Q2 2024 BellRing Brands Inc Earnings Call

Operator: Please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Meyer, Investor Relations for Bellring Brands. Please go ahead.

[noise] withdraw your question. Please press star one one again.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Jennifer Meyer Investor Relations for Bell Ring brands. Please go ahead.

Jennifer Meyer: Good morning, and thank you for joining us today for Bellring Brands' second quarter fiscal 2024 earnings call. With me today are Darcy Davenport, our President and CEO, and Paul Rode, our CFO. Darcy and Paul will begin with prepared remarks, and afterwards, we'll have a brief question and answer session. The press release and supplemental slide presentation that supports these remarks are posted on our website in both the Investor Relations and the SEC Filing sections at bellring.com.

Jennifer Meyer: Good morning, and thank you for joining us today for Bell Rang brands second quarter fiscal 2024 earnings call with me today are Darcy Davenport, our president.

Darcy Horn Davenport: And Colorado, CFO Darcy I'll call will begin with prepared remarks, and afterwards, we'll have a brief question and answer.

Darcy Horn Davenport: The press release and supplemental slide presentation that supports some marks are posted on our website in both the investor Relations team.

Jennifer Meyer: 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 that are subject to risks and uncertainties that should be carefully considered by investors as the actual results could differ materially from these statements. These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded, and an audio replay will be available on our website.

Darcy Horn Davenport: All infections.

Darcy Horn Davenport: In addition, the release and slides are available on the Sec's website.

Darcy Horn Davenport: 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.

Darcy Horn Davenport: Carefully considered by investors.

Darcy Horn Davenport: The actual results could differ materially from these statements.

Darcy Horn Davenport: These forward looking statements are current Aggregators call and management undertakes no obligation to update these statements.

Darcy Horn Davenport: 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 GAAP measure see our press release issued yesterday and posted on our website with that I will turn the call over to Darcy.

Jennifer Meyer: 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.

Darcy Horn Davenport: Thanks Jennifer, and thank you all for joining us last evening. Last night, we reported our second quarter results and posted a supplemental presentation to our website. I'm happy to share that we had an excellent first half, with Q2 results above our expectations. The business continues to accelerate as we bring in new shake capacity and begin to drive demand. For the first time since 2021, we executed two successful club promotions in one quarter, which sparked a ton of consumer and retailer excitement.

Darcy Horn Davenport: Thanks, Jennifer and thank you all for joining US last evening, we reported our second quarter results and posted a supplemental presentation to our website.

Darcy Horn Davenport: I'm happy to say that we had an excellent first half with Q2 results above our expectations. The business continues to accelerate as we bring on new shake capacity and begin to drive demand.

Darcy Horn Davenport: For the first time since 2021, we executed two successful club promotions in one quarter, which sparked a ton of consumer and retailer excitement.

Darcy Horn Davenport: Net sales grew 28% over the prior year, and adjusted EBITDA was up 53%. Greater than expected shake demands, specifically non-promoted, drove the net sales and adjusted EBITDA margin outperformance. As you saw in yesterday's press release, we raised our outlook for the year. We now expect net sales to grow 16 to 19 percent over fiscal 23 and adjusted EBITDA to grow 18 to 24 percent. This raise, at the top and the bottom line, was based on better than expected first half performance, strong consumption trends, confidence in our capacity expansion, and our decision to execute a price increase on shakes late in Q4. Moving to shake production.

Darcy Horn Davenport: Net sales grew 28% over prior year and adjusted EBITDA was up 53%.

Darcy Horn Davenport: A greater than expected shake demand specifically non promoted drove the net sales and adjusted EBITDA margin outperformance.

Darcy Horn Davenport: As you saw in yesterday's press release, we raised our outlook for the year. We now expect net sales to grow 16% to 19% over fiscal 'twenty, three and adjusted EBITDA to grow 18% to 24%.

Darcy Horn Davenport: It's right at the top and the bottom line was based on better than expected first half performance strong consumption trends confidence in our capacity expansion and our decision to execute a price increase on shakes late in Q4.

Darcy Horn Davenport: We have made remarkable progress on our plan to grow and diversify our shake supply. We are making more shakes every quarter, with Q2 production coming in as expected and up significantly versus the year-ago quarter. We remain on track to grow production north of 20% this year, enabling strong net sales growth in 24 and increased weeks of supply by year end. Now to the category and Brandon.

Darcy Horn Davenport: Moving to shake protection.

Darcy Horn Davenport: We have made where mark about progress in our plan to grow and diversify our shakes supply we are making more shakes every quarter with Q2 production coming in as expected and up significantly versus the year ago quarter. We remain on track to grow production north of 20%. This year, enabling strong net sales growth and 24 and increased weeks of.

Darcy Horn Davenport: The Convenient Nutrition category grew 5% in Q2 as tailwinds around health and wellness and fitness continued to drive growth. Consumer interest in functional beverages and sports nutrition products continues to be high, with mainstream, ready-to-drink brands driving most of the growth and bringing new households into the category. RTD led the category by 10%, driven by promotions and distribution gains. Ready to Mix grew 3%, slowing this quarter as consumers traded down to value brands and switched to other high-protein products, including RTDs.

Darcy Horn Davenport: Supplied by year end.

Speaker Change: Now to the category and brand updates.

Darcy Horn Davenport: The convenient nutrition category grew 5% in Q2 as tailwind around health and wellness and fitness continued to drive growth.

Darcy Horn Davenport: Consumer interest in functional beverages, and sports nutrition products continues to be high with mainstream ready to drink brands driving most of the growth and bringing new households into the category.

Darcy Horn Davenport: Our T D led the category up 10% dry driven by promotions and distribution gains ready to Max grew 3% slowing this quarter as consumers traded down to value brands and switch to other high protein products, including our Tvs.

Darcy Horn Davenport: Despite this change in consumer behavior, our powder brands still outperform the tracked category. Premier protein shake consumption growth remained strong this quarter at 29%. Growth was robust across all channels in Q2, driven by promotion, strong velocity, and distribution expansion. The highest growth was in mass in e-commerce.

Darcy Horn Davenport: Despite this change in consumer behavior, our powder brands still outperformed performed attractive category.

Darcy Horn Davenport: Premier protein shake consumption growth remained strong this quarter at 29% growth was robust across all channels in Q2, driven by promotion strong velocities and distribution expansion.

Darcy Horn Davenport: Mass benefited from display activity and distribution gains, while e-commerce saw strong growth behind promotional events. The Club Channel, boosted by successful promotions at both of the major club retailers, drove healthy volume lifts and household penetration. April consumption remained strong at 16% despite somatostocks in track channels. Flavors continue to drive retailer and consumer excitement. Our newest 30-gram flavor cookie dough is performing well with top 10% velocities in mass; our seasonal flavor, salted caramel popcorn, and soft salad.

Darcy Horn Davenport: Our highest growth within mass and e-commerce mass benefited from display activity and distribution gains while ecommerce has strong growth behind promotional event.

Darcy Horn Davenport: The club channel basically by successful promotions at both of the major club retailers drove healthy volume lifts and household penetration.

Darcy Horn Davenport: April consumption remained strong at 16% despite some out of stocks in tracked channels.

Darcy Horn Davenport: Flavors continue to drive retailer and consumer excitement our newest 30 Gram flavor Cookie dough is performing well with top 10 per cent velocities in mass.

Darcy Horn Davenport: Our seasonal flavor salted caramel popcorn saw solid success.

Darcy Horn Davenport: Our brand metrics remain healthy. Premier Protein, with an RTD market share of 21%, remained its top position as the number one brand in the RTD segment, as well as the number one in the broader convenient nutrition category. TDPs grew 33% over the prior year quarter but saw a slight sequential decline. With shake supply remaining tight and demand greater than expected this quarter, we experienced some temporary out of stocks late in the quarter and in May.

Darcy Horn Davenport: Our brand metrics remain healthy premier protein with RTD market share of 21% remained at the top.

Darcy Horn Davenport: <unk> maintained its top position as the number one brand in the RTD segment as well as the number one.

Darcy Horn Davenport: In the broader convenient nutrition category TD.

Darcy Horn Davenport: <unk> grew 33% over the prior year quarter, but saw a slight.

Darcy Horn Davenport: Sequential decline with shakes supply remaining tight and demand greater than expected. This quarter, we experienced some temporary out of stocks late in the quarter and into April.

Darcy Horn Davenport: Retailer inventory levels are starting to improve with TDP stabilizing, and we expect further improvement throughout the second half. I'm pleased to see the brand reach another all-time high in household penetration this quarter, reaching over 18% of households. Premier Protein added one percentage point of household penetration versus Q1 and grew 26% over prior years. As of Q1, the brand was a significant contributor to the overall RTD category growth. Premier Protein's household penetration continues to be the highest in the category, and we expect modest growth in the remainder of fiscal 24. With the RTD segment's household penetration below categories such as nutrition bars and energy drinks, we still see tremendous opportunity to grow in our existing channels.

Darcy Horn Davenport: Retailer inventory levels are starting to improve with TDP stabilizing and we expect further improvement throughout the second half.

Darcy Horn Davenport: I'm pleased to see the brand reached another all time high and household penetration this quarter, reaching over 18% of households Premier protein added one percentage point at household penetration versus Q1 and grew 26% over prior year.

Darcy Horn Davenport: As of Q1, the brand was a significant contributor to the overall RTD category growth.

Darcy Horn Davenport: From your protein Kaufhold penetration continues to be the highest in the category and we expect modest growth in the remainder of fiscal 'twenty four.

Darcy Horn Davenport: With the RTD segments household penetration below categories, such as nutrition bars, and energy drinks, we still see tremendous opportunity to grow in our existing channels.

Darcy Horn Davenport: Premier Protein Powder continued its strong trajectory, growing 52% in Q2 behind brand investments, distribution gains, and strong velocity. We remain encouraged by the growth potential of the Premier Protein brand in this format. Premier powders continue to bring mainstream consumers into the category, with 80% of its growth coming from outside the category. Its household penetration reached 1.7% this quarter, and we continue to believe the brand will be a contributor to mainstreaming the powder category in the same way it did for the ready-to-drink category.

