Bob O’Shaughnessy: Yes, that’s an interesting question. I’m not sure we can think like a manufacturing company completely. The risk profiles are different. But having said that, I think there are – based on the strength of the operation, based on the cash flow that we’ve consistently shown despite growth, which historically is not the way this industry has behaved, we believe there is an opportunity for people to think a little bit differently about the equity. In terms of how we manage the leverage on the balance sheet, a lot of that will have to do with our opportunities to invest in the business and what we do on the share repurchases. But even you look at the rating agencies, they’ve been slow, but they’ve been responsive to kind of I think seeing the value in the business model and also the way the debt gets looked at. So, would we use more debt for something? Without question, if it were for the right thing.
Joe Ahlersmeyer: That’s helpful, Bob. Thanks so much. Take care.
Operator: Our next question comes from a line of Michael Rehaut with J.P. Morgan. Please go ahead.
Michael Rehaut: Thanks. Appreciate it. wanted to circle back just on incentives and where we are today and to the extent that there’s the potential for those to decline, how we should think about the impact on 2024. So, when you talk about, I think assuming in 2024, 6.5% of a load rate for incentives, and I believe you said that was similar to the fourth quarter, if you could just remind us where you were in the fourth quarter versus the third and earlier in the year. And to the extent that perhaps incentives ticked down a little bit in the first quarter of 2024, should we be thinking that that would be a 3Q or a 4Q impact? Just trying to get the sense there of the lag.
Ryan Marshall: Yes, Mike, I’ll take the first part of that, and then I’ll have Bob do the last piece. So, we’re up 50 basis points from Q3. We were 6% in Q3, 6.5% in Q4. In terms of what that means for 2024, I think I addressed it on a prior call. We’re going to actively be managing our incentive load, but we’ve shared with you what our assumption is in kind of current form. If there’s an opportunity to peel those back, we’ll do it and we’ll certainly share that with you. In terms of kind of the quarters that it would impact, right now about 50% – somewhere around 50% of our sales are spec. so, those are closing in kind of the following quarter. Spec sales now would either be late Q1 closings or early Q2 closings. If it’s a dirt sale, Q1 closings typically end up being Q3 or early Q4 closing.
So, we factored all of those assumptions into the margin guide that we gave for the year, which is 28% to 28.5%, just to repeat that. And then Bob, I don’t know if you have the incentive load for Q1, Q2. I think that was the only piece I didn’t answer.
Bob O’Shaughnessy: Yes. It was about 6% in each of the first, second, and third quarters, and it was 4.3% in the fourth quarter of last year.
Michael Rehaut: Great. No, that’s helpful. Thank you for that. I guess secondly, I’d love to kind of shift a little bit to the SG&A side. I think you gave guidance for the first quarter, but you’ve been running last couple of years plus or minus around 9%, low 9%. Obviously, we’ve heard a little bit about higher commission rates coming back maybe in a more choppy market at points in the past year or so. Overall solid market, but still we’ve heard a little bit about commissions maybe coming up a little bit. How should we think about SG&A and the potential for further leverage over the next couple of years against the growth algorithm that you talked about? And if commissions, let’s say are stable from here, could we see an 8% at some point or getting closer to an 8% number? Would just love your thoughts on that.
Ryan Marshall: Yes, Mike, we’ve – I think we’ve always been thoughtful in how we spend SG&A dollars. We have historically made some extra investments in the quality of the homes that we build and deliver and the customer experience that we provide for our homeowners. And then we – and we invest incremental dollars in the culture of our workforce. So, we’ve tried to maintain balance within the SG&A structure as well. We’re not trying to run kind of the leanest and the lean – on the lean end, we’re also not trying to overspend. I think we’re trying to be very balanced. In terms of the leverage for 2024 specifically, we’ve kind of given the guide, which will put us kind of in the low nines. And that’s really reflective of kind of what Bob guided too on the average sales price, which we’re expecting to be flat.
And against that, you’ve still got wage inflation for kind of our internal employees running close to 3.5%, 4%. So, there’s some pressure. There’s pressure on the SG&A front that we’re not necessarily getting the benefit of on the ASP increase side. So, in terms of kind of where it goes into the future, time will tell, but we’ve given the best visibility that we can for 2024. Bob, I don’t know if you – anything you’d add on SG&A. Bob keeps us honest, I’ll tell you that. We’re not overspending anywhere, at least not under Bob’s watch.
Michael Rehaut: Great. Thank you.
Operator: Our next question comes from the line of Sam Reid with Wells Fargo. Please go ahead.
Sam Reid: Hey, thanks so much, guys, for taking my question here. Wanted to drill down a little bit on the first-time buyer. You guys have given a lot of good color on pricing. It does sound like price did move lower for this buyer group a bit again during the quarter. Maybe help us unpack the relative split perhaps between higher incentives for this buyer group as you try to make these homes more affordable versus perhaps some of the other affordability levers that you might be pulling, like smaller floor plans, et cetera. Kind of any color here would be appreciated.
Bob O’Shaughnessy: Yes, I would tell you, if you look year-over-year, pricing at 422 to that buyer is down 6%. Year-over-year is down about 1% versus the trailing quarter, so the third quarter of this year. And I would tell you it is largely incentive-related. And so, we’re not – we haven’t in the last three months or the last 12 months, had a radical redesign of the product that we’re offering to people. Communities, when they get entitled, you have product approvals. So, to a degree, you can see people saying, I want the smaller floor plan. I would tell you, that’s not the driver of the price change. It is the incentive load that we’ve introduced. So, it’s that 220 basis points, which for that buyer is about, call it, $8,000. That’s the price decline.
Sam Reid: No, that’s helpful. And maybe one more on pricing here, just from a slightly different vantage point. You guys have given good color in the past on option and lot premiums and the impact on ASP. I want to say it’s been around $100,000 or north of $100,000 across your entire mix throughout 2023. Curious as to where that trended in Q4, and maybe give us a sense as to your outlook for that piece of the price component into 2024.
