Russ Tiejema: Jay it’s Russ. I would just add this perspective also. As we discussed, on the Investor Day when we laid out the long-term deployment of the cash flow that we expected the business to generate, it continues to focus on three layers of capital deployment. Obviously, first and foremost is capital investment organically into the business. Second, M&A, and third, returns to shareholders. And we acknowledge at that time that there’s a lot of firepower that we view over the next four years, given the highly cash generative nature of the business that we would be able to simultaneously fund all three layers of that strategy. And that is our intent today and will continue to be our intent. While we didn’t necessarily repurchase a lot of shares during the quarter, I’ll just get in front of that one right now and remind everyone that just like individual share executions, company management is held to the standard of only repurchasing shares during an open window, or subject to a 10b5-1 trading plan.
And even during a window when you want to execute a 10b5-1 plan, if there is any information that council thinks is potentially material or non-public information, that does restrict your ability to be repurchasing shares. And given the degree of corporate development work underway at the business, including Fleetwood, our assessment of our contextual, et cetera that did limit us somewhat ensure repurchase execution over the quarter. That doesn’t mean that that is not a continued priority for us going forward. And look at the cash generation power of the business. We commented – I commented during my prepared remarks that we’re on track to meet or exceed the upper bound of our free cash flow guide this year, at that upper bound, that would imply cash generation in access of $11 a share this year.
That’s a low-teens free cash flow yield. So, I wouldn’t want people to think that we’re in any way diverging from our capital deployment plan because there is significant cash generation power in the business that we will deploy across all three layers of the strategy just as we discussed at Investor Day.
Jay McCanless: Okay. Great. Thanks for taking my questions.
Howard Heckes: Thanks, Jay.
Operator: Thank you. The next question is coming from Ruben Garner of Benchmark Company. Please go ahead.
Ruben Garner : Thank you. Good morning, everybody.
Howard Heckes: Good morning, Ruben.
Russ Tiejema: Good morning, Ruben.
Ruben Garner : So, you mentioned, I think you used the term competitiveness continuing in the fourth quarter. Can you talk about maybe which categories within doors? Is it exterior? Is it is it the more customized doors? Is the commoditized ones? Or is it certain channels? Where are you seeing the most sort of competitive pressure from a pricing standpoint?
Howard Heckes: Yeah, Ruben. This is Howard. Yeah, it’s a cyclical market. Housing is cyclical and in down cycles, capacity is available. That’s just natural. And then you have an option, all companies sort of have an option to either try to pick up volume with special pricing or to maintain margins. And some companies may need to pick up volume to keep their factories running, for example. But obviously, as a larger market leader, we find ourselves in a bit of a more unique position. And our belief is that, more better off, our industry is better off, our shareholders are better off in the long run if we manage the business price cost and focused on maintaining margins. So that requires some short-term sacrifice and trade-offs in terms of volume.
But we continue to believe it positions us to grow. When the demand strengthens, which we know it’s going to. So it’s more in this commoditized area, obviously, anything that’s differentiated and really fundamental to our strategy. As we think about our strategy, it’s really about decommoditizing this important category, which has already taken place in a lot of other building product categories. And we think now is the time for doors.
Ruben Garner : Okay. That’s helpful. And then, as I think about the strong free cash flow this year, maybe help me with puts or takes going into next year. Are there still working capital opportunities? Anything else to think about, would you lean into capital investments even in a uncertain environment in ‘24 just given your positive outlook longer term?
Russ Tiejema: Yeah. Ruben, it’s Russ. I’ll take that one. The working capital initiatives that we’ve launched this year will continue to have some power in 2024. This is not kind of one and done initiative. And the initiatives are balanced across all areas. We’ve harmonized payment terms to maximize our cost receivable realization. We’ve also carbonized and linked in our payment terms to maximize AP. And we’re looking at where we properly deploy inventory across the network to bring them into our levels down overall. That’s all had a meaningful impact on the record operating cash flow that you saw this year. But we see some of those initiatives, which were implemented in many cases, by the way until middle of this year, is continuing to have tailwind into next year.
So, whereas, as I commented on the call, we’ve brought our core working capital down from 24% last year at this time to about 20% now. We see a pathway to bring it down further to the high-teens in 2024. So, again, we’ll comment on that more when we discuss our guidance for 2024. And how we see free cash flow trending for next year when we give our guide at the February call.
Ruben Garner : Great. Thanks. Congrats on the strong execution in a tough environment guys. And good luck to the remainder of the year.
Howard Heckes: Appreciate it, Ruben. Thank you.
Operator: Thank you. At this time, I’d like to turn the floor back over to Mr. Heckes for closing comments.
Howard Heckes: Thank you, Donna, and thanks again for everybody for joining us today. We appreciate your interest and continued support. And this concludes our call. Operator, will you please provide the replay instructions?
Operator: Thank you for joining Masonit’s third quarter 2023 earnings conference call. This conference call has been recorded. The replay may be accessed until November 22nd. To access the replay, please dial 877-660-6853 in the US or 201-612-7415 outside of the US, enter conference ID number 13741587. Thank you. Ladies and gentlemen, you may enjoy the rest of your day.
