General Finance Corporation
Q2 2017 Earnings Call Transcript

Published: 7 Feb 2017

[Operator:]

Welcome to General Finance Corporation’s Earnings Conference Call for the Second Quarter Ended December 31, 2016. Hosting the call today from the Company’s corporate offices in Pasadena, California are Mr. Ronald Valenta, Chairman and Chief Executive Officer of General Finance Corporation; Charles Barrantes, Executive Vice President and Chief Financial Officer, and Jody Miller, President of General Finance Corporation. Today’s call is being recorded and will be available for replay beginning at 5

[Chris Wilson:]

Thank you, operator. Before we begin today, I would like to remind you that this conference call may contain certain forward-looking statements. Such forward-looking statements include, but are not limited to our views with respect to future financial and operating results, competitive pressures, increases in interest rates for our variable rate indebtedness, our ability to raise capital or borrow additional funds, changes in the Australian, New Zealand or Canadian dollar relative to the U.S. dollar, regulatory changes, customer defaults or insolvencies, litigation, acquisition of businesses that do not perform as we expect or that are difficult for us to integrate or control, our ability to secure adequate levels of products to meet customer demand, our ability to procure adequate supplies for our manufacturing operations, labor disruptions, adverse resolution of any contract or other disputes with customers, declines in demand for our products and services from key industries such as the Australian resources industry or the U.S. construction and oil and gas industries, or a write-off of all or a part of our goodwill and intangible assets. These risks and uncertainties could cause actual outcomes or results to differ materially from those described in our forward-looking statements. We believe that the expectations represented by our forward-looking statements are reasonable, but there can be no assurance that such expectations will prove to be correct. For more details regarding these risks, please see the Risk Factors section of our periodic reports filed with the SEC and posted to our website at generalfinance.com. These forward-looking statements represent the judgment of the Company at this time, and General Finance Corporation disclaims any intent or obligation to update forward-looking statements. In this conference call, we will also discuss certain non-U.S. GAAP financial measures such as adjusted EBITDA. A reconciliation of how we define and arrive at adjusted EBITDA is in our earnings release and will be included in our quarterly Report on Form 10-Q. And now, I now turn the call over to Ron Valenta, President & CEO. Ron, please go ahead.

[Ronald Valenta:]

