David Meyer: Maybe what you’re asking a little bit, I’d say farmer sentiment might be tempered a little bit, like you say, there’s a lot of noise out there. There’s interest rates, things like that. But it said so much demand before and the production levels were so much below previous peaks that the demand is still good. But maybe farmer settlement might be off a little bit, but I have a deal with farmers for over 40 years. They’re always pretty negative. But there is some noise out there in that, but still the demand is still outpacing supply and high horsepower.
Bryan Knutson: Yes, good point, Dave.
Larry De Maria: Okay. Thank you. And then can you give us some color on the second-half? Obviously, a good quarter. Construction looking stronger and you’re actually a little lower. It seems like the core guide, ex-O’Connor should be going up, not staying flat for the year, which would imply maybe a lower second-half than the expectations in the consensus numbers? So can you talk about expectation in the second-half? Or is there a deceleration? Or is it just really about not getting production or not having confidence in the production and then a fiscal 3Q versus 4Q sales split? Thanks.
Bo Larsen: Yes, a couple pieces of commentary on that, right? I’d say — from a top line perspective, if you look at same-store sales growth on our domestic ag business, it’s been about 7% in the first-half of the year. We expect something similar in the second-half of the year. Then you layer on any growth expected from a Heartland perspective, which given some of the commentary about sprayer production, we’d expect their growth to be north of those levels. Mathematically speaking, from a margin perspective, we’ve been touching on it, right? But that’s where some of the math comes into play to get to the results. So the top line is very much what we’ve been discussing and reiterated the guidance. And gross margin moderation is something we’ve been talking about since the beginning of the year.
So year-over-year in Q3 and Q4 we would expect margins to be lower than they were in the prior year. And that would be for a number of reasons, including what Bryan was touching on a little bit earlier. And then from a split perspective, we would expect Q3 to be our highest quarter and Q4 to be a little less than that, but more than what we just saw in the second quarter. So that’s also consistent with the expectations that we had put out there previously. The other thing just to help you out and doing your math and getting to where we come out to from an expectation perspective is you did see other interest expense higher in the second quarter, and we would expect that in the third and fourth quarter as well, certainly, as you’re comparing to the prior year period.
So put all that together and take a step back, what we’re really doing is reiterating a guidance midpoint of $4.80, which is outside of the O’Connors acquisition, which is on top of last year’s record results. And if you really zoom out and talk about where we’re at today, with our earnings power versus where we were in the prior peak, we were talking about $2 per share looking good. So again, we’ve spoken this year about higher confidence in achieving average pretax margins north of 5% through the cycle. The reasons why we have confidence in getting there, focusing on our organic growth through market share gains and continuing to execute on our pipeline. So for us, and I hope you hear it, we’re nothing but excited about how the rest of the year shapes up and how we’re going to be well positioned to continue to execute next year.
Operator: Thank you. Our final question this morning comes from the line of Steve Dyer with Craig-Hallum Capital Group. Please proceed with your question.
Ryan Sigdahl: Good morning, Brian, Bo. Ryan on for Steve. Just want to follow up on that last time. And I guess when you say Q3 highest, is that the core business, excluding the acquisition just made of O’Connors or is that all in Q3 will be the highest revenue?
Bo Larsen: Yes. No, that’s a great point, and thanks for allowing me the opportunity to clarify that. That was our expectation, excluding the O’Connors acquisition. So then we layer the O’Connor’s acquisition on top of that. So I appreciate that.
Ryan Sigdahl: Good. And then just a quick follow-up. Could you realize any manufacturing incentives in Q2? And then what are your assumptions within guidance for the back half of the year regarding incentives?
Bo Larsen: Yes. Another opportunity for me to clarify there. So last year, we started to accrue for manufacturer incentives in the second quarter to the tune of $2.6 million. This year, we haven’t yet done that, just aligning again with the cadence of production that we’re expecting and for that to continue to increase in the back half of the year, and we just talked about our expectations in the second-half from a volume perspective, i.e., the second-half being larger than the first-half. So we definitely expect to recognize similar levels. Overall for the year, it will just fall in the back half of the year as opposed to starting incrementally last year to recognize that $2.6 million a year in the quarter.
Ryan Sigdahl: Great. Thanks, Bo. Good luck guys.
Bo Larsen: Thank you.
Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Mr. Meyer for any final comments.
David Meyer: All right. Thanks, everybody, for your participation and your interest in Titan Machinery, and we look forward to updating you on our progress on our next call. So have a great day.
Operator: Thank you. This concludes our conference today. You may disconnect your lines at this time. Thank you for your participation.
