ABM Industries Incorporated (ABM) Q1 2022 Earnings Report, Transcript and Summary

00:07 Good afternoon, and welcome to the ABM's First Quarter Fiscal 2022 Earnings Call. At this time, all participants are in a listen-only mode. Please not that there will be a brief question-and-answer session following the ABM management teams formal remarks. [Operator Instructions] As a reminder, this conference is being recorded. 00:33 It is now my pleasure to introduce Paul Goldberg at ABM. Mr. Goldberg, you may begin.

00:41 Good afternoon, everyone, and welcome to our First Quarter 2022 Earnings Call. My name is Paul Goldberg, and I'm the Senior Vice President of Investor Relations at ABM. With me today are Scott Salmirs, our President and Chief Executive Officer; and Earl Ellis, our Executive Vice President and Chief Financial Officer. 01:00 Please note that earlier this afternoon we issued our press release announcing our first quarter of fiscal 2022 financial results. A copy of this release and accompanying slide presentation can be found on our website abm.com. 01:16 After Scott and Earl's prepared remarks we will host a Q&A session. But before we begin, I would like to remind you that our call and presentation today contain predictions, estimates and other forward-looking statements. Our use of the words estimate, expect, and similar expressions are intended to identify these statements. Statements represent our current judgment of what the future holds. While we believe them to be reasonable, these statements are subject to risks and uncertainties that could cause our actual results to differ materially. These factors are described in a slide that accompanies our presentation, as well as our filings with the SEC. 01:57 During the course of this call, certain non-GAAP financial information will be presented. A reconciliation of historical non-GAAP numbers to GAAP financial measures is available at the end of the presentation and on our company's website under the Investor tab. 02:14 And with that, I would like to now turn the call over to Scott.

