Chris Moore: Perfect. That’s helpful. Let me switch gears here. So Ford is postponing a $12 billion EV factory. The reasons given were unwillingness of customers to pay extra for its electric vehicles. Just wondering kind of how you look at that? Any impact potentially on the ICE auto business or EV business in general. Just kind of your thoughts there.
Neil Brinker: Yes, it’s an interesting question, right? We don’t focus on EV automotive. Our EV areas that we focus in terms of the electrification is on specialty vehicles. We really look at larger EV applications that require our systems and solutions. And we’ve moved away from any EV related to automotive that’s component related. So, where we see growth and where we see the demand, we’re partnered with – we’re on 119 different engagements with customers in the areas that we target for EV. We see 27 orders or platform wins that we’re very pleased to have won. We’re expanding our EV product group. We’re expanding capacity in our plants in Tennessee. We just recently put out a press release that we’re expanding into Europe.
We’re going to be producing in Italy. So we see growth in the areas that we’ve defined – that is target for us in the EV. Again, that’s in systems and in vehicles like specialty vehicles, municipal buses, school buses, last mile delivery vehicles, that’s the space that we’re focused on.
Chris Moore: No, I got that. I understand it wasn’t on the auto side. I was just curious if you’re getting any pushback from a pricing perspective. Sounds like so far, so good on that front. So I will leave it there. I appreciate it.
Neil Brinker: Thank you.
Operator: Thank you. Our next question is from Jeff Van Sinderen with B. Riley Securities. Please go ahead.
Jeff Van Sinderen: Hi. Good morning, everyone. Now you mentioned lumpiness, I think, and a pull forward, I believe you said, into Q2 in the data center segment, maybe you can, if I caught that right, maybe you can just help us understand the dynamics there.
Mick Lucareli: Yes. It’s Mick. So definitely, we – from a forecast standpoint, probably the last, you know, three or four months or so, based on schedules from our customers. We knew the lowest quarter of the year would likely be our Q3. Those data center, what we’ve talked about in the past, is they can be lumpy. These are, we had a photo in the presentation, really large construction projects. And so we’re required to have product ready to be shipped. But when they’re pulled, it depends on the customer and the completion. They only want it on time, ready to go. So in Q2, we had a little bit higher revenue than we thought that was really going to be, we thought would be coming in Q3. And then in Q3, we expect to have a lower amount of revenue in Q3 and a big ramp in Q4. Again, just based on – consistent with our order book, but it’s based on the timing of where we see the customers pulling and asking for those shipments.
Jeff Van Sinderen: Okay. Fair enough. And then I just wanted to follow up on the CDU. I guess latest thoughts on how you’re approaching high performance approaching high performance in AI data centers? And then does the CDU address that, given that it’s liquid cooling or not for that market?
Neil Brinker: No, that’s a good question. Yes, it does address that. So anywhere where you need to augment your cooling capacity in a data center where you have the traditional air cooling mechanisms. And if you – as a data center or co-location want to expand into higher performance, higher computing speeds because of AI or AV or ML, machine learning, you would need a more efficient cooling technique and liquid cooling is a more efficient cooling technique. So this is liquid cooling that supports direct to chip, for example, cooling to allow for removal of heat on those heat loads on those silver racks. So yes, it is part of that – those market drivers. This helps support and solve for that problem.
Jeff Van Sinderen: Okay. And I think you said that that’s actually going to be available in the first part of calendar 2024 or did you mean? I wasn’t clear on that.
Neil Brinker: Yes, we’re looking at the first. We’re looking at the first part of next year, correct.
Jeff Van Sinderen: Okay. Great. And then just one quick one if I could squeeze it then. Any update or any updated thoughts, I guess, on what you’re seeing in terms of M&A potential targets, pipeline? Any more color to add there?
Mick Lucareli: Yes. It’s been flowed a little bit, but we talked maybe a quarter or two ago with rate hikes and nervousness around the economy. We saw some deal flow and opportunities kind of slow down. People were hesitant to come to the market. I would say the last few months it’s been picking up a little bit for us. In addition, as Neil and I have talked about, we’re continuing to have more people on the Modine side being aggressive with dialogues, discussions, knocking on doors. So, we’ll continue to report back. But it’s a 100% effort going forward and I think we’re feeling good about the pipeline with opportunity we’re building.
Jeff Van Sinderen: Okay. Great. Thanks for taking my questions and continued success.
Neil Brinker: Thanks, Jeff.
Operator: Thank you. [Operator Instructions] Our next question is from Tim Moore with EF Hutton. Please go ahead.
Tim Moore: Thanks, and congratulations on the gross margin expansion and the data centers growth. For overall Modine, I mean, it seems like you’ve harnessed the quickest and easier way to grow sales is through your current customers, that helps the margin profile quicker, and maybe a new customer that has new engineering design cost drag. As you look out over the next 12 months, I mean do you expect to take on some more new customers outside of the EV platforms that you’ve been signing up? Do you think that might weigh a little bit on gross margin expansion, or do you think the 80/20 would offset that if you’re adding new customers?
Neil Brinker: Yes. Well, it’s a good question, Tim. Certainly, we’re looking at new customers and new geographies where we’ve identified market-facing verticals that are growth. So if you think about the GenSet market, you think about what we’re doing in EV, data centers, indoor air quality, absolutely. And through 80/20, as we identify those customers, we have filters, just to be direct. We’ve got filters in place to make sure that we don’t have erosion in terms of all the hard work that we’re doing.
