Good day, and welcome to The Vita Coco Company Fourth Quarter 2024 Earnings Conference Call. At this time, all participants will be in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. John Mills, Managing Partner with ICR. Please go ahead. Thank you, and welcome to The Vita Coco Company Fourth Quarter 2024 and Full Year 2024 Earnings Results Conference Call. Today's call is being recorded. With us are Mr. Mike Kirban, Executive Chairman, Martin Roper, Chief Executive Officer, and Corey Baker, Chief Financial Officer. By now, everyone should have access to the company's fourth 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's 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 release 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 today, we will use some Non-GAAP financial measures as we describe our business performance. Our SEC filings, as well as the earnings press release and supplementary earnings presentation, provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures and are available on our website as well. And with that, it is my pleasure to now turn the call over to Mr. Mike Kirban, our Co-Founder and Executive Chairman. Thanks, John. And good morning, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2024 financial results and our expectations for our performance in calendar year 2025. I want to start by thanking all of our colleagues across the globe for our continued strong performance and for their commitment to The Vita Coco Company and to our mission of creating ethical, sustainable, better-for-you beverages that uplift our communities and do right by our planet. Coconut water remains one of the fastest-growing categories in the beverage aisle, delivering double-digit volume growth in our major markets, which has resulted in 2024 being another record year for the category and for our company in full-year net sales, net income, and Adjusted EBITDA. We believe this reflects the success of our initiatives to drive growth in the category through growing households and increasing occasions. In the U.S. in 2024, we estimate that the coconut water category grew in household adoptions by 9% and household buy rate by over 7%, according to Numerator, reflecting very strong consumer interest in the category, which we believe is related to favorable demographic trends and increasing interest in health and wellness, desire for clean ingredients, and growing demand for functional beverages. For the full year 2024, according to Circana, the Vita Coco brand grew 9% in retail dollars in the U.S. and grew 21% in the U.K., while the category grew 14% and 19%, respectively. As we've discussed, we were hampered in the summer by significant inventory shortages due to limited ocean container availability, which limited our third quarter shipments and negatively affected our service levels. We believe this resulted in a slowdown in branded scan growth in the third quarter, which has since strongly rebounded as inventory levels have improved. Both our depletion trends and our scan trends accelerated during the fourth quarter, with U.S. Circana showing 9% branded retail dollar growth, even though we chose not to repeat a major club promotion from 2023. This acceleration has continued and even accelerated year- to- date, with U.S. branded scan growth of 20% for the last 13-week period ending 2/16/2025. This strong momentum and much stronger inventory position than last year leads me to be very optimistic for branded growth in 2025. In addition to the very healthy Vita Coco retail growth, we've seen strong scan growth for private-label coconut water. During the fourth quarter, we saw our private-label coconut water shipment trends improve as we put the supply chain challenges of last summer behind us. I believe that our private-label business remains a strategically important aspect of our business from a supply chain perspective and that it allows us to benefit more fully from our category growth initiatives. In 2024, our commercial initiatives, including emphasis behind Vita Coco multipacks, Vita Coco Farmers Organic, and Vita Coco Juice, proved to be strong growth drivers. I expect these initiatives to continue to drive growth into 2025. One highlight was that Vita Coco Juice continued to gain share at retail, with U.S. scans increasing 42% for the full year, outgrowing the canned segment of the category by 2x. The introduction of our Vita Coco Coconut Water 1 L pack into a key convenience store chain has also been incredibly successful, and we believe that it is now one of the highest-performing items in that retailer's juice door. We believe the fact that consumers are showing a desire for larger packages for on-the-go consumption is an encouraging sign for our long-term growth trajectory. Vita Coco Treats, a refreshingly sweet and delicious coconut milk-based beverage, is beginning to roll out nationally with very strong retailer distribution commitments and the addition of a new flavor, Orange & Creme, to provide a better billboard and more options for consumers in search of a midday treat. We're excited about the initial reception for Vita Coco Treats and for the future of innovative coconut milk-based beverages, which create an indulgent occasion that could offer us yet another path for long-term growth. In 2025, we'll continue our occasion-based marketing to tap into the versatility of coconut water to drive adoption among new consumers and give existing ones more reasons to stock up on Vita Coco. Our initiatives will continue to focus on key occasions like smoothies, cocktails, and greens, among others. But new for 2025, we expect to place more emphasis on active hydration, attempting to position Vita Coco as the go-to alternative to traditional sports drinks, thanks to its naturally occurring electrolytes. As consumers increasingly prioritize health and clean ingredients, I believe that we are well-positioned to tap into this growing trend to unlock our next phase of consumer growth. Our international business is very healthy, with strong performance in Europe led by the U.K. and Germany. In