Alta Equipment Group Inc. (ALTG) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Alta Equipment Group First Quarter 2020 Earnings Call. [Operator Instructions] I would now like to turn the call over to your speaker today, Sinem McDonald, Director of External Reporting. Please go ahead.

Thank you, Josh. Good afternoon, everyone. Thanks for joining us today to discuss Alta's first quarter 2020 results. With me on the line today, we have our Chairman and CEO, Ryan Greenawalt; and our Chief Financial Officer, Tony Colucci. We will begin with some prepared remarks before we open the call for your questions. Before we begin, I'd like to remind you that today's call contains forward-looking statements, including statements about future financial results, our business strategy and financial outlook and other nonhistorical statements as described in our press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Alta's growth, market opportunities and general economic and business conditions. These statements also include our expectations regarding risks related to the continued impact of the COVID-19 pandemic on our business, operations and financial results. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release, which is available at investors.altaequipment.com. And with that, I'll now turn the call over to Ryan.

Thank you, Sinem, and welcome to Alta's First Quarter 2020 Earnings Conference Call. I hope all of you on the call today are well. I will focus my remarks on what we are seeing and the actions we've taken to effectively operate our business during the COVID-19 pandemic. Tony Colucci, our CFO, will then provide Q1 financial results and an update on our liquidity and capital structure. We got off to a strong start for the year and saw relatively limited impact from the COVID-19 pandemic in our first quarter financial results. In fact, while the first quarter feels like a long time ago, it's worth noting that our performance demonstrated the underlying power of our business model, both in terms of parts- and service-driven organic growth and our ability to identify and close acquisitions. When we spoke -- when we last spoke with you in late March, we were just starting to see the change in the business environment as shelter-in-place mandates went into effect across many of our markets. Rapid change in the business climate materialized in March, and we immediately began executing the playbook that enabled us to emerge in a strong position from the Great Recession of 2008 and '09. While the current crisis is different and more multifaceted, the same dexterity in the model allowed us to take aggressive mitigation actions that we have -- that have helped fortify the business and position Alta for the economy's reopening and recovery. The last 6 weeks have been some of the most difficult we've seen in our careers, but we are open for business at all of our locations, and we are beginning to see some bright spots in our markets and indications of increased demand for our products and services. As you heard me say on the road show and our recent earnings call, our financial model is driven by our parts sales and service business that delivers high margin reoccurring revenue and steady cash flows. We don't focus on short-term variability in new and used equipment sales as near-term reductions are unlikely to have a long-term impact on equipment population in our territories. In our experience, equipment sales tend to bounce back relatively quickly coming out of economic downturns when replenishment cycles are extended and demand for new equipment is pent up. To reiterate, our strategy is to populate our geographies with new, used and rental equipment and then harvest the installed base to grow parts and service revenue. And we do not project that COVID-19 will have a material long-term impact on equipment populations in any of our territories. Our strategy to expand into new geographic markets and diversify our customer base proved valuable in the current environment as different regions are affected in different ways by the crisis. In looking at our 2 operating segments, both of which have been deemed essential businesses, our Construction Equipment business has been less impacted than the industrial equipment side in the first half of the current quarter. However, the Industrial segment continues to be highly cash flow positive with a healthy contribution from parts and service revenue streams. We look at Construction as more in a growth mode with our Illinois Construction Equipment business continuing to mature and with the addition of Flagler in Florida, which continues to perform well and also benefits from less seasonal weather and less impact from the coronavirus pandemic. Overall, while some manufacturing markets like automotive have slowed considerably, other life-sustaining services like biopharma, medical, food and beverage have experienced strong demand spikes, particularly in areas with large and dense populations. Looking closer to home, the State of Michigan went into shelter-in-place mode in late March, and Detroit has been one of the hardest-hit metro areas in the country. While it's hard to predict whether we'll have a V- or U-shaped recovery, we have seen early signs that the worst is behind us, and we're starting to see better operating conditions in our local market. Once we get outside of the Detroit area, our business in Western Michigan has remained healthier. Meanwhile, Illinois has been much more buoyant than our other Midwest locations, particularly on the construction side. The Illinois construction market represents a significant opportunity to increase share, and we are growing the field population and replicating the strategy we used in Michigan to grow our parts and