Q1 2021 H&E Equipment Services Inc Earnings Call
Good morning, and welcome to aging equipment services first quarter 2021 earnings Conference call. Today's call is being recorded at this time I would like to turn the call over to Mr. Kevin Inda, Vice President of Investor Relations. Please go ahead.
He Kate and welcome to <unk> equipment Services Conference call to review the Companys results for the first quarter ended March 31 2021.
Which were released earlier this morning.
The format for today's call includes a slide presentation, which is posted on our website at Ww Dot AG dash equipment Dot com.
Please proceed to slide two conducting the call today will be John Engquist Executive Chairman of the board of Directors Brad Barber.
<unk> Executive Officer, and Leslie Magee, Chief Financial Officer and Secretary.
Please proceed to slide three.
During today's call, we'll refer to certain non-GAAP financial measures and we've reconciled these measures to GAAP figures in our earnings release and in the appendix to this presentation. He.
He said, which is available on our website.
Before we start let me offer the cautionary note that this call contains forward looking statements within the meaning of federal Securities laws stay.
Statements about our beliefs and expectations and statements containing words, such as May could believe inc.
Expect anticipate and similar expressions constitute forward looking statements.
Forward looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward looking statement.
A summary of these uncertainties is included in the Safe Harbor statement in the company's slide presentation.
For today's call and also includes the risks described in the risk factors on the Companys. Most recent annual report on form 10-K, and 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 statements. The company does not undertake to publicly update or revise any forward looking statements. After the date of this conference call with that stated I will now turn the call.
Over to Brad Barber.
Thanks, Kevin and good morning, everyone. Welcome day to day equipment services first quarter 2021 earnings call on the call with me today are John Engquist Executive Chairman, Leslie Magee, our Chief Financial Officer, and Kevin and our Vice President of Investor Relations.
I'll begin on slide four.
I will briefly discuss our first quarter highlights.
On the trends in our rental business and provide an update on our growth strategy Lastly will review our financial results for the quarter in more detail. After we will take your questions slide six please.
We are becoming increasingly optimistic that the cycle may be nearing a return to pre pandemic levels.
Manned and our end user markets continued to improve throughout the first quarter, particularly with our rental utilization.
The historic Winter Storm in February was an unexpected headwind for our business during the quarter as approximately 40% of our branches were closed from nearly a week.
Even after the weather cleared the severity of the storm had an extended impact on some of the hardest hit areas.
Price impact from the storm and lower than expected financial results from this disruption we're pleased with our operational performance and continued forward momentum in our rental business.
Total rental total revenues in the first quarter were down two 6% or seven 5 million from a year ago, and we're making significant strides towards further improvement as the year progresses.
Slide seven please.
Now let me provide some additional color on the momentum in our rental business.
The frame the cadence of improving customer demand during the quarter look at our physical utilization strength trends during the period as I said on our fourth quarter call. We started the year just under 60% and we expect that utilization to be slightly challenging during the first quarter due to typical seasonality from the end of December to the end of January.
<unk> increased 430 basis points.
From the end of January to the end of February utilization drove another 170 basis points. Despite the impact from the winter storms from the end of February to the end of March we gained another 260 basis points.
Also in early March 5th of utilization surpassed our 2020 levels, which was before we realize the full impact of COVID-19 later in the month.
Thus, we eventually land utilization of 63, 5% for the first quarter, which was down just 80 basis points from a year ago. Currently utilization is running significantly higher than this time, a year ago up nearly 1000 basis points ahead of the 2020 and within 370 base.
This point of the same period in 2019, which was a very good year for our rental business.
We are pleased that our rental rates are also stabilizing down 4% versus year ago, and 2% <unk>, 2% sequentially and improvement from declines of four 5% and 3% in the fourth quarter.
As we progress into the stronger seasonal quarters, we expect to see rental rates showed sequential positive increases.
We are also encouraged by the recent rebound in several key.
Industry indicators the.
The February Dodge momentum Index Rose seven 1% to 149 from the revised January reading of $139, one the highest level in nearly three years.
