Todd Gleason : Yes. Much bigger, I guess, is what I would say. Look, these are — we typically reference a very standard sort of $2 billion level, but let me kind of provide some more color here, Bill. I would say, if you were to be consistent with comparatives, when we joined — when I joined in mid-2020, we were — our pipeline of pursuits, if you index it, and therefore, you remove the noise associated with COVID for a second here. We were really pursuing about $1.4 billion of pipeline opportunities would be the number that we would use. And by the end of 2021, we were pursuing between $1.8 billion and $2 billion of orders. So we had grown about 15% to 20%, give or take, maybe a little bit more, of pipeline pursuits. By the end of ’22, that number was certainly consistently above $2 billion, $2.1 billion to $2.4 billion.
In fact, we mentioned in November of 2022 that we were bidding on more jobs than we had ever in a moment. In that month, we were bidding on more dollar level of jobs than we had ever bid on before at a specific point in time. So that was only 90 days ago, right, 120 days ago. It’s not like we’ve seen this major change. So we like the pipeline. It’s certainly up 10%, 15% the last — each year, the last couple of years, maybe a little bit more in terms of that. And I would say, look, it’s the right thing for us to do. We want to use a baseball analogy. We want to have more swings at the plate even if that means maybe we weren’t getting as many hits. Every time we’re at the plate, if you’re getting more swings at the plate, you’re actually getting more hits overall.
William Dezellem : Todd, with orders up 10% to 15%, pardon me, pipeline up 10% to 15% and orders up significantly greater than that. Does that imply that your win rate is improving? Or is it just the type of — the mix of the pipeline just happens to fit better with your business?
Todd Gleason : I think in certain businesses, our win rate has improved. We’ve done a really nice job with marketing, and I want to call out the great work that our teams are doing in our platforms and our sort of corporate functional, Ramesh’s organization that drives real focus and clarity around customer pursuits. We review jobs of a certain size and profile, and we move very fast to get our businesses working together to increase the size of those pursuits so that we have multiple platforms instead of going after $3 million or $4 million worth of content, we might go after $5 million, $6 million, $7 million because platforms are partnering together to go win jobs in coordinated fashion. So these are all the plays in our playbook where we have people working together much better.
And I think — and we have a lot more to do. I mean we’re still in the early days. But overall, it drives a higher win rate probably. But overall, I also would say it just gives us more opportunities to go after.
Peter Johansson : And Bill, there’s — in the cultural shift the company is undergoing, this is a subtle, but important move we’re seeing. We are seeing our commercial teams pursue more and playing to win more. The level of confidence that they will, if they win the job, get the investment and resource necessary to execute the job is very, very high because they know that if they bring the business to the company, the company will support them and it will get delivered. In the past, what I’ve learned is that, that wasn’t necessarily the case. Our teams almost put a constraint on themselves. They put a governor on their commercial performance because they felt that they brought something big and interesting to the business, they had struggled to get it resourced.
That’s not the case today. Our commercial teams with their marketing efforts and their targeting efforts are going after very good pieces of business, well, in some cases, larger than we historically would have pursued and they’re winning and getting resourced. And that combines with the pipeline being bigger and playing to win more aggressively leads to the results you’re seeing.
Operator: And our next question today comes from Gerry Sweeney of ROTH Capital.
Gerard Sweeney : Just a couple of quick follow-up questions. Just curious, I’m not sure if you broke it out, but — or if you do break it out, but revenue short versus long cycle currently?
Todd Gleason : Yes. So when I joined, we were 80% long cycle, very cyclical business profile. And again, some of that had to do with the COVID situation, but — and only 20% short cycle. Where we’ve increased our percentage to 30% short cycle, our goal ultimately — and, well, like I said, we haven’t yet gotten the full benefit of the 4 acquisitions, now the fifth acquisition that we made, most of which have higher percent of short cycle deals in our pipeline if we choose to do them, likely have a higher percent of short cycle as well. Our goal would be to blend our business model to be more 50-50 over time. Now our growth rates in the mid-cycle and long-cycle projects could make that challenging, and that’s a good reason that we might not quite get there in the next few years.
But I think we’re making good steady progress. Our organic growth in short cycle has been very strong. So it has a long cycle. So that’s been a challenge to close the gap on that. But Wayne Denny and his team in the fluid handling business, for example, doing a great job launching new products, getting more distributors, improving their win rates and their delivery time and the quality. And so I’m very confident and optimistic that we’re going to continue to organically and inorganically close that gap because ultimately it just gives us a better business mix for consistent financial profile.
Gerard Sweeney : And then SG&A as a percentage of revenue, that’s been ticking down. I’m just curious if there’s some more room there or how do we look at that?
Todd Gleason : Yes. It’s — again, in the quarters, it’s going to ebb and flow a little bit from an adjusted SG&A perspective, and if we go and dive through the numbers. Obviously when you make acquisitions too, you have to rationalize a little bit how you’re — we like to keep the leadership team. So it’s not like we’re not buying these businesses for cost synergies, et cetera. So we have to think about what’s the investment needed to really maximize growth. Ultimately we want to grow our investment in the S part of G&A is going to continue; sales, marketing, business development and ultimately, and we hope and believe that the G&A part of SG&A is stable and that our resources that support our businesses from a functional perspective, around our HR and finance and legal and operations, those — that talent is able to support more business, and then we’ll add to that as we need.
So I believe, ideally, we’re going to continue to really leverage SG&A and help us expand margins.
Operator: Our next question today comes from — is a follow-up from Jim Ricchiuti at Needham & Company.
James Ricchiuti : Just a question with respect to some of the inflationary pressures you’ve been experiencing, to what extent that had an impact in Q4? And I’m also wondering along those same lines, I think you guys have talked about pricing and whether that becomes potentially more of a tailwind in ’23 as you get the full benefit of that.
Todd Gleason : Yes. Inflation has been a longstanding challenge for most companies, especially industrial companies. So it can be, whether it’s materials, whether it’s people, logistics. I think in the fourth quarter, our pricing overall had really kind of caught up because we booked jobs in backlog, 1/3 of our backlog is shorter term, 1/3 of its more midterm, 6-9 months revenue, and then 1/3 of our backlog is some are starting between 6 months turning into revenue and could go up to 18 to 24 months of getting all that revenue. So if we put better pricing in place, it takes a little bit of time to get it to our P&L to offset the cost that’s necessary to deliver on some of our projects. And obviously we’re hiring people as we go.
So yes, I think the fourth quarter was a better balance for us and which is why gross margins were back up above 32%. There’s room to go still on productivity and pricing, and we hope that a stable inflationary environment, which is, I think, how we’re feeling things look right now. No doubt that there’s interest rates are going up or have been going up and there’s going to continue to be a bouncing ball on some inflationary costs, but it feels more stable than it was 6, 9, 12, 18 months ago.
