Jerry Revich: Yes. Hi. Good afternoon, everyone. I’m wondering, Fred, if you could just say more about the margin outlook for 2024, generally, at the midpoint of sales and EBITDA outlook you’re looking for pretty close to flattish margins. You spoke about the price assumptions. Can you just flesh out the other moving pieces and if you folks were to surprise the upside, what would those levers look like?
Fred Bohley: Sure. Sure, Jerry. This is Fred again. Really walking through from the engineering SG&A standpoint, flat to slightly up with just some inflationary pressures. I think to the upside and I think this gets to Dave’s comments earlier, the demand is really strong. We’re still in this situation where, can the entire vehicle supply chain get the proper parts to the OEMs to build? Clearly they’re building less over-the-road tractors and are focused on building where they have strong demand, which, fortunate for us is right in the middle of our core addressable market, medium-duty Class 8 straight truck. So I think the upside to margins will be stronger topline revenue, and as you know, we have very, very attractive incremental margins.
So that’s what will drive the upside. That’s unfortunately not entirely in our control. We’ll control what we can and we’ll be positioned to supply our products. But that’s the biggest upside in the guide that we put in front of you guys today.
Jerry Revich: Thanks.
Operator: Our next question comes from the line of Tim Thein with Citi. Please proceed with your question.
Tim Thein: All right. Thanks. And again, a two-for-one here. Maybe I’ll just ask just, Fred, from the standpoint of product mix and with defense seeing another outsized growth year, that business can carry the margin dynamics can be quite varied depending on whether to be selling to the DoD or international customers. So maybe just a word in terms of how that –is that historically a lot of that, I guess, more so on the wheel or on the track side would be a headwind of margins. But just how are we thinking about the impact from this big growth in defense and the implications just in terms of the overall impact and mix? Thank you.
Fred Bohley: Yeah, Tim. Thanks. This is Fred. As you mentioned, we do have defense guided up at a midpoint, 34%. And historically, our defense business, especially our track defense to the U.S. Government has been our lowest margin business, cost plus fixed fee. But as we’ve continued to expand the business, over half of that track business is being driven by Outside North American sales, where it’s really a commercial negotiation. So as we look at that increased 34%, certainly don’t expect it to be a negative drag on EBITDA margins.
Tim Thein: Okay. Thank you.
Operator: Thank you. There are no further questions at this time. And I’d like to turn the floor back over to Chairman and CEO, Dave Graziosi, for closing comments.
Dave Graziosi: Thank you, Camila. Thank you for your continued interest in Allison and for participating on today’s call. Enjoy your evening.
Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
