Matt Flannery: Thanks, Rob.
Operator: Thank you. Our next question comes from Seth Weber with Wells Fargo.
Seth Weber: Hey guys. Good morning. You guys are obviously planning to sell a lot more fleet used fleet this year. And Matt, I think I heard you reference something about a broad mix or something different channel mix or whatnot. Can you just give us some more details on what your €“ kind of how you’re selling this used fleet? I mean there’s obviously some concerns about used pricing starting kind of rolling over. And what your expectations are? What’s embedded in your expectations for used equipment pricing for 2023? Thanks.
Matt Flannery: Sure. So, we feel good about the end market including pricing. We’ll fall off the historic eyes that we’ve set over the last two years, maybe a little bit, but we’ll find out. And I think one of the things we’re going see is that the increase of replacement capital costs could definitely have a halo effect on used pricing. But when we think about what channels we’re going to open up is what we were talking about, we’ve been strictly or 90% retail all the way in the first three quarters of 2022. And then you saw we lose it up a little bit to get €“ to do some more volume in Q4. And that wasn’t because there weren’t options; it was to retain fleet to rent. Because we €“ the supply chain just wasn’t getting fleet to us fast enough for our customers.
We’re hoping our expectation is that we can go back to a more normalized channel mix in 2023, and that’s what’s embedded in our guidance. So, we’ll open up the broker chain. We’ll do some trades. We probably won’t do much auction unless you have something that’s really in this repair. We’re not really a big auction player. But just opening up that channel mix over and above the retail, and that will allow us to rotate out about $2 billion worth of hopefully.
Seth Weber: Got it. Okay. That’s helpful. Thanks. And then just on the strength in the specialty margin in particular was pretty notable is €“ I think it was 400 basis points year-to-year. Is there something €“ is there some step changes happened there? Is it the general finance business, it’s clicking or anything you’d call out that is supporting that big jump year-over-year? Thanks.
Matt Flannery: Yes. I think there are a couple of things there, Seth. I mean certainly, growth has been good, so that’s helped drive fixed cost absorption. But beyond that, you had really good cost control in the quarter. And you also had some beneficial mix both within the specialty segments and on a project basis that benefited that flow through.
Seth Weber: Okay. All right guys. Thank you very much.
Matt Flannery: Thanks, Seth.
Operator: Thank you. Our next question comes from Timothy Thein with Citigroup.
Timothy Thein: Thanks. Good morning. Just maybe group two together here. Matt, maybe the first is just on fleet productivity and just how you think about the components within that in 2023, just thinking of maybe time and rate given that you held on the fleet longer in this year to make sure you met the demand presuming you’re running pretty hot on time. So potentially, that starts to run against you, but maybe I’m wrong on that. And then just kind of the interplay on rate. And then the second question, maybe for Ted, is just any help in terms of EBITDA to operating cash flows, how should we think about, say, cash interest and cash taxes. Any help you have on that? Thank you.
Matt Flannery: Sure, Tim. On the fleet productivity, we still feel that the environment is going to be very constructive to drive positive fleet productivity. But you pointed out, the reality of our time may have been running so hot, but at some point, you have to look at it, are we running the appropriate level of time? Can we continue to raise it? Or does it become a bit of a headwind. With that being said, even if time becomes a headwind just because we’re running so hot in some key categories, and we need to make sure we have availability for our customers. We still have ample opportunity to drive positive fleet productivity. And we think the end market is constructive for that. We’ll feel comfortable that both in as reported and pro forma basis will exceed our hurdle rate that we talk about that 1.5% even if that goes up to 2%. So, we feel good about it. And Ted, you can take the EBITDA question.
Ted Grace: Yes. So Tim, just in the absolute, we would look for cash taxes in 2023 to be about $565 million. That’s an increase roughly of about $240 million. Cash interest at about $600 million, which would be an increase of $195 million or so. And so when you bridge kind of that $1.1 billion increase in EBITDA against a roughly $460 million increase in free cash flow, really that the delta is going to be the change in working capital.
