Q2 2021 McGrath RentCorp Earnings Call
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Ladies and gentlemen, thank you for it spending by welcome the Democrats rent Corp, second quarter of 2001 for 1 conference call. At this time all conference participants are in a listen only mode. Later, we will cut back our question and answer session.
And the fine if you have the question you won't meet the press Star 1 followed by the number 1 on the telephone keypad. This conference call is being recorded today Tuesday August Street group out of a sense of like the 1 before we begin note that the matters the company management will be discussing.
The day, that's already not statements of historical facts are forward looking statements within the meaning of the private Securities Litigation Reform Act of 90.95, including statements regarding our full year 2000, like the 1 financial outlook as.
While our statements relating to the company's expectations strategies prospects are of targets. That's forward looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected and the day.
Shouldn't the risks associated with the ongoing COVID-19, pandemic and related economic dynamics and important factors that could cause actual results to differ materially from the company's expectation are disclosed on the risk factors in the company's form 10-Q, and other S. E C filings.
Forward looking statements are made only as of the date hereof.
Except as otherwise required by law, we assume no obligation to update any forward looking statements and addition to the press release you shouldn't the day. The company also feel the wood that S. E C. The earning release and form 8-K, and its form 10-Q for the quarter ended June 30.
1000 for Wednesday, 1 speaking today will be Joe Hanna Chief Executive Officer, and Keith Pratt Chief Financial Officer other.
And I will turn the call over at the Mr. Han Yeah go ahead Sir.
Thank you for ANZ and good afternoon, and thank you everyone for joining us on today's call I will start the call with some comments on our second quarter 2021 performance as well as our look ahead, Keith will provide additional detail and his financial review and outlook comments.
Our second quarter was a very busy 1 for US and addition to managing the business during our seasonally busier time of order bookings and preparation for summer of deliveries, we completed 2 acquisitions and began our integration processes for both for.
The core rental business is running well with a 10% company wide rental revenue increase year over year.
Modular rental revenues grew by 14% with about half of that growth coming from the acquisitions of design space and kitchens to go.
Portable storage rental revenues were up 23%.
Rental revenue also grew at Trs and Adler.
I am pleased to report that all of our business units are contributing to year over year expansion and rental growth for the corporation.
So, let's take a look at each of our businesses and our progress with the acquisitions.
And mobile modular and we saw across the board strength and our commercial rental business.
<unk> were broad based across many different market verticals, such as government private business general construction and infrastructure to name a few and.
In terms of commercial business pipeline, our quote volume for the quarter was strong and the project inquiries where quality and nature.
Our education business realize some benefit from the flow of federal stimulus money in the states and subsequently in the education funding.
And California, we saw some districts of lot funds for classrooms to accommodate additional administrative staff offices and teaching space nature.
Nationwide work to modernize facilities as well as accommodate student population growth continued.
Funding has been generally available to continue projects.
Tourists from telco are 7% rental revenue growth was driven by broad based demand from the 5 G aerospace and defense and semiconductor segments.
Testing work and the R&D labs was healthy for the quarter and.
Of our communication segment network improvements continued in the field.
Contractors require test equipment with more demand for wired infrastructure expansion, but less for wireless segment activity.
At Adler, our teams achieved a 4% rental revenue increase driven by increases and our environmental services and industrial services segments.
4 of our 5 other geographic regions realized rental revenue growth.
Some plant and refinery projects that had been previously delayed were turned on and the general economic recovery during the quarter.
Partially offsetting that was less pipeline work than the prior years as projects concluded and new ones did not replace them.
We continue to manage the business to maximize cash flow.
Now that I've reviewed rental revenues for our businesses I would like to address another important revenue stream and that is new equipment sales at mobile modular and via <unk> design space and kitchens to go.
New building sales are often a viable option for customers seeking modular solutions and it is the service we are enthusiastic to provide.
And so the economy recovers from the pandemic and construction activity increases we are seeing some effect of supply chain disruptions and cost Escalations and this has impacted our sales for the second quarter and our new equipment sales outlook for the rest of the year.
Some projects are being reduced and scope put on a slower time line and a few of been put on hold.
We believe this is a reaction to the economy operating at a higher pace and believe the disruptions to the temporary in nature.