Darcy Horn Davenport: Premier protein powder continued its strong trajectory growing 52% in Q2 behind brand investments distribution gains and strong velocities. We remain encouraged by the growth potential of the premier protein brand in this format.

Darcy Horn Davenport: Amir patterns continue to bring mainstream consumers into the category with 80% of its growth coming from outside the category.

Darcy Horn Davenport: It is household penetration reached one 7% this quarter and we continue to believe that the brand will be a contributor to mainstreaming the powder category in the same way Premier dead for the ready to drink category.

Darcy Horn Davenport: Our licensing strategy continues to perform well with cereal and frozen pancakes, attracting new consumers to the brand. Although not a significant revenue driver, these two products boost Premier's overall household penetration to 19%, or nearly 1 in 5 households. Turning to Dimetite, U.S. consumption remains strong in mainstream FDM channels, but overall consumption declined 8 percent, weighed down by ongoing softness in specialty channels and increased competitive activity in e-commerce.

Darcy Horn Davenport: Our licensing strategy continues to perform well with cereal and frozen pancakes, attracting new consumers to the brand although not a significant revenue driver. These two products best Premier's overall household penetration to 19% or nearly one in five households.

Darcy Horn Davenport: Turning to Diamond type U S consumption remained strong in mainstream F. D M channels, but overall consumption declined 8% weighed down by ongoing softness in specialty channel and increased competitive activity in E Commerce.

Darcy Horn Davenport: Despite these headwinds, I'm encouraged to see the brand maintain its record-high household penetration with TDPs and shareholding steady. Looking forward, we are increasing our investment behind the brand, both in marketing and promotion. We are excited to expand our national marketing campaign with San Francisco All-Pro running back Christian McCaffrey. We are eager to see the impact that enhanced digital marketing and a top-tier influencer will have on brand awareness and household penetration.

Darcy Horn Davenport: Fight these headwinds I'm encouraged to see the brand maintained its record high household penetration with TD peas and share holding steady.

Darcy Horn Davenport: Looking forward, we are increasing our investment behind the brand both in marketing and promotion. We are excited to expand our national marketing campaign with San Francisco, All Pro reading back Christian Mccaffrey, we're eager to see the impact that enhanced digital marketing and a top tier influence or will have on the brand awareness and household penetration.

Darcy Horn Davenport: Last, we are putting the final touches on innovation that will expand Diametize's product line. Overall, we continue to be bullish on the mainstream powder opportunity with two complementary brands. In closing, our excellent first-half results position us well for an above-algorithm fiscal year. Our confidence in the long-term outlook for Bellring remains strong. Our brands are leaders in the highest growth areas of an on-trend category. The ready-to-drink and powder segments are in the early stages of growth with major tailwinds. Premier Protein and Diametize are leading mainstream brands with low household penetration and strong loyalty.

Darcy Horn Davenport: Last we are putting the final touches on innovation that will expand diamond tasers product line.

Darcy Horn Davenport: Overall, we continue to be bullish on the mainstream patter opportunity with two complementary brands.

Darcy Horn Davenport: In closing our excellent first half results position us well for an above algorithm fiscal year, our confidence in the long term outlook for <unk> remains strong.

Darcy Horn Davenport: Our leaders in the highest growth areas of an on trend category ready to drink and powder segments are in the early stages of growth with major tailwind.

Darcy Horn Davenport: Premier protein and diamond ties are leading mainstream brands with low household penetration and strong loyalty.

Darcy Horn Davenport: Our momentum continues to grow on shakes as we start to layer in promotion. Our Shaped Capacity Plan is on track to support many years of robust growth. I'm excited to see the momentum continue into 2025 as we layer in more innovation and national marketing. Thank you for your interest in our company. We look forward to sharing our progress next quarter.

Darcy Horn Davenport: Our momentum continues to grow on shakes as we layer it start to layer in promotion.

Darcy Horn Davenport: Our shake capacity can plan is on track to support many years of huge of robust growth.

Darcy Horn Davenport: I'm excited to see the momentum continue into 2025, as we layer in more innovation and national marketing.

Speaker Change: Thank you for your interest in our company we.

Darcy Horn Davenport: We look forward to sharing our progress next quarter I'll now turn the call over to Paul.

Paul A. Rode: Thanks, Darcy. Good morning, everyone. Net sales for the quarter were $495 million, up 28% over the prior year, above our expectations with strong demand for premier protein shakes, the biggest driver of the outperformance. The Justice Depot was $104 million, an increase of 53%, adjusted EBITDA margins of 21%, and also exceeded our expectations, benefiting from favorable gross margins and leverage on higher net sales, starting with brand performance. Premier Protein net sales grew 34% behind strong volume growth for RTD shakes and powders.

Paul: Thanks, Darcy and good morning, everyone.

Paul: Net sales for the quarter were 495 million up 28% over prior year above our expectations with strong demand for premier protein shakes the biggest driver of the outperformance.

Paul: Adjusted EBITDA was $104 million, an increase of 53%.

Paul: Adjusted net adjusted EBITDA margins were 21% and also exceeded our expectations benefiting from favorable gross margins and leverage on higher net sales.

Paul: Starting with brand performance Premier protein net sales grew 34% behind strong volume growth for RTD shakes and powders.

Paul A. Rode: Promotional activity, distribution gains, and organic growth drove the increase in net sales. Shared consumption dollars grew 29% compared to shipment growth of 34%, with the difference driven primarily by the lapping of a prior year trade inventory deload. Diamantized net sales increased 5% this quarter as the brand benefited from increased distribution and promotional activity in domestic mainstream channels, along with international strength.

Paul: Promotional activity distribution gains and organic growth drove the increase in net sales.

Paul: Shake consumption dollars grew 29% compared to shipment growth of 34% with the difference driven primarily by the lapping of prior year trade inventory deload.

Paul: <unk> net sales increased 5% this quarter as the brand benefited from increased distribution and promotional activity and domestic mainstream channels along with international strength.

Paul A. Rode: These gains were partially offset by continued weakness in the specialty channel and increased e-commerce competitive activity. Gross profit of $164 million grew 40%, with an increase in gross profit margin of 280 basis points to 33.2%. The margin increase resulted from net input cost deflation, partially offset by incremental promotional activity.

Paul: These gains were partially offset by continued weakness in the specialty channel and increased ecommerce competitive activity.

Paul: Gross profit of $164 million grew 40% with an increase in gross profit margin of 280 basis points to 33, 2%.

Paul: The margin increase resulted from net input cost deflation, partially offset by incremental promotional activity.

Paul A. Rode: Compared to our expectations, gross margins benefited from greater than expected non-promoted volume and non-recurring cost favorability. SG&A expenses as a percentage of net sales were 14% and roughly flat to the prior year. Advertising and promotion spend increased $3 million but was flat as a percentage of net sales at 3.1%. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity. We generated $16 million in cash flow from operations in the second quarter and $90 million in the first half.

Paul: Compared to our expectations gross margins benefited from greater than expected non promoted volume a nonrecurring cost favorability.

Paul: SG&A expenses as a percentage of net sales were 14% and roughly flat to prior year.

Paul: Advertising and promotion has been increased $3 million, but was flat as a percentage of net sales at three 1%.

Speaker Change: Before reviewing our outlook I would like to make a few comments on cash flow and liquidity.

Speaker Change: We generated $16 million of cash flow from operations in the second quarter and $90 million in the first half.

Paul A. Rode: We expect net working capital growth in Fiscal 24 to modestly exceed our net sales growth rate as we add weeks of shake supply in the second half. As of March 31, net debt was $761 million, and net leverage was 1.9 times.

Paul: We expect net working capital growth in fiscal 'twenty four to modestly exceed our net sales growth rate as we had weeks of chegg supply in the second half.

Paul: As of March 31.

Paul A. Rode: With our EBITDA growth and strong cash flow generation, we anticipate net leverage will remain below two times in fiscal 2020. With respect to our share repurchases this quarter, we bought 400,000 shares at an average price of $56.46 per share, or $23 million in total. Our remaining share repurchase authorization is $289 million.

Paul: That was $761 million and net leverage was one nine times with our EBITDA growth and strong cash flow generation, we anticipate net leverage will remain below two times in fiscal 'twenty four.

Paul: With respect to our share repurchases. This quarter, we bought 400000 shares at an average price of $56 46 per share or $23 million in total.

Paul: Our remaining share repurchase authorization is 289 billion.

Paul A. Rode: Turning to our outlook, we raised our fiscal 24 guidance for net sales to be $1.93 to $1.99 billion and adjusted EBITDA of $400 to $420 million. Our guidance implies strong top-line growth of 16 to 19 percent and adjusted EBITDA growth of 18 to 24 percent, with healthy adjusted EBITDA margins of 20.9 percent at the minimum. The updated guidance reflects our better-than-expected first-half results and strong consumption. In the second half of fiscal 24, product and logistics costs are expected to increase compared to the first half, with pricing actions on Shake planned late in the fourth quarter.

Paul: Turning to our outlook, we raised our fiscal 'twenty for guidance for net sales to be $1 93 to $1 99 billion and adjusted EBITDA of $400 million to $420 million.

Paul: Our guidance implies strong topline growth of 16% to 19% and adjusted EBITDA growth of 18% to 24% with healthy adjusted EBITDA margins of 29% at the midpoint.

Paul: The updated guidance reflects our better than expected first half results and strong consumption trends.

Paul: In the second half of fiscal 'twenty four product on logistics costs are expected to increase compared to the first half with pricing actions on shake planned late in the fourth quarter.

Paul A. Rode: At the midpoint, our second half net sales are expected to grow 13 percent with adjusted EBITDA margins of approximately 20 percent. As we enter the second half, we have largely lapped the relaunch shake flavors and expect sales growth to be driven by continued organic momentum and distribution. Compared to the second half of fiscal 23, we expect EBITDA margins to be similar. Turning to the third quarter, our net sales growth is expected to largely track our second half growth rate.

Paul: At the midpoint of our second half net sales are expected to grow 13% with adjusted EBITDA margins of approximately 20%.

Paul: As we entered the second half we have largely lapped the relaunched shake flavors and expect sales growth to be driven by continued organic momentum and distribution gains.

Paul: When compared to the second half of fiscal 'twenty, three we expect EBITDA margins to be similar.

