NYSE:BRBR BellRing Brands Q3 2024 Earnings Report $74.75 +0.82 (+1.11%) As of 03:59 PM Eastern Earnings HistoryForecast BellRing Brands EPS ResultsActual EPS$0.54Consensus EPS $0.44Beat/MissBeat by +$0.10One Year Ago EPS$0.34BellRing Brands Revenue ResultsActual Revenue$515.40 millionExpected Revenue$504.73 millionBeat/MissBeat by +$10.67 millionYoY Revenue Growth+15.60%BellRing Brands Announcement DetailsQuarterQ3 2024Date8/5/2024TimeAfter Market ClosesConference Call DateTuesday, August 6, 2024Conference Call Time9:00AM ETUpcoming EarningsBellRing Brands' Q2 2025 earnings is scheduled for Monday, May 5, 2025, with a conference call scheduled on Tuesday, May 6, 2025 at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by BellRing Brands Q3 2024 Earnings Call TranscriptProvided by QuartrAugust 6, 2024 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:00Hello. Thank you for standing by. Welcome to Bellring Brands Third Quarter Fiscal Year 20 24 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. Operator00:00:29I would now like to turn the call over to Jennifer Meyer of Investor Relations for Bellring Brands. You may begin. Speaker 100:00:36Good morning, and thank you for joining us today for Bellring Brands' Q3 fiscal 2024 earnings call. With me today are Darcy Davenport, our President and CEO and Paul Rhode, 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 atbellringdot com. In addition, the release and slides are available on the SEC's website. Speaker 100:01:08Before 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. Speaker 100:01:44With that, I will turn the call over to Darcy. Speaker 200:01:48Thanks, Jennifer, and thank you all for joining us this morning. I have 4 key messages today that I want you all to walk away with. The first, I'm happy to share that we had a strong quarter. The business continues to perform as we bring on new shake capacity and begin to drive demand. Net sales grew 16% over prior year and adjusted EBITDA up 38%. Speaker 200:02:09We saw strength in Premier Protein with net sales up 20%. Our EBITDA margins were above our expectations as we benefited from favorable gross margins. I'm proud of our year to date performance with each quarter delivering above our long term algorithm. My second message, premier shake demand remains strong. The RTD shake category continues to grow with premier protein bringing in new consumers. Speaker 200:02:35Our consumption grew 10% in Q3 and accelerated to 20% in July. Premier Protein hit an all time high in household penetration and remains the highest in the RTD category outpacing its nearest competitor by 6 percentage points. We have the number one velocity SKU across entire RTD category and 80% of our products rank in the top third. We continue to believe that the brand has a ton of untapped potential given we haven't started meaningful marketing or innovation. My third message, our production delivered to plan and our outlook has improved. Speaker 200:03:13Our diversified Coman network has consistently delivered to expectations every quarter this year and I'm happy to share that we have secured incremental capacity in Q4. This additional production enables us to fill remaining customer inventory gaps and allows us to rebuild our internal inventories to our target safety stock levels setting us up for a strong fiscal 2025. I would be remiss if I didn't give a huge shout out or as we say ring the bell for our entire organization, but especially the sales and operations teams. It is challenging to manage a rapidly growing business in a dynamic category, but it is incredibly hard to do it with limited safety stock when there is little room for error. So thank you all for your hard work. Speaker 200:04:03What we've learned will benefit us for years to come. My last message really is a culmination of the first three. Our better than expected Q3 performance, confidence in demand and increased Q4 production drove our decision to raise our outlook for the year. We now expect net sales to grow 18% to 20% over fiscal 2023 and adjusted EBITDA to grow 27% to 30%. We are proud of our performance to date and encouraged by our momentum going into 2025. Speaker 200:04:37While certainly not finished with our planning process, our initial estimates for next year are to deliver at the high side of our long term net sales growth algorithm of 10% to 12%. We will provide more details on fiscal 2025 outlook in November. Now to get a bit deeper into the category and brand highlights. The convenient nutrition category grew 7% in Q3 and all forms saw stronger growth versus Q2. Ready to drink led the category up 11% driven by strong velocities and distribution gains. Speaker 200:05:12Mainstream RTD brands continue to drive most of the growth and are bringing in new consumers into the category. Ready to mix grew 8% boosted by feature and display activity. Protein continues to have incredible tailwinds and high relevance with a broad swath of consumers. It is beneficial for almost every age depending on their nutrition and health goals. It is rare to have a nutrient that is equally as critical for a child, a teenager, a pregnant woman, an athlete and an aging adult, while providing a wide variety of benefits ranging from muscle building to weight management. Speaker 200:05:48The more we learn, the more our teams get excited about our future potential given our brand's mainstream appeal. Turning to our brands. Premier shake consumption growth remained strong this quarter, up 10% with volumes up 14%. Growth was robust in mass, food and e commerce driven by strong velocities and distribution expansion in mass and food. Club would be outlier with flat dollar consumption growth versus year ago because of temporary changes in our assortment and flavor specific out of stocks. Speaker 200:06:21Encouragingly, club consumption returned to growth in July and overall consumption grew 20%. Our brand metrics remained healthy. Premier Protein with RTD market share of 21% maintained its position as the number one brand in the RTD segment as well as the number one brand in the broader convenient nutrition category. Both market share and TDPs grew throughout the quarter with TDPs up 13% versus Q2. Expansion in form including bottles and pack size along with improved in stocks drove the distribution gains and we expect further TDP growth in Q4. Speaker 200:07:02As I referenced at the beginning, I'm pleased to see the brand reach another all time high in household penetration with 19% of households drinking Premier Protein. We surpassed our goal for the year, adding roughly 3 percentage points of household penetration in fiscal 2024 with repeat and buy rates continuing to hold steady. Premier Protein continues to bring in new category consumers with almost all of our growth coming from outside the category. All of this is especially encouraging because in a high growth category with low household penetration, we see plenty of room to continue to grow our brand and expand the category. Premier Protein Powder continued its strong trajectory, growing 44% in Q3 behind distribution gains and strong velocities. Speaker 200:07:51In fact, at a major mass customer, we have the number one velocity item in the retailer's powder category. We remain encouraged by the growth potential of the Premier Protein brand in this format and are investing more marketing dollars behind it in Q4. Its household penetration reached 1.8% this quarter and we continue to believe the brand will be a contributor in mainstreaming the powder category in the same way Premier did for the ready to drink category. Turning to DYMETYZE, the brand remains one of the strongest in the category with velocities in the top third at key customers. However, U. Speaker 200:08:29S. Consumption, which covers about 60% of the global brands, was challenged this quarter as a result of tough comparables, continued competitive pressures and ongoing softness in the specialty channel. Despite these headwinds, July had a record e commerce promotion showing there's still a ton of excitement for the brand. It is also worth noting that Diamatized International business, which represents about 30% Speaker 300:08:52of the Speaker 200:08:53brand, continues to be strong with net sales up 18% this quarter. Looking forward, we are increasing investment behind Dymatize in the U. S. Both in marketing and promotion. Our national marketing campaign with San Francisco All Pro running back Christian McCaffrey launches this month. Speaker 200:09:11We are excited to see what this type of top tier spokesperson and amazing creative can do for the brand. Overall, we continue to be bullish on the mainstream powder potential with 2 complementary brands. In closing, I am proud of our year to date progress. We are on track to deliver results ahead of our guide last November. Our confidence in the long term outlook for Bellring brands remains high. Speaker 200:09:37Ready to drink and powder segments are in the early stages of growth with major tailwinds. Premier Protein and Dymatize are leading mainstream brands with low household penetration and strong loyalty with Premier Protein maintaining the number one share position in the category. Our momentum continues to grow on shakes as we start to drive demand. Our capacity plan is on track to support many years of robust growth. I'm excited to see our organization pivot from supply focused to demand driving. Speaker 200:10:08At our core, we are a growth company. So our entire organization is eager to have all of our demand drivers in place for 2025, including our national marketing campaign on our biggest brand. Thank you for your interest in the company. We look forward to providing more specifics around fiscal 2025 next quarter. I will now turn the call over to Paul. Speaker 300:10:29Thanks, Darcy, and good morning, everyone. Net sales for the quarter were $515,000,000 up 16% over prior year, modestly above our expectations. Adjusted EBITDA was 120,000,000 dollars an increase of 38%. Adjusted EBITDA margins were 23.2% meaningfully exceeding our expectations and lifted primarily by favorable gross margins. Starting with brand performance. Speaker 300:10:53Premier Protein net sales grew 20% behind strong volume growth for RTD shakes and powders. RTD shake growth of 19% was driven by organic growth, distribution gains and to a lesser extent higher trade inventory levels. Shipment growth outpaced consumption dollar growth as a result of late Q3 trade inventory builds and lower net retail pricing. Entering the 4th quarter, trade inventory levels are improved and nearly the target levels with the remaining gaps to be filled in Q4. Dymatized net sales decreased 3% this quarter on 4% higher volumes with double digit growth for international more than offset by declines domestically. Speaker 300:11:30For domestic, recall we are lapping a challenging comparable period that included heavy display activity and changes in club distribution. Promotional activity and unfavorable mix were also a headwind to growth this quarter. Gross profit of $190,000,000 grew 40 percent with an increase in margin of 630 basis points to 36.8%. The margin increase resulted primarily from net input cost deflation as we lap elevated protein cost in the prior year. Gross profit in the quarter also included an unrealized mark to market gain on our commodity hedges, which drove 80 basis points of the year over year increase. Speaker 300:12:06Compared to our expectations, gross margins benefited from more favorable whey protein cost than expected and to a lesser extent non recurring cost favorability. SG and A expenses as a percentage of net sales were 14.4% relatively in line with the second quarter with advertising promotion spend 2.9 percent of net sales. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity. We generated $69,000,000 in cash flow from operations in the 3rd quarter and $160,000,000 year to date. As expected, shake inventory levels increased in the 3rd quarter with further increases expected in the 4th quarter driven by incremental production. Speaker 300:12:45As of June 30, net debt was $776,000,000 and net leverage was 1.8 times. With our EBITDA growth and strong cash flow generation, we anticipate net leverage will remain below 2 Speaker 400:12:57times in Speaker 300:12:57fiscal 2024. With respect to our share repurchases this quarter, we bought 1,300,000 shares at an average price of $58.08 per share or $74,000,000 in total. Our remaining share repurchase authorization is $216,000,000 Turning to our outlook. We raised our fiscal 2024 guidance for net sales to be $1,960,000,000 to $2,000,000,000 and adjusted EBITDA of $430,000,000 to $440,000,000 Our guidance implies strong top line growth of 18% to 20% and adjusted EBITDA growth of 27% to 30% with healthy adjusted EBITDA margins of 22.0% at the midpoint. The updated guidance reflects our better than expected Q3 results, confidence in demand and increased shake production in the 4th quarter. Speaker 300:13:38Our updated guidance implies 4th quarter net sales growth of 14% at the midpoint with premier protein the main driver. Dymatized and all is expected to be relatively flat year over year. Premier Protein growth is largely volume based on distribution gains, higher LTO volumes and continued robust organic growth, partially offset by reduced club promotional activity. We expect shipment dollar growth for Premier RTD shakes to modestly outpace consumption growth as we fill the remaining retailer inventory gaps and load new distribution. 