The demand is there and so as robust funding so project adjustments and timing of accommodations are being made but the overall sentiment is still very positive.
Our pipelines and backlogs are healthy and we are looking forward to continued activity as more and more customers value the typically lower cost and reduce timelines compared to conventional construction.
The integration of design space and kitchens to go are progressing nicely and as planned we.
We acquired both companies to expand our geographic footprint and to provide a more complete solution to our customers with an expanded product line.
These acquisitions represent long term investments and we're excited at the opportunities we have ahead of us.
The teams have been working exceptionally hard and making the integration process advanced swiftly. So we can realize benefit and it is showing and our progress.
We are already seeing positive synergies from combining resources foremost is the cultural fit which is critical for us to be able to implement operational improvements as we share of better ways to serve our customers.
We are sharing leads between each of the businesses and have already uncovered opportunities and have closed orders.
The design space team has access to our California, mobile modular fleet, which should help improve utilization and our ability to provide the best building solution for our customers.
Additionally, we are already handling leads for classroom rentals, and our new design space locations. So this opens up additional revenue opportunities for us.
Looking forward the second half of the year is typically the stronger half at.
At mobile modular and our commercial business is healthy and quote activity is strong entering the third quarter.
In particular commercial activity has been a big positive driver of growth and our portable storage business and we expect that to continue.
Sentiment with our school districts is positive and we're well positioned to accommodate third quarter orders based on final student head counts once classes resume.
At Trs <unk> opportunities are expected to continue both in the R&D labs and in the field.
Expansion of bandwidth to accommodate more data traffic is a constant test equipment driver.
At Adler, we of whether it's some turbulence and believe we are coming out the other side of sentiment has improved and we are feeling more optimistic about opportunities across the business.
Like many companies today, we are managing through supply chain issues increased cost for materials and some wage pressures. We are carefully watching these trends and are adjusting pricing when possible using sophisticated tools to help and the process.
Before I hand, the call over to Keith for his remarks, I'd like to take a moment to sincerely. Thank our teams for their hard work and long hours spent making our integration of design space and kitchens to go move along as planned while also delivering a solid quarter of organic growth the.
The combined efforts of all of our teams new and old and some signs of economic recovery have given us the confidence to increase our overall financial outlook for the year.
With that I'm going to turn the call over to Keith who will take you through our financial review.
Thank you Joe.
And as Joe described compared to the second quarter of 2000, and 'twenty, We had solid performance from our core rental businesses and we were encouraged by continued improving business demand trends over the course of the quarter.
For today's review I will provide highlights from our second quarter results a discussion of the impact from our acquisitions and our outlook for full year performance.
When comparing this year to last year keep in mind that.
The initial impact from the pandemic, we had a very strong second quarter of 2020 helps.
Helped by strong sales revenues.
Modest decline and rental revenues.
And Lo and country center, and the SG&A costs as the pandemic of roughly reduced activity levels.
Our second quarter results include 2 acquisitions.
And on April 1 we closed kitchens to go for $2.3 million.
On May 17, we closed the design space acquisition, which was an all cash transaction with a purchase price of $266.5 million.
So our second quarter results included a full quarter of kitchens to go and.
Just 6 weeks of design space revenues, but included a significant portion of the related transaction and the initial integration costs.
Together these acquisitions contributed $5.5 million total revenue.
A $2.6 million increase to adjusted EBITDA.
And the 2 cent reduction to earnings per share for the quarter.
Looking at the overall corporate results for the second quarter of 2000. The 21 total revenues increased 6% to $146.4 million.
The majority of the revenue increase was for our rental and rental related services at mobile modular Trs for and telco and the Adler.
All of which I will discuss further and the segment reviews.
Each of our rental segment grew rental revenues year over year and.
Sequentially.
Selecting the generally improved business conditions, Joe described earlier.
The company has $3.1 million operating profit declined for the quarter was primarily the result of $5.7 million increased selling and administrative expenses and $5.1 million increase inventory center costs.
Defined as direct costs of rental operations other on our income statement.
The higher SG&A costs were primarily the result of our 2 acquisitions.
While the higher inventory center costs were the result of higher business activity levels. The addition of the acquired businesses and the impact.
And that's from cost inflation pressures for materials and labor.
Okay.
The second quarter, adjusted EBITDA increased 1% to $58.5 million compared to a year ago.
