Hello, and welcome to The Vita Coco Company's first quarter 2022 earnings conference call. My name is Liz, and I'll be coordinating your call today. Following prepared remarks, we will open the call for your questions with instructions to be given at that time. I'd now like to hand the call over to John Mills with ICR. Thank you, and welcome to The Vita Coco Company first quarter 2022 earnings results conference call. Today's call is being recorded. With us are Mr. Mike Kirban, Executive Chairman, Martin Roper, Chief Executive Officer, and Kevin Benmoussa, Chief Financial Officer of The Vita Coco Company. By now, everyone should have access to the company's first quarter earnings release issued earlier today. This information is available on the investor relations section of The Vita Coco Company's website at investors.thevitacococompany.com. Also on the website, there is an accompanying presentation of our commercial and financial performance results. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press releases and other filings with the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also, during the call, we will use some non-GAAP financial measures as we describe the business performance. The SEC filings as well as the earnings press release and supplementary earnings presentation providing reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures are available on our website as well. With that, it's my pleasure to turn the call over to Mike. Thanks, John, and good afternoon, everyone. Thank you for joining us today to discuss our first quarter 2022 financial results and full year guidance. I'll begin this afternoon's call by reiterating our long-term growth strategy and discussing our leading position in the fast-growing coconut water and coconut water adjacent categories. Martin Roper, our CEO, will then discuss the details of our top-line growth drivers, provide an update on our supply chain, and outline our pricing plans and initiatives. Kevin Benmoussa, our CFO, will finish with a more detailed discussion on the first quarter results and our updated outlook for the year. To start, I wanna sincerely thank all of our colleagues all over the world for their continued commitment to The Vita Coco Company and their dedication to our mission of creating ethical, sustainable, better for you beverages that uplift our communities and do right by our planet. Our first quarter was another quarter of strong top-line growth, validating that our strategic initiatives are working. Net sales grew 28% year-over-year to $96 million in the quarter, with our flagship Vita Coco coconut water brand as the main driver of growth, increasing 38% over the prior year period. The overall coconut water category continues to show robust growth and according to IRI is growing at a rate of 13% in U.S. measured channels, with Vita Coco coconut water driving most of that growth and taking incremental share of the category. Today, we enjoy undisputed category leadership with 50% share, which is up 7% from a year ago, according to IRI-measured tracked channel UPC. This rate of growth often leads me to getting asked the question, why over the past couple of years has Vita Coco been growing so fast? I thought today it would make sense to break down our growth and share with you where it's coming from and why we believe it will continue well into the future. For starters, coconut beverages are part of the changing taste of America, driven in large part by demand from multicultural and specifically Hispanic and Asian American consumers. We believe these consumer groups have demonstrated a preference for natural and functional beverages and in many cases, an affinity for the coconut. To provide a sense of scale of the popularity of the coconut as an ingredient in beverages, it is a segment of $2.8 billion in size in America, which is bigger than oat and almond combined and has been outgrowing the total beverage segment by 200 basis points, according to SPINS. We are one of the most recognized coconut beverage brands in the world and find ourselves in a unique position due to our asset-light route to market as well as our supply chain, which ties profit to purpose, to benefit from the opportunity to source from a very large beverage marketplace. Over the years, we've found that our products actively source from the $11 billion juice category, while at the same time, we offer a natural source of electrolytes, allowing us to source from the $10 billion isotonic category. As the leading innovators in the coconut beverage category, we have a track record of translating these opportunities into category growth, market share, and increased household penetration. As an example, since we launched the Vita Coco Pressed line three years ago, we have grown that innovation to 69% ACV while delivering 17% of our total branded volume and adding an entirely new consumer to our base. As a matter of fact, 16% of our consumers only buy Vita Coco Pressed. As a beverage pioneer, we plan to continue to take a leading role in driving innovation in the coconut water and coconut water adjacent categories. This year, we're accelerating our efforts to source from the juice category with our Vita Coco juice cans launched in regional C-stores this quarter. On top of that, we're building on our strength in the hydration segment by rolling out our coconut drink mix powders at select national retailers and expanding our distribution of Vita Coco coconut milk. Meanwhile, we're pushing growth in shopper