Cody Ross: That sounds good. Thank you for taking our questions. Best of luck.
Russell Diez-Canseco: Thanks, Cody.
Operator: The next question comes from the line of Matt McGinley from Needham. Matt, please go ahead.
Matt McGinley: Thank you. With your updated EBITDA guidance, it implies that your EBITDA margin shrink from about 11% in the first half to 4% in the back half. You noted the reasons and you said there could be some conservatism built into that. But is that 4% EBITDA margin implied in the back half, the run rate into next year, meaning that’s like a new margin profile upward growth. Are these expenses just unusually weighted towards the back half of the year and next year should kind of look more like the average for the year and not have this front half, back half dynamic of high margin, low margin.
Thilo Wrede: Yes, Matt, thanks for the question. I would not say that our exit rate in Q4 is going to be the run rate for next year. What you’re seeing this year is that the EBITDA margin, it moves around quite a bit from quarter-to-quarter based on when we spend marketing dollars depending on how we roll out promotions and so on. There’s really nothing changed about our EBITDA margin guidance, which is low double digits. That’s what we’re aiming for. We have accomplished that first half this year. The second half will look a little bit lower than that. But that doesn’t take anything away from where we want to go. And as we are growing and getting a bit more efficient with our spending, that is how we will get to that double-digit EBITDA margin on a consistent basis.
Matthew McGinley: Great. My second question is on the inventory. You’ve been building inventory for the last year to support the volume growth and probably the stock up to negate any potential impact from AI. Do you expect inventory levels to decline through year-end? Or is this the right level of inventory to support the business going forward?
Thilo Wrede: So where our inventory levels are today, supply for the year-to-date has come in exactly where we expected it. We’ve been talking about the slight dislocation in order patterns of Q2. So inventories may be a bit higher than what we would have planned for. But it gives us the opportunity to now draw the inventory down throughout the balance of year and start ’24 with a healthy inventory position. And so that then gives us the certainty that we’ll have the supply that we need for our growth going forward. And with that, we feel comfortable about the position that we have right now.
Russell Diez-Canseco: Yes. Matt, the other thing I would call out is that, as you’ve observed, there is some seasonality to this category and to our own sales. And so because we haven’t figured out a way to convince the chickens to lay more eggs in the winter when sales are higher than in the summer when they’re lower, we actually build up some inventory every summer and then draw it back down every winter, and there is a baseline of that in our annual planning.
Matthew McGinley: That makes sense. Great. Thank you.
Operator: The next question comes from the line of Adam Samuelson from Goldman Sachs. Adam, please go ahead.
Unidentified Analyst: Good morning, everyone. Thank you for taking our questions. This is actually Guillermo [ph] stepping in for Adam. I was wondering if you could provide some additional color on the lower capital expenditure guidance. What are the kind of opportunities that you are putting on hold or potentially walking away from? And if this could mean a potential deferral into the ’23, ’24 capital program?
Thilo Wrede: Guillermo, thanks for the question. The updated capital guidance, it’s really a reflection of some investments that we’re pushing into ’24 to make sure that we have the right resources in place to execute the spending. Part of it is an assessment that I’ve done the last four months since I’ve joined about where do we put our money and what do we focus on. So there’s not one single thing that really drives this reduction of guidance. It’s several things that are coming together. Timing is part of it. There’s some technology spending that we are pushing into next year, for example, to make sure that we are in the best possible position to execute that correctly.
Unidentified Analyst: That’s super helpful. And if I may ask a follow-up on what would be the necessary conditions for you to start becoming more active on the potential launch of a new category that you had mentioned previously.
Russell Diez-Canseco: Well, Guillermo, it’s Russell. I think consistent with the way we’ve talked about that in past calls, the — our own internal expectations for whatever we do next have certainly risen in terms of path to profitability and the detail with which we have an operating plan that we’re confident in, those rise in part with cost of capital. And so one thing that would certainly help us move a little faster would be to see cost of capital come back down, just as it would for I think, anybody considering investments in more speculative or start-up kind of new category expansion opportunities. So for us, we continue to work in earnest. And the good news is that if and when we announce something, it will have benefited from even more rigor than we might have otherwise brought to it in a zero cost of capital environment.