Germany, the category has grown over 40% over the last year, according to Nielsen, and we are now the leading branded coconut water at three times the size of our closest branded competitor. We believe the growth that we're seeing in our more mature markets, like the U.S. and U.K., is indicative of the long-term potential in our less developed markets. We intend to step up our investment in international markets where we have a strong brand position and can benefit from driving category growth. And if we're successful, we believe international will become a larger part of our growth story as these markets are significantly underdeveloped relative to the U.S. I'm also pleased to share that we recently extended our Keurig Dr Pepper distribution agreement. This contract extension will allow us to continue to leverage KDP's strong distribution footprint throughout the U.S. and is a testament to a great partnership and relationship that is 15 years strong. Our priorities for growth remain unchanged: continuing to add households, expanding occasions, acceleration of our international businesses, and innovation to drive new occasions and attract new customers. I believe that coconut water is becoming a household staple across the globe, and we're very excited and proud to be the leading brand in our primary markets and to help drive this growth. Based on the acceleration of the category seen late in 2024 and year- to- date, and our significantly stronger inventory and additional capacity arriving this year, I believe that we will have an exciting 2025. And now, I'll turn the call over to our Chief Executive Officer, Martin Roper. Thanks, Mike, and good morning, everyone. I'm pleased to report a strong quarter to finish the year and to report record annual net sales, net income, and Adjusted EBITDA, even with the supply chain challenges of the summer and the loss of the private-label coconut oil business that started in the second quarter. Net sales in the quarter were up 20%, driven by growth of Vita Coco Coconut Water and private-label shipments, benefiting from an acceleration of growth in the coconut water category and improvement in available inventory, which allowed us to rebuild distributor and retail inventories from the low levels of the third quarter. As Mike noted, our branded promotional activity during the quarter was reduced relative to last year due to decisions made to better manage our limited inventory, and this resulted in our reported net price improvements. Even so, our fourth quarter gross margins decreased relative to prior quarters, primarily due to more expensive ocean freight flowing through to our P&L. Although slightly weaker than last summer, ocean rates have remained elevated entering 2025. We believe there is the potential for rates to decline as the picture on potential tariffs and the opening of the Suez Canal become clearer and as the shippers add new capacity. We believe that current ocean rates are at unusually high levels relative to long-term averages, and therefore, we have only entered into limited 12-month fixed-rate contracts to secure capacity and service on one lane where the service commitment is important to our reliability of supply. If we see competitive fixed-rate offers for long-term contracts that make sense to us, we would be willing to enter into more expansive fixed-rate agreements to cover more lanes. As we've previously highlighted, last year, we experienced significant inventory constraints, which led to unacceptable private-label service levels that would blow our standards. As a result of these challenges, we currently expect to lose some regions with certain private-label retailers during 2025. Assuming this occurs, this will initially appear in our second quarter shipments with deeper impact in subsequent quarters. These assumptions are built into our current forecast for full-year net sales. As Mike mentioned, we remain committed to competing for private-label business and believe we have value to offer as a reliable, diversified partner to larger private-label programs and that long-term, we should be able to regain some of these losses. Based on the inventory we have in transit and in country to start the year, we are confident that we can generate strong growth in 2025, driven by mid to high-teens branded growth offset by the expected weakness in private-label shipments just mentioned. The capacity freed up should create more opportunities for our branded products in the second half of the year and into 2026. We believe that the strong category growth is a positive indicator and supportive of our long-term algorithm for branded growth. In anticipation of such growth, we have secured production capacity for 2025 and 2026, which should provide greater supply chain flexibility than we had in 2024. The new capacity supports our goal to operate with our expected demand at 80%-85% of available full-year capacity. We expect to hit this production capacity level in the second half of 2025, which should give us more sourcing flexibility. While our fourth quarter brand scan performance in the U.S. strengthened, it was not as strong as we believe it could have been as Walmart reset its stores during the quarter. The location of Vita Coco moved into their conventional shelf-stable juice set with some significant reduction in our SKUs and space, despite Vita Coco exhibiting very strong growth leading into the reset. This has initially created mid-teens declines in weekly store sales at Walmart, which has hurt our total reported U.S. scan performance. This has also produced outsized reported retail distribution declines accompanied by an improvement in sales per point of distribution. Long-term, we believe that the juice aisle has higher foot traffic than our old location and that this move should benefit us greatly provided we can get the right SKUs on the shelf. We are currently working closely with Walmart to improve availability and visibility within their stores. Approaching the normal reset timing for most retailers this spring, we believe that our initiatives will result in