Ron Keating: Thank you.
Operator: Our next question comes from Mike Halloran from Baird.
Mike Halloran: Hey. Good morning, everyone.
Ron Keating: Good morning.
Ben Stas: Hi, Mike.
Mike Halloran: So the CapEx, 5% of sales plus-minus. I’m guessing the high levels just a reflection of your confidence in leveraging the balance sheet to drive customer growth through some of the product offerings, correct?
Ron Keating: Agree.
Mike Halloran: Okay. Thank you. And then second one, any areas where you’re seeing any cracks in the portfolio? I know Ron talked about pretty healthy orders across the board. Just wondering if there are any pockets we have leading indicators that are showing some concerns, anything on the project side because obviously, the commentary has been really positive, which is good?
Ben Stas: Yeah. Mike, I would say that as we show slide 5, you can obviously see the incoming order rate and the order expectation continues to be very strong. We do see some of our end markets slowing down the acceptance of capital. It doesn’t mean they’re not canceling anything. It’s still in the pipeline, still in the works, but they’re slowing down some of the POs being cut, I think being cautious. We continue as you think about a canary in the coal mine, we watch light and general industry would be the first one that we think we would see slowing, but we’re still seeing very favorable order activity there. And as we highlighted on slide 5, we expect to see that in the first quarter of 2023 as well.
Mike Halloran: Thanks for that. Last one quick. Just any comments on the pipeline actionability on the M&A side and your willingness to move at this point?
Ben Stas: As far as the M&A pipeline?
Mike Halloran: Correct.
Ben Stas: Yeah. I mean, we continue to work with tuck-in acquisitions. We were able to close out three last year as well as close out the acquisition of Frontier’s equity to get full ownership of that. We have a number of small tuck-in acquisitions in the pipeline, and we feel like they’re going to be actionable in 2023 as much as they have in the past year.
Mike Halloran: Great. Appreciate everyone. Thank you.
Ben Stas: Thanks, Mike.
Operator: Your next question comes from Andy Kaplowitz from Citigroup.
Andy Kaplowitz: Good morning, everyone.
Ben Stas: Good morning, Andy.
Ron Keating: Good morning, Andy.
Andy Kaplowitz: Ron and Ben, just maybe talk a little bit more about Q4 in terms of that adjusted EBITDA margin. I think it was down 70 basis points, a little worse actually than Q3. I know you talked about price cost being margin accretive, but weaker productivity, I think you talked about pressuring your margin. Is labor productivity stable, getting worse, better? And how do you factor that in looking at that 2023 guide?
Ben Stas: Yeah. Great question. So we — it’s ISS that was where we saw the margin pressure. And a lot of the margin pressure came from productivity, particularly in the service tech area. We had a lot of onboarding of new service techs in the quarter and in the last two quarters to gear up to support that strong service backlog. So we do expect the productivity to improve overall within ISS in the coming quarters, but part of this is temporary as you continue to onboard this service at the most speed. And I think one of the things, the strong digital growth in revenue will help us as we go into the full, into the future once we get through some of this onboarding period. And also in our factories, we had a lot of new labor ads in the factories gearing up for that strong backlog. And as we are onboarding them as well, there is some period of lower productivity. But that’s predominantly what drove the challenges for ISS.
Andy Kaplowitz: Ben, that’s helpful. And then maybe just — can you give us a little more color? I know there’s always a level of EBITDA adjustments that you take. They were a little higher in Q4. Would you say this is the high watermark and for those adjustments? And how do you factor those or think about those into 2023?
Ben Stas: Yeah. A lot of the adjustments were the cash €“ non-cash exposure on FX on intercompany loans. But we should see 2023 relatively similar to 2022. There’s not anything that’s an outlier, maybe a little higher as we do some rooftop consolidations. Some of the adjustments you probably noted was in the area of restructuring as we’ve ramped up Mar Cor. And so we still have Mar Cor work to do in that area. But 2023 should be relatively in line with 2022.
Andy Kaplowitz: Helpful. Thanks a lot.
