Snap One (SNPO) 9 Nov 222022 Q3 Earnings call transcript

Good afternoon. Welcome to Snap One Holdings Corporation's Fiscal Third Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Snap One's Senior Vice President of Finance, Eric Steele. Sir, please proceed.

Great. you. Thank welcome fiscal and earnings quarter Snap call. conference to afternoon, third One's XXXX Good

this being call reminder, a As is recorded.

Joining us and CEO; John are today from Mike Snap Carlet, One Heyman, CFO.

performance, our would may future management additional events therefore, of performance. placed but forward-looking and to financial remind begin, not statements, response make like These in or not questions, them. we contain forward-looking upon future should we everyone Before guarantee reliance statements expectations, that not your prepared statements limited remarks and statements future to undue do including, to, be

reasonable, Although risks ended annual on undertake Form after we believe current expectations report filed XX, could Risk differ these expectations including to results involve that company's or obligation identified are statements those revise and period occur the reflect on with materially. events our SEC. of changes the annual we Factors any December These based management to are of the Actual and uncertainties, call. section this XXXX, no the for inherent statements XX-K in

today's only financial time date GAAP are also XXXX. referenced of time-sensitive call broadcast, measure. in is directly press call the the non-GAAP All earnings This reconciled in comparable that information November X, contains as release to of measures accurate our most this and

site a Web would like Relations be will recording made and investors.snapone.com. call conference our available webcast Investor I Finally, replay being to remind this everyone is for on that at

which a Relations site. our also on earnings In be Investor the addition presentation accompanying have to can these results, we supplemental webcast, posted Web found

John? CEO, our to over Heyman. call the turn now will I John

and get hear perspective Obviously, quickly. to everyone, on thanks results, joining for Thanks, afternoon. to we'll us our everyone that and wants Eric. this Welcome,

before the today's the remainder for to call I as to for After company of discussion, give discuss However, in the our that, Carlet, performance call recent remarks review background, outlook some more the and questions. provide to will year. financial well for Mike our results over as then quarter to depth opening share turn some CFO, our you closing the begin I'll

Let's get started.

provide that to Snap To scale. end security a we on global and deliver begin, customers to One, smart professional at empowers discerning living joy, integrators a connectivity platform

to XX,XXX distributor network local branches. do-it-for-me distribute with our integrators leading work and and our through portal a growing integrators, of these our we professional As proprietary third-party products approximately e-commerce to

We our proprietary cycle. further software and partners support and their to them serve our of is customers life Here essence the commercial our with to strategy. solutions the workflow successfully platforms project Only across integrator allow residential This

our Here positioning One, on integrators at tremendous front we're our durable and Snap of in opportunity us. the company and to growth capitalize

is inarguable become require is and homes future growth. #X that our smarter support professional and long-term the the next the and technology, it that believe than and help better of Snap over driver decade company No businesses this is integrate for to We will positioned One.

X% in our we the issues, now openings. foreign climate softer delays to we branch and We it grew highlights get chain a acknowledge below update. supply headwinds call tough to local into further. Turning approximately a some out our results I expectations. were just QX before currency that in want #X, despite business economy,

Industries recent rate CEDIA finally, we managed Living as by And with at XXXX. cost future. the show successfully to Expo, the evidenced sequential we that launches us flagship well Smart margin have through for inflationary expect new We in product trade environment contribution which the sustain wowed position increases, the

rates. the and ongoing the has navigated successfully economic team rising Ukraine war complicated global backdrop chain During an pandemic, the the interest our impacts challenges logistics supply inflation, and year, of and by in

started to clearly has grown more environment the of some subside, challenges market While these uncertain. have overall

of view near-term ignore performance, of in impact our long-term the cannot on elements these remain we prospects. While our we steadfast

for We living believe differentiation growth solutions smart Snap of and our continue One integrator of competitive success. providing positions holistic the to role central long-term adoption, the in

continue our will to We execute against growth unchanged. remains which strategy,

half So is end we to softer of that, a anticipated the than to We of in the speed observe seeing Here normal October did forecast. trends why previously a the moderated have what not a and hit bit We current the acceleration quarter. but second bit environment. a continued bump? quarter, are sales of have the a at pace of daily in see began we be

levels remain into our partners, visibility demand underlying trends dug is feedback busy. analyzed the the integration and activity and we as healthy. from pipeline Two, near-term remain Their reality they

are However, who purchased in own elevated inventory supply to their response work starting levels challenges. through to inventory, hold certain integrators, of that chain

partners, important who also through our buyers, relative and insulated it's inflationary discerning pressures are we on from to remember economic a end that cost serve basis. slowdowns more Three,

still this are customers resiliency While the our enhances more markets, of becoming high-end end cautious.

