SPX Technologies, Inc. (SPXC) Q2 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the SPX Corporation’s Second Quarter 2017 Earnings Conference Call. At this time all participants are in a listen-only model. Later we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today’s conference, Mr. Paul Clegg, Vice President of Finance and Investor Relations. Sir, you may begin.

Thank you, Terence, and good afternoon, everyone. Thanks for joining us. With me on the call today are Gene Lowe, our President and Chief Executive Officer; and Scott Sproule, our Chief Financial Officer. A press release containing our second quarter 2017 results was issued just after market close. You can find the release and our earnings slide presentation as well as a link to a live webcast of this call in the Investor Relations section of our website at spx.com. I encourage you to follow along with the slide presentation during our prepared remarks. A replay of the webcast will be available on our website until August 10. As a reminder, portions of our presentation and comments are forward-looking and subject to Safe Harbor provisions. Please also note the risk factors in our most recent SEC filings. Our comments today will largely focus on adjusted financial results. Specifically, we will focus on adjusted core operating results, which exclude the results of the South African projects, and we will separately provide an update on those projects. This quarter, our GAAP results include a charge of $22.9 million to update our estimate of the cost to complete the projects in South Africa, which has been adjusted out of core results. Another adjustment to our GAAP results this quarter is an adjustment for nonservice pension items. Scott will review these items in detail. You can find reconciliations of all adjusted figures to the respective GAAP measures in the appendix to today’s presentation. Finally, we plan to be on the road this month meeting with investors. And on September 6, we will participate in Vertical Research’s Global Industrials Conference. And with that, I will turn the call over to Gene.

Thanks, Paul. Good afternoon, everyone. Thanks for joining us. On the call today, we’ll provide you the brief update on our overall results, segment performances and end market conditions before going into Q&A. During the second quarter, execution remains strong in our core businesses and the initiatives that we have been implementing since the spinoff continued to progress well, resulting in 330 basis points of operating margin expansion. Our Detection and Measurement segment experienced healthy order growth, and our Engineered Solutions segment continued to see the benefits of our operating model shift and cost reductions in process cooling. Based on the strength of our first half results and our visibility into the second half customer demand, we are increasing our full year guidance for 2017 adjusted EPS to a range of $1.65 to $1.75, from our prior range of $1.55 to $1.70. And in South Africa, we have implemented actions to accelerate the completion of the projects and further reduce risks. Scott will talk more about the financial impact in his section. Overall, I’m very pleased with our core operational performance and the fact that our involvement in the South African projects, although not without challenges is now in the later stages of completion. We remain well positioned to execute on both our organic and inorganic growth plans for our pipeline of opportunities remains robust. Turning to our results, we reported adjusted EPS of $0.44, adjusted operating income was $32 million reflecting over 50% growth on slightly lower revenue compared with the prior year period. Our Detection and Measurement and core Engineered Solutions segments, both recorded significant margin expansion, partially offset by slightly lower margins in the HVAC segment. As always, I would like to give you a brief update on the progress we have made during Q2 on our value creation initiatives. Our organic initiatives to support growth of new product introductions and expand into adjacent markets continues to gain traction and we’ve been strengthening our sales teams and go-to-market structures across our platforms, which has helped broaden our market coverage and increased win rates in targeted areas. In HVAC, our Everest cooling tower continues to win orders and we’re very pleased with the interest we’re seeing in both commercial and light industrial markets. In Detection and Measurement, within our fare collection business, our Genfare link product has won several follow-on orders and we have also received industry awards recognizing Genfare’s distinct benefits, including convenience, security and service. Within our cable and pipe locators business, we launched an innovative cloud-based system allowing customers to improve the quality of underground detection. In our communications technologies businesses, we have seen some positive benefits in our order patterns as a result of sales and channel coverage model changes we have made. Our signal monitoring products are experiencing backlog growth and momentum on order conversion. And in obstruction lighting, we continue to attract customer interest in our Vanguard LED products including our new entry level Vanguard Red lighting solutions. In process cooling, within the Engineered Solutions segment, our strategy of expanding our components and aftermarket sales continues to progress. These markets offer solid growth opportunities at attractive margin levels. Before turning the call over to Scott, I want to touch on the South African projects. Over the last two years, we have taken numerous steps to accelerate the progress and reduce risks in South Africa, including enhancing site work and fabrication resources and in sourcing scopes of supply. At the end of 2015, we successfully negotiated that these scoping of major parts of our work, effectively eliminating years of construction responsibility and cost, while significantly reducing our risk profile. During the first half of this year, we began taking further actions to accelerate the timeline of certain work streams and improve our control over the projects by adding additional resources. As a result of our actions, we are now in a much better position than at the spin, and we now expect to be substantially complete with all but one of the five original scopes of work by the end of 2017 and with our roll in South African projects by the end of 2019. When you look at the overall project, this is approximately one year ahead of previous expectations. And with that, I’ll turn the call over to Scott to review our results for the quarter, including the South African project results.

