Operator: Next, we go to Joe Giordano with TD Cowen.
Joe Giordano: Just curious on the management changes that you articulated for January 1st. Is there any real like change in the org structure internally just in terms of how the businesses are going to roll up? You have a COO now. Like, just curious if there’s any kind of like structural changes in how the business is going to report.
Robert Mehrabian: Yes. I think that’s a good question, Joe. Two things. First, we have one subsegment, which is in the instruments businesses. You remember instruments consists of marine, environmental test and measurement. The marine already refers to George Bobb, the test and measurement and environmental reports to me. Those would begin reporting to George in January. Edwin has been running our biggest segment, which is our Digital Imaging segment. He will continue running that for a while. But as time goes on over the next 12 to 18 months, they will begin harmonizing, George learning more about the Digital Imaging businesses and Edwin learning more about the businesses that George is running at the present time. The resilience to all of this is that I’m not going anywhere.
We’ll continue to work together, the three of us, also, of course, with others like Jason and Steve Blackwood and Melanie, to make sure that all the assignments, changes happen slowly, orderly and don’t offset any of our market leading products that we’re focused on. So, I see this as a continuum but one in which both Edwin and George take more responsibility and I move to more to worrying about how to allocate capital with Jason, do more M&A and also improve our margins, which is something we have to do continuously.
Joe Giordano: I appreciate that color there. If I go over to DI margins, I mean, obviously, that’s been a focus area for investors and for you guys. It was pretty substantially higher than maybe what people anticipated this quarter. Curious if there was any kind of one-off type benefits going on this quarter that maybe we have to consider reversing out? And then into next year, we have time before we get there, but I think you guys have been at conferences recently talking about maybe 23% is a good target for next year. Is it early target? You’re kind of going to be there now. If you think this year is off of 20 bps, you’re kind of going to be almost at 23 for this year. So, does that target not just become that much more conservative? How should we think about that?
Robert Mehrabian: That’s a good one. Actually, you’re right. The margins have improved. Right now, we’re projecting for the full year ’23 to be at 22.7%. So, it’s very close to the 23% that you mentioned. Moving further up, of course, that’s what we’re going to strive for. We have to take a little more cost out in DALSA, e2v as we’ve done in FLIR, and we’re doing that right now. And the other part that I think would affect it is that some of the markets that are declined like semiconductor, automation sensors in our vision systems, those are going to come back and then finally, we have some new markets for our Digital Imaging, for example, inspection of lithium-ion batteries. You remember now, most of that manufacturing is beginning to switch back to North America.
And we do have some really good systems for quality control. And you can guess lithium-ion battery, a flaw can be catastrophic. So, these new cameras, new markets will offset some of the declines we have now, but I also think that the semi market will come back. So if all of that takes place, as I’ve just outlined, obviously, our margins should improve.
