Q3 2025 The Simply Good Foods Co Earnings Call

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Greetings welcome to simply good foods company's third quarter fiscal year 2025 earnings call.

Operator: Greetings. Welcome to Simply Good Foods Company's third quarter fiscal year 2025 earnings call.

Operator: At this time, all participants will be in listen-only mode.

At this time, all participants will be in listen only mode.

Operator: The question and answer session will follow today's formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad.

Question and answer session will follow today's formal presentation.

If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.

Operator: Please note, this conference is being recorded.

Please note this conference is being recorded.

Speaker Change: At this time I'll turn the conference over to Joshua Levine, Vice President of Investor Relations. Joshua you may begin.

Joshua Levine: At this time, we'll turn the conference over to Joshua Levine, Vice President of Investor Relations. Joshua, you may begin. Thank you, Operator.

Speaker Change: Thank you operator, good morning, and welcome to the simply good foods company's third quarter fiscal year 2025 earnings call for the 13 week period ended May 31, 2025 today, Jeff Tanner, President and CEO and Chris dealer CFO, who will provide you with an overview of our results which were provided in our earnings release.

Joshua Levine: Good morning and welcome to the Simply Good Foods Company's third quarter fiscal year 2025 earnings call for the 13-week period ended May 31, 2025.

Joshua Levine: Today, Geoff Tanner, President and CEO, and Chris Beeler, CFO, will provide you with an overview of our results, which were provided in our earnings release issued earlier this morning at approximately 7 a.m. Eastern Time.

Speaker Change: <unk> issued earlier this morning at approximately seven am eastern time.

Joshua Levine: Our prepared remarks will then be followed by a Q&A session.

Speaker Change: Our prepared remarks will then be followed by a Q&A session.

Joshua Levine: A copy of the release and accompanying presentation are available on the Investors section of the company's website at www.TheSimplyGoodFoodsCompany.com. This call is being webcast and an archive of today's remarks will be made available.

Speaker Change: Copy of the release and accompanying presentation are available on the investors section of the company's website at Www Dot the simply good foods company Dot Com. This call is being webcast and an archive of today's remarks will be made available.

Joshua Levine: During the course of today's call, management will make forward-looking statements which are subject to various risks and uncertainties that may cause actual results to differ materially. The company undertakes no obligation to update these statements based on subsequent events. A detailed listing of such risks and uncertainties can be found in today's press release and the company's SEC filing.

Speaker Change: During the course of today's call management will make forward looking statements, which are subject to various risks and uncertainties that may cause actual results to differ materially.

Speaker Change: Company undertakes no obligation to update these statements based on subsequent events a detailed listing of such risks and uncertainties can be found in today's press release and the Companys SEC filings.

Joshua Levine: Note that on today's call, we will refer to certain non-GAAP financial measures that we believe provide useful information for investors. Due to the company's asset light, high cash flow business model, we evaluate our performance on an adjusted basis as it relates to EBITDA and diluted EPS. Please refer to today's press release for a reconciliation of our non-GAAP financial measures to their most comparable measures prepared in accordance with GAAP.

Speaker Change: Note that on today's call, we will refer to certain non-GAAP financial measures that we believe provide useful information for investors.

Speaker Change: Due to the company's asset light high cash flow business model, we evaluate our performance on an adjusted basis as it relates to EBITDA and diluted EPS. Please.

Speaker Change: Please refer to today's press release for a reconciliation of our non-GAAP financial measures to their most comparable measures prepared in accordance with GAAP.

Joshua Levine: The Acquisition of Only What You Need, Inc., or OIN, was completed on June 13, 2024. Therefore, the company's a year ago performance for the 13 weeks ended May 25th, 2024, does not include results of the O&S. References during this call to organic or legacy Simply Good Foods refers to Simply Good Foods' business excluding Owen.

Speaker Change: The acquisition of only what you need ink or Oh and was completed on June 13th 2024. Therefore, the companies a year ago performance for the 13 weeks ended may 25th 2024 does not include results of the owned business.

Speaker Change: References during this call to organic or legacy simply good foods refers to simply good foods business, excluding O N E.

Joshua Levine: As we have now lapped the anniversary date of the Owen acquisition for future calls, the use of organic will refer to year-over-year growth for brands we have owned for more than 12 months.

Speaker Change: As we have now lapped the anniversary date of the one acquisition for future calls the use of organic will refer to year over year growth for brands. We have owned for more than 12 months for Q4 that will include the growth of simply good foods, excluding <unk> for the first few weeks of the quarter and growth for the entire company for the balance of the quarter.

Joshua Levine: Q4 that will include the growth of Simply Good Food's Excluding Owen for the first few weeks of the quarter and growth for the entire company for the balance Finally, all retail takeaway data included in our discussion today, unless otherwise noted, is for the 13 weeks ended June 1, 2025, and reflects a combination of circumstantial NELO++C and company estimates for unmeasured channels as compared to the prior year.

Speaker Change: Finally, all retail takeaway data included in our discussion today unless otherwise noted is for the 13 weeks ended June <unk> 2025, and reflects a combination of some new low plus plus C and company estimates for unmeasured channels as compared to the prior year.

Geoff Tanner: I will now turn the call over to Geoff Tanner, President and CEO. Thank you, Josh. Good morning, everyone. And thank you for joining us.

Jeff Tanner: I will now turn the call over to Jeff Tanner, President and CEO.

Jeff Tanner: Thank you Josh good morning, everyone and thank you for joining us I'll start by reviewing our Q3 performance before turning it over to our new CFO, Chris Baylor, who will discuss our financial results and our updated fiscal year 2025 outlook.

Geoff Tanner: I'll start by reviewing our Q3 performance before turning it over to our new CFO, Chris Beeler, who will discuss our financial results and our updated fiscal year 2025 outlook. We will then be available to take your questions. Momentum continued in Q3 with net sales up 14% year-over-year, driven by the acquisition of Owen and approximately 4% organic growth. Consumption was once again up double digits for both Quest and Owen, more than offsetting the anticipated declines for Act. As a reminder, Quest and Owen, in aggregate, make up approximately 70% of our net sales today. Growth for the nutritional snacking category remains robust in Q3, up double digits again, reflecting the continued mainstreaming of consumer demand for high-protein, low-sugar and low-carb food and beverage options.

Jeff Tanner: He will then be available to take your questions.

Jeff Tanner: Momentum continued in Q3 with net sales up 14% year over year, driven by the acquisition of O N and approximately 4% organic growth.

Jeff Tanner: Consumption was once again up double digits about question, Oh and more than offsetting the anticipated declines for Atkins.

Jeff Tanner: A reminder, quest in O N in aggregate make up approximately 70% on itself today.

Jeff Tanner: Gross for the nutritional snacking category remains robust in Q3 up double digits again, reflecting the continued maintenance training up consumer demand for high protein low sugar and low cat food and beverage option.

Geoff Tanner: Simply Good is at the forefront of this generational shift, with an attractive portfolio of three uniquely positioned brands, powered by leading sales and marketing capabilities. and the talented R&D and supply chain team. Adjusted EBITDA in the quarter grew approximately 3% year over year. While our margins remained strong overall, they were under pressure during the quarter as we realised higher levels of inflation, most notably from cocoa and whey. As we discussed on prior calls, we expected inflation to impact our margins as we moved into the second half.

Jeff Tanner: Simply good is at the forefront of this generational shift with an attractive portfolio of three uniquely positioned brands powered by leading sales and marketing capabilities.

Talented R&D and supply chain teams.

Jeff Tanner: Adjusted EBITDA in the quarter grew approximately 3% year over year.

Jeff Tanner: Our margins remain strong overall, they were under pressure during the quarter as we realized higher levels of inflation.

Blake: And Blake from Colorado and Hawaii.

Blake: As we discussed on prior calls we expect that inflation impact on margin as we moved into the second half.

Geoff Tanner: in response to the Tedwin. Substantially stepped up our productivity and cost management efforts and we've started to realize the contribution from pricing we've taken on select items We expect to realise the full benefit of productivity and pricing actions over the next 12-18 months. Cash Flow Generation remains a hallmark of this organization. In the year since we acquired Owen, we have repaid essentially all of the $250 million we borrowed to finance the PIT. And during Q3, we repurchased over $24 million worth of our common stock. At only half a turn of leverage today, our balance sheet gives us optionality going forward.

Blake: In response to these headwinds we substantially stepped up our productivity and cost management efforts and we started to realize the contribution from pricing we've taken on select items.

Blake: We expect to realize the full benefit of productivity and pricing actions over the next 12 to 18 months.

Blake: Cash flow generation remains a hallmark of this organization.

Blake: In the year since we acquired island, we have repaid essentially all of the $250 million, we borrowed to finance the purchase.

Blake: And during Q3, we re purchased over $24 million worth of our common stock.

Blake: And I only half a turn of leverage today.

Speaker Change: Alex She gives us optionality going forward.

Geoff Tanner: Finally, considering our top and bottom line performance year to date, and trends to begin the fourth quarter, we are tightening our ranges for full year net sales and adjusted EBITDA. I want to commend our teams for the tenacity amidst a dynamic operating environment and delivering a year where we expect to generate approximately 3% organic growth and mid-single digit total adjusted EBITDA growth, as well as to successfully integrate OEM.

Speaker Change: Finally, considering our top and bottom line performance year to date and trends to begin in the fourth quarter, we had tightening outrageous for full year net sales and adjusted EBITDA.

Speaker Change: I want to commend our teams for their tenacity amidst a dynamic operating environment and delivering a year, where we expect to generate approximately 3% organic growth and mid single digit total adjusted EBITDA growth as well as to successfully integrate our.

Speaker Change: Turning to our largest brand quest, which represents approximately 60% of our net sales today.

Geoff Tanner: Turning to our largest brand, Quest, which represents approximately 60% of our net sales today. The brand delivered another quarter of double-digit retail take-away and net sales growth. Consumption in Q3 grew 11% with household penetration up 120 basis points year over year to 18.3%. As Quest approaches a billion dollars in net sales, we see a long runway of opportunity driven by a framework for growth based on disruptive innovation. expanding physical availability, and increasing brand awareness. Our Salty Snacks platform embodies this strategy. Salty Snacks Retail Takeaway grew 31% this quarter and is on pace to become the largest platform on the question.

Speaker Change: The brand delivered another quarter of double digit retail takeaway and net sales growth.

Speaker Change: <unk> in Q3 grew 11% with household penetration up 120 basis points year over year to 18, 3%.

Speaker Change: As quest approaches $1 billion in net sales, we see a long runway of opportunity driven by our framework for growth based on disruptive innovation, expanding physical availability and increasing brand awareness.

Speaker Change: Our salty snacks platform embodies this strategy.

Speaker Change: Salty snacks retail takeaway grew 31% this quarter and is on pace to become the largest platform on the quest business.

Geoff Tanner: We continue to successfully launch exciting new flavours and sizes, expand distribution and merchandising in and out of our aisle, as well as in new channels, and we remain focused on building awareness through award-winning marketing. As we work to expand physical availability of chips, we're particularly excited about the support we're getting from retailers who see the growth and incrementality of the segment. As an example, at a large mass merchant, Quest recently secured incremental shelf space within our core aisle during their upcoming reset later this year. In addition, at the same customer, Quest gained multiple placements outside our aisle, including on their highly visible health and wellness wall, as well as near their heavily trafficked grocery section.

Speaker Change: We continue to successfully launch exciting new flavors and sizes expand distribution and merchandising in and out of that trial as well as our new channels and we remain focused on building awareness through our award winning marketing.

