David Maura: Thanks, Bob.
Operator: Our next question comes from Chris Carey with Wells Fargo. Your line is open.
Christopher Carey: Hi. Good morning.
David Maura: Good morning, Chris.
Christopher Carey: Jeremy, can you perhaps be a bit more specific about the Q1 headwind that you’re looking at? Yes, I guess I’m even looking at the Q4 delivery and appliances. And if I just annualize that going forward, which I know — there’s seasonality in that business, but I’m getting to potentially an EBITDA that is already in line with your guidance just based on that business alone. So is that business is going to take a real step back to Q1? The other businesses as well. I appreciate the commentary on Q1 and the full year, but any sort of like specificity would be helpful.
Jeremy Smeltser: Yeah. Sure. Yeah. So interesting situation with the HPC business. It was really around the end of — the latter part, I should say, of Q3 and the first part of Q4, where we were experiencing our most significant inflation, particularly around excess containers, causing detention and demurrage costs as well as our need to get overflow distribution space. And so most of those costs, they’re significant, they were actually on the balance sheet at 9/30, and they’ll be flushed through in Q1 mostly, some in Q2 across the whole company. I think David mentioned in his prepared remarks, that’s about $55 million of capitalized variances that are in excess of our current standard costs that sit on the balance sheet that will fluster the P&L, probably about 70% of it in Q1 and most of that in HPC.
And that’s why I referenced the sequential reduction in inventory — or I’m sorry, in EBITDA in HPC because I agree, that would not be our typical seasonal pattern. The good news is that is behind us. It will be a little bit in Q2. We actually do expect to grow profitability in HPC in Q2. And unless something big changes from a macro perspective, it will be fully behind us in the second half of the year across the businesses.
Christopher Carey: Okay. I understand. And so in excess of that, and just to again clarify the drivers of the outlook. Excuse me. The demand, I think David mentioned that, that facing it through the demand that’s lower post-pandemic, retailers continue to reduce inventory. And then obviously, you’re selling through the higher cost inventory. And I’m just trying to assess visibility here. The higher cost inventory, I appreciate that flows through. But can you just comment on your visibility for guidance after Q1 just in the context of demand lower post-pandemic, tighter inventories at retail? Do you feel like you’re in a place where you have enough visibility on where retailer inventories are that by Q2, you should be in a better place? So if you could just frame that, I think that would be helpful.
David Maura: Let me take a crack at it, and then Jeremy can fill in the blanks. Look, our Pet business is predominantly consumption-driven business now. And we continue to see positive POS there, as I sit here today. And while pet adoption is down, that installed base from the pandemic is still big. And we’re also taking market share. So what I can tell you is Pet is our biggest pro forma business. While we definitely see things like high-priced aquarium, fish tanks and the durable components of it are down, we believe we can grow through that given that we’re more consumption weighted and we’ve got a lot of new exciting products coming out that we’ll talk to you about next quarter. Home & Garden had, I think, the perfect storm in — to say fiscal ’22 is a challenge.
