Executive Summary / Key Takeaways

• Simply Good Foods ($SMPL) is a leader in the growing nutritional snacking category, strategically transforming its portfolio through the high-growth Quest and recently acquired OWYN brands, which together represent approximately 70% of net sales and are driving double-digit growth.
• The company delivered solid Q2 FY25 results with net sales up 15.2% and Adjusted EBITDA up 17.6%, benefiting from Quest volume growth and the OWYN acquisition, despite planned declines in the Atkins brand.
• Management is executing a multi-faceted strategy focused on innovation (new Quest platforms like Bake Shop and Milkshakes, revitalized Atkins products, OWYN extensions), expanding physical availability across channels, and increasing brand awareness, supported by an agile, asset-light supply chain.
• A key strategic focus in FY25 is the optimization of the Atkins brand, proactively eliminating low ROI investments and managing distribution shifts to build a sustainable, profitable long-term business, while leveraging its relevance in the evolving weight wellness conversation, including GLP-1 users.
• Simply Good Foods ($SMPL) reaffirmed its FY25 outlook, projecting reported net sales growth of 8.5% to 10.5% and Adjusted EBITDA growth of 4% to 6%, positioning the company to achieve results at the high end of its long-term algorithm in fiscal year 2026, while rapidly reducing debt following the OWYN acquisition.

Setting the Scene: A Leader in the Evolving Nutritional Snacking Landscape

The Simply Good Foods Company ($SMPL) operates at the forefront of the dynamic and expanding nutritional snacking category, a market segment characterized by robust growth fueled by increasing consumer demand for convenient, better-for-you food and beverage options. At its core, Simply Good Foods ($SMPL) aims to lead this movement with a portfolio of trusted brands – Quest, Atkins, and OWYN – that offer products aligned with prevalent health and wellness trends, primarily focusing on high protein, low sugar, and low carbohydrate profiles.

The company's strategic foundation is built upon an asset-light business model, relying on co-packers for manufacturing, which provides flexibility and agility in responding to market shifts and scaling production. This model supports a strategy centered on innovation, organic growth, and opportunistic acquisitions to expand its wellness platform. Simply Good Foods ($SMPL) positions itself as a category advisor to major retailers, leveraging its market insights and brand strength to drive category growth and secure favorable placement for its products across diverse retail channels, including grocery, club, mass merchandise, and e-commerce.

Central to Simply Good Foods' competitive differentiation is its technological approach to product formulation. The company specializes in "flipping the macros" of traditional, often unhealthy, food categories, replacing high levels of sugar and simple carbohydrates with protein and fiber. This is not merely a marketing claim but is underpinned by specific R&D capabilities that develop unique recipes and formulations. For instance, Quest's Protein Milkshakes deliver a category-leading 45 grams of protein with only 2 grams of sugar, utilizing ultra-filtered milk for taste. Similarly, Atkins Strong shakes offer 30 grams of protein with fiber, targeting specific nutritional needs. OWYN's plant-based shakes are formulated to be allergen-tested while achieving a superior taste profile that increasingly appeals to mainstream consumers, differentiating them within the plant-based segment. This focus on delivering specific, quantifiable nutritional benefits and appealing taste profiles through differentiated formulation technology is a key element of the company's competitive moat, fostering consumer loyalty and enabling premium pricing relative to more conventional snack offerings from larger, diversified CPG peers like PepsiCo (PEP), Mondelez International (MDLZ), or Kellanova (K).

Portfolio Transformation: Building Growth Engines Through Strategic M&A

Simply Good Foods' current market position is a direct result of strategic evolution, notably marked by significant acquisitions that have reshaped its brand portfolio. Formed in 2017, the company initially centered around the Atkins brand, a pioneer in the low-carbohydrate lifestyle. A pivotal moment arrived with the acquisition of Quest Nutrition in November 2019. This move significantly expanded the company's reach within the protein-centric segment, adding Quest's innovative product lines and disruptive brand ethos. The integration of Quest was successful, quickly establishing it as a primary growth engine.

