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Operator: Hello, everyone, and welcome to the BellRing Brands Second Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. Now it’s my pleasure to turn the call over to Jennifer Meyer with Investor Relations for BellRing Brands. The floor is yours.

Jennifer Meyer: Good morning, and thank you for joining us today for BellRing Brands Second Quarter Fiscal 2025 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 support these remarks are posted on our website in both the Investor Relations and the SEC Filings sections at bellring.com. In addition, the release and slides are available on the SEC’s website. Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements.

These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded, and an audio replay will be available on our website. And finally, this call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Darcy.

Darcy Davenport: Thanks, Jennifer, and thank you all for joining us this morning. Last evening, we reported our second quarter results and posted a supplemental presentation to our website. I’m happy to share that we had a good first half, delivering a second quarter largely in line with our expectations. For the first time since 2021, we had a full quarter with Premier Protein demand drivers. This drove net sales of 19% with strong EBITDA margins of over 20%. Premier shake consumption accelerated up 25%, and we reached new highs in household penetration, market share and shake TDPs. As you saw in yesterday’s press release, we affirmed our fiscal ’25 outlook for net sales growth of 13% to 17% over fiscal ’24 and EBITDA growth of 7% to 14%.

While we have some puts and takes in the second half that Paul will review, I am pleased that our outlook and consumption remain resilient and strong. Now to our Q2 category and brand highlights. Even though broad consumer sentiment is weakening, protein and specifically our category remain incredibly healthy. The convenient nutrition category grew 12% in Q2 with every day and sports nutrition driving most of this growth. From a form perspective, ready-to-drink growth was strong and continued to lead the category up 19%, driven by robust consumer demand and increased promotions. RTDs remain the second fastest-growing category in the entire store, only behind eggs. Mainstream everyday and sports nutrition RTD brands continue to bring new consumers into the category and are up over 30%.

Ready-to-mix grew 10%, a slight acceleration from the last two quarters behind distribution gains and increased consumer demand. Turning to our brands. As I mentioned earlier, Premier shake consumption was up 25% this quarter. Growth was robust in all channels driven by increased promotions, distribution expansion and strong velocities. Expansion in pack size and form, including bottles, drove the distribution gains along with space gained for our new indulgence line. Improved retailer in-stocks also contributed to our year-over-year growth. Our newest seasonal flavor, lemon bar drove high consumer interest with sell-through outpacing expectations. As we come off a heavy promotional quarter, consumption remains healthy with April up 16%. We expect distribution gains, improved in-stocks and display activity to continue to drive consumption, resulting in Q3 growth in line with Q3 growth in the mid- to high teens.

Moving to our brand metrics. Premier Protein reached all-time highs in household penetration and market share. Household penetration gained 1 percentage point, nearly reaching 21%. Promotional activity, our media campaign and new products contributed to this result. We saw growth in buy rate and with repeat rate remaining steady demonstrating our category-leading consumer loyalty. Premier Protein with RTD market share of 27% maintained its position as the #1 brand in the RTD segment as well as the #1 brand in the broader convenient nutrition category. All of this is especially encouraging because in a high-growth category with low household penetration, we see plenty of room to grow — to continue to grow our brand and expand the overall category.

Given our brand metric gains this quarter, driven by promotions and the new media campaign, we decided to expand our Q4 promotions. We know from experience, promotions and more importantly, the displays that come with them are key to reaching new households and growing our business. With our capacity position better than ever, it allows us to lean into effective tactics to drive demand and grow the overall category. Premier Protein powder continued its growth with consumption up 22% in Q2 behind strong velocities and distribution gains. I’m delighted to share that the product recently gained full distribution at club retailer and currently has the highest velocity across all way protein powders in this key customer. We remain encouraged by the growth potential of Premier Protein brand in this format.

