Earnings Call: Q2 2021

Aug 11, 2021

Earnings release

Good morning, and welcome to SunOpta's Second Quarter Fiscal 2021 Earnings Conference Call. By now, everyone should have access to the earnings press release that was issued this morning and is available on the Investor Relations page on SunOpta's website at www.sunopta.com. This call is being webcast and its transcription will will be available on the company's website. As a reminder, please note that the prepared remarks, which will follow, contain forward looking statements and management may make additional forward looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. We refer you to all risk factors contained and SunOpta's press release issued this morning, the company's annual report filed on Form 10 ks and other filings with the Securities and Exchange Commission for a more detailed discussion of the factors that could cause actual results to differ materially from those projections and any forward looking statements. The company undertakes no obligation to publicly correct or update The forward looking statements made during the presentation to reflect future events or circumstances, except as may be required under applicable Securities Laws. Finally, we would like to remind listeners that the company may refer to certain non GAAP financial measures during this teleconference. A reconciliation of these non GAAP financial measures was included with the company's press release issued earlier today. Also, please note that unless otherwise stated, all figures discussed today are in U. S. Dollars and are occasionally rounded to the nearest million. And now, I'd like to turn the conference call over to SunOpta's CEO, Joe Inan. Good morning and thank you for joining us today. With me on the call is Scott Hawkins, our Chief Financial Officer. Our 2nd quarter results Nearly 10% revenue growth and 61% EBITDA growth demonstrates the strength of our strategy and the quality of our execution against our corporate priorities. These priorities are portfolio transformation, Accelerating customer centric innovation and doubling the plant based business. We continue to emphasize We are realizing in plant based beverages reflects our competitive advantages combined with continued strong consumer demand. In our fruit based business unit, the progress we continue to make is being driven by internal efforts to optimize customers, capacity, operating costs and pricing. Before I begin unpacking our Q2 results, let me offer 3 key takeaways from the quarter. 2nd, based on our business development pipeline with existing and new customers, we remain about the long term growth prospects for our plant based portfolio. 3rd, though we remain very focused On co manufacturing, our portfolio of owned brands in plant based is also performing well, delivering solid gains, helping us bring innovation to market And increasing in importance in both revenue and margin. Let me first start with a high level view of key accomplishments from the Q2, and then I'll share some of the details by segment. Overall, 2nd quarter results were Q2 2020 to $202,300,000 and up 17.5% compared to Q2 2019. Gross margin improved by 40 basis points to 13% and adjusted EBITDA advanced 0.8 percent to $16,100,000 or 8 percent of revenue. Plant based continued to be our key growth driver, While our focus in fruit based remains on improving productivity and profitability, and we demonstrated the significant leverage inherent in our model, with adjusted EBITDA increasing at a much faster rate than revenue. We are pleased with the progress of our strategic initiatives around expanding capacity and plant base and improving productivity across the network. Manufacturing is core to our business and the progress we have made in transforming our operations has been impressive. From multiple capacity expansions in plant based to footprint optimization and automation in fruit, we are building real competitive insulation in our The added production we brought online and plant based in the Q4 of 2020 is performing well, giving us headroom to aggressively pursue new business opportunities. Our Allentown project is also tracking the plan, Expected to be operational in late Q4 and we are starting a similar sized project in Modesto. Automation implemented in our plant is driving solid gains in productivity and making us more nimble around core capacity utilization. We have made considerable progress in consolidating our fruit based operations with the exit of our South Cape facility in July and closure of our Santa Maria facility in Q1. Finally, we've made significant progress de risking our fruit based operations, including sourcing 3x more fruit from South America and processing over 50% more in Mexico versus a year ago. The trends around plant based combined with our strategically advantaged capability has set the stage for yet another expansion of our I'm pleased to announce that we are in the final stages of negotiating a lease for the construction of a new mega facility in the Dallas Fort Worth area to support long term growth in our plant based business. This greenfield 275,000 square foot facility is by far the largest CapEx project we have ever undertaken. Having capacity to grow is a core element of our 5 pronged service offering, and we are excited that this capacity will continue to allow our customers and our brand to keep pace with consumer demand. The plant is expected to be operational by late 2022 and will augment the incremental capacity we brought online at the end of 2020 along with the Allentown and Modesto expansion projects. In aggregate, the Projects we have in motion now effectively give us the ability to double the business. We have intentionally designed this project to be developed in phases as customer demand rises. In addition to supporting continued growth in our core business, this new facility broadens our geographic footprint, adds new capabilities and further strengthens our competitive position as a partner for our customers. With this new plant, we will have facilities in the East, the West, the Midwest and now the South, allowing us to offer very competitive costs by having a more efficient national network. Now let me turn to our segment results. Starting with our plant based segment, We have 3 strategic priorities. 