Q2 2025 The Vita Coco Co Inc Earnings Call

Okay.

Hello, and welcome to the Vita Coco Company's second quarter 2025 earnings Conference call. My name is Michelle I'll be coordinating your call today. Following prepared remarks, we will open the call to your questions. What's the instructions to be given at that time.

And the call over to John Mills with.

ICR. Please go ahead.

John Mills: Thank you, and welcome to the Vita Coco Company second quarter 2025 earnings results conference call. Today's call is being recorded. With us are Mr. Mike Kirban, Executive Chairman; Martin Roper, Chief Executive Officer; and Corey Baker, Chief Financial Officer. By now, everyone should have access to the company's second quarter earnings release issued earlier today. This information is available in the Investor Relations section of the Vita Coco Company's website at investors.vvitacococompany.com. Also on the website, there is an accompanying presentation of our commercial and financial performance results. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Thank you and welcome to the bite of Cocoa Company second quarter 2025 earnings results Conference call.

Today's call is being recorded.

With us are Mr. Mike carbon executive Chairman, Martin Roper, Chief Executive Officer, and Corey Baker, Chief Financial Officer by now everyone should have access to the Companys second quarter earnings release issued earlier today. This information is available on the Investor Relations section of the Vita Coco Company's web site at investors Dot V.

Cocoa company Dot com.

Also on the website there is an accompanying presentation of our commercial advantage of performance results certain comments made on this call include forward looking statements, which are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 995.

John Mills: These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings of the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also, during the call, we will use some non-GAAP financial measures as we describe our business performance. Our SEC filings, as well as the earnings press release and supplementary earnings presentation, provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures and are available on our website as well. And with that, it is my pleasure to now turn the call over to Mr.

These forward looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.

Please refer todays press release and other filings with the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.

Also during the call we'll use some non-GAAP financial measures as we describe our business performance.

Our SEC filings as well as the earnings press release and supplementary earnings presentation provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures and are available on our website as well.

It is my pleasure to now turn the call over to Mr. Mike Urban our co founder and executive Chairman.

John Mills: Mike Kirban, our co-founder and executive chairman.

Mike Kirban: Thanks, John, and good morning, everyone. Thank you for joining us today to discuss our second quarter financial results and our expectations for the balance of 2025. I want to start by thanking all of our colleagues across the globe for our continued strong performance, particularly in a dynamic environment and for their commitment to the Vita Coco Company and advancing our mission of creating ethical, sustainable, better-for-you beverages that uplift our communities and do right by our planet. In the second quarter, we continued to see strong performance against our key initiatives. Coconut water remains one of the fastest-growing categories in the beverage aisle, growing 20% year-to-date in the US and 35% in the UK based on Circana data.

Thanks, John and good morning, everyone. Thank you for joining us today to discuss our second quarter financial results and our expectations for the balance of 2025 I want to start by taking all of our colleagues across the globe for our continued strong performance, particularly in a dynamic environment and for their commitment to the vertical company and advancing our mission.

Creating ethical sustainable better for you beverages that uplift or communities and do right by our planet.

In the second quarter, we continued to see strong performance against our key initiatives.

Can up water remains one of the fastest growing categories in the beverage aisle growing 20% year to date in the U S and 35% and a U K based answer kind of data.

Mike Kirban: This, coupled with the acceleration of the emerging German market, has resulted in very strong global net sales performance for our second quarter and similarly strong reported gross profit, net income, and adjusted EBITDA. Year-to-date, according to Circana, Vita Coco Coconut water continues to perform very well, growing 16% in retail dollars in the US and growing 39% in the UK. In 2025, our US commercial initiatives include emphasis on Vita Coco Multi-Packs, Vita Coco Farmers Organic, and Vita Coco Juice, the expansion of our SKUs in convenience stores, continued investment in our food service efforts, and the national launch of Vita Coco Treats. We're excited about the initial performance of Vita Coco Treats in the US and for the future of innovative coconut milk-based beverages, which creates new usage occasions that could offer us yet another path for long-term growth.

This coupled with the acceleration of the emerging German market has resulted in very strong global net sales performance for our second quarter and similarly strong reported gross profit net income and adjusted EBITDA.

Year to date, according to Mr. Kannan Vita Coco coconut water continues to perform very well growing 16% and retail dollars in the U S and growing 39% in the UK.

In 2025, our U S. Commercial initiatives include emphasis on Vita Coco multi packs Vita Coco farmers organic and Vita Coco juice the expansion of our Skus in convenience stores continued investment in our foodservice efforts and the national launch of vertical creeks.

We're excited about the initial performance of Coca treats in the U S and for the future of innovative coconut milk based beverages, which creates new usage occasions that could offer us yet another path for long term growth.

Mike Kirban: According to Circana, Vita Coco Treats would have added 4% to the growth rate of Vita Coco Coconut water in the second quarter US retail scans if reported as a consolidated brand family. This is a good start, but we still have a lot of work to do. Year-to-date, our international business is very healthy and accelerating, with strong performance in Europe. Our increased investment this year in the UK, Germany, and other select European markets is paying off with healthy growth and brand share wins, and we intend to continue our focused investment in select markets in an effort to drive long-term gains. In our investor presentation on June 4th, which is available on our Investor Relations website, we laid out an index for estimated consumption per capita for coconut water in our current major markets.

According to Chicago Vita Coco treats would have added 4% to the growth rate of Vita Coco coconut water in the second quarter U S. Retail scans if reported at the consolidated brand families. This is a good start but we still have a lot of work to do.

Year to date, our international business is very healthy and accelerating with strong performance in Europe.

Our increased investment this year in the U K, Germany, and other select European markets is paying off with healthy growth and brand share wins and we intend to continue our focused investments in select markets in an effort to drive long term game.

In our Investor presentation on June four which is available on our Investor Relations website, we laid out an index for estimated consumption per capita for coconut water and our current major markets.

Mike Kirban: While the US is the most developed market, household penetration is still well below other juices like cranberry juice or orange juice, and our current Vita Coco Coconut water growth in the US is coming from both growth in household and growth in velocity per household through consumption occasion expansion. We're excited about the current performance and believe that we can at least double the US coconut water category in the coming years. We believe that the coconut water category is still in its infancy in markets outside of the US and that there is significant long-term potential as these markets develop. We're very proud to be the leading brand in our primary markets and the primary driver of this category growth.

While the U S is the most developed market household penetration is still well below other juices like cranberry juice or orange juice.

And our current Vita Coco coconut water growth in the U S is coming from both growth in households, and growth in velocity per household through consumption occasion expansion.

We're excited about the current performance and believe that we can at least double the U S coconut water category in the coming years.

We believe that the coconut water category is still in its infancy in markets outside of the U S and that there is significant long term potential as these markets develop.

We're very proud to be the leading brand in our primary markets and the primary driver of this category growth.

Mike Kirban: Over time, we believe our international business will become a larger part of our consolidated growth story, and I expect our European operations could eventually be as large as our America's businesses today. In summary, the acceleration of the category that we saw in late 2024 has continued through the first half of 2025, and with our significantly stronger inventory position, strong retail programming and innovation, and additional production capacity, I believe that we are well positioned to continue our growth, and I'm excited for the remainder of the year. And now, I'll turn the call over to our Chief Executive Officer, Martin Roper.

Over time, we believe our international business will become a larger part of our consolidated growth story and I expect our European operations could eventually be as large as our Americas businesses today.

In summary, the acceleration of the category that we saw in late 2024 has continued through the first half of 2025 and with a significantly stronger inventory position strong retail programming and innovation and additional production capacity I believe that we are well positioned to continue our growth.

And I'm excited for the remainder of the year.

And now I'll turn the call over to our Chief Executive Officer Martin broker.

Martin Roper: Thanks, Mike, and good morning, everyone. I'm pleased to report Vita Coco's continued strong performance in the second quarter. Net sales in the quarter were up 17%, driven by growth of the Vita Coco Coconut water of 25%, benefiting from strong growth in the coconut water category and improvements in our own available inventory and service levels. We also saw a 102% growth in our other products category, primarily representing the positive impact from Vita Coco Treats. Our branded scan results in the United States were very strong, although slightly behind category growth due to the drag in our scans primarily created by the changes in the Walmart set late last year. Our Walmart trends improved slightly during the quarter, but were still down high single to low double digits, creating an estimated low single-digit drag on our total US branded scan trends in the quarter.

Thanks, Mike and good morning, everyone. I am pleased to report Vita Coco as continued strong performance in the second quarter.

Net sales in the quarter were up 17% driven by growth of the Vita Coco coconut water up 25% benefiting from strong growth in the coconut water category and improvements in our own available inventory and service levels.

We also saw a 102% growth in our other products category, primarily representing the positive impact from body cocoa trees.

Our branded scanners out so in the United States with very strong, although slightly behind the category growth due to the drag in our scans primarily created by the changes in the Walmart set late last year.

I will not trends improved slightly during the quarter, but was still down high single to low double digits, creating an estimated low single digit drag on our total U S branded scanner trends in the quarter.

