Phil Ng: Okay. I appreciate the color, guys.
Operator: Our next question today comes from Eric Bouchard with Cleveland Research. Please go ahead.
Eric Bouchard: Thanks. Two things, if I could. First of all, on the commercial side, Jeff, you outlined a path to improvement in the back half of the year. I assume that’s more residential focused, especially because commercial has been better. What is the path you’re expecting or we should expect for commercial to travel from here? And is there an incremental pressure that that applies to the business in 2024, perhaps into 2025 relative to 2023?
Jeff Lorberbaum: Yeah. As we went through 2023 and the rates started going up, the commercial business slowed down. We expect it to continue to be slower. We think there is going to be a lag time between projects getting started, giving how tight the markets are for borrowing money, and the costs of borrowing money. And then what I described earlier was when the interest rates start falling, the projects will come in, but then the time it takes to start them before we actually feel it could be a year to a year and a half or more.
Eric Bouchard: Okay. And so, within this, the path for revenue growth for Mohawk, if 25% of the business is Europe and 25% of the business is commercial, I’m just trying to get a sense of the improvement in rates in US residential, at the same time, those are lags or incremental lags. Can the revenues of the business grow in that type of an environment, or do you need to wait for the commercial to recover before the total company can generate revenue growth?
Jeff Lorberbaum: We’re expecting the growth in the residential business to offset the decline in commercial, and so to have a growth in it even though the commercial is weaker.
Eric Bouchard: And then the second question, the CapEx change in ‘24 versus ‘23. Can you just dig into that a little bit? What are you doing less of in ‘24? What did you do more of in ‘23? Just give us a little bit of perspective on that decision?
James Brunk: Sure. As I noted in prepared remarks, our forecast for 2024 is about $480 million. About 50% of that is going to be focused on cost reductions and product innovation. 20% will be to complete the growth initiatives that we’ve identified around laminate, quartz countertops, LVT, porcelain slabs, and insulation. And then about 30% is for maintenance and other items in the year.
Eric Bouchard: Okay. Thank you.
Operator: Thank you. And our next question comes from Stephen Kim with Evercore. Please go ahead.
Stephen Kim: Yeah. Thanks very much, guys. First question, I guess, could you talk a little bit more about the pricing dynamic? Maybe give us a sense for how it’s — if it’s varying at all across product or market? I gather, in the US, particularly in ceramic, it seems like you’ve got some pressure coming from imports, but I was wondering if you could just sort of contextualize that sort of across your portfolio the pricing dynamic specifically?
James Brunk: So, what we believe is that pricing is generally at the bottom, more near the bottom, and so you should continue to see that trend through the year. From a comparable standpoint from year-over-year, you certainly still see the pressure. We anticipate, though, that lower material and energy basically to align with price and mix, and then other inflation items, such as wages and benefits and insurances and those types of items, to be more covered by productivity and restructuring actions. In the EU, Europe remains still weak with pricing pressures and lower production rates. But as Jeff pointed out, as we go through the second half of the year and that improvement should drive improved year-over-year results.
Stephen Kim: Okay. Helpful. [Technical Difficulty]
James Brunk: I’m sorry, Stephen, you’re going to have to repeat that.
Stephen Kim: [Technical Difficulty]
Operator: Mr. Kim, this is the operator. We’re not able to make out what you’re saying. I’m going to clear the question. If you can dial back in, we’ll get you back in the queue, sir. Our next question comes from Timothy Wojs with Baird. Please go ahead.
Timothy Wojs: Hi, guys. Good morning. Just really had two questions. So the first one, maybe just a longer term or bigger picture question around M&A. Historically, Jeff, kind of coming out of cycles, there’s been a little bit more kind of M&A activity in the flooring industry over the last couple of decades. I guess, how would you kind of characterize the opportunity around M&A as maybe we come out of the bottoming of this cycle? I mean, would that same kind of M&A opportunity be there today like it was over the last several cycles?
Jeff Lorberbaum: So, I don’t know how to predict the future, but in the past, what’s happened is that when you get with low margins in the businesses, that the expectations of the sellers are high and the expectations of the buyers are low and you can’t get together. So, as you start coming out and the margins start going back up, it’s easier to align with valuations. So, anybody who has wanted to sell or wants to get out, it typically comes as you’re in the first couple of innings of the coming out of it, and I would expect the same thing is going to happen this time.
Timothy Wojs: Okay. Okay, good. And then just second question on the new kind of LVT formulations and lines. Is there any way just to give us an update on kind of what you’re seeing with that and maybe any sort of kind of preliminary feedback or expectations for maybe what sales might look like there over the next several quarters?
Chris Wellborn: I can just comment that we’re ramping up our West Coast production and our new extrusion process in Georgia. We’ve also got unique technologies to provide improved visuals and surfaces. And so, we’ve got a lot — and we’re also introducing a new renewable polymer core as an alternative.
