Q3 2021 Alta Equipment Group Inc Earnings Call
Good day, and thank you for standing by and welcome to the I'll take Whitman group third 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 to ask a question. During the session you will need to press star one on your telephone.
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I would now like to hand, the call since over to your speaker today, Jay Cynthia Mayer Director. Please go ahead.
Thank you Celine good afternoon, everyone and thank you for joining us today.
A press release detailing Alta third 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 result.
On the call with me today are Ryan Greenawalt, our chairman and CEO and Tony Colucci, Our Chief Financial Officer for today's call management will first provide a review of the third 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 auto <unk> growth market opportunities and general economic and business condition.
We have based these 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 operation.
Although we believe these expectations are reasonable we undertake no obligation to revise any statement to reflect changes that occur after this call.
Descriptions of these and other risks 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 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 <unk> Alta equipment Dot Com I will now turn the call over to Ryan.
Okay.
Thank you, Jason and welcome everyone to our third quarter 2021 earnings call on the call today I will provide highlights on the quarter give an overview of persisting industry dynamics and discuss the progress we've made on our strategic growth opportunities.
Tony will then go into more detail on the financials.
We had a great quarter net revenues increased 33, 7% year over year to 295 million with adjusted EBITDA growth of 43, 4% to $31 4 million and high margin product support revenue, including parts and service sales grew 22, 1% in the third quarter.
Drivers in the quarter included the current favorable market dynamics outperformance is in our new England, Upstate New York and Florida region.
The fourth consecutive quarter of above average equipment sales, which will help to drive future product support opportunities.
Increased rental revenue driven by supply chain constraints continued strength in our construction segment strong growth in product support and.
And the initial benefits of the recent ERP integration, which transitioned to our acquired businesses onto our centralized platform driving synergies, creating cross selling opportunities and streamlining operations.
On the labor front productivity remains a benchmark levels driven by robust robust service demand to meet this demand. We have continued to hire technicians. Looking ahead, we continue to recruit aggressively hired additional recruiting support staff and are currently recruiting across all geographies.
Third quarter market conditions led to strong demand for new and used equipment increased rental fleet utilization and a growing need for replacement parts and services Altair remains well positioned to take advantage of the current price appreciation and high rental and labor rates to drive growth across all markets, the breadth and diversity of our equipment portfolio are extensive.
Venturi and rental fleet and our best in class service and parts business give us a meaningful competitive advantage. These capabilities will allow us to meet customer demand and provide a work around for supply constraints, while driving current demand new customer growth and long term value in the business.
We also made progress on our long term strategic opportunities peak logics continued to add to its record backlog, while attracting new customers. We plan to leverage this business strategically across our enterprise as we seek opportunities to expand our relationships and cross sell equipment to these customers. We are excited about the business's trajectory.
A great deal of opportunity, especially since supply chain constraints and emphasize the need for updated and streamlined warehousing and logistics solutions.
Our E mobility initiatives continued to progress progress led by our agreement with Nikola Motors to exclusively sell and service Nikola class eight trucks in the New York, New Jersey, Eastern Pennsylvania, and New England markets. We expect the Nikola trucks will begin rolling out in the first half of 2022 and we have been planning on all fronts to ensure we are prepared.
To meet the growing demand within the EV space, delivering our exceptional service to Nikola customers stay tuned.
In October we successfully held our innovate 'twenty one event excellent stadium, which brought together 500 customers gas manufacturing partners and team members. The event showcased the most recent innovations in our material handling business, including the latest in integration and automation from peak logics. The highlight of the successful event was the Nikola Tre bad.
Michael the first product offering of our commercial electric vehicle business that will complement our construction and material handling segments.
Additionally, we recently announced two acquisition targets that align our accretive and strategic M&A criteria and growth strategy. In early September we acquired bearing industries, a dock door company that services, the new England market. The addition of this strategic acquisition increases, our warehousing and logistics capabilities and complements our peak logic business.
Expanding our full service materials handling offering in a growing market.
