Bellring Brands, Inc. Q2 FY2023 Earnings Call

Good day, and welcome to the BellRing Brands Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to Jennifer Meyer, Investor Relations for BellRing.

Good morning, and thank you for joining us today for BellRing Brands second quarter fiscal 2023 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 filing section 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.

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. I'm pleased to share that our first half performance was strong, with Q2 results above our expectations. The business is steadily accelerating and gaining momentum as we bring on new capacity and begin to drive demand. Net sales grew 22% over prior year and EBITDA and adjusted EBITDA was up 34%. We continue to see higher shake production leading to higher in-stocks, which is driving higher consumption at the shelf. You saw last night, we raised our outlook for the year. We now expect net sales to grow between 17% and 21% over fiscal 2022, with adjusted EBITDA to grow 18% to 23%. Our better-than-expected first half performance along with strong consumption trends and continued category momentum drove our decision to raise the top- and bottom-line. In addition, the updated guidance factors in lower-than-expected input costs in Q4. Let's start with shake production. We saw double-digit production growth this quarter, as we finished lapping the worst of our supply constraints. Our capacity expansion plans are on track with annual production expected to grow low double-digits in fiscal 2023. Our bottle co-manufacturer is performing above our expectations, and our newest Tetra co-manufacturing facility had a smooth start-up in Q2. As a reminder, our two greenfield facilities were scheduled to come online in Q4. One of these co-manufacturers is slightly ahead of schedule; however, we are not expecting meaningful contribution from either of these new co-manufacturers until fiscal '24. Our incremental capacity in '24 is expected to be north of 20%, setting us up for many years of robust shake growth. Now to our category and brand updates. The convenient nutrition category remained strong at 16% in Q2, accelerating 2 points compared to the prior quarter. Ready-to-drink was at 21%, and ready-to-mix grew 24%. Both segments are growing despite price increases and continued capacity constraints across the RTD competitive set. Everyday and sports nutrition segments are driving category growth, as more consumers seek functional food and beverages and pursue their fitness goals. New powder products, in particular, are boosting sports nutrition growth. Premier Protein shake consumption strength accelerated this quarter, up 22%. Growth was robust across all key channels with the highest growth in food and mass, as those channels were the most impacted by our capacity constraints last year. The eCommerce channel returned to growth this quarter, as our bottle supply is now sufficient to meet demand. In April, overall shake consumption continued to grow at 31%, demonstrating continued strength. Our brand metrics made great strides this quarter and reflect the strong momentum we are feeling in the business. Premier Protein market share ended the quarter at 19%, up 130 basis points versus a year ago. And I am proud to share that across tracked channels, the brand became not only the number one brand in the RTD segment, but also the number one brand in the convenient nutrition category. This is especially exciting given we still had limited SKUs on the shelf and hadn't started meaningful marketing and promotion. I'm pleased with the progress Premier Protein made in household penetration this quarter, with the brand increasing 3% versus Q1, reaching 14.2% of households, the highest in the category. We expect to steadily grow households as we increase items on the shelf and restart marketing and promotion activities. Our repeat and buy rates are holding steady, demonstrating consumer loyalty. Premier Protein powder has more than doubled this quarter, with consumption up an astounding 123%, beyond our first-ever national marketing campaign. It exceeded our expectations, driving record-breaking sales and household penetration for the product. We continue to be excited about the growth potential for Premier Protein in this incremental format. Turning to Dymatize. The brand had a great quarter, with consumption dollars up 38% across tracked and untracked channels. We saw double-digit growth in nearly all channels, driven by distribution gains, pricing, and promotion. The brand's strength continued into April with consumption up 32%. The one exception was club, where we went from two full-time items in '22 to one full-time less expensive item this year. Consumption on the new SKU is performing well. Our strategy around expanding Dymatize to mainstream channels is working. Market share and TDPs reached all-time highs this quarter and household penetration continues to grow. We ended the quarter with 5.5% market share in tracked channels. Encouragingly, as Dymatize adds new households and distributions, repeat and buy rates are holding steady. In closing, I am encouraged by our first half progress. In almost every part of our business, whether it is brand, format, or channel, we are gaining momentum. Our category continues to show remarkable growth on strong macro trends tailwinds. Premier Protein reached the number one share of both tracked RTD and the entire convenient nutrition category for the first time. Premier's household penetration is back to growth. We are expanding shake capacity and are now only months away from a step change in our shake production run rate. We are reintroducing our full range of Premier Protein shake flavors and restarting marketing and promotion. Premier Protein powder and Dymatize consumption are rapidly climbing, bringing mainstream consumers into the category. We have a deep innovation pipeline that will help fuel our future growth. Lastly, and I would argue most importantly, our culture is thriving. For the seventh year in a row, we earned the Great Place to Work certification. Our U.S. employees voted, and we received our highest average score ever, with 93% of our U.S. organization saying that it was a great place to work. We remain confident in our long-term outlook for BellRing and look forward to providing further updates next quarter. Thank you for your continued support. I will now turn the call over to Paul.