4th quarter gross margins are expected to improve meaningfully over the year ago quarter benefiting from lower net input cost while higher marketing outweighs the gross profit margin improvement. Speaker 300:14:18Lastly, we expect 4th quarter adjusted EBITDA margins to be down slightly compared to prior year. In closing, we are pleased with our year to date performance. Our momentum is high and we are well positioned to close out the year. I will now turn it over to the operator for questions. Operator00:14:33Thank Our first question comes from the line of Andrew Lazar with Barclays. Your line is open. Speaker 500:14:58Great. Good morning, everybody. Speaker 200:15:00Good morning. Speaker 500:15:02Darcy and Paul, I think last quarter you mentioned you were planning for a price increase to start hitting in the Q4 on premier ready to drink shakes. Is that still the plan given that you had much more favorability in input costs this quarter than you thought? Speaker 300:15:19Yes. We are still moving forward with the price increase. Keep in mind that a lot of the favorability in this particular quarter was related to whey protein powders, which is the input cost for our powder business not our shakes. So a lot of the favorability was on whey protein and that is as you may recall from last quarter, we talked about there was a very sharp rise expected in the 3rd quarter on whey protein cost. For us, we're just a bit conservative on how quickly that flowed into our P and L. Speaker 300:15:49And so we saw some favorability because of primarily because of whey protein, so it's not as much related to shakes. Shakes were pretty much largely on track on cost. Speaker 500:15:57Great. Thanks for that. And then Darcy, you mentioned securing some incremental capacity that will help you in the Q4 to get back to your all the way to your target sort of inventory or safety stock levels. Was that incremental capacity that was already in the pipeline that's just now sort of coming online or was it incremental to sort of what you had planned for this year? And then as part of that, have you formally committed to increasing the number of lines beyond the initial 4 at each of your 2 greenfield facilities yet? Speaker 500:16:29I know you've been considering it for some time, but I'm just wondering how that looks as you think through potential supply needs for 2026 and 2027? Thanks a lot. Speaker 200:16:39Yes. The incremental capacity was incremental to what we originally thought at the beginning of the year. So very good news. We have been pushing our existing co mains for more capacity for the last couple of years. And, this is really the first time that we've been able to secure some. Speaker 200:17:00So I think it's good news. I think it's good news that our co mans have fully stabilized and are now actually having some efficiencies that they're able to pass on. So all around very good news. As for the expansion of our co mans with new lines, we have not we're in the process of evaluating who we're going to expand with. But generally, the timeline is the same. Speaker 200:17:35We expect to need new capacity in 2026. Speaker 500:17:40Thanks so much. Speaker 200:17:42Thank you. Operator00:17:43Thank you. Please stand back for our next question. Our next question comes from the line of Ken Goldman with JPMorgan. Your line is open. Speaker 600:17:54Hi, thanks so much. I appreciate the early look into the top line next year with the understanding that the year hasn't even started yet. I was just curious, are there any early reads just as we think about the flow through of the top line to the bottom line, any particular tailwinds or headwinds we should think about in terms of costs that might lead EBITDA growth to veer more than usually or positively or negatively from where sales growth is? Speaker 300:18:25Yes. Good morning, Ken. So a couple of things that I would say for thoughts for fiscal 2025. First, we're talking we've obviously highlighted that we expect to that fiscal 2025 for our shake business will driving demand, which would suggest obviously incremental marketing spend, potentially promotional spend. So as we look from 2024 to 2025, I would expect to see some step up on the marketing line and then promotion perhaps. Speaker 300:18:53And obviously, we may toggle between those 2 as we make decisions on driving demand on promotion versus marketing. The other one is we are expecting inflation to continue into 2020 or to increase in 2025 versus 2024. It's more impactful on our powder business. We're expecting a pretty sizable step up starting really in Q4 and then into the first half of next year. But on powder on our shake business, we still expect some inflation throughout the year, but obviously we've taken a price increase there. Speaker 300:19:24So I think we can largely offset with our price increase on shakes. But going forward, I expect some headwinds on inflation, perhaps some headwinds on marketing and promotion. Speaker 600:19:38Thank you. And then for a follow-up, we started to see your biggest shakes competitor or Speaker 300:19:46at least what we would see Speaker 600:19:47as your biggest one gaining shelf space in the mainstream beverage aisle in a couple of sort of traditional supermarkets. I'm just curious, is this something that's getting more widespread? Is it more anecdotal? And I'm just curious if it sort of accelerates your desire to migrate the Premier Shake brand a little bit more into the more mainstream part of stores as well or if it's not really a consideration at this point? Thank you. Speaker 200:20:16So, yes, we've absolutely been tracking it and it's true. There's been some expansion and it's really through DSD. Not surprising that that competitor has expanded into the beverage aisle. As you remember getting out of the aisle, so it's kind of I think I would separate our strategies into 2 pieces. 1 is more the near term of getting out of the aisle, right? Speaker 200:20:44So getting out of the aisle, has always been a key part of our strategy. That can show up in a couple of different ways. 1 is endial display. The other is displays in other part of the store. And we have been actively pursuing that both of those strategies, especially with that is a key part of our single strategy. Speaker 200:21:09You actually go out to we saw a lot of this quarter and we'll see it next quarter, a fair amount of bottle displays and you'll see it everywhere from right adjacent to the pharmacy section where we are to at checkout you'll see them in coolers and you'll even see them in other areas of store like near the deli. So absolutely a key part of our strategy. Then if you look more long term which is I think what you're more asking which is around the movement of us into a more mainstream aisle. And that and I would say that we are still actively evaluating. We actually think that we can get a lot of the bumps, of eyeballs of awareness and therefore trial by the first two strategies which is just endial display and multiple placements around the store versus the actually picking up the category and moving, but we're absolutely evaluating. Speaker 600:22:26Got it. Thank you so much. Speaker 200:22:28Thanks. Operator00:22:29Please stand by for our next question. Our next question comes from the line of Thomas Palmer with Citi. Your line is open. Speaker 700:22:41Good morning and thanks for the question. You noted in the prepared remarks how innovation for Premier Protein has maybe not been as big of a focus in part due to some constraints. Is there a point as we look out towards next year that this starts to ramp up and become a bigger focus? And then just any examples to highlight on this front? Speaker 200:23:03Yes. So I would put innovation into 2 buckets. The first bucket is what I call little I innovation which is basically pack size format expansion. So that can be a combination of like we have bottles, it can be bigger packs, smaller packs, it can be different sizes, which we'll get at different macro levels of protein. So that in my mind is kind of little I innovation. Speaker 200:23:35Flavor also is put into that segment. We see just a ton of opportunity in with Little I Innovation. When you talk about Big I Innovation and that is really going for incremental consumers and incremental occasions, Yes, so that we've kind of put on the back burner because of capacity, but you'll see us increasing focus and increasing launches of new lines in 2025. Obviously, I'm not going to get into what that innovation is on a public call, but you'll see a couple of new lines come out on Premier Protein next year. Speaker 800:24:23Great. Thank you. And then on DYEMATIZED, Speaker 700:24:28what's the messaging, I guess, in this new marketing campaign? And what's the target? Is it more customer awareness for the brand? Is it trying to differentiate the brand in what seems to be maybe a little bit more of a competitive segment right now? Just any help on that as we move into the back half of this campaign launches? Speaker 200:24:51Yes. So the focus is and you'll it actually hits the air this week. So you should hopefully see it. The focus is really around awareness. I mean our household pen is 1%. Speaker 200:25:08So it's around awareness of the brand. Dymatize is a premium product and so which consumers are expected to pay more for. And so we want to explain why it's worth it and why people should really kind of graduate to dimatize. And we're doing it with borrowed equity of Christian McCaffrey. What's amazing about him is it is a super authentic connection because he already uses Dymatize in his kind of nutrition and workout regimen. Speaker 200:25:48And it is a key part of his success. So it is not by coincidence that we're launching the campaign right as football season is starting. And so that is and obviously he is a big name. So, that is that's the focus. It is an awareness campaign, and it's focused around the dimatized equity. Speaker 200:26:11In addition to that equity campaign, we also have a couple other spots that will focus on flavor. So if you think of kind of upper funnel, lower funnel of a marketing campaign, upper funnel is we have both going on within the campaign starting in Q4 and then it will continue into 2025. Speaker 800:26:36Thanks for all the detail. Operator00:26:39Thank you. Please stand by for our next question. Our next question comes from the line of Brian Holland with D. A. Davidson. Operator00:26:49Your line is open. Speaker 800:26:51Yes, thanks. Good morning. Maybe just referring back Paul's earlier response and question about pricing, mindful of when commodities are flowing through the P and L and also more broadly just kind of the volume, the challenging volume backdrop across CPG. Just any sense you can provide or share with respect to customer response to the pricing that you announced last quarter? Speaker 200:27:19Paul, you want me to answer that? Speaker 300:27:20Yes, please. Speaker 200:27:22Yes. So, I mean pricing is never easy. What I will say is it is helpful that other competitors have taken pricing recently. And again it is because that of the rising cost of specifically manufacturing, labor, freight, etcetera. So we're seeing some increases and other people are passing it on too and they did it before us which always helps. Speaker 200:27:52And then but no major pushback, I would say, and it's all of them are over the line. Speaker 800:28:03Perfect. Thanks. And then I wanted to ask about we're getting asked about private label competitive dynamics with some rollouts, particularly in whey powder. So Darcy, I was hoping maybe you could just provide a little bit of perspective on what private label looks like in this in the categories you compete in more broadly? And maybe any historical perspective to help sort of frame what private label has done in this category and maybe the limits to its ability to take share, if that makes sense? Speaker 200:28:44Yes. So private label in it's definitely less, I guess, mature in this category than in others. It in RTD it's about 9%. Powders is about 4.5%. Just realize that more and that's in tracked channels. Speaker 200:29:06So, just remember