Peter Jackson: Yeah. No. That’s the million-dollar question, Collin. You’re absolutely right. We continue to wrestle with this. We continue to see the trends of that normalization, right? The share that we took, that we took a lot of and given back a little bit of it. The price that we took and we took a lot of and given back a little bit of it. It has played out, but I think it’s been slower than we’ve anticipated. This quarter we did see a fair amount of what we expected. I think where the beat came, at least in my mind, was some of the timing around some of the rebates, some of the productivity, some of the favorable tailwinds and some of the product mix, which is a little better than expected. Not massive, but it accumulated into a number that was a healthy beat on the margin line, to your point, expected.
Dave Rush: The only thing I’d add is, we have a focus on using our scale to leverage our supply chain opportunities better, get a lower landed cost, more direct sourcing. Those come in little bits. We get a bite here on a product, a bite there on a product, but over time they start adding up. That along with the investments we’ve made in the manufacturing, automation and the efficiencies gained there, again, a little bit at a time, but then you look back at six months of doing it and it’s actually a meaningful number. Those things we’re starting to be able to track and see actually help.
Collin Verron: Great. I appreciate the call and good luck going forward.
Dave Rush: Thank you.
Operator: And we have our next question from Adam Baumgarten with Zelman.
Adam Baumgarten: Hey guys. You mentioned the multifamily declines that you’re expecting in the second quarter of next year. Do you expect that business to normalize from a margin perspective in 2024 at this point? I know it’s been a bit of a tailwind.
Peter Jackson: We do. Yeah. We think those things are kind of hand in glove, both the volumes and then the resulting margins as competition levels a little bit.
Adam Baumgarten: Okay. Thank you.
Peter Jackson: Thank you.
Operator: And our next question comes from Kurt Yinger with D.A. Davidson.
Dave Rush: Hi, Kurt.
Kurt Yinger: Great. Thanks, and good morning, everyone. Hey. I just wanted to stick on the gross margin line and I guess if you were to kind of peel back some of the multifamily benefits, I mean, how would you kind of characterize where that core gross margin stands versus where you would expect normalized to be and what stage of that normalization process are we in, because we’ve talked about it in a long time. It seems like over the last several quarters, it started to materialize, but the tail of how that stretches into next year also seems pretty long. So just love to hear your thoughts there?
Peter Jackson: Yeah. So there’s a couple of different pieces, right? If you stipulate, which I think you have, that we’ve set multifamily aside for all the reasons we’ve already talked about, I think the storyline on single-family is that we’ve seen the bulk of the margin normalization in the core products. There’s more to go, but I think we’ve seen the bulk of it. If you look at subcategories quarter-over-quarter, so Q3 2023 to Q3 2022, you’re talking mid-single digits percentages of margin that we’ve given back in the commodity space. We’ve given back price and margin in every one of the categories. So that normalization that we’ve been talking about, we’ve been digesting it and we’ve been processing it.
I don’t think we’re done. I think when we look at the numbers, we see the trends in certain categories and markets, there’s probably another leg there, but it’s far smaller than the first leg. So we’re in the sixth, seventh inning here. We’re not in the second inning. That said, there’s certainly every quarter timing and things that come through in terms of, like Dave said, when we see benefits, when we see the timing on certain rebates, that sort of thing and multifamily is not to be minimized, right? It’s been a big deal for us this year and we do think it will normalize into next year.
Kurt Yinger: Okay. That’s super helpful. And then just on the technology front, I’m curious with some of the pilots that you’ve had, what are some of the most promising offerings within that where you’ve seen particular traction and maybe some of the big learnings that you’ve taken away from these programs that you’ll look to implement or change on the full scale launch early next year?
Dave Rush: Yeah. That’s a great question. I would tell you, understand the pilots are not for learning how to implement. It’s for learning how to develop. So what we’ve used the pilots for is get the product where we want it to get. Having said that, one of the favorite modules of the folks that are engaged is the one that you can take and put all the plans for HVAC, framing, plumbing, all into a module and it shows where those trades potentially would collide with each other and resolve that collision before it goes live into the field and that is the one that particularly builders think gives them the biggest and quickest return from savings, because it minimizes the mistakes that you would have to learn on the fly in the field and you get ahead of them.
So that’s probably the one that we get the most positive feedback on. But what we’re really trying to do is get everything resolved from a customer perspective on the front end so when we go to a full product launch, they’ll already have solved the problems that they’re counting on us solving.
Peter Jackson: Maybe the best example of that that Dave was just referring to is the shoppable digital twin. So that has been a core aspect of this, right? You’re taking the plan, you’re putting it into that three-dimensional environment and the real bang for the buck is the shopability. They want to be able to pick up a siding or a roofing or whatever and see it on the rendering, have it be impacted with the real design, be able to quote it and shop it and buy it. And that entire experience, as you might imagine, is quite complex, right? It’s challenging both technically and from a UI/UX user interface, user experience type of dynamic. So what we’ve been really focused on this summer is putting our product in front of them, right, as it stands, getting the feedback of how it works, how they’re actually going to transact and interact with that tool and making the tweaks behind the scenes to really drive the technology and the functionality to meet that need state head-on.
