Ryan Connors: I wanted to talk about, go back to that question, the prior question there on gross margin, look at that from the standpoint of price and how well you have continued to do in terms of price capture and price realization, even though you are stacking multiple years of price increases on top of each other now. So, it’s been very impressive. Can you just give us some perspective on what’s enabling that? Is the market just really that tight in terms of the supply side because it does seem like the demand side has moderated a little bit, at least in residential, any color you can give us about how pricing has held up so well?
Bob Pagano: Ryan, one of the things that we have really focused on, we have been investing significantly in smart and connected products, and we are having a higher value proposition to our customers. So, that’s one of the things that allows us to drive pricing in the marketplace is because we have a differentiated solution to our customers. So, I think that’s been the big focus, which is helping to support that.
Shashank Patel: And the other thing, Ryan, this year, the other thing that’s benefited us is certainly on the cost inflation side. If you think about labor costs, they are still inflating. But on the commodity side, commodities have been softer than we had anticipated. Freight has also – logistics has been softer than we had anticipated. That’s helped the margin story as well.
Bob Pagano: And the last thing I always want to add is, from a mix point of view, residential is lower margin than commercial. So, our residential and OEM business has been down and our commercial business has held steady or up, so that we are having a favorable mix in margin. So, we got to watch that as residential starts coming back.
Ryan Connors: Okay. That’s good color. Secondly, on Bradley, just going back to that, looking at that more from the perspective of your channels to market and how Bradley differs or is similar to your existing product line? In other words, are there different set of distributors and channel partners there? Are there synergies potentially there, or on the other hand, are there complications there with trying to integrate all of that. Anything you can tell us about how these products from Bradley go to market versus your legacy portfolio?
Shashank Patel: Well, a lot of it goes through wholesalers, which are the same wholesalers we deal with every single day. So, some of the rep channels are different, but we are maintaining those rep channels and especially on the safety side, right. The safety channel is different from what we have traditionally done. So, again, overall, we feel this is very complementary to what we are doing. And we haven’t built very much sales synergies on purpose, I don’t believe in sales synergies. So, if they happen, they happen, we will hold our team accountable for them, but I don’t do deals based on sales synergies, so this is driven by cost synergies.
Ryan Connors: That’s a prudent approach. Much appreciate it. Thanks for your time.
Bob Pagano: Thank you.
Shashank Patel: Thank you.
Operator: Your next question comes from the line of Jeff Hammond with KeyBanc. Your line is open.
David Tarantino: Hey. Good morning guys. This is David Tarantino on for Jeff.
Bob Pagano: Good morning.
Shashank Patel: Good morning.
David Tarantino: Just maybe back on Bradley and to attack it maybe a little bit of a different way. Could you talk about how it positions you guys in the front of the wall relative to what the competitive landscape looks like there and how you win in that market?
Bob Pagano: Well, Bradley is a leading brand in that market. It’s known for its high quality, innovative products and the higher end of the product, which is very similar to the Watts’ portfolio, right. So, quality, innovation is exactly what they are and a brand that’s been over 100-years-old. So again, a large following, and that’s what we really liked about the acquisition as a leader in its prospective area.
David Tarantino: Great. And then maybe sticking with Bradley, could you talk a little bit more about the cost synergies and kind of the cadence you expect them to show through and where the biggest opportunities are?
Bob Pagano: Yes. We noted that we have about $12 million of cost synergies. We think probably 40% next year, 40% and then 20% at the very end. A lot of those are, as I have said in my prepared remarks, the One Watts performance system, which is really focused on lean supply chain and our global sourcing, obviously. So, those are key attributes. The teams are working them hard right now, and we have line of sight to getting to all of them.
David Tarantino: Great. And maybe if I could sneak one last one in. Could you maybe give a little bit more color on what you are seeing on the ground in Europe? It seems like the guide implies some moderation there. And I think the results there have been surprisingly resilient to-date?
Bob Pagano: Yes. They have been – Europe in the first half of the year was performing very well, leveraging a lot of what I call the subsidies, especially in Italy. We are seeing some of those subsidies starting to slowdown. And we saw that in September and October, we saw some further softening on the new construction side of that market. So, we are watching that very closely. It’s held up longer than we expected it to, which has been a pleasant surprise. But we are starting to see them slow down. I think a lot is dependent on how cold a winter they are going to have. Last year, they had a mild winter. So, people had excess funds to work on energy-efficient products inside their homes. And I think those incentives are tailing off, but we will see if new incentives are put in next year. But right now, we are being cautious based on our order input. In particular, in September and October is why we are being a little cautious on Europe right now.
