Good day, and welcome to BellRing Brands First Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Instructions will be given at that time. As a reminder this call is being recorded. I would now like to turn the call over to Jennifer Meyer, Investor Relations for BellRing Bands. Please go ahead. Jennifer Meyer Good morning, and thank you for joining us today for BellRing Brands First Quarter Fiscal 2025 Earnings Call. With me today are Darcy Davenport, our President and CEO; and Paul Rode, our CFO. Darcy and Paul will begin with prepared remarks and afterwards, we'll have a brief question-and-answer session. The press release and supplemental slide presentation that support these remarks are posted on our website in both the Investor Relations and the SEC filings sections at bellring.com. In addition, the release and slides are available on the SEC's website. Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded and an audio replay will be available on our website. And finally, this call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Darcy. Darcy Davenport Thanks, Jennifer, and thank you all for joining us this morning. Last evening, we reported our first…

Thank you. [Operator Instructions] Our first question comes from David Palmer with Evercore ISI. Your line is open.

Thanks. Good morning. I wanted to ask you about your growth. How you're growing this year, you think in ways that are different than maybe last year and maybe the opportunities going forward, if you go through this transcript, you can get a lot of stuff. A lot of things are going on. You mentioned the indulgent types, the new pack types, PET versus the aseptic boxes. We saw some strong growth in e-commerce. So I'm just wondering how you're -- how you would characterize the growth levers this year and what's coming in stronger or more importantly? And then maybe how this will play out even beyond '25?

Sure, it's a great question. So first of all, I mean this year is fundamentally different from last year. I mean we have ample capacity where we really can drive the business. I mean, I mentioned in my prepared remarks that the entire organization is now focused on demand driving. Where you really see that is, is the first time that we have started national advertising. We have not had national advertising on our main business, our shake business since 2021. So that's a big difference. And honestly, that is the one driver that can lift all channels. So incredibly important. The second piece is just around distribution. We expanded distribution -- like distribution and innovation, I would say. So in past -- last year versus this year, we're really driving distribution and innovation. Whereas last year, we were still having out of stocks on the shelf, especially in the food accounts. And then I would say the third big one is promotion in food. So last year, we did not -- we kind of eased in promotion last year and we started in the club channel and then expanded from there. We now have promotion across and we started layering in promotion and display in the food channel. And I always like to repeat this, because I think our business is different from many other businesses is, it is less about the sense off for promotion. So it's not about deep discounting. All we want, we display is what moves our business. And so, we kind of do as little as we can from a sense off standpoint to get those displays in aisle. And so, and we're really starting January, Feb, March are big is the big season for us where the most new consumers enter into the category. And so it's nice to see our big displays out there like they have been in past years. So those, I would say those are kind of the three big areas that are different this year than last year. So hopefully, that answers your question.

Thanks. And if I -- a separate follow-up, on Dymatize International really was super strong this quarter, we would estimate maybe up 40%. How do you see Dymatize playing out this year as a brand? Was that international strength sort of a one off this quarter? Any thoughts about Dymatize in '25? Thanks.

Yes, we expect the Dymatize International business to continue to be strong throughout the year and drive the overall business. In the US -- so remember, international business for Dymatize is about 40% of the global brand. So -- and I -- the US business is pressured. We have -- a few years ago, we took a lot of pricing. The category took a lot of pricing because of way protein prices really accelerating. Well, we're seeing those commodity prices continue to accelerate. So the P&L is pressured specific -- I mean globally, but the consumer in the US is much more pressured. So I think that as we look at the global brand, international will stay strong throughout the year and we are looking at basically like single digit growth for the global brand.

Thank you.

Thank you. Our next question comes from Andrew Lazar with Barclays. Your line is open.

Great. Thanks so much. Good morning. Darcy, last quarter, you talked about the learnings from several of the tests that you did of your advertising campaign behind Premier. And that is now in full swing on a national basis. I know this is the first one in many years. So I'm trying to get a sense of what sort of response knowing it's still early that you're seeing to the campaign based on whatever metrics that you use to sort of assess the lift or the payback?