baskets with our multi-pack expansion in food and mass channel. According to Numerator, Vita Coco's household penetration currently stands at 11% on a 52-week rolling basis. That's up approximately 170 basis points over the last year, meaning that we've added about 2.4 million households versus the prior year. While we're extremely proud of the progress we've made, we believe our coconut beverages are still in the early days of becoming a household staple, and that there's meaningful headroom as we continue to add households and consumption occasions. Putting it all together, we remain confident in our ability to deliver on our long-term algorithm of mid-teen net sales growth. Additionally, we remain committed to our goal of being the industry's better beverage company, one which focuses on providing healthier alternatives to conventional beverage brands, and one that strives to do better for the world in which we live. Our strong brand momentum, combined with our commercial execution over the last 12 months, has resulted in increased space and distribution for our brands this year. Based on this brand health, a strong demand environment, and our market leading position, we are now comfortable executing the first frontline price increase taken by our company in many years. We believe that by the end of this year, the planned price increases should, on an annualized basis for 2023, fully offset the current unusual cost levels, which Martin will elaborate on further. Before I turn it over to Martin, I want to briefly mention the change in management titles announced last week. Martin and I have decided to transition from our titles of co-CEOs to Martin as CEO and myself as executive chairman. Throughout the IPO process and in the months following our IPO, there have been many questions around what does co-CEOs mean? Who does what? Et cetera, et cetera. We both felt that the best way to clarify our roles was to change our titles, and that's what we've done. Martin and I have been managing the business in partnership for the last three years, and neither that partnership nor the structure of it will be changing in any way. Martin will continue to run the day-to-day operations of the business, while I continue to focus on the areas where I'm most passionate and can drive shareholder value, which are creating long-term strategic growth opportunities for our business, expanding our relationships with suppliers and retailers, growing our social impact work, and driving our entrepreneurial culture. With that, I want to reiterate the excitement and fire I feel inside as we continue to drive growth with our core brands, bring new, healthy alternative brands to market, and ultimately become the leading diversified non-alcoholic beverage portfolios of the future. Now I'll turn the call over to our Chief Executive Officer, Martin Roper. Thanks, Mike. As Mike said earlier in his comment, in terms of our top line growth, we are very pleased with our strong start to 2022 in both the first quarter and into the second quarter so far. We remain encouraged by the strong consumer demand for our products, and we're pleased with our supply chain's ability to successfully meet most of that demand, even in a very challenging transportation environment. In the first quarter of 2022, we increased global net sales by 28% to $96 million, compared to net sales of $75 million in the first quarter of 2021. The strong performance versus last year was driven by 38% growth of Vita Coco Coconut Water and 17% growth in private label. Net sales in the Americas, which comprised 88% of total net sales in the first quarter of 2022, increased 33% to $85 million, compared to $64 million last year. Net sales for our international segment, which comprises the remaining 12% of total net sales, were roughly flat to the prior year. Within the Americas, growth of our branded portfolio was supported by a number of initiatives across all channels and by our decision to prioritize growth and gaining market share over increasing price substantially. In the first quarter of this year, we gained an incremental 3,000 points of retail distribution, and we believe we remain on track to gain up to 25,000 new points of distribution as new sets are completed this year. While early into the launch of our Vita Coco Coconut Juice can offering, we have been met with positive reaction from C-store retailers and the first few weeks of scan data are encouraging. In food and mass channels, we've gained incremental shelf space on our multi-packs for 1-liter and 500 mL Vita Coco Coconut Water, which are performing well. While representing a slightly lower revenue per case equivalent, are contributing meaningfully to our growth and to our average consumer purchase. One of our key competitive advantages that underpins our strong top line performance is our supply chain. It has continued to perform well with the unprecedented supply chain challenges the world is facing, particularly the unpredictability of supply of ocean shipping containers and rates, and challenges at ports with detention and demurrage. While we are short on certain SKUs in certain locations, we are happy with the overall flow of our product given the conditions. We exited 2021 with the outlook that the transportation cost environment, particularly the ocean freight market, would start to stabilize this fiscal year. However, a combination of unforeseen factors, including the China COVID shutdowns, conflict in Europe, continued port congestions, and continued