Simply Good Foods Earnings: Quest and OWYN Drive Growth Amid Margin Pressures
- Hardik Shah
- Jul 11
- 3 min read
TLDR
Strong Top-Line Growth: Q3 net sales rose 13.8% to $381M, driven by OWYN acquisition and 3.8% organic growth, mainly from Quest.
Margin Pressure from Inflation: Despite gross profit rising 3.7%, gross margin fell 350 bps due to cocoa, whey, and tariff impacts.
Narrowed FY25 Outlook: Adjusted EBITDA expected to grow 4–5% and OWYN forecasted to hit $145M in annual sales.
Business Overview
The Simply Good Foods Company (Nasdaq: SMPL) develops and markets nutritional snacks and beverages under three core brands: Quest, Atkins, and OWYN. Its product portfolio includes protein bars, RTD shakes, salty snacks, and confections. Quest and OWYN now contribute about 70% of total revenue, with the company positioned at the forefront of the high-protein, low-sugar, low-carb consumer trend.
Financial Results
Simply Good Foods earnings, for the third quarter ended May 31, 2025:
Net Sales: $381.0M, up 13.8% YoY; OWYN contributed $33.6M.
Organic Sales Growth: +3.8%, led by Quest (+15.0%) offset by Atkins (-12.7%).
Adjusted EBITDA: $73.9M, up 2.8%.
Net Income: $41.1M, nearly flat YoY.
Gross Margin: Fell to 36.4% from 39.9%, impacted by elevated cocoa and whey costs and OWYN’s inclusion.
YTD Performance:
Net Sales: $1.08B, up 13.2%.
Adjusted EBITDA: $211.9M, up 10.6%.
Adjusted Diluted EPS: $1.46, up 9.8%.
Forward Guidance FY25
Net Sales Growth: 8.5%–9.5%.
Adjusted EBITDA Growth: 4%–5%.
OWYN FY25 Sales: Targeting $145M, midpoint of previous guidance.
Gross Margin: Expected to decline ~200 bps due to inflation and tariffs, partially offset by productivity and pricing actions.
“We expect to generate approximately 3% organic net sales growth and mid-single-digit Adjusted EBITDA growth, as well as to successfully integrate OWYN.” — Geoff Tanner, CEO
Operational Performance
Wins
Quest Salty Snacks: +31% growth; becoming the brand’s largest platform.
OWYN RTD Shakes: +20% growth; distribution grew to 62% ACV.
Cash Flow Strength: $133M YTD cash flow; $150M term loan repaid; $24M stock buyback in Q3.
Challenges
Atkins Brand Decline: -13% retail takeaway due to club channel distribution losses and fewer promotions.
Gross Margin Pressure: Driven by commodity inflation and tariffs starting to impact the P&L.
Market Insights
The nutritional snacking category remains in a strong uptrend:
Category Growth: +12.8% YoY; 17 consecutive quarters of high single-digit or better growth.
Consumer Shift: Continued mainstream adoption of high-protein, low-sugar, and low-carb diets.
GLP-1 Trends: Management cited growth opportunity in science-backed products supporting weight loss journeys, especially for GLP-1 users.
Strategic Initiatives
Innovation Pipeline: Quest Overload bars and 45g Milkshake launched; Bakeshop and salty snack expansion in play.
Atkins Revamp: Plans for SKU rationalization, new packaging, website relaunch, and ad campaigns.
OWYN Integration: Nearly complete, with strong synergies expected in FY26.
Distribution Expansion: Quest and OWYN gaining shelf space as Atkins’ footprint shrinks.
“We are stepping up our productivity and other mitigation efforts to offset elevated headwinds from inflation and tariffs.” — Geoff Tanner, CEO
Capital Allocation
Debt Reduction: $240M of the $250M OWYN acquisition-related debt repaid within a year.
Share Repurchases: $24M spent in Q3; ~$50M remaining under current authorization.
Leverage: Net debt to adjusted EBITDA reduced to 0.5x, offering strategic flexibility.
“In the year since we acquired OWYN, we have repaid essentially all of the $250M we borrowed to finance the purchase.” — Geoff Tanner, CEO
The Bottom Line
Simply Good Foods is navigating a complex operating environment with resilience, showing solid sales growth led by Quest and OWYN, while facing margin pressures from inflation and tariffs. Management’s tightening of FY25 guidance reflects disciplined execution. Key watch areas for investors include the revitalization of Atkins, margin recovery through cost actions, and continued momentum in Quest salty snacks and OWYN RTD shakes. The business is well-positioned for long-term value creation through its innovation and consumer-driven portfolio.
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