Q3 2021 Toromont Industries Ltd Earnings Call
Some of them, yes, we lapped a silty duckenfield they'd be touched soup, the people who pay them to be honest with you I had thought about getting because that's the renewable isn't it assumed that that's guilty.
[music].
This conference is being recorded so it's gonna stay home if they don't have as you see.
All participants please standby your conference is ready to begin.
Good morning today is November 5th 2021, welcome to the Tor month third quarter 2021 results Conference call. Please be advised that this call is being recorded your host for today will be Mr. Michael Mcmillan. Please go ahead Mr. Mcmillan.
Great. Thank you Valerie and good morning, everyone.
Thank you for joining us today to discuss the results of try them on industries limited for the third quarter and nine months of 2021.
Also on the call with me. This morning is Scott <unk>, President and Chief Executive Officer.
As noted in the press release issued yesterday, we will be referring to a package posted on our website and we encourage listeners to download it and follow along.
At this time.
And as noted on slide two of our presentation I'd like to advise listeners that this.
This presentation may contain forward looking statements and information that are subject to certain risks uncertainties and assumptions that may lead to actual results or events to differ materially from those expected.
For a complete discussion of these factors refer to our press release from yesterday, which is available on our website.
As is our practice, we will focus on key highlights for the current quarter Scott will begin with a few general remarks, followed by comments on our overall results after which I'll provide some highlights on our divisional results and financial position.
After our prepared remarks, we will be more than happy to answer questions.
Over to you Scott.
Thank you, Mike and good morning, everyone.
Before I begin I would ask.
Move to slide three of the package.
Overall end market activity levels remain solid with the easing of the pandemic restrictions and shutdowns and the businesses continue to operate.
Fluid complex and uncertain operating environment with many variables.
Equipment group reported strong prime product deliveries and solid order bookings in the quarter.
Tight supply of equipment from Oems, coupled with improved sales activity versus last year.
<unk> lower equipment inventories.
Rental and product support activity improved driven mainly by higher utilization levels.
Timko continued to deliver on their order backlog that had significant growth last year. However.
<unk> decreased on timing of customer construction schedules impacted by Covid related supply chain restrictions.
That said product support activity improved, particularly in the recreational market as facilities prepare to reopen for the winter season.
Overall, the operating leverage remained favorable.
We are continuing to assess the learnings from the past year with respect to cost structures, new ways to do business with continued focus on customer deliverables as activities and businesses open.
Yeah.
Given the variables, we continue to operate with caution.
Returning the fluid nature of COVID-19 variance, maintaining disciplined protocols as well as evaluating economic factors flowing from the pandemic, including supply chain disruptions equipment and parts availability and factors affecting affecting inflationary rates.
Turning now to our financial results highlighted on slide four.
Backlogs for $1 1 billion at quarter end up 124% versus Q3 2020.
In the equipment group solid bookings continue mainly in our mining and construction businesses, which represent approximately 33% and 45% of our backlog respectively.
Simple backlogs or 29% lower versus last year.
That exceptionally strong bookings in the first nine months of 2020.
Temco Q3 bookings improved mainly due to recreational orders, both Canada and the U S.
On a consolidated basis revenues increased 8%, reflecting solid activity levels in the equipment group in most markets and regions and regions and weaker packaged sales at Semco.
Overall equipment group execution was solid.
Product support and rental revenues increased 4% and 6% respectively compared to the similar quarter last year and were both up six and 7% respectively on a year to date basis.
Operating income was up 19% in the quarter and 33% year to date on the higher revenues coupled with good margins.
Revenue growth outpaced expense growth.
Easing of COVID-19 restrictions has improved activity levels on a year to date basis.
Net earnings increased 21% in the quarter.
37% year to date versus 2020, while basic earnings per share increased $19 13 per share in the quarter and increased by 73 to $2 75 per share on a year to date basis.
We appreciate and value our entire team's incredible effort and ongoing commitment to adapt to changes in the business environment and focus on executing customer deliverables.
Activity levels trended well as demonstrated by our backlog levels, however, production schedules and supply chains are challenged and likely to impact availability and results in delivery date extensions.
