Q3 2023 Alta Equipment Group Inc Earnings Call
Speaker 1: Good afternoon, and thank you for attending the ultimate equipment group. 3rd quarter 2023 earnings conference call. My name is Matt and I'll be a moderator for today's call. I'll now turn the call over to Jason, the mayor director reporting and technical accounting with all the equipment group.
Good afternoon, and thank you for attending the Alta equipment group third quarter between 23 earnings Conference call. My name is Matt and I'll be your moderator for today's call I will now turn the call over to Jason <unk> director of SEC reporting and technical accounting with Alta equipment group.
Speaker 2: Thank you Matt. Good afternoon everyone and thank you for joining us today. A press release detailing Alta's third 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.
Thank you Matt.
Afternoon, everyone and thank you for joining us today.
Press release detailing <unk> third 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 result.
Speaker 2: On the call with me today are Ryan Greenewald, our Chairman and CEO , and Tony Kalushy, our Chief Financial Officer.
On the call with me today are Ryan Greenwald, Chairman and CEO and Tony <unk>, Our Chief Financial Officer.
Speaker 2: For today's call, management will 1st, provide a review of our 3rd quarter 2023 financial results. We will begin with some prepared remarks before we open the call for your questions.
For today's call management will first provide a review of our third quarter 2023 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.
Speaker 2: 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.
Speaker 2: These forward-looking statements are subject to both known and unknown risk uncertainties and assumptions, including those related to all to growth, market opportunities, and general economic and business conditions.
These forward looking statements are subject to both known and unknown risks uncertainties and assumptions, including those related to ultra growth market opportunities and general economic and business conditions.
Speaker 2: 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.
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 operation.
Speaker 2: Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call.
Although we believe these expectations are reasonable we undertake no obligation to revise any statement to reflect changes that occur after this call.
Speaker 2: Descriptions of these and other risks that could cause actual results to differ materially from the forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today.
Script trends of these and other risks that could cause actual results to differ materially from the forward looking statements are discussed in our reports filed with the SEC, including our press release that was issued today.
Speaker 2: During this call, we may present both GAP and non- GAAP financial measures. A reconciliation of GAP to non- GAAP measures is included in today's press release and can be found on our website at investors.ulti equipment.com. I will now turn the call over to Ryan.
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 <unk> I'll take equipment Dot Com I will now turn the call over to Ryan.
Speaker 3: Thank you, Jason. Good afternoon, everyone, and thank you for joining us today.
Thank you Jason Good afternoon, everyone and thank you for joining us today.
Speaker 3: Before I begin, I want to recognize our employees because without their hard work and dedication, our continued record performance would not be possible.
Before I begin I want to recognize our employees because without their hard work and dedication our continued record performance would not be possible.
Speaker 3: Also, in light of the recent tragedy that has struck Lewiston, Maine, where we have long operated, we want to extend our heartfelt condolences to all those affected by the senseless act of violence.
Also in light of the recent tragedy that has struck Lewiston, Maine, where we have long operated we want to extend our heartfelt condolences to all those affected by the senseless act of violence, our thoughts and prayers are with the victims their families and all members of the community who are grappling with the profound pain and loss.
Speaker 3: Our thoughts and prayers are with the victims, their families, and all members of the community who are grappling with the profound pain and loss.
Speaker 3: I will now begin with a quick review of our 3rd quarter financial highlights. These are found on slide 5 of the presentation made available on our website.
I will now begin with a quick review of our third quarter financial highlights. These are found on slide five of the presentation made available on our website.
Speaker 3: Demand in our end user markets remain solid. Total revenue increased 15.1% year over year to 466.2 million.
Demand in our end user markets remained solid total revenue increased 15, 1% year over year to $466 2 million.
Speaker 3: Construction and material handling revenues increased to 282 million and 168.6 million respect.
Speaker 3: New and used equipment sales grew 20.7% to 253.6%
New and used equipment sales grew 27% to $253 6 million.
Speaker 3: Product support revenues increased 12.1% year over year with part sales increasing to $69.5 million and service revenues increasing to $60.6 million.
Product support revenues increased 12, 1% year over year with part sales increasing to $69 5 million and serving service revenues increasing to $60 6 million.
Speaker 3: We continue to increase our field population and in quarter and we have more than 1300 factory trained tech.
We continued to increase our field population and at quarter end, we had more than 1300 factory trained technicians.
Speaker 3: As a result of our solid performance in our major business segments, which includes contributions from our acquisitions as well as organic growth, adjusted EBITDA grew 15.9% to 51 million.
As a result of our solid performance in our major business segments, which includes contributions from our acquisitions as well as organic growth adjusted EBITDA grew 15, 9% to $51 million.
Speaker 3: Despite the macro economic environment, we continue to see strong demand in the diversified markets we serve. I would like to highlight the resilience of your resiliency of our construction segment, especially in Florida, which has experienced tremendous growth. Our construction segment, despite its name, has a myriad of applications that extend far beyond road commercial or housing projects.
Despite the macroeconomic environment, we continue to see strong demand in the diversified markets. We serve I would like to highlight the resilience of your resiliency of our construction segment, especially in Florida, which has experienced tremendous growth.
Our construction construction segment. Despite its name has a myriad of applications that extend far beyond road commercial or housing project.
The investments we've made have brought relationships and capabilities they extend into scrap demolition markets large scale aggregate and mining operations our generation.
Speaker 3: The investments we've made have brought relationships and capabilities that extend into scrap and demolition markets, large scale, aggregate and mining operations, power generation.
Speaker 3: Perf and maintenance and the list only goes on from there. We are focused on further expansion of this segment going forward.
And maintenance and the list only goes on from there.
We are focused on further expansion of this segment going forward.
Speaker 3: We are happy to see supply chains continue to improve. Demand for our material handling equipment also remains strong. Our backlog remains at a record level and customer sentiment remains favorable.
We are happy to see supply chains continue to improve.
Demand for our material handling equipment also remains strong our backlog remains at a record level and customer sentiment remains favorable.
Speaker 3: In terms of our growth strategy, it is evident we are executing upon our objectives. On October 13th, we closed our purchase of Burris Equipment Company, a premier supplier of compact construction and turf equipment with three locations in Illinois.
In terms of our growth strategy. It is evident we are executing upon our objectives on October 13th we closed our purchase of burst equipment company, a premier supplier of compact construction and turf equipment with three locations in Illinois.
Speaker 3: Growth in the highly fragmented, compact segment of the construction equipment market continues to outpace other segments. This acquisition gives us further coverage and market penetration in the metro Chicago market and brings with it a talented group of experts in the region with longstanding customer relationship.
Growth in the highly fragmented compact segment of the construction equipment market continues to outpace other segments. This acquisition gives us further coverage and market penetration in the Metro Chicago market and brings with it a talented group of experts in the region with long standing customer relationships.
Speaker 3: In our second transaction of the quarter, on November 2nd, we acquired all into
And our second transaction of the quarter on November 2nd we acquired all the industries.
Speaker 3: A privately held Canadian equipment distributor with locations in Ontario and Quebec. This is Alta's 1st investment in Canada for our construction equipment segment.
<unk> held Canadian equipment distributor with locations in Ontario, and Quebec.
This is also its first investment in Canada for our construction equipment segment.
Speaker 3: Alt has built a high performing equipment dealership in the aggregate and mining space, a growing end market in their region.
<unk> has built a high performing equipment dealership in the aggregate and mining space, a growing end market in that region.
Speaker 3: This deal meets several of our strategic objectives for growth. First, we are gaining exclusivity with a portfolio of top performing OEMs with an existing install base and the potential to grow in a market poised for growth and highly correlated to infrastructure and best.
This deal meets several of our strategic objectives for growth first we are gaining exclusivity with our portfolio of top performing Oems with an existing installed base and the potential to grow in a market poised for growth and highly correlated to infrastructure investment.
Speaker 3: Second, equipment for this segment is highly engineered and specialized to unique end markets, allowing for greater margins on equipment sales.
Second equipment for this segment is highly engineered and specialized to unique end markets, allowing for greater margins on equipment sales.
Speaker 3: Lastly, the heavy duty nature of the crushing and screening process creates a steady stream of product support revenue through periodic maintenance and sales of replacement parts and repair service.
Lastly, the heavy duty nature of the crushing and screening process creates a steady stream of product support revenue through periodic maintenance and sales of replacement parts and repair services.
Speaker 3: This business is poised for further organic growth and will likely benefit from our M&A strategy going forward.
This business is poised for further organic growth and will likely benefit from our M&A strategy going forward.
Speaker 3: These transactions are immediately accretive since our public offering in 2020. we have added 537Million in total revenue and 65Million in adjusted EBITDA. We have expanded our dealership network as well as entered new end user markets, and we'll continue to follow the strategic path as evidenced by these recent transactions.
These transactions are immediately accretive since our public offering in 2020, we have added $537 million in total revenue and $65 million and adjusted EBITDA. We have expanded our dealership network as well as entered new end user markets and we'll continue to follow this strategic path as evidenced by these recent transactions.
