Greetings. Welcome to Ecolab’s Third Quarter 2023 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andy Hedberg, Vice President, Investor Relations for Ecolab. Thank you, Mr. Hedberg. You may begin.

Thank you, and hello, everyone, and welcome to Ecolab’s third quarter conference call. With me today are Christophe Beck, Ecolab’s Chairman and CEO; and Scott Kirkland, our CFO. A discussion of our results, along with our earnings release and the slides referencing the quarter results are available on Ecolab’s website at ecolab.com/investor. Please take a moment to read the cautionary statements in these materials which state that this teleconference and the associated supplemental materials estimates of future performance. These are forward-looking statements, and the actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our most recent Form 10-K and our posted materials. We also refer you to the supplemental diluted earnings per share information in the release. With that, I’d like to turn the call over to Christophe Beck for his comments.

Thank you so much, Andy, and welcome to everyone on the call. “Building on our momentum with strong and reliable growth.” That’s the headline for Ecolab third quarter. Thanks to exceptional execution by our team, Ecolab delivered a very strong quarter as our momentum continued with 7% organic sales growth, which was actually exactly as expected and 18% growth in adjusted earnings per share, reaching the high end of our expected range. Against unpredictable macro conditions, we drove continued strong pricing, new business, accelerated volume trends and continued robust margin expansion. Our focus remains on offense, which we are best at, continuing to fuel strong and consistent double-digit earnings per share growth. We maintained strong organic sales growth with pricing increasing by 7%. This increase reflects both, the value-based pricing we put in place last year and the new pricing we’ve implemented this year, reflecting the enhanced value we offer to our customers. Our volume trends continue to strengthen as well, which is great news, with new business helping to accelerate volumes despite softening in global end market demand. Organic operating income margin continued its impressive expansion, up 160 basis points compared to last year, reaching 15.5%. This notable progress reinforces our path towards achieving our long-term margin goal of 20%. In the third quarter, our adjusted gross margin expanded 360 basis points to 41.3%. This strong expansion is a result of our value-based pricing strategy, improved volume trends and a slight decline in delivered product costs. While global energy prices remain dynamic, we’re confident in our value-based pricing strategy and is absolutely necessary, our capability to implement energy surcharges. We continue to take a prudent stance on the trajectory of delivered product costs as costs remain up nearly 40% compared to pre-inflation levels. Assuming the current high energy price…

Thanks, Christophe. That concludes our formal remarks. Operator, would you please begin the question-and-answer period?

[Operator Instructions] Our first question comes from the line of Tim Mulrooney with William Blair.

So, I see you eclipse 19% OI margin in institutional in the third quarter, which was great to see. If you go back to pre-pandemic times, you’re doing about 21% OI margin every year on an annual basis. I think there’s some debate amongst the investor community about whether or not Ecolab will ever get back to that 21% OI margin days or if the business has structurally changed. I’d love to get your perspective on that, Christophe, how long that might take, particularly given the good momentum that we’ve seen this quarter?

Thank you, Tim. I have no doubt in my mind that we will get there. We have a great team running a great business and a great trajectory. And as mentioned many times, Tim, the P&L of I&S will end up in a better place post the cycle versus previous years like 2019. Just for perspective, o in Q4, as mentioned during Investor Day as well, our OI dollar will already be back to the 2019 level. So I really expect to cross that 20%, 21% line in the next few years while we drive new business innovation, price, the advantage of the new organization as well with the focus on sales and service and leverage as well digital technology, as we’ve done over the past few years. So, of all the opportunities we have in front of us, all the challenges that we might be facing, I think Institutional is going to be probably one of the best promises that we have ahead of us.

Our next question comes from the line of Seth Weber with Wells Fargo.

You mentioned a few times in the slides in the release and your comments just about new business wins. I’m just -- can you talk to the selling environment, your sort of traction with new wins and how we should think about new ads going forward? Thank you.

