Dan Florness: Yes. So you talked about more variable, less variable. That answer will change over time, Dave. If I think of 2022, a big chunk of our compensation programs, whether that be to our district leadership, the leadership in a lot of support areas, our regional leadership, our executive leadership. If you look at all those groups, a big driver of pay is growth in pretax. And if you think about that from the context of — you look at it from the last — the 5 years prior to 2022, we’re growing our pretax ex. And in 2022, we grew our pretax ex x2. So there was a very sizable increase in incentive comp that was paid out in 2022 versus the prior years. And that actually aid into quite a bit of our efficiencies during the year if you look at it just from a P&L perspective and a labor efficiency because that’s a meaningful payout.
Depending on what you conclude our earnings growth will be in 2023, I suspect it will be a smaller number than 2022. And that will cause in the 2023 time frame variable to actually be higher than it had been in the last few years because of that swing. If I look at things that we have done historically in the model, if you’re opening branches every year, you’re adding a fixed layer of expenses every year. If you’re adding people into those branches, you’re not getting a lot of revenue and gross profit dollars for those ads. There’s a fixed layer that you’re adding. That really isn’t part of our model anymore. And — because when we’re adding labor into new units, it’s going into an Onsite, and we’re going into Onsite because we’re — we have an understanding with the customer of what’s going to ramp up, and that ramps up a lot faster than historical branch network would.
So from that standpoint, in 2023, more variable. As we move out over time, it’s going to depend on what the economy is doing, and is it pulling us up or pushing us back as far as our ability to grow our earnings. And — but I think you also have our ability to manage headcount in a much different way today than we could have. If you’re adding 100 branches, you need 200 people to go into those branches on day 1. And that element has changed. And so it gives us the ability to manage the P&L in a fundamentally different way. The other piece is, while this doesn’t tie right to your variability question, as we’re growing things like LIFT, it allows us to create efficiency, the leverage that Holden talks about. And that’s going to keep building over time because we’re at about 17% of our devices today are supported through LIFT.
That was about 5,000 a year ago and that’s going to continue to grow over time. And that just allows us to either remove a layer of expense as well as a layer of assets or invest in selling energy faster or accommodation of the 2. So I hope that answers your question, and — but it’s about the year you’re asking it to, but in 2023, there’s a little bit more variability.
Holden Lewis : Yes. But I would say looking over the course of the cycle, Dave, I don’t think our variability has changed. I think what we’ve done is we’ve reduced the level that our SG&A as a percentage of sales over time can decline to without impairing our levels of service, our ability to grow, et cetera. So I think we’ve reduced our floor of operating expenses to sales. I don’t think the variability of our cost structure has changed much.
Operator: Our next questions come from the line of Josh Pokrzywinski with Morgan Stanley.
