All right. Good morning. This is Tami Zakaria, Head of U.S. Machinery, Engineering, and Construction Sector Equity Research at JP Morgan. It is my pleasure to welcome Chris Eperjesy, Chief Financial Officer of Custom Truck One Source. For those that need an introduction, Custom Truck One Source provides truck and heavy equipment rental and sale services and serves customers in the United States, Canada, and Mexico. With that, I'll turn it over to Chris for his presentation.
Good morning, everyone. I'll take about 10 minutes just to give you kind of a brief overview of the company, just in case you don't know. At the first slide, you saw those photos. Those were photos of products that we manufacture. You know, the way we position ourselves is a one-stop shop platform. So we focus on both rental of specialty equipment as well as sales and then aftermarket parts and service. On an LTM basis, we're $1.87 billion of revenue, $427 million of EBITDA. We have about 2,500 employees. And in our rental fleet, we have just under $1.5 billion of assets, original equipment costs, and 10,300 units. You'll see in the charts on the lower right, just some information about our end market, our revenue distribution, and our rental fleet. I'll go through that 'cause I do think it is important.
If you look at our end markets, roughly 60% of our revenue comes from the utility space, so transmission and distribution. That's pretty consistent with where it was last year. I think last year it was 60%. Infrastructure has actually grown. Last year it was roughly 20%. It's this past year was 24%. So we have seen pretty significant growth there. Rail and telecom are both about 5%. In terms of our revenue distribution, about two-thirds of our revenue comes from the sale of new and used equipment. Just under a third comes from rental. Under 10% comes from aftermarket parts, service, and sales. In terms of our rental fleet, so as I mentioned, we have one just under $1.5 billion in our rental fleet. That rental fleet is distributed amongst these products.
So buckets are roughly 31%, diggers 17%, and other T&D is 22%. So you'll see the majority of our rental fleet is geared towards the utility space. Then we also have cranes, rail, and telecom, all between 5%-10%. In terms of the year that just finished, it was another record year for us. So I'll just hit on some of the highlights. Revenue was up 20% versus 2022. Adjusted gross profit was up 13%. And then our adjusted EBITDA was up just under 10%. While our margins in all of our segments held flat, what you'll see there in terms of why our EBITDA flow-through was lower than revenue is there is a mixed impact. Our new sales equipment business is on an adjusted profit basis in the mid-teens, high-teens. And our rental business tends to be closer to 75%.
So you're seeing a little bit of a mixed impact there. In terms of the business segments, we have three ERS, which is our rental and new sales business, our TES business, which is new equipment sales, and then APS, which is aftermarket parts and service. You'll see the ERS business was up roughly 10%. That was largely driven by the used equipment sales ex coming out of the rental fleet. I think that was up just over 20%. Our TES business had another very strong year. Every quarter we had double-digit growth, and we're just under 30% for the year versus when the deal was the combination occurred in April of 2021. We've continued to delever, although this year we were flat year-over-year. But at the time of the deal, we were 4.6, and we finished the year at 3.5.
And I'll talk a little bit more about that in a slide later. We did open three new branches. One of the, I think, opportunities for us is as we look at some of the white space in the country is to get some new locations, service sales, and rental locations. So we've been able to open three, which I'll also talk about in a moment. In terms of end markets, you know, very favorable end markets in the utility space, infrastructure, rail, and telecom. We've laid out here just the impact of the IIJA impact. You can see it's $hundreds of billions as well as just the overall capital expenditure that's occurred in the industry. You can see it's high single-digit to low double-digit kind of CAGRs over the past three or four years. So just great end markets.
And we're seeing that in terms of our backlog and our overall demand. I'm not gonna go through all these, obviously, but we have a very diverse and highly loyal customer base. You'll see not very concentrated. We have 8,000 customers. Our top 15 customers represent about 16% of our overall revenue. No single customer represents more than 3%. And you can see here just a representative list across the utility space, infrastructure, telecom, and rail. And again, we have a long tenure, 15+ year tenure with most of our top customers. You know, we have a pretty broad industry equipment, as well as geographic distribution. So pretty resilient business, as we look forward. I talked a little bit about the differentiated one-stop shop model. We think it's unique.