total net distribution improvement despite the short-term challenges at Walmart. Our confidence in the category and Vita Coco brand trends remains very high. We are projecting healthy net sales growth driven by strong branded net sales for both international and the U.S., partially offset by the identified losses in private-label of both oil and coconut water. We're projecting healthy Adjusted EBITDA growth as well, even though we expect slightly higher finished goods costs and higher average ocean freight rates for the year relative to 2024, especially in the first quarter of 2025. With that, I will turn the call over to Corey Baker, our Chief Financial Officer. Thanks, Martin, and good morning, everyone. I will now provide you with some additional details on the record 2024 financial results and our outlook for 2025. For the full year 2024, net sales increased $22 million, or 5% year- over- year, to $516 million, driven by Vita Coco Coconut Water net sales growth of 10%, partially offset by private-label declines of 10%, as growth in private-label water was offset by the transition of private-label oil. On a segment basis, within the Americas, Vita Coco Coconut Water increased net sales by 8% to $343 million, and private-label decreased 13% to $90 million. Vita Coco Coconut Water saw a 5% volume increase and a 3% net price mix benefit, while private-label sales decreased 13%, driven by a 2% decrease in volume and an 11% price mix reduction due to the private-label coconut oil transition. For the full year 2024, our international segment net sales were up 16%, with Vita Coco Coconut Water growth of 20%, where we saw strong growth across our major markets. Private-label sales increased 3%, as strong sales of private-label coconut water were partially offset by the transition out of private-label coconut oil. On a full-year basis, consolidated gross profit was $199 million, an increase of $18 million versus the prior year. On a percentage basis, gross margins finished at 39% for the year. This was up approximately 191 basis points from the 37% reported in 2023. This increase in gross margins resulted from branded coconut water pricing and favorable product mix. Moving on to operating expenses, 2024 SG&A costs increased slightly to $125 million, driven by increased investments in people resources focused on driving future growth and expanding our supply footprint, which was mostly offset by reduced marketing spend in light of supply challenges over the summer. Net income attributable to shareholders for the year was $56 million, or $0.94 per diluted share, compared to $47 million, or $0.79 per diluted share for the prior year. Net income benefited from higher gross profit and increased interest income, partially offset by unrealized losses on FX derivatives and higher year-on-year taxes. Our effective tax rate for 2024 was 21%, versus 19% last year. The increase was driven by the jurisdictional mix of pre-tax profits with higher net state income expense than in the prior year and the impact of higher non-deductible expense this year related to covered employees' compensation compared to last year. 2024 Adjusted EBITDA was $84 million, or 16% of net sales, up from $68 million, or 14% of net sales in 2023. The increase was primarily due to the increased gross profit previously discussed. Turning to our balance sheet and cash flow, as of December 31st, 2024, we had total cash on hand of $165 million and no debt under our revolving credit facility, compared to $133 million of cash and no debt as of December 31st, 2023. The increase in the cash position was due to the strong net income for the year, partially offset by the increase of working capital of $34 million and the repurchase of shares valued at $12 million. The working capital increase was driven by an inventory increase of $33 million. Our higher ending inventory is representative of the health of our inventory levels as we enter 2025. We entered 2025 with a very strong category, healthy inventory levels, exciting innovation, and confidence in our team and our Vita Coco brand. While facing some headwinds, we are excited about our ability to continue to deliver strong results. We expect net sales between $555 million and $570 million, with expected gross margins for the full year of 35%-37%, delivering Adjusted EBITDA of $86-$92 million. We are expecting the category to grow mid-teens this year, with the Vita Coco brand tracking broadly with the category. As Martin indicated, we expect some reduction in private-label service areas, which will partially offset the expected mid-teens brand performance. We expect gross margins to be lower in the first half of the year as we continue to experience elevated ocean freight rates, and that gross margins will improve slightly in the second half as rates improve, and they should benefit from the impact of a U.S. branded pricing increase in the summer designed to offset some of the cost inflation we are experiencing. In 2025, we expect the net pricing impact in the full year to be approximately flat as we return to a more normal promotional calendar in the second half of the year. We expect SG&A to increase to low to mid-single digits as we restore marketing reductions from last year and increase investments in people, supporting our continued capacity expansion and the growth opportunity we see, specifically in international markets. This guidance reflects our current best assumptions on marketplace trends and our global supply chain performance. Finally, a word about the potential impact of tariffs. At this point, we have not included any impact from tariffs in our guidance. Obviously, the size of any potential tariffs in the countries to which they apply are critical to quantifying the impact on our business. As we have said before, if broad import tariffs were applied to coconut water produced in the countries that we source from for any prolonged length of the time, we would take pricing, expecting similar tariffs to impact our competitors and potentially other beverage categories. Our products are primarily sourced from