Ladies and gentlemen, thank you for standing by and welcome to the Alta Equipment Q3 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I'd now like to hand the conference over to your speaker today, Sinem McDonald, Director of External Reporting. Thank you. Please go ahead, madam.
Thank you. Good afternoon, everyone. Welcome to Alta's Q3 2020 Earnings Conference Call. With us today on the call 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 quarter, and then we will conduct a Q&A session. We will begin with some prepared remarks before we open the call for your questions. Before we get started, I would like to take this opportunity to remind you that today's call contains forward-looking statements, including statements about future financial results, our business strategy and financial outlook, and other non-historical statements as described in our press release. These forward-looking statements are subject to certain risks, uncertainties, and assumptions, including those related to Alta's growth, market opportunities, and general economic and business conditions.
These statements also include our expectations regarding risks related to the continued impact of the COVID-19 pandemic on our business operations and financial results. 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 are reasonable, we undertake no obligation to revise any statement 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, which is available at investors.altaequipment.com.
With that, I'll now turn the call over to Ryan.
Thank you, Sinem. Welcome to Alta Equipment Group's Q3 2020 Earnings Conference Call. I will provide an update on the operating environment and progress on our growth initiatives. Then Tony Colucci, our CFO, will walk you through our Q3 financial results. First off, I hope you and your families are safe and healthy during these very challenging times due to the ongoing COVID-19 pandemic. We continue to be designated as an essential business and are pleased to report that all 51 branches remain fully operational today. The strict employee and customer safety protocols we implemented at the onset of the pandemic remain in place and provide a blueprint in the event our business is impacted by any subsequent COVID-related disruptions. Once again, the Alta team rose to the occasion and delivered quality work in serving our customer base's diverse needs.
Since our last conference call, Alta suffered a tragic loss with the passing of Rob Chiles, our head of construction. Rob was a mentor to countless individuals and an evangelist of our guiding principles. While Rob's energy and enthusiasm for our business will be missed, I'm deeply humbled and proud of how the Alta family has rallied to carry on Rob's great work and move the business forward. I'll now provide some highlights of our Q3. In looking at our Q3 results, we reported a sequential improvement in revenue driven by strong growth in our higher-margin parts and service businesses. We have recovered from the dip in the summer months and experienced steady increases in customer demand as the Q3 progressed. In addition, we closed two accretive acquisitions that deepen our presence in the Midwest region and expand both our product lines and OEM relationships.
We operated at near 100% capacity, and we are at pre-COVID levels in terms of capacity and labor utilization across our business. Revenue was $220.6 million, and we generated $21.9 million in adjusted EBITDA, a 10% increase over the Q2 and a slight increase over last year's comparable quarter. As business recovered, we loosened some of our cost mitigation efforts during the quarter to facilitate top-line growth. Our flexible cost structure and the dexterity of our business model allowed us to align expenses with revenue and increase profitability in the quarter. Our technician count increased by over 8% through a combination of internal growth in our Florida construction business and our acquisitions of both Hilo in New York City and Martin Implement in Chicagoland. We are continuing to actively recruit technicians in all markets to meet the growing need for equipment repair that exists across all regions.
Turning now to operations. From a regional perspective, we saw improved demand and stability in both our construction and material handling businesses. In our manufacturing regions like Michigan and Indiana, we saw stabilization throughout the quarter as companies continued to increase production, and we have seen our labor utilization return to pre-COVID levels. In Florida, our product support business continued to ramp up with increased demand for equipment repair. We see continued strength in high-tech healthcare and food and beverage markets, particularly in the Northeast. Our warehouse, e-commerce, and logistics customers are experiencing a period of high growth, particularly in large population-dense markets like New York City, Boston, Chicagoland, and Metro Detroit, and remain our fastest-growing end market. Moving to recent acquisitions. In late October, we announced the closing of Howell Tractor & Equipment, our sixth acquisition so far this year.
