Whole Earth Brands Inc (FREE) 2020 Q4 法說會逐字稿

Good morning, and welcome to Whole Earth Brands Fourth Quarter and Full Year 2020 Conference Call. (Operator Instructions) Please also note that today's events are being recorded.

At this time, I would like to turn the conference over to Jeff Sonnek, Investor Relations at ICR. Sir, please go ahead.

Thank you, and good morning. Today's presentation will be hosted by Albert Manzone, Chief Executive Officer; and Andy Rusie, Chief Financial Officer. Executive Chairman, Irwin Simon, is also participating on the call today and will be available for Q&A.

The comments during today's call and the accompanying presentation contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs as well as a number of assumptions concerning future events.

Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC.

We'll refer to certain non-GAAP financial measures. Please refer to the tables included in the earnings release, which can be found on our Investor Relations website, investor.wholeearthbrands.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures.

With that, I'd now like to turn the call over to Albert Manzone, CEO.

Thank you, Jeff, and good morning, everyone. Reflecting on our 2020 performance, I am extremely proud of our team and the pace of execution since our business combination at the end of June 2020. We delivered a strong finish to 2020 with fourth quarter consolidated net product revenue growing 8.5% on a constant currency basis.

Our Branded CPG business had a particularly strong quarter, growing 12% on a pro forma constant currency basis with market share gains in the natural category across the world. With 2 significant acquisitions in our first 7 months since going public, we have already reached $500 million in run rate revenue and significantly strengthened our market position.

Looking ahead, we're making great strides toward our vision of enabling healthier lifestyles and providing access to high-quality, plant-based sweeteners, flavor enhancers and other foods for our diverse portfolio of trusted brands and delicious products in a $30 billion addressable market of sweeteners and natural baking mixes.

We believe we are well positioned to compete in this growing market, thanks to the following key drivers: first, our addressable market in the better-for-you sweetener category as sustainable, secular tailwinds that our branded CPG portfolio is distinctly able to take advantage of, given our innovative products, distribution strengths and global scale.

Second, the additions of Swerve and Wholesome significantly strengthened our leadership position and the integration of both is proceeding as planned.

Third, with a healthy balance sheet, a clear vision for our future and an exceptional team, we believe we can achieve sustainable growth for brand building, innovation, increased market penetration in the U.S. and globally, a world-class supply chain and an exceptional team.

Starting with our addressable market. Our business is aligned with powerful long-term secular forces around health and wellness as people identify solutions that helps them achieve their goals. In fact, nearly half of consumers are looking for ways to cook healthier. With our broad assortment of leading brands, coupled with innovation that allows sugar substitute for beverage consumption and banking, the latter accounts for 50% of sugar consumption globally. We believe strong consumption growth will continue for years and decades to come.

Our ability to address these powerful trends was further bolstered by our recent acquisition of Swerve and Wholesome, which has transformed our presence in the market, doubling our North American market share and enhancing our mix of natural sweeteners, which now makes up 88% of our North American Branded CPG segment revenue.

Each of our key North American natural sweetener brands, Whole Earth sweeteners and newly acquired Swerve and Wholesome brands all realized significant consumption growth in 2020.

Whole Earth and Swerve grew more than 40%, while Wholesome grew nearly 21%, all of which significantly outpaced the category average of 12%. Additionally, our Equal brand outperformed respective category average as well with 10.9% consumption growth. We believe our advantaged Branded CPG portfolio will continue to deliver high-quality growth.

Our integrations of the Swerve and Wholesome acquisitions are proceeding on plan. We have brought key personnel onboard from those organizations to maintain continuity and help build-out our organizational capabilities. We have already actioned key commercial, supply chain and back office initiatives, including significant wins and ACV expansions at key retailers with existing products and innovations.

Moving now to our vision for the future. I believe that we have put together a deliberate portfolio of quality assets and brands in attractive categories and growth geographies to form the foundation from which we will grow to create a significantly larger enterprise.

On that, we will deliver on our key growth pillars. Our first pillar is brand building. We're leveraging our world-class consumer insights and marketing team to continue to drive awareness for our brands and increase household penetration in the U.S. and around the world. You will see several initiatives targeted at those very objectives in the months ahead.

