Q4 2020 Mohawk Group Holdings Inc Earnings Call
Ladies and gentlemen debt since the operator today's conference is scheduled to begin momentarily until that time your lines will be placed on hold until the conference begins again, ladies and gentlemen. This is the operator did they spun for instance is scheduled for begin momentarily until that time.
Your line of other placed on hold until the conference begins thank you.
[music].
Thank you for his funding by and welcome to the Mohawk Holdings.
Holdings incorporated quarter for earnings report conference call. At this time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question you're going day session. You'll want me depressed for one on your telephone keypad if you.
For any further assistance please press.
As far as zero I would now like to hand, the conference. So very dear speakers today, Mr. Ryszard <unk> director of Investor Relations. Please go ahead.
Thank you for joining us today to discuss Mohawks fourth quarter 2020 earnings results on today's call I need sorry, co founder and CEO and Fabry somebody eat our outgoing Chief Financial Officer, and our tour Rodriguez, our income and Chief Financial Officer.
A copy of today's press release is available on the Investor Relations section of Mohawks website at Mohawk G. P Dot com.
I would like to remind you that certain statements. We will make in this presentation are forward looking statements and these forward looking statements reflect mohawks judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting Mohawk business. Okay.
You should not place undue reliance on these forward looking statements for a more thorough discussion of the risks and uncertainties associated with Mohawk with forward looking statements to be made in this conference call and webcast. We refer you to the disclaimer regarding forward looking statements that is included in our fourth quarter.
Earnings release, as well as our filings with the S. T C.
We do not undertake any obligation to update or alter any forward looking statements, whether as a result of new information future events or otherwise. In addition, the company may refer to certain non-GAAP metrics on this call explanation of these metrics can be found in the earnings release filed earlier.
Today with that I will turn the call over to Jenny.
[laughter].
Thank you Celia and good afternoon, everyone.
I'd like to start this call by taking a minute to acknowledge our team's perseverance and grit through a very challenging year.
20th wondering was our first full year of public company and it was market of course by the tragedy of the global COVID-19 pandemic.
While the pandemic led to a strong year for ecommerce it was not without significant challenges.
By the difficulties with the pandemic restrictions the need for a more work and severe supply chain disruption. We grew our net revenue is 52% year over year.
We also achieved adjusted EBITDA profitability earlier than we had expected for the first time, we're profitable on a full year basis.
This despite our investment in long term growth.
We accelerated our M&A strategy and acquired five leading ecommerce brand. We also refinanced our outstanding debt and we got our international expansion.
Finally, we launched a record 37, new products and expanded our total SKU count to over 300 as of December 31, 2020, we now have over 3000 skus, thanks to our M&A strategy.
And my last few communications with the investment community I've made it clear that one of our strongest assets other companies our culture of accountability.
As I've discussed previously the online CPG industry is continuing to experience an accelerated consolidation effort.
We've seen over $3 billion of free.
<unk> capital injected into early stage companies looking to build the CPG platforms for the future consolidated a fragmented ecosystem of all non brand through M&A.
Mark is really well positioned to take the leading role in this fast paced industry consolidation.
Given the investment we made in our team as well as our technology and our supply chain platform.
Looking back at our last few M&A transactions I'm very happy with our ability to integrate the asset for the business that we acquired.
We continued to reap the benefits of our black from what the years of investment in infrastructure and E. Commerce expertise as we integrate every asset that we acquire faster and more efficiently.
Since the start of 2021, we've added e-commerce businesses with a total of $82 million and $16 7 million in trailing 12 months revenue and adjusted EBITDA, respectively. Our M&A pipeline, meaning deals that we're currently looking for is a very robust.
The University of Amazon Third party sellers had an aggregate <unk> of approximately $300 billion. We're currently looking at businesses and assets with an aggregate unaudited an annualized net revenue of $522 million and $97 million of adjusted EBITDA.
The significant growth. We're experiencing also comes from an important set of strategic investments that we're making to emerge as a global leader and its online CPG industry.
With that in mind I'm Super excited to share some changes to our organization that will help us drive the vision of MX platform going for it I'll start with our CFO for recent day, who has played an instrumental role over the years and driving the financial strategy of the company.
Recently for reasons for being an important driving force in non M&A execution and has been the architect of several of our recent transactions working closely with Joe We think of our general counsel.
This will therefore be for really the last call our CFO and we're excited to see them execute on his new role as general manager and head of corporate development and Europe reporting directly to me.
