Welcome to the BellRing Brands Fourth Quarter and Full Year 2020 Earnings Conference Call and Webcast. Hosting the call today from BellRing Brands are Darcy Davenport, President and Chief Executive Officer; and Paul Rode, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 1:30 p.m. Eastern Time.

The dial-in number is 800-585-8367, and the passcode is 4971167. [Operator Instructions]. It is now my pleasure to turn the floor over to Jennifer Meyer, Investor Relations of BellRing Brands for introductions. You may begin..

Good morning, and thank you for joining us today for BellRing Brands Fourth Quarter Fiscal 2020 Earnings Call. With me today are Darcy Davenport, our President and CEO; and Paul Rode, our CFO. Darcy and Paul will begin with prepared remarks, and afterwards, we'll have a brief question-and-answer session.

The press release and supplemental slide presentation that support these remarks are posted on our website in both the Investor Relations and the SEC Filings sections at bellring.com. In addition, the release and slides are available on the SEC's website.

Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements.

These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded, and an audio replay will be available on our website. And finally, this call will discuss certain non-GAAP measures.

For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Darcy..

Thanks, Jennifer, and thank you all for joining us this morning. Last evening, we reported our fourth quarter and fiscal 2020 results as well as posted a supplemental presentation to our website. This presentation provides more insight into our business, consumption and key metrics.

We finished 2020 strong with record net sales for the quarter at $283 million, up 32%, and adjusted EBITDA of $57 million. For the year, net sales grew to $988 million, slightly exceeding our revised sales guidance with adjusted EBITDA of $197 million.

Despite the challenges that COVID created, we exceeded our long-term algorithm and delivered net sales growth of 16%. Adjusted EBITDA came in at the midpoint of our original guidance, and we delivered strong cash flow generation, reducing our net leverage.

I'm proud of our accomplishments in our first year as a public company, and specifically, for the resilience our employees demonstrated throughout a challenging year. This morning, I'll review the category, brand highlights, growth strategies and end with our fiscal '21 outlook.

The convenient nutrition category has been stable since mid-June, although below pre-COVID levels as a result of less on-the-go usage mainly due to nutrition bars. Across the category, we are seeing fewer shopping trips, higher basket sizes and the category continues to shift to eCommerce and food channels.

Our main segments, liquids and powders, have rebounded to their pre-COVID growth rates. However, the virus has impacted the category segments differently. Adult and everyday nutrition brands continue to gain share driven by higher in-home usage.

Weight management has suffered as consumers move to comfort foods, while sports nutrition brands are primarily flat as consumers figure out new ways to exercise outside the gym. Premier Protein shake consumption improved this quarter, up 20% across tracked and untracked channels.

Growth was strong across all of our key channels, club, mass, food and eCommerce. Effective promotional programs, along with distribution gains and healthy velocities drove consumption growth. Untracked channels continued to outpace tracked up 38%, while tracked returned to growth this quarter.

This strong momentum has continued in Q1, with the first 6 weeks showing 21% growth across tracked and untracked channels, with impressive gains in food, mass and eCommerce. We made great progress against our growth strategies this year. Premier Protein household penetration reached 6.8%, gaining 1 percentage point this year.

Our distribution continues to increase with brand TDPs up 9% sequentially and 26% for the year. We now have an average of 6.7 items on shelf. We're pleased with the effectiveness of our sales and marketing activities and look forward to building on our success in '21. Our new products continue to excite both consumers and retailers.

Our seasonal offering, Pumpkin Spice, drove strong velocities across both eCommerce and retail outlets. Our newest 30-gram flavored cinnamon roll shipped at the end of the fourth quarter and quickly sold out across eCommerce platforms. We also started to ship a new pack size, 12-count, to the mass channel at the end of the quarter.

This is a major '21 initiative for us because larger pack sizes represent 1/4 of the FDM category. We're excited to give consumers the option to buy larger packs anywhere they shop, and early results are promising. Dymatize had a fantastic quarter up 57% domestically, with growth across all channels.

Our new products ISO100 Fruity and Cocoa PEBBLES have vastly exceeded our expectations, becoming the #3 and #5 flavors within the ISO100 line. We are quickly gaining distribution across all channels on these exciting new products.

Our international business was relatively flat due to COVID, but showed strong sequential improvement, up 50% versus last quarter. Premier shakes in Canada drove most of the gains, while Dymatize and PowerBar continue to be challenged within the global specialty channel.

