Earnings Call: Q2 2020

Aug 6, 2020

Good day, and welcome to the Nomad Foods Second Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Taposh Barry, Head of Investor Relations. Please go ahead. Thank you for joining us to review our Q2 2020 earnings results. With me on the call today are Chief Executive Officer, Stefan Deschmaker and Chief Financial Officer, Sami Zekhout. Before we begin, I would like to draw your attention to the disclaimer on Slide 2 of our presentation. This conference call may make forward looking statements that are based on our view of the company's prospects, expectations and intentions at this time, including consideration related to the impacts of COVID-nineteen. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and this slide in our investor presentation, which includes cautionary language. We will also discuss non IFRS financial measures during the call today. These non IFRS financial measures should not be considered a replacement for and should be read together with IFRS results. Users may find the IFRS to non IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within this presentation does represent adjusted figures for 2019 and for 2020. All adjusted figures have been adjusted for exceptional items, acquisition related, share based payment and related expenses as well as non cash foreign exchange gains or losses. And all comments from here on will refer to those adjusted figures. And with that, I will hand the call over to Stefan. Thank you, Taposh, and thank you all for joining us on the call today. 1st and foremost, I hope that you and your families continue to stay healthy and safe throughout these unprecedented times. Earlier today, we reported our 2nd quarter earnings results, marking NoMad's 14th consecutive quarter of organic revenue growth. In addition, we also announced our intention to commence a tender for up to $500,000,000 of our ordinary shares, representing a significant return of capital to our shareholders. Starting first with our 2nd quarter earnings results. We're pleased to report another quarter of exceptional performance with nearly every financial metric exceeding the expectations that we provided on Q1 earnings call. 2nd quarter financial highlights were as follows: organic revenue growth of 12.3%, driven by a 9 0.9% increase in volume and mix and a 2.4% increase in price. This performance was in line with the business update that we provided in June. Gross margin of 30.3%, reflecting 50 basis points of expansion adjusted EBITDA growth of 21% to €119,000,000 adjusted EPS growth of 26% to €0.34 per share. Based on our year to date performance and our expectation that sales growth in the back half will now remain elevated, we are raising our organic revenue guidance for the year and now expect to be above the high end of our prior range for both adjusted EBITDA and adjusted EPS. Importantly, this new outlook now includes approximately €10,000,000 of incremental strategic investments to be deployed over the course of the next 6 months. Let's turn to the details of the Q2 beginning on Slide 4. We're very pleased to report 2nd quarter organic revenue growth of 12.3%. Performance was fairly consistent throughout the quarter, with all 3 months achieving double digit organic revenue growth. Importantly, we were encouraged to see growth sustain at an elevated level, even as stay at home restrictions were relaxed across Europe beginning in early May. Frozen food has proven to be one of the fastest growing and most durable FMCG categories throughout Europe these past 4 months. At NoMad, our business has performed at a very high level, a testament to the agility of organization and the power of the brand. Moreover, our portfolio is concentrated in the sweet spot of the packaged food space in frozen, branded and retail. This focus has worked to our advantage, and it is where we continue to direct our attention. While we had original plans for strong growth in 2020, the impact of COVID-nineteen has undeniably accelerated our top and bottom line results, due in large part to an influx of new consumers discovering our brands and significant repeat behavior since the start of the pandemic. During the Q2, we recruited an unprecedented number of new consumers into our portfolio, with 12 week old hold penetration up 4 percentage points to 44% across all 3 largest markets. Across each of our 3 largest markets, the UK, Italy and Germany, millennials demonstrated the strongest spending growth amongst consumers, a clear indication that our power brands, Birds Eye, Igloo and Findus are resonating with this important and influential set of shoppers. Our expansion of green cuisine will only further strengthen our appeal amongst millennials, given the high value that they're assigned on food that is healthy, convenient and sustainable. In terms of repeat purchase, we saw a notable year on year uptick among users we repurchased 2x or more during the quarter. For example, in the UK, our largest market, nearly 40% of NoMad users repurchased into our brand 2x or more during the Q2. We are encouraged to see repurchase rates that are best in class amongst frozen savory, ahead of other branded competitors. We responded to sustained and elevated demand by running our product lines at maximum capacity, while creating new safety protocols in our factories, all which have remained open and operational throughout this pandemic. Despite these extraordinary efforts, they were still part of our portfolio where demand all stripped our ability to supply during the Q2. As you may know, our largest factories in Bremerhaven, Rekken and Lower Stoft were already running at high utilization rates prior to COVID-nineteen. While there was adequate capacity to deliver our regional plants, the unanticipated spike in demand did create some bottlenecks, which reduced our factory service levels to as low as 87% in April. We responded by increasing factory output and reducing demand creation activities during the Q2, namely advertising and in store promotions, which led to temporary market share declines during the month of May June. The good news is that these actions have enabled us to not only improve our customer service levels, which are now back to a robust 98%, but also to rebuild our