Speaker 3: Our platform also gives us access to significant organic.
Our platform also gives us access to significant organic opportunities.
Speaker 3: As announced today, we are excited to now enter the central and western Pennsylvania market where we'll where we will operate as case power and equipment of Pennsylvania.
As announced today, we are excited to now enter the central and Western Pennsylvania market, where we will where we will operate as case power and equipment a Pennsylvania initially.
Speaker 3: Initially serving Pittsburgh and surrounding areas through two strategically planned locations in Cranberry Township and Delmont with plans to further expand into central Pennsylvania in twenty twenty four.
Initially serving Pittsburgh and surrounding areas through two strategically planned locations in Cranberry Township in Delmonte with plans to further expand into central Pennsylvania in 2024.
Speaker 3: Serving general construction, infrastructure, and residential and non-residential construction contractors, both locations will sell and service the full line of up case heavy, compact, and sub-compact equipment and attachments, as well as provide for complimentary services, including captive financing, plan maintenance solutions, telematics, and parts of work.
Serving general construction infrastructure and residential and nonresidential construction contractors, both locations will sell and service. The full lineup of case heavy compact and sub compact equipment in attachment as well as provide for complementary services, including captive financing planned maintenance solutions telematics.
<unk> and parts support.
Speaker 3: Alta's demonstrated success in supporting OEMs through dealer succession and consolidation issues made this dealer appointment possible and further demonstrates the power of our dealership platform and the value we bring to our OEM partners.
Also has demonstrated success in supporting Oems through dealer succession and consolidation issues made this dealer appointment possible and further demonstrates the power of our dealership platform and the value we bring to our OEM partners.
Speaker 3: Lastly, I'd like to again 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 the 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.
Lastly, I'd like to again touch on Altice corporate culture as a company, we strive everyday to foster a culture of empowerment accountability and opportunity and we rally around the 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.
Speaker 4: Our shared purpose is the foundation of our commitment to these key areas. Our commitment to environmental sustainability, including a focus strategy to drive customer adoption and commercial viability of various electric mobility solutions. The safety of our employees and technicians and the dedicated and inclusive culture that we continue to develop each day. In closing, I'd like to thank the all-to team for all your hard work in delivering another solid quarter. And I'll now turn the call over to Tony Klootchi or CFO .
Our shared purpose is 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 electro mobility solutions, the safety of our employees and technicians and the dedicated an inclusive culture that we continue to develop each day.
In closing I'd like to thank the Altra team for all your hard work in delivering another solid quarter and I'll now turn the call over to Tony <unk> Our CFO.
Thanks Ryan.
Speaker 5: Good evening, everyone, and thank you for your interest in Alta Equipment Group and our third quarter 2023 financial results. Before I begin, I want to welcome our new team members from Burris Equipment in Illinois and Alta Industries in Canada to the Alta family.
Good evening, everyone and thank you for your interest in Alta equipment group and our third quarter 2023 financial results before I begin I want to welcome our new team members from various equipment in Illinois, and all industries in Canada to the <unk> family.
Speaker 5: The senior leadership team is excited to build upon the legacy of each of those great companies, and we look forward to a bright future together as one team.
The senior leadership team is excited to build upon the legacy of each of those great companies and we look forward to a bright future together as one team.
Speaker 5: My remarks today will focus on 3 areas. 1st, I'll be presenting our 3rd quarter results, which continue to outpace historical comps as our business continues to benefit from increased equipment availability in the face of strong and market demand and our growth and organic growth and our higher high margin product support.
My remarks today will focus on three areas first I'll be presenting our third quarter results, which continued to outpace historical comps as our business continues to benefit from increased equipment availability in the face of strong end market demand and our growth and organic growth in our high margin product support business.
Speaker 5: I'll also briefly touch on the increase to our adjusted EBITDA guidance for fiscal year 2023.
Also briefly touch on the increase to our adjusted EBITDA guidance for fiscal year 2023.
Speaker 5: Second, I will walk through the economics on each of the two aforementioned Q4 acquisitions, Burris and Alt, and their overall impact on the financial profile of the business.
Second I will walk through the economics on each of the two aforementioned Q4 acquisitions versus an alt and their overall impact on the financial profile of the business Lastly, I'll be presenting a recap of the past four years and contrasts Walter is today versus who we were at our IPO in February of 2020 as part of that.
Speaker 5: Lastly, I'll be presenting a recap of the past four years and contrast who all today is today versus who we were at our IPO in February of 2020. As part of that discussion, I'll summarize notable return on Capitol metrics over the past four years.
I'll summarize notable return on capital metrics over the past four years before I get to my talking points. It should be noted that I'll be referencing slides from our investor presentation throughout the call today I'd encourage everyone on today's call to review our presentation and our 10-Q, which is available on our Investor Relations website at <unk> Dot com.
Speaker 5: Before I get to my talking points, it should be noted that I will be referencing slides from our investor 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.
Speaker 5: With that said, for the first portion of my prepared remarks, and as presented in slides 10 to 14 in the earnings deck, third quarter performance.
With that said for the first portion of my prepared remarks and is presented in slides 10 to 14 in the earnings deck third quarter performance.
For the quarter the company recorded $466 million.
Speaker 5: For the quarter, the company recorded $466 million.
Speaker 5: revenue of $466 million, which is up $61 million versus Q3 of last year. Embedded in the $466 million of revenue for the quarter is a near 10%, $38 million organic increase over Q3 2022, making for a comparatively strong quarter against increasingly more difficult comp.
Revenue of $466 million, which.
Which is up $61 million versus Q3 of last year embedded in the $466 million of revenue for the quarter is at near 10% $38 million organic increase over Q3, 2022, making for a comparatively strong quarter against increasingly more difficult comps.
Speaker 5: Specifically, equipment sales increased 43Million dollars for the quarter to 282Million dollars, which will ultimately bode well for future incremental part product support revenue.
Specifically equipment sales increased $43 million for the quarter to $282 million, which will ultimately bode well for future incremental part product support revenues.
Speaker 5: To that end, year to date, we've now placed approximately $149 million more equipment into field population when compared to the first three quarters of 2022.
To that end year to date, we have now placed approximately $149 million more equipment into field population when compared to the first three quarters of 2022.
Speaker 5: Moving on to our product support business lines. In spite of the quarterly comparals getting more difficult, product support revenues were up $14 million versus last year, as we continue to realize organic growth in our high margin parts and service departments year over year.
Moving onto our product support business lines.
Part of the quarterly comp hurdle is getting more difficult product support revenues were up $14 million versus last year. As we continued to realize organic growth in our high margin parts and service departments year over year.
Speaker 5: Closed out the revenue lines as it relates to our rental business, we saw the natural and expected increase versus Q2, as rental revenues hit $54 million for the quarter, up approximately $4 million from last quarter. As Q3 typically represents the strongest quarter of the year for rental in our Northern region.
To close out the revenue lines as it relates to our rental business. We saw the natural unexpected increase versus Q2 as rental revenues at $54 million for the quarter up approximately $4 million from last quarter. As Q3, typically represents the strongest quarter of the year for rental and our northern region.
Speaker 5: From an EBITDA perspective, we realized $51 million in adjusted EBITDA for the quarter, which is up $7 million from the adjusted level of second quarter 22 and up $3.5 million on a pro forma basis.
From an EBITDA perspective, we realized $51 million and adjusted EBITDA for the quarter, which is up $7 million from the adjusted level of second quarter, 'twenty, two and up $3 $5 million on a pro forma basis, a function of our organic growth and realization of operating leverage when compared to last year on.
Speaker 5: a function of our organic growth in realization of operating leverage when compared to last year. On a trailing 12 basis we achieved 184.4 million dollars of adjusted evadot which converted into 127.4 million dollars of economic ebit. Our version of unleavened free cash flow for approximately 70% conversion rate on evadot.
On a trailing 12 basis, we achieved $184 $4 million of adjusted EBITDA, which converted into $127 $4 million of economic EBIT.
Our version of Unlevered free cash flow for approximately 70% conversion rate on EBITDA.
Speaker 5: Lastly, on EBITDA, and as mentioned in today's press release, given year-to-date performance, our expectations for a solid Q4, and the two acquisitions that were closed this quarter, we are raising guidance to a range of $187 million to $192 million of adjusted EBITDA for fiscal year 2023.
Lastly, on EBITDA and as mentioned in today's press release, given the year to date performance our expectations for a solid Q4 and the two acquisitions that were closed this quarter. We are reading raising guidance to a range of 170, I'm, sorry, $187 million to a $192 million of adjusted EBITDA.
For fiscal year 2023.
Speaker 5: On to cash flows. As depicted on slide 13 of our investor deck, on a pro forma basis, the business is generating just above $81 million in annualized levered free cash flow to common equity prior to growth CapEx, a metric we view as akin to normalized economic earnings available to common equity holders. More on this.
On the cash flows as depicted on slide 13 of our investor deck on a pro forma basis. The business is generating just above $81 million in annual <unk> Levered free cash flow to common equity prior to growth Capex. A metric review is akin to normalize economic earnings available to common equity holders.
