Q2 2021 Alta Equipment Group Inc Earnings Call
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Good day, and thank you for standing by and welcome to the <unk> Group second quarter 2021 earnings call.
At this time all participants are in a listen only mode.
After the speakers remarks, there will be a question and answer session.
A question. During this session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance please press star zero.
I would now like to hand, the conference over to your Speaker today, Andrew Randall director of Finance.
These go ahead.
Thank you Celine good afternoon, everyone and thank you for joining us today.
Press release detailing <unk> second quarter 2021 financial results was issued this afternoon and is posted on our website along with a presentation designed to assist you in understanding the company's results.
On the call with me today are Ryan Greenawalt, our chairman and CEO and Tony <unk>, Our Chief Financial Officer for today's call management will first provide a review of the second quarter financial results.
We will begin with some prepared remarks before we open the call for your questions.
Before we get started I'd like to remind everyone that this conference call may contain certain forward looking statements, including statements about future financial results, our business strategy and financial outlook achievements of the company and other non historical statements as described in our press release.
These forward looking statements are subject to both known and unknown risks uncertainties and assumptions, including those related to <unk> growth market opportunities and general economic and business conditions. We are basically forward looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business.
Financial condition and results of operations.
We believe these expectations are reasonable we undertake no obligation to revise any statements to reflect changes that occur after this call.
Descriptions of these and other risks that could cause that could cause actual results to differ materially from these forward looking statements are discussed in our reports filed with the SEC, including our press release release that was issued today.
During this call we may present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's press release and can be found on our website at investors that also equipment Dot com I will now turn the call over to Ray.
Thank you Andrew and welcome everyone to our second quarter 2021 conference call I will provide highlights from the quarter and then turn the call over to Tony for a review of the financial results.
The second short quarter showed a continuation of positive industry trends and our business environment favorable for both our material handling and construction equipment verticals. Our results for the first half of the year combined with record backlog in both our material handling and construction businesses strengthen our confidence in the growth opportunities ahead, and our full year outlook.
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Customer demand increase each month throughout the second quarter, while new equipment supply constraints persisted and lead times extended for deliveries of new equipment. These market conditions are helping to drive increases in our rental fleet utilization as well as demand for our replacement replacement parts and services.
The supply demand imbalance is also driving price depreciation of new and used equipment and increased rental rates.
Alta is utilizing the breadth of our equipment brand portfolio and extensive inventory and rental fleet to satisfy customer demand and win new customers.
Equipment sales were higher than our internal plan for the third consecutive quarter, which supports our core growth strategy of populating our coverage area with equipment in order to provide parts and service over the intermediate and longer term.
For those who followed the <unk> story and as I've said in the past our growth strategy is built around populating. The geographic regions, we serve with equipment from an increasingly wider group of manufacturers and then providing quality service from our skilled technical workforce. This strategy drove our product support business up 53% this quarter.
Now turning to key financial highlights.
Revenue was $292.7 million and adjusted EBITDA came in at $28 million for the quarter. Our construction segment, which is our growth engine had an exceptional quarter and generated strong organic growth of 37, 2% our material handling segment, which is our more mature business grew organically seven 7% amid supply chain constraints.
I also want to highlight that our product support grew organically more than 30% over last year's second quarter. Another proof point that we are fully we can recovered from the impact of Covid.
Geographically, we saw continued strength from Florida in our construction segment overall and are beginning to see some positive trends out of the New York region, which was acquired last December. Additionally, equipment sales from our used and rental fleets were at all time highs and as I mentioned rental fleet utilization continues to decline our labor productivity remains strong and we have been actively.
Brooding in every market, we serve adding nearly 160 technicians from this time a year ago.
In the quarter. We also completed the full integration of several acquisitions, we made during 2020 Flagler Paolo and left tech onto our ERP platform. That's brought another $300 million of revenue onto our platform in the quarter and fully integrates our systems to drive both top and bottom line synergies across our enterprise Tony will go into a bit.
More detail on this in his remarks.
Additionally, we continue to make significant progress on our corporate development initiatives that position us well for long term growth earlier. This week, we announced the formal launch of our E mobility strategy with our agreement with Nikola Motors, a designer and manufacturer of heavy duty commercial battery electric vehicles and fuel cell electric vehicles. This agreement will provide also with <unk>.
Inclusive rights to sell and service Niko a long haul class eight trucks in the New York, New Jersey, Eastern Pennsylvania, and New England markets and as you know the EV market is in its early stages and is experiencing significant growth. We view. This initiative as a natural extension of the operational expertise we have built in the material handling segment and construction.
