Q1 2020 Earnings Call
[music].
Good day, everyone and welcome to the mobile mini 2021st quarter Conference call.
At this time I would like to inform you that this conference is being recorded and that all participants are currently and they listen only mode.
There's also a presentation that accompanies todays conference call, which you can access at mobile Minis website at Www Dot mobile mini dotcom.
It is on the investors page.
Before turning the call over to Kelly Williams Mobile Minis, Chief Executive Officer, I will read.
Safe Harbor statement.
For the presentation and the comments begin mobile mini went back to remind you that some of the statement and responses to your question and this conference call. It may include forward looking statement.
They are subject to future events and uncertainties that could cause our actual results could differ materially from these statements.
Any forward looking statements should be considered in conjunction with the cautionary statement in our press release and the risk factors included in our filings with the FTC, which mobile mini encourages you to read.
In addition, please refer to the investors section of mobile Minis website to find additional disclosures and reconciliations of non-GAAP financial measures that will be used on today's call.
Now I will turn the call over to Kelly Williams.
Good morning, and welcome to mobile Minis first quarter 2020 conference call.
Kelly Williams mobile Minis, President and CEO and with me today is van Welch, our executive VP and CFO.
To begin I'd like to thank all mobile many employees for their hard work dedication to the company in these challenging times.
The safety and health of our employees has always been paramount to us and as an even greater focus to us during the current crisis.
Today, we will discuss our strategy our Q1 results the impact of the Cobot 19 pandemic on mobile money and provide a merger update.
Well then open the call up the questions.
Encourage you to review the full quarterly presentation for your reference which has been posted to our web site.
[noise] mold many strategies profitably grow our business by offering customers premium products and services in two business segments containers in Texas.
These steel centric products have similar asset characteristics long life low to no maintenance high margins short payback periods and strong cash flow generation, which is incredibly beneficial and economic situations like today.
Well, helping throughout the cycle, our free cash flow generation is particularly strong in a downturn because our capex is demand driven and we can reduce capex at our discretion.
We also have unique ability to generate free cash flow coming out of a cycles trough because her long lived fleet is red ready in the upswing. Some notable capex is only needed when demand exceeds the prior peak.
In addition to our sustainable business model than counter cyclical free cash flow generation are nearly $450 million up liquidity from cash on hand, and revolver availability will help us whether the economic downturn and be ready for growth when the market turns around.
Now turning to our results for the first quarter, we had a great quarter.
Another period of solid execution through increased efficiency, resulting in a rate increases in both segments. The storage solutions and continued growth in managed services.
On a year over year consolidated basis, we increased both adjusted EBITDA and adjusted EBITDA margin for the ninth consecutive quarter.
Following a historic 2019 free cash flow generation Q1, 2020 free cash flow was nearly 40% greater than prior year.
And as of March 31st 2020 leverage of 3.5 times with the lowest it has been since September 2014.
Our return on capital employed significantly exceeded exceeded arc cost to capital and continued to be greater than 10%.
Storage solutions adjusted EBITDA of 51.8 million for the first quarter was 6.4 million or 14% greater than prior year with an adjusted EBITDA margin of 42.5% a 420 basis point increase.
Storage solutions rental revenue for Q1, 2020 increased 1.8% year over year, we achieved rate increases in our storage solutions business in both North America, and the UK per store solutions composite rates were up 3.3% year over year.
North American stores solutions also achieved another record quarter with adjusted EBITDA margin of 44.6% and improvement of 430 basis points versus Q1, 2019, driven by strong revenue growth as well as cost efficiencies and lower short term variable incentive plan expense.
North America storage solutions rental revenue of 96.5 million for the quarter was up 3.2% driven by 3.7% increasing year over year rental rates favorable mix with ground level offices and an increase in managed services, partially offset by a decrease in units on rent.
Ground of losses continued to be favorably received by the North American market the increased rates and units on rent for glows improved the product mix in North America.