Thanks, Darcy, and good morning, everyone. As Darcy highlighted, our second quarter and first half performance was strong. Net sales for the quarter were $386 million and adjusted EBITDA was $68 million. Net sales grew 22% over the prior year and adjusted EBITDA increased 34% with an adjusted EBITDA margin of 17.6%. Starting with brand performance. Premier Protein net sales grew 26%. Higher average net selling prices contributed 20% to overall growth. Volumes grew 6%, reflecting increased shake production compared to the year ago and strong growth for Premier powders. Shake net sales growth of 22% was in line with consumption growth in the quarter. Dymatize net sales grew 11% compared to the year ago, benefiting from higher net pricing, organic growth, and increased brand investments, offset slightly by 1% lower volumes. As expected, volumes were negatively impacted by the lapping of our strategic discontinuation of certain Dymatize products. In addition, club volumes declined as we lap distribution changes and the impact of load and timing this year. The combination of these items was an approximate 23% headwind to the net sales growth rate in the quarter. Excluding these items, net sales growth tracks closer to consumption growth. Gross profit of $117 million grew 35% with gross margins of 30.4%, up 280 basis points. Our pricing actions continue to offset significant inflation. The increase in gross margin was largely driven by lapping prior year supply chain inefficiencies and favorable freight rates. Excluding one-time separation cost, SG&A expenses as a percentage of net sales increased to 180 basis points. Our marketing spend accounted for the majority of this increase as we invested behind Premier Protein powders and Dymatize. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity. We generated $20 million in cash flow from operations in the first half of the year. Net working capital increased in Q2, primarily driven by higher raw material inventory. We expect to generate much stronger cash flow in the second half as our working capital increase largely reverses, driven primarily by lower raw material and optimized Dymatize inventory levels. We are already seeing some of the working capital timing reversed in the month of April, as we generated approximately $23 million of cash, excluding financing activities. As of March, net debt was $954 million and net leverage was 3x. With our expected EBITDA growth and strong cash flow generation, we continue to anticipate net leverage to be lower than 2.5x by the end of fiscal 2023. With respect to our share repurchases this quarter, we bought 900,000 shares at an average price of $29.74 per share. Last week, the Board approved a new $80 million share repurchase authorization. Turning to our outlook. We raised our fiscal '23 guidance for net sales to be $1.61 billion to $1.66 billion and adjusted EBITDA to $320 million to $335 million. The updated guidance reflects our better-than-expected first half results, strong consumption trends, and category growth momentum. Our outlook for EBITDA is tracking modestly higher, factoring in higher net sales as well as lower-than-expected input costs in Q4. For Q3 net sales, we expect mid to high teens percentage growth compared to the prior year, with both Premier Protein and Dymatize growing double-digits. Approximately two-thirds of the overall growth is expected to come from pricing, and the remainder from volume. We expect Q3 gross profit margins to modestly step up versus Q2, with further margin expansion in Q4. Likewise, we expect adjusted EBITDA margins to step up each quarter. Q3 adjusted EBITDA dollars are expected to be flat to the prior year, as sales growth is offset by higher advertising and other G&A expenses. Before wrapping up, I want to review our capital expenditures guidance. We now expect to spend approximately $6 million this year, as we invest in systems and process improvements to support our long-term growth. In closing, we are 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.

Thank you. Our first question comes from the line of Jason English with Goldman Sachs.

Hey, folks. Thanks for swapping me in. I appreciate it. Can you give a little more context around the pace and magnitude of the re-engagement you're talking about in terms of marketing and merchandising activity going forward? And on a related topic, because they always kind of tie to margins, we're looking at the high protein whey cost and they fallen precipitously in the recent months. And I think we're now tracking with substantial down like 36% year-on-year levels. When would you expect that to flow through, begin to flow through? And how much of that upside would you expect to reinvest back in the belly of the portfolio or belly of the P&L to keep the revenue going? Thank you.

