Alta Equipment Group Inc. Q1 2023 Earnings Call

Speaker 1: I.

Speaker 2: Good afternoon and thank you for attending today's ALTA Entertainment. I'm sorry, ALTA Equipment Group, first quarter of 2023 earnings conference call. My name is Jason and I'll be your moderator for today's call. I'll now turn the call over to Jason Dan Meyer, Director of SEC Reporting in Technical Accounting. I'll be your moderator for today's call.

Speaker 3: with ALTA Equipment Group. Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. Oppressedly, detailing ALTA's first quarter 2023 financial results with issues this afternoon, and is posted on our website, along with the presentation designed to assist you in understanding the...

Speaker 3: will reopen the call for your questions.

Speaker 3: Before we get started, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including statements about future financial results, our business strategy and financial outlook, achievements of the company, and other non-historical statements as described in our press release.

Speaker 3: These forward-looking statements are subject to both known and unknown risk on certain keys and assumptions, including those related to altered growth, market opportunities, and general economic and business conditions.

Speaker 3: We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial conditions, and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call.

Speaker 3: Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today.

Speaker 3: press release and can be found on our website at investors.ulti equipment.com. I will now turn the call over to Ryan.

Speaker 4: Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. For those following along with the slide presentation, I will begin on slide 3. First, I will discuss our first quarter business highlights, our unique operating model, and the demand in our end user markets. Lastly, I will provide an update regarding the solid execution upon our growth strategy.

Speaker 4: $120.7 million, which included strong organic growth as well as contributions from our acquisitions.

Speaker 4: Construction and material handling revenue increased 233.1 million and 164.8 million respectively and our newest segment, Master Distribution, contributed the other 26.7 million in the quarter. As a result, adjusted EBITDA grew 36% to 40.8 million versus a year ago.

Speaker 4: to an increasingly diversified customer base. At the end of the first quarter, we had nearly 1200 skilled revenue-producing technicians, which is substantially greater than even the largest pure-play equipment rental businesses.

Speaker 4: Even during periods of challenging economic conditions and downturns in construction cycles, our business remains resilient due to the scarcity of product support personnel and resources in the major markets where we compete.

Speaker 4: uptime matters.

Speaker 4: Now for a quick update on the business segments. In the material handling segment, long-term trends towards warehouse and logistical automation persist in all to as well positions for this growth opportunity. We continue to see the benefits of our newly increased market footprint, which now includes Eastern Canada.

Speaker 4: and the sales synergies evident between the traditional forklift dealership model anchored by exclusive distribution rights and the engineered products business where we are unrestricted geographically but benefit from the significant infrastructure and sales coverage that comes with the integrated model.

Speaker 4: We estimate that we cover over 20% of the North American lift truck market with our exclusive rights dealership business and can cover North America and beyond through peak logics and the affiliated material handling products.

Speaker 4: The construction equipment segment is benefiting from infrastructure and other governmental legislation. Our Florida operations are performing well, helped in part by significant growth in non-residential construction projects and significant state spending on infrastructure.

Speaker 4: Furthermore, the state has announced a multi-billion dollar Everglades restoration project which aligns well with our equipment product portfolio of large articulated dump trucks, excavators, and other earth moving equipment.

Speaker 4: We are continuing to benefit from pent-up demand for services in the Florida market and our appetite to grow the technician headcount and parts and service sales in the region have been met with enthusiasm by our customers. Along with growth in our core Volvo construction equipment business, we are benefiting from the expanded product portfolio and investment in branch infrastructure.

Speaker 4: Our e-mobility business is well positioned to seize on opportunities across a broad range of products and services, and similar to our core business, we have anchored the segment on exclusive distribution rights in key markets.

Speaker 4: Here we are utilizing our existing branch infrastructure to support the product launch while limiting fixed cost exposure, improving market acceptance and viability. In parallel, we're building an in-house team of integrators and a portfolio of ancillary products to assist our customers in navigating and executing on the transition away from fossil fuels for transportation.