We also acquired Gibson machinery, a premier equipment distributor based near Cleveland that marks our first location in Ohio, as we continue to expand our construction equipment geography, and the breadth of our OEM relationships.
Both of these acquisitions acquisition support key growth areas of our growth strategy, including expanding our geographic reach with an increasingly wider group of manufacturers, providing quality service from our skilled technical workforce expanding capabilities and driving innovation within our strategic initiatives our pipeline remains active.
As we continue to search for accretive deals that will help drive and support our growth strategy and long term value.
Our continued progress in the third quarter is carrying momentum into the end of 2021. Looking ahead. We believe also is well positioned for continued success. We have grown each segment of our business added skilled technicians further diversified into a new vertical and drove continued momentum in our warehousing and logistics business. Additionally, we.
<unk> integrated the acquisitions, we have made since becoming public and we did all of this while remaining in an enviable financial position with a solid balance sheet.
As we move into 2022 and beyond we have an eye towards the long term vision of the company. We believe we are well positioned relative to the future and in the past so what do we mean by that.
We can take care of the pass through our construction segment, which rebuilds roads and bridges as our country gears up for one of the biggest infrastructure updates in its history.
And as we look to the future R. E V and sustainability initiatives have positioned us for continued future growth in a large addressable market the.
The most exciting part is that we are already seeing such strong demand that any infrastructure legislation will only bolster demand in our core markets.
So to wrap up we are confident in our outlook and are looking forward to finishing the year with solid momentum with an eye towards the future as we remain focused on driving long term shareholder value in 2022 and beyond.
Lastly, I would like to thank the altra team members once again for all of their hard work in making this a world class company I will now turn the call over to Tony to discuss our third quarter financial results Tony.
Thanks, Ryan and good evening, everyone and thank you for your interest in Alta equipment group and our third quarter earnings call before I start.
I want to wish everyone, a happy veterans day and for those veterans of members of the military listening in thank you for your service to our country.
Second I'd like to welcome our new team members at bear in industries in Massachusetts, and Gibson machinery in Ohio, The senior leadership team and I look forward to earning your trust and embracing you into Ulta as one team culture.
My remarks today will focus on four main areas first I'll be presenting our third quarter results as part of that commentary I'd like to reiterate for investors. How the current supply chain situation is impacting Alta and our business model continues to respond positively to the situation.
I will profile, the bearing and Gibson transactions from a financial perspective, and a browned out my comments for the quarter with a quick check in on the balance sheet.
Second given that it's been a full year since acquiring pic logics, which represented a strategic acquisition and our formal entry into the warehouse system design and build space I will present on your one look back on the deal highlighting our ability to realize synergies and enhance our target's value post close third I want to provide some.
Industry data as it relates to the class eight truck market and altice opportunity within the commercial EV space specific to our northeast region, and recently announced agreement with Nicola last I'll discuss the positive revision to our guidance as we carry the momentum of the year into the final quarter.
Before I begin it should be noted that there are several slides in our presentation, 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.
I'd encourage everyone on today's call to review our presentation, which is available on our Investor Relations website at Alta equipment Dot com.
With that let's review Q3 <unk>.
First starting with the income statement for the quarter. The company reported total revenue of $295 million, which was a record sales quarter for our business year to date. The business has achieved $857 million of revenue as we look to finish well over the $1 billion Mark in revenue for fiscal 'twenty one.
Inside of the $295 million of revenue is at 24% organic sales increase over Q3, 2020, driven primarily by our construction segments year over year organic growth.
And breaking the P&L down further in our all important product support business, we realized $87 million in revenue for the quarter, achieving 9% organic increase and a 9% organic increase year over year on a consolidated basis on.
On the construction side, specifically our product support business grew 15% on an organic basis, while the material handling segment product support business grew 5%.
To remind investors as it relates to new equipment supply issues and the impact it has on our product support business in short customers existing fleets or not being replenished so age and hours of existing fleets continue to rise with each passing month as the age and hours rise the need for service technicians in repairs and maintenance.
