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SG

Simply Good Foods Co (SMPL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered a clean beat and healthy growth: net sales rose 15.2% to $359.7M, Adjusted EBITDA +17.6% to $68.0M, and Adjusted Diluted EPS $0.46 vs $0.40 LY; management reaffirmed FY25 outlook and raised OWYN sales guidance to $140–150M .
  • Against S&P Global consensus, SMPL beat on revenue ($359.7M vs $354.4M*) and Primary/Adjusted EPS ($0.46 vs $0.40*), with gross margin also above expectations (36.2% vs 34.38%) despite a 120 bps YoY decline driven by OWYN mix; FY25 interest expense and tax rate guidance moved lower ; estimates via S&P Global.
  • Quest continued to power the portfolio (60% of sales) with salty snacks up 45% and strengthened merchandising/distribution; OWYN accelerated distribution/velocity with a path to double sales in 3–4 years; Atkins remained a drag as management proactively rightsizes spend and shelf space .
  • Key catalysts: nationwide club test for Quest chips (not in FY25 outlook), launch of Quest 45g Protein Milkshakes, lower net interest expense from term loan repricing and debt paydown, and continued OWYN distribution wins; watch 2H input cost inflation and tariff headwinds (estimated $5–10M in FY25) .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and earnings momentum: net sales +15.2% to $359.7M, Adjusted EBITDA +17.6% to $68.0M, Adjusted Diluted EPS $0.46; CEO: “Strong top-line enabled Adjusted EBITDA growth of 18% year-over-year” .
  • Portfolio execution: Quest salty snacks grew 45%, retail takeaway +13%; OWYN takeaway +52% with both distribution and velocity gains; CEO: “We are executing well, adding new doors, winning with innovation” .
  • Balance sheet and cost actions: $50M term loan repayment in Q2 (YTD $100M) with repricing cutting the margin by 60 bps (~$2M annualized); net leverage 0.7x TTM Adjusted EBITDA .

What Went Wrong

  • Gross margin compression: GM fell 120 bps YoY to 36.2% (OWYN mix + 10 bps inventory step-up headwind); full-year GM still expected down ~200 bps vs FY24 with inflation/tariffs in 2H .
  • Atkins headwinds: retail takeaway -10%; distribution losses at a key club and reduced low-ROI spend to pressure 2H; full-year POS now down low double digits (from high single digits) .
  • Working capital drag: YTD cash from operations ~$63.3M vs $94.0M LY on higher working capital needs .

Financial Results

Quarterly actuals (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M)$375.7 $341.3 $359.7
Gross Margin %38.8% 38.2% 36.2%
Diluted EPS (GAAP)$0.29 $0.38 $0.36
Adjusted Diluted EPS$0.50 $0.49 $0.46
Adjusted EBITDA ($M)$77.5 $70.1 $68.0

Q2 YoY comparison

MetricQ2 2024Q2 2025
Revenue ($M)$312.2 $359.7
Gross Profit ($M)$116.9 $130.1
Gross Margin %—36.2%
Diluted EPS (GAAP)$0.33 $0.36
Adjusted Diluted EPS$0.40 $0.46
Adjusted EBITDA ($M)$57.8 $68.0

Q2 brand/geography breakdown

CategoryQ2 2024 ($000s)Q2 2025 ($000s)
Atkins (North America)122,755 108,650
Quest (North America)180,874 210,771
OWYN (North America)—33,806
International8,570 6,428
Total Net Sales312,199 359,655

Q2 estimates vs actuals (S&P Global)

MetricConsensusActual
Revenue ($M)354.4*359.7
Primary EPS (adj. proxy)$0.40*$0.46
EBITDA ($M)60.5*62.4*
Gross Margin %34.38%*36.21%

Values retrieved from S&P Global*. EBITDA “Actual” reflects S&P tool’s actual field*.

KPIs and balance sheet (Q2 FY25)

