Kurt Yinger: Got it. Okay, and I’m not sure if I missed it, I apologize if I did, but was kind of the full year outlook for gross margins I guess, maintained on that 43.5% to 44.5% range. And I guess if we were to think about coming down from Q1, is that primarily a mix factor just in shifting more back towards capital or anything else that, I guess, could dampen us from the elevated Q1 level that we just saw?
Michael McKenney: You’re correct, Kurt. It’s really a function of just having more capital in the mix. And I also wanted to point out that, that guidance range of 43.5% to 44.5%, that has the inventory write-up in it, the impact of that in there, which is about probably 25 basis points for the year or something like that.
Kurt Yinger: Got you. So that would be, I guess, the GAAP gross margin, not the adjustment?
Michael McKenney: Correct. It’s a — it’s the GAAP gross margin. I thought that would be the most useful to put out.
Kurt Yinger: Got it. Okay. That makes sense. And then in terms — it looked like Key Knife and KWS order of magnitude contributed maybe $24 million to $25 million in bookings and sales this quarter. Any way to think about kind of the split of that between aftermarkets, parts and consumables versus capital?
Michael McKenney: Well, Key Knife is essentially all parts and consumables and the split on KWS is about 60-40, with 60-40 being parts. So however you’re building your model, you can use that as the way to parse it.
Kurt Yinger: Okay. Makes sense. And then just lastly, there are 2 big deals in the containerboard space, the consolidation of some European and U.S. players. How do you think about any potential impacts to your business from that? And I guess, longer term, any thoughts around kind of the implications of just continued consolidation in some of your key forest product customer base?
Jeffrey Powell: Yes. As you obviously know, Kurt, there’s been a fair amount of consolidation for — actually going on for quite some time. The overall global demand continues to grow. But I actually think it’s a positive thing for us. I think it’s positive for the industry because they do a better job in balancing supply and demand, they do a better job in, I think, in controlling pricing and improving their profitability. And from our perspective, we always want our customers to be as profitable as possible because then they have the capital to invest in their business. And so for us, I think, generally speaking, consolidation is good because it increases the profitability of the industry and increases their opportunities to invest, to continue to drive efficiencies in the business.
And the other big customer of ours; obviously, if you’re talking about IP and WestRock, both of them are quite big customers of ours. So I actually look at it as ultimately as a positive thing because it will improve the overall health of the industry.
Operator: Our next question comes from the line of Gary Prestopino with Barrington Research.
Gary Prestopino: A couple of questions here. First of all, Mike, the D&A for this quarter did not reflect, I believe, a full quarter run rate from the acquisitions. Can you give us an idea of what the D&A would be on an annual basis or even a quarterly basis with the full effect of these acquisitions?
Michael McKenney: Yes. The — I would — well, the most important piece of it to me is on the recurring amortization. And right now, we have that at about $7.2 million annually. So you can — and we maintained our guidance range on the D&A, but that will hopefully help you in terms of — the valuations are still open, but I think we’re closing in on finalizing.
Gary Prestopino: Okay. That’s great. And then given the environment that you’re operating in right now, especially with the capital projects being choppy, and with the acquisitions that you’ve made here this year, do you think you can keep your parts and consumable revenues as a percentage of revenues in the high 60s, low 70s throughout the year?
Michael McKenney: Well, as we go through the year, we’re looking at capital increasing. So I would say, we’ll probably be in the kind of 62% to 65% range as we go through the remainder of the year by quarter.
Gary Prestopino: Okay. And then lastly, just on adjusted EBITDA because that’s how I look at your company. And you may have mentioned this in the guidance. Did you give an adjusted EBITDA margin number for this year in terms of what is part of your guidance?
Michael McKenney: No, I haven’t. I usually do not do that because well, one, Gary, would be with the guidance I’ve given out, you can back into it, right? You have all the pieces to back into it. But I will say very broadly that the guidance range that we’ve given out would — when you calculate that, you’ll find we’re about 21%-ish.
Operator: [Operator Instructions] And it looks like I’m currently showing no further questions at this time. I’ll hand the conference back over to Mr. Powell for any closing remarks.
Jeffrey Powell: Thank you, Norma. So before wrapping up the call today, I just want to leave you with a few takeaways. The first quarter was a solid start to 2024. Despite continued economic uncertainty, our employees around the globe continue to focus on meeting our customers’ needs and finding new ways to deliver long-term value to our stakeholders. Our financial health is excellent, and our ability to generate strong free cash flow has us well positioned to quickly pay down the debt associated with our recent acquisitions. We look forward to delivering exceptional value for all our stakeholders again in ’24, and we want to thank you for joining us today, and we look forward to updating you on our progress next quarter.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.