Paul: Okay.

Paul: Turning to the third quarter, our net sales growth is expected to largely track our second half growth rate.

Paul A. Rode: Premier Protein drives its growth as volumes are expected to increase in the mid to high teens. Diamantize partially offsets Premier's strong growth, with the brand facing a tough prior year comparable in Q3 as it laps a club, load-in, and FDM display activity. Margin is expected to improve modestly from the year-ago quarter with significantly higher gross margins as we lap peak protein prices. This increase is mostly offset by incremental marketing spend and SG&A as a percentage of net sales.

Paul: Premier protein drives this growth as volumes are expected to increase in the mid to high teens.

Paul: <unk>, partially offsets premier strong growth with the brand facing a tough prior year comparable in Q3 as it laps a club lowdown in FTM display activity.

Paul: Adjusted EBITDA margins are expected to improve modestly from the year ago quarter with significantly higher gross margins as we lap peak protein prices.

Paul: This increase was mostly offset by incremental marketing spend in SG&A as a percentage of net sales.

Paul A. Rode: In closing, we're pleased with our first half momentum. Our strong first half results give us greater confidence in our full year outlook and long-term growth prospects. I will now turn it over to the operator for questions.

Paul: In closing, we're pleased with our first half momentum our strong first half results give us greater confidence in our full year outlook and long term growth prospects.

Operator: Thank you. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Stand by while we compile the Q&A roster. Our first question comes from Ken Goldman from J.P. Morgan.

Speaker Change: I'll now turn it over to the operator for questions.

Speaker Change: Yeah.

Operator: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.

Operator: Our first question comes from the line of Ken Goldman from Jpmorgan.

Kenneth B. Goldman: Hi, thank you, and good morning. I wanted to get a sense, a little bit, of, you know... I think you mentioned that non-promoted sales of Premier did quite well this quarter, too. And I'm just curious, if I heard you right there, what do you attribute the acceleration of these base products to in light of, you know, how well the promoted products did at the same time? Is there a natural correlation between the two just in terms of new generation? Or am I playing that up too much in my head?

Kenneth B. Goldman: Hi, Thank you and good morning.

Kenneth B. Goldman: I wanted to get a sense a little bit of.

Kenneth B. Goldman: I think you mentioned that non promoted sales of premier did quite well this quarter too and I'm just curious if I heard you right. There what do you attribute the acceleration kind of in those base products to in light of how well the promoted products data at the same time as their NAV.

Kenneth B. Goldman: Natural correlation between the two just in terms of new generation or.

Darcy Horn Davenport: Good morning, Ken. So, what still has been true, and what continues to be true is that about 80% of our growth comes from outside of the category. So we continue to get a ton of new households into the category, which shows our all-time high of household penetration this quarter and the one point jump up. I mean, in general. The more we ship, the more we sell, and we really haven't had healthy fill rates in FDM yet.

Kenneth B. Goldman: Playing that up too much in my head.

Speaker Change: Hi, good morning, Ken.

Speaker Change: <unk>.

Speaker Change: Still what has been true in what continues to be true is about 80% of our growth comes from outside of the category. So we continue to get a ton of.

Speaker Change: New households into the category showed on our all time high of household penetration this quarter and the one point jump up.

Speaker Change: I mean in general.

Speaker Change: The more we ship the more we sell them.

Speaker Change: And we really haven't had healthy accelerates and SDM yet.

Darcy Horn Davenport: And so honestly, this quarter, we saw strong promotions in our two club customers, pretty much what we expected to see, but what was higher was actually the non-promoted in pretty much all channels outside of those promotional periods.

Speaker Change: And so honestly this quarter was we saw strong promotions in our two club customers pretty much what we expected to see but what was higher was actually the non promoted in.

Speaker Change: In pretty much all channels outside of those promotional period.

Kenneth B. Goldman: understood. Thank you. And then, as we think about, you know, raising the guidance, and we look ahead toward the upper end of that range, is there potential, and I'm not trying to, you know, fish for even higher guidance than what you've already looked at, but I'm just trying to get a sense of, if there is demand there, how much above sort of the high end of your sales guide you could potentially get to just given some of the capacity constraints We have

Speaker Change: Understood. Thank you and then.

Speaker Change: As we think about the guidance raise.

Speaker Change: And we look ahead.

Speaker Change: Toward the upper end of that range.

Speaker Change: Is there a potential and I'm not sure I think.

Speaker Change: Fish for even higher guidance than what you've already looked at it but I'm just trying to get a sense of if there is demand there how much above sort of the high end of your sales guide could you potentially get too just given some of the capacity constraints that have been mentioned so far.

Darcy Horn Davenport: We have production that can absolutely satisfy, you know, the full range of our guidance. Obviously, as I said on past calls, we need to, we do not have enough internal inventory. We need to build safety stock. However, toward the end of the year, we plan to get up to our target of six to eight weeks. You know, if demand continues to be robust, then we have the flexibility to toggle between building more inventory versus going, you know, and satisfying sales.

Speaker Change: We have production that can absolutely satisfy them.

Speaker Change: The full range of our guidance obviously.

Speaker Change: As I've said on past calls.

Speaker Change: We need to we do not have enough internal inventory, we need to build safety stock. However toward the end of the year, we plan to get up to our target of six to eight weeks.

Speaker Change: If demand continues to be robust then we have the flexibility to toggle between.

Speaker Change: Building more inventory versus going and satisfying sales.

Darcy Horn Davenport: So, I think we've always said that we're going to be nimble this year just because of that we are, you know, building safety steps, internal inventory, but, you know, rest assured that we have the production to satisfy the high end, you know, our full guidance, and then we're going to have to just assess the situation in Q4 to see if we're going to build inventory or, you know, satisfy it if there's more demand than expected.

Speaker Change: So I think we've always said that we're going to be nimble this year.

Speaker Change: Because of that we are building.

Speaker Change: Safety stocks internal inventory.

Speaker Change: But.

Speaker Change: Rest assured that we have the production to satisfy the high end.

Speaker Change: A full guidance.

Speaker Change: And then we're going to have to just assess the situation in Q4 to see if we're going to build inventory or satisfied if there's if there's more demand than expected.

Speaker Change: Great. Thank you Darcy.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Operator: Thank you. One moment for the next question. Our next question comes from the line of David Palmer from Evercore ISI.

Speaker Change: Our next question comes from the line of David Palmer from Evercore ISI.

David Sterling Palmer: Thanks. Good morning.

David Sterling Palmer: Thanks, Good morning, Alright, It was obviously a pretty dynamic quarter with some of the ramp up in promotion mix with the two club promotions.

Operator: It was obviously a pretty dynamic quarter with some of the ramp-up and promotion mix with the two club promotions. But at the same time, you had strong gross margins, so I wanted to kind of double-click on those two things. What were some of the learnings, both in and out of expectation, from the increase in merchandising from the quarter? And I know you mentioned two. I was wondering if that meant that it was unusual, or if this is pretty close to the norm that you would expect in terms of the impact of price mix from promotional activity in the upcoming quarter.

David Sterling Palmer: But at the same time you had the strong gross margins. So I wanted to kind of double click on those two things.

David Sterling Palmer: What were some of the learnings both in and out of expectation from the increase in merchandising from the quarter.

David Sterling Palmer: And I know you mentioned the two I was wondering if that meant that that was an unusual or this is pretty close to the norm that you would expect in terms of the impact of price mix from promotional activity in the upcoming quarters.

Paul A. Rode: Hey Paul, I'll start with the learnings, and then you can hit on any price mix. Yep. Different things. So.

Speaker Change: Hey, Paul I'll start with learnings and then you can hit on any price mix.

Darcy Horn Davenport: The learnings from the promotion. So remember, we haven't done really... any significant club promotions or promotions at all since 2021. So it's been a while.

Paul: Yep differences so.

Paul: The learnings from the person so remember we haven't done and really.

Speaker Change: Any significant club promotions or promotions at all since 2021, so it's been a while and so we weren't exactly sure what to expect.

Darcy Horn Davenport: So we weren't exactly sure what to expect. Honestly, there was a ton of excitement. I've talked about this before, the key to our success in promotion is the display. Get out of the aisle, get new people to see our products. And that is where we increase household penetration; we get the bump and stick for the brand. It has been true for the entire time this brand has been around. So, sure enough, that is exactly what happened.

Speaker Change: Honestly, there was a ton of excitement.

Speaker Change: I've talked about this before the key to.

Speaker Change: Our success on promotion is display.

Speaker Change: Get out of the I'll get new people to see our product.

Paul: And that is where we increased household penetration, we get the bump and stick for the brand. It has been true for the entire time. This brand has been around.

Darcy Horn Davenport: We got great displays and a ton of retailer support for the event, and that flowed straight into strong results. So I would say, I don't think it's a lot of new learnings, but more confidence that the fundamentals of the brand are very much intact, and there's a ton of excitement from consumers and retailers.

Paul: Sure enough that is exactly what happened we.

Paul: We got great displays.

Paul: And at time of retailer support for the events.

Paul: And that that flowed straight into strong results. So I would say I don't think it has a lot of new learnings, but more confident that the fundamentals of the brand are very much intact and there is a ton of excitement from consumers and retailers.

Paul A. Rode: And then on pricing, we always expected the second quarter to be the most significant headwind on pricing because of the significant promotional activity that we were doing on shakes as we entered the second half. We still expect some light promotion in Q4 on shakes, but really, from a pricing perspective, it's pretty balanced for the rest of the year. We aren't expecting major headwinds or tailwinds in any given quarter on pricing.

Paul: And then on pricing, we always expected the second quarter to be the most significant headwind on pricing because of the significant promotional activity that we're doing on shakes as we entered in the second half we still expect some white promotion in Q4 on shakes, but really from a pricing perspective, it's pretty balanced in the rest of the year we are.

Paul: Expecting major headwinds or tailwind on any given quarter on pricing and then as we get late in Q4.

Paul A. Rode: And then as we get late in Q4, we are modeling a light benefit in the fourth quarter on pricing, but again, it's late in the quarter, so it's a pretty modest benefit. It's more about 25, but net-net, not a lot of, at least on the shakes, not a lot of pricing really impacted.

Paul: We're modeling a slight benefit in the fourth quarter on pricing, but again, it's late in the quarter. So it's a pretty modest benefit it's more about 25, but net net not a lot of.

Paul: At least on the shakes not a lot of pricing.

David Sterling Palmer: And then just on the gross margin, thanks for that, the 300 or so basis points expansion there, you know, how would you describe that maybe, you know, build up to 300 in the quarter, and how should we think about that?

Paul: Really in particular.

Paul: Yes.

Paul: And then just on the gross margin thanks for that.

Paul: 300, or so basis points expansion there.

Paul: How would you describe that maybe.

Paul: Buildup to the 300 in the quarter and how should we think about that.

Paul A. Rode: And your questions started a year ago.

Paul: Going forward.

Speaker Change: And your questions.

Paul: Brian Brown gross margins I think if you had to I know, it's hard to break out specifically, how many basis points are due to each thing, but if you guys just talk about commodity.

David Sterling Palmer: Around gross margins, I think if you had to, I know it's hard to break out specifically how many basis points are due to each thing, but if you guys just talk about commodity price mix and then volume leverage meta promotions, you know how would you think about the gross margin expansion this quarter and then how does that apply to the second half? Thanks.

Paul: Price mix and volume leverage net of promotions, how would you think about the gross margin expansion this quarter.

Paul A. Rode: Sure. So, from a gross margin perspective, the significant expansion was from lower protein costs. So, as you may recall, last year, we had very high protein costs, especially for our powder business in Q2 and into Q3. So, if you think about last year by quarter, the second and third quarters were by far the highest protein costs. And then in the fourth quarter, they started to pull back, which is why you see higher gross margins in our fourth quarter a year ago.

Paul: And then how does that apply to the second half.

Speaker Change: Sure. So from a gross margin perspective significant expansion was from lower protein cost. So as you may recall last year, we had very high protein costs, especially on our powder business in Q2 and into Q3. So if you think about last years.

Speaker Change: Last year by quarter, the second and third quarter and by far the highest protein cost and then in the Q in the fourth quarter. They started to pull back which is why you see stronger gross margins in our fourth quarter a year ago. So when you look at Q2, specifically significant expansion at the gross margin line.

Paul A. Rode: So, as you look at Q2 specifically, significant expansion in the gross margin line, that's partially offset by, you know, significant promotion offsetting that. We also saw about 50 basis points of favorability from what I would call just some non-recurring items, so, you know, co-man, true-ups, payments for missing on minimum volumes, that's about 50 basis points, but most of the expansion is just protein costs offset by promotion.

Speaker Change: That's partially offset by significant promotion offsetting that we also saw about 50 basis points of favorability from what I would call just.

Speaker Change: Some.

Speaker Change: Nonrecurring items so.

Speaker Change: Call me on true ups payments for missing on minimum volumes, that's about 50 basis points. The most expansion is just protein cost offset by by promotion.

Speaker Change: That's great. Thank you.

Operator: Thank you. One moment for the next question. Our next question comes from the line of Thomas Palmer from Citi.

Speaker Change: Thank you one moment far next question.

Speaker Change: Our next question comes from the line of Thomas Palmer from Citi.

Thomas Hinsdale Palmer: Good morning and thanks for the question. I wanted to maybe start off on the input cost environment. It sounded like you're expecting less favorability as we move through the year. But you also noted 3Q a year ago was a bit elevated along with that second quarter. So is it kind of less deflation as we move into 3Q? And then is there a point where we kind of return to inflation, or is that more of a fiscal 25 consideration?

Thomas Hinsdale Palmer: Good morning, and thanks for the question I wanted to maybe start off.

Thomas Hinsdale Palmer: Back on the input cost environment.

Thomas Hinsdale Palmer: I'd like Youre expecting less favorability as we move through the year, but you also noted <unk> a year ago was a bit elevated along with with the second quarter. So is it kind of less deflation as we move into <unk> and then is there a point, we kind of return to inflation or is that more of a fiscal 'twenty five consideration.

Paul A. Rode: Yeah, so if you look at the second half, we are expecting costs to go up from the second quarter, mostly on our powders, which go up significantly. It's about a 50 percent increase from Q2 to Q3, so it's significant. Shakes start to modestly head higher in the third and fourth quarter on proteins, so from a sequential basis, they increase. Versus a year ago, we still see fairly significant favorability on proteins in the third quarter, but it does start to significantly moderate in the fourth quarter, so there's very little benefit in the fourth quarter, but still pretty significant favorability in the third quarter.

Thomas Hinsdale Palmer: Yes. So if you look at the second half we are expecting cost to go up from the second quarter, mostly on our powders, which go up significantly it's about a 50% increase from Q2 to Q3, so insignificant chegg start to to modestly head up higher in the third and fourth quarter on proteins. So from a sequential.

Thomas Hinsdale Palmer: Central basis increases versus a year ago.

Thomas Hinsdale Palmer: We still see fairly fairly significant favorability on.

Thomas Hinsdale Palmer: On proteins in the third quarter, but it does start to significantly moderate in the fourth quarter. So there was a very little benefit in the fourth quarter, but still pretty significant favorable in your third quarter and again, that's just the dynamics of lapping last year's high kind of peaks at Q2, Q3 last year, and we're seeing kind of the.

Paul A. Rode: And again, that's just the dynamics of lapping last year's high kind of peak in Q2, Q3 last year, and we're seeing kind of the, I'll call it, the floor in the current protein environment here in the second quarter, then it starts to head up again. So that's the dynamic. So we still should see some favorability in the second half, but mostly in the third quarter on our proteins.

Thomas Hinsdale Palmer: The I'll call it the floor in the current the current protein environment here in the second quarter then it starts to head up again. So that's the dynamics, we're still we still should see some favorability in the second half and mostly in the third quarter on our proteins.

Thomas Hinsdale Palmer: Okay, thanks for that. And then just on marketing, I think one thing you've talked about in recent quarters is kind of some flexibility to pull back on marketing if demand is running particularly strong. And I realize some of this that you're talking about with marketing is a shift maybe between brands, but it does seem like Premier, you've got kind of limited safety stock and very robust demand in the quarter. To what extent are we seeing kind of a shift there with a pullback in Premier versus a ramp-up in Diamond Ties? And how does that kind of net out as we think about the second half versus what you'd planned on initially?

Speaker Change: Okay. Thanks for that.

Speaker Change: Then just on marketing I think one thing you've talked about in recent quarters as kind of some flexibility to pull back on marketing if demand is running particularly strong in.

Speaker Change: I realize some of this is that you are talking about with marketing as a shift maybe between brands, but it does seem like premier you've got kind of limited safety stock very robust demand in the quarter.

Speaker Change: To what extent are we seeing kind of a shift there with the pullback in premier versus a ramp up in <unk> and how does that kind of net out as we think about the second half versus what you had planned on initially.

Darcy Horn Davenport: Yeah, we have decided to, oops, I'll start and then you can add, Paul. We decided to pull back and move the major equity campaign from Q4 this year to Q25, but we pivoted some of those dollars to both Premier Powder, Premier Bottles, and Dymatize. So think of kind of the Tetra side of our business on Premier as being the constraint side. But we're still spending, but on the other parts of our business, but not just Dymatize. So definitely spending on Premier Powder and Bottles. Just to explain, yeah, I mean, we had called previously for...

Speaker Change: Yes, we have decided to I'll start and then you can add Paul Davis.

Speaker Change: We decided to pull back.

Speaker Change: <unk>.

Paul Davis: And move the the major.

Speaker Change: Equity campaign to from Q4 this year at $2 25, but.

Speaker Change: But we pivoted.

Speaker Change: Some of those dollars to both premier powder.

Speaker Change: Premier bottles and diamond ties, so think of kind of the tetra side of our business on premier as being that constraint constraint side.

Speaker Change: But so we're still spending but on the other parts of our business, but not just diamond type so definitely spending on premier powder and bottles.

Paul A. Rode: And just to expand, yeah, I mean, we've called previously for, you know, low 3s, kind of 3 and 3.5% for the year. We're still in that ballpark, as Darcy said. We have toggled a little bit between brands and pulled back slightly from maybe our prior expectations, but it's a modest, modest change.

Speaker Change: And just I think you.

Speaker Change: Call It previously for <unk>.

Speaker Change: Low threes kind of three to three 5% for the year, we're still in that ballpark as Darcy said, we have toggled, a little bit between brands and pulled back slightly from maybe from our prior expectation but.

Speaker Change: It's a modest modest change.

Speaker Change: Great. Thank you for the color.

Operator: One moment for our next question. Our next question comes from the line of Bryan Spillane from Bank of America.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Speaker Change: Our next question comes from the line of Bryan Spillane from Bank of America.

Bryan Douglass Spillane: Thanks, Operator. Good morning. Good morning, everyone.

Bryan Douglass Spillane: Thanks, operator, good morning, good morning, everyone. So just two one a clarification Paul just.

Bryan Douglass Spillane: Just following the discussion around gross margins in the back half of the year. So.

Operator: So, just to clarify one point, Paul, just following the discussion around gross margins in the back half of the year. Will gross margins be up a little bit more in the third quarter versus last year than they will be in the fourth quarter? It sounded to me like 3Q and 4Q should be roughly similar, maybe 3Q a little better because you won't have as much promo, and then 4Q a little less gross margin expansion, but just wanted to make sure I was hearing that correctly.

Bryan Douglass Spillane: Will gross margins.

Bryan Douglass Spillane: You up a little bit more in the third quarter versus last year then.

Bryan Douglass Spillane: We'll be in the fourth quarter. It sounded it sounded to me like <unk> should be roughly similar maybe <unk> a little better because you won't have as much promo and then <unk> a little less gross margin expansion, but just want to make sure I was hearing that correctly, yes.

Paul A. Rode: Yeah, you've got it correct. So we don't see, you know, Q3, Q4 ought to be pretty similar from a margin perspective, gross margin. And you're correct that, from a year ago, you will see, from a year-ago perspective, much more favorability in the third quarter than the fourth. And that's protein dynamics as proteins start to step up in our second half, where they started to step down in last year's Q4. So that's why the favorability is less in Q4, but it is still.

Bryan Douglass Spillane: All right. Thank you.

Speaker Change: Yes, you've got it correct. So we don't see.

Bryan Douglass Spillane: Q3, Q4 ought to be pretty similar from a margin perspective.

Bryan Douglass Spillane: Gross margin and you are correct that you will see from a year ago perspective, much more favorability in the third quarter than the fourth and Thats the protein dynamics as protein start to <unk>.

Bryan Douglass Spillane: Step up in our in our second half where they started to step down in last year's Q4. So that's why the favorability is less in Q4, but still favorable alright.

Darcy Horn Davenport: And then, Darcy, can you talk a little bit about... rather than household penetration, just kind of how the sort of consumer basis is changing, if it has. So I guess what I'm asking is just, are you recruiting more kids, you know, male versus female age cohorts? You know, initially, you know, this was a pretty, relatively narrow consumer base, but I'm just curious if it's expanding, and I ask that, I guess, in the context of, you know, I think with Fairlife and CorePower, they're definitely seeing a pretty wide age cohort, especially younger ones, drinking it. So I'm just curious, with Premier Shake specifically, if you're beginning to kind of widen the consumer base. We definitely are.

Bryan Douglass Spillane: Alright. Thank you and then Darcy can you talk a little bit about.

Bryan Douglass Spillane: Okay.

Bryan Douglass Spillane: B rather than household penetration just kind of how the sort of consumer base is changing if it has so I guess, what I'm what I'm what I'm asking is just are you recruiting more kids.

Darcy Horn Davenport: Male versus female age cohorts.

Darcy Horn Davenport: Initially this was a pretty.

Darcy Horn Davenport: Relatively narrow consumer base, but I'm just curious.

Darcy Horn Davenport: If it is expanding and I ask that I guess in the context of I think with fair life and core power.

Darcy Horn Davenport: They are definitely seeing a pretty wide age cohort, especially young drinking it. So I'm just curious with premier Shake specifically right. If you are beginning to kind of widen the consumer base.

Darcy Horn Davenport: We definitely are. Not kids though, this is definitely an adult brand. I mean, it's, you know, high in protein, so it is more of an adult brand.

Speaker Change: We definitely are not.

Bryan Douglass Spillane: <unk>, though this is definitely adult brand I mean, it's.

Bryan Douglass Spillane: High protein so, but it is more of an adult brand.

Darcy Horn Davenport: But absolutely, as we Honestly, like both the Koch side of the business and our side, we're the ones driving the category growth with these new households. So we are bringing in, yes, younger people. But honestly, with such a low household penetration, we're bringing in just a really diverse set of age and gender, etc. So what's unique about Premier, and I know I've talked to you guys about this, is our ability to really source volume from all ages and types of people looking for different things.

Bryan Douglass Spillane: But absolutely as we.

Bryan Douglass Spillane: Honestly like both the coke side of the business and our side, we're the ones driving that category growth with these new households, So we are bringing and yes, we're bringing in younger people, but honestly like with such a.

Bryan Douglass Spillane: A low household penetration.

Bryan Douglass Spillane: Brand, we're bringing in just a really diverse set of age and gender et cetera. So.

Bryan Douglass Spillane: What's unique about premier.

Bryan Douglass Spillane: I know I've talked to you guys about this is our ability to really source volume from.

Bryan Douglass Spillane: All ages kind of people looking for different things. So number one reason why people enter premier is to lose weight.

Darcy Horn Davenport: So the number one reason why people enter Premier is to lose weight, but we also source volume from the adult nutrition side of the business, from sports nutrition. Our range of consumers is very, very wide, and we actually, more than many other brands out there, we actually have a pretty even split of genders. So what is magical about this brand is just how broad it is, and you can see that in the consumers that we're bringing into the brand.

Bryan Douglass Spillane: But we also source volume from the adult nutrition side of that business from sports nutrition, We range, where are our range of consumers is very very wide and it and we actually more than many other brands out there, we actually have a pretty even split of <unk>.

Bryan Douglass Spillane: <unk>. So what is magical about this brand is just how broad it is and that you can see that in our consumer.

Bryan Douglass Spillane: The consumers that we're bringing into the brands.

Speaker Change: Okay. Thanks.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Operator: One moment for our next question, which comes from the line of Robert Moskow from T.D. Cowan.

Speaker Change: Our next question comes from the line of Robert Moskow from TD Cowen.

Robert Bain Moskow: Hi, thanks for the question. I think in your prepared remarks, you said that TD points are showing signs of stabilization in the most recent periods and that, you know, the out-of-stocks have stabilized. How soon do you think it will be before you can get those ramping higher again? Like, is it in the next few weeks we should expect TDPs to start recovering higher or not? Thanks.

Robert Moskow: Hi, Thanks for the question.

Robert Moskow: I think in your prepared remarks, you said that TD points are showing signs of stabilization in most recent periods.

Speaker Change: The out of stocks have stabilized.

Robert Moskow: How soon do you think it will be before you can get those.

Robert Moskow: Ramping higher again in the next few weeks, we should expect tdp's to start recovering higher or not thanks.

Darcy Horn Davenport: We'll see we'll see improvement kind of every month, so we'll see improvement throughout Q3 and then we'll get back to you with kind of all-time highs in Q4.

Robert Moskow: You will see we will see improvements kind of every every month.

Robert Moskow: So we will see improvement throughout Q3.

Robert Moskow: And then we will get back to kind.

Robert Bain Moskow: Okay, great. And then a quick follow-up, you know, these club promos you did were obviously very successful. Do you think your competitors are going to conduct similar promotions in the second half of the year? And if so, does that present any risk of a shock to your demand in that channel or not? So from a

Robert Moskow: Kind of all time highs.

Robert Moskow: Q4.

Speaker Change: Okay, Great and then a quick follow up.

Speaker Change: These club promos you did were obviously very successful.

Robert Moskow: Do you think your competitors are going to conduct similar promotions.

Speaker Change: In the second half of the year and if so does that does that present any risk of a shock to your demand in that channel or not.

Darcy Horn Davenport: From a club promotion standpoint, I mean, most competitors are already doing promotions. So there's the exception of, you know, Fairlife hasn't been doing promotions, but I expect them to when they get in a good supply, in a supply situation, to do them as well. But we're pretty complementary. I mean, I always go back to. I always go back to that. There is room for two strong brands in a low household penetration, high growth category. And we have both been very successful on every single channel, but specifically on the club channel.

Speaker Change: So from a <unk>.

Speaker Change: Club promotion standpoint.

Robert Moskow: I mean, most competitors are already doing promotion.

Speaker Change: So there is an exception.

Speaker Change: The <unk>.

Robert Moskow: Fair life Hasnt been doing.

Robert Moskow: Promotions, but.

Robert Moskow: I expect them to when they get in a good supply.

Robert Moskow: And our supply situation that they will as well.

Robert Moskow: But we are pretty complementary I mean, I always go back to <unk>.

Robert Moskow: Go back to that.

Robert Moskow: There is room for two strong brands in a low household penetration high growth category.

Robert Moskow: And we have both been very successful in every single channel, but specifically in the club channel.

Speaker Change: Great Alright, thank you.

Operator: One moment for our next question, which comes from the line of Kaumil Gajrawala from Jeffreys.

Robert Moskow: Thanks.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Speaker Change: Our next question comes from the line of Kyle Mill, Gosh Raw Wala from Jefferies.

Kaumil S. Gajrawala: Hey guys, good morning and well done. Can you talk a bit about aisle placement? I think for quite some time it was about moving products to other parts of the store and with the business still being so sort of linked to features and display and pulling them out of the aisles. Are you able to shift where in the store you are or increase the number of places you are within the store?

Kyle Mill: Hey, guys good morning, well done.

Kyle Mill: Can you talk a bit about how placement I think for quite some time it was about moving the.

Kyle Mill: The products to other parts of the of the store and with the business still being so sort of linked to feature and display in pulling them out of the aisles are you able to shift we're in the store you or increase.

Darcy Horn Davenport: So our focus right now, well, our focus right now is just really good stocks within the pharmacy. We are, you know, as I said earlier, display is a huge driver for us. So we still think that there is a lot of upside within the pharmacy, just getting displays kind of outside of the pharmacy. Longer term, we do see, so think of it just as incremental. Incremental display that could include some incremental placement. We already are. So for instance, in some mass retailers and food retailers, we have singles up in the cooler. So it's more of like a grab and go.

Kyle Mill: The number of places you are within the store.

Kyle Mill: So our focus right now our focus right now is just really good at in stock.

Kyle Mill: Within the pharmacy.

Kyle Mill: We are as I said earlier that display is a huge driver for us. So we still think that there is a lot of upside within the pharmacy, just getting display is kind of outside of the pharmacy.

Kyle Mill: Longer term, we do see so think of it just as incremental.

Kyle Mill: Incremental display that could include some incremental placement we already are so for instance.

Kyle Mill: And in some mass retailers and food retailers, we have singles up in the cooler so as more for like a grab and go so we're aggressively going after those kinds of opportunities.

Darcy Horn Davenport: So we're aggressively going after those kinds of opportunities. So, you know, to answer your question, yes, we are absolutely looking for it. The more places we can be in the store to kind of introduce our brand to more people, the better. I think that eventually, more in the medium and longer term, we do think it's interesting to actually change aisles. But for now, we think that there's a ton of upside just through building our base business within the pharmacy section and then getting incremental placement and display throughout the store.

Kyle Mill: To answer your question, Yes, we are absolutely looking for the more places we can be in the store to kind of to introduce our brand to more people the better I think that.

Kyle Mill: Eventually more in kind of the medium longer term we.

Kyle Mill: We do think it's interesting to actually change aisles, but for now we think that there is a ton of upside just through building our base business within the pharmacy section and then getting incremental pace placement and display throughout the store.

Kaumil S. Gajrawala: Okay, great. And on the price increase, maybe just some more details on why it's linked to where costs are because it looks like it's coming through just as capacity is going to kick up again. So any more details on the thought process behind the price increase.

Speaker Change: Okay, Great and then on the <unk>.

Speaker Change: This increase.

Speaker Change: Maybe just some more details on.

Speaker Change: Why is it linked to where costs are because it looks like its coming through just as its capacity is going to kick up again.

Speaker Change: So just any more details on the thought process behind the price increase.

Darcy Horn Davenport: Sure, yeah, we've seen some cost increases in co-man cost, logistics, packaging. And so, and actually, you know, many of our competitors have taken the price. So we are, you know, our biggest competitor took prices in Q1. So this is on, and mainly it's because the entire category is really seeing rising costs. Honestly, outside of the kind of dairy inputs. However, dairy inputs are also supposed to, as Paul talked about, start rising again. So it's late in the year. We talked about late in Q4. And I think that we feel comfortable with our price difference versus competition after the price adjustment.

Darcy Horn Davenport: Sure, yeah, we have seen...

Speaker Change: Sure, Yes, we have seen some we've seen cost increases in <unk> costs logistics packaging.

Speaker Change: And so and actually.

Speaker Change: Many of our competitors have taken price.

Speaker Change: So.

Speaker Change: We are.

Speaker Change: Our biggest competitor took price in Q1.

Speaker Change: So this is.

Speaker Change: And mainly it's because.

Speaker Change: The entire category is really seeing rising costs.

Speaker Change: Honestly outside of kind of the dairy inputs. However, dairy inputs are also supposed to as Paul talked about to start rising again so.

Speaker Change: It's late in the year you talked about late in Q4.

Speaker Change: And I think that we feel comfortable with our price difference versus competition after the price increase.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Operator: One moment for our next question, which comes from the line of James Salera from Stevens.

Speaker Change: Our next question comes from the line of Jim <unk> from Stephens.

James Ronald Salera: Hi guys, good morning.

Jim: Hi, guys. Good morning, Thanks for taking my question.

James Ronald Salera: Thanks for taking our question. Darcy, I wanted to drill down a little bit on the TDPs that you mentioned from the out-of-stocks. Do you have any sense for what retailers did with those shelf placements as there were some out-of-stocks? Did they flex bars in? Did they move a competitor in?

Jim: Firstly I wanted to drill down a little bit on the TDP is that you mentioned from the out of stocks do you have any sense for what retailers did with those shelf placements as there was some out of stocks. They flex bars in do they move a competitor in just any color there would be helpful.

Darcy Horn Davenport: Just any color there would be helpful.

Darcy Horn Davenport: So what we know is that there is no space; we didn't lose any space. So that is where, you know, we knew that it was going to be temporary. And honestly, Jim, it's...

Speaker Change: So what we know is no space, we didn't lose any space.

Speaker Change: So that is where we knew that it was going to be temporary and and honestly janet's.

Darcy Horn Davenport: They're sporadic. So what happens is that we have certain flavors of four-count going out for a period of time, then 12 count. And so the space, retailers, honestly, there are holes, and there are holes on the shelf occasionally. So it's not about that. Maybe they will expand the products on the shelf to kind of fill in the holes. But the idea is that it will be for a relatively short period of time, and it's never so broad that the entire brand is off the shelf.

Speaker Change: They're sporadic so there so what happens is that we have certain flavor is a four count going out for a period of time than 12 count.

Speaker Change: And so the space retailers honestly, they're holes in the <unk> on the shelf occasionally so it's not about that and maybe they expand the products on the shelf to kind of fill in the holes, but the idea is that it is for <unk>.

Speaker Change: A relatively short period of time, and it's never so broad that the entire brand as off the shelf.

James Ronald Salera: Okay, that's helpful. And then, I guess as a follow-up to that, do you have the ability to see, you know, for example, if my favorite flavor is on the shelf, do I just then reach for chocolate, which is, you know, two slots down? Or does that typically end up being just kind of a lost sale?

Speaker Change: Okay. That's helpful. And then I guess as a follow up to that do you have the ability to see.

Speaker Change: For example, if if my favorite flavor is on shelf did I. Just then reach for chocolate, which is two slots down or does that typically end up and just kind of a lost sale.

Darcy Horn Davenport: Yeah, you're describing the challenge with forecasting because what we're finding is that, yes, there is, for the most part, there, especially because our biggest capacity constraint has been on forecast, so consumers will just change to a different flavor, every once in a while, they'll also change to a different pack type, so, you know, when four-count chocolate's not available, they'll go to 12-count chocolate, for There's even some channel shifting, so they might go to a different channel because it might be available there.

Speaker Change: Yeah, Youre, describing the challenge with forecasting.

Speaker Change: Because what we're finding is that yes, there is but for the most part there, especially because our.

Speaker Change: Our biggest capacity constraints has been on four count and.

Speaker Change: So consumers will just change to a different most of the time to a different flavor.

Speaker Change: And every once in a while they will also change to a different pack types. So four counts not spore count chocolate is not available they'll go to 212 count chocolate for instance, there is even some channel shifting so they might go to a different channel because it might be available. There. So that is the challenge of forecasting accurately because.

Darcy Horn Davenport: So, that is the challenge of forecasting accurately because there is so much interplay between the flavors and the pack sizes. For the most part, they are staying within the brand. Every once in a while, you know, there are times, and I would say it's more the minority, that if somebody has a favorite flavor, they will just, kind of weight, purchase for that. That cycle, and then they'll see if it's back on the shelf the next time they shop.

Speaker Change: Theyre so much interplay between the flavors and the pack sizes for the most part they are staying within the brand.

Speaker Change: Every once they're there are times and I would say, it's more the minority that if somebody has a flavor it's favorite flavor. They will just.

Speaker Change: Kind of wait to purchase for that.

Speaker Change: That cycle, and then ill see if its back on the shelf the next time they shop.

Operator: Great, I appreciate the color. I'll hold back in the queue.

Speaker Change: Great I appreciate the color I'll hop back in the queue.

Operator: One moment for the next question. Our next question comes from the line of Matt Smith from Stiefel.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Speaker Change: Our next question comes from the line of Matt Smith from Stifel.

Matthew Edward Smith: Hi, good morning. I wanted to ask Paul a follow-up question about the third quarter guidance. You said it was tracking to the implied second half growth rates for revenue. That implies a fairly even phasing of growth in the second half of the year with a tougher comparison for the fourth quarter. Do I have that right?

Matthew Edward Smith: Hi, Good morning, I wanted to ask Paul a follow up question about the third quarter guidance. You said it was tracking to the implied second half growth rates for revenue and then place fairly even phasing of growth in the second half of the year with a tougher comparison in the fourth quarter do I have that right and can you talk about the phasing of promotional activity.

Paul A. Rode: And can you talk about the phasing of promotional activity for the rest of the year? Are there any large incremental events year over year that we should be aware of?

Speaker Change: <unk> for the rest of the year are there any large incremental events year over year that we should be aware of.

Matthew Edward Smith: Yes, you are tracking it correctly. We expect growth to be pretty..., pretty similar in Q3 and Q4 compared to a year ago. In the fourth quarter, we have some light promotion, but it's not, it's nothing. We also had some promotion, light promotion on shakes in the fourth quarter of last year, so I think overall, there's not a dramatic change in promotion, promotional activity between the years.

Paul Davis: Yes, you were tracking it correctly and we would expect growth to be pretty pretty similar in Q3, and Q4 compared to a year ago.

Paul Davis: In the fourth quarter, we have some light promotion, but it's not it's nothing we haven't we also had some promotion light promotion on shakes in the fourth quarter of last year. So I think overall, there's not a dramatic change in promotion promotional activity plan years.

Matthew Edward Smith: Thank you. And just one more follow-up for me, and I'll pass it on afterward.

Speaker Change: Thank you and just one more follow up for me and I'll pass it on after.

Speaker Change: Shipments were in line with consumption in the current quarter or do you expect that to persist through the second half of the year is there a potential for retailers to start to increase their inventory levels exiting the year.

Paul A. Rode: Our expectation is that shipments and consumption will largely track, and it will likely modestly swing towards shipments. You know, it's a little bit of an inventory load, but nothing, we're not expecting anything dramatic in the second half. So again, we're trying to replenish shelves as well as keep up with the demand. So we would expect a little bit of shipments above consumption in the second half.

Paul A. Rode: Shipments were in line with consumption in the current quarter. Do you expect that to persist through the second half of the year, or is there potential for retailers to start to increase their inventory levels at the end of the year? Our expectation is that...

Speaker Change: Our expectation is that shipments and consumption will largely track it would likely.

Speaker Change: Modestly.

Speaker Change: A swing towards shipments a little bit of inventory load, but nothing we're not expecting anything dramatic.

Speaker Change: In the second half so again, we're trying to replenish shelves as well as keep up with the demand. So we would expect a little bit of shipments above consumption in the second half.

Speaker Change: Great. Thank you.

Operator: One moment for our next question. Our next question comes from the line of Matt McGinley from Needham.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Speaker Change: Yes.

Speaker Change: Our next question comes from the line of Matt Mcginley from need him.

Matthew Robert McGinley: Thank you.

Matthew Robert McGinley: The increased e-commerce competition for <unk>. This quarter can you expand on what you saw there competitively and is that something you expect to persist or is that something that is more unique to this quarter.

Matthew Robert McGinley: Um, yeah, this one was a new one. And obviously, Q2, New Year, New You, we always see increases in promotion and marketing because it's the time when the most new people enter the category. But this year was much more extreme than in the past, meaning a ton of more emerging brands, so the smaller brands, doing very deep discounting and really leaning into marketing. So, highly competitive, and I would say, and that's pretty much the entire powder category.

Speaker Change: Yes. This one of a new one and so obviously Q2, new year, New you will always see.

Speaker Change: Increases in promotion and marketing because it's the time when the most most new people enter into the category, but this year was much more extreme than in the past, meaning a ton of.

Speaker Change: More of the emerging brands, so the smaller brands doing very deep discounting and.

Matthew Robert McGinley: And <unk>.

Speaker Change: Really leaning into marketing so.

Speaker Change: Highly competitive and I would say and that's very much the entire powder category we.

Speaker Change: We also saw some.

Darcy Horn Davenport: We also saw some Consumers seeking value, so not only buying brands on the deal that I just referenced, but also some trading down to value brands. And then even staying with what we saw in Dymatize, actually buying, looking for value, but actually upsizing. So going from a 20-serve, for instance, to a 5-pound because it was a better value. So a lot of deal shopping in general, just value seeking. If we do, we expect it to continue. It continued in April.

Speaker Change:

Speaker Change: Consumers seeking value so not only buying brands on deal that I just referenced but also some trading down.

Speaker Change: <unk> value brands and then even staying we saw what <unk> is actually buying looking for value, but actually upsizing. So going from a 20 <unk> for instance to a five pound because it was a better value. So a lot of deal shop.

Speaker Change: Being in general just value seeking.

Darcy Horn Davenport: So I think in general, we expect that it will continue through through Q3. I think the big question is, in the powder category, when commodities decrease, competitors invest that money into promotion. Well, now prices, commodities are going to start increasing again. So we do believe that there will be less deep discounting because of that. That makes sense.

Speaker Change: And.

Speaker Change: From.

Speaker Change: If we do we expect it to continue.

Speaker Change: It continued in April so I think in general we expect that it will continue through.

Speaker Change:

Speaker Change: Through Q3, I think the big question is.

Speaker Change: In the powder category when commodities decrease.

Speaker Change: For the most part competitors invest that money into promotion well now prices and commodities are going to start increasing again. So we do believe that there will be less deep discounting because of that.

Speaker Change: Okay that makes sense.

Speaker Change: One quick follow up on the revenue trend in the back half a little bit difficult to tease out your seasonal trends given all the volatility you've had in the supply chain for the past few years.

Speaker Change: You expect the third quarter to generate more revenue than you did in the second or where does that step down.

Darcy Horn Davenport: We would expect it to modestly increase from the second quarter sequentially. Okay, great.

Speaker Change: We would expect it to modestly increase from the second quarter sequentially.

Speaker Change: Okay, great. Thank you.

Operator: One moment for our next question. Our next question comes in the line from Jon Andersen from William Blair.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Speaker Change: Our next question comes from the line of Jon Andersen from William Blair.

Jon Robert Andersen: Good morning. Thank you for the questions. Two quick ones. I was just hoping you could give us an update on your capacity plans, not for the balance of 24, but looking out to 25 and supporting growth in 2025, what your expectation is there in terms of shake capacity additions. And then the second question is just on powders. It looks like premier protein powder was the most popular. Consumption was up very nicely in the quarter, but declined a bit softer. Are you seeing anything in the market that would have you maybe thinking about balancing your resources against those two equities differently going forward in the powder segment? Thank you. So production first.

Jon Robert Andersen: Hi, good morning, Thank you for the questions.

Jon Robert Andersen: Two quick ones.

Jon Robert Andersen: Just hoping you could give us an update on.

Jon Robert Andersen: You kind of capacity plans for the balance of 24, but looking out to 'twenty five and supporting growth in 2025, what your expectation is.

Jon Robert Andersen: Is there in terms of shake capacity additions and then the second question is just on powders.

Jon Robert Andersen: It looks like Premier protein powder was up consumption was up a.

Jon Robert Andersen: Very nicely in the quarter diamond types a bit softer.

Jon Robert Andersen: Are you seeing anything in the market that would.

Jon Robert Andersen: Have you maybe thinking about balancing your resources against those two equities differently going forward in the powder segment. Thank you.

Darcy Horn Davenport: So production first. So 25 production. We feel good about the production increases. So just so you weren't asking about 24.

Darcy Horn Davenport: But, you know, on track for a 20% plus production increase. And remember, that was always back and loaded. So we are expected to see strong production; we saw strong production in Q2, and that will continue into Q3 and Q4 of this year. And when we go into 25, that will continue into 25. So without specific numbers, you know, we have enough production to support the high end of our algo, plus buffer capacity, plus the needed production to rebuild internal inventory if we do not get back to target levels by the end of 24. So I feel really good about the production ramp up. Just know that we are still scaling up our two greenfield facilities, and so those start every quarter becoming more and more important. So that's one piece.

Speaker Change: The production first.

Speaker Change: So 25 production, we feel good about that the production increases so just I know you weren't asking about 24.

Speaker Change: <unk> on track for 20% plus.

Speaker Change: Production increase and remember that was always back end loaded.

Jon Robert Andersen: So we are expected to see strong production, we saw a strong production in Q2 and that will continue into Q3 and Q4 of this year. When we go into 'twenty five that will continue into 'twenty five so.

Jon Robert Andersen: Without specific numbers, we have enough production to support high end of our algo plus buffer capacity plus.

Jon Robert Andersen: Any so.

Jon Robert Andersen: The needed production to rebuild internal inventory, if we do not get back to target levels by the end of 'twenty four so I feel really good about the production ramp up and.

Jon Robert Andersen: Just know that we are still scaling up our two greenfield facilities and so those start.

Jon Robert Andersen: Every quarter are becoming more and more important.

Darcy Horn Davenport: Secondly, around powder, the one thing I didn't say when I was talking about e-comm and the dynamic of consumers seeking value, Premier has been a big beneficiary of that. So think of Dymatize as being kind of a super premium athlete brand. Well, Premier is very much a mainstream powder brand that is good value. And so one of the reasons why Premier is doing so well is because of the dynamic going on.

Jon Robert Andersen: So that's one piece.

Jon Robert Andersen: Lee around powder.

Jon Robert Andersen: One thing I didn't say when I was talking about E com and the dynamic of.

Jon Robert Andersen: Consumers seeking value Premier has been a big beneficiary of that so.

Jon Robert Andersen: <unk> dimer ties as being kind of a super premium athletes brand, while premier is very much a mainstream powder brand.

Jon Robert Andersen: That is a good value and so we've actually seen one of the reasons why premier is doing so well is because of the dynamic going on so yes.

Darcy Horn Davenport: So, to answer your question, I think it's less about diverting resources from Dymatize to Premier Powder, but we have the ability to support both businesses. And we will continue to increase the support for Premier Powder because we're really encouraged by that format. And, I mean, I said it in my prepared remarks, but we believe with 80% of the growth coming from outside of the category, we really think that Premier can help mainstream the powder category very much like the brand did for RTD. So, we're really bullish on the opportunity with Premier Powder.

Speaker Change: To answer your question I think it's less about diverting resources from Donna ties to Premier powder, but we have the we have the ability to support both businesses.

Speaker Change: And we will continue to increase the support on premier powder because.

Speaker Change: We're really encouraged by that format and I mean, I said in my prepared remarks, but we believe with 80% of the growth coming from outside of the category. We really think that premier can help mainstream that powder category very much like.

Speaker Change: The brand did for RTD, So we're really bullish on the opportunity with premier powder.

Speaker Change: Alright, thanks, so much.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Operator: One moment for our next question. Our next question comes from the line of John Baumgartner from Mizuho Securities.

Speaker Change: Our next question comes from the line of John Baumgartner from Mizuho Securities.

John Joseph Baumgartner: Maybe first off, I just wanted to follow up on promotion, Darcy, and getting more displays outside of the aisle. Right now, this category and brand stand out for growth, and retailer interest follows, but that also takes you into greater, I guess, conflict or overlap for space with other food and beverage that's maybe higher margin for the retailer or, I guess, even general merchandise. How do you think about sustaining outside-the-aisle merchandise over the longer term?

John Joseph Baumgartner: Good morning, Thanks for the question.

John Joseph Baumgartner: So maybe first off.

John Joseph Baumgartner: Just wanted to follow up on promo Darcy and getting more display outside of the idle right.

John Joseph Baumgartner: Right now this category and brand standout for growth and retailer interest follows but but also takes you into greater I guess conflicts or overlap for space with other food and beverage that's maybe higher margin for the retail or I guess, even general merchandise.

John Joseph Baumgartner: Is placement mostly contingent on retailers maintaining their interest in health and wellness shelf sets? Does the cost of display go up? Is outside-the-aisle just destined to be more of a seasonal phenomenon? How do you think about that over time?

John Joseph Baumgartner: Do you think about sustaining outside the I'll merge over the longer term placement, mostly contingent on retailers', maintaining their interest in health and wellness shelf sets. There is the cost of display go up is outside the I'll just destined to be more of a seasonal phenomenon. How do you think about that over time.

Darcy Horn Davenport: It's an interesting question. So I can tell you that every single one of our.

Speaker Change: It's an interesting question. So I can tell you that every single.

Darcy Horn Davenport: Conversations with Retailers. They see the trends within health and wellness. They see the growth coming from this category and specifically RTDs, and it is stronger than... almost any other category in the store. So it has the attention, it has the support. They also know that it's a low household penetration category, so the growth should continue. Um, so I think it's less about, I, you know, I think there's less concern around. The Retailer Support and Borrowing from Other Categories. I think it's there.

John Joseph Baumgartner: One of our.

John Joseph Baumgartner: Conversations with retailers.

John Joseph Baumgartner:

John Joseph Baumgartner: They are they see the trend within health and wellness they see the growth coming from this category and specifically our Tds.

John Joseph Baumgartner: And it is stronger than.

John Joseph Baumgartner: Almost any other <unk>.

John Joseph Baumgartner: Category in the store. So it has the attention. It has the support they also know that it's a low household penetration category. So the growth should continue.

John Joseph Baumgartner: So I think it's less about.

John Joseph Baumgartner: I think it's less concern around.

John Joseph Baumgartner: Thus the retailer support and borrowing from other categories I think it's there.

Darcy Horn Davenport: Right now, our conversations are really, and we're seeing it, that space is increasing. Space is increasing not only for RTDs but within, you know, and taking space from the other parts of the business or the other segments, but also increasing the overall space for convenient nutrition. So if you're talking about displays, obviously it's more competitive, but the retailers seem, you know, appear to be very excited about the opportunity, and I've never heard the margin pushback as to giving up display space versus other categories.

John Joseph Baumgartner: Right now our conversations are really and we're seeing it is that space is increasing.

John Joseph Baumgartner: Space is increasing not only for RTD is.

John Joseph Baumgartner: But within.

John Joseph Baumgartner: And taking space from the other parts of the business or the other segments.

John Joseph Baumgartner: But also increasing the overall space for convenient nutrition.

John Joseph Baumgartner: If youre talking about displays.

John Joseph Baumgartner: Obviously, it's more competitive.

John Joseph Baumgartner: But the retailer.

John Joseph Baumgartner: Appear to be very excited about the opportunity and I've never heard the margin push back as to giving display space versus other categories.

John Joseph Baumgartner: Okay, thanks for that. And then, in terms of Dymatize and the e-commerce pressure there, you stress pricing as a big factor. But I'm curious, with the advantage Dymatize has over these emerging brands in bricks and mortar and marketing resources, is there anything you can do in physical channels to drive more engagement, more ingredient awareness, and sampling purchases that then converts back to stronger e-com sales even at a higher price?

Speaker Change: Okay. Thanks for that and then in terms of diamond ties and the E. Commerce pressure there, yes strip pricing is a big factor, but I'm curious with with the advantage <unk> has over these emerging brands in bricks and mortar and marketing resources is there anything you can do in physical channel to drive more engagement more ingredients awareness and <unk>.

Speaker Change: <unk> purchases that then converts back to strong E comm sales, even at the higher price points.

Darcy Horn Davenport: Yeah, I think there's a lot that Diamantides can do. I mean, I think that we learned a fair amount this last quarter. I think it caught us a little by surprise, how aggressive a lot of these emerging brands were on e-com. And we had a marketing campaign, but we were a little conservative on the weight, so our share of voice was lower than it needed to be.

Speaker Change: Yes, I think Theres a lot diamond size can do I mean, I think that we learned we learned a fair amount. This last quarter I think it caught us a little.

Speaker Change: It caught us a little off guard.

Speaker Change: That.

Speaker Change: How aggressive hawaii's them hurting the brands were on E com.

Speaker Change: And we had a we had a marketing campaign.

Speaker Change: But we were a little conservative on the way.

Speaker Change: Our share of voice was lower than it needed to be so I think kind of learning.

Darcy Horn Davenport: So I think a lot of learning; we're going to be aggressive on the back half, not only with marketing campaigns across all channels but really supporting e-com. We're going to be looking at leaning a little more into promotion, just to be competitive. And then also just from a campaign standpoint, really excited about Christian McCaffrey and being able to, that is just a timing thing of when we signed him and when we can actually get assets out there.

Speaker Change: We're going to be aggressive on the back half.

Speaker Change: And not only with.

Speaker Change: <unk> marketing campaign across all channels.

Speaker Change: But really supporting E com, we're going to be looking at maybe a little more into promotion.

Speaker Change: Just to be competitive.

Speaker Change: And then also just from a campaign standpoint.

Speaker Change: Really excited about Christian Mccaffrey, and being able to that is just a timing thing of when we signed them and when we can actually get assets out there. So that's going to be really exciting to be able to lean into his celebrity.

Darcy Horn Davenport: So that's going to be really exciting to be able to lean into his celebrity and push that out. So, you know, Diamond Ties is an amazing brand. It's the second biggest whey protein brand on e-comm. So I feel great about the business, you know, a little bit of learning in Q2, but nothing that I don't think we can, you know, we'll be able to write it off in the back half to get back to growth. Thank you.

Speaker Change: And and pushed that out so you know.

Speaker Change: <unk> is an amazing brand it's.

Speaker Change: Second.

Speaker Change: Second biggest whey protein brand on an E com, so I feel great about the business.

Speaker Change: Little bit of learning in Q2, but nothing that I don't think we can we'll be able to write it in the back half to get back to growth.

Speaker Change: Thanks Ali.

Operator: One moment for our next question. Our next question comes from the line of Bill Chappell from Truist Securities.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Speaker Change: Our next question comes from the line of Bill Chapell from <unk> Securities.

William Bates Chappell: Thanks. Thanks for squeezing me in. Darcy, maybe a follow-up on Brian's question in terms of new consumers, and I just didn't know if there was a way to quantify things like the percentage that are now male, the repeat rates, stuff like that that you might have. And the reason I ask is, I just, and this is not specific to you, I just have a tough time with the household penetration kind of metric, because it would, you said that you had low household penetration, but then also being at 18, 19% seems like one in five households is pretty good household penetration for this product.

William Bates Chappell: Thanks, Thanks for squeezing me in.

William Bates Chappell: Darcy just maybe a follow up on Brian's question in terms of new consumers in.

William Bates Chappell: No if there's a way to quantify like the percentage that was mailed the repeat rates stuff like that that you might have and the reason I ask is.

William Bates Chappell: And this is not specific to you I just have a tough time with the household penetration.

William Bates Chappell: And a metric because it would.

William Bates Chappell: You say that you have low household penetration, but then also being at 18, 19% seems like one in five households, pretty good household penetration for this for this stage of the category or even if it just say one in five households have a beverage category. It seems like you should be a lot bigger than revenue. So I'm just trying to to understand.

William Bates Chappell: What does that mean or how do you look at the opportunity beyond household penetration or even how do you quantify household penetration to kind of get you excited because it seems like repeat rate or.

William Bates Chappell: Quantifying new consumers into the category would be.

William Bates Chappell: Helpful at least to us to.

Darcy Horn Davenport: Okay, so... No, I know. It's a great question, Bell.

William Bates Chappell: Better understand the metric.

Darcy Horn Davenport: So, okay, first of all, men, male-female split. So I think, again, what's unique about Premier is it's a pretty even split, a little more male than female, so call it 60-40, 55-45. But, you know, a good split between male and female. That is unique.

Speaker Change: Okay. So.

Speaker Change: Let's start with letting their estimate.

Speaker Change: It's a great question, but also okay first of all men.

William Bates Chappell: Female split so I think again, what's unique about premier is it's a pretty even split little more male than female so call. It call. It 60, 40, 50 545, but good split between male and female that is unique. So you think of the diet brands more women than men fourth neutral.

Darcy Horn Davenport: So you think of the diet brands, you know, more women than men, more nutrition, more men than women. Most of the other brands in the category kind of have a specific lane and a defined consumer, and really, it's hard because of the brand to get out of that. So that is one of the things that's really unique about Premier.

William Bates Chappell: Asia and more men than women.

William Bates Chappell: Most of the other brands in the category kind of have a specific lane and a defined consumer and really it's hard because of the brand to get out of that so that is one of the things Thats really unique about premier. So first of all just hit that one on the.

Darcy Horn Davenport: So, first of all, just hit that one. On household penetration and repeat rate. So here's the way I look at it. First of all, a strong category-leading repeat rate, about 50%, on household penetration. So we're, you know, right around to call it 18%. The RTD shake category, about 45%. Convenient nutrition overall, about 75%. So overall, I think that there is a lot of room.

William Bates Chappell: On the household penetration and repeat rate so here's the way I look at it first.

William Bates Chappell: First of all strong category, leading repeat rate about 50%.

William Bates Chappell: And.

William Bates Chappell: On the household penetration.

William Bates Chappell: So we're right around call it 18%.

William Bates Chappell: Sure.

William Bates Chappell: The RTD shakes category.

William Bates Chappell: 45% convenient nutrition overall about 75%. So overall I think that like there is a lot of room when I go to a.

Darcy Horn Davenport: When I go to another category, which is relatively new but more mature or relatively, kind of conflicting, I guess about, they're about the same age, so to speak, but bigger, is energy drinks. And when I look at that, the energy drink category has about the same household penetration as convenient nutrition, so call it 70, 75. But the number one market share and number two market share players are at 50%.

William Bates Chappell: Another category, which is relatively new but more mature are relatively.

William Bates Chappell: Kind of conflicting.

William Bates Chappell: Yes about there are about the same age so to speak but bigger.

William Bates Chappell: Is energy energy drinks.

William Bates Chappell: And when I look at that the energy drink category about the same household penetration as convenient nutrition. So call. It 70, 75, but the number one market share and number two market share players are at 50%.

Darcy Horn Davenport: So I look at that, and I'm like, okay, so there is a ton of room to grow here, knowing that the top two brands are bringing in a lot of new consumers. 80% of our growth is coming from outside of that category. And that, and it's already coming from outside of the category. And we really haven't started marketing. That just tells me there is a ton of room to grow both the brand as well as the catalog.

William Bates Chappell: I look at that and I'm like Okay. So there is a ton of room to grow here.

William Bates Chappell: Knowing that the top two brands are bringing in a lot of new consumers, 80% of our growth is coming from outside of that category and that and it's already coming from outside of the category and we really haven't started marketing.

William Bates Chappell: That just tells me there is a ton of room to grow.

William Bates Chappell: Both the brand as well as the category.

William Bates Chappell: Yeah, yeah, definitely. I'm sorry. I could probably keep going, but I will keep the call short and go to Diamond Ties for one follow-up. Do you think the growth of Premier Powder is leading to some trade-down that's affecting Diamond Ties, or is it mainly discounting from other brands?

William Bates Chappell: Does that help them, yes, you're definitely I'm sorry.

William Bates Chappell: We keep going but I will keep the.

William Bates Chappell: Sure.

William Bates Chappell: And go to <unk>.

William Bates Chappell: Diamond ties one follow up do you think the the growth of Premier powder is leading to some trade downs.

Darcy Horn Davenport: They're very different consumers, so there is not a lot of interaction.

William Bates Chappell: Affecting diamond does or is it mainly discounting from other brands.

Darcy Horn Davenport: So, definitely. And like I said, the beauty, again, the same dynamics between Premier RTD and Premier Powder, over 80% of the growth in both businesses is coming from outside of the category. So it's less switching and trading down, but actually, consumers are entering the powder category through Premier.

William Bates Chappell: They're very different consumers there is not a lot of interaction so definitely other brands.

William Bates Chappell: Got it. Thanks so much for the color.

William Bates Chappell: And like I said, so the beauty again.

William Bates Chappell: Same dynamics between Premier RTD and Premier powder.

William Bates Chappell: Over 80% of the growth on both businesses are coming from outside of the category. So it's less switching and trading down but actually consumers are entering the powder category through premier.

Darcy Horn Davenport: Thank you.

Speaker Change: Got it.

Operator: Thank you. At this time, I am showing no further questions. This concludes today's conference call. Thank you for participating. You may now all disconnect.

Speaker Change: So much for the color. Thank you.

Speaker Change: Thank you.

Speaker Change: This time I am showing no further questions. This concludes today's conference call. Thank you for participating you may now all disconnect.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

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