Michael Hartnett: Well, I think the industry is still waiting to see orders from the infrastructure bill, which would be substantially important to the — to our business. And it’s — and I think that’s the oldest of the bills that has been approved. And I would say it’s — the impact that bill has had on the economic environment so far for everybody seems to be very minimal. So, we do expect that once that spending does hit the markets. And when we look around at, for example, the aggregate market, we see that — for the most part — much of the US is running at full capacity today. So, new plants will have to be built to produce cement and asphalt in aggregate in order to absorb that capital and produce the end items that improve the roads, improve the dams and improve the infrastructure that — that spending is meant for.
So, we’re really at the beginning of that entire phase. This is must have felt — it must have felt this way in 1958 when Eisenhower announced the building of the interstate highway system.
Vivek Srivastava: Thank you.
Michael Hartnett: I’m sure everybody was waiting for that money to be spent.
Vivek Srivastava: Great.
Operator: Thank you. Our next question is from Ron Epstein with Bank of America. Please proceed with your question.
Unidentified Analyst: This is on for Ron. Could you guys give more detail on what you’re seeing for labor talent acquisition, attrition rate is still high and where that’s at?
Michael Hartnett: We’re not seeing — it’s dependent upon where you are in the country. I mean, we’re in — heavy on the East Coast, light in the Midwest, heavy on the West Coast, heavy in the Southeast in terms of production facilities. We’re not seeing any problem with that’s unusual relative to labor. We’re probably seeing more problems that are unusual in California with regard to ridiculous legislations. But we’re not seeing the problem with labor. And typically, year-to-year, we’ll bring in close to 100 new engineers from — these college graduates and train them into bearing makers and assembly makers and valve makers and so on and so forth. And we’re having no problem recruiting at that level today.
Unidentified Analyst: Great. Thank you. And then just one other one. Could you give an update on what you’re seeing so far for the marine exposure, how that’s going? Are you guys expecting to see any of the benefits from the supplemental AUKUS funding?
Daniel Bergeron: Yeah. Right now, we are very busy working with Newport News and Electric Boat on quoting new boats and new Virginias and new Columbias. There’s a lot of activity. That business has grown at double-digit for us, and we expect it to for the next 12 months.
Unidentified Analyst: Great. Thank you so much.
Operator: Thank you. Our next question is from Steve Barger of KeyBanc Capital Markets. Please proceed with your question.
Steve Barger: Hey, thanks for taking the follow up. Rob, I just want to make sure I understand your commentary on margin sustainability relative to the 3Q guide. At the midpoint, I’m getting consolidated op margin in kind of the mid 20% range like at historical levels versus the 22% plus in the first half. Is the guide conservative? Or is one of the segments going to have a seasonal step down or some headwind in the quarter?
Robert Sullivan: The third quarter is always a tricky one, right, because we lose a number of production days. It’s not unusual to see a little bit of headwind on that front. But as I alluded to last year from a gross margin or last quarter — from a gross margin perspective, we felt 43% was a good target, and I still believe that. So, it’s a challenging quarter with the holidays, just — which reduces our margin profile, but Q4 looks strong on that front. So that’s kind of where we’re looking to shape up for the year.
Steve Barger: Yeah. Is one segment or the other taking outsized hit from fewer days in 3Q?
Robert Sullivan: I mean, it depends on the location. So no, not really. It’s pretty much across the organization.
Daniel Bergeron: Yeah. Steve, this is Dan. I think it would be more impact on classic RBC, because we actually closed down a lot around the holidays. And so, if you look at the six months, we’ll be right on track to where we were prior in the first six months of the year.
Steve Barger: Got it. Thank you.
Operator: Thank you. Our next question is from Tim Thein with Citi. Please proceed with your question.
Timothy Thein: Great. Thank you. Good morning. The first one is — just in terms of going back to the aerospace discussion, can you just give us maybe a little bit more color in terms of your expectations in the back half of the year and into 2024. A lot of discussion just in terms of the OEM production ramp, which is clear. But maybe just some discussion on aftermarket, what you’re seeing there? Is the supply chain issue has been a constraint for you at all? Or just what are you seeing there? And then again, kind of your expectations into the back half of the year to into 2024.
Michael Hartnett: Well, 2024 on the aerospace and defense side is going to be extremely strong for us. And we have eight to 10 plants that are servicing that business with different products. And when we look at — right now, we’re going through our FY 2025 budget review and we’re in the process of establishing what our revenue outlook is per unit, per business unit. And we usually start that process in October and then refine it in November and December, so that we can put plant budgets together by January. And then we know how much we can spend on SG&A by February. So that’s the sequence of events. And so, we’re in our second turn on revenue outlooks by plant based upon — driven by content and driven by normal in and out business to establish what the 2025 baseline is for the aerospace and defense units.
