Good morning and welcome to the Emerson First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to our host, Colleen Mettler, Vice President of Investor Relations at Emerson. Please go ahead.

Good morning, and thank you for joining us for Emerson's first quarter 2024 earnings conference call. Today I am joined by President and Chief Executive Officer, Lal Karsanbhai; Chief Financial Officer, Mike Baughman; and Chief Operating Officer, Ram Krishnan. As always, I encourage everyone to follow along with the slide presentation, which is available on our website. Please join me on Slide 2. This presentation may include forward-looking statements which contain a degree of business risk and uncertainty. Please take time to read the Safe Harbor statement and note on the non-GAAP measures. I will now pass the call over to Emerson's President and CEO, Lal Karsanbhai, for his opening remarks.

Thank you, Colleen and good morning. I'd like to begin by thanking the Emerson team for delivering a strong start to 2024. I'd also like to extend my appreciation to the Emerson Board of Directors and to our customers for your continued confidence in us. Our first quarter results demonstrate, the underlying strength of the markets we serve, the meaningfulness of our differentiated technology and the relentless execution of our global teams. Please turn to Slide 3. Q1 was a strong start for Emerson. As we continued our focus on executing and driving value creation for our shareholders. The demand environment remains healthy for process and hybrid markets. We continue to see projects moving forward at a healthy pace in markets like chemical, LNG, life sciences, metals and mining and sustainability and decarbonization. Even in the face of higher interest rates, ongoing geopolitical challenges, and upcoming elections in key global markets, including the U.S. Our customers 2024 CapEx budgets are shaping up constructively, and are largely supportive of the demand environment we are experiencing. This robust environment, along with continued execution by our teams is a key contributor to the Q1 performance. Q1 orders, sales, operating leverage and adjusted earnings, all exceeded expectations, providing confidence to increase our full year guidance. This performance reflects our ability to win with a focused approach to our growth platforms and through continued investments in innovation. It is also a testament to our new differentiated portfolio with leading technology, strong profit margins, and exposure to the important global secular growth markets. This is exhibited by our gross margin and adjusted EBITDA expansion since 2021. Our business is well positioned to capture investments in areas like energy security and affordability, sustainability and decarbonization, digital transformation, and nearshoring. Regarding our portfolio, we continue to reiterate that…

Thanks, Lal, and good morning, everyone. Please turn to Slide 8, where we have summarized our first quarter financial results. Underlying sales growth was 10%, led by our process and hybrid businesses. Intelligent devices and software and control grew 11% and 9%, respectively. Discrete automation was down low single digits as expected. All world areas were strong with Asia, Middle East and Africa up 15%, Europe up 10% and the Americas up 8%. Price contributed approximately 2 points of growth. Test and measurement, which is outside of the underlying sales measure, contributed $382 million, exceeding expectations for the quarter. I will discuss test and measurement performance in more detail on the next slide. Backlog is now $7.6 billion, which is up $500 million versus September 30, when excluding test and measurement. Emerson adjusted segment EBITDA margin improved 190 basis points to 24.6%. Volume, margin-accretive price-cost, which included net material deflation, ongoing productivity programs and the test and measurement performance, all contributed to the margin improvement. Operating leverage excluding test and measurement was 41%. Adjusted EPS grew 56% to $1.22, up $0.44 and is a strong start to the year. Double-digit sales growth and 41% operating leverage contributed to the $0.33 of operational improvement year-over-year. Non-operating items contributed $0.11 year-on-year, mainly due to lower stock compensation, which contributed $0.08 versus Q1 of 2023. As a reminder, all legacy mark-to-market stock compensation plans are now complete. Also contributing to the non-operating items were interest income of 4% and share count, which contributed $0.02. Tax was a $0.03 headwind. Lastly, free cash flow for the quarter of $367 million was up 51% versus the prior year. This was in line with our expectations for the quarter as we saw modest improvement in work capital year-on-year. Headwinds related to acquisition fees and restructuring impacted…

[Operator Instructions] The first question comes from Andy Kaplowitz of Citigroup. Please go ahead.

Good morning, everyone. Lal, I think your backlog at $7.6 billion, it was up relatively significantly, even excluding test and measurement addition with the orders, as you said, a plus 4%. Can you talk about organic order visibility going forward? It seems like process/hybrid has been relatively strong as you thought. Can you sustain that mid-single-digit kind of order growth going forward? And then have you seen an inflection yet in NATI-related orders?

