Michael Miller: Pleasure.
Operator: Our next question comes from Joe Ahlersmeyer with Deutsche Bank. Please proceed with your question.
Joe Ahlersmeyer: Hi, everybody. Good afternoon and thanks for taking the questions.
Jason Niswonger: Sure.
Joe Ahlersmeyer: I’d like to revisit the gross margin quickly, if we could. Because just looking back over the last several years, even before COVID, this is, I would say, your smallest sequential revenue growth, 3Q versus 2Q, but it’s among your best gross margin performance. I want to make sure I interpret your commentary, Michael, that it’s more of a normalization and nothing particularly strong in the third quarter. So if we’re looking into kind of the fourth and the third is a good indication of the strength of your margins right now.
Michael Miller: Yes. Thanks for asking that question and getting the clarification. So I mean, historically, we would say that our best margin, particularly from a gross margin quarter, is going to be the third quarter. And last quarter, we talked about a range of gross margin of sort of 30% to 32%. We still think that from an operational environment that is sort of a long-term sort of normalized run rate, if you will, from a gross margin perspective. But we just wanted to highlight the fact that there wasn’t necessarily anything extraordinary in cost of goods sold and therefore, gross margin in the quarter that we would just call out necessarily. And except for, of course, what we had said earlier that it being a benign inflationary environment, combined with the availability of the types of material that we need to install and getting it in a timely manner has really improved significantly the efficiency of the operation on the sort of the install scheduling side of the business, and that is really what’s flowing through to the gross margin, not just in the third quarter, but really throughout 2023.
Joe Ahlersmeyer: Yes, makes a lot of sense. And then just curious if you agree with much of the commentary shared by peers and others around a shift back to single-family in 2024 and how that dynamic might play into material tightness into next year and perhaps even more supportive of pricing?
Michael Miller: So I’ll do the first part of that, and then Jeff can talk about the material tightness or potential material tightness, I should say. But we definitely agree with the general perspective around 2024 being certainly enough year for single-family. I mean everything that we’ve seen both from the public builders that reported so far, their orders are up 40% admittedly from a very low base. But I think both the public builders and all of the private builder surveys that we’ve seen, combined with the conversations that we’re having with our customers, we believe even after the disruptions that we saw in the mortgage market in October, surveys that have come after that have still supported an environment that would be sort of a mid-teens order growth in ‘24, combined with a mid- to maybe high single-digit closings growth in ‘24 for single family. And we have not seen or heard anything that would be contrary to that on a macro basis.
Jeff Edwards: Yes. Hi, this is Jeff. As Michael pointed out, assuming relatively robust and positive sales order volume, material is already fairly tight. Now some of that’s due to maintenance and rebuilds and there is – as we know and all have talked about over the years, so a little bit of capacity coming on with a new plant from Kanoff, supposed to be the latter half, I think, of the second quarter, but it’s not so significant as to really put the industry into anything that resembles anything like a loose market as it relates to material. It’s going to be tight for some time, I think based on the health – the degree of healthiness in the market and the capacity that’s out there.