1st, build a competitively advantaged business model around quality, capacity, refrigerated plant based milks and third, build a multi pronged go to market business that includes co manufacturing, private label and owned brands. Results in the 2nd quarter show significant progress on all measures, including a 21.4% increase in plant based revenue, which was on top of an 11.9% increase in the Q2 of 2020, generating a 2 year stack of 33.3%. Now let me share a bit of retail sales category data to help frame our results. The plant based beverage category in retail continues growing despite overlapping the COVID frenzy of Q2 2020. For the 13 week period that aligns with our Q2, plant based milks increased 3.7% overall due to continued strong sales of oat milk. From a foodservice standpoint, Plant based milks are an ingredient in coffee beverages and therefore we don't have syndicated data for food service. But based on our sales It is safe to say there were robust sales of plant based coffee drinks in foodservice. There are 3 primary drivers of our growth in the From a product standpoint, it was oat milk. From a channel standpoint, it was foodservice. And from a go to market standpoint, it was both Our core co manufacturing customers and our own brands. Oat milk accounted for half our growth in Q2, which is similar to what we experienced in Q1. Importantly, the gains we are realizing in oat milk are coming from both existing customers like Starbucks as well as winning new business. In addition to strong foodservice new business, we signed a multiyear extension to continue supplying oat milk to a large CPG company who is currently the market share leader in retail oat milk. Their sales success, along with strong results from other customers, provide authentic marketplace testimony To the quality of our oat milk and the proprietary manufacturing process, we have built to help our customers differentiate their product offerings. It is quite likely that the demand we are seeing for our industry leading oat milk will necessitate the construction of yet another oat processing system in the not too distant future and would be in addition to the Texas project. As I mentioned, we will phase these projects in as good capital stewards. From a go to market standpoint, we saw very strong growth in our top 5 customers with sales growth of 49% in the quarter. As it relates to our own brand, the addition of Dream and Westsoy, which we acquired in mid April, were additive to plant based revenues in the 2nd quarter, accounting for approximately 4 percentage points of our segment's growth. In addition to this, our recently launched brand of organic oat milk creamer, Stone is seeing strong sales velocities in both retail and e commerce and is gaining distribution with a line of sight to being in over 3,500 stores by year end. From a channel perspective, our growth in plant based during the second quarter Was more concentrated in foodservice, which has been experiencing a rebound versus last year when COVID was significantly pressuring this channel. Moving to our fruit based segment, our 3 strategic priorities are number 1, derisking the business through geographic diversification, Customer pricing programs and better grower relations. Number 2 is it focused on becoming a low cost operator in frozen fruit through automation and footprint reengineering. And number 3 is to evolve the portfolio via innovation towards more value added offerings. We made solid progress against all three of these in the quarter. We have been focused on supply chain reengineering to lower costs and improved margin, which is expected to enable us to deliver sharply higher earnings when revenue growth returns to a consistent upward trajectory. 2nd quarter results in fruit based were illustrative of these efforts. Despite revenue being down 1.9%, We showed improvement in both segment level gross margin as well as segment level operating margin. Similar to plant based, The normalization of at home consumption trends contributed to lower retail sales volume of frozen fruit, partially offset by increased foodservice volume. For the 13 week period that coincided with our results, Retail frozen fruit category sales were down 1.7% due to lapping significant COVID driven growth in the prior year period. It's a much different story in fruit snacks with the category experiencing Strong growth of 10.4%. Our initiatives around rationalizing marginally profitable customers and products were another factor pressuring fruit based revenues in the 2nd quarter. Finally, supply constraints with certain fruit varieties negatively affected revenue from blended fruit offerings. This was also a headwind in Q1, so not a surprise. Partially offsetting these factors were