David Lowe: I think that the — when we talk about the Industrial and Process space, I’m generalizing, but the channels really don’t stock a lot. Their demand varies all over. And quite frankly, many of them wouldn’t know what to order to do a plan ahead in terms of a price adjustment. As Mark touched on, certainly the CED is probably, if we look at the — if we go back to 2019 — we’ve done a little work on this, is certainly the shortest cycle of all of our short-cycle businesses. And I feel that there to some degree, what we could be experiencing at this point is a return to normalcy or more normalcy. Better quality supply chains, still some gaps in electronics and chips. But I feel pretty good that what we are seeing is, I’d say, getting to a situation — getting closer to a situation where the channel partners order with confidence knowing that we’re going to ship promptly.
Michael Halloran: Got it. So it sounds like what you’re saying is the seasonal patterns are reasonably normal, but there’s going to be some volatility expected through the year. So there’s going to be some variance in that thought process as we move forward.
Mark Sheahan: Yes, it could be some order volatility. Hopefully, the factories are a better spot where what we actually get out the door is a little bit smoother than the order rate volatility. Of course, we still got big backlogs, right? So I mean a year ago, when we were talking with you guys, we were lamenting the fact that we had $350-plus million of backlog, and that’s where we’re at here today, too. So
Michael Halloran: Thanks, Mark. Thanks, David. Appreciate it.
Mark Sheahan: Yes.
David Lowe: Thank you.
Operator: Thank you. One moment for your next question. Your next question comes from the line of Saree Boroditsky from Jefferies.
Saree Boroditsky: Hi, good morning. So gross margins were up a little bit sequentially, but still remain under pressure. What do you need to see to get gross margins back above that 50% level?
Kathy Schoenrock: Hi, Saree, this is Kathy. I think what we experienced in the quarter, as I said in my comments, we really saw the unfavorable effect of that current foreign currency exchange. I think where — with where rates are at right now, we don’t expect that headwind to continue into €˜23. I mean, obviously, rates could change. And given that we did have a favorable price/cost dynamic in the fourth quarter, I think we’re optimistic about how we enter €˜23 and beginning to see some gross margin rate expansion. Of course, that — we need volumes to remain the same, cost to main the same. So those will be the two factors that we continue to monitor here in the first quarter and throughout 2023.
Mark Sheahan: Yes. I would just add that after really about a half a dozen quarters of serious price cost pressure really going back to early in Q2 of — gosh, I guess we’ve got to go back quite a way as maybe at the beginning of ’22. The progress that we made here in Q4, I think, was impressive. And I would say it reflects the impact of pricing that we did at the beginning of the year. And the — by now famous interim price increases that we completed throughout the summer months. And anticipating a question, the lesson is not lost on us.
