Q3 2023 REV Group Inc Earnings Call

Greetings and welcome to REV Group third quarter 2023 earnings conference call.

At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star-0 on your telephone keypad.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Drew Conniff, Vice President Investor Relations. Thank you. And now us for the

Good morning and thanks for joining us on today's call. Earlier today we issued our third quarter fiscal 2023 results. A copy of the release is available on our website at investors.re regroup.com.

connect your lines at this time. Thank you.

Today's call is being webcast and a slide presentation, which includes the reconciliation of non-GAAP to GAAP financial measures, is available on our website. Please refer now to slide 2 of that presentation. Our remarks and answers will include forward-looking statements, which are subject to risks, that could cause actual results to differ from those expressed or implied by such forward-looking statements.

These risks include, among others, matters that we've described in our Form 8K filed with the FCC earlier today and other filings that we make with the FCC.

We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. All references on the call today to a quarter or a year are our fiscal quarter or fiscal year, unless otherwise stated.

Joining me on the call today is our President and CEO , Mark Skaneczny.

Please turn to slide three and I'll turn the call over to Mark.

Thank you, Drew, and good morning to everyone joining us on today's call. Today, we will be discussing our third quarter performance that continues to reflect top and bottom line improvements compared to the prior year. I am very pleased with the progress we are making to advance the initiatives we laid out in prior quarters to increase throughput at several locations across the enterprise, particularly within the F&E segment. As you may recall, these detailed initiatives are focused on resource planning, both internal and external, improving upfront process capabilities across sales, and the development of the move.

engineering, purchasing, and material management teams, and optimizing factory and production line configurations.

Shortly, I will provide an overview of our consolidated third quarter performance as well as detailed segment financials. Before I comment on the quarterly results, I would like to highlight some notable items that occurred within the quarter. First, demand for our products remains strong with consolidated backlog of 5% from the prior year to $4.1 billion.

The resiliency of the company's consolidated backlog is primarily a result of strong order intake within the fire and emergency segment, which ended the third quarter with its 11th consecutive quarter record backlog, as well as strong orders for school buses over the past year within the commercial segment. Municipal budgets remain strong with the backing of multi-year federal stimulus programs, plus local funds aimed at modernizing public service vehicle fleets. A total of five businesses within the fire and emergency segment and our Type A school bus business set records for order revenue within the quarter.

We believe this reflects the quality of our vehicles, strength of our brands, and breadth of the dealer network across our portfolio. The stability of municipal-based backlog provides long-term visibility for sourcing strategies and production planning as well as executing on our platforming and operational improvement roadmaps.

Industry leadership, arts innovation, and a continued focus on safety are among the reasons we hold top positions in the markets we serve.

Within the quarter, Horton Emergency Vehicles delivered its first ambulance equipped with the Horton occupant protection system featuring M-brace to New Orleans EMS. This advanced airbag safety system is designed specifically to protect emergency care providers against head and neck injuries during frontal impacts and rollover situations while they are inside the patient compartment.

M-BACE integrates an airbag into an innovative multi-point restraint that protects emergency care providers while allowing them mobility and freedom of work. It is an important milestone for the industry and example of our company's commitment to deliver solutions that provide safety enhancements to our nation's first responders.

Within the quarter, we converted earnings to cash with free cash flow conversion at 268% of adjusted net income. Quarterly net income was a two-year high and trade working capital decreased by $51 million sequentially. limited sales tax northern USbas andObseritates have lacked substantial access o

Year-to-date free cash flow conversion reached 110% of just the net income. We believe there is opportunity to continue to reduce our trade working capital over the next several quarters. We believe there is opportunity to continue to reduce our trade working capital over the next several quarters.

Despite the overall solid working capital performance within the quarter, consolidated inventory is $45 million higher than prior year, which includes $50 million of additional chassis. Just bubble up on theATA on the Mario Healthcare App Display and all the new features you must

In previous calls, I stated that we would be willing to accept delivery and put more chassis on the balance sheet due to the constraints we experienced in fiscal 2022. The increase in chassis inventory has helped our business plan production more efficiently, a key lever to the F&E and commercial segment revenue growth year-to-date. Exiting the third quarter, our chassis inventory secured not only fourth quarter production, but many cases production into and through the first quarter of next fiscal year.