project We and overall the manage an delays changes cost are downs trade to their starting observe buying as installation. in product de-scoping, such behavior, project to of some

course, the as all continue monitor uncertainty. would Of expect, we macro you to broader

highly beyond, long-term secular As XXXX propel we we growth. to ahead trend convicted which of our the look will smart in remain and living adoption,

growth. normalize. also strengthening by confidence that a pricing Together, have a durable is this poised the encouraged of contribution are that adjustments and long-term costs margin sustainable to input We beginning we gives for due rate benefit business to us

past Let reflect on few quarter. minutes me the take to a

earlier, earlier. I in slowing was this profitability. given and faster we of are current net macro levels, uncertainty, is were through our mentioned this quarter, pace our what flowed As September near-term project but forecast. and dynamics spoke to than the of the than tone taking we at to experienced a cautious inventory previously and the partially growth attributable stabilized destocking to slowdown The lower Demand and has sales expectations have for our to tightening

smart hardware consumers. for to remains integrators experience of Despite In strong. software we quarter the living QX, and industry end improving slowdown, delivered operational the end enhance position our both believe many in as the our on the commitments we by we very continue and

family CEDIA impact including results, launch recent XXXX the announced upcoming the with we we of drive interface refined those following: of Expo, First, our new enhance the innovative XXXX upcoming remotes of the customers' which experience. user we products, base. a on represents will a installed launch design, industrial packed a end of several announced a that Halo, Halo the and upgrade expect new for automation will At an ControlX features with opportunity meaningful positive elegant

This wireless built-in monitoring simple We OvrC access will the to our network connection which benefiting Everyone due speeds are WiFi enables also efficiency end partners. new for for will in up management provide both and maintain. to X market be Araknis faster now networking. improved our and with and point, consumers product customers and integrators enhanced technology with wants set

announced Lighting growth we of integrates temperature us. launch is lighting, To and the big bolster fully upcoming color, vibrant immersive brightness and a to lighting our a which for portfolio, linear category scenes experience. personalize lighting automated for

we building years wire, suite our changed products, Radiance product are ago Radiance, a audio a customers. Finally, to and Radiance, we outdoor a and their that it modular, again. changing of delight for in entertainment lighting integrators our of on system. We launch audio new single drive outdoor all outdoor with announced the opportunities Episode is will unique

can started product One launched that and the we be these our announcements, Snap to integrators. internationally Power WattBox on exciting purchased so strategically the addition more they portal, by merchandise access access to In easily points networks

We strategic our had to quarter. accomplishments few the Moving a third key initiatives. in

of commercial, long-term part new that the product security, of our which NDAA Luma as and announced First, our and across maintenance. we to features, both peace with an the compliant strategy simplifying in AI-powered In grow launch product upcoming end of ongoing security IP we offerings solution, XXX while security providing surveillance customers delivers expanded mind greater installation markets. is

Series, commercial the applications Carbon launched are menu ceiling we like which and for digital commercial, signage. mounts, For boards designed

automation Clare systems Second, as home quarter's Clare's conventional solution by we and lightly One. acquired call, luxury provider referenced a security market security automation previously and Snap middle last level hybrid security systems. Controls, distributed featured addresses the control opportunity between home products in attractive and whole of

in locations Canada new of end. expansion branch coming in in serve quarters Louis, brings company's to X the better integrators domestic to continued local to in opening branch We with branch our Third, presence as further This our strategic the we quarter footprint openings domestic Missouri forward omni-channel in look markets. XX a more St. by July. additional

the industry acquisition XSight and other our increases service to builds to last product announced levels provide service on productivity to efforts. RMR investment and and their in year an the quarter, completed we XX/X Following a service based acquisition also business Parasol, increasing partners opportunities of support to while of creating OvrC, customers. The for Parasol addition our new close on in profitability, strategic running to capabilities their our remote line powerful the the on integrator focus our

outlook I Mike. will over turning briefly the call comment now before our on to

the detail. rest the to deliver we will reducing of for our Mike the for XXXX, are in and challenges and to focused prepare are Considering sales profits which XXXX EBITDA on both manage we XXXX, business we leverage. and operating earlier, guidance As adjusted net drive referenced strong continuing discuss further

think reflects our operating environment execution we we As remain XXXX, the to are about we expect continued plan challenging. the growth operating of that strategy. an constructing In response,

including our integrators our drive our launch one, course, generate our And enhance ecosystems; finally, us We endeavor new continuing enable strategies sheet enhanced optimize four, commercial partners across through share new our exciting the of products algorithm increasing outperform, remain doing innovate following: will which branches; two, three, focused to and of long-term and business, adoption and -- on security to moderate our will efficiency this. including we generally with referred local growth expenses opening while which existing in the with adding consistent controllable we will will all will productivity, earlier; to to to that And markets. balance the I profitability. of wallet

consistently We partners, dynamic environments. us prosper and positions our strong in business model macro believe execution our integrator resilient to diversified

dynamic are supply our chain. an in We interesting observing

of couple the of from past tens supply millions in years, of costs inefficiencies. have additional dollars incurred chain Over we

normal tailwind seeing be in expenses XXXX. we now believe margins We that will to proprietary our material are to logistics in and product freight, componentry return a a

