Earnings call transcript: Simply Good Foods Q3 2025 sees steady growth

Simply Good Foods Co (SMPL) reported robust financial performance in its Q3 2025 earnings call, showcasing a 13.8% increase in net sales year-over-year to $381 million. Despite a slight dip in net income from $41.3 million to $41.1 million, the company maintained steady growth with an adjusted diluted EPS of $0.51, up from $0.50 last year. The stock closed at $24.12, near its 52-week low of $23.50, reflecting broader market pressure that has led to a 35.8% decline over the past six months. According to InvestingPro analysis, the stock appears undervalued at current levels, with analysts maintaining a consensus buy recommendation.

Key Takeaways

• Simply Good Foods Co’s net sales increased by 13.8% year-over-year.
• Adjusted diluted EPS rose slightly to $0.51.
• The company repaid $240 million of its OWYN acquisition debt.
• The nutritional snacking category continues to grow by double digits.
• Simply Good Foods expects continued double-digit growth for Quest and OWYN products.

Company Performance

Simply Good Foods Co demonstrated solid performance in Q3 2025, driven by strong sales in its Quest and OWYN product lines. The company capitalized on the growing demand for nutritional snacks, particularly in the high-protein, low-sugar segment, which is expanding rapidly. Despite challenges with gross margins, the company’s strategic initiatives have kept it on a growth trajectory.

Financial Highlights

• Revenue: $381 million, up 13.8% year-over-year
• Gross profit: $138.5 million, up 3.7%
• Gross margin: 36.4%, down 350 basis points
• Adjusted EBITDA: $73.9 million, up 2.8%
• Net income: $41.1 million, slightly down from $41.3 million
• Adjusted diluted EPS: $0.51, up from $0.50

Outlook & Guidance

Simply Good Foods Co expects full-year net sales to increase by 8.5% to 9.5%, with adjusted EBITDA growth projected at 4% to 5%. The company anticipates challenges in gross margin in the first half of FY2026 but remains optimistic about continued growth in its Quest and OWYN product lines. The nutritional snacking category’s robust growth is expected to continue, supporting the company’s positive outlook.

Executive Commentary

CEO Geoff Tanner stated, "We are uniquely positioned as a leader in the fast-growing nutritional snacking category," highlighting the company’s strategic positioning within the market. CFO Chris Bealer emphasized the strength of cash generation, noting, "Cash generation for this business is very strong," which underscores the company’s financial stability and operational efficiency.

Risks and Challenges

• Gross Margin Pressure: Continued challenges are expected in maintaining gross margins due to rising costs.
• Competitive Market: The ready-to-drink protein shake segment is experiencing increased competition, which could impact market share.
• Distribution Cuts: Atkins products are expected to face distribution cuts, which may affect sales growth.
• Regulatory Impacts: Potential regulatory changes could impact the product portfolio and operational costs.
• Market Saturation: The company must continue to innovate to maintain its competitive edge in a rapidly growing market.

Q&A

During the Q&A session, analysts inquired about the distribution challenges faced by Atkins and sought clarification on growth expectations for OWYN. The company addressed these concerns by outlining its pricing and cost management strategies, as well as discussing potential regulatory impacts on its product portfolio.

Full transcript - Simply Good Foods Co (SMPL) Q3 2025:

Conference Operator: Greetings, welcome to Simply Good Foods Company’s third quarter fiscal year 2025 earnings call. At this time, all participants will be in listen-only mode. The question and answer session will follow today’s formal presentation. If anyone should require operator assistance during the conference, please press 0 from your telephone keypad. Please note this conference is being recorded at this time. I’ll turn the conference over to Joshua Levine, Vice President of Investor Relations. Joshua, you may begin.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Thank you, operator. Good morning and welcome to The Simply Good Foods Company’s third quarter fiscal year 2025 earnings call for the 13-week period ended May 31, 2025. Today, Geoff Tanner, President and CEO, and Chris Bealer, CFO, will provide you with an overview of our results, which were provided in our earnings release issued earlier this morning at approximately 7:00 A.M. Eastern Time. Our prepared remarks will then be followed by a Q&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 adjusted 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 OWYN, was completed on June 13, 2024. Therefore, the Company’s year-ago performance for the thirteen weeks ended May 25, 2024 does not include results of the OWYN business.

References during this call to organic or legacy Simply Good Foods refer to Simply Good Foods business excluding OWYN, as we have now lapped the anniversary date of the OWYN acquisition. For future calls, the use of organic will refer to year-over-year growth for brands we have owned for more than 12 months. For Q4, that will include the growth of Simply Good Foods excluding OWYN 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 13 weeks ended June 1, 2025, and reflects a combination of MULO C and company estimates for unmeasured channels as compared to the prior year. I will now turn the call over to Geoff Tanner, President and CEO.