02:19 Thanks, Paul. Good afternoon and thank you all for joining us today to discuss our first quarter results. ABM is off to a great start in 2022 as demonstrated by our results. I'm particularly pleased with our organic revenue growth of over 9%, which was broad based and reflected not only a pandemic recovery, but also robust demand for services that enable healthy buildings, sustainability and energy efficiency. 02:46 Our service offerings closely align with these trends and we were successful winning new business with world-class clients, and this momentum is positioning ABM for strong growth in 2022. First quarter revenue grew nearly 30% to $1.9 billion and adjusted EPS was $0.94, both above our expectation. Margin was solid at 6.6% in the quarter and reflected the expected change in mix from a high volume of EnhancedClean and disinfection related work orders to a more traditional mix of janitorial and other services. 03:23 Due to our stronger than anticipated first quarter performance we are raising guidance for adjusted EPS to $3.50 to $3.70, which is a 5% increase at the midpoint of the range. I'm pleased with the resilience our business has shown throughout the pandemic and excited about our future as we shift toward a more normal operating environment. While we still face labor challenges as things continue to ramp up, we are confident in how we are structurally positioned relative to labor cost inflation, and I'll explain why in a few minutes. 03:57 First, let me comment on the demand environment. Beginning with B&I, office occupancy rates remain at low levels, but are gradually increasing. And this trend is expected to continue throughout 2022. The East and West coasts are about 15% to 25% occupied, with the Midwest higher at about 30% to 40%. The Omicron variant delayed return to office plans, but we expect activity will pick up in April, assuming no further setbacks. Demand is greatly improved for special events such as concerts and sporting events as venues are operating at fuller capacity. Looking forward, as occupancy rates rise, we will benefit from increased volume, but we'll also see an easing in the labor efficiency we've experienced for the past several quarters. 04:48 Moving onto Aviation, travel rebounded significantly from the prior year with the U.S. passenger volumes now much closer to pre-pandemic levels, mostly driven by consumer travel. We believe travel demand will continue to trend higher, especially in the second half of the year, as both business and consumer travel is expected to pick up. We are pleased with the margin improvement for Aviation, which has been aided by our focus on optimizing our service mix. 05:18 This is the first quarter we are reporting results for our new industry group, Manufacturing & Distribution. M&D is off to a great start, and the strategic logic of aligning these key verticals is already paying dividends as we are expanding with existing clients like Amazon and winning new business. Occupancy rates in M&D have remained high, largely driven by consumer demand for goods and services through both the e-commerce and retail channels. The growth in demand we are seeing is coming from the expansion of distribution facility square footage to meet the continued strong growth in e-commerce. Demand is also coming from larger clients who want to partner with a service provider with the resources and scale to support their growing footprint. ABM is clearly uniquely positioned to meet this need. 06:06 In Education, K-12 and college and universities are operating with 100% in-person learning. We expect demand for our services to be relatively stable. The roll off of free education accounts in the back-half of fiscal year '21 resulted in Q1 revenue declining 1% year-over-year. However, on a sequential quarterly basis revenue, operating profit and margin, all improved. In fact, operating profit improved $4.6 million, and margin increased over 200 basis points as we manage labor costs related to the ramp up of in-person learning. It's important to note that Education operating margin is now over a 100 basis points above pre-COVID levels, even after the return to in-person learning. 