It's over the years, we also believe it aligns well with our long term strategy as we aim to diversify our business into high growth industries with exclusive territories anchored by Premier partners, we plan to leverage our existing footprint and deep knowledge in electric mobility to meet this growing demand and deliver world class service to Niccolo customers not only are we excited.
About this partnership from a business opportunity.
It also aligns with our ESG principles, and helping to reduce emissions and driving environmental sustainability.
We also continue to build on the great success, we had been experiencing from our logistics and warehousing solutions group since acquiring <unk> roughly one year ago, we have seen a significant increase in the number of opportunities. We've had to help our customer base with Easter facility costs increased throughput improve productivity and gain efficiencies in their warehousing processed <unk>.
<unk> currently has a record backlog and has seen significant demand from customers for the implementation of innovative technologies like automation and robotics to help streamline operations. This unique capability has also helped us to broaden their scope with a full service solution and increased sell through opportunities expanding our ability to win new business and drive <unk>.
Both in our customer base.
We also recently entered a partnership with a small robotics company to enhance our capabilities in this space. We believe that partnership complements our warehouse automation and software solution capabilities and support the growing demand for robotics and automation in the material handling space <unk> remains one of our most exciting growth opportunities.
On the M&A front, our pipeline remains strong and we continue to be in active discussions with other equipment dealers and both our construction and material handling businesses.
The operational.
<unk> improvements we made in 2020 to mitigate the impact of the pandemic are driving scale and improve profitability. These strategic actions combined with a significantly improved operating environment and strong macro tailwind.
Position us well this year and beyond.
We remain well capitalized and are prime to take advantage of targeted acquisition opportunities that drive long term growth.
We also had several longer term strategic opportunities on the horizon, including continued expansion within the warehousing and logistics space and our entry into the commercial vehicle sector, both of which provide extremely high growth potential and strategic alignment with our customer demand lastly, we could not have done any of this without the.
The hard work dedication and resiliency of the Altra team members.
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I will now turn the call over to Tony to discuss our second quarter financial results Tony.
Thanks, Ryan and good afternoon, everyone and thank you for your interest and also equipment group and our second quarter 2021 financial results I Hope that you went through.
The fund summer as we head into the back half of 2021.
My remarks today will focus on four key areas first I will be presenting our second quarter results, which we are pleased with as we've now closed the COVID-19 GAAP from 2020 entirely and look forward to growing our business in the second half of 2021 and beyond.
As part of that commentary I'll also briefly recap our April high yield bond rate and its positive impact on our balance sheet.
Second as much has been made of the supply chain constraints, which have impacted many industries, including ours I'd like to highlight for investors managements view of all the current supply chain situation is impacting Alta and how we believe our business model is responding to the situation on a department by Department basis.
Third given that it's been a full year since the <unk> acquisition in Florida, which was the largest in the company's history I will present, some important metrics that highlight our ability to improve the target's value and realize the expected synergies as we implement our strategic approach to the market as part of that commentary also briefly touch on some integration wins, we had in <unk>.
Q2 from a business system perspective.
I want to provide some thoughts on this newly announced commercial EV opportunity from a financial viewpoint and how we are framing this opportunity in relation to capital deployment.
Before I begin it should be noted that there are several slides in our <unk>.
<unk>, which was released prior to our call that presents our quarterly and year to date numbers in greater detail than what I will discuss here today.
To everyone on today's call to review, our presentation, and our 10-Q, which is available on our Investor Relations website at Alta equipment Dot com.
For the first portion of my prepared remarks, I'll provide an overview of our second quarter performance.
Starting with the income statement.
For the quarter. The company recorded total revenue of $293 million, which is a record sales quarter for our business.
$293 million of revenue for the quarter is a 23, 5% organic sales increase over Q2, 2020, which was heavily affected by the pandemic.
However.
To lesser impacted Q3, and Q4 of last year. The second quarter of 2021 compares extremely well from a sales perspective as we are seeing increased demand for our products and services across all of our revenue streams.
Once again and this is three quarters in a row now we saw continued strength in equipment sales, especially as it relates to used equipment and rental fleet sales as rental equipment sales for the quarter came in at $36 million.
All told when considering just our equipment sales over the last three quarters, we've populated nearly $500 million of equipment into the field, which bodes extremely well for the future of our high margin product support departments and our longer term prospects.
