Q4 2021 Bellring Brands Inc Earnings Call
Welcome to Bell Ring Brands' fourth quarter 2021 earnings conference call and webcast hosting the call today from Bell ring 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 <unk>.
130 P M eastern time.
The dial in number is 870 539146, no pass code is required.
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 of building brands for introductions you may begin.
Good morning, and thank you for joining us today for borrowing brands as fourth quarter fiscal 2021 earnings call with me today are Darcy Davenport, our president and CEO, Paul Brown, our CFO.
Paul will begin with prepared remarks, and afterwards, we'll have a brief question and answer session.
The press release, the supplemental slide presentation that support these remarks are posted on our website in both the Investor relations and the S&P filing sections are salaried alcohol.
In addition, the release and slides are available on the SEC's website.
Before we continue I would like to remind you that this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements Adil.
Additional information regarding these risks and uncertainties discussed under the forward looking statements section in the press release, we issued yesterday and posted on our website.
We also urge you to read both registration statement, the proxy statement and prospectus and other documents related to the proposed distribution of posts interest in Boeing France that will be filed with the SEC when they become available because they will contain important information.
These forward looking statements are subject 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 last evening, we reported our fourth quarter and fiscal 2021 results and posted a supplemental presentation to our website.
2021 was a strong year for Bell ring net sales grew 26% to just under 1.25 billion with adjusted EBITDA of 234 million.
Despite supply chain disruptions, our fourth quarter net sales finished strong at $340 million up 20% and adjusted EBITDA was $60 5 million.
Consumption meaningfully grew across both brands with but with Premier protein RTD shakes up 30% and diamond ties powders up to 50% across both tracked and untracked channels. Despite both brands experiencing some out of stocks.
Margins remained strong but were lessened by rapid escalation in protein and freight costs.
Paul will provide more detail about the quarter, but I want to step back and reflect on how the COVID-19 pandemic has affected the convenient nutrition category as well as our brands.
Since the pandemic started people went from being reactive recipients of health care to proactive consumers of health and wellness solutions.
In response consumers shop, more engaged ways to keep themselves and their families protected from this virus.
The result was a massive consumption increase of nutrition products, especially functional drinks that offer energy and immune health benefits.
The trend of preventative and proactive health existed before the pandemic like COVID-19 drastically accelerated the importance of self care.
Then in mid 2020, one as the country was reopening the convenient nutrition category benefited from an additional tailwind the renewed desire by many consumers to get back in shape and lose their COVID-19 weight gain driving additional households into the category.
As of September 30th household penetration of ready to drink liquids and ready to mixed powders were both at all time highs.
Both premier protein and Diamond type brands are perfectly positioned to take advantage of these long term trends as their trusted leading brands with strong loyalty.
In 2021 Bell ring largely drove this incremental category expansion with strong execution across our growth strategies, including successful distribution gains effective marketing campaigns and new product trial.
Premier protein became a 1 billion dollar brand this year and diamond ties proved to have strong mainstream appeal, becoming a significant growth contributor to bell ring. We now have two leading brands with strong prospects.
However, this year's expansion came with some growing pains.
Our sales outpaced production for both shakes and powders supply chain disruptions affected our entire industry, including labor shortages and equipment delays impacting our ability to access the anticipated level of flex production.
As a result, we depleted safety stock and year end inventories are too low leading to out of stocks in the marketplace.
We are partnering with our retailers and as the number one brand in our segment, they're working with us as we make strategic adjustments to improve our service level.
Good news is inventory levels are starting to improve.
We are adding shake capacity in our existing co manufacturers and expanding our co manufacturing network in 2022 we expect shale production to increase in the low to the low to mid teens how's.
However, this is not enough to satisfy our robust demand and build back safety stock at the same time.
As a result, we are temporarily reducing some of our lower velocity Tetra Shake Skus. In addition to pulling back on promotion and marketing.
We expect our production growth will outpace shipments because much of new of the new production will be used to replenish safety stock and returned to adequate service levels.
Beyond 'twenty two we are aggressively investing in shape production through numerous long term volume commitments I'm pleased to announce that we have entered into an agreement with post to build a shake processing facility, which will be dedicated to premier protein. We are excited to leverage our relationship with post specifically the asymmetric manufacturing knowledge and its foods.
Service business.
