Ken Newman: Right. No, that makes sense. I guess, for my follow-up, kind of following up on that. I mean, you did increase the CapEx here, for some of these digital investments. I think Kristen, you mentioned a decent amount of that going towards cloud computing. Can you just quantify how much of that is contemplated in the new CapEx guide? And when do you expect to see those benefits start to monetize through the income statement?
Kristen Actis-Grande: Yes, Ken. Happy to talk about that. So it is contemplated in the CapEx range that we gave. I would assume around $35 million of that roughly going to the digital core initiative that we talked about. And maybe let me put a little bit more color around that, than we kind of went into in the prepared remarks. But we really see this as being key to ongoing productivity generation and the ability to scale profitable growth once it goes live. So this is not a full-scale ERP system. Just to be clear, like we’ve kind of implemented parts of this along the way over the years. So, our finance systems done already, PIM, web pricing, we’re not putting warehouse management and scope for this. And then a little bit – I guess a little bit more color on this, too.
We brought in a new CDIO last year, John Hill. He’s led several of these implementations before, and he’s got a dedicated team that’s taken us through this. So it ends up being about $35 million this year. I think a similar amount then in ’25 with the program coming online towards the end of ’25. I’d expect some productivity benefits to start trickling in a little bit earlier that, just related to kind of the business process reengineering on order to cash and procure to pay, which is really what the system is targeting. So maybe some small productivity generation in ’25, but then material impact the P&L post ’25. And of course, that’s when the depreciation would start to hit as well.
Ken Newman: Understood. Thanks.
Kristen Actis-Grande: You’re welcome.
Operator: And our next question today comes from Ryan Merkel with William Blair. Please go ahead.
Ryan Merkel: Thanks. Good morning. Two questions, first of.
Kristen Actis-Grande: Good morning.
Ryan Merkel: Hi, good morning.
Erik Gershwind: Hi Ryan.
Ryan Merkel: Just on UAW, the impact of down low single-digits, how did you quantify that? Was that the 10% direct down sort of 20%, 25% or are you including sort of the indirect impact in there as well?
Kristen Actis-Grande: Yes. We’re including the indirect impact in there, Ryan. So what we’ve tried to look at was – the change that we’ve been seeing in the IP end markets in auto, transportation, primary metals and fabricated metals. And as Erik mentioned, we’ve got some direct exposure in auto. So when we look at that one that’s probably a little bit cleaner to track, although there’s even some things that map in there, which aren’t sort of perfect representations of our business. But primary metals and fabricated metals, would be where we would look to try to gauge the impact that, may be happening in the other spaces through like the job shops and the machine shops. So, we’re basically looking at like what normal sequential trends, would look like for our sales in those spaces. And then we’re looking at what the IP indices are doing to kind of triangulate against that low single-digit number that we gave.
Ryan Merkel: Okay. Am I in the right ballpark where sort of all auto is down maybe 20%?
Kristen Actis-Grande: I think that would be roughly in line with what we were seeing when we did the analysis, yes.
Ryan Merkel: Okay. Okay. That’s helpful. And then just back to gross margins in the walk, just high level, it sounds like first half will be down year-over-year in second half up year-over-year. Is that roughly correct? And the reason being in the second half, you get benefits from the line review and then you’ve lapped the price cost headwind right in 3Q?
Kristen Actis-Grande: Yes. Maybe let me give it sequentially, Ryan, because you got the noise from the public sector contract win in the second half. So, what I would think about if you’re starting with Q4 as the jump-off point on the 40.5, you’re going to move up slightly sequentially into Q1. I’d expect a small inflection again in Q2 and then Q2 into Q3 with the second half being roughly level. That might be a little bit of an easier way to think about it, because there is a lot of noise in the year-over-year comps. Hopefully, that makes sense.
Ryan Merkel: Yes, it does. Okay. I appreciate it. Thanks.
Kristen Actis-Grande: Welcome.
Operator: And our next question today comes from Chris Dankert with Luke Capital. Please go ahead.
Chris Dankert: Hi. Good morning. Thanks for taking the questions.
Kristen Actis-Grande: Hi Chris.
Chris Dankert: I guess, on the digital launch mace.com kind of revamp here, just any additional detail on timing? Should we still expect that before calendar year-end? And then maybe just any kind of contribution to sales growth, we should be kind of assuming in the guidance there?
Erik Gershwind: Chris, so the – basically, the e-commerce improvements and the heavy lifting on this is done. So Kristen mentioned in the D&A, the impact of the P&L, the good news is the work is done. The rollout will be occurring really over the next quarter or so. So customers will begin to – that’s when the customers will begin seeing an impact. We’re pretty encouraged. What I would say is, it’s factored in to our guidance for basically what Kristen described coming out of the gates here were slow. We expect some sequential build in part, because of this UAW situation at some point, of course, normalizing, but in part, because of the initiatives, and that’s a piece of it. I think what we expect to happen with e-commerce, is it’s not going to be a light switch.
This will build over time. It is one of the things though that gives us confidence beyond this year, looking at kind of with a three-year lens, a multiyear lens. What gets us excited as we look back to the prior three-year chapter and we achieved our growth targets, or we exceeded the growth over IP without really getting the engine of our core customer growing, we think this is a big piece to it. So, I don’t think it will be a light switch, but I do think we’re going to start seeing benefits, beyond the next quarter.
