Alta Equipment Group Inc. Q1 FY2021 Earnings Call

Good day ladies and gentlemen. Thank you for standing by and welcome to the Alta Equipment Group First Quarter 2021 Earnings Conference Call. At this time all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would like to hand the conference over to your host, Sinem McDonald. Thank you. Please go ahead.

Thank you, Eddie. Good afternoon, everyone. Thank you for joining us today for a press release detailing Alta's first quarter 2021 financial results that was issued this afternoon and is posted on our website, along with a presentation designed to assist you in understanding the company's results. On the call with us today are Ryan Greenawalt, our Chairman and CEO; Tony Colucci, our Chief Financial Officer. For today's call, management will first provide a review of the first quarter financial results. We will begin with some prepared remarks before we open the call for your questions. Before we get started, I'd like to remind everyone that this conference call may contain certain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, reflecting management's current expectations regarding future results of operations, our business strategy, financial outlook, achievements of the company, and other non-historical statements as described in our press release. These forward-looking statements are subject to both known and unknown risks, uncertainties, and assumptions including those related to all sales growth, market opportunities, and general economic and business conditions. 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 and can be found on our website at investors.altaequipment.com. Before Ryan makes his opening comments, I want to remind everyone that our annual shareholders meeting is scheduled for Wednesday, June 9th at 9:30 AM Eastern Daylight Time, and will be in a virtual-only meeting format. With that, I will now turn the call over to Ryan.

Thank you, Sinem. Welcome everyone and thank you for joining the call today. The strong momentum we established in the second half of last year continued in the first quarter as the post-pandemic recovery takes hold and our market shows notable improvement. We are pleased to report that the year is off to a good start as labor productivity and rental utilization are the two most impactful operating metrics. They now exceed 2019 pre-COVID levels. This is quite an accomplishment and a true testament to the dedication, hard work, and determination of the Alta team members. I'm proud to lead such an outstanding company, and I am genuinely thankful for their incredible contributions. Our strong first quarter financial performance in an industry that typically has a slow start is particularly encouraging and demonstrates the powerful platform we've built as the operating environment continues to improve. We're confident we'll deliver increased results as the year unfolds. I'll begin by reviewing some key highlights from the quarter and then turn it over to Tony for a detailed financial review of our first quarter results and our outlook for the full year. Looking at our financial highlights, total revenue grew 49% to $268.8 million with 5.2% organic growth. For the second consecutive quarter, our new equipment and rental equipment sales came in above our internal plan. For those who followed the Alta story over the past year, you know that our business model is not focused on short-term or quarterly new equipment sales. We view this strong sales quarter as a positive indicator of future parts and service revenue, which provides a higher margin and is an important driver of profitability. We also had an exceptionally good quarter in our construction business due to strong contributions from prior acquisitions, particularly our Florida business, as well as 20% plus organic growth. Adjusted EBITDA grew 38% to $22.9 million compared to $16.6 million in last year's first quarter, showing the diversity in our business and the breadth of our recovery since the start of the pandemic. I'd like to quickly touch on our recent debt offering and capital restructure. On April 1st, we closed on an oversubscribed public debt offering that reduced our interest expense, increased liquidity, and significantly improved our capital structure. While Tony will provide greater detail in his remarks, the key takeaway is that we lowered our cost of capital and now have fresh firepower to use as we pursue the acquisition opportunities that remain in our market. Looking at our operating performance, we're beginning to see the early benefits of our strategy to diversify our geographic footprint and expand our product lines. Our increased product portfolio has enabled us to meet customer demand despite supply chain disruption. Last year, we took advantage of market conditions and executed seven acquisitions, which are now in various stages of integration into our systems and infrastructure. Some regional markets are further along in the recovery than others, but our established Midwest markets, along with our entry into the Florida and Northeast markets position us well for strong growth as regional industry conditions continue to improve. Two great examples are the opportunities we see in Florida, a healthy construction market that operates during all four seasons, and the New York state region, where we have a complementary construction and material handling presence with Lift Tech Advantage. Starting with Flagler in Florida, this business and region was a bright spot. Once again, construction activity was strong since our acquisition of Flagler early last year, we have seen steady growth, and we filled a regional gap in service demand and significantly grown our technician headcount. Late last year, we acquired the construction assets of Advantage Equipment, which operates three branches in the Northeast region of New York State. In addition to becoming the authorized distributor of Volvo products, this acquisition allowed us to diversify our customer base while providing a great opportunity to increase our regional presence and grow the aftermarket parts and service revenue streams. The construction market in New York is approximately the same size as our market in Michigan and is significantly underserved with roughly half the number of skilled technicians. This presents an attractive growth opportunity in the region and in many respects is similar to the playbook we used in Florida, where we have grown headcount significantly since acquiring Flagler last year. Early in the first quarter, we took a major step in building our solutions capability in the material handling business by making a small but strategic acquisition. ScottTech provides warehouse management software to the logistics market and serves as a great complement to PeakLogix, our national material handling systems integrator. We can now go to market with a full suite of products that provides a competitive advantage in the fast-growing warehouse and e-commerce market, where we expect continued growth opportunities. As we look ahead to the full year, we see macro-related tailwinds that can provide a positive framework for accelerating future growth. We anticipate improved business conditions to continue as the country reopens with pent-up demand for capital projects and a renewed focus on replacing aging infrastructure. We are well positioned to take advantage of these positive developments as our strong relationships with a growing number of leading OEMs and our proven capabilities in both construction and material handling make us the perfect partner to meet growing demand. Our focus remains centered on executing our strategy of expanding our presence in existing markets while seeking the right opportunity to add quality equipment products to the Alta family. In summary, our first quarter results put us on pace to meet our expectations for the full year 2021. We are experiencing a V-shaped recovery and believe that our investments in expanding our geographic footprint and product lines position us well to benefit in an improving operating environment. I'd like to thank our manufacturing partners for their support, our dedicated employees for their hard work, and our shareholders for their continued confidence in the company. And with that, I'll turn the call over to Tony for the financial review.

