BellRing Brands, Inc. Q3 FY2025 earnings call

Key Messages

• The ready-to-drink shake category is rapidly growing with long-term potential, driven by trends like health and wellness and convenience. RTDs grew 16% this quarter, with 70% from volume, and 1 in 2 households now consume RTD shakes.
• Premier Protein is the #1 brand in the RTD segment and broader convenient nutrition category, with 25% market share, 19% consumption growth in Q3, and high household penetration and loyalty.
• The company is building momentum through increased brand support (media campaigns, updated packaging), distribution expansion, and innovation (indulgence line, almondmilkshakes).

Brand Support

• Launched first media campaign since 2021 in late December with strong ROI, followed by a second wave in July featuring updated packaging.
• Increased in-store investments via promotion, display, and demos, with a dedicated team and new broker partner to expand merchandising.

Distribution

• Generates 11% of convenient nutrition category sales but only a 4% share of shelf; aims to gain TDPs on core products, single-serve bottles, innovation, and a short-term club pallet in Q4.

Innovation

• Launched indulgence line targeting incremental consumption occasions, with strong performance and expanded distribution. Launched almondmilkshakes, a nondairy protein offering, with promising early results.

Premier Protein net sales grew 6% with volume and pricing both up 3%. Distribution gains and promotions drove volume growth. Dymatize net sales increased 5% due to strong international and domestic RTD shake sales. Adjusted gross profit was $192 million, up 3% from prior year, but adjusted gross profit margin decreased 130 basis points. Premier Protein contributed approximately 1/4 of the ready-to-drink shake category growth, with 70% of the category's 16% growth coming from volume.

Fiscal '25 Guidance

• Tightened guidance with net sales expected to be $2.28 billion to $2.32 billion and adjusted EBITDA $480 million to $490 million.
• Fourth quarter net sales expected to grow 14% at midpoint, driven by Premier Protein. Adjusted EBITDA margins in Q4 expected to be ~19% midpoint.
• Gross margins to be lower due to higher promotional spend and input cost inflation, partially offset by SG&A leverage. Protein cost headwinds, including elevated whey, to continue into fiscal '26.

Tariffs

• Monitoring latest developments, with tariffs on dairy protein from NZ and EU slightly increasing fiscal '26 COGS impact, expected to be a low single-digit impact.

• Tariffs on dairy protein sourced from New Zealand and the EU could impact fiscal '26 cost of goods sold.
• Input cost inflation, particularly on whey protein, posing headwinds for both powders and shakes.
• Fourth quarter gross margins negatively impacted by packaging redesign costs and lapping of onetime favorability, totaling a 100 basis point headwind.

Q: Andrew Lazar asked about fiscal '26 planning.

A: Darcy Horn Davenport said it's too early to talk about fiscal '26, but they're in the planning process and feel great about the long-term opportunity with retailers and category leadership.

Q: Kaumil Gajrawala asked about narrowing guidance and consumption vs shipments.

A: Darcy explained that Q3 consumption was slightly higher than expected due to pricing mix, but gains from a short-term club pallet were offset by competitive pressure in club, leading to narrowing the upper end. Paul added that Q3 consumption was masked by e-commerce load-in, expected to deload in Q4.

Q: David Palmer asked about category growth and share gain.

A: Darcy stated it's too early to give exact numbers but emphasized the category's vibrancy, the company's role as category captain, and ongoing innovation as drivers for future growth.

Q: Megan Clapp asked about competition and single-serve opportunity.

A: Darcy discussed unique club competition context, ongoing merchandising and display efforts with retailers, and focus on single-serve displays in ambient and cooler locations next year.

Q: Jim Salera asked about promotional cadence with new competition.

A: Darcy said promotional cadence has been consistent, with Q4 club promotions up-leveled, and noted promotional periods typically align with consumer behavior.

Q: Yasmine Deswandhy asked about confidence in on-algo growth for next year.

A: Darcy felt good about long-term prospects, citing past demand drivers being added back and the company's position as category captain as reasons for confidence.

Q: Peter Grom asked about Q4 gross margin pressure and transitory vs lingering headwinds.

A: Paul said Q4 gross margin pressure is due to higher promo spend, input cost inflation on proteins, packaging redesign costs, and lapping of nonrecurring favorability. Whey protein headwinds to continue into fiscal '26, and tariffs to impact fiscal '26 COGS.

Q: Jon Andersen asked about innovation and capital allocation.

A: Darcy discussed strong performance of indulgence line and early promise of almondmilkshakes. Paul stated no significant change to capital allocation priorities, focusing on organic growth, debt paydown, and share buybacks.

Q: Steve Powers asked about '26 planning and consumption trends.

A: Darcy explained Q3 consumption nuances and that they're in the planning process with long-term algorithm of 10%+ growth. Paul discussed Q4 net sales and margin expectations.