Q3 2024 Premium Brands Holdings Corp Earnings Call

Speaker Change: Good morning and good afternoon ladies and gentlemen and welcome to the premium brand Holdings Corporation 3rd quarter 2024 earnings conference hall, question and ask this session.

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Speaker Change: This call has been recorded on Wednesday, November 6, 2024. Our speakers today are George Paleologou, CEO and President of Premium Brands, and will Kalutycz, TFO of Premium Brands. I would not like to turn the conference over to George, please go ahead.

George Paleologou: Good morning and welcome everyone to our 2024 3rd Quarter Conference Call.

George Paleologou: With me here today is our CFO Will Kalutycz. Hopefully you've had a chance to listen to our pre-recorded call posted on our website this morning. We will now take your questions.

Speaker Change: Your first question comes from Martin Landry with Stiefel. Your line is now open.

Martin Landry: Hi, good morning guys. Good morning.

Martin Landry: My first question is on the...

Martin Landry: the Lays on boarding your new clients.

Martin Landry: I'm just trying to understand and just confirm, you know, as there have been cancellation of programs or as there have been...

Martin Landry: Ringo Association of Thurms, there have been reduction in volumes or is this just again just normal lengthy onboarding procedures. Any caller would be helpful to understand what's going on.

Speaker Change: Yeah, Martin, there's absolutely not been any cancellations at all. As you know, we've included the Business Development Pipeline in the deck.

Speaker Change: We've actually launched some programs later on in the quarter.

George Paleologou: Launching some in the fourth quarter as well.

George Paleologou: As we mentioned in the last conference call, some of the onboarding times take longer because the customers are so large.

George Paleologou: So again, nothing unusual the pipeline is as robust as it has ever been.

George Paleologou: Episode 2

Speaker Change: Okay, and it's a good segue into actually that's right that you're referring to a slight 14 on your US pipeline

Speaker Change: I thought it was very interesting so you are highlighting the business portion of 704 million dollars that could be completed in 2025. That's obviously a nine-year-old revenue run rate. So you know...

Speaker Change: Yes, that's it.

Speaker Change: For us, it's a bit difficult to put this into a forecast, just trying to understand. If you would be in our shoes and looking at modeling 25, how much of that number could boost your revenues for 25?

Speaker Change: Again, it's a tough, difficult question because of the whole timing issue we've been facing.

Speaker Change: and the reality is...

Speaker Change: All those first two columns with numbers in them, you know, totaling of billion dollars. All of those are active and all of those could potentially hit 2025.

Speaker Change: It's not just 700 million in the first column, but the way we just give you a bit of background and color around those columns

Speaker Change: You know that highly likely column, those are initiatives that when we sit down and go through them with our businesses, they're 80 to 100% probability. So very, very confident in achieving those, and it's just timing.

George Paleologou: versus the likely are a little bit earlier, they're probably 60 to 80% probability range. So when we look at that and rough terms, you know.

Speaker Change: in terms of modeling you.

George Paleologou: Maybe 50% hitting by the middle of the year. The vast majority of those hitting at a run rate by the end of the year. Again, the challenge we've been dealing with for the last several quarters is the timing around these initiatives.

Speaker Change: You know, there are, that last George mentioned, you know, very confident we're going to get there. We're in great discussions with the customers.

George Paleologou: Nothing's been canceled, it's just been one of, you know, working through the process, figuring out the listing structure, figuring out the right launching time.

Speaker Change: and dealing with the processes in these large customers we're dealing with.

Speaker Change: Okay, and then maybe last question for me.

Speaker Change: in the specialty food segment, when you exclude your large client as some...

Speaker Change: I'm softness in itself. You sit at your volume growth is up 2.3%.

Speaker Change: It does look a little weak and you're calling out.

Speaker Change: A couple of items are calling out beef jerky. We can visit the sales increases, you're calling out.

Speaker Change: and the ladies and gentlemen, I'm going to call you out the week's spending.

Speaker Change: and the convenience store segment and food service. So maybe would be Turkey and the weakness in food service.

Speaker Change: and Koniastor, just again for modeling purposes, when did that happen and how long, like, are we, is just going to be in something that's going to be with us for the next year? Just understand a little bit, you know.

Speaker Change: What, like if this recent impact has been going on for a long time or any color would be helpful.

