Ryan Brinkman: Hi, thanks for taking my question. I thought to ask around the drivers of profit in the quarter after it looks like margin tracked nicely above analyst estimates, starting with whether the margin in Q1 tracked higher, lower or in line with your own estimates. As I know, your guidance is really for the full year, not the quarters. And then looking at the 80 bps of year-over-year margin improvement, how much of that increase would you say roughly correlates to expense leverage on the higher sales that would be typically expected, versus other more structural factors like the fit for growth initiatives you talked about, versus maybe anything else, such as less structural or more period-specific customer recoveries or any other factor. Thank you.
Phil Eyler: Sure, Ryan. So let me take that. Let me start with your first part of the question. First quarter came in, as I mentioned earlier, a little better than what we were expecting a couple of months ago. And this is driven by two factors: one, is really a great execution by the Fit-for-Growth team, particularly around – accelerate some of the negotiation with suppliers on material cost reductions as well as the acceleration of value engineering projects, taking cost out of bill-of-material, and then also the annual price reduction while the environment, as expected, became more normal. On the pricing side, the annual price reduction was a drag of about 80 basis points in the quarter year-over-year, which is smaller than what the pre-COVID and pre-inflation rate used to be for a company, which is about 200 basis points.
So, these are the positives. And more a timing aspect is around the cost, the startup cost of the two new plants, which came in a little lighter in the first quarter, but will be pushed out to the second quarter. So they are a combination of really good work by the team as well as a little bit of timing. I think on your second part of the question, I think, I answered earlier to, I think Luke’s question before, but really gross productivity was 170 basis points margin expansion. Fit-for-Growth was 160 basis point margin expansion. And then these were offset by wage inflation, which still remains elevated, particularly in Mexico and Eastern Europe, which accounted for 120 basis points of degradation. And then the annual price reduction was the 80 bps that I mentioned.
Volume, to your question, actually was a drag because year-over-year volume was actually negative. So we’re pleased with the fact that we were able to increase gross margin rate by more than 200 basis points year-over-year, in spite of the lower volume. So that goes to, again, back to the great work that the team has done on Fit-for-Growth.
Matteo Anversa: Ryan, just. I would be remiss not to highlight the great work our purchasing group is doing. Very strategic relationship building and negotiating has really accelerated. We are very pleased with what that team is doing.
Ryan Brinkman: I appreciate it. Thank you.
Operator: We have reached the end of our question-and-answer session and concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