that most of the powder category there's just less in tracked channels, for powder. So, I mean, our estimates are actually for powders it's probably closer to where RTD is so call it 9% to 10% if you kind of look at the whole marketplace. And same thing for bars. So what has what is interesting is for the most part it's maintaining share. So, it's not growing faster in our category than the branded players. Speaker 200:29:41So it's just maintaining share. And that has been the case for the last few years. This just happens to be now there are as you know there are stronger private labels and less strong private labels. So I think the success depends on the retailer. However, I would generally say that in this category people look for trusted brands. Speaker 200:30:21And so and that has been the case. I think where we saw it first go was I think it has to do borrowers, I would say had a bigger I would say went private label first, then powder and I think RTDs will be last. And part of that has to do with the just dynamic in the category, meaning that there just isn't a lot of capacity in RTDs. It's very complicated to produce. The private label within RTDs at least are concentrated in a couple of retailers. Speaker 200:30:59And others have tried and have not been successful and so I think are a little scared of it. So does that give you some reference and context? Speaker 800:31:11Yes. No, that's extremely helpful, Darcy. I can leave it there. Thank you. Operator00:31:15Great. Please stand by for our next question. Our next question comes from the line of Yasmeen Deswanaj with Bank of America. Your line is open. Speaker 900:31:29Hey, guys. Good morning and thanks for the question. So I just had a quick one on Premier. So you said you had strong consumption growth in all key channels with club being the exception. Are you able to quantify the impact of the temporary changes in assortment? Speaker 900:31:44And also you mentioned that club consumption began to accelerate in June and into July. So is there any way to quantify that? And do you expect that acceleration to hold in 4Q or even accelerate further Speaker 400:31:57from there? Speaker 200:31:59Okay. Sorry, there were a lot of questions in there, Yasmin. Can you just Speaker 400:32:02Sorry, sorry. Speaker 200:32:03Sorry. Yes, yes, yes. Can you just say the question one more time? Speaker 900:32:07Yes. So just the first question of all of that is just are you able to quantify the impact of the temporary changes in assortment in 4Q, just as it relates to club kind of being weaker than the rest of the channels in Premiere? Speaker 300:32:22And you said Q4 Speaker 200:32:23Yes, Paul, do you want to give that? Speaker 300:32:25I just want to clarify, are you saying the temporary changes in Q3? Or you said Q4, just want to make sure, okay. Yes. So we did have some changes in club assortments in the Q3 primarily with one of our largest club customers, which did start to ship in late in the quarter and early into the Q4. So we should see the year over year headwind of that change in Q4 as we move forward. Speaker 300:32:57I don't know if I have a precise number of what we think that impact was, but certainly it had an impact to the club growth in the quarter, as well as just some of the out of stocks and some of our other club customers, which vastly improved as we got later into Q3 and you're seeing that in the growth as we hit late Q3 into Q4. Yes. Speaker 200:33:17And yes, if you're thinking about headwinds to consumption, I think that I mean our Q3 consumption was lower than what we expected and we would say that we would have expected about 4 percentage points higher than what we saw. So the combination of the and basically that was due to some delayed shipments that went out. And so part of about 3 points of that was replenishment for out of stock and about one point of that was due to new products being shipped in. So hopefully that helps with around 4 points of consumption. Speaker 900:34:01Okay, great. That's really helpful. And just a quick follow-up and it's a more higher level question. I just had a quick one on your target consumer base as it relates to growing household penetration. I know you said previously that this is a more adult brand, but I saw recently that there was an activation in New York and these pop ups tend to skew towards younger audiences. Speaker 900:34:21So could you just talk a little bit about the consumers that you plan to address from here and how you expect that to drive continued household penetration growth? Speaker 200:34:31Yes. So you saw the ice cream pop up? Speaker 400:34:34Yes. I saw that. Speaker 200:34:36That was very successful. And so yes, so low household penetration category, low household penetration brand. So, currently, our average age is right call it early 40s but ranges. And so we our marketing campaign will really focus on that we're trying to get to kind of younger the younger population where we can bring them into the category early and then keep them throughout. So as you can tell that was one kind of that was one test activation but you'll start seeing it as we build out our marketing campaign for next year for Premier, you're going to see that come through in the creative of who we show as well as if you can see it through just the targeting efforts. Speaker 900:35:41Okay, great. Thanks so much guys. Operator00:35:51Our next question comes from the line of Robert Moskow with TD and Cowen. Your line is open. Speaker 1000:35:57Hi, thanks for the question. Just to clarify, I think you said consumption was about 400 basis points lower than what you thought for various factors. Was that for all channels or is that just for club? I didn't catch it. Speaker 200:36:15All channels, but it was majority the most of the effect was club as well as some food. Speaker 1000:36:22Okay. And the reason I ask is, if you just look eyeballing Slide 8, if you look at the consumption trends for Premier Protein RTD, it's your biggest segment. The comps get really difficult in October and Q4 in general, growth up 36%. And do you need some kind of major acceleration? And are you expecting a major acceleration in kind of this tracked consumption pattern in 4Q? Speaker 1000:36:58And do you think that would be how would that relate to shipments? Because I know you're still filling inventory gaps. Do you think shipments could be even higher than that? Speaker 300:37:08Yes, I'll take the latter. Speaker 200:37:10Yes. You can do that, yes. Speaker 300:37:11Yes. So as I mentioned in my prepared remarks that we do expect shipments to modestly out pace consumption growth. So shipment growth slightly outpaced consumption growth in the Q4 and that's because we're continuing to replenish the remaining out of stocks and getting our retailers' inventories full, but also shipping new distributions. Darcy touched on some of this before. So we've got some bottles going in and some other distribution. Speaker 300:37:37So yes, we expect a modest increase or shipments ahead of consumption in the Q4. As far as the chart you're referencing, I think you're looking at the October timeframe. So last year, we did in August have a club event. We called it a small club event in August. And so that's what you're seeing kind of in the 13 week rolling as it gets to October. Speaker 300:38:02It's mainly the impact of that August promotion. We are lapping that this year. We're doing less days on promotion. So it is a bit of a headwind for us in the Q4, but that is all contemplated in our guidance and our thinking around shipments versus consumption. Speaker 600:38:19Okay. So let's Yes. Operator00:38:20And Rob just to Speaker 900:38:21Go ahead. Speaker 200:38:22I know that there is we both are focused. Go ahead. Speaker 1000:38:28Darcy, you go first. You're CEO, so please go ahead. Speaker 200:38:31Well, I know that everybody is focused a lot on consumption, which I understand why. So I thought it might help a little bit to give you some of the monthly dynamics that we expect in Q4. Obviously, July was really strong at 20%. And then but that will we expect overall Q4 consumption to be kind of like low teens. So we'll see and that was some of the dynamics that Paul was just talking about. Speaker 200:39:00In August, you should expect especially late August, you should expect a consumption dip and it's mainly because we're lapping that club promotion that is in untracked channels but is captured in MULO plus and then you'll see an acceleration into September. So you see strong July, come down a bit in August because of the lapping of this club promotion and then increase again in September. Speaker 1000:39:33That's very helpful. Thank you very much. Operator00:39:36Yes. Thank you. Please stand by for our next question. Our next question comes from the line of David Palmer with Evercore ISI. Your line is open. Speaker 700:39:50Thanks. And thanks also for that last point. Just a follow-up on that. If we were to broaden out and just think about volatility as we're seeing in the data or maybe we can do a retrospective and look at how the sales have been volatile in the past. How much of that volatility do you think is related to not only an ebb and flow of your capacity constraints, but also a key competitor's capacity constraints maybe being different than yours, maybe they had it at different points in the past making for easy comparisons competitively. Speaker 700:40:28And then you perhaps had some constraints in addition to the assortment reset that you talked about in this last quarter. Just any comments on that and even how that governs the comparisons that we'll be seeing in the coming quarters? Speaker 200:40:45Yes. So I'll start with our I hate to use the word volatility, but the changes within our consumption patterns are absolutely a reflection or exacerbated by our lack of safety stock and lack of trade inventory. So I'm going to give you so I mentioned that consumption was below what we expected in Q3. The reason was timing and what happened was we had some shipments that were planning to go out in May. They didn't go out. Speaker 200:41:29They were delayed until June and the associated consumption got pushed to July. Well, this happens all the time. We have changes of releases based on what we expect but you don't see it or consumption doesn't reflect it because the retailer has enough trade inventory. We have enough safety stock to basically blunt those kind of changes. And because we do not, some of these show up in the consumption. Speaker 200:42:09So when we get back to which we're close, when we get back to adequate safety stock as well as adequate trade inventory, we just will not see these types of kind of I guess volatility as you put it. The second piece is this is completely having to do with our safety stock and our trade and the retailers' trade inventory less about competition. Interestingly enough, I mean I talked about the category being that is really the growth is driven by the mainstream brands. Well, the mainstream brands us as well as biggest competitor all of our growth almost all of our growth is coming from outside of the category. So there really is not very much brand shifting between the 2 brands. Speaker 700:43:11Thank you for that. And just by judging on your EBITDA margins for this year, it looks like you'll finish above the 18% to 20% long term guidance. How are you thinking about your long term margin now? Is that something that could be in the low 20s longer term? Speaker 300:43:31Yes. We obviously, yes, as you mentioned, we're having a strong margin year keeping in mind that it's still not a full demand driving year on especially on our biggest business Premier Protein. So I wouldn't think I don't think the 20% is our new normal. But yes, it's something we're certainly evaluating it. We like our long term algorithm, gives us flexibility on spend, but we've always said that our target was to be on the upper part of that and we've been consistently on the upper part of that, but we'll continue to reevaluate it and obviously when we come to November, we'll give our thoughts on how it plays out in fiscal 2025. Speaker 700:44:12Okay. Thank you. Operator00:44:15Thank you. Please stand by for our next question. Our next question comes from the line of Jim Solera with Stephens. Your line is open. Hi, guys. Operator00:44:25Thanks for taking Speaker 400:44:26our question. Darcy, I wanted to drill down a little bit in club. In my area in the Midwest, I've seen a pretty significant increase in promotion from albeit smaller competitors, but other competitors that have RTD shake offerings. I guess first question is, is that something that you see more broadly or maybe that's more concentrated in my area? And 2, as you think about maybe the promotional cadence moving forward and maybe the ability for the category