the Philippines and Brazil, with additional sourcing in other Southeast Asian countries and co-packing facilities producing in Canada and Mexico. We believe this diversified network allows us to adjust as the relative economics change, but any adjustments have long lead times, so if tariffs were applied specifically to any country we source from, we will face unexpected costs that would affect our guidance. Long-term, we would flex our sourcing to optimize our total costs and adjust our pricing to cover any long-term tariff impact. A nd with that, I'd like to turn the call back to Martin for his closing remarks. Thank you, Corey. To close, I'd like to reiterate our confidence in the long-term potential of The Vita Coco Company, our ability to build a better beverage platform, and the strengths of our Vita Coco brand and the coconut water category. We're confident in our ability to navigate the current environment, and we are excited about our key initiatives to drive growth. We have strong brands and a solid balance sheet, and we are well-positioned to drive category and brand growth both domestically and internationally. Thank you for joining us today, and thank you for your interest in The Vita Coco Company. That concludes our fourth quarter and full year 2024 prepared remarks, and we will now take your questions. Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. One moment while we compile the Q&A roster. And our first question will come from the line of Bonnie Herzog with Goldman Sachs. Your line is open. Hi, good morning. This is Ethan Huntley on for Bonnie Herzog. Thank you for taking our questions. Maybe just a question here on the category more broadly. How fast do you expect the coconut water category to grow this year in aggregate and maybe even a longer-term view as well? Then I also understand you have plans to grow your branded coconut water business in the mid-teens range this year. So just trying to understand what that might mean for you in terms of a market share perspective and, as a category leader, what initiatives do you have to increase household penetration and usage occasions and ultimately drive growth and awareness for the category? Great morning, Ethan. Thank you for the question. Let me start off with the category, and I think there's sort of different answers. Like we talk about North America, I think we're expecting the category to grow long-term in the high single digits, low double digits. I think that's representative of its sort of five-year growth rate. On our total business, that will be augmented by international, which, while a smaller part of our business, we're seeing category growth rates that are higher than that by 5 to 15 percentage points. So that's sort of how we get to our long-term sort of goal to grow brand mid-teens. Just pulling back to sort of this year and the more immediate term, I think last year the category in North America grew in the mid-teens, which is sort of slightly ahead of what I just said, and actually in the last 13 weeks has sort of accelerated to sort of the low 20s. And so we currently think we're seeing an acceleration of the category. Whether that lasts for the full year or not is very difficult to say. I think in our assumptions for mid-teens branded growth, we're assuming that the category maintains a solid mid-teens branded growth, but as I said, the category is currently accelerated ahead of that. And then when we talk about that, treats is sort of outside that because it's sort of a coconut milk-based product, so that's potentially incremental for our brand. As we look at international, we're trying to grow share in growing markets, and we're trying to accelerate those markets, and we're trying to add markets. So our hope would be that international would grow faster than our North American business. And then as it relates to your last question, we're very much focused on growing the category, which is about education and trial, and then growing our households, which is about branded share gains and trying to make our brand more appealing than the other brands that are around us. And we do that through some of our social media marketing and innovation, and then obviously retail execution is a very important driver of share and also of trial. And so that's what we're trying to do. And I think what we've seen over the last five years is the category, at least in North America, where we have reasonable data through Numerator. We've seen household growth rates that are pretty healthy and household buy rates that are pretty healthy that collectively combine to accomplish our growth rates in the last five years. And there's no reason why those can't continue. Our household penetration, we believe, is still way less than other juices. Our household buy rate is still relatively low. And certainly, you have the old 80/20 rule where a lot of volume is drunk by 20% of your consumers, so there's a lot of opportunity to increase volume. So no, we feel very good about the category and very good about our brand prospects. Great. That's very helpful color. And maybe just one more, if you don't mind, on the distribution side. Could you maybe touch on how much more distribution upside you see and maybe which channels you ultimately see the most opportunity in? And I think you alluded to maybe potential shelf, cooler space gains and resets this year. So maybe just curious if you have any commentary on how much space you expect to gain this year. And thank you. Yeah. Just maybe limiting our comments to Americas and Circana data. I'd refer you to Slide 10 in our investor deck where we sort of lay out our ACV, how it's changing. That's sort of how we think about it. We still have opportunities in food and everyday presence. We have pretty good distribution in mass. Our big distribution opportunities are in convenience store. With that said, we still have opportunities on multi-packs in food more generally. We still have opportunity in multi-packs in mass. In C-store, we mentioned that we had launched 1 L with a key retailer that was quite successful. C-store has