As we described in our press release earlier today for breaches already secured our first European M&A transaction with pay per direct operating supplies brand based in the UK.
Well I'll group is a company that loves promoting from within and therefore I'm extremely pleased to announce our two Rodriguez our new CFO.
Three three and a half years of tenure at Mohawk more Rds exhibited excellent in every mission. He pursues he has a remarkable work ethic and strong sense of integrity.
Honored to have already by my side as we tackle the challenges of becoming a dominant global enterprise.
Of course for reason his new role will be available to help already with this transition.
I'd like to note that audio from rehab work closer together and support each other for over 10 years across multiple companies.
We have met with M&A, playing such an important role in our growth story I'm also thrilled to announce that our general counsel jewelry CECO is effective immediately promoted to chief legal officer and head of corporate development North America.
Joe has been at the forefront of our M&A strategy since day, one alongside with the rig.
And as a strong blend of skills. The drive is critical for this critical function for us.
Before he joined <unk> group join our substantial M&A strategy and other deal experiences with various business and legal roles at <unk> corporate venture Citigroup Goldman Sachs and an operating ROE that earlier stage VC backed debt companies.
The other is coming there was an associated in the corporate the appointment of corvette Swindon more and he also has a CPA, which do you obtain was working at Ernst and young and prior to attending Columbia Law School I'm very confident of the future M&A strategy would Joe leading the way.
Finally, I want to take this opportunity to also welcome Natascha Louis to SASSA join US in January of this year as our new Chief marketing officer before joining Mohawk SASSA would the cofounder and CEO of flavor pill, a publisher and experiential marketing agency, which he sold per bustle media in 2018.
This actually brings more entrepreneurial firepower to already strong executive team.
His role he will drive the next evolution of our corporate and consumer brand marketing strategy I'm.
I'm looking forward to sharpening, our storytelling and reaching larger audiences together as we communicate our vision for consumers and the investment community worldwide.
I could not hope for a better way to start this year and I continue to be amazed that the drive and enthusiasm of our team as we work hard to make 'twenty 'twenty, one a landmark year for our company with that I'll turn it over the range for more details on the fourth quarter.
Thanks for that even good afternoon, everyone here are the operational performance details about fourth quarter for.
For the fourth quarter of 2020, net revenue increased 61, 9% to $41 $5 million from $25 $6 million in the year ago quarter.
Strong gain was probably attributable to direct sales volume of new products launched in the second half of 2019 net vertical expansions as we launched competing products to our own steam products.
This increased net revenue by $4 8 million.
Wholesale revenue of PPE products, which contributed $2 7 million and historical products plus recently acquired products.
We suffered from inventories Schwartz in the quarter, which we estimate to be an impact from approximately $6 million.
Against all normal.
Sales levels.
Gross margin for the fourth quarter increased to 45, 2% from 35, 4% in the year ago quarter and decreased from 47, 8% in Q3 2020.
The year over year improvement in gross margin was due to both favorable product mix, including new products required pursuant to M&A pricing from vendors and how your product pricing, while being partially offset by wholesale PPE sales, which carry much lower gross margin.
The quarter over quarter decrease in gross margin was driven by mix for sustained portfolio as well as a higher percentage of liquid sales as we cleaned up some of our inventory balance.
Additionally, sales and distribution was negatively impacted by ship ship again impact, which drove higher cost in last mile fulfillment given the carrier tightness in the quarter.
Our overall Q4 2020 contribution margin was 11, 2%.
<unk> of the previously mentioned factors, which improved compared to the prior year, which was negative six 6%.
This year over year improvement was driven by significantly improved product you need to call it mix coming from mix and pricing related to inventory Schwartz of our sustained products. We tried to see of 15, 2%.
Adjusted EBITDA, which excludes stock based compensation and changes in fair market value of warrants and earn out liabilities for the fourth quarter of 2020 improved to two zero point $5 million from a loss of $7 $6 million in the fourth quarter of 2019.
I would highlight that our adjusted EBITDA profitability as a result of the growth in our business from both our existing products and new product launches combined with our fixed operating expense leverage which benefits from the automation in our business model and continued improvements in order you need economies.
Turning to the balance sheet.
At December 31st 2020, we had cash of $26 $7 million compared with $37 $4 million at the end of September two.
2020.
Sequential decrease in cash stems, primarily from a $2 $5 million decrease in cash used in operations.