On this metric later.
Speaker 5: Moving on to the balance sheet, we ended the quarter with approximately $207 million in availability on our revolving line of credit facility with $36 million suppressed and total leverage came in at roughly 3.9 times 2023 adjusted EBITDA. In summary, both leverage and liquidity came in at levels similar to last quarter.
Moving on to the balance sheet, we ended the quarter with approximately $207 million in availability on our revolving line of credit facility with $36 million suppressed and total leverage came in at roughly three nine times 2023, adjusted EBITDA in summary, both leverage and liquidity came in that level.
Over the last quarter.
Speaker 5: Lastly, I'm a balance sheet. I wanted to note the quarter over quarter flattening in our inventory levels. As we ended Q3 with $493 million of inventory versus $498 million of inventory at the end of Q2. As mentioned in previous calls, as equipment supply chains began to normalize at the end of 2022, ALTA, like many other industry participants, who came together as a representative member and nationally had a? there. In particular, I crusant a few classes short of 20 at the same time. A student thathmm. After a while, I choose the blackstone bridge that I always keep the Bishop Of the Church. When A lot of me are accused, as my principal.
Lastly on the balance sheet I wanted to note the quarter over quarter flattening and our inventory levels. As we ended Q3 with $493 million of inventory versus $498 million of inventory at the end of Q2.
As mentioned in previous calls as equipment supply chains began to normalize at the end of 2022 Alta like many other industry participants saw an unprecedented level of inventory replenishment in the first half of 'twenty, three which put pressure on working capital and led to redeployment of Floorplan lines as I mentioned last quarter we.
Speaker 5: Saw an unprecedented level of inventory replenishment in the first half, 23, which put pressure on working capital and led to redeployment of floor claims.
Speaker 5: As I mentioned last quarter, we expected the pace of this replenishment to moderate significantly in the second half of the year. And we have seen just that in Q3. Currently, we feel comfortable that we are now back with the normal range of inventory levels, given both our history and our benchmark KPIs unexpected equipment turnips.
Did the pace of this replenishment to moderate significantly in the second half of the year and we have seen just that in Q3.
Currently we feel comfortable that we are now back within normal range of inventory levels, given both our history and our benchmark kpis unexpected equipment turnover.
Speaker 5: Moving on to the second portion of my prepared remarks. Some financial commentary on the two acquisitions we recently closed on, Burris and Alt.
Moving on to the second portion of my prepared remarks, some financial commentary on the two acquisitions. We recently closed on <unk> at all.
Speaker 5: In October we completed our acquisition of births equipment. This acquisition adds an incremental $40 million of revenue and approximately $4.5 million of incremental adjusted EBITDA on an annualized basis. As Ryan mentioned, this acquisition adds important infrastructure and talent for our compact equipment segment in metropolitan Chicago. At a total purchase price of $14 million, the 3.1X deal is immediately accretive to shareholders and to our leverage profile.
In October we completed our acquisition of burst equipment. This acquisition adds an incremental $40 million of revenue and approximately $4 $5 million of incremental adjusted EBITDA on an annualized basis as Ryan mentioned this acquisition adds important infrastructure and talent for our compact equipment segment in Metropolitan Chicago.
At a total total purchase price of $14 million to three onex deal is immediately accretive to shareholders and to our leverage profile.
Speaker 5: On November 1st we complete our acquisition of all the industries with operations in Montreal and Toronto. This acquisition adds an incremental $50 million of revenue in close to $8 million of incremental adjusted EBITDA on an annualized basis in US dollars. As noted, the acquisition represents our first investment in Canada in our CE segment and it aligns us with a market leading crushing and screening equipment OEM.
On November one we completed our acquisition of <unk> industries with operations in Montreal, and Toronto. This acquisition adds an incremental $50 million of revenue and close to $8 million of incremental adjusted EBITDA on an annualized basis in U S. Dollars as noted the acquisition represents our first investment in Canada.
In our <unk> segment, and aligns us with our market, leading crushing and screening equipment OEM.
Speaker 5: In terms of structure, the $35 million purchase price, net of excess working capital, was cut into $22.3 million in cash at close, a $2.2 million three-year cellar no, and $10.5 million of ALPG stock, which importantly was valued at $13 a share, invests over a five-year time.
In terms of structure, the $35 million purchase price net of excess working capital was cut into $22 $3 million in cash at close to $2 million.
Three year seller note and.
$10 $5 million of <unk> stock, which importantly was valued at $13 a share and vest over a five year timeframe.
Speaker 5: The best thing it's about shares mimics the tenor of our new partners employment agreement.
The best thing in sell of shares mimics the tenor of our new partners employment agreement as it was important to us that sellers were fully aligned and incentivized with our vision going forward. This structure ensures a true partnership and is immediately accretive to all to shareholders and like burress is accretive to our leverage profile.
Speaker 5: as it was important to us that sellers were fully aligned and incentivized with our vision going forward. This structure ensures a true partnership and is immediately accretive to all the shareholders and, like Burris, is accretive to our leverage profile.
Speaker 5: Now, for the final portion of my prepared remarks, I'd like to recap where the company stands today versus where we were just four years ago at our IPO in February of 2020.
Now for the final portion of my prepared remarks, I'd like to recap, where the company stands today versus where we were just four years ago at our IPO in February of 2020 and.
Speaker 5: In our view, the numbers are impressive and reflect the commitment of our employees and our culture and a relentless pursuit when it comes to the execution of the plan we laid out for our investors at the beginning of 2020.
In our views the numbers are in our view the numbers are impressive and reflect the commitment of our employees and our culture and our relentless pursuit when it comes to the execution of the plan, we laid out for investors at the beginning of 2020.
Speaker 5: As depicted on slide 19, we have now formally to double the size of our business since the IPO, based on multiple data.
As depicted on slide 19, we have now formally doubled the size of our business since the IPO based on multiple data points. As you can see we've gone from $900 million in revenue to over $1 8 billion gone from operating in 43 locations to 85 and increased EBITDA from $94 million to a one.
Speaker 5: As you can see we've gone from nine hundred million dollars in revenue to over one point eight billion gone from operating in forty three locations to eighty five. And increased EBITDA from ninety four million dollars to a hundred and eighty nine million dollars at the midpoint of our new guidance.
<unk> hundred $89 million at the midpoint of our new guidance range.
Speaker 5: Additionally, we've gone from 1,700 to approximately 3,000 team members and from 850 to over 1,300 skilled mechanics.
Additionally, we've gone from 700 to approximately 3000 team members and from 850 to over 3500 skilled mechanics.
Speaker 5: And we've gone from operating in 10 states to 15 states in the U.S. and the two major provinces in Canada in all three of our major sectors.
And we've gone from operating in 10 States to 15 states in the U S and the two major provinces.
Vincent in Canada, and all three of our major segments. So.
Speaker 5: So the results speak for themselves, and we're so proud of the team and these accomplishes.
So the results speak for themselves and we're so proud of the team and these accomplishments.
Speaker 5: And the growth has come through both organic investments and be a strategic acquisition. To that end, and I reference flag 20, we believe that we've been good investors along the way. When we deploy capital, we are hyper focused on generating appropriate returns on invested capital for our business.
And the growth has come through both organic investments and via strategic acquisitions to that end and I referenced slide 20, we believe that we have been good investors along the way when we deploy capital we are hyper focused on generating appropriate returns on invested capital for our business and.
Speaker 5: And as presented on slide 20, our economic EBIT yield, which is our version of ROIC, on both M&A and organic investments have been impressive over the past four years.
And as presented on slide 20, our economic EBIT yield, which is our version of ROIC.
On both M&A and organic investments have been impressive over the past four years, all told we've deployed $432 million of capital since the IPO and have earned a $14 five return on that capital on the capital deployed for.
Speaker 5: All told we've deployed $432 million of capital since the IPO and it earned a 14 and a half return on that capital on the capital of the capital.
14, 5% return on the capital deployed I.
Speaker 5: I would also know for investors that are executive comp programs most heavily weighted metric is economic ebit yield or ROIC. In the end, all to senior management is highly incentivized to drive returns on investment, which ultimately fully aligns us with Cheryl.
I would also note for investors that our executive comp programs, most heavily weighted metric as economic EBIT yield or ROIC.
In the end Ultra senior management is highly incentivized to drive returns on investment, which ultimately fully aligns us with shareholders.
Speaker 5: With both the performance since the IPO and historic returns in mind, at the bottom of slide 19, you will note what we view as a disconnect between our performance since the IPO and our market cap today. As a reference point, and as previously mentioned, the company is now generating $81 million of free cash flow to equity on an annual basis, or approximately $2.50 per share. This compares to $0.74 per share on this metric at the time of the IPO.
With both the performance since the IPO and historic returns in mind at the bottom of Slide 19, you will note what we view as a disconnect between our performance since the IPO and our market cap today as a reference point and as previously mentioned the company is now generating $81 million of free cash flow to equity on an app.
Annual basis or approximately $2 50 per share this.
This compares to <unk> 74 per share on this metric at the time of the IPO.
