McGrath RentCorp (MGRC) 2015 Q3 法說會逐字稿

Welcome to the McGrath RentCorp third quarter 2015 conference call. At this time all conference participants are in a listen only mode. Later we will conduct a question and answer session. (Operator instructions). This conference is being recorded today, Thursday, October 29th, 2015.

Now I would like to turn the conference over to Geoffrey Buscher of SBG Investor Relations. Please go ahead, sir.

Thank you, operator. Good afternoon. I'm the investor relations advisor to McGrath RentCorp. I will be acting as moderator of the conference call today.

On the call today from McGrath RentCorp are Dennis Kakures, President and CEO, and Keith Pratt, Senior Vice President and CFO. Please note that this call is being recorded and will be available for telephone replay for up to seven days following the call by dialing 1-888-203-1112 for domestic callers, and 1-719-457-0820 for international callers. The conference ID for the call replay is 159257. This call is also being webcast and will be available for replay. We encourage you to visit the Investor Relations section of the company's website at mgrc.com.

Our press release was sent out today at approximately 4:05 p.m. Eastern Time, 1:05 p.m. Pacific. If you did not receive a copy but would like one, it is available online in the Investor Relations section of our website, or you may call 1-206-652-9704 and one will be sent to you.

Before getting started, let me remind everyone that the matters we will be discussing today that are not truly historical are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding McGrath RentCorp's expectations, beliefs, intentions or strategies regarding the future.

All forward-looking statements are based upon information currently available to McGrath RentCorp. And McGrath RentCorp assumes no obligation to update any such forward-looking statements. Forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those projected. These and other risks relating to McGrath's RentCorp's business are set forth in the documents filed by McGrath RentCorp with the Securities and Exchange Commission, including the company's most recent Form 10-K and Form 10-Q.

I would now like to turn the call over to Keith Pratt.

Thank you, Geoffrey. In addition to the press release issued today, the company also filed with the SEC the earnings release on Form 8-K and the Form 10-Q for the quarter.

For the third quarter 2015 total revenues were flat at $113 million compared to the same period in 2014. Net income decreased 1% to $13.6 million from $13.7 million. And earnings per diluted share increased 2% to $0.54 from $0.53.

Reviewing the third quarter results for the company's mobile modular division compared to the third quarter of 2014, total revenues increased $6.9 million, or 15%, to $53.1 million due to higher rental, rental related services revenues, partly offset by lower sales revenues. Gross profit on rents increased $5.8 million, or 49%, to $17.7 million.

Rental revenues increased $4.7 million, or 19%, and rental margins increased to 59% from 47% as depreciation as a percentage of rents decreased to 16% from 17% and other direct costs as a percentage of rents decreased to 25% from 36%. Selling and administrative expenses increased 8% to $11.8 million, primarily due to higher allocated corporate expenses.

The higher gross profit on rental and rental related services revenues, partly offset by lower gross profit on sales revenues and higher selling and administrative expenses, resulted in an increase in operating income of $5.6 million, or 86%, to $12.2 million.

Finally, average modular rental equipment at original cost for the quarter was $678 million, an increase of $71 million. Equipment additions supported growth across all regions, and our portable storage business. Average utilization for the third quarter increased from 73.3% to 76.7%.

Turning next to third quarter results for the company's TRS-RenTelco division compared to the third quarter of 2014. Total revenues decreased $3.4 million, or 11%, to $29.3 million, primarily due to lower rental and sales revenues. Gross profit on rents decreased $2.9 million, or 24%, to $9.3 million. Rental revenues decreased $2.9 million, or 11%. And rental margins decreased to 41% from 48% as depreciation as a percentage of rents increased to 44% from 40%, and other direct costs as a percentage of rents increased to 15% from 12%.

Selling and administrative expenses decreased $0.4 million, or 7%, to $5.4 million, primarily due to lower allocated corporate expenses. As a result, operating income decreased $2.8 million, or 29%, to $7.1 million.

Finally, average electronics rental equipment at original cost for the quarter was $268 million, an increase of $6 million. Average utilization for the third quarter decreased from 62.5% to 61%.

Turning next to third quarter results for the company's Adler Tanks division compared to the third quarter of 2014. Total revenues decreased $1.2 million, or 5%, to $24.5 million, primarily due to lower rental and rental related services revenues, partly offset by higher sales revenues. Gross profit on rents decreased $1.9 million, or 16%, to $10.3 million. Rental revenues decreased $1.3 million, or 7%, and rental margins decreased to 59% from 65% that as deprecation as a percentage of rents increased to 23% from 21% and other direct costs as a percentage of rents increased to 18% from 14%.

