John Baumgartner: Okay. Great. And then as a follow-up, coming back to the promotional discussion for Premier ready-to-drink, the distribution points they’re up like 40% year-on-year, but the volume velocity is going down slightly even absent larger promo and advertising spending. Is there anything notable in terms of where these most recent distribution points have been accumulating or whether it’s non-price promotion, that’s elevating the volume more so than you would typically see as you build distribution?
Darcy Davenport: At most of the distribution gains on Premier are two-fold. So, one is the expanded breadth of the flavors. So getting some of the past flavors back on, but just continuing to expand. We have launched — now we launched chocolate chip cookie dough and first mass our seasonal flavors are really doing just incredibly well gathering a lot of the consumer excitement. The second piece is the up-sizes to 12 count in food and mass which have seen a lot more incrementality than we would have seen. So those distribution points are working harder because they’re bigger packs.
John Baumgartner: Great. Thanks for your time, Darcy.
Darcy Davenport: Thanks.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Kaumil Gajrawala from Jefferies. Kaumil, please check your line. Make sure that you are not on mute. If your line is muted, please un-mute it or please rejoin using the commi feature. Our next question comes from the line of Matt Smith from Stifel.
Matt Smith: Hi. Good morning, Darcy and Paul. I wanted to ask a question about when you look at the sales growth outlook in fiscal 2024, how do you balance the rate of household penetration gains against upside to the annual buy rate? When we look at the buy rate, it implies a relatively low frequency of purchasing through the year. So are you looking at your promotional activity to drive frequency with existing users or more to bring new users into the Premier Protein brand?
Darcy Davenport: Both, actually, I think that what you saw in this last — if you look at the household penetration that was gained in this last year call it 25% that is really a result of both getting back to some light – is you saw household penetration pop in Q4 of last year. And then has continued. And that was a factor of bringing back some light promotions. And then — but it also — but then you also look at the buy rates in our supplemental that also increased. For the first time it’s been pretty steady throughout the last several years. But it popped up this last year. And that is a result of that kind of getting back into promotion. And especially, in our club account. So it’s really a combination of both. And that’s why we believe we’ve in promotion and it’s mostly because you get out of the aisle and you’d get new eyeballs, but then also people load up as well.
And we know that once this brand is in the household not only do people consume more, but more people in the household consume it. So it really is a combination.
Matt Smith: And Paul just a follow-up on the guidance outlook. The midpoint now suggests a slightly higher EBITDA margin. What’s supporting the higher margin? Is that additional volume leverage? Or do you have better line of sight into protein costs in the second half? Last quarter you talked about some supply ingredient tightness. Has that alleviated? Are you better covered now through the end of year?
Paul Rode: So we are slightly more covered than we were back in November. So we do have better visibility. We’re not fully covered at this point. So fourth quarter still have some open. But yeah, we’re a little bit more covered. As far as your question around margin you’re right. The midpoint is about 20 basis points higher. And it’s a combination of the two things you mentioned. So total leverage of G&A sort of the higher sales of being leveraged on the G&A line. And then just a little bit better visibility into the protein for the rest of the year. So those are the two main drivers. Nothing really dramatically has changed from our original guidance.
Matt Smith: Okay. Thank you. I can leave there and pass it on.
Paul Rode: Thank you.
Operator: Thank you. One moment for our next question. Our next question come from the line of Brian Holland from D.A. Davidson.
Brian Holland: Good morning. Darcy, you touched on Premier Protein ready-to-drink shake sitting with new two TDPs this quarter. Just curious any sense whether that incremental shelf space is coming from other competitors within ready-to-drink shakes or an adjacent category?
Darcy Davenport: I can’t speak to a mass retailer that reset in Q4. And we’ll call it may be indicative of others and it was a combination a not only higher set of convenient nutrition gain space. And but also the ready-to-drink and powdered segments gained space within effect. So bars actually lost space. And then within, kind of, ready-to-drink space, there’s always a shuffling around. And we’re seeing that performance nutrition and what we call everyday nutrition those are the parts of the ready-to-drink category that are really that are kind of booming where some of the others adult weight those are not doing this one.
Brian Holland: Appreciate the color. And then just curious, you gave some data points on January consumption trends for Premier Proteins within ready-to-drink shakes. Just curious, what you’re seeing from a competitive standpoint around resolution season, if there’s any change in promotional activity or anything of the sort? Is there anything noticeably different or incremental to this time last year?
Darcy Davenport: We are seeing – I mean it’s only a few weeks in. But I think that our business is moving. We are seeing more promotions, actually across the whole category. And actually, we saw it in Q1 as well, which was not normal to have promotions in that kind of October, November, December timeframe. So we are seeing some enhanced promotion, more so on – a little bit more so on the powder side of things but also on the ready-to-drink side. Saw a few people taking pricing within ready-to-drink this last quarter and then just consumption is just incredibly strong on ready-to-drink in January.
Brian Holland: Helpful. Thanks.
Darcy Davenport: Thanks.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Jim Salera Stephens.
Jim Salera: Hi, guys. Good morning. Thanks for taking my question.
Darcy Davenport: Good morning.
Jim Salera: I wanted to ask – I think historically, you’ve mentioned on the ready-to-drink shakes like around 60% of the use occasions is breakfast like a meal – like breakfast replacement. As you’ve increased the number of households, has that use occasion kind of held steady or have we seen a different consumer that is maybe using it as a lunch replacement or as a supplement after workout? Maybe I’ll start there.
Darcy Davenport: The bulk of our concession is still breakfast. So that has stayed constant. One area – this is where innovation can help and even in flavors. So when we launch café latte for instance. That has the equivalent amount of caffeine as a cup of coffee. And so people started using that as a replacement for that kind of afternoon latte. So that’s an example where we purposefully use innovation to expand the occasion. But at the end of the day still the bulk of the consumption is a breakfast replacement.
Jim Salera: Okay. And then if I think about when I go through the store in my area, I’ve seen a lot of your products placed kind of in the middle of the aisle, as you’re walking through some of the main aisles. Obviously, highly visible, good place for an impulse purchase. If the product is kind of part of daily consumption and you’re seeing increase in household uptake. Do we think about that as being part of the display throughout the year and not just around kind of the New Year, New You season?
Darcy Davenport: For sure, for sure. I mean our focus – and our entire sales team is focused on getting display – quality merch is the focus because I mean and I said this earlier, but it’s less about sent off or TPRs that’s going to drive the business. But it’s the display, because it’s a mainstream product that has low household penetration and still fairly low awareness. And just buy — because protein is hot. It’s convenient. And you put it out in front — and you kind of put it out in front of people’s eyes and all of the sudden, they consider it. And so, I think that absolutely the goal is to get more display. Get our products out where they think about it. At the cash register in coolers and aisle and really increase the awareness of it.
Q – Jim Salera: Okay. Great. Thanks. I’ll hop back in the queue.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Thomas Palmer from Citi
Q – Thomas Palmer: Good morning and thanks for the question. Maybe just follow up first on just the cost environment, as we think about the balance of this year. I think a quarter ago you kind of indicated the first half was expected to be more favorable. It sounds like you have visibility at least stretching through 3Q and maybe into 4Q. How does that favorability I guess, progresses when we think about the second half of the year?
Paul Rode: Yes. Again, our thoughts haven’t changed too much from the November guidance. So you’re correct that we expect more protein favorability in the first half, and then that starts to moderate as we go into the second half. What we’ve seen recently is, there’s been — it’s slightly favorable from where it was, but we’ve seen some puts and takes within the protein complex of some were up some were down. But that we still expect our favorability to start to moderate as we get into the second half. So cost will go up in the third and fourth quarter sequentially, as we go forward.
