Operator: Good day, and thank you for standing by. Welcome to BellRing Brands Fourth Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] 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. Please go ahead.

Jennifer Meyer: Good morning, and thank you for joining us today for BellRing Brands fourth 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 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 fourth quarter and fiscal '24 results and posted a supplemental presentation to our website. Fiscal '24 was a great year for BellRing Brands. Our net sales grew 20% with adjusted EBITDA of 30%. Our full year results for the second year in a row meaningfully exceeded our long-term algorithm, as we added shape capacity and began to layer in demand drivers. The end of the year is an important time for us to reflect on the past and reassess the future opportunity. There were three things that stood out to me. The first is the expanding growth potential of the convenient nutrition category, specifically, the segments that we compete in, ready-to-drink shakes and ready-to-mix powders. Ready-to-drink is the category standout, delivering double-digit growth in each of the last four years. Despite all of this growth, it still has low household penetration at 48% compared to most mature categories that are close to double that. This, combined with strong macro trends like the mainstreaming of protein, growing popularity of functional foods and beverages, and the continued rise in healthy convenient foods, highlights a long path of future growth. The second thing that stood out to me is the power and incredible future potential of our brands. This year was a pivotal year for our largest brand, Premier Protein, because we steadily increased our supply, and we demonstrated that the demand is there and will continue to grow as we layer in demand drivers. Premier Protein reached new highs across many key metrics, including household penetration, market share, distribution and buy rate. What is truly unique is that we did this without significant advertising or promotion at many retailers, further illustrating the brand strength, strength and future potential. The third thing that struck me is about our organization. Our team has been working hard to prepare for the moment when shake production would be unconstrained. We have fantastic advertising campaigns prepared, compelling category story that will unlock shelf space for the future -- for the category as well as our brands, and we developed delicious new products with a promising pipeline of innovation. At our core, we are a growth company, and we have been preparing for this moment, and we are ready for a strong '25. Now let's get to Q4 category and brand highlights. The convenient nutrition category grew 6% in Q4. It is rapidly transforming into an everyday and sports nutrition category. These segments make up 75% of it and are growing approximately 10%, in Q4, which better reflects the category momentum. From a form perspective, ready-to-drink growth accelerated and continued to lead the category, up 13% driven by household penetration and buy rate, a fairly rare combination CPG. Mainstream every day and Sports Nutrition RTB brands continue to drive most event growth and are up 25% versus a year ago. Ready-to-mix grew 4%, slowing from Q3, which was boosted by incremental feature and display activity. We continue to be excited about the tailwinds that protein provides consumers and its high relevance with a broad swath of individuals. Turning to our brands. Premier shake consumption growth accelerated this quarter, up 14%. Growth was strong in mass, food and e-commerce channels, driven by accelerated velocities, feature and display activity along with distribution expansion in mass and food. Club grew despite lapping a longer promotional period -- promotional event in the prior year. October's overall consumption accelerated, up 28%, lifted by distribution gains and Pumpkin Spice our fall seasonal flavor. Pumpkin Spice has demonstrated impressive incrementality to the brand and was the number one pumpkin item at a major mass retailer this fall. As I mentioned earlier, our brand metrics remain strong