Q3 2022 H&E Equipment Services Inc Earnings Call
Good morning, and welcome to <unk> equipment services third quarter 2022 earnings Conference call.
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.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note this event is being recorded.
At this time I would like to turn the call over to Mr. Jeff Chastain, Vice President of Investor Relations. Please go ahead.
Thank you and good morning, everyone welcome to our review of <unk> results for the third quarter of 2022.
We appreciate your participation and your continued support a copy of the press release covering our third quarter results was issued earlier today and can be found along with all supporting statements and schedules at the <unk> website, Www dot HD dash equipment Dot com our discussion this.
Morning is accompanied by a slide presentation, which can also be found at the <unk> website under the Investor Relations tab events and presentations.
As you will see on slide two of the presentation I'm joined today by Brad Barber, Chief Executive Officer, John Engquist, President and Chief operating Officer, and Leslie Magee, Chief Financial Officer, and corporate Secretary.
Brad will begin today's discussion, but before I turn the call over to him I'll call your attention to slide three and remind you that today's call contains forward looking statements within the meaning of the federal Securities laws.
Statements about our beliefs and expectations and statements containing words, such as May could believe expect anticipate and other expressions constitute forward looking statements.
Looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward looking statement.
Summary of these uncertainties is included in the Safe Harbor statement contained in the company's slide presentation for today's call and includes the risks described in the risk factors in the company's 2021 annual report on Form 10-K, and other periodic reports.
Investors potential investors and other listeners are urged to consider these factors carefully in evaluating the forward looking statements and are cautioned not to place undue reliance on such forward looking statements. The company does not undertake to publicly update or revise any forward looking statements. After the date of this conference call.
So we are referencing non-GAAP financial measures during today's call you will find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation as supporting schedules to our press release and in the appendix to today's presentation materials.
Finally, unless specifically noted our results and comparisons for the periods reported and discussed. This morning are presented on a continuing operations basis.
Now I'll turn the call over to Brad Barber, Chief Executive Officer of <unk> equipment services.
Okay.
Thank you, Jeff Good morning, and welcome to our review of the third quarter 2022 financial results. Your participation in today's call and continued interest in HD or appreciate it.
Our third quarter financial results were exceptional and continue to trend to financial improvement across consecutive quarters practice of five focused on rental operations has been a significant component of our consistency in 2022 alright.
Our industry, leading rental rates fleet utilization fleet growth and steady expansion of our branch network have also contributed to the quarter's outstanding results. Collectively. These factors have led to substantial improved financial performance in the third quarter, which included record revenues in our equipment rental segment strong gains and profitability.
Notable margin appreciation on both a business segment and consolidated basis.
Proceed to slide four.
I'll begin this morning with a review of our financial highlights for the core followed by discussion of several of the critical performance factors that contributed to another impressive quarterly result brought our equipment rental segment.
In addition, I'll address our outlook for it for the industry and why I currently believe strong business conditions should persist through the fourth quarter and into 2023.
I will close with a rundown of considerable progress achieved towards expanding our business and positioning <unk> for future success.
Relating to the latter point I will discuss our previously announced acquisition of one source equipment rental incorporated which we closed earlier. This month lastly will follow with a thorough review of third quarter financial results, including business segment performance and an update on our capital structure and liquidity then we'll be happy to address your questions.
Onto slide six.
A review of our third quarter highlights reveals the continued strength and vigor in the equipment rental business cycle business conditions remain fundamentally strong throughout the quarter with elevated activity across our branch network.
Given these robust business fundamentals total revenues in the third quarter reached $324 3 million or 17, 7% better than the same quarter in 2021, while improving 10% on a sequential quarterly basis.
Also adjusted EBITDA gained 24, 1% on a year over year basis closing the quarter at $139 4 million, while posted a margin of 43% with both financial managers, representing a record for our company.
Revenues from our equipment rental segment, which include ancillary rental revenues were up 28, 6% on a year over year basis, and 11, 4% sequentially totaling a record of $253 6 million.
