Rob Wertheimer: Perfect. That answers that if I’m allowed. You guys have some experience with megaprojects by now and I know there’s a lot of different kinds of megaprojects running from LNG to airport to semiconductors to whatever. But there’s a lot of just questions if commercial or office or whatever construction declines and megas rise, do you have a sense if on a dollar for dollar basis you lose a dollar in one, you gain a dollar in the other? If that’s materially different on mix and I’ll stop there. Materially different.
Matthew Flannery: On what? Rob? On mix. On mix. So if you lose a mix so you lose a dollar of office construction, you lose a certain amount of revenue, you gain a dollar of mega construction, you gain a certain amount of revenue.
Rob Wertheimer: How does that shift out for you? Thank you. Thanks Rob. Take that. So we’re probably thinking more about if you’re thinking about what that larger customer, larger project, longer duration rental does from a mixed perspective there’s a bigger variance if you’re thinking about just transactional business. So certainly our largest customers get a little bit leverage out of their spend with us than Joe the plumber walking in the store. So that’s where the biggest gap is. But one of the reasons why we built a go to market to make sure we specifically cater to these large customers, large projects and large plants is because when you could put those big block of revenues to work at one site you could serve them much more efficiently.
So on the top line there may be some variance certainly between your transactional business in the top line rate that you charge but margin wise, we historically don’t see much of a difference because of that lower cost serve and that’s why we’ve built this go to market to cater to those projects. Thanks.
Operator: Thank you. Our next question comes from Stephen Fisher with UBS. Please go ahead.
Stephen Fisher: Thanks. Good morning. Just to follow up on the megaproject discussion, I’m curious if you could talk a little bit about what’s happening beneath the surface there on the megaprojects within your pipeline. Obviously there’s some headlines about some projects experiencing some delays, but I guess to what extent are any new ones coming onto the radar screen as well? Or is it more like just a known population at this point? Curious about just the flow of what you’re seeing in the market opportunities there.
Matthew Flannery: Sure Steve. I would call the handful, I think it’s less than a handful somewhere four or five projects that have hit the headlines are really not relevant to the whole pipeline that we’re tracking. And to be fair, I’d say the same about new ones coming on. We do find out about new things coming on all the time, but the basis is pretty robust and pretty well known quantity and we’ve been tracking that and that number remains strong at a steady level. When we think about the other thing about these handful of projects, none of them are macroeconomic related. Right. There are some delays that you’d call political, maybe that there was a Chinese partner that one of the plants was dealing with that got some noise about, others are permitting.
There was a job in South Carolina that got delayed because some environmental potential issues that they have to work through. So we’re not seeing things that are slowed down because there’s economic issues. It’s really more just individual issues that are coming up for each of these projects. So not anything that we’re concerned about. There’s still a robust pipeline of jobs, many of which we have fleet on today and many of which we know are coming out of the ground in 2024.
Stephen Fisher: Great. And then just a bigger picture question about Ahern when we think about next year, are there actual tailwinds in 24 from Ahern or is it more just kind of like a neutral? You said kind of just lapping the utilization. And what about the synergies? I know there have been some plans about synergies, so I’m curious if it’s actually going to be adding from Ahern next year. Just sort of like a neutral. I would call it more neutral.
Matthew Flannery: I would call it more well scrambled at this point other than some of the cleanup we’re doing and certainly will be by year end when we lap the anniversary. As far as the synergies, we did a good job. We’ll meet the synergies that we had guided towards and that we had targeted by year end. We’re pretty close to done with them now, so we’re in good shape there and it’ll be nice to have a little bit cleaner view to share with you all. No more pro forma as reported. I know it’s been confusing on some of the metrics specifically and all that will be cleaned up by year end.
Stephen Fisher: Terrific. Thank you very much.
Operator: Thank you. Our next question comes from Jerry Revich with Goldman Sachs. Please go ahead.
Clay Williams: Hi. Yes, this is Clay Williams on for Jerry Revich. Quick question. One of the hallmarks of your acquisition strategy has been the ability to get acquired businesses to post utilization and margins that are typically in line with the base business. As we approach the one year anniversary on Ahern, when do you this asset can have comparable fleet productivity and margins as the base business or still work to do there.
Matthew Flannery: So usually we say as far so is there a differentiation? Right. So the asset attributes, which would be more the fleet productivity will get there next year, right? Somewhere around. But you have to remember it would be a like for like asset. They didn’t have specialty, they didn’t have some of the higher dollar UT items. But when you think about their assets that we bought from them, by next year we expect them to look the performance to look like the assets that we own in that category. Now, when you think about margin, to get all of our processes implemented in their stores, it usually takes a little longer. Now you’re talking somewhere between 18 months, two years, depending on how fast we move. So there’ll be a little bit of drag still on the operations of those stores as they implement all the new activity, the new tools. But from the fleet productivity, it should be mostly realized by next year.
Ted Grace: The one thing I might add, and just for everybody’s benefit, each deal certainly has its unique profile from a margin standpoint. Just for clarity’s sake, we’ve talked about this pretty extensively, but the deals we do tend to be margin dilutive structurally. That’s not to say they’re not very good deals economically, the returns have clearly been very attractive. But if you think about Ahern, they were doing 35% EBITDA margins, LTM fully synergized. They were going to be sub 40. That was the same thing for Blue Line, I think NES fully synergized, they would have been 42. NEF was closer. But certainly if you look at GFN, they were doing LTM EBITDA margins at 27. They were in the low 30s synergized. And that same thing was true with Baker.
So we do a great job. We take pride in the fact that we’re able to integrate these companies and extract a lot of value, including through cost energies. But there has been that just Greg, I’m sure you appreciate that, but for other people’s benefit, I just want to make sure we added that.
Clay Williams: Thanks, appreciate it. And on guidance, midpoint of guidance implies margins are slightly up sequentially in Q four versus three Q. This is better than a normal seasonality? What’s improving versus normal seasonality? Or should we not be looking at it from a midpoint to midpoint? Thanks.
Matthew Flannery: Yeah, we have always been consistent in telling people, don’t anchor to midpoint. And it’s not to kind of give a winker or nod which direction you should be thinking. But we’ve given that range, that’s kind of where we feel comfortable indicating fourth quarter, but beyond that, we don’t give quarterly guidance, as you know.
Operator: We’ll take our next question from Tim Thein with Citigroup. Please go ahead.
Tim Thein: Thank you. Good morning, Matt. back to your earlier comments on that. You expect fleet productivity to be positive in 24. Do you still believe that or confident in terms of the ability to exceed inflation? I know you mentioned positive, but is your expectation that can be positive in excess of inflation? And to that point you mentioned the dollars you’ll be replacing upwards of 20%. Is that just as you think about bringing in more fleet today, that you’re dropping out from seven, eight years ago? Is that one and a half percent number close to what you think actual inflation rate should be in this environment?