Additionally, we continued to monitor inflationary rates and economic factors at this as the pandemic unfolds.
Hiring remains top priority grow our product support offering and meet demand.
The diversity of our geographic landscape and market served extensive product support and service offerings. The.
Technology investments and financial strength together with our disciplined operating culture continue to position us well.
We are proud to continue to provide essential services and solutions that our clients are looking for while remaining diligently focused on safeguarding our employees and protecting our business for the future.
Mike I'll turn it over to you for some more detailed comments on the group results.
Thanks, Scott, let's put a bit more color on the operating results starting with the equipment group on slide five.
Revenues were up 10% in the quarter to 17% on a year to date basis on strong equipment sales combined with higher product support and rental activity in most markets and regions.
Total new and used equipment sales were up 16% overall in the quarter and up 30% year to date.
<unk> increased across most markets and regions in the quarter, however, somewhere lower than prior year on timing of equipment delivery and customer specific quarters.
In the quarter construction markets were up 5% mining up 141% power systems down, 3% material handling down, 4% and agriculture effectively flat year over year on.
On a year to date basis equipment sales were up across all markets, reflecting the pandemic effects last year rent.
Rental revenues were up 6% in the quarter and 7% year to date.
Most markets and segments were up reflecting continued improvement in the market activity in the third quarter against a weak comparable last year.
Light equipment rentals were up 9% in the quarter and 8% year to date heavy equipment rentals were down 2% in the quarter, However were up 22% year to date.
Power rentals were up 30% in the quarter, 13% year to date and material handling rentals were up 36% in the quarter and 21% year to date.
<unk> revenues were down 28% in the quarter and 32% year to date on the smaller average fleet, reflecting the recent customer preference for purchase versus an initial rental period. The <unk> fleet was $37 3 million versus $42 four a year ago and in both cases, well below our normal left.
<unk> suite operate at prior to the pandemic.
Product support revenues grew 3% in the quarter and 7% year to date in both parts and service revenues and the majority of the markets and regions.
Activity within construction markets was up 1% in the quarter and 8% year to date mining was up 2% in the quarter and 4% year to date material handling was up 16% in the quarter, 22% year to date and agriculture activity was down 22% for the quarter and 9% year to date.
Gross profit margins increased 170 basis points in the quarter and 60 basis points year to date compared to last year.
Margins increased across all revenue streams, partially offset by unfavorable sales mix equipped.
The equipment margins were up 130 basis points in the quarter and 50 basis points year to date, reflecting strong demand.
Product support margins were up 50 basis points in the quarter and 20 bps year to date, reflecting improved efficiency on higher volumes.
Rental margins were higher by 80 bps, and 100 bps for the quarter and year to date, respectively.
These improvements reflect higher utilization as well as benefits from fleet adjustments, including selective dispositions and acquisitions over the last year.
A shift in sales mix with lower a lower proportion of product support revenues to total revenues decreased margin by 100 bps in the quarter and 150 bps year to date.
This is reflective of stronger comparative equipment sales in the year.
Selling and administrative expenses in the quarter increased $9 6 million or 9% and $24 1 million or 8% for the first nine months of 2021.
Excluding the CW is booked last year expenses were up 3% and 5% for the quarter and year to date, respectively.
The increase is mainly attributable to higher compensation costs on higher staffing levels.
Salary adjustments and higher profit sharing accruals with higher earnings partially offset by a lower mark to market adjustment on deferred share units.
Other expenses, such as travel and training increased.
Increased in support of higher activity levels and after a reduced spending period.
Allowance for doubtful accounts decreased $1 million in the quarter and 9 million for the first nine months of the year on good collection activity.
Operating income for the quarter and year to date was 25% and 37% respectively.
Reflective of the higher revenue level, coupled with lower expense ratio again.
Revenue improvement outpacing expense growth.
Bookings increased 45% in the quarter and 85% year to date across all sectors, except material handling which was lower by 46% in the quarter mining led the way up 268% with several large orders construction up 25%.
Power up 46% and agriculture up 24%.
Backlogs of $903 5 million or 253% higher than this time last year across all sectors.
