The Hain Celestial Group, Inc. (NASDAQ:HAIN) Q4 2023 Earnings Call Transcript

The Hain Celestial Group, Inc. (NASDAQ:HAIN) Q4 2023 Earnings Call Transcript August 24, 2023

The Hain Celestial Group, Inc. reports earnings inline with expectations. Reported EPS is $0.11 EPS, expectations were $0.11.

Operator: Greetings, and welcome to The Hain Celestial Group Fourth Quarter Fiscal Year 2023 Earnings Call. At this time all participants’ are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Alexis Tessier, Investor Relations for Hain Celestial Group. Thank you. You may begin.

Alexis Tessier: Good morning, and thank you for joining us on Hain Celestial’s fourth quarter fiscal year 2023 earnings conference call. On the call today are Wendy Davidson, President and Chief Executive Officer and Chris Bellairs, Executive Vice President and Chief Financial Officer. During the course of this call, we may make forward-looking statements within the meanings of federal securities laws. These include expectations and assumptions regarding the company’s future operations and financial performance. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations. Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed from time-to-time with the Securities and Exchange Commission, as well as the press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statement made today.

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We have also prepared a presentation, inclusive of additional supplemental financial information, which is posted on our website at hain.com under the Investors heading. Please note that remarks today will focus on non-GAAP or adjusted financial measures. Reconciliations of GAAP results to non-GAAP financial measures are available in the earnings release and the slide presentation accompanying this call. This call is being webcast and an archive will be made available on the website. And now I’d like to turn the call over to Wendy.

Wendy Davidson: Thank you, Alexis, and good morning, everyone. We appreciate you joining the call today. I’ll start today’s call by reviewing our fourth quarter results before discussing the steps we’re taking to transform our business and the progress we’re already seeing on the journey to return the company to sustainable, profitable growth. Then Chris will review our financial results in more detail along with our outlook for fiscal 2024, before I offer some closing remarks. I’m pleased to report that we achieved fourth quarter results, which were near the high-end of our expectations. Adjusted net sales on a constant currency basis were down slightly 1.5% year-over-year, consistent with our guidance. And adjusted EBITDA on a constant currency basis was $43.5 million at the high-end of our guidance.

As expected, the net sales decline in the fourth quarter was driven by the North American segment, where a large customer promotion for snacks in the prior year period was not repeated and by some softness in personal care. There were several bright spots in our results stemming from strategic actions we began taking in the third quarter for both our North American and International businesses. In North America, we are seeing bright spots in key snack and beverage brands, with Garden Veggie snacks and Celestial seasoning bagged tea, both returning to growth after a challenging third quarter. Garden Veggie snacks grew dollar sales by 4% in the 12-weeks ended July 16th, on 14% growth in TDP, and Celestial seasoning bagged tea grew dollar sales by 2% on 7% growth in TDP.

Additionally, Greek Gods yogurt continued its standout performance, growing dollar sales 12% on a 20% increase in velocity and our Earth’s Best baby and kids grew dollar sales 20%, excluding formula on 19% TDP growth, in part due to Earth’s Best snacks innovation launched earlier this year. Formula continues to be a challenge, driven by industry-wide supply shortages. In the international segment, we continued the momentum from the third quarter to achieve another quarter of adjusted net sales growth. The growth was driven by the U.K. led by meal prep formerly called Pantry, particularly in private label, where we have a meaningful presence, as well as by snacks. We were also encouraged to see sequential improvement in meat free with our private label growing 9% in the quarter and gaining share, as the category continues to show signs of stabilization.

Strength in the U.K. was only partially offset by softness in the non-dairy beverage business in Continental Europe. While non-dairy beverages were down year-over-year for fourth quarter as a whole, we are encouraged by sequential improvement we’ve seen throughout the year, especially in our strong private label segment and by growth in both June and July. The recovery in non-dairy beverage is largely led by private label, and appears to gaining positive momentum. As a category leader in both branded and non-diary private label, we believe our portfolio is well positioned to benefit from this development. During the quarter, we delivered improvements in gross margin across the business, through both pricing and productivity initiatives, including the consolidation of our meat free manufacturing footprint.

