With respect to how we executed in Q1 that gave us confidence in raising the margin outlook. I would tell you, we saw a really strong margin performance in the fourth quarter, really beginning in the third quarter of 2023, but again in Q4. And because Q4 and Q1 on a seasonally adjusted basis tend to be lower volume and lower margin quarters for us, we really wanted to preserve some of the upside potential until we saw some of the normal seasonal upticks in our business in the second quarter, but with the strong performance in the first quarter, we really could not wait to reflect that we now expect a full year that will hit that 100 margin — 100 basis points of margin expansion.
John Morris: I mean, I think, the risk there, Devina, was, as we discussed it, Bryan, the risk was with such a strong performance, if we didn’t raise guidance, there might’ve been questions on this call about, so is there something that we’re not seeing that you’re seeing, is there something that you had that benefited you, and of course, Devina already answered that. The answer was no. But we were a little concerned that if we didn’t raise margin after such a huge margin performance, that by the way, was on the heels of two other quarters, that you might start asking questions about it, are we missing something and you’re not missing anything, we’re just improving the margin that much.
Bryan Burgmeier: Got it. Got it. Thanks for that detail. Last question for me is, I know we were waiting for a little bit more detail on the investment tax credits and it seems like you put a comment in the press release, $37 million in 1Q, $145 million for the year. I guess I’m just curious if that was kind of in line with your original expectations and are we still kind of tracking for like a $300 million benefit over the course of your investments through 2026? Thank you. Good luck in the quarter. I’ll turn it over.
Devina Rankin: Great. Thank you. So, our original expectations for 2024 were $120 million. So our current outlook of $145 million is a $25 million increase of the ITC benefit in 2024 specifically. With regard to our full outlook for ITC capture over the development plan that we have outlined, we are tracking toward the high end of the original range of $250 million to $300 million.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Jerry Revich with Goldman Sachs. Your line is open.
Jerry Revich: Yes. Hi. Good morning, everyone.
Jim Fish: Good morning.
Devina Rankin: Good morning, Jerry.
Jerry Revich: Really nice performance this quarter and over time you folks have consistently expanded margins by 20 basis points, 30 basis points per year, almost like clockwork. And I’m wondering, as we think about the long-term plan from here, should we be thinking about 2025 as a lower year of margin expansion, because we’re getting such good price cost spread this year or does that not factor into how you’re thinking about the longer term plan that you folks unveiled what six months or nine months ago?
Devina Rankin: It’s a great question and while it’s a little too early for us to be looking to specifically set guidance for 2025, I do agree with you that there are some fundamentals that would make us a little more cautious to effectively repeating a 20-basis-point to 30-basis-point margin expansion year-on-year. But that being said, I would tell you there are some fundamentals with respect to what we’re seeing that we know have additional runway and growth, and those fundamentals really come on the labor and repair and maintenance side. So repair and maintenance long term has been below 9% of revenue. In Q1, we’re at 9.5%. So 50 basis points of savings across a year is $100 million of EBITDA. So if we could see ourselves get there, I do think that that’s one of the things that could give us some incremental traction above that 20 basis points to 30 basis points long-term.
The one thing that we don’t really have clarity on yet, but we — based on what we know today will be a headwind is that the alternative fuel tax credits will expire at the end of 2024 and that’s been about a $55 million benefit to our operating expenses on an annual basis. So that could be a headwind that would temp down our margin for the years ahead. But we really do think there’s strong traction in labor and repair and maintenance that will more than offset that headwind.
Jim Fish: Jerry, I think…
Jerry Revich: Super…
Jim Fish: … there’s some, it’s always going to be a combination of headwinds and tailwinds. Tara’s here, she can talk about the fact that we have a bit of a tailwind next year when it comes to recycle shutdowns. I mean, this year we’re going to see somewhere in the neighborhood of $30 million, maybe a little less, as an impact, a negative impact on us from shutting down these recycle plants while we rebuild them. That drops off pretty significantly next year. So you probably have somewhere in the neighborhood of a $25 million pickup or tailwind next year. The other thing that John and I and Devina have all talked a lot about is this kind of reduction in heads, but doing it in a low-impact way. So it’s just through attrition.
And when we think about that, as I look at our actual headcount from 2022, it’s down over 2,000 people, and none of those people were not — none of those people were riffed. We’re not going through an arbitrary reduction in force. That’s just choosing to not replace folks and we’ve given about four or five different categories where that happens. But several of those categories are still not complete. One of them John’s talked about, which is the shift from rear load to automated side load. Each time you do that, there is a person that is no longer needed on the back of the truck. As you can imagine, we have pretty high turnover there, so we just take advantage of that through attrition. Similarly, in TerraShop [ph] and the recycling business, as we rebuild these plants, we’re seeing somewhere between a 30% and 40% reduction in labor cost and so there are some related heads that come out with that.
So we still, even in 2024, have another, probably, John, 1,200 total heads that will come out…
John Morris: Right…
Jim Fish: … if you combine those two categories and that takes us from 2,000 to 3,200, 3,300. So that’s a big, big part of this, is that we’re doing this in a more labor-efficient way and it really is coming to fruition.