Martin Roper: We have had preliminary discussions with Walmart about the next potential reset. Based on those discussions, we expect an improvement in distribution with a joint goal of attracting coconut water category shoppers to Walmart. If these plans are implemented, we believe that Walmart will become a growth engine for our brand in 2026 and beyond. The second quarter saw the impact of the private label transition that we expected and referenced in February. The private label business remains strategically important to us, and we continue to bid on select private label opportunities. We believe we are very competitive in these bids and recently secured new private label business, which will benefit us in 2026.

We've had preliminary discussions with Walmart about the next potential reset based on those discussions we expect an improvement in distribution with a joint goal of attracting coconut water category shoppers to Wal Mart.

If these plans are implemented we believe that Walmart will become a growth engine for our brands in 2026 and beyond.

The second quarter saw the impact of the private label transition that we expected and referenced in February.

Divot label business remains strategically important to us and we continue to bid on select private label opportunities. We believe we are very competitive in these bids and recently secured new private label business, which will benefit us in 2026.

Martin Roper: Our gross margins were down in the quarter relative to last year due to a number of inflationary cost factors, including higher ocean freight rates, cost of goods inflation due primarily to the addition of new capacity, and the initial impact of the 10% baseline tariff, which started to hit our P&L late in Q2. We believe ocean freight rates are still elevated relative to historical levels, and we are operating primarily on spot rates with some fixed price arrangements on certain lanes to secure capacity. With US tariff outcomes uncertain, we expect short-term volatility in ocean freight rates, but believe that rates should decline on average through the balance of the year. If we see competitive fixed rate offers for long-term contracts that make sense to us, we would be willing to enter into fixed rate agreements to cover more lanes.

Our gross margins were down in the quarter relative to last year due to a number of inflationary cost factors, including higher ocean freight rates cost of goods inflation due primarily to the addition of new capacity and the initial impact of the 10% baseline tariff, which started to hit our P&L late in Q2.

We below if ocean freight rates are still elevated relative to historical levels and we are operating primarily on spot rates with some fixed price arrangement on certain lanes to secure capacity.

With U S tariff outcomes uncertain, we expect short term volatility in ocean freight rates, but we believe that rates should decline on average through the balance of the year.

If we see competitive fixed rates offers from long term contracts that makes sense to us we would be willing to enter into fixed rate agreements to cover more lanes.

Martin Roper: Entering the third quarter, we have significantly more Vita Coco Coconut water inventory than at the same time last year and expect a very strong third quarter for our branded business as we lap major service issues and reduce promotional activity from last year. In the second half of the year, we plan to use our improved inventory position to drive consumer trial and to secure incremental promotion opportunities where available. We believe that the strong category growth is a positive indicator for future growth and supportive of our long-term branded growth algorithm. For 2026, we have secured adequate production capacity to support continued branded growth and to support our expected private label relationships. Our planned US-based price increase in May to cover inflationary cost of goods pressures produced an approximately 7% increase at US food retail, according to Circana over the quarter.

Entering the third quarter, we have significantly more vita Coco coconut water inventory at the same time last year and expect a very strong third quarter for our branded business as we lap major service issues and reduce promotional activity from last year.

In the second half of the year, we plan to use our improved inventory position to drive consumer trial and to secure incremental promotional opportunities where available.

We believe that the strong category growth is a positive indicator for future growth and supportive of our long term branded growth algorithm.

For 2026, we have secured adequate production capacity to support continued branded growth and to support our expecting private label relationships.

Our planned U S based price increase in may to cover inflationary cost of goods pressures produced an approximate 7% increase at U S food retail according to some kind of over the quarter.

Martin Roper: The initial consumer reaction to these increases has been in line with our expectations, but it is too early to fully understand any long-term price elasticity impacts. We're currently assuming that the baseline US tariff rate of 10% continues, which, as we noted last quarter, applies to approximately 60% of our global cost of goods sold. We are currently executing US retail price increases to cover the unmitigated tariff costs of this baseline rate. With our diversified supply chain and the important role of coconut water in our consumers' lifestyles, a healthy category, and our brand strength, we believe that we can navigate any additional tariff impacts. Given the uncertainty on the timing and sizing of any additional tariffs above the baseline 10% rate and the uncertainty of the lead time impact of implementing any mitigating activities, we are not including any such announced tariffs in our outlook.

The initial consumer reaction to these increases has been in line with our expectations, but it is too early to fully understand any long term price elasticity impacts.

We're currently assuming that the baseline U S tariff rate of 10% continues which as we noted last quarter applies to approximately 60% of our global cost of goods sold.

We are currently executing U S retail price increases to cover the unmitigated tariff costs of this baseline rate.

With our diversified supply chain and the important role of coconut water and our consumers' lifestyles, a healthy category and our brand strength, we believe that we can navigate any additional tariff impacts.

Given the uncertainty on the timing and sizing of any additional tariffs above the baseline 10% rate and the uncertainty of the lead time impact of implementing any mitigating activities, we are not including any such announced tariffs in our outlook.

Martin Roper: We have a global diversified supply chain sourcing primarily from the Philippines and Brazil, with some additional sourcing from Thailand, Vietnam, Sri Lanka, and Malaysia, which gives us flexibility to react to any long-term tariff changes. To summarize, our category is very healthy, our brand is performing, and our supply chain is supporting growth and provides us with flexibility to mitigate the potential tariff impacts long term. We are confident in our team's ability to execute and deliver on our plans, and for the full year 2025, our confidence in the category and Vita Coco brand trends remains very high. We believe that longer term, we will benefit when ocean freight rates return to historical levels, and this should allow us to achieve or beat our long-term financial targets. With that, I will turn the call over to Corey Baker, our Chief Financial Officer.

We have a global diversified supply chain sourcing and primarily from the Philippines, and Brazil with some additional sourcing from Thailand, Vietnam Airlines here in Malaysia.

Which gives us flexibility to react to any long term tariff changes.

To summarize our category is very healthy our brand is performing and our supply chain is supporting growth and provides us with flexibility to mitigate the potential tariff impacts long term we.

We are confident in our team's ability to execute and deliver on our plans and for the full year 2025, Our conference and mechanically invited cocoa brand trends remains very high.

We believe that longer term, we will benefit when Asian freight rates return to historical levels and this should allow us to achieve or beat our long term financial targets.

Is that I will turn the call over to Cory Baker, our Chief Financial Officer.

Corey Baker: Thanks, Martin, and good morning, everyone. I will now provide you with some additional details on the second quarter 2025 financial results and our outlook for the full year. For the second quarter of 2025, net sales remain very healthy, increasing $25 million, or 17% year over year, to $169 million. Vita Coco Coconut water grew 25%, partially offset by private label declines of 25%, where we have begun to see the impact of the private label losses we discussed last quarter. On a segment basis within the Americas, Vita Coco Coconut water increased net sales 22% to $120 million, and private label decreased 37% to $15 million. Vita Coco Coconut water saw a 21% volume increase and a slight net price mix benefit, while private label sales were driven by a 34% decrease in volume and a 3% decrease in price mix.

Thanks, Martin and good morning, everyone. I will now provide you with some additional details on our second quarter 2025 financial results and our outlook for the full year.

For the second quarter of 2025, net sales remained very healthy increasing $25 million or 17% year over year to $169 million Vita Coco coconut water grew 25%.

Holly offset by private label declines of 25% are where we have begun to see the impact of the private label losses as we discussed last quarter.

On a segment basis within the Americas.

Coco coconut water increased net sales, 22% to $120 million and private label decreased 37% to $15 million.

Coco coconut water SAR, 21% volume increase and a slight net price mix benefit.

Divot label sales were driven by a 30% decrease in volume and a 3% decrease in price mix.

Corey Baker: For the second quarter of 2025, our international segment continued to deliver strong results, with net sales up 37% and Vita Coco Coconut water growing 43%, driven by strong growth across all our major markets. Private label sales increased 29% due to strong sales of private label coconut water. For the quarter, consolidated gross profit was $61 million, an increase of $3 million versus the prior year. On a percentage basis, gross margins finished at 36% for the quarter. This was down approximately 450 basis points from the 41% reported in Q2 2024. This decrease in gross margins resulted from higher year-on-year ocean freight rates, higher finished goods product cost, and the 10% baseline tariff that began to impact our gross margins late in the quarter. This was partially offset by a favorable product mix.

For the second quarter of 2025, our international segment continued to deliver strong results with net sales up 37%.

Coco coconut water growing 43%.

Driven by strong growth across all our major markets private label sales increased 29% due to strong sales of private label coconut water.

For the quarter consolidated gross profit was $61 million, an increase of $3 million versus the prior year on a percentage basis gross margin finished at 36% for that quarter.

It was down approximately 450 basis points from the 41% reported in Q2 2024.

This decrease in gross margins resulted from higher year on year Ocean freight rates higher finished goods product costs and a 10% baseline tariffs that began to impact our gross margins late in the quarter. This was partially offset by favorable product mix.

Corey Baker: Moving on to operating expenses, FC&A cost increased $7 million to $36 million within the quarter, driven by increased market expenses, higher people-related costs, increased reserves for bad debt, and overlap of rent expense for our new office. Net income attributable to shareholders for the quarter was $23 million, or 38 cents per diluted share, compared to $19 million, or 32 cents per diluted share for the prior year. Net income benefited from higher gross profit and a larger unrealized gain on derivatives and a lower year-on-year tax rate, partially offset by higher year-on-year FC&A spending. Our effective tax rate for Q2 2025 was 19%, versus 25% last year, which is primarily driven by discrete tax benefits and a favorable geographic mix of pre-tax profits. Q2 2025 adjusted EBITDA was $29 million, or 17% of net sales, compared to $32 million, or 22% of net sales in 2024.

