The Hain Celestial Group, Inc. (HAIN) Earnings Call Transcript & Summary

Welcome to the Jefferies consumer conference. I'm Rob Dickerson, the U. S. field analyst at Jefferies. And I'm honored to have President and CEO, Mark Schiller; and CFO, Javier Idrovo from Hain Celestial, with us today. Hain has executed impressively on its all-inclusive simplification and optimization turn-around, which in turn has led to material margin expansion, improved brand and category positioning and impressive top line growth potential going forward as we enter the next phase in the company's strategic plan, Hain 3.0. with that, I'll turn over to you mark for some opening remarks and then we can just jump into Q&A.

Sure. Well, thanks for having us, Rob. We are excited to be here. For those that aren't real familiar with the journey, let me just spend 2 minutes on it and then give you a little bit more about what we're focused on right now. So this company was founded about 25 years ago with a Founder who really had the foresight to see that health and wellness was going to be a trend and here to stay versus a fad. He acquired 25 businesses -- 55 businesses over 25 years and created this terrific portfolio of health and wellness offerings. I was brought in about 3 years ago to turn us from more of a holding company into an operating company and with that kind of restore the margins and the profitability of the company and set us up for growth. That was Hain 2.0. It started 3 years ago, and we are pretty much at the end of that transformation. It involves significant simplification of the portfolio, building capabilities that we needed to be a world-class operator, maniacal control on costs and ROI focus on the things that we were doing and really building a foundation for resurrection of the top line. In that process, we sold 23 brands that had about $1 billion of sales but only $15 million of EBITDA. We used the proceeds to significantly de-lever the balance sheet. And we have been on this journey of significant margin expansion. We gained about 600 points of margin over the last couple of years and really building the foundation for top line acceleration, innovation, marketing, rebuilding customer relationships. Earlier in late September, earlier this year, we came out with Hain 3.0, which is really the transition for us to being a high-growth company again. We believe that we have tremendous growth opportunities in front of us, and we really have the foundation to accelerate that growth. So we're at the beginning of that journey. And we've called this year kind of a transition year between the old strategy and the new strategy, and we're excited about the future potential of the company. With that, I'll turn it back to you, Rob.

Perfect. Thank you, Mark. So like you just said, I'll start there. You've called fiscal '22 a bridge year, so to speak, right, as you pivot into Hain 3.0. So I thought we would just start with the current operating environment in the U.S., the industry overall is dealing type capacity, lower inventories, labor shortages, trial cost relation, we kind of heard it all. So I'm just curious, how would you say such a backdrop is impacting your supply chain, at least, currently? Is there any risk to kind of your '22, '23 productivity targets because of it or not?

Yes. So let me start with the last part first, and then I'll talk about how supply chain is impacting our business. We have a very robust productivity agenda. We've been generating about 4% of sales in productivity. That's about $50 million a year. We have a terrific line of sight to that $50 million this year and the $50 million next year. Candidly, we've been re-prioritizing projects because with some of the supply chain disruptions, some of the things that we were hoping to execute sooner, we've moved later given the complexity or the headwinds that we're facing and others were moving forward because of the necessity around labor shortages and transportation shortages. So things like automating equipment that leaves us with less of a need to hire more people, things like filling up trucks and taking trucks off the road, so that we don't need as many drivers and trucks is a great -- a great productivity project. It's great for the environment, but it also plays an important role in a complex supply chain world like we're in today. With regard to the first part of the question, what I would tell you is the labor shortages and supply chain disruptions impact us on inbound materials, on manufacturing and on outbound finished goods. And the middle piece, which is the manufacturing, we've done a really good job of managing a very tough environment. We've hired the positions that we need to hire. Our factories are running full out. They're running efficiently. I just saw today, we had record output in one of the facilities that we did a consolidation of 2 facilities into 1. We've hit record production for a number of weeks in a row here. So the internal part of this equation, which was complicated by labor, we've done a terrific job on. Where we continue to face headwinds as does the entire industry is the things that we don't control. I don't control the labor in my co-manufacturing facilities. I don't control how long it takes to get raw materials like tea from Asia or packaging materials from China. It's more expensive. It takes longer. And then on the outbound side, getting trucks to ship product from our facilities to our customers' facilities has also been a little bit hit and miss. And so the result of that is it adds cost. It adds complexity. You have to find backup options that come at a premium price. You have to airfreight things that come at a premium price. So it is adding cost and complexity. But that said, we are servicing our business better than most, both here and in Europe. And I know that because customers are calling us with merchandising opportunities that somebody else vacated with space opportunities where others have openings on the shelf. And so while we're certainly not perfect and we're certainly have our share of headwinds, our relative performance has been very good and we continue to be optimistic about our ability to overcome the challenges.

