John Heyman: On I think there’s two different offerings. There’s the Connect offering and the way I would think about that model is, of a dollar of revenue, we share 40% with the integrator. So, 60% goes to the bottom line. There’s some costs against that, call it 5% other variable costs. And so, think of that as kind of a mid-50s margin product. And then with the Assist offerings, think of them similarly, but we have a smaller share for the integrator. They only get 30%, we get 70%, but we’re still at mid-50s gross margins because we have to do some work there in terms of cost of sales, specifically labor. And so, that’s how you should think about it.
Stephen Volkmann: Super, thanks. And then maybe a little more granularly, Mike, your waterfall relative to contribution margin in the quarter, the 2.7% from various cost goodness, I guess. How should we think about that going forward? Is that sort of a catch up and we’re kind of done? Is there more you can do in that particular bucket of costs that we can expect going forward?
Mike Carlet: Yes. Hey, Steve. We’re not done by any stretch. I don’t think we expected to grow that much going forward. I think as you think about ‘23 versus ‘22, a lot of the ways that everybody was doing the system is sort of self-corrected, whether that’s ocean transportation, some other things that were out there. So, part of that 2.7, I think, is just something that everybody’s experienced as things have normalized. Not to take credit away from all the supply chain teams everywhere that have worked really hard to make that happen. As we go forward, we continue to have focus on driving additional incremental opportunities across the supply chain. And so, we would say that, we would expect 50 basis points type of improvement from additional cost activity as we look forward next year.
That’s a relatively conservative internal number that we have. I’ll tell you our internal goals are higher than that. But I think as you think about our guidance, that’s what we think is still out there from the efforts that we’re putting forth that we can generate with hopefully upside from there. But, that’s real activity from our team, that’s not market activity or correction. It’s really things that our teams are doing to drive effectiveness and efficiency in the supply chain.
John Heyman: Hey, just real quick. This is John, Steve. Our supply chain teams and our engineering teams, now that all these componentry issues are out of the way, are getting back to what they were doing before COVID and supply chain, which was figuring out how to take costs out of the products for the industry. Some of that will retain in terms of margin, some of that will pass on to the industry in terms of price. But the amount of re-platforming that the Company has done, engineering, working with supply chain and our purchasing operations, I think we’ll continue to see benefit out of that and I just want to call those efforts out of those teams.
Stephen Volkmann: Super. Okay, thanks. And, then just a final quick one, 1P, 3P mix any visibility into that going forward?
Mike Carlet: I think we expect two things to happen. While on a like-for-like basis, we would expect the, continue to see the 3P mix continue to be slightly higher percentage of sales. It’s going to grow 50 basis points to 100 basis points more for the next couple of years. That’s mostly driven by our local store openings, the mix of local as we add TVs and local stores, we’ll continue to drive that mix down. Right now, I think for the year, we ended at about 66%. I know I put it earlier, I just don’t have it right in front of me. But it’s about 66%, proprietary product, which was, I think compared to close to 68% the year before. And I’d expect that to continue to slip down a little bit, offsetting that, as this RMR revenue grows, not this year.
As John said, the impact of Control4 Connect and Assist is pretty minor this year. But going forward, as we think about ‘25 and beyond, that should offset that. So after this year, our models say that the 1P, 3P mix should hold relatively flat with the incremental RMR offsetting whatever happens to multiple store openings and the introduction of 3P products on a sort of steady state basis. We might always do things in the future that would change that, but at least as we think about the current model, that’s what we would expect in the future.
Stephen Volkmann: Got it. Thanks so much. I’ll pass it on.
Mike Carlet: Thanks, Steve.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Robert Jamieson with UBS. Your line is now open.
Robert Jamieson: Hey, thank you. Congrats on the numbers today. Nice margin performance. One thing I, how should we think about, the physical store locations? I know you’re pausing new openings, but you talked about, transferring all these stores to a single operating system. Just curious what you think, is there margin benefits that we should expect there?
Mike Carlet: There are some small operating margin benefits. If you think about what we’ve had to do over the last four years is we’ve been really operating almost six different platforms in the Company, the old SnapAV platform, this old Control4 platform and a platform for each one of the four legacy local businesses that we bought back in 2018 and 2019. And, I can tell everybody we’re two years into our five-year plan that existed pre-COVID and the whole COVID disruption, supply chain disruption causes us to go very consciously a lot slower on those things as we focused on, the supply chain and maintaining inventory for our suppliers and all the other things that, lots of folks in the world have had to do. As we bring all those systems together, we’ve combined Control4 and Snap in the U.S. into a single portal instance.