<unk>, 40% of which are currently expected to be delivered this year and subject to timing differences, depending on vendor supply customer activity and delivery schedule is approximately 8% of the backlog is scheduled for delivery in 2023.
Now, let's turn to Simcoe on slide six revenues were down 5% in the quarter and up 25% year to date, mainly due to lower package revenues.
Apply chain and Covid related restrictions have also resulted in deferral of some customer specific construction schedules that said product support activity improved 10% in the quarter and increased 1% year to date, mainly reflecting a gradual increase in economic activity as site restrictions started easing in demand and recreational centers.
<unk> increased in anticipation of reopening for the winter season.
Package revenues were down 16% in the quarter with decreases in both recreation industrial markets and up 50% year to date with increases in the recreational industrial markets for the quarter.
For the quarter package revenues in Canada were down, 29%, reflecting lower industrial and recreational revenues.
In the U S package revenues increased 57% on smaller on the smaller activity base with higher revenues in both industrial market and recreational markets.
On a year to date basis package revenues increase in both Canada, a 53% and in the U S up 37% with increases in both recreational industrial markets in Canada across all regions and in the U S product support revenues increased in both the quarter up 10% and year to date up 1% versus last year <unk>.
<unk> in Canada increased 10% in the quarter and remained relatively flat year to date, reflecting as previously noted the gradual increase in economic activity of site restrictions in most areas ease and demand, particularly in the recreational centers increased in anticipation of reopening for the winter season.
In the U S. The higher technician base continued to support activity levels, resulting in a 10% increase in the quarter and a 6% increase year to date, albeit on a smaller base.
Gross profit margins decreased 320 basis points in the quarter and 420 460 basis points year to date versus last year. The decrease in gross profit margins in the quarter was due to lower package margins, mainly due to certain larger projects and lower product support margins, partially offset by a higher sales mix of <unk>.
Alex support revenues to total revenues.
On a year to date basis. The decrease was due to lower package margin combined with unfavorable sales mix of product support revenues to total revenues as well as slightly lower product support margins margins, mainly reflect activity levels. The nature of projects in process and construction schedules, which are variable.
Selling and administrative expenses were up 5% in the quarter and 9% year to date, reflecting higher spending to support future sales certain costs, such as travel and training were higher after a period of contained spending compensation increased on higher staffing levels, while occupancy cost increased related to <unk>.
<unk> expansion.
The allowance for doubtful accounts decreased on good collections slightly offsetting the increased costs.
Operating income was 47% lower for the quarter and down 19% year to date, reflecting lower packaged sales and lower margins along with slightly higher expenses in the quarter on a year to date basis higher package revenues were more than offset by lower gross margins, partly due to lower product support mix and increased expenses.
Yeah.
Bookings were $48 5 million in the quarter up 22% versus last year recreational bookings were 200% higher on increased market activity in both Canada and the U S. After a period of limited activity given the pandemic closures and restrictions booking.
Bookings in industrial markets were 23% lower with reduced activity in both Canada and the U S year to date bookings were $132 5 million, 35% lower than last year recall that several large industrial orders were received in Canada in the first quarter of 2020, resulting in a decrease in bookings compared to last year.
Industrial orders were down 52% with a decrease in both Canada and the U S.
On a positive note recreational orders increased 17% to $59 1 million with increases in both U S and Canada.
Backlogs of $153 $8 million or 29% lower than the end of September last year, mainly related to progress against a relatively large industrial orders noted we expect approximately 52% of this backlog to be realized as revenue. This year. However, this is subject to construction schedules and potential changes.
Coming from the COVID-19 pandemic.
On slide seven I'd like to touch on a few key financial highlights.
Noncash working capital reflects our teams focus and effective actions to proactively manage changes relative to activity levels and underlying demand management of our working capital received keen focus as we position the company for the future account.
Accounts receivable aging is trending well as DSO remained flat at 46 days compared with Q3 of 2020 inventory levels continue to be adjusted in light of market activity and were $164 million below prior year levels, which also were managed lower.
Last year due to pandemic influences.
Accounts payable reflect the timing of purchasing and the wind down of certain extended terms with suppliers, which is effectively complete.