Ultimately $25 million from the smash acquisition offset by $19 $9 million.
Net debt issuance and other financing activities the cash used in operations as compared to the previous quarter was driven by working capital as a result of planned seasonal inventory buildup.
New products are in terms of new products in the fourth quarter 2020, we launched five new products some products slipped into the first quarter of 2021, we.
We expect to launch 18 to 20, new products in the current quarter.
To conclude the key takeaways of the quarter. Our revenue is growing fast profitability continues to improve the plot for model continues to show its strength.
I'm going to trade over to already to discuss their going forward items.
Thank you for Bruce.
Mohawk today announced that it signed a binding term sheet to acquire photo paper direct specialized in the printing supplies category. Besides the U K. It marks our first of many international acquisitions to come in the future.
The unaudited trailing 12 month revenue and adjusted EBITDA as of December 31, 2020, or $15 million and $4 million respectively. The true.
Action is expected to close by mid April.
We also announced today, our intent to refinance all of our current debt outstanding which includes the December 2020, senior secured note and existing February 2021, senior secured notes totaling $53 9 million as of today.
And our $30 million revolving credit facility with a 110 million senior secured note to an institutional lender.
The senior secured note has an 8% annual interest rate payable in cash on a quarterly basis with a three three year maturity.
In connection with the senior secured note the company will issue to the institutional lender warrants to be determined at the closing of the refinancing and we expect this refinancing to close in the first half of April.
Yeah.
Full year 2020 revenue guidance the company now expects net revenue to be in the range of 350 million for $380 million up from 340 million to $370 million, reflecting the addition of photo paper direct.
For the full year 2021, adjusted EBITDA guidance for the company now expects adjusted EBITDA to be in the range of 30 million to $34 million up from $28 million to $32 million.
Finally, I want to mention with the vesting schedule for employee stocks, we are anticipating that certain members of the executive management team will need to sell some of their Mohawk stock primarily to satisfy tax liabilities associated with the vested shares.
This will be done primarily as part of <unk>, one plans and they have been implemented so having been implemented and will be fully disclosed in the SEC filings at the sales were made.
With that I'll turn it back to the operator to open the call for questions.
Thank you and for instance.
Shipments in order to ask a question you May Press Star then the number one on your telephone keypad again, that's for then the number one.
Zone.
Your first question comes from the line of Brian.
Joe from Oppenheimer.
Ask your question.
Good afternoon.
Nice quarter nice year, Gratulate withdraw the new appointments from the organization.
Struggled for a few questions I thought I'd run through here I mean first off with regard to the.
Potential acquisition targets you called out in the press release for $522 million within that within that are there are any L O wise.
Signed at this point.
Hey, Brian.
Yeah. Thanks for the question.
The answer is yes, although theyre not binding and obviously all this pipeline as are all subject to due diligence and all the efforts that we've got to put to get those to the finish line, but there are some non binding otherwise already in place as part of the due diligence process.
Got it and the second question I have just with regard to the the guidance progress I guess, particularly on the top line. So the $3 50, the updated guidance of 353 at each day, because it implies substantial growth off the I think one of your five or so you did this year can you help us just understand maybe where the key assumptions behind that.
Also I want to make sure I'm clear that.
There are no within that 353, you're not assuming further acquisitions correct.
Okay.
Maybe I'll, let already answered that one yeah. Thanks for your needs.
Yeah.
The guidance that includes there obviously, we close smashed at the end of December we closed helix solution at the end of February. So those items are included in that guidance number.
The only uptick that we have from acquisitions as the photo direct which.
But we said on an annual basis would be about 15 million in net revenues of $4 million and adjusted EBITDA.
Then order yet.
I guess the first part of my question was just you know what what are the true something you'll besides that I mean, what are some of the real the key the key assumptions that would be key drivers for the expected revenue growth here in 2021.
Brian I think maybe if I can if I can jump in here again.
The main drivers are just again the launch of new products that we are looking to us to continue to put out there without a core business model as well as the sustained growth of the products that we launched through our own brands or acquired those are currently.
The the driving forces of that guidance and there are no.
It doesn't include any additional M&A that is in the pipeline or anything like that if that is that.
It makes sense.
That makes sense for again.
Then I'm going to ask one more and I'll turn it over but not with regard to the contribution margin for Bruce you've talked about this in your prepared comments, but.