strong demand, has translated into both transportation capacity and pricing remaining unusually tight. Kevin will discuss in more detail the impact this has had on gross margin, but there are essentially three major buckets within our cost of goods that we want to emphasize. The first is finished goods, which was favorable in the quarter with our average cost per case equivalent of product purchased at manufacturer declining on a cost per case basis based on favorable sourcing decisions and product mix. The second area is domestic transportation and warehousing costs, which were significantly elevated in the fourth quarter of 2021 and into the first quarter. We took steps to mitigate these cost increases late in the first quarter of 2022 through changes in customer service levels and freight utilization initiatives, and have been encouraged by the recent improvements. Although those costs driven by port congestion are expected to remain challenging. The third area is ocean freight, which has remained elevated and unpredictable and applied the most meaningful pressure to our cost structure in the first quarter versus prior year. Also, as a reminder, late last summer, we entered into a multi-year commitment to cover part of our 2022 ocean container needs at an attractive rate that has proven to be a very prudent decision. We have been strategically patient in entering into additional fixed rate contracts in this elevated market and have focused successfully on securing capacity guarantees for the balance of the year. Based on current commitments, approximately two-thirds of our container needs for the remainder of 2022 are secured at contract prices, and our financial outlook assumes the balance of our needs are priced at the current prices that we are being offered. We have some flexibility to manage exactly what containers we need based on volume trends, inventory levels, and sourcing decisions. Last year, we chose to pursue market share, volume growth, increased distribution, and shelf space rather than take price, as we believe the elevated costs and disruptions will be more transitory than they have proven. Given the duration and magnitude of the cost pressures and based on our commercial performance, including our strong brand trends and expected increased shelf presence, we now believe that we are well positioned to implement frontline price increases in the second quarter, with further increases planned before the end of the year, setting us up well in 2023 to fully offset the current cost levels. We still firmly believe these cost impacts are temporary and will structure our price increases to allow us to adjust our approach if the cost outlook improves. Our primary commercial focus for the balance of the year is navigating the supply chain logistics challenges, executing our price strategy, and continuing to build the opportunities of canned coconut juice and C-stores and multi-packs in mass and food channels. We feel very good about our ability to achieve our revenue guidance for 2022, and while we believe the initiatives that I have just described may offset the unexpected elevated transportation costs for the balance of the year, we must lower our full year adjusted EBITDA guidance to account for the elevated costs experienced before these initiatives are fully implemented. Based on everything we see in the market currently, we believe the worst may be behind us from a margin deterioration perspective, and that we would expect our gross margins to return back closer to historical levels as our pricing take effect or if the cost pressures subside. Our outlook represents current cost levels and expectations for the improvements I have just mentioned. With that, I will turn the call over to Kevin Benmoussa, our Chief Financial Officer. Thanks, Martin, and hello, everyone. I will now provide you with some detail on the first quarter of 2022 financial results. I will then discuss our updated outlook for the 2022 fiscal year. Even while we continue to post record-breaking sales growth, we are currently navigating through extraordinary times which have had a disproportionate impact on our margins. Our company remains on healthy financial footing as we still anticipate generating meaningful profits on a full year basis and continue to operate with fairly low leverage and ample liquidity. In Q1, net sales grew 28% to $96 million, an increase of $21 million compared to the first quarter of 2021. The increase was driven by continued strong consumer demand for Vita Coco Coconut Water, with global net sales for this product category up 38%. On a segment basis within the Americas, Vita Coco Coconut Water grew 40% to $59 million for the first quarter of 2022 as compared to the same period last year. The increase was primarily driven by higher case equivalent volume from continued strong consumer demand, combined with positive price mix benefits. Private label grew 20% to $23 million for the first quarter, driven by a strong book of orders and ample inventories on hand. International segment net sales grew 2% to $12 million in the first quarter of 2022, driven by higher case equivalent volume in Europe, partially offset by our China market, which was impacted by a return to lockdown and lower opportunistic community sales across other APAC markets. Within the international segment, Vita Coco Coconut Water grew 29%, while private label declined 5%. On a constant currency basis, the international segment net sales growth was also impacted by negative