Kevin Brewer: It’s Kevin. Yes, so I mean, I think I said it a little bit earlier, but there’s plenty of capacity right now for the order rate that we’re seeing in shipments that are required. And once this new logistics center comes online, that’s going to help and we also have, as I mentioned, there’s additional manufacturing Kaizen that are ongoing right now. It’s part of our normal process, we’re a little bit more heavy with them right now as the logistics center is getting filled up with material. So yes, we’ve got lead times, we’re booking orders in the 2025, but our lead times are much shorter than that. In the past, what I would say is that we’ve always said that with the ship from cell process, assuming material is on hand, we can turn tools within the quarter if we need to.
And we have — that is the other piece of thing supply chain. So I’ll give a quick update on that. I mean our supply chain has — continue to improve. I think you don’t hear about it a lot right now within our peer group because we’re still ramping and I think a lot of our peer group has not been ramping. So I’m not going to say things are perfect with supply chain, but our suppliers are keeping up with us and are allowing us to ramp and we’re adding more capacity almost daily with our supply chain. So our lead times are not a problem I should say with customers right now. I think for the most part, that’s not preventing us from getting orders. And frankly, I think our lead time is probably still — it may be helping us because we’ve been able to, I think, execute pretty well for the last few years, even when the pandemic was kind of fully coming at us.
So lots of things have been done over the last couple of years to add capacity and we’re really — we’re really almost over that big [Technical Difficulty] now its going to come down of hiring people and bringing up additional off-shift capacity. We run second and third shifts, they’re nowhere near, this fully utilizes first shift. So we can hire. The hiring process has been — it’s been going okay for us. The market was really tougher while hiring, it’s probably gotten a little bit better. And certainly, that Korea facility in Korea when we brought that online, actually we were able to hire for capacity [indiscernible]. So again, I think at the end of the day, our lead times are assuming everything is there, we can get a — for material we can get to a lot in a quarter, but it’s not something that’s an issue right now.
David Duley: Final question for me is regarding gross margin, I think I asked this question on the last conference call to hit the 44% target for the year, Q4 gross margins are going to spike up, I guess, 250 or 300 basis points, let’s say, right around 47%. And I guess, if they’re exiting the year at 47%, why would they drop back down to 45%?
Kevin Brewer: Yes, well, first thing I would say is, we won’t exit at 47% because part of that spike got taken out with Q2 coming at 43.7%. So — but you’re absolutely right, David, when we were talking 42% in Q2, the math, to get you there had a pretty big step-up in the second half and we’ll still have a step up. We’re going to have 44% in Q3, which suggest we still need a stronger Q4 and the new math may bring it close to 45%. So the thing that moves margins around is the mix, that’s a big piece of it. And the other thing is, as we continue to bring in — complete these gross margin initiatives, that’s been one of the things driving gross margins over the years. So it’s — you know I always talk about full year gross margins because quarter-to-quarter, things can move around.
But if you look at or kind of our progress over the last many years for gross margins on a full year basis, we’ve been continuing to notch these things up and based on expecting end at 44% this year, that notches it up a little bit more where we have quarters of above 45%, yes when we do our models, we’re talking full year averages. So when you look at the $1.3 billion model, that’s not 1 or 2 quarters of greatness, that’s a full year when you look at something like that. So yes, hopefully, I answered your question.
Doug Lawson: Kevin, let me just jump in with one thing just you said mix, but I want to make sure it’s clear, there’s 2 mixes we worry about or we look at. One is the type of systems, the product extends high energy have better margins than some of the standard products. And then the second is the systems versus CS&I because we move to $1.3 billion, a big piece of that growth comes in systems. And so that does put a little pressure on the margins because the percentage wise, it’s still roughly the same for CS&I, but it’s a much higher revenue gain in terms of the systems.
Kevin Brewer: Yes, that is a good point. I probably should remember to mention that. I mean we always say that CS&I is accretive. But if you look at what takes us from the current run rate to $1.3 billion, the majority of the increase is coming in [Technical Difficulty]. And so that suggest that we are making progress on systems because if we weren’t, our margins will be going backwards. So the fact that we’re still making progress and we’re putting a much bigger mix of systems in, which come in at lower margins of CS&I, that mix view does impact things. So again, we’re right, we’re where we want to be. The other piece of it, too, which I probably should have mentioned as well is, I mean, the product extension is a big piece of it as well.
I mean, that’s helped quite a bit with the margins and that’s part of the mix, too. It’s not just high energy versus high current, there’s mix within the product segment. So there’s a lot of moving pieces, but everything is moving in a positive direction. That’s the goal to keep it going that way and we have the initiatives with very detailed road maps in place that gets us to where we want to be.
