Q1 2020 Earnings Call
Good morning, and welcome to the hatred and eat equipment services first quarter Twentytwenty earnings call.
Today's call is being recorded.
At this time I would like to turn call over to Mr., Kevin into Vice President of Investor Relations. Please.
Oh, Thank you Mark and welcome to the aging equipment services conference call to review the company's results for the first quarter ended March 31st.
During 2020, which were released earlier this morning.
The format for todays call includes a slide presentation, which is posted on our website.
The W.W.W.G. dash equipment dotcom.
Please proceed to slide two conducting the call today will be John includes executive Chairman of the board of Directors Red Barber, Chief Executive Officer, and probably not.
Totally Mcgee Chief Financial Officer and Secretary.
Please proceed to slide three.
During today's call, we will refer to certain non-GAAP financial measures. We've reconciled these measures to GAAP figures in our earnings release in the appendix to this presentation each of which is available on our website.
Before we start let me all the cautionary note that this call contains forward looking statements within the meaning of the federal Securities laws [noise].
Statements about our beliefs and expectations and statements containing words, such as maybe you could believe expect.
Anticipate and similar expressions constitute forward looking.
Forward looking statements involve known and unknown risks and uncertainties, which could cause actual results could differ materially from most contained in any forward looking statement.
Summary of these uncertainties is included in the Safe Harbor statement contained in the company slide presentation for today's call and also include the risks are described in the risk factors and the company's most recent annual report on form 10-K.
In other periodic reports investors potential investors and other listeners are urged to consider these factors carefully in evaluating the forward looking statements and are cautioned not to place undue reliance on such forward looking statement. The company does not undertake to publicly update or revise any forward looking statements. After the date of this conference call.
With that stayed about now I'll turn the call over the Brad Barb.
Thank you Kevin and good morning, everyone. Welcome basically equipment services first quarter 2020 earnings call on the call with me today or John enforced Executive Chairman Leslie Magee, our Chief Financial Officer, Kevin and a vice President Investor Relations slot both ways.
Given the unprecedented challenges that we're facing with the Coke liking crisis I'll begin my comments today addressing the actions our company has taken it response and the impact is having on our business I'll briefly discuss our first quarter performance and then lastly, we'll review our financial results for the quarter in more detail. After we will take your.
Questions.
Patrick please.
All of US are now dealing with the realities of Kobin 19.
H. and he has been in business since 1961, it's at that time, we've seen it. All this includes hurricanes large fires earthquakes and blizzards, along with multiple recessionary period, including the last major financial crisis, beginning in 2008 would project work literally stop for lengthy period of time.
Senior management team of HD has more than 100 years, a combined experience not only within the industry, but specifically at Ace you need.
Hoping a challenging market conditions are not new to us. However, the scope igniting bar situation is unique in many ways in retreat in it with the respected seriousness it deserves.
We care deeply about our employees our customers and the communities. We serve nationwide to this end, we took quick and strict action based on CDC and Debbie ATRIO recommendations to curtail illness in our workforce and reduce business interruption for our company and customers. We've been designated in central business and our branches remain open to serve our CFO.
Customers in each of our markets, we're very focused on safely providing equipment parts and service to customers need to perform their work.
There have been project cancellations and delays as a result to cope with 19.
While our business will continue to be impacted activity remains for all of our services, albeit at much lower levels, we have taken and we'll continue taking necessary actions to rightsize our business in this environment in this environment, which is evolving on a daily basis. These actions include head count reductions modified work schedules reducing.
With where needed furloughs in selected branch locations as well as appropriate adjustments to our capital spending plans.
Slide seven please.
Our results for the fourth quarter were impacted by the ongoing rebalance and supply of supply and demand seasonality and the co. Good 19 outbreak demand in our end user nonresidential and other construction markets in January and February was softer than our expectations pressuring physical utilization.
Well there was a headwind during the quarter, especially during January and February and March whether improved but the negative effects of cobot 19 began to said in an additional pressure was quick we evident in all of our markets.
As a result, our financial results were negatively affected from the top to bottom line with total revenues down 8.8% from a year ago.
