Douglas Bauer: Well, as far as growth, I’ll take the top line, Stephen, this is Doug. We are continuing to establish operations. We are — we announced Utah last year and I would expect to have established operations in the Florida and Coastal Carolina markets this year. So either organically or through M&A, we’re going to continue to grow top line growth in those new markets. In our existing markets, we’ve got 15 divisions across the country, half are close to stabilization on the West, generating strong cash flow, very good margins. And then the Central and East continues to be our growth markets, seeing tremendous growth as I mentioned in the prepared remarks in the Texas and Carolina markets which we’re very bullish on.
Glenn Keeler: And Stephen, I’ll take some of the others. On targeted leverage, we don’t have a specific target because it will depend on the business needs. But I think where we’re at right now and then after we pay off the bonds is a good place to be, we’re low 30s now on a debt to capital will be low 20s after we pay off the bonds, somewhere in that range, I think, is a good spot for us to be in.
Douglas Bauer: As far as margins long term, Stephen, I mean, listen, we underwrite our land deals, 18% to the 22% range. But we do self-develop about 65% — probably closer to 70% of our lots and when we underwrite those deals, it’s typically in the low 20s, somewhere between 20% to 24%. So if you’re developing more lots, you should have a better margin profile, right? If you’re buying finished lots, you’re going to be on 18% margin. So that’s kind of how we look at the long term.
Glenn Keeler: And I know you asked — go ahead, Stephen.
Stephen Kim: No, no, no. I don’t want to interrupt you.
Glenn Keeler: Okay. I know you asked about operating margin. And I think as we get more scale in the out years, you’re going to see that increase to the operating margin. Our goal there is to get more leverage on our fixed costs and increase that bottom line operating margin.
Stephen Kim: Makes sense. Okay. And then — got you. And then so…
Douglas Bauer: Let me interrupt you one more time, Stephen. We’re in a very — if anything is normal, as I mentioned earlier. But our business plan is very simple. We’ve increased book value per share of 15% since the end of 2015. And our goal is very simple. We’re going to increase book value per share, 10% to 15% through a combination of share repurchases and strong earnings. So our focus is driving the stock price up. We just focus on book value per share because all the other extraneous discussion on multiples and everything. It really doesn’t mean anything to us. We’ll trade with the group, however, they trade. We’re just focused on making more money going forward and delivering a great customer experience.
Stephen Kim: Okay. Yes, that’s helpful. Helpful context. I noticed that your lot option count, not your supply but the actual number of lot options you had declined for a couple of — has not declined for 2 quarters in a row. Curious if you could give a little context around that, where you see that going forward? And then, Glenn, what do you think is on a year supply-owned basis, a level that we should be thinking that you can run — you intend to run the business at kind of low 3s in terms of your supply owned, is my guess?
Glenn Keeler: Yes, Stephen, good question. I think the overall lot supply that you’re seeing and it’s been kind of flattish over the last couple of quarters, that’s just timing. We have a strong pipeline and so there’s good growth in that pipeline. But part of what you’re seeing is you’re seeing a decrease in some of those longer-term land holdings that are owned as we continue to work through some of those assets. And we’re replacing a lot of that with more option land. So that’s just the mix change there. And then going forward, we’re targeting 2 to 3 years owned from a land perspective. And it just depends on the market. There are some markets where we’re under 2 and then some markets that we’re closer to 3 but that’s kind of the range.
Operator: Our next question comes from the line of Tyler Batory with Oppenheimer.
Tyler Batory: My first question is just strategic around market expansion, new markets. Can you just revisit your philosophy around organic market expansion compared with M&A, talk through some of the positives and negatives of those avenues. And the reason I asked, there has been a fair bit of M&A so far in the space this year. So I’m not sure if that changes your perspective or perhaps if you have a different view on the M&A landscape today compared with the last call in the fall.
Douglas Bauer: No. I mean, like I mentioned earlier, I would expect us to establish operations in Florida and the Coastal Carolinas this year, either organically or through M&A. As you can imagine, the only — the big difference between M&A and organic is you’re paying a multiple of some sort on M&A and organically, you’re paying book value. So that’s really the difference. And frankly, we started organically back in 2009. So we do have a very strong playbook of growing organically. We’ve had tremendous success. So we’ll continue down both paths.
Tyler Batory: Okay, great. And a follow-up on gross margin, just specific on the guidance in Q1. Just help us bridge where you exited in Q4 versus what you’re expecting in Q1. It sounds like you’re pulling back a little bit on incentives but gross margins are still going to be perhaps down. So just trying to get a good sense of what you’re expecting in terms of your outlook in Q1 specifically?
