Matthew Pine: Yes. And maybe a little bit of color on revenue synergies, Deane. I am proud of the team. In Q4, we completed the APT integration to water infrastructure, which was a big deal. We’ve appointed regional synergy leads for the revenue capture around the globe, and incentives are in place to drive that execution. And one thing we’ve been really focused on is training our sales teams as well as our service teams. And as you know, in December, we announced the creation of the WSS segment for 2024, and a few comments there. Number one, we feel it’s going to accelerate our synergies both on the cost side as well as the revenue side, which is where we’re focused the most. One thing that maybe is not as intuitive, I do think it’s going to help us with technician utilization, so we can leverage our technicians across the broader portfolio and also provide better career-pathing for them long-term, as well as leveraging technology.
And then, the big thing it does for us, it really helps us leverage and enable the international expansion of WSS going forward in 2024, like I said, internationally. And then the most important thing, it makes it easier for our customers, because at the end of the day, it’s about customer focus. And our customers, instead of picking up the phone to pick make four phone calls they can make one to Xylem to solve their biggest problems.
Operator: The next question is from Mike Halloran with Baird. Please go ahead.
Mike Halloran: Yes, good morning everyone.
Matthew Pine: Good morning, Mike.
Mike Halloran: So, a couple of questions here, first, you commented on confidence in the end markets and sustainability of existing trends. Maybe talk a little bit about utility in industrial markets. What the customers are saying at this point, willingness to put capital forward for CapEx-related projects, any signs of softness, acceleration? How are you thinking about things on that side?
Matthew Pine: Yes, I could start this out. I mean, on the CapEx front, we’ve seen continued momentum there. For us, the proxy is our Treatment business. Orders were very strong both in Q4 and the full-year, up double-digits. And so, that gives us a lot of confidence. And that number is not only just in the U.S, that’s a global number. So, every region is performing very well in treatment. So, from a CapEx perspective, we haven’t seen any pullback or any concern there. And obviously, a big part of our focus in our portfolio in utilities is focused on the OpEx side, and that’s about 75% of the revenue and that remains pretty strong. And it’s also we’ve talked about buoyed, especially the long-term. It’s not going to be this year or even in the next year, but over the next five to seven years, it’s buoyed by regulation globally, whether that’s in the U.S. with the Infrastructure Bill, which Includes PFAS funding or if you get into Europe with The Recovery and Resilience Act and then the AMP cycle in the U.K., that gives us a lot of confidence that we’ll continue to see those markets do well.
I’d say, industrially it’s a little bit of a mixed bag on the new segment WSS, which is a Legacy ISS business, which contains assessment services and dewatering now. We’re seeing strong momentum there, especially in power, life sciences, microelectronics, we’re seeing a lot of bid activity there and we feel good about that. We’ve seen a little bit of lumpiness in the Applied Water end markets, especially resi. Some of that is just due to coming out of the pandemic where people were investing their discretionary income and upgrading their houses and also weather has played some of our role and that is a lot of our resi products are applied into Ag applications. And so, we’ve seen some lumpiness there in the U.S. and a little bit in Western Europe.
So, that’s a little bit of the view of the landscape.
Mike Halloran: Appreciate that. Second question, just on the pricing side of things, I guess twofold, one, how are you thinking about pricing for 2024? And as you think about the multiyear journey here as you’re rolling out 80/20 and all the other toolkits you’re going to be implementing, what is the opportunity for pricing as you think about the broader portfolio?
Matthew Pine: Yes. Mike, maybe I’ll take that one. So, price expectations for next year are going to ramp down versus the capture that we experienced in 2023, will be a little over a point. That’s still significantly higher than pre-pandemic pricing, yes, but it is an opportunity as we look forward, as we calibrate and hone in the skills to continue to capture the value for our products across the portfolio. Obviously, that one point plus varies across the different segments with M&CS and WSS going forward, probably stronger price capture opportunities. And then, 80/20, I think will be up as we roll out opportunities within AWS as they’ve done some additional analytics and we look for just a better pricing methodology and capture on some of the longer tail customers that we have.
Obviously, we’re leveraging price as one of our components to offset inflation. The team does a really good job driving operational productivity as a second lever to offset inflation. So, we’re going to manage price and material costs and stay positive. Obviously, that will compress a little bit next year as pricing goes down, but also our expectations relative to inflation will be price material cost positive and then look for productivity to really enhance our margins as we move forward.
Operator: The next question is from Scott Davis with Melius Research. Please go ahead.
Scott Davis: Hey, good morning, everybody.
Matthew Pine: Hey, good morning, Scott.
