Q1 2024 Alta Equipment Group Inc Earnings Call
Good afternoon.
Bethany: and thank you for attending the Alta Equipment Group first quarter 2024 earnings conference call. My name is Bethany, and I will be your moderator for today's call. I will now turn the call over to Jason Dammeyer, Director of SEC Reporting and Technical Accounting at Alta Equipment Group.
Thank you for attending the Alta equipment Group first quarter 2024 earnings Conference call. My name is Stephanie and I will be your moderator for today's call.
Jason Dammeyer: Now I'll turn the call over to Jason <unk> director of S. E T reporting and technical accounting with Alta equipment group.
Jason Dammeyer: Thank you Bethany.
Jason Dammeyer: Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta's first quarter 2024 financial results was issued this afternoon and is posted on our website along with a presentation designed to assist you in understanding the company's results. On the call with me today are Ryan Greenawalt, our Chairman and CEO, and Tony Colucci, our Chief Financial Officer. On today's call, management will first provide a review of our first quarter 2024 financial results.
Jason Dammeyer: Afternoon, everyone and thank you for joining us today.
Jason Dammeyer: A press release detailing our first quarter 2024 financial results was issued this afternoon and is posted on our website along with the presentation designed to assist you in understanding the company's results.
Jason Dammeyer: On the call with me today are Ryan Greenwald, our chairman and CEO and Tony <unk>, Our Chief Financial Officer.
Jason Dammeyer: For today's call management will first provide a review of our first quarter 2024 financial results. We will begin with some prepared remarks before we open the call for your question. Please proceed to slide two.
Jason Dammeyer: We will begin with some prepared remarks before we open the call for your questions. Please proceed to slide two. Before we get started, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including statements about future financial results, our business strategy and financial outlook, achievements of the company, and other non-historical statements, as described in our press release. These forward-looking statements are subject to both known and unknown risks, uncertainties, and assumptions, including those related to altered growth, market opportunities, and general economic and business conditions.
Jason Dammeyer: Before we get started I would like to remind everyone that this conference call may contain certain forward looking statements, including statements about future financial results, our business strategy and financial outlook achievements of the company and other non historical statements as described in our press release. These.
Jason Dammeyer: We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today.
Jason Dammeyer: These forward looking statements are subject to both known and unknown risks uncertainties and assumptions, including those related to <unk> growth market opportunities and general economic and business conditions.
Jason Dammeyer: 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.
Jason Dammeyer: Although we believe these expectations are reasonable we undertake no obligation to revise any statement to reflect changes that occur after this call.
Jason Dammeyer: Descriptions of these and other risks that could cause actual results to differ materially from these forward looking statements are discussed in our reports filed with the SEC, including our press release that was issued today.
Jason Dammeyer: During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release and can be found on our website at investors.altaequipment.com. I will now turn the call over to Ryan.
Jason Dammeyer: During this call we may present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's press release and can be found on our website at investors <unk> equipment Dot Com I will now turn the call over to Ryan.
Ryan Greenawalt: Thank you, Jason. Good afternoon, everyone, and thank you for joining us today.
Ryan: Thank you Jason Good afternoon, everyone and thank you for joining us today I'll begin with a quick overview of our first quarter results then provide a current assessment of the business conditions in our end user markets.
Ryan Greenawalt: I will begin with a quick overview of our first quarter results, then provide a current assessment of the business conditions in our end-user market. Tony Colucci will then walk through a detailed analysis regarding our financial and operating performance for the quarter and our outlook for the balance of 2024. There is an earnings presentation available for today's call that both Tony and I will be referencing. Our results for the quarter, consistent with historical patterns, were impacted by seasonal factors, particularly winter weather affecting our construction equipment segment in the Northern Region.
Ryan Greenawalt: Tony Colucci will then walk through a detailed analysis regarding our financial and operating performance for the quarter and our outlook for the balance of 2024 there.
Ryan Greenawalt: There is an earnings presentation available for today's call at both Tony and I will be referencing.
Ryan Greenawalt: Our results for the quarter consistent with historical patterns, we are impacted by seasonal factors, particularly winter weather affecting our construction equipment segment and northern regions. Despite this we achieved $441 6 million in revenue up $29 million year over year, driven by continued strength in our markets.
Ryan Greenawalt: Despite this, we achieved $441.6 million in revenue, up $20.9 million year-over-year, driven by continued strength in our market. Our combined product support and rental revenues grew organically by $6.3 million, reflecting the sustained high levels of activity and equipment utilization in our region. Notably, our equipment sales margins were impacted by a shift in revenue mix, which Tony will further explain in his prepared remarks.
Ryan Greenawalt: Our combined product support and rental revenues grew organically by $6 3 million, reflecting the sustained high levels of activity and equipment utilization in our regions.
Ryan Greenawalt: Notably our equipment sales margins were impacted by a shift in revenue mix, which Tony will further explain in his prepared remarks while.
Ryan Greenawalt: While new equipment sales and margins may face challenges from market dynamics, we remain focused on leveraging our dealership capabilities and value proposition to capture market share. Slides 5 through 7 of today's investor presentation highlight the strength of the product support and rental businesses within the core dealership platform for both construction and material handling, highlighting the resilience of the business model. Looking forward, we are optimistic about the construction end markets. The backlog of work and activity levels at our customers indicate continued strength for our product support and rental business lines.
Ryan Greenawalt: While new equipment sales and margins may face challenges from market dynamics, we remain focused on leveraging our dealership capabilities and value proposition to capture market share slides five through seven of today's investor presentation highlight the strength of the product support and rental businesses within the core dealership platform for both construction and material handling.
Ryan Greenawalt: Highlighting the resilience of the business model.
Ryan Greenawalt: Looking forward we are we are.
Ryan Greenawalt: We're optimistic about the construction end markets the backlog of work and activity levels that our customers indicate continued strength for our product support and rental business lines.
Ryan Greenawalt: Industry indicators are favorable for our end market demand, non-residential starts are forecast to increase in 2024, and state transportation budgets are up double digits in our Midwest and Florida markets year over year. Federal infrastructure and megaprojects are still accelerating, providing long-term opportunities across our geographic footprint. In our material handling business, we have solid visibility based on our current customer backlog. Our diverse end markets offer opportunities across numerous verticals. Full year 2024 global lift truck market unit volumes are projected to remain strong compared to pre-pandemic levels but to have decreased moderately from a year ago.
Ryan Greenawalt: Industry indicators are favorable for end market demand nonresidential starts are forecast to increase in 2024 and state transportation budgets are up double digits in our Midwest and Florida markets year over year.
Ryan Greenawalt: Federal infrastructure and Mega projects are still accelerating providing long term opportunities across our geographic footprint.
Ryan Greenawalt: And our material handling business, we have solid visibility based on our current customer backlog, our diverse end markets offer opportunities across numerous verticals full year 2024 global lift truck market unit volumes are projected to remain strong compared to pre pandemic levels, but decreased moderately from a year ago. We are very excited about the <unk>.
Ryan Greenawalt: We are very excited about the commitment Hyster Yale is making to driving innovation in the product portfolio and market leadership with regard to technological innovation. We are working closely with them on initiatives like advancing fuel cell vehicles at major ports and zero emission battery-powered terminal tractors for use in intermittent transportation hubs. We are also collaborating with the Hyster Yale dealer network and implementing wide-scale technological enhancements, such as operator systems and vehicle automation, for improved safety and efficiency.
Ryan Greenawalt: Commitment Hyster, Yale is making to drive driving innovation in the product portfolio and market leadership with regards to technological innovation. We are working closely with them on initiatives like advancing fuel cell vehicles at major ports in zero emission battery powered terminal tractors for Houston Intermodal transportation transportation hubs. We're also collaborate collaborating.
Ryan Greenawalt: Along with the Hyster, Yale dealer network and implementing wide scale technology enhancements, such as operators to systems and vehicle automation for improved safety and efficiency. We believe we are positioned to drive additional market share in our markets given our strategic footprint and the strength of the hyster Yale product portfolio.
Ryan Greenawalt: We believe we are positioned to drive additional market share in our markets given our strategic footprint and the strength of the Hyster Yale product portfolio. Our M&A activity since our public offering underscores the success of our growth strategy with 16 strategic acquisitions at accretive valuation multiples. We remain committed to pursuing accretive transactions that complement our core business and enhance long-term shareholder value. We continue to expand our geographic reach and product portfolio within existing business segments by leveraging strong OEM relationships and forging partnerships with new OEMs that meet our criteria.
Ryan Greenawalt: Our M&A activity since our public offering underscores the success of our growth strategy with 16 strategic acquisitions at accretive valuation multiples, we remain committed to pursuing accretive transactions that complement our core business and enhance long term shareholder value, we continue to expand our geographic reach and product portfolio within existing.
Ryan Greenawalt: Business segments by leveraging strong OEM relationships and forging partnerships with new Oems that meet our criteria.