That all makes complete sense. Yes, you're not the only one. All right. So look, I think you've stated previously, you've taken 6% to 10% pricing on average on most of your North America portfolio. I think that's entered the market sometime in September. Elasticity is obviously a big topic right now as well. I'm just curious kind of how you think the elasticity piece could play out, maybe why some of your brands or all of your brands can be better positioned maybe relative to some other brands in the store that aren't yours, given your demographic makeup? And maybe just kind of how you're thinking about any incremental pricing you might need to take as the year moves forward?

Yes. So, we took 6% to 10% pricing in the U.S. in September. And candidly, so far, we've seen almost no volume fall off at all, which is a pleasant surprise. Part of that is because, again, many companies are taking pricing, and so our relative pricing may not have changed dramatically. But a lot of it is the resiliency of the brands and the fact that as a health and wellness company, we cater to a much more affluent consumer to begin with. So if you were buying organic products or things that are healthier for you, they tend to come at a premium price, which means we tend to have a more affluent household that has actually done quite well during the pandemic. If you think about real estate prices and about the stock market going up, the more affluent part of our community has done very well and, therefore, paying an increased price for the products that they want has not been an issue. Now that said, we are taking our first round of pricing in Europe as we speak. I would expect a similar reaction there. but we're also taking our second round of pricing in the United States because we had about $20 million to $25 million of incremental inflation versus when we laid out the plan in late August. And so we're in the process of having those conversations with retailers. You have to first negotiate with the retailer to get the pricing in. And then, of course, you have to make sure that the consumer wants the products and is willing to pay for them. We have a very robust pricing model. So it's not just, "Hey, here's a universal price increase." We look at our relative price versus the competitive set. We look at the health of our business. We look at whether we want to be a leader or a follower. And so we've been pretty pinpointed in terms of how we've done it, even though it's a pretty big number. It's been very well thought out and surgical, and I expect that we will continue to do that as we bring the second round to fruition sometime in mid-third quarter.

Got it. Okay. That's actually very helpful. And would you say -- so at least I have to try, I mean in terms of that incremental pricing dynamic, I think you said $25 million of incremental costs. I'm not sure kind of how that correlates with the pricing. I mean it seems like 6% to 10% pricing would be kind of the lion's share and then you kind of move incrementally from there, right? I -- doesn't seem like...

There's another couple of points in the U.S. We're taking the first increases in Europe, which will be about 4% to 5%. So in aggregate across the whole company by the time we get through this next round of pricing, we will have taken about 8% or 9% in North America and more like 4% to 5% in Europe.

Got it. Okay. Perfect. And then look, innovation, new distribution gains, these are obviously core drivers of being frio. We've heard from some that getting the innovation on the shelf is potentially less of a need for some retailers just given there's a lot of elevated demand still in the marketplace. So I don't know why shake up what's already selling, so to speak. Would you agree with that or not? Because it obviously seems very case specific, and you seem to be getting great innovation still on the shelf.

