Q2 2020 Vital Farms Inc Earnings Call
[music].
This time all participants are in listen only mode. After the speaker presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone.
If you're acquiring any further assistance please press star zero.
Now my pleasure to introduce Investor Relations I see are actually diesel.
Thank you good afternoon, and welcome to vital farms second quarter 2020 earnings conference call and webcast.
On today's call, our Russell P.S., Canseco, President and Chief Executive Officer, and Jason Dell, Chief Financial Officer, and Chief operating Officer.
By now everyone should have access to the company's second quarter earnings press release filed today after market close.
This is available on the Investor Relations section of the company's website at Www dot vital farms dot com.
Before we begin please note that all of the financial information presented on today's call is UN audited and during the course of this call management may make forward looking statements within the meaning of the federal Securities laws.
These statements are based on managements current expectations and beliefs.
And involve risks and uncertainties that could cause actual results could differ materially from those described in these forward looking statements.
Please refer to today's press release.
The company's quarterly report on form 10-Q for the quarter ended June 28, 2020 filed with the FCC and other filings with the FCC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied.
Any forward looking statements made today.
Please note that on today's call management will refer to adjusted EBITDA, which is a non-GAAP financial measure while the company believes this non-GAAP financial measure provides useful information for investors. The presentation of this information is not intended to be considered an isolation or as a substitute for the.
Financial information presented in accordance with gap.
Please refer to today's press release for a reconciliation of adjusted EBITDA to with most comparable measure prepared in accordance with gap.
I'd also like to note that we're conducting our call today from our respective remote location.
As such there may be brief glazed cross talk or other minor technical issues. During the call. So thank you in advance for your patience and understanding.
I'd now like to turn the call over to Russell D.S. conceptual President and Chief Executive Officer of vital farm Russell.
Thank you Ashley and good afternoon, everyone. It's great to speak with all of you on our first earnings call as a public company.
On today's call I will briefly review, our second quarter financial highlights provide an overview of our business model and discuss the reasons. We believe our brand is well positioned for long term growth.
Jason Dale our Chief operating Officer, and Chief Financial Officer will then review, our second quarter financial results in more detail and discuss our fiscal 2020.
We then look forward to taking your questions.
First or second quarter financial highlights.
Please to report strong second quarter.
Net revenue increased 84% to $59.3 million compared to the second quarter last year.
We also saw positive trends in our key profit metrics gross profit margin increased over 400 basis points year over year.
Adjusted EBITDA improved 111% from the second quarter of 20 $19 million to $9.3 million, demonstrating our continued increasing profitability.
Because many of your New York story, I would like to provide an overview of our business model and our growth strategy.
Farms is on a mission to bring ethical due to the table.
By coordinating a network of approximately 200 small family farms and bringing their products to a national network of approximately 14000 stores.
Our values are rooted in contract capitalism, exemplified by our belief that to build a sustainable enterprise, we must prioritize the long term benefits for each of our stakeholders, our customers and consumers our employees, who we call crew members, our farmers and suppliers our communities the environment.
And our stockholders.
Sure if I'd be corporation as well as a public benefit Corporation.
Our premium and values driven positioning in genders trust with consumers and makes vital formed a strategic and valuable brand for retailers and as we continue to build trusted brand to nexsan butter I'm optimistic about the categories, we could potentially disrupt the offer consumers and other stakeholders better options.
Since our founding in 2007, we have focused on delivering growth and profitability working Apple we delivered a net sales growth at 64% kind of gross profit growth of 71% in the first half 2020.
In the last 52 weeks ending June 14th 2020, we were the number one pasteuria tech brands with 78% dollar share of the U.S. pasture raised tech markets and the number two overall brand based on retail dollar sales.
Next I'll turn to our growth strategy.
Our growth strategy consists of four key elements first expand household penetration through greater consumer awareness second grow within the retail channel.
Third expand our footprint across foodservice for extend our product offerings through innovation.
Now I'll walk through our highlights from quarter to along each of these four dimensions.
First helpful penetration.
The second quarter household penetration increased to 2.7% up from 1.9% at the end of 2019 and up 70 basis points on a sequential basis from the first quarter.
We recognize that some of these gains are driven by trends toward more eating at home due to cope with 19.
We do see some early signs that consumers were trying our products for the first time are making repeat purchases.
Example, during the cobot stock up you read the eight weeks ending April 19th approximately 450000, new buying houses so purchase vital farms.
