Andrea Teixeira: So just to this would offer 200 to 230 basis points opportunity that you think you realized already in 2023 or that’s going to be a long term goal?
John Lindeman: No we think on the sales level that we call within that outlook range, we have an opportunity to get there over the course of 2023.
Andrea Teixeira: So that would mean that 21% to 21.3%-ish, like roughly, so it’s about 21%, which is the level that you had in 2021. So as — just to make sure that that would be at some point, so let’s say, third quarter, fourth quarter, or you think that obviously you called out that pricing will be tough in the first quarter. So I’m assuming you are going to ramp to that level but not for the full year, of course. Is that fair?
John Lindeman: That’s correct
Andrea Teixeira: And then in terms of like the inventory, you mentioned that the inventory adjustments are mostly done but you still have some pricing concessions, I guess, in the first quarter that needs to work through. So within your guide like in terms of volume and pricing, how we should be thinking of the $300 million in top line, like what is the — how should we be thinking in the midpoint $300 million, part of how much of that 10% decline would be coming from — actually more than that, would be coming from volume and I guess pricing? I’m sure that the volume decline would be greater than what the total sales would be down, but how much pricing do you still have carryover or mix carryover?
John Lindeman: So we are estimating that in Q1 we will have some negative price/mix impact much like we did here in Q4. And again, for the same reason that we continue to sell through the remaining portion of our sort of high risk lighting products. But we are expecting low single digit positive pricing for the remainder of the year. And so I think when you sort of look at that across the span of the full year, think of it as a very low single digit positive pricing for the full year, and then the residual will just be the volume.
Operator: Your next question comes from John Anderson from William Blair.
John Anderson: I wanted to ask just about the commentary around stabilization in average daily sales. And I’m not sure, I’ve heard similar commentary, perhaps not from you in this way but from some others in the industry. And I’m just wondering if you’ve seen enough of that at this point in terms of the duration coupled with other input you are getting from customers and others in the channel that kind of gauge your degree of confidence here that not only can we see stabilization and kind of the seasonal recovery in ’23, but then kind of growth in the back half and what kind of level of growth kind of thinking about second half?
Bill Toler: I think it’s fair to say that, we were trending, the industry was trending down all the way through October, and then it did begin to really flatten and sequentially show a little improvement, November, December, January, February. So that’s good. And we think that’s when you take in all the factors, seasonally adjust and all that, you can say, right, we really are sort of — others have said bouncing along the bottom, and I think that’s probably a reasonable way to think about it. But the other thing that gives us more confidence is kind of the things people are saying, the inventory levels we are seeing in Headset, the pricing, the stabilization, the kind of, let’s say, mood and tone we are getting from customers, is speaking to there being people coming back into the business that it probably took a year, 18 months off.
And we think that, that is encouraging. But it’s been a ride, you’ve been with us the whole time, John, and it’s been difficult to find the bottom here. So we’re very cautious about how much we call and how much we’re predicting. That’s why our projection for the years that 2.90 to 3.10, which is still not anywhere close to where we’d like to be, but we think it’s reflective of how we believe the industry to be performing right now. And part of that back half is, of course, you’re up against pretty soft comps from the back half of ’22. So hopefully, you’re able to show growth off of that and get to that midpoint 300 for the year and hopefully go past.
John Anderson: You mentioned the product portfolio work that you’re doing. I think you mentioned 40 brands, perhaps over a thousand SKUs rationalized. Where are you do you think in terms of that part of the restructuring work, is that largely complete at this point, is there more work to do? And where do you think — as the industry does recover, how does your business look different exiting this industry recession than it did entering and I’m thinking, proprietary versus non-proprietary mix, maybe even the kind of the categories that mix across the business and perhaps what that says about your kind of position in the industry?
Bill Toler: No, I think that proprietary will should continue to expand and it should be 55, last year, it should get deeper this year, maybe 60, 65 in two or three years from now and get to two thirds of our business in two or three years would be proprietary. We still have some very strong branded partners we represent and we’re proud of that. But I think back to your first question, I hope that we exit this phase with a simplified business, right? I mean, we were carrying almost 200 brands and representing and the industry doesn’t need and can’t support 200 brands. So there should be some natural shakeout in smaller businesses, and some are going to go away naturally, some are going to go away representing them, some will find other people to represent them.
But I think you’re seeing from the bigger distributors who also own brands that we were focused on fewer SKUs, more powerful SKUs, less brands, less complexity, and hopefully a simpler, cleaner operation, which has helped to come out of it on with a higher penetration of proprietary. We have to have the depth of proprietary brands to be able to support the infrastructure to distribute broadly to the industry the way we do. So that’s important for everybody to have that kind of healthy proprietary penetration, if you will. So I think simpler business, less brands, less SKUs is certainly there. We’ve been doing this portfolio rationalization every year now for three and a half years, and I think we’ve done the big work. But I think every year you should always do the pruning of the bottom 15% or so.
And I think you’ll see that as more of the of our work going forward. This year was a pretty good whack that we took on over 30% of the SKUs and 40 some brands is quite a big change.
John Anderson: Last one for me. You did mention that you’ve seen some, I guess, better sequential trends in some of the markets, Colorado, Oregon, Washington, I think you mentioned, even Oklahoma. How about in maybe some of the newer states that have been, I guess, somewhat delayed in terms of going live or ramping up, I’m thinking of some in the Northeast Corridor. Any commentary around what you’re seeing there and whether that could be maybe positive tailwind as you move forward?