Ryan Greenawalt: Furthermore, we are exploring new business segments in tangential or complementary equipment markets. The opportunity to electrify the medium-duty, over-the-road truck fleet over the next decade is substantial, driven by the convergence of market demand and legislative mandates for zero tailpipe emissions. We are actively exploring ways to position ourselves at the forefront of this transformative trend, leveraging our expertise and resources. The transition to electric vehicles for medium-duty commercial vehicles draws a compelling parallel to the evolution of electric forklifts over the last 50 years.
Ryan Greenawalt: Furthermore, we are exploring new business segments, and tangential or complementary equipment markets.
Ryan Greenawalt: The opportunity to electrify the medium duty over the road truck fleet over the next decade as substantial driven by the convergence of market demand and the legislative mandates for zero tailpipe emissions, we are actively exploring ways to position ourselves at the forefront of this transformative trends leveraging our expertise and resources that transition.
Ryan Greenawalt: To electric vehicles for medium duty commercial vehicles drives a compelling parallel to the evolution of the electric forklifts over the last 50 years initially electric forklift faced scepticism in challenges similar to those now encountered by medium duty evs, such as concerns over performance runtime and upfront costs, however, advancements in technology and growing environmental awareness.
Ryan Greenawalt: Initially, electric forklifts faced skepticism and challenges similar to those now encountered by medium duty EVs, such as concerns over performance, runtime, and upfront costs. However, advancements in technology and growing environmental awareness gradually transformed the forklift industry. Over time, electric forklifts gained acceptance due to their efficiency, lower operating costs, reduced emissions, and improved battery technology. As technology continues to advance and infrastructure develops, we anticipate a parallel trajectory for medium-duty EVs, ultimately leading to widespread adoption and integration into the transportation ecosystem.
Ryan Greenawalt: Gradually transformed the forklift industry overtime electric forklift gained acceptance due to their efficiency lower operating costs reduced emissions and improved battery technology as technology continues to advance the infrastructure to develops.
Ryan Greenawalt: We anticipate a parallel trajectory for medium duty evs, ultimately leading to widespread adoption and integration into the transportation ecosystem.
Ryan Greenawalt: In summary, while the first quarter was challenging, we are extremely optimistic that our business is poised for a successful 2024, especially with better visibility into the year. Thank you for your continued support and confidence in our company's strategy. Now, I'll turn it over to Tony for a detailed analysis of our financial and operating performance.
Ryan Greenawalt: In summary, while the first quarter was challenging and we are extremely optimistic that our business is poised for a successful 2024, especially with better visibility into the year. Thank.
Ryan Greenawalt: Thank you for your continued support and confidence in our company strategy now I'll turn it over to Tony for a detailed analysis of our financial and operating performance.
Tony: Thanks, Ryan and good evening, everyone and thank you for your interest in Alta equipment group in our first quarter 2024 financial results and trust that you and your families are looking forward to summer as we all are here at Alta before I begin I want to take my 3000 also teammates for their hard work in the first quarter, which given weather and opera.
Anthony J. Colucci: Thanks, Ryan. Good evening, everyone.
Anthony J. Colucci: And thank you for your interest in Alta Equipment Group and our first quarter 2024 financial results. I trust that you and your families are looking forward to summer as we all are here at Alta. Before I begin, I want to thank my 3,000 Alta teammates for their hard work in the first quarter, which, given the weather and operating conditions, took focus, perseverance, and commitment to our customers and to one another. Thank you.
Anthony J. Colucci: Conditions took focus perseverance and commitment to our customers and to one another to navigate.
Anthony J. Colucci: My remarks today will focus on two primary areas first I'll be presenting our first quarter results, which were naturally affected by the seasonal impact of winter weather on the construction business in our northern regions, but nevertheless saw continued revenue growth and strengthen our product support.
Anthony J. Colucci: My remarks today will focus on two primary areas. First, I'll be presenting our first quarter results, which were naturally affected by the seasonal impact of winter weather on the construction business in our northern regions. But nevertheless, I will continue revenue growth and strengthen our product support in our rental offering. I will also provide details on the equipment revenue makeshift year over year, which impacted our equipment gross margins in Q1 on a consolidated basis.
Anthony J. Colucci: Rental offerings.
Anthony J. Colucci: I will also provide details on the equipment revenue mix shift year over year, which impacted our equipment gross margins in Q1 on a consolidated basis I will also discuss specifics of how our core business segments performed well in the quarter and our headwinds experienced that eco versus peak logics two of our subsidiaries impacted the quarter on a comparative basis.
Anthony J. Colucci: I'll also discuss specifics of how our core business segments performed well in the quarter and how Hedwin's experience at Ecoverse and Peak Logics, two of our subsidiaries, impacted the quarter on a comparative basis. Second, I'll discuss our outlook for the remainder of the year, including current insights into some of our activity-based KPIs as we turn the seasonality corner in April. 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.
Anthony J. Colucci: Second I'll discuss our outlook for the remainder of the year, including current insights into some of the are activity based kpis as we turned the seasonality corner in April.
Anthony J. Colucci: 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 10-Q, which is available on our Investor Relations website at <unk> Dot com.
Anthony J. Colucci: 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 ALTG.com. Before I get into the first quarter performance, again, as I mentioned, the construction segment in our northern geographies is subject to weather constraints in Q1, which makes the sequential comparison of Q4 2023 difficult to Q1 2024. With that said, for the first portion of my prepared remarks, and in line with slides 10 through 19 in the earnings deck, on first quarter performance.
Anthony J. Colucci: Before I get into the first quarter performance again as I mentioned, the construction segment in our northern geographies is subject to weather constraints in Q1, which makes the sequential comparison of Q4 2023 difficult to Q1 2024 with that said for the first portion of my prepared remarks and in line with slides 10 through nine.
Anthony J. Colucci: In the earnings deck first quarter performance.
Anthony J. Colucci: For the quarter. The company achieved record Q1 revenue of $441 6 million up $21 million or 5% versus Q1 of last year.
Anthony J. Colucci: For the quarter, the company achieved record Q1 revenue of $441.6 million, up $21 million, or 5% versus Q1 of last year. Embedded in the $441.6 million of revenue is a $14.7 million, or 6% organic sales increase in our core material handling and construction segments, making for a comparatively strong quarter in our core business against a record level. Specifically, rental revenue increased 7.1% organically for the quarter in our core business segment.
Anthony J. Colucci: Embedded in the $441 6 million of revenue is a $14 7 million or 6% organic sales increase in our core material handling and construction segments, making for a comparatively strong quarter in our core business against a record level compare that spin.
Anthony J. Colucci: Specifically rental revenue increased seven 1% organically for the quarter and our core business segments, our product support businesses. Once again drew grew $3 $2 million organically in the quarter amidst the difficult operating environment.
Anthony J. Colucci: Our product support businesses once again grew $3.2 million organically in the quarter amidst the difficult operating environment. To fully understand the quarter, it's necessary to break down the business segment by segment. First, our material handling section.
Anthony J. Colucci: To fully understand the quarter, it's necessary to break down the business segment by segment.
Anthony J. Colucci: First our material handling segment, excluding <unk> and more on peak in a minute had strong organic revenue growth of 11, 8% in the quarter, specifically, new and used equipment sales were up an impressive 23% versus last year as new lift truck equipment availability, specifically from heister Yale wasn't.
Anthony J. Colucci: Proved year over year. Additionally, rental revenue was up 5% Youre, a notable 5% year over year, our product support businesses business lines were relatively flat versus Q1 of 2023 as more prep and delivery of the increased level of new equipment led to more non billable time in Q1 2024 when compared to.
Anthony J. Colucci: Our product support business lines were relatively flat versus Q1 of 2023 as more preparation and delivery of the increased level of new equipment led to more non-billable time in Q1, 2024 when compared to Q1, 2015. From a gross margin perspective in the material handling segment, again, ex-peak logics, equipment parts, and service gross margins were all improved or stable versus last year. Notably, when you take PeakLogics out of the equation, new equipment sales gross margins were stable, despite an increase in the equipment supply in the market, making for an overall more competitive pricing environment year over year. To focus briefly on PeakLogix,
Anthony J. Colucci: Q1 2023.
Anthony J. Colucci: From a gross margin perspective in the material handling segment again ex peaks logics equipment parts and service gross margins were all improved or stable versus last year, notably when you take <unk> out of the equation new equipment sales gross margins were stable. Despite an increase of the equipment supply in the market, making for an overall.
Anthony J. Colucci: More competitive pricing environment year over year.
Anthony J. Colucci: First, recall that PeakLogix is a subsidiary company in our material handling segment that designs, builds, and implements automated warehouse solutions for end markets up and down the material handling spectrum. Strategically, Peak provides our sales force and our material handling customer base with high-end automation solutions that our quarter lift truck business does not. Peak, as we've mentioned previously, was incredibly active and highly profitable post-pandemic, as customers took advantage of financing what are larger long-term CapEx projects at attractive interest rates, and given the employment levels in the work-from-home movement, automation at customer sites became more of a necessity versus a choice.
