BellRing Brands, Inc. Price & Performance (BRBR)

These forward looking statements are current as of the date of this call and management undertakes no obligation to update these statements. As a reminder, this call is being recorded and an audio replay will be available on our website. And finally, this call will discuss certain non GAAP measures. For a reconciliation of these non GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Darcy. Thanks, Jennifer, and thank you all for joining us this morning. Last evening, we reported our results and posted a supplemental presentation to our I'm pleased to share that is off to a good start. The business accelerated as we layered in demand drivers and kicked off new campaigns on both brands. Our results were slightly ahead of our expectations on the top line, with more favorability on the bottom line. Both net sales and adjusted EBITDA grew approximately 25% driven by Premier Protein.

Our EBITDA margins benefited from favorable gross margins As you saw in yesterday's press release, we raised our outlook for the year. We now expect net sales to grow between 1317% over and adjusted EBITDA to grow between 714%. Our strong performance along with confidence in demand drove our decision to raise our guidance. We expanded coverage of the convenient nutrition category as well as our business. In the new database, the total convenient nutrition up from 13,000,000,000 a sizable increase in tracked coverage.

The new database provides a more accurate picture of the category across channels and a better reflection of our strong market position.

Now to category and brand updates. The convenient nutrition category grew 12% in As I mentioned last quarter, it is rapidly transforming in [indiscernible] and making up 75% of sales. From a form perspective, ready to drink growth accelerated and continued to lead the category, up 18% driven by strong consumer demand. RTDs were the second fastest growing category in the entire [indiscernible] Only behind eggs, which had unique supply demand dynamics. Mainstream, everyday sports nutrition, RTD brands continue to bring new consumers into the category, and were up 31%. Ready to mix grew 8%, sustaining growth rate. Overall, we see the total convenient nutrition category momentum increase in and I look forward to an even stronger growth during the Q2 New Year, New Year season.

Turning to our brands. Premier shake consumption growth accelerated this quarter, up 23%.

Growth was strong in all channels, driven by distribution expansion, accelerating velocities and incremental promotional activity. Expansion in form including bottles and pack size along with improved in stocks drove the distribution gains. Our seasonal flavor, wintermint chocolate, has demonstrated high retailer this season. Consumption growth continued with Jan. 0 up 17%. Our brand metrics remained strong with Premier Protein reaching all time highs in TDPs and household penetration. The brand continues to gain new consumers reaching 20% of household this quarter. In calendar year Premier Protein grew household penetration 7%. A significant contributor to the overall RTB category growth.

The brand's repeat and buy rate grew for the calendar year, demonstrating our category leading consumer loyalty. Premier Protein with RTD market share of '26 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. 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 overall category. Premier Protein Powder continued its strong trajectory with consumption at 24% in behind strong velocities and distribution gains. We remain encouraged by the growth potential of Premier Protein brand in this format. Its household penetration reached 2% this quarter, And during calendar year Premier Powders household penetration grew 22%.

The second highest of any competitor in the powder category. We continue to believe Premier will be a contributor to mainstreaming the powder category in the same way that Premier did in Ready to Drink. We're thrilled to share that our Premier Protein national marketing campaign hit screens late in Dec. 0.

Just ahead of the New Year, New Year season.

It is a high energy spot that captures how Premier Protein brings joy to the health journey. Featuring the tagline Sweeten the Journey, it shows that healthy eating doesn't have to be hard, but can actually be enjoyable and fun. This is our first nationwide campaign since 2021 and will reach TV, streaming and social media audiences. Although early, the campaign is generating significant increases in search, and traffic to our website is up 80% versus year ago. From an innovation standpoint, we launched a new line of premier protein products, our indulgent line. Which are available in four decadent shake flavors and one powder flavor. These items are richer and creamier targeting an incremental consumption occasion, while still delivering on the new The items are building distribution and although early, are off to a promising start. More innovation is planned throughout In addition to exciting advertising and new products, we are updating our logo and redesigning our packaging for the first time in close to a decade. The refreshed design builds on our strong performing current design and brings a modern look that improves discoverability at the shelf. We expect the updated design will start to hit the shelves in the second half.

