Alta Equipment Group Inc. Q3 FY2020 Earnings Call

Thank you. Good afternoon, everyone. Welcome to Alta's Third Quarter 2020 Earnings Conference Call. With us today on the call are Ryan Greenawalt, our Chairman and CEO; and Tony Colucci, our Chief Financial Officer. For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session. We will begin with some prepared remarks before we open the call for your questions. Before we get started, I would like to take this opportunity to remind you that today's call contains forward-looking statements, including statements about future financial results, our business strategy and financial outlook and other nonhistorical statements as described in our press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Alta's growth, market opportunities and general economic and business conditions. These statements also include our expectations regarding risks related to the continued impact of the COVID-19 pandemic on our business, operations and financial results. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release, which is available at investors.altaequipment.com. And with that, I'll now turn the call over to Ryan.

Thank you, Sinem, and welcome to Alta Equipment Group's Third Quarter 2020 Earnings Conference Call. I will provide an update on the operating environment and progress on our growth initiatives; and then Tony Colucci, our CFO, will walk you through our third quarter financial results. First off, I hope you and your families are safe and healthy during these very challenging times due to the ongoing COVID-19 pandemic. We continue to be designated as an essential business and are pleased to report that all 51 branches remain fully operational today. The strict employee and customer safety protocols we implemented at the onset of the pandemic remain in place and provide a blueprint in the event our business is impacted by any subsequent COVID-related disruptions. Once again, the Alta team rose to the occasion and delivered quality work in serving our customer base's diverse needs. Since our last conference call, Alta suffered a tragic loss with the passing of Rob Chiles, our Head of Construction. Rob was a mentor to countless individuals and an evangelist of our guiding principles. While Rob's energy and enthusiasm for our business will be missed, I'm deeply humbled and proud of how the Alta family has rallied to carry on Rob's great work and move the business forward. I'll now provide some highlights of our third quarter. In looking at our third quarter results, we reported a sequential improvement in revenue, driven by strong growth in our higher-margin parts and service businesses. We have recovered from the dip in the summer months and experienced steady increases in customer demand as the third quarter progressed. In addition, we closed 2 accretive acquisitions that deepen our presence in the Midwest region and expand both our product lines and OEM relationships. We operated at near 100% capacity, and we are at pre-COVID levels in terms of capacity and labor utilization across our business. Revenue was $220.6 million, and we generated $21.9 million in adjusted EBITDA, a 10% increase over the second quarter and a slight increase over last year's comparable quarter. As business recovered, we loosened some of our cost mitigation efforts during the quarter to facilitate top line growth. Our flexible cost structure and the dexterity of our business model allowed us to align expenses with revenue and increase profitability in the quarter. Our technician count increased by over 8% through a combination of internal growth in our Florida construction business and our acquisitions of both Hilo in New York City and Martin Implement in Chicagoland. We are continuing to actively recruit technicians in all markets to meet the growing need for equipment repair that exists across all regions. Turning now to operations. From a regional perspective, we saw improved demand and stability in both our construction and material handling businesses. In our manufacturing regions like Michigan and Indiana, we saw stabilization throughout the quarter as companies continue to increase production, and we have seen our labor utilization return to pre-COVID levels. In Florida, our product support business continued to ramp up with increased demand for equipment repair. We see continued strength in high tech, health care and food and beverage markets, particularly in the Northeast. And our warehouse, e-commerce and logistics customers are experiencing a period of high growth, particularly in large, population-dense markets like New York City, Boston, Chicagoland and Metro Detroit and remain our fastest-growing end market. Moving to recent acquisitions. In late October, we announced the closing of Howell Tractor and Equipment, our sixth acquisition so far this year. Howell serves the Northern Illinois and Northwest Indiana market with a wide range of heavy construction, mining and crane equipment. They enjoy a great reputation as a premier service provider and have a strong relationship with leading manufacturers, such as Sennebogen, a new addition to Alta's product line in the region. The acquisition is immediately accretive to adjusted EBITDA with strong sales synergies to increase volume and profitability going forward. Our third quarter results included Martin Implement Sales, which we closed on July 31. Martin operates 3 branches in the Chicago area and sells, rents and services a full range of equipment to the construction and municipal markets. In addition to expanding our branch footprint and manufacturing relationships, Martin accelerates all this penetration of the Illinois construction market, which is in its early stages. PeakLogix, a recent material handling acquisition, has exceeded our original expectations in its first 3 months as part of Alta. It serves a large, national customer base and is focused on the growing warehousing end market. We have begun to cross-promote their services across our material handling customer base and integrate their product and service offering with other warehouse automation solutions. Our balance sheet remains one of our best assets, and our current liquidity position supports our robust acquisition pipeline. In summary, we are pleased to deliver another quarter of solid financial results, driven by the great execution of our flexible dealership model. We are particularly proud that we have successfully navigated our business through the challenges brought on by the pandemic. Alta is poised to end the year with strong momentum, positioning us for growth in 2021 as the recovery takes place and the economic environment improves. There are many positive secular trends in our industry: the urgent need for infrastructure upgrades, the ongoing move towards e-commerce, the accelerated adoption of advanced technologies, and the increased electrification of mobile equipment. All these provide powerful tailwinds for Alta's future growth. I would like to once again thank our manufacturing partners and customers for their support, our employees for their dedication and hard work, and our shareholders for their confidence in Alta. Now I'll turn the call over to Tony for his presentation.

