Jamieson Wellness Inc

TSX:JWEL

Earnings Call Analysis

Jamieson Wellness Achieves Strong Q3 Growth and Confident Guidance

In Q3, Jamieson Wellness experienced a notable 16% increase in consolidated revenue, reaching $176 million, driven by a 20% rise in branded sales. Key markets like Canada and China contributed significantly, with Canadian revenue up 15% and Chinese revenue soaring 82%. Gross profit margins improved markedly, with consolidated gross margins rising 460 basis points to 38.4%. Looking ahead, the company revised its 2024 revenue forecast to between $725 million and $755 million, indicating a growth rate of 7.2% to 11.7%. Adjusted diluted EPS guidance was set at $1.57 to $1.63, suggesting a potential gain of up to 5.2% year-over-year.

Overview of Strong Performance in Q3 2024

In the third quarter of 2024, Jamieson Wellness reported robust growth, achieving consolidated revenue of $176.2 million, which marks a significant increase of 16.3% compared to the same quarter last year. The driving force behind this growth was the Jamieson brands, which saw a revenue increase of 20%, amounting to $155 million. This surge was attributed to a successful marketing strategy in China, as well as a new integrated advertising campaign in Canada that spurred strong consumer demand.

Regional Growth Highlights

Breaking down the performance by regions, Canadian revenue grew by 15.1%, influenced by solid consumer consumption and favorable pricing conditions. Notably, revenue from the Youtheory brand experienced an increase of 5.7%, driven by innovations and expanded distribution. However, the Chinese market was exceptional, with revenue soaring 81.7% on a constant currency basis, largely due to significant marketing investments and tailored product offerings. Additionally, Jamieson’s international revenue increased by 25.2%, marking a successful expansion strategy across various markets.

Profitability Metrics and Margin Expansion

Profitability during the quarter showed encouraging signs, with consolidated gross profit rising by $16.4 million. The consolidated gross profit margin improved remarkably by 460 basis points to 38.4%. This margin growth is related to a strategic shift towards higher-margin branded sales and adjustments from previous year's fair value amortizations. Furthermore, the gross profit margin specifically for Jamieson Brands increased by 520 basis points, reaching 42.1%, fueled mainly by the company's growth in China.

Strategic Investment in Marketing

Jamieson continued to strategically invest in its brand, with SG&A expenses increasing by 36.4% due to enhanced marketing efforts, which accounted for $9.6 million of that increase. This investment is perceived as necessary to support global expansion initiatives and brand growth, particularly within digital and traditional marketing channels. The company reported an adjusted EBITDA of $33.9 million, reflecting a $2 million increase from the previous quarter.

Dividends and Cash Flow Position

The company maintained a solid cash flow position, generating $18.5 million from operations before considering working capital changes—a notable improvement. Jamieson distributed $8.8 million in dividends during Q3 and ended the quarter with over $200 million in cash and available lines of credit. The announced dividend of $0.21 per share is scheduled for payment on December 13, 2024.

Guidance for Fiscal 2024 and 2025

Looking ahead, Jamieson has narrowed its fiscal 2024 guidance for consolidated revenue to between $725 million and $755 million, representing a growth of 7.2% to 11.7%. Specifically for Jamieson Brands, revenue is projected to be between $620 million and $645 million, an anticipated growth of 12.5% to 17%. In the Strategic Partners segment, revenue expectations have been adjusted downward to $105 million to $110 million, reflecting a decrease of 12% to 16%. Additionally, the company expects adjusted EBITDA for the year to be between $139 million and $143 million.

Conclusion: A Promising Future

In summary, Jamieson Wellness’ third-quarter performance showcased strong financial results driven by effective branding strategies and market expansion, particularly in China. With solid revenue growth across key markets and a commitment to ongoing investments in brand development, the company appears well-positioned for continued success. Investors can look forward to the positive trajectory projected for fiscal 2024 and the focused execution anticipated in fiscal 2025.

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon, everyone. Welcome to the Jamieson Wellness conference call to discuss the financial results for the third quarter of 2024. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the company. As a reminder, today's call is being recorded.



On the call today from management are Mike Pilato, President and Chief Executive Officer; and Chris Snowden, Chief Financial Officer and Corporate Secretary. Before I turn the call over to Mr. Pilato, please note that a press release covering the company's second-quarter financial results was issued this afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website.



