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Executives

Geoffrey Buscher – SBG Investor Relations

Keith Pratt – Senior Vice President, Chief Financial Officer

Dennis Kakures – Director, President, Chief Executive Officer

Analysts

Scott Schneeberger - CIBC World Markets

David Gold - Sidoti

Jamie Sullivan - RBC Capital Markets

McGrath RentCorp (MGRC) Q1 2008 Earnings Call May 8, 2008 5:00 PM ET

Operator

Welcome to the McGrath RentCorp first quarter 2008 conference call. (Operator Instructions) Now I'd like to turn the conference over to Geoffrey Buscher of SBG Investor Relations.

Geoffrey Buscher

I'm the Investor Relations adviser to McGrath RentCorp and will be acting as moderator of the conference call today. On the call for McGrath RentCorp are Dennis Kakures, President and CEO, and Keith Pratt, Senior Vice President and CFO.

Please note that this call is being recorded and will be available for telephone replay for up to 48 hours following the call by dialing 18004052236 for domestic callers and 1-303-590-3000 for international callers. The passcode for the call replay is 11111984.

This call is also being broadcast live via the Internet and will available for replay. We encourage you to visit the Investor Relations section of the company's website at MGRC.com.

Our press release was sent out today at approximately 4:05 Eastern Time or 1:05 Pacific. If you did not receive a copy but would like one, it is available online in the Investor Relations section of our website or you may call 12066529704 and one will be sent to you.

Before getting started let me remind everyone that the matters we will be discussing today that are not truly historical are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, including statements regarding McGrath RentCorp's expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements are based upon information currently available to McGrath RentCorp, and McGrath RentCorp assumes no obligation to update any such forward-looking statements.

Forward-looking statements involve risks and uncertainties with could cause actual results to differ materially from those projected. These and other risks relating to McGrath RentCorp's business are set forth in the documents filed by McGrath RentCorp with the Securities and Exchange Commission, including the company's most recent Form 10-K and Form 10-Q.

I would now like to turn the call over to Keith Pratt.

Keith Pratt

In addition to the press release issued today, the company also filed with the SEC the earnings release on Form 8-K and its first quarter 2008 Form 10-Q.

For the first quarter 2008, total revenues increased 8% to $65.4 million from $60.8 million for the same period in 2007.

Net income increased 10% to $10.3 million, or $0.43 per diluted share, from $9.3 million, or $0.37 per diluted share for the same period in 2007.

Reviewing the first quarter results for the company's Mobile Modular division, Mobile Modular total revenues increased $0.6 million or 2% to $35.8 million from the same period in 2007 due to $1.9 million higher rental and rental-related services revenues, partially offset by lower sales revenues during the quarter.

Gross profit on rents increased $1.4 million, or 9%, to $17.2 million due to higher rental revenues. Rental revenues increased $2.1 million, or 9%, over 2007 while rental margins were unchanged at 66%.

Selling and administrative expenses increased $0.5 million, or 7%, to $6.9 million from $6.4 million in the same period in 2007.

The rental revenue increase resulted in an increase in pre-tax income of $0.5 million or 5% to $11.7 million for the first quarter 2008 from $11.2 million for the same period in 2007.

Finally, average Mobile Modular rental equipment for the quarter was $451 million, an increase of $39 million from the first quarter of 2007.

Average utilization for the first quarter increased from 81.3% in 2007 to 82.5% in 2008.

Turning next to first quarter results for the company's TRS-RenTelco division, first quarter total revenues increased $3.3 million, or 14%, to $27.8 million compared to the same period in 2007 due to higher rental and sale revenues.

Gross profit on rents increased $1.6 million, or 20%, to $9.6 million as compared to 2007.

Rental revenues increased $2.8 million or 15% as compared to 2007, and rental margins increased from 41% to 43%.

Selling and administrative expenses increased $1.1 million, or 24%, to $5.9 million from $4.8 million in the same period in 2007.

Pre-tax income increased $0.9 million, or 21%, for the first quarter 2008 to $5.2 million from $4.3 million for the same period in 2007 primarily due to higher gross profit on rental and sales revenues.

Finally, average electronics rental equipment at original cost for the quarter was $235 million, an increase of $44 million from the first quarter of 2007.

Average utilization for the first quarter increased from 66.6% in 2007 to 68.8% in 2008.

