Alta Equipment Group Inc.

October alone, top 75 million, which is nearly 60% of our entire women's sales in Q3. With that, we believe the pattern witnessed in the third quarter reflected a shift rather than an indication of softness, as customers seemingly elected to push purchases from Q3 into Q4 as they awaited more definite signals on interest rate direction and year-end tax benefits under the One Big Beautiful Bill Act. That timing dynamic, coupled with greater confidence in backlogs and financing, sets the stage for what we believe is the beginning of a fleet replenishment cycle. As we sit here today, our backlog in material handling remains over the 100 million mark, helping to provide visibility for the next several quarters. Even with muted volumes during the quarter, productivity and cash flow remained resilient. SG&A is down roughly $25 million year-to-date, driven by structural cost savings, improved efficiency, and a disciplined execution. Those efficiencies are now embedded in our run rate and provide for operating leverage as the market rebounds. Turning the focus now to our construction segment. Our construction equipment segment performed admirably given continued tightness in private capital spending. Demand from customers tied to long-term, fully funded infrastructure work remains strong. In Florida, permitting activity on large DOT and Corps of Engineers projects has accelerated, translating to greater deliveries early in Q4. In Michigan, the legislature's record $2 billion road and bridge funding package is already driving new bid activity and multi-year visibility. These are durable tailwinds that reinforce our position as a key equipment partner on essential public works projects. Taken together with rate relief and the tax incentives of the Big Beautiful Bill, we see construction entering a healthier demand phase. Industry data suggests we've bottomed in the general purpose construction markets throughout our various APRs, positioning ALTA for growth as replenishment gains momentum in 2026. In this regard, we've prepared a new slide this quarter, slide seven, which shows the industry volume disconnect we've experienced from our regional norms, specifically in the last few years. We believe a reversion to normal industry levels in our APR can quickly return some of the volume losses we've experienced, and given some of the tailwinds we see, the environment is prepared for a rebound. Turning over to our material handling segment, Industry volumes have also exhibited multi-year softness as illustrated on slide seven. Material handling revenue is essentially flat year over year. The Midwest and Canadian markets remain soft primarily due to automotive and general manufacturing weakness. In contrast, our food and beverage and distribution customers continue to perform well. We're seeing early signs of recovery in automotive demand, the ongoing, sorry, in automotive demand, the ongoing Reindustrialization of U.S. key regions, particularly the Great Lakes mega region, is creating powerful long-duration demand tailwinds across all the then markets. As manufacturers, logistics operators, and infrastructure investors expand capacity in these high-growth corridors, the need for reliable material handling, construction, and power solutions continue to rise. Nowhere is this more evident than in the power and utility sector, where investment in grid modernization, renewable integration, and data center infrastructure is accelerating. Alta is uniquely positioned to capitalize on this trend, combining our deep regional footprint, OEM partnerships, and product support capabilities to serve the expanding industrial base and the critical infrastructure that underpins it. During the quarter, we completed the divestiture of our dock and door division, another deliberate step in sharpening our portfolio and focusing our resources on our core dealership operations. This transaction reflects our commitment to capital discipline and reinvestment in higher return areas of the business. Alta's business optimization efforts are centered on strengthening the company's flywheel, delivering the right product to the right customer executed by the right people, while deepening the resilience and profitability of our core operations. Through disciplined execution, we are streamlining workflows, sharpening accountability, and improving customer cost to serve across every business line. Product support remains the engine of Alta's value creation model, driving recurring revenue and lifetime customer relationships through best-in-class parts, service, and rental solutions. At the same time, we are refining our product portfolio to concentrate capital and talent around the brands, segments, and geographies that align most directly with Alta's long-term strategy and OEM partnerships. Together, these actions form a cohesive approach to business optimization, reinforcing operational excellence, advancing our unified strategy, and accelerating the virtuous cycle of customer intimacy and sustainable growth. In closing, as we enter the fourth quarter, we're seeing tangible signs of recovery across our business. Deferred demand from the third quarter is now flowing into the pipeline, supported by a steady acceleration in infrastructure and public works funding across our key markets. At the same time, recent interest rate reductions and the incentives introduced under the One Big Beautiful Bill are beginning to restore contractor competency creating a more constructive environment for capital investment and sustained customer activity heading into year end. In short, we believe the industry is turning the corner, and Alta is exceptionally well positioned to capture that upswing. Before turning it over to Tony, I want to thank all 2,800 members of Team Alta for their focus, execution, and commitment to our purpose of delivering trust that makes a difference. Your resilience and customer dedication to continue to define who we are and how we win. With that, I'll hand it over to Tony Gallucci to walk through the financials in more detail.