Turning to Dymatize. The international business drove the global brand this quarter. More than offsetting domestic headwinds. Despite recent U. S. Trends, the brand remains strong. Holding the number two share position within Sports Nutrition Powders. Which represents about half of the overall powder category. While household penetration and overall distribution levels remain stable, we are starting to see some encouraging signs from both marketing our marketing campaign as well as our new products. Our marketing campaign with San Francisco running back Christian McCaffrey exceeded our benchmarks and drove strong lift to the to our brand metrics. As a result, we've expanded our core team of Diamond Types athletes and influencers partnering with tennis professional and Olympic medalist Tommy Paul who is ranked number nine in the world. On the innovation front, we launched two new platforms this quarter. We know that diametized consumers purchase both free workouts and RTD products. So in Dec. 0, we launched RTD Shakes with fruity and cocoa pebbles flavors as well as pre workout powder called Energize available in three flavors. Early results for both products are positive and we continue to be bullish on the sports nutrition category opportunity. In closing, our results position us well for another above algorithm year.

Our organization has officially pivoted to demand driving. Strong macro tailwinds around protein are driving robust long term growth in our category with ready to drink and powder segments in the early stages of growth. Premier Protein is already the number one convenient nutrition brand and we are just starting to drive demand. Our innovation pipeline on both brands is rich enabling us to bring excitement to consumers and our retail partners for years to come.

Last, we have a scalable regionally diverse supply chain able to support our long term growth projections. Our confidence in the long term outlook for Bellerin remains high. We look forward to sharing our progress next quarter I will now turn the call over to Paul.

Thanks, Arcee, and good BellRing, everyone. As Darcy highlighted, had a good start to Net sales for the quarter were $5.33,000,000 dollars and adjusted EBITDA was $125,000,000 Net sales grew 24% over prior year adjusted EBITDA increased 25%. Adjusted EBITDA margins were 23.5% meaningfully exceeding our expectations. Starting with brand performance, Premier Protein net sales grew 26% behind strong volume growth for RT and D Shakes and Pow Distribution gains, incremental promotions and organic growth drove the sales increase as well as a benefit from our price increase on shakes taken in Shipment dollar growth slightly outpaced consumption dollar growth. Diamondized net sales increased 13% quarter on 12% higher volume Similar to recent quarters, strength in international business continued with double digit sales growth. This was partly offset by domestic headwinds. Gross profit of $200,000,000 grew 35% with an increase in gross profit margin of three ten basis points to 37.5%. Our pricing actions offset modest input cost inflation in the quarter. We expect the rate of inflation to increase throughout the year. Compared to our expectations, gross margins benefited from $5,000,000 of non BellRing cost favorability and $150,000,0.0 of unrealized mark to market gains on our commodity hedges, which combined drove margins higher by approximately 120 basis points.

SG and A expenses were $80,000,000 an increase of two seventy basis points as a percentage of net sales with higher spend for advertising and promotion and warehousing, the main drivers. Advertising promotion spend was 2.8% of net sales up from 1.4% last year's as we kicked off new campaigns for both mir protein and dimaty. However, shifted roughly $4,000,000 of marketing spend from the to later in the year. This along with favorable gross margins contributed adjusted EBITDA margins coming in above our expectations. Operating profit of $115,000,000 increased $42,000,000 compared to prior year. And was positively impacted by lapping $17,000,000 of accelerated amortization last year. Before reviewing our outlook, I'd like to make a few comments on cash flow and liquidity. We generated $3,000,000 in cash flow from operations in the As anticipated, our working capital increased as we added shake supply to our inventory. Moving forward, we believe our inventory levels are largely normalized and accordingly our adjusted EBITDA to cash flow conversion will improve for the remainder of the year. We continue to expect our cash flow in to be in line with and weighted to the back half of the year. As of December '31, net debt was $7.90,000,000 dollars and net leverage was 1.7 times.