Thanks, Ryan. Good afternoon, everyone, and thank you for your continued interest in Alta Equipment Group and our third quarter financial results. It's hard to believe that we're already on the doorstep of closing out our first fiscal year as a public company. Before I start, I first want to address all of my teammates at Alta. The past 9 months have challenged us all, both professionally and personally and in ways we couldn't have dreamed of last year at this time. Through it all, furloughs, new health and safety protocols and through the tragic loss of a valued leader and friend, you've all stayed the course, and I'm proud to be part of a like-minded group of people that stick together through times of adversity. On behalf of the senior leadership team, thank you. Second, I want to welcome our new team members at Martin Implement and Howell Tractor in Chicagoland to the Alta family. I'm excited about the prospects of integrating your talents with our existing Volvo business in Illinois as we continue to invest in talent, infrastructure and OEM relationships in the strategic growth market for the company. My remarks today will focus on 3 areas: One, I'll be presenting the snapback in business activity that we realized in the third quarter and how that increased activity impacted our financial performance for the quarter. Specifically, I will focus my comments and analysis on a few sequential quarter-over-quarter metrics as the business emerged from COVID-related lockdowns in the second quarter. Second, I'll reiterate the structural benefits of our integrated dealership and rental business model. I'll be discussing our product support performance over the past 3 quarters and how those revenue streams provided steady cash flows throughout 2020 despite volatile business conditions. I also want to touch on our rental business, specifically utilization and its impact on year-over-year EBITDA. Lastly, I'll be discussing the balance sheet, our M&A and CapEx spend for the quarter, and the impact on our leverage and liquidity position at the end of Q3. For the first portion of my prepared remarks, I'd like to present the positive snapback in business activity that manifested itself fully in the third quarter. It should be noted that there are some slides in our presentation, which was released prior to our call today, that present this impact in greater detail than what I will discuss today. I'd encourage everyone on today's call to review our presentation and our 10-Q, which is available on our Investor Relations website at altaequipment.com. So let's dive in. For those familiar with my remarks on our previous 2 earnings calls, recall that we have been keenly focused on demand for labor hours of our skilled technicians. This is a metric that provides real-time data on business levels in our various geographies and business segments. To quickly recap, in the middle of March, starting with the automotive shutdown in Southeast Michigan, we incurred what effectively was an abrupt 30% reduction in demand for labor hours across our service operations. As mentioned on the second quarter call, as large portions of the economy began to reopen, we saw a pretty steep rebound at the end of the second quarter, which continued throughout Q3. Currently, demand for labor hours has returned to just under 100% of pre-COVID levels. This reversion to the norm in demand for labor hours led to an $11 million improvement or 19% increase in parts and service revenue in the third quarter when compared to the second. Important to note, we've held labor efficiency and, therefore, gross margin in our service department throughout 2020, which is a testament to our managers' ability to match supply of labor with demand on a real-time basis. In previous quarters, I've spoken about our dealership revenue streams, particularly parts and service, as having dexterity in that we are able to maintain earnings on those revenue streams in varying macroeconomic climates. We've put this business model and our management team to the test in 2020, and we believe it's a test that we solidly passed. Specifically, organic parts and service business had EBITDA of $3.7 million, $4.2 million, $4 million in quarters 1, 2 and 3, respectively, despite having volatile swings in revenue. It's our opinion that Alta's product support cash flows are a key metric that management and investors can rely on throughout the economic cycle. One item of note. In previous quarters, we've made special mention of the cost mitigation efforts we implemented in response to the decrease in