Please note that the prepared remarks, which will follow, contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them.



We refer you to all risk factors contained in Jamieson's press release issued this afternoon and in filings with the Canadian Securities Administrators for a more detailed discussion of the factors that could cause actual results to differ materially from those projections and any forward-looking statements. The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances, except as it may be required under applicable securities laws. Finally, we would like to remind listeners that the company may refer to certain [Audio Gap]



I will now turn the call over to Mr. Pilato to get started. Please go ahead, sir.

[Michael Pilato, executive]

Thank you, Angeline, good afternoon, everyone. Thank you for taking the time to join us on the call today.



I'll start with an overview of our Q3 performance and key growth activities. Chris will then review the financials in detail before I conclude our prepared remarks and open the floor to questions.



In the third quarter, consolidated revenue reached $176 million, representing a 16% increase compared to the prior year. Our brands continue to resonate with consumers globally with growth in all of our key geographies. Consumers continue to focus on improving their health and wellness with quality brands they can trust, and this is reflected in our branded revenue growth of 20% in the quarter.



In Canada, revenue increased by 15% over Q3 2023 and a 4% growth year-to-date, driven by continued strong consumer consumption, pricing, and lapping of a customer inventory reduction in the same period last year. In addition to product innovations, we discussed earlier in the year, such as an expansion of our Jamieson gummies line and new and improved 100% Complete Multivitamins.



In Q3, we launched 2 new Jamieson sleep support products that are doing well and contributing to our innovation targets for the year. China revenue increased almost 82% in Q3 and 89% year-to-date, driven by our marketing and promotional investment strategy. Our dedicated team in China continues to work closely with our global consumer insights team to ensure Jamieson is anticipating consumer needs and responding with product innovations to meet them.



As a result, in Q3, we significantly outpaced category growth in both units and dollars and generated material gains in on-trend categories such as energy, immunity, bone health and eye health. Youtheory revenues increased nearly 6% on the quarter and 13% year-to-date, driven by consumer consumption, innovation and new distribution and partially offset by the initial stocking of product renovations in the prior year. Our youtheory brand continues to resonate with consumers. And in Q3, in particular, we drove double-digit growth of 2 of our products in the stress and energy categories. These 2 consumer need states that continue to be on trend.



International revenue increased 25% in Q3 and 17% year-to-date, driven by innovation and new distribution gains. This was a particularly exciting quarter for our international business as we grew in every region in which we operate.



In our Strategic Partners segment, revenue was down by just over 5% as expected. Through the quarter, the team was focused on replacing our previously lost contract, and we are pleased to have secured new partners during Q3 and expect to have new business begin shipping before the end of the year.



From a profitability standpoint, consolidated normalized gross margins rose by 230 basis points due to substantial growth in branded sales during the quarter, and adjusted EBITDA rose by $2 million to approximately $34 million.



With a successful Q3 behind us and the end of 2024 just around the corner, we remain committed to delivering on our strategic priorities. Our new integrated advertising campaign in Canada is reinforcing the Jamieson brand's position as a leading vitamin-mineral supplement brand. It is connecting consumers even more deeply with our brand and history of industry-leading quality and trust through digital marketing, social media engagement, influencer partnerships, and engaging TV ads featuring our own facilities and team members.



In 2025, we will expand this exciting campaign globally, sharing these snapshots of Jamieson's operations, people, and commitment to quality with new audiences worldwide. We are continuing to invest in brand growth in China and the U.S. as our high-quality products continue to gain the trial and trust of consumers in these markets.



Distributor-partner collaboration has been integral to growth in our international business, and we are continuing to deepen our relationships with our distributor partners to support this fast-growing segment of our business.



Thank you for your support as we continue to work towards delivering another successful year.



Now let me turn it over to Chris for a deeper dive into our financial performance. Chris?

[Christopher Snowden, executive]

Thank you, Mike, and good afternoon, everyone.



In the third quarter, consolidated revenue increased by 16.3% to $176.2 million. This growth was driven by our Jamieson brands as our marketing strategy in China and new integrated advertising campaign in Canada helped fuel strong consumer demand, resulting in an increase of 20% to $155 million to cycle against the closeout of previous revenue in the quarter.