The strength of this performance was due in part to a combination of healthy rental rate appreciation, a strong physical fleet utilization, which averaged 73, 3% or 140 basis points ahead of the same quarter in 2021.
Also equipment rental revenues benefited from continued fleet growth.
Our rental fleet as measured by original equipment cost or OSC was $305 4 million larger than a year ago measure on an increase or an increase of 16, 7%.
A fundamentally sound business cycle will typically exhibit three important attribute rental rate appreciation strong utilization and growth in the rental fleet.
Each was present in the third quarter and the results and it resulted in record revenue performance.
Onto slide seven please.
Rental revenue in the third quarter totaled $224 1 million a year over year increase of 26, 9% and a sequential quarterly improvement of 11, 4%. The record results surpassed the previous record set last quarter rental gross margin rose to 55, 6% or 470.
Basis points better than the year ago quarter, and 190 basis points ahead of the second quarter of 2022.
The segment's results were supported by another quarter of excellent pricing achievement as demonstrated.
By year over year rental rate increase of 10, 1% and our sequential quarterly gain of three 2%.
On average our rental rates have increased an impressive 8.9% through the nine months ending September 32022.
Our ability to achieve such impressive levels of rate increase was made possible by our proprietary smart re platform and exceptional execution by our professional sales force.
An excellent pricing environment was supported by a combination of persistent customer demand and a constrained supply of equipment, which together sustained high utilization through the quarter.
As noted earlier, our third quarter average physical utilization was 73, 3% representing our highest quarterly measure since the second half of 2017. The result was 140 basis points ahead of the third quarter of 2021, and 10 basis points better than the previous quarter and 2022.
Despite growing our fleet I always see by $277 million since the beginning of 2022, including $129 million in the third quarter utilization of our fleet has shown sequential quarterly improvement in 2022, which is indicative of the strong underlying demand for our equipment as well as our exceptional.
Racial capabilities.
The robust industry environment resulted in the third quarter dollar utilization of 42, 7% or 380 basis points better than the third quarter of 2021, and 180 basis points ahead of the previous quarter. In 2022. There was the result was yet another record in the quarter.
As we manage through the final quarter of 2022 and consider business prospects for 2023, we're continually encouraged by what we see out here.
Slide eight please.
We continued to experience a steady backlog of projects in the non residential construction and industrial end markets.
Feedback from our customer base remains reassuring with projects proceeding as planned and also with the continuation of a robust demand global supply chains remain challenge limiting the immediate availability of equipment.
These factors reinforce a strong business environment and apart from traditional seasonality or are expected to sustain a set of underlying fundamentals characterized by strong fleet utilization and favorable pricing trends into 2023.
In addition, we remain encouraged by the indicators for future construction activity.
Recent measures from Dodge momentum index, and the architectural billing index and the associated builders and contractors continue to signal the likelihood of further expansion well into 2023 as additional construction projects into the planning stages. Furthermore, we expect to benefit from the onset of numerous infrastructure.
Projects, beginning in 2023 as well as other construction projects that contribute to the expansion in the U S manufacturing capabilities and renewable energy.
We believe these programs will provide greater visibility to emerging construction opportunities.
Our evaluation of projected construction activity in the end markets, we serve reinforces our confidence in the future and represents a sturdy base of support and an important catalyst for growing our company.
Slide nine please.
Throughout the third quarter, we demonstrated exceptional progress in our strategic initiatives, which earlier this year, we identified as record fleet investment for the rental fleet and continued expansion of our branch network. In fact, 2022 has been a year of record growth and expansion for <unk>.
Despite continued disruptions to swap two global supply chain, we increased the year to date gross capital investment of our fleet to $379 5 million, including $163 9 million in the third quarter.
The size of our fleet as measured by always see is now just over $2 1 billion, representing a record for the company.
We expect to close 2022 with gross capital expenditures in a range of 465 million to $500 million.
Regarding expansion of our operations our acquisition of one source, which closed on October one 2022.