I'll start and...

Thanks, Jason. Go ahead.

Go ahead, Darcy.

I was going to address the marketing question, and you can handle the second one. Regarding our demand-driving activities, we began shipping the new flavors at the end of this quarter, but it didn't really impact consumption until April from a marketing perspective. Dymatize will remain stable from Q2 to Q4. We did have some marketing efforts focused on Premier Protein powders, and we will start supporting the rest of the shakes in Q3 and Q4. The marketing will be relatively light during Q3 and Q4 as we are just beginning to reconnect with our consumers while anticipating increased demand in 2024. Now, I'll pass it over to Paul to discuss the dollar standpoint before addressing your second question.

In the second quarter, we allocated just over 3% of net sales to marketing and anticipate maintaining similar investment levels in the second half of the year. For fiscal 2023, we expect to continue spending around 3% of net sales on marketing. Regarding protein, we updated our EBITDA guidance and noted that gross margins are expected to improve sequentially from the third quarter to the fourth quarter, primarily due to benefits in our powder business, although shakes will see improvements later, likely in fiscal 2024. While we expect significant reductions in protein costs in fiscal 2024, we are also facing inflationary pressures in other areas of our supply chain and packaging, which are becoming more pronounced in the second half of the year. Overall, we are beginning to see some benefits from protein in the fourth quarter, but more substantial impacts will come in fiscal 2024 for shakes.

Okay, that's helpful. And as those lower costs flow through, is there a risk that pricing will flip negative as you re-engage on promotions, merchandising at retail?

Darcy, do you want the retail question?

We expect that in the powder segment of our business, as commodity prices fluctuate, we typically manage this with promotions. When prices drop, we tend to increase our promotional efforts, which is how we handle commodity pricing.

Hey, Jason, looking ahead to 2024, we anticipate a return to a more typical promotional calendar compared to the very light one in 2023. We do expect some modest challenges from pricing, but this should improve as protein costs decrease.

Yeah, got it. Makes sense. Thank you.

Thanks, Jason.

Thank you. One moment for our next question, please. And our next question comes from the line of Bryan Spillane with Bank of America.

Thank you, operator, and good morning, everyone. I wanted to discuss the performance of shakes in the quarter by channel, noting that the tracked channels outperformed the untracked. Is that accurate? Additionally, as we look ahead to the next few quarters, should we anticipate the same trend, with tracked channels continuing to outperform untracked ones?

You're correct that food and mass were significantly impacted by our capacity limitations last year. We are now past that, which is reflecting in the stronger performance of tracked channels compared to untracked. We anticipate this trend will continue. Additionally, we're currently underrepresented in food and mass distribution, which presents considerable growth opportunities. As we begin to ship our flavors in food and mass, including both the paused options and new launches, we expect to see increased distribution growth.

Bryan, if I could add one thing, the one thing I would add is that FDM is a more complicated channel and that has a lot more flavors and pack sizes, where club is a limited SKU environment. So you mentioned prioritization, but it is more complicated, which is why we took a little bit longer to get to some of those flavors and pack sizes fully back to bright because it takes a lot more SKUs to manage.

Okay. And if I...

Bryan, if I could add one thing, the one thing I would add is that, FDM is a more complicated channel and that has a lot more flavors and pack sizes, where club is a limited SKU environment. So you mentioned prioritization, but it is more complicated, which is why we took a little bit longer to get to some of those flavors and pack sizes fully back to bright because it takes a lot more SKUs to manage.

By the end of calendar year 2024, we will have completed a full cycle of resets and our entire existing portfolio will be available. After that, the focus will shift to new items and innovation.

Okay, thank you.

Thank you. One moment for our next question, please. And our next question comes from the line of Ken Goldman with J.P. Morgan.

Hi. Thank you. How do we think about your ability to maximize capacity in the new plants into next year? And I realize, you're not prepared to give any formal guidance next year and of course there'll be some kind of production ramp-up period. But it feels to me, looking at the Street's numbers, the Street is looking at under 12% sales growth for you next year, but you're going to have so many tailwinds from that supply chain expansion and what it allows you to do in terms of marketing and the reintroduction of products and so forth. So it feels like it would be kind of a uniquely strong growth here and the Street is not really modeling that. Again, I'm probably putting you on the spot in a way you can answer right now, but I'm just trying to get a sense for how quickly you realize you really can get up to that max capacity in those new plants?

