Mike Witzeman: Joanna, I think it’s important that the components of how we got back of 2019 are a little bit important, as Nick mentioned. So we have seen a significant amount of wage compression and issues and — issues with wages going up faster than our reimbursement. But we’ve been able to effectively keep a lot of the efficiencies that Nick and his team at VITAS were able to garner through the pandemic and telehealth and those sorts of things. So we’ve offset some of those wage pressures with other efficiencies. I think we think there’s some opportunity for future margin expansion, but it’s not going to be any big bang kind of expansion. There’s going to be incremental, methodical increases, call it 2025 and beyond.
Nick Westfall: And everything we’re going to do is focused on continued sustainability of the business, not maximizing short-term, near one quarter marginal contribution.
Joanna Gajuk: No, I appreciate that. Thank you. Thank you for those comments. And I guess the similar question on the Roto-Rooter, so sounds like for 2024, your guidance calls for, I guess, maybe a little bit less than what you described in prior calls when it comes to long-term growth. So I guess a similar two part question. What gives you confidence you can grow faster I guess 2024 versus 2023, and it sounds like pricing, I guess, is the driver there. But then how do we think about growth after that? Like is it fair to assume that kind of 4% growth is sustainable growth, or should it kind of snap back to something a little bit higher in years after, when the economy, I guess, sees in a different spot? Thank you.
Kevin McNamara: Yes. I just make a couple of comments about Roto-Rooter. I mean it’s tough. We’ve really never had a period where the telephone has stopped ringing so suddenly. We think there’s reasons for that. I mean basically, if you said what I really think the reason is driving it is that we had a sustained period where inflation was far above wage gains in the country and that environment has shifted. It’s going to take some time to recover from that. But that’s macroeconomics. I mean, we’re small company in Cincinnati, I mean so that’s for the economists in the areas of Chicago to flesh out. What our belief is that it’s a tough patch. I mean, the good thing about that is when we say that we’re seeing this throughout the industry, certainly our system with regard to franchisees and contractors and whatnot.
The good news is I think it’s going to give us an opportunity to buy some franchises, to be honest with you, because that’s the time when they become available. So that’s the silver lining. Now with regard to looking out for the future, I think that when all the dust continues to settle on Google marketing, which is a problem now, because in this tough sales environment, we’re spending a lot more on Google marketing than we were a year ago. But when the dust settles, we have such a competitive advantage, and that is each call for service in this industry, because we have a broad service line that is plumbing, drain cleaning, excavation, water restoration each call is more valuable to us and we will be able to afford to pay more for those leads.
And I guess when the dust settles and there’s a proper pipe setting mechanism for that, we’re going to have a huge comparative advantage. So we feel very good when you talk about sort of I mean our relative position is very good in the industry as it improves. Now, the question of how high is up for the industry? You got to remember that we provide services to houses and apartments and small businesses generally. So the question is what are the formation rates for those three sectors? They’re not 10%, they’re less than that. So we have a — we’ll be providing services to a fairly stable, patient, patient of us, fairly solid customer base and we’ll just be hoping to take market share with the continued aging of the blue collar workforce. So steady as she goes on Roto-Rooter, but very — very — continues to be a very solid business.
The first quarter of last year was through the roof, largely caused by very unusual. We don’t like to talk about weather issues, but January of last year — December and January of last year were just very unusual weather events. And so we’ve mentioned it a lot just to warn everybody that it’s going to be a tough comparison, certainly through December and January, but as we get to the rest of the year, it’s much easier comparison.
Nick Westfall: Joanna, I think from a 2024 perspective, we’ve — the guidance we’ve given is pretty straight down the middle. I think we think it’s achievable, but it definitely assumes a level of improved consumer sentiment and consumer demand sequentially as the year goes on. So we’re thinking a little demand volume improvement in the second quarter, a little more in the third, a little more in the fourth. So we have definitely assumed some improving economic indicators and economic performance towards the end of the year and then as far as 2025 and beyond. I would think somewhere in that 4% to 6% revenue range is probably a fairly sustainable path when you think about price increases. And then as Kevin mentioned, some demand improvement given our positioning in the industry and our positioning with Google Advertising and those sorts of things.
Joanna Gajuk: And the very last question, just to tie all these things out when it comes to the margin outlook for that segment, for the Rooter. So the guidance implies some improvement year-over-year in 2024 because I guess you assume top-line is growing. So how should you think about margins going forward in the Roto-Rooter if you grow, like you said, 4% to 6%. Is this enough to kind of drive margins higher over time? Thank you.
Mike Witzeman: I think it’ll drive margins higher. But again, if there’s not going to be any big bang jump, 200 or 300 basis points are going to be methodically improving as we obtain leverage on that top-line growth.
Kevin McNamara: Keep on the Google marketing, I mean, we’re spending $1 million a month more on that. I say when we say the dust settle on that, it’s a short-term jolt to we think it’s all accretive, but it’s on a comparative basis, it’s a little bit of a jolt to margin. And the kind of singles and doubles that Mike is talking about as far as the improvements does first have to overcome that jolt.
