DENVER - Simply Good Foods Co (NASDAQ: SMPL), a provider of branded nutritional foods and snacking products, reported third-quarter earnings that slightly surpassed Wall Street expectations. Shares were up 5% following the announcement.
The company's adjusted earnings per share (EPS) for the quarter was $0.50, exceeding analysts' estimates by $0.02. However, revenue for the quarter fell short of the consensus estimate, coming in at $334.8 million against expectations of $336.75 million.
The company's third-quarter performance was characterized by a 3.1% increase in net sales compared to the same quarter last year, which stood at $324.8 million. This growth was primarily driven by the Quest brand's volume. Gross margin also saw a significant improvement, with a 320 basis point increase from the previous year, primarily due to lower costs for ingredients and packaging.
President and CEO Geoff Tanner attributed the strong quarter to the continued growth of Quest, improved Atkins marketplace trends, and robust gross margin performance. Tanner also expressed satisfaction with the Quest brand's new advertising campaign launched in March, which is expected to increase household penetration.
Looking ahead, Simply Good Foods reaffirmed its full fiscal year 2024 outlook for "legacy" net sales, which are expected to grow around the mid-point of the company's long-term algorithm of 4-6%, including the benefit of an additional week. The recently acquired OWYN brand is projected to contribute $25-30 million in net sales for the remainder of the fiscal year. The company also raised its full-year Adjusted EBITDA growth expectation to about 8%, up from the previously estimated range of 6-8%, citing strong gross margin expansion that has provided flexibility for increased marketing and growth initiatives.
The company completed the acquisition of Only What You Need, Inc. ("OWYN") on June 13, 2024, which is expected to strengthen its position in the ready-to-drink shake market and introduce a new consumer segment. Tanner highlighted the strategic win from the acquisition, which aligns with the company’s goal to solidify its leading position with retail partners.
Simply Good Foods' financial health appears robust, with $208.7 million in cash and a year-to-date cash flow from operations that increased by about 50% compared to the previous year. The company plans to pay down a portion of its term loan debt during the remainder of fiscal year 2024 and aims for a net debt to Adjusted EBITDA ratio of around 1.25x by the fiscal year-end.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.