Andrew Carter: Thanks. Also, just to – and then I guess just to get to the structural gross margin, I know that last quarter it was 35.1. you felt that was kind of normalized for pricing benefits. This quarter, you added $230 million subsequent to the quarter of annual M&A. Is that a higher margin kind of? So, what’s – I guess I’m getting at is, what is kind of the structural gross margin for this business, all things considered, all prices are matching one another, et cetera, that we should be thinking about going forward. Thanks.
Doug Black: We’ve said kind of this is the base year for gross margin. So, if you went back to the beginning of the year, our guidance was like 34.5%. Things went pretty strongly in the first half of the year. So, we kind of started going back up to the more – the high end of that range. We’re probably going to be more at the low end of the range as we reset this year.
John Guthrie: Yes, the range being 34.5 to 35.
Andrew Carter: Okay, got it. And just last question, you said minus one SG&A, kind of core SG&A. How much of that was kind of driven by freight?
John Guthrie: Most of our freight is in cost of goods sold. So, it’s primarily there. We do have some freight costs for the kind of blast light for our own trucks, but that’s not really what’s driving the primary. The primary thing, as Doug alluded to, and the actions we’ve taken is really on staffing to more match, and our labor costs to more match the sales volume.
Andrew Carter: Thanks. I’ll pass it on.
Operator: Thank you. Our next questions come from the line of Matthew Bouley with Barclays. Please proceed with your questions.
Matthew Bouley: Hey, good morning. Thanks for taking the questions. Just back on the comment around driving higher margins in 2024, if you do still have some deflation flowing into the first half of 2024, and maybe given some of those comments you made earlier, Doug, on the end markets next year, I mean, the question is, would you need higher volumes in 2024 in order to grow margins in 2024? Or maybe said another way, what would happen to margins if volumes are say flatter in 2024? Thank you.
Doug Black: Yes, I think in terms of gross margin, it wouldn’t have a significant impact. Obviously, an SG&A leverage is where you – from an EBITDA margin standpoint, positive volume is better than flat. And so, we’re focused on both. But in terms of gross margin, like I said, with the deflation kind of abating in the first half at say a slightly lower level than we’ve seen in the second half of this year, should get a bit of a tailwind there. And then our margin improvement initiatives, we should see some benefit from. And those aren’t highly – obviously, there’s extremes, but those aren’t – those wouldn’t be impacted significantly between a couple of percent volume.
Matthew Bouley: Got it. Okay. That’s helpful there, Doug. Thank you for that. And then secondly, just on the repair and upgrade end market, I’m curious, how do you think about the leverage of your business to existing home turnover, which clearly the move in interest rate seems like there’s – having a bit more of an outsized impact to that part of the housing market. How do you guys think about your exposure there and what that could mean to repair and upgrade? Thank you.
Doug Black: Yes, well, I’ll start with the long-term trend is there. Outdoor living people are – invest in their backyards. They enjoy their outdoor living space spaces. And as more people are working from home, that’s driving growth there. So, that’s a solid trend. It’s interesting that housing turnover had normally been a driver of remodel. A new person moves in, they want to redo the backyard or – and that would be business for us. You’ve got a lot of people that are sitting on low interest rates that aren’t selling their homes. So, home turnover is lower. However, now you’ve got the opposite effect that since I’m going to stay here, I’m going to do the project that I was putting off because I was going to move. So, it’s interesting how those two – I’m not sure if they completely balance, but there are certainly puts and takes there.
Overall, we think the remodel market’s going to be solid. Long term, the remodel market is going to be a strong growth driver for us going forward.
Matthew Bouley: Yep. No, that’s fair. Thank you for that. And just quickly on the SG&A, was there anything in that Q3 number in terms of incentive comp relative to Q2? Any kind of true ups of accruals? Any kind of little details in there that sort of help the SG&A number? Thank you.
John Guthrie: I’ll say, incentive comp is certainly less this year, and will be – our commissions are based on sales growth. So, they’re going to be less this year, year-over-year than they were last year.
Matthew Bouley: All right, thanks, John. Thanks, Doug. Good luck, guys.
Operator: Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Doug Black for any closing comments.
Doug Black: Okay. Thank you all for joining us today. We certainly appreciate your interest in SiteOne and look forward to speaking to you again after the fourth quarter. Would like to take one more opportunity to thank our terrific associates for all they do to help build SiteOne, our suppliers, and our customers. Have a great day.
Operator: Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
