- Flat Net Sales Total net sales remained at $340.2 million YoY, with Quest growing 10% and Atkins declining 17%.
- Gross Profit Decline Gross profit fell 15.8% to $109.9 million, with a 590 bps drop in gross margin to 32.3%.
- Aggressive Share Buybacks $150 million borrowed to repurchase 7% of stock, with a $200 million increase in repurchase authorization.
- Full-Year Outlook Net sales growth -2% to 2%, adjusted EBITDA -4% to 1%, and gross margin decline of 100-150 bps.
- Second-Half Recovery Q4 profit growth expected to rise double digits YoY, driven by pricing, productivity, and cocoa benefits.
Segment Performance
Quest net sales grew nearly 10%, driven by 12% consumption growth, while Atkins and OWYN declined 17% and 3%, respectively. Atkins' business has 75% of sales from SKUs in the top half of category velocity, and the company is working to replace slower-moving SKUs with faster-turning ones from Quest and OWYN. Quest Salty had a strong quarter, with 40% growth driven by innovation, new distribution, and merchandising gains.
Outlook and Guidance
The company reaffirmed its full-year outlook, expecting net sales growth between -2% to 2%, with growth from Quest and OWYN offset by Atkins. Gross margins are expected to decline by 100-150 basis points, and adjusted EBITDA year-over-year is expected to be between -4% to 1%. The company expects Q2 net sales to decline 3.5-4.5%, but growth is expected to improve meaningfully in the second half.
Valuation and Share Buyback
The company's stock is currently trading at a P/E Ratio of 22.47 and an EV/EBITDA of 12.07. With its stock at attractive levels, the company borrowed an incremental $150 million to accelerate its share buyback program, repurchasing over 7% of its common stock since the start of the year. The Board authorized a $200 million increase to the existing share repurchase program, indicating the company's confidence in its long-term algorithm and its view that the stock is undervalued.
Growth Prospects and M&A
Analysts estimate next year's revenue growth at 4.3%. The company is confident in its long-term growth prospects, driven by its brands' differentiated positions in the RTD category. M&A is still a consideration, but the company is currently focused on share buybacks. The company's pipeline of new products, including innovations in OWYN and Quest, is expected to contribute to growth in fiscal '26.