Q2 2022 Transcat Inc Earnings Call
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Greetings and welcome to the Transcon, Inc. Second quarter fiscal year, 2022 financial results.
This time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad, but you know this conference is being recorded I'll now turn the conference over to your host CFO Mark Doheny you may begin.
Thank you operator, and good morning, everyone. We appreciate your time and your interest in Transcanada with me here on the call today is our president and CEO Lee Rudow.
We will begin the call with some prepared remarks, and then we will open up the call for questions. Our earnings release crossed the wire after markets closed yesterday. It can be found on our website Transkei dot com in the Investor Relations section.
The slides that accompany todays discussion are also posted on our website. If you would please refer to slide two as you are aware we may make forward looking statements during the formal presentation and Q&A portion of this teleconference. Those statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause the actual.
I'll defer materially from where we are today.
These factors are outlined in the news release as well as with documents filed by the company with the Securities and Exchange Commission you can find those on our website, where we regularly post information about the company as well as on the SEC's website at SEC Dot Gov. We undertake no obligation to publicly update or correct any of the forward looking statements contained in this call.
Whether it is as a result of new information future events or otherwise except as required by law. Please review our forward looking statements in conjunction with these precautionary factors. Additionally, during today's call, we'll discuss certain non-GAAP measures, which we believe will be useful in evaluating our performance you should not consider the presentation of this additional information.
Asian isolation or as a substitute for results prepared in accordance with GAAP.
We've provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release.
So with that I'll turn the call over to Lee to begin the discussion.
Thank you Mark good morning, everyone and thank you for joining us on the call today.
We achieved excellent results in the second quarter on solid operational execution, and our ability to capitalize on strong demand across both our service and distribution segments. We generated broad based growth across a wide range of end markets, resulting in a consolidated Q2 revenue increase of 21%.
The $54 million, a second quarter record for Trans cat.
In addition to the strong revenue growth.
Holidayed gross margin expanded 140 basis points to 29% adjusted EBITDA, a very important metric for us given our level of acquisition activity grew 36% from prior year to $7 $1 million at.
At the end of August we acquired next our enterprise asset management. The teams are actively working together, we've already identified numerous synergistic growth opportunities and I'll talk more about next in a few minutes.
Turning to our service segment, we performed at a very high level and recorded our 15th straight quarter of year over year revenue growth that record continues to be an amazing accomplishment for.
For both our sales team and entire Trans Cat organization.
In the second quarter, we achieved approximately 14% organic service growth and 20% overall service growth.
Regulated markets, where the cost of failure is high continues to be an important driver of our service revenue trends.
<unk> continues to perform exceptionally well and life sciences market, where our value proposition resonates the most.
In the second quarter, we expanded our service gross margin to 32, 9%.
When we compare service gross margin to two years ago in fiscal 2020, our gross margin increased 730 basis points. That's an interesting data point and a testament to our effective deployment of continuous improvement initiatives as well as the inherent leverage in our service business.
Moving on to distributions despite elevated levels of backlog due to supply chain constraints distribution grew 22% on strong demand with particular strength in the wind power generation market and of course, we're up against easier comparisons to a COVID-19 impacted prior year quarter still distribution gross margin.
<unk> improved to 23, 5%, a 202 hundred 40 basis point expansion from the prior year, driven largely by favorable product mix.
Yeah.
After the completion of next up.
The acquisition of next to our balance sheet remains strong with a leverage ratio of around one and a half times up from under one times prior to the acquisition by any measure we are pleased with our second quarter performance as I mentioned in the past the talent and commitment of our team continues to be an important strength and one that will continue to leverage with that I'll turn things over to mark.
Mark.
Thanks, Lee I'll start on slide four of the earnings deck, which provides detail regarding our revenue on a consolidated basis and by segment for the second quarter.
<unk> revenue of 50.
$4 million was up 21% versus prior year on broad based strength across both of our operating segments service segment revenue growth remained very strong at 23% with 14% of the growth coming organically and the other roughly 6% from acquisition as we mentioned we close the next acquisition on August 31, so our.
Second quarter consolidated and service segment results included approximately three and a half weeks of next.
And this added about 600000 of revenue in the quarter.
Turning to distribution revenue of $20 8 million was up 22% versus the prior year, we saw improved market conditions across our base business compared to our prior year quarter that was significantly impacted by the pandemic. We saw particular strength in the wind power generation market as we shipped several large orders at a relatively higher margin.