Thanks, Gene. I’ll start with our net results for the quarter. On a GAAP basis, we reported a loss per share of $0.19. On an adjusted basis, our earnings per share was $0.44, a significant improvement from the comparable $0.33 earned during the second quarter of 2016. As we typically do, our adjusted earnings per share exclude the result associated with our South African projects, including the Q2 charge though described in detail in a moment. As well as nonservice related pension expense. From an operational standpoint, the success we experienced in the first quarter continued. Our 2017 results reflected increased order conversion in Detection and Measurement and benefits of ongoing operational improvements, most notably in Engineered Solutions. Before reviewing our core results, let me walk you through the financial impact of the South African projects charge. As Gene noted, we have made significant progress towards completing our scopes to work and reducing our risk profile related to the South African projects in 2015. And during the first half of this year, we made several decisions on what is going to take to further address risk and accelerate execution. Based on our revised plans, we have update our estimates to complete the projects, which resulted in a charge of $22.9 million recorded as a reduction in revenue of $13.5 million and an increase in cost of $9.4 million. The charges comprised of investment and incremental resources in order to accelerate project completion, the cost of showing up our supply chain to improve our schedule, which includes both the insourcing of fabrication to our operations and addressing issues with one material supplier at risk of not meeting delivering schedules. And we have experienced higher than anticipated costs incurred, as we close out certain scopes of work. We’ve also updated future estimates to reflect this experience. As we’ve said, we view the obligations associate with the South African project, it can do a finite life, amortizing liability and primarily focus on the cash required to support its completion. Based on the actions we have taken and where we are today with projects, we are now in a position to revise our estimate of when we will be substantially complete with our work, which is now the end of 2019. And provide our first comprehensive estimate of the total remaining cash outflows on the projects. In the first half of this year, we spent $27 million on the projects we now estimate we’ll spend an additional $60 million to $70 million in completing the projects of which $25 million to $30 million will be spent during the second half of 2017. And understanding the timing of these cash flows, it’s important to understand the remaining milestones on the project as these would be the key factors as we reduce cash spend in South Africa. As Gene stated by the end of this year, we’ll be complete with a larger scope of work remaining on for construction. In 2018, we’ll be taking further actions to reduce spend and rightsize operations. And by the end of 2019, we’ll be substantially complete with all of our scopes of work. We are in the late stages of our work on the South African projects, and we are confident what it will take to execute with the projects are now without risk and is possibly we could experience variability in future results. Now let me move on to our Core results for the quarter. For Q2, Core revenues were down modestly. The decline was primarily due to timing of both transformer shipments in our Engineered Solutions segment and cooling shipments in our HVAC segment. These declines were partially offset by strong sales growth in our Detection & Measurement. Core segment income margin for the quarter increased to 13.6% compared with 10% in the prior year as we experienced significant margin expansion in both Engineered Solutions and Detection and Measurement. Now I’ll walk you through the details of our results by segment starting with HVAC. Revenues for the quarter declined 1.3% compared to the prior year. This included the negative currency effect of 60 basis points in an organic revenue decline of 70 basis points. Our heating product sales were modestly stronger in the quarter, but this was more than offset by the timing of cooling shipments. In 2016, we had unusually high concentration of cooling shipments in Q2. In 2017, we’re expecting full year growth in cooling, but shipments are more evenly distributed through the quarters compared to the prior year. Segment margin declined to 120 basis points in Q2, largely due to a less profitable sales mix associated with the timing of revenue from cooling shipments. Overall, we remain pleased with our teams continued focus on operational improvements in both the heating and cooling businesses. We remain on track to achieve our full year segment margin guidance for HVAC of approximately 16%. In Detection and Measurement, each of the product lines contributed strong segment results, with increased front log conversion driving significant increases in sales and margins. Revenues increased 7.3% in Q2 with an organic increase of 8.8%, partially offset by a negative currency effect. Sales of bus fare collection systems and obstruction lighting products were the key growth drivers. The order intake for communication technologies products was strong for both signal monitoring and obstruction lighting products. Last quarter, I indicated that we were more encouraged by the timing of front log conversion from these products, so we’re very pleased to see the solid Q2 order intake. Segment income margins were 26.8% or an increase of 670 basis points. This increase was primarily due to higher profit contribution from increased sales of bus fare collection systems, obstruction lighting products as well as lower SG&A spent associated to cost-reduction initiatives across the segment. For the year, we expect operating profit growth across our product lines – in all of our product lines in Detection and Measurement. However, quarterly margin variability can be impacted by project mix and timing, which are favorable factors in our Q2 segment results. Overall, a strong backlog and a longer cycle products and solid order trends in our book and turn products gives us confidence that we can now achieve segment revenue growth for the year a little above the high end of our long-term target range of 2% to 6%. In our Engineered Solutions segment, excluding the results of South African projects, revenues were approximately $163 million during the second quarter, down 4.1%, including a small favorable currency effect. The decline was primarily due to the timing of transformer shipments, which we continue to expect to be similar to 2016 level on a full year basis. When compared with the prior year, segment income increased $8.7 million, and margins improved 550 basis points to 9%. The increase was due primarily to a change in operating model that we’ve been implementing in our process cooling business, a favorable project mix and the benefit from restructuring actions taken in 2016. As a reminder, the operating model change comes with lower revenue profile and changes the way we participate in a broader market, which revenue growth in other areas of the business, we’ll touch on this more on our guidance update. Turning now to our financial position. Our balance sheet remained solid. We ended the quarter with cash and equivalents of around $84 million. Our net leverage was 2.2 times at the end of Q2, consistent with where we ended Q1. As a reminder, we exited the spin and a leverage ratio of 2.7 times, and this now marks the third consecutive quarter we have maintained operating leverage within our target range of 1.5 times to 2.5 times. Based on our typical cash flow seasonality and increased expectation for cash flows from our Core businesses, we expect to end the year with a net leverage ratio at or below the midpoint of our target range of 1.5 times to 2.5 times, which is slightly better than our previous communications. And we remain confident in our ability to deploy capital for actions to drive incremental shareholder value, including acquisitions and the growth focused areas of our company. For 2017, we are targeting greater than 100% cash flow conversion of our adjusted net income. And our projections to have capacity of $400 million of capital available for deployment over the next four years remain unchanged. The expectations we provide is around South Africa did not effect our estimate of capital available to deploy these changes were within the parameters of our capital planning models. And with that, I’ll turn the call back to Gene.