Thank you, Chris. Good morning and thanks for joining us to discuss General Finance’s results for the second quarter fiscal year 2017. As in prior earnings calls, I will begin with a brief discussion of our operations and then provide an update on our outlook for the remainder of the fiscal year. Our CFO, Chuck Barrantes will then provide a financial overview, and following his remarks, we will open the call for your questions. Also, joining us today for our question and answer session is Jody Miller who was recently appointed our president after serving as our Executive Vice President and CEO of GFN North America Leasing Corp. We're very fortunate to have someone of Jody’s caliber within our company and I’ve known him over a decade. He's extremely -- he has an extremely successful track record in the portable services and equipment rental sectors. Jody is exceptional talented and a proven leader in achieving operational excellence, superior sales results in high asset returns. He will continue to serve as a great mentor to the senior management team and employees at each and every level. Now on to your operational review. We are encouraged by our second quarter results as we delivered strong sequential growth from our first quarter exceeding our expectations in both of our geographic venues and giving us increasing confidence in the remainder of calendar year 2017. Our geographic expansion continued with the opening of six greenfield locations within our existing geographic footprint fiscal year to date all of which either are or by fiscal year end expected to be cash flow positive. We also completed two acquisitions in North America which added two more locations and one in the Asia Pacific area. Our North America leasing operations continued to experience healthy demand in the majority of its end markets and product lines, apart from the oil and gas sector where during the second quarter, non-oil and gas leasing revenues increased by 10% compared to the prior year’s second quarter. Additionally, most of our product lines in North America experienced higher average monthly units on lease and/or higher average lease rates during the quarter, which specifically led to a record quarter for leasing revenues of Pac-Van. Our ongoing favorable results and strong execution in our core North America portable storage business is in part driven by our strong commitment to providing superior customer service and as evidenced by our industry leading Net Promoter Score at Pac-Van which was 87% for the most recent quarter and 85% for the last twelve months. Our liquid containment business in North America had another challenging quarter on a year over year basis due to the lower level of drilling and completion activity in the oil and gas sector. With that being said, we are seeing signs of increased production activity in Texas and we achieved higher sequential fleet utilization during the quarter which averaged 44%, up from 39% in the first quarter and 37% during the fourth quarter of last fiscal year. In addition, we believe that the monthly lease rates have stabilized and in some instances have modestly increased. We remain focused on growing our business with new and existing customers in the basins that we serve benefiting from our high level of customer service and our safety record while others in the industry have had significant issues in both of these areas. We believe that as the industry continues to experience higher levels of activity, we are all well positioned to benefit and therefore return to the higher levels of profitability. Our North America manufacturing operations continued to be impacted by the lack of demand for new frac tanks and the start-up of new product lines. However we have made good progress in the marketing and production of our chassis and specialized blast resistant standard products and remain focused on making these steel based products commercially viable. We are optimistic that we will post improved financial results for the second half of our fiscal year both sequentially and on a year over year basis and we continue to monitor the situation at Southern frac. Now turning to the Asia Pacific region. In the Asia Pacific, total revenues during the quarter were down. However, leasing revenues increased by 15% from last year’s second quarter. With almost every end market experiencing year over year growth and was combined with a moderately favorable foreign translation effect between periods, sales revenue declined year over year largely driven by three large low margin sales in last year's second quarter that were not repeated this year. The Royal Wolf’s team continues to implement a number of growth initiatives and is focused on building upon its leasing market position across the region through a combination of organic growth, accretive acquisitions in greenfield openings. Now I'd like to discuss our company-wide outlook. On our first quarter call we stated that we expected consolidated adjusted EBITDA would be flat to increasing up to 10% in fiscal year 2017 from fiscal year 2016. Based on our year to date results and assuming the average exchange rate for the Australian dollar versus the US dollar remains at current levels for the remainder of fiscal year 2017, we believe that the consolidated adjusted EBITDA will be in the lower end of that range and that the consolidated revenues for fiscal year 2017 will now be in the range of $270 million to $285 million. This outlook does not take into account the impact of any additional acquisitions that may occur in fiscal year 2017. One of the main reasons that we're lowering our expected revenue range is that our original forecast included a meaningful amount of revenue at Royal Wolf from fleet sales of workforce accommodation camps that were previously used in the natural resources sector. It has taken longer than anticipated to sell these units and in some cases we are leasing them rather than selling them. So we have decided to remove a significant portion of sales revenue associated with these and other potential sales from the remainder of the fiscal year outlook. We do not expect much, if any, profit from contribution from these sales. To conclude, we remain focused on pursuing our long term growth opportunities, including significantly expanding our North American footprint and strengthen our market leadership in the Asia Pacific region. As always, we remain disciplined in our capital allocation, deploying our resources and capital where we see healthy demand and opportunity with the primary focus on affordable storage container and office container product lines. At this point, I'd like to turn the call over to Chuck for his financial review.

[Charles Barrantes:]

