Stephen Ferazani: Already starting to delever out of the ASPEQ deal, clearly continues to be a strong cash flow generator. Any targets on where you’re expecting or targeting net leverage to go near-term versus longer-term?
Mark Carano: Yes. I think, Steve, I mean, we’ve communicated that we’re most comfortable on kind of a net leverage range between 1.5x and 2.5x and I don’t think anything has changed with respect to that today. Obviously, leverage will be dependent on acquisition activity. But as we look into next year, we’ll see what sort of opportunities present themselves and whether there’s anything that makes sense from an M&A perspective.
Stephen Ferazani: Any reason to think you’d lean towards smaller after making the larger ASPEQ deal?
Mark Carano: No, not necessarily. I think we’ll kind of consider any and all opportunities that are out there, right? Small ones, obviously, can be nicely accretive but some of these more mid-sized transactions that we completed this year fit nicely as well. I think it will be a function of what opportunities are there and is there a strategic rationale for them along with a value creation path. I think that that’s more important, obviously, than size.
Operator: And your next question comes from the line of Walter Liptak from Seaport Research.
Walter Liptak: I wanted to ask about the D&M segment. It did a little bit better than I was expecting and it was up quarter-over-quarter. And you mentioned in Larry’s question that there was some pull-forward of projects. I wonder if you can give us a little bit more on that.
Paul Clegg: Yes. So we [indiscernible] at about $0.03 of impact for the third quarter coming from the fourth quarter and that was largely related to our fare collection business but we also did a little bit better in our AtoN business than anticipated.
Walter Liptak: And then maybe the same thing on orders. The backlog looked pretty strong to me and it looks like the orders might be up sequentially and year-over-year. I wonder if you can talk about what’s going well in the different businesses within D&M for orders?
Paul Clegg: So yes, our backlog overall for the — at the end of the quarter, Walt was around $234 million and that’s about flat sequentially. As you know, in our D&M business, our backlog tends to flex up and down a little bit as you bring in the large projects in terms of orders and then deliver them. So the variances maybe are a little less meaningful than the absolute size of that. But I think what I would say is the project businesses which make up the vast majority of D&M backlog, are very high relative to historical levels. And Comtech and our fare collection business are really the largest contributors to that but we also have seen some nice backlog in our [indiscernible] business.
Walter Liptak: And I guess thinking about those larger projects, are those going to ship in fourth quarter? Or are these the kind of projects that are going to be shipping in, say, 2024 or the first half, or whatever?
Paul Clegg: Yes, it’s a good question. We do have some of that backlog that goes into next year, Walt. So we feel like we’re starting to be well set-up for 2024. There’s a little bit of it that would roll even into the subsequent year, into 2025.
Operator: [Operator Instructions] And your next question comes from the line of Damian Karas with UBS.
Damian Karas: Perhaps on the official end to Medupi and Kusile, I remember the days when we were talking about that literally quarter-in, quarter-out, if not more. Some pretty vivid memories of all that. Are you sure you don’t want to get involved in any mega-coal-power projects, Gene?
Eugene Lowe: Yes, I think that’s a pretty safe assumption and particularly augmented by the fact that we sold all of those businesses about 6 years ago. So it’s good to put that in the rear-view mirror.
Damian Karas: Most definitely. So I appreciate all the color on the demand environment. But I think, for the last question that was asked, so you’ve mentioned solid order trends. I don’t want to make any presumptions about the level. Could you just share any numbers around the actual order rates year-over-year in the quarter and how are those lining up?
Paul Clegg: I think maybe what I could give you is that our book-to-bill in really both segments is one or better. And going into the next quarter, into the fourth quarter, we’d expect it to be a little bit better than 1. And again, coming off fairly strong quarters in terms of deliveries.
Damian Karas: And then, I wanted to ask you about your distribution partners, right? A lot of manufacturing companies, certainly in the HVAC industry, they’ve been experiencing destocking challenges. It’s not something that you guys have really touched on. I recognize you have more build-to-order aspects to your HVAC business. But could you just remind us, kind of across SPX, where you do rely on kind of third-party distribution? And I’m curious to hear is you seeing any indications of distribution partners maybe carrying some excess inventory.
Eugene Lowe: Yes, Damian. What I would say is you’re exactly right. I think the bulk of our business is engineered to order, so it’s not really going into that distribution zone. I would say there are a couple of exceptions to that. Probably the biggest one would be our residential hydraulics, or residential boiler business. And that is where we actually have very good visibility into where the distributors are, what they’re carrying, not at every distributor but a good chunk of them and a good feel for the market. This is something we spend a lot of time on in making sure that we feel like we know whether the distribution is balanced, or high or low. And what we see today is it’s pretty balanced on that side, so we don’t really have any concerns there.
Right now, on the boiler side, we’re keeping our eyes more on the weather. Now, typically a cold snap will drive a big chunk of extra orders and so forth there. But I think that’s the biggest place that we keep our eyes on. The second one I would say which is smaller but would be radio detection. And I would say that we’ve seen perhaps a little bit of destocking there. That’s already in our numbers this year. Obviously, with interest rates going up, we are seeing that some distributors who really finance their inventory, it’s becoming a lot more expensive to finance inventory. And therefore, some of these smaller distributors, midsize distributors, they’re very careful about what they own. But those would be the two places I would say that we need to think about it.
And I don’t know, anything else that I missed here with regards to [indiscernible]?