Hi, Andy, no, happy to give you some color on the orders. So obviously, as you know about our business, orders can fluctuate on a quarter-to-quarter basis, which is why we guided in that lower single-digit range in the first half of the year, but finishing the year in the mid-single-digit range, as we are now. We have a high degree of confidence about that based on two factors, Andy, the first being our MRO business continues to be relatively strong. It represented approximately 65% of the revenue in Q1, and we expect that to remain robust as we go through the remainder of the year. And that provides us a strong base of order activity. Secondly, the conversion in the funnel. We booked approximately $400 million that represented almost a little over 90 projects that we won out of the funnel in the first quarter. The funnel grew despite that. And we continue to see activity, particularly in energy transition driven by the Middle East and Africa, in the sustainability area, life sciences, and of course, a tremendous amount of activity in metals and mining. So from an underlying Emerson perspective, the focus really is process and hybrid to continue to provide that underlying strength through the year. Now what we will see is a recovery in discrete in the second half, and that's what we've got baked in here. We are still in the lower single digits negative right now in our discrete markets. It's really demand-driven, as we've been talking about for the last couple of quarters. We do expect a recovery in orders into the second half, of course, between comps and obviously some demand elements there. As far as NI is concerned, it's very much on plan to what we expect in terms of orders. We do also believe that there's a second half positive return on the order activity. And we're starting to see early signs in markets, particularly like semiconductor, as you see these companies come out and report. So very much on plan on both ends and which gives us confidence in the underlying strength of the order activity, Andy.

Helpful. You obviously had a good quarter and raised the outlook. But maybe just on free cash flow, you didn't change your guidance despite the better quarter and outlook. Did you raise your acquisition-related costs? Is CapEx going up? Anything that you could talk about on that side or on the working capital side?

Andy, it's Mike. I'll take that one. Yes, the guide was maintained at $2.6 billion to $2.7 billion. And with respect to the $250 million that we called out in November, that's tracking right on plan. About $100 million in the quarter plus the cap, that's on the operating cash flow items, mostly integration-related. And then we did see a little bit elevated CapEx, again, very much in line with expectations. We thought a lot about the guide, obviously. And just to go through a little bit of the math, we -- while we took up the earnings, we took up the sales, the net of that is about $50 million in cash flow, still within the $2.6 billion to $2.7 billion. So we elected not to take it up given where we set first quarter. But certainly sitting here today, I can tell you we feel better about the cash flow guide than we did three months ago, and it's all going to plan.

That’s great. Appreciate the color guys.

The next question comes from Steve Tusa of JPMorgan. Please go ahead.

Hi, good morning. Can you just talk about the -- just maybe the bridge, a little more clarity there from the $0.13 you did for NATI to the $0.07? It doesn't look like all of that account was accounted for by a $30 million sales decline. And then, I guess, on a -- just when you look out to this $1.55 billion guidance, going from what you've done in the first half, do we expect that to be kind of linear from the $350 million in Q2 in sales? Or is it kind of heavily loaded in the fourth quarter?

Yes. Steve, it's Mike. I'll talk a little bit about the test and measurement performance and the EPS performance in the quarter. We talked a little bit about this stub dynamic, which really was simply the early 11-day period that we didn't own them the first part of the quarter. The sales were much lower than we expected. We expected something more ratable. They were not ratable. And that drove about $0.02 of improvement from what we expected. And the business leverages, as you know, really nicely. So pushing those sales out into the quarter drove part of that $0.13 performance. Now of that, there was also some Q1 sales that we were expecting in Q2. And so when we thought about the guide, we took that $0.08 beat and we rolled $0.05 forward, and that's where we landed. So great performance on test and measurement, and we're really off to a great start there. Ram, do you want to talk about the...

The second part of the question, yes, I think it's not all in Q4. So you'll see evenly distributed in Q3 and Q4, it will step up from the $350 million. So we feel pretty good about the $0.40 to $0.45 as we sit here.

Right. And just one last one, just on the discrete. You guys have been a little more steady on that discrete performance. So you're -- relative to some of your peers who had a very strong backlog liquidation in the second half of last year, you guys kind of started to see some of that weakness. So the comps start getting easier in the fourth quarter, correct, the year-over-year comps?

Yes, actually, in the third quarter from -- and third and fourth quarter should be good quarters for us from a discrete perspective, correct.

