Ingersoll Rand Inc. (NYSE:IR) Q4 2023 Earnings Call Transcript

Ingersoll Rand Inc. (NYSE:IR) Q4 2023 Earnings Call Transcript February 16, 2024

Ingersoll Rand Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Ingersoll Rand Q4 2023 Earnings Call. Please note that this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Matthew Fort, Vice President of Investor Relations. You may begin your conference.

Matthew Fort: Thank you and welcome to the Ingersoll Rand 2023 fourth quarter earnings call. I’m Matthew Fort, Vice President of Investor Relations. And joining me this morning are Vicente Reynal, Chairman and CEO; and Vik Kini, Chief Financial Officer. We issued our earnings release and presentation yesterday afternoon, and we will reference these during the call, both are available on the Investor Relations section of our website. In addition, a replay of this conference call will be available later today. Before we start, I want to remind everyone that certain statements on this call are forward-looking in nature and are subject to the risks and uncertainties discussed in our previous SEC filings, which you should read in conjunction with the information provided on this call.

Please review the forward-looking statements on Slide 2 for more details. In addition, in today’s remarks, we will refer to certain non-GAAP financial measures. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, both of which are available on the Investor Relations section of our website. On today’s call, we will review our company and segment financial highlights and provide full year 2024 guidance. For today’s Q&A session, we ask that each caller keep to one question and one follow-up to allow time for other participants. At this time, I will turn the call over to Vicente.

Vicente Reynal: Thanks Matthew and good morning to all. I would like to begin by acknowledging and thanking our employees for their hard work in helping us deliver another record year in 2023. We finished the year on a high note with strong fourth quarter and full year results, despite the constantly changing macroeconomic environment. Our 2023 performance reinforces the impact our employee ownership mindset has for Ingersoll Rand. I would also like to welcome our new employees from our recent acquisition of Friulair, whom I had the chance to visit last week in Italy. I was very impressed by the entrepreneurial and technological spirit that has made this company grow at an impressive organic CAGR of 15% over the past three years.

Starting on Slide 3, in 2023, we demonstrated again how we continue to outperform against our long-term Investor Day commitments with double-digits growth in revenue, adjusted EBITDA, adjusted EPS and free cash flow. As we move to 2024, demand remains solid. And while macroeconomic and geopolitical uncertainties continue to be at the top of everyone’s mind. We remain agile and focus on what we can control. IRX is our competitive differentiator and combined with our ownership model, we remain confident in our ability to execute on our commitments. We recently held our Investor Day this past November, and I’d like to spend a few minutes providing a couple of important highlights that we presented. On Slide 4, we highlighted how we deliver compounding results through our economic growth engine.

With the use of IRX, we have created an increasingly durable financial profile underpinned by our employee ownership model. Since 2016, we have transformed the company into a premier growth compounder. We have reduced the cyclicality through divesting our club car and HBS businesses and reinvested approximately $2.3 billion into accreative acquisitions focused on high growth sustainable end markets. Today, our balance sheet is stronger than ever and we enter 2024 well positioned to build upon our progress to date. Moving to the next page, we show how we are uniquely positioned to grow market share within the $55 billion of highly fragmented addressable markets we currently play. The combination of our product portfolio, multi-channel, multi-brand strategy, massive install base and unmatched commercial and operational footprint provides an exceptional foundation for continued market share growth, both organically and inorganically.

On Slide 6, we demonstrate how we remain committed to delivering financial performance, while also doing good for the planet and our community. On the left hand side of the page, we have some very exciting news to share. S&P Global recently announced that Ingersoll Rand ranked first in the world within our industry, up for number two in the prior year. Also, Ingersoll Rand was named to the A list for its performance in tackling climate change and commitment to global environment leadership by CDP. CDP annuals environmental disclosure and scoring process is globally recognized as the gold standard for corporate transparency. Finally, as shown on the right hand side of the page, we continue to make progress towards our aggressive 2030 goals, and we’re already well on our way to achieve them.

On Slide 7, we show the catalyst for the progress, which is a highly engaged employee base combined with an ownership mindset. And as shown on the left hand side of the page, our employee satisfaction is over 600 basis points higher than the industry average. We believe our employee ownership model drives the increased employee engagement and as illustrated on the center of the page, we have created a massive economic opportunity for our employees and their families. That has been life changing for many, as expressed on the quotes from some of them. All of these leads us to the next slide, where you can see that the combination of all these factors, executed through our economic growth engine is evidence that our model provides durable long-term performance.