Speaker Change: As we work to expand physical availability of chips, we're particularly excited about the support we're getting from retailers.

Speaker Change: See the growth and incremental <unk> of the segment.

Speaker Change: As an example at a large mass merchant quite recently secured incremental shelf space within our core IL during their upcoming race that later this year.

Speaker Change: In addition at the same customer quest gained multiple placements outside out of aisle, including on their highly visible health and wellness wall as well as any other heavily trafficked grocery section.

Speaker Change: Shifting to buy consumption growth of 3% this quarter led by growth from out here, Our Christi line and our new Ultra light boss.

Geoff Tanner: Shifting to bars, consumption grew 3% this quarter, led by growth from our Hero Crispy line and our new Overload bar. Initial distribution and velocities for overload continue to build in line with that plan and both consumer and retailer feedback has been positive. The recent launch of our 45-gram Quest milkshake is also progressing nicely, building ATV and awareness. We're supporting this new platform with activations across the country focused on driving triumph. Similar to Overload, ACV is expected to build through the rest of the calendar. We're also seeing solid contribution from our Bakeshop platform, which continues to be a highly incremental basket builder for us and retailers.

Speaker Change: Initial distribution and velocity uncle I'd continue to build in line with that plan and both consumer and retailer feedback has been positive.

Speaker Change: The recent launch about 45 Grand Quest Milkshake is also progressing nicely, noting a T V and awareness, we're supporting this new platform with activations across the country focused on driving trial.

Speaker Change: Similar to other Lord ATV is expected to build through the rest of the calendar year.

Speaker Change: We're also seeing solid contribution from our bank shot platform, which continues to be a highly incremental basket builder for us and right Tyler.

Geoff Tanner: We're excited about the innovation we have coming on this platform in fiscal 2026. To wrap it up on Quest, we're pleased with our Q3 performance and execution. As we enter Q4, we remain committed to driving growth and investing in the brand. Positioning Quest continue its growth trajectory into fiscal 26.

Speaker Change: We're excited about the innovation, we have coming on this platform in fiscal 2026.

Speaker Change: To wrap it up on quest, we're pleased with our Q3 performance and execution.

Speaker Change: As we enter Q4, we remain committed to driving growth and investing in the brand.

Speaker Change: Positioning quest continues its growth trajectory into fiscal 'twenty six.

Speaker Change: Okay.

Speaker Change: Moving to Atkins consumption in the third quarter was down 10% versus prior year consistent with our forecast.

Geoff Tanner: Moving to Atkins. Consumption in the third quarter was down 13% versus prior year, consistent with our forecast. As we discussed last quarter, declines accelerated due to broader distribution losses at a key customer and from not repeating high-volume merchandising events from a year ago. These two drivers accounted for most of the Q3 decline.

Speaker Change: As we discussed last quarter declines accelerated due to broader distribution losses at a key customer and from not repeating high volume merchandising events from a year ago. These to drive this accounted for most of the Q3 decline.

Speaker Change: We're on a journey towards a more focused and sustainable Atkins business.

Geoff Tanner: We're on a journey towards a more focused and sustainable Atkins business. Importantly, the core SKUs of the Actions Portfolio perform above category velocity benchmarks. However, the brand does have a long tail of SKUs, many of which turn at below category average levels. Therefore, our approach continues to be to drive towards an optimized assortment for the brand. including bringing to market improved innovation, like we've done with the 30 gram Atkins Strong Shake. And channels like e-commerce, where we do not have space constraints, we continue to grow nicely with retail takeaway at a key customer, up 7% this quarter.

Speaker Change: Importantly, the core Skus of the Atkins portfolio performed above category velocity benchmark. However.

Speaker Change: However, the brand does have a long tail of Skus, many of which 10 are below category average levels. Therefore, our approach continues to be to drive towards an optimized assortment for the brand, including bringing to market and product innovation like we've done with the 30 Gram Atkins strong shed.

Speaker Change: In channels like E Commerce, where we do not have space constraints, we continue to grow nicely with retail takeaway at a key customer up 7% this quarter.

Speaker Change: Part of the rationale and proactively pruning Atkins shelf space is working with retailers where possible to more effectively utilize the turtle shelf space allocated to simply good foods.

Geoff Tanner: Part of the rationale in proactively pruning act in shelf space is working with retailers where possible to more effectively utilize the total shelf space allocated to services. As an example, during upcoming resets, we expect Atkins to see a significant decline in distribution at a large mass retailer. However, we will offset a majority of Acton's space losses with gains for Quest and Owens SKUs that are higher turning and, in the case of Quest, more profitable.

Speaker Change: As an example during upcoming rate that we expect Atkins to see a significant decline in distribution at a large mass retailer.

Speaker Change: However, we will offset a majority of Atkins space losses with gains for quest and Owen Skus that are highest or anything and then the case requests more profitable.

Geoff Tanner: Our commitment to supporting the brand and confidence in the long-term vitality. is underpinned by the strength of the core skew. Consumer research and customer conversations continue to reinforce a strong need for a science-based brand and products that help consumers with their weight loss journey. including those using or coming off GLP-1 drugs. We remain committed to our revitalization plan, again, in support of building a healthier, more profitable, and more sustainable world.

Speaker Change: Our commitment to supporting the brand and confidence in the long term vitality of the business is underpinned by the strength of the core Skus.

Speaker Change: Consumer research and customer conversations continue to reinforce a strong need for our science based brands and products that help consumers with their weight loss journey.

Speaker Change: Clothing does using or coming off G O P. One drugs.

Speaker Change: We remain committed to our revitalization plan again in support of building, a healthier more profitable and more sustainable business.

Speaker Change: Moving to our.

Geoff Tanner: Moving to Owen. Retail takeaway increased 24% in Q3, with strong contribution across channels. Owen's Ready to Drink Shakes Retail Takeaway grew over 20% in a quarter. Distribution increased 18%, benefiting from recent gains made during the spring recess. Reflecting on Q3 consumption growth, we fully anticipated that trends would slow relative to the first half as we were lapping some sizeable wins from the prior year. As we enter Q4, despite a slightly slower start in June, we expect retail takeaway trends to remain strong, benefiting from incremental distribution wins, as well as planned merchandising activity across several retail partners.

Speaker Change: Retail takeaway increased 24% in Q3 with strong contribution across channels.

Speaker Change: Once ready to drink shakes retail takeaway grew up at 20% in the quarter.

Speaker Change: Distributions increased 18% benefiting from recent gains made during the spring reset.

Speaker Change: Reflecting on Q3 consumption grows we fully anticipated that trends with slower relative to the first half as we were lapping some sizable wins from the prior year.

Speaker Change: As we enter Q4, despite a slightly slower start in June we expect retail takeaway trends to remain strong benefiting from incremental distribution wins as well as planned merchandising activity across several retail partners.

Geoff Tanner: Stepping back, we continue to see a long runway of growth for the brand, due to strong velocities and category incrementality that position Owen to continue to expand distribution.

Speaker Change: Looking back we continue to see a long runway of growth for the brand due to strong velocities and category incrementally that position <unk> to continue to expand distribution.

Geoff Tanner: Household Penetration and Awareness, which remain well below peers. and leveraging Simply's R&D team to fill key portfolio gaps across flavors and sizes in even new formats. at approximately 10% of our net sales today and with integration work nearly complete. We remain confident in our ability to drive strong, double-digit growth. We have the team, capabilities, and insurgent mindset to enable Owens to contribute to Simply's top and bottom line growth for years to come.

Speaker Change: Household penetration and awareness, which remain well below peers.

Speaker Change: And leveraging someplace R&D team to fill key portfolio gaps across flavors and sizes and even new format.

Speaker Change: At approximately 10% of our net sales today and with integration work nearly complete.

Speaker Change: We remain confident in our ability to drive strong double digit growth, we had the team capabilities and insurgent mindset to enable and to contribute to simply its top and bottom line growth for years to come.

Speaker Change: To summarize.

Geoff Tanner: To summarize... I'm pleased with the momentum in our business, our fiscal year-to-date performance and our outlook as we work to close the year.

Speaker Change: I am pleased with the momentum of that business a fiscal year to date performance and our outlook as we work to close the year.

Geoff Tanner: Simply Good is uniquely positioned as a leader in the fast-growing nutritional snacking category, with a portfolio and team built to lead the generational shift of demand towards high protein, low sugar, and low-carb food and beverage products. We will do this by introducing delicious innovation, expanding physical availability of our products, and building brand awareness. With approximately 70% of our portfolio through Quest and Owen, driving strong top and bottom line growth, as well as an agile culture, flexible supply chain, and a talented team, we are confident in our ability to deliver sustainable growth and create meaningful shareholder value.

Speaker Change: I think <unk> is uniquely positioned as a leader in the fast growing nutritional snacking category with a portfolio of entertain built to lead the generational shift in demand towards high protein low sugar and low cat food and beverage products.

Speaker Change: We will do that by introducing a delicious innovation.

Speaker Change: Spanning physical availability of our products and building brand awareness.

Speaker Change: With approximately 70% of our portfolio request, an island driving strong top and bottom line growth.

Speaker Change: As well as an agile culture flexible supply chain and a talented team we are confident in our ability to deliver sustainable growth and create meaningful shareholder value.

Chris Beeler: I will now turn the call over to Chris, who will provide you with the details of our financial results. Thank you, Geoff. Good morning, everyone. Total Simply Good Food's third quarter net sales of $381 million, increased 13.8% versus last year. driven by the contribution from Owen of $33.6 million, or 10%, as well as 3.8% organic carbon. Organic net sales growth was driven by Quest, which grew 15% in The brand benefited mainly from strong retail takeaway, as well as a modest improvement in retailer trade inventory to ensure operational continuity during a warehouse transition early in Q4.

Speaker Change: I will now turn the call over to Chris will provide you with the details of our financial results.

Speaker Change: Hello.

Speaker Change: Thank you Jeff good morning, everyone.

Speaker Change: Total simply good foods third quarter net sales of $381 million increased 13, 8% versus last year.

Speaker Change: Driven by the contribution from oven, a $33 $6 million or 10% as well as 3.8% organic growth.

Speaker Change: Organic net sales growth was driven by quest, which grew 15% in Q3.

Speaker Change: The brand benefited mainly from strong retail takeaway as well as a modest improvement in retailer trade inventory to ensure operational continuity during a warehouse transition early in Q4.

Speaker Change: Net sales for Atkins declined 12, 7% in line with consumption.

Chris Beeler: Net sales for Atkins declined 12.7% in line with And Owen had another solid quarter with retail takeaway up double digits versus price. Gross profit of $138.5 million. increased 3.7% from the year-ago period, driven mainly by the inclusion of oats. Roe's Margin was 36.4%. The Decline of 350 Basis Points vs. Pride driven mainly by elevated input costs, most notably cocoa and whey. that were only partially mitigated by productivity and... The inclusion of Owen in our results was also a headwind in... selling and marketing expenses of $33.8 million. were down modestly versus prior. with declines on the legacy business partially offset by the inclusion of Owen to the portfolio.

Speaker Change: And and had another solid quarter with retail takeaway up double digits versus prior year.

Speaker Change: Gross profit of $138 5 million increased three 7% from the year ago period, driven mainly by the inclusion of all of it.

Speaker Change: Gross margin was 36, 4% a decline of 350 basis points versus prior year.

Speaker Change: Driven mainly by elevated input costs, most notably cocoa and weigh that.

Speaker Change: That were only partially mitigated by productivity and pricing.