With call as Carlet, Mike that, the to more detail turn well our discuss our to CFO, results over quarter's in I outlook. XXXX the Mike? as will

John. Thanks,

the ramp was the and including up quarter for XXXX. comparable sales continued from in sales product of taken in during million, local the Growth XX, of Staub, Turning proprietary quarter in the past was begin, our in in X.X% the driven year-ago third late year. to incremental sales ended opened January $XXX.X also growth, branches by the year to fiscal the September cumulative which impact growth net benefit results acquired past the period. To of million quarter third in year. financial now $XXX.X the organic fiscal increased The adjustments reflects this net price

basis, year-over-year in XXXX a greater-than-anticipated expected a on in QX. response creating our forward moderated to pull due in late was QX larger demand than adjustment, part a growth direct Sales to sales June in cost price

of Additionally, has of a branch growth, delayed openings, this growth. our local moderating key our pace year, driver further been

anticipate do additional QX. several we branch However, openings local in

the growth down target basis, CAGR our sequentially of pro forma double-digit growth consistently long-term line While is communicated on in growth. with quarterly a X-year rate the is low

sales XX.X% operating a discuss net margin, quarter measurement over in in the in of increased to or from third margin sales of second did net sequential We see fiscal will comparable a in net the non-GAAP X% or XX% performance, That's a changed $XXX.X million as of sales, I which contribution Contribution $XXX.X moment. consecutive year-ago quarter. a period. of million percentage increase

towards contribution As sales. a our local mix and percentage local a as primarily the our sales branch branch in strategy, to as in growth was third-party related decrease expansion drove net change of skews product which expected, product footprint year-over-year margin

fiscal the the quarter, represented of total XX.X% sales comparable third net year-ago to product In in third-party period. XX.X% sales compared

our to portfolio reminder, term net typically to As longer local we expansion a lower for the product strategic part The of and over aspire third-party curated our as shop product value a branch of relative contribution a our proposition remains partners. proprietary percentage an a be integrator footprint margin of one-step products. our as third-party has sales important

in by the was benefit improvement increase. chain the on XX.X% margin above, an to a we QX The by of aided drive sequential primarily to As in airfreight XXX supply price contribution in inbound including costs, of net product the contribution to increase pleased basis from QX XX.X% The increase as margin a approximate XX.X% in declining sequentially QX percentage quarter dynamics, further sales quarter-over-quarter QX. rate driven freight improved reduction in was a use referenced are point full from partly by basis, margin offset June of mix. in and

Selling, was sales administrative onetime XX.X% quarter expenses our comparable the decrease that $XXX expenses million $XX.X associated decreased in in net of net quarter period. the to year-ago our This due million QX general XX.X% from primarily and XX.X% in sales or IPO to or SG&A with fiscal last third during expenses in occurred lapping year. of

and general or increase million add-back third related administrative coming and expenses which fiscal XX.X% expense increased company, with to cost growth, we full SG&A own million as for wage The Clare, $XX.X year strategic operating sales of and in from the XX.X% not to the After net adjusting prior items, is of ongoing adjusted selling, to sales. support associated for did $XX.X net period a completion public the investments of Staub acquired quarter. increased X.X% of and costs or

a of in in $X totaled to period. net loss comparable net the the year-ago loss compared third million quarter $XX.X Our million

of million quarter EBITDA $XX.X net or to of described expense net or sales or year-ago decreased Adjusted sales third margin. growth outpacing sales a of to net from of contribution period. in non-GAAP EBITDA, performance quarter operating the decreased non-GAAP net of $XX.X of XX.X% Adjusted measurement measurement attributable year-ago XX% to million in the 'XX of in million $XX.X growth X.X% compared a or operating was The above million net comparable sales decline adjusted the XX.X% income, comparable to primarily $XX.X operating of the in period. X.X% X.X% performance, our

million operating year purchases in of in the in And in cash flow primarily decrease and attributable free period. negative months X property comparable performance, $XX.X negative non-GAAP million a over The equipment. measurement modest September cash in compared of to the ended cash operating and totaled XXXX, XX, increase $XX.X flow, year-ago net to activities used was a free

use to including $XX.X of operating The million moderate. in which capital, supply us the resulting inventory including net in ended of in working we activities increases continue expect sequential our X in working use XX, million. has to driven improvement investments XXXX, protect Net September negative been the against in capital, in $XX of We've used primarily the inventory. the cash change cash moderated months seen quarter, for was by to growth chain,

and cash revolver At After $XX.X third incremental end an the cash quarter XXXX, $XX.X of the of we secured of down liquidity we the million the approximately capacity sheet. including term with equivalents general of for of had facility additional and existing $XX million. million to of million used fiscal liquidity, undrawn $XX.X revolving that purposes. added loan most corporate remaining proceeds We provide balance to the our loan to cash the credit quarter, pay

or growth generate conservative want loan, towards to like opportunistic million. for high strategic very tap be arise do be of the deploy macro acquisitions $XXX able this capital liquidity forma into to to be drivers approximately rates incremental to liquidity, needing as We organic is we'd Pro term and not return. but we anticipate given situations incremental environment, the total to that

a the back our the for John, financial minutes take I over before I outlook update just an will to year. provide on few to turn remainder the Now of call

