00:07 Greetings, and welcome to The Simply Good Foods Company fiscal fourth Quarter twenty twenty one conference call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. 00:31 It is now my pleasure to introduce Mark Pogharian, Vice President of Investor Relations. Thank you. You may begin.

00:38 Thank you, operator. Good morning. I am pleased to welcome you to The Simply Good Foods Company earnings call for the fourth quarter and full-year ended August twenty eight, twenty twenty one. Joe Scalzo, President and Chief Executive Officer; and Todd Cunfer, Chief Financial Officer, will provide you with an overview of results, which will then be followed by a Q and A session. 00:59 The company issued its earnings release this morning at approximately seven a.m. eastern time. A copy of the release and the accompanying presentation are available under the investors section of the company's website at www.thesimplygoodfoodscompany.com. This call is being webcast, and an archive of today's remarks will also be available. 01:19 During the course of today's call, management will make forward-looking statements that are subject to various risks and uncertainties that may cause actual results to differ materially. The company undertakes no obligation to update these statements based on subsequent events. A detailed listing of such risks and uncertainties can be found in today's press release and in the company's SEC filings. 01:39 Note that on today's call, we will refer to certain non-GAAP financial measures that we believe will provide useful information to investors. Due to the company's asset-light strong cash flow business model, we evaluate our performance on an adjusted basis as it relates to EBITDA and diluted EPS. 01:55 Additionally, adjusted results exclude the mark-to-market effect of the treatment of company’s private warrants. We have included a detailed reconciliation from GAAP to adjusted items in today's press release. We believe these adjusted measures are a key indicator of the underlying performance of the business. 02:11 The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for a reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. 02:28 With that, I'll now turn the call over to Joe Scalzo, President and Chief Executive Officer.

02:34 Thank you, Mark. Good morning, and thank you for joining us. Today, I'll recap Simply Good Foods' fourth quarter results and provide you with some details on the performance of our brands. Then Todd will discuss our financial results in a bit more detail, and we'll wrap it up with a discussion of our outlook before opening it up to your questions. 02:56 Despite the challenging environment throughout fiscal twenty twenty one, our business accelerated in the second half of the year with both of our brands generating nice gains. We executed well and exceeded our plan as net sales surpassed one billion dollars in fiscal twenty twenty one. 03:17 The diversification of our business provides us with multiple ways to win in the marketplace. We're particularly pleased with our growth in twenty twenty one across brands, key customers and products. New product launches were successful and our innovation pipeline is strong and focused on new formats that give us increasing access to new snacking occasions. 03:42 Looking back on the year, our entire supply chain team performed well in a challenging external environment. We responded quickly to the changing environment to minimize the effect on our business, customers and consumers. The collaborative work of our team with suppliers, manufacturers, and distributors enabled us to service our retail and e commerce customers as well as expand gross margin in an increasingly inflationary period that grew more challenging as the year progressed. 04:16 As many of our U.S. Food group peers have discussed, the cost and service challenges during the past six to nine months related to such things as procurement, labor and transportation will most likely continue throughout the coming year. Importantly, the price increase we announced in June that was effective September twelve provides us with a significant…

14:26 Thank you, Joe and good morning everyone. I will begin with a review of our net sales. Total Simply Good Foods fourth quarter net sales increased sixteen point nine percent to two sixty million. The core North America business contributed seventeen point one percentage points to total company growth, driven primarily by Atkins and Quest volume across major forms and channels. 14:47 Net price realization in Q4 was a slight benefit driven by lower trade promotion. Our core international business was a two point one percentage point benefit to sales growth driven by strong gains in Australia for both Atkins and Quest. And the simply protein brand divestiture and the European business exit were a combined two point three percentage point headwind. 15:13 Moving on to the other P and L items, gross profit was one hundred and four point five million dollars, an increase of eighteen point six percent versus last year. Gross margin of forty point two percent increased sixty basis points versus the year ago period. As expected, supply chain inflation was a headwind this quarter. However, it was more than offset by the previously mentioned lower trade promotion, as well as favorable product and customer channel mix. 15:39 As Joe discussed, we anticipate significant supply chain inflation in fiscal twenty twenty two due to higher cost related to raw materials, packaging and logistics. The price increase that went into effect last month along with cost saving initiatives should largely offset these cost pressures barring a significant step up in cost inflation from current levels. 16:01 Adjusted EBITDA increased thirty point nine percent to forty eight point five million due to the higher sales and cost control. Selling and marketing expense increased six point three million driven by incremental brand building investments on both Atkins and…