to take price, should we think about kind of alternating promotions between brands as putting a ceiling on pricing power from the category? Speaker 200:45:13Let me answer your first question and then I might need a little bit of clarity on the second one. So in club, yes, promotional intensity has increased a little bit and it's really it's actually not the top 2 brands but all the rest of them as you said. I will say and that is not a new trend that is really over kind of the last call it year ish. And there seems to always be somebody, a brand on promotion and VM. So that is, I would say, more of a kind of a long term trend. Speaker 200:46:00The second and is that indicative of the rest of the marketplace? Definitely in powder there and I talked about it on the last call and this trend continued where there has been an increase in discounting and promotional intensity on powders for sure across the marketplace. RTD it hasn't been extreme it hasn't been as extreme but there's definitely been an uptick in promotion on RTDs. And I think it really has to do with capacity coming on. I think that we have a little bit more capacity and so people are able to get back to driving demand. Speaker 200:46:50And sorry, what was the second question? Speaker 400:46:53Yes. The second part was really just if there's kind of this always on promotional calendar for the space, does that limit pricing power just given the value gaps if there's always somebody in the category that has a promo on even as your promos kind of roll on and off? Does that limit how much price you can take because you need to keep kind of a relative gap to whoever's on promo at that time? Speaker 200:47:22No. I mean, I think that we I'll just talk for our brand. I feel very good about our pricing power. And we're we have an incredibly strong brand with high loyalty and I think we've shown that consistently over the course of kind of the last few years given the performance of the business despite capacity constraints. Really consumers have stayed with us. Speaker 200:47:54So I think that for us, we are not going to go we do not need to go deep on promotion. I have said this before, the key for promotion for us is getting display. So we will do as little TPR as we need to get the display because the display is where we get the eyeballs, the eyeballs are where we get the trial, the trial is where we get the repeat and there it goes from there. So, that will be our focus and we see we have 2 major drive periods. Everybody enters into the category really in our Q2 Jan Feb March. Speaker 200:48:39So that's a big drive period. And we started we got back to promotion this year during Q2. We will expect to do it again next year. And then we will also have kind of a second drive period in the Q4 period. And it will be a little bit lighter because again I think we've learned that we don't have to go deep or really as frequent. Speaker 400:49:05Okay, great. I appreciate the color. I'll hop back in the queue. Operator00:49:10Thank you. Please stand by for our next question. Our next question comes from the line of John Anderson with William Blair. Your line is open. Speaker 400:49:20Hi, thanks for the question. I was wondering if you could talk a little bit about fall shelf resets and how your expectations are there perhaps relative to last year? And is that kind of factored into your expectations for shipments to run ahead of consumption in the Q4? And then the second follow-up question is just on capacity. You've had your base plan for capacity and now secured some incremental capacity on top of that. Speaker 400:49:53I'm just wondering where that maybe puts you in terms of supporting sales growth in 2025? Thanks. Speaker 200:50:04TDPs for Q4, we do expect some increases. There will be a combination of so if you actually if you look at the supplemental presentation on page 10 is a great graph to show the increases. We did get fairly big increase last year and that was around a mass retailer that we expanded shelf space a fair amount. We will see some increase in Q4, not as dramatic as we did last year, but we got some nice space in that retailer and then we'll also see a little more favorability from just filling the gaps of trade inventory that we didn't fill in Q3. So part of the increases will be out of filling the trade inventory for the ones that are left and then partially it's going to be shipping in for new distribution. Speaker 200:51:06So yes, we do expect and Paul said this in his prepared remarks, we do expect to have shipments a little bit ahead of consumption in Q4. The second piece is capacity and yes, the incremental production that we secured this quarter really sets us up nicely. It allows us to not only deliver our guidance and actually raise it, but also fill our get to our target weeks of safety stock, which is 8 weeks that going into 2025. So we're in a great place to really hit the ground running and get back to demand driving. Speaker 400:52:01Thanks so much. Operator00:52:03Thank you. Please standby for our next question. Our next question comes from the line of Bill Chappell with Truist Securities. Your line is open. Speaker 1100:52:14Thanks. Good morning. Speaker 800:52:16Good morning. Speaker 1100:52:17Hey, just two questions. 1, I didn't fully understand. When you talked about the consumption 400 basis points below your expectations and a lot of that coming from the club channel. I'm just trying to understand why it was below your expectations? You just seem to have a good handle on obviously club channel and shipments and products and stuff like that. Speaker 1100:52:38So was there something that surprised you intra quarter or just help us understand that? Speaker 200:52:46Yes. So go ahead. Why don't you get Speaker 300:52:49Yes. No. Yes, I think Darcy touched on it a little bit earlier. So it really comes down to the timing of shipments. So we did have some shipments into club and to other customers to refill some of the out of stocks as well as to ship some of the new distribution in bottles and other in some of our other flavors. Speaker 300:53:10It just happened later in the quarter than we expected. And so that was a direct that had a direct impact on our consumption growth in the Q4, which as Archie mentioned a minute ago, it was about a 400 basis point headwind to our consumption growth. So we're around 10%. If you add that, that would put our consumption growth at about 14% if that was shipped on time. We have shipment timing changes from time to time. Speaker 300:53:34It's not uncommon. It's just when you're not to pull safety stock internally, those things sometimes fall out and that's what we saw in the quarter. Speaker 1100:53:44Got it. And I'll have a follow-up and then I have another follow-up. But did that then impact your July sales is why it got a boost because of the timing of shipments? Speaker 300:53:55I would not say it necessarily well, let me back up. So you saw consumption start accelerating in June and more into July and that is largely because of us getting that those out of stocks filled as well as getting that distribution into the trade. So that did have a direct impact on consumption, which is why you saw it accelerate in June and further into July. Speaker 1100:54:17Got it. Okay. And then my real follow-up, just back on pricing and especially as we move forward, I mean, I'm just trying to couple the commentary of everyone in your category is playing well in the sandbox on pricing, but you're sourcing most of your new customers outside the category. And so as we hear of CSDs and energy drinks and others talking about more promotional levels just to kind of revive their categories. Does that come into your thought process as you think about pricing and promotion as we move into fiscal 2025? Speaker 200:54:55I think Bill, I think this comes to what are they trading what are they giving up to buy so the people outside of the category what are they giving up to buy a shake? So for instance most of our most of our occasions are breakfast replacements. So, in essence what consumers are trading out is an Egg McMuffin, a bagel and cream cheese, etcetera. And so those things are for the most part more expensive than a $2 shake. And so I think that that is where I think we see we have and you were so not only is it less expensive, but it's also a much more healthy breakfast. Speaker 200:55:49And so I think that's where you're seeing and that's why we feel like all of our data would say that we have pricing power. Speaker 1100:55:56Got it. No, that helps a lot. Thank you. Operator00:56:00Thank you. Please standby for our next question. Our next question comes from the line of John Baumgartner with Mizuho Securities. Your line is open. Speaker 1200:56:12Hi, good morning. Thanks for the question. Operator00:56:15Good morning, Doug. Speaker 1200:56:16First off, Darcy, I wanted to ask about innovation and long term development of Active Nutrition. And you touched on it a bit with your comment on Big Eye Innovation. But more broadly, as we see the high protein, low sugar formulations becoming standardized, to what extent do you think this category can evolve? I guess similarly to energy drinks where you're now including ingredients and functions in combination with caffeine. I mean, how do you assess proteins ability to evolve similarly between liquids and powder? Speaker 1200:56:44And I'm thinking here 3, 5, 7 years not a fiscal 2025 comment. Speaker 200:56:51Well, I think the first piece and it goes back to what I talked about in my prepared remarks just about kind of how amazing the nutrient of protein is. And just how the more we learn that the wide variety of people it is beneficial to, which obviously has innovation ramifications as well as the benefit it provides which also has innovation ramifications. So I think there is such a huge opportunity which actually I know you asked about big eye innovation but actually that is the reason why we are so encouraged by the little I innovation because there is so much upside just by putting our existing formula or something close to it in different packages in different kind of pack sizes in different formats. So there's that because there's a ton more kind of household penetration potential. Then you go to the Bigeye Innovation and if you look 5, 7, 10 years out, I think what you'll see is protein as a part in complement with other functional ingredients. Speaker 200:58:21I mean I think that the specialty if you walk into a the mainstream gets influenced by kind of 2 places. 1 is sports nutrition in kind of the specialty world you walk into a vitamin shop at GNC and you see where that part that side is going or from like natural right. So those are the two places that influence it the most. And when you go into those places you see a combination of real food. So that has an influence. Speaker 200:58:58But then you also see really leaning into function. And so I think that's where the category will go. Speaker 1200:59:08Great. Thanks for that. And then as a follow-up, in terms of competition in RTD, Texas supply has been the standard and tightness has been a major barrier to entry. We're seeing some of the newer entrants adopting bottles. And I'm curious your take on industry bottle capacity, the extent it can be a means for newer players to sort of circumvent the tetra tightness and the extent to which bottles can play in channels such as mass and club as opposed to just more of a single serve opportunity? Speaker 200:59:37So bottles is also constrained and it really is I think that what is constrained is the upstream aseptic processing. So whether you put it in a bottle or a tetra, it is the aseptic processing upstream capacity that is constrained. But I think that in general in the same time that the tetra capacity is opening up so is the bottle capacity and that is what you're seeing. And yes, I think we see the opportunity for bottles for us because it's a smaller part of our business. We actually see the potential for the growth potential of bottles actually the growth being bigger for us not numbers of shakes, but we see that there be there is a and that's when I talk about format, that is one of the formats that we see potential with. Speaker 1201:00:42Great. Thank you, Darcy. Operator01:00:45Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. This concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallBellRing Brands Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) BellRing Brands Earnings HeadlinesUBS Initiates Coverage of BellRing Brands (BRBR) with Neutral RecommendationApril 24 at 12:48 AM | msn.comBank of America Securities Sticks to Its Buy Rating for BellRing Brands (BRBR)April 17, 2025 | markets.businessinsider.comThe Crypto Market is About to Change LivesI've discovered something so significant about the 2025 crypto market that I had to put everything else aside and write a book about it. This isn't just another Bitcoin prediction – it's a complete roadmap for what I believe will be the biggest wealth-building opportunity of this decade. The evidence is so compelling, I'm doing something that probably seems insane: I'm giving away my entire book for free. April 24, 2025 | Crypto 101 Media (Ad)Morgan Stanley Remains a Buy on BellRing Brands (BRBR)April 17, 2025 | markets.businessinsider.comFive of the Top Better-for-You Snack Stocks for 2025April 14, 2025 | baystreet.caThe American Packaged Food IndustryApril 11, 2025 | uk.finance.yahoo.comSee More BellRing Brands Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like BellRing Brands? Sign up for Earnings360's daily newsletter to receive timely earnings updates on BellRing Brands and other key companies, straight to your email. Email Address About BellRing BrandsBellRing Brands (NYSE:BRBR), together with its subsidiaries, provides various nutrition products in the United States. The company offers ready-to-drink (RTD) protein shakes, other RTD beverages, powders, nutrition bars, and other products primarily under the Premier Protein and Dymatize brands. 