David Manthey: Yeah. It’s a great problem to have. All right, guys. Thanks for the overview. Good luck.
Neil Schrimsher: Thank you.
Operator: Our next question comes from Chris Dankert with Loop Capital. Please proceed.
Chris Dankert: Hey. Good morning, guys.
Neil Schrimsher: Good morning.
Chris Dankert: I guess, hoping to dig in a little bit more on gross margin here. I mean, really impressive beat in the quarter versus what we were looking for. I mean, can you kind of maybe parse apart what was really driving that? I mean, was it freight? Was it price/cost? Was it just kind of the internal execution you’ve been going through here? Any other color you can kind of give us on what really drove gross margin in the first quarter here?
David Wells: Yes. Beyond the 41 basis point year-over-year benefit from LIFO that we broke out, you’re still up 40 basis point year-over-year. So Q1 is typically our seasonally softest gross margin quarter as some rebate programs, etc., reset. But really solid execution across all aspects, thinking about some of our margin enhancement initiatives focused on freight recovery, kind of the work around operations excellence there, really all the levers hitting there. So nice work by the team. Despite Engineered Solutions growth being more modest, nice contribution still from the mix standpoint there. And that we talked about it, segment gross margins and obviously the EBITDA margins up very nicely. So even on that lower volume, driving a nice mixed contribution there.
So really that 40 basis points year-over-year operational improvement, 20 basis points sequentially, there’s no one factor that just sticks out. Kind of price/cost drill neutral as we think about how that’s reading through the P&L. And just really continued solid work by the team and thinking through all the levers, continuing to focus on the pricing for the value that we’re driving on the Engineered Solution side of the business. And like I said, really hitting on all cylinders on that front.
Neil Schrimsher: Yeah. And Chris, I’d say, I’m pleased with the execution and the performance in it. I think Dave covered from a LIFO standpoint. We would expect similar — perhaps the $4.5 million to $5 million in the next quarter as we think. A couple of things did align in the quarter. So if I think about it for the second quarter, I think perhaps we may be down sequentially in that side, perhaps more at the 29.5 or so in that area. But still good strong performance as we’ll operate in the second quarter.
Chris Dankert: Got it. Thanks so much for the color, guys. And really nice execution by the team. I guess, to move to Service Center here, I know you don’t typically comment on the month, but maybe just any comments on October-to-date there? I mean, is Service Center kind of down in line with the overall guide for kind of low-single-digit pullback here in 2Q?
Neil Schrimsher: As we think about it in the quarter performance, I think the Service Center segment has performed well. And so we think about flattish overall, we could have — in October, we could have Service Centers probably being a little better than that at this stage.
Chris Dankert: Got it. And if you’d indulge just one more, I’m curious, just on your backlog in Engineered Solutions has been pretty elevated. Is that kind of back to normal levels here? Have we seen any cancellations? Just any commentary on backlog would be great.
Neil Schrimsher: Yeah. I’d say, overall, backlog as we think about it, we’re still pleased. We think back pre-pandemic to those levels as historical norms. We’re still going to be operating at a 2 times plus from a backlog standpoint. So that’s encouraging for us as we think forward. In the quarter, we did have some conversion of that, as expected. We would expect further of that in this side, but teams are doing a nice job of how we’re working to engineer new solutions and add to that anytime that including in technology. If there’s a slowing or a little bit of lull, it allows teams to work on solutions. But we’re encouraged, especially in industrial off-highway mobile, that backlog, that level and what we’re doing to convert.
