Christopher Glynn: Okay. So good chance it’s not a talking point next year beyond a discussion of how you run the business in theory?
Meenal Sethna: Correct.
Christopher Glynn: Okay. And then I just want to go back to Matt’s questions about the electronics and industrial margins implied steep second half ramp to get to upper teens for the full year result for electronics and mid-teens for industrial. Is that just really all volume related? I guess, I don’t know about how mix and absorption are factoring into that equation. But the first and second quarter guide, it does look like a steep ramp. So we want to kind of understand the model a little bit better.
Meenal Sethna: Sure. So, yes, on both electronics and industrial, a little bit different for both. On the electronics side, definitely, we’re counting on definitely a) some volume improvements, right, and I won’t reiterate everything Dave talked about. But we see the signs, right, where the destocking will end. And as we start to replenish inventory that drives some growth there. So that’s part of it. There’s also some cost things also that we’re continuing to look at, especially as we consider the semiconductor part of the business where we’ve seen some market weakening there. So those are really the two drivers as we think about electronics. So I feel good about the margin trajectory and just basically the work that we’ve done over the past several years on electronics.
With industrial, yes, on some volume, we’re counting a little bit on that, but I would also say there’s some more internal work that’s going on. That’s really the business where we’ve had over the past few years, some very strong organic and also inorganic growth. So there’s a lot of work we’re doing behind the scenes around footprint to make sure we’re getting closer to customers, getting the cost structure right and also adding capacity as well. Some of what you saw in the first quarter was we’re in the midst of a couple of these actions right now. And so there were some manufacturing constraints, also some costs that we recognize. I expect that to improve in the next few quarters and that’s what’s also helping to drive the profitability.
Christopher Glynn: Got it. That makes sense. Thanks. Thanks for the answers.
David Heinzmann: Thanks for your questions, Chris.
Operator: Your next question comes from the line of Saree Boroditsky from Jefferies. Your line is open.
Saree Boroditsky: Hi. Thanks for taking my question. Just building on what you’re just talking about. You mentioned some manufacturing issues impacting the first quarter margin in Industrials. Could you just size that impact for us so we can think about the recovery in margins there?
Meenal Sethna: Yes. I mean, I would think about it as I mentioned two things. One, I would say just some additional costs we incurred, but also just some capacity constraints as we were without getting into the wheels, doing some things on moving equipment around. So I’d say from a growth perspective, I’d say we were probably looking at a couple of points of growth on the top line, which, of course, drops into the margin. And then just maybe a point or so on cost. So again, as we work through that, I expect we still have a little bit of activity here in the second quarter, but we absolutely expect it to get better.
Saree Boroditsky: That’s helpful. And sticking with Industrial, you talked about some weakened industrial markets and you provided some great detail on there. Maybe just think about, as you think about the improving signs of destocking, how do we actually think about the overall end market demand and how that impacts sales as we think about the remainder of the year?
David Heinzmann: Yes. Specific to the industrial, kind of softening, I would say, that kind of impacts two different parts of our business. Within the Electronics segment, our power semiconductor business is heavily indexed to broad-based industrials. There, we clearly saw softening demand. And our current view is that we can’t expect that to probably continue for the next couple of quarters in that side of it. And then it also shows up in our industrial segment, where we saw — and we talked a little bit about it in the prepared remarks kind of mixed signals there where some broad-based areas that were slower, but other areas that had strength. So in like renewable energy side of things where we tend — the big driver for us there is in two categories.
One is energy storage and the other is kind of grid level sort of solar installations and wind energy. And the grid level solar has slowed and we’ve seen that be slower. But the energy storage side continues to be really robust. So our best view right now is that industrial space probably remains at the slower pace for perhaps a couple of quarters before we start seeing that come back a little stronger.
Saree Boroditsky: Appreciate all the color there. Thank you.
David Heinzmann: Thanks for your questions, Saree.
Operator: Our next question comes from the line of David Williams from Benchmark. Your line is open.
David Williams: Hey, good morning, and thanks for taking my questions. I guess first, David, is there a way to think about the level you’re undershipping relative to maybe in consumption. And maybe you can speak to how you’re feeling about your level of visibility there across maybe the full supply chain. I think in the past, you’ve mentioned that EMS inventory was still elevated, but it was challenging to get a good view there. Or at least some better granularity, but you mentioned you feel like that’s getting better. So just anything that could help there around those two? Thank you.
David Heinzmann: Sure. And then we’ve talked about how in the electronics side of our business that, it’s been a bit of an elongated cycle. So it’s the peak to trough has been a little longer than we have typically seen before and we really think that based on our analysis and the work we do with customers is that is really driven out of the fact that end customers, EMS, OEMs, bulked up a little more on inventory in this past cycle than historically they have because of all the disruptions that were taking place. So that’s what’s kind of elongated. So right now as we try to get a better handle on the end customers’ inventories. We have discussions with them. We have discussions with our distribution partners to kind of get a sense of what they’re seeing on demand and what they’re seeing from, as an example, EMS customers.
What the general sense is we’re getting at this point in time is that it’s getting closer to working its way out. So maybe in the next quarter or so that, that access at the end customers began to get to a more normal level. And we have full visibility, of course, to our distribution partners in the channel. So that’s a mix of it. That’s what gives us a little more confidence that we think things will get back to a bit normal — a bit more of a normal sell-in to sell-out sort of mode as we head into the back half of the year.
