Q4 2024 Alta Equipment Group Inc Earnings Call

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Operator: Good afternoon and thank you for attending the Alta Equipment Group fourth quarter and full year 2024 earnings conference call. My name is Joel and I will be your moderator for today's call.

Joe: Good afternoon, and thank you for attending the Alta equipment group fourth quarter and full year 2024 earnings Conference call. My name is Joe and I will be your moderator for today's call.

Jason Dammeyer: I'll now turn the call over to Jason Dammeyer, Director of SEC Reporting and Technical Accounting with Alta Equipment Group. Jason, you may proceed. Thank you, Joel.

Speaker Change: Now I'll turn the call over to Jason <unk> director of SEC reporting and technical accounting with I'll take with that group. Jason You May proceed.

Jason: Thank you Joel.

Jason Dammeyer: Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta's fourth quarter and full year 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.

Jason: Afternoon, everyone and thank you for joining us today.

Jason: Press release detailing <unk> fourth quarter and full year 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.

Jason Dammeyer: On the call with me today are Ryan Greenawalt, our Chairman and CEO, and Tony Colucci, our Chief Financial Officer. For today's call, management will first provide a review of our fourth quarter and full year 2024 financial results. We will begin with some prepared remarks before we open the call for your questions. Please proceed to slide two.

Ryan Greenawalt: On the call with me today are Ryan Greenawalt, our chairman and CEO and Tony <unk>.

Speaker Change: Our Chief Financial Officer for today's call management will first provide a review of our fourth quarter and full year 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: 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 four looking statements are subject to both known and unknown risks, uncertainties, and assumptions, including those related to altered growth, market opportunities, and general economic and business conditions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations.

Speaker Change: 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.

Speaker Change: 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. 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 bid.

Speaker Change: <unk> financial condition and results of operations.

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. 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.

Although we believe these expectations are reasonable we undertake no obligation to revise any statement to reflect changes that occur after this call.

Speaker Change: <unk> 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.

Ryan Greenawalt: 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 that alter your equipment Dot Com I will now turn the call over to Ryan.

Ryan Greenawalt: I will now turn the call over to Ryan. Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. I'd like to start by expressing my gratitude to our employees, customers, and shareholders for their continued trust and confidence. Despite a complex macroeconomic environment in 2024, Alta Equipment Group remains steadfast in executing our strategy, reinforcing our position as a leader in the heavy and industrial equipment sector.

Ryan Greenawalt: Thank you Jason Good afternoon, everyone and thank you for joining us today I'd like to start by expressing my gratitude to our employees customers and shareholders for their continued trust and confidence despite.

Ryan Greenawalt: Despite a complex macroeconomic environment in 2024, and also equipment group remains steadfast in executing our strategy reinforcing our position as a leader in the heavy industrial equipment sector.

Ryan Greenawalt: I'll begin today with a high-level overview of our fourth quarter and full-year results before sharing insights on the current business environment and our strategic outlook for 2025.

Ryan Greenawalt: I'll begin today with a high level overview of our fourth quarter and full year results before sharing insights on the current business environment and our strategic outlook for 2025.

Ryan Greenawalt: Following my remarks, our CFO, Tony Colucci, will walk through the financial details, including our cash flow performance and outlook for the year ahead. 2024 was a year of resilience and disciplined execution amid challenging market conditions. The impact of higher interest rates, an oversupplied equipment market, and election year uncertainty weighed on market demand across key end markets. Despite these headwinds, our diversified business model helped us to navigate market volatility and maintain revenue levels comparable to last year. For the full year, total revenue held steady at approximately $1.9 billion, underscoring the resilience of our dealership model and the enduring strength of our product support.

Tony: During my remarks, our CFO, Tony <unk> will walk through the financial details, including our cash flow performance and outlook for the year ahead.

Tony: 2024 was a year of resilience and disciplined execution amid challenging market conditions, the impact of higher interest rates and oversupply of equipment market and.

Tony: In the election year uncertainty weighed on the market demand across key end markets. Despite these headwinds our diversified business model helped us to navigate market volatility and maintain revenue levels comparable to last year.

Tony: For the full year total revenue held steady at approximately $1 9 billion underscoring the resilience of our dealership model and then and be enduring strength of our product support business.

Ryan Greenawalt: In the fourth quarter, revenue declined 4.5% year-over-year to $498.1 million, reflecting broader market trends. However, sequential growth over Q3 suggests a post-election rebound. Adjusted EBITDA for the year reached $168.3 million, a testament to our disciplined cost management and proactive strategies in optimizing our rental fee and working capital.

Tony: In the fourth quarter revenue declined four 5% year over year to $498 1 million, reflecting broader market trends.

Tony: However, sequential growth over Q3 suggests a post election rebound adjusted EBITDA for the year reached $168 3 million, a testament to our disciplined cost management and proactive strategies and optimizing our rental fleet and working capital.

Ryan Greenawalt: Entering the year, we faced a 2026 maturity wall on our ABL and high-yield bonds. In June, we proactively addressed this by successfully raising $500 million in senior second lien bonds, refinancing our senior debt, and extending maturities to 2029. This strategic move strengthened our balance sheet, enhanced liquidity, and secured patient capital to support the business through the cycle, ensuring financial flexibility as we navigate the current market environment.

Tony: Entering the year, we faced in 2026 maturity wall on our ABL and high yield bonds in June we proactively addressed this by successfully raising $500 million in senior second lien bonds refinancing, our senior debt and extending maturities to 2029. This strategic move strengthened our balance sheet enhance liquidity and secured patient capital to support that.

Tony: Business through the cycle, ensuring financial flexibility as we navigate the current market environment.

Ryan Greenawalt: I'll now talk about our business segments starting with construction equipment. Construction equipment sector faced a challenging year impacted by industry-wide oversupply, tightening credit conditions, and a slowdown in private non-residential construction. While infrastructure projects provided some stability, overall demand remained. However, market dynamics varied significantly by region. The northern markets, particularly the Great Lakes area, saw steeper industry sales declines with double-digit contractions year over year. In contrast, Florida experienced a downturn, but fared better than the national average, highlighting the localized nature of the CE market and the diverse demand drivers across the geography. In 2024, new and used equipment sales in our CE segment saw a 10.2% decline organically, a reduction of over $60 million, reflecting these macroeconomic challenges.

Tony: I'll talk about our business segments, starting with construction equipment.

Tony: The construction equipment sector faced a challenging year impacted by industry wide oversupply tightening credit conditions and a slowdown in private nonresidential construction activity, while infrastructure projects provided some stability overall demand remained subdued.

Tony: However market dynamics varied significantly by region, the northern markets, particularly on the Great Lakes area saw steeper industry sales declines with double digit contractions year over year. In contrast, Florida experienced a downturn, but fared better than the national average highlighting the localized nature of the CE market and a diverse demand drivers across the geographies.

Tony: In 2024, new and used equipment sales and are seeing that in our CE segment saw a 10, 2% decline organically a reduction of over $60 million, reflecting these macroeconomic challenges. However, organic product support revenues increased three 7% year over year, driven by stronger service rate utilization.