As we exit the year, we will continue efforts to optimize total inventory by utilizing chassis pools and dealer floor planning arrangements.

Finally, today we are raising guidance for fiscal 2023. We are pleased with the momentum we are building with our productivity and product simplification initiatives. Within the quarter, several of our businesses saw improvement in their throughput rates, resulting in increased starts and completions.

With increased product completions, these locations are experiencing improved price realization as they work through their older backlog and produce higher price units that resulted from the price increases that were enacted over the past 18 months.

Increased throughput coupled with other operational improvements result in bottom line momentum within the F&E segment and helped two of three businesses within the commercial segment to exceed our 2023 profitability targets provided at the 2021 investor date. Within the recreation segment backlog and shipments from our two most profitable businesses have decided to pass to deliver on our fiscal 2023 margin guidance provided last December .

As a result, we have raised the consolidated midpointed guidance for net sales by 3% and adjusted EBITDA by 10% for fiscal year 2023.

Now turning to our third quarter results on slide 4.

Consolidating net sales of $680 million increased 85 million or 14% compared to the third quarter of the prior year. The increase was driven by higher shipments and sales within the F&E and commercial segments, partially offset by lower sales in the recreation segment. F&E segment sales reflect a 34% increase in fire group sales and a 51% increase in ambulance group sales.

The fire group increase was primarily the result of higher unit shipments, which benefited from an improved supply chain, price realization, and early success of productivity initiatives aimed at increasing throughput. Unit shipments of fire apparatus increased 30% from the prior year, reaching a 2.5 year high. Increased ambulance group sales were related to higher unit shipments as well as price realization from early rounds of increases enacted throughout fiscal 2021 and 2022.

Ambulance shipments increased 42% versus last year's trough that was impacted by supply chain and chassis constraints.

Record commercial segment sales continue to benefit from higher shipments of school buses and terminal trucks and price realization.

Due to the relatively short backlogs entering 2022, these two businesses have been the first to fully realize new pricing put in place last year. Lower recreation sales were primarily a result of lower unit shipments of non-motorized categories and an unfavorable mix of lower-priced gas units within the Class A business.

Consolidated adjusted EBITDA of 39.4 million increased 9.9 million or 34% versus last year with increased contribution from the fire and emergency and commercial segments partially offset by lower contribution from the recreation segment.

Higher contribution from the F&E segments includes improved results in both the fire and ambulance group.

Commercial segment EVA DA benefited from improved profitability in school bus and specialty businesses partially offset by decline in municipal transit business.

The lower recreation contribution was primarily related to fewer shipments and increased discounting within certain categories.

Please turn to page 5 of the slide deck as I move to a review of our third quarter segment results.

Fire and emergency third quarter segment sales were $323 million, an increase of 40% compared to the prior year. The increase in net sales was primarily due to increased shipments of fire apparatus and ambulance units, a favorable mix of higher content ambulance units, and price realization.

Fire group throughput increased sequentially and year-over-year to reach a two-year high in net sales. All fire businesses contributed with third quarter shipments, marking fiscal year-to-date high. The Holden plant, which received the majority of KME brand production after its footprint was rationalized, shipped the highest number of units since the third quarter of 2020.

Shipments of ambulance reached an 11-quarter high, resulting in the group's highest quarterly sales over the past six years.

All ambulance businesses increased throughput sequentially and year over year as improved material availability provided confidence to hire labor and ramp production throughout the year-to-date period. Success of productivity initiatives resulted in sequential unit shipment increases of 20% and 12% at our two largest plants.

F&E segment adjusted EBITDA was $18.1 million in the third quarter of 2023 compared to adjusted EBITDA of $1 million in the third quarter of 2022. The increase was primarily a result of higher volume, manufacturing efficiencies, and improved price realization partially offset by inflationary pressures. Fire group profitability improved 430 basis points for the prior year and 320 basis points sequentially. Group profitability was primarily due to higher sales volume, manufacturing efficiencies, and improved price realization at several plants.

