BELLRING BRANDS INC

Previous wording

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of BellRing Brands, Inc. and its consolidated subsidiaries. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein, our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and the “Cautionary Statement on Forward-Looking Statements” section included below. The terms “our,” “we,” “us,” the “Company” and “BellRing” refer to BellRing Brands, Inc. and its consolidated subsidiaries.

Current wording

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of BellRing Brands, Inc. and its consolidated subsidiaries. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included herein, our audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and the “Cautionary Statement on Forward-Looking Statements” section included below. The terms “our,” “we,” “us,” “Company” and “BellRing” refer to BellRing Brands, Inc. and its consolidated subsidiaries.

Previous wording

During fiscal 2023, input cost inflation, including raw material, packaging and manufacturing costs, impacted our supply chain and put downward pressure on profit margins. As a result, we took pricing actions on certain products in the prior fiscal year. During the first half of fiscal 2024, inflationary pressures on protein costs eased while other costs, such as packaging and manufacturing, continued to face inflationary pressures. We expect inflationary pressures on most input costs to increase during the second half of fiscal 2024 compared to the first half of fiscal 2024, and inflation could have a materially adverse impact on our business in the future if inflation rates were to significantly exceed our ability to achieve price increases or cost savings or if such price increases impact demand for our products.

Current wording

During fiscal 2023, input cost inflation, including raw material, packaging and manufacturing costs, impacted our supply chain and put downward pressure on profit margins. As a result, we took pricing actions on certain products in the prior fiscal year. During fiscal 2024, inflationary pressures on protein costs eased while other costs, such as packaging and manufacturing, continued to face inflationary pressures. We expect inflationary pressures on most input costs to increase during the remainder of fiscal 2024, and inflation could have a materially adverse impact on our business in the future if inflation rates were to significantly exceed our ability to achieve price increases or cost savings or if such price increases impact demand for our products.

Previous wording

Net sales increased $176.7 million, or 24%, during the six months ended March 31, 2024 compared to the prior year period. Sales of Premier Protein products were up $164.2 million, or 26%, driven by 32% higher volumes primarily due to increased promotional activity, which resulted in lower average net selling prices and distribution gains. Sales of Dymatize products were up $12.4 million, or 12%, on 14% higher volumes. Volumes increased primarily due to the timing of quarterly shipments in the prior year period and distribution gains. Sales ofall other products were up $0.1 million.

Current wording

Net sales increased $69.5 million, or 16%, during the three months ended June 30, 2024 compared to the prior year period. Sales of Premier Protein products were up $72.3 million, or 20%, driven by 19% higher volumes primarily due to higher RTD shake production and distribution gains. Sales of Dymatize products were down $1.7 million, or 3%, driven by a decrease in average net selling prices primarily due to increased promotional spending and unfavorable mix. This decrease was partially offset by 4% higher volumes primarily due to increases in international channel volumes. Sales ofall other products were down $1.1 million.

Previous wording

Net sales increased $109.0 million, or 28%, during the three months ended March 31, 2024 compared to the prior year period. Sales of Premier Protein products were up $106.0 million, or 34%, driven by 45% higher volumes primarily due to increased promotional activity, which resulted in lower average net selling prices, and distribution gains. Sales of Dymatize products were up $2.8 million, or 5%, on 1% higher volumes. Average net selling prices increased in the three months ended March 31, 2024 primarily due to favorable mix. Sales ofall other products were up $0.2 million.

Current wording

Net sales increased $246.2 million, or 21%, during the nine months ended June 30, 2024 compared to the prior year period. Sales of Premier Protein products were up $236.5 million, or 24%, driven by 27% higher volumes primarily due to increased promotional activity, which resulted in lower average net selling prices, higher RTD shake production and distribution gains. Sales of Dymatize products were up $10.7 million, or 6%, on 11% higher volumes. Dymatize volumes increased primarily due to the timing of quarterly shipments. This increase was partially offset by decreased average net selling prices in the nine months ended June 30, 2024 primarily due to increased promotional spending. Sales ofall other products were down $1.0 million.

Previous wording

Operating profit increased $33.0 million, or 57%, during the three months ended March 31, 2024 compared to the prior year period. This increase was driven byhigher net sales (net of increased promotional activity), as previously discussed, and lower net product costs of $34.6 million (primarily due to lower raw material costs). These positive impacts were partially offset by higher employee-related expenses of $7.9 million and higher advertising expense of $3.3 million.