Moving onto operating expenses SG&A costs increased $7 million to $36 million within the quarter driven by increased marketing expenses higher people related cost increased.

Increased reserves for bad debt and overlap of rent expense for our new office.

Net income attributable to shareholders for the quarter was $23 million or 38 cents per diluted share compared to $19 million or 32 cents per diluted share for the prior year.

Net income benefited from higher gross profit and our larger unrealized gain on derivatives and a lower year on year tax rate, partially offset by higher year on year SG&A spending.

Our effective tax rate for Q2, 2025, plus 19%.

25% last year, which was primarily driven by discrete tax benefits and a favorable geographic mix of pre tax profits.

Q2, 2025, adjusted EBITDA was $29 million or 17% of net sales compared to $32 million or 22% of net sales in 2024.

Corey Baker: The decrease in adjusted EBITDA was primarily due to the higher FC&A expenses, partially offset by higher year-on-year gross profit. Turning to our balance sheet and cash flow, as of June 30, 2025, our balance sheet remained very strong, with total cash on hand of $167 million and no debt under our evolving credit facility. Our accounts receivable increased by $39 million, versus December 31, 2024, primarily due to increased net sales within the quarter. We exited Q2 with a very strong category in the Americas and Europe, healthy inventory levels, exciting innovation, and confidence in our team's execution and our Vita Coco brand. Our updated guidance reflects our current best assumptions of marketplace trends, competitive price actions, and our expected price elasticity under a 10% baseline tariff environment and an assumption that ocean freight rates will soften through the balance of the year.

The decrease in adjusted EBITDA was primarily due to the higher SG&A expenses, partially offset by higher year on year gross profit.

Turning to our balance sheet and cash flow as of June 32025, our balance sheet remained very strong with total cash on hand of $167 million.

And no debt under our revolving credit facility.

Our accounts receivable increased by $39 million versus December 31, 2024, primarily due to increased net sales within the quarter.

We exited Q2 with a very strong category in the Americas and Europe.

Inventory levels exciting innovation and confidence in our team's execution and our via telco brand.

Our updated guidance reflects our current best assumptions on marketplace trends competitive price actions in our expected price elasticity under 10% baseline tariff environment.

Assumption that ocean freight rates will soften through the balance of the year.

Corey Baker: We are confident in our ability to continue to deliver strong top-line performance and therefore are raising our full-year net sales guidance to between $565 and $580 million. We expect gross margins at the midpoint of our prior guidance range of approximately 36%, with FC&A growing low to mid-single digits, resulting in full-year adjusted EBITDA of $86 to $92 million. We are now expecting Vita Coco Coconut water sales to grow in the high teens, with incremental growth coming from Vita Coco Treats, partially offset by the weakness in our private label business. We expect strong Q3 net sales performance as we lap the inventory shortages of last year, with a tougher Q4 net sales comparable due to the benefit of distributor and retail inventory replenishment. We are expecting gross margins for the full year of approximately 36%.

We are confident in our ability to continue to deliver strong top line performance and Thats why we are raising our full year net sales guidance to between 565 and $580 million.

We expect gross margins at the midpoint of our prior guidance range approximately 36%.

SG&A growing low to mid single digits, resulting in full year, adjusted EBITDA of $86 million to $92 million.

We are now expecting Vita Coco coconut water sales to grow in the high teens with incremental growth coming from Vita Coco treats partially offset by the weakness on our private label business.

We expect strong Q3 net sales performance as we lap the inventory shortages of last year was a tough.

Q4, net sales comparable to the benefit of distributor and retailer inventory replenishment.

We are expecting gross margins.

On a full year of approximately 36%.

Corey Baker: We expect gross margins to be sequentially lower in Q3 due to the timing of tariff impacts and mitigating pricing actions, as well as temporarily higher ocean freight rates blowing through the P&L, with Q4 gross margins sequentially improving. We expect full-year FC&A to increase in the low to mid-single digits due to increased people investments, including increased incentive and stock compensation and other focused investments to support the delivery of our growth objectives as we aim to maintain our strong branded growth momentum into 2026. And with that, I'd like to turn the call back to Martin for his closing remarks.

<unk> gross margins to be sequentially lower than Q3, due to the timing of tariff impacts and mitigating pricing actions.

As well as temporarily higher ocean freight rates flowing through the P&L with Q4, our gross margin sequentially improving.

We expect full year SG&A to increase in the low to mid single digits due to increased <unk> investments, including increased incentive and stock compensation and other focused investments to support the delivery of aircraft injectors as we aim to maintain a strong branded growth momentum into 2026.

And with that I'd like to turn the call back to Martin for his closing remarks.

Martin Roper: Thank you, Corey. To close, I'd like to reiterate our confidence in the long-term potential of the Vita Coco Company, our ability to build a better beverage platform, and the strength of our Vita Coco brand and the coconut water category. We are confident in our ability to navigate the current environment and are excited about our key initiatives to drive growth. We have a strong brand and a solid balance sheet, and we are well positioned to drive category and brand growth both domestically and internationally. Thank you for joining us today, and thank you for your interest in the Vita Coco Company. That concludes our second quarter 2025 prepared remarks, and we will now take your questions.

Thank you Corey to close I'd like to reiterate our confidence in the long term potential of the Vita Coco company, our ability to build a better beverage platform and the strength of our Vita Coco brand in the coconut water category.

We are confident in our ability to navigate the current environment and are excited about our key initiatives to drive growth.

We have a strong brand and a solid balance sheet, and we are well positioned to drive category and brand growth both domestically and internationally.

Thank you for joining us today and thank you for your interest in Nevada Cocoa company that concludes our second quarter 2025 prepared remarks, and we will now take your questions.

Michelle: Thank you. To ask a question at this time, please press star one-one on your telephone and wait for your name to be announced. To withdraw your question, please press star one-one again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Kamal Jarawala with Jeffries. Your line is open. Please go ahead.

Thank you to ask a question at this time. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile our Q&A roster.

Our first question is going to come from the line of Campbell with Jarrod.

Paula with Jefferies. Your line is open. Please go ahead.

Kaumil Gajrawala: Everybody, good morning. I guess a couple of things. The first on revenue, obviously doing very, very well. Can you maybe, is it possible to parse out how much of that is sort of, you know, inventory rebuild and such now that supply is in a place where you'd like it to be versus, you know, some equivalent of like same-store sales type of trends? And then with Treats and Treats going national, is that, is it happening? Has it already happened? And is there just anything in the figures that we should be aware of as it relates to that contribution?

Hi, everybody good morning.

I guess a couple of things the first one on revenue obviously Gary.

Very very well can you maybe is it possible to parse out how much of that is sort of.

Inventory rebuild and such now that supply is in a place where you would like it to be versus <unk>.

Some equivalent of like same store sales type of trends and then with treats increase going national is that.

Happening has it already happened and is there just anything in the figures that.

We should be aware of as it relates to that contribution.

Martin Roper: Sure. Well, good morning. So on the scan, let's say the retail scan side, it's obviously reflective of healthy inventory, but we had healthy inventory in Q2 of last year. So I wouldn't say that any of the scan trend data is reflective of easy comparables. We will certainly see that in Q3, but I wouldn't say that in Q2. And then relative to Treats, we rolled Treats nationally, sort of ended Q1 in the US. It was also introduced in the UK. And so I would say that's, you know, national, and we have good coverage. We didn't get complete retailer authorizations everywhere, but for a first step, it was very good. So I think what you're seeing on sort of shipment certainly is the launch in Q1, which would obviously have benefited a little bit from inventory fill of the pipeline.

Joe Good morning.

So on the Scott, let's say the retail scanner side, it's obviously reflected healthy inventory, but we had healthy inventory in Q2 of last year. So.

I wouldn't say that any of the scan trend data is reflective of easy comparison payables, we will certainly see that in Q3, but I wouldn't say that in Q2.

And then relative to treat suites.

The.

ROE treats nationally sort of ended Q1.

In the U S.

He was also introduced in the U K.

And so I would say that.

International and we have good coverage, we didn't get complete retailer authorizations everywhere, but for a first step that was very good.

So I think what youre seeing on sort of.

Shipments certainly is the launch in Q1, which would obviously have benefited a little bit from inventory fill up the pipeline and then Q2 is probably more reflective of sort of potential ongoing state, but obviously until you get repeat going we don't really know what the ongoing rate of sales out, but we're very happy right now.

Martin Roper: And then Q2 is probably more reflective of sort of potential ongoing state, but obviously until you get repeat going, we don't really know what the ongoing rate of sales are. But we're very happy right now, and I think as we indicated, it's added a little bit to our total branded scan volumes in Circana and the US. Importantly, Circana, depending on how you buy it, or Nielsen may only report coconut water. So Treats is a coconut milk-based beverage and may be outside of the visible Vita Coco brand trends that people see depending on what data they have.

And I think as we indicated.

<unk> added a little bit to our total branded scan volumes.

<unk> in the U S importantly, depending on how you buy it or Nielsen may only report coconut water so treat as a company.