06:58 Technical Solutions is seeing robust demand in the e-mobility market. E-mobility has grown from a small service line to the largest portion of ATS's backlog. We have programs with several auto OEMs to install EV charging stations in their dealer networks, and we are winning new business with municipalities and corporate fleets. We expect demand to rise as the funds dedicated to EV charging within the U.S. infrastructure bill begin to be allocated. The transition to electric vehicles is just getting started, and we aim to capitalize on our leading position to broaden our growth opportunity to include initial design and service and maintenance, complementing our EV installation services. Sustainability and energy efficiency will also drive long-term demand for our HVAC and bundled energy solutions where we guarantee our clients energy savings. This has been our core offering in ATS for many years. 08:00 Overall, in addition to a constructive demand environment, we are distancing ABM from the competition as we integrate the Able acquisition and move forward with our Elevate initiative. The Able integration progressed well in the first quarter, and our teams will continue this work for the balance of the year. Our initial focus has been on combining team members, clients and operations into a unified service delivery platform. As we undertake this process, client satisfaction remains paramount, and our customers have responded favorably. Our next step will be to on-board Able to our common shared service and IT infrastructure. Our team remains confident that we will achieve the synergy targets we laid out when we announced the acquisition. 08:47 We also made good progress -- on core elements of our Elevate program. Last month, we launched a cloud based tool which streamlines the candidate application process and provides hiring managers with more visibility into the hiring process. This investment is especially timely now and should improve the yield of our recruiting efforts. In addition, we are driving increased employee retention through more data driven methods. We recently launched a tool that provides greater insight into labor trends at our job sites. This data helps our teams to create an action plan to improve retention. We will continue to share the progress we're making on Elevate in the coming quarters. 09:32 Before I turn it over to Earl to discuss the financials, I'll briefly discuss the labor environment. I know it’s top of mind with our investors as it is with our team. Let me start by stating the obvious. No company is immune to labor cost escalation or the tight labor market. That being said, the majority of ABM's wage inflation risk is mitigated by the makeup of our direct labor workforce. As a percentage of our contract revenue, roughly 2/3 of our direct labor is represented by collective bargaining agreements, where wage increases are fixed, or they're part of a cost plus arrangement or part of some other arrangement where wage rates are known. Within that 2/3, the majority is unionized labor, and the annual increases are generally in the range of 3% to 4%, and have now been locked in for the next 2 to 3 years and are transparent to our clients. Transparency makes capturing increases less difficult as clients know that our increases are a direct result of stated contractual wage increases. So that leaves about 1/3 of our labor costs that are not contractually protected. 10:46 In these instances we seek adjustments to cover cost escalations when appropriate. Our success in adjusting wage rates is a reflection of the value our clients place in ABM, and our ability to provide essential service even during the most challenging of times like we just saw during COVID. We have good success rates in recovering these costs. We would point to 2018 and 2019's labor prices as good validation. And in those instances, where we can't come to an agreement with our client, we have the courage to let our services be rebid and repriced. 11:23 On the topic of labor availability, like everyone else, we feel the effects of the labor shortage, and we are proactively responding through several initiatives, including greater use of data and analytics, enhancing our pre-employment on-boarding process and the initiation of a candidate care services team. These actions are helping to drive important short term and long-term benefits to our recruiting and candidate retention programs. 11:53 The data supports the progress we are making. July of 2021 marked the point where we had the highest number of job openings. Since then, we've been trending down, and since then, the number of job applications is up 14% and the number of applications per open job is up 25%. We believe that the number of people coming back to the workforce will only increase as inflation continues to take a toll and forces people back into the market. We remain confident in our ability to manage through today's challenging labor environment, just as we've done in the past. 12:31 With that, let me now turn it over to Earl for the financials.

