Q3 2021 Bellring Brands Inc Earnings Call
Welcome to bellring Brands third quarter 2021 earnings conference call and webcast hosting the call today. From bellring brands are Darcy Davenport, president, and chief executive officer and Paul rode. Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 1:30 p.m. eastern time. The dial-in number is 1-800-585-9396..800.
5:8.
5.8, 3.6 7 and the passcode is 747..9008 at this time all participants have been placed in a listen-only mode. It is now my pleasure to turn the floor over to Jennifer Meyer investor relations bellring brands, for introductions. You may begin.
With me today are our president and CEO of Paul rode RCF. Oh, 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 filing sections about ring.com in
The release and slides are available on the SE C's website. Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties. That should be carefully considered by investors as actual results could differ, materially from the 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
Alibi on our website. And finally this call will discuss certain non-gaap measures for reconciliation of these non-gaap measures to the nearest Gap 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 last evening, we reported our third quarter results and posted a supplemental presentation to our website. I'm happy to report that we turned in a record quarter with net sales of 3 hundred, forty 2 million and adjusted ebitda of 70 point..5 million performance, exceeded our expectations, lifted by success of our growth initiatives, and tremendous category momentum.
Premier Protein and Dymatize grew net sales 65% and 99 percent respectively, driven by distribution gained, strong, velocities, and favorable category Tailwinds, following are better than expected. Third quarter results. We are, once again, raising our outlook for the year. We now expect net sales to grow at 27 to 30 percent for the year.
Where else are raising our adjusted ebitda guidance range to between between 230 and 235 million? We continue to experience, meaningful cost pressure. However our price increase on shakes upcoming powder, pricing action and our cost Out programs are helping to offset these headwinds
as a result of accelerated growth coupled with network delays in our a in adding Tetra capacity we have run into short-term Supply constraints over the next. Several quarters we are adding significant capacity into our existing Co manufacturers as well as expanding our code manufacturing Network, delays in 2021 capacity. Stem from the same issues. I expect that you've heard from other companies challenges with equipment delays and limitations on.
Neighbor.
While we expect inventory will be low for several several quarters. Our organization has experience managing in this environment, while focusing on our priorities to deliver our long-term growth objectives. We faced capacity challenges before and thrived on the other side. And I expect a similar outcome again.
Will provide fiscal, 22, guidance in November. But to preview, we expect we expect net sales growth and adjusted ebitda margin to be. Well, within our long-term algorithm, we will give more context in detail in the November call.
Trying to this quarter. We are seeing tremendous growth in the convenient nutrition category, ready-to-drink beverages grew 29 percent versus year ago. But even more impressive is the sequential growth of 8% versus the January through March period. Which historically is the category strongest volume period.
RTD beverages added an impressive, 2 points of household penetration versus year ago and Premier. It then Premier is driving close to eighty percent of that increase. These large gains are driven by several factors. First, Health is top of mind for consumers. There are more people worried about improving overall health, losing weight gain during COVID-19 and making resolutions to exercise more.
Second consumers are actively seeking, healthier food Solutions and gravitating towards shakes and powders because of the products, versatility and convenience. These Trends have existed for years but COVID-19 has accelerated them.
Moving to our brand highlights. Premier Premier Protein Shake consumption group, 46 percent across tract, and untracked channels. Growth was driven primarily by distribution gains and increase in category, momentum, all of our key Channel stuff, strong growth with food and math Leading The Way of 98% and 67 percent respectively.
Our growth strategies are working well for me or proteins household. Penetration reached an all-time high of 8.2%, an increase of 20% over year, over a prior-year are repeat rate and by rate on our 30 grams Shake line have remained strong and stable, which is encouraging because growth Brands tend to see velocity declines as they rapidly grow household. Penetration are strong distribution. Build continued with brand pdp's at 53%.
Versus year ago and RTD market share and track channels reach 20.7% gaining 3 percentage points.
Premier protein powders had another great quarter with track consent consumption of 85% driven by distribution velocity and category. Momentum powders are rapidly evolving Beyond Sports into wholesome and proactive Health. In fact every day powders are now the same size as Sports powders and track channels. We believe this is a strong future growth opportunity for us.
Not a dime.