Our supply chain performed well all year, executing best-in-class service in the midst of unexpected volatility. Our frontline employees in our Germany plant and within our logistics and co-manufacturing network were invaluable to our success.

Our fifth and newest co-manufacturer is performing well, and our shake network remains well positioned to support our growth plans. Now to our outlook. As you saw in yesterday's press release, we expect fiscal '21 net sales to grow 8% to 13% and adjusted EBITDA to grow between 5% and 10%.

This guidance is consistent with our long-term algorithm of 10% to 12% net sales growth at 18% to 20% EBITDA margin. EBITDA growth lagged sales growth because we are choosing to invest in brand building and our commodity and logistics costs are running higher year-over-year.

Despite the higher cost, we are prioritizing driving share in a growing market. We believe now is the time to bring new households into the category rather than maximizing immediate margin.

We will do that through increased strategic media and promotional spending, stronger creative, execution of Premier Proteins, upsize initiatives and continued flavor expansion. As a result of the increased investment, we expect the timing of EBITDA growth to be entirely in the back half.

This is due to strong Q2 media spend, raw material and logistics headwinds in the front half, and lapping COVID demand shifts. Overall, I'm very confident in our expansion plans for 2021 as we increase investments, grow our brand awareness and continue to generate strong cash flow.

The RTB and powder categories have stabilized and are growing at pre-COVID levels. Our household penetration is increasing. We are gaining significant distribution on both existing and new products. Our marketing and promotional strategies are working, and our supply chain is well positioned to support our growth.

Although we continue to face challenges with COVID, I continue to be energized by our potential and our long runway for growth. I will now turn the call over to Paul..

Thanks, Darcy, and good morning, everyone. Net sales for the quarter was $282.6 million, up 32%. Adjusted EBITDA was $56.7 million, up 22.5%, and EBITDA margin was 20.1%. Premier Protein net sales increased 37%, with RTD shake net sales up 40%. Fourth quarter results benefited from favorable trade inventory changes in both 2019 and 2020.

Excluding these items, our underlying growth largely tracked consumption growth of 20%, driven by distribution gains for both existing and new products and incremental promotional activity. We continue to expect this brand to grow double digits, aided by gains in distribution and investments in promotions and marketing.

Dymatize net sales grew 15% this quarter, driven by strong increases in eCommerce, club and mass. International sales for both Dymatize and PowerBar improved sequentially but remained challenged as a result of COVID. Turning back to consolidated results.

Gross profit of $90 million increased 17% this quarter, with gross profit margin declining 400 basis points to 31.8%. The margin decline was related to anticipated higher input cost, primarily milk-based proteins and incremental promotional activity.

SG&A expenses were flat compared to prior year, but declined 390 basis points as a percentage of net sales to 12.5%. Higher employee-related expenses of $3 million and incremental public company costs of $1.8 million were partially offset by lower IPO costs of $2.7 million. Marketing spend was flat compared to prior year.

Turning to full year 2020 results. Net sales of $988 million grew 16% over the prior year, with gross profit of $338 million, growing 8%. Gross profit margins declined 230 basis points to 34.2%, reflecting higher input costs and incremental promotional activity. SG&A as a percentage of net sales was 15.4%.

Adjusted EBITDA of $197.2 million was relatively flat compared to prior year, with margins declining 320 basis points to 20% and included $8.7 million of incremental public company costs. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity.

We had a strong fourth quarter for cash flow, generating $70 million from operations and $97 million for the year. We repaid $25 million of revolver borrowings in the quarter, leaving us with $49 million of cash on hand and $170 million available under our revolver at quarter end.

As of September 30, net debt was $655 million and net leverage was 3.3x. Since the IPO, we have reduced net debt by $82 million. We expect to reach net leverage of 3x in fiscal 2021. We recently announced a $60 million stock repurchase authorization, and we'll continue to utilize our asset allocation decisions to enhance long-term shareholder value.

Turning to our outlook. We expect fiscal 2020 net sales of $1.07 billion to $1.12 billion and adjusted EBITDA of $207 million to $217 million. The midpoint of our outlook implies double-digit top line growth and EBITDA margins above 19%, both of which are in line with our long-term algorithm.

Our EBITDA growth is expected to lag our top line growth as we invest behind our brands and experienced input cost inflation, the latter of which is expected to be most impactful in the first half and moderate in the second half.

Similar to 2020, we expect promotional activity and advertising investments to peak in the second quarter and meaningfully pressure margins. These timing items combined with COVID's impact on our fiscal 2020 quarterly gating is expected to result in high single-digit sales growth in the first half and mid-teens growth in the second half.

