Shawn Vadala: Yeah, sure. So in the first quarter, of course, the first quarter, we’re going to have a significant volume decline in the first half of the year. So for the first quarter, we’re going to be down over 200 basis points, probably in the 230, 240 kind of basis point range. Now, it’s important to understand, too, like currency has a pretty big effect on the first quarter. So it’s probably like 100% negative headwind to our margin in the first quarter, and I think we called out in the press release a 4% headwind to earnings per share. But that’s going to change quite a bit as we get into the second half of the year, especially the fourth quarter and so for the full year, we’re looking at the operating margin to be up in the kind of like 30 bps kind of a range, and if you exclude currency, it’s probably in like the 70 bps, 70 bps plus kind of bps kind of a range.
Operator: We’ll move to our next question from Daniel Arias at Stifel.
Daniel Arias: Hi, guys. Thanks for the questions. Shawn, maybe just going back to the guide, if you take out the $58 million and you add it to 2024, it does get you to that upper point or two that you’re guiding to, but in order to have the dollars be the same, it seems like the outlook would need to be for three points or so of growth. So is there something else that’s amounting to a partial offset? How do you see the outlook now versus last quarter when you exclude the logistics issue?
Shawn Vadala: Yeah. Hey, Dan, it’s a fair point. Like as you mentioned, we built the — we expect the shipping delays to largely benefit the first quarter of this year and so we acknowledge there’s upside to the full year guidance because in addition to that benefit, there’s also like a growth rate benefit as we get to the end of the year in the fourth quarter, given the base that we’re kind of growing off of, but when we kind of step back from all that, we just kind of felt like it’s still very early in the year and while we’re not seeing anything new in the business, Patrick talked about in the prepared marks that yes, there’s still challenges in the market, but just want to confirm we’re not seeing anything new at this point, but it’s still early in the year.
We just prefer to be a little bit cautious given various uncertainties and the back waiting of the year, but when we look at the second half of the year, we still feel good. We feel like we’re really well positioned for the second half. We talked about some of these new product launches in the prepared remarks. We have a lot of really exciting programs that we’re launching. We spent a little bit of time talking about Spinnaker 6 in the prepared remarks, but there’s other corporate programs that we’re working on as well. So we feel like we are well positioned for the second half and just acknowledge I think there’s a little bit of upside. Yeah, we’re being a little bit cautious as we start the year, but we just want to see how things play out a little bit.
Daniel Arias: Okay. So just to be clear here, you’re not passing along the full amount of the logistics offset, but you also don’t see anything in the end market makeup that has you feeling less confident than before or that has you looking for less growth than before. Is that a fair summation?
Shawn Vadala: Yeah, I think that’s fair.
Daniel Arias: Okay. And then just as a follow up, maybe from an end market standpoint, it would be great if you could just give any color you could on the degree to which sentiment on China has changed in the quarter versus last quarter. Maybe it hasn’t at all, but it would be good to get sort of an updated view on the word on the street when it comes to ground level conversations, thoughts on rebound, etcetera.
Patrick Kaltenbach: Yeah, I’ll take that. Look, Shawn and I have been in China in December and of course we’re in continued conversations with the local team there, sales management team to see if there are any changes. I would say China at the moment is still quite weak, especially in pharma, biopharma, but from our perspective, the situation has not deteriorated from what we reported on at the JPMorgan conference. Clearly they have seen still facing many headwinds. There has been very significant spending and growth during the COVID period, but right now we are facing a situation where there’s a lack of stimulus from the government. There’s a lot of uncertainty still there. There is some reduced foreign investment as well.
So all of the economy that is focused on stabilizing the real estate market and I think that in itself leads to just also softer demand at the moment, but overall it hasn’t changed. As I said in my comments, core industrial has been actually a bit better than expected in Q4, but we remain a bit cautious on our outlook, still in the first half of ’24 and the second half will be easier for us because we have much easier compares. As a reminder, we had been down 25% in Q3 last year, 23% in Q4. This year, we told you that the first half will be down. So the second half will be now for us in ’24, there’ll be an easier compare. I think we have a lot of good strategic drivers there. We have a very strong team and we are confident that we will be able to continue getting market share with our programs, our products that we have there and there’s also long-term that the market in China has, as we told you before, has high single entry growth opportunities.
Daniel Arias: Okay. Thank you guys.
Operator: We’ll go next to Derik de Bruin at Bank of America.
Derik de Bruin: Hi, good morning. Thanks for taking my question. So can you talk a little bit about more about what you had to do to sort of like fix the logistical issues and what your third party is, and I guess just are you confident that these are not going to be at Red debt? And you made some sort of allusion to or comment about the Middle East. Are you seeing, what do you think is really sort of the risk there? I don’t think you ship much through the Red Sea, but can you just sort of talk about sort of like what you’ve done to sort of ameliorate and fix some of the issues around that? Thanks.
Shawn Vadala: Yeah. Hey, Derek, maybe I’ll start off. So maybe I’ll start off with the latter part of the question with the Red Sea and the Middle East. Of course we do have things coming from Asia that are on boats or ships going through the Red Sea. So we will have higher freight costs a little bit as we kind of go this year, but I think the bigger thing is really what does that mean to our customers? It’s not really directly related to us, as you say. It’s really about what does it mean to our customers? So I think there’s still an unknown there. I know, especially in Europe, there’s been a lot of sensitivity around various inflationary topics over the last couple of years, whether it’s all the geopolitics that have put pressure on energy costs or whether it’s just inflation in general.
This is just another thing kind of in the mix. In terms of our business, just to be clear, you’re right. We don’t sell very much at all into that region. So it’s not a direct impact at all. In terms of what are we doing to improve the logistical situation, Patrick, did you want to take that?
Patrick Kaltenbach: Sure, I can take that. We are making actually quite pleased with the ongoing progress that we’re making and we are also expecting really to work down the backlog during Q1. We have a lot of our own experts there on site as well to help the local management team of our service partner there to get all the processes in place and stabilized, which have been the issue during Q4 when we transferred the full 100% of the volume from our former logistics provider to this new logistics provider. There are a lot more comprehensive processes involved on site there, like mini finish processes, etcetera and that can be brought our experts there to help them understand these processes, build enough capacity and making sure that everything from product into the logistics center to product out of the logistics center, that process flow is stable and really matching the volumes that we are expecting.
As I said, we’re making good progress there. We expect the backlog to go down and having a more stable operation clearly at the end of Q1 and while it still might maintain some more oversight from us during the next couple of quarters, we are confident that this is a very good logistics provider moving forward and that they can deliver the performance that we expect from them.
Derik de Bruin: Got it. And then just one follow-up. Where are we on the stocking issues and pipette tips and sensors and all that? Can you just sort of like give us an update? Is there still waiting for customers to burn down inventory?