Our second pillar is innovation. We plan to continue to deliver above 15% of our product revenues from innovation on a 3-year rolling basis. We have a competitive advantage with 6 R&D centers focused on enhancing innovation and development across the globe in natural, baking, added benefits and adjacencies. For example, we're excited by the launch of our new baking ingredients, utilizing innovative ingredients such as Erythritol, Monk Fruit and Allulose. In 2021, we are planning to launch over 45 new products in our Branded CPG segment.

Our third pillar is growing distribution. Our expanded portfolio of brands significantly improves our shelf presence and visibility with retail customers. Today, our ACB for Whole Earth sweeteners and Wholesome is only in the 20s, while Swerve is at approximately 55%. We are already bringing the power of our portfolio to bear in the marketplace with our retail relationships to increase distribution. Each brand has inherent advantages in the natural channel, traditional grocery retailers, mass, club and e-commerce. Through those inherent brand advantages, we can leverage our power of one to the benefit of our other brands. In addition, we see opportunities for Swerve and Wholesome in key developed international markets, leveraging our existing organization.

We also see an opportunity to enter new international markets, including India and China. We have hired top talent in each of those markets and our intent to capture a share of the 2.7 billion consumers leveraging our already well-known brands across various distribution channels.

Our fourth pillar is manufacturing and distribution. Our supply chain is set to be a competitive advantage for Whole Earth Brands and will allow us to drive top line revenue growth, margin expansion and generate cash flow. Our priorities are to complete the flavors and ingredients manufacturing footprint optimization in 2021 and begin the reinvention of our Branded CPG North America supply chain to leverage the combined assets of Whole Earth Brands, Swerve and Wholesome.

Our fifth and last pillar is our world class team. The team has strong operational competitive teams, agility and passion across all brands, all regions and all functions. Moreover, this is a highly scalable organization with global resources in place to expand our presence in new and existing markets.

Turning to our Flavors & Ingredients segment. Despite certain COVID-19 headwinds that impacted our Flavors & Ingredients segment in 2020, we expect the business to continue to produce strong operating income, driven by our diverse end markets.

As I mentioned last quarter, we have new leadership structure in place that is establishing a growth-oriented focus to drive the segment's future performance. We recently launched 50 new products under our Magna family that better address the unique needs of our customers across the diverse end markets that we serve. This includes consumer packaged goods, over-the-counter health care as well as beauty and personal care products. We're enthusiastic about the broadening of our existing portfolio and about the customer-centric innovations that we're bringing to the market to rejuvenate growth of the segment that commands a significant global leadership position.

We also continue to make progress on the footprint optimization project that is underway. This initiative will provide us with significant operational advantages for our platform, and we look forward to delivering the planned financial benefits in 2021 and 2022.

As we pursue our growth objectives to reach $1 billion of revenue, we intend to continue our penetration of the better-for-you sweetener category. Over time, we intend to expand into adjacencies in the sweetener and other sweet categories, which includes verticals such as chocolates, bars, jams and spreads.

M&A remains an important component of our long-term growth strategy. But in the near term, we are focused on our organic growth efforts, integration plans and generating free cash flow to reduce our balance sheet leverage.

With that, Andy will talk you through the financial details, our outlook for 2021 and provide some additional details on our long-term growth framework.

Thank you, Albert, and good morning to everyone. As a reminder, for those new to our company, our consolidated financials reflect both predecessor and successor periods, indicative of the June 25, 2020, business combination date.

Fourth quarter results that I'll discuss compare the successor's 2020 fourth quarter results ended December 31, 2020, to the predecessor's 2019 fourth quarter results. As a result, our reported GAAP financials may not be comparable to the predecessor period. I'll call out some of the items that impact comparability, where appropriate, to enhance your understanding of our financial progress and also point you to our non-GAAP reconciliations at the end of the press release for additional detail.

Also, I encourage you to view the supplemental earnings presentation on our Investor Relations website.

Additionally, we completed the acquisition of Swerve on November 10, 2020. I will speak to reported results including Swerve and to results excluding Swerve.