12:36 Thank you, Scott, and good afternoon, everyone. For those of you following along with our earnings presentation, please turn to slide 5. First quarter revenue increased 29.7% or $1.9 billion, primarily driven by a full quarter contribution from the Able acquisition, a continued recovery from the pandemic, most notably in Aviation, and solid demand for our janitorial and engineering services. Organic growth of 9.1% was supported across all industry groups with the exception of education, which had a slight year-over-year decline. 13:13 Moving on to slide 6, net income in the first quarter was $76 million or $1.11 per diluted share compared to $74.6 million or $1.10 per diluted share in the same period last year. The increase in GAAP income reflects favorable operational earnings and a higher benefit associated with self-insurance adjustment related to prior years, largely offset by investments in our Elevate initiatives, Able integration costs, and higher corporate expenses. 13:47 Adjusted net income for the first quarter decreased 6% to $64.4 million or $0.94 per diluted share compared to $68.3 million or $1.01 per diluted share in the first quarter of last year. The decrease primarily reflects higher corporate expenses and 1 additional workday compared to the prior year period, partially offset by higher segment earnings. 14:13 Adjusted EBITDA for the first quarter was $123 million, compared to $123.7 million in the prior period. Adjusted EBITDA margin for the quarter was 6.6% versus 8.6% last year, primarily driven by the anticipated decline in higher margin disinfection services. Please note that our calculation for adjusted EBITDA margin has changed in order to provide a clear understanding of our operating margins. Specifically, we are revising our calculation for adjusted EBITDA margin for all periods presented to exclude parking management reimbursement revenue. This revenue and the associated costs, which net out to zero, are both recorded on a gross basis and generally have no associated margin. Prior to fiscal year 2022, parking management reimbursement revenue was included in the calculation of adjusted EBITDA margin. 15:13 With the addition of Able, corporate expenses were $23.2 million higher compared to the prior-period, due to investment in our Elevate initiative, Able integration expenses and costs related to hiring activities, which more than offset the benefit from self-insurance adjustment related to prior years. 15:34 Now turning to our segment results, beginning on slide 7. B&I increased 49.2% year-over-year to over $1 billion, driven primarily by a full quarter of contribution from Able, increased year-over-year office occupancy and growth in special event. Excluding the contribution from Able, B&I organic revenue increased 4.6% over the prior year period. Operating profit in B&I increased 14.6% to $83.3 million, driven by higher revenue. Operating margin of 8.1% reflects lower EnhancedClean and disinfection related work orders. 16:16 Aviation revenue increased 42% to $200.3 million, marking the third consecutive quarter of robust year-over-year revenue growth. This improvement was largely driven by increased holiday airline traffic with U.S. passenger volumes now moving closer to their pre-pandemic levels. Aviation operating profit increased to $8.9 million compared to $3.1 million in last year's first quarter, driven by the significant rebound in revenue, as well as our efforts to emphasize higher margin airport facility services. The year-over-year operating margin improvement of 220 basis points reflects greater economies of scale. 16:59 Turning to slide 8. Revenue within our Manufacturing & Distribution industry group grew 5.4% $359.1 million. Strong organic growth in this segment was driven by new customer wins and expanded business with leading e-commerce clients. Operating profit increased 2.3% to $40.6 million on higher sales volume. Operating margin decreased 40 basis points to 11.3% due to low levels of EnhancedClean and disinfection related work orders. 17:36 Education revenue declined 1.1% to $205.7 million, largely reflecting the roll off of a couple of accounts. Looking forward, we are optimistic as several new bidding opportunities are opening up. Operating profit totaled $12.6 million, down from $21.7 million in last year's quarter. The decline in operating profit in large part was due to the ramp up in labor required to support 100% in-person learning versus 25% last year. Operating margin was 6.1%, and in line with our expectations. 18:14 Technical Solutions grew $25.9 million to $141.8 million driven by continued strong growth in our emerging e-mobility service offering. Operating income included a $7.7 million gain on the sale of selected healthcare-related customer contracts. Excluding the gain, operating profit improved 53% to $9.2 million, and operating margin increased 120 basis points to 6.5% as we benefited from operating leverage on higher revenue. 18:50 Moving on to slide 9. We ended the first quarter with total debt of $1.2 billion, including $167 million in standby letters of credit, resulting in a total debt to pro forma adjusted EBITDA ratio of 2.1 times. At the end of Q1 we had available liquidity of $796 million, including cash and cash equivalent of $46.6 million. 19:17 Turning to capital allocation. We initiated a share repurchase program during the first quarter, we repurchased approximately 300,000 shares at a total cost of $13.3 million. The repurchase program has continued into second quarter. Lastly, we are proud to have paid our 223rd consecutive dividend in the first quarter. 19:41 Now, I'll briefly discuss our updated guidance as shown on slide 10. As Scott mentioned earlier, we are increasing fiscal 2022 EPS guidance. Specifically, we now expect GAAP EPS to be in the range of $2.65 to $2.85. Also, our guidance for adjusted EPS is now expected to be in the range of $3.50 to $3.70 compared to $3.30 to $3.55 previously. The increase in our adjusted earnings forecast is due to our strong financial performance in Q1 fiscal 2022, as well as our favorable outlook for the balance of the year. The updated guidance represents a 5% increase at the midpoint of the range over the previous guidance. 20:31 Also, due to the change in the calculation of adjusted EBITDA margin, we now expect fiscal 2022 EBITDA margin to be in the range of 6.4% to 6.8% compared to our prior guidance of 6.2% to 6.6%. This update is merely a reflection of the change in methodology of the calculation. 20:53 With that, let me turn it back to Scott for some closing comments.