Speaker 4: This quarter we are reporting on our newly created master distribution segment which Tony will describe in greater detail during his commentary. The segment is currently comprised of the Ecoverse business which we acquired in November of 2022. Ecoverse has exclusive rights to distribute in the US and Canada for Dopstat, a premier line of recycling solutions.

Speaker 4: along with several other manufacturers of specialty recycling equipment.

Speaker 4: The recycling equipment market in the United States has been experiencing growth driven by various factors including increased environmental awareness, governmental regulations, and the need for more efficient waste management practices. Recycling equipment used in solid waste management can include shredders, balers, compactors, sorting systems, conveyors, and other machinery designed to process.

Speaker 4: dollar per year industry by the end of the decade.

Speaker 4: From a strategic perspective, all of the major tenets hold true from our debut as a public company three years ago. We have a unique platform to grow and consolidate in adjacent markets with significant barriers to entry and long-term growth prospects. We have a disciplined approach to M&A and fertile prospecting conditions.

Speaker 4: And we have a proven and repeatable execution and integration process led by a seasoned team of industry veterans.

Speaker 4: All this momentum has given us the confidence to increase adjusted EBITDA guidance.

Speaker 4: Lastly, I'd like to quickly touch on all this corporate culture. As a company, we strive every day to foster a culture of empowerment, accountability, and opportunity, and we rally around a shared purpose, delivering trust that makes a difference.

Speaker 4: I want to again thank our employees for delivering trust to our customers, our business partners, and to our valued shareholders. We believe that a purpose-built organization will be the foundation of our commitment to these key areas.

Speaker 4: Our commitment to environmental sustainability, including a focus strategy to drive customer adoption and commercial viability of various electric mobility solutions.

Speaker 4: the safety of our employees and technicians, and the dedicated and inclusive culture that we have created and continue to develop with each day. In closing, I'd like to thank the ALTA team for all your hard work in delivering a solid start to 2023. I'll now turn the call over to Tony, our CFO .

Speaker 4: Thanks Ryan, good evening everyone and thank you for your interest in Alt equipment group in our first quarter of 2023 financial results. I trust that you and your families are looking forward to a great summer as we all are here at Altta. Before I begin I want to thank my 2800 Altta teammates which now span from Illinois to Maine and from Canada to Florida.

Speaker 4: on a great first quarter, as you have set the footing for another remarkable year here at Ulta. Thank you for your continued focus and commitment to our customers and to each other. My remarks today will focus on three primary areas. First, I'll be presenting our first quarter results, which we are pleased with.

Speaker 5: I'll present for the first time the results of our master distribution segment, which encompasses our new Ecoverse business unit.

Speaker 5: Second, I want to briefly revisit our field population-based business model and present our view on the long-term impacts of what was a record Q1 in equipment sales for the business. As part of that discussion, I'll update investors on the financial operating leverage we continue to realize and how a larger field population votes well for future operating leverage.

Speaker 5: before I get to my talking points, it should be noted that I'll be referencing slides from our earnings presentation throughout the call today. I'd encourage everyone on today's call to review our presentation AnartinQ, which is available on our investor relations website at ALTG.com.

Speaker 5: Before I get into first quarter performance, quick reminder to investors on the seasonal elements of our business. Specifically, the construction segment in our Northern Geographies are subject to weather constraints in Q1, which makes this sequential comparison of Q1 to Q4 difficult. Thus,

Speaker 5: The more appropriate comparison for Q1 2023 is Q1 2022. And on a year-over-year comparison, we outperform it on just about every key metric. With that said, for the first portion of my prepared remarks, and in line with slides 10 through 16 in the investors.

Speaker 5: presentation, first quarter performance.

Speaker 5: For the quarter, the company recorded revenue of $420 million, which is a great start to the year considering the seasonality I just mentioned, and it's up almost $90 million versus Q1 of last year.