historically been a 500 ml sort of market, so that provides us with, again, a nice runway to grow C-store. And then we have the innovation like Juice, which is the canned product, or like Treats, which is the coconut milk product, which also should provide distribution, so opportunity. So we still have a fair amount of runway on that, both from innovation and with the core family. Coming back to your question as to how we view things, I think we called out the Walmart reset, which relates to the Modern Soda set that there's a lot of hype around. And we got relocated to the juice aisle, resulting in some lost points of distribution, which has caused a drag on our scan data. And you can work out how big Walmart is relative to the rest of the universe, but the Walmart trends are down double digits. And that's a pretty big lag on our actual main scan trends, so a pretty big drag on our top line right now. But certainly, we can weather it. We're growing the business even with that, and we see it as a big opportunity because if we fix the distribution and get the right product mix in that juice shelf, it's actually a high-traffic shelf, and it should be really good for us long-term. So we're actually pretty excited about it, but we're weathering that first-year transition. And putting aside, if you include those distribution losses in that juice set reset, we still think we're going to grow distribution this year. So our net understanding of retailers' commitments to us is positive despite that drag. Very helpful. Thank you. One moment for our next question. That will come from the line of Eric Serotta with Morgan Stanley. Your line is open. Great. Thanks, guys. Hoping you could give some colors to the current state of inventories at various points in the channel with the fourth quarter replenishment. Are you at targeted levels? Do you expect further benefit from replenishing, or do you expect further benefit from replenishment in the first half? And then in terms of the U.S. price increase, can you give us an idea of the order of magnitude there? Have you started discussions with retailers on that? And how is it being received in an environment where most categories are having a tough time on getting incremental pricing? Thank you. Good morning, Eric. To start with the inventory levels, as you can see from the financials, we ended the year with very healthy inventory levels overall. A good chunk of that is still in transit, so we're in a significantly better place to start the year, and we feel good where we are this year. We would like to see still more in our warehouses close to the markets, which we expect to happen in Q1. We're currently not seeing any shipping challenges, so we feel good overall, but still a little bit more in transit than we would like due to the shipping delays we've been seeing. And then in terms of pricing, those letters will be making their way out to the customers now through Q1, and the sales teams are working with the customers on market execution, which will begin in the summer. As we talked about from a guidance perspective and as we look at the promotional activity we're cycling in the second half, we don't expect any financial impact versus 2024, but that will start to make its way to the market starting in the summer. Just on the pricing, we have a pretty good story. Obviously, ocean freight is higher now than it was a year ago significantly. Other cost inflation is starting to work its way through on finished goods. So we have a good story. And then, but the category is also growing really healthily. So it's a pretty good story, and at least I'm not aware of any current pushback, but obviously, there can always be pushback. Just coming back to your inventory question, we started adding capacity a year ago. We have good inventory. We will provide good service with the category accelerating. Then obviously, that's challenging because it's accelerating maybe faster than we thought, but that's good. And the extra capacity that is coming online would help our second half. So we're looking forward to getting through June with our current plans and then having inventory available for more opportunistic endeavors. Got it. Just to follow up on that, any read as to where customer and distributor inventories are? I know they were clearly below target for last summer. Just sort of wondering, should we think of you guys shipping ahead of consumption in the first half as you further rebuild the pipeline inventories, or has consumption accelerated such that shipping ahead of consumption isn't really possible or practical? And that would be a good problem to have or a high-class problem to have. But just looking to sort of get where your customers' and retailers' inventories are to see if there's further replenishment ahead. Yeah. Well, first of all, I like your comment. It would be a good problem to have, although it's always painful, right? But back to year-end inventories, I think we felt we had largely replenished retail and distributor. We are working with our distributors to try and build inventory going into the summer, and that may affect a little bit of timing on the quarters if that actually is possible. Sometimes that's possible. Sometimes it isn't, but we'd love to add an extra week of inventory to enter that May, June, July, summer selling period just because it makes everything flow much easier if you're not responding to fires. But I think it's fair to say that we're very comfortable with where inventories were at the end of the year. So in most degrees, we're back to a normal cadence unless, again, something changes. Terrific. Thanks so much. I'll pass it on. One moment for our next question. That will come from the line of Chris Carey with Wells Fargo. Your line is open. Hey, good morning, guys. I wanted to start on [crosstalk]. Hi, Chris. I wanted to say, good morning. I wanted to start on gross margins. From a phasing perspective, we're obviously exiting the year lower than where you're going to end the year. I think Corey made a comment about back half modestly improving or something