Peter Clifford: Yeah, Matt. This is Peter. We went back and actually updated here at the end of the quarter the preview that we gave you guys in the Investor Day and went back to 2009 through 2023, and it kind of said the same thing, that ultimately we’ve achieved about 50 basis points of kind of margin expansion each and every year throughout that period. That’s what we would kind of expect as we lean forward. Levers are still the same, right. We’ve got the opportunity to move to cheaper grades of recycled, which is primarily cap composite opportunity, increased recycled content, which is obviously the PVC Deck and Trim. And as well, across all three product categories, we have the opportunity to reduce our cost to convert those recycled materials down. So, we feel really good, again, about, for us, recycling is more iteration than innovation.
Jesse Singh: And sorry. I think, just to put a minor point on that, relative to what we said on the Investor Day, you should think that we’ve added another 100 basis points of benefit, 50 a year, as Pete pointed out. And as we look at our — our margin opportunity, as we demonstrated in our last quarter, we certainly have a number of levers that we can pull, and certainly recycling is one of them. But we’ll continue to drive the other elements of productivity.
Matthew Bouley: Got it. Well, thanks, Jesse. Thanks, Pete. Good luck, guys.
Operator: Your next question comes from the line of Philip Ng from Jefferies. Please go ahead.
Phil Ng: Hey, guys. Congrats on a strong quarter to finish the year. Pete, if I heard you correctly, your guidance for 2024, you’re assuming 2% inventory lap, and the rest is Commercial initiative. So, that seems pretty conservative. Your sellout, it sounds like fourth quarter is in the mid-to-high single digits. So, implicitly in your full year sales guide, what are you assuming for sellout? And it sounds like it’s assuming some moderation. Is that just a function of comps with some of the wins that you had on new products this year — this past year?
Jesse Singh: Yeah. I — what I would say against the planning assumption is, we’re assuming in our planning assumption that there is some potential for market — for the market to be a bit slower than what we’re seeing now. And given the data and the macroeconomic environment, we think at this stage, it’s appropriate to plan for a potential slowdown in R&R to become more negative. So the way you should just look at all of this is, we’re assuming a modestly less constructive market next year, and that’s really how the numbers work.
Phil Ng: Okay. On that note, Jesse, you’ve kind of managed the channel conservatively, right? I think the color you’ve given us all year was, when you’ve done your survey, channels generally were a more upbeat. So, I’m curious, when you’ve done your survey, what is your channel partner kind of expecting, anticipating for growth in 2024? How are they kind of managing the early buy? Last year they were a little more conservative and they kind of bought more through the year. Like, how are they kind of communicating their outlook for next year or for calendar 2024?
Jesse Singh: Yes. Obviously, we’re in the midst of conversations right now, but I think if you were to aggregate a wide variety of channel partners, I think what they would tell you is, as they look out next year, they see a flattish year with the opportunity if we execute together in our categories, to outgrow the flattish year in our product. So, that’s the macro view. Now against that, we’re working with them to make sure that, they’re being well serviced and that they’re in a really good position. So, I would think of this as a pretty normal year relative to how folks are going to look at early buy. And if last year were conservative, I think we’re sitting well on top of that. I’m not saying they’re going to be more aggressive.
I’m not saying they’re going to be more conservative. I think it’ll be a pretty consistent pattern, and it’s really a matter of, when they choose to buy and at what level. But I think, in general, the feedback from our channel is one of flat with the potential of positive in aggregate and a recognition that we have a unique ability to outgrow that.
Phil Ng: Okay. Appreciate the color. Thanks a lot.
Operator: Your next question comes from the line of Michael Rehaut from J.P. Morgan. Please go ahead.
Michael Rehaut: Thanks. Good afternoon, everyone. Thanks for taking my question. Yes. I just wanted to first, circle back a little bit to the first quarter and if I heard right, you are expecting, a little bit of inventory conservatism in the channel against a sell-through up mid-to-high single digits on the Residential side. So, is that something that we should be expecting? I guess in effect that to shift into the second quarter and, it sounds like you’re kind of looking for sell-through to — for the year to be, maybe a little bit more moderate as the year progresses relative to the first quarter. Is that — I just want to make sure we’re understanding that correctly and you might have a better, gross number in the second quarter, is that the right way to think about the cadence in the first half?
Jesse Singh: I would say, Mike, it’s probably too early to start to guide the second quarter. I think our intent has been, in particular over the last, six to 12 months, to make sure that we’re doing a really good job of service so that our channel can operate with an appropriate and if necessary, conservative inventory level. We’re lapping that now as we had that at the end of the first quarter in ’22. We expect channel to be in a good but, flattish situation with last year and still able to support growth. And then as we move through the quarters, we’ll see how volume progresses and, relative to sell-through assumptions, we’ve got pretty good visibility obviously in the quarter that we sit and we’ve got good, directional visibility as we look at January and February just given backlogs.
And so beyond that, everything is just a planning assumption. What we’re trying to do is, gauge the market and, conservatively plan against what the market could do. So I think we’re not in the prediction game right now of what’s going to happen in March, April, May, June of next year. What we’re just laying out is an appropriate planning assumption that we feel really good about our ability to deliver both on top and in particular our EBITDA against.
Michael Rehaut: Okay. I appreciate that, Jesse. I guess secondly, you kind of highlighted for your fiscal full year planning assumptions, continued investment in marketing and brand initiatives from a strong gross margin performance. I’m just thinking about, longer-term and I’m wondering about, if the investment this year is something that, you would consider a little bit above average as you continue to build out, the platform. You obviously over the last couple of years, you’ve made a couple of different acquisitions, Pergolas for example, and, the overall category continues to gain share as well. Would love to understand, those investments and, if you kind of think over the next two or three years, you might be able to get better leverage out of the SG&A, relative, and I think ultimately how to think about incremental EBITDA margins over time.
Jesse Singh: Yes. I would put it in a real simple way. I think this year we have an opportunity, if we have the room, to continue to invest in the business. So, you’re probably not — our current assumption is that you’re not going to see leverage on SG&A. If anything, it might, contribute to, 10, 20, 30 basis points of negative leverage. But I think as you move out beyond that, we’ve made pretty substantial investments in our sales and marketing organization. We’ve seen a benefit from it. You should expect that it’s really our choice, but I think as we move through ’24 into ’25, we should start being in a position to get leverage off that. We certainly could get leverage this year if we chose to. It’s really a lever that, we’ll decide how to pull, but right now that lever is more in an investment.
