Alta Equipment Group Inc. (ALTG) Q1 2021 Earnings Report, Transcript and Summary

Good day ladies and gentlemen. Thank you for standing by and welcome to the Alta Equipment Group First Quarter 2021 Earnings Conference Call. At this time all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session [Operator Instructions] Please be advised that today's conference is being recorded I would like to hand the conference over to your host, Sinem McDonald, Thank you. Please go ahead.

Thank you, Eddie. Good afternoon, everyone. Thank you for joining us today at press release detailing Alta's first quarter 2021. Financial results was issued this afternoon and it's posted on our website along with a presentation designed to assist you in understanding the company's results. On the call with us today are Ryan Greenawalt, our Chairman and CEO; Tony Colucci, our Chief Financial Officer. For today's call management will first provide a review of the first quarter financial results. We will begin with some prepared remarks before we open the call for your question. Before we get started, I'd like to remind everyone that this conference call may contain certain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, reflecting management's current expectations regarding future results of operations, our business strategy, financial outlook, achievements of the company, and other non-historical statements as described in our press release. These forward-looking statements are subject to both, known and unknown risks, uncertainties and assumptions including those related to all sales growth, market opportunities, and general economic and business conditions. 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 reasonable, we undertake no obligation to revise any statements 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, and can be found on our website @investors.altaequipment.com. Before Ryan makes his opening comments, I want to remind everyone that our annual short shareholders meeting is scheduled for Wednesday, June 9th at 9:30 AM Eastern daylight time, and will be in a virtual only meeting format with that. I will now turn the call over to Ryan

Thank you, Sinem. Welcome everyone and thank you for joining the call today. The strong momentum we established in the second half of last year continued in the first quarter as the post pandemic recovery takes hold and our market share, sorry. Our market shows notable improvement. We are pleased to report that the year is off to a good start as labor productivity and rental utilization are two most impactful operating metrics. Now exceed 2019 pre-COVID levels. This is quite an accomplishment and a true Testament to the dedication, hard work and determination of the Alta team members. I'm proud to lead such an outstanding company, and I am genuinely thankful for their incredible contributions. Our strong first quarter financial performance in an, in an industry that typically has a slow start is particularly encouraging and demonstrates the powerful platform. We've built as the operating environment continues to improve. We're confident we'll deliver increased results as the year unfolds. I'll begin by reviewing some key highlights from the quarter and then turn it over to Tony for a detailed financial review of our first quarter results in our outlook for the full year and looking at our financial highlights, total revenue grew 49% to $268.8 million with 5.2% organic growth. For the second consecutive quarter our new equipment and rental equipment sales came in above our internal plan for those who followed the Alta story over the past year, you know that our business model is not focused on short-term or quarterly new equipment sales. We view this strong sales quarter as a positive indicator of future parts and service revenue, which provides a higher margin and is an important driver of profitability. We also had an exceptionally good quarter in our construction business due to strong contributions from prior acquisitions, particularly our Florida business, as well as 20% plus organic growth. Adjusted EBITDA grew 38% at $22.9 million compared to $16.6 million in last year's first quarter, showing the diversity in our business and the breadth of our recovery since the start of the pandemic. I'd like to quickly touch on our recent debt offering and capital restructure. On April 1st, we closed on an over-subscribed to public debt offering that reduced our interest expense, increased liquidity and significantly improved our capital structure. While Tony will provide greater detail in his remarks, the key takeaway is that we lowered our cost of capital and now have fresh firepower to use as we pursue the acquisition opportunities that remain in our market and looking at our operating performance. We're beginning to see that early benefits of our strategy to diversify our geographic footprint and expand our product lines. Our increased product portfolio has enabled us to meet customer demand despite supply chain disruption. Last year, we took advantage of market conditions and executed seven acquisitions, which are now in various stages of integration into all the systems and infrastructure. Some regional markets are further along in the recovery than others, but the expanded in our established Midwest markets, along with our entry into the Florida and Northeast markets position as well for strong growth as regional industry conditions continue to improve. Two great examples are the opportunities we see in Florida, a healthy construction market that operates during all four seasons and the New York state region, where we have complimentary construction and material handling presence with lift tech advantage, starting with Flagler and Florida, this business and region was a bright spot. Once again, as construction activity was strong since our acquisition of Flagler early last year, we have seen steady growth and we've filled a regional gap in service demand and significantly grown our technician headcount late last year, we prize or acquired the construction assets advantage equipment, which operates three branches in the Northeast region of New York State. In addition to becoming the authorized distributor of Volvo products, this acquisition allowed us to diversify our customer base while providing a great opportunity to increase our regional presence and grow the aftermarket parts and service revenue streams. The construction market in New York is approximately the same size as our market in Michigan. And it's significantly underserved with roughly half the number of skilled technicians. This presents an attractive opportunity growth opportunity in the region. And in many respects is similar to the playbook we used in Florida. We have where we have grown headcount significantly since acquiring Flagler last year. Early in the first quarter, we took a major step in building our solutions capability in the material handling business by making a small but strategic acquisition. ScottTech provides warehouse management software to the logistics and market and serves as a great compliment to PeakLogix our national material handling systems integrator. We can now go to market with a full suite of products that provides a competitive advantage in the fast growing warehouse and e-commerce market, where we expect continued growth opportunities. As we look ahead to the full year, we see macro related tailwinds that can provide a positive framework for accelerating future growth. We anticipate improved business conditions to continue as the country reopens with pent up demand for capital projects and a renewed focus on replacing aging infrastructure. We are well positioned to take advantage of these positive developments as our strong relationships with a growing number of leading OEMs and our proven capabilities in both construction and material handling make also the perfect partner to meet growing demand. Our focus remains centered on executing our strategy of expanding our presence in existing markets while seeking the right opportunity to add quality equipment products to the Alta family. In summary, our first quarter results put us on pace to meet our expectations for the full year 2021. We are experiencing a V-shaped recovery and believe that our investments in expanding our geographic footprint and product lines position as well to benefit and an improving operating environment. I'd like to thank our manufacturing partners for their support, our dedicated employees for their hard work and our shareholders for their continued competence in the company. And with that, I'll turn the call over to Tony for the financial review.