with premier protein reaching all-time highs in TDPs and household penetration. Shake TDPs grew 21% versus Q3 and we improved in-stocks and expanded both forms and pack sizes. Household penetration added just over 3 percentage points reaching 19.4% and surpassing our goal for the year. Impressively, we saw growth in repeat and buy rates with repeat rate increase increasing to 52%, demonstrating our category-leading consumer loyalty. Premier Protein with RTD market share of 23%, maintained its position as the number one brand in the RTD segment as well as the number one 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 continue to grow our brand and expand the overall category. Premier Protein powder continued its strong trajectory in Q4, with consumption growing 43% beyond strong velocities and distribution gains. In fact, at a major mass customer, it was the fastest growing brand across the entire powder category in the quarter. We remain encouraged by the growth potential of Premier Protein brand in this format as it reached over $75 million in net sales. We expect another year of robust growth in '25, as we invest more marketing dollars to drive awareness. We continue to believe the brand will be a contributor to mainstreaming the powder category in the same way Premier did to ready-to-drink. Turning to Dymatize. The brand remains one of the strongest in the powder category with velocities in the top third as key customers. Household penetration and overall distribution levels remain stable. U.S. consumption, which covers about two-thirds of the global brand was relatively flat versus last quarter, but down compared to a year ago, as a result of the ongoing softness in the specialty channel and a tougher comparable at food and club. Encouragingly, Dymatize international business continues to be strong, with net sales up 30% this quarter. As a result, global Dymatize net sales delivered growth for the quarter. Our national marketing campaign with San Francisco All-Pro running back Christian McCaffrey, launched on November 14 during NFL Thursday night football. In addition to new advertising, we have new product platforms launching in the first half of fiscal '25. Overall, we continue to be bullish on the sports nutrition category opportunity. Now to our outlook. As you saw in yesterday's press release, we are anticipating another above algorithm year. We expect fiscal '25 net sales to grow between 12% and 16% and adjusted EBITDA to grow between 5% and 11%. As a reminder, our algorithm in net sales growth of between 10% to 12% with EBITDA margins of between 18% and 20%. Our plan reflects strong volume growth for Premier Protein and a pivot from supply focused to demand driving. We are eager to have all of our demand drivers in place this year and are stepping up our marketing dollars on Premier Protein. We are excited to see our national marketing campaign on Premier hit screens late in the first quarter, ahead of New Year, New use season. EBITDA growth in fiscal '25 is expected to lag net sales growth as we experienced input cost inflation across our portfolio, most notably on our powder business and our increased marketing activities. Paul will provide further details on our fiscal '25 outlook. In closing, I'm thrilled with our performance this year. Our confidence in the long-term outlook of BellRing remains high. Strong macro tailwinds around protein are driving robust long-term growth in our categories with ready-to-drink and powder segments in the early stages of growth. Premier Protein and Dymatize are leading mainstream brands with low household penetration and strong loyalty with Premier Protein maintaining the number one share position in the category. Our innovation pipeline is rich, enabling us to bring excitement to consumers and our retail partners for years to come. Last, we have a scalable, regionally diverse supply chain able to support our long-term growth projections. Finally, I would like to thank all of our employees, customers and operations partners for an incredible year, and I look forward to a fantastic fiscal '25. We will provide updates on our progress next quarter. I will now turn the call over to Paul.

