Alta Equipment Group Inc.

Good afternoon and thank you for attending today's ALTA Entertainment, I'm sorry, ALTA Equipment Group first quarter 2023 earnings conference call. My name is Jason and I'll be your moderator for today's call. I'll now turn the call over to Jason Dammeier, Director of SEC Reporting and Technical Accounting with ALTA Equipment Group.

Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. A press release detailing ALTA's first quarter 2023 financial results was issued this afternoon and is posted on our website, along with a presentation designed to assist you in understanding the company's results. On the call with me today are Ryan Greenewalt, our chairman and CEO, and Tony Colucci, our chief financial officer. For today's call, management will first provide a review of the first quarter financial results. We will begin with some prepared remarks before we open the call for your questions. Before we get started, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including statements about future financial results, our business strategy and financial outlook, achievements of the company, and other non-historical statements as described in our press release. These forward-looking statements are subject to both known and unknown risks, uncertainties, and assumptions, including those related to altered growth, market opportunities, and general economic and business conditions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release and can be found on our website at investors.altaequipment.com. I will now turn the call over to Ryan.

Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. For those following along with the slide presentation, I will begin on slide three. First, I will discuss our first quarter business highlights, our unique operating model, and the demand in our end user markets. Lastly, I will provide an update regarding the solid execution upon our growth strategy. Tony will detail our first quarter financial results, so I just want to highlight our first quarter accomplishments so we can get into the Q&A session as quickly as possible, after which I have a few parting comments. Our business is off to a solid start this year, with revenues increasing $89 million to $420.7 million, which included strong organic growth as well as contributions from our acquisitions. Construction and material handling revenue increased $233.1 million and $164.8 million, respectively, and our newest segment, master distribution, contributed the other $26.7 million in the quarter. As a result, adjusted EBITDA grew 36% to $40.8 million versus a year ago. Our business model is versatile and resilient, and we are unique in the breadth of our product offerings, the scale of our addressable market, and the defensiveness of our market position. Our focus is on driving and sustaining long-term equipment field population and aftermarket support penetration to an increasingly diversified customer base. At the end of the first quarter, we had nearly 1,200 skilled revenue producing technicians, which is substantially greater than even the largest pure play equipment rental businesses. Even during periods of challenging economic conditions and downturns in construction cycles, our business remains resilient due to the scarcity of product support personnel and resources in the major markets where we compete. In short, customers buy and rent from the businesses most equipped to handle their most immediate service challenges. This is where Alta thrives and is the spirit of our service mantra. uptime matters. Now for a quick update on the business segments. In the material handling segment, long-term trends towards warehouse and logistical automation persist, and Alta is well positioned for this growth opportunity. We continue to see the benefits of our newly increased market footprint, which now includes Eastern Canada, and the sales synergies evident between the traditional forklift dealership model, anchored by exclusive distribution rights, and the engineered products business where we are unrestricted geographically but benefit from the significant infrastructure and sales coverage that comes with the integrated model. We estimate that we cover over 20% of the North American lift truck market with our exclusive rights dealership business and can cover North America and beyond through peak logics and the affiliated material handling products. The construction equipment segment is benefiting from infrastructure and other governmental legislation. Our Florida operations are performing well, helped in part by significant growth in non-residential construction projects and significant state spending on infrastructure. Furthermore, the state has announced a multi-billion dollar Everglades restoration project, which aligns well with our equipment product portfolio of large articulated dump trucks, excavators, and other earth moving equipment. We are continuing to benefit from pent-up demand for services in the Florida market and our appetite to grow the technician headcount and parts and service sales in the region have been met with enthusiasm by our customers. Along with growth in our core Volvo construction equipment business, we are benefiting from the expanded product portfolio and investment in branch infrastructure. Our e-mobility business is well positioned to seize on opportunities across a broad range of products and services, and similar to our core business, we have anchored the segment on exclusive distribution rights in key markets. Here we are utilizing our existing branch infrastructure to support the product launch while limiting fixed cost exposure, improving market acceptance and viability. In parallel, we're building an in-house team of integrators and a portfolio of ancillary products to assist our customers in navigating and executing on the transition away from fossil fuels for transportation. This quarter we are reporting on our newly created master distribution segment, which Tony will describe in greater detail during his commentary. The segment is currently comprised of the Ecoverse business, which we acquired in November of 2022. Ecoverse has exclusive rights to distribute in the US and Canada for DOPSTAT, a premier line of recycling solutions, along with several other manufacturers of specialty recycling equipment. The recycling equipment market in the United States has been experiencing growth driven by various factors, including increased environmental awareness, governmental regulations, and the need for more efficient waste management practices. Recycling equipment used in solid waste management can include shredders, balers, compactors, sorting systems, conveyors, and other machinery designed to process and recycle different types of waste materials. These equipment types are used in recycling facilities, waste management companies, municipalities, and other organizations involved in the recycling and waste management industry. The recycling industry is still in its infancy and is expected to grow to a multi-billion dollar per year industry by the end of the decade. We're excited about the organic growth opportunity in this segment and the potential to apply the master distribution business model to future opportunities and other specialty end markets. From a strategic perspective, all of the major tenants hold true from our debut as a public company three years ago. We have a unique platform to grow and consolidate in adjacent markets with significant barriers to entry and long-term growth prospects. We have a disciplined approach to M&A and fertile prospecting conditions. and we have a proven and repeatable execution and integration process led by a seasoned team of industry veterans. All this momentum has given us the confidence to increase adjusted EBITDA guidance. Lastly, I'd like to quickly touch on Alta's corporate culture. As a company, we strive every day to foster a culture of empowerment, accountability, and opportunity, and we rally around a shared purpose, delivering trust that makes a difference. I want to again thank our employees for delivering trust to our customers, our business partners, and to our valued shareholders. We believe that a purpose-built organization will be the foundation of our commitment to these key areas. Our commitment to environmental sustainability, including a focused strategy to drive customer adoption and commercial viability of various electromobility solutions, the safety of our employees and technicians, and the dedicated and inclusive culture that we have created and continue to develop with each day. In closing, I'd like to thank the ALTA team for all your hard work in delivering a solid start to 2023. I'll now turn the call over to Tony, our CFO.

