BellRing Brands(BRBR) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The company's unaudited financial statements for Q1 and H1 2025 show significant growth in net sales and earnings, increased assets and liabilities, and decreased operating cash flow due to higher inventory Condensed Consolidated Statements of Operations Net sales for Q1 2025 increased 19% to $588.0 million, with net earnings reaching $58.7 million; for H1 2025, net sales rose 21% to $1,120.9 million, and net earnings grew 34% to $135.6 million | | Three Months Ended March 31, | Six Months Ended March 31, | | :--- | :--- | :--- | | (in millions, except per share data) | 2025 | 2024 | 2025 | 2024 | | Net Sales (in millions) | $588.0 | $494.6 | $1,120.9 | $925.0 | | Gross Profit (in millions) | $189.8 | $164.3 | $389.4 | $312.3 | | Operating Profit (in millions) | $95.1 | $91.0 | $210.4 | $164.0 | | Net Earnings (in millions) | $58.7 | $57.2 | $135.6 | $101.1 | | Diluted Earnings per Common Share | $0.45 | $0.43 | $1.04 | $0.76 | Condensed Consolidated Balance Sheets Total assets increased to $947.5 million as of March 31, 2025, driven by higher inventories and receivables, while total liabilities rose to $1,201.6 million due to increased long-term debt | (in millions) | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Current Assets (in millions) | $710.6 | $592.7 | | Inventories (in millions) | $385.3 | $286.1 | | Total Assets (in millions) | $947.5 | $837.0 | | Total Current Liabilities (in millions) | $243.4 | $203.7 | | Long-term debt (in millions) | $953.7 | $833.1 | | Total Liabilities (in millions) | $1,201.6 | $1,042.9 | | Total Stockholders' Deficit (in millions) | ($254.1) | ($205.9) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $51.2 million for H1 2025, primarily due to increased inventories, while net cash used in financing activities rose to $76.3 million due to higher treasury stock purchases | (in millions) | Six Months Ended March 31, | | :--- | :--- | | | 2025 | 2024 | | Net Cash Provided by Operating Activities (in millions) | $51.2 | $90.5 | | Net Cash Used in Investing Activities (in millions) | ($1.9) | ($0.5) | | Net Cash Used in Financing Activities (in millions) | ($76.3) | ($59.2) | | Net (Decrease) Increase in Cash (in millions) | ($26.9) | $30.9 | Notes to Condensed Consolidated Financial Statements Notes detail operations, revenue breakdown, related-party transactions, debt, and legal contingencies, highlighting shakes as a primary revenue driver, a co-packing agreement, and a significant Joint Juice litigation liability Net Sales by Product (in millions) | Product | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Shakes (in millions) | $487.5 | $397.9 | $927.0 | $747.9 | | Powders (in millions) | $88.0 | $84.1 | $169.2 | $153.8 | | Other (in millions) | $12.5 | $12.6 | $24.7 | $23.3 | | Total Net Sales (in millions) | $588.0 | $494.6 | $1,120.9 | $925.0 | - The company has a co-packing agreement with Comet Processing, Inc., a subsidiary of Post Holdings, for RTD shakes. Purchases from Comet totaled $20.8 million and $27.1 million for the three and six months ended March 31, 2025, respectively[32] - As of March 31, 2025, the company had an estimated liability of $21.9 million related to the Joint Juice litigation, which is included in "Other current liabilities"[66] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting a 19% increase in quarterly net sales driven by Premier Protein volume growth, and analyzes inflationary pressures, operational results, liquidity, and capital resources Results of Operations Q2 fiscal 2025 net sales increased 19% to $588.0 million, driven by Premier Protein sales, while operating profit grew 5% to $95.1 million, tempered by higher product, advertising, and warehousing costs - Q2 2025 net sales increased 19% year-over-year, driven by a $92.3 million (22%) increase in Premier Protein product sales, primarily due to 15% higher volumes from increased RTD shake production, distribution gains, and more promotional activity[83] - Dymatize product sales grew 3% in Q2 2025, with 20% higher volumes from international expansion and new products, partially offset by unfavorable product mix affecting average net selling prices[83] - The 5% increase in Q2 2025 operating profit was partially offset by several factors: - Higher net product costs of $17.8 million (driven by raw material and manufacturing costs)[85] - Increased advertising expense of $12.5 million[85] - Higher warehousing and distribution costs of $3.3 million[85] Liquidity and Capital Resources The company's liquidity is supported by cash from operations and its Revolving Credit Facility, with $130.0 million available, and $183.7 million spent on share repurchases in H1 2025, while cash from operations decreased due to higher inventory levels - As of March 31, 2025, the company had $130.0 million of available borrowing capacity under its $250.0 million Revolving Credit Facility[92] - During the six months ended March 31, 2025, the company repurchased 2.5 million shares of its common stock for a total cost of $183.7 million[93] - Cash provided by operating activities decreased by $39.3 million to $51.2 million for the six months ended March 31, 2025, primarily due to increased inventory levels driven by higher production[98] Quantitative and Qualitative Disclosures About Market Risk The company identifies primary market risks as commodity price fluctuations, foreign currency exchange rate changes, and interest rate volatility, using derivatives to manage commodity risk and noting variable interest rate exposure - The company is exposed to commodity price risk and uses futures and options to hedge; a hypothetical 10% adverse change in the price of its principal hedged commodity, non-fat dry milk, would have decreased the fair value of its derivative portfolio by less than $1 million as of March 31, 2025[111] - As of March 31, 2025, the company had $840.0 million in fixed-rate 7.00% Senior Notes and $120.0 million in variable-rate borrowings under its Revolving Credit Facility, exposing it to interest rate risk[113][114] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[116] - No significant changes occurred in the company's internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[117] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, including Joint Juice and Protein Products Class Litigations, with an estimated $21.9 million liability accrued for Joint Juice, not expected to materially affect financial condition - The company is defending multiple lawsuits, including class actions related to its former Joint Juice product and its current protein shakes and powders[119] - Information regarding legal proceedings is detailed in Note 13 of the financial statements, which is incorporated by reference into this section[119] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024 - As of the date of this quarterly report, there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K filed on November 19, 2024[120] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased approximately 2.4 million shares of common stock, and in March 2025, the Board approved a new $300 million share repurchase authorization, replacing the previous one Share Repurchases for the Quarter Ended March 31, 2025 | Period | Total Shares Purchased | Average Price Paid per Share (in USD) | | :--- | :--- | :--- | | Jan 2025 | 549,577 | $72.79 | | Feb 2025 | 913,753 | $72.44 | | Mar 2025 | 931,541 | $70.28 | | Total | 2,394,871 | $71.68 | - On March 6, 2025, the Board of Directors approved a new $300 million share repurchase authorization, effective until March 6, 2027, and cancelled the prior authorization[123] Other Information This section discloses that on February 26, 2025, the President and CEO adopted a Rule 10b5-1 trading plan for the potential sale of up to 59,200 shares of common stock, expiring February 26, 2026 - Darcy H. Davenport, President and CEO, adopted a Rule 10b5-1 trading arrangement on February 26, 2025, to sell up to 59,200 shares of common stock, with the plan expiring on February 26, 2026[124] Exhibits This section lists the exhibits filed with the Form 10-Q, including various agreements, corporate governance documents, and CEO and CFO certifications required by the Sarbanes-Oxley Act - The report includes a list of exhibits filed, such as the CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and the Interactive Data File (iXBRL)[125][128]