Our portfolio is positioned to capitalize on global mega trends such as sustainability, digitalization and quality of life. We expect to leverage our organic growth enablers to deliver on average mid single-digit organic growth through 2027. And as you can see, we outperformed this commitment again in 2023, delivering 10% year-over-year organic revenue growth. In 2023, we also deliver 6% of in year growth from M&A. The combined organic and inorganic growth of 16% also surpassed our low double-digit growth commitment, and not only did we surpass our growth targets, but we also exceeded our margin expansion initiatives, generating 170 basis points of adjusted EBITDA margin expansion, and again, surpassing our long-term targets for this metric.

With IRX, as our competitive differentiator and over 400 impact daily management sessions or IDMS across our company each week, our high performance culture encourages a strong focus on execution. In 2023, we deliver adjusted EPS growth of 25% and a free cash flow margin of 18%. These results prove that we are premier durable growth compounder. On Slide 9, to date, we’re on track or ahead of schedule in delivering the 2025 targets set at our previous Investor Day. We have set new aggressive targets for 2027 long-term financial and our results give us confidence in delivering those targets that are on average over the cycle. Turning to Slide 10, M&A continues to be at the forefront of our capital allocation strategy. We invested over $450 million across 13 acquisitions in 2023.

These acquisitions have been both market leading products and technologies, while accelerating our addressable market with close adjacencies. As of today, we currently have 10 transactions under LOI. Our M&A funnel remains strong and continues to be over 5x larger than it was at the time of the RMP. We expect an additional 400 to 500 basis points of annualized inorganic revenue to be acquired in 2024. The 10 transactions currently under LOI are similar in size and nature to the Bolton deals we have done over the past few years. However, outside of these 10 LOIs, we still have a couple of deals in the funnel where the purchase price exceeds $1 billion. I will now turn the presentation over to Vik to provide an update on our Q4 and full year 2023 financial performance.

Vik Kini : Thanks Vicente. On Slide 11, we finished the year strong in Q4 through a balance of commercial and operational execution fueled by IRX despite the constantly changing macroeconomic environment. Total company organic orders and revenue increased 3% and 4% year-over-year respectively. We remain encouraged by the strength of our backlog, which is up over 8% year-over-year. This provides us with a healthy backlog to execute on entry in 2024 and gives us conviction in delivering our full year 2024 revenue guidance. The company delivered fourth quarter adjusted EBITDA of $501 million, a 19% year-over-year improvement and adjusted EBITDA margins of 27.5%, 160 basis point year-over-year improvement and a hundred basis point improvements sequentially from Q3.

Free cash flow for the quarter was $552 million and for the year we delivered nearly $1.3 billion of free cash flow with an 18% free cash flow margin and 105% conversion to adjusted net income. Total liquidity of $3.6 billion at quarter end was up approximately $400 billion sequentially. Our net leverage continues to improve both year-over-year and sequentially. And 0.6 turns, we are 0.2 turns better than prior year and 0.3 turns better than prior quarter. Turning to Slide 12 for the total company on an FX adjusted basis, Q4 orders and revenue both grew 11%. Total company adjusted EBITDA increased 19% from the prior year. The ITS segment margin increased 260 basis points, while the PST segment margin was flat year-over-year, and corporate costs came in at $47 million for the quarter.

Finally, adjusted EPS for the quarter was up 19% to $0.86 per share. The adjusted tax rate for the quarter was 20.7% with the full year adjusted rate finishing slightly above 22%. On Slide 13, total company full year orders grew 8% and revenue increased 17%, both on an FX adjusted basis. Total company adjusted EBITDA increased 25% from the prior year. The ITS segment margin increased 240 basis points, while the PST segment margin increased 130 basis points. Corporate costs finished the year at $173 million, driven by continued investments to support growth in areas like demand generation and IIoT as well as the impact of incentive compensation adjustments. Lastly, adjusted EPS for the year was up 25% to $2.96 per share. Moving on to the next slide.