service business. Alta's ability to move quickly and effectively would not be possible without our most important asset, our people. We are an essential business operating 43 branches serving a wide variety of industrial and construction customers across several Great Lakes and Northeast states as well as Florida. The hard work and dedication of our people have allowed us to remain open across all regions and businesses in order to support our customers and communities. Today, we continue to maintain strict operating policies to protect our people and customers, including new work guidelines across the organization and the creation of a task force with active participation from all operations teams to coordinate prompt communications with our supply chain and OEM partners. I view the Alta culture as a critical driver of our success, and we have long emphasized a One Team mindset. Alta employees have embraced the spirit of shared sacrifice, which has enabled us to enact temporary furloughs and other cost-saving measures while continuing to meet the needs of our customers. In the current crisis, the Alta team has demonstrated the best of our culture and continues to build on our hard-earned 36-year track record for delivering the highest quality equipment, parts and service support. Our skilled technicians continue to provide us with a key competitive advantage in the markets we serve. They are essential to providing aftermarket parts and services to our installed base of industrial and construction equipment customers. Alta has the distinction of being an Employer of Choice due to our ability to recruit, train and develop the specialized talent. We've been able to increase our skilled labor force by approximately 20% in Florida over the last 6 weeks as business activity has continued at a near normal pace. As you will recall, one of our goals when we acquired Flagler earlier this year was the great opportunity to significantly add skilled labor in the Florida region to maximize our potential. We continue to enjoy excellent relationships with our OEM partners, and we're grateful for their partnership. Our team has worked closely with Hyster-Yale, Volvo and JCB and our other OEMs to ensure we're collectively supporting customers as best we can. Given the evolving business environment, I'd like to provide additional perspective on how we are managing our capital spending and operating expenses. Tony will provide further comments in his formal remarks. I've already mentioned our quick action to implement our playbook from the financial crisis. Back then, Alta was a very different business, much smaller with a sole focus on industrial equipment and significant concentration with Michigan automotive customers. While we saw a significant drop in equipment sales 10 years ago, our parts and service business held up well, and we preserved gross margin, profitability and cash flow. Today, through organic growth and acquisitions, we are significantly larger, far more diversified in terms of end markets and geographical footprint and more resilient to challenging macroeconomic conditions. The same approach applies to preserving the business fundamentals. Since late March, we've been adjusting our inventory on a daily basis across the organization, balancing our rental fleet and labor utilization and working closely with our OEM partners to service and protect customers. We've continued to reduce spending on all major CapEx projects and a limited spending on rental CapEx. We've also took swift action in April to manage our cost structure. We've eliminated all nonessential spending, meaningfully reduced executive and senior level compensation and instituted a combination of workforce reductions and furloughs. These actions have enabled us -- and have enabled our business fundamentals to stabilize and allow our margin profile to line up with the expectations we discussed at our investor presentations earlier this year. Looking at the balance sheet, there has been very little change in our capital structure and credit profile since we last spoke with you in late March. We have ample liquidity and financial flexibility to continue to navigate the -- and efficiently manage our business. We entered the second quarter in a more favorable cash position than we expected earlier this year. Our acquisition pipeline remains full and discussions are ongoing, though we are closely balancing decisions in the near term with the immediate priorities of our business and our people. We are in the enviable position of being well-capitalized and highly regarded in the equipment dealer market, and we will be opportunistic in engaging with opportunities to build our business and geographic footprint. As we look ahead, visibility remains limited and conditions are evolving across the markets we serve. However, we are confident in the strength of our business model and believe the immediate actions we've taken puts us in position to weather the storm and emerge stronger as the economy begins to reopen. We have a solid operating platform, exclusive agreements with high-quality, industry-leading OEMs and a diverse group of customers that serve growth markets. Our unique business model, which consists of populating our territories with new use in rental equipment and then harvesting the field population to grow higher-margin parts and service revenue, positions us well to continue to produce steady cash flows over the long term as business conditions improve. In closing, I want to thank our employees for their dedication and perseverance, our OEM partners for their support and our customers and shareholders for their confidence during these truly unprecedented times. With that, I'll now turn the call over to Tony Colucci for his formal remarks.

