The Simply Good Foods Company (SMPL) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales rose 3.1% year-over-year to $334.8 million, led by Quest growth and offsetting Atkins softness; retail takeaway outpaced net sales at 5%.

• Net income increased to $41.3 million from $35.4 million year-over-year; gross margin improved by 320 bps to 39.9% due to lower ingredient and packaging costs.

• Adjusted EBITDA grew 7.9% to $71.9 million; Adjusted Diluted EPS was $0.50, up from $0.44.

• OWYN acquisition closed in June 2024 for $280 million, funded by cash and a $250 million incremental term loan, expanding presence in the RTD shake market.

• Full-year net sales for legacy business reaffirmed to grow at the midpoint of the 4%-6% long-term algorithm, including a 53rd week; FY24 Adjusted EBITDA expected to increase about 8% year-over-year.

Financial highlights

• Q3 gross margin was 39.9%, up 320 bps year-over-year; gross profit for Q3 was $133.6 million, up 12.1%.

• Adjusted EBITDA margin for Q3 improved to 21.5%; year-to-date Adjusted EBITDA was $191.7 million, up 7.5%.

• Year-to-date net sales reached $955.6 million (+3.6%), gross profit $365.6 million (+9.8%), and net income $110 million (+13.5%).

• Adjusted diluted EPS for Q3 was $0.50 (GAAP $0.41); year-to-date Adjusted EPS $1.33 (GAAP $1.09).

• Operating cash flow for the nine months was $166.8 million, up 50% year-over-year.

Outlook and guidance

• FY24 net sales for legacy business expected to grow at midpoint of 4%-6% range, including 53rd week; OWYN to add $25–$30 million in Q4.

• Total company Adjusted EBITDA growth for FY24, including OWYN, expected at about 8% year-over-year.

• Q4 gross margin expected around 38% (including OWYN, excluding non-cash inventory step-up).

• Fiscal 2025 expected to face gross margin compression due to input cost inflation, especially cocoa.

• Management monitoring ingredient inflation and supply chain risks, but expects continued profitable growth.