Our strategy of expanding distribution to more mainstream channels has been very successful. The business was at 98% domestically it with growth in all channels. We identified the right products and pack sizes for these channels with the brand performing in the top third of the category and math and gloves, ISO 100, fruity and Cocoa Pebbles continue to be breakthrough products, driving excitement to the brand and strong velocities.
Before closing I would like to comment and post announcement yesterday to distribute. Its interest in bell ring to post shareholders. As you know, we completed our IPO a little less than 2 years ago since then we've made Solid strides in our business, delivering great results. And creating shareholder value We Believe upon completion of their proposed. Transaction bellring will have increased strategic, flexibility, and should benefit from more liquidity in our shares. I'm delighted that Rob will continue in his role.
At Bell Rings executive chairman as we have built a great complementary partnership and even following the the transaction we will continue to work closely with the post team.
I'm really proud of what we've accomplished since our IPO, and I remain, even more bullish on our future category. Momentum and relevant in our society has never been stronger. Our portfolio of Brands is bringing in new households as consumers, migrate to healthy, Convenient, Food Solutions are new products are generating consumer excitement and Performing ahead of our of our expectations. We're going deeper and consumer, insights and uncovering, unmet needs resulting in an exciting and
Patient pipeline for our consumers and our customers. Our supply chain is laser focused on bringing on more capacity to keep Pace with our tremendous top-line growth. And is already making significantly more shakes every quarter.
I want to thank our employees and our Co, man and retailer partners for all their hard work. That drives our business every day. I will now turn the public all over 2 pulse.
Thanks to our scene, good morning everyone. As he mentioned the third quarter, exceeded our expectations with record net sales adjusted even though, net sales were 3 hundred forty, 2 point 6 million up, 68% adjust sahiba do was 70 point, 5 million up 83 percent, and even the margin was 20.6%. Our Top Line performance is very strong across all brands. Also results further benefited from category tell winds as well as Laughing the COVID-19 related impacts in the prior year.
Protein, net sales, increase 65%, primarily driven by RTD shakes distribution gains, strong velocities and better performing promotions, drove this Grove.
Additionally, we lap the negative COVID-19 impacts in the prior year period.
Diamond Eyes, net sales, nearly doubled, this quarter growing 99% and benefited from laughing, the negative COVID-19 impacts in specialty in international markets in the prior year, period.
Favorable product and customer. Mix drove an improvement in average, net selling prices.
Turning back to Consolidated results. Gross profit of a hundred, eleven point 3 million increase 62 percent this quarter with an expected decrease in gross profit. Margin to 32.5% as we approve ously, discussed this decline, resulted from higher Freight and input cost.
SG & A expenses for forty..2 point 6 million. And as a percentage of net sales decline, 360 basis points to 12.4% reflecting, leverage for SGA base.
This leverage was achieved by 3.4 million of incremental marketing and consumer advertising expenses and higher. Incentive compensation of course,
Operating profit of 50, 1.5 million increase 68 percent or Twenty 1 million compared to Prior year and was negatively impacted by 11.8 million of accelerated amortization. This was a non-cash expense recorded in connection with our decision to discontinue our Supreme Protein brand and was treated as an adjustment for non-gaap measures.
It's in third quarter.
Made a strong third quarter for cash, flow generating 72 million from operations as of June 30. Net, that was 529 million. And that leverage was 2.3 times
Fernand or Outlook is Darcy, previewed. We are raising our fiscal 2021. Net sales guidance, ranged 1.25 to 1.28 billion with adjusted, ibadah expected to range between 230 and 236 million.
We expect we expected we expect our strong sales and category. Momentum to continue into the 4th quarter organic growth distribution, gains plan promotional activity and our Sheikh price increase or driving net sales growth
Protein of grade inflation have continued to rise ahead of our expectations and along with milk. Protein inflation will pressure, you're over your gross parties.
Recall, our fourth quarter typically carries the lowest gross margins driven by the volume of promotional activity. In the fourth quarter, we expect the sg&a. Leverage to offset a portion of the gross margin decline. We are thrilled with our year-to-date performance or confidence in the Bell. Rings story remains unchanged with that, I'd like to turn the call back over to the operator questions.