Let me highlight the impacts on two major business segment during the first quarter.
In terms of our rental business physical utilization decreased 570 basis points to 64.3%, but 70% a year ago.
Rates were 0.4% lower than a year ago and declined 1.9% sequentially.
As a result.
Rental revenues decreased 0.7% compared to last year in dollar utilization declined to 33.1% from 35.2% a year ago.
As expected and turbulent times, new equipment sales are often impact it more than our other revenue streams customer or not is likely to commit the large capital purchases given given today's uncertainty.
Subsequently, new equipment sales were down 47.8% from a year ago with cranes down 58.6% in Earth moving down 42.8%.
Given the significant weakness in the energy markets, let me remind everyone that exposure to oil and gas remains low at 6% of total revenue on a last 12 months basis. This compares to 13% on an LTM basis in the fourth quarter 2014, the last peak period.
Lastly, we have opened two new branch locations this year, adding that location, Birmingham, Alabama, and an additional Raleigh, North Carolina location.
Turn the call over the last week to discuss our first quarter financial results in more detail.
[music].
Good morning, everyone. Thank you Brad that's proceed to slide 12 for more details of our financial results.
Before getting into the financial I would like to Bracelin dispatch and non cash goodwill impairment charge at 62 million identified in connection with an interim goodwill impairment test.
To certain triggering events related to the impact our business from the added 19.
The impairment charge will not resolve any cash expenditure and will not affect the company cash sufficient liquidity availability or covenant test under its senior secured credit facility.
As a result of various headwinds barges to staff, our total revenues decreased 8.8% or 27.79 to 295.9 million compared to the same parity year again.
Our rental revenues decreased 0.7% 158.69 from 159.79 a year ago.
Our average time utilization based on I haven't seen with 64.3% for the quarter compared to 70% a year ago.
Sides of our fleet increased by 3.3% of 61 million compared with the prior year comparable period.
Rental rates this quarter decline, 0.4% year over year.
Rates decreased 1.9% sequentially.
Primarily to suggest significantly lower physical utilization I dollar time declined 210 basis points.
3.1% versus last year.
I knew liquidity sales decreased 47.8% or 28.2 million to 30.9 million compared to 59.1 million last year with lower new sales in all product line, Ukraine sales were down 58.6, or 11.99 earthmoving sales decreased 22.8%.
Or 9.8.
You see Kwitny sales increased 5.3% or 1.6 million 31.29, decreasing in all major product line, except originating which increased 4.29 or 41.3%.
So from our rental fleet comprise 93% total used equipment sales this quarter compared to 96% a year again.
Our 14 service segments generated 46.69 in revenue on a combined basis up 1.3% from a year ago.
At this time lets move onto gross profit in March.
Gross profit decreased 7.2% to 105.5 million from a year ago consolidated margins once RT, 6.9% compared to 36.3% a year ago, primarily as a result of a positive mix shift to rental.
Lower gross margins in certain business segments, partially offset this positive mix.
For gross margin detail by segment, our rental gross margins were up 46.1% during the quarter compared to 48.7% a year ago and were impacted by the 570 basis point decline on utilization and pressure on late.
Margins on new equipment sales decreased by 11.2% during the first quarter compared to 11.9% a year ago, largely due to lower R&D earthmoving and Ukraine margin.
Used equipment sales gross margins were 35.5% from 35.8% last year.
Merely due to low margin.
I'm, sorry, low lower use margin on Earth moving.
Material handling margins and used crane margins.
Margins on pure rental fleet and weak sales were 36.4% compared to 37.5% a year ago parts and service gross margins on a combined basis increased to 41.1% compared to 40.7% a year ago.
Slide 13.
As a result at the 62 million impairment charge loss from operations for the first corner of 2020 was 31.9 million.
Excluding the impairment charge income from operations for the first quarter 2020 decreased 15.7% to 30.1 million or 10.5% of revenues compared to 35.7 million or 11.4% of revenues in the prior year period, they declining income from operations and margin.
It's primarily a result of lower gross profit and gross margins in the rental business combined with higher Sta costs. These declines were partially offset by positive mix shifting revenue mix and an increase in gain on sales of property and equipment compared to last year's first quarter.
