Reuben Garner: Jeff, maybe to start, operating expenses in the third quarter came in, I think, lower than what you guys were looking for and it looks like there is a step-up in dollars in the next revenue. Can you kind of walk through maybe what was different for you in the third quarter? And is there any seasonality of spending or anything else that would lead to the step up in the next quarter?
Jeff Stutz: Yes. Happy to, Reuben. You’re spot on. We €“ and I would tell you that given order trends, just in general terms, we are really taking every measure to manage costs in line with lower demand levels. So that’s just the general overview comment. I would tell you that one of the big factors in the third quarter, and this speaks to our guide for Q4 as well as the impact of declining volumes around incentive compensation as an example. So we did see some of those accruals come down in the third quarter. So you won’t get a repeat of that in Q4, if that makes sense. So that’s one of the factors that’s causing some lumpiness there. But I would also tell you that we historically €“ and I think you know this from past.
We tend to see some seasonal uptick between Q3 and Q4 in spend rates just as we ready ourselves for the €“ for new product releases and so forth that tend to be seasonal as we move into the early part of summer. So I think all of those factors combined caused that. But look, I would tell you that those programs work as designed. They are variable in nature. And when you see volume levels drop, you see those come down. And so I think it’s no surprise, but it is a factor that influenced the comparison to the guide.
Reuben Garner: Okay. And then same kind of line of questioning on the gross margin side, it looks like with your guidance for the next quarter, you’re still kind of on the path that you laid out at the end of last year, and that’s what I think is despite less volume than you probably would have otherwise thought and then maybe less mix of the higher-margin retail. Is that right? And I €“ and if so, can you kind of walk through what’s kind of improved sequentially? Is it simply price flowing through and finally, some deflation or inflationary release?
Jeff Stutz: Yes. I think you’re hitting on a couple of the key points, Reuben. And by the way, I appreciate the observation because we €“ this is an area that we wanted to make sure we emphasize and that we feel really good about. I mean the margin expansion across the business is every bit as strong as we had expected it to be. And I think it’s encouraging to see it even as demand levels have fallen. And that’s been a message that we’ve consistently been sending that we think we can achieve that. So we feel really good about that. I think our guide, if you look just sequentially from Q3, a couple of things that inform that, pricing is one of them. And you mentioned that that’s somewhere on the order of 30 basis points. We’re going to get a little bit of lift from commodities.
So we are seeing a couple of areas where we’re starting to see market prices move around even some reinflation look at market price of steel, for example, that’s been ticking up of late, but we still believe that as a basket commodities will be favorable to us sequentially. The other thing that I’d point out is there is a mix factor in there that’s going to help, but I want to give a shout-out to the retail side of the business. We’ve had a couple of quarters here where we’ve had some one-offs that we’ve talked to about things like inventory storage costs and so forth that have pressured margins. We expect those to meaningfully improve as we move into Q4. So that’s another driver of that expected increase in gross margin.