Thank you, Seth. Well, selling new business is what we’re best at and what we like the most doing. So we shift to offense over the past few quarters is delivering results because our team is really focused on driving new business with our customers, in more difficult environment, and it’s always been the case at Ecolab, well, our customers are looking for ways to improve their operating performance, which is what we’ve always done for them and that they need the most, right now. So they’re very receptive to what we can do as well for them. At the same time, we’re bringing as well all the offerings from the company, especially Water and Hygiene in Industrial segments, but also in Institutional which are very well received by our customers, and we have innovation as well, which has made a step change over the last few years, which are addressing customer challenges or opportunities that they have. So all in, the team focused on what they truly like with the right tools, right innovation, right new products, and customers that are open to what we can do for them, speak, improving their operating performance. Ultimately, that’s all driving better performance in terms of new business, which is really good.

Our next question comes from the line of Josh Spector with UBS.

Hey Christophe, and a question along the similar lines and particularly just related with just volume expectations. I mean you were pretty confident a couple of months ago that you’re going to deliver positive volumes in 3Q. I guess it rounds down to zero or maybe flattish is the best way to describe how that came in. You’re talking about positive volume in the fourth quarter. I guess, I don’t know, did 3Q change versus your expectations of where it would come in? And the backlog combined with -- or the new wins combined with base earnings, I guess, how do you envision volume moving into early next year? Thanks.

Volume is the most important driver, obviously, for us. And Q3 happened pretty much as expected. We can talk about rounding, obviously here, but we were in positive territory, which is good. And if we exclude Europe, which is the most difficult place in terms of volume, we are at plus 1% already. And I feel confident that in Q4, we will have a 1% volume growth overall also for the company. So when I look at the trajectory that we’re having on volume, especially with all the pricing that we’ve done over the past few years and in a market that’s not exactly booming right now, I feel really good with what we’re doing, where we’re heading. And to your point, for ‘24, while it’s the best way we can close the year with good volume momentum in order to start ‘24 in whatever environment we’re going to find with a company that’s having good sales momentum, which is our number one priority as a company right now.

Our next question is from the line of Mike Harrison with Seaport Research Partners.

Congratulations on a nice quarter here. Just in terms of the Healthcare and Life Sciences business, I’m curious, if we saw any of the benefits from some of the changes that you’re making on the Healthcare side of that business already in Q3, or are those actions still to come? And then, just curious on the onetime 6% sales benefit, did that also help margins come in higher or was that kind of an average incremental margin contribution?

Thank you for your nice comment, Mike. It’s three comments on your question. So focused on Healthcare, not Life Science, I know that they all combined, obviously, but two very different stories, as we know. So, first, if we saw some results of the organizational changes in Q3, the short answer is yes, but it’s early. I’ve been really impressed with how the team has executed this bifurcation, truly leveraging the market strength, the breadth, the critical mass of Institutional, both in terms of selling to new customers or existing institutional customers, the healthcare portfolio and at the same time, getting the costs down. The team has moved very fast, very well, and I’m really pleased with where we are right now. But that being said, it’s very early in the process. So, it’s going to leverage as well or lead to better results in the quarters to come. It’s still a lot of work that remains, but I like the progression. It’s going to be always better, so as we move forward. Now the last point on the onetime sale was related to a contractual commitment that we had to deliver by the end of the third quarter. If you strip that out, Healthcare had kind of low single type of growth, which is better than in the past, but probably what we’re going to see in the next immediate quarters until we can truly accelerate by leveraging the power of the Institution. But overall, I like the progress that we’re making in Healthcare, but let me be very clear. So, I’ve not been happy with the performance of Healthcare for many years. I’m really happy with what the team is doing now in terms of transformation, early results, more is to come and more work is also required to get to the place that we all want to be with that business.

Our next question is from the line of David Begleiter with Deutsche Bank.

Thank you and very nice quarter, Christophe and team. Just on the delivered product costs, they came in below your expectations -- or better than your expectations. What drove that? And what are your expectations for Q4?

