Holden Lewis: And the delevering of our trucking network. So I think, first off, you have that sequential headwind. Now, in the past, I’ve argued that it might be slightly more muted into Q4, but that was also based on a lot of freight advantage. Now, I will tell you in the third quarter, we’ve begun to see cyclically, sometimes when things get challenging you can see some of your freight revenue piece begin to soften a little bit. And we saw some of that during the third quarter. And the leverage that you get when you grow the freight revenues reverses when you don’t. And that was a bit of a challenge at the end of the third quarter that if that carries into the fourth quarter because demand is still weak, I think that, that goes from something that was doing fantastically for us in Q2 and becomes perhaps a little bit weaker.
So I think that plays out perhaps a little bit softer as well. And then I guess I do believe that there’ll be some moderation in price cost. So I think relative to the third quarter level, I think you’re likely to see the fourth quarter come down a little bit greater than normal seasonality in this case.
Patrick Baumann: Great. Helpful color. I really appreciate that. And then, I got one more in terms of the branch size now. It looks like it’s close to that target you laid out in the fourth quarter, around the fourth quarter conference call, I think you said 1,450 for U.S. plus Canada. So maybe if you could update us on [Technical Difficulty] is that for now? And then a couple of things in context of that, like how should we think about that sales momentum in the non-res and reseller accounts, which I think has been hurt by some of this consolidation and then also the occupancy expense account where I think you’ve been benefiting from some of that in terms of costs coming out of the business? Thanks for any color on that. I appreciate it.
Holden Lewis: That may be four questions.
Dan Florness: Yeah. I’ll try to unpack that in reverse order. And if I missed something, help me out. But first off, branch count 1,450 is our target number. That’s not a — we’re at this number and an edict comes out that says thou shalt not close or thou shalt not open. That number could — perhaps we should talk in ranges instead of exact points because 1,450 was what our internal team identified as a target number, looking at demographics, and I believe it, I don’t have the stat in front of me, so if I’m wrong, I apologize, I would have been in the flipbook from the first — from January. But I believe at 1,450, we were within 30 minutes of 93% of the U.S. manufacturing base and so it’s a theoretical number. Could I see it go down to 1,400, yes.
Could I see it go to 1,500, yes. The closure piece will become ever quieter. And as we move into 2024, I know just yesterday, I was chatting with Casey and Jeff about some of that and what they’re seeing because there’s still a few closures on the horizon. Part of it is reminding folks that the openings are okay, too. And so I think we’ll be in that 1,400, 1,500 range. So don’t read anything into it moving up or down 20.
Holden Lewis: And then since it wraps into the concept, what you will see is as the rate of closings moderate versus the last several years, you’re going to have a little bit less of an incremental sort of take out of costs than we’ve had over the last several years. We still believe occupancy is ultimately leverageable but you had inflation at the same time that you had close things that tended to offset one another, and that’s going to moderate as you go into 2024 and beyond to some degree, so.
Dan Florness: If I look at occupancy in the third quarter, we actually didn’t leverage it. And part of the reason for that is within occupancy, we have two components. We have our branch and Onsite network. We have, obviously, our distribution centers. But we also have our FMI, our vending and FASTBin. And the reason we classify that as occupancy. When we started vending 15-plus years ago, looked at it and said, a vending machine is basically a shelf. We’ve taken a shelf out of the branch. We’ve wrapped it in a metal box, and we put that shelf in the customer’s facility, but it’s a shelf. And we really challenged our district leaders to think about that as occupancy on our internal P&L. We classify it as occupancy because if a branch grows from 100 to 150 and for simple purposes, let’s just say that, that 50,000 of growth is all vending.
I shouldn’t need a bigger building. And my occupancy grows because I have the depreciation and expense associated with my vending platform. And it was a way of more holistic about it. Our FMI numbers, as you know, we’re signing 95 devices a day. Our FMI grew 6%. And our expenses within occupancy, and that was about 55%. So our occupancy grew just under 4%. And about 55% of that related to vending. But even though we closed some branches and closed some locations, our rent has not gotten cheaper in the last 12 months, and we will continue to be challenged with that. One of the things we’ve talked about on prior calls is the thing we call Lyft. And Lyft is about efficiency of where we’re picking the product to replenish FMI vending today with FMI more broadly.
But it also — if I have a 50 vending machines out of — that are serviced out of a branch, and I don’t need to stock all of that inventory in the local branch because I’m picking it in an automated distribution center in a highly efficient way. Now that distribution center isn’t free, but I also don’t need to expand the footprint of my branch because I freed up 40 feet of shelving that was dedicated to FAST vending in the past. But it’s given us some challenges on the fact that occupancy has grown. And as you can imagine, the further you get from the middle of the country, the more expensive the space gets and when you get into some of our businesses in Europe, it’s more expensive than it is in Winona, Minnesota. But I feel good about our ability over time to continue to manage that and lever it, as I said with our FMI, that business is growing quite handsomely, and we grew our expense to 6%, so we levered that nicely.
