# Dear Fellow Stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NASDAQ_SMPL_2021/NASDAQ_SMPL_2021.mmd` · pages 2-8_

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Dear Fellow Stockholders,

I am pleased to provide you with the Annual Report to Stockholders of The Simply Good Foods Company.

Fiscal Year 2021 was one of great change in our business driven by the ongoing health and safety concerns during the second year of Covid-19. We experienced significant shifts in consumer shopping and consumption behaviors that had short term effects on our growth. Consumer demand swings across a broad range of consumer-packaged goods created bullwhip effects across supply chains around the world, challenging the flow of products to customers and in some cases creating missed revenue opportunities from product out-of-stock situations. And to protect the safety of our employees and their families, we found ourselves in our second year of remote operations. All these factors combined to create an unpredictable and challenging environment for our Company.

I am very proud of what we all achieved during these challenging times and I'm thankful for the dedication and collaborative spirit of our people. Because of them, we achieved outstanding financial results and emerged from the year with a stronger business and more capable company.

## Fiscal Year 2021 Overview

I was pleased with the strong rebound in growth for both of our brands as the year progressed and consumer mobility improved with the rollout of Covid-19 vaccines across the United States. But mobility was not the only factor. Innovation in marketing and new products was a major contributor to our improving sales performance as well as our progress in attracting new consumers to our brands.

Recent product launches outside our core bar and shake forms have resonated with consumers driving growth in new snacking occasions. New product launches in confections, cookies and chips contributed to the strong growth we experienced as the year progressed and consumers began the slow process of returning to more normal lives. These "snacker" product forms now constitute nearly one-third of our revenues.

Both of our brands launched new creative messages during 2021 and we expect those investments will grow top of mind awareness. Household penetration, a key metric of marketing success, grew significantly for both Atkins \( ^{®} \)  and Quest \( ^{®} \) . While we clearly are benefiting from the long-term consumer trends of increased snacking, convenience, on-the-go consumption and health and wellness, investing to improve the relevance and consideration of our brands remains important to our success. Fortunately, our strong gross margin, despite an inflationary cost environment, give us the financial flexibility to make those necessary investments.

Shopping behavior continued its seismic changes during 2021. Online shopping, pick-up and delivery continue to grow at an accelerated rate with major brick-and-mortar retailers like Walmart and Target accelerating their respective online platforms. This has challenged our traditional mindset of segmenting brick-and-mortar and e-commerce, as we have adopted an omni-channel marketing mindset to adjust to these changes. Pick-up and delivery at brick-and-mortar retailers, as well as traditional online sales, about 15% of our total sales, was a key driver of our growth and will continue to be a focus for us in the years ahead.

As many of our U.S. consumer packaged food group peers have discussed, the cost and services issues during the year related to such things as procurement, labor and transportation was challenging and will most likely continue throughout the coming year. In fiscal 2021, our supply chain team performed well despite the challenging external environment. We reacted quickly to the changing conditions to minimize the effect on our business, retail customer and consumers. The collaborative work of our team with suppliers, manufacturers and distributors enabled us to service our retail and e-commerce customers as well as expand gross margin in an increasingly inflationary period that grew more challenging as the year progressed.

We executed well during the year and exceeded our plan. Of note, in fiscal 2021:

• Net sales increased 23.1% to $1,005.6 million;

• Despite an inflationary cost period, gross margin increased 10 basis points to 40.7%;

• Marketing expense increased 25.3%;

- Adjusted EBITDA increased 34.7% to \(207.3 million resulting in Adjusted EBITDA margin of 20.6%, up 180 basis points versus last year; and

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- $150 million of term loan debt was repaid resulting in cash and cash equivalents of $75.3 million and a trailing twelve-month Net Debt to Adjusted EBITDA ratio of 1.8x at the end of the fiscal year.

