B&G Foods (NYSE:BGS) Q2 2026 Earnings Call

0:00 Good day, and welcome to the B and G Foods Second Quarter twenty twenty six Earnings Call. Today's call, which is being recorded, is scheduled to last about an hour, including remarks by B and G Foods' management and the question and answer session. I would now like to turn the call over to A. J. Schwab, Director, Corporate Strategy and Business Development for B and G Foods. A. J?

0:24 A. Good afternoon, and thank you for joining us. With me today is Bruce Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter in the earnings release we issued today, which is available at the Investor Relations section of bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We refer you to B and G Foods' most recent annual report on Form 10 ks and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition.

1:13 B and G Foods undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. We will also be making references on today's call to the non GAAP financial measures adjusted EBITDA, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage, base business net sales and segment adjusted expenses. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Bruce will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights and his thoughts concerning the outlook for the remainder of fiscal twenty twenty six and beyond.

2:07 I would now like to turn the call over to Bruce. Thank you, A. J. Good afternoon, everyone. Thank you for joining us today. I'm going to cover a number of topics on our call this afternoon, which will include our change in CEO and why we are so excited to have Rob Mills join our executive leadership team at B and G Foods.

2:29 Our portfolio reshaping efforts, which consists of the divestitures of low margin, working capital intensive business, including Green Giant US Frozen, L'Assure U. S. Shelf stable and the Dob Pappino brand over the past twelve months. The establishment of our Green Giant U. S. Frozen contract manufacturing business, which we expect to provide a modest but consistent contribution to adjusted EBITDA and cash flows, as well as the acquisition of the higher margin cash generative Collagen and Kitchen Basics brands. Our second quarter results, which demonstrate our ability to grow adjusted EBITDA and net cash provided by operating activities despite a challenging industry backdrop, and an update on our fiscal twenty twenty six guidance, which we are reaffirming at previous levels across net sales, adjusted EBITDA and adjusted diluted earnings per share.

3:32 While it is taking time to implement this portfolio reshaping and we are still evolving today, we can see the green shoots as our business results continue to improve and we continue to better position ourselves for a more steady and more balanced financial performance in the future. Now, before I move on to our performance in the second quarter, I'd like to take a moment to comment on our CEO transition and the appointment of Rob Mills as our Chief Executive Officer. Having served on our Board of Directors for the past eight years, Rob brings a unique combination of deep knowledge of our company and extensive operating experience. He understands our brands, our customers, our opportunities, and importantly, the challenges that we need to address.

4:23 This familiarity significantly reduces the traditional transition period for a new CEO and positions Rob to move quickly, establish clear priorities, and accelerate the actions necessary to improve execution, strengthen the business, and create sustainable shareholder value. Rob's experience is particularly well aligned with what B and G Foods needs at this point in our evolution. He joins us from Tractor Supply Company, where he has held senior executive leadership roles spanning strategy, digital commerce, technology and business operations with direct P and L accountability. During his tenure, Rob helped lead large scale transformation and growth initiatives across a complex multibillion dollar public company, while building deep experience in digital, data, AI, productivity and operating execution.

5:25 Rob also brings extensive M and A and corporate development experience, including evaluating, acquiring, and integrating businesses. This combination gives Rob a broad perspective on organic and inorganic value creation, disciplined capital allocation, and active portfolio management. Rob comes into this role with a strong sense of urgency and a clear understanding of B and G Foods. During his first ninety days, he intends to spend considerable time with our employees, customers, business partners, and shareholders, listening and developing an even deeper understanding of the challenges and opportunities in front of us. His eight years on our board provide an important head start, allowing him to use this period not simply to learn the business, but to quickly establish priorities and begin translating these priorities into action.

6:24 Rob's immediate focus will be on strengthening execution, maximizing the potential of our core brands, improving productivity and cash generation, and accelerating the strategies that can return the business to sustainable growth. Rob is excited about the future of B and G Foods and the opportunity to build upon the strength of our brands while bringing new capabilities and greater speed to the organization, and so am I. We believe that his experience in digital transformation, data, and AI can help us modernize how we operate, better understand and serve our customers, consumers, and improve decision making and identify new opportunities for growth and productivity. Rob is also looking forward to engaging directly with the analyst and investor community in the months and years ahead, and sharing more about his priorities and vision for B and G Foods.

