Snyder's-Lance (LNCE) Carl E. Lee, Jr. on Q2 2016 Results - Earnings Call Transcript

| About: Snyder's-Lance, Inc. (LNCE)

Snyder's-Lance, Inc. (NASDAQ:LNCE)

Q2 2016 Earnings Call

August 09, 2016 8:00 am ET

Executives

Kevin Powers - Senior Director, Investor Relations, Snyder's-Lance, Inc.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Analysts

Brett Andress - KeyBanc Capital Markets, Inc.

William B. Chappell - SunTrust Robinson Humphrey, Inc.

Akshay Jagdale - Jefferies LLC

Amit Sharma - BMO Capital Markets (United States)

Jonathan Feeney - Consumer Edge Research LLC

Mario Contreras - Deutsche Bank Securities, Inc.

Michael W. Gallo - C.L. King & Associates, Inc.

Eric Mitchell Gottlieb - D. A. Davidson & Co.

Operator

Good day, ladies and gentlemen, and welcome to the Snyder's-Lance Second Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Kevin Powers, Senior Director of Investor Relations. Sir, you may begin.

Kevin Powers - Senior Director, Investor Relations, Snyder's-Lance, Inc.

Thank you, operator, and good morning, everyone. With me today are Carl Lee, President and Chief Executive Officer; as well as Rick Puckett, Executive Vice President and Chief Financial Officer of Snyder's-Lance, Incorporated. During today's call, we will discuss our 2016 second quarter results, as well as our outlook for the balance of 2016. As a reminder, we are webcasting this conference call, including the supporting slide presentation under the Investor Relations section of our corporate website at snyderslance.com.

Before we begin, I would like to point out that during today's presentation, management may make forward-looking statements about our company's performance. Please refer to the Safe Harbor language included in our presentation. A reconciliation of GAAP results to non-GAAP financial measures is available in our earnings release and slide presentation, both of which are posted on our website.

I'll now turn the call over to Call Lee, President and CEO, to begin management's comments. Carl?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Thank you, Kevin, and good morning, everyone. We appreciate you joining our second quarter call today. I'll begin my comments with an overview of the quarter and provide an update on our integration of Diamond Foods. Rick will then take you through the quarter in more detail and discuss our 2016 outlook.

Now, if you'll join me on slide 5, we'll begin to talk about the second quarter results. We delivered solid financial results in second quarter that were ahead of our original expectations. While sales were a little lower than anticipated, we delivered operating margin expansion and achieved strong bottom line results.

Net revenue increased 41% with the contribution of Diamond Foods. Excluding Diamond, net revenue increased by almost 1% on core brands. The overall decline of 1.3% was driven by reduced sales in our other revenue category due to some planned changes in contract manufacturing. I plan to go deeper into our revenue performance in a second.

Operating margin expanded 90 basis points. This improvement in the quarter was driven by strong cost controls across the P&L. Our savings initiatives drove increase in plants utilization, supply chain efficiency and savings in procurement as well as SG&A savings, as we manage expenses carefully. Our margin expansion plans are fully under way as we discussed with you previously. Our adjusted EBITDA reached almost $79 million for the quarter, up almost 57%.

In addition, the integration plans are on track for Diamond and our efforts to capture the synergies are on schedule. We expect those benefits to accelerate as we move through the second half of this year. Good bottom line performance in the quarter and our outlook for 2016 continues to reflect our margin expansion efforts.

Now, join me on slide 6 as we talk a little bit more about our revenue. Now, turning to Q2 revenue results, again, total revenue increased 41% to $610 million. Diamond contributed an incremental $184 million, keeping in mind this reflects some weakness in Diamond brand performance that we are addressing quickly. The new Diamond portfolio of brands extends our consumer reach, our channel penetration and our growth potential. Therefore, we remain excited about the power of this important transaction.+

As expected, our Snyder's-Lance legacy net revenue declined in the quarter due to anticipated changes in contract manufacturing. Partially offsetting this was growth in Partner Brands and our Branded business. Branded revenue increased 0.4%, driven by 1% growth in core brands, with volume growth of nearly 3.5%. This is a significant improvement from our first quarter results as our renovation process is driving momentum in our pretzel sales trends.

Let's take a closer look at our quarter brand performance during the second quarter. If you will, join me on slide 7 as we begin to look at our individual legacy brands. Starting with Snyder's of Hanover. As we discussed, the pretzel category has been facing some headwinds, and this has impacted our performance. However, our renovation process, led by our marketing team and driven by our sales organization, is delivering the early results we expected.

In the second quarter, we kicked off our new integrated marketing plans that included TV advertising, new products and enhancements to our promotional calendar; have all led to a step up in our consumption trends. In the second quarter, we moved back to the position of gaining market share. I'll talk a bit more about Snyder's of Hanover in just a few moments as we continue to review plans for this very important brand.

Turning attention to Lance. Lance sandwich crackers continues to benefit from the brand renovation process that we completed last year. We've successfully leveraged this effort in the past to drive brand and category growth. We are seeing positive velocity and base business growth across all channels.

Consumer enthusiasm over the new packaging design and product enhancements have driven solid sales growth for the last four quarters. Given the growth we are planning, we'll be bringing on additional manufacturing capacity at the end of the third quarter. Our gluten-free products continue to outpace our expectation as we see sales growth with both our retail customers and our online merchants.

Cape Cod continues to benefit from our early brand renovation. Good growth in the quarter as we outpaced the category nearly two to one. DSD execution continues to drive retail visibility, extending our franchise and our consumer awareness. Strong base performance in successful limited batch new items are helping to ensure we maximize the summer demand for Cape Cod. Cape Cod is a strong contributor to our margin enhancement initiatives.

Pretzel Crisps grew share in the quarter and we continue to drive household penetration. During the quarter, we launched apple sticks and new flavors to refresh the line in time for the back half of 2016. Innovative new products continue to expand consumer reach and usage occasions.