<unk> increased our branch network by 10 locations, including an initial president.
Presence in three states, Illinois, Indiana and Kentucky.
Additionally, we gained density with locations within our existing coverage area.
One source is an accurate excellent cultural fit for <unk> with an emphasis on operations excellence and customer satisfaction.
The integration process is underway and we're excited about the prospects of our combined operations as well as our growing presence in the Midwest and south.
Slide 10 please.
The consistent progress of our accelerated new location program was evident in the third quarter with four branches opened during the period the.
The openings included our tests branch at Florida are 12 branch in California, Our 21st branch in Texas, and our first branch in Delaware.
The latest branch openings, bringing the total of new locations. This year to eight with more openings expected in the fourth quarter. We are confident in achieving our goal of no fewer than 10, new locations in 2022.
As I conclude my comments on the quarter and prepare to turn the call over to Leslie I want to review the substantial progress achieved over the last 12 months to position the company for better long term success.
Progress began in 2021 with a transformative divestiture, including the sale of the Crane business.
This was a consequential step in our evolution to a pure play rental focus.
Short time later, we exited earthmoving distribution in the state of Arkansas, and we continue to evaluate strategic opportunities that would further concentrate our focus on rental operations.
<unk> has clearly demonstrated the ability to transition our business, while successfully executing strategic growth initiatives in less than two years, we have substantially exited our lower margin less predictable distribution business and simultaneously delivered significant improvement in key financial metrics. Following our intensified focus on the rental business.
Also we've added 28 locations to our branch network expanded to 120 locations across 29 states, while investing significant capital in our rental fleet, which now sits at a record OFC of more than $2 1 billion.
Through this period of transition and growth our operational performance has remained exceptional.
With a greater concentration on rental operations HED remains poised for revenue growth and margin appreciation throughout this fundamentally robust business environment, while benefiting from a steadier base of revenues and margins through the entirety of the business cycle.
So what that highlight our outstanding suite of information systems and platforms that are instrumental in achieving many best in class performance measures.
These systems will continue to evolve and support our operating proficiency.
Finally, <unk> has both an experienced and motivated team of loyal professionals, who demonstrate a dedication to excellence and respect towards our customers and each other in addition to our intensified focus on rental operations. It is our robust systems talented workforce and attract geographic footprint that positions <unk> for <unk>.
Tesla for a successful future.
Slide 11 please.
I will now turn the call over to Leslie for a review of our third quarter financial performance Lastly.
Thank you Brad good morning, and welcome everyone I'll begin today's financial review on Slide 12.
Third quarter revenues totaled $324 3 million, an improvement of $48 8 million or 17, 7% compared to the third quarter of 2021. The increase was led by the combination of a larger rental fleet rising rental rates and strong utilization.
Same factors drove a 26, 9% increase in rental revenue, which set another record in the quarter totaling $224 1 million compared to $176 7 million in the third quarter of 2021.
Rental rates increased 10, 1% when compared to the year ago quarter and were three 2% better on a sequential quarterly basis.
Utilization remained strong throughout the quarter closing at an average at 73, 3% or 140 basis points ahead of the third quarter 2021.
And 10 basis points better on a sequential quarterly basis.
We continued our record investment in the fleet with fleet, we see increasing $305 4 million or 16, 7% when compared to at least see at September 32021, since the close of 2021, and we see is that $277 million or 14, 9%.
<unk>.
Continuing with other business segment result used equipment sales in the third quarter declined $10 8 million or 34, 7% to $20 3 million, we continue to prioritize utilization, while we only question that remains constrained, resulting in lower sales across all major product lines.
New equipment sales increased by $4 1 million or 21, 4% to $23 5 million compared to the third quarter of 2021 with the increase due primarily to higher sales of earthmoving and other equipment.
Consolidated gross profit set another record in the third quarter totaling $151 9 million, an increase of 38 million or 33, 3% compared to the third quarter of 2021.