Proceed to slide 14.
Net loss was 37 million or dollar and three cents loss per share in the first quarter. The effective tax rate was 21.9% first quarter of 2020. Adjusted net income was 10.8 million 30 cents per diluted share in first quarter 2020, compared to net income a 14.2 million.
40 cents per diluted share in the first quarter of 2019, the effective tax rate was 20, 26.2% on an ACA adjusted basis in the first quarter 2020, compared to 26.4% a year ago.
Please move to slide 15.
Adjusted EBITDA was 99.2 million in first quarter compared to 100.99, a year ago, a decrease of 1.7%.
Adjusted EBITDA margins expanded 250 basis points to 34.7% this quarter compared to a year ago, primarily due to the shift in revenues to ramp up and higher gain on sales of property and equipment.
Partially offsetting these positive factors were higher SG nine costs versus a year ago.
Next on slide 16.
As soon as expenses for the first quarter of 2020 were 79.6 million compared with 78.69 in the prior year, a 1 million a 1.2% increase.
<unk> expenses in the first quarter of 2020 as a percentage of total revenues were 27.8% compared to 25.1 for standing here at that.
Oh boy salaries wages payroll taxes employee benefits and other related.
Expenses decreased 1.7 million offsetting this decrease was a 1.59 increase in excess liability insurance and a 0.99 anything and outside services.
Expenses related to Greenfield branch expansion increased 0.59 compared to a year ago.
Next on slide 17, not misfire, you're fine fleet, Capex and cash flow for the first quarter and our greatest fleet Capex in the first quarter was 32.59 includes non cash inflows from inventory our gross capex was down approximately 53% compared to first quarter a year ago, our net rental.
Capex for the quarter with only 3.4 million.
Gross Ctdna PPD Capex for this quarter was 10.1 million and that was 3.8, our average fleet age as of March 31st and 7.7 months.
Free cash flow for the first quarter of 2020 was 40.5 million compared it to use of 94.3 young a year ago, which did reflect the acquisition of we granted in February of last year, the increasing free cash flow was also due to lower Natalie investment this year.
Next slide 18 claims.
At the ended the first quarter the size of our rental fleet based on how we see with 1.9 billion EUR, 3.3% or 61.2 million increase from a year ago. An average dollar utilization was 33.1% compared to 35.2 person year data, reflecting lower time utilization angry.
Proceed to slide 20 plane.
And lastly, we had a strong balance sheet with ample liquidity and no near term maturities at the end of the first quarter. The outstanding balance under the amended Avi Office building was 184.9 million and is down 32 million since December 31st we had 557.3 million.
Cash borrowing availability at quarter end net of 7.7 million of outstanding letters of credit.
Our excess availability was 994.4 million, which is the measurement used to determine if our spring fixed charge coverage covenant is applicable.
Our credit agreement requires 75 million of excess availability before this covenant would even screen.
Therefore, with excess availability at March 31st of nearly $1 billion. We're in a very strong liquidity position and we have no covenant.
[noise] the company pay 23rd consecutive quarterly cash dividend, while dividends are always subject to approval by the board of directors. It is our intent to continue the dividend policy.
So with that let's now getting into question operator, if you would please provide instructions for queuing session.
[noise] this time.
Ladies and gentlemen, if he would like to ask a question you signaled by pressing star worn on your telephone keypad.
If you need to remove yourself from the Q. Please press star to.
Again, if you would like to ask your question. Please signal with start one on your telephone keypad.
We can now passed to the first question from Seth Weber RBC capital markets. Please.
Oh, Hey, Hey, everybody good morning, and hope you're doing well.
[noise] couple couple of questions. This morning.
I guess, maybe Brad you talked about January and February being a little bit softer than you expected.
Can you just give us any color why that and that's kind of it's.
Pre cove. It obviously, so can you give us any thoughts as to what may have caused the slower start to the year.
And then as a follow up can you just talked about can you share any trends that you're seeing here and that you saw in April.
Did you see any stabilization.
Across the month or anything that you could point to for a more kind of recent updates.
