Michael Petras: Yes. David, we’re going to continue to do the right things around cost and make sure there’s a balance here of taking care of our customers. But this is not a cost play. This business, in total, as we’ve talked about many times, there’s a high single-digit organic grower. We feel confident in our ability to return to those levels when we get through this abnormal time period, if you will, with some of the destocking and bioprocessing challenges that are out there. I mean bioprocessing isn’t a huge segment for us, but it does impact us as well, particularly in the Sterigenics side and a little bit in Nelson. When we look at our margin rates, we feel pretty confident that they’re going to return to historical levels as they did in the quarter that you saw here.
The first quarter was abnormally low but as we messaged in the past, that’s always our lowest quarter of the year. But I want you to think this is a big machete ripped a bunch of costs out play. That’s not what this business is about. We feel confident in our ability to continue to grow this business in high-single digits and work through this current cycle we’re in. So I just want to be clear with that, David. We’ll continue to drive efficiency, Mike and Joe, in particular, our working operating efficiencies in our time. And as you may recall, late last year, we built up quite a bit of talent within the Nelson side to address potential demand that would come because we’re really focused on service. Since that demand has not come through as strongly as we like, we’ve appropriately let some of those head counts, if you will, trade down on a natural level.
But I don’t want you to think we’re getting super aggressive and just taking a bunch of costs out.
Operator: The next question is from Luke Sergott from Barclays. Please go ahead.
Luke Sergott: Just a follow-up on Windley’s question there. So on the volume side, you mentioned a little bit of bioprocessing. Can you kind of break out where the weakness was med device versus the pharma non-devices business that you guys have?
Michael Petras: So I would just say, Luke, on bioprocessing, we see that in the Sterigenics business mostly. It’s not a huge portion, but it’s a good mix for the company. That industry, as you’ve seen with some of our customers’ have publicly gone forth in the last weeks, they continue to struggle with volumes. So that would tell you that’s where we’re seeing it. We also have some food and cosmetics within the Sterigenics side, that’s been a little softer in the current cycle and then also medtech. On the lab side, it’s med device and some bioprocessing and some of the pharma side as well biopharma in particular.
Luke Sergott: Okay. Any quantification on how the bioprocessing volumes are down? Just to frame it and then I have a follow-up on like your outlook.
Michael Petras: Yes. They’re down significant double digits [Technical Difficulty] probably 30% or so.
Luke Sergott: Okay. That’s helpful. And on the recovery in the back half, you talked about Steri volumes improving sequentially. Can you just give us a sense of how the quarter paced out, what your exit rates were? Anything that gives you that confidence where you can say things are going to start getting better and step up.
Michael Petras: Yes, there is a cyclicality in this business a little bit. As you saw, first quarter to second quarter. When we look at the third quarter, I’ll take you Sterigenics, if you look at the third quarter, we’ll see a slight improvement, slight, if you will, versus second quarter and then slight improvement again in the fourth quarter. And then on the Nelson side, obviously, on the Nordion side, we gave prepared remarks on that 75% of the revenue will be in the second half with 50% of the total year’s revenue will be in the fourth quarter. So you could kind of figure how that. It’s a big hockey stick, which we knew all year long. And the Nelson side, you’re not going to see significant growth when you look at it at the back half of the year from the levels that we were at here in the second quarter. Third quarter will be a little lighter than the fourth quarter when you think about it that way.
Operator: And the next question is from Casey Woodring from JPMorgan.
Casey Woodring: As a follow-up to the Nelson point, it looks like Nelson revenue came in, in line with expectations today. So just wondering if the new guide is contemplating a slower recovery in Nelson in the back half than maybe what you had originally thought, guiding the flat revenue here sequentially? Or was the revised guidance here mainly lower Sterigenics volume? And then, just what are you hearing from customers in Nelson, any sort of order trend commentary that you can give so far through 3Q.
Michael Petras: Yes. Casey, thank you. I would say on the both Nelson and Sterigenics have been factored in. The softness have been factored into the guide, consistent with the comments I just made a little bit ago, you’ll see third quarter a little lighter than you see the second, and you’ll see fourth quarter more in line with kind of a second. So you’ll have a relatively flat, if you will, second half of the year versus where we finished second quarter. As far as what we hear from customers, one of the things we really are obsessed with is quality and service, making sure our Net Promoter Scores, we continue to see improvements in stability in that area, which we’re proud of. Hit or miss, we’ve got some customers that have not made some new product testing a high priority for them.
