H&E Equipment Services Inc (HEES) 2016 Q2 法說會逐字稿

Good morning, and welcome to the H&E Equipment Services second quarter 2016 earnings call. Today's call is being recorded, and at this time, I would like to turn the call over to Mr. Kevin Inda, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Lisa, and welcome to H&E Equipment Services conference call to review the Company's results for the second quarter, ended June 30, 2016, which were released earlier this morning. The format for today's call includes a slide presentation, which is posted on our website at www.he-equipment.com.

Please proceed to slide 1. Conducting the call today will be John Engquist, Chief Executive Officer, Brad Barber, President and Chief Operating Officer, and Leslie Magee, Chief Financial Officer and Secretary.

Please proceed to slide 2. During today's call, we'll refer to certain non-GAAP financial measures, and we've reconciled these measures to GAAP figures in our earnings release, which is available on our website.

Before we start, let me offer the cautionary note that this call contains forward-looking statements within the meaning of the federal securities laws. Statements about our beliefs and expectations and statements containing words such as may, could, believe, expect, anticipate and similar expressions constitute forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. These risks include those described in the risk factors in the Company's most recent annual report on Form 10-K.

Investors, potential investors and other listeners are urged to consider these factors carefully in evaluating the forward-looking statements, and are cautioned not to place undue reliance on such forward-looking statements. The Company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call.

With that stated, I'll now turn the call over to John Engquist.

Thank you, Kevin, and good morning, everyone. Welcome to H&E Equipment Service's second quarter 2016 earnings call. On the call with me today are Leslie Magee, our Chief Financial Officer, Brad Barber, our President and Chief Operating Officer, and Kevin Inda, Vice President of Investor Relations.

I'll direct my comments this morning to our second quarter highlights, our business and overall market conditions. Then Leslie will review our financial results. When Leslie finishes, I will close with a few brief comments. After that, we'll be happy to take your questions.

Proceed to slide 5, please. The nonresidential construction market remained healthy, and demand for rental equipment continued to be solid during the second quarter. Unfortunately, weather was again a major headwind for our business with the heavy rainfall and subsequent flooding in South Texas and Louisiana.

Despite this headwind, we maintained strong utilization at 70.1% based on OEC, down just 20 basis points from a year ago. Strong demand for AWPs helped offset a significant decline in earth-moving utilizations.

Our distribution business, specifically cranes, continued to be soft as a result of the ongoing weakness in the oil patch. New crane sales declined 52%, or $19 million, from a year ago. On a combined basis, our distribution segments were down $19.7 million.

Beginning with the top line, total revenues decreased 7.7%, or $20.3 million, to $242.1 million. Net income was $7.5 million, or $0.21 per diluted share, and EBITDA was $72.5 million, down 8.7% from a year ago.

In terms of our rental business, revenues were $108.7 million and essentially flat with a year ago. Gross margins remained strong at 46.9%. Our overall rental rates declined three-tenths of a point from a year ago, as the competitive environment, especially on the big projects, continues to be extremely aggressive. We continue to believe rates will be flat to down slightly for the remainder of the year.

From a regional perspective, we are experiencing rate pressure in our Gulf Coast market due to aggressive pricing on large projects that are under way and the weak oil patch. Dollar utilization remains solid at 33.9%, versus 34.2% a year ago.

Proceed to slide six, please. This slide illustrates our nationwide footprint, various regions, branch locations and greenfield sites that we have opened during the last three years and thus far into 2016. We currently have 76 total branches and have opened 13 greenfield sites since the beginning of 2013. We expect to open two or three more locations this year.

All of our recent greenfield branches have focused on growing our rental business. In addition, all of the new branches we open are contiguous to or within our current regions. Overall, the performance of our greenfield branches has been very positive, as we conduct a tremendous amount of market research before pulling the trigger. While we will continue to consider acquisition opportunities, we believe our greenfield growth strategy is currently the right strategy at the right time for our business.

Slide seven, please. The oil and gas markets remain weak and accounted for roughly 4% of our total revenue in the second quarter. While oil prices are significantly higher than earlier this year and the rig count has increased somewhat, we believe the oil industry is not convinced that current oil prices will hold firm.

However, if we see oil get to $60 and remain there, we would expect to see a material improvement in our energy-exposed markets. Our biggest exposure to the oil and gas markets is in the Permian and Eagle Ford basins, which are lower lifted cost fields. We are seeing some drilling again in the Permian, but nowhere near the levels at the peak.

