For Mike, you’re calling the bottom in Q4, it sounds like from the destocking perspective. I’m sure we’ll get asked tomorrow, what gives you the confidence in that given Q3 was a little worse than you had forecasted. What gives you the confidence to call Q4 at the bottom? Thanks.
John Heyman: Okay. Let me try to tackle the first part of your question, Adam. I think we look at a lot of macro statistics. We all read the headlines about housing. But the macro statistics would say the luxury market is still in pretty good shape. I think if you look at the listings of new homes, it’s roughly 59,000 this year versus 55,000 last year, new listings are up somewhat. We also know homebuilder confidence is down with interest rates. But those are the macro stats, again, when we get back to the industry, we focus on the capacity of the integrator and how many integrators we have. And they have a significant amount of demand in front of them. Proposal activity is actually up. The pipeline shrinkage that they’ve seen is negligible, like down a couple of days.
They are continuing to sign up new clients. There is as the [ busyness ] index, there’s no slowdown that speed that they’re sensing. And that’s because they pivot their capacity to whatever the highest and best use of their labor is. There are still plenty of homes being built or being sold — to start to utilize their capacity. They go to commercial projects, or they go back to their installed base and have them upgrade their surveillance system or sell them our new Halo remotes, which are doing fantastically in the market or upgrade their networks. And so all of those things keep the industry very busy. So I think the — I think people look at our company and say, gosh, the macro is really tough. The company has got to be feeling it. I’ve already spoken to the fact that we are feeling it a little bit.
But the fact is the industry has significant demand still to serve. They may be serving it in a more budget-oriented manner. And that is one of the headwinds we face right now. That’s different than back in 15 years ago where money was flowing freely. Mortgages were super cheap. The integrator would could sell anything they could get their hands on, including very expensive projects. And so I think we’re just back to a little bit kind of a normal right now. And so we’re positioning the company through the — our integrator acquisitions, through the software initiatives we have, through all the product introductions we have to grow through that. And we’re very happy, as now I’ll turn it over to Mike to see this channel destocking quickly getting behind us.
So Mike, let me turn it over to you.
Mike Carlet: Yes. Thanks, John. Yes, Adam, so just to be clear as I said before, we actually don’t track inventory. What we track is time to install. What we were able to see is for all of our IP connected products, whether they’re OvrC enabled or our Control systems when do they leave our warehouse and when do they get installed. And so we take that time, and we do some extrapolation, and we look at cost and a bunch of other factors and try to say, okay, what does that imply for inventory. And so it really has been a bell curve. And so if you go back to early to mid ’21, would have been pretty much a straight line, so much of a straight line that we never really used to look at it. We had the data, but it was — we never tried to tie it to our financials.
And it was pretty much of a straight line of that time to install. I’ll make up a number here, and just call it 50 days. It’s not the real number, but just say 50 days. And then an increase up to almost 100 days, and now we’ve been watching it come back down. And so the guest work we’ve been doing, is it going all the way back to 50 days? Is it going below 50 days? Is it going to stop at 60 days? And as we’re sitting here today, we definitely have seen that inflection point of the curve at the bottom of a bell curve, where we start seeing it going to the tail. We’ve definitely seen that in the last few months. as we’re here. We still don’t know exactly where it’s going to end. I still think originally, we thought it was going to end somewhere above the 50-day time frame.
We still think that’s probably the case, but it’s probably coming back to where it was before closer to where it was before than we originally anticipated, but we definitely see that we’ve reached that inflection point. It’s definitely slowing down, and we, again, have a high level of confidence that we’ll be there by the end of the year. Not to say that there won’t be small variations. I think there’ll always be small fluctuations. We will absolutely be looking at and tracking the future. But I think they will be de minimis. I think there will be things. It won’t be a significant factor of our sales going forward outside of something else causing it to spike up or for a different reason, crash down, but we’re not seeing that in the data.
