Financial Data and Key Metrics Changes - Simply Good Foods reported Q3 net sales of $381 million, an increase of 13.8% year over year, driven by the acquisition of Owen and 3.8% organic growth [21][22] - Adjusted EBITDA for the quarter was $73.9 million, up 2.8% from the previous year, while net income was $41.1 million, slightly down from $41.3 million last year [23][24] - Gross margin declined to 36.4%, a decrease of 350 basis points year over year, primarily due to elevated input costs [22][24] Business Line Data and Key Metrics Changes - Quest, representing approximately 60% of net sales, achieved 11% consumption growth in Q3, with household penetration increasing by 120 basis points to 18.3% [11][21] - Atkins experienced a decline in consumption of 13% in Q3, attributed to distribution losses and the absence of high-volume merchandising events from the previous year [14][15] - Owen's retail takeaway grew by 24% in Q3, with ready-to-drink shakes seeing over 20% growth [17][21] Market Data and Key Metrics Changes - The nutritional snacking category continued to show robust growth, with overall consumption up double digits, reflecting a shift towards high protein, low sugar, and low carb options [7][19] - The company noted that Quest and Owen together account for approximately 70% of net sales, indicating strong market positioning [19][20] Company Strategy and Development Direction - Simply Good Foods aims to lead the generational shift towards healthier food options through innovation, expanding physical availability, and increasing brand awareness [19][20] - The company is focusing on optimizing the Atkins brand by reducing lower-velocity SKUs and enhancing the core product offerings [15][16] - There is a commitment to driving growth in the Salty Snacks platform, which saw a 31% increase in retail takeaway [12][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged inflationary pressures impacting margins, particularly from cocoa and whey, and emphasized ongoing productivity and cost management efforts [8][9] - The outlook for the full year has been tightened, with expectations for net sales growth of 8.5% to 9.5% and adjusted EBITDA growth of 4% to 5% [28][30] - Management expressed confidence in the long-term growth potential of Quest and Owen, despite anticipated challenges with Atkins [19][20] Other Important Information - The company has repaid nearly all of the $250 million borrowed for the acquisition of Owen and has repurchased over $24 million worth of common stock [10][27] - The company is actively evaluating pricing strategies to address high input costs and maintain gross margins [96] Q&A Session Summary Question: Distribution expectations for Atkins and impact on sales - Management expects continued double-digit declines for Atkins due to distribution cuts but anticipates offsetting gains from Quest and Owen [36][39] Question: Performance expectations for Owen - Management remains confident in Owen's growth potential, expecting similar consumption trends to continue into FY 2026 [44][47] Question: Gross margin outlook and pricing strategies - Management indicated that gross margins are under pressure but are working on productivity and pricing actions to recover costs [65][68] Question: Capital allocation priorities - The company prioritizes M&A, debt repayment, and share buybacks as part of its capital allocation strategy [98][99] Question: Impact of Texas legislation on product portfolio - Management believes the impact of new regulations will be minimal, with only a few SKUs requiring reformulation [108][109]