Nigel Coe: Can you just maybe just give us kind of your thinking on what gives you confidence that this utility destock is sort of going to be finished by year end, because I think that’s the key for a lot of folks here, so any metrics on kind of selling the sellouts, backlog burn or days on hand, any intel there would be helpful?
Bill Sperry: So we’ve been using backlog — Nigel, let’s say that to simplify your question, Electrical is already in the position of being kind of book and bill, okay? So we’ve used backlog in the second and third quarters of this year, and we still have more backlog than we traditionally do. I would say, pre-pandemic, we would think about backlog being in the six week range as being very normal and typical of our book-and-bill kind of enterprise. I’d say we’re sort of in the quarter and half of backlog now, so it’s maybe 2.5 times typical size. So we still have the backlog on the power side. And I think that the models that we’ve built and the way that we’re looking at those specific businesses who have gone to a much more normal lead time and we see those are the areas where we think they’re shipping more than they’re receiving from us.
And as we talk to our customers and the models that we’ve created, it feels to us like that burns off that whole phase burns off by the end of the year. And we’re kind of using what we saw in Electrical because it’s — that’s a good precursor, we think. And so those — all that stuff combines but I do appreciate I think there’s maybe some art and some science mixed together in that answer.
Gerben Bakker: And maybe I’ll provide an additional comment here, Nigel, is that while I think Bill correctly points out, there’s a lot of moving parts. The good part is we have very strong tie-ins with not just our electrical channel partners, but with our utility and customers. So through those discussions, we can have discussion where the inventory sits in that channel because it sits in both places. And we see clearly in certain product lines, supported by the order rate and the shipment rates that the inventories come down, and they’re telling us when they’re getting towards that end of where they want to be. But I’ll also remind you that the demand in the utility sector is still very, very strong. And in those same conversations, customers are very optimistic about the increased higher levels of spend.
If you look at our CapEx plans going forward, elevated. So while certainly a little bit uncomfortable managing through this time as we look out a little bit, we feel really good about the end demand and that we can continue to grow our business through the cycle.
Nigel Coe: And then just on the Electrical Solutions margins, I think with all this noise in the utility, I think we’re forgetting that these are continuing to like inflate to record levels, especially when we consider the residential business would be obviously well below that the average. So when volumes inflect, I think you’re calling for volume to reflect in the fourth quarter and then obviously into 2024. Do you think you can actually build on these margins or is there going to be some offsets that I can’t think of any, but are you confident you can push margins into maybe the [Indiscernible] levels?
Bill Sperry: Yes. I think you’re looking at it the same way we are, which is that this is a new base and that new volumes should drop at incrementals. And I think the one overlay to all that, that gives me maybe even more confidence than you is Mark Mikes spent seems like a lifetime making our Power Systems multi-brand platform compete collectively and act really efficiently. And he really is at the early days of him adding what I would just call overall segment efficiencies to how those different silos are running. And so there’s both the math of growth and incrementals but also Mark’s experience with us and track record of finding just structural ways to make it cheaper to operate and more efficiently, I should say.
Operator: Our next question comes from the line of Brett Linzey of Mizuho.
Brett Linzey: Yes, I wanted to come back to comm controls up 28% and other strong quarters you catch up on supply chain. I know at one point, you had a $1 billion backlog, $6 billion of pipeline of projects in the funnel. Just curious what the conversion of that funnel has been looking like? And then do you think you can build off some of this catch-up growth this year as we flip the calendar ’24?
Bill Sperry: Let me start with the first one — or the second one, I’ll let Gerben comment maybe on the overall picture. But yes, we think the momentum of having the chip supplies saw is really helping us get some backlog from the meter side out and as well on the AMI side. So it’s a welcome surge of momentum that certainly will carry us through fourth quarter, Brent, maybe I’ll let Gerben talk back really about the positioning of…
Gerben Bakker: And now regarding the backlog, it still sits around that $1 billion-ish mark As we look forward, especially with some of the technologies that we are developing to serve some of those new applications of distribution, automation, we feel well positioned in this market over the next several years out, and we see it in our quotation activity that’s picking up. These are big projects that timing of which tends to be a little more unpredictable than the regular stock and flow part of our business. But we’re quite optimistic and bullish about what this business can contribute over the next few years.
Brett Linzey: And then just a follow-up, I think you noted the additional manufacturing capacity, the two recent deals could be favorable. I guess, how does this change your current capacity plans or what you’re thinking in terms of ’24 budgeting? And can you absorb some of the acquired capacity, any context there?
Bill Sperry: I think on the Balestro side, it’s really adding to the capacity of our North American insulator arrester business. I think on the systems control side, as I was mentioning, Brad has some ambitious growth plans that we really embrace, so I think we’ll be looking to add capacity. As we mentioned, they’ve been growing double digits for eight years in a row, and so we’re looking to help [buttress] that.
Gerben Bakker: And I’d say, on the kind of specific to Balestro, helps with the investment needs even into next year because that was one of the areas we were contemplating having them make investments in to grow that block or this capacity, but it’s not the only one why not constraints in other areas. If you look at our transmission business and other parts of the businesses, we clearly still need to invest into next year to be able to capture that growth over the next few years [indiscernible] but it’s not unique.