Speaking of our product support business, which is made up of parts and service, we realized an impressive $87 million of revenue for the quarter. Another company high watermark, achieving 31% organic increase year over year on a consolidated basis now this level of year over year growth was somewhat expected in our material.
Handling segment segment, given the impact that Covid had on our product support business in Q2 of last year.
And if there's a takeaway here that said, we are confident that our material handling product support business.
Now fully back to pre pandemic levels and on the road to sustainable growth like it was prior to Covid.
On the construction side, we're really proud to report that our product support business also grew 30% on an organic basis recall that our construction product support business was less impacted by Covid, which leads us to believe this is a validation of our business model and our ability to grow the more the most important aspects of our business effectively.
I'll touch more on that later in my prepared remarks.
From an EBITDA perspective, we realized $28 million and adjusted pro forma EBITDA for the quarter, which is an improvement of $3.6 million over the adjusted pro forma level of second quarter 2020, representing the first quarter since the beginning of the pandemic, where we've picked up EBITDA versus the previous year's comp.
So the highest quarterly pro forma EBITDA, we've recorded as a public company.
Additionally, our trailing 12 month pro forma adjusted EBITDA comes in at a $102.3 million is that measure continues to trend up towards our guidance range of a $110 million to $115 million for the fiscal year, which we reaffirmed in our press release earlier today.
Another encouraging metrics for the quarter.
And another positive byproduct is the current supply demand imbalance in the equipment market is the increased due to continued increase in physical utilization of our rental fleet, which was over 65% at June 30 represent almost a 20% increase versus the same time last year.
Lastly, and I gave a lot of detail on our new high yield bond on our Q1 call, but given its not fully accounted for in our second quarter 10-Q, I thought I'd give a quick recap recap in short the $350 million five year bond accomplished several major items simultaneously for our business and our capital structure.
Immediately reduced in fixed our cost of debt at a favorable level. It created a $150 million of liquidity by paying down our ABL and uncapped suppressed availability. It removes some restrictive covenants on the term loan that was constraining our ability to access more cost effective first lien capital.
Most significantly we believe this new capital structure gives us tremendous runway for the future future.
<unk> can now be accretive to shareholders. When it comes to financing. The next dollar of capital needed to execute on M&A and other strategic growth initiatives.
To that end and to give a quick update on the balance sheet. We ended the quarter with approximately $290 million of availability on our line of credit and leverage came in at three four times forward 2021 adjusted EBITDA.
Certainly comfortable positions on both metrics.
Now moving to the second area of my prepared remarks, Brian and I have taken a lot of questions from investors over the past quarter on how the current supply chain environment, especially as it relates to our key Oems.
Our business and so I wanted to provide our view of how the current backdrop impacts cash flows at Ulta.
First I would refer call participants to slide 19 of our Investor presentation, which illustrates my car.
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Similar to the lens, we use to view our business as we move through Covid. We've taken a segment based department by Department approach to framing up the impacts of the current situation.
To start with and to be clear the primaries today for Ulta is specific to the receipt of new equipment from our Oems, while we've incurred some pressure related to parts availability, we would classify this as more of an inconvenience, where it's a real threat in the short term and a distant second place relative to the issues going on.
With new equipment deliveries.
Internally when we frame up the impact Department by Department, we first analyze the department's cash generative capabilities on a relative basis high medium and low SEC.
We analyze the severity of the supply chain issues on each department and the grid on slide 19 shows the results of our view.
As you can see and it probably goes without saying the inability to source new equipment is impactful to our ability to generate cash flows within our new department. However.
Similar to some of the discussions we had on Covid, we need to keep in mind that the razor we need to keep in mind, the razor and blade philosophy that our new equipment sales relatively speaking, it's not a large cash generator for our business, but an avenue to Peel population as a result, while the current situation may be difficult on our Oems the ability to generate cash flows.
New equipment the impact on us on a dealer has a dealer is rather muted in relative terms.
Moving to used equipment and equipment out of our rental fleet first we doesn't make these revenue we designate these revenue streams from these departments as moderate from a cash generation perspective for Alta, meaning that there are more impactful to our overall cash flows versus new equipment sales, but less impactful than parts service.
And rental but this area simple supply and demand economics are at play and when there is a scarcity of new equipment supply coming into the market the demand for you.
And in turn so does pricing given the size and quality of our used and lightly used equipment in our rental fleet today, we are well positioned to benefit from record level pricing to date and in our estimation over the near term.
Our view is that any EBITDA shortfalls observed in new equipment sales will at least be offset by gains via sales.
Used and rental equipment.