Thanks, Ryan. Good afternoon, everyone. And thank you for your interest in Alta Equipment Group and our first quarter 2021 financial results. I trust that you and your families are safe and healthy and anticipating a well-deserved summer. My remarks today will focus on three key areas. First, I'll be presenting our first quarter results, which we are pleased with as we close the COVID gap and look forward to continued recovery across our business landscape and a better 2021 for Alta, our employees, and our investors. Second, I want to highlight and discuss a recent bond raise, which closed right after the quarter end on April 1st, and detail the balance sheet flexibility and other benefits the bond financing gives us both now and for years to come. Lastly, for the first time in our brief history as a public company, I'll provide guidance on 2021 adjusted EBITDA and discuss the relevant elements and assumptions that drive the metric. Before I dig in, it should be noted that there are some slides in our presentation, which was released prior to our call that presents our first quarter numbers in greater detail than what I will discuss here today. I 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. For the first portion of my prepared remarks, let's start with our first quarter performance, beginning with the income statement. A few key items to note for the quarter, the company recorded revenue of $269 million, which is a solid start to the year and especially notable after posting record fourth quarter sales results of $280 million. Embedded in the $269 million of revenue for the quarter is a 5.2% organic sales increase over Q1 2020, which recall was largely unaffected by the COVID pandemic making for a comparatively sound quarter. Similar to the fourth quarter of 2020, we saw continued strength in equipment sales, especially as it relates to used equipment and rental disposals, as rental equipment sales for the quarter came in at $232 million. Additionally, and notably, as it relates to our product support business model, we continue to realize organic growth in our parts and service departments in our construction segment with that figure increasing 14.3% year-over-year. From an EBITDA perspective, we realized $23 million in adjusted pro forma EBITDA for the quarter, which is just $800,000 off from the adjusted pro forma level of the first quarter of 2020. The $800,000 variance is the closest the business has come to completely closing the COVID gap on a year-over-year basis since the pandemic began. Breaking down the segments in more detail, as we analyze the trends of our traditionally more stable parts service and revenues, we can see that in our construction segment, the V-shaped recovery has now surpassed its COVID starting point with tailwinds behind it, and our material handling segment, which continues to be cash-flow positive and profitable for the quarter, while it has yet to reach its COVID starting point, has continued to close the gap again in Q1 like it has in each sequential quarter since the second quarter of last year. Before I move to the next key area of my remarks, I want to revisit the strong equipment sales results for the quarter and touch on the market and the specific dynamics that are driving the numbers. First, I'll reiterate our razor and blade business model. Our strategy is to drive market share for our OEM partners through equipment sales, which in turn builds field population that yields future high-margin product support business. I've also mentioned in the past that Alta has a rent-to-sell approach to certain product categories of heavy equipment, which allows us to create different price points of lightly used equipment for customers, which we sell out to meet customer demand and drive field population. Given some of the near-term supply chain constraints that the industry is experiencing with new equipment, we saw increased demand for our used and rental equipment in the first quarter, and we expect that trend to continue over the coming quarters. All told, when considering just our equipment sales over the last two quarters, we've populated nearly $330 million of equipment into the field, which bodes extremely well for the future of our high-margin product support departments and our longer-term prospects. We believe that our flexible approach with customers when it comes to our rent-to-sell model and the breadth of our expanded product portfolio, which is currently de-risking the impacts of the OEM supply chain constraints, revealed itself in the first quarter, as we were able to deliver equipment solutions to customers, despite the challenges impacting the supply chain. Another encouraging metric for the quarter, another positive by-product of the current supply-demand imbalance in the equipment markets is the continued increase in the physical utilization of our rental fleet, which is up approximately 10% when we compare equipment on rent in March of 2020 versus March of 2021. As it relates to rental fleet and cap backs, as mentioned on previous calls and in concert with our plan for 2020, we have kept the size of the rental fleet effectively flat for the quarter. During the quarter, all capital expenditures related to the fleet were for replenishment purposes to replace the