Xian Siew: Okay. Got it. Thanks. And then maybe in the 2024 guidance bridge, which is helpful, you also have $0.30 from other as a benefit. What is that exactly?
Ryan Gwillim: A lot of that is gross margin factors and there are — I mean, there’s a kind of a laundry list of them that we didn’t want to make the slide any more busy than it was. But you can think of various COGS and other initiatives that we’re doing above the OpEx line that will help to offset some of the sales softness, certainly in the first half of the year.
Xian Siew: Got it. So it’s like a gross margin. Okay.
Ryan Gwillim: Yeah. It’s mostly all, it’s a litany of gross margin goodness. A lot of them are programs that each of our divisions are doing to take costs out at the COGS level instead and also at the same time working on their OpEx.
Xian Siew: Okay. Thank you guys. Good luck.
Operator: Our next question is from Fred Wightman with Wolfe Research. Please proceed.
Fred Wightman: Hey, guys. I wanted to come back to the engine refill comments and I’m a little bit surprised that you’re talking about not having as much of a pipeline opportunity there, just given some of the OEM backlog comments that you guys have made historically. And I know that you’ve stopped giving the OEMs who wanted to transition to Mercury power, but are you still seeing conversion for that backlog? Is that conversion more muted just given what’s going on with retail and wholesale? How does that sort of share opportunity stand on like a backlog go forward basis?
Dave Foulkes: Yeah. So maybe I’ll start and Ryan could pick up. We did note share gain as, and clearly, part of that share gain is Mercury getting into more OEMs and getting more share of existing OEMs. There are a couple of notables coming across the line. I think you might see a few in Miami already. So we’re continuing to convert. I think so, if you look at the overall market, obviously, the way the market is behaving is affecting every OEM and that is somewhat reflected in the $1.50 that Ryan included at the start of the bridge. But the additional OEMs that we’re bringing on Board and we do continue to do that, and increased mix in others is reflected in that $0.50 of share opportunity.
Fred Wightman: Okay. If we could shift to the boat business, I mean, you guys just posted almost a 6% operating margin in a quarter where you were down over 20% in sales. And if we look historically, I think you guys would be really, really happy with the 6% margin agnostic of sales for up, down or sideways. So can you just sort of help us maybe give a state of the union for the downside margin performance of that? I mean, you’ve talked about getting back to double digits historically, understanding that it’s a tough wholesale environment today, but is that 6% a pretty good floor going forward?
Ryan Gwillim: Hey, Fred. I’ll take this and Dave can fill in. Yeah. I — we are pretty happy. I mean, given that volume is down almost 20%, as you said, off of a Q4 2022 where we did hit that 10% operating margin, which I believe was the fourth out of five quarters we did it in a row. Yeah, we’re pretty happy with that fourth quarter performance. And that’s in an environment where we have a little bit extra discounting to spur retail, certainly in the start of the season. But it also reflects some really nice operational improvements really across all of our brands. The Boat Group’s done a great job of taking OpEx out and keeping it out. And so, yeah, I would say 6% is a pretty nice floor for a quarter where volume is where it was.
I think you’ve seen the guidance for the full year and in a year where we’re still going to produce a little bit lower than we did in 2023, holding margins into that kind of 6%, 7%, 8% for the full year number is something that a handful of years ago would have been pretty darn impossible. So, the testaments of the operating jobs and all the businesses, but certainly the focus on taking OpEx out and keeping it out.
Fred Wightman: Perfect. Thanks a lot.
Operator: Our next question is from Scott Stember with ROTH MKM. Please proceed.
Scott Stember: Good morning. Thanks for taking my questions as well.
Dave Foulkes: Hey, Scott.
Scott Stember: It sounds like you guys are looking for a flattish boat market this year. What are your assumptions as far as getting some help from interest rate reductions from the Fed?
Dave Foulkes: Yeah. I think the interest rate reductions from the Fed and also other global central banks, given our presence in Europe particularly, but also in other markets, has two effects. One is directly impacts financing costs and the other is frees up kind of family budgets, discretionary spending more broadly, and maybe a tertiary effect is just consumer confidence. So, there are a number of kind of tailwinds that hopefully when that cycle begins will be introduced. I would say that, there is a lot of promotional financing around at the moment, including from us. But you will, if you go to the bookshelves or if you look online, you will see many companies offering promotional rates. So, I would say that, a lot of people are not paying, unless that credit rating is not high, they’re probably not paying the nominal rate, which at the moment has dropped about 50 basis points to about kind of 8.5%.
I think probably more people are seeing 599, 699 [ph] rates. One of the things we are seeing though is, we continue to see a lot more cash buyers and even though the promotional interest rates pull people in, a lot of cases, the deal closes with people taking the cash and paying cash. So, I think, the primary effect will be there, but the secondary and tertiary effects of more discretionary income and consumer confidence are at least equally as important.
Scott Stember: Got it. And then last question on the engine side, Repower. I guess one of the theories is, as you guys have more production capabilities and as the OEM side is falling back a little bit in a tougher economy, that boat owners would Repower their boats with some of your newer products. A, are you starting to see that yet, and B, could you just remind us of the margin dealt on an engine between Repower and OEM?
