# Dear Fellow Stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-defensive-packaged-foods/NASDAQ_SMPL_2019/NASDAQ_SMPL_2019.mmd` · pages 2-8_

---

Dear Fellow Stockholders,

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

Fiscal 2019 was an important year for our relatively young company. Beyond the financial numbers, which were outstanding, we accomplished three important milestones during the year.

First, we validated the power of our growth strategy for our Atkins \( ^{®} \)  brand by significantly growing lifestyle buyers for the second consecutive year, and in doing so, we delivered revenue and earnings performance in fiscal 2019 that well exceeded our expectations, and placed us the upper tier of U.S. Food peers.

Second, we established our growth vision for our company that will be our true north for future growth. Specifically, our growth aspiration is to be a leader in the U.S. nutritious snacking category with a portfolio of great brands. This vision not only grounds us from an Atkins growth perspective, but also focuses our acquisition strategy going forward by primarily seeking out leading nutritious snacking brands.

And lastly, in August we announced our acquisition of Quest Nutrition, a growing lifestyle snacking company. Importantly, we believe the Quest \( ^{®} \)  brand is a perfect portfolio complement to our Atkins brand, in that it is another leading nutritional snacking brand that possesses a unique consumer target and brand promise while providing us needed scale with key supply chain partners and customers.

## Outstanding Performance in a Challenging Year

We entered the year with solid momentum from fiscal 2018. During that year, we accelerated marketing investments while expanding our target audience to lifestyle low carb consumers, and in doing so repositioning Atkins as a lifestyle brand with a unique array of nutritious snacking and meal replacement products. With Rob Lowe as our spokesperson, we communicated the benefits of Atkins' approach to low-carb nutrition and better-for-you snacking. The results were accelerated retail and revenue growth throughout the year.

The momentum continued in fiscal 2019 with increases in marketing programs and effective marketing execution, resulting in over $100 million in retail growth for the fiscal year. It was our single-largest absolute growth year in over a decade, and we were the #1 growth brand, on a dollar basis, within the nutritious snacking category. \( ^{(1)} \)  Equally important was our increase in total buyers, driven by lifestyle consumers. As noted above, this was the second consecutive year of strong buyer growth, and further validation of our strategy to reposition the Atkins brand to a larger consumer target.

We are proud of our performance during fiscal 2019. It was a year that presented us with a unique challenge. The extent of the strong consumer demand for Atkins products surprised us and affected all of our products by depleting our short-term supply across all forms. This required us to execute on a few key initiatives to address the situation: we reduced promotional support and in many instances cancelled existing promotions to focus our supply on shelf inventory; we delayed new product launches to free up production time to existing products; and we leveraged our strong supplier relationships to gain access to more short-term capacity. Our team executed excellently against these initiatives, and in doing so, delivered outstanding financial and marketplace performance.

<--- Page Split --->

## Growth Vision to be a Leader in the Nutritious Snacking Category

The nutritious snacking category is benefitting from a number of consumer mega-trends that include growing snacking incidence and consumer desire for health and wellness, convenience and meal replacement products. These trends have been long-term in nature and a driver of improving household penetration for the category over the past 5+ years. Despite these trends and significant improvements in household usage, the category is still only purchased by 50% of U.S. households, compared to most food categories at 90%+. \( ^{(2)} \)  For this reason, we believe our category is advantaged with compelling long-term growth prospects. Consequently, in setting our growth vision, we remain focused on becoming a leader in this category. Our growth vision acknowledges the consumer movement towards better-for-you snacking as well as the need for a broader portfolio of brands to achieve our vision. Our growth vision is 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"

Atkins has been a clear leading brand in this movement toward better-for-you snacking evidence by 11 consecutive years of positive retail sales growth at a compound annual rate of nearly 15%. The breadth and depth of scientific evidence supporting the health benefits of controlling carbohydrate consumption and the brand's unique low carb weight management positioning give us confidence in the long-term growth prospects for Atkins. Obesity and diabetes incidence continue to grow and the Atkins approach to nutrition directly addresses these healthcare epidemics. We believe that the brand's mission is a worthy one and tied to its scientific roots, namely, to help consumers learn to eat right as their primary source of better health.

Given the relatively modest household penetration of the brand, we believe significant growth opportunities remain. Our growth strategy for Atkins is clear: to grow brand awareness on the benefits of an Atkins lifestyle, leading to improved consideration and trial of the brand among the large consumer target of lifestyle low-carb consumers. Given the brand's historical consumer loyalty, we are confident that we can continue to grow our buyer base by focusing on attracting new users to the brand.

We do acknowledge that the sheer size of this category will require us to add unique brands to our portfolio over time. We believe that these brands will address unique consumer targets, offer different products and benefits and alternative views as to what constitutes health and wellness.

## The Acquisition of Quest Nutrition

In August, we announced the acquisition of Quest Nutrition. Quest \( ^{®} \)  is a 10-year old lifestyle consumer brand that began as a low-carb protein bar sold mainly in health clubs and specialty stores. Over the last decade, it has successfully expanded into mass retail and its products into protein cookies, chips and even better-for-you pizza. Its core protein bar growth has remained robust behind marketing and flavor innovation. We were attracted to the brand due to its authentic roots among young, active, urban millennials and its protein-rich, low-carb, low-sugar nutritional positioning. Quest's mission is compelling and on target for better-for-you snacking consumers:

## "Making the foods you crave, work for you, and not against you"

We believe the Quest brand is highly complementary to the Atkins brand in that the consumer targets are unique, yet we share overlapping supply chains and customers. During our diligence, we were impressed by Quest's management team and believe they will help strengthen our organizational capabilities to create a more scalable platform for growth and future acquisitions. We believe this combination will be transformative for our Company in the years to come. Quest gives us needed scale and capabilities and offers both incremental growth and cost opportunities going forward. We welcome the Quest team to our Company and look forward to working with them to realize our full potential together.

<--- Page Split --->

We Remain Confident in our Growth Strategies and Ability to Deliver on our Long-Term Financial Algorithm

With fiscal 2019 behind us, we are focused on fiscal 2020 and the opportunities that lie ahead. As noted last year, we understand that our performance will be measured based on consistency year-after-year. We believe we compete in an attractive category with two uniquely positioned brands. We are confident in our ability to effectively integrate Quest into our business and to execute on our initiatives and drive continued growth. We believe our long-term revenue target of 4-to-6% is achievable, as is our ability to deliver Adjusted EBITDA at a rate slightly greater than net sales. \( ^{(3)} \) 

I am thankful to our Board of Directors, who have excellently balanced being supportive while challenging me and the management team. Their thinking and guidance have made our team and our business better. Without them, our past year's results would not have been possible. In particular, I would like to thank our Chairman, Jim Kilts, and Vice-Chairman, Dave West, for their time and insights. Having two accomplished packaged goods CEOs on our Board and active in our business is a tremendous asset to me, personally, and to the Company. I also, would like to thank our Committee Chairpersons: Nomi Ghez, Clayt Daily and Jim Healy for their leadership. Much of the work of the Board is done at a Committee level, where their leadership and thinking have been invaluable. And lastly, I welcome our three newest Board members, Michelle Goolsby, James White and David Ritterbush. Each brings unique experiences and skills that can only make us and our business stronger.

In closing, I would like to thank the employees of Simply Good Foods. Their hard work and superb execution in fiscal 2019 made our results possible.

On behalf of our Board, employees and myself, thank you for your continued support. I look forward to updating you on our progress throughout fiscal 2020.

Sincerely,

![](images/4_0.jpg)

Joseph E. Scalzo

President & Chief Executive Officer