So, DPC or delivered product cost was roughly 3% down versus last year. A little bit better than what we had expected. It’s always a very broad mixed bag, as you know. So we have 10,000 raw materials that we buy. So they didn’t all go in the same direction, obviously. So some easing on the market. At the same time, our supply chain team speak, procurement team did also some remarkable work as well with our partner suppliers. So both together led to this 3% easing versus last year. Keeping in mind that our costs are still 40% higher than where they used to be pre-inflation. That’s important to keep in mind. I expect kind of the same type of costs for Q4, so kind of a similar easing versus the prior year. And I expect basically those costs to stay similar in the quarters to come, which will mean the slight easing versus ‘23 when we talk about ‘24. I’m not banking on big improvements in the quarters to come. And if they come, well, we will all benefit from them.

Next question is from the line of Jeff Zekauskas with JPMorgan.

Ecolab buys its raw materials sometimes monthly, sometimes quarterly, sometimes annually. So, raw materials have moved down through the course of the year, but it may be that the timing of your contractual agreements has slowed the benefits for Ecolab. Can you talk about how you purchase your raw materials in terms of the way raw materials are repriced? That is, should we expect different incremental changes on a six-month basis or a three-month basis or an annual basis?

Well, I have two ways to answer your questions, in a complicated way or in a simple way, Jeff. So, I’ll go for the simple way. You’re right that depending on the raw materials, it’s monthly, some quarterly, some annually with different types of contractual agreements. I think, we have a very good team. We have a new leadership as well who is doing an exceptional work, by the way, so on procurement. The short way to explain it is, usually, we have a two- or three-quarter lag between the market-to-market price changes up or down, by the way, that impact two or three quarters down the road our P&L. That’s the rule of thumb that I’m using and that you should be using as well.

Our next question is from the line of John McNulty with BMO Capital Markets.

So the Industrial business, I guess I was a little surprised to not see a little bit better margin lift just given that you have gotten some good pricing there and the raw materials does look like are starting to come off. So I guess, one, can you help us to think about what the volumes were there? And then, do you feel like we’re at a bottom in terms of the volumes for that business, and maybe we start to see things level off a bit? Or is there more to kind of think about in terms of concerns going forward? How would you frame that?

Thank you, John. Well, Industrial is in a very good place, actually. But I’d like to ask Scott maybe to give some perspective on margins evolution.

Yes, happy to, Christophe. So yes, as you’re referring to the Industrial wide growth was at 8% but the growth rates are really impacted by a couple of things. Certainly, there’s a base comparison to last year. If you look at this on a two-year basis, that business is improving. And then also, as we spoke to on the SG&A, they’re impacted by the incentive comp given the strong performance they’ve had in the year. But overall, in that business, as Christophe sort of referenced, that the strong pricing that we delivered this year, we continue to add new pricing. And now as we start to see that DPC easing modestly, and there was certainly the biggest impact by that. But on a dollar basis, that OI really remains very strong and I think will continue to improve off these levels. But really, as Christophe mentioned, the opening, expect that the growth to return to double-digit OI growth in the fourth quarter, and you’ll see the marginal impact on that as well.

Yes. As mentioned early on, John, I like a lot the performance of Industrial for the past few years, and that’s going to be even more true in the years to come. If you strip out that incentive-based compensation, so the OI growth would be in the upper teens, which is what you’re going to see in the fourth quarter as well. So, it was kind of a one-quarter story underlying our performance very strong.

Our next question comes from the line of Manav Patnaik with Barclays.

Just two-parter, Christophe. So in the pricing, firstly, I think in terms of what you already have in place, if you rolled through, I think you get mid-single-digit pricing next year. But just curious on how you feel like you could keep pushing the pricing dynamic? And then, just a quick follow-up was the new sales pipeline that you’re really confident on, like how big is that the perspective? Like how much of a volume headwind can that offset?