With household penetration of only 2%, we continue to believe Premier powder has a long runway for future growth. Our new Premier Protein marketing campaign ran nationally during the second quarter, reaching TV, streaming and social media audiences. We are pleased with the first wave’s results with all key measures exceeding benchmarks. We expect the second wave, which starts later in Q3 to feature a new logo and package design. As a reminder, the new package builds on our strong performing current design and brings a modern luck that improved discoverability at shelf. Our media and interim is focused on our new indulgent line. Recall, we launched this new line late in Q1 with 4 decadent shake flavors and 1 powder flavor. These items are richer and creamier targeting an incremental consumption occasion while still delivering on the nutritional that our consumers expect for the Premier brand.

The items continue to build distribution and are off to a promising start. Indulgence has demonstrated impressive incrementality, bringing in a considerable number of consumers new to the brand and category. More innovation is planned later this year. Turning to Dymatize. The brand posted positive domestic consumption growth this quarter, up 3%, lifted by brand investments and new products. Dymatize improved its market share in the powders category to the #4 position and continues to hold the #2 share position within sports nutrition powders. While the domestic business made progress this quarter, the global brand continues to be driven by momentum outside the U.S. with Dymatize international business up double digits. Our Dymatize athlete-focused marketing campaign is generating high consumer engagement.

The campaign has improved our brand metrics and showed great success in bringing in consumers new to the brand. We will continue to add top-tier athletes to our Dymatize roster in the coming years. Recall, we launched two new Dymatize products this quarter. RTD shakes as well as a pre-workout called Energize. We are encouraged by the positive signs we are seeing in the Dymatize business as we expand our portfolio, and we remain bullish on the sports nutrition category opportunity. In closing, our Q2 results position us well for another above-algorithm year. Strong macro tailwinds around protein are driving robust long-term growth in our category with ready-to-drink and powder segments in the early stages of growth. Premier Protein is already the #1 convenient nutrition brand, and we are just starting to drive demand.

Our innovation pipeline for both brands is rich, enabling us to bring excitement to consumers and our retailer partners for years to come. Our confidence in the long-term outlook for BellRing remains high. Thank you for your interest in our company. We look forward to sharing our progress next quarter. I will now turn the call over to Paul.

Paul Rode: Thanks, Darcy, and good morning, everyone. As Darcy highlighted, we had another good quarter. Net sales were $588 million, and adjusted EBITDA was $119 million. Net sales grew 19% over prior year and adjusted EBITDA increased 14%. Adjusted EBITDA margins were in line with our expectations at 20.2%. Starting with brand performance. Premier Protein net sales grew 22% behind strong volume growth for RTD shakes and powders. Distribution gains and promotions drove the sales growth along with a positive benefit from higher net pricing. Dymatize net sales increased 3% this quarter on 20% higher volume. Double-digit sales growth for international was partly offset by domestic headwinds. Adjusted gross profit, which excludes mark-to-market adjustments on commodity hedges, was $203 million and grew 22% from prior year.

Adjusted gross profit margin of 34.5% increased 80 basis points. Our pricing actions have offset input cost inflation to date. However, the rate of inflation will increase in the second half of ’25, pressuring margins when compared to prior year. SG&A expenses were $91 million, an increase of 140 basis points as a percentage of net sales. Higher advertising and promotion spend and warehousing costs largely drove the increase. Advertising and promotion was 4.7% of net sales, up meaningfully from 3.1% last year’s second quarter. The A&P step-up was driven by the new Premier Protein national advertising campaign that ran throughout the entire second quarter and support for the indulgence RTD shakes launch. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity.

We generated $48 million in cash flow from operations in the second quarter and $51 million in the first half. We continue to expect our cash flow in fiscal ’25 to be in line with fiscal ’24. As of March 31, net debt was $932 million, and net leverage was 1.9x. With our strong cash flow generation and EBITDA growth, we anticipate net leverage will remain below 2x throughout fiscal ’25. With respect to our share repurchases this quarter, we bought 2.4 million shares at an average price of $71.68 per share or $172 million in total. As of March 31, our remaining share repurchase authorization was $280 million. Turning to our outlook. We affirmed our fiscal ’25 guidance for net sales to be $2.26 billion to $2.34 billion, and adjusted EBITDA of $470 million to $500 million.