Thank you, Ryan. Good evening, everyone, and thank you for listening in today and for your continued interest in Alta. Like Ryan, I want to first thank all of Alta's employees and their families as their efforts, understanding and professionalism have been an inspiration to myself and the senior leadership team during the past few months as we navigate the COVID-19 crisis together as 1 team, in line with one of our guiding principles. I also want to thank Alta's senior leadership team for their guidance, experience and support. You guys have made difficult decisions in tight windows balancing the needs of all of Alta's stakeholders, and you've done it with the proper amounts of due care, expertise and business acumen. Thank you. My remarks today will focus on 4 areas: a brief recap of financial performance in Q1 2020 versus Q1 '19, focusing on organic figures; pro forma review of trailing 12-month financial metrics, given that the leaseback is now behind us and Flagler and Liftech are now part of the Alta story. I'll touch on our capital structure and focus on 3/31 leverage and liquidity levels. And lastly, I would like to present the impact COVID-19 has had on Alta from a financial perspective and give some insights into our financial playbook, which I've coined the MMR or Measure, Mitigate and Recover. This acronym mimics our financial management philosophy over the past 2 months. First, financial performance in Q1, and I'll be focusing specifically on organic metrics. Overall, we believe we had a solid quarter. Revenue grew to $118 million for the quarter or 15% on an organic basis, with 2/3 of that growth coming from the CE segment. Product support was up 11% on an organic basis across the enterprise. Gross profit grew to almost $30 million for the quarter or up 8% on an organic basis. Despite that revenue growth, EBITDA on an organic basis was up just over $1 million, primarily due to the margin pressure in our legacy CE business, an increase in necessary SG&A costs related to being public and the impact COVID-19 had on our rental business in the last 2 weeks of March. Going segment by segment, a few highlights. Our Industrial segment was up 11.6% organically with sales -- the sales in rental departments being the primary drivers of that growth. That segment saw 38% of its revenue come from the all-important, high-margin product support departments. In the Industrial business, Q1 saw stable margins in each department across the segment as the Industrial segment continues to benefit from a large and more mature field population relative to our construction business. For Construction, in Q1, we continue to see the growth in maturation of this segment, 18.6% organic revenue growth overall with almost 30% growth in the product support departments. As opposed to the 38% of the total revenue in the Industrial segment, product support accounted for 27% of total revenue for Construction in Q1, showing its relative youth versus the industrial segment. Important to note that in Q1 of 2019, the product support mix of revenue was 24% for the segment, showing it remains on the path toward maturation. Overall, management is pleased with Q1 performance, especially given some of the organic growth figures and the headwinds that developed toward the end of the quarter. Having discussed Q1, at this point, I'd like to turn our attention to some of our enterprise-wide pro forma numbers, which are inclusive of the acquisitions of NITCO, Flagler and Liftech, all of which impact our trailing 12-month performance metrics and assume that Alta had owned each of the companies for the entirety of the time frames noted. Specifically, we have Q1 2020 pro forma revenue of $208 million and $18.8 million in adjusted EBITDA. Now it's important to note that the seasonality of our business suggests that approximately 20% of our fiscal year EBITDA is usually generated in Q1. Applying this factor to the $18.8 million of pro forma EBITDA will put us just around $94 million of EBITDA, assuming no growth from some of our target acquisitions. This figure would not be too far off of where we expected to be during our recent capital raise process. Also of note, on an enterprise-wide basis, is that our segment revenue has shifted and is more heavily weighted to our Construction segment. On a pro forma basis, revenue is now 52% Construction, 48% Industrial versus 44% Construction, 46% Industrial, pre-IPO and the acquisitions of Liftech and Flagler. As the Construction segment inherently has slightly lower gross margin profile than Industrial, this revenue mix shift will impact our consolidated margin percentage trends going forward. But importantly, the added volume will certainly be additive to the nominal amount of gross profit the business is generating. I'd like to get into the third area of my prepared remarks on the capital structure. A few key points. Our capital structure and liquidity position remains a strength for us as we navigate these current business conditions. As Ryan mentioned in his comments, we have more liquidity than we expected early on in Q1, given the larger-than-anticipated amount of stockholders that rolled into Alta's equity. As of 3/31, the company held $150 million in cash liquidity. That liquidity is driven off of a $247 million collateralized borrowing base related to our ABL revolver and a $97 million net draw of that same revolver. Moving on to leverage, which finished the quarter at 3.1x net debt-to-trailing 12-month EBITDA and senior leverage of 1.4x debt to -- senior debt to trailing 12 months EBITDA, giving us a comfortable amount of room covenant-wise. I also want to point out for those that may not be familiar that given the recent capital raise, all of our debt maturities are long dated and nothing of significance is scheduled to mature for approximately 5 years. Want to spend a minute on capital allocation. A few comments here. First, management halted the stock buyback program that was announced in late February, almost as soon as it started. And that