Nigel Coe: Thanks. Good morning. Sorry about that. Thanks for the question. I’m sorry, I missed a part of the call, Nick, where you were running through the guidance point. Did you call out the degree of order acceleration? I know you called out double-digit growth sequentially. Just wondering if you quantified the order and backlog exiting the quarter.
Nick Gangestad: Yes, I did call some of that out. First, we saw double-digit order growth sequentially in Q1, and we expect double-digit order growth sequentially in Q2. And then further ramp into Q3 and Q4 for orders. And that’s being driven by the progress we’re seeing with excess inventory in the channel coming out. In terms of the backlog, we ended fiscal year 2023 with a backlog of $4.1 billion, and we saw that come down high single-digit percent in the first quarter.
Nigel Coe: Okay. That’s very helpful. Thanks and sorry I missed that. Are we still looking at $3 billion as the point where this stabilizes and where we start to see that real inflection in order rates?
Blake Moret: I’m sorry, the $3 billion?
Nigel Coe: Yes, $3 billion of backlog. I think that’s what you called out as sort of normal-ish level.
Nick Gangestad: Yes, what I said on the last call is that we expect the backlog in a more normal range of 30% to 35% of our revenue. I think that we still see that as a good point. I’d say our current projections see us at the high end, closer to the high end of that 30% to 35% range now for fiscal year 2024.
Nigel Coe: Okay, that’s great. And then my follow-on question, Nick, is I understand that the mix impacts from Lifecycle services are growing, the Software Control and ID. But maybe the 240 basis points of gross margin compression year-over-year, maybe just unpack that for us in terms of mix versus M&A impacts. Just curious because that — given that pricing was 3 points, price/cost positive, that’s a fairly big delta.
Nick Gangestad: Yes. So, if you look at our press release, we have gross profit down 240 basis points year-on-year. About a third of that is coming from the investment spend that I talked about year-on-year, that that’s because our R&D spend is part of that growth. So, that’s about a third of that decline in the margin there. Our acquisitions, Clearpath and Verve, are 30 basis points are a small part of that. And then the rest of it would be coming from mix and underutilization of our — underutilization of our supply chain in the first quarter.
Nigel Coe: Okay, that makes sense. Thanks Nick.
Operator: Our next question comes from Steve Tusa from JPMorgan. Please go ahead, your line is open.
Steve Tusa: Hi, good morning.
Blake Moret: Morning.
Nick Gangestad: Hey Steve.
Steve Tusa: So, I guess just from a stability perspective on the deliveries. Is there a particular end-market or anything like that that’s driving this what kind of looks to be a very choppy outcome on delivery? Is it like are there certain segments of the market or product types that are not maybe flowing as smoothly as they have in the past?
Blake Moret: No, Steve, it’s really — I mean, it is product and it’s centered in the Intelligent Devices. So, where you have the greatest diversity of SKUs between variable speed drives, motion control. And these are the areas where you’re seeing that shift that I mentioned earlier, where we were bringing down a significant amount of past-due backlog, and now we’re moving towards what is a more normal book-and-bill environment. But there’s no unsurmountable challenges that we don’t expect to be resolved in Q2. It was the shift that we saw really Q1 and a little bit into Q2, is that move from having the vast majority of our shipments as past-due backlog moving to more book-and-bill, centered within the Intelligent Devices segment.
Steve Tusa: Okay. I guess just also, just, Nick, from an earnings perspective, first half is going to be relatively low, is how much of a linear step-up do you think for 3Q and 4Q as we just think about the seasonality here?
Nick Gangestad: Yes, it will really be bringing us where the first two quarters of this year are, I’d say, under-reflecting end-demand for our products as that excess inventory is being worked through. And then Q3 and Q4 are getting back to a more normal. So, yes, that makes it more heavily weighted to the back half of the year. But given our plans of what we’ll be doing from spending, the type of earnings growth, is very consistent with what we expect with that kind of uptick in revenue into Q3 and Q4.
Steve Tusa: Okay. And just lastly, just on the orders, we’re getting to something in the kind of 1., I don’t know, 1.6, 1.7 range. Is that about right?
Blake Moret: Yes, we haven’t given the specific number, Steve. We talked about double-digit sequential growth from the trough in Q4 to Q1, with expected continuing double-digit sequential growth from Q1 to Q2, and really continuing through the year.
Steve Tusa: Okay. Thanks a lot.
Blake Moret: Yes, thank you.
Operator: Our next question comes from Chris Snyder from UBS. Please go ahead, your line is open.
Chris Snyder: Thank you. I wanted to ask about the guided step-up in margins from the high teens level in the fiscal second quarter to about mid-20s in the fiscal third quarter. I understand volumes are getting better sequentially, but that implied sequential incremental is much, much sharper than what we would kind of say is normalized for the company. So, can you just sort of talk about other drivers of that sequential margin uplift into the back half beyond just volume?
