ALTG (2020 - Q4)

Good afternoon, ladies and gentlemen, and welcome to the Alta Equipment Group Fourth Quarter 2020 Earnings Call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. And now, it is my pleasure to hand over the conference to your host, Sinem McDonald, Director of External Reporting. Sinem Mc

Thank you, Christian. Good afternoon, everyone. Welcome to Alta's fourth quarter and full year 2020 earnings conference call. On the call with us today are Ryan Greenawalt, our Chairman and CEO; and Tony Colucci, our Chief Financial Officer. For today's call management will first provide a review of the fourth quarter and the full year financial results. And then we will conduct a Q&A session. 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 at investors.altaequipment.com. And with that, I'll now turn the call over to Ryan.

Thank you, Sinem and welcome, everyone. Thank you for joining Alta Equipment Group's fourth quarter 2020 earnings call. Our strong performance and solid financial results in the fourth quarter capped off a transformative and very successful 2020 despite the significant impact of the COVID pandemic. We achieved several important accomplishments which I'll briefly touch on before turning the call over to Tony for a financial review of the fourth quarter and full year. The operating environment for our services continued to improve from the prior quarter as customer demand increased consecutively each month in the fourth quarter. Labor productivity, which is the heartbeat of our operations increased to benchmark levels before the end of the year. In response to increased sales activity and demand for labor hours, we added to our product support workforce both, organically and through acquisitions and ended the year with over 900 skilled technicians, an increase of approximately 250 technicians year-over-year, and representing roughly half of our total headcount. Our entire Alta team once again rose to the occasion during these difficult times demonstrating incredible dedication and delivered on our commitment to exceptional service and equipment uptime. A sincere thank you to all of our employees who make Alta the great company it is today. And touching on our financial highlights; fourth quarter adjusted EBITDA came in at $24.6 million on revenue of $280.4 million. We reached a true milestone in delivering over $1 billion in revenue on a pro forma basis with adjusted pro forma EBITDA of $98.7 million for the year. Our liquidity position remains strong and our balance sheet flexible in providing the support needed to execute our organic and acquisition growth strategy. And looking at the full year, we overcame many challenges that we faced due to the COVID pandemic and navigated the business through unprecedented shutdowns. We were designated as an essential business and remain fully operational at all of our 54 branches across 11 states. Our variable cost structure and the dexterity of our business model allows management to swiftly implement cost reduction measures to efficiently manage the business and sustain positive adjusted EBITDA and mitigate against margin declines. The revenue decline was less than anticipated and business activity began to pick up from the April trough through the end of the year. As we move through the recovery in the second half of the year, we reduced some of the cost mitigation measures and began calling back skilled technicians who were furloughed as big business activity returned to pre-COVID levels. The diversity of both, our geographies and our end-markets enabled us to weather the pandemic storm. Also as a reflection of our business model, our product support revenue remained strong during this period and grew 47% in 2020, compared to the prior year when including our required revenues. In 2020 consistent with our acquisition strategy, we expanded our geographic footprint, established relationships with new OEM partners, and further diversified our end-market reach. In the fourth quarter, we completed two accretive acquisitions that increased our scale and strengthened our business profile. We acquired the construction dealership assets of Vantage Equipment which operates three branches in the northern region of New York State. Alta is now the authorized distributor of Volvo products in most of New York State, a region that offers significant additional