Operator: And our next question coming from the line of Matt Sheerin with Stifel.
Matt Sheerin: Just a few questions from me. One, just in terms of top-line and your expectations for sequential growth in the subsequent quarters in the back half of ’24. I guess the question is, has your visibility improved or confidence improved given that looking at the last six quarters or so. I think there’s at least three quarters where, there had been top-line issues or headwinds in the quarter for various reasons, right? So, I guess the question is, has that confidence or visibility improved and how?
Todd Kelsey: Yes. So, Steve is going to take this question Matt.
Steve Frisch: I think as Todd talked about in terms of kind of seeing these rolling changes coming through the different sectors, I think it kind of follows that same philosophy where our confidence in the future forecast, it really kind of varies a bit by sector and sub-sector. So specifically like Aerospace and Defense, much more confident in what we’re seeing from the Aerospace and Defense customers in terms of what their demand looks like as well as our confidence in supply chain. So as Oliver kind of gave a little bit of guidance there, I’d say, we have more comfort level there. And we see, as Todd highlighted in the industrial sector, stabilization in the SemiCap market. As we are starting to talk to customers about their back half 2024 forecasted into 2025, gaining confidence that those things will come to reality and basically working with them to make sure we can achieve that.
A little bit of volatility like the communication sector, Todd talked about. We have seen a few surprises there, but more focused on technology changes and a little bit of shift there. Obviously, going through this Healthcare/Life Sciences challenge now again ultimate long-term look very confident. If you look at where the wins are at in the funnel, which is indicative of our customers are really kind of trying to reevaluate, what their sourcing strategies are. We did have a few customers come out and announce their plans to close facilities and consolidate for us. That’s a good thing. We talked about our funnel increasing. Those larger increases are coming from opportunities like that. So there may be a little bit of volatility here in this quarter in terms of where we are seeing those forecast, but as we look to the future, we expect those inventory corrections kind of burn through real potential for those sub-sectors to take off.
Matt Sheerin: Steve, in terms of that inventory burn at customers in those sectors you discussed, are you getting, do you have a sense from customers or how long that’s going to take? And in terms of like forward orders, are you seeing signs, I don’t know it’s 8 to 12 weeks out that things are improving?
Steve Frisch: Yes. We are looking at it customer-by-customer and actually product-by-product and it does vary. Some products for example the things that supported COVID, some of the laboratory test equipment. Their inventory levels are a bit higher and will take a little bit longer to burn through. Other things more related to surgical platforms or other related elective procedures. We are feeling more confident those will rebound more quickly. We are going through the analysis kind of product-by-product and it does vary a bit. But again our confidence level, it will come back. It’s not really a product issue, it’s just really more of an inventory problem.
Todd Kelsey: One of the things I’d add to Mike or Matt is, when we look at the at our outlook and outlook for the back half of the year, and we are taking it from a very conservative point of view, but we have a number of program ramps that are well underway that are going to continue to provide additional revenue in the back half of the year. We have got the supply chain improvement that Oliver talked about and that leads right into the unfulfilled demand that we still have out there. So looking at this conservatively, we have confidence that, we are going to see the sequential improvement that I talked about. One other revenue component — related component that I just want to hit on quickly, as I want to correct a statement that I made in the prepared remarks.
And when I talked about our growth rate, I talked about us having an 8% CAGR over our last five fiscal years, which is accurate, but that is a 250 basis point spread above the industry average, so not the ’25 that I had mentioned earlier.
Matt Sheerin: Just on the communication side, could you remind us, like what the sub-sectors or industries, because I know you don’t play in mobile networks or base stations anymore, right? It’s mostly in other areas.
Todd Kelsey: Yes. It’s really broad brand infrastructure that we are talking about there, Matt.
Matt Sheerin: And that weakness are you seeing across, your vendor base or customer base?
Oliver Mihm: Yes. I will note that, we are well-represented in that technology space. And so as there is an expected technology upgrade here in the future and so when that does manifest, we’re going to enjoy the growth as part of that.
Matt Sheerin: And just a couple of quick questions for Pat, if I can. One, Pat, in terms of your expectations for margin expansion in the back half of ’24, and obviously, gross margins should expand. But in terms of SG&A, you talked about some near-term expenses, but does that go down in Q3 or because of IT costs and others, is that going to be at those elevated levels?
