• Net Sales: $375.7 million, an increase of 17.2% year-over-year.

• Adjusted EBITDA: $77.5 million, up 15% compared to the previous year.

• Gross Margin: 38.8%, a 120 basis point increase from last year.

• Net Income: $29.3 million, compared to $36.6 million last year.

• Full Year Net Sales: $1.33 billion, a 7.1% increase from the previous year.

• Adjusted Diluted EPS: $0.50 per share, compared to $0.45 per share last year.

• Cash Provided by Operating Activities: $216 million for the full year.

• Term Loan Repayment: $135 million repaid, with an outstanding balance of $400 million.

• Net Debt to Adjusted EBITDA Ratio: 1.0x.

• Capital Expenditures: $5.7 million for fiscal 2024.

• Warning! GuruFocus has detected 4 Warning Signs with SMPL.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Net sales increased by 17.2% in the fiscal fourth quarter, driven by the acquisition of Owen and an additional 53rd week.

• Gross margin improved, resulting in an adjusted EBITDA increase of 15% compared to the previous year.

• The nutritional snacking category continues to grow strongly, driven by volume, with key sub-segments like bars, shakes, and chips showing increases.

• The integration of Owen is progressing as planned, with expectations of significant shareholder value through revenue growth, margin expansion, and cost synergies.

• The Quest brand is expected to have another strong year, with anticipated retail takeaway growth of 9% to 10%, supported by increased production capacity and new product launches.

Negative Points

• Atkins brand sales declined by about 5%, with expectations of continued decline due to reduced marketing and trade investments.

• Temporary chip supply constraints negatively impacted Quest's performance, leading to stockouts at retailers.

• Input cost inflation is anticipated to be a headwind in fiscal 2025, potentially leading to gross margin contraction of about 200 basis points.

• The company plans to discontinue its breakeven Canada export business, impacting fiscal 2025 sales growth.

• Atkins is expected to see a high single-digit decline in retail takeaway in fiscal 2025, partly due to planned reductions in spending and distribution losses.

Q & A Highlights

Q: Can you provide insights on the recent innovation launches, particularly the Bake Shop and coffee drinks, and how they compare to previous innovation cycles? A: Geoff Tanner, President and CEO, mentioned that the Bake Shop platform, which includes muffins and brownies, is performing well and meeting expectations. The platform targets a sizable market with its low sugar and high protein offerings. Quest's innovation strategy focuses on flipping macros on large snack categories, and they are encouraged by the early performance of these new products.