7:22 We believe that Rob has the right combination of institutional knowledge, operating experience, strategic leadership, M and A expertise, and transformation capabilities to move quickly, make disciplined decisions and accelerate value creation for our shareholders. We are very excited to have Rob as part of the B and G Foods family. Rob will be joining our third quarter earnings call in November. And now back to the quarter. For the second quarter of twenty twenty six, we generated $383,300,000 in net sales, a net loss of $4,000,000 or $05 per diluted share, adjusted net income of $4,900,000 or $06 per adjusted diluted share adjusted EBITDA of 60,400,000 and adjusted EBITDA as a percentage of net sales of 15.8%.

8:21 As we review our second quarter twenty twenty six results, we will highlight the impact of our various M and A transactions, which include the divestitures of the Don Pappino and L'Assour U. S. Brands in the summer of twenty twenty five and the divestiture of the Green Giant U. S. Frozen business in early March twenty twenty six. Simultaneous with the Green Giant U. S. Frozen divestiture, we commenced the contract manufacturing business pursuant to which we produce Green Giant U. S. Frozen products at our vegetable manufacturing facility in Mexico on behalf of the new owner of the Green Giant U. S. Frozen business. In addition, we acquired the Collagen and Kitchen Basics brands in late March of twenty twenty six.

9:09 Unless otherwise noted, the three divestitures are included in our Q2 twenty twenty five financials, but not our Q2 twenty twenty six financials. While the new contract manufacturing business and the acquired brands are included in our Q2 twenty twenty six financials, but not our Q2 twenty twenty five financials. Because the divestiture of the Green Giant Canada has not yet closed, there is no impact to our net sales or adjusted EBITDA. However, because Green Giant Canada is classified as an asset held for sale for accounting purposes, the pending divestiture does impact how Green Giant Canada assets are carried on our balance sheet and within certain line items of our P and L.

9:57 We expect the Green Giant Canada divestiture to close during the third quarter and look forward to providing an update after the divestiture has been completed.

10:09 Net sales for the quarter of twenty twenty six decreased by $41,100,000 or 9.7 percent to $383,300,000 from $424,400,000 for the second quarter of twenty twenty five. The decrease was primarily attributable to the Green Giant US Frozen, L'Assure US Shelf Stable and Don Pepino brand divestitures, partially offset by incremental net sales from the Green Giant US Frozen contract manufacturing business and the acquisition of the Collagen and Kitchen Basics brands. Net sales of divested brands contributed approximately $68,000,000 to Q2 twenty twenty five net sales.

10:55 Net sales of acquired brands plus the contract manufacturing business contributed approximately $37,000,000 in net sales during the second quarter of twenty twenty six.

11:09 Base business net sales for the second quarter of twenty twenty six decreased by $10,200,000 or 2.9% to $346,300,000 as compared to $356,500,000 for the second quarter of twenty twenty five. The decrease in base business net sales was driven by a decrease in volume of $15,500,000 or 4.3% of base business net sales, partially offset by an increase in net pricing and product mix of $5,100,000 or 1.4% of base business net sales, and the positive impact of foreign currency of $200,000 or 0.1% of net sales.

11:56 The timing of the fourth of July holiday cost us about 1.5 shipping days in the quarter or approximately $5,000,000 to $7,000,000 of net sales in the second quarter of twenty twenty six. For the year to date period, base business net sales are on track with our plan and were essentially flat or up $200,000 to $711,400,000 for the first two quarters of twenty twenty six from $711,200,000 for the first two quarters of twenty twenty five. Gross profit was $79,600,000 for the second quarter of twenty twenty six or 20.8% of net sales, and adjusted gross profit was $83,700,000 or 21.8% of net sales.