Speaker 5: So in summary, we have grown this metric 3.5x in four years with minimal dilution along the way. The reverse side of this metric is to say that Alta's equity now trades at 25% free cash flow to equity versus the 7% on that metric at the IPO.
So in summary, we have grown this metric three buybacks and four years with minimal dilution along the way.
The reverse side of this metric is to say that all of those equity now trades at 25% free cash flow to equity versus the 7% on that metric at the IPO.
Speaker 5: While we understand the uncontrollable ebbs and flows of the equity markets, we are highly cognizant of the disconnect for what we believe to be fair value for our equity. And as we head into 2024, we will be laser focused on creating more of our own compets.
While we understand the uncontrollable ebbs and flows of the equity markets. We're highly cognizant of the disconnect to what we believe to be fair value for our equity and as we head into 2024, we will be laser focused on creating more of our own capacity to grow by optimizing existing cash flow streams and being strategic and opportunistic with capital as we have demonstrated.
Speaker 5: by optimizing existing cash flow streams and being strategic and opportunistic with capital as we have demonstrated over the past four years.
Over the past four years.
Speaker 5: In closing, I'd like to thank my all to colleagues for a great Q3. I'm looking forward to a strong finish to the year in the coming weeks. And I wish all of all to employees, our customers and OEMs and our shareholders a happy upcoming holiday.
In closing I'd like to thank my <unk> colleagues for a great Q3, Im looking forward to a strong finish to the year and the coming weeks and I wish all of <unk> employees, our customers and Oems and our shareholders happy upcoming holiday season. Thank.
Speaker 5: Thank you for your time and attention, and I will turn it back over to the operator for Q&A.
Thank you for your time and attention and I'll turn it back over to the operator for Q&A.
Speaker 1: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you're any reason I'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, here using a speaker phone, please remember to pick up your hands that before asking your question. We'll pause here briefly as questions are registered.
Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad. If for any reason to remove that question. Please press star followed by two again to ask a question Press Star one as a reminder, if you are using a speakerphone. Please remind me to pick up your handset before asking a question. We'll pause here briefly is questions registered.
The first question is from the line of Alex Rigel with B Riley. Your line is now open.
Speaker 1: The first question is from the line of Alex Reigel with B Reilly, your line is now open. Good evening gentlemen, great
Ladies and gentlemen, great quarter congrats.
Thanks, Alex Alex Good evening.
Speaker 6: Good evening, Ryan and Tony. So as we approach 2024, can you talk a bit about your order book, how that might have changed over the last few months? And what customers are saying about higher interest rates and how they could impact purchase plans in 2024? And then any other kind of general thoughts on organic growth outlook for 2020.
Good evening.
And Tony So as we approach 2024 can you talk a bit about your order book, how that might have changed over the last few months as well.
What customers are saying about higher interest rates and how they could impact.
Purchase plans in 2024.
And then any other kind of general thoughts on organic growth outlook for 2024.
Sure. Alex. This is this is Tony I'm, assuming when you when you say order book, you mean kind of on the customer size sales backlog correct versus our own order book without purchasing equipment.
Speaker 5: Sure, Alex, this is Tony, I'm assuming when you say order book, you mean kind of on the customer side, sales backlog. Correct? Versus our own order book with purchasing equipment. Yeah. So.
So.
Speaker 5: Correct. Correct. We, we, yeah, we, we have, you know, the construction segment, Alex is a little bit more of you need to have the inventory on the ground, which is why you're seeing such such good results here recently in that segment on equipment sales.
Correct, we yes, we have.
The construction segment, Alex is a little bit more of you need to have the inventory on the ground, which is why youre seeing such such good results here recently in that segment on equipment sales.
Speaker 5: versus having large backlogs like the material handling side where you've got large customers buying fleets by the dozens if not the hundred
Versus having large backlogs like the like the material handling side, where you've got large customers by buying.
Fleets by the dozens if not hundreds.
Speaker 5: On the material handling side we will go into 2024 with
On the material handling side, we will go into 2024 with.
Speaker 5: What I would say is record backlog in terms of, you know, forklifts, forklift customers, the material handling equipment. And then, you know, forklift customers, the material handling equipment.
What I would say is a record backlog.
In terms of.
Forklifts forklift customers in material handling equipment.
Speaker 5: And we have yet to see a material amount of cancellations related to factors that you just described, inflation, interest rates.
And we have yet to see a material amount of cancellations related to factors that you just described inflation interest rates.
Speaker 5: so on and so forth. So we feel really good about kind of visibility on equipment sales and material handling.
And so forth. So we feel really good about kind of visibility on equipment sales in material handling.
Speaker 5: And you know as we go around our different regions on the construction side It's it's still hard to point to an end market or
And as we go around our different regions on the construction side.
It's still hard to point to an end market or a contractor base that doesn't have large backlogs of work.
Speaker 5: a contractor base that doesn't have large backlogs of work, whether it be in the commercial side, aggregates and mining, as Ryan mentioned, or more specifically, I should say, DOT work. And we made a point of.
Whether it be in the commercial side.
<unk> mining as Ryan mentioned or even.
More specifically I should say.
Work.
And we made a point of.
Speaker 5: highlighting that specifically is DOT budgets have kind of wrapped up for the year. They're up 14, 15% in the markets that we're in. And so.
Highlighting that specifically is DLP budgets have kind of wrapped up for the year.
They are up $14, 15% in the markets that we're in and so.
We feel pretty good about just sentiment headed into 24 on the equipment side.
Speaker 5: We feel pretty good about just sentiment headed into 24 on the equipment side. Certainly that can change if you know, especially in the construction segment. If Mac where economic factors change. When it comes to the more a new ties revenue streams as we had to 24. You know, we've been here nine years. I don't think that we've ever not grown parts and service 10% organically or at least high single digit.
Certainly that can change it.
Especially in the construction segment.
If macroeconomic factors change.
When it comes to the more annuity type revenue streams as we head to 'twenty four.
I've been here nine years, I don't think that we've ever not grown parts and service, 10% organically or at least high single digits.
Speaker 5: on that line and I think we would expect the same headed in the next year as we try to kind of harvest a lot of the revenue that's out there from the increased equipment that was sold in 23 here. So yeah I think
On that line and I think we would expect the same headed into next year as.
As we try to kind of harvest a lot of.
The revenue that's out there from the increased equipment that we sold in 23 here. So.
Bob.
Yes, I think that's how I'd leave that one.
Speaker 6: And then Ryan, I was intrigued by some of your comments on the specialty equipment side. Definitely sounds like you're going to be through M&A and organic methods growing that business a lot quicker. Can you talk a bit about that and a little bit more about the generally higher margins that you capture in that business?
And then Brian I was intrigued by some of your comments on the specialty equipment side definitely sounds like youre going to be.
Through M&A and organic.
To.
Grown that business a lot quicker can you talk a bit about that and a little bit more about the generally higher margins that you're capturing that business.
Sure Alex.
Speaker 4: The sort of rule of thumb is that the more commoditized the market, the lower the more competitive the landscape and the lower your margins are going to be. So the margins are going to be higher because there's less competition. It's more engineered towards a specific application, which makes it a narrower playing field in terms of the competitive landscape.
That sort of rule of thumb is that the more commoditized market.
The more competitive landscape in the lower your margins are going to be so the margins are going to be higher because theres less competition, it's more.
Engineered towards a specific application, which makes it a narrower playing field in terms of the competitive landscape.
And then the other comment that I made was just about sort of the product support yield on that type of equipment. So if you imagine what the equipment is doing.
Speaker 4: And then the other comment that I made was just about sort of the product support yield on that type of equipment. So if you imagine what the equipment is doing, you know, handling heavy material aggregate, you know, basically stone, it's chewing up the parts and it has a very high, you know, product support yield on the equipment. Alex, the way I would think.
Handling heavy material aggregate basically stone.
Its chewing up the parts in it it has a very high.
Product support yield.
Equipment.
Alex the way I would think about.
Speaker 5: You're referencing all tier AULT and the specialized equipment that they represent.
So youre referencing all tier LT.
In the specialized equipment that they represent.
Speaker 5: very, very much akin to the ego verse.
Very very much akin to eco versus in terms of the specialized sort of niche products.
Speaker 5: in terms of the specialized sort of niche products that are used in pretty difficult applications. It's gonna imagine crushing rock and stone. And yet you can command a good margin on those products and all-tinkum statement will look a lot like eco-versus from a margin perspective because of that.
That our Houston pretty pretty difficult applications as you can imagine crushing rock in stone.
And yes, you can command.
Amanda.
Good margin on those products and Alt Ultra income statement will look a lot like like eco versus from a margin perspective.
Out of that.
Very helpful. Thank you very much.
Thank you for your question.
Speaker 1: Next question is from a line of Matt Somerville with DA David's linear wires.
Next question is from the line of Matt Summerville with D. A Davidson your line is now open.
Speaker 7: Thanks, couple of questions. Can you maybe talk about what you're seeing in terms of new and used equipment pricing and what your thought is heading into 24 there and then also can you touch on rental rates and what you're seeing in rental fleet utilization and again any high level income next year would be helpful there and then I'll follow up.