Ryan Greenawalt: However, organic product support revenues increased 3.7% year-over-year, driven by stronger service rate utilization. The backlog of federal infrastructure spending under the IIJA program remains a long-term catalyst with significant funds still to be deployed. Additionally, state DOT budgets in key Alta regions, including Florida, the Northeast, and the Midwest remain elevated, reinforcing demand for heavy equipment rentals and service. Our master distribution felt a similar headwind in 2024 as supply demand imbalances and broader economic uncertainty weighed on sales. That said, we see momentum building. Channel partners are reporting stronger utilization and increased sales of environmental and specialty machines, setting the stage for growth in 2025.

Tony: The backlog of federal infrastructure spending under the IHA program remains a long term catalyst with significant funds still to be deployed Additionally state dot's.

Tony: <unk> and key also regions, including Florida, the northeast and the Midwest remain elevated reinforcing demand for heavy equipment rentals and service.

Tony: Our master distribution felt a similar headwind in 2024 as supply demand imbalances and broader economic uncertainty weighed on sales that said, we see momentum building.

Tony: <unk> partners are reporting stronger utilization and increased sales of environmental and specialty machines setting the stage for growth in 2025.

Ryan Greenawalt: As the market adjusts to an equipment oversupply, we are confident that supply, demand, and balance will normalize by mid-year 2025, creating a healthier environment for new equipment sales. Additionally, our rent-to-sell strategy continues to be a critical tool in optimizing fleet utilization and balance sheet efficiency.

Tony: As the market adjust to an equipment oversupply, we are confident the supply demand imbalance will normalize by midyear 2025, creating a healthier environment for new equipment sales. Additionally, our rental sales strategy continues to be a critical tool in optimizing fleet utilization and balance sheet efficiency.

Ryan Greenawalt: Now turning to the material handling segment. The material handling segment also faced headwinds, primarily due to the moderation of backlog-driven growth. The North American lift truck market experienced a decline in new order bookings as the industry worked through record backlogs accumulated in prior years. As a result, while deliveries were strong, net new orders slowed, impacting future sales blocks.

Tony: Now turning to the material handling segment.

Tony: The material handling segment also faced headwinds primarily due to the moderation of backlog driven growth the north American lift truck market experienced a decline in new order bookings as the industry work through record backlogs accumulated in prior years as a result, while deliveries were strong net new orders slowed impacting future sales velocity.

Ryan Greenawalt: Alta's material handling revenue remained stable at $687.4 million for the year, a 0.9% increase from 2012. supported by Sustained Product Support Growth and Stable Equipment Market. However, pricing pressure, particularly in the used equipment market, presented challenges. Our warehouse solutions business also saw softness, reflecting cautious capital spending from large logistics and distributions customers.

Tony: All of this material handling revenue remained stable at $687 4 million for the year up nine.

Tony: <unk> increase from 2023 supported by sustained product support growth and stable equipment margins, however, pricing pressure, particularly in the knee.

Tony: And the used equipment market presented challenges our warehouse solutions business also saw softness reflecting cautious spend capital spending from large logistics and distributions customers.

Ryan Greenawalt: Despite these challenges, the long-term outlook for material handling remains strong. The continued growth of e-commerce, increased adoption of automation, and the transition to Class 3 electric equipment create opportunities for Alta. Our investment in warehouse automation, fleet electrification, and enhanced service offerings position us to capitalize on these trends in the market.

Tony: Despite these challenges the long term outlook for material handling remains strong the continued growth of ecommerce increased adoption of automation and the transition to class III electric equipment create opportunities for Alta our investments in warehouse automation fleet electrification and enhanced service offerings position us to capitalize on these trends in the market.

Ryan Greenawalt: Now turning to the Electric Vehicle Center. I want to provide an update on the current status of our e-mobility. While recent industry developments have led to questions about the broader adoption of battery electric vehicles and fuel cell electric vehicles, we continue to see steady momentum in key markets. For example, major transportation hubs are making long term commitments to hydrogen power. Reinforcing Hydrogen's Viability for High Utilization Applications. That said, challenges remain, particularly around charging and fueling infrastructure, cost competitiveness, and supply chain. As we evaluate opportunities in this space, our focus remains on ensuring we align with technologies that provide real-world value to our customers while maintaining a disciplined approach to investing in emerging markets.

Tony: Now turning to the electric vehicle segment.

Tony: I want to provide an update on the current status of our E mobility business.

Tony: Industry developments have led to questions about the broader adoption of battery electric vehicles and fuel cell electric vehicles, we continue to see steady momentum in key markets. For example, a major transportation hubs are making long term commitments to hydrogen powered fleets.

Tony: Forcing hydrogens viability for high utilization applications that said challenges remain particularly around charging and fueling infrastructure cost competitiveness and supply chain constraints as we evaluate opportunities in this space. Our focus remains on ensuring we align with technologies that provide real world value to our customers, while maintaining a disciplined approach.

Tony: Two investing in emerging solutions.

Ryan Greenawalt: And now to 2025 Operational As we enter 2025, we remain focused on three key priorities. First Operational Efficient. Enhancing profitability through cost optimization, streamlining SG&A, and improving fleet utilization. Second, disciplined capital allocation. We successfully reduced net debt by over 60 million in the second half of 2024 through rental fleet, right-sizing and working capital optimism. Our $20 million share repurchase program remains active and we will deploy capital opportunistically based on market conditions. And third, strategic growth in M&A. Similar to 2024, we are taking a more opportunistic stance to acquisitions in 2025, prioritizing high-margin, reoccurring business lines with a focus on expanding our geographic footprint of exclusive distribution rights for world-class products.

Tony: And now to 2025 operational initiatives.

Tony: As we enter 2025, we remain focused on three key priorities first operational efficiency enhancing profitability through cost optimization, streamlining SG&A and improving fleet utilization.

Tony: Disciplined capital allocation, we successfully reduced net debt by over $60 million in the second half of 2024 through rental fleet right sizing and working capital optimization, our 20 million share repurchase program remains active and we will deploy capital opportunistically based on market conditions.

Our third strategic growth and M&A.

Tony: To 2024, we are taking a more opportunistic stance to acquisitions in 2025 prioritizing high margin reoccurring business lines with a focus on expanding our geographic footprint of exclusive of exclusive distribution rights for world class products.

Ryan Greenawalt: In closing, despite market challenges, Alta remains well-positioned for long-term success. Our differentiated business model, disciplined execution, and customer-centric approach provide a solid foundation for growth. The fundamentals of our industry remain intact, and we are confident that our strategic priorities will enable us to navigate short-term uncertainties while driving long-term shareholder value.

Tony: In closing despite market challenges altra remains well positioned for long term success, our differentiated business model disciplined execution and customer centric approach provide a solid foundation for growth the fundamentals of our industry remain intact and we are confident that our strategic priorities will enable us to navigate short term uncertainties, while driving long term.

Tony Colucci: Now I'll turn it over to Tony for a detailed analysis of our financial and operating performance.

Tony: Shareholder value now.

Tony: Now I'll turn it over to Tony for a detailed analysis of our financial and operating performance.

