David Raso: Hi. Thank you. I just wanted to pick up on the orders so far in ’23 commentary. Even excluding the hydrogen comp, PST orders were up 0.2%, basically flattish year-over-year, while the ITS obviously was up 3.6%. Are you saying the order growth has accelerated so far in ’23, just to be clear?
Vicente Reynal: Well, David, again, we’re saying that the order momentum is actually positive across the two segments. So, yes, I mean, if you think about it from a percentage perspective, that is correct.
David Raso: And the type of projects that you’re getting, I just want to understand what’s the pricing in these new orders versus what’s in the backlog already? Just to get some sense of, assuming costs don’t reaccelerate, what is the pricing dynamic in the new order book?
Vik Kini: Yes, David, I would say to Vicente’s remarks that orders in first quarter, quarter-to-date across both segments are trending positive on an organic basis. And within that, I would say the pricing dynamic, given the carryover pricing dynamic that Vicente mentioned, which, as you would expect, is more obviously evident in the first half of the year, comparatively speaking, I’d say it’s comparable to what you have seen exiting 2022. So, nothing has dramatically changed in that respect. And I think to the question that was asked before, the margin profile is healthy on those projects, and the pricing levels on those projects are commensurate or comparable to what you see in some of the more standard book/ship type business. So, we’ve been seeing comparable margin performance and comparable pricing across both the shorter cycle and longer cycle components of our business.
David Raso: All right. Appreciate it. Thank you.
Operator: Thank you. We now have Steve Volkmann of Jefferies. Please go ahead when you are ready.
Steve Volkmann: Great. Thanks. Good morning, guys. I want to go back to the supply chain. I was interested in your comments that you didn’t project anything really improving through the year. But can you just give us the sort of current conditions? Because it seems like we’re hearing sort of broadly the things are improving. So, I just wanted to kind of square those up.
Vicente Reynal: Yes. I mean, so it is definitely improving as compared to last year. What we’re saying is that — but there’s still some bottlenecks and issues that pop up here and there. So, it’s not — again, what we’re saying is that it is not perfect. It is not back to normal conditions. And that what we foresee here as we go into 2023, whether it is with the reopening of China or a lot of the CapEx cycle releases that we’re seeing in terms of long cycle, we think there’s going to be continued constraints in the supply chain. So, these were just being more proactive in terms of kind of realizing that there’s a lot of work that our teams need to continue to do and realizing that, hey, things are not going to be back to normal from a supply chain perspective as we go into the second half, based on a lot of these other kind of trends or indicators that we’re seeing that are happening in there.
Steve Volkmann: Okay. Great. And then, just Vik, anything — I think you mentioned 100 basis points of EBITDA margin through the year. Anything to think about relative to the two segments or one versus the other?
Vik Kini: Yes. It’s a good question. So, yes, approximately 100 basis points enterprise-wide. You’re going to see both segments trend right around there. I do think the PST probably is a little bit more outsized than ITS, probably not overly surprising, because you had a little bit of an inverse happening in 2022. So, I think a lot of this is now, quite frankly, as we’ve now got Seepex, which was probably the largest headwind on EBITDA margins through the better part of 2022, now that’s coming closer to fleet average with, frankly, still room to run, I think you’re going to see a little bit more outpace on the PST side comparatively speaking, but total business should be trending closer to 100 basis points.
Steve Volkmann: Great. Thank you, guys.
Operator: Thank you. We now have Josh Pokrzywinski from Morgan Stanley. Your line is now open, Josh.
Josh Pokrzywinski: Hi, good morning, guys.
Vicente Reynal: Good morning, Josh.
Vik Kini: Hey, Josh.
Josh Pokrzywinski: Just wanted to dig into — hey, good morning. Just wanted to dig into the complexion of what you’re seeing on the compressor side or even maybe more broadly across (ph). You talked about some of the big drivers, Vincente, around things like nearshoring, kind of a broader CapEx cycle. I mean, we just haven’t seen one of those in so long. I’m just wondering like are you seeing larger pieces of equipment, a lot more of what looks like capacity versus replacement. I know some of that detail, it can go missing in the numbers. But as you talk to customers, like are they adding roofline? Are they adding capacity? Or is this sort of an extended replacement cycle that has kind of been caused by all this post-COVID interruption?
Vicente Reynal: Yes, Josh, I’ll say that we’re seeing a little bit of a good blend of both in terms of new rooftops as well as expanding even capacity. And just to put in perspective, I mean, it’s not dissimilar to what we or Ingersoll Rand were doing ourselves. So, as you remember, last year, we reopened our Buffalo facility. So that was — you could consider that as an expansion of capacity. We also invested in expanding our factory in Brazil. So that was actually you could think about an incremental rooftop. We just here announced our expansion of the footprint and creation of a new building facility in India, which is on top of our already four manufacturing facilities in India. So, I think it’s — and our customers are doing the same, and we’re very close to the customers because we believe to be in region for region is the most strategic factor and uniqueness that we have as a company, and this goes back all the way from our Gardner Denver days that we were doing that.
So again, we’re seeing a lot of good momentum of that in region for region continuation because of onshoring not only in the US, but we’re seeing it in India, we see it in China, we see it in Europe. And I think our ability to flex our products and our localization to that, it’s driving that pretty good momentum, I would say. And from a technology perspective, to your question, we’re seeing solid momentum and we said that on the prepared remarks on oil free, which again, is good news because we’re moving more towards these kind of high-growth sustainable end markets food, beverage, pharma that — where we can provide more unique solutions to those customers, and, therefore, see that accelerated growth.
Josh Pokrzywinski: Got it. That’s helpful. And then, just a follow-up on hydrogen, specifically. And I think there’s a lot of stuff out there that’s in discussion, maybe projects that are not quite ready to go FID, because there’s (ph) making clarity in the IRA that hasn’t been established yet. But just wondering how you guys are thinking about the timing of when you could see another order wave there? And anything you’re watching specifically that could help us track alongside that?
Vicente Reynal: Sure, Josh. Maybe I’ll see it — kind of put it in two buckets. One is the — on the PST side, where we make dispensing units, we’re seeing better momentum on acceleration that we see here in Europe where more countries are leveraging hydrogen and so we expect to maybe see better momentum as we go here in 2023 in Europe. The early cycles of that PST hydrogen really happened more so in Asia Pacific. And we always said that, that was kind of the core start and then it was going to move to Europe and eventually gets to the US. And we’re seeing that. Started in Asia Pacific, it’s moving to Europe, and we’re seeing conversations about dispensing hydrogen networks and things like that in the US, as you very well said, on the IRA budgetary commentary that we are read about.
On the ITS, it’s not too dissimilar. But I will say that the large capital investments that have been talked about in terms of hydrogen, we’re not seeing that kind of come through fruition yet within the compressor side or the ITS side. So, we still think that there may be more room to come on that. And as you very well said, whether IRA or some of the other funds that are in Europe, hopefully, that kind of gets some of the projects getting released. But — so good tailwinds we expect for a couple of years to come.
Josh Pokrzywinski: Great. Thanks for the color. I’ll leave it there.