In addition, our EBITDA growth is expected to be entirely in the second half. Heading into the first quarter, we expect our sales growth rate to moderate in line with our long-term algorithm.

Consistent with the first - consistent with past first quarters, we expect to benefit from shipments occurring ahead of consumption for Premier Protein shakes as retailers build inventories to support January promotions. We expect our first half quarterly EBITDA pacing to closely track 2020.

Last, giving consideration of both BellRing Inc.'s taxes and distributions to Post Holdings, BellRing's total income tax cash outflows are expected to be approximately $34 million in 2021. We expect cash interest expense to be approximately $40 million. With that, I would like to turn the call back over to the operator for questions..

[Operator Instructions]. Your first question is from Ken Goldman of JPMorgan..

I'm wondering if you could explain a little bit the reasoning behind the share buyback lately or that you authorized lately.

Is there anything to read into that other than why companies do share buybacks in general because it's sometimes a good use of capital? I think there's some speculation that maybe there's - you'd be looking to buy from a particular holder, a particular large holder of BellRing, but I'm just wondering if you could elaborate that a little bit because it has created some market speculation..

Yes. Ken, this was simply a tactical move to give us flexibility in a volatile market. So we have great - as you guys know, we have great organic growth, and we generate strong cash flow. So it just seems prudent to keep all uses of cash open..

Okay. And then my follow-up would be, I just wanted to make sure I heard you correctly on the 1Q sales growth number. I think you said it should be within your long-term range.

So are you looking for somewhere between 10% to 12% in that first quarter? And does that account for - I'm sure it does, but just to make sure, all of the puts and takes between difficult comparisons on shipments, maybe any reversal of 4Q ship-in? Just wanted to make sure I'm getting all that correct..

Yes. The context was that, obviously, we had higher growth in this last quarter. And yes, our Q1 will be more in line with our long-term algorithm. Expect but more [of it] [ph] on the higher side..

Your next question is from Andrew Lazar of Barclays..

I want to dig into the sales guidance a little bit further. I think you expected first half sales growth, high single digits; second half, mid-teens. If we take the low end of both of those ranges, I think, it gives us full year sales growth at kind of roughly the midpoint of your full year guidance.

So I guess what I'm getting at is the low end gets to sort of the midpoint. So it would seem to build in some level of conservatism, which I think in light of current dynamics and all the uncertainties makes sense. So I just wanted to get a sense from you Darcy.

How you're thinking about the sales growth rate for the year in sort of a prudent way? And if that's what gives you - or what gives you the confidence to provide a full year sales outlook, given all the uncertainty, would be the first one..

So yes, that math is correct and that's where we see the year ending. I think that we want to be conservative. Obviously, we have there's a lot of unknowns, but we have a lot of things going for us. Obviously, we have expanded.

We have line of sight to resets in major accounts as well as we have new products that are hitting that are early look is performing well. We're also lapping distribution gains from last year. And we are increasing our brand building, specifically our advertising, which we saw worked last year, and now we're just extending the time.

So we're feeling good about the top line and hitting that number..

Got it.

And then it's a good segue into my next question, which is really just - I don't know how much - how specific you can get on some of the outcome of some of the shelf resets and such, but maybe any color or a little more detail on - maybe how much space you've gained? Or whether you think that was incremental to the category? Or if it came from sort of other players or other subcategories? Just trying to get a little more color on that, depending on what you can share..

Sure. Yes. So as I said last quarter, we gained - in Q4, we gained about 9% TDPs, and it was mostly food accounts, whereas coming into Q1, they are a major reset. So a large mass account as well as club. So in those, they're resetting now started at the beginning of November, and so you can go into stores and see it.

We actually - we were - from a category standpoint, the category space generally stayed the same. It looks like there are some gains in liquid and powders at the expense of bars, but it is nominal. From a BellRing standpoint, we gained a fair amount. So we will more than double our space at a major mass account. So it's pretty exciting.

And that - and we gained with Premier primarily, but also with Dymatize. What was also nice is we gained across forms. So predominantly, we gained in shakes, as expected, but we also got powder in there, which is nice. And we're seeing really good gains on our powder business across food accounts. So that's nice to see..

Our next question is from John Baumgartner of Wells Fargo..

Darcy, just hoping you could expand a bit on the marketing plan for fiscal '21? I mean, you're coming off a year of significant investment. So any thoughts on the ROI would be great.

