John Healy: Understood. And then just on capital allocation question. When you look at kind of a 400,000 retail environment, does that make you comfortable €“ is that environment comfortable enough for you that you guys would look at acquisitions or look at buyback? Or do you scale back those things given the retail environment for the next 12 months or so.
Michael Happe: I’ll ask Bryan to take that.
Bryan Hughes: Great question. Well, it’s going to be a dynamic environment as we’ve been talking about throughout the call. I have stated before, and I’ll reiterate it. Our capital allocation priorities really don’t change given the environment. We’re going to continue to focus on growth. Organically and inorganically, make sure our liquidity is sufficient, particularly at times like this where there’s a higher level of uncertainty we’ll target that range of 0.9x to 1.5x in terms of our leverage ratio and then returning cash to shareholders. And it’s all dependent on the environment that we’re in and our forward view of the environment, which we’ve talked about throughout the call as to how we allocate. So I think that, that’s the primary comments that we would make.
We did pay a cash dividend that was up 50% in this quarter. We held back on share repurchases for a couple of reasons. First, Q1 is historically a seasonally low cash generating quarter. And last year was the strong exception to that. But historically, Q1 is relatively lower than it was this year. And then second, as we talked about our free cash flow was impacted by working capital increases driven by continued supply disruptions and Mercedes-Benz recall specifically. So our free cash flow generated in Q1 was certainly something that influence our decisions around share repurchases in Q1 here. So I think that’s the context that I would provide as it relates to capital allocation. And Mike, I’ll turn it back to you if you want to add anything further.
Michael Happe: No further comments.
John Healy: Thank you, guys, and have a great holiday season.
Michael Happe: Thank you, John.
Operator: Thank you. Come from the line from Brandon Rolle with D.A. Davidson. Please proceed.
Brandon Rolle: Thank you for taking my questions and fitting me in here. Just quickly on margins, I think you had talked about the margin progression earlier in the call. Historically, it seems like there’s €“ with the exception of last year during 2Q 2022, seems like there’s a step up in margins for the Towable and Motorhome segments. Do you think margins have bottomed there?
Bryan Hughes: Yes. We feel good about the increases that we’ve made to the Motorhome business over time, Brandon, we’ve talked about that in past quarters and how our current expectation is to maintain that double-digit EBITDA margin. And so you can see that over time over the last several quarters now, we’ve been able to accomplish that and even in more challenged times like what we’re seeing now, we were able to maintain that double-digit EBITDA margin in the Motorhome business. So that’s where we’ve seen the most notable change over the last three years now. On the Towables side, I talked about that earlier in our expectation that the seasonally low Q1 here is in line with what we’ve seen historically and in line with really our expectations.
So a bright side to the margin story is certainly marine as you saw in Q1, marine is performing very well relative to the portfolio. And so we’re liking everything that we’re seeing in the marine and really in line with what we had expected to see when we brought Barletta into the portfolio. So that has played out in line with our expectations and what we anticipated. So a good story there.
Brandon Rolle: Great. And just one last one. On the Motorhome side, you had talked about orders being reasonable. It looks like just from the data you provided, implied orders might have been down about 80% versus 2019 levels. Kind of how do you feel €“ is that reflective of kind of where demand is right now? Or is the channel filling up quicker than expected? Thanks.
Michael Happe: Yes, Brandon, this is Mike. I guess the term reasonable is in light of the volatility in the world around us. Again, certainly, dealers are paying close attention to their overall inventory levels. I would tell you in the month of November, we got no new orders on Mercedes chassis as an example. And that was certainly different than a year ago. Almost a third of our field inventory on Winnebago-branded Motorhomes is on Mercedes chassis. And so it’s hard to take orders when the dealers essentially know that, that’s something that they can’t really see forward to. So yes, I mean, it is chaotic in the way that a small dealer, a large dealer is looking at a variety of these categories. But again, relative in this order from positive to less positive Marine orders, Motorhome orders, Towable orders is the way that I would rank those.
So we’ll see what happens as dealers get into the retail selling season. We are coming up on show season here over the next three, four months. That begins in earnest after the holidays with a number of different shows, including the Florida RV SuperShow down in Tampa, I think the third week of January. And so we’ll learn a lot in many ways over the next 60, 75 days about our prospects for the rest of fiscal year 2023 and calendar 2023 and subsequently, I think orders will definitely respond to whatever the retail activity is as we make the turn of the calendar year.
Brandon Rolle: Great. Thank you so much.
Michael Happe: Thanks.
Operator: Thank you. And this concludes the Q&A portion of today’s conference. I’d like to turn the call back over to our host.
Ray Posadas: Thank you, everyone, for joining our call today. From the Winnebago Industries team, we wish you and your families a happy holiday season and look forward to connecting in the new year. Thank you.
Operator: And thank you, ladies and gentlemen. This concludes today’s call. Thank you for participating, and you may now disconnect.