Thank you as a reminder. If you would like to ask a question, press star, then 1 on your telephone keypad again. Star would come into the question queue.
And our first question is going to come from the line of Andrew's are Barclays.
He's right, thanks for the questions. Good morning, everybody. First, you want to start off with maybe trying to compare a little bit. The severity of the capacity, constraints that bell ring faced the end of 18 and early, nineteen just sort of what you're seeing. Now I back then, obviously it forced the company to, you know, cut back on a couple of flavors. And then sort of SK use, maybe cut back on some promotional activity with key customers and and it certainly did impact, you know, the Top Line performance
They significantly. Can you compare a little bit about what you're seeing?
Van. And if it requires you to pull back on flavors or SK use or a renovation in any way or or promotional activities with with key customers that that be the first 1.
1.
It is, I would say it's pretty different from last time. So first of all, we have a healthy network of coming you facture. As we've worked really hard to diversify and to add more cocoa manufacturers to our our Network and we are making significantly more shakes every quarter. So I mean, just to give a little more color than I did during the prepared remarks is, we just, you know, significant,
We grew faster than our base case that our best case that we forecasted. So we were prepared for a 20% increase which was double double our long-term algorithm and we had flexibility to go even higher than that. And we ended up growing 30. And so and then the flex capacity that we thought we had that we were relying on was delayed to
Me too. And those were some of the the reasons that I talked about before which was around manufacturing, delays and labor issues. So we went into our, we basically dug into our inventory and then and as you know, we've talked about how to add the it takes some time to add capacity so you're right. We're going to we're not going to be forced to go as Extreme as we did before which was going down to 2 flavor strategies. What we will.
Like we do is we're going to have to manage demand to supply for several quarters and we will use, you know, the obvious levers, which would be both you know, promotion and marketing to do so. And then I think last quarter you mentioned that you are sort of based planning assumptions, for elasticity did not include competitors. Raising raising pricing, I have to assume given what we've seen in costs for everybody that
That generally there's been a general raising of prices across the board but which would make elasticity may be a little bit more tenable anyway, but wanted to get a sense from you on how that's been progressing. Thanks so much. Exactly. Right. So and that is 1 of the factors that led to our beat in the quarter. The, you know, the first was just around the category Tailwinds which were stronger than we expected but the second is around, you know, our assumptions around, Shake elasticity.
No. We we did assume that we would we would see some elasticity and in a couple things factored and we just haven't we haven't seen any any hit to volume at all and it was really a result of a couple things 1 retailers, reflected reflected at shelf later than we expected. And then also, as you said competitors, there have been competitors follow, we just started seeing that late in
The quarter.
And then and then lastly, we just we've actually seen volume increases instead of volume declines. Since we raise price. Thank you. Thank you. And our next question, will come from the line of Ken Goldman JPMorgan.
You'll have to manage demand to supply for, I assume that that has been somewhat, informed by that.
For how that 10 to 12 percent range has been perhaps affected by your relative, inability to supply the demand at this time.
We factored that into our preliminary estimates and you're exactly right Ken, you know, we're not ready to go into details into 22. But we did want to give you a sense that we still believe that we can we can grow 10 to 12 percent on top of the kind of outsized growth that we saw this year and that's going to be coming from you know several different places it's going to be it's going to we're going to still going to see growth. We expect to still see growth and shakes but we
Have strong powder businesses and we're going to we expect to see growth in in powders as well.
Great, my follow-up over the 52-week less. If you 2 weeks, you showed a slide, you're growing almost as fast in supermarkets as you're going, Andy, calm. You know, I'm sure groceries are seeing these numbers thinking about ways of expanding your disability. Your darts are you previously said if you know you're not seeing any signs you'll be given space in a much more heavily traveled, I'll soon. So I guess I'm not going to ask about that but what other steps can you take with your Supermarket? Customers to improve your
Take advantage of those velocity Trends and maybe it's just as simple as continuing to build more and better displays, but just wanted to, I guess, get your thoughts there. Yeah. That's exactly right. You know, we know what drives our business displays are really effective way, you know within the tool set that we have right now. Effective way to bring in new consumers, I mean, I said this in my prepared remarks but you know,
We're bringing in 80% of the new people into the category. So we are doing that even, you know, within within the set, but displays really effective, or advertising is really effective and just, you know, just the product. So I think that what we're doing is working those Grocery and math customers are seeing the tremendous growth. So there we're both incented to continue.