20:57 Thanks, Earl. ABM continues to operate from a position of strength, supported by favorable secular growth trends like healthy buildings, sustainability and energy efficiency and solid cash flow. We have a world-class client base, the industry's best team and the scale and product breadth to support our clients in a way our competitors just can't. And with the recent acquisition of Able we significantly expanded our capabilities to comprehensively address our clients' evolving needs across the spectrum of facility services and engineering solutions. Our Elevate initiative will serve to further strengthen our market position and widen our competitive moat. 21:42 With that, let's take some questions.

21:48 Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Sean Eastman with KeyBanc Capital Markets. Please proceed with your question.

22:23 Scott, Earl, good evening. Thanks for taking my questions. I just wanted to start on the guidance. Just so I understand what shifted around. Does the updated full year guidance just flow through the stronger than anticipated results in 1Q with sort of a status quo outlook over the balance of the year versus internal expectations? And then the midpoint of the updated guidance would imply that the first quarter represents quite a bit more of the full year outlook than normal. So just wondering why that would make sense.

22:59 Sure. Let me take that. So yeah, I think a lot of it will flow through the first quarter, but we are optimistic and we think Q2 will start seeing a little bit of headwinds, because return to work will have us lose some of that labor efficiency, but we are getting more benefit than we expected when we originally guided, right? Because people still aren't back to work, and they're just starting to head back now. So we have that -- we do have that as a tailwind going into Q2 and Q3. But we have to remember, we're still in the labor situation that we're in now. And even though we think we're handling it really well, we still have to be cautious as we think through the rest of the year.

23:44 Okay. Fair enough, fair enough. And then, since there is a lot of moving parts, it’d just be great to level set on how the margins are expected to trend over the balance of the year, right? We have the labor efficiency element kind of abating, but then we've got some Able synergies maybe ramping up, and then, of course, Elevate benefits ramping up. So just trying to think through what a good expectation is over the balance of the year off of this first quarter result?

24:17 Yeah, sure. I mean, look, we didn't change our guidance on margins. And I think for us that's a bit of -- it's the same kind of themes that I said earlier, Sean, which is like, again, we think we'll have some good tailwinds for Q2 because of delayed return to work, but again cautious with the labor environment. So too soon for us to make a call on margins rising right now. I think we're just -- we're being real cautious about this.

24:48 Okay, got it. I'll turn it over there. Thanks a lot, guys. And great start to the year.

24:52 Thanks.

24:53 Thank you. I appreciate it.

24:56 Our next question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question.

25:04 Scott, Earl, good afternoon.

25:06 Good afternoon.

25:08 So I wanted to ask about the Manufacturing & Distribution segment. I think you used to be Manufacturing & Technology. So I mean, I guess, I'm curious how you're thinking about organic growth in this business for '22 as it's contemplated in your guidance? And how that would compare to what we would have seen relative to historical standards?

25:31 Yeah, look, I mean we're still optimistic about this group, and the trends are with us, right, with e-commerce and logistics. So, we're pretty excited that we made this pivot proactively. And while we don't guide to organic growth per segment, this will be a higher growth rate. I think if you would ask me where this will land, where Technical Solution is typically our highest growth rate in the high single-digits, I'm not so sure that M&D is going to be far behind that. So we really feel like we got a winner here, and it's proving out already with what we've seen since we formed it.

26:14 Now that's what I'm looking for, Scott. Just some directional help. That's really helpful. Thank you. And I wanted to ask about something you've mentioned in your prepared remarks, about you're Education segment. Your margins are 100 basis points above pre-COVID levels even though everyone's return to school. So I mean, I assume that means pandemic related labor efficiencies are now gone. But can you talk in a little bit more detail about why those margins remain so high relative to pre-pandemic levels? And how much of that you think is structural?

26:46 Well, look, I really feel good that we're hitting a stable rate. So we are very, very focused on profitability. I think culturally, the firm has been changing and pivoting towards margin as much as revenue growth rate. So I think it's just a higher quality of clients we are -- we able to re-staff more efficiently. And this is something -- if you remember, we were talking about for the last couple of years about the fact that, when we get to re-staff jobs we'll do it more efficiently and keep some of that labor efficiency that we got through it. So I think that's proving out as well. And it's early to call, it's our first quarter, but just the fact that we're operating at a 100 basis points higher than we were pre-COVID should encourage everybody.

27:38 I do recall you talking about holding on to some of that labor efficiency as you move beyond the pandemic. And it appears you are executing on that. So we will stay tuned. Congrats on a nice quarter.

27:54 Great, thank you.

27:58 Our next question comes from the line of Andrew Wittmann with Robert W. Baird. Please proceed with your question.

28:05 Thanks. Good evening, and thanks for taking my question, guys. I guess maybe first, just to start off with couple of -- a number of questions here. Earl, can you talk maybe about what your outlook is for CapEx and free cash flow for this year? And maybe just comment -- I just want to make sure that on the change in the margin calculation, that has about a 20 basis points impact, was that included at your Analyst Day as part of your 7% target or should we expect that your long-term target now is 7.2%?

