Simply Good Foods grew Q3 net sales 13.8% to $381 million, driven by the Owen acquisition and roughly 3.8% organic growth, with Quest again posting double-digit takeaway and consumption that more than offset anticipated Atkins declines. Gross margin fell 350 basis points to 36.4% on elevated cocoa and whey costs and the dilutive Owen mix, holding adjusted EBITDA growth to about 2.8% even as the company repaid essentially all of the $250 million Owen acquisition debt. Management tightened full-year guidance to 8.5%-9.5% net sales growth and 4%-5% adjusted EBITDA growth, while flagging continued double-digit Atkins declines and margin pressure carrying into early fiscal 2026.
Thank you, operator. Good morning, and welcome to the Simply Good Foods Company's Third Quarter Fiscal Year twenty twenty five Earnings Call for the thirteen week period ended 05/31/2025. Today, Jeff Tanner, President and CEO and Chris Beeler, CFO will provide you with an overview of our results, which were provided in our earnings release issued earlier this morning at approximately 7AM Eastern Time. Our prepared remarks will then be followed by a Q and A session. A copy of the release and accompanying presentation are available on the Investors section of the company's website at www.thesimplygoodfoodscompany.com.
This call is being webcast and an archive of today's remarks will be made available. During the course of today's call, management will make forward looking statements, which 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 provide useful information for investors.
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. Please refer to today's press release for a reconciliation of our non GAAP financial measures to their most comparable measures prepared in accordance with GAAP. The acquisition of Only What You Need Inc. Or Owen was completed on 06/13/2024. Therefore, the company's year ago performance for the thirteen weeks ended 05/25/2024 does not include results of the Owen business.
References during this call to organic or legacy Simply Good Foods refers to Simply Good Foods' business excluding Owen. As we have now lapped the anniversary date of the Owen acquisition for future calls, the use of organic will refer to year over year growth for brands we have owned for more than twelve months. 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. Finally, all retail takeaway data included in our discussion today, unless otherwise noted, is for the thirteen weeks ended 06/01/2025 and reflects a combination of Sercona's MuLo plus plus C and company estimates for unmeasured channels as compared to the prior year. I will now turn the call over to Jeff Tanner, President and CEO.
Thank you, Josh. Good morning, everyone, and thank you for joining us. 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. We will then be available to take your questions. Momentum continued in Q3 with net sales up 14% year over year, driven by the acquisition of Owen and approximately 4% organic growth.
Consumption was once again up double digits for both Quest and Owen, more than offsetting the anticipated declines for Atkins. As a reminder, Quest and Owen, in aggregate, make up approximately 70% of our net sales today. 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. Simply Good is at the forefront of this generational shift with an attractive portfolio of three uniquely positioned brands powered by leading sales and marketing capabilities and a talented R and D and supply chain teams. Adjusted EBITDA in the quarter grew approximately 3% year over year.
While our margins remained strong overall, they were under pressure during the quarter as we realized higher levels of inflation, most notably from cocoa and whey. As we discussed on prior calls, we expected inflation to impact our margins as we moved into the second half. In response to these headwinds, we substantially stepped up our productivity and cost management efforts, and we've started to realize the contribution from pricing we've taken on select items. We expect to realize the full benefit of productivity and pricing actions over the next twelve to eighteen months. Cash flow generation remains a hallmark of this organization.
In the year since we acquired Owen, we have repaid essentially all of the $250,000,000 we borrowed to finance the purchase. And during Q3, we repurchased over $24,000,000 worth of our common stock. At only half a turn of leverage today, our balance sheet gives us optionality going forward. 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. I want to commend our teams for the tenacity amidst a dynamic operating environment and delivering a year where we expect to generate approximately 3% organic growth and mid single digit total adjusted EBITDA growth, as well as to successfully integrate Owen.
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. Our Salty Snacks platform embodies this strategy. Salty Snacks retail takeaway grew 31% this quarter and is on pace to become the largest platform on the Quest business.
