Peter Saleh: Thank you very much.
Operator: And our next question comes from Jake Bartlett with Truist Securities.
Jake Bartlett: Great. Thanks for taking the question. Mine — sorry, I’m not sure if anyone else heard that noise. But I am wondering about margin expansion, expected margin expansion in 2024. Do you expect any contribution from operating expense leverage or, is that really all driven by gross margin profits?
George Holm: Well, it’s driven by mix. It would probably be the number one. We do expect to see expense ratios get better as we get deeper into the year. Remember we have a big investment in kind of outsize for us right now in our Salesforce, and we still have more productivity gains that we need to get. But we’re not in any way displeased with where our expense ratios are, what we expected and we think we’re making wise investments in people.
Jake Bartlett: Got it. That makes sense. I just — I look at operating expenses as percentage of sales has been up for the last, I think about four quarters. And so I just want to confirm that, do you expect leverage on operating expense for the remainder of the year or by the end of the year to kind of — maybe kind of think of operating expense being flat as a percentage of sales in 2024 versus 2023?
George Holm: Well, there’s so many moving pieces with that. Our mix of business that we had today versus a year ago is a slightly more expensive customer base to service than what we had a year ago. So that is certainly part of it. Then when you get into our fulfillment business where we don’t necessarily take financial possession of the product and we’re not the one billing the end user of the product, then we’re just running the gross profit and we’re not the sales. So that’s going to give you artificially high expense ratios, because you don’t have the full cost of that case to spread those expenses over. It also produces extremely high EBITDA margins because you don’t have the billing of the full case, only the service to deliver that case to the consumer.
Jake Bartlett: Got it. Got it. That makes sense. And just this is a kind of a nitpicky modeling question, but LIFO reserve adjustment, it kind of went to a positive adjustment this quarter from negative last quarter. What are the puts and takes in terms of the reserve adjustments for the remainder of the year and maybe what drove the increase, the positive adjustment in the first quarter?
George Holm: Yeah. It’s something that just fluctuates around the quarters. We don’t really provide any guidance on that going forward. It’s — so I’ll just leave it there.
Jake Bartlett: Okay. Thank you so much.
Operator: And we have our next question from Edward Kelly with Wells Fargo.
Edward Kelly: Thanks guys. Thanks for letting me back on. Just a couple of quick ones for you. Working capital, how do you think working capital plays out this year from a cash flow perspective? It’s been drag the last few years. Definitely larger than it would normally be for you guys. More neutral-ish. Do you think it’d be again this year? And then, there was $215 million in M&A this quarter. I don’t — maybe I missed it. I talked about that. Just any color there. Thank you.
George Holm: Sure. Our networking capital, Ed, I mean, we continue to see improvements there, so we do think that’ll continue to improve throughout the year. And as I mentioned, we periodically from time to time make investments in — like we did this past quarter in inventory, but that’s opportunistic. So those do come into play occasionally. And then on M&A, we did make a — it’s an immaterial acquisition that we had, but it was very strategic to what we’re doing with Convenience and Food and Foodservice. So we feel really good about it, but it’s immaterial to our overall financial results.
Edward Kelly: Okay. Thank you.
Operator: And we have reached our allotted time for our Q&A session today. I would now like to turn the call back over to Bill Marshall for closing remarks.
End of Q&A:
William Marshall: Thank you for joining our call today. If you have any follow up questions, please contact us at investor relations.
Operator: Thank you. This does conclude today’s program. Thank you for your participation. You may now disconnect.