As we expect continued moderation in the inflationary environment in fiscal ‘24, so still above normal levels, we see further opportunity to improve gross margin. We also made progress on our debt levels in the quarter paying down $28 million in debt. Debt repayment coupled with reinvesting in strategic business capabilities remains a top priority for free cash flow. Overall, we are pleased with the stabilization of many of our core categories as we finished the year. As you know, we’ve been undertaking a significant review of our company’s strategy and reimagining our business in order to realize our full potential and return Hain to consistent profitable growth. We’ve begun taking meaningful steps to simplify our business and set the foundation for our transformation by focusing on enhancing our capabilities, optimizing our organization, strengthening our end-to-end supply chain, improving our productivity pipeline, optimizing our route to market and fueling our brand building initiatives.

Early actions are bearing fruit, reinforcing our confidence in our strategy and future growth potential. Let me share a few examples. We spoke last quarter about our efforts to enhance our capabilities and expand into margin accretive channels such as immediate consumption and away from home. We believe there is a significant opportunity for our brands outside of traditional retail and on the go consumption occasions within C-stores, airports, offices, and universities amongst others. These immediate consumption channels drive brand reach and visibility and are both price and margin accretive as shoppers are willing to pay more for convenience. Our portfolio is well positioned to take share in this channel, particularly our snacks and tea brands.

Hot tea is one of the fastest growing beverages in food service and we are seeing consumers adding to their morning and evening routines with snacking occasions away from home. Morning and evening snacking occasions are up 3% versus a year ago. We are enhancing our away from home capability and our go to market strategy as it requires a very unique sales process and a distinctive and focused sales model, different than that used for traditional retail channels. While a new focus for Hain, this is a channel in which I have in-depth experience, and I’m pleased that we are already seeing progress against this effort with C-store sales growing double-digits in the 12-weeks ended July 16th. Additionally, we are building out our revenue growth management capability to drive effectiveness and efficiency in price realization, brand building, and end market share growth.

For example, we recently executed a successful SKU rationalization initiatives within our international segment, which streamlined a brand’s offering by nearly half. These efforts resulted in a highly productive core, which is now seeing double-digit growth and increased velocity, a win for both Hain and our retail partners. Furthermore, e-commerce continues to be a focus with increased support and optimization on marketplacesandretailer.com with updated content, expanded assortment, improved media efficiency, and increased spend on key brands. Garden Veggie snacks, Earth Best, and Celestial seasonings are all grown consumption with double-digit increases in traffic online. We continue to focus on refining our operating model so that it is future fit to drive effectiveness and efficiency, supported by Global Centers of Excellence.

Earlier this month, we announced our new global headquarters in Hoboken, New Jersey. The space and location was thoughtfully selected to meet the evolving needs of our business. At nearly half the size of our footprint in Lake Success, our new headquarter will serve as the anchor to our hub and spoke flexible working model where teams will come together to collaborate at significantly less cost than our prior location. This approach aligns to our purpose of inspiring healthier living and serves as a competitive advantage in attracting and retaining top talent, regardless of where they are located. The headquarter will also serve as the home of Hain’s Innovation Experience Center, where team members, customers, and consumers will be able to immerse themselves in our products, explore consumer insights, and create innovative opportunities for the future.

Our Centers of Excellence are designed to leverage global scale where appropriate, enembley execute locally for impact. Our first global center, which we announced earlier this year, was for supply chain. Through this COE, we have simplified our end-to-end planning and enhanced our productivity pipeline process, generating $34 million in productivity in the back half of fiscal ’23. When coupled with pricing this has allowed us to offset record levels of inflation, while maintaining average on shelf availability fill rates ahead of the industry over the course of the fiscal year. We are in the process of establishing additional global Centers of Excellence in areas such as innovation, brand building, talent management, and technology. Our Baby and Kids businesses in North America and international have begun collaborating to share consumer and category insights, brand strategy, innovation, and creative assets across the Ella’s Kitchen and Earth’s Best brands.

This facilitated the launch of Earth’s Best crunchy sticks in the U.S., which are similar to the best-selling Ella’s Kitchen Melti sticks in the U.K. This partnered innovation over delivered expectations at launch, helping to deliver strong growth in Earth’s Best snacks in the quarter, with expanded distribution and support in fiscal ‘24. Our strategic reinvestment in marketing and brand building is also beginning to yield positive results. As you may recall, the supply chain challenges we faced in fiscal ‘22 led to a temporary pullback in marketing efforts, which negatively impacted sales in fiscal ‘23. In quarter three, we began taking action and reinstated brand support and are encouraged by the positive momentum as a result. In the fourth quarter, we saw marked improvement in Celestial seasonings tea due in part to the Magic in Your Mug campaigns that we activated in fiscal quarter three.