I think I heard you say there was some pressure in there from sounds like transferred transportation costs, but if you look at the contribution margin, particularly the sustained category.
Fourth quarter still up nicely year on year, but the rate of the rate of increase in Q4 diminish somewhat from out of Q3 and Q2 for how should we think about I guess I want make sure I have couple of questions one of them to make sure that it is transportation costs that weighed upon that and had been how should we think about that dynamic as we pushed into 'twenty one.
Okay.
Please go ahead and I'll respond to the true to the posture.
So yes, I mean, it's all you know.
In Q4, you always have the increase in shipping rates.
The debt.
Actually happens every year right, it's the seasonal the seasonal increase because of the.
Christmas shopping season, which applies to all of the local carriers.
EPS Fedex until one rate as well as our Amazon actually on that side right. So this is always always the case that you're going to have a sequential drop in Q4 versus Q2 Q3, and it's also linked to the fact that the product mix changes and we have more products on Amazon that we have on the SPM from that perspective, we're at or on a P. M.
Shipping advantage cost advantage, which we do not have on the Amazon side right. So you'll have that all the time as to the ship again.
Maybe or you can pick up that question on a go forward basis.
Yeah. Thanks for Bruce Yeah, there'll be a little bit of pressure in Q1, and Q2, I think it's pressure that everyone's feeling or it's a global phenomenon and it's not just the Mohawk thing.
But that's been factored in our guidance and our updated guidance there.
We think as we get into the summer months, we'll see that kind of go away and and and.
And continue to to.
See that go away and less pressure there on our profitability.
But I appreciate it thank you.
Your next question comes from the line of Matt Koranda from Roth Capital. Your line is now open.
Hey, guys. Thank you just on the pipeline that you guys delineated I know you sort of partially answered a question on just a bit ago, but wanted to wanted to be sure.
What percentage of the pipeline is sort of under LOI versus sort of just earlier stage kicking the tires, maybe you could just bracket it out for us. So we can understand kind of how early stage. Some of the pipeline is versus late stage.
Yeah, Brian this is any other.
At this point, we just wanted to give a sense of how much looking at but as I mentioned you know.
Where are we will leave it at that for now we're just working on a lot of deals in parallel, but we don't have to.
Necessarily go into too many details on how many of them already in Hawaii.
Okay Fair enough I guess, the just for the question, though it was basically just to understand.
What's the threshold under what you would put into that pipeline I guess, maybe that's more of a fair question because I know, it's hard to answer the other leiphart.
Yeah.
That's a great question the way our due diligence process works is we have several layers of the diligence and the first layer is one where we see if it can even make it to apply behind this is where we use Amy very quickly to understand the core metrics that we're seeing literally without even getting the internal data of that company right before we even.
Get that company under LOI, and NDA and ask them to give us all the data we use our analytics and what it tells us about the market to see if it even hitting the threshold by which you would it would get into the pipeline and that's really.
What that means right. So what we described in our pipeline.
From an external perspective.
What are the other than we have on the sales and on the modes and center and other aspects is good enough for us.
People look.
Okay got it so it's already cleared a hurdle if you will to get into the pipeline. There. Okay. And then just maybe attacking the 2021 guidance from a little bit of a different angle.
The the acquisition that you're doing photo paper I understand it's probably not gonna be able obviously, it's definitely not going to be a full year of contribution in terms of revenue and EBITDA.
But if I do the math just at the midpoint of the guidance raise it seems like it implies that maybe were not fully factoring that in or or maybe we're just sort of we're seeing some headwinds in the core business. So we're fully factoring in the acquisition, but seeing some had one maybe just talk about the assumptions embedded there. So we can understand exactly why.
Using the guidance by $10 million on revenue and $2 million on our EBITDA.
EBITDA.
Yeah, Let me, let me take a first stab at it and maybe already wants to add more to it but.
General Madden like we were.
Look at this as a couple a couple of factors as you mentioned.
Not going to be there and benefit from the full year of the business that's one.
Second we were giving a wide range still because the world is still not entirely stable, especially around supply chain right. So we're.
Still observing very close to everything that's happening with <unk>.
With Covid and the kind of like downward effect of the pandemic on supply chain. So we're getting some some room there right to for the unknown and then finally.
We're looking to reinvest a lot of the contribution margin that is assets that were acquiring are bringing in.
Our goal is to become a very large company with a global footprint.
And that investment is.
Born in right now, especially as we continue to.