Speaker Change: Yeah, so in terms of, you know, I'll start with a bit of the positive.

Speaker Change: In terms of the Canadian portion which you know in the quarter as we talked about, generate that you know it's roughly stable a little bit up year or be year in volume terms so we do expect that to continue to increase improve over the coming quarters.

Speaker Change: in terms of the economy, factor for specialty foods.

Speaker Change: I'm going to talk mostly about special foods first and I'll give you some general comments on premium food distribution group.

Speaker Change: In terms of the economy, it's really been the C-store sector that's been challenging for us.

Speaker Change: and the reality is we're generally dealing with, you know, particularly in our U.S. initiatives with these large customers that are pretty resilient in the face of the economic challenges being faced down there in the U.S.

Speaker Change: and so...

Speaker Change: That is, you know, maybe there's one more quarter until we start stopping the C-store impact that we've been seeing now for a buddy year.

Speaker Change: So that's really end of 2024 story and stabilizing in 25. That's the same with jerky as well. Jerky and a big part of the jerky story is the sea store channel. And so we'll start laughing at the end of this year.

Speaker Change: and so yeah you know in 2025 those should be stable to you know maybe starting to see a little bit of organic growth from them so that that's not going to be the headwind it was this year.

Speaker Change: And Martin, I should comment too that we didn't give any specific guidance to the balance of 2024, but with our Q4 results, we expect to have better clarity.

Speaker Change: particularly around the food service customer that we talked about for the impact on this quarter. And so our intention is to provide 2025 guidance with our Q4 results.

Martin: Okay, that's helpful. Thank you.

Martin: Your next question comes from Derek Lessard with TD Cowan. Your line is now open.

Derek Lessard: Yeah, good morning, gentlemen. So maybe, Will, I just want to hit on the last one, on your last point there and talk about.

Martin: The larger client there, is there anything to suggest that there's a permanent impairment? And if not, do you have a sense of when that recovery would be?

Speaker Change: Yeah, Derek, I think overall the QSR segment in the U.S.

Martin: slowed down during the quarter.

Speaker Change: I think that a lot of large QSR players have reported and you know again you know there was a definite slowdown in QSR.

Speaker Change: With regards to our large customer, I think it's well-known, it's well-publicized in terms of...

Speaker Change: the strategies they have in place to turn it around and, you know, we're obviously supportive and and we don't think anything is tournament is permanent as you say we think that that They're on the right track in terms of addressing

Speaker Change: their traffic issues.

Speaker Change: Okay and that's fair George. So I guess if I can ask another question and I know obviously I'm talking hypotheticals but if it were permanent, do you think you could find a home with other potential customers to take up that capacity?

Speaker Change: Well, I think that in the deck, Derek, we've included

Speaker Change: I can't remember which page it was, but we basically have a breakdown of the different channels that we service now in our sandwich group.

Speaker Change: Basically, seven different channels now are being serviced by us, all developed more recently as we've added more capacity.

Speaker Change: For 2025, we fully expect to be shipping product to the international markets as well. So there's a lot of growth initiatives with regards to the other channels, other than the QSR channel.

Speaker Change: is about 1.2 billion, rough numbers.

Speaker Change: And you can see from the slide that, you know, the opportunities in the channel excluding any growth or impact from that large food service customer, you know, is $650 million. So just current initiatives.

Speaker Change: Yeah, George, and one last one for me before I break to you. Can you maybe just talk about the international opportunity and what that looks like?

Speaker Change: with a club store chain, and we're getting more opportunities. We're looking at a number of sandwich queues with them for the Asian market.

Speaker Change: Thank you.

Speaker Change: Thanks, Sherry. You're next.

Speaker Change: Your next question comes from Kyle McPhee with Cormac Securities.

Speaker Change: Your line is now open.

Kyle McPhee: Hi, just to talk a bit more about the U.S. growth programs turning on with all your new capacity. In Q2 you mentioned, you know, in some of your color that you were having

Speaker Change: Deep bottlenecking issues at some of the new U.S. facilities, you know, the bakery, I think, to cook protein are a couple examples. Can you provide an update on the operational side of things? Have you now sorted through all the issues, you know, into Q4 and beyond?

Speaker Change: Yeah, so on the bakery group...