Speaker Change: The inclusion of all of it in our results was also a headwind in the quarter.

Speaker Change: Selling and marketing expenses of $33 $8 million were down modestly versus prior year.

Speaker Change: With declines on the legacy business, partially offset by the inclusion of <unk> into the portfolio.

Speaker Change: G&A expenses were $41 $2 million, an increase of $9 $7 million versus last year.

Chris Beeler: G&A expenses were $41.2 million, an increase of $9.7 million versus last year. primarily due to integration expenses and the inclusion of... excluding stock-based compensation and one-time integration. GNA increased $4.8 million to $31.4 million. driven mainly by the addition of O and T. As a result, adjusted EBITDA of $73.9 million increased 2.8% from the year ago. That interest expense of $4.2 million was up modestly versus the prior year. while the affected tax rate was 25.5%. up slightly versus low. Net income was $41.1 million, down from $41.3 million last year. On a fiscal year-to-date basis, net sales are up 13.2%.

Speaker Change: Primarily due to integration expenses and the inclusion of above it.

Speaker Change: Excluding stock based compensation and one time integration costs, G&A increased $4 $8 million to $31 $4 million driven mainly by the addition of all of them into the portfolio.

Speaker Change: As a result, adjusted EBITA of $73 $9 million increased two 8% from the year ago period.

Speaker Change: Net interest expense of $4 $2 million was up modestly versus the prior year.

Speaker Change: The effective tax rate was 25, 2% up slightly versus last year.

Speaker Change: Net income was $41 $1 million down from $41 $3 million last year.

Speaker Change: On a fiscal year to date basis net sales are up 13, 2% supporting gross profit and adjusted EBITDA growth of nine 2% and 10, 6% respectively.

Chris Beeler: supporting gross profit and adjusted EBITDA growth of 9.2%. and 10.6% respectively. Margins have compressed mainly as a result of the inclusion of Owen in our... Third quarter reported EPS was $0.40 per diluted share versus $0.41 in Q3 last year. adjusted diluted EPS was $0.51 compared to $0.50 in the year-ago period. On a fiscal year-to-date basis, the company generated reported diluted EPS of $1.14 billion. up 4.6% versus the prior year. whereas adjusted dose DPS of $1.46 increased 9.8% versus the comparable prior year period.

Speaker Change: Margins have compressed mainly as a result of the inclusion in our results.

Speaker Change: Third quarter reported EPS was <unk> 40 cents per diluted share versus 41 cents in Q3 last year.

Speaker Change: Adjusted diluted EPS was 51 cents compared to 50 in the year ago period.

Speaker Change: On a fiscal year to date basis, the company generated reported diluted EPS of $1.14 up four 6% versus the prior year.

Speaker Change: Whereas adjusted diluted EPS of $1.46 increased nine 8% versus the comparable prior year period.

Chris Beeler: I want to commend the team for their hard work and strong experience. on delivering our results so far this year and their perseverance amidst a dynamic environment. Note that we calculate Adjusted Diluted EPS as Adjusted EBITDA, Less Interest Income, Interest Expense and Income Taxes, divided by Diluted Shared Absorption.

Speaker Change: I want to commend the team for their hard work and strong execution on delivering our results. So far this year and their perseverance amidst a dynamic environment.

Speaker Change: Note that we calculate adjusted diluted EPS as adjusted EBITDA less interest income interest expense and income taxes divided by diluted shares outstanding.

Speaker Change: Please refer to the press release for an explanation and reconciliation of non-GAAP financial measures.

Chris Beeler: Please refer to the press release for an explanation and reconciliation of non-GAAP financial...

Speaker Change: Moving to the balance sheet and cash flows as of May 31st 2025, The company had cash of $98 million and an outstanding principal balance on its timeline of $250 million, bringing our net debt to trailing 12 month adjusted EBITDA to approximately 0.5.

Chris Beeler: Moving to the balance sheet and cash flow, as of May 31st, 2025, the company had cash of $98 million and an outstanding principal balance on its term loan of $250 million, bringing our net debt to trailing 12-month adjusted EBITDA to approximately $1.5 billion. 0.5 Fiscal year-to-date cash flow from operations was $133 million. compared to approximately $167 million last year. The decline was primarily due to higher uses of working capital. Capital expenditures were approximately $3 million. During the quarter, the company repaid $50 million of its term loan debt. bringing fiscal year-to-date repayments to $150 million. In the 11 months since we've acquired Owen, the company has now repaid $240 million of the $250 million borrowed on...

Speaker Change: Times.

Speaker Change: Fiscal year to date cash flow from operations was $133 million compared to.

Speaker Change: Approximately $167 million last year.

Speaker Change: The decline was primarily due to high usage of working capital principally inventory.

Speaker Change: Capital expenditures were approximately $3 million.

Speaker Change: During the quarter the company repaid $50 million of its timeline that.

Speaker Change: Bringing fiscal year to date repayments to $150 million.

Speaker Change: In the 11 months since we've acquired the.

Speaker Change: The company is now repaid $240 million of the $250 million borrowed touches.

Speaker Change: In addition, during the quarter the company used $24 million to repurchase nearly 700000 shares.

Chris Beeler: In addition, during the quarter, the company used $24 million to repurchase nearly 700,000 shares. The company has nearly $50 million remaining on its current share repurchase authorization.

Speaker Change: The company has nearly $50 million remaining on its current share repurchase authorization.

Speaker Change: Moving onto our outlook as you saw in this morning's press release, we are updating the ranges of our full year net sales and adjusted EBITDA guidance.

Chris Beeler: Moving on to our outlook, as you saw in this morning's press... We are updating the ranges of our full year net sales and adjusted EBITDA guidance. Specifically, we expect the following. Total company reported net sales are expected to increase 8.5% to 9.5%. with Organic Net Sales Growth Driven Primarily by Volunteers. Embedded within that, we anticipate Owen Net Sales to finish the year at approximately $145 million. is the midpoint of our previously provided... Total company adjusted EBITDA is expected to increase 4% to 5%. which continues to include an assumption that gross margins will decline 200 basis points on a full year.

Speaker Change: Specifically, we expect the following.

Speaker Change: Total company reported net sales are expected to increase eight 5% to nine 5% with organic net sales growth driven primarily by volume.

Speaker Change: Embedded within that we anticipate net sales to finish the year at approximately $145 million, which is the midpoint of our previously provided range.

Speaker Change: Total company adjusted EBITDA is expected to increase 4% to 5%, which continues to include an assumption that gross margins will decline 200 basis points on a full year basis.

Speaker Change: Please note that our outlook includes the 50 <unk> week in fiscal year, 2024, which represents an approximately two percentage point headwind to full year growth for net sales and adjusted EBITDA in fiscal year 2025.

Chris Beeler: Please note that our outlook includes the 53rd week in fiscal year 2020. which represents an approximately 2 percentage point headwind to 4 year growth for net sales and adjustments.

Speaker Change: As it relates to the fourth quarter I would like to highlight a few items.

Chris Beeler: As it relates to the fourth quarter, I would like to highlight a few items. First, we expect Q4 Organic Net Sales to grow around 3% at the mid- which as a reminder will include Owen within the Organic Net Sales Growth Calculation for most... Second, our implied gross margin outlook for Q4 reflects an increase in realized inflation. as well as the impact of tariffs which are beginning to flow into our P&L. Please note that both of these drivers are expected to continue for some time. As Geoff said earlier, we are stepping up our productivity and other mitigations...

Speaker Change: First we expect Q4 organic net sales to grow around 3% at the midpoint.

Speaker Change: Which as a reminder, we'll include oven within the organic net sales growth calculation for most of the quarter.

Speaker Change: Second our implied gross margin outlook for Q4 reflects an increase in realized inflation.

Speaker Change: As well as the impact of tariffs, which are beginning to floating swap P&L.

Speaker Change: Please note that both of these drivers are expected to continue for some time.

Speaker Change: I just said earlier, we are stepping up our productivity and other mitigation efforts.

Chris Beeler: that these offsets will take time to be fully realized. And third, our updated full-year adjusted EBITDA growth outlook implies a low double-digit decline at the mid-20s. for a mid-single-digit decline, excluding the...

Speaker Change: These offsets will take time to be fully realized.

Speaker Change: And third our updated full year adjusted EBITA growth outlook implies a low double digit decline at the midpoint in Q4.

Speaker Change: Or a mid single digit decline, excluding the extra week.

Speaker Change: Finally, I would note that our advocacy and current economic conditions and consumer purchasing behavior will remain generally consistent over the balance of the company's fiscal year.

Chris Beeler: Finally, I would note that our outlook assumes current economic conditions and consumer purchasing behavior will remain generally consistent over the balance For a comprehensive summary of our four-year outlook and details on certain below-the-line items, please see slide 16 in our presentation.

Speaker Change: For a comprehensive summary of our full year outlook and details and certain below the line items. Please see slide 16 in our presentation.

Speaker Change: That concludes our prepared remarks, thank you for our interest in our company.

Chris Beeler: That concludes our prepared remarks. Thank you for your interest in our company. We are now available to take... Thank you.

Speaker Change: Now available to take your questions.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session.

Operator: At this time, we'll be conducting a question and answer session. If you would like to ask a question at this time, please press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Speaker Change: If you'd like to ask a question at this time. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue you.

Speaker Change: You May press star two if he like to withdraw your question from the queue.

Speaker Change: For participants are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please while we poll for questions. Thank you.

Operator: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you and the first question today is from the line of Matt Smith with Stifel. Please proceed with your questions.

Matt Smith: And the first question today is from the line of Matt Smith with Stiefel. Please proceed with your question. Hey, good morning. Geoff, you call that distribution expectations across the portfolio for the upcoming fall shelf reset, including what sounds like significant losses for Atkins.

Hi, good morning.

Speaker Change: Good morning.

Speaker Change: Jeff you called out distribution expectations across the portfolio for the upcoming fall shelf reset, including what sounds like significant losses for Atkins can you expand on how much of a distribution head when do you expect for the brand and in product segments, and how you expect that to impact sales through the channel kind of help.

Geoff Tanner: Can you expand on how much of a distribution head when you expect for the brand and product segments and how you expect that to impact sales through the channel, kind of help bridge the comments between significant distribution loss against consolidating the distribution behind the hardest working SKUs? Yeah, thanks, Matt. I appreciate the question. So the double-digit decline on Atkins... that we're seeing right now, obviously a headwind to total company growth. I do want to credit the team, though, for... proactively addressing it head-on with retailers and with that revitalization effort. As we approach the full reset conversation with buyers...

Speaker Change: Bridge the comments between significant distribution loss against consolidating distribution behind the hardest working at Skus.

Matt Smith: Yeah. Thanks, Matt I appreciate the question.

Matt Smith: So the double digit declines on Atkins.

Matt Smith: And I was saying that I haven't seen a headwind to total company growth.

Matt Smith: I want to credit the team now.

Matt Smith: Proactively addressing it head on with retailers and with that revitalization efforts.

Matt Smith:

Matt Smith: Yes.

Matt Smith: As we approach the fall reset compensation with bias we.

Geoff Tanner: We had very productive conversations with them about the best use of space for the category and for Simply Good Food. And those conversations acknowledge that Atkins has a strong core of skews, but certainly a long tail of lower velocity. So in conversations with those retailers... The net result is that we're expecting additional cuts for action. that we do expect to offset with gains from Quest and Owens.

Matt Smith: We had very productive conversations with them about the best use of space for the category and for simply.

Matt Smith: And those conversations acknowledged the Atkins has.

