Bo Larsen: I mean, in talking about back half of the year and our expectations, we touched on fact that we do expect some moderation in the gross margin perspective. But from an operating expense perspective, we expect to remain in line or below prior year as a percentage of sales. And for the full-year, that same story would be true at this point is to be in line or probably a little bit below last year’s percentage of sales from those operating expenses.
Reid Seay: Okay, thank you. And on the O’Connors acquisition, it looks like last fiscal year today, finished with gross margin slightly a bit low. Do you all expect to see some synergies uplift that gross margin? Or can you touch on maybe some margin synergies? Just a little more color there would be great.
Bo Larsen: Yes. So in the financials that we provided in the supplemental deck, they had gross margin of 18.7%. I think that’s what you’re referencing, slightly below ours and then actually had a pretax margin of 7.2%. So the profitability of their business is one of the many things that really attracted us to the management team and their operating model. That margin, if you factor in the fact that they are a little bit more skewed to equipment sales makes a lot of sense and is pretty similar to us. In terms of synergies, I mean, what we’re really looking at is focused on a consolidated executive leadership team looking at the business from a global perspective. We want to continue to support that senior management team to execute on the growth strategy that they had in front of them.
And then there are some unique opportunities from a service model perspective and being able to provide customers 24/7 type support as we look at the different time zones that we’re now operating in as well.
Reid Seay: Right. Thank you all for the color.
Operator: Thank you. Our next question comes from the line of Mig Dobre with Baird. Please proceed with your question.
Mig Dobre: Good morning. And thank you for the question here.
Bo Larsen: Hi, Mig.
Mig Dobre: I want to go back to the inventory discussion. And I’m sort of curious as to how you think inventories will progress for you for the remainder of the year. It sounds like you’d like more inventory, if available. So as the supply chain is getting better for the OEM, are you sort of inferring here that you’re going to continue to build inventories through year-end. So I guess that’s part number one. And then related to this, given that so much of your business is now presell, can you comment at all about your presale activity on model year ’24 equipment in North America? And then I have some follow-ups. Thanks you.
Bo Larsen: Yes, I’ll maybe start with the inventory question, and then Brian might touch on the presales. So from an inventory perspective, we would expect the inventories probably will increase sequentially in the third quarter and then come down a little bit from there in the fourth quarter. We typically see that to be the case. We did mention that largely speaking, from a high horsepower perspective that most of everything that we’re going to receive is retail to customers, Of course, we need to turn that around with predelivery inspection. So again, we’ll see what we’re able to do with normalizing that backlog. And those are really the factors that are at play from a bigger picture perspective in terms of the increase that we’ve seen year-to-date versus what we would expect in the back half of the year, the back half would — should be a lot less than what we saw in the first-half.
And again, the first-half was kind of — very welcome to get us replenished levels on some of these other categories, back half, a smaller modest increase, and again, focusing on normalizing that backlog.
Bryan Knutson: Yes. Mig, this is Bryan. I would just add we’re definitely trying to be really clear that we are short in certain key product categories, and those are the areas that we’re looking to get more in. But as you know, there are other product categories where we’re finally feeling pretty good about where we’re at. We’ve been running low for quite a while now. And then there are a couple of other product categories that we talked about last call that we have a little bit excess of smaller tractors in some of those. And so I think you see it implied in our guidance is us being proactive about just in the second-half here, cleaning up that mix a little bit. So we’re positioned really well for next year and hope that some of these key product categories will open up.
And so we’re proactively addressing these few smaller categories where we’re a little long, and that’s what you see in the anticipated margins that we’ve got reflected most dealers, I know they wouldn’t do that. They wouldn’t be feeling the pressure yet that stuff isn’t aged. And so we really just want to — are cognizant of our healthy mix and are being proactive there. And to your presale question, as you know, the OEMs are keeping the order books really tight here. They’re not out very far — these key product categories are on allocation. And so as Bo said, we’re we just finally are out into ’24 now. And with our first tranche of early orders there, we’ve got names on all those key product category units.
Mig Dobre: But again, do you get a sense that volumetrically demand for model year ’24 is up relative to 23. And I ask the question because it matters within the context of inventories building on your balance sheet and in the industry more broadly.
Bryan Knutson: No, I would say demand is still very similar to how it’s been in those key product categories. But importantly, demand has been outpacing supply now for a long time on those. And then normalized in the other product categories. So yes, I don’t see demand increasing here as we’ve got a little bit lower net farm incomes and likewise on the construction side, but demand is still strong. And again, as I mentioned, our order boards in those key product categories, we’re still selling everything we can get for the allocation we have so far.
David Meyer: David, I’ll just reiterate my comment. I don’t see us getting sold sprayers, all wheel orders or forward-drive tractors, in any quantities of stock until at the earliest second-half of 2024, that’s how tight it is.
Operator: Thank you. Our next question comes from the line of Larry De Maria with William Blair. Please proceed with your question.
Larry De Maria: Yes, thanks. Good morning. First question, let’s just pick up where we left off there. On the early order programs in presales — and what is the message that you’re — we’re sort of seeing on calendar 2024. I mean I understand that obviously, there’s orders and there’s short supply. So first of all, are there any cancellations out there that we’re seeing? And to BJ’s question point about demand not getting stronger, are we seeing I don’t know talking about a flat calendar 2024 at this point. What’s the specific messaging on what the order programs are telling you about next year?
Bryan Knutson: Yes, I think so, Larry, so to answer your first question, no cancellation still and yes, ’24 is a long ways out at this point but that’s flattish is kind of our anticipation at this point for demand perspective. But again, then you got to work in the fact that we need production availability to increase in these key product categories, and we haven’t been able to keep up there with demand and that fleet continues to get older in those certain product categories.