own inventory levels to support for elevated consumer demand in the second half of twenty twenty. Further, preliminary data in July suggests that our market share is stabilizing, and promotional support to deliver on our robust plans for the 3rd and 4th quarters. Moving on to gross margins. We achieved 50 basis points of gross margin expansion during the 2nd quarter. A positive development versus our prior expectations, which called for a year on year decline. This was driven by lower promotions, as I just described, but also fixed cost leverage and favorable channel mix. We're pleased to see the business return to gross margin expansion, 1 quarter earlier than we had originally planned, and remained on pace to achieve gross margin expansion during the second half of the year. As you may know, we have successfully navigated an unprecedented level of raw material inflation in 2019 2020, arising from a correction in fish prices and persistent strength of the U. S. Dollar, the transactional currency for approximately 20% of our cost of goods. Inflationary pressure is now clearly abating. Earlier this year, before COVID-nineteen, we had already observed a moderating trend in fish prices, a welcome development. Since then, supply demand dislocations in the out of home channel have created some unique opportunities for us. These benefits should accrue in the back half of this year. Another recent trend has been a strengthening of the euro, which is near a 2 year high versus the U. S. Dollar. To the extent that this trend sustains, a strong euro would help further contain our cost of goods in 2021, while driving a higher real time conversion of our euro denominated results into U. S. Dollars, the currency in which our stock trades. Finally, we generated a significant amount of cash in Q2, bringing our 1st 6 month adjusted free cash flow generation to EUR 243,000,000 We have made meaningful strides in optimizing our working capital terms over the past year and are pleased to be in the position to both generate this amount of cash, but also use it to fund highly accretive actions like the expected tender offer, which we announced today. Our business has performed at an exceptional level through the 1st 6 months of 2020, with consumer shift to at home consumption and frozen food in particular, providing strong macro tailwinds. Looking forward, as I mentioned earlier, our business is exceeding our expectations relative to where we thought we would be exiting Q1 and certainly versus our plans at the start of this year. This has created a unique opportunity to both raise our guidance for 2020 and to deploy approximately €10,000,000 behind incremental strategic investments to capitalize on our success to date and fuel key growth initiatives to position the business for continued success entering 2021. While this year guidance would have been even higher with all these investments, we're fortunate to have the opportunity to deploy capital to create sustained long term value for our shareholders. Our plan is to allocate these additional resources across 3 strategic pillars of growth: 1, the targeted retention of new consumers who have entered our brand since the onset of COVID-nineteen 2, even greater media support behind our core portfolio where we have superior ROIs And finally, doubling down on Green Cuisine, our plant protein brand. Green Cuisine continues to perform very well with our revenues and gross margin both exceeding our plans. This is despite a delayed activation program, which we shifted our plans from Q2 to Q3 as a result of COVID-nineteen. I'm happy to share that we are now beginning to activate the Green Cuisine brand across all Continental European markets with the multi channel media campaign and traditional trade and promotion support. This is starting in Germany and Austria as we speak and will expand to the other markets throughout the Q3. In terms of distribution, Green Cuisine, which was available in only 2 countries at the start of the year, is now available in 10 European markets and will be in all our markets by early 2021. And finally, we're making excellent progress along our innovation agenda with Green Cuisine set to expand into the exciting meat free poultry category in the coming weeks, starting with the U. K. Market. I'd like to conclude by providing some broader perspective as we celebrate our 5th year anniversary as a public company. We are on an exciting journey, and I'm sure that I speak on behalf of our entire organization when I say that we are incredibly proud of the performance that we've been able to generate in a relatively short period of time, and we look forward to the opportunity still to come. Our Q2 results mark Loma's 14th consecutive quarter of organic revenue growth, and based on our updated expectations for this year, we are well on our way to delivering a 4th consecutive year of organic revenue growth in 2020. While we have clearly benefited from unprecedented demand for frozen food, this slide also demonstrates our longer term track record for growth leading up to this year. From day 1, we have managed this business with an owners mentality, acting in the best interest of long term sustainable shareholder value creation. As such, we firmly believe between our consistent track record of delivering results, solid financial health and attractive growth prospects that Nomad Foods is well equipped for continued success throughout and beyond the COVID-nineteen pandemic. This brings me on to the other piece of news this morning. Earlier today, we also announced our intention to commence a tender offer to purchase up to $500,000,000 of the company's ordinary shares. As you know, we raised equity 18 months ago to prepare ourselves for a slate of interesting acquisition opportunities that we saw ahead of us at the time. We have maintained our discipline by sticking to our acquisition criteria and ultimately passed on a number of deals. In the meantime, our business has evolved in a very positive way. Our revenues, adjusted EBITDA and cash balance have grown while our leverage has come down. As we sit here today, we see numerous avenues for growth within our European frozen food footprint, both organically and inorganically. And as a result, we believe that further