Turning to slide five our consolidated gross profit of $14 6 million was up 27% from prior year and our gross margin expanded 140 basis points to 29%.
Service gross margin expanded 70 basis points from prior year and hit a second quarter record of 32, 9% as we leveraged our fixed costs from the high level of organic growth and our technician productivity remained strong disc.
Distribution segment gross margin of 23, 5% was up 240 basis points from prior year on a more favorable sales mix, which included the wind market power generation strength.
Turning to slide six consolidated operating income of $3 6 million was up 16% from the prior year. It should be noted that both consolidated and service segment operating income was impacted by approximately $800000 of one time transaction costs related to the acquisition of <unk> <unk>.
Including a 1% Irish stamp tax on the full purchase price of the acquisition as is customary when acquiring businesses based in Ireland.
Distribution operating income of 900000 improved significantly from the prior year third quarter, which of course was impacted by the pandemic.
Turning to slide seven Q2, net income of $3 million increased $1 million from prior year and our diluted earnings per share of <unk> 40.
We're up 13 cents, a result of the strong operating performance the.
The second quarter included a favorable discrete tax benefit due to tax accounting associated with stock option activity.
With this in mind, we now expect our full year fiscal 2022 tax rate to be in the range of 14% to 15%, which is down from our previous expectation of 16% to 18%.
Turning to slide eight where we show our adjusted EBITDA and adjusted EBITDA margin, we use adjusted EBITDA, which is non-GAAP to gauge the performance of our segments. Because we believe it is the best measure of our operating performance and ability to generate cash.
Additionally, and as we mentioned earlier as we continue to execute on our acquisition strategy. This metric becomes even more important to highlight as it does adjust for onetime deal related transaction costs as well as the increased levels of noncash expenses that will hit our income statement from acquisition purchase accounting.
For example, approximately $1 6 million of intangibles amortization expense is expected to be recorded in the first year of ownership of <unk>, which.
Which is largely related to the value of acquired customer relationships.
In addition for purchase accounting rules, we will amortize the acquired backlog of approximately $500000 over the first five months post acquisition, which will be a reduction to both revenue and therefore gross profit and operating income.
Once this backlog is fully amortized after five months, we would expect next as higher level of profitability to add approximately 100 basis points to our service segments gross margin profile on a go forward basis.
With that in mind consolidated adjusted EBITDA of $7 1 million was up 36% from prior year and our adjusted EBITDA margin increased to 14%.
Both segments showed strong improvement from prior year as always a reconciliation of adjusted EBITDA to operating income and net income can be found in the supplemental section of this presentation.
Moving to slide nine.
Cash flow from operations was in line with our expectations as working capital increased on the very strong organic revenue growth.
Year to date capital expenditures.
Capex through the end of the second quarter was $3 8 million compared to $3 $1 million year to date in the prior year and continued to be centered around service segment capabilities and technology, including automation and future growth projects.
Slide 10 highlights our strong balance sheet at quarter end, we had total debt of $43 million with a leverage ratio of one five times.
We did utilize our credit facility for the next acquisition in the quarter and we had $46 6 million available from the facility at quarter end.
Lastly, we expect to file our Form 10-Q later today.
With that I'll turn it back to you Lee Okay. Thank you Mark.
As we look forward, we expect our strong balance sheet to continue to support our strategic capital allocation opportunities combined with our service revenue growth sustainable gross margins and an active M&A pipeline transport is well positioned to continue to deliver solid earnings growth like I mentioned earlier, we're extremely excited.
It about our recent acquisition of next up next it brings a differentiated suite of technical consulting and staffing services to both asset management and to drive optimization of calibration programs for pharmaceutical biotechnology and medical device companies.
The current focus primarily is in the United States and Ireland.
While still very early the alignment between nex and transfer that is clearly visible on our end the acquisition expands our addressable markets and accelerates the opportunity to add value to our present and future customer base.
As we look ahead to the third quarter, we expect to have another strong quarter of growth in both service and distribution and service. We're projecting similar revenue growth as we just achieved in the second quarter of 2022.
We would expect roughly half of the growth to be organic and the other half to come from acquisitions.
We're expecting the typical sequential service gross margin decline as we move from the second quarter to third quarter from the normal increase level of holidays. However, we do expect margin expansion over the prior year similar to the level of expansion we achieved in the second quarter of this year the primary.
Driver for the expected third quarter service margin expansion will be the inherent leverage in the service business as it continues to grow.
Looking forward to distribution, while we're not immune to the supply chain constraints impacting most companies the business has.
