Earnings Call: Q2 2020

Jul 29, 2020

Good morning. Today is Wednesday, 07/29/2020. Welcome to the Toromont to announce the Second Quarter twenty twenty Results Conference Call. Please be advised that this call is being recorded. Your host for today will be Mr. Michael McMillan. Please go ahead. Great. Thanks, Melanie. Good morning, everyone. Thank you for joining us this morning to discuss the results of Touramont Industries for the second quarter and first half of twenty twenty. Also on the call with me today is Scott Medhurst, President and Chief Executive Officer. As noted in the press release issued yesterday, we be referring to a package posted on our website similar to that provided last quarter. We encourage listeners to download and follow along. At this time, and as noted on Slide two of our presentation, I'd like to advise listeners that this presentation may contain forward looking statements and information that are subject to certain risks, uncertainties and assumptions that may lead to actual results or events differing materially from those expected. For a complete discussion of these factors, refer to our press release from yesterday, which is available on our website. As is our practice, we will focus on key highlights. Scott will begin with a few general remarks and some comments on our outlook, after which I'll provide some highlights on the financial results. Then we'll be more than happy to answer your questions. Over to you, Scott. Thank you, Mike, and good morning, everyone. Before I begin, I would ask that you move to Slide three of the package. From the start of COVID-nineteen pandemic, we've continued to focus our efforts on three main areas: safeguarding our employees, servicing our customer needs and protecting our business for the future. Our critical incident executive response team was activated at an early stage and continues to meet regularly. We are monitoring developing trends and pronouncements, assessing our best course of action and responding appropriately. We are very proud and appreciative of our team's efforts and recognition that this has been a challenging time for all. As a result of reduced economic activity, we experienced lower earnings and net income in the quarter. However, strong financial position was maintained. April experienced the lowest activity levels. Some recovery began to phase in through May and June. However, caution is warranted as activity was still below prior year levels. COVID-nineteen continues to put us in an unprecedented environment, as outlined on Slide four. We are proud of our team and suppliers' ability to navigate through this pandemic and support our customers through the provision of essential services. In addition to our critical incident response team, our management and leadership teams continue to monitor the evolving situation closely and are taking responsible measures to manage and protect the interests of our people and customers while managing the long term health of the business. The diversity of our geographical landscape and markets served, extensive products and service offerings and financial strength, together with a disciplined operating culture, position us well to weather this situation for the long term. Turning now to our financial results highlighted on Slide five. Consolidated revenues decreased 13% in the quarter due to lower economic activity caused by response to COVID-nineteen. Product support and rental revenues were lower by sixteen percent and thirty one percent, respectively. Equipment sales were lower by 6%, reflecting lower new equipment sales across most markets. Year to date revenue was down 7% to GBP 1,600,000,000.0 after a somewhat positive start to the year in the first quarter. Operating income was 31% lower on reduced gross margins. This was mainly due to lower rental fleet utilization and sales mix, combined with higher expenses as a percentage of revenues due to fixed costs. Government subsidies were not significant factors in the quarter. Although savings were realized in the quarter due to actions by the management team along with things like travel restrictions, other incremental costs were incurred to protect our employees, keeping our customers safe and protecting the company through the long term. These costs included safety supplies, facility sanitization requirements, plexiglass installations combined with finance costs associated with the additional liquidity. Operating income was 22% lower year to date for similar reasons for the quarter. Operating income margin decreased 160 basis points to 8.5%. Net earnings decreased 34% in the quarter versus a year ago. Earnings per share tracking the reduced earnings was $0.62 per share. Year to date, net earnings were also down year over year by 24% at $1.08 per share. Backlogs were $496,500,000 at 06/30/2020, compared to $551,500,000 at June 3039. This resulting from a cautionary business environment. However, CIMCO remains above last year. We are proud to take part as an essential service. Dormont's businesses serve critical essential services, including, but not limited to, food production, storage and distribution networks, power generation, including backup power, critical infrastructure, transportation and emergency response. We continue to monitor the situation closely and evolve business practices and appropriate measures to manage and protect the long term health of the business. The diversity of our geographic landscape and markets served, extensive product and service offerings and financial strength, together with a disciplined operating culture, position us well to weather the situation. Moving