Earnings Call: Q2 2020

Aug 6, 2020

Earnings release

Good day, ladies and gentlemen, and welcome to the Premium Brands Holdings Corporation Second Quarter twenty twenty Earnings Call. As a reminder, this call is being recorded. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. At that time, participants are asked to press star one to register for a question. Our speakers will be George Piliologo, CEO and President of Premium Brands and Will Kalutych, CFO It is now my pleasure to introduce your host, George Pilli Logo. Please go ahead, sir. Thanks, Lisa, and good morning, everyone. Welcome to our twenty twenty second quarter conference call. I would like to start today's call by thanking my 9,000 PB associates who continue to do an amazing job every day and every week producing the foods needed to feed and nourish our fellow citizens. Citizens. I feel very privileged to have such a great and dedicated group. Their commitment to the cause and their hard work and dedication during these uncertain and volatile times is greatly appreciated. Turning to our results, our second quarter numbers are satisfactory given the COVID-nineteen related disruptions to our business, but do not fully reflect the many reasons we're so excited about our future as they do not tell the full story. Despite the many challenges we faced during the quarter due to the COVID-nineteen pandemic, we remain as excited as ever about our business and are encouraged by the momentum we're taking into the third quarter, driven by the reopening of the economy and the return to some level of normalcy. I will now turn the presentation over to our CFO, Will Kaludic, who will review our financial results for the quarter, after which I will make a few brief comments followed by Q and A. Will? Thanks, George, and good morning, everyone. Before discussing our results for the quarter, I would like to caution you that to the extent we make forward looking statements during our presentation, our forecast and assumptions are subject to change and actual results may vary. Please see our 2019 and 2020 MD and A filings, both of which can be found on the Cedar website, www.sedar.com, for details on some of the factors that could cause our actual results to differ from our current expectations. Turning to our results. Our revenue for the quarter grew by $31,200,000 or 3.3% to a record $976,600,000 despite our company facing the most challenging operating environment in its history. The increase was driven by approximately $93,000,000 of organic volume growth in certain areas of our business, business acquisitions, which accounted for $30,000,000 of the increase, dollars 25,000,000 in selling price inflation and $15,000,000 in exchange related inflation. These factors were partially offset by approximately $132,000,000 in COVID-nineteen related sales impacts. The $93,000,000 in organic volume growth, which was driven by new customer initiatives in the seafood and sandwich categories as well as successful new product launches, translates to a growth rate of 9.8%. This is in line with the growth rates of 13.87.4% in the first quarter of this year and the fourth quarter of last year, respectively, and above our long term targeted range of 4% to 6%. The $132,000,000 COVID-nineteen sales impact related mainly to the partial or full shutdown of a number of our customers operating in the foodservice and channels, partially offset by unusually high demand for certain products in the retail channel. Our adjusted EBITDA for the quarter fell to $67,100,000 from $88,200,000 in the 2019 due to COVID-nineteen related issues, namely the $132,000,000 sales impact and $10,900,000 of net transitory costs, which is after $3,500,000 in COVID-nineteen related marketing and travel cost savings. These items were partially offset by some general margin expansion resulting from a combination of past selling price increases, inventory strategies used to hedge against commodity cost volatility and declines in the cost of certain seafood commodities. Overall, the impact of COVID-nineteen related factors on our adjusted EBITDA was most severe in April with our May and June results each showing substantial sequential improvement. Our adjusted EBITDA margin was 6.9% versus 9.3% in the 2019. The decrease of two forty basis points was driven by a variety of factors, including: one, the net loss of sales volume associated with the COVID-nineteen sales impacts two, the GBP 10,900,000.0 in net transitory COVID-nineteen related costs and three, sales mix changes as a portion of the COVID-nineteen related impact on our foodservice and QSR channel sales was partially offset by the affected businesses pursuing new but lower margin sales opportunities. The general margin expansion I outlined earlier helped to lessen the impact of these factors. Our adjusted earnings per share for the quarter decreased to $0.57 per share from $1.1 per share in the 2019 due to the COVID-nineteen factors that impacted our adjusted EBITDA. In terms of our outlook for 2020, while we continue to see steady improvement in the performance and stability of our businesses, we are not providing any sales or adjusted EBITDA guidance at this time based on there still being considerable uncertainty about what the impacts of COVID-nineteen will be for the remainder of the year. We do, however, based on current circumstances, expect the current trend of improvement to continue subject to the