Howell serves the Northern Illinois and Northwest Indiana market with a wide range of heavy construction, mining, and crane equipment. They enjoy a great reputation as a premier service provider and have a strong relationship with leading manufacturers such as Sennebogen, a new addition to Alta's product line in the region. The acquisition is immediately accretive to adjusted EBITDA, with strong sales synergies to increase volume and profitability going forward. Our Q3 results included Martin Implement Sales, Inc., which we closed on July 31st. Martin operates three branches in the Chicago area and sells, rents, and services a full range of equipment to the construction and municipal markets. In addition to expanding our branch footprint and manufacturing relationships, Martin accelerates Alta's penetration of the Illinois construction market, which is in its early stages.
PeakLogix, a recent material handling acquisition, has exceeded our original expectations in its first three months as part of Alta. It serves a large national customer base and is focused on the growing warehousing end market. We have begun to cross-promote their services across our material handling customer base and to integrate their product and service offering with other warehouse automation solutions. Our balance sheet remains one of our best assets, and our current liquidity position supports our robust acquisition pipeline. In summary, we are pleased to deliver another quarter of solid financial results driven by the great execution of our flexible dealership model. We are particularly proud that we have successfully navigated our business through the challenges brought on by the pandemic. Alta is poised to end the year with strong momentum, positioning us for growth in 2021 as the recovery takes place and the economic environment improves.
There are many positive secular trends in our industry. The urgent need for infrastructure upgrades, the ongoing move towards e-commerce, the accelerated adoption of advanced technologies, and the increased electrification of mobile equipment. All these provide powerful tailwinds for Alta's future growth. I would like to once again thank our manufacturing partners and customers for their support, our employees for their dedication and hard work, and our shareholders for their confidence in Alta. Now I'll turn the call over to Tony for his presentation.
Thanks, Ryan. Good afternoon, everyone, and thank you for your continued interest in Alta Equipment Group and our Q3 financial results. It's hard to believe that we're already on the doorstep of closing out our first fiscal year as a public company. Before I start, I first want to address all of my teammates at Alta. The past nine months have challenged us all, both professionally and personally, and in ways we couldn't have dreamed of last year at this time. Through it all, furloughs, new health and safety protocols, and through the tragic loss of a valued leader and friend, you've all stayed the course, and I'm proud to be part of a like-minded group of people that stick together through times of adversity. On behalf of the senior leadership team, thank you.
Second, I want to welcome our new team members at Martin Implement and Howell Tractor in Chicagoland to the Alta family. I'm excited about the prospects of integrating your talents with our existing Volvo business in Illinois as we continue to invest in talent, infrastructure, and OEM relationships in a strategic growth market for the company. Ryan, the senior leadership team, and I look forward to earning your trust and embracing you into Alta's one team culture. My remarks today will focus on three areas. One, I'll be presenting the snapback in business activity that we realized in the Q3 and how that increased activity impacted our financial performance for the quarter. Specifically, I will focus my comments and analysis on a few sequential quarter-over-quarter metrics as the business emerged from COVID-related lockdowns in the Q2.
Second, I'll reiterate the structural benefits of our integrated dealership and rental business model. I'll be discussing our product support performance over the past three quarters and how those revenue streams provided steady cash flows throughout 2020 despite volatile business conditions. I also want to touch on our rental business, specifically utilization and its impact on year-over-year EBITDA. Lastly, I'll be discussing the balance sheet, our M&A and CapEx spend for the quarter, and the impact on our leverage and liquidity position at the end of Q3. For the first portion of my prepared remarks, I'd like to present the positive snapback in business activity that manifested itself fully in the Q3. It should be noted that there are some slides in our presentation, which was released prior to our call today, that presents this impact in greater detail than what I will discuss today.
I'd encourage everyone on today's call to review our presentation and our 10-Q, which is available on our investor relations website at altaequipment.com. Let's dive in. For those familiar with my remarks on our previous two earnings calls, recall that we have been keenly focused on demand for labor hours of our skilled technicians. This is a metric that provides real-time data on business levels in our various geographies and business segments. To quickly recap, in the middle of March, starting with the automotive shutdown in Southeast Michigan, we incurred what effectively was an abrupt 30% reduction in demand for labor hours across our service operation. As mentioned on the Q2 call, as large portions of the economy began to reopen, we saw a pretty steep rebound at the end of the Q2, which continued throughout Q3.
Currently, demand for labor hours has returned to just under 100% of pre-COVID-19 levels. This reversion to the norm in demand for labor hours led to an $11 million improvement or 19% increase in parts and service revenue in the Q3 when compared to the second. Important to note, we've held labor efficiency, and therefore, gross margin in our service department throughout 2020, which is a testament to our managers' ability to match supply of labor with demand on a real-time basis. In previous quarters, I've spoken about our dealership revenue streams, particularly parts and service, as having dexterity, in that we are able to maintain earnings on those revenue streams in varying macroeconomic climates. We put this business model and our management team to the test in 2020, and we believe it's a test that we solidly passed.
Specifically, organic parts and service business had EBITDA of $3.7 million, $4.2 million, $4 million in quarters one, two, and three, respectively, despite having volatile swings in revenue. It's our opinion that Alta's product support cash flows are a key metric that management and investors can rely on throughout the economic cycle. One item of note, in previous quarters, we've made special mention of the cost mitigation efforts we implemented in response to the decrease in business activity related to COVID. As business picked up and then stabilized in the Q3, we relaxed, and in some instances, ceased those cost mitigation efforts. While we hope lockdowns and COVID's impact is behind us, we will continue to monitor business levels and are prepared to execute the same cost-cutting playbook should conditions dictate.
While our dealership model, specifically parts and service, has showed its value and dexterity throughout the year, our rental business has presented to be more challenging. While our rent-to-rent revenue was up $5.4 million on an organic basis versus the Q2 of 2020, the year-over-year trough has proven more difficult to dig out of, specifically when analyzing our utilization metrics. To provide some context, for the six months that ended September 2020, on an organic basis, we've had on average $25 million-$30 million less equipment on rent than we did for the same six-month period in 2019. Said a different way, whereas historically we've experienced 65%-70% physical utilization, we've been realizing closer to 60% on average. To be clear, our rental revenue is up approximately $16 million year-over-year. It's the utilization on our fleet that has regressed.
Now, how has that lack of organic utilization impacted EBITDA? All told, we've given up approximately $11 million in EBITDA year-to-date on an adjusted pro forma basis versus last year, and we estimate that roughly 65% of that shortfall is related to the rental business. With that in mind, we are certainly not alone when it comes to year-over-year utilization slippage, as our 13% year-on-year reduction in rental revenue and physical utilization drop is consistent with the rental industry in general. Like others in the rental industry, we remain bullish on the long-term prospects related to the rental business. We believe the investments we made in our fleet in 2020 position us well for the recovery. However, we also need to be prudent with our fleet size and scale our investment in rental fleet accordingly and in line with customer demand.
Additionally, as I mentioned on previous calls, it's important to point out that our rental business represents just over half of Alta's EBITDA and highlights the diversity of our cash flow streams compared to the publicly traded rental houses, as Alta benefits from the aforementioned product support revenue, whereas others almost exclusively are tied to rental. Real briefly, to recap the quarter from a profit and loss perspective, revenue $221 million, with $71 million coming from the all-important parts and service departments, which is up approximately $15 million from the Q2 of 2020. Gross margins for the quarter in the dealership-related departments, new used parts and service, were in line with historical levels. From an operating income perspective and looking into the segments, our industrial segments continues on its profitable growth path, as that segment produced $4.2 million of operating income for the quarter.
On the construction side, when adjusting for one-time expenses, we reported a loss of $2.9 million in operating income for the quarter. As stated previously, we continue to be bullish on the long-term prospects of our youthful construction segment. As it grows and realizes the benefit of a broader field population, with the recent investments we've made in Flagler, Martin, and Howell, we expect profitability to grow in future periods. In summary, this led to an adjusted pro forma EBITDA result of approximately $22 million for the quarter, which is up slightly from the Q2 and off approximately $6 million when compared to last year. A couple of other notable highlights that I believe position us well for the future and support some of the investments we've made.
New and used equipment sales were up $5.3 million or 8.7% organically year-over-year, as we look forward to future field population gains. This increase in sales was primarily driven by our construction segment's new and used equipment sales, which increased 30.5% on an organic basis year-over-year. Additionally, our construction segment's product support revenues have increased 15% year-over-year on an organic basis, a reflection of equipment sales of years past. PeakLogix, our new design and build warehouse solutions and systems integration company, is off to a great start and has outperformed expectations on the bottom line thus far. Moving on to the balance sheet and our capital profile at the end of Q3. Two key factors to discuss here, leverage and liquidity. First, liquidity. Recall that we closed the IPO with roughly $150 million in cash and revolving liquidity.
Since the IPO in mid-February, we've acquired three, and now a fourth, strategic businesses using existing revolving liquidity, funded growth CapEx in our rental fleet, and serviced the cash costs of our debt. As of the end of Q3, I'm happy to report that the business has the same level of liquidity that it had at the IPO, or approximately $150 million. We believe that holding liquidity at $150 million to be an impressive result and a reflection of our cash flow profile and strong collateral base, which we used to fund these three important items without impacting the company's liquidity position. This is also a testament to how we thoughtfully positioned our capital structure and how we fund M&A. On to leverage.
While liquidity is a function of the value of our assets and our ability to cash flow and service revolving debt, leverage is a measure more directly tied to asset utilization. As mentioned, our rental fleet has been performing at sub-optimal levels when compared to historic norms, which has impacted our leverage position at the end of the Q3. There are two primary drivers for the increase in leverage. The negative impact on our adjusted pro forma EBITDA when compared to last year, and two, the aforementioned investments we've made on acquisitions and in our rental fleet. I'd like to comment on rental fleet for just a moment. First, recall that our rent-to-sell model, where we are selling lightly used two and three-year-old heavy equipment out of our fleet to drive field population, which in turn drives parts and service revenue over the long term.
I mention this because a large portion of this rental fleet was into the rent-to-sell product categories, which we know will generate profitable product support business for us in the coming years. Importantly, and in line with historic norms, we also expect Q4 to be a strong rental disposal quarter. Lastly, and importantly, rental fleet CapEx always precedes utilization in EBITDA, which timing-wise is a net negative for the company's current leverage profile. As an example of how rental investment manifests itself over time, on our previous call, we made note of the rental fleet investment we've made in Florida. In recent months, our Florida construction rental business has produced approximately $400,000 more in rental revenue versus the months prior to that investment being made, and we expect that positive trend to continue.
However, it will take at least a year for that investment to fully impact our trailing 12-month EBITDA figure, and ultimately leverage. Having discussed the details of Q3, and as I conclude my remarks, I'd like to turn your attention to some of our enterprise-wide pro forma trailing 12-month numbers. If we look back at our pre-COVID numbers on a pro forma basis, our business was producing approximately $94 million in EBITDA. As I mentioned, we are running about $11 million behind that number year to date. I expect that variance versus last year, albeit more muted, to continue into the Q4 as well. On the flip side of COVID's impact, we've invested heavily, and we believe prudently, throughout the year in four businesses that under normal circumstances, we know have generated approximately $13 million in EBITDA per year.
As discussed, we've also made an investment in rental fleet that we expect to lead to future EBITDA in the future. As we leave 2020 behind, and with an eye toward 2021, macroeconomic setbacks notwithstanding, we believe that we can regenerate the COVID-related EBITDA shortfall at a minimum and add additional EBITDA as we continue to cultivate field population and realize the synergies of the investments we've made in 2020. In closing, I again want to thank all of my teammates at Alta for your commitment to the business during what has been a year not soon to be forgotten. I have great faith in our proven business model, our leadership team, and our vision for the future. To our investors, we appreciate the opportunity to be stewards of your capital and operate daily with your best interests in mind.