For the fourth quarter ended December 31, 2020, consolidated product revenues were $75.7 million, representing a 10.1% increase from the $68.8 million for the comparable period last year. Included in the fourth quarter 2020 product revenue was $4.3 million related to the acquisition of Swerve. Excluding Swerve, organic product revenue grew 3.8% compared to the prior year fourth quarter or increased 2.2% on a constant currency basis.

Reported gross profit was $25.2 million, down from $26.2 million in the prior year period. And gross profit margin was 33.3% in the fourth quarter of 2020, down from 38.1% in the prior year period. Results were negatively influenced by a $3.9 million noncash purchase accounting charge. Adjusted gross profit margin when adjusting for all noncash and cash adjustments was 41.8%, up from 41.1% in the prior year, driven by favorable product mix in the Branded CPG segment and productivity.

Operating loss was $6.9 million compared to operating income of $5.5 million in the prior year period. And consolidated net loss was $5.1 million in the fourth quarter of 2020 compared to net income of $12.9 million in the prior year. These 2 figures reflect $5 million of M&A transaction costs, $4.4 million of onetime and ongoing public company costs and $3.9 million of noncash purchase accounting adjustments, which were not incurred in the prior year.

Adjusted EBITDA increased 5.8% to $14 million compared to $13.2 million in the prior year period. This increase was primarily driven by revenue growth and productivity actions, partially offset by higher ongoing public company costs.

Now let me take you through the segment results for Q4. Branded CPG product revenues increased $10.5 million or 24.6% to $53.3 million for the fourth quarter of 2020 compared to $42.8 million for the same period in the prior year. On a constant currency basis, product revenues increased 22.1%, driven by strong retail and e-commerce growth in our North American business and the addition of Swerve partially offset by foodservice softness. Excluding Swerve, segment organic product revenue grew 14.5% compared to the prior year fourth quarter, an increase of 12% on a constant currency basis.

Operating loss for the Branded CPG segment was $4.9 million in the fourth quarter of 2020 compared to operating income of $2.6 million for the same period in the prior year. The decrease was driven primarily by $5 million of M&A transaction costs and $4.4 million of onetime and ongoing public company costs that are included in the company's Branded CPG segment.

Flavors & Ingredients product segment revenues were $22.4 million, a decrease of 13.9% compared to the same period in the prior year. The decrease was primarily driven by timing of shipments within 2020 and COVID-19 impact on customer orders. Operating loss for the Flavors & Ingredients segment was $2 million in the fourth quarter of 2020 compared to operating income of $2.9 million in the prior year period. The decrease was driven by a $3.4 million noncash purchase accounting adjustment related to inventory revaluations and a $1.4 million amortization of intangible assets resulting from the June 25, 2020, business combination.

Now shifting to a brief review of our full year performance for the 12 months ended December 31, 2020. Consolidated product revenues were $275.5 million, an increase of 1.2% compared to full year 2019 on both a reported and constant currency basis. Included in 2020 product revenues were $4.3 million related to the Swerve acquisition. Excluding Swerve, organic product revenue decreased 0.3% compared to the full year 2019.

Branded CPG segment product revenues were $177.6 million, an increase of 7.1% on both a reported and constant currency basis. Excluding Swerve, segment organic product revenue grew 4.5% compared to the prior year on both a reported and constant currency basis. Growth was driven by strong retail and e-commerce category growth as well as share gains globally, partially offset by softness in the foodservice channel. Growth was led by North America and Western Europe.

Flavors & Ingredients segment product revenues were $97.9 million, a decrease of 7.9% compared to the prior year. The decline was primarily driven by lower revenues in our international business.

Reported gross profit was $96.3 million, a decrease of $12.2 million from $108.5 million in the prior year. And gross profit margin was 34.9% in 2020, down from 39.9% in the prior year. Results were negatively influenced by a $12.6 million noncash purchase accounting charge. Adjusted gross profit margin when adjusting for all noncash and cash adjustments was 42%, down from 42.6% in the prior year, driven by product mix.

Consolidated operating loss was $44.3 million compared to $29.7 million of operating income in the prior year, and consolidated net loss was $42.6 million for the full year 2020 compared to net income of $30.8 million in the prior year. The decreases reflect noncash asset impairment charges, purchase accounting adjustments, business combination transaction-related costs and ongoing and onetime public company expenses, which are not comparable to the prior year period.