In the following eat your P. Eight week period, ending June 14, 20% have already become repeat purchasers and 45% of those purchased vital farm eggs multiple times during busy.
Second grow within the retail channel.
During the second quarter vital form store count increased by over 700 doors, driven primarily by the grocery or food clapped the tree our velocity in the class of trade remain robust despite the expanded distribution and in the natural channel, including whole foods philosophies increased by double digits.
Third expand our footprint across food service, well, we see growth opportunities in foodservice headwinds in that sector in quarter, two limited our ability to attract new customers. This remains a small segment of our business and we look forward to bring additional focus to it.
The sector rebound.
For extend our product offering through innovation.
Our focus in quarter two with on the successful ramp up production of argue egg bites, which we launched in August egg bites are new line of single serve refrigerated bites made with high quality ingredients, including vital farms ashtray liquid eggs hatcheries cheese.
Mainly raised me and vegetables.
Consumers are staying at home more than usual right now and for many their days are busier than ever we created egg bites to address the growing number of consumers, who crave protein pack breakfast made with fresh ingredients, but who don't always half the time to cook.
As our first multi ingredient product. This launch has given us valuable experience in the entire innovation process from ideation to procurement to co manufacture management.
Our successful launch involve many crew members from across the company and we thank them for their tireless efforts to bring this product to market.
Now I'll talk a bit about the impact of cobot on our business as we mentioned earlier, we believe kobin related shifts in consumption toward in home.
I have created Tailwinds for our retail product.
It's like February we focused on the health and wellbeing of our crew members and other stakeholders.
As a result, we have seen limited impact on our supply chain with just to confirm cases, among our operations team at X Central station in Springfield, Missouri.
Their continued healthy and commitment has allowed us to deliver increased production above pre cobot levels to help supply the increased demand we're experiencing from a retail partners.
In summary, we believe buckle farms is incredibly well positioned for growth as we remain focused on increasing penetration in both retail and foodservice channels, increasing brand awareness ongoing product innovation and continuing to support family farms as we sort of a robust market for food produced from humanely raised.
I'd like to now turn the call over to Jason who will walk you through our second quarter financials.
Thank you Russell and good afternoon, everyone. It's great to be speaking with you on our first earnings call the public company.
We're very pleased with our second quarter financial results and what we believe are significant opportunities for growth.
We've made meaningful investments to build a growing trusted business as we increase penetration in the retail channel.
Revenue in the quarter was $59.3 million, 84% compared to the second quarter last year.
Our strong quarter gives us confidence in our expectation to exceed total net revenue of $285 million for the full year of 20, twond, representing a growth rate in excess of 45% compared to 20, Mike.
Gross and net revenue for the second quarter with 2020 was driven primarily by increasing gross <unk> and butter sales, which were mainly because of volume increases to distributors and a high turnover rate of sales to retail customers some of which resulted from stay at home trends associated with co mid nineties.
The increase in net revenue was partially offset by sales incentives offered to customers in connection with <unk>.
Gross profit was $22.7 million or 38% of net revenue for the second quarter of 2020 compared to $11 million or 34% of net revenue for the second quarter last year.
The 11.7 million dollar increasing gross profit and the more than 400 basis points of course margin increase was primarily due to the increase in net revenue.
A portion of the increase in gross margin attributable to lower cost associated with warehousing and transportation chalet inventory.
Total income from operations was $9.1 million in the core compared to $3.9 million and the second quarter last year.
5.2 million dollar year over year increase was primarily due to the increase in net revenue and expanded gross margin.
Net income was $5.9 million or 16 cents per diluted share compared to $2.8 million or eight cents per diluted share in the second quarter or 29.
Total operating expenses were $13.4 million or 23% of net revenue compared to $7.1 million were 22% of net revenue in Q2 last year.
It's primarily includes SGN a expenses of $10 million, a 5.2 million dollar increase compared to Q2 of last year and shipping and distribution expenses of $3.4 million, an increase of $1.3 million year over year.
The increase in SGN, a was primarily due to an increase in employee related costs due to increased overall headcount to support our growth increased spending on marketing programs and an increase in corporate development expenses associated with our IPO.
The increase in shipping and distribution expenses was primarily due to an increase in sales volume, which resulted in increased costs related to third party free associated with distribution of our products.
Our adjusted EBITDA was $9.3 million for the second quarter of 2020 compared to $4.4 million in the second quarter of 29 tea, which represents an 111% increase.
