The Honest Company, Inc. (HNST) Earnings Call Transcript & Summary

All right. Well, thank you, everyone, for being here. I'm Dara Mohsenian, Morgan Stanley's household products and beverage analyst. We're very pleased to welcome Honest here to the fireside chat today, including CEO, Nick Vlahos and CFO, Kelly Kennedy. Just before we begin, a quick disclaimer, please see the Morgan Stanley research website at www.morganstanley.com for our research disclosures. And if you have any questions, please reach out to your Morgan Stanley representative. Honest has a very strong track record of organic sales growth over the last few years, although similar to a lot of names in the group, there's been more volatility recently.

So we appreciate you guys being here today. It's an exciting time to have you here. And I thought maybe first, Nick, we could just start with, obviously, it's been a very volatile period in the markets in general over the last couple of years, particularly for smaller, higher growth companies that don't have a large or long public track record. So maybe just give us a little bit of a state of the union here on how you feel about the business, your growth opportunities going forward. Yes, in light of this market environment where there's clearly been a lot of volatility?

No. Thanks, Dara. Thanks for having us. It's good to be back in New York and be here together. I would say when you think of the Honest thesis, I've been in the organization as a CEO for 6 years, and we've been around for ten. So it's been kind of this last ten year period, we've really focused on really starting to scale this business in a bigger way. And the thesis for us has always been around the consumer, which is, you know, consumers are interested in being more conscientious about what they use from a product perspective. They care about ingredients, they care about sustainability. They care about social responsibility. And when you think about Honest and where we stand today versus kind of what's on the horizon over the next, call it, ten years, I would say, number one, you think of the overall kind of TAM that sits out there, there's about $20 billion out there that's being forecasted by 2025 that's out there for the taking when it comes to clean and natural. So consumers are more interested in these categories in this space. So the forecast by 2025 as these categories are going to grow anywhere between 9% and 10%, whereas the conventional players are going to grow between being flat to up maybe 2%. So there's tailwinds around the consumer as you think of our thesis. Number 2, when you think about Honest from a penetration perspective, right now, we sit in about roughly -- we have about a 5% household penetration. So out of 129 million households in the U.S., you can find us at about 6 million households. We've grown that about 2 million households over the last couple of years. So the opportunity for us still early innings, is to not only delight those 6 million consumers, those households that we currently have, we really continue to expand that moving forward. And we've got our capabilities around marketing as well as innovation to be able to drive that. The third kind of anchor here is our omnichannel distribution. So as you think about Honest, hey, there's a consumer that's interested in clean and natural 2, the overall market and the trend is that this is going to continue to grow at a 9% to 10% clip moving forward. 3, how are we going to drive that consumer to be delighted with Honest products is through our distribution and make our product more accessible. That's where we've picked up about 2,500 Walmart stores over the last couple of months that we're going to be scaling into 2023. We've picked up over 1,000 public stores in the Southeast. So this is a business that's 50% digital, 50% retail roughly right now. So we truly have this omnichannel experience. And that's why as we forecast out kind of the next 2023, the next 6 months, we're forecasting into 2023 7% to 10% growth in the front half. So I think early innings when you think about our story, but we're really building a business, a modern CPG business early the next ten years, not just the ten years that we've currently been in.

Great. That's a helpful overview of the long term. Maybe we can get a little bit into the short term. And obviously, pretty strong performance at retail recently, looking at the track channel data. Maybe talk a little bit about what's been driving that? Number one. And number 2, obviously, there's been a much greater contribution from pricing, right? So there are questions going forward. I think for companies across the household products industry where to sort of top line land when this outsized pricing drops off. So A, a bit of a review on the short-term performance, what's driven some of the strength at retail. And then B, how you think about the top line sustainability going forward, particularly sort of looking at price versus volume?

