Q – Nigel Coe: Great. Thanks for the – Thanks for the question, guys. Sorry, to bore you in another – obviously, aero margins were great. What’s the timing of Boeing shipments to customers affected there? Just curious, if there’s a timing issue there. But mainly, my question is around 2Q margin dynamics. And thinking about that drop-off in the Zebra royalty income in the second quarter, are we looking at maybe margins, I don’t know down like 300 basis points year-over-year in the second quarter for IA? And therefore, the balance of the segment margin performance is actually probably more like on trend? So, just any more color on the 2Q margins by segment would be helpful.
Greg Lewis: Yes. No, we don’t expect IA margins to be down 300 basis points in 2Q, on a year-over-year basis. We talked about the Zebra impact. Again, it’s $45 million a quarter on the revenue side. There is some costs associated, with that as we talked about over the last two years, as we’ve had that impact into our P&L. So you guys can do the math on the direct impact of just that item all by itself. But we have other actions in place to continue to offset that. I don’t expect margins to necessarily be up year-on-year in IA, but nothing to the degree that we described in terms of 300 basis point drop.
Nigel Coe: Okay. And then any color on aero margins in second quarter?
Greg Lewis: Yeah. Just that I would expect them to be down sequentially from Q1 that Q1 is going to be the high point. And as we go through the year, again, our overall expectation is flattish on a year-on-year basis but Q1 will be the high point.
Nigel Coe: Okay. That’s helpful. Thanks.
Operator: Our next question comes from the line of Andy Kaplowitz with Citi. Your line is now open.
Andy Kaplowitz: Hey, good morning, everyone.
Vimal Kapur: Hey, good morning, Andy.
Andy Kaplowitz: Vimal, maybe can you talk a little bit more about what you’re seeing by region? I think you mentioned strength in India. How important is that region becoming? And what are you seeing in China and Europe?
Vimal Kapur: Yeah. So I would say if I go around the corner, we continue to see strength in our high-growth regions, specifically in India and Middle East. Those remain strong. China also did well for us. We grew high single-digits on the strength of our aero and energy business. So net-net, we do see strong — continued strong trend in emerging markets. Europe has stabilized. I would say the worst is definitely behind us. We see more recovery and positive trends, specifically in short cycle we talked about it earlier in Europe. And US, of course, is the balance here. So net-net, high-growth region remains a tailwind in overall revenue mix for Honeywell.
Andy Kaplowitz: Great. And I just want to follow up on the process business. I think you mentioned delays. Is it you’re seeing more geopolitical uncertainty or election fears higher rates? I think you still have a good outlook for that business. Maybe talk about it a little bit more.
Vimal Kapur: So Process Solutions business absolutely. Our booking — we carried a strong backlog and our booking trends remains strong there. Aftermarket is double-digit growth for several quarters in a row. So that business will as I mentioned before will repeat 2023 pattern of high growth. And we expect to do — continue to do well in that segment monetizing installed base, aftermarket software all our strategies are really working. And also, diversification into new verticals, as the new energy segment are emerging like battery storage gigafactories all are becoming attractive growth optionality for us in that business.
Andy Kaplowitz: I appreciate it. Vimal.
Vimal Kapur: Thank you.
Operator: Our next question comes from the line of Jeff Sprague with Vertical Research Partners. Your line is now open.
Jeff Sprague: Hey, thank you. Good morning, everyone.
Vimal Kapur: Good morning.
Jeff Sprague: Hey, Vimal. Good morning. Hey, Vimal, just back to kind of the ongoing portfolio review and you said it could be many things not one big thing. Can we take that? Or should we take that to mean, as we look at kind of your revenue disaggregation right there’s kind of 11 buckets we track and model to that none of those entire sleeves would be gone at some point in time in your thought process?