One as performance a we provides for be business. guidance net as well annual of As adjusted EBITDA, those metrics for key believe overall reminder, as indicators sales the Snap our to

modest dilutive FX Clare, continued year-to-date anticipation performance, impact a expect have results short-term; to in Our considers headwinds, our consolidated market fiscal pricing of our adjustments; ongoing we XXXX uncertainty. the acquisition guidance of on and

mind, guidance annual With sales ranges. these adjusted net inputs adjusting are in we and our EBITDA

fiscal year on to increase represent to and sales week. and after net impact X% XX% of between in billion adjusting XXXX as-reported December XXrd fiscal XX% XX% an remove range to to compared ending year expect XXXX, the to an basis billion, the $X.XXX fiscal now XX, We prior which $X.XX of the the

branch includes Access sales We contributing volume, XXXX adjustments growth is Staub which adjusted believe follows: of the XXrd FX X% a and we've growth, price headwinds net headwind the basis, represents a On is historical mentioned. M&A, of local openings, factors of impact XXXX XX-week to on X% recently the lapping Networks and net of growth X% an for for as drives including organic basis week that our are some Electronics. and XX% our supply growth challenges our net chain completed in the derived the of growth year. sales from as-reported

the an of as-reported demand our light to year prior are softening In environment, on also we revising in $XXX $XXX adjusted range million with guidance to EBITDA roughly basis. line million,

we steps commented in our margin expense demand profitability. take already the our to structure gross remain on outlook, trajectory confident manage proactive are to has and to John continuing drive While

back update final the I before call one to pass over Now John.

Board Snap through that of As repurchase common authorized to $XX potential XX the XXXX. a approval, was the One's stock which of from reminder, date May our program Directors end approved up the of stock of of repurchases million

XXXX, this XXX,XXX common As at policy, opportunistic stock share XX, sheet and approximately aggregate growth of an That approximately order: completes continue balance capital my in prioritize allocation shares of will we Consistent to with M&A September value we organic strength, our million. repurchases. had then accretive $X.X summary. repurchased of investments, our

I additional will over call any John commentary. now turn for the to back John?

Thanks, Mike.

Q&A. closing we few thoughts a hit Just before

bullish around First, model. the even longer in aspirations environment, term our we and operating growth this remain

carrying in of XXXX proprietary security, 'XX, in launches, markets, confidence local growth product our and we such have the strategy adjacent pricing and our branch to XXXX. as For opening over commercial adjustments benefit

supply rate alleviate. We also trajectory the continuing chain favorable our costs -- anticipate as related contribution to margin rate

that of support to and to us partner strive launches, new supporting investments their grow to trust Only all a of environment, in employment and our on the be our in investments, front integrators one integrators them. our and remains to Even on includes we moderated our Here in continue capitalize platform service investment Second, focus business. strategy. software opportunity This product the

And the we we third, recently we have today only seen said period. is will all homes believe as offer and strengthen this and over businesses the future. imagine and of for types The smarter next we we continue decade, become I during temporary, slowdown that experiences earlier, can our that demand driving in will the those to company

capacity a invested We've over integrator customer, end and for and margin operating platforms One better the that Snap growth increases drive the in more that solutions will scale time. way for in for

current growth. to up set Our the the us of year for first actions sustainable preparing the in longer-term quarters three while us in succeed also have environment,

call Q&A. Operator, with please the open for And that,

first Chris Our from UBS. Instructions] the [Operator comes question from line of Snyder

Your line is open.

updates. And Thank and the more provide hoping inventory quantify integrator some digestion. to anything kind then of can integrator that be the you level. continue appreciate think 'XX? company rearview destocking all you, the the and on back I seeing what of color was in the realized in you headwind the to could the do point grow of with at in also, for the half Is the kind line headwind activity at there you're will

what Look, there out been not chain historically, Thanks, challenges is of supply aware that inventory. reversing are our partners carried become of many by we've that to the had. And responding that that practice have Chris. have they've much kind

for prior kind would sold-through OvrC, versus analysis on currently of in channel estimate in partners inventory triangulated our about being surveys, on, have terms through we relative $XX of, we what data call when of see we say to practices. by year the would instance, million of are million systems numbers and we cetera, We inventory sitting that et that own sold-in our $XX to would is the turned

half couple of during a in that analysis, primarily seen revenues percentage that through the half 'XX drove higher year, have points second of first that, that built of this that We, time. the and was likely

is inventory. with a few noted continue through most our build past surveys, what partners, to the Over that minority we've partners of to inventory and started have months, that again, unwind

et would the way, the and seeing all to and just I in point, by we September. interest rates, that new cycle started August cetera,

supply from on we some practice in start alleviating, like that's our we channel, are There but believe don't having gone and they that this actually unwind. are But has other see still issues, supply integration don't. the chain are we the spots, away partners. it lost suppliers not seeing to So chain

that. next so and start they'll And to that believe X of in, I period that inventory burn over we to kind in we're would the months, include X the down

it's I something CEDIA to this the something at practice became really as our -- partners, we will is. service talk aware that started say to where of been a and because to it's started was that services companies that's we that partners, it nonstandard by channel, our provide to

