Abhi Khandelwal: Yeah, Allison. As we mentioned in our opening remarks, we took down inventory about $65 million in 2023, which is about a 0.4 point improvement as we think of 2024 we’re targeting another 0.5 point of improvement from an inventory standpoint.
Allison Poliniak: Got it. Thanks for the color.
Abhi Khandelwal: Thank you.
Operator: The next question comes from the line of Mike Halloran with Baird. Please proceed with your questions.
Mike Halloran: Good morning, everyone.
Eric Ashleman: Good morning, Mike.
Mike Halloran: So let’s just start on the overall thought process for the year. Certainly appreciate all the color, prepared remarks. But as you think about how you’re conceptually setting the guidance here, is the thought that you’re basically looking for sequential stability across the platform from current levels, understanding that the ag piece, the dispencing piece, have some cyclical pressures. But the remaining pieces is just relatively normal cyclicality, not assuming an inflection or should we be thinking about those positive catalyst markets as you’re pushing some sort of inflection in the numbers this year as an offset, and then maybe just talk about how you’re expecting that cadencing to workout.
Eric Ashleman: Yeah. I’ll kind of hit it from a revenue and demand side and let Abhi sort of square up how it financially tracks alongside of it. But, yeah, I think if you move from left to right, kind of start at the midpoint of last year. Again, we saw a back half that was pretty stable for us. Slight reductions in final reductions in backlog, but really ended the year with a normalized position. And I’ll remind people that for IDEX what that means is, we turn things really, really fast, it gives us about a half a quarter of visibility when we stand here, here on January 1 looking at it. So we’re kind of back to equilibrium in that perspective. And then, we started to see this sort of broader support emerging out of the snow, if you will in the end of Q4 and continuing through January.
January was a nice start for us in all three segments. And so then as you project forward, you’re right, Mike, we actually have a — it’s a little bit of a seasonal uptick for us, that’s fairly typical from Q1 to Q2. We’ve not been able to see it the last couple of years because of some different dynamics that have been out there that’s simply weather-related and hits businesses like water and a few others. And so we have a natural uptick there. Some of these early bookings and some of the support that we’ve seen just given our lead times and customer expectations kind of dials in around Q2 as well. So there’s a little bit of an additive bounce there and explains a bit of a difference between Q1 and Q2. We have a series of growth bets that of course we have positioned across all verticals.
I offered a few highlights in the opening comments. Those are known programs, known platforms we’re engaged on those now and we feel more assured about when they’re going to start along the way. And then we have things like, a slight recovery in the semiconductor markets kind of modeled more back-half than the first. So, I think it’s normal IDEX, certainly a normal entry position as we look at the year some normal seasonality, normal run-out of growth bets that we have that accelerate through the year. Made a little bit more exaggerated, I think by, certainly a conservative call on the first quarter, given that we just landed here. We just landed here, we’re seeing some things come together and we just kind of have a — there is a little bit of an air pocket here just based on lead times as to where those things land and how quickly we can get at them.
Abhi Khandelwal: Yeah, Mike. Just to add a little more color to it as you kind of– just to build on Eric’s commentary here. So if you go from left to right, kind of think about where we ended Q4. We ended Q4 at $1.83, as I move the pencil forward and look at, what we’re seeing in Q1, again to Eric’s point, we took a bit of a conservative view. Just sequentially, we expect operationally to get better by $0.12 to $0.15. So if you just look at operationally, $1.83 at $0.15 to it you have not $1.98 closer to $2. Year-over-year, it doesn’t matter sequentially as I think about it, what does impact us is a $0.10 stock-comp timing and then $0.04 of variable comp reset that kind of takes our guide down to what we’ve laid up in the paper here from $1.75 to $1.77.
But sequentially as you look at it operationally, we are seeing the improvement that Eric is talking about, it’s early days. But as Eric mentioned we build backlog in January, majority of that is shippable in Q2 and beyond and then you see a seasonal uptick from Q1 to Q2.
Mike Halloran: Great. Super helpful. And then, just an update on how you’re looking at the M&A landscape here actionability of the portfolio. I mean, from loss of opportunity, I’m guessing it’s probably not that different than what you talked about the last few quarters, the last couple of years, but any revenue update you have?