Matt Smith: A strong core of scares, but certainly a long tail of lower velocity skus.

Matt Smith: So in conversations with those retailers.

Matt Smith: The net result is that right.

Matt Smith: We are expecting additional cuts for action.

Matt Smith: That we do expect to offset with gains from quest.

Matt Smith: Sure.

Geoff Tanner: So, while we're early in our planning cycle for 26, but more specifically to your question, We do expect to see continued double-digit declines on the Atkins business in 2026, driven almost entirely by these distribution cuts. part of our strategy with Atkins to build a more sustainable, more profitable, and more efficient business. And if you step back a little bit... And as I mentioned, the core of the Atkins portfolio, representing the majority of sales. turn above category benchmark. And so primarily what we're dealing with with Atkins is a space issue.

Matt Smith: So while we're early in our planning cycle for 'twenty, six but more specifically to your question.

Matt Smith:

Matt Smith: We do expect to see continued double digit declines on the Atkins business and 26, driven almost entirely by distribution costs, but again.

Matt Smith: It's part of our strategy with Atkins to build a more sustainable manner.

Matt Smith: <unk> ball and more efficient business and if you step back a little bit.

Matt Smith:

Matt Smith: As I mentioned, the core of the Atkins portfolio, representing the majority of sales.

Matt Smith: 10 above category benchmarks.

Matt Smith: And so primarily what we're getting nice with Atkins is a space issue.

Matt Smith:

Geoff Tanner: and I have a point to e-commerce. where there is no space constraint and the business is at high single digits. I think this underscores the health of the Actions brand. The job it does for consumers, that we're being, you know, eyes wide open and realistic. about the space challenge and having very productive conversations with retailers about how to offset those challenges.

Matt Smith: And I would point to e-commerce.

Matt Smith: Where there is not a space constraint there in our space constraints.

Matt Smith: And the business is up high single digits.

Matt Smith:

Matt Smith: I think just underscores the health of the Atkins brand.

Matt Smith: The job at that for consumers that we're paying.

Matt Smith: Wide open and realistic.

Matt Smith: About the space challenge and having very productive conversations with retailers about how to offset those challenges with guidance with question Allen.

Matt Smith: begins with a question. That's very helpful. And as a follow-up, you talked about still expecting double-digit declines on Atkins as you look out to fiscal 26.

Matt Smith: Okay.

Matt Smith: That's very helpful and as a follow up you talked about still expecting double digit declines on Atkins as you look out to fiscal 'twenty six I think there was a an aspiration to for the total company to grow.

Chris Beeler: I think there was an aspiration for the total company to grow towards its long-term algorithm, call it 4% to 6%. Are your expectations for Quest and Owen such that you think that's still reasonable, or do you think the Atkins decline at this point is a little above what you had previously expected as you look out to next year?

Matt Smith: Towards its long term algorithm call it 4% to 6% didn't can you or your expectations for question Oh in such that you think that's still reasonable or do you think the Atkins decline at this point is a little above what you had previously expected as you look out to next year.

Matt Smith: Yeah.

Chris Beeler: Yeah, Matt, it's Chris. I'll take that. I'll take that question.

Matt Smith: Yeah, Matt, it's Chris I'll take that so I'll take that question.

Chris Beeler: Look, it's still very early in our planning process, and we'll give obviously a full guide in October. What I can say on the top line, that we will expect to see similar consumption trends on Quest and Owen as we've seen in recent times. We do expect Atkins trends to get slightly worse than 25. Geoff just said. So I think we'd still be looking at growth, but like Geoff said, Atkins would definitely be a slight headwind.

Speaker Change: Look it's still very early in our planning process and we'll give them. The C. A full guide in October.

Speaker Change: What I can say on the top line.

Speaker Change: We will expect to see similar consumption trends on question Owen as we've seen in recent times.

Speaker Change: We do expect Atkins trends to get slightly worse in 'twenty five as Jeff just said.

Speaker Change: So I think we'd still be looking at looking at growth, but like Jeff said Atkins, we'd definitely be us.

Speaker Change: Slight headwind to total company growth.

Chris Beeler: Total Company Growth You know Matt, when you strip out the merchandising cuts and distribution losses on it... Brian's actually... essentially flat, and even in a large club customer, we've lost distribution, we've been too clear about that. We were growing slightly, it's just that the space constraints, particularly in that limited skew environment. led up to losing on Ankit. And again, even if you look at e-commerce, where the nodes-based constraints were growing, so...

Speaker Change: Yeah.

Speaker Change: When you strip out the merchandising cuts and distribution losses on Atkins.

Speaker Change: The brands actually performing essentially flat.

Speaker Change: And even in even a large cloud customer we've lost distribution would be clear about that we.

Speaker Change: We were growing slightly.

Speaker Change: It's just it's a space constraints, particularly in that limited SKU environment.

Speaker Change: Have they have laid off to losing on actions.

Speaker Change: And the Guy.

Speaker Change: If you look at ecommerce when there's not space constraints, we're growing so.

Speaker Change: Our plan moving forward with the business with Atkins and into 'twenty six and.

Chris Beeler: Our plan moving forward with the business with AgConsane N226 is to proactively address those challenges. with retailers and obviously that will flow through.

Speaker Change: To proactively address the challenges are.

Speaker Change: With retailers and obviously that will flow through to <unk>.

Speaker Change: Sex.

Speaker Change: With actions.

Speaker Change: Thank you I'll pass it on.

Chris Beeler: Thank you.

Chris Beeler: I'll pass it on.

Speaker Change: The next questions are from the line of Peter Grom with UBS. Please proceed with your questions.

Peter Grant: The next questions are from the line of Peter Grant with UBS.

Peter Grant: Please receive your questions. Thanks, operator. Good morning, everyone. I wanted to ask on Owen a bit of a slowdown in the track data, and I think it was a bit weaker than we had modeled in the quarter. So, we'd just love some perspective on how the brand is performing relative to your expectations. Was this slowdown largely contemplated as you think about the guidance?

Speaker Change: Thanks, operator, and good morning, everyone.

Peter Grom: I wanted to ask on <unk>.

Speaker Change: In a bit of a.

Speaker Change: So down in the track data and I think it was a bit weaker than we had modeled in the quarter.

Speaker Change: So would just love some perspective on how the brand is performing relative to your expectations was the slowdown largely contemplated as you think about the guidance and then Chris I just wanted to make sure I understand your response to Matt's question that you. You said you would expect growth similar to what we've seen recently so can you maybe put some guard rails in terms of what that might mean.

Chris Beeler: And then, Chris, I just wanted to make sure I understand your response to Matt's question. You said you would expect growth similar to what we've seen recently. So, can you maybe put some guardrails in terms of what that might mean for Owen as we think about fiscal 26?

Speaker Change: For <unk> as we think about fiscal 'twenty six.

Speaker Change: Yeah, I'll take the first question and hand, it off to Chris.

Geoff Tanner: Yeah, I'll take the first question and then hand it off to Chris. And we remain very confident in the Owen business and believe it has a very long runway of sustained growth. We fully anticipated the deceleration in the second half. always in our plans and reflected in our guidance. The key driver here, as we said before as we left, significant TDP gain. particularly at a large club and mass customer. And given where the brand is in its maturity curve, though, we're very confident that distribution gains are going to re-accelerate as we look into Q4. We have very clear line of sight to those gains coming over the summer and into the fall.

Speaker Change: And we remain very confident in the <unk> business.

Speaker Change: And believe it has a very long runway of sustained for us.

Speaker Change: To your question.

Speaker Change: We fully anticipated the deceleration in the second half that was always in our plans and reflected in our guidance.

Speaker Change: The key driver here I've said before as we lap significant T D P gains.

Speaker Change: Particularly at a large club and mass customer.

Speaker Change:

Speaker Change: And given where the brand is in its maturity curve.

Speaker Change: We're very confident that distribution gains have gone to reaccelerate.

Speaker Change: As we look into Q4.

Speaker Change: We have very clear line of sight to those games coming over the summer and into the fall Q3 was just we were lapping a period and we didn't.

Chris Beeler: It was just, we were laughing, period. And we didn't, we were laughing about it. staying in the period of distribution guards from last year. I would highlight that... Owen's ACP Today is in the low 60s. which is about 20 or 30 points below leading ready to drink peers, so it has a significant opportunity to add more breads on the shelf and in customer conversations, they're very bullish on this brand and we will be seeing, you know, meaningful gains starting in the summer and into the fall and even looking beyond that, I'm excited about. additional platform innovation that should keep that distribution engine going.

Speaker Change: While we were laughing.

Speaker Change: Sustained period of distribution growth from last year.

Speaker Change: I would highlight that.

Speaker Change: Oh in the HCV today as in the last six days.

Speaker Change: Which is about 20 to 30 points below leading ready to drink tea.

Speaker Change: So it has a significant opportunity to add more Brett on shelf.

Speaker Change: Right.

Speaker Change: In customer conversations that very bullish on those brands and we will be seeing.

Speaker Change: You know meaningful guidance starting in the summer.

Speaker Change: And then to the into the fall.

Speaker Change:

Speaker Change: And even looking beyond that.

Speaker Change: I'm excited about it.

Speaker Change: Additional platform innovation that should keep that distribution engine going.

Chris: I'll turn it over to Chris.

Chris Beeler: I'll turn it over to Chris. Yeah then, maybe just to clarify, what I was saying is if you look at Quest and Owen, recent consumption trends, we expect those to continue into FY26. So just to specify a couple of points. On Owen in Q3 we had, you know, let's call it 24, roughly 24% consumption growth. We'd expect something similar to that in FY26 on a four-year basis.

Speaker Change: Second question, Yeah, and then maybe just to clarify it.

Chris: What I was saying is if you look at quest and oven.

Chris: Recent consumption trends, we expect those to continue into FY 'twenty six.

Chris: So just just to specify a couple of a couple of points.

Chris: And in Q3, we had let's call it 24, roughly 24% consumption growth.

Chris: We would expect something similar to that in FY 'twenty six on a full year basis.

Chris: And what that's gonna do Okay. That's helpful.

Chris Beeler: and more thoughts can it do.

Chris Beeler: Okay, that's all. I think if you think about the portfolio, what that's going to do, it's going to continue mixing Quest and Owen larger in the portfolio and Atkins smaller in the portfolio, given the numbers.

Chris: Do you think about the portfolio what that's gonna do it's going to continue its continue mixing question Alvin larger in the portfolio and Atkins smaller in the portfolio given the numbers that jeffs already laid out earlier.

Chris Beeler: Geoff's already laid out.

Chris: Okay. That's really helpful and I guess my second question just is on the <unk> exit rate and how we should be thinking about that in the context of 26 and now you've kind of called out top line, 3% at the midpoint, it's a little bit below the long term algo profit down mid single digits, excluding the extra week in it.

Chris Beeler: Okay, that's really helpful. And I guess my second question just is on the 4Q exit rate and how we should be thinking about that in the context of 26 and that you kind of called out top line 3% at the midpoint, it's a little bit below the long-term outgo, profit down to single digits excluding the extra week and, you know, as mentioned, these costs are going to continue with maybe the offset likely to take some time. So, I know you're still early in the planning process here, but just any thoughts in terms of how we should be thinking about or how this exit rate should inform our view on the path forward.

Chris: As mentioned these costs are going to continue with maybe the offset likely to take some time. So I know youre still early in the planning process here, but just any thoughts in terms of how we should be thinking about where how this exit rate should inform our view on the path forward.

Chris: I wouldn't think too much about the exit rate I would really I would really say that it is a bit too early to give guidance on EBITDA, we will do that in October.

