BellRing Brands, Inc. (BRBR) on Q4 2021 Results - Earnings Call Transcript
Operator: Welcome to BellRing Brands' Fourth Quarter 2021 Earnings Conference Call and Webcast. Hosting the call today from BellRing Brands are Darcy Davenport, President and Chief Executive Officer; and Paul Rode, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 1:30 p.m. Eastern Time. The dial-in number is (800) 753-9146. No pass code is required. At this time, all participants have been placed in a listen-only mode. It is now my pleasure to turn the floor over to Jennifer Meyer, Investor Relations of BellRing Brands, for introductions. You may begin.
Jennifer Meyer: Good morning, and thank you for joining us today for BellRing Brands' fourth quarter fiscal 2021 earnings call. With me today are Darcy Davenport, our President and CEO; and Paul Rode, our CFO. Darcy 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. Additional information regarding these risks and uncertainties is discussed under the Forward-Looking Statements section in the press release we issued yesterday and posted on our website. We also -- both registration statements, the proxy statements and prospectuses and other documents related to the proposed distribution of Post interest in BellRing Brands that will be filed with the SEC when they become available because they will contain important information. These forward-looking statements are subject 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. And finally, this call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Darcy.
Darcy Davenport: Thanks, Jennifer, and thank you all for joining us. Last evening, we reported our fourth quarter and fiscal 2021 results and posted a supplemental presentation slide. 2021 was a strong year for BellRing. Net sales grew 26% to just under $1.25 billion with adjusted EBITDA of $234 million. Due to supply chain disruptions, our fourth quarter net sales finished strong at $340 million, up 20%, and adjusted EBITDA was $60.5 million. Consumption meaningfully grew across both brands, with Premier Protein RTD shakes up 30% and Dymatize powders up 50% across both tracked and untracked channels despite both brands experiencing some out-of-stocks. Margins remained strong but were lessened by rapid escalation in protein and freight costs. Paul will provide more detail about the quarter, but I want to step back and reflect on how the COVID-19 pandemic has affected the convenient nutrition category as well as our brands. Since the pandemic started, people went from being reactive recipients of health care to proactive consumers of health and wellness solutions. In response, consumers saw more engaged ways to keep themselves and their families protected from this virus. The result was a massive consumption increase of nutrition products, especially functional drinks that offer energy and immune health benefits. The trend of preventative and proactive health existed before the pandemic, but COVID-19 drastically accelerated the importance of self-care. Then in mid-2021, as the country was reopening, the convenient nutrition category benefited from an additional tailwind, the renewed desire by many consumers to get back in shape and lose their COVID-19 weight gain, driving additional households into the category. As of September 30, household penetration of ready-to-drink liquids and ready-to-mix powders were both at all-time highs. Both Premier Protein and Dymatize brands are perfectly positioned to take advantage of these long-term trends as they are trusted leading brands with strong loyalty. In 2021, BellRing largely drove this incremental category expansion with strong execution across our growth strategies, including successful distribution gains, effective marketing campaigns and new product trials. Premier Protein became a $1 billion brand this year and Dymatize proved to have strong mainstream appeal becoming a significant growth contributor to BellRing. We now have 2 leading brands with strong prospects. However, this year's expansion came with some growing pains. Our sales outpaced production for both shakes and powders. Supply chain disruptions affected our entire industry, including labor shortages and equipment delays impacting our ability to access the anticipated level of flex production. As a result, we depleted safety stock, and year-end inventories are too low, leading to out-of-stocks in the marketplace. We are partnering with our retailers, and as the #1 brand in our segment, they are working with us as we make strategic adjustments to improve our service levels. Good news is inventory levels are starting to improve. We are adding shake capacity in our existing co-manufacturers and expanding our co-manufacturing network. In 2022, we expect shake production to increase in low -- to the low to mid-teens. However, this is not enough to satisfy our robust demand and build back safety stock at the same time. As a result, we are temporarily reducing some of our lower velocity tetra shake SKUs in addition to pulling back on promotion and marketing. Expect our production growth will outpace shipments because much of the new