Mike Dennison: Yes. That business has continued to grow across the middle league and in softball but it’s got a lot of room to learn. I mean there’s a lot of — especially all in the college by the way. And then you’ve got some international expansion in Korea and Japan, maybe in Taiwan that we think is very interesting. What we saw is that there was definitely a return to baseball and baseball grew significantly this year with a post-COVID world. Kids are out there playing more and more in the field and picking up these bats. And the price points of these pieces of equipment are also going up very nicely. So when I look forward in the next three to four, five years of what we can actually see in front of us, I think this business has really going to grow better than our bike business growth especially obviously now, but it’s got good growth in the next three to five years and I think there’s a lot we can go do.
So I’m more confident where this business goes. And I don’t think they’re necessarily coded bump in baseball. It’s actually the opposite. I think it got better post-COVID when people could return to sports kind of the mass.
Jim Duffy: Okay. Thank you so much.
Operator: Our next question comes from Anna Glaessgen, B. Riley.
Anna Glaessgen: Hi. Thanks for taking my question.
Mike Dennison: Hi, Anna.
Anna Glaessgen: I guess touching on SSG for the fourth quarter. I think on the last call you talked about expecting sequential improvement as BOEs prepare to launch next year or next model year product. It sounds like that’s going to be delayed a bit given the level of inventory in the channel. Is that something we should be expecting in the beginning of 2024 but then you mentioned that channel normalization could extend to the first half. So when should we expect that new product?
Mike Dennison: Yes. Anna, it’s a good question. We are seeing some customers some are, like I said earlier, some of our better OEMs who have managed inventory very well, roll out the new model year. So that’s helping us in Q4. But as Dennis pointed out in his script, it’s fairly moderate growth in Q4 over Q3 which is a reflection of other OEMs who are struggling more significantly in the quarter and canceling some of their production plans in this quarter that they had committed to earlier in the year. So that’s really the mix shift that’s going on in Q4. Everybody is just trying to get rid of all the old components and products in their inventories. And everybody knows that if they didn’t do in 2024. They really can’t afford to not do in 2025.
So when you think about when the people really have to be out there with new bike models in spring of 2024. They have got to have solved this problem. And I mentioned earlier in one of the questions about getting through the inventory by June. Those things are tied together. They have to eliminate the inventory. They don’t miss another model year as that pretty dramatic to our businesses.
Anna Glaessgen: Got it. Thanks. And then touching on the fourth quarter guidance, would it be possible to parse out what the UAW impact is assumed to be?
Mike Dennison: Yes I mean we can sure try. It’s going to be fairly significant obviously. What we’re finding out is that even though the tentative strike ended at the end of October. So you think okay, October was the down month and that gives you a pretty finite number. The challenge and the reason why I’m hesitant to answer it is because it depends on the pace that they restart up these factories and it’s not linear and it’s not real clean. So my opinion is we’re going to see the impact of these strikes through November and then we’re going to get into the holidays. So the reason for our conservative guide in Q4 is because while I think in it through the implications of the strike in November, we’re going to run right in the holidays after that and that’s just a limited problem. So we’re not real positive on the automotive OE part of our business in Q4.
Anna Glaessgen: Got it. And just following up there. Are you expecting that chassis availability will be back to normal by the end of 2023, or could this extend into 2024?
Mike Dennison: Generally speaking, I think it will get back a little at the end of the year. There’s the challenges that we faced throughout the year with getting these new models launched whether it’s the Barco [ph] or other vehicles which we really want to see in our operating business in 2024. My assumption is in that you miss this in 2023 it won’t be an issue in 2024 at all on mix.
Anna Glaessgen: Okay, thanks.
Operator: Our next question comes from Mike Swartz, Truist.
Mike Swartz: Hey, good evening, guys. Maybe just to start on the Marucci acquisition. I think you said that the business is accretive to both growth and margins throughout the 25% EBITDA margin. Can you give us a sense of what the baseline is for revenue there? And then what the longer-term outlook for growth would be on the top line as well?
Mike Dennison: Yes. It’s a little early for that right now, given the fact that we don’t have a closing date yet, right? So I’m going to shy away from that a little bit but this is a strong growth vector for us moving forward. And these EBITDA margins I mean we’ve hit them deep and we understand them very, very well. They’re very real very achievable margins. And that’s why without hesitation we’re saying this is accretive from the EBITDA margin side for us going forward. They have a fantastic vertical integration strategy right now and then we see synergies down the road with them on the raw material sourcing side, supply chain side and manufacturing as well.
Mike Swartz: And needless to say, I would assume you’re not reflecting any benefit from Marucci in your first quarter guidance?
Mike Dennison: That is absolutely correct. There is nothing, nothing in the guide from Marucci.
Mike Swartz: Okay. Great. And then switching over just to maybe the impact of the auto strike. Obviously, there’s a lot of elements of this that should be temporary in nature. But as we think about their cost structure and the higher labor costs, is there any risk that they start getting more aggressive with contractual negotiations and pricing with some of their vendors?
Mike Dennison: We haven’t seen it Mike. I would question the same thing with you. So I think it’s a great question that you’re asking it. I will tell you that as our strategy continues with OEMs is to drive innovation and technology and the new dual valve product that we’re selling on the upcoming Raptor platform is our most expensive and most technologically advanced products that we’ve ever made. So we’re going to continue to push those price points up, because we’re going to make better and better product versus going downstream to make cheaper products. And keep in mind, where the elasticity is for most of these OEMs is on those types of vehicles. So there’s less pricing pressure for them there then there is probably in the bottom end of the lineup. So I think we’re going to get less pressure just for those reasons.
Mike Swartz: Okay, great. Thanks.
Operator: Our next question comes from Alex Perry, Bank of America.
Alex Perry: Hi, thanks for taking my questions here. I guess maybe I just wanted to clarify so the impact of the UAW strike on the quarter was in the tune of $45 million. Did you mention that? And then I know you gave some qualitative context on sort of the 4Q impact of the UAW strike. But is it fair like if we were to take how much you lowered your guidance by is there a way to sort of contextualize how much of that was sort of SSG and that coming in under what you thought versus quantifying the impact of UAW?
Dennis Schemm: Yes. No, I think that’s a great question. So, I think in Q3, in Mike’s prepared remarks, he talked about it being around $45 million impact from the strike and so that was prestrike and post-strike in the quarter. When we look to Q4, the way I was pretty much thinking about it is probably got another $25 million or so relative to SSG and just the slowing of that business there as we continue to grind through that inventory recalibration and working with our distributors and OEs. And then the remainder — and this is where it gets difficult right because there’s the UAW impact all of October was essentially impacted. Some of November is going to be impacted as they start to ramp back up. So, it’s challenging there to really nail that down.
But then there’s also what I’d call the macroeconomic interest rate environment that is causing dealers and distributors to hold less inventory. They’re not leaning in as much because the carrying cost of this inventory is that much more expensive. So, that’s how I’m thinking about it. But for rough math I mean that $25 million for SSG $100 million or so is a combined UAW impact and this macroeconomic overhang.
