Q3 2021 Whole Earth Brands Inc Earnings Call
[music].
Good morning, and welcome to the whole Earth brands third quarter 2021 conference call all participants will be in a listen only mode.
After todays presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded.
At this time I'd like to turn the conference call over to Jeff Sonic Investor Relations at ICR. Sir. Please go ahead.
Thank you and good morning, today's presentation will be hosted by Albert Men's only Chief Executive Officer, and Brian Litman, Chief Accounting Officer.
As executive Chairman Irwin Simon is also participating on the call and will be available for Q&A.
The comments during today's call and the accompanying presentation contain forward looking statements within the meaning of the safe Harbor provisions.
<unk> Securities Litigation Reform Act of $19 95 Allstate.
All statements other than statements of historical facts are considered forward looking statements. These statements are based on management's current expectations and beliefs as well as a number of assumptions concerning future events.
Such forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward looking statements.
These risks and uncertainties are identified and discussed in the company's filings with the SEC. We will also refer to certain non-GAAP financial measures today. Please refer to the tables included in the earnings release, which can be found on the Investor Relations website investor Dot holders brand's dotcom.
Reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. Additionally, we have provided a supplemental earnings presentation on the Investor Relations website that may be useful in your analysis of the company's performance.
I'd now like to turn the call over to Albert <unk> CEO.
Thank you, Jeff and thanks to everyone for joining the call today.
In Q3, we continued to demonstrate the strength and momentum of our portfolio and our ability to generate strong topline and bottom line growth for our business we.
We reported.
Consolidated organic constant currency revenue growth of six 1%, including acquisitions in both periods.
Branded CPG segment pro forma organic constant currency revenue growth of seven 6%.
Versus 2020, or 14, 3% on a two year stacked basis versus third quarter 2019, due to strong volume growth.
Record adjusted EBITDA of $22 1 million, our power of one strategy to enhance our shelf presence and drive greater <unk> with retail customers across hold some work order and equal is working well.
We're seeing the distribution gains that we have been building towards across all sales channels, including retail E Commerce and foodservice.
And we see this momentum continuing through the fourth quarter and into next year.
Inflation and supply chain management are top of mind for the entire CPG industry.
And it is a focus of ours as well.
However, we believe we are in a relatively better position and offers given that we had a bit of a head start.
We were already working on the table all the initiatives to mitigate volatility protect margin and create opportunities to drive greater efficiencies over the long term.
This includes our.
Our previously announced supply chain reinvention projects pricing and trade spend optimization.
Our focus on sourcing manufacturing operations logistics and distributions.
Forever, we're continuing to drive synergies, we swerve in wholesale which is yet another tool to protect our business against this macroeconomic forces.
As such we remain comfortable.
Reiterating our fiscal 2021.
Guidance, we are most price increases stage with retailers to go live in the start up next year.
As we look ahead.
We're confident in our ability to deliver strong sustainable growth and take advantage of market opportunities.
The basis for our confidence lies in our proven operating model built on five strategic pillars brand building.
Innovation distribution supply chain and our work class team.
Let me now provide some Q3 highlights.
Well now our brand building and innovation.
Our growth across our branded CPG and flavors and ingredients segment has been driven primarily by volume year to date.
Demand for our categories remained strong across both developed and emerging markets.
And we have continued to gain share within those categories in recent years.
We have very recognisable brands with number one or number two share in most key markets with new packaging design campaigns, including our hold some purpose led marketing campaign.
And influencers messaging in an attractive industry, where consumers demand is projected to be strong for years to come.
We're meeting our goal of 30 product launches this year in branded CPG and 15 in flavors and ingredients and will have over 15% of our branded CPG segment revenues.
<unk> the from product innovation on the three year rolling basis.
Our innovation in branded CPG is focused on high growth categories, such as blend base Quito.
Keto friendly zero sugar functional benefits organic and fair trade incurring categories of sugar substitutes baking and.
In baking mixes as well as expanding into sugar to that then.
Over categories.
How have the consumption of sugar in baking and we're ideally positioned to take a disproportionate share I am very pleased with the performance of our acquired brands baking mix portfolio as we lapped 2020 with dollar sales consumption growth up double digits and distribution at Moores and <unk>.
60% year on year.
Well now our market execution.
