Steve Tusa: Right. And I guess just on the cash flow statement, I think like — I’m not sure if I’m seeing this right but $2 billion of share repo in ’24. I mean I think that’s a pretty decent-sized number. Anything going on specifically there?
Craig Arnold: $2 billion at the midpoint — okay, go ahead, Tom.
Tom Okray: Yes, no, we finished 2023 with $2.6 billion in cash. And given how we’re guiding and given how we are doing a better job of managing working capital, given the supply chain constraints are going away, we’re going to have a very good year of generating cash in 2024. So we go to our capital allocation tenants and we’re very clear, we’re not going to collect cash on the balance sheet. So at the midpoint, we’ve got $2 billion. As was said in the prepared remarks, though, this gives us plenty of dry powder to do strategic M&A., so even with that $2 billion. And the final thing I would end with is our net leverage on the balance sheet which you probably know, Steve, is 1.3. So we’ve got a very strong balance sheet, just a ton of flexibility from a capital allocation perspective.
Steve Tusa: Right. So it’s a 2% lift from share count in general embedded in the guidance for EPS growth-ish?
Tom Okray: Relatively minor, a couple of pennies versus consensus, yes.
Operator: Our next question is from the line of Joe Ritchie from Goldman Sachs.
Joe Ritchie: So I think Chris kind of touched on this in his question but maybe to ask it more explicitly. As you think about that first $1 billion plus in mega projects that you’ve won, just what’s the margin profile of those wins and how we should be thinking about that ultimately materializing in the P&L?
Craig Arnold: Yes. I would say that the margin profile on these mega projects is not going to be terribly different than the margin profile in the underlying business. It’s — these — we are in a position, as you can imagine, when your capacity constraint to be selective around where you win. And so we would not expect — even though they’re big projects and oftentimes you find a large project, margins take a bit of a haircut, we should — you should not expect that as these mega projects translate into revenue.
Joe Ritchie: Got it. That’s great to hear, Craig. And then I guess, look, the funnel keeps on growing now for the last couple of quarters at a pretty material rate. There’s a lot of concern with the election coming that perhaps this first wave of projects that have broken ground continues but maybe you get a stall on the second — in the second wave. Just any thoughts around that? I know you kind of touched on the potential for labor constraints but I’m really more — any other thoughts that you would have on just continuing to grow the funnel and then making sure that, that actually — we’ll actually see that ultimately in your outlook?
Craig Arnold: Yes, no, I appreciate the question and the concern. I mean given the upcoming elections and in many ways, it’s kind of an unknowable in terms of how the election is going to turn out. And then, quite frankly, even with the change in the administration, difficult to know what position they will take with respect to a lot of the stimulus spending that is essentially underlying and supporting these mega projects. And I will tell you, what gives us a fairly high level of confidence that it’s not going to change materially, is that a lot of these projects are going into red states. And so despite what may happen kind of on the political front, the benefactor of a lot of these projects are actually those red states. And it’s walk to wait and see how it all plays.
And we don’t think today it’s going to have a material impact. Today, we are looking at more demand and we have capacity to serve. So even if there was a little bit of a give back, the business is still in great shape and to support the long-term growth assumptions for the company. But in many ways, it’s kind of the unknowable. We just don’t know how the election is going to unfold and then what happens afterwards.
Operator: The next question is from Julian Mitchell from Barclays.
Julian Mitchell: Thanks a lot, Tom, for all the help. Maybe just a first question would be around, when you think about sort of the mega projects and the impact on North America orders, so you’ve had a sort of a book-to-bill well over 1x in 2023 even with those trading 12-month orders being down somewhat off the high base. When you look at 2024, is it sort of a similar construct where I suppose you could have orders down but the book-to-bill still over 1x just because of the capacity constraints? And then more broadly, any concerns that you and your peers collectively are adding maybe too much capacity in electrical output?
Craig Arnold: Yes, no, appreciate the question, Julian. And it’s certainly — it’s one of the things that we spend a lot of time thinking about as well in terms of what will the tenor of 2024 would look like. But I think the short answer to the question is, yes. I mean it’s very much possible that you could continue to see a moderation of orders and a book-to-bill and a total backlog that doesn’t change. In fact, when we came into 2023, we actually expected to be able to eat into the backlog and the backlog grew by some 15%. And so the industry continues to be constrained. And obviously — but for industry constraints, we would post bigger growth numbers than we provided in the guidance. The demand is there to grow faster than 7.5% that we’ve talked about as the midpoint of our guidance. So that absolutely is possible that you could essentially — orders could moderate in your backlog to continue to be record highs or continue to grow.
Tom Okray: Yes. And just to add a little bit more color to that. And Julian, we talked about this in previous calls and tried to put it in the prepared remarks but I think it’s very important for everyone on the call. We have modeled year-over-year order decline, meaningful order decline. And in those scenarios, given our backlog coverage, as we said in the prepared remarks, we are able to have robust organic growth well into 2025. So that gives us great confidence that even if year-over-year orders continue to decline in a meaningful way, we’ve still got a good runway.
Julian Mitchell: That’s helpful. And then just a quick follow-up. Maybe switching to eMobility. You had raised that medium-term revenue guide a few months back. The noise or the news in the EV world is sort of very, very uneven. So maybe just sort of tell us how you see it for the growth rates of that business. We can see a very high growth rate dialed in for eMobility this year. Maybe just any sort of perspectives on that and maybe how you’re outperforming the industry.
Craig Arnold: Yes. Appreciate the question, Julian. And as you know, as we talked on our guidance, we’re anticipating 30% growth in our eMobility business. And I can tell you that 30% number is today dialed back from what our customers are asking us for. We do recognize that the industry itself has gone through a little bit of a, I’d say, a wake-up call with respect to the underlying demand for EVs. By the way, still great demand, still good growth. Some 20%, I think, in the fourth quarter for us. But overall, a slower rate of growth than perhaps what people were anticipating maybe 12 months ago. So we think the industry will continue to grow and grow nicely. And what we try to do as we build our own plans and our guidance is to make sure we’re appropriately hedged back to ensure that we’re able to deliver our commitments.