Speaker Change: We are still in the process of, you know, it's one of our ongoing projects with the San Leandro plant, the new laminated dough plant. And, you know, you'll see from our CAPEX slide, Kyle, that, you know, we still are investing. We're not yet completed that project. And a lot of the investment going on right now is around the automation of processes, so the basic capacity is in place.

Speaker Change: And the last part of the project is just investing in the efficiencies. And so, that is not yet there. You know, we do expect there, I think, those projects, that that project is supposed to wind up or be completed by the end of this year.

Speaker Change: and and so there's a little bit of investment still to go and then there's still a bit of a learning curve with you know it's a new employee workforce.

Speaker Change: and that takes some time bringing it up to speed combined with learning this new technology. So that operation was a good portion of our restructuring costs in the quarter because of some of those inefficiencies.

Speaker Change: But our newer artisan bread facility in BC here, Kyle, is running really well and

Speaker Change: making a lot of progress in terms of opening up new accounts and new customers in the U.S., which is part of the growth that you saw, the organic growth you saw with our bakery group overall.

Kyle McPhee: Okay, and is it fair to say, you know, there's no operational issues at the other new U.S. facilities, aside from this bakery?

Speaker Change: Well, the Hempler's expansion, we still, there's a lot of new technology in that plant that we're still playing with and figuring out a bit. So, but yeah, we're close to completed that, but you know, it's still not humming at 100%.

Speaker Change: Okay, and on your new slide about the U.S. sales pipeline, I noticed that the bakery sales programs are mostly classified as early stage. You know, what's happened there? I thought, you know, a lot of the bakery sales programs were pretty visible among some key clients of yours, so why is it now called early stage?

Speaker Change: Well, if you look at for the last couple of quarters, if you look at our slide on the growth rates

Speaker Change: in the bakery group, you know, they've been like 20-25 percent. You know, the reality is a lot of the projects have hit and they're now reflected, and this doesn't capture anything that was achieved by the end of Q3.

Speaker Change: So we'll still have the run rate benefit of a lot of those programs.

Speaker Change: Bye.

Speaker Change: This is just new stuff. So there we've just had, you know, I think we've talked about this in the past, Kyle, a lot of their programs were success with a customer in one region and expanding it into other regions with that customer. So that's why you're seeing a lot of this immediate growth, easy growth.

Speaker Change: and then these are new discussions on top of it. So if you look at the run rate growth of them next year, you know, it will continue to be quite stellar.

Speaker Change: Got it. Okay, I'll pass it along for now. Thanks.

Speaker Change: Thanks, Scott.

Speaker Change: Your next question comes from Vishal Sridhar with National Bank. Your line is now open.

Vishal Sridhar: Thank you.

Vishal Sridhar: Hi, thanks for taking my questions.

Speaker Change: Wondering about the Canadian conventional business. You'd highlighted that as a weak part in your Canadian business overall, the conventional segment of the supermarket. Wondering if you're seeing some turnaround in that.

Speaker Change: Vishal, I would say that we're seeing signs of...

Vishal Sridhar: consumer confidence returning in Canada.

Speaker Change: We're not there yet, but we are seeing signs of improvement in the sentiment.

Speaker Change: of the consumer and, you know, we think it has to do with the lower interest rate environment and obviously the lower inflation as well. So we'll just keep our fingers crossed.

Speaker Change: Thank you. And with respect, Will, to the balance sheet, how should we expect that to unfold given this speed bump associated with the large QSR customer and the delays? When do you anticipate you'll be back into your targeted timeframe?

Speaker Change: Oh, yeah.

Speaker Change: Yeah, it certainly, you know, the quarter did set us back a little bit. The reality is we still expect by the end of 2025 to be within our targeted range. You'll see in quarter four there's going to be a lot of moving parts.

Speaker Change: with the asset sales we talk about in the press release and then, as George mentioned in his comments, that we are very close on completing a number of acquisitions this quarter.

Speaker Change: So, but overall, you're not going to see much of a change in the balance sheet, assuming all that plays out like planned in Q4, but with Q1, Q2 next year, you should start seeing deleveraging and being back in our targeted range by the end of the year.

Speaker Change: Okay, and with respect to the acquisitions that you aim to capture, I presume we should think equity, and how much equity should we be thinking? Is there a way for us to model it?

Speaker Change: Unfortunately, it's not a big component of it. Again, we don't want to get into the details of it at this point.