Yes. I mean the good news for us is when you look at whether it's IRI or it's Nielsen data, you're seeing consistent, whether it's 12 week, 4 week of late, double-digit growth in each of our respective categories, diapers wipes, skin, personal care. And when you kind of go a little deeper in that, you're seeing not just dollars but also volume growth for us. So it's not just pricing that's contributing to that growth number. It's actually also volume. So what we're seeing from a consumer perspective is as we're driving new distribution and we're driving additional footprint within the marketplace, we're seeing kind of that throughput from a consumption standpoint because again, on the retail side of the business, this is where we're really scaling the business right now. We've always had kind of the digital piece. But as consumers have now gravitated more into retail, we've had that southeast corridor, for example, in places like Florida and Georgia, et cetera, that we did not have broad distribution, now picking up the Walmart side of the business, the public side of the business, that scale is going to continue to be able to be a lever for us to really drive our algorithm as we look at the growth numbers moving forward, and that's why we forecast 2023 right now, front half of the year, 7% to 10% top line growth from a scale standpoint. So that, we're going to continue to see kind of as a positive. The second area is our innovation cadence. When you look at over the next 3 years, we've invested in internal laboratories in California to really build out 3-year strategic product plans. So whether it's the diaper business, it's the light business, it's the skin, the personal care beauty business, being able to support that through this omnichannel lens of taking the innovation and putting it in the right places. We have a partnership now with Ulta, and we're in over 600 stores in our skin business to be able to drive that. We are also building out our business with Amazon. So as you think of the future, there's really 3 areas for us. One, it's this kind of marketing component around how do we get into more households. So we take that household penetration number from 5%, how do we double that over the next few years, to go from 6 million households to 12 million households. 2, is this innovation through your strategic product plan, how do we continue to innovate in each of these respective categories. And 3, is really this omnichannel distribution strategy around how do we make this product accessible based on wherever the consumer wants to shop. Today, they're interested more in retail. But guess what, digital over the last few years has been a benefit for us because we've had that throughput based on where the consumer was at that time. So, those are the areas for us as we think of the future, where we're going to see the consistency around growth because, again, ten years old going up against companies that have been around for 100-plus years, a good proof point for us is take Target. We've been doing business with Target now for about 6 years. We just hit our 84th consecutive week of growth, and that's going head-to-head with the big competitors within the marketplace. So again, very optimistic about where we see growth as we look to the future, but there has been volatility based on some of these quarters and when you're starting to really scale a business of this size were a few million dollars can sway a quarter significantly. And I think as we look to 2023, a lot of that volatility, I think, is behind us because now we're going to have more ability, not from an optionality standpoint when it comes to scaling and having that distribution in more places that you're not relying on just one or 2 customers.

Right... Okay. And maybe we'll stick with innovation for a minute. It's been an important part of your success over the last few years. And for companies your size, it can often be a pretty important piece of the story. So as you look out over the next few years, can you talk about contribution, what's sort of in the pipeline, how you think about that versus the last few years? And Kelly, maybe you can touch on the margin piece of innovation. I know cost ovation has been a big focus. I'm sure we'll get into margins here today, right? But how you think about that contribution over time from an innovation perspective?

Yes, we'll take it. The way we think about innovation, we kind of have 3 big buckets. We continually kind of revitalize what is very kind of consumer leading products. So for example, we relaunched our clean conscious diaper. You've seen the numbers we've created great kind of acceleration in some of the demand as a result of kind of being leading edge and making continual improvements with our core product line. So that's kind of one area we continue to focus. The second is product line extension. A great example is one of our best-selling products is our mascara. It's the leading clean mascara. -- for example, on Amazon, we sell one every 90 seconds. We've expanded that line now with a lengthening in addition to volumizing mascara, which was highly incremental for our business. So we continue to bring and fill out the product line in areas where we're doing very well. And the last, of course, would be what we call big bets, which are -- we are one brand. We -- the way that we -- the thesis for us is to take a consumer that knows and loves Honest and we can play in so many different areas and expand, whether it be from diapers, from wipes into skin care, beauty. And we think there's a lot of other areas where we can play in as well. So when Nick talked about a 3-year kind of horizon, we have a pipeline and of new innovation coming in all 3 of those categories. And areas as we think about margin, we are very focused -- and one of our tactics for margin expansion includes margin-accretive innovation. So as we think about areas such as beauty, as we think about skin care and these big bets, it's one of the areas where we're focusing will take us on our map and our path to 40-plus margins is innovation accretive and taking kind of the portfolio of products we have in expanding areas that have a higher margin profile than a diaper.

Okay. And I guess in general, as we think about innovation, it sounds like you've got a focus on all 3 of those vectors and pretty confident that the contribution will continue to be robust going forward relative to recent history. Is that fair?

Yes, the way we talked about the growth algorithm is the 3 components that Nick talked about being pretty equally weighted in terms of driving growth, which includes continued marketing investment to drive velocity, drive household penetration, -- so that share of wallet. The second would be product innovation and the third is distribution. So those are 3 areas that we all white space for us as we think about growth. We talked about 7% to 10% growth in the first half of next year. So those are pretty equally weighted across those 3 tactics.

