So if we get volume growth, Mike, things will be great. If volumes hang in there at the low single-digit level, I don’t see any deterioration in terms of the overall performance. And there could be some upside in terms of some of the initiatives we have on the cost side to make sure that we’re taking advantage of all the opportunities that we have available to us. There’s plenty of work for us to do here.
Michael Halloran: Well, thanks for that Mark. And then you mentioned initiatives, how do you think the internal M&A efforts are going? Maybe some conversations on pipeline actionability and any thoughts on the broader landscape on the M&A side?
Mark Sheahan: Well, we’re hearing that ’24 might be a little bit more favorable than ’23, just in terms of overall M&A activity levels. I feel good about our pipeline. I think I’ve said this before, but I think that today, I could pull any of the names on our pipeline. I’m going to know how big the company is, what the strategic fit is actionability, what kind of contact we’ve had with those companies. And so it’s really just a matter of are they ready to get into a transaction or not. I think Graco is in a good spot to be able to look at those opportunities. I think we have a lot to offer. We have world class manufacturing operations. We have a global distribution channel. We have professional marketing and sales. So if we get the right opportunity with the right management team, we’re ready to go. And like I said, I think we feel pretty good about the overall shape of the pipeline these days.
David Lowe: I would just add to that, that I think our experience in ’23 really reflects what we saw industry-wide with declines in deal volume. Certainly, the deal supply slipped. I think as maybe in some cases, sellers withheld moving forward trying to figure out where private equity fits in all of this. And at least on some transactions, we followed pretty closely multiples remain elevated. With that said, the work is ongoing with respect to pipeline management, reaching out and cultivating transactions. It’s long-term retail work, but I think that any time we can find opportunities where we could work on them on an exclusive basis as opposed to an auction basis, that remains a real opportunity for us. And as Mark said, in addition to the, I’d say, our operating philosophy and our channel management skills and some other things that we’re proud of is that, quite frankly, given our financial situation, when the opportunity comes along, we can move very quickly.
Michael Halloran: Appreciate it gentlemen. Thank you.
Mark Sheahan: Thanks Mike.
Operator: Thank you. One moment please. Our next question comes from the line of Saree Boroditsky of Jefferies. Your line is open.
Saree Boroditsky: Hi, good morning. So you typically say low single-digit growth in all regions and segments, but you kind of admitted that today. So maybe just talk about where you expect to see higher or lower growth within the guidance of low single digits for 2024?
Mark Sheahan: I don’t think we’ve fine-tuned it. I think we just decided that we’re going to go with the overall macro and I think we’re smart enough to know like what’s going to be up, what’s going to be down, but I feel very confident at this point that overall, that’s where the number should be at.
Saree Boroditsky: What are your customers talked about commercial sales maybe weakening in the second half of this year due to lower completions. Maybe just talk within contractor about how you’re thinking about the resi and commercial completions within your guidance in 2024?
Mark Sheahan: Yes, I do think that commercial is expected to slow down, but it’s still going to grow in ’24. At least that’s what they’re predicting right now. I’m probably a little bit more bullish on the residential side than maybe what some of the headlines are. I do believe that rate stabilization, the fact that the Fed is going to cut rates gives people more confidence to purchase new homes, and I think that the builders are going to pick up on that and hopefully, we see more activity there. We also expect to see more turnover in the North America market. Once people can see that they’re not going to be locked into these low mortgage rates and maybe they can move into new houses. I think that will be favorable for our contractor business, too.
I’m also really excited about the new products coming out in CED. We had great success with the QuickShot product that we launched last year that really helped, and we’ve got some new products coming out here in ’24 including a new line of electric sprayers, a new — what we’re calling a Pro shot, which is basically taking that QuickShot technology and applying it to all our installed base of sprayers in the marketplace. We’ve got some new guns coming out on the industrial side. We have a new gun coming out in the spray foam category. We have some two component flooring products coming out in CED. So pretty excited about the launches that are happening in ’24 gives us confidence that hopefully we’ll be able to grow the revenue in line with what we had projected.
Saree Boroditsky: And just to add one more. Your industrial margins at 37% in the quarter. I think it’s the highest it’s ever been. So maybe just think about that as starting off point, how you’re thinking about price cost in 2024, the volume impact, just how you think about industrial margins as you think about 2024 and beyond. Thanks.
Mark Sheahan: Yes, I think they can go higher if we get the volume. Like I said earlier, I think that there’s a lot of capacity in the factories. Volumes have not been as strong lately as they had been historically. Most of the growth in ’23 came from our pricing actions. So there’s no lid on the industrial margins that I am aware of.
Saree Boroditsky: Great to hear. Congratulations, thanks for taking my questions.
Operator: Thank you. One moment please. Our next question comes from the line of Joe Ritchie of Goldman Sachs. Your line is open.
Joe Ritchie: Thanks. Good morning guys.
Mark Sheahan: Morning Joe.
Joe Ritchie: So just my first question, like look, I agree with what Mike said earlier, just the performance this year on the margin with really no volumes was pretty impressive. As I kind of think about your product cost initiatives, how far along would you say you are? And maybe if you could just provide a little bit more color on how that’s impacting margins as well, that would be great?
Mark Sheahan: Are you talking about the purchased items in the factories when you say product cost?
Joe Ritchie: Yes, just that you’re continuing to lower product costs. I would imagine that you’re simplifying your line and also from a sourcing perspective, probably also benefiting. But any color that really kind of driving lower product costs across your portfolio?