So it just launched at the end of December last week of December. So it's very, very new. But the early -- what we look at right now, because it's too soon to really see lifts in market. But we look at website traffic, we look at online search and those look really strong. So we're getting consumers attention and they're acting. And they're actually searching Premier Protein. So that's exactly what we want to see. I think that this was a well-researched campaign. So I think I told you guys last quarter that we did -- we performed three test markets. We also did a fair amount of creative testing. We wanted to make sure we got it right, because it was the first time that we have launched national media in several years. So all the test markets met or exceeded the lift expectations. We made a few -- we found a few areas from a creative standpoint that we could tweak and improve the spots. And so we were able to do that, and we're really pleased with the early performance.

Thank you for that. And then I think last quarter, you mentioned sort of starting to have more top-to-top discussions with key customers. Now that you have sort of ample capacity and some more innovations to talk about that sort of warrant, right, talking about more incremental shelf space in the store. Would you expect this to lead to sort of material gains along these lines of this fiscal year? Or are those things and those sorts of decisions by retailers really a sort of a longer burn sort of process? Thanks so much.

I would say yes and yes. First of all, I think that one of our main growth drivers is just around getting our fair share of the shelf. We're about a 25% market share player, the number one in the category. So we should absolutely have a quarter of the shelf, if not more because we're driving most of the new consumers into the category. So that is happening. We have capacity and you're starting to see some really strong increases in TDPs. You can track it in our supplemental presentation. But -- so that is happening. But then also these top-to-top, those conversations are more around the future of the convenient nutrition category. And how -- I mean, there is -- it's a new category, 30-ish years old and it's rapidly changing. And so if you go to the shelf set in a food account looks very different from a mass account and looks very different from a club account. And so there's a lot of opportunity to bring in consumer insights to help consumers around make sense of all the products and how they use the products and who they're for because right now it's very confusing. So those conversations, not only expanding the convenient nutrition category, expanding sports nutrition and everyday portion of the category, which is now three-quarters of it, so those kind of conversation and those bigger changes take time, but in the meantime, we're also expanding, just getting our -- kind of our fair share of the shelf.

Great. And just lastly, what would you put your share of shelf at versus your market share right now?

It is -- so I don't have the exact number, but it's about half was where it should be.

Thanks so much.

Thanks.

Thank you. Our next question comes from Ken Goldman with J.P. Morgan. Your line is open.

Hi, good morning, and thank you for the help in sort of framing the rest of the year in terms of cadence. I was wondering if I could ask a follow-up to that, which is how would you like us to think about Premier mainly ready-to-drink consumption in track channels? Any sort of ups or downs or unusual trends we should think about just as we look ahead at the biweekly releases going forward.

And Ken, you're mostly talking about Q2?

Yes and no, yes, but I'll say yes and yes, just like you did a little bit of both, whatever you can offer would be great.

Okay. So January, I said, was up 17%. We expect overall Q2 to be in the mid-20s. So we should be seeing acceleration as we go into Feb and March. And that is really driven and again, now I'm using MULO+. So we have a broader look at track channels. So that includes both Amazon and Costco. But yes, so we will -- so we should be seeing an acceleration into Q2 and then we should see strong consumption throughout the year.

Got it. Thank you. And then as we think about the ready-to-mix category in the US, I think there was some hope that might be -- that there might be a little bit of a rollback situation for lack of a better phrase in January with a large customer across a number of different manufacturers. I was just curious, A, is that correct that we were expecting that? And B, did that happen as planned? And I guess, C, what are you looking for in terms of overall category pricing there in light of some of the challenges at the higher end of the Premium portion of the category as well as higher input costs going forward?

Okay. Ken, can you -- so you said that we were expecting a rollback...

I'll simplify that, Darcy.

Yes. That'll be great.

I was under the impression. No, I'll simplify it. I thought there might be and maybe I misheard this last quarter, there might be a hope that there might be a little bit of incremental promotions at a particular customer in January across ready-to-mix. But really broadly, I'm just trying to get a sense of what you're viewing or what you're expecting from pricing in that category, especially for the premium side in light of some of the challenges and in light of -- at the same time, some higher weight costs, if that makes sense.