normal seasonality of our businesses. Despite the near term uncertainty, we remain confident in meeting or exceeding our 2023 sales and adjusted EBITDA targets of 6,000,000,000 and CAD600 million, respectively. To this end, we expect substantially all of the impacts of COVID-nineteen to be transitory. Our organic growth initiatives largely remain intact, albeit with some delays, and many of our businesses have developed additional new sales opportunities as well as strengthened customer and supplier relationships as a result of the crisis. Furthermore, we are now resuming our acquisition and CapEx growth strategies, both of which have been temporarily put on hold due to pandemic related concerns. Turning to our financial position, we went into the COVID-nineteen crisis with a solid financial position and continue to maintain a conservative balance sheet and strong liquidity. Our senior debt to adjusted EBITDA ratio at the end of the quarter was 2.7 to one, which is within our long term targeted range of 2.5 to one to three point zero to one, and we had approximately $380,000,000 of unutilized credit capacity. Subsequent to the quarter, we completed a combined common share and convertible debenture offering that resulted in net proceeds of $308,700,000 This increased our unutilized credit capacity to approximately CAD690 million, reduced our pro form a Q2 senior debt to adjusted EBITDA ratio to 1.5:one and position us to resume our acquisition and CapEx growth strategies while maintaining a very conservative balance sheet. In terms of capital expenditures during the quarter, we spent 19,500,000.0 on a variety of capital projects that were either relatively small or initiated prior to the COVID-nineteen crisis, including a 41,000 square foot expansion of our artisan bakery in Langley, DC, several meat snack capacity expansions, adding additional charcuterie tray pack capacity at our Reno sandwich plant and the installation of automated production lines at our Phoenix sandwich plant. With the resumption of our CapEx based growth strategy, we also announced that we are in the process of assessing five major capital projects with a combined preliminary estimated cost of $87,000,000 Subject to these projects meeting our minimum internal rate of return threshold of 15% on an after tax unlevered basis, we expect them to commence over the next two quarters and to be completed between the 2021 and the 2022. Turning to dividends. During the quarter, we declared a dividend of $21,700,000 or $57.75 per share, which on an annualized basis works out to $2.31 per share. Our free cash flow for the trailing twelve months was $161,300,000 as compared to dividends of $82,700,000 resulting in a payout ratio of 51.3%. While our payout ratio was up relative to 38% to 43% range that it has been at in recent years, we were pleased that it was still near our general target of 15% despite facing one of the most challenging economic environments in recent history. I will now pass the presentation back to George. Thank you, Will. We began the quarter with the economy in full lockdown with many of our foodservice and QSR customers having to shut down their businesses. Rather than panicking, we reacted to this extreme situation based on our core values and our focus on creating long term sustainable value. We avoided mass layoffs and cost cutting as much as possible and instead prioritized the health and safety of our people, stay close to our customers and suppliers and help support the well-being of our communities around us. While many of our businesses suffered greatly financially during April, we remain steadfast in our belief that demand would return and that we needed to be well positioned to meet our customer needs when it did. Sure enough, demand came back strongly in May and virtually overnight many of our businesses saw their plants go from being idle to full capacity with their staff working long hours to meet customer needs. This trend continued into June with several of our businesses not only meeting their budgets, but also delivering record results. We were also very pleased to see progress once again being made on a number of key growth initiatives, including in the categories of fresh and value added seafood, artisan sandwiches, meat snacks, premium dried cured meats and cooked proteins. Our overall sales growth for the quarter despite April being the most challenging month our business has ever experienced is indicative of the momentum we gained for May and June. We continue to disrupt the traditional food space catering to the needs and wants of health conscious consumers who are willing to pay for quality and great taste. Our focus on quality, transparency, innovation and social values is resonating with an increasing number of consumers and driving demand for our products. We believe that COVID-nineteen will accelerate this trend as more people realize that a healthy diet is important to maintain a strong immune system and defending against diseases such as COVID nineteen. Looking past COVID nineteen, I have no doubt that our company will emerge from this crisis stronger and more resilient as we're uniquely positioned with our decentralized entrepreneurial culture, which pushes decision making to the front lines, our unique ecosystem, which provides support and resources and allows our businesses to focus on the long term and our diversified business portfolio. Our acquisition