The Vita Coco Company, Inc. (COCO) Earnings Call Transcript & Summary

All right. Good morning, everyone. Thanks so much for coming. We're really excited for our next speakers. We have with us today Vita Coco's Co-Founder and Executive Chairman, Michael Kirban; and CFO, Kevin Benmoussa. And Vita Coco was founded back in 2004, and they are the market leader in the attractive and fast-growing coconut water category. They have a full pipeline of products that use functional benefit with aesthetic and better-for-you ingredient. So thank you both for joining me today.

Thank you.

Thank you for having us.

So again, welcome. It's so fun to be doing this in person and not over the screen, right? So why don't you kind of kick things off this morning and talk about your net sales growth guidance from last week. You guys just reported Q1 results. Now you maintain your guidance of 16% to 20%, and it's above your long-term target of mid-teen levels. So could you break down for us some of the key drivers of this top line growth? And then thinking on the context of how much do you expect will be driven from velocity and/or distribution gains? And then also thinking about longer term, could there be upside to your long-term targets, given the growth that you're seeing?

Yes, you want me start?

Yes. Go ahead.

As you look at our growth last year, which was significant, the majority of it was coming from velocity gains. It was bringing new consumers in and current consumers drinking more of the product. We worked really hard last year, proving that the category has a lot of growth ahead of it, continues to grow, brings new consumers in, interesting consumers, ethnically diverse consumers that retailers are looking for. And that led to what we're seeing this year, which will be a lot of distribution growth. So last year, there was limited distribution growth. This year, there is significant distribution growth with new planograms that have come down and are coming down new points of distribution. So we believe that this year will be more of a blend of velocity and distribution. Is there anything else?

No, I think that's right. And I would point you out also, Bonnie. I mean, in Q1, we grew 28% overall. So very strong growth, really driven by coconut water, almost 40% globally. So as you add all that up and you see our market share position right now and how we're gaining share and penetration overall, we feel confident about the outlook and then how we would [ fit into the ring ].

Okay. That's helpful. And then as you look at the coconut water category, at least from the visibility that we have, which is the Nielsen data, recognizing that doesn't capture the full category. But we're seeing more recently a little bit of slowdown in the category. So I just wanted to understand from you, is that more of a function of the tough comps? Or is there something underlying in the category? Or is there a shift happening to non-track channels?

Yes. I think if you look at the first quarter, it was really strong, continued the strong growth, 30%-plus growth. Like Kevin said, Vita Coco branded coconut water net sales grew almost 40% in the first quarter. If you look at the last 4-week data set, it's a wonky period. I mean if you look at it compared to the category compared to 2019, in the last data set ending like mid-April, the category grew 30% and Vita Coco grew 60% over 2019. So it's what everybody is seeing, right? People ran to the store, bought a bunch of stuff in March of 2020. They were in their house, not leaving and consuming everything they bought in March and April of 2020, and you saw this massive growth. In '21 over '20, we grew 92%. And so clearly, it's a tough comp that we're up against. But still growing double digits even against those tough comps. I think Vita Coco brand grew 14%, 15% in that same data set over prior year. And so -- but now it's starting to accelerate again. We feel really good about the growth. We believe that coconut water will be a staple in people's homes across the U.S. over the next several years. And we're building that out. We think there's a real opportunity to see that. When you walk into somebody's home, you expect to find OJ or milk, you should expect to find coconut water. So that's the objective.

Well, and speaking of that, if I think about the growth -- the long-term growth of the category and your spend. You guys are the market leaders. So are you kind of leaning into spending, trying to whether it's increased awareness, I feel like most people should be aware. But household penetration is still quite low. So it's maybe an education of the benefits of this category. Is that something that you're committed to doing as the market leader?

Yes. I mean building awareness is important, bringing new consumers into the category is important. In the past year, we increased household penetration by 1.7%, brought in 2.5 million new households into the category, which we're really happy about, excited about. At the same time, today, at least right now, our biggest issue is supplying the demand that we have. I think like everybody else in consumer, it's getting the right product to the right places to get on the right shelves at the right time, and it's tricky. And so our biggest issue is not demand, it's supply more from a logistical standpoint than a production standpoint. So I think we spend appropriately. We're not looking to as we were talking about recently, over stimulate the demand. We need to get product on shelf and fill points of distribution that have been added [indiscernible] that are on shelf in certain cases.

Okay. So speaking on that because, yes, that definitely came up last week with your results. And so is there a way for you to quantify how much stronger your Q1 would have been if you were only able to get that supply and fill it?