We ended the third quarter in a strong financial position with ample liquidity, including cash of $733 million and our net debt to capitalization ratio at minus 5% overall, our balance sheet is well positioned to support changes in demand as we emerge from the pandemic.
Also of note we participated in our NCI program repurchasing about 470000 shares to date.
And finally as announced.
The board of directors yesterday approved the regular quarterly dividend at a rate of 35 per common share consistent with the last quarterly dividend when it was increased by <unk> <unk>.
Per quarter or 12, 9%.
On slide eight we conclude with some takeaways some key takeaways as we look towards Q4 and 2022.
We will continue to focus on our three key priorities protecting our employees, serving our customers and providing our business.
<unk> our business for the future.
We expect the business environment to remain dynamic with many variables at play for the remainder of 2021 and as we enter 2002.
A tone of caution is warranted given the inflationary factors persistent cells <unk>.
<unk> and response required as vaccination rates improve and restrictions ease we.
We continue to proactively monitor developments closely and refine our business practices appropriately.
As discussed today market activity was solid in the quarter and similar to the first half of the year unique customer buying patterns are evident.
Relative to historic trends.
Prime product in parts supply pressures were evident including extended delivery dates due to supplier constraints. We continue to work actively with our business partners and suppliers on an ongoing basis monitoring availability.
Livery schedules and customer buying preferences.
Across the organization, we're continuing to leverage the learnings from the past year with respect to cost structures and new ways to do business technician higher hiring also remains a top priority to meet demand and build our team for the future.
Operationally and financially we are well positioned to effectively respond to both customer requirements and market opportunities leveraging our operating discipline and culture.
Additionally, I'd like to comment on the outlook section, where our mid to long term prospects.
Are described as being very optimistic.
When we look at infrastructure work in mining activity relative to our backlog I would emphasize again relative to our backlog we are pleased.
However, there are many variables in play relative to availability.
Inflationary costs and other economic factors. These considerations combined with a highly competitive environment I mean, we need to earn the business with this in mind. The statements should be understood in interpreted that we are encouraged with the backlog, but that too needs to be executed properly.
The optimism noted is reflective of our large backlog at play over the medium to long term nothing more nothing less.
That concludes our prepared remarks at this time, we'll be pleased to take questions Valerie.
Valerie over to you to set up the first call. Please. Thank you we will now take questions from the telephone lines. If you have a question and you are using a speaker phone. Please lift your handset before making your selection.
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Our first question is from Cherilyn Radbourne with TD Securities. Please go ahead.
Yeah.
Thanks, very much and good morning.
Morning, Charles.
Scott to the extent that you have no equipment supply.
Talk about how you work with the team to flex the other lever that you have to satisfy demand rental you can rebuild.
Yes.
I mean, it started to really creep in in the quarter some of those constraints.
We were pleased again, we've been sticking with those pipeline disciplines, which I think.
Continued to pay off a bit in the quarter.
We're fortunate and we're working hard on our rental strategy so their utilization.
Was really improving in the quarter when you compare it to last year or so so that was good where our fleet uploads you know have been a bit of a struggle as well, but the good thing was the utilization really improved in the quarter, which was which was good. So that's certainly.
Adds to some of the outcomes in terms of used equipment I mean, we were down 11% in the quarter on the equipment.
Just provide a little more.
Color on that.
That reflects the tight operating environment when it comes to low hour used equipment.
So that was down as well as the our appeal income so.
Again, we were operating at a bit of a unique environment with.
Interesting customer buying behaviors.
But still we were able to when you when you talked about pulling levers the team did a nice job continuing on with our strategy to work with customers on our our different solutions in the used equipment environment.
Our used purchases in trade revenues were actually up.
It's over 30% in the quarter. So so that shows the team's working hard work with customers on other used equipment solutions.
Pleased pleased with that.
So those are some of the factors going on there.
And then of course on the product support side we're.
We're working hard and they're in the rebuild activity.
That increased on a unit basis, I think were up 16, and 16% and on a revenue about <unk>. So there are some areas of the teams.
Pleased with some of the outcomes, but.