23:10 Thanks Todd. In fiscal twenty twenty two, we'll build on our momentum and expect to deliver solid net sales and adjusted EBITDA growth. We're confident in our business as both Atkins and Quest have strong advertising, marketing and innovation plans in place to drive growth. 23:29 Looking at the key metrics for the full fiscal twenty twenty two, assuming no meaningful change in workplace mobility, we expect net sales to increase eight percent to ten percent versus last year. This includes a one percentage point headwind related to the European business exit. 23:51 We expect supply chain cost inflation in the fiscal year and anticipate the gross margins will be modestly lower versus the year ago period. The price increase that went into effect last month and cost savings initiatives should largely offset these cost pressures, barring a significant step up in cost inflation from current levels. 24:16 Marketing expense is expected to increase in line with sales growth and G and A leverage should result in an increase of adjusted EBITDA, slightly greater than the net sales growth rate. And the decline in interest expense should result in an increase of adjusted diluted EPS greater than the adjusted EBITDA growth rate. 24:40 We anticipate that that the first half of the year will be stronger than the second half of the year from a growth rate standpoint, as the year over year comparisons are more difficult as we proceed through the year. 24:54 Turning to the first quarter, we expect net sales growth to be similar to the fourth quarter of fiscal twenty twenty one. Supply chain cost inflation will be a headwind in the quarter. However, due to existing raw material coverage, as well as the price increase and cost savings initiatives, gross margins should be relatively flat versus prior year. 25:18 Supply chain cost inflation is expected to be a greater headwind for the balance of the year. As we emerge from the challenges of COVID-nineteen, our business is stronger and our organization is more capable as such, we remain confident in our short and long term growth prospects. 25:37 We are executing against our strategies to position us to deliver on our financial objectives with the ability to invest in our business as a path to increasing shareholder value over the long term. We appreciate everyone's one interest in our company and we're now available to take your questions. Operator?

26:00 Thank you. [Operator Instructions] Our first questions come from the line of Jason English with Goldman Sachs. Please proceed with your questions.

26:39 Hey, good morning folks. Thanks for slotting me in and congrats on a great year. Two questions. First on service levels capacity, you referenced chips be in a bit capacity constraint. Can you give us some quantification of how much that's holding you back when you expect the capacity to be back online or – not back online, but expanded to be able to meet the demand? And then also related, can you walk through the situation across some your other categories? Obviously there's a lot of service load disruptions in the industry. Give us the status of where you stand with available capacity and service levels and things like bars and shakes, etcetera?

27:19 Yes. I'll start up with chips. So, we did pull back promotional activity on chips in the fourth quarter. That's part of the reason why we had favorable price realization. So, we were tight on chips and peanut butter cups in Q4. Going into this year that has been resolved. We're actually in a much better position on both of those products. We feel really good about the ability to service our customers this year.

27:46 And Jason answering to your question regarding kind of other categories. There's no one single issue in our supply chain beyond what Todd just covered, but we're experiencing episodic kind of discontinuities in our supply chain that create a bullwhip effect from a service level. So, you kind of deal with those on a case by case basis, nothing really different than I think everybody is experiencing right now on the sector where service levels are challenged as you deal with an ingredient not showing up or a [indiscernible] not being able to staff a shift. We're dealing with those things pretty much every day.

