James Lico: Yes. Joe, are you talking about inventory or backlog?
Joseph O’Dea: I’m talking about inventory.
James Lico: Okay. Well, I don’t think we had a big inventory correction here. If I — I might have miscommunicated that, but I think what we’re really saying, the backlog answer I just had is really the story relative to our rate. And I would say most of that in Sensing is not really inventory as much as it is — it could be inventory but it really is much more OEMs really pushing out. I think it’s much more of a demand issue than in excess in specific verticals. The majority of that backlog reduction, which you could think of that as the order kind of orders changing is really in three specific verticals as we talked about, one being in sort of in automation, industrial automation, mostly with Europe OEMs, semiconductor, really two equipment companies that we supply, HVAC kind of on a global basis in China and a little bit of medical with some specific customers.
So that’s really the big change in our excess backlog number that I was just suggesting to Joe, and that’s really mostly in Sensing, a little bit of Tek, a little bit at Fluke, but not — but really a big story. And relative to inventory in channel, what I was trying to suggest is, yes, a little bit at Tek relative to China. But in North America and Europe, we still had pretty good POS. And I would anticipate that if demand’s really normalizing a little bit more. So if we continue to see that, we’ll see some normal changes in inventory as lead times come down, but nothing — we don’t anticipate at this point anything dramatic.
Joseph O’Dea: That’s helpful. And then I wanted to ask on EA and just how to think about the revenue growth potential and incrementals there over the next kind of five years, what you’re thinking about to get to that kind of ROIC target. I mean, it seems like we’re looking at maybe solid double-digit revenue growth and some really strong incrementals and the 10x go-to-market is pretty compelling. But maybe any details there in terms of kind of what you see for that revenue growth over the next number of years?
Charles McLaughlin: Yes. Joe, we think it’s going to be low double digit over the next five years. Really strong incrementals here like we’ve got some other examples that about 60% fall through. It gets us — I think we talked about or as Jim mentioned earlier, with 20% of our next 5-year free cash flow, we’re going to get $0.40 of EPS out in 2028. That’s the math that we’ve given out.
James Lico: And I would just add, that’s obviously a lower growth rate than they’ve anticipated. We think there’s upside opportunity as well, given the synergy and the go-to-market expansion. So we like the business, and we look forward to continuing to talk about it in the near term.
Joseph O’Dea: Thank you.
James Lico: Thank you.
Operator: Thank you. I will now turn the call over to Jim Lico for closing remarks.
James Lico: Thanks, Krista, and thanks, everyone, for taking the call. We appreciate the time and energy and enthusiasm of the questions. We obviously have some — we’ll have some follow-up with many of you and we look forward to that. I think what you saw in the quarter, obviously, a few changes on the revenue line. But I think what we’ve tried to say from day one is that we see some normalization in the second half. We saw that maybe a little bit more in the third than we anticipated. But what we also said is that we’ll continue to drive margins and continue to set the business up for long-term sustainability and success. I think the margin expansion you saw the free cash flow, the number of deals that we did that was very consistent with the strategy we’ve outlined.
We think we continue to set up for 2024. Well, we’ll obviously get to a guide here in the next few months. We look forward to finishing the year out here strongly. We’ll see you on the road, and we look forward to taking your follow-up. Thanks, everyone. Have a great day.
Operator: This concludes today’s conference call. Thank you for your participation, and you may now disconnect.