Ken, you're really putting me on the spot, but I’m just joking. We've indicated that we anticipate production to exceed 20%. However, it's important to note that not all of that production will translate into sales as some will go toward replenishing our internal inventory. I believe it's reasonable to expect net sales to reach the higher end of our range, which is between 10% to 12%. So, I feel the market estimates are pretty close. You’re correct that we have momentum in the business, as we've been experiencing record weeks without promotions, marketing, and without utilizing our full portfolio. We're excited to see this momentum continue as we increase our capacity.

Thank you. My follow-up question is regarding the powders segment. You mentioned that you will need to promote to offset any cost deflation. However, not all producers can promote simultaneously due to limited shelf space. Is it fair to assume that while you may not always lower your net price drastically, you will be gradually moving in that direction? I’d like to understand your perspective on this when considering net pricing in relation to inflation or deflation.

Our general plan is that Dymatize and now Premier Powder have low household penetration. We really want to invest in brand building, not just promotion. We see a significant opportunity to attract new consumers to try these products and to mainstream them further, primarily through brand marketing. We believe there is a substantial opportunity to invest in the brands as commodity costs decrease, which will reflect in our top-line performance and help bring more households into the category.

Okay. Thank you.

Thank you. One moment for our next question, please. And our next question comes from the line of Matt Smith with Stifel.

Hi, good morning.

Good morning.

We've heard this morning about your restarting of promotional and marketing activity later this year. And I'm curious, if inventory levels for retailers need to build in your fourth quarter ahead of planned events in the beginning of your '24, should we expect shipments to outpace consumption in the back half as retailers build back the additional flavors and perhaps build inventory ahead of distribution gains and promotional events?

I can address that. We anticipate that shipments will slightly exceed consumption, though not by a significant margin. Regarding the flavor relaunches, these will be phased in as retailers update their shelves, rather than all at once. For promotions, we plan to implement some light promotions on shakes in the fourth quarter, but we expect these to be utilized within the same quarter. Overall, we expect a slight increase in shipments compared to consumption in the second half as we refresh flavors, but it won't be a substantial rise.

Okay. And then, just quickly as a follow-up. Club events have been significant volume driver in the past. Do you have visibility and confidence in your capacity that you have the ability to restart promotional events in the club channel beginning in your fiscal '24?

Yes, we factored in the volume that we expect to sell through with club events and overall events, promotional events within food and mass, and that's all within our forecast that we're adding capacity for.

Thank you for that. I'll pass it on.

Thanks.

Thank you. One moment, please, for our next question. And our next question comes from the line of Andrew Lazar with Barclays.

Great, thanks a lot. Good morning, everybody.

Good morning, Andrew.

I think the new greenfield or dedicated co-pack facilities are being constructed on larger footprints, allowing for additional lines to be added much more quickly than was previously possible with older, more space-constrained co-pack facilities. I'm curious about how many lines are being added to these new facilities. Has there been a recent change that has increased your capacity for additional lines beyond what you initially expected, considering the current momentum and consumption trends in the business?

Currently, in the two new facilities, the setup is such that for the post facility, there is capacity for 10 lines, but they are starting with four. This has been the plan from the beginning, and they haven't produced anything yet. The expected timeline for building a new facility, including finding the land, is generally between two to three years. However, with our partners now having more space available for growth, the timeline is reduced to about 18 to 20 months if we need to implement the full processor and fillers. We are already discussing volume for 2025 and 2026 with our partners. The second facility has also added four lines, which aligns with our future plans, and we are already considering expansion opportunities with them as well.

Thank you for that. With household penetration continuing to increase, you mentioned that the repeat rate has remained quite stable. Should we typically expect repeat rates to decline as we onboard more households, particularly those with more casual or less loyal users? If that is the case, we haven't seen that with Premier, correct?

Yes, definitely. As you increase both distribution and household penetration, it's typical to observe a decline in repeat and buy rates. This happens because your core loyal customers, who tend to make more frequent purchases, are augmented by new customers who may be less committed. However, it's encouraging to see that both of our brands, Premier Protein and Dymatize, are maintaining stable buy and repeat rates even as we're expanding distribution and household reach. This indicates strong loyalty among our consumers.