Thanks couple of questions can you maybe talk about what youre seeing in terms of new and used equipment pricing and what your thought is heading into 'twenty. Four there and then also can you touch on rental rates and what youre seeing in rental fleet utilization and again any.
High level into next year would be helpful. There and then I have a plausible.
Yeah.
Sure Matt This is Tony.
Speaker 5: I think that if you, I'll take those in buckets here. New equipment, you know, we continue to see, I would just say, inflationary level, CPI level, kind of increases. And what I always try to emphasize there is, you know, we just try to hold our margin.
I think if you.
I'll take those in buckets here new equipment.
We continue to see I would just say inflationary level.
<unk> level kind of kind of increases and what I always try to.
Emphasize there is.
We just try to hold our margins.
Speaker 5: Ultimately, and you can see in this quarter, there's no different. I think we ended the quarter at 16% on new and used combined for the quarter. And so we have that, we get to fit kind of in between the OEM and the customer, but nothing really to speak of beyond typical what you're seeing in inflation for new equipment.
Ultimately and you can see in this quarter is no different than I think we ended the quarter at 16% on new and used combined.
For the quarter and so we have that we get to sit kind of in between the OEM and the customer.
But nothing really to speak up beyond typical what youre seeing in inflation for new equipment.
Speaker 5: I will say that unused equipment, we're not unlike the rest of the industry, a lot of the industry publications are seeing moderation or even decreasing in certain segments, product segments of the kind of construction and material handling portfolio of products.
I will say that unused equipment, we're not unlike the rest of the industry a lot of the industry publications are seeing moderation.
Or even even decreasing in certain segments.
<unk> segments.
Of the kind of construction and material handling portfolio of products.
Speaker 5: So definitely have seen some moderation that way. Some of the industry publications that are out there based on auction pricing and we like to use auctions kind of as our last resort, meaning we'd rather retail, use the equipment, but we definitely have seen some moderation that way as well.
So definitely have seen some moderation that way some of the industry publications that are out there based on auction pricing.
We like to use auctions kind of as a as a last resort, meaning we we'd rather retail used equipment, but we definitely have seen some moderation that way.
As well.
Speaker 5: And I would expect that both of those things I'm new and use to continue not sort of in any sort of material way, but the trans maybe to continue into into 24. I'm the utilization side, we are always striving for 35 to 40%.
And I would I would expect that both of those things on new and used to continue.
That's sort of in any sort of material way, but the trends maybe they continue into <unk> into.
<unk> 24.
On the utilization side, we are always striving for 35% to 40% 35 ish, we can we can.
Speaker 5: 35 ish we can we can earn a good return on financial utilization and so I think you know annualized we're running about 200 million dollars on the rent to rent line on a 50080 ish million dollar fleet. Roughly 35%.
We're in a good return on financial utilization and so.
I think annualized we're running about $200 million in the rent to rent line on a 580 ish million dollars fleet roughly 35%.
Speaker 5: And that's kind of where we want to be we've got. And we want to always try to drive that as high as possible.
And thats kind of where we where we want to be we've got.
And we want to always try to drive that as high as high as possible.
Speaker 5: Rains, rental rates, I think we published in the deck today that we're up 6% versus last year and so as we saw in 21 and 22 sort of double digits.
Rates rental rates I think we published in the deck today that we're up 6% versus <unk>.
Versus last year and so.
As we saw in 'twenty, one 'twenty, two sort of double digit level mid.
Speaker 5: level, mid teens even in some categories, rental rate increases. We've seen moderation there. So it's long answered to your question, Matt, but I think moderation will continue into 24. And we're just gonna stick to our KPIs on equipment turns. We'll scale the rental fleet appropriately, relative to demand. We've talked a lot about a rent to sell approach where we think we can...
Mid teens, even in some categories rental rate increases we have seen moderation there.
Long answer to your question, Matt, but I think moderation will continue into 'twenty four and we're just going to stick to our kpis on equipment turns.
We will scale the rental fleet appropriately.
Relative to demand, we've talked a lot about our rent rent to sell approach, where we think we can.
Speaker 5: scale that rental fleet back quickly if needed and we're constantly turning it anyway. So...
The scale that that rental fleet back quickly if needed.
We're constantly turning it anyway so.
Hopefully that helps.
Speaker 7: No, I appreciate the comprehensive answer. And then maybe if you guys can just spend a minute talking about some of your other end markets, obviously, construction is a big important one. But some of your material handling, pacing, end markets, what do you see in warehousing, logistics, automotive, et cetera, et cetera. And then are you seeing any sort of canaries, if you will, at this point? Thanks.
No I appreciate the comprehensive answer and then maybe if you guys can just spend a minute talking about.
Some of your other end markets, obviously construction is a big important one but some of your more.
Your material handling facing end markets. What are you seeing in warehousing logistics automotive et cetera, et cetera, and then are you seeing any.
Sort of Canaries, if you will at this point thank you.
Matt I'll take that one this one it's Ryan.
Speaker 4: Matt, I'll take that one. This one's Ryan. You know, on the material handling side, we have a pretty diverse...
And then on the material handling side, we have a pretty diverse.
Speaker 4: and market exposure which has some reasonable pockets of concentration.
And market exposure, which has some regional pockets of concentration.
Speaker 4: In the Midwest, it's heavier manufacturing. You know, we just saw the conclusion of the UAW strike, which is good news. You know, it really wasn't much of an impact on the business. There were...
In the Midwest, it's heavier manufacturing.
Yeah.
The concur.
Conclusion of the UAW strike, which is good news.
It really wasn't much of an impact on the business. There were some plants in our territory that were affected but we're happy that.
Speaker 4: some plants that in our territory that were affected, but we're happy that
Speaker 4: Everything looks like it's moving along in terms of that labor dispute and the market.
Everything looks like it's more.
Moving along in terms of that labor dispute and.
The market.
Speaker 4: For autos, we think it'll be stable next year. There's been a lot of...
For autos, we do think it will be stable next year theres been a lot of.
Speaker 4: turmoil and just disruption with the move towards electromobility, but we're seeing that generally our area of the country is benefiting from that. As we see new plants coming online for batteries, old plants converted to new lines and new products.
Turmoil in just disruption with the move towards electric mobility, but we're seeing that generally our area of the country is benefiting from that as we see new plants coming online for batteries.
The old plants converted.
New lines and new products.
Speaker 4: So just speaking about manufacturing, we think it's stable, stable demand going into next year. On the warehousing and distribution side, a similar story, that business tends to follow the density of the market, so the population density tends to have areas like New York City, Boston, Chicago, Detroit, all have heavy exposure to the warehousing and logistics market.
So just speaking about manufacturing, we think it's stable stable demand going into next year on the warehousing and distribution side.
Similar story.
That business tends to follow the density of the market. So the population density tends to have.
The areas like New York City, Boston, Chicago, Detroit, I'll have heavy exposure to the warehousing and logistics markets.
Speaker 4: And the only thing that we're seeing there is a little bit of a softening as it relates to the engineered solutions, the warehouse automation. We're seeing projects as we've commented on last quarter, taking a little bit longer to get through the fail cycle. And this is an area we do think is somewhat more related to interest rates as it's less discretionary. You know, with-
And the only thing that we're seeing there is.
A little bit of a softening as it relates to the engineered solutions the warehouse automation.
We're seeing projects.
Commented on last quarter, taking a little bit longer to get through the sales cycle and this is an area. We do think is somewhat more related to interest rates as it's less.
Discretionary with with.
Speaker 4: Our forklift fleet states they come up for renewal and it's a pretty formulaic renewal process that those are sticky accounts with
Our forklift fleet, they come up for renewal and it's a pretty formulaic renewal process.
Those are sticky accounts with.
Speaker 4: with the warehousing market that it's more discretionary investments that are based on an ROI and we're seeing interest rates potentially having an effect there. And then another major market for us on the material handling side is food and beverage that seeing no slow down there and then in the northeast in particular the chemical and medical type of and markets where those those also. I'm superior very stable and been poised for for growth next year.
With the warehousing market there are more discretionary investments that are based on an ROI and we're seeing interest rates potentially having an effect there.
And then another major market for us on the material handling side is food and beverage.
Seeing no slowdown there and then in the northeast in particular, the chemical and medical.
Type of end markets, where those those also.
Appear very stable and poised for growth next year.
Thank you guys.
Thank you for your question.
Speaker 1: Next question is from the line, does Steve hands in with Raymond James? Can you guys that open?
Next question is from the line of Steve Hansen with Raymond James Your line is now open.
Sure.
Speaker 8: Yeah guys, thanks for the time. Maybe a first one on the balance sheet. I'm curious where you are in that inventory journey that you described with the supply chains loosening up. You know, how much further do you feel like you have to go and what do you think the optimized level will be achieved?
Yes, hi, guys. Thanks for the time.
Maybe a first one on the balance sheet, just curious where you are in that inventory journey that you described with the supply chain is loosening up.
