Ryan Greenawalt: Thank you, Jason, and good afternoon, everyone. We appreciate you joining us to review Alta Equipment Group Inc.'s fourth quarter and full year 2025 results. I will begin with an overview of our performance, highlight trends across our business segments, and outline how we are positioning Alta for long-term value creation as we look toward 2026 and beyond. We finished the year on a solid note. After operating through nearly two years of elevated inventories, tariff-driven cost pressures, an ...

Core Insights - Alta Equipment reported revenue of $509.1 million for the quarter ended December 2025, marking a year-over-year increase of 2.2% and a surprise of +5.5% over the Zacks Consensus Estimate of $482.57 million [1] - The company reported an EPS of -$0.39, which is a decline from -$0.34 a year ago, and represents a -34.48% surprise compared to the consensus EPS estimate of -$0.29 [1] Revenue Breakdown - New and used equipment sales generated $300.9 million, exceeding the average estimate of $271.54 million from two analysts [4] - Parts sales amounted to $68.1 million, significantly higher than the average estimate of $26.64 million based on two analysts [4] - Rental equipment sales were reported at $38 million, below the average estimate of $47.68 million from two analysts [4] - Rental revenues totaled $42.8 million, falling short of the average estimate of $62.93 million based on two analysts [4] - Service revenues reached $59.3 million, which is lower than the average estimate of $72.97 million from two analysts [4] Stock Performance - Shares of Alta Equipment have returned -0.8% over the past month, contrasting with the Zacks S&P 500 composite's +0.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Viewpoint - Hiab has signed a strategic dealer agreement with Custom Truck One Source, significantly enhancing its distribution and service network for loader cranes and truck-mounted forklifts in North America [1] Group 1: Company Overview - Hiab is a leading provider of smart and sustainable on-road load handling solutions [1] - Custom Truck One Source is a premier equipment solutions provider operating in over 40 locations across North America [1] Group 2: Strategic Agreement - The agreement aims to expand the distribution and service network for Hiab's loader cranes and MOFFETT truck-mounted forklifts [1]

Core Viewpoint - Hiab has signed a strategic dealer agreement with Custom Truck One Source, significantly enhancing its distribution and service network for loader cranes and truck-mounted forklifts [1] Group 1: Company Overview - Hiab is a leading provider of smart and sustainable on-road load handling solutions [1] - Custom Truck One Source is a premier equipment solutions provider in North America, operating in more than 40 locations across the region [1] Group 2: Strategic Agreement - The agreement aims to expand the distribution and service network for Hiab's loader cranes and MOFFETT truck-mounted forklifts [1]