Celestial bagged tea grew 2.3% in the latest 12-weeks, while the category posted a mild decline resulting in Celestial gaining share. Tea also benefited from our work as a category captain with a large retail partner on the optimization of assortment and shelf set. Furthermore, we are seeing encouraging early results from Peppermint K-Cups and Sleepy Time with Melatonin, both new tea innovations supported by strong customer programming this summer. Also, launching in the third quarter was our Earth’s Best Good Food Made Fun campaign, which helped to drive Earth’s Best snacks growth of 8%, on 18% growth in TDPs in the latest 12-weeks. We have programming in place with our key retail partners focusing on 360 activation, including retail media, in-store events, digital coupons, and retailer website engagement.

We will continue to deliver Good Food Made Fun across all consumer touch points in fiscal ‘24, including new packaging, websites, and public relations social media. In the fourth quarter, we launched our Crazy Delicious Vegetables, media campaign for Terra Chips. The early results show campaign effectiveness, brand awareness, and purchasing intent, all surpassing industry benchmarks. The early success we are seeing across these areas of focus gives us confidence that we have the right comprehensive plan in place to build our brands and return the business to growth in fiscal 2024. We view fiscal 2024 as an inflection point, a year during which we will reset our foundation and pivot to growth. Consistent with what I shared on the last call, we plan to make brand building investments across key brands to drive growth, while also optimizing the effectiveness of our marketing dollars to work harder.

We will begin to make investments to enhance our away from home and e-commerce capabilities. Two channels, which we expect will provide meaningful growth in the future. Before I hand the call over to Chris to share the financial details, I want to thank the entire Hain team for their commitment to our purpose of inspiring healthier living through better for you purpose driven brands. I recently completed my first seven months of visits to see all of our global sites, including manufacturing, distribution, and offices across the U.S., Europe, and Canada, which left me energized by our capabilities and our team’s passion. I am encouraged by our potential to leverage our reach and scale to deliver sustainable and profitable growth as the leading better for you branded enterprise.

With that, I’ll turn it over to Chris.

Chris Bellairs: Thanks, Wendy, and good morning everyone. Fourth quarter consolidated net sales decreased 2% versus the prior year period to $447.8 million, inclusive of a $1.3 million impact from foreign exchange. On an adjusted basis, consolidated net sales decreased 1.5% in the quarter, consistent with our guidance of low-single-digit decline. Adjusted gross margin was 22.7% in the fourth quarter, an increase of approximately 330 basis points versus the prior year period and an increase of 130 basis points from the third quarter of 2023. Driven by pricing and productivity, partially offset by inflation. Adjusted EBITDA on a constant currency basis was $43.5 million versus $35.4 million in the prior year period. This came in near the high-end of our guidance range of $40 million to $44 million.

Total SG&A came in at 14.9% of net sales for the quarter, as compared to 15.5% of net sales in the prior year period, benefiting from cost management. Net loss for the quarter was $18.7 million or $0.21 per diluted share, compared to net income of $3 million or $0.03 per diluted share in the prior year period. This is inclusive of a non-cash intangible asset impairment charge, totaling $19 million, resulting in an impact of $14 million after tax. Adjusted EPS was $0.11 versus $0.08 in the prior year period. Turning now to our individual reporting segments. In North America, reported net sales decreased 5.1% to $281.8 million in the fourth quarter. Adjusted net sales decreased 4.3% versus the prior year period, an improvement from the rate of decline in the third quarter.

The year-on-year decrease was primarily a function of previously discussed non-repeated customer promotions and softness in personal care. Q4 adjusted gross margin in North America was 22.7%, a 270 basis point increase versus the prior year period. Our margin performance reflects pricing and productivity, partially offset by inflation. Adjusted EBITDA at constant currency in North America was $27 million, a 1.8% decrease versus the prior year period. The decrease was driven by lower sales and increased marketing spend. North America’s adjusted EBITDA margin was 9.5% on a constant currency basis, a 30 basis point increase from the prior year period. In our International business, reported net sales increased 3.7% to $166.1 million in the fourth quarter.

