Vintage Wine Estates, Inc. (VWE) on Q1 2022 Results - Earnings Call Transcript
Operator: Greetings, welcome to the Vintage Wine Estates, Inc. First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Deborah Pawlowski, Investor Relations for Vintage Wine Estates. You may begin.
Deborah Pawlowski: Thanks Kyle and hello everyone. We certainly appreciate your time today and your interest in Vintage Wine Estates. Joining on the call today are Pat Roney, our Founder and CEO; Terry Wheatley, our President; and Kathy DeVillers, our CFO. Pat and Terry will provide an overview of our first quarter fiscal year 2022 results and discuss our strategy for growth as well as our outlook for fiscal '22. After which, we will open the call for questions. As you are aware, we will probably make some forward-looking statements during this formal discussion, as well as during the Q&A session which are outline here on Slide 2. These statements imply the future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from where we stated here today. These risks and uncertainties and other factors are provided in the release as well as with other documents filed with Securities and Exchange Commission. These documents can be found at our website or at sec.gov. During today's call, we will discuss some non-GAAP financial measures, we believe this will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. With that, you will turn to Slide 3, I will turn it over to Pat -- I'm sorry Terry to begin. Terry?
Terry Wheatley: Thank you, Deb. And welcome everyone. These are very exciting times here at Vintage Wine Estates and we're making excellent progress gaining market share, advancing our multi-brand omni-channel strategy, while building a stronger operations and finance infrastructure. We grew over 3% in the quarter over last year, and importantly, had a 37% revenue growth in our direct-to-consumer business. And this growth was up against headwinds presented by supply chain challenges. Russell Joy, our COO, has joined us at an opportune time to help us deal with juggling of current and new suppliers to get the glass and other supplies we need and working to meet our customer requirements. Looking to our growth efforts, VWE launched the first ever celebrity branded e-commerce retail store that is vertically integrated to VWE direct-to-consumer production, management in fulfillment. The e-commerce store is rich with content information and appeal to an established customer base, supported with best practice and proven digital to delivery success. We are first movers in this arena and believe the e-commerce retail store model is the next frontier in celebrity alignment. We believe our strength in digital marketing is a clear differentiator for us as we directly touch close to 1 million individuals who love our wines. We expect to leverage this channel with our ready to drink offerings as well. Looking to Slide 4, we're making solid progress on our efforts to strengthen our finance infrastructure to address the incremental demands of being a public company, but also the variances in the accounting processes. We engaged a consultant to review our control processes and staffing. They are providing the suggested adjustments to our inventory and costing oversight to ensure we have the needed processes and the right people throughout the organization to support a strong, reliable and sustainable finance and accounting structure. We also continue to progress building out the business and today announced the acquisition of ACE Cider Company. Pat will review the acquisition in greater detail, but it's an excellent addition to our RTB offerings, providing us a greater diversity with a leading Cider brand, and adding a new channel to our market. Turning to Slide 5, you will see we remain fairly evenly balanced among our three business channels. In our direct-to-consumer segment, as I mentioned, we have significant growth of 37% as we consistently amplify efforts through our many direct-to-consumer channels, including our tasting rooms, wine clubs, ecommerce, QVC, telemarketing, digitally native brands and the addition of the Sommelier Company. Our customer first philosophy combined with our top tier digital marketing capabilities are driving our growth. Our marketing tactics, leverage customer advocates to drive brand recognition and celebrate loudly our superior customer experience. We had increased tasting room traffic, significant growth in wine club membership and retention, and are continuing to gain traction in our ecommerce in digital channels. Of note, our average order value across all key transaction sites was up 3%. Volume for direct-to-consumer was up 13% and operating income improved 127%, reflecting an excellent improvement in product next. Moving on to wholesale, our revenue was up about 8% and benefited from increased international volume and more favorable product mix. This more than offset some minor brand and marketing programs that we discontinued since the first quarter last year. Strong margin in this business also reflects the favorable product mix. Our prime brands are winning market share. We continue to be encouraged by the reception of our dog by retailers and the engagement with consumers for this brand. Bar Dog is up almost 37% in depletions. Firesteed, B.R. Cohn, Kunde, Cherry Pie are also brands that continue to grow above the industry average. We continually evaluate the portfolio to determine where brands are succeeding and manage our distribution channels to drive sales. And next, our B2B business, demand remained very solid and B2B, which is our private label and production services. Shipments for this segment were challenged because of the difficulty of getting enough glass in a timely fashion in order to meet customer schedules. As a result, we had shipments to a major retailer rescheduled in to the last nine months of fiscal 2022. These programs are shipping now, and we'll continue through the third and fourth quarters as well. We also have new commitments from a large retailer for a third quarter by that will support our B2B business as well as proposals with several other B2B customers we should see materialize in the later quarters. With that, let me turn it over to Pat to talk more about our results, the recent acquisitions and our outlook. Pat?
