Michael Yates: So your assumption is right, that D2C is a positive product mix and helps the profitability. Don’t — and D2C was up 22% in a quarter, but D2C is still a relatively small piece of the overall Black Diamond business. We did a little over nine — just around $9 million in revenue D2C this quarter, just to put it in perspective. So the weakness is continues around kind of rightsizing inventory. And I think in the prepared remarks, I mentioned that we sold more inventory, more discontinued merchandise inventory, more promotional pricing. So to continue to move inventory and turn that into cash, the pricing is very aggressive in the marketplace. And we did reduce inventory at Black Diamond by over $10 million. And in order to do that, we needed to be very aggressive on pricing, specifically in the wholesale market here in North America.
Matt Koranda: Okay. And then in the fourth quarter implied guide, it just sounds like you’re assuming deterioration in profitability relative to the third quarter, at least on an overall basis. Did your guide build in the assumption that promotions at BD get worse in the fourth quarter? Is that how we should think about the compliance?
Michael Yates: No, I don’t think — I think — no. I think it stays about the same. Our guide assumes about a 35% gross margin in the fourth quarters, which is not too dissimilar to what we experienced here, 35.5% here in the third quarter.
Matt Koranda: Okay. But the EBITDA, sort of the implied EBITDA margin in the fourth quarter, does sequentially get worse? So if gross margin isn’t the culprit, are we leaning into SG&A? Is there some sort of uptick in spending there, like, help us understand that sequential decline? Because it — I think it goes down by north of a hundred bps fourth quarter relative to the third.
Michael Yates: I think the bigger impact you’re going to see is on the gross margins, and the EBITDA at Precision Sports in the fourth quarter.
Matt Koranda: Okay. So Precision, all right. Can we just — want to touch on that for just a second and then I’ll turn it over to others. But should we just assume that that third quarter run rate in terms of revenue contribution from Precision sustains into the fourth quarter? I’m just trying to get the right way to think about sort of revenue contribution from Precision in the fourth quarter at these kind of lower levels.
Michael Yates: It’s probably even a little less because of the shutdown I’ve mentioned in December.
Matt Koranda: Okay. Got it. So sequentially lower than the third quarter on revs, and then probably in terms of margin, we should assume probably some headwinds to margin as well in the fourth quarter, just given the shutdown.
Michael Yates: Yes. Correct. Correct.
Matt Koranda: Okay. And then any benefit you mentioned, and we picked up in the data, kind of mid-October with the geopolitical disruption and whatnot. There was definitely an uptick in demand for at least a period of time. How much — to what extent have you built in the benefit of that in the fourth quarter? And how sustainable do you think that is? Because it just — it feels like maybe it’s just a couple weeks of benefit and then that that dies down. But have you guys seen any sort of decline in demand since that uptick in October?
Michael Yates: Good question, Matt. There’s two things going on. I mentioned both, in October we saw an uptick both from a military and a defense standpoint. I think the defense, home defense — uptick in that market here in the US with some of the geopolitical things going on across the world that was — there was an uptick late October related to that. But we don’t think that has a lot of legs, that was a couple a week, 10 days worth of uptick that we’re — that we heard from our distributors and retail partners. From a military standpoint, we have seen that uptick, right? But for a certain caliber bullet, right? And we are shifting capacity to that opportunity. And we’d already had capacity designated to that. We’re just adding more capacity to the opportunity for the geopolitical challenges over in Europe and the Middle East. So long way to say yes, I think the military has some legs, but the market here at home was a blip.