28:30 Yes. It makes sense. But it sounds like nothing too serious. The second question, leverage now below two times, Quest integration effectively complete. What is your acquisition appetite now in light of those conditions and what are you seeing in the marketplace? Anything interesting at regional valuations?

28:53 Well, we're always hungry and we obviously have the capacity now to look at assets. So, the market is busy. So, we keep busy looking at those assets and as we've kind of explained externally the folks we like things in our aisle. We like staying in our category, because we understand the category, if it's our supply chain, it fits our selling capability. And we, the first screen for us is always how strong is the brand how well do we understand the consumer targets, do we think there's opportunity to accelerate innovation and marketing communication to build the brand? So, we're staying pretty busy right now. And we will be patient to find the right thing as we always are.

29:42 Good to hear. Thanks a lot. I’ll pass it on.

29:45 Thank, Jason.

29:48 Thank you. Our next questions come from the line of Chris Growe with Stifel. Please proceed with your questions.

29:55 Hi. Good morning. I’ll add my congratulations as well. Nice quarter and nice outlook there. If I can ask first in relation to Quest and just kind of how the demographic profile if you will, that users, is that different for Atkins and kind of, then what you expect as mobility improves for active nutrition and for weight management, if that hopefully happens throughout fiscal twenty twenty two?

30:21 Yeah. So, the target, the interesting thing, Chris I thing you already know this. The interesting thing is the kind of the macro nutrient, kind of the nutritional philosophy of both brands is pretty similar, right? On Quest it's majors and protein because if it's active, consumer benefit, kind of miners and low carb and low sugar where Atkins with the weight management benefit, majors in low carbs and low sugar and kind of miners in protein, but for the most part the nutritional profiles are very, very similar. The consumer benefits and the consumer targets are very different. 30:56 So, on Quest, it's about being active and fueling your ability to be active. So, it tends to be younger, tends to be fitter, tends to be more physically active. So, kind of think of the target audience adults under thirty five. 31:16 Atkins tends to be, got a little bit of weight to lose, tends to be a little bit older. Both groups demographically, financially a little bit better, a little bit better educated, but tend to have a little bit of weight to lose on Atkins and tends to be older, kind of over thirty five. So, no very, very little overlap between the brands.

31:37 And as you look through the year, do you – go ahead sorry.

31:40 What was your second question? As [indiscernible], if we think mobility improves, how will it affect our brands? Interestingly enough, we've seen Quest accelerate during the second half of the year. Even the Quest bar business has done extremely well. And now part of that is channel development C-Store for traffic is better. Amazon is the largest customer Quest of the businesses been channel benefited, but we're seeing even the bar business start to accelerate. 32:17 Atkins we have, we're really encouraged by the growth. So, second half growth was around twelve percent on an absolute level kind of the third and fourth quarter consumption was about the same, the rate has lot to do with what happened last year. But the composition of Atkins is encouraging buyer growth for the year up double digit and what's been holding Atkins back has been the buy rate, which is kind of down mid-single digits, right? 32:45 So, in doing our analysis on Atkins, we understand being at work is an important driver to snacking occasions and has been holding down buy rates. So, we didn't build this into our assumptions on our business, but if mobility improved, we would see, we would expect to see upside on our business and in particular around Atkins and in particular on bars.

33:09 Okay. That was very helpful color. Thank you. Just a quick follow-up and, or I guess I had a question around shelf resets and shelf space and I guess there have been some shelf resets, what you're seeing right now from a high level and as you look at the shelf set here for your brands?

33:27 Yes. So, I'll talk a little history first. We saw good growth on both brands in the last fiscal year. Shelf sets are happening. The ones that happened in the fall are happening as we speak. We expect it to be pretty positive for us. As we've said pretty consistently, the new product pipeline on both brands is pretty good. So, we would expect pretty good performance there. And I would also say, retailers have relearned the importance of large brands to drive category, consumers study to the category and to the aisle. 34:07 And so, we see them kind of focusing in general focusing on larger more important brands. To keep the [rails] [ph] healthy and keep their categories healthy. So, we're benefiting from those tailwinds.