Geoff Tanner, President and CEO, Simply Good Foods Company: 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 2025 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 OWYN and approximately 4% organic growth. Consumption was once again up double digits for both Quest and OWYN, more than offsetting the anticipated declines for Atkins. As a reminder, Quest and OWYN in aggregate make up approximately 70% of our net sales today. Growth for the nutritional snacking category remains 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 Foods Company 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 talented R&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 12 to 18 months. Cash flow generation remains a hallmark of this organization.

In the year since we acquired OWYN, we have repaid essentially all of the $250 million we borrowed to finance the purchase, and during Q3 we repurchased over $24 million 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 the 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 OWYN.

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 a billion dollars 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 that plan and both consumer and retailer feedback has been positive. The recent launch of our 45 gram Quest milkshake is also progressing nicely. Building ATV 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 2026. 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 2026.

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 Atkins Strong shake 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 utilize 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 OWYN 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-1 drugs. We remain committed to our revitalization plan, again in support of building a healthier, more profitable, and more sustainable business. Moving to OWYN, retail takeaway increased 24% in Q3 with strong contribution across channels. OWYN’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 sizeable 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 positions OWYN to continue to expand distribution, household penetration, and awareness, which remain well below peers, and leveraging Simply Good Foods Company’s R&D team to still keep portfolio gaps across flavors and sizes and even new formats at approximately 10% of our net sales today. With integration work nearly complete, we remain confident in our ability to drive strong double-digit growth. We have the team capabilities and insurgent mindset to enable OWYN to contribute to Simply Good Foods Company’s top and bottom line growth for years to come.

To summarize, I’m pleased with the momentum in our business, our fiscal year-to-date performance, and our outlook as we work to close the year. Simply Good Foods Company is uniquely positioned as a leader in the fast-growing nutritional snacking category with a portfolio and team built to lead the generational shift of demand towards high protein, low sugar, and low carb food and beverage products. We will do this by introducing delicious innovation, expanding physical availability of our products, and building brand awareness. With approximately 70% of our portfolio through Quest and OWYN driving strong top and bottom line growth as well as an agile culture, flexible supply chain, and a talented team, we are confident in our ability to deliver sustainable growth and create meaningful shareholder value.

I will now turn the call over to Chris Bealer, who will provide you with the details of our financial results and outlook.

Chris Bealer, CFO, Simply Good Foods Company: Thank you, Jeff. Good morning, everyone. Total Simply Good Foods third quarter net sales of $381 million increased 13.8% versus last year, driven by the contribution from OWYN of $33.6 million, 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 OWYN had another solid quarter with retail takeaway up double digits versus prior year. Gross profit of $138.5 million increased 3.7% from the year-ago period, driven mainly by the inclusion of OWYN.

Gross margin was 36.4%, a decline of 350 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 OWYN in our results was also a headwind in the quarter. Selling and marketing expenses of $33.8 million were down modestly versus prior year, with declines on the legacy business partially offset by the inclusion of OWYN to the portfolio. G&A expenses were $41.2 million, an increase of $9.7 million versus last year, primarily due to integration expenses and the inclusion of OWYN. Excluding stock-based compensation and one-time integration costs, G&A increased $4.8 million to $31.4 million, driven mainly by the addition of OWYN to the portfolio. As a result, adjusted EBITDA of $73.9 million increased 2.8% from the year-ago period.

Net interest expense of $4.2 million was up modestly versus the prior year, while the effective tax rate was 25.2%, up slightly versus last year. Net income was $41.1 million, down from $41.3 million last year. On a fiscal year-to-date basis, net sales are up 13.2%, supporting gross profit and adjusted EBITDA growth of 9.2% and 10.6%, respectively. Margins have compressed mainly as a result of the inclusion of OWYN 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 May 31, 2025, the company had cash of $98 million and an outstanding principal balance on its term loan of $250 million, bringing our net debt to trailing twelve month adjusted EBITDA to approximately 0.5x. Fiscal year to date cash flow from operations was $133 million compared to approximately $167 million last year. The decline was primarily due to higher uses of working capital, principally inventory. Capital expenditures were approximately $3 million.

During the quarter, the company repaid $50 million of its term loan debt, bringing fiscal year to date repayments to $150 million. In the 11 months since we’ve acquired OWYN, the company has now repaid $240 million of the $250 million borrowed on the purchase. In addition, during the quarter the company used $24 million to repurchase nearly 700,000 shares. The company has nearly $50 million 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 OWYN net sales to finish the year at approximately $145 million, 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 53rd week in fiscal year 2024, which represents an approximately 2 percentage point headwind to full year growth for net sales and adjusted EBITDA in fiscal year 2025. 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 OWYN 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&L. Please note that both of these drivers are expected to continue for some time. As Geoff said earlier, we are stepping up our productivity and other mitigation efforts, but these offsets will take time to be fully realized. 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.

Conference Operator: Thank you. At this time, we’ll be conducting a question and answer session. If you’d like to ask a question at this time, please press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you’d like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. The first question today is from the line of Matthew Edward Smith with Stifel. Please proceed with your questions.

