Andrew Masterman: Actually there, I should say . So outside, I think when you look at our overall dollar levels of spend, you take that percentage and kind of look at, that is kind of more the trajectory that we’re going at as a business.
Tim Mulrooney: Got it, that’s very helpful, one more quick, one from me. You lowered your CapEx projection by $10 million to $15 million. Can you just talk about what investments you’re planning to make that you no longer think it’s necessary to make this year, just we always think about, are they cutting in the growth CapEx or what’s going away so anything there? Thank you.
Brett Urban: Yes, hi Tim, it’s Brett. And I just think this shows kind of the resilience of our business and one of the levers we can pull when we kind of see a low snow quarter coming, we look at the balance sheet and determine what leverage we can pull CapEx being one of them, right? I think if you look at kind of the minimum level of CapEx of the business, just maintaining our equipment is probably around 2.5%. So we’re still guiding to 3%, 3.25% which I would say we’re still investing in some growth on top of that while maintaining. But I think the key point is really this is the lever we can use to offset some of the cash that we’re going to potentially lose from low snow to kind of pull down that CapEx level a bit in years like that.
Andrew Masterman: Yes, Tim, we don’t expect this to impact the business. In fact, if you look at the investments we’ve made over the course of the last five or six years, we’ve actually improved the age of our fleet by about a year over that period of time. So whenever we see a downturn or shift in any part of our business, these are the kinds of things that we can do on a short-term basis without really affecting any of the growth initiatives that we have in place.
Tim Mulrooney: Understood on that kind of cyclical cash flows and thank you very much.
Brett Urban: Thanks Tim.
Operator: Thank you. Our next question comes from the line of Phil Ng from Jefferies. Your line is now open. Please go ahead.
Unidentified Analyst: Hi guys, this is Maggie on for Phil. My first question on the 2Q guide, the sales number makes sense. But on the decline in EBITDA dollars and margins, can you kind of parse out how much of that is loss of new volume versus some of those development timing headwinds you called out or any other incremental headwinds baked in there?
Andrew Masterman: Yes, Maggie, you can basically take the entire shortfall in our guide relative to prior expectations it is almost 100% to a shortfall in snow. And that’s really what it is. If you can think about – back in 2020, we talked about some of the drop-through rates that we have on revenue. It’s the same situation where a shortfall in revenue drops through at about a negative 30% on margins. So it reached $1 million that’s about $300,000 less of EBITDA relative to the snow levels. So if you just take that kind of calculation that really pretty much takes into consideration. The other aspects of our business are actually doing quite well. And so as you look at the underlying land performance, the underlying margin performance and development, we’re seeing good momentum there. It’s just masked by the fact that the snow levels are happening.
Brett Urban: Yes and I would be a little bit more specific. I think it’s exactly right. Almost 100% of the change in guide is snow related. And if you look at snow last Q2, we had $208 million of snow revenue posted last Q2. This quarter, the midpoint of the guide is $120 million of snow revenue. So an $88 million decline in snow revenues at the midpoint of the guide. If you apply around the 30% margin to that guide, it’s an additional $26 million. So the midpoint of our guide, with the same amount of snow revenue last year, it would have been in the mid-60s from an EBITDA perspective and showing margin improvement of almost 100 basis points. And if you kind of look at our guide now, and I’ll just echo Andrew’s comment, it is 100% snow-driven, and really just the lack of snowfall specifically in the Northeast and Mid-Atlantic region.
Unidentified Analyst: Okay, okay that’s very clear. And then my second question, how do the development headwinds in 2Q impact how you’re thinking about the segment for the full year? And can you kind of remind us how much visibility you have to those projects flowing through and maybe how that’s driving your confidence in the 10% organic growth you’re talking about in the back half?
Andrew Masterman: Yes, we have very good visibility, let’s say, six months out with our development pipeline. And the situation we’re at right now in Q2 is really just the timing of projects. As you know, these projects come in, they come out. They’re just depending on when the subcontractors before us get done. And so the timing of these projects that we’re seeing in Q2 is slightly less than it was the prior Q2. But we know right now that as we look at our backlog and this is a book backlog – this is not forecast backlog. These are projects that are signed. And frankly, from where we’re at in landscaping, we’re the last one of the projects. So these buildings are being constructed as we speak. These landscaping projects are going to happen, and we’re very confident that 10% plus organic growth in the back half of the year will happen, which will give us kind of that mid to high single-digit total organic growth for development in the fiscal ’23.
Unidentified Analyst: All right, thanks guys.
Operator: Thank you. Our next question comes from the line of George Tong of Goldman Sachs. Your line is now open. Please go ahead.
George Tong: Hi thanks, good morning.
Andrew Masterman: Good morning.
George Tong: January snowfall is now tracking below historical levels hi, as you noted. Can you elaborate on the assumptions around February and March snowfall that you’re embedding into your guidance? And overall, how much conservatism is baked into your outlook?
Andrew Masterman: Yes, so George, as you look at the range, we factored in clearly January, no snow at all on the I-95 corridor. As we look at February, we’re factoring in the range frankly at the midpoint is a very low snowfall in the I-95 corridor. At the low end of our range, we are factoring in no snow environment in I-95 with continuing performance in the Midwest and Rocky Mountains, which we’ve seen, historically happened. So in summary, at the low end of the range is continued no snow in the corridor with average though in the Midwest in Rocky Mountains and at the high end of the range, says that actually in the second half of February and into March, there is a return to kind of normalized snow in that I-95 corridor.
