Greetings and welcome to The Simply Good Foods Company Fiscal First Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Mark Pogharian, Vice President of Investor Relations for The Simply Good Foods Company. Thank you. You may begin.

Thank you, operator. Good morning. I am pleased to welcome you to The Simply Good Foods Company earnings call for the first quarter ended November 28, 2020. Joe Scalzo, President and Chief Executive Officer; and Todd Cunfer, Chief Financial Officer, will provide you with an overview of results, which will then be followed by a Q&A session. The company issued its earnings release this morning at approximately 7:00 A.M. Eastern. A copy of the release and the accompanying presentation are available under the Investors section of the company’s website. This call is being webcast and an archive of today’s remarks will also be made available. During the course of today’s call, management will make forward-looking statements that are subject to various risks and uncertainties that may cause actual results to differ materially. The company undertakes no obligation to update these statements based on subsequent events. A detailed listing of such risks and uncertainties can be found in today’s press release and the company’s SEC filings. Note that on today’s call, we will refer to certain non-GAAP financial measures that we believe will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today’s press release for a reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. With that, I will now turn the call over to Joe Scalzo, President and Chief Executive Officer.

Thank you, Mark. Good morning, and thank you for joining us. Today, I will recap Simply Good Foods' first quarter results and provide you with some details on the performance of the brands. Then Todd will discuss our financial results in a bit more detail and we will wrap it up with a discussion of our outlook before opening the call to your questions. Before I discuss the first quarter results, let me briefly remind you of the unique advantages of our business and why we are confident that we are well-positioned to drive long-term sustainable growth. Simply Good Foods is a U.S. leader in the attractive nutritional snacking category. While the category has significantly grown household penetration over the last five-plus years, it is still well under-penetrated compared to most food categories at about 50% of U.S. households. We have two large scale brands in Atkins and Quest with meaningful consumer benefits and broad appeal among two different consumer targets. Furthermore, we have demonstrated marketing capabilities to grow new loyal consumers over time. We benefit from long-term compelling consumer mega trends of snacking, health and wellness, convenience and on-the-go nutrition. We have a diversified business across retail channels, customers and products, which provides us multiple pathways to win in the marketplace. We operate an asset-light business model that has proven resilient and flexible in a volatile demand marketplace and generates strong free cash flow to fund our organic growth, while also enabling us to participate in M&A. Despite temporarily reduced consumption during the pandemic due to fewer on-the-go consumption occasions, our business has quickly resumed growth even though consumer mobility is still well below pre-pandemic levels. For these reasons, we are confident that as consumer mobility improves, the growth rate of our brands will also improve, driven by the underlying benefits of the consumer mega trends I mentioned earlier and our ability to attract new consumers to our brands. We remain committed to operating our business for the long-term and doing the right thing for our brands, our employees, our customers, and our consumers during these challenging times. Lastly, I am encouraged by the start to the year as first quarter sales and earnings growth as well as retail takeaway all exceeded our estimates. Moving to Slide 5. First quarter net sales exceeded our expectations, driven primarily by strong e-commerce growth, retail takeaway that exceeded our expectations, and the timing of shipments related to the seasonal inventory build by certain retailers. Adjusted EBITDA for the first quarter increased 53.2%, primarily due to a full quarter of Quest, the greater than anticipated increase in sales versus our plan, and strong cost controls. Total Simply Good Foods' Q1 retail takeaway in measured and unmeasured channels increased mid-single digits and steadily improved as we moved through the quarter. Our performance was driven by the snackier portion of our portfolio, primarily confections, chips and cookies that are consumed mostly at home, while bars for both brands remain pressured in measured channels due to fewer on-the-go occasions. Importantly, we gained overall market share versus the category, which declined low single digits. Our performance in the mass channel improved a bit versus last quarter, but it’s still lower than the year-ago period due to reduced shopper trips since the start of the pandemic. The commitment to the nutritional snacking category by major retailers remained strong and our distribution gains on new products were in line with our estimates. Early consumer off-take of these new items is encouraging. As we discussed last quarter, measured channel retail takeaway plateaued in mid to late July after sequentially improving versus the April trough as consumer mobility improvement stalled. In September, the