John Heyman: Thanks, Chris. I don’t think it’s the integrator destocking. In fact, if you look at most proposal data, you would see proposal dollar sizes are up, but closed proposals are actually down. So the integrators recognize their marketing to a high-end customer, and they typically go in with more bells and whistles and then have to meet budgets. And as you might imagine, all things being equal, budgets are — budget pressures tougher today than it used to be. I think that holds whether you’re selling to an end customer or a spec home builder. I think that — so that’s number one. Number two, in previous cycles, the most drastic cycle was 2007, ’08 and ’09, and both Snap and Control4, which were separate companies, experienced quite frankly, a growth during those times, which were some of the worst times in housing, obviously, in the country’s history.
And the reason for that was there was a trade down from higher-end systems to more budget-oriented systems. Snap One has typically not played at the highest end. That’s in terms of when you think about price, we build great products, but we’ve never competed with what I’ll call the ultra premium. And so I think that positions us generally to win share. But what I will say is, as I look at our data in certain categories, there are also products that are less expensive than our own. We have good, better, best. And so there are products that are priced less expensively. We sell those products to. They’re typically third-party products. And we’ve definitely seen some growth in those categories. So whether it’s our own trading down from in the good, better, best world from best to good or from — or to some 3P products, we definitely see some of that, and we balance all that.
But we feel like we’re, again, in most of our 1P categories, we are gaining share, and that’s because we either have a price advantage or the power of integration with our software systems wins the day.
Christopher Snyder: Yeah. I appreciate that. And then maybe just following up on that. If you look at the 1P versus 3P product this quarter, a pretty big disconnect proprietary down third-party at almost 6. I understand over the long term, third-party more white space, maybe that’s just the better grower. But is the delta you’re seeing right now just kind of reflective of the channel dynamics in that the proprietary products are seeing the most significant rate of destock. And that’s the last one.
John Heyman: Let me — I’m going to turn that question. I’m going to let Mike unbundle that for us. But what I will remind everybody is the inventory destocking headwinds that we see are all around our proprietary products. So in the third quarter, we’re still fighting that as we do compares in our proprietary products, we’re not fighting that, generally speaking, in third-party products. But Mike, do you want to deconstruct that for Chris?
Mike Carlet: Yes, John. No, I think that’s certainly one of the factors. I think Chris, there’s four factors that we look at that are driving the difference in performance when you just look at the raw numbers, but you’re right, with third-party products being up 5.5% year-over-year in our 1P being down 8.3%. One is exactly what John said, it’s a channel inventory while it does impact both 1P and 3P, our data would say it impacts 1P significantly more. The second thing is as we open new local stores and continue to ramp that up, it disproportionately grows the 3P product sales. So it’s not a same-store analysis on a same-store basis, you’d see a bit different. It took out the impact of new stores. The third thing is this gets a little less said, but there’s impact of back orders when you think less this year, because this year, the supply chain sort of normal.
But if you wanted to last year and look, there were timing of back orders, both on 1P and 3P product that we’re clearing at different times. So whether that was like an audio video receiver that was out of stock while or projectors had a big out of stock and then cleared or other things that happened. So the timing of backwards all on Texas. And the last thing is new product launches. We’ve actually been making an effort to launch some new noncompetitive third-party products over this year. which we’ve added in. So if you disaggregate the numbers down internally, and I don’t want to get to all the specifics of it, but if you just were looking at what we do internally, we would note that if you took those four things out and normalize for all of them, the 1P and 3P growth rates are almost the same.
In fact, 1P is slightly ahead. But then on a same-store, same product basis, excluding channel inventory, excluding back orders, you get to numbers that are almost the same from a growth rate standpoint.
Operator: Our next question or comment comes from the line of Adam Tindle from Raymond James. Mr. Tindle, your line is now open.
Adam Tindle: Okay, thanks. Good afternoon. I wanted to start on the channel inventory piece. And just for context, I think the story we’ve been hearing prior to this was — backlog was growing because there’s not even enough resources at the integrator to keep up with the demand that they’re seeing. Now we’re on kind of the other side of that, and I know these things go in cycles. But I guess the part of the question, first, John, would be what this is saying about demand. There’s some aspect of backlog getting better because supply is normalizing, like you said, but curious if you could comment on demand and any metrics that you look at, whether that’s pipeline, et cetera. And then for Mike — sorry, it will be a multi-partner, but I’m breaking it up between you, too.