Anthony J. Colucci: To focus briefly on peak logic first recall that peak logics as a subsidiary company in our material handling segment that designs builds and implement automated warehouse solutions for end markets up and down the material handling spectrum strategically peak provides our sales force and our material handling customer base with high end automation.
Anthony J. Colucci: <unk> that our core lift truck business does not.
Anthony J. Colucci: Peak as we've mentioned previously was incredibly active and highly profitable post pandemic as customers took advantage of financing what our long larger long term capex projects at attractive interest rates and given employment levels in the work from home movement automation at customer sites became more of a necessity versus a choice.
Anthony J. Colucci: As we move further away from the pandemic, as interest rates rise, Peak's customers have been more reluctant to take on large automation prices. From a comparative perspective, in Q1 of 2023, Peak was still working off of 2021 and 2022 backlog related to the aforementioned tailwinds, tailwinds that have dissipated in the current climate. In terms of impact, Peak was down approximately $9 million of revenue year over year.
Anthony J. Colucci: As we moved further away from the pandemic as interest rates rose peaks customers have been more reluctant to take on large automation projects from a comparative perspective in Q1 of 2023 peak was still working off a 2021 and 2022 backlog related to the aforementioned tailwind that ones that are.
Anthony J. Colucci: <unk> in the current climate in terms of impact peak was down approximately $9 million of revenue year over year and at roughly 30% gross margins. One can do the math on the impact to EBITDA for the quarter.
Anthony J. Colucci: And at roughly 30% gross margins, one could do the math on the impact to EBITDA for the quarter. To summarize the material handling segment, our core lift truck business, which makes up 93% of the revenues in our material handling segment, is off to a positive start for the year, while peak underperformed, impacting the segment overall on a comparative basis. Now on to the construction segment.
Anthony J. Colucci: To summarize the material handling segment, our core lift truck business, which makes up 93% of the revenues in our material handling segment is off to a positive start for the year, while peak underperformed impacting the segment overall on a comparative basis.
Anthony J. Colucci: From a revenue perspective, against a difficult cop, especially as it relates to equipment sales, the segment was up 6.6 million dollars in revenue and experienced organic growth on each revenue line as equipment sales, parts, service, and rental all contributed to the growth in the quarter. Notably, rental revenue was up nearly 8%, and our product support lines increased approximately 6% organically, despite a challenging weather environment. From a gross margin perspective, the construction segment saw a year over year reduction in margin as we navigate a competitive new equipment environment driven by the increased supply in the market compared to last year.
Anthony J. Colucci: Under the construction segment from a revenue perspective against the difficult comp, especially as it relates to equipment sales. This segment was up $6 $6 million of revenue and experienced organic growth on each revenue lines as equipment sales parts service and rental all contributed to the growth in the quarter.
Anthony J. Colucci: Notably rental revenue was up nearly 8% and our product support lines increased approximately 6% organically despite a challenging weather environment from.
Anthony J. Colucci: From a gross margin perspective, the construction segment saw year over year reduction in margin as we navigate a competitive new equipment environment driven by the increased supply in the market compared to last year, Nonetheless, and notably our rental disposal margins held strong at nearly 28% for the quarter.
Anthony J. Colucci: Nonetheless, and notably, our rental disposal margins held strong at nearly twenty-eight percent for the quarter. Moving on to the Master Distribution Segment, which houses our EcoVerse subsidiary. To understand EcoVerse's performance for the quarter, it's important to understand its business model. First, recall that Eco-Verse has master distribution rights for the United States and Canada through exclusive agreements with several European OEMs that manufacture high-end environmental processing equipment. As a master distributor, Ecoverse sells equipment it purchases from the OEMs to a sub-dealer network that it manages through contractual agreements for various designated territories throughout North America.
Anthony J. Colucci: On the material onto the master distribution segment, which houses our <unk> subsidiary.
Anthony J. Colucci: To understand the eco versus performance for the quarter. It is important to understand its business model.
Anthony J. Colucci: First recall that eco versus master distribution rights.
Anthony J. Colucci: For the United States, and Canada through exclusive agreements with several European Oems that manufacture high end environmental processes processing equipment as the master distributor eco versus sells equipment purchases from the Oems to a sub dealer network that it manages through contractual agreements for various designated territories throughout <unk>.
Anthony J. Colucci: With America <unk>.
Anthony J. Colucci: ECO versus OEMs was no different than equipment OEMs around the world in terms of the supply chain challenges that have affected the delivery of new equipment to dealers since the pandemic. As I've noted previously, and as it relates to our core business, 2023 was the great replenishment when it comes to equipment dealers restocking their inventories to normal pre-pandemic levels. In particular, the first quarter of 2023 spoke for a big portion of the great replenishment, and ECO versus sub-dealers were no different as they restocked their yards with ECO versus equipment in Q1 of 2023, leading to an unprecedented level of sales in EBITDA for ECO versus OEMs.
Anthony J. Colucci: Eco versus Oems, we're no different than equipment Oems around the world in terms of the supply chain challenges that afflicted the delivery of new equipment to dealers since depend debit as I've noted previously and as it relates to our core business 2023 was the great replenishment when it comes to equipment dealers restocking their inventories to normal preprint.
Anthony J. Colucci: Demick levels in particular, the first quarter of 2023 spoke spoke for a big portion of the great replenishment and eco versus sub dealers were no different as they restock their yards with eco versus equipment in Q1 of 'twenty three leading to an unprecedented level of sales and EBITDA for eco groups.
Anthony J. Colucci: With Q1 of 2023 as context, the same restocking dynamic was not apparent in the first quarter of 2024, as eco versus sub dealers were sitting on a normalized level of equipment. All told, Eco versus revenues were down $13.9 million for the quarter, and given its 25% equipment margin profile, its year-over-year performance led to a headwind for the enterprise of approximately $4 million of EBITDA versus Q1 of $23. More on why we think this quarter is not indicative of the future for Eco-Verse in a moment.
Anthony J. Colucci: With that Q1 2023.
Anthony J. Colucci: With 2000 with Q1 of 2023 as context, the same restocking dynamic was not apparent in the first quarter of 'twenty four is equal versus sub dealers, we're sitting at a normalized level of equipment.
Anthony J. Colucci: All told eco versus revenues were down $13 9 million for the quarter and given its 25% equipment margin profile, it's year over year performance led to a headwind for the enterprise of approximately $4 million of EBITDA versus Q1 of 'twenty three.
Anthony J. Colucci: More on why we think this quarter is not indicative of the future the future for ecommerce in a moment.
Anthony J. Colucci: With the segment performance in mind, and I would refer participants to the adjusted EBITDA Bridge on slide 13 of our presentation on a consolidated basis, we realized $34 1 million of adjusted EBITDA for the quarter, which is down $6 $7 million from the adjusted level in 2023.
Anthony J. Colucci: With the segment performance in mind, and I would refer participants to the adjusted EBITDA bridge on slide 13 of our presentation, on a consolidated basis, we realized $34.1Million of adjusted EBITDA for the quarter, which is down 6.7Million dollars from the adjusted level in 2023. As discussed, and as presented in slide 13 of our presentation, our core businesses outperformed Q1, 2023, while the aforementioned dynamics surrounding Ecoverse and Peak served as the primary tailwinds and headwinds for our business in the first quarter.
Anthony J. Colucci: As discussed and as presented in slide 13 of our presentation. Our core business businesses outperformed Q1 2023, while the aforementioned dynamics surrounding <unk> served as the primary tailwind or headwinds for our for our business in the first quarter that said, we expect each of the impacting factors listed on <unk>.
Anthony J. Colucci: That said, we expect each of the impacting factors listed on slide 13, which challenged Q1 performance, to become less impactful on a relative basis for the remainder of the year. This is a good segue into guidance and a discussion on our outlook for the remainder of the year. First, I would reiterate slide 7, which is a window into our daily activity, specifically as it relates to rental utilization and labor productivity. As you will see on slide 7, our rental fleet is experiencing its natural seasonality as we head further into the construction season, and labor productivity is held stable at high levels.
Anthony J. Colucci: Slide 13, which challenged Q1 performance to become less impactful on a relative basis for the remainder of the year, which is a good segue into guidance and a discussion on our outlook for the remainder of the year.
Anthony J. Colucci: First I would reiterate slide seven which is a window into our daily activity, specifically as it relates to rental utilization and labor productivity as youll see on slide seven our rental fleet is experiencing its national natural seasonality as we head further into the construction season and labor productivity has held stable at high levels.