Certainly improved over prior year, and we expect that to continue going forward and to achieve low teens revenue growth in the third quarter the driver of the growth driver.
Improved market conditions generally and of course comparisons to a COVID-19 impacted Q3 of last year. So in conclusion, the future looks bright for trans cat, we like our differentiated strategy, our balance sheet and cash flow are strong our acquisition pipeline is active and we are actively leveraging our past investments in infrastructure.
The structure, so we expect to perform well both from a revenue and margin perspective.
And with that operator, please open the line for questions.
Thank you at this time, we'll be conducting a question and answer session.
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One moment, please while we poll for questions.
Our first question is from.
Greg Palm with Craig Hallum Capital Group. Please proceed with your question.
Yeah. Thanks, Congrats on the good quarter here.
Thanks, Greg Thanks, Greg.
So maybe just diving in a little bit on the gross margin commentary the guidance specifically for the current quarter. So I'm guessing some of that you know it implied guidance. It's just due to normal seasonality, but just wanted to make sure. We're all understanding some of the impacts from from next year. So it sounds.
There's going to be.
Know what a 500000 dollar gross profit impact from the purchase accounting and that should be you know almost entirely through and then after that your you said something like 100 basis point positive impact in the quarters ahead did I did I hear that right.
That's correct, yeah, it'll take five months so all of our third quarter will be impacted by that then we'll get back to a go forward basis I guess, one month of the fourth quarter will have it and then as I mentioned in rough math it should improve the service gross margin profile by roughly a 100 basis points.
Perfect and how are you viewing pricing out there I'm not sure. If that's been a driver has the potential to become a larger growth driver, but how are you specifically dealing with some of these higher cost pressures that seems like everyone else is seeing out there.
Yeah, Greg This is Lee so from a cost perspective, we are seeing.
Some pressure obviously on wages of our technicians and employees in general and I've been pretty impressed with so far our ability to pass that along to the market and you know where we've needed to make price increases to hold margin and even in some cases improvement we've been able to do so I think we've got a pretty decent strategy around that so I would.
<unk>.
Yeah.
Increased costs to be covered by an increase in revenue.
Yeah fair enough and I don't know maybe you saw this come in but certainly labor shortages and challenges are you know what everybody else is talking about these days and you've spent a lot of time and effort in improving your processes and automating some of those labor intensive far roles I'm just.
Does that differentiate you know how much of a competitive advantage do you think that is at a time when you know no nobody can really find adequate amounts of labor.
Well without question.
The more you automate the easier.
Knowing to have easier time, youre going to have with labor and labor shortages.
<unk> also invested and we're really in the early stages I wish we were further along but the fact is we've had an intention to train more text to build our own techs to launch our own Tech school now for years, and we have started that and it is yielding some early.
Positive results, but.
As we get further along with developing our own taxes, we get further along in automation because they are both really in the early stages, that's going to bode well for us that's going to be a differentiator for us and it should support growth differentiated growth. So you are right. There is a key issues.
And it's just a matter of letting those vessels kind of flow through and mature a little bit.
I think we're early yet and so we're doing pretty well considering it's still early and we have that to look forward to.
Yeah. It makes sense and I guess just last one you know now that Nexus is part of the company. How do you think about geographic expansion now that you have an owned asset in the European market is that a focus or a priority or not really at this point.
Yes, and no. So yes from the perspective of we are in Ireland. There's 30, some employees there to work for US they're engaged every day with life science companies. So to me I.
Think having a calibration lab in Ireland is very logical I'm not going to call. It imminent, but it's definitely on our radar something we want to get done.
Probably early next fiscal year in that rough timeframe as far as expanding beyond that beyond Ireland. You know that's not really on our radar today of course, it's something that we know as a possibility when the timing is right, but right now its U S and Ireland and yeah, we're absolutely focused on it.
Okay, great, especially luck going forward. Thanks for all the color Gregg thanks for the questions.
And our next question comes from the line of Jeff mentioned mentioned B. Riley. Please proceed with your question.
Hi, Good morning, everyone and let me add my congratulations as well on the strong metrics.
Given the recent acquisitions.
What is life science concentration of your business at this point and I guess, where do you see that concentration headed.
Okay.
I would estimate Jeff at this point. This is Lee that the concentrations were up about 60% of our business and remember within life Science itself, you've got biotechnology, you've got medical device companies, you've got pharma companies as well so it kind of it's kind of a range even within life sciences, but.
