Alta Equipment (ALTG) - 2024 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents Alta Equipment Group Inc.'s unaudited condensed consolidated financial statements for Q2 2024, including balance sheets, income statements, and cash flows, with explanatory notes Condensed Consolidated Balance Sheets Total assets increased to $1,591.3 million by June 30, 2024, while total liabilities rose to $1,466.1 million, and stockholders' equity decreased to $125.2 million Condensed Consolidated Balance Sheet Summary (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $835.9 | $838.0 | | Total Non-Current Assets | $755.4 | $732.9 | | TOTAL ASSETS | $1,591.3 | $1,570.9 | | Total Current Liabilities | $610.4 | $635.1 | | Total Non-Current Liabilities | $855.7 | $786.1 | | TOTAL LIABILITIES | $1,466.1 | $1,421.2 | | TOTAL STOCKHOLDERS' EQUITY | $125.2 | $149.7 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $1,591.3 | $1,570.9 | - Key changes include a decrease in cash from $31.0 million to $4.5 million, a reduction in the line of credit from $315.9 million to $214.2 million, and an increase in long-term debt from $312.3 million to $477.4 million, reflecting debt refinancing activities[9] Condensed Consolidated Statements of Operations The company reported a net loss of $11.9 million for Q2 2024, a shift from prior-year net income, despite a 4.2% revenue increase, due to higher expenses and a debt extinguishment loss Statement of Operations Summary (in millions, except per share data) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $488.1 | $468.4 | $929.7 | $889.1 | | Gross Profit | $132.0 | $126.8 | $252.6 | $248.1 | | Income from Operations | $10.3 | $16.2 | $9.4 | $28.3 | | Loss on extinguishment of debt | $(6.7) | $— | $(6.7) | $— | | Net (Loss) Income | $(11.9) | $2.4 | $(23.8) | $3.4 | | Net (Loss) Income available to common stockholders | $(12.6) | $1.7 | $(25.3) | $1.9 | | Diluted (Loss) Income per Share | $(0.38) | $0.05 | $(0.76) | $0.06 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $21.0 million for H1 2024, while financing activities provided $32.1 million due to debt refinancing, resulting in a $26.5 million cash decrease Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(21.0) | $(33.8) | | Net cash used in investing activities | $(37.4) | $(40.6) | | Net cash provided by financing activities | $32.1 | $74.1 | | Net change in cash | $(26.5) | $(0.4) | | Cash, End of period | $4.5 | $2.3 | - Financing activities in 2024 were marked by significant debt restructuring, including proceeds from borrowings of $849.3 million, extinguishment of long-term debt of $319.4 million, and principal payments of $476.2 million[23] Notes to Financial Statements Notes detail accounting policies, debt structure, segment performance, and stock-based compensation, highlighting the $500.0 million new notes issuance in June 2024 and a $6.7 million loss on extinguishment Disaggregation of Revenues for Six Months Ended June 30, 2024 (in millions) | Revenue Stream | Amount | | :--- | :--- | | New and used equipment sales | $480.1 | | Parts sales | $150.9 | | Service revenues | $130.2 | | Rental revenues | $102.2 | | Rental equipment sales | $66.3 | | Total Revenues | $929.7 | - On June 5, 2024, the company completed a private offering of $500.0 million of 9.000% Senior Secured Second Lien Notes due 2029 to refinance existing debt[60] - In connection with the new notes issuance, the company extinguished its previously issued Senior Secured Second Lien Notes due 2026, recording a loss on extinguishment of $6.7 million[62] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 2024 financial performance, noting a 4.2% revenue growth offset by higher expenses, increased interest costs, and a debt extinguishment loss, leading to a net loss Consolidated Revenue Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 (M) | Q2 2023 (M) | Change (M) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $488.1 | $468.4 | $19.7 | 4.2% | | Gross Profit | $132.0 | $126.8 | $5.2 | 4.1% | | Income from Operations | $10.3 | $16.2 | $(5.9) | (36.4)% | | Net (Loss) Income | $(11.9) | $2.4 | $(14.3) | NM | - Organic revenue growth was 0.1% for Q2 2024, as a 5.6% organic decrease in new and used equipment sales was offset by organic growth in aftermarket sales (6.2%) and rental equipment sales (15.7%)[138][140] - The shift to a net loss was primarily driven by a $6.7 million loss on debt extinguishment, higher interest expense (up $11.4 million), and an $11.1 million increase in operating expenses[134][145] Material Handling Segment Results Material Handling segment revenue grew 3.8% to $175.6 million in Q2 2024, driven by service and rental growth, with gross profit margin improving to 33.9%, despite a decrease in income before taxes Material Handling Revenue (Q2 2024 vs Q2 2023, in millions) | Revenue Stream | Q2 2024 | Q2 2023 | Change (%) | | :--- | :--- | :--- | :--- | | New and used equipment sales | $90.2 | $90.2 | 0.0% | | Parts sales | $26.9 | $26.4 | 1.9% | | Service revenues | $35.7 | $33.0 | 8.2% | | Rental revenues | $20.0 | $18.6 | 7.5% | | Total Revenues | $175.6 | $169.1 | 3.8% | - Segment gross profit margin increased to 33.9% from 33.1% in the prior year, driven by a 290 basis point improvement in service margins[147][152] Construction Equipment Segment Results Construction Equipment revenue grew 4.8% to $294.9 million in Q2 2024, despite a 1.9% organic decline in revenue and a $5.2 million loss before taxes, driven by softer equipment sales and margin compression Construction Equipment Revenue (Q2 2024 vs Q2 2023, in millions) | Revenue Stream | Q2 2024 | Q2 2023 | Change (%) | | :--- | :--- | :--- | :--- | | New and used equipment sales | $145.5 | $149.2 | (2.5)% | | Parts sales | $49.2 | $42.6 | 15.5% | | Service revenues | $30.3 | $26.6 | 13.9% | | Total Revenues | $294.9 | $281.5 | 4.8% | - Organic new and used equipment sales decreased by $14.7 million (9.9%) due to softer demand from contractors amid high interest rates and increased competition[159][160] - New and used equipment sales margins compressed by 270 basis points to 12.9% due to greater equipment supply in the market[162] Master Distribution Segment Results Master Distribution segment revenue declined 22.0% to $16.7 million in Q2 2024, primarily due to a 22.6% drop in equipment sales and a softer market, resulting in a $1.1 million loss before taxes Master Distribution Revenue (Q2 2024 vs Q2 2023, in millions) | Revenue Stream | Q2 2024 | Q2 2023 | Change (%) | | :--- | :--- | :--- | :--- | | New and used equipment sales | $14.4 | $18.6 | (22.6)% | | Parts sales | $2.4 | $2.5 | (4.0)% | | Total Revenues | $16.7 | $21.4 | (22.0)% | - The revenue decline is attributed to a softer demand dynamic in the dealer channel compared to Q2 2023, when sub-dealers were fulfilling stocking needs to meet high pent-up demand[171] Liquidity and Capital Resources The company's liquidity relies on operations and credit facilities, with $21.0 million cash used in operations and $32.1 million provided by financing in H1 2024, ending with $4.5 million cash and $339.0 million available borrowings - Net cash used in operating activities for the six months ended June 30, 2024 was $21.0 million[177] - Gross rental fleet capital expenditures for the six months ended June 30, 2024, was $113.6 million, offset by $66.3 million in proceeds from rental equipment sales[185] - As of June 30, 2024, the company had $339.0 million of available borrowings under its ABL Facility and Floor Plan Facilities[186] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rates, commodity prices, and foreign currency, using derivatives to mitigate, with a 1% interest rate increase potentially reducing annual pre-tax earnings by $2.4 million - The company's primary market risks are interest rates, commodity (fuel) prices, and foreign currency exchange rates[189] - As of June 30, 2024, a one percentage point increase in interest rates on variable rate debt would reduce annual pre-tax earnings by approximately $2.4 million, including the impact of an interest rate cap hedge[191] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[195] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[196] PART II - OTHER INFORMATION Legal Proceedings The company is involved in routine legal proceedings, which are not expected to materially impact its financial statements - The company is subject to various legal proceedings in the ordinary course of business, which are not expected to have a material financial impact[72][201] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the company's 2023 Form 10-K[202] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 231,334 shares for $2.0 million in Q2 2024 under its $12.5 million share repurchase program, with $10.5 million remaining available Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining Under Program (M) | | :--- | :--- | :--- | :--- | | April 2024 | — | — | $12.5 | | May 2024 | — | — | $12.5 | | June 2024 | 231,334 | $8.73 | $10.5 | | Total | 231,334 | $8.73 | $10.5 | Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2024 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the second quarter of 2024[206] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, debt agreements, and officer certifications