Okay. And Nick, maybe just a brief review of the Walmart expansion, the Ulta expansion, what it's done for you. As I mentioned, clearly some pretty strong growth at retail. How do you think about that in terms of incrementality, velocity of the business post those launches, distribution expansion is a pretty big piece of the story, but sort of getting at the underlying health of the business, but also what those launches do for the company in terms of incrementality and maybe expanding that household penetration over time, which from my viewpoint, would be sort of the key metric as we look out over the next 5, ten years?

I think what's always been important for us is we've been strategic. So strategy led. So we don't just go chase business in just random places. So we've been very methodical around this third vector for growth that we talk about, which is this omnichannel distribution. So what's the beauty of Honest is here we are a ten-year story, and there's so much interest still for this type of a brand because there's always the cynic of like, gosh, I don't know, is clean and natural? Is that really differentiated? Are these growth rates real? And the beauty of kind of this third area around omnichannel and have folks like the Ultas and the Walmarts and the Publix's interested in the brand, they're interested because of 3 things: one, they're interested in the category growth that we can drive with this brand and the attractiveness of that consumer that they're very interested in attracting. So when I talk about the TAM and I talk about kind of those tailwinds, here we are in a challenging period, you can say recession and you continue to see the velocities where I'm going head-to-head versus these big competitors continuing to grow. And the IRI and the Nielsen data is out there for folks to take a look at. So that's kind of the number one area, the growth component that we can add and the attractiveness of this consumer to drive really the share of wallet. So having one mega brand, think about it this way, you can be in the diaper aisle, you can be in the wipes aisle, you can be in skin and personal care. You can be all the way into beauty. So you have 5 areas within a store with one brand. So the marketing efficiency when I've attracted a consumer around Honest, I'm not having to spend now dollars within every category, whereas another company with 5 different brands would have to have a P&L that they're investing disproportionately. -- the retailer likes the fact that you can drive scale because also they're looking to drive a lot of their digital business, their click and collect, et cetera, around more solution-oriented brands like ours. So that's kind of the one area. 2, they also like the fact that from a marketing standpoint, we can help them really innovate kind of their digital capabilities. So everyone sees more digital dollars being spent from a marketing perspective. We're a digitally native brand. This whole formula we have around content and community, which we talk about from a marketing standpoint to create really snackable content that's relevant on a week-by-week basis, not just here's a 30-second ad on television from the old days. But being relevant on an ongoing basis around a business, they're interested in working with us and being able to do that because that connects back to that first point around how you attract that consumer. And then the third area is really differentiation how do you continue to differentiate around this innovation that we've invested in to be able to yield kind of throughput and product for them that's going to be unique. So take Walmart, for example. We have 17 items and diapers and wipes and skin and personal care with kind of customized sizing for them that offers additional value as well as unique sense really on the personal care side that really creates a differentiation for them that's attractive to their consumer. But again, us being also been targeted on where we put that product, it's not just go blanket the market, but being the right stores in the right places because that also balances our inventory and how we think about the backroom and how we manage overall the business from a forecasting perspective, et cetera. So those are the 3 areas that continue to be played back to us -- and that's whether it's Walmart, it's Ulta, that's what the honest value proposition is around, number one, accretive when it comes from a growth perspective as well as pennies and margin. 2, the differentiation kind of on this marketing side of the business and how you attract that consumer and then this digital capability.

Right. And when you think about the 2,500 Walmart stores, about half of those are in the South and Southeast where we traditionally have not had the ACV and haven't been as successful for our customers. So we do think of that business as incremental.

Okay. And what's the governor on store expansion going forward? If you look at track channels, ACV or 50% but moving up. Obviously, some of those larger established 100-year companies, you mentioned earlier, are almost fully distributed easily in the '90s -- as you think about expansion over time, is it more you have to have measured expansion internally to sort of manage growth to manage the brand in the right way? Is it more you have to convince external customers? And just how do you think about that ramp up, looking out 5 to ten years looking out longer?