business activity related to COVID. As business picked up and then stabilized in the third quarter, we relaxed and, in some instances, ceased those cost mitigation efforts. While we hope lockdowns and COVID's impact are behind us, we will continue to monitor business levels and are prepared to execute the same cost-cutting playbook should conditions dictate. While our dealership model, specifically parts and service, has showed its value and dexterity throughout the year, our rental business has proved to be more challenging. While our rent-to-rent revenue was up $5.4 million on an organic basis versus the second quarter of 2020, the year-over-year trough has proven more difficult to dig out of, specifically when analyzing our utilization metrics. To provide some context, for the 6 months ended September 2020, on an organic basis, we've had, on average, $25 million to $30 million less equipment on rent than we did for the same 6-month period in 2019. Said in a different way, whereas historically we've experienced 65% to 70% physical utilization, we've been realizing closer to 60% on average. To be clear, our rental revenue is up approximately $16 million year-over-year. It's the utilization on our fleet that has regressed. Now how has that lack of organic utilization impacted EBITDA? All told, we've given up approximately $11 million in EBITDA year-to-date on an adjusted pro forma basis versus last year, and we estimate that roughly 65% of that shortfall is related to the rental business. With that in mind, we are certainly not alone when it comes to year-over-year utilization slippage as our 13% year-on-year reduction in rental revenue and physical utilization drop is consistent with the rental industry in general. Like others in the rental industry, we remain bullish on the long-term prospects related to the rental business. We believe the investments we made in our fleet in 2020 position us well for the recovery. However, we also need to be prudent with our fleet size and scale our investment in the rental fleet accordingly and in line with customer demand. Additionally, as I mentioned in previous calls, it's important to point out that our rental business represents just over half of Alta's EBITDA and highlights the diversity of our cash flow streams compared to the publicly traded rental houses as Alta benefits from the aforementioned product support revenue, whereas others are almost exclusively tied to rental. So real briefly, to recap the quarter from a profit-and-loss perspective, revenue, $221 million, with $71 million coming from the all-important parts and service departments, which is up approximately $15 million from the second quarter of 2020. Gross margins for the quarter in the dealership-related departments, new and used parts and service were in line with historical levels. From an operating income perspective and looking into the segments, our industrial segment continues on its profitable growth path as that segment produced $4.2 million of operating income for the quarter. On the construction side, when adjusting for one-time expenses, we reported a loss of $2.9 million in operating income for the quarter. As stated previously, we continue to be bullish on the long-term prospects of our youthful construction segment. As it grows and realizes the benefits of a broader field population and with the recent investments we've made in Flagler, Martin and Howell, we expect profitability to grow in future periods. In summary, this led to an adjusted pro forma EBITDA result of approximately $22 million for the quarter, which is up slightly from the second quarter and off approximately $6 million when compared to last year. A couple of other notable highlights that I believe position us well for the future and support some of the investments we've made. New and used equipment sales were up $5.3 million or 8.7% organically year-over-year as we look forward to future field population gains. This increase in sales was primarily driven by our construction segment's new and used equipment sales, which increased 30.5% on an organic basis year-over-year. Additionally, our construction segment's product support revenues have increased 15% year-over-year on an organic basis, a reflection of equipment sales of years past. And PeakLogix, our new design and build warehouse solutions and systems integration company, is off to a great start and has outperformed expectations on the bottom line thus far. Moving on to the balance sheet and our capital profile at the end of Q3. Two key factors to discuss here: leverage and