Operator: Your next question comes from the line of Jerry Revich with Goldman Sachs. Your line is open.
Jerry Revich: Yes. Hi. Good morning, everyone.
Ivo Jurek: Good morning.
Jerry Revich: I’m wondering if you could just talk about a little bit more on the capital deployment plan for this year. Obviously, stock buyback over $100 million is in the works. But can you expand on that because you’re set to generate pretty significant free cash flow and with EBITDA growing, leverage just naturally coming down. Would love to hear more Brooks, if you don’t mind.
Brooks Mallard: Yeah. So look, we — as you just said, I’ll take the words out of your mouth. As you just said, we generated substantial free cash flow year in and year out, right? And so we are going to continue to pull the levers that move us toward our medium-term goal of 1.5 times leverage, right, which means we’re going to continue to pay down debt. And that’s going to be our primary vector for capital deployment here in the short to medium term. Having said that, because we generate a substantial amount of cash flow, we want to make sure that we have all avenues open to us in terms of deploying capital to reward our shareholders. And so we took out the stock repurchase authorization for $100 million. And we’ll use that also as a vector to help reward shareholders here through the short and medium term.
But I would say we’re still primarily focused on debt reduction. Debt reduction and profitability improvement is a way to improve to get to our medium-term leverage target of 1.5 turns. But we want to make sure that we have all avenues available to us in terms of capital deployment.
Jerry Revich: And Brooks, I didn’t hear you mention M&A within that context, how attractive is it today versus the bolt-on M&As we saw you folks do in the last cycle?
Ivo Jurek: Yeah. Look, I mean we always look at opportunities, but we feel that presently, kind of in 2023, we’ve made some commitments about getting our balance sheet to be very much in line with what our premium industrial peer group looks like. There are significant benefits in a lower interest expense and that can generate more free cash flow. And our stock is so inexpensive that we believe that that’s the best way of deploying capital. And so those would be the two levers in the short term. And I think that none of that should be surprising to what would we have signaled and communicated to the markets over the last kind of 12 months. So we’ll stay true to that and some great opportunities appear, and we feel that we would be able to generate very substantial returns on going out to the markets and doing some M&A, we generate enough cash to be able to do that.
And our leverage, it is coming down pretty dramatically as we said. So we are in a very good shape to be able to now start thinking about all three of these avenues of potential capital deployment.
Jerry Revich: Right. And I would say, too, that as we focus on debt paydown as our primary lever to get to 1.5 turns. That also leaves us maximum flexibility in terms of dry gunpowder to do whatever to deploy capital in whatever way is going to best reward our shareholders.
Operator: Your next question comes from the line of David Raso with Evercore ISI. Your line is open.
David Raso: Hi. Thank you very much. Sorry if I missed this, but I’m still trying to make sure I understand the cadence of the organic sales year-over-year. So the down one for the year, is that — if I could sort of maybe play this out, it looks like it’s downsized in in the first quarter, is second quarter the idea of down 3% in the back half of the year is up 2%. I’m just trying to get a sense of the cadence for my first question.
Brooks Mallard: Yeah. So look, we’re not going to — we’re not forecasting second quarter quite yet. I would say if you look at — we expect there to be a progression of things getting better throughout the year. And so we’ve given our first quarter guidance, second quarter does it come in minus 3%, minus 2%. It remains to be seen how quickly things inflect. We think we’ve taken a pragmatic view from a volume perspective. And so if things get better, faster, that’s good for us. Margins will improve faster and things will get better. But we think we’ve taken a pragmatic view and we’ll continue to update as we move through the year.
David Raso: But to be clear, though, the second half of the year, do you expect the return to growth to be in the third or fourth quarter? Because I’m thinking about the personal mobility comment earlier that, that destock continues beyond the first half I’m just trying to level set when do we think we return to growth? And then the follow-up, if you can give us some sense between the business segments, which one do you think will be kind of above the company guide on which one below? I was just trying to get a sense of perspective on the business segments and the cadence? Thank you.
Ivo Jurek: Yeah, David. We anticipate a modest growth in the second half, as we have outlined in our prepared remarks, I mean it’s natural taking into account where we are guiding Q1. And I’ll leave it at that. And I did state that we anticipate that the personal mobility should start recovering in the second half of the year after about four or five quarters of rather significant inventory destock. So that’s really where I would probably leave it with you. And we’ve provided you with a framework on the end market performance, and that’s probably a good amount of outlines that should give you an ability to take a look and develop a model.