expansion opportunities. Vantage also diversifies our customer base and serves as a great complement to our Lifttech business which serves the New York material handling market. This combination is powerful and allows us to bring our full resources to this large and growing market. As we mentioned on our third quarter earnings call, we closed the Howell Tractor and Equipment acquisitions in late October. Howell serves the Northern Illinois and Northwest Indiana construction markets with a wide range of construction and crane equipment. Howell enjoys a strong relationship with leading manufacturers such as Sennebogen, which is a new addition to Alta's product line in the region. Looking at the full year, we completed seven acquisitions which in total contributed approximately $23 million to adjusted EBITDA in 2020, our most active year on the M&A front. Alta has become the partner of choice in the fragmented equipment dealer market as we provide manufacturers the benefit of our scale, liquidity and reputation to facilitate share growth and customer loyalty. The structural supply demand and balance between buyers and sellers in our industry remains intact and we continue to execute on our growth strategy. As we noted in today's news release, we've rebranded our Industrial Segments and Material Handling. Material Handling is the recognized industry vernacular and better describes the range of our capabilities. The rebranding will have particular significance of messaging to the e-commerce sector which values the integration of Material Handling equipment with the more sophisticated systems offerings. PeakLogix, a national material handling systems integrator we acquired in mid-year has significantly enhanced our positioning in this area and provides us with a competitive advantage in the fast growing, warehousing and logistics market, which has only continued to pick up steam as the recovery continuous. Peak offers a complete material management solution and delivers efficiency and increased productivity for it's customers. We've been able to cross-sell and promote their services across our entire material handling customer base, and integrate them with our other warehouse automation solutions. We also expanded our full service capabilities in this area, more recently with a small but strategic acquisition in ScottTech, which provides warehouse control software and systems. It is important to highlight that these new systems integration services are unconstrained by our dealership territories and both acquired businesses have customers throughout the U.S. and internationally. And looking forward we see a clear path to a full recovery as the recovery takes hold and the year progresses. The investments we've made in technology products and people position us well to continue our strong performance entering 2021. We're encouraged by the positive trends we're seeing, especially by the strong secular tailwinds that are apparent in our material handling and construction segments. E-commerce growth is driving higher volumes from large retailers who warehouse their products which increases our opportunity to expand and lean into this area of the business. The demand for automation and more complex systems and technology in warehousing and material handling has never been greater, and we believe it is in the early stages. There is clearly upside from potential federal stimulus and pent-up demand for capital projects to improve our net -- our aging national infrastructure. Alta's strong relationships with leading OEMs and our recent geographic market expansion position us to be a great partner for both, material handling and construction equipment markets. This was truly a transformative year by any measure; we believe our strong financial results in our first year as a public company demonstrate the outstanding execution of our resilient dealership model and our operational discipline through a difficult and unprecedented time. We are exciting -- excited and increasingly confident in our ability to deliver increased financial results and enhanced shareholder value moving forward. I'd like to thank our manufacturing partners for their support, our dedicated employees for their hard work, and our shareholders for their support and confidence in the company. With that, I'll now turn it over to Tony for his financial review.