However, even with the weakness in the oil patch, utilization in our combined oil field markets was 69.3% during the second quarter. Time utilization in our four Texas branches with the heaviest oil and gas exposure average around 68.5% utilization on a combined basis during the second quarter. Ninety-one percent of our revenue in Texas, our largest oil-exposed market, is coming from non-energy-related activity.

The weakness in the oil and gas markets has not only had a material impact on our crane business, but the crane market in general. In fact, the crane market may be as soft as we have ever seen, and we don't expect a solid market for cranes to return until the energy market rebounds.

The weakness is also having a spillover effect on our parts and service business, as there is little rebuild opportunity on cranes right now. When the oil and gas markets eventually rebound, we expect there will be a significant amount of pent-up demand for cranes.

Proceed to slide eight, please. Let me conclude with a few key points on our current market conditions, which we believe remain favorable for our overall industry and the particular end-user markets we serve.

In terms of the industry in general, two of the leading indicators for the nonresidential construction markets posted solid gains towards the end of the quarter. The May ABI increased to 53.1 from 50.6 in April, which was the highest level in nearly a year. The June ABI was also strong at 52.6. It marks the fifth consecutive month-to-month above the expansion level of 50.

The Dodge Momentum Index in June hit the highest level since January 2009, and reflected the largest sequential improvement since May of 2006. Recent Dodge data also indicates the cycle continues to expand with strong construction starts and puts in place. The Fast Act, which was passed on December 4th, will also be a positive for the industry with $305 billion in funding to fix much-needed infrastructure nationwide. Approximately $230 billion has been appropriated for highways alone.

At this time, I'm going to turn the call over to Leslie for the financial review.

Good morning, and thank you, John. I'll begin on slide 10 to discuss our financials in greater detail. As John discussed, the weather and ongoing weakness in our distribution business were significant challenges for our business during the second quarter.

To summarize, total revenues decreased 7.7%, or $20.3 million, over the same period a year ago to $242.1 million. $14.5 million of this decrease was related to lower new equipment sales. Gross profit decreased 5.4%, or $4.7 million, to $81.7 million compared to a year ago.

As for the rental segment, rental revenues were essentially flat over the same period a year ago at $108.7 million for the quarter. Despite the weather challenges, physical utilization remained healthy, with average time utilization based on OEC of 70.1% for the quarter compared to 70.3% a year ago.

As John mentioned, solid demand for AWPs offset the weakness in earth-moving equipment due to weather and the ongoing softness in crane demand. AWP's physical utilization increased 230 basis points, while earth-moving and crane physical utilization declined 530 basis points and 270 basis points, respectively.

Again, we are encouraged that aerial work platform equipment, which represents 60% of our rental fleet, is showing solid demand, and we believe the issues impacting earth-moving demand are temporary in nature.

Taking a deeper dive into physical utilization by end market, our utilization in non-oil field markets was 70.4% this quarter, down slightly from 70.8% a year ago. In all of our oil field markets, combined physical utilization was 69.3% compared to 68.9% a year ago. Rental pricing declined 30 basis points from the year-ago rate, and our dollar returns were 33.9% compared to 34.2% a year ago.

As we expected, new equipment sales did not mirror the increase we delivered in the first quarter, declining to 22.5%, or $14.5 million, to $49.9 million. Crane sales decreased 52%, or $19 million, and year-over-year increases in new AWP and earth-moving sales partially offset the significant decline in new crane sales.

Used equipment sales also decreased, down 17.8%, or $5.2 million, to $23.8 million. Sales from our rental fleet comprised 85.4% of total used equipment sales this quarter, compared to 82.1% in the second quarter a year ago. Our parts and service segment delivered $43.6 million in revenue on a combined basis, down 1.2% from a year ago.

Total gross profit for the quarter was $81.7 million compared to $86.4 million a year ago, a decrease of 5.4% and a 7.7% decrease in revenue. Consolidated margins were 33.8%, compared to 32.9% a year ago.

To expand on gross margins by segment, rental gross margins for the quarter were 46.9% compared to 46.7% last year. For the second quarter, margins on new equipment sales were 10.7% compared to 11.8% a year ago. Used equipment sales gross margins were 29%, compared to 32.2% last year. Margins on pure rental fleet only sales were 32.4%, compared to 37.2% a year ago. Parts and service gross margins were 42.2%, compared to 41.6% a year ago on a combined basis.

