Jerry Gahlhoff: So yes that is something – that is a trend that we’ve seen as more and more pest control companies have gotten more mature in the digital space. We have seen say the Googles of the world be able to pass along higher cost to us in terms of – especially for things like pay-per-click things along those lines. So you see that rise. And I also want to point out just because demand is flat through say Google search data or something like that or it’s down 1% year-over-year or something along those lines, doesn’t mean you as a company can’t perform or take a larger share of that demand through – we have great marketing teams, certainly at Orkin and throughout some of our other brands as well that do some of the digital activity.
And they can achieve more with the dollars spent in that market. But back to your original question, we certainly have seen over time over the last several years an increase in digital cost of customer acquisition that makes that gap between door-to-door and digital certainly narrower, and so when you look at the door-to-door model you think that can be a pretty good model if you sell it right, and especially when you consider the door-to-door is selling you density because they’re working neighborhoods and you’re picking up a dense more dense populations than say onesie-twosie stuff coming in from all over a metropolitan area on the digital side. So, when you factor the efficiencies that door-to-door bakes in long term even though it’s a little bit more money upfront it may be it’s a really strong offering from a long-term standpoint as well.
Tim Mulrooney: Got it. Thank you.
Jerry Gahlhoff: You’re welcome.
Operator: Thank you. Our next question comes from the line of Josh Chan with UBS. Please proceed with your question.
Josh Chan: Hi, good morning Jerry and Ken. Congrats on a good quarter. I guess I wanted to ask about the customer acquisition split I guess. You mentioned digital and door-to-door mostly on this call but I guess of the ways that you acquire customers could you just give us like a rough ballpark on how what channels they typically come through in?
Jerry Gahlhoff: Got it. You’re asking like what percent of customers come through which channel?
Josh Chan: Yes exactly.
Jerry Gahlhoff: Yes we really don’t disclose that information.
Ken Krause: But I would say that today much larger portion comes through a digital channel or more comes outside of door-to-door then comes from door-to-door.
Jerry Gahlhoff: Yes. There’s digital. There’s the consumer awareness that makes the phone ring when they call our customer agents where — they know our brands. They know our name and they call us automatically and never have to go to Google to do a search because they’ve seen our name phone number they see a vehicle in the neighborhood and they make the phone call, right? So, the word of mouth is still a powerful channel. So, it’s really all those things that come into play to drive that but certainly digital is an important part. But we also don’t like to over-rely on it as well. And we also think about technician sales. We’ve put a great deal of emphasis. And one of the things that you learn in this business is when you’re not staffed your technicians don’t sell.
So, if they are — if they’re too swamped with too much work to do they’re not going to go out. And when that when somebody down the road talks to them they’re going to be a little less hesitant to want to sell that new job because it’s just more work for them. But when you’re staffed and you’re staffed to a healthy levels your technicians get engaged. So, we see increases in our technician sales and their activities as a result of our better staffing levels as well. So, it’s all these ways that we can acquire customers.
Josh Chan: Right. thanks Jerry. And then I guess on the restructuring side of things is there a way to think about the payback period of the cost? And what kind of savings you expect to generate from those efforts?
Ken Krause: Yes, it’s an attractive payback, Josh. Thanks for the question. When you look at the spend the $5-or-so million of spend, there’s probably close to $8 million to $10 million of compensation associated with that. So, my experience has been a one-year payback is very acceptable. You can see a six-month payback and a spend associated with the restructuring here. With that said, I think if you look at the prepared commentary, we’re focused on reinvesting as well. And so there is an opportunity to reinvest in new talent new talent like Lindsey. She kicked off the call today, our new Head of IR, new folks across all of finance and accounting IT, we’re making significant changes in as well. And other back-office functions. So, we’re looking at how do we upgrade the talent, how do we improve, how do we modernize what we do. And some of that is going to take some reinvestment of that $8 million to $10 million.
Josh Chan: Sure. That makes a lot of sense. Thanks Ken. Thank you both for your time.
Ken Krause: Thank you.
Operator: Thank you. Our next question comes from the line of Aadit Shrestha with Stifel. Please proceed with your question.
Aadit Shrestha: Good morning. Thanks for taking my questions and congratulations on a strong quarter again. So, what was the internal cost inflation? Is it still predominantly fleet related? And how do we how has this trended actually through the year? And just kind of related to that you talked about price/cost spread it remains positive. I think it was around 50 basis points. How has that trended versus 2Q or 1Q? And how do we think about it for remainder of the year and into 2024?
Ken Krause: So, it’s Ken. I think I’ll take that question. Our focus is to continue to have a positive positively manage the price/cost equation. If you look at the input costs in our business, a large percentage on a cost of services provided are people costs materials and fleet. For the most part, we’ve done a really good job at leveraging and improving the efficiency over those costs throughout 2023. If I go back to Q2, for example, we saw improvements in margin some of that was related to Fox. We also had headwinds if you remember from the casualty reserve. But when you separate those two, in the second quarter, we saw improved margin similar to what we saw this quarter. What we saw this quarter was outsized improvement associated with the casualty claims and insurance costs.
If you go back to last year in the third quarter we were very transparent in talking about a very unfavorable headwind associated with insurance and claims. So, we were able to see improvement from what we saw last year. But our focus is to continue to be positive on the price/cost equation. Really the only headwind we saw in the quarter within our organic cost was in fleet which specifically was related to lower gains on the sale of leased vehicles. We actually talked about that in Q2 and highlighted that we would be seeing some of that here in Q3 we did see it but we were able to fully offset that and see improvements. And so that’s the focus continued improvement in margins as we go forward.
