Michael Happe: Joe, good morning. This is Mike. I probably won’t offer a specific number because that would lead to some reverse math calculations on how big we think that business will be and we don’t disclose that by brand category, but it will contribute no doubt to that number. We knew Grand Design motorized was in play when we offered our last targets in 2022. So I mean the Grand Design motorized strategy will be a material contribution to our financial and share future here at the Company. So I won’t offer specifically what that number will be, but you’ll see the majority of that ramp up in fiscal years ’25 through ’27. We’ll get some units out the door here in fiscal ’24 fourth quarter. But we have a very robust strategy for Grand Design motorized over the next three to four years, and we have high confidence that the Grand Design motorized team can execute their business plan.
Joe Altobello: Understood. Just to follow up on that, the EBITDA margin target of 11% to 11.5%. I assume that — that assumes that your Motorhome margins remained in the high single digits?
Michael Happe: Yeah, we very much believe that, as Bryan inferred here with a response a little while ago that there is upside on our motorized margins from where we stand today, both in terms of the benefits of volume in the existing businesses. But we anticipate that Grand Design motorized will also be a financially acceptable and good contributor to that segment yield going forward as well. So all three of our brands, Winnebago, Newmar and Grand Design, we believe can operate in that zone that you talked about. I mean long term, we’ve been very public with saying that we expect all of our businesses and all of our segments to be double-digit adjusted EBITDA yield in the future. And so that’s our long term aspiration and we expect that the Motorized segment will work its way there over time.
Joe Altobello: Okay, great. Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from Brandon Rolle of DA Davidson.
Brandon Rolle: Good morning. Thank you for taking my questions. First, just on getting back to the pricing conversation, one of your largest competitors had mentioned they were going back to their supplier partners to identify opportunities to reduce costs where possible. One, have you had those conversations as of late? And two, how have they progressed? And three, which segments within your business right now do you feel like need the most price reductions or need to improve their affordability the most to improve retail sales? Thank you.
Michael Happe: Yeah. Good morning, Brandon. This is Mike. We have great relationships with our supply chain partners. We have less scale than our two largest RV competitors do. We have less scale candidly than some of the other larger marine players. And so we have a little less leverage to throw around in terms of volume to be able to negotiate component and material pricing. But we’re very proactive in those discussions and certainly work well with our suppliers to, we believe, have fair pricing. So we will continue to do that. And believe me, as we continue to organically and inorganically create scale in this company, we will expect that the benefits of that will come from our suppliers as well. As far as which parts of the portfolio need those cost reductions.
Listen, we’ve been very upfront that probably the single greatest current cost pain point in our business model today is motorized chassis. And I think for the whole of the industry, if we are to improve the affordability of motorized RVs going forward, we will need to see motorized chassis pricing begin to stabilize and then we will need to work closely with those chassis partners to see what we can do to improve costs going forward. But that is probably the biggest challenge in our business right now in terms of addressing affordability.
Bryan Hughes: I’ll add just a little bit onto that, Brandon. Some of our — not all, but some of our purchases or categories of supply are contractually tied to certain indexes or commodities. We’ve seen a lot more stability in the commodity space, steel, aluminum, lumber, notably. And so as a result, we’re seeing, likewise some stability in the cost input. So not nearly the volatility that we’ve seen over the past couple of years. So smoothing out of costs, we’re not seeing that being a big driver going forward. We’ll continue, obviously, as Mike alluded to, negotiate appropriately with our vendors where we think we have an opportunity for that.
Brandon Rolle: Great. Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from David Whiston of Morningstar.
David Whiston: Thanks. Good morning. Just curious, in terms of the continued hesitation by dealers, and I understand they want to get their inventory right sized, but are interest rates still one of their most primary concerns? And if so, how many rate cuts does the RV industry really need to see before we see any kind of meaningful change or improvement in consumer and dealer confidence?
Michael Happe: Yeah. Good morning, David. This is Mike. Yes, interest rates and obviously the associated costs to our end consumers are amongst the top two or three factors that they say are inhibiting stronger retail or slowing down retail as we speak. It is interesting, this spring we are hearing some signs that end consumers are beginning to understand that rates are going to be a little higher or meaningfully higher here into the future for a while than they were two or three years ago. And so could there be some acceptance by consumers that this is where rates will be for a little while, and if they want to get into the RV or boat lifestyle, they just have to deal with that and find a way to afford that. We could see a little bit of that, but there is no doubt that both of our businesses are interest rate sensitive in terms of consumer appetite and decision making for our products at retail.
