Steve LeClair: Yes. Thanks. The IIJA funds have certainly been slower than we would have liked or anticipated as we’ve gotten into the back half of this year. What I would say is that we’re starting to see some green shoots in this, particularly in the upper Midwest. There is a couple of states that started to see projects BrinkLoose and actually funding go through, particularly in Michigan, Wisconsin and the Dakotas, there is been some projects that have been utilizing that funding. So we’re really anticipating that we will see some more volume start to BrinkLoose in 2024, and that should be some tailwind for us on the municipal side.
Asher Sohnen: Thanks, that’s very helpful. I will turn it over.
Steve LeClair: Thank you.
Operator: Our next question is from Joe Ritchie from Goldman Sachs. Please go ahead.
Vivek Srivastava: Hi, this is Vivek Srivastava on for Joe. And thank you for the question. Maybe just starting with gross margins. Your gross margin performance has been pretty impressive for the last few quarters. And just wanted to understand how much are synergies contributing? Particularly after you close the deal, when do you start realizing some of those gross margin synergies?
Mark Witkowski: Yes. Thanks, Vivek, for the question. As we talked about, we expected some gross margin normalization throughout 2023, kind of in that 100 to 150 basis points range. And we did definitely experience some of that pressure on some of these product categories like I’ve talked about that we’ve flushed through that lower cost inventory. And really, the offsets that we’ve seen there have been, as you mentioned, some of the accretive M&A, which has also brought some synergy with it. I’d say probably more so just given the timing of some of those acquisitions, more of it’s just been the accretive nature of it. There is some work that we will do yet to deliver on some of those synergies to drive some more of the gross margin improvement.
And then I would say a lot of good progress in the quarter and some of our sourcing optimization work that’s brought in some nice over-performance, more so than I would say, we were expecting in the third quarter. So, those are really the elements of it. In terms of breaking them all out specifically, we are not necessarily going to do that, but I did want to give you some additional color there on what some of those drivers are.
Vivek Srivastava: That’s helpful. Thanks for that. And just on the SG&A front, it looks like last four quarters, your SG&A has been growing faster than the revenue growth. How long can this trend continue? And when do you expect it to normalize?
Mark Witkowski: Yes, sure. As it relates to SG&A, there is really a handful of factors in there. I would say some of these M&A acquisitions that we have done, while they brought us higher gross margins, many of those also have had a little higher SG&A base. So, that’s put a little more pressure on SG&A. And then I would say some of the cost inflation of SG&A has trailed some of the product cost inflation that we have seen. So, there is still a little bit more, I think the flow-through from an SG&A perspective. And then we have made a handful of, I would say, growth investments that have been SG&A impacting into the results. So, I am expecting some more SG&A pressure in Q4. And I think normally, we would expect some SG&A productivity for a full year in 2024.
But just given the timing of the M&A that I talked about and some of these investments, we are probably going to see a little bit more pressure as we look out throughout 2024, but those are really the drivers of it.
Vivek Srivastava: Great. Thanks.
Mark Witkowski: Yes. Thank you.
Operator: Our next question is from Ryan Connors from Northcoast Research. Please go ahead.
Ryan Connors: Great. Thanks for taking my question. I wanted to ask about the private label side and if you can give us an update on your progress there. It looks like Enviroscape is a private label deal. And also, I assume the greenfields help you to accelerate that somewhat. So, you have talked about going from 2% to 10% private label. Can you talk about where – like if we are 12 months from now, kind of ‘24, what the vision is, does some of these things move the needle and we are – what inning are we going to be in as we move through ‘24? Is it a material improvement from the 2%?
Steve LeClair: Yes. Ryan, this is Steve. So, I appreciate the question. Yes, certainly, Enviroscape has some private label content to it for our geosynthetics business for sure. As we look at how we expand that, there is just a broad assortment of products and accessories out there that we have been able to develop beyond certainly geosynthetics, but when we get into other accessory kits and things along those lines. So, we will continue to do that. The long-term plan we had was getting into this 10%-plus in terms of private label. So, we will be making investments and we will continue to enhance that performance through next year. We will have a little bit more color to share on that as we wrap up the year-end.
Ryan Connors: Got it. Okay. And then my other question was on specific line, which is water metering and AMI. Any – can you give us any update on what you are seeing there, both in terms of the near-term demand cadence and also M&A, it seems like metering was more of an M&A focus a few years ago, but kind of the recent deal flow doesn’t seem like metering has really been as much of a part of that. So, is that – just curious whether that’s intentional or whether that’s just a function of what’s for sale out there?
Steve LeClair: Yes. If you look at our quarterly results that we had, meter was an incredibly strong quarter. And a lot of that was backlog that we have had for projects that were executed where now we are starting to see that supply chain ease up with a couple of our key manufacturers and getting that product out to go execute. Bidding activity remains incredibly strong. You are certainly seeing where AMI and advanced metering has become much more broadly accepted and we play a key role in helping to get that out to those customers, whether they are small rural customers looking at AMI systems or even some of the large metropolitan areas. So, we continue to see really a lot of strength in that end market. From an M&A perspective, we did a couple of acquisitions early on to get access to certain lines.
As we look across the country right now, we certainly have coverage of many different lines all across the country at this point. So, from an M&A perspective, you may not see a whole lot of activity in that as we feel pretty secure with the access to the products that we have got across the broad portion of the country.