Consolidated adjusted EBITDA margin was 40% compared to 42% of year ago.
No I will break the results down by reviewing rental division operating results and performance compared to the second quarter of 2000 for 'twenty.
Mobile modular total revenues increased 7.8 million or 10% to $84.6 million.
The primary driver was $6.6 million higher rental revenues with approximately $4 million of the increase.
Due to rental revenues earned during the quarter from new design space and kitchens to go and customers.
The average monthly rental rates for the quarter was $2, 5, 9%, which was 7% higher than a year ago, primarily due to mix changes.
<unk> the impact of the acquisitions.
Overall market pricing conditions were stable.
Average fleet utilization for the second quarter decreased $2.75, 5% from 77, 7%.
Reflecting the softer market demand conditions from the effects of the pandemic during most of the last 12 months.
Higher rental revenues.
We offset by 28% higher inventory center costs, and 23% higher depreciation expense.
Resulted and rental margins of 57% compared to 61% of year ago.
As mentioned earlier, the higher inventory center costs reflect higher business activity levels. The.
The addition of the acquired businesses and.
Some impact from cost inflation pressures for materials and labor.
Sales revenues decreased <unk> 5 million to $14.8 million, primarily due to lower and new equipment sales.
At Trs for and Telco total revenues increased $7 million or 2% to $33.8 million on the higher rental revenues, partly offset by lower sales revenues.
Rental revenues for the quarter increased 7%, we saw continued strength and general purpose test equipment rentals, which grew 9%.
Communications equipment rentals were flat compared to a year ago and continue to be impacted by less field work on communications infrastructure, partly as a result of the delays caused by the pandemic.
The average monthly rental rate for the quarter was 393% down 2% compared to a year ago.
This lower average rental rate reflects the continued mix shift towards more general purpose equipment rentals, the tend to have longer term transactions and the longer asset lives compared to communications.
Overall market pricing conditions continued to be stable.
Average utilization for the second quarter increased to 67, 7% from.
And from 63, 9% of year ago.
And rental margins were 40%.
Average of 41% a year ago.
Sales revenues declined 20% year over year, 2 for $8 million.
With gross profit, increasing 3% due to higher gross margins on sale of 62%.
At Adler tank rentals total revenues increased $1.3 million or 7% to 20 million on higher rental rental related services and sales revenues.
Rental revenues for the quarter increased 4%.
Collecting improved demand and multiple geographies and the end markets compared to a year ago.
The average monthly rent the rent for the quarter was 327% up 5% compared to a year ago, primarily due to mix changes during the quarter.
Overall market pricing conditions continue to be competitive.
Average utilization for the first quarter decreased slightly to 44% from 44, 3%.
And rental margins were 49% compared to 51% a year ago.
Moving on the remainder of my second quarter comments will be on a total company basis.
Selling and administrative expenses increased $5.7 million or 19% to $36.3 million, primarily a result of the acquisitions.
Employee salaries and benefit costs increased by $3 million, mostly due to increased headcount from the addition of design space and kitchens to go employees.
The acquisitions also resulted and 1.7 million higher amortization of intangible assets and.
<unk> 9 million of transaction costs.
Interest expense was $2.3 million and increase of 3% as a result of higher average debt levels, partly offset by lower average interest rates.
The second quarter provision for income taxes was based on the effective tax rate of 24, 6% compared to 26, 4% a year earlier the.
The lower rate this year with in part due to increased excess tax benefits from stock based compensation.
For full year of 2021, we currently expect and effective tax range of between 25% and 26%.
Next I'd like to turn to our year to date and cash flow of highlights.
Net cash provided by operating activities was $98 million and increase of <unk> 5 million.
We paid $284.3 million for the acquisition of substantially all of the assets of the design space and kitchens to go businesses.
Rental equipment purchases were $58.9 million compared to 57.5 million in the last year.
This excludes the $186.6 million estimated fair value of design space and kitchen to go rental assets acquired this year.
Healthy cash generation allowed us to pay $21.1 million and dividends.
Total borrowings on the bank lines of credit and private placement notes increased $250 million.
At quarter, and we had net borrowings of $473 million.
Apprised of $160 million notes outstanding and $313 million under our credit facility.
With the capacity to borrow an additional $119 million under our lines of credit.