Kind of a real more of a real time update thank you.
Sure.
Thank you said when we hope you're doing well also.
So January February we're particularly web months, even by January February standards, and we kind of called that out the two to some degree that was a piece of it as we've talked for a couple of quarters now.
We stayed we've seen supply and demand coming into balance and and we thought people were acting rationally. So I would say that in early Q1 weather was a larger impact than we had planned and we were still seeing some of the supply demand imbalance in select markets. So.
We were we were way off of expectations, but we were a little softer than we had planned and those are the primary drivers.
As it pertains to you know are we seeing some stabilization. We should think we are oh, we are utilization bottom somewhere.
Close to 56% Oh, we're we're running.
More in the neighborhood of 59 to 60 today, we think some incremental improvement over the last few weeks, what I would tell you that it's really early in its difficult to project what utilization may do for the remainder of the year.
But yeah, we do think we've seen the bottom we hope that this incremental improvement continues to occur.
But the last two weeks have been positive, but I'll tell you the feedback from our field is Wellbore positive then what you know is evidenced in that utilization I just offered a view the context, but that's where we are.
Okay, if I could just get a follow up in there given your comments about supply demand.
For the fleet in the industry in your your gross Capex rental Capex was down I think 55% or something like that is that the right way to think about it and not asking for just a guide for the year, but just directionally is that how you're thinking about the fleet.
Your investment this year and do you think fleet would be.
Bigger or smaller.
By the end of the year versus last year. Thanks.
I think our fleet is gonna be down a little bit by the into the year and we're going to be very disciplined with our capex. So.
That's helpful to either.
Yep, that's perfect. Thank you very much guys like if you stay safe.
Oh.
Yeah.
You can now passed to the next question from Stephen Ramsey Thompson Research Group. Please go ahead.
Good morning, I guess, starting with kind of free cash flow expectations do you expect to be positive free cash for the year do you need or plan to sell fleet.
To do so in in the event that you are positive free cash would it be used for debt paydown or would you just trying to keep it around for safety in any opportunistic opportunities at all.
Yeah sure Steve So we we do not have to sell del fleet to generate.
This cash flow and as is kind of always our policy as we collect this cash we're going to pay down our you'd be ill Ah. So.
That should answer both of those costs.
Great and then speaking about the Gulf coast in the southeast with those regions, making up.
Such a large percentage of sales can you maybe talk to activity specifically in those markets through Q1 and into April and is there enough activity baby to warrant moving fleet into the area for some incremental capex into those branches.
So.
If we talk solely about our rental business I would tell you that are our utilization or are neither are pretty much the same across the footprint. If we were talking about the distribution business then you know.
States like Texas may be more heavily impacted on bringing sales and whatever the massive dealer and where we then in Arkansas may be more heavily impacted with earthmoving sales, but as it pertains to a rental fleet. There is no dramatic shift of product that's necessary.
So now we're not moving any unusual amount the fleet were always managing fleet, that's part of a process.
As always we'll be but nothing unusual there.
Great and then I guess somewhat similarly, maybe want to dig in on energy expose branches is is there any difference there as far as moving fleet out of those branches or you, leaving it.
In the area to be positioned for any return of activity.
Sure. So as you know, it's about 6% of our overall revenue we've spoken in other calls that our heavy our heaviest exposure relative to our exposure is probably in the Eagle Ford shale and we've been moving fleet out of.
That market are those select locations for quite some time now so we're we're where we need to be that's been a kind of a constant and ongoing process that we're kind of achieving what we need at this point, we'll start to slow.
Excellent. Thank you.
Thank you.
We met May now passed to the next question from Steven Fisher, Yes. Please go ahead.
Great. Thanks, Good morning, guys, what you're doing wells [noise].
Just to follow up on the comments that you made to Seth about color from feedback in the field. So.
What exactly are they telling you.
They give you a little bit more confidence relative to what that initial utilization number is looking like.
[laughter], our operators or just generally very optimistic.
Our customers are generally very optimistic.
The thing that causes me a little pause on their optimism while I. Appreciate it is just the low levels were operating from today as compared to where we were a year ago.