Forex impact of approximately two percentage points. Consolidated gross profit for the first quarter was $19 million, driven by strong case equivalent volume growth, favorable net pricing, and positive mix from Vita Coco Coconut Water, which were more than offset by significantly higher transportation costs versus last year. While our coconut water supply chain continues to perform exceptionally well given all the market disruption, the cost to meet the demand, primarily related to the transportation environment, remained elevated well above what we expected as we headed into the year. As a result, our consolidated gross margin in Q1 contracted approximately 12 percentage points year-over-year to 20%. Moving on to operating expenses. Our SG&A in the first quarter increased $5 million to $25 million versus the same period last year. The increase was largely due to increased spending on personnel, including equity-based compensation and other costs related to operating a public company. Moving down the P&L, net income attributable to shareholders was $2 million or $0.04 per diluted share for the first quarter of 2022, which benefited from a non-cash mark-to-market effect gain of approximately $9 million, compared to net income of $2 million or $0.03 per diluted share in the first quarter of 2021. Adjusted EBITDA in the first quarter was a loss of approximately $3 million versus a gain of approximately $6 million in the same period last year. The year-over-year decrease was driven by the decline in gross profit, combined with higher SG&A spend, as previously discussed. Now, I would like to provide more detail on the drivers of our gross margins contraction in the quarter. We have experienced persistent cost pressures from transportation, most notably ocean freight container shipping costs and domestic logistics, including outbound freight. Our first quarter was impacted by unexpectedly high overages related to clearing issues at ports that we only had full visibility to very late in the quarter. Some of these charges were particularly unusual, resulting from a highly disruptive global logistics environment, which we do not anticipate will repeat through the next few quarters. We estimated the impact of this item for the quarter to be approximately $2 million. As you can see in the presentation we posted earlier today on our investor relations website, our total cost of goods increased 19% on a case equivalent basis, mostly driven by a sharp increase of our transportation costs, while finished goods benefited from positive rate mix. Within transportation costs, our domestic logistic costs were up over 50%, while ocean trade more than doubled versus last year. To put this into context, year-over-year, our total transportation cost mix as a percent of our total cost of goods went from 25% to 40%, which on a rate basis represent approximately a $15 million impact to our gross profit for the quarter. What I hope this highlights is the significant upside we have to our gross margin structure once this transitory cost pressure recedes, which we remain confident will ultimately happen. As Martin described earlier, we have made the deliberate decision to remain strategically patient and not lock ourselves into what we believe are overly inflated ocean container rates. This means that when spot rates do subside, we believe we will be well-positioned to recover relatively quickly, and we expect that based on current assumption, the positive impact on our margin should be significant. Okay, turning to our balance sheet and cash flow. As of March 31st, we had total cash on hand of $18 million and $12 million of debt under our revolving credit facility, compared to $29 million of cash and $0 debt as of December 2021. The decrease in net cash was primarily driven by working capital as per our business seasonality, partially funded by our credit facility. Now moving on to our full year guidance. We continue to expect fiscal year 2022 net sales to be between $440 million and $455 million, representing growth in the range of 16%-20% versus 2021, as consumer demand for our products remain very robust. However, as we have discussed, the cost environment and its negative impact on our gross margins has been very challenging, especially in the first quarter. As a result, we are updating our forecasted non-GAAP adjusted EBITDA to be in the range of $27 million-$32 million, which reflect the increased cost pressure we're facing and accounts for the further mitigating action we have identified across our P&L for the remainder of the year. Embedded in our guidance are the following assumptions as you think through your model. For net sales, we expect continued strong case equivalent volume growth in 2022 in the mid-teens%, with a few percentage points positive price mix lift driven by the Americas segment as pricing actions start to take effect in mid-late Q2. We are expecting cost of goods sold per case equivalent inflation in Q2 and Q3 to run into the high single digits% to low double digits% versus prior year, which should moderate towards end of year as we lap larger cost increases in Q4 2021. As a result, we're modeling an improvement in gross margin in Q2, followed by slight sequential improvements in Q3 and Q4, and anticipate our full year 2022 gross margin to land in the mid-twenties%. Below the line, we expect higher year-over-year operating expenses from increased personnel expenses and costs associated with being a public company, though we have identified opportunities