Yes. I think we've gone from roughly when I first started in 6 years ago, roughly about 20,000 retail outlets. We're in about 50,000 retail outlets today. The way we look at it is, can we drive accessibility for the consumer and make our products available where they want to shop. And that's where the beauty of being truly omnichannel, a lot of folks talk omnichannel now. But we're really the only brand that can actually sell -- we're selling at a Nordstrom, we sell at Target, we sell at Walmart, we sell it Douglas in Europe, being in a position to really have both kind of the 50% digital and then 50% actually retail in the market. So the answer to that for me is, hey, we're going to be where the consumer is. So we don't want to just be in any store, but be in the right geographies and the locations to make our product accessible that day for that consumer. And that's how we're going to continue to build kind of over the next years, this thesis around still tons of room because as I go back, that household penetration number sitting at about 5% to be able to just double that, we're going to be very happy as we think about kind of our next 10-year horizon when you think of the business.

I think the beauty of our business as well is that it's not just store penetration, but we can launch, for example, strategically an important part of the country for us to launch in Publix with our personal care. And over time, what -- even when we started with Target, we -- over time, as we innovate, we can bring more products to shelf more SKUs on shelf. So the strategy is expanding SKUs, expanding doors. We're not in 100% of doors even with some of our leading partners and then, of course, moving into new distribution as well. So all 3 of those can work in our growth strategy.

Right. Okay. And then returning more to the short term. You guys did reduce full year revenue guidance recently. We talked about the strength at retail. Obviously, retailer inventories were a big piece of that. Just give us a little bit of a review, any changes in underlying consumer demand, digital plays into that and e-commerce, right, in the shift there, which is actually my next question. So just give us a little bit of update on sort of changes in retailer inventory versus any changes in consumer demand? And then maybe I'll just throw in the next question, which is sort of the shift back to retail from digital. How do you think about that in terms of impact on your business? And you've also made some tweaks on the digital side and how that's going so far? I'll remind you if that was too many question.

I'll start with the first part of the question, maybe Nick, you can take the second. So when we think about 2022, we have seen shipments lagging the consumption. We've seen acceleration even in the most recent data within the IRI and Nielsen growing both volume as well as overall share, which we're really excited about. It's industry-wide. We tend to have a little bit more concentration with some of the partners that are particularly focused on reducing weeks of supply. We saw some of that in Q3. We saw it continuing to Q4. As we move into 2023, we see much more consistency between consumption and shipments in our overall revenue as we are lapping things like headwinds in the digital channel, the destocking rotational programs, we recognize that there was certainly some noise in 2022. But we did recognize that. We thought it was best to be as transparent as possible, call that and ensure that people were aware. But we do anticipate, as we move into 2023, as Nick highlighted, our focus on consistency of results, we think there'll be a lot less noise kind of in the system as we move into next year.

Yes. The only piece that I would add on the second part of that question is on the digital side, there's going to be retailers that are going to move inventory. It's up to us from a forecasting perspective, to be in a better position, kind of what we're sharing and what we see because we're seeing things kind of real time. The large digital player that's taken inventory down roughly 20%, we're seeing consumption still running up close to 20%. So that should all equivalize as we start to move forward. But also, again, when you're a smaller business and you're starting to scale, and you know I've worked on big businesses and legacy companies and build brands that have been around for 100-plus years, that volatility of a handful -- a few million dollars creates a lot of disruption within the market. We own ensuring that as we think of guidance and we talk about 2023 in that 7% to 10% and then we're going to go give kind of the rest of the year at the next earnings call, is to make sure that we're mitigating kind of those risks and understanding kind of where that volatility potentially can be to ensure that we start driving that consistency. So as we think of that next ten-year story, you're going to see more of a consistent narrative across the board because the opportunity is still there. And here's a brand that now sits at ten years old that has scale, that has the ability now as we pull in some of this new business that we're talking about and still drive kind of the historical business, when you're talking about the Targets and 80 consecutive weeks of growth, et cetera, to be able to really delight that consumer because there's going to be more of them in the future than less. And whether it's digital or physical retail, we'll be in a position to be there for them.

Great. We touched on pricing earlier. Obviously, it's been an important driver of fundamentals in the industry over the last year and a half here. You've taken price increases across 2-thirds of your portfolio. You've got plans for the majority of the rest of the portfolio in December. Can you talk about how that's gone in terms of consumer demand elasticity to pricing? Has it changed at all sequentially. We're sort of used to traditionally in past cycles, there's initial consumer reaction. It didn't seem to happen this time around. -- is almost strangely enough, more risk that it sort of happens later as consumer spending pressures build up. So any changes there, but also competitively price gaps versus the competition, what you're seeing on that front? And I guess, just last, retailer pushback, particularly for smaller to midsized companies in the industry, right, that can be a bigger issue in theory. So it'd be helpful to have you run through each of those 3 components in terms of pricing.