Thanks Ryan. Good afternoon, everyone. And thank you for your interest in Alta equipment group and our first quarter, 2021 financial results. I trust that you and your families are safe and healthy and anticipating a well-deserved summer. My remarks today will focus on three key areas. First I'll be presenting our first quarter results, which we are pleased with as we close the COVID gap and look forward to continued recovery across our business landscape and a better 2021 for Alta our employees and our investors. Second, I want to highlight and discuss a recent bond race, which closed right after the quarter end on April 1st and detail out the balance sheet flexibility and other benefits. The bond financing gives us both now and for years to come. Lastly, for the first time in our brief history as a public company, I'll provide guidance on 2021 adjusted EBITDA and discuss the relevant elements and assumptions that drive the metric. Before I dig in, it should be noted that there are some slides in our presentation, which was released prior to our call that presents our first quarter numbers in greater detail than what I will discuss here today. I encourage everyone on today's call to review our presentation and our 10 Q, which is available on our investor relations website and also equipment.com for the first portion of my prepared remarks. First quarter performance, starting with the income statement, a few key items of know for the quarter, the company recorded revenue of $269 million, which is a solid start to the year. And especially actually notable after posting record fourth quarter result sales results of $280 million embedded in the $269 million of revenue for the quarter is a 5.2% organic sales increase over Q1 2020, which recall was largely unaffected by the COVID pandemic making for a comparatively sound quarter. Similar to the fourth quarter of 2020, we saw continued to strengthen equipment sales, especially as it relates to use the equipment and rental disposals as rental equipment sales for the quarter came in at $232 million. Additionally, and notably, as it relates to our product support business model, we continue to realize organic growth in our parts and service departments in our construction segment with that figure increasing 14.3% year-over-year. From EBITDA perspective, we, we realized $23 million in adjusted proforma EBITDA for the quarter, which is just $800,000 off from the adjusted proforma level of first quarter of 2020. The $800,000 variance is the closest to business has come to completely closing the COVID gap on a year-over-year basis, since the pandemic began. Breaking down the segments in more detail, as we analyze the trends of our traditionally more stable parts service and revenues, we can see our construction that in our construction segment, the V-shape recovery has now surpassed its COVID starting point with tailwinds behind it and our material handling segment, which continue to be cash flow positive and profitable for the quarter, while it has yet to reach its COVID starting point it has continued to close the gap again in Q1 like it has in each sequential quarters since the second quarter of last year. Before I move to the next key area of my remarks, I want to spend a moment revisiting the strongest equipment sales results for the quarter and touch on the market and the specific dynamics that are driving the numbers. First I'll reiterate our razor and blade business model. Our strategy is to drive market share for our OEM partners through equipment sales, which in turn builds field population that yields future high margin product support business. I've also mentioned in the past that Altair has a rent to sell approach to certain product categories of heavy equipment, which allows us to create different price points of lightly used equipment for customers, which we sell out of to meet customer demand and drive field population. With that business model as a drag backdrop, given some of the near term supply chain constraints that the industry is experiencing new equipment, we saw increased demand for our use and rental equipment in the first quarter and we expect that trend to continue over the coming quarters. All told when, considering just our equipment sales over the last two quarters, we've populated near nearly $330 million of equipment into the field, which bodes extremely well for the future of our high margin products, support departments and our longer-term prospects. We believe that our flexible approach with customers when it comes to our rent to sell model the breadth of our expanded product portfolio, which is currently de-risking the impacts of the OEM supply chain constraints revealed itself in the first quarter, as we were only able to deliver equipment solutions to customers, despite the challenges impacting the supply chain. Another encouraging metric for the quarter and another positive by-product of the current supply demand in balance and the equipment markets is the continued increase in the physical utilization of our rental fleet, which is up approximately 10% when we compare equipment on rent in March of 2020 versus March of 2021. And as it relates to rental fleet and cap backs as mentioned on previous calls and in concert with our plan for 2020, we have kept the size of the, the rental fleet effectively flat for the quarter. During the quarter, all capital expenditures related to the fleet