Speaker 5: Embedded in the $420 million of revenue for the quarter is a 16.2% organic sales increase over 2021-2022, making for a comparatively strong quarter. Specifically, new and used equipment sales increase 45% for the quarter to $220 million.

Speaker 5: far and away a record bubble of Q1 equipment sales for the business and in fact a quarter that compares favorably to our less seasonal sales equipment quarters historically.

Speaker 5: equipment sales for the business and in fact a quarter that compares favorably to our less seasonal sales equipment quarters historically.

Speaker 5: With equipment supply chain issues abating, we are seeing a more normalized environment in terms of equipment deliveries and having the additional equipment supply in the face of a strong demand backdrop is refreshing for our customers and our sales teams.

Speaker 5: And this quarter's equipment sales result was a simple reflection of matching supply and demand.

Speaker 5: Moving on to our product support business lines, we continue to realize impressive organic growth in our parts and service departments in both segments, with that figure increasing an impressive 15.3% in the material handling segment and 22.3% in the construction segment year over year.

Speaker 5: 0.6% on a consolidated basis year over year, primarily the result of a favorable rate environment for heavy equipment.

Speaker 5: From an EBITDA perspective, we realized $40.8 million in adjusted EBITDA for the quarter, which is up $10.8 million from the adjusted level of first quarter 2022.

Speaker 5: On a trailing 12 basis, we achieved $178.6 million of adjusted pro forma EBITDA, which converted into $127 million of economic EBIT or enlovered free cash flow for a 71% conversion rate on EBITDA.

Speaker 5: Additionally, on a gap basis, income from operations was $12.1 million for the quarter, up $7.5 million versus last year.

Speaker 5: Lastly, and as depicted on slide 13 of our investor deck, on an adjusted pro forma basis, the business is generating just above $77 million in annualized, levered free cash to common equity prior to growth cap X. In our view, this metric is indicative of economic earnings associated with the growth cap. That is to say,cosamin fucked up in age prices by recorded earnings.

Speaker 5: with driving equity value for shareholders.

Speaker 5: Before I move on to the balance sheet, I wanted to present to investors the financial performance for our new segment, Master Distribution, which was presented separately in our 10Q filed earlier today.

Speaker 5: As I mentioned earlier, ECOverse, which was acquired in Q4, is the first business unit in our asset-like master distribution segment, and it's off to a great start. For it's an inaugural quarter, the segment posted an impressive $23.5 million in equipment sales.

Speaker 5: $2.9 million in parts sales, which yielded $4.2 million in GAAP income from operations. Investors should keep in mind that Eco versus Sales, which are primarily weighted to selling equipment to its sub-dealers, are more heavily weighted to the first half with an additional emphasis on the first quarter of the calendar year.

Speaker 5: As we've mentioned previously, to investors, when we acquired Ecoverse, we believe strongly in the capital efficiency and return on investment profile of the master distribution business model, and Ecoverse proved us right in their first quarter as part of Alta Equipment Group. Thank you to our new family at Ecoverse, and we look forward to continued strength in that segment.

Speaker 5: for many years to come.

Speaker 5: Before I move on, a quick check in on the balance sheet as of quarter end and in line with previous periods. We ended the quarter with approximately $220 million in unsuppressed availability on our revolving line of credit, and total leverage came in at roughly 3.6 times 2023 adjusted EBITDA at the midpoint of our guidance.

Speaker 5: Now, moving on to the second area of my prepared remarks, I'd like to quickly revisit our business model and our view on the long-term impacts of what was a record Q1 in Equipment Sales. As Ryan and I have mentioned many times and in parallel with other dealership-based businesses, our business model and our long-term financial success is heavily predicated on how large our serviceable field population is.

Speaker 5: In simple terms, the larger the serviceable field population, the more high margin product support revenues the company is able to realize in the future.

Speaker 5: This business model is depicted graphically on slide 14 of our investor presentation.