Tony Colucci: Thank you, Ryan. Good evening, everyone. And thank you for your interest in Alta Equipment Group and our fourth quarter and full year 2024 financial results. Before I start, I first want to thank all of my Alta teammates for their hard work and dedication to our business and our customers in what was a unique 2024. More importantly, thank you for your commitment to one another in concert with Alta's guiding principles. My remarks today will focus on four key areas. First, I'll briefly present our fourth quarter results. Second, I'll present and comment on our full year 2024 results, focusing on key themes and the factors that led to the year-on-year reduction in EBITDA.

Tony: Thank you Ryan and good evening, everyone and thank you for your interest in Alta equipment group, and our fourth quarter and full year 2024 financial results before I start I first want to thank all of my teammates for their hard work and dedication to our business and our customers and what was a unique 2024.

Tony: More importantly, thank you for your commitment to one another in concert with both those guiding principles my.

Tony: My remarks today will focus on four key areas first I will briefly present, our fourth quarter results.

Tony: Second I'll present and comment on our full year 2024 results focusing on key themes and the factors that led to the year on year reduction in EBITDA.

Tony Colucci: Third, I'll provide guidance for 2025 adjusted EBITDA and discuss the assumptions that underpin the annual guide. Lastly, I'll be reiterating our cash flow profile, specifically resetting for investors why our rent-to-sell business model allows us to cash flow throughout the cycle, as the 2023 and 2024 comparative is indicative of that theme. 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 in our 10K, which is available on our investor relations website at ALTG.com.

Tony: Third I'll provide guidance for 2025, adjusted EBITDA and discuss the assumptions that underpin the annual guide lastly, I'll be reiterating our cash flow profile, specifically resetting for investors why are rent to sell business model allows us to cash flow throughout the cycle as the 2023 and 2024 comparator.

Tony: <unk> is indicative of that theme.

Tony: Before I get to my talking points. It should be noted that ill 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-K, which is available on our Investor Relations website at <unk> Dot com with that said with the first portion of my prepared remarks, and as presented in the slides.

Tony Colucci: With that said, for the first portion of my prepared remarks, and as presented in slides 10 to 12 in the earnings deck, fourth quarter performance. For the quarter, the company recorded revenue of $498.1M, underpinned by a notable $69M sequential increase in equipment sales when compared to Q3, indicative of a return to the equipment markets by our customer base post-selection. While this increase was a welcome relief from the first three quarters of the year, gross margins on equipment sales were weak as the overhang of supply in the markets continued to pressure pricing in Q4. Additionally, given the uptick in demand in Q4, we made prudent inventory decisions to ultimately relieve the balance sheet by taking lesser than average margins on a certain subsection of the used equipment, something that we don't expect to reoccur going forward.

Tony: Tend to 10 to 12 in the earnings deck fourth quarter performance for the quarter. The company recorded revenue of $498 1 million.

Tony: Underpinned by a notable $69 million sequential increase in equipment sales when compared to Q3 indicative of a return to the equipment markets by our customer base post election, while this increase was a welcome relief from the first three quarters of the year gross margins on equipment sales were weak as the overhang of supply in our markets continue to pressure pricing.

Tony: In Q4. Additionally, given the uptick in demand in Q4, we made prudent inventory decisions to ultimately relate to the balance sheet by taking lesser than average margins on certain certain subsection of the used equipment something that we don't expect to reoccur going forward.

Tony Colucci: While the equipment sales lines outperformed our expectations, part service and rental revenues underperformed for the quarter, as rental equipment in the north came back into our yards early than expected, driven by the mild fall weather, which allowed contractors to finish jobs on time, and before the snow flew. Additionally, given the increase in equipment demand for the quarter, we made strategic decisions to offload rental fleet, primarily in our rent to sell product categories in our construction segment, whereby we sold equipment to customers that were renting the units, which ultimately put pressure on rental revenues and EBITDA for the quarter.

Tony: While the equipment sales slides outperformed our expert expectations parts service and rental revenues underperformed for the quarter as rental equipment in the north came back into our yards early than expected driven by the mild fall weather, which allowed contractors to fitness jobs on time on time and before the snow flu. Additionally, given the increase in equipment demand for the quarter.

Tony: <unk>, we made strategic decisions to offload rental fleet, primarily in a rent to sell product categories. In our construction segment, whereby we sold equipment to customers that were renting the unit, which ultimately put pressure on rental revenues and EBITDA for the quarter.

Tony Colucci: Lastly, on revenue, as mentioned, our product support departments underperformed in the quarter, which we believe to be more of a timing issue than anything structurally wrong in our business, as the midweek holiday schedule impacted PTO for our technicians and for our customers more acutely than in previous years, ultimately leading to reduced workdays in the quarter when compared to years past. On the cost line, expense optimization initiatives that started earlier in the year began to hold, take hold as investors should take note of the sequential reduction in SG&A expenses realized in Q4. On a run rate basis, our calculations suggest these cost optimization efforts have yielded approximately $8 million on an annual basis.

Tony: Lastly on revenue as mentioned our product support departments underperformed in the quarter, which we believe to be more of a timing issue than anything structurally wrong in our business as the mid week holiday schedule impacted PTO for our technicians and for our customers more acutely than in previous years, ultimately leading to reduced workdays in the quarter.

Tony: When compared to years past.

Tony: On the cost line extent expense optimization optimization initiatives that started earlier in the year began to hold take hold as investors should take note of the sequential reduction in SG&A expenses realized in Q4 on a run rate basis. Our calculations suggest these cost optimization efforts have yielded approximately $8 million.

Tony: On an annual basis in summary, we recorded $40 7 million of adjusted EBITDA for the quarter.

Tony Colucci: In summary, we recorded $40.7 million of adjusted EBITDA for the quarter. Now turning to our full fiscal year 2024 financial The company recorded $1.88 billion in revenue in 2024, effectively flat when compared with 2023 revenue. On the adjusted EBITDA line, the company achieved $168.3 million a year when compared to $201 million pro forma adjusted EBITDA in 2023, effectively creating an estimated $33 million gap between 2023 and 2024. When we look back at the anatomy of that gap, the explanation is fairly simple. 1, given 2024 market conditions previously noted, we didn't sell as much equipment in 24 when compared to 2023, with the issue most acutely present in our construction and master distribution segments.

Tony: Now turning to our full year fiscal full fiscal year 2024 financial results. The company recorded $1 $88 billion in revenue in 2024, effectively flat when compared with 2023 revenue on the adjusted EBITDA line. The company achieved $168 3 million for the year when compared to 201.

Tony: Pro forma adjusted EBITDA in 2023, effectively creating an estimated $33 million gap between 'twenty three and 'twenty four.

Tony: When we look back at the in the anatomy of that gap. The explanation is fairly simple one given 2024 market conditions. Previously noted we didn't sell as much equipment in 'twenty four when compared to 2023 with the issue most acutely present in our construction and master distribution segments, all told a reduction of approximately.

Tony Colucci: All told a reduction of approximately 100Million dollars from proforma levels of 2000 from the proforma levels of 2023 and new equipment, new and used equipment volumes impacted EBITDA by roughly 13Million dollars. Number two, given the supply overhanging the equipment markets and the competitive environment for deals, gross margins on equipment volumes we were able to execute on were compressed year over year, and that margin compression on new and used equipment impacted the EVDA line roughly $24 million in 2020-24. These two factors totaling $37 million were offset by previously mentioned cost optimization efforts as well as variable costs released on lower sales volume, which totaled approximately $7 million for the year.