Speaker Change: But it's certainly not a big component, you know, there's other components of contingent consideration, minority interest investment, those types of things as well built into there.

Speaker Change: It's not going to move the needle in terms of our outstanding shares.

Speaker Change: Okay, that's helpful. Thank you for that. And with respect to that large QSR customer, just

Speaker Change: to get your understanding on it. So they are embarking on strategy changes and one of the topics out there is possible skew rationalization. Wondering if that's been talked about on your side and how should we think about the impact on PDH if that manifests?

Speaker Change: Yeah, Vishal, we can't really comment on the specifics.

Speaker Change: of the customer. I think you know that food is a big component of what they do. There's lots of discussions around innovations, new launchings.

Speaker Change: timing of launchings, promotions, all of those things as usual with any sort of big partner customer, but we can't really get into more detail than that.

Speaker Change: Okay, I appreciate it. Thank you.

Speaker Change: Thanks, Vishal.

Speaker Change: Your next question comes from Mark Petrie with CIBC. Your line is now open.

Mark Petrie: Hi there, I actually just wanted to follow up on that last topic and hoping you could just help us understand the dynamics that you experienced in Q3 exactly, was it?

Speaker Change: But, you know, outside of that, when you look at the customer's units...

Mark Petrie: sold, you know, our decline was, you know, in line with it, so we're not exactly clear at this point, but we are sort of cautiously optimistic for Q4 that there is some volatility from the ordering patterns that will benefit Q4.

Speaker Change: Right, okay, and I guess just going back to Q2 maybe...

Speaker Change: you know, can you give us a sense of what type of growth you would have experienced or what type of performance there would have been in that in that period? Because my understanding was that some of their deceleration had already kind of begun in Q2 as well. So just trying to sort of square all that up.

Speaker Change: Not that we experienced, Mark. We were hitting our numbers, our projections that they had given us by the end of Q2.

Speaker Change: And some of that, Mark, could be that volatility of ordering.

Speaker Change: certainly that could be a factor. Also they launched a new product in the quarter and so there's a little bit of channel fill on Q2 that would have helped as well. What I would also say Mark is that

Speaker Change: because we have other QSR customers in Canada and the U.S.

Speaker Change: Up to the end of Q2, customers were frequenting QSR. Maybe the casual dining was slowing down, but QSR was certainly robust.

Speaker Change: and in the third quarter we've seen a slowdown with regards to QSR in general.

Speaker Change: So, I'm sure that there's a little bit of that in what happened in Q3.

Speaker Change: yeah okay okay that's helpful and then I also wanted to follow up on just the comments with regards to the Canadian market

Speaker Change: And, you know, your comments about recovering from the impact of a weaker consumer environment.

Speaker Change: You said you're sort of seeing signs of consumer confidence in Canada. What are those signs? Like, is that just less trade down, less promo penetration? Is it behavior from the retailers? Like, what are those signs?

Speaker Change: Canadian consumer was very, very conservative for quite a while, mainly because of the high interest rate environment.

Speaker Change: and the high inflation and we're just starting to see some evidence that things are improving out there.

Speaker Change: yeah okay got it thank you and and just last one on the on the distribution business and the volume growth specifically could you just sort of

Speaker Change: help clarify the kind of performance by region because I think you said that Canada turned positive and then was it was the deterioration in in international and US a little less so or or what was the dynamic there exactly?

Speaker Change: Yeah, I know that the big story or the big headwind in at least on the sales line for premium food distribution was our lobster business.

Speaker Change: The Canadian fishery if you recall from last quarter, actually the Q2 fishery went quite well.

Speaker Change: which is creating lower catch rates for the fishers because the lobsters aren't moving around as much and there's a whole story there.

Speaker Change: Anyway, so what's happened is because of the poor main fishery, the pricing environment has gotten quite high for lobsters, that's prevented a lot of promotion.

Speaker Change: and were very disciplined in their pricing. So they actually made up for somewhat in their margins and what they could sell it for, but that was really the big headwind in Premium Food Distribution Group.

Speaker Change: Okay, and just to be clear, that manifested in the U.S. and in international, but Canada... Oh yeah, yeah, sorry, sorry, yeah, that was a North American international story.

Speaker Change: Yeah, understood. Okay, thanks for all the comments and all the best.