to optimize and slow the pace of some of these investments. With that, I'd like to turn the call back to Martin for his closing remarks. Thank you, Kevin. To close, I'd like to reiterate our confidence in the long-term potential of the Vita Coco brand. We remain excited about our key initiatives to drive growth long-term and short-term. Despite the persistent challenges in the transportation environment, we are encouraged by the continued strong consumer demands for our products and are pleased with our supply chain's ability to meet that demand while providing a high level of service to our retail partners. The Vita Coco Company has a strong balance sheet, and we are well-positioned to emerge stronger once transportation costs subside, which we firmly believe they will. Thank you for joining us today, and thank you for your interest in the Vita Coco Company. That concludes our first quarter earnings prepared remarks, and we will now take questions. If you'd like to ask a question at this time, please press the star then the number one key on your touchtone telephone. To withdraw your question, press the pound key. Our first question comes from Bonnie Herzog with Goldman Sachs. Thank you. Hi, everyone. Hi, Bonnie. Hi. My first question is on your full year EBITDA guidance. I guess it implies a pretty big ramp for the remainder of the year. Given everything, you know, you faced in Q1 and what you called out in terms of the continued gross margin pressure, you know, I'm just trying to understand, you know, what this assumes for your SG&A expense. I think it's gonna need to be a fair amount below, you know, prior year as a percentage of sales. I just wanna make sure I'm understanding that and the drivers behind that. You know, certainly what it assumes in terms of your marketing expense versus maybe your prior expectations. Yes. Hi. Hey, Bonnie, this is Kevin. I'll take this one. Right. Bonnie, what you've seen reflected in your guidance is essentially, you know, reflecting the higher than expected cost environment, right? Which is offset by the incremental pricing action, and some of the accelerated cost saving initiatives we're planning to take for the balance of the year. We will plan to increase pricing, you know, starting actually mid to late Q2, and you'll see that effect also in Q3 and Q4 as well. In terms of SG&A, the saving is expected to be fairly smooth across the quarters remaining. We expect marketing spend, to your question, to be in the mid-single digit as a percentage of net sales, as opposed to what historically has been in the mid to high single digit. What this means is, you know, on a dollar term, we'll probably be more or less flat last year in dollar terms, right? That answers part of your question here. We also identified some efficiency initiative across our fixed cost structure, right, as you think about the rest of the SG&A. That's really what makes up our guidance, and we feel confident we can achieve the balance of the year executed on that. Okay, just a quick follow-up on that. Just, you know, in terms of the marketing, you know, growth, just seeing now mid-single digits, just trying to think about that relative to, you know, the underlying consumer demand. Is that the right amount as your business continues to grow to kind of pull back on the spending? Or is it a reflection of, you know, you guys becoming a little bit more efficient with your marketing spend potentially? Hi, Bonnie, it's Martin. I'll take that. I think the underlying demand, you know, for our branded product remains very strong. We're certainly, you know, from a business point of view, not currently challenged by a lack of demand. The supply chain challenges, you know, we've been able to support the demand, but it's, you know, there are sort of some gaps on SKUs and certain coasts, and it's not like we need to accelerate demand given what we're currently dealing with. We're very happy with demand. I would point you to our investor deck, which talks about the three-year stack. You'll see that the demand remains very robust on a three-year comparison basis. The one-year comparison is it's got some noise in it due to some activity last year. The two-year stack has some noise in it due to COVID. The three-year stack, we think, is probably representative of the health of the business. As we, you know, I think it's obvious from our comments that the transportation costs came in higher than we anticipated, certainly than we had anticipated when we last spoke to you. We basically took the decisions to take aggressive actions on pricing and on SG&A to basically make sure that our model worked in a way that we were comfortable with, given the fact that demand currently does not appear to be a major problem. Okay. No, that's helpful. Then I guess my second question is on the pricing. I mean, maybe first on your Q1 results, I'm just looking at. I guess what I'm seeing is limited price realization in the quarter. I just wanna make sure to understand the key drivers of that. Then, you know, you called out the, you know, the first frontline price increase, and I think you guys mentioned a few percentage points, but could you help us understand, is that low single digits, mid-single digit pricing? I heard the timing being implemented mid to late Q2, but give us a sense, is that across your portfolio or channel, et cetera? Just, you know, trying to understand where that's gonna be most effective. Thanks. Sure. I can start here, Bonnie, around your question on the price mix