Chris Beeler: I wouldn't think too much about the exit rate. I would really say that it is a bit too early to give guidance on EBITDA.

Chris Beeler: We'll do that in October. We've got a lot of moving parts, so we're still waiting, like everyone else, for clarity on tariffs, which as you know and as we've seen this week, that continues to shift. We generally do have good visibility to our input costs through the end of the calendar year, and we're working to build We're also working to quantify the benefits and timing of our productivity program that we talked about in the script, and on pricing action. um What I can say on EBITDA is while we're working to land the plan, we can see already that the shape of the year is going to be more challenged in the first half than the second half as we get the higher cost into our base and the benefits of productivity and other mitigants will build as they are slightly on the lag.

Chris: We've got a lot of moving parts. So we're still waiting like everyone else for clarity on tariffs.

Chris: Which you know as you know them as we've seen this week that continues to shift.

Chris: We generally do have good visibility to our input costs through the end of the calendar year.

Chris: We're working to build coverage through the through more of a fiscal 'twenty six.

Chris: We're also working to quantify the benefits and timing of our productivity program that we talked about in the script and on and on pricing actions.

Chris: What I can say on EBITDA as well we are working to Atlanta plan, we can see already that the shape of the year, it's going to be more challenged in the first half than the second half as we get the higher cost into our base and.

Chris: And the benefits of productivity and other Michigan's will build.

Chris: As they are slightly on the lag.

Chris: Yeah, and I just wanted to build up to that we are still early in our planning cycle I do want to remind the strength of the category.

Geoff Tanner: Yeah, and I just want to build off of that. We are still early in our planning cycle. I do want to remind the strength of the category. 17 quarters now of high single, low double. growth, the generational shift towards high-protein, low-carb, low-sugar is not slowing down, it's accelerating. When you look at our portfolio, you know, through Quest and Owen that represent 70% of our net sales. growing very nicely, double digit, and both brands have a significant... Runway. When you look at the top line for us, the primary issue that we're working through is... Acton Space and losing some of the tail, which was to Matt's question.

Chris: 17 quarters now of high single low double digit growth.

Chris: The generational shift.

Chris: Towards high protein low carb low sugar is not slowing down and it's accelerating.

Chris: When you look at Apple Folio.

Chris: Through question, Alan that represent 70% of our net sales.

Chris: Growing very nicely double digits and breath, both brands had five brands have a significant runway.

Chris: When you look at the topline for US the primary issue that we're working through.

Chris: Atkins space.

Chris: And losing some of the tail, which was to Matt's question and if you just got one click lower I really would point to quest.

Geoff Tanner: And if you just go one click lower, I really would point to questions. which continues to put up high single low double digits week-to-week underpinned by a salty business that is on pace to be a large segment.

Chris: Which continues to put up high single low double digits week to week.

Chris: Underpinned by our salt business that is on pace to be our largest segment.

Chris: And then if you look more broadly across quest.

Geoff Tanner: And then, if you look more broadly across the... every part of the portfolio.

Chris: Every part of the portfolio is growing so well.

Geoff Tanner: So, we're early in the cycle. There are some headwinds we're working through, but I do want to remind that the fundamentals of our category and of our business remain very strong.

Chris: We're early in the cycle.

Chris: There are some headwinds there were concerns but.

Chris: I want to remind that the fundamentals of our category.

Chris: <unk> of our business remain very strong.

Chris: Great. Thanks, so much I'll pass it on.

Geoff Tanner: Great.

Geoff Tanner: Thanks so much.

Geoff Tanner: I'll pass it on.

Pete: Thanks Pete.

Speaker Change: The next questions come from the line of Jim Soliris with Stephens. Please proceed with your question.

Jim Salera: The next question is from the line of Jim Salera with Stevens. Please receive your question. Hi, Geoff. Hey, Chris. Good morning. Thanks for taking our question. Hi.

Jim Soliris: Yes. Good morning, Thanks for taking my question I wanted to start and see if you guys could give us an update just on the number of average Skus quest has across retail and particularly with kind of a focus on.

Jim Salera: I wanted to start and see if you guys could give us an update just on the number of average SKUs Quest has across retail and particularly with kind of a focus on, as you continue to expand the portfolio and Salty becomes a bigger mix, what should we think about as being kind of a target or a goal number of SKUs? As I imagine, if you're getting into other placements outside of kind of your traditional aisles, that should probably increase, you know, the overall number of placements you got. So, any thoughts on that to start off?

Jim Soliris: To expand the portfolio and just hold it becomes a bigger mix, where should we think about as being kind of a target or a goal number of skus is because I imagine if you are getting into other placements outside of kind of your traditional aisles that should probably increase.

Jim Soliris: Overall number of placements you guys. So just any thoughts on that to start off.

Jim Soliris: Yeah.

Geoff Tanner: I don't really think about a brand having a target number of SKUs. Particularly in the case of Quest, which has proven its ability to... expand well beyond the core bar. I would point that there's very few brands that I've seen in my career that can do that. um I see continued distribution growth. In Our Aisle, En Coeur, Particularly on salty Salty Business Request It's clear we're still in the very early innings on salty. and every new flavor. And that we've brought to market under Salty has been highly incremental. I think that reflects the size of the addressable market, which is $50 billion.

Jim Soliris: I don't really think about a brand having a target number of skus.

Jim Soliris: Particularly in the case of class, which has proven its ability to.

Jim Soliris: Expand well beyond the core bar I would point that there's very few brands that I've seen in my career that can do that.

Jim Soliris:

Jim Soliris: I see continued distribution growth.

Jim Soliris: And our aisle on quest.

Jim Soliris: Particularly on salty.

Jim Soliris: Despite the size of it.

Jim Soliris: Salty business for quest.

Jim Soliris: It's clear we're still in the very early innings on salty.

Jim Soliris: And every new flavor.

Jim Soliris: And now that we've brought to market under salty has been highly incremental.

Jim Soliris: I think that reflects the size of the addressable market, which is $50 billion.

Geoff Tanner: and of course there's The Disruptor. in that space, and Clare Market Leader. And then you have to imagine we're working on additional forms of salty that will continue to drive distribution.

Jim Soliris: And twice since the disruptor.

Jim Soliris: In that space and clear market leader.

Jim Soliris: And that and then you have to imagine we're working on additional forms of salt team that will continue to drive distribution.

Geoff Tanner: So I don't so much have a target number of SKUs, I think the addressable market on salty is significant. We're going after it.

Jim Soliris: So much have a target number of Skus I think the addressable market on salty significant we're going after it.

Geoff Tanner: What I would then go to is... We're making a concentrated effort. drive distribution out of our aisle. So historically Simply Good Food was more focused on our aisle. but as we see the demand for high-protein, low-carb sugar mainstream. There's clearly an opportunity for us to drive greater physical availability outside of our aisle and we've made that a key priority and focus for the organization moving forward.

Jim Soliris: What I would what I would think gotcha.

Jim Soliris: We're making a concentrated effort.

Jim Soliris: To drive distribution out of our aisle. So historically its simply was more focused.

Jim Soliris: On on their oil.

Jim Soliris: But as we say the demand for high protein low sugar mainstream.

Jim Soliris: There's clearly an opportunity for us to drive greater physical availability outside of our aisle.

Jim Soliris: We've made that a key priority and focus for the organization moving forward I have made a lot of investments in that area that I expect to pay off in 'twenty and.

Geoff Tanner: I've made a lot of investments in that area that I expect to pay off in 26 and beyond, whether that be... secondary placement in mainline aisles where we have some tests going on. whether that be additional merchandising around the store.

Jim Soliris: And beyond.

Jim Soliris: That would be secondary.

Jim Soliris: Secondary placement and mainline, Iowa, where we have some tests going on.

Jim Soliris: Whether that be additional merchandising around the store.

Geoff Tanner: or whether it be a new channel, such as Away From Home and Places We're Not Today. So don't really view it as Quest having a particular target, per se, it's just meeting the demand that's clearly there for the business, both in our aisle and across the store. Okay. Well, I appreciate the thoughts there.

Jim Soliris: Or whether if they are new channels such as away from home.

Jim Soliris: Places where not today so.

Jim Soliris: Don't really view it as quite.

Jim Soliris: Quest, having a particular target precise.

Jim Soliris: Meeting the demand is clearly there for the businesses, both in awhile and across the store and beyond.

Speaker Change: Okay, well I appreciate the thoughts there and then Chris if I can ask a question on gross margin, if you're able to kind of quantify.

Chris Beeler: And then, Chris, if I could ask a question on gross margin. If you're able to kind of quantify, I know we have the cocoa headwinds, but you mentioned tariffs starting to throw through the P&L. On a go-forward basis, and just as we think about where 26 might land, is it fair to assume kind of gross margin more in a range of, you know, 36 to 37 versus kind of the upper 30s if we still assume kind of tariff impact is around where it's at today? Yeah, good question.

Speaker Change: I know, we have the cocoa headwinds, but you mentioned tariffs starting to flow through the P&L.

Speaker Change: On a go forward basis, just as we think about where 26 might land is it fair to assume kind of gross margin more in the range of <unk>.

Speaker Change: <unk> 36 to 37 versus kind of the upper thirties.

Speaker Change: Should we still assume kind of tariff impact is around where where it's at today.

Speaker Change: Yeah. Good question I'm, not going to specifically talk about a specific range on gross margin I like I said earlier that one of the.

Chris Beeler: I'm not going to specifically talk about a specific range on gross margin. Like I said earlier, that one of the We've got good visibility to our cost in the first, you know, for the rest of this calendar year. We're looking to lock in some more coverage and to get better visibility to the second half of the year. We've also got a lot of moving pieces on terrace. frankly we don't have a lot of clarity on given the recent extension, second extension of the tariff deadline. I would like, and like I said, the second half. The second half of the gross margin challenges we have this year, we're going to see those flowing into the first half as I talked about earlier.

Speaker Change: We've got good visibility to our cost in the first you know for the rest of this calendar year, we're looking to lock in some more coverage and to.

Speaker Change: Ability to the second half of the year.

Speaker Change: We've also got a meeting all the moving pieces on tariffs, but frankly, we don't have a lot of clarity on given the recent extension.

Speaker Change: Second extension as the tariff deadline.

Speaker Change: <unk>.

Speaker Change: I would like and like I said the second half.

Speaker Change: Second half gross margin challenges, we had this year, we're going to see those flowing into the first half as I talked about earlier.

Chris Beeler: We do expect to have a better gross margin picture in the second half of FY26 as the high costs get into our base and the productivity and pricing benefits build. Our target as a company continues to be high 30s. And that's something that we remain very committed to. cycle up and cycle down over time, but it's something that we believe is extremely important. That gross margin is where we fuel our investments in innovation and brand building. High cocoa costs in particular, and a little bit tariff, we've seen that come under pressure right now, as Chris said that will flow through in the second half, but this is also why we've materially stepped up our productivity efforts.

Speaker Change: We do expect to have a better gross margin picture in the second half as FY 'twenty six I saw the high costs get into our base and productivity and pricing benefits build as I said Oh yeah.

Speaker Change: Yeah, I'll tell you as a company continues to be high cities.

Speaker Change: Gross margin.

Speaker Change: Ideally high up and that that's something that we remain very committed to obviously that all.

Speaker Change: Cycle after cycle down over time.

Speaker Change: But it's something that we believe is extremely important.

Speaker Change: Because that gross margin is where we feel that our investment in innovation and brand building.

