Joe O’Dea: Appreciate it. And then I just wanted to ask on the ROI side and the examples you gave on the oil-free compressor and 14% more efficient than the previous model. And just any more perspective on when that previous model would have been launched to get a sense of would customers be it sort of a natural kind of replacement stage? Or what about that ROI is compelling such that the payback would encourage them to replace ahead of the natural aging of the prior model system?
Vicente Reynal: Yes. Joe, I would say that right now, ROIs — and again, it could vary by region, but we’re seeing ROIs between 12 to 15 months. So it’s a really great payback, again, driven by a combination of energy efficiency, but also driven by higher energy costs. So, I think it’s just one of those that we’re driving really hard. And customers, when they see a payback of 12 to 15 months or call it, less than two years and combine that with the sustainability and what many of them had to do with Scope 1 and Scope 2 is the other kind of great factor that gives us a great tailwind.
Joe O’Dea: Got it. Thank you.
Operator: Your next question comes from the line of Chris Snyder from UBS. Please go ahead.
Chris Snyder: Thank you. I wanted to ask on the fourth quarter. The guide — a pretty wide range of outcomes in the organic growth guide, anywhere from down 1% to up 6% by my math. Can you just maybe talk about some of the puts and takes or the variables that would drive the range of outcomes from the high end to the low end? Thank you.
Vik Kini: Yes. Sure, Chris. What I would probably tell you here is we kind of view it as probably, frankly, a bit of a tighter spread than that. But if I take it by the two components, and maybe I’ll talk kind of year-over-year based on the guide here. Like we said, we do expect to see positive organic growth that includes across both segments, starting on the ITS side. If you’re thinking, the guide would imply something in the range of roughly approximately 3% organic growth year-over-year. Again, given the pricing momentum we’ve seen as well as an expectation of organic volume growth, you can probably think of it as roughly speaking, two-thirds price, one-third volume. And I think I would fall back on kind of exactly what we said all year is that if there’s kind of an upside opportunity in the context of the guide and as we think about Q4, it would really be that organic volume side of the equation, particularly on the — I’m sorry, on the ITS side, where again, backlog continues to remain at effectively record levels.
On the PST side, I’ll go back to kind of some of the commentary we made earlier here. Again, continue to expect to see organic — positive organic growth, probably a little bit more of a pricing tailwind comparatively speaking to what you’ve seen in ITS. And I would just really frankly attribute that more so to what we’ve said over the course of the last one to two years. ITS probably got out a little bit quicker than PST on the pricing front. And as such, now PST probably has a little bit of a longer-lasting tail on the pricing side of the equation. But again, those would be kind of the dynamics we would expect. But again, we would expect to see positive on both sides of the equation effectively falling at the midpoint of the guide as you saw us make in the prepared comments.
Chris Snyder: Thank you for that. Really, really helpful. Maybe for my follow-up, just on prior commentary around the expecting sequential order improvement into Q4, it doesn’t really seem like that’s seasonal. It seems like typically, Q4s are similar to Q3, if not lower. So, should we take that? Is that just around timing of some of these bigger projects coming through? Or is that a signal of demand is at least stabilizing, if not improving? Thank you.
Vik Kini: Yes, I would actually say it’s probably a function of both. So for example, if you go back to last year, we acknowledged and you heard Vicente say in the prepared comments, Q3 was kind of a peak from an orders perspective in the context of some of these longer-cycle orders, some biogas orders, some things we saw last year that created that tough comp, right? And we did see — we even indicated last year that think about it more on a second half basis, where you saw Q4 orders kind of normalize comparatively speaking to Q3. Now you’re kind of facing the other side of that equation. So obviously, very tough comps in Q3, which we acknowledged. You saw that kind of play itself out. And now as you think Q3 to Q4, I think a combination of consistent, stable kind of MQLs, stable demand patterns, some of the longer cycle dynamics that Vicente spoke to.
I think that sets up for what we’re expecting to see in terms of the positive trajectory, both from Q3 to Q4 as well as on a year-over-year basis. Is there some degree of seasonality that is particularly a little bit more on the ITS side? Yes. I guess, obviously, with some of the other noise, you haven’t necessarily seen that as prevalent, particularly in the last few years. But I wouldn’t speak to any dramatic seasonality of no point itself out this year, whether it be ITS or PST.
Chris Snyder: Thank you.
Operator: Your next question comes from the line of Nathan Jones from Stifel. Please go ahead.
Adam Farley: Thank you. This is Adam Farley on for Nathan. My first question is on channel inventory. What, if any, impact of channel inventory correction having on your business?
Vicente Reynal: Yes. Adam, I would say, again, given the highly customized nature of our products, there’s really no material risk on the destocking that serves — that kind of serves really well for the ITS segment. And for the PST segment on those businesses that kind of sell through distribution, we monitor really closely the sell-in and the sell-through or the sell-out activities to ensure that we prevent our customers from getting into an overstock situation. And we — we have been doing this that way for probably — I mean, we have data points over the past five years to really have a good view as to what’s going on in the distribution channel.
Adam Farley: Okay, that makes sense. And then on my follow-up, the Power Tools and Lifting business continues to show really solid growth. That business has really improved under your ownership. So, what’s driving the strength there? And I believe that business has been considered noncore in the past. So, maybe could you provide an update on, are you thinking about the portfolio and the potential for portfolio rationalization?
Vicente Reynal: Sure. So you’re absolutely right that the PTL business has really done incredibly well. And to point out, when we acquired Ingersoll Rand, PTL came in with mid-teens EBITDA margin and now it’s pretty close to that ITS kind of blended average kind of get getting to that point. So great improvement while still growing the business. The real nature of a lot of this performance has really been new product introduction. So, the team has done a really great job of reinvigorating new product. And I think the exciting piece here is that as we look into 2024, they’re going to be launching a next-generation set of tools as well as lifting mechanisms that we think could continue to see some good performance.
Adam Farley: Thank you for taking my questions.
Operator: And we have no further questions in the queue at this time. I will turn the call back over to Vicente for closing remarks.
Vicente Reynal: Great. Thanks, everyone, for your level of interest. And as we said on the call, I want to thank, again, all of our 20,000 employees across Ingersoll Rand who are owners of Ingersoll Rand, and have a great performance here as we kind of close the year and as we go into 2024. So, thanks again for the interest and look forward to catching up with many of you. Thank you, thank you, everybody.
Operator: This concludes today’s conference call. Thank you for your participation and you may now disconnect.
