Peter Clifford: Yes, Mike. The view on the commodities front, from an expectation perspective of kind of what’s embedded in the planning assumptions is looked at, input costs have stabilized and are expected to remain kind of relatively flat all year with a few modest increases in the back half of the year. So, it’s kind of steady-state is sort of the view from sort of the industry publications’ CDI.
Mike Dahl: Okay. So, the $35 million total, you think, fully encompasses where we’re at today?
Peter Clifford: It does. And if you remember, commodities dropped very sharply right after we started the year. So, really they dropped fast and then they stabilized. And we’ve been kind of riding sideways here for the last couple of six to eight months.
Mike Dahl: Okay. My second question, okay, maybe I misinterpreted this when the initial release came out, but I think when the Vycom divestiture came out, the idea was to roll up all of the reporting into the Residential segment. Now you’re putting corporate expenses into Resi, but keeping Scranton Products separate in Commercial. Anything to read into that in terms of whether your intent has changed on what to do with the remaining Scranton Products business?
Peter Clifford: Yes. I mean, look, I think it was obviously a way for us to make it easier for folks to compare us to our peers within the building product space that most folks that follow us are most interested in Residential. So, it seemed logical to put those two pieces together.
Mike Dahl: Got it. Okay. Thanks.
Operator: Your next question comes from the line of Rafe Jadrosich from Bank of America. Please go ahead.
Rafe Jadrosich: Great. Hi, guys. Thanks for taking my questions. First, I wanted to just ask, can you talk about the sell-out trends in Decking versus the Exterior categories that you saw last quarter? And then what are you assuming in your outlook for each of them?
Jesse Singh: Yes, at a high level, both of them were — were roughly similar and positive. And I think as we look out to next year, we’re not parsing out, any specific business. As we’ve highlighted, we’ve got conversion opportunity and new products on the Deck, Rail, and Accessory side. And we’ve also got a number of new products that will help us drive wood conversion on the Exterior side. So, we’ve seen nice sell-through growth in both of them.
Rafe Jadrosich: Got it. And then just following up on some of the earlier comments on the early buy, you mentioned that normally the majority of the early buy is in the second quarter, but some of it has historically fell in the fiscal first quarter. But this year, effectively, it’s all going to ship in the second quarter. What’s — is there a way you can quantify the rough impact of that assumption? And then what portion of your sales in a typical year would come in, in the early buy?
Peter Clifford: Yes, I mean, I’ll take the first part of the question on sort of, the catalyst for most of it moving to the second quarter now is, look, it used to happen in the first quarter because capacity wasn’t capable of supplying as much product as what was needed in the second quarter. Obviously, with the capacity expansions of the last two years, that’s really, again, kind of the catalyst for why we really don’t feel like there’s a need to have any of the shipments in our fiscal 1Q and that virtually all of it will be in the second quarter.
Jesse Singh: And then relative to the percentage, we haven’t talked about that. I think the most important part of this winter negotiation is that we position ourselves well with our customers to drive growth throughout the year. So for us, the most valuable part of this is the partnership discussion of how we’re going to work together to grow our mutual businesses with our channel partners. And in that respect, the quarter and the discussions are important to set up the year. What it does do is, it gives us pretty good visibility on revenue within the quarter. And so, as we’ve talked about in the past, and our competitors have too, really the October quarter and the January quarter are really quarters that end one year and begin another, and they are staging quarters. And then, we’ll see the real impact in season as we move into, our fiscal, third quarter and fourth quarter.
Rafe Jadrosich: Thank you. That’s helpful.
Operator: Your next question comes from the line of Trey Grooms from Stephens Incorporated. Please go ahead.
Noah Merkousko: Hey. Good afternoon. This is Noah Merkousko on for Trey. Thanks for taking my questions. So, maybe first I just wanted to follow up on gross margins. It sounds like, continuing to ramp production from here. You’ve highlighted the raw material deflation that will help the front half of fiscal year ’25, and then kind of roll-off in the back half. So, I guess, would — you’d expect gross margins to be stronger in the front half and then moderate in the back half. Is that kind of the right way to think about it here? Or are there other items we should consider as we think about ’24?
Peter Clifford: Like, obviously, year-over-year, the performance on gross margin is going to be meaningfully accretive in the first half of the year, given what we’re lapping. And then, I would assume or expect kind of consistency in the back half of the year with this second half of ’23.
Noah Merkousko: Got it. That makes sense. And then on my follow-up, it sounds like continuing to make investments in SG&A which would prevent leverage in ’24. But when you think about SG&A as a percent of sales, is ’23 a pretty comparable year, or would you expect that number to move meaningfully higher?
Peter Clifford: We’re not expecting significantly negative leverage. It’ll be flat to modestly negative, as Jesse said, it’s probably reasonable to think maybe 20 bps.
Noah Merkousko: Got it. That makes sense. Thanks for the time and good luck with the rest of the year.
Jesse Singh: Appreciate it. And the last comment on that, that really depends on volume. And as we look at, our ability to deliver EBITDA margin, we feel really good that in any scenario, we can get into that 24% plus range that we talked about that puts us on a path towards that 27.5% that we talked about by ’27. And so with that, thank you all for joining. We feel, as you can tell, we’re pretty pleased with how we ended the quarter and we feel excited about what’s ahead of us and look forward to chatting with the rest of you offline as needed. Take care, and thanks for joining us. Appreciate it.
Operator: This concludes today’s conference call. Thank you for your participation, and you may now disconnect.