And orders.

And orders. And then sales will turn positive in Q4.

Right. On an easier comp.

Correct.

Yes. Okay, great. Thanks a lot. Appreciated.

The next question comes from Jeff Sprague of Vertical Research. Please go ahead.

Hello. Good morning, everyone. Lal, two for me. First one, just on LNG. Obviously, it's a global business, and you talked about the Middle East. But just give us your perspective on what the administration has done on approvals in the U.S. and how that might impact your business, the funnels and anything related on your mind.

Yes. No, certainly, we're disappointed with the administration's decision to hold permitting -- export permitting regarding LNG, not just from an Emerson perspective, from an overall -- as an American, to be very honest. But it is a global business. We have significant activity ongoing in Qatar, of course, in Mozambique and in Guyana, which will provide ample activity and gives us confidence in the forecast that we have in the funnel movement. In terms of the projects we're executing in North America, we don't see any meaningful impact to 2024 at this point in time. The projects that we have won have the approvals required, not just for construction, transportation, but ultimately for exports. And our partners, Bechtel and others that we've discussed on these calls, have given us the confidence, Jeff, that we are -- that 2024 is relatively solid. Then as we go forward, we'll see. We continue to see accelerated strength in the East Coast of Africa and in the Middle East, and there's some activity up in Canada as well. So we'll see where that goes related to the U.S. decision.

And then just to be totally clear, Lal, the project funnel that you illustrate for us quarterly, does some of the non -- I guess, pending approval U.S. projects, are they in that funnel?

Yes, they're in the funnel. Depending on the year that we had, expectation of funnel looks at about a three-year lens of activity. So they are in the funnel there. And as you know, in the construction of a liquefaction -- excuse me, Jeff liquefaction plant is a 4- to 5-year event. So certain decisions will continue to be made based on assumptions of export licenses being awarded down the stretch, Jeff.

Right. And then just shifting on NATI real quick. Certainly suspect that your synergies initially laid out were somewhat conservative. But I wonder if you could address the 3-year versus the 5-year. So kind of the underlying cost synergies, I'm not surprised they're going up. I think part of the reason that you talked about 5 years was really treading carefully on salesforce, R&D organization and that sort of thing. So just give us your thoughts on where that is and maybe the cultural side of the integration, I guess, is the heart of the question.

Well, I will start with this, Jeff. We have a phenomenal management team by Ritu Fabre and a great integration team here at Emerson that works very closely with the business. The team spent a significant amount of time between signing and close to do the work so that we could hit the ground running. But of course, as you can imagine, this is a very large transaction. We bought this company because we believe it can grow and it can run better. And we wanted to have a degree of caution in how fast we could go, what we could accomplish. And to many degrees, we've been pleased with the degree of execution, the speed at which it's been done and the energy that the team has had around the effort, which then gave us confidence, not just to increase the number but to increase the time of execution -- to decrease the time of execution to 3 years. Ram, any color on that?

Yes, you said it. I think the team, as we both reviewed the plans, felt very, very good in the quality of the opportunities that we had identified, and there is a shared vision around, trying to get this done faster and moving the business along. And that's where we've been very pleasantly surprised, the cultural similarity between how we both think, the customer-centricity and how we apply the rules to do the synergy actions. I think there -- we feel very confident that we could move faster. And that's the reason we raised it, and we also believe we can get it done by the end of year 3.

Great, good luck. Thanks.

The next question comes from Nigel Coe of Wolfe Research. Please go ahead.

Thanks. Good morning, everyone. So obviously, a lot of questions on NATI so far, National Instruments, I guess. You've obviously accelerated the time line for the synergies. As Jeff mentioned, you raised it by $20 million. But you kept the 31% margin targets. Just wondering if there's anything kind of offsetting the upside to cost synergies we should consider there?

All right. Nigel, it's Mike. No, there's really on plan. And remember, that's five years out that we were talking about, 31%. We are on track. I think the important thing for the near term is that our expectation around that adjusted EBITDA margin will be that it's a little bit up year-over-year on down sales, reflecting the synergy actions. And moving forward, no, there's really no change to our longer-term expectation around the profitability of test and measurement.

No, no. But the $20 million gives you an extra point of margin. So just wondering if there's anything to offset that. It doesn't sound like there is, but just that's the spirit of the question.

There isn't. I mean at the...