liquidity. First, liquidity. Recall that we closed the IPO with roughly $150 million in cash and revolving liquidity. Since the IPO in mid-February, we've acquired 3 and now a fourth strategic business using existing revolving liquidity, funded growth CapEx in our rental fleet and serviced the cash cost of our debt. As of the end of Q3, I'm happy to report that the business has the same level of liquidity that it had at the IPO or approximately $150 million. We believe that holding liquidity at the $150 million level is an impressive result and a reflection of our cash flow profile and strong collateral base, which we'll use to fund these 3 important items without impacting the company's liquidity position. This is also a testament to how we thoughtfully positioned our capital structure and how we fund M&A. On to leverage. While liquidity is a function of the value of our assets and our ability to cash flow and service revolving debt, leverage is a measure more directly tied to asset utilization. As mentioned, our rental fleet has been performing at suboptimal levels when compared to historic norms, which has impacted our leverage position at the end of the third quarter. There are 2 primary drivers for the increase in leverage: the negative impact on our adjusted pro forma EBITDA when compared to last year; and the aforementioned investments we've made on acquisitions in our rental fleet. I'd like to comment on the rental fleet for just a moment. First, recall that our rent-to-sell model, where we are selling lightly used, 2- and 3-year-old heavy equipment out of our fleet to drive field population, which in turn drives products and service revenue over the long term. I mentioned this because a large portion of this rental fleet was into the rent-to-sell product categories, which we know will generate profitable product support business for us in the coming years. Importantly and in line with historic norms, we also expect Q4 to be a strong rental disposal quarter. Lastly and importantly, rental fleet CapEx always precedes utilization in EBITDA, which, timing-wise, is a net negative for the company's current leverage profile. As an example of how rental investment manifests itself over time, on our previous call, we made note of the rental fleet investment we've made in Florida. In recent months, our Florida construction rental business has produced approximately $400,000 more in rental revenue versus the months prior to that investment being made, and we expect that positive trend to continue. However, it will take at least a year for that investment to fully impact our trailing 12-month EBITDA figure and ultimately leverage. So having discussed the details of Q3 and as I conclude my remarks, I'd like to turn your attention to some of our enterprise-wide pro forma trailing 12-month numbers. If we look back at our pre-COVID numbers on a pro forma basis, our business was producing approximately $94 million in EBITDA. As I mentioned, we are running about $11 million behind that number year-to-date. And I expect that variance versus last year, albeit more muted, to continue into the fourth quarter as well. On the flip side of COVID's impact, we've invested heavily and we believe prudently throughout the year in 4 businesses that, under normal circumstances, we know have generated approximately $13 million in EBITDA per year. And as discussed, we've also made an investment in rental fleet that we expect to lead to future EBITDA. As we leave 2020 behind and with an eye toward 2021, macroeconomic setbacks notwithstanding, we believe that we can regenerate the COVID-related EBITDA shortfall at a minimum and add additional EBITDA as we continue to cultivate field population and realize the synergies of the investments we've made in 2020. In closing, I again want to thank all of my teammates also for your commitment to the business during what has been a year not soon to be forgotten. I have great faith in our proven business model, our leadership team and our vision for the future. To our investors, we appreciate the opportunity to be stewards of your capital and operate daily with your best interest in mind. Like many of you, I'm looking forward to that last digit on our calendars changing from a 0 to a 1 in a few weeks. But in the meantime, I hope that each of you take some time to take inventory of the most important things in life over the next 2 months. I wish all of you and yours nothing but health and happiness this holiday season. Thank you for your time, and I will turn the call back over to the operator for Q&A.