The March Abi increased to 55, 6% from 53 point excuse me $55 six from 53 three in February reaching the highest point since July of 2007.
The a b C backlog indicator, an ABC customer confidence index have also shown solid improvement in recent months. This day to certainly correlates with the sentiment of our customers, which continues to grow increasingly positive as we move into the year.
As we know a federal infrastructure proposals on the table and overtime, we will see how the potential bill unfold any meaningful bill that passes would likely be a benefit to <unk> with earth, moving comprising 23% or $400 million of our $1 8 billion total rental fleet and consisting of a wide range of dirt.
<unk>, we're in a good position to benefit from an infrastructure related project.
Let me quickly provide some observations about the Gulf Coast, specifically, Texas.
State fully lifted restrictions associated with COVID-19, much earlier than many other.
And our business there is doing well energy related work is coming back and new projects are abundant.
Furthermore, Texas is not waiting on on an infrastructure Bill, Texas D. O T recently announced they would let almost 10 billion in new construction projects in fiscal year, 2021, which is up 27, 5% year over year.
Additionally, the winter storms recap on taxes as well as other joining states with mass power outages water system failures and other major problems.
Correcting these issues will be a massive effort and could result in significant spending on projects to ensure these infrastructure figures never occur again.
We remain very bullish about our opportunities in Texas and along the Gulf Coast.
Overall demand is solid industry indicators are positive and business can pitch conditions continue to improve.
Our market position is strong and we have expansive we have an expansive and growing footprint in high growth geographies, we like our exposure to a wide range of verticals in the non residential construction segment and other healthy end markets H and he has all the tools to capitalize on these improving conditions.
Slide eight please.
Let me conclude by providing an update on our growth strategy in terms of our organic growth plans. We believe that our expansion team is on track to accomplish our goal of opening eight to 10 starts this year.
We opened two new branches in the first quarter in Lodi, California, and Concord North Carolina.
With load out we have 10 branches in California, and further expect to expand our presence in this day.
Our new branch in Concord, North Carolina will complement our existing branch in Charlotte and break the number of <unk> branches in the state to eight.
Thus far in the second quarter, we have opened another five branches, including Murphy's Borough, Tennessee, Longview, Texas, Macon, Georgia, Knoxville, Tennessee, and Marietta, Georgia.
Ah Mercury's borough location positions us within a second branch is 25 miles from our existing Nashville facility to adequately support our current customer activity, new bid and new business from nearby municipalities with long view, we will be able to capture new business and provide greater convenience to our customers in areas between the growing Dallas, Texas and Sri.
Port Louisiana markets.
We now have 22 branches in Texas.
Making allows us to serve customers between central Georgia in existing facilities in Atlanta, Savannah and Opelika.
Marietta positions, a third branch near Atlanta, one of the fastest growing cities in the past 10 years and increases our total locations in the state the fat.
Notable is the third largest city in the state and gives us our fifth location in Tennessee.
With seven new locations opened year to date, we're clearly executing upon this component of our growth strategy.
Lastly, our balance sheet remains strong and we continue to explore opportunities to deploy capital for acquisitions in the general rental and specialty segments that will complement our existing business and further expand our geographic scale and product offering with this I will now turn the call over to Leslie to discuss our first quarter financial results in more detail Leslie.
Good morning, everyone and thank you Brad Let's proceed to slide Aladdin for more details of our financial results.
As a reminder, the prior year's first quarter results included a noncash goodwill impairment charge.
<unk> identified.
Identified in connection with an interim goodwill impairment test due to start on sugar and advance relating to the impact on our business from the COVID-19 pandemic now let me move on on key off first quarter of 2002 line.
Good loans.
We're pleased with that total revenues were only down two 6% or seven 5 million.
$278 4 million compared to the same period, a year ago, especially given the impact to our business from the winter storm rental revenues decreased 11, 8% or $18 7 million to $139 9 million from 168 69, a year ago.
Size of our fleet decreased by eight 4% or $161 million compared with the prior year comparable period.