Yes, it makes perfect sense. We're watching it very closely, because, yes, like you said, Whey pricing is increasing and it's expected to continue to increase. Right now, promotions across -- promotion across the category is pretty stable. So not -- we're not seeing a decrease in promotion to offset the increase in Whey Protein yet. I think that likely -- we still believe that we're going to see it. We haven't seen any pricing yet. So I think that -- we believe we just have to see it later in the year because that's where you really start seeing the increases in Whey Protein. But we haven't seen it yet. We haven't seen a dramatic shift in promotion plus or minus.

Got it. Thank you.

Thank you. Our next question comes from Thomas Palmer with Citi. Your line is open.

Hey, thanks for the questions. First, I just wanted to make sure I understood the timing of cost inflation and kind of what's driving it. You talked about mid-single digit. Is that still the expectation? And then what's driving that uptick as we move into the back half? Is it really just looking at way or kind of other items to call out? Thanks.

Yes. Our overall expectation hasn't changed, it's mid-single digits. And really in my prepared remarks, the shifting -- some of the shift of Protein is for the full year, it's really neutral, but it's just a little bit more favorable first half, a little less favorable second half, unfavorable in the second half for net. It's not that different. It's -- as far as what's driving, there's a little bit on Whey Protein, there's a little bit on Milk Protein. So again, we're talking about relatively small amounts, but a little bit of an uptick. And it's just market-driven. Whey Protein continues to remain fairly tight supply-demand dynamics. So the costs there remain elevated. And then on Milk Proteins, which are the primary input for our shakes, it's just been a steady increase. The market non-fed dry milk is -- has been bouncing up and down a bit. We're still not fully covered in the latter parts of the year. So we're obviously being cautious in watching that market. But again, we're talking about pretty small changes net. It's really no different than our expectation of mid-single digits for the full year.

Right. Thanks for that. And then on Dymatize, you noted earlier in the call how pricing had run up quite a bit a couple of years ago, and I think last year was given some cost tailwinds rather promotional for the group as a whole. Maybe update on the promotional intensity you're seeing now that costs are really starting to escalate? And are you seeing any outright price increases or at least a pullback in that promotional activity by the Group? Thanks.

We are not. So we haven't seen pricing yet. There are some rumors out there, but nothing -- we haven't seen anything at the shelf from a price increase standpoint. And there hasn't been a dramatic change of promotion. So pretty steady promotional levels. So we expect that there is going to be a change later in the year as these higher Protein costs start flowing through the P&Ls, but we haven't seen it yet.

Understood. Thank you.

Thank you. Our next question comes from Kaumil Gajrawala with Jefferies. Your line is open.

Hi. Hey, everyone. Good morning and congratulations, you're liberated from all the capacity constraints over recent years. There's a lot going on in what you've laid out. I guess the big sort of question is what's the right pace of doing all these things between the marketing and the repackaging and the innovation? There is sometimes a risk of going too fast, especially because this is really your first year of having the ability to be a lot more demand focused. So how do you know you're sort of going at the right speed and not too fast?

I love that question. And so we have been, if you think about the last year, starting end of '23 into '24 and now '25, I would say we have been pressing the accelerator kind of consistently. So we first layered in promotions in some channels we did some light kind of light innovation more around flavors just to give consumers and retailers some flavor excitement. Then this year was now we are launching both innovation as well as doing advertising, but we're still not -- we've talked about wanting to get to 4% to 5% of spend on marketing. We're not there yet. We are slowly accelerating for the exact reason that you are talking about, which is, we don't want to get into a supply constrained situation. And we don't need to, we want to try to figure out the right level of support for our business to consistently drive it year-over-year. So that is -- it's a fine line, but so far, I think we've been doing it well and we'll continue to keep that in mind. And just your question around packaging, we have been working on packaging for a while and I'm really excited about the new graphics. It's an evolution, not a revolution. But it is going in the right direction. It will improve all of our testing. It's going to improve discoverability. It's a more modern look and we really haven't -- we've done small changes to our packaging, because it works well. But we haven't done kind of a logo redesign and package redesign in about a decade. So it's pretty exciting and that should roll in toward the end of the year, basically like the second half.

That's good context. Thank you.

Thanks.