Now to our outlook as you saw in yesterday's press release, we expect fiscal 'twenty, two net sales and adjusted EBITDA to grow between nine and 13%.
This guidance is consistent with our long term algorithm, despite our outsized growth in 'twenty, one and capacity strengths in 'twenty two.
Net sales growth is back half weighted and sick and sequentially grows every quarter as new capacity comes online.
Growth in powder volumes price increases on both brands and reduced trade promotions drive year over year sales growth.
This growth coupled with reduced marketing and improved SG&A leverage will ultimately drive EBITDA gains despite significant inflation.
Before closing I would like to share that in October Bell ringing post signed a transaction agreement related to post previously announced intention to distribute its interest in bell ring to pose shareholders. We believe upon completion of the proposed transaction Bell ring will have increased strategic flexibility to manage our capital structure and should be.
Fit for more liquidity in our shares.
As part of the agreement post will continue to provide certain services to bell ring for up to three years to facilitate a smooth transition.
We had a phenomenal 2021 and the future remains bright for both our products and our categories.
Our growth strategies are firing on all cylinders. Despite current supply constrained we continue to invest in our innovation pipeline, bringing product news to consumers and growing our category.
Our strong demand combined with supply chain challenges create a clear organizational focus for 'twenty two.
Aggressively build supply and be ready to turn on demand driving engine as soon as supply allows.
I want to thank our employees and our co man and retail partners for all the hard work that made 21, such a successful year.
I will now turn the call over to Paul.
Thanks, Darcy and good morning, everyone.
This morning, I will briefly review category and brand highlights followed by our financial results and close with our outlook.
The convenient nutrition category category continues to show remarkable growth.
Ready to drink beverages grew 20% versus year ago with ready to mixed powder is growing 18%.
RTD beverages. Once again added two points to household penetration penetration with average buy rate growing 11% versus a year ago.
As Darcy discussed strong consumer tail winds are driving these gains.
Our growth strategies are working well for your proteins household penetration reached another all time high of eight 4% up 20% over prior year.
Ah repeat rate and buy rate on our 30 Gram Shake line remained strong and stable.
So a tremendous distribution gains this year.
However, our GDP has declined this quarter pressured by out of stocks.
Premier protein powders are showing great momentum with tracked consumption up 76% for the quarter.
We're pleased with this year's performance of Premier powders and look forward to growing this product further in 2022.
<unk> continues to benefit from expanded distribution across mainstream channels philosophy has remained strong and it continues to perform in the top third of the category were sold in the U S.
Moving to our financial results net sales for the quarter were $340 million up 23%.
Adjusted EBITDA was $60 5 million up six 7% and EBITDA margins were 17, 8%.
Our top line performance remained very strong across all brands, but our sales growth was negatively impacted by supply chain disruptions.
This call is lower than anticipated production, which exacerbated already low inventories and drove mid sales for the quarter.
Despite these challenges premier protein net sales grew 18, 2%, primarily driven by RTD shakes distribution gains and strong velocities.
Net sales outpaced volume growth, reflecting price increases taken to offset milk protein and freight inflation unfavorable product mix.
Yeah.
<unk> net sales grew 41% driven by strong distribution gains the velocities.
Domestically the brand was up 31% growing in all channels.
International was even stronger up 67% as we lap the negative impacts of Covid in the prior year.
Last favorable product mix drove an improvement in average net selling prices.
Gross profit of 96 million increased six 9% this quarter with an expected decrease in gross profit margin of 28, 2%.
As we've discussed this decline resulted from higher input and freight costs as well as planned promotional activity.
Whey protein costs sharply higher this quarter ahead of our October price increase on powders, which weighed heavily on margins.
Our price increase on shakes is offsetting higher bulk protein cost.
SG&A expenses were $38 million and as a percentage of net sales declined 130 basis points to 11, 2%, reflecting leverage on our SG&A base.
Turning to full year 2021 results net sales of $1 2 billion grew an impressive 26, 2% over the prior year with gross profit of $386 2 million growing 14, 3%.
Gross profit margins declined to 31.0%, reflecting higher input costs and planned incremental promotional activity.
SG&A expenses were $167 1 million and as a percentage of net sales declined 200 basis points to 13, 4%. Despite $6 1 million of higher marketing and advertising expenses and $5 2 million of restructuring and facility closure costs related to our business realignment.
