Alta Equipment Group Inc. (ALTG) Q2 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Alta Equipment Group Second Quarter 2020 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Sinem McDonald, Director of External Reporting for Alta Equipment Group. Please go ahead.

Thank you, Christine. Good afternoon, everyone. Welcome to Alta's Second Quarter 2020 Earnings Conference Call. With us today on the call 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 the quarter, and then we will conduct a Q&A session. We will begin with some prepared remarks before we open the call for your questions. Before we get started, I would like to take this opportunity to remind you that today's call contains forward-looking statements, including statements about future financial results, our business strategy and financial outlook and other nonhistorical statements as described in our press release. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those related to Alta's growth, market opportunities and general economic and business conditions. These statements also include our expectations regarding risks related to the continued impact of the COVID-19 pandemic on our business, operations and financial results. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today. 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, which is available at investors.altaequipment.com. And with that, I'll now turn the call over to Ryan.

Thank you, Sinem, and welcome to Alta's Second Quarter 2020 Earnings Conference Call. I'll discuss the progress we've made in operating our business during the second quarter, including a quick review of our recent acquisitions. Tony Colucci, our CFO, will then walk you through our financial results and provide an update on our liquidity and capital structure. We had a strong second quarter performance and very solid financial results for both the second quarter and first half of the year despite challenges due to COVID-19. I'm excited to say that our organic revenue and margins held up well, and our key financial metrics that came in close to the best case scenario we laid out on our first quarter call. This accomplishment reflects the dexterity of our business model and cost structure and our experience in navigating our business during an economic downturn. We made steady progress throughout the quarter and experienced higher equipment utilization and increased demand for our products and services from the April trough through June. These positive trends continued through July, and we are currently operating at nearly full capacity compared with pre-COVID levels, suggesting that we are reapproaching the strong start we had in the beginning of 2020. During the quarter, we also moved forward and closed 2 accretive acquisitions and announced a third that are consistent with our growth strategy to further expand our capabilities, penetrate existing markets and broaden our relationships with quality equipment manufacturers. The last 4 months certainly created operating challenges from both an internal and supply chain perspective. And I'm proud of how our team and our dealership model have responded. Back in March, we quickly implemented strict operating policies to protect the Alta workforce and communities we serve against the challenges brought on by the pandemic. As revenue and operating metrics continue to improve, we have started to recall furloughed skilled labor team members to meet our growing customer demand as we get deeper into the recovery phase. Labor utilization improved throughout the quarter and is approaching benchmark levels. As an essential business, we continue to operate all 48 branches of our dealer network that serves a growing list of material handling and construction customers across several Great Lakes and Northeast states as well as Florida and the Southeast. As you know, some of these regions were hot spots and among the hardest hit over the past few months. Thankfully, our team members have experienced very low levels of infections or major outbreaks during this time. Throughout this difficult period, the Alta team rose to the occasion and delivered high-quality service and overall support to meet our customers' needs. Our people remain our greatest asset and reflect the remarkable culture that exists at Alta today, particularly during such a difficult time. Organic revenue in the second quarter declined only 3% sequentially, and our adjusted EBITDA margin essentially held at 10.4% despite the pandemic's impact. For the quarter, we delivered $20.1 million of adjusted pro forma EBITDA and $191 million in total revenue, a 41% increase over -- year-over-year, including acquisitions. Our business model and growth strategy focused on populating the geographies we serve over time with new and used equipment, which we both rent and sell so we can harvest our installed base to grow higher margin and reoccurring revenue from our parts and sales and service business. And looking at the construction and material handling business across geographies, as this quarter progressed, we saw an easing of shelter-in-place restrictions in the hard-hit Great Lakes and Northeast regions. A bright spot was in our rental business, where both customer demand and rates held up well and better than anticipated. We believe this reflects the rent-to-rent and rent-to-sales variability of our dealer-centric model, particularly compared with national rental houses that you may be familiar with. Our business in the Northeast and Illinois is weighted more towards the industrial side and serves a wide variety of end markets. Illinois continues to present a great opportunity to grow share and expand field population to drive our parts, sales and service business. Our business in these 2 regions held up well as they serve more dense markets, which include warehousing and logistics, which experienced a surge in demand during the pandemic. Overall, we continue to see signs of stability and higher demand in many of the key manufacturing markets we serve, including the health care-related and food and beverage sectors that provide life-sustaining services. Construction products in Florida have remained open, and our business remains robust in this outdoor market. The state and local markets have used the overall economic downturn to accelerate road and other infrastructure projects, taking advantage of reduced traffic. We continue to enjoy excellent relationships with our key OEM partners and welcome the new relationships we've been able to forge through the further expansion of our business. As the recovery continues to progress, we look forward to continuing to deliver more equipment to serve our customers' needs. Our geographic expansion and diversity of our revenue sources has clearly served us well during the economic downturn. In the quarter, we closed 2 acquisitions, PeakLogix and Hilo Equipment & Services and announced a third, Martin Implement Sales, which we expect to close shortly. These are well-established quality providers that are perfectly aligned with our strategy to execute accretive acquisitions and collectively increase penetration in existing markets, expand our geographic footprint and broaden our OEM relationships. Since becoming a public company in mid-February, we have successfully added approximately $9 million in EBITDA on a 12-month trailing basis, which is consistent with our targets prior to our IPO. Looking forward, they will help us -- help expand our field population, allowing us to increase the significant growth opportunity in parts, sales and service businesses. Each of these companies bring very unique -- special and unique capabilities to Alta. PeakLogix is a national material handling systems integrator focused on the fast-growing warehousing end market. The company serves a Fortune 500 clientele and will position Alta with more products and greater logistics expertise, enabling us to add greater value for our material handling customers. We look at PeakLogix as a strategic opportunity that can accelerate the growth of our entire industrial segment by introducing new services to our existing customer base. We also took an important step in further strengthening our presence in the large Northeast market with the acquisition of Hilo Equipment & Services. Hilo operates 3 additional branches in the New York City metro area in sales and services new and used material handling power equipment. Hilo extends our strategy to consolidate the Hyster-Yale network in the Northeast, a dense industrial truck market. More recently, we announced the acquisition of Martin Implement Sales, a Chicago land-based equipment dealer that sells, rents and services an expansive range of equipment to construction and municipal end markets. The addition of Martin expands our branch footprint and accelerates the large growth opportunity we see in the Illinois construction market. In addition to bringing new relationships with quality manufacturers, we expect the transaction to close this current quarter. We entered the second half of the year with increased visibility and greater confidence that we've turned the corner. Our strong business model, combined with the actions we implemented, enabled us to cut expenses, preserve capital and generate cash flow. As a result, our capital structure and credit profile remains in excellent shape, and we have ample liquidity to drive organic growth and pursue strategic acquisitions. We are a stronger company today and are well positioned to deliver robust financial results as economies reopen and the market for our services improves. Before turning the call over to Tony, I'd like to express my sincere appreciation and thanks for the dedicated Alta team for their hard work and dedication, our OEM partners for their support and our shareholders for their confidence in our mission. With that, I'll now turn the call over to Tony.