The improvement in adjusted EBITDA was primarily due to expanded gross margin as well as leverage overall fixed operating costs.
Looking ahead, we expect adjusted EBITDA ought to be in the range of $14 million to $16 million for the full year of 2020.
Now shifting to our capital structure.
Subsequent to the end of the second quarter on August four 2020, we completed our initial public offerings in which we issued unsold 5.040 million 323 shares of common stock and certain selling stockholders offered and sold 5.659 million 250.
He shares of common stock at a public offering price of $22 per share.
This resulted in net proceeds jealous of approximately $99.5 million after deducting underwriting discounts commissions on operating expenses.
We did not receive any proceeds from the sale of shares by the selling stock holders.
Total outstanding debt as of June 28, 2020 was $9.8 million of note the company's $17.1 million cash balance as of June 28, 2020 does not include the proceeds from our IPO or reflect our payment and full of 1.9 million to.
All those in outstanding borrowings under our equipment loan with PNC Bank.
Capital expenditures totaled $4.7 million for the second quarter 2020, we plan to use the proceeds from our IPO for general corporate purposes, including working capital operating expenses and capital expenditures, including to further fund our expansion of central station or shall like processes.
Facility in Springfield, Missouri to increase our capacity for the distribution of pasture raise shell legs.
As of September for 2020, there were 39.432 million 161 shares of common stock outstanding.
As we look ahead at the robust market for food produced from humanely raised animals. We believe we have a unique opportunity a bottle forms to achieve strong growth today and for many years to cope.
With that now I'll turn the call back over the Russell.
Thanks, Jason.
I think I'm a vital farm story that we just shared with you. This company more so than any other than a part of does a fantastic job of living its values every day.
The multi stakeholder model comes the framework within which we make our strategic decisions and is no coincidence that our commitment to the values of conscious capitalism and of meeting the needs of all of our stakeholders has resulted in profitable growth. Thank you for joining the call today and for your interest in vital farms.
Ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.
To withdraw your question first pelkey, please standby well be compiled that you want a roster.
No first question comes from the line of Rob Dickerson with Jefferies.
Great. Thank you.
So welcome first call did a great job.
I guess this is kind of my first question can be short, it's just on household penetration favor, saying, Oh, I see a west or across the board philosophy companies you spoke to a 2.7% and total penetration, which is a nice step up from where.
You are just earlier this year. So maybe just some kind of brief commentary on kind of probability you know retaining.
As much of that step up in penetration as it and maybe you know kind of if there are any shifts or pivots kind of around the strategy in the near term.
Maybe not only retain it but to maybe accelerate your goals and longer term basis.
Now given a high trial and repeat.
Thanks, Rob and thanks for the warm welcome and thanks for being here.
So a few thoughts the first is we do have you know.
We got the question a lot internally and externally or are you gonna be able to hold on the game.
And and we do have some early signs that I referenced in the call.
About our ability to convert trial intervene <unk>, which is an early stage of the loyalty, we hope to real cab over time. So we've got some percentage of people who bought us for the first time in the in the peak pantry loading period of cobot have come back at bought US the second time.
In the subsequent eat we carried and and some portion of those shoppers have bought us more than one and that we had the specifics in the in the interim.
So it's early days, but there is some evidence that some new shoppers kept buying us even when maybe their usual brand showed backup on the shelf right.
We we were already focused on the entire shopper journey from awareness all the way through loyalty and so you know we certainly recognize that we've had an uptick or an acceleration of new trial and so we're absolutely no maintaining our strong clip.
To the loyalty part of that and that includes the.
The community management in our social media.
Platforms for example, in the way that we interact with or without reading fans.
And and and other looking at other ways in which people interact with our brand beyond simply receiving a broadcast message from us. So that's definitely top of mind from.
The good news is.
We did not make an aggressive assumption about the retention of this new trial in order to deliver on on the you know the guidance for the year and and so you know if you yeah. It's too early for us to predictable the extent to which will retain that business, but we are making.
Relatively I think conservative assumption, both in terms of how much longer the the kobin related lift remain and in terms of how much of the new trial, we repaid so there may be.
And upside opportunity there beyond our expectations as we continue to see how consumers behave in the coming month.
Alright, great and stuff I guess kind of follow up you are you just said.
Just in terms of that you apply that cash revenue guidance right. It looks like it's about call. It 30, 35% year over year.