Yes. In the U.S., we're actually doing quite well getting innovation on the shelf. And I think part of it is -- we launched some of this innovation at the beginning of the pandemic, and we only had a handful of customers take it because many weren't resetting. And we now have pretty clear empirical evidence on the incrementality and the velocity of these items that makes them a really low-risk investment for a retailer to take on. So we're doing quite well on our innovation here. What I would say in Europe, where they're having much more severe transportation challenges and keeping the shelves hold, there's been a little bit more of a slowdown in terms of innovation acceptance. Again, we're getting our innovation in, in some places, but there's a bunch of customers that have chosen not to do resets right now until they can really keep the shelf stock.

Okay. Got it. And then, I guess, in Q1, it looked like U.S. consumption growth actually stepped up for you sequentially at least. Maybe just kind of some broad comments on what you think is driving that improvement? If you think that's sustainable, and then kind of maybe what the core drivers of that accelerated top line growth in the second half would also be? We have got kind of 2 parts. Maybe Javier also wants to jump in.

Yes. So the first thing I would say, you hit it on the head. We've had kind of consistent acceleration in the top line. Our 12-week is better than our 52-week, and our 4-week is better than our 12-week. And it's a function of a couple of things. One, obviously, we just talked about pricing and low elasticity, which is helping. But a lot of it is this innovation where we're getting incremental distribution, and we're seeing incremental velocity on the things that we have on the shelf, which is a function, again, of good customer service, where we may be in stock while others are not and also good marketing because we've been increasing the marketing on that core set of brands for a period of time now. And so I do expect that this will continue. I think we have a lot of distribution opportunity still ahead of us. We have more wins that we know are coming that you'll see in the second half of the year, which is part of why we are optimistic about the top line acceleration through the balance of this fiscal year. And if we continue to do the right things, which is service the customer well, nurture the brands, provide them with the marketing support to create awareness and trial and create great products at a reasonable price that consumers want, we think we're going to continue to see acceleration. You're on mute, Rob.

Sorry about that. Okay. So I guess, next, just meat and dairy alternatives and snacks, these -- you've kind of defined are the core areas of your turbocharge growth segment, which is, I think, you've laid out are expected to reach 10% to 13% revenue growth by fiscal '25. Again, broadly, just curious kind of what gives you the confidence that your brands within meat and dairy alternatives, specifically have the power to penetrate the broader EU zone, right? Kind of there's a larger competitive set, sometimes it's country specific. Obviously, taste profiles for different demographics can change the penetration potential given brands, I would assume kind of before you laid out the strategy in 3.0 and present it to all of us that you did a fair amount of work to understand the real potential of those brands. So I'm kind of curious if we could just dig in a little bit kind of what that work showed and why you think those brands can really cross from basically the U.K. into the broader European zone?

Yes. So the first thing I would tell you is if you just look at the turbocharge categories, they're growing double digits. So our presumption of 10% to 13% growth really just assumes we hold share. It's not even assuming that we necessarily gained significant share. And given that it's a crowded space and there's a lot of people entering, I think that's a prudent planning stance. But with regard to the specific question, so we are the #3 nondairy beverage provider in Continental Europe. We are very strong in Northern Europe. We have opportunities in Southern Europe, but we have, we believe, the low-cost manufacturing model we've been at nondairy beverages for 25 years. We've been working a primary innovator in the category because we've been at this so long. So we think we are in a very good position, both from a cost structure as well as from an innovation capability to kind of continue to build out that business in Europe. And we just recently launched the nondairy beverages in the U.K. under the Linda McCartney brand. Linda McCartney, again, was Paul McCartney's first wife. He is the spokesperson for the brand. He has a great brand recognition. So when you start thinking about Linda McCartney plant base going into Continental Europe, you're doing it with a spokesperson that's a household name versus trying to create this nascent brand from scratch. He's got tremendous credibility. It's a real family passion versus just we hired a celebrity folks person. They founded this brand. And so I think the combination of the marketing muscle of the McCartney family, again, we've been at this for 25 to 30 years. So great expertise in innovation and in manufacturing that I think gives us a very competitive position. And then the third thing I would say is we have the #1 share chilled brand in Canada in -- a brand called Yves that was also pioneered in this category and has been around 25 years. And we have Linda McCartney that is #1 or 2 in frozen plant based in the U.K. We're now taking the innovation from the other partner getting into chilled in the U.K., leveraging the Canadian products and taking frozen into Canada, leveraging the U.K. product. So we've got proven products that we're just expanding geographically. And again, we've got strong brands in those 2 core geographies plus the Linda McCartney name that we've already successfully expanded into Austria. We've just gone into Ireland. We're looking at some of the other countries. So I think we've got a pretty good track record that doesn't rely on us hitting a home run in every country, but it gives us pretty good confidence based on what we've seen and what we've already accomplished that we've got a lot of upside here.

