What Management Said

Read the full Q3 2025 transcript ↗

Due to the company's asset light, high cash flow business model, we evaluate our performance on an adjusted basis as it relates to EBITDA and diluted EPS. References during this call to organic or legacy Simply Good Foods refers to Simply Good Foods' business excluding Owen. For Q4, that will include the growth of Simply Good Foods excluding Owen for the first few weeks of the quarter and growth for the entire company for the balance of the quarter. I'll start by reviewing our Q3 performance before turning it over to our new CFO, Chris Bealer, who will discuss our financial results and our updated fiscal year twenty twenty five outlook.

Momentum continued in Q3 with net sales up 14% year over year, driven by the acquisition of Owen and approximately 4% organic growth. Growth for the nutritional snacking category remained robust in Q3, up double digits again, reflecting the continued mainstreaming of consumer demand for high protein, low sugar and low carb food and beverage options. In the year since we acquired Owen, we have repaid essentially all of the $250,000,000 we borrowed to finance the purchase. Finally, considering our top and bottom line performance year to date and trends to begin the fourth quarter, we are tightening our ranges for full year net sales and adjusted EBITDA.

Turning to our largest brand, Quest, which represents approximately 60% of our net sales today, the brand delivered another quarter of double digit retail takeaway and net sales growth. Consumption in Q3 grew 11%, with household penetration up 120 basis points year over year to 18.3%. As Quest approaches $1,000,000,000 in net sales, we see a long runway of opportunity driven by a framework for growth based on disruptive innovation, expanding physical availability and increasing brand awareness. Salty Snacks retail takeaway grew 31% this quarter and is on pace to become the largest platform on the Quest business.

What went well
  • Net sales rose 13.8% year over year to $381 million in Q3, driven by the Owen acquisition contribution of $33.6 million plus approximately 3.8% organic growth.
  • Quest, roughly 60% of net sales, delivered another quarter of double-digit retail takeaway and net sales growth, with consumption up 11% and household penetration up 120 basis points to 18.3%.
  • The Quest Salty Snacks platform grew retail takeaway 31% and is on pace to become the largest platform on the Quest business.
  • Quest and Owen consumption was again up double digits, together making up about 70% of net sales and more than offsetting anticipated Atkins declines.
  • The company repaid essentially all of the $250 million borrowed to finance the Owen acquisition and repurchased over $24 million of common stock during Q3, leaving leverage at about half a turn.
  • Adjusted EBITDA grew approximately 2.8% to $73.9 million, and fiscal year-to-date adjusted diluted EPS rose 9.8% to $1.46.
What went wrong
  • Gross margin fell 350 basis points to 36.4%, driven mainly by elevated input costs, most notably cocoa and whey, only partially mitigated by productivity and pricing.
  • Atkins consumption declined 13% versus prior year, and management expects continued double-digit Atkins declines into fiscal 2026 driven almost entirely by distribution cuts.
  • Owen retail takeaway decelerated in the quarter as the company lapped significant distribution (TDP) gains, particularly at a large club and mass customer.
  • Fiscal year-to-date cash flow from operations declined to $133 million from about $167 million, primarily due to higher working capital uses, principally inventory.
  • Margins remained under pressure overall as inflation hit the second half as anticipated, with the full benefit of productivity and pricing actions expected only over the next twelve to eighteen months.

Guidance Changes

MetricPeriodCurrent guidance
Total company reported net sales growthFY20258.5% to 9.5% (range tightened) (Tightened)
Total company adjusted EBITDA growthFY20254% to 5% (range tightened) (Tightened)
Full-year gross marginFY2025Decline of about 200 basis points
Owen net salesFY2025Approximately $145 million (midpoint of prior range)
Owen consumption growthFY2026Roughly 24% on a full-year basis (similar to Q3)

Performance Breakdown

MetricYoYNote
Total net sales +13.8% Owen contribution of $33.6 million (about 10%) plus 3.8% organic growth.
Quest organic net sales +15% Strong retail takeaway plus a modest improvement in retailer trade inventory ahead of an early-Q4 warehouse transition.
Atkins net sales -12.7% In line with consumption decline; distribution and merchandising cuts on lower-velocity tail SKUs.
Gross margin -350 bps to 36.4% Elevated input costs, mainly cocoa and whey, plus the dilutive inclusion of Owen, only partially offset by productivity and pricing.
Adjusted EBITDA +2.8% to $73.9M Sales growth partly offset by gross margin compression and higher G&A from Owen and integration.
Quest bars consumption +3% Growth led by the Hero Crispy line and new Overload bars, up from flat in Q2.
Quest Salty Snacks retail takeaway +31% New flavors and sizes, expanded distribution and merchandising in and out of aisle, and award-winning marketing.

