Alex Sturnieks: Yeah. That’s awesome to hear. And then just a quick last one for me. You guys kind of touched your balance sheet improved during the quarter, it’s looking pretty healthy. Can you guys discuss a little bit more in-depth about your thoughts around the capital allocation? But with the new products innovation seeming to drive these sales, could you see some additional spending in R&D to drive more product innovation, the upcoming quarters or kind of how are you going to go about that with your allocation there?
Brian Murphy: Yeah. Great question. This is Brian again. And Andy, Andy can chime in. So, we are focused on obviously organic growth, M&A, share buybacks being our kind of primary three. Obviously, we paid down debt as well in the quarter. But we are very focused on organic through innovation and it’s one of the reasons, one of our strategies for maintaining our margins and ultimately higher ASPs, et cetera. So when we think about that, R&D, to your point, it’s a huge part of that, right? I mean, gosh, almost 12% to 15% of our total workforce are people that are dedicated to just R&D and product development, which in my view is a very, it’s a high percentage relative to some of the other companies that I’m aware of and have even looked at to acquire.
And so one of the reasons why I think it is a lighter percentage relative to the total versus some other companies. is the fact that we have through consolidation moving facilities into Columbia. We’ve used some of those savings to bulk up our R&D department. So instead of outsourcing prototyping instead of outsourcing some of those functions, or even relying upon other third parties. We’ve decided to take that in-house and really leverage the intellectual property we have through our incredible engineers and designers and do most of what we can in house. So that gets us to market more quickly. It ensures that we can sort of lock up this innovation pipeline that we’ve talked about. So I think as a percentage of sales, I think it’s a good number.
But I don’t think we’re missing any dollars there. I think spending it wisely. And our pipeline as you’ll see over the coming years will definitely show the fruit of that.
Alex Sturnieks: Hey, thanks. That’s very helpful. Thank you guys.
Brian Murphy: Yeah. Thanks, Alex.
Operator: [Operator Instructions] The next question is from Matt Koranda with ROTH Capital Partners. Please go ahead.
Matthew Koranda: Hey, guys. Good afternoon. Wondered if you could maybe just elaborate a bit more on the retail expansion for Grilla and MEAT. I know you said you’re not going to necessarily be providing quarterly data points on it, but I’m just curious at a higher level, any way to think about the entry into retail, whether that’s through specific strategic retailers that you’ll be dealing with, are there limited SKUs you’re going into retail with or are you going in with the full set of SKUs that they offer timing of entry? Is that factored into the growth outlook this year? Just some details, high level on that would be very helpful.
Brian Murphy: Yeah, certainly. Hey, Matt. This is Brian. So yeah, I mean, we’re very excited about MEAT and Grilla and one of the strategies that we had, one, when we started MEAT was to generate enough interest where we could get the opportunity to place it at certain retailers. And if you have an unknown brand and you’re trying to sell it into retail, it’s a much more difficult value proposition. If it’s a brand that has gained steam, it’s more well known, influencers are getting behind the brand. You get to a point where retailers are approaching you and that’s definitely the case that we’re faced with the opportunity. So we have been very careful about when to bring MEAT! Your Maker into retail. And obviously, we bought Grilla, just over a year ago and so the same there.
And we’ve been, we’ve enjoyed the direct-to-consumer path. We think there’s still tremendous upside for those two brands in direct-to-consumer. With that said, there is an opportunity to get the brands in front of consumers because that is part of marketing. Some folks that is their exposure to certain brands. And so we have been approached by some retailers that we think very, very highly of have been good partners of ours. And to have a specific viewpoint on how to approach the market with the new brand and some innovation. And so we are, we have been selective with who those retail partners are. I can’t share those with you right now. But ultimately, we’re going to start out small make sure that we have the right sort of flywheel built with the consumer, make sure that we’re supporting it appropriately.
We’ve seen brands go into retail too quickly, too much too soon. And we’ve sort of learned from that on the sidelines and so we want to do it in the right way certainly, come out with the splash with certain retailers and then assess as we go forward. So, we’re being a little cautious on sharing too much, but we do expect this year in this fiscal to be announcing some of those some of that placement.
Matthew Koranda: Okay. That’s fair. And just maybe spinning back to the retailer inventory health that you talked about in the prepared remarks and maybe discussed a bit in the Q&A here. Just curious how we’re thinking about a replenish cycle and how that kicks off? I mean, we’ve just gotten a lot of data points recently from retailers that suggest that consumer demand is still pretty soft and it just seems like retailers are still quite reticent to take on a lot of inventory. So curious how you think that plays out this year? I know you said probably more likely to result in back half growth, but just maybe if you could elaborate on how you’re thinking about the replenishment cycle, as we get into the back half of the year?
Brian Murphy: Yeah. Great question, Matt. It’s Brian again and Andy feel free to jump in. I think it’s — there’s a few things here. One is, there aren’t any sort of broad brush strokes across the retail landscape. We’re seeing a tale of many cities. We’re seeing some retailers depending on the product categories that they’re in are faring better than others and others that have managed inventory more tightly that we’ve seen them bounce back already. When we look at replenishment, we’re having this conversation before the call, we do get replenishment. It’s not like a flip, a light switch flips as you know. And all of a sudden they start ordering. They’re already ordering. All these retailers are still replenishing their inventories with our products, but it’s a matter of looking at their targeted inventory turns in the year and as consumer demand has slowed that number in order to reach those turns is somewhat of a moving target and I think you’ve even maybe commented on that some of your in some of your reports.
So the other dynamic that I haven’t really seen come out in earnings calls is, is the fact that, that some retailers really had to look to online sales to be successful over the last two to three years or the other ones had to play hurry up offense. And so that gave them a tremendous benefit. As a result, if you look at the same demand, if you just assume the same demand pre-COVID versus where we are today, or what a normalized level looks like. I think you’re going to see some retailers who are well run carry less inventory because they may have some vendors who are able to do more drop shipping. So what that means for them is they can obviously offer more assortment. But at the same time, they don’t have to carry that inventory. They can sort of lean on the manufacturers of the vendors more to carry some of that.
So, yet to be seen what that looks like, but I think the vendors that have that capability to dropship and can do it effectively and be a good partner with some of those retailers. I think we’ll see some of those, be more successful. And certainly we have that ability. Does that answer your question, Matt?