Speaker Change: Thanks Mark.

Speaker Change: Your next question comes from Chris Leawood-Desjardins. Your line is now open.

Chris Leawood-Desjardins: Hi, good morning George and I hope you're both doing well.

Chris Leawood-Desjardins: Thanks for the additional disclosure on the revenue contribution from that large QS customer. I guess my question is, when I sort of do the math, it looks like revenues from that customer were around $196 million for the quarter.

Speaker Change: or down around 6% compared to last year. Just wondering if that $196 million revenue is a fair run rate?

Speaker Change: to assume for the next few quarters, or do you anticipate maybe further contraction in Q4? And that's why you kind of refrained from providing an updated 24-hour outlook.

Speaker Change: Again, Chris, because that large customer is a public company, we can't really speak specifically as to the volumes we do with that customer.

Speaker Change: But, you know, I would say that overall if you look at other QSR chains and the declines in terms of the traffic and the revenues, you know, you can come to probably the right conclusion.

Speaker Change: in terms of, you know, the volume impact.

Speaker Change: Gotcha. Okay. Now, that's right. Now, I'm just trying to figure out, George, just in terms of what's last quarter kind of the bottom.

Speaker Change: in terms of all the transitory challenges.

Speaker Change: that they face, or is Q4 or Q1 still going to be more sort of pressure, just trying to figure out from that side? Yeah, there's a lot of public disclosure on them, Chris, so I kind of refer you to public disclosure.

Chris Leawood-Desjardins: Okay, no, that's great. And then I guess maybe we want to just ask about...

Speaker Change: If you can also talk a little bit more about just the REBME outlook for the other core

Speaker Change: U.S. specialty food segment, you know, as you know in your press release, the organic volume growth rate excluding that large QS customer was, you know, quite solid up at 8% in a quarter. And I'm just wondering, is sort of high single digit, you know, a good organic volume growth target?

Speaker Change: for next year for that U.S. specialty food to exclude that large U.S. customer? Is that a... Yeah, so if you look at the quarter, Chris, and you look at the three product or business groups in that U.S. initiative slide...

Speaker Change: Those growth rates that we show for the quarter X the customer we've been talking about should be stable to better going forward. Again, driven by that pipeline of opportunities as things start hitting the road.

Speaker Change: Okay, so in other words, if you did 8% in Q3, when you say stable or better, it could be as good as 8% or higher than 8% Yes, exactly

Speaker Change: Yeah, and I just want to add to Will's comment, Chris, is that, as we've said before, historically, the challenge for us has been capacity.

Speaker Change: We've got a lot of programs that are successful with customers in the U.S.

Speaker Change: In many cases they want to roll them out to new geographic areas and you know as we speak today you know we're

Speaker Change: Capital investment that's organic and some of it will come through acquisition. So so again, there's a pretty good visibility with regards to to to these opportunities

Speaker Change: Okay, that's helpful. And then just maybe still on the specialty foods group, so when I look out to next year, you know, assuming you can achieve that high single-digit or even low double-digit organic volume growth run rate.

Speaker Change: How should we think about just the margin profile? Is it fair to assume we can still expect EBITDA margin expansion?

Speaker Change: Make sure in that segment, you know, assuming that QSR customer remains a bit challenged, but you can offset that by other growth in other pipelines. Just overall, holistically, do expect margin expansion. Make sure in the specialty foods group.

Speaker Change: Yeah, a simple answer is yes, Chris. Again, we've talked in the past.

Speaker Change: The contribution margins on the growth coming out of those platforms are very strong, with the weakest being the Sandwich Group, which is the one that's struggling with that customer. So yes, but again, I don't want to get into specifics. We'll talk more next quarter when we release our 25 guidance.

Speaker Change: Okay and my last question maybe for Will for you is it you know it looks like for this year your capital expenditures are going to be run rating around 350 million for the full year. I'm just wondering if you can share with us what what's the outlook for for next year?

Will Kalutycz: Yeah, and I'm glad you asked that, Chris, because in the presentations on slide 17 with the CapEx, there's actually a typo. The forward CapEx on those projects is only $160 million, not the $230 million that shows in the slide.

Will Kalutycz: So outside of any new projects, which would be incremental to our outlook, that's our look for next year.