Great question, Manav. Sorry, they’re related, obviously. But the first one, pricing dynamics. If we think about our pricing, so going up, retention has remained very stable, customer retention and at the same time, saw volume accelerating. So it’s basically showing that our balance of pricing and volume acceleration is going quite well. And I’m keeping a very close eye on that because we’re keeping customers for life in our company and I want to make absolutely sure we do that the right way for our customers and for our company. So bottom line, I like the pricing that we’ve had so far, when I look at what’s going to happen in the next few quarters. So in Q4, the carryover from last year by definition is going to get close to zero, obviously, since it’s going to be annualizing over the 12 months. New pricing is quite good actually. So, I’m especially pleased with the new pricing we have, which we will have, obviously, in Q4. And in 2024, it’s a bit early to go too much in detail, but we’re going to be pleased with the pricing that we have while we keep accelerating as well the volumes. So really keeping both in a very good place. Now to your question on the net new business, as you know, we’re not reporting the dollar value of the growth, but we are really reaching record levels on a quarterly and annual basis as well of new business. Our team is 80% focused on new business. It’s where we’re good at, what we like doing, as mentioned before. And those good results ultimately are compensating for the softening of the demand globally out there from all our customers. So, if our volume is accelerating, it’s all related to our new business.

The next question is from the line of Shlomo Rosenbaum with Stifel.

Hey Christophe, I want to get back to a question that was asked earlier in terms of the volume. It sounds like after three quarters of negative volumes, you’re starting to get into the positive territory. Could you just go into some of the kind of standout categories over there? What volumes are increasing and which volumes are decreasing? I know you mentioned a little bit about geography, but maybe you could talk a little bit just by like business unit, what’s going on in various areas of Industrial? Obviously, Paper is down. But what are the standout areas where you might have accelerating volumes versus the ones which are shrinking? And how we should think of that going into next year with some of the softening end markets?

Yes. So to give you a simple answer, so the ones that are on the soft side, Paper, you mentioned it and Europe is the second one. So those are the two. Everything else is trending in either positive direction or improved direction, if they were on the negative side. I’m especially pleased with the I&S, Institutional & Specialty improvements and Water is going to keep improving as well. So those two key businesses are going to be good in the quarters to come, at least with what we’re seeing as well right now. So, we have passed elimination as well, which is always a bit of a different volume play, as we know. That’s doing exceptionally well. We know that competition has a lot to do with themselves. By the way, it’s providing us an opening for us to gain share as well. And our team is doing an excellent job in pest elimination, where we see growth, really steady, strong and margins as well at the same time keeping improving. So overall, our business in a very healthy place with a few places where we need to work on, as mentioned, Europe and Paper. But to the point of Europe, I’d like to mention as well that margin improvement has been great. So volume challenged in Europe, as we know, but okay, not great. And when I think about our operating income it almost doubled in Europe in the third quarter. So the team has done some really good work.

Our next question is from the line of Andy Wittmann with Robert W. Baird.

I guess maybe, Scott, probably for you, when I was just looking at the adjustments to the results, I noticed that there was $26 million of restructuring and the total exclusions were $0.13 for the quarter. You talked about last quarter expectation of 5. And actually, the guidance for fourth quarter is pretax around $30 million by my calculations or $0.09. I guess, could you just talk about what the restructuring actions were in the quarter and the quarter ahead? Maybe which segments, geographies? And are these -- is it another restructuring program that you’ve taken in the past forming here, or can you just maybe talk about some of the operational effects of what you’ve achieved and are trying to achieve?

Yes, certainly, Andy, happy to do that. Thanks for the question. Yes. So if we look at Q3, the special charges, restructuring was higher than we had guided to. But that’s really due to the timing of the phasing of our combined savings program that we had announced earlier this year, that’s really focused your question on where are we focused on it. This is really targeted around Institutional & Healthcare and as well as Europe, it started in the end of last year and then we added on to it earlier this year. And that’s what really drove it but really around the timing. But still expected, as I think I’ve talked about in previous calls that about of that program, about 90% of those costs are going to be done by the end of next year, okay? And so there will be a little bit of a tail going to 2024. But really then if you look at that, as Christophe talked before, we’re seeing the benefits in Healthcare from the program there, but we’re also seeing great improvement in the Institutional businesses and that’s where it was really focused. And then, as we talked about at the end of last year, the actions taken against Europe and Christophe mentioned that we’re seeing really great margin improvement in Europe as well. So, I think the actions that we are taking are having the benefits we expected.