Your first question comes from the line of Alex Rygiel from B. Riley.

Very nice quarter.

Alex, thank you.

Can you discuss how the current performance of different end markets compares to pre-COVID activity levels? Specifically, which markets are currently stronger or weaker, and do you think these trends will continue for a significant period?

Sure, Alex. This is Ryan. I would say that the end market with the strongest demand growth is related to warehousing, particularly in e-commerce. As I noted earlier, we are experiencing the most growth in denser urban areas. We are well positioned in terms of population density in our footprint, including Chicagoland, Greater Boston, and New York City, which are all major logistics hubs. We are also seeing increased interest in advanced technologies and autonomous solutions, as well as a shift toward narrow aisle and warehousing-type products, which we are well equipped to handle. This aligns with our strategy with PeakLogix, as we aim to increase our market share in that area. This is a valuable addition to our resources, allowing us to penetrate that customer segment more deeply.

And then on the weaker side?

On the weaker side, we are noticing some stabilization in certain manufacturing areas. In Michigan, where we have observed a rebound in the auto market, it has leveled off. We anticipate a somewhat stagnant or flat market for next year. This situation is somewhat counterbalanced by strong performance in Elkhart, Indiana, where there is robust demand in the RV market that looks promising for the next couple of years. Florida continues to shine in the construction market. While there are challenges, we remain optimistic about potential increases in infrastructure spending. Recent positive developments from Congress suggest continued federal investment. Regarding weak markets, we don’t see any; instead, we see markets with uncertainty, where some may hold off on significant purchases. As long as operations remain stable and there are no major shutdowns, we can keep our mechanics engaged and maintain product support for the business.

And broadly speaking, as it relates to the rental business, when might we see that business sort of turn more positive?

Alex, this is Tony. It seems we are experiencing some fits and starts with various projects, which has been our experience here. I can't pinpoint the exact reasons, but it may be influenced by some macroeconomic factors related to COVID. I'm uncertain if the election impacted people's willingness to commit to projects. As I mentioned earlier, we need to be prudent regarding our fleet size and adjust our investment in the rental fleet according to demand. History suggests that during periods of volatility, customers tend to favor rental products for flexibility. Recently, we've noticed a bit more stability in utilization metrics compared to Q2 and Q3. However, I would say that our outlook on when we will see rental utilization metrics return to normal remains unclear.

And then lastly, you mentioned your acquisition pipeline was very robust. How does it compare to back in February? What do acquisition prices look like today? And have any meaningful opportunities arisen that might be outside your core markets?

I will begin by discussing pricing. In a previous call, we indicated that book value typically serves as a baseline for value. We are actively seeking dealerships that hold exclusive rights to territories with top brands, and these situations are not distressed; rather, we aim to acquire dealerships that will enhance our market presence and infrastructure. I believe the prices have remained fairly stable, and we are underwriting deals consistently. The market landscape is as promising as it was a year ago. Our goal in going public was to sustain our growth path, and we see ongoing opportunities for that. Regarding your question about potential tangential markets, we certainly see ways we can apply our product support expertise in new markets and with different equipment. We are currently exploring some of these options, although none are imminent. For example, we are looking at the general transportation sector, including over-the-road trucks, and various ancillary equipment related to construction such as cleaning and recycling machines. With our capability to repair both electric vehicles and diesel-powered machinery, we have numerous product avenues we could eventually integrate into our offerings.

Your next question comes from the line of Mike Shlisky from Colliers Securities.

So I wanted to go back to some of the questions earlier on your rental utilization. So while we talk of other fleets out there, it seems like the general trend was that the trough utilization really happened in end of June or the first part of July, and they've ramped up since and kind of ended the quarter on a much better level when they started, almost back to normal again and have gotten stable, if not better, into October. Can you give us a sense as to the shape of the curve in your utilization? Did it end a lot better than it started in Q3 at the very least?

Yes, Mike, I can address that. Overall, our experience aligns with what you've mentioned. At the start of Q3, our utilization was lower than anticipated, but we have gradually increased since then. However, we are still trailing behind last year's figures. Recently, we've observed that utilization has remained steady from the end of September into October. It seems that contractors may be trying to complete projects that were delayed because of COVID, pushing their timelines into Q4 and trying to finish up in accordance with the weather. We have noticed a stronger trend in utilization lately. I agree with the sentiment that the beginning of the quarter was not as good as the latter part.

Can you provide some details about how the integrations are progressing between Hilo and Martin? Have there been any challenges in integrating the companies you've acquired in New York, Illinois, Indiana, Florida, and others, especially given the restrictions on travel? Has this process aligned with your expectations?

When we consider integration, there are two key aspects: IT and financial integration, along with management integration. I'll address the finance and IT integration, and then Ryan can provide insights on management. I want to highlight that the Howell Tractor deal, which we completed a couple of weeks ago, is now fully integrated into Alta's system. This marks the first instance since we adopted the eXtend system that we successfully integrated an acquisition over a weekend. We closed the deal on Friday, and by Monday, thanks to the efforts of our IT and accounting teams, Howell Tractor was operational and processing invoices and work orders through our eXtend system. Regarding the other acquisitions, we have a project plan in place. NITCO and Martin are set to be integrated into our system by the end of this year, in just a few weeks, as part of a significant initiative. The remaining acquisitions—Liftech, Flagler, and Hilo—are slated for integration in 2021, likely around mid-year. PeakLogix has a different business model and lacks rental, parts, and service capabilities like ours, which means it will probably be the last to fully integrate.