28:40 Sure. Yeah, thanks for the question. So let me answer the last question first. So with regards to the margin change on the parking, that was not included in the guidance that we actually gave back in December. And again, we've anticipated that on an annual basis, it’s anywhere between 20 and 30 basis points of that. So that would actually be tacked on to the guidance that we actually provided. 29:03 Based on your first question associated with the outlook for cash flow and CapEx. So, our capital expenditures still are estimated to be about $45 million on the year. With regards to cash flow, our underlying operating cash flows continue to be very strong. However, now what you're going to see this year is a number of one-time items that will offset that. Most notably, in this last quarter we started to repay the deferred payroll taxes that we actually had through the CARES Act, so that -- it was about $66 million. On top of that we estimate our -- we are looking for about $140 million of the legal settlement which most likely will come in this next quarter. And then with the $80 million that we've actually earmarked around Elevate, those all total up to close to about $280 million. So those -- that really does offset the strong cash flow that we will be generating. So we're looking at really flattish cash flow when you take that into consideration.

30:07 And it keeps our leverage well still.

30:08 Absolutely.

30:09 Even with kind of 0-based cash flow, we're still at a 2 leverage, which is really opportunistic for us.

30:18 Yeah. And you feel comfortable enough to do a little buyback too, so. And then just, Scott. I guess just on Technical Solutions, going back to that segment for a second. I mean, it sounds like this -- you call it, e-mobility, but a lot of that is, I guess, a lot of that is just installation of car charging stations. Can you just talk to us about the size of what do you expect that business to be this year? Do you expect that the Technical Solutions business will have maybe more even seasonality? I mean historically that business has been a lot of summer work for schools to improve their energy efficiency with the things that you put in an upgrade. But it sounds like this charging business and the e-mobility is getting to be pretty significant. You said it's the biggest part of your backlog. So I'm just wondering if the quarterly revenue contribution becomes a little less seasonal, and maybe if you could just talk about the overall size of this business today?

31:14 Sure. Yeah. And personally, you're really onto something there. I think it will take a couple of years, frankly, Andy, for us to feel like the seasonality has gone. It's still a nascent business for us. I think we did about $40 million or so of EV charging last year, and it could be triple that, it could be even more than that. It's -- this is a field that we're going to -- you're going to see ABM putting a lot of resource around, because right now we're mostly focused on the installations, which is actually a lower margin part of the business, right? Probably, margins that replicate more of our janitorial margins versus the traditional Technical Solutions margins, but that being said, I think of the installation as kind of the centerpiece of the e-mobility ecosystem, whereas there is an opportunity for us to actually do the design work prior to the installation, and we do that with our bundled energy solutions. So we have good proof points for being able to engineer and design solutions. 32:17 And then think about after its installed, the ability to do maintenance, right? Which is a recurring revenue stream and we're even talking about, can we even procure power? Now, we may not self-perform all those things. We may get into different partnerships, but I think the point is, this is going to be a very fast growing field and it's really good to start from a position of strength and being the number 1 installer in the country right now. So we'll be talking a lot about e-mobility, and hopefully we're going to see some really strong growth over the next 2 to 3 years. And again, coming full circle, to your point, probably then less seasonality in ATS should keep growing in an outsized manner.

33:05 Great. Thank you very much.

33:08 Thanks.

33:10 Our next question comes from the line of Marc Riddick with Sidoti. Please proceed with your question.

33:18 Hey, good afternoon, gentlemen.

33:20 Hey, Mark.

33:21 So I wanted to touch on a couple of things, and I guess maybe frame it from the standpoint of the comments around Education sort of being 100% back and having the margin benefit. I was wondering, if you could you sort of -- and this is more of a broad brush in kind of looking for as far as thoughts. But I wanted to get a sense of what role visibility might play in something like education versus other verticals where you kind of know when school is about to start, right? But I wanted to get a sense of maybe if you can share some thoughts as to some of the learnings that you take from the education process? And how that sort of translates to some of the other verticals, particularly around pricing labor and the role that visibility plays in that?