It's hard. I mean I would tell you this, we've been awarded significant distribution points from retailers. And because a lot of those distribution points are on multipacks and items that are really growing really fast for us, getting them to retail has been challenging and filling those points of distribution has been challenging. But it's starting to flow now, which we feel really good about coming into summer. To quantify how much better the growth of almost 40% in H1 could have been, it's impossible to do. I mean, we can't but...

Fair. Right.

We think so.

We would seem to be able to push harder in all of these types of things, more display activity.

And then kind of going back to the category and the health and the underlying or the core consumer. Are you guys noticing any changes with the behavior from that consumer? And I'm asking and I want to say, as we come out of COVID, but I don't know if I should even be saying that because of everything that's going on. But just think about how that consumer is evolving. Are they still prioritizing health and wellness and possibly more so going forward? Is that something you're seeing?

I think. We talk about this. And this trend of people moving to healthier, better-for-you products has been happening for over a decade. But it was really -- it really accelerated throughout COVID. I think this movement to healthier, functional, better-for-you products. And if you look at some of the fastest-growing brands in the beverage aisle today, it's Bodyarmor, it's Vita Coco, it's CELSIUS, it's [ Ascensia ]. These are all trade-ups. And consumers are trading up to healthier, more functional, better products. And so I think even as there's inflation and prices of everything are going up, I don't see people moving backwards in that respect in terms of their health, especially as it relates to Vita Coco, which is quite habitual. If you go to the grocery store, you buy your 1 liter of Vita Coco, you use it your smoothie every morning -- to make it smoothie every morning, you're going to do that every morning. You're not going to trade down to water or to an inexpensive juice that you might add when the price goes from $3.99 to $4.50 for 1 liter, right? It's like, I think that, that kind of consumer behavior and movement to healthier, better-for-you functional products continues, and I think continues to accelerate like we've seen in the past couple of years.

And then taking that further, because you alluded to it, your strategy is to implement more pricing, and you just talked about that last week and additional price increases in the second half on top of what you already did or plan to do in Q2. So could you talk through that in a little bit more detail? And give some color on the extent of the price increases that you expect to take? And then I'm thinking about when they'll be rolled out into the marketplace and when we might see that show up in the scanner data?

So you're absolutely right. So let me start first, Bonnie, late last year, we started to take net price essentially, but we were not as aggressive by design and as we talked about that, right, because we felt we were in a unique position to grow share, to really push out the competition, which we did. We finished the year with 7 points of share gain, increased household penetration. So the strategy has really worked as you think about what we've done. And now we feel we're in a much stronger position as a market leader to be more aggressive, especially given the cost of one we're in. So what we're doing is, as we speak, starting implementing price increases, we started like later -- this month and late last month, you'll see that picking and really showing up in the data probably towards the end of Q2, but really the back half of the year, Q3, Q4. And what we've talked about Body is we've designed those price increases that -- at the end of the day, when everything is settled down on a full year basis, the goal is to really cover pretty much the inflation we're seeing on the transportation side this year, right? So this is how we think about the price increases, and that gives you a sense of as costs -- if costs remain at the current levels, this is really designed to help us offset some of that pressure. And of course, as we head into next year, and we didn't provide any guidance, obviously, but that gives you a sense of margin potential if the cost start to subside as well.

Okay. And then some of the pricing that you've already implemented, how are you seeing elasticities hold?

Yes. So what we've seen late last year was encouraging, right? So obviously, we've seen less impact from elasticity and as I take a common team across the industry that everybody is seeing, that has been the great experiment and everybody took so much price and elasticity has been sort of encouraging. We're monitoring that frankly. But so far, we feel that there is always -- nobody is fully immune to elasticity, but I think so far, the result has been encouraging. I would say, on the demand.

And remind us your price points relative to some of your competition and whether or not where they're at and then any pricing that they're either taking or have already put into the market.

So if you look at the category, the coconut water category, like Kevin mentioned, we're north of 50 shares now. And then the closest competitors are all under 10 share. So it's challenging to look at the category as coconut water specifically. But if we did, you'll see 2 brands that are kind of in that sub-10% range that I think are our largest competitors. One is on the higher price end, they're already almost double the price of us at retail. And then the other one is on the lower price end, Goya, which has taken significant price and still can't get product to shelf. And so I think they've taken -- I don't have it in front of me, but call it 25%, 30% price. And so we think that's a great thing because it's bringing up the bottom part of the category, and kind of giving us the opportunity to take price and also as we introduce our cans coconut juice, which plays in that same space, gives us the opportunity to do that at what we think is a really good price.