to Slide six, the Equipment Group's parts and service business provides stability and benefits from a large and diversified installed base. Prior to the outbreak, the long term outlook for infrastructure projects and other construction activity was positive across most territories. The company has a large base of mining customers, which in some cases temporarily reduced operating activities as a result of the COVID-nineteen implications. These customers and jurisdictions they operate in continue to evaluate appropriate activity levels on a daily, weekly basis. Longer term, mine expansion continues to look positive, but of course depends on global economic and financial conditions. The company has taken actions to reduce expenses, participating in government programs such as work share. Human capital, including our technician workforce, is one of our most valuable assets, and we will protect that asset to the extent possible. In the quarter, we continued to move forward with our investment in information technology, aligning our dealership under one operating system as well as facilitating and securing remote access to our networks. This creates added expense during the integration. Actions are being balanced between short term adjustments relative spend while also being sensitive to long term requirements, ensuring the business is positioned well for future growth opportunities. Broader product lines, investment in rental equipment and developing product support technologies supporting remote diagnostics and telematics are expected to contribute to long term growth once economic, financial and social environments return to a more normalized state. Simcoe's installed base and product support levels are well positioned to support current and future operations and growth trends. The diversity of markets served, expanding product offerings and services, strong financial position and disciplined operating culture position the company well for continued growth in the long term. Solid booking activity and backlogs positions the business well as economic conditions improve. I will now turn the call over to Mike to take you through highlights of the financial results. Mike? Thanks, Scott. Let's put a bit more color on the operating results, starting with the Equipment Group on Slide seven. Revenues were down 13% in the quarter versus a year ago and 6% year to date, reflecting the reduced economic activity resulting from the COVID-nineteen pandemic. Construction shutdowns and or slowdowns in many markets resulted in lower equipment sales as well as lower product support and rental activity. As Scott noted, we did see some improved activity toward the end of the quarter, but a tone of caution was evident and activity was still below last year's levels. Cost containment efforts, including human resource initiatives and reduced travel, partially offset the impact of lower revenue. Total new and used equipment sales were down 6% in the quarter and 2% year to date. Sales in construction markets were down 3% in the quarter and up 1% year to date. Most significantly impacted were sales to mining markets, which were down 45% in the quarter and 32% year to date. Power Systems sales were up 10% in the quarter and 2% year to date, reflecting progress on projects already underway. Material handling equipment sales were down 2% in the quarter and up 3% on a year to date basis, while agriculture markets were lower, down in the quarter and on a year to date basis by 10%. Rental revenues were down 31% in the quarter and 18% year to date. All markets and segments were lower, reflecting the familiar theme of reduced market activity. Revenue declines in each market for the quarter were as follows: light equipment rentals, 23% power, 41% construction, 41% material handling, 28% Rental revenues from equipment on rent with a purchase option or RPO were down 55% in the quarter as lower market activity also resulted in lower demand for RPO equipment. Product support revenues declined 16% in the quarter and 7% year to date. Construction and mining equipment in territory was idle or operating at reduced rates for much of the quarter, leading to reduced product support activity, which was down 1711%, respectively, in the second quarter, down 85%, respectively, for the first half of twenty twenty. Material handling activity was 27% lower in the quarter and 15% lower in the first half of twenty twenty. Agricultural markets reported increases in the quarter and the first half of twenty twenty, up 158%, respectively, reflective of the team's efforts in a challenging market and weak comparative results in 2019. Power Systems product support activity was down 13% in the second quarter, but was up 2% year to date on good activity at the beginning of the year. Gross profit margins decreased 150 basis points in the quarter and 120 basis points year to date. Equipment margins were low in the quarter and year to date, mainly due to sales mix. Rental margins were lower in both periods on lower fleet utilization coupled with straight line depreciation expenses. Product support margins were higher in both periods on higher parts margins. Sales mix was unfavorable in both periods with a lower percentage of product support activity to total revenues. Selling and administrative expenses were down 7% in the quarter and 3% for the first half, reflecting lower activity levels as well as cost containment initiatives that phased in during this period of uncertainty. Compensation cost decreases decreased as initiatives such as vacation planning, salary reductions, governmental work share programs and layoffs were implemented. Travel