Let me add a few comments. So you totally support what Scott just said. Obviously, I’m really happy that most of the combined programs are coming to a close by the end of this year, which was the plan, so delivered as expected as well. At the same time, we know that digital technology, artificial intelligence will open some new productivity opportunities for us in the future. There’s nothing clear in our plans right now, but we will keep looking at that. And if there is an opportunity to improve significantly our productivity through technology in the quarters and years to come, we will certainly capture them and discuss that with you.

Our next question is from the line of Steve Byrne with Bank of America.

Christophe, I’d like to hear your view or maybe ranking among your four key product areas: Water, Hygiene, Energy and Pest with respect to potential share gains. And would you expect your SG&A to increase over time commensurate with revenue growth, or do you see a pathway to perhaps reduce that 47,000 headcount in a way that either utilize your digital approach or whatever to be more efficient and help you reach that 20% operating margin goal?

Yes. Maybe two questions in your question here, Steve. So first, in terms of share gain, we’re not a consumer goods company. So, it’s a bit harder to have the exact numbers, obviously here. But directionally, when I look at the big ones, so I&S up 12% in a flat market, so that’s obviously indicating very interesting share gains. Pest Elimination, up double digit when competition is either in the single digit or down for some of them as well. That’s showing as well, so share gain. Industrial, even comparing to a very strong last year in the mid-single, well, PMI in the U.S. and in the EU is negative. So that’s also showing share gain as well. And as mentioned, in Healthcare growing back again is also showing quite a healthy performance. So overall, I like a lot of how we’re progressing versus our peers in the marketplace. Now to your question on SG&A, as I’ve shared with you in the past, I think that ultimately, the Company is going to be much bigger in the years to come. I don’t think that our team is going to be much bigger. But I’m not expecting the team to be reduced but it might be in different places. And I want to make sure that the number one place where I want to have all the firepower I can is in the front line, which means our team serving our customers, where we will leverage digital and AI technology, not only to improve productivity to help them serve more customers, sell more solutions but more importantly, spend way more time in creating value for our customers, which drives obviously value for our customers, which drives new business, which drives pricing and ultimately improves our margin. So the way I think about SG&A in ratio, it’s going to keep going down the years to come. But ultimately, I’ll make sure as well that through digital technology, we increase the impact of our front line with our customers, which has been core to this company for the years past too.

Our next question is from the line of Patrick Cunningham with Citi.

On the Life Sciences business, how should we think about new business growth and investment into next year given some of the persistent near-term weakness sort of juxtapose with the long-term growth opportunity and margin expansion that you highlighted in your Investor Day?

Yes. So, Patrick, on Life Science, we’ve seen improvement, which is good in the third quarter, in a market that’s generally down. And I see that as a short-term impact in the industry, it’s an industry, pharma, biotech, that is very promising for the future, a few challenging times for a few quarters. We see how many more quarters that’s going to last for the industry out there, but I’m very bullish with where the industry as a whole is going in the years to come. Now, when it comes to our own performance, well, the fact that we have positive growth is also a sign of the new business that we’re generating, the share that we’re gaining as well versus our competition. And it’s in that time that Ecolab usually focuses the most in investing for the future. And as I’ve shared during Investor Day, well, we’re investing in capacity making sure that we will have enough production capacity, for the years to come to deliver our growth and not just in one location, but in several locations in Asia, in Europe and in North America. And at the same time, it’s also building capabilities. It’s building our team. It’s building expertise. It’s building science and R&D as well at the same time. And if the market is a bit different short term than what we had expected a year or two ago, our investment plan hasn’t changed because for me the future totally unchanged. It’s just a short-term impact that the market is having on everyone’s performance.

The next question is from the line of Kevin McCarthy with Vertical Research Partners.

Christophe, I’d welcome your updated thoughts on the Healthcare business. I guess, in terms of operations, would you expect that business to grow on par with your corporate average next year or better or worse? And then, on the strategic side, I think you’ve now separated infection prevention from Surgical. And maybe you can kind of talk through what you’re seeing in terms of incremental benefits from that in the early days as it relates to customer touches and productivity and the like?