The ratio of funded debt to the last 12 months actual adjusted EBITDA was 2.0121.
Finally, turning to our financial outlook the.
The recent positive rental demand trends across each of our business segments are encouraging.
Challenges for the remainder of the year will include the fact that supply chain delays labor shortages and higher material costs are starting to extend project timelines and causing some new modular equipment sales to push out to later in the year or into next year, which could impact new sales for our modular business.
Including <unk> and our acquisitions.
We currently expect total revenue between 610 and $640 million.
Which is up from our previous outlook of $570 million to $610 million.
Adjusted EBITDA between 245 and $260 million.
Which is up from $232 million to $247 million previously.
Gross rental equipment capital expenditures between 101 hundred $20 million, which is up from $90 million to $110 million previously.
While the potential for pandemic related disruption remains we are encouraged by the overall improving business activity levels, we have recently seen.
That concludes our prepared remarks.
Francie you May now open the lines for questions.
Thank you and participants of sovereign.
Line Bruce So ask the question you will need the press star 1.
And Keith Bob again that star and the number 1 on your telephone.
With your question.
Breath of the pad.
Your first question comes from the line of Scott Schneeberger from Oppenheimer. Your line is now open.
Thank you good afternoon.
For my first question.
Could you remind us last year and the second quarter.
Sales were elevated and.
And.
They were.
Comparable this year within within $2 million and the second quarter.
Could you remind us what was driving the elevation of last year and then transitioning to the look ahead.
And you could provide a little bit more color about.
What's kind of happened in the second half for sales and why do you think that's going to be down. It sounds like you think it's going to be pushed out.
But just curious about that and then and then a follow up on that subject.
Yes.
Of the things to unpack, there Scott, but a year ago <unk> sales were very strong and the second quarter.
And that was 1 of the contributors to a good second quarter for US last year and I also think projects that were completed and the second quarter of last year in a way they were pre pandemic and the <unk>.
Machinery. If you will was underway the units were built the installations were occurring before too much impact from the pandemic occurred that's really looking in the rearview mirror.
Looking ahead of really reflecting on the comments. We just made what were seeing now when we talk to the people and the business and as Joe mentioned across all parts of the business our traditional modular side of the business. Our <unk> part of the business, where we actually manufacture units and then the 2 acquisitions really seeing the common theme.
<unk>.
Harder to get materials, then it was more expensive to get materials anecdotes such as it used to take 3 weeks to order of door of window today and can take 2 to 3 months to get that same piece of material, which is critical to having timely completion of the project. So those are just.
Some of the comments regarding the supply chain issues I think it's important to point out and.
We actually think we're going to of a very good sales year, it's just not going to be quite as good as we might have expected just a couple of months ago and I think thats really what were trying to convey here. If you look at my prepared remarks, and I know, we covered a lot, but we actually think overall sales will be up year over year.
And that's partly because we had a good pipeline of ourselves and it's partly because of the acquired businesses. Both have a significant sales component in their overall revenue mix. So I'll kind of pause there is that helping address your question and happy to provide any other color.
Yes.
Your supply chain that flow youre, not able to get parts to create the product for sale or on the <unk> side, but also for your manufacturers who you are for your retail or is it your customers where they are delayed on projects and their projects.
Starting later.
And you could differentiate there please yes Scott.
The impact on our own production is is not the real driver it's more cuts.
Customers delaying because theyre, having their own supply issues on their own site.
That makes sense, yes.
Yes, it does any of that and what I wanted yes, thanks, Joe and then.
And then just within this and the context of the guidance is what is the contribution of the acquisitions.
I guess I'm going to speak in terms of the midpoint of the guidance.
What's the contribution from design space for the balance of the year and.
And then on the organic side.
Appears that you you have of lower guide.
On the on the legacy side of the business is that purely from the sales or is there another component on on that part of the thank you.
Yes.
I'll say, a few words and then turn it over to Keith.
And what's really important too.
And make sure everyone understands and that is the rental the rental business is quite healthy and so we're we're very pleased with how that's that's been progressing for the year and we're projecting to have.
Nice growth on a year over year basis, once we finish the year and so that's the real driver in the company and I think what we're seeing here right now and as we're trying to convey a little bit and Keith can give you. Some more details on it is just the sales lumpiness and sale of some of these push outs are.
