We’ve got a healthy pipeline of opportunities but we’d want to see those move ahead through this year and into next year, as you described. So clearly, there is a refresh cycle out there. The embedded base is larger than it’s ever been that’s people that deployed more applications for mobile devices in their environment. So the installed base is larger. So those will continue to refresh and every customer is on a different cycle. So I think that whether you’re talking about a postal environment in a specific country or a G&L provider or a larger retailer. What we have seen is that even in retail, these larger orders have been more measured as I talked about, so haven’t been large scale, as Nate described in kind of mega deals, they’ve been smaller in size and rolling out over time.
We’d expect probably that same thing will happen in places like T&L. So I think it will be a measured overall recovery. And I think we feel that we’ve got a strong base to continue to refresh but it’s going to take time.
Joe Giordano: Fair enough. And then maybe just shifting to the balance sheet quickly. With your key markets, at least we get the data magnitude of recovery but it seems like deterioration has kind of stopped. It was good to see you pay back some debt here. Cash flow looks strong. So is there an appetite for buybacks to kind of increase your leverage on a recovery as you come out of this?
Nathan Winters: Yes. As you mentioned, we finished the quarter at a little over 2.5x leverage ratio, so slightly above the target range. That begins to move back within the range, particularly as we roll through Q3 of last year. Today, we feel like we have ample flexibility with the revolver. As you mentioned, we are prioritizing debt paydown just given the debt leverage ratios and the current interest rate environment but we do plan to reassess buybacks as the year progresses, particularly in the second half.
Operator: The next question comes from Andrew Buscaglia with BNP Paribas.
Andrew Buscaglia: So I just want to check on — you commented on the guidance. You’re seeing a sequential step down in margin seasonally. It seems like — the comment on the Q3 looking more like looking similar to Q2, just to clarify, you’re talking about run rate on sales? And then what about margins? Because it does seem like you’re expecting some lift in Q4. I’m wondering what’s behind that.
Nathan Winters: Yes. No, you’re absolutely right. So the comment on Q3 similar to Q2 was on — from a revenue perspective, we do expect an uptick in margin as we go through the year. Some of that just similar to what we talked about in the last call which is phasing of some of the incremental cost actions that will be coming through late this quarter and early part of Q3 as well as our, say just normal project timing between things, like payroll taxes and just the typical funding cycle with — as you get into Q3, Q4, you get into holidays, so it tends to be a little bit of a downtick in terms of just seasonal spend. So I think there’s no magic bullet there in terms of the actions we need to take in order to deliver that sequential improvement from Q3 — into Q3 and Q4.
Andrew Buscaglia: Okay. And then maybe along the lines of Joe’s question, heading into your cash flow is improving, you raised it a bit. What about M&A now? I think the software story has been nice. It’s helping you lately. So what’s the environment like as you see it with deals?
Bill Burns: Yes, I’ll take that, Nate. I would say that organic growth continues to be our first priority overall. I think our M&A philosophy really hasn’t changed much. We’re clearly targeting assets that are clearly adjacent and synergistic to our portfolio today, as you’ve seen us acquiring kind of these adjacent and expansion areas. We have a strong balance sheet, obviously, that could support that over time here. I think in the short term, there’s clearly a higher bar as — given the macro environment and the debt leverage that we’re at today. So I think we’ll continue to be inquisitive and look what’s out there. I think we see it as an opportunity to be strategic and add to our portfolio, products and solutions that we have in the marketplace. And I think that in the short term, I think it’s just a higher hurdle.
Operator: The next question comes from Brian Drab with William Blair.
Brian Drab: So clearly, I just want to clarify one thing. So clearly, you’re seeing the recovery in retail and you said you expected that to play out this way where retail comes back before manufacturing and T&L. Are you — does that mean that you’re not seeing recovery in manufacturing and T&L yet or that the recovery in retail is just stronger at this point than those 2 categories?
Bill Burns: Yes, I would say that we’re not seeing it there yet. I would say that the T&L customers are clearly still absorbing capacity built out during the pandemic and that they’re continuing to take actions to optimize their operations overall. I would say that manufacturing is impacted by the broader market trends of uncertainty. And clearly, still a services-based economy versus a goods-based economy. But I think overall, our value proposition remains strong in both markets. We’ve got strong relationship across T&L. And I think that we’ll see them continue to buy again once the capacity is built out. I would say manufacturing is an opportunity for us. Overall, as customers continue to buy again, they are — will invest in automation and things like traceability and resilient supply chains.
Those themes haven’t gone away but we’ve seen just a conservative nature of spending based on the uncertainty. So that represents an opportunity for us. I would say that manufacturing unlike T&L is kind of underpenetrated for us, that there’s an opportunity for us. And we’ve got new solutions within manufacturing, so like a machine vision, robotics automation, our demand planning strengthens our offering there as those markets recover. So — and we’ve also shifted additional sales resources through this to manufacturing. So I think that we expected retail was the first to decline. It’s the first to recover. T&L and manufacturing will follow. I would say we’ve got strong relationships across T&L but lots of opportunities there when it does recover.
And manufacturing will continue to be a focus area for us because we see it as an opportunity longer term.
Brian Drab: Okay. And then I wonder if I could ask a question this way. You have that good slide that you used where you talk about the core and the adjacencies and expansion markets and growing expected longer-term mid-single, high single and low double digit, respectively. I’m just wondering, in your outlook for the next year, can you frame it in terms of those 3 categories, what you’re expecting for growth in those 3 categories?