But you know.
There there are a lot of folks we see a silver lining and I think the prevailing.
Settlement of our customers and our operators not suspect our entire industry is that this recovery is gonna be well quicker than any other recovery seeing from a soft point like this.
Hi.
You know the cadence that actually occurs on is we'll get to watch it as it happens, but I can tell you that are our focus our employees and our customers and I believe our sector. In general is very optimistic about opportunity for things to continue to improve and I think the question is around how rapidly.
So I guess just a follow up there so.
Is there any group consistency as to how project is actually starting back up and what they're seeing is it really just in states that.
Had.
Close down projects is it any particular end markets I really just trying to get a sense of the extensive of project activity. That's starting back up to now and if there's any sort of.
Rhyme or reason to how it's happening.
Yeah, I don't think I could lead you to a rhyme or reason that that's a common theme across all geographies what I could shares we have projects now that took a six eight we pause that are coming back online and some of these with sizable amount of product on it.
So that the positive that's good that's good news. We also at the same time have projects that we were expecting to start over the last few weeks or maybe in the near term in the next few weeks that are either delayed or in certain cases have been canceled. So there are puts and takes its across all geographies there are certain sag.
Yes, you know the convention services business, that's not going to be good for the rest of the year.
We know that but generally speaking these nonresidential commercial construction projects.
It's a mixed bag of projects starting to come back online, but it's not one geography, where an entire state was locked down there have been many most states. We operate in have allowed construction activity to maintain at certain at some levels of some of them almost entirely a and then within that you have search.
And customers are project that has self imposed shut down for a period of time for safety reasons.
Got it that's helpful. And then just based on what you've seen so far in the rate landscape. How would you say the industry overall is reacting is there.
You saw some pricing softness the are you seeing broad pricing declines out there or is it coming from a more limited section of the industry.
It's it so there are certainly pricing pressure any time utilization fall. So these levels and remains at levels other than historic typical we're gonna have pricing pressure, but I can tell you have we seen a lot of discipline from our largest competitors.
There have been isolated regional competitors, who who don't show the same discipline, but they're not large enough to disrupt the broader opportunity that exists. That's a nuisance at this point, but our larger competitors that we run into everyday on all these projects their remaining disciplined.
Very helpful stay safe Thanks, a lot.
Thank you.
We can now passed to the next question from Ross Clarity Bank of America. Please go ahead.
Good morning, guys.
Well I.
Good morning.
But I'm just curious.
Things are stabilizing our you were saying.
You're getting that fleet back in this in the field with shorter duration rentals that give you a less visibility or do you like the very modest recovery, you've seen off the bottom or.
Is the duration of those projects kind of what.
You know you lost in a way down I'm, just trying to get a feel for if it's if it's more like hand to mouth type type business. As you are bouncing off the lows here [noise].
No Ross it it's the same customers that call the machines offerings that are calling us to written for machine. So we expect similar duration theres no mix in project type or or or mix of product within project types. It's it's business as usual to the extent this that makes sense.
Got it.
And then a business for likely or or or for whatever but what's the goodwill charge tied to was tied to any specific you know acquisition.
Or or region any color there you can provide.
So it's not tied to a specific acquisition and because it's all accumulated together once it guys on the balance sheet, but we did an impairment tests in interim and impairment test due to triggering event surrounding kind of bad and a decline in economic.
Additions in the stock price and.
The industry and those sort of thing that and it relates to our reporting a virus that is is one of our rental components that includes branches that have a distribution.
Component to it.
Okay got it thanks, Isaac and in terms of in terms of time, you guys. I mean, if we're sitting here in the kind of 60% range in a couple of months deeper into the season do you think that you or you know the larger players that not asking you to speak for anybody else, but it.
That natural the to believe that maybe folks are going to get more aggressive on.
On selling down some fleet to to shrink their fleets a little bit more as you'd get like more towards the end of the the season and what do you feel like a pricing perspective, I mean, I realized that everyone is that the major player something to being disciplined now, but the longer we go at depressed levels.
Is there a risk that pricing deteriorates kind of later summer and fall.
