Simply Good Foods Q3 2025 slides: Strong sales growth offset by margin pressure

Introduction & Market Context

Simply Good Foods Company (NASDAQ:SMPL) reported its third quarter fiscal year 2025 results on July 10, 2025, highlighting continued strong sales growth despite ongoing challenges with its Atkins brand and margin pressure. The company’s stock has been under pressure, trading near its 52-week low of $23.50, with shares closing at $24.12 prior to the presentation.

The nutritional snacking category continues to demonstrate robust growth, increasing 12.8% year-over-year, marking the 17th consecutive quarter of at least high single-digit growth. This trend reflects what the company describes as the "mainstreaming" of consumer demand for high protein, low-sugar, and low-carb food and beverage options.

Quarterly Performance Highlights

Simply Good Foods reported Q3 net sales of $381.0 million, representing a 13.8% increase year-over-year. This growth was primarily driven by the OWYN acquisition, which contributed 10.0 percentage points to overall growth, while organic growth contributed 3.8%.

As shown in the following key performance metrics:

Net income for the quarter was $41.1 million, down slightly by 0.6% compared to the prior year, while Adjusted EBITDA grew 2.8% to $73.9 million. However, margins faced pressure, with gross margin declining from 39.9% to 36.4% and Adjusted EBITDA margin contracting from 21.5% to 19.4%.

The drivers of growth for the quarter and fiscal year-to-date are illustrated in this breakdown:

Brand-Level Performance

The company’s portfolio showed divergent performance across its three main brands:

Quest continued its strong momentum with Q3 retail takeaway growth of 11% and household penetration increasing 120 basis points to 18.3%. The brand’s salty snacks segment was particularly impressive, with consumption increasing 31%, driven primarily by distribution gains. Quest is approaching $1 billion in net sales, with management expressing confidence in its multi-year growth runway.

Atkins, however, continued to struggle with Q3 retail takeaway declining 13%. This performance was attributed to previously announced distribution losses at club stores and the decision not to repeat significant volume-driving merchandising events from the prior year. Management also noted that Atkins is expected to lose significant distribution during an upcoming reset at a large mass retailer in late summer.

OWYN, the company’s newest acquisition, demonstrated strong growth with Q3 retail takeaway increasing 24%. Growth was balanced across channels, including MULO+C (+26%) and e-commerce (+19%). The brand’s ready-to-drink shakes grew over 20%, with ACV (all commodity volume) increasing 7 points year-over-year to 62%, though this remains well below most peers (>80%).

Detailed Financial Analysis

Simply Good Foods’ profitability metrics for Q3 2025 compared to the prior year show the impact of growth investments and margin pressure:

The year-to-date performance follows similar trends, with strong top-line growth but compressed margins:

Adjusted diluted earnings per share for the quarter was $0.51, representing a 2.0% increase from $0.50 in the prior year. The reconciliation from GAAP EPS to adjusted EPS is detailed below:

Balance Sheet Strength & Capital Allocation

Simply Good Foods continues to demonstrate financial discipline, improving its trailing twelve-month Net Debt to Adjusted EBITDA ratio to 0.5x. As of May 31, 2025, the company had $98.0 million in cash and cash equivalents and a term loan balance of $250.0 million.

The company’s capital allocation strategy has focused on debt reduction and share repurchases. Fiscal year-to-date, Simply Good Foods has repaid $150.0 million of its term loan ($50.0 million in Q3) and utilized $24.3 million to repurchase 0.7 million shares (all in Q3). Since the closing of the OWYN acquisition on June 13, 2024, the company has repaid $240 million of the $250 million borrowed to fund the acquisition.

The following chart illustrates the company’s historical net debt reduction since the Quest acquisition:

Forward-Looking Statements

Simply Good Foods updated its fiscal year 2025 outlook, with expectations detailed in the following table:

The company now expects net sales growth to be in the 8.5% to 9.5% range, with OWYN contributing approximately $145 million for the fiscal year. Gross margin is expected to decline by approximately 200 basis points year-over-year, with half of the decline attributed to higher inflation and tariffs in the second half, and the other half due to the inclusion of OWYN.

Adjusted EBITDA growth is projected to be in the 4% to 5% range year-over-year. Management noted that fiscal year 2024 included a 53rd week, representing a 2 percentage point headwind to both net sales and Adjusted EBITDA growth in fiscal year 2025.

Looking ahead, Simply Good Foods remains confident in its ability to capitalize on the growing nutritional snacking category, with approximately 70% of its portfolio (Quest and OWYN) driving strong top and bottom-line growth. The company plans to continue investing in innovation, expanding physical availability, and broadening awareness of its brands to enable sustainable growth and create shareholder value.

Full presentation:

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