So, I think we’re now very close to a point where we’re feeling confident in both the timelines and the budgets on land development, it makes a lot of sense for us to leverage that tool where the capacity in the margin on the deal allows for it.
Carl Reichardt: Thank you. That’s a great answer. I appreciate that. And then you purchased $45 million, I think, this quarter repurchase stock, you’ve been sort of up and down on that over time. With the model now shifting towards one where you’re generating cash on a more consistent basis. And my guess is you’d expect to continue to do that more so than the more volatile cash generation periods in the past. Is your expectation that share repurchases are not going to be a more permanent part of the capital reinvestment plan for Meritage? Thanks.
Phillippe Lord: Yes, it is. I mean we’ve always been very programmatic about not diluting our shareholders. Recently, we’ve been even more programmatic about taking more shares out of the system than we put in. I think it’s a great way to return shareholder value as long as it balances out with our ability to grow our business and generate revenue growth on the top line through market share and community count growth in orders. So it’s a key part of our strategy for returning capital back to our shareholders. And especially when our stock price is trading below book, — it just seems like the responsible thing to do, when we buy our land at below book, when we know our land is worth above book. So we continue to do that.
Carl Reichardt: Thank you, Phillippe.
Operator: Our next question comes from Susan Maklari with Goldman Sachs. Please state your question.
Susan Maklari: Thank you. Good morning everyone. Thanks for taking my questions. I think that during the commentary, you talked a bit about the construction times continuing to improve during the quarter. Can you talk about the key constraints perhaps that are still out there, that are kind of preventing that from going back to where we were before the pandemic. And any thoughts on the cadence at which that can continue to come down?
Phillippe Lord: We’re really close to getting back to where we were pre-pandemic. We probably have a couple more weeks of opportunity. I think the constraints continue to be the same ones, mostly on the front-end of the business, putting down our foundations, framing our house and those types of things. But especially with all the increase in starts that are happening right now and all the builders starting way more homes. I think there’s only so much more we’re going to get in the near-term. But we’re really pleased with what we’ve accomplished. We can turn — again, we can turn our business three times a year with our current cycle times. We’ll try to figure out if we can get those extra two weeks back to pre-pandemic levels. We may never get back there. We’ll see. But that’s what we’re seeing in the market right now.
Hilla Sferruzza: I think, Philippe mentioned in response to a prior question that labor is stable. It’s very true from a cost perspective, but the capacity of labor has maybe increased a little bit. So we’re definitely seeing the same improvements in the marketplace with our peers.
Phillippe Lord: Yes.
Susan Maklari: Okay. That’s helpful color. And then you mentioned also that you expect SG&A I think, to move to the high single-digit range kind of overtime. But for the quarter, the SG&A came in a bit higher than where we were. Any thoughts on how we should be thinking about that just seasonally as we end the year and then overtime, just the sort of keys to getting to that target that you talked about?
Hilla Sferruzza: So I think it’s the right – high single-digits is the right number over time, although the next couple of quarters with the commitment that we’ve made to increase our community count and the land that we have under development, you’re going to see some incremental overhead coming through, as we look to work through that pipeline. Once the revenue from those communities starts coming through, you’re going to see that rebalance. But right now, we’re once again in a high-growth period on the acquisition side, and we’re just a couple of quarter lag until those communities start to generate cash flows.
Susan Maklari: Okay. All right. Thank you for that. Good luck with everything.
Operator: Our next question comes from Joe Ahlersmeyer with Deutsche Bank. Please state your question.
Joe Ahlersmeyer: Hey, good morning, everybody. Thanks for the questions.
Phillippe Lord: Good morning.
Joe Ahlersmeyer: I wanted to talk about the community count again. Given the outlook for next year depends on that, largely – could we just talk about how your visibility to that path to 300 and beyond may be different from how it was in the past, even kind of before COVID when you talked about 300 and then when you achieve 300 more recently. Because I’m just thinking about if you are looking at communities where you’re targeting a specific absorption and you’re using incentives to get people up to that. There’s probably less of a risk of sell-out than maybe before. And then as you’ve increased the land spend here and you’re better positioned you might feel better about what you’re able to bring online on the growth side of bringing community counts online. So just curious if you could talk through the puts and takes there.
Phillippe Lord: Yes, I think you answered it in your question, but the last time when we kind of said we were going to be 300 communities, the assumption we were going to do three or four net sales per month. And now our assumption is we’re going to do four. So we understand sort of the demand and what the closeout scenarios are going to look like, and we’ve invested in the land appropriately to build off of that assumption. So I think with that, we have a lot better visibility that under a four a month type of environment we can get to that growth for next year. Obviously, we don’t ever predict community count growth 12 months 16 months out if we don’t have the land under development, and we’re not working on those communities.
So I think everything is being worked on and actively developed today. So we have that visibility. Even though it hasn’t gotten any easier to open up communities, municipal delays, land development is still moving very, very slowly. I think we’re getting better at understanding how long it’s going to take and be able to predict our business. And we’ve built in those longer cycles to open up communities into our forecast. So with those two components, I think we feel pretty good about what we’re going to do next year.
Joe Ahlersmeyer: That’s great. Appreciate that. And then just thinking about the mix of either geographic mix, but primarily on the buyer segment side, what that might look like when you do get to $300 million, is it going to be less on 1MU than you’re even at today. And then some of your peers have called out when they have sort of the shifting mix a year ahead, kind of what the ASP mix headwind could look like, assuming just all other price is stable, how should we think about potential mix headwinds on ASP next year?
Phillippe Lord: Yeah. We’re not prepared to give out guidance into 2024, yet there’s a lot of still moving parts and pieces as it relates to feeling comfortable with that. But I think our mix is kind of what it is. I think we’re about 80% to 85% entry level and 20% to 15% 1MU. And frankly, those are migrating closer and closer because we just built a really nice entry-level home or really value-oriented 1MU Home. So that’s kind of going to be our mix, but we’re not comfortable of guiding out ASP at this point because there’s just too many things still moving around.
Joe Ahlersmeyer: Understood. Thanks a lot. Good luck.
Operator: Our next question comes from Jay McCanless with Wedbush Securities. Please state your question.
Jay McCanless: Okay. Thanks. So the first question I had, you talked about higher land costs starting to work through, is that going to be more second half 2024 given when you think the community count is going to ramp? Or is that something we should be thinking about for gross margin for all of 2024?
Hilla Sferruzza: Yeah. It’s kind of sequential. I would say it’s already started. Philippe mentioned that part of our composition of our current gross margin is higher land costs already in Q3 as communities change over it’s going to become a more material portion until our entire composition of our land portfolio is going to be that higher land development basis. So I think if you’re modeling, I would say, slow growth and land basis from now until the end of 2024 is probably a safe assumption.
Jay McCanless: Okay. And then incentives, could you talk about what those were in terms of either dollars or percentage of average home price for 3Q 2023? And what are you seeing now in what — in the orders you’re writing?
