BellRing Brands(US:BRBR)2020-05-09 02:42Financial Data and Key Metrics Changes - The company reported record sales of $258 million, an increase of 19% year-over-year, and adjusted EBITDA of $43 million, down 12.5% due to planned marketing investments [10][23] - Gross profit increased by 11.6%, while gross margin declined by 220 basis points to 34.3%, primarily due to higher input costs and increased trade promotions [23][26] - SG&A expenses as a percentage of net sales increased by 330 basis points to 18.4%, driven by increased marketing spend and public company costs [27] Business Line Data and Key Metrics Changes - Premier Protein's net sales grew by 26%, with volume increasing by 27%, driven by distribution gains and higher promotional activity [24] - Dymatize's net sales declined by 2%, with strong eCommerce growth offset by declines in international and club channels [25] - PowerBar's net sales and volumes decreased by 20% and 27%, respectively, due to lower international volumes and portfolio optimization [25] Market Data and Key Metrics Changes - The overall category grew by 6.5%, with the liquid subcategory growing by 11% during the second quarter [12] - eCommerce sales for Premier Protein grew by nearly 200%, indicating a significant shift in consumer purchasing behavior [16][50] - The company noted that pantry loading during COVID-19 contributed to growth, but expected a reversal in the third quarter as consumers deload [30] Company Strategy and Development Direction - The company plans to continue focusing on national advertising campaigns, which have generated over 1 billion impressions and increased household penetration from 5.3% to 6.6% [17] - Distribution expansion remains a key driver, with significant gains in untracked channels, including clubs and eCommerce [18] - New product launches, such as Café Latte and Protein with Oats, are performing well and contributing to growth [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in reaffirming full-year guidance despite the challenges posed by COVID-19, citing strong momentum in growth strategies [22][30] - The company anticipates that the long-term effects of COVID-19 will be positive for the category due to increased trial gains [14] - Management expects operating cash flow to improve in the second half of fiscal 2020 as working capital timing reverses [27] Other Important Information - The company ended the quarter with approximately $77 million in cash and borrowed $65 million as a precautionary measure [28] - The net debt was reported at $735 million, with a net leverage of 3.5 times, targeting a reduction to 3 times by fiscal 2021 [28] Q&A Session Summary Question: Insights on household penetration and consumer behavior - Management noted that high repeat rates indicate strong consumer loyalty, and they expect new buyers to convert into long-term customers [33][34] Question: Inventory dynamics and retail destocking - Management expects retailers to deload inventory in the third quarter due to lower consumption pull-through in April [39][40] Question: Impact of dairy costs on business - Management acknowledged a drop in dairy prices but indicated that protein prices may not fully track this decline [44][45] Question: eCommerce growth trends - eCommerce growth was reported at 200% in April, with expectations that this trend will continue post-COVID [50] Question: Private label competition - Private label share in convenient nutrition is still small, and management does not foresee significant impact on their business from private label competition [51][52] Question: Guidance and long-term growth outlook - Management remains confident in maintaining full-year guidance despite short-term challenges, with expectations of pent-up demand post-COVID [78][79]