Operator: [Operator Instructions] Our next question comes from the line of Brian Drab with William Blair.
Brian Drab: On the margin dynamics for the year. I’m just wondering if you could put a finer point on this or maybe repeat what — some of what you said. So 31.3% gross margin in the first quarter — is the expectation that it sounded like that might step down slightly in the second quarter and then maybe we’re down back into the 28% range in the second half of the year. To the extent you can, can you put a finer point on what we should expect for gross margin for the year?
Tim Francis: Brian, it’s Tim. I’ll take that one. Yes. So in total, we expect the Infrastructure segment to see an improvement in its full year gross profit margin when compared to the full year of 2023. So what that means is the opportunistic purchase of steel that we saw in the first quarter doesn’t — the effect of that is less in the second quarter. So we’ll see a slightly reduced gross profit margin in Q2. And then we will see a slightly reduced gross profit margin in the second half of the year to make the math work for why the gross profit margin is better for the full year versus 2023.
Brian Drab: And then you gave us some directional commentary on the volumes for TD&S, L&T or I guess you gave TD&S, but you didn’t give L&T. And I guess, to the extent that you are willing to, can you tell us how much volume change for some of these subsegments? And what was L&T — because I’m looking at L&T up — sorry, that one was down, I think. What — I have no idea how much pricing affected L&T. So I don’t know what to think here with total revenue down 3% for the subsegment. What did volume do there?
Tim Francis: Sure. So as it pertains to the first quarter, for L&T, pricing was flat. We did have a little bit of unfavorable currency that was about $2 million of the decrease and then we did do some very selective deselection of some very small subproduct lines. That’s really tied to Valmont being focused on the profitable growth. That deselection won’t continue for the rest of the year. But really, that’s the main driver of why volume was down slightly for first quarter is as we look at some of our international markets, we chose to exit some very small product lines.
Avner Applbaum: Yes, and let me just add a little bit more color to kind of overall our segments. So L&T specifically, it’s following the macro trends that we’re seeing in the market. So if you look at the transportation — it’s trending in conjunction with the infrastructure road spends, and we’re seeing strength in that market. On the lighting side, we are seeing some areas where it’s not accruing at that level. We mentioned that also in the past. Some of the residential build does impact our business, and we track that. And we expected some softness in that space. But overall, the L&T has strong drivers, and we expect that throughout the year. Telecommunication, we addressed that as well. Telecom will be soft following some of the CapEx spending by the large carriers.
You’ll listen to both Verizon and AT&T that reduced their CapEx spend in Q1, just in their earnings 27%, 28%. So they’re going to go back to business as usual. That’s impacting our telecom business. But we’re going to control what we can control. We continue to enhance our geographic reach, work with our partners such as Ericsson, increased our product offering. And again, the telecom market has the long term, it’s very positive. If you just look at some of the stats, expecting 5G to cover over 85% of the population in the future. So telecom this year will be soft. L&T positive on the transportation side. So hopefully, that gives you additional color. But overall, when you look at Infrastructure, getting close to that mid-single-digit range is where we’re expecting that to be.
Operator: Our next question comes from the line of Jon Braatz with Kansas City Capital.
Jon Braatz: Avner, you mentioned that — or maybe Tim mentioned that pricing was down a little bit in irrigation and trying to get a better sense between pricing in Brazil versus North America?
Avner Applbaum: So I’ll take that question. So when I look at the pricing in North America, what we’re doing there, it’s very strategic. It’s in very few targeted markets that we’re taking some actions to maintain around our strategy to maintain our market share overall. So very strategic in North America. In Brazil, I would say, the approach that we’re taking is the pricing is better in Brazil. But right now, as you do more larger scale projects that could just impact some of your mix and you’ll get less pricing per pivot there. But overall, that is the dynamics around the markets. And like I said earlier, we’re pleased with what we’re seeing on the order intake on both regions, and we’ll continue monitoring. And like I said, the long-term on both of these regions is very positive for us.
Jon Braatz: Avner, in this — the current market conditions maybe have been a little bit tighter. Are you seeing buyers purchase the full complement of technology solutions when they purchase a pivot?
Avner Applbaum: Yes. So when we — overall, I would say the answer to that is yes. The tech actually is what gives the pivot a stronger value proposition and our sophisticated buyers and dealers and growers, they see that and we are selling the full suite of technology.
Jon Braatz: And last question. SG&A costs have been controlled nicely. And how much of that goes beyond maybe what we saw the actions that you took last year from Prospera. How much of it goes beyond the cost savings because of the actions you took with Prospera?
Tim Francis: Well, this is Tim. Let me try to answer that. It was beyond Prospera, right? It was — we did a full realignment program that touched infrastructure, agriculture and corporates. So that was approximately $36 million of cost. What we’re seeing right now is that our SG&A savings this year will be beyond that. And another way to think about it is our SG&A as a percentage of sales will be lower this year than it was in fiscal year 2023 on a consolidated basis.