In Strategic Partners, as we continue to cycle against the closeout of a previous customer contract, revenue was $21.2 million in the quarter, an anticipated decline of 5.4%. Breaking down our branded revenue results in the quarter. Canadian revenue increased by 15.1%, driven by strong consumer consumption, pricing, and the impact of customer inventory reduction in the same quarter of the previous year. Youtheory revenue increased by 5.7%, driven by consumer consumption, innovation, and new distribution impacted by the timing of product renovations and innovations in the prior quarter. China revenue grew 81.7% on a constant currency basis, driven by our marketing and promotional investments. Jamieson International revenue increased by 25.2% on a constant currency basis, driven by innovation and distribution gains.



From a profitability perspective, consolidated gross profit increased by $16.4 million in the quarter, while normalized gross profit increased by $12.9 million. This was mainly driven by increased revenue and higher profit margins. Consolidated gross profit margin increased by 460 basis points to 38.4%, while normalized consolidated gross profit margins increased by 230 basis points. Margin improvement due to higher mix of Jamieson branded sales and the amortization of fair value adjustments in the prior year.



Within the Jamieson Brands, gross profit increased by $17.6 million, while normalized gross profit increased by $14.1 million, mainly driven by revenue growth and higher branded margins. Gross profit margin in Jamieson Brands increased by 520 basis points, while normalized gross profit margins expanded by 250 basis points to 42.1%, primarily driven by growth in China and favorable category mix.



In our Strategic Partners segment, gross profit margin decreased by 460 basis points to 10.9%, impacted by lower volumes impacting plant utilization and customer mix. In the quarter, SG&A expenses increased by 36.4% to $42 million.



Excluding the impact of specified costs, SG&A increased by $10.4 million, mainly driven by $9.6 million in marketing investment to grow our brands and continue to prioritize our global expansion initiatives. Specified costs of $3.6 million in the quarter are mainly comprised of our IT system implementation costs. Operating income in the third quarter increased by $4.8 million, driven by higher gross profit and partially offset by increased investment in marketing. On a normalized basis, operating income increased by $2.2 million and adjusted EBITDA increased by $2 million to $33.9 million. Adjusted net earnings in the quarter was $15.8 million or almost $1 million higher than Q3 2023.



A reconciliation of adjusted EBITDA and adjusted net earnings is provided in today's press release announcing the third quarter results.



Turning to the balance sheet and cash flow. In Q3, we generated cash from operations before working capital considerations of $18.5 million, almost $1 million higher, mainly due to increase in our operating profits. Cash generated from working capital increased by $37.4 million due to the timing of accounts receivable collections, income taxes payable and managed lower inventories.



In Q3, we distributed $8.8 million in dividends and ended the quarter with more than $200 million in cash and available operating lines. Based on the strength of our forecasted cash flow this year, we've announced a dividend of $0.21 per common share or approximately $8.8 million in aggregate. This dividend will be paid on December 13, 2024, to common shareholders of record at the close of business on November 29, 2024.



Now turning to our outlook. The investments we've made this year in digital and traditional marketing continue to provide returns and the consumer consumption remains strong across each of our primary markets. Based on these factors, we are iterating our outlook for fiscal 2025 while narrowing our full year guidance for fiscal 2024.



Updates to our 2024 guidance include consolidated revenue is now expected to range between $725 million and $755 million, an increase of between 7.2% and 11.7% from our previous range of 6.5% to 12.5%. We now expect Jamieson Brands revenue to range between $620 million and $645 million, an increase of 12.5% to 17% from our previous range of 12% to 18% growth.



Strategic Partner revenue is now expected to range between $105 million and $110 million, a decrease of 12% to 16%, updated from our previous guidance range of 10% to 20% decrease. We have narrowed our range for consolidated adjusted EBITDA and now expect between $139 million and $143 million, up to 3.6% growth.



Adjusted diluted earnings per share of $1.57 to $1.63, up to 5.2% growth compared to the prior year. A complete discussion of our outlook for the fourth quarter and full year fiscal 2024 as well as factors affecting our expected performance are included in our outlook section of our MD&A filed this afternoon.



And with that, I will turn the call back to Mike for closing comments. Mike?