of the sort relative to the front half of the year. In a way, I kind of read that as we should start to see a pretty notable sequential uptick into the front half relative to the Q4 exit rate. In general, can you just contextualize the shape of gross margins through the year as you kind of strive toward this full-year target? And just connected to that, freight rates are certainly up year-o ver- year, but they are declining. So maybe just talk to the trend in freight rate that we might be seeing as we get into the back half of the year into 2026, like some level of normalization. Or are we talking about, at least right now, higher durable rates as you look over the next two years? Thanks. So good morning, Chris. There's a few things in there. But from a guidance and a gross margin, we are focused on the full year and the quarters, as you know, do get a little difficult. But the biggest item and why we expect second half to be stronger than the first half is that curve of ocean freight. We entered the year with more inventory than last year, so in the range of four months. So there's this delay of carryover of the higher ocean freight from last year coming into the first half. So that big spike we saw in the summer of last year is flowing through in Q4 into Q1. And then we have an expectation of ocean freight rates dropping through the year that will improve the margin with some partial offset to less pricing and some underlying inflation. But it's really that curve from a modeling perspective, the biggest item with bits of timing in there is that curve of ocean freight improving through the back half. And we have an assumption through the year that ocean freight will get closer. And I'll let Martin comment more on rates closer to historic levels, but not all the way to historical levels at this point. Yeah, Chris, to your point, we're still paying above what we were paying last year and still what we would regard as unusually high. I think for the full year, we expect our average rate of ocean container cost to be higher than last year, right? So let's start off with that. That's baked into our assumptions. It's being driven by the inventory carryover that Corey indicated. And certainly, in January and early February, the rates really didn't move down that much. As we think about the rates and we develop guidance, we expect there to be some downward movement, partly because some of the uncertainty around tariffs is, I don't know whether it's removed or what uncertainty, but there was a fair amount of inventory buildup prior to the new administration, and that should decrease demand for ocean freight. There is incremental capacity coming online, and then there is hope that the Suez Canal will reopen as a passage. I think there started to be reports of some ships going through, but I think most of the major carriers are holding off probably till May or June, and when that happens, that will release a couple of things. One is it will add capacity in terms of the carrier's ability to move product globally. And then it will also actually reduce transit times, which will give us a one or two-week inventory bump for Europe and the East Coast, so we're looking forward to that, but obviously, don't really know where it goes. While we think that the rates will fall, it's very unclear how fast they will fall, and we've expected them to fall before, and we've probably told you they would fall before. And if you look at the indexes, it's been quite a roller coaster the last 12 months. So we've taken somewhat of a conservative approach on thinking about that baked into our guidance. But equally, if rates were to drop tomorrow to old historical levels, as Corey mentioned, we had three, four months' worth of inventory that's got to flow through. So if that was to happen, that would really impact the back of the year. But as we think about our business long-term, we think that ocean freight should drop to historical levels, and that will allow us both to invest in brand and grow the business and also to support our business in a better way. And so we think the long-term outlook is very good. Just when it happens in the next 12 months, we're guessing just like you're guessing. Okay. Thanks so much. And regarding the business, which is, of course, the core focus for the long term, the category tracking over 20% branded on a year-to-date basis and the outlook suggesting something more like mid-teens, is there an assumption that we're just going to normalize or we don't know how much this strength is going to sustain? And also, I just want to be clear about this. The consumption trends that we see right now, are they inclusive of the headwinds that you're experiencing at Walmart right now, or should we be expecting a deceleration in trend going forward as some of these items that you're talking about start to work into the numbers? So thanks so much. Yeah. So the numbers we reported for brand last 13 weeks include the headwinds of Walmart, and you can probably back into what those would look like based on assumptions of Walmart's share of food, right? And I think our assumptions for the year are based on category growing U.S. mid-teens and branded holding share or gaining share. I think we do, obviously, but we have some benefit of hopefully having inventory in that Q3 period when we had some weakness last year. We should be able to return to normal promotional cadence in the back half of the year, which should also help. And then the promotional cadence also drives trial, so that helps the category. I think it's fair to say we're reporting a 13-week because we're seeing it. We like to normally plan around long-term trends as opposed to short-term trends, but certainly, the current category health is very encouraging, as is our brand health. Okay. Thank you. One moment for our next question. That will come from the line of Michael Lavery with Piper Sandler. Your line is open. Thank you. Good morning. You mentioned in prepared remarks how you're pivoting a little bit to emphasize hydration messaging more clearly or strongly. Can you unpack