You know, so we have great relationships with our suppliers, which are largely OEM suppliers, attachment suppliers, as well as, you know, we offer our customers an opportunity to either buy equipment, new equipment, used equipment, and also rent from our rental fleet. And so, you know, we think having that end-to-end customer solution is a real benefit for us and creates a competitive moat when you think about the $1.5 billion and 10,300 units that we have in our fleet. In terms of our branch network, we're up to 38 locations now. We just recently announced three new locations: Casa Grande, Arizona, which has some production capabilities. Sacramento and Salt Lake City, which are similar to our other locations in terms of service, rental, and new sales capabilities.
The areas that we're continuing to focus on, and if you were here last year, there were five regions. We've checked Southwest off now, but the specific Northwest, Northern California, the New Jersey, New York Metro area, and then the Carolinas are the areas that we're really focused on as we look at future growth. This is just a summary of our performance year-over-year. As I mentioned, we had pretty significant growth year-over-year, 19% revenue, just under $1.6 billion, just under $1.9 billion. Saw similar growth in our adjusted gross profit. EBITDA, again, was up from $393 million to $427 million. Saw good growth across all of our markets. One headwind that we have had is we do have floor plan interest costs, which is actually a reduction, to EBITDA. We don't add it back as an interest cost.
We have seen, as a result of higher interest rates and a strategic decision to kind of mitigate some of the impacts of supply chain, we've carried probably higher levels of inventory than we typically would. We are seeing a little bit of that impact. But in spite of that, we are still able to show pretty significant growth year over year. Similar story here, just trying to show you kind of what's happened since the deal closed in April of 2021. We've added about $500 million of revenue. You can see $135-$140 million of EBITDA. Unfortunately, and I'm sure this will come up in the Q&A, we have not seen a similar appreciation in our share price. Our share price is close to the level at which Platinum Equity executed the deal back in April of 2021.
So definitely think there's some opportunity there. Our three segments, I'll just touch on this a little bit. I talked about it. We have three segments, equipment rental solutions, which we call ERS, truck and equipment sales, which we call TES, and then our aftermarket parts and service. Our aftermarket parts and service, as I said on an earlier slide, is roughly 6%-7% of overall revenue, so relatively small. Our ERS segment really is focused on the sale of the rental assets when they come off, as well as the rental of the assets that are in our fleet. Typically, the key metrics that we look at are utilization on the fleet, OEC on rent, so original equipment cost on rent, and then on-rent yield.
And then in our truck and equipment sales business, obviously, it's our backlog, which I'll talk about in a second, it continues to be at relatively elevated levels. And then, of course, our aftermarket parts and service business, where we focus on selling tools, kits, and providing other services for the vehicles that we rent and sell. In terms of our overall balance sheet and liquidity, you'll see here, at the time of the deal close, we had 4.6 times leverage. We got that as low as 3.3 times, and then saw it come up in the fourth quarter, as a result largely of the investment impact on our share buyback program. On the top right, you'll see we have, you know, significant availability under our existing ABL facility.
So we have a $750 million facility where we have about $325 million, that's suppressed availability on that, and then existing ABL availability of about $200 million. We have set, and I'll talk about in our guidance in a sec in a second, a leveraged target of getting below 3x, by the end of this fiscal year. We had set a similar goal for the year that just ended, but we made the decision, to invest in some of that inventory, just given the growth that we were seeing, that effectively pushed that goal out for about a year. In terms of the guidance, so we announced this guidance, was it last week, last week or the week before, in terms of, you know, our expectations for 2024, we think it's gonna be another, growth year for us.
We think, you know, it's gonna be mid-single-digit to double-digit, so 7%-17% growth there. So we finished, as I mentioned, at $1.9 billion. We're projecting between $2 billion and $2.18 billion. You can see the different segments there: ERS, 1%-5% growth; TES, 13%-27% growth; and then APS, 4%-11%. Overall EBITDA growth, we're expecting somewhere in the range of 3%-10%. You know, one of the things we'll probably talk about in the Q&A, we have seen a little bit of softness in our transmission business on the rental side. And really, we do think it's temporary. It's not any indication of long-term demand and just getting some projects started and some funding. And hence, that is what's driving the lower ERS growth.
But we continue to see really strong demand on the TES side. So we expect that to continue this year, and have another year of double-digit growth. Additionally, we've set a couple additional targets. We're gonna generate more than $100 million of leveraged free cash flow. We do expect to get below the 3x leverage by the end of the year. It'll be another year of an approximate $400 million gross CapEx in our rental fleet. And the way to think about our CapEx is typically about $100 million is what we think of as net maintenance CapEx. So when I say that, of that $400 million, roughly $300 million would be maintenance CapEx. We'd have another roughly $200 million of proceeds on sales of used equipment. So we think of that kind of as the net investment in the maintenance CapEx.
