Toromont Industries Ltd

TSX:TIH

Earnings Call Transcript 2021-Q3

[Operator]

Good morning. Today is November 5, 2021. Welcome to the Toromont Third Quarter 2021 Results Conference Call. Please be advised that this call is being recorded. Your host for today will be Mr. Michael McMillan. Please go ahead, Mr. McMillan.

[Michael Stanley Howie McMillan, Executive VP & CFO]

Great. Thank you, Valerie, and good morning, everyone. Thank you for joining us today to discuss the results of Toromont Industries Limited for the third quarter and 9 months of 2021. Also, on the call with me this morning is Scott Medhurst, President and Chief Executive Officer. As noted in the press release issued yesterday, we will be referring to a package posted on our website, and we encourage listeners to download it and follow along. At this time, and as noted on Slide 2 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 for the current quarter. Scott will begin with a few general remarks, followed by comments on our overall results, after which I will provide some highlights on our divisional results and financial position. After our prepared remarks, we'll be more than happy to answer questions. Over to you, Scott.

[Scott J. Medhurst, CEO, President & Director]

Thank you, Mike, and Good morning, everyone. Before I begin, I would ask you move to Slide 3 of the package. Overall, end market activity levels remain solid with the easing of the pandemic restrictions and shutdowns. The businesses continue to operate in a very fluid, complex and uncertain operating environment with many variables. Equipment Group reported strong prime product deliveries and solid order bookings in the quarter. Tight supply of equipment from OEMS, coupled with improved sales activity versus last year have resulted in lower equipment inventories. Rental and product sport activity improved, driven mainly by higher utilization levels. CIMCO continued to deliver on their order backlog that had significant growth last year. However, revenues decreased on timing of customer construction schedules impacted by COVID-related supply chain restrictions. That said, product support activity improved, particularly in the recreational market, as facilities prepare to reopen for the winter season.Overall, the operating leverage remained favorable. We are continuing to assess the learnings from the past year with respect to cost structures and new ways to do business with continued focus on customer deliverables, as activities in business is open. Given the variables, we continue to operate with caution, monitoring the fluid nature of COVID-19 variants, maintaining disciplined protocols as well as evaluating economic factors flowing from the pandemic, including supply chain disruptions, equipment and parts availability and factors affecting inflationary rates.Turning now to our financial results highlighted on Slide 4. Backlogs were $1.1 billion at quarter end, up 124% versus Q3 2020. In the Equipment Group, solid bookings continued mainly in our mining and construction businesses, which represent approximately 33% and 45% of our backlog, respectively. CIMCO backlogs were 29% lower versus last year, which had exceptionally strong bookings in the first 9 months of 2020. CIMCO Q3 bookings improved mainly, due to recreational orders in both Canada and the U.S. On a consolidated basis, revenues increased 8%, reflecting solid activity levels in the Equipment Group in most markets, in region and regions and weaker packaged sales at CIMCO. Overall Equipment Group execution was solid. Product support and rental revenues increased 4% and 6%, respectively, compared to the similar quarter last year and were both up 6% and 7%, respectively, on a year-to-date basis.Operating income was up 19% in the quarter and 33% year-to-date on the higher revenues, coupled with good margins. Revenue growth outpaced expense growth. The easing of COVID-19 restrictions have improved activity levels on a year-to-date basis. Net earnings increased 21% in the quarter, 37% year-to-date versus 2020, while basic earnings per share increased $0.19 to $1.13 per share in the quarter and increased by $0.73 to $2.75 per share on a year-to-date basis. We appreciate and value our entire team's incredible effort and ongoing commitment to adapt to changes in the business environment and focus on executing customer deliverables. Activity levels trended well, as demonstrated by our backlog levels. However, production schedules and supply chains are challenged and likely to impact availability and results in delivery date extensions.Additionally, we continued to monitor inflationary rates and economic factors, as the pandemic unfolds. Technician hiring remains top priority, grow our product support offering and meet demand. The diversity of our geographic landscape and market served, extensive product support and service offerings, the technology investments and financial strength, together with our disciplined operating culture continue to position us well. We are proud to continue to provide the essential services and solutions that our clients are looking for while remaining diligently focused on safeguarding our employees and protecting our business for the future. Mike, I'll turn it over to you for some more detailed comments on the group results.