Adjusted EBITDA increased 18, 6% to $233 9 billion with a margin of 18, 8%.
Before reviewing our outlook I would like to make a few comments on cash flow and liquidity.
We had a strong fourth quarter on cash flow generating $80 2 million from operations and $226 1 million for the year.
The decrease in inventories drove a favorable benefit in fiscal 2021, which we expect to largely reverse next year as we rebuild inventories.
We are wondering if its $2 6 million of cash on hand, and full availability under our $200 million.
Revolver at quarter end.
As of September 30, net debt was 457 4 million and net leverage was 2.0 times.
Since the IPO, we've reduced net debt by approximately $280 million.
Now to our outlook.
We expect fiscal 2022 net sales of $1 36 to $1, four 1 billion and adjusted EBITDA of $255 million to $265 million.
The midpoint of our outlook implies double digit topline growth with adjusted EBITDA margins, just under 19% both of which were in line with our long term algorithm.
Sales and adjusted EBITDA growth are expected to be weighted to the second half.
Gross margins are expected to be pressured by double digit input cost inflation, primarily weight and milk proteins.
Our powder powder portfolio is facing significant cost headwinds as whey proteins are at historical high prices.
These inflationary pressures are expected to be offset by price increases, including a double digit price increase on our powder portfolio effective in October.
We continue to closely monitor inflation and are prepared to take further pricing actions as warranted to combat these pressures.
Heading into the first quarter, we expect mid single digit net sales growth as higher net pricing, partially offset by volume declines on RTD shakes as we start to rebuild inventory.
We currently expect adjusted EBITDA to modestly decline from prior year with margins improving sequentially from the fourth quarter.
Compared to prior year higher whey protein caused some logistics inefficiencies and efficiencies are expected to weigh on margins.
Finally, as previously announced posted Bill do you expect the distribution of a significant majority of post ownership interest in BOE range be completed in the first calendar quarter of 2022.
In connection with the distribution, we expect an increase in net debt at Bell rang with pro forma net leverage no greater than four times upon occurrence of new debt.
More details will be provided as far as progress is made in implementing posts plan.
In closing there is no doubt we are facing challenging short term dynamics with high inflation and capacity constraints.
However, the long term fundamentals of this business are solid.
BT nutrition category has dramatically accelerated and is at the center of health and wellness trends.
Premier protein, a dime size, our leading mainstream brands with incredible loyalty.
Current and future co manufacturers, who are looking to expand our eagerly seeking to partner with us because of our leadership position and growth trajectory.
While we and our industry are facing short term challenges the long term opportunity for our business has never been brighter.
I will now turn it over to the operator for questions.
Yeah.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone telephone you may remove yourself from the queue at any time by pressing the pound key once again, if you would like to ask a question today, Please press star and one.
And we will go first today to Andrew Lazar with Barclays. Your line is open.
Great. Thanks, so much good morning, everybody.
Good morning, Brian.
Firstly I want to start out maybe with some of the strategic adjustments that you mentioned that you are working with retailers to manage through some of the supply constraints. Maybe you can talk a little bit about what youre seeing along these lines on the competitive front, I guess or others, having similar issues.
Or could there be some risk of a more permanent shelf space losses, even though velocity of premier clearly remains very strong.
Alright, so I'll try I'll give a little more color on our temporary SKU reductions.
So we are looking at just reducing our the the bottom velocity skus temporarily so we're looking at reducing four skus on our 30 Gram line from a competitive standpoint. This is absolutely a industry wide problem anybody who is in <unk>.
30, and the $3 30 ml shakes, which is our size of shake is.
Facing capacity constraints that theyre looking for incremental volume. The other thing is also on bottles. So some of our competitors producing bottles and there are facing supply constraints as well its different they have different issues, but there are issues with the.
Foil on top of that that close the and that's the seal on bottles as well as E V. O H felt that filter. So there are a lot of different supply constraints that are affecting this industry and so and when you. If you go out to the marketplace you see out of stocks across the board from.
In across the competition landscape.
Thank you for that and then you've talked more recently about your sort of volume elasticity assumptions in regards to some of the pricing that you were taking a somewhat conservative view not assuming that others necessarily follow a pricing I'm, assuming the whole <unk>.
History, obviously and facing all of this has been taking pricing pretty aggressively maybe you can update us on what youre seeing from an elasticity perspective, even though I know it's still somewhat early.