Current wording

Operating profit increased $35.6 million, or 47%, during the three months ended June 30, 2024 compared to the prior year period. This increase was driven byhigher net sales, as previously discussed, and lower net product costs of $36.2 million (primarily due to lower raw material costs, partially offset by higher manufacturing costs). These positive impacts were partially offset by higher employee-related expenses of $8.8 million and higher advertising expense of $3.3 million.

Previous wording

Operating profit increased $30.8 million, or 23%, during the six months ended March 31, 2024 compared to the prior year period. This increase was primarily drivenby higher net sales (net of increased promotional activity), as previously discussed, and lower net product costs of $42.0 million (driven by lower raw material costs, partially offset by higher manufacturing costs). These positive impacts were partially offset by higher accelerated amortization of $17.4 million related to the discontinuance of the PowerBar business in North America, higher employee-related expenses of $13.2 million and higher advertising expense of $4.3 million.

Current wording

Operating profit increased $66.4 million, or 32%, during the nine months ended June 30, 2024 compared to the prior year period. This increase was primarily drivenby higher net sales (net of increased promotional activity), as previously discussed, and lower net product costs of $78.2 million (driven by lower raw material costs, partially offset by higher manufacturing costs). These positive impacts were partially offset by higher accelerated amortization of $17.4 million related to the discontinuance of the PowerBar business in North America, higher employee-related expenses of $22.0 million and higher advertising expense of $7.6 million.

Previous wording

Interest expense, net decreased $2.3 million during the three months ended March 31, 2024 compared to the prior year period primarily due to lower borrowings outstanding under our Revolving Credit Facility (as defined in “Liquidity and Capital Resources” within this section). As a result, the weighted-average interest rate on our total outstanding debt decreased to 7.0% for the three months ended March 31, 2024 from 7.3% for the three months ended March 31, 2023.

Current wording

Interest expense, net decreased $2.9 million during the three months ended June 30, 2024 compared to the prior year period primarily due to lower borrowings outstanding under our Revolving Credit Facility (as defined in “Liquidity and Capital Resources” within this section). As a result, the weighted-average interest rate on our total outstanding debt decreased to 7.0% for the three months ended June 30, 2024 from 7.2% for the three months ended June 30, 2023.

Previous wording

Interest expense, net decreased $4.1 million during the six months ended March 31, 2024 compared to the prior year period primarily due to lower borrowings outstanding under our Revolving Credit Facility. As a result, the weighted-average interest rate on our total outstanding debt decreased to 7.0% for the six months ended March 31, 2024 from 7.2% for the six months ended March 31, 2023.

Current wording

Interest expense, net decreased $7.0 million during the nine months ended June 30, 2024 compared to the prior year period primarily due to lower borrowings outstanding under our Revolving Credit Facility. As a result, the weighted-average interest rate on our total outstanding debt decreased to 7.0% for the nine months ended June 30, 2024 from 7.2% for the nine months ended June 30, 2023.

Previous wording

Our effective income tax rate was 25.2% and 25.0% for the three months ended March 31, 2024 and 2023, respectively, and 24.9% and 24.7% for the six months ended March 31, 2024 and 2023, respectively.

Current wording

Our effective income tax rate was 24.2% and 24.5% for the three months ended June 30, 2024 and 2023, respectively, and 24.6% for both the nine months ended June 30, 2024 and 2023.

Previous wording

During thesix months ended March 31, 2024, we repaid$25.0 million under our revolving credit facility, which is provided under our credit agreement entered into on March 10, 2022 (as amended, the “Credit Agreement”) in an aggregate principal amount of $250.0 million (the “Revolving Credit Facility”). As of March 31, 2024, there were no outstanding borrowings or letters of credit under the Revolving Credit Facility, providing us available borrowing capacity of$250.0 million. Letters of credit are available under the Revolving Credit Facility in an aggregate amount of up to $20.0 million. Our Credit Agreement provides for potential incremental revolving and term facilities at the Company’s request and at the discretion of the lenders or other persons providing such incremental facilities, in each case on terms to be determined, and also permits the Company to incur other secured or unsecured debt, in all cases subject to conditions and limitations as specified in the Credit Agreement.