Renewal rates this quarter declined 4% year over year, however rates were down on lease to pursue.
Even though the prior year comparable period was before significant impact to our business from the COVID-19 from Patheon 19, China utilization in the current quarter decreased only 80 basis points to 63, 5% compared to a year.
Consequently, our dollar returns decreased 110 basis points to 32% compared to last year.
New equipment sales increased 22, three percentage to 37, 7%.
Cash and $39 million last year.
Crazy. It was primarily the result on a 72, 3% or $6 1 million increase in new Crane sales.
Equipment sales increased 33, 8% or $10 5 million to $41 8 million and was primarily the result of higher sales in all product categories, except cranes.
From our rental fleet comprised 93% of <unk> sales in the comparative period.
Our parts and service segments generated 41, 90 day revenue on a combined basis, which is down 13, 9% from a year ago.
Moving on to a discussion of gross profit and margin gross profit decreased 11, 8% to $93 million from a year ago consolidated margins from 33, 4% compared to 36, 9% a year ago, primarily because of lower gross margins on rentals and used equipment sales combined.
With revenue mix.
For gross margin detail by segment rental price margins were 42, 1% third quarter from over 46, 1% of your volume.
Any pressure on rates and time utilization.
Also the prior year comparable period included an additional billing day as a result on leap year on February 29, 2020, which we estimate accounted for approximately 60 basis points.
The decline in the first quarter of 2021 on risk.
On June.
Margins on new equipment sales increased to 11, 4% during the first quarter compared to on level. Two was for the year guidance as margins were higher in all product lines with the exception that knee pain and new leather sales.
He used equipment sales base margin decreased to 32, 1% from 34, 5% last year, primarily due to lower margins in all categories, except other used equipment gross margin margins on pure rental fleet and we sales were 34% compared to 36, 4% year ago.
Parts and services based margins on a combined basis were 41, 6% on 41, 1% net.
Slide 12 please.
Income from operations for the first quarter of 2020 was $18 5 million or six 6% of revenues, which is compared to a loss from operations of $31 nine net prior.
Prior year period included a loss from operations for the first quarter of 2020 was 62 million noncash goodwill impairment charge, including the impairment charge income from operations was $30 1 million or 10, 5% of revenues a year ago.
The declines in income from operations and margins compared to prior year on an adjusted basis was primarily a result, Inc.
6% declining revenues revenue net lower gross margin and lower gain on sales of property and equipment $4 1 million.
Partially offsetting these declines in income from operations were lower SG&A costs at seven 1% from $5 7 million.
Proceed to slide 17.
Net income was $4 2 million on 11 cents per diluted share in the first quarter of 2021 compared to a net loss of $37 million or a loss of $1 <unk> per share in the first quarter of 2020 day effected income tax rate was 27, 1% Inc.
First quarter on 2021 and.
And 21, 9% in the first quarter of 2020, excluding.
Excluding the prior year's impairment charge net income line.
$248 million or 30 cents per diluted share and first quarter of 2020 on an adjusted basis day affected income tax rate was 26, 2% in the first quarter of 2020.
Please move to slide 14.
Adjusted EBITDA was $83 2 million in the first quarter of $2099 2 million a year ago, a decrease of 16, 2%.
Adjusted EBITDA margins were down 480 basis points to 29, 9% this quarter compared to a year ago largely as a result of revenue mix. In addition, adjusted EBITDA margins were negatively impacted by lower gross margins combined with lower gain on sales of property and equipment.
As he mentioned SG&A expenses declined $5 7 million or seven 1%.
Partially offsetting.
Maintain declines to adjusted EBITDA margin.
Next slide 15.
G&A expenses for the first quarter of 2021 were $74 million compared with $79 6 million in prior year, a $5 7 million seven 1% decrease.
G&A expenses in the first quarter of 2021 as a percentage of total revenues were 26, 6% compared to 27, 8% a year ago employee salaries wages payroll taxes and related employee benefits and other employee related expenses decreased $3 4 million, primarily as a result of lower <unk>.