Drive, the
It's so much. Thank you.
And our next question will come from the line. Up, hem, Alle Kaufman morganstanley. Hi, good morning. What factors do you see as contributing to the elevated demand that you've seen recently? And I guess what's kind of driven it to be ahead of what you were planning for relative to your expectations?
if there were, there were basically 3 areas that overperformed and you know, I I reference some of them when when responding to Andrews question but the first was you know the category the category we haven't seen these types of increases in the category, you know, really ever you know the category was liquids was at 29 percent even in the
Cat in the quarter but even some of that is do, you know, just a laughing COVID-19. But even when you look at June and July and when you get to June and July, you are no longer laughing the COVID-19 period so that is pretty clean and the category still growing mid double digits. So if you think of what it was like precoded we were seeing pretty much steady 5 to 6%.
You know, now we're seeing mid double digits. That's it's pretty dramatic. So and that goes back to you know I hit some of the drivers from a consumer Behavior standpoint in my prepared remarks but we did conduct a study to really get under what is driving this kind of outsized category growth and it was those things that I reference you know consumers are looking to eat healthier. They are you know health I mean
All know this during this COVID-19 period. We are constantly thinking about how to improve our overall health. Consumers are looking to lose weight to actor. Kind of a sedentary period. They're looking to exercise more and they're looking for kind of Sports Products. They're also heat seeking Health advice, and doctors are recommending this category and they're recommending from your protein. And then there's also just some
Amet conditions as stimulus and America reopens, I mean, traffic just generally is just very high. So those are all leading to an about size category Tailwinds that we were not expecting the gravity of it. The second piece is around. Shake pricing elasticities. We did have some conservatism in our numbers, we're not seeing them and then the third is really around Dymatize. We saw better-than-expected results out of
Specialty. And
then we, we forecasted
Great. That's very helpful and to what degree is the capacity that coming online incremental to be original plan. And how much flexibility will you have to scale back on production if demand moderates?
The new Quebec. I mean the new capacity is all incremental so the and then from a flex that we always incorporate some flexibility into into our forecasts. So we will we will always be able to kind of dial it up and dial it down.
Great. Thank you. Thanks.
And our next question will come from the line of Chris grow with steeple.
Hi, good morning. Good morning. Hi. I just had a question if I could first on understand. I think to Paul the pricing came through this quarter, you also talked about inflation kind of coming in ahead of your expectations. I just was curious as you stand today. Does pricing offset inflation and is there a chance to go for more pricing? Given some of the continued inflation you're seeing in your business?
Yeah you're correct. We have seen, you know, continued inflation, particularly on our, our powder business and so that we have a price increase going into effect in q1 on that and we continue to evaluate the level of price increase their because they increases on whey protein of really, really not a much higher. Honor Sheikh business are our price, increase is largely offsetting Commodities but as they continued to rise with me home, continue to evaluate some additional levers to pull their
Global offset that is especially as we get into 22.
Okay. And then I had a question Darcy on Supply and just thinking about, you know, when you run of these issues where you have a shortage of Supply, in some cases, just like the cost basis of your supply chain. So I'm just Are there specific geographies for example, now that you've got a pretty good diverse, you know, supply of product where you have less of an inventory, buffer, therefore you may have some more margin effect and therefore as you get back to kind of full production you know you can you can actually get a better kind of
For cost opportunity for your business that makes sense. It makes perfect sense and all start and I'll let Paul add-on, but you're right. I mean, we are during this period of time. When we're low on inventory, we're basically shipping product wherever it is to wherever it needs to go, which is, you know, not efficient. And so, and we will continue doing that for several quarters. Until we build back up our inventory.
3, and once we do, then we're going to see the benefit of of that. So, you know, if you kind of you obviously, you know, we're going to, this is all Dynamic. But if I were betting, I think we'd see that toward the end of 22,
when we call, you know,
In efficiencies, in our, in our numbers, especially in Q4 is as to Darcy point, we are working hard to ship product were needs to go and that's not always going to be the most optimal cost and as we expand our our Network, then it gives us even more flexibility to to optimize for 8. Okay? That's very helpful. Thank you.