Thanks, Ron. We'll be filing our quarterly report on Form 10-Q shortly at which time this document will be available on both the SEC’s EDGAR filing system and on our website. And I encourage investors and other interested parties to read it as it contains a substantial amount of information about our company, some of which we will discuss today. Turning to our financial results. Total revenues were $72.3 million in the second quarter of fiscal year 2017 compared to $83.3 million for the second quarter of fiscal year ’16. Leasing revenues were $45.3 million and comprised 64% of total non-manufacturing revenues, compared to $44.1 million and 55% for the prior year’s quarter respectively. Non-manufacturing sales revenues were $25.4 million in the quarter, down from $36.7 in the second quarter of 2016. In our North American leasing operations, revenues for the second quarter of fiscal year 2017 totaled $40.7 million compared with $43.5 million for the year ago period, a decrease of 6%. Leasing revenues declined by approximately 3% on a year by year basis primarily as a result of a 40% drop from the oil and gas sector. However leasing revenues increased from all other sectors by 10% driven mostly by a large increase in the commercial sector, and as Ron mentioned, a record leasing quarter for Pac-Van. Revenues at our North American manufacturing operations for the second quarter were $1.9 million, including intercompany sales of $300,000 to our North American leasing operations. This compares to $2.6 million of total sales during the second quarter of fiscal year 2016 and negligible intercompany sales. In our Asia Pacific leasing operations, revenues for the second quarter fiscal ‘17 totaled $30 million compared with $37.2 million for the prior year period, a decrease of 9%. The decline in revenues occurred primarily in the transportation, construction and commercial sectors and as Ron mentioned earlier, was largely driven by last year's inclusion of three lower margins sales to freight customers of approximately $8 million that were not repeated this year. These declines were partially offset by the increase in oil and gas sector and were accompanied by approximately 5% favorable foreign exchange translation effect between the periods. In addition, as Ron also mentioned earlier, leasing revenues increased by 15% from the second quarter of last year. Consolidated adjusted EBITDA was $17.8 million in the second quarter of 2017, down from $18.9 million in the second quarter of 2016 but significantly up sequentially from $13 million in the first quarter of fiscal year ‘17. Adjusted EBITDA margin as a percentage of total revenues was 25% compared to 23% in the prior year’s quarter. In North America, adjusted EBITDA for our leasing operations was $10.9 million in the second quarter compared with a very strong $13 million for the year ago quarter. Included in these results were adjusted EBITDA for Lone Star of $1.2 million and $3 million for 2017 and 2016 second quarter period respectively. Our manufacturing operations on a standalone basis, adjusted EBITDA was a loss of approximately $0.5 million for the quarter, an improvement over the loss of approximately $1 million in the second quarter of 2016. Asia Pacific’s adjusted EBITDA for the quarter was $8.4 million as compared to $7.8 million in the year ago period, an increase of approximately 7%. On a local currency basis, adjusted EBITDA was up approximately 2% from the prior year’s second quarter. Interest expense in both the second quarter periods was $5 million. Interest expense was lower on a year over year basis in our Asia Pacific leasing operations due to both lower average borrowings in the period and a lower weighted average interest of 4.9% for the second quarter of this fiscal year versus 5.6% in the year ago period. However this was partially offset by a stronger Australian dollar between the periods. In North America, interest expense increased slightly due to higher average borrowings on a year over year basis and a slightly higher weighted average interest rate of 5% as compared to 4.8% in the second quarter of last year. Net loss attributable to common shareholders in the second quarter of 2017 was $0.6 million or $0.02 per diluted share compared with net income attributable to common shareholders of $100,000 or breakeven per diluted share in the prior year period. Both periods include a reduction of $922,000 for the dividends paid on our preferred stock. For the first six months of fiscal year 2017 we generated free cash flow before fleet activity of $6.7 million which was impacted by an $11.3 million reduction in cash flow due to timing and collection of trade receivables and satisfaction of payables, accrued liabilities and other revenues. These working capital items reduced cash flow by $20.6 million when comparing fiscal ’17 with fiscal year ’16 as they positively impacted cash flow by $9.3 million in last year's first half. Historically we have experienced significant variations in operating assets and liabilities between periods when conducting our business in due course, so this is not unusual per se. Free cash flow for the first six months of fiscal year [2017] was $24.8 million. As a reminder, we define free cash flow to be cash from operating and investing activities adjusted for changes in non-manufacturing inventory, net fleet CapEx and business from recent acquisitions. For the first six months of fiscal year 2017, the company invested a net $15.1 million in the lease fleet consisting of $7.1 million in North America and $8 million in Asia Pacific, as compared to $17.3 million in net fleet investment in the year ago period, $11.8 million of which was in North America and $5.5 million in Asia Pacific. Turning to our balance sheet. At December 31, 2016 the company had total debt of $361.4 million and cash and equivalents of $6.4 million, with a net leverage ratio of six times for the trailing twelve months. This compares with $352.2 million and $9.3 million at June 30, 2016 respectively, which equates to a net leverage ratio of 5.6 times. Receivables were $46.7 million at December 31, 2016 as compared to $38.1 million at June 30. Days sales outstanding and receivables at December 31, 2016 for our Asia Pacific and North American leasing operations increased from 36 to 56 days and 49 to 54 days respectively since June 30. December 31, our Asia Pacific leasing operations had in Australian dollars 11.6 million available to borrow under its $150 million credit facility and our North American leasing operations had $9 million available to borrow under its $232 million credit facility. We are pleased with our Royal Wolf’s recent successful refinancing of the Australian $100 million facility, a portion of its credit facility extending its maturity date by five years to January 2022. Our North American credit facility is also in the process of being refinanced which we expect to have completed at or near the end of our fiscal third quarter and in any event well ahead of the current maturity date in September 2017. This now concludes our prepared comments. And I would like to turn the call back to the operator for the question and answer session.