On a consolidated basis, interest expense for the first quarter 2008 decreased $0.1 million to $2.5 million from the same period in 2007 as a result of the company's lower average interest rates, partly offset by higher average debt levels.

The first quarter provision for income taxes was based on an effective tax rate of 39.2%, which was up slightly from the first quarter 2007 rate of 39%.

Next, I'd like to review our 2008 cash flows.

We continue to generate strong cash flows to invest in our business and return value to our shareholders. For the three months ended March 31, 2008, highlights in our cash flows included net cash provided by operating activities with $25.6 million, an increase of $9.2 million compared to 2007. The increase was primarily attributable to the reduction in accounts receivable and improved operating results in 2008 partly offset by other balance sheet changes.

We invested $21.6 million for rental equipment purchases, partly offset by $5.4 million in proceeds from used equipment sales.

Dividend payments to shareholders were $4.4 million.

Net borrowings increased $21.1 million from $197.7 million at the end of 2007 to $218.8 million at the end of the first quarter 2008.

We continued to have a solid, low-leverage balance sheet.

During the first quarter 2008, the company repurchased 968,746 shares of common stock for an aggregate repurchase price of $21.9 million for an average price of $22.61 per share. There were no repurchases of common stock in the first quarter of 2007. At this time, 210,878 shares remain authorized for repurchase.

For 2008, first quarter adjusted EBITDA increased $3 million, or 10%, to $34.3 million compared to $31.3 million in 2007 with consolidated adjusted EBITDA margin of 52%. Our definition of adjusted EBITDA and a reconciliation of adjusted EBITDA to net income are included in our press release and Form 10-Q for the quarter.

Turning next to 2008 earnings guidance, at this time, based on first quarter 2008 results and our outlook for the remainder of the year, we are reconfirming our full year earnings per share guidance to be in a range of $1.72 to $1.82 per diluted share.

At this point I would like to turn the call over to Dennis.

Dennis Kakures

Let's begin with some color on our Modular rental business for the quarter. I was very pleased with our 9% increase in rental revenues, our main driver of earnings growth, to $25.9 million for the first quarter 2008 from a year ago. This increase is primarily related to classroom and commercial building shipments in the second and third quarters of 2007. We should experience a full 12 months of rental revenues in 2008 on a large number of these orders.

The favorable increase in quarter-over-quarter rental revenues was chiefly due to strong classroom rental growth during the second and third quarters of 2007 in Florida and Texas.

In Florida, the popularity of our Campus Maker classroom product, [half-size] reduction and the phasing out of older model code portable classrooms continues to support our educational business growth.

In the Texas market, we are benefiting from opportunities in both modernization and student growth.

During the first quarter we saw favorable educational booking levels for the 2008-2009 school year in California, Texas, and Florida classroom markets. Keep in mind that the great majority of the classroom rental orders booked during the first quarter and those that will be booked during the second quarter will not ship and begin billing until the third quarter of 2008 and virtually all of these orders will be multiyear transactions.

For the first quarter of 2008 our residential construction rental booking activity in the California market saw significant weakness in new order activity. Keep in mind that residential construction represents less than 4% of companywide annual rental revenues historically.

We also saw lower demand and a more competitive environment for new non-residential construction projects in California that utilize singlewide modulars. However, we are seeing healthy demand for larger, nonresidential construction projects in California emanating from $30 billion in bond measures passed in late 2006 for the building of wastewater treatment plants, dams, levies and other infrastructure. The additional good news about these engineering-type projects is that they typically utilize larger modular buildings and have multiyear rental terms.

Commercial business activity in the Texas market continued to be favorable during the quarter and is supported by a strong oil industry sector.

In Florida we saw a marked increase in both commercial opportunities and booking levels during the first quarter of 2008 compared to prior quarters. We continue to be excited about the long-term opportunities to grow our commercial rental business in the Florida market.

For clarity purposes, we define our commercial rental business for modulars as everything other than education. In other words, it includes office, display and workspace for residential construction, nonresidential construction, commercial and industrial businesses, the petrochemical industry, health care and a very large mix of other specialty needs.

In our newest markets, North Carolina and Georgia, we are focusing our efforts during the first half of 2008 mainly on marketing our classroom products and services to the educational community. There is a significant amount of pickandshovel work to be done with decision makers in getting the Mobile Modular brand established in these markets. Although we are pleased with the reception we've received in the market to date, it will take time to gain traction and produce material results from these new geographic investments.