National accounts revenue remained greater than 35% of North America storage solutions rental revenue for the twin trailing 12 month.
Managed services continued to expand with 2400 plus items on rent in Q1, 2020, generating 3.6 million in revenue, which was up 52% year over year.
The UK business adjusted EBITDA increased 7.4% year over year due to general cost management and lower trucking expense. This operational efficiency translated into year over year margin expansion of 270 basis points to 31.7% for Q1 2020.
UK rental revenue for the first quarter decreased 3.3% year over year healthy, 1.9% increasing year over year rental rates was offset by a decrease in units on rent an unfavorable mix.
As we anticipated in the last earnings call in Q1, 2020 tank and pump solutions faced challenging prior year comps in the industry softening taken pump rental revenue decreased 3.5 million or 12% year over year, driven by a decline in average owned fleet on rent.
This resulted in segment adjusted EBITDA of 8.1 million, an adjusted EBITDA margin of 29.9% for Q1 2020, we manage cost to offset the impact of the current revenue trends have continued to proactively address variable expenses and overhead optimization where possible.
No I want to take some time to discuss our current business conditions in light of Cobot 19.
The U.S. government deemed us an essential business.
Mobile mini ground level offices, and containers are being used for office space to provide social distancing and also as testing centers.
Managed services has been bundling our office in storage solutions with furniture and Handwashing stations to provide a one stop one stop solution.
Prior to mid March North American storage solutions maintained a healthy pipeline of pending orders that was greater than prior year.
However, the non essential business closures and travel restrictions stemming from the fight against the pandemic led to current delays and cancellations of orders and as a result, our pipeline is now lower compared to this point last year.
North America storage solutions units on rent as of March 31, 2020 was essentially flat to prior year.
And as of April 29 units on rent was approximately 2.5% below prior year.
Given fewer pickups and deliveries our trucking revenue, which is over 20% of a rental revenue on average will be affected in Q2.
Some of the decline is relative to postponement of retail construction remodels.
Both national and localized contractors perform remodeled for certain parts of our national account customers localized remodels that started pre cobot 19 are currently ongoing unrelated new orders will start on time in Q2 and onwards.
Pending orders related to Remodels conducted by some national contractors are temporarily postponed in some cases due to travel restrictions.
The UK segment has a similar story after transitioning to a territory base sales model and utilizing similar sales tools is the North America segment. The UK business had a growing pipeline of pending orders that was greater than prior year until late March when the UK government orders, an immediate full nationwide shutdown of the economy.
Similar to North America, the majority of the UK units at customer sites remain on rat. So year to date April deactivations are much lower than prior year.
I wanted to provide an update to our merger.
As previously announced on March 2nd 2020, mobile mini entered into an all stock merger of equals with will Scott.
The merger is subject to customary closing conditions, including shareholder vote approval and regulatory approval.
We have submitted our HSR antitrust filings.
There's a new revolver credit facility committed for the combined company to ensure access to ample liquidity it close.
Both mobile mini and we'll Scott are working diligently on the integration plans. We continued to anticipate the deal will close in the third quarter. The year and are very excited about the opportunity to partner and the new co with well Scott.
Well now turn the call over to van.
Thank you Kelly and good morning.
I hope everyone is very well under these very unusual circumstances.
In Q1, 2020, we generated $22.5 billion, a free cash flow up $6.3 million year over year.
This marked the 49th consecutive quarter of positive free cash flow.
To put that statistic into perspective that means we generated positive free cash flow during the great recession of 2008 to 2010 as well as the industrial recession of 2015 to 2016.
We expect strong free cash flow to continue in Q2.
Capex spend decreased nearly $12 million year over year for Q1 2020.
The majority of fleet Capex spend was related to conversions or ground level offices or G. I love as these products remain in high demand.
To adjust to current market demand our targeted full year Capex spend is now $25 million to $30 million.
With a focus on jello's.
In Q1, 2020, we acquired $4 billion are rolling stock the finance leases.
Similar low levels or anticipated in Q2 2020.