pipeline also remains especially robust and we expect to execute a number of transactions during the second half of the year. COVID-nineteen has motivated many more successful food entrepreneurs to reach out to join our unique ecosystem. We're delighted and honored to be able to offer them ownership solutions that preserve their operational independence while providing them access to our extensive resources and best in class services. I will now turn it back to Lisa for the Q and A segment of the presentation. Lisa? Thank you. We'll take our first question from John Zamparo with CIBC. You mentioned in the press release that you lost sales in the Sandwich platform that you successfully pivoted to to gain new customers, and those came with some lower margins. So I guess two parts. Are these relationships or clients you plan to maintain, or do you view it as a stock gap solution? And do you have a way you can get the margins on those products products to where you like? Yeah. The answer is, obviously, we believe that some of the the business will be sustainable over the long term. Some of the business, the new business was lower margin only because effectively we went out and pursued the business on an urgent basis. As QSR gets back on track, obviously, we're prioritizing our incumbent customers. But we do plan to continue with some of the business that we pivoted to, but not all of it. Right now, the fact is that we probably got a little more demand than we have the ability to supply given some of the labor challenges that we still have in certain facilities, particularly in The US. Okay. That's helpful. Thanks. And then on your foodservice, customers, it was roughly a third of overall sales from last year. I think it's between, 40 to 60 between specialty and distribution. But of those foodservice sales, do you have a number of what percent would come from quick service versus casual or fine dining? Just because it does seem like the farmers really outperformed in this environment. Yeah. The the quick service sales, John, will all be primarily in the special food specialty food segment, food service sales. That's mainly QSR. Got it. Okay. And then last one for me. Sorry. Go ahead. Yeah. So if you look at that chart in the in the AIF, that's where you you see that breakdown. Right? Got it. Okay. Thanks. And then last one for me. You mentioned April being the most challenging month you've seen and then notable improvement in May and June. Can you give us a sense of how organic volumes performed throughout the quarter by month? And is it fair to say that July has seen incremental improvement versus what you saw in June? Yes. So the best way to illustrate that, John, is on our website, there is an updated investor presentation, and we show our weekly sales year over year. And so you really see the trend. You saw a dramatic decline through April and then sort of hitting a trough at the April. And since then, we've seen a steady improvement. For the last eleven weeks, we've been consistently sort of on a year over year basis similar to levels we were at the start of the first quarter. And and that's continued through July. Okay. Got it. That's very helpful. Thanks. I'll get back in the queue. Thanks, Sean. We'll take our next question from George Doumet with Scotiabank. Yeah. Hi, guys. Congrats on our recurring order. Just to follow-up on the the trend of July improving. Can you guys maybe talk about what areas of strength you're seeing or pockets you're seeing strength in terms of July and improving July? Is it C store? Is it QSR? Anything to talk to there. Yes. Hi, George. As we've mentioned earlier, George, we began to see pickup in QSR. QSR was effectively shut down in April. It's a big channel for us for many, many reasons. So we began to see a little bit of pickup in May, which helped our revenue and sales numbers, of course. But June was mostly back to normal. Most of QSR had opened by then or up to 80% or 90% open. So we had a significant pickup in demand through the QSR channel. QSR for us did better than we anticipated. I think there was a lot of pent up demand. So and we're seeing those trends continue into July and and August. Okay. And in that channel, there's been a recent commentary. I guess, struggle for the the breakfast category. I think you saw with Dunkin' himself with McDonald's, probably because of stay at home. But I'm just wondering, have you guys seen that impact at all your in that daypart in the sandwich platform? Or are you shifting to different dayparts? Or any commentary there? Our demand from the QSR channel in general, George, and again, we do deal with many, many major banners has been very strong for us in many, many cases. Based on the demand that we see, we're actually shorting that channel today, which is amazing to us in terms of how far we've come from April. Again, I can only comment on what we see in terms of demand, but demand from the QSR channel is very strong. I mean, to your original question, the other channel that suffered greatly in April, of course, with the complete lockdown of the economy was the C store channel in both Canada and The US. And with everybody or almost everybody taking driving holidays as opposed to flying holidays, we're seeing a lot of pickup in demand in the C store channel in North America. Okay. That's helpful. And just one last minute then, Nick. Can you maybe a two two part question. Can you maybe give