The delta between the $300 and the $400 would be growth CapEx, which will largely be focused on specialty rental and vocational space, so things like refuse trucks, roll-off trucks, water trucks, and then things like hydro excavators and hydrovacs. With that, I think we can open it up to Q&A.
Perfect. Thank you. I'll start off with some questions and then open it up to the audience toward the end. So, you had a strong 2023, despite supply chain remaining a gaining factor. So let's start there. Where, in terms of supply chain normalcy, are you at now? What areas remain bottlenecks versus pre-COVID levels or pre-COVID times?
Yeah. I mean, you've seen we've been able to expand our inventory levels back, you know, to historical levels or even higher. So we've definitely seen an improvement across the board, so much better than it was.
It's not wide open, so we would not call it back to normal. You know, our chassis, what do you call it? Our Class 8 chassis, which had been an issue, now are much more available. So we're not experiencing a lot of difficulty with our Class 8 chassis. But we continue to experience some around our Class 5. Our attachments, much better than it was. So we're in a much better position than we were even a year ago and certainly much better than we were two years ago. And so it's I would really describe it as more one-offs now than any, you know, across the board issues with, you know, any one supplier, whether it's a chassis OEM or an attachment OEM.
Got it. So lots of comments today from several companies around U.S. infrastructure, spending and mega projects.
Remind us, how does your product portfolio fit into that narrative, and what are your competitive advantages for, let's say, an infrastructure project?
Yeah. And so, you know, I, in one of the early slides, I talked about the end markets that we serve. We serve utilities, so transmission, distribution, infrastructure, which are the roll-offs, the refuse trucks, the water trucks. Hydro excavators would all be in that category, and then rail and telecom. And so all of those end markets are extremely well-positioned. You know, I think our competitive advantage is obviously the size of our fleet. So we have, you know, 10,300 units, and we're continuing to invest there. And just our overall capability on the new equipment side and that the investments we've made will allow us to continue to expand, and that is one thing to note.
While the margins in the TES business tend to be lower than the rental margins, it's also a much lighter asset business in terms of the invested capital that's required. If you think about the rental fleet, you know, we have $1.5 billion of original equipment costs there. So it's a much heavier investment in terms of assets, in terms of invested capital.
So to dig a little deeper on that, in a typical infrastructure or utility project, when do your products see the most engagement in demand? Is it toward the, you know, the front end when you break the ground or toward the tail end or pretty consistent throughout the life of the project?
It's pretty consistent throughout.
If you think about a utility project, as an example, when they're digging to do the poles, they would be using our derrick or our digger derricks to dig. When they're now working on the poles, they would be using our bucket trucks to go up and work on them. And they could also be using our pole trailers as they're bringing the trailers to it. So it's typically once construction begins is when our typically our products get used, and they typically get used through the duration of the project.
Got it. So and then last earnings call, you spoke about some softness in utilities. Can you recap for us what happened and whether you think this can reverse in the near term? I think you mentioned you you don't see it as a structural weakness in demand. So what's really driving this? When do you see this inflecting?
Yeah. It's definitely not structural. We definitely see good long-term demand across all of our end markets, but specifically in utility and specifically in transmission. What we have seen is just the timing of some of the funding, the timing of some of the projects, getting ready to go. So we have a long list of ones that are getting ready to go. They're just not there yet. You know, there can be some regulatory issues at times, and certainly, there's some funding issues. But everything we hear from our customers, everything we see, this is really temporary. And we would expect by the second half of the year that these projects are gonna be picking back up, and we'll get back to normal utilization.
If you think about our utilization, you know, we've historically guided, you know, mid-70s used to be really good, and 80 was great. We had a period where demand was just so strong that we got up into the high 80s for a brief period of time at the end of 2022. We still have across most of our products and most of our end markets, utilization that's at that 80% range. It's really what's happening in transmission that's bringing it down. I think we finished the year at 75-ish% in terms of overall weighted utilization. But we would expect that to rebound by the second half of the year.
So 2 follow-up questions on that. The first one, if the Fed were to slash rates this year, historically, is that a positive for rental demand?
Yeah.
You would think, you know, as rates were rising, that that might push customers from buying new equipment to renting new equipment. We actually didn't see any correlation. And so we saw continued strong demand in both. And so I think the answer is, you know, we're not seeing that strong correlation at all.
