Jennifer Honeycutt: Yes. Great question, Deane. We knew that the EPA was headed towards a 4 parts per trillion limit of detection here. So that’s not fundamentally new news for us. What is new news there is the time line for compliance with [indiscernible] in 2027 but you are right that this is a phenomenally difficult and complex problem to solve in a fit-for-purpose way. Right now, the way to solve for this is water sample set to centralized lab, run through GC mass spec, answers come back, a couple of weeks later. In the meantime, the municipality has discharged tens, if not hundreds of thousands of gallons of water. We are investing in this area. We do believe we have a right to play here. Hach in itself has over a 70-year history of innovating in the analytics space.
We’ve got a broad portfolio there. And certainly, on the water treatment side, particularly in applications, we’ve got great expertise there as well. But I would say this is a long game here with solutions that are not imminent but we’re probably still a couple of years out here in terms of identifying and developing fit-for-purpose technology that addresses both detection and destruction. We think that winning is going to require both. And right now, the analytical test options, as you say, are not fit for purpose in terms of being at plant. And frankly, destruction technology is not readily available either. There are products out there, granular activated carbon being one of them that can capture PFOS [ph] but what happens when you refresh those resin beds, you’re just moving the PFOS [ph] to some other place like a landfill.
So it’s going to be a long journey here but we are investing in a number of organic activities and are open to inorganic options as well.
Deane Dray: That’s really helpful. And I fully appreciate that time line that you’ve suggested that’s everything that we’ve heard as well. There’s a question between wanting something and there’s a demand — industry demand versus the practicality given the complexity of the molecules. But I really appreciate the color. And I’m so glad to hear you mention destruction as well because that’s an opportunity. And then just for a follow-up question and I’ll echo Scott’s comments about that 60% threshold on gross margin and how big a deal that is. And I remember when Danaher hit that level as well. And just one of the ways that you might be able to boost that further I know your business model is a direct to customer on the — overall and especially on the Hach consumables where you just would think there’d be more of a distribution angle to this which would lower that cost of getting the reagents to the customers.
Just where does that stand? Is that a nonstarter? Or is that something you’ve explored? I know in some countries, you will use distributors just because it’s not practical to have direct but just where does that stand?
Jennifer Honeycutt: Yes. I mean I think you’re right, Deane. We do and will use distribution for our analytics businesses in certain countries. They tend to be areas where we don’t have critical mass in terms of staffing up the full capability of selling direct. We think it’s actually a good thing to sell direct. And it’s part of what I would consider to be the secret sauce because we have that long-standing technological applications knowledge. And it’s that customer intimacy and the insight to their processes, their process control, their analytics needs, they’re unmet — the problems that have yet to be solved that give us great insight and creates the flywheel of feedback loop from our sales and service organization to our new product development organizations that help us continue to innovate and evolve the product portfolio to solve unmet customer needs.
So we are not inclined to sort of steer away, if you will, from our direct sales model just from a margin benefit standpoint. We think there’s lots of opportunity by virtue of applying VES and working on mix. The teams are doing a great job here in delivering margin as a result of just good operating execution, right? The factories are running better, procurement teams are pushing back on inflationary pressures and we’re doing far fewer spot buys. So we had a number of other levers that we can pull relative to margin without compromising the secret sauce of customer intimacy.
Operator: We’ll take our next question from Andrew Krill with Deutsche Bank.
Andrew Krill: I wanted to ask on — going back to price and price costs more specifically. Just can you give us an update on what you’re assuming there? I think we’ve heard from several companies like transportation, labor, certain rows all continue to be pretty inflationary. So is the guide assuming you can stay price cost positive, like on a margin basis or just dollars? And anything there would be really helpful. And if there’s any big difference by segment?
Sameer Ralhan: Andrew, I’ll take that one. Essentially, from a price, from a guide perspective and the future look perspective, we’re modeling in price in line with historical norms; so it’s 100 to 200 basis points. This quarter, of course, as things are rolling off, we came in a little bit towards the high end of that range. But I think from an outlook perspective on the guide perspective, 100 to 200 basis points is a good way to model. On the raw materials and the material side, look, I think it’s a pretty broad mix of kind of things that we buy all the way from semiconductor, some of the circuit boards down to stuff in plastics and think of those nature that tied to commodities. I would say the operating discipline and the VES really helping us kind of manage that, I think, has been a big differentiator.
