Jesse Lederman: That’s great. It’s very encouraging. Generally, spec builders have a higher inventory turnover ratio and you’re hovering around 1 times, which is a bit below the peer group. Now that your cycle times are improving and you’re on more consistent start cadence since the beginning of the year, do you have internal targets that you’re striving for in terms of working capital as a percentage of revenue or inventory turnover that you discuss internally to drive the business?
Dave Messenger: Not to try to avoid your question, but yes, we obviously have a variety of internal metrics, internal hurdles that we’re looking at everything from the time that we are reviewing land deal to when we’re doing starts for homes and opening new communities, but it’s nothing that we published or put out there right now.
Jesse Lederman: Okay. Understood. Thanks for all the color.
Rob Francescon: Okay. Thank you.
Dave Messenger: Thanks, Jesse.
Operator: The next question is from Michael Rehaut with JPMorgan. Please go ahead.
Andrew Hassen: Hi, guys. This is Andrew Hassen on for Mike. I appreciate you taking my question. I just want to — yeah, congrats on the quarter as well. I just want us to maybe, obviously with understanding that you’re not guiding margins, help us think maybe through some of your assumptions or thoughts on construction costs, pricing, or the land environment to help us think of gross margins next year, or this year rather?
Dave Messenger: I think it’s obviously going to be a combination of all those things that given, right now, our guidance is estimating an ASP of around $380,000 in the low and high end, and then we are looking to pull back incentives. But we know that some of that is — some of those savings will get eaten up by some direct cost increases. So, while we’re still experiencing positive trend in the fourth quarter, later this year we may see increases. So, it will be how well can we negotiate direct costs down across our national platform in order to provide some additional margin left.
Andrew Hassen: Thank you for that. And then, maybe if you can just review your capital allocation priorities going forward?
Dave Messenger: Yeah. I would say that we continue to invest in the business. We’ve got roughly 75,000 lots owned and controlled with about 60% of those being off-balance sheet under some form of option and controlled arrangement. And we’re looking to continue growing the business. As I said earlier with somebody else question — with one of the other analyst questions, we’re looking to grow our community count. So, we think that we’ll have plenty of opportunities to be reinvesting this capital that we’re generating back into the business and grow organically, as well as Dale said, look, there are other parts of the market that we’d like to see M&A opportunities, and Florida being one of them. We just executed on the transaction in Tennessee, and so we think there will be other opportunities that come out for us to utilize this capital to continue to grow the business.
Andrew Hassen: Thank you, Dave. I appreciate that. That’s all for me.
Operator: [Operator Instructions] The next question is a follow-up from Jay McCanless with Wedbush Securities. Please go ahead.
Jay McCanless: Hey, thanks for taking my follow-ups. I just wanted to get a sense of what percentage of Communities during the fourth quarter you’re able to raise price and what pricing power looks like as you start the new year.
Dale Francescon: Jay, it’s — I can’t give you a specific number, but it really comes down to we’re adjusting prices and reviewing them on a weekly basis on a subdivision by subdivision level. I can give you just kind of a general feel that certainly once we saw some interest rate relief, we started raising prices, reducing our incentives, because most of — look at it, most of our homes have some type of incentive in it. Most of the increased price is really reflected in reduced incentives. Although there are increased base prices from a case to case basis, but it’s really more incentives, and so — which is all based on what we see in terms of competition for that particular subdivision level of inventory we have, that type of thing. But in general, on a directional basis, we are seeing that our incentives are going down and that’s really where our focus is.
Jay McCanless: That’s great. And then, the other follow-up I had, what are you seeing from competitors right now? Has some of the frenzied discounting and promotions that we’re seeing in the fourth quarter, is that lessened somewhat or is it still pretty aggressive what you’re seeing from some of the larger competitors?
Dave Messenger: Well, it’s — not withstanding the fact that still generally inventories are very low, everybody is looking to move product. And from time to time, one competitor or another may be discounting homes more than the rest of the market. But in general, we’re not seeing rampant discounting going on out in the market. And what was there in the fourth quarter seems to have settled down as we’ve gone into the new year.