Tony: $100 million from pro forma levels of 2000 from the pro forma levels of 2023, and new equipment, new and used equipment volumes impacted EBITDA by roughly $13 million.

Tony: Number two given the given the supply overhanging the equipment markets and the competitive environment for deals gross margins on equipment volumes, we were able to execute on were compressed year over year and that margin compression on new and used equipment impacted the EBITDA line.

Tony: Roughly $24 million in 2024.

Tony: Yes.

Tony: These two these two factors totaling $37 million were offset by previously mentioned cost optimization efforts as well as variable costs released on lower sales volume, which totaled approximately $7 million for the year.

Tony Colucci: To conclude, the reduction of our 2024 adjusted EBITDA was almost exclusively related to the supply-demand dynamics and the macro factors that were at play in the construction equipment markets this year, and we are proud of how the business reacted to these factors.

Tony: To conclude the reduction of our 2024 adjusted EBITDA was almost exclusively related to the supply demand dynamics and the macro factors that were at play in the construction equipment markets.

Tony: This year and we are proud of how the business reacted to these factors.

Tony Colucci: A quick check-in on the balance sheet as of year-end, and as depicted on slide 15. We ended the quarter with approximately $330 million of cash in availability on a revolving line of credit facility, certainly a comfortable amount of liquidity to navigate any business climate that may be ahead of us.

Tony: A quick check in on the balance sheet as of yearend and as depicted on slide 15, we ended the quarter with approximately $330 million of cash and availability on our revolving line of credit facility, certainly a comfortable amount of liquidity to navigate any business climate that may be ahead of us.

Tony Colucci: Last point on 2024 as it relates to the balance sheet and optimization efforts. I want to point investors to slide 19 and note that at the end of Q2, when we realized that we were in a different demand environment than what we had planned for, we outlined for investors that we expected to reduce the size of the fleet by 40 to 50 million dollars and de-lever the balance sheet as much as possible by year end. I'm pleased to report mission accomplished. And as noted on slide 19, we were able to flex our fleet by $45 million, which was the primary factor in us paying down funded debt by $61 million in the second half of 2024.

Tony: Last point on 2024 as it relates to the balance sheet optimization efforts I want to point investors to slide 19, and note that at the end of Q2.

Tony: When we realized that we were in a different demand environment than what we had planned for we outlined for investors that we expect it to reduce the slides the size of the fleet by $40 million to $50 million and Delever the balance sheet as much as possible by year end I am pleased to.

Tony: To report mission accomplished and as noted on slide 19, we were able to flex our fleet by $45 million, which was the primary factor is paying down funded debt by $61 million in the second half of 2024 I'll provide more detail on how we were able to accomplish this when I present, our cash flow model more materially.

Tony Colucci: I'll provide more detail on how we were able to accomplish this when I present our cash flow model momentarily.

Tony Colucci: Moving on to the third portion of my prepared remarks, 2025 adjusted EBITDA guidance, which was included in today's earnings release. In terms of the guidance range itself, we expect to report $175 to $190 million of adjusted EBITDA for the full year 2025. A few observations on the guide, and I'd like to point investors to the bridge provided on slide 20 of our presentation, which presents the path as we see it from our 2024 adjusted EBITDA to the midpoint of the 2025 goal.

Tony: Moving on to the third portion of my prepared remarks, 2025, adjusted EBITDA guidance, which was included in today's earnings release.

In terms of the guidance range of <unk> itself, we expect to report a $175 million to $190 million of adjusted EBITDA for the full year 2025, a few observations on the guide and I would like to point investors to the bridge provided on slide 20 of our presentation, which presents the path as we see it from our 2020 for adjusted EBITDA.

Tony: To the midpoint of the 2025.

Tony Colucci: First, I should point out that the guide does not have any aggressive assumptions on equipment sales growth, specifically in the construction segment. That said, between better volumes in our material handling and master distribution segments and expanded gross margins overall, we've calculated this positive impact to EBITDA at $7 million. Investors should keep in mind that 100 basis points of gross margin on a billion dollars of equipment, net of direct cost, is approximately $7 million of incremental EBITDA for all. Second, we expect to drive organic growth and product support revenues, much like we've done historically. And more notably, we expect to be more efficient in product support in 2025.

Tony: First I should point out that the guide does not have any aggressive assumptions on equipment sales growth specifically in the construction segment that said between better volumes in our material handling and master distribution segments and expanded gross margins overall, we've calculated this positive impact to EBITDA at $7 million.

Tony: Investors should keep in mind that 100 basis points of gross margin on $1 billion of equipment net of direct selling cost is approximately $7 million of incremental EBITDA for ulta.

Tony: Second we expect to drive organic growth and product support revenues much like we've done historically and more notably we expect to be more efficient in product support in 2025, our confidence here is based on technician productivity efforts that began in 2024, which will yield less non billable time and better profitability in 'twenty five.

Tony Colucci: Our confidence here is based on technician productivity efforts that began in 2024, which will yield less non billable time and better profitability in 2025. Between these 2 items, we expect an incremental 9M dollars of EBITDA coming from product support.

Tony: Between these two items, we expect an incremental $9 million of EBITDA coming from product support.

Tony Colucci: Third, as mentioned previously, we believe that the cost out initiatives implemented in 2024 yielded an 8M dollar run rate in savings. Estimating that we realized half of those savings in 24, this leads the other half or $4 million to be realized in 25.

Tony: Third as mentioned previously we believe that the cost out initiatives implemented in 2024 yielded 8 million yielded an $8 million run rate in savings.

Tony: Estimating that we realized half of those savings in 'twenty for this leads the other half were $4 million to be realized in 'twenty five.

Tony Colucci: 4th, when it comes to rental, our growth expectations here are minimal as we look to drive physical utilization year over year versus getting aggressive on any, any rate increase assumptions or on the size of the fleet. Lastly, we have general inflationary type costs on our impacts and our cost structure each year associated with raises for employees, increases in employee benefits, and other selling expenses which are a headwind to the aforementioned positive factors influencing you.

Tony: Fourth when it comes to rental or growth expectations here are minimal as we look to drive physical utilization year over year versus getting aggressive.

Tony: E rate increase assumptions or on the size of the fleet.

Lastly, we have general inflationary type costs on our impacts in our cost structure each year associated with raises for employees increases in employee benefits and other selling expenses, which are a headwind to the aforementioned positive factors influencing EBITDA.

Tony Colucci: I would caveat that all the factors predispose a generally supportive macro environment, which seems to be changing daily. And to the extent that To the extent more than typical macro dislocations occur, some of our assumptions may prove false.

Tony: I would caveat that all the factors predisposed to generally supportive macro environment, which seems to be changing daily and to the extent that.

To the extent more than typical macro dislocations occur some of our assumptions may proved false.

Tony Colucci: To summarize, we remain confident in our business model and in our long-term prospects, and the team at Alta is committed to the execution of this plan and getting the business back to a more profitable growth path in 2025.

Tony: To summarize we remain confident in our business model and in our long term prospects and the team at Ulta is committed to the execution of this plan and getting the business back to a more profitable growth path in 'twenty five.

