Eric Gerstenberg: Yes. And just to reiterate one other final point. Each quarter this year, as you know, Michael, our performance in the ES segment has outpaced our expectations. And we continue to have margin expansion throughout the course of the year to back up what Mike was saying. So very strong outlook in ES continues.
Michael Hoffman: So one of the things — and I’m going to oversimplify this, and it’s not that Clean Harbors was never been pricing. But I think that the industrial waste industry has adopted a pricing mantra coming out of hyperinflation that is different than history. What comfort can you give us all that discipline can — it didn’t get tarnished in 3Q or going into 4Q and is in case is sustainable. You can manage an overall price cost spread, and therefore, it’s a component of organic growth and operating leverage going into ’24.
Eric Dugas: Yes, Michael, it’s Eric Dugas. I’ll take this one and then I’ll allow Eric and Mike to kind of chime in. But pricing continues to be a strategic initiative of ours. In Q3 here for the reasons we’ve discussed, we did have the plant challenges. We did have a small mix change for some of the streams that we didn’t see come through that are coming back through in October here. But I would think going forward pricing will continue to remain quite strong. And just to kind of provide a little color in more recent times, we’re seeing kind of early returns in October here where the volumes are extremely strong. The trend volumes are at kind of an annual high here. And really, that just gives us some good evidence that going forward, pricing momentum remains.
Eric Gerstenberg: Thanks, Michael. Just to add, we’re going to successfully hit our target this year of over $200 million of price increases to really occur of what’s been happening with inflation across the business and expand our margins. As we go into next year, we fully anticipate that we’ll hit a goal north of $150 million. And that’s going to be tempered a little based on inflation coming down a little bit. But we have — we continue to be very regimented on our approach of making sure our price improvement helps us to expand in margins, but also continues to accelerate past our increase in costs.
Mike Battles: Yes, Michael. And one last point that both of those points are really sound from Eric and Eric, but the — what allows us to get that price is that the sales pipeline remains very strong. And I want to make sure that people on the call understand that, that our sales pipeline as we go into Q3, it was actually higher than Q2 and the higher has been all year. So when you think about — in pipeline, they’re just at their sales pipeline. Sometimes they don’t materialize. But make no mistake that we feel good about going — allowing us to get that price is the pipeline that allows us to kind of continue to drive that price.
Michael Hoffman: Okay. And then this is a nuanced question, Eric Dugas. In the revised EBITDA buildup, you have about a $16 million dip at the midpoint in net income, but you only have a $10 million in cash flow from operations. So is there a working capital savings that’s been captured to help keep the free cash at that midpoint of $315 million?
Eric Dugas: Yes, I think that’s right, Michael. We are seeing some good improvement here on the working capital side and just looking at kind of trends and how it plays out in Q4. That’s exactly kind of how we’re thinking about it.
Michael Hoffman: And you’ll keep — you’ll be able to hold on to that going to next year. This isn’t a timing issue. This is structural.
Eric Dugas: Correct. Free cash flow next year continues to look pretty strong.
Operator: Our next question comes from the line of David Manthey with Baird.
David Manthey: First question, should you read anything into the fact that deferred revenues ticked down a bit sequentially despite the lower-than-expected utilization. And then if you could talk about the price mix and the backlog, I think you might have mentioned it, but is the value sitting there higher than what you incinerated this quarter?
Eric Gerstenberg: Yes, David, this is Eric. I’ll take that. Yes, we did have a slight tick down in the deferred inventory. However, based on that pull forward of our turnaround, our incineration drum deferred inventory actually went up throughout the quarter. So we continue to have significant drum inventory to work off as we proceed through the fourth quarter and into 2024. So that really makes up the substantial part of the difference there.
Mike Battles: And Dave, I’m not sure if you’re asking about price of mix. So pricing in incineration was low single digits, 3%, I think, was the number. But really, that’s pricing up 8% or 9% and mix kind of bringing it back down to 3%. And so that’s really what’s happening here. So the pricing that we talked about with Michael and other investors, that remains very strong going into 2024.
David Manthey: Got it. And then second, on a mid-80s incinerator utilization you’ve been reporting lately, at the time in the past, that used to be consistently 90% plus. Is utilization going to be lower on a secular basis today for some reason? Or is that extra, say, 5% of future opportunity?
Eric Gerstenberg: Yes, Dave, I’ll take that. This is Eric. Our incineration utilization each quarter of this year, our low point was the first quarter where we were dealing with some of those freeze issues. Our expected annual utilization would be in the high 80s on an annual basis. This year, we’ll come in at that 85%, 86%, 87% on an annual basis. . The reason that incineration utilization runs in that area is because of our focus on really managing significant amount of drums and high-value direct burn waste stream, which puts it in that midpoint. As we look at project business, other things that would add on to the utilization, such as the things that are out there, as PFOS opportunities are up for the project business coming from super fund sites. That’s where we would leverage that incinerator utilization into those very high 80s and into the low 90s area.
Mike Battles: And just to clarify for some investors that we have a 70,000 ton incinerator in El Dorado, Arkansas. A down day is a lot of production. We don’t assume any days in that calculation. So that when we say kind of high 80s, that’s assuming a normal amount kind of down days. And so that’s really the – I want to make sure people understand that we’ll never get to 100% because there will be – we take those plants down twice a year, and for maintenance. And so those are part of the calculation of utilization.