Free cash flow for the quarter was $552 million, including CapEx which totaled $30 million. Total liquidity now stands at $3.6 billion based on approximately $1.6 billion of cash and $2 billion of availability on our revolving credit facility. Leverage for the quarter was 0.6 turns, which was a 0.2 turn improvement year-over-year. And in 2023, we returned $295 million to shareholders through share repurchases and dividends. Specifically within the quarter, cash outflows included $130 million in share repurchases, $39 million deployed to M&A and $8 million for our dividend payment. M&A remains our top priority for capital allocation and we continue to expect M&A to be our primary use of cash, as we look ahead. I will now turn the call back to Vicente to discuss our segments.

Vicente Reynal: Thanks, Vik. On Slide 15, our Industrial Technologies and Service segment delivered solid year-over-year organic revenue growth of 5%. Adjusted EBITDA increased 26% year-over-year with an adjusted EBITDA margin of 30%, up 260 basis points from prior year with an incremental margin of 48%. We also delivered sequential margin expansion of 120 basis points from Q3 to Q4. It is important to note that we have already achieved our 2025 high 20s adjusted EBITDA margin target for ITS, which is a full two years ahead of schedule. We continue to see solid demand for our products with organic orders also up 5%. Moving to the product line highlights. Compressors were up low double-digits in orders and up mid-single-digits in revenue.

Industrial vacuum and blower were down low double-digits in orders, but up low double-digits in revenue. The order decline was mainly driven by prudently de-booking an order from an electric truck manufacturer in Europe that had some battery supply issues. However, the prospects are starting to look better for this manufacturer in 2024. Also, it is important to highlight that core product lines continue to show strong momentum on a two year stack, excluding FX and also excluding the recent acquisitions of SPX Air Treatment and Roots’ blower. On a two year stack, compressor orders were up mid-teens and revenue was up high 20s. Industrial vacuum and blower orders were up low double-digits and revenue was up mid-30s. As a reminder for additional detailed information on product lines and regional splits, we have moved the chart, which was previously included on this page to Slide 21 in the appendix.

For our innovation in action section, we’re highlighting a new compressor with advanced two stage technology. This product is a great example on how Ingersoll Rand is providing an innovative digitally-enabled sustainable solution with a 17% energy efficiency improvement versus the competition. Turning to Slide 16. Organic revenue in the Precision and Science Technology segment was approximately flat year-over-year. The PST team delivered adjusted EBITDA of $94 million, which was up approximately 2% year-over-year with a margin of 30.1%. Organic orders were down 1.6%, driven by the Life Science businesses. We see organic orders growth stabilizing and we remain positive about the underlying health of the PST business. In fact, PST excluding the life science businesses has seen positive organic orders and revenue growth in 11 out of the last 12 quarters.

In addition, short cycle orders in the industrial businesses were up mid-single digits in Q4. Overall, the PST segment remains on track to meet our long-term Investor Day growth commitments. For our PST innovation in action, we’re highlighting our ARO piston pump system. This is a perfect example of leveraging both i2V and demand generation to pivot an existing product line into a high growth sustainable end market. Over the past 12 months, we have already taken $7 million in orders with a leading OEM solar panel producer, which has the potential for $1 million in annualized after-market revenue. As we move to Page 17, we’re introducing our 2024 guidance. Total company revenue is expected to grow between 5% to 7% with the first half growth of 4% to 6% and the second half growth of 6% to 8%.

We anticipate organic growth of 2% to 4%, where price is approximately 2/3 and volume 1/3. FX is expected to contribute approximately 1% of a tailwind for the year, of which the impact will be realized relatively evenly throughout the year. M&A is projected as $160 million, which reflects all completed and closed M&A transactions in 2023, as well as the acquisition Friulair. Corporate costs are planned at $160 million and are expected to be incurred evenly per quarter throughout the year. Total adjusted EBITDA for the company is expected to be in the range of $1.915 billion and $1.975 billion. At the bottom of the table, adjusted EPS is projected to fall within the range of $3.14 and $3.24, which is approximately up 8% at the midpoint. We anticipate adjusted tax rate to be roughly 23%, gross interest expenses to be about $155 million and CapEx to be around 2% of revenue.

On the right hand side of the page, we have included a 2024 full year guidance bridge showing the growth associated with both operational activity and the impact associated with corporate cost, interest income and expenses, FX, share count and changes in the adjusted tax rate, and based on the above guidance adjusted EPS growth is expected to be 6% to 9%. As we sit here in mid-February, we would like to provide some commentary on Q1. We expect our normal seasonality to return in 2024 from a revenue perspective, which means that Q1 will be the lowest revenue quarter of the year. In addition, as a reminder, Q1 has a very tough comp as we deliver 20% organic revenue growth in Q1 of 2023. As a result, we anticipate organic revenue growth to be flattish to slightly up for a quarter with continued year-over-year margin expansion.