This is an area. We believe we are best in class talent and relationships to continue to source and sell used equipment to satisfy our customers' demands until the supply chain issues subside.
And the rental department.
First this department is classified as highly cash generative for Ulta and similar to the supply demand remarks, I just made the dearth of new equipment in the market is driving utilization of our rental fleet as customers are filling the void in their own fleets with our rental equipment as I mentioned earlier, our physical utilization was approximately 65% at June 30.
And we've also observed that rental rates have trended higher in the current situation should be viewed as bullish for the rental program.
Onto the service Department.
This department is also classified as highly cash generative for Alta just high margin Department also acts as the linkage to our customers' equipment.
In terms of the impact.
The equipment supply constraint is having on the department in short customers.
Existing fleets are not being replenished, so age and hours of existing fleets continue to rise with each passing month.
The agent hours right against the backdrop, where uptime matters the need for service technicians in repairs and maintenance will increase this aging and utilization phenomenon is positive for the demand of our technician's time, and our labor productivity overall.
Lastly.
But parts Department, which is another department classified as highly cash generative for Alta.
Is directly correlated to the service departments activity and assuming we can continue to source parts at the current pace, which we believe will be the case then it follows that all of the tailwind to describe for service would manifest in the parts department as well again, the current environment is bullish for our parks Department.
So in summary, four of our five departments or revenue streams. We believe we will actually benefit relatively speaking from a lack of new equipment supply in the market today and over the short run new equipment sales will be pressured. However, this department is not a cash large cash flow generator for alto overall to be clear so long as there is field population.
Our geographies being utilized and demand for rental fleet altice cash flow profile will remain intact and potentially benefit as the equipment industry supply chain normalized.
Moving onto the third area of my prepared remarks, I'd like to give a brief update on the Flagler acquisition from earlier last year.
We believe our experience with Flagler is reflective of our ability to execute post close as we look to realize the opportunities and synergies identified during the sourcing and diligence process. Additionally, flagler was the largest largest deal in the company's history and given that we had a full year of operating under the <unk> brand I thought it was.
Appropriate to provide an update on that investment.
I would refer call participants to slide 20 of our Investor presentation, which shows our experienced thus far in Florida and some key metrics.
As we shared with investors during the IPO Road show in late 2019 early 2020 recall that our two major Dcs in the Flagler deal where that one the dealership with under technicians. If you will they didn't have enough text or the amount of field population they generated and the size of the Florida market and <unk>.
They lack the ancillary Oems specifically in the road and compact segments.
As a result, we saw an opportunity to expand their product portfolio, which would both increase and diversify the revenue base and bring large end markets into play.
For item number one and as you can see on slide 20, we've increased annual product support revenue by almost $12 million or 25% in year, one and we've increased tech tech head count by 41% or 26 heads.
Given the operational and market headwinds that we had to endure over the first 12 months of ownership down in Florida, We couldnt be more excited about these results, which validate our investment thesis.
As for item number two we've added several impactful product offerings in the Florida market, including leading road equipment manufacturers and road Tech and Pietersen compact equipment suppliers, any bond and yammer and a multitude of manufacturers in the environmental processing space.
Our dealer arrangement with eco versus importantly, most all of these OEM arranges arrangements give us exclusive rights to the product and OEM parts, where all of Florida.
Last but certainly not least and this is an important intangibles that you will not see in our profit and loss statement as we've added great industry talent and leadership with this acquisition. The results we achieved down in Florida near ramp in year, one, which we still view as at the beginning could not have been achieved without the team's appetite to do more in the regional.
Leadership's ability to be confident enough in themselves to be open to what we believe is an enhanced operating philosophy. Thank you and congratulations to our Florida team.
Before I move on to the last area of my remarks, and in the vein of M&A integration I would point investors to slide 21. This slide presents where we stand with integrating our 2019 and 2020 M&A targets.
Onto our business system as you will know and we were very busy in this regard in the second quarter. We have now we now have 90% of our business operating on a common ERP platform. This allows us much more visibility into our business in real time allows geographies to share inventories and customer data and it helps us track and drive key.
Key kpis in our business.
This win in Q2 cannot be overstated and a big Thank you to all of the Ulta employees, who had a role in the Q2 systems integration.
Moving on to the last area of my comments I want to add to Ryan's remarks on <unk> commercially the opportunity from a financial perspective, and how we are framing the opportunity relative to risk and capital deployment.
From a strategic perspective.
Class eight over the road truck segment has long been on Ryan and also strategic map and.