Speaker Change: Obviously with the higher cost in particular and a little bit tariffs.

Speaker Change: When you're saying that come under pressure right now as Chris said, it will fluctuate over the second half.

But this is also why.

Speaker Change: With materially stepped up our productivity efforts.

Chris Beeler: as an offset and why we've executed some pricing and right now we're contemplating additional pricing where it makes sense. So we remain very committed. getting those gross margins back up and you know that as we think about 26 probably a lag to that but that's just a fundamental tenet to our company and how we create value and build brand.

Speaker Change: As an offset and why where we've executed some pricing and right now we're contemplating additional pricing where it makes sense. So we remain very committed to getting that gross margin back up.

Speaker Change: And as.

Speaker Change: As we think about 'twenty, six it'd probably be a lag to that.

Speaker Change: But that's just a fundamental tenet to our company.

Speaker Change: And how we track value and build brands.

Speaker Change: Great.

The detail, but I can give you.

Speaker Change: Thanks, Jeff.

Speaker Change: The next questions are from the line of Camille Gosh wallet with Jefferies. Please proceed with your question.

Camille Garjoala: The next questions are from the line of Camille Garjoala with Jeffreys. Please state your question. Good morning.

Speaker Change: Okay.

Camille Garjoala: One just, I guess, quick clarification and then a question on Quest, which is, on the clarification, is Atkins double-digit declines next year just as simple as the distribution cuts sort of lapping over the course of next year, or do you think on a sort of distribution adjusted, the brand is also declining? I think you said for so far, it's, at the moment, it's flat. Just curious in that comment.

Speaker Change: Good morning.

Speaker Change: Just a quick clarification and then.

Speaker Change: Question on Quest, which is.

Speaker Change: On the clarification is doubled.

Double digit declines next year, just as simple as.

Speaker Change: The distribution cuts sort of lapping over the course of next year or do you think sort of distribution adjusted.

Speaker Change: The brand is also declining I think you said for so far.

Speaker Change: But it's flat just curious on that comment and then on costs.

Geoff Tanner: And then on Quest, sort of the real question is, as you talked about capacity expansion, if you can maybe just dig into that a little bit, you know, how much, how fast is, is that maybe the biggest limiting factor for growth at Quest? And then the commentary on entering other parts of the storm, where is it going? So, you know, outside of its own aisle, but what are the sort of target locations?

Speaker Change: Real question is.

Speaker Change: You talked about capacity expansion. If you can maybe just dig into that a little bit how much how fast is that maybe the biggest limiting factor.

Speaker Change: For growth at Quest.

Speaker Change: And then the commentary on entering other parts of the.

Speaker Change: The storm.

Speaker Change: Where is it going so outside of its own but what are the sort of target locations.

Speaker Change: Yeah.

Speaker Change: <unk>.

Speaker Change: So to your first question on I think your question is really the fundamental health of the back end.

Geoff Tanner: So, to your first question on, I think your question is really the fundamental health of animals. Uh, I think that was Matt's question. Follow-up. The When You Strip Out Distribution Losses and Merchandising Cut Atkins is ostensibly flat. And again, that underscores two things. One. the health of the brand. consumer demand for a brand that helps them with weight wellness, how trusted the brand and and how and the credibility that Atkins had in that space. Bye. We are obviously acknowledging that Atkins has a large footprint. and it has a tail of skews that turn below category averages.

Matt Smith: I think it was Matt's question.

Speaker Change: Follow up.

Speaker Change: When you strip out <unk>.

Speaker Change: Distribution losses and merchandising costs.

Speaker Change: Atkins is substantially flat.

Speaker Change: And again that that underscores two things.

Speaker Change: One.

Speaker Change: Right.

Speaker Change: The health of the brands.

Speaker Change: The consumer demand for our brand that helps them with.

Speaker Change: Weight wellness, how attractive the branded.

Speaker Change: And.

Speaker Change: And how.

Speaker Change: Credibility that Atkins head in that space.

Speaker Change: But.

Speaker Change: We work, obviously acknowledging the Atkins has a large footprint.

Speaker Change: It has.

Speaker Change: A tail of Skus that 10 below category averages.

Geoff Tanner: and that we're proactively working with retailers to rebalance that across the Simply portfolio. But that will lead to Atkins continuing to have distribution cuts.

Speaker Change: And that we're proactively working with retailers to rebalance that across the assembly portfolio.

Speaker Change: But that that that will lead to actions continuing to have distribution cuts.

Geoff Tanner: To your question on Quest and Salty, we continue to be, as I said, very encouraged by the growth we're seeing on Salty. in a week-to-week, it's 25% to 30%. Consumption growth, week in, week out. We continue to be very encouraged by the support we're getting from retailers. Additional merchandising are called out in the script. Large mass customer on the wall of wellness. He's got a tits going on. with the dedicated section in our aisle, and we've got additional display around the store. And that has necessitated us to pull forward our capacity planning. because we see no sign of the business slowing down and we want to make sure that we are ahead of it.

Speaker Change: So your question on <unk>.

Speaker Change: Quest and salty.

Speaker Change: We continue to be as I said very encouraged by the growth we're seeing on salty.

Speaker Change: In a week to week, it's 25% to 30%.

Speaker Change: Consumption growth weekend week out.

Speaker Change: We continue to be very encouraged by the support we're getting from retailers.

Speaker Change: With additional merchandising I called out in the script.

Speaker Change: Large mass customer on the wall of wellness.

Speaker Change: Got a test going on.

With a dedicated section in our aisle and without additional display around the store.

Speaker Change: And that has necessitated us to pull forward.

Speaker Change: Our capacity planning.

Speaker Change: Because we see no sign of the business is slowing down and we want to make sure that we are ahead of us.

Geoff Tanner: and that we can service the market and service consumers with our products for years to come. So we want to get ahead of that.

Speaker Change: And that we can service the market and surface consumers without products for years to come so that that.

Speaker Change: We want to get ahead of that.

Geoff Tanner: And then I think you asked about where we're driving additional distribution. The key elements of that are, firstly, in channels where we're not. So, we've been transparent about a very important test that we ran at a large club customer. where we did very well. We're in conversations about expanding on that as we move into 26. We've got some tests going on in the mainline salty aisle that we're very encouraged about.

Speaker Change: And then I think you asked about where we're driving additional distribution.

Speaker Change: I'd say that the.

Speaker Change: The key elements of that are.

Speaker Change: Firstly in channels, where we're not.

Speaker Change: So we think transparent about a very important test that we ran at a large club customer.

Speaker Change: Where we did very well we're in conversations about expanding on that as we move into 'twenty six.

Speaker Change: We've got some tests going on in the mainline salty aisle that we're very encouraged about.

Camille Garjoala: And then on top of that, a big focus for me is putting our products within arm's reach of consumers around the store. So we've amped up our retail execution capability. just getting secondary placements, as well as away from home. So, when you think about QUERC, Increased physical availability is a significant growth factor for us. very focused on driving that. So, yes, winning in our aisle. but driving availability at Quest. Got it. Thank you. That's useful. No follow-up. I think I asked you three questions at once. Thank you.

Speaker Change: And then on top of that.

Speaker Change: A big focus for me.

Speaker Change: Putting.

Speaker Change: Our products with add ons range of consumers around the store set with amped up how retail execution capabilities.

Speaker Change: Just getting secondary placements as well as away from home.

Speaker Change: You know when you when you think about.

Speaker Change: Quest.

Speaker Change: Increased physical availability.

Speaker Change: It's a significant growth vector for us in the coming year.

Speaker Change: Very focused on driving that so yes, winning in our aisle.

Speaker Change: But driving availability at quest everywhere.

Speaker Change: Got it. Thank you must useful no follow up I think asking three questions at once.

Speaker Change: Right got it thanks Bill.

Speaker Change: Thank you.

Speaker Change: So my first question to as many participants as possible. We ask you. Please limit yourself to one question.

Operator: So we may address questions from as many participants as possible. We ask that you please limit yourself to one question.

Robert Moskow: The next question comes from the line of Robert Moskow with T.D. Cowan. Hi. Thank you.

Speaker Change: The next question comes from the line of Robert Moskow with T. D. Cowen. Please proceed with your question.

Robert Moskow: Hi, Thank you.

Geoff Tanner: Geoff, I was wondering if you have any color for us on the fight for distribution space in the ready-to-drink protein shake category. I would imagine more new entrants are coming in, more capacity is being built. How has that influenced your ability to get your new Quest shake on the shelf, and do you foresee any change in the fight for shelf space going forward?

Robert Moskow: Jeff I was wondering if you have any color for us on the fight for distribution space in the ready to drink protein shake category.

Robert Moskow: I would imagine more new entrants are coming in more capacity is being built.

Speaker Change: How has that influenced your ability to get your new quest.

Speaker Change: Jake on the shelf and then do you foresee any change in the fight.

Speaker Change: Shelf space going forward.

Geoff Tanner: Good morning Rob. It's not a surprise to me that we're seeing stepped-up levels of competition in the ready-to-drink space. I think that's a reflection of... The State of the Center Store, it's a reflection of the strength of our category, which as I mentioned now, Quarters of Double-Digit Grub. So, particularly in ready-to-drink, which is seeing outside growth even within nutritional snacking, it's not a surprise to me that... So far, when it comes to Quest beverage, we've been very pleased with our ability to gain distribution. Right now, we're in the early innings of that launch, our ACVs have round about 22-23%.

Rob: Yeah, Good morning, Rob.

Rob: It's not a surprise to me that we're seeing stepped up levels of competition and theyre ready to drink space I think that's a reflection of.

Rob: The state of the same store, it's a reflection of the strength of our category, which as I mentioned now 17.

Rob: It is a.

Rob: Double digit growth.

Rob: So, particularly in ready to drink which is seeing.

Rob: Seeing outsize growth, even within nutritional snacking is not a surprise to me that there's been some recent entrants.

Rob:

Rob: So so far when it comes to <unk>.

Rob: Quest beverage, we've been very pleased with our ability to gain distribution.

Rob: Right now.

Rob: We're in the early innings of that launch right AC phase of round about 20% to 23%.

Geoff Tanner: that that will build as we get into the fall reset. So we're being able to secure great distribution not just within our aisle. But more broadly, targeting coolers, for example, where I've been very pleased and it's leveraging the new capabilities we've put in place to drive distribution out of our aisles. What that reflects is that we've got a 45 gram protein shake. that is performing, you know, early, but performing very well. So, people obviously trust the brand. a lot of support behind it. It's a competitive space.

Rob: But that will build as we get into the fall reset.

Rob: So we've been able to secure great.

Rob: Great distribution.

Rob: Not just within our IL.

Rob: But more broadly Todd.

Rob: Targeting.

Rob: Coal is for example.

Rob: We're having very plays and it's leveraging the new capabilities, we've put in place to drive distribution out of our eyes.

Rob: What what what that reflects.

Rob: We've got 45 Gram protein shake.

Rob: They are performing.

Rob: Italy, but performing very well.

Rob: So.

Rob: People, obviously trusted brand.

Rob: I'm, putting a lot of support behind that it's a competitive space.

Geoff Tanner: I want to be cautious with our projections for this business. However, early, early, you know, in 3-4 months into the launch year, despite the competitive environment, which you referenced. I'm pretty optimistic about what I'm seeing out of this milkshake launch and increasingly optimistic about, you know, what a sizable beverage business could mean for the Quest.

Rob: I want to be cautious with our projections for this business.

Rob: However.

Rob: Early early you know in three.

Rob: Three or four months into the launch here.