[Operator:]

[Operator Instructions] Our first question comes from Brent Thielman with D.A. Davidson.

[Brent Thielman:]

Good morning. Just on the shift in revenue outlook for the year, if I heard you right, you had some sales at Royal Wolf that may not transpire as originally anticipated. What does your exposure look like now to the natural resources sector in Asia-Pac and is this kind of more of a one-off type of situation that in terms of this move-out revenue?

[Charles Barrantes:]

Yeah. So we had two things that we’d forecasted, and then in comparing to the prior quarter. First of all, we had these accommodation units out of the sector that we thought we would be selling faster than we have. And when we are moving fleet, we are tending to lease it more than selling. So the negative is we're not going to sell as much. The positive is actually going out on lease. So that's actually favorable long term and actually puts us in a better position but in the short term we don't think we'll see the sales that we thought, as well we were forecasting it at a very minimal margin. So it really doesn't affect our EBITDA as much as it does, just the top line. And then your question on how much exposure, so we've ever had this little exposure to it and it's less than I think it's probably 10% of the whole.

[Ronald Valenta:]

Yes, it’s probably 5% thereabouts, so, on the oil and gas sector, not in the Asia Pacific area.

[Brent Thielman:]

And then, Ron, any thoughts on -- obviously we’re starting to see Permian pick up in terms of activity, thoughts on customer feedback, inquiries in the frac tank products. But then I guess, a follow-up question that would be, have we or when will we start to see kind of the bottom of this challenging pricing environment to your particular assets?

[Ronald Valenta:]

Yes, so we have -- as I announced a little earlier we have Jody -- he's been kind enough to come out and visit with us today to be able to join us on this call. So that matters relates to the oil and gas, the downturn and whether we're coming off of it and the impact that we're seeing, I think Jody would probably be the better one of the group to answer that.

[Jody Miller:]

Thanks, Ron. Yeah, I think we definitely see more optimism coming in the future, the utilization kind of hit bottom and we've seen steady increase and that's actually picked up nicely over the last thirty days or so as well. And I think Ron's mentioned the last couple of calls that we foresee utilization going up and rates would follow that. So I think it follows the activity level and as the units go back out, we'll see rates stabilize, we’ll start to increase.

[Charles Barrantes:]

Yeah, Brent, this is Chuck. So we’ve seen sequential growth these last couple of quarters, primarily at Lone Star but also Pac-Van. But it's going to be utilization creeping up first and then rates and we look at the second half, and while we're cautiously optimistic, we're still very conservative in terms of our approach of how we're looking at the oil and gas sector. WTI has been solid, been over fifty for the last couple months and so on and so forth. But as of right now it's increasing but not as large as people would normally think. So it’s still very competitive out there.

[Brent Thielman:]

And then I guess, last one for you Chuck, in terms of that credit facility, kind of what are the next steps with the lenders here and I guess, just curious your borrowing capacity down here temporarily, it looks like capacity, do you really need to run the business day to day?

[Charles Barrantes:]

Well, if it's stayed day to day our capacity that we have right now is very sufficient but we look at it in terms of opportunity loss, we want to get capacity up because we're an acquisitive company. So we don't want to miss out on business opportunities. But to specifically answer your question we are more than adequate on a day to day basis with the capacity that we have here in North America.

[Operator:]

Your next question comes from the line of Scott Schneeberger with Oppenheimer.

[Unidentified Analyst:]

Good afternoon everyone. This is Greg on for Scott. Within your Asia Pacific operations you noticed some softness in transportation, construction and consumer end markets. Just wonder if you could touch upon the drivers behind this and how you expect this to trend moving forward?

[Ronald Valenta:]

Yes, on the transportation side, I think we’re seeing a lot less volume than historically, so I don't think we're expecting much growth there on the construction side. We've always been under-weighted and so even when that market’s contracting we never thought we'd have enough capital allocated to that sector. So we'll continue to do, as an overall it is slower, flattish I'd say but I think specifically on the construction side, we have some real upside there. And I think that we addressed the mining part earlier on the Davidson question.

[Unidentified Analyst:]

Perfect. Thanks for that. And just wondering if you could give us some additional color on the greenfield locations you opened in the quarter.

