Bradley Barton: All right, thanks for the time.
Scott Donnelly: Sure.
Operator: Thank you. We’ll go next to the line of Noah Poponak with Goldman Sachs.
Noah Poponak: Hi, good morning, everyone.
Scott Donnelly: Hi, Noah.
Frank Connor: Hi, Noah.
Noah Poponak: The aviation margin is — that’s one of the highest levels in a while and the incremental, I think, is a little higher than your kind of long-term framework. And I guess that’s despite the performance number you cited. If I add that back, I’m more in the mid-teens. And so I guess, as I think about where that margin goes over time, obviously the labor and supply chain inefficiencies you’re citing won’t be solved immediately, but also won’t last forever. So is it reasonable to think about the margin adjusted for that in the quarter as kind of a baseline plus an incremental for where you can go late next year into the middle of the decade?
Scott Donnelly: Well, I’m probably not ready to guide into the middle of the decade, just yet, Noah.
Noah Poponak: Well, you have a pretty big backlog in that business now.
Scott Donnelly: Well, look, there’s look, I think the margins are very good. The guys, you’re right, are working through challenges, which we would certainly hope will abate somewhat over time. I mean, obviously there’s inflation that’s baked into the numbers at this stage of the game. But I think we’ll probably avoid doing too much in terms of guiding out to the future other than what is a good gross margin products. I mean, I think we’ll be the way to long-term, think about this is going to be around that 20%, 25% conversion and we’re sort of looking at certainly growth as we look into 2024 and beyond. But again, it’s going to be in some part, constrained by supply and also I was just looking and making sure that we’re tracking to where the demand is in the marketplace.
I think again, we’ve talked before about the health of this industry should be running with a substantial backlog, and we are now running with a substantial backlog, and that’s a good place for the whole industry to be. So…
Noah Poponak: In the near-term, is it reasonable to expect that price net of inflation number to grow because I think your — I think the pricing in your backlog is still better than what’s hitting the P&L now, although correct me if that’s wrong. And then if inflation is decelerating, it would seem like both the top and bottom end of that number would be widening.
Scott Donnelly: Well, look, I think we do feel good about the pricing that’s going into the backlog, but we are still seeing inflationary pressures. The rate of inflation is certainly coming down, but there is still inflationary pressure out there.
Frank Connor: Yes. Remember, we have some longer-term supply contracts, so we did a nice job of responding to any demand in the market and created a more appropriate pricing environment, but there is some lag effect associated with our contracts and just the flowing in of inflation. But we still feel very good about where we are price net of inflation, but there is a lagging impact on some of those cost inputs.
Noah Poponak: Okay. And just the last piece on it, is your price, your rate of change in price decelerating with maybe some normalization in the market or did you not increase it so fast that it needs to slow and the rate of change is just kind of holding at this point?
Scott Donnelly: I don’t know. I have not run a first derivative on our price at this point, but I don’t know. We probably won’t go into that level, quite that level of detail, but suffice to say, we’re still getting price and feel good about how that price demand is working in the market.
Noah Poponak: All right, I appreciate it. Thank you.