The game was all the pricing coming through.
We've really seen zero elasticity, we test we took price and our volumes went up.
So, but yes competitors have followed in the RTD space, we're starting to see a pretty dramatic and we.
Talked about it in the last call and Paul can provide more color, but we've seen some rapid escalation on away, specifically, which is the predominant ingredient in our on our powder side of the business and where we took price as at 10 one.
On our powder business and we are also seeing competition.
Take price on way as well.
As we look forward I think we're in just the recent months and just this last month, we continue to see way increase further so I expect that competition as well as we will be looking at additional pricing on powder.
Thanks, so much.
<unk>.
And we will take our next question from Chris Growe with Stifel. Your line is open.
Hi, good morning.
Good morning.
Question a bit of a follow on to Andrew's question.
I know Paul you had mentioned double digit inflation in the first half of the year.
As you see it today, what's the sort of inflation you expect overall for the year and then do you expect pricing to be up based on the inflation you see today pricing to offset inflation as you know today.
Yes.
My comment was that double digit inflation for our full year.
We.
As far as you mentioned, we have seen a run up in the last 30 days really especially on whey protein is a little bit less on milk proteins, but whey protein continues to be a sharper. So when we when you asked US. This question three months ago. The expectation was that whey protein was was going to be a significant headwind in the first half and then the pricing the costs started to come down in the <unk>.
Second half, but we're now seeing is that cost stays elevated really throughout our throughout our fiscal year and so that puts a lot of pressure on our our powder margins because of that so.
Darcy mentioned whats the latest increase in cost on way it seems likely that we need to take further pricing to offset cost.
Powder business the inflation on our shake businesses.
Single digits.
Continuing to monitor and assessing if we need to take further pricing actions on our shake business.
Okay. Thank you for that and then just a quick question.
Darcy around the new production manufacturing capacity as opposed to putting in place I know that when you went through the situation a few years ago.
You had a pretty clear plan a multiyear plan for building capacity through your third party manufacturers to levels that would fully support your business and your growth outlook. Obviously, there's little things have happened the pandemic and this has caused it to be a little short I guess I'm trying to understand is presumably before posted announced this new facility you had a plan.
For incremental capacity to meet your demand is post displacing some of that capacity or is it going to be incremental or an additional and do you need. It I guess do you have the capacity you think at that point in time to meet demand at once that new facilities online.
Okay.
Yeah, So I love the little thing called the pandemic.
Yes, so we have a multi year.
Strategic plan around adding co Mans I actually Rob talked a little bit about it on the post call just to step back we currently have.
Five locations, we are looking at.
Having eight to 10 in call. It five years post is a part of that and an important part of that but we are looking to continue.
Continue to diversify our co manufacturing locations throughout the country and I think one of the changes kind of I would say the evolution of our strategy from a co man standpoint is we are really where we're leaning into.
Volume.
We're being more aggressive and moving forward I think we see what our business can do we still believe that we are in the early innings of both household penetration of the category household penetration of our brands distribution as well as we still have not.
Fully marketed premier protein. So we are absolutely leaning into kind of high sides of of.
Of our models and post is a part of that I think just the last thing I would say is our fifth location is a debt that we currently have I think I've talked about this that it's a dedicated facility to premier protein, we like that we like that it increases our our control and so that is if you think of the <unk>.
Most expansion in partnership that's just kind of that same path, but accelerated so where do we like it's obviously, a sister brand, which gives us more control over.
Thanks for all the time.
Yeah. Thanks.
Yeah.
We will take our next question today from David Palmer with Evercore ISI. Your line is open.
Thanks, just a question.
On the points of distribution Thats, great detail, how much do you think that 25% reduction in points of distribution since June hurt your consumption.
It's interesting I mean, we we grew 30% this quarter. So here is the fascinating thing and I think one of the reasons why I get so excited about premier protein is the loyalty. So what we find so let's go back in in 2018.
<unk> when we had a failure of a co man.
And we had to pull back to two flavors, we went to chocolate and vanilla.
And what we've found is first of all many of our.
Retail partners actually held the space for US the second piece was our consumers, we actually didn't lose household penetration.
Our consumers just bought chocolate and vanilla.
And so I think that we are we have such a loyal consumers that actually our consumption doesn't really go down I mean like like you said, we lost them temporarily lost some tdp's with last quarters, because because of out of stocks.