Anthony J. Colucci: Simply put, these KPIs provide technical support for the anecdotal conversations that we are having with our customers daily, which is that they are busy. These customer activities should bode well for our product support and rental revenue lines for the foreseeable future. When it comes to EcoVerse, which was the biggest driver of the EBITDA variance for the quarter, we believe that Q1's performance is isolated and timing-related and not a signal for the future. For example, EcoVerse produced almost $7 million of revenue in April versus $12.8 million for the entirety of Q1.
Anthony J. Colucci: Simply put these kpis.
Anthony J. Colucci: <unk> technical support to the anecdotal conversations that we're having with our customers daily which is that they are busy this customer activity should bode well for our product support and rental rental revenue wise for the foreseeable future.
Anthony J. Colucci: When it comes to <unk>, which was the biggest driver of the EBITDA variance for the quarter. We believe that Q1's performance is isolated.
Anthony J. Colucci: <unk> timing related and not a signal for the future in fact eco versus produced almost $7 million of revenue in April versus $12 8 million for the entirety of Q1, we.
Anthony J. Colucci: We remain excited about EcoVerse, its business model, and its prospects going forward. Relative to Peak Logics, we believe that that business unit will remain challenged so long as the current interest rate environment holds, but, similar to EcoVerse, we believe in the long-term synergies between Peak and our core lift truck. Lastly, investors should keep in mind that the two businesses acquired in Q4 of 2023, Burris and Alt, are both seasonal businesses housed in our construction segment, and EBITDA from both of those businesses will be heavily weighted to the remainder of the year versus Q1.
Anthony J. Colucci: We remain excited about eco versus its business model and its prospects going forward.
Anthony J. Colucci: Relative to <unk>, we believe that that business unit will remain challenged as long as the current interest rate environment holds but similar to <unk> believe in the long term synergies between peak and our core lift truck business.
Anthony J. Colucci: Lastly, investors should keep in mind that the two businesses acquired in Q4 of 2023 bursts and halt are both seasonal businesses housed in our construction segment and EBITDA from both of those businesses will be heavily weighted to the remainder of the year versus Q1.
Anthony J. Colucci: In summary, we remain bullish about our prospects for the fiscal year 2022. With that commentary as context, given Q1 performance and the current competitive new equipment environment, we are adjusting the top end of our adjusted EBITDA guidance for the year from $217.5 million to $212.5 million, while keeping the $207.5 million floor of the range in place for 2024. In closing, I want to once again thank my Alta teammates for again rising to the operating challenges that Q1 presented our business. Your teamwork and dedication is infectious and is the core of what makes Alta Equipment Group special. Thank you for your time and attention, and I will turn it back over to the operator for the Q&A.
Anthony J. Colucci: In summary, we made we remain bullish about our prospects for the fiscal year 2024.
Anthony J. Colucci: With that commentary as context, given Q1 performance and the current competitive new equipment environment. We are adjusting the top end of our adjusted EBITDA EBITDA guidance for the year from $217 5 million to $212 $5 million, while keeping the $275 million floor of the range in place.
Anthony J. Colucci: For 2024.
Anthony J. Colucci: In closing I want to once again, thank my oath the teammates.
Anthony J. Colucci: Again rising to the operating challenges that Q1 presented our business Youre teamwork dedication is infectious and is the core of what makes Alta equipment group special. Thank you for your time and attention and I will turn it back over to the operator for Q&A.
Speaker Change: Thank you.
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Speaker Change: We'll now begin the question and answer session. If you would like to ask a question. Please press star followed by one.
Operator: From keypad if for any reason to move a question. Please press star followed by <unk>.
Operator: Again to ask a question. Please press star one as a reminder.
Operator: Speakers, please remember to pick up your handset before asking your question. We will talk to you briefly ask questions registered.
Matt J. Summerville: Our first question comes from the line of Matt.
Matt J. Summerville: Summerville with D. A Davidson. Please go ahead.
Operator: Thanks.
Matt J. Summerville: Thanks. A couple questions. You know, first, if you were to put together a chart similar to chart 13, with respect to the top end, walk down on guide. What would the green bars look like that are maybe doing better? And then I guess, can you kind of bucket where, you know, the downside ends up coming from between peak, between Ecoverse, some of the other items you talked about, just help understand, or help us understand kind of order of magnitude, the impact, put some takes on the full year into?
Operator: Questions first if you were to <unk>.
Matt J. Summerville: Put together a chart similar to chart 13.
Matt J. Summerville: With respect to the top and work down on guidance, what would be what would the green bars looked like there may be doing better and then I guess can you kind of bucket.
Matt J. Summerville: We're the.
Matt J. Summerville: On the downside ends up coming from between peak between eco versus some of the other items you talked about just help understand or help us understand kind of order of magnitude.
Matt J. Summerville: The impact puts and takes on the full year EBITDA guidance.
Tony: Hey, Matt its Tony.
Anthony J. Colucci: Hey Matt, Tony, I think what I was trying to address is that, as I mentioned, Eco-Verse, which was the biggest driver of the variance in the quarter, and we have the impacts of the first quarter on slide 13, $4.3 million. We think that the comps for Eco-Verse get easier, number one, for the rest of the year, and as I mentioned, they did $7 million, give or take, in April, so they are off to a relatively good start here for Q2.
Anthony J. Colucci: I think what we were trying to what I was trying to address is that.
Anthony J. Colucci: As I mentioned, the eco versus rate, which was the biggest.
Anthony J. Colucci: The biggest.
Anthony J. Colucci: Driver of the variance in the quarter and we have the we have the impacts of the first quarter on slide 13, $4 $3 million, we think that the comps for eco versus get easier number one for the rest of the year and as I mentioned.
Anthony J. Colucci: <unk>.
Anthony J. Colucci: Did $7 million give or take in April so off to a relatively good start here for Q2.
Anthony J. Colucci: Similarly, Peak Logics would have the same sort of sentiment, I guess, or dynamics surrounding it as they became more impacted by the elements of having a customer base sensitive to interest rates, again, large CapEx projects, etc.; they would have started to feel that impact in Q2 of last year. So I think, one, the comps get easier, which means the headwind that impacted Q1, in our minds, won't be there in the spring quarters going forward.
Anthony J. Colucci: Similarly peak logics.
Anthony J. Colucci: <unk> would have the same sort of.
Anthony J. Colucci: Sentiment I guess, our dynamic surrounding it as they became.
Anthony J. Colucci: They became more impacted by the elements of.
Anthony J. Colucci: Having a.
Anthony J. Colucci: Our customer base sensitive to interest rates again, large capex projects et cetera.
Anthony J. Colucci: They would have started to feel that impact in Q2 of last year. So I think one is the comps get easier which means.
Anthony J. Colucci: The headwind that impacted Q1 and are buying won't be there in the in the.
Anthony J. Colucci: Quarters going forward relative to the last thing on slide 13, as you know, we always burden EBITDA with.
Anthony J. Colucci: Relative to the last thing on slide 13, as you know, we always burden EBIDTA with interest on the floor plan, the new showroom-ready floor plan. Obviously, that became more of an issue toward the latter half of 2023, and the comp there gets easier as well.
Anthony J. Colucci: Interest on floor plan, new new showroom ready floor plan, obviously that became more of an issue towards the latter half of 2023 in.
Anthony J. Colucci: The comp there gets easier as well.
Anthony J. Colucci: Relative to the core businesses, we feel we feel good about material handling.
Anthony J. Colucci: Relative to the core businesses, we feel good about material handling. We had a strong quarter, as I mentioned, about 23% year over year equipment sales on an organic basis in the core material handling business. So we feel like that's on trend.
Anthony J. Colucci: We had a strong quarter as I mentioned something.
Anthony J. Colucci: 23% year over year equipment sales on an organic basis in the in the core material handling business.
Anthony J. Colucci: So we feel like that is on trend.
Anthony J. Colucci: Construction.
Anthony J. Colucci: We didn't necessarily.
Anthony J. Colucci: Construction, we didn't necessarily know that the acquisition sort of, if you're looking at a pro forma basis, Alton Burris, their EBITDA will really start to kick in now, kind of thing, Q2 through Q4, while we were absorbing their fixed costs in kind of the first quarter. What I will say is if there is a headwind we have our eye on, and that impacted Q1 a little bit relative to expectations, it's construction equipment sales. I think a lot of the comp set has been out discussing the pricing dynamics in the market, dealer channels being stocked up, but also while end markets are still strong fundamentally.
Anthony J. Colucci: The acquisition sort of if you're looking at a pro forma basis Alton burress.
Anthony J. Colucci: Their EBITDA will really start to kick in now kind of think Q2 through Q4, while we were absorbing the fixed cost and kind of the first quarter. What I will say is if there is a headwind we have our eye on and that impacted Q1, a little bit relative to expectations. It's construction equipment sales.
Anthony J. Colucci: And I think a lot of the comp set has been out discussing the pricing.
Anthony J. Colucci: Pricing dynamics in the market.