Turning to Slide 18, as we wrap up on today’s call, I want to reiterate that Ingersoll Rand is in a solid position. We continue to deliver record results and both our long-term and ’24 guidance is reflective of our performance to date and our increasingly durable financial profile. To employees, I want to thank you again for another excellent finish to the year. We deliver strong results by demonstrating our commitment to meeting our financial targets and executing our economic growth engine through the use of IRX. Thank you for your hard work, resiliency and focus actions. These results show the impact you each have as owners of the company. Our balance sheet is as strong as ever, and with our discipline and comprehensive capital allocation strategy, we remain resilient and have the capacity to deploy capital to investments with the highest return as we continue our track record of market, our performance.

We remain nimble, continue to monitor the dynamic market conditions and we’re prepared for the challenges that may come. And with that, I’ll turn the call back to the operator and open it for Q&A.

Operator: [Operator Instructions] Your first question comes from Mike Halloran with Baird.

Mike Halloran : So let’s start with where you ended there on the guidance piece. Certainly appreciate all the context and help and understand the relatively normal seasonality. But maybe you could just talk to what you’re embedding from an underlying assumption perspective when it comes to the broader environment, broader end markets. Is this a year where you just see relatively sequential stability? Any specific pockets you’re concerned about or where you see opportunities for acceleration? Less of an Ingersoll specific question meaning. I know you have a lot of drivers that you can use to goose growth relative to whatever the end markets are doing. More of just an end market specific in an environment question.

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Q&A Session

Vicente Reynal : So maybe kind of give you a perspective here on how we think about it by region first. I would say in America as expected, we’re seeing much better momentum. I will say mainland Europe — I want to say America is — I mean, not only the U.S. but even also Mexico and South America, where there’s a lot of good progress going on with the teams down there. Mainland Europe remains relatively stable. I was just in Europe last week and really solid momentum from some good pockets of growth that we’re seeing. But I’ll say, I’ll call it more stable. I’ll say broader Middle East and India, also very good momentum. I mean, particularly in India and you’ve seen that we have done quite a few investments in India too as well.

Not only from an inorganic perspective, but also organic. And I’ll say that APAC, Asia Pacific is the one that has the most headwinds specifically I’ll say here in the first half of the year. And it is driven mainly by tough comps. I mean, we saw strong double-digit organic revenue growth in the first half of 2023 in Asia Pacific, mainly driven by China. And at this point in time, I mean, China is not a market that we call it that is perhaps booming. We’re not immune to that, but we expect to outperform the market there to as well as the teams have proven that they could do that even in 2023. So that’s kind of from a regional perspective. I’d say from an end market perspective, nothing that I would call out to be highly differentiated in a sense, as you have seen us always pivot to these high growth sustainable end markets, we gave you one very good example here with arrow based on pump.

This is a legacy product line that we kind of reinvigorated reutilized I2V as a way to relaunch the product. And with the use of the demand generation, we were able to position that product line into a very good growth end market on first of all take sales. So, I say Mike, I mean I think the playbook continues to be the same. It is be agile, very nimble, leverage to demand generation and demand generation and IRX as a way to continue to execute.

Mike Halloran : And then a follow-up on the Life Science side. The one area of PST that like a lot of the folks are seeing some headwinds here. You listened what the bigger players in the industry are saying. There is more stability front half, improvement back half, I don’t know, at least modest. Is that similar to what your expectations are from a recovery curve at this point?

Vicente Reynal : That’s kind of what we think to as well, Mike. Again, as you said, maybe bottoming out here as we kind of come into the first half and then seeing sequential improvement. I don’t say, I mean not in an exponential way, there is not that pent-up demand, but I would say in a very logical way to get back to the good growth that these end markets should continue to see over the long-term.

Operator: Your next question comes from Julian Mitchell with Barclays.

Julian Mitchell: First off just wanted to look at the sort of cadence through the year perhaps first off. Based on what you said, is it fair to assume sort of first quarter is about 21% of earnings for the year? And when we’re looking at incremental margins, you call out that high 30s figure for the year. Is that fairly steady across both segments, as we move through 2024?