first month of our fiscal first quarter, our retail takeaway growth was flattish due to a weaker back-to-school season. However, in October and November, our marketplace trends steadily improved. Total Simply Good Foods’ nutritional snacking category retail takeaway in Q1 outpaced the category across all timeframes, driven primarily by the more at-home snackier portion of our portfolio as well as improving Atkins’ shake trends and the last year’s launch of Quest shakes. In December, the first month of our fiscal second quarter, our performance continued to sequentially improve. Turning to the first quarter, net sales increased 51.9%, driven by the Quest acquisition. Specifically, Quest net sales increased $78.7 million to $95.8 million. Atkins’ net sales increased 2.2% and was a 1.9% contribution to total company growth. The divestiture of SimplyProtein business was a 1.7% headwind. The increase in adjusted EBITDA is a direct result of higher gross profit, driven by the inclusion of Quest, legacy Atkins cost control, and Quest acquisition synergies. Tom will provide greater details on these metrics in just a bit. Atkins’ Q1 IRI MULO + C store measured channel retail takeaway was off 5.7%, but outpaced the weight management category. Similar to last quarter, Atkins bars were pressured due to lower on-the-go usage occasions for this form across the category. Atkins shakes sequentially improved throughout the quarter, and in November, our shakes retail takeaway was about flat versus the year-ago period. Atkins confections momentum continued with retail takeaway up 13.2% as these products are primarily consumed at home. We were encouraged by our improving marketplace trends during the quarter, especially given the soft start in September, partially due to the weaker than expected back-to-school season. While still early, we are pleased with the distribution gains and consumption performance via our recently launched new products, particularly our iced coffee protein shakes and indulge dessert bars. E-commerce growth continues to be a strength, with consumption up 45% in Q1, with new to e-commerce consumers representing one-third of sales. Shakes continued to perform well in this channel, up double digits. E-commerce is now about 10% of Atkins sales, up from 4% just two years ago and should continue to be a driver of growth. Our brands are responsive to marketing initiatives, and we are pleased that new buyer growth resumed in the quarter. It was encouraging to see this positive trend as it was the first quarter of positive growth since the pandemic began. As expected, overall buy rate was down versus last year, reflecting lower on-the-go usage occasions. As we move into Q2, we expect continued strong e-commerce growth, improving consumption from new product distribution gains, and new year seasonal merchandising that at least equaled to year-ago. Although we remain cautious about consumer seasonal participation, given the recent surge in COVID-19 cases throughout the U.S. Let me now turn to Quest where Q1 retail takeaway increased 15.2% in the measured IRI MULO plus C store universe, driven by improving trends across major food, mass and club channels. Similar to last quarter, our performance was driven by cookies, chips and confections and the year-ago launch of shakes as well as distribution gains on new products. Quest snacks, chips, cookies, and confections performed extremely well, with retail takeaway in Q1 up 76%. Retailer and consumer demand for these products remained strong and represents about 26% and growing of the Quest business in Q1. The majority of the Quest shake distribution gains occurred in calendar 2020 and is a slight headwind as we make our way through the remainder of the year. Quest bars declined 8% in Q1, better than the bar segment, which was off low double-digits. As mentioned previously, bars have been impacted by lower on-the-go consumption occasions. As I stated earlier, Quest e-commerce business continues to do well, with retail takeaway up 60%. Our business with Amazon continues to excel with similar growth rates for bars, chips, and cookies. As we move into Q2, we anticipate that retail takeaway will continue to be solid and it will outpace the category. E-commerce will remain strong. Chips, cookies, and confection distribution gains will be a benefit, and New Year seasonal merchandise will be greater than last year. However, similar to Atkins, we remain cautious about consumer seasonal participation given the recent surge in COVID-19 cases. Additionally, Quest retail takeaway comparisons in the year-ago period up 26.8%, are strong partially due to last year’s shake launch. In summary, we are pleased with the better-than-expected start to fiscal 2021 despite the ongoing challenges of operating in the COVID-19 environment. We exceeded our estimates, driven primarily by strong e-commerce growth, retail takeaway that was better than our expectations, and the timing of shipments related to the seasonal inventory build by certain retailers. We are encouraged by our improving marketplace trends and confident we will outpace the category, although in the near term, it could be challenging given the increase in COVID-19 cases across the U.S. We will continue to engage with consumers and be flexible in our approach to brand investment to drive growth as we execute against our strategies to drive sales and earnings during the fiscal year. Now, I will turn the call over to Todd to provide you some greater financial details.