Make for us in getting into Europe, and beyond that our ambition is to become as I said other mobile enterprise right. So you know, we always factor that in as well into our plant.
Okay Gotcha.
That's helpful. Thank you and then just last one I'll just sneak one more in here.
Could you maybe just speak to.
The performance of some of the brands that you've talked in over the last six to eight months or so I'm curious maybe anything qualitative you can share on the performance or maybe quantitative just in terms of sales rankings. How some of the agents have performed relative to your expectations have you been able to improve some with Amy and just curious about the track record there.
Yes. Thanks, Great question look in general, we don't want to break down on a product level, but we're very happy with the performance of the acquisitions so far.
Physicians also suffer here and there from supply chain share in an all stock outs, but otherwise as we said you know global events that are.
<unk> pretty much out of our control and we're doing our best to mitigate them. So some of that has happened, but if you exclude that.
We're very happy with the performance and we're extremely happy with the speed at which we're able to.
Basically ingest those assets right I mean, that's to me one of the most powerful things and the result of many other work.
To see how quickly we were able to put 3000 skus on Amy from.
One when we closed that deal was exceptional and it gives me enormous.
Looking forward. It just gives me a lot of comfort.
But the pace of which we're going to continue to execute those right. So again, you know overall happy with the performance happy with our ability to.
Bring those those assets into our platform and.
Overall, excluding again the supply chain issues were really happy with the performance of these assets.
Okay very helpful I'll jump back in queue. Thank you.
Again participants if you would like to ask a question you May Press Star then the number one on your telephone keypad again, that's for the number one on your telephone keypad.
Next question comes from the line of Bryan Keane.
Yeah.
Alliance Global partners.
Ask your question.
Hi, guys. Thanks for taking my questions in a brief hopefully you won't be a strange and we'll get to continue to have our conversation.
[laughter] I'm sure given there's so many profitable.
Companies that are FBA.
Not just what you have determined.
Or in your immediate pipeline can you talk about outside of amey, saying it fits in your platform what are the determining factors outside of willingness when you're comparing targets.
Who your priorities are to buy versus others.
Sure. There's a really good question by the way so.
So any kind of like other connects back to the question Matt.
But before but I'll give a little more color there right. So as I mentioned as part of the due diligence we put put to work Amy on the first kind of like.
Probably when we look at the when we look at these assets we look at them from the point of view of the data we have in EMEA and see that they meet the minimum threshold, which includes typically.
Currently from a strategic perspective, we look for assets that have.
And evergreen shelf life, so as long as possible.
We believe these products are going to be used for the data that we have relevant to consumers because they are not in categories that are fashionable easily disruptive all rights on a long shelf life is one.
Mode in terms of.
Ranking appearance and searches and also obviously social proof and customer satisfaction that is iron cloud in terms of just typically years of great customer satisfaction and no hiccups there.
Those are those I would say are kind of like the baseline by which we would even get the products in the pipeline the second stage as we dig.
Into the data that we cannot have right I mean for example, what other what other real margins of the product we won't know that until we really signed an NDA.
And get the data in the data room around the cost of goods, who doesn't any factors or other manufacturers meeting our criteria. That's when a lot of other big and comes in to really understand the full kind.
Kind of profitability profile and sustainability profile of the business right. It's important to emphasize one more time that right now at this point in time, given the incredible momentum that is happening in this consolidation of the industry. Our focus is mainly on category leading assets that already have a moat that already ranking well.
And the main advantage that we're gaining is the operating leverage where we don't have to take day.
For the entire fixed cost typically we reduced our fixed costs vary dramatically. Once we put the assets on board, we would of course from time to time.
Keep some of the.
People, who want US day, if they are talented and fit the culture of our team but in general most of the advantage comes from that diminishing of the upright the fixed the fixed cost and the creation of operating leverage and a focused strategically on had the highest possible quality assets right over time that strategy could shift more in may.
Companies that maybe have great quality, but don't have for example, the best marketing in the ranking and all these other things that we know what to do but just right now because of the competition that is happening. The focus is more mature high quality assets does that does that answer your question yes.
Great. Thank you and then.
It's not the same question you just guide us a little bit different so I'm not sure. If it's too early given the shortages you just discussed but can you talk about how you think Amy has impacted the rankings in sales other companies you've acquired that have a couple of quarters. I mean, I think there's only two one of them was for acquisitions at the same time, but have you.
Been able to see evidence of any changes in market share or any change in the business or is that too early.