Like many of you, I'm looking forward to that last digit on our calendars changing from a zero to a one in a few weeks. But in the meantime, I hope that each of you take some time to take inventory of the most important things in life over the next two months. I wish all of you and yours nothing but health and happiness this holiday season. Thank you for your time, and I will turn the call back over to the operator for Q&A.
Your first question comes from the line of Alex Rygiel from B. Riley. Your line is open.
Thank you. Good evening, gentlemen. Very nice quarter. Hey, Alex. Thank you.
Good evening, Alex.
Well, first question here. In comparison to sort of pre-COVID activity levels, I suspect since then there's been some mix shift and some different end markets that have been strong. Can you go into a little bit more detail on which ones are stronger today and which ones are weaker today, and maybe whether or not those trends can persist for indefinitely or at least a degree of time here?
Sure. Alex, this is Ryan. I would say that the end market where we're seeing kind of the strongest demand growth is anything related to the warehousing, in particular e-commerce, as I referenced in my remarks, where we're seeing that the most is denser urban areas. We were well-positioned in terms of some of the population density in our footprint. Chicagoland, Greater Boston, New York City, these are all big logistics hubs. We're seeing increased interest in some of the advanced technologies, autonomous solutions, a mix shift towards narrow aisle and warehousing-type products, which we're well-positioned for. That ties into our strategy with PeakLogix. It's a drive to get wallet share from that end market. This is a new tool in our bag, and we can drive deeper penetration into that customer end market.
On the weaker side?
On the weaker side, we're seeing it stabilize in some of the manufacturing areas. Michigan, where we've seen the auto market rebound, it's leveled off. We sort of forecast a kind of an anemic market or a flat market for next year. That's kind of offset with, in another manufacturing environment is Elkhart, Indiana, Northern Indiana, which is very strong. They're having a really strong demand for their market, the RVs, and that looks to be strong for the next couple of years. In terms of the construction market, Florida remains a bright spot. In terms of a weaker spot, we're kind of hopeful that we see some larger infrastructure spend. There were some positive things that happened with Congress this week in kind of messaging that we're going to see continued investment there from the federal government. In terms of weak markets, we don't see that.
What we just see is uncertain markets, maybe some staying on the sidelines for big purchases, which, for us, as long as the lights remain on and we don't have any broad shutdowns, we know we keep our mechanics busy, and we keep that product support end of the business moving.
Broadly speaking, as it relates to the rental business, when might we see that business sort of turn more positive?
Boy, Alex, this is Tony. I think there seem to be just some fits and starts with different projects. At least that's been our experience here. I'm not sure we can put our finger on it other than just some of the macroeconomic factors that are at play with COVID. I'm not sure if the election had something to do with people wanting to commit to projects or not. As I mentioned in my remarks, what we have to do is we have to be kind of prudent with our fleet size here and scale our investment in rental fleet relative to demand. Now, what history would suggest is that periods of volatility, customers are going to be more driven toward rental product, as they want to maintain flexibility. We're hopeful here.
More recently, we have seen some more stability in utilization metrics than we did in Q2 and Q3. I guess what I would say is that that crystal ball is still fairly foggy in terms of when we'd see rental utilization metrics kind of snapping back here.
Lastly, you mentioned your acquisition pipeline was fairly robust. How does it compare to back in February? What do acquisition prices look like today? Have any new meaningful opportunities arisen that might be outside your core markets?
I'll start with kind of the pricing. In terms of value, on a previous call, we had kind of said that book value is generally going to be a floor on the value. We're pursuing dealerships that have exclusive rights over territories with premier brands. These aren't distressed situations where we're trying to bottom-feed. We're trying to buy dealerships that we're going to bolster our footprint and our infrastructure. I think that the prices have remained relatively consistent. We're kind of underwriting the deals the same way. The landscape remains as kind of as fertile as it was a year ago. The reason that we went public was to continue to execute on our growth trajectory, and we see a continued landscape for that.
The last part of your question, there are absolutely tangential markets that we could leverage our product support prowess into new markets and new types of equipment. We are actively pursuing or at least evaluating some of those opportunities. Nothing that's in the near term, but some examples would be just the general transportation over-the-road trucks, some of the ancillary types of equipment that touch on construction, like some of the cleaning equipment and recycling equipment. There are lots of end markets where once you have the capability to repair electric vehicles or machinery powered by diesel engines, which we can do both, we have a lot of purview into different types of products that we could ultimately add to our offering.
Very helpful. Thank you, gentlemen.
Your next question comes from the line of Mike Zalewski from Colliers Securities. Your line is open.
Hello, gentlemen. Good afternoon.
Good afternoon, Mike.
Hey, Mike.
Hey. I wanted to go back to some of the questions earlier on your rental utilization. When I talk with other fleets out there, it seems like the general trend was that the trough utilization really happened in end of June or the first part of July, and they've ramped up since. Kind of ended the quarter on a much better level than when they started, almost back to normal again, and have gotten stable, if not better into October. Can you give us a sense as to the shape of the curve in your utilization? Did it end a lot better than it started in Q3 at the very least?
Yeah, Mike, I can speak to that. I think in general, I can say that that was our experience as well. The beginning of Q3, for us, utilization-wise, was softer than expected. We've sort of ramped up from there, I would say. The issue is we're still sort of lagging last year's levels. What we've seen is utilization hold here through the end of September into October. I'm not sure exactly, but probably contractors are, maybe that projects that have gotten pushed due to COVID, they're trying to wrap up here, so they're being elongated into Q4. They're trying to get things done relative to the weather. We have seen a hardening, if you will, in utilization more recently.
I would agree with, I guess, maybe the general sentiment that the early part of the quarter was worse than the latter.
Okay, great. Thanks for that. Can you also share some color on how the integrations are going between Hilo and Martin and so forth? Have there been any challenges in trying to integrate companies you've acquired in New York, Illinois, Indiana, Florida, et cetera, without the benefit of being able to travel as much? Has it been a challenge? Has this kind of progressed in line with expectations?
Mike, I'll take maybe the first part of it. When we think about integration, we've kind of got the IT and the financial integration, and then you've got more of the management integration. I'll speak for the finance and IT-related integration, and then maybe Ryan can weigh in on the management side. I guess I first want to mention that the Howell Tractor deal that took place here in the last couple of weeks, few Fridays ago, is fully integrated today into Alta's system. It's the first time since we've been on the eXtend system that we've taken the opportunity to cut an acquisition target over on a weekend. We closed the deal on Friday, and thanks to the professionalism and the acumen of our IT and accounting people, on Monday, Howell Tractor came up cutting invoices and work orders out of our eXtend system.
That one is actually fully integrated. When it comes to the others, we have a project plan in place from an integration perspective. NITCO and Martin are scheduled to come in onto our system at the end of the year here, so just a few weeks, and there's been a major initiative going on that way. The remainder of the acquisitions, Liftech, Flagler, Hilo, will be 2021 initiatives. I'm not sure exactly when, but probably toward the middle of the year with each of those. PeakLogix, just to kind of round it out. PeakLogix, a little bit different business model. They don't have rental. They're not in parts and service in the same way we are. That will probably be the last business that we end up fully integrating.
Ryan, I don't know if you want to speak to kind of the management.
