The Simply Good Foods Company (SMPL) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 FY25 rose 10.6% year-over-year to $341.3 million, driven by the OWYN acquisition, organic growth, and strong category momentum.

• Adjusted EBITDA increased 13.1% to $70.1 million, with gross margin expanding to 38.2% due to favorable input costs.

• Net income was $38.1 million, up from $35.6 million last year, reflecting higher gross profit and lower income tax expense.

• Retail takeaway for the quarter was about 8%, with Quest up 10% and OWYN up 67%; Atkins declined 4% but outperformed expectations.

• The OWYN Acquisition was completed in June 2024 for $281.9 million, expanding plant-based offerings and integration is progressing as planned.

Financial highlights

• Gross profit increased by $15.4 million to $130.5 million, with gross margin at 38.2%, up 90 basis points year-over-year.

• Adjusted EBITDA margin was 20.5%, up from 20.1% last year.

• Net income was $38.1 million, and adjusted diluted EPS was $0.49 versus $0.43 last year.

• Cash flow from operations was $32 million, down from $47.5 million, mainly due to higher inventory and working capital from OWYN.

• $50 million of term loan debt was repaid in Q1; outstanding principal now $350 million.

Outlook and guidance

• Fiscal 2025 net sales expected to grow 8.5%-10.5%, with OWYN contributing $135-$145 million.

• Adjusted EBITDA projected to increase 4%-6%; 53rd week in FY24 is a 2-point headwind to growth.

• Input cost inflation anticipated, especially in cocoa and whey, with productivity and cost savings initiatives to partially offset.

• Gross margin for FY25 expected to decline about 200 basis points, with Q2 down about 300 basis points year-over-year.

• Fiscal 2025 capital expenditures projected at $10-$15 million; net interest expense expected at $23-$25 million.