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Greetings, and welcome to the Fiscal 2024 First Quarter Earnings Call for Applied Industrial Technologies. [Operator Instructions] As a reminder, this conference is being recorded Thursday, October 26, 2023. I would now like to turn the call over to Ryan Cieslak, Director of Investor Relations and Treasury. Please go ahead.

Okay. Thanks, and good morning to everyone on the call. This morning, we issued our earnings release and supplemental investor deck detailing our first quarter results. Both of these documents are available in the Investor Relations section of applied.com. Before we begin, just a reminder, we'll discuss our business outlook and make forward-looking statements. All forward-looking statements are based on current expectations subject to the certain risks and uncertainties, including those detailed in our SEC filings. Actual results may differ materially from those expressed in the forward-looking statements. The company undertakes no obligation to update publicly or revise any forward-looking statements. In addition, the conference call will use non-GAAP financial measures, which are subject to the qualifications referenced in those documents. Our speakers today include Neil Schrimsher, Applied's President and Chief Executive Officer; and Dave Wells, our Chief Financial Officer. With that, I'll turn it over to Neil.

Thanks, Ryan, and good morning, everyone. We appreciate you joining us. I'll start today with some perspective on our first quarter results, current industry conditions and our expectations going forward. Dave will follow with more specific detail on the quarter's performance as well as our updated outlook and guidance. I'll then close with some final thoughts. So overall, we had a nice start to fiscal 2024. We delivered strong earnings performance with EBITDA and EPS growing at respective 12% and 21% over the prior year and hitting new record first quarter levels. This was against a more modest sales growth backdrop that was largely in line with our expectations. The Applied team did an outstanding job driving gross margin expansion during the quarter, reflecting ongoing internal initiatives, strong channel execution and freight cost management. We're also beginning to see LIFO expense normalize as inflation starts to moderate and inventory levels stabilize. As highlighted in past calls, LIFO expense was a notable headwind to margins and earnings over the past several years. While we anticipate inflation to persist going forward and there's a degree of uncertainty on the cadence of LIFO expense moving forward, we expect more normalized LIFO expense levels to provide a clearer view of the progress we continue to make along our initiatives as well as the ongoing evolution of our business mix and industry position. We also had another solid quarter of demonstrating cost control. In addition to lower variable expenses as sales growth normalizes, we continue to benefit from greater efficiencies and cost leverage following investments in talent and technology as well as an ongoing focus across our shared services model. Our operational discipline and execution commitment remain key guiding post as we navigate an evolving demand environment and continue to invest across our business for future growth. As it relates to the broader demand backdrop, trends were largely in line with our expectations during the quarter. As we highlighted in recent quarters and consistent with macro industrial indicators, we continue to see normalization in customer activity across areas of our business. Customer production facilities have settled into a steady cadence following a heavy utilization ramp in recent years. In addition, we continue to face a headwind from slower activity across the technology sector, which we estimate negatively impacted our year-over-year organic growth by over 100 basis points in the quarter. A slower technology vertical has impacted our year-over-year sales growth for almost a year at this point. Our exposure to technology vertical has increased in recent years, both with strong organic growth and acquisition. This includes essential solutions integral to the production supply chains and infrastructure across semiconductor and electronics manufacturing as well as data center operations. On a side note, orders within this vertical have stabilized and we believe the year-over-year sales trends will begin to improve in coming quarters as comparisons ease and demand starts to rebound considering the many secular and structural tailwinds within this growth vertical. Outside of technology vertical, underlying sales growth held in well during the first quarter against difficult comparisons. 22 of our top 30 end markets were positive year-over-year, which is relatively stable with last quarter. Growth was strongest in many of our top industry verticals and across our larger national account base. Trends were most favorable across food and beverage, lumber and wood, mining, pulp and paper, energy, utilities and refining verticals during the quarter. In addition, we continue to capture incremental growth opportunities from our industry position, local service capabilities and cross-selling initiatives. We're also seeing more benefits both directly and indirectly from reshoring activity and investments in U.S. industrial infrastructure as well as projects tied to the ongoing energy transition. This includes demand for our technical products and solutions as the broader industrial economy supports incremental production activity from these investments. We're seeing these benefits across many of our businesses in the U.S., including our service center and flow control operations as well as our core industrial and mobile fluid power business. Related sales across these