concentrating our strategic focus within these opportunities offers our shareholders the best return on our investment. Organically, we have strong momentum and are making incremental strategic investments to ensure that our business is well positioned entering 2021. Consumer interest in our iconic brands has never been higher. Moreover, expansion into the plant protein space through Green Cuisine positions the company for the possibility of accelerated organic revenue growth in the years to come. At the same time, we are refining our M and A focus towards European frozen acquisitions, which are primarily mid sized in nature. This compelling and targeted pipeline will require us to carry significantly less cash on our balance sheet than we have in recent quarters. This brings me to our intention to repurchase up to $500,000,000 of our stock through a modified Dutch auction process. As stated in this morning announcement, the expected tender offer is intended to serve 2 objectives. 1st, we recognize that we are carrying more cash than we need, and as a result, we are returning excess cash to our shareholders in what we believe is the most efficient way of doing so. 2nd, we believe repurchasing our shares is a compelling and accretive use of our cash, while preserving financial flexibility to pursue our M and A pipeline, as I just described. Our confidence in the growth prospect of our business and the European frozen food category has never been higher. In fact, we have begun planning our 1st ever Investor Day to be held virtually later this fall to present the various growth initiatives ahead of us. We look forward to sharing more details on this exciting event in the coming weeks. And with that, I will hand the call over to Sami to discuss the financials and guidance in more detail. Sami? Thank you, Stefan, and thank you all for your participation on the call today. Turning to Slide 7, I will provide more detail on our key 2nd quarter operating metrics, beginning with revenues, which increased 11.4% to €599,000,000 driven by 12.3 percent organic revenue growth and were offset by 90 basis points of foreign exchange translation. Organic revenue growth was stronger than we expected at the time of our Q1 earnings call in May and was in line with the business update that we provided in June. Organic revenue growth was led by our branded retail business, which represents 90% of sales and grew just under 20% during the Q2. This was offset by more modest growth in private label and declines in foodservice. Growth was geographically broad based with 7 of our 13 countries posting revenue growth in excess of 15%. 2nd quarter gross margins expanded 50 basis points to 30.3%. The year on year increase exceeded our prior expectations and was driven by reduced promotion fixed cost leverage and favorable mix. We are pleased to see the business return to gross margin expansion and continue to anticipate year on year gross margin expansion throughout the second half of the year as a result of supply chain productivity benefits. Moving down to the rest of the P and L. Adjusted operating expenses increased 1% year over year, reflecting growth in indirect and the diluted decline in A and P. The decline in A and P, which we had planned for, reflects our prior decision to shift Green Cuisine advertising from Q2 to Q3 and to reduce unnecessary stress on our supply chain amidst an unprecedented level of consumer demand. Adjusted EBITDA increased 21 percent to €119,000,000 and adjusted EPS increased 26 percent to €0.34 for the quarter. Turning to cash flow on Slide 8. We generated €243,000,000 of adjusted free cash flow during the 1st 6 months of the year, nearly three times the amount that we had generated for the same period a year ago. In 6 months, we have already surpassed the amount of free cash we generated through all of the year 2019. This is an exceptional level of performance, and I'm proud of our entire organization for maintaining their discipline on cash throughout this crisis, while making structural enhancements in our working capital over the past 2 years. In addition to better terms on both receivables and payables, working capital also benefited from the fact that we significantly depleted our inventories as we chase demand as a result of COVID-nineteen. We converted nearly 180 percent of our adjusted EBITDA into adjusted free cash flow through the 1st 6 months of the year, reflecting seasonality, structural enhancements and the effect from COVID-nineteen. Looking out, we expect Q3 to be a use of working capital as it typically is due to the harvest. Moreover, with our customer service level now back to normal, we're also rebuilding our inventory stocks to support our second half plan and to secure enough safety stock in the event of a second wave of COVID-nineteen across Europe. With that said, we do expect to end the year with robust cash generation and cash conversion. With that, let's turn to Slide 9 to review our 2020 guidance, which is based on foreign exchange rates as of August 3, 2020. For the full year 2020, we are raising our organic revenue guidance from mid single digits to high single digits. As a result, we now expect adjusted EBITDA and adjusted EPS above the high end of our prior guidance ranges. This equates to adjusted EBITDA in excess of €460,000,000 and adjusted EPS in excess of €1.27 When translated into U. S. Dollars, the currency in which our share trade, Full year 2020 adjusted EBITDA guidance equates to at least $543,000,000 and adjusted EPS guidance equates to at least $1.50 Adjusted EPS guidance assume a fully diluted share count of 198,000,000 in Q3 and Q4, which may ultimately be lower based on the outcome of the proposed tender offer, which we announced this morning. Our guidance now assume an elevated level of organic revenue growth in the second half of the year, reflecting 4 factors: 1, the sustainable growth that we have experienced throughout the pandemic, including double digit organic revenue growth in June July, despite the easing of government restrictions 2, the accretive effect of the strategic investment that Stephane described in his remarks 3, the replenishment of retailer inventory, including the recovery of out of stock positions and 4, the return to a more normal promotional level now that we have our service level back to normal. As I mentioned earlier, gross margins are expected to increase in the back half of the year as a result of supply chain productivity. And finally, we expect operating expenses to grow ahead of revenues as a result of our decision to deploy incremental strategic investments in the back half of this year. That concludes our remarks. I will now turn the session over to Q and A. Thank you, operator. Back to you. Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question. Great. Good morning, everybody, or I guess, good afternoon for you. Good morning, Andrew. Good morning, Andrew. I want to start off, if I could. I really appreciated the specific wording in today's release around the refined strategic focus, right, for some of your M and A going forward, to be really specific to sort of European frozen food acquisitions. I think, Stephane, maybe it was a few quarters ago even where you had started to talk about the increased sort of time and resources that NoMad was spending against really developing relationships through multiple different avenues with potential targets around some of these types of frozen food targets. And I'm curious, is it your sense that maybe those relationships are now starting to become a little more fruitful or you've got a little more visibility around how some of those might work out? And how has the sort of current state of affairs, all things pandemic related, impacted some of those discussions maybe with potential targets one way or the other? That would be the first thing. Okay. Okay. Thank you. It's a long question. I'll try to let me start with a bit of a background, Andrew. It's 14 consecutive quarters of growth. This with cash flow that is generating, it is quite high, more than 0.5 times a year. Obviously, it will deliver its balance sheet. And in the middle of this, with and without COVID by the way, frozen food that is looks increasingly attractive and we're in the middle of this as the category leader. So we think and again, that's why deliberately I'm talking about organic and inorganic, but both are extremely attractive for us. And I think it's the right thing to do, which is to be disciplined, to be logical, which is we are going to focus behind this category. Green cuisine is a great example. And in terms of M and A, yes, I think it's important to mention and you're right talking about refined M and A focus. It's an interesting pipeline. It's a pipeline where for as a leader, you have all the reasons to generate good value from this. And beside that, obviously, you know as much as I do that M and A is you have to talk to people and at some stage it's coming. So when you can't plan these things, but you have to be ready. And what we see is with refined focus and with so much cash, we think it's only the right thing to do to return cash to shareholders while leaving obviously enough cash and cash flow generation for this refined focus. So that's how we see things, which is we think quite logical and also requires obviously quite some discipline. Thank you for that. And then I don't know if you have this handy and if not, obviously that's fine. You talked about some of the trial and repeat metrics that you're seeing for current I think you described it as current nomad users. I didn't know if we dig down a little bit there and we look at those that are consumers that are new to the brand, if you will, how their repeat looks as well? That's the good news. And again, let me use a potential a good proxy which is the millennials and what we can see that these new nomad buyers, the millionaires over index and this is interesting, Andrew. It goes the same way in the UK, in Germany, in Italy, which represent altogether something like 2 third of our business. So that's for us a good news. 2 good news. One is that we are gaining penetration across the board. And second, when you to your point, when you dig deeper, you go to the millennials, it goes even faster. Great. Thanks very much. You're welcome. Our next question comes from the line of John Baumgartner with Wells Fargo. Please proceed with your question. Good morning. Thanks for the question. Good morning. Sami, you're Good morning, Sami. Good morning. You're about 4 to 5 months into this elevated COVID demand environment. And I'm wondering if you could elaborate a little bit in terms of what you're learning about your found realization of flexibility, you mentioned increasing capacity or maybe even new recognition of inefficiencies in the midst of this demand uptick. So how are you thinking about the phasing and the opportunity set related to the overheads and the lean manufacturing at this point? Thank you. Let me start again by thanking our people in terms of supply chain. I think they've been fantastic. And we've all the 13 plants have been left open throughout this whole process, which is which shows something in terms of motivation of our people. The reality is we have a reasonably tight and obviously we're working on it, capacity utilization across the plants, especially with our big plants in Germany in the UK. And so while the team has done a fantastic job, we've been producing as much as physically possible. And in the meantime, during this crisis where or service level inevitably when it started to go down, we also have tried to respond by reducing the promotional activity because that would have been a mistake. And by doing so and by working very hard with the supply chain, now we're back to more normal level in the region of 98% and we've been able to produce some safety stocks so that we're feeling in a better shape in the looking ahead in Q2. So that's where we are. We're not standing still, obviously. We're also checking short to midterm how we can obviously increase some capacity in some plants, but that's where I think we are. And we see this by the way in terms of market share starting to normalize. Sami, anything else I'm missing? No, Stefan. Thanks for that. And then Stefan, just a quick follow-up on Green Cuisine. Wondering if you could just update a little bit for us in terms of the UK, your household penetration, market share, anything noteworthy there? And then I think also in H1, you launched into a number of