[Michael Pilato, executive]

Thanks, Chris. In summary, our third quarter was marked by exceptional growth and innovation across all of our key markets. With a 16% increase in consolidated revenue, driven by Jamieson Brands' strong performance and significant gains across multiple markets, we are poised for continued success. Our strategic investments and product innovations are resonating with consumers and driving our momentum forward. None of this would have been possible without our amazing Jamieson Wellness team, who I would like to thank for their dedication to driving growth, fulfilling commitments and ensuring our high-quality products help to inspire better lives every day.



Now over to Angeline to go to Q&A.

[Operator]

Thank you. [Operator Instructions] [Audio Gap] Your first question comes from Derek Lessard from TD Cowen.

[Derek Lessard, analyst]

So yes, congrats on a strong quarter. I just want to touch on youtheory. You're lapping last year's big stocking event. Just could you maybe talk about what the growth would have been excluding that event?

[Michael Pilato, executive]

Yes. Last year at this time, if you remember, we were shipping in some renovated products across from Q2 and into Q3 on those pipe fills. It would have been a low to mid-double-digit growth rate, Derek, without that lapping.

[Derek Lessard, analyst]

Okay. That's helpful. And maybe just talk about some of the categories. I think you highlighted in the press release, innovation and new distribution as growth drivers. Can you just maybe talk about -- just some color around those drivers?

[Michael Pilato, executive]

Sorry, I just missed the first part of that, Derek. Yes. We're having a little bumpiness here. Sorry, try it again.

[Derek Lessard, analyst]

Yes, no worries. I was just wondering if you can just maybe add some color about the innovation and new distribution growth drivers, youtheory specific.

[Michael Pilato, executive]

youtheory, in the quarter. Yes. So we have picked up some incremental distribution. As we've talked about, we're slowly picking up distribution in channels outside -- brick-and-mortar channels outside of our main customer when we bought the business, and we're starting to see some of that distribution come to fruition.



We've talked before about the expansion of distribution into some other club channels where we didn't play or club customers where we didn't play. We've expanded some offerings in online. We've expanded some offerings in the natural channel and continue to pick up pieces of distribution that we think are long-term sustainable pieces of distribution over time.



From an innovation perspective, we have some sugar-free gummies that we put out into the market. We have our ocean-friendly Omega that we launched earlier in the year that continues to ship. And then in Q4, which aren't in these numbers, but has started to ship out now in the very early days to some retailers and online outlets in a test phase is our new GLP-1 products. So you'll be hearing a little bit more about those in the upcoming quarters.

[Derek Lessard, analyst]

Okay. And just maybe one follow-up and final one for me. On the youtheory guidance for Q4, you said some of that growth is partially offset by new e-commerce business partnerships and a customer inventory drawdown. Could you just maybe talk about what those 2 items are?

[Christopher Snowden, executive]

So the new partnership from an e-commerce perspective is a transition from a direct sales model through Amazon to a partner that takes title and uses AI capabilities to accelerate growth through e-com. That goes at a wholesale price versus a direct-to-consumer price, which accounts for the reduction in revenue, but we accrue the same margin and profitability from that customer set. And then the reduction is just a shift in timing from a promotional order pattern by one of our customers, shifting a little bit of volume into 2025.

[Operator]

The next question comes from Zachary Evershed from National Bank Financial.

[Zachary Evershed, analyst]

So narrowing China to closer to the top end of guidance must mean that things are going a little bit better than expected. Can you get into what's driving that? And do you have a good idea of customer stickiness with another quarter in the system?

[Michael Pilato, executive]

Yes. I mean in China, we continue to see strong growth behind our investments and continue to see a category that continues to grow in China. Now we are significantly outpacing that category in both units and dollars. We've talked before about this investment is one that is very variable in nature, right? It's got a lot of digital components to it where we can move money around or investment around based on what's working and as we talked about as well, China is like a real live model where our e-com team, for example, can move levers on the spot live by hour, by day, by week.



As we see things that work better than other things, we're able to move some of that investment around. So it's the team just continuing to drive investment based on learnings and consumer insights we're getting in real time. So we'll continue to leverage that well into the future as we continue to build those capabilities.



And we're quite pleased with what we're seeing in China. We are lapping much higher quarters now because we did see some of this growth really start to happen in late Q3 and into Q4 last year, if you remember. But we are setting ourselves up here for a very nice close in China and a very nice year that we're very proud of.