[Jody Miller:]

Yes, this is Jody, and I think we're very happy with the results so far. All of our cold starts from last year are accretive to the Pac-Van side, we had additional cold starts this year and each of the four are on plan or above plan for the year. So we're very happy with the progress.

[Operator:]

Thank you. Your next question comes from Greg Eisen with Singular Research.

[Greg Eisen:]

I wanted to ask about maybe -- operations in the Asia Pacific market specifically. First, you had these non-recurring low margin sales last year and you didn't see it repeat in this quarter, and that was one reason you called out. How much is left from last year at Royal Wolf in terms of low margin sales that will not recur in Q3 and Q4? How much of a headwind do you have just from that?

[Charles Barrantes:]

Well, last year for sure we had three large sales about $8 million which was single digit and I believe they had estimated for the back half with probably an additional 5 million which I think they’re conservatively forecasting are not going to be there. But all of these, so $13 million to $15 million are low margin sales, that we don’t anticipate happening. So I guess that would be the headwind coming from last year.

[Greg Eisen:]

So about 5 million is left that won't repeat?

[Charles Barrantes:]

Probably, probably.

[Ronald Valenta:]

And now that you asked the question, just to understand the low margin sales, so we traditionally would not do them but in most cases they are customers that maybe receive from us and it's sort of required part of the overall service, so we'll do them. If we had our own brothers we probably wouldn't and they're not consistent, we sort of artificially alter our numbers, and that's why we would prefer not to do them but it's a matter of maintaining relationships, we know we obviously have done and we will continue to. And as Chuck has alluded to, we're not forecasting anything in the second part of the period.

[Charles Barrantes:]

The other thing that's impacting the back half and really fiscal full year is we anticipated as Ron had mentioned mining camp sales, somewhere in the vicinity of $13 million to $15 million. These we expected very little, if any, EBITDA profit on it so -- but it does have an impact of reducing our revenue forecast. So those are things that would impact probably some of the revenue differences that you are seeing from last year to this year.

[Greg Eisen:]

Right. But you actually showed an improved margin percent by not experiencing those sales?

[Charles Barrantes:]

That is correct. As a matter of fact, some of these mining camps guess are not selling, they’re actually going on lease, so you do have a nice pickup on EBITDA but the total revenue number is substantially down.

[Greg Eisen:]

Got it. We operate based on EBITDA, I understand that. Continuing on with the Asian operation, tell me if I'm wrong but somewhere between the press release and your comments, like I'm under the impression that the activity and actually results or demand in the oil and gas sector in Asia Pacific was up for the quarter year over year versus the United States, obviously down 40% in leasing. Did I read that right? And why would that --

[Ronald Valenta:]

Yes, and the reason -- one of the primary reasons is one of our large customers a couple years ago, maybe a year and half, couple years ago went into the receivership and we have been receiving actually proceeds from them. Royal Wolf will have their press release coming out later today but about a million and a half of the leasing revenues in the Asia Pacific relates from the collectability of these Titan receivables from receivership. So that helped out a lot. One thing, we had officially -- that it’s really shifted between the back half and the first half, we’d expect to receive these, just so happens we didn’t expect it in the second quarter.

[Greg Eisen:]

Yes. I remember reading about the Titan. Yes, I understand that. And then sticking with the oil and gas business for a minute, could you talk about how -- it sounds like you're seeing signs that demand is picking up in the drilling and production activity, especially in Texas. Do you have -- could you describe how long the time lag might be from when your customers or their customers, I should say, one or the other, start showing up onsite to when you start getting workorders or requests for equipment? Where are you in the timeline, in terms of their process to -- if they start digging holes in the ground again and working the old holes, do you immediately see demand or does it take a month, couple of months? Any idea what that would be?

[Jody Miller:]

So I think as Ron mentioned in the past calls, we're really focused on the completion and production side. So the drilling side we do some business with the drilling side but not as much. So it really does depend on the company, some people go ahead and track and produce out of those wells fairly quickly within a month or so, and others cap them and wait some time before they produce out of those well. But we definitely think an activity increase over the last month or two and foresee that continuing steadily going the next quarter or so as well. Does that answer that your question?

[Greg Eisen:]

That does, that does. I'll get back in the queue and let someone else go. Thank you.