Rob: Despite the competitive environment, which you referenced.

Rob: I'm pretty optimistic about what I'm, saying out of this milkshake launch.

Rob: And increasingly.

Rob: Optimistic about what a what a sizeable beverage business could mean for the questions.

Rob: Nice.

Speaker Change: Can you be more specific do you think it'll get into club stores, the new quest item or is it focused on different channels initially.

Geoff Tanner: Can you be more specific? Do you think it'll get into club stores, the new Quest item, or is it focused on different channels in it? Um... It's a little early, I mean I... Probably, ideally, Rob... We'd want to build the business outside the club. Before taking in the $30, $40 price point to Club, typically how you'd want to launch a new product like this. If we have the ability to test and club, we might do that, but as we think about getting to market, particularly with the higher price point that this product has, ideally we want singles distribution.

Rob:

Rob: It's a little early.

Rob: Sure.

Rob: Ideally Rob.

Rob: I wouldn't want to build a bear that.

Rob: Outside of club.

Rob: We're taking in the 30 $40 price point to club typically how you'd want to launch a new product like this.

Rob: If we have the ability to test them cloud, we might do that.

Rob: But as we think about getting to market, particularly with the higher price point that this product has.

Rob: Ideally we want singles distribution.

Geoff Tanner: Thumbful Pack If we build a business, we would then take it to the club environment where you're talking 12 to 15 packs.

Rob: Four packs, we built the business. We would then take it to club in the tough environment, where you're talking 12 to 15 packs that that's typically how I would want to bring a product like this to market.

Geoff Tanner: That's typically how I would want to bring a product like this to market. Thank you.

Rob: Great. Thank you.

Speaker Change: Thanks, Rob.

Speaker Change: Our next question is from the line of Jon Andersen William Blair. Please proceed with your question.

Jon Andersen: Our next question is from the line of Jon Andersen and William Blair. Hi, good morning. Thanks for the question.

Jon Andersen: Hi, good morning, Thanks for the question.

Speaker Change: Hey, Jonathan.

Jon Andersen: Let's say I have a two-parter. You've talked about pricing, that you've executed some. Excuse me, and are considering more across the portfolio. Can you provide a little bit more color around, you know, the pricing you've implemented to date and how you're thinking about that going forward?

Speaker Change: Let's say of a two parter you've talked about pricing. Thank.

Speaker Change: You've executed some.

Speaker Change: Excuse me and are considering more across the portfolio can you.

Speaker Change: But a little bit more color around that.

Speaker Change: Pricing has been implemented to date and how are you.

Just thinking about that going forward and then I wanted to kind of shift gears and ask about capital.

Chris Beeler: And then I wanted to kind of shift gears and ask about capital allocation priorities. You know, you paid down some debt and bought back some stock in the quarter. Leverage ratio's in great shape, but well below a turn.

Speaker Change: Capital allocation priorities.

Speaker Change: Pay down some debt.

Speaker Change: Bought back some stock in the quarter leverage ratio is in great shape, but well below with churn how are you thinking about.

Chris Beeler: How are you thinking about you know, where you want to apply capital, you know, going forward, you know, to best use. Thank you.

Speaker Change: You know where you want.

Speaker Change: Capital.

Speaker Change: Going forward.

Speaker Change: The best use thank you.

Speaker Change: Yeah, I'll take the price question I'll turn it over to Chris our capital allocation.

Geoff Tanner: Yeah, I'll take the price question.

Geoff Tanner: I'll turn it over to Chris for capital allocation. So we did take pricing recently on our Atkins shakes business. reflecting higher input costs. So that's been in market now for over a quarter. And to your point, we are evaluating additional pricing as we see cocoa remain somewhat stubbornly high. And we are looking at tariffs, as Chris said.

Speaker Change: We did take pricing recently on our Atkins shakes business.

Speaker Change: Reflecting higher input costs.

Speaker Change: So that that's been in market now for over a quarter.

Speaker Change: And to your point, we are evaluating additional pricing as we say <unk> remains.

Speaker Change: Somewhat stubbornly high and we are looking at tariffs as Chris said.

Speaker Change: TBD ultimately I'm with Atlanta.

Speaker Change: Yeah.

Geoff Tanner: https://www.youtube.com is that we need to, as I mentioned earlier, when we talked about gross margins... We need to recover our car. to support our gross margin, that enables us to support investment in our business. So we are unsurprisingly evaluating pricing more broadly across the portfolio, exactly how. You know, the levers, you know, you could look at prices increases or trade reductions, but, you know, we're right now in the middle of figuring out how best to go execute that. As we look at input costs remain stubbornly high.

Speaker Change: We need to as I mentioned earlier, when we talked about gross margin.

Speaker Change: We need to recover our cost.

Speaker Change: To support our gross margin.

Speaker Change: That enables us to support investment.

Speaker Change: Our business. So we are unsurprisingly evaluating pricing more broadly across the portfolio.

Speaker Change: Exactly how.

Speaker Change: Yeah. The levers you could look at prices and prices will trade reductions but.

Speaker Change: You know where we're at.

Speaker Change: Right now in the middle of figuring out how best to go execute that as we look at input costs remain stubbornly high.

Speaker Change: Turn it over to Christopher capital allocation.

Christopher: Thanks for the question John.

Chris Beeler: Thanks for the question, Jon. So look, as you said, cash generation for this business is very strong, and yet our net debt is down to 0.5. Our cash and capital allocation priorities have not changed, so we are constantly evaluating best ways of using excess cash. We use a structured framework. Our main use of cash, Our main business is M&A We do see some interesting M&A things in the pipeline Second priority would be debt pay-down Obviously we said on the call that we have paid down about $250 million We are pretty happy with that debt level And last we have the capital used that is going to be on buy-backs, if it makes sense and when it makes sense.

Christopher: Look as you said cash generation for this business is very strong and yes, our net.

Christopher: Net debt is down to 0.5.

Christopher: Our cash and capital allocation policies have not changed so we are constantly evaluating the best ways of using excess cash we use a structured framework.

Christopher: Main use of cash.

Christopher: It is in excess of operations I mean uses M&A let.

Christopher: And we do see some interesting M&A things in the pipeline.

Christopher: Second priority would be debt pay down obviously, we've said.

On the call that we've paid down now it's about $250 million.

Christopher: We're pretty happy with that that debt level.

Christopher: And then the last third.

Christopher: Capsule used is going to be on buybacks if it makes sense.

Christopher: When it makes sense, but.

Chris Beeler: But as we've said before, we're a high-margin, asset-line model. We do convert a lot of annual EBITDA to cash. And as we said on the call, we have about $100 million of cash today. And we've talked again on the call about things we've used that cash for over the last 12 months.

Christopher: As we've said before we're you know we're a high margin asset light model, we do convert a lot of annual EBITDA to cash and as we said on the call we have about $100 million of cash today.

Christopher: And we talked again on the call about things, we use that cash for us in the last sort of the last 12 months, but yeah priorities would be.

Chris Beeler: But yeah, priorities would be, number one, M&A, number two, debt pay down, and then lastly, any buyback. That's helpful.

Christopher: One M&A number two debt pay down and then lastly, any buybacks.

Christopher: Okay.

Chris Beeler: Can I squeeze in one more? I apologize. I know you're not ready to comment specifically on 2026, but, you know, you have said that you're running 70% of the business now in the two high-growth brands, Quest and Owen. You expect those to kind of continue to grow consumption in the double-digit range or better. And then a bit of a drag from Atkins kind of carrying over into fiscal 26. Seems if you kind of do the math, you could still see top-line growth. you know, at Algorithm next year. Is that a fair assessment? Or do you think that the drag from Atkins is a little bit bigger than initially anticipated?

Christopher: That's helpful can I squeeze in one more I apologize.

Christopher: I know you're not ready to comment specifically on 2026, but you have said that you're running 70% of the business now.

Christopher: To high growth brands question.

Christopher: And when you expect those.

Christopher: Can you to grow consumption in the double digit range.

Christopher: Or better.

Christopher: And then a bit of a drag from Atkins kind of carrying over into fiscal 'twenty six it seems like you kind of do the math you could still see top line growth.

Christopher: Yeah.

Christopher: Ed algorithm next year.

Christopher: That a fair assessment or do you think the drag from Atkins ease a little bit a little bit bigger than initially anticipated.

Chris Beeler: Thanks.

Christopher: Yeah.

Chris Beeler: Yeah, no, I just want to reiterate, we're early in the cycle, the 26th. As we build the plan both on the top and bottom line, to your point, we've got 70% of the portfolio. growing double-digit. which is very encouraging, the category that's... 17 quarters of double-digit growth. With that being said, Actions will be a drag as we go into 2026, and we're just working through exactly how that is going to mix through. What I would point out, and Chris referenced this earlier, As you go through 26 and even looking further ahead, Atkins does start to mix down very materially in the portfolio.

Christopher: I just wanted to say that reiterate where we're early in the cycle and 26.

Christopher:

Christopher: As we build the plant both on the top and bottom line.

To your point, we've got 70% of the portfolio.

Christopher: Growing double digit.

Christopher:

Christopher: Which is which is very encouraging in the category.

Christopher: 17 quarters.

Christopher: Double digit growth with that being fed actions.

Christopher: Is it will be a drag as we go into 'twenty.

Christopher: And we're just working through exactly how that is kind of a mix through.

Speaker Change: What I would point out Chris referenced this earlier.

Speaker Change: As you go through 2006, and even looking further ahead Atkins thats got to mix down very materially in the portfolio.

Speaker Change: And and then that obviously has an inflection implications on total company.

Chris Beeler: And then that obviously has inflection implications on total company.

Chris Beeler: But 26 will be a year where we will have to address the Atkins distribution headwind. Thank you.

Speaker Change: About 26 will be a year, where we will have to address the actions distribution headwind.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of Alexia Howard with Bernstein. Please proceed with your question.

Alexia Howard: The next question comes from the line of Alexia Howard with Bernstein. Please proceed with your question. Good morning, everyone.

Alexia Howard: Good morning, everyone.

Speaker Change: Good morning.

Alexia Howard: Can I ask a slightly different question around the legislation that's just been passed in Texas requiring warning labels to go on to foods containing 44 additives by 2027? I'm just curious about how much of your portfolio might be affected, whether you can take steps over the next 18 months to actually eliminate a lot of those additives, is that going to be a major challenge for you, and which specific ingredients might be most challenging? What we've heard from others is that things like preservatives and antioxidants are actually much more challenging because of shelf life than the original list of artificial dyes that have been wandering around the media for the last few months.

Alexia Howard: Can I ask Oh.

Slightly I guess.

Alexia Howard: A quick question around the legislation that has just been passed in Texas.

Alexia Howard: Requiring.

Alexia Howard: Labels to go on tier four fleets containing 44 attitudes by 2027.

Speaker Change: I'm just curious about how.

Alexia Howard: How much of your portfolio might be affected.

Alexia Howard: Whether you can take steps over the next 18 months to actually eliminate a lot of things attitudes is that going to be a major challenge for you and which specific ingredient might be most challenging we've heard from others is that things like present participant antioxidant.

Alexia Howard: Actually much more challenging because its shelf life than the original list.

Alexia Howard: Dice.

Alexia Howard: Wondering around the media for the last few months.

Geoff Tanner: Thank you.

Speaker Change: Yeah, I would like to say I appreciate the question.

