Susan Maklari: Okay. That’s all very helpful. And I guess it also leads to the next question of how do you think about the uses of that cash. You mentioned that you’re obviously in a net cash position now as it relates to your balance sheet. What are some of the priorities? You bought back stock in this past quarter. Would you consider getting more aggressive there, or anything else that’s on your radar?
Stuart Miller: Yes. So, I’m happy you asked that question. I know it’s on the minds of many of our investors and people that follow the Company. We’re not ashamed of having too much cash. In fact, in these — in times like we’ve been in, it’s a tremendous advantage and produces a lot of optionality. Looking backwards to this quarter, this was a tough reconciling quarter. Again, you have the clash of prices coming down in a very complicated supply chain that was in this repair, exacerbated by two hurricanes rolling through our primary markets. This was a very good quarter to focus on our balance sheet and cash generation. But here we sit in what we do with cash, we’re likely to continue to generate cash with the program that’s in place.
Stock buybacks are clearly one of those avenues. We’re constantly looking opportunistically at repurchasing stock. We did purchase some stock this quarter. But in the abundance of caution, we just decided to go slow before we go fast. Stock buybacks are on the table. But, also as we come around, we know — and remember that in the body of my messages, we are going to sit with a production reduction, I think, it’s going to be by a third, maybe more, a reduction in production of homes, both multifamily and single-family. We are not going to see the existing home market, putting a lot of supply in place because buyers are protecting low interest rates. And we’re not going to have an inventory overhang. So, it is our belief that the duration of this correction is going to be somewhat smaller or more limited.
And having additional capital enables us to be opportunistic in growing our business when those signals start to come our way as well. And you know us from the past. People have seen how we operate in the past. Lennar tends to be a first mover; we probably will be in this case as well. So, book to grow our business and to buy back stock and to pay down debt, all of these are viable uses of cash. We’re fortunate to have the optionality to go slow first and then to accelerate and to pick and choose where the best returns are garnered.
Operator: Next, we’ll go to the line of Ken Zener from KeyBanc. Please go ahead.
Ken Zener: Stuart, an iconic movie says, ABC, always be closing, which requires you to start homes to optimize inventory turns, which reduces your land, your most cyclical asset. A simple strategy as many investors overlook when considering margins alone. My first question is, with starts leading orders, could you comment on how you balance the unit economics of, let’s say, the lower margin, 5% versus the incremental cash flow of selling that unit as your land goes down 20% or perhaps 50% when your actual inventory units decline because I think the idea is the income statement is nice, but the cash flow that comes from these choices is much more cyclically important.
Stuart Miller: Well, in your question, you basically embedded the entirety of our strategy because the reality is if you look backwards, we have been reducing our SG&A to extremely low levels so that as margins come down, we’re still producing cash and we’re producing profit and bottom line. But at the same time, it enables us in tougher time to continue turning our inventory, turning our land inventory, as I noted, our higher price purchased to yesterday’s pricing land inventory. We will continue turning that. It is cash productive and we’ll redeploy that into repriced land purchases for the future. All of this is symbiotic and works to drive cash flows, replenish inventory appropriately positioned while keeping the trains running on time and generating cash flow, improving the balance sheet and maintaining profitability. So, that is basically the game plan.
Ken Zener: Great. And then second question, Diane, I think your comments on owned land, 2.5 years versus 1.9 absent WIP is new. Within that context, my question is if you do 12,500 starts at 50,000 annualized, just to make it simple, does that suggest or imply your ending inventory units will probably be down versus — year-over-year versus your 60,000 closing because that’s going to be potentially an enormous amount of cash flow from that unit reduction? Thank you.
Diane Bessette: Yes. I think that’s right, Ken. I mean, as you’ve heard us say consistently, we’re very focused on keeping volume up, capturing our market share. We’re enthusiastic about resolving some of the supply chain issues. You heard Stuart mention that we think embedded in our balance sheet might be about $1.5 billion. So, whether that’s the exact right number or not is we can debate. But directionally, the point is there’s a lot of cash sitting on our balance sheet. And so, as we unwind all of that, that would lead me to believe that you’ll see lower inventory level and low home and construction — construction.
Stuart Miller: And by the way, it reminds me of a meeting that we had with one of our investors some years ago, where we mapped out — and when I say some, I’m talking about like 6 or 7 or 8 years ago, where we mapped out exactly the strategy. You remember that, Rick?
Rick Beckwitt: Yes.
Stuart Miller: We mapped out exactly the strategy and said, this is what we’re going to do, all the way down to the reduction in that inventory level, and this is exactly the game plan.
Operator: Our next question is from Matthew Bouley from Barclays. Please go ahead.
