Bill Brundage: Yes. Well, we were pleased with the team’s execution on gross margins in the first quarter, staying above that 30%, delivering 30.2%. And we had expected a little bit of a step down coming out of — you may recall in Q4, we were at 30.6%, but we talked about some onetime inventory gains as we sold through some older inventory. As I think about that 30.2%, yes, there’s a little bit of pressure from a commodity perspective, but the team is really executing well with own brand sales. That continues to be about 10% of our revenue. And that’s, as you know, gross margin accretive and then really good pricing discipline in the field as we’re managing through what is a tricky time from a commodity perspective. So really good execution.
Kevin Murphy : Yes. Building on that, Will, the team did a great job from an execution perspective and gross margin pressure was less so of an impact in gross profit dollar was, as you think about deflation in the commodity markets, a lower gross profit dollar on the gross margin, it’s relatively consistent. When you think about the mega project landscape and the approach, the group is doing a very good job of selling value-added services, selling our product strategy to make sure that our gross margin is relatively consistent as we approach that mega project landscape. And in fact, if you look at our non-residential business today, I mean, what’s clearly evident in the numbers, there are more commodity-based product impacts on the non-residential side and yet that business is in a growth territory. And so volume growth inside of the non-residential space is something we’re pretty proud of as we’re sat here today.
Operator: Our next question comes from Patrick Baumann from JPMorgan.
Patrick Baumann: First one, maybe dive into the customer groups a little bit. The commercial mechanical growth improved nicely, I thought, versus the fourth quarter there. Anything in particular to call out in terms of drivers? Is it — was it more RMI focused or any particular verticals within that, that drove that? And then I’ll leave that one there, and I’ll go to the next one.
Kevin Murphy : Yes. Patrick, thanks for the question. And from a commercial mechanical perspective, you’re right, we were pleased with what that growth looks like. If I go back to the previous question, it really is in line with that portion of the discussion non-residential activity in market is a bit challenged. Our business mix has got a good split between repair, maintenance and improvement and new construction. We have seen good activity levels in places like data center work as well as the mega project landscape and how that commercial mechanical space feeds in quite well with our industrial business for that onshoring of manufacturing activity, electric vehicle production, sustainability build-outs and the like. And so it really was that balanced non-residential exposure that was strong for us.
And then like I say, to be in a volume growth territory and to be able to hold gross margins relatively consistent as we move through a deflationary space on commodity-based products, we feel pretty good about where that is. So again, the balanced nature of the business serves us well and our ability to sell through into these different growth areas of non-residential is very pleasing for us.
Patrick Baumann: Yes, helpful. And then maybe a follow-up on the gross margin question. Do you look at that low 30s number now as being normalized at this stage for, I guess, pricing deflation, et cetera. I’m just wondering if that you can hold in that range now going forward and start to kind of grow from there?
Bill Brundage: Yes, Pat, our belief has been over the last several quarters that the gross margins would learn that 30% mark. And so we’re, again, pleased with the execution to date. Certainly, we’re not expecting significant additional deflation that could put some pressure further pressure on that gross margin in any particular quarter. But we very much feel like that 30% range is a good normalized point from which we can build on into the future as we get back to some market growth and then continuing to take share in executing our strategy. And as that commodity deflationary environment stabilizes and we operate from a more normalized environment, we then intend to build on that gross margin steadily and durably over time by not only implementing our product strategy and driving those things that are important to our company, but also in continuing to build out value-added services that allow us to see that value reflected in the gross margin of our business.
So that’s not a floor for us. We’ll continue to build from there over time just like we have historically.
Operator: Our next question comes from Kathryn Thompson from Thompson Research.
Brian Biros: This is actually Brian Biros on for Kathryn. I guess to start, can you just touch on a little bit more on the mega project beating in today’s environment, kind of how Ferguson wins here and how you differentiate versus your peers? I know in the past, you’ve talked about kind of getting closer to the engineer or the GC or the owner to kind of be involved in the process to get the right products there. But any more color in the current environment would be helpful.
Kevin Murphy : Yes. The mega project landscape actually is playing out very much as we expected. We knew this was going to be a slower landscape in terms of what bidding activity looks like and how that bidding activity flows into open orders and how open orders flow into actual revenue and construction. So it really is playing out as expected. We’re pleased with what that ramp-up looks like. We won’t see the full impact of this structural tailwind until we get into the coming years. That said, as we’ve discussed in past quarters. For us, this is a catalyst for how we want to operate in the future. These mega projects are large construction projects where scale is beneficial. And bringing the scale of our supply chain and our capabilities to bear inside this market is helpful.