areas on a combined basis were up a high-single-digit percent over the prior year during the quarter. This generally aligns with readings on U.S. industrial capacity utilization, which have been relatively firm at prior cycle highs in recent months. These trends suggest that the current market easing is more reflective of a cooling in customer activity rather than a retrenchment or contraction, while growing secular spending backdrop is providing incremental support. Within our Service Center segment, sales increased nearly 5% organically over prior year levels on top of 20% growth during the first quarter of last year. Our core U.S. Service Center network led the way with relatively firm trends through the quarter, which is an encouraging sign considering the shorter cycle nature of our Service Center sales and related correlation with the underlying U.S. industrial production activity. We continue to see strong growth across larger national accounts and fluid power aftermarket sales as well as benefits from our sales force effectiveness initiatives. As a reminder, these include greater use of prescriptive analytics, system investments and ongoing talent initiatives. We continue to benefit from our ability to consistently serve our customers' technical break/fix needs at a scaled, but localized level, while providing them direct access to solutions for their fluid power, flow control, consumables and advanced automation needs. The progress we've made on our strategy and market position has enriched and deepened our customer relationships within our Service Center network. This is presenting a greater scope of business opportunities at all points of the business cycle as we are increasingly viewed as a strategic solutions provider for critical industrial infrastructure. We're also continuing to identify opportunities to further enhance our local service reach and accelerate our growth potential moving forward. This is reflected in the two bolt-on service center acquisitions we announced in early September; Bearing Distributors and Cangro Industries. Each company brings deep customer and supplier relationships as well as strong technical talent that will strengthen our footprint and strategic growth potential across the U.S. Southeast and Upper Northeast. We welcome both Bearing Distributors and Cangro to the Applied team and look forward to seeing their capabilities bolster our value proposition moving forward. Within our Engineered Solutions segment, sales were up close to 1% organically over the prior year. Segment growth has moderated from prior quarters, as expected, primarily reflecting more difficult comparisons and reduced activity across the technology in market, as highlighted earlier. Automation sales were also slightly lower year-over-year on an organic basis during the quarter, though partially reflecting the timing of more complex Engineered Solutions shipments as well as ongoing component delays and supply chain constraints. This was more than offset by positive sales growth across our off-highway mobile and industrial fluid power verticals as well as our higher margin process flow control products and solutions. Our mobile and industrial fluid power OEM and Engineered Solutions sales are benefiting from a healthy backlog that expanded over the past couple of years. Part of the backlog growth reflects market penetration as we continue to leverage our leading capabilities in electronic controls, IoT, electrification and autonomous systems. This includes design, engineering and software coding and the integration of these advanced features into hydraulic and pneumatic systems. Our expertise in these areas is strengthening our value proposition as the fluid power space evolves and is providing a robust pipeline of long-term growth opportunities as we lead the fluid power distribution space towards these next generation platforms. MRO activity and capital spending on process infrastructure also remains positive in our core flow control end markets with incremental support from backlog conversion and new business tied to our customers' decarbonization efforts. In addition, despite more muted sales growth in the quarter, overall customer interest and new business opportunities remained elevated across our automation operations with our sales funnel and pre-sales engineering activity remaining at record highs. We're very excited about the potential of our automation platform, including an active pipeline of strategic M&A opportunities that we expect to further scale and optimize our industry position going forward. From a capital allocation standpoint, we remain very well positioned to drive ongoing organic investment as well as accelerate M&A going forward. We have flexibility to return capital through other avenues if necessary. This includes a potentially more active approach to share buybacks considering our positive long-term outlook and the underlying intrinsic value we see across our company as we progress along our strategy and toward our financial objectives. Lastly, I want to highlight our recent published ESG report, which I encourage you to spend time reviewing. We've expanded the report this year to include energy consumption detail, broader information on our sustainability solutions and initiatives and more insight into our ESG actions moving forward. We remain focused on advancing our commitment and opportunity around this important stakeholder area both now and into the future. This includes building on our legacy of being a responsible corporate citizen by implementing greener practices in our operations, promoting diversity, fostering continuous learning across our organization and supporting our communities. At this time, I'll turn the call over to Dave for additional detail on our financial results and outlook.

