Richard Wehrle: I think something else, Mig, continue to keep in mind what we tried to say in our written part of the script is no matter what this division does if they have that fall off, as Jeff mentioned, in sales, the backlog falls down, our requirement here is to try to do everything we can to maintain that 10% operating margin, which is an article for this year, no matter what the revenue comes out in this division?.
Mircea Dobre: No, I appreciate those last comments, and I did hear that. It’s just that I’m trying to understand what you’re sort of doing now maybe proactively to be able to deliver that because if I’m going to try to ask it down…
Jeffery Leonard: Yes, what we’re doing, Mig, is what we’ve been doing for a couple of quarters, offering retail incentives to our customers will walk into a dealership and buy a piece of equipment, which works pretty well in the ag side of the space. And while I was a little uncertain whether that was going to pay off from the actions we took last year, we did see that bump-up in orders in our Bush Hog division in the first quarter, and they actually produced a very, very nice first quarter from my point of view at a very historical level of both revenue and profit. So that was positive. We just have to do that now across some of the other brands and see if we can get the same impact.
Bush Hog is an iconic brand, as you know, Mig, so it’s natural that, that we would see the biggest uplift. Some of our other brands are probably not going to see the same immediate lift in both orders and backlog from those incentives. But that’s the tool that we have, right, because we have to do the channel inventory. You know that and I know that. We have to clear that in order to get to better running, reordering and a rise in backlog.
Richard Wehrle: Well and also, we mentioned, as I mentioned too, as well, the labor force, we made reductions in this division in the labor force because we want to try to get ahead of this strained a little bit so that we’re allowing ourselves to try to do everything we can to maintain that 10%. If the orders continue to soften as Jeff reported, we’re going to continue to take more actions to make sure that we reduce our cost and control our expenses.
Mircea Dobre: Understood. Final question for me. Going back to the discussion that you had earlier with Mike on the government exposure that you have. I’m kind of curious as to how you guys are thinking about funding in that sector more broadly. I mean, we’re coming off a couple of really strong years here. Do you think this is sort of sustainable as we think about ’24 and into ’25 here in terms of the set of customers continuing to be well funded and continuing to order? Or should we kind of, I don’t know, temper our expectations at some point to some degree?
Jeffery Leonard: Obviously, at some point, Mig, there’s going to be an ease of temper expectations because we’re coming out of a series of very extraordinary circumstances following the pandemic and all of the federal level incentives that have been put out there.
But before joining this call and before writing my comments and my remarks, I took a pretty deep dive into where governmental finances are right now. And when you look at it, at least in the U.S. the states are in very, very good shape. They’re in a very strong condition and they’re going to continue to invest. I’m quite certain of that.
The municipalities are more mixed. Some of the bigger cities are incurred a lots of costs related to resettling immigrants. So you know that you read the news same as I do and they’re are under some fiscal pressure as a result of that. But remember, most of their funding comes from housing costs, property tax. And housing is not stumbled at all. In terms of prices coming down. Now obviously, that’s going to sustain municipal income at a traditional level for a long time. So I think you will eventually see in paper. I certainly don’t see it coming this year, Mig. I think we’re into strong running all through 2024 on the governmental side of our business and the tapering may come in 2025.
And if I had the answer in my head about whether this was going to be a soft landing in our economy or stumbled, we are able to give a much more clear answer to that. But I see at least another 12 months of really good running on the governmental side.
Operator: The next question comes from Tim Moore from EF Hutton.
Timothy Moore: All right. I want to wish Richard, the best of retirement and time with his family. So it’s great and a straight shooter, which was really helpful for investors. And maybe I’ll start with a question for Jeff. On Industrial Equipment, as you look out on this division and historically, it wasn’t too long ago, the operating margin was higher, and you’ve done a great job, getting it back to close to that. But what do you think is kind of a realistic operating margin ceiling looking out to maybe next year without giving formal guidance, if there’s no recession, do you think it can do a 13.5% op margin next year?
Jeffery Leonard: Yes. I do, Tim. Confidently, yes. I think that when you look at our most notable competitor, name I won’t mention, and the oft-mentioned references to their higher operating margins. If you actually do a side-by-side to [indiscernible] and we allocate our corporate costs out to our 2 divisions, as you probably know, are most of it, our main competitor is not. So when you correct for that, we are neck and neck in terms of operating income as a percentage of sales, right neck and neck. So I think we are running very well right now, and I do believe there’s further opportunity to expand the margins in that group for sure because there’s still some inefficiencies there that will pick up as the volume continues to build.
