Overview of BellRing Brands, Inc.

BellRing Brands, Inc. is a consumer products company that operates in the global convenient nutrition category. The company’s principal products are protein-based consumer goods, with its primary brands being Premier Protein and Dymatize. BellRing has a single operating and reportable segment.

Financial Performance

Net Sales

• Net sales increased by 19% during the three months ended March 31, 2025 compared to the prior year period. This was driven by a 22% increase in sales of Premier Protein products, a 3% increase in Dymatize product sales, and a decrease in sales of all other products.
• Net sales increased by 21% during the six months ended March 31, 2025 compared to the prior year period. This was driven by a 24% increase in sales of Premier Protein products, an 8% increase in Dymatize product sales, and a decrease in sales of all other products.

Operating Profit

• Operating profit increased by 5% during the three months ended March 31, 2025 compared to the prior year period. This was driven by higher net sales, partially offset by higher net product costs, increased advertising expense, and higher warehousing and distribution costs.
• Operating profit increased by 28% during the six months ended March 31, 2025 compared to the prior year period. This was primarily driven by higher net sales and accelerated amortization of $17.4 million recorded in the prior year period related to the discontinuance of the PowerBar business in North America, partially offset by higher net product costs, increased advertising expense, and higher warehousing and distribution costs.

Interest Expense, Net

• Interest expense, net increased by $2.0 million during the three months ended March 31, 2025 compared to the prior year period due to higher outstanding borrowings under the company’s Revolving Credit Facility.
• Interest expense, net increased by $1.5 million during the six months ended March 31, 2025 compared to the prior year period due to higher outstanding borrowings under the Revolving Credit Facility.

Income Tax Expense

• The company’s effective income tax rate was 25.3% and 25.2% for the three months ended March 31, 2025 and 2024, respectively, and 24.5% and 24.9% for the six months ended March 31, 2025 and 2024, respectively.

Liquidity and Capital Resources

Borrowings and Repurchases

• During the six months ended March 31, 2025, the company borrowed $230.0 million and repaid $110.0 million under its Revolving Credit Facility.
• The company repurchased 2.5 million shares of its common stock at an average share price of $71.98 per share and a total cost of $183.7 million during the six months ended March 31, 2025.
• The company paid $2.2 million of excise tax that related to fiscal 2024 and 2023 share repurchases during the six months ended March 31, 2025.

Cash Flows

• Cash provided by operating activities decreased by $39.3 million during the six months ended March 31, 2025 compared to the prior year period, primarily due to increased inventory levels, increased tax payments, and increased interest payments.
• Cash used in investing activities increased by $1.4 million during the six months ended March 31, 2025 compared to the prior year period, resulting from an increase in capital expenditures.
• Cash used in financing activities increased by $17.1 million during the six months ended March 31, 2025 compared to the prior year period, driven by higher payments for the repurchase of common stock, higher repayments under the Revolving Credit Facility, and higher tax withholding payments related to stock compensation plans, partially offset by higher borrowings under the Revolving Credit Facility.

Debt Covenants

• The company’s Credit Agreement contains affirmative and negative covenants, including a requirement to maintain a total net leverage ratio not to exceed 6.00:1.00, measured as of the last day of each fiscal quarter. The company was in compliance with this financial covenant as of March 31, 2025.
• The indenture governing the company’s 7.00% Senior Notes also contains negative covenants that limit the company’s and its subsidiaries’ ability to engage in certain activities.

Strengths and Weaknesses

Strengths

• Strong performance of the Premier Protein brand, with a 22% increase in sales during the three-month period and a 24% increase during the six-month period.
• Successful introduction of new Dymatize products, leading to an 8% increase in Dymatize sales during the six-month period.
• Ability to generate positive cash flows from operations and maintain compliance with debt covenants.

Weaknesses

• Reliance on third-party contract manufacturers for the manufacture of most of the company’s products, including one manufacturer for nearly half of its RTD protein shakes.
• Significant volatility in the cost or availability of inputs to the business, such as freight, raw materials, packaging, energy, labor, and other supplies.
• Dependence on a limited number of third-party suppliers for certain ingredients and packaging.

Outlook and Future Considerations

The company expects to continue generating positive cash flows from operations and believes its cash on hand, cash flows from operations, and possible future credit facilities will be sufficient to satisfy its future financing requirements. However, the company’s ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other business risk factors.

Inflation, including the potential impact of tariffs, could have a materially adverse impact on the company’s business if inflation rates were to significantly exceed its ability to achieve price increases or cost savings, or if such price increases impact demand for its products.

The company’s 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.

The company may seek to repurchase shares of its common stock, with such repurchases depending on prevailing market conditions, the company’s liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.

Overall, BellRing Brands, Inc. has demonstrated strong financial performance, with significant growth in net sales and operating profit. However, the company faces challenges related to its reliance on third-party suppliers and the volatility of input costs. The company’s ability to navigate these challenges and continue its growth trajectory will be crucial for its future success.