James Hardiman: Let me ask a question this way then. You made the comment about — and some of this sort of overlaying the calendar year and the fiscal year, right? But ultimately, when things stabilize and ultimately improve, you’re talking about retail and wholesale getting better mid to late calendar ’24, which is really fiscal ’25 for you guys effectively. But then there was a comment in the prepared remarks where you said that you thought the second half of your fiscal year would realize at least a pro rata portion of this expected increase, right? The industry — the shipment assumptions from RVIA do assume a meaningful increase in shipments. Can you just clarify all of that? It sounds like you’re still saying you think wholesale is going to be up materially during the second half of the year, but I just want to make sure.
Michael Happe: At this time, we have stated for calendar year ’24 a retail to wholesale equity number of 350,000 units. As I mentioned in a question that was asked earlier, I think it’s about the timing of when dealers begin to move more aggressively towards that 1:1 ratio. I think dealers are waiting on both the RV and marine side for some of these early spring retail shows to happen across the country. We have Tampa coming up in a few weeks, which is obviously one of the bellwether RV shows. We have some large marine shows, including the Minneapolis Boat Show coming up here in about a month, month and a half. I think some of the dealers are waiting to see some green shoots of retail stability as we’re going into the year. But if you do the math on historical turns and even if the dealers want to run their business at slightly elevated turns, they would need to begin to managing their inventory to a little bit higher level going into the [mid] of the retail season in that March through July period.
So we do anticipate that some of our fiscal year ’24 will see the benefit of this movement back towards a 1:1. And as Bryan said, in calendar ’24, I think a 17% increase projected in wholesale shipments. Timing will be the wildcard as to how much of our fiscal year gets the benefit of that. But we do anticipate seeing a lift in shipments in quarter three and quarter four that is material. Obviously, if that doesn’t develop, we’ll manage our business accordingly to continue to be disciplined and patient to that end. But that is what we’re planning for is a rebound here this next late spring and summer.
Operator: Our next question is going to come from the line of Noah Zatzkin with KeyBanc Capital Markets.
Noah Zatzkin: Most of my questions have been asked and answered. But given the move in steel prices in recent months, just wondering if there’s any way to think about the margin implications, maybe the size of the impact as you see it in the second quarter or the back half?
Bryan Hughes: We’ve seen easing in a lot of our key commodities, steel being one of them, certainly, and aluminum, lumber as well. Typically, what we’re going to do in this environment, Noah, as we experience some easing of some cost inputs that might have ties back to commodities, we’re going to manage our margin very carefully. Obviously, as we’ve talked about earlier in the call, we’re doing all that we can to pass along any kind of price reductions that we can realize to the end customer as well as to the dealer network so that they’re able to price more aggressively to the end customer. I think that’s the best way of thinking about some of those commodities easing. We talked about like-for-like ASP reductions, for example, in the Towables space.
That would be one example of how we intend to handle any kind of commodities easing and our cost inputs easing as a result. But I think that’s — my guidance to you would be that we’re going to manage margins to the extent we can, but try to pass along to end customers any cost favorability.
Noah Zatzkin: Maybe not to put too fine of a point on the second quarter, but I think you kind of mentioned to expect quarter-over-quarter decline in profit. Is it a quarter-over-quarter decline in EBITDA the right way to think about it?
Bryan Hughes: Certainly, we’ve been clear that we expect a top line that’s a little softer in Q2 relative to Q1, so sequential decline. I also mentioned that there’s going to be the usual deleverage associated with that and pretty consistent allowances or discounts from Q1 to Q2. So net-net, through those comments, I guess, I’d be guiding you towards a slightly lower EBITDA margin in Q2 versus Q1.
Operator: And our next question is going to come from the line of Brandon Rollé with D.A. Davidson.
Brandon Rollé: Just first, on the inventory destocking you’re seeing in the environment right now. Could you comment on what you’re seeing in the Towables space versus Motorhomes and kind of the time line for those two segments?
Michael Happe: They’re definitely moving a little bit differently. I think the motorhome category still has potentially a little bit of destocking left to do in some places, and some of that certainly will depend as we’ve talked on retail. But if I were to pick a couple of places where we could see further inventory destocking on the Motorized side, it would probably be Class A, some parts of that, particularly potentially Class A diesel, and then some parts of the Class B category as well. As all of you know, the Class B category has been very frenetic from a competitive intensity standpoint. A lot of new brands and players getting into the game, a lot of motorized chassis have become available as the overall demand for van chassis around the world has been reduced.