And our next question is going to come from the line of Camille guards or walleye with credit Suite.
All right. Thanks, thanks for taking the question. The first, the first ones on investment spending marketing. Now that Wellness is really taking off. Obviously, this woman been part of the plan A couple of years ago, and particularly powders has this changed your your investment plan or your Capital deployment strategies.
Yeah, it is. We have 2 brands that go after 2 distinct consumers and and they both are, and we have figured out what drives us
We have a ton of upside, I think there is a tremendous opportunity especially on kind of mainstream powders. If you look back at what Premier did or TD's and meaning that the kind of mainstreaming of that category, I think that's coming in powders. We're starting to see it, you know. I mentioned that everyday powders in track channels is now the same.
Same size as Sports, which is a really big change in the category. So, absolutely, we're planning on supporting powder. We are, you know, because we've seen some kind of outsized Demand on Powder. We do need to build up our inventories again. We did, you know our Demand with higher than our, than our capacity for powder. So we did dip into our inventory, but once we fill that up, we're going to be supporting it strongly.
Texture.
Thank you. And if I could ask us a question that's in some ways may be linked to the first question, which is in your prepared remarks. As it relates to the post transaction. You mentioned liquidity as well as something strategic is ma maybe now higher on your priority list, given that transaction and how you're looking at the categories.
Nothing has changed in our kind of General view on em and I mean, I still think you know, you've heard me say this many times but so we're focused on the art in our organic growth of Our Brands. You know, we still believe that's the biggest opportunity. However, you know, we are constantly looking at what's out there from an m&a perspective. And so, you know, this definitely readies us even more to take advantage of those opportunities.
But that's not the driving Factor.
Got it. Thank you.
And our next question will come from the line of built to pail with truest securities.
He's thanks, good morning. I fully get the, you know, pick up in and health and wellness at the end of the pandemic and what's your studies, you know, losing weight and feeling healthier stuff like that. But did something in your findings, you know, see that shakes versus bars kind of tipped because it seems like you're certainly outperforming the, you know, within the various forms and factors.
And I didn't know, you know, that would seem if we were all going back to work and on the go, maybe that would drive it. But you know, it didn't know if there was some reason why you were seeing. And if it was sustainable that, that shakes her now really kind of stepping up even further.
So if you think of the 3 form bars, shakes and powders and the degree that they that those categories or subcategories have mainstreamed bars have definitely mainstream first. So and when I say mainstreamed bars have really become more of a snack food, you know, 50 the household penetration of bars is 50% or about 45% and
It already really has gone from I would say you know it is you know it's more of a healthier snack but it is a snack, whereas both shakes and powders, haven't gone there to that degree. I mean, household penetration of shake still about 25 percent. So if you think, I mean, it could double just to get to wear bars are. So I do believe in then powders is even even
power from a household pain standpoint. I think there is more of an association of kind of proactive, Health there from everything, from kind of higher, protein levels to, you know, immunity claims to vitamins and minerals. I mean, the vitamin and mineral. The so when we asked consumers, why from a nutritional standpoint? They purchase you know, our shakes, its number 1 protein.
And second is the vitamin and mineral blend. So I think that it just there is more of a health halo around both shakes and powders as where I think there's more of a snacking halo around bars.
Got it. But nothing's really changed over the past 4 or 5 months is just kind of coming out that the those have kind of manifested. Yeah, I don't think anything has changed in from the product delivery standpoint. What I think is changed is just the intensity in the focus around health and wellness and their focus on. And also, I mean, the big reason why people enter the category is they they want to lose weight. It's not about
Going to those, you know, weight management brands.
But people and we get success stories all the time around people using Premier Protein and losing weight.
Why not? Just a question on channel. I mean, now you've come through a season of expanding even further into the club Channel where, you know, you probably have 5 times the number of skus that that a normal cpg company would have in a club Channel. I mean me, but you're still seeing strong growth are gues. Looking forward, is there a possibility of further, you know, further excuse for the Shelf space?
It just velocity here or are we starting to see some maturation of of that? And most of the growth will come from non club channels going forward.