Obviously did better than that in Q2 for all the obvious reasons on your now CAD two thirds the way through Q3 and also there might not be as much visibility right I suggested before so I guess just got him as he kind of speak debt I always say do too conservative died.
But just in terms of kind of how you get to that guide is that we had decent visibility because they have a field, where Q3 you might come in and them or just you know doing our best it's essentially kind of gas our Q4 as or given the 700, new doors coming to the quarter.
And what have you feel like your visibility is actually pretty good for the second half that's it thanks a lot.
Yeah. Thanks, Rob So that's what I'll, let me try been at a macro level and then and then Jason may want to chime in as well we Ah yes.
We are absolutely humble about the fact that we there's a lot of macro uncertainty in the future right that that you know.
What the what the economy, what the election brings unemployment rate the February the the potential for a full resurgence et cetera, and the countervailing forces us.
The one had more eating at home.
And create a tailwind for our product portfolio and channel portfolio, it's primarily at retail.
And at the same time, the potential headwind of maybe higher unemployment lower incomes et cetera. So.
Well, we're not I think we are.
Comfortable with our annual guidance.
In light of that uncertainty in the fourth quarter.
Kind of where I think that.
Okay great.
Yes, the only thing I'd add is the only thing I'd add is to your point, Rob I think if we see things continue the reason why we have a range of guidance would be that would pull you towards the higher end.
So if we see kind of what we've seen continued not the peaks of the co bid, but what we're kinda cm day in day out continue we'd end up towards higher wage.
Thank you.
Our next question comes a lot of Pamela often with Morgan Stanley.
Hi, congratulations on the IPO.
I.
Wanted to ask about your outlook for the promotional environment for the back half. The year. You I think initially you had talked about potentially stepping up promotions and reinvesting some of the strength this quarter. So.
So just was curious you got an upscale on your plan there.
Thanks, and what it had thanks.
Sorry.
So I appreciate you being here and I appreciate that question.
So yes, our approach in the first half a year.
Before we.
With so much of the year being remaining on certain was hey, it in the pantry loading.
So, let's like link that through let's call it mid April.
The retailers and we agreed that.
You know it wouldn't make sense to to do a lot of promotional activity at a time when we were all just trying to stay afloat.
Shelf.
We did plan to go back to a more more typical promotional cadence and depth in the back half of the year recognizing that if we saw a resumption of.
Strong demand and the challenge of saying in Soc, we might agree with retailers to pull that back as well.
Because we're continuing to see a lift above kind of pre cobot levels.
We are you know, we're we're trying to be pretty.
Judicious and purposeful with investments in promotion, we want to be great partners to retailers, but we're not relying on extensive promotional plans at this point to deliver the year we don't.
At least at this point the trend seems to be not requiring that.
Okay.
That makes sense. Thanks.
And then just got you can provide some more color on aggravates and how its initial performance has been just in terms of the reception with retailers and consumers and your outlook for further distribution growth for that product.
Thanks, Yeah, so feel really early days I mean, we just hit started hitting shelves.
Few weeks ago we.
Had a relatively modest expectations for this year for advice as we were just kind of getting that up and running and things are working out about as well as we expected them to so we'll have lots more insights into that.
In our next and Rx release, but but today, it's pretty early.
I.
Thank you.
Thank you.
Thank you and our next question comes from the line of Chris Growe with Steve.
Hi, good afternoon.
I'll add my congratulations as well so good quarter and congrats on the IPO.
Thank you. So the question if I could first on the on just the gross margin, which was a obviously very strong performance in the quarter and obviously not looking for quarterly guidance here, but its but just to understand the factors. We should consider run the second half of the year. You have I was just some great fixed cost leverage coming through I guess I'd be curious as well to what degree.
Or where are your capacity utilization stands today, maybe your PQ, where I'm sure running about was kind of full out what's sort of level you down to make if somebody is around the fixed cost leveraging of the business.
I think that's gonna be for Jason.
Yeah. So thanks, Chris Yeah, I think first to just kinda point out the good your your point about the gross margin beat in Q2. So I think you know definitely the peaks of cobot of what we saw on there I think you could probably attribute about 280 basis points related to kind of about peak of where we were out.
I think some of that's broken down between what what we just talked about with Pam in terms of just you know trade and promotional footprint and not doing much about in the quarter and then just as we were selling everything like we had because the retailers, we're really trying to to get any product they could.