benefit we expect, right? As you recall, when we talked a few weeks ago, we discussed about the price mix expected to be mostly in the Americas in the low single digits with some offsetting impact from international, right? Essentially having sort of a limited impact overall on price mix on a cost-weighted basis. What we're expecting now is actually you know, some positive mix lift on a cost-weighted basis, right, will be driven by higher positive impact in the Americas due to the pricing action we're taking. If you think about the positive lift in the remainder of the year, it is fair to assume to expect a low single-digit price mix benefit that will help our top line and net sales overall. And as it relates to sort of a lot that was gonna happen in Q3, Q4, I think we're not comfortable, you know, giving a number other than we think it prudent to plan for, you know, price increases that, on a dollar basis, would cover our cost of goods increase that we're currently experiencing, and that will give us flexibility to react either way if and when those costs, you know, decline or if they were to worsen, we could put more in. But I think currently we just want to preserve flexibility. That's how we're thinking about it by the end of the year, which we think will set us up for a good 2023. Okay. Thank you for that. Thanks, Bonnie. Thanks, Bonnie. Our next question comes from Laurent Grandet with Guggenheim. Hey, good evening, everyone. Paris, the first- Hello. Hey. Paris, the first question is really probably more clarification. It's rare to already be talking about 2023. You said in your press release that gross margin were impacted by increased transportation costs and that the price action you are taking for the remainder of the year should fully offset in 2023 the transportation cost increases. Does it mean that gross margin should come back to the level you enjoy or you were planning for 2023 and for 2022 in 2023? Yeah. Hi, Laurent. Good question. I'll take that, Kevin. To that, Laurent, what we're saying here is, you know, we're assuming right now at current cost level that after you take into effect all the pricing action we're doing sequentially in the remainder of the year on an annualized basis as you start next year, you should cover pretty much in dollar terms the inflation we're seeing this year. What this means is, you know, margin, we should see expansion next year, so you're right. Though it will take a little bit of a ramp up to get fully to the historical level of the mid thirties with experience, right? Over the last couple of years. We should get back a couple of points of margin for sure, and what we're saying is we will cover most of the inflation that we're seeing on a dollar term basis. Okay. Thanks for the clarification. I mean, it's more about your growth and beyond kind of your core business. You changed a few things. I mean, you moved Boosted to energy. You are launching a Coconut Juice. You said again, you want to push for Coconut Milk. But like for you to have more color about those initiatives. I mean, Coconut Milk, I'm not sure. I mean, I'd like to understand how serious you are about it. I mean, it doesn't show up in panel's numbers and your other segment is relatively small still. Especially on those three products. Boosted became energy, the Coconut Juice, and the Coconut Milk. Thanks. Yeah, a great question. I think, you know, all these initiatives are ones we're excited about, and they're all showing promise, but they're all somewhat small in their current form. We didn't, you know, choose to elaborate them in our script or comment about them fully. I would say that each of them in and of themselves is interesting, exciting and has, you know, significant potential. You know, rather than spend a lot of time talking about things that aren't happening, I think our thought was we would raise them as they start to show potential that we can celebrate rather than talking about things that are still pretty small and you can't track. Okay, fair enough. I pass it on. Thank you very much. Thank you. Thanks. Our next question comes from Brian Stein with Bank of America. Hey, thanks, operator. Good afternoon, everyone. I guess first, just to follow up on Bonnie's question, and I just wanna make sure I understood it right. Kevin, when you talked about marketing over the balance of the year, is that a change from what you were expecting before? Are you actually gonna be spending less in marketing for this year than what you were originally planning at the start of the year? Yeah. It's fair to think about it this way. I think we're finding ways to be efficient with our marketing spends. You know, we review our marketing mix and we feel confident it's the right one. You know, even with the efficiency initiative, we have identified our brand. That's fair to assume that we plan on spending a bit less than originally thought and originally anticipated heading into the year. Yes. Is some of that tied to? I think I've heard a couple of times there's maybe some SKUs or, you know, there's. It's still not perfect, right, in terms of product availability. Is any of that tied to just, you know, don't wanna overstimulate the consumer because you wanna make sure you've got enough product? Is that part of what the factoring was in that decision? Yes. Yeah. I think partially, obviously the demand situation. I think we described it as being tight, right? It's lumpy in terms of SKU availability by coast. Overstimulating that demand would likely, you