A copy of our earnings release and accompanying presentation is available on the Investors section of the company's website at thesimplygoodfoodscompany.com. Due to the company's asset-light business model, we evaluate our performance on an adjusted basis as it relates to EBITDA and diluted EPS. Then, I'll turn the call over to Chris, who will discuss our financial results and our updated outlook in a bit more detail before we open it up to take your questions. As we discussed on our last earnings call, our overall performance remains well below where we believe this business should perform, with each key financial metric declining meaningfully versus the prior year.
Gross margin declined 390 basis points to 32.5%, and adjusted EBITDA declined 22.5% to $57.2 million. Quest and OWYN net sales grew 1.1% and 3.6% versus prior year respectively, and both brands performed slightly better than we expected. Purposeful nutrition remains an attractive category supported by favorable long-term consumer trends, and retailers continue to view the category as an important source of growth. This increase is necessary to offset inflation we are experiencing across proteins, packaging, and other key cost inputs.
While we remain focused on productivity initiatives and cost reduction efforts, rebuilding margins requires decisive action on pricing, and we believe this increase is appropriate. Decisions are being made faster, priorities are clearer, and resources are increasingly concentrated behind fewer, higher return opportunities. Quest remains our largest brand and most important growth engine of the company. In the third quarter, Quest retail takeaway grew 1.4% compared to 2.4% growth last quarter.
| Metric | Period | Current guidance |
|---|---|---|
| Net sales | FY2026 | $1.345B-$1.355B (down 7%-6%); assumes current consumption trends plus expected distribution losses |
| GAAP gross margin | FY2026 | Expected to decline ~375 bps on input costs (proteins), supply-chain restructuring and OWYN quality-issue mitigation |
| Adjusted EBITDA | FY2026 | $220M-$225M (down 21%-19% YoY) |
| Net sales | Q4 FY2026 | $322M-$332M (down 13%-10%); similar consumption plus undershipping to right-size customer inventories |
| Adjusted EBITDA | Q4 FY2026 | $52M-$57M (down 22%-14%); strongest GAAP gross margin of the year as productivity offsets inflation |
| Price increase | September 2026 | High-single-digit across most of the portfolio to offset inflation |
| Capital expenditures | FY2026 | $25M-$30M (reduced on investment-priority changes) |
| Diluted share count / tax rate | FY2026 | ~90 million weighted-average diluted shares; Q4 effective tax rate ~25% |
| Metric | YoY | Note |
|---|---|---|
| Net sales | -6.3% to $357M | Weaker consumption, driven by a 24.6% Atkins decline, partly offset by Quest (+1.1%) and OWYN (+3.6%) growth. |
| GAAP diluted EPS | -$0.58 (net loss $52M) | An $82 million non-cash impairment of goodwill and the Atkins/OWYN brand intangibles drove a GAAP operating loss of $49.9 million. |
| Operating margin (GAAP) | -14.0% | The impairment charge; excluding it and restructuring, the underlying business remained profitable (adjusted EBITDA $57.2M). |
| Adjusted EBITDA | -22.5% to $57.2M | Volume declines and higher input costs, partly offset by productivity. |
| Gross margin | 32.5% (-390 bps; 34.3% ex-restructuring) | Volume declines, higher protein input costs and $6.2M of restructuring; ex-restructuring beat forecast on productivity. |
| Quest net sales / takeaway | +1.1% / +1.4% takeaway | Chips (+17%) and milkshakes (+50%) growth offset by a ~5% bar consumption decline; household penetration +120 bps to 20.5%. |
| Atkins net sales / takeaway | -24.6% / -23.9% takeaway | Declining household penetration (8.5%, -220 bps) from insufficient marketing and distribution losses. |
| OWYN net sales / takeaway | +3.6% / -1.3% takeaway | Prior product-quality issue and weak marketing; distribution resets expected over 6-12 months, household penetration flat at 4.3%. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Execution-driven turnaround | New CEO diagnosis | Returning CEO Joe Scalzo frames the challenges as execution-driven, not category-driven, focused on three priorities: strengthening the economics/cost structure, ensuring strategic consistency and organizational focus, and rebuilding ROI-based brand investment — early progress with faster decisions and clearer priorities. | — |
| Pricing to rebuild margins | Margin erosion | A high-single-digit September price increase offsets protein/packaging inflation (expected to continue into fiscal 2027) to rebuild a P&L toward the long-term algorithm (~40% gross margin, ~10% marketing, ~20% EBITDA margin), accepting elasticity of one-plus and a volume/household-penetration hit as short-term pain for long-term gain. | — |
| Quest — refocus on the core | Largest growth engine | Quest remains healthy (household penetration up to 20.5%), but management is refocusing on the core bar and chip segments (~80% of the brand); bars are the top priority (weak innovation, poor top-of-funnel communication) with a new marketing agency reasserting superior nutrition and taste. | — |
| Atkins reset | Declining penetration | Atkins is being reset to a disciplined, fact-based baseline aligned with current household penetration; comparisons ease into Q4 and next year, weekly run-rate consumption is more consistent, and management sees a role for Atkins in a GLP-1 weight-management world (high interactivity between Atkins snack buyers and GLP-1 users). | — |
| OWYN integration cleanup | Product-quality issue | The product issue is fixed but distribution losses on non-core line extensions are expected over 6-12 months; the core 32g protein shake and powder business is already showing signs of growth, with a long-term opportunity to close the gap between ~4% household penetration and an ~18-19% interested audience. | — |
| Marketing reallocation to top of funnel | Overweight lower-funnel | Investment is shifting back to higher-ROI top-of-funnel streaming/connected media (Quest marketing grew but was being spent too low in the funnel); a marketing-mix study and GLP-1 consumer-insight work will guide future ROI-justified investment. | — |
| GLP-1 opportunity | Off-drug maintenance thesis | A completed GLP-1 study yields consumer insights to guide marketing and innovation; management will test ideas in market next fiscal year, with Atkins showing high interactivity between snack buyers and GLP-1 weight-management users — details to come. | — |