a little bit what that might look like and where there may be disconnects in consumers' understanding? Or is that a component of the product that isn't really appreciated maybe as well as I would imagine it to be? Or how do you play that out in your marketing? Yeah. Hey, Michael. It's Mike. If you think about how we started this business and marketing coconut water, it was all about kind of natural sports drink, right? And that was the beginning of the business. Over the last few years, a lot of the growth has come from marketing specific use education. So we've talked several times about whether it's in smoothies or in a cocktail or for the hangover or in greens, powdered greens, all of these types of things. And that's become a real big focus for us and I think has been a growth driver. But getting back to our roots a little bit and really starting to market the product as a natural alternative to sports drinks, we think is a huge opportunity to further expand usage and households. And so we're ready to start doing that. We're starting to invest against it in our typical way of investing in marketing, whether it's digital and social and influencer and all of these types of things. But we think that that's an opportunity to really go after more consumers. So that's the objective. Is there a packaging or is there an opportunity to even maybe, I don't know, maybe even in a PET bottle or something, get into the sports drink aisle next to some of those guys? Or have you considered that? How do you think about maybe even just a sort of more obviously parallel or mirrored extension or packaging form? Yeah. I think in terms of packaging, we have the PET. We have the Tetra. I don't think packaging changes are really in the mix for this, like a sports cap or something like that. I think in terms of placement in the store, we like where we're at. And very often, we are adjacent to sports drinks and enhanced waters and so on. I think it's more about the marketing communication and getting people to realize that coconut water has three times the electrolytes of a sports drink. And it's natural, and it's from a tree. And so we think there's a real opportunity there. And that's the real focus. It's really a communication opportunity, communication opportunity, we think. No, that makes good sense. And then just following up on your tariff commentary, obviously, there's plenty of uncertainty. But can you maybe just help us understand a little bit better your co-packing? It sounds like that's Mexico and Canada. I guess we'll find out in less than a week if that's coming through or not. But how big a percentage of your portfolio comes from those co-packers, and how quickly could you find new ones if it made sense to do so? It's a very small percentage of the total production. Specific items, we like co-packing in Canada and Mexico because it gives us the opportunity, especially with innovation, to get things to market quicker. But it's a small percentage of our total supply. Nothing produced there can't be produced elsewhere? Yeah. I think the important thing is that in the short term, there might be impacts, and obviously, we deal with those. In the long term, we have the ability to move that production to other countries. It just obviously wouldn't happen to affect probably this year. Okay. Thanks so much. One moment for our next question. That will come from the line of Eric Des Lauriers with Craig-Hallum. Your line is open. Great. Thank you for taking my questions, and congrats on the strong quarter here. Thanks, Eric. Good morning. Good morning. I'm wondering if you could expand on the commentary on additional production capacity that you've secured for 2025. I think you mentioned that should help improve flexibility. Should we think of that as any sort of new geographies and helping to improve some of the ocean freight availability? Just wondering if you could expand on that new capacity and how it helps improve flexibility? Yeah. I think as we talked about last year, we were sort of basically selling every case we could make and get into the country. And that wasn't a very comfortable place to be, particularly in the third quarter. And so we ran production at full capacity through the Q4 to build inventories, and that's why we feel much better about our inventory situation. We started talking last April about adding capacity to get ahead of what we perceived to be a very healthy category and to rectify this problem. Capacity takes anywhere from nine, 12 months to even 18 months to come online. And the capacity that we talked about, or that we alluded to last April, is now coming online. That production will then flow into the U.S. starting June, July, which is related to my comments about our second half product capacity or product availability being much stronger than our first, even though we start the year with very good inventory. So we are securing capacity for next year, assuming strong category growth in the sort of mid-teens and brand growth accordingly. And we're trying to build that capacity to get up to a level where, on a full-year basis, we're running at 80%-85% of capacity based on our plans. And so we think we have line of sight to do that. We are adding facilities, and you'll see that the facility count, I think, in our 10-K has changed and probably will continue to change through when we get to next year. From a diversification, it's a lot easier to add factories in markets you're familiar with partners you are. So we're still concentrated, well, not concentrated, but we're still sourcing mainly from the countries that we currently partner with. But we're actively looking to open up other countries. Most of them are in Asia. Most of them rely on Asia ocean freight to the East Coast and West Coast. So while the reliance on some of the feeder networks from some of the islands would change if we open that capacity, we would still be beholden to the Asia, East Coast, West Coast major lanes. So yes, on the local market basis, our goal is to add some diversification in the next 12 months. We probably haven't done so