Thanks, Ryan. Good evening, everyone, and thank you for your interest in Alta Equipment Group and our first quarter 2023 financial results. I trust that you and your families are looking forward to a great summer as we all are here at Alta. Before I begin, I want to thank my 2,800 Alta teammates, which now span from Illinois to Maine and from Canada to Florida, on a great first quarter as you have set the footing for another remarkable year here at Alta. Thank you for your continued focus and commitment to our customers and to each other. My remarks today will focus on three primary areas. First, I'll be presenting our first quarter results, which we are pleased with, as our business benefited from increased equipment availability and a high level of demand for our products and services. Additionally, I'll present, for the first time, the results of our master distribution segment, which encompasses our new EcoVerse business unit. Second, I want to briefly revisit our field population-based business model and present our view on the long-term impacts of what was a record Q1 in equipment sales for the business. As part of that discussion, I'll update investors on the financial operating leverage we continue to realize and how a larger field population bodes well for future operating leverage. Lastly, I'll touch briefly on our prospects for the remainder of the year and how that impacted our decision to raise our 2023 adjusted EBITDA guidance. Before I get to my talking points, it should be noted that I'll be referencing slides from our earnings presentation throughout the call today. I'd encourage everyone on today's call to review our presentation and our 10Q, which is available on our investor relations website at altg.com. Before I get into first quarter performance, a quick reminder to investors on the seasonal elements of our business. Specifically, the construction segment in our northern geographies are subject to weather constraints in Q1, which makes the sequential comparison of Q1 to Q4 difficult. Thus, The more appropriate comparison for Q1 2023 is Q1 2022. And on a year-over-year comparison, we outperformed on just about every key metric. With that said, for the first portion of my prepared remarks, and in line with slides 10 through 16 in the investor's presentation, first quarter performance. For the quarter, the company recorded revenue of $420 million, which is a great $421 million, which is a great start to the year, considering the seasonality I just mentioned, and it's up almost $90 million versus Q1 of last year. Embedded in the $420 million of revenue for the quarter is a 16.2% organic sales increase over Q1 2022, making for a comparatively strong quarter. Specifically, new and used equipment sales increased 45% for the quarter to $220 million, far and away a record level of Q1 equipment sales for the business, and, in fact, a quarter that compares favorably to our less seasonal sales equipment quarters historically. With equipment supply chain issues abating, we are seeing a more normalized environment in terms of equipment deliveries, and having the additional equipment supply in the face of a strong demand backdrop is refreshing for our customers and our sales teams. And this quarter's equipment sales result was a simple reflection of matching supply and demand. Moving on to our product support business lines, we continue to realize impressive organic growth in our parts and service departments in both segments, with that figure increasing an impressive 15.3% in the material handling segment and 22.3% in the construction segment year over year. To close out the revenue lines, As it relates to our rental business, we continue to realize organic growth in both segments as well, with rental revenues increasing 6.6% on a consolidated basis year over year, primarily the result of a favorable rate environment for heavy equipment. From an EBITDA perspective, we realized $40.8 million in adjusted EBITDA for the quarter, which is up $10.8 million from the adjusted level of first quarter 2022. On a trailing 12 basis, we achieved $178.6 million of adjusted pro forma EBITDA, which converted into $127 million of economic EBIT or unlevered free cash flow for a 71% conversion rate on EBITDA. Additionally, on a gap basis, income from operations was $12.1 million for the quarter, up $7.5 million versus last year. Lastly, and as depicted on slide 13 of our investor deck, On an adjusted pro forma basis, the business is generating just above $77 million in annualized levered free cash to common equity prior to growth CapEx. In our view, this metric is indicative of economic earnings associated with driving equity value for shareholders. Before I move on to the balance sheet, I wanted to present to investors the financial performance for our new segment, Master Distribution, which was presented separately in our 10Q filed earlier today. As I mentioned earlier, Ecoverse, which was acquired in Q4, is the first business unit in our asset light master distribution segment, and it's off to a great start. For its inaugural quarter, the segment posted an impressive $23.5 million in equipment sales, $2.9 million in parts sales, which yielded $4.2 million in gap income from operations. Investors should