Julian Mitchell: Thanks, Rob. And does that mean it’s sort of an even waiting in that step-up, or Q3 will always have a bigger one in terms of that step-up sequentially than Q4 is having?
Rob Rehard: Yes. Q3 would be a bigger step-up off of Q2 than Q4 over Q3.
Julian Mitchell: That’s great. Thank you.
Rob Rehard: Yes.
Operator: The next question is from Jeff Hammond with KeyBanc Capital Markets. Please go ahead.
Jeff Hammond: Hey, good morning, guys.
Louis Pinkham: Good morning, Jeff.
Jeff Hammond: So just on PES, I’m just trying to — I mean, your commentary and I guess how starkly weak it’s been, is maybe disconnected a little bit from the OEMs. So I’m just trying to understand, how have you seen share shift? I know you picked up some share during COVID maybe because you had a closer supply chain. There’s been some SEER changes and refrigerant changes. Are you seeing share shifts as these new models are coming out? Or are we underappreciating 80/20? Just level set us on share and just some of these kind of regulatory changes?
Louis Pinkham: Yes. So, Jeff, I appreciate the question. We feel good about our share position. We do not feel like — and to your point, we definitely gained some share during COVID. We think we’ve held on to much of it. Now with 80/20, this is the piece of the business where we have managed 80/20. We’re no longer going to sell product at low margins. That’s just not who we are. We sell value in our product and technology. And so we have seen some 80/20 pruning in this space, but that’s really not a driver here. From a regulatory perspective, you know, for sure, with the 2025 GWP regulations, we are working with all of our OEM customers. In some aspects — in some perspective, they have to redesign their products to meet the requirements.
And this tends to help us because they typically choose a more energy-efficient motor and that should be a positive for us in the end. But I want to circle back a little bit to your initial part of your question, which was a disconnect with the views that are being stated right now. A couple of things I’d clarify. There are definitely some lack of clarity in the market. And I think we’ve had a few false starts. And I remind you that our HVAC OEMs, when they’re talking about current situations, they’re talking about consumer demand and that’s a bit of a lag from what we would see with demand. And in addition, some of that demand is going to be satisfied through stock levels. And in addition, I’d say to that, there’s embedded price in their demand and unit volumes are still under pressure.
And as you know, we don’t link to their price levels. And so all in, we’re perhaps a bit more cautious just because again January, we thought we’re going to see a bit of a recovery. Honestly, fourth quarter, we were hearing from OEMs that we’re going to see recovery. And so we’re being cautious. April gives us a little bit of confidence, but again, one month does not make a trend. So a lot there, Jeff, but hopefully, that was helpful of how we’re thinking about it.
Jeff Hammond: Okay, great. And then just IPS, I think you said, mix was a positive and you thought that would step-back. What in particular was driving the positive mix and why don’t you think it would continue? And then just within the kind of guide change on IPS margins, is that better synergies or is there some mix in there as well?
Rob Rehard: Yes. So the mix was largely around, hey, we had fairly strong distribution versus OEM as we move through the first quarter. We don’t see that same strength as we move into the second quarter. Our synergies absolutely continue to build as we move through the year. We saw synergies of roughly $26 million in the first quarter and are on track to that $90 million. So continue to build as we move through the year. So that — but the mix impact is really just not the continuation that we saw in the first quarter on that strong distribution versus OEM.
Jeff Hammond: Okay. Thanks.
Louis Pinkham: Thanks, Jeff.
Operator: The next question is from Nigel Coe with Wolfe Research. Please go ahead.
Nigel Coe: Oh, thanks, good morning. Thanks for the question.
Louis Pinkham: Good morning. Nigel.
Nigel Coe: Good morning. Just another question on PES. I’m sorry about that. But your 2Q guide would embed very little pickup Q-o-Q from 1Q to 2Q. And I think 2Q is normally your seasonally strongest quarter. So I understand, you know, Louis, you want to be very cautious, big signals from customers. But is there anything you’re seeing to maybe kind of inform that sort of view on 2Q other than want to be very cautious. And then my follow-on question with that would be maybe some more details around the restructuring you called out for that segment.
Louis Pinkham: Yes, you know, really, no. I feel like when we were here in October and then we were here in January, we were in similar situations. And so we’re going to be cautious about our guide for this quarter. Now again, 1.1 book-to-bill rate coming out of Q1, orders down 2% in April gives us some confidence. I wish we could have this conversation after May [ph] because then I’ll have more confidence — because again, I felt like I was in a similar situation in January. So we’re going to be cautious here, make sure that we execute beyond that, that’s really the view.
Rob Rehard: And then on the second part of your question there. We do have some restructuring savings that are embedded in the guide and we don’t typically comment on segment level restructuring actions, but there’s certainly a component, but a lesser component to the second quarter step-up in margins versus what we expect in terms of like I said, a little bit of volume, a little bit of volume goes a long way in terms of absorption, but also a line of sight to some better mix coming through in the second quarter versus the first. So yes, restructuring actions will help, but it’s not a big driver of the improvement going forward.
Nigel Coe: Okay. That’s helpful. Thanks. And then we’ve seen copper prices running pretty hard here. So I’m wondering if the NPFs, which I think are mainly within PES, whether that’s having some impact to your second quarter margin. I think there’s a bit of a lag on recovery there. So anything to say on the NPFs? And then as we unplug industrial from the guide, are there some standard costs coming from industrial into the other segments?
