Michael Quenzer : Yes. I would just add, we obviously don’t give quarterly guidance. But generally, when you look at the seasonality that you plot as we just talked about, maybe a little bit more destocking as Alok talked about through the distributor business in Q1 and then starting to revert back up thereafter. And then a little better production out of the commercial factory, maybe little better volumes in Q1 from commercial as well.
Joe Ritchie : Got it. Okay. That’s helpful. And I guess, look, just a follow-up question to M&A. Maybe just remind everybody what your criteria for M&A would be? And if you’re looking for potential deals in the space. What is your kind of appetite to go broader internationally versus the footprint that you have today, which is predominantly U.S.
Alok Maskara: I mean I think from our perspective, we like where we are positioned. So let’s start that like we think we are positioned in an attractive market. That happens to be North America, but it could be somewhere else. I mean what we look for is attractive end markets, where we can win, where we can succeed, where we can generate the appropriate returns. I don’t think we exited Europe because of Europe. We exited because the margin profile was weak, and we did think we were positioned to win there. So I don’t want to make any specific comments and rule anything in or out at this stage. But we will look at those things is how does it benefit our shareholders? Are we positioned to win. Does it create attractive opportunities for us versus share buyback? I mean, end of the day, we have done very well, and we’ll continue to do well based on share buyback. But I mean we’re going to look for markets where we are positioned to win.
Operator: I will take our next question from Damian Karas with UBS.
Damian Karas : I wanted to ask you about your commercial outlook for this year. You spoke to a lot of the pent-up demand and the older installed base. You’re guiding the building come for volumes to up low singles. Could you maybe just kind of parse that out, how you’re thinking about planned replacement versus emergency and new construction?
Alok Maskara: Sure. So I’ll tell you, it’s maybe a tale of 2 halves that is quite a few moving pieces, but let’s talk positives, right? I mean our order rate remains strong. Our backlog although doesn’t matter, but in the short-term backlog remains solid. Our sales team is pretty excited and we see no impact of any of the things that we read about, whether it’s KBI index and all that, we do see some projects moving to the right. So we are a bit cautious as we go into it. We also — as we talk to our key accounts find a lot of enthusiasm around the R454B product and are somewhat concerned that maybe towards mid- to late this year, they might say, “well, I’ll just wait for the 454B versus take the existing product.” So that’s kind of baked into us, we looked at the guide for different competing factors, just to go back to it, pleased with the current order rate, please with the current backlog, freeze with our production output excited about this Saltillo factory, even adding more to our output because we remain supply constrained versus demand constraint.
And they just want to reflect some of the noise/what we see in the future is slow in construction and any weird air pocket that could come in if you look at 454B transition.
Joe Ritchie : I guess just thinking about the overall industry, look, I know you said you think consolidation could be a good thing for the market, but you’re expecting to kind of gain share. I guess one of my observations coming out of the HR, it does feel like there’s a bigger push in the U.S. by some of these overseas players. I’m wondering if you’re perhaps seeing any increased competition or expect to maybe see some over time.
Alok Maskara: We saw that too — and I’m sorry, I missed you at the HRI show, but like I went to all the boots and it was impressive on some of the overseas players and the amount of money spent on the booth. I’ll tell you the amount of money they spend in the pools correlated to the market share in U.S., it probably more reflects their aspirations for the future. I think what these players have done very well, it comes to mini splits and VRF, but if it comes to traditional unitary products, I think very few — if any of them had any success, and that’s where the core U.S. market remains very, very different and you know many splits and all are still in single-digit market share overall and had a tough year in ’23. But listen, we are — on the only — we are the only unaffiliated player in U.S. So we look at the international players, both as a threat and as an opportunity to be able to work with them to drive our joint market share in some areas.
But we also look at it as a threat. So that’s the way we look at it, but we were pleased with the interest we are getting on our own new products like at AHRI, we were pleased with people excited about new production capacity we’re adding, the emergency replacement products that we displayed and just general energy from our sales team on how robust the activity was. It was the highest attendance AHRI show has had, which kind of makes me more optimistic on the economy than what I read in the newspapers.
Operator: [Operator Instructions]. We’ll take our next question from Deane Dray with RBC Capital Markets.
Deane Dray : Maybe if you could just expand on the comment, a lot of discussion on the new refrigerant. And Alok, I think you said you’re not expecting a prebuy. And I think you added the term, there might be some — was it inventory fatigue. Just it’s an interesting concept. Maybe you can expand on that, please, if I heard that correctly.