Word. I'm really pleased with our club Channel growth and really it is around, you know, velocities and traffic. I don't expect us to get a lot more distribution in the club Channel but I do think there's a lot of upside just from a household penetration and just the you know, more people even just leveraging the incredible kind of traffic
That the club channel is getting right now. I mean, their traffic numbers are off the charts and it's really impressive. So I think that will be leveraging their increased traffic, as well as there's a lot of upside just from a household penetration standpoint on our brand in in the club Channel. Great, thanks so much for the color thanks. Thank you. Our next question will come from the line of Brian spelling with Bank of America. Hey, good morning, everyone.
So I wanted to ask question just about the capacity expansion and just get a little bit more color on a couple of items..1 is just it sounded like Darcy from your prepared. Remarks was this, a project that's already been delayed. I think you mentioned something about, you know, other companies, having issues getting equipment. So I guess that's my first question is just, when did this start has it already been delayed? Its first question.
So yeah, so I would say it is a two-fold, you know, problem I get. So the first was outside demand, which I talked about that the second was, are, you know, when you think about our Flex capacity that were that to get that Flex capacity, we were relying on new lines to come into our existing phone manufacturers. It was expect we were expecting to see approximately
9 lines only for came in. So only for got, put into our comb and network 5. Got delayed to next year. So that is what I was talking about. I think that if those lines came in, I think that we'd be in a different situation. However, I want to just be super clear, our commands are amazing and they have delivered on there, you know, commitment,
The and they've done extraordinary work for us to support our business throughout this pandemic. So I have nothing but positive things to say about our Co man. Yeah, no, I appreciate that. I just I think we've all had experiences with you. No difficulty, buying everything from, you know, patio stones to Lumber. And, you know, it just are all projects have been delayed, just trying to get a sense for what's the risk of further delay like is the equipment, already? In transit being delivered?
You know, is there a laborer?
You, in terms of getting the lines up and running, just be great to know like what percentage of what needs to be done to get those lines up and running next year has been completed or you know, like where are we in the timeline of that project? And is there a possibility for further delay capacity every quarter and we are adding
Adding and when I say we I mean in in partnership with our comb and partners, so they are adding capacity. Both those some of it is labor, you know, the, the situation that I was told by the CEO of 1 of our partners was, you know, they have 4 lines and every weekend they don't have enough labor to run 1 sits idle, 1 line sits idle.
They don't have the labor to run it so that just gives you an example. So right there that in that situation, the capacity is in there, it's just about training, you know, getting enough labor. And and these are, these are the talent, High Talent labor. And so it's about training them and bringing them in. That is well on its way. There are there different situations where we are. We've already gotten the the equipment and it's being installed.
Gold. And then there are other ones that are more long lead. Where were, you know, that we're waiting for the equipment to be delivered? So I would say there are various timelines that we have factored in and we have been conservative in our in our projection. All right that's helpful. Thanks Darcy! Thanks and our next question is going to come from the line of Robert Dickerson with Jeffries.
Great thanks so much sorry but kind of how you know it differs potentially for U relative to the category. Obviously it sounds like you know category growth is you spoken to is far ahead of where it was just 2 years ago. My sumption is you are likely or hopefully not you know the oh,
Company in a sitting in the situation. So, you know, I guess kind of the direct question is just, you know, as you get through this increase capacity build to meet demand as you look out, you know, throughout the category of your competition to feel like others are in a similar similar situation, such that your actual market share to not be threatened, because others might be able to fill in that demand more quickly than
you. Yeah, we are not alone. So the entire, you know, a Seth aseptic processing network is constrained. So if anyone is trying to, you know, get more capacity than they already contracts that they have already contractually committed to, it's going to be difficult, you know, it's going to be, it's going to take some time until the network catches up to this, you know, amazing increase of demand.
Okay.
And then just mechanically for you Paul you know I know there's question earlier around Ma and darts. Are you thinking about you have to look at pipeline? I heard other call this morning and kind of saw the release. It sounds like Post Distribution from post that leverage would be at a rate similar to the IPO and I just actually had a number of people keep asking
You know, the 1 question is, what is that leverage ratio? You know when you went public and then secondly I think through that special dividend just to clarify, it sounds like you know, what is implied here is just that cash will be coming out so it's still raining but you're going to put more leverage on the business, pay the special dividend and then you'll reset from there. So kind of indirectly, it sounds like you do.
