Bryan King: October. So there are elements to making sure that they are able to have clean numbers for that opportunity which include — really was set around some real growth in profitability as well as their targets. And right now, we would expect that, that will be a tough reach for them to hit. But we — and we’ve got a great relationship with that management team. So we want to make sure that we give them every opportunity to kind of get through October with their stewardship of kind of the margin profile there. So it’s easier for us to take those actions that we took in the month of June looking forward to how the businesses are getting integrated on the test equity side itself. And so that’s why when we call out the $4 million of actions that we took on the test equity side and we didn’t call out actions that we’ve played that the management team of Hisco is has looked at as the 2 businesses come together, we wanted to make sure that we wanted them to have every opportunity and we would love for them to hit the earnout.
There are gross margin initiatives that are across that total vertical now that we will see during the third and fourth quarter, some as it relates to the test equity side and more opportunity going forward as it relates to the Hisco side. There are — when we think about longer-term structural margin opportunities for the whole business and when we speak about how Hisco allows the whole business to have a structurally higher margin, there’s 2 real levers there. One is the fact that Hisco with test equity allows test equity and Hisco together to get to a higher structural margin than where test equity would have been by itself and it gets there faster, like this action that allowed us to take on the test equity side. We had targeted to get test equity to double-digit EBITDA margin at the end of the year or before the end of the year.
And that’s without Hisco as part of it. And that’s been the operating objective that, that team has been moving towards for the last 18 months. We continue to feel confident that they are marching us that direction. There’s also the stabilization, if you will and kind of the repeat volumes that you get out of OEM and MRO that are now 2/3 plus of the revenue, especially with revenue being softer and tested measurement in the kind of benches and some of the capital spend on the test equity side. That’s really where we’ve seen, just like we called out the 8% growth in the digital side of test equity during the last quarter. So that part’s been growing. The consumables have been growing but the softness has been on the capital spending side. Now, that whole division is much more levered to that.
And that ought to allow us to optimize both the cost structure and the way that we approach margins to pull that up. The value-added capabilities that Hisco has are allowing some opportunities to look back at Gexpro Services and at Lawson, where we have — Lawson’s got the highest structural margin profile because of the contribution margin that it enjoys. But there’s opportunities that we are seeing on pulling some of the capabilities of Hisco back across the Gexpro services in the test or the Watson side. And then there are some capabilities that expo Services has on the value-added side that are allowing us to look across the test equity Hisco platform. And those are on the margin side. And additionally, we have seen very good traction with the Hisco team out of the gate.
They’ve been great key players and they’ve seen an assigned real opportunity to being able to cross-sell some of — specifically the capabilities the Gexpro services and Lawson half into their customers on the — where they’re more deeply embedded and also the geographic expansion that we’ve been able to grow with the Hisco transaction south of the border.
Operator: Your next question is coming from Ken Newman of KeyBanc Capital Markets.
Ken Newman: So Ron, you gave some pretty good answers, very, very detailed answers here for a lot of my questions I was going to ask. So, maybe I’ll just ask one here on [ph].
Ron Knutson: Ken, its 30 years of being asking the questions that you’re asking. Yes, given that I’ve been on the other side of these calls for so many years, it’s hard for me to resist, not trying to offer some color that I’ll probably get in trouble with my team afterwards.
Ken Newman: Well, for my question, we are hearing more this earnings season about customers revising orders as lead times are improving, especially in some of these electrical components that maybe you guys touch a bit with tax equity and Gexpro. Curious if you’re seeing that today? And how do you view that impacting demand at all in coming quarters?
Bryan King: Ron, well, there’s 2 ways to answer that question. One is to specifically talk about how lead times have influenced our own purchases and then also some of the actions that we took a year ago were 18 months ago — or I guess, 15 months ago when we were concerned about lead times. And so over the last 2 years, we certainly increased the working capital intensity in our businesses across the business, across our verticals and we’ve got the benefit today of being able to take a more take a posture on our working capital investment that should allow us, specifically in opportunities that we’ve identified to lean up our working capital investment over the next 3 to 6 months, maybe 9 months to kind of get through it or so.