Tony Colucci: Moving on to the last portion of my prepared remarks, I'd like to focus investors on slides 13 and 14 from today's earnings presentation. which presents Alta's cash flow performance in 2023 and 2024. As an introduction to the slides, in the five years of being a public company, one of the items that I spend more time dealing and discussing with investors is Alta's cash flow profile, especially as it relates to our rent to sell business model, which is admittedly unique and requires a second level understanding. Slides 13 and 14 aim to help equity and debt investors alike with this understanding and presents the rent to sell model in a more simplistic way than previous iterations.

Tony: Moving on to the last portion of my prepared remarks, I'd like to focus investors on slides 13, and 14 from todays earnings presentation.

Tony: Which presents altice cash flow performance in 2023, and 'twenty four as an introduction to the slides in the five years of being a public company one of the items that I spend more time dealing in discussing with investors is <unk> cash flow profile, especially as it relates to our rent to sell business model, which is admittedly unique and <unk>.

Acquires a second level understanding.

Tony: Slides 13, and 14 aimed to help equity and debt investors like with this understanding and presents the rent to sell model in a more simplistic way than previous iterations.

Tony Colucci: First, slide 13, which provides the definitional foundation of rent-to-rent fleet versus rent-to-sell equipment. As noted on the slide, rent-to-rent is treated and invested in via maintenance capex like a traditional fixed asset. Notably, rent-to-rent fleet is meant to be held over the long term and the return on investment in the rent-to-rent fleet will come via the rental stream on that fleet over many years. As opposed to rent-to-rent, rent-to-sell equipment should be viewed more like an analyst would view general inventory as it might be temporary or as it is meant to be a temporary or short-term investment in equipment to take advantage of market demand for lightly used heavy construction equipment.

Tony: First slide 13, which provides the definitional foundation of rent to rent fleet. There is rent to sell equipment as noted on slide rent to rent is treated and invested in the maintenance capex like a traditional fixed fixed asset, notably rental rent fleet is meant to be help or the long term and the return on.

Tony: <unk> and the rent to rent fleet will come via the rental stream on that fleet over many years.

Tony: As opposed to rent to rent rent to sell equipment to be viewed more like an analyst would view general inventory as it might be temporary.

Tony: As it is meant to be a temporary or a short term investment in equipment to take advantage of market demand for lightly used heavy construction equipment.

Tony Colucci: The return on investment on rent-to-sell fleet, similar to new equipment, is primarily made through the ultimate sale of the equipment versus the rental stream earned on the equipment during its time on our balance sheet. Most importantly, like inventory, minimal to no maintenance capex is required on the rent-to-sell fleet. Lastly, on slide 13, you will note the variation of the rent to sell equipment levels in 2023 versus 24. Important to note that in 2023, we are planning for a strong 2024, which ultimately was not the case. Said differently, in 2023, we've leaded up for a certain level of demand we were experiencing and expecting to continue in 24.

Tony: The return on investment on rent to sell fleet similar to new equipment is primarily made through the ultimate sale of the equipment versus the rental street rental stream earned on the equipment. During its time on our balance sheet. Most importantly, like inventory minimal to no maintenance Capex is required on the rent to sell fleet.

Tony: Lastly on Slide 13, you will note the variation of the rent to sell equipment levels in 2023 versus 24 important to note that in 2023, we are planning for a strong 2024, which ultimately was not the case said differently in 2023 weeks lead it up for a certain level of demand, we're experiencing and expecting.

Tony: To continue in 'twenty four but in the midst of 2024 when it was clear that demand levels were lower than what we had planned for we prudently reacted and reduced our rent to sell equipment efficiently and profitably overall the juxtaposition that was 2023 versus 2024 presented on slide 13 is a great example of the flexibility.

Tony Colucci: But in the midst of 2024, when it was clear that demand levels were lower than what we had planned for, we prudently reacted and reduced our rent to sell equipment efficiently and profitably. Overall, the juxtaposition that was 2023 versus 2024 presented on slide 13 is a great example of the flexibility of our rent to sell business.

Tony: Have a rent to sell business model.

Tony Colucci: Moving on to slide 14, which presents an updated way for investors to deserve our cash flow performance in a simplistic manner. The first layer of the analysis analysis is to isolate free cash flow prior to rent to sell or RTS decisioning, which allows us to remove the complexity with the rent to sell equipment from the analysis. Now, walking down the analysis on slide 14. First, you will note that the analysis starts with our traditional adjusted EBITDA calculation, but has additional non-cash advects that come directly from our cash flow statement. This adjusted EBITDA is then reduced for the gain loss on the sale of rent to self-lead, a figure that comes directly from our construction segment financial.

Moving on to slide 14, which presents an updated wafer investors deserve our cash flow performance in a simplistic manner.

Tony: The first layer of the analysis analysis is to isolate free cash flow prior to rent to sell or Rts, decisioning, which allows us to remove the complexity with the rent to sell equipment from the analysis.

Tony: To walk.

Tony: Not walking down the analysis on slide 14 first you will note that the analysis starts with our traditional adjusted EBITDA calculation, but as additional noncash add backs they come directly from our cash flow statement. This adjusted EBITDA is then reduced with the gain loss on the sale of rent to sell fleet a figure that comes directly from our construction segment financial.

Tony Colucci: Next, we burden the calculation for net PP&E CapEx needed for traditional operational fixed costs and cash taxes, two items that must be attended to annually. Going down the slide, next we burden for pro forma maintenance CapEx associated with the rent to rent fleet, which again is treated as a traditional fixed asset. This first layer of the calculation, ultimately years, yields free cash flow prior to rent-to-sell decision. Next, we bring in the Rent-to-Sell Cash Activity for the Year, which is presented in a simple cash in and cash out manner, all sourced directly from our Gap Financial.

Tony: Next we burdened the calculation for net PP&E capex needed for traditional operational fixed costs and cash taxes cash taxes, two items that must be attended to annually.

Tony: Going down to slide next week burden for pro forma maintenance capex associated with the rent to rent fleet, which again is treated as a traditional fixed asset.

Tony: This first layer of the calculation ultimately years yields free cash flow prior to rent to sell decisioning.

Tony: <unk> bring in the rent to sell cash activity for the year, which is presented in a simple cash in and cash out manner, all sourced directly from our GAAP financials.

Tony Colucci: Note that as previously discussed on slide 13, in 2023, we made the decision to fleet up, which depressed free cash flow after rent to sell decisioning, while the flexing down of the fleet in 2024 allowed us to drive free cash flow after rent to sell decision in 2024. As you will note, we had a better free cash flow performance in 2024 versus 23, despite the notable reduction in EBITDA year-over-year. In the end, free cash flow after rent-to-sell decisioning is what is left before we service debt and make other capital allocation decisions. To conclude the presentation of the slide, we bring in cash interest to provide a coverage ratio that you will note has been nearly two times in each of the past two years, a comfortable level on that ratio.

Tony: Note that as previously discussed on slide 13 in 2023, we made the decision to fleet up which depressed free cash flow after rent to sell decisioning, while the flexing down of the fleet in 2024 allowed us to drive free cash flow after rent to sell Decisioning in 2024.