Thanks, Ryan. Good evening, everyone, and thank you for your interest in Alta Equipment Group and our third quarter 2025 financial results. Before getting into the quarter, I want to begin by recognizing our employees, customers, and partners for their support in Q3. Our business model is resilient, but it takes commitment, collaboration, and trusting partnerships to execute on that resiliency day-to-day. Thank you to all. My remarks today will focus on three key areas. First, I'll present our third quarter financial results, which reflect the challenge equipment sales and rental environment overall, although we believe some of these challenges may be dissipating. As part of that discussion, I'll give a brief financial overview of the quarter for each of our three segments. Lastly, I'll touch on the balance sheet and cash flows for the quarter. Second, I'll be presenting what we believe to be the company's bridge back to $200 million of EBITDA and the factors impacting that bridge. Lastly, I'll discuss our expectations for the remainder of the year on both adjusted EBITDA and free cash flow before rent to sell decisioning. Throughout my remarks, I'll be referencing information presented on slides 10 through 21 in our earnings deck. I encourage everyone to follow along with the presentation and review our 10Q, both available on our investor relations website at altg.com. First, for the quarter, the company recorded revenue of $422.6 million. a 5.8% organic reduction versus last year. Revenues retreated sequentially in the quarter, mainly on equipment sales. However, product support remained steady and was up sequentially versus Q2, as I'll remind investors that our parts and service departments continue to act as an annuitized and stable cash flow stream in what is clearly a volatile equipment sales environment. As it relates to equipment sales, as mentioned, we believe that similar to last year, customers pushed off capital spending in Q3, for more clarity on interest rates and their own businesses' annual performance relative to the tax incentives available in the big, beautiful bill. Both of those factors, we believe, help drive our highest equipment sales number of the year in October and provides a tailwind for Q4 equipment sales overall. Lastly, rental revenues are down $5.3 million year-over-year, but up $2.1 million sequentially, with the year-over-year decrease largely related to our strategic decision to reduce the size of our rent-to-sell fleet as we focus on better utilization and ultimately enhance returns on investment in rental fleet. Now focusing in on the segments for the quarter. First, material handling. As mentioned previously and as presented on slide 11, new and used equipment in our material handling segment were down a modest $1.6 million year-over-year, but notably the line was up on a sequential basis. As despite industry bookings for new forklifts continuing to run below historic norms, we have been able to keep keep pace with the prior year through selling allied lines and tariff-free used equipment to our customer base. Also important to note, and as Ryan mentioned, that despite demand challenges for the industry, Alta continues to carry a healthy backlog of equipment, over $100 million worth of new allied and used equipment into Q4. In terms of product support revenues, while we continue to run behind last year's pace in parts of service, most predominantly in our Midwest and Canadian geographies, I mentioned on our Q2 call that we believed that we had found a bottom in these departments, and that dynamic played out in Q3, as product support revenues and material handling outpaced the second quarter by nearly 4%. As noted on slide 11, adjusted EBITDA was up year over year and sequentially versus Q2, coming in at $17.5 million in Q3 for the segment. On to our construction segment, and as highlighted on slide 12, As a precursor to my comments, I would reset for investors that equipment sales in our CE segment can be and have historically been volatile, especially when compared to equipment sales in our material handling segment and certainly when compared to our other revenue streams. This volatility has certainly been evident in both 2024 and 2025, as macro factors such as interest rates, tax laws, election fears, tariff and trade policy uncertainty, and customer backlog in local funding can all impact the CE customer's segment. CE segment customers' decisioning and went to purchase a piece of equipment. With that as a backdrop, we saw equipment sales in our CE segment drop $18.7 