  • Cash: $103.7M; Term loan outstanding: $300.0M; Net Debt/TTM Adjusted EBITDA: 0.7x .
  • YTD Cash from Operations: ~$63.3M .
  • Weighted average diluted shares: 101.8M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY25+8.5% to +10.5% +8.5% to +10.5% Maintained
Adjusted EBITDA GrowthFY25+4% to +6% +4% to +6% Maintained
OWYN Net SalesFY25$135–145M $140–150M Raised
Gross Margin vs FY24FY25~-200 bps (inflation) ~-200 bps (incl. tariffs) Maintained/clarified
Net Interest ExpenseFY25$23–25M $21–23M Lowered
Effective Tax RateFY25~25% ~24% Lowered
CapexFY25$10–15M $10–15M Maintained
Net leverage (exit)FY25~0.5x (intent) ~0.5x Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Quest salty snacks capacity & growthAdded second line; POS +34%; chips to normalize; broader club test planned Salty +45% with strong merchandising; national club test drove ~3 pts Q2 consumption uplift; nationwide test in FY26, not in FY25 outlook Improving supply → broadened distribution
Bars competitiveness & innovationBars flattish to low single-digit target; accelerate “Overload” bars Overload launched; sharpening price points; building advertising; C-store momentum Stabilizing with new news
OWYN growth & integrationPlant-based leader; 20–30% FY25 POS; synergies mostly FY26 Takeaway +52%; ~50/50 distribution/velocity growth; confident to double sales in 3–4 years Sustained high growth; synergies on deck
Atkins revitalization & GLP-1Rightsizing low-ROI trade/marketing; expect FY25 POS down HSD POS down ~10%; FY25 POS now down low double digits; reallocation to Quest/OWYN; GLP-1 positioning continues Near-term pressure; long-term repositioning
Gross margin & input costsFY25 GM down ~200 bps; coverage largely locked Q2 GM 36.2% (better than plan); 2H headwinds from cocoa/whey; legacy ingredient tailwinds fading GM still pressured in 2H
Tariffs & supply chain—15–20% of COGS exposed; $5–10M FY25 headwind confined to late FY25; mitigations under review New headwind; quantifying/mitigating
Capital structureTarget ~0.5x by FY25 exit Repriced term loan (-60 bps), paid down $100M YTD; FY25 NII lowered Strengthening

Management Commentary

  • “Simply Good Foods grew second quarter retail takeaway 7%… Adjusted EBITDA growth of 18% year-over-year, which also benefited from favorable commodities and strong cost discipline.”
  • “Quest now represents 60% of the company's net sales… as Quest approaches $1 billion in net sales, we continue to see a long runway for growth.”
  • “OWYN… has low single-digit household penetration and awareness… we remain confident we can double net sales of the core business in the next 3 to 4 years.”
  • “Gross margin was better than we planned… second half, we anticipate inflation on whey continuing; we expect CLI and cocoa inflation to increase significantly.”
  • “We opportunistically repriced our term loan, lowering the effective margin… by 60 basis points or nearly $2 million on an annualized pretax basis.”

Q&A Highlights

  • Atkins outlook: POS now down low double digits (from high single digits) due to incremental club space loss; portfolio shift to Quest/OWYN accretive as Quest contribution margin ≈10 pts higher than Atkins .
  • Tariffs: 15–20% COGS exposure; $5–10M FY25 headwind; late-year timing; potential mitigations; USMCA exemptions possible for Canada-produced items .
  • Quest shakes relaunch: 45g protein milkshakes “flip the macros” on indulgent milkshakes; early strong retailer acceptances .
  • Club test: FY25 outlook does not include another Quest rotation; expect the larger test and volume impact in FY26 .
  • FY25 guide fine-tuning: NII lowered to $21–23M; ETR to ~24%; capex $10–15M; leverage ~0.5x by YE .

Estimates Context

  • Q2 FY25 beats: Revenue $359.7M vs $354.4M*; Primary (Adjusted) EPS $0.46 vs $0.40*; Gross Margin 36.2% vs 34.38%; EBITDA $62.4M vs $60.5M* .
  • FY25 consensus (as of report): Revenue ~$1.450B*; management reaffirmed 8.5–10.5% growth and raised OWYN guide; NII and tax rate both moved lower, which should support EPS vs prior consensus trajectory .
    Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Broad-based beat with reaffirmed topline/profit outlook and improved financing costs lowers risk to FY25 EPS trajectory .
  • Quest remains the key compounding engine (salty +45%, chips capacity doubled, nationwide club test next fiscal year) while bars are supported by Overload innovation and sharper pricing .
  • OWYN’s distribution/velocity flywheel continues; guide raised to $140–150M, with credible pathway to doubling in 3–4 years; synergy realization set for FY26 .
  • Near-term watch items: 2H commodity inflation (cocoa/whey) and tariff pass-through/mitigation; management quantifies $5–10M FY25 tariff headwind and is pursuing mitigations .
  • Atkins headwinds are self-inflicted and strategic (rightsizing low-ROI spend, reallocating space to higher-velocity SKUs), pressuring FY25 but improving portfolio mix/margins .
  • Balance sheet strength and cash generation enable continued debt paydown, opportunistic buybacks/M&A optionality; net leverage trending to ~0.5x by YE .
  • Catalysts ahead: broader club rollout (FY26), Quest milkshakes adoption, incremental salty distribution, OWYN new doors/SKUs, and productivity initiatives to offset cost shocks .