Matthew Edward Smith, Analyst, Stifel: Hi, good morning.

Geoff Tanner, President and CEO, Simply Good Foods Company: Morning, Jeff.

Matthew Edward Smith, Analyst, Stifel: You call that distribution expectations across the portfolio for the upcoming fall shelf reset, including what sounds like significant losses for Atkins? Can you expand on how much of a distribution headwind you expect for the brand and product segments, and how you expect that to impact sales through the channel? Kind of help bridge the comments between significant distribution loss against consolidating the distribution behind the hardest working SKUs.

Geoff Tanner, President and CEO, Simply Good Foods Company: Yeah, thanks Matt, I appreciate the question. The double digit declines on Atkins that we’re seeing right now are obviously a headwind to total company growth. I do want to credit the team though for proactively addressing it head on with retailers and with that revitalization efforts. As we approached the full reset conversations with buyers, we had very productive conversations with them about the best use of space for the category and for Simply. Those conversations acknowledged that Atkins has a strong core of SKUs but certainly a long tail of lower velocity SKUs. In conversations with those retailers, the net result is that we expect additional cuts for Atkins that we do expect to offset with gains for Quest and OWYN.

We’re early in our planning cycle for 2026, but more specifically to your question, we do expect to see continued double digit declines on the Atkins business in 2026 driven almost entirely by these distribution cuts. Again, it’s part of our strategy with Atkins to build a more sustainable, more profitable, and more efficient business. If you step back a little bit, as I mentioned, the core of the Atkins portfolio representing the majority of sales, turn above category benchmarks. Primarily what we’re dealing with with Atkins is a space issue. I would point to e-commerce where there is no space constraint, there are no space constraints and the business is up high single digits.

I think this underscores the health of the Atkins brand, the job it does for consumers, that we’re being eyes wide open and realistic about the space challenge and having very productive conversations with retailers about how to offset those challenges with gains with Quest and OWYN.

Matthew Edward Smith, Analyst, Stifel: That’s very helpful. As a follow up, you talked about still expecting double digit declines on Atkins as you look out to fiscal 2026. I think there was an aspiration for the total company to grow towards its long term algorithm, call it 4 to 6%. Are your expectations for Quest and OWYN such that you think that’s still reasonable or do you think the Atkins decline.

Geoff Tanner, President and CEO, Simply Good Foods Company: At this point, it’s a little above.

Matthew Edward Smith, Analyst, Stifel: What you had previously expected as you look out to next year.

Chris Bealer, CFO, Simply Good Foods Company: Yeah, Matt, it’s Chris.

Geoff Tanner, President and CEO, Simply Good Foods Company: I’ll take that question.

Chris Bealer, CFO, Simply Good Foods Company: Look, it’s still very early in our planning process, and we’ll give obviously a full guide in October. What I can say on the top line, we will expect to see similar consumption trends on Quest and OWYN. As we’ve seen in recent times, we do expect Atkins trends to get slightly worse than 2025, as Geoff just said. I think we’d still be looking at growth, but like Geoff said, Atkins would definitely be a slight headwind for total company growth.

Geoff Tanner, President and CEO, Simply Good Foods Company: Matt, when you strip out the merchandising cuts and distribution losses on Atkins, the brand’s actually performing essentially flat. Even in a large club customer, we’ve lost distribution. We’ve been clear about that. We were growing slightly. It’s just that the space constraints, particularly in that limited SKU environment, have led us to losing on Atkins. Even if you look at e-commerce, where there’s no space constraints, our plan moving forward with the business with Atkins and into 2026 is to proactively address those challenges with retailers, and obviously that will flow through into 2026 with Atkins.

Matthew Edward Smith, Analyst, Stifel: Thank you.

Geoff Tanner, President and CEO, Simply Good Foods Company: I’ll pass it on.

Conference Operator: The next questions are from the line of Peter K. Grom with UBS Investment Bank. Please receive your questions.

Peter K. Grom, Analyst, UBS Investment Bank: Thanks, operator. Good morning, everyone. I wanted to ask on OWYN, a bit of a slowdown in the track data, and I think it was a bit weaker than we had modeled in the quarter.

Geoff Tanner, President and CEO, Simply Good Foods Company: We’d just love some perspective on this.

Peter K. Grom, Analyst, UBS Investment Bank: How the brand is performing relative to your expectations. Was this slowdown largely contemplated as you think about the guidance? Chris, I just wanted to make sure I understand your response to Matt’s question. I think you said you would expect growth similar to what we’ve seen recently, so can you maybe put some guardrails in terms of what that might mean for OWYN as we think about fiscal 2026?