Milk based beverage and maybe outside of the visible Vita Coco brand trends that people see depending on what data. They have just had a couple of things I think in terms of growth.

Mike Kirban: Just to add a couple of things, I think in terms of growth, household and consumption per household are growing really fast, and that is probably the biggest driver of the growth as the category is mainstreaming. And then in terms of Treats, like Martin mentioned, yeah, we had a national rollout, but it was with specific retailers. So there's a lot of distribution to be had, which will be pitched coming up in the next month or two for next resets, which would be next March. So a lot of opportunities to build distribution on it.

Household in consumption per household are growing really fast and that is probably the biggest driver of the growth is the categories mainstreaming.

And then in terms of treats like Martin mentioned, yes, we had a national rollout, but it was a specific retailer. So theres a lot of lot of distribution to be had.

Which will be pitched.

Coming up in the next month or two for next resets, which would be next March.

A lot of opportunities still build distribution on the one thing I would add on the top line growth come on as the international business is very very strong Bryan over 40 in the quarter and not really impacted at all by any out of stocks small amount and thats mostly.

Corey Baker: The one thing I'd add on the top-line growth, Kamal, is the international business is very, very strong, growing over 40 in the quarter and not really impacted at all by any out-of-stock. Small amount, it is mostly consumer growth in the UK and Germany.

Consumer growth in UK and Germany.

Kaumil Gajrawala: Okay, got it. Actually, that brings up another question, but I wanted to, on international, how should we be just thinking about sort of scale mix effect margin? You know, I'm looking at your FC&A has come up, and there's been a lot of people and a lot of other investments in the brands. How are you sort of, are you sort of spending up ahead of growth? Are you looking to maybe catch up? Because obviously growth is quite substantial, and you need maybe a higher base of investment. How are you sort of thinking about that between domestically and internationally?

Okay got it.

Actually that brings up another question, but I wanted to on international should we how should we be just thinking about sort of.

Gail mix affect margin.

Im looking at your SG&A has come up and it's been a lot of people and a lot of.

Other investments in the brands how are you sort of.

Are you sort of spending up ahead of growth are you.

I'm looking to maybe catch up because obviously growth is quite substantial.

Maybe a higher base of investment how are you sort of thinking about that between.

Domestically and internationally.

Corey Baker: From an FC&A perspective, we are investing, I'd say, a little bit ahead of the curve, and we're making strategic investments. We've talked about first Germany with increased FC&A marketing, and then as we look to expand, but not doing anything excessive. So it's not catch up. And then to support that growth, we're seeing in both markets, we're being investing in supply chain resources to ensure we have the supply, the right quality, the right factories to support that growth. So, you know, our FC&A growing mid-single digits, investing ahead of the curve, but not nothing crazy, I'd say.

Yes.

On an SG&A perspective, we are investing I would say.

A little bit of ahead of the curve and we are making strategic investments you've talked about Germany with increased SG&A marketing in that as we look to expand but not doing anything excess ups, that's not catch up and then to support that growth. We're seeing in both markets, where we've been investing in supply chain resource Thats in <unk>.

Supply the right quality, the right factories to support that growth so.

Our SG&A growing mid single digits.

Investing ahead of the curve, but not nothing crazy I'd say.

Kaumil Gajrawala: Got it. Thank you.

Got it thank you.

Michelle: Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Bonnie Herzog with Golden Stacks. Your line is open. Please go ahead.

Thank you and one woman as we move on to our next question.

And our next question is going to come from the line of Bonnie Herzog with Goldman Sachs. You guys. Your line is open. Please go ahead.

Bonnie Herzog: All right. Thank you. Good morning, everyone. I had a couple of, good morning. I had a couple of questions on your guidance. First, you know, you raised your top-line growth and essentially narrowed your gross margin guidance, but maintained your EBITDA guidance, which I guess implies, you know, less leverage. So just trying to understand maybe what changed there. And then second, you know, your full-year EBITDA guidance does imply a lot faster growth in the second half of about, I think it's 22% versus, you know, the decline you saw in the first half. So I realize, you know, the year-over-year compares are easier in the back half, but just hoping you could give us just a little bit more color on the drivers of this expected acceleration.

Alright. Thank you good morning, everyone.

When you go out a couple of good morning, I had a couple of questions on your guidance first you raised your top line growth and essentially narrowed your gross margin guidance that maintained <unk> guidance, which I guess implies.

Less leverage so just trying to understand what changed there and then second you are.

Full year EBITDA guidance doesn't quite a lot faster growth in the second half of about I think 22% versus the decline you saw on the first half so I realize.

Year over year compares are easier in the back half, but just hoping you could give us just a little bit more color on the drivers of that expected acceleration.

Martin Roper: Sure. Well, let me take it, and then maybe Corey can cover up for what I might maybe miss. I think we obviously feel very good about our branded top line, and I think that's driving the increase in our guidance as we look at on the back of the year. Certainly, in the second half of the year, we're going to benefit from a very, you know, easy comparisons in Q3 relative to the out-of-stocks that we had last year, and then a little bit of a swing back in Q4 where, you know, Q4 last year we benefited from replenishing the inventory, but we have some pretty easy comparisons. So we feel pretty good. I think on the gross margin side, you know, frankly, we struggle on guidance. You know, we're saying it's approximately 36, and you know, we're pretty obviously comfortable with that.

Yes.

Sure well, let me take it and then maybe Corey can.

Cover for what I might maybe Miss I think we obviously feel very good about our branded top line.

And I think that's driving the increase.

Our guidance as we look at on the back of the year.

Certainly in the second half of the year, we're going to benefit from a very.

Easy comparisons in Q3 relative to the out of stocks that we had last year and then a little bit of a swing back in Q4.

Q4 last year, we benefited from replenishing the inventory, but we have some pretty easy comparisons. So we feel pretty pretty good I think on the gross margin side.

Frankly, we struggled on guidance, we were saying it's approximately 36%.

We're pretty comfortable with that.

Martin Roper: Obviously, that's a tightening, I suppose, from 35 to 37, but I don't think we really wanted to do 35.5 to 36.5. It felt sort of silly. But what I would say on the cost side is we've got a number of factors going on. There's obviously some higher ocean freight that we experienced in Q2 from the spike that occurred in the indexes that, you know, will obviously flow through into our P&L in the second half of the year. That was unexpected, you know, when we last talked to you. We now have a little better clarity on the timing of the tariff impact relative to mitigating actions, and there's a little bit of lag on the mitigation actions. So that's also a headwind on the cost of goods side.

Tightening I suppose from 35% to 37, but I don't think we really wanted to be 35, 5% to $36 five itself sort of silly.

But what I would say on the cost side is we've got a number of factors going on there is obviously some higher ocean freight that we experienced in Q2 from the spike that occurred in the index is that.

Obviously flow through into our P&L in the second half of the year that was unexpected when we last talked to you.

We now have a little bit of clarity on the timing of the tariff impact relative to mitigating actions and there's a little bit of a lag on the mitigating actions. So that's also a headwind on the cost of good side. So that's pulling cost a good hire I suppose than perhaps we would have anticipated and thats, how the whole thing sort of felt together and sorry, if I missed anything.

Martin Roper: So that's pulling, you know, cost of goods, you know, higher, I suppose, than perhaps we would have anticipated, and that's how the whole thing sort of fell together. And sorry if I missed anything.

Corey Baker: Maybe just two things. One, we talked about in the prepared remark, the pricing is starting to hit the market, but there's some factors and some mix that drove it a little bit later than expected, which pressures the Q3 margins a bit. And then our FC&A, we talked about last quarter, is a bit more aligned with our sales curve throughout the year. And part, as we look into the back here, we do see some increased incentive comp and stock comp that drives a little bit of variance, but overall, that's how the guidance came together.

David maybe just two things one we talked about in the prepared remarks.

This thing is starting to hit the market.

Some factors in some mix that drove it a little bit later than expected.

<unk> pressures that Q3 margins a bit.

Our SG&A, we talked about last quarter is a bit more aligned with our sales curve throughout the year in part as we look into the back here, we can see some increase in incentive comp and stock com that drives a little bit of a variance but.

Overall, that's how the guidance came together.

Bonnie Herzog: Okay, that's helpful. So just to, I guess, summarize, so you're feeling good about the top line, the momentum, you know, what you have planned in the back half, but maybe just some conservatism based on, or despite, I guess, the freight rates declining throughout the year and just kind of talking through some of the other, you know, cost pressures or headwinds that you're facing. Is that how we should think about it?

Okay. That's helpful. So just to summarize so youre feeling good about the topline in the meantime.

You have planned in the back half, but maybe just some conservatism based on ore. Despite I guess the freight rates declining throughout the year and just kind of talk through some of the other.

Cost pressures or headwinds that you're facing is that how we should think about it.

Corey Baker: Yes. With what Mark was saying, there's was higher ocean freight earlier in the summer that will flow through in Q3. So our ability to freight rates continue to drop. Much of that will flow into next year at this point. So we don't see as much ocean freight tailwind as maybe we would, you would think.

Yes, so with wealth market.

What's higher Ocean freight, yes earlier in the summer that will flow through in Q3, so our ability to frame rates continue to drop much of that will flow into next year at this point.

We don't see as much ocean freight.

Tailwind as maybe we would.

