Alta Equipment Group Inc.

Good afternoon and thank you for attending the ALTA Equipment Group third quarter 2024 earnings conference call. My name is Elliot and I'll be your moderator for today's call. I'll now turn the call over to Jason Danmeier, Director of SEC Reporting and Technical Accounting with ALTA Equipment Group.

Thank you, Elliot. Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta's third quarter 2024 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 our third quarter 2024 financial results. We will begin with some prepared remarks before we open the call for your questions. please proceed to slide two. 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 Alter's 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. I will begin with a quick overview of our third quarter results, then provide a current assessment of the business conditions in our end user markets. Tony Colucci will then present a more detailed analysis of our financial and operating performance for the quarter and our outlook for the balance of 2024. But before we dive in, I want to take a moment to recognize and extend our thoughts to our Florida team members who have been impacted by hurricanes Helene and Milton. We know this has been a challenging time and your resilience and dedication are inspiring. We're committed to standing by you every step of the way as you navigate the recovery process. Now to my prepared remarks. Like many other industrial companies, our third quarter results continue to be impacted by the ongoing uncertainty in our end user markets, particularly regarding customers' commitment to capital investments and purchasing new equipment. This dynamic has been most impactful in our construction equipment segment. where new and used equipment revenues decreased by $44.5 million or 29.5% on an organic basis. Many customers put capital investments on hold in the third quarter while they awaited election outcomes and more clarity on interest rates. However, post-election sentiment has already improved and we anticipate that customers will deploy capital more broadly in the fourth quarter and into 2025. During the third quarter, we also saw positive impacts from our business optimization initiatives as we reduced general and administrative expenses when compared to earlier in the year. Despite a difficult revenue quarter, we are proud of the progress made with our balance sheet, reducing rental fleet and working capital, which allowed us to deleverage by nearly $40 million in the quarter. While the equipment sales market has been disappointing in 2024, our dealership model with diverse revenue streams has shielded our business from market cyclicality. Our rent-to-sell approach to the equipment rental market also enabled us to react quickly, selling off lightly used fleet and right-sizing our balance sheet efficiently. I will now talk about segment performance. In our construction equipment segment, revenues declined as demand softened, leading to a drop in new and used equipment sales. Rental revenue also decreased in this segment based on lower than expected physical utilization of equipment. Product support revenues held up and was boosted by additional technician headcount and higher market rates for labor. In the material handling segment, revenue saw a modest increase, largely due to progress on a substantial sales backlog. Product support continued to grow with service revenues rising, which helped mitigate pressures from a highly competitive market. Despite these competitive pressures, we continued to capture market share, thanks in parts to the market positioning of our product portfolio and our lead time advantage in certain product models. Collectively from all segments, our high margin product support business continues to perform strongly with revenue increasing 7.8% to 140.2 million. This demonstrates the stability of our dealership model that our dealership model provides, ensuring that our business remains resilient even amidst fluctuations in the equipment market. Turning to e-mobility, we have an exciting update regarding process progress in this segment. specifically our efforts to commercialize hydrogen fuel cell electric vehicles. We are excited to share that ALTA has delivered Nikola fuel cell EV trucks to DHL, marking a significant advancement in our electrification strategy. ALTA is providing these vehicles to DHL on a turnkey full-service lease. The first fuel cell electric vehicles, or FCEVs, have been deployed in Illinois, complementing the battery electric vehicles we already have operating in the Chicagoland area. Our product will be serviced out of our Calumet City, Illinois facility, ensuring top notch maintenance and uptime. Turning to future outlook. Looking ahead to 2025, we expect a normalization in the oversupply of new equipment in the first half of the year and construction equipment spending to be supported by easing interest rates and more favorable lending conditions. Infrastructure related project pipelines are strong and state DOT budgets are expected to remain elevated. The recent election outcome may further drive near-term demand for construction equipment fueled by anticipated infrastructure investments and favorable policies. Additionally, the administration's proposed tax cuts, regulatory reductions, and incentives for domestic manufacturing could prompt businesses to expand facilities. The opportunities in our material handling business remain favorable. We are confident that our strong relationship with Hyster Yale, Unmatched product support capabilities and resilient diversified end markets will enable us to capture further market share in 2025. We are particularly focused on increasing our share of the electrified product classes where we maintain a competitive advantage in lead times. Additionally, we expect our e-mobility business to gain further traction as customers begin the shift to electrify their vehicle fleets. We currently have a sales backlog of approximately $20 million, with most of that expected to convert in the next six months. Now I'd like to elaborate on our strategic focus. At AltEquipment Group, our success and sustainability are powered by a purpose-driven culture that aligns with our strategic vision. Our focus is centered on three key areas. One, optimizing our business. Two, delighting our customers. And three, developing and retaining top talent. Our guiding principles, invest in the best, passion for excellence, mutual respect, one team, and customers for life continue to shape our leadership and operations. They are the foundation of our purpose-driven culture and the key to achieving sustainable growth and shareholder value. To further support our shareholders and in line with our positive outlook for 2025, our board of directors has expanded our share buyback program to 20 million. which we will deploy if opportunistic dislocations between the company's long-term value and share price arise. In conclusion, while 2024 has presented its challenges, the dedication of our nearly 3,000 employees to our core principles has been unwavering. I'm incredibly proud of their commitment, which has been instrumental in navigating this tough market. As we look to 2025, we remain focused on executing our strategy, fostering a culture of trust and excellence, and positioning Alta Equipment Group for long-term success. Now, I'll turn it over to Tony for a detailed analysis of our financial and operating performance.