production will be used to replenish safety stock and return to adequate service levels. Beyond '22, we are aggressively investing in shake production through numerous long-term volume commitment. I'm pleased to announce that we have entered into an agreement with Post to build a shake processing facility, which will be dedicated to Premier Protein. We are excited to leverage our relationship with Post, specifically the aseptic manufacturing knowledge in its food service business. Now to our outlook. As you saw in yesterday's press release, we expect fiscal '22 net sales and adjusted EBITDA to grow between 9% and 13%. This guidance is consistent with our long-term algorithm despite our outsized growth in '21 and capacity strength in '22. Net sales growth is back half weighted and sequentially grows every quarter as new capacity comes online. Growth in powder volumes, price increases on both brands and reduced trade promotions drive year-over-year sales growth. This growth, coupled with reduced marketing and improved SG&A leverage, will ultimately drive EBITDA gains despite significant inflation. Before closing, I would like to share that, in October, BellRing and Post signed a transaction agreement related to Post's previously announced intention to distribute its interest in BellRing to Post shareholders. We believe, upon completion of the proposed transaction, BellRing will have increased strategic flexibility to manage our capital structure and should benefit from more liquidity in our shares. As part of the agreement, Post will continue to provide certain services to BellRing for up to 3 years to facilitate a smooth transition. We had a phenomenal 2021 and the future remains bright for both our products and our categories. Our growth is firing on all cylinders. Despite current supply constraints, we continue to invest in our innovation pipeline, bringing product news to consumers and growing our category. Our strong demand, combined with supply chain challenges, create a clear organizational focus for '22, aggressively build supply and be ready to turn on demand driving engine as soon as supply allows. I want to thank our employees and our co-man and retail partners for all the hard work that made '21 such a successful year. I will now turn the call over to Paul.
Paul Rode: Thanks, Darcy, and good morning, everyone. This morning, I will briefly review category and brand highlights, followed by our financial results and close with our outlook. The convenient nutrition category continues to show remarkable growth. Ready-to-drink beverages grew 20% versus a year ago with the ready-to-mix powders growing 18%. RTD beverages, once again, added 2 points to household penetration with the average buy rate growing 11% versus a year ago. As Darcy discussed, strong consumer tailwinds are driving these gains. Our growth strategies are working well. Premier Protein's household penetration reached another all-time high of 8.4%, up 20% over prior year. Our repeat rate and buy rate on our 30-gram shake line remains strong and stable. We saw tremendous distribution gains this year. However, our TDPs declined this quarter pressured by out-of-stocks. Premier Protein powders are showing great momentum with tracked consumption up 76% for the quarter. We're pleased with this year's performance of Premier powders and look forward to growing this product further in 2022. Dymatize continues to benefit from expanded distribution across mainstream channels. Velocities remain strong, and it continues to perform in the top 1/3 of the categories were sold in the U.S. Moving to our financial results. Net sales for the quarter were $340 million, up 20.3%. Adjusted EBITDA was $60.5 million, up 6.7% and EBITDA margins were 17.8%. Our top line performance remained very strong across all brands but our sales growth was negatively impacted by supply chain disruptions. This caused lower-than-anticipated production, which exacerbated already low inventories and drove missed sales for the quarter. Despite these challenges, Premier Protein net sales grew 18.2% primarily driven by RTD shake distribution gains and strong velocities. Net sales outpaced volume growth, reflecting price increases taken to offset milk protein and freight inflation and favorable product mix. Dymatize net sales grew 41% driven by strong distribution gains and velocities. Domestically, the brand was up 31% growing in all channels. International was even stronger, up 67% as we lap the negative impacts of COVID in the prior year. Last, favorable product mix drove an improvement in average net selling prices. Gross profit of $96 million increased 6.9% this quarter with an expected decrease in gross profit margin of 28.2%. As we have discussed, this decline resulted from higher input and freight costs as well as planned promotional activity. Whey protein costs moved sharply higher this quarter, ahead of our October price increase on powders, which weighed heavily on margins. Our price increase on shakes is offsetting higher milk protein costs. SG&A expenses were $38 million and, as a percentage of net sales, declined 130 basis points to 11.2%, reflecting leverage of our SG&A base. Turning to full year 2021 results. Net sales of $1.2 billion grew an impressive 26.2% over the prior year with gross profit of $386.2 million, growing 14.3%. Gross profit margins declined to 31.0% reflecting higher input costs and planned incremental promotional. SG&A expenses were $167.1 million and, as a percentage of net sales, declined 200 basis points to 13.4% despite $6.1 million in higher marketing and advertising expenses and $5.2 million of restructuring and facility closure costs related to our business realignment. Adjusted EBITDA increased 18.6% to $233.9 million with a margin of 18.8%. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity. We had a strong fourth quarter on cash flow, generating $80.2 million from operations and $226.1 million for the year. A decrease in inventories drove a favorable benefit in fiscal 2021, which we expect to largely reverse next year as we rebuild inventories. We have $152.6 million of cash on hand and full availability under our $200 million revolver at quarter end. As of September 30, net debt was $457.4 million, and net leverage was 2.0x. Since the IPO, we reduced net debt by approximately $280 million. Now to our outlook. We expect fiscal 2022 net sales of $1.36 billion to $1.41 billion and adjusted EBITDA of $255 million to $265 million. The midpoint of our outlook implies double-digit top line growth with adjusted EBITDA margins just under 19%, both of which are in line with our long-term algorithm. Sales and adjusted EBITDA growth are expected to be weighted to the second half. Gross margins are expected to be pressured by double-digit input cost inflation primarily whey and milk proteins. Our powder portfolio is facing significant cost headwinds as whey proteins are at historical high prices. These inflationary pressures are expected to be offset by price increases, including a double-digit price increase on our powder portfolio effective in October. We continue to closely monitor inflation and are prepared to take further pricing actions as warranted to combat these pressures. Heading into the first quarter, we expect mid-single-digit net sales growth as higher net pricing was partially offset by volume declines in RTD shakes as we start to rebuild inventory. We currently expect adjusted EBITDA to modestly decline from prior year with margins improving sequentially from the fourth quarter. Compared to prior year, higher whey protein costs and logistics inefficiencies are expected to weigh on margins. Finally, as previously announced, Post and BellRing expect the distribution of a significant majority of Post ownership interest in BellRing in the first calendar quarter of 2022. In connection with the distribution, we expect an increase in net debt at BellRing with pro forma net leverage no greater than 4x upon incurrence of new debt. More details will be provided as progress is made in implementing Post's plan. In closing, there is no doubt we are facing challenging short-term dynamics with high inflation and capacity constraints. However, the long-term fundamentals of this business are solid. The convenient nutrition category has dramatically accelerated and is at the center of health and wellness trends. Premier Protein and Dymatize are leading mainstream brands with incredible loyalty. Current and future co-manufacturers who are looking to expand are eagerly seeking to partner with us because of our leadership position and growth trajectory. While we and our industry are facing short-term challenges, the long-term opportunity for our business has never been brighter. I will now turn it over to the operator for questions.
Operator: . And we will go first today to Andrew Lazar with Barclays.
Andrew Lazar: First, I want to start out maybe with some of the strategic adjustments that you mentioned that you're working with retailers to manage through some of the supply constraints, maybe you can talk a little bit about what you're seeing along these lines on the competitive front. I guess are others having similar issues? Or could there be some risk of more permanent shelf space losses even though velocity of Premier clearly remains very strong?
Darcy Davenport : Right. So I'll give a little more color on our temporary SKU reductions. So we are looking at just reducing our -- the bottom velocity SKUs temporarily. So we're looking at reducing 4 SKUs on our 30-gram line. From a competitive standpoint, this is absolutely a industry-wide problem. Anybody who is in 30 -- the 330 mL shakes, which is our size of shake, is facing capacity constraints that they're looking for incremental volume. The other thing is on bottles. So some of our competitors are producing bottles, and they're facing supply constraints as well. It's different. They have different issues but there are issues with the foil on top -- that close the seal on bottles as well as EVOH filter. So there are a lot of different supply constraints that are affecting the industry. And so -- and when you -- if you go out to the marketplace, you see out-of-stocks across the board from -- in the competition landscape.
