Harrison Bauer: Hi. This is Harrison on for Bascome Majors. Thanks for taking my questions today. Lorie and Brian both mentioned the milder winter affecting the maintenance business, but now that’s been revenue dropping for three quarters sequentially and then profits have dropped the last two, could this be a broad cyclical adjustment or maybe customers – specific customers pulling back the use of their network? And then when would you expect stabilization and maybe what some of your trajectory for the maintenance business going forward?
Justin Roberts: Hey, Harrison, this is Justin. Good to hear from you today. I would say that actually this business has always had some seasonality and cyclicality, so that you see a run-up in our fiscal Q2 in the winter and then a further step up in our fiscal Q3 in the spring because the winter does drive volumes in the wheel business and then there’s a spring restocking and then Q4 and our fiscal Q1 definitely have some, I would say, more normalization. So we see this as a broader – this isn’t a change in the business, this is more of just the normal seasonality we see in the winter time, didn’t manifest this year. So it’s not a big cyclical shift in the business. It’s more of just – no things did not manifest as they historically do.
And we are moving into our Q3 and undertaking various remedial actions to kind of make sure that our volumes are going to manifest as expected, and that we’re, I’d say, managing the cost structure and overhead as proactively as possible. I don’t know if there’s anything else you’d like to add, Brian, on that.
Brian Comstock: No, I think you hit it perfectly, Justin. The seasonality typically is over two, two and a half quarters. We’re already seeing that moderate as we move into this next quarter, and we’re not projecting any major shortfalls moving forward in that business.
Harrison Bauer: Thank you for that. And for my second, now that the North American manufacturing production rate and margin profile seems to be stabilizing with solid order recovery sequentially. Can you share some updated thoughts on what your ultimate margin range you’d expect to generate manufacturing with a mid-cycle backdrop? And then from where we sit today, if orders are stable, would you expect a higher or lower margin maybe just directionally for fiscal 2025? Thank you.
Lorie Tekorius: Great question, Harrison. I would say that if I look out into 2025, and we have stability and the kind of visibility that we have right now, I would expect to be at the upper end of the range that we provided. I know that the men and women that are working specifically within our manufacturing organization as well as our commercial organization. We’re always finding ways to improve the throughput so that we can drop more of the revenue through some margin and to the bottom line.
Operator: The next question is from Ken Hoexter with Bank of America. Please go ahead.
Ken Hoexter: Great. Good luck to Adrian and congrats on the team on building the backlog. But maybe if I can, Lorie, unpack that margin – your multiple margin outlook a little bit better. I guess, near term, I know you just gave a long-term 2025, but given your low to mid-teens outlook, are you still expecting manufacturing margins to stay at double digits here for the second half? And then do you expect to see maintenance margins. I didn’t quite get the answer there. Are you expecting them to return to double digits? Or maybe you can give your thoughts on that.
Lorie Tekorius: Thank you, Ken. I hope I didn’t misspeak, but we are not expecting low to mid-teen margins. We’re expecting mid-teens margins with the expectation that we will continue marching through this fiscal year on a solid trajectory.
Justin Roberts: And on a consolidated basis.
Lorie Tekorius: And on a consolidated basis, yes, thank you, Justin. From the Maintenance Services business perspective, we do – as Brian said, we’re taking a number of actions to think about how we’re running that business, how we’re thinking about, how we schedule equipment into those shops to strain efficiency. That’s part of the reorganization of some of our activities and combine some of our operating resources around engineering, quality and things like that, so that we can take the strengths that we have in our manufacturing operations and share those more broadly with our rail services group and vice versa, take some of the strengths of what we been able to do in those repair shops and share those with our manufacturing facilities. So I would say we do expect in the third quarter, the [indiscernible] margin and we expect to continue on the overall path for consolidated margins to improve.
Justin Roberts: And if I could just draw a firm line under your manufacturing question, Ken, we do not anticipate manufacturing margins going backwards much less dropping back into the single digits at this point on a gross margin basis, just to be very clear about that.
Lorie Tekorius: Thank you, Justin.
Ken Hoexter: Very helpful. And then Lorie, if I can revisit – I think it was maybe Matt’s first question on the ASP decline. I guess if I just look at the backlog, total revenue per ASP per car, right, in terms of your total backlog, it fell, as you mentioned. Is that – I just want to revisit, is that just a mix issue in terms of what you’re selling versus anything going on in the industry? I just want to clarify that one answer there.
Justin Roberts: So it’s – sorry, you were asking, Lorie, but I have a hard time not talking. So it’s a combination of mix. And then there is some as you’re well aware, we do have the ability to escalate and deescalate raw input costs on our backlog. And so as there is some moderation on our input costs, primarily steel, steel surcharge and whatnot, that pricing comes down a little bit, too. The piece to really reiterate is that on a core pricing basis, the pricing that drives profitability and on lease rates, that is being disciplined, that is stable to up kind of across the various car types.