With our EBITDA growth and strong cash flow generation, we anticipate net leverage remain below 2x throughout With respect to our share repurchases this quarter, we bought 143,000 shares at an average price of $77,.12 per share or $11,000,000 in total. In Jan. 0, we repurchased about 550,000 shares at an average price of $72,.79 per share or $40,000,000 As of January '31, our remaining share repurchase authorization is 124 we raised our guidance for net sales to be $2,.26 to $2,340,000,000,.00 and adjusted EBITDA of $4.70,000,000 dollars to $500,000,000 Our guidance implies strong top line growth of 13% to 17% and adjusted EBITDA growth of 7% to 14% with healthy adjusted adjusted EBITDA margins of 21.1% at the midpoint. As Darcy mentioned, our better than expected performance drove our decision to raise our outlook. Before reviewing our outlook, I want to give some perspective on our cadence throughout the year. Overall, our quarterly sales phasing hasn't changed significantly from our Nov. 0 guide.

Recall, we expect net we expect sales growth to be weighted to the first half of the year as the lapsed trade inventory loads in '24 which we estimate to be a mid single digit headwind to our go.

Regarding adjusted EBITDA, we have made some modest I mentioned we shift in marketing spend from the to the Additionally, protein costs in the are trending slightly more favorable than expected and more unfavorable in the The combination of these items and a stronger than expected has shifted EBITDA growth toward the In addition, our guidance continues to include cost related to packaging redesign. As a result, we expect EBITDA margins to be modestly lower than the first staff. At 21%. Moving to our forecast. We expect mid to high teens net sales growth Dime Ties and all others expect to be flat to down year over year. We expect consumption dollar growth to be meaningfully exceed shipment dollar growth for Premier Shakes, which is typical in the We expect adjusted EBITDA margins to decline modestly compared to year ago, with significantly higher marketing spend more than offsetting higher gross margins. In closing, we are pleased with our strong start [indiscernible] our results gives us greater confidence in our full year outlook and long term growth prospects. I will now turn it over to the operator for questions. Our first question comes from David Palmer with Evercore ISI.

Your line is open.

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

So first of all, mean, this year is fundamentally different from last year. I mean, we have ample capacity where we really can drive the business. I mean, I mentioned in my prepared remarks that the entire organization is now focused on demand driving. Where you really see that is this is the first time that we have started national advertising. We have not had national advertising [indiscernible] our main business, our shake business since 2021. So that's a big difference. And And honestly, that is the one driver that can lift all channels. So incredibly important.

The second piece is just around distribution. We expanded distribution like distribution and innovation, I would say. [indiscernible] in past last year versus this year, we're really driving distribution and innovation. On the shelf, especially in the food accounts. And then I would say the third big one is promotion in food. So last year, we did not we kind of eased in promotion last year and we started in the club channel. And then expanded from there.

We now have promotion across and we started layering in promotion and display, in the food channel. And I always like to repeat this because I think our business is different from many other businesses is it is less about the sense off for promotions So it's not about deep discounting All we want [indiscernible] display is what moves our business. And so we kind of do as little as we can from a sense off standpoint to get those those displays in aisle.

And so and we're really starting Jan. 0, Feb. 0, March 0 are big is the big season for us where the most new consumers enter into the category. And so it's nice to see our big displays out there like they have been in past years.

So those I would say those are kind of the three big areas that are different this year than last year. So hopefully that answers your question.

Thanks. And if I [indiscernible] was super strong this quarter. We would estimate maybe up 40%. How do you see Domitize playing out this year? As a brand. Was that international strength sort of a one off of this quarter, any thoughts about Domitize in 2025? [indiscernible] the diamatized international business to continue to be strong throughout the year. And drive the overall overall business.

In The U. S. So remember international business for Dynatize is a about 40% of the global brand. [indiscernible] The U. S. Business is pressured. We have a few years ago We took a lot of pricing and the category took a lot of pricing because of of whey protein prices really accelerating. Well, we're seeing those commodity prices continue to accelerate.