Our adjusted effective tax rate for the quarter was 25% compared to 26.5% for the same quarter in 2019, and we now expect an effective tax rate of 25% to 27% for 2020.
During the quarter dividend payout totaled $13.6 million.
In addition, we invested $4.8 million for a tuck in acquisition in February to further strengthen our storage container business in Dallas, Texas.
As Kelly stated this quarter's leverage ratio of 3.5 times was mobile minis lowest leverage since Q3 2014.
We continue to manage cost and working capital to reduce debt in 2020 and maintain our strong balance sheet.
We have a flexible capital structure with no near term debt maturities.
At March 31st 2020, we had $438 million, a revolver availability and over $10 million with cash on hand, we have ample liquidity to meet foreseeable need.
In response to the economic downturn, we're spending both tuck in acquisitions and share repurchases.
For the near term our capital deployment is focused on dividend payout and debt paydown to reduce leverage.
Our counter cyclical free cash flow generation, coupled with nearly $450 million of current liquidity strengthens our financial flexibility and positions us to manage through these uncertain times and be ready for growth when the economy rebounds.
And with that I'll hand, the call back to Kelly.
Thanks, Dan we have a unique operating model in storage solutions that can that differentiates us so that the business segment can outperform GDP on a rental revenue basis in Q2.
We will also maintains strong adjusted EBITDA and adjusted EBITDA margins for storage solutions in Q2.
Whatever the market conditions are we will manage our business proactively to outperform the market.
Importantly, we expect to achieve consolidated adjusted EBITDA margin greater than 40% in Q2.
Return on capital employed will continue to exceed weighted cost to capital in Q2 and dividends per share will grow 10% year over year for the quarter.
To conclude we have taken.
Significant specific steps to further improve our financial resilience and liquidity position, we will generate positive counter cyclical free cash flow for the fiftyth consecutive month in Q2 2020.
Our demand driven model allows us to proactively respond to this current economic situation and when the market turns around we will equally be ready for growth.
I'd like to finish where I started giving my heartfelt. Thank you to our teams who are going above and beyond to serve our company and our loyal customer base. During this critical moment I also wish all of you listening today continued safety and good health I.
Ill now turn the call over to the operator for instructions on the QNX. Thank you very much.
Thank you another conducting a question answer session, if you'd like to be placed into question Q. Please press star one under telephone keypad, a confirmation told will indicate your line is in the question Q you May press star to if we'd like to <unk> question from the Q for participants using speaker equipment, maybe necessary to pick up a headset before press.
I think star one.
One moment, please only poll for questions.
First question today is coming from Scott Schneeberger from Oppenheimer and company. Your line is not a lot.
Oh, thanks, very much good morning, everybody I guess I like to start out Kelly could you address just what you've seen chain. So lets say starting in mid March the progression of of customer activity.
Just to your conversations any anecdotes you can.
Share just is how things have progressed over the last five or six weeks and and where you think that leaves us as we approach. The next to a next two months of the quarters. Thanks.
Yeah, sure and good morning, Scott.
I tell you that was it was probably a march twentyth or so where we started to see an impact in the business. You know we measure our new orders very intensely I think is everybody's aware here. So we've had a run rate here of three or four years of very solid progress in terms of our our new orders in the in the.
30 to recognize the improvement to prior year.
It started to slow there I would say I'm just looking back to you know to try to get a little bit more color.
Today, our new orders were down in April about 25% and that's that's stabilized.
Considerably so.
You know that that was pretty much the trends got I would tell you happened fairly early in that 10 tends to be a number that we stabilize too we gave a little more color on the fact that our units on rent as of yesterday were down 2.5% to do allow everybody to understand that you know mid March we had a really strong volume pick up in the first quarter. So mid.
March we were slightly ahead of prior year into March we were flat at the close to the at April here were two and half percent down or so so you can see that you know the activation slow, but we've also had a significant amount of stickiness with our units on rent.