Pat Roney: Thank you, Terry, and good afternoon, everyone. If you'll turn to Slide 6, I'll first touch on our most recent acquisition ACE Cider. ACE is one of the fastest growing craft ciders in the country. This is a great addition to our ready to drink portfolio, and also complements our channels to market and extends our market research by adding beer distributors to our wholesale network. This creates a new growth opportunity for our ready to drink portfolio of products. We also see this as providing another platform for growth and diversification, such as wine on tap and new ready to drink brands. ACE was founded in 1993 and is located in the hardest Sonoma County, a region well-known for not just as winemaking, but also as premium apple orchards. The product portfolio is full of award winning fruit forward ciders and includes the world's original pineapple cider. This is the number one selling fruit flavored cider in the United States. ACE is our second acquisition thus far this fiscal year. At the beginning of the quarter, we acquired Vinesse, which is off to a great start. It has measurably enhanced our DTC platform, and our marketing team is moving faster leverage our digital capabilities to increase member average order value and grow membership. As I've noted before, we have a strong organic growth strategy that is complemented with our acquisition efforts. Our acquisition pipeline remains robust, and we expect that we are not finished with acquisitions for fiscal 2022. Turning to Slide 7, we can dive further into the results for the quarter. While revenue was up over 3% in the quarter were not for the $7 million in delayed shipments resulting from class shortages, revenue would have been up 16%. We will still ship that volume, and it will be spread over the last nine months of the year. We are confident we're not losing any business because of these constraints. And in fact leave we're doing a relatively good job to stay ahead of the challenge. As Terry mentioned, we had very strong growth in our DTC segment with revenues up 37%. This included 18% organic growth and the rest from acquisitions, volume was up 13%. Our strong marketing programs and focus on our luxury brands throughout the growth. This focus is also reflected in margins for the segment with expanded 670 basis points, 17% operating margin. Wholesale revenue was up nearly 8% and included approximately $0.5 million in acquired revenue. Organic growth was 4%. We were encouraged with our depletion volume growth as well, which is up 1% year-over-year, but importantly was up over 14% on our priority and focus brands. Our improved processes focus on brand management and the benefit of good product mix also drove 600 basis points of margin expansion for this segment to 26%. B2B was hampered by the glass shortages I mentioned that delayed about $7 million in shipments in the future quarters. We're not for that we would have had about 20% growth in this segment as well. Margins were dampened somewhat but still relatively strong if 31% reflecting good product mix. While we are nimbly addressing the challenges of the supply chain, we are expecting that will not be resolved easily or quickly given the pervasive impact is having throughout the world. I'm impressed with our team has been able to accomplish given the significance of these shortages. If you'll turn to Slide 8, adjusted EBITDA was $11.8 million and EBITDA margin was 21.1%. Included in that amount is about 1.2 million in nonrecurring public company expenses that we expect to roll off in fiscal '23. In fact, these expenses should decline by about $300,000 per quarter in the second half of the year. While adjusted EBITDA calculations, the changes will benefit net income in the future. These include certain professional fees and an unusually high DNO insurance for a company of our size. Slide 9 demonstrates our financial strength, which provides us the flexibility to execute our growth plans. The timing of our capital expenditures for our warehousing and bottling capacity expansion rolled into the first quarter. But we still expect our maintenance CapEx to be still relatively modest about $2 million to $3 million for the business as it is today. On Slide 10, you will see that we are upgrading our guidance by providing our expectations based on the current business, which includes finance and it does not include any pro forma expectations of prospective acquisitions. Although I do expect we'll execute at least one more acquisition in fiscal '22. Given that we are in effect raising our guidance, we expect revenue will be in the range of 265 million to 275 million. At the midpoint of the range, this represents about 22% growth over fiscal '21. And also because of the seasonality that we see by quarter, we thought it would be helpful to provide the next quarter's revenue expectations. We believe that our second quarter will have revenue in the range of about $77 million to $82 million. This includes Vinesse, and we've also considered supply chain constraints but that does remain a risk factor. We expect continue to navigate the unprecedented supply chain constraints impacting everyone, as we work to identify alternative supply sources and carefully manage shipments to meet customer's demands and pull all available lovers to capture price throughout the fiscal year. We expect adjusted EBITDA for the year to be in the $63 million to $65 million range or about a 24% margin at the midpoint. If you turn to Slide 11, continue that these are really exciting times at Vintage Wine Estates. Over the last 20 years, we have executed a plan that delivers excellent growth, having a unique value proposition for our customers. As we advance our strategy, we believe we can accelerate our delivery on value with even stronger talent, a larger strategic vision, and greater financial flexibility. With that, Kyle and Deb, we can open the call for questions.
Operator: Thank you. At this time, we will be conducting a question-and-answer session. Our first question is from Vivien Azer with Cowen. Please proceed with your question.
Vivien Azer: So Pat, my first question is for you. You noticed that the end of your prepared remarks that you're going to pricing lever as much in as many places as you could, sorry, that was a terrible paraphrase. But I think that's the message you're trying to get across. I was wondering, if you could just be a little bit more specific there? You're certainly not alone and leaning into pricing. I'm seeing that throughout my coverage universe, beer distilled spirits, CSC, salty snacks. So it seems like the environment is ripe for pricing. But how do you think about pricing in terms of rate and whether there are any nuances across your business segments?
Pat Roney: Vivien, so we think, we're not alone in the industry and the industry starting to signal that because of the cost increases or anything in glass and other items, this time probably to be looking at price increases. And we'll do that strategically across each of the channels, direct-to-consumer. We have a fair amount of control in that area. And then the wholesale segment, we're also going to take a hard look at some of our brands and in the after the Christmas holiday season. And we fully expect that while there are no price increases, baked into our revenue, guidance or baked into our plans, we do expect that there will be some opportunities and some reasons to take price in the third and fourth quarter.
Vivien Azer: And then, maybe my second questions on the Cider acquisition and congrats on announcing that. The route to market opportunity makes a lot of sense to me in terms of your own RDD portfolio. But can you talk about please what was specifically attractive about that asset, yet following other operators that participate in insider categories that been a little bit volatile, in subject to some competitive headwinds in other ready to drink format? I think hard filters one example is weight on cider. So any commentary on the kind of strategic rationale beyond distribution will be very helpful? Thank you.
Pat Roney: So I think with Vivien excited cider, which is seen 10% growth every year and a new flavor introductions that it hasn't been impacted by some of the other categories. And as you know, we specifically chosen to stay out of the seltzer market, but we see strong potential for organic growth there. And because of our abilities to expand these production capabilities into a dual location with one on the East Coast, we see significant opportunities for expansion of the brand in those segments. And so, we were attracted by that. And we obviously were attracted by the distribution opportunities that we mentioned before. And we have a very strong new product innovation pipeline that what we believe is ideal for this category. And those are the combinations of factors that lead us to the acquisition.
Vivien Azer: For me, before I pass it along. There's been a lot of industry ink spilled around how tough the question has been in Europe, particularly wondering if you can just comment on that any direct implications for your business, I would think would be minimal, given your sourcing by geography. But then, in addition to that, can you speak to the opportunity perhaps that presents for your USA portfolio? Thank you.
Pat Roney: So, they did have a certainly a very, very challenging harvest and Europe this year, and we believe that that will create significant opportunities for the California and Washington Oregon wine markets to move into certain price points by potentially take some additional price and expand distribution and expand overall growth is in the category so we think that's a strong, strong opportunity for us.
Terry Wheatley: Can I add to that, Pat? Also on the sparkling front, with the shortage of sparkling coming over for this holiday, we're really we have our Laetitia sparkling brand that is in California launching nationally. We have the Paula Kornell sparkling brand, we are getting every bottle we can out into the marketplace to fill the shortages that are coming from that.
Vivien Azer: Thanks for that incremental colors you shared. Just one quick follow-up and I promise I will pass it along. Do you have fewer restraints in terms of supply for the format that would satisfy sparkling relative to the standard turn to P&L?
Terry Wheatley: Well, we still have some -- we do have some supply constraints. We're ramping that up down in Laetitia. We do have some on Paula Kornell, but that is something we're really focused on is building out our supply path on that.
Operator: Our next question is from Michael Baker with D.A. Davidson. Please proceed with your question.
Michael Baker: I'd like to ask about the guidance and dig into that a little bit. What's different in this guidance versus the previous guidance? And now as 265 to 275 including the acquisitions, I presume, since the time that you own them, the prior guidance was 265 to 275 on a pro forma basis. So is that pro forma versus actual I guess which is a difference? And so I guess what I'm trying to get at is, what's the underlying organic guidance? Has the underlying organic guidance changed at all? Or is it just that, the timing of the acquisitions that you're adding? The way I calculate is that these acquisitions will maybe add 25 million to 30 million for the year if they said about 20 million annually, and based on when you own them. So the underlying growth would be more like would be about 8% to 12%, 10% of midpoint. Is that the right way to think about it?
Pat Roney: Yes, Michael. So you are thinking about it correctly. We're still in line with our organic growth targets of about 10%. And when we did the original numbers, we gave pro forma guidance which actually included a full 12 months of pro forma and our feedback from our friends, our analyst was that we should be perhaps we shouldn't be looking at providing just actual guidance, which is what we're now doing. So, we're not taking the benefit of on a pro forma basis, we're having those acquisitions in for 12 months, we're now showing them based upon when they come in. And so, it actually makes the acquisition numbers, real numbers a little bit stronger than what it would be on a pro forma basis.
Michael Baker: Yes, right. I am actually. Oh, sorry. Go ahead, Terry.
Kathy DeVillers: No, this is Kathy. Sorry, I just wanted to make sure that, so it's only for the time that we've actually got the acquisitions in our portfolio. And it doesn't include any future acquisitions yet, either, which previously, the pro forma even had that built in.
Michael Baker: So I guess, just cut through all that, but the bottom line is. Is there any change to your organic, non-acquisition outlook, in the current guidance versus the previous guidance?
Pat Roney: No, it's still at 10% maybe a little bit of upside, but we don't want to get through our specific. We want to get to our biggest quarter, which is our second quarter before we look at changing any of that.
Michael Baker: Right now, I just want to make sure it's clear. That's what I thought as well make sure it's clear, because, in some respects, you say, you made an acquisition here that could add $20 million on an annual basis yet, the number didn't really go up. But up because there are different ways of presenting it. So it's a little confusing. I just want to make sure it's clear. By the way, I think the way you're doing it now is the right way to present is the better way to present it. But it is a change. So maybe they could do a little bit of confusion, so just wanted to clear that up. Okay, thanks. I think that makes sense. Secondly, that the glass shortage, I guess, when did that start to, so I know, we just means after your last call, and you talked about some things, some shortages there. But once it really starts to impact the business, when did the shortage go from a little bit of an issue to actually not being able to ship on time. Was that wondered that sort of start to roll downhill if you will?
Pat Roney: So our major glass supplier was hacked to be basically very, very early in July, late June, early July. And that's when they started experiencing inability to deliver to look glass. So it started in the first quarter. And that's when we chose not only to couldn't bottle enough, but we also chose to move in a couple of our retail partners programs out to make sure that they can have full inventory when they were ready to launch their programs.
Michael Baker: One more, if I could. I think now is about the time where some of your wholesale partners start to think about their progress for next year. They're resets for the spring, what are you seeing from some of your big retail partners, maybe even new potential partners about how they're looking at your product? And then the anything that might be new in terms of doors or retailers or faces or anything like that?
Kathy DeVillers: Well, most of our big retailers are announcing in the next two weeks. Actually, this calls a little bit early for that. We expect target -- we have an idea of what they're going to be doing but they will put it in writing the first week in December. We're expecting Kroger's got some numbers out there. We have not heard from Walmart yet. So, we're -- every week we're getting new and those would set in March. But we are in a position right now to say what we got and tell us the inks dried on their announcements.
Operator: Our next question is from Luke Hannan with Canaccord. Please proceed with your question.
Luke Hannan: I want to start on the, I guess, the organic growth trends that you would have seen during the quarter, and specifically with the, your tasting rooms, and maybe some of the traffic trends that you're seeing there throughout the quarter. Can you just talk about the cadence of this, and specifically, also how it's trending versus pre-COVID levels, both on I guess, the volume of customers that you're showing through there, and also how successful you've been in being able to convert those customers into wine club members?
Terry Wheatley: Pat, maybe I'll take this one. Our traffic has doubled since last year at the same time. And we're back to the 2019 level, so excited about how the traffic is coming back into the pay syndrome, I think there was a lot of pent up demand for people to get back out and get into the tasting rooms. We are having a few headwinds in terms of just staffing making sure that we've got locations for people to be out and being service correctly and that really is affected maybe our conversion into our wine clubs. We had we ran really great conversion from traffic into or tasting room visitors into wine clubs. We are we are looking at right now over 35% conversion into wine club. We hope to get that back to say in the 40% range. So still really good, we feel that's a very healthy number but we know we can do better in that. But we also see I will say that we're seeing the attrition in our wine clubs going down. In fact the attrition is down 18%. So with that during COVID really putting a focus on the, what we want to say as our white glove service, putting personal notes in the wine club packages, putting actually put like small gifts, tiny things, seed packets, or just notes or a corkscrew or something like that. And it really -- it sounds silly that those simple things, slow down the attrition, but we're pretty, pretty thankful for how we curved the attrition rate during COVID and keeping those wine club members happy.
Luke Hannan: Another one, if I can just inflation specifically as passing through price increases, what we've seen thus far from companies in our coverage universe is, it seems like there's a very, I guess, healthy propensity for the consumer to be able to beer these price increases, I imagine. That's what you're seeing as well and probably aided by the fact that these customers are already sort of used to paying for a premium, experience premium products. So they're more willing, I guess, feel to possibly those price increases. Have you seen anything on your end in terms of elasticity of demand, where maybe you're seeing demand erosion from passing through these price increases? Or is it pretty much what you would have expected?
Terry Wheatley: Well, I would just say, we've done a few price increases in our direct-to-consumer. You're able to add $0.50 or $1 a bottle, which is impactful on a case. We haven't heard any pushback or seen any slowdown from that. So we have been able to start looking at primarily direct-to-consumer. We haven't taken any price increases on our wholesale side. And we don't intend to until we get as Pat said, through the holidays, we see what competitions doing we can see where we could go with that. So but we haven't the tiny the small price increases we've taken in some of our direct-to-consumer or ecommerce on our websites, we really haven't seen any kind of pushback or loss in sales from them.
Luke Hannan: Last one for me and I'll pass on just coming back to the eighth and just curious, Pat, if you can share what the I guess maybe the current margin profile is about business, is it the multiple that you would have paid on that? Is it sort of in line with what you expected? You expect to get it down to say five times in 12 months like your historical acquisitions or it should we, should we be expecting something different there?
Pat Roney: So in turn in terms of the multiple in the margin opportunities for this, we do see some synergies, I don't expect it fully to go all the way down to justify that we expect rapid growth, and then that'll probably bring it closer down to that side of the multiple. But we currently on an acquisition basis, we are around 10 to 11 times multiple and we are able to synergize that down fairly quickly.
Operator: Our next question is from Wendy Nicholson with Citi. Please proceed with your question.
Wendy Nicholson: First question just on the Cider acquisition, did you say what percentage of their business is on premise versus off premise? And is balancing that out or changing that balance part of the distribution opportunity that you see?
Pat Roney: We see actually more opportunities in terms of geographical expansion. They're heavily into the West Coast. We see expanding that into the East Coast if there's a fair amount and stronger chain distribution. The pineapple is in a strong 30% to 35% ACB, some of their new flavors such as guava and mango around 13% of the growing rapidly. So, we've seen that is a good area. And the on-premise for them their cage business as well as their bottle business is starting to improve after the pandemic. So, we don't see a significant shift more towards on premise with the exception, potentially some opportunities and major national accounts that we call on, they're currently not going on. But there's perhaps more at the retail than the on-premise segment of it.
Wendy Nicholson: And then just in terms of it sounds like a neat fit for your portfolio. But could you characterize your sort of things we're looking at for the next acquisition to be primarily? So on the wine side, you have a broader view you're looking at our TDs. Any change in terms of what you're looking at, and what you think might fit into the portfolio from here?
Pat Roney: I think it's still largely on the wine side, that's really the vast majority of it. These are a couple of plug-ins plays that we indicated early on, that we've been looking at. And I don't see in their ready to drink very many more acquisitions, I see more, more innovation on that side of it. And then back to acquisitions on the main ones winery side of it.
Wendy Nicholson: And then just last thing, the comment you made about the consultant you've hired to sort of look at sort of your internal processes and oversight of inventories and things like that. Do you think what that person is doing could affect the timing of your acquisition, sort of pipeline or how comfortable you are in terms of moving forward? I know you've got a long track record of making great acquisitions and having them integrated seamlessly. But is there any sense to well, that guy does his work or whatever? We got to slow things down and make sure we're crossing novelties and dotting all the eyes.