So the P and L is pressured, I mean, globally, but the the consumer in The U. S. Is much more pressured. So I think that as we look at the global brand, international stay strong throughout the year. And we're looking at Basically like single digit growth for [indiscernible] Thank you.

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

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

So we just it just launched at the December,.

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

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

I would say yes and yes. First of all, I think that one of our main growth drivers is just around getting our fair share of the shelf.

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

But in the meantime, we're also expanding just getting our kind of our fair share of the shelf.

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

Versus your market share right now?

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

Thank you. Our next question comes from Ken Goldman with JPMorgan. Your line is open.

Hi, good morning. And thank you for the help in sort of framing the rest of the year in terms of cadence. I was wondering if I could ask a follow-up to that, which is how would you like us to think about Premier, mainly ready to drink, consumption in tracked channels. Any sort of ups or downs or unusual trends we should think about just as we look ahead at the biweekly releases going forward? And Ken, you're mostly talking about Yes and no, yes but I'll say yes and yes, just like you did. A little bit of both, whatever you can offer would be great.

Okay.

So Jan. 0, I said, was up 17%. We expect overall to be in the mid-20s. So we should be seeing acceleration as we go into and March 0 And that is really driven And again, now I'm using [indiscernible] So So we have a broader look at track channels. So that includes both Amazon and Costco.

But yes, so we will so we should be seeing an acceleration into and then And then we should see strong consumption throughout the year.

Got it. Thank you. And then we think about the rated mix category in The U. S, I think there was some hope that might be that there might be a little bit of a rollback situation for lack of a better phrase in Jan. 0 with a large customer. Across a number of different manufacturers. I was just curious A, is that correct that we were expecting that and B, did that happen as planned? And I guess, see, what are you looking for in terms of overall category pricing there in light of some of the challenges at the higher end of the premium portion of the category as well as higher input costs going forward.

Okay. Can you so you said that we were expecting a rollback I'll simplify that Darcy.

Yes.

Yes. I was under the impression no, I'll simplify it. I thought there might be and maybe I misheard this last quarter, there might be a hope there might be a little bit of incremental promotions at a particular customer in Jan. 0 across ready to mix. But really broadly, I'm just trying to get a sense of what you're viewing or what you're expecting from [indiscernible] in that category, especially for the premium side, in light of some of the challenges and in light of at the same time some higher weight cost, if that makes sense?

Yes, it makes perfect sense. We're watching it very closely. Because a, yes, like you said, we price [indiscernible] expected to continue to increase. Right now, promotions across the category is pretty stable.

So not we're not seeing We're not seeing a decrease in promotion to offset the increase [indiscernible] Whey Protein yet. I think that likely we still believe that we're going to see it We haven't seen any pricing yet. So I think that we believe we just have to see it later in the year. Because that's where you really start seeing the increases in Waferro But we haven't seen it yet. We haven't seen a dramatic shift in promotion plus or minus. Got it. Thank you.

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

Hey, thanks for the questions.

First, I just wanted to make sure I understood the timing of cost inflation and kind of what's driving it. You talked about single digit. Is that still the expectation? And then what's driving that uptick as we move into the back half? Is it really just [indiscernible] or kind of other items to call out?

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

Great.

Thanks for that.

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

And we are not. So we haven't seen price [indiscernible] we haven't seen anything at the shelf from a price increase standpoint. And there hasn't been a dramatic change of promotion. So, pretty steady promotional levels So we expect that there is going to be a change later in the year as these higher protein costs start flowing through the P and Ls, but we haven't seen it yet.

Understood. Thank you.

Thank you.

Our next question comes from Kamiel Gargiwala with Jefferies. Your line is open. Hey, everyone. Good morning.

And congratulations. You're liberated from all the capacity constraints over recent years.

There's a lot going on in what you've laid out. I guess the big sort of question is what's the right pace of doing all these things between the marketing and the repackaging and the innovation there is sometimes a risk of going too fast, especially because This is really your first year. Of having the ability to be a lot more demand focused. So how do you know you're sort of going at the right speed and not too fast?