was restricted throughout the quarter, where training increased early in the quarter and then declined with the lower staffing levels. Bad debt expense increased in both the quarter and first half of the year in consideration of the potential increased collection risk in the current economic environment. Information technology related costs also increased in both the quarter and the first half of the year as system integration efforts at the dealership continued. Operating income decreased in both the quarter and year to date on lower revenues and gross profit margins, also leading to a higher expense ratio. Bookings were down 30% in the quarter to $298,000,000 Lower orders resulted reflecting lower underlying economic activity and the cautious tone within the market. On a year to date basis, bookings were down 12% to $636,000,000 as higher power and material orders were more than offset by decreases in other areas. Backlogs of $269,000,000 were $135,000,000 lower than this time last year. Now let's turn to CIMCO on Slide eight. Revenues were down 12% in both the quarter and year to date on reduced construction activity stemming primarily from slower economic activity and temporary shutdowns related to the pandemic. Timing of receipt of orders and customer specific construction schedules also affect the timing of revenue recognition. Product support activity continued given the essential nature of the business, albeit at a slightly lower level. Package revenues were down 20% in the quarter on lower construction activity due to site restrictions and against a tough comparable last year. Revenues in Canada were down 32% with declines in both industrial and recreational markets. In The U. S, package sales were up 51% as lower industrial sales were offset by higher recreational revenues. Product support revenues decreased 3% for the quarter and 1% for the first half of the year. Revenues in Canada decreased on lower economic activity resulting from site restrictions. In The U. S, revenues increased on the higher technician base and continued activity in the industrial sector. Gross profit margins decreased 70 basis points in the quarter on lowered package margins, partially offset by favorable sales mix of product support revenues to total revenues. Year to date gross profit margins increased 120 basis points with higher package margin combined with a favorable sales mix of product support revenue to total revenues. Selling and administrative expenses were down seven percent in the quarter. Bad debt expense improved on strong collection activity. Travel and training costs were lower, reflective of restrictions in place for most of the quarter. On a year to date basis, selling and administrative expenses increased 3% largely on compensation related to increased headcount offset by cost reductions in other areas related to reduced activity. Operating income decreased 29% in the quarter and 37% year to date, largely on lower revenue related mainly to the timing of project activities. Bookings were up 15% to $52,000,000 in the quarter. Industrial orders were 53% higher with increases in both Canada and The U. S, while recreational orders were down 22% with lower orders in The U. S, only partially offset by an increase in Canada. On a year to date basis, bookings were up 43, reflecting strong industrial order activity in Canada, offset by a decrease in The U. S. Recreational orders decreased in both Canada and The U. S. Backlogs of $228,000,000 were up 54% versus June on strong industrial backlogs in Canada. Ultimately, approximately 70% of the backlog is expected to be realized as revenue this year. However, this is subject to construction schedules and potential changes stemming from the COVID-nineteen pandemic. On Slide nine, I'd like to touch on a few corporate highlights. Noncash working capital was GBP 17,000,000 lower at GBP $468,000,000 versus a year ago. Strong focus has been placed on managing accounts receivable, aging and inventory levels. Lower accounts payable reflect the timing of receipt and terms on inventory purchases. As of June 30, we maintained our strong financial position with cash of 537,000,000, available liquidity of 616,000,000, and a strong balance sheet. As announced, the board of directors yesterday approved the regular quarterly dividend at a rate of 31¢ per share, consistent with the last quarterly dividend when it was increased by 15. The company is also very pleased to announce that subject to annual shareholder approval, Mr. Robert Ogilvie, Chair, and Mr. Wayne Hill have agreed to serve on the board until 2023. The extension of their services will balance the board renewal process with their depth of knowledge and experience, ensuring a smooth transition of roles with new directors. That concludes our prepared remarks, and we'll be pleased to take questions. Operator, please set up the first call. Thank you. Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. The first question is from Jacob Bow. Please go ahead. Good morning. Good morning, Jacob. Good morning, Jacob. Yes, I wanted to start off on the equipment backlog down quarter on quarter and year And I know it can be a bit lumpy, but maybe just some comments on what you're seeing in backlog for construction versus mining? Yes. It was the backlog is on a comparative basis, obviously down and softer. It's reflective of the environment. Obviously, in Q2, you get a bit of a build, but it's also reflective of our inventory and availability that we experienced in Q2. So and then as you mentioned, Jacob, we there is some lumpiness in there really due to the power comparatives quarter over quarter. And of course, the mining environment that we experienced in Q2, I mean, the equipment sales were down almost 50% in Q2. So and usually, that helps build your backlog in there on the equipment side of the business. Okay. And has that improved at all here in July or on the minus side? I think right now, what we saw in the quarter was soft, cautious environment on the customer side throughout all the industries we're operating in. Okay. Maybe my second question here, just interested in hearing how things progressed through the quarter and into July as far as the ramp of revenue growth. I mean, the world was quite a bit different in April versus June versus today. What was that ramp like, say, for new equipment, product support, rental revenues? Okay, I'll start with rental. Rental was a we started to experience, as we noted in March, and then rental continued to be a real drag on our earnings through the quarter. We have fairly large rental fleets relative to our strategic approach. So utilization was much lower on a month by month basis when you compare to the previous quarter. It did improve as the quarter progressed, but still below last year. And I'm talking ranging from anywhere from 3% to high 8%, 9%. So these were shifts that took place in there on the rental fleet activity. The other thing we saw reflecting the cautious environment, our rental conversions down significantly on new RPO. So we were single digit. And that's usually you get last year in the quarter, we had a very active environment there. Again, reflective of the cautious environment. Product support was down, and it started to improve. But as you saw, our WIP levels at the end of the quarter were still below previous year. You know, what we saw was, in the quarter, was quite interesting, as June activity, if you look at it holistically, the industry numbers improved, but it was all driven by the compact construction equipment. So if you look at the large equipment being sold in the quarter, those segments, that was down 26. And these are industry numbers. And even in June, it was down 21%. Where the activity really started to improve was on the CCE compact construction side. So I think that's reflective of segments like landscaping. I think there was a lot of people started working on their backyards and so things of that nature. But so there was some, you know, in various areas, as I outlined, some improvements, but still below last year when you look at it on a month by month basis. The following question is from Cherilyn Radbourne. Please go ahead. Thanks very much, and good morning. Good morning, Cherilyn. Good morning. Just wanted to ask relative to the equipment group. We were a little surprised, guess, that, rental and product support seemed to be hit a little harder than equipment sales in the quarter. So maybe you can help us understand that dynamic. And I guess I'm curious whether that just reflects deliveries of equipment that would have been ordered previously. And maybe if I look at bookings activity and equipment, that sort of circles the square, so to speak. Yes, well, think it's important when you look at these segments, we had particularly in Quebec and Ontario, I mean, there major shutdowns that took place starting in April. And, you know, I think that's that's reflective of some of these these outcomes. We had, you know, we had over twenty minutees in care and maintenance at one point, as well as a pullback in other mines in their production. So that that really impacts your your product support, your overall equipment sales. And then combined those construction sites shut down, right? In particularly in Quebec. And even though we were classified as essential services. So there were some fairly aggressive measures taken, understandably. And that created some of these outcomes. And then of course, when customer fleets get parked, the demand for rental does not increase. So there's sort of how we how it outlined in the quarter. I don't know if you have anything else to add there, Mike. Yeah. I think it's just natural that when you think of the idle equipment for periods of time, and then of course, you know, things like parts and service drop fairly significantly, right, which is what we talk to in terms of mix and so forth. And you need to have the utilization up before we start getting that type of activity supporting the business as well. Okay. So that kind of ties into my other question, which is do you think there's any pent up demand for product support in the market? Or was the pressure on product support simply a function of lower hours on machines during the quarter? Well, that was a big part. Know, you you just the hours logged on those machines, you know, were down. So we'll we'll see how things progress. I mean, we wouldn't want to speculate now. You know, we did see improvements as quarter progressed on the equipment utilization and the mine starting to come back on. So we'll see how things evolve and how production develops here. But that, you know, even in June we saw a very cautious I mean, customers, you know, normally in Q2 you've got customers that are, you know, highly productive. They were focused on getting those jobsites up and running or mine sites. And, you know, they've got to get their fleets active, get organized, and and that's really what took place in in q two. So we'll see how things develop here. It's a very cautious environment, obviously. Mhmm. And if I could sneak one last one in. Can you just give us a bit of color on how rental rates held up relative to utilization there? Yeah. The rates, when we did our comparisons, they weren't too bad, Cherilyn, actually. Really more utilization story, right? Yeah, it was utilization more than anything. Thank you. That's all from me. Thank you. Thank you. The following question is from Michael Doumet. Please go ahead. Hey. Good morning, guys. Good morning. I wanted to follow-up on Jacob's question just in terms of getting the cadence of the rebound through the quarter. I mean, would it be possible for you guys maybe just to help us out and disclose what your June product support sales were compared with last year just so we know what we're going into q three with? Well, if you look at it on a consolidated, it was it was still down. Right? We we even, you know, our we've been talking quite a few quarters about our rebuild initiatives, and they were they were down even 13%, you know, through the quarter. So and again, it's just reflective of the cautious environment that's taking place. So and it was fairly equal when we look at the declines on parts and labour on a percentage basis. So, you know, but again, we did see improvement as things progressed. But I mean, customers are focused on getting those job sites up and running and mine sites and even in the power segment. And maybe not as focused on their repair schedules and plans. Okay. We did see improvement in our in our in our labor hours a bit as well. Okay. And just I mean, just for so that I understand correctly. So there was an improvement month to month, but the the improvement from April to June was insignificant, or it was significant just for cost They were they were improving steadily, but still below last year's levels Mhmm. On a month to month basis. Gotcha. Okay. Thank you. And then maybe just on SG and A, mean, how should we think about SG and A ramping back up with with revenues through the recovery? And, I was just wondering if there are any cost reduction initiatives that you think, could be considered to be structural. Yeah. It's a great question. You know, I think we're we're keeping really tight rein on our costing and so forth and making sure that, you know, productivity levels are there and supporting the the appropriate level of activity. And so I would say a cautious phase in that supports the business. Structurally, would say you hear a lot today about working from home and other things like that. And I would say there's you know, we've learned a lot through the process in terms of what roles we can work we can perform more remotely than directly in branches and offices. But I would say, you know, still a lot to be done and a lot to be learned there before we would say there's a real structural shift in how you operate. But you know, I think overall from a compensation perspective, we're still very focused managing you know, travel is restricted. We did invest early in the quarter on training, as I mentioned in some of the comments. And so initially as we assessed COVID, we did move our folks into some training initially, which I think will help us with some potentially some productivity later in the year because we've got that training significant amount behind us. But it's going to be very surgical, I would say, from that perspective. And again, we have to be very mindful of the cautious environment and bring staffing back in at the appropriate time. The team, I think, did a very good job on the discretionary expense. But we're also trying to be very sensitive to how we come out in the long term, right? I guess could have Mike and I talked about it, we could have pulled a little harder. But we're being very conscious of protecting critical components of our business, whether it be skilled labour. And again, looking to that long term, even our integration continued on our systems, which there's some one time only expenses in there that you know, we just believe we we wanted to move continue to move forward on. And as well with the COVID protocols and things, there were some some expense associated with that to protect our people. Mhmm. And, you know, we just we just really look at that as that's what we had to do to manage the business, both protecting our people, customers, and the long term health of the business. Got it. That's great color, guys. Thank you. Thank you. The following question is from Yuri Lynk. Please go ahead. Hey. Good morning. Morning, Yuri. Good morning. Wondering if you can put a little more color on on the discussions you're having with your your mining clients, particularly in the in the gold sector, given how the the price of that commodity has moved up quite substantially. So are you getting any different signals from these customers than you might have had six to nine months ago? Yes. Well, actually, we're heavily engaged in this sector, and we're involved with discussions. We'll see how things evolve. As I always say, we've got to earn the business with our value propositions. But obviously, the some of the commodity prices are attractive, and we'll see how again, the quarter was really about over twenty minutees going in care and maintenance and some pullbacks and restrictions on the operations side of it. But we're obviously heavily engaged here and we'll see how things progress. Mining companies look at their plants going forward as they come out of the second quarter. Okay. Nothing you can give us on quoting activity or anything like that that might be We're engaged. We're engaged, but we'll how things evolve. Right? Right. Yes. It's still early. Understood. Maybe just on on the the staffing levels, you know, how do you feel your your shops are are staffed? And I'm just asking in the context of, you know, some some employees in in some industries are are might be hesitant to return to a physical work workplace. So just how do you feel you're you're staffed in dealing with those potential issues? I'm you know, we're really pleased how our leaders have handled this very challenging and delicate situation when we have people moving to layoffs and work share programs. We we are monitoring our skilled labour and supervisions very closely on a I'll call it a daily basis with some because it is a unique environment, and we're trying to stay close to our people who are both active or homely. If we did, I'd say we peaked in the May with those layoffs, or the work share programs. And so we continue to be very focused on that at the end of the quarter with some improvements. But we're pleased how our people are reacting and understanding the situation, and because we want to retain, right? And I would say so far end of the quarter, we're really proud of the team and how our people have reacted to what's required as a as and I'll call it a team first approach in in the best interest of all. I'm I'm extremely proud of our people and leaders on that front. Okay. That's it from me, guys. Thanks for the color. Thank Yes. Thanks. Thank you. The following question is from Ben Cherniavsky. Please go ahead. Your line is now open. Good morning, guys. Good morning, Matt. Good morning. I'm just wondering if you can shed a little bit of light on the comment around product support margins increasing in the quarter. That just a mix issue in the type of, parts that you're you're selling? Or, what what's behind that trend? Well, maybe I'll just start on that, Ben. You know, there's a couple of comments that we did make in there. And I think one thing to keep in mind is like when it comes to mix and the lower level of product support as proportion of revenue, given the drop in activity that we've talked about quite extensively, we are seeing strong parts margins but at a lower level, right? I think you see that also in our Simcoe business where we spoke a bit about product support was tracking reasonably well. But again, it really comes down to the balance of activity in the other part of the business, right, and how that blends out over time. So it's a combination of activity and in areas of our business where we have essential services and support. I think of things like power and certainly on the Simcoe side, for example, you you do see more resilience there. Right? Lot to do with the mix in Pardon me? Lot to do with the mix in there, right, type of sales going in. Yes. Because I think the disclosure singled out the parts margins and equipment group, and that was just Right. Is that just mix of the types of parts that happen to sell? Yes. It's just mix with I wouldn't read too much in that. Yes. Okay. And then on Simcoe side, just the very strong order intake in the backlog where it sat at the end of the quarter. Maybe just a bit of a surprise given the environment. How did you guys manage to get that kind of activity booked, confronting the lockdown? And where is it exactly coming from or not exactly, but generally, where is it coming from? What explains that significant increase? Yes. The booking activity in the quarter really came from the Canadian industrial side of our business. We've been fortunate with some good wins in there. It continued in quarter. Team's doing a nice job in there. In that space, there's some investments going on, whether it be food and beverage type environment, so which I guess adds up in this type of situation we're And so good work on behalf of the team. Mean that backlog is very strong. But on there's been some softness on some of our service. I mean you look at the recreational side, that was down, that was impactful in the quarter. And normally, then what we see when it starts early April and through the summer months, you get some really good service work on the recreational side. That obviously has not been at the same levels we're accustomed to and reflected in there. But we're pleased with our team's progress and positioning going forward. Even on the Semco side, some of our construction projects had to be shut down, particularly in Quebec, which impacted our progress here on some of the projects. But sort of it is what it is, right? And but the good thing is that industrial side and coating activity remained solid. Right. Well, that's good to see. If I could just ask one more on the equipment group. With the mining sales being down as heavily as they were, I mean, I guess everyone was expecting overall your deliveries would be down, but it looks like mining took the brunt of it. Yes. Was there any can you just remind me from a year ago? I know you often will reference a difficult comparable period when you're lapping a period previously that had big order deliveries. Is that a factor at all? I don't I didn't see any mention of it, but was Yeah. Was a last year, it looked like? Yeah. There was a little bit of a comp in terms of the what what we described as the lumpiness of planning. But actually, the the real comp, we had a booking in there on the power side in the backlog last year. So that was maybe a larger impact. Although power activity on the sales side for prime product and electric power was very impressive in the quarter as well. And we were pleased with the activity on the revenue streams for prime product and electric power. Yes. And that would probably make sense given the environment as well. But Right. Okay. Just back just back on mining, did I mean, it it had been sort of fits and starts in the mining sector as I recall prior to COVID. Did you find that the the the COVID just put a complete not a