[Michael Stanley Howie McMillan, Executive VP & CFO]

Tanks, Scott. Let's put a bit more color on the operating results, starting with the Equipment Group on Slide 5. Revenues were up 10% in the quarter, 17% on a year-to-date basis on strong equipment sales combined with higher product support and rental activity in most markets and regions. Total new and used equipment sales were up 16% overall in the quarter and up 30% year-to-date. Sales increased across most markets and regions in the quarter. However, some were lower than prior year on timing of equipment delivery and customer-specific orders. In the quarter, construction markets were up 5%, binding up 141%, power systems down 3%, material handling, down 4%, and agriculture effectively flat year-over-year.On a year-to-date basis, equipment sales were up across all markets, reflecting the pandemic effects last year. Rental revenues were up 6% in the quarter and 7% year-to-date. Most markets and segments were up, reflecting continued improvement in the market activity in the third quarter against a weak comparable last year. Light equipment rentals were up 9% in the quarter and 8% year-to-date. Heavy equipment rentals were down 2% in the quarter, however, we're up 22% year-to-date. Power rentals were up 30% in the quarter, 13% year-to-date and material handling rentals were up 36% in the quarter and 21% year-to-date.RPO revenues were down 28% in the quarter and 32% year-to-date on a smaller average fleet reflecting the recent customer preference for purchase versus an initial rental period. The RPO fleet was $37.3 million versus $42.4 million a year ago, and in both cases, well below more normal levels we'd operate at prior to the pandemic. Product support revenues grew 3% in the quarter and 7% year-to-date in both parts and service revenues in the majority of the markets and regions. Activity within construction markets was up 1% in the quarter and 8% year-to-date. Mining was up 2% in the quarter and 4% year-to-date. Material handling was up 16% in the quarter, 22% year-to-date, and agriculture activity was down 22% for the quarter and 9% year-to-date.Gross profit margins increased 170 basis points in the quarter and 60 basis points year-to-date compared to last year. Margins increased across all revenue streams, partially offset by unfavorable sales mix. Equipment margins were up 130 basis points in the quarter and 50 basis points year-to-date, reflecting strong demand. Product support margins were up 50 basis points in the quarter and 20 bps year-to-date, reflecting improved efficiency on higher volumes. Rental margins were higher by 80 and 100 bps for the quarter and year-to-date, respectively. These improvements reflect higher utilization as well as benefits from fleet adjustments, including selective dispositions and acquisitions over the last year. A shift in sales mix with lower -- a lower proportion of product support revenues to total revenues decreased margin by 100 bps in the quarter and 150 bps year-to-date. This is reflective of stronger comparative equipment sales in the year.Selling and administrative expenses in the quarter increased $9.6 million or 9% and $24.1 million or 8% for the first 9 months of 2021. Excluding the CWS booked last year, expenses were up 3% and 5% for the quarter and year-to-date, respectively. The increase is mainly attributable to higher compensation costs on higher staffing levels, annual salary adjustments and higher profit sharing accruals with higher earnings, partially offset by a lower mark-to-market adjustment on deferred share units. Other expenses such as travel and training increased in support of higher activity levels and after a reduced spending period. Allowance for doubtful accounts decreased $1 million in the quarter and $0.9 million for the first 9 months of the year on good collection activity.Operating income for the quarter and year-to-date was 25% and 37%, respectively, reflective of the higher revenue level, coupled with lower expense ratio, again, revenue improvement, outpacing expense growth. Bookings increased 45% in the quarter and 85% year-to-date across all sectors, except material handling, which was lower by 46% in the quarter. Mining led the way, up 268%, with several large orders, construction up 25%, power up 46%, and agriculture up 24%.Backlogs of $903.5 million or 253% higher than this time last year across all sectors. Approximately 40% of which are currently expected to be delivered this year and subject to timing, differences depending on vendor supply, customer activity and delivery schedules. Approximately 8% of the backlog is scheduled for delivery in 2023. Now let's turn to CIMCO on Slide 6.Revenues were down 5% in the quarter and up 25% year-to-date, mainly, due to lower package revenues. Supply chain and COVID-related restrictions have also resulted in deferral of some customer-specific construction schedules. That said, product support activity improved 10% in the quarter and increased 1% year-to-date, mainly reflecting a gradual increase in economic activity, as site restrictions started easing and demand in recreational centers increased in anticipation of re-openings for the winter season. Package revenues were down 16% in the quarter, with decreases in both recreation and industrial markets and up 50% year-to-date with increases in the recreational industrial markets for the quarter.For the quarter, package revenues in Canada were down 29%, reflecting lower industrial and recreational revenues. In the U.S., package revenues increased 57% on a smaller activity base with higher revenues in both industrial market and recreational markets. On a year-to-date basis, package revenues increased in both Canada, up 53% and in the U.S., up 37%, with increases in both recreational industrial markets in Canada across all regions and in the U.S.. Product support revenues increased in both the quarter, up 10% and year-to-date, up 1% versus last year. Revenues in Canada increased 10% in the quarter and remained relatively flat year-to-date, reflecting, as previously noted, the gradual increase in economic activity as site restrictions in most areas ease and demand, particularly in the recreational centers increase in anticipation of reopening for the winter season.In the U.S., the higher technician base continue to support activity levels, resulting in a 10% increase in the quarter and a 6% increase