Anthony J. Colucci: Dealer dealer channels being stocked up.
Anthony J. Colucci: And.
Anthony J. Colucci: But also while end markets are still strong fundamentally so if we've got our eye on anything relative to the guidance. It's it's construction equipment sales.
Anthony J. Colucci: So if we've got our eye on anything relative to the guidance, it's construction equipment sales that provide the variability. But we feel really good about rental parts and service over the remainder of the year in our core business.
Anthony J. Colucci: That provides the variable, but we feel really good about rental parts and service over the remainder of the year in our core businesses.
Speaker Change: Thank you for that detail, maybe just a quick follow up on on parts and service.
Anthony J. Colucci: Thank you for that detail. Maybe just a quick follow-up on parts and service, you know; growth there has organically decelerated a bit. I know you called out maybe a little bit of some weather-related challenges, but what's your full year expectation for organic growth in parts and service? And then maybe can you comment on what you're seeing in terms of rental rates as well as utilization levels versus a year ago? Thank you.
Anthony J. Colucci: Growth there organically decelerated a bit I know you called out maybe a little bit of some weather related challenges, but what's your full year expectation for organic growth in parts and service and then maybe can you comment on what youre seeing in terms of rental rates.
Anthony J. Colucci: As well as utilization levels versus a year ago. Thank you.
Anthony J. Colucci: Sure.
Anthony J. Colucci: Sure, Matt, I think what we saw in rental rates was probably low single digits, maybe to mid single digits in the first quarter here. Utilization, and we provided that, by the way, in terms of just equipment on rent. And you can, you can back into kind of physical utilization or dollar utilization based on the size of our fleet. But I think that held up pretty well year over year.
Speaker Change: Matt I think what we saw in rental rates is probably low single digits, maybe mid single digits.
Anthony J. Colucci: In the first quarter here.
Anthony J. Colucci: Utilization on the <unk>.
Anthony J. Colucci: We provided that by the way.
Anthony J. Colucci: In terms of just equipment on rent.
Anthony J. Colucci: And you can you can back into kind of physical utilization or dollar utilization based on the size of our fleet.
Anthony J. Colucci: But I think that held up pretty well year over year. The fleet was bigger but in terms of dollars on rent.
Anthony J. Colucci: The fleet was bigger, but in terms of dollars on rent, we held up pretty well year over year rental revenue. You know, just all told was up more than that sort of low single-digit rate, which means we just had more dollars on rent because we, I think the number was 8% in our construction business rent to rent business was up. So that's rental.
Anthony J. Colucci: We held up pretty well year over year rental revenue.
Anthony J. Colucci: Just all told was up more than that sort of low single digits right, which means we just had more dollars on rent because we I think the number was 8% and our construction business rent to rent business was up.
Anthony J. Colucci: So thats rental.
Anthony J. Colucci: The in.
Anthony J. Colucci: The, the, in terms of product support, we've messaged that, especially in our construction business, there's so much field population. That's a little bit more in its infancy in certain markets that are material handling businesses. We would be disappointed if we didn't see, you know, low, low, double digits, high singles on that number in terms of product support combined parts and service combined organic growth year over year. Material handling will be a little bit more muted than that, just given the kind of the, just the dynamics and the maturity around that business.
Anthony J. Colucci: In terms of product support we've message that we especially in our construction business that.
Anthony J. Colucci: There is so much field population thats, a little bit more in its infancy in certain markets that our material handling business, we would be disappointed if we didn't see.
Anthony J. Colucci: Low double digits high singles on that number in terms of product support combined parts and service combined organic growth year over year.
Anthony J. Colucci: Material handling will be a little bit more muted than that just given kind of the.
Anthony J. Colucci: Just the dynamic in the maturity around that business.
Anthony J. Colucci: So, yeah, it did. I think part of what we saw relative to the mild winter was less cold start issues, and less repairs around snow removal kind of activity, right? Somebody might have impaired a piece of equipment because of snow removal, and so some of that impacted Q1, but hopefully, that helps Matt in terms of just where we expect to be. We'd like to be in the high single digits kind of on a combined basis. Understandable, thanks.
Anthony J. Colucci: So yes it did.
Anthony J. Colucci: I think part of what we saw relative to the mild winter was less cold start issues.
Anthony J. Colucci: Less repairs around.
Anthony J. Colucci: Snow removal kind of activity rates somebody.
Anthony J. Colucci: Maybe in pairs a piece of equipment because of snow removal.
Anthony J. Colucci: And so some of that impacted Q1.
Anthony J. Colucci: But hopefully that helps Matt in terms of just where we expect to be we'd like to be high single digits kind of.
Anthony J. Colucci: On a combined basis here.
Speaker Change: Understood. Thanks totaled.
Anthony J. Colucci: I understand. Thanks, Tuttle.
Tuttle: Thank you sure.
Anthony J. Colucci: Our next question comes from the line Kathryn Thompson with Thompson Research Group. Please go ahead.
Catherine Thompson: Our next question comes from the line of Catherine Thompson with Thompson Research Group. Please go ahead.
Catherine Thompson: Alright, Thank you for taking my questions today.
Ryan Greenawalt: Hi, thank you for taking my questions today. This is just a broad market and market look. Could you give a little bit more color just in terms of megaproject dynamics, and have you seen any notable change in the pace of work going into megaprojects, and importantly, any update on pricing on that particular end market? Thank you.
Ryan Greenawalt: This is for just on a broad market and market.
Ryan Greenawalt: Look.
Ryan Greenawalt: Could you give us a little bit more color just in terms of Mega project dynamics and have you seen any notable change in the pace or <unk>.
Ryan Greenawalt: Project.
Ryan Greenawalt: Going into the Mega projects.
Ryan Greenawalt: Currently any update on pricing on that particular end market. Thank you.
Ryan Greenawalt: This is Ryan I'll take that.
Ryan Greenawalt: This is Ryan. I would say that, relative to what we see in megaprojects, it's stable. We don't see any big changes in pricing per se.
Ryan Greenawalt: I'd say that relative to what.
Ryan Greenawalt: What we did in Mega projects, it's stable, we don't see any any big changes in.
Ryan Greenawalt: And pricing.
Ryan Greenawalt: For se.
Speaker Change: I think the projects in general as we've said Kathryn is kind of Cree.
Anthony J. Colucci: I think the projects, in general, as we've said, Catherine, create longer-term demand where our contractors might be working on a megaproject, if you will. We're always once removed; our equipment's being used by customers, which then are using the equipment on a potential megaproject site. We have anecdotal evidence that our customers are on some of these projects, but what it does is it gives them confidence that they're going to be busy for longer.
Anthony J. Colucci: It creates longer term demand, where our contractors might be working on.
Anthony J. Colucci: A mega project. If you will we're always once you remove our equipment is being used by customers, which then.
Anthony J. Colucci: Are using the equipment on a potential Mega project site, we have anecdotal evidence that we know our customers are on some of these projects.
Anthony J. Colucci: But what it does is it gives them confidence that they're going to be busy for longer.
Anthony J. Colucci: And we continue to hear that from customers that maybe are on those projects that these are long term multiyear projects.
Anthony J. Colucci: And we continue to hear that from customers that maybe are on this project that these are long-term, multi-year projects that kind of create what Ryan has termed kind of adding any to the game in terms of any sort of potential construction cycle. What we keep saying is there's only so much resources in the construction supply chain, and you come back to the labor element of things. And, you know, there's only so much labor that can actually get into some of the equipment that we sell to our customers to execute on these projects. So, anyway, hopefully that's a helpful comment.
Anthony J. Colucci: That kind of create what Ryan is.
Anthony J. Colucci: Termed kind of.
Anthony J. Colucci: Adding earnings to the game in terms of any sort of potential construction cycle.
Anthony J. Colucci: What we keep saying is there is only so much.
Anthony J. Colucci: Resources in the construction supply chain and you come back to the labor element.
Anthony J. Colucci: Of things and.
Anthony J. Colucci: There's only so much labor that can actually get into some of the equipment that we sell our customers to execute on these projects.
Anthony J. Colucci: Anyway, hopefully that's helpful commentary.
Speaker Change: Yes, without visibility and lithium construction equipment segment.
Anthony J. Colucci: With that visibility and with your construction equipment segment, it has been a negative mix, but there is margin expansion opportunity for that segment. With this increased consistent visibility with megaprojects, presumably, that would help with better pricing, which would be supportive of margin growth. I mean, is that something you are seeing in the market right now?
Anthony J. Colucci: Yes.
Anthony J. Colucci: It has been a negative mix in but there is margin expansion opportunity for that segment with that increased consistent visibility with mega projects I think presumably that would help with that.
Anthony J. Colucci: Pricing.
Anthony J. Colucci: Which would be supportive of margin growth.
Anthony J. Colucci: <unk>.
Anthony J. Colucci: Is that something you are seeing in the market right now.