the strong performance in our innovation driven fruit snacks business, reflecting volume growth from new business development and very strong consumer demand. Finally, Increased commodity pricing for raw fruit provided a 3% lift to 2nd quarter fruit based revenue as we passed along higher costs to customers. From a customer standpoint, lower distribution From large retail customers coupled with supply challenges negatively affected our frozen fruit business in Q2. Conversely, significant growth, especially from large CPG customers in Snacks drove revenue and margin increases. Our top 5 strategic customers in snacks collectively grew 76% in Q2 versus the same time in 2020. As part of our effort to evolve the portfolio through innovation, we'll have a fruit smoothie base, whole fruit and toppings like quinoa crisps And granola. We are also launching chia seed bowls, which feature a chia seed base and whole blueberries. Consistent with our agnostic go to market approach, this product innovation will launch in some retailers under our brand Sunrise Growers. It will launch as a private label offering in other retailers and we are also in development to co manufacture this product for a large CPG We are currently in test with a major club store chain under the Sunrise Growers And we have authorization from several customers starting in Q4 of 2021 and rolling into 2022. In summary, we continue executing at a very high level across the organization. Through the first half of twenty twenty one, we've delivered on our We've been winning business with new customers, capturing additional business from existing customers, adding capacity and expanding our portfolio of products. Coupled with our strong balance sheet, SunOpta remains well positioned for substantial long term growth in some of the fastest growing CPG categories, all of which support my continued optimism for the future. We remain committed to the previous 2021 outlook and believe our strategies and our team will continue to deliver as we seek to fuel the future of food. Now I'll turn the call over to Scott take us through the rest of the financials. Scott? Thank you very much, Joe, and good morning, everyone. We're excited to report another solid quarter. As Jill mentioned, 2nd quarter revenues of 202,300,000 We're up 9.7% year over year as strong volume gains led to a 21.4% increase in plant based, While fruit based had a modest decline of 1.9% as we continue to focus on rationalizing marginally profitable business. Adjusted EBITDA increased 60.8 percent to $16,100,000 as our strategic focus I'm growing plant based and optimizing fruit created significant leverage across our business. Gross profit was $26,300,000 for the Q2 of 2021, an increase of 3 point compared to $23,300,000 during the Q2 of 2020. The plant based segment accounted for $3,200,000 of the increase in gross profit due to higher volumes, the addition of the Dream and West Soy brands and productivity improvements within our plant based beverage and ingredient operations. Gross profit in the fruit based segment was basically flat Change impacts from stronger Mexican peso were largely offset by volume growth in fruit snacks and fruit based toppings along with productivity gains in the plants. As a percentage of revenues, 2nd quarter gross margin 13% compared to 12.6 percent a year ago, a 40 basis points increase. The plant based segment gross margin was 17.9%, down only 30 basis points from last year. This is a very strong result considering plant based absorbed 110 basis points of depreciation expense associated with the capacity expansions we added in the 4th quarter and 40 basis points of increased transportation costs. These headwinds were almost entirely offset by increased revenue and productivity gains, reflecting our investments to drive scale and efficiency. Raw material pricing did not have a material impact on plant based gross margins Because of the weighting toward the co manufacturing customers, which tend to operate under pass through pricing arrangements for all raw material inputs. Gross margin in the fruit based segment was 7.1% compared to 7% last year, an increase of 10 basis points. Our near term focus in fruit based continues to be optimizing profitability through a combination of rationalizing marginal business, Operating income was $1,700,000 in the 2nd quarter compared to a loss of $400,000 in the prior year. SG and A increased $800,000 or 3.8 percent to $22,700,000 as integration expenses related to the Dream and Westlake acquisition were partially offset by lower variable compensation costs. Loss attributable to common shareholders from continuing operations for the Q2 was $1,700,000 or $0.02 per diluted share compared to a loss of $7,700,000 or $0.09 per diluted share during the Q2 of 2020. Note that this quarter's loss is after giving effect to $4,700,000 of other expense charges, primarily related to the exit of our Southgate food processing facility compared with other income of $800,000 last year. On an adjusted basis, 2nd quarter 2021 earnings were $100,000 or $0.00 per diluted share versus an adjusted loss of $7,900,000 or $0.09 per diluted share in the prior year period. As Jill mentioned, adjusted EBITDA was $16,100,000 compared to $10,000,000 in the prior year, a 60.8% increase. I'd like to remind listeners that adjusted EBITDA and adjusted earnings are non GAAP measures and it reckons up $69,000,000 from $137,000,000 at the end of the Q1 due to the seasonal build of fruit inventory along with the acquisition of the