Jeff Mezger: We are not assuming they’re going to fall, John. So if rates were to hold where they are, we would probably be around the midpoint. If rates go up, you may tilt down to the low point. We also have some communities opening this quarter and kind of when they open — if we hit our opening dates, it helps orders and if they miss opening day, that will hurt orders. So, we’ve got that variable as well. But what we were trying to guide is really, it’s — we view it right now as a pretty normal environment, and we expect normal absorption rates and part of our balancing price and pace we are not going to let them run above four. If a community is selling well, we rather take the margin and hold it down around four as opposed to letting everything run right now.
Operator: Thank you. And the next question comes from the line of Michael Rehaut with J.P. Morgan. Please proceed with your question.
Michael Rehaut: Hi, thanks for taking my question. Good afternoon, everybody. I wanted to focus a little bit on the balance in terms of fiscal ’24, how you’re thinking about capital deployment? You laid out an aggressive community count growth target for the end of the year, and how you think about either deploying capital or capital allocation as it relates to funding your organic needs, which obviously take priority, generally speaking compared to share repurchase activity. This year, you, I think you have done $250 million I believe share repurchases in the first three quarters. Does your — to capital — anticipated capital needs for next year, would that kind of affect or I guess lower, let’s say, all else equal, the potential for a similar amount of share repurchase? Should we look for something perhaps more moderate? Just any kind of directional thoughts there would be helpful.
Jeff Kaminski: Sure. Yeah, I think, as we’ve indicated past few quarters, we see there’s is stock buyback strategy is a very powerful tool right now particularly given our leverage, low leverage ratio and very strong cash generation in the business. We are investing in land, as you mentioned, and we do want to stay focused on that and on growing the business, but we do believe it’s an and equation, not an or equation at this point. And for many years, we had a dual strategy of de-levering frankly and taking our debt levels down while reinvesting in the business. And given our current leverage ratio, what we foresee for the future and our targets, that debt reduction need is no longer there. So we are pivoting more towards share repurchases combined with reinvestment in the business towards growth at favorable returns.
So, I listen, I don’t know, how many factors impacting our share buyback strategy and the decisions we make on a quarter-to-quarter basis. So there are lot of things that go into it, but certainly, all things being equal, we’d like to continue down that path. We think it’s been very positive for the company and very positive for our shareholders and we’d like to see that continue, and if things pan out as expected for next year, we do plan to continue it.
Michael Rehaut: Okay. I appreciate that, Jeff. I guess, I was just wondering about maybe the rate of repurchase potentially moderating a little bit, not necessarily either or, but I guess we’ll have to see how next year plays out.
Jeff Kaminski: Yeah. I view it right now, Mike, that we had a very comfortable level of repurchase. We have still been growing cash balances and all the ratios are staying very well aligned. So, we are not even close to that point and like I said, we’ll see how it plays out, but that’s the overall strategy. Hopefully, that’s helpful for you.
Michael Rehaut: Yeah, that’s great. I guess secondly, and I’m sorry if I missed this earlier, I think Rob laid out that during the quarter, you raised price in 65% of your communities, lowered in 10%, I’m curious on that, [if there’s an ability] (ph), maybe drill down a little further. I’m curious on the 65%, what was the rough degree of magnitude of those price increases? And also, as I think someone else kind of asked earlier and I apologize if I didn’t get to hear the answer, but how pricing kind of progressed in August and September as seasonality returned as rates kind of a moved little bit higher, if perhaps those price increase trends kind of moderated or maybe just completely subsided. Rob, any color there as well?
Jeff Mezger: Rob, you want to go through it again?
Rob McGibney: Sure. So I guess just to take your — the last part first. I think we touched on that before, but we really didn’t see it change dramatically as far as the increases from week to week or from month to month in the quarter. Despite rates moving up in August, we still had a good number of communities, we were selling faster than our planned pace. So in those communities, we continue to lift price. As far as the magnitude of the increases on the 65% who were increased across the company, that was about $9,000 on average.
Operator: Thank you. And our next question comes from the line of Truman Patterson with Wolfe Research. Please proceed with your question.
Truman Patterson: Hey, good afternoon, everyone. Thanks for taking my questions. Clearly, you all have been discussing increasing the investment spend going into the back part of the year. Are you actually finding many or any kind of quick turn, finished lot deals? And whether this is contemplated in the year-end 2024 community count growth of 15%? And then, big picture, some in the industry have been moving towards an option heavier land strategy. I’m just — would love to get your thoughts on potentially deploying more land banking further down, moving further into option land, et cetera.
Jeff Mezger: Truman, we are seeing some finished lot deals and the land market appears to be freeing up a little bit. So that’s encouraging. None of those would be included in our guide for next year. When we are doing our planning, until it’s land committee approved, nothing gets counted in anything. It’s out there, but it’s not — it’s not part of community count. So if we are able to snag some, it may come out of ’24 with more, who knows, we’ll see. As to land bank, I can’t speak for any of the other builders. Our view has been what the size of the communities we are buying, we don’t want to do the land bank, we don’t need to and hate to give the margin away, because it has diluted the margin because the land bankers taking some of the margins, and it doesn’t really mitigate risk.
So you’re not de-risking, you’re just moving money around and we would rather focus on phasing our developments having as few finished lots hanging around us as possible, and just real time. We’ve got a known sales pace, we know where we are headed. We can pull the trigger on some more development and they — what happened is costs have gone up, the development side of land is actually now higher than the land site itself. So you can control your development and just we think right now, it’s the best approach for us because we can keep lifting our margin a bit along the way.
Truman Patterson: Okay. Perfect. And then the SG&A moving a little bit higher. I think a lot of that’s lack of leverage, right, just from the closings differential? But, one of your peers mentioned that they were seeing increased third-party broker commissions. I’m just hoping you could help us think through that. Where do, kind of, broker commission stand as a percentage of closings today versus history? And whether or not you all expect them to kind of gradually normalize because they were at pretty depressed levels in 2021 and in the first part of ’22?
