Merger Strategy & Upside Modeling for Production Supply Venture

We've heard that pretty bluntly.

Hey, Katie.

We've heard that pretty bluntly from internal and external capital partners. Like, what the fuck is this thing? Like, what is it and where— what is it doing? And over the next 3 years, like, and very strangely, people are still wanting to see a hockey stick, you know what I mean? Which I feel like is really more of just like a can you put an optimistic case together and defend it exercise than it is. And like, this is what people are going to get sold on. So that's how we've approached it, and we can kind of get into that. But to that end, I think the point too— and sorry, JD, we— Sean was caught up and then we were just kind of catching up on some of the other pieces. But the point too on this is I think the landscape across which we are currently negotiating is going to remain challenged in the sense that what I was just talking about, it's like for our group to get comfortable more or less with like an economic structure that is compensatory for the go-forward risk associated with that current kind of supercooperation, it's going to need some horsepower and just some like, you know, I guess third-party verification, if we're trying to solve for this solves the problems, I would— if I'm Victor, I want someone else other than the problem solvers, like, telling me, like, yeah, this is kind of a thing. And it, you know, there's some backends up there. So I am looking to bring in an investment bank from an advisory standpoint.

Okay.

And it's probably going to be American Discovery Capital, I think.

Yeah, I think we've done work with them.

You have? They repped you guys when you took down Zio and Star Wagon, and they repped Coyote, um, in their sell side. So they were buy side for Zio Star Wagon, sell side for Coyote. Intrepid was your buy side for QOD.

I'm pretty close.

I'm closer with Intrepid than I am ADC. However, I think that ADC has a better handle on this little corner of capitalism. And I think that their recent experience with Sinaloos and Lewis carving that out of a publicly traded company, you know, is a bit of a feather in their cap. So I think pulling them in to kind of help us more or less validate, but also really accelerate the pace at which we are moving on this. And I think that they're going to be able to provide some extra horsepower on a lot of the backend diligence pieces, as well as just like, they're gonna have more tools in their tool belt in terms of like, mechanically, how do you put this thing together so that parties are achieving their goals?

Yeah.

Thoughts on that? Some information for you. I actually think that we recently re-engaged ADC on some work around valuation, right? So I share that more just like, I think that there's a level of trust and familiarity with ADC, with NHPP. And so provided that that work doesn't conflict them out of this work, they probably are the right partner because it shows that like, okay, they truly do understand this.

And that honestly, again, that's confirmatory. And I think we'll find out really quickly if it conflicts them out. Yeah, because really what I was trying to figure out there on the third order is, are they conflicted out because of Dargenzia? Like, I think, um, I thought about that one, who I've also— but like, I'm interested to stress test some stuff. But anyway, I think they're good too. I think they— like, I think they have that. And even if not, like, I think Intrepid's a good number two, but I'm looking to kind of introduce that here. Because, you know, although we are the furthest along, I think that like our structure is probably going— I would imagine our structure is maybe the least straightforward relative to any other group you might be talking to who has a like cash component, which we probably never will. So let's start that. Good to hear you've kind of already engaged them. I will not bring that up. In any conversation we have with them. But I think that if we are able to achieve that kind of like, I guess, mutual or parallel engagement, and all part— or if we can't, but all parties are okay at least engaging them or signing some type of conflict waiver here or something, we can go— we can see where that goes to. Okay, number 3 is the kind of like upside case. JD, if you're teed up to pull that in, let's get into that. Yeah, I'll pull it up.

It's—

I got to tell you, it's so, I don't know, refreshing. Also, it's been nice that I think of all of the people in our little ragtag band of misfits, Mike Dos Santos has the most polish. Uh, so glad that's the one you're—

I actually called Mike this morning.

Uh, he just landed. He's in LA.

Oh, I, I figured he was on a plane.

Yeah.

Well, did you hear the backstory that we're from?

Like, for some reason I had a feeling. For some reason I was like, these two assholes have got to know each other somehow.

Yeah. Oh my God. Yeah, dude.

Great, dude.

Yeah.

All right, JD, hit it.

Um, so the original projection didn't have any upside cases baked in. The way that we kind of built out the upside cases was having an effect on either the price or volume of all the assets that are being, uh, run through the business. So effectively, if you just look at revenue, the only components that we really look at— utilization, price, volume. So the upside scenarios that we modeled were threefold. It was acquisitions, different types of business lines, so more into live events and less so in the entertainment space. And then also a changing of the way that we do business with the entertainment space. So going to the line producer level and the studio level, level rather than going to transportation coordinators coming to us and, requesting equipment. So all those items all have their own different cost structures associated with them, but largely the contribution margin of each of those is pretty significant, I think, because all the fixed overhead already exists. It's just now about pulling more assets through that system or pulling them in at a higher frequency, or out for longer-term rentals. So the additional acquisitions, we moved Rather than saying here is the Georgia entity, assuming that's a part of PacaCo, let's make that an additional acquisition and kind of have that pull through so we can see just what we have in the LA and then what you guys have in the New York and Georgia on a standalone basis. Great live event expansion going after more on the festival side, assuming that the trends hold where more people are looking for more live events and that's kind of the the, uh, the offset to all the AI items where it just becomes a bigger percentage of what everyone is spending their time and money doing, going out and getting more of that new business that develops from the AI side. And then the new production companies and how we interact with them, going to the line producer level and trying to get exclusives through some sort of agreement with them, or even going up higher to the studio, although I think that's heavier lift than going to the line producer level and trying to work out deals with them rather than letting the coordinators source their equipment through multiple different vendors. Um, each of those has their own considerations. I think there's some price concessions that need to be made for those second two ones that I highlighted, but utilization should go up, um, in relation to that. So when you kind of layer in those three, each of them have their own incremental revenue and EBITDA assumptions built in. Because they're mainly utilization drivers, not necessarily a ton of additional overhead. We assumed that the, that additional revenue is pretty profitable. So if we go to our summary output here, you can see the new financial performance of the business 2026, assuming nothing has really changed, and we start to ramp up from '27 to 2030., getting up to $26 million of EBITDA on $93 million of top line.

