Jamie Cook: Hi. Good morning. I just wanted to dig into the Vocational margin guide. It was even understanding we’re combining Commercial and Fire & Emergency, but it’s lower, I guess, than I would have thought, not really much of a year-over-year improvement. So can you talk to the path to get to, I guess, F&E margins would be the driver there to double-digit? And then, John, just given where the guidance is today, can you talk about your comfort level with your 2025 financial targets or should we assume that just gets perhaps pushed to the right? Thanks.
Mike Pack: Sure. I’ll start with Vocational. So the way to think about it, Jamie, is we’re really — you put the two segments together, I think, ultimately, some modest growth there that you back out $150 million to $200 million on a typical year for Rear Discharge Mix Service. I think that creates a little bit of noise. I would say this year too, we do have a transition services agreement. So we’re going to have — we’re not going to fully benefit from some of the cost synergies materially yet this year. So that’s something we’ll continue to look for, for the future. I think the biggest thing that’s driving the margins, obviously, as John mentioned and I mentioned in our prepared remarks, Fire & Emergencies typical margins or municipal fire trucks are down a bit right now.
really because of legs and realizing pricing as well as some of the inefficiencies of manufacturing right now and the tight supply chain environment. What we do expect, though, is that as we get into — we have more price coming online in 2023, about in line with inflation. We have significant double-digit increases already in backlog beyond the current levels as we get into 2024. So we would expect as supply chains to improve and we get those additional pricing benefits in that business that we’ll get back to our typical margins in 2024 and beyond.
John Pfeifer: Yeah. Let me address your question, Jamie, on 2025. We provided our 2025 outlook in May. We still look at that outlook as what we’re expecting to achieve. And I’ll just break that down a little bit. If you talk about our backlog continuing to grow. We’re now at over $14 billion. That’s because we are designing and developing really effective new programs and winning contracts in the Defense business that we really like. So the great sign is that we continue to see strong order rates and really strong backlogs. We’ve got great program development, a lot of exciting new programs from electrification to autonomy. This is what we want to do, and this is what we want to drive our future, and it’s driving that backlog that we’ve got.
So the only thing that’s been holding us back in the short term is, a, getting over the inflation that we’ve had to deal with, and b, getting over the supply chain disruption dynamics. We’ve come a long way to get through the inflation problem. You’ll start to — you’ll continue to see that get better and better. And as we go through and we continue to execute improvement in the supply chain you’ll see the same there as well. But ultimately, that’s what’s been holding us back. When you look at the long-term outlook of the business and the business we’re winning and the programs that are being developed and some to be announced yet, it gives us confidence that $25 is right there where we thought it would be.
Jamie Cook: Thank you.
Pat Davidson: Thanks, Jamie.
Operator: Our next question comes from the line of Mig Dobre with Baird. Please proceed with your question.
Mig Dobre: Hey. Thanks. Good morning, guys. Maybe sticking with the USPS contract. How much revenue, if any, is embedded in your 2023 outlook? And my recollection is that in your 2025 targets, you had something around $700 million worth of revenue associated with this contract. So I guess the question is, based on all the changes that have occurred since you issued those targets, is that still a reasonable number and can you give us some perspective as to how we’re going to ramp in ’24 to get to that 25% figure.
Mike Pack: Sure. Mig, I guess from a — the revenue and margin that you have for NGDVs is pretty minimal this year, consistent with what we’ve said were, we’ll be starting production late in the year. So not really a driver, ramping up meaningfully in 2024, closer to full rate production in 2025. Certainly, as John mentioned earlier, based on the question, obviously, with the mix shift, that should be that should be a bit of a revenue tailwind as we think about that, the program because, I guess, or the quantities and so on that we’re thinking about in 2025 are not necessarily different than we were thinking about during Analyst Day.
John Pfeifer: But the mix could be up.
Mike Pack: Absolutely.
John Pfeifer: That’s going to tell you revenue tailwind to that 25% number, meg because the mix is improving.
Mig Dobre: Right. And I don’t know, if this is going to ramp linearly or if there’s some kind of a more back weighted sort of mechanism that you guys are anticipating right now?
John Pfeifer: Well, I think the U.S. Postal Service wants us to get to full rate production as fast as we can.
Mig Dobre: Great. Okay. Then my follow-up, going back to Vocational. I appreciate what you’re trying to do here combining all these business lines, but it sounds to me like your ambitions are obviously a little bit greater than the product lines that you currently have. Is there some thought here that you can lean a little more aggressively into M&A, and maybe really add some new verticals here in the next couple of years?