<unk>, our total revenue stream.
But I'll also mention that as Keith said, even though our sales.
We're projecting that to actually be up on a year over year basis. Its just not as much as we are.
Had anticipated just a few months ago. So Keith I don't know if you have anything you want to add to that.
Yes, sure let me try and say a few things Scott just to help you sort of wrap your arms around it 1 of the things we share when we announced the 2 acquisitions was the revenue that the.
And each experienced and full year 2020, and that was $81 million for design space and.
Around $17 million for kitchens to go so if you put your arms around that in terms of the kind of year. They had last year I would say if you take the combined acquisitions and look at this year and design space feel very good of bonds.
I think kitchens to go who is experienced and a little bit more of the project push outs and delays that we referenced earlier, but still getting good pipeline. Good momentum in terms of the things they see and the horizon not 1 important thing to keep in mind is not only will there be the potential for some of the sales.
<unk> of those businesses to slide a little bit which means some projects, we might've expected and third quarter May go to for some we were expecting and and fourth may slide into next year.
In addition, keep in mind debt.
Fairly typical when you complete and acquisition there'll be a few areas, where the accounting policies and revenue recognition may be a little different and I'll just take a moment on this because it does impact some of the revenues will experience during of sort of transition period of the next few quarters and as you know with our own beer.
And we see this and the 2 acquisitions, our 3 big revenue streams are the rental revenues rental related services and sales and each of the 2 acquired businesses kind of those revenue streams in each case, they relatively speaking and have a higher percentage of their total revenue in the.
The sales and rental related services buckets as compared to rents and it's just their nature of their business. So for all of these businesses. The revenue recognition around rental revenues essentially the same so no issues there on rental related services, which is mainly delivering product and setting it up.
Mcgrath, we recognize that revenue ratably over the life of the contract the <unk>.
Other 2 businesses actually recognize that revenue at time of completion. So it's a little bit of of difference. So on our books those rental related revenue streams are going to build up gradually over the next few quarters.
Because the game, they're going to be recognized ratably over the life of the respective contract so that causes a little bit of a.
Sort of less revenue and the near term till we build up to the normal run rate and we are of similar issue with sales revenues and the.
The other businesses recognize sales base.
Based on percent complete, whereas we recognize all of the revenue when the full project is finished and accepted by the customer so for us. During this transition period, we have some sales that were in the pipeline, where perhaps 70% of the revenues already being recognized by the acquired company.
And when we actually get it finished we won't be getting $100.
Of the 100% revenue recognition, we may get the remainder of it might just be 30% on a project. So again and those are kind of details and the transition period, but the big picture here is rent side looks very good if anything a little ahead of where we would have expected to be sales side, we've got some accounting transition issue.
And we've seen some delays and the marketplace that could cause things to slight a bit and the second half of the year and again, having said all of that.
It's going to be a good year for sales, we expect it to be up compared to a year ago, not just quite as much as we had been hoping for just a few months ago before a lot of the supply chain issues became more evident.
Okay. Thanks can you break out in the guidance.
What.
The specifically in the and the EBIT Doll line, what contribution is from acquisition and what contribution is organic and the change.
Yeah.
Yes.
Scott I would say, we haven't got that.
The visibility just to share today, and that's partly because of these businesses are not functioning and a very integrated way, especially with design space and California. So its not as easy to break that out but they are definitely going to contribute to the second half of the year.
And do so strongly with the caveat as I mentioned earlier about some of those revenue streams and some of the sales items.
Okay. So so on the well on the overall everything together, it's purely and the sales and the accounting issues not rental at all rental if anything of a little better than expected across all segments.
Correct, that's accurate yes, okay.
And then.
Just curious like looking specifically at Trs.
Noticed.
Rental revenue grew sequentially first quarter to the second.
And 2% this year and 18 and 19 of the grown a little bit more sequentially is it a slow seasonal ramp this year you sound bullish on the rental prospects and Crs I'm just curious what's what.
And it looks a little bit.
Obviously U S sequential build so I'm just curious.
And.
And what gives you the confidence is coming in stronger and the second half of we just had a delay.
Yes, I think there is I think generally market conditions are improving things or there is more demand now than there was before and I think thats whats really given us our confidence.
