Michael Benstock: Yes. And since Mike didn’t mention Contact Centers, Contact Centers had some tough comps for the quarter and didn’t quite grow as we had expected. But part of that, it was a timing issue. I think you’re going to see greater growth from our Contact Center business going forward. Already in second quarter, we know that our growth is going to be better than what we were able to show in first quarter. So we’re optimistic about that business as well. And getting back to the cadence we’ve spoken about of high teens to low – I’m sorry, high single digit to low teen growth and high teens EBITDA margin.
Kevin Steinke: Okay, great. And you spoke there to the continued strength in gross margin and the improvement in gross margin really stood out in both Branded Products and Healthcare Apparel. And it sounds, would you say like there’s some sustainability to these gross margin levels going forward? Or I think I asked a similar question last quarter, but how are you thinking about that for the remainder of this year?
Mike Koempel: The remainder of the year, we expect margins to still reflect improvement over last year, like not necessarily to the level of the first quarter, but I would say, Kevin, as you’re looking at the balance of the year, again, we would expect to continue to reflect margin rate improvement in driving the business.
Kevin Steinke: Okay, great. And on the SG&A side, you mentioned, I think a couple items that increased SG&A in the first quarter, and you talked in the earnings release about some investments. So, is this a reasonable run rate for SG&A for the remainder of the year, or how are you thinking about that over the next few quarters?
Mike Koempel: Overall, Kevin, I would say, it’s a reasonable proxy. We have made investments – continue to make investments in talent. And also, obviously, as the business improves, we’re recognizing additional expenses as it relates to just associate payroll and whatnot. So, some of those will be consistent. The things we called out, for example, in the fair value put option that we had an adjustment to this quarter, that obviously wouldn’t repeat itself. So there could be a little bit of variability quarter-to-quarter, but I’d say it’s a good proxy for the balance of the year.
Kevin Steinke: Okay. And you mentioned starting to lap some of the higher labor costs in Contact Centers and perhaps increasing price there. What’s your ability to increase price or plans to increase price over the course of the year in that business?
Michael Benstock: I think it’ll be less frenetic than it was last year. We’re not in a position to really have to raise prices dramatically to get where we want to go. We’ve done some small price increases already this year, but we’ll continue to do them as necessary, and contracts allow us to do so and where we can’t gain efficiencies in some other way to create more bottom line for that business.
Kevin Steinke: Okay, thank you for taking the questions. I’ll turn it back over.
Michael Benstock: Thanks Kevin.
Operator: The next question is from David Marsh with Singular Research. Please go ahead.
David Marsh: Hey, guys. Congratulations. Really a fantastic quarter.
Michael Benstock: Thank you.
Mike Koempel: Thanks Dave.
Michael Benstock: We’re feeling good about it.
David Marsh: Yes, I would be too. It’s great print here. Following up on kind of some of the earlier questions, I mean, this 40% gross margin is, I was just looking back the last few years. I don’t think you guys have ever been this high. I mean, is this – it sounded like – in terms of your response to the last call, maybe feel like that could come back in a little bit. But it sounds like you also may feel like you could stay in pretty close to that range. Maybe you could just provide a little bit more color there.
Michael Benstock: Yes. If you remember on an earlier call, I don’t quite recall when it was last year. We spoke about the fact we had shed some customers who were very, very low gross margin and were no longer accretive, and that’s helped us a great deal, focus on the customers that are profitable and the margin improvement. I mean, it’s been kind of a buyer’s market out there with the pullback from most American companies from Asia. Asian factories are dying for work. They’re all underutilized. So the pricing has been very good in our own factories in Haiti. We’ve seen great efficiency gains and really operating them in a much – I would say, a much more profitable manner to the company with less variances and so on to standard costs.
So, all-in-all, I mean, it’s all come together. We’ve got a good pricing environment with our customers. We’ve got a good costing environment with our vendors, and our own factories are doing very well. And that’s allowing us to invest in a lot of talent in the business. And that talent obviously is to even create more efficiency within the business. So we’re feeling good about where our margins are at. Slight pullback, it could go either way. I wouldn’t necessarily bank on it pulling back. It could just as easily be even a little bit higher, not much, than it currently is.
David Marsh: That’s a great color. Really helpful. Yes. The other thing I think that you guys should definitely be commended for is, the inventory reduction you guys have been able to achieve in the last 12 months looks like about $30 million, 24% reduction. I know last year you guys had talked about feeling as though the inventory was a little bit above where you want it to be. Would you say that you’re kind of where you want it to be now? Or do you think you could still perhaps whittle a little more away on that?
Mike Koempel: Yes. Dave, last year we talked about setting the goal for ourselves by the end of the fiscal year to right-size inventories. And as you said, we made significant progress. And so we – by the end of 2023, we were able to achieve our goal of getting inventories more in line. As we look forward, as we’re looking to fuel the business, I see us making certain investments in inventory to support sales. So going, I’d say, a little bit more on the offense in some cases as opposed to pulling back on inventory. But we feel good about where we are. And I think we’ll be focusing on inventory turns going forward and obviously going forward, keeping that in line with the demand curve. So, again, as we look ahead and look at the trend of the business, we’ll make investments – and continue to make investments in inventory. But again, overall feel good about the position we’re in.