And then looking ahead, what sort of contemplated for F '21 year-on-year? And how are you expecting the spend to tilt between advertising promo or other merchandising?.

Sure. So we were really pleased with our 2020 results from an advertising standpoint. Our main goal of the advertising was to increase penetration. And we hit our goal, our annual goal. We actually hit it about midyear and then as well as brand awareness, et cetera. So for '21, the strategy is, basically do more of what was working.

So we're going to continue to spend in both TV and digital. We're going to expand the time. So we felt like we had the right level of spend in Q2, which, again, is new year, new year for us. So the big - the major time when new households come into the category will extend from 4 months to about 7 months. And then we'll be increasing spend in eCommerce.

And then display in store, so promo. And then obviously, we'll be - we're also expanding space. So I would say what is new from a marketing standpoint is our focus on buy rate. So we're focused on both household as well as buy rate. So that's where the upsizing comes in and then the increase in promo.

So a similar - I would say, similar strategy from an advertising standpoint, but just more of it..

Okay. And then just to follow up on the innovation front. I guess our sense is that your pipeline is already fairly substantial for the next few years. And you mentioned some of the new flavors.

But as COVID persists and you see consumers gravitating towards more functional products, the ensure, the boost, how does that inform your views on the ability for Premier to sort of go to different need states? I mean, can that brand travel? Or do you think you have to grow through M&A, if you're going to kind of branch out to other functional types of areas?.

Sure. This is where I think Premier has a ton of advantage. I mean, one of the key differences about the Premier Protein brand versus, I would say, any other brand in the category is its ability to travel.

So whereas many of the other brands are strong within their need state, they may be a weight management brand, they may be an adult nutrition brand or a sports nutrition brand, what Premier does is, it fits squarely in not everyday nutrition, but it sources volume from all of the others.

So it gives us tremendous room to innovate and kind of lean into those spaces. And those are some of the areas that we're looking into. I mean, I think I talked about how COVID has really uncovered a trend that was already in going on in the category around proactive health.

And I think you're starting to see immunity claims across categories in the store, but specifically in our area. You'll see that later in the year on Premier, but we'll start leaning into those ways to innovate. But obviously, M&A will - we'll lean into M&A in any area that we feel Premier can't go..

Your next question is from Brian Holland of D.A. Davidson..

I wanted to ask a follow-up on Andrew's question about shelf space and how that's evolved. And specifically, looking at private label, I think we've seen in the past that whether following SlimFast or after that Atkins, more recently, I was wondering if you're seeing them sort of mimic you on the 30-gram shake side.

How you're seeing that evolve? Any new products there? And maybe how you're competing against that? And maybe more broadly, how is that playing out? What do you think that says about where you are as far as being on trend? Because I think it's fine if private label is coming in.

But if that's where the growth is in private label, it probably speaks to your leadership..

Yes. So private label represents about 8% of RTDs, and it's up about 9%. That is - it's pretty consistent. It's up a little bit more this quarter, but nothing dramatic. The vast majority of that in tracked channels, so that's just in tracked channels. The vast majority of that is in Walmart.

And so we really - Premier has pretty low interaction with overall private label. We're about a 55% interaction index, so pretty low. Over the years - so because Equate is such a strong brand in private label, they have products that compete in every single need state. So about 2 years ago, they launched a Premier fighter.

It really has not affected our business very much. And so I think that's a good example of a strong private label, but has really not affected our business. And so I think that as we look, - and new, you asked about new entrants. Yes. So Sam's recently launched a 30 - kind of a 30-gram fighter. Again, we're watching it.

But again, based on Equate, we really think that it - we don't think that it will have a big impact on our business..

I appreciate the color, Darcy. Separately, a fair amount of cost inflation, obviously, hitting gross margin. It would appear as though you're limited on price as a total offset as you look to drive household penetration.

So I'm wondering what you're looking at or what you're currently doing on the supply chain side to maybe help manage or smooth out some of this raw material and logistics pressures that you're seeing going forward?.

Do you want me to tell - I'll take this, Paul, and then you can add on as you see fit. So yes. So yes, it's a conscious decision to not take price. We basically are seeing the increases in the - more in the front half than we are in the back half as we're seeing kind of a spike in milk protein costs as well as some logistic costs from COVID.

So we are actively working on cost-out programs, both this year as well as - we started last year as - we're doing it this year, and we're even expanding. We already have line of sight to projects that we're working on for '22 and beyond.

But I think because we see the cost increases hitting mostly in the front half and kind of subsiding in the back half, and our focus on market share and brand building. We think we can weather this in kind of the first half. The one thing I'd say, I'll say is we're watching it.

I mean if our calculus isn't correct and commodity prices increased more than expected, we took price February of '19. And the organization executed well. Elasticity was as expected. So we can always make that decision, and we are monitoring it closely..

We'll go to our next question who is Chris Growe of Stifel..

I just wanted to ask a question first on the gross margin, so a little bit on Brian's question, but just to understand you had 2 major factors weigh on the gross margin sequentially and year-over-year, I guess, promotions - you see promotional rebuild as well as input cost inflation.

Is it possible to disaggregate that? Just - and more importantly, I'm just trying to understand is kind of how much is ongoing? And how much kind of pressure, especially from inflation, we could see in the first half of the year?.

Yes.

Chris, your question, I assume, is on Q4 margins, specifically?.

Yes..

So from a Q4 perspective, you're right, there's two major items that were impacting margins, promotional activity and raw materials. Raw materials was a bit more impactful than promotion. In fact, the fourth quarter was our highest impact from raw materials versus last year. So it's hitting a peak.

As we go into next year, Darcy highlighted that, and we've highlighted, obviously, in our prepared remarks and earnings release that, we do expect raw material prices to impact us primarily in the first half with the most impact in the first quarter. Keep in mind that last year in the first quarter, protein prices were just starting to rise.

So we had some favorability that as the costs got higher in the rest of the year. So it's a little bit more of a headwind in the first quarter. But really, it's the first half, it takes the brunt of the impact. It's very modest in the rest of the year, but it starts off highest in first quarter as it's better as we go through the year..

Okay.

And I had just one other question for Darcy, just in relation to the category growth rate, in particular, where you operate, and I'm thinking particularly in liquids, do you expect to see a growth profile much like you saw in 2020? Or do you think - although we've seen an uptick in the growth of the category, is it more like kind of where we exited fiscal '20 as we look ahead to fiscal '21? Just trying to get a level set on kind of where the category shifts out for the year..

Yes. So historical growth rates for the category is about 5%. We're a little bit above that right now. And obviously, that dipped during Q3 of last year. But yes, I expect it to go back to historical, so about 5%. It's been very steady.

So in the supplemental deck that we put out, we added a slide on the category that very clearly shows you the COVID stock up, the deload and then just how steady the category has been back to pre-COVID levels. So I expect that to continue. Obviously, there can be some bumps depending on lockdowns, et cetera.

But overall, I think it will come back to - it will be consistent with where it has been for the last 3 months..

Your next question is from David Palmer of Evercore ISI..

Just a question on some of the dynamics we can see just in the measured channels, which I know is highly imperfect, but just from some of the standpoint that you're talking about with the immunity claims and one player like Ensure that is doing well in the measured channels.

It seems to be positioned against certain claims, but also positioned against older demographics, and they may be benefiting from COVID in certain unique ways, and perhaps you're going to go after those need states a little bit more with some of your messaging.

But then with regard to some of your coverage, one of the beauties of your brand is it covers different need states. And when you market against those in post-COVID, weight management and on the go nutrition, particularly at breakfast, will be back.

And I'm wondering how much of a headwind you think you have from COVID on those need states such that, frankly, you'll just get some easy wins in the second half of your fiscal year, and I'll leave it there..

Yes. So it's a good point of making sure that we look at what was going on last year because it was - from quarter to quarter, it was very different. So when we look at lapping Q2, you have to remember that in the last 2 weeks there was a massive spike in consumption, where - and then conversely, in Q3, the comps are easier.

And then Q4 sort of got back to normal. So those are exactly what we are expecting. You're absolutely right that Ensure has been benefiting, benefiting probably the most in our category from COVID. So I mean, they will obviously have some pretty hard comps.

But like I said before, the beauty of the Premier brand is, first of all, we market more generally. We talk about a quick, easy, delicious, healthy breakfast, which honestly can travel across all these states.

And so we believe that our marketing, which we've tested in market, obviously, last year as well as tested quantitatively that it's hitting on all those need states, and so we think we'll make up some ground and source some volume from several of them..

And I mean, just a follow-up on that.

Do you think you've lost a chunk of business because there's less of that time compressed on-the-go parent to maybe - or the worker that needs to grab something and go? Have you done any consumer research that shows how much you've lost on that need state?.

