Operator: Our next question will come from Matt Koranda with ROTH MKM.
Mike Zabran: It’s Mike Zabran on for Matt. So the recent heavy discounting makes a lot of sense even on the more premier products but just any visibility on when we can expect a halt or even a reduction in the level of discounting? And to what extent is pulling back on that heavy discounting factored into the half EBITDA profitability expectation?
Yaniv Sarig: Arty, I’ll let you take that?
Arturo Rodriguez: Yes. Yes. No, I think again, if you follow discounting and pricing on Amazon, it’s a bit dynamic, right? But the point here was if we can clear out all this expensive inventory and normalize our inventory levels, we can bring back to product at normal costing because now we’re back to like pre-pandemic pricing from a shipping container perspective. And so as such, the view we’ve been saying is that as we enter the second half of the year, all that should be normalized. So we should be back to more normalized pricing along with normalized costing to get to a normalized contribution margin or starting to see a good chunk of that in Q3 and into Q4. So that’s why we’re really pointing towards that same half point. We could get that a little bit earlier into Q2 but we’re really not — we can’t really say on that. So that’s why we’re really focused on the second half right now.
Mike Zabran: Okay. So normal level of competitive discounting in the second half of the year but first half of the year, we should get through all of the discounting to clear the excess inventory. Am I understanding that correct?
Arturo Rodriguez: Yes, yes. I mean you’re always doing some form of discounting and price adjustments just to stay at the competitive Landscape depending on the season. That’s normal, yes. But yes, you’re right. You should see more normal pricing type position as we enter the second half, for sure.
Mike Zabran: Got it. That makes sense. Just 1 more for me. How are we circumventing the Amazon SBA fees? So I understand you guys have 3PL sites and FDA at your disposal but maybe just speak to how we’re optimizing between using Amazon versus 3 pill sites to get products to customers.
Yaniv Sarig: That’s actually a great question. and really, the answer is, as you know, Matt, like we put a lot of effort in building a network of 3PLs that’s connected to our Amy platform which, as you remember, we used to do our own fulfillment for the larger items but also for the smaller items which typically gets fulfilled to BA, restore those items in our own 3PL before we send them to FDA to go to going in fulfilled, right? And the answer to your question relies on really how can we optimize the BPL distribution of the products that go to FDA to reduce the cost of NBA, meaning if you have — again, we have, I think, at this point, over 19 3PLs, maybe 1 less because we’re optimizing all the time. When our logistics department receives containers, they actually use a bunch of different models that we put together to figure out what’s the optimal way to send those inventories to 3PL.
And the goal there for that inventory is to be as close as possible to the FDA warehouses to which we ship them so that we can, a, have less inventory in FBA and b, spend less money sending it to A which then offsets a little bit some of those kind of higher FAs that we’re seeing recently right? So again, our network of warehouses doesn’t only give us an arena when it comes to oversized items because our fulfillment there is quite competitive with FDA. But also for the smaller items, where the fulfillment will happen to FVA, the distribution to be as so as possible to the FBS standards helps a lot.
Operator: It appears there are no further questions. This concludes your question-and-answer session. I would like to turn the conference back over to Ilya Grozovsky for any closing remarks.
Ilya Grozovsky: Thanks. As part of our shareholder Perks program which, as a reminder, investors can sign up for a riper participants have the ability to ask management questions on our earnings calls. I want to thank all of the shareholder Perks participants for their loyalty, their participation in program and for their questions. I have picked a few of the most popular questions this quarter and that they have sent in. So here they are. First question is, when do you intend to be fully operational in Europe and do you plan to cover more European countries in the future?
Yaniv Sarig: Thanks, Ilya. So obviously, we’re really excited about Europe. It’s been something that we wanted to do for a while but the supply chain crisis was preventing us from making moves a little earlier. But in general, as we mentioned in the prior press release, we already have good infrastructure set up in some of the most important countries. And we currently don’t expect to go into further countries in Europe. But really, it’s about maximizing what we’re already in which are the biggest markets and just sending more of our products there, right? That’s the big effort here in 2023. Is now that the supply chain issues are cleared, we’re focused on making sure that we can maximize the amount of our existing portfolio products that are not yet in Europe that we can bring to market in Europe which again, should have a significant effect on 2024, right?
Once we’ve achieved that, we could then look at other countries in Europe but there’s no current plan to do that at this point there’s up work with what we’re doing.
