So despite the fact that we have seen a specific decline in Avionics, Military and Space, given the project nature of the business or the timing project nature of the business, we do see a very positive trend also on this end market in 2024.
John Franzreb: Okay. So KELK was up a little bit sequentially. DTS was down a lot because they had a big order flow in Q3, and that should pretty much stabilize in the first half. Is that what we’re looking at there?
Ziv Shoshani: And is expected to modestly improve and improve much more in the second half of the year.
John Franzreb: Excellent. I’m curious what’s driving the higher tax rate these days? It seems to be ticking up a lot.
William Clancy: Yes. So John, so good morning. So the higher tax rate is predominantly, we have a geographic mix of income. So depending upon where our income’s being generated, right now it’s being generated in higher tax rates in, we’ve seen in the past. But then this tax rate this year had some one-time cost for tax positions. But as we mentioned, we’re going to participate 27% operationally in 2024.
John Franzreb: Okay. And by my reckoning, this was the most aggressive share repurchase quarter, I think since the company went public. Can you just kind of walk through the decision process there and why you’re so aggressive on repurchasing stock?
William Clancy: Well, John, as you recall, and I think we’ve talked about this. As part of our capital allocation, we’ve always listed as internal growth M&A and the buyback of the stock was always one of the top parameters for a capital allocation. And we will continue to incorporate all of those attributes and the capital allocation and we’ll continue to – and we’re continuing to be very active in the market today.
John Franzreb: Okay. And one last question on revenue growth. Ziv, you mentioned a couple, I don’t know, potential items and went through the segment presentations, data centers and new product development and MS. If we were going to look at like near-term revenue catalyst opportunities, especially new ones, which are the most viable near term revenue opportunities for the company?
Ziv Shoshani: Okay. So if we are looking at 2024, we are looking in two verticals. One is the vertical of the macro improvement, macro economy improvement, given the fact that we have seen inventory is being depleted in the queue. And I would say that part of that would run the improvement would be Test and Measurement for semiconductor equipment for the sensor piece. In addition to the general industrial that is also expected to improve. The other piece is our business development activity in respect to new applications, selling to new applications and new product that we have developed. In that case, I could give as an example, what I did mention regarding the aluminum based systems, that’s a new, completely new market for us.
And we have just started to provide the systems in order to enter into a new market. In addition to that, as I mentioned, I think in the prior call is the humanoid application where we are at the very final design stage. But once the prototype phase is going to take off the expectation is over time that is – it’s also going to gain more volume. And then, for example, I have on the Weighing Solution side that we have developed, a new cost – very cost competitive product, which we have applied for a patent and we believe it’s also going to gain momentum. So there are really two verticals for the potential upside of revenue. One is the macro economy change, and the other piece is our business development activities to capture new business.
John Franzreb: Perfect. And with that, actually, I’ll get back into queue and let somebody ask some questions. Thank you, Ziv.
Operator: Thank you. [Operator Instructions] We have a follow-up question from John Franzreb. Please go ahead.
John Franzreb: Well, I have to ask about the three to five-year long-term targets. Do you still think they’re viable given the protracted downdraft we’ve had in the booking order profile?
Ziv Shoshani: Well, I would say, John, if you can recall, we put our three years plan in respect to revenues, the 45%, if I can recall, gross margin. And then we also set an OMD. As you could see, despite the so-called in a way mixed business environment. The company has achieved in Q4, a record gross margin of 43%, which means, we are working on optimizing our topline growth in terms of business development activities. We continue to look at – or we have a longer term plan regarding operational excellence in respect to efficiency improvement, product relocation, sourcing cheaper materials, which is going – which in combination with the topline revenue is going to, I think there is a – there is a high level of confidence that we are going to meet the 45% gross margin, which will also assure the profitability target.
So by the mix, so-called the current mix, I would say mixed business environment. I am quite confident that the plan that we have laid out or the three, five year plan is very viable.
John Franzreb: Okay. Excellent. That’s good to hear. And just one last question. Any update on production capabilities in Israel? Has it still been a non-factor? Just I think it’d be prudent to brush up on that topic?
Ziv Shoshani: Sure. So I would say as you know, we have two operations in Israel. They’re located in the center of Israel. We are operating in Israel at the normal levels. The actions that we have taken in prior quarters in respect to securing raw material, shipping, finished goods in advance and working with our freight forwarders [still applies]. There is no issue whatsoever with our operations. We are working with full efficiency and at optimum capacity. So our operations in Israel are operating intact working at the normal level.
John Franzreb: That’s great to hear. Thanks for the update Ziv.
Operator: This concludes the Q&A session, so I’ll now hand over to Steve to conclude.