complete, but is that is that primarily what explained that kind of a drop, you think, or was the sector sort of already heading in this direction for the mining sales specifically? Yeah. I think, you know, I I mean, I I don't wanna speculate, but, you know, because of the the shift that you took place in there on the production side with with many of the the mines involved with, certainly there was a a cautious environment to start. But I think, you know, I mean, the commodity prices are are are favorable in many areas. Maybe there's some sensitivities being focused on their balance sheets, I don't know. That might have a little bit to do with it as well. But we'll see how things evolve here. I mean, gold certainly is at a favorable price. We like that sector. We have a lot of activity in there, and we'll see how things evolve. Okay. That's helpful, guys. Thanks very much. Thanks, Ben. Thanks, Ben. Thank you. And the following question is from Maxim Myszuchev. Please go ahead. Hi, good morning gentlemen. Good morning, Max. Just a very quick question on mining, if it's possible. I'm not sure if in the past you provided kind of a breakdown between gold versus non gold exposure. But is it fair to say it's around you know, sort of 60% on the mining side of of of your mining business? Or is that is that too much? Yeah. You know, I think you have to keep in mind it does vary a bit, Ben. But, you know, generally speaking, we look at it as about 50%. About 50% is in the gold and then the other base metals make up the rest, right? Yep. Okay. That helps it a bit with the integration, right, Max? Yeah. Yes. For sure, makes sense. And then correct me if I'm wrong, but obviously, it was, last year, a very competitive environment for hiring technicians, and this is such a critical part of your business. Just curious to see how your sort of onboarding practices have changed. And is it easier to find people, obviously, as the economy opening up? Just maybe any comments there. Well, certainly, I mean, we were our our our aggressive strategy obviously came to a halt in q two because we were more concerned about protecting the existing team. I think it's it's it's really we were you know, it was again, as I said on the previous call, we were very focused on making sure our retention was good as we worked through these layoffs and work to share programs. In terms of the temperature externally for availability, I mean, we really I I'd say we'll get a better pulse on that in the coming second half because we were very focused just internally, right, on protecting our people as best we could. Right. Makes sense. And last, a bit of a cleanup question. In relation to how should we think about the noncash working capital? Obviously, very strong and positive swing in Q2, but any comments you can provide for the back half of the year, if if if any? Yeah. Great great observation there, Max. I think, you know, really, really proud of the way the team has responded and the way that our model functions, with the distributed nature. The team has done a tremendous job on collection activity behind inventory management from that perspective, right? And so as we look, we're pretty conservative in terms of how we think forward. I think, again, I would emphasize the cautionary environment as we look into the second half. There's still a lot of variables there that we're I think we're all looking to understand as time progresses. And so I think we feel comfortable with where we're at. However, there are going to be a number of things that happen in the second half here. And the team is prepared to really keep tight controls on it. So again, we're trying to balance having the availability of what we need, working very closely with our customer needs, but also their credit picture. And I don't see it changing dramatically, Max. I think it's just a matter of focus on the environment and trying to trying to manage through what we see as a cautionary sort of landscape going forward. Right? Sure. The government's got the threat that what's that? Sorry. Please go ahead. I was just gonna say, you know, the one thing we all have to keep in mind is also with the incentives that the government stimulus the government has put in place, those things will come to an end. And so, you know, we all have to be mindful of, you know, how that also ripples through the economic environment and what that means from a a working capital management perspective. Right? So, you know, we're we're well from emerging from the pandemic at this point. Lots to be seen yet. For sure. But I guess, I mean, it's fair to say that we shouldn't expect, you know, these types of run rates, kind of over over the back half of the year is gonna normalize. And, I mean, hopefully, as things opening up and the mining opportunity, hopefully presents itself, we should see sort of normalization on the other side. Is is that a fair assessment? Yeah. I mean, that's difficult to say. Right? It's very difficult to say at this point in time. I mean, I think, we're going to just monitor it as we can and invest very prudently and very carefully in terms of inventory and so forth. Very difficult to comment on that as we look at the second half at this point. Fair enough. Okay. Well, that's it for me. Thank you very much. Thanks, Max. Thanks, Max. Thank you. And there are no further questions registered at this time. I'll turn the meeting back over to Mr. McMillan. Great. Thanks, Melanie. Thank you, everyone, for participating on the call today. That concludes our call. We wish everybody a great day, and please stay safe. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.