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01/10 16:26
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals: OWYN's strong growth and distribution expansion are positive, but Atkins' decline and gross margin pressures offset this. The Q&A revealed uncertainties regarding guidance and fiscal '26 performance, with management's vague responses adding to investor uncertainty. The market cap suggests moderate reactions, leading to a neutral prediction.
Net Sales Net sales for Q3 2025 were $381 million, up 13.8% year-over-year. This growth was driven by the acquisition of OWYN, contributing $33.6 million (10%), and 3.8% organic growth. Quest grew 15%, while Atkins declined 12.7%.
Adjusted EBITDA Adjusted EBITDA for Q3 2025 was $73.9 million, a 2.8% increase year-over-year. Margins were under pressure due to inflation, particularly from elevated input costs, partially mitigated by productivity and pricing actions.
Gross Margin Gross margin for Q3 2025 was 36.4%, a decline of 350 basis points year-over-year. This was mainly due to elevated input costs and the inclusion of OWYN in the results.
Net Income Net income for Q3 2025 was $41.1 million, slightly down from $41.3 million in the prior year. The decline was attributed to higher integration expenses and the inclusion of OWYN.
Cash Flow Fiscal year-to-date cash flow from operations was $133 million, down from $167 million in the prior year. The decline was primarily due to higher uses of working capital, particularly inventory.
Quest Brand Performance Quest, representing 60% of net sales, grew 15% in Q3 2025. Retail takeaway grew 11%, and household penetration increased by 120 basis points to 18.3%. Salty snacks retail takeaway grew 31%, and Bars consumption grew 3%.
Atkins Brand Performance Atkins consumption declined 13% in Q3 2025, mainly due to broader distribution losses at a key customer and not repeating high-volume merchandising events from the prior year.
OWYN Brand Performance OWYN retail takeaway increased 24% in Q3 2025, with ready-to-drink shakes growing over 20%. Distribution increased 18%, benefiting from recent gains during the spring reset.
Quest Salty Snacks: Retail takeaway grew 31% this quarter, becoming the largest platform on the Quest business. New flavors and sizes were launched, and distribution expanded.
Quest Overload Bar: Initial distribution and velocity are building as planned, with positive consumer and retailer feedback.
Quest Milkshake: The 45-gram Quest Milkshake is progressing well, with activations across the country to drive trial.
Atkins Strong Shake: A new 30-gram shake introduced as part of efforts to revitalize the Atkins brand.
OWYN Distribution: Distribution increased 18% during the spring reset, contributing to a 24% retail takeaway growth in Q3.
Quest Expansion: Quest secured incremental shelf space at a large mass merchant and gained placements outside the core aisle, including on a health and wellness wall.
Cost Management: Stepped up productivity and cost management efforts to counter inflationary pressures, with full benefits expected in 12-18 months.
Debt Repayment: Repaid $240 million of the $250 million borrowed for the OWYN acquisition within 11 months.
Portfolio Optimization: Shifted shelf space from Atkins to higher-turning and more profitable Quest and OWYN SKUs at a large retailer.
OWYN Integration: Integration work for OWYN is nearly complete, positioning it for long-term growth.
Inflation Impact: Margins were under pressure due to higher levels of inflation, particularly from unspecified sources, impacting profitability.
Atkins Brand Decline: Consumption for the Atkins brand declined by 13% due to broader distribution losses at a key customer and the absence of high-volume merchandising events from the previous year.
Gross Margin Compression: Gross margins declined by 350 basis points year-over-year, driven by elevated input costs and the inclusion of OWYN in the results.
Tariffs: Tariffs are beginning to impact the company's P&L and are expected to continue for some time.
Atkins Distribution Losses: Atkins is expected to see a significant decline in distribution at a large mass retailer, though partially offset by gains for other brands.
OWYN Integration Costs: Integration expenses for OWYN have increased G&A costs, impacting overall profitability.
Economic Conditions: The outlook assumes current economic conditions and consumer purchasing behavior will remain consistent, but any changes could pose risks.
Full Year Net Sales Growth: Total company reported net sales are expected to increase 8.5% to 9.5%, with organic net sales growth driven primarily by volume. OWYN net sales are anticipated to finish the year at approximately $145 million.
Adjusted EBITDA Growth: Total company adjusted EBITDA is expected to increase 4% to 5%, with an assumption that gross margins will decline 200 basis points on a full-year basis.
Q4 Organic Net Sales Growth: Q4 organic net sales are expected to grow around 3% at the midpoint, including OWYN within the organic net sales growth calculation for most of the quarter.
Gross Margin Outlook: Gross margins are expected to decline due to increased inflation and tariffs, with mitigation efforts taking time to fully realize.
OWYN Growth: OWYN is expected to contribute strong double-digit growth, with net sales projected at approximately $145 million for the year. Incremental distribution wins and planned merchandising activity are expected to support Q4 performance.
Quest Growth: Quest is expected to continue its growth trajectory into fiscal 2026, driven by disruptive innovation, expanded physical availability, and increased brand awareness. Salty snacks platform is on pace to become the largest platform on the Quest business.
Atkins Revitalization: Atkins is undergoing a revitalization plan to optimize its assortment and focus on core SKUs. Despite expected distribution declines at a large retailer, the company plans to offset losses with gains for Quest and OWYN.
Share Repurchase: During Q3, the company repurchased over $24 million worth of its common stock. Additionally, the company has nearly $50 million remaining on its current share repurchase authorization.
The earnings call reveals a mixed but generally optimistic outlook. Despite some short-term challenges, the company expects significant improvements in the second half of the year, driven by innovation and distribution gains. Share repurchases and a focus on high-growth brands like Quest and OWYN are positive indicators. The market cap suggests a moderate reaction, leading to a positive prediction.
The company demonstrates strong sales growth projections, particularly for OWYN and Quest, despite challenges with Atkins. Strategic initiatives in product placement and innovation are promising. However, declining gross margins and the OWYN issue are concerns. The company's balanced capital allocation and share buybacks add positive sentiment. The market cap suggests moderate stock volatility, leading to a positive forecast for the next two weeks.
The earnings call presented mixed signals: OWYN's strong growth and distribution expansion are positive, but Atkins' decline and gross margin pressures offset this. The Q&A revealed uncertainties regarding guidance and fiscal '26 performance, with management's vague responses adding to investor uncertainty. The market cap suggests moderate reactions, leading to a neutral prediction.
The earnings call summary highlights several positive factors: EPS exceeded expectations, a strategic acquisition of OWYN, and a $50 million share repurchase program. Despite competitive pressures and supply chain challenges, the positive EPS and acquisition of OWYN, which is expected to drive future growth, are strong indicators. The Q&A reveals some concerns about Atkins' sales guidance, but the company's proactive approach to product innovation and distribution expansion for OWYN suggests optimism. Given the company's market cap, these factors collectively suggest a positive stock price movement over the next two weeks.
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