United Rentals, Inc. Q4 FY2024 Earnings Call

Good morning and welcome to the United Rentals' Investor Conference Call. Please be advised that this call is being recorded. Before we begin, please note that the company's press release, comments made on today's call and responses to your questions contain forward-looking statements. The company's business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control and consequently, actual results may differ materially from those projected. A summary of these uncertainties is included in the Safe Harbor statement contained in the company's press release. For a more complete description of these and other possible risks, please refer to the company's annual report on Form 10-K for the year ended December 31, 2024, as well as to subsequent filings with the SEC. You can access these filings on the company's website at www.unitedrentals.com. Please note that United Rentals has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations. You should also note that the company's press release and today's call include references to non-GAAP terms such as free cash flow, adjusted EPS, EBITDA and adjusted EBITDA. Please refer to the back of the company's recent investor presentations to see the reconciliation from each non-GAAP financial measure to the most comparable GAAP financial measure. Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer; and Ted Grace, Chief Financial Officer. I will now turn the call over to Mr. Flannery. Mr. Flannery, you may begin.

Thank you, operator, and good morning everyone. Thanks for joining our call. We are pleased to report our solid fourth quarter results yesterday as the year culminated with record revenue, EBITDA and EPS. We again saw growth across our construction and industrial end markets as well as continued strong demand for used equipment. Our team doubled down on being the best partner of choice for our customers. Our diligence on safety, coupled with unmatched service, technology and operational excellence translated into the results we reported. Importantly, all of this sets the foundation for our future growth. Today, I'll discuss our fourth quarter results, followed by our expectations for 2025, and finally, recap why we are excited about the H&E acquisition we announced a few weeks ago. Then Ted will discuss the financials in detail before we open up the call for Q&A, which we will keep focused on United Rentals as a stand-alone company. Our plan remains to update the investment community on the combined companies after the transaction closes, which is still expected by the end of our first quarter. So with that, let's start with the fourth quarter results. Our total revenue grew 9.8% year-over-year to almost $4.1 billion. And within this, rental revenue grew by 9.7% to $3.4 billion, both fourth quarter records. Fleet productivity increased by 4.3% as reported and 2% excluding Yak. Adjusted EBITDA increased to a fourth quarter record of $1.9 billion, translating to a margin of over 46%. And finally, adjusted EPS grew year-over-year to $11.59, another fourth quarter record. Now let's turn to customer activity. We saw growth in both our general rental and specialty businesses. Specialty rental revenue impressively grew more than 30% year-over-year and even without Yak, a strong 18%. These results were driven by rental revenue across all businesses with a combination of solid same-store sales growth and an additional 15 cold-starts putting us at 72 for the full year. And as a reminder, these specialty cold-starts are a key element to accelerating our growth in this high-return segment. By vertical, we continue to see similar trends to the rest of last year with non-residential growth helping to fuel construction and industrial growth driven by manufacturing and power. And we saw new projects across data centers, chip manufacturing, sports stadiums and power, to name a few. Now turning to the used market, which continues to exhibit strong demand. We sold over $850 million of OEC in the quarter, which was a record for any quarter in our history. The depth and health of demand in the used market is allowing us to rotate our existing fleet to ensure we can serve our customers' needs efficiently. This is evident through our full year CapEx of over $3.7 billion. And as a result, we drove free cash flow of nearly $2.1 billion, which translated to a very healthy free cash flow margin of over 13%. The combination of our industry-leading profitability, capital efficiency and the flexibility of our business model enables us to generate meaningful free cash flow throughout the cycle and in turn, create long-term shareholder value. To that end, we returned over $1.9 billion to shareholders last year through a combination of share buybacks and our dividend. And while we paused our share repurchase plan ahead of the H&E closing, I'm pleased to announce we'll be raising our quarterly dividend by 10% year-over-year to $1.79 per share. Now let's turn to 2025, which we expect to be another year of growth, again, led by large project growth. Customer optimism, backlogs and feedback from our field team, combined with the demand we're carrying into the new year, all support our guidance. This was reinforced at our annual management meeting, which we held earlier this month in Houston, Texas, where we discussed how a key element of our culture is the quality of people who work for United Rentals. And this was on full display in Houston, as over 2,600 team members came together to focus and engage on being the partners of choice for our customers through our differentiated value proposition. Finally, I'd like to reiterate what I said two weeks ago when we announced our intent to acquire H&E. We're very excited to combine two complementary businesses. The transaction checks all three boxes we require when evaluating M&A: Strategic, financial and cultural. Growing the core is a key component of our strategy and I'm really thrilled to have the opportunity to add high-quality capacity, meaning people, fleet and real estate to the United Rentals team. This will allow us to better serve customer demand over the long term. It will also accelerate our growth, all while generating compelling returns for our shareholders. It's really a win-win outcome. Things remain on track for a first quarter close and there are no further updates to provide you today. In closing, and building upon what I just discussed with our latest acquisition announcement, we remain focused on being the best rental company in the industry. Our unique value offering, industry-leading technology and our go-to-market approach, combined with our capital discipline, give me confidence that we're well positioned for both customers and shareholders for the long term. We continue to progress towards our 2028 aspirational financial goals, which we laid out in May of '23 and look forward to delivering on these results as we continue to execute our strategy. With that, I'll hand the call over to Ted and then we'll take your questions. Ted, over to you.