Geoff Tanner, President and CEO, Simply Good Foods Company: Yeah. I’ll take the first question and then hand it off to Chris. We remain very confident in the OWYN business and believe it has a very long runway of sustained growth. To your question, we fully anticipated the deceleration in the second half. It was always in our plans and reflected in our guidance. The key driver here, we said before, is we lack significant TDP gains, particularly at a large club and mass customer. Given where the brand is in its maturity curve, though, we’re very confident that distribution gains are going to reaccelerate. As we look into Q4, we have very clear line of sight to those gains coming over the summer and into the fall. Q3 was just overlapping a period when we didn’t, while we were lapping a sustained period of distribution growth from last year.

I would highlight that OWYN’s ATV today is in the low 60s, which is about 20 to 30 points below leading ready-to-drink peers. It has significant opportunity to add more breadth on shelf and in customer conversations. They’re very bullish on this brand and we will be seeing meaningful gains starting in the summer and into the fall. Even looking beyond that, I’m excited about additional platform innovation that should keep that distribution engine going. I’ll turn it over to Chris. Second question.

Chris Bealer, CFO, Simply Good Foods Company: Yeah, and maybe just to clarify, what I was saying is if you look at Quest and OWYN recent consumption trends, we expect those to continue into FY2026. Just to specify a couple of points on OWYN, in Q3 we had, let’s call it 24, roughly 24% consumption growth. We’d expect something similar to that in FY2026 on a full year basis. That’s helpful as you think about the portfolio. What that’s going to do is continue mixing Quest and OWYN larger in the portfolio and Atkins smaller in the portfolio, given the numbers that Geoff’s already laid out earlier.

Peter K. Grom, Analyst, UBS Investment Bank: Okay, that’s really helpful. I guess my second question just is on the 4Q exit rate and how we should be thinking about that in the context of 2026. You kind of called out top line 3% at the midpoint. It’s a little bit below the long-term algo, profit down mid single digits excluding the extra week, and mentioned these costs are going to continue with maybe the offsets likely to take some time.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: I know you’re still early in.

Peter K. Grom, Analyst, UBS Investment Bank: The planning process here, but just any thoughts in terms of how we should be thinking about or how this exit rate should inform our view on the path forward?

Chris Bealer, CFO, Simply Good Foods Company: I wouldn’t think too much about the exit rate. I would really say that it is a bit too early to give guidance on EBITDA.

Geoff Tanner, President and CEO, Simply Good Foods Company: We’ll do that in October.

Chris Bealer, CFO, Simply Good Foods Company: We’ve got a lot of moving parts.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: So.

Chris Bealer, CFO, Simply Good Foods Company: We’re still waiting like everyone else for clarity on tariffs, which, as you know, as we’ve seen this week, continues to shift. We generally do have good visibility to our input costs through the end of the calendar year, and we’re working to build coverage through more of fiscal 2026. We’re also working to quantify the benefits and timing of our productivity program that we talked about in the script and on pricing actions. What I can say on adjusted EBITDA as well, we’re working to land the plan. We can see already that the shape of the year is going to be more challenged in the first half than the second half as we get the higher cost into our base, and the benefits of productivity and other mitigants will build as they are slightly on the lag.

James Ronald Salera, Analyst, Stephens Inc.: Yeah.

Geoff Tanner, President and CEO, Simply Good Foods Company: I just want to build up for that. We are still early enough in the planning cycle. I do want to remind the strength of the category, 17/4 now of high single, low double digit growth. The generational shift towards high protein, low carb, low sugar is not slowing down, it’s accelerating. When you look at our portfolio through Quest and OWYN, that represents 70% of our net sales, growing very nicely double digit. Both brands have a significant runway. When you look at the top line for us, the primary issue that we’re working through is action space and losing some of the tail, which was to Matt’s question. If you just go one click lower, I really would point to Quest, which continues to put up high single, low double digits week to week, underpinned by Salty Business that is on pace to be our largest segment.

If you look more broadly across Quest, every part of the portfolio is growing. We’re early in the cycle. There are some headwinds we’re working through. I do want to remind that the fundamentals of our category and of our business remain very strong. Great.

Peter K. Grom, Analyst, UBS Investment Bank: Thanks so much.

Chris Bealer, CFO, Simply Good Foods Company: I’ll pass it on.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Thanks, Pete.

Conference Operator: The next question is from the line of James Ronald Salera with Stephens Inc. Please receive three questions. Hey Geoff.

James Ronald Salera, Analyst, Stephens Inc.: Hey Chris. Good morning. Thanks for taking our question. I wanted to start and see if you guys could give us an update just on the number of average SKUs Quest has across retail, particularly with.

Geoff Tanner, President and CEO, Simply Good Foods Company: Kind of a focus on you.

James Ronald Salera, Analyst, Stephens Inc.: Continue to expand the portfolio and Salty becomes a bigger mix, what should we think about as being kind of a target or goal number of SKUs? I imagine if you’re getting into other placements outside of kind of your traditional aisles, that should probably increase the overall number of placements you got. Just any thoughts on that?

