Gregory Lovins: Yes. So as you said, Josh, seasonality in the last few years has been pretty unique with a lot of the destocking in 2022 and 2021 and then the destocking we saw in 2023. But generally, we would expect some seasonality benefit moving from Q1 to Q2, just like we talked about in the first quarter, we had a seasonality impact from inland base apparel in our Asia business from Lunar New Year, we get a little benefit of that volume from Q1 to Q2. At the same point, as I talked about, we have a little bit of sequential inflation that takes us a little bit, as I mentioned a few minutes ago, to cover that. And also our annual wage inflation for us kicks in on generally April 1st each year. So that’s a sequential headwind from a cost perspective as well.
And we’ll obviously be implementing productivity initiatives to cover that, but it is a sequential impact when we look Q1 to Q2. So again, and then that pull forward kind of brings it down. Without the pull forward, our underlying business, as I said, would be up sequentially without that.
Operator: Our next question comes from the line of Chris Kapsch from Loop Capital Markets. Please proceed with your question.
Chris Kapsch: Yes, hi. Good afternoon. So my question is focused a little bit more on strategically addressing the intelligent label opportunity. And it’s — that RFID adoption expands beyond traditional, say, item level apparel and into other verticals. Based on sidebar conversations we’ve had and at our recent conference, we talked about this, but your efforts to use sort of value selling techniques to capture more of the value that a program brings to bear in a given application or vertical beyond just sort of a cost-plus pricing paradigm that might be the case with a more straightforward solution like logistics shipping labels, for example. So I’m just wondering in terms of that value proposition for a use case that brings something like inventory accuracy or to help with shrink or replenishment or to prevent stock outs or to help sales.
Just wondering if that approaching these potential new use cases with more of that value selling proposition? How is that going? And is this something that could sort of change the paradigm in terms of potential margins for this business as growth persist going forward? Thank you.
Deon Stander: Thanks, Chris, for the question. Yes, so I’ll just remind, Chris, in the discussion that we had as well, is one of the reasons why we have such conviction around the growth potential of the business is just the scale of the opportunities in these adjacent categories. And I think I said before, food is in an order of magnitude, 4x or 5x larger than our apparel opportunity in total. And we’re only there 40 or so penetrated. Logistics is 60 billion units relative to apparel of $40 billion. And all those segments are still at the nascency where we see an opportunity to help sort of connect the physical and digital by leveraging both our RFID capability and some of our other capables we have around data management and material science as well.
And that gives us the confidence as we look forward to know that we’ve been investing in this. And now as these markets slowly start to adopt, we’re starting to see that the benefits that we think are there are manifest in those segments, and we believe will also be ubiquitous when you look at broader segment adoption as well. I think the approach that we’ve taken, as we’ve looked into these segments is one that we’ve been building on for a while, Chris, which is what is the scale of the differentiation of the total solution we’re able to bring to bear in those opportunities. And clearly, the more differentiated the easier it is for us to have more of a premium of value that we’re able to recover, but also scale of the opportunity of the value we’re providing our customers is actually large in that regard.
And we’re seeing some of that come to bear in some of the trials and pilots and small rollout that we’re doing right now. I think as we move forward, the concept of having a broader solution sell, including hardware, software, sensing technology, material science is at its infancy, but I think it will play a larger part in our future as we move forward in the years to come.
Operator: Our next question comes from the line of Michael Roxland from Truist Securities. Please proceed with your question.
Unidentified Analyst: Thank you. Deon, Greg for taking my questions. This is [indiscernible] on for Mike today. You kind of touched on it so far today, but just hoping we could dial in more. Recognizing that the timing of these IL deployments and pilot programs can change quarter-to-quarter. Could you maybe give us a tentative read on 2024, what the cadence for IL deployment looks like this year? I think there’s a — you call that a large logistics company that you’re still working through, I believe, in the first half. But are there any other industries that might benefit this year?
Deon Stander: Hi, Niko, the current forecast that we have, the way we’re seeing the year unfold is basically all of the programs that are in rollout or an expansion. We have confidence that they will continue to do that. Now there always may be one or two quarters that things switched in terms of department changes and categories. Where we have pilots and trials, our effort is focused on trying to, particularly in food and logistics, move those to more adoption quicker than we are currently planned at the moment. And when we see that, that helps drive the broader industry adoption that we’re anticipating. I think if I took a step back overall, we know that the benefits case in some of these new segments is very compelling but it is going to be down to getting one or two customers started and making sure that those benefits are visible across the industry.
And that’s typically when we see adoption start to resonate. And in that context, those can be episodic. They can be very lumpy as well as we’ve seen the history of apparel. And so the one difference between apparel and the other segments that we know is in the original apparel rollout over time, we have to both prove the technology and validate the business case. That doesn’t remain — that’s not the case now as we look at these new segments because the technology is proven. And so in the discussions we’re having in the pilots and trials that we’re doing at the moment, we can clearly see the benefits are there. And we’re working hard, including across a broader range of logistics companies and a broader range of food companies to make sure that we’re bringing them to full rollout in time.
Operator: Our next question comes from the line of George Staphos from Bank of America. Please proceed with your questions.