I love that question. So we have been if you think about the last year starting and now I would say we have been pressing the accelerator kind of consistently. So we first layered in promotions in some channels. [indiscernible] did some light kind of light innovation more around flavors just to give consumers and retailers some flavor excitement.

Then this year was now we are launching both innovation as well as doing advertising But we're still not we've talked about wanting to get to 4% to 5% of spend on marketing. We're not there yet. We are We are slowly accelerating for the exact reasons that you're talking about, which is we don't want We don't want to get into a supply constrained situation, and we don't need to. We want to try to figure out the right level of support for our business to drive it year over year. So that is exact it's a fine line, but so far, I think we've been we've been doing it well, and we'll continue to keep that in mind. And just [indiscernible] question around [indiscernible] We have been working on packaging for a while and I'm really excited about the the new graphics. It's an evolution, not a revolution. But it is going in the right direction. It will improve all of our testing It's going to improve discoverability. It's a more modern look. And we really haven't [indiscernible] because it works well, but we haven't done kind of a logo redesign and package redesign in about a decade.

So it's pretty exciting and that should roll in toward the end of the year, basically like the second half.

That's good context. Thank you.

Thanks. Paul, thanks for taking our questions. Darcy, I wanted to go back to something you mentioned earlier, which is that Premier is really driving mostly new entrants into the category. You look at the scan data, it really seems like Premier and maybe one of the brand are the ones that continue to gain share. Just give us some insights into why some of the other legacy brands aren't seeing the same level of engagement from these new consumers given that the cash [indiscernible] The growth is coming from mainstream so basically the everyday nutrition and sports nutrition segments And it's it's really the kind of modern brand. I think if you separate the category into how we look at it, which is adult nutrition, Sports nutrition, everyday nutrition and weight management You really start seeing a a dynamic where it used to be that adult and weight Really with most of the category, it's where the the category began. And now you see those parts of the business that's really declining or just stagnant. And you see The sports nutrition and and every day just kind of exponentially growing. I think it is because those part of the categories are more They're more positive.

They're more proactive health messages as opposed to the adult and the weight side of things are more about deprivation And so I think that that is I think it's a changing consumer view of the entire category going much more into that positive wellness side, as opposed to what you want to change about your body. So I think that is part of it. Great.

And then if I think about Premier in particular, is there a way to split up the volume gains between frequency among existing households, so whether it's I used to have it once a week and now I have it 3 times a week versus just new households coming brand that haven't tried the product before?

I don't know if I have that We probably need to follow-up with that. I don't have that off. I don't want to give you the the wrong number. All I would say is that We're seeing and it shows in our supplemental presentation where you see that not only are we increasing households, but we're also increasing buy rate and repeat rate. So it's rare that you [indiscernible] a business that is growing households as well as growing distribution innovating, etcetera. But at the same time, time increasing buy rate and repeat rate.

So it's definitely so I don't have the breakdown I would say they are both contributing to our growth.

Okay. [indiscernible] Hop back in the queue.

Thank you. Our next question comes from John Baumgartner with Mizuho Securities.

Your line is open. Good morning. Thanks for the question.

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

Yes. I think that for us, the goal is display. And so we we know we do not think that we need to go as deep as perhaps we did a few years ago. However, what I will say is that this doesn't have to do with just what we want. And so, it is always a negotiation with our retail partners about what their what their rules are about the required depth to get display. So I if it was up to us We would only do we would have very little TPR, if any. We would just do display. Because we know that that's where you get the eyeballs, you get the trial We bring people into the franchise and then our 50% repeat [indiscernible] But again, there are more stakeholders that we need to work with and they have different rules. Okay. Thanks for that. And then on the ready to mix side, coming back to this absence of more prominent price increases thus far, do you get the sense at all that the volume success of Shake is maybe forcing the powder segment to hold prices more so than usual and sort of accept some margin pressure to reinforce relative value there?

I mean, I guess I'm curious if maybe there's more of a fundamental change in how powder is pricing especially if there's some expectation or optimism for lower cost later this year?