Paul Rode: Thanks, Darcy. Good morning, everyone. I'm pleased to share our fourth quarter results came at the high end of our expectations. Net sales for the quarter were $556 million, and adjusted EBITDA was $117 million. Net sales and adjusted EBITDA both grew 18% over the prior year, with adjusted EBITDA margin of 21%. Starting with brand performance. Premier Protein net sales grew 20%, primarily driven by strong volume growth for both RTD shakes and powders. RTD shake sales grew 21%, boosted by organic growth and distribution gains as well as a 1% benefit from our price increase taken lead in Q4. Shipment dollar growth outpaced consumption dollar growth with shipments benefiting from load ends of new distribution and Q1 promotions, as well as replenishment of food channel shelf gaps. Dymatize net sales increased 4% this quarter on 7% higher volume. Strength in the international business continued in Q4 with double-digit sales growth. This was partially -- this was partly offset by domestic headwinds with softness and distribution losses primarily in specialty and food weighing down overall brand growth. Gross profit of $205 million grew 32%, with an increase in margin of 400 basis points to 36.9%. Gross profit included higher unrealized mark-to-market gains on our commodity hedges versus prior year and production attainment fees received from shake co-manufacturers. Excluding these impacts, gross margins increased 250 basis points compared to a year ago primarily from net input cost deflation as we lap elevated protein costs in the prior year. Excluding one-time costs in the prior year period, SG&A expenses as a percentage of net sales increased 320 basis points, more than half of which was driven by higher marketing spend as expected. Advertising and promotion spend rose to 4.5% of net sales as we increased marketing support across our portfolio. Operating profit of $112 million grew 44% and was positively impacted by lapping $7 million of accelerated amortization recorded in the prior year. Turning to full year fiscal '24 results. Net sales were just shy of $2 billion, up 20% over the prior year. Gross profit of $707 million grew 33% with margins up 360 basis points over 2023. This growth was driven by input cost inflation, partly offset by higher promotional activity. SG&A expenses were $285 million and when excluding one-time items, increased 160 basis points as a percentage of net sales. Marketing spend increased 60 basis points versus prior year and was 3.1% of net sales this year. Adjusted EBITDA grew 30% to $440 million with a margin of 22.1%, an increase of 180 basis points. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity. We generated $4 million in cash flow from operations in the fourth quarter and $200 million for the year. As expected, shake inventory levels increased in the fourth quarter driven by incremental production volumes, putting us in a strong inventory position at the end of the year. In fiscal 2025, we expect to further build shake weeks of supply at optimal levels, most notably in Q1. As a result, our cash flow in fiscal '25 is expected to be similar to fiscal '24. As of September 30, net debt was $769 million and net leverage was 1.7 times. With our EBITDA growth and strong cash flow generation, we anticipate net leverage will remain below 2 times in fiscal '25. With respect to our share repurchases this quarter, we bought roughly 700,000 shares at an average price of $55.97 per share or $41 million in total. For the fiscal year, we repurchased 2.6 million shares at an average price of $56.12 or $147 million in total. Our remaining share repurchase authorization is $175 million. Turning to our outlook. We expect fiscal '25 net sales of $2.24 billion to $2.32 billion and adjusted EBITDA of $460 million to $490 million. Our guidance implies strong top line growth of 12% to 16% and adjusted EBITDA growth of 5% to 11% with healthy adjusted EBITDA margins of 20.8% at the midpoint. We expect dollar and percentage sales growth to be weighted to the first half of the year, while adjusted EBITDA growth will be weighted to the second half. From a brand perspective, we expect mid-teens sales growth for Premier Protein driven by volume gains, shake list price increase benefit and continued category tailwinds. Key drivers of Premier Protein's volume growth include distribution gains on new and existing products, increased promotional activity and organic growth, expanded formats and pack sizes, along with innovation drive new distribution growth this year. Net sales growth in the first half of fiscal '25 benefits from lapping low shake supply in the prior year, while the second half faced a modest headwind as we lap trade inventory loads in the prior year. We expect low to mid-single digit sales growth for Dymatize in fiscal '25 driven by volume. Fiscal '25 adjusted EBITDA margins are expected to decline 130 basis points at the midpoint, but at 20.8%, still above our long-term algorithm of 18% to 20%. Gross margins are expected to be moderately pressured by higher protein and other input costs. Significant inflation will weigh on our powder margins in fiscal '25 after experiencing very favorable protein rates in '24. On shakes, our price increase taken in fourth quarter of '24 is expected to largely offset inflation, which gradually increases throughout the year. SG&A as a percentage of net sales is also expected to be a modest headwind to margins as we increase marketing for Premier Protein, particularly in the first half compared to a year ago. Turning to our first quarter forecast, we expect net sales growth north of 20%, with Premier Protein the main driver. Dymatize and all others expected to grow low to mid-single digits. Premier protein growth is lifted by distribution gains, promotions and organic growth as well as our shake price increase. We expect shipment dollar growth for Premier shakes to be relatively in line with consumption growth. First quarter adjusted EBITDA margins are expected to be meaningfully lower than prior year as higher SG&A expenses, partially offset by a modest increase in gross margins. On SG&A, we're expecting a significant step-up in advertising promotion spend from very low levels a year ago as we kick off our Premier Protein nationwide campaign late in the quarter. Gross margins compared to prior year benefit from our recent pricing action on shakes, offset partially by input cost inflation. In closing, we are encouraged with our strong performance in fiscal '24. Our long-term outlook remains bright, and we look forward to delivering another above algorithm year in fiscal '25. I will now turn it over to the operator for questions.