us your outlook in vehicle cost inflation environment? I know it's been pretty active from the first half, but can you maybe give us your outlook on the second And how much do you think of that $25,000,000 that we the price increase that we took, given that some of the inflation came off, how much of that do you think you keep hold on to in the back half? Well, I'm going to add to your second question first, George. In terms of the inflation that we're a good portion of that was the price increases we put through back at the end of Q2, beginning of Q3 last year in response to the ASF issues that specific to the port complex and what happened in China. So those are sustainable. Those are long term changes that were made and have been maintained. And as we go into the back half of the year, we'll ASF and the issues around that and the impact it had on commodities really kind of went away in the first half of the year or the second quarter anyways. So we're being very conservative concerned about that emerging again in the quarter. So we intend to maintain those selling price increases. But on a year over year basis, you're not going to see that inflationary impact because those like I said, those price increases were in Q3 last year. In terms of your first what was your first question, George? Yeah. Just a general view on do you see any inflation in back half at all? I could see that the base Oh, yeah. Commodity cost. Yeah. So, again, similar to an earlier question, I'm going to refer you to our investor update. There's a great slide in there that shows what happened in the two of our bigger commodity complexes, pork and beef, what happened in those over the last quarter and what an incredibly volatile challenging environment it was during the quarter. Those have come back. They're sort of tracking back in line or even below 2019 levels. So that's the current trend. But the big subject and the big unknown is how is ASF and Chinese demand for North American protein going to play out in the back of the year. And that's really what's going to drive inflation depending on what happens there. Our next question comes from David Neumann with Desjardins. Great set of results overall. Very impressive. Just one last question on the top line. There were some programs I think you you sort of put on ice that were in the throes of, you know, almost being launched. And I'm thinking, like, you know, some of the Rayburn's programs and Dunkin' and and a few other ones. Are are the ones that were put on hold, are they back operating in? And did that contribute as well into the June period in July? Yes. So so again, a lot of these launches are taking place as we speak, David. A lot of them were delayed mainly because of our inability to visit customers and to do demos and to do promotions and all of those things. A lot of these things went on hold because everybody was working out of their homes. But we are seeing a lot of activity now. We've launched a number of programs into both C Store club and we will be launching a number of initiatives in the near future. So there's a lot of activity now within the group, a lot of innovation. And we're happy to see some traction with regards to customers taking meetings and obviously giving us new opportunities. And further to that, David, in terms of your question on how much of an impact was in the quarter, a lot of that stuff did not impact the quarter. Organic growth that we saw in the second quarter was driven by a lot of initiatives we've been talking about for the last couple of quarters, what we've been doing with our seafood businesses, particularly in The U. S, some new listings in Canada in the seafood category, some new products launched in the cooked protein, a lot of things that have been in the works and contributing to our growth going into the quarter as well. Okay. And so that that we would expect those to start contributing kind of in the second quarter, second half kind of or third quarter, second half kind of thing? Correct. Okay. That's the that's the new stuff that George is talking about. Right. Okay. And just over the margins, obviously hold on. My phone rings. I didn't turn it off. Sorry about that. They never give up. Right? Just over the margin on specialty foods, obviously, a a little more, lower relative margins and and and, frankly, understandable. You had to replace some of the activity levels. As we move into the second half here and and specialty foods, I'm thinking, how How are the margins playing out as these new programs kick in? As you get sort of contribution margin on fixed cost absorption and all that, what is sort of the near term and long term outlook on sort of the margins overall? Yes. I'll just start, David, by saying that you have to remember that April was not a very good month in every respect. Effectively, a lot of our customers were in a complete lockdown, and we made decisions based on trying to keep our employees busy. We took on businesses that were low margin or relatively low margin. Again, and the results in April are effectively skewing our numbers. As we get back to normal, you will see some normality back to the the numbers. But I will pass it back back to Will to give you a more complete answer. Okay. And and, you know, I I do we do expect to see some improvement, like George says, because April was such a challenging month. So some improvement in the back half. But the reality is that