The profitability at our largest fire apparatus plant reached a two-year high and our primary chassis plant reached a three-year high. The hold-in plant has continued to advance the integration of the KME branded product into its production cadence. Although these KME units are lower margin given the slow ramp and inflationary headwinds experienced since the move, improved starts and a more continuous workflow over the past two quarters has produced an extensive learning curve and instead will propose to produce

Probability that our largest fire apparatus plant reach a two-year high and our primary chassis plant reach a three-year high. The Holden plant has continued to advance the integration of the KME branded product into its production cadence. Although these KME units are lower margin given the slow ramp and inflationary headwinds experienced since the move, improved starts and a more continuous workflow over the past two quarters has produced a great completion of these units.

and accelerated the plant's opportunity for improved sales and margin in fourth quarter and beyond. Ambulance Group profitability improved 670 basis points compared to last year with the largest plant reaching a five-year high in adjusted EBITDA margins and dollars. Year-to-date, two of the group's four businesses have reached the 2023 margin target provided at the 2021 investor date. There has been significant progress in the other two businesses as well with year-to-date margin improvement of 370 and 500 basis points compared to the same period last year. This momentum positions Group well to achieve our intermediate margin.

Target goal set forth at the 2021 investor day. Record F&E backlog of $3.2 billion increased 49% year over year reflecting strong orders and pricing actions.

Industry demand remains above historical trends with a unit year-to-date book-to-bill ratio of 1.4 times.

Our lead times remain industry-competitive and our pricing strategy will continue to consider current and anticipated inflation that aligns with expected delivery dates.

Today's update to the full year outlook anticipates maintaining the F&E segment third quarter revenue run rate with approximately 50 to 75 basis points of sequential margin improvement as we continue to execute on our rev drive operational excellence initiatives and produce more current price units.

Turning to slide six, commercial segment sales of $143 million was an increase of 29% compared to the prior year. The increase was the result of higher unit sales of school buses, terminal trucks and street sweepers, and price realization, partially offset by an unfavorable mix in supply chain challenges in the municipal transit bus business. Within that business, we continue to experience shortages of key components such as seats and wiring harnesses that are creating manufacturing inefficiencies and limiting shipments of complete units.

Commercial segment adjusted EBITDA of $11.6 million increased 71% versus the prior year. The increase in EBITDA was primarily a result of higher shipments and price realization within the school bus, terminal truck, and street sweeper businesses partially offset by the inefficiencies in the transit bus business.

Commercial segment backlog was $508 million at the end of the third quarter, a decrease of 4% versus the prior year. The decrease in backlog is primarily a result of higher completion rates of school buses, terminal trucks and street sweepers, and lower orders for terminal trucks and street sweepers, partially offset by record orders for school buses in the third quarter.

Unit backlog for terminal trucks and street sweepers have normalized in the three to four month range at current production rates and the municipal transit has normalized approximately twelve months while school bus backlog remains higher than the historical trend.

In the fourth quarter, we expect commercial segment revenue and adjusted EBITDA margin to be similar to the past two quarters.

Turning to slide seven, recreation segment sales of $215 million was down 16% versus last year's quarter. Lower sales were primarily a result of fewer shipments of Class A, Class B, Tow-Bold and Camper units, an unfavorable mix of Class A gas units which carry a lower average selling price and increased discounts in certain categories.

Partially offsetting the decrease were higher sales of Class C units and price realization. Recreation segment adjusted to EBITDA of $18.4 million was a decrease of 38% for a prior year. The decrease was primarily a result of lower shipments, an unfavorable mix of Class A gas units, and increased discounting of certain categories partially offset by price realization and material savings.

Segment backlog of 409 million decreased 67% in the first prior year.

The decrease is primarily due to continued production against backlog and order cancellations primarily in the tollable, camper, and Class B categories.

The overall segment net book to bill ratio, including our order cancellations, was 0.6 times within the quarter. However, over 90% of third quarter unit sales were replaced with orders for new model year 2024 units. The overall segment net book to bill ratio, including our order cancellations, was 0.6 times within the quarter unit.

Sequentially, new model year orders increased 13% compared to the second quarter.

Acciting third quarter, a motorized business.

This is represented over 90% of year-to-date segment profit and the backlog in those categories remain in a normalised range of 6-8 months.

Today's updated guidance lowers the outlook for full year recreation segment revenue and as a result, it's adjusted EBITDA dollars to reflect soft consumer demand and cautious dealer stocking activity primarily in the total, camper and Class A categories.

We now expect full year segment revenue to be down mid-single digit versus last year's record performance. This is a slight decrease from the prior outlook of flat to down low single digits and reflects lower production rates that are aligned with lower order rates in the categories I just mentioned.