Dream and WestSoy brands. Total debt reflects $159,000,000 drawn on our asset based credit facility, with a balance representing smaller credit facilities, lease and other financing arrangements. Leverage stood at 3x at the end of the second quarter versus 6.3x a year earlier. From a cash flow perspective, cash used in operating During the Q2 of 2021 was $39,100,000 compared to cash generated of $2,700,000 during the Q2 of 2020. The change in operating cash flow versus last year was due to a stronger seasonal build of food inventory and more expensive inventory compared to this time last year. Cash used in investing activities was $32,400,000 compared with $6,300,000 in last year's Q2, reflecting the acquisition of Dream and Westsoy. Prior to providing our outlook, I'd like to spend a few minutes on inflation as this remains a major area of discussion across all industries. The potential impact of inflation on our business varies across 3 categories, which are 1, raw materials 2, operating costs and 3, supply chain costs. These three categories have different impacts based on how we go to market, which are 1, private label 2, co manufacturing and 3, branded products. For example, in our plant based business, A significant amount of our revenue is through co manufacturing arrangements, where our customers typically bear most of the risk of price variation in raw material costs. In contrast, our fruit based business is more concentrated in private label product where price pass through timing tends to lag and where we are largely, but not fully insulated from increases in raw material prices. In branded products, we did not experience any material inflationary headwinds in the quarter, but changes in commodity prices will need to be Costs entirely, so any inflation must be offset by plant productivity initiatives. Finally, when we look at supply chain costs so they bear the impact of changing freight rates. It's the opposite with our private label business, where we are typically delivering the product to the customer, noting there is some opportunity to pass along cost increases, but again, It's more limited and often lags in timing. Lastly, in branded products, we are exposed to changes in freight costs and need to offset those with productivity gains. In summary, like everyone, we are facing rising costs in many areas, but the most meaningful areas to us today Our plant based business is largely insulated. In total, given our increase in overall margin, we have demonstrated our ability to grow gross profit and EBITDA despite an inflationary environment. At this time, we don't see any inflationary trends in our business that would dramatically impact this progress as we go into the second half of 2021. Let me close by providing some commentary around the outlook for second half of twenty twenty one. Obviously, there is uncertainty surrounding the impact of COVID-nineteen and the potential changes in consumer behavior as a result. But based on our current expectations, we offer the following outlook. On the top line, we forecast plant based to look similar to Q2 in terms of year over year growth. In fruit, We similarly think revenue will look like Q2 with single digit declines. From a margin standpoint, it is very much the same story With plant based remaining in the high teens and fruit being similar to last year's margin levels, recognizing we have more challenging comps in the back half. Finally, from an EBITDA standpoint, we forecast strong year over year improvements, Again, recognizing our comps get tougher in the second half, where last year's second half represented 60% of 2020 EBITDA. Before opening up the call for questions, just a reminder that for competitive reasons, we do not provide detailed commentary regarding customer or SKU level activity. With that, I'd ask the operator to please open And your first question comes from Andrew Strelzik with BMO. Hey, good morning. Thanks for taking the question. My first one is about your commentary around the competitive mode and competitive dynamics. And it certainly sounds from the data points that you provided like everything is in And you mentioned some ways that you're building your competitive insulation. But can you talk about what drives your competitive moat, where you're what you're doing to build that competitive insulation and if you've seen any changes in competitive dynamics kind of over the last several months or quarters? In terms of changes in the competitive landscape, we have not seen anything material so far this year. In terms of how we view our competitive differentiation in the marketplace, we We're particularly proud of the strength of our R and D organization and our ability to partner with big CPG companies to drive innovation And then deliver the quality that they expect day in and day out. 2nd is we have very deep long relationships with our customers. And third, we believe we have a very advantaged supply chain and certainly the project that we referenced in Texas is a major strategic Capabilities as well as cost and sustainability differentiators is going to be just a further strengthening Of our business model, this gives us plants in or within 100 miles of 4 of the 5 biggest states in the U. S. With Texas of course being the 2nd biggest state in the U. S. And so we are excited about That is the further insulator for the business. Okay. That's helpful. And then on the outlook for the fruit based segment, Is the change from a top line perspective relative to what you've communicated