Bonnie Herzog: Okay. That helps. And then maybe a, that helps. And then just maybe a follow-up just in terms of reinvestments or, you know, like the SG&A, you know, was up quite a bit in Q2. So any more color on that? And then again, just, you know, with you guys maintaining the SG&A guidance for the year does imply, you know, slower, you know, SG&A growth in the second half. Is that, you know, maybe if you could, I don't know, drill down a little bit on the SG&A line, just kind of help us understand just general expense versus some of the marketing, you know, and how we should think about your your reinvestment needs in the second half. Thank you.

That helps and then Nathan.

That helps and then just maybe a follow up just in terms of.

We investments like that.

G&A.

It was up quite a bit in Q2, so any more color on that and then again just with you guys maintaining.

The SG&A guidance for the year does imply slower.

Slower SG&A growth in the second half is that.

Maybe if you could drill down a little bit on the SG&A line, just kind of help us understand just general expense versus some of the marketing.

How we should think about.

Reinvestment rates in the second half thank you.

Corey Baker: Yep. The largest was marketing spend in the first half, and that is a combination of the Treats, the rollout, a bit of timing overall in the full year marketing. And then the people cost, as I discussed earlier, led by international second largest bucket, as well as some incentive comp and stock comp items that ultimately would be adjusted out of the EBITDA. Then we had, you know, a couple, they're smaller but unique items, our bad debt reserves, which is just a calculation on our current accounts receivable increase this year versus actually income last year. So a bit of a unique item. And then we are in the process of moving offices, so we're currently experiencing double rent. So towards the back end of the year, those things normalized. The marketing was more accelerated year to date than it will be in the back half.

The largest was marketing spend in the first half and that is a combination.

The trades the rollout.

A bit of timing overall in that full year marketing.

And then the people cost.

Sure. There are led by international second largest bucket as well as some incentive comp and stock comp item that ultimately would be adjusted out of the EBITDA than we had.

A couple of the smaller but unique item.

Bad debt reserves, but just a calculation on our current accounts receivable increase this year birthday actually income last year, so a bit of a unique item and then we are in the process of moving offices that we're currently experiencing double rent so towards the back end of the year those things.

I'm alive and marketing is more accelerated year to date than it will be in the back half.

Corey Baker: The incentive structures will balance out. So just is a bit more consistent through the year this year than last year.

The incentive structure as we will balance out so just.

Is it a bit more.

Consistent through the year this year than last year.

Bonnie Herzog: Okay. That's helpful. I appreciate it. I'll pass it on. Thank you.

Okay. That's helpful. I appreciate I'll pass it on thank you.

Michelle: Thank you. And one moment for our next question. Our next question comes from the line of Christian Jengarwa with ViaVe. Your line is open. Please go ahead.

Thank you and one moment for our next question.

Yes.

Our next question comes from the line of Christian <unk> with Bofa. Your line is open. Please go ahead.

Kaumil Gajrawala: Hey, everyone. You have Christian on for Pete. Thanks for taking our question. First, on tariffs, just how potentially higher tariffs than the 10% baseline figure would impact EBITDA this year and potentially next year? And you know, how confident are you guys in that you are going to see 10% tariffs? Thanks.

Hey, everyone you have Christian on for Pete Thanks for taking our question.

First on tariffs, just how potentially higher tariffs in the 10% baseline figure would impact EBITDA this year and potentially next year.

How confident are you guys in that you are going to see 10% tariffs. Thanks.

Hello.

Martin Roper: So I think, you know, what we would say on tariffs is obviously there's a lot of uncertainty. We're currently operating under a 10% baseline tariff environment, and that is included in our guidance. Last quarter, we discussed how the tariffs would apply to, you know, our US-based product cost. And we provided, I think, the estimate that you wanted to back into it. You took 6% of our global cost of goods dollars, and that would approximate to the dollar cost that we think the tariffs would equate to. And that's sort of how you back into an estimate of tariff impact, let's say, at a 10% rate. You would come up with a number. Also, last quarter, we said if the tariff-free rates were applied, we expected the tariffs based on our current sourcing to be in the low 20s as a percentage rate.

So I think what we would say on tariffs.

There's a lot of uncertainty we're currently operating under a 10% baseline tariff environment.

And that is included in our guidance.

Last quarter, we discussed how the tariffs would apply to our U S based product cost and we provided I think the estimate that you wanted to back into it you took 6% of our global cost of goods dollars and that would approximate to the dollar cost that we think the tariffs would great.

And Thats sort of how you back into a estimate of tariff impact, let's say at a 10% rate.

You would come up with a number.

Also last quarter, we said if there was a territory rates were applied we expected the tariffs based on our current sourcing to be in the low twenties as a percentage right now obviously since then.

Martin Roper: Now, obviously, since then, you know, the announcements that have been happening haven't really aligned with retaliatory, so that's why we're not really talking about that. And many of the announcements that have happened have been announced frameworks for trading deals that we haven't seen details yet. And because we haven't seen details yet and we don't really know what's happening on August 1st, we're just not including it in any forward-looking statements. On the positive side, you know, obviously, everyone's talking and deals are being negotiated that potentially are lower than the retaliatory rates. Also, on a positive side, there have been anecdotal comments that maybe, you know, commodities and agricultural goods that aren't available in the US might be treated differently, but it's all hypothetical and there is no specifics.

The announcements that have been happening haven't really aligned with <unk>. So that's why we're not really talking about that and many of the announcements that have happened have been announced frameworks with traded grill that we havent seen details yet and because we haven't seen details yet and we don't really know what's happening on August 1st we're just not including it in any forward looking.

Sure.

On the positive side, obviously everyone's talking and deals are being negotiated that potentially are lower than they were down to rate.

Also on a positive side has been anecdotal comments that maybe.

Commodities and agricultural goods that aren't available in the U S might be treated differently.

It's all hypothetical and there is no specifics and so very hard to comment on other than to say that we're operating the business and focusing on growth and assuming that once we know what the long term impact on our businesses. We can then make long term plans.

Martin Roper: And so very hard to comment on other than to say that we're operating the business and focusing on growth and assuming that once we know what the long-term impact on our business is, we can then make long-term plans to deal with it and to mitigate it to the best of our abilities. So that's how we're thinking about it. And right now, you know, we have as good as information as everyone else does in the market.

To deal with it and to mitigate it toward the rest of our ability. So that's how we're thinking about it and right now we have as good as information as everyone else does in the market.

Kaumil Gajrawala: Okay. Got it. And then just one more, just, you know, a common theme from CPG, you know, earnings for, you know, throughout this year has just been how the Hispanic shopper is spending less, and that's putting pressure on companies. I believe you guys have sizable exposure towards the Hispanic consumer, yet you guys continue to post strong sales growth. Do you have any insights on the Hispanic consumer or why you seem to be insulated from this trend? And that's it for me. Thanks, guys.

Okay got it and then just one more just.

A common theme from CPG.

Earnings for <unk>.

Throughout this year I just spent how the Hispanic shopper is spending less and that's putting pressure on companies. I believe you guys have sizeable exposure towards the Hispanic consumer yet you guys continue to post strong sales growth do you have any insights on the Hispanic consumer why are you seem to be insulated from this trend and that's it for me thanks guys.

Martin Roper: So I don't think our, you know, consumer insights is robust enough to sort of pull it all apart, but what we would say is our convenience store trends are very strong. And I think that's visible in the, you know, available scan data. And to us, if there was weakness in the Hispanic consumer as it relates to our brand, that's probably where it would show up. And I think that's where it's showing up on the BSI for those guys who are talking about it. So we don't see it. I think for us, our consumers, while we do over-index to Hispanic and Asian and African American, we also tend to over-index to what I would call average wealth to above-average wealth households or income households.

So I don't think our consumer insights is robust enough to sort of pull that all apart. What we would say is a convenience store trends are very strong.

And I think thats visible in the available scan data.

And to US if there was weakness in the Hispanic consumer as it relates to a brand thats, probably where it would show up and I think that's where it's showing up on the PS side.

Guys, who are talking about it so.

So we don't see it I think for us our consumers, while we do over index to Hispanic and Asian and African American.

Also tend to over index to what I would call average well.

So above average wealth households are income households, so we probably a little less exposed to the lower income brackets, where maybe that is occurring but thats again, just the gas we don't have good data on it and frankly, given our trends were just focused on continually continuing them.

Martin Roper: So we're probably a little less exposed to the lower income brackets where maybe that is occurring, but that's, again, just a guess. We don't have good data on it, and frankly, given our trends, we're just focused on continuing them.

Michelle: Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Eric DeLorius with Craig Helen Capital Group. Your line is open. Please go ahead.

Okay.

Thank you and one moment as we move on to our next question.

Our next question is going to come from the line of Eric Dey, Laureus with Craig Hallum Capital Group. Your line is open. Please go ahead.

Corey Baker: Great. Thank you for taking my questions and congrats on continued very strong top-line results here.

Great. Thank you for taking my questions and congrats on the continued very strong topline results here.

Kaumil Gajrawala: Thanks, sir.

Corey Baker: First one for me on private label, just trying to help kind of just square the outlook here. So, you know, we had some lost regions that impacted Q2. I think I heard from Martin that you perhaps won some additional private label contracts recently. I guess just, you know, kind of from these levels in Q2, you know, seasonally adjusted, should we expect modest growth going forward? I guess just overall how to think about, you know, potential volatility in private label in the coming quarters.