Pat Roney: No, we're moving forward our acquisition strategy. We're pretty comfortable with that and we're pretty comfortable with our ability to continue to make the acquisitions and continue to grow this business. So, we're not intended to slow anything down.
Operator: Our next question is from Daniel Biolsi with Hedgeye. Please proceed with your question.
Daniel Biolsi: Can you provide an update on the California harvest implication for costs and availability for grapes?
Pat Roney: So the California harvest was a quality standpoint, and actually pretty good harvest. From a quantity standpoint, it was lightened certain varietals light and suddenly unblocked and lightened cabernet in the premium Northern California segments. The rest of the rest was pretty normal. So I don't see any significant issues in terms of pricing as a result of that.
Daniel Biolsi: And then can you for comparison purposes, tell us like maybe directionally what the gross margins would have been? If you had sold the 7 million in B2B could be ASPs were much lower, and that sort of delayed business strength?
Pat Roney: I believe we mentioned that earlier in terms of that. We pull that backup.
Terry Wheatley: We didn't talk to gross margin.
Pat Roney: We did talk about 31% margin. Yes, beside the shipment that we delayed there were things that then put more of the margin in the group focused on our bottling operations, which is a little bit lower margin. So, we would have had more overall dollar margin and margin.
Daniel Biolsi: And then, did you sort of choose that the private label business to be short the glass? Is that how it only affected for that, that one type of business or within a certain type of bottle that you're short?
Pat Roney: It was a certain type of bottles, and what was the timing associated with the cycle that we were in.
Operator: Our next question is from Joe Feldman with Telsey Advisory.
Sarang Vora: Hi, this is Sarang Vora for Joe Feldman. I had a quick question following up on the gross margin as well. In your outlook, your EBITDA is showing a very strong improvement year-over-year in '22. With all these changes in the class and gross margin, as well as labor you highlighted, can you share some color on the gross margin outlook for 2022? Like, stood it north of 40%, likes around that range? I know last year, it has been, a little bit up and down. So just curious to know how you think about the gross margin trajectory for '22?
Pat Roney: Yes, as the gross margin trajectory will continue to improve, I mean, it's not just issues impacted with the glass or any price increases associated with that. But our efficiencies from our new bottling lines and the efficiencies from our new warehousing operations are items that are really going to help those who have been in the work for two, almost two years. So, it's a combination of all of these things, but we fully expect to hit our EBITDA margin targets for the year as well as our gross margin numbers.
Sarang Vora: And I have one follow-up on the acquisitions too. I mean, in the past year, you completed Kunde, you completed CSC, Vinesse. You have a one more. Can you help us understand the past requisitions? How they are tracking, like, are they exceeding your expectation, like Kunde like, you are probably two quarters in, how is that performing compared to your expectation, any major changes you did over there, or CSC any changes? How you are tracking on the cost side? Any color you can provide on the past acquisition? And how they are tracking compared to your expectations?
Pat Roney: So, has been doing very, very well against our expectations. Now, of course, we've managed that winery for 10 or 11 years. So, we know it fairly well. And it was we've had a couple of quarters on that. And it's certainly operating within our expectations. And so many companies that we've had now for just three months is still in transition and getting started but just looking like it has a lot of opportunities for good growth for us.
Sarang Vora: And one final question. On the wholesale side, you highlighted like higher case volumes internationally. Is that new or, that market expanding as well for you? Just curious to know.
Pat Roney: It is just timing and some pandemic related changes. Terry, you want to expand upon that?
Terry Wheatley: Yes, I would just say those markets are opening back up. We're able to ship back into China. We've had a couple of big shipments going back there. The LCBO Canada's opening back up. That was really shut down or slowed down. So, we're seeing those businesses just bounce back up. I wouldn't say its new business. I would say its returning business.
Sarang Vora: That's great. Thank you so much.
Operator: We have reached the end of the question and answer session, and I will now turn the call over to Mr. Pat Roney for closing remarks.
Pat Roney: Great, thank you very much. I just like to thank everybody for taking the time to be on our call today. And we think that we're making excellent progress with our strategy to be a leading producer of fine quality wines and continue to grow our business through our differentiated omni marketing's organization. Thank you for your time and enjoy the rest of your day today.
Operator: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.