When it comes to the stickiness, I know there's a lot of questions about that in a lot of our calls. We do have some measurements on that. We continue to refine those as well. We don't release that data publicly, but we are pleased with what we're seeing today. And as you see, the business just growing quarter after quarter after quarter. We're continuing to refine our understanding of what that baseline looks like versus incremental consumer base, and we'll continue to build off of that into the future.

[Zachary Evershed, analyst]

Got you. Thank you very much. And then obviously, you're very happy with the spend in China and the real-time data there. How does the return profile differ on the marketing spend in the U.S. versus the brand awareness spend in China?

[Michael Pilato, executive]

Well, it's just a totally different model, I mean when you look at the two businesses, you have -- when you look at any of the countries, you have the most digitally enabled country in the world in commerce in China. So you do focus most of your spend around those digital channels, which do two things for you. They drive marketing, they drive awareness, they get your message out in front of consumers, and they also give the consumers the ability to purchase with immediacy. So in China, with most of the investment being spent in that way, you really can reflect and revise and read the returns in real time.



When you get to the U.S., it's more of a traditional market like Canada, where you're spending some of your investment on digital commerce, which is a portion of the business. But a lot more of your percentage on what would be more, I would say, traditional marketing and brand building, which comes with a different read in terms of ROI.

What we do, do as a company in all three markets is we do continually invest in what we call market mix analysis which really gives us a return on all of the different marketing apertures that we have. We do that in -- you kind of do that backwards. So as the year closes, we'll look back over the year and figure out what spends drove the most returns -- what types of spends drove the highest return, and we'll do that by market, and then we'll revise our plans into the new year based on where we're getting the highest return. So our insights team work hard on those analysis and really unlocking opportunities for us to drive higher return as we invest.

[Operator]

Thank you. The next question comes from Justin Keywood from Stifel. Please go ahead.

[Justin Keywood, analyst]

Hi, maybe just a follow-on, on the China discussion. Any impact from the stimulus?

[Michael Pilato, executive]

Hi, Justin, nice to hear from you. Nothing that we saw, like we didn't see anything material. The stimulus came out, which is great news for China, great news for consumers for sure. We did hear some good positive sentiment from our team in China that felt good about it. But no material impact to our business. Our business has continued to trend very positively. We've continued to outpace market growth. Our categories continue to resonate with consumers as the Chinese consumer continues to be engaged in health and wellness and proactive health. So nothing material that we could see or call out at this point.

[Justin Keywood, analyst]

Maybe a hard question to answer, but historically, has there been any correlation with stimulus and Jamieson's business and increased vitamin sales?

[Michael Pilato, executive]

Are you talking China again? Sorry?

[Justin Keywood, analyst]

Well, any region for that matter?

[Michael Pilato, executive]

No. I mean our category has continued to show strength pre-pandemic, during the pandemic, post pandemic, in the recent stimulus announcements in a country like China. Really, we have not seen a change in the continued category growth as we see it, and in China, it's early days. I mean that stimulus was announced not too long ago. And we're just continuing to focus on what we can control, which is investing in the brand, resonating with consumers, driving innovation, driving distribution and continuing to drive sales. If we see any material pickup due to something like stimulus, we'll call it out. But at this point, we have not, and historically, I can't recall at any point where we've seen anything like that.

[Justin Keywood, analyst]

Okay, thank you, and then we saw some pretty healthy cash generation in the quarter, $24 million cash from ops where traditionally Q3 has been a working capital use. So just wondering if there was any dynamics there that accounted for? And then also in Q4 has historically always been Jamieson's best quarter for cash generation? And should we expect the same this year?

[Christopher Snowden, executive]

We did have some timing impact pulling cash into Q3 versus Q4. So we've maintained our guide from an $85 million to $95 million normalized cash from operations and still feel very confident that, that's our full year target.

[Justin Keywood, analyst]

Great, and then just maybe one question with the new U.S. administration coming in. There is some speculation there could be some change in the nutraceutical space. Any initial observations there?

[Michael Pilato, executive]

No. I mean we don't have any additional color at this point. I'm not sure what you're referring to in nutraceutical changes. We have not seen anything that would concern us or material -- from a material perspective. That U.S. business is a U.S. manufacturer. We manufacture in the U.S. We have manufacturing jobs in the U.S. in Irvine, California. We continue to invest in the U.S. economy, and we feel pretty good where we're positioned in the U.S. despite or regardless of who's leading the administration in the U.S.