Core Insights - Alta Equipment reported a revenue of $422.6 million for the quarter ended September 2025, reflecting a decline of 5.8% year-over-year [1] - The company's EPS was -$1.31, worsening from -$0.86 in the same quarter last year [1] - Revenue fell short of the Zacks Consensus Estimate of $458.63 million, resulting in a surprise of -7.86% [1] - The EPS surprise was -385.19%, with the consensus estimate being -$0.27 [1] Revenue Breakdown - New and used equipment sales generated $211.1 million, below the average estimate of $241.98 million from two analysts [4] - Parts sales reached $75.3 million, significantly exceeding the estimated $31.49 million [4] - Service revenue was $66.4 million, compared to the average estimate of $75.66 million [4] - Rental revenue amounted to $48.4 million, falling short of the estimated $65.97 million [4] - Rental equipment sales were $21.4 million, compared to the average estimate of $51.36 million [4] Stock Performance - Over the past month, shares of Alta Equipment have returned -9.9%, contrasting with the Zacks S&P 500 composite's +1.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - The company recorded revenue of $422.6 million for Q3 2025, representing a 5.8% organic reduction compared to the previous year [16] - Adjusted EBITDA for the quarter was $41.7 million, slightly down year-over-year on a pro forma basis, primarily due to reduced episodic equipment sales in the construction equipment segment [24] - Free cash flow before rent-to-sale decisioning was approximately $25 million for the quarter, totaling around $80 million year-to-date [24] Business Line Data and Key Metrics Changes - In the material handling segment, new and used equipment sales were down $1.6 million year-over-year but showed a sequential increase [18] - The construction equipment segment experienced a drop in equipment sales by $18.7 million compared to Q3 2024, but October sales indicated a potential recovery [20] - Product support revenues in the material handling segment were flat year-over-year, but up nearly 4% sequentially from Q2 [19] Market Data and Key Metrics Changes - The backlog in material handling remains over $100 million, providing visibility for the next several quarters [6][18] - Industry data suggests that the general-purpose construction markets have bottomed out, positioning the company for growth as replenishment gains momentum in 2026 [9] - The Midwest and Canadian markets for material handling remain soft, primarily due to automotive and general manufacturing weakness [10] Company Strategy and Development Direction - The company is focusing on optimizing its business model by divesting non-core operations, such as the dock and door division, to concentrate resources on core dealership operations [10][11] - The strategy includes enhancing product support capabilities to drive recurring revenue and lifetime customer relationships [11] - The company aims to capitalize on the ongoing reindustrialization of key U.S. regions, particularly in the power and utility sector [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in demand, particularly in construction equipment, as deferred demand from Q3 is expected to flow into Q4 [12] - The enactment of the Big Beautiful Bill is viewed as a net positive, enhancing liquidity and reducing future cash taxes [25] - Management believes the industry is turning a corner, with Alta well-positioned to capture the upswing in demand [12] Other Important Information - The company completed the divestiture of its dock and door division, which is expected to have minimal impact on the EBITDA guidance for 2025 [52] - The company ended the quarter with approximately $265 million in cash and availability on its revolving line of credit, providing ample capacity to navigate the current business climate [25] Q&A Session Summary Question: Discussion on construction equipment and anticipated upswing - Management indicated that October's performance could signal a positive trend for sales and margins in construction equipment [38] Question: Factors affecting gross margins - Management noted that while gross margins are currently flat year-over-year, there are signs of stabilization in used equipment prices, which could lead to an upswing in margins [40] Question: Movement in manufacturing and material handling - Management clarified that the lift in material handling is more related to fleet replenishment rather than a significant increase in market demand [41] Question: Context of backlog in material handling - The backlog has decreased from $125 million at the start of the year to the low $100s, primarily due to improved lead times rather than a significant drop in demand [46] Question: Strong aftermarket gross margins - Management attributed strong aftermarket gross margins to mid-year price increases and improved operational efficiencies [50] Question: Rationale behind the divestiture of the dock and door unit - The divestiture was strategic, as the dock and door business did not align well with the core operations, and it was determined that it would be better managed by a dedicated entity [52]

Q3 2025 Financial Results - Total revenue decreased by $26.2 million, a 5.8% decrease, from $448.8 million to $422.6 million compared to Q3 2024[33] - Product support revenue increased by $1.5 million, a 1.1% increase, reaching $141.7 million in Q3 2025 compared to $140.2 million in Q3 2024[13, 33] - Rental revenue declined by $5.3 million, a 9.9% decrease, due to approximately $40.2 million fewer rental fleet assets on average between Q3 2025 and Q3 2024[33] - Selling, General, and Administration (SG&A) expenses decreased by $4.7 million, a 4.2% decrease, compared to Q3 2024[14, 33] - Adjusted EBITDA was $41.7 million, with an Adjusted EBITDA margin of 9.9%, a 0.3% increase from Q3 2024[14, 33] Segment Performance - Construction segment revenue decreased by $20.7 million from $262.3 million to $241.6 million, a 7.9% decrease[13, 41] - Material Handling segment revenue decreased by $1.0 million from $168.9 million to $167.9 million, a 0.6% decrease[13, 36] - Master Distribution segment revenue decreased by $3.2 million from $18.2 million to $15.0 million, a 17.6% decrease[45] Capital Structure and Strategy - The company has an uncapped liquidity of $265 million as of September 30, 2025[61] - The company amended its ABL facility to increase borrowing capacity and extend the maturity from 12/31/2025 to March of 2029 and raised $500 million in Senior Secured Second Lien Notes effectively maturing in June 2029[63] FY2025 Guidance - The company projects Adjusted EBITDA to be between $168.0 million and $172.0 million[73] - The company projects Free Cash Flow before RTS Decisioning to be between $105.0 million and $110.0 million[73]