In fact, as we've mentioned to investors previously there are several examples amongst our sister lift truck and construction dealers across the industry landscape that has have successful class eight dealerships as there are natural synergies between the verticals as it relates to operations business model Kpis and technical talent needed.
To be successful with.
We've always viewed the overall over the road truck market is the most logical fit in terms of a potential third vertical we have a proven track record of driving market share for our OEM partners and building best in class service operations that keep customers equipment up and running and we intend to use the playbook now and the commercial EV market.
To eliminate the strategy from a financial perspective, we see the entry into this market as further monetizing and leveraging the existing intangible value Volta.
It's been tested refined challenge enhancement invested in over many years.
From a business model perspective, we intend to have the same approach to the commercial HVAC segment as we do in our material handling fee segments, It's new used parts service and rental so nothing changes there.
From a capital allocation perspective, fanatically, we view this as an asset light and rich light entry into an exciting and potentially significant opportunity, we will meet customer demand with the supply of inventory purpose built facilities and technical talent the.
The current plan is to initially leverage our existing infrastructure in the northeast and then too little capital onto this segment as it evolves and treat the risk and reward profile of additional investment appropriately as we go along.
Another way to think about our entry into this segment is to contemplate the level of capital investment and time that would have been necessary to purchase truck dealers shifts throughout the northeast and recreate the territory that we now have covered through the Nikola partnership.
I don't know what that number would be but I'm certain the financial investment we're contemplating to pursue the same opportunity those acquisitions would have presented us pales in comparison.
I'd like to close by noting that we don't believe our entry into this segment will materially affect our earnings for the remainder of the year and certainly as visibility into and materiality of the segment.
It comes into focus for management, we will update investors accordingly.
In closing given our second quarter results. The current business landscape the impacts of the recent bond raise in the organic and inorganic opportunities that continue to present themselves from a growth perspective, we remain excited about <unk> future and continuing to execute for altus shareholders for the remainder of 2000.
'twenty one.
For your time and attention and I'll turn it back over to the operator for Q&A.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad and again that is star then the number one on your telephone keypad phosphate.
Phosphate just a moment to compile the Q&A roster.
We have our first question coming from the line of Alex Rygiel with B Riley Securities. Your line is open.
Hi, Good morning, this is actually min Cho for Alex.
Congratulations on a really strong corner and thank you for all the detail you provided on the yeah.
Slide very helpful.
Can you name it.
Okay sorry.
Just wanted a couple of questions.
Nicola agreement and I understand it's still very early on.
And I know Tony you talked about.
Past success based investment going forward, but could you talk a little bit about Pos.
Pass on.
The capital requirements and terms.
Buying parts and just training of the technicians for that part of the business.
Yeah.
Sure Ben.
It's a good question.
If you've heard me.
Talk about our parts and service.
Operations in the material handling side of the business and in the fee side of the business.
I've almost referred to or I have referred to the cash flows from that business as free EBITDA.
Because the capital intensity of running our parts and service operations.
It's just not very capital intensive.
And so we view this in the same way that putting parts on the shelf that typically.
And then in a normal dealership world are going to turn.
Three to five times, a year very capital efficient and then when you talk about.
The investment related to training texts.
That's something we're doing on a regular basis when new models come out for our Oems.
So training technicians is frankly already built into our cash flow. So we see this is no different which is why we view this as certainly from a parts and service perspective is.
Nothing different than we've done in the past, which is which is asset light.
Got you and could you talk about maybe some of the initial customers can be in the northeast I know Nikola had done some work with Budweiser and they probably have some distribution locations as well and just talk about any cross selling opportunities with our material handling business.
Sure. This is Ryan and I will take that we think that the cross selling opportunities there'll be some of the same early adopters of the hydrogen fuel cells for.
Material handling.
There aren't any specific names that we would point to in the northeast, but these are these are going to be.
Target accounts that are large retailers and distributors. So the likes of Amazon Walmart Anheuser Busch is a great example.
I will say, just giving on liquidity now and that.
You've made so much progress integrating the acquisition can you talk a little bit about M&A pipeline and potential timing and maybe size of anything that could occur in the year.
We'll probably stay away from any specifics about what we can say is that the pipeline is still there.
And and we are having active conversations.
Across each of the segments really.
And we <unk>.
M&A is part of <unk> DNA it has been for over 10 years.
And we expect it to be going forward as well, but I guess the long in the short of it is we still see opportunity M&A wise.
In both segments of our existing business.