And you mentioned earlier that the pricing that you're putting in the market, you expect it to offset the COGS inflation that you're seeing. So I definitely wanted to talk through maybe the 3 major buckets you guys talked about last week. Maybe review those for us, I know one is domestic or I should say, transportation but also ocean. So kind of talk through the visibility that you have on those buckets and what we can see for the rest of the year?

Sure. So if you think about the 2 key buckets, you have finished goods, which is still the primary driver of the COGS. And then you have transportation which is made of ocean freight and domestic logistics. So a couple of things, I would say. Obviously, the cost pressure we've seen has been on the transportation side. If you look at versus last year, especially in Q1, ocean freight had been the biggest pinpoint. When you look at the mix, where transportation used to be 25% of our COGS in Q1 of last year, it went up to 40%, okay? So a lot of that driven by ocean freight. Ocean freight component of the mix is more than doubled year-over-year, so just to give you a sense. If you think about margin impact, we've talked about 15 points of gross margin impact from transportation. So that's quite significant. To put this into context, that's $50 million roughly on a rate mix basis of cost absorption, so that's a lot in Q1 alone, right? So about that, I would say about 2/3 of that impact is ocean-freight driven, the rest is domestic logistics. Now within domestic logistics, we've also identified a few items that we talked about being very high and very unusual, like more one-timers nature that were really related to I would say the global disruption we're seeing, especially if you think about ports, clearing containers, issues with the pension, [indiscernible]. So we've seen a lot of that in Q1, especially, frankly. So we've identified $2 million of those costs that were really in Q1 that we have identified as more one-timers and not expected to repeat in the next quarters. So that's really what drove the pressure. Now if you think about COGS balance of year, we definitely revised a little bit our sort of assumption for the inflation expected overall on COGS, now more in the high single digit, low double digit overall for COGS. But like we said, we discussed last week, we have a notified action pricing mainly a big one on the gross margin, but also other areas within the P&L to offset some of that pressure to help us balance the year.

And what you just mentioned the high single digit, low double digits. That's all COGS?

That's basically all COGS per case equivalent, right? So if you think about our COGS per se on a rate basis, for the full year on an average basis, we think it's going to be up in the high single digit, low double digits for the year versus last year.

And that still assumes within those buckets, pretty elevated on COGS...

Yes. Yes, absolutely. Absolutely. That's just a high level of COGS. And that goes back to what we mentioned, at least we're trying to give a sense of, hey, we think this is not structural, what's going on. This is more transitory, probably staying with us a bit longer right now, but it will go at some point. I think we firmly believe I don't have a crystal ball, I can't tell you exactly when, but at least that give you a sense of when those costs received give you a sense of margin expansion.

Well, and that's a good point. And it is the theme with many companies, and it's very challenging. But your business is unique given the shipping and the ocean freight. So think about this environment maybe not changing and transportation remaining elevated for more than we're expecting, 2-plus years. How would you run your business differently, if at all? I mean is there a way to change the business in any way to better manage that?

We're already starting to do some of that, as Kevin mentioned, right, between price and other things throughout the organization that we can manage, there's an opportunity to make significant headway in terms of bringing some of that money back.

Yes. And also, I would point you, Bonnie. So we talked about ocean trade. Let's talk about ocean freight for a second. We talked about being sort of covered right from a capacity and price point of view for about 2/3 of our balance of the year, which also helps on that front if costs stay at that level. The 1/3 remaining floating, we also have opportunity to manage that, right? So if you think about how do we manage the supply flow of demand, also inventory levels, we can play around with that. So we can also manage that 1/3 on the floating side. So if those costs remain a bit longer, we can also have some flexibility to managing that. However, there's a lot of uncertainties, as you know. But I think we've shown -- we prefer to look at different actions throughout the P&L to help us offset as we can. And we always reassess, right, what makes sense.

And you mentioned earlier just unfortunately, you haven't been able to get the supply to fill the demand in Q1, especially. Has it gotten any better in the last month or 2? Or are you still -- mostly gotten worse?

It's getting quite a bit better as there's more availability. Our issue is not production, right? We have a tremendous amount of products sitting in warehouses all over Southeast Asia and Brazil. It's getting containers into the U.S. It's a combination of getting the space on the boats, but it's also getting product into the right port at the right time and then moving that product. It's gotten a lot better as of late, and we think it's going to get better and better. I think there's a lot of things going on in the global shipping world right now that have kind of messed things up. But it's starting to -- we're starting to see signs of it at least on the availability standpoint for sure.