Slide 11, please. Income from operations for the second quarter decreased 23% to $25.4 million, compared to $33 million last year, on a margin of 10.5% compared to 12.6% in the second quarter last year. Income from operations declined as a result of lower revenues and higher SG&A compared to a year ago.

Proceed to slide 12. Net income was $7.5 million, or $0.21 per diluted share, in the second quarter, compared to $11.5 million, or $0.33 per diluted share, in the same period a year ago. Our effective tax rate was 41%, compared to 40.9% a year ago.

Please move to slide 13. EBITDA was $72.5 million in the second quarter, compared to $79.4 million a year ago, and EBITDA margins were 29.9% compared to 30.3% a year ago.

Next, on slide 14, SG&A was $57 million, a $2.6 million, or 4.8%, increase over the same period last year. SG&A as a percentage of revenue was 23.6% this quarter, compared to 20.7% a year ago. Branch expansions contributed $1.9 million, or nearly 75% of the increase, in SG&A during the quarter.

Next, on slide 15, our gross fleet capital expenditures during the second quarter were $69 million, including non-cash transfers from inventory. Net rental fleet capital expenditures for the quarter were $48.7 million. At the end of the second quarter, the size of our rental fleet, based on OEC, was $1.3 million, less than a 1%, or $8.8 million, increase since the end of 2015. Gross PP&E CapEx for the quarter was $6.3 million, and net was $5.4 million. Our average fleet age as of June 30th was 31.6 months.

We generated free cash of $12 million in the second quarter, compared to $21.9 million a year ago. The single largest driver of the difference was higher fleet spending compared to last year's second quarter based on timing and demand.

We've included a free cash flow GAAP reconciliation to net cash provided by operating activities in the appendix at the end of the presentation, reconciling free cash for the same periods presented here on this slide.

Proceed to slide 17, please. At the end of the second quarter, our outstanding balance under our $602.5 million ABL facility was $174.5 million, and therefore we had $420.3 million of availability at quarter end, net of $7.7 million of outstanding letters of credit.

I'll now turn the call back to John for conclusion, and then we'll open the call for questions.

Thank you, Leslie. Please proceed to slide 19. Let me quickly conclude so we can take questions. Weather and the ongoing weakness in our distribution business were both major challenges for our business during the second quarter. However, let's focus on the positives.

Despite the obstacles during the quarter, our utilization based on OEC was solid at 70.1%. I would also point out the trends during the progression of the quarter, which were very positive. Average utilization based on OEC for the month of April was 69.2%. Utilization climbed to an average of 71.4% for the month of June. Based on today's data, we're currently running north of 72% on average.

We should also look at earth-moving utilization trends given the heavy weather impacts during the quarter. Earth-moving utilization was 61.9% on average for the month of April, gradually increasing to 64.5% for June, and is currently averaging around 68%. I would also point out our rental rates have only declined 0.2% on a year-over-year basis. We believe these metrics measure up very well when compared to what we've seen reported this far in the industry.

Lastly, we paid our eighth consecutive quarterly cash dividend on June 9th. As usual, the dividend is subject to Board review and approval each quarter.

At this time, we'd like to take your questions. Operator, please provide instructions.

Thank you, sir. (Operator Instructions). Steven Fisher, UBS.

Just a quick clarification first, just to make sure the weather impact you had was in the month of April.

Well, it was spread over the second quarter. May was a really tough rain month also.

Okay. Just in terms of how you're thinking about rental revenue year over year in the second half of the year, I mean, you're right on the cusp of an inflection with kind of flat revenues in Q2. Are you thinking about pushing CapEx to support revenues, or are you going to sort of just manage for returns? How should we think about the year over year in the second half of the year?

Well, we're not going to push CapEx to drive revenue. We're going to spend money where it makes sense, and I think what you'll see us do is spend some money on aerial equipment. Our aerial utilization is currently running around 75%, so the demand is exceptionally strong, and we are spending some money there.

We're actually shrinking our crane fleet right now. We spent a little money in some select markets on earth-moving equipment, but primarily what we're spending there is maintenance capital. So we're going to spend money where it makes sense, but we wouldn't be spending money just to drive revenue.

Okay. So it sounds like we should expect some year-over-year moderate declines in rental revenues the second half.

Well, no, I'm not saying that. I'm saying that we're probably going to spend some growth capital on aerials, and we'll be spending money where it makes sense, but I'm not saying we're going to decline in revenues.