know, make it more lumpy. Yeah, that certainly enters into it. You know, we're obviously feel pretty good about sort of the consumer demand, the consumer interest, the growing household penetration, everything, and certainly aren't that worried on the demand side relative to a marketing investment being slightly reduced from what was planned. Basically flat to last year. Got it. Okay, helpful. Just last one for me is just, I guess as we're looking forward, right, and Kevin, you did a very nice job laying out the buckets of where the cost pressures are and cost of goods sold. Are those pretty well locked in at this point or, you know, is there a lot of room for variability? I guess the reason why I ask is, you know, it's changed, right? You know, on March ninth you reported earnings and you had a view on what costs were, and especially in the first quarter it was a lot different, right? It just seemed like maybe either things moved around or, you know, there was something in terms of the visibility of that. I'm just trying to understand, I guess, as we look forward here, how much more visibility maybe do you have today on that cost pressures than maybe you did when we spoke on March ninth? Let me take that, Brian. Good question, right? When we spoke earlier in the year, you know, we had planned assumptions that were reasonable, like Q4, Q1 as we head into the year. We didn't fully anticipate the impact of ocean freight disruption on the domestic logistics, right? What I would point you at is the $2 million that I mentioned in my earlier prepared remarks. Of course, they were really both unusual and one-time in nature. Those costs, to give you more specifics, they were related to, you know, clearing issues at ports with containers, detention, demurrage. And those costs, we only had visibility on it and frankly very late in the quarter. We think those costs will not repeat. We have identified them, and we have also put in place processes and mechanism to prevent, you know, further issues like this. That's already a big chunk of what we're seeing. Q1, that was $2 million. Frankly, we're continuously improving our capabilities across systems, process and teams to get even better visibility as we head into the quarters. Right now, you know, based on what we're seeing and the anticipated elevated, you know, environment we are in, we feel confident we can, you know, deliver on the back half of year and execute upon that. Basically what we're saying, Brian, is that the continued pressure we have in the cost per seat back half of year will be offset by the action we're taking, right? Both on the pricing, but also below the line as you think about G&A, and other action items, right? That's how we think about balance of year, and we have a bit better visibility on that. Okay, thank you for that. Basically, you know, if we're kind of thinking about 2023, and again, just thinking about margins and profitability and acceleration in gross profit, we're really, we should just be looking at ocean freight, right? I mean, that's effectively, you know, like as that loosens up or moves, that's gonna be the real driver in terms of margin recovery in 2023. Yeah, sure. I think that's gonna be the biggest driver. There are costs related to detention, demurrage that are tied to port logistical stalls. Ocean freight is easily the biggest driver. If that you know returns to five-year historical norms, then that's a big unlock. Okay, perfect. All right, thanks guys. Thanks. Our next question comes from Chris Carey with Wells Fargo. Hi, thank you. Just following up on that line of questioning. You know, what if your outlook for cost per case equivalent, you know, tracks ahead of what you're currently thinking, you're already gonna be spending a little bit less between the lines. Would you look at taking a little bit more pricing, or are you happy just to maintain the market shares and, you know, kind of, you know, take a little bit more of the pressure on the margin and set yourself up for 2023? Hi, Chris. Let me take that. I think what we're saying, Chris, is we're actually being more aggressive now, right? Let me take a step back first of all. I wanna highlight the fact that we've, you know, we talked about it earlier, this year when we came out for Q4, and last year we took the strategy and by design not to take too much price, right? Because we realized we're in a unique time to really push out the competition, gain share, and we actually grew a lot. We gained share over 7 points. We're now, you know, category leader, obviously with 50% share. The strategy has clearly worked. I think now, fast-forward where we are today, given the environment we are in from a cost point of view, we feel with a much stronger footing to take more price, and that's what we're doing. We feel that this incremental price action we'll be taking combined with the other cost initiative we have for balance of year will fully offset the incremental pressure on cost we're seeing, right? This really is the way you gotta think about it, and we feel comfortable with the action we're taking right now from a pricing point of view. Hope that answered your question. Okay. Yeah, that's helpful. Then, you know, just, you know, on top of that, right? You know, from a distribution potential in the U.S., clearly you continue to track ahead of your long-term algorithm. You know, what prevents you from continuing to do that over time? Are you concerned that, you know, growth starts to slow after these really significant