Sara Zawoyski: So Jeff, I would say that 23% really captures where we are at today. But no doubt, we continue to work our tax planning as we always do. And that 23% tax rate really is two things. One, it does encompass and roll in the impacts of that global tax standard change, effective Jan 1, and that was really 2.5 point rate increase and that’s at $0.11. The other roughly 1 point really relates to two things: higher North America income and really rolling in that impact of ECM. When we expected some of that as well to kind of carry over into 2024 here. I think there’s a couple of things I said in my prepared remarks here, but I think it’s worthy of just noting again is we expect to meaningfully offset the cash tax impact of this higher rate related to that global tax standard.
And as we were working kind of the final element of our tax planning, we really prioritized the cash flow element of things so the cash taxes, which is adding a bit to our overall tax rate. But all-in-all, in 2024, we expect those cash taxes to be meaningful lower – meaningfully lower than that overall tax rate.
Jeffrey Sprague: Great. Understood. And then just on the Data Solutions vertical. It sounds like it came in at roughly $500 million given your kind of $550 million comment for 2024. But can you just kind of confirm that where we finished and any other color kind of power versus cooling inside that number?
Beth Wozniak: So Jeff, we finished the year over $450 million, and we said we’re well on our way to be over $500 million this year. And I think as we see our growth, certainly, liquid cooling is increasing in terms of the percentage of that overall revenue as we just see that continue to accelerate. And we’re going to see liquid cooling solutions proliferate into other areas like energy storage or edge devices and industrial over time as well. So we see a nice trajectory and future growth there.
Jeffrey Sprague: Okay. Great. I thought you said $550 million for 2024. My bad. Thank you. That’s all from me.
Operator: Your next question will come from Jeff Hammond with KeyBanc Capital Markets. Please go ahead.
Jeffrey Hammond: Hey. Good morning, everyone.
Beth Wozniak: Good morning.
Tony Riter: Good morning, Jeff.
Jeffrey Hammond: Just on the order rates. I think you said down slightly. I don’t know what were kind of the trends through the quarter or if there are any segments that grew or maybe more of an outlier within that?
Beth Wozniak: The Q4 always as we get through the end of the year and distributors are looking at their inventory position. I mean, I don’t know that there’s any trend there. I would just comment that we actually did see EFS orders positive in the quarter.
Jeffrey Hammond: Okay. And then would you expect those orders to kind of reaccelerate once you get through this destock? It sounds like you think it’s done.
Beth Wozniak: I think the word I would say is that they’re slowly going to adjust and build. So I made the comment that we saw positive sell-through and so what we do expect is that over time, we’re going to see inventory levels build, but I wouldn’t call that an acceleration, I’d say that they’ll slowly improve.
Jeffrey Hammond: Okay. And then ECM, I had – came in a little bit light versus my model. I didn’t know if that was some slowness or seasonality of the business or any other timing issues?
Sara Zawoyski: Yes, Jeff, I think that’s basically just seasonality. It was right where we had expected it to be. We talked a little bit about this last quarter that while it is seeing some of the residential headwinds the distribution part of that business continues to grow, and it did so in Q4 as well. So you can think about that ECM business from a seasonality standpoint to look a lot like the EFS business.
Jeffrey Hammond: Okay. Thanks a lot.
Operator: The next question will come from Brian Drab with William Blair. Please go ahead.
Brian Drab: Hey. Hi, good morning. Thanks for taking my questions. I was wondering first on the Thermal business. Did you see any impact from warmer weather, especially in some of the industrial applications in Canada?
Beth Wozniak: I would say we actually saw our product sales in the quarter improve and increase. So – and some of that is just inventory levels were down in the channels. And when there were pockets of cold weather, we saw product sales increase. So nothing to call out or note there, really.
Brian Drab: Okay. And so that’s not affecting your outlook really for the Thermal business in terms of the MRO in those colder regions seeing – so warmer weather isn’t really a trend that you’re seeing a concern in the near term in that business?
Beth Wozniak: Not in the near term. And I think one of the things as we talk about the energy transition, it actually takes more content, more controlling elements and because you’re trying to maintain a temperature. And so remember, our Thermal business isn’t just about heating – freeze protection, it’s also about maintaining process temperature. And so we actually see that the energy transition with decarbonization and LNG and clean fuels and biofuels that there’s a great opportunity in front of us.
Brian Drab: Okay. Yes. Sorry, if I was dwelling on that point a little bit, just one of your main competitors talked a lot about that recently. And so I just wanted to get a sense for if that was impacting you. And then the last question for me is, could you comment at all on the gross margin trajectory for the year and whether any of the capacity additions that you’re putting in place might have any – put any ups and downs into the forecast for gross margin 2024? Thank you.
