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Simply Good Foods (SMPL +3%) is trading modestly higher following its Q3 (May) report. The stock initially traded lower, but turned higher during the positive earnings call. The weight loss nutrition company (brands include Atkins, Quest, OWYN) reported EPS slightly above expectations, which followed a very large beat in Q2 (Feb). Revenue increased 13.8% yr/yr to $381 mln, which was roughly in line with expectations. Revenue growth continues to be strong from Only What You Need (OWYN) and Quest, while Atkins remains a drag on overall growth.

• Consumption was once again up double digits for both Quest and OWYN, making up 70% of net revenue for SMPL, which is more than offsetting the declines in Atkins. Quest consumption grew 11%, with house-hold penetration up 120 bps yr/yr to 18.3%. Salty Snacks is on pace to become the largest platform within the Quest business, with retail takeaway growing 31%. Management is quite excited about the support it's getting from retailers, who have recognized the growth of the segment.
• SMPL also remains bullish on OWYN, with retail takeaway and distribution increasing 24% and 18%, respectively. SMPL expects retail takeaway trends to remain strong, benefiting from incremental distribution wins. Management is confident in their ability to achieve double digit growth in OWYN due to its strong velocities and category incrementality, which will help OWYN expand distribution, house-hold penetration, and awareness.
• Growth for the nutritional snacking category remained robust in Q3, up double digits for the 17th consecutive quarter. This reflects the continued mainstreaming of consumer demand for high-protein, low-sugar and low-carb food and beverage options.
• For its Atkins brand, net sales declined 12.7%, and consumption was down 13% yr/yr, with the declines accelerating due to broader distribution losses at a key customer and from not repeating high volume merchandising events. Although management has plans to put Atkins back on a growth trajectory, it expects to see continued declines in its final quarter of FY25 and into FY26. Perhaps investors were disappointed that there was not a positive outlook for FY26.

Overall, the results in Q3 for SMPL were solid, with growth being driven by Quest and OWYN. In particular, management remains bullish on OWYN and is pleased with the trajectory of the nutritional snacking category, which is an encouraging sign. We suspect that management saying that Atkins is expected to remain weak heading into FY26 is being viewed as a disappointment by investors. People want to see the brand turnaround at some point. On a final note, we wonder if SMPL is losing any customers given the high price points of their products. Management remains bullish, but it is something for investors to keep an eye on in the future.