Geoff Tanner, President and CEO, Simply Good Foods Company: To start off, I don’t really think about a brand having a target number of SKUs, particularly in the case of Quest, which has proven its ability to expand well beyond the core bar. I would point that there’s very few brands that I’ve seen in my career that can do that. I see continued distribution growth in our aisle on Quest, particularly on salty. Despite the size of the salty business for Quest, it’s clear we’re still in the very early innings on salty. Every new flavor that we’ve brought to market under salty has been highly incremental. I think that reflects the size of the addressable market, which is $50 billion. Quest is the disruptor in that space and clear market leader. You have to imagine we’re working on additional forms of salty that will continue to drive distribution.

I don’t so much have a target number of SKUs. I think the addressable market on salty is significant. We’re going after it. What I would then go to is we’re making a concentrated effort to drive distribution out of our aisle. Historically, Simply Good Foods was more focused on our aisle. As we see the demand for high protein, low carb sugar, mainstream, there’s clearly an opportunity for us to drive greater physical availability outside of our aisle. We’ve made that a key priority and focus for the organization moving forward. I’ve made a lot of investments in that area that I expect to pay off in 2026 and beyond. Whether that be secondary placement in mainline aisles where we have some tests going on, additional merchandising around the store, or in new channels such as away from home in places we’re not today.

I don’t really view it as Quest having a particular target per se. It’s just meeting the demand that’s clearly there for the business both in our aisle and across the store and beyond.

James Ronald Salera, Analyst, Stephens Inc.: Okay, I appreciate the thoughts there.

Geoff Tanner, President and CEO, Simply Good Foods Company: Chris, if I could ask.

James Ronald Salera, Analyst, Stephens Inc.: A question on gross margin, if you’re able to kind of quantify. I know we have the cocoa headwinds, you mentioned tariffs starting to flow through the P&L on a go forward basis. Just as we think about where 2026 might land, is it fair to assume kind of gross margin more in a range of 36% to 37% versus kind of the upper 30s if we still assume kind of tariff impact is around where it’s at today?

Chris Bealer, CFO, Simply Good Foods Company: Yeah, good question. I’m not going to specifically talk about a specific range on gross margin. Like I said earlier, we’ve got good visibility to our cost in the first, you know, for the rest of this calendar year. We’re looking to lock in some more coverage and to get better visibility to the second half of the year. We’ve also got all the moving pieces on tariffs that frankly we don’t have a lot of clarity on given the recent extension, second extension of the tariff deadline. Like I said, the second half gross margin challenges we have this year, we’re going to see those flowing into the first half. As I talked about earlier, we do expect to have a better gross margin picture in the second half of FY2026 as the high costs get into our base and productivity and pricing benefits build.

Geoff Tanner, President and CEO, Simply Good Foods Company: As I said earlier, our target as a company continues to be high 30s gross margin, ideally higher. That’s something that we remain very committed to. Obviously, that will cycle up and cycle down over time, but it’s something that we believe is extremely important because that gross margin is where we fuel our investment in innovation and brand building. Obviously, with the higher cocoa costs in particular and a little bit tariffs, we’re seeing that come under pressure right now. As Chris Bealer said, that will flow through the second half. This is also why we’ve materially stepped up our productivity efforts as an offset and why we’ve executed some pricing. Right now, we’re contemplating additional pricing where it makes sense. We remain very committed to getting those gross margins back up. As we think about 2026, there’ll probably be a lag to that.

That’s just a fundamental tenet to our company and how we create value and build brands.

Matthew Edward Smith, Analyst, Stifel: Great.

James Ronald Salera, Analyst, Stephens Inc.: I appreciate the detail. I’ll pack it in view.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Thanks, Jim.

Conference Operator: The next questions are from the line of Kaumil S. Gajrawala with Jefferies LLC. Please receive your questions.

Chris Bealer, CFO, Simply Good Foods Company: Hey everyone, good morning.

Geoff Tanner, President and CEO, Simply Good Foods Company: Just a quick clarification and then a question on Quest.

Chris Bealer, CFO, Simply Good Foods Company: The clarification is Atkins double digit declines.

Geoff Tanner, President and CEO, Simply Good Foods Company: Next year, just as simple as the distribution cuts sort of lapping over.

Chris Bealer, CFO, Simply Good Foods Company: Course of next year.

Geoff Tanner, President and CEO, Simply Good Foods Company: Do you think on a sort of distribution-adjusted, the brand is also declining?

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: I think you said for so far.

Geoff Tanner, President and CEO, Simply Good Foods Company: It’s at the moment it’s flat. Just curious on that comment, and then on Quest, sort of the real question is as you talked about capacity expansion, if you can maybe just dig into.

Peter K. Grom, Analyst, UBS Investment Bank: That a little bit, you know how.

Geoff Tanner, President and CEO, Simply Good Foods Company: How fast is that maybe the biggest limiting factor for growth at Quest and then the commentary on entering other parts of the store, where is it going so outside of its own aisle. What are the sort of target locations? Yeah. To your first question, I think your question is really the fundamental health of Atkins. I think it was Matt’s question. When you strip out distribution losses and merchandising cuts, Atkins is ostensibly flat. That underscores two things. One, the health of the brand, the consumer demand for a brand that helps them with weight wellness, how trusted the brand is, and the credibility that Atkins has in that space.