And our consumption still grew 30%.
Yes, it's amazing.
Just thinking about your margin guidance. It would seem that your gross margins that would be equivalent to where youre guiding for 'twenty two might be in the 30% range or so which would be well below where it was in fiscal 19 I just wonder do you see a path back to mid <unk> gross margins.
If so when do you think you would get there and I'll pass it on thanks.
Sure I'll take that yes. So if you go back to 19 much different dynamics in 2019 and that the.
<unk> hairy situation is obviously much different now than it was than in 2019, we took a price increase which was actually a little bit of a head of inflation and so we really saw.
Very high margins as we look at 'twenty two as you described that you described it correctly is how we're thinking about it there is compression in the compression is largely on our protein powder business.
The magnitude of the whey protein increases we're looking at two X protein costs versus a year ago.
But more meaningful in the first half as we look at is margins. So really this is there is two main things that are impacting our margins.
Thinking of potential compression one is the whey protein costs. The other is we do we are experiencing some logistics inefficiencies. We saw some in the fourth quarter, we expect to see more in the first half and that's really related to our our lower inventory levels. So thats, requiring us to two cross country ship and expedite to do different things to try to get product.
To our customers our retail partners as quickly as possible. So that is also weighing weighing on margins, but it is a little bit it's a different situation for 2019, mainly because of the inflationary environment.
Great. Thanks, guys I'll get back to you Im sorry, if I go back to your last question, Yes, we do see a path. Obviously, we think the whey protein costs or it's transitory, it's going to come back down and we're talking to stay at historical highs. So we can expand our gross margins there and we think there are paths on shakes as well you talked about.
We're expanding the number of our co man so that gives us some geographic diversification as well, which should improve freight rates. We do think we have pricing power on the brand. So we do think there is a path to get back to the margins that we've typically seen in the past, but obviously in this inflation environment, So a little more challenging.
Yeah, I just wanted to add one thing.
Obviously, you guys know this but the.
The pricing power is I mean, just going back to the brand loyalty and the brand loyalty is not just limited to premier protein. We have incredible brand loyalty also on the <unk> business and so obviously.
That is required and when you think about pricing power and we are we have shown that on both businesses that we can we can price for this inflation and the end consumer stick with us so and its really is in.
Inflation is.
It is affecting all everybody in the category. So we feel like we're in we're in good place.
Thanks.
We will go next to Ken Zaslow with Bank of Montreal. Your line is open.
Hey, good morning, everyone.
Good morning.
So I'm going to go a little bit earlier question.
Are you planning of this process I look back at your last quarter and how you guys were fairly confident in the structure. So what actually fell in your planning process.
How do we ensure in two years from now.
That we don't have to go through this again and it becomes a two to three year episodic will again.
So we ended up I mean, I think we've talked about we grew two years and one this year.
In essence.
We ended up the year at 26% that was largely due to premier protein.
And.
That so we usually plan three years out.
And when you and.
Growing two years, and one that accelerates that that amount and what happened that in combined in combination with that the network that the co manufacturing network. The expansions were delayed that put us in a situation that we are now I would say what what is.
Different and what we have learned is what youre seeing in our.
And in our manufacturing strategy and that is what were talking about before it includes diversification.
The second is leaning more into the high side. So what we had done in the past was we had take or pays.
That largely protected the downside, but then we relied a little bit more on that flex capacity that I have talked about before and which because we're the number one we're the number one brand in the category, we usually got that flex capacity, while unfortunately during the supply chain and the pandemic that flex capacity went away.
So we didn't get it and so going forward we're now.
Guaranteeing that kind of high side and then in addition, we are diversifying our co man.
If you think of a few years ago, we really had most of our volume and one co man. We now have five locations moving forward we will have.
Probably double that and then the third piece is these dedicated locations where it is focused just on premier protein and then and we're so we're enhancing our control and even more so with a with a sister company within post so I would say those three kind of.
<unk> of the strategy is y.
I do not believe that we will have this time this kind of issue in the <unk>.
Future.
However, I will say, it's hard to recover from two years in one.
Okay.
Yes.
Okay, Yeah, I'll just add the only thing I would just add is keep in mind. This category absolutely accelerated beyond expectation I mean, it's been a category that.