34:18 That seem to work well this past year. Yes. Thank you. Okay, that's great. I appreciate your time this morning.

34:23 Thanks, Chris.

34:27 Thank you. Our next questions come from the line of Wendy Nicholson with Citi. Please proceed with your questions.

34:33 Hi. Two questions. First, short-term, do you think there's any need for more pricing? It's great that the pricing you took in June has gone through, but do you think that there has been sufficient either commodity or freight inflation that you need to take more? And then second question, longer term, I know you talked about favorable operating leverage as enabling adjusted EBITDA to grow faster than gross profit. But you've been able to reduce SG&A now for I think, three years in a row as a percentage of sales. And I'm wondering how much further you have to go, you're doing a great job advertising more, so, how much more fat is there in G and A before you start to cut into muscle from a productivity perspective? Thanks.

35:15 Yes. So, I'll take the first one. So, from the pricing, gross margin perspective, first, I'll just start off and say, we're super proud of our ability to expand gross margins by sixty basis points in Q4, and ten basis points for the full year, just given this supply chain environment out there right now. Second, we saw the inflation coming. We priced very aggressively to manage that inflation and feel really good about execution of that by our sales force. 35:48 Commodities are not slowing down. To be frank, we thought, when we took the price increase, we might see some leveling off especially in our second half of the year, we're not seeing that yet. We're still hopeful we're going to see that, but some commodities are slowing down, some are still growing at accelerated rates. So, right now, we feel good about the guidance we've given. 36:12 We don't feel like we need to do any additional pricing if we do, see some modest increase in our cost assumptions. I think we can manage that through trade expense, I'm pulling back there a little bit. But if we see an acceleration beyond what our expectations are, all levers are in play, we will price that we have to. 36:37 Regarding the SG&A leverage, I would say there's two reasons why we're getting so much leverage right now. One is, the Quest integration and the synergies that we got from that. Obviously we reduced some headcount with the combined company. We’ve got some great synergies that we've executed almost fully at this point. So, that has helped. 36:58 Second, is just the growth in the business, when you're growing ten percent, fifteen percent, twenty percent top line, you can, and G and A is only growing maybe four percent or five percent, you get some significant leverage. So, I don't see us pulling back on absolute dollars in G and A. But I think we'll continue to get leverage in our P and L as the business accelerates. 37:23 Got it. That sounds great.

37:25 Wendy, this is Joe. I just want to, I’d add a little bit of color to what Todd said, and he’s being modest, his team has done a phenomenal job of seeing in cost inflation soon enough and estimated it well enough that it put us in a position to take what was a pretty aggressive price increase in September. We don't see the need to price again. So, mid to upper single digit pricing, we feel like we're in very good shape through the fiscal year. 37:59 We would have to see a significant acceleration of commodity cost inflation relative to where it is right now in the second half the year to even think about pulling that lever, and we frankly think that's a relatively low probability. So, really congratulations to Todd team. Part of our success has been seeing it early enough and not being too optimistic that it's not going to be too bad. We took a very aggressive cost inflation point of view that compelled us to take some aggressive pricing in the marketplace.

38:34 That's sounds fantastic and very, very rare among your peers. So, definitely congratulations on that front. But just as a follow-up you did talk about sort of lower levels of promotion and to the extent you see an increase in mobility and you're eager to remind those people that they need to by either Atkins or Quest as they go back to work, what type of step-up in your promotional spending or promotion activity do you have embedded in your forecast for fiscal twenty two or how much flexibility do you have to step up that promotional activity?

39:07 We tend to always lean in the first half of the year believing that the sales will come and then we'll have back end room to spend. So, we're leaning into our marketing programming as we speak and we'll continue to do that through January and February.

39:24 Terrific. Thanks very much.

39:29 Thank you. Our next questions come from the line of Steve Powers with Deutsche Bank. Please proceed with your questions.