So starting second going next to last think half of of half couple it into first based unwind. activity, cetera, And points I et a to this through see probably bit. the year, of growth a year, last quarter it's of last on quarter

generally, of lot chains appreciate combined communication kind Thank of you I market color. just end have with a destocking. the of seen what for the supply [indiscernible]. the improving the all market, with we've And kind slowdown lot but a seen

idea per quarters, million. QX? impact year, of So I though, integrators $XX will over worked revenue Did million so the at an million And -- there maybe $XX down or extra confirm, get headwind sitting want somewhere in just on next Or unwind quarter all to the the that three then is like an like guess next two that may the QX? maybe is really right? not at I be over $XX to in the kind

out a fourth, $XX first the hopefully, million way second will work its million, first definitely an headwind consider kind put for I just and of $XX million started $XX it in to me QX. for be more hard to would actual think think and It's I it on number than quarter. quarter. by it I to end it's And us unwind to of don't the the over it.

John. you, that. Appreciate Thank

each company follow-up. limit and to their The that you. comments question requests one participant Thank one

Stephen from the from comes Jefferies. question of next Volkmann Our line

Your open. line is

Chirag this actually for Steve Patel on It's evening. Good evening.

down it comment How that really of number feel what's How general, next over kind on you Chris' own that and point? pricing a move to think going much on real will is your kind to to carry question just but at you and I integrator time? side hit of you be wanted Just And start much looking this the period -- in of we'll inventory my do draw inventory. to the then what with regarding need here. are be

of Chirag. and little longer on sales Mike. It's Sure. has even than up supply were our Obviously, bit Thanks, chain, given seen bit inventory slowdown, bit this have expected as little of a a quarter, it. top in we little built more we

So manage feel between team our then comfortable by that $XX forecast, the million current the $XX it. rate supply right run and out to about inventory X shrinks, as that now, our now of But to we Obviously, middle or next levels good middle and if taking we expect chain we feel will million and about of as the grows year as we then the have the next X at whether of down to we demand we react next that assuming to come million the pretty have year, to to stays sales curve to $XX over months. of system that. would about forecasting through we think right, the we are

pricing see larger we've the supply as in definitely think seen you're on about think the think I year, versus And targeted -- costs if moderate we we -- and I price next increases. I think chain point,

we here we will, from of have Should course, in a today perspectives increase, the we current then we pricing with cost standpoint. costs As respond sit the see business.

an for just year? what's other carryover a is the have I within the idea last a single-digit looking of it of little increases low quarters guess that own I even? there higher given is is happening bit that fair was that it of kind idea? been the your portfolio, part here a excellent. impact way over next the of the think Or couple for -- than to about kind Is That’s

what next done already impact is X%. about pricing year The Yes. on we've

a just carryover. So

be X% action if but in year to it incremental full a So sales. through it go quarters, we year, for lift the you pricing on next would current different no carry as timing, did different year

that. Appreciate

Thank you.

Markets. question from next from Our line Capital of Ketan comes the Mamtora BMO

line Your is open.

evening. Is good to half more Thank October. John, that QX, in of your quarter prepared kind the you and through trends know and the the a possible around does just look? in I impact. a in into of little you back it color additional third kind September, provide mentioned Curious a little you saw quarter? remarks you if how it the color of that line little around through how is or provide with bit can sort worse? And of better any trended October

carry Sure. our business linear that I quarter the the always And Thanks reason the that our for always saw speaking, is the been generally the -- would say don't for we the biggest trend. that And throughout during was pretty trend quarter. question. inventory. that's partners been has

that they're stretching to when certain rewards and So it's programs we is all much The very quarter, the try to business. a sell-through exception that rebate meet. to the of last month have

generally expected levels. And various so be in September. those once that at had -- and to significant We again happen

half. had in price the part -- I And the had say of August, forget, so, -- we a second X% the in quarter, first we would we increase in what don't

knew that. were buy inventory of for there we ahead So some

see. saw feel lag I started of And company. we expected. recover, X-year little to a seen expected with in didn't QX. the almost haven't that's in a So And bit Then we tenure have my every in That a sales, and we that first like was what September it's we the in strong quarter, just we quarter. finish

clear And and partners were start inventory directly. the pretty or being we that to to happen week with of CEDIA the that's industry we last the -- was having as at we where And able started discussions it either inquire to be quarter, our service there unwound. was to providers

that's it. of part Now I think

alleviating first the with the think again, news vendors, I'm us. all, cycle. of of it but to supply Like with you've the if many is been all, come back part -- chain including I to is, not going second many,

when Second, about to sitting if faster, on to you're reading you inventory, think is a news a all and especially you're up small of and supply the catching you're liquidating business. your think going bunch start to chain the business person you're that

