Eric Ashleman: Yeah. That’s one of the healthiest indicators that we have here. Just for everybody on the call, again, these are the shortest cycle more sort of widely dispersed businesses that we have with the most fragmented customer sets. And so when they move they tend to indicate, where the world is going either way. When they move together they strongly indicate where the world is going and, we saw them move together, back at the original zones of recalibration here as they move down. And in Q4 and certainly continuing here in January, they are all moving together towards the positive. These are modest rates, but a simple green arrow next to all of those names across IDEX, is meaningful and supports a lot of the confidence that we have.
Deane Dray: That sounds great. Because we look at those and it’s coincident with some of the better indicators we’ve seen from the ISM new orders. So I’m glad it’s consistent. And that’s it. Thank you.
Abhi Khandelwal: Thanks you, Deane.
Operator: The next question is from the line of Vlad Bystricky with Citigroup. Please proceed with your questions.
Vlad Bystricky: Hey. Good morning, guys. Thanks for taking my call and thanks for all the great information. Just quickly, and sorry if I missed it, did you say what price cost actually was in the quarter and what you’re assuming for price cost in ’24 as well as your overall price assumptions in the 0% to 2% organic growth outlook?
Abhi Khandelwal: Yeah. Absolutely, Vlad. This is Abhi. So firstly, for the fourth quarter, we saw pricing around 4%. It was definitely start– we definitely start to see it come down as the year progress, so a few quarters later compared to the, prior quarters, but it’s closer to 4%. As I think about 2024 what we’re modeling is a 2%, price in the guide. But what we’re more focused on is the price cost spread. As I think about the price-cost spread it’s in the, 80 basis points to 100 basis points, which is again it’s higher than the historical averages IDEX has seen. And even the 2% price capture, if you go back in time and look at the IDEX historical pre-pandemic was in the 80 to 100 basis point, 120 basis points. So that’s what we’ve modeled in the guide.
Vlad Bystricky: Perfect. That’s really helpful. Thanks, Abhi. And then I just wanted to ask you a little more– Slide 10 is very helpful color around what you’re seeing in businesses and the end markets. Can you talk a little more about what you’re seeing with respect to energy transition-related demand. Kind of particular project types that are seeing a pickup or driving that and whether you’re seeing it across regions or more pronounced in any particular geographies.
Eric Ashleman: Yeah. I’ll take a shot at that and of course, it always go through a bit of an IDEX filters. So we’re a couple of derivatives away from what you might notice is a headline. So think of this as almost any technology that’s involved in, kind of the transition from traditional energy to alternate sources and emerging sustainable sources. And we see that in places like battery manufacturing. We don’t make the batteries but we do a lot of the work around material handling because it’s pretty nasty caustic material. And so we’ve seen really, really nice velocity there and continuing into ’24 on things supporting kind of all the work that goes on for switch-over to battery tech. Even some of the businesses that we have in FMT that have a little bit of mining exposure have been strong for a while, they continue strong and of course, it’s tied to the mineral extraction that goes with that.
One of our recent acquisitions on the Airtech side and that business ever since it came and was a part of IDEX, one of its strongest catalyst has been alternative energy solutions where we do some of the thermal management that happens inside. So it’s, again, we’re kind of in the box, with our high-tech components and we’re doing very, very critical jobs and we’re doing them a little far away from the headlines, but you can absolutely see the lines coming right back into that industry. You asked about geographic spread. I wouldn’t say there’s I mean, we have projects in Europe. Some of them ultimately land in Asia. So it’s pretty uniform across the globe. But again, we’re hitting it in these niche verticals and niche applications.
Vlad Bystricky: Great. That’s really helpful color. I appreciate it. Thanks.
Abhi Khandelwal: Thanks, Vlad.
Operator: Our next question is from the line of Rob Wertheimer with Melius Research. Please proceed with your question.
Rob Wertheimer: Thanks. So my question is going to be on HST, Life Sciences within it and how you manage costs and I guess there’s a kind of a specific one, to your question on how the financials may play out and then just a larger question on philosophy on how you manage the business. Is the cost structure currently set such that if demand does come back, and you see above-normal incrementals you kind of return towards historical margin levels? I mean that’s kind of the first one, do you kind of prime for return would cost come back. And then the second question is more just how do you think about cutting cost when businesses turn down? Obviously nobody has a crystal ball, we can’t see what happens in two years. If you’d known how deep this downturn would have been would you have managed the business any differently or not? Thanks.