Selling and administrative expenses increased $0.4 million, or 7%, to $6.9 million, primarily due to increased marketing and administrative expenses. As a result, operating income decreased $2.1 million, or 30%, to $5.1 million.

Finally, average rental equipment at original cost for the quarter was $306 million, an increase of $11 million. Average utilization for the third quarter decreased from 62.7% to 58.6%.

On a consolidated basis, interest expense for the third quarter 2015 increased 2% to $2.4 million from the same period in 2014 as a result of the company's higher average debt levels, partly offset by lower average interest rates. The third quarter provision for income taxes was based on an effective tax rate of 39.5%, compared to 39.2% in the third quarter 2014.

Next I'd like to review our 2015 cash flows. For the nine months ended September 30th, 2015, highlights in our cash flows included net cash provided by operating activities was $100.6 million, an increase of $15.7 million compared to 2014. The increase was primarily attributable to decreased prepaid expenses and other assets, partly offset by lower income from operations and other balance sheet changes.

We invested $104.9 million for rental equipment purchases compared to $113 million for the same period in 2014, partly offset by $19.7 million proceeds from sales of used rental equipment. Property, plant and equipment purchases decreased $1.1 million to $8 million in 2015. Dividend payments to shareholders were $19.7 million, and the repurchase of the company's common stock totaled $48.8 million.

The company began repurchasing shares in March under a 2008 Board of Directors Repurchase Authorization for up to two million shares. In August, the company's board authorized repurchase of an additional two million shares. Year-to-date, through October 28th, the company repurchased 2.33 million shares with an aggregate purchase price of $61.8 million, and an average per share price of $26.51. As of October 28th, 1.67 million shares remain authorized for repurchase.

Net borrowings increased $59.6 million from $322.5 million at the end of 2014 to $382.1 million at the end of the third quarter 2015. With total debt at quarter end of $382.1 million, the company had capacity to borrow an additional $147.9 million under its lines of credit, and the ratio of funded debt to the last 12 months adjusted EBITDA was 2.26 to 1.

For 2015 third quarter adjusted EBITDA increased $0.6 million, or 1%, to $47 million compared to the same period in 2014, with consolidated adjusted EBITDA margin at 42% compared to 41% in 2014. Our definition of adjusted EBITDA and a reconciliation of adjusted EBITDA to net income are included in our press release for the quarter.

Turning next to 2015 earning guidance. Our 2015 full year earnings guidance range remains unchanged at $1.55 to $1.65 per diluted share.

Now, I would like to turn the call over to Dennis.

Thank you, Keith. Now let's take a closer look at each rental business for the quarter. Modular division wide rental revenues for the quarter increased $4.7 million, or 19%, to $30.2 million from a year ago. This is the 10th consecutive year-over-year quarterly rental revenue increase for our modular division.

During the third quarter we experienced a 6% increase in division-wide, year-over-year first month's rental revenue bookings for modular buildings compared to exceptionally strong third quarter 2014 booking levels. We also continue to see rental rates rise for various size products as demand exceeds readily available supply.

Modular division average and ending utilization for the third quarter of 2015 reached 76.7% and 77.9% respectively, an increase from 73.3% and 74.2% a year ago. This is the highest modular division third quarter advantage utilization level since 2008.

Modular division income from operations, or EBIT, for the quarter increased to $12.2 million, or by 86% from a year ago. The margin for the quarter increased to 23% from 14% last year. This strong increase in profit was driven primarily by higher rental revenues and a rental revenue margin expansion. Gross margin and rental revenues increased to 59% for the quarter from 47% a year ago.

Direct costs associated with readying equipment and inventory center operations as a percentage of rental revenues decreased to 25% from 36% for the same period a year ago. During the quarter, we tightened down our spending for various building preparation and related inventory center operations. As utilization has risen in various product categories and geographies, we are more selective on rental opportunity project choices, overtime hours, supply expenditures, and building preparation for future time periods.

During the quarter, modular division EBIT results also benefited from higher profit on rental related services, offset by higher SG&A expenses and lower profit on equipment sales from last year's quarter. The higher SG&A costs were primarily related to increased sales and operation staffing levels to support the recovery of our modular rental business as well as the continued expansion of our portable storage rental business.