[Operator:]

[Operator Instructions] Our next question comes from the line of Brian Gagnon with Gagnon Securities.

[Brian Gagnon:]

Hi, it’s Brian and Neil. Can you give us an idea what you're seeing on pricing for containers? And then I'd also like to discuss also on the greenfield side, how many terminals do you have today? How many do you add in ‘16 and plan to add for the balance of this year? And then, what are your thoughts for the following fiscal year?

[Charles Barrantes:]

But let me historically answer what we've got right now. So you talk about specifically North America.

[Brian Gagnon:]

Yes.

[Charles Barrantes:]

When you mean by terminals, you mean branches?

[Brian Gagnon:]

Yes.

[Charles Barrantes:]

We've got as of the end of December, 55 branches, three in Canada, 52 in the US. During the fiscal year we added four greenfields

[Ronald Valenta:]

And I think again we’ve had success with the greenfields in the past and I think consistent future growth would be, what we're thinking we had four last year and four this year.

[Brian Gagnon:]

Jody, welcome. Can you give us your thoughts on do you want to accelerate this growth of greenfields? Is it better in your opinion to do greenfields, or acquisitions, or does it just depend?

[Jody Miller:]

Yeah, it really does just depend on the market. We really like the hub and spoke model where we can support the greenfields out of other locations to keep the low cost overhead and then ideally growing into a full-fledged location over time. So we're selective in our greenfield expansion but we definitely see it is a positive strategy and will continue to do so. And then as far as acquisition, it really does depend on what comes in and what we can find and then we react accordingly.

[Brian Gagnon:]

And then thoughts on pricing?

[Jody Miller:]

So the pricing continues, I think we would say, we're following the industry as far as pricing or steady increases in the pricing. And I think Ron mentioned earlier it was a record quarter for Pac-Van on lease revenue which is exciting as well. So I think it will be very consistent going forward.

[Ronald Valenta:]

And I could tell, Neil or Brian -- but in terms of going forward, so I mean we consistently expand, over the year we’re going to try to have 6 to 10 and that's greenfields and/or acquisition. And the current fiscal combined with Asia Pacific, we’ve done nine now. So we're right in the range of what we think we would do it annually. Of course if other opportunities came up, we could exceed ten but generally we’re still good quoting six to ten number and we're currently at nine for the year.

[Charles Barrantes:]

Since, Brian, you had asked something about on pricing and rates in our containers in North America. On rate it increased in Q2 to from Q1. So our average rate was 1.29 compared to 1.21 in Q1, and then for the office containers, the GLLs increased to 3.27 from 3.07 in Q1. So pricing is very strong in our core business.

[Brian Gagnon:]

Okay. I know this will be a more challenging question, but in a time when we're seeing bottoming and beginning to start to see increase in utilization, can you give us any -- I hate this word -- can you give us any color on monthly trends, on how it's gone from your bottom to where you are today in utilization in the oil and gas side?

[Charles Barrantes:]

Yeah, so just on the utilization and this is, would be for Lone Star, where we have most of our capital deployed in the two basins of note, Eagle Ford and Permian, so at the end of our Q1 we were at 32% and that's moved to 37, and we have been capping the 40 number here and there since then. So we're seeing steady utes. I think we would be happy to see 300 to 500 basis points move in utes each quarter. And then as we said consistently before, once utes move up probably 70% to 80%, then we think you would start then seeing our rental rates move up after that. Well, not only our utes, but obviously the sector utes. But we’re sort of a mirror reflection of the balance. So we're definitely in a better spot. Not even as fast as any of us would like, but that’s sort of where we are and where we think we’re going.

[Brian Gagnon:]

And Chuck, you went quickly through this. And I obviously don't write as fast as I used to. The Lone Star EBITDA, I think you gave numbers on that. What was it in this quarter and in the first quarter?

[Charles Barrantes:]

So hang on, $1.2 million is the EBITDA number for the quarter, this quarter and it was $1 million last quarter. So compared to $3 million last year. So it’s moving up sequentially, though, no matter how fast relatively we’re going to go up.

[Brian Gagnon:]

Well, I would assume that as activity picks up, it's a several-month lag before you start to see RFPs and orders coming in for equipment. So the price improvement that we saw in oil price in the fourth quarter won't necessarily begin to hit your business until you get to Q1, Q2 of calendar year.