Tony: As you will note, we had a better free cash flow performance in 2024 versus 23. Despite the notable reduction in EBITDA year over year in the yen free cash flow after rent to sell Decisioning is what is left before we service debt and make other capital allocation decisions to.

Tony: To conclude the presentation of this slide we bring in cash interest to provide a coverage ratio that you will note has been nearly two times in each of the past two years, a comfortable level on that ratio in.

Tony Colucci: In summary, free cash flow after rent-to-sell decisioning produced in each of the past two years, which encompassed two extremely different operating environments, The company has plenty of cash flows to service its current debt levels and still have additional cash flow to allocate elsewhere. Finally, I would note that the average cash flow available for equity investors in 2023 to 2024 was approximately $45 million, which means that recent trading levels in the stock would suggest that ALTG Common is trading at a 30% free cash flow yield and below one turn of EBIT.

Tony: In summary, free cash flow after rent to sell Decisioning produced in each of the past two years, which encompassed two extremely different operating environments.

Tony: The company has you can see that the company has plenty of cash flows to service its current debt levels and still have additional cash flow to allocate elsewhere.

Tony: Finally, I would note that the average cash flow available for equity investors in 2023 to 2024 was approximately $45 million, which means that recent trading levels in the stock.

Tony: Would suggest that LPG common is trading at a 30% free cash flow yield and below one turn of EBITDA.

Tony Colucci: Last point on side 14 is that this analysis is fully reconcilable to our gap-based financial statement, our gap-based statement of cash flows, and that reconciliation is available in appendix B of our earnings presentation, which I encourage investors to digest and inquire on to fully understand Alta's cash flow and financial profile as the uniqueness of our business model and gap requirements can sometimes be difficult to navigate in determining the business's true cash flow capability.

Tony: Last point on Slide 14 is that this analysis vote analysis is fully reconcilable to our GAAP based financial statement are GAAP based statement of cash flows and that reconciliation is available in appendix b of our earnings presentation, which I encourage investors to digest and inquire on to fully understand <unk>.

Tony: Cash flow and financial profile as the uniqueness of our business model and GAAP requirements can sometimes be difficult to navigate in term and determining the businesses true cash flow capability.

Tony Colucci: In closing, again, I want to thank my teammates at Alta for your commitment to our business and to each other throughout 2024. You embodied our guiding principles in a challenging environment, and I'm proud of all of your efforts.

Tony: In closing again I want to thank my teammates and also for your commitment to our business and to each other throughout 2024, you embodied our guiding principles in a challenging environment and I'm proud of all of your efforts to our shareholders. We appreciate your confidence and look forward to driving shareholder value in 2025.

Tony Colucci: To our shareholders, we appreciate your confidence and look forward to driving shareholder value in 2020.

Operator: Thank you for your time and I will turn it back over to the operator. Thank you.

Tony: Thank you for your time and I'll turn it back over to the operator for Q&A.

Tony: Thank you will.

Operator: We'll now open the line for questions. If you'd like to ask a question at this time, please dial star 1 on your telephone keypad. If for any reason you need to remove your question, please dial star 2. Again, to ask a question, dial star 1. As a reminder, if you're using a speakerphone on today's call, please remember to pick up your handset before asking your question. We'll pause here briefly to allow questions to generate in the queue.

Speaker Change: Now open the line for questions if you'd like to ask a question at this time all star one on your telephone keypad.

Speaker Change: For any reason you need to remove your question. Please style start to again to ask a question dial star one.

Speaker Change: As a reminder, if youre using a speakerphone on today's call. Please remember to pick up your handset before asking your question.

Speaker Change: We'll pause briefly to allow questions to generate in the queue.

Canyon Hayes: The first question is from the line of Matt Summerville with DA Davidson. Your line is now open. Hi there, you've got Canyon Hayes on for Matt Summerville tonight. Thanks for taking our questions. You had already alluded to it as a degree in the guidance. I just wanted to double click a little bit on the equipment sales volume. What's the sort of underlying assumption for price capture imbued in that guide? And kind of along those lines, what are the base assumptions within each of Alta's markets? Should we be assuming this guide assumes that inflection in any degree or any help there as far as underlying growth rates would be helpful?

Speaker Change: The first question is from the line of Matt Summerville with D. A Davidson your line is now open.

Speaker Change: Yes.

Speaker Change: And there you've got Kenyan Hayes for Matt Summerville Tonight, Thanks for taking our questions.

Speaker Change: You can already to a degree in the guidance I just wanted to.

Speaker Change: Double click a little bit on the equipment sales volume, let's just sort of underlying assumption for price capture and viewed in that guide and kind of along those lines what are the base assumptions within each of all this market should we be.

Speaker Change: Should we be assuming this guide assumes that inflection in any degree of year.

Speaker Change: Any help there as far as underlying growth rates would be helpful.

Canyon Hayes: For more information, visit www.FEMA.gov Yeah, I think Canyon, the way that we're thinking about it, and to go kind of segment by segment, one is it's important for everybody on the call to understand kind of the impact that was 2024. And we'll start in the construction segment. Whereas Ryan noted, you know, we have markets like Florida and upstate New York that were down 10 to 15%, and a market like Illinois down 20%, just selling equipment. And so it's important to understand kind of the impact to the downside that happened to appreciate kind of what the guide represents.

Speaker Change: Yes, I think canyon, the way that we're thinking about it and to go kind of segment by segment. One is it's important for everybody on the call to understand kind of the the impact that was 2024.

Speaker Change: And we will start in the construction segment, whereas Ryan noted we had markets like.

Speaker Change: Florida in upstate New York that were down 10%, 15%.

Speaker Change: In a market like Illinois down 20% to selling equipment. So it's important to understand kind of the impact to the downside that happened.

Speaker Change: To appreciate kind of what the guide represents so overall in the <unk> segment.

Canyon Hayes: So, overall, in the CE segment, you know, we're not making any grandiose prognostications, if you will, on the size of the market in 2025 versus 24. We do think that given the supply overhang sort of melting away here over the first half will allow us to be more competitive from a market share perspective. So, even if the markets are off a little bit here in 24, we're thinking flattish at least, because we can potentially take some share.

Speaker Change: We're not we're not making any grandiose.

Speaker Change: Prognostications, if you will on the size of the market.

Speaker Change: In 2025 versus <unk> 24, we do think that given the supply overhang.

Speaker Change: Sort of melting away here over the first half will allow us to be more competitive.

Speaker Change: From a market share perspective, so even if the markets are off a little bit here in 'twenty four we're thinking flattish at least because we can potentially take some share back.

Canyon Hayes: Um, in the, in the material handling, and then that that's not not at all to say anything about. Um, what what I mentioned on margins in the material handling side. Um, again, modest, low, single sort of growth, uh, there where we know that we've got, um, you know, a half a year or so of backlog. Um, some of that is at risk, uh, maybe in the back half, but, um, we, we think that the back half is, uh, going to be stronger bookings wise than the 1st, half as I mentioned. So, uh, but but modest, low, single digit sort of numbers there and material handling on the master distribution side.

Speaker Change: In the material handling and then that.

Speaker Change: Not at all to say anything about.

