So at this point, we don’t see anything different to what we had previously guided in terms of strength in the Broadband end markets. We’ve seen a little bit of timing in Broadband, but nothing that takes us away from expectations. It’s within a few percentage points here and there. So to give a simple answer to your question, we still expect Broadband end demand to come back first and we feel that given some minor changes in timing, et cetera, we’ll see our Broadband business follow that.
Jeremy Parks: Yeah. Maybe the only thing I’ll add here, Reuben, for your benefit is that, keep in mind that the Broadband seasonality in Q1 is a little bit more significant because those products are going in the network. So typically, Q1 is not a particularly strong quarter in Broadband. Once we hit the spring, usually, we see volumes increase in that business.
Reuben Garner: Okay. Great. And then, we sort of touched on this, but I just want to kind of hopefully get a maybe a bridge on a year-over-year basis, Jeremy, if possible. The gross margin performance in the quarter was really strong considering the top line environment. Can you kind of walk us through how you were able to sustain those kind of gross margin levels in the face of volume down as much as it was?
Jeremy Parks: Yeah. I mean, you’ve got — for sure, we’ve got pressure coming from the negative leverage in the volumes coming down. So we’ve got to absorb those fixed costs on a smaller amount of volume. But the offset is that — is positive mix. So I think where we’ve been strong is in our highest-margin products. So some of the actives, switches and other things that we’re selling as part of our solutions, the reality is, if you look at the products that are really held in inventory at customers and at distributors, it’s probably disproportionately things like cable and some lower-margin products. So the bulk of the impact that we’ve seen volume-wise has been in some lower-margin products. So I think you’ve got negative leverage, but then that’s offset by positive mix. And so that’s how we’ve been able to hold margins up through the past 12 months.
Reuben Garner: Understood. Thanks for taking the questions and good luck this year.
Ashish Chand: Thank you.
Jeremy Parks: Thank you.
Operator: [Operator Instructions] We’ll go next to Rob Jamieson with UBS.
Robert Jamieson: Hey. Good morning. Congrats on the results and solid guidance today. I appreciate all the detail that you have provided this morning. I guess for me, just within Industrial Automation Solutions, can you maybe provide us a little color on what you saw in the fourth quarter, maybe even full year just across the different end markets between discrete, process, energy and mass transit?
Ashish Chand: Yeah. So obviously, discrete has been less robust in the second half of ’23. And that is driven by — largely by the destocking phenomenon and maybe to some extent by the interest rate environment where people slowed down some of their projects. We even noted, as we’ve mentioned previously that some of the reshoring projects in discrete slowed down because there was a shortage of labor. They didn’t have enough people to either build or operate this plant. So in Q3, we saw that come down. If you remember, orders were down almost — just over 20% actually sequentially and POS was down at that point, about 8%. Now in Q4, we saw that whole thing stabilize. Orders were up about 7% sequentially. POS was flattish. And we’ve seen other indicators — leading indicators, including PMI that show that it’s heading in the right direction.
So discrete is still an area where we expect some weakness and then it will come back once this inventory cycle is — we get to the other side. But meanwhile, we did see significant growth in process markets and in mass transit. In mass transit, especially because of our high focus on providing this full mission-critical solution, we have a number of engagements. These tend to be more long term. They don’t get impacted, Rob, so much by inventory changes, et cetera. And we have a fairly robust pipeline there. But yes, so to answer your question, it was more discrete, more linked to the inventory phenomenon and I think it’s stable now.
Robert Jamieson: Perfect. That helps. Thank you very much. And then I guess, just like last one, a higher level. You talked a lot about the CICs and the success there. I guess, maybe two things, an update on kind of conversions with customers that have come through the door. And then maybe just some high-level thoughts on outside of just the solution and attacking the right KPIs for your customers. Maybe can you talk a little bit about other investments that you’ve made in software or middleware solutions like Horizon?
Ashish Chand: Yeah. So there are a few things happening. So first of all, on the CICs. So typically, when we engage with customers in the long term for a data or a network solution, our success would be about one-third of the customers would convert eventually, which is fairly healthy. We’ve seen that once we get a customer to invest in a validation test at a CIC, that rate might actually go up 2 times to 3 times, right? So it’s fairly significant, the change that we see in that customer engagement. And we’ve seen more and more instances now where customers come to us, typically, with a complex kind of idea in their heads and then we walk them back a little bit, talk about the KPIs they want to address. So for example, we’ve previously mentioned, we worked with this utility company in Spain, and their KPI was the average time it took to find a fault in their network.
And they were experiencing 140 minutes on average. And we were able to take that down to about 35 minutes and they saved obviously, a lot of money through better revenues and saving on fines. So it’s interesting. Each customer typically comes initially with a semi network design. We walk them back to KPIs. We design a better workflow and data flow and then we get there. Now part of this, obviously, is how we bring different sources and destinations of data together and Belden Horizon has turned out to be really phenomenal experience for most of our customers because it’s very neutral. It doesn’t — it’s not application software. It’s not designed to do anything with the data other than cleanse it, sort it and connect it to different — connect different sources to different destinations.
One interesting thing that’s happening, by the way, with Horizon is we are now testing more and more offering data as a service, although we are not — we haven’t yet commercialized that. And we’ve had requests now to incorporate more machine learning and AI into Horizon which we have been doing. And the example I’d like to quote is, imagine a factory which has cobots and a worker may be walking into the arc of a robotic arm and with machine learning on our edge devices and some form of an LLM in Horizon, we can actually stop that robotic arm without anything going to the cloud because otherwise, there’s too much latency and somebody might get injured, right? So those kinds of applications, they’re not always the ones that get a lot of attention in the media as AI applications but they save lives and they save time and they increase productivity.
And that’s where we are going with that whole software layer, which has turned out to be an exciting journey even for us in terms of learning. So again, lots of interesting things happening, but I think you are thinking about it the right way. Customer KPI is getting impacted and the software really making a big difference in that.
Robert Jamieson: Awesome. Thanks so much.
Operator: There are no further questions at this time. I would like to turn the call back over to Aaron Reddington for any closing remarks.
Aaron Reddington: Yeah. Thank you, operator, and thank you, everyone, for joining today’s call. If you have any questions, please contact the IR team here at Belden. Our e-mail address is investor.relations@belden.com. Thank you.
Operator: This does conclude today’s conference call. You may now disconnect.
