Marc Vandiepenbeeck: Yes. So I don’t think, we are going to change our approach on JC Capital. This is really a tool we have to strengthen our ability to provide value and attach service and deepen our relationship with customers as we provide like the full suite with the system, the service and then the financing that wraps around that. When it comes to our trade working capital, I mean we had a very strong start of the year. We’ve improved pretty much every single fundamental there in terms of both receivable management, I’d say, as well as our ability to manage our inventory. If you look at our cash collection cycle overall — and if you exclude the impact of the unwinding of factoring, we improved that cash collection cycle by about five days, which we are very happy with that outcome.
If you look at the guidance we have given for the year on free cash flow conversion, we’re maintaining the 85% despite very strong performance in the first half and we see the continuous improvement in our working capital metrics. But you need to understand, we continue to invest in almost attractive organic growth opportunities, particularly as we increase capacity to meet the very high-demand we see in data center. We’re going to be able to make those investments and maintain that 85% conversion, but we want to capitalize on that growth we see in the market.
Operator: Thank you. And our next question today comes from Scott Davis of Melius Research. Please go ahead.
Scott Davis: Hi, good morning guys. I just — I’m looking at the APAC numbers and applied obviously down a fair amount. But fire more flattish — Fire & Security more flattish. I’m just — to me it’s — I would have expected those to be a little bit more correlated. So was there more project selectivity on the applied side. Was that what you we are saying, George, I kind of lost the train of thought there for a sec when you were talking about it.
George R. Oliver: No. As we’re looking at what we are deploying from a solution standpoint, we are looking at each of the domains and then how we differentiate and how we go-to-market, being able to capture what we see to be the secular trends around data centers in some of these key end-markets. And so it is really just based on the backlog that we’ve had, how it is converting. And then as we are getting more integrated solutions, you will see where we get more of a broad-based pickup in all of the domains. The Applied was specifically where in the construction market, as Marc said, we have a big base of business in China. We have the market-leading position. And we have probably seen more of a decline on the commercial side, commercial — more of the commercial resi-side.
And so as we have adjusted inventories and as we’ve been working to now make sure that our resources are allocated more broadly across some of the other verticals, we’re starting to see a real strong pipeline to develop. And we are converting that pipeline. So as Marc said through the second half, we will get back to positive orders, as well as positive revenue by the end of the year. So we are confident that we are going to recover that. And then, Scott in general just making sure that we are with the differentiated solutions that we are deploying, not only are we getting the share, but then from a service standpoint, getting the attached service also.
Scott Davis: Okay. That’s actually really helpful. And then switching over to data center side. I mean, where — I understand your traditional capabilities and then Silent-Aire gave you, I think it was air handling capabilities at a higher level. Where are you as far as capabilities at chip level cooling? And is there anything — any partnerships that you are forming to address liquid cooling?
George R. Oliver: Yes. So let me frame up data centers because it has been obviously a key area for us as we have been deploying our resources, investing over the last few years because we saw this coming. I would say, that we are well-positioned with the cooling technologies and solutions, and a lot of that is working directly with each of the key hyperscalers and colos. Now we’re partnering with them understanding from a technology deployment, how does that cooling technology then get deployed at the chip and depending on how these are going to be configured. So we are making sure that only with our — not only with our innovation and investment, it is complemented with what we are doing and how we go-to-market to serve their needs.
So we’ve got the right capacity to meet the increased demand. And like we said earlier, we are providing more than just chillers. So as we go in with our customers, we have got strong capabilities across air handlers, as well as craws and now we are including the full solution, including controls, building controls, fire and security. Now as you look at the — how these data centers are being designed for the future, they are going to be over a gigawatt of power consumption. They are going to need a wide range of air cooled and water cooled to support the exponential growth to support, as well as then how it’s deployed from a liquid cooling standpoint. So not only are we innovating with hyperscalers and colos, on making sure that we are partnering with the right application of our cooling technology that ultimately delivers the most amount of efficiency.
And I would say, Scott, that the investments we’ve made with R&D and with the world-class laboratories that when we design, build, test and demonstrate performance of the equipment over the entire data center — operating envelope. We’ve engaged almost 100% of the data center operators and working very closely with them, not only with how we differentiate the solution. But as important, as Marc said we’ve been investing in making sure we have got the right capacity with the right technology to ultimately be able to support the demand. We’re projecting right now when I said our orders in the first half exceeded all of fiscal year 2023 orders for data centers. And we have a pipeline that continues to support that type of growth. So we have been adding capacity to meet this demand.