Thanks, Neil. Just as a reminder before I begin, as in prior quarters, we have posted a quarterly supplemental investor presentation to our investor site for your additional reference during the call. Turning now to details of our financial performance in the quarter. Consolidated sales increased 3.1% over the prior year quarter, acquisitions contributed 110 basis points and foreign currency had a positive 20 basis point impact. This was partially offset by a 1.6 percentage point headwind from one less selling day in the quarter. Netting these factors, sales increased 3.4% on an organic daily basis. As it relates to pricing, we estimate the contribution of product pricing on year-over-year sales growth was in the low-single-digits for the quarter and slightly below fiscal 2023 fourth quarter levels. Moving now to sales performance by segment. As highlighted on Slides 7 and 8 of the presentation, sales in our Service Center segment increased 4.7% year-over-year on an organic daily basis when excluding the impact of foreign currency, the initial contribution from our early September acquisitions and the one less selling day in the quarter. Growth was strongest across our U.S. Service Center network, partially offset by more modest sales trends across our international operations. Segment operating income increased 9% over the prior year, while segment operating margin of 13% was up 60 basis points. Within our Engineered Solutions segment, sales increased 1.2% over the prior year quarter with acquisitions contributing 220 basis points of growth, which was partially offset by a negative 160 point headwind from the selling day impact. On an organic daily basis, segment sales increased 0.6% year-over-year. We continue to see solid sales growth within our industrial and off-highway mobile fluid power solutions as well as sustained customer MRO and capex spending into process flow infrastructure. Sales however within our automation operations declined 5% on an organic daily basis over the prior year, partially reflecting delayed customer shipment and install activity of Engineered Solutions as well as the adverse impact of ongoing supply chain constraints. In addition, as mentioned earlier, segment sales trends continued to be impacted by slower activity within the technology end market, which negatively impacted segment growth by approximately 400 basis points in the quarter. Segment operating income increased 9% over the prior year, while segment operating margin of 14.2% was up 100 basis points from prior year levels. Highlighting now our gross margin performance. As detailed on Page 9 of the deck, gross margin of 29.7% increased 81 basis points compared to the prior year level of 28.9%. During the quarter, we recognized LIFO expense of $4.6 million compared to $9.1 million in the prior year quarter. This net LIFO tailwind had a favorable 41 basis point year-over-year impact on gross margins during the quarter. While directionally in line with our expectation of easing LIFO expense near-term, the overall magnitude of decline was greater than anticipated, reflecting ongoing normalization of inflation and more stable inventory trends across our business. That said, our underlying gross margin performance continues to reflect solid execution and our margin expansion potential. This is becoming more transparent as LIFO expense begins to moderate. When excluding LIFO expense, gross margins were up nearly 40 basis points over the prior year and 20 basis points sequentially. We continue to manage broader inflationary dynamics well through our ongoing focus on various gross margin countermeasures and initiatives. This includes enhanced analytics, freight expense management and channel execution. We also saw solid gross margin performance within our Engineered Solutions segment during the quarter, helping both segment profitability and mix dynamics during the quarter. As it relates to our operating cost, selling, distribution and administrative expenses increased 2.1% compared to prior year levels. SD&A expense was 18.7% of sales during the quarter, down from 18.8% during the prior year quarter. On an organic constant currency basis, SD&A expense was relatively unchanged over the prior year period. We continue to leverage labor cost, reflecting talent and systems investments as well as benefits from shared services deployment and operational excellence initiatives. Results also reflect the flexibility of our operating model, including inherent adjustments as sales growth normalizes as well as our ongoing operational focus. Our ability to hold operating costs relatively flat in light of ongoing inflationary headwinds and growth investments is another highlight of our solid performance in the quarter and execution potential. Overall, sustained sales growth, gross margin management, lower LIFO expense and nice cost leverage drove a 12.3% increase in EBITDA over prior levels during the quarter, while EBITDA margin of 12.2% increased 100 basis points year-over-year. This includes a 41 basis point year-over-year impact favorability due to lower LIFO expense. We also benefited from lower net interest expense during the quarter, primarily reflecting greater interest income from higher cash balances and investment yields. Combined with a slightly lower tax rate relative to prior year levels, reported earnings per share of $2.39 was up over 21% from prior year levels. Moving to our cash flow performance. Cash generated from operating activities during the first quarter was $66.2 million, while free cash flow totaled $61.9 million. Compared to the prior year, free cash was up over 200%. As a reminder, the first quarter is typically our lowest cash generation quarter from a seasonal perspective. Looking ahead, we expect easing working capital trends as the year progresses, including some benefit from the conversion of work in process tied to our Engineered Solutions segment as well as continued benefits from our working capital initiatives. From a balance sheet perspective, we ended September with approximately $360 million of cash on hand and net leverage at 0.5 times EBITDA, which is below the prior year level of 1.1 times. Our balance sheet is in a strong position to support our capital deployment initiatives moving forward as well as enhanced returns for all stakeholders. Our capital deployment priorities remain consistent with organic growth and acquisitions, our primary focus areas. We remain disciplined with our M&A approach, focus on targets and valuations, supporting our return requirements and strategic priorities. Turning now to our outlook. As indicated in today's press release and detailed on Page 11 of our presentation, we are raising full year fiscal 2024 guidance to reflect first quarter earnings performance and modest accretion from our early September Service Center acquisitions as well as lower assumptions for LIFO expense and net interest expense. We now project EPS in the range of $9.25 to $9.80 per share based on sales growth of 1% to 4%, including 0% to 3% organic growth assumption as well as EBITDA margins of 12% to 12.3%. Previously, our guidance assumed EPS of $8.80 to $9.55 per share, sales growth of 0% to 4% and EBITDA margins of 11.9% to 12.1%. Our sales outlook continues to take into consideration economic uncertainty and easing price contribution as the year plays out. We also assume ongoing moderation in broader market activity as customers continue to normalize production levels near-term. In addition, based on month-to-date sales trends in October and our near-term outlook, we currently project fiscal second quarter organic sales to decline by a low-single-digit percent over the prior year quarter. Please note, the second quarter represents our most difficult comparison for fiscal 2024 with prior year second quarter organic sales increasing over 21% and nearly 40% on a two year stacked basis. We are also assuming potentially more subdued scheduled maintenance activity within our core Service Center network into the seasonally slower late fall and winter months this year as customers manage calendar year end budget spending in an uncertain macro environment. Further, we're assuming the year-over-year -- technology vertical headwind persists and sales growth in our automation operations to remain muted near-term, partially reflecting the cadence of system shipments and difficult comparisons. Lastly, we expect second quarter gross margins to decline sequentially following the strong performance we saw during the first quarter. While we are encouraged by our first quarter gross margin performance, including ongoing traction with our internal initiatives, we believe it remains prudent to assume a more balanced trajectory near-term considering normalizing volume trends, ongoing inflationary pressures and the potential for modest mix headwinds. Further, the trajectory of LIFO expense remains uncertain pending greater clarity on supplier price adjustments as well as considering the long LIFO tail impact that we can see given the random consumption nature of our SKU mix. From the EBITDA margin perspective, our guidance assumes second quarter EBITDA margins to be flat to up slightly year-over-year, reflecting potential expense deleveraging on modest organic sales declines as well as ongoing inflationary headwinds and growth investments offset by lower LIFO expense compared to the prior year. With that, I will now turn the call back over to Neil for some final comments.