This is Ryan I would just add that the structural themes of consolidation remain very much alive. So that we still see continued runway for our strategy.
Alright, Thank you I'll hop back into the queue.
We have our next question coming from the line of Brian fast.
Raymond James Your line is open.
Thanks, Good afternoon guys.
Just a first question here when we think about I guess, the north eastern and Midwest business relative to the Florida business can.
Can you just talk about what kind of synergies you get between the North Cisco just trying to get a sense of how easy it is to move equipment freely.
For parts between the two regions if demand warrants it.
Sure I'll take that this is Ryan that is a.
Synergy is a significant part of our excitement around the Florida deal and we're seeing it play out in reality its a four season market. It's also a large and growing market.
Examples of the synergies are equipment coming off lease or rent at the end of the season in the north where were going to go into frost and not have a lot of earthmoving going on.
Those those assets are easily transferable to the south or they can be put.
The rental fleets and utilized or sold into the market and become part of our field population.
And then Conversely flu.
Florida is a it's a large market we're very active in it and because it is large and we're making a market, we're taking and trades were bringing in lease returns that we could have a constant supply of lightly used.
Machinery that we can move to the north to meet demand. So that is definitely up for US a theme right now.
Using our scale using the breadth of our portfolio to win business because today the supply chain constraints are making it very difficult to operate for our customers but.
A good environment for us to show our capabilities and try to win win share.
Okay. That's good color.
And then just could you speak to the extent that weather I guess site restrictions are still limiting factor here or I.
I guess hiring entertaining Texas in Europe.
Limiting issue going forward.
Just trying to get a sense of maybe what are the challenges going forward given that the recovery is just so strong.
Around here.
Sure so.
We are in an industry, where technical talent has been in short supply since pre fire before the.
The pandemic so the pressures remain there.
Our industry is.
It's highly skilled.
Wages and so we are not having a problem attracting talent that some of the other industries are experiencing so we're we're meeting the demands of the market in terms of recruiting.
Brian I was going to jump in I think the first part of your question was.
Restrictions.
The way I took that was maybe related to COVID-19.
And we're not seeing any yet we're not seeing any.
Impact that way.
At the moment.
In terms of our technicians to be able to get on site to fixed equipment.
Okay. So that's it for me just a little Mark.
Matthew I'll, just going to add that there is some some regional pockets of where supply.
Chain related to Covid Covid is more of a factor in keeping the market tempered versus actual infection rates I just wanted to.
I'll clarify that.
Okay. Thanks.
Again in order to ask a question simply press Star then the number one on your telephone keypad.
Star then the number one on your telephone keypad.
Our next question coming from the line of Matt Summerville with D. A Davidson your line is open.
Good afternoon, Ryan and Tony.
Good afternoon.
This is Jonathan on for Matt today.
I'd like to start.
Asking you about.
What kind of trends you saw in your end markets throughout the quarter.
From April to June and then starting into July what was relatively strong and what might have been relatively soft.
Yes.
This is Ryan I'll take that.
I think the way for us to think about that is that all of the markets were strong all were recovering incrementally cover over quarter, where we still see some in it.
It's what I referenced on the previous question, we're seeing in areas related to manufacturing.
And starts and it's happening at a slower pace because of the supply chain constraint. So we sit here in Metro Detroit area, where the demand is obviously there for automobiles when we've got.
Supply chain shortages, so that they can manufacture it through.
Through output.
Well from a demand perspective, as Ryan and I have a regional meetings and segment meetings.
Quarterly we ask the same question about end markets.
In each of the regional <unk>.
<unk>.
Everybody had to think long and hard about an end market that was.
Where activity wasn't high there were very few if any that.
We were able to able to point to that gives you more color.
Yes, that's useful thank you.
And then.
Follow up.
Where do you expect.
Selling general and administrative how that.
It might trend for the rest of 2021.
From that around $72 million level, which is recorded.
Yes.
When we talk about SG&A.
It really comes in three different buckets personnel up which is.
Hopefully off here the personnel.
Does include some level of variable costs, especially as it relates to salesmen.
And sales woman commissions.
So there is some variability there, but the vast majority of that level is fixed so so long as new equipment, new used and rental equipment sales stay at the levels. They were in Q2.
I would expect that number to fluctuate a whole lot over the remainder of the year.
Okay great.
Again in order to ask a question. It seems no press Star then the number one on your telephone keypad that is star then the number one on your telephone keypad.
Thank you. This concludes today's Q&A session. Thank you for participating you may now disconnect.
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