Consolidated adjusted EBITDA was $54.5 million, a decrease of 4.2% versus prior year driven by new ongoing public company costs and lower product revenues in our Flavors & Ingredients international business, partially offset by increased product revenues within the Branded CPG segment and productivity actions.

Now moving to cash flow and the balance sheet. We generated consolidated cash flow from operations of $10.5 million for the full year 2020. That is net of $11.7 million of business combination transaction-related expenses that were funded by the seller of MacAndrews & Forbes and $18.3 million of onetime cash add back costs. Our 2020 capital expenditures were $8 million. Free cash flow when excluding cash-related add backs and transaction expenses was $32.4 million.

As of December 31, 2020, we had cash and cash equivalents of $16.9 million and $179.7 million in debt net of issuance costs.

Subsequent to the end of fourth quarter, on February 5, 2021, we entered into an amended and restated credit agreement, in part, to finance the acquisition of Wholesome Sweeteners. The new agreement provides for a $75 million 5-year revolving credit facility and a $375 million 7-year senior secured first-lien term loan B. Reducing balance sheet leverage is a corporate priority, and we estimate that we will achieve a ratio of net debt to adjusted EBITDA of approximately 4x by December 31, 2021.

Shifting to our outlook. We are introducing full year 2021 guidance, including our recent acquisitions of Swerve and Wholesome. The outlook includes expectations for growth on a pro forma organic basis and margins for the combined business. We define pro forma organic growth to be as if the company owned both Swerve and Wholesome for the full years 2020 and 2021. We expect consolidated product revenues to be in the range of $493 million to $505 million, representing reported growth of greater than 78% and pro forma organic growth of 3% to 5%.

Consolidated adjusted EBITDA in the range of $82 million to $85 million, representing reported growth of greater than 50% and pro forma organic growth of 3% to 5%. We also expect adjusted EBITDA margins to be approximately 17% of consolidated product revenues.

Adjusted gross profit margin will be 34% to 35% of product revenues, which again reflects the influence of our acquired assets, Wholesome and Swerve.

Total capital expenditures will be in the range of $10 million to $12 million, which is an increase of $2 million to $4 million from 2020. The increase is associated with our footprint optimization project.

Lastly, we expect 2021 tax rate of approximately 23%. We are also raising our long-term product revenue growth target, which reflects the continued growth of the category and the impact of our recent acquisitions over the next 3 to 5 years.

We expect the following: net product revenue growth in the mid-single-digit range. Adjusted EBITDA growth in the mid- to high single digit range, which implies the operating leverage that we foresee as we further integrate the businesses and drive organic growth. Adjusted gross profit margin is expected to be in the range of 34% to 36%. Adjusted EBITDA margin is expected to be in the range of 17% to 19%. Capital expenditures will approximate 1.5% of product revenues annually. And lastly, the tax rate will be approximately 23%.

That concludes our prepared remarks. Operator, now over to you. Please open the call to Q&A.

(Operator Instructions) Our first question is from Rob Dickerson with Jefferies.

So I guess just a couple of quick questions. The first question is just around, I guess, the 3- to 5-year organic sales growth target. You lifted it to mid-single digit from low single digit to mid. Business is still, right, in early innings. You've done 2 impressive acquisitions. I'm just curious kind of what gives you confidence to change it to mid-single digit relative to kind of longer-term guidance you just set in middle of last year?

Do you want to start, Andy?

Sure. Yes. No, happy to take that one. First, I think it reflects, like you said, the acquisitions -- the strength of the acquisitions. I'd say there's -- number one, I think the category, I would say, will continue to grow. We feel very confident. I think Albert alluded to that in his opening remarks about really the strength of the better-for-you sugar categories that we're in and the growth that will continue for the foreseeable future. One, we feel very confident with that and then the trends that are underlying that, number one.

Number two, we feel very confident with the acquisitions and the commercial synergies that we'll be able to drive across the legacy Whole Brands portfolio with Swerve and with Wholesome. So we think our ability to execute within a growing category gives us the confidence to get to that mid-single-digit growth rate from a long-term perspective.