Paul, do you want to talk a little bit about where we think pricing is going to go From a protein cost perspective on whey, yes, I think what we're seeing is that costs [indiscernible] we expect those to really go through our fiscal year. So I would not say that we've necessarily seen on whey powders relief yet. I think it's still a tight supply demand dynamic on whey powders and expect that really to continue through our fiscal year, which I would say is in general, it's I think our perspective is it's hanging on longer than we expected. So it may go beyond this fiscal year, but obviously that's still to be determined as we get further along. But yes, I'd say our view is that it's seems to be sticking a little longer than expected.

There definitely is a different dynamic because milk protein concentrate is what the protein that we use in our shakes and then whey protein is what is in the Powder business. And there's definitely a different cost dynamic in both. They're both growing they're both increasing but milk protein concentrate is kind of just more steady where you don't have the whey protein is a bit more volatile. And so, and has increased dramatically over time. So I think, yes, there's just a different P and L reality in both sides of the business.

Okay. Rishi. Thanks, Paul.

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

I was just curious, Darcy, if you could sort of discern for us between on some of these distribution gains, how much of that is [indiscernible] Versus kind of like new product launches that you've talked about. I guess it seems like you have a long tail of white space that you've referenced over the past year plus.

With respect to getting your products new forms single serve, other channels, etcetera. So I'm just curious, as we think about the long term opportunity for how big this brand, how big this category can be, how broadly it could be distributed Where we are in that and the distribution gains that we're seeing specific to this quarter, how much of that is really just kind of core blocking and tackling as capacity constraints ease versus actually tapping into the long term white space.

Okay.

So From an out of stock, let's just start with kind of the block and tackling out of stocks that we're lapping. We'll probably fin it we'll have lapped most of the out of stocks by Q I think they ended kind of Q2, trailed into Q3. By Q4 of last year, we had mostly full shelves So if you think of that, so if you think of percentage of our growth, I think we would say kind of single digit part of our growth, maybe a quarter of our growth is coming from that. In the first half. So that's just kind of like now when you think about the long term opportunity of distribution, I would bucket it into 2 sides. I mentioned to Andrew that we were if you assume that your share of shelf should equal your market share, [indiscernible] We basically should double our space. It varies dramatically from account to account.

But at a macro level, We should we should about double our space given where our market share is That's one piece. That's just share of shelf. But then when you think of when you're in a high growth category, fastest growing within one of the fastest growing within the store The entire category should increase in space. And so, I think that's where it gets really interesting And where the continued so once we fix the shelf, meaning that we get our fair share then we start talking about overall increase in the category space. And those are the top to top discussions. And the ones that should win there, obviously, are the ones that are driving the new consumers into the shelf. And there aren't that many of those brands and we're one of them.

Thanks. That's very helpful. And then maybe just on that last point, Capacity constraints are easing. Presumably not just for you, but for the category. We've seen little green shoots, some some tinier brands, certain private label SKUs having some nice growth here off of obviously low basis.

Just curious how you're seeing the competitive landscape as maybe more capacity becomes available? And certainly, to your earlier point about the category being the 2nd strongest behind eggs right now from a growth standpoint.

Clearly, that brings eyeballs from a competitor standpoint.

So just curious what you're hearing and seeing with respect to competitive activity, innovation, etcetera around the moat that you've built here with Premier Protein and ready to BellRing?

Yes.

From a competitive standpoint, I would say there aren't a ton of major changes since the last several quarters. The mainstream and sports nutrition brands are winning. [indiscernible] they're the ones bringing in new consumers into the category. Gaining distribution both in aisle and out of aisle. Which has been Again, the key because it's a low household penetration category, so people need to see the product. And the smaller brands Honestly, I mean, yes, you always see some new plants products kind of come and go, but really ones that make a difference and are making an impact and gaining a lot of shelf space. There just aren't that many. Within ready to drink, very different within ready to mix. Ready to mix, you see upstarts all the time. And I think that's the big difference between ready to drink and ready to mix in bars Ready to mix and bars are much easier to formulate You can get you can You can basically formulate it in kind of a kitchen, a commercial kitchen, where It's the ready to drink category is just highly complex. It's hard to formulate. It takes 2 plus years formulate these products. Have to make them in a very facility that is kind of wall to wall stainless steel aseptic very expensive, Usually, you have to commit to long term volumes to get the space So it's just a much different, yes, competitive moat, I would say.