Thank you, Joe, and good morning everyone. Let me start with two points as they relate to the numbers you see on the slides that follow. First, for comparative purposes, we will review financial statements for the 13 weeks ended November 30, 2019 versus the 13 weeks ended November 28, 2020. Second, given our asset-light strong cash flow business model, we evaluate our business performance on an adjusted basis as it relates to EBITDA and diluted earnings per share. We have included a detailed reconciliation from GAAP to adjusted historical items in today’s press release. We believe these adjusted measures are a key indicator of the true underlying performance of the business. I will begin with a review of our net sales. Total Simply Good Foods’ net sales increased 51.9% driven by the Quest acquisition. Specifically, Quest net sales increased $78.7 million to $95.8 million, a contribution of 51.7% to total Simply Good Foods first quarter net sales growth. Recall, we only owned the business for 24 days in fiscal Q1 2020. So, the majority of the increase in this quarter is driven by the acquisition. Atkins’ net sales increased 2.2% and was a 1.9% contribution to total company growth driven by strong e-commerce performance, solid international growth in Australia driven by increasing velocities of existing items, distribution gains, and innovation, and the timing of shipments related to the seasonal inventory build by certain retailers. We estimate that these factors contributed about 2 to 3 percentage points each to Atkins’ growth. These gains were partially offset by softness in measured channels. As Joe mentioned, Atkins’ IRI measured channel retail takeaway in the first quarter was off 5.7%. The divestiture of SimplyProtein on September 24 was a 1.7% headwind. As previously stated, the divestiture of SimplyProtein and the exit from Europe is about a 2% headwind to both the first half and full year fiscal 2021 net sales growth. Now, for a review of first quarter results across other major metrics. Gross profit was $94 million, an increase of $31.8 million or 51.2% versus last year. The increase in gross profit was primarily driven by the Quest acquisition. Gross margin was 40.7% in the first quarter of fiscal 2021, a decline of 20 basis points versus last year due to the full quarter impact of the lower margin Quest business and unfavorable mix. Gross profit in the prior year was affected by a non-cash $2.4 million inventory purchase accounting step-up adjustment related to the Quest acquisition. Recall, the non-cash inventory purchase accounting step-up was a 160 basis point headwind in the fiscal first quarter of 2020. Adjusted EBITDA increased 53.2% to $48.7 million driven by the increase in gross profit, partially offset by a 36.7% increase in selling and marketing expenses primarily due to the inclusion of Quest. For the full year, the company continues to anticipate that marketing will increase at least in line with organic sales growth. General and administrative expenses increased $7.3 million as a result of the inclusion of Quest and integration costs, restructuring expenses, and stock-based compensation totaling $4.9 million. Moving to other items in the P&L, interest expense increased $3.4 million to $8.4 million due primarily to a full quarter of Quest related acquisition debt. Our effective tax rate in the first quarter was 27.1%. As a result, net income in Q1 was $22.5 million versus a loss of $4.8 million in the year-ago period. Turning to EPS, first quarter reported EPS was $0.23 per share diluted compared with a loss of $0.05 per share diluted. Impacting reported EPS includes depreciation and amortization expense of $4.5 million higher versus last year due to the inclusion of Quest, stock-based compensation of $1.1 million, integration costs of $1.2 million and restructuring expenses of $2.5 million. Meanwhile, adjusted diluted EPS, which excludes the items just mentioned, was $0.29, an increase of $0.07 versus the year-ago period. Note that we calculated adjusted diluted EPS as adjusted EBITDA less interest income, interest expense, and income taxes. Please refer to today’s press release for an explanation and reconciliation of non-GAAP financial measures. Moving to the balance sheet and cash flow in November 2020, the company paid down $25 million of its term loan, and at the end of the first quarter, the outstanding principal balance was $581.5 million. In the first quarter of fiscal '21, combined cash flow from operations and proceeds from the sale of SimplyProtein was about $21 million. As of November 28, 2020, the company had $91.5 million of cash and the trailing 12-month net debt to adjusted EBITDA ratio was 2.9x. Capital expenditures were nominal in Q1. However, we still expect $5 million to $6 million of CapEx in fiscal 2021 driven primarily by equipment for our new warehouse. Our outlook this year for interest expense remains unchanged at approximately $30 million. I would now like to turn the call back to Joe for closing remarks.

Thank you, Todd. As consumer mobility increases, we expect the growth rate of our business to improve. We have a portfolio of brands aligned with consumer mega trends at both health and wellness convenience and on-the-go nutrition. Additionally, consumers continue to express that high protein, low carb and minimal sugar are important attributes while making snacking decisions. As such, we feel good about our long-term business prospects. Our business is performing well and improved month to month in the first quarter, driven by the growth of confections, chips and cookies, which are more often consumed at home. A return to more normal consumer shopping behavior is on the horizon given the multiple vaccines that are now being deployed in the U.S. However, at this point in time, it’s difficult to predict when this will occur. Therefore, the unknown duration of reduced consumer mobility could continue to pressure bar usage occasions and trips in the mass channel through the balance of the fiscal year. As a result, it remains difficult to provide full-year fiscal 2021 outlook at this time. Given our better-than-expected first quarter results, we have updated our outlook for the first half of the fiscal year. Assuming U.S. consumer movement restrictions remain at the current levels, we now anticipate net sales of $455 million to $465 million and adjusted EBITDA of $85 million to $90 million. This includes a 2% headwind to net sales growth related to the SimplyProtein divestiture and Europe exit that Todd mentioned earlier. Additionally, we reaffirm our expectation that full-year gross margin will be about the same as last year and adjusted EBITDA margin should increase. We have an advantaged asset-light variable business model that enables strong cash flow from operations that provides us with financial flexibility. We are executing against our strategies and are well-positioned for long-term sustainable net sales and earnings growth that we expect will create value for our shareholders. We appreciate everyone’s interest in our company and now are available to take your questions.