Okay. And then I'm just curious, these 2 kind of subcategories within the turbocharge bucket, these are obviously front and center, right? I mean these are core drivers of the total company growth strategy. Maybe I missed it, but for all the time I've been following Hain, I don't feel like they ever spoken about as much. I mean I remember at some point, Mark, we were speaking about dairy alternatives and other larger players came up and you said, "Well, I don't think people even realize that we do this." And I said, "Well, I didn't realize you did that." Now this is -- these areas are core drivers for you. So I'm just curious, was this -- as you kind of entered Hain, did you see these and say, "Oh, those are -- that's great potential. We're going to speak about the U.S. Then we're going to speak about optimization and international namely Europe. We're also divest the fruit business to get margins up. And then by the way, here are some other things we just haven't really been talking about for a few years, but they're there and they have huge potential. So just to find out...

It's a great question. When I was brought in, my mandate was fix the U.S., which was hemorrhagic. And we had lost about 70-plus percent of our profits in 18 months, and it was in free fall. And honestly, the international was treated as an annuity when I came in. It was like just leave them alone, they're doing fine, fix the U.S. So the transformation strategy in Hain 2.0 was really all about turning around and building the foundation to turn the United States back into a growth business. And as we started doing that, we started taking the playbook that was working here and saying, "Well, why couldn't this work in Europe as well?" And as I started spending more time on Europe, not only seeing how we could leverage the productivity machine, I realized we had 10 #1 and 2 share brands in Europe that we were not really focused on. And so we had good operators. They were doing their thing. But we said, wow, as we start to really think about being a growth company, we need to think much more globally because there's tremendous opportunities outside of the U.S., not just the U.S. And so what you have with the 3.0 strategy is while we manage the businesses locally, our strategy is much more global, right? And so there were some places where we have brands in both geographies. We have Ella's baby food and Earth's Best baby food. We have soup brands in the U.K., -- 3 soup brands in the U.K., we have Imagine Soup here. We have Yves and Linda McCartney that I talked about. So there are synergies between those businesses on innovation, on marketing, on productivity. But there's also just terrific brands that have great growth potential that honestly were under-invested in Hain 2.0 because we weren't focused there. So as we start thinking about how do we become a really robust growth story again, some of the best opportunities are in Europe. And I think as we go forward, you'll hear a lot more about the potential there and a lot more about what we're doing to turbocharge those brands, not just the 1 tier.

Got it. And would you say if there are some incremental wins that occur in Europe and distribution is broad enough, you always would consider looking to take other brands that might have the potential to kind of shift into Europe or at least innovation, product development, what have you? It seems kind of like a natural thought process, you just might still be early.