It's it's pretty darn close to 60% and we'll gather some data on that and probably report. The next time you see you now.
See us.
Okay, Great and then kind of a multipart question yourself you can bear with me.
But maybe you could speak to where we are in terms of recent acquisition integration margin synergies and then those are fully realized at this point or if there's more to come and then if you could give us your latest thoughts on the overall evolution of the margin profile of the company considering the acquisitions you've made.
Maybe what kind of margins, we could be looking at a year from now or ultimately and then maybe touch on future acquisitions and the M&A pipeline, how they might impact the overall margin profile going forward.
There's a lot there sorry about that yeah, well I think I got the gist of it.
So margins relative to two acquisitions can kind of go both ways I mean generally speaking like in the case of <unk>. They are pretty attractive margins and once we sort of burn off some of the accounting of the costs in the short run next five months or so we would see that is enhancing our margins sometimes when we do a bolt on acquisition for example.
And we leverage it and already existing infrastructure, we're going to get some margin pop because we're going to be able to lower cost one lab manager versus two and some reduction in infrastructure costs relative to the two companies, but sometimes we'll buy a company in a territory that we don't have a lab and youre not going to get those synergies and so there might be minimal so it kind of it goes both ways.
It really is dependent on the acquisition itself.
Overall margins, Mark and I talk about this all the time with our teams and we.
We've gotten to where we wanted to go where we said we would hope we would go several years ago and now we have arrived and the question is how much more runway is there and we think that our margins will continue to improve maybe not at the same rate as the last couple of years, but we think we can get over time into the into the mid Thirty's. That's kind of our next threshold, we will do that through.
Operational efficiencies that we're always working on and investing in we'll do it through automation as that matures through our system and so if we had the same gross margins in service two years from now that we have today I would be disappointed I see us improving and getting to a higher level and that will take some time, but I think it's pretty visible to us as far as the acquisition pipeline.
And the number of acquisitions and how they will affect margin I think it's too early to tell we have a we have a very attractive pipeline. There are some bolt ons. There. There is some new territories, there theres theres different different drivers for the for the companies that are in our pipeline and I'd have to really kind of look at it in a more specific way to come up with what I think margins our margins.
Can be affected by I think it's way too early to answer that question, but I would stick to the first two answers it could go either way depending on the type of acquisition, we're making.
Okay. Thanks for taking my questions and continued success. Thank you.
Thanks.
Our next question comes from the line of Scott Buck with H C. Wainwright. Please proceed with your question.
Hi, good morning, guys.
I'm, hoping that maybe you can give us a little bit more color on organic growth.
What is that is a benefit from just being in the markets that you're in versus may be taking some share from some of your peers that are out there.
I think it's a combination of those two things and perhaps even more so.
We are taking market share from the competition I think our value proposition is strong and then of course I'm biased, but in my opinion.
Very strong compared to our competition, so I like to keep it that way that's a contributing factor some of the organic growth is just some pent up demand companies getting back running and we just have a healthy sort of demand right. Now that's helpful and I think the third factor is life sciences that particular market as compared to automotive or semiconductor.
There are some of the markets. We don't concentrate in life Sciences is a nice place to be at the high cost of failure that I alluded to.
In my in my earnings script, and so good market, good time, and strong value proposition, which fosters you know.
Taking market share from the competition I think it's all three of those things and then the final thing I'd add too is when you have a tight tight labor market like we do today are Scott what you find is that in house labs are struggling to maintain their calibration technicians. For example, so if you have a lab with six technicians that work for pharmaceutical.
Company and one retires as we talk about and another one perhaps ziller.
Yes.
Or it goes to another employer all of a sudden they're out of compliance they've lost a third of their staff. So they would turn to a company like Trans cat to supplement augment those shortages as I think all four of those factors are contributing to the strong organic growth.
Great that's really helpful. I'm curious on distribution.
Your inventory look like and are you, having any trouble sourcing equipment.
Four potential retail.
Given supply chain issues.
Yeah, I would say, yes, it's.
Very long lead times now so just like I'm sure. The rest of the companies that you report on we're seeing that our overall backlog is up now sales are up and orders are up but it's also driven by the supply chain lengthening out so.
So inventory actually came down a little bit you might notice in the quarter it might be a little bit low.
It's a natural levels as we wait for some of this to come in.
It's not something that we would call out as a.
A huge difference from the last time, we referred out its still there maybe the vendor lead times are lengthening immune longer though.
Alright, Greg Mark I appreciate that and then last one from me can you just remind us where you are.