Gross margin grew to a record 46, 8% or 540 basis points ahead of the third quarter of 2021, and 190 basis points better than the sequential quarter in 2020 team.
Higher margins on rental rental either in used equipment sales were the primary drivers at the record result.
A comparison of third quarter business segment margins to the year ago quarter with solid margin improvement with casually equipment rental margins at 55% compared to 45, 6% and record grin on margins at 55, 6% compared to 59%.
Also used equipment margins in the quarter improved to 53, 7% compared to 37, 6% with blade only margin, which exclude used equipment obtained through trading improved to 55, 6% compared to $39 seven Christine.
Margins on newly Quintanar were 13, 8% compared to 12, 4% and finally margins on parts sales improved to 29% compared to 24, 5% while service margins dipped slightly to 63, 2% compared to 65, 2%.
Slide 13 please.
Income from operations in the third quarter increased 42% to $64 million compared to $45 7 million in the third quarter of 2021.
Martin into third quarter to 19, 7% compared to 16, 6% in the third quarter of 2021.
The improvement was primarily due to higher gross margins on rental rental leather and used equipment sales and partially offset by lower gain on sales of property plant and equipment our PP&E.
Recall the prior year results included a gain of $5 3 million relating to the sale of our Arkansas branch, which was a component of our transition to a pure rental Falcon.
Proceed to slide 14 please.
Net income in the third quarter raise 55, 2% to $38 4 million or a $1 five per diluted share compared to $24 7 million or <unk> <unk> per diluted share in the year ago quarter.
Our effective income tax rate in the third quarter was 25, 2% compared to 24, 7% over the same period of comparison.
Let's move to slide 15 please.
Adjusted EBITDA in the third quarter reached a record $139 4 million or 24, 1% better than the prior year title of $112 3 million.
The percent increase compared favorably to our 17, 7% improvement in total revenue our adjusted EBITDA margin in the third quarter increased to a record, 43% or 220 basis points better than the third quarter of 2021, and 160 basis points ahead of the prior quarter.
During 2022.
Stronger revenue mix, along with higher margins on used equipment rental and rental either trials the favorable outcome, which was partially offset by lower gain on sales of PP&E. Following the prior year sale of the Arkansas branch.
Next slide 16 please.
SG&A expenses totaled $87 9 million in the third quarter, an increase of $13 5 million or 18, 1% compared to the third quarter of 2021. The increase was due primarily to employee salaries wages incentive compensation related to increased profitability and head count.
In addition, higher facility expenses liability insurance and professional fees contributed to the increase.
<unk> as a percentage of revenue SG&A expense in the third quarter.
Were unchanged at 27, 1% compared to 27% a year ago.
Our branch expansion efforts contributed $3 3 million as expansion in the third quarter of 2000, 22000, <unk> compared to the year ago quarter as nine branches were opened since the year ago period.
Slide 17 please.
Turning to our capital expenditures and cash flow growth slate capital expenditures in the third quarter totaled $163 9 million, including noncash transfers from inventory net rental fleet capital expenditures in the quarter were $144 5 million.
Gross PP&E capital expenditures for the third quarter were $11 9 million why net PP&E expenditures were $11 1 million.
Our average fleet age as of September 32022 remained among the lowest in the industry at 46 months and compared to the industry average fleet age at 53 months.
Net cash provided by operating activities totaled 107 million in the third quarter, while free cash flow used in the quarter with $47. One with the latter result, reflecting the continuation of our fleet investment program.
Slide 18.
On September 30 of 2022, the size of our rental fleet based on original equipment cost was approximately $2 1 billion, an increase of $305 4 million or 16, 7% larger than at the close on September 30th 2021 average dollar utilization in the third quarter of two.
22 improved to 14, 7% compared to 38, 9% in the prior year quarter.
On slide 19.
Net debt at the close of the third quarter was approximately $1 billion compared to $973 million at the close of the previous quarter and 2022, our net leverage in the third quarter remained at two two times over the same period of comparison, we have no maturities before 2028 on our one.
Two 5 billion of senior unsecured notes.
Let's flip to slide 20 please.
Our liquidity position at September 32022 totaled $968 million, including a cash balance of $225 million and borrowing availability under our amended ABL facility of $740 3 million.
Excess availability under the ABL facility improved to approximately $1 4 billion at September 32020 team compared to approximately $1 2 billion on June 30 of 2020 team with the increase reflecting the continued investment in our fleet and favorable fleet appraisal results.
Our minimum availability as defined by the ABL agreement remains 75 million by definition excess availability is the measurement used to determine if our springing fixed charge is applicable with excess availability of $1 4 billion. We continue to have no covenant concerns.
Finally, we paid our regular quarterly dividend of <unk> 27, and a half cents per share of common stock in the third quarter of 2022, while dividends are subject to board approval. It is our intent to continue to pay the dividend.
Slide 21 please.
In summary, our third quarter results are further evidence at the success of our business strategy, our intensified focus on rental operations, including significant fleet investment and steady expansion of our geographic reach has strengthen <unk> competitive position, leading to an expanded base of opportunities and what remains.
Fundamentally robust cycle.
Later opportunities have led to consistent and meaningful improvement in financial performance gross profit and EBITDA are currently at record levels as our rental revenues and margins also our dollar utilization, which is a measure of how well we are deploying capital to our fleet stood at 42, 7% this quarter a level that.
It would be difficult to achieve in absence of a pure play rental strategy.
Outlook for our industry remains encouraging with new opportunities emerging due in part to the U S manufacturing and energy transition you should expect further expansion of our operating presence. In addition to a continued focus on operational improvement and when appropriate and occasional enhancement to our business strategy all of which are in.
Tended to drive further improvement in financial metrics.
With that we're ready to begin the Q&A period, operator, please provide instructions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question is from Seth Weber with Wells Fargo. Please go ahead.
Hi, guys. This is actually Larry savitsky on for Seth today, Thanks for taking my questions.
Sure. Thank you Larry.
I just wanted to start out with Lee I mean, obviously really really strong again on 0.1.
Percent year over year.
How should we think about rate going into the fourth quarter in 2023.
I mean, how much further can you see raiko or what are your expectations there.
Yes, our base expectation is that rates will remain positive we're not immune to seasonality.
You know sometime in November .
October is typically our peak utilization loss in November we start to see some softness from both weather and holidays.
Where we go with Wright will probably be determined by how much typical seasonality.
We were seeing this this quarter.
I don't know that it's impossible that we scare at 10% exit rate.
But I don't I wouldn't say, that's a given I think we're probably somewhere in the eight 5% to 10% expectation with maybe another point coming out of the quarter. John would you have anything to add to that.
Yes look it's.
As long as utilization holds which which we expected will as Brad mentioned October is typically our peak month for utilization and with where we are today. We are very comfortable we expect the remainder of the quarter to be solid demand is still there.
Brad mentioned seasonality is a reality that we're going to have to deal with when we look at Q4 of last year. The seasonal impacts were not typical it was it was not nearly as impactful as it has been in past year or so.
That being said I think.
It is fair to say that we could achieve double digit exit rate.
Between the eight 5% to 10% range is is where we feel comfortable.
Okay, great. Thanks, that's very very helpful. Thank you.
Yes.
Follow up.
On your acquisitions can you just tell us how much acquisitions contributed to revenue in the quarter end.
Expectations for the fourth quarter.
Yes.
It contributed nothing to the quarter, we actually closed at the beginning of October so it will be embedded in.
Into Q4.
We've had pretty limited disclosure, but roughly a $138 million, we see in our revenue mix that's similar to ours.
Point out.
As excited as we are this is a great acquisitions superior culture, great team, where we're going to do good things. This is a smaller business, where we're going to find opportunities to purchase product at a better price and to increase their rental rates among other operational efficiencies and I think the point there is.
Theyre not theyre not performing at quite the same levels of HMA.
$130 million of fleet.
Bringing a very motivated capable team aboard and theyre going to be a positive contributor here in Q4 and going forward.
Great. Thanks for the color guys I appreciate it.
Thank you.
The next question is from Steven Ramsey with Thompson Research Group. Please go ahead.
Good morning wanted to continue with that line of thought on one source.
Maybe can you talk to.
The EBIT margin gap versus <unk>.
Just order of magnitude and how quickly you think you can get.
One source to your company operating levels.
Now let me take the Steven Thank you for the question, let me take the last piece of that first I think given a steady state of economy, we will have them at our levels in 12 to 18 months.
You know as it pertains to the impact I mean, they are a little lower than we're achieving but give us 12 months to 18 months and I think those folks as part of <unk>. They will be operating at the same levels.
Excellent and then when you compare this October to other years in October.
Visibility right now greater than prior years as you look forward and what is fueling our supporting that visibility.
Yes.
Our visibility today is better than the last few years for sure.
We've been in like environments, before where we have really good visibility with the momentum we see in our utilization as we sit here today with the rate achievement with the discipline in the market with the constrained equipment supply that is going to persist through the better part of next year, if not all of next year.
Lays out a nice set of dynamics for us to continue to grow and achieve improvement our business. There is not a customer we speak to of any magnitude has anything other than conservative Manning their projects and getting these things started no postponements no cancellations in new projects hitting the books every day.
So I do feel like we see while there are some other looming economic concerns.
Our visibility in all of the data points anecdotal unquantifiable point to another very solid 2023.
Okay helpful and then.
Could you talk about the.
Occasional enhancement of your business strategy big moves in the past year, plus what do you what does that mean going forward.
It can mean a variety of things you know we continue to evaluate acquisition opportunities I think we've been I think we've proven to be very selective and disciplined.
Going to continue to be selective and disciplined we always have the opportunity of adding a larger portion or maybe state it better a meaningful portion of specialty rentals into our mix.
Thats not fixing to occur next week, but that's an opportunity for us.
The opportunity for us to continue to develop our system Gino so often.
Folks may believe that with a 120 locations in 29 states that in some way our systems may not be up to par with our largest competitors and that's just not the case, we could run up on enterprise multiples of our current size with our systems and so as we continue to build those out I think theres a lot of opportunity built into that.
Achievement.
So acquisitions specialty.
Punch it out 10 plus.
Plus locations a year very proud of our team we spent the better part of a decade.
Paying some tuition or perfecting our warm start strategy thats accompanied by outstanding acquisition excuse me talent pipeline and so we've done the work.
60, plus year old company.
We've always been consistent we've always been reliable.
We've all we've been growing in rental for the last decade, and we're positioned ourselves now so we can grow a little bit faster than rental while we're more focused and thats going to continue to show up in our results.
Excellent and then last quick one for me residential vertical is 10% of trailing 12 month revenue that is slowing clearly and in the coming months, how much of that is multifamily and therefore may have more durability.
And should it slow meaningfully how could this impact utility utilization rates and the need to redeploy that fleet.
It will have no impact.
We're almost entirely multifamily it's it would be rare to see in <unk> equipment machine on a single family residence.
Great. Thank you.
Thank you.
The next question is from Sherif <unk> with Bank of America. Please go ahead.
Hey, good morning, everyone and congratulations on the great quarter.
Thank you.
So just looking at the strong market demand Youre seeing in your current fleet. How are you thinking about equipment orders next year relative to this year and how do you placed a large or a substantial portion of your orders for next year already.
Sure. If we have we are we've placed both pose in what we call apos advanced purchase orders.
And so yes, we have we've negotiated with all of our key manufacturers and our orders are slated for next year with an ability to continue to refine as we closed the year out.
And could you give us a.
A sense of the pricing thats been negotiated on those orders.
Sharif so far we are looking at.
Mid single digits I mean.
Our best analysis tells us we're going to be somewhere in the 4% to 6% range and that's with all products combined.