September expected. based these And we just are in the guidance the about we was of very that given, don't sales early and what typically we on is, Mike's the October, are I not in will with on we But we seeing look as what October calls. say are In comfortable November. kind talk we so that quarter at

as dynamic through move And openings John. helpful, in of we of the That’s this and follow-up, it. of how investments about think you uncertain sort branch do Got sort pace my environment? as

I prudently. think about it

it's as It's -- strong outlook question. years. we a X we are we asking put next next I very one together especially, as over the think for year, our great to have a X budget we'll ourselves

to are we'll moderate next our to we And other are investments bit a be We means going next them year. assess for probably the in continuing scenarios areas. revenue targeted various which year, with more

share We in market. core all on outsized partner commercial believe much what based residential I we the talked than opening environment we a at the growth which strategies, the and can grow call through about, see, see a I we our, will continue wallet security sites, of grow pace things the markets, local slower technology products, the new growth to acquisition, faster

those optimistic, in growth areas. very -- frankly, about so are And we our

And we happening always market. ask what's ourselves then in the is the question

doing we profitability assess notion that assess we're be as while the we're to And to willing so where going that, with we invest so. increase to going

piece. that's one So

the is technology early core branches. piece that working of strategy internal opening second year. on the in of is local We're some The to that

year, affected year, the got supply have a revenues quarter well as to branch bunch chain and we've branches local but been And in of this openings open of which so this earlier plans year, this opened which year. this affected fourth should permitting local

would will We've quarter. these fourth that year next what opened get some sites about work working the we And in internally is are I say we got technology on.

We an in will revenues year. second the and opening target keep then next more on eye we half of sites

helpful, Thank you. luck. That’s Good very John.

you. Thank

Thank you.

comes from of Our Keith the Hughes next from question Truist. line

open. is line Your

Thank you.

we've to the does with towards shift some more we’ve discussed particularly go seen the here, for on cash of use still free Given pace going your flow reduction? outlook kind the of debt time? are Or short-term, the in it same we thinking

probably to underwrite at what bar from want does environment paying Hey those we went our an frame. Keith, standpoint It debt reason out view. to revolver Mike. that we this that want as it's we there. to external look can ROI would pay I additional raise things. do Obviously, And frankly, time and we the to and and down say sure make the whether attention during macro was obtained We [ph] quite out are we the It opportunities, organic substantially or doesn't flexibility. to are that's term provide the shift investment

We've long-term we got view generation. flow comfortable don't we of comfortable of I cash deploy our our still and think capital. to I growth are if lot that going it we plan, feel really a certainty But with think because changes our feel

on certain changing start will are things a feel think comfortable about at that, But if where we obviously, So less reprioritizing. now, really liquidity I we think standpoint. about we for that, from we right are

change about doesn't our it. how on we prudent be but prioritization play, think how we will of We

Thank Okay. you.

Thank you.

from of question the Morgan Erik from next Woodring Stanley. Our comes line

Your line open. is

Maybe a forward guys. I on thought inventories, two branch emerging inventories XQ some my sales pull was of the average I a just well. customer growth, or for slowing the inventories color customer a mentioned daily Obviously, John. on that number questions. opening. follow-up as question, you headwinds, Hey, elevated first of taking and channel you delayed in provided have kind was Thanks other most the significant Thanks. a follow-up have If business after understand the understand now. kind we factors the the I today help And put very impact the -- side, maybe kind helpful. it qualitatively just XQ? like on maybe that biggest us in of that having that. Can which seems you right are to help better is then us headwind of maybe of

Thanks, I you thing. know would Erik. one it be love I guys, just to and have

of it's more think things. a smaller I of a few combination

we're say controllable -- carrying we side, only affects of does we course, It inventory. I products. inventory what chain supply how the On much also carry just the when just enough is launch is doesn't because it would affect

showed So launched at product more would to that I hoped launches of would some CEDIA, say have we quickly. we the have

a as local entity, So said gives my some we think a are control but comments, that's store. when I permit don't local We things control opening to -- integrators but are entity a much. the it open that #X. busy, local there a can't #X, and in government I us

lengthen. delays causes that times when So those

buying projects two of market. we that are builders just I years. The And leave lots saying that's colleagues I seeing places. might to is, four. call is that that second conservatism this seeing I their that as what in on but builders. resulting mean base. of couple descoping thinking think And of a the are today everyone -- the the are And to And speakers, piece, of I have might there's It we're though, business. -- we speakers past is strong the room I friends, in of in want that lots they're instead don't I And as would know to businesses think that kind I four with lots is a say going with cheaper I over of that market it's of the in been and in customer speakers. talked mean read