Commissions and incentive pay combined with head count reductions decreases in health insurance cost and worker compensation costs and other employee cost reductions implemented subsequent to the first quarter of 2020 in response to COVID-19 impacts our debt is bad debt expense decreased $1 $3 million on liability.
<unk> decreased $9 million legal and professional fees decreased $6 million, partially offsetting these decreases was on line $9 increase in our credit litigation loss contingency.
Approximately $2 2 million in the total increase in SG&A expenses was attributable to our warm start opening compared to a year ahead.
Next on slide 16 on.
On this slide you will find Capex fleet, Capex and cash flow for the 12 month period, ending March 31 2021.
Fleet Capex from the first quarter was 71 setting.
Including non cash transfers from inventory on net rental fleet Capex for the first quarter was $32 9 million gross PP&E capex for the first quarter was $7 3 million in net was $7 1 million.
Our average fleet age as of March 31, 2021 was 41 five months.
Free cash flow for the first quarter of 2021, $28 2 million.
Compared to our free cash flow of 45, nine a year ago.
Next on slide 17.
At the end of the first quarter the size of our rental fleet based on <unk> was $1 8 billion, an eight 4% on $161 million decrease from a year ago average dollar utilization was 32% compared to 33, 1% a year ago, reflecting lower time utilization and rate.
Proceed to slide 19 please.
We continue to operate with ample liquidity and no near term maturities at the end of the first quarter, we had net borrowings under our amended ABL facility and more than $300 million on cash on hand at quarter end.
We had $741 3 million of cash availability at quarter end net of $8 7 million of outstanding letters of credit.
Our excess availability was $968 5 million at the end of the first quarter, which is the measurement used to determine if our springing fixed charge.
Have any of the critical with excess availability of nearly $1 billion, we have no covenant concerns.
Also our net leverage remains low at two four times, we paid on a regular dividend of <unk> $27.05 per common stock share again in the first quarter and while dividends are always subject to board approval. It is our intent to continue to pay the dividend.
Let's now get into questions. Operator, please provide instructions for the Q&A session.
Sure.
Yes.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw from the question queue. Please press Star then two.
First question comes from Steven Ramsey of Thompson Research Group. Please go ahead.
Yes.
Hey, good morning.
Maybe just start with fleet size down 8% improving outlook.
And obviously seasonality coming in.
How do you think about capex for the rest of the year.
Would you prefer your capex to be even higher but the constraints at the manufacturer's level.
May be slowing you down from maybe what you would prefer to do on the Capex front.
Yes, good morning, Steve.
The answer is I think we're very pleased with our capex that we have in the Q there is some products.
We've really had an opportunity to pull forward as Leslie mentioned, we had a little headwind in SG&A costs related to pulling forward. We've opened now seven of these greenfield slash warm starts for the year.
That's that's been a little bit of a challenge, but generally speaking we've been able to meet the expectations. If there would be anything different isolated products, we would pull forward a little faster, but for the full year. We have no concerns we got on orders in early.
Price protected very very minimal and in most cases zero price increase so while we're satisfied that we've got the plant fill our expectations.
Okay, Great and then.
Thinking about the winter weather impact.
Maybe how that hits Q2.
Are you seeing any kind of catch up work there or is it already caught up.
Or do you.
Expect higher fleet on rent.
In Q2, partly from the winter weather catch up.
The net.
That disruption we had had two specific impact on our business. The one you're referring to is the pause it placed on our utilization, having 40% of our locations shut down the better part of a week and then some of that extended impact certainly pause it so to that part to that to your question.
We have resumed.
Recently run back up close to 68% utilization so our trend on on rate continuing to improve has resumed and we are satisfied with that the area. It had an impact to us not in Q2, but in Q1 that we can't really replace or resume on was in our parts and service business.
You lose those man hours Theyre, just losses, not its not pent up demand that we've got adequate demand on the parts and service side of our business, but it had more of a specific impact depart from service, but on the rental side. We're in good shape, our utilization is trending back to our expectations approaching 68% and we expect that trend to continue.
Sure.