Thank you, Ryan and good evening, everyone. Thank you for your interest in Alta Equipment Group and our fourth quarter and full year 2020 financial results. Before I start, I first want to congratulate all of my Alta colleagues, and all of Alta's shareholders on our one year anniversary as a public company. The past year has been equal parts challenging and exciting. Navigating a global pandemic certainly wasn't part of our plan as we entered the public markets 13 months ago, but our business and most importantly, Alta's employees rose to COVID's challenge and delivered a performance that Ryan and I are extremely grateful for, and proud of. Additionally, I want to welcome our new team members at Vantage Equipment, and ScottTech in upstate New York to the Alta family. The senior leadership team is excited about integrating your talents into our business and into Alta's one team culture. We look forward to earning your trust. My remarks today will focus on four key areas: first, I'll be presenting our fourth quarter performance, which we are pleased with. As the business continues to close in the COVID gap and gain ground year-over-year on some key metrics. I'll be focusing in on specific departmental revenue figures, organic cash flows and rental fleet fluctuations, and outperformance on these metrics impacted the balance sheet and our leverage profile in a positive way. Second, I'll be discussing our full year 2020 performance and sequential quarter-over-quarter trends in two of our key performance indicators. Specifically, I'll discuss how those KPI trends correlated to EBITDA performance for the year, and how those 2020 trends compared to 2019, a year reflective of a more typical business climate. Third, I want to touch on year-end acquisition of Vantage Equipment, how we thought about the return profile of our investment when compared to the cost of capital associated with the preferred stock we raised to fund the transaction. I also want to provide some high level financial figures on the ScottTech acquisition that we closed at the beginning of this month. Lastly, I'll discuss the balance sheet, and in particular, our leverage and liquidity position as we entered 2021. Real quickly, it should be noted that there are some slides in our presentation which was released prior to our call today that presents our fourth quarter and full year numbers in greater detail than what I will discuss today. I'd encourage everyone on today's call to review our presentation, and our 10-K which is available on our Investor Relations website at altaequipment.com. With the first portion of my prepared remarks; fourth quarter performance. First, let's talk about the profit and loss statement. For the quarter, the company recorded revenue of $280 million, which is a record sales number for Alta. I'll get into what drove that figure to such a high level in a moment but the $280 million represents a $60 million sequential increase over Q3 and a 9.4% increase on an organic basis versus Q4 2019. From an EBITDA perspective, we realized $24.6 million in adjusted EBITDA for the quarter, up from $21.9 million in the third quarter of 2020. Importantly, our adjusted pro forma EBITDA for Q4, which assumes we had owned Vantage and Howell for the entire quarter was $26.2 million, or $2.7 million less than Q4 of 2019. I'll come back to that $2.7 million EBITDA variance a little later in my comments. Next, I'd like to talk about organic cash flows in the fourth quarter. First, I mentioned the $280 million in revenue a moment ago, and how that was a record sales number for the business. Just to focus in on that briefly; on previous calls I mentioned how the fourth quarter is typically the largest equipment sales quarter of the year for Alta, and in particular, it's historically been our largest rental equipment sales quarter of the year. Really in a bit further, new and used equipment sales were $135 million for the quarter, a $37 million increase over Q3; another record number. But importantly, we recorded an additional $38 million of rental equipment sales for the quarter, a number that is two times the amount sold in Q3 2020. The reason why I focused on the $38 million rental disposal number is because it led to a net decrease of $10.5 million in rental fleet, which when coupled with our EBITDA for the quarter led to an organic delivering of approximately $15 million, and an unlevered free cash flow conversion on EBITDA factor of over 100% for Q4 2020. We believe this organic delevering to be a powerful indication on the marketability of our rental fleet assets and our ability to generate cash flow and liquidity by optimizing our rental fleet in a short period of time. On an organic basis, we believe this to be the story of the quarter. Few other P&L highlights before I move on. And just to jump back to the equipment sales number in Q4 just for a second; let's keep in mind our razor and blade business model. The $103 million in equipment sales for the quarter is now customer field population which bodes well for the future of our high margin product support departments. Another encouraging metric from the P&L; we saw a $2.5 million rental revenue increase over Q3 2020 on an organic basis, an indication of continued strengthening in our rental business. And importantly, continued year-over-year organic growth in our parts and service departments in our construction segment. Moving on to the second key area of my prepared remarks. I'd like to focus on some high level pro forma numbers for the full year 2020 and certain quarter-over-quarter trends in key performance indicators we observed throughout the year. First, for the fiscal year 2020, as Ryan mentioned, on a pro forma basis our annual revenue is now slightly above the $1 billion mark. And on an adjusted pro forma basis, our EBITDA as of the year -- as of year-end was nearly $100 million. A few key points and trends to point out is we do a look back on 2020, and I'd like to refer everyone to Slide 19 of our earnings presentation which depicts the data I'll be referring to. First, as we've discussed on previous calls, two major drivers of EBITDA cash flows in our business correlate to two key performance indicators we track; labor productivity and rental fleet utilization. Of note and discussed on prior calls, we saw the bottom in labor productivity in Q2 2020 began to recover on the metric in Q3, and I'm happy to report that we were able to achieve pre-COVID labor productivity levels in Q4; that trend has continued as we moved into Q1. So for labor productivity, a V-shaped recovery to be sure, and with positive trends headed into 2021. Second, rental utilization which I -- which as I have mentioned previously, has lagged historic levels realized in our business. And as you will note on slide 19, our physical utilization variants versus the prior years followed a similar trend that labor productivity followed in 2020. We began to see the follow-up towards the end of Q1, the year-on-year variance was most acute in Q2, we started recovering in Q3, and continued to close the gap in Q4. Now, unlike labor productivity, as of the end of the year, we have yet to fully close the gap on rental utilization. Having said that, and importantly, the early signs in Q1 are encouraging and suggest a continued closing of the gap. So, in summary, as we looked at these two key KPIs and how they trended throughout 2020, and we correlate them against our EBITDA performance throughout the year; we noticed similar trend in terms of the gap versus historic norms. Again, referring to slide 19 you will note that our year-on-year EBITDA performance mimics the trends observed in the two KPIs. In summary, of the $13.7 million in EBITDA variance for the year, approximately 75% was incurred in Q2 and Q3. Importantly, as with both the KPIs, we continue to narrow the year-on-year EBITDA gap here in Q4 with the gap being $2.7 million on a pro forma basis for the quarter versus a $6.7 million gap in Q3 2020. Last item of note in this section of my commentary, the turbulence of 2020 disguised a typical seasonality in our business, and in particular, the seasonality of our EBITDA. In the EBITDA look-back chart on slide 19, you will note that almost 25% of our pro forma 2020 EBITDA more typically and expectedly given our construction [Technical Difficulty] annual EBITDA, Q2 and Q4 delivered 20% and 25% each, and [Technical Difficulty] the macro backdrop [Technical Difficulty]. For the third area of my prepared remarks; I'd like to briefly touch on our recent M&A activity in the preferred stock offering we contemplated [Technical Difficulty]. For the year, we completed our acquisition of Vantage at an additional $40 million of revenue. The acquisition further expands our territorial reach with Volvo and provides for natural synergies with Lifttech, our material handling operation in upstate New York. At a total enterprise value of about $23 million, we believe the deal to be accretive from an EBITDA multiple standpoint, as well as in comparison to the cost of capital we sourced to fund the transaction, which was the preferred stock offering we completed in concert with the acquisition. With approximately 30 technicians serving a market territory known to be greater in size in our established Michigan territory, where we staff more than 100 technicians, we see -- we see a tremendous aftermarket opportunity and expect to double the size of that business overtime, thereby furthering the accretion over the cost of capital used to fund the deal. Onto ScottTech; on March 1, we completed the acquisition of ScottTech Integrated Solution as a complement to our PeakLogix acquisition completed in the middle of 2020. Specializing a warehouse management software and systems integration, we believe the combination of PeakLogix and ScottTech further expands our full solution product offerings and increases our commitment to the emerging technology space. At a purchase price of approximately $2.5 million, the acquisition adds approximately $10 million of revenue in close to a $1 million of annual EBITDA to the enterprise. For the last part of my prepared remarks, I want to give a quick update on the balance sheet and our credit profile at the end of Q4. Two key factors here to discuss: leverage and liquidity. First, leverage. I mentioned early in the call, we realized an organic de-leveraging in the business by virtue of our big quarter in rental equipment sales. That factor alongside solid EBITDA performance in the quarter and the use of the preferred stock offering to fund advantage acquisition all led to total leverage reducing from about 3.6x EBITDA in Q3 to 3.4x at year end, which with senior leverage dropping to 1.8x, with both leverage ratios being well inside our leverage covenants. Touching on liquidity. And we feel really good about our position here. Recall that we closed the IPO with roughly $150 million in cash and revolving liquidity. Since the IPO in mid-February, we've acquired five, and now at six strategic business funding growth CapEx in our rental fleets, specifically in an emerging market like Florida, in service the cash cost of our debt. As of the end of Q4, I'm happy to report, the business held the same level of liquidity that it had at the IPO or approximately $150 million. We believe holding liquidity at these levels, given all the challenges and activity that 2020 presented to be an impressive result, a reflection of our cash flow profile and a strong collateral base, which we use to fund important strategic investments. This is also a testament to how we thoughtfully positioned our capital structure and how we fund M&A. In closing, I want to thank all of my teammates at Alta for your commitment to the business and to each other throughout 2020. To our investors, we appreciate the opportunity to be stewards of your capital, and appreciate your support as we navigated our first year as a public company. I have great faith in our proven business model, our leadership team and our vision for the future and look forward to a successful 2021. Thank you for your time. And I'll turn it back over to the operator for Q&A.

[Operator Instructions] The first question is from Alex Rygiel from B. Riley. Your line is open.

Thank you, Ryan and Tony. Very nice quarter and strong year. Congratulations.

Thank you, Al.

Thanks, Alex.

A couple of quick questions. Your adjusted EBITDA margins today are around 10%. Can you talk about some of the drivers to margin expansion in 2021 and beyond?

Sure, Alex. When we look back at the fourth quarter there, I've made special note in my comments about the large amount of rental equipment sales. And so for the quarter, it's going to feel like, it's going to look like that our EBITDA margins were depressed, but it really was a function of all of the equipment sales and to refer back to the razor and the blades concept that's inherent in our business model. As you know, razors don't have as good of margin as the blades and so that that mix got thrown out of whack there in the fourth quarter. As we drive forward here, obviously the business model is to continue to grow, feel the [ph] population, build the product support business, which is higher margin in the future. So we would think that the mix, as we continue to move along, won't be the same as it was in the fourth quarter and shift more kind of appropriately back toward a more regular mix of parts and service, thereby kind of driving that EBITDA margin a little bit further north in the future. When we think about rental, EBITDA margins on rental are very high as well. We had some positive news there and it continue to trend in the appropriate direction. So, so long as rental continues to trend, that will also drive the EBITDA margin higher.

And then could you maybe talk a little bit about which customer categories are rebounding the quickest, post-COVID here? And which ones are rebounding slower and maybe add some thoughts on whether or not those slower customer categories could catch up?

Sure, Alex. This is Ryan. So a couple areas that are rebounding faster at our home turf is the automotive industry in our home state of Michigan. And then throughout our material handling dealership footprint, anything related to the warehousing market has remained steady and is accelerating. Also with supply constraints, anything related to steel, the scrap industry is hot right now. That's a component of our business, scrap demolition in the steel industry on the construction side.

And then lastly on M&A. Can you talk a little bit about your M&A pipeline, both within sort of your core business lines, as well as thoughts about adding a third leg?

Sure. We think about the first leg being territorial expansion with our two most significant OEM partners. And those opportunities, we're always watching for, but there has to be a catalyst, some kind of succession planning issue or a catalyst, a reason for one of the ownership groups to be looking for an exit. What we have a lot of, is infill opportunities, which there were several examples of that last year. As we as we look to some of these markets where we're less mature or the new entrants and taking over territories where we can grow share, we'll be looking to build the product portfolio and there could certainly be an M&A component of that talking in smaller dealerships in our existing footprint. And in terms of the third segment, as we mentioned on the last call, we're very focused on kind of watching the evolution of transportation, the electrification of the over the road fleet. Over the road, the truck segment is something that we'd like to be in long term. And as the business evolves, we think that we're really well-positioned with our experience in both electric, on the battery side and the fuel cell side from our material handling business. So those are conversations that we're open to. It's sort of very active time. A lot of new companies coming to market and that we do envision something long term in that sector.

Very helpful. Thank you.

Your next question is from Michael Shlisky from Colliers Securities. Your line is open.

Good afternoon, guys. Can we can we just get back to the [indiscernible] I may have missed it. Can you repeat back with the organic growth was in the quarter? And of the various revenue categories that you have in your release in your 10-K, which ones were the biggest drivers of that while the other things are going to be up for sure?

Mike, I'll take the first half of that. I think your question was the organic growth for the quarter. I think the number was 9.4% as an enterprise. Yes, 9.4%. What was the second half of your question, Mike?

I was just curious as to which categories of revenue drove the organic growth the most?

Oh, yes, by in large Mike, it was the equipment sales as I mentioned. Rental equipment sales. As customers, we get toward year end, customers have capital budgets that maybe they're looking to get rid of for the year, if you will. We also have customers that have historically looked to take advantage of bonus depreciation from a tax perspective. And so, the fourth quarter is usually overweight equipment sales and it was again this year, probably more than we expected. But that equipment sales number is what's driving a lot of the organic growth. We did have organic growth, as we mentioned in the rental line in parts and service and construction as well. Which all kind of bodes well when you kind of peel the layers back here.