When adjusted for the impact of foreign exchange, net sales increased 3.6%, compared to the prior year period. This represents the second consecutive quarter of growth in the segment and a significant improvement from decline in the first-half of the year. Our year-over-year increase for International adjusted net sales reflects an 8.2% increase in the U.K. partially offset by an 8.7% decline in Continental Europe. The U.K. increase was driven by a benefit from the category recovery in private label and the diversification of our portfolio in both brand and private label. The year-over-year decline for Continental Europe was driven by non-dairy beverage performance, which, as Wendy mentioned, appears to be stabilized. International gross margin was 22.7%, up approximately 440 basis points year-over-year, as pricing and productivity more than offset inflation.

International adjusted EBITDA at constant currency was $27.5 million, a 62.8% increase for the prior year period. On a constant currency basis, adjusted EBITDA margin was 16.6%, up approximately 600 basis points versus the prior year period and 400 basis points, compared to the third quarter. Shifting to cash flow and the balance sheet. Fourth quarter operating cash inflow was $40.5 million versus an outflow of $18.9 million a year ago. The higher operating cash flow resulted from a strong improvement in net working capital. As we anticipate generating incremental positive cash flow in fiscal 2024, we expect resulting cash to be used to pay down debt, while strategically investing in the business. CapEx was $6.4 million in the quarter and $27.9 million for fiscal 2023.

Finally, we ended the quarter with cash on hand of $53.4 million and net debt of $775.4 million, translating into a net leverage ratio of 4.3 times as calculated under our amended credit agreement. Consistent with our stated priorities for cash, we have reduced net debt by $70 million since the end of the first quarter of 2023. Turning now to our outlook. As Wendy said, we view 2024 as an inflection point where we will reset our foundation and return to top line growth. In fiscal ‘24, we anticipate balanced growth across the portfolio within both our North America and International segments, achieving low-single-digit organic net sales growth. Fueled by productivity increases year-over-year, we expect to make brand building investments across key brands to drive growth, and will also make modest investments in our away from home and e-commerce capabilities.

We expect these investments along with the refunding of our incentive plan, as compared to fiscal ‘23 will create an adjusted EBITDA drag of approximately $20 million as we invest for the future. As such, we are offering the following guidance for fiscal ‘24. We expect adjusted net sales to increase by 2% to 4% year-over-year. Adjusted EBITDA to be between $155 million and $165 million. And lastly, we expect to generate free cash flow of $50 million to $55 million. Our 2024 guidance assumes that currency exchange rates will remain near current levels, pricing will recover most expected cost inflation, and productivity will drive gross margin expansion and fuel investments in brand building, channel growth capabilities, and employee incentive compensation.

Our full-year guidance is heavily back half weighted. The first quarter of the fiscal year is typically our seasonally smallest quarter in terms of net sales and adjusted EBITDA. This dynamic will be enhanced in the first quarter of fiscal ‘24 as there are several headwinds that we expect to impact our North America business, which we don’t expect to continue over the balance of the year, because of these factors we are providing guidance for fiscal Q1. On the top line, we are continuing to experience industry-wide supply constraints related to our Earth’s Best organic baby formula business, which we are currently working through. In addition, we are optimizing promotional activity for Terra chips resulting in a near-term revenue headwind, but we anticipate longer term the move will unlock a more profitable growth mix.

Lastly, there has been a timing shift in a personal care program within a non-measured channel. On the margin front, carryover inflation in Q1 is expected to be higher than that in the balance of the fiscal year. And we expect pricing and productivity will begin accelerating in Q2. As such, we expect the following for the fiscal first quarter. Adjusted net sales to decline by a low-single-digit percentage year-over-year and adjusted EBITDA to be between $20 million and $21 million. We expect results to improve starting in the second quarter as fuel initiatives and pricing take hold with operating model improvements positively impacting the back half of the year. With that, I’ll turn the call back to Wendy for closing remarks.

Wendy Davidson: Thank you, Chris. Before I close out today’s call, I would like to share the news that Chris will be stepping down as CFO of Hain Celestial on September 4th. Chris has played a key role with the company through a time of extensive change and has helped to build a strong finance team with deep expertise to deliver for the future. With this new I’m pleased to share that Lee Boyce Chief Financial Officer of Hearthside Food Solutions will become Hain’s new CFO effective September 5th. Lee brings more than 30-years of experience in leading finance within organizations across the food and hospitality industries, including Hearthside, a leading contract manufacturer in the food industry’s largest privately held bakery.