Now let me turn our attention to TRS-RenTelco and their results. Rental revenues for TRS-RenTelco, our electronic division, declined by $2.9 million, or 11%, to $22.6 million from a year ago. The year-over-year reduction in rental revenues was driven entirely by lower communications test equipment business activity. We continue to experience a significantly slower wireless communications network upgrade environment compared to the first nine months of 2014. General purpose test equipment rental activity, as measured by rental revenues for these products, was higher during the third quarter as it has been throughout 2015 compared to 2014 levels.

EBIT for the quarter declined by $2.8 million, or 29%, from the same period in 2014. The reduction in rental revenue of $2.9 million was the primary contributor to lower year-over-year EBIT along with higher laboratory costs and lower gross profit on equipment sales, partially offset by lower SG&A and depreciation expenses.

The higher percentage drop in year-over-year EBIT at 29% compared to rental revenues at 11% is primarily due to equipment mix and depreciation expense typically making up between 70% to 75% of direct rental costs. In other words, within any given quarter, we'll only have a limited amount of variable costs associated with rental revenue generation that can easily and responsibly be taken out of the business. In particular, with communications test equipment having much shorter depreciable lives than for general purpose test equipment, there are significantly higher monthly depreciation expense, but also much higher rental rates than for general purpose test equipment. As a result, when communications test equipment is underutilized, it impacts profitability more significantly than for general purpose test equipment due to its higher carrying costs without its matching higher rental rates and revenues.

Average equipment utilization was 61% for the quarter, compared to 62.5% for the same period in 2014. Average rental rates for the third quarter of 2015 declined by 11% to 4.62% from 5.2% a year ago, primarily due to the on-rent equipment mix increasing for general purpose and decreasing for communications test equipment. General purpose test equipment has longer depreciable lives, and lower rental rates, than communications test equipment.

Now let's turn our attention to Adler Tank Rental and their results. Rental revenues at Adler Tank Rentals, our liquid and solid containment tank and box division, decreased $1.3 million, or 7%, to $17.4 million from a year ago. Adler Tank Rentals serves a wide variety of markets segments, including industrial plant, petrochemical, pipeline, oil and gas, waste management, environmental field service, and construction.

Average utilization and total original cost of rental equipment were 58.6% and $306 million respectively for the third quarter of 2015 compared to 62.7% and $294 million a year ago. Third quarter average equipment on rent at original cost was $179 million, compared to $184 million a year ago, and we ended the period at $175 million. Average monthly rental rates also declined to 3.25% for the quarter from 3.39% in 2014. The reduction in both utilization and rental rates from a year ago is directly related to lower crude oil prices and the significant decline in wellhead related drilling and completions activity.

These dynamics have put increasing downward pressure on 21K multipurpose tank utilization and rental rates in upstream, midstream and downstream energy sectors, as well as in other market verticals. Keep in mind our 21K tanks are a multipurpose product and are the primary containment storage utilized in virtually all market verticals from ground water collection to fracking to ethanol glycol deicing fluid storage. We remain cautious in our outlook for our liquid and solid containment rental business for the foreseeable future as market forces drive a material reset of both the oil and natural gas industries.

Adler Tank Rentals EBIT for the quarter decreased $2.2 million, or 30%, to $5.1 million from a year ago. The higher percentage decrease in EBIT at 30% as compared to rental revenues at 7% was primarily the result of higher equipment processing costs, increased SG&A expenses associated with a larger sales organization, and higher depreciation expenses all from a year ago.

Now let me take a moment and update everyone on our portable storage business. Mobile modular portable storage continue to make good progress during the third quarter in building its customer following, increasing booking levels, and growing both rental revenues and profitability from a year ago. First month's rent booking levels and rental revenues for the third quarter grew by 37% and 29% respectively from the same period a year ago. EBIT for our storage container rental business was up two-fold from the third quarter of 2014.

We're working hard to make each of our portable storage operating geographies increasingly successful. We are on track towards building a meaningfully sized storage container rental business with attractive operating metrics.

Now for a few closing comments. There are very compelling factors supporting our share buyback activities thus far in 2015. Over the past few years, we have been through a significant investment cycle in the company. During this period, we launched our portable storage business, expanded our modular business to the mid-Atlantic region from Georgia to Washington DC, entered the liquid and solid containment rental industry through the acquisition of Adler Tank Rentals, and created a national footprint for the business.

