Shaun Kelley: Good morning, John. Thanks for taking my question. I just want to go back to the loan loss commentary for a minute and — or the provision commentary. And I’m just kind of trying to follow the — you know, more just the expectation that you guys have embedded here. So, you know, obviously there was a — you know, there was an increase last year, and I think the way you packaged it in the answer to the former question was that the expectation was that would normalize a little bit after we kind of got through some issues last year with the consumer. But as we just kind of look at it on a percentage basis, it looks like it’s actually continuing to increase sequentially. So my question is sort of what level of normalization were you kind of embedding or are you embedding today? And, you know, what — if we were to stay at the current run rate and just sort of current behavior, you know, what would that imply or how big of an impact would that have?
Jason Marino: Yes, Shaun. So to your first question, what we — when we looked forward as of Q3 last year and looked at the environment that we were in, we knew it was going to take some time for those delinquencies and then ultimately, the defaults to kind of run through the system. So we’re seeing that today and it’s, you know, continuing as we thought. So I think when we provided the guidance here in February, we indicated that the loan loss was going to be higher year-over-year in Q1. And that’s what we’re seeing. So really, as we look forward in terms of estimating any kind of future delinquencies and defaults, it’s hard to give you an estimate as to what the impact could be. As John mentioned, and as I mentioned on the call too, we do hope — we do need those delinquencies to improve here. And that’s what we’ve been seeing over kind of the end of the first quarter and here into April, so.
John Geller: So, Shaun, the only other thing I’d add there, I think, in terms of a more normalized run rate, we did talk about — because the way the models work on the defaults, right, if you have higher defaults, that goes into your static pools, and therefore, you’re using that to predict the future. So, you know, we talked about our run rate loan loss for this year and going forward could be 100 basis points, 150 basis points higher, right, in terms of higher, more normalized loan loss. So that does get kind of embedded into the future in terms of new loans. So that — you know, that’s embedded in our overall development margin. And what we’ve talked about is that we are going to need to continue to provide for new loans at a slightly higher rate than we’ve done historically because of the higher defaults we’ve experienced.
Shaun Kelley: So, John, just to recite that back to you, then sort of 100 basis points, 150 basis points off of, let’s call it a normalized level would — you know, would be what’s kind of embedded in the outlook as you see it today. We’re obviously a little bit above that percentage. I think if we look at it year-on-year, it’s like closer to 200 basis points. Is that — am I kind of in the ballpark of how to think about it?
Jason Marino: Yes, that’s right. And remember, the first quarter of last year was before we started seeing some of this increased delinquency activity. So Q1, last year was lower than the rest of the year. So that’s why the first quarter looked, year-over-year, worse than kind of the guidance for the full year.
Shaun Kelley: Yes. Okay, I follow that, Jason. Thank you. And then my follow-up would be just sort of the puts and takes between development and rental margins, as you outlined it. So if I caught it correctly, I mean I thought coming into the year that with rental, the issue was going to be that you were going to have higher HOA fees and then that was going to be a bit of a headwind on the cost side because you were having to pay, you know, to support some of that inventory that you hadn’t sold yet. Perhaps I misunderstood that, but, you know, where does that kind of net out today? Because obviously, you were able to utilize some of this rental pool and move some of those dollars between. But on an aggregate basis for the year, including Q1 now, how do you think about that rental profit? And then I think development, you just said a couple hundred basis points for the year below last year. Is that kind of the right ballpark for those two line items? Thanks.
John Geller: Sure. Yes. On the development margin side, yes, for the full year, we expect, you know, that the development margin, and we talked about this in our original kind of guidance for the year, to be down a couple hundred basis points year-over-year. You know, some of that is, you know, the higher loan loss reserves, right? That’s a deduct from revenue and impacts your margin. And some higher marketing and sales costs. Yes, on the preview packages, as we do more preview packages and allocate the rental income, you are charging — because of the higher unsold maintenance fees and cost of that inventory, you are charging over to marketing and sales a slightly higher cost. But there’s also a lot more keys getting used in the previews.
So that was the $6 million or so I mentioned earlier, which is just a bit of geography, right, that’s improving the rental profits. It’s an impact on your development margin a little bit. Yes, for the full year for rentals, we’re feeling better just given as, you know, as the year is shaping up. As I’ve talked about, our occupancy was up, you know, call it about 2.5%, 3% year-over-year. And last year was a good first quarter. So teams doing a great job getting rentals there. And, you know, as we’ve also talked about, when you think about the cost of our rentals overall, you know, about 85% is a bit fixed coming into the year. So for us to, you know, really drive better profitability, and that’s what we did in the first quarter, we got occupancies up, right, and we were able to keep, you know, the average rate, you know, fairly flat year-over-year.
So our setup for the year is looking better. You know, still a bit early days, but we’re hopeful that, you know, maybe rentals, you know, could be where we were at last year or maybe a little bit better. So we’ll see how the year goes, but we got off to a good start here in the first quarter.