Yes, go ahead.

No, there isn't. There isn't necessarily anything we've identified to offset the $20 million. I mean the 31% margin targets 5 years out. I mean, obviously, what we are finding is good investment opportunities. And right now, we're focused on executing the synergies by year 3. If we find good investment opportunities, we'll make that because I think 31% is the target we've set, and we feel pretty comfortable getting there. But if the $185 million comes through with no additional investment opportunities, maybe the number goes up, but that applies your outnumber.

Okay. No, that's fair. I know I'm being counting, but just this worth question. And then you had some extraordinarily strong growth numbers within ID. I mean the 28% within measurement analytics. It looks like it's just an easy comp. So just -- maybe just talk about that a little bit. But more importantly, there's a theory out there that the process and hybrid markets are on a lag of discrete. And therefore, the spot part we've seen in discrete automation right now is sort of like a precursor for what you might see six months down the road. So can you just maybe address that point? And just anything unusual or concerning that you're seeing? It doesn't sound like it, but certainly, just maybe address that concern out there.

Yes, happy to, Nigel. I've been speaking and been asked about this for the last three quarters or so. And again, what we experienced in the quarter continues to be very consistent with our initial commentary. The drivers around process and hybrid are being supported by the secular macros that we've been discussing, whether it's energy security, affordability, nearshoring, sustainability to digital transformation. And I think those macro secular drivers are robust enough and secular in nature that they will go through a different type of cycle than we've seen historically. Secondly, we did not experience a boom and bust environment in the process space in over the last cycle. This is a much more moderated capital cycle that we experienced. So we don't have the overcapacity situations and the overbuild situations that we have typically experienced. There was much more discipline in the capital layouts by our customers. And that's a benefit as well. So our business continues to be very robust, obviously. We continue to have confidence in the order runs and in the execution through the year.

Yes. Just to answer the first part of your question, measurement solutions up 28%. That's a function of that the supply chains coming back in that business. If you remember, it was an easier comparison. Q1 of last year, we had significant challenges on the electronics front, which have alleviated. So our orders are up high single digits, sales up 28% driven by improving supply chain. So it's clearly a data point driven by weaker -- easier comparisons, I would say, with Q1 of last year.

Right. That’s perfect. Thanks.

The next question comes from Scott Davis of Melius Research. Please go ahead.

Hey, good morning, everybody. Congrats on a good start. I wanted to back up a little bit when you talk about R&D transformation at test and measurement. What do you mean? Is it like an 80-20 type thing that you're going to refocusing? Or just -- I know they're -- those good folks at NATI always spend a lot of money. But was it generally unfocused, do you think? Or how do you guys think about it?

Yes. I think it's purely on prioritization of the projects. I think we've gone in with our management system on how do we focus on the critical few priorities that can move the needle from a growth perspective. I mean there's lots of opportunity. The beauty of what we're finding at NATI is a culture of innovation, plenty of opportunities across 4 very important market segments where we can move the needle, macros around those markets like EVs, ADAS and semiconductors that are supportive of strong innovation. But I think we're bringing some discipline into how do we prioritize, how do we look at where do these resources need to be in order to balance cost capabilities, particularly in software versus Austin, for example. And I think these are prudent moves that will allow us to drive more innovation at a better cost from an R&D as a percent of sales.

And I will just add, Scott, to that. I think a company like NI with the market position it has in the space and the legitimacy of its technology will always have a role in the research element of innovation. That's always going to be a responsibility that we have in the space to continue to move that needle forward. And we will, by all means, as we do in all our businesses, continue that. But having viable commercial programs is important. And that's where parking some cars and investing heavily in the ones that we believe and management believes will ultimately result in customer success is really important. So really good work and thoughtful work being done by the team here led by Ram, of course, and Ritu.

Helpful context. If we back up a little bit again, you cited the SAF win with DG Fuels. Can -- what is the scope when you classify something like a win like that? Are you talking full meters, valves? Is there controls? Is there -- is it kind of across a full suite of offering? Or is there more specific stuff that you target for those types of projects you would class as a win?

Yes. No, this was a -- if you think about our -- the automation stack, this was pretty much across the entire stack, the final control elements, the muscle in the plant, the sensing elements that we use both flow, pressure level and temperature, the DeltaV control system and then the analytics packages alongside it. So this was a holistic full package, 100% Emerson win, which really proved out the value of the portfolio and how it all comes together at a customer site.