Yes. So we actually do have a lot of the brands that are here over in Europe. But again, they've been kind of underinvested in, if you will. We do have some great snack brands here and other things like Celestial Tea. It's a big tea market in Europe that we've not focused as much on because, again, we were focused in word on just the United States. I think as we start to think about a more global strategy, taking things from here over to Europe is a much easier thing to do because you go 1 country at a time, right? And each country has its own customer base and it's -- sorry about that. Each has its own customer base, has its own culture. And so we can do it in a very pay-as-you-go fashion when we go from west to east. When you're going from Europe to the U.S., it's a big splash investment. And it's not to say we'll never get into plant-based meat here or nondairy beverage, but it's not part of our 3.0 strategy. So if we choose to go there, that would be a lucky strike extra. Our plan doesn't hinge on it. But we do think there's some nice significant opportunities for expansion throughout Europe for sure.

Perfect. Maybe it's more of a Pain 4.0. I'll circle it back. Okay. I guess next question just around Snacks at least now it seems to be a bit more U.S.-centric, as you said. I mean you have some snack brands in Europe. But I'm just curious, again, look, I mean given so many companies are focused on increasing snacking as a percent of their portfolios, I feel like at this point, kind of every company really likes the snacking piece. Why do you think you kind of have the right, so to speak, to win in broader snacking and take share of the total category? And I asked it seems like your innovation actually is really differentiated, the pipeline strong, and you're playing kind of in the niche areas within snacks. So just kind of simple question is, why can you continue to win in snacks because maybe you're just playing in very specific areas where people -- others aren't?

Yes. I think, look, the playbook that we've employed, which is a great innovation, that's highly incremental focused exclusively on taking things that people like and making a healthy version of it has been a winning formally. I see it on sensible portions, which is up almost 60% over the last 2 years. It's a great product at a value-oriented price that makes it mainstream in terms of its potential, and it's a better alternative to some of the other snacks that people are eating. And with the right innovation, the right marketing muscle behind it, we've certainly grown that business very strongly. We have baby snacks under the Earth's Best on Sesame Street name, where we have the exclusive license to Sesame Street in some of these categories, which has also been incredibly successful and very margin accretive to our portfolio. And in Europe, we have the Hartley's business, which is a gelatin type business, high single-digit growth, really good, robust margins. And again, with innovation and marketing muscle, we've been able to be really successful. So I think we've got terrific opportunity. We have the Terra brand that, quite frankly, has not performed as well as we would like. It had some supply challenges as we work through some of the plant consolidations and things that you've heard me talk about, but it's a wonderful differentiated brand that has a lot of potential behind it. And so I think that the right investment, the right innovation and continued strong partnering with the retailer, we've now got a foot in the door, which is giving us a lot more opportunities than we had just a few years ago. So I think we're going to fare quite well.

Okay. And then just shifting to the marketing side. Obviously, this has been a core component of an improvement in the overall top line potential. We haven't really seen marketing dollars massively expand. So I'm just curious now, right, as you've optimized the portfolio by you're operating, call it, 20 core brands, right, within the U.S. and Europe, plus or minus, but it seems like it's around that number. As you think going forward, is it just an ongoing kind of reallocation of that marketing spend? Or could you get to a point where you say, look, we've spent enough. The top line is actually growing and to continue this momentum, we might view marketing spend growing in line with sales as an appropriate measure because we're able to give back some of the gross margin expansion?

Yes. So a couple of things there. So while you have not seen marketing as a percentage of sales increased significantly versus 2.0, we've reduced the nonworking spending of marketing by about 75%. So the working dollars against the consumer has actually risen quite substantially over the last couple of years just by -- we had like 12 ad agencies when I got there, and we're down to 2. So a lot of nonworking dollars that were never seen by the consumer. Our 3.0 thesis is that pricing will offset inflation and that the productivity that we generate, much of that will go into marketing and some of it will go to the bottom line. And 2.0, it all went to the bottom line to just restore the profitability of the business. So I do think we will be in a position to make meaningful increases into our marketing spending. Obviously, that starts with the assumption that pricing covers inflation, and we're in a little bit of an unprecedented time right now. So it's hard to make that incremental investment, particularly when you've got supply disruptions. So I think you will see over the next few years, an increase in marketing spend. And to your point, we do have a lot of brands. So we have a little bit of a shark tank mentality, best idea wins, come and show me something that I need to invest in, show me that it's got a good ROI, show me how it solves a strategic need for the business and a consumer problem, and those kinds of things are getting investment. And it's been an interesting cultural shift from, I have a brand every year and I get to spend it on what I want to. My brand marketing budget is now 0, and I have to go justify that they should put investment here versus somewhere else. But I think it's going to lead to us upping our game on the marketing side and getting to higher and higher ROIs on everything we invested.