Thank you. Our next question comes from Jim Salera with Stephens. Your line is open.

Hey, Darcy and Paul. Thanks for taking our questions. Darcy, I wanted to go back to something you mentioned earlier, which is that, your Premier is really driving most of new entrants into the category. If you look at the scan data, it really seems like Premier and maybe one other brand are the ones that continue to gain share. Can you just give us some insights into why some of the other legacy brands aren't seeing the same level of engagement from these new consumers given that the category as a whole is kind of seeing a lot of new people engaging with it?

Yes, the growth is coming from mainstream, so basically the everyday nutrition and sports nutrition segments. And it's really the kind of modern brand. I think if you separate the category into how we look at it, which is adult nutrition, sports nutrition, everyday nutrition and weight management, you really start seeing a dynamic where it used to be that adult and weight really was most of the category. It's where the category began and now you see those parts of the businesses really declining or just stagnant and you see the sports nutrition and every day just kind of exponentially growing. I think it is because those part of the categories are more they're more positive, they're more proactive health messages as opposed to the adult and the weight side of things are more about deprivation and so I think that is -- I think it's a changing consumer view of the entire category, going much more into that positive wellness side as opposed to what you want to change about your body. And so I think that is part of it.

Great. And then if I think about Premier in particular, is there a way to split up the volume gains between frequency among existing households. So whether it's, I used to have it once a week and now I have it three times a week versus just new households coming from the brand that haven't tried the product before?

I don't know if I have that, we probably need to follow-up with that. I don't have that off. I don't want to give you the wrong number. All I would say is that we're seeing and it shows in our supplemental presentation, where you see that not only are we increasing households, but we're also increasing buy rate and repeat rates. So it's rare that you see a business that is growing households as well as growing distribution, innovating, et cetera, but at the same time increasing buy rate and repeat rate. So it's definitely -- so I don't have the breakdown. I would say they are both contributing to our growth.

Okay, great. Appreciate the color. I'll hop back in the queue.

Thank you. Our next question comes from John Baumgartner from Mizuho Securities. Your line is open.

Good morning. Thanks for the question.

Good morning.

Darcy, on the Shake side, it sounds as though you're gaining confidence that the depth of deal on promo for the consumer doesn't need to be as deep as it's historically been. And I'm curious to the extent to which that then enables you to recalibrate your budget and transfer more funding into slotting or other areas that open new opportunities for where in the store you can be displayed or increase the frequency of quality promo. Is there may be a longer term benefit to be had here?

Yes. I think that for us the goal is display. And so, we know, we do not think that we need to go as deep as perhaps we did a few years ago. However, what I will say is that this doesn't have to do with just what we want. And so, it is always a negotiation with our retail partners about what their rules are about the required depth to get display. So, if it was up to us, we would only do, we would have very little TPR, if any, we would just do display because we know that that's where you really -- you get the eyeballs, you get the trial, we bring people into the franchise and then our 50% repeat fuels it. But again, there are more stakeholders that we need to work with and they have different rules.

Okay. Thanks for that. And then on the ready-to-mix side, coming back to this absence of more prominent price increases thus far, do you get the sense at all that the volume success of Shake is maybe forcing the powder segment to hold prices more so than usual and sort of accept some margin pressure to reinforce relative value there? I mean -- I guess I'm curious if maybe there's more of a fundamental change in how powder is pricing, especially if there's some expectation or optimism for lower cost later this year?

Paul, do you want to talk a little bit about where we think pricing is going to go?

From a protein cost perspective on Whey?

Yes.

I think what we're seeing is that costs have remained elevated and we expect those to really go through our fiscal year. So I would not say that we've necessarily seen on Whey powders relief yet. I think it's still a tight supply demand dynamic on Whey powders and we expect that really to continue through our fiscal year, which I would say is, in general, it's -- I think our perspective is it's hanging on longer than we expected. So it may go beyond this fiscal year, but obviously, that's still to be determined as we get further along. But yes, I'd say our view is that it seems to be sticking a little longer than expected.