Helpful. Thank you. Congrats. I’ll pass on.

The next question comes from Julian Mitchell of Barclays. Please go ahead.

Hi, good morning. Just wanted to circle back to the discussion around sort of process investments by the large customers, particularly in the sort of oil and gas and energy world. Because it does seem as if there's an understandably a clear effort on that part is sort of shovel more of their cash to shareholders, whether they're government in the Middle East or public shareholders in the West. So just wondered your thoughts, Lal, on the kind of sustainability of that high single-digit orders growth in process that you saw in Q1. Should we expect that to moderate over the next sort of 12 months or so? And does that then pull the backlog down with it? Or the book-to-bill was so high that the backlog can still grow with moderating orders?

Yes. It's a great question, Julian. I just returned from the Middle East where our team spent -- India and the Middle East, so our team spent time with significant customers in Saudi Arabia, Abu Dhabi, Qatar. And I can tell you that the environment is very robust, predominantly around sustainability and energy transition, those 2 elements. And I think there's enough demand-driven activity that will give us confidence in the sustained mid-single-digit kind of exit rate on process on the total company orders at the end of the year. So at this point, we've been thinking and analyzing this now for about three quarters or so. But we haven't seen any kind of deceleration in the process, particularly in the spaces that you're asking about. As a matter of fact, we continue to see very disciplined spending, very intentional around core elements of automation that can differentiate production around reliability, efficiency, productivity, of course, and safety. And that hasn't waned yet. And I don't -- we don't foresee that as we go through the year.

That's helpful. Thank you. And then just a much more sort of near-term fiddly question. Just looking at the second quarter guide on Slide 10, so the EPS at the midpoint is going up maybe $0.02 sequentially from Q1 despite a decent revenue and volume increase sequentially. Partly, that's the test and measurement earnings falling sequentially. But just wondered if there was anything else like in the base business changing in terms of mix or something like that as you move from sort of Q1 to Q2.

No, you hit it right with the test and measurement comment. And the leverage in the low to mid-40s coming through reflects no big change in mix or trajectory. So no, really nothing there on the Q2 guide.

Great. Thank you.

The next question comes from Chris Snyder of UBS. Please go ahead.

Thank you. I also wanted to ask on National Instruments. Q1 came in about $80 million above the guide. But you guys are now talking to a full year of $1.5 billion to $1.6 billion. All the commentary on the last call was $1.6 billion. So I guess, why that range following the beat? Is it just a rounding error? Or is National Instruments maybe turning a little bit slower than you thought previously? Thank you.

Yes. Chris, if you go back to November guide, that range has remained consistent. I think it was just a round in $1.6 billion that was being spoken about.

Yes, thank you. And then I just want to ask on margins. It's been a real bright spot for the company over the last couple of years. You guys beat the incremental guide again here in Q1. But I believe the full year guide on the incrementals was lower, I think, from -- to low to mid-40s from mid- to high despite the Q1 beat. Is there anything there on mix or something that we should be aware of? Thank you.

Yes. Chris, the -- in the comments, we talked about the effect of foreign exchange. We changed assumption there, and it had a 1-point increase on FX, which comes into the leverage number with a much lower profitability attached to it. The drivers around leverage remain the same with volume and leverage and price/cost, and then we continue to drive the Emerson management process with cost reductions to offset inflation, so yes. But to answer your question specifically, the change in the guide was really solely attributed to that FX element.

Thank you.

The next question comes from Deane Dray of RBC Capital Markets. Please go ahead.

Thank you. Good morning, everyone. Look, there's been a lot of focus on the progress you're making on the cost synergies front in National Instruments. Can we talk a bit about expectations for revenue synergies? It might be too early, but just timing and size and where it might come from? Is it cross-selling? Are there new customers you've been opened up to? But just what's the expectation?

I'll let Ram add a little bit of color. But certainly, it's something that we're keenly working on. Obviously, the focus was on the commitment on cost. And we do believe alongside management that, that is a -- had been and is an evident opportunity. Having said that, we are -- I'm not going to suggest that we're 3 or maybe even 6 months away to come out publicly with some sales ideas, but we're certainly working on customer-specific ideas on sales synergies. Ram and I and Ritu have held a number of customer meetings jointly and thinking through opportunities that we have across the Emerson portfolio as it comes in with NI. Ram?