Andrew Lazar: And then you've talked more recently about your sort of volume elasticity assumptions in regard to some of the pricing and that you were taking a somewhat conservative view, not assuming that others necessarily follow pricing. I'm assuming the whole industry, obviously, in facing all of this, has been taking pricing pretty aggressively. Maybe you can update us on what you're seeing from an elasticity perspective, even though I know it's still somewhat early in the game with all the pricing coming through.
Darcy Davenport : We've really seen zero elasticity. We took price and our volumes went up. So -- but yes, competitors have followed in the RTD space. We're starting to see pretty dramatic -- and we talked about it in the last call, and Paul can provide more color. But we've seen some rapid escalation on whey, specifically which is the predominant ingredient in our -- on our powder side of the business. And we are -- we took price as of 10/1 on our powder business, and we are also seeing competition take price on whey as well. As we look forward, I think we're -- in just the recent month -- in just this last month, we continue to see whey increase further. So I expect that competition as well as we will be looking at additional pricing on powder.
Operator: And we will take our next question from Chris Growe with Stifel.
Christopher Growe: Just had a question, a bit of a follow-on to Andrew's question. I know, Paul, you had mentioned double-digit inflation in the first half of the year. As you see it today, what's the sort of inflation you expect overall for the year? And then do you expect pricing to be up as you -- based on the inflation you see today, pricing to offset inflation as you know today?
Paul Rode : Yes. My comment was the double-digit inflation for our full year. When we -- as Darcy mentioned, we have seen a run-up in the last 30 days, really, especially on whey proteins, a little bit less on milk proteins, but whey protein continues to be sharper. So when we -- you asked us this question 3 months ago, the expectation was that whey protein was going to be a significant headwind in the first half and then the pricing -- the cost started to come down in the second half. What we're now seeing is that cost stays elevated throughout our fiscal year, and so that puts a lot of pressure on our powder margins because of that. So as Darcy mentioned what the latest increase in cost on whey, it seems likely that we need to take further pricing to offset cost on our powder business. The inflation on our shake business is in the single digits, something we're continuing to monitor and assessing if we need to take further pricing actions on our shake business.
Christopher Growe : Okay. And then just a quick question, Darcy, around the new production manufacturing capacity that Post is putting in place. I know that when you went through this situation a few years ago, you had a pretty clear plan, a multiyear plan for building capacity through your third-party manufacturers to levels that would fully support your business and your growth outlook. Obviously, there's little things have happened, the pandemic and has caused it to be a little short. I guess I'm trying to understand is, presumably, before Post announced this new facility, you had a plan for incremental capacity to meet your demand. Is Post displacing some of that capacity? Or just is it going to be incremental or an additional? And do you need it, I guess, do you have the capacity you think at that point in time to meet demand once that new facility is online?
Darcy Davenport : Yes. So I love the little thing called the pandemic. Yes. So we have a multiyear strategic plan around adding co-mans. Actually Rob talked a little bit about it on the Post call. Just to step back, currently have 5 locations. We are looking at having 8 to 10 in, call it, 5 years. Post is a part of that and an important part of that, but we are looking to continue to diversify our co-manufacturing locations throughout the country. And I think one of the changes, kind of, I would say, the evolution of our strategy from a co-man standpoint is we are really -- we're leaning into volume. So we're being more aggressive at moving forward. I think we see what our business can do. We still believe that we are in the early innings of both household penetration of the category, household penetration of our brands, distribution as well as we still have not fully marketed premier protein. So we are absolutely leaning into kind of high side of our models, and Post is a part of that. I think just the last thing I would say is our fifth location is a debt that we currently have. I think I've talked about this, that it's a dedicated facility to Premier Protein. We like that. We like that it increases our control. And so that is, if you think of the Post expansion and partnership, that's just kind of that same path but accelerated. So we're -- we like -- it's obviously a sister brand, which gives us more control.
Operator: We will take our next question today from David Palmer with Evercore ISI.
David Palmer: Just a question on the points of distribution. That's great detail. How much do you think that 25% reduction in points of distribution since June hurt your consumption?
Darcy Davenport : It's interesting. I mean, we grew 30% this quarter. So here is the fascinating thing. And I think one of the reasons why I get so excited about Premier Protein is the loyalty. So what we find -- so let's go back in 2018, when we had a failure of -- and we had to pull back to 2 flavors, we went to chocolate and vanilla, what we found is, first of all, many of our retail partners actually held the space for us. The second piece was our consumers -- we actually didn't lose household penetration. Our consumers just bought chocolate and vanilla. And so I think that we have such loyal consumers that actually our consumption doesn't really go down. I mean, like you said, we lost some -- temporarily lost some TDPs this last quarter is because of out-of-stocks, and our consumption still grew 30%.
David Palmer: Yes. It's amazing. Just thinking about your margin guidance, it would seem that your gross margins, that would be equivalent to where you're guiding for '22 might be in the 30% range or so, I mean, which would be well below where it was in fiscal '19. I just wonder do you see a path back to mid-30s gross margins. And if so, when do you think you would get there? And I'll pass it on.
Paul Rode : Sure. I'll take that. Yes. So if you go back to '19, much different dynamics in 2019 and that the inflationary situation is obviously much different now than it was then. In 2019, we took a price increase, which was actually a little bit of ahead of inflation. And so we really saw very high margins. As we look at '22, as you described it, you described it correctly, how we're thinking about it. There is compression and the compression is largely on our protein powder business. The magnitude of the whey protein increases, we're looking at 2x protein costs versus a year ago and even more meaningful in the first half as we look at as margin. So really, this is there's 2 main things that are impacting our margins and thinking of potential compression. One is the whey protein costs. The other is we do -- we are experiencing some logistics inefficiencies. We saw some in the fourth quarter. We expect to see more in the first half, and that's really related to our lower inventory levels. So that's requiring us to cross country ship and expedite and do different things to try to get product to our customers, our retail partners as quickly as possible. So that is also weighing on margins. But it is a little bit -- it's a different situation for 2019 mainly because of the inflationary environment. I want to get back to your -- sorry, to get back to your last question, yes, we do see a path. Obviously, we think the whey protein costs are transitory, it's going to come back down. We're not going to stay at historical highs. So we can expand our gross margin there. And we think there are paths on shakes as well. Darcy talked about we're expanding the number of our co-mans. That gives us some geographic diversification as well, which should improve freight rates. We do think we have pricing power on the brand. So we do think there is a path to get back to the margins that we've typically seen in the past. But obviously, in this inflation environment, it's still a little more challenging.
Darcy Davenport : Yes. I just wanted to add one thing. Obviously, you guys know this, but the pricing power is -- I mean, just going back to the brand loyalty, and the brand loyalty is not just limited to Premier Protein. We have incredible brand loyalty also on the Dymatize business. And so obviously, that is required when you think about pricing power. And we have shown that on both businesses that we can price for this inflation and consumers stick with us. So -- and it's really -- this inflation is affecting all -- everybody in the category. So we feel like we're in a good place.
Operator: We will go next to Ken Zaslow with Bank of Montreal.
Kenneth Zaslow: So I'm going to go a little bit earlier question. How is your planning of this process, I look back at your last quarter and how you guys were fairly confident in the structure. So what actually failed in your planning process? And how do we ensure in 2 years from now that we don't have to go through this again and this becomes a 2- to 3-year episodical event?