You know, positions wouldn't be a near-term event. Especially given the capacity constraints and the special and, and the special dividend.
Yeah. So robbed this morning that they similar to the timeline so that that that range was here 4 times. It was just below 4 times we business that generates tremendous cash flow and we deliver these leverage deliver very quickly. And so, our expectation would be while you're maybe right at a point in time.
Transaction. Maybe, you know, a little more challenging at that leverage level, but we can feel ever so quickly that we don't see it as a as an impact relate to our you know near term strategy to seek him in a
okay. Supply chain can actually potentially benefit you on the margin side, relative to others that you do, have it in the house and it just for I speak with other companies right there. If there's a lot of upsides to know and did a lot of volumes you actually and the commodity,
Normalize might get a lot of upside margin, but if it goes down you might actually, you know, it's pressured a lot more with a comb and it's usually absorbed a little bit but it so manufacturers, I'm just curious if you just kind of touch on that and kind of how that may or may not help you going forward.
Hey Paul. I'm going to let you tackle this once so it's just sometimes he'll manufacturers absorbs, right? That you would have to absorb internally if you had a full in-house manufacturing like I'm not sure if that's right trying to get color on that. Yeah I can't I can't speak for what others do I think.
Roll the ball.
As of the major commodity. So we're buying the proteins because we believe that we can know with ours and leverage, get the Best Buy of those proteins. There are some smaller things that are comments by that. We try to leverage where they have advantages to cost and then where we have advantages to cost and then that's so that's how we see is kind of our competitive advantages of were optimizing that on on both ends, but I can't speak for help how others work on that.
Alright, great. Thank you. Thank you so much.
And our final question comes from the line of Ken zaslow with Bank of Montreal.
Good morning, everyone.
Hygen, you know, you look at the elasticity and through the findings, it seems like your left essity is actually fairly low and that there's able to be price increases. We've seen other companies, you know, called the confectionery companies who've kind of transitioned a little bit towards making more frequent, pricing changes price increases. Rather than just, you know, doing when there's inflation, would you consider that as an option? Given the low elasticity that you have?
I mean, we would, I think for now, you know, we are still looking, you know, we are a gross brand. We are trying to expand. We, you know, we believe that we are sort of in the early Innings of the Premier Protein brand growth. We still have a ton of upside from a household penetration standpoint, we have a ton of upside from a market share standpoint.
We're excited to grow. You know, the liquid category and have more people use this category and our brand. So I think you know, that's that that would be the reason why we would not just because, you know, we are still wanting to grow, you know, as fast as we can. Now, if if we see increase it, you know, those are always part of our evaluation as we're looking at, right?
Rising costs excetera. I mean, there is a cliff at some point. You know, we aren't seeing it now but we're probably not seeing it because of, you know, the other the other competitors have rotted. Also, we didn't see it until many of our of our retailers, didn't raise price until, you know, the middle of the quarter, but, and we're going to be watching it closely.
My second question is on repeat purchases. What was your repeat purchase and what do you attribute to an inn? What can you learn from those findings to do something better going forward. I'll leave it there. Thank you. Yeah, I stayed over 50% and that's, you know, for the last 5 years. So you think about from 2017 to now how
That's our business.
Estranged. I mean we doubled household penetration but yet our repeat has stayed above 50% which is really. I mean, it's it's 1 of the top repeat rates in the category. So I think it's just a testament to an amazing product that consumers. Absolutely love. I mean, 1 of the metrics that we we track is around brand lots and that's really important. And so we want to always make sure that we
We are kind of surprising and delighting our consumers with and that's going to that's going to look, we we look across a lot of different kind of touch points. It's everything from, you know, new flavors to, you know, our our Improvement, on our Shake around immunity it includes, you know, all kinds of different improvements to the product as well as expanding. So I think that, you know, our goal is to keep that.
High as possible and based on the track record, I think we'll do that.
Great. Thank you. Thank you.
Thank you. And with that, we will conclude today's bellring Brands quarter 3.2021 earnings conference called, we do appreciate your participation and ask that you, please disconnect. Thank you.