We continue to successfully launch exciting new flavors and sizes, expand distribution and merchandising in and out of our aisle, as well as in new channels, and we remain focused on building awareness through award winning marketing. As we work to expand physical availability of chips, we're particularly excited about the support we're getting from retailers who see the growth and incrementality of the segment. As an example, at a large mass merchant, Quest recently secured incremental shelf space within our core aisle during their upcoming reset later this year. In addition, at the same customer, Quest gained multiple placements outside our aisle, including on their highly visible health and wellness wall, as well as near their heavily trafficked grocery section. Shifting to bars, consumption grew 3% this quarter, led by growth from our Hero Crispy line and our new Overload bars.
Initial distribution and velocities for Overload continue to build in line with our plan, and both consumer and retailer feedback has been positive. The recent launch of our 45 gram Quest Milkshake is also progressing nicely, building ACV and awareness. We're supporting this new platform with activations across the country focused on driving trial. Similar to Overload, ACV is expected to build through the rest of the calendar year. We're also seeing solid contribution from our Bakeshop platform, which continues to be a highly incremental basket builder for us and retailers.
We're excited about the innovation we have coming on this platform in fiscal twenty twenty six. To wrap it up on Quest, we're pleased with our Q3 performance and execution. As we enter Q4, we remain committed to driving growth and investing in the brand, positioning Quest to continue its growth trajectory into fiscal 'twenty six. Moving to Atkins. Consumption in the third quarter was down 13% versus prior year, consistent with our forecast.
As we discussed last quarter, declines accelerated due to broader distribution losses at a key customer and from not repeating high volume merchandising events from a year ago. These two drivers accounted for most of the Q3 decline. We're on a journey towards a more focused and sustainable Atkins business. Importantly, the core SKUs of the Atkins portfolio perform above category velocity benchmarks. However, the brand does have a long tail of SKUs, many of which turn at below category average levels.
Therefore, our approach continues to be to drive towards an optimized assortment for the brand, including bringing to market improved innovation like we've done with the 30 gram Act in Strong Shed. In channels like e commerce, where we do not have space constraints, we continue to grow nicely with retail takeaway at a key customer up 7% this quarter. Part of the rationale in proactively pruning Atkins shelf space is working with retailers, where possible, to more effectively utilise the total shelf space allocated to Simply Good Foods. As an example, during upcoming resets, we expect Atkins to see a significant decline in distribution at a large mass retailer. However, we will offset a majority of Atkins space losses with gains for Quest and Owen SKUs that are higher turning and, in the case of Quest, more profitable.
Our commitment to supporting the brand and confidence in the long term vitality of the business is underpinned by the strength of the core SKUs. Consumer research and customer conversations continue to reinforce a strong need for a science based brand and products that help consumers with their weight loss journey, including those using or coming off GLP-one drugs. We remain committed to our revitalization plan, again, in support of building a healthier, more profitable and more sustainable business. Moving to Owen. Retail takeaway increased 24% in Q3, with strong contribution across channels.
Owen's ready to drink shakes retail takeaway grew over 20% in the quarter. Distribution increased 18%, benefiting from recent gains made during the spring resets. Reflecting on Q3 consumption growth, we fully anticipated that trends would slow relative to the first half as we were lapping some sizable wins from the prior year. As we enter Q4, despite a slightly slower start in June, we expect retail takeaway trends to remain strong, benefiting from incremental distribution wins as well as planned merchandising activity across several retail partners. Stepping back, we continue to see a long runway of growth for the brand due to strong velocities and category incrementality that position Owen to continue to expand distribution, household penetration and awareness, which remain well below peers, and leveraging Simply's R and D team to fill key portfolio gaps across flavours and sizes and even new formats.
Thank you, Jeff. Good morning, everyone.
Total Simply Good Foods third quarter net sales of $381,000,000 increased 13.8% versus last year, driven by the contribution from Owen of $33,600,000 or 10%, as well as 3.8% organic growth. Organic net sales growth was driven by Quest, which grew 15 in Q3. The brand benefited mainly from strong retail takeaway, as well as a modest improvement in retailer trade inventory to ensure operational continuity during a warehouse transition early in Q4. Net sales for Atkins declined 12.7%, in line with consumption. And Owen had another solid quarter with retail takeaway up double digits versus prior year.