Anthony J. Colucci: I think when we think about margin growth in our construction business, it's a mix towards product support meaning parts and service revenue versus.
Anthony J. Colucci: I think when we think about margin growth in our construction business, it's a mix toward product support, meaning parts and service revenue versus, you know, selling equipment to contractors that might be working on a megaproject. So, to the extent that 1 of our customers needs equipment to be on a megaproject, We, you know, we, we, we love it, obviously, but it's all in the end game of driving field population, whether that field population makes its way to a private non-res project or a large megaproject.
Anthony J. Colucci: Selling equipment to contractors that might be working on a on a mega project. So to the extent one of our customers' needs equipment to.
Anthony J. Colucci: To be on a Mega project.
Anthony J. Colucci: We love it obviously.
Anthony J. Colucci: But it's all in the.
Anthony J. Colucci: And game of driving field population, whether that field population makes its way to a.
Anthony J. Colucci: Private non res project or a large mega project.
Anthony J. Colucci: Frankly, sometimes we're not sure that's contracts or are working on both all kinds of things and again in the vein of just our Gillette model, where we're putting razors out in the field and we want to sell the blades.
Anthony J. Colucci: Frankly, sometimes we're not sure because contractors are working on all kinds of things. And again, in the vein of just our Gillette model where, you know, we're putting razors out in the field, and we want to sell the blade. Yeah, exactly.
Speaker Change: Yes exactly.
Catherine Thompson: Yep, exactly. And that was the point I was getting to. Thank you very much.
Speaker Change: That was the point I always get into exactly thank you very much.
Speaker Change: Great. Thank you Catherine.
Speaker Change: Thank you.
Alexander John Rygiel: Our next question comes from the line of Alex Rygiel with B. Reilly. Please go ahead.
Speaker Change: Our next question comes from the line.
Alexander John Rygiel: Alex <unk> with B Riley. Please go ahead.
Alexander John Rygiel: Thank you and good evening gentlemen, a couple of quick questions here first equipment sales in the quarter were stronger than I had expected and.
Alexander John Rygiel: Thank you and good evening, gentlemen. I have a couple of quick questions here. First, equipment sales in the quarter were stronger than I had expected. And, you know, this should be a positive trend kind of confirming the success of building that field population. Summerville, Alta Equipment, Ryan Greenawalt, Bryan Fast, Alta Equipment, Ryan Greenawalt
Alexander John Rygiel: This should be a positive trend kind of confirming success at building that field population.
Alexander John Rygiel: Just wanted to your core goals.
Alexander John Rygiel: But it does take into consideration pricing volume mix. So can you talk a bit about volume growth and Directionally. How you think about volume growth through the remainder of the year.
Tony: Hey, Alex it's Tony.
Anthony J. Colucci: Hey Alex, it's Tony, and thanks for the question. I think what you saw in Q1, and this is where I tried to provide as much detail on each segment, but to answer your question appropriately, you've really got to go segment by segment. Volume growth in Q1 relative to, you know, our core material handling, core to lift truck business, was for sure up 23%. I think the number was year over year on an organic basis, mainly on the backs of just new equipment and specifically Hyster Yale.
Speaker Change: Thanks for the question.
Speaker Change: Thank you.
Anthony J. Colucci: What you saw in Q1.
Anthony J. Colucci: Where.
Anthony J. Colucci: Tried to provide as much detail on each segment, but to answer your question appropriately really Gotta go segment by segment.
Anthony J. Colucci: <unk> growth in Q1 relative to.
Anthony J. Colucci: Our core material handling quarter lift truck business for sure was up 23% I think the number was year over year on an organic basis, mainly on the backs of just new equipment.
Anthony J. Colucci: What we have noticed historically is margins on forklifts have historically been on the lower end if we look at our entire portfolio in terms of just gross margin selling equipment. Does that bode well down the road for additional product support? We'd like to think we're taking share when our volumes are up in material handling, which again will bode well for the future. So we expect to deliver more material handling equipment in 2024 than we did in 23. And I think that we're off to a good start.
Anthony J. Colucci: Specifically heister Yale.
Anthony J. Colucci: What we have messaged historically as margins on forklifts historically.
Anthony J. Colucci: I have been on the lower end, if we look at our entire portfolio in terms of just gross margin selling equipment does it bode well down the road for additional product support.
Anthony J. Colucci: We'd like to think we're taking share when our.
Anthony J. Colucci: Volumes are up in material handling, which again will bode well for the future.
Anthony J. Colucci: So we expect to deliver more material handling equipment in 2024.
Anthony J. Colucci: We did in 2003.
Anthony J. Colucci: And I think that we're off to a good start what that does though is it does put pressure on gross margins sort of on a relative basis and then when we have.
Anthony J. Colucci: What that does, though, is it does put pressure on gross margins sort of on a relative basis. And then when we have what went on at peak in the quarter, it further sort of impacts things. But that's how I would kind of mention or answer the question on material handling.
Anthony J. Colucci: On a peak in the quarter it further sort of impacts things, but.
Anthony J. Colucci: That's how I would that's how I would kind of mentioned.
Anthony J. Colucci: Construction volume, you know, we still, as we see, we have a lot of, we know that equipment's being utilized. Our service call intake is stable or growing as we get into the season here. Rental equipment, remember, Alex, we've kind of got this rent-to-sell model.
Anthony J. Colucci: Answer the question on material handling construction volume.
Anthony J. Colucci: We still as we see we have a lot of we know that equipment is being utilized our service call intake is stable or growing as we get into the season here.
Anthony J. Colucci: Rental equipment.
Anthony J. Colucci: Remember, Alex we've kind of got this rent to sell model.
Anthony J. Colucci: And so to the extent that volumes off of our balance sheet and onto a customer's maybe wean a little bit, it could mean that customers are, for whatever reason, interest rates, election, choosing to rent versus buy. I think we could see an element of that that might put pressure on new equipment volumes where maybe we'll have to rent or grow our RPO fleet, if you will, rental purchase options. So, and the challenge there becomes, it really becomes a battle, a pricing battle to hold share.
Anthony J. Colucci: And so to the extent that volumes off of our balance sheet and onto our customers, maybe wanes a little bit it could mean that customers are for whatever reason interest rates election, choosing to rent versus buy.
Anthony J. Colucci: We could see an element of that that might put pressure on new equipment volumes were maybe where have to rent or.
Anthony J. Colucci: Grow our RP O fleet, if you will rental purchase options.
Anthony J. Colucci: So in the challenge there becomes it really becomes a battle of pricing battles to hold share and Thats, what the Oems are so important.
Anthony J. Colucci: And that's when the OEMs are so important in terms of supporting the dealer network. And for us, that's Volvo, no surprise. And, you know, historically, they've been supportive in helping us hold margin. But nonetheless, I think, you know, we saw some of that pressure in Q1, and we would expect that to continue. But as Ryan mentioned in his remarks, we intend to hold the share and sell value, which at the end of the day is uptime related to your service department.
Anthony J. Colucci: In terms of supporting the dealer network and for US that's Volvo.
Anthony J. Colucci: No surprise.
Anthony J. Colucci: And historically they've been supportive in helping us hold margin, but nonetheless, I think we saw some of that pressure in Q1, and we would expect that to continue but as Ryan mentioned in his remarks, we intend to hold share and sell.
Anthony J. Colucci: <unk> sell value, which at the end of the day is uptime related to your service Department.
Anthony J. Colucci: On the material, on the master distribution side, we think it's in a, we believe that it's an anomaly. I think Eco-Verse has a lot of great things going on with its end markets and recycling and so forth. In terms of their volume, given the surge that was Q1 of 23, I think it's difficult to say that they'll match the same level of volume in that segment, but we intend to kind of hold the EBITDA through pricing gains and things like this, increased parts sales, and hold the EBITDA and master distribution, hopefully when we look back at the end of the year. So long answer, Alex, but three segments to kind of break that up.
Anthony J. Colucci: On the material on the Master distribution side, we think it's we believe it's in a lump anomaly.
Anthony J. Colucci: I think eco versus a lot of great things going on with its end markets and recycling.
Anthony J. Colucci: And so forth in terms of their volume given the surge that was Q1 of 'twenty three I think it's difficult to say that they'll match the same level of volume in that segment, but we intend to kind of hold the EBITDA.
Anthony J. Colucci: Through through pricing gains and things like this.
Anthony J. Colucci: Increased parts sales.
Anthony J. Colucci: And hold the EBITDA master distribution, hopefully when we look back at the end of the year, So long answer Alex but.
Anthony J. Colucci: Three segments that kind of break that up.
Alex: That's helpful. And then any chance you can comment on the P&L impact of the difficult weather.
Anthony J. Colucci: And then, any chance you can comment on the P&L impact of the difficult weather and if this is recoverable in kind of the second quarter, or is it just lost? Yeah, I think that's probably part of the problem.