Thank you. At this time, we’ll be conducting a question-and-answer session. Our first question comes from the line of Brian Holland with D.A. Davidson. Please proceed with your question.

Yes, thanks. Good morning, and congrats on the strong quarter here. I wanted to ask a couple of questions about the Quest business. I think you were surprised as you acquired the business kind of the expandability of it, kind of the performance and some of these adjacencies that were rolled out. Clearly, that appears to continue to be a catalyst. As we see bars as a category sort of underperform, how quickly and how much of a focus is expanding into the chips, the cookies as some of the frozen products, et cetera, the adjacencies for Quest that seem to be doing quite well?

Yes. Good morning, Brian. It’s a good question. I think first of all, we had high expectations for the Quest business when we bought it and it has exceeded our expectations over the last year. The question you are asking about is around the balance between the protein bar business at Quest and the all other forms. And I think it’s important that we stay focused on ensuring that the bar business continues to recover and starts growing. The metric I would point to is, unlike the Atkins business, the Quest business overall brand awareness is still relatively low for the most part; most households in the United States are not familiar with the Quest brands. So, the job from a brand standpoint is to continue to build brand awareness and get the brand better known. The easiest avenue to do that is through the protein bar business, which is the largest, most important part of the business. So, you should expect us to continue to focus on that. That said, alternative forms, especially right now, when at-home consumption is more important, is an important component to the brand. So, focusing on the chips, the cookies, and now the confections on that business helps us introduce the brand, build brand awareness, and drive consumption at home. So, I think you should see us continue to balance between those two things, because we believe that there is upside growth in the bar form as well as the alternative forms.

Understood. Appreciate the color. And then just one other follow-up there on the Quest business. Can you just remind us, starting from a lower gross margin base, product mix, et cetera, how we – where we are in the integration of that asset and thinking about the synergies flowing through this year, and any changes as far as opportunities there to take cost out of that business or get those margins back up comparable to legacy Atkins?

Yes, this is Todd. The margins are – we are seeing improvement on the Quest side. They are definitely getting a bit closer to legacy Atkins business. So, we are probably about two points below from a margin – gross margin perspective. Some of the synergies have kicked in from a logistic standpoint, so we are starting to see some of those benefits. We have a number of other projects from a supply chain perspective that will kick in later in the year. So, I think we will continue to see some progress against those gross margins. Again, just the business channels that it’s in, some of the forms that are in long-term, it’s probably always going to be a little bit less than legacy Atkins, but we are definitely making some progress.

Thank you, Todd. I will leave it there. Best of luck to everyone.

As a follow-up to that, given the size of the bar business in both of the brands, it is – it tends to be the more profitable form from a company standpoint. So, driving bar performance over time is a margin-enhancing opportunity for the company.

Got it. Best of luck, everyone. Thanks.

Yes, thank you.

Thank you. Our next question comes from the line of Jason English with Goldman Sachs. Please proceed with your question.

Hey, good morning, folks. Happy New Year and congrats on the improving sales momentum throughout the quarter. I guess, let’s pick up where you just left off on margins. Looking out to 2Q, I get that 2Q is sequentially always a bit of a margin step down from 1Q given seasonality. But Quest is in the prior year base, why are we going to flip to so much margin compression year-on-year, at least based at the midpoint of your guidance?

Yes, I don’t think we are going to have a lot of margin compression from a Q2 to Q2 perspective. We’ll have potentially a little bit depending on where the product and channel mix comes in. But I think the margins should be relatively in line with last Q2 from Q1 to Q2 as we talk about Q2 is always the lowest gross margin and EBITDA margin quarter for us because of the heavy intensive merchandising that occurs in this quarter, but year-over-year, we should be fairly similar.

Are you referring to gross margin or EBITDA margin?

I am referring to gross margin.