Thanks, Matt, and good morning, everyone. As Matt just shared, we had a strong finish to the year, setting both fourth quarter and full year records for total revenue, rental revenue, EBITDA and EPS, which supported the attractive returns and significant free cash flow we also generated in 2024. So with that said, let's jump into the numbers. Fourth quarter rental revenue was a record at $3.42 billion. That's a year-on-year increase of $303 million or 9.7%, supported again by growth from large projects and key verticals. Within rental revenue, OER increased by $177 million or 6.9%. Breaking this down, growth in our average fleet size contributed 4.1% to OER, while fleet productivity added another 4.3%, partially offset by assumed fleet inflation of 1.5%. Also within rental, ancillary and re-rent grew by 22% and 30% respectively, adding a combined $126 million to revenue driven primarily by strong growth in specialty and hurricane-related work in the quarter. Turning to our used results. As Matt mentioned, we took advantage of a strong market to sell a record amount of fleet in the fourth quarter, generating proceeds of $452 million at an adjusted margin of 48.9% and a recovery rate of 53% on assets that were almost 8 years old on average. Moving to EBITDA, as I mentioned, adjusted EBITDA was a fourth quarter record at $1.9 billion, translating to an increase of $91 million or 5%. Within this, rental gross profit increased 7%, contributing an additional $136 million year-on-year. This was partially offset by used where the ongoing normalization of the market drove a 9% decline in used gross profit dollars, translating to a $21 million headwind to adjusted EBITDA in the quarter. SG&A increased by $36 million year-over-year, which was in line with revenue growth, so good efficiency there. And finally, the EBITDA contribution from other non-rental lines of businesses increased by $12 million, driven largely by strong new equipment sales. Looking at profitability, our fourth quarter adjusted EBITDA margin was 46.4%, implying a 210 basis points of compression. I'm sure we'll dig into this during Q&A, so I thought it might be helpful to frame some of the key factors here. The combination of used and stronger-than-expected new equipment sales were together about 80 basis points of year-on-year headwinds. Said another way, excluding these two factors, our adjusted EBITDA margin would have been down about 130 basis points with flow-through a little better than 33%. Closer to the core, and as you just heard me highlight, we had higher growth in ancillary and re-rent revenue that, as you know, come with lower margins. If we also adjust for these, our EBITDA margin would have been down about 60 basis points, with implied flow-through of roughly 40%. While this is modestly below our long-term goal, it reflects our continued investment in key aspects of our strategy, including specialty, technology and capacity to support the long-term growth of our business during what we view as a slower phase of the cycle. And lastly, our adjusted earnings per share was a fourth quarter record at $11.59. Shifting to CapEx; fourth quarter gross rental CapEx was $469 million. Moving to returns and free cash flow, our return on invested capital of 13% remained well above our weighted average cost of capital, while full year free cash flow totaled a robust $2.06 billion. Our balance sheet remains very strong, with net leverage of 1.8x at the end of December and total liquidity of over $2.8 billion. I'll note this was after returning a record of over $1.9 billion to shareholders in 2024, including $434 million via dividend and $1.5 billion through repurchases that reduced our share count by over 2.1 million shares. So to wrap up both the quarter and the full year, we were very pleased with the results our team achieved in 2024. Now let's look forward and talk about our 2025 guidance, which I'll remind you, is standalone, meaning it does not include any contributions from H&E. As you've seen from the press release, we anticipate another record year. Total revenue is expected in the range of $15.6 billion to $16.1 billion, implying full year growth of 3.3% at midpoint. Within total revenue, I'll note that our used sales guidance is implied at roughly $1.45 billion or a mid-single-digit year-on-year decline on a percentage basis. This, in turn, implies a little faster growth within our core rental revenue, call it, mid-single-digit on a percentage basis. Within used, I'll add that we expect to sell around $2.8 billion of OEC translating to recovery rate in the low 50s versus the mid-50s in 2024 but in line with pre-pandemic norms. Our adjusted EBITDA range of $7.2 billion to $7.45 billion. At the midpoint, excluding the impact of used, this implies flow-through in the 40s and flattish adjusted EBITDA margins versus as reported flow-through of around 30% and approximately 50 basis points of margin compression at the midpoint of guidance. On the fleet side, our gross CapEx guidance is $3.65 billion to $3.95 billion with net CapEx of $2.2 billion to $2.5 billion. Within this, we peg our 2025 maintenance CapEx at around $3.3 billion, implying growth CapEx of roughly $500 million at midpoint. And finally, we are guiding to another year of strong free cash flow in the range of $2 billion to $2.2 billion. Turning to capital allocation. One of the benefits of our balance sheet strategy and free cash generation are the flexibility they provide to invest in growth opportunities when they arise. As you know, we intend to capitalize on this through the pending acquisition of H&E where we will invest almost $5 billion at targeted returns well above our cost of capital. As previously shared, we are pausing our buyback program ahead of H&E and we intend to utilize our free cash flow in 2025 to reduce our leverage from roughly 2.3x on a pro forma basis to a goal of around 2x within 12 months of close. Finally, consistent with our strategy to return excess capital to our shareholders, I am very pleased to reiterate that we are increasing our quarterly dividend by 10% to $1.79 per share, translating to an annualized dividend of $7.16. So with that, let me turn the call over to the operator for Q&A. Operator, please open the line.