It sounds like there's a little ZBB in there, an old school. I like it. Okay. And then just in terms of the margin expansion potential in the business, I mean, obviously, there's been a lot of low-hanging fruit you're able to extract that fruit out of the business, right? It's been very impressive what the trajectory has been up to this point. The longer-term guide does still imply some margin expansion. I'm just -- again, I'm wondering -- in terms of that top line growth potential of the business, right, you find -- and I'm ignoring the current cost inflation environment for a minute, that if you're able to actually get to, let's say, you're at 6% revenue growth, but you think you can get to 9% is a great opportunity. At some point kind of in the evolution of Hain, would you say there will be pockets of time where you are kind of potentially pushing the business to make sure you're getting that appropriate share, you're getting the appropriate volume growth and the top line growth that comes through and not necessarily need to go from mid-teens EBITDA margin to low 20s. I feel like Phase 1 was a lot about the margin expansion. Now it's more about capturing the market.

Yes, I think you're spot on. Look, we were intentionally vague in terms of the trajectory between here and the end goal of where we want to be in 2025. Because there is going to be years where we say we want to invest more in the top line, and there's going to be years where we say we want to monetize the investments we made from last year. And so I think it really is going to come down to what are the growth opportunities in front of us? Are we adequately supporting those opportunities to ensure they're successful? And then are we giving the Street an algorithm that investors want to invest in? And so I don't think it's going to be linear. It's not like the growth is going to go from 3 to 5 to 7 to 9. It will be higher in some years. It will be lower in some years. It's going to be pretty robust in the second half of this year, we know that for a number of reasons. I'm not suggesting that, that all of a sudden is our new baseline and it grows from there. It's grown for a reason. We've got some incremental programs, merchandising programs that we didn't have a year ago. We have some overlap opportunities with -- there was a Brexit pull forward last year in anticipation of border disruptions that Q3 volume moved into Q2. So when we get to Q3, that will be a tailwind. But a lot of it, again, is distribution expansion, innovation, working and the things that we need to invest in to continue to keep these businesses growing robustly.

Perfect. All right. And then, I guess, before kind of asking more questions on the M&A side, just the targeted investment bucket. I think that includes Tea baby and yogurt. And then I guess, HPP, but I'll ignore that for a minute. As you think about those areas, which still seem to have a great growth opportunity, just kind of given the lower growth potential of the businesses relative to the turbocharge bucket, is that kind of how you think about kind of overall brand building spend allocation or to go back to what you said earlier, it's really not the best idea. Somebody brings you a great idea in yogurt, you can't pass it up. You allocate that. So it doesn't necessarily sound as if you have this 3-year budget planned out for each of these categories.

No. And I think, look, what we promised was 6% to 9% top line growth. That means it's a little faster and targeted and a little slower in turbo or vice versa, I'm not sure that necessarily matters. We have assumed in the algorithm that we hold share on the Turbo brands, and we gained share on the targeted investment brands because we have been gaining share. We're gaining share on Tea. We've been gaining share on Ella's Kitchen for 15 years in the U.K. It's the #1 baby food. We are gaining a lot of share now on Earth's Best. And again, it's really about where are the opportunities, where do you want to make investments, where do you have breakthrough innovation that can expand the category and the brand. And if we have it in yogurt, it will be in yogurt. If it's in tea, it's in tea. But I would expect that we will invest in those brands. We're just going to do it, again, smartly and selectively and make sure that we're putting our precious resources on the place that we're going to get the best return.