Speaker Change: What I mentioned that margins in the material handling side.

Speaker Change: Again modest low single sort of growth.

Speaker Change: There were we know that we've got.

Speaker Change: Half a year or so of backlog.

Speaker Change: Some of that is at risk maybe in the back half but.

We think that the back half is going to be stronger bookings wise than the first half as <unk> mentioned so.

Speaker Change: But modest low single digit sort of numbers, they're in material handling on the.

Speaker Change: The master distribution side again, we've kind of gone back to an average of the last two years, that's more of an asset light.

Canyon Hayes: Again, you know, we've, we've kind of gone back to an average of the last 2 years. That's more of an asset light. Um, master, um, master distribution agreement business, right? Where they're more of a broker in between sub dealers and and and the way that we're thinking about sales, they're sort of the average of 23 and 24, which puts that number. Um, you know, at a, at a 20% sort of, um, year on year increase, the nominal dollars aren't as big given the size. That's the, that's what the guy did.

Speaker Change: Master.

Speaker Change: Master distribution agreement business, right, where they're more of a broker and between sub dealers and Oems.

Speaker Change: The way that we're thinking about sales there are sort of the average of $23 24, which puts that number.

Speaker Change: Sure.

Speaker Change: At a 20% sort of year on year increase the nominal dollars aren't as big given the size of this segment.

Speaker Change: That's the.

Speaker Change: That's what the guidance based on.

Speaker Change: Yes.

Canyon Hayes: Great, thank you. And, you know, with Dodds v. Leverage at 4-7, how should we think about kind of immediate actions and prioritizations to bring that leverage lower and maybe what you're thinking about ending the year out on the leverage profile? Thanks. Yeah, sure. I think, you know, we've, we've, we did a lot throughout the second half in terms of being mindful of, of the leverage. And I think of leverage on a nominal dollar basis sometimes versus just the, the leverage ratio. If you look at slide six, sorry, 15 in our deck, a year ago, we would have been sitting at mid threes, and now we're mid fours.

Speaker Change: Great. Thank you.

Speaker Change: Adults Sheila for jet fuel.

Speaker Change: Seven how should we think about kind of immediate actions and prioritization is to bring that leverage lower than maybe what youre thinking about ending the year out on the leverage profile.

Speaker Change: Yes, sure I think.

Speaker Change: We did a lot throughout the second half in terms of being mindful of the leverage and.

Speaker Change: I think of leverage on a nominal dollar basis, sometimes versus just the the leverage ratio. If you look at slide <unk>.

Speaker Change: Sorry, 2015 in our deck a year ago, we would have been sitting at mid threes and now we are mid fours.

Canyon Hayes: And that gets to the rent to sell sort of model that I, I laid out for, for investors here, which means that's all to say that the leverage ratio can be fleeting. But we, we, we worked hard to kind of take care of the nominal leverage. So to get the leverage ratio down, we'll continue to, you know, pour cash flows against, against the debt as they, as they come in and be mindful of the leverage. We have no grand intentions to grow the fleet, rent to sell or rent to rent this year. And so there should be some cash left over to pay down nominal debt.

Speaker Change: It gets to the rent to sell sort of model that I laid out for for investors here, which means that's all to say that the leverage ratio can be fleeting.

Speaker Change: But we worked hard to kind of take care of the nominal leverage so to get the leverage ratio down we will continue to.

Speaker Change: For cash flows against against the debt as they as they come in.

Speaker Change: And be mindful of the leverage we have no grand intentions to grow the fleet rent to sell or rent to rent this year.

Speaker Change: And so there should be some cash leftover to pay down nominal debt. How EBITDA plays out we've given you kind of are our prognostication, there and so we're hopeful that we can.

Canyon Hayes: How EBITDA plays out, we've given you kind of our, our prognostication there. And so we're hopeful that we can have, you know, some accretion on the leverage ratio.

Speaker Change: Hum.

Speaker Change: Some accretion on the leverage ratio I would also point out for investors that we've provided a new slide on tangible asset coverage.

Canyon Hayes: I would also point out for investors that we've provided a new slide on tangible asset coverage in slide 16. That is another way to think about the leverage profile, the business where we believe that the debt is covered by, you know, over $250 million on a fair market value. Great, thanks for the detail.

Speaker Change: Slide 16 that.

Speaker Change: It's another way to think about the leverage profile of the business where we.

Speaker Change: We believe that that is covered by over $250 million on a fair market value basis.

Speaker Change: Great. Thanks for the detail.

Canyon Hayes: Thanks, Canyon. Thank you.

Speaker Change: Thanks Kenny.

Speaker Change: Thank you the.

Steven Ramsey: The next question is from Steven Ramsey with Thompson Research Group. Your line is now open. Hi, good evening.

Speaker Change: The next question is from Steven Ramsey with Thompson Research Group. Your line is now open.

Hi, Good evening I wanted to start on the product support operating expenses moods, maybe can you clarify how much you have already done in that area to make that.

Steven Ramsey: I wanted to start on the product support, operating expenses moves. Maybe can you clarify how much you have already done in that area to make that those business lines more efficient? How much of the guide is based on what you've done versus what you plan to do in 2025? Yes, Steven, I think of it in two ways. The cost out of the $8 million, that was more fixed cost. sort of administration. expenses. So I would say that that's done, but let's just say the first kind of wave, if you will, is done. The rest that's left in product support is sort of embedded in the guide and is started in earnest probably in Q4.

Speaker Change: <unk> business lines more efficient how much of the guide is based on what you've done versus what you plan to do it.

Speaker Change: In 2025.

Stephen: Yes, Stephen I think.

Speaker Change: I think of it in two ways the cost out of the $8 million that was more fixed cost.

Stephen: Sort of administration.

Stephen: <unk> expenses, so I would say that that's done but.

Stephen: The let's just say the first kind of wave if you will.

Stephen: <unk> has done.

Stephen: The rest that's left in product support.

Stephen: Is sort of embedded in the guide.

Speaker Change: And is <unk>.

Stephen: <unk> in earnest probably in Q4.

Steven Ramsey: And then we expect to realize some gains in 2025 related to technician productivity. And this is where things like training, rework, non-billable time, and just being more efficient or productive with every hour and price realization, that is all yet still out there, I would say. And that's one of the bars that's in our bridge here in the slide deck. That would be bar number 3.0 Parts and Service Efficiency.

Stephen: And then we expect to realize some gains in 2025 related to technician productivity and this is ware.

Stephen: Things like training rework non billable time.

Stephen: And just being being more.

Stephen: Efficient or productive with every hour.

Stephen: And price realization.

Stephen: That is all yet still still out there I would say and Thats one of the bars that that's in our bridge here in the slide deck that would be bar number.

Stephen: Three parts and service efficiency. So that's a go get for us in 'twenty five.

Steven Ramsey: Okay, that's great.

Stephen: Okay, that's great.

Steven Ramsey: And then I wanted to think about for construction customers purchasing equipment, how you think that unfolds in 2025. Do you think the key lever there is optimism around in-market activity? Clearly, that's somewhat tied to interest rates. Or do you think it's more about borrowing rates being more conducive to purchasing? Or I'm sure it's a mix of both, but curious how you're assessing that backdrop.

