We’ve all taken a pretty close look at just our overall inventory health. There’s a bit of inventory cleanup here as we work towards the end of the year. And then I would say, maybe to a lesser extent, a third factor being a modest impact from some of the customer wins that I mentioned that are driving some of our above market growth in the education space. I think those are probably the key factors. As I go below the GM line, there is some modest step-up in SG&A, really, particularly on a sequential basis as we think about maybe not some of the transactional FX tailwinds we saw in Q3 repeating and some onetime SG&A benefits that we saw in Q3 that we don’t expect to repeat in Q4. But it’s primarily all held up at the gross margin level, Vijay.
Vijay Kumar: That’s helpful, Michael. And yes, I did notice your free cash performance certainly at the high end of the industry, so if it’s not on the (ph) free cash. Maybe one for Brent here on — Brent, what’s the right way to think about ’24? I’m not asking for guidance. It’s more — what is the right jump-off point? Should I be looking at Q4 trends? And is that the jump-off point or are there some one-off items here in Q4 because I think that implied as maybe 17.5%, sub-17.5% adjusted EBITDA margins. Is that the right jump-off point we should be thinking of for about next year?
Brent Jones: Yes. One, good to speak with you. I think following on Michael’s comments, it’s too early to get to the exact jump off for ’24. We are in the middle of our budget process. There are so many puts and takes there. So I don’t think it’s the right time to make the call, but we’ll be talking to everyone again soon. And we’ll definitely go in our normal guidance — normal cadence pardon me and give you clarity in the months to fall.
Vijay Kumar: Understood. Thanks guys.
Michael Stubblefield: Yeah.
Operator: Our next question comes from Jack Meehan with Nephron Research. Jack, please go ahead. Your line is now open.
Jack Meehan: Thank you. Good morning. Michael, I wanted to ask about what you’re seeing at large pharma and large biotech. You described it as stable. We have seen some headlines around budget cuts from some large players. I was just curious what you’re seeing and what you’re assuming kind of the fourth quarter?
Michael Stubblefield: Yeah. Good to hear always. Jack, thanks for the question. I think as you look at the results that we just printed and the reconfirmation of our guide for the fourth quarter, we really are seeing the trends that we originally discussed maybe back in the second quarter persisting through the back half of the year. And that’s including the research environment within Biopharma. The funding headwinds that we ran into earlier in the year on biotech seemed to have bottomed out in the second quarter. We saw relative stable revenue performance in that customer segment in the third quarter, and we’re assuming something similar for the fourth quarter. Under the heading of, I would say, positive signal and sentiment.
I think if you look at funding for biotech, there is maybe some incremental bright spots in that space here over the last quarter or two that keep us optimistic about that space. But we’ve got the bottom there, and we’re assuming stability here in the fourth quarter. Large pharma — mid- to large pharma is an area where we also were starting to see some cautionary spending trends creep into the business there as we emerged from the second quarter played out largely in line with expectations in the third quarter, and we’re assuming that those trends continue here in the fourth quarter. I think when I step above funding and budgets and kind of the cautionary posture that we see in the market right now, we ultimately hang our hat on just the promising science that is being funded.
The pipelines are incredibly robust. There’s a number of blockbusters moving their way through the pipeline activity level continues to be quite strong. And as I’ve referenced a couple of times, the commercial intensity that we’re applying and have been applying over the last number of months really has us positioned well here — our activity levels with our customer. As we think about heading into the year-end here is as strong as it’s been all year. So we continue to be cautiously optimistic here as we close out the year.
Jack Meehan: Great. And then, was wondering if you could share your thoughts on capital equipment, instrumentation? Just what your expectations are for the fourth quarter? And maybe more broadly, we’re seeing a little bit of a used market emerge or equipment that was placed on the last few years. I was curious, if you’re seeing any examples of that and what you think is going on? Thanks.
Michael Stubblefield: So as you know, the capital equipment part of our business is relatively modest. It’s less than 15% of our revenues. And it tends to be focused on kind of the lower dollar value purchases within our customers’ budgets, I think less than $50,000 type equipment and instruments. And we’ve seen, I would say, relative stable performance on a dollar basis over the last couple of quarters. I think when we look at how we reported the quarter, there’s a modest step down on a percentage basis, but that’s more driven off of just the year-over-year comps, but the revenue has been relatively consistent over the last couple of quarters. And we’re — our expectation is that continues into the fourth quarter. And of course, as we get into the fourth quarter, it’s not — it’s quite topical or timely to talk about year-end budget flushes and which is a dynamic that we would typically experience towards year-end, and it’s primarily concentrated in this area of capital equipment as customers look to close out the year and use their available budgets As we signaled in the second quarter and consistent with the way we’ve guided the back half of the year, we’re not expecting a year-end budget flush.
And so as I think about the fourth quarter on a relative revenue performance, we would anticipate a capital equipment spending in Q4 to be similar to what we saw in the third quarter.
Jack Meehan: Sounds good. Thank you.
Operator: Our next question comes from Michael Ryskin with Bank of America. Michael, please go ahead. Your line is now open.
Michael Ryskin: Great. Thanks for taking the question, guys. And great to work with you, Brent. Looking forward to it. First, I want to talk a little bit about sort of the curve improvement as it shows up going forward. I think this quarter, you guys really talked about encouraging trends, sentiment improvements, just more positive feedback, not so much orders improving or anything like that. But as we think through going into next year and beyond, how should we visualize that curve of the rebound? It’s been more than four quarters of challenges in the market and for you in terms of declines and destocking some of these pressures. So once things do inflect back up. Is it going to take four quarters to get back to normal or is it going to move a little bit faster than that, just because once it’s flushed out, it will come back quickly?