new markets. Obviously, still early, but I'm curious, any observations you can make thus far in terms of retailer merchandising and your kind of initial buy in before the marketing really kicks in, in the back half of this year? Thank you. Yes. So overall and again, independently from COVID, I think what we can see in the countries like U. K. Or Ireland where we started ahead of time And in the new countries, we're gaining market share. So it means something that we as a category leader in frozen food, we're coming with the right combination in terms of quality of products and in terms of pricing. So that's one thing and that's very interesting for us. What we also can see is, yes, initially we thought that we would be a bit late this year given COVID because when you have that kind of crisis, the retailers and for the right reasons by the way, the retailers prefer to focus on a very limited number of SKUs because it makes their life easier, it's a better allocation of the space and all the rest of it. And I fully understand that. And at the same time, what we've seen is no. I think we're not behind plan by the contrary. We've seen all our countries with the exception of 3 markets, but they're going to come in the second by next year, they will be also ready. So another 8 countries have launched Green Cuisine. And in our model, John, what you need to understand is it's global local. Obviously, to have the input and to have the, let's say, the feedback and really have the countries with you is crucial. And so with the enthusiasm that we have seen from these guys, we are very positive. We are more than ever confident that our target of €100,000,000 plus by 2022 will be achieved. And in the meantime, we're not standing still. So we've started to advertise in Germany and Austria or the countries will come. We also, in terms of innovation, we're coming with I think it's coming next month actually in September in the UK with the new line of plant protein in terms of poultry, which is excellent. I can tell you it's a great taste, fantastic. So all our exec members, when we have this I know it's a digression, but still I couldn't resist. We have this tasting session. I can tell you at the end of the testing session, nothing was left. So it says something about the quality of the product. So that's where we are. We also as you can see, we've also decided to allocate part of the €10,000,000 to further reinvestment behind Green Cuisine because we think it's a great category, it's there to stay, but you have to think big and that's what we increasingly are doing. So that's what we see. So we all and I'm sure that what I'm saying is fully representative of what the whole organization thinks behind Glien Cuisine, very exciting and fully in line with our strategy. Thanks, Stefan. Much appreciated. Our next question comes from the line of Rob Dickerson with Jefferies. Please proceed with your question. Hi, good morning. It's Matt Fishbein on for Rob. Thanks for the question. Congrats on a solid quarter. Good morning. Good morning. So A and P was down double digits in Q2 incremental €10,000,000 in the back half, assuming that's on top of the Q2 shift. What does the promotional environment in your key geographies look like currently? Have you seen a full normalization of promotional activity or some markets still less promotional than others? And on Green Cuisine, glad to hear you're doubling down and it's exceeding plans. On the Q3 rollouts, thinking back to the slide you shared with us at CAGNY showing the 2020 timeline, Will Green Cuisine be out in all those planned markets by the end of Q3 or Q4? I think in response to John's question, you said that some markets are now planned for the beginning of next year. Just trying to get some clarity around that. And how many of these markets have seen advertising get activated already versus how much is coming on later this year? Thank you very much. Sami, do you want to start with the promotional side? Yes. I'll get started on the promotional side. I mean, 1st and foremost, yes, we've been shifting, I mean, advertising spending from Q2 to Q3 and have made the strategic choice to reinvest in the range of about 4, let's say, €10,000,000 you can see effectively that there was a very strong momentum. I mean that gave us the confidence that this was the right move with the appropriate return on those investments. The one thing that's important to note is this is a promotional category. So we have to be clearly present from a promotion standpoint. And so when you look at where we are today with our supply chain back to almost normal, we are going to have a take care of promotion back to normal as well and be able defend the business. I leave it up to you to Stephane to comment on Glintelyme. Yes. Thank you, Sami. So back to the countries, actually having already 10 countries carrying Green Cuisine is higher than what we originally planned, so that's very good for us. And again, the Nordics are coming very early next year. So that's that. 2nd piece in terms of advertising, we already started to advertise in Ireland and in the UK last year and actually we're just starting to advertising in Germany and in Austria as we speak actually. The other countries are going to follow in the coming weeks. So more to come. Initial results are good. And by the way, something I forgot to mention is what we can see also is a great enthusiasm from the retailers And we see this from the quality of the plans we're putting together with them. Perfect. Thanks for the additional color. And just a quick follow-up, Stephane. Have you won any incremental distribution beyond what you originally secured for Green Cuisine based on the retailer's response? The answer is overall, and I said, a great response from the retailers. In the UK, which is probably the best where it's the most relevant piece because that's we know the most mature market and that's where we have already gained a significant position. What we can see is without mentioning names, by definition, you don't want to do this, that we're working on partnership even closer with them, which means you understand what it means, yes, that we're doing well in terms of positioning, in terms of obviously space allocated to Green Cuisine. And again, it's