aforementioned assets, which were sold out of the fleet, preserving our ability to meet rental demand with the appropriate amount of equipment supply. Now, moving on to the second key area of my prepared remarks, I'd like to provide an overview of our recent bond instruments and provide detail on its terms and highlight our belief that this is a game changer for our capital structure and a big win for our business and shareholders as we go forward. Before I launch into the details of the new bond, I'd like to reset our former capital structure and certain relevant metrics that existed prior to the new issuance. Recall that we had a $300 million ABL facility that was bearing interest at LIBOR plus 175 basis points in the first lien position of our capital structure. This facility was drawn $160 million prior to the refinancing and thus with a borrowing base of $300 million, the business had $140 million in liquidity available in the previous structure. Next, recall that in the second lien spot, we also had a five-and-a-half year, $155 million term loan, which was entered into at the IPO that had an interest rate of LIBOR plus 800 basis points, which in retrospect was an out-of-market coupon. The term loan also amortized at 5% a year, and subjected the company to leverage covenants, which ratcheted down over the life of the loan. Focusing in on that last piece, the covenants over time would have made it increasingly more prohibitive for us to access liquidity on our ABL loan to fund our growth initiatives, potentially forcing us to source more expensive equity-like capital to fund these important investments. Now keeping the previous capital structure and some of its prohibitions in mind, let's get into the bond. First, some of the high-level terms of the issuance: the bond is $350 million in size with a 5.58% fixed interest rate, a five-year tenor, no amortization, and importantly has no material financial or leverage covenants, allowing us access to our first lien liquidity. A few other key positive impacts of the bond, both for today and more importantly, what this means for our future financing: one, liquidity impact: we free up an additional $141 million worth of liquidity. As we use the bond proceeds to pay off the $155 million term loan and also pay down most all of our lines of credit draw, post-refinance, the company now has approximately $280 million of liquidity available. Number two, immediate cost reduction of debt and elimination of interest rate risk, while the accretion on cash savings is modest initially. Our calculations suggest we reduced our weighted average cost of debt by 50 basis points. The fixed rate nature of the bond has also eliminated any of our interest rate risks going forward. Third, there will be no cash leak on the bond given that there is no amortization schedule on the bond; we were able to keep more cash flow in the business over the next five years. Lastly, and most significantly, we believe this new capital structure gives us tremendous runway for the future. This runway will be accretive to shareholders when it comes to financing the next dollar of capital needed to execute on M&A opportunities. Our calculations suggest that the new capital structure allows us to pursue $300 million worth of enterprise value at any incremental cost of capital of what is effectively 2%, while still maintaining an appropriate amount of liquidity to run the business and also being responsible with leverage. Finally, for the last part of my prepared remarks, I would like to discuss the 2021 adjusted EBITDA guidance, which we mentioned in today's earnings release. First, we've chosen to provide guidance on annual adjusted EBITDA, as we believe this metric is most indicative of the cash flow generation of the business and is a familiar comparable metric for the investing public. Additionally, we believe annual EBITDA figures are appropriate in this quarterly given seasonality and what sometimes can be ebbs and flows in equipment sales month to month and quarter to quarter in our business. Second, in terms of the number, we expect to report $110 million to $115 million of adjusted EBITDA for the full year 2021. A few observations here: one, we felt like with all the M&A activity in 2020 with COVID hopefully in the rearview mirror from a business perspective and our first quarter performance that this was an appropriate time to provide guidance on 2021 adjusted EBITDA. Second, pursuant to previous comments I've made and investor materials we've produced, we've been focused on how and when we would be able to get the business, including our 2020 acquisitions back to 2019 levels, which was $113 million of adjusted pro forma EBITDA. After analyzing each of our businesses relative performance in the first quarter and the expected trends for the remainder of the year, we feel confident in our ability to return to 2019 EBITDA levels here in 2021. In closing, given our first quarter results, the ever-improving business landscape we see ahead, and the impact of the recent bond raise, we feel our business is in a great position right now and we're excited about executing our business plan for all the shareholders over the remainder of 2021. Thank you for your time and attention, and I'll turn it back over to the operator for Q&A.