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Andrew Lazar from Barclays.

Andrew Lazar: Great. Thanks. Good morning, Darcy and Paul.

Darcy Davenport: Good morning.

Andrew Lazar: Thanks. I guess first off, Darcy, I think you have done some trial runs in isolated geographies around increased marketing spend behind Premier and that you would sort of use those learnings to kind of inform, how you want to go about this the broader national campaign this year. If I have that right, maybe what are some of the key takeaways or learnings from those trials as it relates to sort of the approach you're taking this coming year around the increase in advertising and consumer spend?

Darcy Davenport: Perfect. Thanks for the question. You're right. We did a couple of things this quarter to prepare for our national campaign. We had three in-market tests and then we also just did some additional creative testing. We're still waiting for the full results, but the early results would say that the in-market tests met or exceeded our lift expectations, so that's great. And then the second piece is on the creative testing. We saw some areas. It was -- they performed very well, but we saw some opportunities to improve the creative, which is kind of, in my mind, the best case scenario is the existing -- what we have the existing creative performed at or above our expectations in market, but we also have some areas to tweak it and improve. So all in, feeling really good. We have the time to tweak the creative a little bit, and then we'll hit the market later in Q1.

Andrew Lazar: Great. Thank you for that. And then I guess what is your sort of current view on what the increase in capacity will look like in fiscal '25. I think as of last quarter, it was kind of a mid-teen increase that was expected. I don't know if that's changed or not. And then are you closer to having to start to add maybe additional lines in either or both of the greenfield production facilities because I know that takes some time to get those up and running. Thank you.

Paul Rode: Yeah, Andrew. For fiscal '25, the production volumes that we're expecting are in the mid- to high teens. Some of that is because we have -- as we touched on last quarter, we did get some incremental production, which obviously benefited Q4 into Q1, and we expect that to continue on into the future. And so we really expect that our current network can support our growth really later into fiscal '26 and '27. So it’s a little bit perhaps further out than we discussed previously on when we think we may need to look at additional lines. So we believe we can continue to get additional volumes from our existing network, which obviously for us is better because it’s lower risk, it’s easier for us to do. So a little change from last time, but not dramatic.

Q – Andrew Lazar: Thank you so much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Ken Goldman from JPMorgan.

Ken Goldman: Hi. Good morning, everybody. Thank you. I wanted to ask, Darcy, previously, you had indicated that this year's revenue growth, 2025 might be near the top end of the longer-term algos, so maybe around 12%. Now 12% is at the bottom of the range. Can you maybe walk us through what changed in the last few months that gave you incremental optimism that allowed you to feel a little more comfortable with the higher range at this time? Or was it previously just a case of, hey, maybe you were -- it was a little too early to be precise and now you have a little more clarity into how the year is going to unfold?

Darcy Davenport: Yeah. I think it's just the latter. Our full plan wasn't finalized in August when we had our last call. And so, we knew that it was rolling up strong and felt comfortable with the top end of our algorithm. But just as this planning process kind of developed, we obviously saw more opportunity.

Ken Goldman: Makes sense. And then for my follow-up, Paul, you gave some helpful information on the first quarter. I may have missed it, but I don't think we kind of had enough puzzle pieces to kind of get exactly to where you're thinking about for EBITDA dollars, understanding that sales will be up 20% or more, but that the margin will be meaningfully lower. Any more clarity that you can give us on sort of where you'd like to kind of net out on that bottom line in terms of dollars or bottom line growth would be helpful, I think, just because of those kind of major puts and takes there.

Paul Rode: Yeah. So yeah, we expect our first quarter EBITDA margins to be meaningfully lower than a year ago. There's -- the biggest driver is on the SG&A line, which we expect a significant step-up for our marketing. So with our A&P. You may recall last year, our A&P was relatively on the low side at about 1.4%. So it was very low last year. We're expecting it to step up very meaningfully this year as we are marketing behind brands, but also starting to do premier national marketing towards the latter part of the quarter. So it’s a very significant step-up on the market – on the SG&A line, and we expect some additional headwinds on G&A. So it’s a very significant step-up for SG&A. And then our gross margins, we actually expect those to be moderately favorable as pricing for shakes does offset some of the inflation. But net-net, a pretty meaningfully lower EBITDA margin in Q1 versus a year ago.

Ken Goldman: Thanks so much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matthew Smith from Stifel.