Yes. And also, you can also look at public market index, for example, right, if you look at the Ocean Container Rate Index, showing some sign of stabilization, which is encouraging, and that's also part of the reason why we didn't want to lock ourselves fully as you think about contract because we think this may be in a very high environment right now, and it wouldn't make sense for us to do so. And we want to capture very fast once those costs start to go down and bank on that margin recovery, right? So that's really what we're trying to do here.

And I know we touched on this again a little bit, but just implementing some of the aggressive cost efficiency that you've also touched on. Is there any more color that you can share with us today to help us better understand?

Yes. Yes, I think a couple of areas I can highlight. So if you think about SG&A as a whole. So marketing, we talked about. What I would say around marketing is in an environment where supply remains tight and the demand is quite high, as Mike mentioned earlier, we don't feel the need to overly spend in marketing this year and this is more like a tactical decision. We're investing in all the places. So I think there's opportunity to dive down the marketing spend, at least for the remaining of the year and die it up again as needed as we go forward. So that's one area. Second area is...

Just to be clear, marketing spend this year is pretty -- dollar wise is pretty flat to last.

It's pretty flat. It's going to be still very, very flat. So when I say die down versus original plan, right? So we had originally planned a much higher spend and we can always die that down. But still on a dollar basis fairly flat versus last year. So that's 1 area. The second area is around fixed costs. We always have opportunity within the G&A as you think about delayed hiring plan, for example, or being slow pacing some of the investment we had originally planned, right? So those are some areas also we're looking at to be more efficient. Of course, we always make sure we're not compromising all the needs that we have from a back-office point of view, to be a public company. So that's for sure. But there's always areas as you think about deployment of investment to support back office that can be slow pace and then revisit it. So that's sort of the areas that we're looking at right now to generate some of that efficiencies.

So it's that combined with the pricing that's going into the market and will be going in and then the visibility you might have on the cost. Just thinking about your margin outlook going forward. I know the goal is eventually to get your margins back to, I think, mid-30s. So how are you thinking about even next year relative to this year? I mean on listing, I'm thinking all else equal, margins should expand in '23?

Yes. I think, look, we -- it's still too early to give formal guidance, obviously, as you can understand. But I think what we're seeing around pricing, which is designing the price so that we can sort of mostly cover the inflation we've seen this year, if that holds true and costs remain where they are, we should see some margin expansion on a full year basis. So that's probably the right way to look at. Of course, also a function of the cost. If costs come down further, that could be even more margin expansion, but that's how we're thinking about it in terms of pricing and the effect it has on margins.

Okay. And let's talk a little bit about innovation as I look at your product this summer. Talk about, for us, if you would, please, any extending innovation that you had planned for this year? I know we just discussed it's kind of hard to get the supply, but what is in store for the consumer?

So the big stuff is not necessarily the most exciting stuff. It's -- multipacks are really a big driver of growth for us and consumers are buying more and keeping more in the house and drinking more. So multipacks are a big component of it. And then as we think about Vita Coco specifically, from an innovation standpoint, we launched Farmers Organic last year in Whole Foods. It was an exclusive with Whole Foods, and we're now launching it across most major retailers. And it is bringing in a whole new price point. It's margin accretive, obviously. And so it's a great item for us to bring in a consumer that is looking for an organic product, celebrating the work that we do and the farmers that we work with in these developing countries. And then on the other side is the cans. So we've talked a lot about this. We're really excited about what this looks like for the business over the next several years as we talk about growth moving well beyond this year. Canned coconut juice is -- represents about 30% of the coconut water category today, and it's a place we don't -- we haven't played historically. It is really big in C-store and in mass, and this is our first canned juice offering. We launched it with a major retailer in the Southeast -- major convenience retailer in the Southeast and in the Northeast just a few weeks ago, and it's doing really well. It's doing really well. So we're excited about the initial results. As we get more product flowing, we'll be able to start expanding that a little bit further. But for us, that's a big opportunity over the next 2, 3, 4 years to bring in a new consumer that we haven't really had before and further expand the category.

And you mentioned, so you're not -- I mean some of your products in the C-store channel, but it's still a very low percentage of your mix. So the opportunity and runway that you see is distribution, specifically in the C-store channel with this new can?