Our first question will come from Steven Fisher with UBS.

Congratulations on a nice year. Maybe you could just touch upon the bigger-than-usual ancillary and re-rent. What's the main activity driving that? Was that sort of more shifting of equipment around that you got fees on? And maybe what's the expectation for the next few quarters on that, if you could even forecast it? And I suppose the bigger picture question here is on the margin side, what would you have to see in order to get flow-through back into the kind of 50% plus range?

Sure. I'll start, Steve, and then Matt can jump in. So on ancillary and re-rent, I think there are a couple of things. Certainly, the storm-related opportunities were a big part of both, probably more so in re-rent than ancillary, although there was definitely a benefit in ancillary. And then within ancillary, the other thing we've talked about all year is some of the benefits we've had in specialty. So in terms of setting things up, breaking them down and those kinds of services that relate to some of the new businesses we're in, those obviously have seen kind of sharp growth in '24 and that's contributed to that outperformance versus, call it, OER. Does that help on the first question?

Yes.

On the second question, I think there are a couple of things. I mean certainly, relative growth rates matter. I think I made the comment just a couple of minutes ago that we think we're in the slower growth phase of the cycle. And the reason that's important is it drives relative fixed cost absorption. So as we get through '25 and we do expect to accelerate thereafter, that obviously drives good absorption that helps drive better flow-through. At the same time, in this environment, we've talked about making very intentional investments in things like cold-starts and technology that have been marginal drags. We think those have been excellent investments with great ROI. That's why we've called them out and been pretty clear that we don’t want to forgo those opportunities just for the sake of an arbitrary flow-through goal. So Matt, anything you'd add there?

No, we always aim to maintain strong margins, and Ted can provide further details. Excluding used sales, we anticipate margins to be similar to year-over-year comparisons.

Yes, that's a good point. I'm not sure if you asked it specifically, but in my comments, I mentioned that if you exclude used sales, the flow-through would be in the mid-40s, and we've maintained flat margins, which we consider very good performance in this environment. I want to remind everyone that even though inflation has decreased, it is not reversing. We are still dealing with a significant amount of inflation. Therefore, achieving these results requires hard work.

Great, that's helpful. And then just maybe on the pipeline of large projects. I'm curious how that looks today relative to a year ago. What do you see as the differences in the large project landscape this year versus last year?