Sure. On the management side, we're kind of off to the races in terms of the integration. Another thing that happened, not in the third quarter but more recently to support the growth, is we've reorganized our material handling business, the industrial segment, to allow for leadership enterprise-wide and have promoted 2 individuals. Alan Hammersley is the President, and Craig Brubaker is the COO. And that business today is being managed as one enterprise. We're having quarterly meetings where we keep all of the regions kind of on the same KPI. And bringing them on the business system later next year is just going to accelerate that and make that more efficient to manage it that way. On our construction side, the same type of reorganization is underway. We have regional leaders driving the Great Lakes region, the Florida region and the Northeast, where we have the JCB side. And similarly, the integrations in terms of sharing inventory for remarketing, trying to drive rental utilization and sharing inventories across state lines, things like that, are well underway. So we look forward to the day when we have everybody operating on one business system. We chose the e-Emphasys eXtend system because of its transparency and scalability, and we look forward to kind of driving some more efficiency through that technology over time.

That's great color, guys. I want to throw in one last one, if I could. You've added technicians since last quarter. Some didn't probably work the entire third quarter. You also seem to have better rental utilization at least for the full fourth versus the full third quarter. And certainly, there seems to be a general economic rebound here. Is it fair to say, without giving us full-on guidance, that Q4 results should look quite a bit better than Q3?

Mike, this is Tony. I'll address that. We are quite optimistic about the dealership aspect of our business. We experienced a sudden halt in Q2, but we've spoken positively about business activity levels stabilizing in Q3. There is some delay in rebuilding work in progress and managing costs, which affected us slightly in Q3, but we hope that will improve in Q4. I see Q3 as a transitional period leading to normalcy in Q4. The more challenging aspect to predict is the rental utilization. As I mentioned earlier, some of the outcomes will depend on that. However, as we move into Q4, we feel confident about the rental utilization levels, relatively speaking.

Your next question comes from the line of Bryan Fast from Raymond James.

Just looking if you can talk about the organic growth in parts and service revenue. Do you think that's reflective of pent-up demand as restrictions eased? Or are you starting to see the benefits of an increased focus in that area?

Yes. I'll take that one, Bryan. I think thankfully, we've got organic growth kind of on a sequential quarter-over-quarter basis and year-over-year when we look at the quarter specifically in our construction segments. I'll answer it both ways. The quarter-over-quarter kind of sequential organic growth was absolutely just related to the snapback, if you will, from COVID. I think more importantly, when we think about the business on a longer-term basis, specifically in construction, we continue to sort of pace at 15%-ish on an organic basis in the parts and service segment. And in my mind, that's a validation of the business model, where you've got to kind of make an investment into really what have been nascent territories for some of our major OEMs, specifically Volvo. And you've got to make sure you're accessing customers whether it's through rental and generate field population. And over time, that field population comes home to roost, if you will, in the form of parts and service. So when I think about the kind of quarterly year-over-year organic growth, I think about the equipment that was sold 2 and 3 years ago starting to manifest itself from a profitability perspective.

Okay. Thanks, Tony. And then just on the SG&A front, I know you provided some color there, but just looking for more granularity. If you exclude the share-based comp expense from SG&A, you get SG&A as a percent of revenue in line with last year. Is that reflective of a normal run rate? Or are there still some costs that could come back as the operating environments normalize this year?

No. I think that Q3, from an SG&A perspective was pretty normalized. I made mention of kind of the cost mitigation efforts that we relaxed in Q3. The majority of that was relaxed in the early innings of the quarter. And so one thing to point out is when we bring last quarter when I made mention of the variable cost nature of our dealership model, you have some natural costs like fuel, for instance, when technicians aren't out driving around to customers. You're not going to have as much spend in fuel. All of those sort of costs came back to us in the third quarter here. And I think that what you saw there was a normalized level.

There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating.