Operator: Thank you for your question. Next question is from the line of Steve Ramsey with Thompson Research Group. Your line is now open.
Steve Ramsey: Hi, good evening. Maybe to start with the Burris acquisition, solid EBITDA margin, 11% ish, it looks like. Can you talk to how Burris compares to your existing margin profile in the state? And if there is much of a difference, what accounts for that gap? And then maybe lastly, will Burris require much investment in the next couple of years to raise the financial performance of that business even further?
Tony Colucci: Sure, Steve. Thanks for the question. To be clear, Burris – so Burris is in the state, it’s in Illinois, $4.5 million of EBITDA and $40 million of revenue kind of mimics our profile. Burris is – the revenue streams are more heavily weighted to rental versus, let’s say, a dealership like Ault and I’ll talk to Ault in a second here, which means rental is obviously CapEx intensive, which is why we present economic EBIT and refer to that so often. I believe we picked up about a $20 million rental fleet in the Burris acquisition. And as Ryan mentioned, they’re doing a lot of compact rentals. So turf and ag specialists, smaller skid steers, smaller construction equipment, etcetera. So I would classify Burris’ revenue mix and sort of capital intensity very akin to Alta’s business in the rest of the U.S. here on the construction side specifically.
With Ault, up in Canada, the business model is not one that’s rental model. They may do very short run, what we would call, RPOs, rental purchase options, because this is large crushing and screening equipment, which typically has to get on site and maybe run for a few weeks or a couple of months where buyers want to make sure that they can – things are running well and commit to the asset. But this is not a long-term rental model where you’re holding assets and running them for 5 and 10 years or anything, frankly, beyond a year. So the cash flows – the Ault cash flows, $50 million in sales, $8 million, give or take, of EBITDA, and almost I think $5 million of that falls to the bottom line. So not capital intensive, reminds me a lot of our Ecoverse from a capital intensity perspective.
I believe $12 million of the $50 million is parts revenue, which is, as you know, we love, comes in at a really high margin, probably $4 million or $5 million of service and then the rest is just equipment sales. So it’s a dealership profile business with hardly any rental aspects and should be a really good cash-generative business for us going forward.
Steve Ramsey: Excellent. That’s helpful. And then looking at material and handling parts and service gross margins, combined be up nicely, again, for the second consecutive quarter, can you talk to the reasons for that improvement? And is that something that can be sustainable going forward?
Tony Colucci: It definitely could be sustainable to take the back end of the – or the back half of that question first. I think we’ve taken over a few regions where we’ve noticed just some inefficiencies in non-billable time. And so we’ve implemented some of our processes and procedures. And then of course, you’re always kind of looking at the rate that are you at market? Or is there room there? And I think what you’re seeing there, Steve, is just kind of us running our playbook from a KPI perspective, driving efficiencies. And yes, I do think you’ll see that continue.
Steve Ramsey: Okay. Excellent. And then one last one for me. I think this has been alluded to. The rental fleet continues to grow and rates are higher, but then fleet availability is improving as well. Thinking about that juxtaposition. Are customers still judging the rent versus buy decision in a similar way now to prior years?
Tony Colucci: I think the – well in prior years, there wasn’t – there was this decision that had to get made between, frankly, us and the customer, meaning did we want to part ways with a rental asset. And that was predicated on what rates are we getting out in the market? How did that rate convert into returns on invested capital for that bespoke piece of equipment? And so in previous years, we were holding back maybe and saying, look, we need to hold this because we can’t find another one or we’re not sure we’re going to get another one for some time, whether – whoever the OEM was. And so as things have loosened up, I think the decision has become more natural from a history, let’s just say, pre-COVID, where a customer’s decision is more predicated on their own backlog and whether they want to commit to an asset or do they just need an asset to maybe finish a job or supplement their existing fleet because they’re pushing relative to some deadline or something that they have.
So I think it’s become much more natural in terms of the buy versus rent decision. And we will be prepared for both, as I always say, is we’d rather have our rent-to-sell fleet out on a customer’s balance sheet or a bank’s balance sheet and reap the rewards of parts and service in most instances. But customer preference sort of requires us to be renting lightly used equipment as well. So we’ll be prepared for both, Steve, with the ultimate goal of driving field population.
Steve Ramsey: That’s helpful color. Thank you.
Operator: Thank you for your question. Thanks, Steve. There are currently no additional questions waiting at this time. So I’ll pass the call back to the management team for any closing remarks.
Tony Colucci: Thank you, everybody, for attending our Q3 earnings call. And as I mentioned, happy upcoming holiday season to everybody. Thank you.
Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.