But there definitely is a different dynamic because milk Protein concentrate is what the Protein that we use in our shakes and then Whey Protein is what is in the powder business. And there's definitely a different cost dynamic in both. They're both increasing, but Milk Protein concentrate is kind of just more steady where you don't have -- the Whey Protein is a bit more volatile. And so -- and has increased very dramatically over time. So I think, yeah, there's just a different P&L reality in both sides of the business.

Okay. Thanks, Darcy. Thanks, Paul.

Thank you. Our next question comes from Brian Holland with D.A. Davidson. Your line is open.

Thanks. Good morning. I was just curious, Darcy, if you could sort of discern for us between -- on some of these distribution gains, how much of that is capacity constraints easing versus kind of like new product launches that you've talked about. I guess it seems like you have a long tail of white space that you've referenced over the past year plus with respect to getting your products new forms, single serve, other channels, et cetera. So I'm just curious, as we think about the long-term opportunity for how big this brand, how big this category can be, how broadly could be distributed, where we are in that and the distribution gains that we're seeing specific to this quarter, how much of that is really just kind of core blocking and tackling as capacity constraints ease versus actually tapping into the long-term white space.

Okay. So from an out of stocks, let's just start with kind of the block and tackling out of stocks that we're lapping. We'll probably finish -- we'll have lapped most of the out of stocks by Q, I think they ended kind of Q2, trailed into Q3. By Q4 of last year, we had mostly full shelves. So if you think of that -- so if you think of percentage of our growth, I think we would say kind of single-digit part of our growth, maybe a quarter of our growth is coming from that in the first half. So that's just kind of what. Now when you think about the long-term opportunity of distribution, I would bucket it into two sides. I mentioned to Andrew that -- but I -- that we were -- if you assume that your share of shelf should equal your market share, we basically should double our space. It varies dramatically from account to account. But at a macro level, we should about double our space given where our market share is. That's one piece. That's just share of shelf. But then when you think of when you're in a high growth category, fastest growing within -- one of the fastest growing within the store, the entire category should increase in space. And so I think that's where it gets really interesting and where the continued -- so once we kind of fix the shelf, meaning that we get our fair share, then we start talking about the overall increase in the category space. And those are those top-to-top discussions. And the ones that should win there obviously are the ones that are driving the new consumers into the shelf. And there aren't that many of those brands and we're one of them.

Thanks. That's very helpful. And then maybe just on that last point. Capacity constraints are easing, presumably not just for you, but for the category. We've seen little green shoots some tinier brands, certain private label SKUs, having some nice growth here off of obviously low bases. Just curious how you're seeing the competitive landscape evolve around you as maybe more capacity becomes available. And certainly, to your earlier point about the category being the second strongest behind eggs right now from a growth standpoint, clearly, that brings eyeballs from a competitor standpoint. So just curious what you're hearing and seeing with respect to competitive activity, innovation, et cetera, around the moat that you've built here with Premier Protein and ready-to-drink.

Yes. From a competitive standpoint, I would say there aren't a ton of major changes since the last several quarters. The mainstream in sports nutrition brands are winning and they're the ones bringing in new consumers into the category, gaining distribution both in aisle and out of aisle, which has been again the key, because it's a low household penetration category, so people need to see the product. And we -- the smaller brands are honestly let -- I mean, yes, you always see some new plant products kind of come and go, but really ones that make a difference and are making an impact and gaining a lot of shelf space, there just aren't that many within ready-to-drink, very different within ready-to-mix. Ready-to-mix, you see upstarts all the time. And I think that's the big difference between ready-to-drink and ready-to-mix in bars. Ready-to-mix in bars are much easier to formulate. You can get -- you can basically formulate it in kind of a kitchen, a commercial kitchen, where it's -- the ready-to-drink category, it's just highly complex. It's hard to formulate. It takes two-plus years to formulate these products. You have to make them in a very -- in a facility that is kind of wall-to-wall stainless steel aseptic, very expensive. Usually, you have to commit to long-term volumes to get the space. So it's just a much different, yeah, competitive moat, I would say, than in the other parts of the category.

Thank you. Our next question comes from Matt Smith with Stifel. Your line is open.

