Operator: And your next question comes from the line of Joe Ahlersmeyer from Deutsche Bank. Your line is open.
Joe Ahlersmeyer: Hey, everybody. Thanks for taking the question. I’d like to talk about long-term profitability in the context of the EBITDA bridge that we’re seeing today, hearing you talk about sort of net neutral price/cost in the back half, seems to me like probably the positives and negatives have reduced in magnitude, meaning you’re likely getting less deflation as we move through here but there’s also not a major giveback on price. And so moving into next year, we shouldn’t really assume that, that changes much necessarily. And then on the investment side, in manufacturing and the under-absorption there, that seems to me like something that – part of that is temporary as part of this investment but also if the end markets are improving, you would get a better incrementals on volume through that manufacturing line.
So I’m just trying to model how you would get back down to 28% to 29% long-term EBITDA margins, when in a year like this, you’re guiding to nearly 30% at the high-end.
Scott Cottrill: Joe, it’s Scott here. So we’re not going to get into talking fiscal 2025 or longer. I will tell you, though, the performance that we’ve had in the year-to-date through the first six months, absolutely exceeding our expectations, as Scott talked about during the prepared remarks. The EBITDA bridge is presented and shown for a reason, right? It shows you all the key drivers that we have. And as you look at that, you’re right in looking at your assumption, management’s got our own view of it and we’ll share that when the time is right. But what does that volume picture look like as we turn the corner into next year. Price/cost, this company does, I don’t know if anybody does a better job at managing price/cost than what ADS does.
So we’ll continue to look at that. And anything that you assume on the volume side that comes back whenever you assume it in the cycle or a year, then you get some really nice, fixed cost absorption that comes to that manufacturing line. And we’ll always manage our SG&A cost to make sure that we’re being competitive. To Scott’s point, it’s getting the capacity where it needs to be during kind of a downturn. It’s also getting more efficient, more competitive when we come out of it as well, which is, what you heard us talk about related to customer service, order execution and so forth. So again, not going to get into 2025. We did at the Investor Day, give 28% to 29% margins as kind of a three-year look as to where at the end of fiscal 2025, we expect to get.
We’ll obviously update that guide as we come out with guide related to next year in the May time frame, like we always do. But again, it doesn’t stop us from executing and delivering as much as we can based on the environment that’s in front of us.
Joe Ahlersmeyer: Yes. I agree with you on the price/cost. I think the numbers don’t lie there. Maybe then back to fiscal 2024, what maybe is included at the high-end of the sales range for residential. We’ve heard the builders talking about development spend. Just wondering what your assumptions are within your guide there for when you might see that, if it’s not in fiscal 2024, is it the early part of 2025, because it seems like all signs point to increased land development spend into next year?
Mike Higgins: Yes. Joe, Mike Higgins. I think with regards to the residential, this kind of move or the positive optimism that the builders have been talking about further development, that’s probably an FY2025 impact for us. That’s not going to happen in FY2024. As they kind of ramp and start to develop more land for more communities, more subdivisions, we would expect to see that sometime in the next fiscal year but not really counting on any of that for FY2024.
