Today, Geoff 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. Due to the company's asset-light business model, we evaluate our performance on an adjusted basis as it relates to EBITDA and diluted EPS. As a result, we are reaffirming our full-year outlook for net sales and Adjusted EBITDA. Consumption in Q1 grew 2%, led by double-digit growth from Quest and OWYN, which combined to generate 71% of our net sales.
Growth was also supported by another robust quarter for the nutritional snacking category, which grew 10%. We are executing well on initiatives to drive the top line and to rebuild our gross margin. Specifically, with respect to our margin, recent pricing actions are now reflected on shelf, with elasticities to date in line with our expectations, albeit data remains limited. Our robust productivity program, which we started 18 months ago, is delivering results, taking costs out of the system and ensuring we have a multi-year pipeline of initiatives for the future.
However, we remain confident that our top and bottom-line performance will improve once we get beyond Q2, and as mentioned, we are reaffirming our full-year outlook. The growth is being propelled by the mainstreaming of consumer demand for high protein, low sugar, and low carb products. Turning to our brand, Quest had another solid quarter, delivering 12% consumption growth and nearly 10% growth in net sales. Household penetration reached nearly 20% this quarter, up 200 basis points year-over-year, and up 50 basis points versus last quarter, a continuation of sequential momentum observed for some time.
| Metric | Period | Current guidance |
|---|---|---|
| Net sales growth | FY2026 | -2% to +2% (Reaffirmed) |
| Gross margin | FY2026 | Decline of 100-150 basis points (Reaffirmed) |
| Adjusted EBITDA growth | FY2026 | -4% to +1% (Reaffirmed) |
| Net interest expense | FY2026 | $19 million to $21 million (Updated for higher borrowings) |
| Weighted average diluted share count | FY2026 | ~96 million shares (Updated for buybacks) |
| Effective tax rate | FY2026 | 25% (Unchanged) |
| Quest consumption growth | FY2026 | High single digit (On track) |
| Metric | YoY | Note |
|---|---|---|
| Reported net sales (Q1) | Flat at $340.2 million | Quest growth offset by Atkins and OWYN declines |
| Quest net sales (Q1) | +~10% | 12% consumption growth led by salty snacks, distribution, and velocity gains |
| Atkins net sales (Q1) | -17% | Lost distribution at several key retailers, two-thirds of the headwind |
| OWYN net sales (Q1) | -3% | Lingering product quality issues and elevated retailer inventory |
| Gross profit (Q1) | -15.8% to $109.9 million | Elevated input costs (notably Cocoa) and first full quarter of tariffs |
| Adjusted EBITDA (Q1) | -20.6% to $55.6 million | Margin pressure from inflation and tariffs |
| Adjusted diluted EPS (Q1) | -$0.10 to $0.39 | Margin challenges and one-time costs, partly offset by lower interest expense |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Quest Salty snacks | Supply constrained a year ago | Consumption up 40%, household penetration over 10%, ACV up nearly 5 points, items per store up 34% | Strong growth |
| Quest Bars re-acceleration | Critical imperative with Overload as first step | Flat consumption in Q1; multi-pronged plan with platform innovation, merchandising, distribution, and marketing expected to show results in the second half | Turnaround in progress |
| OWYN integration and growth | Recently acquired, building synergies | Consumption strong but shipments lagging on quality issues and inventory; marketing more than doubled, plans for powders and platform innovation | Recovering |
| Atkins rationalization | 10%-15% of business is tail SKUs | Unchanged; 75% of sales from top-half-velocity SKUs; partnering with retailers to replace tail SKUs with Quest and OWYN; more flowback than forecast | Managed decline |
| Margin rebuild | Pricing and productivity lagging inflation | Lag begins to overlap in second half; pricing, productivity, and Cocoa tailwind to lift toward mid-36% gross margin by Q4 and 37%+ over time, partly offset by whey inflation | Improving into h2 and fy2027 |
| Capital allocation / buybacks | Open to M&A; portfolio brand approach | Borrowed incremental $150 million to accelerate buybacks, repurchased over 7% of shares, board added $200 million authorization, viewing stock as undervalued | Aggressive repurchases |
| GLP-1 clinical study | Two-year pilot underway | Encouraging results returned last month showing Atkins-diet patients retained more muscle mass and had fewer side effects; will leverage in New Year, New You media and retailer selling | Emerging opportunity |