Increases, which is bullish for our product support business.
In the rental department, where we had a very good quarter, we saw organic growth of 4.3 million of rent to rent revenue or 15% organically and $3 $5 million in sequential quarter over quarter growth on higher utilization.
As it relates to utilization metric that has been a direct beneficiary of equipment supply issues, and which drives EBITDA and cash flow for our business as of September 30th we had achieved approximately 70% physical utilization of our fleet up from 65% at the end of Q2.
One additional note on sales out of our rental fleet, we continue to realize higher than normal levels of sales out of our rental fleet as customer demand for likely used assets in the absence of new equipment remained high throughout the quarter importantly, we've been able to source equipment in the aftermarket transfer new inventory into our fleet to backfill. These <unk>.
<unk> and satisfy customer demand for rental assets, all why my all while maintaining strong utilization.
Keep in mind that the higher level of rental fleet sales drive holtz's field population with all which ultimately helps drive future revenue in our high margin product support business.
Just to put a close on the supply chain discussion overall.
So long as Theyre still population, our geographies being utilized and demand for rental fleet Altice Castle profile remains intact.
Continuing on the P&L and another positive for the quarter our earnings benefited from operating leverage versus Q3 2020, specifically in our construction segment as presented on slide 19 of our Investor presentation investors will note that in the construction segment, which has historically been and continues to be.
Our growth story for Alta the segment realized 115% increase in cash operating income versus 45% increase in cash gross profit, which is indicative of positive operating leverage as we define it.
As the construction business continues to grow we expect this operating leverage story to continue to play out.
From an EBITDA perspective.
We realized $31.5 million and adjusted pro forma EBITDA for the quarter, which is an improvement of $6 $5 million over the adjusted pro forma level of third quarter 2020 represented the second consecutive quarter since the beginning of the pandemic, where we have picked up EBITDA.
Versus the previous year's comp.
It's also 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 $109 2 million as that measure continues to trend positively.
To close my remarks on Q3's performance a quick check in 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 six times for where 2021 adjusted EBITDA.
Comparable positions on both metrics from management's perspective.
Lastly, I wanted to touch briefly on the financial metrics associated with the acquisition of bear in industries and Gibson machinery.
On a combined basis, we've added approximately $25 million of pro forma revenue $3 6 million of EBITDA.
Excluding synergies for a total purchase price of approximately $15 5 million or roughly 4.3 times EBITDA.
A level consistent with the valuation range, we have historically purchased at and immediately accretive to all the shareholders.
Moving on to the second area of my prepared remarks, I would like to give a brief update on the peak logics acquisition from June 2020.
First I would refer call participants to slide 20 of our Investor presentation, which presents a profile of the acquisition and our experience with peak logics since the acquisition.
We believe our experience with peak logics 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 peak logics.
It wasn't a typical acquisition for us and that it was a design and build engineering business without a lot of tangible assets versus the pure play equipment dealership and I thought it was appropriate to provide an update on that investment, especially given the macro trend that surrounds peaks businesses.
As we shared with investors when the deal was announced recall that our major thesis in the peak deal were one we would be able to take greater advantage of the macro tailwind in warehousing and logistics to we would fill a void from an expertise perspective as our existing lift truck customer base was demanding a higher level of sophistication.
And when it came to the material handling needs and we saw great opportunity to do more with existing customers.
Customers by expanding our in house capabilities.
<unk> three that peaks unique expertise will allow us to be even more proactive with new customers that we otherwise historically may not have been able to reach thereby leading to incremental lift truck related sales in short we believe the combination would be mutually beneficial and that also could drive incremental business, where peak and peak.
We'll do the same for all of them.
In terms of alpha's ability to impact peaks business as you can see on slide 20, we've increased peak annual revenue by $10 million or approximately 40% in year, one and more than double the EBITDA from $1 9 million to $4 4 million over the same time period keep in mind that this is an asset light business model.
