BellRing Brands, Inc. (BRBR) Q4 2025 Earnings Call Transcript

Almond Milkshakes: Launched as the first non-dairy protein offering, already the #2 turning 4 count in the non-dairy RTD set, with nearly half of buyers new to the brand. Distribution is expanding in 2026 with advertising support.

Coffeehouse Shake Line: New product line offering 30 grams of protein and caffeine equivalent to one cup of coffee. Launching in mid-December in mass and e-commerce channels, supported by paid media, influencer partnerships, and in-store sampling.

RTD Shake Category Growth: The category has doubled in retail sales since 2019 to $8.7 billion, with household penetration at 54%. Expected dollar growth is high-single to low-double-digit in the next few years.

Retailer Partnerships: Retailers are increasing category space, testing higher traffic aisle locations, and expanding display space to capture growing consumer demand.

Cost Savings Program: Enhanced flexibility to reinvest in future growth by optimizing co-manufacturing, warehousing, and transportation networks, as well as procurement savings from ingredients and packaging.

Advertising Investment: Increased advertising spend to 4%-5% of net sales, with a new creative campaign launching in late December to drive household penetration and brand relevance.

Long-term Revenue Growth Algorithm Update: Updated from low double digits to high single digits (7%-9%) due to a larger revenue base and competitive environment. Premier Protein remains the primary growth driver.

Focus on Innovation: Comprehensive demand study conducted to guide multiyear innovation strategy, with new products targeting incremental occasions and consumer segments.

Competitive Pressures: The RTD shake category has attracted significant competition, including newer insurgent and crossover brands, as well as declining legacy brands. This increased competition is expected to create a more challenging environment in the near term.

Commodity Inflation: Significant commodity inflation, particularly in whey protein costs, is expected to pressure gross margins, especially in the first half of fiscal 2026.

Tariffs: The introduction of tariffs is expected to have an ongoing annualized impact on margins of approximately 120 basis points, starting in fiscal 2026.

Promotional Spending: Promotional spending is expected to slightly increase as new brands work to establish themselves in the market, which could impact profitability.

Q1 Performance Challenges: The first quarter of fiscal 2026 is expected to be softer due to tough comparisons with the prior year, non-repeating promotions, and timing-related headwinds, resulting in a roughly 5% decrease in net sales.

Dymatize Brand Challenges: Dymatize is expected to weigh down overall growth rates due to high protein costs, reduced brand investment, and difficult sales comparisons.

Tariff Mitigation Uncertainty: While efforts are being made to mitigate tariff impacts, the success of these measures remains uncertain, posing a risk to margins.

Advertising and Brand Investment Costs: Increased advertising and brand investment costs are expected to pressure adjusted EBITDA margins, particularly in the first half of fiscal 2026.

Fiscal 2026 Net Sales Growth: Expected to grow by 4% to 8%, with adjusted EBITDA margins of 18%. Sales for the year are anticipated to be modestly below the long-term algorithm due to a softer first quarter and competitive dynamics.

Premier Protein Growth: High single-digit sales growth expected, driven by category tailwinds, distribution gains, innovation, and brand investments. Volume growth will be partially offset by low single-digit headwinds from promotional investments.

Dymatize Sales: Expected high single-digit sales declines due to price increases to offset whey protein inflation and reduced brand investment.

Q1 Fiscal 2026 Performance: Net sales expected to decline approximately 5%, with flat consumption for Premier RTD shakes. Challenges include tough comparisons, non-repeating promotions, and sales pull-forward effects.

Advertising Investment: Advertising spend to increase to approximately 4% of net sales, with significant year-over-year dollar increases in Q2 and Q3. A new creative campaign will launch in late December to drive household penetration and brand relevance.

Innovation Plans: Focus on new product launches, including Coffeehouse shakes and almond milkshakes, targeting incremental occasions and new consumer segments. Distribution expansion and advertising support planned for these innovations.

Long-Term Revenue Growth Algorithm: Updated to 7% to 9% annually, with Premier Protein driving growth. Adjusted EBITDA margin algorithm remains at 18% to 20%, incorporating higher brand investments and tariff impacts.

Cost Savings Initiatives: Efforts to optimize co-manufacturing, warehousing, transportation, and procurement to bolster margins and offset tariff impacts.

Commodity and Tariff Impacts: Significant input cost inflation, particularly whey protein, and tariffs expected to pressure margins in fiscal 2026. Tariffs to have an annualized impact of approximately 120 basis points on margins.

Share Repurchase: Our strong track record of cash generation continued this year, and we meaningfully stepped up our share repurchases, buying approximately 7% of our shares outstanding. We expect another successful year in fiscal '26 with a softer Q1 followed by a stronger balance of the year.

Share Repurchase: Our strong balance sheet enabled us to repurchase 9 million shares or $473 million in total or approximately 7% of shares outstanding. We've continued to repurchase shares in October with $40 million repurchased to date in the first quarter.