prior, is that really related to the pricing that you mentioned? Or Are you seeing some underlying improvements, whether it's in the fruit snacks that you mentioned or otherwise that the outlook underlying has actually Yes. As referenced, we're optimistic and have great momentum in the fruit Next business, frozen fruit in 2020 had some pretty major volatility from a COVID standpoint. So we are seeing some return to normalization, if you will, in the retail landscape. And so we think those two factors combined afford us the opportunity to deliver a pretty solid back half number relative to the SKU and Customer rationalization that we've done. Sure. That makes sense. And then just lastly for me, is there any other detail you can provide on the kind Your R and D capabilities with the new facility or excuse me, the new headquarters. So I'm not sure if that plays into it, but any kind of color around that would Helpful. Thank you. Yes. I think we'll get into unpacking that as we get kind of closer. I mean, we're at the stage now. I mean, we're on the doorstep hopefully of Signing a lease here and we've done site selection. We have kind of broad understanding around capabilities that we're going to put in. But this Facility is really an unlock for growth in 2023 beyond. And so I think it's probably more appropriate for us to Hold on specifics there until we get closer. So hopefully that makes sense. Yes, absolutely. Thank you very much. Your next question comes from John Anderson with William Blair. Okay. A lot of areas we could go into. Let me start by asking a little bit about foodservice, which was A strong channel for you in the quarter. Obviously, you're getting help from the kind of the rebound in that channel. You did call out Customer in the prepared comments, I think your largest customer and referenced oak based products, I think you're supplying outpaced products for them. Is that new and is that durable? Yes, that is new. With Oat, we started Shipping out to Starbucks in the middle of the second quarter. We are playing a secondary supplier role there. We were pleased that we were able to step in and help our largest customer with one of our SunOpta branded products. I know Some of the folks on the call have seen that product in stores and have asked us about it. So we were we felt fortunate that we were able to step in and help them. In terms of durability, we would fully expect that we will be in a position to continue to help them well into 2022. Okay. Thanks. That's super helpful. And then you mentioned that I thought it was interesting, you kind of called out brands, your own brands in A little bit more, I think, than you have in the past, even noting that they're playing an increasingly important role In the portfolio from a contribution perspective, could you talk a little bit more about that and how you kind of do that in a way that allows you to remain kind of customer agnostic as well? Yes. Obviously, with the acquisition in mid April, the revenue that we realized It was 100% incremental and so brands delivered, just the acquisition delivered 5 points of the 21 points Growth that you would have seen and so we felt it was appropriate to call that out. I would tell you to date, our brand initiatives have been Additive with no subtraction. The integration is going well. The sales volume is coming in as Exactly as we've expected. We're very focused on non cannibalistic growth levers And trying to push on non cannibalistic activities with respect to our large co manufacturing customers. And really what I can tell you is, since the acquisition, all of the activities with Our major co manufacturing customers have all been around deepening and lengthening our partnership. Okay. Thank you, Amit. I did also want to ask sorry, I'm circling back around to You made a comment on a multiyear extension with the Tacoma for the largest, I think oat milk brand in the U. S, did I hear that one right? And is that a how new is that? What kind of duration or visibility does That new arrangement kind of provide you and is that kind of part of the calcium lift for the greenfield facility in Texas? You're just seeing In aggregate, more demand, longer relationship durations from big customers and plant based? That is not a new relationship for us. That has been a long standing relationship with The company that is currently running the leading national brand in Elk Elk in the U. S. And it was a multiyear extension. Okay. I guess both the last question, I'll pass it on, is around just outlook. I think last quarter, I may be a little off on this, but last quarter you may have said That you expected strong double digit EBITDA growth in 2021. I think today you said EBITDA growth without the double digit. I might just be parsing words, but Has the outlook changed at all in terms of EBITDA in the second half or for the full year relative to kind of your initial expectations or expectations as of last quarter? Thank you. Hey, John and Scott. Good morning. As you know, the outlook has not changed. I think what we want to recognize is that the comps obviously get a lot tougher in the back half. I think I pointed out that 60% of last year's EBITDA was in the second half. So no change in outlook, just on a comparative basis, Your next question comes from Alex Fuhrman with Craig Hallum Capital. Great. Thanks very much for taking my question. Wanted Talk a little bit more about oat milk. I think that's pretty amazing that it's driving half of your revenue growth Plant based considering it's still