Thanks, Erik first one from me on private label.

Just trying to help.

Kind of just square the outlook here. So we had some loss regions that impacted Q2.

I heard from Martin that you, perhaps one some additional private label contracts recently.

I guess just kind of from these levels in Q2 seasonally adjusted should we expect modest growth going forward.

I guess, just overall, how to think about potential volatility in private label in the coming quarters.

Martin Roper: Yeah, great question, Eric. I think as we said earlier in the year that we lost some regions across multiple retailers, the first impact of that was visible in Q2. The forward-looking impact of that is, is that frankly complicated because, like, for instance, in Q3 last year, we had inventory issues relative to private label, and therefore the shipment comparisons are very easy. So I think it's going to be pretty turbulent on a comparable basis for the balance of the year. What I would say is that Q2, you know, reflects all the known losses that we are aware of, and it's probably a pretty good indication of what future trends might look like on a long-term basis. But that being said, private label itself is pretty healthy right now. So you're seeing offsetting growth from the category.

Yeah, Great question, Eric I think as we said earlier in the year that we lost some regions across multiple retailers.

The impact of that was visible in Q2.

Forward looking impact of that is.

Is that frankly complicated because for instance in Q3 last year.

Had inventory issues relative to private label and therefore, the shipping shipment comparisons are very easy. So I think it's going to be pretty turbulent on a comparable basis for the balance of the year.

I'd say as that Q2 reflects all the known losses that we are aware of.

And it's probably a pretty good indication of what future trends might look like on a long term basis, but that being said.

Private label itself is pretty healthy right. Now so you are seeing offsetting growth from the category.

Martin Roper: And on top of that, as we indicated, we have won an additional piece of business that we're excited about. It won't impact until '26. So that's, I think, the best color I can provide you for your modeling. But so it's complicated and it's murky because of the year-on-year, but there's nothing new to report other than that we won something that will help us in '26.

And.

On top of that as we indicated we have one additional piece of business that we're excited about it won't impact until 'twenty six so.

I think the best color I can provide you for your modeling.

But.

So it's complicated and it's working because of the year on year, but.

There is nothing new to report other than that we want something that will help us in 2011.

Corey Baker: No, that's all very helpful. I appreciate that. And just a quick one on Walmart. Remind us the timing around shelf resets here and when you may have clarity on if Walmart will go through with these expanded distribution plans.

No. That's all very helpful. I appreciate that.

Just a quick one on Walmart.

Remind us the timing around shelf resets here and when you may have clarity on if Walmart will go through with these expanded distribution plans.

Martin Roper: Timing is October, September, October, sometime. If they stick to last year's timing, right? Last year's timing was sort of November-ish. And if they stick to an annual cadence, then we would hope to make progress on this in early Q4.

Timing is October September October sometime if they stick in the last year's timing.

It was sort of November ish.

And if they stick to an annual cadence than we would hope to make progress on this in early Q4.

Corey Baker: Yeah. Great. And then just the last one for me on Treats and kind of innovation as a whole. So, you know, very nice contribution from Treats early on. That's rolling out nationally. Can you just kind of comment on, you know, how you see the potential for the coconut milk-based beverages kind of as a category? As you guys kind of look at this, I mean, would this mostly be something similar to Treats where it's, you know, a bit of a sweeter, like, indulgent option as opposed to, you know, some of the better-for-you aspects of coconut water? And I guess just overall, I mean, should we kind of be thinking of a shift in focus from you guys on the innovation front towards, you know, more coconut milk beverages and away from perhaps isotonics and energy drinks?

Great and then just last one for me on trades and kind of innovation as a whole.

So very nice contribution from treats.

That's rolling out nationally.

Can you just kind of comment on how you see the potential for coconut milk based beverages kind of as a category.

As you guys kind of look at this I mean would this mostly be something similar to <unk>, where it's a bit of a sweeter like indulgence option as opposed to some of the better for you aspects of coconut water and I guess, just overall I mean should we should we kind of be thinking of a shift in focus from you guys on the innovation.

Fronts towards more coconut milk beverages and away from perhaps isotonic energy drinks.

Mike Kirban: Definitely not away from. I think continuing to, you know, focus on coconut water as a great sport drink and as super refreshing and as used in all these incredible usage occasions from, you know, the hangover cure to cocktail mixers to smoothies to all of these things. I think as we think about coconut milk-based beverages, it's somewhat new to us. It's somewhat new to the US. It's a trend that's growing really quickly and has become quite large in other parts of the world, specifically Asia, China, throughout all of Asia, using coconut milk as a base for this kind of midday indulgent treat. You see it in all of the coffee shops. The top best-selling item is a coconut.Is

Definitely not away from I think continuing to.

Our focus on coconut water as.

As a great sport drink and as Super refreshing and is used in all of these incredible usage occasions from.

The hangover cure in a cocktail mixers too smoothies to all of these things I think as we think about coconut milk based beverages.

New to us it is somewhat new to the U S.

It's a trend that is growing really quickly and has become quite large in other parts of world, specifically Asia, China throughout all of Asia.

Using coconut milk as a base for this kind of mid day indulgent treat.

It's you see it in all of the coffee shops, the top best selling item is the Coca is always a coconut milk base.

Michelle: always a coconut milk-based, refreshment. And so we think that that trend continues and really expands in North America and Western Europe and throughout the rest of the world. And it's something we want to be, you know, a driver of and a big part of. So, it's another avenue for growth, not necessarily, you know, taking away from the core, which is Vita Coco coconut water, which we think is still in its early days and has a huge opportunity to continue to grow as a hydration drink.

On refreshment and so we think that that trend continues and really expands in North America, and Western Europe and throughout the rest of the world and its something we want to be a driver of and a big part of it.

It's another avenue for growth not necessarily.

<unk>.

Taking away from the core which is Vita Coco coconut water, which we think is still in its early days and has a huge opportunity to continue to grow as as a hydration drink.

John Mills: Got it. It's very helpful. Thanks for taking my questions.

Got it very helpful. Thanks for taking my questions.

Mike Kirban: Thank you. One moment for our next question. Our next question is going to come from the line of Jim Stellara with Stevens. Your line is open. Please go ahead.

Thank you.

One moment for our next question.

Our next question is going to come from the line of Jim <unk> with Stephens. Your line is open. Please go ahead.

Martin Roper: Hey, guys. Good morning. Thanks for taking our question. Corey, I just wanted to maybe a quick housekeeping question. You mentioned 4Q growth margin improving sequentially from 3Q. Do we expect that to still be down from 2Q level or just you can kind of level set that cadence for us just for starters?

Hey, guys. Good morning, Thanks for taking my question.

I just wanted to maybe just a quick housekeeping question, you mentioned <unk> gross margin improving sequentially from <unk>.

We expect that to still be down from <unk> level or just if you can kind of level set that.

Cadence for us just for starters.

Michelle: We haven't provided the quarterly expectation in Q4, especially given the size is generally lower year on year, you know, throughout the year than us because of the size of the volume within the quarter and some of the fixed investments driving higher costs. But what we do see, you know, in the more short term is that impact of tariffs at the beginning of Q3 with the delay of pricing driving it down from Q1. And then you get to the overall approximately 36 for the year based on the remainder of the year.

We haven't provided the quarterly expectation in Q4, especially sizes.

Generally lower year on year throughout the year than us because of the.

Size of the volume within the quarter and some of the fixed investments driving.

Higher costs.

We do see.

More short term is that impact of tariffs at the beginning of Q3 with the delay of pricing driving it down from Q1, and then you get to the overall approximately 36 for the year based on the <unk>.

The remainder of the year.

Martin Roper: And then I certainly appreciate the difficulty of, you know, forecasting given all the, you know, the news cycle and changing tariff rates. But at least, you know, what's been announced is the negotiated rate for the Philippines is, I believe, 19%. And so if the assumption is a 10% baseline in your guidance, but you know, we assume that the deal for the Philippines materializes, you know, as it's been reported, would it be safe to say that the full year, that 36 gross margin would probably, we would probably undershoot that a little bit if we run through a 19% tariff on the Philippines, even setting aside, you know, whatever ends up happening with the deal?

Okay and then.

I appreciate the difficulty of forecasting given all of the.

The new cycle, and changing tariff rates, but at least.

What's been announced is the negotiated rate for the Philippines is I believe 19%.

And so if the assumption is 10% baseline in your guidance, but we assume that the deal for the Philippines materializes as it's been reported.

Would it be safe to say that the full year, that's 36 gross margin would probably.

Understood that a little bit if we run through and 19% tariffs on the Philippines, EBIT setting aside whatever ends up happening with Brazil.

Michelle: I would say that, yes, the 19% has been announced. But yesterday, you know, Commerce Secretary Howard Lutnick on SquawkBox said that President Trump has agreed to set zero tariffs for those natural resources that are not grown in the US in trade deals. So we don't know. but if, if, we're looking at 19% from the Philippines, and if our average goes from 10 to 19 or 20 or whatever it is, we feel that we can manage that between margin mix in 26, with more branded and branded growth, ocean freight rates declining, which we see happening and continuing to happen, and potentially some additional pricing. We think that if that does happen, we can manage the business, accordingly.