Okay. Just maybe, lastly, can you just give us some of your key assumptions underlying the flat to slightly lower rate for the year and going forward in terms of fleet growth utilization mix? What do you think it will take to be able to get to that flat to slightly lower?

Well, look, we're still comfortable that -- the area of the country we're seeing the biggest rate pressure is in the Gulf Coast, and it's relating to the fact that there's a lot of big projects going on and the competitive pressures on those big projects are -- it's strong. I mean, it's really aggressive pricing.

Four of our seven regions have seen year-over-year rate improvement, so rate pressure is not real broad-based for us. We've got some markets we're seeing solid rate gains, and then we've got some markets, like the Gulf Coast, that there's a lot of rate pressure, but we're comfortable that we can maintain flat to slightly down rates for the remainder of the year.

Okay. Thanks a lot.

Neil Frohnapple, Longbow Research.

Just a quick follow up on that rental rate commentary, John. I mean, what's your sense of what's causing the competitive pressure? I mean, is it stemming from still excess equipment in the market, or just anything else you can point to? And if it is excess equipment, kind of when you would expect that to normalize.

I think it's different by category. I mean, the crane demand is just so weak. I mean, you've got rate pressures there. I think there's probably some excess capacity in heavy earth-moving equipment right now that's putting some rate pressures. On the aerials side, it's a pretty positive picture from a utilization standpoint.

But these big, long-term projects, it's just United is going after those projects hard, Sunbelt is going after them hard, and it's a very competitive rate environment on those big, long-term projects.

Okay, great. And can you just remind us really quickly what percentage of your rental fleet or rental revenue is tied to crane? I think you called out aerial earlier being the largest portion, but what does crane make up today?

Crane is about 10%, 11% of our fleet.

Okay, got it. Thanks, Leslie. And then switching gears, could you just talk about what you're seeing regarding the used equipment prices, and if you would expect any notable movements over the coming quarters based on anything you're seeing in the market, such as inventory levels? And I guess as a follow up, should we really into anything on the used equipment margins ticking down a little bit in the quarter?

I think -- and Brad may add more color to this. I think there's residual pressures on cranes right now just because of pure lack of demand, so crane pricing is under some pressure. Aerial pricing is holding up well. We're not seeing a lot of degradation there. And there's probably some rate pressure on heavy earth-moving equipment just based on capacity issues.

Sure. I think, additionally, I'd mention that there was a mix issue within the quarter of some of our distribution-based sales or our RPO sales that pulled on our margin a little bit, not so much -- our typical aerials that we're selling out of the fleet for replacement, those margins are maintaining very well.

Great. Thanks a lot. I'll pass it on.

Thank you.

Nick Coppola, Thomson Research Group.

Going back to the wet weather real quickly, is there any way that you can just help us think about the size of the impact there, and kind of in lieu of that, any kind of qualitative way to think about it in terms of what -- maybe what June looked like after the rainy April and May, or what other regions looked like?

Well, I think if you go back to my comments, my prepared comments on utilization and the trajectory or the progression of utilization in the quarter, you can see that there was pretty steady improvement, and there was a big jump in earth-moving utilization after June, and I believe that was heavily related to the weather drying up.

Nick, I would add -- so we've got nearly $300 million in earth-moving products, something in that range, and we have a large waiting in Louisiana, where we're -- I think we're the Komatsu distributor in Louisiana and Arkansas, and so we were heavily impacted with that product. I'd also point out, though, on earth-moving related to rental rates, earth-moving is the only product that we had both year-over-year and sequential rate increases in. So while the rains tied us down -- and a year ago we were probably nearly 75% utilized with that product line, so maybe at some level it's a difficult comp.

As John stated, again, and he just referred to in his prepared comments, we're seeing improvements. Will we get back to 75%? I don't think that's our prediction. But will we continue to incrementally increase as this weather gets past us? Absolutely. And we were very specifically weighted heavier in Louisiana, Texas to a lesser degree, and so, subsequently, impacted more by weather. We can't quantify it, but hopefully that color will help you a little bit.

Nick, our utilization from April to today has improved about 600 basis points on earth-moving equipment, and I think that's heavily weighted to the weather just drying up.

Okay, that's helpful. And then moving over to new sales, clearly you talked about crane demand being weaker as a result of oil and gas, and there was actually a $19 million decline there in new crane sales. If you back that out, it looks like new sales were actually up year over year, and so can you just talk more about broad trends and new equipment sale demand?