[Justin Keywood, analyst]

Thank you for taking my questions.

[Operator]

Thank you. The next question comes from Nevan Yochim from BMO Capital Markets. Please go ahead.

[Nevan Yochim, analyst]

Hoping to start on the domestic market, solid bounce back here in Q3. Just trying to understand the growth a little bit better. Can you parse out the benefit from the prior year customer inventory reduction and then the amount you would have received from price and underlying consumption growth?

[Michael Pilato, executive]

Yeah, I look at it this way. Let's start with consumption, so when we priced the business in Q2, we had that all passed through to consumers, we had to recover some incremental costs that we've seen over the last couple of years. And really, what we're seeing today from a consumption perspective, we saw it in the quarter is kind of low double-digit dollar growth and kind of low to mid-single-digit unit growth. So when you take that and you look at what we lapped last year, there's like kind of mid-single-digit lapping of an inventory burn that you add on top of that, and that's how you get to 15% growth.

[Nevan Yochim, analyst]

Okay. Perfect. That's helpful, and then I believe in the domestic market in Q4, you're also referencing a customer inventory reduction in the prior year. Can you provide a bit more detail on what happened there and then the magnitude of this impact?

[Michael Pilato, executive]

Yeah. What we're referencing in Q4 is we're again in Q4 lapping some burn that we saw a year ago. So we should see another strong quarter in Canada, where we see continued consumption growth based on pricing and continued volume growth as well as we're lapping more burn that happened in Q4 a year ago, if you go back to our releases from Q4. So it's going to be a continuation in terms of the types of build that we see from pricing, unit consumption growth and then lapping an inventory burn.

[Nevan Yochim, analyst]

Okay, and then lastly, just on the Strategic Partners segment. Taking a look at the margins, there's a few onetime items impacting this year. How are you thinking about the margin progression in 2025? Could you potentially be back to prior year levels? Or would it be a multiyear growth period to get back to 2023 margins?

[Christopher Snowden, executive]

So we have new contracts starting in Q4 as well as in early 2025. As that volume takes place, as we continue to drive volume within our soft gel facility, those margins will repair. But I wouldn't expect them to be back to 2023 levels for some time.

[Operator]

Thank you. [Operator Instructions] The next question comes from Zachary Evershed from National Bank Financial. Please go ahead.

[Zachary Evershed, analyst]

Hey again, so the NCIB expired yesterday. Any plans to renew to keep your options open? Or is that over and done with?

[Christopher Snowden, executive]

Yeah, the renewal of that is in process, and we'll have a press release announcing the renewal of that shortly.

[Zachary Evershed, analyst]

Perfect, thanks. On the political side of the spectrum, any concerns on tariff disruptions? Or do you guys pretty much avoid cross-border shipments entirely?

[Michael Pilato, executive]

I mean there's a lot of moving pieces right now in terms of where this could all go. We're continuing to monitor it. We cross many different borders, obviously, we're an international global company. As I talked about, though, from the U.S. business, like it's very immaterial what we would produce outside of the U.S. business in the U.S. we are a manufacturer in the U.S., almost everything we sell there is made there. Raw materials for that business are not sourced from places that we have concern today.



We continue to monitor any type of tariffs in and out of Canada. However, there's a lot of moving parts here, Zach, because we import raw materials, we manufacture, we export finished goods. We're just going to continue to monitor. It's early days, and we just -- we don't know what any impacts will be because we don't know what the tariff situation will be. What we can tell you is in prior times when tariffs came up and tariffs came to the forefront, our category was not affected.

We typically are a health benefit product. We fall under some essential categorization depending on the times and where it's coming from, but we have not had impact in the past, and we don't anticipate any material impact at this time, but we'll continue to monitor it. We also do a lot of multi-sourcing, multi-supplier sourcing. We're able to move our sourcing around for a lot of the things we buy, and we'll continue to leverage that as a risk mitigation plan into the future.

[Zachary Evershed, analyst]

Great and thanks. And then just one last one on the IT system implementation. How is that going?

[Christopher Snowden, executive]

Everything is absolutely 100% on track with implementation planned for Q1 2025.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.