Matthew Smith: Hi. Good morning. Thanks for taking the question. Marketing stepped up in the fourth quarter and you called out higher marketing spend for the upcoming fiscal '25. Should we think of the 4.5% of sales from the fourth quarter as a goalpost for the full year or maybe even higher than that with the rollout of the marketing campaign being more targeted in the fourth quarter?

Paul Rode: No. If we think about fiscal '25, I would not expect 4.5% to be the full year, I think it would be -- it should be a little bit less than that. Again, Q4, we have a number of things going on, including the test marketing we had for our Premier shakes. I will say that as you look at fiscal '25, marketing will be a bigger headwind to margins and EBITDA in the first half than it is the second half because we did step up marketing in the second half of '24. So as you look at ‘25, fairly sizable step-ups in both Q1 and Q2 of '25 versus a year ago, and then it more moderates in the second half. But net-net, it should be somewhere in the high-3s to low to mid-4s for the year.

Matthew Smith: Thank you, Paul. I’ll pass it on.

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

David Palmer: Thanks. I’ll maybe make this a super general question about convenience channel. I know there’s a lot of curiosity about strategies to improve your penetration in that channel and growth rate in that. And I would suspect there’s some synergies with expanding plastic bottle capacity as well there. Could you maybe talk about that?

A – Darcy Davenport: Sure. Yeah. So the convenience channel, just I will give a broader perspective. So we -- it only represents about 10% of the category. So it’s actually a pretty small part of the category and so that is not -- it just is not our immediate focus. And we see that actually the bigger opportunity for us is expanding distribution where we already are distributed. So TDPs incremental displays in food. I mean we think there’s an opportunity to double our business in food, that is that -- and we also see a very big opportunity in mass. So those are the big expansion opportunities. Now I want to separate out the convenience channel and the single-serve opportunity because we actually think the single-serve opportunity is a very big one. It’s just not 00 it just doesn’t have to be in the convenience channel. And so that is something that we are absolutely, we’re expanding our bottle production and will be -- and we are focused internally as an organization to expand our single bottles and that would be in the channels that we already are being distributed.

David Palmer: No. That’s great color. I just wanted to ask one more on advertising. If you get to the 4s, as Paul was just talking about in terms of advertising mix, where do you – where does that place you in terms of your share of voice in the category. It feels like this category might be under advertised right now versus your 20% market share? How much of the heavy lifting will you be doing in terms of advertising voice. And I’ll pass it on.

Darcy Davenport: Yeah. So just from a share of voice, it gets close on Premier Proteins and same -- and we are also advertising Dymatize, but I think you’re more asking about premier protein. It’s during -- so what’s unique about this category is just a little bit of a seasonality. So Paul mentioned that we will start advertising kind of at the end on Premier at the end of Q1. Just to kind of prime the pump for the big season, which is our Q2 or January, February, March, that is when most people -- most new people enter into the category during – air quoting diet season. But -- so during the period when brands are advertising, so think of mostly Q2, Q3, Q4, we will have a competitive share of voice.

David Palmer: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jim Salera from Stephens Inc.

Jim Salera: Hey, Paul. Hey, Darcy. Good morning.

Darcy Davenport: Good morning.

Jim Salera: I wanted to ask a question just about maybe the composition of growth, and I appreciate probably gave a lot of good detail in the prepared remarks. But what are you guys expecting for kind of RTD shake category growth? And then when you talk about some of the distribution gains is that distribution for the whole category? And obviously, you have a prominent place there or is it you're finding Premier is gaining distribution where other competitive were kind of being left out in that incremental shelf closing?

