Lawrence De Maria: So obviously, the big question that people focused on is you just beat by $0.09. You only raised by about $0.05. So question is, is there some conservativism built into the fourth quarter? Or are you seeing any signs to be wary of? And how come, obviously, maybe we pulled forward some demand. So can you just talk to that aspect of the guidance, please?
Paul Clegg: Yes. Larry, this is Paul. We are raising by $0.05. In terms of whether we — for a lot of these models out there, we beat by about $0.06 for the quarter. About half of the improvement that we saw relative to what we were expecting was due to some pull-forward from the fourth quarter and that was in the Detection & Measurement segment on a project basis and that was about $0.03, actually, of that. We also did get a tax impact this quarter that was a bit higher than what we were originally anticipating and that had to do with the repatriation of some cash. And the impact there was about $0.04.
Mark Carano: I would say just from a guidance perspective, I mean, I think we view it as sort of balanced given the market conditions that we’re seeing out there today.
Lawrence De Maria: Then obviously, as much as we care about 4Q, we’re also looking towards 2024. And you guys have been doing exceptionally well. Are there any pockets of weakness? We talked about some of the strength you’re seeing. Any actual tangible signs of weakness, concerns out there other than the macro tea leaves? So just kind of what are you seeing that’s concerning specifically out there, if anything?
Mark Carano: Larry, we’re not really seeing anything as we sit today, that’s sort of tangible weakness, right? We are monitoring kind of the broader economic environment which, depending on your perspective, could be positive to mixed in the markets you’re in. But overall, we’re not seeing anywhere. We continue to monitor our run rate businesses and we watch those very closely. We’ve kind of characterized them as steady and largely on target. So it’s kind of what we see as we sit today.
Lawrence De Maria: You talked about having a higher backlog, I think, exiting the year and some of the strength you’re seen out there and trends and things. So if we’re going to assume we’re talking about incremental margins next year, can you just talk in terms of our modeling? How should we think about either incremental margins or versus just overall margin improvement next year based on continuous improvement, just some perspective on how we should be thinking about that?
Paul Clegg: Yes, Larry, Gene mentioned several tailwinds that we think are blowing favorably for us in the HVAC space around cooling. So we think we’re in a very good position there. You’ve heard us talk about some of the continuous improvement processes that we have in place and some of the investments that we’re making this year to improve our overall throughput and even expand capacity somewhat for the cooling business. I think we feel very good there about our margin opportunities. We did mention previously that there was probably about 100 basis points of price/cost benefit in our HVAC segment overall that at some point, if we were to see some progression in the price/cost equation, we could get some of that back. But I think overall, Larry, we feel good about our opportunities in HVAC to continue pushing the margin profile.
In Detection & Measurement, as you know, we had about 100 basis points headwind this year associated with some mix in our communication technologies business. and a supply chain issue that we had in the third quarter which has been resolved at this point. We’re expecting those to go away next year. So as we set the stage, set the table for next year with project orders which we think look pretty good for us, I think we feel good about our opportunities there also.
Operator: And your next question comes from the line of Stephen Ferazani with Sidoti.
Stephen Ferazani: I want to follow up on some of the other questions. Obviously, with a quarter left, we can sort of back into how you’re guiding for 4Q. You addressed it a little bit, right, because I can back into D&M for fourth quarter and that looks flat to down and another quarter where margins are down year-over-year. And I think you just said some of the pressures on margins are through this quarter. I’m just trying to get a better sense of your expectations of the D&M, particularly when we’re looking at another quarter of down margins and flattish to down revenue, how you pick that up next year. And was that just simply projects hit in 3Q versus hitting in 4Q of the year ago?
Mark Carano: Yes. So if you are looking at the year ago period, you’re absolutely right, that that was our highest quarter in D&M in the prior year. I think our margins in that quarter were almost 24% which is on the higher end of what we’ve been doing in that segment. And it was due to a concentration of some more favorable mix products in the prior year. This year, we did call out that we did have, again, that 100 kind of basis points impact from a couple of different items. One was, again, the mix in Comtech and a supply chain issue that’s been resolved. We would still expect to see fourth quarter as our highest margin quarter in Detection & Measurement this year. And we would expect to benefit from the absence of those same issues in the subsequent year.
Stephen Ferazani: When we think about moving forward with infrastructure funding which has clearly been funneling at least through the summer, as well as inflation Reduction Act and some other federal funding that could directly impact you, are you seeing it now? And can you see a bigger impact from some of those funding opportunities next year?
Mark Carano: Steve, we have seen some benefit from some of that government funding, particularly in our transportation business. Some of those projects have already have benefited from availability of that funding. And we anticipate that, next year, we will begin to see additional dollars benefit many of the businesses across the platform. We’ve talked about where that could benefit AtoN as well as our Location and Inspection businesses. And then, clearly, you may see some benefit from some of the HVAC businesses as well. So we’re watching that carefully. We anticipate that we’ll see more of those dollars flow out. I think most people believe that the distribution of those funds has been slower than I think anyone anticipated. But we believe we’ll benefit from those next year and beyond, quite frankly, for the next few years.