Well, we think the crane market is going to continue to be difficult until we see some improvement in the energy markets. Our earth-moving market in the second quarter was actually down year over year. I think our market share was up a little bit, so we had some year-over-year improvement, but you can look at what Caterpillar is reporting and Deere is reporting on the construction equipment side of their business, and we are seeing some declines there, but we think our earth-moving sales will kind of be steady as it is. We think cranes will continue to be very difficult.

Okay. Thanks for taking my questions.

Sean Egan, KeyBanc Capital Markets.

I just wanted to quickly start out with a question on the utilization cadence that you mentioned. You talked about July being 72%. Can you help us understand how that compares on a year-over-year basis?

Yeah, I'll speak -- we're very close to flat year over year. We're slightly behind. Aerial work platforms remains probably about 150 basis points ahead year over year. Cranes are still down 400-plus basis points. Earth-moving -- I referenced a while ago in my comment to Nick that we were nearly 75% utilized this time last year, and we're nearing 70% utilization right now in earth-moving, so we're still down 500 basis points. Fork trucks in general are down just a tick.

So it's very, very similar, with the exception of earth-moving and cranes. Cranes -- we don't have a lot of hope that it's going to make a meaningful improvement. Earth-moving we think will incrementally continue to improve.

Got you. Thanks for that. And then staying on earth-moving, I can appreciate that weather would certainly impact utilization as well as overall demand for earth-moving, but do you think that part of that could have to do with project starts or projects moving into different phases? We've certainly seen starts decline as these projects roll out and ramp up into different phases. Do you expect this kind of pressure to continue?

Look, I think when you look at our earth-moving utilization, we're going up against a very, very difficult comp from a year ago. As Brad said, our utilization on earth-moving a year ago was around 75%, which is unusually high for that product line. We had a bunch of projects going on in Louisiana that were in the dirt phase, and we took advantage of that and had very high utilization.

Construction starts in the Gulf Coast are down significantly, about over 50%. Now, that's against an unbelievably difficult comp. I mean, we had construction starts a year ago unlike anything we've ever seen in the Gulf Coast, so it's a difficult comp. But, yes, I think there are not as many projects in the dirt phase right now as there was a year ago.

Sean, I'd also add keep in mind when we say earth-moving equipment, this is not 100% heavy site-work construction equipment. It includes mini excavators, skid steers, small dozers, small excavators, and so that stuff goes on a multitude of projects in a variety of stages, not just grubbing and land clearing. In fact, I'd tell you those products I just mentioned are where we've kind of focused our investment over the last year or so.

Okay, great. Thank you. And if I could squeeze in one more quick clarification. The Gulf Coast region made up a smaller proportion of overall revenue and gross profit than it has historically, and I'm wondering if you would attribute that all to the weather impact that we saw or maybe a confluence of other factors?

Well, I think it's what I just discussed. I think some of it's certainly weather-related. I mean, the weather impact was very real for us. But, again, construction starts are down significantly year over year, so that has some impact.

And bear in mind, that's where we sell a tremendous amount of cranes when things are rolling.

Yes. Yes. But with that said, there's still a tremendous amount of work going on in the Gulf Coast, and it's still -- the Gulf Coast is still driving 50% of our revenue.

Great. Thank you very much. That's all for me.

You bet. Thank you.

Kenneth Williamson, JPMorgan.

I just wanted to see if you could update your thought process on rental equipment purchases going forward. It seems like utilization is hanging in okay. What are your plans for -- I know you talked about aerial work platform, but just as a general picture, how much do you anticipate you'll be spending this year on CapEx?

Well, we don't give CapEx guidance, but we will grow our aerial fleet some this year. It's not going to be super aggressive growth, but we're running at such a high utilization level, it certainly makes sense for us to invest in our aerial fleet. As I said earlier, we'll be shrinking our crane fleet and probably keeping our earth-moving fleet relative to that.

Yes, Kenneth, the other thing I would mention, we've stated we've opened three greenfields this year. We're going to open at least two more, and those greenfields typically have about 70% to 80% of their product mix come from aerial work platforms. So when we think about growth, a piece of that is going to be driven by these -- let's just call it, right now, five greenfields we're going to have in this calendar year.

Okay. Do you anticipate that the number directionally is going to be in line with 2015? Higher? Lower?

Total CapEx number?