34:07 Yeah. That's terrific, because I'd love to talk about that. It was a good learning for us. And we are pleased actually that we didn't have everything come back at the same time just from a labor ramp up standpoint. So for us, we got a lot of learnings on how to restaff jobs efficiently, we got a lot of learnings on how to find and attract labor in this environment market by market. And some of the learnings we have is that it's a very market driven approach and each geographic market has different -- I guess, really different dimensions to it. So this was a good test case for us, a good pilot for us. As the rest of our industry groups ramp up, we're obviously really pleased at how we performed, again, settling in at a 100 basis points higher than pre-COVID, we'll see if that translates through with the other industry groups, but we got a really good lesson from -- education from the Education group.

35:07 And I'd just add to that. In addition to what we've learned with regards to the deployment of labor, the Education IG probably has a higher percentage of non-unionized labor and therefore we've really -- we've actually honed in our skills on how to really accelerate price escalations across the increase in wage. And that's something that we're going to transfer those learnings across the other IGs.

35:32 It’s a great point.

35:35 Great. And then just my follow up is -- and again, it's going to be a little squishy, so forgive me, but if we were to look at, particularly for the folks that are returning to office work and particularly within B&I, right? What was the best scenario look like for the ramp-up as far as the timing of that? Because obviously we're seeing a lot of companies come out with various announcements post Omnicom as far as starting to bring folks back so, sort of in a ABM perfect world, what type of -- how would that look as far as what you would prefer to see that you think will be beneficial for the management of that process?

36:15 Yeah, I mean look, what I would say is, we pride ourselves on how agile we are and how we adopt. I think we saw it through COVID. So it doesn't matter how this plays out. We feel really confident we'll do well. But that being said, a slower ramp would be better for us, right? Because a slower ramp up to office means slower in terms of hiring, finding people and re-staffing. So -- and it looks like that's playing out. So there's no magic to that, right? I don't think there's anybody that thinks April 1 is going to be some kind of big bang back to the office. So we like the way this is playing out, Marc.

36:58 Excellent. Thank you very much.

36:59 Thanks.

37:00 Thanks, Marc.

37:02 Your next question comes from the line of Tate Sullivan with Maxim Group. Please proceed with your question.

37:08 All right. Thank you. Scott, I apologize if you touched on it earlier, but you called out Amazon in your prepared remarks, and then can you touch a little more on the EV charging opportunity with your existing customers? I mean -- and the evolution of that. Is it starting mostly education or parking customers, and can it go to more companies like Amazon or is that spread out among your end-markets, please?

37:32 Yeah, that's a good question. We think there is going to be -- look, the one thing we know is happening is everybody is going to need EV charging in their facility, right? Whether it's a school, whether it's an office building, whether it's an airport. And so we think there will be a good opportunity for cross-selling. It's just us getting out there and starting to have those conversations. We just unveiled something called our Smart Parking New. It's more of an artificial intelligence way of thinking about parking and we did this in LA and it's taking EV charging, it's taking revenue dynamics and putting it all together for an offering. So for us, the EV charging space and e-mobility space combined with our different end-markets and our parking assets should be a real accelerator for us in the future.

38:31 Great. I'm sure you can quantify that cross-selling as well too. Well, thank you for all the detail and the opportunity.

38:38 Thanks for the question.

38:42 There are no further questions at this time. I'd like to hand the call back over to Scott Salmis for closing remarks.

38:49 Yeah, I just want to thank everyone for joining tonight. And we're looking forward to getting back to you next quarter. But as you can tell, we're really optimistic about the future, and clearly super proud of the results that we just posted. So more to come. Thanks everybody. Have a great night.

39:09 Good night.

39:10 Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.