Nicole DeBlase: Thanks Tom. I will pass it on.
Operator: The next question is from the line of Julian Mitchell from Barclays. Please go ahead.
Julian Mitchell: Hi. Good morning. Maybe I just wanted to ask a quick question about the sort of core revenue or organic revenue outlook. So, you had that very helpful slide on the main end market moving pieces. Should we sort of assume from that, that that blends to about kind of 6%, 7% market growth, and then you are adding about a point or so of share, and that’s kind of how you get that 7% to 8% organic growth number for next year that you discussed, I think in September?
Craig Arnold: I appreciate the question, Julian. And obviously, it’s certainly early for us to give you kind of a definitive side on where we think 2024 will be, and we will do that in February. But I do think that kind of the framework and the way you talked about it is very much consistent with the way we are thinking about it. We talked about kind of the exit rate of the year in that 7% to 8%. And that’s kind of a good proxy for the way to think about 2024, subject to whatever changes that we see between now and the end of the year. But that – those market outlook slides are very much consistent with our current view. And unless things go sideways someplace in the world, which we don’t anticipate, that would be a good kind of starting point to think about it.
Julian Mitchell: That’s helpful. Thank you. And then just one thing I wanted to circle back to was around the sort of gap between the products and the systems on the electrical side. I guess historically, you had – those were sort of two sides of one coin, the products, the shorter-cycle piece, systems is the longer cycle piece and sort of where the lag one would follow the other. So, when we are thinking about next year, the gap between products and systems presumably narrows. Is the assumption that they sort of meet in the middle, products improve a bit, systems slows down because of comps, or any kind of way we should think about it maybe projects or mega projects mean the systems piece sustains a very wide outgrowth versus products, for example.
Craig Arnold: Yes. I appreciate that question, Julian. And I would tell you from where we sit, I mean this products versus systems view of the electrical markets, we would suggest it’s probably not the most effective way to think about it in general. And it’s one of the reasons why we changed our reporting structure. And we have been so much focused on the end markets that we serve. And so we really do the better model and the way – better way to think about the company is here are the big end markets that we serve, commercial and institutional data centers, utilities, residential. These are the big end markets that we serve. And in every one of these large end markets for the most part, they will accept – can take a product.
In some cases, we will sell a system or a solution into these same end markets. And so what we tried to do and the framework that we provided is give you a sense of what we think is going to take place in these end markets. And where you see differences in the way our businesses perform, take Europe, for example, versus the U.S., we have today in the U.S., a much bigger percentage of our business that would go into end markets like data center and utility than we would have in our business in Europe, where they would be much more indexed into, let’s say, the MOEM segment, which is in decline in Europe or in the residential section – segment, which is really in decline everywhere. So, I think that’s a better way to think about how to model the company than this distinction between a product and a system.
Julian Mitchell: That’s very helpful. Thank you.
Operator: Thank you. The next question is from Steve Volkmann from Jefferies. Please go ahead.
Steve Volkmann: Hi. Great. Thank you, guys for fitting me in. Just a quick follow-up to go back to this kind of backlog thing, which I think you guys have explained pretty well. But Craig, is it a reasonable planning assumption that we end 2024 at sort of whatever the new normal is for backlogs that’s slightly higher than historical number?
Craig Arnold: Yes. I will tell you. And I wish I had an answer to that question definitively, Steve, in terms of what that backlog is going to look like at the end of 2024. I can tell you what we said about this year that we didn’t anticipate this year that we could materially eat into the backlog because, once again, we knew what the underlying orders look like. We understood, essentially have a very good view on what our markets would be and what our capacity is. We are bringing on some new capacity that will come online in 2024. That will help us eat into the backlog. Having said that, are we going to end 2024 at the same level as we are today, we would hope quite frankly, that we can reduce backlog during the course of 2024.
We would view that as a successful year all else being equal because it’s given us the ability to shorten lead times and do a better job of responding to customer demand. But sitting here today, I mean to suggest that I would have any visibility into what that number is going to be at the end of 2024, this would not be realistic. And so we hope that we can reduce backlog by essentially shortening up some lead times. But at this point, if the markets continue to be as robust as they have been, that will be challenging.
Tom Okray: Yes. Even reducing backlog, it would be hard to imagine based on the scenarios we have looked at that we would get our backlog at the end of 2024 to our historical backlog coverage.
Craig Arnold: Yes. Well, we probably will never get back there. But hopefully, we can reduce backlog.
Tom Okray: For sure, yes.
Steve Volkmann: Great. That’s definitely helpful. And then I am going to pivot to the AI question, but I want to ask it from the other point of view, which is that I think you guys actually capture a fair amount of data from collected IoT devices, etcetera. So, can you just comment on sort of where you are in terms of collecting your own data and providing services and systems that leverage that data into maybe new business models over the next few years?
Craig Arnold: No, definitely appreciate that question. And as you know, this is independent of AI, we had been on this journey inside the company to really digitize and digitalize our company. And so that what we said is that every single product, every new product that we develop, we expect it to have a microprocessor to be able to stream and process data and information. And so that has been going on inside of the company for the better part of the last 5 years. And as a result of that, we have been able to create some really attractive and interesting new value propositions around how we essentially can monetize our own data. And it’s one of the things that we wrap up in this term you will hear us talk about called the Brightlayer platform.
So, we have Brightlayer for data centers, Brightlayer for utility markets and Brightlayer for residential. So, this data platform that we use today to essentially find ways to monetize our data either in the form of data-as-a-service or software is something that’s happening broadly across the company and all enabled by the fact that all of our devices today, most of our devices today, I should say, are intelligent and have the ability to stream data. I would encourage for those of you on the call, one of the things we are going to try to do next year as a part of our investor meeting is to invite you to our center in Houston and to show you some very real examples of software and data solutions that we are selling today in various applications to our customer base that really monetizes our data and monetizes our software.