Thanks, Dave. So to wrap up and summarize, we are encouraged by the sustained earnings growth into early fiscal 2024. We have many self-help growth and margin opportunities that we expect to manifest in coming quarters. That said, we remain cognizant of the uncertain economic backdrop near-term, including the impact of higher interest rates on business investment globally as well as increased geopolitical unrest. Combined with gradual improvement in supply chain dynamics industry-wide, our outlook continues to assume industrial activity remains more mixed near-term as customers realign production volumes to more typical seasonal patterns and take a more systematic, albeit still constructive, approach to capital spending. Importantly, the underlying fundamental backdrop within our core end markets and industry focus remains positive. This is underpinned by ongoing positive feedback from our customers, including planned growth investments as North American manufacturing activity, infrastructure spending and industrial capacity continues to expand. From greater equipment maintenance activity and system modernization to required investments in automation and IoT, our comprehensive portfolio of technical solutions, engineering talent and local service support are increasingly critical to our customers. This is evident in the resilience we see in our core U.S. Service Center network where booking activity is holding up well into the early part of our second quarter despite normalizing in-market demand. In addition, sales funnel activity across our automation business continues to grow with our increasing scale and application expertise, a significant value proposition for our customers and suppliers. This is unlocking cross-selling opportunities and the development of new solutions and tools that we expect to supplement our automation addressable market and growth potential for years to come. Further feedback from our team and customers highlight growing demand from our core automation solutions, including accelerated adoption of collaborative and autonomous mobile robots to address structural labor shortages and optimize workflows. We're investing in industry-leading engineering talent, premier supplier technologies and production capacity to optimize our automation growth potential long-term. Combined with an active M&A pipeline, we expect our automation platform to scale significantly over the next several years and be accretive to our organic growth profile as we continue along our company evolution. We're also excited by the growth potential we see developing around modernizing fluid power systems. Our capabilities and strategy and electronic control integration is providing a strong foundation to develop new and advanced hydraulic and pneumatic solutions. This will be critical to addressing our OEM customers' needs around energy efficiency, autonomous systems and electrification of industrial and mobile equipment. We have a strong industry position in this area given our advanced and centralized engineering capabilities, investments in research and development and broad scale across the U.S. We also see steady growth across our process flow control operations, reflecting the longer cycle nature of this area of our business as well as expanding growth opportunities supporting the energy transition and a growing portfolio of business tied to the hygienic space. Combined with a potential rebound across the technology sector, recent stabilization in broader industrial macro data points and easing comparisons beginning in the second half of fiscal 2024, we see a favorable sales growth set-up building in coming quarters and into 2025. However, we're mindful of broader economic dynamics that can potentially influence the timing and impact of these various tailwinds near-term. Further, as we've shown in the past, our business model and operational discipline provides the playbook and flexibility to easily adjust if need be, while simultaneously generating significant cash flow. Our balance sheet and liquidity provide a strong support to opportunistically pursue ongoing organic investment and strategic M&A in the current environment as well as other capital deployment that could augment returns for all stakeholders going forward. Once again, we thank you for your continued support. And with that, we'll open up the lines for your questions.