We have also shepherded the turnaround and continuing recovery of our modular business through improving financial health from having lost approximately $1.00 of annual EPS due to the effects of the great recession. Historically, our modular division has been our largest earnings engine. We are well on our way to creating four large rental businesses whose combined annual earnings horsepower will be materially greater than we have experienced to date.

As both a business manager and an investor in McGrath RentCorp, I can fully appreciate the challenges associated with getting four different rental businesses all performing at favorable levels consistently. Cyclical challenges with our different rental businesses will occur from time to time, just as we are experiencing today with our electronics, liquid and solid containment divisions. However, that shouldn't overshadow the significant potential future financial performance of these rental businesses over time.

The company's management and board are confident in the foundation for growth in place today, supporting greater shareholder value in the future. Our buyback efforts in 2015 are a clear signal we believe the longer term intrinsic value of McGrath RentCorp has not been reflected in our share price more recently.

And now Keith and I welcome your questions.

(Operator instructions). And we'll go first to David Gold with Sidoti. Please go ahead.

Hey, good afternoon.

Hi, David.

Hi, David.

Just a couple of questions for you. First, can you speak a little about on the mobile modular side, what particular pockets or areas are we seeing the strongest demand there, and you know trends in non-res construction?

Well, if we go by market, you can look at -- and let's just take it by market. I think if you look at the Texas market, we've continue to have a strong year, and that's, you know, primarily from commercial and also from some educational greater demand. That's been a healthy market for some time and it continues to be so for the time being. We have not seen any really negative impact from the oil and gas challenges thus far.

If you look at the Florida market, we've had very healthy year-over-year quarterly rental revenue increases from the educational demand side. So we had a very good -- we had a good booking year last year. We had a better one this year. And that's primarily educational related.

If you look at the mid-Atlantic region, we've had healthy year-over-year quarterly rental revenue increases from both -- primarily from educational and also from commercial demand.

California, healthy year-over-year rental revenue growth from commercial and some educational demand. Most of the goodness has come from the northern part of the state. Southern California is much more dependent upon the educational market recovery, which is slowly occurring. We're seeing some good up tick there.

So that's really how I would categorize, you know, the modular business here this quarter, and actually for, you know, this year as a whole.

And David, if I could just add a few (inaudible) Q3 over Q3. In terms of the overall growth in the modular business, it was roughly half from education, half from commercial, so good balance and reflecting well the fleet investments that we've made. And as you'll recall, you know in prior quarters we had talked about commercial leading the recovery, now we're seeing more balance. And then regionally all four major regions contributed strongly to the year-over-year growth in the business.

Perfect. When you talk about seeing a good uptick in California on the education side, Dennis, what's -- how are folks essentially financing that? Have they found another way? Or, you know, any color you could give there is helpful.

Yeah. Well I'd be happy to. Well first of all, the way school districts in the past few years have been funding school facility projects is primarily through their local funds. And these are through local bond funds, parcel taxes, developer fees, those types of items. And what has happened in California is because the demand has been so pent up on both modernization of schools and for new facilities, that districts have gone ahead and really financed these projects themselves. Whereas historically it's been really 50% from the local level, 50% from the state level.

And the really good news in all of this is that we've received word in the third quarter that a state-wide facility bond is now qualified for the November 2016 ballot to be voted on by the electorate. The initial amounts for the bond issue are approximately $9 billion. Keep in mind the last state-wide facility bond measure to be on a ballot in California was in November of 2006 and it was for about $7 billion. Also keep in mind that since 1982 only one state-wide educational facilities bond measure has failed, and that was in 1994. Fourteen out of 15 passed over this timeframe, which is about a 90% passage rate.

The vote is based on 50% plus one vote. It's not a high threshold. If passed, it will be extremely beneficial to the California educational facility market, and we should benefit very handsomely, both in terms of modernization projects, which we put rental equipment into those market opportunities, as well as for Enviroplex on school facility purchases for more permanent installation.

And just to clarity that. So if it gets past the electorate, does that -- is that the precursor to putting it on the ballot or that's --

No, it's already -- the big item over the last 10 years is not being able to get one on the ballot. This is on the ballot. This was an initiative so it's going to be on the ballot. That's guaranteed.

Okay.

The size of it is currently projected at $9 billion. There could be some negotiating with the executive branch and that could be modified. I wouldn't think it would be modified significantly. So it's on the ballot. And the statistics I gave you on 14 out of the last 15 facility bond measures passing, that's once they're on the ballot voters have always been very, very supportive on a state-wide basis. And California has likely never been in greater need than it is currently for facility funding.