All right. So now fun part, just in terms of the M&A conversation, right? I mean your leverage is obviously at an awesome spot. Can only beat it. At the same time, you've thrown out there the potential to divest the HPP business. I'd assume that divestment would occur if it's the right valuation for you, not to keep it. But if it were to be divested and given where your current leverage is, I mean, obviously, you'll be sitting on a fair amount of cash, right, with a high growth algorithm. It's kind of a very beautiful place to be. If you sit here today and say, okay, if that would occur, and we had that cash, these are the areas that we'd like to extend in. I don't know if there's any color you can provide in terms of geographical preference, kind of category preference or it's all going to be completely opportunistic and case specific?

Yes. So in 3.0, we said we're going to continue to reshape the portfolio, and we want to be a bigger fish in fewer ponds, if you will. And personal care at some point, it certainly simplifies the business if we become a pure-play food and beverage company. But we're creating a lot of value there. And you said it well, if the right offer comes along, we would consider it, but we're continuing to generate a lot of value and growth there. I think in terms of categories that we're focused on, it really starts with the turbocharge buckets first. We'd like to bulk up in those categories because they're high-growth categories because we think that there's a lot of growth potential there and then we will selectively look within the targeted investment groups as well if the right opportunity comes along. We are -- we've said that we want to be acquisitive that we are having conversations with people about various assets. I'm optimistic that we will find ways to deploy that cash, Rob, because just generating a bunch of cash and sitting on it is not really our strategy either. It is -- how can we create a high-growth, high-profit company? And the good news, as you said, is we have a lot of flexibility now. So we're well positioned to do acquisitions if we so choose, and we can find the right asset, but we're going to do it in a disciplined way. And we're not going to chase assets just because we have a flexible balance sheet. So there's a lot of optionality in here, which is great, and it allows us to deploy our capital in meaningful ways that are going to return good returns to shareholders.

All right. Trust you well. I guess lastly, just want to ask around kind of overall perspective rationale on the recent secondary offering that occurred. I mean, obviously, the stock took a little bit of a hit, probably because of it. But -- and I've had a lot of people ask me about it. Doesn't necessarily seem as if kind of the rationale behind it was malicious in any way. So I just thought I'd give you an opportunity, Mark, to kind of address it and what your comments about it might be?

Sure. I mean I think everybody knows we have an activist who came in about 3.5, 4 years ago with the explicit hope of turning around the business. He basically has funds that people are invested in, and he needed to return the investments back to shareholders. He had time limits on those investments. And candidly, he extended one of those funds an extra year, and got his investors to agree to give him another year because he believes there's so much upside in the stock. So he really had to return that money. It was as simple as that. And obviously, when you put 12 million more shares into the marketplace, it's going to create some short-term disruption. But it doesn't change the investment thesis in this business at all. Engaged Capital is still an investor in our business. The money that they invested personally from engaged funds is still there. There's almost 2 million shares owned by Engaged Capital. Glenn Welling is still sitting on the Board. He's very much a believer in the potential of this company and the path that we're on. And so it really is just a simple liquidating event for his shareholders that he needed to do. And obviously, as a shareholder, he has a choice on when he sells his shares. And he's been a terrific partner of ours, and I expect he will continue to be in the future. So there's really no signal in any of that other than it was something he needed to do based on the terms of this fund.

Yes. Completely understood. Glenn is great tail. I doubt if he's listening. I think, Glenn, obviously, had a lot of confidence in you and that played out well. So give Glenn a lot of credit for this, too. Look, Mark, Javier, thanks a ton. Great meeting. Very helpful, as always. If anybody has any questions for either Mark or Javier, please reach out to me. I'm always happy to help. And with that, we'll conclude the call. Thank you very much.

Thanks for having us, Rob.

Thank you.