Adam Tindle: Got it. That’s helpful Mike. And maybe, if I could flip the question on instead from a balance sheet perspective. I think, as that inventory comes out if I understand the business model correctly that that will actually be a tailwind to cash flow. And sorry if I missed it, but if you could maybe cover your cash flow expectations for the year and any expectations on the progression of that would be very helpful. Thanks.
Mike Carlet: Sure. We don’t specifically guide cash flow, but I’ll give you just some highlights and overview of where we think we’ll be. Certainly, from an inventory standpoint, we ended the year with over $300 million of inventory. It’s going to continue to creep up in Q1 this year as we think about Chinese New Year and just stocking for that and just the cadence of bringing product in. But our ops team has been working really hard to get that rightsized and we’ve got some internal targets. But at least as we think about it and talk about externally, we think $275 million is about the right number for where we think we need to be given current demand. And we think, we’ll be there by the second half of the year, whether that’s the end of Q3, the end of Q4, depends upon some timing, but we do see that.
So throughout the year, as we think about that inventory balance dropping by $25 million or $30 million, that will certainly be a source of cash and a tailwind to cash flow. Other than that, our cash flow we think will be very, very normal with our adjusted EBITDA not very much else going on with working capital outside that inventory number. Our normal level of CapEx we’ve got a couple of million dollars more left in our Lehi office relocation. We’ve got a couple of million dollars of work that we’re doing around our IT systems and consolidation. But other than that the normal activity that we have with the caveat that as we always talk about don’t forget that TRA that’s out there. We made our first TRA payment recently this year. That was about $11 million that was made in Q1.
There’s still $111 million liability on that. We don’t have another payment to make until Q1 of next year, but we did pay $11 million towards the TRA in Q1 this year.
Adam Tindle: Very helpful. Thanks Mike.
Mike Carlet: You bet.
Operator: Thank you. Our next question comes from Keith Hughes with Truist. You may proceed.
Keith Hughes: I had a question on the destocking, we talked about a lot here. Is there specific products that you think are really heavy in the channel? And then on that, how do you gauge where channel inventory is? How is that actually done?
Mike Carlet: Yeah, it’s a great question Keith. John, I’ll jump on this and then feel free to add any color if you want. I think as we talked about it last time and last quarter and as we talked about this was never a big issue in our channel historically, something we had not paid a lot of attention to. Our partners 20,000 integrators out there buy product today and they’re typically installing on a job next week next month as that job is going to completion. I think what we think and what we believe is as the supply chain really became challenged as integrators and our partners found it more problematic to find products if they can’t get their hands on product, they can’t complete a job they can’t get paid. And so they look for those products that had the most risk of stocking out, that had the lowest replaceability, that had the highest switching costs and said we’re going to start thinking about stocking up on them.
