Hale Holden: Great. Thank you. And the second question was on the SKU reduction efforts for this upcoming 12 months. Do you have a – or would you be able to give a range in terms of what, you know, in aggregate, what level SKUs you’re taking out? Is it low single-digits or much higher? Where that could help on margins going forward in the future?
Niko Lahanas: I won’t quantify it. It’s going to vary BU by BU. So, we’re going to look at all the businesses. We’re going to have to make judgment calls too. You know, that kind of work is not free. Sometimes you know, you have to get rid of SKUs and sometimes you don’t get full price. So, we’re going to have to weigh, you know, each BU and look at the SKU count and look at what the contribution of the SKUs are, so very hard for me to quantify it right now.
Hale Holden: Fair enough. I appreciate the time. Thank you.
Niko Lahanas: Thank you.
Operator: Our next question comes from the line of Carla Casella with JPMorgan. Please proceed with your question. And Carla, your line is now live.
Carla Casella: Hi. Can you hear me now?
Niko Lahanas: Hi Carla.
Operator: Yes.
Carla Casella: Hi. So, following on some of the prior questions, the inventory you mentioned is a little bit heavier on your books. How long do you think to work through some of that excess and high-cost inventory?
Niko Lahanas: I think probably anywhere from, you know, 12 to 18 months, I think in that area.
Carla Casella: Okay. Great. And then on the Garden distribution business that you sold, did you give the total price or I’m wondering if there is any connection between that – any ties between that business and then the other pieces of your business?
Niko Lahanas: I’m not quite following that, Carla. Could you repeat that question? I want to make sure I answer it properly.
Carla Casella: Yes. Yes. So, the Garden distribution business that was sold…
Niko Lahanas: Yes.
Carla Casella: Yes. Did that business interact to any of your other arms? Like, is there any synergies or…
Niko Lahanas: Sure.
Carla Casella: Or was there dyssynergies that you lose?
J.D. Walker: Sure. Carla, this is J.D. It did. So, this was a distribution of third-party vendor items to the independent channel to the independent Garden nurseries. And they – we also through that same distribution organization sold our branded products as well. Now, the beauty of the deal that we have with BFG Supply, they are a national distributor. And this is their core competency. They will continue to distribute our branded products to that channel, to the independent channel as well. So, really it’s both companies focusing on their core competencies. And it was a incredibly complex business for us, 4,500 SKUs distributing to 4,000 customers that had 6,000 stores. So, we’re reducing the complexity significantly by exiting that business.
And as Niko said before, it was a marginally profitable business. We will maintain our distribution business to our larger big box customers. And there, here again, our branded products ride along with those products to the stores.
Carla Casella: Okay. Great. And then did you give the sale price or the impact on revenue or EBITDA? I may have missed, I missed a little bit at the beginning.
Niko Lahanas: No. We haven’t done that. It’s fairly de minimis. 5% of Garden revenue is what we gave out, but it was margin dilutive to the Garden business overall.
Carla Casella: Okay. Great. Thank you.
Operator: And our next question comes from the line of Karru Martinson with Jefferies Company. Please proceed with your question.
Karru Martinson: Good afternoon. Apologies if I missed it. Did we break out what the TDBBS acquisition cost us and what it’s going to add to the top and bottom-line?
Niko Lahanas: No. No. We don’t give that information out. But, you know, if you look at the cash flow statement next quarter. You probably can configure it out.
Karru Martinson: Okay. And certainly working capital, nice source of cash, I mean I hear your commentary that there’s still some inventory that you guys would like to move out, but, you know, how should we think about working capital this year, you know, certainly compared to this past year that was certainly a benefit to our bottom-line?
Niko Lahanas: Yes. I don’t think it’ll be quite as dramatic, but I think there’s still work we can do as far as converting, you know, inventories into cash, working on payables, receivables. I think it’s – you know, and everybody is doing it, it’s not just us. So, we’re going to stay after it. I really love the progress we’ve made, but there is still more work to do.
Karru Martinson: Okay. And then when we look at the opportunity for M&A, it certainly does sound like, you know, value buyers of growth businesses, tuck-ins, things of that nature, it doesn’t sound like these are transformative transactions, but for the right one, where are you guys comfortable taking leverage to?
Niko Lahanas: We’ll go over 4 for the right deal. We’re happy going over 4 and then de-levering as quickly as possible back to our stated, you know, range of 3 to 3.5. So, willing to lean in to the right deal for sure.
Karru Martinson: Thank you very much, guys. Appreciate it.
Niko Lahanas: Thank you.
Friederike Edelmann: And that was our last question. And with that, I would like to thank you, everyone, for attending our call today, and have a wonderful Thanksgiving. If there are any questions later on, please reach out to me. Thank you.
Operator: And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