Speaker 5: The obvious first obstacle to kick off that earning cycle is to expand our field population by selling more equipment than we have historically. And our sales team, supported by our OEM's ability to deliver product, did a tremendous job of increasing our serviceable field population in the first quarter of 23 when compared to last year.

Speaker 5: to the tune of $60 million of incremental equipment sales. And if you do the math, that incremental gain of $60 million in the quarter,

Speaker 5: should yield approximately $30 million of incremental annualized parts and service revenue over the long run. In summary, we are excited about the level of Q1-23 equipment sales means for our future product support prospects, and we hope to rinse and repeat this success in the coming quarters and for years to come. Before I move on to guidance, I wanted to follow up on my remarks from our last.

Speaker 5: of adjusted gross profit in Q1-23, when compared to last year, which led to an incremental $10 million of adjusted operating income for the quarter, which is 30% on an incremental basis versus 20% on a standalone basis for the quarter. This is the definition of creating operating leverage. Understanding that some of the operating leverage was related to the increase in equipment.

Speaker 5: adjusted EBITDA guidance, which was included in today's earnings release.

Speaker 5: From a nominal perspective, we've taken the guide up $3 million on both sides of the range. So the updated guide is now $180 million to $188 million of adjusted EBITDA for fiscal 2023. A couple of points to make here. First, our guidance has always been more heavily weighted to known variables.

Speaker 5: versus unknown in terms of revenue lines, where we have the most visibility. And for our business, those revenue lines are parts of service.

Speaker 5: and we are bullish that those lines will continue to grow for the foreseeable future.

Speaker 5: Simply put, our product support revenue set the bedrock for our guidance calculations. Second, as mentioned previously, new equipment sales, which can ebb and flow quarter to quarter based on a variety of factors, were definitely flowing in the first quarter, and our product availability added into Q2 gives us confidence for this foreseeable future on equipment sales.

Speaker 5: Lastly, while in the north the kickoff to our rental season was slightly delayed due to a difficult April weather-wise, we remain confident that rental utilization and rates will be solid when we put the final touches on 2023 as a whole.

Speaker 5: In closing, I want to once again thank my all to teammates for a great start to the year where it's committed to our strategy and our ability to execute on that strategy as we've ever been. And we look forward to a great 2023 for our employees, our business partners, and for ALTG shareholders.

Speaker 5: Thanks for your time and attention, and I will turn it back over to the operator for Q&A.

Speaker 2: If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, it is star one. Our first question is from Matt Somerville with DA Davidson. Your line is now open. Your line is now open.

Speaker 2: Hi, Ryan and Tony. This is Will Jelison on some of that this afternoon.

Speaker 2: Well, good afternoon. So for the first question, I'm curious to learn a little bit more about how additive the Florida Department of Transportation dollars can really be to the construction business and just to better understand how it helps the business between sales, rentals, parts and service. I'm wondering a little bit more about how you think about that impact.

Speaker 4: This is Ryan. I'll take that. We generally think of any stimulus coming as adding innings to the cycle because the...

Speaker 4: we see it as bullish, but it's hard to really measure. We think of it as just added buoyancy to the demand backdrop. I think it creates confidence amongst our customer based on the Florida will that they're gonna be busy for a long time on infrastructure work, which means they're more committed.

Speaker 5: to not only that first sale for us, but all the aftermarket sales thereafter.

Speaker 2: Okay, great. Thank you for that. And then as a follow-up, I wanted to ask you about product support because something that called out to me during the quarter was it was a pretty strong acceleration on a year-to-year growth basis relative to the last quarter in both materials handling and construction, which was really impressive. And I'm curious about the level of sustainability.

Speaker 5: and product support, so as maybe labor rates go up, we've got to charge more to our customers, and our skilled technician base is the intangible value of our business, as we've talked a lot about, and they're in high demand to keep customers' equipment up and running, as Ryan mentioned earlier. So.

Speaker 5: We have pricing power, that's number one, in terms of price times quantity. And so the bottleneck really becomes the quantity and that's where we talk about technician headcount, recruiting and retention. And we've done our operations team and our human resource team is doing a great job in that regard.

You know, we're focused on things like keeping, you know, nice facilities and keeping our technicians in the late model vans and investing in all the right areas to retain them. So when you're able to do those two things, you have pricing power, the P takes care of itself and when you're executing like our ops teams does in terms of headcount.

the queue comes along with it. So the ability to sustain those levels is really less predicated. We've got the equipment out there, as I mentioned, more predicated on Technician Headcount and reaping the rewards of what our sales team has given us the opportunity.

to do. That's great. Thank you Tony for answering that. Our next question is from Alex Rykale with B Riley. Your line is now open.

Thank you. Good evening gentlemen. Very nice quarter. First, you don't provide quarterly guidance, but how do you first quarter results stack up relative to your internal projections?

And I guess another way I'm asking this is, is your increased guidance because of the strong first quarter or is it because of improved expectations of the remaining three quarters?

Yeah, good question, Alex, this is Tony. I think it's a little bit of both and I don't mean to kind of cop out on the answer, but I think internally we met expectations on the more visible, if you will, revenue stream, so part service.

Rent to rent even, where there probably was a little bit of a beat in our minds is on the equipment line. And as I've mentioned in the past, that can be fleeting sometimes, and our OEMs are doing a great job. We had a more natural...

kind of inventory build through Q4 and into Q1. And then it becomes kind of a race with our technicians again to prep and deliver equipment and get it in the hands of customers. So if there was a beat kind of internally, it would have been on that equipment line. And then, you know, just the competence of what Q1 brought us.

and talking to customers and thinking about end markets kind of led to maybe a little bit more bullishness on the guy.

And then thanks for the new slides. Slide 14. Are you saying that parts and services as a percentage of new use in rental can rebound back to 55% in...

What is the typical lag in parts and services as it sort of catches up to a more normalized level relative to New used and rental sales? Yeah, Alex what what we were trying to depict is is using history kind of just as a as a

barometer, if you will, on average. So if you just look at the last couple of years, 50% parts and service relative to equipment sales. And what we were trying to, what I was trying to convey was to the extent equipment sales go beyond.

what they have historically. And in this case, in Q1, $60 million beyond 2021.

Someday there'll be a, and it won't be a step function immediately to your point, but someday over time as that incremental $60 million of equipment ages, breaks down, there'll be $30 million of parts and service revenue out there for us to sort of harvest, if you will.

at really strong kind of incremental margins. And so the point was not to say that we'd get back to 55, although I do think there's room to move that up. It's just the way the math works as you kind of layer more equipment on in the early innings, if you will.

and then the metric itself sort of catches up. So, and then you also have a mixed issue where construction might be a little bit less than material handling when it comes to product support as a percent of revenue. The second part of your question, Alex, how long? You know, we've done some studies on this, and the material handling business, it can be almost immediate.

because we're signing contracts for maintenance agreements alongside of delivering large fleets. Sometimes to the extent those fleets are replacing old equipment, there's really not much of a gain there. You might be able to charge a little bit more for the new fleet versus the old.

to the extent it's incremental, and the material handling side, the product support, revenue can hit immediately. More typical though is a two to three year lag based on our kind of internal analysis. Before that full, in this case, $30 million would sort of unveil itself. It would kind of come over.

pro rata, if you will, over that two or three year period. Very helpful. And then Ryan, you.

On slide 7, you highlighted expand alternative energy related opportunities. Can you go a little bit deeper into that opportunity?

So there are a couple opportunities as it relates to alternative energy and it's the fueling that goes along with electro electric drivetrains.

For the battery electric vehicles, it's going to be charging infrastructure and actually installation and inspection and maintenance of those types of systems. And then for the fuel cell truck, which is coming later this year, it's the actual gas delivery dispensing equipment onsite at the customer sites.

delivery vehicles, compressed tank delivery vehicles for the gas, that's all part of the ecosystem that's being built around this electro mobility and something we have a lot of experience from the legacy business on the material handling side.

delivery vehicles, compressed tank delivery vehicles for the gas. That's all part of the ecosystem that's being built around this electro-mobility and something we have a lot of experience from the legacy business on the material handling side. Very helpful. Thank you very much.

