leverage and a good start to the second quarter gives us confidence to increase our full year net sales and Adjusted EBITDA(4) outlook. As we stated previously, we expected supply chain cost inflation to be a significant headwind in fiscal 2022, largely offset by the price increase and cost savings initiatives. However, supply chain costs remain at elevated levels and over the remainder of the year we expect inflation, primarily due to higher ingredient costs, will result in gross margin contraction greater than our previous outlook. We will continue to execute against our strategies, and believe we are positioned well to manage through the high-cost environment and deliver on our short and long-term objectives,” Scalzo concluded.
Balance Sheet and Cash Flow
In the first quarter of fiscal 2022, the net cash used in operating activities was $7.3 million and affected by the timing of working capital. The Company continues to anticipate that full year fiscal 2022 cash flow from operations will be greater than last year. During the quarter, the Company repaid $25.0 million of its term loan debt, and at the end of the first quarter the outstanding principal balance was $431.5 million. As of November 27, 2021, the Company had cash of $35.4 million and a trailing twelve month Net Debt to Adjusted EBITDA ratio of 1.8x(5).
Outlook
The Company anticipates that it will build on its momentum and generate solid net sales and Adjusted EBITDA growth in fiscal 2022. Assuming no meaningful improvement in workplace mobility, the Company anticipates the following in fiscal 2022:
In the first quarter of fiscal 2022, the net cash used in operating activities was $7.3 million and affected by the timing of working capital. The Company continues to anticipate that full year fiscal 2022 cash flow from operations will be greater than last year. During the quarter, the Company repaid $25.0 million of its term loan debt, and at the end of the first quarter the outstanding principal balance was $431.5 million. As of November 27, 2021, the Company had cash of $35.4 million and a trailing twelve month Net Debt to Adjusted EBITDA ratio of 1.8x(5).
Outlook
The Company anticipates that it will build on its momentum and generate solid net sales and Adjusted EBITDA growth in fiscal 2022. Assuming no meaningful improvement in workplace mobility, the Company anticipates the following in fiscal 2022:
- Net sales to increase 12-14% versus last year. Included in the sales outlook is about a 1 percentage point headwind related to the European business exit that was completed in the fourth quarter of fiscal 2021. The Company’s previous outlook was for net sales growth of 8-10%;
- Gross margin contraction of about 250 basis points versus last year. The Company’s previous outlook was for modest gross margin contraction;
- Full-year fiscal 2022 Adjusted EBITDA(4,6) to increase slightly less than the net sales growth rate. Marketing expense will increase versus last year, although less than the net sales growth rate, and G&A leverage will be significant. The Company’s previous outlook was Adjusted EBITDA to increase slightly greater than the net sales growth rate.
Simply Good Foods (SMPL) stock price chart since their listing
The image below shows the stock price history of Simply Good Foods since its listing in middle of 2017. And it's been a very good time for Simply Good Foods stockholders. Over the last 5 years the stock returned 227.6% to Simply Good Food stockholders.
The stock of Simply Good Foods is also trading at a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Simply Good Foods stock is very positive at this point in time.
The stock of Simply Good Foods is also trading at a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Simply Good Foods stock is very positive at this point in time.
Simply Good Foods Company (SMPL) latest stock valuation
So what is Simply Good Foods stock worth based on the release of their latest earnings report and their outlook provided. Based on their latest earnings report and the outlook provided our valuation model provides a target price (full value price) for Simply Good Foods at $29.30 a stock. We therefore believe that the stock is overvalued.
We usually suggest long term investors look to enter a stock at least 10% below our target price (full value price) which in this case is $19.70. So a good entry point into Simply Good Foods' stock would be at $26.40 or below.
We expect the stock of Simply Good Foods to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
We usually suggest long term investors look to enter a stock at least 10% below our target price (full value price) which in this case is $19.70. So a good entry point into Simply Good Foods' stock would be at $26.40 or below.
We expect the stock of Simply Good Foods to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release for Simply Good Foods Company
It is expected that Simply Good Foods Company will release their 2nd quarter 2022 earnings report in late April 2022