keep in mind that Ecoverse's sales, which are primarily weighted to selling equipment to its sub-dealers, are more heavily weighted to the first half with an additional emphasis on the first quarter of the calendar year. As we've mentioned previously to investors when we acquired Ecoverse, we believe strongly in the capital efficiency and return on investment profile of the master distribution business model, and Ecoverse proved us right in their first quarter as part of Alta Equipment Group. Thank you to our new family at Ecoverse, and we look forward to continued strength in that segment for many years to come. Before I move on, a quick check-in on the balance sheet as of quarter end, and in line with previous periods. We ended the quarter with approximately $220 million in unsuppressed availability on our revolving line of credit, and total leverage came in at roughly 3.6 times 2023 adjusted EBITDA at the midpoint of our guidance. Now, moving on to the second area of my prepared remarks, I'd like to quickly revisit our business model and our view on the long-term impacts of what was a record Q1 in equipment sales. As Ryan and I have mentioned many times and in parallel with other dealership-based businesses, our business model and our long-term financial success is heavily predicated on how large our serviceable field population is. In simple terms, the larger the serviceable field population, the more high margin product support revenues the company is able to realize in the future. This business model is depicted graphically on slide 14 of our investor presentation. As you can see on the slide, on a long-term average, product support revenues have averaged approximately 50% of our field population sales. Now, with that business model as the backdrop, the obvious first obstacle to kick off that earning cycle is to expand our field population by selling more equipment than we have historically. And our sales teams, supported by our OEM's ability to deliver product, did a tremendous job of increasing our serviceable field population in the first quarter of 23 when compared to last year, to the tune of $60 million of incremental equipment sales. And if you do the math, that incremental gain of $60 million in the quarter should yield approximately $30 million of incremental annualized parts and service revenue over the long run. In summary, we are excited about the level of Q1 23 equipment sales means for our future product support prospects, and we hope to rinse and repeat this success in the coming quarters and for years to come. Before I move on to guidance, I wanted to follow up on my remarks from our last call and provide an update on the operating leverage we continue to realize in Q1 of 2023. As we continue to push more nominal gross profit on top of our existing cost infrastructure. I would appoint investors to slide 15 of our investor presentation to highlight the point. As you can see on the slide, we realized an incremental $31 million of adjusted gross profit in Q1 23 when compared to last year, which led to an incremental $10 million of adjusted operating income for the quarter, which is 30% on an incremental basis versus 20% on a standalone basis for the quarter. This is the definition of creating operating leverage. Understanding that some of the operating leverage was related to the increase in equipment sales for the quarter, as discussed earlier, make no mistake that the field population model and the organic increase in product support revenues year over year have a notable influence in driving this operating leverage. Finally, for the last part of my prepared remarks, I would like to discuss the increase in our 2023 adjusted EBITDA guidance, which was included in today's earnings release. From a nominal perspective, we've taken the guide up $3 million on both sides of the range. So the updated guide is now $180 million to $188 million of adjusted EBITDA for fiscal 2023. A couple of points to make here. First, our guidance has always been more heavily weighted to known variables versus unknown in terms of revenue lines where we have the most visibility. And for our business, those revenue lines are parts and service. and we are bullish that those lines will continue to grow for the foreseeable future. Simply put, our product support revenues set the bedrock for our guidance calculations. Second, as mentioned previously, new equipment sales, which can ebb and flow quarter to quarter based on a variety of factors, were definitely flowing in the first quarter, and our product availability headed into Q2 gives us confidence for the foreseeable future on equipment sales. Lastly, While in the north, the kickoff to our rental season was slightly delayed due to a difficult April weather-wise, we remain confident that rental utilization and rates will be solid when we put the final touches on 2023 as a whole. In closing, I want to once again thank my Ulta teammates for a great start to the year. We're as committed to our strategy and our ability to execute on that strategy as we've ever been, and we look forward to a great 2023 for our employees, our business partners, and for ALTG shareholders. Thanks for your time and attention, and I will turn it back over to the operator for Q&A.