The growth rates more than doubled over the last six to nine months to happen very quickly. So I think I think that caught a number of companies off guard or you can see on the shelf as you go out to the stores and looking at our.
Category, it's call. It it's kind of a number of companies off guard to Darcy for I think we're doing a lot of things to anticipate and to grow this business but.
When the category accelerates like it did obviously it catches everybody a little bit off guard on it.
I was minimized minimizing the transition from last quarter to this quarter in terms of planning.
I'll take that offline and then the other question I have is when I think about 2023 with all this stuff beyond beyond behind us.
Do you think that your earnings potential changes.
Or you're on a new.
<unk>, which which.
You will grow from that how do you kind of frame. The 2023 2024 thought process in terms of either earnings power.
Our earnings base with a growth of that can you recover and I'll leave it there and I appreciate your time.
Sure.
I actually will go back to your comment because I don't think I I address that Ken just what changed since August then the main thing of what changed is our co man. So demand continued to consumption continued to increase and then but the bigger thing is our supply chain we had attainment.
Misses by our co Mans because of both.
Both some COVID-19 issues.
As well as labor so those were the two pieces.
And and happy to talk more about that offline I'm on from a 23 standpoint. So this is where we can go back and look at history.
<unk>.
And what happened in <unk> when we.
Had some demand shaping in the past is the following year had accelerated growth.
And I expect that that that would be the same obviously its early in 'twenty, two and so I don't want to get too far ahead of ourselves.
But we will have added capacity coming online throughout this year, we basically have capacity coming on every single quarter capacity grows every single quarter and our.
Our revenue growth with that but then in in 'twenty. Three we will be you know reintroducing the the flavors that we pulled back on we'll reengage marketing and promotion. So I think there's definitely an opportunity to be above algorithm on the top line.
So with the new capacity you would argue that you would go into the capacity not go up a bit so the capacity expansion would be your new b as you fill it is that is there and I am sorry that she did an extra two b question and I'll leave it there.
Correct.
Great. Thank you.
Yes.
Yeah.
We will go next to Pamela Kaufman with Morgan Stanley. Your line is open.
Good morning.
Good morning.
You mentioned that you expect production to exceed shipments in fiscal 'twenty. Two how do you think about the tradeoff between rebuilding inventories versus meeting the strong demand in the market and preserving your market share performance.
Okay.
For US right now inventories are just too low and we need to be able to service our customers on a consistent basis and so that requires a minimal amount of inventory and safety stock. So we need to get to that minimum amount.
And then we can and that and that's what we're talking about so the differential between shipments.
And consumption is really is really just rebuilding and getting to that basic amount of safety stock. So we can service them consistently.
Okay. And then you also mentioned that you are adjusting your marketing and promotional activities in light of the supply shortages can you talk about what changes you are making will there be a different cadence of promotional events this year or just.
Less marketing.
Yeah.
So I'll hit the strategy.
Strategy and I'll pass it to Paul to discuss cadence.
Yes were pulling back we will we will be pulling back on promotion.
Promotion and marketing, we will still have some.
<unk>.
Kind of social digital our strategy on marketing changes a little bit it becomes more about sustaining we have part of our loyalty for our brands is kind of a one to one communication that we have via social and digital will continue that and but for but we you know we're not going to have any.
Television advertising like we've had in the past.
And then in addition, we will be pulling back on promotion. So we will and then I'll pass it to Paul for cadence.
Yes. So if you look at 'twenty, one from a marketing perspective, it was heaviest in our second quarter. So obviously that'll be a benefit to <unk>.
EBITDA growth year over year in the <unk>.
<unk> perspective, Q4 in Q2, our biggest promotional quarters Q4 is our biggest so again by pulling back on promotion that will be.
Net positive from an EBITDA perspective, and so that's how we're thinking about the cadence from a marketing perspective, I would expect mark can you be a bit lighter in the first half and then as we can.
Actually grow our top line will grow marketing start to add back marketing.
With it.
Thank you.
And we will go next to Ben BN venue with Stephens. Your line is open.
Hey, Thanks, good morning, everybody.
Good morning, good morning.
First a quick question about guidance and then a follow up just about the capacity ramp on guidance.
Probably all of this is for you.
You talked about pricing increases that you are planning on taking you also talked about considering additional pricing increases our RTD.
Shakes out.
Does the guidance that you provided include taking more price to offset inflation or would that be incremental to the guidance that you provided.