And ladies and gentlemen, we have Michael Shlisky from Colliers Securities. Mike, your line.

Good afternoon, gentlemen. I wanted to touch on some of your comments earlier about the sort of supply chain issues in the lift truck world or probably in both categories, which I think in any construction you touched on how it really drives some of the used sales, which makes a lot of sense. Substitution when you can't get from the OEM. So, but from the dealers who don't have anything available, I'm curious whether the shortage of new equipment has also led to some really strong parts and service as well. I think you briefly mentioned it, but just the detail as to whether you've got some really good boost folks trying to stick to the equipment rather than buying new?

Yeah. Mike, this is Ryan. I'll take that. You know, the demand is definitely there. The thing that is the governor on parts and service revenue is going to be headcount mechanics, which is one of the reasons we highlight that so often. So the demand is there, but our ability to meet that demand will be predicated on our ability to continue to onboard mechanics. The other thing that's happening is some flexibility in terms of that, the used inventory in the rental business. So to meet rental demand, if we're seeing really high utilization on particular assets, we might look to our remarketing department to put assets into the rental fleet that we normally wouldn't. And then in addition to that, we're looking at lease returns and things like that as a flexible model of trying to bring additional equipment into the fleet if lead times are too stretched. So, you know, we're just trying to maintain flexibility to meet our customer demands, but the way that we think about the parts and service will be kind of governed by headcount.

Mike, this is Tony. One quick follow-up based on Ryan's comments. And for everyone to understand, we are not seeing any real issues in the supply chain relative to parts, which as everybody is aware is an important part of our business. So where we're seeing it maybe with some of the new equipment like Ryan alluded to, we're not seeing that same effect in parts, which is good.

Yeah, that's an important question too. I also want to turn to the COVID-19 situation. I keep hearing from folks that it's really been tough still, especially in the state of Michigan. I'm not sure if that's true or not. You guys certainly have a better view on that than I do. Has COVID been an issue for absenteeism or any other issues during Q1 and the first part of Q2, or are the headlines I'm reading not quite accurate?

No, Mike, that's a good question. And it's probably a good time to highlight that the headlines are in relation to the infection rates in Michigan. We did have a very tough spring in regard to that. But it hasn't translated to headwind in the business. We're seeing a V-shaped recovery in all of the markets. The shape of the V is not as steep in Michigan, but to us, it appears more related to supply chain issues and our still heavy concentration in the auto sector versus COVID-related issues. So again, it's a V-shaped recovery, not as steep, but the auto industry is making cars. And when we were in the worst of the eye of the storm of COVID, the whole industry was shut down.