If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, it is star one. Our first question is from Matt Somerville with DA Davidson. Your line is now open.

Hi Ryan and Tony, this is Will Jellison on for Matt this afternoon.

Hey Will, good afternoon.

So for the first question, I'm curious to learn a little bit more about how additive the Florida Department of Transportation dollars can really be to the construction business and just to better understand how it helps the business between sales, rentals, parts and service. I'm wondering a little bit more about how you think about that impact.

This is Ryan. I'll take that. You know, we generally think of any stimulus coming as adding innings to the cycle because, you know, the work, the contractors are at full capacity. They're all working off of backlog. What we like about transportation is our product portfolio is very well positioned for it, for the big road building type work. So, you know, we see it as bullish, but it's hard to really measure. We think of it as just added buoyancy to the demand backdrop.

I think it creates confidence amongst our customer base down in Florida, Will, that they're going to be busy for a long time on infrastructure work, which means they're more likely to commit to assets and put things like articulated dump trucks and excavators on their balance sheet, which, as I discussed in my prepared remarks, leads to not only that first sale for us, but all the aftermarket sales thereafter.

Okay, great. Thank you for that. And then as a follow-up, I wanted to ask you about product support because something that called out to me during the quarter was it was a pretty strong acceleration on a year-over-year growth basis relative to the last quarter in both materials handling and construction, which was really impressive. And I'm curious about the level of sustainability in those growth rates across both materials handling and construction in the aftermarket business.