Thanks, Scott. Turning to an update of our end markets. Overall, SPX remains positioned to perform well over the second half of 2017. In HVAC cooling, the order pipeline continues to be solid, and the business is performing well at an operational level. In HVAC heating, demand in the second quarter was in line with our expectations. And our earnings guidance does not anticipate any improvements, driven by colder weather during 2017 compared with last year. In Detection and Measurement, we saw favorable trends in sales and orders, specifically, the order intake for communication technologies products were strong. We saw increased front log conversion in fare collection systems. And we expect obstruction lighting product sales to continue to be strong through the second half. Transformer pricing remains stable as the market continues to display consistent demand from medium-powered units, and lead times continue to average 30 to 40 weeks. Our Engineered Solutions segment continues to reflect the benefits of our business model shift in process cooling. And we continued to see improved bottom line results from our strategy to enhance our focus on components and our service business. Turning to our 2017 guidance. Our strong first half results and visibility into the remainder of the year give us confidence to increase our full year 2017 EPS guidance range to $1.65 to $1.75. We expect this year to have a more – a far more balanced first half to second half earnings profile compared with 2016. We now expect Core revenue to be in the range of $1.35 billion to $1.4 billion. We expect Core segment income margin to be approximately 13%, and expect adjusted operating income margin in the 8.5% to 9% range, all of which are above our previous ranges. We have also adjusted our segment guidance expectations. Our HVAC segment guidance remains unchanged with 2017 growth on the lower end of our 2% to 4% long-term target range and segment income margin of around 16%. In our Detection and Measurement segment, we now expect 2017 growth a little above the 2% to 6% long-term target range and approximately 23% segment income margin. We previously expected growth in the middle of the 2% to 6% range, with segment income margins between 21% and 22%. The margin increase is due to largely operating leverage on higher sales. In our Core Engineered Solutions segment, for 2017, we continue to expect an organic revenue decline in the mid-single digit percentages, reflecting our business model shift in process cooling. We also expect segment income margin of 6.5% to 7% compared with our prior guidance of 6% to 7%. As Scott mentioned, we want to provide some increased clarity on the revenue effect of the business model shift in Engineered Solutions. The changes in our strategy of how we participate in the process cooling market, with enhanced emphasis on components and service and less emphasis on full scope projects are driving a very favorable impact on segment profitability and margins. We expect that to continue. However, optically, the reduction in revenue from this change mask the underlying sales growth we are experiencing from new product initiatives and sales channel development efforts. To help illustrate the impact of this change, if you were to exclude from backlog the revenue that does not meet our revised criteria, we estimate the Engineered Solutions segment would have a baseline revenue of approximately $540 million to $560 million or about $60 million to $80 million lower than our current 2017 guidance implies. We expect that it will take until 2019 before our reported numbers fully reflect the impact of this business model change. Yet, we expect baseline revenues related to our underlying process cooling and transformer sales to continue growing at a GDP-type rate for low single digits. Additionally, in the appendix of today’s presentation, you’ll find updates for other factors to help you complete your model. In summary, overall, I’m very pleased with our second quarter performance and am excited about our path forward. Our margin expansion continued during the second quarter, with margins in both our Detection and Measurement and Core Engineered Solutions segments showing solid improvement. In South Africa, we are in the later stages of the project, although we still have work to do. We have accomplished a lot since this spin, and our actions leave us in a position to execute faster and with reduced risk. We’re excited about our growth potential and continued to execute on plans for new product and market growth across our businesses. We also continued to pursue inorganic growth opportunities with our primary focus on both on bolt-on acquisitions. We have an attractive target pipeline and look forward to providing an updates on these opportunities as they execute. As always, we plan to weigh these prospects opportunistically against other capital allocation actions and make choices that maximize shareholder value. We believe the plans that we have outlined put us on a solid path to drive sustainable, double-digit earnings growth. And now, I’ll turn the call back over to Paul.