You know.
I guess, there's always a risk that pricing could deteriorate. It's not my it's not my opinion that is likely to continue to deteriorate.
With the strength of our balance sheet and I think our you know our larger competitors that disciplines easy to have a now for companies that require heavy use of the auction process to liquidate assets, that's probably the riskiest component.
From a from a value standpoint residual values retail values are remaining steadier than auction values and as you know.
We will use the auction process in isolated way, but that is not the big way, we move product that agency, we do a door professional sales force so.
I think that we're going to continue to see pricing similar to what we see today.
Oh, Leslie and I, both went through with the margins were on on used equipment sales I think 93% of that is fleet sales, we've talked about Earth moving earthmoving, it's really been the headline of the more depressed pricing at auction.
And you know we're still we're still getting really good values and I'd also remind you were on top of the strength of our balance sheet I mean, our fleets 37 months. So we've got a really young fleet. We're just not going to give this product away and I think that you will continue to see disciplined among our larger players in the same respect.
Okay got you know just on the distribution business. If you guys could comment a bit I mean, you.
You didn't have much of a recovery I mean, you did in earthmoving for a bit cranes business has just been dismal now for three years, what do you guys thinking on the distribution business going forward and.
And the future and.
Just how are you managed to that and the downturn in any kind of glimmers of hope or what it would take a really turned around.
Sure well you know there a lot of things I'd say about distribution I mean in in some respect it allows us to maintain our fleet at the high levels, we do.
I think our distribution business is very helpful to us achieving the types of consistent pricing margins and value that we receive particularly on earth moving in crane products being sold out of our rental fleet.
Oh that distribution piece is in one respect parts and services of the Steadiest piece of our overall revenues typically would have blended gross margin north of 40%.
So there are a lot of good things.
You know if we were to look at the volatility of the new sales piece alone.
No I would understand the concern of the question.
But I would say to you that we're happy with the balance of what we have it where we're in the distribution business. We're not we're not growing it we don't have the opportunity to grow it were confined by geographical territory.
And that focus does not dilute our focus on growing our rental business and so I could say, there's some puts and takes within that relationship.
But we like to balance that we have today.
Okay got it all the best guys. Thank you.
Thank you.
As a reminder, ladies and gentlemen, if you would like to ask a question. So you signaled by pressing star one on your telephone keypad hubs.
If you need to move assessing the Q you can press star to Star One if you would like to ask a question.
We can now passed to the next question from Stanley Elliott from Stifel. Please go ahead.
Hi, Good morning, this is Brian Brophy on for Stanley.
Just wanted to ask about SGN, a given some of the cost actions you guys are taking how should we be thinking about that into the second quarter and into the back half the year. Thanks.
Yeah, that's a good point, so I would not consider the S seen $8 that we incurred in the first quarter to be send much irrelevant run rate moving forward given the cost reductions that we've made instead I would look to SDMA as a percentage erad anyways and today.
We expect as DNA as a percentage of revenue on a full year basis in 2020.
Similar to what we saw in the first quarter yeah. The various quarters throughout the year may have some fly ups and down but on a full year basis I expect it to be you know.
In line with what we found the first quarter.
Okay, perfect Thats really helpful and then focusing specifically on on some of the large petrochem projects that you guys have exposure to what are you seeing in this area you guys seem cancellations delays.
And you guys expect these projects to kind of go through when when the economy starts getting going again.
Sure. So what we've seen at this point, it's been much more delays the cancellation of.
You know keep in mind that there are a lot of projects going on at all times some of them or traditional maintenance that occurs particularly this time of year, others are just new construction and growth.
And you know from a safety standpoint, many companies many petro chemical refineries as well as the contractors themselves elected not to have that many folks aggregating and such tight quarter for for health insurers. So we certainly I've seen some delays pauses.
We're certainly seeing those folks go back to work literally as we speak and ramping them up in what appears to be kind of waves or phases.
You know will we see cancellations are broad based cancellations due to this that's not what we're seeing in at this point in time, but we're going to continue to pay attention.