Our next question comes from Ted Jackson with Northland Securities. Your line is now open. Your line is now open.

Thanks very much. Congratulations on the quarter. My first question is really around equipment pricing. If you pay attention to all the heavy equipment manufacturers, and High Street Yale in particular, all of them have gone through some

you know, pre-material increases in terms of pricing to, you know, catch back up, deal with inflation. And a lot of those higher price sales are backlogged and starting to find their way through. So I'm kind of curious if we were to look at your new equipment sales, you know, kind of how much of it was pushed forward by units and how much of it was pushed forward by pricing in terms of growth.

Ted, what I would say is we're probably in line, what we're doing is we're trying to

nine times out of 10 is just passing along the price increase that the OEMs would say. So if Ister Yale has, I think, been pretty public about what's going on with their pricing, if you notice, our margins have actually expanded a little bit, but nothing significant. We're going to trade kind of in that.

10 to 14, 10 to 15% GP range. And so we would have realized the same kind of increase in costs and been able to pass that along to the customer. One of the things that we highlighted in the press releases

We are not seeing any cancellations in the backlog. We still have despite kind of working, you know, having a lot of equipment sales, as I mentioned, backlogs remain really, really high. So, you know, the incremental $60 million, you know, we are taking share in certain regions.

Like Upstate New York, where we bought Vantage back in 2020, our market share has gone up. We're doing that in certain pockets of, other pockets of our business as well. So again, to the previous point on price times quantity, it's a combination of both. I can't give you the ratio, but I know it's not just all price, I guess is the point I'd like to make.

You know, as supply chains are easing and backlogs going to get worked through and again, it seems like the timeline ticket bring for the. Uh, oh, yeah, I'm sprayed their backlogs back down to let's call it normalized level sometime.

Call it, you know, early first half of 24. Is it fair to assume that as this plays itself out that we should see like consistent growth with regards to, you know, on a quarter by quarter basis for new equipment sales as we roll through 23 and get to.

I think the way I'd answer that, Ted, is the rest of 23, if you look at the inventory levels that we have coming out of Q1.

versus the sales levels, we're somewhere around two turns on new equipment and we probably, that's a pretty good level from a kind of more natural state of affairs. You know, we've been turning our new equipment much faster than that. The last couple of years has given supply chain issues.

So, to the extent the demand backdrop kind of holds here, we would expect to have good equipment sales throughout the remainder of the year, and specifically on the material handling side, where we're selling out of a locked-in backlog that...

Heister Yale likes to speak to as well. We feel pretty good about 2023 as things kind of, you know, to your point on 24, and backlog starts to normalize. You know, I guess we're gonna have to see, you know, if you look at the bookings in the forklift business just in general.

be able to continue to grow that line.

Next topic was just kind of equal versus you brought up a comment with regards to seasonality, business nannicity and things originally were different here, because we have a lot of cabbage

Suggest it would be typically stronger in the first half of a year, the second half. Can you walk us through that a little bit since it's such a new part of the business and help us understand kind of how, for life of a better term, a typical year revenue might flow through that portion of all that going forward? Yeah, so just to recap, ecoverse.

in mind that they're selling to dealers like Ulta. And so as I mentioned previously, we've got a little bit more of a natural state of affairs supply chain wise. We're inventorying up specifically in our construction business in Q1, Q2 and then selling down inventory.

Ted, what I would say is we expect Ecoverse to do better than what the $10 million of EBITDA was in 2022. I think we spoke previously about 15, 20% a year would be something we'd be pleased with.

looks like here. So I'm not asking per se about the year, just kind of understanding like a cadence of it. So you know if I was to say move forward to say 24, 25 I would think about Ecoverse and say the first quarter is going to be by far their stronger quarter and you know by default like you know the third and fourth quarters are going to be their weaker quarters.

