Dave Farnsworth: And that’s not to say that we feel like 20% of the business is at risk. What we’re saying is that there’s contained within that segment of the business that piece of business is where we see the highest concentration of risk that we’re working through. But as Bill said, Kyle, I don’t see a significant exposure for renegotiation settlement in our backlog.
Bill Ballhaus: And then I think the other thing that I would add relative to that area where we’re focused on the technical work, we feel very good about our long term positioning there, because we’re differentiated, we’re sole source, we’re baselined on programs where the capability is mandatory. And our customers are incentivized, we believe, with us to get to the other side on these technical issues, so that we can get to the person runs and get the product into their hands. So hopefully that paints a little bit clearer picture of the technical issues that we’re describing.
Operator: Your next question comes from the line of Michael Ciarmoli from Truist Securities.
Michael Ciarmoli: Just to stay on that topic, I mean, looking at the guidance cut, I mean, can’t we just say the high end of the prior $1 billion to the low end now at $800 million, isn’t that 20% of the business? So I mean, it seems like 20% of the overall business has been kind of compromised here.
Dave Farnsworth: Yes, and I think I would say that when we look at the reduction in the range, it is largely in that business unit where we see the biggest reduction in the revenue. Because as we looked at the first half and the adjustments that we’ve taken that have impacted revenue, they’ve largely been in that business, as Bill said. And as we look at the volume going forward, as we both talked about, we’re going to get these programs lying flat on the development before we really start producing in volume into the production. And that transition to make it seamless and to make it smooth without variability in the future needs to be completed before we move ahead. And that’s why you’re seeing we’re not having as much early material receipts as we’ve had in the past.
We’re managing that carefully, so we don’t end up in a situation where things are — where we brought in things that design changes are still happening, too. And so yes, a significant part of that reduction in the range is driven by that part of the business.
Bill Ballhaus: And I would just offer too that it’s really a timing around that volume and pushing to the right of that volume. And that’s as a result of us being very methodical and working our way through the technical issues to get to a robust baseline that we can produce very predictably and profitably and at scale. And the reason why we’re doing that is because we’re very excited about the prospects for this part of our business. It’s highly differentiated. We have sole source positions. We see a significant growth opportunity in front of us in this area with attractive gross margins, similar to when I walked through with the one challenge program where we had the major source of our impact this quarter still operating at very healthy gross margins going forward. And so we’re very excited about our piece of this business. This volume reduction largely associated with that part of the business is a push out to the right.
Dave Farnsworth: And Michael, I would say it is a thoughtful, intentional view on our part of making that decision to not add to the risk profile by bringing that in — by executing that early.
Michael Ciarmoli: Just the last one, the $150 million guidance cut at the midpoint, you called out the revenue headwind from cost growth in the quarter in volume in the quarter. What’s sort of the breakdown for the year if you can bridge kind of the $23 million in cost growth you saw this quarter? Is it fairly balanced, or how should we think about that?
Dave Farnsworth: I think the way I would look at it is, as we talked about, we’re not trying to guide the back half from a profitability standpoint. It is if you take the first half and you take the reduction that we saw the shortfall in revenue, it’s starting with that as the starting point that that’s in the number for the year and then taking a look at exactly what Bill said, the intentional shifting of execution on contracts until we’ve got some of these things laying flat on that piece of our portfolio, not certainly on our entire portfolio.
Operator: Mr. Ballhaus, it appears there are no further questions. Therefore, I would like to turn the call back over to you for any closing remarks.
Bill Ballhaus: Okay. Well, thank you very much. And I very much appreciate everybody listening into our call this afternoon and the questions, and we look forward to providing you an additional update next quarter. Thank you very much.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