there's still key channels that aren't back to normal. So that's impacting a sales mix, particularly in foodservice, some of our airline business. And then also COVID costs. We do expect those to continue on for at least the third quarter, possibly the fourth, and we'll see how that plays out. We don't expect to get back to sort of original expectations, but we do expect improvement in the second half relative to the second quarter. Okay. And then last one for me, guys. Just on the PFD side, same question. I think you kind of alluded to the answer there anyways, Will. But I was I was really kind of a remarkable resilience to this business, and it did remarkably well in the face of, you know, full service restaurants being shut down and everything else. So it was a very surprising and very positive result. So just in terms of attribution between there was, like, three buckets that you sort of identified there, the lower seat and commodity costs and favorable inventory positions and and some procurement benefits overall. So how what was the sort of attribution there, and how sustainable might that be? Certainly well, it it you know, some of those impacts, particularly like on the seafood deflation, which has helped offset a lot of those costs. Certainly, as we continue to experience the channels that are being impacted continue to be impacted by COVID, we do expect those benefits to sustain because they're somewhat related. For example, two key commodities, salmon and lobsters, which were favorably helping on the commodity cost side is because they're so focused on foodservice. So until we start seeing our foodservice coming back, we should continue to see the pickup on the other side there to some extent. The inventory hedging, that's a tough one. When I in the discussion earlier with George, so much is predicated upon what how protein complex plays out in the second half with ASF. We're still fairly heavy on inventory and well positioned coming out of the second quarter. So that should continue to allow us to weather any spikes or abnormalities. But the reality is today, the market is somewhat settled and a little more on a year over year basis, calm, for lack of a better term. And then how long how long do you have an inventory to kind of exhaust to the exhaust the inventory that you've built up? Well, it's it's kind of an ongoing process of of, you've got a buffer, so when there's spikes in the price, you don't need to go into the market. And the reality is the market is constantly fluctuating, and there's constant change. And so you sort of you use the dips to try and replenish your hedges and you use your long positions to weather the spikes. So it's a function of how long the spike goes on, whether we can weather it or not and how low the dips go in terms of how much we replenish the inventory. So it's not a sort of a simple we have X amount to see us through to X date. Got it. And last one, guys, I'll just squeeze it in here. Does Trump providing support to the Maine lobster industry? I hope you guys I I mean, it's obvious, but, you know, in the absence of an export market, he's supporting that local lobster market in in Maine, where I think 80% of our lobster is procured in in The US. Not a material event or issue for us, David. Okay. Very good. Thanks, guys. Great results. Thanks, David. Thanks, David. We'll take our next question from Bhat Khan with RBC Capital Markets. Thanks and good afternoon. Maybe just following up on the commentary around the Premium Food Distribution segment and the results there. I guess based on your comments, should we read into it that this was maybe largely associated with seafood and the lobster business and probably more of a U. S. Kind of driven outperformance? Or how would you attribute kind of I'm just trying to figure out kind of the big products or the type of customer that helped you deliver these results amidst the shutdowns here. Yeah. Again, first of all, Behat, I I I would say it would be both Canada and The US. I can't say enough about our distribution group and how they've gone out and pivoted and found new customers in both Canada and The U. S. We've retained couple of two very large customers, which we believe to be to be sustainable. You have to remember and the back the backdrop of what we've gone through. You know, some Some food manufacturers were able to keep service levels very high and some have had issues. And I can't say enough about the group and how well executed in terms of jumping in with their with their opportunities. And as a result, they've they've retained some some very large customers, which we believe is business that will be sustainable. And that is on kind of the lobster and seafood side or broadly for PFD? Broadly for for for for broadly for the the distribution group. Okay. And then on Definitely the weighted to the seafood side somewhat. But but also what's interesting is in terms of the margin performance, that was definitely across the segments. You know, again, we our hedging strategies helped a lot with the margins in the more traditional protein categories, while the benefits I talked about earlier in terms of salmon and lobster helped our seafood margins. So the margin performance was driven right across And you have to remember, Bharat, that we've made significant capital investments in that group over the last couple of years. And so we were we had sufficient capacity to take on new