BellRing Brands, Inc. 2026 Q3 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- BellRing Brands reported third quarter fiscal 2026 net sales increased 4%, with Premier Protein RTD shake net sales up 1% and consumption up 6%, and Dymatize net sales up 27% driven by 6% volume growth and 21% price mix.
- Adjusted gross profit was $158 million with a 27.7% margin, down from 35.1% a year ago, due to protein and freight cost inflation and a $10 million charge for excess bottle inventory.
- Adjusted EBITDA margins were below guidance due to inventory-related headwinds and higher freight costs, with a $7 million advertising increase and a $5 million organizational realignment charge included in expenses.
- The company generated $79 million in operating cash flow in Q3 and ended the quarter with net leverage of 3.2 times, expecting approximately 4 times by fiscal year-end due to a sizable legal settlement payment.
- BellRing announced a double-digit price increase on Premier Shakes and additional pricing on powders effective in Q1 fiscal 2027 to offset inflationary pressures.
- Premier Protein household penetration reached nearly 23%, with the highest repeat rate in the RTD shake category.
- Promotional activity in Q3 was seasonally normal at 70% of RTD shake volume sold on promotion, down from heavier Q2 levels.
- BellRing launched Premier Protein 42 gram Ultimate Shake and Premier Protein Sparkling Soda in Q3, expanding into performance protein and refreshment categories.
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Transcript
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Thank you for standing by, and welcome to BellRing Brands' third quarter fiscal year 2026 earnings conference call. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. I would now like to hand the call over to Jennifer Meyer, investor relations for BellRing Brands.
Please go ahead. Good morning, and thank you for joining us today for BellRing Brands' third quarter fiscal 2026 earnings call.
With me today are Mike Axelrod, our President and CEO, and Paul Rode, our CFO. Mike and Paul will begin with prepared remarks, and afterwards we'll have a brief question and answer session. The press release and supplemental slide presentation that support these remarks are posted on our website in both the Investor Relations and the SEC Filings sections at bellring.com. In addition, the release and slides are available on the SEC's website. Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors, as actual results could differ materially from these statements.
These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded and an audio replay will be available on our website. Finally, this call will discuss certain non-GAAP measures. For reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued this morning and posted on our website. With that, I will turn the call over to Mike.
Thank you, Jennifer, and good morning, everyone. Thank you for joining our third quarter earnings call. I'm excited and honored to lead BellRing, and I'm grateful to the board, executive leadership team, and colleagues across the company for the very warm welcome. As it's my seventh day at the company, I'll start the call with introductory remarks and then pass it on to Paul to cover our third quarter performance and outlook for the remainder of fiscal 2026. I joined BellRing after 30 years in the consumer packaged goods industry across both entrepreneurial and large-scale businesses. Throughout my career, I've had the opportunity to grow businesses profitably by strengthening execution, improving operations and speed to market, and investing behind strong brands.
What attracted me to BellRing was the combination of an attractive category with a long runway for growth, the market-leading Premier Protein brand, and a meaningful opportunity to improve execution. I've built my career by putting the consumer first, building strong customer partnerships, and creating value through disciplined execution, and I see many of these same opportunities here. Encouragingly, consumer demand for ready-to-drink protein shakes remains strong, and the category among the fastest-growing in CPG. We continue to believe there is substantial runway for growth, supported by long-term health and wellness trends. While competition has increased, that is exactly what you would expect in an attractive growing category. Premier remains the category leader. Consumer trends improved every quarter this year, and we continue to see considerable opportunities to better realize the full potential of the business.
These category and brand strengths give me confidence that our current financial performance, which has been affected by some transitory factors, does not reflect the long-term potential of the business. As the categories become more dynamic and competitive, winning requires greater operational discipline, faster decision-making, and new capabilities. While we've done many things well, we have not executed consistently at the level we expect ourselves, and we are not satisfied with our financial performance. As Paul will discuss, actions are already underway to put the business on a healthier footing, but I believe there's considerable more opportunity ahead. I believe in building winning teams that are highly accountable, customer-focused, and data-driven. Over the coming months, I'll spend time listening to our employees, customers and partners, identifying opportunities to improve and empowering our teams to make thoughtful decisions and drive accountability across the organization.
There are certainly near-term challenges to work through, but I believe they are manageable, and I see meaningful opportunities to improve performance and better translate our category leadership into more consistent, profitable growth over time. In closing, I believe BellRing's top and bottom line growth opportunity remains compelling. My commitment is straightforward: move with urgency, execute with discipline, and create long-term value for our shareholders. I look forward to speaking with you again on our fourth quarter earnings call to share more about my strategic priorities, operating plans to create long-term shareholder value, and our 2027 guidance. I'll now turn it over to Paul to talk through the quarter and our updated outlook.
