Rafael Santana: So I’ll start with double digits growth last year. We see the opportunity to drive double-digits again for this year. We had about $1 billion in orders for Digital Electronics in 2022. I think this is, well, number one, a significant increase versus the year before. And book-to-bill was really above — very positive, in fact, for 2021 and 2022, one of the highest between our businesses. Some of these are multiyear agreements. So no different than the past couple of years. We need to drive convertibility of orders in 2023 to cover that. North America continues to improve. Internationally, the pipeline continues to be very strong. I think some progress made here on recurring revenues, I think we talked about that a little bit into the business.
We’ve got some additional work to be done there. And supply chain has improved the bet into the fourth quarter here, and that’s, I think, some of the goodness you saw. But as I mentioned, I think we’re continuing to see tough dynamics in supply chain in the first half of the year in terms of chip shortages and semiconductors and some auto ones.
Dillon Cumming: Good, appreciate the time.
Rafael Santana: Thank you.
Operator: Next question comes from Steve Barger with KeyBanc Capital Markets. Please go ahead.
Steve Barger: Thanks. On the guidance slide, it looks like you expect growth in all the categories you list. Are those rank ordered by growth rate and do you expect anything in the portfolio will contract in 2023?
John Olin: They’re not listed in rank order. We have talked at Investor Day that we do expect equipment to be the fastest growing over the next several years. We certainly saw that in 2022 but they’re not listed in rank order, Steve.
Steve Barger: Can you give us any more color around the growth rates that you do expect for those categories?
John Olin: No, we don’t break out that. We’ve talked about the $8.7 billion to $9 million is growth of 4% to 8%. We expect that to be achieved through both our Freight segment as well as transit to both be up in revenue and in margin but we don’t break out the individual pieces of that.
Steve Barger: Can you tell us how much of the 6% projected growth is price?
John Olin: So no, we don’t have that broken out. We don’t typically break that out as well. As we look to next year, we got a lot of uncertainties and we feel very good about the overall margin growth or revenue growth at a midpoint of 6%. But if I was to add color, I mean, of course, double-digit growth sharing the services, MODs really being a key driver of that. On equipment, I mean, we continue to see the momentum internationally. I think the question, it’s really more around the speed in which you convert some of these orders, but there’s certainly a very robust pipeline there. And digital I just made some of the comments here. So overall, I think we have the opportunity here to drive both revenue and margin expansion for our businesses, and that’s what we’re focused on, and that’s really across the board.
Steve Barger: Thanks Rafael. And just to make sure we’re thinking correctly about the cadence comments. If I assume a first half freight margin similar to 4Q, and transient margin around the average of last year, it looks like first half EPS will be down somewhere mid to high single digit versus 2022, is that how you’re thinking about that first half progression?
John Olin: Steve, we’re not providing quarterly EPS guidance. Suffice to say that during 2023, we expect higher revenue growth in the first half versus the second half, and we expect full year margin growth to largely come in the second half of the year.
Steve Barger: Understood. But given the mix issues that you’re talking about, should we assume that the first half freight margin is similar to 4Q?
John Olin: We’re not providing that look. We expect there’ll be more mix pressure in the first half, and that will result in more margin growth coming from the second half of the year.
Steve Barger: Got it. Thanks.
Rafael Santana: Thank you Steve.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Kristine Kubacki for any closing remarks.
Kristine Kubacki: Thank you, operator. Thank you, everyone for your participation today. We look forward to speaking with you again next quarter.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