We are obviously acknowledging that Atkins has a large footprint and that it has a tail of SKUs that turn below category averages and that we’re proactively working with retailers to rebalance that across the Simply Good Foods Company portfolio. That will lead to Atkins continuing to have distribution cuts. To your question on Quest and Salty, we continue to be, as I said, very encouraged by the growth we’re seeing on Salty. Week to week, it’s 25% to 30% consumption growth week in, week out. We continue to be very encouraged by the support we’re getting from retailers with additional merchandising. I called out in the script, large mass customer on the wall of wellness, got a test going on with the dedicated section in our aisle and we’ve got additional display around the store.

That has necessitated us to pull forward our capacity planning because we see no sign of the business slowing down. We want to make sure that we are ahead of this and that we can service the market and service consumers with our products for years to come. We want to get ahead of that. I think you asked about we’re driving additional distribution. The key elements of that are firstly in channels where we’re not. We’ve been transparent about a very important test that we ran at a large club customer where we did very well. We’re in conversations about expanding on that as we move into 2026. We’ve got some tests going on in the mainline salty aisle that we’re very encouraged about. On top of that, a big focus for me is putting our products within arm’s reach of consumers around the store.

We’ve amped up our retail execution capabilities, just getting secondary placements as well as away from home. When you think about Quest, increased physical availability is a significant growth factor for us in the coming year. It was very focused on driving that. Yes, winning in our aisle, but driving availability of Quest everywhere. Got it.

Alexia Jane Burland Howard, Analyst, Sanford C. Bernstein & Co.: Thank you.

James Ronald Salera, Analyst, Stephens Inc.: That’s useful.

Geoff Tanner, President and CEO, Simply Good Foods Company: No follow up. I think I asked you three questions at once.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Thank you.

Geoff Tanner, President and CEO, Simply Good Foods Company: All right, got it.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Thanks. Both.

Conference Operator: Thank you. To address questions for as many participants as possible, we ask you please limit yourself to one question. The next question comes from the line of Robert Moskow with Cowen. Please proceed with your question.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Hi.

Conference Operator: Thank you.

Geoff Tanner, President and CEO, Simply Good Foods Company: Jeff, I was wondering if you have any color for us on the fight for distribution space in the ready-to-drink protein shake category. I would imagine more new entrants are coming in, more capacity is being built. How has that influenced your ability to get your new Quest shake on the shelf? Do you foresee any change in the fight for shelf space going forward? Good morning, Rob. It’s not a surprise to me that we’re seeing stepped up levels of competition in the ready-to-drink space. I think that’s a reflection of the state of the center store. It’s a reflection of the strength of our category, which as I mentioned, now has 17 quarters of double-digit growth. Particularly in ready-to-drink, which is seeing outsized growth even within nutritional snacking, it’s not a surprise to me that there’s been some recent entrants.

So far, when it comes to Quest Beverage, we’ve been very pleased with our ability to gain distribution. Right now, we’re in the early innings of that launch. Our ACVs are around about 22%, 23%, but that will build as we get into the forward resets. We’ve been able to secure great distribution not just within our aisle, but more broadly, targeting coolers, for example, where I’ve been very pleased. It’s leveraging the new capabilities we’ve put in place to drive distribution out of our aisle. What that reflects is that we’ve got a 45 gram protein shake that is performing early but performing very well. People obviously trust the brand, putting a lot of support behind it. It’s a competitive space. I want to be cautious with our projections for this business.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: However.

Geoff Tanner, President and CEO, Simply Good Foods Company: Early three, four months into the launch year, despite the competitive environment which you referenced, I’m pretty optimistic about what I’m seeing out of this milkshake launch and increasingly optimistic about what a sizable beverage business could mean for the Quest business.

Chris Bealer, CFO, Simply Good Foods Company: Can you be more specific?

Geoff Tanner, President and CEO, Simply Good Foods Company: Do you think it’ll get into club stores, the new Quest item, or is it.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: It focused on different channels?

Conference Operator: Initially.

Geoff Tanner, President and CEO, Simply Good Foods Company: It’s a little early. I mean, I ideally, Rob, would want to build the business outside of Club before taking in the $30, $40 price point to Club. Typically, how you’d want to launch a new product like this, if we have the ability to test in Club, we might do that. As we think about getting to market, particularly with the higher price point that this product has, ideally we want singles distribution, some four packs. We build the business, we would then take it to the Club environment where you’re talking 12 to 15 packs. That’s typically how I would want to bring a product like this to market. Great, thank you. Thanks, Rob.

Conference Operator: Our next question is from the line of Jon Robert Andersen, William Blair. Please proceed with your question.