I so that, percent some that little creates of bit softness. just bit on there's think little of kind And now. right of few And a a a going

a more expense of rest it's that our all we we structure. so And so think the budgets a combination of lead year to outlook about us and those into next year think cautious things our the for I as having plan around

really maybe That’s you, that I follow-up. appreciate John. then fair. commentary. a that, And all Thank

highly very a made think awards. the proving yourself clear market your of different number I you proprietary winning regarded. Obviously, is it product and have that very guys in

more a maybe in love kind a see in you of two. those just branch help and XP XP? the the that’s understand in the launch between third-party But product you versus product Can And but I we slowdown would product puts takes there's impact, You at probably quarter, be openings so to Why there rapid of we fairly parse slowdown continue Thank proprietary much. understand rather product. to of your out? more just some the did then than that seeing it from that me. pace. us

Yes, thanks, Erik.

you rates that product for are What decoupled see e-commerce proprietary it, on was nationwide our distributed product a third-party those I would coverage equivalent growth historically, happens because not think you you almost products. our platforms, same-store it over. sales lines. if most did look U.S. we between of when e-commerce underneath And throughout basis, had all our carry the platforms, did historically, both

partners market. that availability product local our we adds that our network, open branch third-party to integrated go So when and in it

so to that's know happen. And we going

our As third-party we what our than in local with more is on we add branches, because greater impact we already the market is proprietary product. products see proprietary are

what -- was store in recent you're most included. If our

Louis. St.

So e-commerce from other we indoor platforms, store. but you ControlX local if store products Louis. in third-party through you our our Strong to buy couldn't speakers couldn't buy openings, Louis, you open our prior store local can buy, mount, can Episode our you local you're could buy TVs can only St. products, at buy some up products carry in that OvrC St. us, buy you We you that

local purchasing XP from their shift to will folks Some store. platform that e-commerce our

those do available with, the dynamic is now the store We but products, on lift it. because from the products weren't it's about we're in previously. greater know That's our products much model We third-party market are both that get proprietary it We dealing there local our in some expected. that opening it.

as biggest to by far one continue is We go are TV impact we forward. the happen. to going that

the it, and XP dynamic all but So XP one that's difficulty]. rate sales the on [technical growth underneath are same-store between the

color, helpful. Super Thanks Mike. for Okay. the

you. Thank

Our of next the Merkel line from from Ryan comes William question Blair.

open. Your is line

Hey, about wanted guys. residential ask to construction. I new

as that the I'm we slowdown as think that seeing. couple the And about are is You didn't you're seeing what for reason there? quarters? softness business for list that next curious, of And a you any your outlook

we -- thanks, Ryan. think I Well,

general that on an from a caution think thought was perspective just I terms ago. what of is us bit of to -- in overall kind I spoke our market I the

In and solutions housing terms be penetration continue of of to the construction market itself, super the is very busy, low. our integrators like our in

-- certainly certainly of an opportunity think for to of integrators So overhang a on softer I I creates think other rates -- interest tons economy bit market, go a to and it creates business. the find our there's higher but an

the building base, it's slow And easy will find pivot, homes, integrator the may find commercial for very construction take widely time what they And be our market, look near-term were of it for think bit building find light about of more so to find in but market. much And trends, of go softness I would go and as products will more integrator a work. when but work, creates they'll I call work layer in the they'll in kind call just down tiny penetrated to I homes, renovation a installed the what when at are They'll it I'd we if work builders the their go builders more concerned today. it pivot.

Got it. Thanks. for That’s all me.

Thank you.

you. Thank

JPMorgan. the Paul Our of next line Chung comes from from call

open. Your line is

for Hi. my question. Thanks taking

expense this throughout next gross of bridge, about uplift the we So quarter. as about about and dissipating? on mix? Or benefits into the Talk of amount quarters? takes the benefit move margin of implemented, puts saw as and on gross like it next as for just air margin we year. shape higher then you've we of benefits the year kind margin, looks the that end coming kind the And product think of a lower do you freight think on pricing about lower the freight the from and margins to the gross similar we Do airfreight performance how the year, is 'XX and think some gross you expect kind even

Paul. Hey,

the you and I gross give color margin. how it. contribution So numbers we the think bridge some guide don't about we on But around from specifically will or our margin

going our trends that we think the year-over-year it change. that really about aren't are would to expectation be performance As QX to be similar seeing QX, should we

the getting pricing. that benefit are We of

We expect it to continue.

