Mick Lucareli: Steph, it’s Mick. Let me give you a little bit more color because there’s a lot of moving pieces. So as you already mentioned, we’re holding guidance but we’re very confident in our ability to hit that top end of our range — with regards to PT or Performance Technologies, we expect that they’ll have another good quarter with both sequential and year-over-year growth. So really good continued progress from Performance Technologies. We’re anticipating that Climate Solutions earnings will be up slightly from Q3 but they do have some pockets of difficult comps. And last year, we had a really strong heating season and heating results from both volume and pricing. We also had a record I talked about last year in the coil heat transfer products area in terms of volume, price and the 80/20 activities.
So as we flip ahead to this year, we see a little bit of softness in — for the coils or HTP area where products are going into residential applications. plus some of our OE customers are leaning out their inventory a little bit. And then this winter hasn’t really cooperated from a heating season. So the general heating market is down a little bit from last year. And then last but not least, in Q4, we’re planning on a little bit higher SG&A, mostly tied to incentive comp. And last year, their incentive compensation was very, very low. So as we look forward, we’re really trying to take a cautious view. We think we have an opportunity to exceed our guidance if volumes hold — and then even looking out into the next fiscal year, Neil just covered our Climate Solutions order books are quite strong.
We feel really good about the upcoming year. And we’re still holding to our fiscal ’24 targets we laid out on our Investor Day. So I hope all of that kind of helps address that. Let me know if you have more questions.
Unidentified Analyst: No, that’s great color. And I just want to move on to free cash flow. Can you just talk us just about working capital, in particular, inventory levels and how you view those closing out to ’23 and then going into next year?
Mick Lucareli: Yes. For most of the year and probably like a lot of other companies you follow, we’ve had higher working capital. Most of that is primarily due, as you mentioned, inventory. It’s taking us some time to lean that out and the supply base is slowly improving. Neil’s talked on previous calls about some components that in the peak or 52-week lead times. So it will take us a little bit of time. I would say for sure, we’ve been carrying at least a $20 million to $30 million excess in inventory and we’re still up quite a bit over that from pre-COVID levels. So in Q4, we expect, I mentioned to have positive cash flow much improved, mostly driven by the working capital improvements. And as we go into next year, I think we’re good from a working capital standpoint, a little too early to give you guidance on that side but we would expect as revenue and earnings grow, we’ll do our best here to continue to manage working capital down to where we were for quite a long time .
Unidentified Analyst: Sounds good.
Operator: Our next question comes from Brian Sponheimer with Gabelli & Company.
Brian Sponheimer: I guess I want to go back to just the outlook. It seems from your commentary and the numbers really bear it out, there’s really positive momentum everywhere in the business. You and your team are doing a fantastic job. And pursuant to a question that was asked before fourth quarter guidance at the high end implies basically a similar quarter to the one that you just had. It just — it seems to me that there’s so much momentum — and I know you’ve spoken to being at the high end, does that basically take the low end of the guidance just completely out of the picture…