It is unique when you see that that our inventory down again and it was soft last year.
I mean, we're down you.
You know over 100% to where it normally is and.
As you know Cheryl in that.
That usually transcends into some <unk>.
Strong conversions in Q4, so it is a bit different and as we said in the last quarter now we really have.
It really crystallized there was a pull forward in buying behaviors in Q2.
That's great color.
As far as how the supply chain is operating differently in this upturn versus previous upturn.
Can you just help us understand that like is it specific model there.
That are in short supply or is it a more diverse problem in my mind.
Yes.
Again, I mean, our new sales were strong and I think that reflects how close you've been working with our with our supply partners.
All fronts.
But it hits its a bit diverse in there when you look at it both on the aftermarket requirements as well as the prime product.
It really crept in there in the.
In Q3, and you see it you know our inventories are.
As you know for sure on those inventory levels down like 19% in the equipment group for this time of year, that's again a bit unique.
So we.
We're working hard in there with <unk>, but.
It's a.
Yes it.
Constraints in there.
Thanks, I'll keep it to.
Someone else.
Thank you very much thank you.
Thank you.
Our next question is from Brian <unk> with Raymond James. Please go ahead.
Thanks, Good morning, guys.
Morning.
Can we just get some color I guess on the landscape for a technician hires.
But it is competitive out there, but maybe just some high level comments on how youre attracting talent.
We're making progress and.
Which is which is good.
It's another trying to be disciplined in our approach throughout all our businesses.
The head count has increased.
Call it nicely could be better, but we are progressing and we're working hard on our.
Talking with various strategies relating to recruitment.
It's not just.
Recruitment. It's also working closely with our apprenticeship programs and that's another key component of our strategy.
We're heavily focused on.
Okay. Thanks, and then just.
Round in your comments on improving operational efficiency.
Leveraging learnings from our past year could you just provide a high level some of those learnings that you expect could help going forward.
Well, we've learned how to operate a bit remotely and you know we were fortunate in Q3 again that operating leverage came through.
<unk> was still there so.
So now we're we're focused on that for going into the planning sessions.
What we've learned in terms of how we can operate a bit differently and really in many ways with technology improve our customer interface.
Just doing a few things differently.
But you know.
The operating leverage was still favorable in Q3.
Things are opening up.
Good to hear thanks, that's it for me.
Okay.
Thank you.
Once again, please press star one at this time, if you have a question.
Our next question is from Michael <unk> with the Scotiabank. Please go ahead.
Hey, good morning, guys.
Good morning, Good morning, just to follow up on that last question I mean, the operating leverage seems to be getting better and better I mean, if you look at it from a.
And SG&A as a percentage of gross margin I mean, the company is essentially enduring a new record territory. So.
You did talk about it a little bit there starting in your last response, but just to get a sense.
It was really just expense management post COVID-19 or.
Should I attribute it mostly to maybe some structural efficiencies in the business.
Well, we're always working on our structural efficiencies and we're always working.
Our operating costs, while we invest in technology, so there's a bit of that in there, but also like we were.
We're fortunate in some things I mean, where we're operating very disciplined right. We're not I mean, we've we've been able that I'm really I couldnt be more proud of our team and adapting to this very complex environment.
No.
In the Q3, we saw inflationary costs start to creep and we saw.
You know there is some economic risk there so we're still cautious.
Sure.
Sure.
But we've been the team has been executing I would say nicely.
And we were fortunate.
The way this operating leverage was positioned again in the quarter.
For multiple variables like you've outlined there so.
Things things are opening a bit and we're working hard to see how we can adapt some of these.
Classify them as best practices, but that still very much is work in progress.
Yes, it's very impressive I mean, maybe another way to think about it well again, Fortunately some areas too.
So you don't want to but we're working with the team is working hard in there to really work hard to execute with customers on the deliverables.
Yeah, that's great and then I guess, maybe the other way to think about it.
I guess again just for us on the outside kind of looking in here.
The equipment group margins are tracking.
Especially above where they were.
The U S.
And I understand maybe the integration is complete but I'm curious.
If you can give any color here.
As to whether the margin gap has mostly close at this point or whether the margins maybe at the legacy regions are finding ways to.