12:48 Gross profit was $87,000,000 for the second quarter of twenty twenty five or 20.5% of net sales, and adjusted gross profit was $89,100,000 or 21% of net sales. Gross profit as a percentage of net sales increased due to the acquisition of higher margin Collagen and Kitchen Basics brands, the divestiture of the lower margin Green Giant U. Frozen business and certain tariff refunds received from the U. S. Government during our second quarter. Selling, general and administrative expenses decreased by $6,600,000 or 14 percent to $40,600,000 for the second quarter of twenty twenty six from $47,200,000 for the second quarter of twenty twenty five.

13:38 The decrease was comprised of a decrease in warehouse expenses of $3,700,000 general and administrative expenses of $2,700,000 consumer marketing expenses of $1,700,000 and selling expenses of $800,000 These were partially offset by an increase in acquisition divestiture related and non recurring expenses of $2,300,000 Expressed as a percentage of net sales, selling, general and administrative expenses improved by 0.5 percentage points to 10.6% for the second quarter of twenty twenty six, as compared to 11.1% for the second quarter of twenty twenty five. We continue to follow these costs closely, and we are taking steps to reduce our ongoing SG and A commitments to better reflect the size of our business going forward, minimizing the impact of stranded costs on our overhead structure from recent divestitures.

14:40 We generated $60,400,000 of adjusted EBITDA or 15.8% of net sales in the second quarter of twenty twenty six compared to $58,000,000 or 13.7% in the second quarter of twenty twenty five. The increase in adjusted EBITDA was primarily attributable to the acquisition of the Collagen and Kitchen Basics brands, the divestiture of the Green Giant US frozen business, the commencement of the Green Giant US frozen contract manufacturing business, and tariff refunds received from the US government during the second quarter. Net interest increased $2,700,000 or 7.5% to $38,500,000 for the second quarter of twenty twenty six from $35,800,000 for the second quarter of twenty twenty five.

15:33 The increase in net interest expense was primarily attributable to an increase in average long term debt outstanding during the second quarter of twenty twenty six relative to the average long term debt outstanding during the second quarter of twenty twenty five and the 11% interest rate on our new senior unsecured notes due 2031. During the second quarter of twenty twenty six, net interest expense was also negatively impacted in connection with our debt refinancing because the new 11% senior unsecured notes due 2031 were issued on 06/10/2026, prior to the redemption of our 5.25% senior unsecured notes due 2027, and therefore during a twenty four day period, we incurred interest expense on both sets of notes, which was only partially offset by the interest earned on the net proceeds of the issuance of the 11% senior unsecured notes due 2031.

16:34 Depreciation and amortization was $14,500,000 in the second quarter of twenty twenty six compared to $16,700,000 in the second quarter of twenty twenty five. We had a net loss of $4,000,000 or $05 per diluted share for the second quarter of twenty twenty six compared to a net loss of $9,800,000 or $0.12 per diluted share for the second quarter of twenty twenty five. The net loss for the second quarter of twenty twenty six was primarily attributable to approximately $9,700,000 of acquisition divestiture related expenses and non recurring expenses, including certain organizational restructuring efforts to reduce the cost overhang related to the divestitures.

17:23 We had adjusted net income of $4,900,000 or $06 per diluted adjusted share in the second quarter of twenty twenty six. In the second quarter of twenty twenty five, we had adjusted net income of $2,900,000 or $04 per adjusted diluted share. Adjustments to our EBITDA and net income are further described in our earnings release that was issued today and our 10 Q, which we expect to release later this week. I would now like to touch on the results by business unit for the second quarter. Net sales for spices and flavor solutions increased by $100,000 or 0.1% in the second quarter of twenty twenty six to $96,600,000 from $96,500,000 in the second quarter of twenty twenty five.

18:15 Spices and Flavor Solutions segment adjusted EBITDA increased by $7,000,000 or 29% in the second quarter of twenty twenty six compared to the second quarter of twenty twenty five. The increase in segment adjusted EBITDA is primarily due to an increase in net pricing and the impact of product mix, an improved cost environment for spices relative to the prior year and tariff refunds received from the US government during the second quarter. Net sales for meals increased 6,400,000 or 6.2% in the second quarter of twenty twenty six to $110,500,000 from $104,100,000 for the second quarter of twenty twenty five.