Yes. I'd call it very similar with the addition of that we're carrying in demand from projects that are ongoing. So when you add that to some of the newer projects that are planned to come out of the ground, we feel good about this segment and certainly feel good about our alignment to serving that part of the business. So I would call it overall, really the whole demand environment, very similar to what we experienced in '24 and our guide, right? So we feel good about the year going forward.

Our next question will come from Blake Greenhalgh with Bank of America.

First one would be just cadence of growth in the first half. Are you guys baking anything that's more second half weighted?

So we won't get into quarterly guidance. But if you just think about CapEx as a starting point, right, we expect to spend CapEx on a similar cadence, more historically normal cadence that we did in '24. From there, there's nothing that I would call out, certainly not back-weighted. We think it will flow with the normal seasonality of our business and more importantly, our customers' demand.

Great. And then on power, there's been a lot of discussion this week about renewables, grid data centers. Can you remind us how big that business is for you guys? And anything you're hearing for '25 that you want to talk about?

Yes. So in its entirety, power is, call it, about 10% of our total revenue. Within that, solar and wind are a relatively small fraction. So those are not markets that move the needle terribly in our power business. So hopefully, that helps give you some sense.

Yes, regardless of the political environment and all the pontificating on what's going to happen, there's a need for that grid to continue to be upgraded. There was long before chips and data centers and there's going to be going forward with or without the same level of chips and data centers. We're not concerned about this. This is a segment we focus on and we feel really good about.

Our next question will come from Jerry Revich with Goldman Sachs.

This is Clay on for Jerry. First question here. What was the specialty organic growth in the quarter? And if you could talk to the color on the dispersion between the individual business lines within specialty, that would be great?

We don't really get into the individual business lines too much. I'll say specialty, as you saw, showed great growth of 30%. But as I said in my opening remarks, even excluding Yak, 18%. And that would be what we call organic growth. Admittedly, there's some cold-starts in there. So that's inclusive of that. But really strong growth that we feel good about. And this has been going on for quite a few years, just double-digit growth in specialty, and as we add new products, as we have in the last couple of years through acquisitions, getting further dispersion of that footprint is another big driver of growth. And we think that will continue on, and we'll probably do another 50-plus cold-starts in 2025 to add to that opportunity.

Great. That's really helpful. Also, I wanted to ask about the options for 2025. While I understand you don't want to discuss the individual product lines directly, I'm curious to know which ones are performing better compared to the average.

Well, I wouldn't say performing stronger; they are all growing strong. I would say that you can think about where the growth is more pronounced, specifically in the cold-starts is the products that we've added over the last couple of years. So think about the General Finance acquisition and specifically here in the U.S. with Pac-Van, we continue to exceed those goals that we had to double that business in 5 years. And cold starts will be a part of that as well, continuing and expanding their footprint. With Yak, our most recent new product line, they're ahead of schedule on our goals to double their business in 5 years. So they're really doing well, and that's been a lot of organic growth. We haven't even broadly gotten to growing the footprint, so that's future opportunity that we're going to do there. And our ROS business, right, our Reliable Onsite business continues to grow organically and through cold-starts. So those are the three I'd point out. But with all that being said, one of our most mature ones is power and they're growing tremendously by adding new products and just continuing to grow their footprint. So it's pretty much across the board, Clay.

Our next question will come from Tim Thein with Raymond James.

Matt, maybe just starting on fleet productivity. The target that you outlined in terms of the ability to outrun inflation of 1.5%, I think still believe in that as a realistic target for '25? And then maybe as part of that, is there an area where maybe there's better opportunity in terms of whether it's time or rate? And maybe you could just speak to that in terms of how you're thinking about just the broader fleet productivity setup for '25?

We are very pleased with the team's performance. While we won't quantify it, we mentioned last year that if we could match the time utilization from 2023, we would be satisfied, and we have achieved that. The team has executed well, and this performance is reflected in our expectations for 2025 and in our guidance. Regarding the other factors, we still view the rate environment positively, mainly due to the necessity created by the fleet inflation the entire industry has experienced over the past few years. The industry needs to increase prices to offset this inflation, and we believe this trend will continue. The mix is another variable, which is influenced by the growth rates of different products and our management of various business lines. There are several elements to consider here, which you have previously discussed. However, we believe this mix will be favorable, enabling us to surpass inflation. In its simplest form, fleet productivity means growing rent revenue faster than fleet growth, and this is included in our guidance for this year.