So, and that's just, that's just the base case we're looking at right now, right? Like none of the, because it doesn't look like any of those other upsides are flowing through.

Is that right? No, these, so this is with the upside. So if we turn the upsides off, I believe we should be back at, uh, where we originally were in, which is in that $7 to $14 million range. Yeah, so here's, you know, 6 to 14. Thank you. Yeah, um, on revenues of $74 to get to that 14. So I think the thing that is still, I think, uh, conservative about this projection is that we're not projecting 40% EBITDA margins here. We're still looking at 30%, whereas historically we've seen when these companies are succeeding and thriving, they can do 40 to 45% EBITDA margins across the board. So there may still be some upside on the operating cost piece, but in terms of revenue, I guess those 3 growth avenues, do those make sense? And does the methodology make sense from a, uh, I guess, how would you drive additional performance out of this business?

Yeah, I guess another sub-question is just, you'd spoken to low-hanging fruit and/or there being things that you might have a gap towards achieving due to the nature of just being a publicly traded company. So I think getting some sense of what— how— if that's reflected maybe in any of these scenarios.

Yeah, yeah, let me think about that one. So let— can you go flip back to that tab? Um, so just in no particular order, just the live events thing. Can you just go down there real quick? So the Just the thing I'm thinking about this as a kind of an upside versus base case, because we actually do a fair bit of events work today. So this would be kind of a growth off of, you know, a base of events. So I wanna be careful about, you know, this isn't going from like 0 to 1, right?

Right.

Can I respond to that? Yeah, go for it. We know and we have that, we assume that the existing event revenue is already captured in that kind of base that this is representative of. And maybe this is, JD, where we tie these two together, is that like this would be— if we need to eliminate 300 or 400 trailers anyway, it's retrofit 100 of them and reposition them to Atlanta and/or some other hub and capture your ACLs, your Bonnaroo, your just kind of East Coast music festival kind of opportunity, um, and that's where your upside or incremental revenue is coming from.

Yeah, I mean, look, that, that's exactly where we see it today, right? Like, we don't have the size of a fleet out in Atlanta to really capture some of those bigger ones, but, you know, I always hesitate to kind of like share some of our internal workings, but like Like on the West Coast, like we're, we're pretty like dominant to the event space.

Like you're the only ones. Anytime you look on Instagram and someone's like backstage at something, like they're at a Starbucks.

Well, yeah, because like the, the essentially the, the, um, the clients that want to call one vendor and they're like, hey, I need 60 trailers. Like there's nobody— like yes, a lot of us are lowly utilized, but like 60 trailers is still like some people's entire fleet.

So like it's 60 trailers that you're okay having a decent amount of L&D to, which translates to downtime like for a short period of time, which requires a heavy lift logistically. Yes, you kind of want to—

one there. Yeah, so that's why I think like Atlanta is— if you're thinking about that as like kind of, uh, geography expansion, yes, I think that's, that's how I would think about it as well. Um, so we're already thinking about it. Um, so how do you— I guess just what are the formulas that are running through this? Like, because obviously there's no— we're not counting any of the trailers as specifically trailer units.

So there's a little— there's some assumptions being made here that I could probably have your, uh, help stress testing. So I don't think you guys— maybe I missed it, but I didn't see any utilization data, so I kind of had to back into what I thought your guys's utilization data was between the truck and trailer fleet, um, and then you— and then using rates. So I assumed your guys' rates were about the same as ours and then backed into a utilization based on revenue from there. So gut check-wise, is 24.4% on trailer and 18.2% on vehicle utilization accurate for 2025, or is that understated or overstated?

I think that's probably right against, against a, um, an inventory of 707 trailers. Yes. Yeah, the, the trailers that you had on Yeah, let's just, let's do some backgammon math real quick. It might be a tad high, right? I'd probably— it's probably with that trailer count, you're probably a little closer to 22.5, 20.

Um, okay.

So, but I'm sure that if this is a probably a very material assumption in the model, let me follow up with you guys, right? Like, I don't want to Right, shave off like $5 million of EBITDA because I just did some, you know, napkin math here.

So, well, so the, the way that we've always looked at utilization is like, yeah, you have to take into account what the base like vehicle count you're actually looking at is, right? You can be 100% utilized on one vehicle or 10% utilized on 1,000. You'd rather be 10% utilized on 1,000, that's 100 vehicles. So, um, the way that the model works here is that it takes our utilization and your utilization, blends it and then projects it out going forward using these static blue cells. So this is just the baseline assumption that I'm building out for these vehicles based on these counts and these rates per day for each one. And then the upside takes whatever the projection in the upside scenario is and adds it or subtracts it, subtracts it from one of those three indicators. So if we're looking at the live event, I'm saying the change in average rate per daily trailer is slightly decreasing because I imagine those will be lower. That would be a lower average rate for live expansion, live events, but that might be wrong. Maybe we need to assume it that's going to increase rates. Um, and then an additional train change in trailer utilization. So for 2027, if our baseline assumption is we're going to be 30% utilized on trailers, now we'd be 31% because of what we're able to do on the live event side.. And then same way for the new production company, or the way that we go after the production companies, um, and the additional acquisitions as well, how that would affect, uh, those 3 variables.

Yeah, but I think barring the, um, but barring some like competitive force like a CES getting their shit together, um, I think that the rates on the live event expansion probably increase, not go down, because you can charge a premium, at least from what we've been able to surmise.

We're currently getting a premium versus— I mean, it's really just as simple as like long-term versus short-term, right? Like, yeah, put a trailer on a show for 10 months versus like, hey, you got to send this thing out to the desert for 3 days for, uh, Coachella. Like, we just get the premium on the short-term rental, and unlike we look at on an ADR basis, right?

Oh, right on. Cool.

Yeah. Um, and when you guys are looking at utilization, are you looking at— is it, uh, time utilization or is it— it's not revenue utilization, right? No, it's time utilization. Yeah. And then are you looking at, uh, the— how do I ask this— the ability to turn the vehicle? Because some, like, for example, uh, trailer goes out on rent, it gets a week on both sides of the rental, um, in hiatus, and then there's time in the period of the rental where there's hiatus. Is that full period of rental— is that 100% utilized, or are you taking it on and off rent during those periods of hiatus to kind of reflect that it's not earning revenue?

It's a great question. I'm trying to remember how we— I, I think what we do is we keep it on rent so it's utilized but at essentially $0.

But I mean, that's a more of a Pat question. That's how we do it. And then we take the average daily rate over the life of the rental. So, um, if you're make— if you're charging, uh, $1,000 a week, we're looking at an average daily rental rate of $133, or whatever that 1,000 divided by 7 is, so like $142. Um, rather than saying, well, we made $200 a day on the rental, but we only rented it for 5 days a week.

Yep.

Um, okay, so I think we're aligned, uh, methodology there. Um, I think the reason I had adjusted the trailer rate down was because I assumed there was a lot of logistic time getting it to and from the location, that even if we were only charging the festival for 4 days or a week of rental, that that vehicle would actually not be available for 2 weeks because of just the process of getting it out there, getting it back, any time that needed to like get that vehicle back into service. Um, Maybe that assumption is incorrect, but I think that was the—

No, that's pretty good. That's actually— well, Sean, to confirm, but I feel like that isn't— it's not bad.

Look at it, right? And in the spirit of being conservative and not overestimating what we're able to do, I think that was where that came from. So yeah, that would be the live event expansion piece. But if we look at— we're keeping the baseline assumptions the same, we're not changing anything on the trailer or vehicle count. Um, the other way to do it would be take 200 vehicles per trailer out of this fleet, but then up the utilization to be representative of what we otherwise would be. So if we're at 30% on 775, we're looking at somewhere in like the 220-ish range. Um, but then we can go down to 500 and say, all right, utilization is going to be 42, 43% and get the same number. So I just kept that static for the sake of, uh, making it easy to change on the fly if we need., but then assuming these baseline levels, which I don't think are, uh, considerably aggressive, I think these are all very achievable, um, just based on what we've seen. I mean, Avon itself did 40.6 in '25, um, and 25.7 on the trailers. You guys were 24.4 and 18.2.

So, and that's before a Q4 opportunistic, like big downsides. Like we got a— we caught lightning in a bottle and were able to basically defleet—

what was it, JD? 80 units? Yeah, it was—

it ended up being 80 and change total at a good price. So like we were pretty stoked on that. And as a result, utilization now this morning is clipping like 55-60% on the vehicle side, which is nice. It helps us kind of— it helps us like kind of feel a little better about getting closer to right-sizing relative to the demand that we talked about at the top of the call.

Yeah. So do you want to go through each of the upside scenarios just kind of one by one? Like, you can I can send some notes, or if you want to send this to me and I can kind of make some comments, send it back. But just at a high level, what I'll probably do is look at like Atlanta. I kind of know what we do in Atlanta today, and I think if the idea is like we're going to kind of take— like, your fleet I think is zero, or do you consider TR part of your fleet out there?

We consider TR part of our fleet out there for now, but it's a toggle. So to be clear, uh, the version of the model I reviewed with you guys on the call last week included them as part of it. Now it is separating them out as an additional acquisition that you can toggle on and off. So if I turn it off, you can just see what Avon and, and all of Coyote's assets and operations do. There's no TR involved and now it's included as a toggle.

You go on, right? So safe to assume they have like 40 trailers.

Is that 30 to 40 trailers? Is that right? They have 90 trailers. So this is their, this is their account right here.

So they've got 89 and 159 vehicle assets. Got it. What about the QD Atlanta trailers?

Do we provide you guys with that count? Uh, we— not on a geographic basis.

It was all just one blended count. So, oh, so that 707 is inclusive of probably non-LA fleets?

Uh, yeah. So there, the 707, here is the information we received from it.

So here's your trailer breakdown. Got it. So is the revenue that's shown in the upside, it's based on just TR, not— that's correct. Oh, got it. Got it.

Got it.

Oh, $5 million today.

It's bigger business than us for sure. Very small percentage of their revenue is derived from LA-based kind of stuff. They are— they use it as a hub, um, but I would say 10% of revenue is Atlanta or Georgia based.

Like specific— yeah, it's their mobile.

Yeah, they're going around the country. Yeah. So I probably want to go look at just like what we've done, like ring-fenced to our Atlanta trailer business to kind of as a comparison to what this upside is, right? So I'm assuming this right here is really just What the— it's like you're taking the TR business from 0 to 1, so like it probably does around $5 million in revenue today and there's just a growth rate applied to that over the next— correct, that's right.

Okay, so there's some incrementality on top of that if we include the COTY part of this?

Yes.

Yeah, well, no, wouldn't that be captured in the base?

Yes.

So I think it's one— so do it like— so this is kind of— this is just a 0-1 thing, there's no, um— do you need any input from me on the TR part of the Atlanta.

No. So I— we can get it. We can get very granular with this model about like what do we think Atlanta is going to do over the next 5 years for like TR or QOD specifically. But for TR, no, we don't need your, your input. This is just either they're in the fold or they're not in the fold.

I agree, JD. I think that's it. I think it's any, any kind of adjustments here is specifically kind of QOD, Starwagons related.

Opportunities.

Again, maybe this is where tying it back into Phase 2 or Scenario 2, it's like if we were able to do some of that, or if we wanted— I have to believe that you guys are out there cutting people off at the knees like we're trying to in Atlanta on production supplies, um, with whatever Hot Bricks or Bunker, whoever it is out there. Um, but like the— or sorry, it's also Apache. I think there's a conversation in this of just like the— if demand continues to collapse or stays plateaued, I think that there is a— if you think about it from the economic law perspective of where we are in the industry lifecycle is just like the person with the best economies of scale and the ability to offer the lowest price. Although this is a weird place where relationships do matter, price is not always the thing, but we're increasingly seeing price start to trump relationship. Yeah. And where we're seeing that the most is Atlanta, um, and that's where we have, you know, our little outpost or beachhead on HDR correction supplies is doing something. It's doing, it's doing something for us, um, as we do that.

So there's that. Got it. All right, so do you want to—

yeah, scroll down. Yeah, so here's the live event expansion piece. Um, the only thing that I originally had personnel in here, I, I'm not sure how it got deleted, uh, but I did assume that there would be some sales personnel included in getting more live events, spun up more activity. And then I did assume the gross margin. We usually go 80% across the board. I assume this would be a little more, laborious just getting things out there, especially if you have to deliver them. Um, so I assumed a 75% gross margin. I can't remember what I assumed for salespeople. I think I said maybe $300,000 just for dedicated sales resources that would kind of make 2027 or whenever we started the initial, um,, pilot, more or less break even, and then it would start to pay dividends in '28, '29, '30.

Yeah, I mean, look, we, we have dedicated events resources on the sales side right now, so those should be baked into our underlying, uh, cost numbers. So as we've kind of talked about, I think some of this is— most of this is probably kind of geographic expansion to new markets. And so how I would think that would work is like we just have one guy here who just I mean, he crushes on his relationships with events, right? He's just like, he goes very deep with them. He's been doing this for a while. The same event company, like Golden Voice or Live Nation, wherever, like, they're, they're— it's, it's one company that's just, you know, setting up different named festivals around the country. So like, the geographic expansion still probably just has the same point of contact. You might just need like a rental agent kind of out on the East Coast to help, you know, facilitate some, some some of the local aspects of the sales process, but like I wouldn't foresee major incremental, at least sales resources needed to expand that. I'm assuming that personnel number though is inclusive of ops and, you know, more guys to turn the trailers and all that kind of stuff. So yeah, I mean, these I think in order to get the 4 million number, I guess what you probably have to believe is that we are truly nationwide and into Canada. Um, just for kind of, you know, uh, point of, um, comparison, in the LA market— sorry, I'm using LA market because LA is our hub, but like we have pretty good coverage kind of up and down California, Vegas, kind of all the warmer weather climates in the Southwest. And through that alone, I want to say we do probably $3 million in rentals, probably $4 million when you account for service costs, delivery, pumping, stuff like that, L&D. So incremental $4 million. The Southeast is a little more seasonal than what you get out here. So it's a little bit of a smaller market. Um, so I think kind of replicating what we've done out here, out there, would probably get you maybe 2 of the 4.

Okay.

So then you got to kind of, you know, be up in the East Coast, which is even more seasonal, you know, capturing kind of, you know, kind of same market share up there. Um, so that's— so it does feel like, as just, just comparing it to kind of what we see out on the, on the West Coast, it feels a little bit high because I don't think there's much more growth opportunity for us on the West Coast. I think that we've you know, kind of hit the— we kind of hit every, every potential, uh, thing that's out there right now. Okay, so it's like, it's gonna be super off. It may be closer to 3 as opposed to 4 in year 5.

I mean, so maybe the way to look at it would be, um, the change. So if we're— assume we have 700-ish trailers, each percentage would be 7 additional trailers always out throughout the course of the year. If you're doing $3 million in revenue right now It's safe to assume that— I guess, what percentage of your overall trailer utilization would be specifically festivals and live events? Would that be like 20-ish percent?

No, maybe a little less. Uh, so you're saying like of the 20 to 25 points of utilization do we have, like, is it—

does it represent 4 points or— Right. So yeah, you have 25 utilization right now.

Is live events 5% of that 25%?

Depends on the year, depends on the month. Well, we're looking at it on a blended, on a yearly basis.

Yeah, blended across the year, yes, probably 3 to 5% is my guess. Um, the, like, the ADR is slightly higher and the utilization is definitely lower. Okay, so, um As like a weighted average. Yeah, like it's gonna, it's gonna take down your overall weighted average utilization, but you make up for it on the, on the—

you raise the weighted average ADR when you do that.

Same like commercials, effectively.

Exactly, exactly. So maybe the other thing I'll throw into this is, and maybe this ties back in on the other side there as well, is lunchbox guys running a steady $2.5 to $3 million in revenue, pretty decent EBITDA margins because he runs it like a shoestring out of a shitty trailer. Y'all took a look at it 3 or 4 years ago. Y'all know that as well. It stayed fairly resilient. He has zero live event business, and it's shocking. Um, and we think that as the, you know, as things progress, that there is a— there's just an increment, there's an attractive acquisition price, that is incremental revenue and EBITDA.

And we still, I think, have line of sight to like $750K of cost takeout on that.

Yeah. Larry's getting pretty old too, right? He will tell anyone that he's just met, he wants someone to buy his business so he can retire. Yeah.

Not the only one. Yeah. Heard that same song and dance from a lot of the coordinators who own their fleets. They're like, totally, I would just buy this thing for me so I can get the fuck out of this.

Totally. Look, I'll tell you, just throwing this out there as well. We think George Sachs is another opportunity for that. I mean, that, that is a fucking whale in terms of just like the amount of demand that he represents. And there's not, not a conversation around that, I think, like, because we're not opposed to buying revenue, or figuring out how to just acquire the revenue if the size of the pie is staying the same.

Yeah, yeah. I mean, George, I know, definitely isn't ready to retire, but he's— I could, you know, managing a fleet while trying to coordinate 3 shows at a time is a lot.

He's been talking to us for years about it, and he gave us terms that just were like, I'm not gonna do that. Um, you know, in hindsight, maybe we should have taken it more seriously just because of what it like would have represented last year, but yeah, still.

Yeah, he's a one of one. He's a very unique— he's a human in terms of his personality. And yeah, he represents just a disproportionate part of the transport revenue in this— in LA.

Yeah. Okay. Um, okay, so I changed the assumptions there to basically max out at 2.75% of additional trailer utilization. But then reversed the kind of declining rate hit from additional live events to an increasing rate hit. So if we assume that the average trailer rate in 2030 will be $2.81 per day, which is just a 2.5% increase every year for 5 years, then this additional, uh, $5 would be like another 2-ish percent increase, um, which I think is pretty, a pretty reasonable assumption. So I think the, the impact of a live event like targeted expansion, or maybe expansion isn't even the word, maybe it should just be growth. Um, the net impact would be 1.6 to EBITDA and 2.6 to the incremental revenue, um, by 2030.

Yeah. Yeah. That, that feels a lot more kind of in line with kind of how I think of the market sizes, right? The opportunities are— okay. But James, you brought up the personnel part of it. Just see, um, I spent a little bit of time yesterday trying to map out a sales org structure. I know that's something that I, I probably owed you for a while. Um, so I finally kind of put some pen to paper yesterday. I'm hoping just the next— I just need a little more time to, you know, get my head around it. What I'll probably do is send you guys something and just say, hey, look, like, because what I'm doing is I'm just doing boxes, no names. And I'm also trying to just, you know, I probably have some questions about how you guys consider admin, right? Because I'm looking at the different files, like I think most of your kind of like junior level salespeople, I think they fall in like a, some of them fall in a sales admin bucket. There's also like a sales column in one of the headcount, you know, things where it says like corporate admin. So like, I'll probably have to come back to you guys some questions. Like, I'm like, hey, here's my proposal.

How does this fit in with what you guys have? Sure. Yeah. We, the, we, there, sales, if it's not someone who's like a, um, a highly compensated employee who like is a relationship holder, all of our additional salespeople just fall into the admin bucket. They're more or less rental agents at that point, not necessarily people going out and driving revenue.

Yep.

Got it. Um, okay. So I think this new production company exclusive arrangements, we're going after the line producers, going after small-time production companies, just trying to be, trying to own more captive, um, business where people come to us exclusively for everything they need on a transportation production supply, basically all those below the line items. Um, we've never really been able to offer it because our breadth of trailer offerings isn't enough. We don't have office trailers, we don't have wardrobe trailers, we don't have specific kinds of office trailers, makeup trailers, those kind of things to actually fulfill the need, but everyone can have the opportunity that this provides is we have the breadth of offerings you guys have with the trailers, um, as well as the, um, capabilities from an operations side to actually make sure we can fulfill these, these opportunities. Um, and then just from a, like, the way that it drives the, uh, the, the assumptions here, we would assume we would have to offer a better rate, which is why you see kind of a cascading lower rate across the board., as the years go on, but a significant increase to the utilization because we have more steady recurring, utilization demand because these productions will be coming to us every time a new production part, starts up. They'd be taking things from production to production. Um, it would just be, it would be a much more predictable business that I think we all want to be in at the end of the day. Um, if we are successful here. Um, and then the, yeah, the incremental revenue is aggressive. Um, but I do think that if we add up, let's just say, just to like, um, right-size where we are, this change in trailer utilization combined is 2.8% and 9%. So we're saying we're going to add 11, and then this one's off, not, um, active yet. So we're saying we're going to add 11.8% of trailer utilization to this 30%. So we're still only at 41.8% with these assumptions baked in there. I still think there's a ton of upside, but but in the, in the spirit of being realistic, I think this is a good baseline just to show what is possible.

Yeah, I think the thing you're going to start fighting if you lean too hard into that, like there's a ton of upside, is, well, you're already ramping from 7 to 16 between year 1 pro forma and year 2, and like, you know, from 16 to 20 and so on and so forth from there. And then I think the question is like, where? Like, I think that upside, as JD and I talked about it yesterday, was like, it's— yes, it's getting that kind of production company level, some of those that like the 101 Studios replacing, you know, BI there or in some of the other bigger ones, or it's achieving that kind of like holy grail that we've talked about. And like with Paramount and Warner is now back in the whole position, I, I have a line of sight to making— to at least getting a shot on goal, to— and there being a receptive audience where there has not been in the past.

But yeah, um, yeah, like in some ways, like to hit the— I think, I think the 8.5 in year 5 is probably assuming you get— you kind of land one of the holy grails of a major studio become the exclusive. And like, I do think you're right. I mean, like, there's no freaking way they're— they're gonna be looking for pennies everywhere after this. Yeah. And so like, I mean, like, just a trailer exclusive where you get 10, 15 points or something just in exchange for the exclusive, like, it's, you know, it's just— it's waiting there for them, right? So, um, yeah, I'm surprised that they— surprised I was doing it yet, to be honest, because it's not as if like we've all been like living you know, things have been like everyone's been fat and happy for the last few years. It's been rough. I don't know why. Like, we're, you know, we just haven't passed that tipping point, I think, where the coordinators, you know, the Teamsters have a stranglehold on things.

But I do think it's the Teamsters, but I don't think it's at the coordinator level. I think it's in the same way that the stevedores on the docks have been able to successfully fend off more automation. Like, you have these, like, black book agreements embedded in each of these, you know, legacy studios that is sort of self-perpetuating. And it would take, um, kind of what we talked about, I think, whatever, last month or so, it would take kind of like a more aggressive stance on just like that this isn't working.

Yeah.

And so that's, that's a separate kind of, you know, thing to flesh out, but we have some, we have some thoughts around it. But JD, what happens if you remove this piece of it? I could just turn it off and then go back to the summary.

Hell of a, hell of a jump. Well, you're also, you're bringing in, uh, TR and you're assuming higher utilization because the other thing that this assumes is that in 2026, we only have 3 months of combined performance. So the utilization levels are extremely low, whereas in 2027, we are combined for the entire time. So we have an increase in utilization based on that. And this is all being driven from the fleet KPIs here. So if I were to say this goes from 27.5 to 30, 32.5 to 45, if you were to take this down to 37.5, let's say,, then you're going to see the adjustment. Now it's 16 to 13. So that's really the big driver there is just that increase in utilization with Coyote's assets because we're at 40% in, um, Avon is at 40.6% and then Coyote's at 18.2% for a combined 30. So assuming we can get higher utilization out of those assets.

That's one of the main drivers there. Okay. Okay, we're coming up on time. Can you recap? Kind of, let's recap this, like a couple of action items and next steps. CBAs would be really helpful.

Like, if we can get a jumpstart on figuring that out. Have we not sent those over yet?

I mean, I feel like you guys have probably asked them a bunch of times.

We've asked for them twice.

Yeah. Let me find out why we're not sending.

Yeah.

That would be very helpful and would just give— I would tell you that that's probably the biggest missing, like, operational piece that will help bolster credibility for that base case being possible. I think that's order of importance. That's a big one. Second down from there would be any of the kind of like cost takeouts or synergies that you guys have line of sight to, however, like rough or conservative to just— I would say that that would be y'all's kind of contribution to getting that base case. And then maybe your thoughts around or whatever kind of stream of consciousness thoughts you have as you react and digest to some of this upside scenario pieces, those three. On our side, I am hoping to get some semblance of clarity with American Discovery Capital this week. And we'll see what kind of the outcome of that. I think, you know, understanding that there's already kind of like a parallel engagement is helpful.

So we'll see where that goes. Yeah. So just this cost takeout or synergy, is this essentially— are you looking for kind of any pre-merger cost takeout that we are going to already have done, or it's just like What do we think the cost takeout is on our side? That—

there's 9 people in production, supply, sales currently baked in, um, to the base case. I think you had said specifically, like, there's probably some opportunity there.

We don't know what that is. Are you looking for this? Like, I can provide them the sales team, that's what I'm working on. But I assume you're looking for it—

are you looking for more broadly on the ops side as well? I guess that's true. If that's on the sales side, then yeah, then that's already going to be achieved. So trying to think. Oh, the only other thing, and this is really not a mission-critical must-have thing, is like West Hollywood stage visibility. I think like solving more settling more or less with finality, some kind of like, and I don't know how serious it was like proposed, but just like internally there's interest and/or appetite that we're suspicious and dubious of. But I think understanding what we're actually looking at and discounting whatever they think they're able to do with it It's helpful understanding, though, that it's not just like kind of the stage as, as y'all's commercial economics, or it's, you have the stage, you have the commercial vehicle services, and there's some disaggregation within that as well as the production supply piece. But again, I don't think that that's mission critical. Jenny, is there anything else that is like, would be very helpful?

To, if not have, have on hand as this progresses? Um, I think the carrying value of the assets or just a detailed asset list. I mean, we still need to understand like what is being contributed, um, and putting some sort of valuation on that component because that's kind of the crux of our entire structure.

Um, but I think James hit on everything else. Yeah, we assumed that the remaining goodwill was going to get written down. Um, But I still think that's like a separate kind of carrying value.

There's still carrying value kind of component. Yeah, let me, let me check. I do believe that as part of our last quarter, we did probably eliminate a lot, if not all, of the remaining goodwill.

But like, that's it.

I've asked that question. There's $8 million left, just so you know. Is there? Okay. It's a question I've asked as well and haven't gotten an answer yet, so I'll—

yeah, we're We're all after that one.

Okay.

Um, all right, all right. Um, anything that would be helpful for us, or anything that we can kind of send you other than just maybe a, another version of this for you to play with?

Nothing right now. Look, let me, let me kind of help push this stuff forward. I think, um, what I'll probably do is like maybe see what I can get over to you guys, and then we'll probably maybe want to reconvene with Steph, I guess, um, just kind of make sure that, you know, she and Pat are involved pushing this process forward a little bit.

That was one final question I had. What is Pat's role? Where is he in the, I guess, entities? He on a Hudson person, or is he a Coyote dedicated asset?

He's a studio dedicated asset. Um, so he's essentially the equivalent of like our studio CFO. We had a CFO who left, and then as opposed to replacing a CFO, we kind of promoted Pat to VP. He kind of serves all of her roles. His direct reporting lines are into Harut, our company CFO, so he's part of the finance org, but the only thing he works on is the studio. So he's a dotted line into staff. It's a messy org structure. Um, the, um, I mean, look, I have you guys for 2 minutes. Let me just ask this. We were kicking this around last time after we got off the call with you guys. We were talking about kind of like deal structure. I think a lot of the value you guys are solving for us is solving our problems, right? Don't answer this question if you— I don't want to get ahead of a conversation that you want to kind of pitch more formally, but like, I was reading between the lines and thinking that maybe what you guys were thinking was that there's no equity stake for Hudson on the back end of this, like the, the compensation we get is kind of solving our problems and not having to report on this. And like, that could be a very fair offer. I'm not even saying that that's not, not fair, but like, it's a, it's a, it's a very kind of binary thing. Like, hey, do we have any kind of future upside on this, or is essentially like the benefit we're getting is like, today we can stop, we can eliminate the QIOTI earnings drag immediately. I mean, I don't know if that's something you guys are willing to talk about right now, but I know it's something we're— it's been a topic of discussion.

I think we're waiting for the other shoe to drop on that conversation. Forgive me if I'm making you walk away. No, it's actually very, very fucking helpful. And it's why I asked about Pat, because I We do not feel like we can be as blunt on the group call. That's why I said the thing about the union stuff as well. I don't feel comfortable talking about it. Yeah. JD, I don't know.

Why don't you respond to this as you have a way of putting it more effectively? Yeah. When we look at the valuation methodologies, if we wanted to just put these two together and say like, here's what you're contributing, here's what we're contributing, I think there is a reason to justify that we would just be taking it off your hands and not getting an equity component. I think we are motivated to make it happen. So I don't think that is something that we're trying to like come out and say like, well, here's what we're doing, take it or leave it. We want to— we're motivated to get something done. I don't think the equity component would be substantial, but I think a minority investment in order to, or a minority equity stake to say, here's a motivation to get this deal done. We get these problems off your hands and there's some upside going down. And whether that's in a preferred equity structure or your, for your common, or if you get some like rev share, whatever that is, just to kind of make it more attractive and be a catalyst to actually make this deal happen. Um, but it would, if it was going to be something like that, it would be a minority stake. It has to be a minority, right? Just to fulfill the control piece and just to be commiserate with the, the risk and operations that we're taking on going forward.

So I honestly can be blunter. I think that I kind of spoke to it last time. It's like, either you want participation and potential future upside, or you want the problem solved wholesale and shore off like the ongoing risk and responsibility. I think Stephanie's response to that is helpful, but it also doesn't necessarily clarify, like, where the parties can go or what y'all are, I guess, solving for. And it's why the, like, internal temperature check kind of question. I think that if I had my preference, we would rather see you with We would rather see Hudson with an ongoing equity stake, but not one that ultimately triggers like an ability to influence operational outcomes or decisions because that defeats the fucking purpose. But also because we kind of just need to do this one way and the fewer voices in the room like there are, the better. But I see value in that. That ongoing stake, I think even just being able to posture as though this publicly traded REIT that is on the cap table, it puts us in a much better negotiating position over the next 12 to 18 months to go get better fucking deals. And if we want to dividend recap a bunch of assets or something just to take some cash out, it gives us, I think, It gives it some of that, I think. At the same time, if the sensitivity or the preference lends towards like, get it the fuck out of here, we understand. And I think that's where you're correct. There is a— of the table that we've built, there's a scenario that has zero, like on the Hudson side, because we think it's fair. And that was even there before the flag on the ground of eliminate earnings by the end of 2026. When you put these two side by side, and you just get objective about it, you're like, the risk that's being taken on here, and the heavy lifting required to even realize that base case in the first part, in the riskiest piece of it, that Plus there's a walkaway risk component for Hudson. It was like, okay, there's something there.

But we don't think that that's the best outcome for the parties at this time unless told otherwise. Yeah. Look, I really appreciate the candor because I just feel like when we have conversations like this, it just allows us to move forward in a more productive way. So between us on this call, I think what you're proposing is probably the right move. It's like, look, we're solving your problems and maybe there's like a hope note version of a very small equity piece so that if there is some kind of upside scenario, that they could feel like, okay, we'll get to participate in upside, but small, right? I think what's helpful for us to have this conversation now is I just want to make sure that myself and probably to a lesser extent Steph is also just getting Mark and Victor's head there, right? Because like I said, Victor can be very optimistic at times, and like, I want him to get the reality of like what this deal is, right? Like, he needs to know that like this, like what you guys are proposing, like we just talked through, like he should be interested in that, right?

It's why we want to pull in ADC.

Yes.

Because I don't think that— just full transparency— I don't think that we're going to be able— any capital partner is going to want to see us mitigate the execution risk of this before or give us very unfucking favorable terms. So, and I say that because I know, like, so I think that we can do better on behalf of that go-forward cap table if we are able to just get this initial piece done and solve for it. But I think ADC and solving for the, and I think you put it very salient in the past, who is in the deal or who is around the deal matters as much as like what the deal is. I think potentially having them gives kind of this patina of like, or just another person at that level to be like, you need to take this fucking seriously so that if you guys have confidence and are like, this is a viable thing that solves the problem and gives us whatever the carrot is, there's a parallel force exerting I won't call it pressure, but just like validating more or less what you are saying. While we have you, I do want to just ask the question because it is going— once you— once we kind of get this piece of it done, I do think that your involvement in a formalized capacity will be required in order to increase the legitimacy and credibility of the thing working. And I think that like that is an entirely in your court kind of like, I guess, go-to-market, if you will, or like path to how is that introduced. But it will be required from my perspective. I don't think that this thing makes a ton of sense if there isn't a— if there isn't a leadership continuity from the like received group of companies that is able to shepherd and really kind of then, as we've talked about, tie the whole thing together. And we would have that be you, but are still obviously sensitive to like your timing on when you think that makes sense or such things are possible, right?

Well, yeah, let's— I mean, timing-wise, it really is dependent on how our timeline of conversations, obviously, you know, as they get more serious with with HCP leadership. Um, you know, the thing I just want to make sure we're kind of— I'm on very kind of open and transparent about— it's like this, like, we've talked— we had talked about this a few months ago, and you kind of were like, hey, like, would you be interested in potentially joining NewCo? And I was like, yes, I definitely would be interested. And like, that remains the case. Um, like, I have been presented with another opportunity that like Hudson does not know about, that I'm— it's very early days I don't know what Hudson's position is as we kind of like go through like changing the company. So like, I want to just kind of make sure I am very kind of clear in my communication. Like, there's absolutely an interest there, but I also like, when you say like this thing kind of is contingent upon my involvement, then I want to make sure I'm not stringing anyone along if I decide not to go with this. Sure. Because like, you know, I just want to be sure I don't— I'm not— I'm being a good partner to you guys, right? So, um, I mean, look, if at some point you're like, hey Sean, like, like, make a fucking commitment, tell me yes or no, like, when we get to that point, let me know and we should have a real conversation.

I think right now like we're still trying to figure out if this thing works or not. And I think that will probably be contingent on your deliverable and what the kind of sales team our sales org kind of looks like. And for us, that's, that will be an opportunity for us to kind of explain to you like what the org structure that currently exists, how that functions, and how we would see kind of like a 30-60-90-180 path to how does that evolve. But I think that like Good to know. I hope it's rad, um, whatever it is. Um, is it— is it— can you tell me this?

Is it in the same space? Oh, you mean the other opportunity that I was approached with? I, I don't want to like oversell what it is. It's just I got, I got some outreach. There's a— it's a— it's, it's in physical production, you know. Um, it's not on the vendor side, so it wouldn't be coming into the into this world. It could go nowhere, but it was one of those conversations where they were like, hey, we kind of need something that's unique. And it was like, oh, I'm kind of— I'm that guy. I'm not trying to be up my own ass here or anything, but it's like there's not very many people who have kind of done both kind of like sales and analytics and strategy in this space.

Totally. I got to tell you, it's really nice talking with you.

When I heard you say ADR, I was like, I love that you set the bar so low for me. I don't know.

Yeah.

Let me put together the sales thing as kind of that first part of that conversation. Like I said, like I'll kind of put like, like I'm very, we're all on the same page here. Like what I'm gonna put together is kind of an efficiency-minded approach. And then I think that it'd probably be good to sit down with you guys and talk through like, hey, here's kind of the unique personalities and structures on our team. Like, let's maybe see how we fit this in and make sure that we're still doing it within the kind of the headcount that, you know, we need to—

the bucket we need to get fit within to make these economics work. So, okay, so in that case, we are going to continue to do— we can move as fast or as slow as the other side can. Um, and we'd say that in just about every deal, I think. We have kind of like the follow-up of like, these are the things that we need to kind of move this forward. A big piece of it is that ADC piece, which I'll look to bring to bear, or some equivalent to that, which we'll look to bring to bear here as quickly as possible. I guess the request would be, if that other thing starts to develop faster, like, let me know, because we would like to like try to time it well or time it right and make something petitive here because I do, I believe, I stand by myself.

So yeah, 100%, I'll absolutely be completely transparent. And like, I'll be very transparent if the thing just evaporates, right? I'm not trying to, you know, like, uh, he said I, I want—

I'm doing this more or less, I'm just trying to like be a good partner.

Pre-negotiate. I'm gonna steal that. That's good.

Yeah.

Okay, cool. Sounds good, man. Thanks for the time, guys.

And I'll follow up on these, uh, follow-ups.

Stuff. Sounds good. Thanks, Sean. Cheers. Bye. Bye. Please go ahead and Do both of these changes.

Please go ahead and do both of these changes.