buyback program has been halted until further notice. In total, the company bought back just less than $3 million of ALTG before the program was ceased. Moving on to rental fleet and our plan there. To start, it's important to note that the impact of COVID-19 on our rental fleet utilization was different amongst our segments and geos. One size certainly did not fit all in this regard. For instance, our Florida construction rental fleet held up better than our Michigan construction rental fleet utilization wise. Having said that, our plan, as it always has been, is to target a benchmark level of utilization across our fleet, and we're paying close attention to these utilization levels. While there's no doubt that our utilization was impacted in April, we see it coming back in May as restrictions lift. At this point, we don't have any plan to drastically reduce the fleet, but we will be prudent and mindful of our utilization statistics as we constantly monitor our fleet and size it appropriately given business conditions. Also, I wanted to highlight that our fleet is relatively youthful, just about 40 months old on average. And we have room to age our fleet without investing in CapEx in the short run. For the last portion of my prepared remarks, I'd like to present the impact COVID-19 has had on Alta from a revenue and earnings perspective. I should note there are some slides in our presentation, which was just released prior to our call that presents the impact of COVID-19 in greater detail than what I will get into verbally here today. I encourage everybody on today's call to review our presentation and the COVID-19 slide specifically. First, I'd like to point out that our geographic and market diversity have acted as a tailwind to our business throughout the pandemic. And to be certain, our size and that diversity makes Alta more apt to handle a situation like this versus any other time in the company's history. We are thankful for our growth. In terms of impact, I mentioned previously on the call, my acronym MMR or Measure, Mitigate and Recover. First, I'd like to focus on the measure portion of that acronym. The measure that management has been focused on daily is the demand for labor hours of our skilled technicians. This is a metric that we believe gives us real-time data on business activity levels in our various geographies and segments. In the middle of March, starting with the automotive shutdown in Southeast Michigan, we incurred what was effectively an immediate 25% to 30% reduction in demand for labor hours across our service operation. A few items of note: one, we believe we found a floor on this metric in mid-April. Two, we believe we have been seeing upticks from that floor on this metric as May has gone along. Now for the second M in the acronym, Mitigation. As Ryan mentioned, management has taken measures to offset what we believe to be a short-term lack of demand for our skilled labor in segments of our rental fleet. First, it's times like these where the dealership model shows its strength. Specifically, over 2/3 of Alta's normal cash costs are variable, allowing for natural cost relief in the sales and parts departments. Second, Alta's management team's expertise and experience in navigating a downturn led to quick reactions to the lack of demand by reducing the supply of labor, as Ryan has suggested on a temporary basis, as difficult as that decision may be. This quick decision-making allowed for Alta to hold labor utilization at benchmark levels. For those that are unfamiliar, labor utilization is defined as our technicians billable hours divided by the total supply of technician billable hours -- or technician labor hours. In holding labor utilization, I can't emphasize enough how valuable leadership and experience in making these difficult decisions have helped us in the past 2 months. So what does it all mean in terms of impact? From an illustrative perspective, in an average month, setting aside seasonality and based on our trailing 12-month EBITDA of $93 million, Alta would average approximately $70 million in revenue and $7.8 million in EBITDA on a monthly basis. Given the departmental revenue impacts we observed in April, our internal modeling suggests that an unmitigated or worst-case scenario would reduce that $7.8 million of EBITDA to $2.4 million, taking EBITDA margin down to 4.1%. We've also internally modeled out what we believe to be a best-case scenario, where the revenue impact would be offset by a 100% variable cost structure. In this scenario, EBITDA would drop from $7.8 million to $6.6 million of EBITDA. Now having laid out the best and worst-case scenarios for this illustrative month and based on what we know as of now, we believe our mitigation efforts will help us to retrace approximately half of the gap between the best and worst-case scenarios or roughly $4.5 million in EBITDA in this worst-case downside scenario. Lastly, as it relates to COVID-19 and its impact, I want to focus on the last letter of the acronym, Recovery. As I mentioned earlier, we believe we saw a bottom in mid-April. And since then, as industries and geographies started to open up, we have seen upticks in our labor hour metrics and rental utilization. It's early yet, but we've seen an approximately 20% to 25% retracement since mid-April on these key metrics and have started calling our skilled labor force back to work. Last point. We took great care in doing what we could to make our cost measures and in particular, a reduction in workforce field as temporary as possible by doing things such as keeping health benefits in place for furloughed employees, with the seminal idea that we weren't saying goodbye to our valued colleagues, but we're saying, "See you soon." And from what we can see, barring no setbacks soon appears to be just around the corner. Thank you, everyone, for your attention. I look forward to further discussion down the road. And at this point, I will open the call back to the operator for questions and answers. Thank you.