Okay, Great and one last quick one from me.
Your outlook you discussed clearly the macros.
Improving and you talked some about what youre hearing from the sales force and customer feedback in the field can you may be sure clarify that if what youre hearing from customers and from your sales force is more or less optimistic than what youre seeing in some of the macro data.
It's more optimistic clearly if you were talking to a group from our salespeople and asked them that we have adequate fleet coming to the extent they had a real view of.
The total plan they would say no we need to buy much more.
And so.
As we're going to continue to grow the fleet when we see opportunities that that optimism is much higher in the field.
We're also on the balance gets these rate improvement that we expect to make for the remainder of the year.
Excellent. Thank you.
Thank you.
The next question is from Stanley Elliott from Stifel. Please go ahead.
Hey, good morning, everyone. Thank you all for taking the question.
Okay.
It started off thinking about the.
On the weather impact.
Those items come off rent.
Just curious kind of how that will flow through.
Look at kind of that 40% it seemed like maybe a 3% sort of a headwind, but just trying to make sure we were thinking about that correctly.
Yes, some of them do come off rent what you certainly don't get as you lose all your momentum going forward.
As we pointed out.
Utilization has continued to step up every week in January I think I covered on our on our fourth quarter call every week in January with sequentially improving in physical utilization when we had that call. The second week in February it was improved over the end of January and we talked about that cadence just continuing as well on my prepared comments.
But to answer your question you do get some off ramps you certainly don't you certainly lose all your momentum and you just kind of stand in place or tread water for a couple of weeks and in that broader geography. So that's.
Good news is that since resumed and we're back off and running and as optimistic as we were before that storm hits.
Yes.
The backlog so a lot of the Oems are facing in some supply chain disruptions things like that you just have a view whether the rental channel could actually increase penetration this cycle or even over the next 12 months relative to new equipment purchases.
I believe the rental I think that is likely to occur in my view is that rental penetration in the short term and likely the longer term is going to continue.
The trend in the direction, it's frankly been trending here for quite some time.
And then lastly in terms of the SG&A lots of moving parts with.
Kind of the slowdown and then some of the new ads is there any way, we should think about debt to the cadence for the balance of the year, especially with what like two two more locations look to be opening.
Yes, I'll, let Leslie give a little more detail, but you nailed it right I mean, we had this we had this.
We had the slowdown we've got these seven locations that we've opened it up in a pretty short period of time.
Leslie you want to give some total sure. So on our last call I stated that we ended the full year 2020 at 2027 pristine as a percentage of revenues and we expect it to slight pressure as a percentage of revenues compared to that for 2021 and that view is really unchanged.
Thats really largely due to the warm start strategy that we have.
Related to the cadence of that in.
Q Q1 is always the he.
<unk> percentage of revenue just because of the seasonality so that should begin to settle down as the progressive down to that overall guidance that I gave.
Perfect. Thank you guys best of luck.
Thank you.
Our next question is from Ross Taylor.
Already of Bank of America. Please go ahead.
Hey, good morning, guys.
Good morning, Ross on.
Hey, Brad can you talk a little bit more about that Texas infrastructure spend and the timing of that as to when it should get spent and where it kind of the types of projects any color there would be helpful.
What I was referring to specifically on prepared comments was dot's spending so roads and bridges primarily.
Those projects will let throughout this year and I do not have the schedule in front of me, but generally they are largely let earlier in the year as opposed to later in the year.
So I would need to research a little bit more to give.
To give you a firm assurance on that but I would tell you that's the typical trend.
What's nice to see is there.
Rejected letting is going to be up about 30% year over year. Okay.
Okay interesting and then.
Are you seeing any.
Signs that the smaller independent rental change that debt may be didn't order as early as you did are really struggling to obtain fleet and losing market share to yourselves and the national rental companies.
Yes.
What I can tell you with certainty if they did not have their orders and they are not going to get product is what I believe so.
I don't have a lot of insight to most small rental competitors, but generally they order in a very short view and a short horizon. So that would imply to me that they probably did not order early and if they have not ordered at this point in time I think they are going to get blocked out on the yield.
