Stephen Volkmann: Great. Excuse me. Good morning, guys. I wanted to think about margins kind of big picture here, and maybe this is Josh question, I don’t know. But at the end of the day, it feels like you guys have sort of achieved your targets earlier than you expected. I wonder if there is an opportunity to sort of bump those higher over time or whether you think those are still the right range to think about? And more specifically, how much volatility maybe on the decremental side if and when we actually sort of end this cycle?
Brent Norwood: Hey, good morning, Steve. With respect to our stated goal of 20% margins €“ through-cycle margins by 2030, maybe a couple of things to unpack there. First goal is to get to a structural through-cycle margin achievement at that point. And we would say we’re not quite there yet. I understand that our guidance would imply 20% for this year. And we certainly have progressed beyond our original goal of 15%, but there is still a little bit further to go on the journey. Part of this year’s performance is based on the best demand environment that we’re in. I think the other thing I would point out there is keep in mind that there is an entirely other element to that goal around the reduction of the standard deviation around margins.
And we’re just now beginning to make progress on our recurring revenue goal by getting the right tech stack out in the market. So I think that part of the journey, we still have a much further way to go. We’re getting started. I think we’re off to a good start. But it’s really €“ you need to consider both our goal to get to sort of through-cycle margins of 20%, but then also minimize the volatility around that 20% as part of the goal suite as well. Thanks, Steve.
Stephen Volkmann: Great. Thank you.
Operator: Our next question comes from David Raso with Evercore ISI. Go ahead please. Your line is open.
David Raso: Hi, thank you. I’m trying to think about €˜24. The order books are not open yet, right? So still some time to think about that and how we’re going to price as well for €˜24. So it looks like the rest of the year, you’re implying pricing is up about 9% in the rest of the year, so maybe a cadence of 13 14 and 10, and then by the fourth quarter, we’re still up 6%, 7%. So I’m just trying to think about initially, I know it’s early, but how are you thinking about pricing for €˜24 as it sits today? And is that roughly the right way to think about the exit on pricing for the year and that kind of up 6% to 7% in the fourth quarter? Thank you.
Brent Norwood: Hey, David, with respect to price, I think your math is probably fair in terms of seeing that price realization number moderate a little bit as we go through the year. Compared to last year, in 2023, we won’t see as much midyear price increase. So a lot of the impact that we’re seeing early in the part of 2023 is based on sort of midyear price actions that we took last year. So I think as we migrate from fiscal year €˜23 into €˜24, it will be a little bit more of a kind of clean break in terms of pricing and will be mostly dependent on what we do for new list prices in €˜24. The calculus there is really going to be based on what we’re seeing in production costs. We’ve seen some positive tailwinds beginning this €“ in the first quarter of this year, and we would expect some of that to get better as we go through the year.
But we’re going to have to take a wait-and-see approach until we get a little bit closer to early order programs before we maybe have a fully formed view on where pricing might be in €˜24. Thanks, David.