Yeah, I think, Will, what's on our mind always is price and quantity. And so we've been able to pass along pricing increases and product support. So as maybe labor rates go up, we've got to charge more to our customers. And our skilled technician base is the intangible value of our business, as we've talked a lot about. they're in high demand to keep customers' equipment up and running, as Ryan mentioned earlier. And so we have pricing power. That's number one in terms of, you know, price times quantity. And so the bottleneck really becomes the quantity, and that's where we talk about technician headcount, recruiting, and retention. And we've done, you know, our operations team and our human resource team is doing a great job in that regard and You know, we're focused on things like keeping, you know, nice facilities and keeping our technicians in the late model vans and investing in all the right areas to retain them. So when you're able to do those two things, you have pricing power, the P takes care of itself, and when you're executing like our ops teams does in terms of headcount, the Q comes along with it. So the ability to sustain... those levels is really less predicated. We've got the equipment out there, as I mentioned, more predicated on technician headcount and reaping the rewards of, you know, what our sales team has given us the opportunity to do.

That's great. Thank you, Tony, for answering that.

Our next question is from Alex Rygale with V. Riley. Your line is now open.

Thank you. Good evening, gentlemen. Very nice quarter. First, you don't provide quarterly guidance, but how did first quarter results stack up relative to your internal projections? And I guess another way I'm asking this is, is your increased guidance because of the strong first quarter, or is it because of improved expectations for the remaining three quarters?

Yeah, good question, Alex. This is Tony. I think it's a little bit of both, and I don't mean to kind of cop out on the answer, but I think internally we met expectations on the more visible, if you will, revenue stream, so part service, rent-to-rent even, where there probably was a little bit of a beat in our minds is on the equipment line. And as I've mentioned in the past, that can be fleeting sometimes. And our OEMs are doing a great job. We had a more natural kind of inventory build through Q4 and into Q1. And then it becomes kind of a race with our technicians, again, to prep and deliver equipment and get it in the hands of customers. So if there was a beat kind of internally, it would have been on that equipment line. And then, you know, just the confidence of what Q1 brought us and talking to customers and thinking about end markets kind of led to maybe a little bit more bullishness on the guide.

And then thanks for the new slides. Slide 14, are you saying that parts and services is a percentage of new use and rental? can rebound back to 55% and what is the typical lag in parts and services as it sort of catches up to a more normalized level relative to new used and rental sales?

Yeah, Alex, what we were trying to depict is using history kind of just as a barometer, if you will, on average. So if you just look at the last couple of years, 50% parts and service relative to equipment sales. And what we were trying to, what I was trying to convey was to the extent equipment sales go beyond what they have historically, and in this case, in Q1, $60 million beyond 2021, someday there'll be a, and it won't be a step function immediately to your point, But someday over time, as that incremental $60 million of equipment ages, breaks down, there'll be $30 million of parts and service revenue out there for us to sort of harvest, if you will, at really strong kind of incremental margins. And so the point was not to say that we'd get back to 55, although I do think there's room to move that up. It's just the way the math works. as you kind of layer more equipment on in the early innings, if you will, and then the metric itself sort of catches up. And then you also have a mixed issue where construction might be a little bit less than material handling when it comes to product support as a percent of revenue. The second part of your question, Alex, how long? You know, we've done some studies on this, and the material handling business can be almost immediate. because we're signing contracts for maintenance agreements alongside of delivering large fleets. Sometimes to the extent those fleets are replacing old equipment, there's really not much of a gain there. You might be able to charge a little bit more for the new fleet versus the old. But to the extent it's incremental in the material handling side, the product support revenue can hit immediately. More typical, though, is a two- to three-year lag based on our kind of internal analysis before that full, in this case, $30 million would sort of unveil itself. It would kind of come over pro rata, if you will, over that two- or three-year period.

Very helpful. And then, Ryan, you – On slide seven, you highlighted expand alternative energy-related opportunities. Can you go a little bit deeper into that opportunity?

So there are a couple of opportunities as it relates to alternative energy, and it's the fueling that goes along with electric drivetrains. The battery electric vehicles, it's going to be charging infrastructure and actually installation and inspection and maintenance of those types of systems. And then for the fuel cell truck, which is coming later this year, it's the actual gas delivery, dispensing equipment on site at the customer sites and delivery vehicles, compressed tank delivery vehicles for the gas. That's all part of the ecosystem that's being built around this electromobility and something we have a lot of experience from the legacy business on the material handling side.

Very helpful. Thank you very much.