A job sites and and you know other end market segments. So if it's a slow leak as we say, it's a slow deflate, which is that the beauty of the business model, but.
You know what has stabilized and our pending order pipeline is still fairly good here. So it's it's really just about whether you know when this opens up and that's certainly a difficult to predict.
And so I appreciate that color could you address a little bit and this is specifically in storage, what you're seeing across the primary end markets.
Well be you know construction is is opened in many states and so you know the the activity still been relatively strong we are on a local level. We continue to do a significant amount of business. I think you know where we have made a pretty big shift is in our on a storage side is in the national account mix. So.
So that's been a little bit challenged in terms of the some of the larger retailer remodels because they've they've been paused and I think it's important to note. Obviously, there's some of these big box retailers are doing extremely well right now so they've plus some of that activity because their volume is significant and and so I think that's a postponement we actually have started to see some.
With that pick back up or at least have.
Stronger line of.
Of vision to the commitment towards the back end of Q2, but.
In some places everything still fairly normal I would say that the retail in market is which is very good has slowed on the construction side.
Thanks, and then and then moving over to Cancun pump I'm just curious your thoughts on on on the verticals you sure there and and maybe a little bit elaboration on in this so oil price environment, what might be expected for turnarounds over the course or the balancing this year.
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Yes, so I think the obviously you know in Q1, we saw some industry softening I think the businesses further impacted by the lack of demand for energy in obvious oversupply of oil, which which we partially offset by stronger level of activity in the petrochem manufacturing.
Area, but yeah. It's it's certainly soft it's a again a little bit more difficult to predict I think the maintenance side of the business I would anticipate a wood, which we'd start to see a little bit more activity in may and June taking advantage of the fact that they can take these plants down and as they are the need for.
For oil has has slowed I think it'll be a an environment, though that's still a wait and see I think you know what's important here is that were taken advantage of taking costs out of the business.
The teams have been very focused on aggressively managing costs.
And I made the comment here earlier that as on a consolidated basis I'm very confident that the the company will run over 40% margins. I'll also tell you I believe it to taken pump business can maintain their current margins from Q1, even in a declining environment with the proactive steps weve take two to manage costs.
Great appreciate that my last one from me and this is across both segments.
Just any any anecdotes with regard to pricing <unk>, what do you anticipate to occur there just from what you've seen over the last few weeks sex.
Yeah. This storage business I mean this is the beauty of the model I still anticipate we showed our new rates Q1 to be up nearly 2% and that's that was really strictly be because we had an increase in national account activity, which which we've explained when we see higher peaks of volume the rates on national account business is discounted slightly.
The there so I anticipate that the remain positive I don't see there's anything there you know will at times become a little bit more aggressive, but I still think you know we have true differentiation and the quality of product in our service levels. So we'll maintain positive pricing there.
On the on the tank side, it's certainly a little bit more challenging.
Environment there again we're.
You know locked in contractually so it's hard to move the pricing one way or another there are certain circumstances here, where we are working with our customers too.
To help them through some tougher times, we might get extensions when we do that.
But I do anticipate a bit of a softening on the pricing in it and the tank side, but I would tell you that the stores that is very resilient and will remain positive and pricing there and I would say, it's probably in that neighborhood of as I mentioned earlier, maybe closer to 2%.
Great. Thanks, Kelly I appreciate it exactly right Scott Thank you.
Thank you next question today is coming from Kevin maybe from Credit Suisse. Your line is not a lot.
Great.
Your wallet, hopefully youve social station.
Congrats on all the color. He can can you maybe just frame out directionally for US you know it sounds like there's some puts and takes I mean things overall came in better than expected, but sounds like you've seen some demand pick up as a result to co that you're in a way to think about just broad stroke, yeah, how much of an uptick you saw around kind of.
Some incremental demand versus the offsets on it sounds like slower.
Transportation things like that just puts and takes as you think about the quarter heading in versus ultimately where you settle.
Well, we've we've certainly seen a pickup in our ground level office business, which has incrementally better rates are accretive rates to the overall portfolio.