Darcy Davenport: Okay. So first, there are a couple of questions in there. The first one was what do we expect for the RTD category. We expect the RTD category to grow at low double-digits. So I think that we will continue to see expansion of RTDs. A couple -- the mainstream brands and premier kind of leading that are the ones driving the category growth, and we'll continue to see that. As far as our distribution gains and when you look at our growth for the year, we expect about 75% of our premier growth to come from new distribution and new products. So that is definitely going to be driving most of our growth. And we will because we are the ones driving the growth, we should get most of the shelf space. So again, I think that we are having incredibly constructive conversations with our retailers. They realize that convenient nutrition is under spaced. Actually, when you look at our category compared to other categories in the store with much lower growth rates I mean, we should have two to three convenient nutrition, should have 2 times to 3 times the category space as it does today. So I think that the retailers see that opportunity. Unfortunately, to date, there's just been a lot of capacity constraints. And so now that at least we are out there, I talked about in my prepared remarks that we have an incredible category kind of selling deck, which walks retailers through the opportunity, and the opportunity is two-fold. One is just incremental space and why the category deserves it. But the other piece is, if you've been in any kind of food account, you'll see the opportunity of just organization and merchandising of the category. The category generally is kind of misunderstood and confusing to many consumers, and it needs to be cleaned up. And so we have a lot of recommendations around that, backed by research, etc. So those were some of the pieces that I was referencing when I was saying kind of we -- the organization is ready for this moment when we are unconstrained where we can actually go on the kind of offensive.

Jim Salera: Great. Appreciate all the thought. That’s it.

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

John Baumgartner: Good morning. Thanks for the question.

Paul Rode: Good morning.

John Baumgartner: Darcy, there were some high-level comments around innovation for 2025. At this point, are you at liberty to speak more in detail about those? And maybe just conceptually, when you speak about new platforms, what's your expectation for these platforms in terms of offering new ingredients or benefits that can attract new users, new age groups and so on.

Darcy Davenport: I'm probably not at liberty to talk as much as you'd like me to. It's still early. But here, I'll talk in maybe a little more specifics. Okay. So Premier -- I'll talk first Premier then Dymatize. Premier, we will continue to have close innovation. I've in the past, called it little eye innovation, that's flavors, pack size formats. So we will continue to expand the offerings there. We think there's a ton of opportunity, low risk and not only do you increase household penetration through these offerings, but you also increase by rate. So that will happen probably a little less sexy than the big eye innovation, but I think what's exciting around next year, we will have two new launches under Premier, and that's what we would call more big-eye innovation, one launching in Q2, the other in Q4. And once they're on the shelf, I'll tell you more about them. And then, Dymatize, we have two lines launching in kind of the first half and these are platform ideas. And in the first half, one -- and they're both I'll have a little teaser is they are both outside of the typical protein powder. So to get a -- and the idea around the big eye innovation for both businesses is it has to check the box for incremental household incremental consumers or incremental occasions. So that is what -- that is what needs to be true. Does that give you a little.

John Baumgartner: Yeah. I'll sit tight. And maybe just a follow-up there. Coming back to the household penetration in shakes, the category level, the rate of increase accelerated this year relative to what we've seen post-COVID, which was already strong. In terms of the underlying drivers and penetration, is it possible to isolate how much of the recent growth in shakes has come from substitution of other formats, whether it's bars or powders relative to absolute new users into the nutrition category, and is that -- has that balance -- is it changing at all? Do you expect it to change in 2025 and beyond? How do we think about that from a penetration perspective?

Darcy Davenport: Most of the growth is coming from incremental to the category. So very little coming from -- well, first of all, only 10% of our growth is coming from brand switching, so start there. And most -- and then the -- so the 90% is coming from new users or our own users buying more. So -- and there's actually -- there is not that much interaction. We're not sourcing a lot of volume from bars and powders, a little from powders, but not that much. Most of it is coming from out like new consumers or our own consumers buying more. And those -- our own consumers buying more are usually, if you think of kind of the consumer progression, those are ones that have recently come into the category and now are becoming with -- because for -- with us, we have 50% repeat -- so with those consumers just continuing to -- maybe they came in a year ago, two years ago and now they're just -- they're becoming everyday users.

John Baumgartner: Thanks, Darcy.

Darcy Davenport: Thank you.

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

Bill Chappell: Thanks. Good morning. Darcy, talk a little bit more about just the decision on stepping up marketing in 2025 and kind of why now and what level? And -- because it seems like it's a step change. I mean you've kind of grown exceptionally well over the past few years despite not doing any national marketing despite not kind of flooding their waves. And it seems like at least this quarter and probably for the next few quarters, you are deciding to step up. So maybe give us an inside look of what the thought process was from the company or from the management team of like why now, where do we go with this? How far is too far, how little is too little? Any kind of color around that would be great.