Vimal Kapur: Look whenever we complete any action of addition and substraction, we’ll give you an early guide for that. As I mentioned, this is no one step change. So it’s not that we’re going to take action of a $4 billion type of thing in a single move. But whenever we are ready to communicate, we’ll give you a heads up on what’s likely coming in. For example, Carrier business will likely come in, Civitanavi will likely come in and what are the implications on the guide? And then what goes out, if and when this happens, we’ll provide you the guide. But what I can share with you is, there is not going to be one mega event on divestiture. It’s going to be a combination of multiple small events.
Jeff Sprague: And one thing you have been clear on is ultimately there’s a monetization play on Quantinuum. Where are we there? Where’s the spending tracking? And can you kind of give us an idea of maybe the time line of a monetization event?
Vimal Kapur: So Quantinuum is in I would say exciting times. We completed a major event of pre-money. We got valuation in excess of $5 billion got more people invested there. We talked about that in the last earnings call. We also met another major milestone. I don’t know if you read that Honeywell and Microsoft announced a major milestone of testing different scenarios to deliver reliable results. So Microsoft gave — ran 14,000 experiments on H2 quantum computer and they were able to prove that every time, all 14,000 times, we’re able to deliver results with accuracy. Why it matters is in quantum the repeatability or accuracy matters more than the speed at this point. Once we are able to solve the problem solving with accuracy, we can work on the speed part.
So, that’s a major milestone and that’s what matters in quantum business. We continue to hit these milestones one after another and we score some wins on the commercial side and that has set us for the next event of the monetization somewhere in 2025. It’s contingent upon hitting this, but I remain confident that we are on the right track on that. And by the way, the last comment I’ll make there is, AI is definitely giving us a lot more momentum. There’s a deeper understanding and appreciation why quantum is necessary. And that’s going to certainly help us when we are ready for an IPO or something similar in 2025.
Jeff Sprague: Great. Thank you for the color.
Vimal Kapur: Thank you.
Operator: Our next question comes from the line of Brett Linzey with Mizuho. Your line is now open.
Brett Linzey: Hey. Good morning, all.
Vimal Kapur: Hi, Brett.
Brett Linzey: Again, I wanted to come back to ESS. You noted the margin contraction on some of this one-time factory restart cost. Maybe could you quantify that? And then any detail on the nature of just the timing of some of these pressures?
Greg Lewis: Sure. So, in our clean energy business, we had been operating as in a trading manner and we had shut down the major facility some number of years ago in that business and we restarted it. And so as you can imagine, that restart has some fits in it, as we go through the course of the year to get to stabilization. And that’s really the — if you look at ESS margins, I’m not going to give you precise numbers. But if you back out the impact of that we would have been roughly flat maybe slightly up on a margin rate basis year-on-year in the first quarter. And so that’s going to take some time to get to stability. But the good news is this is a great business. The long-term dynamics for it from a pricing standpoint, a supply standpoint are very favorable.
As we exit the year, we’re going to have more stable operations internally. And so we’re going to have a very nice exit rate going into 2025 with a very strong business. And again, that business is, think about it being around about $400 million on an annual basis.
Brett Linzey: All right. Got it. Thanks. And then just one more on M&A. Just thinking about the velocity there. I know, last May, you talked about the pipeline prioritization. I think you had 90 deals looking at within your markets and that’s still at the top 10. I guess how is that 90 compared today? I mean it sounds like the enthusiasm, it sounds a little bit more optimistic about some actionability. But, maybe just talk about some of the pipeline and the movement there?
Vimal Kapur: Absolutely. I would say the pipeline is very strong as we sit today. Of course, we compete for every target and we remain very sensitive to both strategic fit and valuation fit. So net-net, we do expect to continue to take some actions on adding new business to our portfolio. And overall, my tone is very positive on that.
Brett Linzey: All right. Great. Best of luck.
Vimal Kapur: Thank you. Okay. Just to wrap up here, I want to continue to express my appreciation to our shareholders for your ongoing support and again, to our Honeywell future shapers, who continue to drive differentiated performance. Our future is bright, and look forward to sharing our progress with you as we continue to execute on our commitments. Thank you for listening, and please stay safe and healthy.
Operator: This concludes today’s teleconference. Thank you for participating. You may now disconnect.
