Michael Hoffman: So when you — just give us a sense of cash conversion of your EBITDA. I mean you had — just to put it in perspective, I mean you’re in the 70s percent of your EBITDA converted into cash. Should we assume that, that carries into 2024 as well, the cash flow from ops less all capital spending?
Jian Guo: I would think it will be in that range, it will be in the range.
Michael Hoffman: And then Alan and Jian, can you help us a little bit about — thank you for the details on the sales year-over-year change in the segments. When you look at the ones that were negative, what’s the balance between price and volume? Like is there positive volume but really negative price and so the whole thing is negative? And so what I’m trying to get at is that there was a decent underlying volume number, but I’m overshadowed by the resetting of price for raw materials, lower freight, all that stuff. How do I think about that across those segments?
Alan Yu: In the fourth quarter 2023, the volume did increase. I believe, Jian, what is the percentage of volume increase overall versus the…
Jian Guo: [Technical Difficulty]
Michael Hoffman: And how was that distributed across the four segments, the operating lines, when you think about that, directionally, positive, negative distributors, national retail versus online?
Alan Yu: I would say that the mainly online sales volume was more positive and into the, I would say, the retail segment that was positive. In the distribution segment, I would say it kind of even out a little bit. But mainly, our growth in the volume is more on the online as well as the national chain account.
Michael Hoffman: And then you alluded to this a little bit, Jian, about cadence. But can we talk — because you’re going to start the year at a much stronger gross margin and finished the year lighter to get to the average of the guidance. Talk to us a little bit about how to think about that cadence. Is there anything lumpy about it or do I just sort of gradually bring it down all year long to work out to get to the midpoint of the range?
Alan Yu: Well, here’s a thing. I think if you’re referring to 2023…
Michael Hoffman: 4…
Alan Yu: If we — 2024 or 2023?
Michael Hoffman: Yes, 4. With the guidance, you start the year at 37% to 38%, 39% gross margin in the first quarter, but the full year is below that. So is it a gradual decline in every quarter or is there — how do I think — I’m just trying to — our modeling, thinking about the cadence very steady decline each quarter. So I get to a blended average for the full year outlook.
Alan Yu: Well, this is how — what Jian mentioned earlier that there’s a very big uncertainty of contract renewal for the ocean freight in May of 2024. So we kind of know exactly what’s going — what might occur in the first quarter and second quarter. But big uncertainty is what is the US dollar, is it going to be weakened or maintain as strong as we are today, as well as ocean freight, is it going to maintain the current level or it’s going to increase? If it increase, how much it increases? So kind of put a cushion in terms of the last two quarters of the end of the year. But we know that our volume is going to be strong. Our expected volume this year, we’re hoping — we’re looking for a goal of 15% growth margin — not growth margin, 15% growth in volume wise,that is our goal that we’re looking to shoot for.
And in terms of, of course, the gross margin, we’re also adding in — there’s some change in terms of calculation classification. We used to have the CapEx at the operating level but now starting 2023 or 2024 we’ll bring the CapEx into the — on the top of the levels. So basically, that will affect the gross margin also. That would be one of the big aspects that will affect the margin.
Michael Hoffman: So just so I think — I understand you, you were being conservative about the direction of ocean freight in your guidance. But as a point of opportunity if, in fact, if the ocean freight proves to be consistent at current levels, is that what I’m — did I hear that correctly? I may be misunderstanding what you’re trying to tell me.
Alan Yu: Yes, that is correct. If the ocean freight maintains stable, then basically, I would say that this is definitely beneficial for our third and fourth quarter.
Operator: The next question is from Ryan Meyers with Lake Street Capital Markets.
Ryan Meyers: First one for me. So if we think about the revenue guidance range, the 8% to 15% growth. What would you need to see to come in at the high end of that range, is that more of a stabilization in pricing or even a little bit of improvement in pricing? Just want to get a good understanding of how we potentially could see that 15% top line growth for 2024?
