Mike Pack: Sure. I think, next year, what I would say is there’s a couple of moving pieces. I think from a revenue standpoint, we had a little bit of volume push out of the fourth quarter to next year. That bolsters next year a bit. And I think ultimately with our – just our production rates, that’s really sort of the result of where we’re ending up from a revenue perspective. I would say right now going in international is sort of flattish. You have some gives and takes. We had a large – we had larger Belgium deliveries. We’ll have other international deliveries this year. So that’s – international is probably not the biggest mover there. Postal Service is a smaller portion of the revenue this year. So there will be a ramp up.
I did mention in prepared remarks, from a margin standpoint, really between NGDV’s startup costs as well as a bit higher NCD, about a $35 million headwind when you think about that year-over-year. I think the very important part though is as we look at NGDV, 2025 is going to be a big ramp up year, and 2026, we expect to be at full rates. That’s going to become a very significant revenue contributor and margin contributor in 2025 and 2026.
Jerry Revich: Super. Thank you.
John Pfeifer: Thanks, Jerry.
Operator: Our next question comes from line of Steve Volkmann with Jefferies. Please proceed with your question. Steve Volkmann, your line is live. Thank you. Our next question comes from the line of Angel Castillo with Morgan Stanley. Please proceed with your question.
Angel Castillo: Hi, good morning. Thanks for taking my question. I was wondering if we could actually unpack the order commentary a little bit more, maybe in particular, looking at the kind of 1Q dynamic, I think historically, or you’ve talked about a return to normal seasonality. If I’m not mistaken, just kind of billings in the first quarter typically pick up pretty materially versus the fourth quarter kind of – tune of kind of 30%. So can you talk about the pickup that you’ve kind of embedded in guidance in terms of earnings growth for access equipment? That’s where I’m referring to that 30%. So is that generally what you expect in terms of billings for the first quarter or can you give us more color as to how to think about volumes kind of sequentially there.
Mike Pack: I think there’s – yes, trying to unpack, I’ll kind of talk about the volume first, and then we can talk about the seasonality of orders. We did say in our prepared remarks that we do expect volume to be up somewhat for Access and Vocational Q – sequentially from Q4 to Q1. But I think just with the return – with more normalcy, with production throughput, supply chains getting better, I think you are going to see some more typical type seasonality with our highest quarters really being from a revenue and profitability perspective, our second and third quarters with the first quarter and the fourth quarter being a bit lower. So that’s fairly typical. So I would expect some volume step up there. You’re probably a little rich at 30%, but that’s what we’re thinking about. And then in terms of, I’ll let John talk about just order cadence.
John Pfeifer: Yes. So Angel talking about orders. So right now with our access equipment segment, we’re still in a very unusual time. It’s not normal for us to go into a year, we’re in early 2024 and be fully booked for the whole year, and that’s the position that we’re in. So when we talk with our customers, the big publicly traded customers that we have, as well as all the thousands of independent customers that we serve, we’re really expecting to start to go back to a normal order cadence. We’re starting to see more equipment replacement in 2024, which is a good thing because equipment needs to be replaced. The fleet age is old, and our customers are indicating that they want to go back to kind of a normal AOP cycle, meaning we really talk at the end of the year about what the following year’s orders are going to look like.
So we expect that season – it has not been normal seasonality in orders the past couple of years, but we do expect normal seasonality to come back into the market, which may mean that we don’t have huge orders in Q1. But we’ll continue to see healthy orders long-term, because we continue to expect the market to perform beyond 2024 into 2025 and 2026 because of all the market dynamics that are in play. So that’s what I’ll say about that.
Angel Castillo: That’s very helpful. Thank you. And then maybe switching over to the free cash flow guide, pretty material step up here kind of year-over-year. So can you just talk about kind of the puts and takes as to what’s driving the improvement and how should we think about that versus maybe your longer term targets that you had set out at past Investor Days for kind of 2025 and beyond.
Mike Pack: Yes. Yes. So good solid step up, I would say. I would expect generally working capital, some working capital decrease, particularly in our Defense segment, that’s certainly going to be a benefit with some of the timing of our programs and billings and collections around that, particularly as the JLTV domestic program winds down. CapEx is still going to be at somewhat elevated level, about $300 million, which is a bit lower than last year. I would expect as we get into 2025, as I’ve said on previous calls, I would expect a step down. And I think the other driver is we’ve had some significant investments beyond just the CapEx element of it in our NGDV program. So that’s certainly going to be another benefit as we look year-over-year.
But I think as cash flow, as we continue to benefit from the ramp up of our new production capacity, CapEx normalizes a bit more. I would expect that you should see continued progression there from a cash flow perspective as we look beyond 2024.
Angel Castillo: Very helpful. Thank you.
John Pfeifer: Thanks, Angel.
Operator: Our next question comes from line of Chad Dillard with Bernstein. Please proceed with your question.
Chad Dillard: Hi. Good morning, everyone.
John Pfeifer: Good morning.
Mike Pack: Good morning.
Chad Dillard: So my question is actually on access equipment. So part of the price increase over the last couple of years came from surcharges due to higher input costs with some of those costs maybe rolling back or kind of like staying steady. Like how are you – are you having conversations about rolling that back with some of your customers?
Mike Pack: Chad, as I talked about just earlier, when you look at the totality of our input costs, we’re not seeing deflation. So that’s the position that we’re in right now.
Chad Dillard: Got it. Okay. And just sticking with access, can you just talk about the mix independents versus nationals this year versus 2023? And can you talk about, like, what you’re seeing from a regional standpoint for that segment?
Mike Pack: Sure. I would say from a mixed perspective, it was generally for the first three quarters of the year, it’s a little bit stronger nationals versus independents, bit more balanced in the fourth quarter. I would say if you wait together the year, we expect fairly similar dynamics going into next year. I would say maybe a little bit of customer mix next year. I think the bigger thing is, I think there are some product shifts, a little bit of boom in telehandler mix shift, but again, not the biggest piece of the dynamics going forward. So I think that’s really what we’re seeing at this point from a mix perspective. So next year probably, or 2024, a little bit heavier weighted towards the nationals versus independents.