How much how much further do you feel like you have to go and what do you think the optimized level will be achieved.
Speaker 5: You know, we feel like we're right kind of in the strike zone Steve. You know, we try to target two turns on new and used equipment. Maybe a little bit quicker than that actually on use.
Yeah.
We feel like we're right in the strike zone Steve.
We tried to target two turns.
New and used equipment, maybe a little bit quicker than that actually unused and we feel like we're kind of right in the strike zone.
Speaker 5: And we feel like we're kind of right in the strike zone.
Speaker 5: of that KPI. You know, you always want to try to do better. We'll never get back to the levels where we're turning our new equipment three and four and maybe even five times a year as we did, through the supply chain issues.
Of that Kpis, you always want to try to do better we will never get back to the levels, where we're turning our new equipment three four and maybe even five times a year as we did.
Through the supply chain issues.
Speaker 5: But I wouldn't expect that to moderate a whole lot or to reduce a whole lot more. I would expect this to kind of just settle and maybe bounce around kind of where we're at here today. I think you know, hi Sir Yale's been pretty.
But.
I wouldn't expect that to moderate a whole lot or to reduce a whole lot more I would expect as it kind of just settle and maybe bounce around kind of kind of where we're at today I think hyster Yale has been pretty.
Speaker 5: up front with some of their issues. We saw a lot of backlog, as I mentioned, on that side of ours. And so to the extent that they're able to increase production and deliver, we actually may see a little bit of an increase from here. But all told, I think we're stabilized.
Upfront with some of their issues, we still have a lot of backlog as I mentioned on that side of the house.
So to the extent that there.
They're able to increase production and deliver we actually may see a little bit of an increase increase.
The increase from here, but all told I think we're stabilized on the inventory level.
Speaker 8: Okay, that's helpful. Thanks. And you referenced a fairly attractive multiple in one of your recent purchases. I just be curious to know how you feel like seller expectations have been shifting is at all given some of the macro backdrop, high rate environment, etc. It sounds like they're still a creative deal to be done. But has there been any major shifting shift in that sort of by seller expectations.
Okay. That's helpful. Thanks, and you referenced.
Fairly attractive multiple in one of your recent purchases I'd just be curious to know how you feel like seller expectations have been shifting if at all given some of the macro backdrop higher rate environment et cetera. It sounds like theres still accretive deals to be done but has there been any major shifting shifted in that sort of seller expectation Todd.
Speaker 5: No, Steve, there really hasn't. And that goes not, it's not just, you know, this last quarter or this last year, I think, you know, up in, with the company nine years, and there's, these companies will always trade with, you know, in a certain range, that range is...
No Steve there really hasn't been that goes to that it's not just this last quarter. This last year I think.
With the company nine years and these companies will always trade.
Certain range that range is.
Speaker 5: Accredives to the ALTA. These are usually single line dealerships that are in a specific territory not the platform that ALTA is.
Accretive to alter these are used.
Usually single line dealerships that are in a specific territory not the platform that Ulta is maybe maybe you have a specific end market that they are concentrated in so the multiples are a little bit lighter than than then.
Speaker 5: maybe have a specific end market that they're concentrated in. So the multiples are a little bit lighter than, then certainly where we would feel fair value would be at, but.
Certainly, where we would feel fair value would be at but.
Speaker 5: No, the answer to that is no, I think, you know, we still think that we can execute on $15 million of EBITDA a year at four to five times.
No the answer to that is no I think we still think that we can execute on $15 million of EBITDA a year at 4% to five times.
Speaker 5: And sometimes we can find deals that are better than that in the sense that we do.
And sometimes we can we can find deals that are better than that in this instance, we did.
Speaker 8: That's great. And maybe just one last one if I can sneak you in, it's just around the buyback and how you feel, the value of the stock today, I think you referenced it in some of your marks earlier around the market cap and the valuation. But just how you feel about that relative opportunity for capital allocation relative to the growth opportunities you might still have on your plate as well. Thanks.
That's great and maybe just one last one if I could sneak it in is just around the buyback and how you feel.
The value of the stock today, I think you referenced it in some of your remarks earlier around the market cap of devaluation, but just how do you feel about that relative opportunity for capital allocation relative to the growth opportunities you might still have on your plate as well.
Yes, so we've always triangulated all the data points.
Speaker 5: Yeah, so we've always triangulated all the data points on the buyback, which would be our leverage in liquidity levels.
On the buyback, which would be our leverage and liquidity levels.
Speaker 5: the M&A pipeline and you know what the multiples are there as I just
The M&A pipeline.
What the multiples are there as I just referenced.
Speaker 5: And obviously some of the strategic elements of the
And obviously some of the strategic elements of the M&A pipeline. These business. Some of these businesses that we're buying come up once in a generation or two generations or three in the case of burst equipment I think Bruce was in the same family for.
Speaker 5: the M&A pipeline, you know, these businesses, some of these businesses that were buying come up once in the generation.
Speaker 5: or two generations or three in the case of births equipment. I think births was in the same family for...
Yes.
Speaker 5: something like 80 years. And so we try to, we try to weight all of those and as the stock slips.
Something like 80 years so.
We try to we try to wait all of those.
The Sox slips.
Speaker 5: Obviously it becomes more attractive relative to potentially the M&A pipeline or using capital, capital elsewhere. But we're also mindful of where we're at kind of in the leverage cycle here and and and you know maybe preserving liquidity. So.
Obviously, it becomes more attractive relative to potentially the M&A pipeline are using capital capital elsewhere, but we're also mindful of where we're at kind of in the leveraged cycle here and.
Maybe preserving liquidity so.
Speaker 9: We, we, I mean, to be clear, we, my remarks were for a reason. We don't want to part ways with capital at the levels that we're at today, which is why you saw kind of the, the, the all to deal, all to a ULT deal struck at a higher price. We wanted to, we negotiated a floor on what we're willing to part ways with on our stock. And so, yeah, that's, that's kind of how we, we positioned that answer. That will cover with
We I mean to be clear, we my remarks, where for a reason we don't want to part ways with capital at the levels that we're at today, which is why you saw kind of the Ulta deal at LTE deal struck at a higher price we wanted to we negotiated a floor.
What we are willing to part ways with our stock.
So.
Yes.
Position that answer.
That's good color I appreciate it thanks guys.
Thanks. Thank you for your question.
Speaker 1: Next question is from the line of Ted Jackson with Northland Security. Come on in, we'll open. Thank you very much. Thank you very much.
Next question is from the line of Ted Jackson with Northland Securities. Your line is now open.
Thank you very much congratulations on the quarter.
Speaker 10: Yeah, I got to, most of my questions are asked at a couple. I'd like to circle to the Pennsylvania opportunity, just because it's kind of unique in terms of, at least my experience with Alta. Can you, was there no, I guess the question is, was there no case presence in that region would be kind of one sort of thing, like how did it come into play? And then, you know, when you put a new...
Thanks, Doug.
Yes.
Yes.
Most of my questions were asked but a couple I'd like to circle to the Pennsylvania opportunity just because it's kind of unique in terms of at least my experience with.
With Alta.
Can you can.
Is there no I guess the question is was there no case presence in that region would be kind of.
One sort of thing like how did it come in come into play and then.
When you put a new.
Speaker 10: Location in, how long does it take for you, for what first of all, what's the investment for, you say a typical location, then your green fielding it, and then, how long does it take for a location like that to hit?
Location and how long does it take for you first of all what's the investment for you to say a typical location and your Greenfield ing It and then with <unk>.
Long does it take for a location like that to hit.
Speaker 10: in terms of where it's actually performing at, the metrics that you would want it to perform at. And that'd be my first question.
Stride in terms of where it's actually performing at the.
The metrics that you would want.
The format and that would be my first question.
Yeah.
Speaker 4: Thanks Ted, this is Ryan, I'll take part of that and then I think Tony will probably fill in some color on that.
Thanks, Ted This is Ryan I'll take part of that and then I think Tony will probably fill in some color on that.
Speaker 4: So first of all, we typically shy away from...
So first of all we typically shy away from opportunities you would seen with Greenfield, we're going into a territory and trying to carve out share for.
Speaker 3: opportunities you would see with greenfield where we're going into a territory and trying to carve out share for a manufacturer who's not already there. You can't create new demands and all you're doing is bringing in products that essentially keep you know a mature market and it's very difficult.
For a manufacturer who has not already there.
You can't create new demand at all Youre doing is bringing in product that potentially.
A mature market and it's very difficult.
Speaker 4: And that's not what this is. Here we have...
And that's not what this is here we have.
Speaker 4: a dealer that has decided to part ways, or it's been against mutual, that they are going to part ways with the case relationship and they're pivoting to a different manufacturer. And they have had some historical success in that market, and there's an existing field population that today is being left unserved and unsupported. And this deal for us is being underwritten on the strength of that field population and what we know.
A dealer that has decided to part ways or it's been against mutual that theyre going to part ways with the <unk> relationship and they're pivoting to a different manufacturer.
And they have had some historical success in that market and there is an existing field population that today is being left unserved and unsupported.