was for replenishment purposes to replace the aforementioned assets, which were sold out of the fleet in the quarter, preserving our ability to meet rental demand with the appropriate amount of equipment supply. Now, moving on to the second key area of my prepared remarks, I'd like to provide an overview of our recent bond instruments and provide detail on its terms and highlight our belief that this is a game changer for our capital structure and a big win for our business and shareholders. As we go forward, before I launch into the details of the new bond, I'd like to reset our former capital structure and certain relevant metrics that existed prior to the new issuance recall that we had it in $300 million ABL facility that was bearing interest at [ph]Lightboard plus 175 basis points in the first lien position of our capital structure. This facility was drawn $160 million prior to the refinancing and thus with a borrowing base of 300 million, the business had $140 million in liquidity available in the previous structure. Next recall that in the second lien spot also had a five and a half year, $155 million term loan, which was entered into at the IPO that had an interest rate of live plus 800 basis points, which in retrospect was an out of market coupon. The term loan also amortized at 5% a year, and subjected the company to leverage covenants, which ratcheted down over the life of the loan. Focusing in on that last piece, the covenants, the covenants overtime would have made it increasingly more prohibited for us to access liquidity on our ABL loan to fund our growth initiatives, potentially forcing us to source more expensive equity like capital fund, these important investments. Now keeping the previous capital structure and some of its prohibitions in mind, let's get into the bot. First, some of the high level terms of the insurance, the bond is $350 million in size as a 5.58 % fixed interest rate, a five-year tenor, no amortization, and importantly has no material financial or leverage covenants allowing us access to our first lien liquidity, a few other key positive impacts of the bond both for today. And more importantly, what this means for our future financing entity, one liquidity impact; we free up an additional $141 million worth of liquidity. As we use the bond proceeds to pay off the $155 million, 10% term loan and also pay down most all of our lines of credit draw, post refile the company now has approximately $280 million of liquidity available. Number two, immediate cost it's of debt reduction and elimination of interest rate risk, while the accretion on cash savings is modest initially and our calculation suggests we reduced our weighted average cost of debt by 50 basis points. The fixed rate nature of the bond has all been eliminated in any of our interest rate risks going forward. Third, there will be no cash leak on the bond given that there no amortization schedule on the bond, we were able to keep more cash flow in the business over the next five years. Lastly, and most significantly we believe this new capital structure gives us tremendous runway for the future. This runway will be a creative to shareholders when it comes to financing. The next dollar of capital needed to execute on M&A opportunities. Our calculations suggest that the new capital structure allows us to pursue $300 million worth of enterprise value at any incremental cost of capital of what is effectively 2% while still maintaining an appropriate amount of liquidity to run the business and also be re being responsible with leverage. Finally, and for the last part of my prepared remarks, I would like to discuss the 2021 adjusted EBITDA guidance, which has mentioned in today's earnings release. First we've chosen to provide guidance on annual adjusted EBITDA. As we believe this metric is most indicative of the cash flow generation of the business and is a familiar comparable metric for the investing public. Additionally, we believe we believe annual EBITDA figure is appropriate. There's this quarterly given seasonality and what sometimes can be ebbs and flows and equipment sales month to month and quarter to quarter in our business. Second, in terms of the number we expect to report $110 million to $115 million of adjusted EBITDA for the full year, 2021, a few observations here, one, we felt like with all the M&A activity in 2020 with COVID, hopefully in the rear view mirror from a business perspective and our first quarter performance, that this was an appropriate time to provide guidance on 2021 adjusted EBITDA. Second pursuant to previous comments I've made and investor materials we've produced. We've been focused on how, and when we would be able to get the business, including our 2020 acquisitions back to 2019 levels, which was honoring 13 million of adjusted pro forma EBITDA after analyzing each of our businesses relative performance in the first quarter and the expected trends for the remainder of the year, we feel confident in our ability to return to 2019 EBITDA levels here in 2021. In closing, given our first quarter results, the ever improving business landscape, we see ahead and the impact of the recent bond rates. We feel our business in a great position right now, and we're excited about executing our business plan for all the shareholders over the remainder of 2021. Thank you for your time and attention, and I'll turn it back over to the operator for Q&A.