Okay. I think your guidance and maybe I need to go back and check my math, but at the midpoint of your guidance for the first-half, and obviously we can back out 1Q, implies that EBITDA margin would be down year-on-year. Is there something happening in the value of the P&L like stepped up SG&A or maybe it’s just – maybe I need to see to go back and check my math?

Yes, slight increase in the SG&A rate as what we are projecting a little bit on the marketing side. So, we can see a little bit of a bump up in marketing. We will see G&A as a percent a little bit higher. We just have some projects going on there, which will have some increase quarter-to-quarter here. It always bumps up in the second quarter as the start of the New Year. We get pay increases. FICA taxes start to kick in again sort of G&A always tends to be a bit higher in Q2 as well. So again, gross margin should be similar. EBITDA margins maybe a little bit lower, but no significant changes.

Okay. And with most of the shelf resets either behind you or good visibility to them, can you give us an update on how you believe your share of shelf has changed?

Yes, Jason, we had a good – we had a guided fall of reset season so far, early returns, right, we have to see consumption, but for the most part, it’s consumption that gives you visibility into PDP growth, so both brands growing PDPs in the high single to low double digits on a percentage basis. So, we did pretty well. Now, you got to – it all comes down to how productive those items are and how incremental those items are to really understand the impact on consumption. So, we need January, February, March to better understand that. As you know, November, December are low consumption months. And so you don’t want to read too much into early reads, but for the most part, most of our new products, off-take has been pretty positive early. We want to see a little bit more data before we feel good about that.

Got it. Good stuff. Thank you, guys. I will pass it on.

Yes. Have a good time.

Thank you. Our next question comes from the line of Chris Growe with Stifel. Please proceed with your question.

Hi, good morning and nice quarter there.

Hi, Chris.

I just had a question - thank you. Hi. Just had a follow-on to Jason’s question as I think about you had some nice shelf space wins, thank you for quantifying the PDPs there, I am just curious to how you define the competitive situation in your categories. And what you are seeing from other big brands that have you competing with Atkins and Quest? And if it also add to that or maybe a good perspective on kind of the new products and how those are contributing to your sales growth, you have a pretty good new product lineup, is there sort of incremental contribution you couldn’t help define from those new products?

Definitely, talking about ourselves first, still really early innings from a consumption of new items. So, we just look at kind of week to week velocities off-take, it appears to be pretty good. So, the peanut butter cup, the lemon bar on class both performing well, on Atkins the iced coffee shakes and the indulge dessert bars all off to pretty good starts. But again, November, December are typically soft consumption months. So, you don’t want to read too much into that, but overall, we feel pretty good about the start. It looks like retailers are coming back kind of in a COVID environment, supporting bigger brands, it appears. So in our category, it looks like that Premier has done pretty well, clearly Atkins and Quest have done pretty well. I don’t – haven’t really looked at the bar set, peers of the kind has done pretty well, most recently from a bar standpoint. So, it looks like maybe retailers have invested in leadership brands in order to drive the category kind of in this – kind of COVID environment. I want to see a little bit more data before I form a stronger opinion than that, consumption obviously becomes more important than just looking at shelf space.

And just one other follow-up which is in relation to the channel performance? Are you seeing a stronger performance in the mass channel versus say grocery? And does that relate to retailers getting behind some of these big brands, is that going to help at a large retailer, for example, that kind of help to push your performance there?

Yes. During the quarter and in the early part of Q2 in general, mass got a little bit better, so steadily improved their performance, I think based upon the fact that got behind the bigger brands and their consumption improved. So in general, our business got better and mass in general, mass business relative to other channels got better. So, we saw kind of steady incremental improvement. Even the bar business in mass got a little bit better. So, I think coming out of the fall resets, mass in general improved their position and obviously, they were leaking market share for a while, they are starting to move in the right direction. That’s obviously given our development in mass that’s important to us. Shopper traffic got a little bit better, but we didn’t see – we didn’t see significant improvements in shopper traffic yet. We haven’t seen that yet. And obviously with kind of COVID cases spiking as we closed the year – and at the new year I think that will be one of the headwinds that we want to keep – continue to keep our eye on.

Okay, thank you for that color.

Yes. You are welcome.

Thank you. Our next question comes from the line of John Baumgartner with Wells Fargo. Please proceed with your question.

Good morning. Thanks for the question.

Hi, John.

I guess going back to Quest in the peanut butter cups specifically, still very early days, but the Nielsen takeaway looks very good. It looks like the annualized is running around $9 million or so. So I am wondering, Joe, if you could speak to the launch, what sort of expectations you have for ACV as FY21 progresses moving outside of target? And then also, how aggressive are you with this product in e-com non-measured channels, and how do you expect the marketing and distribution push will compare coming out of the gate relative to the cookies when they launched a few years ago? Thanks.