I would say that yes.

Yes, the 19% has been announced but yesterday Commerce Secretary Howard Lutnick on Squawk box.

Trump has agreed to set zero tariffs for those natural resources that are not grown in the U S. In trade deals. So we don't know.

But if if.

We're looking at 19% from the Philippines, and if our average goes from 10.

To 19 or 20 or whatever it is we feel that we can manage that between between margin mix in 2006 with.

With more branded and branded growth.

Ocean freight rates declining, which we see happening and continuing to happen.

And potentially some additional pricing we think that if that does happen we can manage the business.

John Mills: And again, just to be clear, our guidance assumes 10% ongoing. It doesn't assume anything else. And certainly in our mitigation efforts, you know, once we know what the, you know, I suppose the guidelines are or what the rules are, then we can mitigate. But there is a lag, right? So again, I think, you know, long term, we're like, okay, we'll be totally fine. And in the medium term, it's like, let's not do anything silly based on announcements that may not, you know, impact us because again, the, you know, the the details are in the details, but we don't have them, right? So, so that's how we're thinking about it. And our primary focus and our messages to our team is let's continue to drive top-line growth and everything will be fine.

Accordingly.

And again, our guidance is 10% ongoing it doesn't assume anything else and certainly in our mitigation efforts.

Once we know what the.

I suppose the guidelines are or what the rules are and we can mitigate but there is a lag right. So again I think long term.

Hey.

We will be totally fine and in the medium term like let's not do anything silly based on announcements that may not.

<unk> us because again.

The details are in the details, but we don't have.

So.

So that's how we're thinking about it and our primary focus and our messages to our team is let's continue to drive topline growth and everything will be fine.

Martin Roper: Great. And then maybe just one quick follow-up on, US private label sales. I think in the quarter, they were just shy of $15 million. Is that a good dollar run rate to think about just kind of for the remainder of the year as we progress forward, you know, kind of in that 15 million range or any, you know, incremental side downside to that?

Great and then maybe just one quick follow up on.

U S private label sales I think in the quarter.

Were just shy of $15 million.

Is that a good run rate to think about just kind of for the remainder of the year as we progress forward kind of in that $15 million range or any incremental.

Michelle: The two pieces, what Martin says Q2 is somewhat representative of the ongoing business. As we've talked in the past, private label is hard to to capture because the revenue is recorded a little bit differently. but we do see growth in the category overall and and faster growth in private label across the category. We'll have the incremental business coming that Martin referenced in 26. So we would hope that that number continues to grow.

Sorry downside to that.

Pizza is what Martin said Q2 is somewhat representative of the ongoing business as we've talked in the past private label, it's hard to say.

Capture because the revenue is recorded a little bit differently.

But we do see growth in the category overall and faster.

Faster growth in private label across the category plus the incremental business coming that Martin referenced in 2006. So we would hope that that number continues to grow.

Okay.

Got it great.

Martin Roper: Appreciate all the detail, guys. I'll hop back in the queue.

Great I appreciate all the detail guys I'll hop back in the queue.

John Mills: Thank you. Thanks.

Mike Kirban: Thank you. And one moment for our next question. Our next question comes from the line of Robert Ottenstein with Evercore ISI. Your line is open. Please go ahead.

Okay. Thank you and one moment for our next question.

Our next question comes from the line of Robert Stein with.

Evercore ISI. Your line is open. Please go ahead.

Corey Baker: Great. Thank you very much. And congratulations on the continued, tremendous success. And, and, and what I want to do is, is, is, is kind of try to get a little billy beneath the, below the hood in terms of that success. And, and maybe understand, a little bit about your marketing and category-building efforts in the US that have been so successful. in terms of, at this point, what what particular demographics are you targeting for increased household penetration? If, if in fact, you're doing that, you know, what particular categories or, I'm, you know, are you looking to gain share from or rather maybe occasions from? you know, it's our sense that, you know, four, five years ago, it was more from kind of juice and water. Now maybe it's more sports drinks. So is, is that happening?

Great. Thank you very much and congratulations on the continued tremendous success and we don't want to do is is kind of try to get a little Billy beneath that below the hood in terms of that success.

And maybe understand a little bit about your marketing and category building efforts in the U S that have been so successful.

In terms of.

At this point, what particular demographics.

Are you targeting for increased household penetration.

Fact, youre doing that.

What particular categories or.

Are you looking to gain share from or rather maybe occasions from.

It's our sense that four five years ago. It was more from kind of juice and water now maybe its more sports strengths. So is that happening. So just trying to understand a little bit about I know youre going into C stores, and that's working really well, but trying to understand maybe some of the brand.

Corey Baker: So just trying to understand a little bit about, you know, I know you're going into C-stores and that's working really well, but trying to understand maybe some of the brand-building marketing aspects of, your your growth strategy.

<unk> marketing aspects.

Your growth strategy.

Michelle: Thanks. Yeah, I think, it's a lot of what we've been doing the last several years and continuing to do that. So if we think about where we're pulling from, it remains, pretty equal, from three major categories, right? It's sports drinks, it's enhanced bottled water, and, and juice. And that continues. we are, from a marketing perspective, for the first time in in a few years, really focusing, a little bit heavier than we might have historically on the sports, sports drink aspect, both through our marketing and our communication. And that seems to be working. and we're excited about that. And then in terms of demographics, we're growing across all demographics. we're focusing our marketing efforts on on young, multicultural, more urban consumers. but it is spreading, across all demographics. We're seeing significant growth in truck stops in the middle of the country.

Thanks, Yes, I think it's a lot of what we've been doing the last several years and continuing to do that so if we think about where we're pulling from it remains.

Pretty equal.

Three major categories right, it's sports drinks, it's enhanced bottled water and energy.

And juice.

And that continues.

We are from a marketing perspective for the first time in a few years.

Really focusing a little bit heavier than we might have historically on the sports sports drink aspect.

Both through our marketing and our communication and that seems to be working.

And we're excited about that and then in terms of demographics, we're growing across all demographics.

We're focusing our marketing efforts on on young multicultural.

More urban consumers.

But it is spreading.

Across all demographics, we're seeing significant growth in truck stops in the middle of the country.

Michelle: I mean, the the category just seems to be working very well everywhere, which is exciting. But the focus of our marketing efforts remains the same that it's been the past couple of years.

The category seems to be working very well everywhere, which is exciting but the focus of our marketing efforts remains the same that it's been in the past couple of years.

Corey Baker: That's great. And then, you know, as a follow-up, is your strategy in terms of what you're focusing on along the lines that you just mentioned the same, pretty much the same in Europe, or are there nuances, regional nuances, whether it's in the UK or Germany that we should be aware of?

Okay, that's great and then as a follow up.

Is your strategy in terms of what you are focusing on.

Along the lines that you just mentioned the same pretty much the same in Europe or are there nuances.

Regional nuances.

Whether it's in the U K or Germany that that we should be aware of.

Michelle: Pretty similar. I mean, there are regional nuances in terms of, you know, focus periods, whether it be Ramadan in the UK and these types of things that, you know, might be different focuses to Hispanic consumers in the US during certain periods. But for the most part, it is the same. It is targeting young, multicultural consumers.

Pretty similar I mean, there there are regional nuances in terms of focus periods, whether it be ramadan in the UK and these type of things that that might be different focuses to Hispanic consumers in the U S. During certain periods, but for the most part it is the same.

It is it is targeting young multicultural consumers.

John Mills: Yeah. And I think one slight difference in Europe is the category is underdeveloped relative to the US. And I think that's, you know, a huge opportunity for us. So there's a lot more category building and education we have to drive in Europe. And certainly, that message is being received pretty well because the growth rates are very high.

Yes, I think one slight difference in Europe is the category is underdeveloped relative to.

So the U S.

And I think thats.

A huge opportunity for us so there's a lot more category building and education, we have to drive in Europe.

And.

Suddenly that message is being received pretty well because the growth rates are very helpful.

Great Alright.

Corey Baker: And it's very early in.

John Mills: And it's very early in category development dates.

And it's very early and category development.

Corey Baker: No, no, super exciting. Thank you very much.

No Super exciting thank you very much.

John Mills: Thanks so much.

Mike Kirban: Thank you. And as a reminder, if you would like to ask a question, please press star one, one. One moment for our next question. Our next question is going to come from the line of Michael Avery with Piper Sandler. Your line is open. Please go ahead.

Thanks, so much.

Thank you and as a reminder, if you would like to ask a question. Please press star 111 moment for our next question.

Our next question is going to come from the line of Michael Lavery with Piper Sandler. Your line is open. Please go ahead.

Kaumil Gajrawala: Thank you. Good morning. Just wanted to touch on freight rates. You mentioned you expect easing in, you know, later in the year. But can you give a sense of maybe how much you're contracting or, you know, already securing for 2026? I think for recent quarters, you've mostly been more exposed to the spot rates and the contracted levels were in this favorable. Has that changed? But what's the kind of forward position that you're sitting on now?

Thank you and good morning.

Just wanted to good morning, Frank.

Great rates, you mentioned you expect easing.

Later in the year, but can you give a sense of maybe how much your contracting or already securing for 2026 I think for.

Our recent quarters, you've mostly been more exposed to the spot rates.