Anthony J. Colucci: This is recoverable in kind of the second quarter or is it just lost.
Anthony J. Colucci: Yeah.
Anthony J. Colucci: Yeah, I think that's probably that's part of the reason why, Alex, we adjusted our guidance down. We felt like the top end of the range probably wasn't achievable given given the Q1 performance, the weather's tough to calibrate. I think some of it, you know, you could, you could, our service margins and construction were down year over year and some of it I think is related to weather just as we've had you know technicians in our construction business that maybe were prepared for the snow season and cold starts and again snow removal related damage work that never really happened given the mild winter and then you just have just soft ground that that also impacted so that that would be the first place I would go but it's really hard for us to kind of put a number on you know year over year weather sort of
Speaker Change: Yes, I think thats, probably thats part of the reason why Alex we adjusted our guidance down we felt like the top end of the range probably wasn't achievable given.
Anthony J. Colucci: Given the Q1 performance the weather's tough to calibrate I think some of it you could you could.
Anthony J. Colucci: Yeah.
Anthony J. Colucci: Our service margins and construction were down year over year.
Anthony J. Colucci: And some of it I think is related to weather.
Anthony J. Colucci: Just as we've had technicians in our construction business that maybe were prepared for the snow season in cold starts and again no stone removal related damage work that never really happened given that given the mild winter.
Anthony J. Colucci: And then you just have just soft ground that.
Anthony J. Colucci: That also impacted so that would be the first place I would go but it's really hard for us to kind of put a number on.
Anthony J. Colucci: Year over year weather sort of impacts.
Speaker Change: Thank you.
Speaker Change: Thanks, Alex.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line.
Edward Randolph Jackson: Our next question comes from the line of Ted Jackson with Northland Security. Please go ahead.
Edward Randolph Jackson: Jackson.
Edward Randolph Jackson: Lastly Securities. Please go ahead.
Edward Randolph Jackson: Thanks very much.
Anthony J. Colucci: A lot of my stuff has been asked, but I've got a few more. I want to circle back, if you would, on the construction. New and Used Equipment Demand. There are a couple things I want to unpack here, and one of them is if you listen to say, like the Caterpillar call or the CNH calls related to construction, both of those companies essentially look for the North American market or America's market to be flat to down and low single digits.
Edward Randolph Jackson: A lot of my stuff has been asked but I've got a few more I wanted to circle back if you put into the construction.
Anthony J. Colucci: And then behind that, there are a number of smaller, more specialty equipment manufacturers that I've had discussions with, and they've definitely seen a little impact in terms of some of the booking stuff, the uncertainty, which, you know, you would think if the demand is there, regardless, at some point, that equipment has to be put into the field. So where I'm going with it is, you know, with that as a backdrop and kind of the commentary from, you know, like CAP and CNH in particular, I mean, is it fair to assume that when we look at just the new and used equipment volume for Alta, we should see something at least similar, you know, something, you know, essentially flat?
Anthony J. Colucci: New and used equipment demand.
Anthony J. Colucci: Couple of things that went on pack here and one of them is if you listen to say like the caterpillar call of the CAH calls related to construction both of those companies essentially look for the North American market or the Americas market, North American market to be flat to down low single digits.
Anthony J. Colucci: And then behind that Theres, another a smaller more specialty.
Anthony J. Colucci: Equipment manufacturers that I've had discussions with them and they have definitely seen.
Anthony J. Colucci: An impact in terms of some of the booking stuff.
Anthony J. Colucci: Interest rates, but the fact of the matter according to them and everyone else I talked to is that.
Anthony J. Colucci: The demand in terms of like projects is there I mean, the government funding has been put in place. These projects have gotten the go ahead in the equipment is needed to be purchased in the pause is just because there's been a rash.
Anthony J. Colucci: The change in terms of interest rates and the outlook for them and it has created some uncertainty, which you would think that demand is there.
Anthony J. Colucci: <unk> at some point that that equipment has to be put into the field, so where I'm going with it is with that as a backdrop and kind of with regards to the commentary from.
Anthony J. Colucci: <unk> in particular.
Anthony J. Colucci: Is it fair to assume that when we look at just the new and used equipment.
Anthony J. Colucci: Volume for.
Anthony J. Colucci: Alta that we should see something at least similar something essentially flat to down.
Anthony J. Colucci: For 24.
Ted: So Ted.
Anthony J. Colucci: So Ted, I'll take I'll take that one. And Brian, if you get any comments, I was gonna start off by just saying that we think that the demand Part of the equation remains pretty stable for the balance of this year but what we're describing is a Basically, you've got all the dealer channel is full and we we aren't competing with the OEMs we're completing with the other dealers the cat dealers the deer dealers and Today, we're all we're all selling from you know Full full rental fleets full inventory and that's going to impact how aggressive the marketplace is, So, you know, for us to hold share in this market, even with the demand backdrop, it's going to potentially, you know, be hard for us to hold margin.
Speaker Change: I'll take I'll take that one and Brian if you get any comments.
Anthony J. Colucci: Start off by just saying that we think that the demand.
Anthony J. Colucci: Part of the equation remains pretty stable for the balance of this year, but what we're describing as a basically you've got all the dealer channel is full and we aren't competing with the Oems were completing with the other dealers the cat dealers that deere dealers and today, we're all we're all selling from.
Anthony J. Colucci: Full rental fleets full inventory and thats going to impact how aggressive the marketplaces.
Anthony J. Colucci: Sure.
Anthony J. Colucci: For us to hold share in this market, even though the demand backdrop, it's going to potentially.
Anthony J. Colucci: It'd be hard for us to hold margins at the same time.
Speaker Change: I would just okay, but it's not it's not a unit volume it's not a unit volume situation. This is youre concerned with <unk> in that regard.
Anthony J. Colucci: But it's not a it's not a unit volume. It's not a unit volume situation. This is you concerned with delivery. Yeah, the supply chain broke free. And now you've got all the inventories are, you know, normalized at the same time.
Anthony J. Colucci: The deliveries yet.
Anthony J. Colucci: Fly chain broke free and now you've got all the inventories are.
Anthony J. Colucci: Normalizing.
Anthony J. Colucci: At the same time.
Anthony J. Colucci: Okay.
Edward Randolph Jackson: Okay, jumping over to material handling, you know, I mean, you kind of got that answered for me anyway. But one of the nuances within Hyster Yale is that, you know, a lot of the backlog that they've been kind of pushing through and starting to deliver has been on the larger end, kind of a higher-margin product. Is that the case in terms of the stuff that's starting to flow through your P&L?
Speaker Change: Jumping over to material handling I mean, you've kind of got that answered for me anyway, but one of the nuances within high Hyster Yale is that a lot of the backlog that they've been kind of pushing through and starting to deliver has been on the larger end kind of a higher margin product is that the case in terms of.
Edward Randolph Jackson: Of the stuff that's starting to flow through your P&L and then when you get into.
Edward Randolph Jackson: And then when you get into kind of bigger systems versus, you know, units versus smaller units, is there a better margin profile for them, for you as a distributor, or is that not the case?
Edward Randolph Jackson: Kind of bigger systems versus our units versus smaller units is there a better margin profile for them for you as a distributor or is that not the case.
Edward Randolph Jackson: Ted This is Ryan again, the margin profile by product category is going to be more related to how specialized and how the competitive environment for it. So the largest by volume type of machine in our construction equipment businesses excavators and it's also the most competitive.
Ryan Greenawalt: Ted, this is Ryan again. The margin profile by product category is going to be more related to how specialized and, you know, the competitive environment for it is. So the largest by volume type of machine in our construction equipment businesses are excavators, and it's also the most competitive. X-Graders by unit volume.
Ryan Greenawalt: Excavators by unit volume he was missing.
Bryan Fast: Bryan. Bryan. But I'm talking.
Edward Randolph Jackson: I'm talking about Hy-Tri-Yale material handling.
Bryan Fast: But I'm talking to Mitch hydrogel material handling material.
Anthony J. Colucci: Material handling. Ted, what I can say about our mix relative to, you know, Hysteria came out with a new narrow aisle product a couple of years ago; supply chain issues sort of delayed, let's say, the market's ability to kind of, well, there were delayed deliveries, frankly, on that class of product. What I will say is we're getting, we're making headway into that class two narrow aisle product line, and it's becoming a bigger part of our business.
Edward Randolph Jackson: Material handling Ted.
Anthony J. Colucci: What I can say about our mix relative to <unk>.
Anthony J. Colucci: <unk> came out with the new narrow aisle product.
Anthony J. Colucci: A years ago supply chain issues sort of delayed, let's say that the market's ability to kind of.
Anthony J. Colucci: Well there was delayed deliveries.
Anthony J. Colucci: <unk>.
Anthony J. Colucci: And that class of product.