And in that mix, certainly helps there but to be clear, it's not certainly not been able to overcome the overall decline in the business Kevin.
You know I it'd be hard to put a number on it in terms of units per day that we've had that relate directly to cope with 19 I will tell you again, the one thing that that's a that's given us a.
A little bit more color is around the national account business. So we do get some of this business through.
Some of these big box retailers that are that are you being utilized this testing sites or or.
You know that type of thing, but I think you still obviously see.
The decline across the rest of the at the end markets. So it's hard to put real color on the cobot 19.
Numbers I'd say, if I were to throw some numbers out there you medicina.
So relative to the current units were doing maybe a 10% of the current volume might be cobot 19 related but.
It's not significant.
Got it that's helpful. And then just any thoughts around trying to you seen any pickup in bad debt on the energy or I'm not that.
The container side, just any color around kind of client behaviors or at least a bad debt and then obviously the cash flow still there purchased.
About that.
Kevin This is banned we're keeping it.
Hey, good morning, Kevin Yeah, we're keeping a close eye on it but to date, we really haven't seen any any any bad debts that have come in or d.. So a year.
Increases.
As of yet, but we're watching it very very close.
I think in this environment a you know my anticipation is we'll see a little bit accrete than that.
Going forward, but we are we're certainly looking at it real close.
Alright, Chipper I'll get back and thank you guys, Hey, Thanks, Kevin.
Thank you. My next question is coming from Justin how from Robert W. Baird. Your line is not alive.
Hi, everyone. Good morning.
Okay.
Good morning, I guess I was.
I was going to ask a question about you mentioned that the trucking being impacted that's 20% of your revenue I assume that the margins on that or lower.
Could you maybe give some context on that just so you can think about you know.
That might close route margins just just next impact.
Yes, that's a good call out that's in fact is certainly a benefit right because it is dilutive to the overall margin.
Oh really I'm on both sides of the business. So I rental margins are about twice, what the trucking margins aren't and we've done a great job of accelerating that those trucking margins do you know the efficiencies that have come out of or the technology advancements we've made through mobility and some of those other things that have benefited us third party management from logistics standpoint, but absent.
Absolutely, it's a it'll be a tailwind from the standpoint that.
Did that volume decreases in it is dilutive to the overall PARP portfolio.
Okay. That's helpful. I guess my second question is just.
You know on 35% or so that's national accounts.
I mean, how many units or are tied to kind of these remodels. Specifically just you can understand the context and what the delay or push outs are doing.
Yes, well I mean, I think it's a if you go back about three years four years, we've talked about the Amazon effect. This this retail remodels are real strategy for us we don't we haven't seen any slowdown with it whatsoever.
I don't know that I have the numbers tied to a we do have in market segments that we look at Oh from a retail standpoint that would be tied to some of that and it I believe it's maybe around 30, 35% or so but that's not that's not all wendy's retail remodels, we've got tremendous national account relationships with some of these big box retailers and others is.
Well, so but I think it it's a it is a big part of our business you know and that's at some of the decline that you're seeing but it's that's certainly a you know relevant to the fact that the travel has been shut down in so many cases here and we do anticipate.
To see that business turned and I think as you know in the news you can see some of the some of these folks talking about the postponements into you know either the latter half of Q2 Q3, or even 2021, but we'll be prepared to pick up where we left off on that business and those relationships are stronger than ever.
And again I think a beauty of this business model is we've not seen a lot of units come off rent. That's why we've really tried to point to the decline in units on rent.
Being a.
Deflating at such a slow pace, because even as as Activations slow we've all obviously seen a lot fewer units come off rent as well so.
No we sustain it the beauty of this model is the fact that we've got a stick significant amount of recurring revenue with all those units out on rent. So it's really the trucking where where the bigger impact is on the storage side.
And then I've got one last one here is just.
On the D.S. gionee coming down pretty dramatically here I think you mentioned, a lower variable comp, which I guess makes sense, because the activations or are down but do you expect the.