And ladies and gentlemen, [Operator Instructions] we have Michael Shlisky from Colliers Securities. Mike, your line.

Good afternoon, gentlemen. I wanted to you just touch on some of your comments earlier about the sort of supply chain issues in the lift truck world or in probably in both categories, which I think any construction you touched on how it really drives some of the youth sales, which makes a lot of sense substitution when it to get so you can get from the OEM. So, but from the dealers don't have anything available. I'm curious whether the shortage of new equipment has also led to some really strong parts and service as well. I think you briefly mentioned it, but just the detail as to whether you've got some really good boost folks trying to stick to the, the equipment rather than buying new?

Yeah. Mike, this is Ryan. I'll take that. You know, the demand is definitely there. The, the thing that is the governor on parts and service revenue is going to be head to mechanics, which is one of the reasons we highlight that so often. So the demand is there, but you know, our ability to meet that demand will be predicated on our ability to continue to onboard mechanics. The other thing that's happening is some flexibility in terms of that, the used inventory in the rental business. So to meet rental demand, if we're seeing really high use utilization on particular assets, we might look to our remarketing department to put you know, assets into the rental fleet that we normally wouldn't. And then in addition to that, we're looking to at lease returns and things like that as a flexible model of trying to bring additional equipment into the fleet, if lead times are too stretched. So, you know, it's a really, we're just trying to maintain flexibility to meet our customer demands, but you know, the way that we think about the parts and service it's going to be kind of governed by head count.

Mike, this is Tony one, one quick follow-up for based on Ryan's comments. And for everyone to understand is we are not seeing any real issues in the supply chain relative to parts which is everybody's aware is an important part of our business. So where we're seeing it maybe with some of the new equipment like Ryan alluded to, we're not seeing that same effect in parts, which is good.

Yeah, that's an important question too. I also want me to turn to the COVID-19 situation. I keep hearing from folks that it's really been tough still and in the state of Michigan I'm not sure if that's true or not, and you guys certainly have a better view on that than I do and has called it being an issue as far as absenteeism or any other issues during Q1 and the first part here of Q2 or are, is the headlines I'm reading, not quite accurate?

No, Mike, that's a good question. And at that probably a good time to highlight that the headlines are in relation to the infection rates in Michigan. And we did have a very tough spring in regards to that. But it hasn't translated to headwind in the business. You know we are, we're seeing a V-shaped recovery in all of the markets. The, the shape of the V is not as steep in Michigan, but it, it, to us appears more related to supply chain issues and are still, you know, heavy concentration in the auto sector versus COVID related issues. So again, it's a V-shaped recovery, not as steep, but you know, the, the auto industry is making cars. And so, you know, when we were in the, in the worst of the eye of the storm of COVID, the whole industry was shut down.

Okay. Sure. And then I also wanted to kind of piece together state of AGU made during your fair remarks. First of all, thanks for giving us the guidance here for the full year. And Ryan, your comments were about improving results throughout the year. Should we take that literally view or sort of see each quarter be a little bit better for me in that perspective between now and the fourth quarter? Or is that, am I reading too much into it?

Mike this is I realized you were referring to Ryan's comments, but I'll take the, I'll take the question. You know, we, we last quarter had a, had a slide on kind of relative kind of EBITDA breaks if you will, by quarter kind of in a historically normal basis. And we expect to kind of get back to those, get back to those levels this year. And so, what that is typically meant for our business and part of Ryan's comments, I believe is that Q1 is usually rough. You know, or, or I'm sorry, I shouldn't say rough, but relatively speaking to the other quarters, we just kind of trend up from there. So when, when we think about the guidance that we're giving at 110 to 115, you can kind of do the rough math, even on average, right. We would expect you to the quarter from here to be to be better than Q1.

