And that’s going to take the form of some digital investments, sales and marketing, engineering investments, et cetera. And we’re really excited about what that holds for us next year.
Operator: Thank you. And the next question comes from Deane Dray with RBC Capital Markets.
Deane Dray: Hey, we’d like to talk a bit here about Data Solutions investment that you’re making. You talked about it last quarter was hoping you could size for us. I think you’ve told us the CapEx, but how much capacity are you adding in liquid cooling and when does that come online? And we’ll probably hear more about this at Supercompute, but just give us a sense of your customer concentration looks like all the hyperscale guys are the ones who’ve moved the fastest into this space. How broadly do you think the customer base extends in what timeframe?
Beth Wozniak: Okay. So this has been — we’ve been adding capacity first, opening a new plant in Mexico, so we could expand capacity within our Minnesota campus, if you will, for more liquid cooling. And then we realized that wasn’t enough. So we’re moving distribution out of that location to a new center to extend more capacity. I think we’re going to double our capacity. Maybe it’s more than that, but I mean, that’s how we’re thinking about it when we look at the liquid cooling. And a couple of things that we’ve been doing, in addition to the hyperscale accounts, we’ve also been creating some more standard offerings that we can take through some of our distribution channels, as well as serve, say, maybe enterprise accounts where they’re looking for maybe not a custom solution, but for something ready to go and off the shelf.
These are some of the products we’ll actually have on display at the Supercompute Trade Show. So we can give a — we can overview for those in attendance just all the different breadth of our capability there. So we’ve often talked about it takes a couple of years to work with an account to get these systems certified. We’ve been doing that for several years now. So we believe these new customers are starting to come online. That’s also part of what’s accelerating our growth into next year. And we just see a long runway here that liquid cooling, just because of the types of chips that are being used and even some of the energy efficiency play there, that that will be the future.
Deane Dray: That’s fabulous. Let me go back to a couple points that Nigel was asking about on ECM. Can you separate for us how much of the cost synergies you’ve captured so far? And it sounds like most of the revenue synergies are still in front that certification to take products into Europe and Asia that still happens, but it sounded like some of Enclosures business might be selling some of ECM as well. Maybe that timeframe is earlier. So where do you stand on cost synergies and timeframe for revenue?
Beth Wozniak: Well, I’ll start with the cost synergies. So I would say, Deane, we’re off to a great start from a cost synergy standpoint. If you recall, we estimated roughly $10 million to $15 million by year three. And some of that execution in the quarter is really a faster than expected realization of some of those cost synergies. Whether it’s looking at some of our freight parcel rates combining kind of the overall insurance programs, I think the team is doing a nice job of finding those synergies early. And so we’re well on track to achieve that $10 million to $15 million of cost synergies. I think the other thing I would just point out too, we’ve talked about this and it shows up really in our cash flow numbers is we are also on track and seeing the cash tax synergies as well of roughly $6 million to $8 million per year across that 10 to 15 year kind of amortization period, so the cost and the tax synergies well on track.
And on the revenue synergies, I would say they’re still in front of us. But what we’ve been working on, we said we’re going to expand the ECM products through our distribution channels. And so we’ve been engaged in those discussions. I mentioned that and I think we’ll start to see that layer in as we go next year. Similarly, we’ve been looking at some of the unique channels that ECM had and what products from our portfolio can we bring through their channel. So again, those discussions are overweighed and I think where we’re trying to certify the product, obviously for global distribution that takes a little bit longer because you’ve got to get those certifications and there are some different modifications we make to the product. So I think going into 2024 is when we start to see those synergies start to layer in.
Deane Dray: Thank you. See you in Denver.
Beth Wozniak: Very good. Thanks, Deane.
Operator: Thank you. And the next question comes from Julian Mitchell with Barclays.
Julian Mitchell: And thanks a lot. And maybe just a margin question first off. So it looks like the fourth quarter guide you’re embedding, I think sort of flattish revenue sequentially at sort of 860-ish or something, but the operating margin is down 250 basis points to 300 basis points. So just wondered if that was roughly correct and understood you often have seasonally down margins in Q4 sequentially, but if there was any particular aspect driving them this time or its just conservatism.
Beth Wozniak: No, if you recall, Julian, there’s a seasonality to that Q3 to Q4 margin that has consistently played out historically. So when you think about it, some of it’s just going to be the mix of the business in terms of Enclosures and EFS versus Thermal. And I think the other piece I would point to is just the acceleration on the investment front from an EPS perspective. So we talked about that in our prepared remarks. A big piece of that is going to be on the Data Solutions investment side of things. So nothing in there beyond really that historical seasonal EPS pattern as well. I think the other thing I would point to just from an EPS perspective, it doesn’t necessarily show up on the wrong side of the equation because that’s overall accretive is just going to be ECM. We do believe that ECM will have less of a contribution, still stronger than what we expected initially. But again, that’s just that added seasonality element to it.
Julian Mitchell: That’s helpful. Thank you. And then, just a second question around the top-line. Should we assume that that orders improvement in EFS translates into sales quickly say in Q4 as sales growing again in EFS. And more broadly heard the comments around destocking. Are you seeing any kind of project delays in commercial or industrial? And then that’s feeding through to distributors, selling into those projects, starting to pull back on their orders to suppliers such as yourself?
Beth Wozniak: Well, maybe one area that I would point to is I’ll just give you an example. Ground rods are used in utilities and telecommunications and construction, et cetera. This was an area where we had really long lead times over the last couple of years, like months, and then we’re now in stock and it’s down to like weeks. And so what we saw there was that there was inventory that had been built up at our channel partners, and then there was inventory even at end customers. And so that’s one of the impacts, as I characterize it that we saw for EFS occurring. Even though, we know the future with everything electrifying, this is a category that is going to continue to grow. And when we’ve tried to understand where the inventory is at, we have — we know in some accounts there are some end customers that perhaps they’re waiting for other components beyond ground rods that we don’t make that have slowed some of those projects.
That’s one area, but that’s just one example. But I would say generally it’s just inventory adjustment is mainly what we’re seeing. And go ahead, Sara.
Sara Zawoyski: Yes. And then just from a Q4 sales perspective, we do expect to see modest growth in EFS in Q4. So if you just take a step back and look at that organic growth of 1% to 3%, we expect Enclosures to lead, expect modest growth in EFS, and then expect Thermal to continue to be down with some of those trends continuing on commercial resi. And that Russia impact and just to characterize that a little bit, that Russia impact specifically on that Thermal Management business is roughly 5 points in Q4.