The dollar basis, what's your spending on that to kind of stay at this level or is there anything else in weren't acute the unusual that so much lower.
Yeah, No I mean, I think some of this is the new new there is the variable comp tailwind that that's associated with it there and we're doing some other things to address comp I think the you know the point that I want to make out as the operating model for model has huge benefits. The way we run this business the branch managers the local CEO right they've got very.
Strong local customer vendor relationships that benefit them in challenging times their comp is set up to maximize profitability. The branch level, our business a portion of our business flexes with volume so when you're talking about third party trucking overtime discretionary spending.
Even some of the fixed cost as relates to overhead, we're very very proactive and quick to react and that's why we're pointing to these margin enhancement. So I'd tell you a lot of this is sticky Justin and and you know. This is also as you guys are aware a part of the big transformation Van was talking about it earlier, we really were never there we're always focused on.
Continuous improvement, but we've certainly reached the level of sustainability around this efficiency being driven in the organization now for quite some time. So this is we're very confident in that ability to drive those margins going forward.
Thank you.
Okay. Thank you.
Thank our next question is coming from Stanley Elliott from Stifel. Your line is not a lot.
Hey, good morning, everybody. Thank you for taking the question men and nice to hear your voice.
Good morning sale.
Steep keeping on that on the cost save Pete can you talk about kind of what you all are doing especially into context of the merger still on track a yield to be completed by third quarter, what sort of dialogues are you all having both parties to make sure that.
Everybody is on the same page in terms of what set up sort of cuts would be expected and and make sure you're not well, let's leave it with that first off I guess sure. Yeah. Let me start by saying, we're very excited about what we've seen a culturally in the in the early integration meetings I think thats they've got some great leadership over there had been extreme.
Only collaborative we're really excited about about the partnership there.
We we've obviously called out a significant amount of the benefits I think scale is certainly one of those and and I could go into things like cross sell expansion those types of things, but we did talk about cross a cost synergies and.
We're we're kind of taken those you know integration steps kind of you know in a in a in a slower fashion here, but you know there's there's certainly some possibilities. These synergies can be recognized a bit earlier, but I still believe that you know the key here is is the technology and as we've had conversations with a with their leadership over there I think we're going to make sure that we we do this right.
So it's a it's it's hard at this point.
Mainly to point to anything that I could call out in terms of synergies.
This early but I'm sure that as we go forward into into an anticipated closed then into Q3 will be able to share a lot more.
And kind of on the technology piece I mean.
You can you talk little bit more about some of things you've done in the past yeah, I would assume to Scott allow you to look even though it's a tough environment to be able to manage it through better than that some of your smaller peers, but maybe some of the experiences that you're seeing on the ground to kind of a support that claim.
Sure well I mean, I think I called out trucking a little bit earlier, I think mobility that a really big key to as handheld devices. We've eliminated paper weve save time, administratively significant time at the branches.
Through our ability.
Through mobility and that part of the technology piece.
I think another couple of pieces here when you think about capital efficiency capital management all of those things I, specifically can tell you with our portal our ability to drive customers to our portal.
Has enabled us to decrease DSL, we've got a lot of folks on auto pay we're not chasing anybody down in terms of of the their type of money or collection of money. There are so many benefits from a technology standpoint, I talked about logistics were managing third parties better through through a portal. There. So there are a lot of benefits on the tank.
Thanks side, we've got to a software program that off is obviously reduces consumption. That's a big benefits something we're taking advantage of today.
The stickiness around once we gain a customer on the tank side.
When it goes back out the RFP that technology is a big deal for us to be able to solidify the value in terms of what we bring to them. So you know technology is a big part of this and you're seeing that and our ability to decrease the so you're seeing that in our margin expansion.
A lot of of these things are a benefit to the organization financially and Stanley. This is band you can look at the reporting that we have in places that reportings down to the branch level you know as Kelly mentioned to each of these branch managers or are the CEO basically of their operation, they're able to look at new orders that are able to look at that.