Building on this foundation, the company completed the acquisition of OWYN in June 2024. This acquisition, valued at approximately $280 million and funded through a combination of cash and incremental debt, was a strategic step to enter the rapidly growing plant-based protein segment and diversify its consumer base. OWYN's focus on clean labels, allergen testing, and a superior taste profile complements the existing portfolio and positions Simply Good Foods ($SMPL) to capture a wider spectrum of health-conscious consumers.

These acquisitions have transformed Simply Good Foods ($SMPL) into a multi-brand powerhouse. As of Q2 FY25, Quest and OWYN collectively represent approximately 70% of the company's net sales and are driving aggregate double-digit growth. This strategic shift towards high-growth, on-trend brands allows the company to leverage its scale and go-to-market capabilities across a more diversified set of consumer needs within the nutritional snacking space.

The Growth Engines: Quest and OWYN Fueling Momentum

Quest continues to be a significant growth driver for Simply Good Foods ($SMPL), demonstrating robust performance. In the thirteen weeks ended March 1, 2025 (Q2 FY25), Quest net sales grew 16.5% year-over-year, contributing significantly to the overall company's top-line increase. Retail takeaway for Quest was up 13% in Q2 FY25 and 10% in Q1 FY25, indicating strong consumer demand. This growth is broad-based, fueled by several key initiatives.

The Quest Salty Snacks platform has been a standout success, growing to a $300 million+ retail sales business and representing approximately 35% of total Quest retail sales in Q2 FY25, with growth of 45% in the quarter. This platform's rapid expansion was supported by doubling manufacturing capacity in Fall FY25, ensuring strong customer service levels and enabling significant merchandising support. A successful national test at a key club customer further underscores the potential for expanded distribution. Management sees a long runway for Salty Snacks given the size of the broader market, low household penetration, high loyalty, and strong velocities.

Innovation remains critical for Quest. The Bake Shop platform, launched in Fall 2024, is proving highly incremental. The company also accelerated the launch of the Overload bar platform to February 2025, bringing indulgent, high-inclusion options to the core bar business. In March 2025, Quest launched Protein Milkshakes, featuring 45g of protein, leveraging its formulation technology to offer a differentiated product in the RTD shake segment. These innovations, supported by the successful "It's Basically Cheating" advertising campaign (which saw household penetration increase over 100 basis points since its debut), are expected to drive continued growth. Quest's FY25 retail takeaway outlook has been increased to the low-double-digit range.

OWYN, the newest addition to the portfolio, is also demonstrating significant momentum. In Q2 FY25, OWYN contributed $33.8 million to net sales and saw retail takeaway increase by 52%. Its RTD shakes grew 53% with distribution up 22%, adding new doors and SKUs per store. OWYN is highlighted as a rare brand that can grow both distribution and velocity simultaneously, making it one of the fastest-growing brands of scale in the category. Management believes OWYN is still in the early innings of its growth story, citing low single-digit household penetration and awareness, high velocities (turning 50% faster than the nearest plant-based competitor in MULO channels), and limited SKU presence per store (averaging only seven). The superior taste profile, which increasingly attracts mainstream consumers, is a key differentiator. Simply Good Foods ($SMPL) is confident in its ability to double OWYN's core business net sales in the next three to four years, driven by continued distribution gains, velocity increases, and potential expansion into new forms. The integration is progressing well, with the majority of synergies expected to be captured at the start of fiscal 2026, targeting a mid- to high teens Adjusted EBITDA margin for OWYN.

The Atkins Optimization: Right-Sizing for Sustainable Profitability

While Quest and OWYN drive growth, the Atkins brand, representing approximately 30% of net sales in Q2 FY25, is undergoing a strategic optimization. Atkins consumption declined 10% in Q2 FY25, following a 4% decline in Q1 FY25. These declines were anticipated, driven by the proactive decision to not repeat significant year-ago volume-driving displays and bonus pack programs, and expected distribution losses, particularly in the club channel.