Contracted levels, we're in a favorable has that changed.

What's the kind of forward positioning that you are still now.

John Mills: Yeah, I think on a forward basis, we don't have much coverage on ocean freight rates. I think our view is still that they are sort of higher than long-term averages, that there is more downward pressure than upward pressure that we see right now, partly due to increased capacity and decreasing demand. Obviously, it's pretty volatile. So, you know, that's a consideration. But we think the volatility is manageable within our P&L and that we're better off sort of mostly being spot and not making forward contracts given the downward pressures that we see. Ultimately, the big sort of change in ocean freight for us would probably be if the Suez Canal route were to open up for Asia to the to Europe and Asia to the East Coast.

Yes, I think on a forward basis, we don't have much coverage on ocean freight rates I think our view is still.

Sort of higher than long term averages that there is more downward pressure than upward pressure that we see right now partly due to increased capacity.

Increasing demand.

Obviously, it's pretty volatile so that's a consideration, but we think the volatility is manageable within our P&L and we're better off sort of mostly being spot and not making four contracts given the downward pressures that we see.

Ultimately the big sort of change in ocean freight rate for us would probably be the Suez Canal route where to open up for Asia.

Europe and Asia to the East Coast that is obviously still shut down although there were expectations that would open but obviously its still shut down but thats. The big sort of thing that we still think will eventually open and that will drive rates down.

John Mills: That is obviously still shut down, although, you know, there were expectations it would open, but obviously, it's still shut down. But that's the big sort of thing that we still think will eventually open, and that will drive rates down as a lot of extra capacity gets added just by the shortened, you know, transit time. So, so we're sitting on the sideline, and we're comfortable with that. We think we can manage the volatility, you know, within our P&L, but that doesn't mean to say it won't cause, you know, volatility in our gross margins quarter to quarter as that, you know, if that volatility continues to happen.

Lot of extra capacity gets added just by the shortened.

At that time, so so we're sitting on the sideline and we're comfortable with that we think we can manage the volatility within our P&L, but that doesn't mean to say it.

Volatility in our gross margins quarter to quarter as that.

That volatility continues to happen.

Kaumil Gajrawala: Yeah. Okay. Thank you. And just on a C-Store and cans specifically, you've got a nice pickup in ACV there. It's still lower than, you know, sort of the grocery levels. But, what momentum are you seeing there? You know, is there a few chains in particular? You've got a little more of a breakthrough. Is your selling story getting better? What's helping put some wind at your back there?

Okay. Thank you and just on a C store in cans specifically.

You've got a nice pickup in ACB there it's still.

Lower than sort of.

The grocery levels, but.

What momentum are you seeing there was there.

<unk> changed in particular, you've got a little more of a breakthrough as you're selling story is getting better what is helping put some wind at your back there.

John Mills: Yeah, I think, you know, we're happy, I suppose, with the increased ACV, but we're unhappy that it isn't going faster. So, but Convenience Store, I think, as you know, is it's, you know, there are a couple of big accounts that sort of get you to 20 ACV, and then it's a lot of independent decision makers with a lot of much smaller decision points. So we're making progress. I think, you know, the good news is our selling story and our velocities are healthy. And where we've been able to add, you know, incremental distribution like the one liter in 7-Eleven, for instance, it sticks and it's a very valuable SKU in that in that door. And that's a message we can take on to the rest of that community. So, currently comfortable with what's going on there.

Yes, I think.

We're happy I suppose with the increased ACB, but we're unhappy if it isn't growing faster so but convenience store I think as you know.

There are a couple of big accounts that sort of gets you to the 'twenty ACB and then it's a lot of independent decision makers with a lot of smaller decision point, So we're making progress I think.

The good news is our.

Selling story and our velocities are healthy and where we've been able to add incremental distribution like the one leader in 711 for instance.

It sticks and it's a very valuable skew in that in that door and thats. The message we can take on to the rest of that community. So.

Currently comfortable with what's going on there, we obviously have work to do to keep driving juice.

John Mills: We obviously have have work to do to keep driving juice. but yeah, feeling very good about our current C-Store business and our trends there are very good.

But feeling very good about currency business trends are very good.

Kaumil Gajrawala: Okay. Thanks so much.

Okay. Thanks, so much.

Mike Kirban: Thank you. And one moment for our next question. Our next question is going to come from the line of Glen West with William Blair. Your line is open. Please go ahead.

Thank you and one moment for our next question.

Our next question is going to come from the line of Glenn West with William Blair. Your line is open. Please go ahead.

Bonnie Herzog: Hey, guys. This is Glen West on for John Anderson. you guys have hit on a lot. So maybe if I could just ask a couple of clarifying points on on what you've talked about related to private label and then the Walmart situation. So on private label, you know, you talked about the new business coming in 2026. I'm just curious if, you know, that business is largely going to offset the losses we've seen, and maybe we can expect to see kind of a substantial rebound in that segment, or maybe how we can think about how that segment's going to perform kind of in 2026.

Hey, guys. This is Glen Weiss on for John Henderson.

You guys have paid down a lot. So maybe if I could just ask a couple of clarifying points on what you've talked about related to <unk>.

Private label on that in the Walmart situation, so on private label.

You talked about the new business coming in 2026, I'm just curious if.

Yes.

This is largely going to offset the losses, we have seen and maybe we can expect to see kind of a substantial rebound in that segment or maybe how we can think about.

How that segment is going to perform kind of in 2026.

John Mills: So, we we haven't disclosed details on the size of the business. And what I think we would say is it's a large customer, but frankly, we don't really know what the volumes will be until they actually hit because, this is a potential new program for them. so it's not really an answer that we can answer other than we're going to try and plan to support a range of outcomes. and then as it relates to, you know, would it replace? I think the, again, it's very difficult to tell. It's a large customer. There's a wide range of outcomes. So honestly, we can't really say if it's going to replace. I think it would be a wonderful outcome for us if next year we were able to, you know, get private label back in the US to flat, for the year.

So.

We haven't disclosed details on the size of the business and I think we would say is it a large customer, but frankly, we don't really know what the volumes will be until they actually hit.

This is a potential new program for them.

So it's not really an answer that we can answer other than we're going to try and plans to support a range of outcomes.

And then as it relates to.

Replace.

I think the.

Again.

Very difficult to tell at a large customer there is a wide range of outcomes. So honestly, we cant really say if its going to replace.

Think it would be a wonderful outcome for US next year, we were able to get private label back in the U S to flat for.

John Mills: That would be a good outcome and maybe even grow it. the growth would come from the new account and also continue growth in private label business. But it's so early to tell, and there's so much complexity. And as we've said, private label is pretty lumpy in how these decisions get made that I really don't want to, you know, provide any any sort of forward-looking guidance on that.

For the year that would be a good outcome and maybe even grow it the growth would come from the new accounts and also continued growth in private label business, but so early to tell.

So much complexity and as we've said private label is pretty lumpy and how these decisions get made that I really don't want to provide any sort of forward looking guidance on that.

Bonnie Herzog: Okay. Worth a shot. thank you. And then, and then on Walmart, do you guys have any early reads kind of on the velocity of the SKUs you have in that new juice aisle? Because I know you frequently said it's it's higher foot traffic. So are those SKUs that you have kind of turning much faster, or or any sort of insight you have there?

Okay worth a shot thank you and then and then on Walmart.

You guys have any early Greens kind of on the velocity of the Skus you have in that new juice aisle.

I know you frequently said, it's higher foot traffic so our.

Those skus that you have kind of turning much faster or any sort of insight yet.

Michelle: Yes. Our our velocities at Walmart are really, they think they've grown 50-plus percent. It's somewhat hard to tell from a traffic perspective because there's a a large reduction of SKUs, but we're very happy with the velocity we're seeing on the SKUs that are in the stores. And we're happy with the overall Walmart performance in general, considering the distribution losses. And in the stores where we've maintained distribution, the the brand continues to do very, very well. So we're we're excited about the future of Walmart for sure.

Yes, yes, yes.

But our velocities at Walmart are really I think they've grown 50 plus percent.

Hard to tell from a traffic perspective, because there is.

Large reduction of Skus, but we're very happy with the velocity we're seeing.

The skus that are in the stores and we're happy with the overall Walmart performance and general considering that distribution losses and in the stores, where we've maintained distribution.

The brand continues to do very very well.

We're excited about.

The future of Walmart for sure.

Bonnie Herzog: And the potential expanded distribution in that aisle with higher velocities. Yeah.

And the potential expanded distribution in that aisle with higher velocity.

Kaumil Gajrawala: Great news. I appreciate your guys' time. Thanks.

Great News.

You guys fine thanks.

Bonnie Herzog: Thank you.

John Mills: Thank you.

Thank you. Thank you. Thank you and I'm showing no further questions at this time and I would like to hand, the conference back over to Martin Roper for any further remarks.

Mike Kirban: Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to Martin Roper for any further remarks.

John Mills: Thank you, Michelle. I'd just like to thank everyone for joining our quarterly earnings call today and look forward to talking to you again in three months. Everyone, have a great day.

Thank you Michele I, just like to thank everyone for joining our quarterly earnings call today and look forward to talking to you again.

Three months, everyone have a great day.

Mike Kirban: This concludes today's conference call. Thank you for participating. You may now disconnect.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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