Thanks, Gene. Terence, I think we are ready to go to questions now.

Thank you. [Operator Instructions] And our first question comes from the line of Ronnie Weiss from Credit Suisse. Your line is open.

Hey, good afternoon guys.

Hey, Ronnie.

Hey, Ronnie.

Just little more clarity around the cash outlook from South Africa. I’m implying $55 million for 2017 on the cash out flow, how much more is this kind of the original plan? And then how the rest that 60 to 70 outflow, does all that come into 2018 or some bleed into 2019 as well?

Ronald, let me start here, and I think it might make sense to step back and just trying to give a little bit of context in where we are in the South African projects and provide some perspective here. Just as a reminder, our primary objective here is to execute our scope of work as efficiently as quickly as possible. And since the spin, we’ve actually put a lot of effort in that, and we’ve made a lot of progress on that front. As a reminder, we descoped a major construction responsibility, which took out several years of construction work. And we have addressed issues with suppliers to ensure schedules will be met, which reduces our risk, and we’re investing in additional resources to further accelerate work. And in these projects, they certainly do have their projects, but I’m very proud of how we made – our team have made the right decision to get this work done. And as Scott had mentioned, by the end of the year, we will only have one of the five original scopes of work remaining. And with this acceleration, we’re basically moving our project material completion up one year to the end of 2019. So I think that there is a lot of activity going on. And we don’t think that the next two years are without risk, but for the first time, we feel confident enough about where we are and what is going to take to complete these projects to actually give a specific time frame for completion and a specific outlay of numbers for cash flows to complete the project. And as we’ve said before, we do view this as a finite life, amortizing liability very much like that. So we view this almost as a balance sheet matter that we take into consideration in our overall capital planning. So I think that we are going to continue to manage this tightly, but we don’t believe this is going to affect our ability on any of our current growth strategy. With the specific cash flow Scott, on the question that Ronnie brought up?