Climb higher.
Versus pre Hewitt, just a little bit of color there.
Between the regions would be great.
Well again, we're in a bit of a unique environment, but in terms of the integration I mean, we slowed a bit there with.
Some of the.
Unprecedented variables that took hold.
With the largest part of the enterprises and Theyre in the equipment group.
We still haven't completed that integration, but I'd say, we got.
Again hats off to the team plug their.
Your execution.
We've worked hard in there, particularly with that ERP integration. So we've really just finished year one of that we're not we're not finished yet actually totally there.
Material handling but.
So I think.
That did contribute a bit.
Yes, I think one part to think about too Michael is.
If you look at the.
The integration platforms systems and stuff progressing nicely I think.
When you look at our business on the rental side and we've talked pretty openly about this.
As Scott mentioned, there was a little bit of a pause with the pandemic.
We're about halfway through a five year <unk>.
Cycle on the on the rental business that we talk to as far as getting to the full cycle productivity levels and in the lifecycle of the fleet in that business and so we've got a couple of years left on that.
Realize the full returns on an aged fleet.
When the disposals on things so that that is parked.
Of the equation yet to come right in specific to the rental side of the business as we develop that market in Quebec and the Maritimes.
Got it that's great color guys and then maybe if I can sneak one last one it's a short one.
The annuity purchase transaction closed in Q4.
Is that expected to lead to any sort of cost savings in subsequent quarters.
It's yet to be seen I mean, we will take a small charges we disclosed in the subsequent event note.
So I think we're working through a number of things on the pension side just to just to.
Economize, there there'll be some small savings I wouldn't say it would be overly material, but certainly being able to <unk> some of the.
Some of the pension and relieve that liability I think is is going to be a positive factor for us going forward in terms of.
Just managing the liability and making sure that our employees are taken care of on their on their pension benefits.
Perfect. Thanks, very much guys.
Thank you.
Thank you.
Next question is from Maxim <unk> with National Bank Financial. Please go ahead hi.
Good morning, gentlemen.
Good morning Max.
Maybe if you don't mind, if we start with product support and.
The other constraints on the parts side.
<unk> is preventing maybe a bit of a more aggressive.
Normalization on this line item or how should we think about this in terms of.
Sort of a pent up dynamic on PFS.
Yeah, a few variables in there Max.
We did start to feel constraints.
With the aftermarket.
But.
The other thing is customers are very busy right there.
There are their demands are high which is reflective in some of these outcomes.
So there could be a bit of.
Pushing out some repair schedules as well.
The other factors some of the mix in there on some of the dynamics I mean the rebuilds.
Whip is increased.
Increased about 6% in the equipment group.
All of that.
That's reflective of some of the outcomes as well and so I think theres been.
With the shift in the last while with new I mean that impacts things a bit as well right.
Terms of the age of the units.
The good thing is our our unit sales were up again in the quarter. So there's a lot of different factors playing in there and there was also a bit of a.
Drag due to FX, if you look at it on a quarter over quarter basis in the parts area as well so all of those.
Sectors.
Contribute to the right.
But I guess I know, obviously, you don't like to.
Telegraph things on a prospective basis, but we should see.
<unk> improvement.
Even though you are facing some constraints will how should we think about that.
At the end of the quarter, we saw with increase.
Right.
You know in this environment I, just it's just theory.
Difficult with many variables in play economically inflationary to really speculate we're pleased with the activity we're pleased with the.
Machine hours increased slightly again.
In the quarter, which was good and.
So we'll see how things play out here, Okay. No that's helpful.
Helpful. Thank you and then just one last question you became a bit more aggressive on the N CIB.
Just curious to see your Youll positioning.
On this particular capital allocation versus.
M&A or I mean, obviously you can do all of the above but just just curious right now in terms of how you think about allocation priorities.
Yeah, Hey, good question thanks for that.
So I would say just out of the gate I would say our capital allocation priorities haven't changed.
We do monitor our cash flows and our liquidity very carefully as you'd expect we are expecting to deploy capital as we've talked about for several quarters now back into the balance sheet as equipment supply availability eases a bit and.
