Andy Kaplowitz: I appreciate the color, guys.
Blake Moret: Thanks, Andy.
Operator: We will take our next question from Jeff Sprague with Vertical Research. Your line is open.
Jeff Sprague: Thank you. Good morning, all.
Blake Moret: Hi, Jeff.
Jeff Sprague: Good morning. I just want to come back to kind of orders and backlog. I’m just kind of confused by the comment that orders ramped during Q4, right? The ending backlog is 4.1 billion. You were guiding 4.5 billion to 5 billion. I know you pulled forward 100 million in sales, right? But maybe just bridge us on what happened other than that sales pull forward. How much of it was cancellations versus just kind of regular way order normalization, if there’s a way to do that?
Blake Moret: Sure. Let me make a couple of comments, Jeff. And then Nick may have some to add as well. So we saw orders increasing. If you look at beginning of the quarter of Q4 to the end, we saw orders exit at a higher rate than at the beginning of Q4, and then with a good uptick from that sequentially in October. So that was the ramp we were talking about, and why we believe that Q4 was the trough for orders.
Nick Gangestad: Yes. And, Jeff, just to go a little deeper in that, what we’re seeing — one of the dynamics we’re seeing in Q4 and we expect to continue through Q1 as well is our channel partners, our distributors working to right size their inventory as we are seeing — as they are seeing good reductions in our lead times. They’re doing the right actions of bringing their inventory levels down. And that’s resulting in lower orders being placed on us. And we expect that to continue through Q1. And we think Q2, as we — and as we discuss with all of our distributors, Q2 is where that will start to change where the inventory levels at our distributors will be reaching the normal level that they expect. So partly I say that just to say, we don’t really see this level of orders we’re seeing now as normalized. We’re seeing them the correct reaction to the actions they’re taking to bring their inventory levels down.
Blake Moret: And if I can add to that. So our distributors are seeing a higher level of incoming orders than they in turn are placing on us due to their high inventory levels. So we have, as you would imagine, very good visibility into our distributors’ incoming orders from their customers, from their end users and the machine builders. And that order activity is higher than what they’re in turn placing on us. So that gives us additional confidence that orders will ramp up as their inventory situation comes down.
Jeff Sprague: And then maybe just on the guide. If I heard right, I think you said you’re expecting positive organic growth in Q1. Obviously, you have a negative in your guide range. I would have thought if that negative were to happen, it would actually happen in Q1 with this order normalization. So maybe just kind of talk about your thought process of what gets you to the negative organic growth for the year versus being positive in Q1?
Blake Moret: Sure. So at the negative end, you would see a slower reduction of inventories at our distributors and a deterioration in the macro. At the upper end of the range, you would see distributors stabilizing their inventory at higher levels than they did before. So getting back to that equilibrium and placing orders that are more reflective of the underlying demand from users and integrators and machine builders. And you would also see at the high end some of the impact from the big projects being spurred by stimulus, specifically in the U.S. I should add as well that on the high end if we talk about total sales, some of the performance in terms of new acquisitions I think there’s some opportunity there as well.
Nick Gangestad: And, Jeff, to follow up on the one question about why Q1, why we think that will be low single digit growth? Yes. If we were only looking at the orders, your question would — that would make sense why not negative. However, we also continue to have a 4.1 billion backlog that we’re entering the year with. And so what we’re seeing in our Q1 revenue is a combination of continued sales of some of that backlog coupled with the lower orders we’re expecting in Q1.
Blake Moret: Yes. And if I could just add one additional piece. We do expect shipments to ramp sequentially in terms of volume through the year. You get into a little bit of the math of comparables based on having such strong shipments at the tail end of the year that enters into the math of the year-over-year growth as well.
Jeff Sprague: Great. Thank you for the color.
Blake Moret: Thanks, Jeff.
Operator: And we will take our next question from Andrew Obin with Bank of America. Your line is open.
Andrew Obin: Yes. Good morning.
Blake Moret: Good morning.
Nick Gangestad: Good morning, Andrew.
Andrew Obin: Maybe just to unpack this minus 2% growth rate limit further, historically, there’s been a strong connection between CapEx and your sort of view of the growth rate. I’m sure you’ll tell us a lot more about it at the Analyst Day in your new framework. I fully appreciate it. But what kind of macro do we need to see for minus 2% to manifest itself? Does this imply push outs of EV batteries? Could you just describe the macro environment behind the minus 2% [indiscernible] forecast? Thank you.