Yes. So, sure. Ronnie, as Gene just said and you all know, prior to today, we hadn’t provided a definitive value of what we expected cost or remaining cash flows to be on the project towards substantially complete. So based on where we are, based on the work that has been done and the actions that Gene and I both through our remarks, we’re feeling more – the confidence level to say what it’s going to be? So the charge in itself implies that it’s higher than what we anticipated, but it’s not materially higher than the originally anticipated spin. And as I said, that was factored into a broad range of outcomes factored into our capital planning model, we give our growth projections. But specific to the amounts for this year and putting that into context with the overall $60 million, $70 million remaining to spend, when we revised our estimates, part of the charge that we have incurred – being incurred as higher cash outflows this year and in future years. But there is also decisions that we’ve made around accelerating in adding resources, that is driving some of that higher cash this year. And the last factor that adding into this year is we had some milestones towards the end of the year for completions of work that have slit towards the end of this year. So we’ve – we just moved the cash receipt of those milestones into 2018. All those factors are into what you’re seeing here for the updated estimate of cash in 2017.

Okay, got it. And then look to the margins on kind of the Core Engineered Solutions, look at the guide slightly above the 6%, that was previously guided to, I look at the first half its about 8%. I guess – margin there, step down as we kind of move through this business model change? And why wouldn’t be kind of the same level as you saw in the first half there?

Yes. We’re obviously very pleased with the results we’re seeing in Engineered Solutions, the impact of the business model shift we’re talking about, and being able to guide to the ending the year on the 6.5% to 7% margins well with on our way to achieving our targets of 8% to 10% margins in this segment. When you look at Q2 in isolation and the 9% margins there, you can’t run rates those. As I said, on my comments, part of that is because we had strong project mix, which included some kind of one-time benefits on some project closeout activities. So there was some benefit there, that is not run ratable and we’re not foreseen that type of activity in the second half, but we do still see solid margin performance in the second half of the year.

Okay. And then Just real quickly lastly, that $60 million to $80 million that you’re planning on kind of winding down out of the backlog, how long do you anticipate that to take?

It will be going through this year and next. So you start getting into 2019 to get a normalized level of revenue profile for detection – I’m sorry for Engineered Solutions. There will be underlying GDP type growth that’s in the business, but it’s been overwhelmed by that execution of the backlog.

Got it, thanks guys.

And our next question comes from Robert Barry from Susquehanna. Your line is open.

Hey guys, good afternoon or good evening.

Hey, Robert.

Just a quickly follow up on the last question. I think you have guided cash outflow for South Africa this year of 20 to 25, right? And now, it’s 55?

That’s correct.

Okay. And I guess, that make sense, you’re just pulling things forward.

Yes. As I said, there is a combination of we’re adding additional resources. We did – as we said, we had – so we had experienced some higher cost as we close out certain scopes of work. And that is causing some higher spend, which is part of that’s coming in this year. And then the third factor is we’ve shifted some collections of receivables out in 2018 based on some of those milestone achievements going into the latter part of this year. So we’re just being conservative on when will that timing is going to happen.

Got you. And I think in the past, when you’ve given the data on the segment income phasing, 4Q is typically twice what 3Q is. Is that relevant this year?

It’s always our highest quarter. When you look at our first half, second half phasing, they’re going to be relatively consistent this year, much more consistent than they were last year, I should say. Fourth quarter will be the highest quarter. It’s always that way with the seasonality of our business, most notably the heating season within HVAC. And then the lot of our other products – our business are more backend loaded naturally. And then Q3 is generally a – certainly comparatively weaker quarter.

Got you. And within detection, I mean, I’m not sure, if that degree of improvement year-over-year was – what was in your plan. I mean, you raise the outlook there, so maybe it was a little bit ahead. But I think what’s guided now implies back half margins averaging in the low 20s, is that right? And I think there’s some seasonality there too? And is that based on what you kind of see in the backlog based on things like fare collection or was there some conservatives on there, that kind of step down?

So I would say – kind of your back of the envelope analysis there on the second half margins is directionally correct. We’re looking at for the full year, 250 bps to 300 bps of margin improvement in the business. And that’s obviously, we have taken that up from our previous guidance, which was based on the strength of Q2, both from the order activity level that we’ve seen, as well as in when he said communication technology that’s an area of the business where, we have been seeing the kind of front log continue shipping into the right. And when we saw in Q2, some real solid order intake in that business, which will execute in the second half. When you looking at Q2’s margins, we’re very pleased with those levels of margins. We’ve talked about in the past with this business as you get a lot of variability in your margins on a quarterly basis based on the level of projects and the mix of the projects and that’s what we saw in Q2. Again, not a margin level run rate, but over the second half of the year we are expecting margin improvement on a year-over-year basis, and then obviously pretty significant margin improvement, when you look at on full year basis.

Got it. And then maybe just lastly on the transformers. It sounds like some things were pushed right anything in particular driving that? And when do you expect that to come back in 3Q or 4Q?

I think was push, it’s just the timing of how shipments are falling of this year based on customer schedules. So it’s really not a push, it’s just really a year-over-year timing perspective. When you look at on a full year basis, we’re expecting very similar levels of shipment on a year-over-year basis on margin performance there.

Okay, thank you.

[Operator Instructions] And our next question comes from Damian Karas with UBS. Your line is open.

Hey, good evening guys.

Hey, Damian.

So I wanted to ask a little bit about the – some of these projects you’ve called out, you mentioned, some several follow-on orders on the Genfare Link and take the monitoring as well as construction lighting. I was hoping you could maybe give us an idea on how much visibility you have timing of those shipments, give a rough idea on that time horizon, for those two projects you mentioned as well as maybe some of those Genfare projects? And any color you could give a sort of on the front log visibility currently?

Hi, Damian, this is Gene here. I think in general, where we say with that Detection and Measurement business was a reminder, we think of these – this segment, its approximately two-thirds run rate, one-third projects. And what we’re seeing is generally positive momentum across all of our product lines. The run rate businesses are healthy and then our two project-based businesses are really fare collection and communication and technology. And as you correctly identified in the fare collection, we’ve had some nice strength there. And that’s something that we anticipate continuing over the next couple of years. As a reminder, the transportation bill has been a driver for that, and there is approximately five years of funding. And we see a lot of activity in that market. I think what is changed for us in the first half of the year is on the communications technology portion, in particular signal monitoring. Those projects, we’ve had a very active front log and seeing a lot of activity, but the conversion of the front log into orders has been slow. And has not been, because we are losing projects is because there were some delays in those projects. What you’ll see is that, we have started converting a lot of that – a lot of those backlog, and as you will see in the queue, our backlog is significantly up in Detection and Measurement. So we feel positive about the segment, and the initiatives that we have taken. I’d say the most important initiatives have been around the sales coverage model as well as some cost actions and a few of the product lines. But in general, we feel Detection and Measurement segment is on a positive trajectory and Scott, do you have anything else to add for Damian there?

Just look at this – and you look at this from the guidance change perspective, coming into the year, the book in turn businesses and serving the project aspect of our bus fare collection business were very healthy, strong businesses and all factored into our – under our guidance, relatively performing consistent with the guidance slightly above. What you’ve seen in this guidance is we’ve been talking about on the communication technology side signal monitoring side of the business, the order intake there had been sluggish and get the front log cap on sliding. So now we’re – we’ve seen that order intake in front log firm up in Q2 and showing a higher degree of confidence on what’s going to execute through the second half of this year. And that’s been one of the larger catalysts for the change in the guidance there in the segment. So we are optimistic, that will continue, we are cautiously optimistic that we will continue. Still, very healthy front log pipeline on the project site and very steady demand across the book and turn side of the business.

Okay. And then on the slide, you wrote active M&A pipeline, I think first-time seeing that. Should we take that maybe something similar here, you’re seeing more reasonable evaluation – anything to read from that comment?

I mean, I’d say that we are very active. I’m actually – I’ve been very pleased with the opportunities that we’re seeing that are out there. Having said that, we are going to be disciplined. But we believe our strategy is, we feel very good about our strategy and it’s always something that it’s hard to talk about until you’re there, but what I would say is, is our expressly stated strategy of really looking at bolt-ons that are predominantly right on top of our HVAC products with a little bit in our Detection and Measurement, we see a nice pipeline there. And I would say over the next 18 months, we’re going to keep working on the pipeline.

Terrific. All right, while I keep it to the single question and a follow-up. Thanks, guys.

Thanks, Damian.

And at this time, I’m showing no further questions.

Okay. Well, Terence, thank you very much. And thanks to all of you for joining us tonight. Look forward to updating you on our progress next quarter and feel free to reach out for questions. Thank you.