Divisions Deactivations in their availed, they're able to pivot then in terms of looking at variable costs looking at third party trucking looking at everything across their cost associated with that particular, but branch and make real time decisions associated around that's a big benefit board.
Perfect. Thank you guys very much.
Hi, Thank you.
That goes where Margaret Star one to ask your question.
Our next question is coming from Sam England from Berenberg. Your line is allies.
Hi, guys just a couple from me the fast one on the plan. He talked about just wondered if you're planning to stay above replacement levels for the time being or whether you're thinking about deflating. So across the next couple of quarters.
Yeah, I think you know as we talked we decreased.
Capex today in terms of where we were were demand driven model Sam as you know.
We are able to look at the utilization look at the pricing we're getting across all of this all of our different.
Units, where thats ground level offices containers or the taken pumps out as well.
English still tankers and whatnot, so we're making decisions based on what we were seen.
Associated around that particular demand.
From a replacement standpoint, obviously from a depreciation you know depreciation and amortization is around 17 million a quarter.
So we're looking at only spending the new additions.
Into that into that $30 million range for the quarter or for the year.
We spent had a gross level about $10 million in the first quarter.
That level of about 6 million. So that's kind of tell you what kind of run rate, we're going to look at going forward.
As we talked about in the prepared remarks, we're also focused.
Primarily going forward on ground level offices, again, where that demand is where that pricing power is that's where we're going to focus and ground level losses is certainly one that meets that criteria.
Okay, Great. That's helpful. Thanks, and then the next one just wondering if you could give us a bit more color on the impact you're saying you type business and the Lockdowns, obviously been more extreme.
Potentially is going to come on longer than it is in some regions in the U.S. and said is that it's been more heavily impacted and you just expect it will continue to be more heavily impacted going towards.
Yes, the answer is yes, and I I do think though that this is another example.
Called this out in the prepared remarks that we.
I would say that probably 70% of the nation is shut down right now and I think specifically that's about what we see in volume declines, but it's also the relevant to the.
To the amount of of returns that we get the customers offering those units. So net net in the UK, we've actually sustained our units on rent and so that recurring revenue is is a is a huge benefit to us where the headwinds come we'll be in trucking there Sam so.
I do point to the to the real positive and it's obviously a little bit disappointed. We if we really had make made huge strides there even in a in spite of Brexit, we have gotten positive with our pending orders and as we've gone through this land based sales model transformation and picked up significant momentum when.
We're able to get through this.
This situation with Cobot, 19, and and there is a little bit of that Brexit scenario, obviously, we feel extremely strong about our position over there in the UK.
And also want to reinforce the fact that are margins continue to get better and.
And I'm also.
The color around Q2, and going forward and and in the UK is that we will continue to increase our margins to prior year, regardless of the macroeconomic environment.
Great. Thanks, and then just just one more.
Okay about that quite flying I, just want is how you're thinking about that proportion in the pipeline that game despite that suits canceled.
Mike in your mind right.
Yeah, I would say.
The majority of vast majority of those are our postponed.
Where are your cancellations are at least in the front end were more around event driven activities entertainment that type of thing where there might have been.
Some sort of a concert series or that type of thing that was scheduled for February that one may be completely canceled although some of those got.
Postponed into the latter half a year, but there's certainly some that were annual events that occurred in February or March or April that are completely cancellations, but those are mostly event driven onetime type events. So I would say a vast majority of those are postponed.
Okay, great. Thanks Raj.
Case and thank you.
Thank you we reach of our question answer session, let's turn the floor that corporate management for any further closing comments.
Alright, Thank you very much and just to reemphasize I wanted to take them when it again to thank our employees and and in such a.
Chartered territory for everybody.
Across the.
Across the country across the world it couldn't be any more proud of our people stepping up and just wanted to thank everybody on the call today stay safe and healthy and thank you very much for attending the Q1 mobile mini conference call.
Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.