Andrew Obin: And just a follow-up on just software, but specific, I guess, facility and asset life cycle, right? We sort of slowed down to high single digit growth. And I apologize if I missed it, but what were the key headwinds that sort of took it down from double digits to high single digits? And how much visibility do we have on this business reaccelerating into year-end and into 2024? Thank you.
James Lico: Yes. We — I think FAL is in great shape. It’s a great story relative to IOS margin expansion that we had. Obviously, we’ve had a great year-to-date in IOS margin expansion, and FAL is a great part of that story. We had a little, I would call it, a little bit of slowing in Gordian but that is really not slowing. It’s just really — we had an exceptional first half, and so it’s a little bit of moderation more than anything, but I wouldn’t read anything into it. That business has never been as good a shape as it is right now. So I think at the end of the day, ServiceChannel’s on a great trajectory. We talked about a number of the good things that are going on in Accruent. I wouldn’t read anything in to FAL than we feel really good about it. It’s — we’re in a good place. It’s going to be a good setup for 2024. The business is really humming along.
Andrew Obin: So 10%-plus is still a good place hold for this business long term?
James Lico: Yes. I think we’ve said sort of high single to low double and it might move around — you do have a little bit of nonrecurring service business in that a little bit that plays out every once in a while, you get a little bit on the comps. But yes, I mean, it’s going to be that way in the 9%, 10%, 11% kind of percent probably you can dial that in for strong success in the years to come.
Andrew Obin: Thanks so much.
Operator: Your next question comes from the line of Scott Davis from Melius Research. Please go ahead.
Scott Davis: Good morning, everybody. I got disconnected earlier so if someone asked this question, I apologize. But can you be — can you clarify on this channel adjustment going direct? Is there a margin payback? I would imagine you capture some of that margin that distributors were getting, but are we going to see that in the numbers? Or did you have to add costs in proportionately to that change?
Charles McLaughlin: Scott, this is Chuck. Yes, there’s a margin component to that. It’s about 7% on the revenue that was going through the North America distributor. And you’ll start to see that show up in price in Q4.
Scott Davis: Okay, good. And when you guys think about kind of your pricing strategy, and I imagine it’s dynamic by SKU, but is this new world we live in one where you can go out every January 1, you think, with some sort of placeholder price increase and capture it in the marketplace? Or is that not how to think about it?
James Lico: No. I think whether it’s — we probably have several dates. If I were to think about the hardware businesses, which we’ve obviously had unprecedented price over the last few years, but we will continue to have good price. We always — we think about it as value capture more so than price. We think about our innovation capability. And if we can bring on higher innovation, ultimately we’ll be rewarded for that from a gross margin perspective. I think our gross margin trajectory over the last few years is really — is not only a good testament to FBS but it’s also a good testament to innovation and our ability to launch products that have tremendous value. So I think the pricing environment is going to be better going in 2024 than normal.
But I would say — I wouldn’t say it’s better than 2023. I would just say it’s better than normal. And we would anticipate continuing to look for those pricing opportunities. You’ll see that a little bit on the software side and built into net dollar retention. And then our pricing metric that we often talk about is really more related to the hardware businesses. But as Chuck mentioned, we’ll get a little bit more price in health care. We’ve been getting more price in health care over the last few quarters. We think that will continue as well into 2024. So a number of things that will be — that we feel optimistic about. We’re not in a guide scenario just yet for 2024, but we are optimistic we can continue to get price.
Scott Davis: Super helpful. Best of luck for the rest of year, guys.
James Lico: Yes, thanks Scott.
Operator: Your next question comes from the line of Nigel Coe from Wolfe Research. Please go ahead.
Nigel Coe: Hi, guys, good morning. So just on the 4Q, just mathematics here. Look, obviously $0.01 on corporate with the fiber. It seems like it’s like maybe $0.01 or $0.02 on FX. Just maybe just confirm that, that move in FX about $0.01 or $0.02 on 4Q. But I’m just curious on Tek there’s obviously a pretty weak forward guidance from them. And I think we’re trying to all figure out whether this is deterioration in short cycle demand or whether consumers of chips like yourself are just destocking. You’ve been obviously holding buffer inventory and destocking. So any perspective you have on that, Jim would be helpful.
Charles McLaughlin: Nigel, why don’t I take the first one? I think there is a little bit — I wouldn’t say $0.02 impact on FX in the fourth quarter. I think it’s probably a little less than one. But there is some effects just to close that one out. And you did note there is $0.01 in corporate cost for the remediation or efforts on the site.
James Lico: Nigel, a little bit. I think I caught your question on TI and a little bit about inventory in the channel and things like that. I didn’t [Indiscernible] their everything they said, but I did read a little bit about it. I would just say from a Tektronix perspective broadly around maybe components and kind of the market, if you will, I think the biggest place we saw some level of inventory correction was in China. We do track inventory levels embedded in our guide as some lowering of inventory in China over the next couple of quarters. We are — I wouldn’t say we’re at elevated inventory levels as demand comes down a little bit. Lead times come down. We are managing with individual channel partners relative to inventory.
But I think in general, we feel like we’re in a pretty good place with the guide of where that all sets up. Obviously, the biggest decision in that is really where the demand goes. But we think we’ve dialed in the kind of demand. The order of projections that I was describing earlier in the call really embedded a number of those things in those complex — regional complexities into how we’re talking about Tektronix. So if that’s the answer, let me know. But if I missed it, let me know.
Nigel Coe: No, no. I’m just curious if you were like taking down ship inventories in particular, but…
James Lico: I was looking down our inventory. The 1 thing about us, and you know this because our working capital performance has been so good. We really didn’t build a lot of inventory into the company. We certainly will be taking actions on inventory, given our revenue guide for the fourth quarter is a little different than it was. So we’re certainly working on that. But in terms of having big inventories on our own, we haven’t necessarily been building big inventories. That’s the sort of lean manufacturing, quite frankly. So sorry, really good question.
