Somero Enterprises (LSE:SOM) — Investor Presentation

0:02 Hello and welcome. This is Tim Avercamp. Thank you for joining us for today's presentation. We're happy to be with you all today. Joining me is Enzo Localsi, our Chief Financial Officer and Secretary. Today, we'll take a look at SOMERO's first half twenty twenty five results, recent innovations, our rest of year outlook, and briefly introduce our long term strategic framework. Following that, we will respond to your questions. Before we get into the detailed review of the market and our results, I'd like to first start with some opening remarks as I'm speaking to you all on my first earnings call for SOMERO ENTERPRISE. On April 1, I was appointed to the role of Chief Executive Officer and Director of the company. I'm delighted and humbled to have been selected for this position to succeed Jack Cooney upon his retirement following a long and impactful career.

0:54 In my first five months, I've had the opportunity to meet several of our investors and look forward to meeting many more of you in the coming weeks. A little bit about my background. I have over thirty years of industrial equipment manufacturing experience domestically and internationally. From an educational perspective, I hold a Bachelor of Science in Mechanical Engineering and a Master's in Business Administration. Notable work history includes four years serving as a group president of Astec Industries, a global manufacturer of specialized infrastructure equipment. I led both the construction machinery solutions and the materials solutions groups which encompassed road building and paving, forestry and recycling, and aggregate processing equipment produced and sold globally. Prior to ASTEC, I had a great twenty two year career with Deere and Company, primarily within the construction and forestry equipment division.

1:44 During my time with John Deere, I held technical and commercial positions of increasing responsibility in engineering, marketing and business development, including Director of Business Partner Integration over Deere's joint venture businesses with Bell Equipment of South Africa and Hitachi Construction Machinery of Japan. In my final role, I served as president of the JV business between John Deere and Yanmar of Japan. My first few months have been great. I've been able to meet and engage deeply with, listen to, and learn from our employees and customers. As I reflect on this time, I appreciate the legacy and strong relationships that we develop every day. SOMERO is truly unique and high performing organization. Our team is passionate about innovating and delivering value that enables our customers' success. I'm energized to be part of the team, and I'm truly excited to help lead this organization on the road ahead.

2:36 A brief overview of SOMERO ENTERPRISE. We are a manufacturer of concrete laser screeds and associated equipment parts and service. Our headquarters is in Fort Myers, Florida, where we also have our training facility, the SOMERO CONCREATE INCITUTE. Our primary manufacturing operation is in Michigan. We have regional sales and service offices in The UK, Belgium, Australia, and India. We've sold products in over 90 countries. Our products are well known for innovative technology delivering precise high quality floors and high productivity. Our equipment is used for a multitude of construction buildings and sites. We are the pioneers of the laser scree that was brought to market in 1986. Our overall product portfolio offering has grown to over 20 products. We have over 130 patents and applications.

3:27 We work very closely with our customers to understand their business, their challenges, and get feedback on solutions that we develop. We have a large offering of different products and models that are preferred dependent upon the application and job requirements. From our boom screeds to ride on screeds to our walk behind screeds, material application grading and skyline products, we offer many different solutions. Our equipment has been used in a multitude of projects across the globe. I'm sure you'll recognize some of the businesses that our equipment has helped construct. In many cases, these end users have high requirements for flat and level floors, which have necessitated and requested the use of SOMERO laser screens. We're also very active in our participation and sponsorship of multiple concrete trade associations.

4:20 I'd like to set the stage for what you should take away from our discussion today. First, as a management team, we continue to operate with a very disciplined approach to managing the business that gets a challenging market drop in H1. Second, despite near term market headwinds and uncertainties, there continues to be resilient underlying demand and the long term drivers for our equipment and technology remain intact. Third, on par with our historical precedents, we are steadfast in our commitment towards continued innovation, ensuring we emerge strongly when conditions improve. Fourth, our full year guidance is reaffirmed with expected trading improvement in the second half of the year. And lastly, we're also very focused on long term and we will introduce the beginning of our long term strategic planning framework to guide the next phase of growth.

5:13 The next slide I'll cover some of our first half highlights. Beyond my appointment to CEO, Bob Schorr, who also has served on the SOMERO Board of Directors since 2015, transitioned to the role of Chairman of the Board, succeeding Larry Horsch. We congratulate Bob on his expanded leadership role and thank Larry for his past leadership as previous chair and continuing role as non executive director. From a macroeconomic perspective, the long term demand drivers remain positive. Non residential construction tailwinds related to onshoring, data infrastructure, manufacturing, warehousing, and power generation to name a few remain intact. North American project activity remains slow due to the market uncertainty and caution related to tariffs, immigration policies, and elevated interest rates.

6:02 The US market conditions in combination with ongoing geopolitical conflicts has also contributed to lower international trading. In the subsequent slides, we'll speak to our new product innovations and offerings launched in 2025. Per our trading statements, we've implemented two rounds of cost cutting measures to mitigate the lower revenue on profits. We continued to achieve good cash flow and had declared an interim dividend to be paid in October. We remain very focused on balancing the short term business conditions while ensuring we are focused on our long term growth and strategic planning.

6:39 In the next slides, I'll discuss the activity within each of our regions. North America represents our largest region overall, accounting for 80% of our total revenue in H1. As noted earlier, with the market uncertainty, North American sales declined by 18% to $31,800,000 primarily driven by lower sales of boomed and ride on screens. Certainly, larger projects and cores have been slow to move forward. We continue to focus on growing our installed base by attracting and delivering solutions to new customers. Our path to market consists of both direct sales and through dealer channel partners with direct sales constituting the majority. Direct sales to new customers represented 15% of our total North American revenue in H1. Customers continue to report healthy bidding and robust backlogs. However, starts, as previously reported, continue to be subdued.

7:31 Realized revenue declines in our parts and services revenue, which includes accessories sold with machines, was to a lesser extent as compared to new machine sales, reflecting that our customers are operating and utilizing their equipment as well as our continued focus to grow recurring revenue.

7:49 Now turning to the international side in Europe, our second largest region, which represented 9% of our total revenue. Activity was slower with total H1 sales at 3,500,000 versus point 1,000,000 same time 2024. Despite the decline, we continue to forge new business and customer relationships. Europe remains one of our key international markets with opportunities for continued growth. Direct sales to new customers represented 38% of our total European revenue. The 2024 opening of our Belgium service center has enhanced our ability to serve the customers in the region and to meet demand for local machine repair and service.

8:30 In Australia, total revenue was 2,100,000 in 2025 versus 3,200,000 in 2024. The Australian market has been challenged with shortage of tradespeople, persistent inflation, and significantly tightened monetary policy to bring inflation back within targets. There remains opportunity for SOMERO to further deepen market penetration in the region. We continue to focus on growing revenue in this territory by broadening awareness and educating the marketplace proposition. Lastly, as we look to the rest of the world, it includes several smaller markets that historically tend to fluctuate. Overall declines in those collective markets were down to a lesser amount than other geographies at 11% with similar drivers previously noted.

9:18 The following table reflects comparable sales by product type. As you can see, we have experienced somewhat balanced declines across most of our products. Of note, we continue to see some success on the SkyStree as we continue to promote and demonstrate the value. Additionally, within the other category, parts and service revenue, which includes accessories, was over $8,000,000 in H1.

9:42 And with that, I'll hand it over to Anzal Lakowski to go over our financials. Thanks, Tim. So we'll start with some of our financial highlights. As you'll see on this slide, our overall downward direction in profits and margins is primarily attributable to declines in sales volumes, as Tim just outlined for us. As a result, we did undertake two rounds of cost cutting measures in April and July, which amounted to $6,000,000 on an annualized basis. Despite the aforementioned declines, we generated more cash from operations and ended the period with a higher level of cash compared to the same time last year, which enables us to continue to fund our dividend and share buyback programs.

10:27 Moving on to operating results. You'll note that gross margins declined 180 basis points to 53%, predominantly due to under absorbed labor and overhead costs mostly incurred prior to the restructuring in late April. Tariffs have not had a material impact on our cost of goods as we source the majority of our components domestically. Therefore, we do not expect to have a major impact from tariffs in the future. Operating expenses in h one twenty twenty five were lower than the same period last year, reflecting the restructuring we undertook in July 2024, which was partly offset by incremental expenses, including costs related to the change in our CEO.

11:13 Moving down to taxes, we recorded a noncash charge against a deferred tax asset due to recurring losses outside The US. This is an accounting entry that we expect will reverse as sales levels improve in the future. From a financial position standpoint, we continue to maintain a sound balance sheet. Receivables remain modest relative to revenue levels. The vast majority of our sales are paid upfront. We extend nominal payment terms on a limited basis to customers. Inventory ticked up a bit from the end of twenty twenty four. Generally, finished goods are depleted towards the end of each year and rebuilt in the first half of the following year. In addition, the introduction of new products also contributed to inventory.

12:04 Liabilities remain relatively modest and consist mostly of trade payables and no outstanding debt. In terms of our cash flows, working capital investment was considerably lower in the first half of this year compared to last year, benefiting from the lower levels of receivables. CapEx spend consisted of ordinary course of business outlays with no projects underway or expected. In the first half of this year, we returned approximately $8,000,000 to shareholders by way of dividends and share buybacks, netting down to a use of cash of just under $5,000,000 compared to $12,500,000 for the same period last year. And with that, I'll hand it back to Tim. Thanks, Enzo.

12:53 We remain committed to investing significant time and resources into working directly with our customers to understand their pain points and develop solutions to address those. I'll touch on some of our new innovations that we debuted at the World of Concrete exhibition in January of this year. First, our new SRS-4E, our first electric boom laser screen. Customer feedback has been positive, particularly in Europe where demand for sustainable solutions is more advanced. Electrification remains an important part of our long term agenda with our approach guided customer demand. We also introduced some creative technology innovations to improve and enhance the overall customer experience. We launched a virtual reality simulation training program for the S22EZ, complete with mobile phone app, giving customers the ability to train anytime, anywhere.

13:43 This cutting edge tool reduces costs, improves efficiency, and demonstrates our commitment to using technology to deliver lasting value beyond the machine itself. Lastly, we also introduced the SOMERO Experts app. This app puts everything an operator needs right in their pocket to help them save time and make machine management even easier. The app features online product manuals, machine startup checklists, step by step troubleshooting videos, and so on. Thus far, we've received very positive feedback from our customers on the VR and expert apps tools.

14:20 Earlier, we discussed our focus on growing our share by attracting and delivering solutions to new customers. The pyramid on this slide is a visual depiction of the segmentation of customers involved with concrete in our largest market, The United States. It's estimated that there are more than 40,000 contractors involved with concrete construction in some shape or form. The segment of customers at the top portion of the pyramid represents those focused on more complex commercial projects that in most cases have elevated requirements for floor flatness and floor levelness. Transitioning down the period, some contractors work encompasses less complex projects for both commercial and residential where requirements for flatness and levelness are more moderate. Many of these contractors on the upper end are SOMERO's partners. They trust the high quality performance and excellent customer support that we can provide.

15:11 Even as the floor specifications begin to moderate, these are still demanding projects that require contractors to be productive and ultimately produce quality floors. In the past, these contractors may have felt that a SOMERO laser screen was out of their reach when they consider overall equipment utilization and the return on investment. The number of contractors in this segment is large. Therein lies our opportunity. We see a great opportunity to continue to innovate and deliver products that can cover a broader spectrum of the market, helping those savvy contractors who are ready to acquire their first laser screen that's simple, that performs, is robust and affordable. One such solution is the all new Hammerhead by SOMERO. Just recently launched, this has been developed with vast customer input and designed for quality, ease of use, and affordability.

16:00 And best of all, it's a SOMERO. Let's take a look at the video.

17:37 Simple setup, ready to run-in minutes, simple operation, training that's fast and efficient, a compact unit that is lightweight, easy to transport, yet powerful enough to get the job done. We're excited about the launch of the Hammerhead. This will help us capture growth into an untapped segment of customers that are looking to take the next step, not only in The United States, but internationally as well. We've received very positive interest in activity since our introduction just a few weeks ago.

18:06 The S15EZ, another new product update launch that's happening right now. The S15 EZ is the next generation successor to the highly regarded S15R midsize boom screed. It incorporates all the latest technologies and features. This new boom screed offers enhanced maneuverability with head rotation and joystick control, robust quality and high productivity, making it well suited to today's market where versatility is needed with varying pore sizes.

18:36 As we look ahead to the rest of the year in 2025, long term demand in The US for non residential construction remains resilient, supported by positive long term trends across key end markets. Global uncertainty linked to factors including tariffs, persistently high interest rates and restricted immigration policies continues to weigh on the pace of projects. However, customers continue to report strong levels of bidding activity and healthy backlogs, which are expected to extend through year end. We continue to expect trading to improve in H2 compared with H1, supported by normal seasonality and contributions from new products. We anticipate full 2025 revenues to be in line with previous guidance of approximately $90,000,000

19:24 For my intro, I joined SOMERO five months ago. I've spent a lot of time listening and learning from our employees, our customers, our board, and shareholders. In the more recent months, the board and management team has started to refresh SOMERO's long term strategic framework to reinforce resilience today, while at the same time positioning the business to capture the substantial opportunities ahead. This framework is designed to guide the company through current conditions with focus and discipline, while sharpening execution around areas of highest impact. In the longer term, the framework is extended, is intended to drive sustainable growth and ultimately superior shareholder returns.

20:04 SOMERO is approaching our fortieth anniversary as a company next year. It's been a long and prosperous journey that's been built through the efforts of our employees and through partnerships with our customers. As we look at our history and where we're going, we think about it as three phases. Our first phase was the founding era, our startup phase. This was the founding by the SOMERO brothers, the invention of the laser screen and the company's early formation.

20:30 The second phase illustrates the past twenty five years with product line expansion, service development, and overall global growth. This was our first growth phase. As we look to the future, this is our third phase. We refer to it as 3.0. It's about our future. The future will include, one, strengthening our foundation, two, driving innovation and not just in product development, but beyond, and three, growth in scale in ways that create real value. It's really the next horizon, our focus on excellence, shaping excellence.

21:05 As we look to the future, the business model and value story of SOMERO remains strong. The overall long term trends related to various types of construction and overall infrastructure needs remains very positive across the globe and the regions that we operate. Demand for SOMERO's equipment is driven by factors that apply across all regions that we serve, the need for quality floors and productive equipment that helps address shortages of skilled workers. SOMERO laser screeds enable increased speed, productivity and pore sizes. Our laser screens achieve best in class flatness specifications. We enable our customers to produce high quality floors. Our equipment provides automation that reduces the strain on labor, and our team provides the best in class customer service and support that our customers rely upon.

21:53 Our strategic framework builds on the company's proven model while incorporating fresh perspectives. It reflects SOMERO's ambition to reinforce its foundations, extend its track record of innovation, and broaden its reach. Crucially, it provides a common language and shared focus across the organization, aligning resources and priorities, and ensuring everyone at the company pulls in the same direction.

22:17 The updated framework is built around three strategic pillars: fortify, innovate, and amplify. These pillars are our themes and will be the guiding light for our strategy going forward. Now the framework is just that. It's the framework. It does not include specific plans and objectives. We're in the process of rolling this out to our organization now and are developing potential initiatives that will be built into our plan.

22:43 Four to five. This is about reinforcing SOMERO's foundation through strengthening operational excellence, delivering best in class customer service and support, and continued investment in people, culture, and processes. As an example, our Holden, Michigan operations represent a very talented and skilled workforce that efficiently produces high quality equipment. At the same time, we're very focused on continuous improvement, trying to ensure that we are better tomorrow than we are today.

23:12 Innovate. This is about driving innovation through new product developments, advancing technologies, refining processes, and discovering better ways to serve our customers. By harnessing customer insight and our industry expertise, we strive to create solutions that address evolving needs and deliver lasting value both within current markets and new potential opportunities. Earlier, we discussed two new product developments in the S15EZ and the Hammerhead LaserScreen. We are known for our innovation. We will continue to make this a top priority. Yet our innovation goes beyond the equipment and the iron. It's about harnessing technology that turns data into information into action. This is demonstrated with our newly offered telematics system as standard on the new S15, S22, and s 28 e z boom screens ordered going forward.

24:04 Amplify. This is about expanding and scaling SOMERO's reach into new customer segments, augmenting sales channels, and spreading awareness of the company's value proposition in existing and adjacent markets through both organic initiatives and strategic acquisitions. As an example of this is our focus on increasing our service and fleet management offerings to our customers.

24:25 This helps our customers keep your SOMERO equipment in top running performance. It also supports our efforts to scale and drive increased recurring revenues for aftermarket parts and services. Fortify, innovate, amplify. To summarize, these pillars are our strategic framework. It does not yet include specific plans and objectives. Implementation of the framework is now underway with a broader organization developing proposed strategic initiatives that relate to each pillar. While this work is in its early stages, the framework ensures the organization and our resources are aligned and directed towards the areas with greatest impact on growth and value creation.

25:05 As the program progresses, the board expects to refine priorities and in time provide further updates in due course. And with that, we'll now open the floor to questions.

25:22 That's great. Well Tim and I thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions. You can do so just by using the Q and A tab that's situated in the top right corner of your screen. We have received a number of questions both pre submitted and through today's live presentation. I'll start the Q and A session off with this one here. How is SOMERO's U. S. Market share trending long term and how are competitive threats evolving? Good question and thank you for that. The founders of SOMERO invented the laser screen technology and therefore have had a considerable lead in the market. We have had competition along the way, they've come and gone. In The US, we have one major competitor and in Europe, we have a handful of smaller competitors.

26:06 Overall, we have a dominant market position. We've recently gathered some information anecdotally because there's no public information available. And generally speaking, we believe we have at least an 80% market share.

26:21 That's great. Thanks very much. Turning to the next question here. Can you provide a breakdown of your end demand by sectors? In particular, what is the share of retail warehouse in your customers work? Has it changed much since 2021? And finally, what is the share of data center related demand? Unfortunately, that information is not available to us. Really, our primary source of information comes from customers, and they'll speak to us in generality, but not specific projects. Clearly, they're going against their own competition and they're not gonna share details with us. What we can say is that data centers is a new sector that has risen over the past year or so. That is backfilling some of the other sectors that have slowed down, particularly warehousing and to some extent manufacturing.

27:09 On a net basis, it's neutral. Understood. Thank you very much. What evidence is there that your market is not saturated? Despite no US recession and huge data center build out, SOMERO's sales have declined for three years. The only time apart from 2008, 2009, this happened in twenty years. Does your installed base exceed current end demand? You know, certainly, we added a great number of machines into the market in 2021 and 2022, where we grew 50% in one year, mainly driven by the warehouse sector, and since then have tapered off. However, that said, we continue to see new customers. 15% to 20% of our revenue are to new customers.

27:57 The concrete contracting space has a low barrier of entry. And therefore, anyone with a pickup truck, a wheelbarrow, and a two by four can enter the market and move up the food chain from the residential into the commercial space. So there's still quite a bit of demand. We don't feel as though the market is entirely saturated, But we would say that existing customers are able to complete the level of work that's out there, given the slower pace of projects with the amount of equipment that's available. Perfect. Thank you very much. What's the forecast revenue evolution of MPD in the next five years? Yeah. Thank you. I'll take that question. This is Tim. You know, as we've shared in the strategic framework that we presented today, innovation will be a continued to be a key pillar for us and from Focus. It's really difficult to estimate what that revenue is when you consider the market dynamics and our portfolio developments underway.

28:56 What we can say is historically, we've introduced two to three new products per year. In some cases, like we shared today, the S15EZ is the next generation, the evolution of technology and features of our previous R version. In other cases, the Hammerhead that we explained today, is really tapping into an untapped customer segment that we haven't operated before. Like I said, it's difficult to quantify the revenue, but we're certainly committed to continue our technology and product development pipeline we're bringing. That's great. Turning to the next question. Why is now the right time to expand SOMERO's reach beyond its traditional base into the expansive midrange concrete contractor segment with the launch of Hammerhead? And then finally, what's the risks of this strategy? Sure, good question. I'll take that one again.

29:43 SOMERO and our customers have really grown with the evolution of the laser screed over time. We consistently get customer feedback that's really helped us grow from the initial laser screed to the over 20 different products we have in our portfolio today. As we've expanded our product line and the applications and the use of the laser screeds have grown, certainly we've seen the value prop in terms of high quality performance on floors as well as productivity. As we look at the current markets today, our customers that utilize our equipment are actually expanding the use of of their laser screens today, looking at doing more concrete in different applications. Again, that productivity element really addresses some of the market trends in terms of lack of unskilled labor, lack of skilled labor overall. As those customers continue to do a combination of commercial and residential work overall, we see a need. Traditionally, those folks are doing the work by hand. And as I mentioned, a two by four, either hands free even using a small vibratory screen.

30:39 We have a very broad offering, but I think in the past, our customers have been hesitant to really understand the return on investment of buying a laser screen considering the utilization of that equipment. With the introduction of the Hammerhead, now we provide an easier operate laser screen that really provides an opportunity to step up to a laser screen at a value price point overall. And so we really see this as an untapped market, again, to grow the use, address those macro trends in terms of lack of skilled labor overall. What we've seen so far as well is good feedback. We see this as an opportunity to grow in the rental. And through our dealer network today, we'll be actually expanding to have machines available for both rent as well as for acquisition. That's great. Thank you very much.

31:25 To follow, you talk about sales to the concrete contractors. Can you address the rental companies such as Sunbelt? Surely, is how you address the smaller slash less sophisticated contractors. Yeah. It's a great question. So like we talked about, you know, the Hammerhead looks a little bit different. Right? It looks like a a product that you could buy from a big box store. Our approach right now is to focus through our dealer channel that we have. We have an existing dealer channel that represents our products. We're looking to expand that. So the rental will be via those dealers. You know, over time, we'll look for opportunities to expand that to larger independent rental companies. That's great. Moving on. The next question is really around share buybacks. The question reads as follows. What is your view on buybacks In light of a weak share price performance and arguably strong demand outlook over the midterm, is this not a good opportunity to deploy more capital on share repurchases?

32:16 Yeah, good question. I'll take that. This is Enzo. Historically, the vast majority of our shareholders have preferred dividends. But over time, we're recognizing there is a bit of a shift. And given the stock valuation currently, share buybacks seem to be more attractive. This is something we're definitely taking into consideration. However, we're gonna play out the refresh of our strategic plan and the buildup of the individual strategies to identify our cash needs in the coming years and reassess our capital allocation policy. That's great. Thank you very much, Henze. A question here for Tim. How does Tim perceive the growth prospects for the company? If they are positive, why not cut the dividend and reinvest in the business to capitalize on those opportunities? Yeah. Thank you. Great question. So if you reflect back on what we shared in our strategic framework, we're still in the very early stages of that development with our innovation and amplify strategic pillars.

33:12 We're in the process right now. We've rolled that out to our senior management team and we're identifying potential strategic initiatives that could lead up to our fiscal year 'twenty six and 'twenty seven budgetary plans. Until we get through that process more and understand what those opportunities are, then we'll take a second look back at the capital allocation point that Angel just stressed previously. That's great. Shifting gears slightly, to what extent is SOMERO's product portfolio offering of use or critical to the construction of AI data centers? Given the significant recent investment in AI infrastructure, why might this not be reflected in product orders to date? Yes. So laser screens are absolutely used on data centers as well as ancillary buildings that support the data centers surrounding it. As I mentioned earlier, other segments in non residential construction have declined over time. And so the pickup in work related to data centers is basically backfilling for that other decline. And the pace of projects also is having an impact. If customers are able to do projects sequentially, there's no need to add to their fleet.

34:22 And as I mentioned, the existing installed base out there at present time at the current levels of activity is sufficient to complete that work. That's great. Thanks very much. How does your thinking on M and A differ from under the previous CEOchairman? If you could give some insight on that, that'd be great. Yeah, go ahead. Why don't you start and I'll answer that. Sure. So historically, the company has been very disciplined in its view on M and A whereby we would only consider companies or products with very strong IP and comparable gross margins similar to SOMERO. I think we can all acknowledge that SOMERO is a bit of a unicorn in the construction equipment space, and therefore we haven't been very successful in identifying those opportunities.

35:10 We are going to take a slightly different view and broaden that criteria. We'll remain within our core, of course. We want to preserve the business that we have, but potentially expanding those filters as there might be other opportunities out there to take advantage of. Yeah, think overall, I would say as a board and the management team, we're very interested to explore opportunities. So we're looking through maybe a little bit different lens and we'll start assessing opportunities as they come. And we'll, of course, bring that back as we go forward. So early in the stages, relative to the strategic framework we're bringing. Understood. Thank you. Another question from an investor. What does CapEx look like over the next year? We don't have any major projects underway. Our typical run rate is $1 to $2,000,000 in the absence of any major expansion.

36:03 We've recently expanded the Houghton facility to provide additional capacity, allowing us room to grow into in due course. Thank you very much. What is SOMERO's competitive advantage versus its US competitors? Yeah, I'll speak to that. And then so you can add afterwards. Certainly from a technology standpoint, we're the innovation leader, right? With the laser screw, we have a very broad product offering overall. We lean in terms of our customer partnerships overall. Our teams are very much connected with the customers in terms of consultativeness, both on application cores and design and helping them to find solutions to meet their needs when they make the cores. I think secondly, what stands out the most in my five months, I've learned a lot from our customers that our customer support, our services support is second to none. We do a great job, and a lot of customers will use us as the benchmark for other OEMs that they buy products for us in terms of that level of service and support overall.

37:04 We're going continue to focus on that as we go forward. Perfect. Moving to the next question. How far is the secondhand market emasculating the market for new machines? We receive approximately five to 10% of our orders. We'll take in a trade in from our customers, which will remanufacture and sell it out into the market. Generally, that is a great product for a relatively new entrant in the market where they can buy a large piece of equipment at approximately a 50% discount to a brand new machine. So that gets them into the SOMERO family. We are not seeing a significant increase in sales of our remanufacturing equipment, suggesting that there is any sort of cannibalization of new products. Yeah, I would also add to that. We do monitor the third party auction sites like IronPlanet or some of those sites. And we haven't really seen growth based on our calculations over the past year or two. So we don't see a change in that trend to date.

38:09 Perfect. Thank you. How do you go about apportioning the current demand weakness to macro uncertainty versus a correction from the 2021 to 2022 pull forward demand? Can you repeat the question, please? Yes, of course. How do you go about appointing the current demand weaknesses to macro uncertainty versus a correction from the 2021 to 2022 pull forward demand? Yeah, certainly the warehousing sector in 2021 and 2022 accelerated the need for warehousing to accommodate for all of the online transactions, e commerce and the like. We're now seeing that warehousing companies like Amazon have slowed down their CapEx spend and warehousing has tapered off. But we are seeing now on the other side, demand for chip factories, EV plants, data centers. But unfortunately, in our current environment with high interest rates, the uncertainty of tariffs and immigration policies, developers are deferring decisions on moving forward with projects. So it's really the delay in starting projects that's having a profound impact on our trading.

39:36 Thanks very much. Another question here. How big is the installed base in The United States? How fast the management think this will grow, and what is useful life of SOMERO laser screed equipment? Yeah. We we look at our installed base from a replacement cycle standpoint. Generally, our equipment are replaced between five to ten years, depending on the utilization, whether it's a large or smaller project. We've got thousands of units out in the field. In terms of growth, I mean, obviously, that all depends on trading and sales, we are tethered to the market overall. However, with the introduction of the Humorhead and entering a new customer segment, we would certainly expect that the additions will accelerate.

40:29 That's great. Thank you very much. You're two months into second half, which will require a meaningful uplift from the first half. Have you begun to see a turnaround that allows you to be comfortable with this forecast? Yeah. We have been trading in line with our expectation for the last two months. Certainly, we expect the second half to be a stronger period compared to the first half, in part due to an uplift from seasonality that we typically get, as well as contributions from new products. Fortunately, we have a bolus of quotes for our $485 which is sort of the next in line from the hammerhead. And for a variety of reasons, including price, customer decided not to buy. That's the low lying fruit where we can go back to with the Hammerhead offering at a lower price.

41:21 And we're amping up our dealer sales as well. That's great. Thank you very much. We have answered lots of questions in today's session, so we just have time for a few more. Parts and maintenance is circa 20% of sales. Can management quantify how they want to expand that service slash maintenance part of the business? Yeah, that's a great question. So today that 20% of sales encompasses aftermarket parts, aftermarket service, as well as accessories that are sold with new machines. I think that number, Enzo, would vary between 15% to 20% historically as a total percent of revenue. We see opportunities to grow that and get more recurring revenue going forward. We've done some recent work to expand some of our larger customers in terms of fleet management.

42:11 So wherein they want us to come in to assess the equipment, actually take care of the service and support, we have opportunities to capture a higher cap rate of those service parts overall. Again, this will be an element probably of our strategic framework as we go forward. So we haven't quantified that opportunity yet, but we're looking to grow that as a percent of total sales. Thank you very much. What percent of sales are to equipment rental businesses like Sunbelt and United Rentals, etcetera? Yes. Go ahead, Nelson. Yeah. So currently, we do not sell to the rental houses such as Sunbelt and and United. The the rental that does occur is through our dealers. Our dealers represent our small line, and on occasion, they will rent the machines to customers. The Hammerhead will fit right into that model for our dealers. So initially, we're gonna start with the dealers, both being able to rent as well as sell, and in the future, we'll consider the independent rental houses.

43:10 That's great, thanks very much. And just one final question. What was the need for a strategic framework? Yeah, that's great question. As a company, we've had a strategic plan and strategic initiatives focused on innovation and international growth. As I come into the organization and wanna engage the broader employee group and management team, we want to expand that participation into really defining our future. And those strategic pillars really define the themes or areas of focus for us. So when we talk about Fortify and Innovate and Amplify, it provides opportunity for us to grow in a lot of different areas in terms of continuous improvement and process and growth and innovation, as well as expansions of those markets that we have. So it's really an aligning tool for us to bring the rest of the organization in to make sure what we focus on is aligned with those pillars and things that aren't aligned with those pillars are things should not focus on. So it's a guiding light for us as we move forward as a company.

44:03 That's great. Well, thank you very much for being so generous with your time and answering so many questions from investors. Of course, the company can view the questions that have been submitted today, we will publish a response on the investment company platform. Just before we do wrap up, Tim, if I could ask you for a few closing comments, that'd be great. Yeah. Thank you very much. Hey. Thanks to all of our shareholders for your continued trust, our employees and your dedication and hard work. Our employees are very dedicated and passionate. As an organization, our team is doing an exceptional job of navigating the current business landscape while keeping a sharp focus on our long term strategy and objectives. I'm really proud of their collective efforts. We're steadfast in our commitment to delivering long term value through customer focus, innovation, and building strong, trusted relationships. So thanks again for your time today, and enjoy the rest of your afternoon.

44:50 That was great. Well, thank you both for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback, and all the management team can better understand your views and expectations. Half the management team of SOMERO ENTERPRISE, we'd like to thank you for attending today's presentation, and good afternoon to you all.