You know relative to where we are versus the peak yeah were down from that but I think we're still getting leverage as as we look forward and I think the guidance that we're giving for the year and the adjusted EBITDA.
Range assumes yes.
Slightly higher margin than what we had originally kind of model, though you guys on the backup to the year and so.
I think it it's it's less about a leverage play there and more just about.
Things starting to line up relative to.
The the warehousing and transportation costs. It was mentioned in a part of the Q2 that will continue those were things that we planned on doing and actually put in place and will continue as we close the back half of this year.
Any comments, you said about but.
Utilization, just rough levels or just give a sense of kind of where you are today and how you can accommodate this this elevated demand.
Yes, so I mean, where we will will probably add.
I'm going to range between 50, and 60% Utilizations, we plenty of capacity do you see us today and again, we continue to stay.
Diligent on the expansion process and expect that to be up and running.
In Oh, and the second quarter, EPS of 22, and well able to support our growth plans.
Just one other quick question around and we kind of discuss has been earlier in an earlier question, but around basically the stickiness of some of this these new sales and just to understand like how many new doors, you're getting we obviously have a household penetration figure that was up a lot of is great.
But just to understand in terms of like new distribution or new shelf kind of new shelf space.
Yes to what degree you're seeing more doors more shelf space accrued to the company here.
Yes, Thanks, Chris It's Russell.
So yes, the the household penetration had a nice lift and we're certainly seeing especially in.
In the natural channel.
Strong shrunk increase in in velocities I think you know we as we mentioned in the in the prepared remarks.
We had about 700, new doors added.
During Q2.
So we continue to.
The effective I think and engaging with retail partners, both existing and new.
We continue retailers are continuing to do category views and be open to to their traditional reset approach and so.
We continue to run kind of worked that process as we always have and and meet with we're not seeing any substantial changes from our plan and our strategy on that.
Okay. Thank you for your time today.
Thank you.
Thanks.
Thank you and our next question comes from the line of Adam Samuelson with Goldman Sachs.
Yes, thanks, good afternoon, everyone.
Yeah.
Hi.
So maybe I'm following up on the earlier question on capacity utilization from a different angle just.
Hi, Jason Russell any comments you could have on on the lives supply chain and.
Obviously.
Having sales up 80% and the second quarter or the north of that and talking about 30%.
This increase in the back half thinking about how far ahead, you've gotta playing your flocks on that are on the ground with your grower network just how tight as them is alive inventory there and are you seeing any issues in terms of in terms of fill rate.
As you've seen this big sockets phobia, then eating at home.
Great. Thanks, Adam Yes, I think you know again the guidance that we gave.
Yeah.
We are well within the supply to just kind of generate that range of or talking about but again as we kinda told all you guys are.
And what you're referencing in terms of our lead time to put down new farms. There, there's not a lot of Randy hit the gas far beyond kind of that range and so one of the things to your point of the uptick we saw in Q2 and the continued kind of sticking as we see as we continue to go through the rest of the year, we're actively planning and making.
Decisions into 21 and bearing being very thoughtful about how we put down the right supply to make sure. We can continue to kind of grow into this where we're in a really great spot right now where where.
Nice supply and demand balance and so we want to make sure that you know, we don't get too crazy and put down a bunch of farms in there to where we actually create an imbalance and so yeah, we're being thoughtful about that and we'll be adding farms in 21 to two certainly support our gross.
All right now that that's really helpful color and then the follow up is thinking about distribution from a.
From a SKU count perspective, and kind of the number of items per door and just wondering how cold. It has impacted I mean benefited you from a from any category reviews that that your retailer customers, particularly in the conventional kind of mainstream.
Channel have done I, just think about kind of points of distribution that you might have in number of items on the shelf and 21 to convert some system households, and tomorrow incurring buyers.
Yes, I appreciate that Adam I, So I don't have.
Hey, and updated statistic on average items per door.
In front of me.
Anecdotally the vast majority of.
Retailer conversations and category reviews of which I'm aware have been somewhere between status quo and adding items there.
Very few examples where we actually lost items or you know for some other reason there was a material impact to the downside on our business. So I think.
My my belief and my interpretation is that there there is some trepidation on the part of retailers about what it felt like to be scrambling for supply in the spring and they want to make sure that they've got a diversity of suppliers and that they're taking care of the vendors that they feel confident can deliver.
In good times and at that and I think we.
