Jennifer Rumsey: Yeah, great. So, obviously, there’s some lead that we have in supplying engines into truck build. So our engine build rates will slightly lead truck build rates, but as I said earlier, from a guide perspective, we think where we were running as we ended the year is going to hold pretty steady through the first part of the year and then we’re forecasting some softening toward the end of second quarter and into the second half of the year.
Mark Smith: In a medium duty truck, there really isn’t that much difference between the two, and market and hours and then heavy duty, that’s where we see a little bit more vulnerability for the market and would largely expect us to move in line with the market.
Jennifer Rumsey: And then the last dynamic is in pickup, we’ve got the product changeover that’ll drive Q4 volumes lower and pickup.
Operator: Our next question is from Angel Castillo with Morgan Stanley. Please proceed.
Angel Castillo: Hi, good morning. Thanks for taking my question. I just wanted to unpack that cadence for the second half a little bit more. I think last quarter you had indicated aftermarket was an area that maybe was giving you a bit of a signal that there was a bit of a softening. And I think you indicated that things came in maybe the higher end of your expectations, and you kind of see that continuing into the first half. So as we kind of position that second half slowdown and now an expectation for aftermarket to actually pick up from the kind of flat to up 5% through the year, can you tell us, I guess, what you’re seeing in terms of customer commentary and any kind of signs or what kind of gives you confidence in that second half slowdown as we think about the year?
Mark Smith: Yeah, I’ll have a go — first go at that question. First of all, I’ll just say on aftermarket, we saw a very pronounced, I would say some element of de-stocking or lower production across our lower demand in parts in Q4, which we largely attribute to customer cash flow management. We don’t expect that to be a continuing trend. We expect to recover from Q4 levels on parts and be pretty steady across the year. On the truck builds, well, of course, you’ve heard from most of our major customers. So we really don’t have much more to say other than the backlog of trucks has been slowly edging down and then the thing that gives us the broader concern is the spot rates and the health of the truck fleet operators. That’s our principal concern.
It’s not our OEM customers and right now that the backlog and the orders still continue at quite decent levels. It’s what’s happening to the underlying economics of freight activity. That’s what’s giving us the concern combined, which hasn’t been moving in the right direction, combined with the slowly easing heavy duty backlog. So it isn’t a kind of pronounced downturn we might have seen in prior cycles at this point, but those are the factors that are weighing into our consideration and I think our guidance isn’t more conservative than anybody else’s and we don’t have any other observations beyond those really.
Angel Castillo: Got it. That’s helpful and then maybe pivoting to Accelera, I just wanted to maybe unpack that a little bit in terms of curious what you’re seeing in the backlog trends from 3Q to 4Q and as you kind of deliver on at least the electrolyzers over the next 12 months to 18 months, can you talk to us, I guess, about the cadence of the profitability of that business? We kind of exit 2024 and you start to have higher deliveries on those and maybe what you kind of foresee the exit rate will be in terms of that profitability?
Jennifer Rumsey: Yeah, so we are in a period of still pretty heavy investment in Accelera businesses are really making both R&D and manufacturing investments to scale up the product and we’re fortunate we have, existing plant and data that we can invest within to do that, to begin to produce electrolyzers and we continue to see growing demand and backlog is, as I noted, at a record level for electrolyzers. So that production rate is going to begin to grow and then you’ll see margin performance in the electrolyzer portion of the business improving as the revenues grow and we deliver that backlog out into the market. Same thing in our electrified components business as we see revenue growth there. You’ll see margin performance improving.
One thing we have now included in our 2024 investment, of course, is beginning to invest in the battery cell joint venture and we believe that, that is a key investment that we’re making together to ensure we have a leading cell for commercial vehicles here in the U.S. and domestic supply, which will both allow us and our customers to take advantage of incentives that are available and ensure security of supply over time into this market.
Operator: Our next question is from Rob Wertheimer with Melius Research. Please proceed.
Rob Wertheimer: Yeah, hi. I wonder if you could give us some thoughts on what’s happening in the data center and large engine market. Obviously, it’s very strong. I don’t know how many years of visibility you have or what that market looks like. Your primary competitor announced a capacity expansion. I don’t know where your capacity and your room to grow into that market if it is, a multiyear kind of curve. So I wonder if you could kind of give us an update on dynamics there.
Jennifer Rumsey: Yeah, the data center market is an exciting growth market, has been for several years a trend with increasing cloud, data storage in the cloud and now with artificial intelligence and other investments. We continue to see very strong demand. We guided up 10% to 15%. Backlog for that market is very, very strong. We’re looking at our capacity to make sure that we can meet the market demand and feeling good about the product offering that we have and of course, that business and the focus on improving underlying performance of that business will help us as that market grows.
Mark Smith: Probably the clearest secular trend over the next couple of years.
Jennifer Rumsey: I don’t. Yeah, I think it will continue.
Rob Wertheimer: And then do you have room to grow in ’25 and ’26? Maybe not sure too much on your capacity, but it seems as though you’re probably, you’re probably being asked to quote or to think about, capacitor that far out, right.
Jennifer Rumsey: Yeah, I will just say we expect that that trend of data center market growth will continue and we are and we’ll continue to look at our capacity and how we position to meet that demand.
Rob Wertheimer: Okay. Perfect. I’ll stop there. If I can sneak one more in on medium duty, there’s a bit of a narrative that as the COVID constrained production, the OEMs prioritized large class state over the medium duty and that’s reflected somewhat in industry outlooks in your out. I’m just wondering if medium duty has more inherent demand than that being helped by interest rates or anything else, or if that’s kind of where the market is kind of flattish? I’ll stop there.
Jennifer Rumsey: Yeah. There were certainly the OEMs experienced a number of supply chain constraints and continued in ’23 and even into the early part of this year, frame rails in particular. So we are, as you as you saw, really expect the medium duty market to continue to hold pretty flat to where it is now. It’s quite strong. We, of course, have a strong position in that market and we’re seeing continued demand and pent-up demand from some of the customers in that market for our product. So less often in there than heavy duty.
Operator: Our next question is from Tami Zakaria with JPMorgan. Please proceed.
Tami Zakaria: Hi, good morning. Thanks for taking my question. So I think you highlighted DV [ph] adoption scenarios at your last Analyst Day. As of today, I know you’re hosting another Analyst Day this year, but as of today, which scenario, the fast versus slow, seems more likely? And how do you think that affects your Accelera target of $6 billion to $13 billion revenue by 2030? Any updates on that?