Hi, good morning. Darcy and Paul, you called out the shift in marketing spend from 1Q to the second half. Can you talk about what drove that change in timing? I know there's a focus on returning marketing and advertising back towards historical levels, but I'm curious how locked-in marketing spend is in the second half.

I can start, Paul, and then you can add to whatever I miss. So the decision really was around -- we were supposed to start marketing in kind of the middle of December. We pushed it back a few weeks and mainly just we were making some adjustments to the creative and it took a little longer. So we pushed it until -- we started on in the kind of last week of December, right before New Year, New Year. So that is kind of the reason why it pushed. Paul, you want to...

Yes. So obviously, we talked about the shift out of Q1 and really we shifted some from Q1 to Q2, which then shifted some to the second half. So the net impact is about a $4 million shift to the second half. But the level of spend for us is still the same as it was when we gave guidance last in November. So nothing has dramatically changed on our marketing spend. We still feel like we have the right level in our guide and our plan. So no big changes there other than just the timing.

Thanks, Paul. And Darcy, as a follow-up, the innovation launch indulgence. How does the expansion play out from here? I think it was launched in some limited customers. Do you expect that to start to expand in this fiscal year? And is that shelf space incremental to Premier's current shelf space where you've already launched it?

Yes and yes. So yes, we started. We launched it in Q1 with one mass customer and then we started in e-Com and then we are planning to expand from there. So you'll start seeing it pop up in different accounts throughout the year. And yes, it's incremental.

Thanks, Darcy and Paul, I'll pass it on.

Thank you.

Thank you. Our next question comes from Robert Moskow with TD Cowen. Your line is open. Our next question comes from Robert Moskow with TD Cowen. Your line is open.

Sorry about that. Darcy, I was hoping for an update on a couple of things. One is, have you given any extra thought to expanding into the convenience store channel, your convenience nutrition drink? I think you should be in the convenience channel. And then secondly, on GLPs, any new data on how the growth of GLPs is helping your business?

Convenience channel is still a future opportunity. It represents about 10% of the overall category. So relatively small. I agree, we should be there. We will be there. But right now, there are other opportunities that are bigger. One of the -- and we've had a fair amount of conversations in the past about just DSD specifically. And we've been doing some work on our side to evaluate that. For now, I think what we're doing is we're kind of testing a hybrid strategy, which we like to call like ship via warehouse, merchandise like a DSD within our channels. And so we're seeing how far that can get us without going all the way to DSD. But convenience, yes, future opportunity, but not immediate. So that's the first one. Second one is GLP-1s. Yeah, so we track it very closely as you might expect. And I would say the headlines tracking much. So the penetration of GLP-1s based on our research is much faster and bigger than what I think the original base case that Morgan Stanley put together. And what -- I would say the one change, it benefits, definitely benefits our products specifically more -- both ready-to-mix and -- ready-to-drink and ready to mix, but a little bit more on the ready-to-drink side. We estimated that it represents about a quarter of our growth. That is still the case. The only change that we saw in the past quarter from our research is, a few more people lapsing. So in essence, the penetration, the household pen, so to speak, is pretty stable. It's not growing anymore. And what we're seeing is there kind of as many people entering or starting with GLPs as coming off and what -- and the reason is because they basically hit their target weight. And so they're sort of -- it's plateauing a bit. We'll watch that carefully in the next coming -- the few coming quarters, but we still see it a big, a nice tailwind for the category.

That's interesting. So when you say that it represents 25% of your growth, if penetration rates do stabilize here, what would happen to that 25% number? Does that mean that it goes to zero or how do I connect those two?

I think that it continues, because of the people that start GLPs, I mean, not everybody is on using RTDs. So I think that it will continue to grow. Also, it's one quarter, it's stabilized. I mean, I think this is really, it's new. So we got to keep watching it. But I think what's encouraging is that, people use RTDs when they're on the drugs, but then they also use them after. So when they come off of it. And so to keep the benefit. So I just think that it's still ultimately, we still have a low household penetration category. Our product is still in a 20% household pen. And so we have a -- this is just one of many growth drivers that we see on our business as well as the category.

Got it. Thank you.

Yes.

Thank you. This concludes our question-and-answer session. Thank you for your participation. You may now disconnect. Everyone, have a great day.