But it hasn’t been material to date, and the team over there is doing a great job of managing substitutions and working with customers, et cetera. So, I would just say, overall, the logistics environment hasn’t really had a lot of volatility over the last 6 months or a year that we experienced over the first 2 or 3 years post COVID.
Chris Pappas: Yes. Kelly, just to add a little bit — a little more insight to that. Again, I think ever since COVID, everybody, all our partners in from over 2,000 suppliers in 40 countries, kind of have adapted. Everybody keeps more inventory now because the world is in a pretty volatile state, right, with two wars going on and we’ve got climate change impacts. So, I think everyone’s gotten kind of ahead of it, right? So, in the U.S., like Jim said, I think everybody was — everybody always anticipates some sort of disruption. So we’re kind of way ahead of it. Our inventory is fine, the team is all over it. And as Jim said, in Dubai, which is our major warehouse, they had a great December. Business was strong and I think any pressure came because it was so strong, the demand was there.
And it’s an incredible team there that is very seasoned and they’re accustomed to dealing with something going with the logistical challenges and they try to get ahead of it way before something happens. So I think we’re good.
Operator: Our next question comes from Andrew Wolf of C.L. King.
Andrew Wolf: I wanted to ask about the guidance, in terms of the margins, EBITDA margin. So at the midpoint of sales and EBITDA expands about 10 basis points in ’24 from ’23. And gross margin at the midpoint is more than that closer to 20%. So from Alex’s question, it appears you guys are looking at the first half being sort of heavy on OpEx and then starting to improve. So I just wanted to get the sense kind of, if you could sort of dive a little more into the cadence of margins, as they flow for the year both. How you see particularly the OpEx where the business is deleveraging? I know you’re not said it well, actually at ICR you did talk about longer-term guidance. Just how you do see the OpEx leverage really being reestablished? Is it going to sort of be, like — is it going to get greater and greater once you start to establish it? Is that how you view it in getting margins up to that 6% to 7% long-term goal?
Jim Leddy: Yes. Thanks, Andy. Just in terms of the guidance and the cadence through the year, it’s a range. I mean, if you look at our EBITDA guidance, it’s $205 million to $218 million. I think the midpoint adjusted EBITDA margin percentage is conservative. I think there’s a chance that could be improved. We do still have some of the near-term cost headwinds related to all the growth investments. We talked about that at ICR and on our third quarter call. That’s mainly in the first half of the year. In the back half of the year, we expect to start to get a little more leverage and then it’s really about ’25 and ’26. I would just go back to Chris’ comments. We expect to drive organic volume through this incredible amount of capacity that we’ve invested in and added in key growth markets over the next couple of years.
It’ll begin in ’24, but we still have, as I mentioned some of the — we haven’t wrapped some of the larger rent investments and some of the other growth related costs, but those will dissipate a lot of the transition costs that we’ve experienced related to the significant amount of M&A we’ve done over the last two years that will start to decline. And so, it’s going to be gradual. Combine that with improving adjusted EBITDA margins and key investments like Hardie’s in Texas, which is a key strategic decision to enhance and accelerate our platform for growth in Texas, which is a huge growth market. They’re diluting us initially. I think we’re a little bit above 5.6% for the full year of ’23. If you excluded the dilutive — the initial dilutive impact of adding Hardie’s, we’d be very close to what we delivered in 2022, we’d be around 5.9%, in 2022, we delivered 6%.
It’s really just about driving the organic volume through these significant capacity investments and then improving the adjusted EBITDA margins over time, as we integrate this kind of 15% of our revenue base that comes at a lower EBITDA margin percentage.
Andrew Wolf: Just speaking of Hardie’s and I know you had other acquisitions that were similar, smaller I think, but similar where you’re able to margin them up, I think 300 basis points into Boston acquisition. Could you just give us a sense of that, like is it more rightsizing the business or is it more the cross sell, which I guess it is more the latter but what percent of the customers are you kind of is the right goal either based on experience or how you’re modeling it that you want to cross sell to and what kind of penetration? And how does, just give us a sense of what needs to happen for that acquisition to really move the right way?