Anthony J. Colucci: I think in terms of big trucks, you know, Alta has always been a dominant force in our, specifically in our Midwest geographies with larger, higher-capacity trucks. The margin profile between the two is relatively, relatively the same overall. I would say our mix is definitely starting to shift toward class 2 because of some of the innovations and broadening of the product portfolio.
Anthony J. Colucci: What I will say is we're getting we're making headway into that class to narrow aisle product line and its becoming a bigger mix of our business.
Anthony J. Colucci: I think in terms of big trucks.
Anthony J. Colucci: Ulta has always been a dominant force in our specifically in our Midwest <unk>.
Anthony J. Colucci: Mid west geographies with larger high capacity trucks.
Anthony J. Colucci: The margin profile between the two is relatively relatively the same overall.
Anthony J. Colucci: <unk>.
Anthony J. Colucci: I would say our mix is definitely starting to shift toward the class two because of some of the innovations and broadening of the product portfolio and Hyster Yale, Yes, Ted now that I understand your question.
Ryan Greenawalt: Yeah, Ted, now that I understand your question, what I was saying holds true for large trucks within the Hyster Yale world. So there's less competition, and we hold higher margins, generally speaking, than the hard-of-the-line product.
Edward Randolph Jackson: Yeah, Ted, now there's...
Edward Randolph Jackson: What what I was saying holds true for large trucks within the hyster Yale World. So it's less there is less competition, we hold higher margin generally speaking then the heart of the line product.
Ted: Okay. Okay, and then my final comment which was and the question is I'm just going to defend you from yourself.
Edward Randolph Jackson: Okay, okay. And then my final comment, which was in the question, is that I'm just going to defend you from yourself.
Edward Randolph Jackson: You guys came in here a little contrite with, you know, you know, really, you know, kind of a downbeat, you know, tone. And, you know, I mean, maybe I talk to you too much, Tony, but, you know, when I look at the guidance and I look at at least my model against consensus, I mean, I was kind of below the low end of your range anyway. And the consensus, when I look at it, is it at the low end of your range?
Speaker Change: You guys came in here it will look and try it with.
Edward Randolph Jackson: Sure.
Edward Randolph Jackson: Really kind of a downbeat tone and I mean, maybe I talked to you too much Tony but when I look at the guidance at least my model against consensus I mean, I was kind of below the low end of your range anyway.
Edward Randolph Jackson: And the consensus when I look at it is at the low end of your range. So.
Anthony J. Colucci: So, you know, give yourself a little, you know, don't beat yourself up so much. I guess that's all I'm saying. I don't know. Your quarter was great. And the outlet doesn't throw me off. OK. Thanks.
Edward Randolph Jackson: Give yourself a little.
Anthony J. Colucci: You don't get yourself up so much I guess, that's all I'm, saying.
Anthony J. Colucci: Quarter was great and the outlook doesn't show me all okay.
Edward Randolph Jackson: Thank you, Ted. Certainly, that's not what we want to say. We feel good about the remainder. Thanks, Ted. Okay.
Anthony J. Colucci: Thank you Ted Yes, certainly.
Speaker Change: That's not what we want to message we feel we feel good about the remainder of the year.
Edward Randolph Jackson: Okay.
Speaker Change: Thank you. Our next question comes from the line.
Operator: Thank you. Now, our next question.
Steven P. Hansen: Steve Hansen.
Raymond James: With Raymond James Please go ahead.
Speaker Change: Yes. Thanks, guys. Most of my questions have been answered, but I did want to circle back on the competitive commentary and just the broader channel inventories being relatively full here I mean, how do you feel about your own inventory and the ability to work that down.
Steven Ramsey: Yeah, thanks, guys. Most of the questions have been answered. But I did want to circle back on the competitive commentary and just the broader channel inventories being relatively full here. I mean, how do you feel about your own inventories, the ability to work that down?
Speaker Change: Through the next couple of quarters in order to free up some cash and how do you think about that in the broader context of balance sheet remix.
Speaker Change: Very much discussion on the balance sheet today, but just trying to get a broader sense for how you want to manage through this environment.
Speaker Change: Yeah. Thanks, Steve the balance sheet was relatively stable which is.
Anthony J. Colucci: Yeah, thanks, Steve. You know, the balance sheet was relatively stable, which is quarter over quarter, some, I think, immaterial moves to the rental fleet and inventory and AR in general, which is why we didn't focus on it. Liquidity is still in a good position, you know, leverage holding at the midpoint of our guidance. So, on your question relative to inventory, we think, you know, we're trying to target two turns of inventory, maybe a little bit less than that in our construction business and maybe a turn higher than that in our material handling business on new equipment.
Anthony J. Colucci: Quarter over quarter.
Anthony J. Colucci: I think immaterial moves to the rental fleet and inventory in general which is why we didn't focus on it liquidity is still in a good position.
Anthony J. Colucci: Leverage holding at the midpoint of our guidance so.
Anthony J. Colucci: But on your question relative to inventory.
Anthony J. Colucci: We think we're trying to we tried to target two turns of inventory, maybe a little bit less than that and our construction business.
Anthony J. Colucci: And maybe a turn higher than that in our material handling business on new equipment.
Anthony J. Colucci: And remember Steve that material handling, it's it's a little bit of Youre.
Anthony J. Colucci: And remember, Steve, that material handling equipment is a little bit of a specialty. These are large fleets that are going to, you know, Fortune 500 companies that are purchased well in advance. So, there's a little bit of prep and delivery time in our shops on the material handling side, but then the fleets are gone and delivered and invoiced. So, the bigger impact to your question is on the construction side.
Anthony J. Colucci: Youre not buying for stock.
Anthony J. Colucci: These are large fleets that are going to fortune 500 companies that are purchased well in advance so theres, a little bit of prep and delivery time in our shops on the material handling side, but then the fleets are gone and delivered an invoice.
Anthony J. Colucci: So the bigger impact to your question is on the construction side.
Anthony J. Colucci: We think we're at a good level inventory wise I could see it spiking up maybe a little bit more from where were at from a year.
Anthony J. Colucci: You know, we think we're at a good level inventory-wise. I could see it spiking up maybe a little bit more from where we are from here as we work through with manufacturers to take delivery. But we think we've got enough equipment on the balance sheet right now to kind of hold steady. So, I guess what I'm saying is I don't see any large reduction. I don't see any large kind of increase. We feel like we're in a good spot to keep turning at the levels that I mentioned and just go from here.
Anthony J. Colucci: As we as we worked through with manufacturers to take delivery.
Anthony J. Colucci: But we think we've got enough equipment on the balance sheet right now to kind of.
Anthony J. Colucci: Hold steady so I guess, what I'm, saying is I don't see any large reduction I don't see any large kind of increase we feel like we're in a good spot to keep turning at the levels that I mentioned and just go from here.
Speaker Change: Okay. That's helpful. Thanks, and then just wanted to go back I think it might've been Ryan was commenting earlier, but most competitive aspects of the market being in excavators, but I mean, just as a broader sweep it sounds like the construction side, it's been more competitive or are there specific liens or verticals, where youre seeing the most competition just curious if that's filtering into that Ren.
Steven Ramsey: Okay, that's helpful. Thanks. And I just wanted to go back.
Ryan Greenawalt: I think it might have been Ryan was commenting earlier about the most competitive aspects of the market being in excavators. But I mean, just as a broader sweep, it sounds like the construction side has been more competitive. Are there specific lanes or verticals where you're seeing the most competition and just careful that's filtering into that rental side on the same vertical or not?
Ryan Greenawalt: <unk> side on the same vertical or not.
Ryan Greenawalt: Hi.
Ryan Greenawalt: The competition that we're seeing is in heavy construction, so the hard-of-the-line Volvo products, large wheel loaders, large excavators, articulated, 40-ton articulated dump trucks, I think maybe less so on the compact end.
Ryan Greenawalt: The competition that we're seeing is in the heavy and the heavy construction. So the heart of the line Volvo products wheel large wheel loaders large excavators articulated 40 ton articulated dump trucks I think maybe maybe less so on the capex into the market.
Speaker Change: Very helpful. Thanks.
Speaker Change: Thank you.
Ryan Greenawalt: There are no additional questions waiting at this time I would like to pass the conference back to Ryan Greenawalt, CEO with Alta equipment group.
Operator: There are no additional questions waiting at this time. I would like to pass the conference back to Ryan Greenawalt, CEO of Alta Equipment Group, for any closing remarks.
Ryan Greenawalt: For any closing remarks.
Ryan Greenawalt: Thank you for joining us tonight. That concludes the call.
Ryan Greenawalt: Thank you for joining us Tonight that concludes the call.
Ryan Greenawalt: That concludes today's conference call I Hope you enjoy the rest of your day you may now disconnect your lines.
Operator: That concludes today's conference call. I hope you all enjoy the rest of your day. You may now disconnect your lines.
Operator: Yeah.
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Operator: Okay.
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Operator: Okay.