Bill Toler: Yes, it should be. I mean, Virginia has been frustrating they keep fooling around with it a bit. New Jersey, New York had been kind of hot and cold. The ones that have kind of stood out recently, Missouri has been a really good state for the industry, I think, seeing a lot of quick sales there. You’ve seen Louisiana is doing pretty well. There are other places that are popping up now. But yes, the Northeast really hasn’t been that huge wave that we all thought was going to happen and I think that’s been something that’s caught us all by surprise, and we hope they’ll get it sorted out. But it hasn’t really been the windfall or the tailwind that we’d hoped for.
Operator: Your next question comes from Chris Carey from Wells Fargo Securities.
Chris Carey: Can you just to address the health of your core consumer right now and whether you have any concerns there as far as stabilization of the industry? I’m really referring to as the growers and whether you just have any read on, on that one way or the other?
Bill Toler: You do a lot of research in this area and you’ve got a lot of insight as well. As you know, we still sell primarily through the retail channel. I mean, work with growers, but obviously don’t sell directly to them. We’re close to the growers. And I think you’re going to see a good bit of consolidation. I think there’s still, in certain markets like in Oklahoma, far too much capacity been built. I think Canada’s still shaken out a bit on that front. California has got an awful lot as well. So I think you’re going to see some shakeout in capacity and some stabilization by elimination in some of these key markets that got overheated, if you will, back in 2021, in early part ’21, they got overheated and they had kind of an artificial level of volume that really wasn’t supported by the population that they serve, probably had a lot of trans shipments moving around.
And I think that as other states are now legalizing, that’s going to balance out and each state will have its own infrastructure to operate the way they choose to operate. But I do think you’re going to see some rationalization as these things — the overbuild areas get consolidated back down.
Chris Carey: I know you’ve been discounting on lighting and you mentioned that in the press release. What’s your near and medium term view between consumables and durables? And apologies if I missed this. But as we’re coming out of this, the durables have a place in this recovery or are even more focused on just creating a more consumable portfolio going forward? So just any comments on the near term but all the strategic portfolio
Bill Toler: For our portfolio, it’s still sort of two thirds, one third consumable versus durable. We had some of our oldest brands are on the durable side ironically Phantom and Active Air and Active Aqua and other ones are there. I think the biggest change in lighting that caused everybody to get a little off kilter was the back we all got way ahead in inventory and then the speed of which high pressure sodium shifted to LED, right? Some industry elements have gone completely out of high pressure sodium lights, we haven’t, we’re staying in them with a very limited range and actually they’re doing okay. So that part is good. But we think that branded representation in each of the key categories is still very important to us as a strategy, as a manufacturer and a distributor.
We want to compete and operate in the lighting business, we think they’ve got very good products from the lighting business. But our bigger part of our portfolio is going to be the consumables, it’s going to be the nutrients and grow media. We like that recurring revenue more rapid stream, but we also want to be represented across all the segments.
Chris Carey: And then one just last follow-up on the lighting side. You know as pricing got to the point where you can clear inventory, the prices need to still come down and then just your sense of lighting inventory in general. Is this going to be an ongoing process given a year or are you getting close?
John Lindeman: No, we do think we’re getting close. And to your pricing point or question rather, with all of the sort of hard work or decisions we had last year with taking pretty aggressive and pretty significant amount of reserves across the span of the year, really the bulk of that was in lighting. And so through that, we put ourselves in a place to be able to kind of discount the levels that we can actually sell through. And I think I mentioned earlier 10% of our sales in the quarter were roughly in the lighting category that may not sound like a lot, because back when we IPO, it was probably about 20% of our business but it’s actually up from Q3. And so I mentioned that because our team did a really good job. I think we mentioned sort of strong effort.
They did a really good job of sort of working our way through this challenged inventory. We do think we have got a little bit more to do. We have kind of focused on trying to get it done in Q1 and then hopefully have some prospects in Q2 through Q4 for a little bit sort of cleaner selling initiative without the discount in lighting.
Bill Toler: And just to give you some perspective on that, the lighting’s after reserves now the value of the lighting is about equal to the percent of sales that it represents as a category for us and when you look at total inventories. So we are much more in line than we would been a year or so ago in that. So that’s a very important dynamic as that you get inventory relative to your sales penetration by segment.
Operator: There are no further questions at this time. I’ll turn it back to Bill for closing remarks.
Bill Toler: Thanks, Colin, and thank you all for this important interest in Hydrofarm. We look forward to speaking with you all soon. Take care.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines.