Yes. Both the can and Vita Coco itself, C-store is our biggest distribution growth opportunity. So already this year, we're adding a lot of new doors, a lot of new C-stores we've never worked with before in parts of the country that we just haven't gotten to. We've talked about this previously, but we never had a C-store team. We built out this business over 15, 17 years without a C-store team. We've built that team out. We're starting to work really closely with KDP, our partner and really build out the C-store channel, which is, as you know, in beverage, a huge component of building a beverage company that we just haven't had historically. And it's working really well. So we're excited about that.

So with some of the innovation, whether it's on the multipacks and then just thinking about the impact on margin, I would imagine the can and single service is going to be much more accretive to margin in the multipacks. I mean how do you expect that to evolve over the next few years?

Do you want to talk a bit about it?

Yes, sure. So I think, look, the core of the business is still as you think about the one that Mike is drinking right now. And I think as we start expanding and playing around with the mix, you always have those mix effects, especially as introduced multipack, but we view this as strategic for us as you bring new consumer and more consumer and more volume to the franchise. I think that plays a role. And we'll always look at the mix this way as you think about introducing your innovation, et cetera. So I think for us, even though the -- all the products don't have naturally the same margin profile. We think that each specific SKU has a role to play from a strategic point of view in the top line makeup.

Do you think has it been incremental to your business? I'm just thinking through, is there any cannibalization? And then I'd be curious what type of consumer or maybe different consumer you're attracting with the can versus what you were just drinking for those that are listening?

Yes. The -- I'll take the second piece of that. You can take the first. But the can is -- it's more of a refreshment opportunity. I think the consumer that is drinking the can is drinking it like they would drink almost a carbonated soft drink. It's on the go, it's refreshment, and it's a little bit less of the consumer that is overly concerned about health and wellness and more looking for pure refreshment. It is also doubling down on a consumer base that we've been really connecting with and has been driving a lot of our growth over the last couple of years, which is ethnically diverse consumers, specifically Asian and Latino consumers who are coming into the category in a big way. This is another area we think that will help bring that consumer into the franchise.

Okay. Another area I wanted to talk to you about is your international business. I know smaller, but how should we think about that going forward just in terms of the mix and how fast can that business grow? And are you investing more to kind of build that business now further?

Yes, so I think right now, it is fair to say we've talked about it before. The Americas segment remain probably like what we think had most opportunity in the near term, right? I mean we think international also has potential. If you look at our key market, we have a couple of key markets. I mean Europe being probably the largest one, as you think about the international segment. China, small business over there. I think we're looking at what could be the unlock in some of those key markets that could be very big for us. I mean China, for example, is one. They're not easy to operate, and we're trying to find what really work and how can we do this? And I think until we find what we would believe it would be a good a lot, we will -- I would say invest responsibly in those markets, right? So right now very much focused on the U.S. We see a lot of opportunities right there, as we talked about, around the innovation. And international should be adding on more to that if we can find it even like a greater [ unlocking ] to this. So I think that's how we view international.

So a little bit deprioritizing international? I mean it's pulled back, thinking about the contribution even in Q1, right, from your international business. So investing wisely?

Yes. Investing wisely responsibly. And I think it's fair to assume, at least for this year as you think about the top line guidance makeup. In Americas, it's still one of the biggest driver of the growth overall.

Yes. The biggest opportunity remains in the U.S.

Yes. That makes sense. And we've talked about this also a lot before your desire to really ultimately become a platform company, especially as you build out a portfolio of nonalcoholic beverages. So can you talk about that a little bit further, how you'll balance that with the growth that you're seeing in your existing category and the opportunities to potentially add? And then what savings or competitive advantages do you think you have to be successful in some other, I don't know, whether it's adjacent categories or essentially non-alc bev categories?

