Operator: Thank you. And our next question today comes from Noah Kaye with Oppenheimer. Please go ahead.
Noah Kaye: Good morning. Thanks for taking the question. And it’s really actually building on one of Nigel’s earlier ones around restructuring and more broadly, productivity gains. You’ve got the $340 million of productivity savings for 2023. Is it time for kind of an updated medium-term target around productivity? And what do you see as the path forward to drive a stronger margin profile for the business? And how much does productivity play into that?
Olivier Leonetti: So we believe, Noah, that fundamentally, we have the ability to be a 30% incremental company. We will achieve improvement in margin through two levers; one, gross margin as we improve our mix as we improve our operations. And the second lever is going to be through OpEx as we keep standardizing and centralizing our operations. And we have, as we see a strong portfolio of ideas and projects to improve the profitability of our enterprise. As I indicated earlier, typically, those projects have below one year payback. We don’t think we need to update today our productivity programs. I think you will see that being embedded in the guide, Noah.
George Oliver: And Noah, just to comment on that. As we have been able to strengthen our operating system globally, it hasn’t identified significant opportunities continuing, so that we can capitalize on and ultimately continue to expand margins going forward to be able to get incrementals 30% plus. And so the payback that we’re getting on the work that we’re doing is within a year.
Noah Kaye: Yes. Appreciate it. Maybe a little bit surprised positively, I would say that the cyber incident didn’t more significantly impact the service business. One, can you kind of explain why that was the case? And two, just talk about how the service and install operations performed during this challenging period for IT infrastructure for the company?
George Oliver: Noah, let me just comment on the cyber incident as a whole. What we learned is we’re not alone, and this is more common phenomenon across companies like ours certainly it was unfortunate. But what I would tell you there was incredible remarkable work by our team with our business continuity plans. And so as we were impacted, our teams really responded well, staying focused on customers, continuing to work and maintain operations with incredible speed and focus. And so with that, we were obviously very proactive in how we’ve communicated with suppliers, customers, employees to maintain our operations. So that is the foundation of what we were able to accomplish. What I would say is that the agility that we saw and the ability to be able to — where we were — where we did have some compromise, be able to get the proper set of data and make sure that we’re continuing to serve across the board.
We’re able to maintain that and stay focused on what matters, which is ultimately delivering for our customers. So even though we had a little bit of disruption in the month of October, which we talked a little bit about earlier, I believe that the work that we’ve done really has positioned us strong going forward, and we’ve seen that momentum come back in November and December.
Operator: Thank you. And our next question today comes from Joe O’Dea with Wells Fargo. Please go ahead.
Joe O’Dea: Hi. Good morning.
George Oliver: Good morning.
Joe O’Dea: First question, I just wanted to ask on channel inventory trends. I think that first emerged as a headwind in the third quarter. I believe you expected to see a more meaningful headwind in the fourth quarter. And so can you size kind of what you believe you saw in the fourth quarter? And then within the guide, what type of headwind would be embedded in sort of first quarter or even second quarter of 2024?
George Oliver: So when you look at our global product book-to-bill businesses that really depend on channel, starting with resi, certainly, we saw a pullback in resi and that was obviously more so in the US versus globally, but overall, there was a decline within resi. So we’ve been working to offset obviously offset the inventory and get positioned for what we believe the new demand to be. And I think as you look at the book-to-bill, it’s getting more normalized relative to on a go-forward basis that we’ve seen the adjustment — when we look — when we track our inventories, so I think we’re back to where we were historically relative to what’s in the channel with our distributors. And so I’m somewhat optimistic that, that’s stabilizing going forward.
When you look at the rest of our book-to-bill businesses, and it’s mainly around Fire & Security controls, the same hold true there. So we think that we’re through most of the headwind with the adjustment of inventory in the channel, we’ve also adjusted our inventory in line with what we believe the forward-looking demand to be. And so it’s important that we’re positioned to be able to support that demand on a real-time basis, which we are. And as we go through reviews business-by-business, looking at what is actually happening, we are encouraged that now we’re seeing orders across the board starting to build back our backlog so that we can be positioned here through the course of 2024 to continue to build on the revenue base on a go-forward basis.
So I mean we’re somewhat optimistic, and I feel that we’ve — the headwind that we saw in the second, third, fourth quarter, some of that now is normalizing, and we’re back to seeing growth.
Joe O’Dea: And then I just wanted to understand kind of project activity in the market, I think 2023 would have seen still a lot of constraints as it relates to labor availability for projects, supply chain availability. What you’re seeing on that front, kind of the smoothness of operating of projects at this point whether labor still remains a constraint? And then just related, I mean, office strength does come across as a bit of a surprise. And so any additional color on kind of what you’re seeing in North America office? Anything that you’re doing where you think you might be driving share gains there?