Okay. Great. That's helpful. And then, again, I know it is very early in the revenue synergistic opportunity with the recent acquisitions. Obviously, leveraging your current footprint in all different channels within retail is a large part of the revenue opportunity.

So I'm just curious, have you already had kind of early stage conversations with retailers that also might give you some confidence in your ability to successfully increase the ACV that you continue to point to is fairly low relative to some other players? And then I have 1 follow-up.

Yes, Rob. I'm happy to answer that. And the answer about the confidence is absolutely yes. As you pointed out, we do have our brands natural that are still in the 20s, and then you have Swerve that is in the 50s and just think about the fact that a 10-point distribution gain across those 3 brands equals to about $30 million incremental sales.

And I would say that the power of one is really about leveraging where those brands are strong today, bringing opportunities for the others and then leveraging across. I will tell you, and I don't want to disclose too much, but we have had significant wins and expansions across major retailers that have already been confirmed and are going to take place. I will take a less confidential subject to tell you that, for example, if you take e-commerce, we grew with over 200% last year. That is best-in-class compared to Swerve and Wholesome, and we are able to already bring to the front those other brands into e-commerce.

So we see a lot of opportunities. Our sales teams have come together. We call on the customers as 1 already since January. And we're very excited because those brands have very strong capabilities in traditional retail grocers, in clubs, in mass, in the natural channel, and as I was saying, in foodservice. And that's for the top line.

We also see significant synergy opportunities at the bottom line through productivity and through our manufacturing footprint and operations. So we're very excited. The teams are working together. We have also been able to strengthen our organization as a result of this. And I think that's the benefit of having closing M&A opportunities like Swerve and Wholesome.

Okay. Perfect. And then just quickly. Albert, I think I had heard you mentioned appetite to expand a bit more over time in categories like jams, bars and spreads. I know you did some of that in Europe already. But cash positioning is still strong, right, with the asset-light model. And it sounds like leverage is somewhat rational for expectation into year-end '21. So if the right opportunity comes up on that acquisition front, are you in a position to act? Or is the line essentially, we'd rather give it some time to integrate these 2 other acquisitions?

Rob.

Yes.

Rob, I'm going to jump in for that one. I think what we're going to do is be acquisitive, be strategic, accretive. And I think as you know me from the past, if they're great acquisitions and they're strategic, with our free cash that [we'll show off] in the ability to pay down debt, we are, by no means, out of the acquisition market.

But on the other hand, we're going to make sure we integrate what we have, but we're not at a business and doing acquisitions.

Albert, you can add to that. Sorry, I jumped in front of you.

No. I think you said it. And aside from this, our -- Rob, our priority right now is on organic growth, and this is very exciting what we have ahead of us. We even have, and I didn't mention it before, significant international opportunity where we just have to leverage our existing organization for Swerve and Wholesome, and we're working on it as we speak. We are pushing the integration, as I was saying, and bringing the teams together and really leveraging the talent that we have across the organization.

And then on the operations and supply chain, I'm very excited because we don't see -- we see some input cost increase, but not to the level of other FMCG companies. And we have a very deep productivity pipeline. Just consider that our total spend went from $19 million in the U.S. to $46 million. So I let you imagine how exciting it is for our supply chain guys to capture those opportunities. And then per Irwin, we will follow on Irwin direction.

Our next question is from Brian Holland with D.A. Davidson.

Could you just remind us again the timing issues impacting the Flavors & Ingredients shipments in 2020 and the extent to which there may be any carryover into 2021?

Andy?

Albert, yes, I can take that one. So Brian, this is -- thanks, good question. This is purely between Q3 and Q4. I think you remember the growth rate for Flavors & Ingredients was over 9% in the third quarter. And simply, we get some customers who only order once a year, and those orders happened more in the third quarter this year versus happening in the fourth quarter last year. So that phasing difference or timing difference is purely between Q3 and Q4.

I'll point you to -- if you go on our website and look at our supplemental deck, you'll see a bridge on there that clearly calls that out. So we don't anticipate -- there's no timing difference into 2021 there.

Okay. Perfect. So then I've got F&I down 3% year-on-year for the second half of 2020. So I understand there's some COVID-19-related headwinds weighing on that. So I guess as I'm looking forward here, would imply to the extent that there's been some impact from COVID-19 that, that would make for some easier compares. You -- obviously, as you referenced earlier today, you have initiatives in place tied to new leadership. Can you provide some framework for whether you expect that segment to grow on the top line in 2021?

Yes. Brian, I'll take that one. So again, I'll put you to the same page on the supplemental deck that we posted, it's Slide 21, which shows a bridge there for our Flavors & Ingredients business. And you'll see on there that the core growth of the business really was about 2% when you exclude the COVID -- the annual COVID impact and then on the international side that we've talked about before, that's behind us.

And so we do anticipate the Flavors & Ingredients business to grow kind of more adjacent to that -- or similar to that 2% number in '21, driven by those initiatives that we've talked about. If you go to our MAFCO website, you'll see all the products that we've launched recently under our Magnasweet product, which we're really excited about, which we've already started getting wins on and are confident in our ability to be able to grow the business this year and into the future.

Perfect. Appreciate the color there, Andy. So then another 1 here, moving forward to the long-term top line and EBITDA growth trajectories, both right in line or to better than what I had anticipated. The construct, however, just a bit different than what's in my model. Fully acknowledged, there could be some element of user error on my part. But does your gross margin outlook just -- is that just simply accounting for the Wholesome mix or is there anything else flowing through, which reflects an update as to how you're thinking about that line versus, say, a few months ago?

No. The only difference versus the few months ago, Brian, is the Wholesome addition. That's completely it. We do have -- we believe, again, we'll continue to have margin accretion, I'll call it, on the legacy business, driven by, one, those -- the footprint optimization in the Flavors & Ingredients business. Number two, synergies as we move forward with the 3 businesses on the Branded CPG side and then just continued productivity. So now that those were expectations that we had in there previously, it's exclusively driven by Wholesome.

All right. Appreciate it. Last 1 for me. We're pretty deep into the first quarter at this point. So any context on how the business is trending vis-à-vis the fourth quarter?

Andy, you say what can be said.

Yes. I mean, obviously, Brian, we can't talk a lot about the first quarter right now. Obviously, Albert alluded to the fact earlier that the integrations of the 3 businesses are going well. We are driving our plans commercially already. There's already been commercial wins. So we're very excited about that.

And no, we think it's -- the business is -- we had a healthy, very good fourth quarter. And that's -- we had good trends as we go into Q1 and into 2021. So that gave us the confidence, obviously, within the Branded CPG business to drive the guidance that was in 2021.

I was just going to add, Brian, that if you look at our market share, which to me is always a critical KPI, we have gained market share in our top 7 markets that represent 80% of our sales across every single one of them. So I would say that beyond the very positive secular category trends that we do have, we do have strong performance for our brands, really driven by the brand building, the innovation, the market penetration that we talked to in the U.S., but also globally. We're entering China. We're entering India as we speak, a world-class supply chain, which is capturing significant opportunities and a great team.

Yes. And sorry for stepping in front of you there, Albert. But just to clarify, some of those commercial wins and R&D flowing through in the first quarter.

Andy?

The commercial wins are in the first quarter. Yes, I mean, we're starting to get that distribution already, Brian, whether they're certain products, but -- I mean [more --] going to see that performance probably more in the second and fourth quarters of stuff that we're executing on.

Our next question is from George Kelly with ROTH Capital Partners.

So maybe just to start following up on the last -- the most recent question that was asked by the prior analyst. So the commercial wins, Albert, that you alluded to, are those done enough where they're included in your guidance? Or are they kind of just nearing completion and so you left them out?

That's a great question. With regard to our guidance, we put out here a guidance that we can meet and potentially beat. And as far as the teams, as I said, there is momentum. We do have -- we're excited about the business, and our job is to meet or beat the guidance.

Okay. That's clear. Then second question for me just relates to your longer-term guidance. And so in your EBITDA target, the margin is 17% to 19%. And for this year, it was 17%. So my question is, what does the ramp -- what is it going to look like? Should it be a pretty steady ramp or are there investments or anything you can call attention to in the next 2 years or so that will keep it kind of at the range it is in 2021?