Adjusted EBITDA margin is still expected to be in the high single digit to 10% range as your work clawback material cost increases.

flex costs to reflect lower sales activity in the categories mentioned, and our expectation that Class B and Class C categories will continue to perform at a high level as they produce against backlog. advice at Dream well for all.

Turning to slide eight.

Year-to-date cash from operating activities totaled $73.4 million, which reflects a strong third quarter performance. Trade working capital on July 31, 2023 was $313 million, a decrease of $34 million compared to $347.8 million at the end of fiscal 2022 and a $50 million reduction sequentially. We spent $9.1 million in capital expenditures resulting in year-to-date free cash flow of $53.7 million. Net debt as of July 31 was $168 million, including $11 million of cash on hand, a reduction of $53 million compared to the second quarter. We declared a quarterly cash dividend of five cents per share payable October 13 to our shareholders record on September 29. At the end of the quarter, the company maintained ample liquidity with approximately $356 million available under the ABL revolving credit facility and our net debt to EBITDA leverage ratio is 1.2 times below our stated target range of 2 to 2.5 times. Debt reduction and internal investments to drive organic growth remain our top allocation priorities within today's rising rate environment.

Turning to slide 9, as I mentioned earlier, today we are raising our full year outlook for net sales, adjusted EBITDA, net income, adjusted net income, and free cash flow. The outlook for revenue is now in the range of $2.55 to $2.6 billion, an increase of $75 million at midpoint. The range of adjusted EBITDA has been raised to $135 to $145 million, an increase of $12.5 million at the midpoint. Increase for adjusted net income is now in the range of $63 to $73 million, and we raise expected cash conversion to 100% or greater with free cash flow in the range of $70 to $75 million. Thank you again for joining us on today's call.

We would now like to open up the call for questions. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Our first question comes from Jerry Revick with Goldman Sachs. Please proceed with your question.

Hi, good morning everyone. This is Jakin Khanna on behalf of Jerry Ravitch. Excellent fire and emergency bookings. How much higher would you estimate the booked margins are compared to what flowed through the 5.6% margins this quarter? So the booked margins, is that the question? Right, just an estimate of the book margins and how much higher are they compared to what flowed through the quarter? Yeah, so I think over the last several quarters we've talked about the price increases we've put in over the past 18 months and within the fire and emergency segment. There's a little bit of difference between the ambulance and fire businesses, but on ambulance we've said it's...

If you compound them, it's about 40% and 35 on the fire side. So obviously, that's accreted to the margin profile for the orders that are coming in. And that's since the implementation date of two years ago, right? That we've talked about over the last 18 months or so. So there are some... Obviously, the mix is a little different than the quarter, so we quote price realization. So that's the realization that we would get over the life of that backlog.

from start zero to the end of the backlog. Thank you very much. I'll pass it on.

Our next question is from Mike Schlitzke with DA Davidson. Please proceed with your question.

Good morning and thanks for taking my question. Maybe I wanted to ask first about chassis supply going forward. There have been some cutbacks in call the class 5, class 4 through 6 maybe chassis over the last couple of quarters. It doesn't seem there's going to be much improvement ahead from what I've gathered so far. I'd just be curious to tell us how you feel about your business as chassis supply particularly on the ambulance side over the last couple of quarters here.

Yeah, Mike, like we said, we feel real good about our chassis supply. And like in my prepared remarks, I did quote, we have chassis supply through Q4 and then on the ambulance side, there's obviously a mixed difference between bands and mods, but looking out through Q1 at our current production rates, we would be secured with our chassis supply through Q1 and in some cases beyond that. So we feel real good on the ambulance side of having chassis availability. The mix might be the only challenge from that perspective, but overall we feel good that we have at least physical chassis on the ground through Q1 of next year. Yeah, and just to kind of follow up on that answer, so when you say you've got chassis supply, you have physical chassis on the onsite. I guess I'm kind of curious where you've got a plan in place if there were to be any major labor disruptions with some of the contracts at the automakers out there, which do build some of the commercial chassis too. Just curious if you have to have any kind of plan in place or if you do have one.