## Completion of Quest Integration

In fiscal year 2021, we largely completed the Quest integration. Recall, in fiscal 2020, we acquired Quest, the operator of Quest \( ^{®} \)  branded protein-enriched bars, chips, cookies and confections. In fiscal year 2021, we completed the implementation of the Quest enterprise resource planning ("ERP") platform across our entire business with no major issues. The new ERP platform has provided us with increased capabilities for future success and provides us with enhanced analytical tools to measure key business metrics and costs. We also made significant progress on our new combined warehouse in Indiana. The warehouse opened in October 2021 and facilitates a more streamlined and efficient approach to shipping both Atkins and Quest products to customers. As a result of the hard work of our team over the last two years, we are on track to achieve our three-year acquisition synergy goal of $20 million.

## Board Succession and Focus on Corporate Responsibility and Sustainability

As always, I am thankful for the ongoing guidance we receive from our Board of Directors. Their business knowledge and insights are invaluable. In January, Joseph Schena was added to the Board of Directors replacing Arvin "Rick" Kash who retired at the end of his term.

Mr. Schena is a consumer products industry executive with 40 years of experience in the areas of Financial Operations and Accounting, Strategy and Business Planning, Investor Relations and Mergers & Acquisitions. His retail and consumer packaged goods background and experience, as well as his financial expertise, make him a great addition to the Company's board of directors.

Rick Kash served on our board since July 2017. His marketing and strategic capabilities made him a tremendous board member and he could always be counted on to provide valuable consumer insights. On behalf of the entire Board of Directors we are grateful for Rick's contributions and input during his term. He will be missed.

In April, our Board of Directors established the Corporate Responsibility & Sustainability Committee. At Simply Goods Foods, we believe that corporate responsibility and sustainability is about making a positive effect with every decision that we make. Environmental, social and governance ("ESG") issues are important to our employees, customers, consumers and investors and the creation of this Committee demonstrates our commitment to elevating our focus on ESG matters as we enter fiscal year 2022. We believe this will enable us to build greater trust with our consumers while also having a positive effect on our employees and in our society.

I look forward to working with the Board of Directors and my entire staff on these endeavors and providing you with updates of our progress.

## Focused on Success in Fiscal 2022

I am cautious about the ongoing volatility of our external marketplace but remain very optimistic about the short and long-term growth prospects for our Company. My confidence is based on our enviable competitive advantages:

• We benefit from long-term consumer megatrends in snacking and health and wellness;

- We have a diversified business across brands, product forms and channels providing us with multiple avenues for growth;

- We have demonstrated over time the capability to discover superior consumer insight that lead to world class marketing that resonates with consumers;

• We have proven best-in-class new product capability across a broad range of snacking products;

• We possess an outsourced business model that is resilient in both supply reliability and cost efficiency;

- We have a high free cash flow business that enables us to invest in organic growth as well as participate in portfolio expanding M&A; and

• We have a highly engaged team that is optimistic, resilient and committed to winning.

In fiscal year 2022, we operate from this position of strength and expect to build upon our momentum. We will maintain our operating flexibility and navigate marketplace challenges related to supply chain cost inflation and changing consumer shopping behavior. We are focused on several opportunities to satisfy the elevated demand for our products.

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Our priorities are aligned around what we can control:

• World class marketing and product innovation that builds brand awareness and consideration;

• Strong customer partnerships that enable both of us to win in the marketplace;

• Top tier supply chain execution;

• Cost control that enables both brand investments and profit growth; and

- Continued strong operating cash generation to invest in our business and opportunistically participate in acquisitions.

In closing, I would like to thank our employees in Denver, El Segundo and around the world along with our valued customers and supply chain partners. Our employees continue to work remarkably well in a remote work environment. They executed well against our plans amid an uncertain operating environment that enabled us to make investments in our brands and our organization to position us to deliver sustainable net sales and earnings growth as consumers and the economy continue to recover from the pandemic.

Additionally, I want to thank the leadership team of Simply Good Foods, as well as our Board of Directors, for their strong engagement and impressive collaboration this year. With the continued guidance and leadership of our management team and Board, I am confident we will navigate the short-term challenges while positioning the business for continued long-term sustainable growth.

Lastly, on behalf of our Board of Directors, employees and myself, I want to thank you, our stockholders, for your investment in The Simply Good Foods Company and your confidence in us to continue to build stockholder value. We hope you and your families remain healthy and safe.

Sincerely,

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Joseph E. Scalzo

President & Chief Executive Officer