Leverage comfort zone is as we think about additional M&A from here.
Yeah, we've talked about.
Two and a half to three times and that range is probably getting on the upper end of where we'd like to be so so it's something that we talk about all the time and that's kind of where we are now.
Perfect well I appreciate the time guys. Thank you very much.
Take care thanks.
Our next question comes from the line of Gerry Sweeney with Roth Capital. Please proceed with your question.
Hey, good morning, guys. Thanks for taking my call.
Hey, Jerry.
Just to.
Follow up almost.
On labor, but more about tech utilization.
Just curious as to how much utilization you have available obviously everything you've talked about in house labs people, leaving you probably have some transition going on and you've had some great organic growth.
Do you have enough utilization to keep growth going.
It's a great question I think the answer to that is.
Yes, generally speaking so the first lever you pull a Jerry when you. When you think about increased business is over time, a lot of our technicians really like over time, not all of them, but a lot of them do it as an opportunity obviously to earn more.
Income and so that would be the first thing you would do we are training text at all times and.
It's I've told the market this before and we talked about at the board level as well, it's always been hard in this industry to find trained.
Technicians that can they can join our company and create value day, one it's been hard for 30 years, that's not going to go away, but I think.
You build a good training program internally you use overtime you sell intelligently at the right margins the right kind of customers that are good fit.
How you want to grow and who you want to grow with I think it's a combination of all those things that makes it manageable because I think that the.
Core of your question is will we be able to grow in a tight labor market and manage the challenges that are inherent in that and I think the answer generally is yes, I thought we couldn't grow and meet our goals I would be voicing that I think there's a myriad ways to get to get over that challenge and we're employing all of them at the present time.
Because I think it is necessary, but I think we're doing it pretty well.
Not keeping me up at night, So I think we'll continue to do well in that respect.
That's very helpful. I appreciate it and then automation, obviously, even automation could play into that a little bit I know this is sort of a process journey that you're.
Sort of working on developing.
Using a baseball analogy since the World series.
What sort of inning are you.
And with the automation program either.
Getting more comfortable with it rolling it out rolling it out to sub sectors et cetera.
Well good question and I would have said a quarter or two and I think I did say, we're probably in the second or third inning.
Maybe this time last year or maybe it was a couple of quarters ago and I would say we are probably we are definitely doing more automation than we were doing a year ago. At this time and we are definitely making progress it's hard but we're doing it right and we will reap the benefits somewhere down the road. We certainly expect to I would say we are going from the third to the fourth inning. So it still.
Early but we've made progress and that's encouraged us.
US tweak our initiatives to be more effective so I feel pretty good about where we are and where we're heading but it's early.
And that's sort of what I anticipated I just.
You said it was a multiyear process. So I just wanted to make sure.
And then final final question acquisitions, obviously, I think next it's a little bit different than just buying the traditional lab, but if you look out on the playing field I mean is there anything.
Different unusual you'll say, hey, transkei could really use this to either.
Differentiate your more or.
Add some type of service.
I'm curious from that perspective right.
The first thing that comes to mind is geography, and many of you have heard me say this before and I'm happy to to railroad, often 20 seconds and under but this company needs to be in Florida, and we're working and we're focused on that and I think we're going to get that one put behind us before too long we need to be in Dallas, we are.
Our in Houston, but we need to be in Dallas, We have two labs in southern California, we need to be in northern California, Minneapolis would be nice because of it is a vibrant medical device market with Boston scientific and St. Jude and Medtronic, we need to be there we need to be in Maryland, the mid Atlantic area needs to be covered more and so we have gaps in our geographic footprint and that alone Jerry.
He is a good driver for US in addition to that we're always looking at capability increased too. So we got our eye on all of the the ways that acquisitions can help us improve the company.
In other words theres lots of runway.
I think so yes.
It sounds like it okay perfect I appreciate it thank you.
Take care.
Our next question comes from the line of Mitra <unk> with Sidoti. Please proceed with your question.
Yes, good morning, and thanks for taking the questions actually speaking of runway I just wanted to follow up on some end market opportunities. Maybe you could provide some more color in terms of on the alternative energy side wind power generation similar potential.
What are the kind of the opportunities you think that might be out there for you and also maybe if you can give us an update on the pipette business, how that's coming along and.
Opportunities to expand also in that area.