Okay, sure. And then I also wanted to clarify a statement made during your remarks. First of all, thanks for giving us guidance here for the full year. And Ryan, your comments were about improving results throughout the year. Should we take that literally to mean that each quarter will be a little bit better for me in that perspective between now and the fourth quarter? Or am I reading too much into it?

Mike, this is Tony. I realize you were referring to Ryan's comments, but I'll take the question. We had a slide last quarter on kind of relative EBITDA breaks by quarter on a historically normal basis. We expect to get back to those levels this year. What that typically means for our business, and part of Ryan's comments, is that Q1 is usually rough, or I shouldn't say rough, but relatively speaking to the other quarters. We just kind of trend up from there. When we think about the guidance we are giving at $110 to $115 million, you can do the rough math; on average, we would expect you to see the quarters from here to be better than Q1.

For our next question, we have Alex Rygiel from B. Riley. Alex, your line is open.

Thank you. Very nice quarter, gentlemen. A couple of quick questions here. Can the new equipment sales continue at this dollar level sort of quarterly through the remainder of the year?

You know, Alex, this is Tony. Good afternoon. We hope so. I think it's definitely, it won't be demand-related. If the new equipment sales take a dip, it will be supply-related and probably more acute on the material handling side versus the construction side. We alluded to it in my comments, but what we're finding is that our product portfolio—if you think about one end of the spectrum, if we were just a Volvo dealer and we didn't have other contract lines that we supported—if Volvo was not able to provide, we would be sunk. What we're finding is that the breadth of our product portfolio means not everybody is out of new equipment all at once with all of these OEMs. So, the breadth of our product portfolio is really helping on the construction side. On the material handling side, we're a little bit more heavily anchored to Heister Yale. I think they've been pretty upfront about what they have going on. The good news on that end for us is that we can wait. As we've said all along, if a customer has to extend a lease on an existing fleet to wait for their new Heister Yales to show up, we're happy to continue to service them throughout that period. We might need to charge a bit less, but there's not a lot of impact even dollar-wise in the material handling segment when we get behind new sales.

One thing I would just add to Tony's comment is that the backlog is continuing to build, really approaching record levels. The demand is there so that when we're talking about equipment sales this year, it's really a function of taking receipt of the equipment and turning it around, prepping and delivering it. That will eventually happen; it's just timing-wise.

And then as it relates to M&A, does the new balance sheet capacity change sort of the relative size of an acquisition that you're pursuing?

No, I don't really think of it that way, Alex. What we're pursuing on all fronts, you know, big moves in our territory will probably be anchored with expansion with our OEM partners versus some of the infill opportunities that we had examples of last year, but we're looking for opportunities on all fronts. COVID last year pulled some deals forward. It was a catalyst for deals that were in the pipeline that transacted in a more tight timeline. We remain very focused on M&A, and that was a big part of this whole strategy with raising the bond: to have the dry powder to continue our strategy.

Again for dispense. We have Matt Summerville from D.A. Davidson. Matt, your line is open.

Thanks. A couple of questions. Talk about your ability, given where the labor market is right now, like how tight it is. Are you still able to organically add to your service tech base? And the reason I'm asking that is that it looked like organic parts and service was only up 1.4% year-over-year total for the company. I know it was up more than that in construction, but I'm trying to kind of square that up. I guess I would've thought organically it would have been a little bit more than 1%.

Ryan, do you want to talk about the labor markets?

So in terms of the labor market, we don't really perceive any additional tightness. It's been in our industry something we've navigated for many years: a dearth of people coming into the trades. So in our industry, we're all seeking the same talent, and we remain focused on it. We are successfully on-boarding technicians. One of the benchmarks that we shared in the third quarter last year was that we had all our employees back from furlough. We're hitting benchmark levels of labor utilization, and today labor utilization is there, and we are actively recruiting and hiring in all markets.

Yeah, Matt. This is Tony. Just touch on the numerics of the part of your question there. When we talk about organically, I think it's important to define that when we think about organically, we're thinking about basically everything pre-IPO, which would have included our Michigan and Illinois construction business. Because recall last year we didn't have the eight acquisitions then, so that business was up like we said, 14%. It's important to think about the nominal dollars associated with it. Our parts and service revenues, given the maturity of the material handling segment, our nominal dollars are much bigger on that side of the house. I made comments on how the material handling parts and service specifically has really started to close the gap. I think it was off on an organic basis something like 6%. And when you roll all that up, you're only up 1.4% organically. But that parts and service business in the material handling is a big number, and that business continues to, even though it's off year-over-year, it's not suffering. It's very cash-flow generative and profitable given its maturity.