Got it. And the second follow-up is on the utilization rate. You mentioned it ticked down to, I think, 77.6% or call it 78%. And so but it's still quite strong compared to other rental companies out there. But is this high 70% sort of the new normal, or what is your expectation of utilization rate as you look into the next four quarters?
Yeah. Our historical guidance, I think, still holds, which is mid-70s to low 80s, you know, is a really good range.
And it will, you know, there is some seasonality throughout the year. There is, you know, we couldn't, you know, encounter issues like we've had in the most recent two quarters with transmission business. But as a general rule, you know, the specialty rental business, especially our end markets, is a lot different than gen rent. And so we typically are pretty resilient in maintaining those utilization rates. And same thing on the residual value side. You know, we hold residual value 60%-70% five, six years, seven years after the asset's been in the fleet. And so, you know, that's very unique versus what you see in the gen rent space.
So we know that specialty rental penetration remains notably lower than general rental.
What do you think is the reason behind this, and what needs to happen for these to reach parity, or is parity at all possible between rental versus specialty?
We definitely think there'll be a closing of that gap. I think gen rent is 50, mid-50s, high-50s kind of penetration. Specialty rental is low- to mid-20s. And so there's obviously a lot of room to move there. What we see in our business, you know, there is a lot of rental and new equipment sales in the utility space. In the specialty and vocational, it tends to be more sales. And so that's roll-off trucks, refuse, water trucks, hydrovac. And so we do think longer term, there's probably an opportunity there for as that market matures and that is where we saw a lot of our growth, in 2023.
As th at market matures, there's gonna be a bigger market for rental. And so we do see that gap closing. You know, I would not put in the near-term horizon it getting, you know, up to that 50%, but certainly, we should see movement.
Got it. Thank you for that. And so, could you share your views on the specialty rental pricing market, with inflation moderating? And we've seen relatively strong pricing over the last 2 years or so. Do you believe rental contract pricing for the specialty channel can see some downward pressure going on from here?
You know, our general guidance has been and continues to be, we think we can maintain margins. And so, you know, in a adjusted gross profit basis for our rental business, it's in the mid-70s%.
Our used equipment sales from the rental business bounces around a little bit more because it depends on whether it's an RPO, which is a rental purchase order, or if it's a used truly a used piece of equipment or if it's a direct sale to a customer. And so that can be anywhere in the 30%-40% kind of range. And then our TES new equipment sales has been kind of in the mid- to high teens. You know, our goal is to continue to maintain those margins. We think there's opportunity long-term to expand them all. But as we look at 2024, I would think more of, you know, maintaining those margins and and cov ering any potential inflationary costs.
Got it.
So just to build on that point of used equipment market, you've seen strong profitability in recent years from the sale of equipment, both used and new. What do you expect a normalization ahead?
You know, I do think that is one of the things as I was talking about the difference between gen rent and specialty rental. We, you know, we think that that'll that's sustainable and will be there for the long-term. And so, as I mentioned, 60%-70% kind of residual values. We're getting 30%-40% margins on those sales when we sell those. And we expect that from everything that we've seen, that that's gonna continue to be kind of what we're gonna experience going forward.
Got it. Okay. So let's talk about your one-stop shop business model. I think that's pretty unique.
Does that have an impact on customer acquisition, or does this more does this drive retention more than acquisition? And more broadly, what do your customers care most about, the business model and why they keep coming back to CTOS?
I think the answer is both. And so customers like the flexibility of being able to you know, and many customers do rent and purchase. So they have that flexibility of perhaps they have a certain base of business, so they buy equipment, but then they can use flex with renting. And so we certainly see that a lot. There are customers that only buy, and there are customers that only rent. As I mentioned, specialty and vocational tend to be buyers versus renters.
But, you know, as we look forward, we think having that flexibility for our customers, which we do, we can easily because we're both the truck upfitter or manufacturer as well as the renter, you know, we can allocate assets, you know, where the demand is. And so as we look forward, we would expect that to continue. You know, I think in terms of what they view most important, certainly availability and flexibility, but also having that broad, you know, network that we have across the country for parts and service, is also something I think that distinguishes us versus, you know, largely a lot of regional and local competitors. And so, you know, that's certainly one of the moats that we have.
Great. And, are you looking to expand your rental fleet into any new product lines or adjacent markets?