Thank you. [Operator Instructions] And our first question comes from David Manthey with Baird. Please proceed.

Hey. Good morning, guys. Thanks very much for the overview. And Neil, that was a great outlook on what we should expect as we look down the path here. So I'll refocus more on company specific items. Let's talk about the low leverage on the balance sheet. Right now, there's only so many outlets for cash flow, and we trust that you won't force an acquisition, of course, but share repurchase maybe with the stock being somewhat thin is a little problematic. Is there anything that you can do organically? Neil, you mentioned the automation area. Is there a more aggressive strategy that you can take there that would drive some attractive shareholder returns for cash invested internally?

Yeah. So Dave, I would say, we are taking those steps and actions. I think we talked about we've organically opened in some geographies. We have capital investment to augment or increase facility space to allow greater project throughput and velocity. We'll be doing things as we assemble these groups and operations in technology systems and investments that we believe are really going to allow engineering speed and velocity to occur and that those engineering -- application engineering teams can leverage one another's work and also have engineering standards that can allow us to go faster. And as we've touched on in the remarks, it remains a focus area for acquisitions along with the rest of our Engineered Solutions area. So we think we're going to have numerous opportunities to deploy capital into the business and continue to profitable growth.

Yeah. And if memory serves, you've opened a couple of these greenfield locations. I'd be interested in just getting an update there. And along those lines, Neil, I'm wondering, is it something where you can really lean into it? I know you're looking at M&A to augment that space as well. But could you open 10 a year? I mean, is that outside the realm? It seems like a very rapidly growing area people are interested in it. You have these secular themes lining up on labor and so forth. So any thoughts there that you could share with us?