million versus last year Q3. That said, based on what we saw in October, we believe Q3 will be an anomaly as customers pushed ahead decisioning the Q4, given the expectations for interest rate reductions in year-end tax plan. Lastly, on equipment sales, from a new and used equipment gross margin perspective, While we continue to run below historic level gross margins on new and used equipment, gross margins on new and used equipment were up slightly on a consequential basis, a hopeful sign that supply and demand dynamics in the marketplace are normalizing and that we may have found a bottom on this metric. Onto product support, which grew roughly 3% year over year in the construction segment and where we continue to outperform internal profitability measures. Further to that point, as presented on slide 14, while the segment standalone EBITDA is down $2.4 million a year to date, the mix of the $75 million of EBITDA in 2025 is of a higher quality versus 24. Specifically, while 2024's EBITDA was more heavily weighted to opportunistic rental equipment sales and related gains, 2025's EBITDA has been more heavily weighted to perpetual profitability gains in the form of increased gross margins and product support, as well as a reduced SG&A load. This realignment from less consistent equipment sales to more reliable recurring product support profitability creates a more resilient and capital efficient business going forward. Lastly, from a segment perspective, master distribution, which houses our Ecoverse business. The story for the quarter continues to be tariff related, as nearly all of the segment's key metrics have been negatively impacted year over year. That said, A stabilizing trade environment between the U.S. and the EU and mitigating measures in the form of pricing actions and OEM risk sharing to best maneuver through the situation have been largely implemented, and we expect will take further hold and bear fruit in Q4. Overall, we are cautiously optimistic that the worst of the trade-related impacts on the segment in 2025 are now behind us. In summary for the quarter, the company generated $41.7 million of adjusted EBITDA, a slight reduction versus last year on a pro forma basis, and mainly driven by reduced episodic equipment sales in our CE segment. Lastly, and notably, as we focus on driving ROIC, the company was able to realize nearly the same level of EBITDA year over year on a leaner balance sheet, as the gross book value of our rental fleet is down near $30 million year over year. In terms of cash flows, and in referencing slide 16, for the quarter, free cash flow before rent to sell decisioning was approximately $25 million for the quarter and stands at roughly $80 million year-to-date. To quickly check in on the balance sheet as of September 30 and as depicted on slide 17, we ended the quarter with approximately $265 million of cash and availability on our revolving line of credit facility, plenty of capacity in terms to navigate the business in this climate. Before closing my comments on the quarter, I'd like to quickly address the impact of Big Beautiful Bill had on the company's income statement in Q3. First, holistically, the company views the enactment of the Big Beautiful Bill as a net positive for both the company and for our customers. From the company's perspective, the effective removal of the interest expense limitation in the Big Beautiful Bill will save the company cash taxes in the future and over time will enhance our liquidity position. That said, Given the reduction in the interest limitation, we had to take a notable one-time non-cash income tax expense to establish a valuation allowance against our net operating loss assets. For clarity, this one-time expense has no impact on the company's operations, its cash liquidity position, or its financing capacity. We welcome the benefits of the big, beautiful bill for both us and our customers going forward. Moving on to the second portion of my prepared remarks. the company's view on the potential bridge back to $200 million of EBITDA and the factors impacting that bridge. As presented on slide seven and as discussed earlier by Ryan, equipment values in our regions in each of our major segments have been depressed in recent years when compared to industry norms. And in the case of our CE segment, in the face of increased state and federal DOT spending in recent years. They illustrate the financial impact of slide seven and the reversion to the norm equipment volumes, and a few other elements, we present the EBITDA bridge on slide 