year-to-date, albeit on a smaller base. Gross profit margins decreased 320 basis points in the quarter and 460 basis points year-to-date versus last year. The decrease in gross profit margins in the quarter was due to lower package margins mainly due to certain larger projects and lower product support margins, partially offset by a higher sales mix of product support revenues to total revenues. On a year-to-date basis, the decrease was due to lower package margin combined with unfavorable sales mix of product support revenues to total revenues as well as slightly lower product support margins. Margins mainly reflect activity levels, their nature of projects in process and construction schedules, which are variable.Selling and administrative expenses were up 5% in the quarter and 9% year-to-date, reflecting higher spending to support future sales. Certain costs, such as travel and training were higher after a period of contained spending. Compensation increased on higher staffing levels, while occupancy costs increased related to facilities expansion. The allowance for doubtful accounts decreased on good collections, slightly offsetting the increased costs. Operating income was 47% lower for the quarter and down 19% year-to-date, reflecting lower package sales and lower margins, along with slightly higher expenses in the quarter. On a year-to-date basis, higher package revenues were more than offset by lower gross margins, partly due to lower product support mix and increased expenses.Bookings were $48.5 million in the quarter, up 22% versus last year. Recreational bookings were 200% higher on increased market activity in both Canada and the U.S. after a period of limited activity given the pandemic closures and restrictions. Bookings in industrial markets were 23% lower with reduced activity in both Canada and the U.S.. Year-to-date, bookings were $132.5 million, 35% lower than last year. Recall that several large industrial orders were received in Canada in the first quarter of 2020, resulting in a decrease in bookings compared to last year. Industrial orders were down 52%, with a decrease in both Canada and the U.S.. On a positive note, recreational orders increased 17% to $59.1 million, with increases in both U.S. and Canada. Backlogs of $153.8 million were 29% lower than the end of September last year, mainly related to progress against the relatively large industrial orders noted. We expect approximately 52% of this backlog to be realized as revenue this year. However, this is subject to construction schedules and potential changes stemming from the COVID-19 pandemic.On Slide 7, I'd like to touch on a few key financial highlights. Non-cash working capital reflects our team's focus and effective actions to proactively manage changes relative to activity levels and underlying demand. Management of our working capital receives keen focus, as we position the company for the future. Accounts receivable aging is trending well, as DSO remained flat at 46 days compared with Q3 of 2020. Inventory levels continue to be adjusted in light of market activity and were $164 million below prior year levels, which also were managed lower last year due to pandemic influences.Accounts payable reflect the timing of purchasing and the wind down of certain extended terms with suppliers, which is effectively complete. We ended the third quarter in a strong financial position with ample liquidity, including cash of $733 million and our net debt to capitalization ratio at minus 5%. Overall, our balance sheet is well positioned to support changes in demand as we emerge from the pandemic. Also of note, we participated in our NCIB program, repurchasing about 470,000 shares to-date. And finally, as announced, the Board of Directors yesterday approved the regular quarterly dividend at a rate of $0.35 per common share, consistent with the last quarterly dividend when it was increased by $0.04 per quarter or 12.9%.On Slide 8, we conclude with some takeaways, some key takeaways, as we look towards Q4 and 2022. We will continue to focus on our 3 key priorities, protecting our employees, serving our customers and providing our business and protecting our business for the future. We expect the business environment to remain dynamic with many variables at play for the remainder of 2021 and as we enter '22. A tone of caution is warranted given the inflationary factors, persistence of the pandemic, and response required as vaccination rates improve and restrictions ease. We continue to proactively monitor developments closely and refine our business practices appropriately.As discussed today, market activity was solid in the quarter. And similar to the first half of the year, unique customer buying patterns are evident relative to historic trends. Prime product and parts supply pressures were evident, including extended delivery dates due to supplier constraints. We continue to work actively with our business partners and suppliers on an ongoing basis, monitoring availability, delivery schedules and customer buying preferences. Across the organization, we are continuing to leverage the learnings from the past year with respect to cost structures and new ways to do business. Technician hiring also remains a top priority to meet demand and build our team for the future.Operationally and financially, we are well positioned to effectively respond to both customer requirements and market opportunities, leveraging our operating discipline and culture. Additionally, I'd like to comment on the outlook section where our mid-to-long-term prospects are described is being very optimistic. When we look at infrastructure work and mining activity relative to our backlog, I would emphasize, again, relative to our backlog, we are pleased. However, there are many variables in play relative to availability, inflationary costs and other economic factors. These considerations combined with the highly competitive environment mean, we need to earn the business. With this in mind, the statement should be understood and interpreted that we are encouraged with the backlog, but that, too, needs to be executed properly.The optimism noted is reflective of our large backlog at play over the medium to long-term, nothing more, nothing less. That concludes our prepared remarks. At this time we'll be pleased to take questions. Valerie, over to you to set up the first call, please.