Yeah. I would say, I don't know that there's a specific number at this stage we feel like we have to. Obviously, we've proven that we can. We like the results that we're getting with the teams and the collaboration, the solutions that we're taking forward in that. And so we'll continue to evaluate what are best entry points into those geographies. But even with our serve footprint today, which is growing and expanding, we're able to reach into others with especially strategic accounts, customer-driven where they're looking for solutions and we've had success with them in other geographies. They're pulling us into those areas. And so we're having success. So we touched on it. We think in time this becomes 10% of our sales. And if we think about the growing addressable market, that's $10 billion and perhaps getting higher. There's more we can do. There's more we will do in this arena.

And you're seeing some of that forward aspect of the incremental organic investment read through, Dave, and the higher capex kind of still 27 to 29 figure in terms of the full year outlook on capex spend. So the end of the day, just not terribly capital intensive too. As you think about greenfielding some of these sites, leveraging our Service Center footprint and the investment that goes in behind that. So continuing to step-up the organic investment. But once again, just kind of fits the nature of this business and not as capital intensive, so not big dollars committed to that.

Yeah. It's a great problem to have. All right, guys. Thanks for the overview. Good luck.

Thank you.

Our next question comes from Chris Dankert with Loop Capital. Please proceed.

Hey. Good morning, guys.

Good morning.

I guess, hoping to dig in a little bit more on gross margin here. I mean, really impressive beat in the quarter versus what we were looking for. I mean, can you kind of maybe parse apart what was really driving that? I mean, was it freight? Was it price/cost? Was it just kind of the internal execution you've been going through here? Any other color you can kind of give us on what really drove gross margin in the first quarter here?

Yes. Beyond the 41 basis point year-over-year benefit from LIFO that we broke out, you're still up 40 basis point year-over-year. So Q1 is typically our seasonally softest gross margin quarter as some rebate programs, etc., reset. But really solid execution across all aspects, thinking about some of our margin enhancement initiatives focused on freight recovery, kind of the work around operations excellence there, really all the levers hitting there. So nice work by the team. Despite Engineered Solutions growth being more modest, nice contribution still from the mix standpoint there. And that we talked about it, segment gross margins and obviously the EBITDA margins up very nicely. So even on that lower volume, driving a nice mixed contribution there. So really that 40 basis points year-over-year operational improvement, 20 basis points sequentially, there's no one factor that just sticks out. Kind of price/cost drill neutral as we think about how that's reading through the P&L. And just really continued solid work by the team and thinking through all the levers, continuing to focus on the pricing for the value that we're driving on the Engineered Solution side of the business. And like I said, really hitting on all cylinders on that front.

Yeah. And Chris, I'd say, I'm pleased with the execution and the performance in it. I think Dave covered from a LIFO standpoint. We would expect similar -- perhaps the $4.5 million to $5 million in the next quarter as we think. A couple of things did align in the quarter. So if I think about it for the second quarter, I think perhaps we may be down sequentially in that side, perhaps more at the 29.5 or so in that area. But still good strong performance as we'll operate in the second quarter.

Got it. Thanks so much for the color, guys. And really nice execution by the team. I guess, to move to Service Center here, I know you don't typically comment on the month, but maybe just any comments on October-to-date there? I mean, is Service Center kind of down in line with the overall guide for kind of low-single-digit pullback here in 2Q?

As we think about it in the quarter performance, I think the Service Center segment has performed well. And so we think about flattish overall, we could have -- in October, we could have Service Centers probably being a little better than that at this stage.

Got it. And if you'd indulge just one more, I'm curious, just on your backlog in Engineered Solutions has been pretty elevated. Is that kind of back to normal levels here? Have we seen any cancellations? Just any commentary on backlog would be great.

Yeah. I'd say, overall, backlog as we think about it, we're still pleased. We think back pre-pandemic to those levels as historical norms. We're still going to be operating at a 2 times plus from a backlog standpoint. So that's encouraging for us as we think forward. In the quarter, we did have some conversion of that, as expected. We would expect further of that in this side, but teams are doing a nice job of how we're working to engineer new solutions and add to that anytime that including in technology. If there's a slowing or a little bit of lull, it allows teams to work on solutions. But we're encouraged, especially in industrial off-highway mobile, that backlog, that level and what we're doing to convert. So still remains at a good healthy level. And the answer to the cancellation question, no, you typically wouldn't see cancellations in that Engineered Solutions piece of the business given the nature of that business. You may see some rephasing of OEM shipments based on demand, but that's pretty modest. Really that 2 times backlog just continues to be driven by kind of strong order trends. And we are still seeing ongoing supplier constraints that are impacting adversely some of that shipment timing and getting those projects out the door. So continuing to see that impact the Engineered Solutions side of the business, some of that reading through to the lower growth for the quarter.