Current wording

During thenine months ended June 30, 2024, we repaid$25.0 million under our revolving credit facility, which is provided under our credit agreement entered into on March 10, 2022 (as amended, the “Credit Agreement”) in an aggregate principal amount of $250.0 million (the “Revolving Credit Facility”). As of June 30, 2024, there were no outstanding borrowings or letters of credit under the Revolving Credit Facility, providing us available borrowing capacity of$250.0 million. Letters of credit are available under the Revolving Credit Facility in an aggregate amount of up to $20.0 million. Our Credit Agreement provides for potential incremental revolving and term facilities at the Company’s request and at the discretion of the lenders or other persons providing such incremental facilities, in each case on terms to be determined, and also permits the Company to incur other secured or unsecured debt, in all cases subject to conditions and limitations as specified in the Credit Agreement.

Previous wording

During the six months ended March 31, 2024, we repurchased 0.6 million shares of our common stock at an average share price of $52.28 per share and at a total cost, including accrued excise tax and broker’s commissions, of $32.5 million.

Current wording

During the nine months ended June 30, 2024, we repurchased 1.9 million shares of our common stock at an average share price of $56.18 per share and at a total cost, including accrued excise tax and broker’s commissions, of $107.1 million.

Previous wording

Short-term financing needs primarily consist of working capital requirements and interest payments on our 7.00% senior notes maturing in March 2030 (the “7.00% Senior Notes”). Long-term financing needs include the repayment of our 7.00% Senior Notes. Additional long-term financing needs will depend largely on potential growth opportunities, including acquisition activity and other strategic transactions. Our asset-light business model requires modest capital expenditures, with annual capital expenditures over the last three fiscal years averaging less than 1% of net sales. No significant capital expenditures are planned for fiscal 2024. Additionally, we may seek to repurchase shares of our common stock. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Current wording

Short-term financing needs primarily consist of working capital requirements and interest payments on our 7.00% senior notes maturing in March 2030 (the “7.00% Senior Notes”). Long-term financing needs include the repayment of our 7.00% Senior Notes. Additional long-term financing needs will depend largely on potential growth opportunities, including acquisition activity and other strategic transactions. Our asset-light business model requires modest capital expenditures, with annual capital expenditures over the last three fiscal years averaging less than 1% of net sales. No significant capital expenditures are planned during the next 12 months. Additionally, we may seek to repurchase shares of our common stock. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Previous wording

Cash provided by operating activities for the six months ended March 31, 2024 increased $70.2 million compared to the prior year period. This increase was primarily due to moderated inventory levels in the current year period (compared to increased inventory levels in the prior year period) and decreased interest payments of $3.2 million due to lower borrowings outstanding under our Revolving Credit Facility. These positive impacts were partially offset by higher receivable levels in the current year period driven by higher net sales and increased tax payments (net of refunds) of $2.1 million.

Current wording

Cash provided by operating activities for the nine months ended June 30, 2024 increased $28.8 million compared to the prior year period. This increase was primarily due to fluctuations in the timing of payments of trade payables and decreased interest payments of $5.7 million due to lower borrowings outstanding under our Revolving Credit Facility. These positive impacts were partially offset by increased trade receivable levels in the current year period, driven by higher net sales, and increased tax payments (net of refunds) of $16.4 million.

Previous wording

Cash used in financing activities for the six months ended March 31, 2024 was $59.2 million. We paid $30.8 million, including broker’s commissions, for the repurchase of shares of our common stock and repaid $25.0 million under the Revolving Credit Facility.

Current wording

Cash used in financing activities for the nine months ended June 30, 2024 was $134.6 million. We paid $106.1 million, including broker’s commissions, for the repurchase of shares of our common stock and repaid $25.0 million under the Revolving Credit Facility.

Previous wording

Cash used in financing activities for the six months ended March 31, 2023 was $30.7 million. We paid $68.5 million, including broker’s commissions, for the repurchase of shares of our common stock and borrowed and repaid $115.0 million and $75.0 million, respectively, under the Revolving Credit Facility.

Current wording

Cash used in financing activities for the nine months ended June 30, 2023 was $139.8 million. We paid $117.6 million, including broker’s commissions, for the repurchase of shares of our common stock and repaid $135.0 million under the Revolving Credit Facility. Additionally, we borrowed $115.0 million under the Revolving Credit Facility.