With [Technical Difficulty] Company and with American Hotel Register. Prior to that, he spent more than 20-years at Mondelez and Kraft Heinz. Lee’s extensive and broad experience will be a tremendous asset to Hain as we transform our business into a globally integrated enterprise. Chris will continue to serve as CFO through the transition, he will participate in Hain’s upcoming Investor Day event in September, and will stay on into November to ensure a smooth transition. On behalf of the company, I want to thank Chris for his many contributions to Hain Celestial and wish him the very best. At this time, I’d like to turn it over to Chris to say a few words.

Chris Bellairs: Thanks, Wendy. I want to thank you and the team for your partnership during my time at Hain. I look forward to seeing the new Hain Reimagined strategy take flight. And I’d like to thank everyone on the call. It’s been a real pleasure working with you. You are in good hand and know I will be cheering Hain on from the sidelines.

Wendy Davidson: Thanks, Chris. As mentioned previously we have examined really every aspect of our business to identify key unlocks to drive our business forward. Over the last several months, our team has been laser focused on developing Hain Reimagined, our multi-year transformation strategy to return our business to predictable, profitable growth. We have identified where we will play and our right to win and the right building blocks to get there. We are simplifying a winning portfolio, and we have identified the right channel mix and geographies to drive our core, expand our reach and gain share across our portfolio. As we lay out our strategy during Investor Day on September 13th, we’ll share how we’re building our future for growth through our commercial focus, where we’re reshaping our market coverage and building capabilities and revenue growth management.

You’ll hear how we’re reimagining our supply chain, where we’re implementing new capabilities, expanding capacity in critical categories, and enhancing operating efficiency. We will share how we are transforming our end-to-end business planning process with news way of working and focused investment in digital that is people led technology enabled, and we’ll share how we’re redefining how we approach brand building to drive greater awareness and loyalty and to get our products into the hands of more consumers everywhere they shop. Same size, scale, and structure, provides us the unique opportunity to blend aspects of traditional CPG growth models with disrupted startups and use it as a competitive advantage. We are taking the best of both world, which enable us to how small the big and how big the small.

All of this of course is only possible through the talent and passion of our Hain teams, who are committed to our company purpose of inspiring healthier living and who live our values every day. It’s an exciting time to be at Hain, and I am optimistic about the future of our business and unlocking the full potential of our brands. We look forward to laying out the details of our new strategy next month and introducing you to Hain Reimagined. Operator, please open the line for questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

Andrew Lazar: Great, thank you. Good morning. Wendy and Chris.

Wendy Davidson: Good morning.

Andrew Lazar: Wendy, I know that you had initially described sort of the approach going forward regarding reinvestment as kind of a, pay-as-you-go approach, and maybe as opposed to a large kind of one-time reset. And I guess, that’s partly due to balance sheet flexibility and such. With the $20 million incremental investment and amended credit agreement. And now it seems like maybe a little bit less of a pay-as-you-go and maybe a little bit more of an upfront kind of reset. So if I’ve got that right, I guess, why the change in approach. And do you now believe this gets Hain to a more sustainable place on brand support? Or is more needed and as you go forward, as more productivity comes through? And then I’ve just got a follow-up. Thanks.

Wendy Davidson: Yes. I appreciate the question. The reality is that a large chunk of that $20 million is actually just re-funding our incentive plans, on a year-on-year basis. So that’s where a large amount of that is. As we look into the year and the investments around brand building, the bulk of it we won’t actually put in place until the back half of the year. So I think we are building the shape, fairly prudent, to ensure that we’re driving productivity and efficiencies in the front half of the year. And as Chris said, we’ll begin to see pricing catch up with inflation, as we go into quarter two. That gives us a bit more flexibility to then lean into some of those reinvestments around brand building. So while the full-year, we’ve built it into the shape, what you’ll end up seeing is, a bit more of productivity in the front half that gives us the freedom to then lean into some of those investments in the back half.

Andrew Lazar: Got it. Okay, thanks for that. And then, guidance for the fiscal first quarter adjusted net sales was for a low single-digit decline year-over-year. I guess what are you expecting more specifically for North America in 1Q? And I guess, to what do we owe — you mentioned a couple of things, but maybe what do we think is driving some of the weaker trends that we’re sort of currently seeing, at least in scanner data. And I guess what gives you the confidence in the inflection that’s needed to hit that 2% to 4% target for the full-year?