Got it. Thank you so much for the detail, and congrats on the quarter here, guys.

Thanks.

[Operator Instructions] And our next question comes from Ken Newman with KeyBank Capital Markets. Please proceed.

Hey. Good morning, guys.

Good morning.

Maybe if we can just start off with the automation demand and just how you're thinking about the cadence of that coming back in the back half. Just touching on the last comment. And Neil, some of your comments, in your prepared remarks, I think you talked about some timing of more complex shipments maybe being pushed out a bit. Can you just expand on that a little bit? I mean, what is still tight specifically in those orders? And then again, just how do you think about the cadence of those shipments for that vertical into the second half?

Yeah. So as I think about it, kind of the -- first, I'll start with kind of what's holding up. Two things. At times it can be small components, small things holding it up. It would be cabling or connectors or interface, PLCs in that area that can create. And then sometimes these projects are part of a larger project that the customer is working on. So those project managers will work their extended Gantt charts on managing that project. And if something else that we're not related to extends out, it impacts that window or that timing. And so as I think on some of those projects, we're going to see them move beyond our Q2 into the start of the calendar year perhaps in some of those. So as I think about overall for the back half, we would expect growth to resume in our automation business in that side. But if I look at that window, it could set-up that it might be similar in Q2 from a demand or a sell standpoint.

Got it. Is there a way to, from a high level, kind of parse out the magnitude of what is more? Is it evenly split between these small components versus big project timing or is one a larger impact than the other?

Well, it's hard to parse out each contributing factor to that. Is it external with projects or inputs or suppliers or components in that, but the teams are working it. We've covered in our operating reviews with them in the side. So we feel like we have a good line of sight. And the other that's encouraging, by the amount of sales collaboration and what the sales engineers are doing and the advanced work by the application engineers, I think it's building a good funnel of conversion opportunities. We touched on the set-up to address needs and problems around labor and material movement. So for collaborative robots and mobile, but we're also seeing it in vision opportunities of how that can positively impact quality and performance plus address some labor challenges that could exist from a customer's operations standpoint. So hey, we remain encouraged in that. Can't control perfectly the timing on some of this project release in the side, but again, we like where we're at. We know as we go into the second half and especially look forward into '25, we're going to expect continued outsized outgrowth contributions from the automation space.

Right. Last quarter I think you gave us -- and sorry if I missed this, but I think you gave us -- you sized the opportunity funnel in automation. I think there were over 100 open projects last quarter. Did you provide an update to that funnel this quarter or are you willing to?

No. I didn't. I would say, it's in a similar realm higher as it would go along. So there's some consistency in that. Obviously, many of those projects are moving to the next stage of the funnel. Plus teams are looking in areas to add to that. So if I draw the comparison to last quarter, it would be greater.

Understood. Maybe if I could just squeeze one more in. Obviously, it seems like the biggest headwind, the only headwind really that you saw this quarter was primarily in the technology sector outside of the tough comps. But I'm just curious if you could just give any kind of other end market information on where you've seen any outsized deceleration, if any, in some of the other verticals you serve?

Yeah. So we touched on technology. I think the only other one that could be presenting some headwinds, aggregates that we'd see in some areas and around the construction and building materials on that side. I think the stack up, as we talked about on the top 30 industries, all-in-all favorable, right, as it compared to last quarter. And many of those that are in the top half of the 30, doing well. But along with the technology, I think that aggregate side are ones that would be declining year-over-year.

Understood. Very helpful. Thanks again.

Thank you.

And there are no further questions at this time. I'll turn the call back to you for closing remarks.

I just want to thank everyone again for taking the time to join us today. And we look forward to talking with you throughout the quarter. Thanks.