Derek Soderberg: Got it. Well, it’s good to hear. And then, Jana, just in terms of use of capital here, you guys called out share repurchases. What’s changed in terms of the priority on that? Do you think shares here at 21 are opportunistic? And then on M&A, it seems to me like maybe the focus has shifted a little bit more towards organic growth and away from M&A. Is that the case? Yes, thanks.
Jana Croom: Those are great questions. So, yes, absolutely. Part of the reason that we had suspended share repurchase, quite honestly, was we’re trying to get our balance sheet out of state where it was healthier considering net debt to EBITDA levels, inventory levels, debt levels, cash, et cetera where we sit now with net debt and also looking at where our stock price is. Yes, I consider the stock price an absolute value here, but also candidly, if we as Kimball aren’t buying our stock, why should we be convincing anybody else to buy our stock? And so we are going to be in the market repurchasing our shares. In terms of the way that we think about the future of Kimball, the pipeline is really robust, and quite honestly, from just a risk-reward perspective, you would always acquire more of Kimball because that is what and that’s what you know you can do well.
That is not to say that we would not be interested in pursuing inorganic opportunities. There are some really interesting things out there. But as we’ve said previously, it would be in the healthcare space, because we were not looking for increased exposure in autos or necessarily industrial. We’ve got really great funnels there. It would be in a geographic region that we don’t currently serve that was going to add something to our complement, or it would be us buying a capability that we don’t already have. Candidly, though, our favorite acquisitions to make are when one of our customers says, hey, I don’t want to produce this book of business anymore. Kimball, will you take this over for us? And again, that’s something that we know that we can do well.
And so I would expect if we were to announce something, it would be in that vein.
Derek Soderberg: Got it. Appreciate it, Jana.
Operator: [Operator Instructions] Our next question comes from Jaeson Schmidt from Lake Street.
Jaeson Schmidt: Hi, guys. Thanks for taking my questions. Just a couple on the test and measurement business. How much of the updated outlook is being driven by the sale versus just broader softness?
Jana Croom: Yes, that’s a great question. And so as we look at our industrial segment, which is where AT&M lives, this quarter, for example, if I look at the decline in industrial, roughly half of it was from AT&M. And remember, it’s not discothe [ph]. That’s truly the decline year-over-year that we saw in revenue in the AT&M business. So hopefully that gives you some color there. But we are — so if I had to chunk it out to you in big pictures, I would say you’ve got the FDA recall from a single customer, the softness in industrial, half of it is the AT&M business. And then you’ve got some bright spots in medical that are offsetting some softness that we’re seeing in automotive.
Jaeson Schmidt: Okay, that’s really helpful. And then, Ric, just curious how much of this decision is driven by when you first came in, looked at the broader book of business, and as you noted, the test and measurement business isn’t terribly synergistic? Or how much of this is being driven by just a response to overall market conditions in the broader business?
Ric Phillips: Very much the former, Jaeson. I think we — as I got into the business and together with the leadership team, really spent a lot of time conducting a strategic review. I saw that the strategic fit really wasn’t there. And that I think the AT&M business will be served better by a different owner and will also allow Kimball to really focus on what we think is a really bright long-term future in EMS, including our medical solutions capabilities that we have. So very, very much strategic as opposed to current market conditions.
Jaeson Schmidt: Got it. And then just the last one for me, and I’ll jump back into queue. Jana, you noted inventory worked down quite a bit in the quarter. Would we expect it to continue to decline this calendar year?
Jana Croom: Yes, and in fact, we’re expecting it to continue to decline this fiscal year. It’s a combination of two things. What we saw was everyone wanted excess inventory on hand because they wanted to feel comfortable coming out of the supply chain shortages that we saw in COVID, and then everyone realized they had too much inventory, and the customer demand for us as the Tier 2 supplier started to drop off. And so we had to right-size the amount of inventory that we had to the current demand. And so as we work through the remainder of the calendar year, and even yet this quarter, we’re actively working with customers to right-size the inventory, cancel what we can, push out what we can, and really get the inventory right-sized for the revenue that we’re going to produce.
Jaeson Schmidt: Okay. That makes sense. Thanks a lot guys.
Jana Croom: Yes. Thank you, Jaeson.
Operator: And our next question is from Tim Moore from EF Hutton. Your line is now open.