Darcy Davenport : So we ended up -- I mean, I think we've talked about we grew 2 years in 1 this year. In essence, we ended up the year up 26%. That was largely due to Premier Protein. And that -- so we usually plan 3 years out. And when you end up growing 2 years in 1, that accelerates that amount. And what happened that in combination with the network, the co-manufacturing network, the expansions were delayed. That put us in the situation that we are now. I would say what is different and what we have learned is what you're seeing in our manufacturing strategy, and that is what we are talking about before. It includes diversification. The second is leaning more into the high side. So what we had done in the past was we had take-or-pays that largely protected the downside. But then we relied a little bit more on that flex capacity that I have talked about before and which because we're the #1 brand in the category. We usually got that flex capacity. Well, unfortunately, during the supply chain, in the pandemic, that flex capacity went away. So we didn't get it. And so going forward, we're now guaranteeing the kind of high side. And then in addition, we are diversifying our co-mans. So if you think of a few years ago, we really had most of our volume in on co-man. We now have 5 locations. Moving forward, we will have probably double that. And then the third piece is these dedicated locations, where it is focused just on Premier protein and so we're enhancing our control and even more so with a sister company within Post. So I would say those 3 kind of evolutions of the strategy is why I do not believe that we will have this time -- this kind of issue in the future. However, I will say it's hard to recover from 2 years in 1.
Kenneth Zaslow: I'm not minimizing it -- yes.
Paul Rode : Ken, yes, I would just add -- the other thing I would just add is, keep in mind, this category absolutely accelerated beyond expectation. I mean it's been a category that the growth rate more than doubled over the last 6 to 9 months and it happened very quickly. So I think they caught a number of companies off guard. You can see on the shelves as you go out to the stores and look in our category, it's caught a number of companies off guard. But to Darcy's point, I think we're doing a lot of things to anticipate and to grow this business. But when the category accelerates like it did, obviously, it catches there by a little bit off-guard, I think.
Kenneth Zaslow: I wasn't minimizing that. I was minimizing position from last quarter to this quarter in terms of planning, but I'll take that offline. And then the other question I have is when I think about 2023, with all this stuff behind us, do you think that your earnings potential changes or you're on a new base, which you will grow from that, how do you kind of frame the 2023, 2024 thought process in terms of either earnings power or earnings base with a growth off that? Can you recover? And I'll leave it there, and I appreciate your time.
Darcy Davenport : Sure. So I actually will go back to your comment because I don't think I addressed it, Ken. Just what changed since August, the main thing of what changed is our co-man. So demand continued to -- consumption continued to increase. And then -- but the bigger thing is our supply chain. We had attainment misses by our co-mans because of both some COVID issues as well as labor. So those were the 2 pieces. So -- and happy to talk more about that offline. On -- from a '23 standpoint, so this is where we can go back and look at history. And what happened in -- when we had some demand shaping in the past is the following year had accelerated growth. And I expect that, that would be the same. Obviously, it's early in '22. And so I don't want to get too far ahead of ourselves, but we will have added capacity coming online throughout this year. We basically have capacity coming on every single quarter. Capacity grows every single quarter and our revenue grows with that. But then in '23, we will be reintroducing the flavors that we pulled back on. We'll reengage marketing and promotion. So I think there's definitely an opportunity to be above algorithm on the top line.
Kenneth Zaslow: So with the new capacity, you would argue that you would go into the capacity and not grow off a bit. So the capacity expansion would be your new base as you fill it. Is that fair? And I'm sorry that I did an extra 2b question, and I'll leave at that.
Darcy Davenport : Correct. Correct.
Operator: We will go next to Pamela Kaufman with Morgan Stanley.
Pamela Kaufman: You mentioned that you expect production to exceed shipments in fiscal '22. How do you think about the trade-off between rebuilding inventories versus meeting the strong demand in the market and preserving your market share performance?
Darcy Davenport : For us right now, inventories are just too low. We need to be able to service our customers on a consistent basis, and so that requires a minimal amount of inventory and safety stock. So we need to get to that minimum amount, and then we can -- and that's what we're talking about. So the differential between shipments and consumption is really just rebuilding and getting to that basic amount of safety stock so we can service them consistently.
Pamela Kaufman: Okay. And then you also mentioned that you're adjusting your marketing and promotional activities in light of the supply shortages. Can you talk about what changes you're making? Will there be a different cadence of promotional events this year or just less marketing?
Darcy Davenport : So I'll hit the strategy, and I'll pass it to Paul to discuss cadence. From -- yes, we're pulling back -- we'll be pulling back on promotion and marketing. We'll still have some kind of social, digital. Our strategy on marketing changes a little bit. It becomes more about sustaining. We have -- part of our loyalty for our brands is kind of the one-to-one communication that we have via social and digital. We'll continue that. But we're not going to have any television advertising like we've had in the past. And then in addition, we'll be pulling back on promotion. So we will -- and then I'll pass it to Paul for cadence.
Paul Rode : Yes. So if you look at '21 from a marketing perspective, it was heaviest in our second quarter. So obviously, that will be a benefit to EBITDA growth year-over-year in a promotional perspective. Q4 and Q2 are our biggest promotional quarters. Q4 is our biggest. So again, by pulling back on promotion, that will be a net positive EBITDA perspective. And so that's how we're thinking about the cadence. From a marketing perspective, I would expect marketing to be a bit lighter in the first half. And then as we sequentially grow our top line, we'll grow marketing, start to add back marketing with it.
Operator: And we will go next to Ben Bienvenu with Stephens.
Benjamin Bienvenu: Want to ask first a quick question about guidance and then a follow-up just about the capacity ramp. On guidance, I think probably, Paul, this is for you. You talked about pricing increases that you're planning on taking. You also talked about considering additional pricing increases on our RTD shakes. Is -- does the guidance that you provided include taking more price to offset inflation? Or would that be incremental to the guidance that you provided?
Paul Rode : It would be incremental, but just to clarify, so yes, there's 2 price increases that we have already taken that will affect fiscal '22 versus fiscal '21. We took a price increase on our shake business in April. So we'll get a half year benefit of that price increase. And we took a price increase at the beginning of our fiscal year '22. So in October, we took a price increase on our powder business, a double-digit price increase. So we'll get the full year benefit of that. Our guidance does not contemplate further price increases outside of the promotional pullback that we just talked about. So there's -- that's the third piece, I guess, of the pricing. But as we look at the rest of the year, we are not contemplating additional pricing on powder and shakes. As Darcy highlighted earlier, with the ramp-up recently of whey, it's likely that will take further pricing on the powder side.
Benjamin Bienvenu: Okay. Okay. Perfect. My second question is just related to the capacity you expect to see during the year. With discontinuities in the supply chain, to what extent does that impede your ability or your visibility into the ramp in that capacity? And concurrent with that, to what extent does diversifying your co-man footprint mitigate the risk of supply chain discontinuities to the -- hitting the schedule on ramping your capacity?
Darcy Davenport : So we are adding -- I mentioned this in my prepared remarks. So we are adding in the mid-teens, basically capacity and it adds every quarter. What I will say is, we're adding to both existing co-mans as well as additional co-mans, in essence, a co-man for Q2, Q3, Q4. There are several key milestones for adding capacity, maybe obvious, but might be helpful. So there is ordering of the equipment. There's delivery of the equipment and then there is installation and startup. They all have, especially in today's world where there's supply chain disruptions all the time, they all have some risk. A lot of the risk is around delivery and shipments. So of the 3 new, we basically have 3 locations that are adding equipment. And 2 out of the 3 have already received the equipment. So that takes out some risk right there. And then the third is expecting it later this month. So that, to me, derisks the new capacity a ton. Then it becomes just around installation and labor and then these are supposed to come on Q2, Q3, Q4. So we're feeling very good about de-risking our plan and around that capacity coming on. The other piece is, for '22, the bulk of our volume, our capacity is actually coming from existing co-mans. So that also is a piece. And we've been pretty conservative on our outlook about what they can -- the attainment targets that we've baked into our guidance. The last question you asked about how more co-mans help diversify that risk? Absolutely. It absolutely does, and that's why that's a key aspect of -- we've already diversified a fair amount over the last several years. We'll continue to diversify. And like I said, we're looking to, within 3 to 5 years, double the number of co-mans that we have, which will help.
Operator: And we have no further questions at this time. This does conclude our call for today. Thank you, everyone, for your participation, and you may disconnect at any time.