Yes. Thank you, Kevin. So, three things. First is bifurcation, infection prevention and surgical as mentioned earlier is progressing very well. It’s really providing the right focus for the surgical business that’s serving different people in a hospital than infection prevention, which is much closer to Institutional. This is helping, obviously, the surgical business. And the fact that infection prevention is now managed by the institutional team, well, we get not only the reach because they serve way more hospitals or institutional products, obviously, than healthcare, you get immediate synergies from a growth perspective, you get the synergies on the cost as well because it’s a way bigger team than what Healthcare as well used to be. So in terms of transition, I like the progress that’s being made. Now, in terms of growth performance, if I think short term, speak ‘24, I think Healthcare is going to be below average of the Company and more longer term -- well, my objective is to make sure that our Healthcare business becomes at least at the average of the Company, if not better, but that’s going to take some time and some work in order to get there.

Our next question comes from the line of Vincent Andrews with Morgan Stanley.

Just a question from me on inventories. Just looking at it, it’s down, I don’t know, mid-high-teens year-over-year, but your volume is kind of flattish and price is up on your delivered products. So, I’m just trying to understand if raws are still sort of flattish, what’s helping the inventory come down and improve the working capital performance?

Thank you, Vincent. I’m going to pass this one to Scott.

Thanks, Vincent. I’d be happy to answer this. So yes, as you probably saw, our Q3 working capital was about $250 million favorable versus last year and largely driven by some targeted inventory reductions. We’re down -- DOH is down about 10 days, so the rate impact on that versus the end of last year. And that’s really been driven by, as the supply chain team has driven great supply chain resilience and allowed us to go after and reduce those inventory levels. And so I would expect really like the working capital trajectory and expect really strong free cash flow growth through the balance of the year and frankly, expect our free cash flow conversion to be above historical levels, which tends to be mid-90s and expect that free cash flow conversion to be above 100% this year on a full year basis.

Our next question is from the line of Rosemarie Morbelli of Gabelli Funds.

Congratulations to everyone on that great quarter. Institution did really quite well. And I was in -- well, I was in several hotels recently. And the level of cleaning, changing sheets, changing towels and so on has come down substantially. I know you are adjusting your operations to reflect this different world. But I was wondering if you could give us a little more details on what you are doing because if they don’t change anything, you obviously don’t sell your products, services and so on? Details would be appreciated. Thanks.

Thank you, Rosemarie. This is a core element of focus between us and our hospitality customers. It was initially driven by shortage, obviously, of labor that they didn’t have to do all that work, which is still a challenge for that industry. At the same time, well, they like the fact that less labor meant as well less cost while pricing went up, that drove good margins for institutional customers, which ultimately is a good thing for the industry, and when the industry is doing well, it’s a good thing for us as well at the same time. That being said, quality standards need to get back to where they used to be. It’s exactly playing into what we’re doing which is having products that are delivering better quality, better standards, better cleanliness with less labor. So it’s 2-in-1 -- 3-in-1, it’s automated dish machine, laundry, floor cleaning, whatever those solutions might be as well so for the industry. So we’ve reoriented really over the last two years, all our innovation towards increasing even more the automation level for our customers in order to drive better cleanliness while using less labor and keeping the margins that they used to have. So at the end of the day, if Institutional industry hadn’t changed for a long time like 100 years, I think that the past few years, it’s an industry that has made a step change in terms of leveraging technology more than ever. Well, this is exactly what we’re doing. For me, it’s going to help bring our partnership between us and our customers to a whole new level, helping them perform better and for us leveraging all the innovations that we have to offer. So, at the end of the day, a good news, and cleanliness is going to improve as well in the hotels that you’re going to visit.

The next question is from the line of Scott Schneeberger of Oppenheimer.

Christophe, could you give us an update? It’s been, I think, nearly five years since data centers and animal health became big areas of focus of the company. Could you speak to growth rates at both and how meaningful they’ve become within their subsegments of Industrial? Thanks.

