Jessica Hansen: I’ll start with lumber and then I’ll leave that up and down on other categories to Paul and Mike, they’re probably better or worse than I am. Lumber is still less than half what it was at its peak back in March of ’22, but it has started to increase since December, which would be kind of a typical seasonal trend. So hopefully, we’re not going to be talking about lumber in terms of big swings in our closings. And most of our year-over-year stick and brick decline is still from lumber, but in terms of sequential moves going forward, we expect it to be relatively modest.
Michael Murray: Very fair. And I think in terms of the other categories, it’s a market-by-market category-by-category, I don’t want to say struggle or battle, but it’s an ongoing effort to be as efficient as we can do that. And we make some progress on some categories and then we might have to give back some on others. So it’s a constant battle, Susan. And we’ve seen right now, I think some moderation in seeing increases, which has been very helpful in margin right now.
Susan Maklari: Okay. All right. That’s helpful. And then you guided your SG&A to be about 7% for the third quarter, which is still really low in there even as you’re making those investments. Can you just talk about the puts and takes into the SG&A as we think about not just the third quarter, but even looking out? Any thoughts there?
Bill Wheat: Yeah, sure. So we’re continually trying to position ourselves to — across our footprint to be in position to grow. And as we’ve gotten larger and have more scale in individual markets, that has involved realigning certain divisions, you’re breaking up certain markets into multiple divisions to put ourselves in a position to more deeply penetrate market share in those markets. And the same has applied across our infrastructure across the country as well. And so we’re making some of those investments right now and we do see pretty quick payback on that. So that’s why our SG&A percentage has remained as low as it has, but we are making those investments that sometimes do have to come a little bit ahead of the growth.
But it’s primarily in people and in making sure we’ve got the depth on our teams and we’ve got the land personnel in various markets in order to be able to tie-up the land positions and develop those relationships with third-party developers and trades to continue to position our platform to support growth.
Susan Maklari: Okay. That’s great. Thank you. Good luck.
Michael Murray: Thank you.
Operator: Thank you. Your next question is coming from Kenneth Zener from Seaport Research Partners. Kenneth, your line is live. Please go ahead.
Kenneth Zener: Good morning, everybody.
Bill Wheat: Good morning.
Paul Romanowski: Good morning, Ken.
Kenneth Zener: All right. Margin stability up 52% of closings intra-quarter orders. Why was it higher specifically? It looks to be, again, I could make my own narrative, but I want to hear it specifically. And then what was the margin spread between those 52% intra-q versus the ones that were naturally coming out of backlog?
Jessica Hansen: I frankly don’t think any of us looked at that before the call, but we can take a look and get back to you. It was 54% versus the 52%, just to clarify. And the driver on that was just a function of we went into the quarter with over 9,000 completed specs and our cycle times are back to normal.
Kenneth Zener: Okay. So you’re getting, yeah, we’ll follow-up on the margin backlog versus intra-q, is that correct?
Jessica Hansen: Yes.
Kenneth Zener: Okay. And then Paul I think you kind of talked about your markets in Florida not being affected by the rise in inventory we’re seeing in coastal markets and/or a higher cost of ownership related to insurance. Could we maybe isolate that comment to a place like Central Texas, I think Austin? I know you’re building in Buda, not Austin per se. But we are seeing inventory go up in Central Texas, you don’t have right the coastal issues. Is this still that you have homes that are affordable and in demand? So you’re seeing the same dynamics you talked about there where we’re kind of excluding coastal conditions? Thank you.
Paul Romanowski: Well, the question and the comment back on Florida was mostly as it relates to insurance and increased costs around that. Inventories, we have certainly seen more inventory in the market today on the resale side than we have in the past. Months of supply has crept up slowly across most of our markets, but majority of what we see coming to the market is still maybe either overpriced or has significant need and work and very minimal in the affordable price points where we tend to compete. So we expect it’s going to take significantly more homes to come on before we see to be a lot of impact on our ability to sell. But we’ve competed in that market forever. We have been a spec builder. We do that to compete in the new-home market as much as we do against the resale market.
Feel very good about our product and positioning against the homes that come to market as resale available when they do. And we think we have a great package of incentives, warranty and closing cost basis to compete against that inventory when it does come on and it will at some point in the future.
Kenneth Zener: Right. Appreciate it. And I guess, Jessica, you said 3% on land. Could you split that between land you developed and land you’re buying finished?
Jessica Hansen: I don’t think we’ve quantified that, and I definitely don’t have that in front of me.
Kenneth Zener: Talk to you guys later. Thank you.
Operator: Thank you. Your next question is coming from Rafe Jadrosich from Bank of America. Rafe, your line is live. Please go ahead.
Rafe Jadrosich: Hi, good morning. Thanks for — thanks for taking my questions. Just first on the fiscal third quarter gross margin outlook for flat to slightly up. Just how do we think about the assumptions for the stick and brick per square foot, net pricing and land inflation that’s baked into that guidance? And then specifically on land inflation, just the lot cost is flat quarter-over-quarter. What are you seeing in terms of land inflation for land that’s contracted today?