And the increasing EBITDA directly impacts incremental cash flows to equity holders in.
The peaks ability to impact <unk> business, we continue to get new opportunities, where peak has been instrumental in introducing ulta to quote lift trucks and all the other allied products to their customers. As an example peak recently introduced salt to a global medical equipment supplier, which led to a 2.5 million dollar equipment sale.
Given the operational and supply chain related headwinds that we had to endure over the first 12 months of ownership with peak. We are pleased with these results and look forward to increasing contribution from peak to our revenue mix as we go forward.
Last and certainly not least we've added great engineering talent and sales leadership with this acquisition. This talent combined with Altice platform will allow us to provide customers with cutting cutting edge solutions in the material handling segment for years to come.
And congratulations to the peak logics team.
Moving to the third area of my comments I wanted to provide some industry data related to auto commercial EV opportunity in the northeast and with Nicola with the idea that the data will help investors frame. The total total addressable market that we will be participating in with our dealerships.
First the class eight truck market averages around 250000 units per year in the U S. With a total value of around $30 billion to $30 billion would equate to what we define as new equipment sales in our business.
The current our our current dealer agreement with me color covers approximately 10% of the class eight unit sales volume in the U S. And includes some of the most attractive territories for rapidly be EV adoption.
As an example, and by many accounts New York has the second most stringent emission regulations and requirements after California for adoption of electric and fuel cell vehicles for commercial transportation.
Thus, we estimate the total total addressable class eight market in the northeast region to be approximately $3 billion of new class eight sales, which could be conservative, giving class H E vs command, a higher ticket price than their diesel counterparts.
Now it remains to be seen what level of market share. We can achieve in the northeast and win that share will be realized but even when applying conservative market share estimates to the $3 billion total addressable market and considering there will be additional used truck product support and rental revenues on top of the new equipment.
Sales one can start to understand and size the opportunity that we have ahead of us in the class eight market in the northeast in the years ahead.
Lastly, and before I close I wanted to briefly address the increase we made to our fiscal year 2021, adjusted EBITDA guidance, which we noted in our press release that went out earlier today.
Given the strong performance, we've achieved year to date. The overall demand we are seeing across our business lines and geographies and our analysis. Our analysis of historic trends on a departmental basis, we have increased our guidance and expect to achieve a 113 million to $116 million of adjusted EBITDA.
For fiscal year 2021.
In closing I want to thank all of my teammates at Ulta for your commitment to our business in 2021, the business will break many financial records in 2021, but nothing is more important than our relationships with one another our customers and our commitment to altice guiding principles to our investors. Thank you for your confidence and support.
Our 2021, we believe strongly in our market position today, our team our opportunities and our ability to execute on those opportunities, which will continue to drive shareholder returns into the future.
I wish all of you and yours, nothing but health and happiness. This holiday season. Thank you for your time and I will turn the call back over to the operator for Q&A.
Thank you.
At this time I would like to remind everyone in order to.
To ask a question press Star then the number one on your telephone keypad again that is star then the number one on your telephone keypad, we'll pause for just a moment to compile the queue.
Any roster.
Okay.
Coming from the line of Alex <unk> with B Riley Your line is open.
Thank you good evening, gentlemen, very nice quarter.
Thanks Alice.
Alex.
Couple of quick questions here first.
Sales of new and used equipment has been at a very high level, you've stated over the last couple of quarters.
In.
I can keep highlighting that you know are suggesting that maybe there could be some softness if we got back to a more normalized environment.
But do you see that sort of more normalized environment on the horizon, particularly since.
Uh huh.
The federal government. So that's passed a federal infrastructure Bill.
Great question, Alex This is Ryan I'll take that so we the short answer is no. We don't see any normalizing happening and as I said in my remarks, we think that any potential stimulus coming from an infrastructure Bill is only going to add to the demand.
You know there is a practical matter of just how much equipment can be delivered and put into Houston, a practical amount of time. So the way that we have been thinking about this is that the cycle is just going to get longer we're in early innings.
