Bruce Thames: Thanks, Brian.
Operator: Thank you. The next question comes from Jon Braatz with Kansas City Capital. Please proceed with your question.
Jon Braatz: Good morning, Bruce, Kevin.
Bruce Thames: Morning, Jon.
Jon Braatz: Along the sort of lines of Brian’s question. In your press release, you talked about – and you’re benefiting this year from deferred maintenance spending. And I guess, by definition, it’s deferred. So when – after they make those expenditures this year, is there a fall through next year? Or does that sort of become sort of a headwind when you look at maybe 2024 versus 2023. What – how important has deferred maintenance spending been for you this year? And how do you think about that next year?
Bruce Thames: Yes. So Jon, great question. I mean we certainly saw a really a significant contraction in maintenance spending during COVID. So we’ve seen that really begin to rebound. And we’ve seen that during the course of this year. Now as we look at this, I mean, we’re seeing a lot of small projects and we believe that there’s been a significant underinvestment in infrastructure over the last 7 or 8 years. And based upon that and kind of the change in the capital allocation strategy going forward, what we’re seeing is reinvestment in existing assets rather than really building a new greenfield. So we don’t expect to see a big surge of CapEx spending that maybe we would have seen in prior economic cycles. However, if you look at our global footprint and the installed base, it’s actually very favorable for our business.
One, is we’re entitled to the recurring revenues where we have the installed base. Second, they tend to be higher margin profile and what we believe is these levels of spending going forward are more sustainable than what we may have seen in previous cycles where you had some very large peaks in CapEx spending. And I would kind of go back to our fiscal year ’19 and fiscal year 2015. So going forward, we actually see a lot of the maintenance spending being stable to slightly increasing in the coming fiscal year.
Jon Braatz: Okay. Thank you. Kevin, two questions. Maybe you mentioned this, is the Russian charge all non-cash? And secondly, supply chain challenges have sort of a headwind, I think you mentioned 180 basis points. You were hearing a little bit of improvement on the supply chain challenges that we’ve seen over the past year. As you look into next year, do you see that begin to ease and the improvement on the – improvement on the gross margin front because of that?
Kevin Fox: Yes, Jon, maybe I’ll take them in order. On Russia, there was about $3 million of cash on the balance sheet that we just reclassified. The rest of it from a P&L, it’s a non-cash entry. We will see some additional impact to GAAP EPS once the exit is complete. Again, that was about $0.11 to $0.20 in GAAP, but a lot of technical accounting from the team there, but essentially, it’s all a non-cash entry in Q3. With respect to supply chain, I think you’re right. I think we see things getting better sequentially. I don’t think we’re prepared to say it’s fixed and everything is back like what it was in 2019. But I think us like many others have built those buffers and the inventory at this point. And I think when we look at our inventory turns and that sequential improvement, I think we expect that trend line continue to go upwards in the quarters ahead.
So yes, I don’t think I’m quite ready to say we’re out of the blue. There are certainly pockets that are still challenging, but it’s much better today than where it was six months ago. And I think we expect those trends to continue going forward.
Jon Braatz: Okay. Thank you, Kevin.
Kevin Fox: Welcome.
Operator: And at this time, we have reached the end of the question-and-answer session. And I would like to turn the floor back over to Bruce Thames for any closing comments.
Bruce Thames: John, thank you, and thank you all for joining here today. I appreciate your interest in Thermon. Enjoy the rest of your day.
Operator: Thank you, everyone. That does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
