Mike Pack: Yes. Yes, you quantified that correctly at $35 million. That’s really a first year phenomenon. So once you’re ramping up, I would expect that as we sort of flip to next year into 2025, there’s going to be meaningful growth in revenue from NGDV and then 2026 is going to be sort of full rate production. That’s a program we’ve talked a lot about. It’s going to be – it’s a great good solid margin program. So that – it’s really just a first year phenomenon when you’re kind of working through that low rate production, which is going to start in April.
Seth Weber: Okay. Thanks, Mike. That’s helpful. And then just on the – your comment about on access, I think you said $20 million of new product development. I’m just trying to conceptualize, like is that the new normal going forward? And I’m just trying to think through like our incremental margins structurally closer to 20% versus 25% that we used to think about – like is this a business that you’re just going to be throwing more money at big picture like is this going to be an annual kind of step-up that we’re going to see going forward? Or is there something unusual here that’s triggering this big inquiries?
Mike Pack: No, I wouldn’t normally – I think that it’s – I think if you look at earlier last year in particular, I think we’re probably more at that run rate for NPD right now. Earlier in the year, though, there was – with supply chain challenges, there’s a lot of focus on battling through supply chain challenges and so on. So, I would – I truly – I think the way to think about access margins is the 20% to 25% incrementals. It varies a bit based on product mix. have your boom that’s going to be generally higher. Some other products could be slightly lower. So, I think right now, it’s really sort of the math equation that revenue is up about $200 million. And it just so happens with NPD being up, that ends up being about 10% of the incremental.
Seth Weber: Got it. Super helpful. Thank you guys. Appreciated.
Operator: Our next question comes from the line of David Raso with Evercore. Please proceed with your question.
David Raso: Hi thank you. After the first quarter guide, you’re implying the rest of the year has down earnings year-over-year. And I’m just trying to understand if you could break up the $80 million of new product development, the investments you spoke of between access, Vocational and Defense. What’s the cadence of that throughout the year? Just so we get a sense of how you’re thinking about the rest of the year after 1Q being down. I also know the interest expense will be higher obviously driven a bit by AeroTech. What is the interest expense number for the full year as well? Thank you.
Mike Pack: Yes. I would say – now keep in mind with interest, there’s two dynamics, because we had about $800 million of cash last year. So, we were earnings about 5% on that early in the year. So, I would look at interest as being a $35 million headwind year-over-year. So, I think that’s certainly a good question on your part there that is a driver. The NPD is fairly spread over the course of the year. So there’s not a big dynamic. I think if you were to look at all the quarters, what I would expect is that you’re going to see that the two highest quarters are going to be the middle two quarters. I think we do certainly have startup expenses related to defense. So that comes into play as well. And that’s sort of over the course of the year. So I don’t really see a step up necessarily in NPD or those startup costs will be sort of the heavy in the second quarter as well. So that’s how I think of it…
David Raso: The interest expense on – Mike, on an absolute level, you’re thinking it for the full year around $100 million. That’s the net interest income and the whole net interest income…
Mike Pack: Well, look net-net, I would say – net-net, I would expect that net interest expense is going to be up about $35 million versus prior year.
David Raso: Okay. So 2023 was net $53 million-ish, it’s like $85 million [ph], the net of those two line items, interest expense and interest income, right? That’s the comparison. The $35 million of those two net, correct? Just – I just want to make sure I’m modeling that correctly?
Mike Pack: I think, that’s correct.
John Pfeifer: Yes, you’re right there. You’re right.
David Raso: Okay. And real quick, I’m just curious, the backlogs are impressive and how far they go out. I assume you’re starting to have some conversations about 2025 for the Access business. Just curious, obviously, folks are aware yourself and others are adding capacity. Any conversation impact from these capacity additions? I mean, we know the players in Mexico and what they’re looking to add and not saying historically they’ve penetrated the rental companies significantly, but maybe they’re now getting around the import tariffs and so forth with the base in Mexico. So just curious, what are the early conversations like with that capacity potentially coming on? Thank you.
Mike Pack: Well, I’ll answer this John. David, I’ll answer that question. When we look at the capacity we’re adding in Jefferson City, Tennessee, that does a lot for us and it does a lot for our customers, and we need that capacity. And we study this very carefully and we study it carefully even with our customers. I’m going to say that first of all with regard to telehandlers, JLG has not really had significant inventory of telehandlers in probably a decade. So when we make a significant investment to expand capacity, there really is a rigorous process that we use before we make any commitments. And we survey the market, our customers desire to have our brands in their fleets, and we will also always build in our ability to pivot if there’s a market issue that arises.
We don’t see a market issue on the horizon at all. We understand the competitive dynamics, but we also understand our position in the market and what our customer’s desire is for our product and their fleets. And then we talk, that includes our new ag end market that we’re already serving today. And we see the significant opportunity that we have with the channels that we’re serving there. So we feel that we have a very prudent, well thought out capacity plan for Access Equipment. And that capacity, by the way, doesn’t just help us with telehandlers. It also helps us with booms where we need more capacity because it frees up boom capacity for us in other places. So this is a well thought out plan. We have to have the capacity to continue to meet the needs of the market, which we expect to continue to grow.
And that’s in spite of whatever the competitive dynamics that we see alongside us as we continue forward.
David Raso: That’s helpful. I appreciate the color. Thank you.
Mike Pack: Thanks.
Operator: Our next question comes from line of Mike Shlisky with D.A. Davidson. Please proceed with your question.
Mike Shlisky: Hey, guys. Good morning. I guess, I was curious, what has the USPS told you about their readiness for receiving the first NGDVs and the higher run rates in 2025 and 2026? I guess I’m asking with respect to whenever EVs are sold, their kind of readiness on the infrastructure for charging, and then more broadly, the ability – the driver training and the mechanic training. I’m just kind of curious to see if how confident you are that when you’re ready, they’ll be ready to actually take the vehicle? Thanks.
John Pfeifer: Yes. Great question. This is John. I’ll answer it. We work really closely with the United States Postal Service, including myself and the Postmaster [ph] General. I mean, we’re very connected. We know where they are planning to put the first vehicles. We know what their readiness is. We are planning to work very closely with the United States Postal Service to onboard vehicles. And as you mentioned, training and making sure that things go really well in the early days. We talk about our slow ramp. We start production in a couple of months, and we talk about our slow ramp. Part of that slow ramp is because together with the United States Postal Service, we want to make sure right from the beginning we really get this right, and then we start to increase production more significantly in 2025 to get the full rate production in 2026.
That’s all well thought out together with the postal service to make sure that we’re putting vehicles where we’re ready to put vehicles and where the postal service is ready to put vehicles. So we feel like we’ve got a really good solid plan and the postal service is really leading the way on their development of being ready to take vehicles.
