Jack Springer: Yeah, the promotional activity is largely at that bigger level. What we said, we don’t expect it to change in the second half. The impact from an MBI perspective is under 100 basis points. So we will supplement and we’ll help our dealers from a promotional aspect, but largely it falls on them. And they’re coming off of a two to three year environment where the margins are extremely high, and so their pencils have sharpened.
Operator: Our next question comes from Jamie Katz from Morningstar.
Jamie Katz: I actually want to carry on with that line of questioning on the flexible cost structure because not only does the EBITDA margin look bad maybe relative to 2020, but I don’t think the implied EBITDA margin has been this low in maybe over a decade. So, can you just reconcile maybe, was it the magnitude of the change? Is it the conditions declined too fast to react? Or are there other sort of one-time items, like investing in the factory, that are really leading to that adjusted EBITDA margin compression because saying that there is a flexible cost structure and then generating EBITDA margins where they’re going to be is sort of in conflict a little bit.
Bruce Beckman: I think a couple of things you pointed to, Jamie, are accurate. You did see a change very, very rapidly of moving from a high wholesale production environment to the low channel inventories, left very quickly, the softness of retail occurred. But one thing – and I’ll let Bruce chime in here – is that we are hyper focused. If you look at what our goals are for the rest of this year, channel inventories have to come in line. And so, we have taken production down more significantly than where probably anybody could have ascertained or predicted and we are going to get inventory levels where they need to be to support our dealers. And honestly, I think dealers appetite right now is they don’t want it to be historic channel inventory. They would like to be, at least for a little while, little bit lower than channel inventory [indiscernible].
Jack Springer: Yeah. And from an EBITDA margin perspective, it’s not really a complicated story. It really is fixed cost, the leverage coming down. We are still seeing, year-to-date, and expecting to see for the remainder of the year, our variable cost structure above the gross margin line to be in that 85% to 90% range that we talked about previously. So, it really is about the magnitude of the revenue guidance change that’s driving up the EBITDA margin decline.
Bruce Beckman: One of the things that I’ll point at to, Jamie, [indiscernible] is really important to understand. We have a long, long history of driving the margins with Malibu, and the differential between the Malibu entity, Malibu and Axis margins and Cobalt, Pursuit, MBG, there are hundreds of basis points of difference. And now you’ve seen a flip that Malibu is more impacted. I think we’re down well under 50% now as a part of the total. And so, that impact from a margin aspect is going to be greater than if it were even across the board, if that makes sense to you.
Jamie Katz: As you think about cleaning up the inventory channel, assuming that the other OEMs are behaving rationally, does that imply – and I know this is early that, like, fiscal 2025 would go back to some sort of normal growth algorithm and it would be much easier to recapture some of that operating leverage. Or is there some transitory sort of float back to normal to get back to where we were?
Jack Springer: I think you nailed it. That’s exactly right. And that’s what we’re positioning for. What I’m seeing is people were being very responsible with general inventories. And that’s what we’re hearing from our dealer. I think that will continue. But even absent that, we are positioning ourselves so that we come out of this and we can recapture that growth much quicker than anyone else if they’re not being as responsible as we are. But [indiscernible] we have to get the channel inventories down.
Operator: Our next question comes from Brandon Rollé from D.A. Davidson.
Brandon Rollé: Just on your updated guidance, what gives you confidence you fully kind of reset the bar for the remainder of the year? And is there any upside being baked in for the last two quarters of the year? Or would you say this is a conservative guide?
Bruce Beckman: I would say it’s a conservative guide. As you can imagine, we’ve had a lot of discussion on it. There is not any upside baked into the second half of the year for us. So that would be welcome certainly, but there’s nothing to say [indiscernible]. We believe that this, as we say, is conservative, and that if we see some positive tailwind, that it’ll be beneficial.
Operator: And our next question comes from Noah Zatzkin from KeyBanc Capital Markets.
Noah Zatzkin: Most of mine have been asked and answered, but just wondering just in terms of capital deployment, particularly in terms of maybe green fielding or acquiring a Pontoon brand. Has anything kind of changed there and just maybe any updates around that process?
Bruce Beckman: Well, I’ll maybe let Jack comment on the pontoon, but from a capital allocation priority standpoint, our capital allocation priorities have changed. First, we looked upon the organic growth initiatives, such as the Roane County, Tennessee facility. We have an active share buyback program. And we’re always on the lookout for M&A opportunities. And as you can understand, we are not able to dictate the timing of when those opportunities present themselves, but our strong balance sheet gives us the opportunity to move quickly when they do.
Jack Springer: Commenting on Pontoons, and I guess M&A in general, Pontoons has been something we’ve talked about. I’ve been consistent. We’ve been consistent on this. We would much rather make an acquisition than greenfield, but that greenfield is absolutely an option for us. Expanding it a little bit. The market, with what we’re dealing with, I think that prompts potential sellers to come to the market. And I didn’t want to go through this. And so, we’re seeing more activity. And it’s across the board. So I will tell you that, from an M&A point of view, we are paying a lot of attention not only to Pontoons, but we’re paying a lot of attention to the outboards, all our outboard market, and categories like that that we’re not in today that we can get into.