Darcy Davenport: Sure. I think that we have always seen advertising as an important demand driver. We -- the last time we were on air was 2021. And the -- and it is it really is -- if you think of the only demand driver that is able to lift your entire business. It's advertising, especially national advertising. And so that is the reason we've always -- we've just had to we needed to wait until we were confident in our supply. And so now we're confident in our supply. What I will say around levels, I mean, Paul talked about just percentage of sales. But I think that's just maybe a little more qualitatively. I think we are being cautious, meaning that -- we are starting to press the accelerator of advertising. And -- but we're not kind of pedal to the metal at the very beginning. We did the test markets this last quarter. So we have a sense of what the lift should be when rolled out nationally. We feel great about that. We also will be ready. We have some upside on production if the results end up to be higher than we expected. But overall, I mean, -- we are -- the big opportunity for Premier and the category is household penetration. And there is nothing better to expand household penetration of the entire business than advertising.

Bill Chappell: Okay. And then maybe kind of tying into that, when you talk about things like you believe you can double the food channel sales over a certain amount of time, like, what are those consumers consuming right now? I mean that's always the -- you have good household penetration. I think you've said that 80% of your consumption is for breakfast. Do you -- is this different meals, different occasions of the similar user or are these new consumers that are coming in and going from meal replacement or going for active nutrition where they haven't over the past few years. What -- what's the driver of that?

Darcy Davenport: Yeah, you're right. So the -- so about 60% of our consumption is a meal replacement. So think of those people, they're not in the category now -- they may not be -- they're either having an unhealthy breakfast and I'm sure you've heard me say they're stopping and having an egg with muffin, they're stopping and having a Dunkin' Donuts. So they're having -- and they want to make a healthier change in their lifestyle, and they start with breakfast or they're not having breakfast at all. And so this is incremental, but they have been told by their doctor or their trainer or their -- or someone that they need to either lose weight or they need to just improve their health, and they start with the improving their first meal of the day. So that is where our research shows where most of the people are entering, the biggest reason is because they want to improve their health and lose weight. And it usually is around breakfast. Now that is the main one. However, as we begin to expand kind of big-eye innovation, then you start going at new occasions on top up outside of kind of just breakfast because yes, breakfast is the biggest one, the next one is midmorning and mid-afternoon snacks and then the next occasion is a replacement for lunch. So based on each one of those occasions, you replace a different food.

Bill Chappell: Got it. So your thought is just more occasions than necessarily -- the occasions is driving probably a little bit more than the new users...

Darcy Davenport: Yeah, new users is number one. New users is number one, occasion number two.

Bill Chappell: Great. Thanks so much.

Darcy Davenport: Thank you.

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

Thomas Palmer: Hi. Good morning and thanks for the question. I just hope to get a quick refresher on your pricing plans. It sounds like you instituted the price increase in the fourth quarter for Premier. And then it did not sound like they were planned last time around on Dymatize. Is that still the case? And then just any magnitude of kind of thinking through the price increase this year and, I guess, confirming that it's just that one round on Premier. Thank you.

Paul Rode: Yeah. The current thinking is really confirming what you said. So we took a pricing -- a mid-single digit price increase on Premier shakes in late in the fourth quarter. So we'll get the benefit of that throughout most of fiscal '25. We are seeing significant inflation on our powder business which we price for back, if you go back in time, we took significant pricing on our Dymatize business and Premier Business powders back in late -- or in the first half of fiscal '22, -- we're seeing protein costs really go back to about those same levels that we saw in late '22 and '23. So we price for that. And so right now, we're not constantly initially pricing per se on our powders, but it is something we're evaluating. What we will look at is perhaps promo rates -- promotional rates could come down a bit. But it's something we're evaluating, but as of now, it's primarily the premier price increase that we're -- that it's completing our guidance.

Thomas Palmer: Okay. And maybe I'll just follow up quickly on the inflation side. Any help on the magnitude of the inflation that you're facing? And then I just want to make sure I have it right. The Premier shakes pricing is covering the magnitude of inflation that you're seeing on that piece of the business, so the pressure would be the powder side.