It would be incremental but just to clarify so yes. There are two price increases that we have already taken that will affect fiscal 'twenty two versus fiscal 'twenty. One we took a price increase on our shake business in April So we'll get a half year benefit of that price increase and we took a price increase at the beginning of our fiscal year 'twenty. Two so in October we took a price increase on our powder.
A double digit price increase so we'll get the full year benefit of that.
Our guidance does not contemplate further price increases outside of the promotional pullback that we just talked about so that's the third piece I guess of the pricing, but as we look at the rest of the year, we're not contemplating additional pricing on powdered shakes as Darcy highlighted earlier with the ramp up recently a way.
It's likely that we will we will take further pricing on the powder side.
Okay, Okay perfect.
My second question is just related to the capacity ramp that you expect to see during the year.
With.
Discontinuities in the supply chain to what extent does that.
Impede your ability or your visibility into the ramp in that capacity and concurrent with that to what extent does diversifying your co man.
Footprints.
Mitigate the risk of supply chain discontinuities to the hitting the schedule and ramping your capacity.
So we are adding.
I mentioned this in my prepared remarks, so we are adding in the mid teens basically capacity and it adds every every quarter. What I will say is we're adding to both existing co mans as well as additional co Mans in essence.
A co man for Q2 Q3 Q4.
There are several key milestones as you are adding capacity, maybe obvious but might be helpful. So you know.
There is ordering of the equipment, there's delivery of the equipment and then there is installation and startup.
They all have especially in at in today's World, where there are supply chain disruptions. All the time. They all have some risk a lot of the risk is around and delivery and shipments.
So of the three.
New <unk>.
We basically have three locations that are adding equipment and at two out of the three have already received the equipment.
So that takes out some risk great there.
And then the third is expecting it later this month so that to me de risks the new capacity a ton then it becomes just around installation and labor.
And then these are supposed to come on Q2 Q3 Q4. So we're feeling very good about derisking, our plan and around that capacity that capacity coming on the other piece is for 'twenty two the bulk of our of our volume our capacity is actually coming from.
Existing co Mans.
So that also is a piece and we've been pretty conservative on our outlook about what they can the attainment targets that we've baked into our guidance.
The last question you asked about how more co mans helped diversify that risk absolutely.
It absolutely does and that's why that's a key aspect of you know we've already diversified.
A fair amount over the last several years will continue to diversify.
And like I said, we are we're looking to.
We're looking to within three to five years double the number of <unk> that we have which will which will help.
Okay very very helpful. Thanks, so much.
Thank you.
Yeah.
And we have no further questions at this time. This does conclude our call for today. Thank you everyone for your participation and you may disconnect at any time.
Okay.
[music].
Okay.
Okay.
Hum.
[music].
Yeah.
[music].
Okay.
[music].
Mhm.
[music].
Yeah.
Okay.
[music].
Hum.
[music].
Hum.
[music].
Yeah.
Yes.
[music].
Okay.
Hum.
[music].
Mhm.
Uh huh.
Uh huh.
Hum.
Hum.
Okay.
Hum.
Hum.
Hum.
Oh, Oh Oh.
Uh-huh Hum.
Oh.
Uh-huh.
Uh huh.
[music].
Uh huh.
[music].
Oh, Oh Oh.
Uh huh.
Oh, Oh Oh.
Uh-huh.
Hum.
Uh-huh.
Uh huh.
Mhm.
Uh-huh.
Hum.
Hum.
Hum.
Uh huh.
Uh-huh.
Uh huh.
Hum.
[music].
Mhm.
Yes.
Yes.
Hum.
Yes.
Hum.
Hum.
Hum.
Hum.
[music].
Hum.
Hum.
Hum.
Hum.
Ooh.
Okay.
Hum.
Okay.
Hum.
Hum.
Hum.
Hum.
[music].
Hum.
Hum.
Hum.
Hum.
Yes.
Yes.
Mhm.
Okay.
Okay.
Hum.
Yes.
[music].
Yes.
Hum.
[music].
Uh huh.
Yeah.
Okay.
Yes.
Hum.
Okay.
Hum.
[music].
Hum.
Hum.
Hum.
Yeah.
[music].
Hum.
Hum.
Yes.
[music].
Yeah.
Yeah.
Yeah.
Hum.
[music].
Yeah.
Okay.
[music].