Timothy Thein: Got it. Thanks, Ted. And did you €“ usually you speak to a merit increase as we think about an SG&A kind of bridge year-over-year. Any €“ have you quantified that as to how we should think about that for this year?
Matt Flannery: Yes. I don’t know if we’re ready to quantify it. But certainly, we’ve got that built into our guidance and built into our operating plan. We always talked about the importance of supporting our employees and taking care of them, and that’s an important aspect of doing just that. So there is absolutely a merit increase built into this guidance. But in terms of quantifying it, it’s not something I think we’re prepared to do.
Timothy Thein: All right. Fair enough. Thank you.
Matt Flannery: Thanks, Tim.
Operator: Thank you. Our next question comes from Jerry Revich with Goldman Sachs.
Jerry Revich: Yes. Hi. Good morning, everyone. I’m wondering if you could, just talk about the impact of the new higher pricing on new equipment on the marketplace. When we saw a Tier 4 higher pricing roll through that had a nice pricing umbrella on the rental industry for the entire fleet. And I’m wondering, I know it’s early post the January price increases by the OEMs. But to what extent is that a pricing opportunity for the industry as you folks see it? How would you compare and contrast this transition versus the Tier 4 transition in terms of driving pricing upside? Thanks.
Matt Flannery: Sure. Well, number one, this would be more across the board, and we feel comfortable, I talk about it in used pricing as replacement CapEx gets increased. That’s kind of an umbrella on the used pricing, residuals, which is a positive. And I think to your point about the whole industry having absorbed some inflation has been €“ has bolstered the discipline that we’ve been seeing. But to be fair, we saw it even before the price increases, and I think this is just the maturity of the industry. You’ve heard us talking about the bigs €“ getting bigger and just more sophistication and information in the industry. I think all those are helping and certainly increased OEM pricing makes that even more important. And so I think your point is well taken. It will probably bolster some of the behavior in the industry.
Jerry Revich: Super. And just curious, a lots of cross currency in the cycle, as we’ve discussed, I’m wondering if you look at the 2011 through 2015 environment, any analog that you would draw in terms of the industry’s ability to match supply and demand today versus that cycle where early on supply demand matched pretty well, but obviously 2015 touch of oversupply. Can you just talk about how you view the industry’s position today between availability and data, et cetera, and how you’re managing the supply/demand balance?
Matt Flannery: Yes. So one of the biggest differences is the information that access €“ everybody has access to, right, whether it’s the route data, whether it’s now that over a third of the industry is covered by top three public companies, right? These type information gives everybody more understanding and visibility of the important metrics to focus on and the opportunities that exist in the industry. So €“ and the scale €“ so specifically for us, and let’s say, our next largest competitor, scale allows us to get through things in a different way. And so I don’t really wouldn’t draw a comparison. I think the industry changed significantly in my 32 years, but even in the last 10, we do things differently, and I’m sure some of our peers do. And I think you’re seeing that manifest in better performance overall for the customer and for the shareholder.
Jerry Revich: Super. And lastly, if I could just sneak one more in there. Ted, I’m wondering if you could just talk about what level of inflation is embedded in guidance overall? And if you can just touch on transportation, specifically where it feels like there might be some tailwinds for you folks on third party? Thanks.
Ted Grace: Yes. In terms of the inflation that’s built into our expectations, certainly probably elevated versus historical levels, probably not as significant as what we saw in 2022. And yet, we’ve been able to manage it very effectively, right? So if you look at that flow through last year, as an example, when you back out use across the full year, flow-through would have been 56%, 57%. So clearly indicative of our ability to manage that inflation very effectively. And when you think about what we’re pointing towards in 2023, a similar level of flow-through on that pro forma basis. So €“ it’s not to say that we’re in a benign cost environment. There’s still elements of inflation that we’re managing and all companies are managing, but we feel very comfortable in our ability to manage it effectively.
In terms of pickup and delivery, that’s an area where, frankly, we’re not trying to make money. So as you see, the price of diesel, as an example, ebb and flow, the impact on our margins is relatively de minimis. So it’s something the team has done a great job managing through in 2022 when obviously, diesel prices were a substantial headwind to companies. But if you think about that dynamic in 2023, I don’t think it will be very appreciable.
Jerry Revich: Super. Thanks.
Operator: Thank you. Our next question comes from Michael Feniger with Bank of America.
