Bill Burns: I’d say overall that it’s hard to predict where each is going to end up. I would say, overall, the core and mobile computing has become — is recovering first. I think each has a different dynamic. So I think that things like tablets and others in the expansion categories will be closely connected to things like mobile computing. RFIDs in that category and that will continue to be an opportunity. I would say, if you think of the kind of last circle to that, software and our services business had a positive quarter in Q1 overall. So I think that’s more recurring revenue-based. Machine vision has been challenged in the short term with areas like semiconductor and manufacturing being down. So I think it varies by each segment.
I think there’s gives and takes in each. I think the core mobile computing first, the others still down but will recover. I think in the adjacencies, RFID and others will be bright spots. And I think software was a bright spot but machine vision challenge in the short term, robotics still rate at its infancy. So I think kind of mixed across those but I think that it’s going to be — all will recover over time. It’s just different time frames for each.
Operator: The next question comes from Meta Marshall with Morgan Stanley.
Meta Marshall: I think you alluded to this in kind of the replacement cycle question earlier in the call. But just any trends between kind of mobile computing and printing as we think about kind of some of these renewal cycles coming up? And then maybe a second, you haven’t touched on the health care market. That’s clearly been an area of expansion for you guys. Just any investment or kind of progress that’s been made on that opportunity?
Bill Burns: Yes. I’d say that as we talked about mobile computing clearly showing the first signs of recovery as expected and we talked through that a fair amount. I would say that in printing, we saw kind of broad-based declines but has stabilized now in Q1. There was a difficult compare in Q1 for both printing and DCS as a year ago, first quarter ’23, we saw supply chain challenges abate in both those areas. So we shipped a lot of printers and scanners in the quarter a year ago. So the compares were pretty tough. I would say that in printing specifically, clearly still challenged by the softer macroeconomic conditions and then particularly by manufacturing but I would say stabilized overall. We’d expect that recovery in printing and scanning would follow mobile computing as we kind of talked about.
Specific to health care, I would say that impacted by the same trends, the broader market overall, clearly tighter budgets in margins within health care, we would see that we continue to drive productivity solutions within health care which allows health care providers to be more efficient which is certainly appealing to them on tight margins and clearly to enhance patient safety. We see home health care is an opportunity for us. So we’re clearly seeing some of our partners address that market. So think of tablets as an example around home health care opportunities. So I think we see optimism. We were at the HIMSS trade show which was well attended in Q1. The largest retail show as we mentioned in the script earlier. But I think that we’ve seen optimism on the point of our partners and our customers just like the other verticals in manufacturing and T&L, we’d like to see more of that optimism turn into real orders like we’re seeing in retail.
Operator: The next question comes from Rob Mason with Baird.
Rob Mason: Bill, you’ve touched on it a couple of times, just the run rate business, you haven’t necessarily seen signs of recovery there yet. I would just want to see if you could put a finer point on the expectations there for the year, just in the context of your overall guide — sales guide up 1% to 5% relative to the — maybe the large deal side of the business?
Bill Burns: Yes, I would say that our thought is probably relatively flat. I think we expected large deals to recover first. We expect mid-tier in run rate to recover after as we’ve talked about already. I think there’s been a lot of optimism on the part of our partners and our distributors in this area and we just want to see more progression, I think, more than anything else. That’s kind of where we’re at. We typically — large deals are the first to decline and then followed by mid-tier and run rate because run rate is kind of the longer tail. And I think we’re going to see that same thing in recovery. We haven’t seen it yet. So I think that, that’s the challenge we’re seeing. I wish the visibility was better through the year.
And I think consequent with our guide, is that we’re kind of guiding to what we see from a visibility perspective and we just haven’t seen the recovery in mid-tier or run rate yet. And the optimism is out there, the opportunities seem to be there, everybody wants to go after it. We just need to see more of it really happen and turn the worse.
Nathan Winters: Yes. I think, Rob, you said that play when you say the flat, right kind of Q1 to Q2 to Q3 [ph] in terms of overall revenue. Flat, just because that’s what we see in terms of the trajectory across all the different categories of business without seeing an inflection point of a dramatic uptick. Again, that’s how we feel it. That was the appropriate guide based on what we’re seeing today across all those different categories.
Rob Mason: Yes. Understood. And then just as a follow-up, Nathan, could you tell us what the placeholder you have slotted into the guidance for debt reduction is for the year?
Nathan Winters: I would assume that the vast majority of the cash — the $600 million of free cash flow will either go to debt pay down, maybe a little bit in terms of held in cash at some modest interest rate but the vast majority would go to debt pay.
Operator: The next question comes from Ken Newman with KeyBanc Capital Markets.
Ken Newman: Most of my questions have been asked but I just wanted to ask a longer-term higher-level question. Obviously, you’ve got some very significant operating leverage implied for the back half and I think that’s mostly just on easier comparisons on the volume side. As we think about maybe returning more towards a normalized operating environment, how do you think about the run rate operating leverage or the run rate incremental EBITDA margins, just given all the cost-out initiatives that you’ve executed on? Would you think that structurally higher than what we’ve seen in past cycles? Or is that still too early to tell?