Thank you.

Thanks.

Thank you. One moment please for our next question. And our next question comes from the line of Pamela Kaufman with Morgan Stanley.

Hi, good morning.

Good morning, Pamela.

Can you talk about the improvement in your performance in the eCommerce channel and your strategy there for Premier? I think your comparisons for eCommerce get easier over the coming quarters. So should we expect to see accelerating growth there?

eCommerce consumption significantly improved this quarter. As you may recall, we experienced a slower ramp-up with our bottle co-manufacturer, which supplies the format we sell online. We have now moved past that phase, and our bottle co-manufacturer is producing consistently. We have the necessary inventory. Last quarter, we faced challenges with our major eCommerce retailer regarding inventory levels, but that situation is improving, leading to better consumption. This quarter, we observed an improvement in eCommerce consumption, and we anticipate ongoing growth in the upcoming quarters.

Great, thanks. And then you mentioned that you expect lower input costs now in Q4. So, can you just comment on what your outlook is for gross margins for the back half of the year?

Sure. Yeah. So from a gross margin perspective, we would expect the second half to be at or slightly below the first half. Keeping in mind that in Q4 we do have some wide promotion that obviously is offset, and we are seeing some other inflationary costs, like I mentioned in packaging and some of other supply chain. But Q3 should be up modestly from Q2 and then Q4 should be up again from Q3, but second half largely in line with the first half, maybe down slightly.

Thank you.

Thank you. One moment please for our next question. And our next question comes from the line of Robert Dickerson with Jefferies.

Thank you very much. Darcy, I have a general question regarding the long-term outlook. I believe the target for gross margin is set at 32% to 34% and for EBITDA at 18% to 20% at least for the first half of the year. Considering the current EBITDA situation, do you feel confident about achieving that goal? I understand there may be some additional spending on promotions and possibly increased marketing efforts, but you also have a favorable production capacity. I'm trying to get your perspective on the current business performance in terms of margins compared to those long-term targets, especially since you're currently performing well despite some capacity constraints.

Darcy, do you want me to start, or you're going to?

Yeah, why don't you start, Paul, with margin.

Yes, you're right that last year we were at the upper end of our EBITDA margin targets, and we're in a similar position for 2023. However, it's important to note that over the past two years, we have scaled back on marketing and promotions. As we approach 2024, those efforts will increase significantly compared to the last couple of years. We've also been dealing with protein costs at record highs. Looking ahead to next year, our focus is on continuing to invest in revenue, which means increasing promotions and marketing, and we expect gross margins to improve slightly from this year. Overall, we aim to maintain an EBITDA margin that is likely at the higher end of our targets, around 19% or more. That's our current goal, but there is an opportunity to potentially reach an even higher margin.

All right, thank you. That's it.

Thanks, Robert.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Matt McGinley with Needham & Company.

Thank you. I have a quick follow-up on the EBITDA guide. Your guidance implies that the margins in the back half will be down I think 150 to 200 bps year-over-year. You noted I think twice that the gross margins will be up sequentially in the third and fourth. Overall, do you expect that year-over-year pressure to be mostly realized in gross margin or in G&A in the back half?

It's primarily in G&A. As we increase our A&P spending compared to last year, that will be the main factor affecting the second half.

That makes sense. And the second question was on with the decline in working capital investment around inventory that you noted, I think you should have a pretty good back half in terms of cash flow generation. What's the priority for capital return in the back half? Is it paying down the revolver balances or repurchasing stock? And does the strong stock performance and multiple expansion that you've had this year, change your priority in terms of how you think about the returning capital?

Yeah, as with the second half, we will prioritize debt paydown or pay down the revolver as you mentioned. But we continue to look at the long-term growth prospects of this business, we still feel are very strong. And so, we will continue to be opportunistic on share repurchases as we get into the second half, but first part will be debt pay down and then second half, share buybacks.

Thank you very much.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Bill Chappell with Truist.

Hey, good morning. This is Stephen Lengel on for Bill Chappell. Thank you for taking our question.

Good morning.

This would just be a quick one. I guess you called out some of the investments in systems to support the long-term growth around CapEx expectations. I guess, have those expectations changed over the past few months? Is there kind of anything you could call out there?