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Atkins distribution cuts and decline—Expecting additional cuts and continued double-digit declines into FY2026, with the brand essentially flat excluding distribution/merchandising lossesDeclining
Quest Salty Snacks expansion—Up 31% and on pace to be the largest Quest platform; 25-30% weekly consumption growth in a $50 billion addressable marketRising
Input cost inflation (cocoa and whey)Expected to impact margins in second half per prior callsRealized higher inflation pressuring margins; cocoa remains stubbornly highRising
Productivity and pricing actions—Stepped up productivity efforts; took pricing on Atkins shakes and select items, evaluating broader pricing; full benefit over 12-18 monthsRising
Owen integration and growth runwayAcquisition completed June 2024Anniversary lapped; deceleration anticipated, ACV in low 60s with 20-30 points of headroom versus peers, reacceleration expectedSteady
Driving Quest physical availability outside the core aisle—Key priority via secondary placements, wall of wellness tests, coolers, club and away-from-home channelsRising
Category strength for high protein, low sugar, low carb—17 quarters of high-single to low-double-digit growth; generational shift described as acceleratingRising

Q&A Summary

How much of a distribution headwind do you expect for Atkins at the fall reset, and how does that square with consolidating behind the hardest-working SKUs?
Management expects additional Atkins distribution cuts driving continued double-digit declines in 2026, but plans to offset them with gains from Quest and Owen. Atkins has a strong core of SKUs but a long tail of low-velocity ones; excluding cuts the brand is essentially flat, and e-commerce, where there is no space constraint, is up high single digits.
Owen track data slowed and looked weaker than modeled; was the slowdown contemplated in guidance, and what does it mean for fiscal 2026?
The deceleration was fully anticipated and in guidance, driven by lapping significant TDP gains at a large club and mass customer. Owen's ACV is in the low 60s, about 20-30 points below leading peers, and distribution gains are expected to reaccelerate over summer and fall. Roughly 24% Owen consumption growth is expected on a full-year basis in FY2026.
How should we think about the Q4 exit rate and the path forward given costs continuing and offsets taking time?
Management cautioned against reading too much into the exit rate and said it is too early to guide on EBITDA, which will come in October. The shape of FY2026 is expected to be more challenged in the first half than the second half as higher costs enter the base and productivity and pricing benefits build with a slight lag.
Can you quantify a go-forward gross margin range for 2026 given cocoa and tariffs, perhaps 36-37% versus upper 30s?
The CFO declined to give a specific range, citing good visibility on costs through the rest of the calendar year, efforts to lock in more coverage, and limited clarity on tariffs after a second deadline extension. Second-half margin challenges will flow into the first half of FY2026, with a better picture expected in the second half. The CEO reaffirmed a long-term high-30s gross margin target.
What are your capital allocation priorities given leverage well below a turn?
Priorities are unchanged: first M&A (with some interesting pipeline opportunities), second debt paydown (already comfortable at the current level after repaying about $250 million), and third buybacks when it makes sense. The asset-light, high-margin model converts substantial EBITDA to cash, with about $100 million of cash on hand.
How is the Texas warning-label legislation on 44 additives by 2027 expected to affect your portfolio?
Management feels much better insulated than large-cap food peers given the high-protein, low-sugar, low-carb profile. Current impact is very small, with only a few SKUs likely needing reformulation and no material cost implications. Owen, being clean-label, plant-based and avoiding the top nine allergens, is seen as especially well positioned.

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Q3 2025 call
Reported 2025-07-10 · figures from the Simply Good Foods Co Q3 2025 earnings call.

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