Bill Lacey: Yes, I think I’ll pick up in your last word, conservatism is definitely a thought that we have as we look at the environment, where first half finishing up at where aero is right around 18.5% between the first quarter and the second quarter. So that implies for the second half, roughly the same amount that we saw in the first half. And so there were some good service, a little bit of a good mix in the second quarter. But we think we’ll continue to have a solid aerospace margin rate come out there. And all that comes through, we’ll be at the upper end of our 2018 to 2019 guide, but we are also being mindful of supply chain as well as our OEM demand, yes.
Louis Raffetto : Great. And just one quick one. Chip, I guess, is it fair to think that you still think OE will grow faster than aftermarket? Or are we less certain today?
Chip Blankenship: We’re less certain today than we were on our last call with the Boeing rates. So one way to think about it is when we develop this operating plan at the start of our fiscal year. We were thinking that third quarter would be higher OE volume and fourth quarter would be even higher yet from an OE standpoint. And now we’re thinking it’s going to be a little bit softer. So the mix will be better from a rate perspective. And we will be working on different margin expansion levers, because we were sort of planning on a higher volume and better flow-through and better amortization of our fixed costs for fourth quarter based on that OE. And then just looking at all the different levers we have to work on margins, we’ll prioritize some of the others that are not related to the OE volume increase and make sure we can deliver in that range.
Louis Raffetto : Great. Thank you very much.
Chip Blankenship: Welcome.
Operator: We’ll take our next question from Pete Skibitski with Alembic Global. Your line is open.
Pete Skibitski : Hey, good afternoon guys. Another nice quarter.
Chip Blankenship: Hey, Pete, thanks.
Pete Skibitski : Hey, one more question on China. I just wanted — the way you guys are talking, it sounds like you’d be at least $185 million, maybe a little maybe $195 million, $200 million for this year. How would you suggest we all think about fiscal 2025, what’s reasonable in terms of everything you know today? Directionally at least up, flat, down, a little down a lot. What’s the right way to think about that?
Chip Blankenship: Well, I don’t know what the right way to think about that is to be just completely candid. What we’re doing is making sure that we’re working on all the other parts of the industrial business to have 2025 be a really good stepping stone towards our 2026 commitments that we put out there. So we’re working on every other part of the industrial business and making sure that we’re ready to respond to the any demand we get from China that can make that story better from a margin standpoint and serve that customer well. So that’s how we’re thinking about it. We kind of model it in there as a very breakeven kind of level for us, something that does no harm to our plans. And we — like I keep kind of saying is these two things that drive us to behave that way.
One is a lack of visibility to a market dynamic that we can predict a trend for and really customer volatility that can result in volume disappearing within a quarter. So those two things I believe require us to plan and act the way we’re – we’re acting right now. If there’s a change to either one of those, like we start getting a lot more visibility to real market dynamics, where we have longer-term customer commitments from all of our customers in China that would allow us to have a firmer view on what a forecast turning into shipments would be, we would plan differently. But for now, that’s our approach.
Pete Skibitski: Okay. Understood. Appreciate that. Last one for me. Just on pricing, the pricing has been pretty solid for you guys in this environment. And inflation doesn’t seem to be going away. We’re in that kind of 3%, 3.5% range. Is it an environment where you’re continuing to kind of press on pricing until something meaningfully changes?
Chip Blankenship: I think we have to, Pete. We have to be mindful that until we see a signal of deflation going on in the general markets on commodities and within even potentially labor. We’ve got to be mindful of the fact that these are long cycle businesses, where commitments were made a long time ago, and we’re happily stuck with our customers, and we’re happily stuck with our suppliers, but trying to make sure we don’t get squeezed in the middle. We’ve got active on price from the aftermarket standpoint and catalogs as well as when long-term agreements come up, the opportunity to negotiate a fair price agreement.
Pete Skibitski: Okay. Great. Thank you.
Operator: We will take our next question from Gautam Khanna with TD Cowen. Your line is open.
Gautam Khanna: Yes. Hi. Congrats on the numbers.
Bill Lacey: Thanks, Gautam.
Gautam Khanna: Hey, I had a question on the OH business. Do you guys have a sense for the level of sales required to breakeven in that business in a given quarter?
Bill Lacey: Look, we do have a good sense of it. And that sort of as we — as Chip just mentioned, as we’re looking out, that’s kind of how we plan the business at that roughly breakeven point. The first half of last year where we didn’t have much OH, it was in that breakeven to a drag…
Chip Blankenship: Is negative.
Bill Lacey: And so then as we started seeing it creep up, that’s where we started to get a lot more leverage and was able to get above that. But we do have a good sense of where that point is.
Gautam Khanna: Would you mind sharing that with us? Last year, first half, I have about $40 million of estimated sales…
Bill Lacey: Yes. I can’t give you that, but we do have a good idea and we use those for planning purposes.
Gautam Khanna: Okay. And I’m just curious, thus far, we’re like a month into the quarter, is it consistent with that $35 million to $40 million rate in Q3 that you’re expecting? Or are you running above that and expecting a slowdown later in the quarter?
Bill Lacey: We are in line with what we guided in the $35 million to $40 range. Yes.
Gautam Khanna: Okay. And just following up on an earlier question about LEAP aftermarket thus far. I’m curious, given the OEM, CFM has a lot of service contracts attached to the lease, are you seeing much in the way of aftermarket pricing opportunity for those products that you’re selling into the aftermarket right now? Or are those going, I would imagine, more and more through the CFM Sears shops and therefore, going out at the same price as an OE sale? I don’t know if you have any view on that?