a relatively small category. Can you talk about where that growth is coming from? That's been more grocery or food service. And then as we think about the capacity you have coming online Over the next year or 2, both the new Texas projects that you alluded to today as well as some of the other So the first part of your question, foodservice or retail, the answer is yes. We are seeing strong oat growth in both Retail sales, co manufactured brands is that predominantly sell into retail, so that was a strong growth lever, excuse me, As well as significant growth in our foodservice sales of oat milk. So both Channels were strong drivers of Oat. Certainly relative to the capacity additions, that is a network Answer in that, yes, those projects will absolutely enable further growth in oat milk. Okay, great. That's really helpful. And then just thinking about your different customers and It sounds like retail grocery store business continues to be strong even as you're lapping tough Related to the pandemic last year, what does that look like as you kind of move into the 3rd and 4th quarter? Presumably, foodservice is going to continue to recover on the other end of the pandemic. Are you expecting Maybe some choppiness as kind of the push and pull between retail and foodservice plays out or has it been pretty much The Q2 overlap in foodservice By far the biggest overlap anomaly that we experienced last year. And so we would see it returning to kind of more historical levels and more traditional overlaps. And that's why we've shared some of the 2019 Numbers as we have gone through this as well is obviously it's a little bit easier to compare to the pre COVID dynamics of the business than always trying to explain Crazy overlaps from last year. Great. That's really helpful. Thank you. Your next question comes from Mark Smith with Lake Street Capital. Hi, guys. A couple of questions for me. First off, you talked about inflationary pressures that you're seeing coming across the board. Can you talk about your ability to take price in your branded products? Yes. As Scott referenced, we have not experienced any major inflationary pressures On the branded side of things, what I would say is obviously the U. S. Retailers are certainly on the receiving end of Significant price increases from many, many, many brands. So I don't think it would be an odd conversation if we found ourselves Call it 6 months' time having to go into the grocery retail environment and take a price increase. But as Scott referenced, as we sit today, we do not foresee any material inflationary pressures on our branded products that would require us to take a price increase. Okay, great. And then as we look at the fruit business, you guys talked about some of the headwinds that you faced there. Anything you can give us on kind of your outlook and what it would take to turn this business profitable again? Yes. I mean, I'll offer kind of a summary of the season. I mean, we met our pack So we processed as much fruit as we need for the next 12 months. The plants ran Better than prior year, but the cost of the fruit, meaning the price that we paid to the growers was significantly higher than previous years, really as a result of just the really skinny inventory positions that everybody in the We had produced a bit of a pricing frenzy, if you will, that lasted for the entire season. We obviously feel like over We can get that pricing moved through to our customers, but we pay for the fruit all upfront and then we realize the pricing over 12 months. So, but in total, I mean, we feel like we can get the majority, the vast majority of that higher cost That is helpful. I think the two headwinds, right, are, as Joe just, I think accurately summarized, improved pricing, but also the peso Strengthening is also a bit of headwind because remember we've got a large facility. We've just run 50% more fruit through down Mexico, I think when I reflect on it, I'm pleased that I think we've pulled the right strategic levers, 3 times more sourcing of food in South America, 50% more processing in Mexico, that's obviously cost advantaged relative to our U. S. Footprint. And then, automation running through those plants, The footprint consolidation and the SKU rat work that I think we've pulled the appropriate levers. I think the key will be just the timescale of the development of And looking at the fruit and snack business, it's doing well. Is there just not enough to really You know drive that business higher to make up for some of the headwinds that you face in other places? And then if you can talk about the new fruit Bold business, is that just a timing that that's going to take a couple of quarters before we see any impact from those new products? Yes. I mean, we the fruit snacks business is a small but mighty growth lever for the business right now that we are looking So it is kind of full steam ahead on the fruit snacks business. It's not as large as our frozen business and therefore just the levering effect We'll take some time. In terms of the bowls products, we share that in the context of one of our 3 strategic Priorities and fruit is moving towards more value added portfolio of products. And so, yes, I mean, we have the product in Distribution right now, but it certainly takes, I would say, north of 4 quarters For retailers to do resets, authorizations, etcetera. So, unfortunately, they are not, aligned in their timing as to when they do resets, but We've had great reception for the product so far. Excellent. Thank you, guys.