And this deal for us is being underwritten on the strength of that field population and what we know field population will yield in the way of parts and service and supporting a head count of technicians.
Speaker 4: a field population will yield in the way of parts and service and supporting a head count of of technicians. So how quickly we can ramp up is going to be dependent on how quickly we can attach on to that customer base and take care of them with their existing equipment and preserve the good will there with the case brand and with that customer base.
So how quickly we can ramp up is going to be dependent on how quickly we can attach on to that customer base and take care of them with their existing equipment and preserve the goodwill is there with the case brand and with that that that customer base.
Speaker 4: As a point of reference, we've resurrected territories for OEMs in the past and our legacy business here in Michigan, the oldest part of our construction equipment business, started with negligible market share and very little field population. And it was about a three year ramp up to being a hundred million dollar business and having sustainable market share.
As a point of reference.
We've resurrected territories for Oems in the past in our legacy business here in Michigan. The oldest part of our construction equipment business started with negligible market share and very little field population and it was about a three year ramp up.
Being a $100 million business and having sustainable market share.
Speaker 4: That's sort of what we're forecasting for this business. Over the near term, without any further territorial expansion, what the territory we have and what the field population that's there, we expect to be able to ramp up to that level over the next three years. And that could be further...
That's sort of what we're forecasting for this business over the near term without any further territorial expansion with the.
The territory, we have and with the field population. That's there we expect to be able to ramp up to that to that level over the next three years and that could be further.
Speaker 4: I guess stimulated by other M&A opportunities or other brands that would be ancillary, allied lines that we could bring in, but that's kind of the strategy.
I guess stimulated by other M&A opportunities or other.
Other brands that would be ancillary allied lines that we could bring in but that's kind of the strategy.
Speaker 5: Tony, do you have anything on just sort of? I think, I agree with Ryan. It's probably, it's at least three years, Ted, before you have any sort of material.
And then Tony do you have anything on just sort of I think I think I.
I agree with Ryan, it's probably it's at least three years before you have any sort of material.
Speaker 5: I think in this instance given, it's a pretty cold start here. We do have, we'll be stepping in some parts revenue, but we've got a ramp up technician.
I think I think in this instance, given.
Pretty cold start here, we do have we will be stepping into some parts revenue.
But we've got to ramp up technicians.
Speaker 5: The facilities effectively, you know, just starting a new here. These were existing facilities that we'll step into the lease with. But case has really, you know, been a good partner here and understands that this is going to take some time. But as Ryan mentioned, we're sort of used to this.
The facilities.
<unk>, just starting a new here.
Existing <unk> facilities that will step into the lease with.
But case has really been a good partner here.
And understand that this is going to take some time, but.
Ryan mentioned, we're sort of used to this situation and we're looking forward to it in terms of capital Ted It's an immaterial amount.
Speaker 5: situation and we're looking forward to it. In terms of capital TED, it's any material.
Speaker 5: kind of amount, we've got some soft costs, right? Just starting to maybe with some sales, some sales.
Amount, we've got some soft costs right just starting to baby.
With some sales some sales.
Speaker 5: sales leaders and people in the branches, but nothing of any sort of material outlay. Eventually we will start to build a rental fleet out there, but again, I don't expect anything material for a perceptible.
Sales leaders and people in the branches, but nothing of any sort of material.
Outlay eventually we will start to build our rental fleet out there, but again I don't expect anything material for several years.
Speaker 10: So if I understand what you said, so the first you're taking over at least is from this.
So.
Understanding what standing what you said, so first you're taking over leases from this.
Speaker 5: dealer that's walking away from case. And is that gonna be the first two locations that you referenced? And then once you kinda get those stood up, then there's growth opportunities for you within the region, just because you have this whole region, and that'll be, you know, sort of a little longer term, you know, build out a few ways. Is that what I'm hearing from you? Correct, we're, correct. We're starting with two locations.
Dealer Thats walking away from case and is that going to be the first two locations that you referenced and then once you kind of get those stood up then there is growth opportunity for you within the region. Just because you have this whole region that will be it.
Sort of a longer term.
Build out if you would is that what I'm hearing from you correct.
Correct, we're starting with two locations.
Speaker 9: where we stepped into the leases and there's other locations kind of to be had. That we expected.
Where we stepped into the leases and theres other locations kind of to be at.
That we expect and we will use.
Speaker 10: Will you bring some of the employee base from those dealers along like when you need to get technicians because they're so hard to get? I mean, will there be at least, you know, kind of a base level of talent you would that's already there that comes along with this or is that something you have to go out and get?
Will you.
Some of the employee base from those dealers along like when you need to get technicians, because they are so hard to get there.
Will there be at least kind of a.
Our base level of talent, if you would it's already there that comes along with this or is that something you have to go out and get.
Speaker 5: There's a base level of talent that, you know, the other dealer clearly had that was, you know, technicians working on K. This is very much, and it's infancy, as it was just kind of announced publicly today, Ted. And so we'll be working on kind of building out the team, you know, in the coming weeks. So today, you know, we're starting a new, but there's talent out there, and we have to kind of...
There is there is a there's a base level of talent that the other dealer clearly had that was technicians working on case.
This is very much in its infancy as it was just kind of announced publicly today Ted So we'll be working on kind of building out the team.
In the coming weeks so.
Today, we.
We're starting a new but there is talent out there and we have to kind of go after.
Speaker 10: So no, I mean, it sounds pretty cool actually. And I honestly, I don't know if there's a press release that because I know in the burning release, you referenced it, but I didn't see it on any news theater on your press release before the call started.
So no I mean.
It sounds pretty cool actually.
Honestly I don't know if theres a press release out because I know in the earnings release, you referenced it but I didn't see it on any new theater on your press release before the call started.
Speaker 10: Going on to just my next question, just kind of talking about the electric side of the Alta House, if you would. You would now, excuse me first, you know.
Going on to my next question just kind of talking about the.
On the electric side of the altar House. If you would you were you announced some of your excuse me first.
Speaker 10: And you call up truck sales last quarter and just maybe an update with regards to, you know, kind of where that stands. I think you felt like there was room for more unit sales by the end of this fiscal year. And then I know the longer term that, you know, one of the out where the business becomes interesting is, you know, maybe less on the battery side or on the hydrogen side. You know, maybe a longer term discussion of where that.
Nicole.
Truck sales last quarter, just maybe an update with regards to.
Kind of where that stands.
I think you felt like there was room for more unit sales by the end of this fiscal year.
Then I know the longer term that when the business becomes interesting is maybe less on the battery side more on the hydrogen side, just maybe a longer term discussion are aware of that.
Speaker 10: how that's developing also. That would be it for me. Thank you.
How thats developing also that would be it for me. Thanks.
Speaker 4: Yeah, and this is Ryan, I'll take that. So, Nikola just had their earnings call, I think, last.
Okay.
Yeah. This is Ryan I'll take that so Nikola just had their earnings.
Carl I think last week and there is not a whole lot more to report than what was announced in that that call in terms of how the recall is being supported.
Speaker 3: And there's not a whole lot more to report than what was announced in that call in terms of how the recall is being supported. We did have an initial fleet installation that unfortunately is part of that recall and we're still navigating that. It's expected that those units will be back in customer hands and Q1 of next year as they work through the battery issue.
Did have an initial fleet installation that unfortunately as part of that recall and we're still navigating that it's expected that that those units will be back in customer hands in Q1 of next year.
As they work through the battery issue.
Speaker 3: And then you know you you kind of teed it right up for me Ted that we think that in our in our region and just in terms of class eight in general longer hall and heavier duty trucking it's gonna be Application more suited for fuel cells
And then <unk>.
T that right up for me Ted.
We think that in our in our region and just in terms of class eight and general longer haul and heavier duty trucking, it's going to be an application more suited for fuel cells.
Speaker 4: And we're excited about the product. Nicola has officially launched the product. It's being heavily demonstrated, especially right now in California, where there's more readily supply of gas.
We're excited about the product Nicola has officially launched the product it's being heavily demonstrated especially right now in California, where there is more readily supply of gas.
Speaker 4: But we're very excited about it and we're poised for this opportunity. We've been supporting.
But we're very excited about it and we are poised for this opportunity we've been supporting.
Speaker 4: auto manufacturing with fuel cell powered forklift for years now. We actually deliver gas for one of the major OEMs in the auto industry. And we're poised to have our gas solution be part of our our our
Auto manufacturing with with fuel cell powered forklifts for years now, we actually deliver gas for one of the major Oems in the auto industry and we're poised to have our gas solution be part of R. R.
Our services going forward, so more on that to come it's still early stages, but we are really excited about the direction niklas headed with the product and we'll be eager to get these trucks back on the road next quarter.
Speaker 4: services going forward. So more on that to come, it's still early stages, but we're really excited about the direction Nicolas headed with the product and we'll be eager to get these trucks back on the road next quarter.
Speaker 1: Thank you for your question. Next question is from the line of Steve Ramsey with pops and research group. You know I know.
Thank you for your question.
Next question is from the line of Steve Ramsey with Thompson Research Group. Your line is now open.