Yes. And just the 2 end markets are clearly going to be EV batteries where -- on a holistic basis where we play on the production automation and NI plays on the validation and test systems on the R&D side and then similarly in semiconductors, 2 markets where I think there's enough customer overlap and a joint capability that provides meaningful value to our customers from R&D through validation, through production is where we will see the opportunities. We're working it. We're not ready yet to commit and quantify the sales synergies, but these are certainly in focus, and we're working through the process.

Great. And then just second question, I joined a bit late, so I apologize if you've covered this, on China. A lot of anxiety about the macro there. It doesn't look like you're positioned in the areas that -- like real estate that are having the most pressure. But just what are the expectations? What are the opportunities over the near term?

Yes. We grew high single digits in the quarter in China sales. We expect in that high -- mid- to high single digits for the year. Our business continues to be relatively robust, again, aligned, Deane, to those same macro secular drivers that we're seeing globally. It's no different in China. Perhaps the end markets are slightly different, specialty chemicals and a few other things. But our position is very strong. Our regionalization strategy has been very strong. And we expect to continue to win in China as we go through the year. Ram, anything?

Yes. No, you said it. I think in our core process hybrid business, power and chemical will drive the growth. I mean, obviously, what's not in the underlying numbers is test and measurement. Test and measurement is consistent with discrete. Off to a tougher start in China, but expecting a second half recovery, consistent with what we're seeing with the discrete business.

Thank you.

The next question comes from Joe O'Dea from Wells Fargo. Please go ahead. Joe O’Dea: Hi, good morning. Just in terms of the remaining 9 months of the year and the guide, obviously off to a strong start. But organically, any change in how you're thinking about that versus 3 months ago? It seems like not much change in what's implied in the organic growth rate. If anything, I think the math would suggest the margins could have ticked down a touch. But I just want to make sure, is the message that the last 9 months of the year, no real change in kind of the organic side of the expectations?

No. We remain Joe, very positive on the environment. Obviously, we couple that with the strong execution by our teams. But in terms of the organic outlook, no change really. Joe O’Dea: Okay. And then related to the strength in measurement and analytical, I understand some commentary on easier comps, but the stacks did improve sequentially. And so as it relates to supply chain, where are you on a normalization? You know, the orders up high single digits is a pretty encouraging number. Are you at a point now where there's still some pent-up backlog to ship out? Or do you view it as having gotten pretty close to more normalization at this point?

Yes, the supply chains have normalized. So in terms of our ability to procure electronics and load factories and drive production out of factories, we feel that's normalized. Now certainly, in the measurement and analytical business, there is some overdue backlog that will ship through Q2. The easier comparisons and our ability to ship that backlog is what drove the 28% in Q1. You'll see that in the measurement and analytical business. That's the last business normalizing from a supply chain perspective. But the demand environment for that business still remains very healthy with orders up in the high single digits. Joe O’Dea: Got it. Thank you.

And the next question comes from Brett Linzey of Mizuho. Please go ahead.

Hey, good morning. Thank you. Wanted to come back to the project funnel. I was hoping you might be able to give some color on the profitability of the growth platforms. And is there anything different or unique about the aftermarket or service attachment rates and the way those deals were structured and Emerson's wallet share there?

No, nothing really different. Look, the profitability certainly varies between MRO and project activity, but that's well known. I think you know that well. But in terms of the mix within the funnel, there's not really a significant difference between a growth platform and traditional project work there. Of course, we have a $150 billion installed base around the world. And with that, some of that is obtained through and managed through service contracts, a large portion of it, where we have commitments for replacement and maintenance with many of our global customers. And others are upgrades, activities and things of that sort.

Okay. Great. And then just shifting to price/cost, I think the original guide was about 2 points. You had 2 points in the quarter. Has the expectation changed at all for the year? And then any movement on material or non-material inflation that is shifting expectations at all on the cost side?

No, price is 2 points in the quarter, 2 points for the year. We feel good, no change there. In terms of our net material inflation, I think we're seeing continued opportunities that we're driving on the direct material side. The logistics costs have come down. We don't see any impact in terms of inflation or it's de minimis from the dynamics around what's going on with -- in the Red Sea or the Panama Canal. So we see NMI or net material inflation continuing to improve as we go through the year.

Okay, great. Appreciate the insights. Best of luck.

This concludes our question-and-answer session, and the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.