39:36 Hey, thanks guys. So, you mentioned earlier in the conversation with Chris, some of the successes, particularly on Quest that you've had winning occasions that maybe less tied to mobility than maybe would have been the assumption in the past, I'm assuming particularly around things like chips and cookies. I was hoping you could just talk about how that experience maybe influencing your decisions around R and D prioritization and whether you see more opportunity now to, in fact cultivate more of those occasions that are independent of consumers being on the go or if that's not how you're thinking about it?

40:16 Our focus on what Mark has coin is the snack here portion of our portfolio was underway before we acquired Quest and accelerated under the phenomenal R and D team led by Jeremy Ivie. So, we've had a focus on it. And the reason for is, it's incremental use occasions in need states to bars and shakes. 40:42 We knew that from Atkins because we had a really big and very strong confection business from the earliest days and now we have a cookie business and a chip business and a growing confection business on Quest. So, we kind of understood that that those would be incremental consumption occasions. Along comes COVID and then we learned that while a lot of our consumption is, in particular on Atkins is consumed at work and in transit. 41:14 So, we kind of, we're a little fortunate and that our diversification by form and additional need states of use occasions became a nice offset to our bar business. By the way, we're not deemphasizing our bar business. We're emphasizing the opportunity to grab new use occasions through other forms and you should expect us to continue to do that, and we'll continue to innovative bars because it's a big and important portion of our business.

41:42 Great. Great. And then you mentioned leaning into advertising in the first half of the year and you talked in the presentation about some of the initiatives both in Atkins and now Quest, can you just maybe elaborate on what you're hoping to achieve, especially on the Quest side of that and if it ties into what we're just talking about in terms of the broadening of those occasions?

42:03 Yes. So, this category is underpenetrated and the marketing challenge pretty much regardless of the brand you're running, is to grow household penetration and bring more buyers in. So, I have eight years of experience with Atkins, the single biggest correlation to growth has been our ability to grow buyers. 42:27 So, we always are focused on how to do that. In the case of Atkins, it's a high brand awareness brand. Virtually, everybody knows the brand. The marketing challenge with Atkins was to change their point of view of what they knew. And the marketing efforts are all built around that. The repositioning of the brand away from a programmatic weight loss brand into a low carb lifestyle weight management expert, right. 42:55 I think we've done a pretty good job of doing that. We feel really good about the growth prospects. In the case of Quest, big brand growing fast, still relatively modest brand awareness. So, over the last few years, people have met the brand by showing up at the shelf and finding really great products that they've tried. Our opportunity on Quest is to drive brand awareness, shape people's point of view about what the brand is about, which our new campaign does. And in doing so, you create pressure at the top of the funnel. I create brand awareness, drives brand consideration, accelerates trial and repeat. 43:34 So, the same strategy, you got to invest to drive buyer penetration, but two different marketing challenges. One is about changing people's points of view about what they thought about the brand, the other is introducing them to the brand. And we've got marketing efforts and marketing investment designed to do those two things.

43:58 Okay. That's awesome. Thanks, Joe. If I could just squeeze one more in, just going back, Jason asked about the initiatives to add progressive capacity in snacks. I guess maybe just give us a little bit of a sense of the pacing of that through twenty, through fiscal twenty two? And then, where you kind of expect your theoretical capacity to sit starting in fiscal twenty twenty three relative to where we've been at the fiscal twenty twenty one run rate? Thank you.

44:25 Yes. I'll kick it off and then I'll turn it over to Todd, who's been closer to it. The first thing I would say, is our challenges on chips and peanut butter cups are because the consumer response far exceeded our expectations on both. So, we did not go into the marketplace believing we're going to have a supply challenge. So, this is not about a supplier falling short on what they provided us. We said they were going to provide us. This is about us not seeing the consumer response that would have been two really great products. 44:59 And so, as we on chips last year as we move through the year, every time we got more supply, we absorbed it with demand. And so, we were not able to build inventory. We weren't able to keep up with service So, we, knowing that changes in capacity takes some time, we slow demand down to build inventory so we could service the business at what is an appropriate level. And I'll turn it over to Todd. He can talk to you about the moves that we're making to add capacity on chips as we speak.