Speaker 11: Hi, good evening. Maybe to start with the Burris acquisition solid, even a margin 11th percent, it looks like, can you talk to how Burris compares to your existing margin profile in the state? And if there is much of a difference, what accounts for that gap, then maybe lastly, will Burris require much investment the next couple of years to raise the financial performance that business even further?
Hi, Good evening, maybe just start with the various acquisition.
Solid EBIT margin of 11 ish percent. It looks like can you talk to how <unk> compares to your existing margin profile in the stake and if there is much of a difference.
It accounts for that gap and then maybe lastly, we'll tourists require much investment in the next couple of years to raise the financial performance of that business even further.
Sure Steve.
Speaker 5: Dr. Skive, thanks for the question. To be clear, so Burris is in the States, it's in Illinois, four and a half million of EBITDA, and 40 million of revenue kind of mimics our profile. Burris is...
Thanks for the question.
To be clear Bruce So Bruce is in the states.
In Illinois.
$4 5 million of EBITDA and $40 million of revenue kind of mimics our profile birth is.
The revenue streams are more heavily weighted to rental.
Speaker 5: The revenue streams are more heavily weighted to rental.
Yes.
Speaker 5: versus let's say a dealership like Alt, and I'll talk to Alt in a second.
Versus let's say a dealership like Alt and I'll talk I'll talk to halt in a second here.
Speaker 5: Which means, you know, rental is obviously cat-backed and intensive, which is why we present economic EBIT and refer to that so often.
Which means rentals, obviously, capex intensive which is why we present economic EBIT.
<unk> of that so often.
Speaker 9: I believe we picked up about a $20 million rental fleet in the Burris Aquas.
I believe we picked up about a $20 million rental fleet.
In the <unk> acquisition.
Speaker 9: And as Ryan mentioned, they're doing a lot of compact rentals. So turf and ag specialists.
As Ryan mentioned, they are doing a lot of compact rentals. So.
<unk> turf in AG specialist.
Smaller skid steers.
Smaller construction equipment et cetera.
Speaker 9: So that I would classify the places asRAID I I
So.
I would classify versus.
Speaker 5: revenue mix and capital intensity very akin to Alta's business in the rest of the US here. I'm in construction sites specifically.
Revenue mix.
And sort of capital intensity very akin to alter his business and the rest of the U S. Here on the construction side specifically.
With all.
Speaker 5: up in Canada, the business model is not one that's rental model. They may do very short run, what we would call RPOs, rental purchase options because this is large crushing and screening equipment which typically has to get on site and maybe run for a few weeks or...
Up in Canada.
Is this model is not one that's rental model.
They may do very short run what we would call RP OS rental purchase options. Because this is large crushing and screening equipment, which typically has to get on site.
And maybe run for a few weeks or a couple of months.
Speaker 9: where buyers want to make sure that they can, you know, things are running well and commit to the asset. But this is not a long-term rental model where you're holding assets and running them for, you know, five and 10 years or anything, frankly, beyond a year. So the cash flows, the alt cash flows
Buyers want to make sure that they can things are running well and commit to the asset but this is not a long term rental model, where youre holding assets and running them for five and 10 years.
Anything frankly beyond a year or so.
The cash flows the all cash flows $50 million in sales $8 million give or take of EBITDA.
Speaker 5: $50 million in sales, $8 million give or take a Vibhada. And almost I think five of that falls to the bottom line. So not capital intensive reminds me a lot of our ecoverse.
And almost I think five of that falls to the bottom line, so not not capital intensive reminds me a lot of our eco versus.
Speaker 5: from a capital and tenancy perspective, I believe $12 million of the 50 million is parts revenue, which is, as you know, we love, comes in at a really high margin, probably four, five million of service, and then the rest is just equipment sales. So, it's a dealership.
From a from a capital intensity perspective I believe.
<unk> million dollars of the $50 million as parts revenue.
Which is as you know we love comes in at a really high margin.
Probably $4 million to $5 million of service and then the rest is just is just the equipment sales. So it's a it's a dealership profile business with not with <unk>.
Speaker 5: Profile business with not with hardly any rental aspects and Could be a really good cash-generative business for us
Hardly any rental aspects.
It could be a really good cash generative business for us going forward.
Speaker 11: Excellent, that's helpful. And then looking at material and handling parts and service gross margins combined, be up nicely. Again, for the second consecutive quarter, can you talk to the reasons for that improvement? And is that something that can be sustainable going forward?
Okay.
Excellent that's helpful and then looking at material and handling parts and service gross margin combined be up nicely again for the second consecutive quarter can you talk to the reasons for that improvement and is that something that can be sustainable going forward.
Speaker 5: It definitely can be sustainable to take the back end or the back half of that question first. I think we've taken over a few regions where we've noticed just some inefficiencies.
It definitely could be sustainable to take the backend of the back half of that question first.
<unk>.
We've taken over a few regions, where we've noticed just some inefficiencies.
Speaker 5: and non-billable time, and so we've implemented some of our processes and procedures.
In non billable time, and so we've implemented some of our processes and procedures.
Speaker 5: And then of course you're always kind of looking at the rate that are you at market or is there room there? And I think what you're seeing there, Steve, is just kind of us.
And then.
Of course, you're always kind of looking at the rate.
Are you at market or is there room, there I think.
What youre seeing there Steve is just kind of us running our playbook from our Kpis perspective, driving efficiencies and yes, I do think youll see that continue.
Speaker 5: running our playbook from a KPI perspective, driving efficiencies, and yes, I do think you'll see that.
Okay excellent and then one last one for me I think this has been alluded to.
Speaker 11: Okay, excellent. Then one last one for me, I think it's been alluded to.
Speaker 11: The rental fleet continues to grow and rates are higher, but then fleet availability is improving as well. Thinking about that juxtaposition, are customers still judging the rent versus buy decision in a similar way now to prior years?
The rental fleet continues to grow and rates are higher.
But then fleet availability is improving as well thinking about that juxtaposition are customers still judging the rent versus buy decision in a similar way now to prior years.
Yeah.
Speaker 9: You know, I think they, well, in prior years, there wasn't, you know, there, there was this, there was this decision that had to get made between frankly, the us and the, and the, and the customer, meaning did we want to part ways with a rental asset? And that was predicated on, you know, what rates were we getting out in the market?
Well in prior years there wasn't.
There was this there was this decision that had to get made between frankly, the us end to end.
And the customer, meaning did we want to part ways with a rental asset and that was predicated on.
What rates, where we're getting out in the market.
Speaker 5: How did that rate convert into returns on invested capital for that bespoke piece of equipment? And so in previous years we were holding back maybe and saying, look we need to hold this because we can't find another one or we're not sure we're going to get another one for some time, whether whoever the OEM.
Did that rate converting to returns on invested capital for that spoke pieces of equipment.
And so in previous years, we were holding back maybe and saying look we need to hold this because we can't find another one or we're not sure we're going to get another one for some time weather.
The OEM was.
Speaker 5: And so as things have loosened up, I think the decision has become more natural from a history, let's just say pre COVID, where a customer's decision.
And so as things have loosened up.
The decision has become more natural from a.
History, let's just say pre pre COVID-19, where a customer's decision.
Speaker 9: is more predicated on their own backlog. And whether they want to commit to an asset or do they just need an asset to maybe finish a job or supplement their existing fleet because they're pushing relative to some deadline or something that they have. So I think it's become much more natural in terms of the Bivers rent decision. And you know.
Is more predicated on their own backlog and whether they want to commit to an asset or or do they just need an asset.
Maybe finish the job.
Supplement their existing fleet, because they're they're they're pushing relative to some deadline or something that they have so I think it's become much more natural.
In terms of the buy versus rent decision.
And.
Speaker 9: We will be prepared for both, as I always say, is we'd rather have our rent to sell, fleet out on a customer's balance sheet or a bank balance sheet and reap the rewards of parts and service in most instances. But customer preference sort of requires us to be renting lightly used equipment as well. So we'll be prepared for both Steve with the ultimate goal of driving field population.
We will be prepared for both as I always say is.
We would rather have our rent to sell fleet out on our customers' balance sheet or our bank's balance sheet and reap the rewards of of parts and service in most instances.
But copper customer preference sort of requires us to.
Be renting lightly used equipment as well so we will be prepared for both Steve with the ultimate goal of driving field population.
That's helpful color. Thank you.
Speaker 1: Thank you for your question. Thank you. There currently no additional questions waiting at this pass. I'll pass the call back to the management team for new closing remarks.
Thank you for your question. Thanks, Steve There are currently no additional questions waiting at this time, so I'll pass the call back to the management team for any closing remarks.
Speaker 5: Thank you everybody for attending our Q3 earnings call and as I mentioned happy upcoming holidays season to everybody. Thank you.
Thank you everybody for attending our Q3.
Earnings call and as I mentioned happy upcoming holiday season to everybody. Thank you.
That concludes.
Speaker 1: That concludes the conference call. Thank you for your participation. May not disconnect your line.
The conference call. Thank you for your participation you may now disconnect your lines.