James Ronald Salera, Analyst, Stephens Inc.: Hi, good morning. Thanks for the question. I have a two parter. You’ve talked about pricing that you’ve executed some and are considering more across the portfolio. Can you provide a little bit more color around the pricing you’ve implemented to date and how you’re thinking about that going forward? I wanted to kind of shift gears and ask about capital allocation priorities. You paid down some debt and bought back some stock in the quarter. Leverage ratios in great shape but well below a turn. How are you thinking about.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Where you.

James Ronald Salera, Analyst, Stephens Inc.: Want to apply capital going forward to best use? Thank you.

Geoff Tanner, President and CEO, Simply Good Foods Company: Yeah, I’ll take the price question. I’ll turn it over to Chris for capital allocation. We did take pricing recently on our Atkins Shakes business reflecting higher input costs. That’s been in market now for over a quarter. To your point, we are evaluating additional pricing as we see cocoa remain somewhat stubbornly high. We are looking at tariffs as Chris said, TBD ultimately on where that lands. We need to, as mentioned earlier when we talked about gross margin, recover our costs to support our gross margin. That enables us to support investment in our business. We are unsurprisingly evaluating pricing more broadly across the portfolio. Exactly how the levers, you could look at price increases or trade reductions, but we’re right now in the middle of figuring out how best to go execute that as we look at input costs remain stubbornly high.

I’ll turn it over to Chris for capital allocation.

Chris Bealer, CFO, Simply Good Foods Company: Thanks for the question, John. As you said, cash generation for this business is very strong. Yes, our net debt is down to 0.5. Our cash and capital allocation priorities have not changed. We are constantly evaluating best ways of using excess cash. We use a structured framework. Our main use of cash that is in excess of operations, our main use is M&A, and we do see some interesting M&A things in the pipeline. Second priority would be debt pay down. Obviously, we’ve said on the call that we’ve paid down now to about $250 million, and we’re pretty happy with that debt level. The last or third capital use is going to be on buybacks if it makes sense and when it makes sense. As we’ve said before, we’re a high margin asset-light model. We do convert a lot of annual EBITDA to cash.

As we said on the call, we have about $100 million of cash today. We talked again on the call about things we used that cash for over the last 12 months. Priorities would be number one, M&A, number two, debt pay down, and then lastly any buybacks.

James Ronald Salera, Analyst, Stephens Inc.: That’s helpful. Can I squeeze in one more? I apologize, I know you’re not ready to comment specifically on 2026, but you know, you have said that you’re running 70% of the business now in the two high growth brands, Quest and OWYN. You expect those to kind of continue to grow consumption in the double digit range or better, and then a bit of a drag from Atkins kind of carrying over into fiscal 2026. It seems if you kind of do the math, you could still see top line growth, you know, at algorithm next year. Is that a fair assessment or do you think that the drag from Atkins is a little bit bigger than initially anticipated? Thanks.

Geoff Tanner, President and CEO, Simply Good Foods Company: Yeah, no, I just want to reiterate we’re early in the cycle for 2026 as we build the plan both on the top and bottom line. To your point, we’ve got 70% of the portfolio growing double digits, which is very encouraging. The category, that’s a 17.4% double digit growth. With that being said, Atkins will be a drag as we go into 2026 and we’re just working through exactly how that is going to mix through what I would point out, and Chris referenced.

Conference Operator: This earlier.

Geoff Tanner, President and CEO, Simply Good Foods Company: As you go through 2026 and even looking further ahead, Atkins does start to mix down very materially in the portfolio. That obviously has inflection implications on total company. 2026 will be a year where we will have to address the Atkins distribution headwind.

James Ronald Salera, Analyst, Stephens Inc.: Thank you.

Conference Operator: The next question comes from the line of Alexia Jane Burland Howard with Sanford C. Bernstein & Co. Please receive your question.

Alexia Jane Burland Howard, Analyst, Sanford C. Bernstein & Co.: Good morning everyone. Can I ask a slightly different question around the legislation that’s just been passed in Texas requiring warning labels to go on to foods containing 44 additives by 2027? I’m just curious about how much of your portfolio might be affected, whether you can take steps over the next 18 months to actually eliminate a lot of those additives. Is that going to be a major challenge for you? Which specific ingredients might be most challenging? What we’ve heard from others is that things like preservatives and antioxidants are actually much more challenging because of shelf life than the original list of artificial dyes that have been wandering around the media for the last few months.

Geoff Tanner, President and CEO, Simply Good Foods Company: Thank you. Yeah. Hi Alexia, I appreciate the question. I’d say at a high level we feel much better insulated than many of our large cap food peers. As it relates to food regulations, that’s obviously underpinned by our category and our products. High protein, low in sugar, low in carbs. We don’t have the profile of many other categories and products where these regulations are centered on. We’ve obviously assessed our portfolio as we look at where some of the regulations are going, and what I would say is that the current impact to our portfolio is very small. There are a few SKUs that we’ll probably have to do some reformulation, but nothing material and nothing that we can’t execute. I wouldn’t anticipate any material cost implications from that. I think that’s a reflection of the strength of our R&D team as well.