Well, the two are very different, obviously. So data centers is growing at incredible rates. We’re not giving the detail here, but it’s strong, and it keeps accelerating. So it’s north of 30%, which is quite remarkable. You see that with the high tech companies, obviously, saw the usage of cloud is going up exponentially. They need way more computing power in places where there is limited water as well at the same time. And there’s almost no one out there who can serve them in a way that’s increasing capacity, reducing water consumption and at the same time, making sure that the uptime remains close to 100%. So quite a challenge from a technology and expertise perspective. This is playing exactly to our strength as a company. That’s why having focused on that business, having a dedicated team on it is paying off more than ever. And I think that we are at the beginning of that growth journey, which is really good. Animal health, a total different story. Obviously, since the promise there is as the food industry is moving away, at least in places where it’s still being used antibiotics, well, you need to have much higher level of hygiene in the farms that are growing, obviously, these animals. We’ve been building that over the last few years. It’s not an exponential growth like data centers has been, is and even more will be in the future. But that’s a business that’s in a good place, but that you can’t compare with the data center business. But it’s a very good complement for our Food & Beverage business which is doing really well overall. So I like those focus and investments that we’re making in those industries, but they’re very different from each other.

The next question is from the line of Josh Spector with UBS.

I guess two quick ones, probably both for Scott, is, when I look at SG&A, flat into fourth quarter, if I think about normal seasonality and what that means for next year, extrapolating that gets me to like $4.4 billion to $4.5 billion or another 10% increase. I guess, is that the right way to think about it, or would you expect it to move differently than that? And just second, you have about $1 billion plus in debt due in the next couple of quarters, pretty low coupon. Are you looking to pay that off, or would you roll that?

Yes. Josh, I’ll handle the two follow-ups. The first one on the debt and where we sit today, have strong liquidity, as you saw on the free cash flows for the third quarter and the expectation for the full year and we ended third quarter with around about $1 billion of cash. And so where we sit today, my expectation would be we pay down both maturities due in December and January combined is a little over $1 billion. So expectation there. Again, long-term focus on capital allocation remains the same. But obviously, in the short term, we’re very committed to deleveraging. And on a good path to do that where at the end of the third quarter leverage ratio was at about 2.5% and feel very good by end of next year to get back down to our historical sort of 2 times range. Getting back to your SG&A question. As we talked about, and Christophe talked about in the open that the Q3 dollar was what we expected -- expect similar levels in Q4, as you talked about, but year-over-year, really largely driven by this incentive compensation. And then, as well, if you look at Q3 had a tougher comp -- low incentive compensation last year, but that underlying productivity remains really strong. Just for perspective on that, SG&A, as Christophe talked about, we will continue to grow this business, but we’re needing less people. And actually, in the third quarter, our headcount year-over-year was down on SG&A 2% and so our sales per head was up about 7%. So showing that good productivity. And I would expect -- it’s early to sort of talk about 2024, but we’ll expect to continue to drive great productivity next year, leveraging the technology that we continue to deploy and really increasing the time that our sales teams spend on creating customer value.

Maybe two points to build on what you just said, Scott. On SG&A, it’s 100% on our control. We’ve demonstrated for years that we drive productivity the right way. It’s not by squeezing cost, it’s by automating our operations and focusing our teams on creating value with our customers. So I completely expect that in the years to come, through technology, through digital, through AI, we will keep on that journey and feel really confident about that. And the point on cash flow and debt speak balance sheet, for me, in those times, having a very strong balance sheet, not only has been true for us for many, many years, it’s especially true today. So getting our working capital as tight as it can be, getting our cash flow as strong as it can be, through volume, new business, pricing and all that business obviously generated is absolutely essential. So, on the two sides, keep looking for good progression, both on SG&A productivity and the strengthening of the balance sheet.

Thank you. Mr. Hedberg, there are no further questions at this time. I’d like to turn the floor back over to you for closing remarks.

Thank you. That’s wraps up our third quarter conference call. This conference call and the associated discussion slides will be available for replay on our website. Thank you for your time for participation. I hope everyone has a great rest of your day.

Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference, and you may now disconnect your lines, and have a wonderful day.