Of a cycle that we think is going to last many years and that's consistent right now across all geos geos and business lines.
That's very helpful and then.
You referenced backlog a couple of different times I know you don't formally disclose a backlog figure, but can you talk a little bit more about sort of backlog today versus maybe the last quarter or a year ago.
Sure Alex I would I would say that it would characterize it as it is a as stabilization backlogs remain at historically high if not record levels in most of the business.
But but it's stable.
We haven't seen lead times stretch much worse than what we saw the previous quarter.
That said, we don't we also don't see it returning to.
Normal normal lead times for more than a year, we think that we're gonna be mid next year to late next year before we see any kind of stabilization of the actual supply chain in the you know our lead times on equipment.
Yeah.
That's great and then looking at the services business. It looked like revenue might might've been a little bit softer than what I was expecting and seen with margin, particularly on a sequential basis anything in particular, there going on in service.
Hum.
No Alex I think.
You know what we've been what we focus on as a management team is kind of the the the organic growth that we see in our businesses sequentially I want to say the $87 million was very close to Q2.
And so the the good news is that that number of husbands flip as we've talked historically.
The product support businesses is almost directly tied to technician head count.
And you know that well while that hasn't hasn't slipped at all we've been able to maintain headcount.
And so.
Nothing we continue to grow organically I guess is the message in the product support business specifically.
And some of our newer geographies like Florida.
We highlighted last quarter.
And the material handling business I think importantly, as a node grew 5% organically.
You know this quarter. So I think the trends are good.
We're very close as you mentioned to Q2, but.
But we expect to continue to drive that number higher.
Very helpful. Thank you very much.
Thank you we have our next question coming from the line of Matt Summerville with D. A Davidson your line is open.
Thanks, a couple questions first with respect to pricing can you talk about what you're seeing on new used rental equipment pricing versus last year and I have a I'm asking a similar question on the parts side of the business and then how you think kind of early read on how you think that trends in 2010.
Two.
I'll I'll take that one Matt.
The environment in terms of pricing and there's a lot of industry data out there but.
But used equipment prices are peaking and or have peaked and continue to peak and so we can see that you know you know.
Margins when he looked at rental disposal margins.
And then even in new and used equipment sales.
Relative to last year, which I think is the first part.
Of your question we.
We would be we would be up versus last year at this time.
Having said that you know when I when I look at our margins on tangible asset sales they've held in and that's in an environment where.
Our Oems are raising prices on us.
So over the last nine months 12 months.
You can see us holding margin in an environment, where we're paying more per equipment were paying more of a pause in some areas, we're paying more for labor.
We've been able to been able to drive drive margin.
Oh, I'm, sorry hold margin in.
And drive it higher on a nominal basis.
And then the same question on the aftermarket side of the business how much price you've taken this year in parts and service and what might be realistic for next.
Matt I'll take that piece of it. So this is Ryan.
The parts and service margins are going to remain relatively static. So we will see price increases likely for most of our manufacturers and we will pass those increases along and hold our margins.
And the same the same is true on the labor side, we're not seeing.
Outsized wage inflation from what we've seen in previous years, but we do every year pass along those increases to the market as to our competition.
Got it and I was hoping to get a little more granularity on some of the main material material handling end markets organically you guys were up 2% year on year, if I sort of I guess I would almost attribute all of that organic increase to peak logics given the contents of the slides.
Put in the deck Tonight. So I guess, what are you seeing in the base material handling markets outside of maybe peak logic and how should we be thinking about that going forward.
So one of the things we love about our material handling business is the diversity of our of our end markets. So you know our heritage in the motor City and Detroit area was that we were heavily concentrated with auto manufacturing and that was historically, a very dense and market. They use a lot of forklifts and menu and in the manufacturing.
Automobiles and still do today.
Day that that percentage has been as.
