Tim Boswell: In the last 12 months in the fourth quarter, let’s see, Tim.
Tim Mulrooney: Just curious how much you think M&A is going to…
Tim Boswell: Yeah.
Tim Mulrooney: … contribute just so that we can figure out, okay, how much of that guidance raise was due to M&A, how much was due to organic? Just trying to hold in…
Tim Boswell: Yeah. Well…
Tim Mulrooney: … on those numbers?
Tim Boswell: That’s an easy one, Tim. If we just do it from an EBITDA standpoint. I said in the prepared remarks, the core business is performing to the prior midpoint of about $1.50 billion and so that I would say the entire guidance increase at the midpoint of about $7.5 million is driven by the acquisitions in Q3.
Tim Boswell: Perfect. Okay. Thank you. And then the Modular, the average rental rates, we saw it decelerate a little bit from 17% in the second quarter to 14% in the third quarter. Just curious how much of that is due to a slowdown in spot rate increases and how much of that might be due to other factors like VAPs or other things.
Tim Boswell: It’s been roughly flat in terms of the mix between the unit pricing trajectory, Tim. And the value-added products contribution at least on that metric. So, frankly, changes of that magnitude of a percentage point here or there, I don’t really consider that to be meaningful.
Tim Mulrooney: Okay. Thank you.
Operator: And one moment for our next question. Our next question will be coming from Steven Ramsey of Thompson Research Group. Your line is open.
Brian Biros: Hey. Good morning. It’s actually Brian Biros on for Steven. Thank you for taking my questions. First on the acquired companies recently seem to be in attractive adjacencies. Can you just touch on how much investment is needed to get these up to par with your core and maybe just reach their full potential and any time line for that?
Tim Boswell: I am going to answer. This is Tim. I am going to answer it a little bit differently and we can quantify more precisely the timing and magnitude of investments at the Investor Day. That is one of the intents. You can assume the unit economics are as good or better than any other fleet category in the portfolio, right? And as such, we are more than happy to invest organically behind both of these categories and there are inorganic opportunities as well through bolt-on M&A that we can use to supplement that. I think in terms of overall capital expenditure expectations going into next year, I still think centering on that $275 million number with a relatively broad range around that is a good place to center, right?
Sitting here right now, we won’t have to invest probably in the first half of the year organic CapEx in the Storage fleet as that utilization recovers. We will be investing in value-added products and we will certainly be investing behind these categories, as well as Modular refurbishments. And again, we will get more precise as we get into March of next year as some of these growth plans are still coming together. But I think you can assume that each of these categories has the potential to be at least as large as our ground level office category just as a data point that’s out there, and as such, we believe they are quite meaningful and quite attractive. So the teams are putting together those growth plans as we speak and we fully intend to invest behind them.
Brian Biros: Understood. And second, I guess, just on Storage. Can you expand on how the — maybe the retail season is shaping up here, you entering thinking around 70% utilization versus mid-80s a year ago? I think you mentioned some stuff earlier on the call, but just how does that change the pricing conversations, if at all?
Brad Soultz: Pricing conversation hasn’t changed a lot. This is Brad. Tim mentioned full stop the number of units we have on rent for seasonal Storage is down from last year, and you also recall last year, they went out quite early like starting in June, which is a full quarter earlier than normal. So it’s — as I mentioned in the last quarter’s call, it started out, shaped up kind of in line with — in terms of rate and timing from a more normal perspective, but it’s certainly below prior year. And as we sit here today, we are roughly 6,000 units on rent behind where we were about one year ago in that category.
Brian Biros: Got it. Thank you.
Operator: And one moment for our next question. Our next question will come from Faiza Alwy. Your line is open.
Faiza Alwy: Yes. Hi. Thanks and good morning. I wanted to ask about some of the macro trends that you are seeing and how you think that’s impacting the business in Storage versus Modular, because it feels like you are not really seeing a slowdown activity seems to be picking up in Modular relative to Storage. So just help us understand some of the dynamics there.
Tim Boswell: Hi, Faiza. This is Tim. I will start, Brad, provide any additional color. I mean, just think about the end market exposures to the two businesses. They are more like than different. I think we beat the retail exposure to death at this point in the Storage segment and that is the number one difference between the volume performance of the two segments. If you think about non-residential square footage starts, they will be down double digits this year as measured in square footage, right, which is the way to look at it, that will correlate most closely with the volume of equipment required and we see that impact roughly evenly distributed across the two segments. Sitting here right now, if you look at the Modular business and actually the Storage business as well, if you look at net new orders.
I mean, the year-over-year improvements are actually quite exciting for us. I mean the Modular business, quoting activity is up about year-over-year and we are seeing pretty strong net new order increases year-over-year on the Storage business, although all caveat, the Storage business was effectively sold out last year, so it was harder to generate net new orders. So the leading indicators in our business right now actually are pretty encouraging going into the end of the year. And as you look at it like different end market indicators going into next year, quoting activity in our business probably being the most interesting, you still have contractor backlogs that are north of nine months. That’s a very healthy level, Associated Builders and Contractors Confidence Survey.
You have got contractors projecting growth and employment growth over the next six months. So there are no objective indicators there that have us kind of concerned about the end market outlook going into next year. And then my comment earlier to Seth, the retail is not going to get any worse. So it can only really get better in 2024. So all of that has us — our base case going into next year is this is a pretty stable outlook with some upside on the Storage volumes.
