Operator: We go next now to Patrick Donnelly at Citi.
Patrick Donnelly: Maybe kind of a follow-up on the 1Q guide. It seems like, again, the order’s encouraging. Maybe a little bit prudent on the guide, as you said, I guess when you think about just the implication for the ramp 2Q to 4Q, is it optimism in the market based on some of those order trends is that obviously the comps get easier in the second half as you work through it. And can you just talk about the visibility into the recovery and kind of what gives you the confidence in the ramp as the year progresses here?
Mike McMullen: Yes, sure, Patrick. I want in lead off, Bob, and then you can add any additional comments you’d like to make here. But when we think about these comps around what we described as a gradual recovery and grow. I think is, first of all, important to remind the audience that we do expect the first half of the year to be very much like what we saw in the second half of ’23. But looking forward, why do we think that things are going to be different in the second half which is though it’s initial and still early, there are some early signs of potential stabilization that you see in our order book. The fact that book-to-bill for the company was above 1, the fact that we had the same result in our instrument business, which has been the most pressured part of the company.
And listen, while it’s too early for customers to be confirming their 2024 budgets with us, let’s go back to the sales phone, which is a predictor of potential growth, right? So our sales funnels continue to show a lot of interest from customers. And we know that at some point in time of things will start to release. The funnels remain healthy. And listen, an environment like this, we’ve seen these things before, which was healthy capital spending has been constrained. So some release can be expected. And we hear — I don’t want to get too down my skies on this, but we hear customers talk about some new focused investments. And I think we’re not calling for a big broad-based market recovery, but certain segments of the market are going to be better.
We’re talking about some investments in R&D tools, what’s going to PFAS testing capacity expansion plan we’re hearing from our customers, Advanced Materials. And then as you mentioned earlier, Patrick, there’s an easier compare in second half ’24 as well. So we do expect this return to growth. And I think as — it’s not simply a hope. We’ve got some information to be kind of back up our thinking there. Again, we’ll know a lot better about how things look when we get to the budgeting phase of our customers in early 2024. Again, right now, the markets for capital — instrument still remain quite challenged. And as I mentioned, we are seeing encouraging signs of potential stabilization, but it’s going to be a journey for our return into growth.
And I think our guide reflects that. And again, I think we’re — we’ve got a high degree of confidence this is what the back half of the year will look like.
Robert McMahon: Yes. And Patrick, you asked about Q1, as I mentioned in the prepared remarks, I think we’re taking a prudent approach here. but we’re also going up against last year where we did have a budget flush and happened earlier in the year but for delivery in November and December, and we’re assuming that we’re not seeing that or building that into our into our estimates. So that happens, then it would be — that would be a nice thing for all of us.
Mike McMullen: Yes, absolutely, Bob.
Patrick Donnelly : That’s helpful. Bob. And maybe, Bob, just on the margin side, helpful to hear you talk through a few of the different moving pieces. It sounds like some cost savings in DGG, among others. I guess can you just give a bit more color on kind of the moving pieces, where you’re pulling levers, the ability to take out some additional costs to hit these margin numbers. Obviously, you talked about margins being up a bit. I think there are some headwinds like incentive comp, things like that. So maybe just talk about the gives and takes there and confidence in terms of some of the cost outs.