Your first question at this time comes from Alex Rygiel with B. Riley.

Ryan and Tony, congratulations on a strong quarter.

Thanks, Alex. Good evening.

Could you do me a favor and dig a little bit deeper into the very strong organic growth in the quarter. Anything unique about the customers or the geography or the service line that experienced such strong organic growth?

Sure. Sure, Alex. The organic growth is kind of runs right parallel to our business model in terms of taking over what was a more dormant territory in Illinois for Volvo. And so we continue to populate -- or have great field population and then follow that field population with more and more mechanics, which leads to parts and service. And so the primary driver of that growth is in the Construction business on the Illinois side of the segment.

Very helpful. And then relative to the 2 acquisitions, Flagler and Liftech, how have they performed relative to your expectations since you've owned it? And how are they faring during COVID?

I'll take this one. This is Ryan. So they're very different businesses and very different markets and responses to COVID. So Liftech was upstate New York, basically all of New York, excluding the metropolitan area. And that business is -- we need to start rebuilding their sales effort. The market share is not where it needs to be. It's kind of lags the national average for the brands that we have there. And so that business is -- will be having a lot of attention in rebuilding the field population and the sales effort. Florida Flagler in contrast, and this is something that we messaged a lot on our road show, we were stepping into a territory that actually had very good market share for the Volvo brand. And the low-hanging fruit for us in Florida really was to bolster their product support business. And I think it's remarkable that in Q1, with this -- the headwind of the COVID hitting on the tail end of the quarter, that we were actually able to grow that headcount of service technicians over 20% in Florida just taking it over. So that was our -- our mission was to hit the ground running there and start adding skilled labor, and we were able to do that even in what have turned into more difficult conditions. The business, you could also sort of delineate that construction is primarily outdoor. Most markets, the construction businesses held up better than our industrial and material handling type products, which are -- have been more impacted by the stay home, stay safe orders that have impacted the different geographies. So Florida is definitely -- for us, it's the brightest spot we have. And we -- not only have we hit the ground running in terms of the product support into the business and bolstering that and adding technicians, but we've also -- we've had some very successful conversations with some of our OEM partners and have some early wins in expanding that product portfolio, taking some of our legacy relationships from the North down to Florida and having more products to sell into that market.

And as it relates to the 20% increase in the skilled labor in Florida, what's your target goal there? And what kind of time line should we think about for you to achieve that target?

Yes, headcount target. Our target near term is to more than double that. The run rate that we have of adding -- that was over a dozen mechanics in 2 months, that's -- we'd like to continue that pace. So really, that will be driven by demand. But what's different in Florida is that we have -- even as the market is anemic or coming down a bit, there's demand for service on the field population that's there. I would say, pent-up demand where they had done a better job selling Volvos and other machinery into the market than they had done harvesting the product support and taking care of the customer need. And that's where had some early success. And that's Alta's culture. That's Alta's vision is to be a -- we're service first. And so we're going to raise the bar in terms of what the Florida customers are used to experiencing, and it's exciting what's going on down there. It will build from there.

That's great. And then on cash flow, how has your cash position and cash flow changed subsequent to the end of the quarter during COVID? And how should we think about cash flow in an unmitigated versus best-case mitigation effort?

Alex, I'll take that one. In terms of our cash liquidity position, like I mentioned in my prepared remarks, we're actually in a better spot than we expected to be coming out of the de-SPAC. We have been able to maintain collections throughout this epidemic here with very few issues kind of on the collection side. So cash flow in that regard has been fine. In terms of the cash flows, I would refer you to our economic EBIT metric, which is holding right around 50% of EBITDA from a conversion perspective. Now at the levels that I mentioned, in terms of the severe downside case, we would not be replenishing fleets. We would age it out. And so -- and in the event that we would start defleeting to rightsize our fleet, we think we could stay cash flow positive in that extreme downside case. So we want to use our fleet kind of as a lever for cash flow. Now as you're defleeting, you're also giving up borrowing base. And so there's a give and a take to that, but that's how we see it.

Your next question comes from Mike Shlisky with Dougherty & Co.

