Q2 2022 Herc Holdings Inc Earnings Call

Speaker 2: Good morning and welcome to the Herck Holdings second quarter 2022 earnings conference.

Speaker 2: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker 2: After today's presentation, there will be an opportunity to ask questions.

Speaker 2: To ask a question, you may press star then 1 on your touch tone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Elizabeth Higashi. Please go ahead. Elizabeth Higashi, please go ahead.

Speaker 3: Thank you MJ and thank you all for joining us this morning. Welcome to our second quarter 2022 earnings conference post. Welcome to our second quarter 2022 earnings conference post.

Speaker 3: Earlier today, our presentation slides were filed at the FCC and are all posted on the newly redesigned IR website at ir.hurtgrantoffs.com.

Speaker 3: This morning I'm joined by Larry Silver, President and Chief Executive Officer, Aaron Birnbaum, Senior Vice President and Chief Operating Officer, and Mark Irian, Senior Vice President and Chief Financial Officer.

Speaker 3: We'll review our second quarter results with comments and operations and our financials, including our view of the industry and our strategic outlook. The prepared remarks we followed by an open Q&A. Before we begin our formal remarks, I'd like to remind you to review our three-carbors straight line on slide three.

Speaker 3: Today's call will include forward-looking statements. These statements are based on the environment as we see it today, and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from the forward-looking statements based on this call.

Speaker 3: You should also refer to the Risk Factors section of our Annual Report on the Form 10K for the year ended December 31, 2021.

Speaker 3: In addition to the financial results presented on a gap basis, we will be discussing non-gap information that we believe is useful in evaluating the company's operating performance. Reconciliation for these non- GAAP measures for the closest gap equivalent to be found in the conference call material.

Speaker 3: Finally, a replay of this call can be accessed via dial-in or through a webcast on our website. Replay instructions were included in our earnings release this morning. We've not given permission for any of the recording of this call, and we do not approve a sanction and any transcribing of the call. Any transcribing of the call.

Speaker 3: I'll now turn the call over to Larry.

Speaker 4: Thank you, Elizabeth, and good morning, everyone. Please turn to slide number four.

Speaker 4: A pleasure report that we achieved strong results in the second quarter, reflecting the positive operating environment and robust demand.

Speaker 4: We continue to achieve new records in the second quarter of 2022 in total revenue, rental revenue, net income, dollar utilization, adjusted EBITDA, and adjusted EBITDA margin.

Speaker 4: Volume and rates contributed to the 35% increase in rental revenue in the second quarter over the prior year.

Speaker 4: Dollar utilization increased 40 basis points to 42.5%, and adjusted even not increased 37%.

Speaker 4: We completed the acquisition of six additional companies with a total of nine locations in the second quarter, including the previously announced acquisition of Cloverdale Equipment Company in April .

Speaker 4: Year-to-date, we have spent $317 million in net cash expenditures on our acquisition strategy.

Speaker 4: On July 5th, we announced the amendment and extension of our senior security assets based revolving credit facility, doubling the capacity to $3.5 billion and extending the maturity to 2027. The additional capacity is expected to provide the company with ample liquidity for several years to come. We announced today that we plan to purchase our common shares under the 2014 Stock Repair Service Program.

Speaker 4: subject to market conditions. The program was established in March of 2014 and has a remaining worth of $395.9 million dollars.

Speaker 4: We believe that given our operating performance and long-term growth prospects, that the year-to-date downturn in our stock price implies a discounted valuation of our real worth. We intend to take advantage of this price imbalance and continue to enhance our returns to shareholders' longer term, keeping in mind that we intend to maintain debt levels within a targeted range of two times to three times net-lovered.

Speaker 4: And finally, based on the second quarter results, and our outlook for the rest of the year, we are updating our 2022 guidance range for adjusted EBITDA to $1.195 billion to $1.245 billion, which implies a 34 to 39% increase over our 2021 results.

Speaker 4: We are also maintaining guidance of our net fleet capital spending to $900 million to $1.12 billion.

Speaker 4: And now let's move on to our financial highlights.

Speaker 4: Please turn to slide number five.

Speaker 4: which shows the second quarter results over the last five years. Our second quarter results shown here on a five year basis demonstrate the acceleration of our growth as part of our shift into high gear strategy.

Speaker 4: Equipment rental revenue was $605.4 million in the second quarter and increase of 35% or $157.4 million compared to the prior year.

Speaker 4: This increase was driven by solid performance in our core business and growing market share from our specialty businesses.

Speaker 4: Total revenue grew 30% to $640.4 million impacted by lower sales of use rental equipment. A decision we made to continue to meet customer requirements in light of a tight supply of new equipment related to supply chain issues from original equipment manufacturers.

Speaker 4: We reported an increase of 53% in net income to $72.2 million, or $2.38 per diluted share in the second quarter, compared with $47.1 million, or $1.55 per diluted share last year.

Speaker 4: Adjusted EBITDA grew 37% over prior year to $284.2 million. Our enhanced scale and focus on operating leverage improved year-over-year adjusted EBITDA margin 210 basis points to 44.4% in the second quarter of 2022.

Speaker 4: This is an exciting time for Team Herc and we are extremely pleased with the performance and tenacity of our team. We are committed to providing excellent customer service and expanding our rental solutions to a broad array of customers and industries to achieve even greater success.

Speaker 4: Now, please turn to slide number six. With 57 years of history in the equipment rental industry, our 6,100 team members work hard to ensure our customers achieve optimal performance safely, efficiently, and effectively every day. Watch for slide 13, please.

Speaker 4: Everything we do is built on our promise and commitment to help our customers and communities build a brighter future.

Speaker 4: As of the end of the second quarter, we operated 333 locations across the United States in Canada in 42 states and 5 Canadian provinces. In Canada, in 42 states and 5 Canadian provinces.

Speaker 4: As we add additional locations and employees to HURC rentals, we are committed to ensuring that we focus on safety training and other programs to assist the new team members in their integration into our HURC culture.

Speaker 4: The addressable North American market size is now estimated to be $60 billion and growing by about 15% in 2022 according to the American Rental Association.

Speaker 4: Every day, new mega-infrared fraudsters and other industrial commercial projects are announced throughout North America. We intend to get our fair share of this new activity.

Speaker 4: We expect to continue our momentum by addressing the opportunities in the market and outperforming the overall industry as we grow through organic growth supplemented by select acquisitions.