Yes. I mean, strategically, we were a price follower. We let the competition go first. It really allowed us to ensure that we maintain the premium that we thought still brought value to our consumer. We have taken now through December, it will be on a little over 3-quarters of our total revenue base. And we've been really pleased. We thought it's gone really well. We generally saw some small short-term hitting velocities in certain categories, but certain categories and products, we didn't see any drop at all in the overall volume. And we do feel that that has dissipated in the most recent data we've looked at. So we're really excited. We think the Honest brand, we've got the pricing power to take as needed, but it's also really important to us to keep that value for the consumer. So some of the areas that we focused on, for example, would be pack-size it create more value on a per unit basis. We recognize what's going on out in the world and we want to ensure to give good value for those consumers. That's where we've seen a lot of acceleration in our businesses, the larger pack sizes, which is a better per unit price for the consumer.

Yes. I would just say from a retailer perspective, there's volatility definitely in the marketplace. What we see with retailers, as we talk to them is the more premium brands, and this is always a misnomer because people think, "Oh, there's just trade down to private label and there's a recession or if the consumer is challenged. What we've seen over the years in my prior life, even today, kind of the premium player that continues to innovate that continues to drive the business, kind of maintains and grow share. It's that middle tier that's not that differentiated. It gets the most impacted with private label sourcing, a lot of that business overall. So that's why when you see the consumption data that we're talking about, the most recent data that you guys published we're running roughly 17% to 20% growth, whether it's a 4 or 12-week window across these categories, and we're seeing dollars as well as volume. What the retailer is telling us and what they like is the fact that by having this mega brand that goes across multiple categories, a diaper, a wipe, a skin and personal care, we're seeing -- roughly, we've had studies that we've looked at, 90% of our consumers might buy a diaper. They're also buying a wipe, a second item. We've got roughly 50% that we've looked at that by a third item. So now I'm driving scale. So from a total dollar standpoint, I referenced earlier, they like the overall category growth that we contribute. They like the fact that those dollars are higher in value and that they cross multiple categories within their footprint. So that is a differentiator versus a traditional company that might have one brand that sells a diaper, but they don't really go beyond into a skin or a personal care or another item. So that, for us, again, is a differentiator when you think of the Honest platform as you think of not just today, but again, as we think of that thesis moving forward.

Another area we've really been able to shift our marketing spend into retailer marketing as we've seen the consumer go from online to in-store and we're able to partner with our content that we spoke about, and it allows the retailer to really amplify as well that message. So I also -- I think it's something that as we've seen that shift, we've seen higher returns, we see more efficiency in our marketing spend as well, and it really supports the retailer.

Right. Okay. And are you guys generally comfortable with competitive price gaps? Are you seeing anything that's opened up that might be a concern -- and second, just given consumer pressures, you talked about trade down a minute ago. Do you think you're seeing any macro impact on your business? I think a lot of value-added categories, premium categories are seeing a bit more pressure. It doesn't feel like that's emerged in Clean & Natural. So just a chance to sort of give us thoughts on if you're seeing any macro impacts on your business? Or you think it hasn't been a big factor?

Yes. Number one, when it comes to the price gaps, kind of the first part of the question, and Kelly referenced this, that we are a follower within the market, and we did that strategically to be able to also drive share during that time period. The good news is we see those gaps equivalize overall versus the competitors. And in parallel during that same time period as we've taken price, and we've been a follower, we're driving more throughput because we're gaining share. And that's why you see the track consumption data continue to play out. The second area, when you think of pricing and kind of the macro environment right now, we're not seeing kind of a pullback when it comes to the consumer in these categories. When you think of Kelly referenced this Mascara, for example, that we have at Amazon right now that we're selling one every 90 seconds, and we continue to innovate in those areas. Areas where consumers still want kind of these affordable indulgences in like the beauty and the skin side of the business, we continue to see that piece of the business continue to flourish. As we've also thought of the consumer, and we referenced it earlier, some of these larger value pack sizes that we've also created. We see that as a value driver also for us when it comes to where the consumer is today and they're looking more value in size because they might eliminate maybe one shopping trip and be able to buy larger sizes. We also, as we think moving out, and that's where we're well positioned on the digital side, if all of a sudden, gas prices have fluctuated. They've come down a little bit, they go back up. If consumers want to shorten trips and not be out in cars down the road, having that digital 50% of the business in digital plays well for us because then we're able, obviously, to go straight to the home from a product standpoint. So again, macro right now, I would say, we've been insulated because of a couple of things. One, yes, our pricing has kind of been equivalized. So everyone within the market is kind of playing. We see the mid-tier brands being impacted the most. And then the second area, around physical and then digital, we think we're well positioned as we anticipate further out that consumers will gravitate also back to digital, but not just going to be just in retail stores, I think we're well positioned for that also.