Management's goal is to right-size investment levels on Atkins to build a sustainable, healthy business. This involves proactively eliminating low ROI investments in trade and marketing that had supported short-term performance but were deemed unsustainable. These decisions will create short- to medium-term headwinds for the brand's sales trajectory in FY25, with full-year POS expected to decline in the low-double-digits range.

Despite these planned headwinds, the Atkins revitalization plan is progressing. New innovation launched in Fall 2024, such as the Atkins Strong 30-gram protein shake and Endulge gummies and truffles, is performing well and significantly outperforming the items they replaced. This innovation helped maintain distribution at key food and mass customers, partially offsetting club channel losses. New advertising campaigns, like "Atkins Way," are resonating and positioning Atkins as an ally to consumers on their weight loss journey, including those using or coming off GLP-1 drugs.

Simply Good Foods ($SMPL) is partnering with retailers to repurpose the space lost by Atkins in the club channel with more productive Quest and OWYN SKUs, though the full benefit of these offsets will build over the next year. While the near-term outlook for Atkins is challenging due to strategic investment adjustments, management believes these actions, combined with ongoing revitalization efforts, will improve the brand's trajectory over time, building a healthier, more profitable, and sustainable long-term business.

Operational Efficiency and Competitive Positioning

Simply Good Foods ($SMPL) operates with an agile, asset-light model, relying on a network of co-manufacturers. This structure provides flexibility in scaling production and adapting to changing consumer demands and ingredient availability. The company's R&D capabilities are a key operational strength, enabling rapid innovation and product development across its brands, from Quest's disruptive macro-flipping formulations to OWYN's taste-optimized plant-based products and Atkins' revitalized offerings. This allows Simply Good Foods ($SMPL) to bring new products to market relatively quickly compared to larger, more vertically integrated CPG companies.

In the competitive landscape, Simply Good Foods ($SMPL) faces a diverse set of players. Direct competitors include large CPG companies with snack portfolios like PepsiCo (PEP), Mondelez International (MDLZ), and Kellanova (K), as well as other companies focused on nutritional products. While larger peers benefit from immense scale, broader distribution networks, and significant marketing budgets, Simply Good Foods ($SMPL) differentiates itself through its specialized focus on high-protein, low-sugar/carb products and its strong brand equity within the health and wellness niche.

Quantitatively, Simply Good Foods' financial profile reflects its position as a growing, yet smaller, player compared to the CPG giants. For the trailing twelve months (TTM), Simply Good Foods ($SMPL) reported a Gross Profit Margin of 37.98%, Operating Profit Margin of 15.49%, and Net Profit Margin of 10.31%. Its EBITDA Margin was 17.57%. Comparing these to TTM figures for major competitors:

• PepsiCo (PEP): Gross Profit Margin ~55%, Operating Profit Margin ~14%, Net Profit Margin ~10%, EBITDA Margin ~18%.
• Mondelez International (MDLZ): Gross Profit Margin ~39%, Operating Profit Margin ~17%, Net Profit Margin ~13%.
• Kellanova (K): Gross Profit Margin ~36%, Operating Profit Margin ~15%, Net Profit Margin ~11%.

Simply Good Foods' gross margins are generally lower than PEP and MDLZ, reflecting potentially higher ingredient costs for specialized formulations, but competitive with Kellanova (K). Its operating and net margins are broadly in line with or slightly below these larger peers, indicating reasonable cost management despite smaller scale. The company's EBITDA margin is competitive, suggesting efficiency at the operational level before accounting for interest, taxes, depreciation, and amortization.

Simply Good Foods' balance sheet shows a Current Ratio of 4.27 and a Quick Ratio of 2.70 (TTM), indicating strong short-term liquidity. Its Debt/Equity Ratio is 0.16 (TTM), which is significantly lower than PEP (2.49), MDLZ (0.68), and Kellanova (K) (1.68), reflecting a conservative capital structure and strong ability to manage debt, particularly after recent paydowns. The company's focus on rapidly reducing the debt incurred for the OWYN acquisition (targeting ~0.5x net leverage by FY25 end) further strengthens its financial flexibility.