Yeah, I would say... Yeah, Mike, I would say the biggest impact is like I quoted there is the mix, right? So we have physical chassis on hand and our production schedule obviously goes out a few months, so we're already looking at what units we have produced against. If there were a strike or contracted supply of some sort, we just might have a different mix that we would have to then change our production schedule. But given it might come up here in the next week or so, we'll be able to revert to a different...

schedule based on what ultimately happens there. So it's really a mixed discussion and making sure that we can change our production plans to meet what chassis we do have on hand.

Okay.

Okay.

I just wanted to ask about recreation real quick as well. This marked the first quarter below 10% margins in quite some time, even with all the seasonal ups and downs, you had a pretty good margin run here. You're now below 10% as of this quarter. I know there are some ups and downs seasonally. I'd be curious if you feel like maybe over a 12-month period, whether it's the next 12 months or a near-term 12-month period, whether you could hold the line on the double-digit margin.

I'm curious in particularly whether you've got so many New Year orders, such solid orders for the New Year models, whether you've got good pricing there to get decent enough margins.

Yeah, I think so, again, we're not gonna give 24 guidance here, but we've always said that we feel comfortable we're gonna be in that 8% to 10%, which is our range, and I think our... Well, we quoted in the call there, we are seeing some momentum in the new orders that we're seeing in 2024. We did have less 22 and 23 units than our competition on the dealer lots, as we've talked about previously. We didn't get ahead of ourselves in the last two years, and we actually produced at a relative modest level, so we don't have a lot of aged units out on our dealer lot, so we've seen a nice take rate on the 24s, as I said, in my prepared remarks. And again, the next couple of weeks are gonna be key for the recreation, see what the market's gonna do at the Hershey show this week, and then open house in two weeks in Elkhart. So we'll see what the consumer demand is, and then also with our dealers in the open house in a couple of weeks. So we'll be able to see what the order appetite's gonna be going forward coming out of the performance of those two shows. Thank you very much.

Yeah, I think so. Again, we're not gonna give 24 guidance here, but we've always said that we feel comfortable. We're gonna be in that 8 to 10%, which is our range. And I think our, you know, what we quoted in the call there, we are seeing some momentum in the new orders that we're seeing in 2024. We did have less 22 and 23 units than our competition on the dealer lots, as we've talked about previously. We didn't get ahead of ourselves in the last two years, we actually produced at a relative modest level. So we don't have a lot of aged units out on our dealer lots. So we've seen, you know, a nice take rate on the 24s, as I said in the, in the, my prepared marks. And again, the next couple weeks are going to be key for the recreation, see what the market's going to do at the Hershey show this week, and then open house in two weeks in Elkhart. So we'll see what the consumer demand is and then also with our dealers in the open house in a couple weeks. So we'll be able to see what the order appetite is going to be going forward coming out of the performance of those two shows. Okay, exciting. I'll pass it along. Thanks so much.

Thank you. Our next question is from Meg Dobrik with Baird. Please proceed with your question. Thank you. Good morning guys and congrats on the quarter. Maybe to follow up on Michael there with recreation, just a point of clarification here. I heard you, I think, in your prepared remarks say that 90% of sales were replaced with new orders in a quarter. By my math that would imply $193 million of orders that you have received in recreation. The gap would be, call it, give or take, $60 million relative to the bookings you reported. Is that all cancellations that still happen in this quarter? Yes. Yes. Okay. So when we are looking at the backlog that you have here, the $409 million, do you anticipate any need for additional cancellations? Because it seems like all of that is coming from towables and such. What is that backlog mix at this point? Apeople not showing up.

you know, should we start to think that orders start to normalize here relative to current levels of demand going forward? Yes, yes, they will and you're exactly right Meg. The toll bulls has hit the trough here and it's actually lower than historical norms. So, you know, it's very shortened. So that backlog has been exhausted from a toll bulls perspective. And when you look at our other businesses we still have, you know, normalizing in our Class B and C, we still have an extended backlog from a historical trend there. So it is, we would expect as the shows or as orders, or as demand picks up that we'll see a backlog. I think most of the cancellations have flushed through the backlog now, especially with the 23 and 22 orders obviously. So it's more around just the new products we have in 24. So, going back to that math, the 193 million,

start to think that orders start to normalize here relative to current levels of demand going forward? Yes, yes they will and you're exactly right Meg. The toll bulls has hit the trough here and it's actually lower than historical norms so you know it's very shortened so that backlog has been exhausted from a toll bulls perspective and when you look at other businesses we still have normalizing in our class B and C we still have an extended backlog from a historical trend there so it is we would expect as the shows or as orders or as demand picks up that we'll see a backlog I think most of the cancellations have flushed through the backlog now especially with the 23 and 22 orders obviously so it's more around just the new products we have in 24. So going back to that math 193 million you would say that that order.