Yes. Actually, I haven’t looked at it relative to cookies. I think in general peanut butter cups will build faster just because of the organization. That’s now driving it right. The legacy SMPL organization, probably a little bit faster than building food drug mass distribution. And historically, within a year, 12 months of launching a new product, we can get pretty close to 50% ACP food drug mass. So, I wouldn’t, I think that’s a reasonable target from a 12-month standpoint. It is performing exceptionally well in e-commerce. And it’s – we have pretty high expectations. Confections is a different use occasion, different needs state than the existing business. It has proven in particular peanut butter cups, in general, have proven to be whether it be on Atkins or on Slimfast to be a pretty compelling item. So, we have pretty high expectations for it and it’s off to a pretty good start. So we are very optimistic about it. And again, it ties back to used case and lead state and it brings in new consumers to the brand because it’s just – it’s a different type of product and appeals to a different consumer. So we are pretty optimistic. And yes, sorry, I don’t have that comparison to cookies that have to go back and look at the build out from the legacy Quest business. I expect we will do better frankly.

Yes. Just one follow-on to that...

Yes.

Just one follow-on to that, I mean, it’s doing – it’s off to a really strong start in C store as well. The C store team has done a really nice job getting distribution we will continue to get distribution. It’s a fantastic single-serve item, not something we don’t have a lot of history with on the Atkins side, but it has the potential to be a very large C store item for us as well.

Okay, great. And then just to follow-up briefly on the shelf sets, obviously, autumn was the big shelf reset period for you, very, very successful. You are not to get ahead of ourselves, but kind of think across the next 12 months, the resets that still have yet to come in the market. Was there anything discrete that benefited you in this August reset period that may suggest future resets may not be successful or do you think between new innovation coming through the marketing ramping here in January, the more promotion not shelf into kind of each season that you can kind of sustain this reset momentum as the rest of your retailers kind of come forward here?

So, your question is right after I got my reset in the fall, you want me to project what the spring looks like.

Good shot.

So look, we feel, we don’t like to talk about what might happen in our business going forward. We feel really good about our product pipeline. We said that before this reset. I continue to like the innovation that’s coming on both brands. We feel good about our position from an innovation standpoint. And after all, it’s the ideas that you have and the ability to attract consumers that attract customers to want to add our items. I think that – I think there appears to be a move to drive leadership brands in order to drive the category. So that appears to play to us and that we have got two of the bigger brands in the set. So I feel good about that, but we are still in early innings of a fall reset. Let’s see how that performs in January, February, March before we start declaring victories in March, April and May.

Thanks, Joe. Thanks, Todd. Appreciate it.

Yes. You are welcome.

Thank you. Our next question comes from the line of Fiza Ali with Deutsche Bank. Please proceed with your question.

Yes. Hi, good morning, and congratulations from me also. So, I just wanted to get some perspective on the back half even though you are not providing an outlook, but if I look at your results this quarter, you weren’t actually that far away from what we were expecting a year ago in this quarter on the top line and actually better on EBITDA. So, it seems that in some ways, you have been able to offset on-the-go weakness by accelerating these other forms that we have been talking about and maybe even accelerating e-commerce. So, just wanted to get a sense from you and how would you frame the uncertainty of the risks and opportunities when things hopefully normalize in the back half, especially in light of easy comps?

Yes, so, well great question. To tell you the truth, we haven’t given much thought to the second half of the year at this point. I will talk to it from a perspective of brand by brand, if you look at the Atkins business, the ’20 – fiscal year 2020 softness was almost exclusively driven by our inability to grow new buyers at the rate that we were accustomed to. If you then multiply their volume and put into the business in the second half of the year that was our miss from a volume standpoint, probably the most encouraging thing in the first quarter was Atkins grew new buyers for the first time since the pandemic. That’s a very encouraging sign. That means people are engaging to some degree back in the category and back into the brand. The opportunity in the quarter was buy rate. So, we just didn’t drive as much buy rate and that has to do with the large component of our business and bars and the away from home consumption element of bars. I think, if I would summarize on Atkins the second half of the year, there are two simple questions: Can we continue to bring new buyers to the brand at the rate we saw in the first quarter and can we improve on the buy rate? Obviously, that’s the big uncertainty both from a new buyer as well as a retained buyer. If we can get the buy rate back up, I think we could have obviously a good back half of the year. I want to see a little bit more data. It’s a little dangerous to read a quarter of data from a panel by rate standpoint, which is a little dangerous, because it’s just not a lot of data at this point. But that’s how I would characterize Atkins, right? Can we get buy rate up? Can the bar start to improve? And we get back closer to historic numbers? On Quest, I think the one comparison in Quest is prior to COVID that business started to step up its growth in the second half of the year and obviously COVID slowed that down for a bit, but we saw more aggressive comps on Quest. So, can we continue? And then obviously, a big bar business buy rate on Quest becomes really important. Can we grow through the challenges and away from home consumption? So for us, the big metric in the second half of the year is going to be what’s mobility look like? How does it impact bars? And then how does that impact buy rate on both businesses as we go forward. I think the other metrics that we can control, which is share, shelf, marketing, media investment, and I think we will do the right things there. The overhang will be, well, how does this – how does the vaccine rollout? How does it improve mobility? And then how quickly does the away from home consumption come back to the two businesses?