Gross profit of $138,500,000 increased 3.7% from the year ago period, driven mainly by the inclusion of Owen. Gross margin was 36.4%, a decline of three fifty basis points versus prior year, driven mainly by elevated input costs, most notably cocoa and whey, that were only partially mitigated by productivity and pricing. The inclusion of Owen in our results was also a headwind in the quarter. Selling and marketing expenses of $33,800,000 were down modestly versus prior year, with declines on the legacy business partially offset by the inclusion of Owen to the portfolio. G and A expenses were $41,200,000 an increase of $9,700,000 versus last year, primarily due to integration expenses and the inclusion of OWEN.
Excluding stock based compensation and one time integration costs, G and A increased $4,800,000 to $31,400,000 driven mainly by the addition of Owen to the portfolio. As a result, adjusted EBITDA of 73,900,000 increased 2.8% from the year ago period. Net interest expense of $4,200,000 was up modestly versus the prior year, while the effective tax rate was 25.2%, up slightly versus last year. Net income was $41,100,000 down from $41,300,000 last year. On a fiscal year to date basis, net sales are up 13.2%, supporting gross profit and adjusted EBITDA growth of 9.210.6% respectively.
Margins have compressed mainly as a result of the inclusion of Owen in our results. Third quarter reported EPS was $0.40 per diluted share versus $0.41 in Q3 last year. Adjusted diluted EPS was $0.51 compared to $0.50 in the year ago period. On a fiscal year to date basis, the company generated reported diluted EPS of $1.14 up 4.6% versus the prior year, whereas adjusted diluted EPS of $1.46 increased 9.8% versus the comparable prior year period. I want to commend the team for their hard work and strong execution on delivering our results so far this year and their perseverance amidst a dynamic environment.
Note that we calculate adjusted diluted EPS as adjusted EBITDA less interest income, interest expense and income taxes divided by diluted shares outstanding. Please refer to the press release for an explanation and reconciliation of non GAAP financial measures. Moving to the balance sheet and cash flow, as of 05/31/2025, the company had cash of $98,000,000 and an outstanding principal balance on its term loan of $250,000,000 bringing our net debt to trailing twelve month adjusted EBITDA to approximately 0.5 times. Fiscal year to date cash flow from operations was $133,000,000 compared to approximately $167,000,000 last year. The decline was primarily due to higher uses of working capital, principally inventory.
Capital expenditures were approximately $3,000,000 During the quarter, the company repaid $50,000,000 of its term loan debt, bringing fiscal year to date repayments to $150,000,000 In the eleven months since we've acquired Boeing, the company has now repaid $240,000,000 of the $250,000,000 borrowed to fund purchase. In addition, during the quarter, the company used $24,000,000 to repurchase nearly 700,000 shares. The company has nearly $50,000,000 remaining on its current share repurchase authorization. Moving on to our outlook, as you saw in this morning's press release, we are updating the ranges of our full year net sales and adjusted EBITDA guidance. Specifically, we expect the following.
Total company reported net sales are expected to increase 8.5% to 9.5%, with organic net sales growth driven primarily by volume. Embedded within that, we anticipate Owen net sales to finish the year at approximately $145,000,000 which is the midpoint of our previously provided range. Total company adjusted EBITDA is expected to increase 4% to 5%, which continues to include an assumption that gross margins will decline 200 basis points on a full year basis. Please note that our outlook includes the fifty third week in fiscal year twenty twenty four, which represents an approximately two percentage point headwind to full year growth for net sales and adjusted EBITDA in fiscal year twenty twenty five. As it relates to the fourth quarter, I would like to highlight a few items.
First, we expect Q4 organic net sales to grow around 3% at the midpoint, which as a reminder will include Oven within the organic net sales growth calculation for most of the quarter. Second, our implied gross margin outlook for Q4 reflects an increase in realized inflation, as well as the impact of tariffs, which are beginning to flow into our P and L. Please note that both of these drivers are expected to continue for some time. As Jeff said earlier, we are stepping up our productivity and other mitigation efforts, but these offsets will take time to be fully realized. And third, our updated full year adjusted EBITDA growth outlook implies a low double digit decline at the midpoint in Q4, or a mid single digit decline excluding the extra week.
Finally, I would note that our outlook assumes current economic conditions and consumer purchasing behavior will remain generally consistent over the balance of the company's fiscal year. For a comprehensive summary of our full year outlook and details on certain below the line items, please see slide 16 in our presentation. That concludes our prepared remarks. Thank you for your interest in our company. We are now available to take your questions.