I would also point out that we've seen some more big industrial contractors the head counts of their workers go way down we're starting to see those workers go back to work. So that's encouraging sign for us.
Perfect. That's that's really helpful. I'll pass them. Thank you.
Let me now passed the next question from Sean Wondrack Deutsche Bank. Please go ahead.
Hi, good morning, and I hope everybody is doing well.
Just as you look at your exposure across your footprint.
It's great to hear that at some of these industries are beginning to come back on when you think about oil and gas and you think back to kind of 2014 2015 on what we saw there was there. Some lessons learned there are there some ways to kind of get ahead of any potential weakness on there. If you could provide some perspective will be helpful. Thank you.
Sure well there were certainly some lessons learned I think we peaked around 13% of our revenues you know more than double where we are today was a from oil and gas.
And so the lessons we've learned in cap in practice. This this entire time since that point in time have been to be more diversified and when we're going to do business and the oilfield markets are oil field projects that are rate should be reflective our return should be reflective of that activity in the volatility that can be associated.
But generally I think what you've seen us run into six 7% really says that peace time as a percent of revenue is been a byproduct of our lesson learned a were not heavily weighted with any particular product none of the product that we offer the oilfield or specific to the oilfield are fungible and.
Most any commercial construction project you would find in the U.S. So we certainly lots of things back then and adapted our business to mitigate that risk and I think it's paying dividends for today.
Thanks, and then but because you have sort of shrunk it by more than half what does that mean, some kind of managing the fleet perspective.
Given that that equipment is exactly fungible with everything does that make it does that alleviate the burden a lot on how you can handle that there.
It's well.
It's.
It's certainly helpful. I mean, you go to have.
I'm going to generalize here to have half of the inventory, we were only talk and rental revenues, but if you only had half of your rental revenue coming from oil and it has sharp downturn as it has again then it's much easier to move those assets.
But but generally it's just it's a non event within our company I don't want to.
Make it sounds as if we're not worried about oil and gas or the need to fleet manage but the way we fleet manage the method that communications our policies and procedures.
All of these things really are no different for the oil and gas markets. So when we see a downturn we naturally respond the same way, it's just not an event internally for us anymore.
Okay. Thank you and then just my last one there's obviously been some rumblings about a potential infrastructure Bill I know that kind of comes in and out of the news, but can you just remind us what that would mean to your business. Please.
It would be tremendous for our business every town.
I think sometimes we don't get excited enough because we heard about it for so long, but if there were a meaningful infrastructure bill it would be outstanding Fracing equipment services.
That's great and good luck going forward I hope everybody remains chase. Thank you.
Thank you. Thank you so.
Looking that moves to our next question from Seth Weber RBS capital markets. Please go ahead.
Hey, Thanks for taking the follow up.
And John good good to hear you on the call.
Going back to Steve Fisher is question Brad.
In the in the context of projects getting restarted can you just talked about is your equipment been part is it idled at the project site or has it been return to.
To the deeper to the branches and then it has to go to be put back out I'm just trying to understand how quickly.
You guys could start to see some of those restart activity if it if the equipment just sitting on the site already you know that obviously be big pretty quick turnaround. Thanks.
Yes to assess its both of the projects that we had the ability to secure the product or certainly doing so when it is sitting there were tracking it there and it's off risk there.
No.
And I would also say that our largest projects that were participating on in sheer volume of units on a project fall within that category without that product was not moved off of those projects and so when they say we're going back to work we've.
A lot of assumptions flip the switch and put it back to work.
No no on smaller projects smaller customers have returned product to our yard, but we don't have any capacity issues on our yard in our largest projects with the largest amounts of equipment that products still sitting there waiting either going back on risk.
Literally as we speak or waiting to go back on right here in the very near term.
Okay. That's all I had guys. Thanks again.
They say folks up okay. Thank you.
There are no further questions at this time I would like to hand, the call over to bad fiber case.
Yes, I'd like to thank everyone for joining us on our quarterly call or we look forward to speaking to you at the end of Q2. Thank you.
Ladies and gentlemen that will include the Haiti equipment services Q1, Twentytwenty conference call. Thank you for your participation you may now disconnect.
[music].