Yes. We have lost on that need state. So the on-the-go, the quick breakfast, I think what's happening, though, is we're over-indexing on the at-home. So it's making up for it.

So we've - so when we return to normal, I think that - what will be - what I don't have a perfect sense of is, do we keep that over-index at-home because people start getting used to having it as a snack in the middle of the day as well as breakfast. And then do we add the on-the-go, so then making it - so getting back those other need states.

Or does it swap? What I'm confident on is that we have new products, we have new distribution. We have all of these other building blocks that are working for us. But that's a piece that we'll honestly have to just watch..

Your next question is from Bill Chappell of Truist Securities..

Darcy, just help us understand. I appreciate that you gave full year guidance in a lot of uncertainty.

But what have you seen over the past 3 months in terms of need states bouncing back or just trends? And just trying to understand how you're looking or how you're building that guidance, especially as we get to April, May, June, and there's so much uncertainty of what's open and not open? I mean is it assuming some need states bounce back, is it - and I guess, so 2 questions.

One, what did you see over the past 3 months in terms of progression of sales from the different need states? And two, how did you build out the forecast for next year with the assumption of that some need states will come back at certain months?.

Yes. So we assumed that the category stays at kind of historical levels - historic level. So that the category continues to grow around low single digits, so that was part of our assumptions. Regarding need states, I would say that we don't necessarily build our forecast like that.

So I think that we are covered because we source volume from kind of all of them. We're obviously right in the everyday nutrition piece, but we source volume from the rest. I think how we build our forecast is, we take the assumption - we use building blocks. So we take the assumption of the category growth rate.

Then we add on new distribution, new products, lapping the prior year new distribution. So that's where we are getting a bulk of our growth, and that's where we come up with what our guidance was..

Got it. I guess, so just to clarify, like, if you looked at July, August, September, was the sale - the trends pretty similar throughout? Or I mean, did you start to see - I mean there's been some thought that as we're coming out of the pandemic, people are tired of having the extra 10 pounds, they want to be a little more active.

And so there should be a migration more to active nutrition.

So did you see things start to accelerate towards the end of the quarter?.

It was very stable. So I mean, again, like I kind of urge you to go to that slide on the supplemental because it is shockingly stable. Throughout the entire - so basically, after we rebounded, they had that de-load in Q3. Q4 in the category was pretty flat. I mean, some small changes, but overall, very flat..

Your next question is from Ken Zaslow of Bank of Montreal..

Can I ask a different line of questioning? What do you guys think about the co-packing capacity out there? Is there constraints to that? And doesn't that limit the number of entrants? And have you seen that change?.

Yes, there absolutely are constraints out there. It has changed. So they - as supply and demand, the co-packers have added capacity, mostly a line here or there. Obviously, we have a new co-manufacturer on the East Coast, so that added capacity. So I would say that it's not as limited as it once was.

However, other than the co-manufacturer we added, there are no new players. It's just a matter of the existing players adding a line here or there..

Okay. And then my second question is, as you look through your supply chain, this has given a lot of people an examination of, okay, what we could do differently, how we could do it. This is the COVID shock, however you want to call it.

What have you learned from the supply chain? Is there opportunities for you to become more efficient and actually gain a couple of margin points here and there as you exit this? Or is this something - I know you've never been a real margin story, it's a top line story, but can you give us any insight to that?.

Yes. We've been digging into our supply chain, for sure, as I know most companies are. Especially because we were facing commodity cost increases, and we wanted to drive the top line. So we were doing whatever we can to offset some of those increases. I mean, just think of, in the past, like you said, we have been a top line story.

So we haven't dug in deep. So we're looking at network design to make that more efficient. I mean, a big part of expanding our co-man network was to put a location on the East Coast, which helps with our network design. But we're looking at everything from packaging to the way we buy, to where we buy, to how we ship.

I mean, across the board, we're evaluating, and we're making good inroads on that to offset some of these cost increases..

Do you think they're going to be permanent? And are we going to see a noticeable change or a change of any sort of - and I'm not talking about next year, I'm just talking about over the next couple of years?.

Yes. I think that what right now is covered up by our cost by the commodity increases, honestly. If we hadn't had some of these, it would be larger. And so - but those will stay. Obviously, these cost out initiatives will - are permanent. So we'll see those, and they'll be more evident as we - as the commodity prices decrease..

Ladies and gentlemen, we have reached the end of our allotted time for questions. Thank you for joining. This concludes today's conference call. You may now disconnect..