45:34 Yes. So, but again, both on ships and cuts, we talked about it earlier, we were short or very tight on supply when we got into Q4. That is largely behind us at this point, we've added capacity on both products in the last month or so. So, we're actually in pretty good shape right now for FY twenty twenty two. We actually have more capacity coming on at the end of this year in the beginning of FY twenty twenty three on chips cups and some other products. So, I think we're in pretty good shape for this year and then as we get into FY twenty twenty three we will actually have expanded capacity to grow the business.

46:17 Okay. Thanks to you both. Appreciate it.

46:22 Thank you. Our next questions come from the line of Jon Andersen with William Blair. Please proceed with your questions.

46:29 Good morning, everybody and congratulations on a great year. I wanted to ask a little bit about household penetration or come back to that because as you said, Joe, it's I think the highest correlation with the growth, particularly for the Atkins brand. Where do you sit today on household penetration for the two brands and household penetration growth has been strong to your point, up double digits this year? Are you seeing the strong growth on both of the brands? And who are these new consumers that you're attracting? Is it the snack year consumer based on the kind of innovation and occasions that you're capturing? So, any commentary around that, kind of the current state of household penetration, the growth and the complexion of that growth in household penetration? Thanks.

47:25 All right. You're talking about the thing I don't sleep about all the time, right, which is where they going to come from and who we getting. So, growing penetration on both brands, Atkins is, we identified our positioning shift, which happened around the time we went public was a move from focusing on what we call low carb [program diners] [ph]. 47:53 Two, and at the time, what we did the study, we thought they were somewhere around eight million of those. And we had done a nice job in the previous eight years targeting those and having successful growth. 48:06 The research that we did say, there were about thirty three million more low carb consumers, lifestyle consumers who had kind of weight management as one of their consumer benefits. So, it's not about weight loss. It's about living with my weight every day and how do I keep that under control? And we've been targeting that consumer, it led to a shift in consumer communication, around fast weight loss, lose twelve pounds in eight weeks, pre and post pictures of people that – or celebrities pre and post to Rob Lowe, skinny dude, never had to lose weight because he knows how to eat and he lives a Atkins lifestyle. 48:55 So, we've been going after those, that consumer target. And I haven't seen a study in the last year, but when we – last time we looked at it those self-directed low carb was a source of growth, not a surprise. In the case of Quest, we gathering our database on Quest from a consumer standpoint. Here's what I do know. The single biggest contributor to Quest household penetration growth has been the growth of chips. 49:23 The other forms have been more stable from household penetration standpoint, but we brought in a significant number of new buyers on chips and they were incremental to the brand, which then leads to a series of marketing questions, why do they buy bars? How do we get them to buy more products? And I've already asked all those questions and the marketing team is working on those things. 49:49 The other thing I want to know about Quest that we're still trying to learn is when I bring them in, do they stay, how much do they buy, how long do they stay, right? Some of the things that are fundamental to effective marketing, what's their life by value and we're in the middle of that work and as soon as I know more, I'll share it with you.

50:11 That's helpful. You anticipated my next question there. So, I'll leave those for your call. But one other follow-up on that, the, as you extend the brands into, you know with other product forms, to serve additional occasions. And I'm particularly thinking about Quest, which as you mentioned earlier is about active nutrition, active lifestyles, fit individuals and you're moving the brand from kind of a bar orientation into more indulgent occasions with frosted cookies this year for instance, do you worry that you maybe lose that a part of that core active fit positioning or is it just, am I not thinking about it the right way that it is just open ended and you don't risk losing that kind of that or turning off that kind of core consumer that has brought you to where you are with it? Thanks.

51:10 Great question, and it was core to the change in strategy and communication. So, if the campaign that was being run prior to the one that just went on air was around the snacks that you crave with the macros that you love, right. So, no compromise, I can get a snack, those things that I would see on a super bowl table for snack table. Those are the things I really crave and I want to have those every day, but I don't want bad macros, right. 51:46 I don't know to be low, high in carbs and sugar and low in protein, right? So that was the positioning before around [craveability] [ph] of snack. The positioning now, which is an evolution of where we were is around athlete worthy nutrition, even though you don't need to be an athlete. And it's around fueling people’s desire for whatever they're trying to achieve. So, it's about to some degree about self-actualization without compromise. 52:18 So, great tasting products that fuel my desire to achieve what I want to achieve. So, we moved away from craveability. Now the products themselves, there's elements of this that are highly indulgent, like you mentioned our ice cookies, but frankly, it's still around, it's regardless of the snack form. It is completely about athlete worthy nutrition, even though you don't need an athlete. And so, we were very choiceful in the campaign. We picked aspiring professional athletes. 52:55 So we picked two, an NFL Rookie and WNBA Rookie, because they're still on a quest to be successful in their professional careers and our target audience finds them very aspirational. And then we picked two people, kind of who changed their career midstream, a former professional football player who became a firefighter, a former office person who became a yoga instructor, right. So again, it's about fueling their aspirations and their quest in life. And we think the positioning addresses that question. That exact question that you asked.

53:37 Very helpful. Thanks so much.

53:42 Thank you. Our next questions come from the line of Eric Larson with Seaport Research Partners. Please proceed with your questions.

53:49 Yes. Thanks everybody, and I'll extend my congratulations as well. I guess, my question is probably more for Todd here, but I'm just trying to get a little bit clear cadence on how your gross profit margins are going to work, so you priced in June, you announced in June and you priced September twelve. So, Q1 is going to get all but maybe a few days if your pricing, is what's holding up the margins as you're still seeing in the first half favorable channel and customer and product mix and that you might be taking a more conservative stance on a comparison basis in the second half, so should we be conservative on our gross margins in 2H?

54:32 Yes. So, for the first quarter, we actually still, as we said in our remarks, Q1 actually gross margin should be relatively flat. We still have some coverage at very attractive prices through Q1. And despite what you correctly said, we're not going to see much of a pricing benefit in the quarter. 54:54 We still had some very favorable coverage and we do have the channel and product mix that you mentioned, which will allow us that we believe to keep gross margins relatively flat in Q1. That coverage largely goes away as we enter Q2. 55:12 So, we do have coverage throughout the first half of the year, but once we get into Q2 and beyond the pricing is not as attractive as we've had in the second half of this year and this first quarter. So, margins will start to contract as we get into Q2 and beyond, but you can expect gross margins to be relatively stable in the first quarter.

55:38 Okay. Thanks. And next question is for Joe. So, Joe, I think you've covered a whole bunch of these points already, but when you look back at your sort of your initial guidance on Quest, I think you said, well we're going to go at Quest quite slowly because we don't want to screw it up. I think that was your comment and you've precisely done that, but as you look at Quest now, obviously, helpful penetration is a big positive. Are you more optimistic on Quest today? And just kind of give you, give us our thoughts because the growth there has been phenomenal and I guess the question is, is it kind of, how sustainable is that growth and I'm just curious on your perception of Quest post acquisition?

56:35 Yes. We had high aspirations and a strong belief in the brand and the performance of the brand has exceeded both of those. So, the business is performing singularly outstanding, and it's been kind of the recent innovation that has been a key driver of the brand. So, the R and D pipeline that we acquired with the brand has for the most part outperformed our expectations. They are very high on chips, strong performance on cookies, strong performance on its entry into infections, RTD’s kind of a push, right, but the other farms performed really, really well. 57:21 So, and then we believed that there was opportunity to continue to sharpen the positioning of the brand because people's – if you just talk qualitatively to people and focus groups who have purchased the brand, they really don't know for the most part what the brands stands for. Core user that bought the protein bar probably saw it in a gym or brought it online, but was part of that little echo system that core user. Those brands understand and knows its history, believes in it. 57:56 A lot of the recent growth in consumers less clear about what the brands stood for. So, our opportunity on the brand and I think we're just in the early stages of that, is you said it, we don't want to screw it up, so we will slow about the positioning of the brand. But we feel like we've got, we got a strategy. We've got communication execution that will grow brand awareness and create a positioning in people's mind around the brand that will enable it to continue to grow beyond just a product innovation.