Our next question comes from Ted Jackson with Northland Securities. Your line is now open.

Thanks very much. Congratulations on the quarter. My first question is kind of really around kind of equipment pricing. You know, if you pay attention to all the kind of heavy equipment manufacturers, and Hyster Yale in particular, all of them have gone through some, you know, pretty material increases in terms of pricing to, you know, catch back up, deal with inflation. And a lot of those higher price sales are backlogged and starting to find their way through. So I'm kind of curious if we were to look at your new equipment sales, how much of it was pushed forward by units and how much of it was pushed forward by pricing in terms of growth?

Ted, what I would say is we're probably in line. What we're doing nine times out of ten is just passing along the price increase that the OEMs would say. So Hyster Yale has, I think, been pretty public about what's going on with their pricing. If you notice, our margins have actually expanded a little bit, but nothing significant. We're going to trade kind of in that 10% to 15% GP range. And so we would have realized the same kind of increase in costs and been able to pass that along to the customer. One of the things that we highlighted in the press releases, we are not seeing any cancellations in the backlog. We still have, despite kind of working, having a lot of equipment sales, as I mentioned, backlogs remain really, really high. And so the incremental $60 million, we are taking share in certain regions. like upstate New York, where we bought Vantage back in 2020. Our market share has gone up. We're doing that in certain pockets of other pockets of our business as well. So again, to the previous point on price times quantity, it's a combination of both. I can't give you the ratio, but I know it's not just all price, I guess is the point I'd like to make.

Sticking on the new equipment sales, you know, as, you know, supply chains are easing and, you know, backlogs can get worked through. And, again, it seems like the timeline to bring for the OEMs to bring their backlogs back down to, let's call it normalized levels sometime and call it, you know, early first half of 24. Is it fair to assume that as this plays itself out that we should see like consistent like you know some consistent growth with regards to you know on a quarter by quarter basis for new equipment sales as we roll through 23 and get to 24 I think I think the way I'd answer that Ted is you know the rest of 23 if you look at you know kind of the inventory levels that we have coming out of q1 versus

the sales levels were somewhere around two turns on new equipment. And that's a pretty good level from a kind of more natural state of affairs. We've been turning our new equipment much faster than that the last couple of years just given supply chain issues. So to the extent the demand backdrop kind of holds here, we would expect to have you know, good equipment sales throughout the remainder of the year. And, you know, specifically on the material handling side, where we're selling out of a sort of a kind of a locked-in backlog that Hyster Yale likes to speak to as well, we feel pretty good about 2023. As things kind of, you know, to your point on 24 and backlog starts to normalize, You know, I guess we're going to have to see. You know, if you look at the bookings in the forklift business just in general, they've remained strong relative to history. And so, you know, OEMs are already booking up 24, 25. And so it remains to be seen. But I think so long as the demand backdrop is there, I still think that we should be able to continue to grow that line.

Okay. Next topic was just kind of eco versus you brought up, you know, a comment with regards to seasonality, you know, the seasonality, that business you suggested it would be typically stronger in the first half of a year than the second half. Can you walk us through that a little bit since it's such a new part of the business and help us understand kind of, you know, the kind of how, like a, you know, for lack of a better term, a typical year revenues might fluctuate flow through that portion of Alta going forward.

Yeah, so just to recap, Ecoverse was about $10 million of EBITDA, $60-ish million, if I have it right, of revenue for 2022. And they just had a really strong $26 million in the first quarter here. which would suggest that they've almost hit half of what they did in 22 in the first quarter. Keep in mind that they're selling to dealers like Ulta. And so, as I mentioned previously, we've got a little bit more of a natural state of affairs supply chain-wise. We're inventorying up specifically in our construction business in Q1, Q2, and then selling down inventory in Q3 and Q4, Ecoverse is selling into that to their dealers, and so Q1 is a really strong quarter, meaning we wouldn't expect this level of Q1 performance throughout the rest of the year. Ted, what I would say is we expect Ecoverse to do better than what the $10 million of EBITDA was in 2022. You know, I think we spoke previously about 15%, 20%, you know, a year would be something we'd be pleased with. I think they're off to a great start, but, you know, hopefully that helps you kind of figure out what the rest of the year looks like here.