Our brands are gaining distribution via our power of one strategy to become retailers key strictly category business partner across retail E Commerce and food service as we raise the profile of our innovative better for you offerings.
We believe our power of one strategy is working because sweeteners in particular natural sweeteners.
Young and fast growing category, where we can work together with retailers to optimize growth improves shop ability and help consumers had this shelf as they look for alternatives to the 100 billion and sugar total addressable market.
The increased consumer mobility is benefiting our foodservice business and there too we're leveraging tariff one to gain a disproportionate share of this channel school.
Olaf brands provides bulk sweetening in banking solutions across all our brands in all our ingredients.
Equal and the whole Earth sweeteners session for coffee or tea hold some organic agave for mixology.
<unk> no sugar low carb for muffins.
Some organic sugar for non GMO organic fairtrade cookies and brownies.
We expect more consumers and foodservice operators to demand natural sweetener options, which represents an incremental opportunity.
Both swerve in wholesome had limited presence in foodservice pre acquisition and will now benefit from our power of one approach with customers.
As shown in our Q3 supplemental presentation made available on our website. This morning.
Happy to report some key performance measures that highlight the direct impact of our power of one strategy.
Of brands as a company grew ACB or distribution in the U S measured channels to 17, 9% overall, which is a three point increase year to date Q3 versus 2019.
<unk> distribution is 54% at 26 point increase on a similar basis and the holder of sweetener. The brand distribution is 31% an 11 point increase.
Our momentum is continuing in Q4, and we still have distribution gains ahead of us as we look at 2022.
From a door count perspective within our U S natural sugar substitute portfolio, we have grown the number of setting stores by 7% per year to date September.
Olaf brands is significantly outpacing the sweetener category grew in all our key developed markets.
Year to date Q3 versus 2019 for example in the U S. Our value sales change is 27% versus seven 6% for the category.
Our household penetration is increasing across all key developed markets. For example in the U S. We tend nurse household penetration grew two points to 28% year to date Q3 versus 2020 with 26% household penetration across our key developed markets.
Versus 77% for process sugar the opportunity is huge and implies an opportunity to engage with an additional 245 million households.
While in manufacturing and supply chain supply chain remains and undoubtedly a competitive advantage for holdorf brands across our branded CPG and flavors and ingredients segments.
As I have noted previously supply chain improvements will allow us to continue to mitigate inflation and drive topline revenue growth margin expansion and free cash flow generation space.
Specific initiatives include commodity pre buys ahead of 2021 acceleration of our branded CPG North America supply chain reinvention.
<unk> flavors and ingredients footprint optimization, including the completed sale of our Camden, New Jersey facility in Q2.
All those initiatives are proceeding on or ahead of plan.
I will now have a world class team.
We far results to prove it I want to recognize our best in class employees and leadership team <unk>.
They demonstrate daily passion competency and engagement to the leader on our vision to build a large organic natural plant based food company.
Our CFO search is progressing well supported by our leading national executive search firm and I am pleased with the quality of candidates we are attracting.
As we continue to accelerate our growth in sweetener and adjacent categories. I'm also pleased to announce the addition of <unk> to our North America leadership team.
<unk> has a demonstrated track record of driving strategic growth brand building and innovation with over two decades of experience at leading companies such as Pepsico and type of consumer products.
It will also play a significant leadership role in our portfolio expansion efforts in the North American market.
With respect to our flavors and ingredients segment, we're very pleased with Q3 and year to date performance.
The business delivered revenue growth in the quarter. Despite the tough comparison due to a strong performance in the third quarter of 2020.
Our investments in R&D and sales are continuing to pay off with good momentum in the business and significant new customer wins anticipated for Q4 and 2022.
We expect the business to continue to produce strong free cash flow driven by our global leadership position in decrease in our diverse end markets.
<unk> brands is the global leader in the better for you sweetener and reduced sugar categories. Our team continues to execute on our vision to grow into a 1 billion revenue company as we pursue free priorities.
First.
Disrupted the massive 100 billion total addressable refined sugar market that is being displaced by fast growing sweeteners.
Second drive category leadership through best in class innovation and brand building and expand our global distribution leverage our strong supply chain capabilities and continue to further accelerate our growth through strategic M&A.
Third continue to evolve our brand and product portfolio towards becoming a large organic natural and plant based food company.
I encourage you to review our Q3 supplemental deck for further highlights and details on our Q3 earnings.
With that Brian with now who will take you through our financials and outlook for 2021.
Thank you Albert and good morning to everyone. As a reminder, we acquired <unk> on November 10, 2020, and wholesome on February five 2021, I will speak to reported results, which includes work on wholesome for the full third quarter period of 21 <unk>.
Additionally, we will provide some select pro forma results as if we own bulks world and wholesome in 2021, 2020, and 2019 to assist in your analysis of the organic growth of the combined portfolio.
Also please refer to our non-GAAP reconciliations at the end of the press release for additional detail.
And I encourage you to view the supplemental earnings presentation on our Investor Relations website.
For the third quarter ended September 32021, consolidated product revenues grew 92, 4% to $128 nine.
$9 million versus the prior year quarter.
On a pro forma basis, including swerve in wholesome for the full quarter in both the current and prior year periods organic product revenue increased six 6% compared to the prior year third quarter or increased six 1% on a constant currency basis.
Reported gross profit was $43 million compared.
Compared to $18 6 million in the prior year third quarter.
<unk> were positively influenced by contributions from this work on wholesome acquisitions.
At 11.5.
$5 million favorable change in noncash purchase accounting adjustments related to inventory revaluations as well as revenue growth for the legacy business segments.
Reported gross profit margin was 33, 4% in the third quarter of 2021 compared to 27, 8% in the prior year period.
Prior year margin was negatively impacted by purchase accounting adjustments.
Adjusted gross profit margin was 33, 6% down from 42, 2% in the prior year driven primarily by the inclusion of <unk> private label business.
Consolidated operating income was $13 5 million compared to $1 1 million in the prior year and consolidated net income was $8 8 million.
Compared to a net loss of $2 8 million in the prior year period.
Consolidated adjusted EBITDA increased 34, 1% to $22 $1 million driven by contributions from this work and wholesome acquisitions and revenue growth in our legacy businesses, partially offset by higher bonus expense compared to 2020.
Now shifting to the segment results for Q3.
Branded CPG segment product revenues increased $61 7 million or 154%.
$102 7 million for the third quarter of 21, driven by the addition of <unk> and wholesome.
On a pro forma basis, including the impact of both acquisitions in the current and prior year quarters organic constant currency product revenue increased seven 6% compared to the prior year third quarter, primarily due to strong volume growth, particularly in our national products portfolio.
On a two year stack basis, when comparing third quarter 2021 to third quarter 2019 branded CPG segment pro forma organic constant currency revenue increased 14, 3%.
Operating income for the branded CPG segment increased $3 million to $10 1 million in the third quarter, a 21 inch.
Increase was driven by contributions from the acquisitions of suburban wholesome revenue growth from our legacy business and lower purchase accounting adjustments.
These increases were partially offset by higher bonus expense costs associated with our supply chain reinvention project and the inclusion of stock based compensation expense in 2021.
Flavors and ingredients segment product revenues increased 1% to $26 2 million for the third quarter of 2021.
The increase was driven by growth in liquid extracts.
And our Magnus we product lines, largely offset by declines in peer derivatives.
Operating income for flavors and ingredients segment was $9 5 million in the third quarter of 2021 compared to an operating loss of <unk> $4 million in the prior year period.
The increase was primarily due to an $8 million favorable change in purchase accounting adjustments related to inventory revaluations.
Our revenue growth and lower operating costs.
Operating expenses for corporate for the third quarter of 'twenty, one or $6 1 million compared.
Compared to $5 6 million of operating expenses in the prior year period, primarily due to the addition of stock based compensation expense in 2021.
Now I will briefly cover September year to date results.
As a reminder, our consolidated year to date 2020 results reflect both predecessor and successor periods indicative of the June 25, 2020 business combination data.
Year to date results I will discuss compared the results for the nine months ended September 32021 to the combined nine months ended September 32020, which includes the successor period from June 26, 2020 through September 30 of 2020, and the predecessor period from January one 2020.
Through June 25 2020.
Additionally, our consolidated reported financial results reflect the completed acquisitions of swerve in wholesome pro forma comparisons include the impact of both acquisitions and the periods of comparison.
Consolidated product revenues increased 88% to $361 3 million as compared to the 2020 year to date period on a pro forma basis organic constant currency product revenues increased two 7% compared to the prior year period.
Branded CPG product revenues increased 128, 1% to $283 6 million, reflecting the acquisitions of wholesome elsewhere.
On a pro forma basis organic constant currency product revenues increased two 6% compared to the prior year period and grew 12, 8% on a two year stack basis as compared to the first nine months of 2019.
Flavors and ingredients segment product revenues were 77 $7 million.
An increase of two 9% as compared to the prior year period.
Reported gross profit was $120 million, an increase of $48 9 million from $71 1 million in the prior year period.
Gross profit margin was 33, 2% in the nine months ended September 32021, as compared to 35, 6% in the prior year period.
Adjusted gross profit margin was 34, 7%.
One from 41, 8% in the prior year period, driven primarily by <unk> private label business.
Consolidated operating income was $16 4 million compared to an operating loss of $37 $4 million in the prior year and consolidated net income was <unk> 5 million for the nine months ended September 32021, compared to a net loss of $37 5 million in the prior year period.
Good.
The improvement was largely due to $40 6 million of noncash impairment charges recorded in 2020, and the positive impact of acquisitions and our 2021 results.
Consolidated adjusted EBITDA increased 51, 9% to $61 $6 million driven by contributions from the acquired swerve in wholesome businesses revenue growth and productivity gains, partially offset by increases in public company costs and bonus expense.
Now moving to cash flow and the balance sheet.
Cash flow provided by operating activities for September year to date was $6 6 million that is net of $19 7 million of nonrecurring or unusual items, such as M&A transaction related costs and restructuring costs or.
Our September year to date capital expenditures were $7 1 million.
Free cash flow, excluding the nonrecurring or unusual items was $19 2 million.
As of September 32021, we had cash and cash equivalents of $33 $6 million and $384 $1 million of long term debt net of unamortized discounts and debt issuance costs using.
Using the midpoint of our adjusted EBITDA guidance, our net debt to adjusted EBITDA ratio at September 32021 was approximately four two times <unk>.
Reducing balance sheet leverage continues to remain a corporate priority.
Shifting to our full year outlook, we are reiterating our full year 2021 guidance, which includes our acquisitions of swerve in wholesome as a reminder, the outlook represents our expectations for growth on a pro forma organic basis.
We define pro forma organic growth to be as if the company owned boats were and wholesome for the full years of 2020 and 2021.
To reiterate our guidance, we continue to expect consolidated product revenues to be in the range of $493 million to $505 million, representing reported growth of greater than 78% and pro forma organic growth of 3% to 5%.
Adjusted gross profit margin is expected to be 34% to 35% of product revenues, which again reflects the influence of our acquired assets also means worth.
Adjusted EBITDA margins are expected to be approximately 17% of consolidated product revenues.
We expect consolidated adjusted EBITDA in the range of $82 million to $85 million.
Representing reported growth of greater than 50% and pro forma organic growth of 3% to 5%.
Total capital expenditures will be in the range of $10 million to $12 million and lastly, we expect cash taxes will be in the range of $6 million to $8 million.
That concludes our prepared remarks, operator now back to you. Please open the call for Q&A.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad Youll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
We'll pause for a moment as Congress join the queue.
The first question is from Scott <unk> from <unk> capital. Please go ahead.
Hey, guys. Thanks for taking my questions, Hey, Irwin I think this year non compete is ending so congratulations on that with.
With Hain.
I guess probably exciting.
As thats concluding.
The.
I guess the first question I had is looking at the debt.
Guys talked about at the end there can you refresh us what the targets are there and when you youre more comfortable that you can get back in the M&A market or are you comfortable already.
Sure Good morning, Scott and thank you for them.
Addressing irwin so I guess, maybe if.
If you want to start with we stat in your Anniversaried not being in the Bryan can that can address the debt piece.
Sure.
Scott.
Three years since I got from Hain and.
Three years.
I did have a noncompete and certain natural organic categories.
And I look forward to working with Albert.
All team.
Guards to future acquisitions in that fast growing natural organic category as I said in the press release, we're going to be focused on plant based we're going to focus on Bachelor we're going to be focused on organic.
And with that we're seeing lots of niche things Albert.
The past has done lots of acquisitions with Pepsi years, but right now our debt levels.
In the fours.
I'm, not a guy who likes a lot of debt.
But I guess I come back to.
Companies, where there is growth we would push our our debt levels for four and a half is where we would do that today, but again, Scott it's buying companies with good growth and good EBITDA.
So and there is lots of stuff. We're working what we wanted to do was get sort of integrated get wholesome integrated and get our holders on track.
Remember, we're really only a public company now for just over a year and what we've been able to accomplish in just over a year in the <unk>.
Size of the company and the growth of the company.
And then.
With the ability to go out there and do a lot more acquisition so.
Back to your question on a long winded answer.
We're excited about going out there and looking at multiple acquisitions over the next few years and looking at a bunch of them now.
Can I just I know I think I'll, probably address that issue maybe I could just ask one more thing Irwin.
Thinking back to your time at Hain, you were almost allergic to get sometimes it seemed like you didn't like a lot of that so you did from time to time I know like have earn outs with equity and that type of thing.
That a possibility here that you would go that route rather than layering more debt on that of that debt on the company and then maybe I'll yield to other questions as we've talked about I'm not sure.
Really good question, and we did use equity and listen.
We have some great equity.
At holder and I think the big thing is is buying those and doing those acquisitions, where there is an earn out and giving equity to share in the accretion of <unk>.
Our equity and a share in the accretion of the earnings that would be a part of it and look for the upside here and I think that is a big thing there is tremendous upside here.
I step back today, and we're in a time when supply chain is being disrupted there's a lot of smaller companies out there today that feel they have to be part of a somewhat bigger and with that we've demonstrated what we've been able to do which were have been wholesome and even taking brands like holder and equal.
<unk> and growing them the way we have the other thing is Scott we have an international business. We have a good strong international businesses with offices around the world. So, yes, we would use <unk>.
Equity.
As part of it and ultimately with the cost of money today.
That's why I'm a little more.
Not as reluctant as it was before to grow there in boral and.
You heard Brian talk about our free cash we throw off a tremendous amount of free cash. The other thing is whole Earth is really asset light. So it's not like we're investing a ton of capital in our Capex.
Okay.
Perfect.
Back in the queue actually let other people a chance to add you have some other questions.
Anyway, Thank you right.
Thank you thanks Scott.
The next question is from Bobby Burleson from Canaccord. Please go ahead.
Hey, good morning.
So just a couple of quick ones on <unk>.
Just regional.
Color to.
The U S are there any areas, where youre, particularly under represented right now.
Just gaining traction in those regions are really helped.
U S growth.
I'm thinking mainly branded CPG.
And retail.
Yeah.
Yes, good morning, Bobby and I missed the piece when you were talking about the region. You mean geographic pieces in the U S. Yes, other geographic regions in the U S where you're underpenetrated.
Particularly with the branded CPG and retail.
Understood.
The way we think about this.
This is a growing distribution across retailers that have a national footprint.
And or very strong regional footprint as we continue to gain distribution.
We see opportunities to close those gaps.
That also indicates Bobby.
We are really at the beginning of this move away from from processed sugar and <unk> and this is why power off one is so important series at a lot of education going on a lot of working with retail partners about IBD T optimizing the growth of those.
Categories and this is why we're so excited.
By power of one and the results we're getting because this is a need as as you know that is for sure a national need global needs in the international lead and therefore with the power of one we see education. This is a very young category, especially on the natural side growing.
Leaps and bounds as there is a ton of opportunity not only as you just mentioned.
<unk> not only opportunities as we always talk about gaining distribution, but there is also specific regional opportunities that we're tackling with retailers does have a national footprint and then increasing the penetration goes wheat acres.
In those regions.
Great.
And just.
As we're on the topic of.
This category.
But obviously a lot of tough supply chain issues out there.
I would imagine that you guys. Like you mentioned are ahead of the curve a little bit in terms of.
Making sure you have ample supply.
Yes, reduce disruptions are you seeing any.
Kind of retail partners.
Maybe gravitating more towards our brand consolidation strategy and the natural sweetener category, where they might want to align.
Yes.
Sweeteners wins.
Someone that has scale like yourselves.
Ken.
The risk of disruptions.
Right, Bobby and I would take you back on this to really 2020, right and if you think about 2020 and if you think about some of the color of the growth that we shouldnt zier with brands like <unk> and <unk>.
And in the order book.
Back in 2020, what you started to have was.
And if he can disruption significantly in a BDC to stock the shelves significant inability from from manufacturers and we said it I said it on previous calls that.
Back in 2020, we had about a 98% 99%.
Service, right and and I talked about the fact that this was boating word interim so building a strategic partnership with those retailers.
The way I think about it is you can never rest on your low rooms, and as you look at 2021, not only we are working very hard and I talked in my prepared remark about being it could be ahead of the curve in terms of securing supply and in terms of managing inflation.
But in addition as <unk>.
As we talked I just talked about we are also bringing new tools like the power, one which combined with <unk>.
Supply combined with.
Maintaining cost are all very important things for the retailer to continue too.
Partner.
The emerging players and we are we still because Irwin just say you know we're the global leader in that space. So the answer is.
We're working hard at it to these are that the confidence from the retail partners.
Bobby just Suffolk.
Just on that I think again and that's a great question.
As we build out our footprint on the whole sweetener category and the benefits.
Of the sweetener category and consumers moving over this category to your point as being that leader out there in either building share from going out and getting new distribution.
Developing new products are doing future acquisitions, and we will build the footprint out to supply I must tell you. The team has done a great job with regards to supply.
Right now, but again there is always challenges out there and I think the big thing is back to what Scott asked before.
Sure.
How do we diversify our portfolio and not just be a sweetener company and that's what we tried to do.
With regards to <unk>, that's what we tried to do with regards to wholesome and thats the direction that Albert and myself and the team while it take this yes, b Thats donuts that sweetener company.
And again, it's great to see foodservice come back it's great to see some of the innovation that we've come out with but we want to be that diversified better for you whether it's plant based whether it's sweetener, whether it's organic and look at that how do we pull it all together I think that's what's important from what holder and it says it's in our name.
Great. Thank you very much.
Thank you thank you Bobby.
The next question is from George Kelly from Roth Capital Partners. Please go ahead.
Hi, everybody. Thanks for taking my question.
So just to start with your full year guidance I was hoping you could.
Help me understand what's implied.
Fourth quarter, so if I look at it.
Revenue it looks like there is a nice step up sequentially from what you just generated in the third quarter.
But then I have EBITDA kind of flattish and so I was hoping you could help me understand just whats driving that revenue growth in the fourth quarter and why should EBITDA.
What kind of move up along with it.
Yes, I can I can start to George good morning.
That Brian.
<unk> as needed, but I would tell you that we are first of all very pleased with our Q3.
Growth.
If you take overall six one and you could take branded CPG, two <unk> versus 2019 of 14 Cree.
And.
We've been planning our business against this range of outcome and I'm very pleased with the job we are doing to execute against that now the second half of the year and I think you see that in Q3, which including market share gains has always been about rolling out innovation and expanding our distribution as we have been.
Turning to you before and you see that materialize now this is a very fluid and grown mint as we have talked in the first two questions.
We have to say then.
We are therefore.
We remain prudent and we'll continue to work to meet our booths, but.
Do you think in a very fluid environment, and we prefer to remain prudent with regard to Q4.
Yes.
Bryan Jordan as you wanted to add.
Yes, George this is Brian.
One thing I would add is especially on the revenue side and I think Albert alluded to it but this is our baking season. So we do get an uplift in Q4 related to the baking season. In particular is this is really our first baking season owning score given that was acquired at the beginning of.
In November of last year. So this is really our first ownership planning in owning the business heading into the baking season. So that's a big driver for some of the lift we would expect for Q4.
And just to make sure I don't know if a bit on the EBITDA front is there any kind of onetime sure that youre getting hit by inflation and so thats.
I just wasn't sure if there was anything.
Bonus related or anything else you can flag that is going to impact Q4 on the expense side.
Brian.
Sure.
I can add there George there is a couple of things obviously, we have a little bit more of our marketing and promotion season weighted towards Q4 to support obviously the baking season in some of the items that I've just had mentioned.
The other items you mentioned bonus for example, and as a reminder, we had a little bit of a different program from a bonus perspective last year, where the bonus program was paid in the form of our shoes are stocked for this year, we're largely more back to a cash bonus so there will be a little bit of <unk>.
Headwind on the bonus expense of line as well, but those are probably just two items I would say off the top of my head that I would point to.
Okay. Great. That's helpful. And then next question for me and I'm not looking for specific 2022 guidance, but.
Looking at the free cash flow you just generated in the quarter really strong.
And curious if you could help bridge.
Just on a go forward basis, just in round numbers, how I should think about your cash conversion from EBITDA to free cash flow and what is kind of normalized capex or what are your working capital expectations going forward.
Any of those kind of things in round numbers would be helpful.
Yes, Georgia, So as you know, we're not providing guidance for next year at this stage, but I would let the <unk>.
Bryan address anything that can be addressed within your question.
Yes, I guess, the only thing I would reiterate George is that we've publicly in the past have indicated capex expectations on a long term view of approximating about one 5% of sales.
But otherwise what Albert indicated, we're not really providing guidance yet going forward.
Alright fair enough.
Thanks, everybody I'll hop back in the queue. Thanks, George Thank you.
Okay.
The last question is from Mark Smith from Lake Street Capital markets. Please go ahead.
Hi, guys as we look at kind of this busy holiday baking season moving into this how do you feel about your.
Inventory out on shelves of retailers today.
Any regions or anywhere where maybe sales could be.
Supply constraints.
Yeah, Great Great question, Mark and good morning. This is you know what why why I'm, so thankful to our organization and our supply chain organization in North sales organization I can tell you that everybody is working very closely together, including the retail partners, including <unk>.
Our distributor to the retailers to make sure that we have a briefing that the consumer ones on the shelf and so far so good we are benefiting from a great network of co manufacturers.
<unk>, which is a spread across the U S and at this point in time, we don't foresee.
Issues.
For Q4.
And Mark just let me jump into Mark let me just jump into that.
You got to commend the team here we brought.
These basically four companies together, we've innovated products.
We also believe gain distribution and we've picked up distribution, where other companies are competitors could not service and at the same time, what we're seeing today is foodservice sales pick up the.
It was a big part of our business.
Dropped off during Covid so.
Again, I would not sit here and say, we're not going to see any disruption out there absolutely.
Because as we get ingredients and packaging pull it together, but again.
I commend the team for what we've been able to do in regards to putting companies together, the new distribution new products out there and also just a category that's growth.
So youll be able to find your square to baked during Thanksgiving and Christmas Mark.
Okay excellent.
Last one for me is just as we look at kind of this organic growth within CPG can you give us a little bit of insight into.
How much of this growth is coming from new customers and kind of growth there versus.
Expanding shelf space within existing customers or more turnover and growth within existing customers.
Yes, that's a great question and I would tell you that the good news is re lease it would be though everything and that's why I think it's great to work with.
Healthy channels, so if you too.
If you look at distribution, we are seeing a growth as I said, we grew our door count of 7% on natural versus 2020. We are also seeing very strong growth in E Commerce, where we have more than our fair share our foodservice business. We've increased mobility grew four.
40%, 30% sorry in <unk>.
Q3 versus Q3 of last year.
And you would see on the supplemental deck that the power of one that we also.
Play out in foodservice and e-commerce, So I always say distribution is a piece of it.
Innovation, I mean, 15 searching new products in the branded CPG, which would represent well over 15% of net sales in the three year CAGR basis is very good for us.
And so I would say that with the brands that we have two category expansion, which we haven't talked about but we're very pleased with the expansion into baking mixes we <unk> five skus of wholesome.
We are growing those double digits, we gained 60 points of distribution. So you essentially have innovation in the core innovation and new categories and I mentioned earlier that we should think that joined taxi is going to be in charge of category expansion.
You have distribution gains you have distribution across the different channels.
And you have a supply chain that.
He is best in class and could do this with a great organization. So that's in a category that is healthy which has been outweighs the ongoing premise. We're in at the beginning of a continued growth in our <unk>.
Healthy category. So our job is to lead deserved that leadership and.
Therefore, we want to make sure that you see growth across all the competence, which essentially provides us sustainable long term growth ongoing.
Excellent. Thank you guys.
Okay.
Thanks Mark.
This concludes the question and answer session I would like to turn the conference back over to Mr. <unk> for any closing remarks.
Sure. So listen thank you very much for taking the time to listen to us.
<unk> has a follow up calls with all of you and please take a look at the supplemental deck that we posted this morning.
There's additional elements in inflammation, which you may find it useful in your analysis again, a big thank you for joining us.
As Irwin said, you can find our products before.
The baking season, the Thanksgiving and Christmas and we hope you enjoy it and thank you so much goodbye.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
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Yes.
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