customers, which is a is significant. Okay. And then just given that these are new customers, are you seeing the trends for this segment also sort of continue through q three? And maybe not at these levels perhaps, but it's still, I guess, the improvement they're continuing? Yeah. So so far, so good. Okay. And then on the specialty food side, the commentary around sandwiches earlier, I guess, we read that to mean that, you know, as of q three, the sandwiches category is now up year over year, or is it that segment is up, but sandwiches sandwiches are directionally better than where they were a few months ago? They're currently running at levels that are above last year's. Okay. And this is driven by some of the They they have challenges in in the second quarter. It was not a great quarter for them. Things improved in May and June as we as we stated, and they continue to improve in into July, August. And as we speak today, they're running ahead of last year. Okay. Just last one for me. Could you maybe provide kind of similar commentary on the sort of the composition of the quarter, you know, across meat snacks and deli meats? You know, how did those trends change, or is most of the categories following the similar trajectory at this point? Our protein group, which is skewed mostly towards retail and club, had a very good quarter and continues to do extremely well. Outside of some capacity challenges, we probably could have delivered better numbers even. There's a lot of great demand for some of our unique value added meat products, including meat snacks, dry cured meats, and, of course, cooked proteins. Thank you. We'll take our next question from Vishal Shreedhar with National Bank. Hi. Thanks for taking my questions. I think you you alluded to it earlier, and I missed it. But the the COVID related costs related to the the thank you bonuses and and safety measures, so on and so forth, did you say that sticks in its entirety for for the for the for the next quarters? Or Well, it it won't be to the extent it was in the second quarter because things like the thank you bonuses, those will start in some businesses tailing off. There was sort of fixed costs of putting in safety processes in the facilities. There were inefficiencies associated with the shutdown and start up of certain facilities. So there were a lot of things that happened in the second quarter that will not continue, but but a portion of those costs will. So the, you know, thank you bonuses are running into the third quarter for some businesses. We have continuing some inefficiencies with with some labor instability, particularly in The U. S, where we're having some problems sourcing labor. So some will continue, but it won't be to the extent it was in the second quarter. Okay. And just moving on here to the demand and the progression of the demand through the quarter. You know, I, like many, are are surprised by just how quickly things turned. And just wondering if if management takes a few steps back, would they consider this demand to to have any impact from the work from home dynamic and perhaps people barbecuing at home more more than usual in this evening? And would stimulus have been a factor? And if these are factors, then then do you see these these factors taking away in the subsequent subsequent periods? Yeah. It's an interesting question, Vishal. You know, when when we we tore apart our sales and tried to analyze, okay, what was the impact of COVID on our business? You know, one of the areas we had to delve into was the retail category because we we definitely saw some unusual strength there driven by by, like you say, stay at home behavior, but also driven by the weather. Because if you recall last year, one of the issues that our protein business struggled with was really poor fantastic weather. So we had to make a call of how much was weather related, how much was sort of this unusual demand. And I think we aired on the side of conservatism, I. E, how much we put into organic growth versus the COVID impact. But all that was taken into account when we came up with that differentiation between what was organic and what was COVID related. Got it. Okay. And just again, switching gears here, you know, in the media, it's reported that retailers are are looking to introduce, obviously, in Canada, new feeding on suppliers. And those things tend to look across the industry when when they're announced. Wondering if you see that coming into your business and if that's a pressure that we should have foreseen in the coming quarters. Again, it's it's typical, of course, of the normal dealings and back and forth relationships with the different customers. I mean, that's that's my only comment today. Okay. Thank you for the comment. Thank you, Michelle. We'll take our next question from Steven MacLeod with BMO Capital Markets. I'm sorry if you gave some of this color already, but I just wanted to get a sense of where you saw from an end market perspective some relative pockets strength and weakness through the quarter and where we are today? Well, as I mentioned earlier, Steve, QSR was nonexistent in April and begun to pick up in May. And by June, to our surprise, it was back to normal. That's what we saw. I mean, this is based on our demand. Surprisingly, we were shorting customers, some customers in some QSR customers in June. So we were surprised from our own perspective. We were prepared for a very slow second quarter. Effectively, that turned out to be April, one month. And May and June were relatively close to normal outside of Will's comments around start up and getting organized again to meet demand. Also, in terms of what I said earlier, the c store channel was extremely slow in April as people stayed at home and isolated at home. The C store channel was very slow and as school closed and people decided to take driving holidays as compared to local staycations and those type of things versus flying holidays. We began to see a pickup in in c store demand as well. And, you know, I would say that club store demand remains strong throughout the the entire quarter. Great. And then you talked about the acquisition pipeline. Is there any more color you can give around sort of what kind of targets you're looking for? And is there a way to quantify, like, what the acquisition pipeline looks like today versus what it looked like sorta pre COVID? Yeah. It's as I mentioned in my in my prepared comments, Steven, it's it's it's extremely robust. We have many acquisitions in the pipeline. As we've stated earlier, we put everything on hold effectively. So we're really backed up. We have a very large M and A team here and they're rearing to go. And we will have a very, very busy second half of the year completing transactions. Also in terms of what I said in my prepared remarks, you know, COVID nineteen in our view has motivated even more successful food entrepreneurs to say, listen, this is tough, this is difficult, maybe I wanna join up with premium brands. I'll have the benefits of joining the PB ecosystem and I'll still run my business. So we extremely busy. We're in a lot of discussions, and we have a lot on the go. That's great. Thank you very much. Thanks, Steve. Thanks, Steve. We'll take our next question from Derek Lessard with TD Securities. Yes. Thanks, and good afternoon, guys. Again, a very strong quarter, so congrats on managing that. I just have one question. Most of my questions have been asked, but I was wondering if you could comment maybe on your ability to pass through price in in this environment. It seems like you you were able to do that. Just wondering if you've had any, I guess, pushback from, from your your customers more more recently than that. Yeah. I I would say, Derek, that that we are in very, very unusual circumstances. And again, my comment is really in terms of the North American market, right? Clearly, channels have a lot of demand. There's a lot of demand by consumers to shop in certain channels. So at the same time, you've got an industry, the food industry in particular, that's having a tremendous amount of labor issues related to COVID nineteen. So so so, you know, a lot of customers are trying to keep the shelves full. So it's really an environment where we're doing our best to fill orders and run our plants as efficiently as possible. In many cases, many manufacturers have very high absentee issues. They're not able to meet orders and we have to step in. And anyways, these are unusual times. You know, know, we I would say that everybody's rational to the extent that it's a run up in protein prices like there was with beef prices. Our customers understand because they have to pay extra as well for some of their fresh beef or pork meats as well. So it's a very different environment where really it's about producing, it's about maintaining business continuity, and it's about making sure that the shelves are full in a difficult operating environment in general. Okay. That's it for me. Thanks. Thank you. Thanks, Derek. We have a follow-up question from David Newman with J. H. Please go ahead. Hi, guys. Just a quick follow-up here. If you look at the environment, George, in terms of the the obviously, the challenges of primary processing is add through this environment. Do you think there's some permanent long term changes here where your business model might resonate more and and be able to operate more nimbly in an environment where we saw all the challenges these guys face. And tied into that are your CapEx that you're putting in, 87,000,000, is it because you view that as an opportunity in this environment? I think the fact, David, is that, whenever or wherever, people congregated because they were essential services effectively, there were COVID nineteen related issues. So I wouldn't even though the primary industry got a lot of press, every company that remained open is an essential industry, of course, hospitals and rest homes had issues with COVID-nineteen. So I don't anticipate that there'll be any permanent changes in terms of the industry. We've all faced challenges, some more than others, of course, but but, you know, I would say that everybody faced COVID nineteen related challenges. And where are you ticketing the the 85 or $87,000,000 toward? Yeah. They're they're they're really sort of traditional avenues we've invested in. They're meat snacks, cooked protein, premium processed meats. They're really driven by our current strategies, nothing to do with what's happened in the primary market. And that does conclude today's question and answer session. I'd like to turn the call back over to George Pililogo for any additional or closing remarks. Thank you, Lisa. I'd like to thank everybody for attending today. Thank you very much. And that does conclude today's presentation. Thank you for your participation. You may now disconnect.