Can easily see that we're going to start to fund our balance sheet and invest in our balance sheet to the tune of in excess of $200 million over time, and our inventories as an example, and we've talked about that pretty openly last few quarters on the NCI b.
We've what we've looked at is with the cash position and so forth is just looking at.
Just working towards dilution, reducing some of the exit option exercise dilution in equity dilution nothing nothing too aggressive obviously in so very selective program and so.
You should expect that we're going to be very disciplined in terms of how we think about allocating our capitalized will always have been.
Okay. That's great. Thank you so much that's it for me.
Thanks Max.
Thank you.
Our next question is from <unk> Khan with RBC capital markets. Please go ahead.
Great. Thanks, and good morning, just following up on the discussion around product support now when you talk to some of your larger mining customers. I guess is there when you try to talk to them about other options in lieu of new equipment.
Are there any hesitation to get into the product support channel you know maybe spending two thirds of the cost to do a rebuild versus just waiting on a new one I just wanted to get a bit more color on some of the conversations you're having and and our customers are saying you know what I'll just maybe weigh in if I can get something in the next few months I want to understand how.
The discussions are going and maybe does that vary across end markets.
Well.
I'll just say we're in normal discussions with customers in terms of value prop. There those are value propositions. When you look at the lifecycle of iron and so we continuously have those discussions and maximizing total total cost of ownership as well as making sure productivity levels are where they need to be.
Availability. So look those are those are somewhat complex value propositions that our teams are working regularly with customers.
Commodity prices are solid.
Production is very important so so you get into discussions on timing of scheduled repairs.
That can impact things a bit here.
But overall.
The other thing in this type of environment with some of the constraints, we're working closely with customers on demand signals.
And.
Yeah.
Getting getting schedules in place and signals into our our supply partners as best we can to work through this in an orderly manner.
Yes.
And then just I guess, when we think about your commentary around hiring new technicians.
When you generally look ahead over the next few months do you think it's more of an issue of the potential for a headwind is it more from maybe higher wages or is it just the sheer.
Shortage of.
This qualified staff to bring into your facilities, what's kind of the dynamic out there in your specific markets.
Well again, there's a lot of factors in play right now, which presents our our tone a bit here.
Please sharing factors economic risk, but also in the constraints, but in terms of technicians I mean work.
We're we've improved this year on our position, which is which is we're pleased.
We continue to focus on that area and recruitment training.
And working closely with the schools.
It's important we continue to focus on those areas.
Particularly on the skilled labor and I would say, where we're progressing reasonably well we can always do better.
We feel.
What we saw in the quarter the demands are still there for the.
Labor and.
So we're going to continue to work hard in there on that front.
And then just one last one for me just I guess broadly on the rental market can you maybe just share some thoughts on.
How you are just seeing the broader rental market evolve as we come out of the pandemic and just any comments on the progress of the battlefield banner in terms of market share or anything you can share on that front.
Yeah. Good question, we are very focused on that area strategically it's a growth area.
We our fleet uploads were impacted particularly in the in the last 12 to 18 months and so.
We're not where we want to be at those investment levels and.
As hopefully things improve we'll continue to allocate capital in those areas are fleet sizes.
The good part was we saw.
Great improvement in the utilization.
All fronts.
Which was good heavy was a little softer, but still overall strong solid utilization, but.
Yes.
Fleet size is not where they need it needs to be.
We're progressing we saw on the light.
We were up nine.
At 9% I think so that's good on higher utilization.
<unk> power system is very very strong numbers in there and material handling very pleased with the team material handling how they've really improved the structure of that.
Rental business. So so thats good so and we continue to be focused on our footprint.
That battlefield, we did expand it a bit this year, which was a terrific on a strategic front.
Alright, thanks very much.
Thank you.
There are no further questions registered at this time I would like to turn the meeting back over to you Mr. Mcmillan.
Great. Thanks, very much Valerie.
And thanks, everyone for your participation today that concludes our call. Please be safe and have a wonderful day take care.
Thank you.
Conference has now ended please disconnect your lines at this time and we thank you for your participation.
Yeah.
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