Got it Okay and then just lastly, how are you thinking about specialty going forward I mean is this.
Is it just kind of something you wish you had more of an will gradually build up or are you feeling more urgency to address it either by M&A or organic investment and what areas of specialty are most compelling to HMA.
Yeah. Good question.
I think it's going to be a slow process for us here, what could move that needle faster would be an acquisition opportunity and we are certainly open to investigating those as they come along.
We would consider it.
As you know and others know we've talked about the trench safety space that plays well with our existing $23, 24% of our earthmoving products. So we would look for things that are synergistic to our existing customer base bring us some more customers, but more importantly allow us to penetrate them deeper.
Over a period of time specialty will still be a relatively small piece of the business here at <unk> and given enough years, and the right acquisitions and organic growth it will become a larger piece. So we're serious we're looking.
Our sense of urgency in getting something done I would just tell you is going to be the same as every other part of our business with discipline and we're focused and we're not going to do anything crazy, but we're at the same time we're optimistic.
Well just on that just a quick follow up on in terms of like how you define anything crazy. It just seems like it's it's hard to there's a lot of competition for these assets.
As we all know I mean, most of these businesses seem to go for a high single digit low double digit EBITDA margins. I mean are you when I ask you about urgency would you guys be willing to tolerate some upfront dilution to to actually start to build a footprint or.
Just curious if you could respond to that.
It's possible on and I don't mean to be evasive.
It's possible to the extent, we would have to evaluate the opportunity in and of itself.
And what we pay on day, one as opposed to what it may bring to us over a period of time being able to grow that or bring that experience into our business and spread it across our footprint could could allow us to pay maybe a price tag that.
Otherwise, we would not have considered on a general rental business.
That being said we're not.
Not going to lean too far forward unless we have a high degree of certainty we can leverage that type of growth opportunity in that hypothetical example, I just gave you.
Okay fair enough. Thank you.
Yeah. Thank you Ross.
The next question is from Steven Fisher of UBS. Please go ahead.
Thanks, Good morning, guys.
Just wanted to start off on the rates I know you talked about stabilization.
But just trying to frame the 4% decline what was the exit rate on that is less a quarter or is that it was still down year over year or were you actually flatter or maybe up.
Well sequentially, we were down two tenths over last quarter.
And our measurement. So that's probably the only information I have that I could give you that kind of guidance directionally, what youre looking for.
Okay, I guess I'm just kind of curious if you are anticipating that we will start to see those rates up on a year over year basis in the second quarter at some point upturn.
Let me speak about sequential and if you have other questions I'd be happy to try to to answer those as well. It is my anticipation is our anticipation that our rates will start to show sequential rate improvement on a quarterly cadence going forward on the near future.
We had stepped down for a number of quarters I think we were down four tenths of a percent in Q4 over Q3 were down two tenths of a percent.
Steve you had 20 basis points.
In Q1 over Q4 seasonally tough times, and we believe that that that cadence will start to move in a positive direction.
How long it takes us to intersect debt year over year is he has a different question that I don't think im prepared to answer too but.
We certainly will get back to previous rates and eclipse previous rates. The question is how long does it take us to do that with the current supply demand environment again, I'm, making these comments just coming out of Q1 and now starting to get the real momentum within our rental business with the current supply demand environment and the discipline.
And that I've seen from our competitors in the marketplace and the disciplined exist in ACD.
We're going to be optimistic that we can push those a little quicker, but rates are very much supply demand driven and the good news is we're moving back into position, where we're going to see sequential rate improvement give me a quarter or so and I'll be able to guide you better on year over year.
Got it that's helpful and you.
Talked a little bit before about some of the optimism out on the field I guess I'm just curious how you would characterize the visibility you have for the second half at this.
And how it compares to the visibility that you would typically have at this time of year.
Okay.
There are a few things.
Yes.
John Engquist, our present, chief operating officers been conducting regional meeting sales meetings, and otherwise, where we're really talking more specifically within the customer size small medium large the diversification customers by ISS Eco. He has a lot of data to support this and then as the anecdotal conversations debt that <unk>.
Along with our sales force and of course, our what we call I connect our CRM tool.
So that's all positive it's probably more anecdotal something I can point out that's just it's a number it's a statistic is that our physical utilization on Earth moving.
Steven.
Youre familiar we've talked about earthmoving is on early cycle indicator. Many times, our earthmoving utilization is exactly the same it was at this point in time in 2019, our fleets not much larger I think its maybe 25 million larger than it was in 2019.
The point is as we did not decline that fleet. The cash it. It's just been somewhat of a stable slightly larger fleet and that physical utilization matches 2019, which was a nice here that has an outstanding indicator to us internally about what's going to come behind the Earth moving being done on these projects. So I don't want to oversell two.
On 'twenty, one, but the stability, we see I believe it is very real and I think our opportunity for utilization to improve in rates to incrementally start to move the right direction.
It's painted on everything we look at.
Makes sense and then just lastly, you talked a little bit about <unk>.
Infrastructure stimulus and how youre, just kind of watching to see how that plays out what would you have to see to really start putting the orders in or is trying to start fleeting up in advance of that so you're prepared for those dollars to when they start flowing.
Yes, we would want to we would want to see the bill and understand where the dollars are going to be spent.
He may have to do some estimates on how many of those dollars are within our 23 state geography.
Since we're in most of the high growth markets, we would expect that a large percent balances would be.
So there are a variety of things we would have to consider.
For this year, we still have an opportunity to bring on more fleet. If we want to I would tell you that we're very focused on discipline, improving our returns in every sense and it would likely be more of a 2022.
Scenario for us on the infrastructure Bill just with the timing I don't know that there are many shovel ready projects as we sit here today.
Got it thanks a lot.
Thank you.
As a reminder, if you have a question. Please press Star then one the next question is from Barry Haimes of Sage asset management. Please go ahead.
Thanks very much.
On a couple of questions. So first one is.
With the price of steel up a fair amount.
You mentioned on your Capex orders, you've put in your price protected but.
If you Werent, how much half price has gone up for equipment.
Versus which he.
You've got in your order book.
And then how much wood.
Lease rates on rental rates have to go up to justify.
You guys increasing fleet at those higher price levels sales first question sure. So the price points really vary by the percentage of steel in a particular product.
I would generalize and say that we've probably seen 2.5% to 5% steel surcharges or had conversations around those levels with most of our manufacturers that.
That being said some of them have maintained their position that they are still per day is no steel surcharges.
So there is a range to the second part of your question at all if you just go down to the base level for every 1% you pay more you need to achieve 1% more rental revenue two to obtain the return you were getting previously and so.
Obviously that has to flow through historically on the rental business. The good news for US there is a blend of older products as well as the newer products the newest product and everything in between and so that's a that's a target that moves over time, but you want to obtain the same rental revenue increase that you have in.
And cost to protect your returns basically.
Great. Thanks, and then I had a question related to.
Alternative energy if you were to.
Look at solar versus wind you know versus.
Let's say a traditional gas fired power plant.
What would be the equipment intensity for.
The types of equipment, you guys sell or rent.
And each of those three is it similar are there big differences, just just from sort of a feel for that thanks.
There are some differences I'll tell you we're agnostic as far as what type of power project goes on they all consume large quantities of products. There is a product mix issue related between solar solus closer to the ground, while wind turbines are way up in the air.
So there are some obvious.
Differences in those types of products I will tell you the products that we deliver to the energy field are the same products that we deliver to our commercial construction sites, we've talked about the fungibility of our products across all product segments. Many many times. So we're not a specialist in any regard in each of the three classifications you meant.
And give us outstanding opportunity, we're participating on all of those today.
Great. Thanks, so much I appreciate the help.
Thank you for the question.
This concludes our question and answer session I would like to turn the conference back over to Brad Barber for closing remark.
We just want to thank everyone for taking the time to attend our first quarter 2021 on earnings call and we look forward to revising this group.
Next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.