19:02 The acquisition of Collagen and Kitchen Basics brands added approximately $13,200,000 of net sales during the quarter. Meals segment adjusted EBITDA increased by approximately $100,000 primarily driven by the acquisition, which offset declines in certain brands. Net sales for specialty decreased by $5,900,000 or 4.4 percent in the second quarter of twenty twenty six to $128,900,000 from $134,900,000 in the second quarter of twenty twenty five. The decrease was due in part to the divestiture of the Don Papino business, which generated $1,800,000 of net sales in the second quarter of twenty twenty five.

19:49 Specialty segment adjusted EBITDA decreased by $8,900,000 in the second quarter of twenty twenty six compared to the second quarter of twenty twenty five. The decrease was due in part to the divestiture of the Dom Pepino business, certain unfavorable cost comparisons in raw materials, increased manufacturing expenses and our investment in critical oil pricing, which on the positive side benefited from increased volumes in the quarter.

20:21 Financial performance for the frozen and vegetable unit during the second quarter of twenty twenty six and the second quarter of twenty twenty five are not comparable due to the impact of the LeSour US and Green Giant US frozen divestitures and the impact of our new contract manufacturing agreement for Green Giant US frozen.

20:42 Net sales of Green Giant Canada remained strong and increased by $500,000 or 2.4% to $23,400,000 for the second quarter of twenty twenty six compared to $22,900,000 for the second quarter of twenty twenty five. Separately, the new Green Giant US frozen contract manufacturing business generated $23,900,000 in net sales during its first full quarter of operation following our sale of the Green Giant US frozen business.

21:15 Our team is looking to build this business, add new customers and increase its volumes. Before I discuss 2026 guidance, I'd like to remind the audience that we continue to live in unpredictable times, and depending on the day we are at war in The Middle East, our 2026 guidance reflects only what we know today and, for example, does not factor in significant changes in inflation, tariff policies, or the potential impact of escalation and conflicts in Eastern Europe, The Middle East, or Latin America could have on our results.

21:52 Also, note that our guidance reflects the expected impacts only of acquisitions and divestitures that have already closed. In other words, our guidance reflects the expected impacts of Don Pepino, Lasour US and Green Giant US frozen divestitures, the commencement of the Green Giant US frozen contract manufacturing business, and the College Gin and Kitchen Basics acquisition, but our guidance does not reflect the expected impact from the pending Green Giant Canada divestiture because that divestiture has not yet closed. Also, as a reminder, our guidance reflects that fiscal twenty twenty six has one fewer week than fiscal twenty twenty five, which had a fifty third week. The benefit of the fifty third week was included in our fiscal

22:42 and we will lap that benefit or approximately $18,000,000 in net sales during the fiscal fourth quarter of twenty twenty six. That said, we are reaffirming our guidance. We are maintaining fiscal twenty twenty six net sales guidance in the range of 1,735,000,000 to $1,775,000,000 adjusted EBITDA guidance in the range of $275 to $290,000,000 and adjusted EBITDA as a percentage of net sales in the range of approximately 15.8% to 16.3%. And based on this guidance, we still expect adjusted diluted earnings per share to be in a range of $0.05 $75 to $0.06 $75 per share.

23:28 Additionally, we expect for full year 2026 interest expense of $157,500,000 to $162,500,000 including cash interest of $150,000,000 to $155,000,000 depreciation expense of $40,000,000 to $45,000,000 amortization expense of $17,000,000 to $19,000,000 cash taxes of approximately $5,000,000 or less, an effective tax rate of 26% to 27%, and CapEx will likely be at the lower end of our 30,000,000 to $35,000,000 target.

24:05 As a reminder, we are making strong progress against our long term goals, which include improving the base business net sales trends of the core business to the long term objective of 0% to 2% growth, reshaping the portfolio for future growth, stability, higher margins and strong cash flows proactively managing our capital structure by using excess cash flow and the net proceeds of divestitures to facilitate debt reduction and ultimately to fund strategic acquisitions. We believe that we have the ability, even in a challenging environment for packaged food companies, to maintain a stable base business and enhance our performance through our growth by acquisition strategy, while simultaneously returning a meaningful portion of our excess cash to investors through our long standing commitment to both debt reduction and a healthy dividend policy.

