Bryan Knutson: Yes. So, stripping everything back and setting the acquisition to the side, right equipment revenues on the Ag segment is about flat to slightly down, versus I think you are referencing the industry volume expectation of like 10% to 15%. And yes, we are better positioned with our equipment, right, and specifically for customers we serve. So, it’s really looking at those relationships and the equipment that they are looking for, and in some cases, our inability to get it in previous years, and now our ability to execute and serve those specific customers. So, it’s not just a broad statement, and we feel pretty good with line of sight, and as we mentioned, with our pre-sale activity through the first half of the year, what we are looking to achieve here.
Joe Grabowski: Alright. And my last question, any early learnings from the O’Connors acquisition and your – maybe your broader thoughts about the Australia market.
Bryan Knutson: Yes. I think just as we continue to get to know the team better and collaborate with them on our best practice sharing and leveraging each other’s knowledge and skill sets, it’s just all been extremely positive. Where, we are really pleased with the acquisition, we are really pleased with the leadership team and the employees over there and very similar business philosophies our two companies have and so that’s really helped with the integration and transition. We really like the market over there. We are very excited to grow over there and continue to invest over in Australia. And yes, we just couldn’t be happier, Joe, and really pleased with that acquisition, excited about going forward.
Joe Grabowski: Alright. Great. Thank you.
Bryan Knutson: You bet.
Operator: Thank you. Our next question comes from the line of Ben Klieve with Lake Street Capital Markets. Please proceed with your question.
Ben Klieve: Alright. Thanks for taking my questions. A couple for me. First of all, regarding the ‘25 outlook, I am wondering if you can kind of help us a bit with top line seasonality. Last year was a very lumpy one, I am wondering if you can kind of point to any historic year, you can give us kind of a bit of a benchmark for kind of how we should look at seasonality here in fiscal ‘25, because I suspect it’s going to be off quite a bit from fiscal ‘24.
Bo Larsen: Yes. So certainly, when you look at it, and things like the strength of the fourth quarter, definitely come into play there with your comments. Big picture wise, surprisingly, and as we look at things average over the last 6 years, last 3 years, last couple of years, a whole bunch of different ways. But as we see it, traditionally, our revenues are about 45% in the first half of the year, 55% in the second half of the year. And Australia, even when you overlay Australia with our financials, we expect something very similar with 45%-ish in the first half of the year, 55%-ish in the second half of the year. The nuance here I think is, you are definitely right, there was some strength in the fourth quarter in our U.S. Ag segment, which kind of made Q4 stand out.
So, I think that that normalizes a bit, and Q3 and Q4 look more similar in FY ‘25 than they did in FY ‘24. But overall, back half of the year about 55%. And then from a first half of the year perspective, that first 45%, Q1 is traditionally and expected to be lower than Q2, and a lot of that is seasonality and timing of activity and purchasing. So overall, big picture wise, it won’t change drastically from what we have seen. But there is some nuance and certainly more of a level setting between Q3 and Q4 is probably the best expectation at this point.
Ben Klieve: Got it. That’s very helpful. Thanks Bo. And then one more from me and I will get back in queue. I am wondering if you can talk about the M&A opportunities today and maybe in the context of kind of how the M&A environment was at mid-cycle in the – assuming midpoint of the previous cycle as well, is the outlook kind of more favorable, less favorable than it was at this point in the prior cycle, or any big takeaways you can point to there?
Bo Larsen: Yes. Thanks Ben. Yes, certainly, I believe there is – there will start to be a greater amount of opportunities here as we go forward. And also we could see a little bit of a change in the multiples and so on as we go more towards mid-cycle here, and as margins come down a little bit for the other dealers as well. But the real drivers still remain in place, all the back office challenges in the – a lot of the single store, the smaller and the traditional operations struggling with the technology and all the HR and government regulations and just a lot of that back office function that really ties in nicely with our models. And so those drivers that just continued to be ever present. And as we again go towards more mid-cycle here, those get highlighted even further.
So, we do believe there will be an increased amount of opportunities as we go forward here. But I would reiterate, for the immediate year here, as we laid out in our prepared comments, we are really focused on our customer care strategy and continuing to focus on driving our parts and service business and increasing our parts and service revenues, increasing our support capabilities for our customers. And we are going to continue to invest in that and be really focused on our customer care strategy. And just really keen on expenses and again, inventory management. So, those are the three priorities we certainly will be opportunistic with acquisitions and as we manage through that inventory that will free up room on the balance sheet, that will generate quite a bit of cash as we exit the year and go throughout next year as well.