Yeah, I would think of, yeah, I think the way that I would think about it is maybe fourth quarter, first quarter would be their stronger quarters and then two and three, Q2 and Q3 may be a little bit weaker.

Okay. And then my last topic, I'll get out of your hair. Just a little discussion with regards to the M&A pipeline. What kind of activities are there, any changes in terms of what you're seeing, in terms of valuations for the assets that you look for, any change in terms of the competitive landscape for assets that you're applying for?

Nothing out of the ordinary, Ted. This is Tony. We continue to take incoming calls. We're a known buyer at this point in our dealer networks and in our geographies. And so, we're being mindful and being selective on what deals we're pursuing.

with what kind of OEMs, but there's very much a pipeline of classic Alta M&A opportunities that are in front of us right now and we really haven't seen valuations.

change. I've been with Alta eight years and still haven't seen... there's not a lot of volatility in private equipment companies when it comes to the multiples.

All right, thanks very much.

Thanks, Ted. Our next question is from Brian Fast with Raymond James. Your line is now open. If you could speak up.

Thanks. Yeah, thanks.

Thanks. Good afternoon, guys. Just on the— Oh, 8-5. … 16 AII.

Just on the Yale Industrial Trucks acquisition this summer of last year, now that we're coming up on a year of that acquisition, do you have a sense that you're gaining market share there, and is that presenting additional opportunities in the region?

Ryan, this is Ryan. I think it's too early for us to report on, I don't know, we ever report on chair first specific OEM, but what we could say there is that we're having growth in the sales area largely as a function of allied lines and just support and training from the parent. So it's, we're excited about the progress as we've got started there.

Yeah, Brian , we've brought some of the OEMs that we represent in the US.

that we've brought those relationships to Canada, and we've made some sales. As Ryan mentioned, early innings, but our sales force up there is really excited to get, and then the technicians working on new things and new technologies, so we're off to a good start there.

Okay, fair enough. And then just on inventory, we saw build-in inventory, obviously, during the quarter, as you guys ramp up. Could you just talk about your comfort level there? Do you feel like you have the right mix of inventory, or are there areas where it's still difficult to source?

Yeah, good question. We're comfortable with the level in general. You know, ended the quarter there with $300, $380 million of new and used equipment. And we're always comfortable with our parts inventory.

just given kind of how quickly it turns. So we're always focused on the equipment, and as I mentioned, we're somewhere around two turns on new and used, which is fine. We've been to these levels, so macro comment there, fine. There still are pockets of...

our product portfolio that are still dragging relative to history in terms of deliveries and lead times and so on, where we wish we had more of a certain product versus kind of, well.

period, we wish we had more of a certain product, but in general the supply chains are abating. We like the mix of our fleet and the new equipment, and what I would say too is when you're part of these dealer networks, when you do have inventory, dealer trades become much more, they're part of things. So you work with your sister dealers on.

they may need something somewhere in some other geography, we may need something and you work together to kind of take it to the competition. And so we haven't had to do a whole lot of that the last couple of years, but that will be something that kind of reignites itself here in the coming months and years.

Okay, thanks. I appreciate the color. That's it for me.

There are no more questions, so I'll pass the call back over to the management team for closing remarks.

Thank you. In closing, I'd like to reflect back on our three years as a public company. We have navigated a global pandemic, historic supply chain disruptions, and a rising interest rate environment. Through this, Altus team executed flawlessly on our growth strategy and our commitment to servicing our customers at the highest level.

As we look to the future, we see tremendous opportunity to build meaningful scale and operating leverage for the business and with this long-term value for our shareholders. I want to say thank you to all my Ulta teammates for a truly phenomenal performance and thank you to our shareholders for your continued support. That concludes the call. Thank you.

That concludes conference call. Thank you for your participation. You may now disconnect your lines.