Thanks, Mike, and welcome to the BellRing team. Our third quarter net sales and consumption exceeded expectations with both Premier Protein and Dymatize contributing to the upside. However, adjusted EBITDA margins were below our guidance, reflecting inventory-related headwinds and higher freight costs. We expect these pressures to continue in the fourth quarter and have incorporated them into our revised guidance, which I will discuss shortly. We remain focused on our growth priorities, including innovation launching this quarter, and are encouraged by the resilience of Premier Protein's brand metrics despite a highly competitive environment. That said, we are not satisfied with our financial performance and are focused on restoring a stronger profit trajectory and delivering more consistent results as we look ahead to fiscal 2027.
To support that objective and the long-term growth of the business, we are taking decisive actions across pricing, channel mix, productivity, and supply chain capabilities to bolster our operating model and address cost pressures.
First, we've announced a double-digit price increase on Premier Shakes and additional pricing on powders, both effective in our first quarter of fiscal 2027. We believe these actions are necessary to offset sustained inflationary pressure in key input costs and support a healthier margin profile over time. With this price increase, we expect volume-related elasticities to be slightly greater than one. Second, we continue to take steps to diversify our business across channels, categories, and adjacent product segments. In FDM and e-commerce channels, we expect meaningful distribution gains in 2027, supported by strong retail demand for both core and innovation offerings. In convenience, we are advancing a disciplined expansion through targeted regional DSD expansion. We believe our core 30-gram protein shakes and our new Premier Protein Ultimate product with 42 grams of protein are well-suited to the convenience channel and can drive incremental growth.
We are also excited about the launch of Premier Protein Sparkling Soda, which expands us into the refreshment category and creates incremental distribution opportunities. Together, these initiatives are expected to broaden our consumer reach and further diversify our channel mix over time. In club, we currently expect our shake assortment next year to be generally consistent with this year, with one item representing a low single-digit sales percentage of this year's net sales expected to rotate out. We expect to retain a portion of that demand with our remaining flavors and continue to see opportunities to expand our club presence through innovation and new offerings that align with retailers' evolving assortment strategies. Third, we have completed several productivity initiatives, including this year's cost savings programs and our organizational realignment, which we announced in late June.
These actions are designed to simplify the business, reduce structural cost, and improve execution discipline as we enter fiscal 2027, where we will continue to focus on cost savings. Finally, we are working to strengthen our planning capabilities and end-to-end supply chain processes to improve inventory management. These efforts are in the early stages and include investments across people, systems, and processes to support more consistent supply chain performance going forward. We'll provide further updates on our 2027 initiatives on our fourth quarter earnings call. Overall, we expect to deliver improved margins over time with progress beginning in fiscal 2027. I'll now turn to an update on the category, our 2026 operating plans, followed by our Q3 results and guidance. Starting with the category, as Mike mentioned, category fundamentals remain healthy with strong consumer demand for protein.
We continue to expect fiscal year category growth in the high single digits, primarily driven by volume. Household penetration continues to grow for both the protein shake category and Premier Shakes. Premier household penetration has reached almost 23%, with shake repeat rate consistently the highest in the category. In the third quarter, 70% of RTD shake category volumes were sold on price promotion. This is relatively in line with historical norms for this period after adjusting for the shift of a major e-commerce promotion while down sequentially from the heavier promoted second quarter. While category fundamentals remain strong, our outlook assumes fourth quarter promotional levels will be more similar to the second quarter trends, reflecting continued value-seeking behavior and elevated promotional activity during the key Q2 and Q4 seasons. Over time, we continue to expect category base price increases as a result of meaningful input cost inflation.
Our demand drivers for fiscal 2026 remain centered on, one, growing our distribution both in and out of aisle. Two, increasing advertising investment while elevating its impact. Three, launching innovation that provides consumer excitement, adds occasion, and drives trial. We remain on track to grow TDP double digits in fiscal 2026. Store activation improvements with our new broker and internal retail sales teams continue to drive meaningful FDM growth. Recall, Q2 and Q4 reflect our typical seasonal increase in promotional activity. Our fourth quarter will include a promotional event with a major mass retailer featuring displays and end caps, which is similar to our second quarter event. In addition, we are repeating our Q4 club promotions with similar timing to last year. Our Q2 promotions delivered significant household gains, including many new-to-category consumers, and we look for further gains in Q4.
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