And will bridge it as for similar QX, pretty in it so if think looks about QX. that probably out look you

cost supply John about mentioned And the call, think during call, year, as our some next descriptor see and do to we as pressures chain portion moderate. of of we continue the those

price purchase to of the in that the variance that moderating. that to push those some whether freight, we've supply PPV So are is ensure pay cost definitely of chain, whether things had that's

mix continue next year, as to see 'XX and had. been in And the margin to margin rates little we as do our to earlier. price that we historically where back still that Clearly, returning the moderation had back see been have as similar over historically. rate impacts we think in bit But back continue talked we 'XX we've our we have will we again, against pretty put of to will us moving about of where that a us, all

you lot new strength Okay, on great. are And then Radiance across during of of portfolio released product kind the you just It seems the products of of the products? attracting relative attention. where a like was a amount seeing follow-up CEDIA, large

term, And Just any comments to on these maybe know your product perform. I are you. some portfolio? Thank have but longer you how headwinds products expected new there, near-term

think we super are I optimistic.

I can't get on think them. wait to their hands integrators

where been an I behind offering. needed to area we a like control system Frankly, where think itself Halo is to going our differentiate entire we’ve been be. remote has the we bit feel

year. is hoped So continues lighting be a the on -- had lighting year. big be I product, would think integrators next We be for will them, The and industry area and their our customers can't to for to Radiance. that this and growth early it hands wait get

You saw the reaction to Radiance.

very gets lighting, think warmer. of exciting. typically, outdoor as big So a the terms in terms spring bit we their is time the of in and in audio products, The weather

generate all generate that. for WiFi we've more very access some more revenues more that. the being And So now got us. they'll just those some really releases behind attachment cases, points systems. to behind received. case, In got of and in important other And are We've well then new out are and build

[Indiscernible] it. great. see Okay, Thanks.

you. Thank

comes Capital. line of the question Brian Imperial from from Ruttenbur next Our

open. line Your is

Yes, thank quick you very question. much. A

saying you on Is up commercial business. picked I think forward? more that moving be you correct may pursuing I that

in markets in see couple security and that have double million market. technology our of -- hundred residential Well, generally the do, conventional of over have the commercial of a growth dollars the the and more kind been we we those growing well for markets, kind fastest speaking, we company Brian,

from a I'm pivot? making talk you of how area? to kind that a comments do you what in that out in go have market or Okay. would order retail, consumer-driven share Can bigger do into about market there plan those wanting to market lot security, hearing to to commercial the about you get maybe in of companies

a I #X. done well, market anyway. -- third information, we And commercial successfully. for comes do we've everybody's business just us, And adjacent two that integrators, of to biggest say very think think generally about I have Our the speaking, first, is reason for work I our it's from things a very that core our customers'

products who are commercial that opposed as identify activities we recruit so go integrators as integrators to We've fit already And have themselves go-to-market for with commercial use. extended residential. to that

that with successful quite been We've strategy.

think that. commercial fully I have We fit but It's been around products. now ago And all thousand of it's some. we implementations launching than new for We our about a ControlX little platform. have for a fit less year a did not release a settings,

commercial are have them of using our also noted about We half customers, OvrCs. that

Those continue from so come are products. to do from could attract partners develop look come us third-party. with our at channel continue with we more continue new development feed or continuing go-to-market And we and could partners to those business resources, those to to how a channel

We just signed with Digital a relationship space. the that Watchdog announced on we surveillance

them to products kind like acquiring are and doing it just them. our company, we customers more And by built of listening ago, so we XX years for and building

is And We of market. developing better have distribution are understanding that that other that team attractive. we product a a companies that product commercial much capability find got fortunate we've a

things are the we building. So those are

course, all this we wallet excited things fast to us drive market? things in of X the -- year's those this how fast about And environment build to there? to Then of how to are And market? that really course, And security the in X share fast fast How for invest is, us next in the it? And those the to are to years. how continue to invest our question in the are cycle. balancing budget make

down staff and the to the X% there staffing question. then your is planned quarter, revenue in Is guidance And to there Are to the in plan final in reductions X%. just Great. any changes any fourth think according one near-term? levels? I

our business the hiring are planned but performance no of would in to is, like there the is for Yes, made on that We are of grow most a business. essential where our I based view what reductions significant all, feel And sufficient workforce. call we've freeze continue the to have that ongoing positions. we do our investments

Thank you.

year. top quick real we one last Brian, bolt you have on talked XXrd the Hey, about that. thing week When our guidance, of QX just

down adjust of a real of couple a if basis. that, our So points points -- guidance on comparable for to a couple is up QX you

sure So make just to hears everybody that.

remarks. this the question-and-answer back Thank to now Heyman time, call over turn you. our At concludes I'd session. to closing Mr. for like his this

right, our there. you they're to keep guys informed. of to continued partners But and off for your We great I want appreciate investors everyone. appreciate And team all who delivering especially the today. on a course, support, our behalf for great really our members time shareholders. wish work their work doing of want partners butts thank we continue I their I and continue All and out to Thanksgiving. everybody our to thank our will it,

third Snap XXXX you. today quarter call. fiscal earnings conference Thank joining for you for One's Thank us

may You disconnect. now