Is much lower and so did the fast growing parts of the business today or is more of the retail and warehousing you think the big box stores. The big you know the Amazon fulfillment centers and warehousing centers Costco's. The walmarts of the world those are that a generation ago. It was the big three that were the big buyers of forklifts and today, it's the big.
That's the big retailers with their logistics businesses.
And then there are regional pockets of you know in the <unk>.
<unk>, we have more of a very high tech and chemical industry Pharmaceuticals educational accounts and.
Illinois more resembles Michigan with the manufacturing, but then a lot more of a robust market on the on the logistics and warehousing side with with Chicago land being a major intermodal area.
One thing that we as we have.
<unk> this call we always check ins just from all of the regions in here from the boots on the ground and we can't point to an end market across the across the geography and across all business segments that weak today.
I spoke a little bit about the warehousing market thats kind of linked to the peak and Thats, where we see really explosive growth and we think that COVID-19 accelerated that has it changed the buying behaviors and people kind of sequestered at home.
And we right now don't see any slowdown in that in that trend. So just overall growth across all markets and.
If theres a growth spot or at an area that where the mix is likely to build over time, it's at warehouse market.
Got it and then he Matt this is Matt.
Apologize, Matt I was just going to jump in there really briefly.
You mentioned, the 2% in the material handling business right.
And I made mentioned previously about new equipment sales and not losing sleep at night.
If there is one.
A couple of points here.
Organically the rental business.
Material handling is up 14% versus last year as I mentioned product support up five.
So the 2% gets diluted by the fact that we haven't been able to take delivery of forklifts.
Cereal specifically.
And get them delivered out into you know out into the market. So if there was an area and this gets to you know where our cash flows come from if there's an area about suffering relative to revenue.
In material handling it's in that new equipment department, but again that that doesn't drive.
Drive EBITDA, when we are able to take delivery.
We would expect a spike in that in that new equipment line.
Excellent that's a very good point. Thank you for that Tony and then just one final question.
Full of tuck in deals just completed and what's your outlook for M&A heading into the remainder of this year, but more importantly into 'twenty two as we think about maybe the next six to 12 months, how actionable is the pipeline.
Given some of the things being talked about in the administration are you seeing maybe more activity than you would otherwise I know 2020 was obviously a big year for you guys, but maybe just spend a few more minutes on M&A. Thank you.
Sure Matt This is Tony.
I think we we've always kind of mentioned that the pipeline and in how active it is and certainly it got really active there.
Towards the end of Q3 I.
I would say and where.
Where whereby people were maybe front running a potential oh sellers, where maybe from running a potential tax increase.
From the fed and so we saw an uptick in terms of volume of sellers at that point.
And we will be taking.
We will be active in the M&A markets, yet before the end of the year, where we expect to be on some of those deals that came across our desks.
I I I don't want to speak to the sizer or identity of any of those targets at this point, but we do expect to be active before the end of the year. The other thing that I would submit is.
We had laid out for investors early on the level of M&A, we thought we would be able to do not necessarily volume wise in terms of how many targets but.
Financial financially.
And we had penciled out somewhere around $15 million of EBITDA on an annual basis.
Obviously, sometimes that becomes lumpy.
In terms of you know being able to two two.
Execute on your pipeline, but we still think that's a pretty good number.
In terms of EBITDA, we'd be able to acquire each year.
Thank you guys.
Do we have.
Our next question coming from the line of Brian.
With Raymond James Your line is open.
Brian Your line is open you may ask your question.
Yes.
Thank you guys.
Could we just get some more color on the landscape for technician hires.
Stand it is competitive out there, but maybe just some high level comments on how youre in attracting talent.
This is Ryan this is a theme that we try to touch on every every call that.
The shortage of skilled trades for our industry has been.
On that topic for decades, it's not it's not a new thing and so companies like all to have to be good at recruiting and attracting that talent and so theres no silver bullet, but we have relationships with trade schools and community colleges with vocational programs and every region, we're focused on Onboarding fresh talent, bringing.
People into the industry and our Princess type programs.
And then our best source of referrals is taking good care of our of our current associates and they are a source of referrals they bring.
Friends and family into the business and.
We've been able to stay in front of our of that demographic.
Demographic headwind of just not enough people coming into these industry jobs.
We right now one thing will highlight is that we do have three full time recruiters on staff that are spending the majority of their time.
<unk> technical talent, and that's something that would set us apart from most of our peers that are that don't have the scale to have that type of an effort.
<unk>.
Fair enough. Thanks.
Then just on the rental utilization number at 70%.
How does this compare to the long term average.
Yeah.
I'll take that one Brian.
This is <unk>.
This is where we would like to be this time of year.
And that 70% range.
So we feel like we're in a good position are well equipped to help his history.
Which as you know we've grown significantly be M&A in and even though organically. The last couple of years, but relative to history that I've been with the company.
70% is kind of a high watermark.
I would say that more typically this time of year, we've been in the mid sixties.
And so yeah, we're very pleased with our with our physical utilization.
And expect to continue to stay at those levels here.
Certainly we'll have seasonality.
Just to remind investors specifically in the rental fleet given our northern exposure.
As we go through Q1 and Q2.
Yeah, we are.
We are very pleased kind of with the with the 70% physical utilization number.
Okay. Thanks, so it seems like a healthy number that's it for me.
Yeah.
Thank you we have our last question coming from the line of <expletive> Ryan with Colliers. Your line is open.
Thank you Hey, guys when you look at your.
Uh huh.
E V E mobility initiative with Nicola what sort of challenges, whether that's facility wise or tech training wise.
Quick present any any issues as you stand up this the northeast part of the country.
Yeah.
So.
The challenges I don't think are unique to.
Nicole are there the challenges that come from seeding the market with a new product and not.
Having a field population so.
As we always remind our investors our business is supporting the product as much as it selling it and we drive a lot of our cash flows from the product support into the business.
The Nicola.
Strategy in an equal growth opportunity will require us to seed the market before we start enjoying that annuity type revenue stream that comes from having the field population.
So that's I think the biggest challenge that's the crux of it in terms of.
The facilities are the training requirements or the supporting the products. We think that we're in a unique position to really partner with Nikola and with the customer base to support the product. We've got a lot of experience in electro mobility from our material handling business we have.
Experienced in both batteries and fuel cell technologies and so we believe we're prepared to hit the ground running and couldnt be more excited about this piece of the business the growth prospects for it.
Okay.
So.
Oh I'm, sorry, I was just going to jump in we are doing some things just infrastructure wise.
And when I say infrastructure.
Facilities wise getting getting prepared maybe repurposing portions of facilities out in the northeast.
The other thing we're doing just kind of in the back office, some administrative stuff to be prepared for for.
For.
Revenue effectively when we're up and running so things like getting our ERP system together preparing for.
Tax tax a sales and use tax compliance so on and so forth. So there are things.
Going on that we're preparing for.
To launch here in 2022.
Okay. Thank you and with the infrastructure spending as you've mentioned layering on an already strong.
Marketplace for you from an M&A perspective does that.
Make you consider throwing that out to other geographies that you're not currently in.
I'll take that one so that's the idea that we would throw the cast the net wider I don't think really applies we are actively prospecting. We are actively engaged in trade groups, where we know the dealers for the various manufacturers and more than ever the phone is ringing.
E N.
Where we are hearing from entrepreneurs that are readied for an exit or we're hearing from original equipment manufacturers that are looking for well capitalized businesses to partner with for distribution.
So we're excited about the infrastructure Bill we're.
We're excited about what the implications for what it what it means for the demand in our markets, but I think that was sort of already cast that net we're looking for growth opportunities that are coherent with our strategy.
As much as possible take U S growth within the region.
And for now that said that there'll be plenty of opportunity to continue to pursue.
Okay, great. Thank you.
Thank you and that concludes the Q&A portion for today's call. Thank you for participating you may now disconnect.
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Hi.
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