Yes, it goes back to the previous one right like the previous my previous answer.
Because we we actually select only the assets that we think already have a moat. The power is not necessarily in the ranking it it's actually again and reducing the operating leverage and maintaining.
The success of those products without having to add a significant amount of people and the growth that happened at that point in time. When there is already a category leader. The small if you like for example, the smash acquisition, which specifically acquired.
Products that we dealt with debt we selected the one by one of the products that we thought met those criteria right. So yes.
In general can Amy achieve better marketing for for other assets, yes, but but but again our selection processes for currently for products that already have a great.
Shlomo tried so it's more about just.
Conserving that mode and continuing to run that.
As possible performance in the long run without taking necessarily the people that debt all the people that are needed to run the business does that make sense.
Perfect. Thank you and then.
You'd be coming out.
A much bigger business quickly.
And through M&A and organic growth, how do I think about product launches for the year are you going to start to accelerate that or is <unk> 20, a quarter really where you're going to be at and you will augment that.
With M&A.
Our goal our goal is obviously to continue to that this is a core and it's super important competency of our company right. There's a lot of other aggregators out there who do not have that capability in all day do with by existing businesses right. We're very proud of our capability around launching product we already have.
Much for every acquisition, we've made except hailing solution because that's too early for all the other acquisitions, we have a product in the pipeline that are coming to augment the acquisition. We've already made really driven again by the data where we see typically that consumers are buying this particular anchor product with other products from other brands.
And other kind of like data points like that will be obviously use the aim pointing on right. So it's an important factor to our business and we'll continue to invest in and accelerate over time, our ability to do that for a launch more products.
Great Lastly, can you give any more details around the special shareholder meeting you highlighted in the press release, Thanks for your time.
Yes so.
What we're doing without loss share holder media as we're asking our shareholders to approve share issuances in accordance with NASDAQ listing rules. This is in regards with the aggregation and dilution rules on acquisitions and related financings right.
So there'll be more information and the definitive proxy statement will be filed.
Yeah.
Great. Thank you.
Yes.
Your next question comes from the line of Thomas Forte from D. A Davidson your line is now open.
Great. Thanks, So first off congrats for for Bruce and congrats to already share.
High level question for you you need to near term I think investors are bullish on companies, including Mohawk group and a lot of private companies that are buying SBA businesses and an argument could be made you have a situation where a rising tide is lifting all boats.
Was hoping you could talk about long term.
Mohawks competitive advantages, including your ability to determine when to buy or build a product to sell in the marketplace.
Maximizing marketplace advertising spending ROI, and then maximize the logistics efficiencies minimizing logistics costs and ensuring products are prime eligible when I see as your long term sustainable competitive advantage.
The market is not making the distinction on.
Thank you.
Yes.
Thanks for the question Tom.
And as you know.
I'm sure. If you asked all of the other Aggregators, though I'll tell you that they have.
For instance, special company, but you know.
Make no mistake.
This aggregation momentum that is happening right now.
We are by far the best debt to execute on that and beyond that we're by far the best set to build the CPG platform that all others are dreaming about right. We're looking at a lot of other companies out there raising capital without really having much expertise without having build the type of platform that we built and so we're extremely confident.
That is we are participating in this consolidation movement. The long term value proposition of what we're doing is a platform play by our ability to manage not only mature assets, but also to acquire up and coming assets and drive them further to growth, where our fixed cost ratio to revenue that is in mind.
Opinion are going to be over time, the best in the industry, that's really the core.
Value proposition an advantage that we have over all the other players in this in this field and I'm I'm excited to see that both the private and public markets are realizing what massive opportunity lies ahead.
But again more than more than more than ever looking at the last few months and what we've been able to achieve and what is ahead of us.
I'm betting very heavily on us to be one of the top players in this space and I think again beyond the acquiring company is our ability to launch new products to acquire up and coming brands and drive them to growth.
And manage again, a very large amount of products across many different channels and the most effective way.
I think that with the best suited to do that.
Great. Thank you Denise.
Again participants if you would like to ask a question you May press Star one on your telephone Keypad. Your next question comes from the line of Matthew <unk> of Sidoti. Your line is now open.
Hi, Thanks for taking my questions and congrats on the quarter.
I know it hasn't been very long since your last acquisition, but we did talk about.
Maybe for some opportunities for driving.
Better for improved operations at the bottling.
Level.
But maybe just generally executing.
