So I think we’re going to play the ball where it lies right now.
Todd Brooks: That’s helpful, thanks. And then Jim, you talked about working to drive leverage to the business and really focused on digestion. If we’re not muting, EBITDA margins with acquisitions for the next couple of years. I guess, how would you want us to think about the pace of EBITDA margin improvement as you’re really working towards integration and digestion of what’s been acquired over the last two years?
Jim Leddy: Yes, I think, the kind of two to three year and five to six year plan that we laid out, we reiterated on the Q2 call. I think that’s still in play, with the target of, mid-sixes towards seven over the next five years. Adding Hardee’s, which is a big revenue produce company with a lower EBITDA margin to booted us on a full year basis by 10 or 20 basis points this year. So if you exclude that based on the midpoint of our guidance, our core business is back towards 6%. And I think, as Chris mentioned, we’re going to focus on improving and integrating the significant amount of acquisitions that we’ve done. So I think definitely the $4 billion target of top line and growth and 6% plus, adjusted EBITDA margins are, I think, between the organic growth, the capital allocation plan that we’ve laid out, we’ve made the significant investments in M&A and infrastructure.
We’re going to continue to grow, we’re going to continue to build some facilities, but at a more moderate pace. And our most profitable growth is organic growth into the capacity that we’ve invested in. So I don’t think it’s materially changed, and as Chris mentioned, we’ll take advantage of accretive M&A opportunities that work within the capital allocation framework that we’ve laid out. So I think the fact that we’re at kind of our peak investment cycle, and we’re going to start mining those investments, aligns well with generating more free cash flow, strengthening the balance sheet over the next couple of years, and potentially, market conditions allowing allocating some more of our cash, our capital, to returning some value to shareholders, depending on market conditions, et cetera.
Todd Brooks: That’s very helpful, thank you both.
Jim Leddy: Thanks, Todd.
Operator: The next question we have is from Andrew Wolf of C.L. King. Please go ahead.
Andrew Wolf: Hi, good morning. Thanks, Jim. That last answer on Hardee’s was kind of where I was going to ask you, but I still want to kind of, you’re kind of getting us to the 35 basis points or so lower, you’ve done margin guide for the year. And, it’s obviously a little more than that for the fourth quarter, but, I mean, I appreciate the bridge, but could you kind of frame it in terms of expectations? I assume the summer, you didn’t have crystal ball in the summer. And I would assume also the insurance maybe was a surprise. So, but what about, Hardee’s and the acquisitions in general? Are they could you frame whether they were a little sort of as a group or individually maybe Hardee’s just a little more diluted than anticipated?
And maybe for Chris, if that is the case, I would assume this is nothing like what you went through many years ago with the protein business. But, any qualitative view on where, how you expect the produce to become not just strategically helpful for cross-selling, but a pretty profitable part of the business? Thank you.
Chris Pappas: Yes. I’m I’ll shoot first, Andy. I think business, it’s pretty much tracking, except for the funky summer, I think it’s tracking to expectation. Most of our businesses, I mean, business is fine. We had the headwind with some of the costs. We took on an extra building, because we got a good opportunity down in South Jersey to really consolidate. We were desperate for space for that Pennsylvania and New Jersey market, take pressure off of New York and our Maryland facilities. So, when we bought Hardie’s, I mean, it’s not up to the EBITDA producing level of what we expect from our Chefs’ businesses, but we kind of knew that, and it was kind of built into the price, when we bought it. So, nothing unexpected there. I think to explain, why we’re not going to hit maybe the — we have really high expectations this year is like Jim said more headwind with the expenses, so yes a little bit of funkiness during the summer then September came back strong October’s coming in pretty strong so overall our customer is doing fine.
We’ve been talking for years and years and I believe in a higher-end customer base usually does better than most than most other sectors of food away from home and we’re extremely diversified. I mean people think that we’re know, they know us for, selling super high-end products, but we sell, what we call upscale casual, which is doing really well. And I think our mix and our diversified customer base has proven to be really resistant. So I think it’s like a little Goldilocks. I think it’s a little bit more than expected on the expenses due to the new buildings that we’ve taken on. We’ve never bought 12 companies in a year. So we had a lot of integration. I think that we underestimated the integration cost of those businesses. But I’m blessed to say that we’re tracking pretty much to expectation with a little headwind on the expense side and a little funkiness of the summer.
Jim Leddy : Yes, Andy, I’ll just add in terms of your question as it relates to Chris articulated it well, but the guidance, Chefs’ Middle East and Greenleaf and even Hardie’s performing pretty much as we expected. We did report the non-core customer that Hardie’s lost. We took an impairment for that when we reported in the second quarter. So that impacted us a little bit, but it was not the material driver of the change to guidance. It’s really been, as we articulated, the higher level of integration and transition costs and primarily the higher cost of insurance risk in places like Florida and California where insurance companies literally don’t want to insure you. And that has come in higher than expected. We don’t expect that level of expense increases to continue in 2024 and 2025. So that’s why we’re highlighting them as growth expenses that have impacted our guidance this year.
Andrew Wolf: Great. Thank you both. One follow-up, Jim. I want to make sure I heard you right. Did you say that September had the best gross margin rate for the year?
Jim Leddy : We had our highest gross profit margin month of the year. Yes.