25:02 We are very excited about the future of B and G Foods, and we thank you for turning into our earnings call this afternoon. This concludes our remarks, and now we would like to begin the Q and A portion of our call. Operator?

25:15 Thank you. We will now be conducting a question and answer session. Your first question comes from Andrew Lazar with Barclays. Please go ahead. Great, thanks. Good afternoon, Bruce. Hey, Andrew. How are you? Hey, there. Good. Maybe to start off, can you maybe quantify how much the tariff refund benefited EBITDA in the quarter and what your expectation would be for that benefit for the full year if there's more to come?

26:00 Yeah, we haven't disclosed the number. It's relatively modest. You go back to kind of 2025 results, and as we articulated then, we had about $8 to $9,000,000 of total incremental tariff exposure. That included tariffs where we were the direct importer of record and where we were not the importer of record. Where we were the importer of record is about a little bit less than half of that and that's largely what we got back in the second quarter. We expect to get some more back throughout the remainder of the year and in certain cases we'll invest that in the business on a go forward basis. Got it. All right. And then I think on the last call, there's quite a bit of discussion around potential inflation building even outside of just soybean oil as it relates to Crisco, but other items too. And that might necessitate some incremental pricing moves despite it being a sort of a challenging environment for everyone.

26:57 Where do you stand on inflation at this stage for this year? What might that mean for pricing? And have you taken any or plan to? And then what sort of elasticity should we be thinking about this time around, just given the consumer is under sort of more pressure than perhaps in the last couple of rounds of pricing the industry took? Thanks so much. Yes, I think on our last call, we were right around the time where both diesel fuel oil, West Texas Brent and soybean oil were all at their peak levels, so they're a little bit inside of where they were before with a couple moves up and down. That's still the largest area where we've seen inflation so far this year. There's a little bit coming in spices as well, but that's primarily where we've seen it. We haven't seen people taking pricing on

27:48 fuel costs, but we certainly have seen that within vegetable oil. And our expectation is to cover that inflation where we can. Right, and kind of the way that you've done it on CRSCO in the past, whatever it is, year or two with that new process. Okay, thank you. Next question, David Palmer with Evercore. Please go ahead. Thanks. I wanted to ask you about non measured channels. I think last quarter that might have been up low double digits or at least some sort of double digits and now it feels like it might maybe up low single digits. Wondering how you're what reason there is for that and how you're thinking about non measured going into the second half?

28:35 Yeah, we're still seeing pretty strong growth across some of our non measured channels. Canada has been strong, continues to be strong. The food service where we have it, this can continue to be pretty strong and then within spices, our private brands relationship continues to be strong as well as some of the other ones. We still see that strength. It's up. It's offsetting some of the damage in the regular track channels, But quite frankly, we need to improve the performance of our retail branded business. And I think that's a lot of the focus that Rob is gonna bring on a go forward basis. Okay. And and just with regard to what we're seeing, when we look at some of the scanner data, it looks like spices is under pressure, but you're having some some areas of strength elsewhere, like cream of wheat. You know? And could you maybe make a comment about, the wins and losses and where you see the most opportunity near and medium term with the brand business?

29:35 And I'll pass it on. Yeah, we're actually seeing pretty good trends in our hot breakfast overall, which would be cream of wheat, McCann's and the pure maple syrup, grandma's molasses. So there's pockets of strength in there. On the spices where there's a little bit of noise is some shift in some of the brands, particularly around Tones and Weber that are going from branded partner brands. So that creates a little bit of the distortion that you're seeing. But look, we need to improve our performance across the board. We've had really good performance in some of the non track channels. We need to see further improvement in the track channels as well. Thank you. Next question, Robert Mosca with TD Cowen. Please go ahead.

30:28 Thanks. Maybe I'll just go right to that last point.