Eric Ashleman: Yeah. No, it continues to be an area of tremendous focus I think irrespective of what the backdrop is. We’ve driven the increases in potential there with funnel build and cultivation and conversations and analysis and other things that really are at the highest level we’ve ever had in the company. I do think though that as maybe the year feel some of the same, fundamental support that we’re talking about here, I could imagine that that might help availability of targets and people might start to think about monetizing them and moving and maybe they lift the market around us as well. So it’s still largely being driven by our efforts, but I think a good environment and we feel very, very positive about what we’re going to be able to do there.
Mike Halloran: Great. Really appreciate everyone.
Eric Ashleman: Thank you.
Operator: Our next question is from the line of Deane Dray with RBC Capital Markets. Please proceed with your questions.
Deane Dray: Thank you. Good morning, everyone.
Eric Ashleman: Hi, Deane.
Abhi Khandelwal: Good morning, Deane.
Deane Dray: Hey. Just want to also add my welcome back to Abhi and also thanks for all the detail and how you’ve laid out the assumptions very, very clear. We appreciate all the specifics.
Abhi Khandelwal: Thank you, Deane.
Deane Dray: I want to circle back on the Life Sciences Analytical story here and just make sure I understand how you’re not expecting and not forecasting any inflection in ’24 and I get that you want to be conservative here because it’s been a moving target. But if you listen to what your customers are saying, in terms of their earnings reports and how they’re forecasting they’re collectively talking if I were to generalize that there would be still some inventory normalization running at least through the midyear, so call it the end of the second quarter. And at that point, they would start to see some normalization, some recovery. They’ve got easy comps in the second half. So, I would imagine maybe there is a timing issue for you and to when that would start to read across into your recovery with these customers. But let’s just start there, just what’s the lead timing difference in terms of that recovery because it does seem like it pivot this year.
Eric Ashleman: Yeah. From an inventory reduction perspective, I mean, again, this is a big industry with a lot of end markets, we have different platforms, different programs and all of them. So, I mean we really get it down to customer-by-customer, factory-by-factory and inventory position between us and them in every single case. So we’ve known for a while that, we’re in pretty lockstep at that level. Then it comes down to individual demand swings and to be fair, there’ll be some and maybe in line with what you’re talking about there is some pockets of end-customer inventory that might still be out there and in the way of recovery and pieces of what we have. But in other places, I think we’re comfortable that the mix is going to work over and kind of hold the flat narrative that we have here and the flat projections that we have internally.
Absolutely I’ve heard some of the same commentary around the back half. I don’t have information to refute any of that and I’d be quite happy if it were to come about that way. But I think just from an internal planning and forecasting perspective. Being conservative in this way, making sure our costs are in control, we’ve got everything ready to go from a materials, resourcing perspective. We’ve built some muscle here to be more dynamic than ever before. I think presents us in lines us up in a way, should that then start to happen in the second half. So, I certainly take the point, I think, if you could see it at our level, you’d see kind of technology and major platform and customers sort of arrayed on a grid that is the way that our teams think about it as they just move across quarter-to-quarter.
Deane Dray: That’s really helpful. One question that’s come up in a couple of calls and discussions that we’ve had in this market is a question of inventory obsolescence, just because of this pocket that we’ve been in of a destock as some of the inventory just is obsolete. It probably is not as much of an effect for you all. But is there any issue there and what might the dynamics be?
Eric Ashleman: Yeah. I mean, I haven’t heard that raised as an internal concern or issue. I’m thinking, a lot of the business we do, let’s say in Analytical Instrumentation I mean it’s a bit more of a mature space, mature industry maybe not as likely in the short-term, dimension to be obsoleted by major steps in technology, but I can add it there. That hasn’t been something that we’ve talked a lot about.
Deane Dray: Good that would be my impression as well. And then just separately just because it’s a good time of year to look at that very near-term crystal ball that you have. All of your bellwether businesses collectively, whether it’s Band-It or gas or Warren Rupp, just what is the kind of the cadence of demand that you’re seeing in your day rates versus your expectations?
