Sam Darkatsh: And then my second question is, I guess, more high level and piggybacks on, I think, what Deane might have been getting at. As it stands right now, are you expecting organic sales growth in 2024? I mean we’re seeing, obviously, EES softening a bit, and that’s your most economically sensitive segment, but your backlogs are obviously very large and stable. So what would have to realistically happen in ’24 not to show organic sales growth?
John Engel: We’d have to go into a severe economic down cycle. We’re not out there with a 2024 guide, except I will tell you that — or outlook. But I’ll tell you, these strong secular growth trends that we’re facing into are weak, and they’re enduring. These are not short-term, midterm. We believe these are long term. We believe they’re structural. We also believe fundamentally, the mix shift of this company to a higher growth set of end markets, and we are a growth company now. When you look at the portfolio evolution and what the mix of our businesses are today and end market exposure today versus pre Anixter and then go back longer term, look at 10, 15, 20 years ago, this has been a fundamental portfolio shift in the higher growth markets.
So I remain very bullish on the secular growth trends and our market outperformance. We’ve done an exceptional drive of cross-sell. We raised it again this quarter. And that’s the hardest thing to get when you get — put through companies together. So I think that speaks to the power of the combination, which is unique to us. That’s a special cost driver, plus the rigor of the process we put in place in our operating model that we’re figuring out to really leverage our sales force to pull in other aspects and capabilities of our company in each and every customer opportunity to sell a much more complete solution and a more complete basket. And I think — I’ve made the statement. I think that’s the largest value creation lever as a result of putting these two companies together, and that has tremendous lengths to it.
It’s the hardest thing to get, and we’re still building momentum there with tremendous opportunity for upside execution.
Sam Darkatsh: Dave, if I can sneak a real quick one in here. The April, up six. By my math or at least my notes, I think May and June are considerably easier comparisons, maybe like five or 10 points or so. Does that hold?
Dave Schulz: Yeah. Just to ground everyone on the call, when you take a look at our second quarter of 2022, we had organic sales growth that was up 21%. So again, as we’ve talked about, if you go back to what we said for April of 2022 on this call, a year ago, we were up 22% in the month of April. So by the math, yes, the comparisons get slightly easier as we progress through May and June.
Sam Darkatsh: Thank you both. Appreciate.
Operator: The next question is from Nigel Coe with Wolfe Research. Please go ahead.
Nigel Coe: Hi. Thanks John. Thanks Dave. Thanks Scott. Good morning.
Dave Schulz: Good morning.
Nigel Coe: Yeah. So just going back to your questions, Dave, on second quarter free cash flow. So it looks like we’re back to neutral, which is I think, where we were initially. So roughly $3 million of free cash flow in the second quarter. Maybe just — I mean, obviously, I’m assuming ARR will unwind through the second quarter, but what is your ambition on inventory? Do you expect to be cutting inventory through the quarter, or is that still more of a second half phenomenon?
Dave Schulz: We do anticipate making progress on inventory, primarily as the supply chains continue to heal and our order lead times return back to normal. And so our expectation is that we’re going to begin seeing our inventory reduce month-over-month. We actually did see the inventory in the month of March did come down sequentially versus February.
John Engel: March.
Dave Schulz: March? March versus February came down sequentially.
John Engel: Right.
Nigel Coe: Okay. That’s helpful. Thanks. And then on SG&A, you talked — obviously, you mentioned the pickup in SG&A investments, particularly within ESS. And it looks like we’re making some, or rather you’re making some adjustments in the second quarter that’s going to have second half benefits. Just maybe just talk about some of the investment spending you made there. It sounds like maybe sales — maybe you’re overstaffed or over-invest there. Maybe just talk about some of the adjustments you’re making and it will be a good run rate for SG&A in the back half of the year? Thanks.
Dave Schulz: Significant SG&A increase in EES. We did have across the entire company. We did have both year-over-year and sequential increases. I think the issue that we saw across the entire company was a little bit more severe in EES primarily as we did have to increase some headcount to support the high sales growth. We’ve also been investing in some new capabilities as well, which has come through. And of course, across the entire company, we continue to invest in our IT and digital transformation. So, not necessarily at the EES level, but you’re seeing that at the enterprise level. The other thing I’ll highlight is in the first quarter, we did experience some unexpected costs, we would consider onetime in nature, particularly related to benefits. So, we’re not expecting that to continue as we enter the second quarter.
Nigel Coe: Great, Thanks Dave.
Operator: The next question is from Tommy Moll with Stephens. Please go ahead.
Tommy Moll: Good morning and thanks for taking my questions.