30:33 Tones and Weber are going from brands to partner brands. Is that new, Bruce? And can you give a little more context as to what the rationale for that is? Yes, it's a continuation of what we've seen over time. We saw this very much early on when we bought the ACH business in like 2016, 2017, and then we're just seeing sort of the follow through there. So in a couple spots, we're losing tones distribution and it's being replaced with us providing distribution of similar product, similar amount of SKUs on the private band side. Okay, but you're not recharacterizing those two brands as like private label or work or anything like that. Okay. No, we're keeping those brands and look, we we want to improve the performance in those brands.

31:31 Okay. Got it. And can you touch on Collagen and Kitchen Basics? The sales were lighter than what we had forecasted. Maybe we got the seasonality wrong. But can you talk to your early learnings on those two? Yes, sales for both I think are just a little bit ahead of where we had forecasted, but maybe we're a little bit more conservative than you were. I think within consumption, there's a little bit of softness in collagen, which we knew when we bought this number two Northeast Regional brand. We have to price it right. I think under the last year or two of prior ownership, particularly leading up to the bankruptcy and post bankruptcy, we think it was mispriced in the market.

32:17 And so we are fixing that. We're looking forward to a strong holiday season. We kind of knew what we were getting here, which is something we've got to really protect and drive cash flows with, but manage that brand as it is, which is a number two Northeast regional player where it's been around for a long time and makes good money where we sell it. Kitchen Basics, think we continue to be surprised by this business. We really like it. We think it's got some growth opportunity in addition to having some pretty good margins. The category has been pretty good. To be fair, it's off season, but people are still buying a lot of broths and stocks in the summer, but it is off season and so it's a little bit smaller. True test for us really will be as we integrate during the winter months, the more traditional soup season in the third and fourth and first quarter.

33:10 Okay. Thank you. Next question, Karru Martinson with Jefferies. Please proceed. Good afternoon. I couldn't help but notice a couple of comments here on implementing portfolio reshaping, active portfolio management. You've done a lot of the heavy lifting here. Is there more to do or are there pockets when you look at your portfolio that you want to accelerate on? I think, Karru, there's always more to do with B and G. Tend to be pretty active in M and A and we're focused on improving our portfolio. I think a big focus for the last year and a half has been the Green Giant strategic review and so we're nearing the end of that and so that's a big lift there.

33:59 There are still things that we'll look at opportunistically across the portfolio from the divestiture standpoint, but I wouldn't put a big expectation there. College in kitchen basics, we want and we expect to do more things like that in the future where we're adding some nice incremental growth and sales and profitability to our business. I'm sorry, I missed it. Did you give a tariff refund number? We did not. Okay. It's not huge number. Okay. Thank you very much. Appreciate it. Next question, Hale Holden with Barclays. Please go ahead. Hey, Bruce.

34:44 On the tariff refunds, which I think is you outlined is all in the spices line, Was that part of your original guidance or is that something that's sort of a put and take as you came across it in the middle of the year? We always knew that it was out there. It's probably a put and take as it factors in and we've got a little bit of both here as we always do. Yeah. And when you think about risk to the next two quarters that get you to the low end or the high end of that guidance range? Maybe you could talk through some of the puts and takes that you're seeing on the ground. Yes. Think if you look at the guidance that we laid out, and it's a little bit more moving pieces because of the M and A transactions, to be within our range, is kind of a flat to down 2% in net sales kind of base business and then plus or minus the rest of the M and A.

35:55 And so we're not looking for anything heroic. We feel comfortable where we are. We do know that we love the fifty third week last year and you'll hear me cry about it when we give our fourth quarter results this year, but we feel like we're on pace given where we are year to date. Great. And then just last question is, anything changed in Canada or we're just waiting on the regulatory process there for the sale? Just waiting on the regulatory process. We're chomping at the bit to to get completed just like I'm sure you guys already hear about it, but it takes time. I'm sure you are. Thank you, Bruce. I appreciate it. Yep. Next question, Carla Casella with JPMorgan. Please go ahead. Hi. Just one follow-up on Hales. You mentioned Canada.

36:42 The 1,735,000,000 to 1,775,000,000 revenue, that includes the Canada business because it hasn't been sold, right? Yeah. We're going to include Canada in our numbers until we sell it, until the transaction Okay. Is And the proceeds, originally we were using a placeholder of $60,000,000 but I think that's when the assets held for sale were closer to that amount. Would the proceeds be now closer to the $32,000,000 assets held for sale? Yeah. And proceeds are going to move around as inventory moves. And so the one thing to keep in mind is we announced this transaction, I think back in the third quarter around where we're near peak inventory levels. Second quarter, we're near trough inventory levels.

37:28 We're coming in the pack season right now and so inventory will be higher and therefore value that we receive in the transaction will be higher. So it's kind of yes to both of your numbers. Ultimately So it's it's Ultimately, it'll be it'll probably be closer to the September of last year number, but we'll see. Right. And it's just gonna match whatever's on the assets held for sale, though there's no incremental amount? There's moving pieces within that and there's a small true up on top of it. Okay. And then just with the asset sale versus the acquisitions, as you look at the overhead costs, are you sitting on stranded costs? Or is there a need to add in additional overhead with Collagen? I'm just trying to get a sense for like a good run rate for SG and A. It came down nicely this quarter, a lot lower than we expected.

38:25 And I'm just trying to get a sense for whether you need to add costs back in, or is there still more room to cut costs? I I think you'll continue to see costs reduced into early third quarter, and then we should be largely at a run rate from there. Okay. And then can you just talk to the M and A environment? Like are there assets out there, things that you would look at or could you consider further asset sales to accelerate balance sheet improvement? We're always looking at both. There are deals that are being announced. There are deals that have been speculated on for some period of time that are kind of sideways and haven't been announced.

39:11 We've seen some large deals get signed and completed in our general kind of space. There's stuff out there. I think it's a matter of finding things at the right price whether we're buying or selling and, you know, I don't I don't know what the next thing is, but at some point, they'll they'll be another one. We continue to look for ways to improve our portfolio over time. Okay. Great. Thanks. Thanks, Carla. Next question comes from William Reuter with Bank of America. Please proceed. Good afternoon. So just to make sure I understand where we are on the tariffs. So I think you said it was 8,000,000 or $9,000,000 You were the importer of record for less than half of that. I think you got most of that back in the second quarter.

40:06 Will you be receiving proceeds where you were not the importer of record? Will those vendors be, I guess, sending those proceeds that they received to you? Where appropriate, we're going to do our best we can to recover every dollar. Okay. All right. And so I guess that could be a little bit of a tailwind to your results in the second half of the year. Is that right? It could. Okay. But again, just keep in mind like the relative size of this is not massive. Yes, understood. And then we're hearing that you had mentioned that you were not pushing through fuel surcharges and you weren't hearing of others doing the same.

40:54 Freight, excluding fuel, domestic freight charges are pretty elevated. Is that putting pressure on your margins in the back half of the year? I mean, define pressure, it's not helping margins in the back half of the year, but it's not. For us fuel is just one part of our logistics costs. We need every penny. So yeah, put a little bit of pressure and like we said, we've got a lot of puts and takes and so we got to find some to offset it. Got it. And then just lastly Certainly for me the fuel impact is not radically different than where it was the last time we spoke. In fact, it's probably better or less scary or less bad. Right. Okay. And then I can't remember the actual number you said.

41:43 It was something in the 20s, the revenue from the contract manufacturing. Where are you at in terms of is that business profitable at this scale or do you need to add business in order for that to generate EBITDA? It's running at about $25,000,000 give or take, maybe just a hair under that per quarter and so annualized that might be just under a $100,000,000. That will not be the 2026 number because we really only started running that in the second quarter. The business is modestly profitable, not game changer, but modestly profitable and it's a benefit to EBITDA. We want that to be a sustainable business. We would love to grow it and we want to continue to service our largest customers well as possible.

42:32 Got it. I guess this will be the last one I promise. How challenging do you think it's going to be to add incremental customers and volume to that facility? I mean it's selling, it takes effort, but we actually think we've got a really good facility and we've got a couple nice little wins already on it, but not game changer, but nice little business that we have and we want to continue to run. Got it. All right, thanks for taking all my questions. Thanks. There are no further questions. This concludes today's teleconference. You may disconnect your lines at this time and we thank you for your participation.