Unidentified Analyst: And I just quickly wanted to touch, based on the track channel data. I believe in the previous quarter, you had mentioned you were expecting something in the track channel data to remain pretty high double digit or so. And — but then most recently, it’s showing like about mid-single, low — high single digits. If you could please comment on that and how you see as you gain distribution to your point, how quickly can we see an uptick in the track channel data as well?
Carla Vernon: I’ll start this off. And Dave, if I miss anything, please let me know. As you know very well, 2023 was the year we got the benefit of going from 50% overall to about an 80% ACV for the brand as a total. What we find ourselves lapping in some of those instances is either timing for retailers, timing shifts for retailers or pipeline build behind some of the new distribution we’ve gotten. I don’t remember the second part of the question. Did I?
Dave Loretta: Well, the current track channel in the high single digits which is more a reflection of what we’re seeing in the consumer spend area. With those tracked channels that are part of that channel which is about 50% of our overall business.
Carla Vernon: Yes, we feel good about — what we feel really good about is that we’re growing on both dollars and units for overall which, as you’ve been watching what’s happening in the consumer products space, that is such a great indicator for us that our consumer really values not only the distinctiveness of the brand but that when they’re making these choices about which brands best serve their needs, even as we have delivered price advances over the last year, 1.5 years, our consumers are actually still growing with us. On top of the additional distribution, we’re still able to demonstrate velocity growth.
Operator: [Operator Instructions] Our next question comes from the line of Laura Champine of Loop.
Laura Champine: Congratulations on achieving profitability faster than we were expecting. I wanted to ask about free cash flow which also beat your expectations in the quarter and in the year. A lot of that came from an inventory drawdown though. Is that a repeatable event? Or should we expect free cash flow flattish or even a little bit worse in 2024?
Dave Loretta: Laura, certainly, the cash flow gains in ’23 were pretty pronounced and it was that opportunity to rightsize the inventory that generated. As well as, I’ll say, that fourth quarter strong earnings results that just flows through to land on our cash balance of $33 million. ’24, I do not expect we will have that kind of a cash flow gain over the course of the year. We do think the inventory levels are better rightsized to the demand in front of us. And so we’ll keep managing that to eke out what we can but we don’t expect free cash flow to be positive. The ending cash balance of $33 million, where we’re at today, we’ll certainly cover any additional needs through the balance of the year. But I do want to call out in 2024, we have some costs related to legal expenses of the cases that we are already reported on.
And those are hard costs and cash flow items that we will have in 2024 that would impact our ability to see positive cash flow. So it will be very flat to slightly down but not the kind of positive cash flow that we’ve generated in ’23.
Laura Champine: Got it. So that will impact cash but obviously not the adjusted EBITDA outlook that you provided today, correct?
Dave Loretta: That’s correct. That would be an add-back. And so — but it is a cash outflow.
Operator: [Operator Instructions] Our next question comes from the line of Dana Telsey of Telsey Advisory.
Dana Telsey: As you think about 2024 and the guidance you gave versus the first half and the second half of the year, given the tougher comparisons on the top line in the second half of the year, what do you see as the drivers of growth in the second half? Is it distribution? Is it something with the categories with new launches how are you thinking about it? And then, as you think about the adjusted EBITDA as we go through the year, any puts and takes we should be mindful of?
Carla Vernon: Dana, it’s great to hear you. Thanks for joining us today. This is Carla. I think we’ll take those in two parts. Let me start out by talking about how we think about our overall growth road map, I would say this all still fits within the context of — as you can see in our investor presentation on Page 9, we really articulate our journey over the course of a few years, right? And so 2023 was absolutely defined as a transformation year for us. We — I think we’ve been really candid about that and hard at work and proud of those results. We still believe in 2024, there are some activities that we want to continue in the vein of our 3 pillars: our Brand Maximization pillar; our Margin Enhancement pillar; and our Operating Discipline pillar.
And as we do that, that will mean that we’re still really helping to drive a very strong and stable foundation of our core portfolio. We — I’ve talked to you before about our real strong belief in the Pareto principle in any CPG company and that every CPG brand, you look at has this sort of stable of core items that really make or break the portfolio. We call those our hero items. We really only defined that strategy as a beginning strategy in 2023. As we look at those hero items, I know that my — that our Chief Growth Officer, Kate, who’s here today, is absolutely reflecting on where are the growth opportunities. You might also see in the slides and we’ve talked to you before. Many of our hero items are very well under-distributed even though we know that they are so popular.