Yes. I think as you look at what we've built over the last many years, we built almost $0.5 billion in revenue business in the coconut water category selling really 2 or 3 SKUs that make up the majority of that volume. I think in doing that, we've built the foundation from which we can build something really significant, and that is a broader, diversified healthy beverage platform. The big guys in the space today are really focused on their core, which is great. It's what they should be focused on. It's carbonated soft drinks and they're doing fine just doing that, but it leads this opportunity, I think, for us, one of the largest healthy beverage companies out there to go out and do more. And when we think about going out and doing more, you look across natural functional beverages. There are a plenty of brands that are doing really well, entrepreneurial-led independent brands that are going from 0 to $30 million, $40 million, $80 million, $100 million in revenue. And then they hit a wall because they don't have the routes to market to further expand. They don't have the financial resources to further expand. They don't have the industry expertise and the category management skill sets that we've been building all these years. And that is really for me, I think, the opportunity to take some of these brands, bring them together under our roof and help them really achieve their full potential. At the same time, we can do that from an M&A perspective. We can also -- we're also doing some of it from an innovation perspective. So PWR LIFT is a brand we brought to market last -- this year. It is a protein enhanced fitness drink. And we launched it in a couple of markets, but really focused on 1 specific market, Arizona. And I was out there last week, and it's doing really well. Consumers are asking for it. It's in the Convenience store. It's starting to turn. We see real opportunity to take brands like this in spaces that consumers are looking for and develop them internally. At the same time, as I think M&A can play a role in building that portfolio out. And as we think about M&A, the big guys are not focused on M&A in this regard, right? They might be looking at massive opportunities, but they're not looking like they used to historically, they used to look at brands doing $30 million, $40 million, $80 million, $100 million in revenue. They realize that they can't really take those brands to the next level because they become too small in their large systems, which I think gives us a perfect opportunity to be that potential consolidator of these type of brands moving forward.

Yes. And just building on this, I would say from a -- what we can bring to the table to those brands, right? It's not only the system we have. So we partner with very strong [indiscernible] have cross-nationally get access to it, but we also have strong commercial capabilities. We've talked about it a lot, and that's also what has made the power of Vita Coco over the years, really being able to really merchandise and execute the brand at the trade. That's what really makes the difference. I think some of those brands don't necessarily have those muscles in a way. And I think that makes us an acquirer of choice for some of those brands that, as Mike said, don't have naturally another exit and can combine forces and be part of a greater platform -- to be part of a better-for-you platform, if you will.

And timing on this, is it something near term? Or is this in the next couple of years as you try and build out this platform company? And then how do you think about your -- I think, your target net leverage is, what, 2x to 3x, if I'm not mistaken? And would you flex that for the right opportunity?

Yes. That's right.

Yes. The timing, I wish I could sit here and announce something today.

Okay. So you're looking.

We're really made opportunistic.

We're looking. There are opportunities out there. We're looking at different opportunities right now. And I think it's not going to be something transformative for the business. I don't think we're in a position to do that, but we're in a position to start to acquire brands that are at the size that I've mentioned that we can really expand quickly. Things that are working really well in a specific geography or a specific retailer or a channel that we can now expand on a national level quickly. That's...

Right. It's your question, Bonnie, around leverage. So we've talked before. So we have limited leverage as of Q1. We think we can comfortably operate the business with up to 2x to 3x of leverage. Frankly, we could go above that for the right opportunity. I think we also -- since we are supplied, we are cash generative. We can have also the opportunity to do an M&A and then delever quite quickly off of that. So I think that gives us the flexibility to go maybe a bit beyond that for the right opportunity. And we have solid balance sheet access to liquidity. So we're just remaining opportunistic and see what could be good for us and can deploy capital when it makes sense.

And I assume at the right price. So I assume right now the valuations are...

That's the thing. I think this idea in this industry was you build a brand, you get it to $50 million, and you sell it for 3x to 5x revenue even if you're losing a ton of money. I think that mindset is changing even for the entrepreneurs and the investors in these businesses because there's not a buyer for them specifically. So I think we're in a really unique position to be able to buy things and even help bring some of these founders along and have them participate in the growth of this business as we continue to grow it as a combination.

Okay. And maybe my last closing question, thinking about your stock, the valuation, market has not been...

Do we have to talk...

No. Is it -- if necessarily want to point out but I want to give you an opportunity to kind of talk to what do you think, honestly, the market is missing with your business? I mean certainly, there's cost pressures. I mean is there anything maybe they're missing the accelerating top line growth and the runway?

I think it's pretty clear. Look, I mean, we're -- if you look at this class of consumer brand -- companies that went public in the last 24 months or whatever it is, I think we're one of the few that are not only growing really fast. If we look at Q1, our core brand growing 40%, our business is growing almost 30% net sales. But we're profitable. We've always been profitable. We generate cash. That's rare, and I think we -- that gets missed because we're getting lumped with -- together with all of the other consumer bids brands that went public that are not in the same position.

I would say the story hasn't changed. Still very much a strong growth story with potential for high margin expansion. And I think the market is probably just looking at short term right now, but I think the margin expansion story is still very much there. And that will prove right over time.

But if Kevin did buy that crystal ball that it kind of earlier...

Share it with me. All right. Well, thank you both so much. I appreciate it.

Thank you.

It's great talking to you.

Thank you.

Thanks, everyone.