Alta Equipment (ALTG) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements Alta Equipment Group Inc. reported Q1 2022 revenues of $331.7 million, up 23.4%, with a narrowed net loss of $1.2 million and increased total assets to $1,030.6 million Consolidated Balance Sheets Total assets increased to $1,030.6 million by March 31, 2022, driven by inventories, while liabilities and equity saw minor shifts Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $504.7 | $448.6 | | Inventories, net | $291.0 | $239.2 | | Total Assets | $1,030.6 | $982.6 | | Total Current Liabilities | $470.7 | $420.6 | | Lines of credit & Floor plan payable | $300.9 | $253.2 | | Total Liabilities | $897.6 | $847.9 | | Total Stockholders' Equity | $133.0 | $134.7 | Consolidated Statements of Operations Q1 2022 net revenues rose 23.4% to $331.7 million, with gross profit up 35.8%, and net loss significantly narrowed to $1.2 million Q1 2022 vs Q1 2021 Statement of Operations (in millions, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net Revenues | $331.7 | $268.8 | | Gross Profit | $91.4 | $67.3 | | Income from Operations | $4.6 | $0.5 | | Net Loss | $(1.2) | $(5.7) | | Net Loss Available to Common Shareholders | $(2.0) | $(5.7) | | Basic & Diluted Loss Per Share | $(0.06) | $(0.19) | Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $133.0 million by March 31, 2022, primarily due to net loss and preferred stock dividends - The change in stockholders' equity for Q1 2022 was primarily influenced by the net loss and preferred stock dividends[14] Consolidated Statements of Cash Flows Q1 2022 saw $6.7 million net cash used in operations, $18.6 million in investing, and $24.6 million provided by financing activities Q1 2022 vs Q1 2021 Cash Flow Summary (in millions) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(6.7) | $0.6 | | Net cash used in investing activities | $(18.6) | $(9.8) | | Net cash provided by financing activities | $24.6 | $8.6 | | Net Change in Cash | $(0.7) | $(0.6) | Notes to Unaudited Consolidated Financial Statements Notes detail accounting policies, revenue streams, debt structure, segment performance, and recent business combinations Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights 23.4% revenue growth driven by acquisitions and strong business, improved gross margin, and sufficient liquidity - The company is currently experiencing 'recovery-related' supply-chain constraints from OEMs, leading to extended lead times for new equipment, but management believes its diversified cash flows and ability to source used equipment will help mitigate the impact[150] - On April 1, 2021, the company completed a private offering of $315 million of 5.625% Senior Secured Second Lien Notes due 2026 to refinance existing debt, reduce borrowing costs, and enhance liquidity[154] Consolidated Revenue and Gross Profit YoY Change (in millions) | Metric | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $331.7 | $268.8 | $62.9 | 23.4% | | Gross Profit | $91.4 | $67.3 | $24.1 | 35.8% | | Gross Margin | 27.6% | 25.0% | - | 2.6 p.p. | - The company operates through two reportable segments: Material Handling and Construction Equipment, with recent acquisitions like PeakLogix and ScottTech expanding capabilities into automated equipment installation and system integration[164][162] Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate exposure on variable-rate debt, with a 1% rate increase impacting pre-tax earnings by $1.9 million - The company's primary market risk is interest rate changes on its variable-rate debt, which includes the ABL Facility and Floor Plan Facilities[217] - As of March 31, 2022, a 1% increase in interest rates would result in an approximate $1.9 million decrease in annual pre-tax earnings, based on the outstanding variable rate debt at that time[218] Controls and Procedures Disclosure controls were ineffective as of March 31, 2022, due to material weaknesses in internal controls, with remediation underway - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to ongoing material weaknesses in internal control over financial reporting[222] - The material weaknesses relate to: (1) user access and segregation of duties, (2) parts inventory controls, and (3) the order-to-cash process[224][226][227] - A remediation plan is in progress, including implementing new ERP modules, enhancing policies and procedures, and providing additional training, with expected completion before the end of fiscal 2022[224][227] PART II – OTHER INFORMATION Legal Proceedings The company reports that it is not a party to any material legal proceedings, other than routine litigation incidental to its business - There are no material legal proceedings to which the company is a party or to which any of its property is subject, aside from routine legal matters[231] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - No material changes have occurred regarding the risk factors disclosed in the company's 2021 Form 10-K[232]