Abhi Khandelwal: Well, look. Thanks for the questions. So as I think about where we’ve been over the last couple of years as just good operators, good business cadence, we’ve been looking at our cost structure, you can see in our financials where quarter-after-quarter if you look at our restructuring around, right, we’ve done work in that area. Where we are today from a cost standpoint in our Life Sciences business, because that was the question, we feel comfortable with where we are, given where the volume levels are. To your point, as the volumes start to turn, the leverage on that is going to be a point where the margin rates are going to expand. As I think about how we’re going to be thinking about this business long-term, it is all about, balancing our cost structure in a way where it physically volume levels. We don’t have any specific plans today to take any more cost out.
Eric Ashleman: But I think coming back to, kind of how we manage it and maybe then applying some hindsight in whether or not we would have done a different. I mean, I would put the same for all IDEX businesses, that the places where we’ve the most careful are areas of domain expertise, technical know-how and, customer relationships. We’re really, really careful with those. Because look at these programs and the lifecycle in these risk-averse areas they only change and come around so often even when it’s in a market as dynamic as this one. And so if you’re not staffed and ready to go. And I use my comments earlier here about, this might seem like a counter-intuitive part of the cycle where business is down, we’re wondering when it’s going to recover, and yet the innovation moves are actually really active.
And again maybe counter intuitively because customers are struggling with some maybe potentially their own resource allocation abilities. That actually dials in quite favorably to our ability to help solve problems with our people. And so think of that is like a very solid core that’s sort of under-glass and we’re very, very careful about going near it. Labor obviously labor markets have eased up a bit. Frankly, it’s easier to flex them and so some of what Abhi is talking about under the year we’ve made those moves. We’ve taken variable resources out that can be brought back in we think quite easily should we need to go up, but that technical core kind of remains. The other thing that we leverage really, really well at IDEX and I think do it quite intuitively as frankly when we look at our leaders.
All of our leaders are kind of ready when they need comes to be able to go do more, because they’re really– we have a flat organizational structure and we’re close to the point of impact anyways. And so, avoidance is actually a big thing, cost avoidance and holding back additions. We are actually able to flex that muscle a lot more than most companies. And so when, environments are here and we’re starting to see the early signs we can sort of be really careful and hold back because we’ve got the deployment plans that allows very smart people to get close to the action and step in. So, I think it’s those two things working around frankly a labor environment that’s healthier for some of that flexing that you just would want to do. All of which says that in the early days of demand run up back to Abhi’s points on margin expansion, we always perform very well as we’re coming out of a period like this for all of these reasons.
The leverage is kind of its highest point.
Rob Wertheimer: Perfect. Thank you for the mini-education there Eric and I look forward to meeting you Abhi. Thanks.
Abhi Khandelwal: Same here. Thank you.
Operator: Our next question is from the line of Brett Linzey with Mizuho. Please proceed with your question.
Brett Linzey: Hey. Good morning, all.
Abhi Khandelwal: Good morning, Brett.
Brett Linzey: Hey. Just wanted to come back to the, distribution MRO and some of the stabilization you’re seeing there, good to see. Just curious, on the other side around CapEx and planning assumptions among your customers. Has the tone changed in terms of capital outlays and things of that nature and what are you expecting in those types of businesses for the year?
Eric Ashleman: Yeah. I mean, you kind of see that large project work and large capital in primarily in our water business to some degree you see it, of course, that’s municipal capital, be it in energy, a little bit in pharma. So I mean, in those zones, I would say it’s early days and modest, but it is positive. So these would be small expansion opportunities or projects that they’ve been talking about for a while that they want to now start to get moving. I don’t know that in many of them I would say you’re at the, kind of mega project level or we’re ready to go, or it’s been sanctioned, but to be fair, that’s the usual step-up when things get more positive. So we are hearing some good indications, from a variety of different markets, about more intentional capital deployment. Not yet at the levels of kind of full-cycle supporting multi-quarter or even year in duration, but good early signs that it’s actually quite different than what we saw in a lot of 2023.