not limited to the UK. We'd invite you to go to France and you have some great examples of in store activation. Excellent. Thank you very much. Our next question comes from the line of Brian Holland with D. A. Davidson. Please proceed with your question. Yes, thanks. First question, if I could. Can you just frame for us kind of what your sales trends are looking like either kind of how you exited the June quarter or to the extent you might have information to that end in July? So what we I'll start and Stefano. Yes, please. Sure. As we mentioned actually, we were up double digit in June July and our prospect for the year is that we will be in a high single digit range roughly. Okay. Thanks. Apologies if I missed that earlier. And then last one for me. Just on the M and A front, Stephane, I think you mentioned in your prepared remarks that you passed on several opportunities. And I'm just reconciling that with the commentary about targeting more European frozen assets. The stuff that you passed on, is that valuation focus? Or is that just kind of is that a valuation issue or is this just thinking about kind of the momentum that you're seeing in Frozen and just a decision that you've made as you looked at other assets maybe outside your core either from a category or geography standpoint. Just maybe any color there that would help us understand the deals that you passed on? Actually, it's all of the above. I'll put it that way. I think we've come up from the start by the way with a list of criteria and we've remained very disciplined with this M and A criteria and all these acquisitions didn't pass the right test, sometimes in terms of valuation, sometimes in terms of quality of assets. And then increasingly so, what we could see is over the last years, this category is really improving. Obviously, it's been exacerbated by COVID, and I think it's more than a short term blip and we're in the middle of this. So with this, when we saw this, we thought that refining going focusing even further behind frozen where we know we understand the category much better than anything else was the right thing. So it's a combination of both. And again, and I use the word probably several times today, so maybe too many times, but I think it's a question of discipline as well. M and A is also a game of patience. It is difficult because sometimes you are you're getting too excited for something that you have worked very hard for. And at the same time, you should never forget that it's about patience, it's about discipline. And discipline in this context means for us that buying back our shares is, we think, the right investment. Appreciate the color. Thank you. You're welcome. Our next question comes from the line of Bill Chappell with Truist. Please proceed with your question. Thanks. Good morning. Good afternoon. Hey, Bill. I guess first on the M and A and on the tender offer, I mean, should we look to that to imply, I guess, one, that you basically the things you're looking at are more expensive than your current stock price and so this was a better use of cash in the near term? And then 2, should we assume that the big potential acquisition that was out there is really kind of moved on to it's really more of the smaller consolidating type acquisitions versus kind of reaching for the big opportunity that sounds like it's now out of reach? I want to do this slightly differently if you don't mind Bill. Back to the multiple, I think multiple is one of the variables and it's only one of them. And sometimes you have fantastic deals that may be at a high multiple and sometimes you have poor deals at low multiple. So I'm not sure that multiples is it's only one variable, one criteria. So I will not admit myself to the multiples. And then in terms of size of the deals, the nature of the frozen food in Europe is such that most of the deals are of a mid size And that's just that. That's just why and the decision to go to return cash to shareholders is just a manifestation of what the reality of the market is. We believe that with the balance sheet we have after the tender, with the cash flow generation we have and we see we compare this with the kind of assets that are available and interesting assets, we believe that we can do them because they're mostly midsized by nature today. So that's that. Got it. And then just switching to kind of private label, I guess the thought is we'll have an extended recovery. Private label is already fairly prevalent. Some of your especially just frozen veggie categories could be viewed as commoditized. I understand that you're putting more money to kind of retain the new customers and brand building and green cuisine is different. But can you kind of help us understand kind of your outlook over the next few quarters and just how you fend off private label or consumer trade down in some of those more commoditized categories? Okay. Let me start with the word commoditized because and I know that a lot of the Nomad Food employees do listen to this session and they would totally disagree with you by the way. When you go to the UK for example and you would say that our piece are commoditized, no, they're coming with premium because they have a quality that is really premium. You can't imagine how much care has been put behind these vegetables in terms of quality, in terms of education, in terms of training with the farmers. And again, it's limited to the UK. You would go to the spinach in Germany, you would have the same. So that's the first thing because commodities, I can tell you. I mean, it's not commoditized. It's quality product and it doesn't come by chance. It's really a question of know and many things. So sorry for this long digression, but I thought it was important to make the point. Back to private label, in Europe, we probably have a longer tradition of private label than in the U. S. I've seen that also in my background as a retailer both in Europe and in the U. S. So today, private label represents around 40%. Depending on the category, but overall, it's stabilizing. What we have seen during this 3, 4 months is actually the market share of the private label has been stable and to some extent in some countries even declining throughout the year, throughout the 4 months. So, now