Got it and then just looking at rental other theres a strong pickup in revenues in it. It's got the highest dollar utilization across your portfolio could you give a bit more color on the sub products and demand in that segment.
Well when you talk about rental other that's primarily few fuel is one of the larger pieces hauling and some other ancillary revenue so.
<unk>.
Could you clarify your question a little more so we'll make sure we are accurate.
And our response.
Yes, so so looking at the fleet.
The fleet utilization and the other category you've seen the strongest dollar utilization in that category. If you could give a bit of color on the demand. There that's driving that strong dollar utilization, yes normally with other we refer more to the gross margin associated.
I think the answer to your question is our teams have done an outstanding job of increasing delivery fees and fuel and fuel charges.
To our end users as we've continued to grow the fleet raise rates and set new levels and utilization damage waiver is also another component of that Theres no material change in damage waiver, but it's a it's another component of those ancillary charges.
Understood and then just within nonresidential exposure, how much of that is tied to new builds versus maintenance or other ongoing.
Activities, such as Capex spend.
It's a mix, it's really more predicated by market.
We're heavily reliant on new construction, that's certainly where the majority of those dollars are but we have selected markets, where there is significant ongoing maintenance on an annual basis. So theres a mix and it's really more driven by geography.
Understood. Thank you.
Thank you.
Again, if you have a question. Please press Star then one the next question is from Stanley Elliott with Stifel. Please go ahead.
Hey, good morning, everyone. Thank you for taking the question and congratulations on a great year so far.
You all mentioned and I apologize if you if you for all the answers some of that's been bounced around our calls but your supply of equipment has been constrained do you get a sense of that improved as much.
In the coming year, and I say that in the context of.
Both dollar and time you'd have been exceptionally strong this year, just trying to get a sense for how that could play out and into next year.
Yes, I don't I don't get the sense that it's going to improve much for this next year, meaning availability from the manufacturers.
I do believe that we have improved the alignment with manufacturers that we're going to spend our money with.
And that we're going to be in better position to achieve Stanley. If you remember we reduced our original capex guidance and as I stated very clearly on the last call that was due to one reason manufacturers' inability to deliver not our desire not to take it. So I think that's going to improve.
One of the questions. We receive just earlier was about have we issued poser.
We have excellent availability going into next year, but I don't think Thats representative of what's going on the supply chain healing itself I think thats I think thats good planning with our team at selected manufacturers, who were confident could supplier needs.
Bring it on one source I guess.
Does that change your appetite for additional warm starts.
In the coming year, and you know even within the context of some of the supply equipment being constrained.
Look it certainly it certainly increases our appetite in those geographies.
As you know we prefer to do warm starts where theres. Some name recognition, where we have a warm base of customer revenues, where we have employees and so bringing this fine company into our company is going to allow us to consider this particular geography more than we have before entering three new states is important to us.
We're looking forward to making those additional considerations.
And then lastly, with Hurricane Ian.
And your position within Florida, how do we think about that in terms of.
You know I don't know if you can drive kind of your time or dollar you're much higher but you know.
It sounds like it would be Oh, you should soak up a lot of additional equipment down there.
Maybe is there any way to kind of quantify or ballpark, what sort of a tailwind that could be for the business over let's say 12 months 18 months something like that.
Well one thing that I can say is the demand is going to be strong for an extended period of time.
As you mentioned.
We don't have a lot of excess supply to feed the need of what's going on down there in south, Florida, but is it an opportunity for sure. It is when when we start to see seasonality impacts hit down there, we will have a little bit of excess fleet come available and theres certainly going to be a place to send it with.
All the repairs and clean up that's going on down there.
Great guys. Thanks, so much and best of luck.
Thank you Stanley.
This concludes our question and answer session I would like to turn the conference back over to Jeff <unk> for any closing remarks.
Okay. Thank you Gary and thanks, everyone for participating on today's call and for your continued interest in HD. We look forward to speaking with you again, Gary. Thank you for assisting us on today's call and good day everyone.
You're quite welcome Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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