[Operator]

[Operator Instructions] Our first question is from Cherilyn Radbourne with TD Securities.

[Cherilyn Radbourne, Analyst]

Scott to the extent that you have quite new equipment supply, can you talk about how you work with the team to flex the other levers that you have to satisfy demand like rental, used and rebuild?

[Scott J. Medhurst, CEO, President & Director]

Yes. Well, we're -- I mean it started to really creep in, in the quarter, some of those constraints. We are pleased, again, we've been sticking with those pipeline disciplines, which I think continued to pay off a bit in the quarter. We were fortunate, and we're working hard on our rental strategy. So the utilization was really improving in the quarter when you compare it to last year. So that was good. Our fleet uploads have been a bit of a struggle as well. But the good thing was the utilization really improved in the quarter, which was good. So that certainly adds to some of the outcomes.In terms of used equipment, I mean, we were down 11% in the quarter on the Equipment Group, but just to provide a little more color on that. That reflects the tight operating environment when it comes to low hour used equipment. So that was down as well as the RPO income. So again, we're operating in a bit of a unique environment with interesting customer buying behaviors. But still, we were able to -- when you talked about pulling levers, the team did a nice job continuing on with our strategy to work with customers on our different solutions in the used equipment environment. And our used purchases and trade revenues were actually up I think it was over 30% in the quarter. So that shows the team is working hard to work with customers on our used equipment solutions. So we're pleased with that.So those are some of the factors going on there. And then, of course, on the product support side, we're working hard in there. And the rebuild activity that increased on a unit basis. I think we're up 16% and on a revenue, about 14%. So there are some areas, the teams we're very pleased with some of the outcomes, but it is unique. When you see that RPO inventory down again, and it was soft last year. I mean we're down over 100% to where it normally is. And as you know, Cherilyn, that usually transcends into some strong conversions in Q4. So it is a bit different. And as we said in the last quarter, now we really kind of -- it really crystallized, there was a pull forward in buying behaviors in Q2.

[Cherilyn Radbourne, Analyst]

That's great color. As far as how the supply chain is operating differently in this upturn versus previous upturns. Can you help us understand that? Like is it specific models or use that are in short supply? Or is it a more diverse problem than that?

[Scott J. Medhurst, CEO, President & Director]

Yes. It's -- again, we -- I mean our new sales were strong, and I think that reflects how close we've been working with our supply partners on all fronts. But it's a bit diverse in there. When you look at it both on the aftermarket requirements as well as the prime product. It really crept in there in Q3. And you see it, our inventories are, as you know, Cherilyn, those inventory levels, they're down like 19% in the equipment group for this time of year, that's again, a bit unique. So we're working hard in there with this one, but there's constraints in there.

[Operator]

Our next question is from Bryan Fast with Raymond James.

[Bryan Fast, Equity Research Analyst]

Can we just get some color, I guess, on the landscape for technician hires? Understanding that it is competitive out there, but maybe just some high-level comments on how you're attracting talent.

[Scott J. Medhurst, CEO, President & Director]

We're making progress and -- which is good. And it's again, it's another trying to be disciplined in our approach throughout all our businesses. The headcount has increased, I'll call it nicely, could be better, but we're progressing. And we're working hard on our talking with various strategies relating to recruitment. But that's not just recouping, it's also working closely with our apprenticeship programs, and that's another key component of our strategy that we're heavily focused on.

[Bryan Fast, Equity Research Analyst]

And then just surrounding your comments on improving operational efficiency, and leveraging learnings from the past year. Could you just provide at a high level, some of those learnings that you expect could help going forward?

[Scott J. Medhurst, CEO, President & Director]

Well, we've learned how to operate a bit remotely. And we were fortunate in Q3 again, that operating leverage came through. What's still there. So now we're focused on that. We're going into planning sessions and what we've learned in terms of how we can operate a bit differently and really, in many ways, with technology, improve our customer interface and just doing a few things differently. But the operating leverage was still favorable in Q3. Things are opening up, though.

[Operator]

Our next question is from Michael Doumet with Scotiabank.

[Michael Doumet, Analyst]

Just a follow-up on that last question. I mean operating leverage seems to be getting better and better. I mean if you look at it from an SG&A as a percentage of gross margin, I mean, the company is essentially entering a new record territory. So you did talk about it a little bit there starting your last response, but just to get a sense, is it really just expense management post COVID? Or should I attribute it mostly to maybe some structural efficiencies in the business?

[Scott J. Medhurst, CEO, President & Director]

Well, we're always working on our structural efficiencies, and we're always working on our operating costs, while we invest in technology. So there's a bit of that in there. But also, like, we're fortunate in some things. I mean we're operating very disciplined, right? We're not -- I mean we've been able, and I'm really -- I couldn't be more proud of our team in adapting to this very complex environment. In the Q3, we saw inflationary costs start to creep in. We saw there's some economic risk there. So we're still cautious for sure. We're -- but we've been and the team has been executing, I would say, nicely. And we were fortunate in the way this operating leverage was positioned again in the quarter for multiple variables like you've outlined there.So things are opening a bit, and we're working hard to see how we can adapt with some of these and I'll classify them as best practices, but that still very much is work in progress.

[Michael Doumet, Analyst]

I mean maybe another way to think about it.

[Scott J. Medhurst, CEO, President & Director]

Well, again, we're fortunate in some areas, too. So we don't want to -- but we're working. The team is working hard in there to really work hard to execute with customers on the deliverables.

[Michael Doumet, Analyst]

That's great. And then I guess maybe the other way to think about it, I guess, again, just for us on the outside kind of looking in here. The Equipment Group margins are tracking essentially above where they were pre-WIP. And I understand maybe the integration is yet complete. But I'm curious if you can give any color here just as to whether the margin gap has mostly closed at this point? Or whether the margins maybe at the legacy regions are finding ways to decline higher versus pre-WIP? Just a little bit of color there between the regions would be great.

[Scott J. Medhurst, CEO, President & Director]

Well, again, we're in a bit of a unique environment. But in terms of the integration, I mean, we slowed a bit there with some of the unprecedented variables that took hold, with the largest part of the enterprise and then in the equipment group. We still haven't completed that integration. But I'd say we got, again, hats off to the team, applaud their execution. We've worked hard in there, particularly with that ERP integration. So we've really just finished year 1 of that. We're not finished yet actually totally there with material handling. But -- so I think that did contribute a bit.

[Michael Stanley Howie McMillan, Executive VP & CFO]

Yes. I think one part to think about, too, Michael, is if you look at the integration platform systems and stuff are progressing nicely. I think when you look at our business on the rental side, and we've talked pretty openly about this. As Scott mentioned, there is a little bit of a pause with the pandemic. We're about halfway through a 5-year cycle on the rental business that we talk to as far as getting to the full cycle productivity levels and the life cycle of the fleet in that business. And so we've got a couple of years left on that to realize the full returns on an aged fleet and when the disposals on things. So that is part of the equation yet to come, right, and specific to the rental side of the business as we develop that market in Quebec and the Maritimes.

[Michael Doumet, Analyst]

And maybe if I can sneak one last one. It's a short one. On the annuity purchase transaction closed in Q4, is that expected to lead to any sort of cost savings in subsequent quarters?

[Scott J. Medhurst, CEO, President & Director]

It's yet to be seen. I mean we'll take a small charge as we disclosed in the subsequent event note. And so I think we're working through a number of things on the pension side, just to economize. There'll be some small saves. I wouldn't say they'd be overly material. But certainly being able to annuitize some of the pension and relieve that liability, I think, is going to be a positive factor for us going forward in terms of just managing the liability and making sure their employees are taking care of on their pension benefits.

[Operator]

Our next question is from Maxim Sytchev with the National Bank Financial.

[Maxim Sytchev, MD & AEC]

Maybe if you don't mind, if we start with product support and the -- are there constraints on the parts side that is preventing maybe a bit of a more aggressive normalization on this line item? Or how should we think about this in terms of sort of a pent-up dynamic on PS?

[Scott J. Medhurst, CEO, President & Director]

Yes, a few variables in there, Max. We did start to feel constraints with aftermarket from -- but the other thing is customers are very busy. Their demands are high, which is reflective in some of these outcomes. So there could be a bit of pushing out some of repair schedules as well. The other factor is some of the mix in there on some of the dynamics. I mean the rebuilds were up. WIP is increased about 6% in the Equipment Group, so that's reflective of some of the outcomes as well. And so I think there's been -- with the shift in the last while to new, I mean, that impacts things a bit as well, in terms of the age of the units.The good thing is our unit sales were up again in the quarter. So there's a lot of different factors playing in there. And there was also a bit of a drag due to FX. If you look at it on a quarter-over-quarter basis in the parts area as well. So all those factors contribute to the outcome.

[Maxim Sytchev, MD & AEC]

But I guess, I know, obviously, you don't like to telegraph things on a prospective basis, but we should see continued improvement even though you are facing some constraints? Or how should we think about that?

[Scott J. Medhurst, CEO, President & Director]

With at the end of the quarter, we saw WIP increase. In this environment, I just -- it's very difficult with many variables in play, economically inflationary to really speculate. We're pleased with the activity. We're pleased with the machine hours increased slightly again in the quarter, which was good. And so we'll see how things play out here.

[Maxim Sytchev, MD & AEC]

And then just one last question. You became a bit more aggressive on the NCIB. Just curious to see your positioning on this particular capital allocation versus M&A? Or -- I mean obviously, you can do all of the above, but just curious right now in terms of how you think about allocation priorities.

