Pamela Kaufman: I was hoping you could discuss the implied Q4 EBITDA margins. The guidance implies margins of about 4%, but that’s less than half of the EBITDA margin year-to-date. So just curious what’s embedded into this outlook, how much of it is a reflection of conservatism versus your plans to step up investment and promotion as you mentioned?
Thilo Wrede: Pam, it’s a great question. Look, we’ve — what we’ve done all year is to make sure that we can deliver what we promised to deliver, so that certainly plays into that. We’re also looking at fourth quarter where the commodity environment is folded in volatile territory. We’re looking at a promotional environment going into the holidays. We’re looking at marketing spend in the fourth quarter. So all of those pieces play together into our EBITDA margin assumption. And I wouldn’t say there’s one factor that’s bigger than the others. It’s really the mix of these different puts and takes that are at play there.
Pamela Kaufman: And then can you just explain the volume dynamics a bit more that you mentioned that impacted Q3? What was the context of the off priced eggs and how should we think about volumes going forward?
Thilo Wrede: Yes, so we have — in the third quarter, we had a few puts and takes when it came to volume, depending on the eggs or flocks that we have, depending on the season that we are in, there are times in the year when we have — not times in the year, there are times of the cycle of the flock where we have more off-sized eggs than eggs at other times. The majority of what we sell at retail are large eggs and if we have eggs that are different sizes, then we need to find different places to sell them. And so what came together in the third quarter was a bit of weather impacted our flock rotation, but we just had more off-sized eggs than we usually do. So those went to the wholesale channel. That’s something that you just don’t see in track data and it’s a channel where we don’t get the same revenue per egg that we do in the retail channel.
So that was worth about mid-single digit — mid-to high single digit volume growth, quarter-over-quarter. We have some other puts and takes and so on a like for like basis, the — our volume growth was high single digit, somewhere around there. This off-sized egg phenomenon that we have in the third quarter, it’s not something that we expect to repeat in the fourth quarter. Quarter-to-date we actually see that these off-sized eggs year-over-year are — that they haven’t grown. And so with these puts and takes that we had in the third quarter, we don’t expect them to repeat in the fourth quarter.
Operator: And our next question comes from Adam Samuelson with Goldman Sachs.
Adam Samuelson: So maybe just sort of keying up that last question on the volumes in the quarter, thinking about how that tracks as we move into next year, I know a big part of the volume growth, near and longer term is around distribution expansion in terms of new units, but also expanding kind of the number of SKUs you have in each of your retailers. As you look line of sight today over the next 6 to 9 months, Russell, how would you frame kind of TDP growth and that being TDP versus velocity as we think about the driver of volume growth going into the first half of next year, self-reset start to come into effect, help us think about the pipeline of new distribution, both new retailers and new shelf space that you’ve got that you can see to?
Russell Diez-Canseco: Adam, good to hear from you. As you know, every year, as we think about the potential drivers of growth, there are new doors to be had. There are additional items in existing doors to be had. Occasionally, there’s even innovation to add on top of that. I think it’s pretty premature for us to guide toward the mix for next year. But I think every year, as Pete and Kathryn and our entire commercial team build their plans, they really do them from a bottoms-up perspective, customer by customer and opportunity by opportunity. And you can count on us to continue to work with retailers to be a great partner to them and to help build their business at the same time we’re building ours.
Adam Samuelson: That’s helpful. And then on the margins for the fourth quarter, I appreciate that there’s potentially some conservatism embedded in there, but just as we look at the commodity input costs within gross margins, I mean that I would think starts to become a bigger tailwind as you go into fourth quarter and into first quarter. So is there actually — it doesn’t seem like that’s embedded in the fourth quarter — fully embedded in the fourth quarter EBITDA margin, but maybe just clarify between the commodity cost side versus the step-up in marketing that seems also to be in there. Just any quantification would be helpful.
Russell Diez-Canseco: Look, before Thilo answers, I will say that, Adam, anytime you mentioned commodity costs, I’m always listening more closely because I think you’ve got a great track record of helping us understand how those markets will play out over time. And so we’re certainly watching as everyone else is to see what happens with the various inputs that we have, although I think you’ve probably got a better crystal ball on that than I do. Thilo, maybe you can speak a bit more about things.
Thilo Wrede: Yes. Adam, on the commodity costs, there isn’t any particular foresight that we have that nobody else has. It was more a reflection that we are in a volatile environment. We just added another conflict that can impact to tell how global markets operate with the Middle East. And so with that, we just remain cautious on the outlook there. The majority of the margin impact, if you want, in the fourth quarter, it’s going to come below the gross profit line, simply in the marketing spend and its investments in the business.
Operator: And our next question is from Matt Smith with Stifel.
Matt Smith: I wanted to ask about the health of the various household groups that you’re targeting with your media. I believe you’re still targeting a higher income group, the avian ape household versus a more everyday type of household with the [Bridget and Ben] household that you’ve referred to them in the past. Are you seeing a difference in consumer behavior in this environment? Are you seeing more incremental consumers from the higher income households or are both groups still holding up well in this environment?
Russell Diez-Canseco: I think that’s a great question. It’s interesting. We certainly, as you correctly pointed out, have expanded the breadth of the target market that we address over time as we gain more insights, both about the behaviors of different demographic groups and psychographic groups, but also who is buying our eggs, whether we’ve specifically targeted them or not. I believe as many as half of the people that buy our products are not necessarily people that we specifically targeted, which I think actually is a positive indicator that the market is even bigger than we typically think it is for our products. At the same time, what we’re finding is that we are seeing, I think, similar levels of health, at least in terms of consumption of our products across the different groups that do buy them, but interestingly, we’re starting to see some self-selection in terms of both channel and product.
