Scott Davis: Wanted to, you made some comments incrementally on China seemed a little bit more cautious, which is not a surprise just given what we’ve heard from others. But it looks like your business there has held up okay, at least versus some peers out there. But what maybe a little bit more granularity there would be helpful. Thanks.
Matthew Pine: Yes. Thanks for the question, Scott. China for us now with a new combination of the company is about mid- single-digit in terms of our revenue. With over 50% of that being water infrastructure from an exposure standpoint, largely tied to public utilities, we’ve seen pretty decent orders there. Q4 orders were up 11%, full-year up 10%. On the revenue side, we were up on a full-year about 2% low single-digits. But if you look back on a two year stack, we’re down mid-single-digits in China. So, the backlog is building, but we haven’t seen that convert to revenue yet. Things continue to slide to the right in terms of funding. I think if you read the news, you continue to see the government’s intervention in the economy there and that’s taking some of the funds away from investing in some of the infrastructure.
But we believe that’s more of a short-term issue. Across the utilities exposure, we continue to see again a healthy pipeline and we’ll continue to monitor that funding. I would say, on the industrial side, it’s a little bit of a similar demand environment and that’s held up a little bit more resilient, to be honest over utilities. And the last thing I would say with China, overall, we expect China to be roughly flat in 2024 for the business.
Scott Davis: Okay. That’s super helpful. Your balance sheet is in fantastic shape and given the way you structured the Evoqua deal, just it leads me natural question would be, are there should we expect kind of some bolt-on acquisitions or anything kind of in 2024 that perhaps you could talk about your M&A backlog and just as much as talk about the pipeline, perhaps talk about your interest in doing deals? That would be helpful.
Matthew Pine: Thanks. It’s a good question. We closed out 2023 very strong following the close of our largest transformational deal in our history. And so, one of the things we’re laser focused on is making sure that we integrate Evoqua well and we get the value capture in the near-term. To your point, we do have a strong M&A pipeline, and the structure of the Evoqua deal allows us flexibility with a strong balance sheet. The short-term focus, Scott is going to be to focus on small to medium bolt-ons. Evoqua, we can fairly ring fence within the business, but there’s other parts of the portfolio where we do want to continue to be inquisitive, with again with small to medium bolt-ons. And we’ll continue our disciplined approach, and we’re evaluating our longer term capital allocation framework, and we’ll share more about that in Investor Day in May.
Operator: The next question is from Andy Kaplowitz with Citigroup. Please go ahead.
Andy Kaplowitz: Hey, good morning, everyone.
Matthew Pine: Good morning, Andy.
Andy Kaplowitz: Matt or Bill, when you look at the 50 to 100 basis points of margin expansion for ’24, could you give us a little more color on how that margin improvement translates by segment? And then you mentioned the 80/20 pilots with a focus on MCS. You did have nice improvement, margin improvement in MCS in Q4. So, how do you think about the margin potential in that particular business over the longer term?
Bill Grogan: Yes, I mean, relative to the largest impact in margin expansion for next year, I think M&CS leads the pack. Obviously, we’ve started our journey on margin improvement and recovery as they’ve gone through chip supply shortages, which I think for the most part has resolved. They’ve added capacity within the production facility to meet kind of the record backlog levels that they’ve had. They’ve gone out with incremental pricing to improve the quality of the margin within the backlog. And I think the value of their products and solutions, they’re able to continue to drive incremental price as we go into next year. So, I think their ability to exit the year at near historic record levels of EBITDA margin is the target.
As they continue to leverage their volume and drive some pretty significant productivity as they look at their labor and material footprint around their products. So, we’re excited about the progress that they’ve made and look for them to continue to sequentially improve as we progress through the year in 2024.
Andy Kaplowitz: That’s very helpful. And Matt, maybe just a bigger picture question for you. I know you won a guy conservatively for this year, being prudent and applied in China, but you’ve got such a strong growth business in MCS, and you’re still only got in 3% to 5%. Xylem had a longer term algorithm of 4% to 6%. So, as you take over the CEO range, do you worry at all that that’s high or given all the self-help focus you know, focus on digitization, all these kinds of things, that that’s still the right longer term growth rate?
Matthew Pine: Yes, I think again, a lot of that is not changed from what we’ve said in the past. It’s just, I think, being balanced in our approach and with a watchful eye to China. We’ve got that flat year-over-year, but there could be some potential headwinds there. And also with Applied Water, which is some of that cyclicality and timing as we think about that, Andy. So, from a long-term framework, none of that’s changed. It’s just really more thinking about in the context of 2024 and, thinking about going out with a balanced approach. We do have a lot of healthy demand across our largest end markets. When you look at the year from a seasonality standpoint, it’s normalized. There’s no change in terms of the seasonality of our business and how we ramp from Q1 through the balance of the year.