market share gains, or do you feel like you're in a position to continue on this pretty significant level of top line growth? Thanks. Well, you know, I think first of all, the category is very healthy, right? And is growing, you know, sort of, double digits. I think we're positioned to help that category grow, and we still have plenty of distribution opportunities. We've talked historically about the opportunities in C-store, which the juice can product is hopefully gonna unlock. Reminder that that is currently just in a couple of regions, and it's not a national launch and hasn't been offered to the major retailers yet. So we, you know, we feel pretty comfortable with our long-term algorithm. Yes, we seem to be currently ahead of it, but and hopefully we can stay ahead of it, maybe with the supply chains returning to normal and costs returning to normal, that would allow us to accelerate that. We don't, you know, we don't see an end of this runway, I suppose, for at least a couple of years. Yeah, I think it's, I spoke a little bit about that in my remarks also, and I think it's, you know, the one of the key things, you know, we continue to add households and occasions, and we believe that we can continue to do that, and that the category is still in its infancy, and that we can continue to drive category growth as the clear category leader. That's the objective. Okay, thank you. As a reminder, if you'd like to ask a question at this time, that's star then one. Our next question comes from Robert Ottenstein with Evercore. Great. Thank you very much. I was wondering if you can talk a little bit about the competitive dynamics that are going on. Presumably, given the supply chain issues that are in the market, the other players are probably having just as bad if not worse issues. Are you seeing significant out-of-stocks from competitors? How are they reacting? To what extent has that, you know, enabled you to gain market share and shelf space? Thank you. Yeah, I think we've seen the smaller competitors taking price much earlier than the bigger competitors, and that sort of you know gives us some confidence that price can be taken here, and there's less promotional activity at the low end of the category. We believe we've benefited, right? That's allowed us to gain more shelf space and actually reduce the shelf space of our competitors. We hope that that is you know a long-term advantage of our strategy. We also believe that the fact that the competitors are having the same cost pressure and supply chain pressures as we are should help us as we start to take price and hopefully continue to gain share this year. Remember also there's long. Yeah, go ahead. No, I'm sorry. I was just gonna say, remember also there's a long tail in this category. There's not significant number two and number three players, you know, being larger than the next ten competitors combined. It's hard to really track, you know, what the competitors, I mean or the effect they're having. They're all quite small in comparison. I guess my thought is that given the sort of pressures that you are facing and given your scale advantages, it would be hard to believe that most of your competitors are making any money at this point. That's right. It's gotta be worse for them. Can I just say one more? Great. Thank you very much. Thanks. Our next question comes from John Anderson with William Blair. Hi, this is David Shakno stepping in for John. I have a two-part question. The first is, how has COVID lockdown measures in Asia affected current production as well as your ability to bring on more capacity? Second, going off of that, I understand you have a distribution partner in China. How have those lockdown measures, if at all, affected your and your partner's operations there and ability to add new points of distribution? The COVID shutdowns, which, you know, seem to be mainly limited to China right now, have not affected our production capabilities or our partners' production capabilities. We do not have production in China. Our production is mostly the Philippines and Sri Lanka and Brazil. From a production point of view, it hasn't been. What China's shutdown has done is thrown a sort of disruption into the global supply chain on the ocean carrier side, and has made that sort of deterioration of capacity with more ships idled and shut down. That's the biggest challenge for us, but no impact on production. In China, from a demand perspective, China is our, you know, third largest market. We've seen some reduction in the cities that have been shut down that started sort of mid-March, with Shanghai being the biggest impact. Obviously it's very uncertain what's gonna happen there, both in, you know, in China from a shutdown perspective. We don't think that, you know, let's say worst case, that shutdown was to continue for another six months, it would not have a material impact on our finances. You know, let's just say if it happens, we feel very sorry for our friends there and we would navigate our way through it. Got it. Great. Thank you very much. I'm showing no further questions in queue at this time. I'd like to turn the call back to Mike Kirban for closing remarks. I think, guys, just wanna say thank you. Thanks for your time again, and we'll be talking. Three months. In three months. We look forward to it. Have a great summer and stay hydrated. Thanks, everyone. Thanks, everybody. Take care. Bye. This concludes today's conference call. Thank you for participating. You may now disconnect.