Great. And then as I think about sort of again these other forms, I mean, it doesn’t sound like that’s where the concern is, like it seems that you can continue to grow that business, you are not worried about the sustainability of trends and those forms even as mobility increases. Is that the right way to characterize it?

Yes, they tend to be – particularly chips and confections tend to be more at-home consumption. So less affected by the pandemic, there is wide space on both of those forums. So, we have the ability to fill out wide space. Consumption continues to be good. The job in Quest is to build brand awareness consideration and trial. Again, from a two business standpoint, if you just step back and look at the marketing challenges on Atkins, everybody is aware of the brand, the job is to change their perspective on what the brand stands for. The job on Quest is to create brand awareness. It’s still relatively low. We have a big, loyal consumer group on Quest, but still relatively low brand awareness outside that group. So, your marketing pressure, continue to build awareness, consideration and trial on that business, right. I am trying to remember the unaided brand awareness I don’t think it’s over 20% on Quest. So, lots of opportunity on Quest to build awareness. All the forms matter, right, bars matter as do the other forms. So we tend to define the issue much more from a consumer standpoint than a product and form standpoint, got to build brand awareness on Quest, got to continue to change people’s points of view of what they believe on Atkins in order to grow household penetration. The products clearly help us to do that, because they attack different need states and use occasions and that helps us.

Great. Thank you so much.

Yes, you are welcome.

Thank you. Ladies and gentlemen, our final question this morning comes from the line of Alexia Howard with Bernstein. Please proceed with your question.

Good morning, everyone.

Good morning, Alexia.

Hi, there. Can I ask about pricing dynamics, particularly on the bars business? We only get visibility and speed measured channel data, but would I be right in thinking that you probably did have a pricing benefit at the net pricing line earlier in the pandemic, perhaps because of a pullback in promotional activity? And I am just wondering with the step up in merchandising on particularly on the Quest side of things, is that going to lead to declines in pricing year-over-year as we look out through the course of 2021? And then I have a follow-up.

Yes, I mean, the pricing benefit that we got from the pandemic was actually fairly short lived. If you remember, we talked about on the last couple of calls, retailers in our Q3 in that March to May time period retailers really pushed out or cut promotional activity just to reduce the complexity in their stores. Lot of those fell into Q4. So, we saw some price realization benefit in Q3 that kind of flipped on the other side in Q4. Q1 of this year, kind of normal, we didn’t see much of a change. We don’t – we kind of have similar merchandising activity here in Q2 as well. So, it was really just a short-term, March to May time period for us where we got that price realization. So as we lapped Q3, we will probably see higher trade rate in Q3, assuming mobility is okay and maybe a little bit of benefit in Q4 as we don’t have as much as we kind of pushed together a bunch of activity in Q4, but right now it’s pretty normalized.

Perfect. That’s super helpful. And then the second question is really around M&A and now that your leverage is down below 3x, I know that was a goal we are seeing for now has an increased appetite to look for possible deals and what would the criteria be for any future you might look at? Thank you and I’ll pass it on.

Yes. With leverage improving, with the integration mostly not completely all behind us and synergies on track, we have started to – we popped up and started looking at possible assets. Again, we like the category we are in, we search for assets that fit our supply chain and fit our front-end customer standpoint. We like branded strong consumer branded businesses that have shown the ability to attract users. So, we tend to look at our business from a consumer brand standpoint first. And I think the only criteria, this may have shifted over the last year or so is size, we are probably looking at assets that are above $75 million to $100 million in revenue. So, we went – it’s challenging when you have two businesses as big as we are to nurture smaller brands. So we are probably looking at assets that are a little bit biggish in size, so that in the portfolio, it’s meaningful that we can focus on it. So and that was obviously one of the reasons we divested SimplyProtein just it would be size challenge from an organization standpoint. So yes, we are up and looking at assets right now and those are the kind of criteria that we think about.