Chris Leawood-Desjardins: Okay, so if I add them up, it sounds like it's about 200 million in total?

Speaker Change: Yeah yeah yeah 150 to 200 yeah. Okay so that's a pretty big step down from the 350 that you guys are spending this year. Yeah absolutely and that's our expectation. We are coming to the end of you know this this major capital investment cycle we've been in.

Speaker Change: Okay, it's very helpful. Thanks, guys. Thank you. Thanks, Chris.

Speaker Change: Your next question comes from Stephen McLeod with BMO Capital Markets. Your line is now open.

Stephen McLeod: Thank you. Good afternoon, guys. Lots of great color so far, so thank you. I just wanted to clarify on a couple things.

Stephen McLeod: Just in respect to, you know, you talked about in the prepared remarks, just accelerated growth in the coming quarters, particularly in protein.

Stephen McLeod: and Sandwich as well. And I'm just, both of those businesses, as you point out, operating below potential.

Stephen McLeod: Just when you put everything together with respect to your largest customer, some of the customer onboarding delays, I'm just trying to get a sense of like what's the visibility into that accelerated volume growth that you're calling out over the next several quarters.

Speaker Change: Yeah, I don't know if there's much more color we can add to what we said earlier Steve, you know The fact is we've got that robust pipeline

Speaker Change: But that pipeline is based on a number of specific initiatives.

Stephen McLeod: and we do expect that to accelerate over the number of initiatives.

Stephen McLeod: won or launched to accelerate over the course of 2025. So, you know, but in general terms, I'd go back to that earlier comment, you know, maybe 50% of them by the middle of the year and, you know, a good portion in the back, an additional portion in the back half of the year.

Stephen McLeod: The customers

Stephen McLeod: The lead time with these opportunities tends to be one to two years, so these are not new opportunities. These are opportunities that we've been working on for the last year or two, trying obviously to match

Stephen McLeod: you know, the demand with the capacity coming to the stream, right? So these are long lead times in general when it comes to these types of launches.

Speaker Change: Right, okay. Okay, now that's helpful. And then maybe just looking at sort of the quarter ahead, you know, Q4, is it fair to say that Q4, you know, might look a lot like Q3 or would you potentially expect it to be, you know, have more in the way in terms of headwinds?

Speaker Change: No, you know, again, on a year-over-year basis, we expect incremental improvement in Q4 as, you know, some of these issues are expected to hit in Q4, these new initiatives.

Stephen McLeod: Thank you for watching!

Speaker Change: Okay, okay, that's great.

Speaker Change: And then just looking at the stock, and it's obviously traded off, and when you factor in today, it's sort of down 20% over the last three weeks. Just wondering, how are you thinking about buybacks, given where the stock is?

Speaker Change: and on valuation.

Speaker Change: We're reviewing all options, Stephen.

Speaker Change: Okay. Okay. That's, uh, that's great. Okay. Thanks guys. Appreciate it. Okay. Thanks, Steve.

Speaker Change: Your next question comes from John Zampero with Scotiabank. Your line is now open.

John Zampero: Hi, good morning, George and Will. I wanted to come back to the topic of customer onboarding. I wonder if you could say, is that primarily from one or two customers, or is it broad-based among several? And are there any internal levers you can pull to move some of these forward?

Speaker Change: Yeah, again, you know, it's easier, John, to talk about channels, right? For example, we just did a major launch with...

Speaker Change: a very large C-store customer in the U.S. We've launched our...

Stephen McLeod: are chicken bites with a very large customer in the U.S.

Stephen McLeod: So these launches are happening all the time.

Stephen McLeod: In some cases, it would be a club customer.

Stephen McLeod: Um, um...

Stephen McLeod: The club channel is our biggest channel that we service in the specialty group. In some cases it's the traditional grocery retail channel. If you visit the U.S. and you visit all of these types of channels, you can find a lot of great products.

Stephen McLeod: of customers, you'll see a lot of our products. So it's happening all the time. We have a lot of things on the go. We're doing innovation sessions with all channels all the time. And anyway, it applies to all the channels.

Speaker Change: Again, if you know our products, you will find them in more and more places with more customers and more channels.

Speaker Change: Got it, okay. A follow-up on the seafood side, I think as of last year...