So, you know, as I talked about, one area that we think there's a lot of opportunities in specialty and vocational, which, you know, we've probably just scratched the surface there, but we have seen significant growth in things in refuse, in water trucks, in hydrovac. And so certainly, that's an area as we look at you know, I mentioned we have about $100 million of growth CapEx. You know, more than half of that is gonna be going to growth in those markets. And so we definitely see an opportunity there.
Got it. So, on your business model, you have the ERS segment, the rental solution segment, and then you have equipment sales segment. Is there a preference to grow one or the other? The rental business is clearly more profitable from a margin perspective.
So is your goal to sort of keep it at the mix they're currently at or change it over time?
We think we can do both. And so if you look at the TES side, as I mentioned, in terms of the required investment for incremental volume, it's relatively low. And so we believe we have incremental capacity. Last year, we announced an expansion at our main campus in Kansas City. I think we added 250,000 sq ft under roof that's just coming online now. We invested, I think, $30 million. And we also doubled the capacity of our Union Grove, Wisconsin facility. And so we have the incremental capacity even at these growth rates. So, as I mentioned, we had 30% growth rate in that segment. Now, it's important to note that segment also supplies the ERS segment.
So they're getting three-quarters of their units from internally, so intercompany. But we think we have the ability to do both.
Got it. So I'll ask one more question before opening up to the audience. So when we think about those two segments, from a margin perspective, where do you see more opportunity for margin expansion? The rental space, the rental segment, or the equipment sales segment? And what would drive that?
Yeah. You know, I hate to answer it this way, but I think both have similar opportunities. You know, I talked about the rental market where, you know, increased focus. We're not taking focus off of utility because we're continuing to invest in it. But the growth in specialty rental and vocational, they tend to be higher utilization, higher rate, so higher margin. And so there could be a mixed benefit there.
We are seeing some of the same in TES, so they're both benefiting from the same. And obviously, with the growth we've been seeing in TES, there's gonna be some absorption impact as you grow, you know, two years in a row at, you know, double-digit kind of growth. So we are seeing the benefit of some of that. And then in APS, you know, a focus on, you know, selling more kits with trucks and, you know, some incremental capabilities on the service side also should help with expanding margins on the APS side as well.
Perfect. Do we have any questions in the room? Yeah. Could you just say it in the mic?
I'm sorry.
Thank you.
Hi. Could you address the age of the fleet that's out in the wild, and is there a potential replacement story within that?
And then second, regarding the rental business, is there a preference to, you know, for the customers to rent for a project, or is it more of a one-off type of rental for a very short period of time?
Yeah. And so, for the latter part, it's both. And now I'm forgetting the first part of the question. I apologize. The age of the fleet. The age of the fleet. And so the age of the fleet right now is about 3.5 years, which we think is relatively young in the industry. Typically, we'll replace 15%-20%. If you just do the math, it's, we said we do $300 million of maintenance CapEx this year on $1.5 billion. So it's roughly, you know, 15%-20% is kind of the replacement that we see.
It's gonna depend on the product in the industry and the segment, in terms of it. You know, there's units that have, you know, more than 10 years kind of use of life. There's some that we change out every 3 or 4 years. And so it's kind of a mix. But on average, we've brought the age down because I think it was close to 4 at the time of the deal close, maybe even over 4. It's now down to about 3.5 years, which we feel like is a good number. Yeah.
I think there's 1 more question over there.
Yeah. It was just a question on the guidance, the fact that EBITDA growth is less than sales growth. And I just why? What are the drivers, and what is it?
Is there a target margin profile as well for the company or target model?
Yeah. That is one of the things, you know, that we're trying to do a better job of is explaining really kind of the sum of the parts and that they're you know, we're a truck upfitter, and we're a specialty rental company. And those are very different. And, you know, a typical truck upfitter will have margins like we have. We'll have, you know, EBITDA margins. I think the peers out there have EBITDA margins, you know, north of 40%. And then, you know, in a specialty rental, because it is, you know, pretty high, investment in terms of capital, what you'll see there is they tend to have very high margins, you know, in the 70s on an adjusted basis, 75%.
But they'll tend to have lower kind of EBITDA margins. But the net of those two, you know, for us, is a 23% EBITDA margin. And so, you know, we think that we're well-positioned. I think we we you know, we need to do a better job probably of explaining that story so you really understand that there's there's two businesses. But the the answer specifically to your question on guidance is we are seeing a lot of growth in the TES business, which has I think last year, we finished just south of 18%, average margins. And, you know, as you mentioned, the ERS business, the rental side is 75%. And with, you know, the fact that the TES is growing double digits, that's what you're seeing. There's not gonna be any margin contraction within any of the segments.