Stephen: Then I wanted to think about for construction customers purchasing equipment. How you think that unfolds in 2025 do you think the key lever there is optimism around end market activity clearly that's somewhat tied to interest rates.

Stephen: Or do you think it's more about borrowing rates being more conducive to purchasing or I'm sure. It's a mix of both but curious how you are assessing that backdrop.

Ryan Greenawalt: Steven, I'll weigh in.

Speaker Change: Stephen I'll weigh in maybe Ryan Ryan might have a thought here.

Ryan Greenawalt: Maybe Ryan might have a thought here. You know, I think so much of what we saw and observed in 2024 was what we believe to be kind of sentiment driven, uncertainty related to the election. And that's gone and we saw the pop. That we were kind of expecting in the 4th quarter relative to our customer base committing to capital assets. Now, whether it continues in the face of additional uncertainty with what's going on, tariff wise, et cetera, is creating a bit of a cloud. What I would say is, is what we're observing in our construction segment.

Speaker Change: I think so much of what we saw in observed in 2024 was.

Speaker Change: What we believe to be kind of sentiment driven.

Speaker Change: Uncertainty related to the election.

Speaker Change: And that has gone and we saw the pop.

Speaker Change: That we were kind of expecting in the fourth quarter relative to our customer base committing to capital assets.

Speaker Change: Whether it continues in the face of additional uncertainty with.

Speaker Change: What's going on tariff wise et cetera.

Speaker Change: <unk> is creating a bit of a cloud.

Speaker Change: What I would say is what we are observing in our construction segment.

Ryan Greenawalt: Is sort of a tale of 2, 2. Customer basis 1 is those that are infrastructure based. Um, are, you know, not not not as much tied to the cycle or interest rates. Those projects are fully funded. We feel pretty bullish about that. That side of our construction business, whereas on the private non res. Projects, you know, that that's where the pressure sort of.

Sort of a tale of two two.

Speaker Change: Customer bases, one is those that are.

Speaker Change: Infrastructure based.

Speaker Change: Are not not as much tied to the cycle or interest rates. Those projects are fully funded we feel pretty bullish about that side of our construction business, whereas on the private non res projects.

Speaker Change: That's where the pressure sort of continues.

Ryan Greenawalt: All right, and then last one for me, I'm curious your take on the warehouse solutions business, maybe the context of where it stands versus the prior peak, and then what your outlook on this business is for 2025. Good evening, Steven. This is Ryan. I'll take this one. You know, relative to the prior peak, we think that we can get back there in the next probably 12 months just through organic growth. We are excited about that business segment. We know that that market is forecast to nearly triple by the end of the decade. And we believe that it could be a powerful part of our platform as our material handling customers embrace automation.

Speaker Change: Alright, and then last one for me I'm curious your take on the warehouse solutions business, maybe the context of where it stands versus the prior peak and then what your outlook on this business is for 2025.

Ryan Greenawalt: Good evening, Steven This is Ryan I'll take this one.

Ryan Greenawalt: Relative to the prior peak.

Ryan Greenawalt: We think that we can get back there in the next probably 12 months just through.

Ryan Greenawalt: Organic growth.

Ryan Greenawalt: We are excited about that business segment, and we know that that market is.

Ryan Greenawalt: As forecasted nearly tripled by the end of the decade.

Ryan Greenawalt: We believe that it could be a powerful part of our platform is.

Ryan Greenawalt: Our material handling customers embrace automation so.

Ryan Greenawalt: So we're committed to it. We think long term, we can really grow that business, both on an organic and potentially an M&A basis. And, you know, our near term goal is to kind of get back to that peak level from pre-growth.

Ryan Greenawalt: We're committed to what we think long term, we can really grow that business, both on an organic and potentially an M&A basis and.

Ryan Greenawalt: Our near term goal is to kind of get back to that peak level from previous years, Steve just to maybe.

Ryan Greenawalt: Yeah, Steve, just to maybe weigh into you. We're not gonna we won't give guidance on peak logic specifically, but we've got kind of a reinvigoration and a renewed kind of stance on that business and we're in it for the long All righty, thank you. Thank you.

Ryan Greenawalt: We into.

Ryan Greenawalt: We're not going to we won't give guidance on peak logic, specifically, but.

Ryan Greenawalt: We've got kind of a reinvigoration and are renewed.

Ryan Greenawalt: Stance on that business and we're in it for the long haul.

Ryan Greenawalt: Alright, thank you.

Ryan Greenawalt: Thank you.

Edward Jackson: The next question is from Ted Jackson with Northland Securities. Your line is now open. Thanks. My questions have all been basically answered. But I was curious, Tony, and this could just be, you know, something wrong with my model. But did you do any reclassifications of any things or restatements of anything in the, you know, from in historic periods? because things in my model aren't footing. And when I go back into it in here, if you're like I can see Ted, we broke out rent to sell, rent to sell gain, I'm sorry, rent to sell CapEx and proceeds between investing and operating cash flows.

Ryan Greenawalt: The next question is from Ted Jackson with Northland Securities. Your line is now open.

Speaker Change: Thanks, My questions have all been basically answered, but I was curious Tony.

Speaker Change: And this could just be.

Speaker Change: Something wrong with my model, but did you do any reclassifications in anything so restatements of any things in.

In historic periods.

Speaker Change: Okay.

Speaker Change: Because things in my model footing and when I go back in 10 years.

Speaker Change: Keith.

Ted Jackson: Ted we broke out rent to sell rent.

Ted Jackson: Rent to sell gain im sorry rent to sell Capex and proceeds between investing and operating cash flows and.

Edward Jackson: And we broke those out from rent to rent. So there's now two lines where there used to be one and that may be I saw that, but my... No, I know, but so but it's nothing that would change like your historic net income on any given period, because my fourth quarter folks, and when I look at the first three quarters of it, it looks and then but it doesn't. Okay.

Ted Jackson: We broke those out from rent to rent. So there's now two lines, where they used to be one and that may be.

Ted Jackson: I saw that but my playbook.

Ted Jackson: No I know, but so but it is nothing that would change like of your historic net income on any given period, because my fourth quarter folks and when I look at the first three quarters of inputs and then but it doesn't okay.

Edward Jackson: All right, well, that answers it for me. Thanks, Seth. Thank you.

Ted Jackson: Alright, well that answers it for me.

Ted Jackson: Sure.

Ted Jackson: Thanks.

Ted Jackson: Thanks Ted.

Operator: There are no further questions. So as a final reminder, it is star one. If you'd like to ask a question.

Ted Jackson: Thank you.

Speaker Change: There are no further questions. So as a final reminder, it is star one if you'd like to ask a question.

Ryan Greenawalt: I think, operator, that would conclude the analyst questions, and we can... Thank you everybody for joining and we look forward to talking to you all after Q1.

Speaker Change: I think I think operator that would conclude the analyst questions and we can.

Speaker Change: Conclude the call here. Thank you everybody for joining and we look forward to.

Speaker Change: Talking to you all after Q1.

Speaker Change: Good evening.

Operator: That concludes today's call. Thank you for your participation. You may now disconnect your line.

Speaker Change: That concludes today's call. Thank you for your participation you may now disconnect your lines.