Late (6:37) July continues to perform well across all natural and traditional retailers. Distribution gains continue as we leverage our DSD sales team across the supermarket channel. We have the opportunity to leverage our strong consumer loyalty with this growing brand as we leverage our better-for-you positioning. We have further room to expand this exciting brand, bringing forth all the resources that Snyder's-Lance has to offer.

Now, turning to slide 8, and focusing a little bit more on Snyder's of Hanover and the brand renovation. I will now update you on the progress that we made over the last 90 days. The Pretzels, Baby advertising campaign worked according to plan as we drew attention to our brand and the category. We saw sales increases across our best-selling product segments and our leading SKUs.

This was aided not only by our marketing plan, it was also supported by ACV distribution gains and improved display coverage by our sales team. We are in a process of refreshing our specialty line of pretzels such as Braided Twists and launching our all-important new organic SKU. In time for back to school, we have transitioned to peanut-free manufacturing and are rolling out an exciting new item for kids. The early results are very encouraging, as consumption trends have rebounded since early April when we began our marketing campaign. We still have some work ahead of us and additional plans to implement as we push for further gains over the next two quarters. But we want to recognize that the early results are very, very encouraging.

Turning to slide 9 as we give you a Diamond update. For our recently-acquired Diamond Foods brands, performance was mixed for the quarter. Kettle brand remains healthy and strengthens our position within the Kettle Chip category. Kettle brings a younger consumer focused on better for you attributes that broaden our appeal across the chip category. In the quarter, new innovation like avocado oil continues to fuel growth as we extend the reach of this successful brand. And we are starting to see ACV expansion as we leverage our DSD and direct sales forces.

Emerald provides us with a strong brand in the snack nut category. We continue to see significant amounts of opportunities to build the Emerald brand. In the quarter, the base business continued to improve driven by Small Bag ACV distribution gains, leveraging the new products for 2016. As a reminder, we continue to overlap the exit of the canister line in a few remaining retailers as we move to the new re-sealable bag. Pop Secret continues to struggle in the quarter as the brand was negatively impacted by category headwinds and competitive activity.

Let's take a minute to discuss our approach to moving trends back into a positive territory. If you follow me to slide 10, we'll give you more update on Pop Secret. As we discussed last quarter, we have turned our attention to renovating Pop Secret. Those renovation plans are being finalized with early execution and we remain excited about the potential of this brand and the marketing efforts that we have under way.

Let me highlight just a few. Early retail response to our plans has been very positive, allowing us to roll out and tackle new promotions and consumer events. We are already picking up additional SKU authorizations and improving our planograms. We are leveraging our quality and taste advantage with consumers as consumption occasion remains very strong. We're expanding the Disney equity to reach more consumers and drive purchase frequency.

Continue to expect to see new consumer marketing programs later this quarter and begin to ramp up in the fourth quarter. While our plans are underway and we know this turnaround will take some time, we remain very excited about the early wins we're seeing, and we're very encouraged by the ongoing retailer support.

Now, follow me to slide 12 and we'll talk about the integration. I'd like to discuss our progress on the overall Diamond Foods combination. As we've previously outlined for you, we expect to realize $75 million of cost synergies from this strategic combination. We plan to invest $10 million of savings back into our brands, so the net savings will be $65 million.

We expect to realize 50% of the cost synergies during the first 12 months and the remaining coming in the second year. We are on track to achieve these targets, and we expect to realize the savings in three key buckets: SG&A, logistics and cost of goods. I'll share with you a couple of our early wins in these three areas.

In SG&A, we've been able to build a stronger sales team. The combination will pay dividends for a long time to come, and we've been able to do that while we also improved our overall selling expenses and reduce some of our cost. The finance team has eliminated redundant public company expenses and professional fees. Our new logistic scales is driving savings and improvements in services, and we've been able to consolidate shipments to maximize our freight efficiency.

We've been able to leverage our expanded manufacturing capabilities, and we've been able to pilot production changes across our plants to deliver a lower production cost. We're also utilizing our scale to drive purchasing efficiencies and making good progress on that front. I'm pleased with the early progress and the dedication of our team as they work diligently to combine these two companies.

Now, follow me to slide 13 and we'll talk about our revenue synergies. We spoke to you last quarter on our strategy to drive these overall synergies and growing (12:07) the top line. So far, we're making good progress on this important front with recent authorizations that are moving into the implementation stage. As expected, our revenue synergies are being driven across four key areas: geography, where we focus on kind of North American expansion of our brands; also some early wins in key channels like the Club and Drug; also with the categories where we got an innovation pipeline that we've been able to enhance and expand leveraging the best of both companies. And then also in e-commerce, where we've been able to increase our resource and expand our focus on this important growing channel.

As we indicated, these wins across these areas will take time for us to ramp up. I hope you could appreciate the sensitive nature of these efforts considering our competitive industry and understand that we cannot share more at this time.

Now, I'd like to turn the call over to Rick who will provide more details on the quarter and walk you through our 2016 financial outlook. Rick?

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Thank you, Carl, and good morning, everyone. If we'll turn to slide 16 in your deck, what you'll see there is the revenue for the second quarter. Net revenue increased by $179 million or 41% for the quarter when compared to last year. Excluding the Diamond contributions, Snyder's-Lance net revenue was down 1.3%, as Carl mentioned earlier. The driver of the lower revenue was our other contract manufacturing, which included planned exits of some lower margin contract business during the quarter. Contract manufacturing was down 18% or $8 million. This reduction, however, had little impact on our gross margin for the quarter.

Turning to slide 17, Branded revenue increased 0.4% and core brands are up about 1% for the quarter. On a volume basis, brands are up just over 3% and core brands are up over 3.5%. We supported the expansion of certain core brands into important direct channels and the launching of new platforms in Late July during the quarter. We expect that this level of investment will continue through the third quarter as we support the renovation efforts underway for some of our core brands.

We had strong growth in our Lance, Cape Cod and Snack Factory brands. We also had significant improvements in the SOH brand. The SOH renovation process is working, and we have good momentum going into the second half of the year. We were able to grow market share across all of our core brands over the last 13 weeks.