Matter of fact, there could be margin expansion. But the blend of them is what's blending the EBITDA growth lower.
Any other questions in the room?
Just in terms of competitive nature here. So you mentioned a lot of the specialty is done in-house. People purchase their own equipment. Do you have opportunity you compete with the other large equipment rental guys in this narrow niche? Do you think your share is, like, leading? And is your growth more about, again, obviously, the sales side, but also, is it convincing folks to go to you guys, or is it taking share from others?
You know, I think it's all of the above. And so we only have one what we would call truly large competitor. It's a privately held company, Altec. And so, you know, their information's not public.
We think prior to our combination, they had the largest rental fleet. We think post the combination of our two rental fleets, Nesco and Custom Truck, that we have an equal or larger rental fleet. After that, it's a lot of regional and local players. In terms of, you know, in terms of where we see growth, certainly, there's some market share gains, especially in the markets that we're going after, specialty, vocational. You know, that's part of it as well. But we do think that the one-stop shop model, having the ability to both sell, to rent, and to service the units, certainly has a competitive advantage versus most of our competition. And so that really is how we see it.
Thanks. And do you do any metal bending yourself, or everything is just, kind of servicing dealership type of sales?
Ask the question again.
I apologize.
Sorry. Do you do any metal bending yourself? Do you value add, or it's mostly just sell?
Yeah. So there is some vertical integration manufacturing. So, you know, we buy chassis. We buy attachments. We put it together, which can involve some metal bending. We also build some of our own bodies, some of our own cranes, and some of our own trailers. And so there is, you know, certainly metal bending going on in the plant. I wanna correct one thing I said before, right, because I think I switched EBITDA margin profiles. Clearly, the ERS business, the specialty rental business, has the higher EBITDA margins than TES would have, more moderate. But in terms of their peers, when we look at them, they're comparable or, in most cases, better than the peer truck upfitters and the specialty rental companies.
Any other questions in the room? I think we have one over there.
Thanks. Just, how much aftermarket did you say you do? And is there a big opportunity to grow the aftermarket? Because usually, truck dealers have, you know, much higher aftermarket and absorption ratios are a lot higher.
Yeah. And so our overall aftermarket business, I think, last in 2022 was 6%. I think this past year was closer to 7%. We think, you know, one thing that we prioritized during the peak demand was service. And so it's important when rental equipment comes off of rent that it has to be serviced and turned around. And so, you know, we've definitely focused on the rental business over the aftermarket parts and service business when it came to service, so third-party service.
That was one thing where there probably, you know, there was a little bit of, there was an opportunity lost because we didn't have the capacity, the service, the assets and the locations, which is one of the reasons why we're expanding locations. In terms of opportunity, we do think, you know, there can be toolkits that go on a truck that are $40,000-$50,000. If we can get the customers to buy those from us as opposed to buying the truck and then giving them somewhere else, we think that has unique economics for us. And then we have proprietary parts for our Load King product. And, you know, so expanding that and making sure that, you know, our customers are using Load King parts is another area that we're focused on. So we definitely think there's opportunity for growth there.
It's just obviously star ting from a much lower base.
I think we have time for one question. Anybody in the room? Okay. So let me address the final question. I wanted to touch on M&A. Mm-hmm. What is your target in terms of M&A, and what is your leverage ratio target? And would you wanna deviate temporarily if any compelling opportunities come?
Yeah. And so deleveraging is a priority for us, certainly. And so we have set the target of getting below three times. We do expect to generate over $100 million of free cash flow, leveraged free cash flow. Opportunistic, tuck-in acquisitions, certainly. You know, we talked about regional footprint expansion. You know, those are not big dollars. Those are $1 million-$2 million of EBITDA.
Small small locations, but big potential because they open up new rental markets, new equipment sales market, and service markets. And so certainly, you know, I could see doing more of those. You know, a larger, more transformative, you know, it ha it would have to be very compelling. And certainly, you know, we would deviate from the leverage target if it, you know, met that criteria that was very compelling, got us into maybe an adjacent market, gave us new capabilities we didn't have. But it would have to be very compelling.
Perfect. If there are no questions in the room, I think we can wrap it up. Any last questions? I think we're good. Thank you so much, Chris. Thanks for joining.
Thank you, everyone.