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There are 13 speakers on the call. Operator00:00:00Hello. Thank you for standing by. Welcome to Bellring Brands Third Quarter Fiscal Year 20 24 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. Operator00:00:29I would now like to turn the call over to Jennifer Meyer of Investor Relations for Bellring Brands. You may begin. Speaker 100:00:36Good morning, and thank you for joining us today for Bellring Brands' Q3 fiscal 2024 earnings call. With me today are Darcy Davenport, our President and CEO and Paul Rhode, 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 atbellringdot com. In addition, the release and slides are available on the SEC's website. Speaker 100:01:08Before 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. Speaker 100:01:44With that, I will turn the call over to Darcy. Speaker 200:01:48Thanks, Jennifer, and thank you all for joining us this morning. I have 4 key messages today that I want you all to walk away with. The first, I'm happy to share that we had a strong quarter. The business continues to perform as we bring on new shake capacity and begin to drive demand. Net sales grew 16% over prior year and adjusted EBITDA up 38%. Speaker 200:02:09We saw strength in Premier Protein with net sales up 20%. Our EBITDA margins were above our expectations as we benefited from favorable gross margins. I'm proud of our year to date performance with each quarter delivering above our long term algorithm. My second message, premier shake demand remains strong. The RTD shake category continues to grow with premier protein bringing in new consumers. Speaker 200:02:35Our consumption grew 10% in Q3 and accelerated to 20% in July. Premier Protein hit an all time high in household penetration and remains the highest in the RTD category outpacing its nearest competitor by 6 percentage points. We have the number one velocity SKU across entire RTD category and 80% of our products rank in the top third. We continue to believe that the brand has a ton of untapped potential given we haven't started meaningful marketing or innovation. My third message, our production delivered to plan and our outlook has improved. Speaker 200:03:13Our diversified Coman network has consistently delivered to expectations every quarter this year and I'm happy to share that we have secured incremental capacity in Q4. This additional production enables us to fill remaining customer inventory gaps and allows us to rebuild our internal inventories to our target safety stock levels setting us up for a strong fiscal 2025. I would be remiss if I didn't give a huge shout out or as we say ring the bell for our entire organization, but especially the sales and operations teams. It is challenging to manage a rapidly growing business in a dynamic category, but it is incredibly hard to do it with limited safety stock when there is little room for error. So thank you all for your hard work. Speaker 200:04:03What we've learned will benefit us for years to come. My last message really is a culmination of the first three. Our better than expected Q3 performance, confidence in demand and increased Q4 production drove our decision to raise our outlook for the year. We now expect net sales to grow 18% to 20% over fiscal 2023 and adjusted EBITDA to grow 27% to 30%. We are proud of our performance to date and encouraged by our momentum going into 2025. Speaker 200:04:37While certainly not finished with our planning process, our initial estimates for next year are to deliver at the high side of our long term net sales growth algorithm of 10% to 12%. We will provide more details on fiscal 2025 outlook in November. Now to get a bit deeper into the category and brand highlights. The convenient nutrition category grew 7% in Q3 and all forms saw stronger growth versus Q2. Ready to drink led the category up 11% driven by strong velocities and distribution gains. Speaker 200:05:12Mainstream RTD brands continue to drive most of the growth and are bringing in new consumers into the category. Ready to mix grew 8% boosted by feature and display activity. Protein continues to have incredible tailwinds and high relevance with a broad swath of consumers. It is beneficial for almost every age depending on their nutrition and health goals. It is rare to have a nutrient that is equally as critical for a child, a teenager, a pregnant woman, an athlete and an aging adult, while providing a wide variety of benefits ranging from muscle building to weight management. Speaker 200:05:48The more we learn, the more our teams get excited about our future potential given our brand's mainstream appeal. Turning to our brands. Premier shake consumption growth remained strong this quarter, up 10% with volumes up 14%. Growth was robust in mass, food and e commerce driven by strong velocities and distribution expansion in mass and food. Club would be outlier with flat dollar consumption growth versus year ago because of temporary changes in our assortment and flavor specific out of stocks. Speaker 200:06:21Encouragingly, club consumption returned to growth in July and overall consumption grew 20%. Our brand metrics remained healthy. Premier Protein with RTD market share of 21% maintained its position as the number one brand in the RTD segment as well as the number one brand in the broader convenient nutrition category. Both market share and TDPs grew throughout the quarter with TDPs up 13% versus Q2. Expansion in form including bottles and pack size along with improved in stocks drove the distribution gains and we expect further TDP growth in Q4. Speaker 200:07:02As I referenced at the beginning, I'm pleased to see the brand reach another all time high in household penetration with 19% of households drinking Premier Protein. We surpassed our goal for the year, adding roughly 3 percentage points of household penetration in fiscal 2024 with repeat and buy rates continuing to hold steady. Premier Protein continues to bring in new category consumers with almost all of our growth coming from outside the category. All of this is especially encouraging because in a high growth category with low household penetration, we see plenty of room to continue to grow our brand and expand the category. Premier Protein Powder continued its strong trajectory, growing 44% in Q3 behind distribution gains and strong velocities. Speaker 200:07:51In fact, at a major mass customer, we have the number one velocity item in the retailer's powder category. We remain encouraged by the growth potential of the Premier Protein brand in this format and are investing more marketing dollars behind it in Q4. Its household penetration reached 1.8% this quarter and we continue to believe the brand will be a contributor in mainstreaming the powder category in the same way Premier did for the ready to drink category. Turning to DYMETYZE, the brand remains one of the strongest in the category with velocities in the top third at key customers. However, U. Speaker 200:08:29S. Consumption, which covers about 60% of the global brands, was challenged this quarter as a result of tough comparables, continued competitive pressures and ongoing softness in the specialty channel. Despite these headwinds, July had a record e commerce promotion showing there's still a ton of excitement for the brand. It is also worth noting that Diamatized International business, which represents about 30% Speaker 300:08:52of the Speaker 200:08:53brand, continues to be strong with net sales up 18% this quarter. Looking forward, we are increasing investment behind Dymatize in the U. S. Both in marketing and promotion. Our national marketing campaign with San Francisco All Pro running back Christian McCaffrey launches this month. Speaker 200:09:11We are excited to see what this type of top tier spokesperson and amazing creative can do for the brand. Overall, we continue to be bullish on the mainstream powder potential with 2 complementary brands. In closing, I am proud of our year to date progress. We are on track to deliver results ahead of our guide last November. Our confidence in the long term outlook for Bellring brands remains high. Speaker 200:09:37Ready to drink and powder segments are in the early stages of growth with major tailwinds. Premier Protein and Dymatize are leading mainstream brands with low household penetration and strong loyalty with Premier Protein maintaining the number one share position in the category. Our momentum continues to grow on shakes as we start to drive demand. Our capacity plan is on track to support many years of robust growth. I'm excited to see our organization pivot from supply focused to demand driving. Speaker 200:10:08At our core, we are a growth company. So our entire organization is eager to have all of our demand drivers in place for 2025, including our national marketing campaign on our biggest brand. Thank you for your interest in the company. We look forward to providing more specifics around fiscal 2025 next quarter. I will now turn the call over to Paul. Speaker 300:10:29Thanks, Darcy, and good morning, everyone. Net sales for the quarter were $515,000,000 up 16% over prior year, modestly above our expectations. Adjusted EBITDA was 120,000,000 dollars an increase of 38%. Adjusted EBITDA margins were 23.2% meaningfully exceeding our expectations and lifted primarily by favorable gross margins. Starting with brand performance. Speaker 300:10:53Premier Protein net sales grew 20% behind strong volume growth for RTD shakes and powders. RTD shake growth of 19% was driven by organic growth, distribution gains and to a lesser extent higher trade inventory levels. Shipment growth outpaced consumption dollar growth as a result of late Q3 trade inventory builds and lower net retail pricing. Entering the 4th quarter, trade inventory levels are improved and nearly the target levels with the remaining gaps to be filled in Q4. Dymatized net sales decreased 3% this quarter on 4% higher volumes with double digit growth for international more than offset by declines domestically. Speaker 300:11:30For domestic, recall we are lapping a challenging comparable period that included heavy display activity and changes in club distribution. Promotional activity and unfavorable mix were also a headwind to growth this quarter. Gross profit of $190,000,000 grew 40 percent with an increase in margin of 630 basis points to 36.8%. The margin increase resulted primarily from net input cost deflation as we lap elevated protein cost in the prior year. Gross profit in the quarter also included an unrealized mark to market gain on our commodity hedges, which drove 80 basis points of the year over year increase. Speaker 300:12:06Compared to our expectations, gross margins benefited from more favorable whey protein cost than expected and to a lesser extent non recurring cost favorability. SG and A expenses as a percentage of net sales were 14.4% relatively in line with the second quarter with advertising promotion spend 2.9 percent of net sales. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity. We generated $69,000,000 in cash flow from operations in the 3rd quarter and $160,000,000 year to date. As expected, shake inventory levels increased in the 3rd quarter with further increases expected in the 4th quarter driven by incremental production. Speaker 300:12:45As of June 30, net debt was $776,000,000 and net leverage was 1.8 times. With our EBITDA growth and strong cash flow generation, we anticipate net leverage will remain below 2 Speaker 400:12:57times in Speaker 300:12:57fiscal 2024. With respect to our share repurchases this quarter, we bought 1,300,000 shares at an average price of $58.08 per share or $74,000,000 in total. Our remaining share repurchase authorization is $216,000,000 Turning to our outlook. We raised our fiscal 2024 guidance for net sales to be $1,960,000,000 to $2,000,000,000 and adjusted EBITDA of $430,000,000 to $440,000,000 Our guidance implies strong top line growth of 18% to 20% and adjusted EBITDA growth of 27% to 30% with healthy adjusted EBITDA margins of 22.0% at the midpoint. The updated guidance reflects our better than expected Q3 results, confidence in demand and increased shake production in the 4th quarter. Speaker 300:13:38Our updated guidance implies 4th quarter net sales growth of 14% at the midpoint with premier protein the main driver. Dymatized and all is expected to be relatively flat year over year. Premier Protein growth is largely volume based on distribution gains, higher LTO volumes and continued robust organic growth, partially offset by reduced club promotional activity. We expect shipment dollar growth for Premier RTD shakes to modestly outpace consumption growth as we fill the remaining retailer inventory gaps and load new distribution. 4th quarter gross margins are expected to improve meaningfully over the year ago quarter benefiting from lower net input cost while higher marketing outweighs the gross profit margin improvement. Speaker 300:14:18Lastly, we expect 4th quarter adjusted EBITDA margins to be down slightly compared to prior year. In closing, we are pleased with our year to date performance. Our momentum is high and we are well positioned to close out the year. I will now turn it over to the operator for questions. Operator00:14:33Thank Our first question comes from the line of Andrew Lazar with Barclays. Your line is open. Speaker 500:14:58Great. Good morning, everybody. Speaker 200:15:00Good morning. Speaker 500:15:02Darcy and Paul, I think last quarter you mentioned you were planning for a price increase to start hitting in the Q4 on premier ready to drink shakes. Is that still the plan given that you had much more favorability in input costs this quarter than you thought? Speaker 300:15:19Yes. We are still moving forward with the price increase. Keep in mind that a lot of the favorability in this particular quarter was related to whey protein powders, which is the input cost for our powder business not our shakes. So a lot of the favorability was on whey protein and that is as you may recall from last quarter, we talked about there was a very sharp rise expected in the 3rd quarter on whey protein cost. For us, we're just a bit conservative on how quickly that flowed into our P and L. Speaker 300:15:49And so we saw some favorability because of primarily because of whey protein, so it's not as much related to shakes. Shakes were pretty much largely on track on cost. Speaker 500:15:57Great. Thanks for that. And then Darcy, you mentioned securing some incremental capacity that will help you in the Q4 to get back to your all the way to your target sort of inventory or safety stock levels. Was that incremental capacity that was already in the pipeline that's just now sort of coming online or was it incremental to sort of what you had planned for this year? And then as part of that, have you formally committed to increasing the number of lines beyond the initial 4 at each of your 2 greenfield facilities yet? Speaker 500:16:29I know you've been considering it for some time, but I'm just wondering how that looks as you think through potential supply needs for 2026 and 2027? Thanks a lot. Speaker 200:16:39Yes. The incremental capacity was incremental to what we originally thought at the beginning of the year. So very good news. We have been pushing our existing co mains for more capacity for the last couple of years. And, this is really the first time that we've been able to secure some. Speaker 200:17:00So I think it's good news. I think it's good news that our co mans have fully stabilized and are now actually having some efficiencies that they're able to pass on. So all around very good news. As for the expansion of our co mans with new lines, we have not we're in the process of evaluating who we're going to expand with. But generally, the timeline is the same. Speaker 200:17:35We expect to need new capacity in 2026. Speaker 500:17:40Thanks so much. Speaker 200:17:42Thank you. Operator00:17:43Thank you. Please stand back for our next question. Our next question comes from the line of Ken Goldman with JPMorgan. Your line is open. Speaker 600:17:54Hi, thanks so much. I appreciate the early look into the top line next year with the understanding that the year hasn't even started yet. I was just curious, are there any early reads just as we think about the flow through of the top line to the bottom line, any particular tailwinds or headwinds we should think about in terms of costs that might lead EBITDA growth to veer more than usually or positively or negatively from where sales growth is? Speaker 300:18:25Yes. Good morning, Ken. So a couple of things that I would say for thoughts for fiscal 2025. First, we're talking we've obviously highlighted that we expect to that fiscal 2025 for our shake business will driving demand, which would suggest obviously incremental marketing spend, potentially promotional spend. So as we look from 2024 to 2025, I would expect to see some step up on the marketing line and then promotion perhaps. Speaker 300:18:53And obviously, we may toggle between those 2 as we make decisions on driving demand on promotion versus marketing. The other one is we are expecting inflation to continue into 2020 or to increase in 2025 versus 2024. It's more impactful on our powder business. We're expecting a pretty sizable step up starting really in Q4 and then into the first half of next year. But on powder on our shake business, we still expect some inflation throughout the year, but obviously we've taken a price increase there. Speaker 300:19:24So I think we can largely offset with our price increase on shakes. But going forward, I expect some headwinds on inflation, perhaps some headwinds on marketing and promotion. Speaker 600:19:38Thank you. And then for a follow-up, we started to see your biggest shakes competitor or Speaker 300:19:46at least what we would see Speaker 600:19:47as your biggest one gaining shelf space in the mainstream beverage aisle in a couple of sort of traditional supermarkets. I'm just curious, is this something that's getting more widespread? Is it more anecdotal? And I'm just curious if it sort of accelerates your desire to migrate the Premier Shake brand a little bit more into the more mainstream part of stores as well or if it's not really a consideration at this point? Thank you. Speaker 200:20:16So, yes, we've absolutely been tracking it and it's true. There's been some expansion and it's really through DSD. Not surprising that that competitor has expanded into the beverage aisle. As you remember getting out of the aisle, so it's kind of I think I would separate our strategies into 2 pieces. 1 is more the near term of getting out of the aisle, right? Speaker 200:20:44So getting out of the aisle, has always been a key part of our strategy. That can show up in a couple of different ways. 1 is endial display. The other is displays in other part of the store. And we have been actively pursuing that both of those strategies, especially with that is a key part of our single strategy. Speaker 200:21:09You actually go out to we saw a lot of this quarter and we'll see it next quarter, a fair amount of bottle displays and you'll see it everywhere from right adjacent to the pharmacy section where we are to at checkout you'll see them in coolers and you'll even see them in other areas of store like near the deli. So absolutely a key part of our strategy. Then if you look more long term which is I think what you're more asking which is around the movement of us into a more mainstream aisle. And that and I would say that we are still actively evaluating. We actually think that we can get a lot of the bumps, of eyeballs of awareness and therefore trial by the first two strategies which is just endial display and multiple placements around the store versus the actually picking up the category and moving, but we're absolutely evaluating. Speaker 600:22:26Got it. Thank you so much. Speaker 200:22:28Thanks. Operator00:22:29Please stand by for our next question. Our next question comes from the line of Thomas Palmer with Citi. Your line is open. Speaker 700:22:41Good morning and thanks for the question. You noted in the prepared remarks how innovation for Premier Protein has maybe not been as big of a focus in part due to some constraints. Is there a point as we look out towards next year that this starts to ramp up and become a bigger focus? And then just any examples to highlight on this front? Speaker 200:23:03Yes. So I would put innovation into 2 buckets. The first bucket is what I call little I innovation which is basically pack size format expansion. So that can be a combination of like we have bottles, it can be bigger packs, smaller packs, it can be different sizes, which we'll get at different macro levels of protein. So that in my mind is kind of little I innovation. Speaker 200:23:35Flavor also is put into that segment. We see just a ton of opportunity in with Little I Innovation. When you talk about Big I Innovation and that is really going for incremental consumers and incremental occasions, Yes, so that we've kind of put on the back burner because of capacity, but you'll see us increasing focus and increasing launches of new lines in 2025. Obviously, I'm not going to get into what that innovation is on a public call, but you'll see a couple of new lines come out on Premier Protein next year. Speaker 800:24:23Great. Thank you. And then on DYEMATIZED, Speaker 700:24:28what's the messaging, I guess, in this new marketing campaign? And what's the target? Is it more customer awareness for the brand? Is it trying to differentiate the brand in what seems to be maybe a little bit more of a competitive segment right now? Just any help on that as we move into the back half of this campaign launches? Speaker 200:24:51Yes. So the focus is and you'll it actually hits the air this week. So you should hopefully see it. The focus is really around awareness. I mean our household pen is 1%. Speaker 200:25:08So it's around awareness of the brand. Dymatize is a premium product and so which consumers are expected to pay more for. And so we want to explain why it's worth it and why people should really kind of graduate to dimatize. And we're doing it with borrowed equity of Christian McCaffrey. What's amazing about him is it is a super authentic connection because he already uses Dymatize in his kind of nutrition and workout regimen. Speaker 200:25:48And it is a key part of his success. So it is not by coincidence that we're launching the campaign right as football season is starting. And so that is and obviously he is a big name. So, that is that's the focus. It is an awareness campaign, and it's focused around the dimatized equity. Speaker 200:26:11In addition to that equity campaign, we also have a couple other spots that will focus on flavor. So if you think of kind of upper funnel, lower funnel of a marketing campaign, upper funnel is we have both going on within the campaign starting in Q4 and then it will continue into 2025. Speaker 800:26:36Thanks for all the detail. Operator00:26:39Thank you. Please stand by for our next question. Our next question comes from the line of Brian Holland with D. A. Davidson. Operator00:26:49Your line is open. Speaker 800:26:51Yes, thanks. Good morning. Maybe just referring back Paul's earlier response and question about pricing, mindful of when commodities are flowing through the P and L and also more broadly just kind of the volume, the challenging volume backdrop across CPG. Just any sense you can provide or share with respect to customer response to the pricing that you announced last quarter? Speaker 200:27:19Paul, you want me to answer that? Speaker 300:27:20Yes, please. Speaker 200:27:22Yes. So, I mean pricing is never easy. What I will say is it is helpful that other competitors have taken pricing recently. And again it is because that of the rising cost of specifically manufacturing, labor, freight, etcetera. So we're seeing some increases and other people are passing it on too and they did it before us which always helps. Speaker 200:27:52And then but no major pushback, I would say, and it's all of them are over the line. Speaker 800:28:03Perfect. Thanks. And then I wanted to ask about we're getting asked about private label competitive dynamics with some rollouts, particularly in whey powder. So Darcy, I was hoping maybe you could just provide a little bit of perspective on what private label looks like in this in the categories you compete in more broadly? And maybe any historical perspective to help sort of frame what private label has done in this category and maybe the limits to its ability to take share, if that makes sense? Speaker 200:28:44Yes. So private label in it's definitely less, I guess, mature in this category than in others. It in RTD it's about 9%. Powders is about 4.5%. Just realize that more and that's in tracked channels. Speaker 200:29:06So, just remember that most of the powder category there's just less in tracked channels, for powder. So, I mean, our estimates are actually for powders it's probably closer to where RTD is so call it 9% to 10% if you kind of look at the whole marketplace. And same thing for bars. So what has what is interesting is for the most part it's maintaining share. So, it's not growing faster in our category than the branded players. Speaker 200:29:41So it's just maintaining share. And that has been the case for the last few years. This just happens to be now there are as you know there are stronger private labels and less strong private labels. So I think the success depends on the retailer. However, I would generally say that in this category people look for trusted brands. Speaker 200:30:21And so and that has been the case. I think where we saw it first go was I think it has to do borrowers, I would say had a bigger I would say went private label first, then powder and I think RTDs will be last. And part of that has to do with the just dynamic in the category, meaning that there just isn't a lot of capacity in RTDs. It's very complicated to produce. The private label within RTDs at least are concentrated in a couple of retailers. Speaker 200:30:59And others have tried and have not been successful and so I think are a little scared of it. So does that give you some reference and context? Speaker 800:31:11Yes. No, that's extremely helpful, Darcy. I can leave it there. Thank you. Operator00:31:15Great. Please stand by for our next question. Our next question comes from the line of Yasmeen Deswanaj with Bank of America. Your line is open. Speaker 900:31:29Hey, guys. Good morning and thanks for the question. So I just had a quick one on Premier. So you said you had strong consumption growth in all key channels with club being the exception. Are you able to quantify the impact of the temporary changes in assortment? Speaker 900:31:44And also you mentioned that club consumption began to accelerate in June and into July. So is there any way to quantify that? And do you expect that acceleration to hold in 4Q or even accelerate further Speaker 400:31:57from there? Speaker 200:31:59Okay. Sorry, there were a lot of questions in there, Yasmin. Can you just Speaker 400:32:02Sorry, sorry. Speaker 200:32:03Sorry. Yes, yes, yes. Can you just say the question one more time? Speaker 900:32:07Yes. So just the first question of all of that is just are you able to quantify the impact of the temporary changes in assortment in 4Q, just as it relates to club kind of being weaker than the rest of the channels in Premiere? Speaker 300:32:22And you said Q4 Speaker 200:32:23Yes, Paul, do you want to give that? Speaker 300:32:25I just want to clarify, are you saying the temporary changes in Q3? Or you said Q4, just want to make sure, okay. Yes. So we did have some changes in club assortments in the Q3 primarily with one of our largest club customers, which did start to ship in late in the quarter and early into the Q4. So we should see the year over year headwind of that change in Q4 as we move forward. Speaker 300:32:57I don't know if I have a precise number of what we think that impact was, but certainly it had an impact to the club growth in the quarter, as well as just some of the out of stocks and some of our other club customers, which vastly improved as we got later into Q3 and you're seeing that in the growth as we hit late Q3 into Q4. Yes. Speaker 200:33:17And yes, if you're thinking about headwinds to consumption, I think that I mean our Q3 consumption was lower than what we expected and we would say that we would have expected about 4 percentage points higher than what we saw. So the combination of the and basically that was due to some delayed shipments that went out. And so part of about 3 points of that was replenishment for out of stock and about one point of that was due to new products being shipped in. So hopefully that helps with around 4 points of consumption. Speaker 900:34:01Okay, great. That's really helpful. And just a quick follow-up and it's a more higher level question. I just had a quick one on your target consumer base as it relates to growing household penetration. I know you said previously that this is a more adult brand, but I saw recently that there was an activation in New York and these pop ups tend to skew towards younger audiences. Speaker 900:34:21So could you just talk a little bit about the consumers that you plan to address from here and how you expect that to drive continued household penetration growth? Speaker 200:34:31Yes. So you saw the ice cream pop up? Speaker 400:34:34Yes. I saw that. Speaker 200:34:36That was very successful. And so yes, so low household penetration category, low household penetration brand. So, currently, our average age is right call it early 40s but ranges. And so we our marketing campaign will really focus on that we're trying to get to kind of younger the younger population where we can bring them into the category early and then keep them throughout. So as you can tell that was one kind of that was one test activation but you'll start seeing it as we build out our marketing campaign for next year for Premier, you're going to see that come through in the creative of who we show as well as if you can see it through just the targeting efforts. Speaker 900:35:41Okay, great. Thanks so much guys. Operator00:35:51Our next question comes from the line of Robert Moskow with TD and Cowen. Your line is open. Speaker 1000:35:57Hi, thanks for the question. Just to clarify, I think you said consumption was about 400 basis points lower than what you thought for various factors. Was that for all channels or is that just for club? I didn't catch it. Speaker 200:36:15All channels, but it was majority the most of the effect was club as well as some food. Speaker 1000:36:22Okay. And the reason I ask is, if you just look eyeballing Slide 8, if you look at the consumption trends for Premier Protein RTD, it's your biggest segment. The comps get really difficult in October and Q4 in general, growth up 36%. And do you need some kind of major acceleration? And are you expecting a major acceleration in kind of this tracked consumption pattern in 4Q? Speaker 1000:36:58And do you think that would be how would that relate to shipments? Because I know you're still filling inventory gaps. Do you think shipments could be even higher than that? Speaker 300:37:08Yes, I'll take the latter. Speaker 200:37:10Yes. You can do that, yes. Speaker 300:37:11Yes. So as I mentioned in my prepared remarks that we do expect shipments to modestly out pace consumption growth. So shipment growth slightly outpaced consumption growth in the Q4 and that's because we're continuing to replenish the remaining out of stocks and getting our retailers' inventories full, but also shipping new distributions. Darcy touched on some of this before. So we've got some bottles going in and some other distribution. Speaker 300:37:37So yes, we expect a modest increase or shipments ahead of consumption in the Q4. As far as the chart you're referencing, I think you're looking at the October timeframe. So last year, we did in August have a club event. We called it a small club event in August. And so that's what you're seeing kind of in the 13 week rolling as it gets to October. Speaker 300:38:02It's mainly the impact of that August promotion. We are lapping that this year. We're doing less days on promotion. So it is a bit of a headwind for us in the Q4, but that is all contemplated in our guidance and our thinking around shipments versus consumption. Speaker 600:38:19Okay. So let's Yes. Operator00:38:20And Rob just to Speaker 900:38:21Go ahead. Speaker 200:38:22I know that there is we both are focused. Go ahead. Speaker 1000:38:28Darcy, you go first. You're CEO, so please go ahead. Speaker 200:38:31Well, I know that everybody is focused a lot on consumption, which I understand why. So I thought it might help a little bit to give you some of the monthly dynamics that we expect in Q4. Obviously, July was really strong at 20%. And then but that will we expect overall Q4 consumption to be kind of like low teens. So we'll see and that was some of the dynamics that Paul was just talking about. Speaker 200:39:00In August, you should expect especially late August, you should expect a consumption dip and it's mainly because we're lapping that club promotion that is in untracked channels but is captured in MULO plus and then you'll see an acceleration into September. So you see strong July, come down a bit in August because of the lapping of this club promotion and then increase again in September. Speaker 1000:39:33That's very helpful. Thank you very much. Operator00:39:36Yes. Thank you. Please stand by for our next question. Our next question comes from the line of David Palmer with Evercore ISI. Your line is open. Speaker 700:39:50Thanks. And thanks also for that last point. Just a follow-up on that. If we were to broaden out and just think about volatility as we're seeing in the data or maybe we can do a retrospective and look at how the sales have been volatile in the past. How much of that volatility do you think is related to not only an ebb and flow of your capacity constraints, but also a key competitor's capacity constraints maybe being different than yours, maybe they had it at different points in the past making for easy comparisons competitively. Speaker 700:40:28And then you perhaps had some constraints in addition to the assortment reset that you talked about in this last quarter. Just any comments on that and even how that governs the comparisons that we'll be seeing in the coming quarters? Speaker 200:40:45Yes. So I'll start with our I hate to use the word volatility, but the changes within our consumption patterns are absolutely a reflection or exacerbated by our lack of safety stock and lack of trade inventory. So I'm going to give you so I mentioned that consumption was below what we expected in Q3. The reason was timing and what happened was we had some shipments that were planning to go out in May. They didn't go out. Speaker 200:41:29They were delayed until June and the associated consumption got pushed to July. Well, this happens all the time. We have changes of releases based on what we expect but you don't see it or consumption doesn't reflect it because the retailer has enough trade inventory. We have enough safety stock to basically blunt those kind of changes. And because we do not, some of these show up in the consumption. Speaker 200:42:09So when we get back to which we're close, when we get back to adequate safety stock as well as adequate trade inventory, we just will not see these types of kind of I guess volatility as you put it. The second piece is this is completely having to do with our safety stock and our trade and the retailers' trade inventory less about competition. Interestingly enough, I mean I talked about the category being that is really the growth is driven by the mainstream brands. Well, the mainstream brands us as well as biggest competitor all of our growth almost all of our growth is coming from outside of the category. So there really is not very much brand shifting between the 2 brands. Speaker 700:43:11Thank you for that. And just by judging on your EBITDA margins for this year, it looks like you'll finish above the 18% to 20% long term guidance. How are you thinking about your long term margin now? Is that something that could be in the low 20s longer term? Speaker 300:43:31Yes. We obviously, yes, as you mentioned, we're having a strong margin year keeping in mind that it's still not a full demand driving year on especially on our biggest business Premier Protein. So I wouldn't think I don't think the 20% is our new normal. But yes, it's something we're certainly evaluating it. We like our long term algorithm, gives us flexibility on spend, but we've always said that our target was to be on the upper part of that and we've been consistently on the upper part of that, but we'll continue to reevaluate it and obviously when we come to November, we'll give our thoughts on how it plays out in fiscal 2025. Speaker 700:44:12Okay. Thank you. Operator00:44:15Thank you. Please stand by for our next question. Our next question comes from the line of Jim Solera with Stephens. Your line is open. Hi, guys. Operator00:44:25Thanks for taking Speaker 400:44:26our question. Darcy, I wanted to drill down a little bit in club. In my area in the Midwest, I've seen a pretty significant increase in promotion from albeit smaller competitors, but other competitors that have RTD shake offerings. I guess first question is, is that something that you see more broadly or maybe that's more concentrated in my area? And 2, as you think about maybe the promotional cadence moving forward and maybe the ability for the category to take price, should we think about kind of alternating promotions between brands as putting a ceiling on pricing power from the category? Speaker 200:45:13Let me answer your first question and then I might need a little bit of clarity on the second one. So in club, yes, promotional intensity has increased a little bit and it's really it's actually not the top 2 brands but all the rest of them as you said. I will say and that is not a new trend that is really over kind of the last call it year ish. And there seems to always be somebody, a brand on promotion and VM. So that is, I would say, more of a kind of a long term trend. Speaker 200:46:00The second and is that indicative of the rest of the marketplace? Definitely in powder there and I talked about it on the last call and this trend continued where there has been an increase in discounting and promotional intensity on powders for sure across the marketplace. RTD it hasn't been extreme it hasn't been as extreme but there's definitely been an uptick in promotion on RTDs. And I think it really has to do with capacity coming on. I think that we have a little bit more capacity and so people are able to get back to driving demand. Speaker 200:46:50And sorry, what was the second question? Speaker 400:46:53Yes. The second part was really just if there's kind of this always on promotional calendar for the space, does that limit pricing power just given the value gaps if there's always somebody in the category that has a promo on even as your promos kind of roll on and off? Does that limit how much price you can take because you need to keep kind of a relative gap to whoever's on promo at that time? Speaker 200:47:22No. I mean, I think that we I'll just talk for our brand. I feel very good about our pricing power. And we're we have an incredibly strong brand with high loyalty and I think we've shown that consistently over the course of kind of the last few years given the performance of the business despite capacity constraints. Really consumers have stayed with us. Speaker 200:47:54So I think that for us, we are not going to go we do not need to go deep on promotion. I have said this before, the key for promotion for us is getting display. So we will do as little TPR as we need to get the display because the display is where we get the eyeballs, the eyeballs are where we get the trial, the trial is where we get the repeat and there it goes from there. So, that will be our focus and we see we have 2 major drive periods. Everybody enters into the category really in our Q2 Jan Feb March. Speaker 200:48:39So that's a big drive period. And we started we got back to promotion this year during Q2. We will expect to do it again next year. And then we will also have kind of a second drive period in the Q4 period. And it will be a little bit lighter because again I think we've learned that we don't have to go deep or really as frequent. Speaker 400:49:05Okay, great. I appreciate the color. I'll hop back in the queue. Operator00:49:10Thank you. Please stand by for our next question. Our next question comes from the line of John Anderson with William Blair. Your line is open. Speaker 400:49:20Hi, thanks for the question. I was wondering if you could talk a little bit about fall shelf resets and how your expectations are there perhaps relative to last year? And is that kind of factored into your expectations for shipments to run ahead of consumption in the Q4? And then the second follow-up question is just on capacity. You've had your base plan for capacity and now secured some incremental capacity on top of that. Speaker 400:49:53I'm just wondering where that maybe puts you in terms of supporting sales growth in 2025? Thanks. Speaker 200:50:04TDPs for Q4, we do expect some increases. There will be a combination of so if you actually if you look at the supplemental presentation on page 10 is a great graph to show the increases. We did get fairly big increase last year and that was around a mass retailer that we expanded shelf space a fair amount. We will see some increase in Q4, not as dramatic as we did last year, but we got some nice space in that retailer and then we'll also see a little more favorability from just filling the gaps of trade inventory that we didn't fill in Q3. So part of the increases will be out of filling the trade inventory for the ones that are left and then partially it's going to be shipping in for new distribution. Speaker 200:51:06So yes, we do expect and Paul said this in his prepared remarks, we do expect to have shipments a little bit ahead of consumption in Q4. The second piece is capacity and yes, the incremental production that we secured this quarter really sets us up nicely. It allows us to not only deliver our guidance and actually raise it, but also fill our get to our target weeks of safety stock, which is 8 weeks that going into 2025. So we're in a great place to really hit the ground running and get back to demand driving. Speaker 400:52:01Thanks so much. Operator00:52:03Thank you. Please standby for our next question. Our next question comes from the line of Bill Chappell with Truist Securities. Your line is open. Speaker 1100:52:14Thanks. Good morning. Speaker 800:52:16Good morning. Speaker 1100:52:17Hey, just two questions. 1, I didn't fully understand. When you talked about the consumption 400 basis points below your expectations and a lot of that coming from the club channel. I'm just trying to understand why it was below your expectations? You just seem to have a good handle on obviously club channel and shipments and products and stuff like that. Speaker 1100:52:38So was there something that surprised you intra quarter or just help us understand that? Speaker 200:52:46Yes. So go ahead. Why don't you get Speaker 300:52:49Yes. No. Yes, I think Darcy touched on it a little bit earlier. So it really comes down to the timing of shipments. So we did have some shipments into club and to other customers to refill some of the out of stocks as well as to ship some of the new distribution in bottles and other in some of our other flavors. Speaker 300:53:10It just happened later in the quarter than we expected. And so that was a direct that had a direct impact on our consumption growth in the Q4, which as Archie mentioned a minute ago, it was about a 400 basis point headwind to our consumption growth. So we're around 10%. If you add that, that would put our consumption growth at about 14% if that was shipped on time. We have shipment timing changes from time to time. Speaker 300:53:34It's not uncommon. It's just when you're not to pull safety stock internally, those things sometimes fall out and that's what we saw in the quarter. Speaker 1100:53:44Got it. And I'll have a follow-up and then I have another follow-up. But did that then impact your July sales is why it got a boost because of the timing of shipments? Speaker 300:53:55I would not say it necessarily well, let me back up. So you saw consumption start accelerating in June and more into July and that is largely because of us getting that those out of stocks filled as well as getting that distribution into the trade. So that did have a direct impact on consumption, which is why you saw it accelerate in June and further into July. Speaker 1100:54:17Got it. Okay. And then my real follow-up, just back on pricing and especially as we move forward, I mean, I'm just trying to couple the commentary of everyone in your category is playing well in the sandbox on pricing, but you're sourcing most of your new customers outside the category. And so as we hear of CSDs and energy drinks and others talking about more promotional levels just to kind of revive their categories. Does that come into your thought process as you think about pricing and promotion as we move into fiscal 2025? Speaker 200:54:55I think Bill, I think this comes to what are they trading what are they giving up to buy so the people outside of the category what are they giving up to buy a shake? So for instance most of our most of our occasions are breakfast replacements. So, in essence what consumers are trading out is an Egg McMuffin, a bagel and cream cheese, etcetera. And so those things are for the most part more expensive than a $2 shake. And so I think that that is where I think we see we have and you were so not only is it less expensive, but it's also a much more healthy breakfast. Speaker 200:55:49And so I think that's where you're seeing and that's why we feel like all of our data would say that we have pricing power. Speaker 1100:55:56Got it. No, that helps a lot. Thank you. Operator00:56:00Thank you. Please standby for our next question. Our next question comes from the line of John Baumgartner with Mizuho Securities. Your line is open. Speaker 1200:56:12Hi, good morning. Thanks for the question. Operator00:56:15Good morning, Doug. Speaker 1200:56:16First off, Darcy, I wanted to ask about innovation and long term development of Active Nutrition. And you touched on it a bit with your comment on Big Eye Innovation. But more broadly, as we see the high protein, low sugar formulations becoming standardized, to what extent do you think this category can evolve? I guess similarly to energy drinks where you're now including ingredients and functions in combination with caffeine. I mean, how do you assess proteins ability to evolve similarly between liquids and powder? Speaker 1200:56:44And I'm thinking here 3, 5, 7 years not a fiscal 2025 comment. Speaker 200:56:51Well, I think the first piece and it goes back to what I talked about in my prepared remarks just about kind of how amazing the nutrient of protein is. And just how the more we learn that the wide variety of people it is beneficial to, which obviously has innovation ramifications as well as the benefit it provides which also has innovation ramifications. So I think there is such a huge opportunity which actually I know you asked about big eye innovation but actually that is the reason why we are so encouraged by the little I innovation because there is so much upside just by putting our existing formula or something close to it in different packages in different kind of pack sizes in different formats. So there's that because there's a ton more kind of household penetration potential. Then you go to the Bigeye Innovation and if you look 5, 7, 10 years out, I think what you'll see is protein as a part in complement with other functional ingredients. Speaker 200:58:21I mean I think that the specialty if you walk into a the mainstream gets influenced by kind of 2 places. 1 is sports nutrition in kind of the specialty world you walk into a vitamin shop at GNC and you see where that part that side is going or from like natural right. So those are the two places that influence it the most. And when you go into those places you see a combination of real food. So that has an influence. Speaker 200:58:58But then you also see really leaning into function. And so I think that's where the category will go. Speaker 1200:59:08Great. Thanks for that. And then as a follow-up, in terms of competition in RTD, Texas supply has been the standard and tightness has been a major barrier to entry. We're seeing some of the newer entrants adopting bottles. And I'm curious your take on industry bottle capacity, the extent it can be a means for newer players to sort of circumvent the tetra tightness and the extent to which bottles can play in channels such as mass and club as opposed to just more of a single serve opportunity? Speaker 200:59:37So bottles is also constrained and it really is I think that what is constrained is the upstream aseptic processing. So whether you put it in a bottle or a tetra, it is the aseptic processing upstream capacity that is constrained. But I think that in general in the same time that the tetra capacity is opening up so is the bottle capacity and that is what you're seeing. And yes, I think we see the opportunity for bottles for us because it's a smaller part of our business. We actually see the potential for the growth potential of bottles actually the growth being bigger for us not numbers of shakes, but we see that there be there is a and that's when I talk about format, that is one of the formats that we see potential with. Speaker 1201:00:42Great. Thank you, Darcy. Operator01:00:45Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. This concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by