On slide 18, operating income increased by $19 million during the quarter. Gross margin improvements were driven by excellent manufacturing performance as we drove better efficiencies and scrap performance in our larger facilities. Good SG&A cost controls helped secure an operating margin improvement of 90 basis points to 8.4%.

As stated in our Q1 call, we did invest approximately $0.10 of EPS in additional advertising compared to Q1. This was used to help drive the renovation of the SOH and our Diamond brands. Our investment in advertising was approximately $0.05 in EPS, more this year than it was last year in Q2.

We made great progress on our cost reduction initiatives, as well as their synergy capture during the quarter as we are driving both of those very aggressively. We still expect to reach both our cost reduction and synergy targets as previously communicated.

Looking at slide 19, we grew adjusted EBITDA by 57% in Q2 driven by the lower expenses and the Diamond contribution. We also drove EPS increases over prior year of 4%, from $0.27 per share to $0.28 per share excluding special items.

On slide 20, our free cash flow continues to show good progress and strength as we deliver our EBITDA, as well as our leverage coming down. Our leverage is expected to be below 4.0 by year-end 2016 and below 3.0 by year-end 2017. We have maintained our expectations around capital expenditures as well for the year at about $80 million to $85 million.

Slide 21 provides a summary of the financial results for Q2. We've covered a lot of this in detail so this is primarily for your information. Let's turn to the guidance on page 22. We are updating the guidance to reflect the actuals through Q2 and our current expectations for the full year. We are narrowing our 2016 EPS guidance, excluding special items, to a range of $1.22 to $1.32 versus our prior guidance of $1.20 to $1.30. This outlook excludes costs associated with the acquisition and the integration of Diamond Foods. However, it does include the $0.10 to $0.12 per share impact from purchase accounting as we've previously talked about. The purchase accounting is tracking in line with our initial forecast.

For fiscal 2016, we estimate revenue in the range of $2.29 billion to $2.33 billion or growth of 39% to 41% over fiscal 2015. We have left this guidance the same even though we are seeing some improvements in some of our core brands and categories. The revenue growth environment continues to be difficult and pricing through promotional activity is necessary to grow. The renovation of Pop Secret that Carl mentioned is at the early stages. So, we have remained cautiously optimistic that we will be able to see more positive trends there this year.

Given the Brexit environment and the currency impact thereof, we will also see about $6 million incremental negative impact on our top line for the rest of the year. Net of these impacts and reflecting the 10-month contribution, we are reconfirming our estimates of $630 million to $650 million of sales for the Diamond brands in fiscal 2016. However, given the incremental negative currency impact, we could be toward the lower half of the range.

We're also now estimating adjusted EBITDA of $313 million to $325 million for fiscal 2016 or approximately 13.6% to 14.2% of revenue. This was previously $310 million to $325 million. As mentioned before, we're estimating CapEx at $80 million to $85 million. In addition to this outlook, we also provide additional information to aid with the forecasting of the combined company.

We're estimating fully diluted share count of 93 million to 94 million, tax rate of 34% to 35% and interest expense of $33 million to $35 million. All three of those have been unchanged since the first quarter. With the addition of Diamond's revenue seasonality, the timing of synergies and our stepped-up advertising in trade promotion in the second and third quarters related to our investments in Snyder's of Hanover and Pop Secret, we continue to anticipate that the fourth quarter will be our strongest quarter in terms of revenue and EPS.

We expect our third quarter to be in the range of $0.28 to $0.31 per share. Please note that we do not plan to provide quarterly guidance on an ongoing basis, but recognize the external forecasting challenges inherent with the transformational Diamond Foods acquisition. And we want to provide with as much visibility as possible.

Now, I'll turn the call back over to Carl for some final remarks. Carl?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Thank you, Rick. Before we begin the Q&A portion of our call, I'd like to make a few final remarks. In 2016, we will continue to execute our strategic plan to drive sustainable growth and deliver shareholder value. We're focused on building premium and differentiated brands. We're going to continue to expand retail distribution. We're going to focus diligently on the integration of Diamond. We're going to continue with our margin expansion efforts to expand our margins. And certainly, we'll continue to invest and develop our people.

As consumers continue to expect more from their snacks, we are in great shape to deliver the nutrition, quality and innovation they expect. We're well positioned to take advantage of the trends happening in our industry, and are confident in our ability to deliver great snacks for our consumers and to drive value for our shareholders.

At this time, we'd like to turn the call back over to operator. And, Chanel, we'll let you take the lead. Thank you.

Question-and-Answer Session

Operator

Thank you, ladies and gentleman. Our first question comes from the line of Brett Andress of KeyBanc. Your line is now open.

Brett Andress - KeyBanc Capital Markets, Inc.

Hey. Good morning. I wanted to first start on the 3% increase in Branded volume, about a $9 million increase in sales. Could you frame up where that volume came in, relative to what you were expecting internally against that $60 million (21:10) in spend?

And then secondly, could you remind us how long that campaign is slated to run for? And did the retail takeaway in pretzels come in above or below what you were expecting internally, to the point where we can maybe see it go positive this year?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Yeah. Let me deal with that question. I think, first of all, we did see some very positive response from the campaign. We did begin to see some pretty immediate lift as we expected. And it wasn't just the TV adverting. It was also the retail plans and some of the customer plans that we had in place. But we saw some very nice lift as I mentioned earlier on a couple of our key segments. Our shapes and our pretzel pieces are part of our most – largest size – largest segments of our overall business there and we saw some pretty good initial response from those.

So, we've seen some good progress on pretzels. We expect that to continue, and it's our most important category and we see some continued growth potential there. So, we've got some additional plans to roll out through the balance of Q3 and also Q4. And I mentioned the new products and some of the activity we've got around back to school. So, we've still got some work to do, but we're feeling good about the progress made so far on pretzels.

Brett Andress - KeyBanc Capital Markets, Inc.

Thanks for that. And on the Diamond business, are you able to give any guideposts in terms of what you're budgeting for walnut prices ahead of what should be another record crop this year? A lot more supply coming out of the market. And what are your expectations for retail nut prices and the demand environment as we move into the back half of the year?