I would remind you of the recent acquisition of OWYN, Only What You Need, clean label, plant-based, avoids the top nine allergens. Not just safe but extremely well positioned against this shift. That’s something that we’re going to continue to focus on with the brand as we turn on marketing and we continue expanding that brand into additional platforms. Not really an issue for us, Alexia. As a general statement, our products are on the right side of this, in particular OWYN. We’re going to really run hard with this trend on that brand.

Alexia Jane Burland Howard, Analyst, Sanford C. Bernstein & Co.: Great, thank you very much and good to hear it. I’ll pass it on.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Thanks Lex.

Conference Operator: The next question is from the line of Brian Patrick Holland with D.A. Davidson & Co. Please proceed with your question.

Geoff Tanner, President and CEO, Simply Good Foods Company: Quest protein bars have seen a nice inflection here relative to the past few quarters. Obviously you had the Overload rollout, which I presume has some if not all of the contribution there. Just kind of curious what you’re hearing, seeing with respect to the response to that launch, how it informs sort of your go forward, and what is still your biggest category under that Quest banner today, and maybe just some sense of what the innovation pipeline, how that’s forming for that specific line. Yeah, I’m very pleased with returning our bar business to growth, which has been a key focus of my organization over the last year. We’ve seen growth plus 3% consumption the last 13 weeks versus flat in Q2. The two drivers that we mentioned in the script are the continued growth of our Crispy or Hero line. I think the new news is Overload.

We’re in the early innings of Overload, but I’ll remind is the ACV on Overload, just because of the timing of the resets, we’re still in the low 20s on ACV. That will build moving forward, but where we have Overload in distribution, it is performing extremely well. I always look to the C-Store channel as a little bit of a barometer on bars and Overload. Bars have risen to some of the top turning SKUs in all of our bar portfolio. If you look at the reviews on Amazon, 4.6 was the last time I checked it, which is one of the highest reviews we’ve ever had. I think what that is a reminder is that there’s no such thing as a mature category or business if you continue to bring disruptive innovation. You’re seeing the category and now our business respond to when we bring out great innovation.

I think I’ve been transparent over the last year or so that we kind of took our foot off the gas a little bit on bar innovation, both on Quest, Atkins, and that has been a big focus moving forward is to reignite our bar innovation, bring exciting new forms and flavors to market. I obviously see the pipeline on the business and it is now very, very exciting to me. The performance of Overload is just a proof point that when we bring great innovation to market, the business responds and we’re going to continue to do that.

Conference Operator: Thank you. The next question is from the line of John Joseph Baumgartner with Mizuho Securities USA LLC. Please receive your questions.

James Ronald Salera, Analyst, Stephens Inc.: Good morning.

Conference Operator: Thanks for the question.

Geoff Tanner, President and CEO, Simply Good Foods Company: Jeff.

Conference Operator: I wanted to come back to Atkins. You mentioned the strength of the core SKUs, and I’m curious if you could speak to innovation for the brand going forward. You know, this class of 2014 that launched back in August, the truffles, the gummy bears, those are nicely accretive to sales. Would you consider those types of products included among the core at this point? Have they proven themselves, and how aggressive do you plan on being with innovation at Atkins moving forward?

Geoff Tanner, President and CEO, Simply Good Foods Company: Yeah, thanks for the question, Dom. Innovation is just fundamental to doing well in this category. As I mentioned in the last question, we had fallen off innovation. I’ve been very candid, I’ve been transparent about that. We dropped the ball on bringing great innovation, particularly on the bar business and in our core. We have ramped up those efforts. I’m thrilled about the pipeline not just on Quest, but on Atkins and OWYN. To drill down more specifically to your question, the 30 gram Atkins Strong platform that we brought to market is doing very well, has really helped drive the growth of the ready-to-drink portfolio. The confection innovation that you referenced, some of it’s doing well and some of it isn’t, and that’s pretty par for the course.

The focus for us, the next wave of focus is going to be on bar and bringing more innovative, more disruptive bar innovation to Atkins. Innovation is critical. It’s the lifeblood of the category. Lift off of it, we’ve turned it back on. It’s helping drive the business on Atkins in particular. The next wave of it has to be on balance.

James Ronald Salera, Analyst, Stephens Inc.: Good.

Geoff Tanner, President and CEO, Simply Good Foods Company: Thanks, Geoff. Thanks.

Joshua Levine, Vice President of Investor Relations, Simply Good Foods Company: Thanks, John.

Conference Operator: Thank you. At this time we’ve reached the end of the question and answer session. I’ll turn the call over to Geoff Tanner for closing remarks.

Geoff Tanner, President and CEO, Simply Good Foods Company: I just want to thank everyone for joining the call, and we look forward to seeing you in October.

Conference Operator: This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.

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