20. First, the starting point of the EBITDA bridge is our current midpoint of the FY2025 adjusted EBITDA guidance. Next, the first step in the bridge is the incremental EBITDA created given ALTA's current market share if equipment volumes simply revert back to historic norms. Note that this element represents $17 million in EBITDA on the bridge. Next, the second step of the bridge is related to a reversion of the norm on gross profit margins on equipment sales. As we've discussed on many calls recently, there's been an oversupply of equipment in the equipment markets for nearly two years now, which has led to an unprecedented competitive pricing environment that ultimately depressed equipment sales margins. The $10 million of EBITDA misstep represents a reversion to the norm on gross margins associated with the normalized level of equipment sales. The third level of the bridge is related to EcoVerse, a business unit that in 2025 has experienced an outside level of impact from tariffs given its business model. The abrupt and blunt impact of the tariffs on this business can't be overstated. As a master distributor of environmental processing equipment that is sourced from Europe, EcoVerse relies on a constant flow of equipment and parts from that region and historically has not held a lot of stock inventory. Thus, the quick implementation of the tariffs was difficult to navigate in the timeline on mitigation efforts had a longer tenor than keeping up with the marketplace. Thus, sales were impacted and margins quickly eroded. That said, since the outset of the tariffs, our team at Ecoverse has been effectively and actively working on mitigation efforts, which included supply chain resourcing, target pricing increases, and supplier cost sharing. We believe these mitigation efforts are largely in place and the road back to Ecoverse contributing to the enterprise from an EBITDA perspective is ahead of us. Thus, the $7 million EBITDA step here. Next, we believe strongly that PeakLogix, our systems integration and warehouse automation business, will revert to historic norms as interest rates come off their highs and CapEx projects get green-lighted for automation projects at customers within our material handling footprint. Thus, the $3 million reversion to the norm for PeakLogix in this column. Lastly, the $7 million negative EBITDA on the last step of the bridge is simply the incremental costs associated with the steps, with steps one and two in the bridge. Overall, we believe the $30 million bridge on slide 20 presents a simplistic, hard, presents simplistic, hard evidence that a reversion to the norm in terms of industry equipment sales volumes and margins and a normal operating environment for both the Ecoverse and Peak provide for a logical path back to the company's targets of $200 million of EBITDA. Moving on to the final portion of my prepared remarks, adjusted EBITDA and free cash flow before rent to sell decisioning for 2025. First, in terms of our adjusted EBITDA guidance for the year, we now expect to report between $168 million to $172 million of adjusted EBITDA for the fiscal year 2020. Notably, the updated range implies a better sequential Q4 versus Q3. Lastly, despite the reduction of the guidance on adjusted EBITDA, we are effectively holding our guidance on free cash flow before rent to sell decisioning, which is again presented on slide 21. As a reminder, free cash flow before rent to sell is a metric that we believe appropriately measures the true free cash flow generation capacity of the business in a steady state and removes the impact of the decisions we make with our rent to sell fleet. Overall, we have set Free cash flow before rent to sell decisioning to be between $105 and $110 million for the fiscal year 2025. In closing, I would say that we remain bullish about our partnerships, our employees, and the long-term prospects at Alta and are confident in our enduring business model. Ryan and I would like to wish all of our 2800 teammates and all of you listening tonight a healthy and happy holiday season. Thank you for your time and attention, and I will turn it back over to the operator for Q&A.

Thank you. We will now open the call for questions. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind and would like to exit the queue, please press star followed by two. And finally, when preparing to ask your question, please ensure that your phone is unmuted locally. The first question today will be from the line of Liam Burke with B Reilly Securities. Please go ahead. Your line is open.