Sure. On the management side, we're kind of off to the races in terms of the integration. Another thing that happened, not in the Q3, but more recently to support the growth, is we've reorganized our material handling business, the industrial segment, to allow for leadership enterprise-wide and have promoted two individuals. Alan Hammersley is the president, and Craig Brubaker is the COO. And that business today is being managed as one enterprise. We're having quarterly meetings where we keep all of the regions on the same KPI. And bringing them on the business system later next year is just going to accelerate that and make that more efficient to manage it that way. On our construction side, the same type of reorganization is underway. We have regional leaders driving the Great Lakes region, the Florida region, and the Northeast, where we have the JCB side.
Similarly, the integrations in terms of sharing inventory for remarketing, trying to drive rental utilization, and sharing inventories across state lines, things like that, are well underway. We look forward to the day when we have everybody operating on one business system. We chose the e-Emphasys eXtend system because of its transparency and its scalability, and we look forward to driving some more efficiency through that technology over time.
That's great color, guys. I want to throw in one last one if I could. You've added technicians since last quarter. Some didn't probably work the entire Q3. You've also seemed to have better rental utilization, at least for the full fourth versus the full Q3, and showed me there seems to be a general economic rebound here. Is it fair to say, without giving us full on guidance, that Q4 results should look quite a bit better than Q3?
Mike, this is Tony. I'll take that one. I think we feel very bullish about the dealership portion of our business. We had the abrupt stop in Q2. We certainly have spoken today in a positive fashion about business activity levels stabilizing in Q3. There is a bit of a lag in terms of rebuilding WIP and bringing costs back that I think hit us a little bit here in Q3, that will hopefully maybe go away in Q4. Meaning, I feel like Q3's a bit of a bridge to normalcy in Q4. The more difficult thing to project here is the utilization on the rental side. As I mentioned previously, some of the results will be predicated on what happens there. Like I mentioned, as we enter Q4 here, we feel pretty good about utilization levels, relatively speaking.
Okay. Well, thanks so much. I'll pass it along.
Thanks.
Your next question comes from the line of Bryan Fast from Raymond James. Your line is open.
Thanks. Good morning, or good afternoon, guys.
Hi, Bryan.
Hi.
Just looking if you can talk about the organic growth in parts and service revenue. Do you think that's reflective of pent-up demand as restrictions ease, or are you starting to see the benefits of an increased focus in that area?
Yeah. I'll take that one, Bryan. I think thankfully, we've got organic growth on a sequential quarter-over-quarter basis and year-over-year. When we look at the quarter specifically in our construction segments, I'll answer it both ways. The quarter-over-quarter sequential organic growth was absolutely just related to the snapback, if you will, from COVID-19. I think more importantly, when we think about the business on a longer-term basis, specifically in construction, we continue to pace at 15%-ish on an organic basis in the parts and service segment. In my mind, that's a validation of the business model, where you've got to make an investment into really what have been nascent territories for some of our major OEMs, specifically Volvo. You've got to make sure you're accessing customers, whether it's through rental, and generate field population.
Over time, that field population comes home to roost, if you will, in the form of parts and service. So long as you have the technician headcount, which we've talked about growing alongside of it, you can capture that profitable business. When I think about the quarterly year-over-year organic growth, I think about the equipment that was sold two and three years ago starting to manifest itself from a profitability perspective.
Okay. Thanks, Tony. Just on the SG&A front, I know you provided some color there, but just looking for more granularity. If you exclude the share-based comp expense from SG&A, you get a SG&A as a % of revenue in line with last year. Is that reflective of a normal run rate, or are there still some costs that could come back as the operating environment normalizes here?
No, I think that Q3 from an SG&A perspective was pretty normalized. I made mention of the cost mitigation efforts that we relaxed in Q3. The majority of that was relaxed in the early innings of the quarter. One thing to point out is when I made mention of the variable cost nature of our dealership model, you have some natural costs like fuel, for instance. When technicians aren't out driving around to customers, you're not going to have as much spend in fuel. All of those sort of costs came back to us in the Q3 here. I think that what you saw there was a normalized level.
Good. That's great clarity. That's it for me. Thanks.
There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating.