BellRing Brands, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2024. The company sells convenient-nutrition products, principally Premier Protein and Dymatize, and reports one operating segment. Unless stated otherwise, amounts are in millions.
Financial performance
| Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Six months ended March 31, 2024 | Six months ended March 31, 2023 |
|---|---|---|---|---|
| Net sales | $494.6 | $385.6 | $925.0 | $748.3 |
| Gross profit | $164.3 | $117.1 | $312.3 | $238.9 |
| Gross margin | 33.2% | 30.4% | 33.8% | 31.9% |
| Operating profit | $91.0 | $58.0 | $164.0 | $133.2 |
| Net earnings | $57.2 | $30.9 | $101.1 | $75.1 |
| Diluted EPS | $0.43 | $0.23 | $0.76 | $0.56 |
| Cash provided by operating activities | Not separately stated | Not separately stated | $90.5 | $20.3 |
Margins are calculated from reported figures. In the quarter, sales rose 28%, operating profit 57%, and net earnings 85% year over year. For the six months, sales increased 24%, operating profit 23%, and net earnings 35%. Six-month operating profit growth included a $17.4 accelerated-amortization charge related to the North American PowerBar discontinuance.
Balance sheet, debt and liquidity
- At March 31, 2024, cash was $79.3; current assets were $513.2 and current liabilities $173.0. Receivables were $229.4 and inventory was $194.1.
- Long-term debt carrying value was $832.4, representing $840.0 principal of 7.00% senior notes due March 2030, net of issuance costs. No revolver borrowings were outstanding; the $250.0 revolving facility was fully available.
- The company repaid $25.0 on its revolver during the six months. It repurchased 0.6 million shares for a reported total cost of $32.5.
- Management said it expects positive operating cash flow and believes cash, operating cash flow, and possible future credit facilities will cover foreseeable needs. The company was in compliance with its 6.00:1.00 maximum total net leverage covenant at quarter-end.
Drivers, outlook and material items
- Sales: Quarterly Premier Protein sales increased $106.0, or 34%, primarily on 45% higher volumes, reflecting increased promotions and distribution gains; promotions reduced average net selling prices. Dymatize sales rose 5% on 1% higher volumes. Six-month Premier Protein sales increased 26%; Dymatize sales increased 12%.
- Costs and margins: Management attributed quarterly operating-profit growth in part to $34.6 lower net product costs, primarily lower raw-material costs. For the six months, $42.0 of lower net product costs was partly offset by higher manufacturing costs, higher employee and advertising expenses, and PowerBar amortization.
- Outlook: No quantified earnings or sales guidance is provided in the supplied filing text. Management expects inflationary pressure on most input costs to increase in the second half of fiscal 2024 versus the first half. It cautioned that inflation could materially hurt results if cost increases exceed pricing or savings capacity, or if pricing weakens demand. No significant fiscal 2024 capital expenditures are planned.
- Litigation: The company reported a $21.0 estimated liability for Joint Juice litigation. A separate putative class action and a California Proposition 65 notice allege lead-related issues involving protein products; the company disputes the claims, says it intends to defend them, and does not expect material adverse effects. The filing reports no related expense other than legal fees for the periods presented.
- Capital allocation: On February 29, 2024, the board authorized a new $300.0 million share-repurchase program, effective March 11, 2024, expiring March 11, 2026. Management stated repurchases may be material and depend on conditions and restrictions.
Most important facts for investors to verify
- Whether sales growth, particularly Premier Protein volume growth driven partly by promotions, can persist without undue pressure on realized prices.
- Whether input-cost inflation, including packaging and manufacturing costs, erodes gross-margin improvement in the second half.
- Operating cash conversion and receivables: receivables increased $61.1 during the six months, partly reflecting higher sales.
- Debt service and covenant headroom against $840.0 of senior-note principal, and the effect of any future share repurchases on liquidity.
- Developments in the Joint Juice matters and protein-product lead allegations, including any changes to estimated exposure or legal outcomes.