58:34 Okay. And just a quick follow-up on that. Obviously part of your household penetration is potentially increased distribution, but you haven't mentioned distribution specifically, what might be the opportunities in that for Quest?

58:52 Well, certainly on Quest it has been because grew distribution on chips, chips outperformed all year as we grew distribution on it. And it grew household penetration. So, in the case of Quest, I can directly tie filling white space with a snack item that grew, significantly grew household penetration. So, I think in that case, white space was really important to brand. 59:16 The only reason we tend to be conservative about talking forward on distribution is, I’ve been in businesses where you build distribution and your velocity per item falls and it's less incremental than you think. So, we just like to see it in the marketplace performing before we talk about its incremental value either from a volume standpoint or penetration standpoint. I like our pipeline. Our pipeline, I believe will be incremental to our core consumption. 59:48 So, innovating beyond bars and shakes I think will be a key strategy to our business going forward. We just like to wait and see how it performs before we talk to you about how we feel about it. I expect with our pipeline, we'll have nice growth in the breadth and the depth of penetration in the marketplace on both of our brands. 60:13 We'll see how they perform from an incrementality standpoint and the ability to drive new buyers to our brand. Our track record is pretty good on both of those I might add, but let's wait and see and see how they perform.

60:25 Okay. Thank you for your comments, Joe.

60:27 You're welcome.

60:31 Thank you. Our last question of the day comes from Kaumil Gajrawala of Credit Suisse. Please proceed with your questions.

60:39 Hi, thanks everybody for I guess squeezing me in, and I'll reiterate what everybody has said about – well done on those pricing maneuvers. I think you guys have one exception than the rule. If I ask you a little more detail on the mix effect on margins, and maybe the mix effect that you expect on margins given there's increase in mobility, obviously, there's mix effect as it relates to product mix, is there maybe a general idea you could give us on how just the impact of what the impact of mix will have on your margins?

61:15 Yes. So, I mean there's really two big drivers. So, as we – last COVID, bars got hit very hard last year during the initial year of COVID. So, as that has come back, bars on both brands is the highest margin products we have. So, that's a huge plus. The second piece I would say is from a channel mix perspective brick and mortar obviously got impacted greatly during COVID, particularly on our business and the e-com world went crazy. E-com margins, we have are very good, but they are a little bit below our brick and mortar. 61:15 So, brick and mortar and e-com now has got more and balance from a growth perspective that has helped as well. I can't give you exact number, but it's been probably, it's been positive, we're not talking a huge amount of delta here because our margins by customer and by form are not dramatically different. But it's been a positive benefit. And I think we'll continue to see that in Q1 and Q2 and that will help us mitigate some of the inflation impact.

62:29 Okay, great. And if I can ask you about e-commerce and if the trends are any different in what you're seeing maybe in your spins data or whatever it is from a market share perspective in your channels outside of the [tract channels] [ph]?

62:45 Yes. So, we've done really, really well in e-com. We have gained share to – obviously with the major e-com player out there. We feel great about our business there, particularly on the Quest side as the growth just continues to be incredible. So, market share has been very positive for us for the last couple of years.

63:14 Okay, great. Thank you.

63:19 Thank you. There are no further questions at this time. I would like to turn the call back over to Joe Scalzo for any closing comments.

63:26 Thanks for your participation on today's call. We hope you continue to remain safe, and we look forward to updating you on our first quarter results in January. Have a good day.

63:37 Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.