So on a blended basis, if you look at 2024, we have roughly 30% today of our volume locked up, and that will, of course, have an impact on pricing. We are tracking very closely the transportation market, and we’ve been watching what’s happening with RINs and the price pop. What’s important to note there though is, we don’t necessarily access the spot market. We are looking at the spot market but also selling forward. So we want to just caution people about just taking a $3.4 RIN price that RINs are trading at today for future pricing in 2024.
Jim Fish: It helps the future market.
Tara Hemmer: Absolutely. Absolutely. Like, we’re more positive pricing going forward into the fourth quarter and of course, 2024.
Jerry Revich: Super. Thank you.
Operator: One moment for our next question. Our next question comes from the line of Noah Kaye from Oppenheimer. Your line is open.
Noah Kaye: Hi. Thanks so much. First, just a clarifying question following up from Tyler, 29% margin, is that the 4Q number or is that kind of the bogey for 2024? I just want to make sure that we all understand that are on the same page.
Devina Rankin: Yes. The way that we’ve looked at the 29% is basically the second half of 2023. Our target was to deliver 29% EBITDA margin. What you see is a 29.6% in the third quarter that modestly outpaced our expectations for the quarter. So it gives us some room in terms of our fourth quarter expectations. But Q4, you can expect us to be in the range of the 28.5% to 29% margin.
Noah Kaye: Perfect. Thank you. Clearly, a big story this quarter is those gains right in margins largely from managing the middle. So I want to delve a little bit more into both labor and equipment availability. Just on the labor side, where is turnover currently? How has that progressed? And then I think in the release, there was a call out of some modest costs for upcoming collective bargaining anything we should be aware of there in terms of how that impacts labor trends.
John Morris: Yes. The collective bargaining comment was simply some dollars we spent in preparation for some contracts we had in the Midwest, which thankfully got resolved. But when we have big agreements like that, it’s not uncommon for us to spend some money to make sure we’re prepared for the worst, so to speak. But in this case, it was a better outcome and those are behind us. And on the labor front, part of my comment earlier was just in the moderation of rate inflation that we’ve seen from 10%, 11% coming out of last year into the first quarter or two of this year and now being closer to the 5% to 6% range in terms of the rate that labor is going up. And you put that against the backdrop of our pricing strategy, which Jim commented on, we continue – we’re seeing a better spread between what’s happened with inflation and some of those costs, in this case, specifically labor.
Noah Kaye: And the turnover? Yes, go ahead, please.
John Morris: And the turnover is still a good story. That was part of my prepared remarks, too, and driver being the biggest. We have about 21,000 drivers in the network and we’re continuing to see improvement there down into the low 20s from probably a peak up in the high 20s to close to 30% 18 months ago.
Jim Fish: Yes. I was just going to say, no, I mean, what you’re really hearing here, and it’s not just specific to your questions, but to all questions is what we’ve been saying for several quarters, which is there’s a few things that are outside of our control. And we’re very focused on those things that are within our control might sound obvious, but it’s not going to sound that different when we get to 2024. And while we’re not giving specific numbers for 2024, I would tell you that when we get to 2024, pricing is going to continue to be good. We’re going to continue to focus, as Devina said and John have said on the middle of the P&L. We feel good about the progress we’re making on OpEx. We feel great about the progress we’ve made on SG&A.
It wasn’t that long ago that we were talking about getting below 11%. Now we’re saying the number is 9%. So – but I think the technology that we’ve been talking about for probably three years is finally starting to show that it really is going to produce some results. And then there’s a bit of a hangover from the pandemic where we – where there were some things that we simply didn’t expect that affected turnover that affected supply chain, obviously, inflation all of that, I think we’ve really, really gotten our hands around and now we’re starting, as John mentioned in his detailed prepared remarks, pull units out that have been sitting on the fence that really we’ve been keeping there as just kind of a cautionary move on our part. So 2024 is going to look, I think, pretty similar.
It’s going to look fairly flat on volume. It’s going to look good on price. We finally will get a little bit of tailwind when it comes to our sustainability businesses because 2023 was tough from that standpoint. And finally, we’ll see some year-over-year positive comps on commodity prices. I think in our RNG business, we’ve talked a lot about RIN pricing. That looks like it’s – it could end up being a good positive year-over-year comp, same with natural gas, last year, Q4 was difficult because of the Ukraine spike in natural gas pricing, all of that kind of went away if you look at natural gas pricing in the first quarter. So I think you’re going to see a fairly another year where we’re saying, here’s what we’re focused on. We’re not going to try and predict what happens with the economy.
But those things that we can control, I think, we’re doing a pretty darn good job of controlling them.
Noah Kaye: For sure. And I just wanted to follow-up less quickly on the truck delivery side. It’s been great. And clearly, you’re seeing that benefit on the MNR of those increased deliveries you already comment to what you expect this year? I know there have been some investor questions around the impact of the UAW strike at Mack, but we do have built slots opening up for 2024 now. Can you just comment into visibility into continued strong truck deliveries?
John Morris: Yes. We’re actually in pretty good shape. That’s an unfortunate situation. But we’ve talked to our supply chain team between Devina and I and the build slots that we have and the trucks really going into the first half of next year don’t look like they’re going to be impacted, partly because we take delivery of chassis a lot earlier than we take delivery of the truck because it’s another manufacturer that’s involved in that. So we’re in pretty good shape there.
Noah Kaye: Excellent. Thank you.
Operator: Thank you. One moment for next question. And our next question will come from the line of Stephanie Moore from Jefferies. Your line is open.