in the last 12 months, but the goal is to add some in the next 12 months. But it won't diversify, obviously, our dependence on ocean freight on those long lanes. That's very helpful. Appreciate that color. And then on the increased points of distribution with upcoming shelf resets, could you just comment on how we should think about the timing of that impact? I'm guessing that second half, but any color you could share would be great. No, it's typically March-April time period. Yeah. I think Q2. Yeah. Okay. That's helpful. And then just last one from me. Just looking for an update on the food service channel. Obviously, much smaller than food and mass for you guys, but I think that's been a recent focus or an opportunity for you guys to take share. And just wondering if you could give an update there? Thank you. Yeah. No, it's been a big focus for us. We've got a good team against it, and we're making really good progress. The biggest opportunities are in hotels, hospitals, college campuses, schools, all of these types of things, and opening up the broadline food distributor network and really managing that network. And it's coming along really well. And we've continued to get wins in that space, and we think it'll be a big piece of our business moving forward. We're underdeveloped there, right? I think for the big players, I'm going to guess it's 10% of their business, and we're way below that, so that just helps you quantify that there is an opportunity there. That's how much incumbent pool is, but I think, as we've said, it's a multi-year play for us to build up to that level because those big guys have been working on it forever, and for a long time, they had exclusivity contracts that blocked us out, but now they don't have coconut water, so we can start to play, and it's just a long-term build. Great. Appreciate the color. Thanks for taking my questions. Thank you. Thank you. One moment for our next question. And that will come from the line of Jim Salera with Stephens. Your line is open. Hey, guys. Good morning. Thanks for taking my question. Thanks. Hi, Jim. Martin, I wanted to ask, and I apologize if you guys touched on this already, but you talked about successful introduction of the 1 L convenience. And if I'm looking at the chart on Slide 10, it looks like there was a modest ACV step-down for the 500 ml convenience. So is part of that the 1 L is swapping in where the 500 ml used to be, or just any color on what's going on there? Yeah. The 1 L sort of test or, but it's been so successful, I wouldn't really call it a test, actually, was incremental point of distribution. I think that marginal change in ACV is more related to inventory flowing over. So the inventory challenges in Q3 would have probably resulted in some lost distribution, at least execution. And then it takes a little while to remember where you were selling it in Q2 and build it back. So it's just sort of that sort of thing. Okay. Good. And then I wonder if we can get an update on PWR LIFT, particularly Mike talking about the focusing on hydration and obviously protein content is very important for consumers right now. And so just thinking about the opportunity to continue to scale PWR LIFT and where we are in that right now. Yeah. Good question. We didn't really talk about it too much in our prepared remarks. I think we basically have a nice, healthy online business, and we've struggled to get PWR LIFT on shelf, even with good retail partners and execution and people in market. So for this year, we said, "Okay, let's focus on the online, and let's continue to build that. And let's take the learnings, do the research, and understand how to get the message of the product to communicate and work on shelf because otherwise, we're just putting it on shelf, and it's too expensive to keep it there." So we're still pretty excited about the category. Obviously, protein beverage is still a very interesting category. I think drinkable protein is a very interesting category. I'm still drinking two a day, mainly for lunch, right? So I still like it. So, [crosstalk]. I look great. [crosstalk]. It looks great, so we remain interested. There's something there, and there will be something there, and if there's anything I know from my history is you don't throw good ideas out when they don't work, and so we're going to continue to iterate it. I would hope that if you ask the same question this time next year, that we've grown the online community and found a way with the packaging and the brand messaging to increase the pool so we can push again because the product is definitely drinkable. It's very popular among our investor community when we talk to them, but maybe our best marketing is these calls, and that's not effective. Okay. Great. Well, maybe we need to get some in-store activations with your face on it to help drive some engagement. God help us all. Maybe if I could sneak in one more on Treats. Do you have a sense for the customer that's buying Treats? Is it incremental purchase, and they're already engaging with Vita Coco and other formats, or do you find that it's a new household, and they're engaging with that Treats product and not with the other products in the portfolio, and there's a chance to kind of cross-sell them into the wider range of SKUs that you offer? Yeah. From what we can see so far, it's a good mix of new and current customers, but it's also skewing quite young, probably younger than our average, even younger than our average customer, which is interesting and we think is a really good opportunity to continue to bring new consumers into the franchise. Great. I appreciate it, caller, guys. I'll hop back in with you. Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to management for any closing remarks. Just like to thank everyone for joining us this morning. I know it's a busy morning across a number of people reporting, but we very much appreciate you listening in, and we look forward to talking to some of you in the next few days. Thank you. This concludes today's program. Thank you all for participating. You may now disconnect.