Okay. Perfect. And then on the repurchase, two questions. Keith, can you give us an actual share count as we stand today so we know what to use for the fourth quarter?

Sure. You'll see it on the face of the 10-Q that was posted today, and it's basically 23.9 million shares. Keep in mind as well in the fully diluted share count you need to allow, you know, maybe 100,000, 200,000 in addition to that posted number to get to a fully diluted number.

Okay. Perfect. So around 24 million should be a decent number for the fourth quarter.

In that neighborhood would be a reasonable estimate. And again, it's subject to whether we do any more repurchase activity and other factors.

Okay. And that brings us to the second part of that question. With good room left on the authorization and we've been pretty aggressive so far, how are we thinking about repurchases on a go forward?

Yeah. I mean a couple of comments. Clearly we've been very active in recent months, and we've actually repurchased approximately 9% of the fully diluted second quarter share kind. We tend to be opportunistic with our repurchase activities and try to take advantage of attractive market window opportunities.

To the extent we make any more repurchases, there are a lot of factors that we take into consideration. Obviously equity market factors, where our share price is, trading volumes that allow us to be active in a big way. We monitor debt and [competent] levels. And obviously look at other capital deployment opportunities. So there's a lot of factors there. There's no guarantee that just because we have the authorization that we will act on it. But clearly we felt there were some attractive price points over the last several months, and we've tried to take advantage of that.

Perfect. Perfect. Thank you both.

Thank you.

And we'll go next to Scott Schneeberger with Oppenheimer. Please go ahead.

Thanks, guys. Can you hear me?

Yes.

Yes.

All right, great. Good afternoon. Following up on David's questions on the repurchases, I'm calculating leverage at 2 times up to 2.3 now from the second quarter to third quarter. Is that accurate? And what type of comfort level do you have with regard to that? And I know you have the liquidity to borrow to do this, but just your comfort at borrowing to do it versus just drawing from free cash flow to perpetuate the buyback plan. Thanks.

Yeah. First, Scott, you'll see, if you look carefully at the press release, we actually give you the leverage at the end of the third quarter. It was 2.26, so your calculation was right in line with that. And again, I just echo the comments from a moment ago. We tend to be opportunistic. We look for opportunities in the market to be aggressive. We obviously felt we encountered that opportunity over the last few months.

In terms of leverage on our debt agreements, we can go as high as 2.75. So the factors we'll be looking at in the months and quarters ahead will be continued performance of the business and growth over time in EBITDA, which allows us to borrow more for the business as a whole. And then looking at other opportunities to deploy capital. But we definitely feel that in recent months, you know buying back our own shares has been a good investment.

Thanks, Keith. The fourth quarter specifically now, you guys are trending towards the high end of the EPS range for the full year guidance. Any puts and takes that we should keep in mind as we model for this upcoming quarter and any one times or other things like that? Thanks.

Sure. I'll just flag a few items. First of all, if you look at our comments in the middle of the year when we reset guidance, we felt that we would have lower sales this year than last year. That still holds true. If you look at Enviroplex, our modular business, and even our electronics business, we're seeing lower levels of sales activity compared to a year ago. Sales can be lumpy for us. They're not the primary business. The primary business is rental. And so I would say as we look into the fourth quarter, I would add that comment again as being a factor. I think sales outlook will continue to be on the softer side for the fourth quarter.

The other thing I would say is with our TRS business and our Adler business, we always warn folks that the fourth quarter is a period where we encounter seasonality. And particularly as we get around Thanksgiving through the end of the year, it's quite common to see some drop off in rental activity in both those businesses. So it's very hard for us to forecast internally, but we would expect that that would be likely to occur in one or both of those businesses in the fourth quarter of this year.

And then the other comment I would make is, given the strength that we've seen in the modular business, and already some potential demand for new orders in the early part of next year, we may continue to invest in fleet in the fourth quarter. And that is a wise investment if it's demand driven and is to -- or to support orders for early in the New Year. So those are just some of the factors that come into play. I think taken as a whole, we would expect earnings to be lower in the fourth quarter than in the third quarter. And you can sort of form your own assessment where that might lie.

Thanks. And just on your comment on purchasing new fleet, what categories are you looking at? What's relevant to that discussion? Thanks.

Well, the comment, just to be clear, it's an expense in existing fleet. So getting units ready to go out on rent, and that's captured under that direct cost of rental operations other. And again, the area where we've been making investments, significant investments is the modular business, and we may well do more of that in the fourth quarter.