And that in that deal post close I'm, just curious side in the early.
First steps after.
Completing the acquisition, how that going particularly in light of having this large M&A pipeline that you're also pursuing do you feel that you have the capacity in house too.
To both execute on an asset like that and.
And go against the M&A pipeline and to the organic growth or do we expect to see maybe fixed cost growing a little bit.
As we move over the next few quarters.
Yeah. Thanks for the question.
We are in the process and then thanks for remembering that some from the last call right. We are in the process of optimizing the supply chain of healing solution with the help of the existing team and we'll make some really exciting progress there, although I don't want to commit to anything yet, but we're getting some good options there.
I think we will further improve that business as an acquisition for us.
Create even more value out of that deal.
In general.
One we'll see would look I mean, we're we're really built to create an incredible ratio would've been fixed cost and revenue and contribution margin but of course, there will be some fixed cost increase right is this going to be a step function.
But again when I compare the.
The hiring.
Without our Aggregators were scrambling to manage the amount of product that they're acquiring nothing like that in my opinion is going to happen here. We're just taking the right measures to make sure that we again become an international company and then we have opportunities across many channels for holistic marketing capabilities will be coming.
Again, a force to reckon with and the CPG online industry right and we're doing that I think in a really smart way based on tons of experience over time.
And again a constant.
I on that kind of ratio between fixed cost.
Revenue and contribution margin.
Got it alright.
Alright, I'll ask for your question I don't think you'll answer, but I'm not going to get.
Is it a shot anyway.
<unk> wanted to become an international company Youre looking at the U K acquisition I think you've mentioned will close in mid April.
If you look out 234 years.
How significant do you expect the international business to be for you. How quickly do you expect that to move I mean, obviously I think you probably have a sizable U S. M&A pipeline and that'll have an impact, but but how significant do you expect international will be in the coming years.
Yeah.
Great question you know.
Look it all depends on how far you're looking right.
E Commerce is across around the world. This has been accelerated in terms of it's a penetration of our consumer demand.
Given the pandemic and that's now going to turn back in our opinion.
There is opportunity around the globe to continue in the model that we have both from the M&A and on the launch of a product I think for US it's always going to be about how how fast can we move without tripping over right and where is the best place to put our resources to make sure that we are.
Capitalizing on all the capabilities that are out there one of the main things that I think I mentioned last time on the call was for example, the fact that.
Amazon had turned its entire platform and especially the rating platform to be international that is by itself a huge advantage for us and other companies.
Companies are operating in.
That area right and it's almost like a must do for us. So we're as I said focused very heavily in Europe. This year, but again over time as we continue to scale, we'd like to be.
Seeing that expansion into India and Japan.
Into China, as well, where we're talking about the biggest e-commerce market in the world.
Again scratching just the surface here and so it's all about you know.
Gauging, all the different opportunities and making the best decisions for the long term to make sure that we are capitalizing on the momentum, but not not going so fast in terms of international expansion that were.
Causing issues with our execution.
Yeah.
Got it thanks, So maybe one one quick.
Anil question for me just on on.
On shares out.
I think between the acquisitions and you're being pretty early stage, it's still sort of a tightly held.
Our share base right now a lot of it internally I think God, maybe some locked up from the acquisitions, but.
I was just curious how how management thinks about holding share versus selling shares personally and just broadly on on some of the bigger holders that have come in through.
Through M&A, how how we should think about those shares coming onto the market or you sort of expect those to stay put for awhile.
Yeah.
Needless to say management is.
For what I already mentioned earlier on the call right. There is some cash.
<unk> five one that have been put in place for tax purposes, but otherwise management is looking at this is still early stage play right and so.
We're not anticipating much of that at least that's almost out of management right I can't speak for other shareholders that we have no.
Control over right.
I, except for what I already mentioned it.
<unk> not expecting much otherwise.
Great. Thank you.
Again for participants if you would like to ask a question you May press for the number one selling for.
That's star then the number one on your telephone.
Please standby won't be compounded for me Boston.
Yeah.
We don't have any questions. So very good for Mr. Healey other job ski.
Yeah.
Thank you.
In terms of the upcoming calendar Mohawk management will be participating in the D. A Davidson consumer conference on March 11.
The Roth conference on March 15th to 17th.
And the Sidoti Investor Conference on March 24th and 25.
Thank you for joining us on the call today, we look forward to speaking with you on future calls this ends our call.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Yes.
[music].