Rick D. Puckett - Executive Vice President & Chief Financial Officer

I'll take that one Brett. We are not able to provide any significant guidance yet on the walnut pricing. Actually, as that works, as you probably now, we take a hard look at that and an international look, of supply and demand and come up with the pricing starting a little later in the third quarter. And the first payment to the growers actually happens in the first part of the fourth quarter. So, we don't necessarily have any specific guidance at the moment other than exactly what you say, is that there is a good indication that the supply is going to be adequate and the demand is probably left a bit unchanged. So, we'll be able to talk more about that at the end of Q3.

As it relates to the pricing, we are seeing some price reduction. But again, nothing more than we would've expected based on where the cost per pound is on walnuts. As you know, they came down dramatically year-over-year in 2015 and 2016. So, we feel comfortable with where we are and we believe that we'll be able to give you a lot more detail on the walnut cost and pricing in the new crop at the end of the third quarter.

Brett Andress - KeyBanc Capital Markets, Inc.

Got it.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I mean, just adding to what – just to add a little bit to that question, because I think, the walnut is a new business for us. There's no doubt about that. But we have spent a tremendous amount of time digging very deep and really getting familiar with that very quickly. We kept in place a lot of the very successful pricing programs and retail programs that the previous Diamond management team had put in place. We've been able to leverage all of their best practices and their experience, we've been able to keep the team in place that was managing it day to day and we've been able to work with our growers very aggressively to make sure we kind of take care of their needs and ours.

So, we've got a better pricing environment when it comes to retail pricing because prices have been moving down over the past couple of months. We've got a more favorable situation as far as the crop that's coming in, like you mentioned before. And so, we're really going to focus to make sure we kind of manage our overall margin dollars there as we go forward.

The good news is we've got the strength of the Diamond brand, which everyone knows is clearly the leader in this category. We've got a really strong position there, kind of like we do with pretzels and Lance, have a leading brand that we can nurture and make sure we kind of maximize the returns.

Brett Andress - KeyBanc Capital Markets, Inc.

Got it. Thank you. And, I guess, a quick one lastly, on the UK business. Does the Brexit impact your view or your international kind of go-to-market strategy or longer term strategy for that business?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

It doesn't at all. I mean, having lived and worked over there for a number of years, I'm excited to be back in the UK and excited to be across the entire European market. We're seeing some real opportunities over there. We've got manufacturing capabilities there in the UK. We've got manufacturing capabilities on continental Europe. So, we're in good shape from that standpoint. We've taken into account some of the early trends that Rick mentioned with some of the forex that we've had to deal with. But we just see it as a very exciting market. We've launched some great new items this year with Kettle that are really doing quite well in the better for you area. We purchased Metcalfe's Skinny Pop at the beginning of the year, or actually entered in a JV with the owners and we're rolling that out and supporting that, and so we're excited about that. So, still very optimistic about the potential and the great management team that we have there focusing on Europe.

Brett Andress - KeyBanc Capital Markets, Inc.

Thank you.

Operator

Thank you. And our next question comes from the line of William Chappell of SunTrust. Your line is now open.

William B. Chappell - SunTrust Robinson Humphrey, Inc.

Thanks. Good morning.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Good morning.

William B. Chappell - SunTrust Robinson Humphrey, Inc.

First, on the Diamond synergies, I understand it's still early stages. But, I think, it was about a year ago – or, sorry, in October, you initially kind of came up with $75 million in synergies. So, is there any learnings, findings you've had in the nine months since then where you think there may be some upside to those type of numbers, or did you just have a great first guess?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I think we've built our confidence around making sure that we can deliver those numbers and make sure we meet expectations that we promised you and the Street. So, execution is well underway. The original plans that we put in place are coming through on schedule. We've got projects assigned to our key executives and our key management team to make sure we execute them kind of one by one. And we've just been able to build again, more assurance that we're going to deliver our targets.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

I would add to that, though, the initial estimate was not, as you kind of framed it as a guess, and I know you didn't mean that. But it was after a huge amount of diligence and conversation with the Diamond management team in terms of where the opportunities lay or lied. And we were very much ahead of the game in terms of our understanding of the cost structure before we actually closed the business and when we actually made those statements in October. So, it was not without a lot of input and analysis to come up with that initially.

William B. Chappell - SunTrust Robinson Humphrey, Inc.

Okay. And then, in terms of kind of the revenue potential, is there any way to quantify even like the Kettle ACV gains that you've seen just since you've had ownership?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

We're being really careful with that information. I hope you can appreciate that. But I think that we're getting authorization gains. I mentioned the Drug channel. I mentioned the Club channel, those areas there that we've been able to make some improvements. It just takes a little bit of time to get the authorization and then get the actual product placed on the shelf and then begin to build the revenue from it. So, the revenue synergies, we did not build into our overall cost synergies, but we're on track as we execute those as well.

William B. Chappell - SunTrust Robinson Humphrey, Inc.

Okay. And then, a final one, a little bit more on Pop Secret. I mean, would you characterize it as more of competitive pressure from ConAgra just coming – and I know for years, they had been kind of seeded a fair amount of market share and didn't know if it's more on price promotion or whether you can really by just making consumers aware of your brand again really renovate the brand?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

It's a little bit of all of it. I think it's the – the category needs support and attention, and we've been through this before when you know – Cape Cod, as we've mentioned, the sandwich crackers. So, we've had some successful track records of renovating brands, as we call it. And we see this just as another challenge, another opportunity.

So, I think there – a couple of the brands in the category are leaning a little bit more into price versus quality and premiumization. We're going to focus on the learnings that we've got so far that show that we've got the best quality and the best taste, and then we'll leverage some of the weapons we've got in our arsenal, so to speak, to continue to kind of reinvigorate the category. But also very importantly, excite people about our brand again.

So, it's just going to take a little bit of time. No surprises there and our comfort level is high. We just got to roll up our sleeves and go to work.

William B. Chappell - SunTrust Robinson Humphrey, Inc.

But you do think the category can actually grow again?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Yeah. Yeah. I think what we're finding when we did the consumer research is that, that occasion of having microwave popcorn at home, a chance to enjoy a movie with a friend or a family member or be streaming TV, that that occasion is still extremely important to consumers. And so, what we've got to do is just to make sure we remind them that our item is included when they have that occasion.

So, consumer research is very positive and the response from the consumers is good. The category, to your point earlier though, had not gotten a lot of attention for a number of years and it just needs a little bit more of that today.

William B. Chappell - SunTrust Robinson Humphrey, Inc.

Got it. Thanks so much.

Operator

Thank you. And our next question comes from the line of Akshay Jagdale of Jefferies. Your line is now open.

Akshay Jagdale - Jefferies LLC

Good morning.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Good morning, Akshay.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Hi, Akshay.

Akshay Jagdale - Jefferies LLC

Hi, Carl, and thank you for the added disclosure in your presentation. It's useful. Can you just give us an update on the CFO search and how that's going? I don't know if I, maybe I missed it but if I did, excuse me.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

No. We have not updated it. But I do appreciate the question because that's an important one for us to deal with. I think I'd just begin by, again, thanking Rick for all of his years of service and for being a good partner. But we've been able to launch a very extensive nationwide search, talking to dozens and dozens and dozens of candidates.

And so I'm very optimistic about the quality of the individuals we're talking to, the talent that we've been looking at, and just the overall response, of a lot of excitement in our company and our strategy and our better for you positioning.

And so, we're in great shape to get this thing finalized over the next couple of months. We're looking for someone that's going to help us continue with our margin expansion efforts. We're going to look for someone that's going to allow us to continue to make sure we improve our shareholder returns.

And then, we want to continue to place some big bets on some very key things that will drive our company and help us continue to grow. So, we're finding candidates with all the skill sets we're looking for and we're finding good response to our search. We're just being diligent to take the time to make sure we really do it right. And the weekends and nights that we've invested have all gone very well so far.

Akshay Jagdale - Jefferies LLC

That's helpful. And then just for the businesses that you acquired, I'm trying to get a sense of the underlying growth there and the way you look at it. So, I know you're not ready right now to maybe update us on long-term guidance on sort of the core brands, but for the brands that you've acquired, a couple of them, there's some unusual things going on, right, so you've got a restaging or repositioning of Emerald that's causing some noise on the top line. But I believe the underlying profitability there is stronger than it's ever been. So, that's a little bit of noise there.

So, can you just maybe give us a sense of the $630 million to $650 million, what's the underlying growth right now? So, the $630 million to $650 million, if you were to take it on a comparable basis from a year ago, what kind of growth rate does that assume? And how much of a drag is sort of the walnut pricing, the FX and maybe sort of the restaging of this Emerald brand impacting those numbers?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I think, as you pointed out in your question, there's a lot of moving parts there. There's some things that are moving with walnut pricing, there's some things moving with currency. There's several things moving.

So, we haven't broken out just the actual growth rate for that collection of brands. I think we've done a good job of giving you a target on the total revenue growth. I think that we see continued good strength in Kettle, and we just got to buy a little more time to overlap some of the transition from the previous canister to the new re-sealable bag.

That brand is very attracted to us. Walnut pricing is begin to stabilize, so we've got to now just focus on our margin and our contribution from that. And in Pop Secret, we mentioned we've got a little bit of work to do, but it's well underway.

So, we still like the portfolio a lot and just as you have with any type of – to normal transition from one company to another, there's a little bit of extra effort involved as you bring the brands over and moving very careful the way we do that. But we haven't broken out the actual growth rates to be specific.

Akshay Jagdale - Jefferies LLC

But do you think long term sort of a 3% to 5% algorithm for the core brands is still something that's realistic?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Definitely. Definitely, Akshay. And that's what we've talked about in the past is that 3% to 5% growth of to the core is important to us, and that's what we're looking for. That'll be offset by a little bit of maybe Partner Brands or contract manufacturing or some of the others things like we saw this period. But our key core brands, targeting at 3% to 5% is still our strategic objective and how we build our marketing plans and our sales efforts.

Akshay Jagdale - Jefferies LLC

And just one last one from me. Just an update on – you've had some disruption, if I may, with one of your larger customers that had been ongoing. Can you give us a little bit of an update on at least the trajectory of where that stands? I know there was a lot of moving parts with that particular customer in every quarter it's sort of the number of moving parts was increasing. Have we found some level of stability with that particular customer? And if you can give us some more strategic view of how you've addressed that issue, that would be great. Thank you.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Yeah, I'd be happy to. I think that to your point, there has been several moving parts there. There was kind of a focus on clean store, focus on SKU rationalization, focus on some other changes in other parts of their merchandizing processes. And so, we've just kind of been able to flow through it. We worked very diligently at retail level, to make improvements at store level, and then worked very diligently at headquarter level to overcome some of the challenges there as well.

So, I would say we're making progress. More progress is needed. That will probably continue to evolve just a little bit over time. And what we've got to do is just make sure we're very attendant to their needs, and to ours and the consumers' that shop there. But at the same time, make sure we're focusing on other retailers so we've got some ways to make up any short-term headwinds.

Akshay Jagdale - Jefferies LLC

Have we reached at least somewhat of a steady state there where you feel comfortable?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I would say we're getting there. Not quite there yet because the things happen, to your point, in phases. There was something that happened in Q3 last year, and then some in Q4, a little bit more, I think, earlier this year. So, it's just been a little bit of a continuous kind of moving parts, to use your term. But the focus is there and I think that a little more time we'll begin to get to the point of getting out from behind it.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Actually, I would add that the combination with Diamond has given us more scale which allows us to put more resources against that strategic partner of ours. So, we've been able to focus and concentrate resources where we weren't able to do that as well in the past. So, that's a very big plus for us. It's allowed us to kind of go from top to bottom, as Carl mentioned.

Akshay Jagdale - Jefferies LLC

Thank you. I'll pass it on.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Thank you, Akshay.

Operator

Thank you. And our next question comes from the line of Amit Sharma of BMO Capital Markets. Your line is now open.

Amit Sharma - BMO Capital Markets (United States)

Hi. Good morning, everyone.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Good morning, Amit.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Hi, Amit.

Amit Sharma - BMO Capital Markets (United States)

Carl, just a follow up on the previous question from Akshay about your largest customer. So, you said third and fourth quarter, we saw some headwinds. Are those – so, understanding, there is an impact year-over-year for these two quarters. But are there any additional incremental headwinds in the first and second quarters?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I think you just – I mean we've talked about this quite a bit and I appreciate the question. But, I think, there's some ongoing evolution there, some ongoing changes there. And I think that we should expect to see a few more. But, I think, the key, as Rick said, we really started addressing them both at retail and then also addressing them at headquarters. So, it's a little hard to predict what will happen as we go forward. But, I think that we just got to continue to kind of hunker down and make sure we're really focused on our retail execution there.

Amit Sharma - BMO Capital Markets (United States)

Got it. That's fair. And then, the question on your trade spending levels or promotional levels, it seems like the delta between net and gross sales seems a little bit bigger or greater than it has been in the past. Can you talk about where are you spending? Is this the right level of trade spending going forward or is it a temporary increase as you're spending more A&M behind some of these brands.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I would say it's more of the latter. It's been some immediate focus behind pretzels and then a couple of other categories. There's also some changes there now because we've got a broader portfolio and we've got a different mix of trade. It's not just these legacy Snyder's portfolio. It's also the Diamond portfolio. So, there's a little bit of shift in there with those type of promotional plans as we begin to address those and manage those going forward. But I think that we've been very careful in managing the trade and we manage it aggressively. But at the same time, we got to make sure we hit some key price points and some key holiday events to just drive overall consumer reach and to expand some market share.

Amit Sharma - BMO Capital Markets (United States)

All right. So, we should see this as a tactical move to take advantage of higher spending, not necessarily a shift in how you view your portfolio?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Exactly. Exactly.

Amit Sharma - BMO Capital Markets (United States)

And then, Carl, one of the tools that other – your larger peers have used is, sort of like to overcome this is, focus more on single serve and different type of packaging, where mix becomes a larger component of the net sales growth. Can you talk about where your portfolio is with that respect? Is that a potential source for probably favorable mix as we look forward?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Yes, it is an area that we do some work in today, there's no doubt about it. I'm very familiar with what you're talking about and that's kind of just the price to size architecture, as we call it, both focused by channel with single serve in certain channels or big bags in others. And we do that today. I think there's more opportunity for us to work on that as we go forward. So, we're very in tune to the consumer serving sizes and what they're looking for and also in tune with kind of the price points that are important to meet, but there does create some flexibility, as you kind of manage the size and price points in combination.

And Amit...

Amit Sharma - BMO Capital Markets (United States)

I'm sorry. Go ahead.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Sorry, Amit. The good thing is we have a manufacturing resource that's flexible enough to meet those needs and to help us get there.

Amit Sharma - BMO Capital Markets (United States)

And Rick, to that point, are all of your brands in a position to take advantage of that strategy, or only a few?

Rick D. Puckett - Executive Vice President & Chief Financial Officer

From a manufacturing perspective?

Amit Sharma - BMO Capital Markets (United States)

Manufacturing and maybe pull a little bit more on the price packaging architecture.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

I think we're reviewing all of that, Amit, as a potential. And as we, again, learn more and more about the Diamond Brands, the applicability there as well as entering the new channels with more aggressiveness, I think we're finding out that we have opportunities across.

Amit Sharma - BMO Capital Markets (United States)

Got it. And my last one is, you talked about perhaps hiring and spending behind Pop Secret in the back half as well. Is that built within the model that you have communicated for this year? Or is it incremental to that?

Rick D. Puckett - Executive Vice President & Chief Financial Officer

No, no. It's built into the guidance I just gave you.

Amit Sharma - BMO Capital Markets (United States)

Okay. But that was originally planned when you gave this guidance last quarter.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Well, I think there are always gives and takes as you go through the year. But, yes, we always knew that we had to address the Pop Secret. But we couldn't do five renovations at one time, we didn't need to. But – so therefore, we prioritize our spend and our efforts.

Amit Sharma - BMO Capital Markets (United States)

Perfect. Thank you very much.

Operator

Thank you. And our next question comes from the line of Jonathan Feeney of Consumer Edge Research. Your line is now open.

Jonathan Feeney - Consumer Edge Research LLC

Thanks very much, and good morning. A couple of questions. I apologize if you addressed this already. I had some technical difficulties earlier in the call. But just looking, and I know it's shifted by a month, I think Diamond sales were like $200 million, $202 million for the period ended July last year, and you have them coming in at $183 million. Are there any big, like, category exclusions? Or is that like that 10% rate of decline on the Diamond business something like what the like-for-like sales would be?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Well, we're eliminating, as you know, the intercompany sales that we had because we've been a – Diamond brand has been a Partner Brand for us prior to the acquisition. So, that's the biggest part of it, Jonathan. That was pretty significant on a quarterly basis.

Jonathan Feeney - Consumer Edge Research LLC

Would you say – were like-for-like sales down?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Well, I would say also that last year, you were probably at a higher walnut cost as well. I mean, that had to play – I don't have a lot of data on last year's actual analysis. But certainly, it was at a higher walnut cost, higher – or sorry, my first comment, I just lost it, but...

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Yeah, the Kettle foods in Partner Brands.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Yeah, right, the Partner Brands concept.

Jonathan Feeney - Consumer Edge Research LLC

Got you. Okay.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

And Pop Secret actually, and you've seen Pop Secret from year-over-year. So, those are the drivers.

Jonathan Feeney - Consumer Edge Research LLC

I got you. Okay. Thanks. And just – when I think of the concept of this merger, it seems like dropping pretty high contribution margin snacks businesses, particularly Kettle, into your legacy independent business owner network, combined with, you talked about (44:23) maybe some better execution, particularly at national accounts where – I think Walmart was particularly (44:29) to Diamond, and being a wholesale product, the national effort was maybe a little bit more of an emphasis. So, can you update on both of those fronts? Like how much – I don't know how, just crudely, like how much of – is Kettle going through Lance-independent business owner network right now or is it completely wholesale? Does that cutover ever happen? And have you seen a lift? And that revenue synergy maybe of Lance products on the West Coast where that distribution had historically not been there but helped by the Diamond presence in national accounts on the West Coast? Thank you.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I think there's clearly some benefits to our DSD model and being able to leverage that for the Kettle brand. As Rick alluded to earlier, we already had Kettle on most of our DSD routes. But obviously now, it's a company brand versus a Partner Brand. So, that by itself, draws more attention to it and gives it additional support. So, I think we'll see some ongoing emphasis on it and some additional activity around it as our sales force gets even more excited about the potential of that brand. And the better for you positioning is very advantageous for us as we really kind of maximize our overall portfolio in that area. So that's good.

I think that it's not 100% DSD, even though a large proportion of it is. You've got a lot of natural channels and other places that we go through the retailer direct or maybe through a distributor. We'll see some additional emphasis there and create some railroad tracks to maybe carry that brand a little deeper but also carry some other brands in with it. So, there clearly are some sales advantages of combining the brands in this broader portfolio that we've got, kind of (46:15) what you were alluding to.

Jonathan Feeney - Consumer Edge Research LLC

Thanks. And I particularly wanted to drill down on that first one, Carl, you mentioned about – because it was a Partner Brand but now it has the potential to deliver a heck of a lot more contribution margin than certainly other Partner Brands and maybe some of your legacy brands if it came to that as well. So, I mean, how do you incentivize the system and how do you feel – how you're driving that incremental profit lift, getting that – maybe pushing that brand a little bit more, or are you?

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I think we're pushing all of our brands as aggressively as we can, and we'll be able to push that more. Not only will we have the advantage of the IBOs with a little bit more attention and commitment to the brand, which is always important, but we've got our sales management team that's back there supporting it and our team is bigger now with the combination of the two companies. And we have got the expertise of managing the key accounts with our key account teams. We have got the expertise of our planograms and how we work with the customers on helping them with their category development. So, there's just a lot more that we can bring to bear to support not only Kettle but really focus on that natural category and emphasize the growth that's there and let Kettle lead the way.

Jonathan Feeney - Consumer Edge Research LLC

Great. Thank you very much.

Operator

Thank you. And our next question comes from the line of Mario Contreras of Deutsche Bank. Your line is now open.

Mario Contreras - Deutsche Bank Securities, Inc.

Hi. Good morning.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Hi, Mario.

Mario Contreras - Deutsche Bank Securities, Inc.

So, on Diamond, if I take the quarterly sales and annualize them, I get to around $615 million which would be a little bit less than the guidance you've provided. I know you've mentioned there was some seasonality. So, could you give us a little bit more detail on that? And then, in addition, is there any assumption that the Diamond core business will improve in the back half or is it just more seasonality-related?

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Mario, this is Rick. Yeah. It is more seasonality-oriented than anything else. So, to your point, if you simply annualize what we've shown in the second quarter, you would get a number less than our full year guidance on that.

So, the fourth quarter tends to be the most significant sales quarter and revenue quarter for Diamond of California brand, and that by itself is the significant contributor to the seasonality. The other brands are somewhat steady throughout the year. So, the seasonality really comes from the Diamond of California brand.

Mario Contreras - Deutsche Bank Securities, Inc.

Okay. Thanks for the clarification. And then, I also wanted to ask, can you just talk a little bit more broadly about the competitive environment that you're seeing in retail? As far as your volume improvement, was that, would you say, more driven by your internal actions, whether it was the increased advertising behind the Hanover brand, selective pricing activities or how much was related to a more favorable competitive environment.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I think, there's a number of key drivers. I think, if you look over, just the retail industry today in general and you take a look at its core comps from a lot of the leading retailers, I would say things really haven't changed so far this year that kind of more the same. But for us, the focus that we've had at retail Snyder's of Hanover and our other brands and really kind of combining good marketing programs with good sales execution, that's been the big driver in our changes. So, the more emphasis we put on our brands and the more planning we have around the display activity, the ACV gains, the merchandising we put in place, the retail customer plans that we build with our retailers, those have been able to kind of lead to some of the growth changes and the projected (49:55) changes that we've talked about.

Mario Contreras - Deutsche Bank Securities, Inc.

Okay. Thank you very much.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Thank you.

Operator

Thank you. And our next question comes from the line of Michael Gallo of C.L. King. Your line is now open.

Michael W. Gallo - C.L. King & Associates, Inc.

Hi, good morning.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Hi, Michael.

Michael W. Gallo - C.L. King & Associates, Inc.

My question is just a bigger-picture question on the snack category in general. Obviously, some of your brands such as Snyder's have been the kind of quintessential, better for you products over the years, and obviously, the category for that is a lot more competitive now. You were supporting the brand in the second quarter. Obviously, you'll be supporting Pop Secret more in the back half. I was wondering whether we should start to think more structurally about just having to put more support behind these brands on just an ongoing basis and whether you think over time, that that will change the kind of profitability of those brands longer term, or whether you think that you can do enough things from an innovation or otherwise to offset it? Thanks.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

That's a good question. I think that there's a lot of ways to answer, and it's important. I think this longer term, we're going to need to continue to support our brands and invest behind our brands. And that's one of the reasons as we've gone after the integration with Diamond. We talked openly about saving 75 and using 10 of it to invest in our brands. So, to your point, we do have some of the incremental money coming in. Once we deliver the savings, once we put a fence around it to begin to use that to support our key core brands.

But in addition to that, as we've just built up our R&D capabilities and both of our innovation capabilities, become more efficient with our marketing spend, we've got better understandings of our consumer needs and customer needs. I think we can do a lot of things both with the spend, but we also can do a lot of things just mechanically and tactically just to be much more efficient and effective with what we're working on.

So, as we lean over more on to online advertising, we get some efficiencies there and some savings. We also reach a lot of good consumers there. As we do some of our field marketing and consumer sampling, those apply.