intake is actually pretty reflective of demand and that's, as we're thinking about your production maybe into 2024, we should be thinking of ranging it around that level. Is that kind of the right takeaway here? No, I think on the motorized, it's reflective of motorized, I think there is gonna be, again, I would say that Tobol's is at a trough right now, so we would see some pickup on the Tobol site, but again, we don't have a lot of exposure as you know on the Tobol site, so it's not gonna swing significantly from a backlog of revenue dollars, but wood on the unit's perspective. So again, our backlog's almost been fully exhausted at Tobol's with probably a month sort of backlog there, so I would expect that to normalize back to the maybe two to three month basis as we've seen historically. And I'm sorry, last question on this segment. In terms of production in the fourth quarter...

pretty reflective of demand and that, as we're thinking about your production maybe into 24, we should be thinking of ranging it around that level. Is that kind of the right takeaway here? No, I think on the motorized, it's reflective of motorized, I think there is gonna be, again, I would say that Tobol's is at a trough right now, so we would see some pickup on the Tobol side, but again, we don't have a lot of exposure, as you know, on the Tobol side, so it's not gonna swing significantly from a backlog revenue dollars, but it would on the unit's perspective. So again, our backlog's almost been fully exhausted in Tobol's with probably a month sort of backlog there, so I would expect that to normalize back to the maybe two to three month basis, as we've seen historically. And I'm sorry, last question on this segment, in terms of production in the fourth quarter for Tobol.

Where are you relative to sort of, and market demand? Are we to infer here that your production has been drastically curtailed as well, close to zero in towables in the fourth quarter, or not? Not zero, it's about a one month backlog, so again, it's somewhere in the 80 to 120 units a month there. So down 50%, similar to the market, right, as we've traditionally done in the 200 type range, 150 to 200. Okay, okay. Then I have a couple more questions on fire and emergency, and I guess the first one, I appreciated all the details in terms of the moving parts within that segment, but just for clarification, which portions of the business are still operating its suboptimal level relative to...

your longer term plans, so where do we still need to see recovery and how much visibility do you have in terms of a timeline here for where you expect full normalization? Yeah, we're still working through that big. It's really on a plant by plant basis and the new management team we put in there with the President and COO is really reflective and why we wanted to give that level of detail just to show that we are, the President and the COO are addressing these location by location and we have localized plans as we've talked about before. So there is work to do, obviously we're not there, our extra rate doesn't imply that we're gonna be at that target, so there's probably half of the businesses still have some work to do to get us to that full range that we're talking about, 7% to 8% in the midterm here and then obviously long term we feel real good with the momentum we've built and the price realization and the margin expansion that we'll see in Q4 and then as...

the aged units exit the backlog with the new pricing we put in, then we'll see margin expansion with that throughput increase. Right. When we're looking at the backlog itself, $3.2 billion, can you help us understand how much of that is deliverable in fiscal 24? And I guess related to your earlier comments about higher pricing flowing through now, why shouldn't we think about your exit run rate from...

aged units exit the backlog with the new pricing we put in, then we'll see margin expansion with that throughput increase. Right, when we're looking at the backlog itself, $3.2 billion, can you help us understand how much of that is deliverable in fiscal 24? And I guess related to your earlier comments about higher pricing flowing through now, why shouldn't we think about your exit run rate from Q4 margin as kind of the anchor?

for fiscal 24 marginal together. Thank you. Yeah, I think that's right. That is the anchor going forward, so we will see momentum coming off of that. I would say on the buildable part of 24, we're still working through, obviously, our plan for next year, so I don't wanna give the guidance there. We are working to also increase throughput there, so exiting Q4 will get a better sense on what we're gonna do from a throughput, as well as a ramp perspective. We still have ramp opportunities in majority of our businesses to get back to either historical highs. We are seeing labor, more quality labor come in, as well as have implemented gain share programs that have been effective in increasing throughput here, so we continue to pull some levers to increase throughput, so I would hold off to say what's ultimately gonna be buildable in 24.