Timothy Moore: That’s great. Yes. I was doing some of that math myself, didn’t seem like the ceiling is close to what you have now, but that’s good news. And maybe just switching gears, I’m just trying to think through of other operating margin drivers. Obviously, the supply chain will hopefully get better in general. Farming and hobby and AG will come back and normalize. But just switching gears to maybe your mid and country efforts, specifically maybe for Europe rather than shipping heavy machinery from the U.S. over there, that cost — how is that going? And is that really more focused on forestry landscaping and sweepers?
Jeffery Leonard: It’s not focused on sweepers in particular at the moment. It’s mainly focused on the vegetation management side and mostly in loading products and to some degree in forestry that chipper that we produce in the U.K. under the Timberwolfe brand we will have a very nice comp in the U.S., and we’re just ramping that up now. So we haven’t really seen the benefits of that yet. We will start to see it in the second quarter coming through on the forestry side. So it’s going well, but obviously, all the other handlings in that division are gaining a lot of our attention right now, as I’m sure you can understand.
Timothy Moore: That makes sense. And not to ask about another distraction, but I’m pretty excited about the rent-to-own fleet. It seems like this back of the envelope comparing some peers. It seems like you would have something like a 35% ROI. And I was just wondering you think you can add 100 more trucks chassis here to that? Maybe get the fleet up to 400 maybe by the end of the year.
Jeffery Leonard: It went up pretty nicely during the quarter. We expect that to continue all through the year. I think we run 17 or 18, something like that in Q1. And we do plan to open a couple of additional rental locations this year. We’ve got those pretty well mapped out and know where we’re going. So yes, I think we’re going to be very nice growth in the rental space from super products during this year, our expectations, Tim, are to get north of 300 units out there, and I think we closed the year roughly 210, 215, 217 units, something like that.
Timothy Moore: Okay. It’s 300 units. Yes, that’s actually the number I was thinking of it. Now that makes sense. That’s a really good opportunity to get the ROI up and helps customers make them happy. But maybe just switching gears to 1 other topic. I mean this is snow removal has been amazing. You have a wide wing innovation, taking market share, it’s pretty clear. Like when does that slow down? I mean when did that kind of normalize? And how the outlook here?
Jeffery Leonard: The outlook from that team is so bullish. I almost have to think myself when I talk to them. They just see the opportunity everywhere. We struggled in the airport snowmobile space, while Tim, we just came out of a big show in Buffalo, got a very nice reception there. And customers are finally starting to see the strength of our products in that space, which is a huge turnaround for where were 3 or 4 years ago.
Our wide wing cloud is selling like hot cakes right now, we can’t build them fast enough. So that’s really interesting.
And we’re still getting largely lead orders out of contractors. We’re also picking up some really big interest now back in our airport area orders for different airports right now for our snow equipment, which is really good. We had to struggle with that about 3 or 4 years ago made a tremendous amount of improvements in there, and that’s not actually showing a lot of interest for us right now.
Richard Wehrle: I can share 1 number with you, Tim. We believe in fairly short order here, our snow removal segment can be $250 million a year in revenue. I’ll be disappointed if it doesn’t get.
Timothy Moore: That’s phenomenal compared to just 3 years ago. That’s amazing. Brian, just one clarification question. I just want to make sure I understood this from the previous comments. For the high single-digit sales growth comments. That’s — I know you got the strike, it clearly impacts you. But what — if you’re factoring kind of the Royal Trucking acquisition at [indiscernible] anniversary material early October, I think it was October 10 or something. It seems like that would add 8% to 9% sales growth a quarter by itself. Am I just kind of thinking about this the right way or you maybe being a little conservative?
Richard Wehrle: That is. I think if you back them out, I think that’s what we’re trying to say is probably closer to that single-digit increase without Royal in there. Yes.
Jeffery Leonard: The uncertainty isn’t around industrial at all. It’s in Vegetation Management. We’re waiting to kind of see how the orders flowing in the second quarter. If the orders pick up nicely, then I can be more optimistic about sales growth for the rest of the year. But we just don’t know as we sit here today, how that’s going to play out. On product, if we see some positive signs right at the end of the first quarter in terms of how that business develops. But I don’t want to confidently say we’ve turned a corner there yet because I don’t believe we have.