[Michael Stanley Howie McMillan, Executive VP & CFO]

Good question, Max. Thanks for that. So I would say just out of the gate, I would say our capital allocation priorities haven't changed. We do monitor our cash flows and our liquidity very carefully, as you expect. We are expecting to deploy capital, as we've talked about for several quarters now back into the balance sheet, as equipment supply availability eases a bit. And I can easily see that we're going to start to fund our balance sheet and invest in our balance sheet to the tune of -- in excess of $200 million over time in our inventories, as an example. And we've talked about that pretty openly in the last few quarters.On the NCIB, we've -- what we've looked at is, with the cash position and so forth is just looking at just working towards dilution, reducing some of the option exercise dilution and equity dilution, nothing too aggressive, obviously. And so very selective program. And so you should expect that we're going to be very disciplined in terms of how we think about allocating our capital as we always have been.

[Operator]

Our next question is from Sabahat Khan with RBC Capital Markets.

[Sabahat Khan, Analyst]

Just, I guess, just following up on the discussion around product support. When you talk to some of your larger mining customers, I guess, is there -- when you try to talk to them about other options in lieu of new equipment is there any hesitation to get into the product support channel? Maybe spending 2/3 of the cost to do a rebuild versus just waiting on a new one. Just wanted to get a bit more color on some of the conversations you're having. And our customers are saying, you know what, I'll just maybe wait if I can get something in the next few months. I just want to understand how some of the discussions are going? And maybe does that vary across end markets?

[Scott J. Medhurst, CEO, President & Director]

Well, I'll just say we're in normal discussions with customers in terms of value. Those are value propositions when you look at the life cycle of iron. And so we continuously have those discussions and maximizing total cost of ownership as well as making sure productivity levels are where they need to be in availability. So those are somewhat complex value propositions that our teams are -- work on regularly with customers. Commodity prices are solid. Production is very important. So you get in discussions on timing of scheduled repairs. That can impact things a bit here. But overall, the other thing in this type of environment with some of the constraints, we're working closely with customers on demand signals and getting schedules in place and signals into our supply partners, as best we can to work through this in an orderly manner.

[Sabahat Khan, Analyst]

And then just, I guess, when we think about your commentary around hiring new technicians. When you generally look ahead over the next few months, do you think it's more an issue of the potential for headwinds? Is it more from maybe higher wages? Or is it just the sheer shortage of this qualified staff to bring into your facilities? What's kind of the dynamic out there in your specific markets?

[Scott J. Medhurst, CEO, President & Director]

Well, again, there's a lot of factors in play right now, which presents our tone a bit here, whether it's inflationary factors, economic risk, but also in the constraints. But in terms of technician, I mean we're -- we've improved this year on our position, which is -- we're pleased. We continue to focus on that area, I mean, recruitment, training and working closely with the schools. That's important. We continue to focus in those areas, particularly on the skilled labor. And I'd say we're progressing reasonably well. We can always do better. We feel from what we saw in the quarter, the demands are still there for the labor. And so we're going to continue to work hard on there on that front.

[Sabahat Khan, Analyst]

And then just one last one for me. Just I guess, broadly on the rental market. Can you maybe just share some thoughts on how you're just seeing the broader rental market evolve, as we come out of the pandemic? And just any comments on the progress of the battlefield banner in terms of market share or anything you can share on that front?

[Scott J. Medhurst, CEO, President & Director]

Yes. A good question. We are very focused on that area strategically. It's a growth area. We -- our fleet uploads were impacted, particularly in the last 12, 18 months. And so we're not where we want to be at those investment levels. And as hopefully things improve, we'll continue to allocate capital in those areas. Our fleet sizes. The good part was we saw great improvement in the utilization on all fronts, which was good. Heavy was a little softer, but still overall, strong, solid utilization, but those fleet size is not where they need to be. And -- but we're progressing. We saw on the light side, we were up I think 9%, I think. So that's good on higher utilization. Even power systems, very, very strong numbers in there and material handling very pleased with the team, material handling, how they've really improved the structure of that rental business. So that's good. So -- and we continue to be focused on our footprint. That battlefield we did expanded a bit this year, which was terrific on a strategic front.

[Operator]

There are no further questions registered at this time. I would like to turn the meeting back over to you, Mr. McMillan.

[Michael Stanley Howie McMillan, Executive VP & CFO]

Great. Thanks very much, Valerie. And thanks, everyone, for your participation today. That concludes our call. Please be safe, and have a wonderful day. Take care.

[Operator]

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.