Jason English: Okay. And I want to come back to the pricing comment before I get there, I want to stay a little higher level, your guidance. I know you didn’t give revenue guidance for next year, but we can all kind of back in just some reasonable assumptions. And it implies like you in the mid-9s, mid- to high 9% EBITDA margin range, which is, it’s kind of similar to an outsourced manufacturer for CPG companies or a private label supplier to retailers. And I don’t think it’s unreasonable to assume that they’re going to look to you as something similar, an outsourced provider or sort of basic production or a here in this case, basic labor. As such, is this like a reasonable base case that this is the right level for this business?
And if you try to get greedy like any private label manufacturer would and chase a higher margin, you’re going to lose business and it becomes just sort of spiral where you get stuck in this 9% to 10%, which can be fine, right, in terms of cash generation, if you’re generating good cash. But I just want to get level set expectation on run rate margins.
Dave Peacock: No, Jason, that’s a great question. I know you’ve read about this in the past. And I came from a background on the investment side where we look contract manufacturing quite a bit in the previous role before joining Advantage. A couple of things to think about when you make that comparison, one, I do think this could be — should be a low teens margin business long term. You’re seeing volatility in the business when you see the sort of swell in margin that occurred as demo fell off and during COVID and then the snapback of that lag in pricing relative to labor cost inflation. A little bit of labor cost mix, if you will, kind of full-time hourly relative to part-time hourly as it relates to just the full pin wouldn’t change as far as the number of people.
But to the degree there’s more part-time hourly available that group would swell in size a little bit. But on the contract manufacturing point and this is stuck with me after reading some of your work previously. First, I’d say one difference. When I look at — we know this business pretty well in the private label side. When I looked at the top 10 categories in private label, they’re anywhere from, on average, on a 10 to 20 different contract manufacturers where we’re in a different situation where you’ve kind of got what I’d say kind of three national alternatives, us being the largest regional network and doing it yourself. So you’ve just got less options from that standpoint when you look at just what the valuation is created. And when you factor in the thought that we do believe that this could be slightly higher margin, and look, right now, if you look at trading multiples of where some contract manufacturers have traded historically, at least in the last seven years, you apply that multiple to our business, and we should have a $5 stock price today.
So to your point, it’s not all bad, but I think there are differences. And I layer in the fact that we need to, and I mentioned in my prepared comments, be very dogmatic about leveraging the insights we benefit from being at sort of this intersection of CPG and retail, brand and private label, and make sure that we’re finding as much value as possible for our clients. And we think the revenue side of these businesses is absolutely critical, not diminishing the production side. But if we’re the partner we should be with our clients and customers, the support we provide should come with a premium.
Jason English: And if your services are so critical and create so much value, why have you not been able to raise price successfully?