Andy?

Yes. No. Good question, George. So I'd answer maybe in 2 buckets. I think the first bucket being the Flavors & Ingredients footprint optimization. We'll get more of a ramp-up from that benefit in 2022. We'll get a little bit of -- some of those benefits starting in the back half of this year, but then we have a full year effect next year. So that will be a more -- maybe accelerated ramp there. But the rest of it, I would say, a pretty linear ramp from the context of leveraging the growth and getting leverage off of our growth, number one.

And then number two, as we execute our supply chain kind of productivity that we believe we can drive over the next 2, 3 years with a combination of the 3 companies, that's going to take 2 to 3 years to realize that. So that's a little bit more of a linear type of modeling exercise.

So I would say, from the guide to 17% to 19%, you'll see maybe a little bit of a bump next year. But then it's pretty linear after that.

Okay. Okay. That's helpful. And then, I guess, last question for me. Just on the new credit agreement, not sure if that's -- I'm sure we'll see it, I guess, in the upcoming K, but what was the pricing on that? What are you paying on the revolver and on the secured term loan?

Yes. So the term loan has a LIBOR plus 450 with the floor of 1% and the revolver's at $375 million.

Our next question is from Mark Smith with Lake Street Capital.

First, can you just give us a little bit more on your thoughts on Wholesome gross profit margin, especially now that you're into it and kind of seeing the operations there and what's built into your guidance?

Do you want to take it on, Andy?

Yes, sure. First of all, no, I mean, first of all, I think -- and credit to the team, we did obviously a lot of due diligence on Wholesome. And the supply chain and the margins were a significant component of that due diligence. So the short answer is there's no new news. We knew the business well before we bought it. And since we've closed it, obviously, we're getting to know it more. But from a margin profile perspective, it's consistent with everything we knew about the business before the closing.

Okay. Perfect. And then second one for me is just as we look at the e-commerce growth that you guys have thrown off, can you talk about your long-term e-commerce opportunity?

Sure. So e-commerce is -- started from very little and grew to about 10%, 12% of our worldwide mix, which is significant, and we continue to see opportunities to grow. Number one, as I was saying, we do have a gap versus our best practice that we can leverage towards Swerve and Wholesome, and we're doing this in North America. Number two, we still have room to grow in a number of new players that are coming, think about Instacart or continuing to drive penetration in Walmart.com versus Amazon.

And then in international, similarly, I mean, in Europe, our performance year-to-date on Amazon is staggering because, obviously, those are companies that are getting to scale in a number of international markets, and we benefit from that because of our relationship in North America. So we see -- continue to see significant opportunity. We see this as a channel that will continue to grow forward as consumers like to shop online, especially millennials and younger generation and now older generation. So we see that as a competitive advantage that we intend to continue to leverage across brands in North America and then in our international markets with the players that are growing there.

Okay. And as we look at your consumer, does that give you a little more confidence in the long-term trends in e-commerce versus maybe the overall e-comm channel perhaps slowing down a little bit as we get through reopening and vaccinations and everything out there?

Yes. That's a great question. Let me answer 2 things about it, right? First of all, the secular trends are very strong for our category and are very strong for the consumer occasions. That is going to continue. What may change is going to be the weight of different channels, as you stated. So let me give you the example of foodservice. We see that as coming back. Not only coming back, but if you think about foodservice in the U.S., this is really pre-pandemic, except for Starbucks. It's really an artificial play only.

So now you have opportunities in that channel as it comes back to bring natural on the front counter and even to play on the back counter, with brands like Wholesome, like Swerve. So we see significant opportunities to manage across channels post-pandemic and grow and benefit from it because of the momentum and the strength we have built into the business.

Another example I just want to give you on e-commerce and why it's going to continue to grow. When you go into a retail store, the space is constrained in some ways, right, so -- especially in some international markets, et cetera. So what you are able to do in e-commerce is to have many more of your products. So if you're interested in Whole Earth collagen, added benefits or in Whole Earth turmeric, you may not find it in all of the stores, but you are going to find it in e-commerce. And that is an additional advantage that we see with e-commerce going forward is the ability to have the full array of SKUs at all times.

And our next question is from Alex Arnold with Odeon Capital.

Yes, my first question is, I guess, Irwin touched on the M&A strategy being on sort of parallel path with integration and new deals. But has the target ideal changed? And what you'd be looking for after completing 2 large core sweetener deals?

Irwin?

Yes, sure. Listen, I don't think the target has changed at all. But I think what we want to build is a complementary and diversified portfolio, but with the common denominator of free out there. And is it to go into other categories? Absolutely. But you heard what Albert said before, the power of one. We're not going to go into 50 different categories, but we will stick to the pillars that Albert talked about and acquisitions that we can integrate into those pillars that are strategic, accretive, we can build global and that we can bring innovation to from our ingredients business, our sweetener business from that standpoint.

And we're in the plant-based business today. We're in the sweetener business. Do we carry it over into a nondairy product, do we carry it into confectionery, do we carry it into baking like we are, but do we carry it into a cookie or something like that as a possibility, do we carry it into snacks? So there's multiple areas we're looking at.

And there's a lot of acquisitions that are coming at us right in our sweet spot in the $50 million to $75 million area and how do we double and triple. And I think the big thing, what Albert talked about before, is -- similar to what we're going to do with Swerve, is great products taken to a certain level by the founders. Now how do we get the distribution and grow it globally? And I got to tell you, it reminds me of some of the great products that [you have seen] and the same with Wholesome. So that's kind of where we are at acquisitions and what's being put to us.

And then, Albert, it sounds like a pretty robust pipeline for product intros this year. Can you sort of take us through timing on new introductions and how we should think about them sort of rolling out and ramping up?

Yes. Thank you very much. Our innovations for -- if you take 2021, our innovations are ready in June 2020. So all the 45 products and the 15 for Magnasweet are available. And so essentially, the rollout is really based on the timing of shelf resets of the major retailers. And so if you look at Europe, that shelf resets usually takes place around March, April. If you look at the U.S., it's anywhere in between March. And if I take the biggest retailer in North America, it's probably going to be September, October.

So those are the meetings that we have, top to top, as I was saying before, in the U.S. with the power of one. And those products are ready to hit the shelf and are going to hit the shelf anytime in between March and September.

Okay. And then, I guess, I understand why you can't talk about current quarter trends, but maybe asking a similar question from a different angle. Can you speak to demand trends as you see them now and as you see them developing into the reopen for both foodservice and grocery? Like how are you thinking about that?

Yes. So as I was saying, as we're thinking about it is we're working very well in retail -- traditional retail, like everybody else. Foodservice has been declining 50% last year. We see that coming back, even though we have been somewhat conservative. And more importantly, as I was saying, I think the -- even the foodservice operators are going to have different requests and needs, which I think we are best positioned to answer to. So I see that as a healthy balance, let's say, with some net positives, which are going to be natural channel because they are, of course, pre-acquisition. We didn't have the strengths of Wholesome and Swerve. With net positives in clubs, where we didn't have, again, the positives of Wholesome, which is very strong there.

And then as I said, as an example, because that's the one that is less confidential to talk about is the strength that we can leverage in e-commerce. So I would say that, again, back to the 3 foundations that we have plus our market share gains plus our 45 new products that you alluded to, which are going to be all in natural. They are going to be in baking. They are going to be in added benefits like Whole Earth turmeric, Whole Earth collagen. And then in adjacencies, we see that as -- we're excited, let's say, about the year 2021.

Ladies and gentlemen, at this time, I'm showing no further questions. I would like to end the question-and-answer session and turn the conference call back over to management for any closing remarks.

Yes. If I may, I just want to make a few closing remarks to say that this is a company that went public in June, made 2 acquisitions by December, closing the second one in February. And I just want to salute the team, which I think has proven that they were best-in-class, and I'm very excited about what they're going to do forward.

I would like to thank Irwin, who has been a constant guidance and support in establishing this company and taking it to where it is today and where it's going to be tomorrow and the Board. So we're very excited and very thankful to the organization, to Irwin and to the Board. And with that, looking forward to have more conversations. Thank you.

Thank you. Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.