Got it. Okay. And then just with the impact of M&A, obviously, as the company has grown a couple of hundred million, isn't what it used to be, United. But is there a way, Ted, just to think about that in terms of the contribution as to what we can expect from the deals done in the back half of the year, presumably that's driving some benefit? Any way to help us in terms of what that may translate from a revenue perspective in '25 as you annualize that?

So we don't get too specific breaking out, obviously, the smaller deals. You would have seen there was something on the order of $300 million of deals we did, most hit late in the quarter, so there really wasn't much benefit in the fourth. In terms of rolling forward, it was a combination of general rentals and specialty. So you can think about what multiple you'd want to apply to EBITDA and figure out what kind of margin that would imply. It's not a huge part of the growth. It will contribute. These are nice deals. We're excited about them, but it's not going to be very impactful in the scheme of our guidance.

More importantly, it's all embedded within our guidance.

Our next question will come from Kyle Menges with Citigroup.

This is Randy on for Kyle. Looking at the guide for gross CapEx, gross CapEx up a little in 2025, could you give some color on what areas you're growing OEC during the year and any areas you plan to pull back a little bit?

Yes, we are not expecting to reduce any of our activities. As mentioned, we have had strong utilization of our fleet, and we anticipate that the demand environment will stay consistent. Therefore, there is no reason to hold back on anything. Regarding our growth capital expenditures, we previously discussed specialty growth, particularly with cold-starts, which will receive a significant portion of the growth CapEx. To break down the figures, we plan to sell approximately $2.8 billion worth of OEC this year. The replacement cost for what we acquired eight years ago is now about 20% higher, totaling around $3.3 billion. This leaves us with about $500 million earmarked for growth CapEx at the midpoint. We expect that a substantial share of this will be allocated to support our specialty growth.

Got it. And then, another quick one. Can you just give some color on what kind of changes you've seen in customer behavior and sentiment following the election and then maybe more recently on some of Trump's executive orders?

I'll start with the first part, and Ted can address the second. We've observed strong customer sentiment, and our field teams have remained optimistic about the year throughout 2024. This positivity is why we provided our guidance, even in light of some contrary market signals. We anticipate similar trends as we move into this year. Our customers are feeling positive, our leadership team is confident, and we're not going to be overly influenced by the daily news cycle. Those additional interactions with customers really bolster our confidence in our guidance and plans. Ted, feel free to add your thoughts on the other aspect.

Yes. In terms of any impact of executive orders, I mean aside from people may have whiplash, I don't think there's been too much. I do think at the end of the day, you look at our customers, you look at their sentiment, I would say it's improved since the election. And I think that's people's perception that you've got a government that's going to be pro-growth, wanting to invest in America. They've been pretty clear about that. Certainly, our customers are well positioned to support that growth and we're well positioned to support them in that endeavor. So whether it's areas of infrastructure, onshoring, certainly power, energy, obviously, Stargate was a big announcement, there's a lot of different things that will continue and/or be incremental that we think are going to be exciting opportunities in '25 and beyond. So Matt, I don't know if you want to share anything?

No, you covered it well.

Our next question will come from Angel Castillo with Morgan Stanley.

This is Brendan on for Angel. In your press release, just diving more into that customer optimism. So you noted that in your press release, we've talked about it here today on the call. Just curious how much of that's actually translating to greater activity today? And then in any areas where it hasn't resulted in an uptick in activity yet, can you describe maybe what customers are waiting for, whether it's greater certainty around interest rates policy, labor availability or just anything else that you would like to call out, please?

Yes, I'll do my best to clarify. This is a sentiment-based measurement, meaning it doesn't reflect current actions but rather asks individuals about their growth expectations over the next 12 months. From this perspective, we see an improvement in net responses, which supports the guidance we've provided. It's difficult to provide further details since we don't have more granular data from that survey. However, I believe people are feeling more positive about the general environment. With the election behind us, many are anticipating more accommodating monetary policy from the Fed, which is likely to benefit the economy. Several factors that have contributed to this optimism are still on track, and it seems that all these elements are coming together, suggesting that things are moving in a positive direction.

Okay. I guess building on that, you mentioned you have a similar pipeline for the new large projects. What does your guidance consider for the smaller local markets that have faced more challenges from rising interest rates?