Simply Good Foods' competitive advantages lie in its targeted innovation, strong brand loyalty within its niche, and agile supply chain. However, it remains vulnerable to input cost volatility (like cocoa), potential aggressive moves by larger competitors into the nutritional space, and execution risks associated with integrating acquisitions and revitalizing a legacy brand.

Outlook and Future Trajectory

Simply Good Foods ($SMPL) reaffirmed its fiscal year 2025 outlook, signaling confidence in its strategic direction and operational execution. The company expects total reported net sales to increase 8.5% to 10.5% year-over-year. This includes the full-year contribution from OWYN, which is anticipated to generate net sales in the range of $140 million to $150 million in FY25. Organic net sales growth is expected to be driven primarily by volume.

Total company Adjusted EBITDA is projected to increase 4% to 6% in FY25. This outlook incorporates expected gross margin compression of approximately 200 basis points versus FY24, driven by anticipated input cost inflation (particularly in cocoa and related ingredients) and the inclusion of OWYN at its current margin profile before synergy realization. Productivity and cost-saving initiatives are expected to partially offset these headwinds.

Below the Adjusted EBITDA line, the company anticipates net interest expense in the range of $21 million to $23 million, an improvement reflecting recent debt paydowns and the opportunistic repricing of the term loan. The effective tax rate is expected to be around 24%. Capital expenditures are projected to be between $10 million and $15 million for the year.

A key financial objective for FY25 is significant debt reduction. The company expects to repay essentially all of the $250 million borrowed for the OWYN acquisition within a year of closing, targeting a net leverage ratio of around 0.5 times by fiscal year-end.

Management emphasizes that the strategic actions undertaken in FY25 – fueling the growth engines of Quest and OWYN, executing the Atkins optimization, and managing costs – are designed to position the company strongly for fiscal year 2026. They anticipate achieving results at the high end of their long-term algorithm (4% to 6% net sales and slightly greater Adjusted EBITDA growth) in FY26, benefiting from the full realization of OWYN synergies and an improved trajectory for the core business.

The outlook assumes current economic conditions and consumer purchasing behavior remain generally consistent. However, risks remain, including potential further input cost increases, the impact of tariffs (estimated $5M-$10M headwind in FY25 COGS, but retaliatory tariffs are uncertain), and the successful execution of the Atkins revitalization and OWYN integration plans.

Conclusion

The Simply Good Foods Company ($SMPL) is navigating a pivotal phase in its evolution, leveraging a transformed portfolio to capitalize on the enduring consumer shift towards nutritional snacking. By strategically acquiring and integrating high-growth brands like Quest and OWYN, the company has built powerful engines driving double-digit expansion, which now constitute the majority of its business. This growth is underpinned by a commitment to innovation, operational agility facilitated by its asset-light model, and a differentiated technological approach to product formulation that delivers sought-after nutritional profiles and taste experiences.

While the strategic optimization of the foundational Atkins brand presents near-term headwinds, these actions are necessary steps towards building a sustainable, profitable business for the long term, particularly as the brand seeks renewed relevance in the context of evolving weight wellness trends. The company's strong financial health, characterized by robust cash flow generation and a disciplined approach to debt reduction, provides the flexibility to invest in growth initiatives and manage potential market volatility.

Simply Good Foods' reaffirmed FY25 guidance reflects confidence in its ability to execute its multi-brand strategy and manage anticipated cost pressures. The focus on positioning the portfolio for accelerated growth and synergy capture in FY26 suggests a clear path towards achieving the high end of its long-term financial algorithm. For investors, the story of Simply Good Foods ($SMPL) is one of strategic transformation, leveraging core strengths in innovation and brand building to lead in a growing category, while proactively addressing challenges to unlock future value.