Perfect. Thank you very much and I will pass it on. Happy New Year.

Have a good day.

Thank you. E-commerce has become an increasingly important part of your business. Would you be able to give some context about the share of Atkins and Quest within the space and maybe some of your perspectives about it going forward?

Hi, everyone. E-commerce has become an increasingly important part of your business. Would you be able to give some context about the share of Atkins and Quest within the space and maybe some of your perspectives about it going forward?

Yes, I will take that one. So from a share of business, Quest, it can – for both businesses, it’s been accelerating. So, it’s 20% to 25% of business for Quest, as Joe said in his opening remarks. It’s close to 10% right now on the Atkins side, both businesses doing exceptionally well and we anticipate that will continue to increase over time.

Okay, that’s helpful. And would you be able to discuss any consumer work that you have done about how much or how little consumers have focused on weight management during the pandemic? And maybe any forward-looking thoughts on that and whether or not that’s maybe impacted your marketing efforts around the New Year’s resolution period?

Yes, it’s a great question. It’s the one we ask ourselves a lot. The – rather the metric that I would point to right now is the new buyer growth in the first quarter on Atkins was encouraging, right, because the concern that we had is while on average, people have gained in the U.S., adults have gained about 12 pounds during the pandemic, there hasn’t been the trigger point to get them to start acting on that. It clearly didn’t occur like we thought it would be a back-to-school. We are kind of hoping and merchandising and marketing as if it’s going to happen in January, February, and March. So, I think that that will be – I think the important key when do people kind of reengage to start making lifestyle changes in order to get that part of their life back under control so that the household penetration, the new buyer data would suggest people are more engaged in that, it will be interesting to see how it plays out in January, February, March.

That’s helpful. And one last one for me, I believe you may have mentioned this in your prepared remarks, but could you talk about the sell-in versus sell-out dynamics versus 1Q during 1Q?

I am sorry could you ask that question again? Are you talking about inventory or you are talking about sell-through consumer dynamics?

The sell-in versus the sell-out dynamics during the quarter.

So, we picked up because of our positive benefit from the shelf resets. We got a nice little pipeline fill from that. That kind of offset, if you remember, we had some back-to-school time period, brought some revenue into Q4 of last year, we thought that was going to be about 2 points headwind to Q1, the reset timing and how well we did kind of mitigated that piece of it largely, that was kind of an offset. So, that was a nice benefit for us in the quarter. And as we talked about, we did have some seasonal shift in between November and December versus prior year and that’s helped us by about 2 points.

Thank you. Ladies and gentlemen, our final question this morning comes from the line of Rebecca Scheuneman with Morgan Stanley. Please proceed with your question.

Good morning and congratulations on a good quarter despite the difficult environment. So, thank you for the insights on the 12 pounds gain on average during the pandemic, I was wondering about that. I am also wondering if your consumer insight data shows anything that could point to habits that have potentially changed permanently that could make weight loss look different when we emerge from the pandemic? For example, home-cooked meals have become more prevalent, I am wondering if there is any way that might potentially dampen demand for meal replacement shakes and bars? Thank you.

I don’t have data that would suggest that the habits and practices that people have formed during the pandemic that’s going to change that. I just have observation that as mobility has improved so has the consumption of our business. So I think that is probably the big debate going on in food companies with larger food companies trying to convince folks that meals are going to come back in vogue and moms are going to continue to cook. I just happen to think that frankly, convenience is always going to be an important consumer benefit that our lives, whether we like it or not are going to become hectic and time challenged as they were before and on the go. Nutritional consumption is going to become ever important, right. I just don’t think, I just don’t think that all of a sudden, we are going to return to the 1950s and 1960s when it comes to eating meals. If you look at millennials, they actually almost don’t see a difference between snacking and eating meals. In fact, they don’t even see them as meal, so, they snacking as everyday eating just as they see a meal. It’s almost seamless between the two. I don’t think that’s changing either quite frankly. So, I am pretty optimistic that just in our own behaviors as a business that when the pandemic is behind us, we are going back to the office because it’s not as efficient to operate remotely and with that will come a lot of the habits and practices that we had prior to the pandemic. My guess is that’s going to be more true than not. And so we are pretty optimistic as that mobility improves so our business and so will bar consumption and that mass shopping behavior will go back to more norms.

Okay, great. Thank you so much.

Yes, you are welcome.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I will turn the floor back to Mr. Scalzo for any final comments.

Yes, thanks again for participation on our call today. We hope you continue to remain safe and we look forward to updating you on our second quarter results in April. Hope everyone has a happy and safe day. Thanks.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.