Okay. Great. And Kelly, I promised you we get to margins, so I don't want to disappoint. So look, on the gross margin side, obviously, some tremendous cost pressures in the industry over the last year, year and a half here. Give us some insight just into the cost pressure going forward. There's obviously a lot of complexities in terms of the timing of flow-through of commodities, right? We started to see some big tracked commodities come off recently like resin, et cetera, but there are some other costs that may be artist track of older things like labor that have held up more. So just a general viewpoint around cost pressures when you start to see that really drop off. And the second part of it would be, look, when you combine that with pricing, when do we sort of start to get to a level where pricing is offsetting costs? At what point can you start to look at gross margin recovery versus what's happened in recent history? And how do you think through that in terms of the timing?

Yes. We talked a little on our Q3 call about 800 basis points of input cost pressure. About half of that is in the transportation. We've continued to see kind of historical highs in some of the commodities that we purchased. Some of those have started to alleviate particularly around transportation. There is a delay on when that flows through to margin for us because we capitalize our inbound transportation. So that will be a couple of months until we see kind of that pressure and flow through to our P&L. But we've covered all in with the pricing actions we've taken so far. We've covered it's almost 500 basis points of that. As we mentioned, strategically followed in order to capture share, which we were very happy with that decision. But we feel with this next pricing action that we're taking here in December, where we are anticipating some coming down of the high transportation costs. We've already seen it. Those have been relatively sustained over the past few months. But we are 100% committed to margin expansion, continuing on our path to 40%. We're going to come back with more color on how that's broken out and what we envision for 2023. There's some continued kind of commodities that have come off some have continued very high. And so as we move into 2023, we're really focused on things like cost ovation. We talked about being -- taking more pricing and feeling strong about our ability to take pricing if necessary if we're not seeing commodities come in where we would like to be to achieve margin expansion in 2023. And clearly, scale over time as we get back to growth, we talked about 7% to 10% growth in the first half. That also benefits us there our fixed costs within our overall margin structure as well.

Right. Okay. And we've got about 90 seconds left, so we can sell Mascara product during that time. And one last question maybe you should just think about long-term margins, right? There's obviously been a lot of volatility in the industry has anything changed from a long-term margin perspective in terms of the way you think about the business relative to some of these outsized cost pressures we've seen recently?

Yes. I mean I would say for us, the mix is also a big component as we start to shift mix as we scale this business. So I talked a lot about, hey, the last 6 years, what we focused on is building the infrastructure and the foundation of a modern CPG business that goes up against these 100-plus year businesses that are out there. So we've done a lot of work in that area. What are the proof points? Like why I believe that it's going to be better in 2023? I think one is we've got -- I talked about the household penetration. Those are real. There's 2 million more households than there were in the last 2 years. We've got 6 million households now that are interested in the honest proposition. 2, is we scaled our skin Personal Care business is now $100 million roughly. So as we look to shift the mix into Skin and Personal Care, as an example, that's going to be an accretive story from a margin perspective. That's not changing. That's more of an opportunity as we look at the out years. 3, is this distribution that we talk about. Having the right distribution in the right places and the right mix, again, is going to benefit us because we're not the price value brand in the marketplace. So, as you think of reduced revenue, trade dollars, et cetera, we're not having to invest disproportionately in those areas that obviously help us from a margin perspective. So when you put those 3 kind of growth areas together, for us, it's going to be consistency on the top line moving forward and consistent gross margin -- and we know if we get that -- those 2 things going well, and we don't just have to be high growth with like no margin and meander. That's not this thesis. As we look at the next ten years, it's the consistency around the growth and then the margin expansion. And coupled with that, you're going to see the EBITDA and everything start to flow. And then you know what, you've got a story that's going to be the next ten years and the next 20 years in the next 30 years.

Great. Well, that's a really helpful overview. We appreciate you guys being here.

Great. Thank you, Dara.

Thank you.

Thanks, guys. Thanks for listening.