Tara Hemmer: So the 11.72 is constant. That’s a constant conversion rate on the RINs.
Devina Rankin: And then on the floating rate debt, we’re at 9% currently.
Dave Manthey: 9%?
Devina Rankin: Yes.
Dave Manthey: Perfect. Thank you.
Devina Rankin: A quick piece of color on the 9% just in July, we went into the markets and secured really strong fixed rate debt on a long-term basis at a coupon of 4.875%. And so when you see the 10-year treasury where it is today, you can certainly say that we’re really pleased with that timing.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Brian Butler from Stifel. Your line is open.
Brian Butler: Good morning. Thanks for fitting me in. Can you hear me?
Jim Fish: Yes.
Devina Rankin: Yes.
Brian Butler: Just to try to keep it quick. On the pricing side, when you talked about kind of that spread over inflation being negative in the first half of the year and kind of positive 100 basis points, how should we think about that going into the fourth quarter? And then maybe longer term, where does that spread – where do you hope that spread or target that spread to kind of even out in 2024 and kind of beyond?
Jim Fish: Yes. It’s a little bit of the answer I gave previously, which was the spread obviously was working against us five quarters ago when you had inflation approaching 10%. And we just were not able to get to that number on either core price or yield. So we were looking at 7.5% core price, 6.2% yield. And now that relationship has really flipped around. So, you’re looking at somewhere in the neighborhood of 4% CPI and declining by the way. And then price, whether it’s yield at 5% or core price at 6.6%, we feel pretty comfortable that – by the way, I don’t think inflation is going to 1% anytime soon. I think you’ll probably see inflation in this range for the foreseeable future. So if that’s the case, I’d like to be able to maintain our own price in this position where it’s slightly above the inflation rate.
And by the way, as John has mentioned, our own inflation is – doesn’t track perfectly with CPI. So while we certainly have come down on labor inflation from the 10%, 11%, 12% that we were seeing a year, 1.5 years ago, we’re still above that kind of 3% to 4% CPI number. So we need to get price in the 5% to 6% range, which is where I think you’ll probably see it going into ’24.
Brian Butler: All right. That’s helpful. And then on the – I know we talked a lot about the productivity and optimization. But just at a very high level, I mean when you think of what’s left to do and what’s been done, is it reasonable to believe that 2024 can produce kind of the similar kind of levels, if not better, than what you saw in 2023?
Jim Fish: I think we’ll talk about 2024 when we get to February. But if you just look at what the progress we made kind of quarter-by-quarter, first half, second half, it would certainly give us a better exit ratio from an operating perspective and a margin perspective. And then I think Devina commented on that earlier. We still feel we have upside, and we’ve always talked about 50 to 100 basis points of EBITDA margin expansion. And as Jim mentioned, we’ve been chasing that a little bit in the last couple of years because of supply chain and inflation and whatnot. It feels like we’re in a much better spot coming out of 2023 than we were coming out of 2022.
Jim Fish: By the way, one thing we really don’t talk about much when we talk about this rear load to ASL conversion. We talk about the heads coming out because there’s obviously a helper on the back of a rear loader. What we don’t talk much about is the pickup in efficiency or productivity because we are – our history, and we’ve got a long history of making these conversions. We are much more productive on an ASL than we are on a rear loader. So there’s, I don’t know, John, 20%, 25% pickup in productivity in the resi line of business where you’re making those conversions.
John Morris: That’s a good number.
Brian Butler: Okay. And then one last quick one. On the sustainability deferred spending, that’s all process related. That’s not waste management making a decision based on where market prices are to delay any of that. It’s really just a matter of going through the mechanics of getting the approvals and things like that?
Tara Hemmer: Correct. We are full steam ahead, as I mentioned, with that about 40 projects under construction in 2024. That will tell you what you need to know there, we’re moving forward.
Brian Butler: All right. Great. Thanks again for fitting me in.
Tara Hemmer: Thank you.
Operator: Our next question will come from the line of Kevin Chiang from CIBC. Your line is open.
Kevin Chiang: Thanks for taking my question. Maybe just one for me. I know this has been tackled quite a bit here. But it does sound like you have a number of – maybe I’ll call the idiosyncratic cost containment programs in place, ones that maybe your competitors or smaller peers don’t have. When you think longer term about that price over inflation spread and the typical margin expansion you’d want to get. Wouldn’t that increase given those idiosyncratic opportunities? Or do you would you price above your own inflation versus, let’s say, industry inflation and essentially those savings get, for lack of a better word, maybe competed away as you go to the market?
Devina Rankin: I think it’s a great question. I think what’s most important is that while we compete in the marketplace, we also compete with ourselves and working to continuously improve our business. And so price is one element of how we grow our business and another part of how we grow our business is ensuring that our cost to serve continues to improve over time. We do believe some of those cost improvement items actually translate into top line growth over time as well. And the best example of that is actually in the national accounts business, where WM is completely differentiated itself in the marketplace and therefore, getting outsized growth on the volume line. The other thing that I think is important, and we don’t tend to do this, but I want to do a quick comparison our 29.6% margin in the quarter actually compares to our largest competitors at 31.1% because of the impact of the recycling line of business and accretion.