Distinguished ourselves that as being great partners in March and April when it counted and so I think one of the benefits of that is as we head into the fall I think generally retailers want to maintain a strong partnership with it.
Okay, I really I appreciate the color I'll pass it on thanks very much.
Thank you.
Thank you Sir your next question comes in a lot of Robert Moskow with credit Suisse.
Hi, Thank you.
I wanted to maybe little bit more about what's happened with being a the contracts that you're negotiating with your farmers I can't give we've taken steps to.
Reduced the risk premium.
We pay for AG.
Which I think makes sense now that you're maybe you have more scale or have you converted more of your farms to these new contracts recently and.
What else discussions going.
Jason you want to take that Yeah, Hey, Rob.
So we're not actively adding supply right now today, we don't have any I think since the last time, we talk to you guys. We you haven't had.
Absent any new actual contracts down so to that point, we're not actively converting people over.
As contracts expire in the next year and as we look to put down new supply they will come on the on the news.
But maybe I can add just little bit more color Rob.
So we are adding supply.
Regularly throughout the either.
And just to support our continued growth I think the distinction is that we haven't recently signed new contracts you can imagine there's a lead times how to contract and then that supply comes online some number of months later.
So there's a distinction I didnt want and view the impression that we aren't adding anything.
Okay.
In that case, they ask you try to expand gross margin over the next few years.
What do you think are the biggest driver is up that gross margin it's Darryl.
Contract.
Changes or are there other factors that might want to pull out here that's good.
Booster margins gross margins higher.
Yeah, I think we're still we're still got the thing playbook, we talked about right like as we continue to look out in the further years and we're not giving guidance right now obviously beyond the end of this year, but we continue to kind of have those same kind of long term growth target pillars, and yes, as we continue to work through.
Through and evolve and get more people on the larger supply contracts and we have out there with farmers and get new new ones put into that you that that will will accrete to our margin.
Okay, all right. Thanks.
Thanks, Rob.
Thank you and our next question comes in light of kids that slow with bank of Montreal.
Hey, good afternoon, everyone.
Hello again.
Just two questions one is on the medium size eggs.
Sounds your strategy there.
How do you think about that and I know you guys have been working on it making sure those things have gone into the market do you feel like there is more permanent see to them.
I have a follow up question.
Great Thanks for that Ken and you're right.
That's certainly something that is an area of focus for us there are.
There are two weeks to think about meeting that one is.
To be able to sell them.
At retail at the shell at the other is to use them as an ingredient.
By converting them into liquid assets. So for example, those medium can be used to make argue egg bites. Those mediums are also used to make a hard boiled eggs and you could imagine if if if and when we.
Bring to market a pasture right after raised liquid whole leg for the foodservice channel involved.
We could you just doesn't begin mix there as well.
We do not currently sell all of those medium eggs at retail.
We are actively presenting that opportunity to retailers and there is some interest again it in part it may be influenced by.
A desire to make sure there is a diverse supply base as we head into.
The fall season, when when often.
There is seasonal demand and often retailers are experiencing.
Some shortages of supply.
But I can't say that we've solved for the entire projected supply next year that continues to be an area that we're focused on solid.
My second question is is how much shelf space did you actually gain.
Or expect to gain in the reset and how do you kind of forecast that and if you could help us out with.
Well you know each retailers different you know generally we try to create a.
Proposals and strategies that are great for the retailer and us and those tend to be very retailer specific in some retailers, especially those where we're seeing high velocity, but we have maybe just one or two excuse for example, we might go in and proposed several more items and there's always an element of.
A negotiation on an element of the retailer deciding what makes most sense for them.
So I don't I, probably don't have a great sort of all can't answer for the market as a whole, but you know I think in the in kind of the.
In the road show process, we had a statistic that wall at whole foods, We've got 14 skews on the shelf out of our portfolio 20.
Our average in mood low is three and change it's between three and four and so.
We certainly believe that the fifth than the fourth fifth and sixth you can still be very productive.
And a meaningful addition to the category and to a retailers.
Category.
Formats.
Great really appreciate it thanks guys.
Thank you Ken.
Thank you.
I'll now turn the conference back over to Russell Diaz Conseco for closing remarks.
Thank you hey, thanks, everybody for being here and for your great questions engagement.
You know it's this is this is new for us and we're really excited to engage with you all stakeholders in what we're doing thanks again have a great day.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program you may now disconnect.
[music].