[Charles Barrantes:]

That’s reasonable, Brian but in this sector it can increase pretty quickly. So we’ve been seeing sequential growth.

[Jody Miller:]

I think definitely our customers are giving us a lot more optimistic view and we definitely are coming out of the bottom and as Ron and Chuck mentioned earlier I think the quarters to come will have less steady growth for sure.

[Ronald Valenta:]

And again we're definitely yield focused on everything we do. So the biggest impact to yield for us is going to be rate, not necessarily ute, not that we’re complaining about increased utilizations but rates are going to have the biggest determining impact to yield.

[Operator:]

[Operator Instructions] Our next question comes from Jack Silver with Siar.

[Jack Silver:]

Great job this quarter, actually, great trend. I want to pick up on what a lot of other people have been talking about. And again, I want to get -- I'd like you to give us a better idea of exactly how you're positioned to re-establish yourself when you bought the business, and of course performed extraordinarily. In terms of both people and equipment, obviously, when the business fell out of bed, a lot of people left the industry and I'm not sure what you did with your equipment. So, there are all sorts of forecasts regarding what the price of oil will be, and there's been a general indication that the frackers can move very quickly. Historically, they have been able to do that very quickly and the rig counts have been moving up. How quickly will you be able to respond in terms of having your people and the equipment available, and how are you positioned relative to the competition? You said earlier that it was still pretty competitive. Have the competitors to a great degree dropped out, and once there is the increase in business, will the remaining competitors be very well positioned?

[Ronald Valenta:]

So I will start, and I think we're in great position, we have a great reputation in the marketplace. Lone Star has always been a premier supplier and we continue to invest in our safety and service through the downturn. So our equipment’s in good shape. We've got equipment setting available, so I think we can react very quickly. As far as the hiring people side of it, again we are very well connected in both of those markets and have a good steady supply of candidates, because we are a very good employer and been able to weather the storm where a lot of the others have not. So I think as the uptick happens, we are proactive in all cases to make sure that we can service our customers and our service levels stay high, including safety. And so I think we're positioned very very well for the future.

[Operator:]

We have a follow-up question from the line of Greg Eisen with Singular Research.

[Greg Eisen:]

Thanks, again. Are you willing to share with us what the revenue contribution was for the quarter and for the year to date from the acquired operations? Was it material or anything that you could disclose?

[Charles Barrantes:]

It's not material. So I would -- we disclosed the purchase -- are you talking about the current year acquisitions?

[Greg Eisen:]

Yeah.

[Charles Barrantes:]

We disclosed the purchase price and we say that we are somewhere around six times EBITDA. So you could probably gather what the impact would be assuming a reasonable EBITDA rate on revenues.

[Greg Eisen:]

That makes sense. And going back to Australia again, and the mining business itself, is there any probability that the demand for those accommodation units and the whole Australian mining industry can come back to life any time in our lifetime? Is this essentially a one-way door?

[Charles Barrantes:]

Yours is lifetime certainly longer than Ron --

[Ronald Valenta:]

But anyway, so we would like to think so but we generally don't sit waiting for things to happen. So we had tried to move these units into a lot of different sectors. So we're not only waiting for mining in our accommodations. So the fleet is moving throughout not only Australia but we actually moved some fleet to New Zealand. So it does have other applications and it does have several applications at the construction sector as well. So the mine would be the best answer for us because it requires the least amount of work, we’re assuming as we usually do, worst case that it won't. And we’d certainly be ready for it if it happened but we are moving fleet again a little bit slower than we'd like into other sectors and other venues to move it. So again we're not really waiting for mining to turn, so I would like to think, at least in my lifetime, I can’t speak for Chuck, that, that fleet will get either sold or utilized in and the positive actually, though, it appears negative, is we thought we’d sell those fleet out for a negligible margin if any. And the truth is we are leasing it out, again slower than we'd like but longer term for us that is the better answer. End of Q&A

[Operator:]

There are no further questions in the queue at this time. It’s now my pleasure to hand our program back over to Ronald Valenta for any closing remarks.

[Ronald Valenta:]

We would like to thank you for joining our call today. We appreciate your continued interest in General Finance Corporation and we look forward to speaking to all of you in the next quarter. Thank you.

[Operator:]

Ladies and gentlemen this does conclude today’s conference call. You may now disconnect your lines.