And we've anticipated that more field work is going to take place as.
Folks as we exit this pandemic and that has occurred to a certain degree, but really hasnt taken off and a significant way yet and.
We're just anticipating that to get more active as time passes.
Okay, and then lastly for me I think I heard.
4 to 5 geographies.
Better and add or.
And the historically, you've talked to and markets. I think you have 6 of them on how they are doing better or worse.
If you said it.
And I Miss David but could we get an update on how the end markets are doing and gave some color earlier.
Just curious on the 6 that you track how are they looking.
The year over year and sequential.
Because it sounds like.
Looking a little bit better and the oil and gas side.
Yes.
Scott, we have 6 and markets I believe 4 of them or.
Positive.
Of the 6 and as I had mentioned in the prepared comments environmental services and industrial services, we're really driving our growth there.
Oil and gas I think was it's really only upstream is really only 5%, which we've reported before and and Thats kind of maintained and so we saw a decrease.
With some of the pipeline work that we had done last year.
Did not.
Recur this year and I just.
Think thats more of a uncertainty than cancellations that were seeing and that work some of its political and some of it's just.
There has been quite of bit of.
Capacity, that's been put on and the last year or so and so some of those projects just haven't haven't taken off yet and so.
But overall.
We think.
As I had said we're coming out of the other side. We're encouraged our customers are talking more about projects that debt.
And I have been delayed that are going to come online and so that's what's causing us to feel more confident at this point.
Yeah, Okay got it and just your question on the sequential performance at Adler all 5 of the regions were up sequentially and all 6 of the vertical markets that we track were up sequentially. So.
Some good trends there and we hope that continues to build as we go into the third quarter.
Alright, great got it guys. Thanks very much thanks Scott.
Your next question comes from the line of Sam and good.
Barrett and Bruce Capital Your line is now open.
Hi, guys its Alex on for Tom.
Just looking at the Capex guide.
Is that going to sort of the inflation and the value of the all of the assets you are buying or is that increased volume and the units being and both as demand strengthens.
Yes, Alex the key reason for the increase is we're going to put more capital into the newly acquired design space regions outside of California.
Think there's opportunity there and the teams are doing a great job they've got a good position and the market. So we wanted to continue to invest and grow that part of the business and Thats really the key change from last quarter and Thats, roughly another $10 million or so and we hope it for successful with the business, we'll be doing more of that going forward.
Okay, great and.
How does the M&A pipeline look of the design space deal and do you have any any limits to where you would take leverage to any part of the deals.
Well I'll just make a comment real quick and Keith can comment on leverage.
We're always.
And I'm looking at opportunities and we're going to continue to do so and we have additional capacity if we need to so that's very much a part of our strategy going forward and where we are.
And we're interested if the right opportunities present themselves.
Yes, and from the point of view of leverage as we reported our leverage reported was just over 2 times on a pro forma basis, it's closer to 1.8.
And with our loan confidence we can go as high of $2.75, but we are very supportive lenders and if there was a key strategic opportunity, where we needed to make adjustments that something we could do.
Okay, Great alright, thanks, guys.
Thanks Sam.
And again participants if you would like to ask the question you've made for as far as the number 1 on your telephone keypad.
And again, that's fine and the number 1 and is now.
For the people.
Your next question comes from the line of Marc Riddick from Sidoti. Your line is now open.
Hi, good evening.
Hi, Mark.
So I was wondering if you could talk a little bit about the pacing of utilization across the businesses throughout the quarter because of it seems as though it was sort of grinding a little little higher if im reading commentary properly and and at least 1 of the bullishness of general General trends why so as long as it gets so I'll talk about.
The.
And that pacing and and what we might what we might be seeing thanks.
Sure I'll just.
Start with modular and we were actually down if you look on a year over year basis, our average utilization.
But the encouraging thing with that is at quarter end and on a sequential basis, I mean utilization hasn't and.
Improve so where we are.
We're seeing positive trends there.
And so.
That's that's been encouraging.
At Trs <unk>.
Utilization is 67% that was up considerably over last year, and that's that's really running and in a very <unk>.
Very good place at this point.
Pleased with that business and the utilization level that we have there now.
And the Adler.
Or was it 44% that was down.
Just slightly on a year over year basis. So we definitely have room to improve there and with our <unk> and <unk>.