Vik Kini: Yes. Julien, this is Vik. I’ll take the first part of your question and I’ll let Vicente probably talk on the margin front. I think the phasing — generally I think you’re in the right ballpark. Maybe other way to say it here is, if you look at the phasing in a manner that’s consistent with, I’d say, revenue and earnings delivery as we saw in 2023, I think you’d be in the right ballpark in terms of our expectations here for 2024. And then in terms of the incremental margin piece, maybe I’ll get started or —

Vicente Reynal: Yes. I can take that. I mean, I think the way I think to about that incremental margin, I mean, think about that 35% to 40% incremental margin. And when you look at the main buckets, I would say, the first bucket of that improvement or good incremental margin comes in from the initiatives that we always do, the I2V, price, very good continued growth momentum on the aftermarket, particularly the recurring revenues. The second bucket will be around the prior M&A improvement activities that we have always spoken about. The third bucket is, you probably saw on some of the appendix that we did some proactive restructuring at the end of 2023. This is kind of part of our continued to be proactive and nimble. And the last fourth bucket I would say in terms of this margin improvement is around corporate cost. You saw corporate cost going down roughly $13 million or so.

Julian Mitchell: And just as we’re starting out the year, looking at orders naturally, the sort of volatile quarter to quarter, reflecting what you said on a sort of a tough Asia environment in the first half of the year and sort of very tough orders comps. Do we think about orders being down perhaps in the first quarter year-on-year and then you pick up after that, as the comps and perhaps Asia get better?

Vicente Reynal : Yes. We typically don’t guide on the orders for the year or on a quarterly basis but we do definitely expect orders to be up sequentially from Q4 to Q1 on an absolute dollar perspective. The way we think about it too as well is that we typically book above one on a book to bill in the first half do typically to larger longer cycle projects being booked and then projects being booked, and then below one in the second half and we don’t anticipate 2024 to be any different to that.

Operator: Your next question comes from Jeff Sprague with Vertical Research.

Jeff Sprague : Vicente, can we just come back to Life Sciences for a moment, and just level set us here now after, kind of a couple tough years, what percent of PST is that business now and do you actually expect it to return to growth in 2024?

Vicente Reynal : The Life Science business is roughly 25% to 30% of the PST segment today. I think as we think about going into the second half is when we expect that to be getting back to normal growth.

Jeff Sprague : Thanks for the guidance on price versus volume. Just give a little bit of color on what you’re expecting, just kind of the price cost equation, as we move through the year and maybe particularly in ITS.

Vik Kini : Yes. Jeff, this is Vik. I’ll take that one. I think simply stated here, I don’t think you are going to see anything dramatically different than what you’ve seen historically. Meaning, we expect to generate approximately 2% price on a full year basis. We would expect to be both dollar and margin positive from a price cost perspective each quarter of 2024. So again, nothing different in terms of that equation as we move to the year. Obviously, ITS being the bigger segment clearly that comment pertains to ITS as well as PST as well.

Operator: Your next question comes from Rob Wertheimer with Melius Research.

Rob Wertheimer : Actually, one more question on life science. I mean, we’ve seen you guys use demand generation and just IRX to outgrow tough markets in China, and maybe Europe last year. Has that been a factor in life science? Is there anything different in that market that constrains it? And then I wonder if you could just kind of compare market dynamics for you and life sciences to some of the other companies and industrials we’ve seen and the long drag. What does the recovery look like? Is there a bounce back? Has there been a decent. I mean, maybe just explain the sales dynamic there.

Vicente Reynal : Yes, Rob, I’ll say, life sciences and I think you were referring to particularly in China. I mean, they have seen similar declines, like the balance of the life science businesses and biopharma related markets. I would say for the balance of our China exposure, it isn’t that much different than the impact we have seen on the ITS side with the one item of node to call out perhaps SPX business that is more impacted by the water market. But that being said, I mean, we’re excited with the prospect of SPX in China. And one example is that again, people tend to better end markets. So for example, the SPX took the same product and relaunched that to move away from the water market and move more into the lithium battery production with a very unique proposition without having to reconfigure that product too much.

I think we just continue to navigate that. I mean, basically, how do we continue to agile and very nimbly move from one end market to the other without having to reconstruct the product lines.