Wendy Davidson: Yes, I think there’s a couple of things that play into it. First, for quarter one, as Chris said, there are some really unique, one-time impacts that happened in the quarter. The largest of that being availability of baby formula that supports Earth’s Best, in North America. And that — we believe a quarter one impact, but we don’t see that as we go throughout the balance of the year, given some of the arrangements that we’ve made with some of our suppliers there. We then also made a choice to margin up the mix around our snacks portfolio, as we pulled back from some promotional activity that was margin dilutive, to make sure that we’re using those brands and putting them into the marketplace in the best way possible.

The challenge with that is, that lapping those big chunks of volume, has an impact in a short period of time, but over time we will improve the overall mix of that. So you’ve got a little bit of that phenomenon. And then the timing of Alba sun care, lapping prior year. So we shipped later in the sun-season last year, and we shipped earlier in the sun-season this year and so you see a quarter-on-quarter view, but it’s not necessarily a weakness overall. So some of this is very much timing related for North America. To your question about what we’re seeing in end market activity, we’re actually really encouraged. We’re encouraged because TDPs continued to grow, which is good. We’re encouraged, because the pricing actions we’ve taken have gone through.

And we’re not seeing an impact in the consumer take rate and probably the third piece that I am more encouraged about is the efficiency of our promotions. If you recall, we didn’t really turn back on promotional activity until quarter three, really late quarter three of fiscal ’23. And we knew it would take a little bit of time for that to catch up. We were far behind category average in the places where we play. We’re now promoting about at industry rate, we’re seeing effectiveness of those promotions. And we’ll have a sort of always on marketing strategy and an always-on promotional strategy, that I think will allow our velocities to catch up with our TDPs. So that’s what gives us real confidence.

Chris Bellairs: Andrew, the three headwinds that Wendy described are in aggregate about 10 growth points of headwinds for North America. So, it is a material headwind in the first quarter. and specifically in the first quarter. And then additionally, if you go back and look at how fiscal ’23 seasonality was for North America. Recall that the first quarter in North America was exceptionally strong last year. So, it was a quarter that got the year off to a very good start for North America, whenever the anniversary. If you go back to two years ago, and adjust for those 10 growth points of headwind versus two year ago actually, it looks like acceptable levels of growth in the first quarter for me. And then the balance of year, North America will recover nicely.

Andrew Lazar: Yes. Thanks for the clarity.

Operator: Thank you. Our next question comes from the line of Ken Goldman with JPMorgan. Please proceed with your question.

Ken Goldman: Thank you, Chris. Good luck to you. I appreciate your help, over the last year or two. Just curious if you can help us a little bit and thank you for all the guidance for next year, including the first quarter. Just wondering if there is a few other line items for the full-year that we could get a little bit of help with, including maybe just directionally how you’re thinking about the gross margin. And then maybe some help on just below the line items for interest and tax, is there anything abnormal there we should think about as we model the year?

Chris Bellairs: Yes. So for gross margin we do continue to see improvement, we expect improvement throughout the year. Call it between a 100 and 200 basis points of gross margin improvement throughout the year. It’ll be a little lumpy, but that would be our full-year expectation. Interest expense will continue to go up modestly in fiscal ‘24, not nearly as much as the increase that you saw from fiscal ‘23 to from ‘22 to ‘23. And then the adjusted tax rate will continue to be competitive in that 23.5%, 24.5% range.

Ken Goldman: Okay, thank you for that. And then just wondering if I can just if you could remind me a little bit of how the incentive program works, just because it sounds like from Wendy what you were saying most of that $20 million is coming from a — I don’t know if it’s a reset or forget the exact word you use of the incentive program, but your EBITDA will be down next year. So could you just walk us through a little bit, what drives that reset to deliver the benefits?

Wendy Davidson: Yes. The structure is actually very comparable to what you see just across, really industry. It’s 50% based on revenue growth, 50% based on EBITDA growth. The challenge we have in fiscal ‘23, is that for the majority of the business, they clipped on both net sales growth and EBITDA. And so, what was accrued to pay out in bonuses, essentially went back into profit. With the plans for fiscal ‘24, we’re building top-line growth, we’re also planning relatively flat EBITDA, even with the investments in the business, and so, the combination of that in the refunding or the accruing for that bonus plan, that’s what you see as an accrual phenomenon, more than anything else. And to be honest, I really hope that we maxed out in both revenue and EBITDA and pair our folks, based on the results that we plan to deliver next year.