Scott Santi : That’s exactly the way we do it. We are self-funding our growth investments through our incremental margin contribution. So at the 35 historical and targeted run rate, that is — that includes — that’s after those incremental investments in growth. We’re investing in capacity now in a really significant way in headcount in the areas that help us grow and supporting innovation. And we’re still going to deliver of 100 bps of margin improvement next year. So that just illustrates the point of these businesses are so profitable that every incremental dollar of revenue that we generate organically drives a lot of incremental cash flow and certainly to support that we’re going to invest some of that, but it doesn’t impair our belief that we’re in a good chunk of it to the bottom line.
Jeff Sprague: Great. Thanks for that context.
Operator: Your next question is from Stephen Volkmann of Jefferies. Your line is open.
Stephen Volkmann : Good morning, guys. Most of my questions have been answered. A couple of quick follow-ups. Is there a portion of your portfolio where you would expect to give back price once the sort of lower energy and transportation and raw material costs kind of work their way through?
Michael Larsen : We have a very small portion of our overall portfolio where the pricing is indexed to raw materials. If you add it all up, it’s somewhere around 5% of our total revenue, so really an immaterial number, where it’s an automatic giveback on price. I think on everything else, we historically command a premium given our — the differentiated nature of our products and services and the quality of our delivery, and we expect to maintain that premium as we compete and focus on gaining market share. So that’s how I’d answer your question, Steve.
Stephen Volkmann : Great. I appreciate it. Pretty minimal then. And then just sort of maybe the obligatory question on capital deployment relative to your thinking on any sort of further divestiture opportunities or M&A pipeline, anything to kind of call out there?
Michael Larsen : Yes. So I think you saw the two divestitures here in the fourth quarter. That’s part of — I think we called out a handful of business units about a year ago. So the first two are done. We’ve got a smaller 1 that’s kind of in the works. And then we’ve got a more meaningful one that is performing at a really high level right now. And I think we’re going to kind of assess the capital markets and conditions and whether it’s the right time to launch sometime this summer and that would kind of round out what we talked about a year ago. So that’s kind of where we’re at.
Stephen Volkmann : Great. And M&A pipeline, sorry.
Michael Larsen : Well, yes, I mean, we get this question every time, we answer it the same way. I mean, I think organic growth is priority number one for all the reasons that Scott just talked about. I think — we’d certainly be interested in high-quality acquisitions that accelerate the long-term growth potential of the company, where we can improve margins through the implementation of the business model and we can earn a reasonable rate of return on our shareholders’ capital. And so MTS is a good example of an acquisition that checks all the boxes. That was a pretty big one that we did a year ago. And to the extent that other opportunities like that present themselves that check the boxes, we’re definitely going to lean in, in a big way. So that’s — but…
Scott Santi : Yes, maybe just a little color on top of that, that’s more sort of topical near term. What I would say generally is that we are not looking to acquire broken businesses, we’re looking to acquire good businesses and help them be great businesses. And in environments where the sort of economic — the macro is uncertain, those good businesses, it’s really not a good time to sell. So if anything, I’d say the environment until the macro trajectory gets a little bit more clear, I would expect that the opportunities might be a little less than normal this year, at least through the first half, but we’ll see.
Stephen Volkmann: Appreciate the color. Thank you.
Operator: Your next question comes from the line of Dan Donner of BMO Capital Markets.
Dan Donner : Excellent. Thank you. So the Food Equipment business, as you have highlighted, has definitely been a standout for you. And after attending the NAFEM Equipment Show yesterday, there’s a noticeable difference in how the business seems to be presenting itself more cohesively than before. So will you comment on this aspect and also on some of the things that you’re doing there with regard to consolidating sales reps and allocating more investments toward maybe the cooking side, specifically products like combi ovens and priors, which are certainly areas that have well-known large competitors?
Michael Larsen : Well, I’ll take a stab. I think we’re not really doing anything different than we have over the last five years in the Food Equipment business. We’ve continued to invest in differentiated products, including the categories that you mentioned. And we’ve been putting up — the team has been putting up some really great numbers as a result of executing on their strategy. And so if you add up the organic growth rate here, over 17% coming out of the pandemic 23% last year, this year, high single digit, double digit, and that’s really as a result of us innovating and growing all product categories.
Scott Santi : And I add to that near term, our supply capabilities winning these businesses.
Michael Larsen : Yes, definitely, I think this has been an area where kind of back to our win the Recovery positioning and the decision to carry enough inventory to service our customers with the same level of excellence in difficult supply chain on the different supply chain conditions has paid off in a big way. And so I think if you get the sense that the Food Equipment team is in a good mood. I think that’s because they’re gaining share and putting up some really strong numbers, including on the margin side, if you look at that almost 400 — almost 500 basis points of improvement on a year-over-year basis. So that business, like we said, has got a ton of momentum going into 2023, and we’re very bullish on the future here.
Dan Donner : Okay. Thank you. Yes, they were definitely in a good mood.
Operator: Your next question comes from the line of Joe O’Dea of Wells Fargo. Your line is open.
Joe O’Dea : Good morning. Thanks for taking my question. I wanted to start the Slide 4, where you show the 300 bps of outgrowth versus the proxy group over the last couple of years. Can you talk to attribution of that? And I think, obviously, a pricing environment where you’ve seen different trends across different companies, I’m not sure the degree to which maybe pricing is outpacing. But the degree to which it’s volume is primarily share gain and just your confidence in the stickiness of those share gains as supply chain corrects?
