Lawrence De Maria: Okay, that’s helpful. Thank you. And then if I could just add one more then, the 5% to 7% water treatment growth, what’s really underpinning that, it sounded like in your prepared comments, it’s mostly price. But given the weakness in residential markets, just kind of curious how to build up their works?
Kevin Wheeler: You are correct. It is mostly price going into next year. Again a bit like the boiler side of the business, we brought our backlogs down, we saw a bit of inventory adjustment in the channel on the water treatment side of the business in 2022. So, next year, I mean, we certainly, we have confidence in the underlying trends in North America water treatment, but most of the volume next year is driven by price. And we could potentially see some pressure on consumer spending as we head into 2023.
Lawrence De Maria: Okay, thank you, and good luck.
Operator: Thank you. Our next question will come from Andrew Kaplowitz of Citi. Your line is open, excuse me.
Andrew Kaplowitz: Good morning, everyone.
Kevin Wheeler: Good morning.
Andrew Kaplowitz: Can you give a little more color into how you’re thinking about the commercial water heater market in ’23? I know you mentioned flattop and regulatory overhang, mostly behind you in electric commercial water heaters, maybe sort of what’s going on electric versus gas, what’s your channel partners are telling you I think you answered about the commercial markets overall, hanging in there, but any more color would be helpful.
Kevin Wheeler: Again, we have a flat to slightly up or, we still have a lead times that are a little bit more extended than we’d like. So, we normally like to be around 15 days, we’re around 25. We believe that the gas market and it’s just, there’re some inventory deficits out there, there’s still some upside on some replacement. So, we look at the market is just artificially, 17% was just artificial, because of the greater the 55 gallon. But underneath that, the market was down mid-single-digits. And that was with a supply chain issue and components and it’s going to normalize and we see it being slightly positive as we go through the year, particularly on the gas side of the commercial business.
Andrew Kaplowitz: Helpful. And then I know you introduced the Voltex heat pump in Q3, can you talk about your early penetration into the market with that particular heat pump and I know heat pump is still a small part of your business, but how might they become a factor later in ’23 and ’24 as IRA implications also impact the business?
Kevin Wheeler: Yes, again, you’re looking at it is, as I talked about, one of our priorities is certainly on the heat pump side of the business is both residential and commercial. And you are right, residential heat pumps represent about 2% of the entire market today. It’s got a really nice growth rate of 35% to 40%. And that’s a positive trend, but it’s going to take some time to move forward. There’s some upfront costs to this that are expensive. There’s some parts of the installation that are a little more difficult than the normal replacement but if you look out forward, a heat pump will become a bigger part of our commercial and residential portfolio. So that that’s going to move forward, again, it’s not going to go at the pace where it takes over the market next year or two, but long-term it’s one of the best value propositions.
It’s got a great decarbonization message. It’s been promoted by a number of states. And of course, when you look at the Inflation Reduction Act that’s still working its way out, but there’ll be a component there that will hopefully help and provide some stimulus as well. So, overall, and then I would tell you, our Voltex has been out a few months. It’s done quite well, but it’s a little early, we just feel real good about the UF of greater than four and the different features and benefits that it brings to the market to zero clearance. It’s a terrific product that can go into just about any application that it needs to. And so far it’s been received really well. But again, heat pumps in the early stages, but it will continue to grow at a greater accelerated rate year-over-year.
Operator: Thank you. This will end the Q&A portion of the conference. I would now like to turn the conference back to Ms. Helen Gurholt for closing remarks.
Helen Gurholt: Thank you everyone for joining us today. Let me conclude by reminding you that our Global A. O. Smith team delivered record sales and strong adjusted earnings in 2022. We look forward to updating you on our progress in the quarters to come. In addition, please mark your calendars to join our presentations at three conferences this quarter. Citi on February 21, Loop on March 14, and UBS on March 23. Thank you and enjoy the rest of your day.
Operator: This concludes today’s conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