So, we will certainly be ready and going to be very selective with acquisitions as we go forward.
Ben Klieve: Very good. I appreciate that color. Thanks for taking my questions. I will get back in queue.
Bo Larsen: Thanks Ben.
Operator: Thank you. Our next question comes from the line of Alex Rygiel with B. Riley. Please proceed with your question.
Alex Rygiel: Thank you. Good morning. A couple of quick questions here. First, can you talk a little bit about your expectations for inventory increasing throughout the year?
Bryan Knutson: Yes. I mean from the color we are trying to provide today is generally right, that we still have inventory coming in. And obviously, we have expectations for good sales pull-through. In terms of quarter-to-quarter, that remains to be seen a little bit. Again, as we have said, lead times have normalized some, but there is still some inconsistency in terms of when things would arrive. But as it stands, I would expect that we do see some uptick in inventory here in the first half of the year, assuming that all of those things stay on schedule, and then we would play it out and see some inventory reduction from there in the back half of the year. All of that subject to again, the timing of how everything plays out. And we will continue to provide an update for you on a quarterly basis.
Alex Rygiel: Thank you. And then what’s your appetite these days to increase investment into your rental fleet?
Bryan Knutson: Yes. So, Alex, we monitor that closely on a real time basis and it just ultimately is a function of our utilization. And so our team does a great job building relations, and relationships and being out there in the market. And we really look to continue to push and promote our rental fleet. It continues to improve every year. And so we are just very mindful, though, of the utilization rates. And as long as we can keep those up and keep improving those, we will continue to add fleet. And as we see them start to taper off or pull back a little bit, we will turn the valves, or decrease the valves back down. And again, just really a function of the utilizations.
Alex Rygiel: Thank you.
Operator: Thank you. And our final question will come from the line of Ted Jackson with Northland Securities. Please proceed with your question.
Ted Jackson: Thanks. You kind of touched on it a little bit with your inventory comments, but I did want to circle back with regards to kind of working capital levels as we roll through fiscal 2025. And that’s obviously tied to inventory levels, a little bit surprised that you would see inventories trending up, like in the first half, given the jump you had in the fourth quarter. But kind of taking that and tying it together, is it fair to assume that we will see a drop in working capital and an improvement in free cash flow during fiscal 2025? And will we – what kind of – what can we expect in terms of free cash flow number for the year, and how would that be weighted out in terms of sort of first half to second half? Thanks.
Bo Larsen: Yes. So, I mean overall, at the heart of your question is would we see better operating cash flow generation, right, and ultimately that all comes down to what the inventory balance is going to look like. So, this year, we saw a significant increase year-over-year in inventory. We certainly wouldn’t expect to see the same thing occur in FY ‘25, right. So, that’s going to be a real positive to the dynamics on the cash flow side. Just a bit more on that, I guess as we as we look at this. So again, we have mentioned a little bit earlier, about 45% of revenue in the first half of the year, 55% in the back half of the year, will kind of the inverse is true in terms of expectations for deliveries. Again, because of the supply chain cash up, right.
So, when you have more – a larger portion of inventory coming in, in the period where you have a lower portion of your sales, that’s just mathematically I guess against it that would lead to a continued increase here in the near-term. But overall as we step back and take a look at this, right, and we talk about the team that we have in place and the controls we have in place and everything that we focus on, the dynamics that have kind of come together here in terms of the cycle turning and then the catch up with the supply chain, ultimately just lead to a situation where it takes a little time to play through, right. So, big picture wise, we talk about maintaining healthy inventory turns, and staying out of interest-bearing inventory. And I think this year, we will see that inventory turns are lower than our targeted levels.
And it probably takes, working through FY ‘26 to get the turns back up, just the dynamics with how those ratios were even calculated. So, we see the transitionary period and kind of a 2-year journey to get back on that term level. But very much seeing it play out something we can manage deliver the higher profitability that we are talking about today, be well positioned for FY ‘26 and beyond. And ultimately, all of that is going to lead to better cash flow generation that we had seen recently. But in terms of specifically now in the quarters, I mean we will have to continue to see how that plays out here in ‘25.