Generally speaking, the situation is quite similar. Some markets present more growth opportunities than others, similar to last year. Previously, we discussed the broad-based nature of our strategy. Now, we are more selective about where we allocate our fleet rather than just responding to demand. The advantage of our model, and the rental model in general, is the flexibility of these assets, allowing us to shift them between different sectors and locations. We have been doing this effectively, which has enabled us to maintain high levels of time utilization over the past two years, and we expect to continue this trend this year.

Our next question will come from Ken Newman with KeyBanc Capital Markets.

I know you guys don't want to talk too deep on the segments in particular, but 2024 was a bit of a softer rental revenue growth year for general rentals. I'm curious if the guide assumes a similar growth profile in '25? And I guess, additionally, on top of that, if there's any way to quantify what you think the impacts from mix are that's implied in the margin guide?

So when we think about general rentals and first specialty growth, I mean, you guys have seen the numbers and we talked about '25 being similar. So yes, at the outset, you could assume similar growth. The great news is we have flexibility with our, let's call it, $3.8 billion at the midpoint within that CapEx, not just the $500 million of growth but even the rest of it, the $3.3 billion modeled replacement. So we can move the appropriate assets to the appropriate markets to feed whatever growth there is. And that's really about all the color I can give you. Other than that, we will continue to feed the specialty footprint growth and cold-start growth and really, the double-digit growth they've had for 10 years plus.

I think on the second part of your question, Ken, I think from a mix standpoint, to Matt's point, '25 is likely going to look similar to '24. So I don't think we're looking for an appreciable shift in mix. If that helps answer the question to a degree.

Yes, that's very helpful. And then maybe just dovetailing off the prior question here right before me, is there a way to talk about the magnitude of demand between the national and the local accounts, particularly as I think about just the rate differential between those two? Obviously, I know you don't want to talk about fees, but they've had a little bit more challenges on the rate side. Curious if you're kind of seeing a similar dynamic.

Yes. As you know, we don't disclose the specific elements of rate, time, and mix. However, we have achieved positive fleet productivity, which is why we consolidate this information, as it manifests differently across various products and customers. We have mentioned that national accounts do leverage your spending, and that is certainly true. However, the reality is that this is a competitive market, and we engage in it appropriately at every level. Therefore, there isn't anything specific I would highlight for any particular customer segment, as it's not as distinct as some may perceive from the outside.

Our next question will come from Scott Schneeberger with Oppenheimer.

On the infrastructure bill and the funds associated with it, we discussed large projects at a high level, and I believe they will be more significant. Are you seeing those funds being distributed? It seems that you anticipate similar flow in '25 as in '24, but I want to focus specifically on that aspect, separate from mega projects and small local projects.

Yes, Scott, I'll take a crack at that. Certainly, we continue to see nice growth in infrastructure in terms of figuring out where the funding is coming from. That's a much more difficult process. I think if you look at some of the information that have been released right ahead of the change of administration, I think there was still something like $300 billion from IIJA that had yet to be allocated. So there's $200 billion that has been allocated. I think it's a fraction of that that's actually been spent. So we continue to feel really good about the opportunity that's underpinned by a lot of that spending that, God knows, the country needs the investment, and it certainly has bipartisan support. So, our expectation that will continue to be a good area for us.

Thank you for that. To the extent you can respond, I assume you just completed a significant acquisition, which will require some integration time. Can we expect that there won't be any major activity before the year's end, especially given your focus on leveraging and the pause in stock buybacks? Additionally, could you provide some insights into your M&A pipeline? You have already moved forward with H&E, but do you still have a large and active pipeline? Any further thoughts on this would be appreciated.

Yes, we have a very strong team that is continuously working on our pipeline, which has remained strong for the past couple of years. We only execute a few deals, so this is significant for us. We will have a lot to manage, and that will be our primary focus. As Ted pointed out, we're aiming to regain leverage back to the midpoint, making that our priority. If a suitable tuck-in deal arises that aligns with a new product line, we will evaluate how it fits into our overall strategy and whether it makes sense for us. We will consistently work the pipeline and make informed decisions that are beneficial for our business at the time. Right now, our primary focus is on absorbing this large acquisition.

And at this time, it appears we have no further questions in queue. I will now turn the call back to Matt Flannery for any additional or closing remarks.

Well, thank you, operator and everyone on the call, we appreciate your time, glad you could join us today. Our Q4 investor deck has the latest and greatest update. And as always, Elizabeth is available to answer your questions. So until we talk again in April, stay safe. Operator, you can now end the call.

This does conclude today's call. Thank you for your participation. You may disconnect at any time.