if you're looking ahead of us, when you look at the likely recession, I would even before starting to talk about private label, I would start about I would talk about, let's say, frozen food, which is convenient, but it's also, I mean, affordable and all products are affordable. So this category tends to do well during recession times. Obviously, private label does well as well. But again, we as an A brand, between our core products, Green Cuisine, the retention of our new consumers, we believe and our additional investments, we believe that we have what it takes to do well during these times. And again, private label and A brands do well together, because retailers do need these brands as well. Our next question comes from the line of Jason English with Goldman Sachs. Please proceed with your question. Hey, good morning and good afternoon folks. Thank you for slotting me in. Good morning, Susan. I want to come back to the M and A strategy. And first, I'm very it finds to be very welcome news, the buyback and the increased discipline, the increased focus. But I guess I'm still a little unclear as to what catalyzed this narrowing of focus because over the last couple of years I've heard you talk about expansion to different categories, expansion to different markets. But now you're coming back, you're really narrowing, really focusing and bringing more discipline. What changed? What catalyzed that pivot? I would put it that way, Jason. I think it's the last 5 years have been a journey. When we started, Novan was losing market share in a declining category, a tires category, I would put it that way. And the first thing we've done is to make sure that in terms of turnaround, we would regain our position as leader in the category. And then little by little, what we've seen is the category has at least has a potential had the potential to offer more. And what we see increasingly so is that it is really a very more than a promising. It's doing extremely well as a category. And we are in the 2 sweet spots, which is we are the category leader. We're coming with new products and all the rest of it. I would say COVID has only exacerbated this trend. And we thought from that, it's unavoidable that the best way to be disciplined and also to be mindful in terms of value creation is we are in the middle of this. We have everything that it takes in terms of organic growth. We have what it takes in terms of an organic and inorganic growth. Let's go for it and that's that. But when you think about the mushroom bottles, the COVID retention, the green cuisine, all the things we have developed over the last 5 years, this goes very well with a focused and disciplined approach and organically and inorganically. That's why. And at the same time, we obviously you can imagine, Jason, we've spent quite some time thinking what the pipeline is. And it's without mentioning names, it's a very good pipeline. It's a very attractive pipeline, and that should keep us busy for quite some time. Okay. That makes a lot of sense. I agree with it a lot. Coming back to business momentum, you sort of foreshadowed a bit into 2021 when you mentioned that your cost position, we contemplate both where commodities gone, particularly fish and in currency. In context of the economic backdrop, certainly building on the last question, potential private label pressure and deflationary input costs into next year. How should we think about your pricing line? You successfully raised prices through the inflationary period. Is now the right time? Is it appropriate to give some of that back, whether it be in the form of list price or higher promotions as we think about 2021? Okay, Sami? It's a bit sorry, hi, Jason. I mean, at this stage, to be fair, it's premature, I mean, to talk about 2021. I mean, we are holding a lot of the observation you have in terms of economic trends, absolutely right. And we're going to have an Analyst Day. I mean, we're undertaking now a complete review of our plans. I mean, as we're refining going into the next year capitalizing on the momentum that we have in the second half. And we'll have an analyst there, as we said, I mean, in full to clearly share with you the plans and how we're going to be managing all of this, I mean, across the year, of, let's say, for next year. So at this stage, frankly, we'd rather really reserve the comments for 2021. Yes, yes, yes. I understand. Thank you very much. I'll pass it on. Thanks. Our next question comes from the line of Robert Moskow with Credit Suisse. Please proceed with your question. Hi, thanks. I think several people have already asked about have you seen them start to develop more aggressive private label plans for merchandising? Like your categories are growing and I would imagine that private label or retailers like to expand private label in categories with a lot of growth. So can you comment on what you think their plans are for expansion, particularly in plant based protein, because it seems like there is access to that texturized protein if those retailers want to develop their own versions of green cuisine? Hi, Robert. The answer to your first question, the answer is yes. We see that they're developing plans. And at the same time, we think it's absolutely fine. There is a place for brands and especially for A brands. And we are A brands and that's absolutely critical. There is place for A Brands and for private label. And the game as such has not changed, Robert. It's always the same. You need to come up with things that are attractive to these guys. Plant protein is a good example. An improved quality is another example. Because at the end of the day, what matters for the retailers and I know that for a fact is the key indicator is the gross profit per square meter of per SKU. And from that standpoint, A brands are just fantastic. So that's what we need to deliver. I think at the same time, there will be also a brand and non brand rationalization which is also fine. I think at some stage too much choice for the consumers is not necessarily a good thing and that's what the kind of things we need to do. And at the same time, it's going to be our job obviously to make sure that our innovations like Green Cuisine are well positioned. But to your point about plant based protein, is it available, is the technology available to these guys? At some stage, it will be. But again, nothing new in this world. It's always been like this. It's the job of the brands to come up with the innovation. And at some stage, is it 6 months, 1 year, 2 years or 3 years down the road, the retailers that are obviously following with private label. So that's nothing new and I don't see why brand protein should be different from that standpoint. Again, it's our job to come up with better quality and that's why you heard me saying I was almost becoming, I would say, romantic about the quality of our plant protein and with poultry, which is just remarkable. Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please proceed with your question. Yes. Hi, good afternoon. Good afternoon. So I wanted to talk about various sales in various countries because as we dig a little bit deeper, it feels like some countries did better than others. We know about some of the issues in the Nordic region, but I thought UK was a little bit below Italy, Germany, France. So I'm curious if you could provide more color around that. Was it more of a market differences or were there share differences? Just once again. Yes. Hi, Faisal. Overall, if you think of, let's say, all of the markets, let's say, with minor exception, we had a pretty consistent if you want performance across the board. I mean, as we had mentioned, I mean, in the script, the vast majority of our market have been growing quite significantly. And if you took about the U. K, I mean, the U. K. Was up about 16% in Q2, which was quite above, I mean, average. So I think when you look at, effectively, the total map from the market, you really see the big ones, I mean, clearly winning very well driving the growth and a bunch of smaller ones as well continuing to get on the same growth pattern. But the growth was pretty broad based, I would say. Okay. And then just on I know you've talked previously about e commerce and I think when we talked in June, you talked about the significant acceleration in online grocery and how your share is higher there. So I'm curious if those trends have continued as some of these markets have begun to reopen and what your share performance has been online? The answer is yes. I think the growth remains very, very high, sometimes north of 50% still now. And so that's more than a blip. And in the meantime, interestingly enough in the most mature market that is the U. K, all the big players have doubled sometimes their capacity. We also have obviously people like Ocado. So it's there to stay. Again, we like e commerce. We like e commerce because it's frozen food is doing well with e commerce for a variety of reasons, defensive and offensive, and we see that in our numbers. Okay. And then I do apologize for coming back on the tender question. But in my opinion, like share repurchase, especially for a small cap company, hardly ever creates long term value creation. If anything, it might result in reduced liquidity. So I wonder if you thought about reducing your debt even further as opposed to repurchasing shares? We looked at all possibilities in the context that Stephane has described. And our borrowing costs, I mean, today are about 3%. We looked at effectively the cash needs that we would have for the future in light of all of the comments that have been made. We have a pretty good, I mean, leverage in place. Actually, that would allow us to continue the strategy of growth that we have. And we really felt after a thorough review of all of our capital allocation option that this was the best option, I mean, from a value shareholder value creation. Okay. Thank you. Our next question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your question. Hi. Thank you for taking my questions and congrats on a strong quarter and the outlook as well. Thank you. My first one is just as you look into 2021, is it possible to grow year over year given the extremely tough comps you've been facing? And what would it take to drive growth if it is there? Is it Green Cuisine? Is it high customer retention from people new to the brands this year? And what are you are you expecting to achieve that at this point? As I had mentioned, I mean, earlier to Jason, I think it's premature to say at this stage, we're clearly gathering all of the detail if you want to really set up our goals, I mean, as we get into the next year. All I would say is that effectively we have a strong momentum with especially with the investment that we are making in the second half, exiting, I mean, 2020. And we are committing to driving, I mean, long term sustainable growth. And we believe that we have the driver. I think the strategies we have in place have been proving very effective pre COVID, during COVID and exiting from COVID with investment that you are making, we clearly feel confident of the momentum we have exiting the year. Got it. And then just quickly on the July trends, are you finding that that's more people who are sticking with the brand as they go back to their normal lives? Or is it more that there's people staying home either due to a resurgence of pandemic here in some regions or even where people are relatively safer, they're still electing to stay home and eat at home and not at restaurants? At this stage, and again, it's quite early to say, but what we see is really a combination of both, John. Got it. Thank you for the color. We have no further questions at this time. Mr. Deshmeker, I would now like to turn the floor back over to you for closing comments. Thank you, operator, and thank you all for your participation on our 2nd quarter earnings call. We are pleased to deliver another quarter of solid performance and are making the necessary strategic investments to fuel sustainable long term growth in the business. At the same time, we are pursuing a disciplined approach to capital allocation, which has created the opportunity to return a significant amount of excess cash to our shareholders. Stay tuned for more details on the timing and agenda of our Investor Day, which we are planning for this coming fall. We look forward to updating you on our progress when we next report Q3 results in November. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.