The Simply Good Foods Company delivered a solid QQ3 2024, anchored by continued Quest growth and meaningful gross margin expansion, even as the business navigates a transition in Atkins and a near-term uplift from the OWYN acquisition that closed after QQ3. Legacy net sales rose 3.1% year over year to $334.8 million, with gross margin jumping to 39.9% (up 320 basis points YoY) driven by lower ingredient and packaging costs and lower freight, enabling higher EBITDA and net income. Adjusted EBITDA reached $71.9 million, up 7.9% YoY, while net income rose to $41.3 million and diluted EPS to $0.41 for the quarter. Year-to-date net sales climbed about 4% to $955.6 million, and gross margin expanded 220 basis points to 38.3%, underscoring ongoing efficiency gains at the asset-light model.
Management highlighted Quest as the marquee growth engine, with retail takeaway in measured channels up 13.5% and Quest chips lifting household penetration as part of a broader salty snacks acceleration. The launch cadence includes bake shop muffins and brownies slated for fall 2024, designed to extend usage occasions and deepen ARPU. Atkins is undergoing a revitalization that emphasizes product innovation, pricing discipline, and ROI-focused trade investments; while management expects a near-term drag on growth from lower ROI investments, they remain confident in a longer-term recovery and are accelerating selective innovations to hold distribution. The OWYN acquisition closed mid-June 2024 and is positioned to broaden Simply Good Foods’ shake portfolio, augment distribution, and unlock category growth with a three-circle growth framework (core product expansion, mainstream crossover, and new formats). The firm projects OWYN to contribute modestly in Q4 (estimated $25–$30 million in net sales) but anticipates a more meaningful impact over the 2025–2026 horizon, with synergies largely realized starting day one of fiscal 2026.
Looking ahead, the company reaffirmed its full-year 2024 outlook for the legacy business (net sales growth around the midpoint of 4%–6%, including the 53rd week) and expects total company adjusted EBITDA to grow ~8% year over year. They acknowledge commodity-driven inflation (notably cocoa for coatings, layers, and inclusions) as a key risk and flagged potential gross-margin compression in 2025, particularly within OWYN and the broader cocoa-related input stack. Investors should monitor how Atkins’ ROI optimization, Quest advertising intensity, bake shop rollouts, and OWYN synergy capture translate into higher penetration, better mix, and margin resilience in a higher-inflation backdrop. Overall, SMPL remains a category leader in nutritional snacking with a diversified brand portfolio and improving free cash flow, supported by a sturdy balance sheet and ample liquidity.