Core Insights - The company reported a 5.8% year-over-year decrease in total revenues for Q3 2025, amounting to $422.6 million, primarily due to a decline in the Construction Equipment segment [4][9] - Despite the overall revenue decline, product support revenues increased by 1.1% to $141.7 million, indicating resilience in this area [4][5] - The CEO expressed optimism about future performance, citing a strong sales month in October and potential benefits from recent legislative changes and interest rate cuts [3][5] Financial Performance - Total revenues decreased by $26.2 million compared to the previous year, with the Construction Equipment segment contributing a $20.7 million reduction [4][9] - Material Handling revenues remained relatively stable at $167.9 million, showing a slight decrease of $1.0 million year-over-year [4][9] - The company experienced a net loss of $42.3 million for the quarter, with a basic and diluted net loss per share of $(1.31) [4][9] Strategic Focus - The company is focusing on long-term federal and state infrastructure projects, with DOT spending budgets projected to rise by 6.0% in fiscal 2026 [3][5] - A divestiture of the Dock and Door division was completed for $6.4 million, aligning with the company's strategy to optimize its portfolio [8][5] - The management is optimistic about entering a fleet replenishment cycle, which is expected to extend into the next year [5][3] Market Conditions - The company noted subdued capital investment in material handling and heavy equipment across select markets, leading to depressed industry volumes [3][5] - Demand remains strong among energy, utility, and food and beverage customers, despite softness in the automotive and general manufacturing sectors [3][5] - The enactment of the One Big Beautiful Bill Act (OBBBA) is anticipated to positively impact the company's financial position and customer base [8][5]

Financial Performance - Q3 2025 revenue reached $482 million, an 8% increase compared to Q3 2024[17] - Adjusted Gross Profit for Q3 2025 was $156 million, a 13% increase compared to Q3 2024[17] - Adjusted EBITDA for Q3 2025 was $96 million, a 20% increase compared to Q3 2024[17] Segment Performance - Equipment Rental Solutions (ERS) revenue increased by 12%, or $18 million, in Q3 2025 compared to Q3 2024[48] Rental revenue increased by 18%, or $19 million[48] - Truck & Equipment Sales (TES) revenue increased by 6%, or $16 million, in Q3 2025 compared to Q3 2024[57] - Aftermarket Parts & Service (APS) revenue increased by 3% in Q3 2025 compared to Q3 2024[59] Fleet and Utilization - The company's specialty rental fleet consists of more than 10,350 vehicles with an original equipment cost (OEC) of $1.62 billion[18] - Average utilization for ERS in Q3 2025 was over 79%, the highest quarterly average in over two years[53] - Average OEC on Rent increased by $180 million and average utilization increased by 610 basis points in Q3 2025 compared to Q3 2024[53] Market Dynamics - The company operates in favorable end markets with positive secular tailwinds, including T&D, Rail, Telecom, and Infrastructure[14] - U S IOU T&D Capex annual total spend in 2024 was ~$91 billion with 8.7% '20-'24 CAGR[21] - U S Telecom / Broadband Capex LTM Spend @ 06/30/25 was $13B+ with 7.9% '21-LTM CAGR[21] Financial Position - Total available liquidity is over $480 million[63] - The company reaffirms its 2025 outlook, projecting consolidated revenue between $1.97 billion and $2.06 billion, representing a 9% to 14% growth[64] Adjusted EBITDA is projected between $370 million and $390 million, representing a 9% to 15% growth[64]

Economic Overview - Inflation is showing signs of cooling, with U.S. consumer prices increasing less than expected in May, primarily due to cheaper gasoline offsetting higher rents. This marks the fourth consecutive month of lower-than-expected core inflation rises. Consumer confidence rebounded in May, indicating increased faith in the economy's prospects [1][8]. Stock Recommendations - Broker-favorite stocks include BrightSpring Health Services (BTSG), Allegiant Travel (ALGT), CVR Energy (CVI), Alta Equipment Group (ALTG), and Cracker Barrel Old Country Store (CBRL) amid improving economic conditions [2][8]. - A screening strategy was designed to shortlist stocks based on improving broker recommendations and upward revisions in earnings estimates over the past four weeks, incorporating price/sales ratio as a valuation metric [3][4]. Company Insights - **BrightSpring Health Services (BTSG)**: Provides integrated health solutions for complex populations, with a projected earnings growth rate of 96.4% for 2025 and a sales increase of 9.1% from 2024 [6][7]. - **Allegiant Travel (ALGT)**: Benefiting from strong air travel demand, with a fleet upgrade plan aiming for 122 aircraft by the end of 2025. The company has surpassed earnings estimates in three of the last four quarters, with an average beat of 32.7% [7][9]. - **CVR Energy (CVI)**: Engaged in renewable energy and petroleum refining, with a focus on developing renewable biofuels. The company has beaten earnings estimates in three of the last four quarters [9][10]. - **Alta Equipment Group (ALTG)**: A leading provider of material handling and construction equipment, with an expected earnings growth rate of 27.6% for the current year and a 10% upward revision in earnings estimates for the June quarter [10][11]. - **Cracker Barrel Old Country Store (CBRL)**: Focused on menu innovation and pricing strategies to drive growth, with an average earnings beat of 68.5% over the last four quarters and a 7.4% share price increase over the past six months [11][12].