Rob Wertheimer : It was a little bit of two. So it was like, does demand generation — has demand generation or other tools allowed you to outgrow the decline in life sciences? And then maybe the same question as Jeff asked in a way, but does the other side of this look like a bounce back or does it just look like a return to normal growth? I don’t know whether destock or whatever at your customers has led to below normal sales and you kind of pop back up in ’25, or whether you just resume normal growth? I will stop there.

Vicente Reynal : To the first question, absolutely, demand generation is really helping us tremendously because then think about, I mean, our products can be applicable to pretty much any end market and we’re being very selective and with demand generation, we can really reach this highly fragmented customer base in a very cost effective way, very rapid, very quickly. And then, provide a better solution to our customers underneath, call it energy efficiency, water efficiency, digitalization all these thematics that we think are important. For the second question, the way we think about it is more normal. We don’t expect this massive bounce back if that happens clearly upside, but the way we like to view it is more normal.

Operator: Your next question comes from Andy Kaplowitz with Citigroup.

Andy Kaplowitz : Vicente, I think you had an increase in your LOIs in Q4 to 10, I think from four last quarter. Are you seeing the M&A market open up a bit more? Is this more your team just finding more deals and those couple of deals that you mentioned that are over a billion, do you see the larger deal market opening up or is it still difficult to get those larger ones over the finish line?

Vicente Reynal : I would say, yes. I mean, the M&A, we feel that continues to open up, and again, I’ll put it in perspective that these 10 transactions in the LOI are similar in size and nature to the bolt-on deals that we have done over the past few years. And these 10 LOIs are also sole source, meaning, we have been proactively talking to the family on and have built some incredible relationships. This is exactly what happened with the Friulair acquisition to us, well, which have been in contact with the founder named Luigi. But so again, outside of these LOIs, we still have a couple of those deals in the funnel where purchase price exceeds $1 billion. So yes, there’s still — I mean, timing of that obviously difficult. But we still have a couple of those in our funnel.

I will also tell you that we actually — also, we walked away from one of those billion dollar purchase price transactions, which again, speaks to the prudency and the discipline of our continued model that even after six to nine months of continued diligence, we decided that it was just not the best case for us to proceed. So, we remain highly disciplined in this environment and we see just a lot of good opportunities out there.

Andy Kaplowitz : And then can you give us more color in terms of the end markets, you answered the question before, but if I look at Americas and EMEA, pretty continued durable growth. Is it more the 20% of your business that’s longer cycle larger compressors? Is it more of the short cycle stuff that’s supporting your growth? And what do you think the sustainability of the two markets is?

Vicente Reynal : We think that maybe over the past couple years it was a lot more on the longer cycle. We see now, perhaps as you cannot continue to see PMI do better is that shorter to medium cycle will continue to see maybe a better momentum inflecting, we see some of that even already here. And you saw, we spoke about that particularly, let’s say even PST on that we said, the industrial shorter cycle of mid-single digits year-over-year and then also sequentially. So, I will say that our teams continue to stay pretty agile in this — in continuing to pursue energy efficiency in the compressors with our story around how we can save tremendous amount of energy, that is a very good thematic that continues to be out there. The thematic around reshoring is very strong. It continues to be the case in countries even like Mexico or even South America. I think the same thematic are still happening that we’ve been talking about for the past couple of years, Andy.

Operator: Your next question comes from Nigel Coe with Wolfe Research.

Nigel Coe: All the big questions I think have been asked, but maybe just give us a bit of color on what you’ve seen in China looks like that was down in the quarter. Maybe just to quantify that and kind of like what’s your sort of base case view on China? And then perhaps as part of that first half versus second half, it looks like core growth flat to 2% in the first half of the year and then we’re going to lift the mid-single-digits in the back half of the year. Is that simply easier comps or are we seeing some acceleration, I don’t know maybe in China or perhaps in life sciences? Any color there?

Vicente Reynal : Yes. I was actually in China a few weeks ago, earlier here in January with the team and we were doing a pre-celebration of the Chinese Happy New Year. But in addition to just reviewing how the business is performing and to keep that in mind, I mean, I think over the past six to nine months, I’ve been to China now three or four times. I think it’s just one that we continue to stay really close to understand how our teams continue to control what we can control. From an orders perspective, yes, I mean China in the fourth quarter was down mid-single-digits, but keep in mind that this is on top of low double-digits orders growth that they saw in Q4 2022. Again I think on a two year stack, they still saw high single-digits order momentum, which is pretty impressive when you consider everything that is going on in China today.