Steve Silver: Good morning, everybody, and thanks for taking the questions. And congratulations on the continued margin expansion momentum. It’s great to see. Following up on one of the initial questions, given the slowdown in the industrial sector that you cited in the prepared remarks. Just trying to get a sense as to how you’re seeing that play out on the balance sheet. It looks like the balance sheet is remaining under the target leverage ratio. You’re reaffirming your free cash flow guidance for the full year. Just trying to get any updated thoughts you might have on the M&A environment, given the macro challenges.
Paul Sternlieb: Yeah. Thanks, Steve, and good morning. Yeah. I think our team continues to execute well, managing our balance sheet responsibly. I feel good about where we landed in the quarter, obviously, bringing the leverage down sequentially from last quarter. So, certainly quite healthy there. I think the team continues to make nice progress year-over-year, particularly on inventory and managing inventory as well. And we have further opportunities to continue to optimize working capital in particular. I think where we sit today, we’re certainly well-positioned from a capital perspective and certainly with our ability to deploy capital. We have and maintained a disciplined and kind of balanced approach to capital deployment, capital allocation.
Certainly, I would say first priority remains CapEx projects here in the business. Our guidance for this year is higher than prior years and we continue to work that. And we’ll continue to look at share repurchase opportunistically. But on the M&A front, we’ve done quite a bit of work. Obviously, we haven’t announced anything to date, but I’d say we feel really good about the progress we’re making internally, both in terms of quantity and quality of the funnel of things that we’re looking at, particularly opportunities that are well linked to our strategy and some of our focus on vertical markets. So, again, we remain very disciplined. Anything we do would have to check all of our boxes both from a strategic and financial and returns perspective.
And we’ve got a pretty comprehensive process to evaluate that, but we’re certainly well-positioned. And to your point, the balance sheet is in good shape to support it.
Steve Silver: Great. That’s helpful. Thanks. And one last one, if I can. Last quarter, you guys highlighted the advancing rollout of the Larzep brand. You cited some new distributor deals and some promising early order flow. Just curious if there’s any update on that front this quarter.
Paul Sternlieb: Yeah. Sure. So, again, one of our key growth initiatives is driving the second — what we call a second brand initiative, which is really targeting essentially the mid-tier segment of the market, particularly in Asia-Pacific and parts of Latin America, where historically, Enerpac has not really played. I mean, we’re more of a premium player, generally speaking, in the space. But there is a need in those markets for a really good quality product, but not necessarily follow the features, functionality and performance of what Enerpac offers. And so, we’ve utilized our Larzep brand, which we already own and built a range of products. It’s certainly a much smaller subset of SKUs that we feel are spot on with addressing the needs of that mid-tier segment of the market.
So far, the progress has been good. We have signed up some distributors in Asia-Pacific and already getting some nice sales progress there. We’re also utilizing some of the existing distributor network in Asia-Pacific and Latin America. And so, we’re seeing some good early traction. But again, I’d say it’s obviously early days for us. It will take time to rollout. I think the exciting thing for us, though, is when we step back and do our view and analysis on the market, we believe in those regions that the size of the mid-tier segment is roughly the same size from a dollar basis a premium-tier of the market. So, it really opens up a pretty nice opportunity for us to capture some additional market share of a broader TAM that we haven’t historically participated in.
Steve Silver: Great. Thanks for all the additional color. Appreciate it.
Paul Sternlieb: Thank you.
Operator: This concludes our question-and-answer session. I would like to turn the floor back over to Paul Sternlieb for closing comments.
End of Q&A:
Paul Sternlieb: Okay. Well, thanks again for joining us this morning. As always, Travis will be available to take any follow-up questions. And in addition, for those interested, we will be attending the Deutsche Bank 15th Annual Global Industrials Materials & Building Products Conference in New York on Wednesday, June 5. We hope to see you there. Thank you.
Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
