Toni Kaplan: Terrific. Thank you.
Jerry Gahlhoff: Thank you.
Operator: [Operator Instructions]. Our next question is from Stephanie Moore with Jefferies. Please proceed with your question.
Stephanie Moore: Hi, good morning. Thank you.
Kenneth Krause: Good morning.
Stephanie Moore: I was hoping you could touch a little bit on maybe what you’re seeing on the unit cost inflation side, some key areas. You give a little bit about labor, but maybe just across the board, labor, materials, equipment, the likes and kind of expectations for 2024 versus what you saw, experienced in 2023? Thanks.
Kenneth Krause: When we look across the cost structure, we look at our people costs, we look at our material supplies, we look at our fleet. Those are the 3 major drivers of cost in addition to insurance and claims, which sometimes can be less controllable, not completely controllable as much as some of the other areas. But we’re pretty pleased with the leverage we saw on the organic side of our business across those 3 cost categories. We continue to benefit from lower gas prices, slightly lower gas prices, lower oil prices. That’s definitely beneficial on the fleet side of our business. The interest rate environment certainly is less favorable from a leasing perspective. But we continue to focus on pricing the value of our services so that our gross margins will continue to improve and step higher.
We were pleased with the 50 basis points we saw this past year on the gross margin side of our — organic side of gross margin, and we’re continuing to focus on leveraging our cost structure in a similar fashion going forward.
Jerry Gahlhoff: And Stephanie, I would add, we do have some concerns about truck prices rising. Some of these fleet vehicles or costs are going up. As Ken mentioned, there’s always the wild card as fuel prices and fluctuations we have there. On the M&S side, we just completed an RFP on our insecticides and termiticides, trying to ensure our pricing is in line on that and trying to generate some savings or at least offset the — as much as we can, some of the price increases that are being passed along to us from some of our suppliers. So those are all things that are top of mind for us that we’ll keep focused on through the year.
Stephanie Moore: Great. No, that’s helpful. And then, I mean, I guess just as a follow-up, I’m just trying to piece together the idea of similar price increases in 2024 versus 2023 but it sounds like the — inflation is supposedly coming down here in 2024. So I guess what you’re saying is it’s probably still a little too early to tell if the inflationary side will have that material — will step down in 2024. Is that kind of the right way to interpret that?
Jerry Gahlhoff: That’s — yes, that’s what I’m hitting at. There’s still — there’s some unknowns, there may be still some costs that we don’t know. And you look at the inflation data that demonstrate that it’s not necessarily slowing as fast as we all would probably like it to. So we’re still — we’re cautiously optimistic there.
Stephanie Moore: Great. And then just lastly, on M&A and kind of M&A activity, any changes in terms of pipeline or willingness of sellers that you’ve seen as of late? Thanks.
Jerry Gahlhoff: I don’t think there’s any significant change. There’s still good deal flow out there. We — there’s good businesses that are out there for sale. And while — from a quarter-to-quarter basis, there’s some ebbs and flows to that kind of volume that we get to see or look at. But there’s still plenty of good business out there that are potentially worth acquiring. So we’ve gotten off to a good start already in January. We feel good about our pipeline. We’re actually a little ahead of where we were last year in that regard. But last year, keep in mind, in January, February, we announced the Fox deal in April, we were heads down working on the Fox deal. So we put a lot of stuff aside to focus on that. So now we’re back to kind of business as usual and looking at normal deal flow.
Stephanie Moore: Great. Thank you guys so much.
Operator: Thank you. Our next question is from John Mazzoni with Wells Fargo. Please proceed with your question.
John Mazzoni: Quickly, yes. So maybe quickly, just to touch on the price/cost spread. Looking at the kind of improvements in the driver safety score and that KPI, could you just help us understand how that can flow through to kind of lower insurance-related costs going forward? And what’s the typical timing or delay? I mean, this is probably not going to be a kind of near-term item, but could we expect in the back half of the year? Or would it be something that has a longer variable lag? Thanks.
Kenneth Krause: It’s a hard thing to predict, John, when you look at that trend line because it does take quite a while to work its way through. The last 12 months or so year-over-year, insurance and claims costs were negative for us despite not having large payouts, large claims that we settled like we did a year or so ago. But with that said, we’re hopeful that it will improve. When we look at safety, it’s not just about the financials either, it’s about our people. And so when we think about our people-first culture, we want people to be safe. We want them to return home each and every night and that’s really the focus here. It’s how we make sure our drivers are safe and the communities that they continue to work and remain very safe, and they can get home each and every day.
So we’re focused on the people side. By doing the right thing, ultimately, the financials will improve. And that’s the focus here. As we think about the future in the next several years, that we’ll continue to see improvements on safety. People will be safe and we’ll see the benefits of that come through our financial statement.
John Mazzoni: Great color. And then maybe just the last one is around kind of a preview of the Investor Day. Anything that we could kind of look forward to, maybe around technology or capital allocation? Or should we just stay tuned? Thanks.
Kenneth Krause: Yes. I would say, stay tuned, but we’re really excited to get back to New York and to spend time with our investment community, talking about our growth prospects, our strategic priorities for the future, talking about how we will continue to expect the investments and growth initiatives. We’re just really excited to spend the day talking about the future of this great company.
John Mazzoni: Sounds great. Looking forward to it.
Kenneth Krause: Thank you, John.
Jerry Gahlhoff: Thanks, John.
Operator: Thank you. This concludes the Q&A portion of the call. I will now hand the call back to management for any closing comments.
Jerry Gahlhoff: Thank you, everyone, for joining us today. We appreciate your interest in our company, and we look forward to speaking with you on our first quarter earnings call in a few months. Thank you.
Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