Got it. I also wanted to ask about your rental fleet here in 2021. I'll have little [ph] spent some time during the downturn, kind of pairing assets, making sure they had [ph] -- it was the best performers and the best outlook. Did you allow that during Q2 to Q4? And of course you have a better performance ahead for the rental fleet from a margin perspective in 2021?

Yes, Mike, this is Tony. I'll take that one. So, when we think about rental, we're thinking always about utilization and cash flows off of it. Not necessarily gross margin, because there's so much depreciation in there. But as we move through Q2 and Q3, we had already kind of committed to making some investments down in Florida, with the Flagler acquisition and adding rental fleet down there. We think long term that it's still the right thing to do. And what we did here in the fourth quarter was kind of optimize a little bit. I mentioned the reduction of about $10 million in organic kind of acquisition costs here. As we left the year end as you'll see, in our numbers, we got roughly a $400 million fleet headed into 2021. We feel good about that fleet level. It may ebb and flow. If we have a $400 million fleet, you'll see in our numbers we turned over almost a quarter of that fleet in the year, which is part of our business model is that rent-to-sell [ph] with the heavy equipment to get it out in the field population. So at any rate, the fleet may ebb and flow a little bit, but by in large, the expectation here is that we're going to keep the fleet kind of in that same level, let the market kind of decide demand to see if we're going to expand, or if we have to pair back some more. But we don't at this point have expectation of growing the fleet in any material way.

Great. And then one last one from me. The EBITDA that we saw in Q4 and the exit rate for the year, is that a good sort of baseline minimum for the full year, adding in perhaps maybe $9 million to $10 million for the last two deals a bit in the fourth quarter? And from there, do you have any sense as to what you might get from close [ph] perspective in 2021?

Yes. Good question, Mike. The number that I would refer you to in the fourth quarter as kind of a good metric to maybe build off as we move along here is the $26.2 million of pro forma EBITDA for the fourth quarter. I made special mention of kind of the seasonality here as we as we go along and how that seasonality kind of gets flipped around a little bit in 2020. But, I think that fourth quarter numbers are a good one to build off of. Relative to organic growth we have the coming off of 2020, we would we would expect some. We're impacted by COVID, so we certainly think we'll be jumping off of 2020 levels. How much? It kind of remains to be seen and I'm not sure we're prepared to give a number at this point.

Just to clarify, the exit rate of $26.2 million, does that include Vantage, which was on December 31 [ph]?

Yes.

It does. Okay.

Yes.

Yes, perfect. Thanks so much, guys. Appreciate it.

Thanks, Mike.

Sure.

Your next question is from Brian Fast from Raymond James. Your line is open.

Good afternoon. Thanks for taking my questions here. Just trying to get a gauge of how supply channels are looking right now. Have you had any issues? I guess sourcing parts or equipment quick lease [ph]? Or are you seeing some delays here?

We're definitely seeing delays in areas. So equipment lead times are starting to stretch in certain product categories, the constraints on steel and other materials are definitely being felt. We always try to remind that we can withstand short-term variability and things like that. We use our rental fleet to fill in for our customer needs and the flip side of that is we see firming up of pricing and utilization on both rental rates and time utilization, but also on the used side, things that are definitely appreciating today.

Okay. Thanks, Ryan. And then if we look at the technician edition, are you able to break out the organic growth and the acquisition growth? Just trying to get a gauge of the recruiting landscape out there.

This is Tony, Brian. Thanks for joining. The one metric that I think we could -- we don't have the number top of mind in terms of how many organic hires we add, if you will, throughout the year. And it gets a little foggy with given COVID and the furloughs and so on and so forth. The one metric that we are kind of pointing to is we've talked a lot about the aftermarket opportunity we saw down at Flagler in Florida. When we took that dealership over, they had 63 technicians. I think we closed the year with 83 technicians on staff down there. So growing in all the right areas where there's a lot of opportunity. Now that same 50% increase or whatever the number is there -- 30% maybe -- we would not have realized that in other areas. It would have been more muted than that. But the Florida kind of experience stands out.