Speaker 4: Before I pass the call over to Aaron Bernbaum, our chief operating officer, I wanna thank the entire crew team for their outstanding contribution and their focus on delivering outstanding customer service. And their focus on delivering outstanding customer service.

Speaker 4: I'd also like to welcome all of the employees of our latest acquisitions to the HIRC family. We are hope you are as proud to be a part of HIRC Reynolds as we are to have you join us. And now Aaron will update you on our operational programs.

Speaker 5: Thank you Larry and good morning everyone. We continue to see steady demand in our markets and attractive opportunities to grow our business, given our investments in additional fleet and our expansion through acquisitions and greenfield locations.

Speaker 5: As you can see from our results, we are increasing our scale and operating leverage in our key urban markets.

Speaker 5: Our team has done an excellent job executing our strategy. As we enter the third quarter, which is typically the seasonally strongest quarter, we see no reason for slowing up our momentum. Clearly, there is more to come. Now please turn to slide number eight.

Speaker 5: Our Q2 results reflect the opportunity we see by accelerating investment in fleet with average OEC fleet of 32% over last year's comparable periods. Equipment rental revenue in the quarter rows to $605.4 million, up 35%, compared with 2021. Our core business continued to benefit from solid operating performance in all of our regional operations.

Speaker 5: Strong rate growth help offset inflationary pressures and our team successfully passed on rising fuel costs through increased revenue recovery and equipment delivery and equipment refueling charges.

Speaker 5: Our pro-solutions business also continued to contribute strong double-digit growth year-by-year in the second quarter of 2022. As we continue to expand our market share in the rental of power generation, climate control, remediation, and public equipment. The integration of the acquisitions we've announced today is on track, and we continue to focus on additional locations and targeted markets through organic growth and acquisitions.

Speaker 5: We will continue to capitalize on our fleet expansion and are investing $900 million to $1.2 billion in Net Fleet Capital expenditures this year.

Speaker 5: Now please turn to slide number nine.

Speaker 5: Our fleet expenditures at OEC total $327 million in the second quarter of 2022.

Speaker 5: Given current equivalent rental demand and our strategic management of fleet and this equipment constrained environment, we dispose of $64 million of fleet at OEC in the second quarter, about $7 million less than last year's second quarter when we began to hold fleet to the healthy customer demand.

Speaker 5: At this point in time, we expect OEC disposals for the full year to be about the same as last year.

Speaker 5: As we said on our 2-1 call, we had most of our 2022 women orders in early last year and continued to receive as much lead as we can get our hands on. However, the overall inflationary impact to our 2022 orders will likely end up in the mid-single-digital level. In the mid-single-digital level.

Speaker 5: As shortages in place and labor costs impact the industry, we do anticipate that industry fleet costs will continue to rise in 2023. We have recently been visiting our largest OEMs and our confident that we will get the fleet we've ordered in 2022 and 2023. In 2021, we have commenced and we have introduced stakeholders with some jeito?? orada 2023.

Speaker 5: Stronger pricing of used equipment and an improvement in our sales channel mix contributed to an increase in equipment sales proceeds as a percentage of OEC. We were pleased to record proceeds of 47% in the quarter compared with 41% last year.

Speaker 5: The average age of our disposal was 86 months in the second quarter, and fleet age is now about 49 months, but about the same as it was a year ago at this time. The average age of our disposal was about the same as it was a year ago at this time.

Speaker 5: Our fleet composition at OEC is on the left hand side of this slide. Total fleet is now a record 5.1 billion dollars as of June 30th, 2022, about 35% higher than OEC fleet at the end of Q2 2021.

Speaker 5: Dollar utilization improved 40 basis points compared to Q2 2021, a new second quarter record of 42.5%.

Speaker 5: This reflects well for the rest of the year since Q3 is typically the best dollar utilization quarter in the year due to seasonality.

Speaker 5: Slide 10 puts into perspective just how much we have expanded specialty over the last several years to serve the growing and dressable market. In 2016, specialty, including prosolutions and pro-contractor, accounted for just 18% of OEC. Today, we're at 24%, closing in our goal of 25 to 30% of total OEC. Slide 10 puts into perspective just how much we have total OEC.

Speaker 5: Our specially fleet is comprised of climate control, power, and distribution, pumps, and pro contractor tools.

Speaker 5: Especially fleet typically averages 14 to 16% higher dollar utilization than CORE.

Speaker 5: We've been growing our specialty branch network to enable rapid response to customer demand.

Speaker 5: Our North American ProSolutions resources can respond to an urgent request by mobilizing equipment for the affected market from a broad network of equipment and major competitive advantage over local suppliers.

Speaker 5: The cross-selling opportunities are significant, particularly as a new offering in our newly acquired locations.

Speaker 5: Please turn to slide 11.

Speaker 5: Our diverse customer mix and base a large national customers operating an essential business structure to provide our sales strategy and provide additional growth opportunities.

Speaker 5: Our diversification strategy over the last several years also targeted new industry verticals to drive healthy and stable growth. As you can see by the strong growth we produced, we are successfully growing across multiple industry verticals and across all regions.

Speaker 5: New account revenue continues to contribute to our growth story as we have focused on our sales force and we are both on new acquisitions.

Speaker 5: This will attend you to be a major opportunity going forward.

Speaker 5: In the second quarter, local rental revenue represented 58% of total rental revenue, up from 56% in the second quarter last year. associated fraud.

Speaker 5: This is nearing our goal of 60% local and 40% national accounts.

Speaker 5: Please turn to slide 12.

Speaker 5: Stafy is always at the core of everything we do, and we continue to focus on striving for 100% perfect days throughout the organization. Stafy is always at the core of everything we do, and we continue to focus on striving for 100% perfect days for 100% perfect days throughout the organization. Stafy is always at the core of everything we do, and we continue to focus on striving for 100% perfect days throughout the organization. Stafy is always at the core of everything we do,

Speaker 5: Our major internal safety program focuses on perfect days.

Speaker 5: That is staged with no OSHA reportable incidents, no app-thought motor vehicle accidents, and no DOT violations.

Speaker 5: In the second quarter on a branch by branch measurement, all of our branch operations achieve the least 98% of days as perfect.

Speaker 5: I'd like to thank our team here for their commitment to operational excellence and safety.

Speaker 5: Their professionalism shows up in the execution of our services to our customers every day.

Speaker 5: Please turn to slide number 13.

Speaker 5: We see continued growth opportunities through 2023 and 2024. As the 10-up demand in all of our end markets coupled with the opportunities to support the many infrastructure projects being announced as part of the $550 billion infrastructure funding provides an outstanding roadmap for future growth.

Speaker 5: Many of the industrial projects being announced are in the geographies where we have focused our acquisitions and green field additions.

Speaker 5: such as Texas, Arizona, Toronto, Detroit, and Chicago. The southeast also has flown prospects.

Speaker 5: New manufacturing facilities for semiconductors, electric vehicles and batteries, LNG plants, renewables in the power grid are being announced consistently. NASA ?????? engineering

Speaker 5: And we have the scale and operation to support the many projects that are being announced throughout all of our regions. The scale and operation to support the many projects that are being announced throughout all of our regions.

Speaker 5: One recent report showed industrial projects announced from November 2021 through April of this year totaled an estimated $180 billion, and more are being announced every week. And more are being announced every week. And more are being announced every week.

Speaker 5: We're closely monitoring these project announcements in the field. The project provides solid visibility for upcoming construction starts and support our view of the long-term growth opportunities in our markets.

Speaker 5: Our regional operations are primed and prepared to continue our growth strategy.

Speaker 5: Now I'll pass the call on the mark.

Speaker 5: Thanks, Aaron, and good morning, everyone.

Speaker 5: The HERC team continues to perform at a high level as we continue to deliver record performance on all our key metrics in the second quarter of 2022.

Speaker 6: The strength and momentum we are achieving both well for the rest of the year and into 2023 as we focus on fast, profitable growth and our continue improving the key metrics to create long-term value for our stakeholders. Using the cleaning of Pandemie in Christcard is a worthy

Speaker 6: and momentum we are achieving bodes well for the rest of the year and into 2023 as we focus on fast, profitable growth, and are continue improving the key metrics that create long term value for our stakeholders.

Speaker 6: Strong demand in our end markets and the ongoing supply challenges.

Speaker 6: of equipment manufacturers continue to provide a strong operating environment for the leading rental companies.

Speaker 6: As Aaron mentioned, we ordered early, so our new fleet is arriving steadily and we expect the new additional fleet growth to drive revenue growth.

Speaker 6: Our operations team has done a great job with delivering record time and dollar utilization while integrating new team members, customers, and fleet into the Earth model.

Speaker 6: This consistent execution has led to excellent performance and strong momentum that will continue throughout 2022 and beyond. And strong momentum that will continue throughout 2022 and beyond.

Speaker 6: Slide 15 shows the summary of our second quarter results, compared with 2021.

Speaker 6: Equipment rental revenue increased by a very impressive 35% per 650.4 million from 448 million in 2021.

Speaker 6: Primarily to continue volume and pricing my metan.

Speaker 6: As we said last quarter, the seasonal trends build sequentially throughout the year. We are successfully executing on our growth strategy and are clearly running in high gear when you view our Q2 results.

Speaker 6: We're pushing hard on both our organic growth and acquisition strategy and enjoying a lot of success.

Speaker 6: Taking a closer look at the 35th descent rental revenue growth in the second quarter, about two thirds of the growth was organic and a third from acquisitions.

Speaker 6: This balladates our ability to grow our core business.

Speaker 6: Our organic growth is outpacing the market growth, and we believe we continue to expand our market share.

Speaker 6: Our successful acquisition strategy provides a nice supplement to our organic growth story and allows us to quickly bring on key rental talents and to penetrate key markets.

Speaker 6: Our revenue growth is not only fast and impressive, but profitable.

Speaker 6: We are delivering excellent results for our investors in creating long-term value.

Speaker 6: Adjusted net income in the second quarter of 2022 increased 57% to $74.8 million or $2.47 per diluted share.

Speaker 6: compared with adjusted net income of $47.6 million or $1.57 who diluted share in the second quarter of 2021.

Speaker 6: Adjusted EBA increased 37% in comparison to Q2 2021.

Speaker 6: Adjust the EBITDA margins, we're also a record for the second quarter and proving 210 basis points to 44.4% in 2022, from 42.3% in 2021.

Speaker 6: All in all, in excellent quarter. We achieved most of what we set out to achieve, and we're very happy with our margin expansion and increasing flow through.

Speaker 6: We're lucky to have a solid and flation-resistant model and have grown fast and held margins in the challenging and flationary environment. We're lucky to have a solid and flation-resistant model and have grown fast and held margins in the challenging and flationary environment. Great. Thank you.

Speaker 6: All of this is manageable for HRF within the context of 35% growth in rental revenues. And as is clear with our performance, we can invest in our business and in our people and continue to improve our adjusted EBITDA margins and investor attempts.

Speaker 6: On slide 16 we highlight the momentum and now pricing and utilisation trends by quarter.

Speaker 6: The graph on the upper left illustrates our success in managing price over the last couple of years.

Speaker 6: and our ability to consistently drive RAID Pro.

Speaker 6: This is always an important metric to manage and it's especially important when faced with cost pressures and then inflationary environment.

Speaker 6: We are especially proud to manage Euro year rate up by 5.5% in the current quarter.

Speaker 6: The current market environment of tight equipment supply and steady demand continues to support our focus on rate and we also benefit from our excellent pricing tools and the discipline and professionalism of our sales team. The industry seems to be enjoying price momentum and we are achieving success in the spot market with our pricing tools as well as with our larger national contract negotiations.

Speaker 6: Track record on executing on price and all sorts of operating environments is clear.

Speaker 6: The momentum in our rates is clear and we expect to increase quarterly rates year over year and sequentially for the remainder of 2022 which sets us up well for 2023.

Speaker 6: Now OEC fleet size close to quarter at about 5.1 billion.

Speaker 6: A combination of early ordering and savvy purchasing has contributed to the steady delivery of fleets in 2022, which was also supplemented by fleets integrated in conjunction with acquisition activity.

Speaker 6: Our average fleet on rent at OEC and Q2 was up by 35% in comparison to average fleet growth of 32%, which represents record time utilization and excellent execution and a solid operating environment.

Speaker 6: Dollar utilization continues to improve by 40 basis points in Q2.

Speaker 6: Improved dollyalization reflects our ability to mitigate inflation and fleet costs through rate growth.

Speaker 6: Positive momentum and dollar utilization is also a long-term value driver going forward and has a powerful and positive impact on our return on assets. It is a long-term value driver going forward and has a powerful and positive impact on our return on assets.

Speaker 6: Slide 17 summarises the acquisitions we've made so far in 2022.

Speaker 6: We focused our acquisitions on high growth markets that complement our current location network. So far through the first six months of 2022 we've acquired 9 companies and 12 locations in 8 states and 2 provinces.

Speaker 6: We spent $317 million in net cash with an average multiple of approximately 5.5 times.

Speaker 6: We see significant revenue synergies and most of the companies we require, and over time, we can run the fleet and operations more efficiently, generating synergized multiples of approximately four to four point five times.

Speaker 6: On slide 18, you can see we have no near-term maturities. We recently amended our evolving creative facility and have doubled the capacity to 3.5 billion extending the maturity to 2027.

Speaker 6: This clearly provides ample liquidity to fund our growth goals and to the future as we commit capital to invest in our business and drive fleet growth into the new cycle.

Speaker 6: Net capital expenditures exceeded cash flow from operations in the second quarter, and we reported negative free cash flow of $197 million before acquisitions.

Speaker 6: We are continuing to take deliveries and are taking as much fleet as we can get our hands on.

Speaker 6: Our volume growth of 35% shows that we are putting it out on rent as soon as it hits the yard.

Speaker 6: Our leverage remains conservative and our current leverage at 2.4 times is in the middle of our target range of 2 to 3 times.

Speaker 6: We also paid out a quarterly pivot end in June at 57.5 cents a rate which applies to the annual payout of $2.30 per share. The annual payout of $2.30 per share.

Speaker 6: Our capital allocation plans are focused on investing in organic growth, strategic M&A, and implementation of a dividend.

Speaker 6: For those of you who have been following us, you know that we discussed holding off on share buyback for a year or two while we focused on the first three initiatives on this slide.

Speaker 6: We've adjusted our capital allocation plans given the recent downturn and our stock price.

Speaker 6: We strongly believe that our long-term growth expectations indicate that HRI is currently trading at a discount to its real value.

Speaker 6: Therefore, subject market conditions we intend to start purchasing our shares under the previously approved 2014 Steery Purchase Program, which has a remaining authorization of 395.9 million.

Speaker 6: Our conservative leverage and ample liquidity provides sufficient resources to initiate a stockback and to remain within our target of two to three times net leverage while we continue to invest in flea, new locations through green fields or acquisitions, distributing payouts and share repriezests over the next few years.?, Yeah.

Speaker 6: On slide 20 we share the latest industry forecast.

Speaker 6: ARA recently increased their 2022 industry revenue forecast to $60 billion from $57 billion reflecting the strength of the growth cycle we are currently in.

Speaker 6: With 15% growth now forecast for 2022 and 6% for 2023.

Speaker 6: Clearly there is some strength to the current cycle despite all the negative sentiment around recession risks.

Speaker 6: Our job to take advantage of the current environment for the benefit of our stakeholders, and that is what we intend to do.

Speaker 6: Remain focussence of all the recession twals and know how to run the recession playbook. However, right now we're in a robust operating environment and we intend to make a robust lunchbox.

Speaker 6: Our 35% rental revenue growth is clearly eclipsing the broader industry growth rate, whether you focus on the top line or our organic growth rate that is over 20%. Our organic growth rate that is over 20%.

Speaker 6: We looked at much more momentum than the industry in general and a taking market share with our estimates of about 4% share at the North American market.

Speaker 6: This is consistent with past experience. Rental companies of scale, with broad rental fleets and a well-diversified customer base, have consistently grown faster than the rental industry in general and Herc is a company of scale, with a large, well-diversified mix of customers.

Speaker 6: This is a very favorable environment to own 5.1 billion of rental fleet. As our customers really appreciate our fleet availability, the breadth of our fleet offerings, and our commitment to service.

Speaker 6: It should remain a favorable environment for increasing rates as everyone is facing cost inflation to a certain extent.

Speaker 6: It's also important to realize that the majority of our business is not directly connected to non-residential construction.

Speaker 6: Our specialty pro-solutions business is a real strategic benefit and we will look to continue to gain share and grow their business.

Speaker 6: There is pent up demand for maintenance and turnarounds and a lot of our industrial plants and this statement should also remain strong in 2022. And this statement should also remain strong in 2022.

Speaker 6: There's plenty of demand in our end markets to support growth in 2022 and 2023. We have to balance sheet and liquidity to be able to fuel that growth by investing in our fleet and our market share and that is what we intend to do. We have to balance sheet and liquidity to be able to fuel that growth by investing in our market share and that is what we intend to do.

Speaker 6: On slide 21 we've raised the lower end of our guidance range to 1.95 billion as we grow more confident with the strength of our business and see the lower end as an unlikely outcome.

Speaker 6: Our guidance for Adjacity BID DA is now $1.95 billion to $1.245 billion, which translates to an increase in Adjacity BID DA of 34% to 39% over our 2021 results.

Speaker 6: We are also maintaining our Net Fleet Capital Expenditures guidance.

Speaker 6: to 900 million to 1.2 billion.

Speaker 6: We believe we are in the early stages of an exciting industry upcycle and intend to deliver excellent performance as we look to continue to execute on our high growth strategy.

Speaker 6: With that, I'll turn the call back to Larry.

Speaker 4: Thanks Mark. Please turn to slide number 22.

Speaker 4: This summary demonstrates the acceleration and growth we are achieving with our investment in fleet and M&A. As you can see we have truly shifted into high gear.

Speaker 4: We've come a long way in the six years since we went public and I'm proud of the tremendous strides that we've made.

Speaker 4: We are demonstrating that we can accelerate top-line growth and show an improvement in adjusted EBITDA margin.

Speaker 4: I think we provide a unique opportunity for all of our stakeholders, but most important of all, I'd like to thank our HURT team members for their diligence, professionalism, and commitment to customer service.

Speaker 4: I think we provide a unique opportunity for all of our stakeholders, but most important of all, I'd like to thank our HURP team members for their diligence, professionalism, and commitment to customer service. We are proud of our team HURP.

Speaker 4: Please turn to slide number 23.

Speaker 4: Many companies are not focusing more on purpose. We began with our vision, mission and values, and committed to a purpose statement to equip our customers and communities for a brighter future.

Speaker 4: We do what's right. We're in this together. We take responsibility. We achieve results and we prove ourselves every day. So now operator, we'd like to open the lines for questions.

Speaker 2: Thank you, Larry. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We will begin today with Rob Wertheimer of Melius Research.

Speaker 7: Please go ahead. Good morning everybody.

Speaker 7: Go ahead. Good morning everybody. Morning everybody. Good morning.

Speaker 6: So impressive EBITDA margin improvement. And maybe I had a question kind of on the potential. So you focused on dollar utilization for many years in our conversations, I guess is the right metric for improving price and time at the same time, I suppose. I'm a little bit curious how much more room there still is on time utilization to get to best in class. I'm a little bit curious as you acquire companies.

Speaker 6: If you're seeing your operational ability to raise up their time utilization as well as other metrics, and just what the glide path is from here. Thank you.

Speaker 4: Yeah, great question Rob. Look, there's always opportunity to tweak a little more out in different areas of our fleet. And certainly in acquisitions, we have a combination. Some we have opportunities to improve time utilization. Some we have an opportunity to improve dollar utilization. And others, we have an opportunity to cross sell for products that they don't carry, which all sort of.

Speaker 4: you know, a rising tide raises all ships, helps us utilize some of our specialty gear that traditionally operates, you know, with lower time utilization than the general rental fleet. So we'll be able to expand into that. But certainly always opportunities in all of those areas. Is it tremendous? No. But, you know, there is a pathway.

Speaker 6: Okay, perfect. Thank you. And if I may, just your thoughts on SGNA, this quarter, how much is pure inflation? How much is sort of strategic investment for growth and how much more of that you have to do? And I will stop there. Thanks.

Speaker 8: I mean most of it's investment for growth, say...

Speaker 8: Your inflation is champion.

Speaker 8: mid single digits on the SG&A lines. We're obviously growing head counts and the operations fast to support the growth so most of it's connected with that.

Speaker 1: Got it.

Speaker 2: Our next call is from Sharif El Shaba of Bank of America. The police go ahead. The police go ahead. The police go ahead. The police go ahead.

Speaker 9: Hi, good morning.

Speaker 6: Looking at the large infrastructure spend ahead, we've had a lot of these larger mega projects announced. And to date, how of those aligned with the footprint that you have that's focused more on dense urban locations. And to date, how of those aligned with the footprint and locations.

Speaker 5: We feel we're really positioned well for all the infrastructure spend we are in. We are in.

Speaker 5: You know, most of the urban markets in North America, we've been investing with Greenfield's and acquisitions in those markets, that's our core strategy. So we feel very well positioned to capitalize on those opportunities. And as we mentioned previously, with our 2022 fleet investments, we've really focused on getting our core of our business larger. So that's the type of fleet, whether it's North moving or aerial that really.

Speaker 5: You see showing up on those in big infrastructure projects.

Speaker 6: Understood. And looking ahead, what do you anticipate your fleet costs look like next year and can you outpace that? And how should we think of that dynamic off a very strong 22?

Speaker 5: And 22, as I mentioned, we're in the mid-fingles. We believe the next year will be higher than that in 23.

Speaker 8: We don't need to, yeah we don't have to outpace that in year one right, that fleet's coming in for eight years so you know you can see that our current you know 5.5% rate increases outpacing the current impact of inflation in our fleet as we pick up

Speaker 1: Thank you.

Speaker 2: Our next question is from Jerry Revick of Goldman Sachs. Please go ahead. You see the Trump administration will only open if

Speaker 10: Yeah.

Speaker 11: Yes, hi, good morning everyone.

Speaker 12: Hey Jerry.

Speaker 11: As we look at the business today, obviously very different from the scrollpile business you folks inherited some six years ago, given where the business stands today with the operating improvement, pricing improvements, in the scenario where we do go into a downturn, can you just talk about what level of operating leverage you folks would expect in the business and Mark, you alluded to having Playbook ready and levers that you folks would pull, can you just expand?

Speaker 11: I'm at part of the conversation. I appreciate it's not the base case, but can we just step through what that scenario might look like for her?

Speaker 8: Yeah, I mean, it all depends on the size and the shape of the downturn. Obviously going in to a downturn with this amount of momentum impacts the sort of strength of the business on the way through. But typically in a downturn, especially the operating leverage works against you in a fixed cost business. So you lose, you sort of head into negative leverage to a certain extent if your revenues are actually decreasing.

Speaker 8: and your cost just staying relatively fixed. But getting from 35% to simply growth, 35% revenue growth is a negative revenue growth. That's quite a big drop. So I would suspect my metham we've got going on in the likely... in the likely... in the likely... in the likely...

Speaker 8: the likely severity of any upcoming downturn being pretty mild, that we'd be able to sort of manage our way through that pretty favorably in terms of operating leverage.

Speaker 11: And, you know, over the course of COVID, you folks flexed the cost structure really well. I'm wondering to what extent you might be able to do that in the next downturn, whenever that might be, to mitigate the margin pressures and the fixed cost pressures that you're alluding to, Mark, based on lessons learned over that challenging period in time.

Speaker 8: Yeah, although every recession has its different sort of shape and impact. So the COVID one was specifically very dramatic on the cost side with everything shut down. So I don't think we'd be able to adjust the cost side or want to adjust the cost side as dramatically as we did in that particular downturn.

Speaker 11: Okay, super. And in the quarter, just on slide 16, you know, you folks, so it looks like utilization increased year-to-year, pricing was up 5.5%, but dollar utilization was up, you know, just 2.5% year-to-year, which suggests that I think a meaningful mix headwind. Can you talk about that? Is that makes away from entertainment or what's driving that and what's the mix outlook into the back after the year?

Speaker 8: Yeah, no great question. Mix has been a bit of a challenge this year. It's mostly due just to relative growth rates and you sort of touched on it with the entertainment business.

Speaker 8: So that was obviously growing incredibly rapidly last year as it was bouncing back from a really low number in 2020.

Speaker 8: So that growth is not as dramatic this year and that is having an impact on mix.

Speaker 8: There's also a bit of an impact on the bulk business with the healthcare rentals that were out. Still some of them out last year with the COVID rentals, they've sort of gone away and that bulk business is having an impact on mix.

Speaker 8: Also the special business was growing much faster than the core business historically and that was having a positive impact on mix and that's not the same as we're growing the sort of core and the special at the moment at a similar growth rate. So good question a bit of a complicated answer mix was a big impact in Q2 should be less going through Q3 and Q4.

Speaker 11: Terrific, thanks.

Speaker 2: Our next question comes from Ken Newman of KeyBank. Please go ahead.

Speaker 12: Hey, good morning, guys.

Speaker 13: 299

Speaker 12: Morning. You know, for my first question, I was just curious if you could talk a little bit about the cadence of business trends that you saw as we progressed through the quarter. You know, obviously I think you're very optimistic about the momentum kind of holding up into what's typically your strongest quarter seasonally next quarter. It does seem like the Ford sentiment for construction spend seems pretty resilient here, even with all the bearish sentiment in the market, but...

Speaker 12: Any color that you've seen from your customers in terms of behavior as we've progressed through the second quarter and here in into July . The second quarter and here in into July .

Speaker 5: Yeah, Ken, this is Aaron. I'll answer that. Q2 is very strong and build up through the end of June . Our time, you is very, very strong. And we're able to do the acquisitions and ultimately on and work on the synergies and really it was a creative to what we accomplished in the second quarter. As far as the sentiment just on the ground, we see a tremendous amount of projects starting and activity. I've been a lot of major urban markets during Q2.

Speaker 12: And then for my follow up, you know, obviously you've been very active on the M&A front here, and the QQ included.

Speaker 12: You gave some good color on the revenue contribution, but I'm curious if you could maybe help us kind of frame what the impact to margins were from the acquisitions this quarter, and maybe the expectation for margin cadence as those deals are integrated later on into the back half.

Speaker 8: So the exfissions are kind of, imagine neutral I would say, they come in.

Speaker 8: They come in pretty close to our corporate margin and then we've got the opportunity to expand that sort of up to our benchmark branch margin through synergies over 18 months to two years as sort of the guide there. So they are neutral, I would say, overall two margins.

Speaker 1: Thank you.

Speaker 2: Our next question is from Neil Tyler of Redburn. Please go ahead. become a scholar you

Speaker 14: Good morning everyone. I've got a couple left, please.

Speaker 14: First on your share repurchase scheme, you've been fairly clear that that's predominantly in response to the change in the share price. But does the decision in any way to restart that buyback reflect either rising valuations or reducing availability of assets to sale and maybe give us a little bit of an update on how you see the M&A pipeline? The second question, you mentioned I think Aaron that you'd visited all the major suppliers recently and were confident on receiving fleet.

Speaker 14: that you needed for this year and for next. But from those meetings, can you perhaps share any latest insight on the broader comments from those customers on the supply chain issues that they're facing and how that has progressed over recent months? Thanks.

Speaker 5: Sure, I'll let Mark take the first question.

Speaker 5: Sure, I'll let Mark take the first question on the share repurchase.

Speaker 8: Yeah, so I mean the acquisition pipeline is still robust. We're still closing deals and looking at deals. You know, we sorted.

Speaker 8: guided to a rough cadence of say 500 million a year and you can sort of see we've made a good fight at that through the first half. So there's no real change in our appetite or our ability to execute. You know it's mostly our response to the share price as you mentioned and we can we can put that on top of our acquisition activity and our sleep rate plans.

Speaker 5: And Neil, on the OEM visits, we mentioned on the narrative that we have been visiting and did visit several in Q2 of our big OEMs. Just to visit with them about strategic, look forward over the next couple of years, and I think it's well known the supply chain's been challenging for everybody. And some OEMs are able to kind of handle the supply of product to us a little more rapidly than others, but they're all working very hard.

Speaker 5: see down the road. We think we're going to continue to have challenges through the end of this year and the first half of next year. But we believe that by the end of 23, it'll get to more normalcy. It's really had to do with the components that the OEMs need to finish their products. So we have been receiving the products, the equipment that we expected to get so far this year. And we've got a line of sight of what's coming the rest of the year.

Speaker 5: But it's not easy. It used to be that you could buy equipment on the spot market for a deal, you know, and get it in a week. You can't do anything like that anymore. And the used equipment market is very, very tight as well. So I think everybody's improving their fulfillment of equipment, and we're very positive on where we're going through next year.

Speaker 14: Great, thanks very much for that. Just to follow up there Aaron, what does that mean in terms of the lead time to which you're committed on equipment purchases in terms of number of months for example?

Speaker 5: We've placed about 40 or 50% roughly 50% of our 20, 23 orders in already. So we in a normal environment, you don't have to get your orders in that much in advance, but in this environment you do. And we're still, as I said, receiving our product this year, but it tends to be where if it used to be two or three months delayed, now it's more like, you know, two months or, you know, one and a half or two months delayed. So...

Speaker 5: We are seeing product showing up every single day in all of our branches all the way through Q2 and enjoy.

Speaker 5: showing up every single day and all of our branches all the way through Q2 and enjoy. That's very helpful. Thank you. Thank you.

Speaker 15: Thank you. You're welcome.

Speaker 2: Our next question comes from Seth Weber of Wells Fargo. Please go ahead.

Speaker 16: Hi guys, this is Larry Stavisky after Seth. How are you today?

Speaker 16: Good, everybody. Great, great. Just a couple of questions. Going back to the kind of the environment where you talked about, you know, not seeing any kind of negative signs or project cancellations, just to reiterate nothing, nothing on interest rates or recession concerns that you're hearing, you know, on the ground or anecdotally from customers. Place a

Speaker 5: The only thing I would mention is just labor, the ability to ramp up. Some of these big jobs need three, four, five thousand employees to conduct the project. That's where they're having some challenges, but nothing on project cancellations, anything of that nature. And as I mentioned, the demand for equipment, our time utilization is super strong. It's an Lord help me all the way down the road. It's common for us to take a huge risk Elephant is just as One, it's extremely difficult. They're having these? synergists are able to operate where everything that's agents of what they do is good that people can do better than the purpose of organizing it's are share, rather than stuff that the big MANY plats are pretty hard to deal with. And we're here to help bible partners have the same initiative as you and your team

Speaker 16: Okay and does that include energy market activity? What are you guys seeing in terms of that?

Speaker 5: Yeah, we divide energy into upstream, midstream, downstream. They've all picked up, of course, since a year ago. And so we're seeing it all along the oil and gas chemical segment of industrial. geo force in this internal induction of prototype.

Speaker 17: Okay, okay, great.

Speaker 16: And then just if I could squeeze in the last one, your rate outlook for the rest of the year, you did mention you still expect sequential acceleration, any kind of color on what we should expect, the exit rate for 22 for pricing. The exit rate for 22 for pricing.

Speaker 8: Yes so maybe a little bit of nuance on that secular message. So secular increase I don't know that we're expecting secular acceleration but we should see increases you know quarter over quarter and year over year going through the rest of the year. You know no guidance on the exit rate. We're happy with a sort of mid 5% zone and we'll be happy to sort of increase that modestly as we go through the year.

Speaker 17: Okay, great that. Thanks guys, appreciate the color. Thanks guys, appreciate the color.

Speaker 12: Our next question is from Matt Brick-Lyer of Gamco. Please go ahead. Hey, thanks and good morning. I just had one for you. As you think about the next, let's say, 12 to 24 months.

Speaker 12: all of the, you know, kind of big infrastructure projects that have been announced and are starting to gain momentum. Could you talk to maybe which equipment types you feel most bullish on, which equipment types you think are going to benefit the most? I think that the equipment types you think are going to benefit the most. I think that the equipment types you think are going to benefit the most.

Speaker 18: from these particular projects.

Speaker 5: Pretty much all of the math or project where it's a new build. So you got to tear up the ground. We call that the civil part. So that's a lot of earth move and wheel loaders, excavators, compaction. The next excavator is compaction. The next excavator is compaction.

Speaker 5: And then they move into concrete tilt up work, they enclose the building, and then you get a lot of material handling, aerial inside. And some of these projects are so big that they don't connect to the grid in a quick fashion. So they need temporary power, temporary cooling, until they can connect to the local energy provider, the grid in the market. And these projects are typically, you know, they're...

Speaker 5: I would say at the low end, a two-year build, and some keep going for five years, depending on what type of big project it is. And then, you know, on the road and bridges, you'd see those on the freeway. Those are, you know, long-term projects. They seem like they never end. So, again, those are a lot of excavators, wheel loaders, compaction, and the aerial to do all the, get the men up in the air to.

Speaker 5: Connect all the concrete, burders, and so on and so forth. All right, that's helpful. Thank you.

Speaker 18: the concrete, purters, and so on and so forth. All right, that's helpful. Thank you. All right, thank you.

Speaker 2: Our next question is from Mick Dobre, a verb. Please go ahead.

Speaker 17: Hey, good morning. Thanks for squeezing me in here.

Speaker 19: me in here. Thank you.

Speaker 19: Hi, I want to go back to your comments vis-a-vis your interaction with your suppliers, your OEM suppliers. So it sounds like the pricing for 2023 equipment is going to be higher than mid single digits. I'm wondering if you can put a finer point on that. And when you sort of look at the sort of pricing you're going to have to pay in 2023, how does that compare historically? I mean, I realize that it's higher than what we've seen maybe in the last.

Speaker 19: a few years, but but I'm wondering if if it's very much out of the norm for what the company has seen in its history and Related to this I guess I'm wondering how you're approaching it, right? Because OEMs are asking for pretty significant price increases That's pretty clear yet input costs raw materials and so on are coming down So from your standpoint as a customer how are you approaching that in your negotiation and the timing of your cat-back?

Speaker 4: Yeah, well, let me sort of take the first part. Yes, we said we'll exit this year with fleet that's probably up mid-single digits over prior year, and we expect that 23 fleet will be higher than that. Probably, you know,

Speaker 4: mid to high single digits, but we haven't quite frankly finalized all about pricing with a lot of our T OEM. So be hard for us to really comment on what our true expectations are until we finalize those negotiations with our suppliers. We're more concerned now immediately with securing slots, production slots and availability slots.

Speaker 4: That's where most of our work has taken place with our key OEMs. While they're still trying to understand what their component supply might be going into next year and what the relative...

Speaker 4: improvements that they can make over this year relative to acquisition and cost of those components. So it would be it would be hard for us to protect, although we do believe it'll be higher than what it was this year going into next year. It was this year going into next year.

Speaker 19: Right, but going back to the essence of my question, the price increases that you're seeing here for 2023, does that impact at all the way you're thinking about dispersing CAPEX? I mean, one could argue that you could sort of wait it out a bit until lower input costs are actually starting to flow through to it. Well, no, it's not going to impact our decision on what we're going to do.

Speaker 4: We're going to try to get as much fleet as fast as we can and put it into the market while we have a robust operating environment and customers demanding fleet for their projects. So remember, the cost only is over a seven or eight year period and on some of the fleet that we're acquiring, some of that has a useful life up to 25 years.

Speaker 4: So the input cost is not that dramatic when it comes to the benefits that we can have of getting gear and putting it on rent. So now it's not impacting our decision to acquire gear in a short term.

Speaker 19: Understood, thanks for clarifying that. Then my last question is on the way you're managing inflation and higher costs within your own business and kind of how you expect that to trend going forward. The flow through margins on our EBITDA a little bit lower than the 50 to 60% that you targeted. So I'm sort of curious here as to how, what is the timeline here for getting back to that more normalized flow through margin?

Speaker 8: Can that happen in 2022 or is this more of a 2023 sort of timeline? I think we discussed in Q1 that those flow-through margins would be improving sequentially throughout the year and they did improve in Q2 to over 51% which was better than we did in Q1. So we expect that flow-through to be better in Q3 and Q4 as we get more revenue.

Speaker 8: and more operating leverage on the cost base. So, that's the impact for this year and we don't anticipate an acceleration of the inflationary environment going into 2023. So that should allow us to continue to improve that flow through going forward. So, being able to improve our EBITDA margins and Q2 by 200 basis points, with these inflation pressures that you like to point out.

Speaker 2: is a pretty good outcome and we're very happy with that. Thanks for the color. Our next question is from Stephen Ramsey of Thompson Research Group. Please go ahead.

Speaker 2: There's a pretty good outcome and we're very happy with that. Thanks, Ms. Keller. Our next question is from Stephen Ramsey of Thompson Research Group. Please go ahead. Morning. Thank you.

Speaker 20: Good morning. Maybe to start with markets generally tied on supply versus demand. Is there a way to think about kind of order of magnitude, percentage of markets that are not in this tight supply-demand equation and are you moving fleet out of those areas to better markets or maybe just generally is there any outsized activity of fleet movement that is higher or lower than normal?

Speaker 5: Steve, really all of our end markets are very strong across all of our regions. In prior years, periods, yeah, we would move fleet from one geography toward another to, you know, get better utilization, but at the moment, all of our North American operations and markets have a big appetite for fleet, and, you know, we want to continue to get our hands on as much as we can to...

Speaker 5: to really feed our needs in our business and what our Salesforce is creating. And what our Salesforce is creating.

Speaker 20: And then one on rates, can you talk to the strengths of spot pricing on the market in this good market versus prior positive cycles? And can you talk to if this spot pricing versus non-spot pricing, is there a larger delta than normal going on there?

Speaker 8: So the spot pricing you know obviously is a little bit more volatile and easier to move so that is very strong currently.

Speaker 8: Hard to compare that to prior cycles, but very strong and stronger than the national account pricing as you'd expect. You're dealing with a quicker turn of that equipment and smaller customers and shorter term demand as opposed to longer term negotiations on contracts with bigger customers. But we do have momentum in both. So we've got success going in that national account negotiation. Those rates are going up and the spot pricing continues to be very strong also.

Speaker 12: helpful thank you. Next question is from David Raso of Evercore ISI. Please go ahead. Hi thank you for the time. Your suppliers don't usually book an order. You're suppliers don't usually book an order.

Speaker 18: properly in the pricing set. So you're coming about 40 to 50% of your 23, let's call it, indications of interest in the equipment you want. Do any of those have set pricing yet or is it still just sort of an indication of interest trying to hold the slot?

Speaker 5: Some does and some is holding the slot.

Speaker 18: Thank you. And then you said you, again, you felt more comfortable after meeting with your supply base thinking about late this year into 23. But you did make the comment that, you know, still a challenge through the first half of 23. And I know it's early macro-conchained, your thought can change. And I know it's early macro-conchained, your thought can change.

Speaker 18: When you think of your fleet growth potential next year from what the suppliers are telling you, is there a level of comfort they're providing that they could give you 10% more, 15% more? I'm just trying to get a sense of what they're communicating and trying to think about a peak into 23 fleet growth potential for you. I think they're more in line with providing what they provided in 22.

Speaker 5: because they need to get more visibility for the whole year of 23 first. So we're optimistic that as they progress through 23, we could probably get more if the markets are still very strong.

Speaker 18: And lastly, the carry-over pricing. If you could answer it maybe just from what we have already today on the books or how we think about the rest of the year, if there was no further price gains after this year, just again, a peak into growth for 23. Is there a carry-over of 3, 4 percent?

Speaker 8: In terms of our rates, yeah, if we got no rate growth from here, right? And that held through 2023, you'd be talking about.

Speaker 8: mid to 3% sort of rate growth book down to the next year.

Speaker 18: Very helpful. Thank you so much.

Speaker 13: Thank you.

Speaker 2: Our next question is from Stephen Fisher of UBS. Please go ahead.

Speaker 16: Great, thanks. Good morning. Why don't you just touch upon how used prices trended over the course of the quarter and how that has affected your decision making in terms of use sales and overall fleet management. We've heard of some softening in various categories in the market. Just curious what you saw and how that's affecting your actions. Thank you. Have a good one.

Speaker 5: Steve, we made the strategic decision through Q2, just like you want to not sell as much fleet as we typically would during the quarter because the rental opportunity was so strong and so we chose to hold on to our fleet. The use market is very strong and that's benefiting us in the fact that the fleet that we are selling, we're able to get the market rates in the retail.

Speaker 5: So then we're selling more of our fleet in Q2 to retail in wholesale than we typically may in the auction market so that really drove up our proceeds because we're able to push the fleet through those channels as limited as it was.

Speaker 4: Yeah, but just a follow on. I'm like, you know, you're the follow on.

Speaker 4: The fact that the market is strong has not really sort of caused us to look to sell more gear because we can do far better as long as that gear is acceptable to our customers operational and doesn't have big repair and maintenance costs associated with it. It's far better for us to keep that in a fleet and rent it. It's far better for us to keep that in a fleet and rent it.

Speaker 16: Okay, but just to clarify, you are not seeing anything in the underlying market conditions of softening or anything like that.

Speaker 5: in the rental market or the used market? Used. I think the used market ran up pretty strong and is somewhat leveling off right now. It's not running up like it was previously.

Speaker 5: It's an elevated status right now.

Speaker 15: Okay, terrific. Thank you.

Speaker 2: Our next question is from Ken Newman of KeyBank. Please go ahead.

Speaker 12: Hey, thanks for squeezing me in for a quick follow up. Yeah, I just wanted to follow up on a prior question about moderating material costs. You know, just maybe could you put that into the context of whether or not there's been more progress on negotiations with your biggest suppliers about pass through pricing. I know that's been a bigger topic in recent months over the past 12 months here.

Speaker 12: at a badge and if that were to go through that be potentially a benefit to you if it's cost worth to continue to decline here. That's cost worth to continue to decline here. That's cost worth to continue to decline here.

Speaker 8: Yeah, Ken, I think that you might be following markets that are moving on as early basis and the suppliers are dealing with costs that move on six monthly, maybe annual basis. So, you know, still is rolled over, copper is rolled over, but way too recently, I think to have any impact on their ability to adjust pricing. So, you know, I don't think we're going to move to a deflationary environment on our equipment costs.

Speaker 8: because some of these commodity prices have rolled over. It is positive that they have. I'm sure that does take a lot of pressure off of our manufacturers but it's way too early I think for that to start factoring into our negotiations in terms of pricing of equipment.

Speaker 12: Understood. I guess the essence of the question is more so about whether or not there's been more progress in the negotiations with the suppliers regarding their want to be you know more more in parity with with material costs and whether or not that's kind of move forward versus you know the last two or three-quarters.

Speaker 8: We don't really talk to them directly about their individual import costs either. So I think they are still faced with cost pressures to still year over year pressure on them that that's the only work. So the conversations with the suppliers around prices heating up is the direction of travel.

Speaker 12: Understood. Thanks for squeezing in.

Speaker 3: Sure, no problem. And thank you all. I hope you all, we took a little bit longer to finish up to get everybody's questions in. So thank you all for joining us today. But before we close, I'd just like to point out that if you haven't already reviewed our 2022 Corporate Citizenship Report, it's on our newly redesigned website at ir.hercgrantles.com. And as always, if you have any questions, please don't hesitate to reach out to me. And we look forward to seeing you all soon. Thanks a lot.

Speaker 1: No.

Speaker 2: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.