So I wanted to real quick -- just get one quick housekeeping item out of the way. You didn't really put a table in the press release directly, but looking at the end of the release, the EBITDA table, the adjustment in EBITDA table, checking out some of the onetime items in that listing, not the D&A, of course, but the various transaction costs, the equity-linked incentives, the debt extinguishment, if you add up all of what's listed in there, just from trying to get to a net income or EPS perspective, I'm kind of calculating that we need to add back like $15 million to try and find some kind of more normalized net income for the quarter. So perhaps your loss of $17 million might be kind of more like loss of $2 million or even a little bit less than that? Am I on the right track there?

Mike, you nailed it. That's exactly right. We have -- you have about $15 million of add-backs all associated with the de-SPAC process. And so if you add it back, like you said, a net income loss of $2 million. Keep in mind that Q1 is usually our worst quarter on that metric, just given seasonality and that we continue to build out in the Construction segment. The Industrial segment, as you'll note, when you get into the Q, remains profitable throughout the first quarter.

Got it. And I don't think you gave us direct guidance here, but you did mention that the first quarter is 20% of EBITDA for the year, and I guess in a more normal year. Can you give us any kind of direction as to how different this year is going to look like from a normal year? I know you've only just bought them as companies a few months ago, but just a general feel for kind of how rough the Q2 numbers might look very broadly speaking, if you wouldn't mind?

Yes, Mike, that I could speak to that. That was -- the commentary in the slides were purposeful in terms of the impact that we saw in April. And we think, as we mentioned, that we found a bottom here in April. So downside best case, like I mentioned in my remarks, we feel like we, for April, at least, might come in right in the middle, given all of our mitigation efforts. And we're starting to retrace some of that downturn. We're hopeful that automotive comes back in a strong way. But there's been kind of fits and starts to that process. And if that comes back, that will help us tremendously. What helped us last week was the lifting of the restrictions on commercial construction here in Michigan. And we've seen a big chunk of our rental fleet that was otherwise sitting go out. And so I don't know that we're going to be able to fully retrace here in Q2. But to the extent things open up, I would expect us to be somewhere between -- what I mentioned was that middle ground on a monthly basis and something more normalized.

When you say normalized, you mean the best case column or even better than that, a more normal average month for you?

Probably more of the latter because we would expect the revenue to return. Correct.

Got it. Perfect. Guys, any thoughts on -- I know you had some M&A deals in the pipeline. You've talked with a few counterparties. Have things been put on hold since the COVID crisis hit? Or are you still having some active discussions with some new partners?

No, it's -- this is Ryan. We are still in active discussions. In our last call, we had spoken to maybe reshuffling some priorities given the uncertainty in the market. So there are some conversations emerging out of this volatility, but the things that we've been working on are still moving forward, and they're just -- they're too preliminary to disclose at this time.

Okay. On the skilled labor question, it sounds like you've got some areas where you're hiring, of course, in Florida, and other areas you had to have furloughs or some reductions. I guess maybe given the broader employment picture across the country, and I would imagine across your footprint, are you seeing more interest from promising graduates or folks who have had other careers looking to switch into a more stable? Or how do you scale good payroll like your company? Or is that still too early to tell on that?

Mike, I think it's too early to tell on that. It's one of the themes that we've always talked about it is that we want to be a preferred employer in our industry. There aren't enough skilled people coming into the trades in our industry, and we are very deliberate in trying to have pipelines of bringing talent in. There's -- right now, our efforts have been on retaining -- managing through this volatility and keeping our team intact and retaining the talent that we've invested in developing. So right now, we don't have an issue with -- of needing talent. There's an overcapacity of labor out there for what the market is. But we think that will snap back. So we're continuing -- we're not taking our foot off the gas in those development areas or recruiting efforts. We obviously don't need additional capacity in areas hard to hit like Michigan or upstate New York, but in Florida and in construction, in general, there's still a need, and we'll be continuing to put attention on that.

There are currently no further questions at this time. I'll turn the call back to the presenters for any closing remarks.

This is Tony. I just want to thank everybody for joining. I think the overriding theme for us is we're thankful that we were named an essential business. And we like to think that we're part of the solution in a lot of ways. There's been pockets of our business that have ramped up, and we've supported medical supply end markets, food and beverage and of course, infrastructure in terms of just being able to have people move around that needed to. So we're thankful that given our position relative to other industries and other verticals of the impacts here because we know it could be worse. And we're also kind of bullish on maybe some of the macro themes that could play out from a robotics perspective or a potential infrastructure play here when this is all said and done. So anyway, thank you, everybody, for joining, and we appreciate your interest in Alta.

This concludes today's conference call. Thank you for your participation. You may now disconnect.