Erik Gershwind: Yes, sure, Steve, and good morning. I would say very, very early. So, we’re not so much yet seeing it in our revenues €“ you’re not seeing it in our revenues, what we are starting to see from our sales team is lists of new construction and projects that are going up, buildings being put up. And so, as you can imagine, our business development team and we’re all over that. It’s fairly widespread in terms of geography and in terms of industry type. I would say heavy emphasis on manufacturing obviously, but the tangible evidence now is it’s going from talk into new construction. So, it’s a bit early to see it in our numbers, but if we do our jobs right and we get involved with those customers from the ground up, that should translate into the numbers in the coming quarters.
Steve Volkmann: Okay. That’s helpful. Thanks. And then maybe a Kristen question. I think you’ve mentioned 20 basis points is the expectation for operating margin dilution from the acquisitions in 2023, historically, I guess I’m still kind of new to you guys, historically as you go out into 2024, 2025, would you expect that to narrow or even reverse and ultimately you get margin accretion?
Kristen Actis-Grande: Yes, we would definitely expect it to narrow and it eventually does become on par with the core business. So, 2024, I don’t think you’re going to hear much about the noise from those two acquisitions. And then as we run our integration playbook, there are a variety of levers we’re pulling that get those businesses on par with the core MSC overall business.
Steve Volkmann : Great. Thanks. I’ll pass it on.
Operator: Our next question today will come from David Manthey of Baird. Please go ahead.
David Manthey: Thank you. Happy New Year everyone.
Erik Gershwind: Happy New Year, Dave.
David Manthey: Yes. As it relates to deprioritizing special dividends, if I look back over the past say 10 years, it looks like it’s well over $0.5 billion, and how should we think about the re-allocation of capital? Is that higher CapEx? Is it investments in the P&L? And or is it just more share repurchase to keep you in that 1 to 2 leverage range? Any details on what your thinking would be appreciated?
Erik Gershwind: Yes, Dave, sure. I’ll take this one. So, I would say this, over time, we have had a capital allocation framework that began with two top priorities that are sort of 1A and 1B. And those are reinvestment into the core business to the extent we see high return projects and right now we’re pretty bullish there. And then two is continued steady growth in the ordinary dividend and no change there. I think the change in emphasis you heard from Kristen is on the next two priorities. The next two priorities are going to be share buyback at the right valuation levels and tuck-in acquisitions. Along the lines of what you saw from us in the last quarter, so tuck-ins to existing business is like a metalworking and OEM fastener.
And I think the reason there, if you want to €“ why the change is, just the return prospects. We’ve always sort of never been led to one tactic. It’s more been about where we see deploying the next dollar to its best use. And I think that we feel good about the prospects for the company and when valuation levels are low in the stock, that’s a good use of capital. And I think you’re also hearing from us our confidence growing in the tuck-in acquisitions based on our track record in the past few years. We feel good about the businesses we bought and the results that they’re producing. And so, that makes us more bullish on that as well.
David Manthey: Sounds good. Thank you. Could you talk about how the benefits of the line review will manifest in your results? What should we be looking for?
Erik Gershwind: Yeah, Dave. So, a little early to say, but in general, and maybe what I’ll do and Kristen you can fill in any missing pieces. Just sort of step back and talk a little more about the strategy, the philosophy here and then that will . But as I mentioned in the prepared remarks, Dave, if I think about the focus of our category organization for the past really three years now since COVID, it’s been two things. Number one, getting product to make sure we have product on the shelves to keep plants running; and number two, staying ahead of the crazy cost inflation that we’ve all been experienced. From our perspective, it was check, check, really good job by our team on both of those. The world is beginning to migrate to a new normal now, moderating inflation, stabilizing supply chain.
This becomes the next natural evolution in the story. So, you know, what we’re going to be looking to do is, we’re going to be looking at our assortment and you’re going to not see us deviate from our idea of having a really broad and really deep product assortment that’s very important to our customers. But what we are going to do is look for opportunities for efficiencies. I think you can expect to see the benefits accrue in the form of purchase cost improvements and that could either be the straight price we pay for products, it could be in the form of rebates or other adjustments, but that’s certainly one area. I would expect to see benefits accrue in the form of operational efficiencies to the extent we see potential to collapse at the fringe, at the margin, collapse some product lines or suppliers, etcetera, that they’d be operational, whether that’s inventory savings or some OpEx and productivity improvements through our supply chain.
That would be another area where I would expect to see benefit.