Speaker Change: And this relates in particular to the international comments. I think, based on last year, your percent of sales coming from international, as in Asia and Europe, was just around a percent or so. Is that still roughly the case? You haven't seen any abnormal growth in that business or exposure to those regions, in particular China?

Speaker Change: It's definitely growing. Our international business is growing from a small base. So there'll be, like for this year, I think we'll grow substantially from a percentage point of view, but it's still relatively small. But again, a big market, big opportunities there over the long term.

Speaker Change: Okay, understood. And then just one more on the M&A side. It seems like you have this long-term pipeline available. I wonder if you consider pausing or deferring some of those deals based on your prioritization of leverage and given you may not wish to effectively pay an equity given where the stock is compared to historical levels.

Speaker Change: One thing I will say about the acquisitions that we've talked about for the fourth quarter, John, is that

Speaker Change: We've been very careful to make sure that...

Speaker Change: We're not hurting ourselves with or hurting the balance sheet with these transactions Yeah, and the fact is liquidity has never been our issue It's just been managing the leverage ratios and so these transactions are actually going to be helpful to that process

Speaker Change: And in general terms, John,

Speaker Change: These types of acquisitions...

Speaker Change: Provide us with incremental capacity.

Speaker Change: which we know we can fill basically relatively quickly as we continue to launch our products into the U.S. market. So really for us, it speeds up our access to capacity.

Speaker Change: and then, like George says, through 25, as we execute on leveraging some of... because these are largely capacity plays in a unique part of the food industry, that's going to help accelerate the leveraging of our balance sheet.

Stephen McLeod: All right, understood. Appreciate the color. I'll leave it there. Thank you. Thanks, Sean.

Speaker Change: Your next question comes from Derek LaSard with TD Cowen. Your line is now open.

Derek LaSard: Hey guys, just a few follow-ups for me. On the sale lease back, you did note that you're in the process of

Derek LaSard: completing two of them. I think, Will, if I'm not mistaken, you mentioned in the past that you had about $400 million. So are we to expect more facilities backs going forward?

Speaker Change: Yes, so it's actually only one sale lease back we're currently finalizing at this point. The other transaction was the sale of a vacant piece of land that was an outright sale, no lease associated with it.

Derek LaSard: And yes, for 2025, we still intend to do two more transactions. This transaction, the sale is for about 68 million U.S.

Derek LaSard: and for next year we're planning on another roughly 250 to 300 million in proceeds from sale and leasebacks, two more transactions.

Speaker Change: Okay, and one final one for me, just on your work in capital, how should we be thinking about that in Q4 and maybe 2025?

Speaker Change: Oh

Stephen McLeod: as well as our sandwich plant is making some product modifications.

Speaker Change: prior to making that change, so we seem to be hitting these bumps in the road, but we still are working on making incremental progress on a year-over-year basis of getting our days purchased and inventory down.

Speaker Change: Okay, that's fair. Thanks, everybody.

Speaker Change: Thanks, Jerry.

Speaker Change: Ladies and gentlemen, as a reminder, should you have a question please press star 1. Your next question comes from Kyle McPhee with Cormark Securities. Your line is now open.

Kyle McPhee: Just a follow-up on the leverage. Do you guys plan to revisit your total leverage target going forward, you know, after the deleveraging cycle you're starting to get into in 2025?

Kyle McPhee: Four times total leverage always kind of be going to be the ceiling for your comfort range as we look at investment opportunities. And as part of maybe, can you speak to the refinancing plan for the convert due or the next year?

Speaker Change: Yeah, so our intention is over time to morph to just our senior debt TBDA range.

Kyle McPhee: being our total.TBDOT range is the convertible but the ventures fall off so in a longer term our total.TBDOT range

Speaker Change: Got it, okay. Maybe I'll squeeze in one last quick one. Are you guys considering more asset sales to trigger more of a stepwise change down for your balance sheet leverage? Maybe asset sales bigger than the vacant land deal you announced this quarter?

Speaker Change: The only specific initiatives in place at this point are the two sale leasebacks I mentioned earlier. Like I said, that's $250 million to $300 million in proceeds.

Speaker Change: No further questions at this time. I will now turn the call over to George for closing remarks.

George Paleologou: Yeah, I just would like to thank everybody for attending today. Thank you very much.

Speaker Change: This will arrive in the Pufferfish Studio of Columbia University September 6.