Okay. That's a great color. I appreciate it. I'll have back in queue.

In for our next question, we have Alex Rygiel from B. Riley. Alex your line is open.

Thank you, very nice quarter. Gentlemen a couple of quick questions here. Can the new equipment sales continue at this dollar level sort of quarterly through the remainder of the year?

You know, Alex this is Tony, good afternoon. We hope so. I think it's, it's definitely, won't be demand related. If the new equipment sales take a dip we, it'll be supply related and probably more acute on the material handling side versus construction side. What we made it, we alluded to it or alluded to it in my comments, but what we're finding is that our product portfolio, if you think about one end of the spectrum, if we were just a Volvo dealer and we didn't have, you know, other contract lines, for instance, that we supported if Volvo was not as something, we would be sunk. What we're finding is that the breadth of our product portfolio is that not everybody is out of new equipment all at once with all of these OEM. So our, our, the breadth of our product portfolio is really helping on the construction side, on the material handling side, we're a little bit more heavily anchored to [ph] Heister Yale. I think they've been pretty upfront with going on with them, the good news on that end for us relative to maybe what an OEM's perspective is. We can wait, as we've said all along, if a customer has to extend a lease on an existing fleet to wait for their, you know, their new Heister yields to show up we're happy to, we're happy to continue to service them throughout that period on reminded, you know, what kind of margins we make on, on selling forklifts is unfortunately it might be a little bit softer for some of our sales guys as they wait for things to invoice. But there's, there's not a lot of impact even Dow wise in the material handling segment, when we, if we get behind a new sales,

I definitely -- one thing I would just add to Tony's comment is that the backlog is continuing to build really it, it right now approaching record levels, it's the, you know, the demand is there so that when we're talking about equipment sales this year, it's really a function of taking receipt of the equipment and turning it around prepping and delivering it. And that, that will eventually happen. It's just you know, where it, it timing wise, it hit in terms of revenue recognition.

And then as it relates to M&A does the new balance sheet capacity change sort of the relative size of a acquisition that you're pursuing?

No, I don't really think of it that way, Alex, what we're pursuing on all fronts, you know, we -- big moves in our territory. We'll probably be anchored with expansion of with our OEM partners versus some of the infill opportunities that we had examples of last year, but we're looking for opportunities on all fronts. COVID last year pulled some deals forward. It was a catalyst for deals that were in the pipelines that transact and, and more of a tight timeline. So, you know, this is we are, we remain very focused on M&A and that was a big part of this whole strategy with raising the bond was to have the dry powder to continue our strategy.

Very helpful. Thank you. Great quarter.

Again for dispense. [Operator Instructions] for our next question, we have Matt Summerville from D.A. Davidson. Matt your line is open.

Thanks. A couple of questions. Talk about your ability given where the labor market is right now, like how tight it is. Are you still able to organically add to your service tech base? And the reason I'm asking that is that look like organic, you know, parts and service was only up 1.4% year-over-year total for the company. I know it was up more than that construction, but I'm trying to kind of square that up. I guess I would've thought organically, it would have been a little bit more than 1%?

Ryan, do you want to talk about the labor markets?

And so in terms of the labor market, we don't really perceive any additional tightness it's been in our industry, something we've navigated for many years, a dearth of, of people coming into the trades. So in our industry, we're all seeking the same talent and we remain focused on it. We, we are successfully on-boarding technicians. You know, one of the benchmarks that we shared in the third quarter last year was that we had all of our employees back from furlough. We're hitting benchmark levels of labor utilization. And today the labor utilization is there and we are actively recruiting and hiring in all markets.

Yeah Matt. This is Tony did touch on the numerics of the numerical part of your question there. When we talk about organically, I think it's important to define that when we talk, when we think organically, we're thinking about basically everything pre-IPO which would have included our Michigan and Illinois construction business. Because recall last year we didn't have, the eight acquisitions then, so that business was up like we said, 14%, and it's important to think about the nominal dollars to associated with it, our parts and service revenues given the maturity of the materially handling segment our nominal dollars are much bigger on that side of the house. And we made -- I made special comments on how the material handling business parts and service specifically has really, started to close the gap. I think it was off on an organic basis something like 6%. And when you roll all that up, you're only up 1.4% organically. But that the parts and service business, the material handling is it's a big number. And that business continues to even though its off year-over-year, it's not like that business is suffering. It's very cash-flow, generative and profitable given its maturity.