No. We've been assessing and looking at our processes, looking at our systems, and so we went through an assessment process that identified some things we want to implement and change. It's not ERP, but it's some of the subsystems and support infrastructure of the business. And so as that became clear that what we are planning to do there, then we realize that some of that would be capital expenditure. And so that's what's really driving the increase. But we look at this, we have a very fast-growing business, and we want to make sure that we have the infrastructure and processes to support that growth not only now but for the next few years. And so we're investing now to make sure that that is the case.

Great. Thank you, guys, so much.

One moment please for our next question. Our next question comes from the line of Jim Salera with Stephens.

Hi, everyone. Thanks for taking my questions. Darcy, you mentioned that you are under-distributed in FDM. What would it take? Is it simply related to capacity constraints and not having all the SKUs that are desired? What needs to be done to get on par or back to a level that's relatively similar to the other channels in FDM?

We believe that the situation is a result of our capacity constraints. However, when you compare us to some competitors, we have an equivalent market share with one of our major rivals, yet they have twice the shelf space we do. We recognize that our Premier Protein shakes, in particular, are currently under-distributed. We understand that we attract new households into the category. Therefore, it’s crucial for us to improve our capacity and ensure those products are available on the shelves. We're receiving positive signals from recent retailer resets and their feedback on shelf dynamics. Retailers are enthusiastic about the additional capacity we are bringing and are showing strong interest in both Premier Protein and Dymatize, which is promising.

Okay. And as a follow-up, if we zoom out and you guys are obviously the leader in kind of that RTD shake category. What does it take to drive overall category awareness? I mean, you have kind of a core consumer that utilizes the product on a normal basis. But what does it take to pull in additional consumers that might not be familiar with kind of the use occasion or just the category more broadly speaking?

It is basic stuff. Going back to fiscal '21, when we were actively marketing, promoting, and driving demand through new items, we attracted new consumers to the category. We increased household penetration by about 1 to 2 points for our brand and the category overall. We have a strategy on how to engage consumers who are outside the category and open to ready-to-drink shakes and powders. This includes TV, digital, and a comprehensive marketing approach that ensures we incorporate shopper marketing along with promotions and displays. We have a proven strategy that works for us, and now it's about executing that strategy again.

Okay. Great. Thanks, guys. I'll pass it on.

Thanks.

Thank you. One moment please for our next question. And our next question comes from the line of John Baumgartner with Mizuho.

Good morning. Thanks for the question.

Good morning, John.

Darcy, I wanted to ask about Dymatize. The momentum in eCommerce has been pretty strong for the last couple of years, but I've been surprised more recently at the pace of distribution growth in grocery and mass. For a brand that's traditionally had an audience that's more specialized, what are you seeing or what's evolving that's giving you confidence Dymatize has appeal in these outlets? And I don't know if it's just white space fill, but if not, it would seem to suggest a much longer runway for growth.

I think one of the most exciting aspects of Dymatize is that it could have either remained a niche product on the specialty side or evolved into a larger, more mainstream sports nutrition brand with relevance across specialty, eCommerce, and FDM. It has certainly turned out to be the latter. Its success in mass retail, particularly with a major mass retailer where we gained distribution a couple of years ago, was a key proof point that this super-premium sports nutrition powder brand for informed athletes could thrive in mass markets. Since then, we have been expanding distribution. Although our supplemental charts still show low numbers, we are experiencing strong growth in distribution within food and mass, and we expect this trend to continue.

Okay, thanks for that. And then just a follow-up...

Mr. Baumgartner, could you please press star, one, one again? Your line seems to have dropped. One moment, please.

Hello?

Your line is back open.

Great. Thank you. And then just to follow up, Darcy. I asked last quarter about the change in data providers, the Numerator, and it was a bit more time under your belt now. Can we sort of revisit that in terms of just grasp with some of the nuances, any learnings or a surprise that you can kind of integrate into the plan going forward? Thank you.

Certainly. We have continued to make progress since last quarter when we first implemented this. With three to four months of experience now, we're gaining a better understanding of consumer behavior, including purchasing patterns and media habits. This has improved our daily management and forecasting capabilities, as we can better analyze our competition and project our growth trajectory. More importantly, I’m excited about how these consumer insights are informing our future planning around brand strategy, media, and communications as we look ahead to 2024 and beyond.

Thank you, Darcy.

Thanks.

Thank you. And ladies and gentlemen, this does conclude today's conference call. Thank you for participating, and you may now disconnect.