That is helpful. That's it for me. Thanks.

Thanks, Brian.

Your next question is from Matt Summerville from D.A. Davidson.

Thanks. A couple questions. First, you just mentioned that you're seeing pricing firming on the rental utilization in the used side of things. With that then, when would you expect the rental utilization gap to be fully closed at this point? Or maybe you're already seeing that in early 2021? So maybe talk about that a little bit?

Matt, thanks for joining. This is Tony. Good question. As I've mentioned in my prepared remarks, in Q1, we're off to a good start in terms of continued closing of the gap, if you will. Will we get there in Q1? I think it still remains to be seen. I like to say by the end of Q1, we would see that utilization gap close. I think the comment that I would make is if we continue to see trends of what we see here in Q1, that utilization gap will get closed here, hopefully by the middle of the year, or in Q2 at some point. But we're gaining on it every day.

Then with respect to the actual utilization rate, can you give us a sense as to where they are currently? Maybe versus where they were just pre-COVID? And maybe where they trough during COVID? Just to kind of frame that up a little better and more specifically?

Yes. I think the way that I would answer that, Matt, is if had $100 of rental fleet, kind of on the hand acquisition costs, in a more normal situation, we might have $60 or $65 of that out on rent. The variance that we saw and the shocks that we saw was something like take 10% off of that figure. So the $60 becomes $54, if you will, and then you can kind of extrapolate that into our business. You can kind of see what happens to EBITDA so on and so forth thereafter. But again, rough math that's kind of what we saw. And it was in the pockets of the fleet. Our material handling fleet didn't see as big of a shock that our construction fleet did in Q2 and Q3. So the 10% figures that I gave you is kind of the mix and the most acute that we saw when you kind of fully mix the entire fleet together.

Got it. And then just two more quick ones. We can do the algebra later, but just to save the time, can you provide us what the organic revenue number was for material handling? And then can you also comment from an M&A perspective, I would imagine the assets that are serving the material handling side of warehousing, logistics, ecommerce, they were starting to see some multiple inflation there. So are those transactions -- do you have anything sort of in the pipeline serving that market? Or is that something that you're happy with the asset base to have in the organic opportunity in front of you that maybe you're not looking at organically now there? Thank you.

I'm going to take the second part of that question while Tony does the math on the first part of the question. So for the kind of non-mobile equipment, the warehouse solutions and the more systems-oriented businesses that we acquired last year and then earlier this year, we are looking for opportunities. We would be opportunistic if we saw something, but we think that we have the platform that we need. This is a business that we acquired intellectual property and now you could think of it as we've taken a group that had half a dozen salespeople on the stream today. They have over 100 material handling sales professionals out looking, mining for opportunities. We think that they'll be very busy for the foreseeable future off of the platform we already have. But that said, we're always looking for interesting assets.

Matt, just to play off that -- I'm not sure we've seen an expansion in multiples or deal multiples because of the kind of the demand in the ecommerce space and the kind of activity in that space. We haven't necessarily seen that play out. And Matt, I'm going to have to -- actually hang on one second.

No problem. Thank you.

Matt, your question, was that quarter-over-quarter in the material handling segment or annual? What was your question? We have to come back.

Yes. The fourth quarter year-over-year organic, you gave it in construction, it's 31.8 and I was curious what it was for material handling?

It looks like material handling, that same figure is down 5%.

Thank you.

We'd have to break that down by department and keep in mind that the material handling segment which hit with COVID and shutdowns and so on and so forth, a little bit harder. But anyway, that's the number.

Perfect. Thank you guys very much.

I'm showing no further questions at this time. I would like to turn the conference back to Mr. Ryan Greenawalt for any closing or additional remarks.

No further remarks. Thank you, everyone, for joining. We look forward to continued success in 2021. Good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a great day.