Okay. So wind energy is doing well right now and for those of you who are familiar with that market without getting into too much detail. It runs in cycles and in the 10 years I've been here I've seen it get hot in Colombia get hot and cool off and some of it used to depend on on government subsidies and the like but right now we just had a good run for the last couple of quarters and that's helped support.
The distribution business, we're thrilled with it but we do expect it to cycle in and cycle out cycle back again, I think if you look at the longer term picture Mitra.
The world is going to turn to alternative energy I think it's a matter of when versus if and and Transco has been in that market and developing our value prop in that market for over a decade, and so when that happens and as that happens, we're really well positioned so that helped us over the last couple of quarters and in and out during the future as it goes through the cycle.
It will be continue to be well positioned the pipettes business to your second question is doing terrific, we knew going into that business. When we were looking.
Going through due diligence process that it was a strong business well managed and it has not disappointed so the market is good for four pipettes, that's helped but more than even the market. It's just a well run company.
Before we bought it it's even better run now because we've taken advantage of our expertise and some of the synergies that existed. So I think we're really pleased.
I see a good runway for that that part of our company to grow as well.
Okay. That's great. Thanks for taking the questions and congrats on a great quarter.
Alright, thank you.
And as a reminder, if anyone have any questions you May press star one on your telephone keypad to join the queue.
Our next question comes from the line of <expletive> Ryan with <unk>. Please proceed with your question.
Thank you and congratulations on the strong execution.
Hey, Lee.
Looking at mix.
And then can you talk a little bit about what the kind of immediate strategy is it bringing your calibration services over there to their customer base.
Or their solutions.
Over over here can.
Can you kind of talk about the cross selling opportunities and how you're staging that.
Sure I'll certainly talk to a degree.
Want to get into too much detail about our strategy I will say that I think it's a good one and it's an exciting one but at a high level.
And at the start but there's no reason why.
We shouldnt be sort of cross pollinating their customer base with ours. There are customers that we deal with that are currently in our pipeline and that exists as part of one of our enterprise accounts that would absolutely benefit from the suite of services that next offers and it goes both ways Nexsan has a customer base a growing customer base that absolutely.
Benefit from understanding and learning more about our calibration services. So I think day, one quarter one year, one that's what we're going to focus on the opportunities that exist right in hand today and the only thing I would add to that is that the next time.
We uncover an opportunity and we're putting our plan together and we're going to sit in front of a customer we absolutely have the ability to bring both teams together and form a team to go after that opportunity. We've already done it a couple of times with early success and I think that thats going to be a big part of it. So what we have today needs to be leveraged from both sides.
Both ways and then new opportunities as we encounter them.
Our value proposition got stronger because of nexon, and we will leverage that to try to win new opportunities.
Okay.
Does that cover for it is that what you want it yes, yes that gives me a good.
Good flavor.
Also you talked about the tight technician market and I know CBL.
Kind of maybe the growth kind of stalled out and I know that's not a.
A strong lever for growth, but it certainly brings some complementary business in have you added any CBL and what do you what what kind of is the tone of conversation that youre, having with with potential customers in the pipeline there.
We've definitely seen an uptick in CBL activity you are right the fastest sort of got shut off with CBL is due to COVID-19 and that makes a lot of sense, but we.
We are definitely seeing a higher level of activity in our pipelines and our new business pipelines around CBL is that to me is not surprising at all to reasons right. One COVID-19 is getting a little bit in the rearview mirror I only get ahead of myself, but we're certainly managing it better than we did a year ago at this time and that helps and certainly the tight labor market is going to foster opportunities and so the <unk>.
Combination of the two is.
Sort of driving the pipeline activity.
Okay all of the rental business.
Yes, it's actually still very strong.
It's a really good environment for that business with supply chain as tight.
To get new equipment. So it's a really good environment and continue to have a really good quarter.
Okay.
Okay, great. Thank you.
Thanks, Nick Thanks, Doug.
And we have reached the end of the question and answer session I will now turn the call back over to the Rhode Island with closing remarks.
Okay. Thank you and thanks, everybody for joining us on the call today. We appreciate your continued interest in Trans Cat just at some points to note on November 16th we will be participating in the Craig Hallum Conference, which is virtual on November 18th we will be participating in the Roth Conference, which is also virtual and on December eight and nine.
<unk> will be participating at the Sidoti Conference, which is also a virtual so feel free to check in with us.
At any time at any of those conferences. If we don't talk to you then we look forward to talking with everyone. After the third quarter results are published and again, thanks for participating today take care.
And this concludes today's conference and you may disconnect your lines at this time.
Thank you for your participation.
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