Thank you. That's helpful. And then just going through your queue very quickly, it looked quite within the construction segment that gross margins on the rental side took a bit of a hit on a year-over-year basis. And I guess that surprises me a little bit if rates, if utilization rates are good and seemingly if utilization rates are good, perhaps you can start charging more.

Are you are you referring to gross margin?

Yeah.

So gross margin in the rent-to-rent business includes depreciation and if you go down a few into our segment reporting, they actually refer to that kind of concept because Flagler which is, more heavy construction coming on, they depreciate their assets pretty heavily. Anyway, it's depreciation, which is driving the year-over-year depressed margin, which is obviously non-cash, our rental revenues are on the mend, if you will as I mentioned, related to utilization.

Got it. And then just from an end-market standpoint, obviously non residential construction, particularly in the Southeast, I would imagine if there's a bright spot perhaps in parts of the Midwest and Northeast as well. So we would put that obviously in the very good column, would we put logistics warehousing e-commerce in that same column, and then conversely outside of automotive, are you seeing for the last what's the right word? I want to use less steep recovery in what markets besides automotive place so kind of the good and the still good, but maybe not as good. It's really what I'm asking that.

And this is Ryan, I think the best way to think about the markets that are recovering, but not as quickly are the markets tied to manufacturing where the supply chain constraints are actually muting demand because they're just waiting for product to come in. You know, so upstate New York, Michigan parts of our Chicago land and that are tied to manufacturing are softer than the markets you've addressed which are definitely seeing surge demand and, you know, more secular long long-term growth.

For our next question, we have Bryan Fast - Raymond James. Bryan your line is open.

Thanks. Good afternoon guys. I was disconnected, so I apologize if this was already addressed, but can we just get some color on the warehouse solution space, and I guess the kind of synergy use you're seeing between material handling business and then PeakLog -- PeakLogix and most recent ScottTech acquisition?

Sure. So that is a essentially a vertical integration of a previous group of vendors. So [ph] Nicco that was an acquisition. We made a New England that's our high cereal dealership in the Northeast had a legacy relationship with PeakLogix. So they, they work together to do warehouse solutions for their customers. After we acquired Nicco, we looked at that as a strategic asset to bolster our capabilities and have more tools in our bag. One of the ways to think about the growth opportunities that we now have a hundred material handling sales professionals out there looking for opportunities for a business that used to have a half dozen sales reps on the street. ScottTech is further driving down to that strategy so that ScottTech was actually a vendor to PeakLogix, so more specialized software and warehouse management type systems. And now that's, again a vertical integration where it's we've added that to the product portfolio. Today there's no missing part of that capability. We have essentially a design build warehouse solutions group where we can with the vendors that are part of our portfolio and then also with outside vendors kind of design and fully implement a solution for our warehousing customers. So this will be a fast growing part of the business and its asset light, it's essentially we're selling solutions and it will have a great cross selling opportunities across the rest of the material handling product portfolio.

Ryan. This is Tony just to follow that up with maybe some anecdotal news, if you will. But one of the things that we know is happening and we've gotten feedback kind of from our salespeople, is that the acumen that the skill set that peak and ScottTech now bring to the table with customers is getting us into deals that we otherwise would not have been able to touch historically prior to adding that sort of talent to the team. And we can't speak specifically about different customers and things that we're quoting on, but we are and we can say that we're getting in on deals that we otherwise wouldn't have for warehouse build-outs retrofit, so on and so forth because of, because of those deals.

Okay. That's very helpful. And then I think you've kind of addressed it with Alex's question, but are you seeing customers pull ahead buying decisions in an effort to get ahead of any pending supply constraints

It's too late. So the supply constraints are upon us. It, there are certain products today that if you wanted to order a brand new from the factory, you're out more than a year. So the companies that we're thinking about that maybe coming right out of COVID last summer could have gotten in front of that. But today the supply constraints are real for our industry they're here. And, and we just like to remind that we have a very flexible structure that we we're here to serve as our customer needs. We use our rental fleet, we'll use new and used inventory to make sure that we can keep them up and running.

And thank you. And we don't have any further questions at this time and ladies and gentlemen on a hound back.

I that's the -- if there are no further questions and we'll have that concludes the meeting this afternoon. And thank everyone for joining.

Ladies and gentlemen, this concludes today's conference call. Thank you for also participating. You may now disconnect.