I'm not asking per se about the year, just kind of understanding like a cadence of it. So, you know, if I was to say move forward to, say, 24, 25, I would. think about Ecoverse and saying the first quarter is going to be by far their stronger quarter and, you know, by default, like, you know, the third and fourth quarters are going to be their weaker quarters.

Yeah, I would think of, yeah, I think the way that I would think about it is maybe fourth quarter, first quarter would be their stronger quarters and then two and three, Q2 and Q3 may be a little bit weaker. Okay.

And then my last topic, and I'll get out of your hair, just a little discussion with regards to the M&A pipeline, what kind of activities out there, any changes in terms of what you're seeing in terms of valuations for the assets that you look for, any change in terms of the competitive landscape for assets that you're applying for?

Nothing out of the ordinary, Ted. This is Tony. We continue to take incoming calls. We're a known buyer at this point in our dealer networks and in our geographies. And so we're being mindful and being selective on what deals we're pursuing and with what kind of OEMs. But there's very much a pipeline of classic Alta M&A opportunities that are in front of us right now. And we really haven't seen valuations I've been with Alta eight years and still haven't seen – there's not a lot of volatility in private equipment companies when it comes to multiples. All right.

Thanks very much. Thanks, Ted.

Our next question is from Brian Fast with Raymond James. Your line is now open.

Yeah, thanks. Good afternoon, guys. Just on the Yale Industrial Trucks acquisition the summer of last year, now that we're coming up on a year of that acquisition, do you have a sense that you're gaining market share there, and is that presenting additional opportunities in the region?

Brian, this is Ryan. I think it's too early for us to report. I don't know that we ever report on Share First specific OEM, but what we could say there is that we're having growth in the sales area largely as a function of allied lines and just support and training from the parent. So we're excited about the progress as we got started there.

Yeah, Brian, we've brought some of the OEMs that we represent in the U.S., that we've brought those relationships to Canada, and we've made some sales. As Ryan mentioned, early innings, but our sales force up there is really excited to get – and then the technicians working on new things and new technologies. So we're off to a good start there. Okay, fair enough.

And then just on inventory, we saw build-in inventory, obviously, during the quarter. Let's just ramp up. Could you just talk about your comfort level there? Do you feel like you have the right mix of inventory or are there areas where it's still difficult to source?

Yeah, good question. We're comfortable with the level in general. Ended the quarter there with $380 million of new and used equipment. And we're always comfortable with our parts inventory, just given kind of how quickly it turns. So we're always focused on the equipment. And as I mentioned, we're somewhere around two turns on new and used, which is fine. We've been to these levels. So macro comment there, fine. There still are pockets of products, our product portfolio that are still dragging relative to history in terms of deliveries and lead times and so on, where we wish we had more of a certain product versus kind of his, well, period. We wish we had more of a certain product. But in general, the supply chains are abating. We like the mix of our fleet and the new equipment. And what I would say too is when you're part of these dealer networks, when you do have inventory, dealer trades become much more kind of they're part of things. So you work with your sister dealers on, you know, they may need something somewhere in some other geography, we may need something, and you work together to kind of take it to the competition. And so we haven't had to do a whole lot of that the last couple of years, but, you know, that will be something that kind of reignites itself here in the coming months and years. Okay, thanks.

Appreciate the color. That's it for me.

There are no more questions, so I'll pass the call back over to the management team for closing remarks.

Thank you. In closing, I'd like to reflect back on our three years as a public company. We have navigated a global pandemic, historic supply chain disruptions, and a rising interest rate environment. Through this, Alta's team executed flawlessly on our growth strategy and our commitment to servicing our customers at the highest level. As we look to the future, we see tremendous opportunity to build meaningful scale and operating leverage for the business, and with this, long-term value for our shareholders. I want to say thank you to all my Alta teammates for a truly phenomenal performance, and thank you to our shareholders for your continued support. That concludes the call. Thank you.

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.