Thank you. That's helpful. And then just going through your queue very quickly, it looked like within the construction segment that gross margins on the rental side took a bit of a hit on a year-over-year basis. And I guess that surprises me a little bit if utilization rates are good and seemingly if utilization rates are good, perhaps you can start charging more.

Are you referring to gross margin?

Yeah.

So gross margin in the rental business includes depreciation. If you go down a few into our segment reporting, they actually refer to that concept. Because Flagler, which is more heavy construction, coming on, depreciates their assets pretty heavily. Anyway, it's depreciation that's driving the year-over-year depressed margin, which is obviously non-cash. Our rental revenues are on the mend, if you will, as I mentioned, related to utilization.

Got it. And then just from an end-market standpoint, obviously non-residential construction, particularly in the Southeast, I would imagine if there’s a bright spot, perhaps in parts of the Midwest and Northeast as well. So would we put that obviously in the very good column? Would we put logistics warehousing e-commerce in that same column? And then conversely, outside of automotive, are you seeing for the last—what’s the right word? I want to use less steep recovery in what markets besides automotive? So kind of the good and the still good but maybe not as good. It’s really what I’m asking.

This is Ryan. I think the best way to think about the markets that are recovering but not as quickly are the markets tied to manufacturing where the supply chain constraints are actually muting demand because they're just waiting for product to come in. So upstate New York, Michigan, parts of our Chicagoland are tied to manufacturing and are softer than the markets you've addressed, which are definitely seeing surge demand and more secular long-term growth.

For our next question, we have Bryan Fast from Raymond James. Bryan, your line is open.

Thanks. Good afternoon, guys. I was disconnected, so I apologize if this was already addressed, but can we just get some color on the warehouse solution space? And I guess the kind of synergy you’re seeing between the material handling business and the PeakLogix and most recent ScottTech acquisition?

Sure. So that is essentially a vertical integration of a previous group of vendors. So Nicco, that was an acquisition we made in New England, our high cereal dealership in the Northeast had a legacy relationship with PeakLogix. So they worked together to do warehouse solutions for their customers. After we acquired Nicco, we looked at that as a strategic asset to bolster our capabilities and have more tools in our bag. One of the ways to think about the growth opportunities is that we now have 100 material handling sales professionals out there looking for opportunities for a business that used to have a half dozen sales reps on the street. ScottTech is further driving down to that strategy so that ScottTech was actually a vendor to PeakLogix, providing more specialized software and warehouse management type systems. And now that's again a vertical integration where we can fully implement a solution for our warehousing customers. This will be a fast-growing part of the business and it's asset light; essentially, we're selling solutions, which provides great cross-selling opportunities across the rest of the material handling product portfolio.

Ryan, this is Tony. Just to follow that up with some anecdotal news: one of the things that we know is happening, and we've gotten feedback from our salespeople, is that the acumen, the skill set that Peak and ScottTech now bring to the table with customers is getting us into deals that we otherwise would not have been able to touch historically prior to adding that sort of talent to the team. We can't speak specifically about different customers and things that we're quoting on, but we can say that we're getting in on deals that we otherwise wouldn't have for warehouse build-outs, retrofits, and so forth because of those actions.

Okay, that's very helpful. And then, I think you've kind of addressed it with Alex's question, but are you seeing customers pull-ahead buying decisions in an effort to get ahead of any pending supply constraints?

It's too late. The supply constraints are upon us. There are certain products today that if you wanted to order brand new from the factory, you're out more than a year. The companies that were thinking they could get in front of that coming right out of COVID last summer should have done it. But today the supply constraints are real for our industry; they're here. We just like to remind that we have a very flexible structure that we’re ready to serve our customers' needs. We use our rental fleet; we'll use new and used inventory to ensure that we can keep them up and running.

That's the—if there are no further questions and that concludes the meeting this afternoon. Thank you, everyone, for joining.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.