Our guidance implies strong top line growth of 13% to 17% and adjusted EBITDA growth of 7% to 14% with healthy adjusted EBITDA margins of 21.1% at the midpoint. Overall, our second half outlook for net sales is unchanged, but now reflects increased sales from our expanded fourth quarter promotions, offset by third quarter reductions in retailer trade inventory levels. Starting late in Q2 and continuing into the third quarter, several key retailers lowered their weeks of supply on hand, which is expected to be a mid-single-digit headwind to our third quarter growth. This change is in addition to the previously anticipated mid-single-digit impact to the third quarter from lapping last year’s trade inventory replenishments. We now expect Q3 net sales growth of low single digits with Premier Protein the main driver and all other flat to down.

Without the impact of these trade inventory changes, our underlying third quarter growth for Premier Protein RTD shakes would be more in line with our expected consumption growth of mid- to high teens. Regarding adjusted EBITDA, we expect second half margins of just over 20% at the midpoint with our EBITDA dollar growth occurring in the fourth quarter. As anticipated, third quarter margins faced moderate year-over-year pressure from input cost inflation, packaging redesign costs and lapping some nonrecurring product cost favorability. Margins in the fourth quarter will be sequentially lower as higher input cost and promotional spend weigh on margins. Wrapping up, we are closely monitoring developments as it relates to tariffs. Based on current policy, a portion of our input costs could be subject to future tariffs with the majority of this potential impact from dairy protein sourced from New Zealand and the EU.

For fiscal ’25, there is no expected impact. Regarding fiscal ’26, given our normal lag time from sourcing the P&L flow, we’d only expect a partial year impact from tariffs. However, we are actively evaluating ways to mitigate tariff impacts. We will continue to monitor and provide updates later this year. In closing, we are pleased with our first half performance. Our Q2 results were strong with our products continuing to resonate with consumers. Our long-term prospects remain bright with a long runway of growth ahead. I will now turn it over to the operator for questions.

Operator: [Operator Instructions]. Please stand by for our first question. It comes from the line of Andrew Lazar with Barclays.

Andrew Lazar: Firstly, the convenient nutrition category, as you said, has grown 12% in each of the first two fiscal quarters. I’m curious what expectations are built into your back half guidance when it comes to sort of category growth just in light of the broader weakening consumer environment.

Darcy Davenport: Yes. The category fundamentals haven’t changed. I mean we are — they are continuing to be incredibly strong, macro tailwinds, also just the low — the fact that the RTD category only has 50% household pen. So long runway. Obviously, the RTD category, you referenced the 12% of the convenient nutrition category, but the RTD category was up 19% and has been consistently driving the overall category and we expect that to continue. Now having — we are modeling some different scenarios. I think that we aren’t seeing the kind of impact of kind of the weakening consumer on our category as much as other people are seeing it in their categories. And I think that just goes to kind of the fundamentals, the macro trends that are just boosting convenient nutrition. Having said that, I think we’re modeling out a few different scenarios, one that it will continue at the rate and then also a couple that it will be slightly impacted, but nothing dramatic.

Operator: One moment for our next question. It comes from Thomas Palmer with Citi.

Thomas Palmer: I wanted to ask on what you were seeing with the retailer inventories. Look, you’re not obviously the only company to highlight this, but your takeaway trends have most been a lot better than many of these others. What do you think is driving that change from your perspective? Does it seem like it will be kind of more of a onetime reset? And is — are there any on-shelf changes or product mix changes that are accompanying those?

Paul Rode: Yes, there are no changes in the inventory set. So what we’ve seen is back when — in last summer, last kind of the second half of last year, some of our retailers leaned into inventory weeks of supply as we were exiting our supply constraints. And in particular, one of our club customers really carried a fairly healthy weeks of supply starting last second half and really carried that through the second quarter. We believe that’s likely a response of just protecting themselves, especially as they got to the first — the second quarter promotions. So we believe it’s onetime and it’s somewhat unique to us. You’re right. We’ve seen — I think there’s some broader macro impacts on why some of our — some of the other retailers are taking their inventories and optimizing them.

But for us, we believe it’s primarily our club customers that we’re protecting themselves after coming out of supply constraints last year. And after we’ve done a really great job of supplying them over the last several months that they have chosen now to optimize. And so we’re seeing that in our orders in particular in April. And that’s obviously — with strong consumption growth that we saw in the second quarter and the consumption growth that continues into the third quarter. So we do think it’s just a timing dynamic.

Operator: Our next question comes from Ken Goldman with JPMorgan.

Ken Goldman: Just to stay on the topic of the trade deload. It’s fairly substantial in size, obviously. And I hear your comment on how it’s onetime and it’s 1 — it’s primarily 1 customer who carried a lot of supply last year. But when it’s that substantial, typically, it doesn’t happen unless there is a little bit of, a, either deceleration in consumption or disappointment in consumption from that retailer side. Are you hearing anything along those lines from your retailers about why they’re really pulling back on this other than that they over ordered because it just — typically, we really don’t see deloads happen unless it’s on the consumption side as well.

Paul Rode: Darcy, do you want to take that?

Darcy Davenport: Yes, for sure. So I really think that this dynamic is unique and related to coming out of capacity constraints. And so there’s really no change in consumption. I mean we continue to see strong consumption. Q2 was up 25%, boosted by the New Year, New You, promotions and advertising. As we go into Q3, we’re expecting to continue to see strong consumption, saw 16% in April. We expect to Q3 to land kind of mid- to high teens, so incredibly strong. So this is really tied to retail — so specifically one, but a couple of retailers holding on kind of protecting themselves coming out of capacity constraints. They were a little bit hoarding inventory to make sure that they didn’t run out of stock on shelf. And then we’ve now showed over several quarters of high in-stock rates and so they felt comfortable about bringing them down.

We thought this could happen. We just had no idea when it would happen. And so — and we’re seeing it. But absolutely, no softness, no concern around consumption.

Operator: It comes from the line of Megan Clapp with Morgan Stanley.

Megan Clapp: I wanted to shift to ask about tariffs, if I could. Paul, I appreciate the commentary and clearly, the operating environment is fluid and a lot can change. I think you said a portion of the input costs could be subject to tariffs. I wondered if you could just expand a bit, maybe remind us what percentage of input costs are raw materials related to dairy protein? And how should we think about potential mitigating actions? Are there opportunities to source some of that — those input costs in the U.S.? Or would you look to things like pricing?

Paul Rode: Yes. So overall, the dairy inputs for our business are, call it, 1/3 to 40% of our total cost of goods sold, but only a portion of those are subject to tariffs. Our powder business is pretty much insulated on shakes. There is — some of our dairy proteins do come from New Zealand and the EU, which currently are contemplated at a 10% tariff. So it’s the portion there that could be impacted. As we look at the total potential impact, we would — our estimation if unmitigated and if the rates do not change from where they are now, it would be a low single-digit impact to our total cost of goods sold. So relatively minor can certainly be addressed. But as far as what can we mitigate? How can we mitigate it? That’s what we’re exploring.

It can be anything from looking at different suppliers. So yes, I think these are all things that we’re assessing still obviously too early to tell. And just to highlight, again, we do not expect any fiscal ’25 impact. Any impacts from tariffs would start sometime after the beginning of fiscal ’26 because of just the lag time from when it goes from sourcing the protein to when it flows through our P&L as well as just some of the things we have with our suppliers that would push some of that into later in the year anyway. So again, we think it’s an overall minor impact, but something we’re continuing to keep an eye on, and we’ll keep you all updated as we move forward.

Operator: Our next question comes from Matt Smith with Stifel.

Matt Smith: I wanted to ask about the increase in marketing and advertising. It was a little higher than I had anticipated in the quarter, reaching 4.7% of sales. Should we think of the second quarter as peak levels in terms of percent of sales? And how should we think about the level of spending for the year now. You talked about the path of returning to 4% to 5% of sales on an annual basis. Have you increased the level of spending in marketing and advertising relative to your previous expectations? Or is the higher investment really more focused on incremental promotional activity in the fourth quarter?

Paul Rode: Yes, overall, our second quarter spend was right in line with what we expected. So again, with the national advertising campaign behind Premier and just our focus on marketing during kind of that peak New Year, new season, the marketing was right in line from what we expected. As far as overall for the full year, we had previously called for kind of mid-3s to low 4s. We have reallocated a little bit of marketing spend in the second half from marketing to promotion, not a big change, but would change our full year thinking down a little bit to more mid-3s to high 3s range. And so that’s what we expect for our marketing spend in the full year.

Operator: Our next question comes from the line of Peter Grom with UBS.

Peter Grom: So I wanted to ask a question around how you think about or how you’re approaching guidance and what remains a really dynamic backdrop. And Darcy, in some ways, this is a follow-up to your response to Andrew’s question, where you talked about category growth and kind of scenario planning. But I’d just be curious, given the many moving pieces and uncertainty, are you approaching guidance differently or kind of giving yourself more cushion just given the backdrop?

Darcy Davenport: Yes, sure. So I would just, again, adding on to what we said, what I — how I commented to Andrew’s question, just we feel great about the opportunity. We continue to feel that there is a ton of growth potential, a lot of tailwinds, the category, our brands, just the overall opportunity we feel great about. But yes, the kind of consumer uncertainty is there. And so yes, we are being a little more cautious. I think historically, in this quarter, we would have tightened our guidance range. We chose not to. And the reason is because we — there — we want — we know a lot, we have visibility to — we have 5 months left of the year. We have visibility into promotional plans. We have visibility into marketing plans.

We have visibility to our distribution gains. But there are still some unknowns, and part of that is kind of the consumer backdrop and what’s going on there. So I think that our approach has been cautious, and we will continue to be that way as that kind of — the consumer is a bit more unstable than we’ve seen in the past.

Operator: Our next question is from Jim Salera with Stephens.

Jim Salera: I wanted to maybe ask about some of the changes in the competitive landscape. If we go back a couple of years, Premier was really kind of at the vanguard of having that 30-gram RTD shake offering. And I think really deserves credit for kind of standardizing that for the industry. We’ve seen a lot of competitors kind of make up their standard offering as well. Recently, we’ve seen some launches that are kind of over 40 grams, but still have limited pour count over 200, but not by much and in that RTD format. Just any thoughts on, do you think that you’re going to need to continue to raise the protein content? Is that kind of the most important characteristic that consumers look for? Or is there a balance between the protein content and the taste and the calorie count? Just any color there would be helpful on how you guys think about how that affects your competitive position?

Darcy Davenport: Yes. Sure, Jim. So we have seen some entrants that have upped the protein level. I do not think that will be the standard. Ultimately, what drives — what has driven our business is this combination of an approachable brand, really good nutritional, so high protein, kind of low sugar, fat and calories, and unbelievable uncompromising taste. So that is what has driven our business. I think as we see this idea, there was a time when 30 grams was thought of as a fair amount of protein in a shake. Now we’re starting to see kind of push the upper limits, but we’re also seeing lower limits. So like I think what you’re seeing is that consumers continue to want more protein, but they want more protein for — some consumers want more protein because they’re trying to boost their protein after a workout.

Some consumers want less protein because they’re looking at wanting an incremental snack. So I think we should just look at — this is — this category is very young. And in a category that has only 50% household penetration, it’s starting to expand and mature and deliver on different occasions and different consumers. And I think it’s actually super exciting. I think that we would never have thought that 40 grams of protein or more would be appropriate for the mainstream. I still think it’s somewhat limited, but there’s definitely — but it’s expanding. So to answer your question, I do not think it will be the norm, but I think we’ll continue to see innovation in both levels of protein. I think we’ll see innovation in what else goes with protein.

I think you’ll see innovation to be more appropriate for certain types of people for different occasions, et cetera.

Operator: Our next question is from Kaumil Gajrawala with Jefferies.

Kaumil Gajrawala: I guess two things. One, on just to really make sure for absolute certainty on this destocking thing. It’s a one and done? Or is it a sort of one and maybe reverses back? And then sort of my main question is on marketing spend or this is the first time that you’ve really kicked up advertising and marketing in earnest. Maybe just some initial thoughts on how it’s been received and what your — maybe what the returns are or what your sort of — any metrics you can share on how it’s going would be useful.

Paul Rode: I can take the first one, Darcy. We do — we are not modeling or our guidance does not contemplate that trade inventory levels rebound and go back up. So we would consider it a one and done.

Darcy Davenport: And then from a marketing perspective, we are still — so as you know, for the New Year, New You, we had a bunch of different demand driving levers. So it is hard to isolate what is causing the up 25% consumption. That will come later this quarter when we do kind of a full analysis where you can really isolate the variables. But what we do know is we have certain KPIs that we follow. And it’s going well. I mean, we’ve hit all of our benchmarks that we set out to hit. Total impressions up 30%, above expectations, web traffic up over 25% organic search, really healthy. So we are getting our consumers’ attention. And I think that — and we’re seeing some nice momentum within the business. But specific ROI by tactic, that will come later in the quarter.

Operator: Our next question comes from John Baumgartner with Mizuho Securities.

John Baumgartner: Maybe first off, Darcy, for ready-to-mix, category level pricing is still soft on the 13 weeks relative to the 52 despite the upstream cost inflation. And I’m curious, is there a sense that with new capacity coming on stream later this year that competitors are just sort of waiting it out and absorbing some of the temporary margin pain? Or are there any indications that given the higher base for retail prices now that maybe elasticities hit more of a tipping point with more pricing?

Darcy Davenport: Yes. We are seeing — we did see some net pricing come down in ready-to-mix. And specifically on promotion, no changes of — we haven’t seen any changes in list price, but what we’ve seen is actually, yes, some increase — some slight increases in frequency and depth from a promotional standpoint. And yes, I think that we still expect some tightening. The only thing I can say is that within ready-to-mix, there are a lot of kind of upstarts, pretty low barriers to entry. So I think that what those — I think those types of companies are really focused on top line and not as concerned about profitability. And so — and mainly they’re looking to sell. So I think that is one piece that is kind of unique to, I think, ready-to-mix.

We have heard kind of rumors that — or actually, I think it’s public that there are some big players that will be taking price. I think it’s later this year. So I do think that it’s going to happen. As far as our pricing, we did announce a price increase on Premier Protein powders as well as a small line within Dymatize to take price as of the beginning of this month. It’s small. It doesn’t really affect like the overall — our overall business because it’s a small part of our business. But we are starting — we’ll see that reflected soon. So I think it’s a little bit of a mixed bag and a little bit of a wait and see.

John Baumgartner: Okay. And then on Dymatize in the U.S., sales are growing in e-comm, but they’re down in every other channel. I’m curious the extent to which that’s more structural where you’re seeing performance-oriented consumers migrating more broadly into e-comm. And if that’s the case, where sort of bricks and mortars is now becoming more structurally inhabited by the everyday consumer. I guess how do you see retailers responding to that? I mean could we see linear space being reduced for the category in total? Does the category maintain space, but it’s easier to shop for new consumers? Is it a benefit for every brand like Premier? Like how do you see the shelf set sort of changing going forward given all the dynamics here?

Darcy Davenport: So e-comm has been a major driver of this category for a long time. And as you know, you know the category well. And that’s really if you back up. Really, this specialty — it was predominantly a specialty category. So the — but — and that as kind of the specialty channel had a ton of headwinds that it shifted to e-comm. So e-comm has been — it’s the #1 channel for Dymatize and it’s the #1 channel for many ready-to-mix brands. However, we still see promise for the kind of mainstream retail channels, and we see it for mainstream brands. I think it will always — I think that e-commerce is a discover. It’s where consumers discover brands, especially in ready-to-mix. So that will continue and a lot of the upstarts can make their way first, you’ll see them first on e-comm.

But then once they hit a certain level and they’re going after kind of the mainstream audience, I think we should expect to continue to see those move from e-comm into mainstream channels. And I think for Premier Protein, huge opportunity. Again, 2% household penetration, lots of room and even opportunity for Dymatize. So within mainstream channels.

Operator: Our next question comes from Robert Moskow with TD Cowen.

Robert Moskow: I just wanted to clarify something regarding the guidance. Darcy, I think you said that given the strong retail performance, you typically would have narrowed the guidance, I suppose, at the higher end of the range. But because of the uncertainties about the consumer, you’re not. But then you also said that the destocking by this major customer was a bit of a surprise. So can you confirm that, yes, that even with that destocking, you still could have narrowed the guidance. Can I separate those 2 things?

Darcy Davenport: Yes, we absolutely could have. And again, with — just with the kind of consumer uncertainty, I think that we are just being more cautious about guidance.

Operator: Our next question comes from the line of Bryan Spillane with Bank of America Merrill Lynch.

Bryan Spillane: Darcy, can you talk a little bit about the — now the interplay between channels. I think if we look at the sequential growth from the previous quarter, looks like e-commerce slows a little bit and maybe mass club flows a little bit, and we’re growing in, for instance, grocery a lot faster. So just trying to get an understanding like how much — is there any cannibalization we should be thinking about as you expand, especially into the more traffic parts of large food retailers? And then if you could also just give us some thoughts on how you’re thinking about pricing across channels, right? So just that there’s no conflict or eliminating — reducing channel conflict from a price basis?

Darcy Davenport: So from a channel perspective, we are not seeing necessarily any cannibalization across channels or a lot of shifting. I think that what you’re seeing, I think we continue — if you look at kind of market share, we see the most opportunity for kind of our share of shelf and the opportunity is around food like FDM, food drug mass. On specifically food. Remember, those were — that was also the channel that last year and the year before that had the most out of stocks. So if you’re looking at kind of, we’re still experiencing some tailwinds from kind of a lower comp, especially in those channels where the in-stocks were a little better in some of the other channels. So really, it has to do with kind of a year ago.

But kind of I would just say macro is we continue to see a ton of room and opportunity really in every single channel, but the biggest opportunity really is FDM, so — and specifically food. So that’s one piece. And maybe I would just emphasize this even more is every channel has opportunity around household pen. So even some of our kind of more mature channels, the channels that we started in like club, they have a ton of opportunity with our brand as well as the overall category because it is only a 50% household penetration category. So a lot, lot, lot of opportunity. And what was the second question? It was around pricing?

Paul Rode: Yes, between channels.

Bryan Spillane: Right. Just to the extent that you’re watching for channel conflict, right, that the price between channels doesn’t encourage cannibalization.

Darcy Davenport: No. I mean we have kind of rules around the big — the pack sizes and channels. And so yes, no, I think the only thing that we see is kind of in an environment where consumers are maybe value shopping a little bit more. I would say the only thing that we see is — we have seen — and I’ve talked about it in past calls, I think that we’ve seen kind of moving up from kind of 4 counts to 12 counts. We’ve seen some movement even to the bigger packs like the club packs. So that is one thing that we’ve seen because they’re looking for kind of a slightly better value per shake. But other than that, I think that it’s very rational.

Operator: It comes from the line of Bill Chappell with Truist Securities.

Bill Chappell: Darcy, just kind of go back to what you had said about new entrants into the category going for more, I guess, lower protein instead of the 40-gram high protein. I mean, historically, Premier has kind of been positioned well for those who wanted that 30-gram protein shake. You had more with a great taste. Is there a thought that you need to be more aggressive or to kind of get those new users with some lower protein shakes go the other way? Or is there so much opportunity right at the kind of that core 30-gram and consumers moving up from end to 20 to 30 that you’re in a good spot. So kind of any thoughts, not necessarily the next couple of quarters, but longer term, you need to get to go to those opening price point, but opening protein point shakes.

Darcy Davenport: I think I would answer that with kind of yes. There is a lot more opportunity with our core 30-gram shake and whenever we do testing, that is by far the most kind of mainstream offering and the one that resonates with the most consumers. So we still see a ton of opportunity in household penetration and in distribution for our 30-gram shake just to continue to proliferate across pack sizes across flavors, et cetera. And I think there’s also a lot of opportunity to innovate. And I’ve in the past, watched you guys through kind of our approach to innovation, which is really around capturing either a new consumer incremental to the 30-gram or a new occasion. And that’s where kind of innovation can play. So part of that can be macro, so up or down in protein levels.

It can also be like our indulgence line, which clearly goes after a new occasion. However, what’s, I think, nice to see is we actually are getting new consumers also with indulgence line. So I think I’d just go back to the fundamentals of this category, when you’re dealing with a category that only has 50% household penetration, there is just a lot of opportunity usually within the base as well as with innovation.

Operator: It comes from Jon Andersen with William Blair.

Jon Andersen: Darcy, I kind of want to follow up on that last point around innovation. My question was could you share maybe a little bit more insight around what you’re seeing for — initially for the indulgence line? As you mentioned, it seems like that’s an opportunity to go after a new occasion. Is that primarily what you’re seeing existing users using it for snacking or a different day part? And then I think you have another innovation, which might be a big eye, not a little eye planned for the latter part of the fiscal year. How should we think about that innovation? Is there more you can say about it? Is that more about expanding the range from a consumer perspective or more occasion-based as well?

Darcy Davenport: Yes. So the early — for indulgence, I’ll start there. We have seen some early success. And I think what we’re seeing is we launched it first in mass and the success there has led to acceptances in other retailers. So do you now expect to start seeing that roll out across kind of food, drug, mass as well as club. So I think that, that is great. It is doing what we wanted it to do, which is it’s highly incremental to the category and from an occasion standpoint. But I think the sort of a little bit of the surprise is also it’s getting at new occasions. So it’s about — at one of our mass retailers, we’re seeing about 35%. The buyers are about 35% new to the category. So again, in a low household penetration category, we want to bring in new people, and it is doing that, which is really exciting.

Also, when you go on to reviews online, you also see a lot of mentions about treat, dessert, et cetera. You think of our baseline, really, you see many more around breakfast replacement. And so the fact that we’re getting nods to treat and dessert, it’s confirming our strategy, which feels very good. The second question just about upcoming nnovateion. Yes, we have another innovation coming in the latter or in Q4. And I’ll just say that, yes, the strategy is around new consumers. So if you step back, we had 2 innovations. The first one is really designed to go after new occasions. The second one is going after new consumers.

Operator: And our last question, one moment, comes from Steve Powers with Deutsche Bank.

Steve Powers: And this may tie together a number of threads you’ve already spoken about. But I just — Darcy maybe a little bit more color and detail into your thinking as to specifically why you’re leaning into the fourth quarter promotions that you called out? Because I guess kind of why is the basic question. And is it opportunistic given the current environment, just given the state of the consumer, given the innovation plans you just spoke to? Or should we think about this as now more of a fixed part of the calendar that’s likely to repeat?

Darcy Davenport: Yes. I think I’d view it as a fixed part of the calendar. So again, if you go back, we have always — pre-COVID, pre-supply constraints, we historically had 2 large club promotions annually for probably close to a decade. And that was kind of the — it was consistent. And I think that when we looked at the improvement in brand metrics, in Q2 last quarter, we measure — our focus is on household penetration. We saw a really nice bump in household penetration. We know that when we do these type of club promotions, we get really, really nice displays, eyeballs and that leads to increased household penetration. When we saw that work so well in Q2, and we have the inventory supported, we were able to kind of expand the Q4 promotion. So really, it was a strategic move that was enabled because we have the inventory to support and it’s nice to be able to partner with our retailers to bring value to consumers, given the backdrop.

Operator: Thank you. And ladies and gentlemen, this concludes our Q&A session and program for today. Thank you all for participating, and you may now disconnect. Good day.