Than in the other parts of the category.

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

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

I can start, Paul, and then you can to whatever I miss.

So the decision really was around, we were supposed to start marketing in kind of the middle of December we pushed it back a few weeks and mainly just we were making some adjustments to the creative and it took a little longer. So we pushed it until we started on in the kind of last week of December right before New Year, New Year. So So that is kind of the reason why it pushed. Paul, you want to [indiscernible] Obviously, we talked about the shift out of Q1 and really we shifted some from Q1 to Q2, which then shifted some second half. So the net impact is about a $4,000,000 shift to second half. But The level of spend for us is still still the same as it was when we gave guidance last in November. So nothing has dramatically changed on our marketing spend. We still feel like we have right level in our guide, in our plan. So no big changes there other than just [indiscernible] Thanks, Paul. And Darcy, as a follow-up, the innovation launch indulgence, how does the expansion play out from here? I think it was launched in limited customers you expect that to start to expand [indiscernible] this fiscal year?

And is that shelf space incremental to Premier's current shelf space where you've already launched it?

Yes and yes.

So yes, we started We launched it in Q1. With 1 mass customer and then we started in e com and then we and then we are planning to expand from there. So you'll start seeing it pop up in different accounts throughout the year. And yes, it's incremental. [indiscernible] Thank you. Thank you.

Our next question comes from Robert Moskow with TD Cowen. Our next question comes from Robert Moskow with TD Sorry about that.

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

Kamehameha's channel is still a future opportunity. It represents about 10% of the overall category, so relatively small. I agree we should be there. We will be there. But right now, there are other opportunities One of the and and we have we've had a fair amount of conversations in the past about just DSD specifically. And we've been doing some work on our side to evaluate that. For now, I think what we're doing is we're kind of testing a hybrid strategy. Which we like to call like ship ship via warehouse, merchandise like a DSD, within our channels. And so we're seeing how far that can get us without going all the way to DSD. But convenience, yes.

Future opportunity, but not immediate. So that's the first one. Second one is GLP [indiscernible] Yes. So we track it very closely. As you might expect. And I would say the headlines [indiscernible] much. So the penetration of GLP-1s based on our research is much faster and bigger than what I think the original base case that Morgan Stanley put together, And what though I would say the one change, it benefits definitely benefits our products, specifically both ready to mix and ready ready to drink and ready to mix but a little bit more on the ready to drink side. We estimated that it represents about a quarter of our growth. That is still the case.

The only change that we saw in the past quarter on from our research is a few more people lapsing.

So in essence, the penetration the household PIN, so to speak, [indiscernible] pretty stable. It's not growing anymore. And what we're seeing is there are kind of as many people entering or starting with GLPs as coming off and [indiscernible] and the reason is because they've basically hit their target weight. And so they're sort of it's plateauing a bit. We'll watch that carefully in the next coming the few coming quarters, but we still see it a big a nice tailwind for the category.

That's interesting. So when you say that it represents 25% of your growth, if penetration rates do stabilize here, What would happen to that 25% number? Does that mean that goes to 0 or how do I connect those 2?

No, I think that it continues. So because of the people that start GLPs, I mean, not everybody is on using using RTDs. So I think that it will continue to grow. Also, it's 1 quarter, it's stabilized. I mean, I think this is really it's new. So we got to keep watching it. But I think what's encouraging is that People use RTDs when they're on the drug But then they also use them after. So when they come off of it. And so to keep the benefits So I just think that it's still ultimately we still have a low household penetration category Our product is still 20% household pen. So we have a this is just one of many growth drivers that we see on our business as well as the category.

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