Geoff Tanner: Hi Alexia, I appreciate the questions. I'd say at a high level we feel much better insulated than many of our large-cap food peers as it relates to Food Regulation. Yeah, that's obviously underpinned by... our category and our products, high-processing, low in sugar, low in carbs, and we don't have the profile of many other categories and products. that where the regulations are centered on. um We've obviously assessed our portfolio. As we look at where some of the regulations are going. and what I would say is that the... Current impact of our portfolio is very small. There are a few skews.

Alexia Howard: I'd say at a high level, we feel.

Alexia Howard: Much better insulated than many of our large cap peers as it relates to <unk>.

Alexia Howard: Regulations.

Alexia Howard:

Alexia Howard: And that's obviously underpinned by.

Alexia Howard: Our category and our product type pricing low in sugar low end caps.

Alexia Howard: And we don't have.

Alexia Howard: Profile, but many other categories and products.

Alexia Howard: That where the regulations are centered on.

Alexia Howard: We have obviously assessed our portfolio.

Alexia Howard: As we look at where some of the regulations are going.

Alexia Howard: Yeah.

Alexia Howard: And what I would say is that the.

Alexia Howard: Current impact to our portfolio, it's very small.

Alexia Howard: There are a few skus.

Geoff Tanner: that will probably have to do some reformulation. but nothing material and nothing that we can't execute and I wouldn't anticipate any material cost implications. From that, I think that's a reflection of the strength of our R&D team as well, and then where I was reminded...

Alexia Howard: That will probably have to do some reformulation.

Alexia Howard: But nothing more.

Alexia Howard: Material.

Alexia Howard: And nothing that we can't we can't execute and I wouldn't anticipate any material cost implications from that.

Alexia Howard: I think that's a reflection of the strength of our R&D team as well.

Alexia Howard: And then what.

Alexia Howard: Remind us.

Alexia Howard: The recent acquisition of <unk>.

Geoff Tanner: The Rates and Acquisition of O.A. Only What You Need, Clean Label, Plant Based, Avoid the Top 9 Allergens. not just safe. but extremely well-positioned against this shift. And that's something that we're going to continue to focus on with the brand as we turn on marketing and we continue expanding that brand into additional platforms. Not really an issue for us, Alexia. As a general statement, our products are on the right side of the... In particular, Owen, we're going to really run hot with this trend on that brand. Great, thank you very much and good to hear it.

Alexia Howard: Only watching a clean label plant based avoids the top nine allergen.

Alexia Howard: Not just.

Alexia Howard: Yeah.

Alexia Howard: Thanks.

Alexia Howard: But extremely well positioned.

Alexia Howard: This shift and that's something that we're going to continue to focus on with the brand as we turn on marketing and we continue to continue expanding that brand into additional platforms.

Alexia Howard: Not really an issue for us Alexia.

Alexia Howard: As a general statement our products on the right side of that.

In particular O N.

Alexia Howard: We're working on are really Red hot with this trend on that brand.

Speaker Change: Great. Thank you very much and good to hear it I'll pass it on.

Geoff Tanner: I'll pass it on.

Alexia Howard: Thanks Alexia.

Speaker Change: The next question is from the line of Brian Holland with D. A Davidson. Please proceed with your question.

Brian Holland: The next question is from the line of Brian Holland with D.A.

Brian Holland: Davidson. Please proceed with your question. Quest protein bars have seen a nice inflection here relative to the past few quarters.

Speaker Change: Quest protein bars have seen a nice inflection here relative to the past few quarters.

Geoff Tanner: Obviously you had the overload rollout which I presume has some if not all of the contribution there, but just kind of curious what you're hearing, seeing with respect to the response to that launch, how it informs sort of your go for it and what is still your biggest category under that Quest banner today and maybe just some sense of what the innovation pipeline, how that's forming for that specific line. I'm very pleased with returning our bar business to growth, which has been a key focus of mine, the organisation. Over the last year, we've seen growth plus re-consumption in the last 50 years.

Speaker Change: Obviously, you had the overload rollout, which I presume has oh sorry.

Speaker Change: Some if not all of the contribution there, but just kind of curious what you're hearing seeing with respect to the <unk>.

Speaker Change: Our response to that launch.

Speaker Change: Inform sort of your go forward in what is still your biggest category under that quest banner today and maybe just.

Speaker Change: Some sense of what the innovation pipeline, how that's forming for that specific line.

Speaker Change: Yeah, and I'm very pleased with our returning our buy business to growth.

Speaker Change: Let's just being a key focus of mine and the organization.

Speaker Change: Over the last year and growth plus three consumption last 13.

Geoff Tanner: Weeks vs Flat Q2. The two drivers that we mentioned in the script are the continued growth of our Crispy or Heroline, I think the new news is overload. We're in the early innings of Oberlo. What I'll remind is the ACV on Oberlo, just because of the timing of the resets, we're still in the low 20s. that will build moving forward, but where we have overload in distribution, it is performing extremely well. And I always look to the C-Store channel as a little bit of a barometer on bars, and overload bars have risen to some of the top-turning SKUs in all of our bar portfolios.

Speaker Change: Wait versus flat in Q2.

Speaker Change: The two drivers that we mentioned in the script or the continued growth of our.

Speaker Change: Christy our hero line.

Speaker Change: I think the new news is overload.

Speaker Change: We're in the early innings of a lot of what I'll remind that the ACB up not just because of the timing of the resets were still in the low twenties.

Speaker Change: On HCV.

Speaker Change: That will build moving forward, but where we have all the loads and distribution.

Speaker Change: It is performing extremely well and I always look to the same store channel is a little bit of a barometer.

Speaker Change: On bonds.

Speaker Change: And overload buys have risen to some of the top turning skus and all about that portfolio.

Geoff Tanner: And if you look at the reviews on Amazon... 4.6 was the last time I checked it, which is one of the hardest reviews we've ever had. I think what that is a reminder. is that there's no such thing as a mature category or business. if you continue to bring disruptive innovation. And so you're seeing the category and now our business respond. to when we bring out great innovation.

Speaker Change: And if you look at the reviews on Amazon.

Speaker Change: $4 six.

Speaker Change: <unk> was the last time I checked it.

Speaker Change: One of the highest would be as we move ahead.

Speaker Change: I think what that is that a reminder.

Speaker Change: He is back.

Speaker Change: There's no such thing as a mature category or business.

Speaker Change: If you continue to bring disruptive innovation.

Speaker Change: And so youre seeing the category and now our business respond to.

Speaker Change: When we bring out innovation.

Geoff Tanner: And I think I've been transparent over the last year or so, that we kind of took our foot off the gas a little bit on bio-renovation, both on Quest and Atkins. And that has been a big focus moving forward is to reignite our bio-renovation. bring exciting new forms and flavours to market. I obviously see the pipeline on the business, and it is now very, very exciting to me. And the performance of Overload is just a proof point that when we bring great innovation to market... Business Responds, and we're going to continue to do that.

Speaker Change: And I would think of being transparent over the last year or so.

Speaker Change: We kind of took our foot off the gas a little bit on buyer innovation, both on quest Atkins.

Speaker Change: In that vein I think focus moving forward is to reignite our bar innovation.

Speaker Change: Bring exciting new forms and flavors to market.

Speaker Change: I, obviously say that pipeline, but on the business and it is now very very exciting to me and the performance of our beloved. It's just a proof point that when we bring great innovation to market.

Speaker Change: Business response, and we're going to continue to do that.

Speaker Change: Thank you.

Speaker Change: The next question is from the line of John Baumgartner with Mizuho. Please proceed with your questions.

Jon Baumgartner: The next question is from the line of Jon Baumgartner with Mizuho. Please proceed with your question. Good morning. Thanks for the question. All right. Geoff, I wanted to come back to Atkins. You mentioned the strength of the core SKUs, and I'm curious if you could speak to innovation for the brand going forward. You know, this class of 24 that launched back in August, the Truffles, the Gummy Bears, those are nicely accretive to sales. Would you consider those types of products included among the core at this point? Have they proven themselves?

John Baumgartner: Good morning, Thanks for the question.

Jeff: Thanks, Jeff.

Speaker Change: Jeff I wanted to come back to Atkins, you mentioned the strength of the <unk>.

Speaker Change: Core Skus and I'm curious if you could speak to innovation for the brand going forward.

Speaker Change: Class a 24 that launched back in August the truffles. The gummy bears those are nicely accretive to sales would you consider those types of products included among the core at this point and they've proven themselves and how aggressive do you plan on being with innovation of Atkins moving forward.

Geoff Tanner: And how aggressive do you plan on being with innovation at Atkins moving forward? Yeah, that's actually a good question, John. Yes, innovation is fundamental to doing well in this category. And as I mentioned on the last question... we had fallen off innovation. been very candid and transparent about that. We've dropped the ball on bringing great innovation, particularly on the bar business and in our core. So we have ramped up those efforts, I'm thrilled about the pipeline, not just on Quest but on Atkins and Owens. to drill down more specifically to your question. The 30 gram Atkins Strong platform that we brought to my care is doing very well.

John Baumgartner: Yeah. Thanks for the question John.

Speaker Change: Yes innovation.

Speaker Change: <unk> is just fundamental to doing well in this category.

Speaker Change: And as I mentioned on the last question.

Speaker Change: We had fallen off innovation.

Speaker Change: <unk> been very candid of being transparent about that we dropped the ball on bringing.

Speaker Change: Great innovation, particularly on the bio business and in our core.

Speaker Change: So we have ramped up does that but I'm thrilled about the pipeline not to sunquest, but on Atkins and Owen.

Speaker Change: To drill down more specifically to your question.

Speaker Change: <unk>.

Speaker Change: Barely Graham can strong platform that we brought to market.

Speaker Change: Very well.

Geoff Tanner: really helped. drive the growth of the ready-to-drink portfolio. Confection Innovation that he referenced, some of it's doing well and some of it isn't and that's pretty path and course.

Speaker Change: Really helped.

Speaker Change: That drive that.

Speaker Change: Both have been ready to drink.

Speaker Change: Portfolio.

Speaker Change: Uh huh.

Speaker Change: <unk>.

Speaker Change: Confection innovation that you referenced.

Speaker Change: Some of it is doing well and some of it isn't in that that's pretty positive of course.

Geoff Tanner: The focus for us, the next wave of focus is going to be on bars. and bringing more innovative, more disruptive bio-innovation to ACCC. Innovation is critical. It's the lifeblood of the category. We've lived off of it. We've turned it back on. It's helping drive the business and in particular the next wave of it has to be on board.

Speaker Change: The focus for us the next wave of progress they've got to be on fire.

Speaker Change: And bringing.

More innovative more disruptive.

Speaker Change: Innovation to Atkins.

Speaker Change: Innovation is critical it's the lifeblood of the category.

Speaker Change: Uh huh.

Speaker Change: Where we have turned it back on.

Speaker Change: <unk>.

Speaker Change: It's helping drive the business.

Speaker Change: In particular, the next wave of that has to be on that.

Speaker Change: Okay. Thanks, Jeff.

Geoff Tanner: Thank you. Thanks, Geoff. Thanks. Thanks, Jon. Thank you.

John Baumgartner: Thanks, John.

Speaker Change: Thank you.

Geoff Tanner: At this time, we've reached the end of the question and answer session.

Speaker Change: At this time, we've reached the end of the question and answer session I'll turn the call over to Jeff Tanner for closing remarks.

Geoff Tanner: I'll turn the call over to Geoff Tanner for closing remarks. I just want to thank everyone for joining the call, and we look forward to seeing you on October...

Jeff Tanner: I just want to thank everyone for joining the call and we look forward to seeing you out on.

Speaker Change: October.

Speaker Change: This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Operator: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.