Managing cash and that business.
We have not been putting capital in and so we have plenty of room to invest.
And just getting our fleet that we have out on rent and so thats been our focus there Keith anything you want to add at all.
Yes, just a quick just a quick follow up the AD load that was up sequentially right.
Utilization for our thing yes. Some of that is correct correct and again Youll see all of this when you look at the public filings and the Q and particular Youll see we ended the quarter at average at 45, 8%. So again gradual gradual improvement we realized that there is a lot of work still to be done.
And hoping for.
Some of those recent market trends to continue with better demand conditions for the business, but those are all positive metrics up Q1, Q2 over Q1 and ended the quarter more strongly than the average for the quarter. So those are sort of healthy data points.
Okay.
What else was going there that's that's very helpful.
Wanted to switch gears around to the education, and maybe what Youre seeing at this point for them, but from a timing perspective, and the kind of feedback that you're getting is it obviously it was a very different year.
I was wondering if you could give a little bit more color around what youre seeing and maybe if it's.
It does.
From a visibility standpoint or a.
And the way the demands.
Might play out how that looks.
How should we think about this year versus not necessarily last year, but going back to more normal times, yes, yes, I think.
Yes.
I'm feeling good about it I mean, we're actually seeing districts that had put off capital investments and capital projects and modernization and growth actually bringing those projects back online.
And and with.
With the fact that stool.
The students are really going to be returning to classrooms of this fall there.
Just don't anticipate that not happening anywhere where we're operating.
And that's also a positive for us.
We will have to see what happens.
Think student counts will be off because we've actually gone a year in between having kids and classrooms and on a full basis back in the classrooms again that we'll have this fall. So I think student council, the off and that might cause a little bit of last minute ordering for us, but I don't anticipate that to be of <unk>.
Big needle mover, but overall, we're feeling good about where our education business is right now considering all of the disruption that had taken place over the past year or so.
We're we're diligently working through and helping districts at this point and we've got classrooms that are available if there are last minute needs.
Great and then I guess the last 1 for me I was wondering if you could talk a little bit about the.
Labor side of things and sort of how that plays into the services.
Opportunities and maybe what Youre seeing there and then maybe I can sneak in a little bit commentary around pricing.
Sure.
Sure I can I can talk about the labor issue it is tough to find people.
And I would say our most challenged area.
And recruiting and filling positions us with drivers and I don't think that should be any of <unk>.
And anyone that has just been been tough for the last several years, but it's even worse now.
And and our.
Our production centers finding folks is the challenge.
We have had to make some wage adjustments.
But overall we are.
We're well staffed and we're not experiencing.
Internal.
Significant opening openings and positions that are affecting our production rate. So.
And I think.
We just need to keep working it and.
And we've got plenty of internal resources that are.
Working on helping us make sure our hiring pipelines are in good shape, so tighter than it we'd like to see it but manageable.
And then I can talk about pricing a little bit too if you'd like to.
Yeah.
Rates have absolutely. Thank you.
Yes, and I know you mentioned you mentioned that rates are rates are hanging in there.
And we actually are and modular and were up 7% year over year and how some of Thats based on the.
And the integration of design space.
It had very nice rates and so we're seeing some of that assistance there, but overall in terms of talking of the teams our commercial pricing is good our education pricing has been good.
And we're not seeing any.
Degradation there at all.
And custom.
Customers have been relatively open when we've had to pass along price increases, which we are doing to account for cost increases that we're seeing and some of the.
Service offerings that we have and let me give you. An example, we may do modifications on of modular building to customize it for our customer we've raised all of our prices there and customers our understanding of that.
And that's just 1 of the things that folks are dealing with right now in terms of.
Getting product they need the product they want of customized according to their use and they're willing to pay a higher price for it. So we've been encouraged and we're hopeful that.
And that reception to those higher prices, we'll continue as time progresses here.
Right no that makes sense.
Thank you.
Thanks Mark.
Ladies and gentlemen that appears to be the last question. Let me now turn the call back over the Mr. Hanley for any closing remarks.
Thank you very much I would like to thank everyone for joining us on the call today and for your continuing interest and our company. We wish you all health and safety and in the months ahead, and we look forward to speaking with you again in late October 2021 to review our third quarter results.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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