Yes, total CapEx number.

Well, I think we're going to stand on our existing comps.

Yes, our gross CapEx will be lower than 2015.

Okay. And I guess I was just curious on the crane sales side of things. Do you have any obligations to purchase new crane equipment going forward, or do you have -- or that might make it difficult to continue to digest that inventory?

We have no obligation to purchase cranes unless we need them, and so we're not buying any cranes right now.

Okay. All right, thank you.

Seth Weber, RBC Capital Markets.

I wanted to kind of go back and revisit some of the Gulf Coast discussion that we've had, that you guys have kind of offered so far this morning and also the comment in the press release about fewer starts or lower project activity and kind of your comment earlier, John, about just starts kind of slowing down.

I mean, what's the right way to think about maintenance work for the region? I mean, is there a scenario where new projects slow down, but maintenance work picks up kind of going forward? And is that enough to offset -- I know you're not talking forward guidance, but just, conceptually, how you think about the business going forward, I mean, could rental revenue continue to see strength based just on maintenance projects, I guess is my question, if new starts slow down?

Yes, Seth, I think the simple, straight answer is, yes, it could. The large projects have been somewhat of a blessing and a curse -- a blessing because just unprecedented amount of work activity, and that will continue for some time. We've all referred to the difficult comp from a year ago from just a pure start standpoint.

The cursed piece -- and maybe that's a strong statement -- is it's attracted a lot of competition, and we're seeing on large projects -- not maintenance projects, not the typical small, medium projects, but on these very large, multi-billion-dollar projects very aggressive pricing, and there's an area where we think there's kind of been a capacity issue that's driven pricing. It's been those large projects. But the answer to your question is, yes, we can continue to grow with the traditional typical rhythm that exists here and the associated maintenance.

And Seth, I would also point out although construction starts are down and, again, against a brutal comp, there are still new industrial projects being announced here on a regular basis that are in the planning and the permitting phases. I mean, this cheap natural gas and the Mississippi River, it's still driving a lot of activity in the chemical manufacturing and whatnot, so I sure don't want to give the impression that the Gulf Coast isn't a very vibrant market, because it is.

Sure. No, that's fair, John. Thanks for that. And I guess just maybe, Leslie, a quick question for you. The SG&A line actually ticked down here, which was surprisingly -- it was lower than what we expected considering the new starts and all that stuff. Was there something in that number that made it unusually high in the first quarter, or is this a good run rate to think about going forward?

I think the second quarter is a better run rate to look at going forward. We did have some unfavorable [health] claims experience in the first quarter, which improved in the second quarter, so that was the bulk of the difference there. There were some other puts and takes, but that was the big difference there, so I would look at the second quarter as more of a run rate going forward.

Okay, very helpful. Thank you, everybody.

Thank you, Seth.

(Operator Instructions). Neil Frohnapple, Longbow Research.

Hey, guys, just one follow up from a higher level. I mean, with you guys being a big Komatsu dealer, does Komatsu buying Joy Global impact you guys longer term in any way or provide any sorts of opportunities, or is that something that's really too early to be determined at this point?

I think it's too early to be determined. I think it's a tremendous positive for Komatsu. I think it's a great acquisition. I mean, it puts them on pretty much a level playing field with Caterpillar in the mining sector. We don't do a lot of mining. Komatsu owns most of their mining distribution. They do that direct. So I don't see it being real meaningful to us going forward, but it's certainly a major positive for Komatsu.

Okay. Thank you.

Yes, sir.

Sean Egan, KeyBanc Capital Markets.

Hey, guys, just a quick follow up for you. You gave the sequential cadence for utilization, and you mentioned that rental rate was just down 20 basis points year over year. I was wondering if you could maybe provide the same level of detail on the rate perspective. I mean, are we seeing things move up sequentially?

Look, we don't like to give monthly rates. We're going to give that on a quarterly basis. I can tell you we are comfortable with the guidance we've given on rates, and we think we'll be just what we said, flattish to down slightly for the remainder of the year.

Okay. Thank you.

And that concludes the question-and-answer session. I would like to turn the conference back over to John Engquist for any additional or closing remarks.

Well, I appreciate everybody being on the call. Look, we're still in a positive environment here on the rental side, and we expect that's going to be the case for some time to come. We think we've got some runway in front of us, and we look forward to speaking with you on the next call. Thank you.

And that concludes today's presentation. Thank you for your participation, and you may now disconnect.