At the end of the first quarter, utilization of our Modular fleet stood at 82.3% compared to 81.5% a year earlier and 82.8% at the end of the first quarter of 2007. The higher first quarter 2008 over first quarter 2007 utilization level is primarily due to increased educational rentals in Florida and increased educational commercial rentals in Texas. The reduction in utilization levels from the fourth quarter of 2007 relates mainly from weakening residential construction demand in California.

Finally, we had a solid quarter-over-quarter increase in gross profit on rents of approximately 9% to $17.2 million, with gross margin on rent at a healthy 66%, the same as a year ago.

Enviroplex, our wholly owned California classroom manufacturing subsidiary, had revenues of approximately $1.8 million during the first quarter of 2008 compared to $1.1 million a year ago. Enviroplex's backlog stood at $13.5 million at the end of the first quarter versus $7.2 million at the end of the first quarter last year.

Glen Owens, our new leader of Enviroplex, has done a very good job in business development and overseeing plant operations in the short time he has been in the role.

We are looking forward to the conversion of the backlog in the sales revenues over the next few quarters and maintaining a healthy flow of new opportunities going forward.

Now let's take a closer look at TRS-RenTelco, our test equipment rental division.

TRS-RenTelco had a strong increase in rental revenues of 15% to $22.3 million from $19.5 million a year ago. We benefited from favorable market demand across a fairly broad base of customer segments, including communications networks, aerospace and defense applications, and semiconductor and consumer electronics product development and manufacturing.

Although our average monthly rental rate declined to an average of 4.6% for the quarter, this was in line with our expectation. The biggest contributing factor during the quarter was the competitive market environment and our push to gain market share.

At the end of the first quarter, utilization stood at 68.4% compared to 66.9% a year earlier. A higher utilization level was driven by a healthy rental marketplace as well as improvement in our sales of earlier generation test equipment inventory.

Gross profits on rents increased 20% to $9.6 million for the quarter compared to a year ago. In addition, gross margin on rents increased to 43% versus 41% last year. Higher rental revenues and lower depreciation and direct costs of rental operations as a percentage of rents drove the higher margin level.

Going forward, we strive to increase gross profit and gross margin on rents as we grow our business levels, better manage our asset pools, and create greater leverage of our centralized sales and equipment processing infrastructure.

Now for some additional comments regarding our EPS results in Q1 and outlook for 2008.

As we've stressed over time, the best gauge of health of the company is the growth of rental revenues and gross profit on rent and maintaining favorable gross margin on rent levels. Our first quarter result reflects solid performance on these metrics.

We also benefited from a lower increase in SG&A [expenditure] in the quarter then forecasted. This is mainly due to various new or replacement positions not having been hired to date or being hired later in the quarter than initially planned.

We also had lower borrowing costs than budgeted due to the Fed's recent key interest rate reductions.

Finally, our EPS for the quarter benefited favorably by approximately $0.02 per share from our buyback of over 1.7 million shares since late 2007.

On the strategic front, we mentioned on our earnings call in February that we would be speaking later in the year about two new initiatives that we're launching in 2008. One of those initiatives is our launching and renting portable storage units under our Mobile Modular trade name. We're initially incubating this effort out of our Northern California modular inventory center at Livermore and plan on rolling it out in each of our regional sales and inventory centers over the next few years.

We believe that we can be highly successful in the rental of portable storage units over the long term for the following reasons:

One, we believe that there are favorable customer-based synergies with a large number of our modular building rental market segments.

Two, we believe that even though it's a steel box, there's room to innovate and improve the product.

Three, we believe that when portable storage rentals are incorporated into our regional sales and inventory center overhead structure, supported by a large installed customer base, that we can achieve better economics and a broader coverage area from single locations than today's operators.

And four, due to the highly fragmented number of operators in this rental space, we believe that we will have the opportunity to acquire various smaller providers, rental assets and income streams at favorable valuation as we move forward.

To date, we've purchased a variety of portable storage rental assets, have a favorable pipeline of opportunities from our limited initial marketing effort of outbound customer calling, and have received our first orders. Keep in mind that this is initially an organic effort that will take time to grow into a meaningful level of rental revenues and earnings.

The second initiative that we're moving forward with in 2008 still has some key steps to complete before we're ready to provide any details. We expect to provide information on this initiative within the next few months.

With respect to our new ERP applications platform, we plan to complete Phase 1 of the project early this summer and launch it in October directly following our busy season for modulars. Phase 1 is by far the largest and most complicated component of our IT application investment.

Everyone should be aware that we're in the process of completing our new debt financing that should provide us with a sufficient amount of drive power to grow our core rental businesses and new initiatives and put us in position to readily act on potential acquisition opportunities. Strong cash flow businesses and healthy low-leverage balance sheet and access to capital for growth have been cornerstones of McGrath RentCorp's success over the years.

As always, we aspire over the long run to produce strong financial results in order to return value to shareholders through both share appreciation and the payment of dividends. We will also continue to be opportunistic in buying back our shares in order to return value to shareholders.

In closing, it's important to keep in mind that there's a countercyclical dynamic to our rental products, especially our Modular business that can serve us during more challenging economic environments. In spite of various negative macroeconomic data and more regionalized concerns, we are off to a good start in 2008.

We are pleased with the outlook and opportunity pipeline for educational rental businesses in our markets. Although there are significant challenges in residential construction, especially in California, and a more competitive nonresidential market overall, we have also seen an increased number of large public infrastructure projects, and our contractor business associated with the petrochemical industry has remained favorable.

Our test equipment rental business is growing nicely and at present has a healthy pipeline of opportunities and outlook.

We are also managing both direct costs of rental operations and depreciation smartly. We are moving forward with our strategic launches and continue our exploratory work on new markets and rental products, and we are investing in IT infrastructure and applications to support a larger McGrath RentCorp in the years ahead.

Finally, we'd like to remind everyone of our upcoming annual shareholders meeting at our corporate offices in Livermore, California on June 4, beginning at 2:00 p.m. We'd also be pleased to provide you a tour of our Northern California sales and inventory center operations for modulars during your visit.

And now Keith and I are available to address any of your questions.

Questions-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Scott Schneeberger - CIBC World Markets.

Scott Schneeberger - CIBC World Markets

I guess I want to start out first with how healthy the pipeline is and how things are looking order-wise for the educational modulars in California. Could you take us a little bit deeper, what you're seeing for orders, and more importantly, too, going a level deeper, giving us some background on how matching funds work and if the school districts are healthy enough to go forward this summer.

Dennis Kakures

I'd be happy to. First of all, just to - if you look at the opportunity pipeline and our booking levels through the month of April, we're very pleased where those are at in California, in just addressing that market to begin with. So that's in line with our expectations. We're pleased with what we've seen. There's still a couple of months left here of pipeline coming through into order realization, so we're still working it. May and June, there's still quite a bit of activity to be had out there.

If you break it down a little bit further, the Southern California market has been a stronger market than Northern California this year within the state.

In terms of schools and their ability to take on products, know that, as you're well aware of, Scott, most of our growth and new order activity is associated with modernization of California schools. The bond monies are in place. There's about $2.6 billion of those monies available from the $3.3 billion from the November 2006 bond measure, and so there's a healthy sum of money there.

Districts, although there are some here and there that may have elected not to move forward with projects because of a variety of reasons, that number has not been significant.

And for the most part districts, if they've passed their local bond measures or parcel taxes, the state is putting up roughly 50%; they're putting up roughly the other 50%. It's just a matter of those districts that have those monies in place being able to move forward.

So the operating budget dynamics with the state, if there's a shortfall in operating budgets in the school districts doesn't impact greatly the modernization aspect for school districts. Some districts it can, but for most districts it does not.

Scott Schneeberger - CIBC World Markets

And with the $2.6 outstanding there, I assume that's out there indefinitely. What are your thoughts, what do you know with regard to the ballot this November, perhaps anything additional or is that $2.6 probably sufficient?

Dennis Kakures

My sense is if it's $2.6 at this point in time, I'd be very surprised to hear there's another bond measure in November for facilities in the state, whether it be for permanent construction or for modernization. And it appears now this $2.6 billion would take us certainly through 2009 and into 2010, at least with the pair of glasses we have on today.

Scott Schneeberger - CIBC World Markets

Shifting gears a little bit, you're mentioning now a little bit more strongly than we've heard in the past that the infrastructure money is getting spent now in California. Could you take us a little deeper on that? What projects are you seeing? How much - I think it was roughly $30 billion approved - just a little deeper there.

Dennis Kakures

The $30 billion, we started seeing more of an uptick in that towards the end of last year, and it's carried on into this year. And that's been a real bright spot on the non-residential construction side of things.

I can't give you more detail in numbers of the $30 billion of, how much has been utilized, but there's still quite a bit of dry powder there, and we've benefited both in Northern and Southern California from those types of projects.

Scott Schneeberger - CIBC World Markets

And then just curious, how strong is petrochemical in Texas, and could you just take us a little bit more on that vertical and perhaps manufacturing, just how strong the environment is for those and how long you think that will persist.

Dennis Kakures

Well, it's very strong, and we do business with a large number of the petrochemical plants in Texas and related industries. So all I can say is that has been strong over the last three years. It continues to be very strong. Obviously oil priced at north of $120 a barrel puts a lot of demand on activities with the oil industry, and obviously raises the bar in terms of their ability to develop various oil reserves and process that oil.

So it lines up very nicely for us in terms of the types of needs that the plants have on change outs and other types of maintenance they need to perform in the plants and us bringing in modulars to provide a temporary space for them, as well as longer-term projects in terms of doing additions to plants as well as, you know, whatever new refining might be done.

Scott Schneeberger - CIBC World Markets

And then on your new portable storage container business, is that just going to be rolled out in California to start, and how is purchasing there? I imagine the containers are getting a little bit pricier with steel prices going up. You know, you have to buy in bulk to get the volume discount. Can you just speak a little bit about the processing going into that business?

Dennis Kakures

Certainly. We're incubating out of Livermore today, and that way it's under the watchful eye of a number of us here. And we have a leader of that business. We've designated someone separately to run that business and to be able to give it its best opportunity for growth, a gentleman by the name of [Mike Bucklin], who's been a senior leader with us for the last couple of years, overseeing our inventory center operation.

And the dynamics are such that we're buying rental [inaudible] both used as well as new, so it's a combination of items. And then we are taking the used equipment and we're branding that and doing various upgrades to that product.

I would say that the pricing has been fairly stable. We haven't seen, you know, we've been researching this for some time now, and over the past year we haven't seen any really significant elevation in the cost of units - slightly, but not significant.

Scott Schneeberger - CIBC World Markets

And then finally, to just get Keith involved, the guidance does not include share repurchases to be done in the future, only those done in the past, and what is the appetite now for share repurchases?

Keith Pratt

The first part of your comment, Scott, is absolutely correct. The guidance range we've confirmed today, that does not include any future share repurchasing. And our philosophy there is, we do analytical work, we look at the valuation of the company's stock. Where we believe that repurchases would be accretive to earnings and in the best interests of shareholders, we will act opportunistically when the opportunity presents itself, and we'll continue to do that.

Operator

Your next question comes from David Gold - Sidoti.

David Gold - Sidoti

First, on the TRS business, you commented on competitive pricing. Are we gaining share there and, if so, how do you measure that?

Dennis Kakures

Good question. First of all, yes, we are gaining share. The way that we measure it is that we've set up a database of really our competitors' accounts and where we think strongholds are at. And what we look at is basically where those accounts were at a year or two ago or whenever we start tracking, and we look at what progress we're making against those accounts over time.

Now some of that can be related to growth in those accounts that isn't pulling market share, but we tend to have a pretty good sense of what's growth and what's not, you know, as opposed to true market share, pulling from a competitor versus just additional growth within the account.

Some of those accounts we were already doing business with. We have a very good tracking system of data, of where an account was to start with, and then we just measure against that how successful we are in booking rentals and first month's rent is our gauge on that.

David Gold - Sidoti

And if I remember right, that's some of the larger accounts.

Dennis Kakures

That is correct. Those tend to be larger accounts, without question.

David Gold - Sidoti

And then, Dennis, you've commented in I think the past couple of calls about classroom pricing maybe not being exactly where you'd like it to be. Can you update us on that?

Dennis Kakures

Well, what we've said is that we expected 2008 to be a competitive classroom rental environment in California in particular, and it's going along as we might have expected.

One thing I want to make sure everyone's aware of, that we have a lot of customers that are, in effect, they just order off contracts like they always have. So although there are a number of projects that are highly competitive, there are also a number of projects that are not competitive and that are done off existing contracts at more standard rates.

But that's to be expected with the inventory that was unutilized coming into 2008. And the good news is that we've had a good opportunity price line year and booking year thus far in California, but with a couple of key months to go here.

David Gold - Sidoti

And then did I hear you right, did you say that you would be - I didn't quite catch it - on the bond issue, you said, with $2.6 billion left, did you say you'd be surprised if there was another issuance this year or not surprised?

Dennis Kakures

I said I would be surprised if there was a bond measure for facilities in November, which is really the next date on which they could do it. If there isn't one in 2008, the next period in which they could do it would be in the first really primary session in 2010 in California, which would be in the first quarter of 2010.

David Gold - Sidoti

And then just lastly, on the portable storage business, how expensive do you expect the launch of that to be for you, how capital intensive?

Keith Pratt

David, we mentioned when we gave guidance in February that we had approximately $1.5 million set aside related to exploring and launching new initiatives. As Dennis mentioned, we have announced portable storage today, so the costs associated with that are already reflected in the guidance that we gave for the year. And then the second initiative, which we're not going into any detail today, again, we've already set aside that in the budget.

Operator

Your next question comes from Jamie Sullivan - RBC Capital Markets.

Jamie Sullivan - RBC Capital Markets

A quick question on the California market and where the bookings for the '08-'09 school year stand, just wondering how much as a percentage of a typical year, say, is booked through May and kind of where we stand this year versus last year.

Dennis Kakures

You know, it's hard to say because every year's a little bit different. We still have a number of significant opportunities on the table that have yet to have a disposition, but we've had - that's not to say to date we haven't booked a material amount of business, we have, but there's still some significant opportunities on the table.

Jamie Sullivan - RBC Capital Markets

So say versus last year, because it sounds like it's a little bit later, normally the first four or five months is when the vast majority of bookings happen. You're saying June, July also has a fair amount of bookings, opportunities as well?

Dennis Kakures

I'm saying May and June in particular. Typically, you know, you can get some in July and August, but it's really May and June. We have another solid six to seven weeks of opportunities that will have an outcome.

Jamie Sullivan - RBC Capital Markets

And as you commented, most of that, you're pretty much on plan from where you were looking at the beginning of the year?

Dennis Kakures

I think we feel very good about where we're at today. Southern California's been particularly strong compared to Northern California, so we are feeling like it's in line with our expectations overall.

Jamie Sullivan - RBC Capital Markets

And on the cost of sales side, it looks like that came in a bit low this quarter, at least versus where I was expecting. Anything going on there? Is that the Enviroplex impact?

Keith Pratt

Nothing unusual if you look at the overall mix in the business. TRS was a slightly bigger percentage of the business in the quarter given the growth rate there was a little stronger, but nothing unusual in the underlying metrics in each division.

Jamie Sullivan - RBC Capital Markets

Because it looked to me like on the cost of sales as a percentage of sales was near historic lows.

Keith Pratt

Keep in mind rental revenues grew more than sales revenues, and so that will happen because the rental margin is higher than the sales margin when you look at the overall business mix.

Jamie Sullivan - RBC Capital Markets

And how big is the portable storage fleet today?

Dennis Kakures

You know, at this point it's small, but we will continue to buy [inaudible] as we utilize them, and we've had a good start. But it's small and should be viewed in terms of a start up, but with an opportunity to accelerate it with some potential acquisitions or being able to roll it out sooner in our other areas, provided we're successful in Northern California.

Keith Pratt

And again, to be clear, we're only active in one location today.

Jamie Sullivan - RBC Capital Markets

Moving to TRS, it still continues to perform well. If we look near term, say, 2Q, does utilization look to be maintained where we are today?

Dennis Kakures

Well, through the call today our booking levels in the second quarter have been very strong. So I would expect if the pipeline - you know if the opportunity in the pipeline continues the way it has in our conversion of opportunities to orders, I would expect utilization to stay in a very healthy range, either where we're at today or north of here.

Jamie Sullivan - RBC Capital Markets

And then are you seeing any changes in the average rental life as the mix of equipment changes?

Dennis Kakures

In our Electronics business?

Jamie Sullivan - RBC Capital Markets

Right.

Dennis Kakures

Not really. We go on average about five months, somewhere in that neighborhood.

Operator

Thank you, and there are no further questions at this time.

Dennis Kakures

Well, I'd like to thank everyone for joining us this afternoon on our Q1 call. We'd love to see as many of you as possible at our upcoming shareholders meeting on June 4 here in Livermore. That will also be webcast. And then otherwise, we will look forward to chatting with you again on our Q2 call, which will be in early August.

Thank you all very much.

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