Paul Rode: Correct. Yeah. So we expect our price increase to -- on shakes to cover inflation on powders. What I would say is, again, we took significant pricing back in '22 on this business. In '24 as protein costs came down, it did drive really strong margins for our powder business in '24. So that's part of the reason you see our EBITDA margins are really strong. in fiscal '24 is a lot of that is just the power really favorable protein rates, and those are flipping on us as we move into '24 -- into '25. And I feel like I missed the first part of your last question, what did I miss?

Thomas Palmer: Sorry, just any help on magnitude of inflation to be thinking about.

Paul Rode: Yes. Thank you. Sorry about that. Yeah. So overall, I would say inflation is in the mid-single-digit range. It's more impactful again, as I mentioned, on our powder business. Powder -- as an example, so in the -- we're looking at cost of -- on our protein for our powder, so that's whey protein, is up about 50%. That's our expectation for fiscal '25, and it's almost double in Q1. So we're talking about significant inflation. So on power, it’s much more significant on our shake business, obviously, it’s less than that, but still inflation on not only the protein, which we expect to continue to increase as we go through the year, but we’re also continuing to see inflation on things like manufacturing cost, a bit on packaging. So much more modest increases and slower to build inflation increases on our shake business around powders, that’s much more impactful, especially in the first half. It moderates as we go through the year, but it’s still a headwind throughout the year for Powder.

Q – Thomas Palmer: Thank you. Thanks for the detail.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Robert Moskow from TD Cowen.

Unidentified Participant: Hey, good morning. This is Jacob Henry on for Rob Moskow. Thanks for the question. I think just one for me. I know it's still early, but how have the elasticity has been versus your expectations on the shakes following the price increase?

Darcy Davenport: It is early, but they’re largely as we expected, I would say, modest elasticity. One interesting piece is we are seeing a trade up from the fore count to the 12 count, and that’s a little higher than we would have expected. Again, we saw that in powders over the last year where consumers would trade up to larger sizes within Dymatize. So not unexpected, but a bit higher. Honestly, I think it’s good news in that they’re moving to -- there’s some pantry loading once you get a bigger pack, you end up consuming more, which I think is great. But that’s really the only piece. But otherwise largely as expected.

Unidentified Participant: Great. Thank you. I appreciate that color. I’ll leave it there.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Steve Powers from Deutsche Bank.

Stephen Powers: Great. Thank you. Good morning. First is potentially a rudimentary question. But Paul, production of payment fees, could you just give us a little tutorial as to what those are and whether they are expected to recur at all or if it was just isolated to the fourth quarter?

Paul Rode: Yeah. So the latter question, we're not expecting those things to continue. So product retainment fee is basically we have our co-manufacturers have volume commitments to us. And if they do not meet those volume commitments, there is a fee to be paid for the missed volume. And so that's what that was in the fourth. So it's something we recognized in our fourth quarter related to volume in fiscal '24 that was not delivered.

Stephen Powers: Yeah. Okay. That's what I thought. Okay. Thank you. And then, Darcy, on incremental innovation, you talked about sort of thresholds for new innovation to drive incremental households or more occasions. I guess, are there any thresholds we should -- or that you think about in terms of the profitability, the incrementality from a profitability perspective, they have to be margin neutral, margin accretive? And how do you kind of balance the complexity that new innovation new platforms represent relative to just trying to keep simplicity and efficiency in the business?

Darcy Davenport: Yeah. Our goal is to have all innovation margin accretive over time. I think that, obviously, when you launch new innovation, you sometimes need to support it at the beginning. But in the long term, we want it to be margin accretive. And just from a complexity standpoint, I mean, -- we have a fairly simple business. So I think we know that when we do launch innovation, there will be some complexity brought in, but honestly, it’s nothing – it’s still a pretty simple business. So again, margin accretive is the goal. And our – and then just our innovation plan is that we would launch 00 over time, we would launch a new platform on the Premier side every 18 months. Obviously, we’ve been – we haven’t launched a lot of big eye innovation over the last few years. So we’ve got a lot in the hopper. So that’s why we have two this year. But over time, we’ll get back to every 18 months.

Stephen Powers: Okay. Very good. Thank you so much.

Darcy Davenport: Thank you.

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