The current convertible bonds are at 4%. Based on what we have seen from the convertible market, it’s around there. It’s probably a little bit less than that if there were to be a new convertible loan. But as convertible loans can be structured with various dimensions and various outcomes. So, the interest rates can vary depending upon how it is structured. But at the same time, we feel we have good cash on the balance sheet. We are in an excess cash position, and with this extra liquidity that we now have raised, I think there is also the possibility that we can pay it down partially or completely. So, we’ll share with you as and when we make the decision.
James Sidoti: All right. And that was going to be my next question. How much cash do you need on the balance sheet to comfortably run the business?
Sam Maheshwari: Yes, if you go back four or five years ago, we were running the business with about $50 million, $60 million. Since COVID, we’ve decided to have $100 million or thereabouts, in terms of the cash, that we would like to carry on the balance sheet. So, with $190 million, we have about $90 million of excess cash compared to that threshold.
James Sidoti: Okay. So, theoretically, you could pay down almost 25% of the outstanding debt.
Sam Maheshwari: Outstanding debt, meaning…
James Sidoti: The convert.
Sam Maheshwari: No, we could theoretically pay down 50% of the convert, because the convert is about $200 million. And between now and June, we are targeting to generate cash, so we might be able to pay down 50% from balance sheet.
James Sidoti: Right. Which should theoretically lead to lower interest rates in 2025 and beyond. It does makes sense. Right. All right. Thank you.
Sam Maheshwari: Thank you, Jim.
Operator: The next question comes from Larry Solow with CJS. Please proceed.
Larry Solow: Great. Thanks guys. And good afternoon, good evening. I guess, the first question, in terms of the guidance or the lower outlook, is it principally – it sounds like its China, but it’s also U.S. or ex-China, because China is only 10% of your overall revenue, right? So are there other drivers? I guess the U.S. or ex-China is also weaker in Medical. And how about Industrial? Has that changed at all? Just trying to kind of piecemeal the reduction. And I think when you started the year you had said, you thought took medical, I think, was going to be flattish overall sales, if I remember correctly. Is there a kind of revised number to that? I know you kind of only guide to the quarter, but it sounds like as a whole, your whole year is clearly coming down. But any more pieces to that kind of puzzle would be great.
Sam Maheshwari: Yes. Thanks Larry. So, yes, China is soft, but on top of that we did say that the broader market in Medical is also soft, particularly driven by what we said, cautious customer behavior. And that phenomenon is not just China. So, yes, there is the effect of China as well as ex-China there is also softness in Medical. So, Medical, we expect it to be down this year, year-over-year. So, that’s what we are currently seeing in Medical. In terms of overall revenue, what we are saying, we have provided the guidance for Q3, and at this time we are seeing Q4 to be flattish to Q3. So, that gives you almost the entire year. We are expecting Industrial business to be a slight growth, flattish to slight up year-over-year.
It’s a pretty strong comp for the last year for what Industrial did. At this time, the cargo business in Industrial is doing very well, and we expect it to continue to do well. But there is softness in Industrial outside of cargo. So, with all of those puts and takes combined, we expect Industrial to be a growth area for us, but very slightly for full year 2024 compared to fiscal 2023. And we expect Medical to be down.
Larry Solow: And the caution from, I guess, is your OEM customers, right, that you’re referring to?
Sam Maheshwari: That is true, yes.
Larry Solow: And I guess you’re kind of it down the chain line, but does that start from the hospital? Because my understanding is, hospitals are actually doing okay. They’re doing pretty fine. I mean their volumes have been good post COVID. And I think concerns about hospitals’ finances are probably overblown, even though I know interest rates are a lot higher and that doesn’t help them. But as far as I understand, capital spending in hospitals has been doing okay. So, are your customers cautious because there’s too much inventory still? Is there any kind of common theme that’s driving this caution?
Sunny Sanyal: Larry, it’s all of the above and the conversation starts with, hey, we have what we need, and we just need to adjust our stocks and stocking levels. Can we slow this down? Can you push out? And then if you dig into, well, why do you have so much inventory? Well, we had expected a different trajectory for and of orders and then the COVID buying behavior post COVID, where people were worried about their factories were clogged and supply chain issues. So, it’s kind of a myriad of things that have come together, causing some amount of destocking and inventory adjustments. And clearly what they had in mind when they bought the components didn’t match up all the way with their current quarter production needs. So, it’s several of those.