I might add that this is the time of year, if we're seeing demand in the educational market of greater significance, that we'd want to start ramping the pre-prep of existing (inaudible) building, which is kind of the last most significant bastion of underutilization in California. So that's -- if we're seeing more activity there, we want to take full advantage of that in getting equipment ready to meet demand.

Thanks. And on the -- I get it on the OpEx versus CapEx. On CapEx at this point of 2015, how are you thinking about 2015 ending and [out] into 2016 with regard to CapEx and categories there? Thanks.

Sure. Just a couple of comments. Year-to-date $105 million spent on new rental equipment. That's down from $113 million over the first nine months of last year. We'll be relatively light on CapEx in the fourth quarter. The full year may come in somewhere in the $125 million to $130 million neighborhood. So if you look at it on a year-over-year basis, we'll probably be spending less on modular as we continue to utilize more of our existing fleet that was off rent.

Our electronics business is probably going to be comparable to last year. And then Adler is running at, you know, less than half what we spent last year. Really very little need to add equipment there. So that gives you a sort of sense of where things are at.

Looking into next year, it's too early to tell. I think if you look at a very high level, we have a lot of fleet investment already made in the Adler business. With our electronics business we'd like to see some improvement in utilization but we're going through a transition with that business, a little less emphasis on the wireless and teleco side and some growth in the general purpose side. So there's a shifting going on. And then with the modular business, there are opportunities to deploy new capital in several regions as well as in our portable storage business. We'll be looking hard at those and will likely be funding carefully, you know, additional growth in key markets.

Thanks.

That said, we've got a lot to work with. I want to emphasize what Keith said. We've got a lot to work with that we already own. And we can't -- we plan to take full advantage of those opportunities.

All right. Thanks. And then just my follow up question to follow on to all that. I know you're not going to provide 2016 guidance at this juncture, but in each of the segments, what is the early outlook just on how you would see trends next year if things remain as stable as they are right now, the demand trends stable as they are? What kind of meaning that would have moving into next year for each of the three major segments. Thanks.

Well, Scott, at a very high level, the modular business has turned the corner. It's doing extremely well. Assuming the bond measure passes next year, which we have a very high confidence level that it will, the momentum for schools, which already has started last year, got stronger this year, we're hoping to be strong entering next year, that all bodes very well for that business going forward. And plus we're going to be getting the year-over-year revenue, rental revenue impact from what gets put on in the second half of 2015 that we start seeing a full year's worth of rental in the next year.

If you look at our liquid and solid container rental business, the oil and gas industry right now is going through some significant changes. And, you know, with that business we expect to have some material headwinds for it. Until that industry really settles out in terms of consolidation of companies, there's going to be some bankruptcies or sale of assets. There's been much less capital investment, et cetera. So that's quite a bit of an unknown to us, but we're taking a very cautious look and we're really trying to manage our costs tightly. And at the same time, we have a lot we can do in terms of building a real world class sales force and really expanding our number of opportunities in other verticals outside of oil and gas.

If you look at our test (inaudible) business, you know quite frankly even though we've had a significant drop off this year, that's really been primarily related, almost exclusively, to the wireless communication side of things, and a particular type of testing that has been done in that industry over the last three years to support really 4G 100 megabit transmission environments. So that business, even though that vertical has really been very challenged and we don't really expect to see a great deal from that over the next year or couple of years, it's performing well in the other verticals.

The general purpose year-over-year rental revenues, the general purpose for 2015 were higher than 2014. We're doing well in the non-wireless areas in communications test equipment. So electronics, despite the significant drop off this year, you know if it maintains somewhere in the same area, we think that's going to be fairly good for next year. We'll have to see how that pans out. And then, you know, there will be another cycle with, you know, not just the 4G, fourth generation, but when the fifth generation of wireless networks takes off, more so in R&D and then deployment, installation and maintenance, you know they'll participate more in that. But the business is well run and we'll have to see how next year plays out.

All right, great. Thanks for all the color.

Okay.

(Operator instructions). I'll pause for a moment. And it appears we have no questions at this time. I'd like to hand the call back over the management for any closing remarks.

Well I'd like to thank everybody for joining us on our third quarter call today. We'll look forward to sharing our fourth quarter results as well as 2016 full year guidance at our call towards the end of February 2016. Thank you so much.

This does conclude today's conference. You may now disconnect. Have a wonderful day.