So, there's just a number of ways for us to continue to expand our reach with our consumers and spend more time in front of them, reminding them of the great quality of our brands and the better for you positioning of our brands. So, it's a combination of a lot of things, but we will continue to put a lot more effort around supporting our brands, some financially and some are just rolling up our sleeves to reach the consumers directly.

Michael W. Gallo - C.L. King & Associates, Inc.

Okay. And then, just a follow-up question on Pop Secret. Obviously, there's been a shift that seems towards more ready-to-eat popcorn where, obviously, the trends have been quite strong. So, I was wondering whether that scenario you might focus on, either with the Pop Secret or with some of your other legacy brands as the consumers kind of shifted how they're consuming popcorn. Thanks.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

I think the ready-to-eat popcorn category has done quite well. I think we're seeing, though, on the microwave popcorn, I think, overall, the poundage and the volume there has been pretty constant. It's been more kind of pricing fluctuations in others as that category has gotten a little bit more focused on value than, I think, really focused on being premium. So, we'll deal with those over time. We do have our Cape Cod popcorn here that has done well for us.

And I think, we could support it more and spend some more time on it, and make sure we're kind of taking advantage of both the microwave opportunity that we know is there and the ready-to-eat opportunity that we see is there. I think having Metcalfe's Skinny Pop in the UK is an important opportunity for us there with that brand. The focus in that new geography as that category begins to take off there. And so to your point, we just got to make sure that we focus on popcorn in general, and we've got the advantage to focus on both at home consumption and then kind of on-the-go consumption.

Michael W. Gallo - C.L. King & Associates, Inc.

Thank you.

Operator

Thank you. Our next question comes from the line of Eric Gottlieb of D.A. Davidson. Your line is now open.

Eric Mitchell Gottlieb - D. A. Davidson & Co.

Yes, good morning.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Hi, Eric.

Eric Mitchell Gottlieb - D. A. Davidson & Co.

I just had a few questions. The third quarter guidance, it looks like most of us or majority of us, were above your expectations. Is that where a bulk of the Pop Secret costs come in or is there something else that we're missing there?

Rick D. Puckett - Executive Vice President & Chief Financial Officer

No. I think you've captured it pretty well, and that's the reason as we've – as we're going through this first year of the Diamond transition, we felt it prudent to kind of give you more insight and disclosure around a quarterly kind of cadence this year. It's not, as I said, an indication of we're going to switch to quarterly guidance because we won't. But as we move through the rest of this year, I think it's important so that we're all on the same page on that. So, yeah, the third quarter is, in fact, representative of some additional investment in Pop Secret but also the continued investment in the Snyder's of Hanover brand as well as continuing to get into some of these important channels that we're currently looking to penetrate in a more stronger way. So, that's the driver.

Eric Mitchell Gottlieb - D. A. Davidson & Co.

So, a majority or all of it is going to be below the top line?

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Well, it would be ...

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Part of the top line.

Rick D. Puckett - Executive Vice President & Chief Financial Officer

It would be a part of the top line because it would come forth or come through in trade, which is a gross to net kind of calculation. So, it would show up in the net revenue number.

Eric Mitchell Gottlieb - D. A. Davidson & Co.

Got it. Okay. And then lastly because a lot of my questions have been answered. The 3.5% volume growth, could you highlight Lance, Cape Cod, Snack Factory, where – what were the leaders there if you can give exact numbers that would be great. And also, what categories kind of fell short?

Rick D. Puckett - Executive Vice President & Chief Financial Officer

Well, as I mentioned in my comments, the strongest growth brands that we had in the quarter were Lance and Cape Cod and Snack Factory. The other core brands, on a legacy basis, were not as strong. We do not provide precise numbers on that. But we are seeing continued strong growth, as Carl mentioned, as result of our renovation efforts on the Lance sandwich cracker category showing up in our numbers. And he also mentioned the fact that we have additional capacity coming online at the end of third quarter. So, it gives you some indication of the kind of growth in that brand.

Eric Mitchell Gottlieb - D. A. Davidson & Co.

Okay. And then, you keep saying that the synergies are on plan. Now, as four to five months in, are you prepared to say how much you've already attained, or a more structural, a more detailed calendar on – so far, we have secured this or secured that and that's why, we think, we're well on our way to getting the half, the 50% in year one.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Yeah. So, as we mentioned initially as we went through this process, the SG&A savings particularly with public company costs as well as some of the senior management costs come out very quickly, right? So, those are the synergies that we've already seen. Other synergies in procurement and we mentioned freight optimization in this quarter, while it did not have a significant impact on Q2, will start to have impact in Q3 and Q4. So, it takes a while to get the programs in place and the negotiations completed.

So, therefore, the cadence of synergies is really weighted towards Q4 and Q1 of next year as we think about capturing that 50% in the first 12 months. And we're still very much on track with that, and we still believe those are good calendarization of the cost synergies.

So, we're doing some things very aggressively in terms of managing that. We have dedicated people and very highly accountable kinds of processes to drive the success of that. So, we're feeling good about our initial calendarization of that. We still feel very confident in arriving at the 50% of synergies came at the end of 12 months after the acquisition, which is really towards the end of Q1 of next year.

Eric Mitchell Gottlieb - D. A. Davidson & Co.

Perfect. Thank you very much. I'll pass it on.

Operator

Thank you. And I'm showing no further questions at this time. I would now like to turn the call over to Mr. Carl Lee for closing remarks.

Carl E. Lee, Jr. - President, Chief Executive Officer & Director

Thank you, Chanel. I just wanted to thank everybody for joining us this morning. This was a very important call for us. We're proud of our team and count our blessings for the quarter that we've been able to post. We got to get back to work as usual and make sure we deliver a good Q3 and deliver on all of the plans that we've got in place for our company. We're excited about where we're positioned, and we're excited about our strategy. And we're committed to continue to build our shareholder value.

So, again, thanks for your valuable time today, and we look forward to talking to a lot of you over the coming months. And we want to stay in touch. Have a very good morning. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.

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