Thanks, Ryan. Good afternoon, everyone. Thank you for your attention today and for your continued interest in Alta Equipment Group as we continue on our growth path and embark on our third quarter as a public company. Before I start, I want to first thank all of my colleagues and their families as their commitment, sacrifice and tenacity propelled the business in Q2 through an unprecedented environment. More than anything, I'm humbled by the support you gave one another, truly embodying our one team principle. Secondly, I would also like to thank all of Alta's customers, especially those that were significantly impacted by COVID. We thank you for your continued business, and look forward to supporting our partnership with you as we continue to navigate these uncertain business conditions together. Lastly, I want to welcome our new team members at PeakLogix in Virginia, Hilo Equipment in New York City, and soon to be new team members at Martin Implement in Chicago to the Alta family. I look forward to earning your trust and embracing you into Alta's culture. My remarks today will focus on 3 areas: one, present the impact COVID had on Alta's revenue and earnings performance in Q2 and compare them to the shocks we were experiencing when we last reported earnings. I'll be focused on top line impacts by department, and our cost mitigation efforts helped to offset those top line pullbacks. Focus area 2: review Q2's financial performance more holistically, having certain notable organic year-over-year metrics, capital expenditures and liquidity flows for the quarter and our leverage and liquidity position at the end of Q2. I'll conclude that commentary with a quick touch on pro forma trailing 12-month financial metrics. Lastly, I want to spend a few minutes discussing the PeakLogix and Hilo transactions from a valuation and strategic perspective. So let's jump in. For the first portion of my prepared remarks, I'd like to present the impact COVID had on Alta in Q2 from a revenue and cost perspective. It should be noted there are some slides in our presentation, which was released prior to our call today, that presents the impact of COVID in greater detail than what I will get into verbally here today. I'd encourage everyone on today's call to review our presentation and the COVID slides specifically, which are on our Investor Relations website. For those familiar with my remarks on our Q1 call in May, I mentioned an acronym, MMR or measure, mitigate and recovery, which reflected our management approach to framing COVID's impact from a financial perspective. First, the measured portion of that acronym. Recall that we have been focused on a daily basis on demand for labor hours of our skilled technicians. This is a metric that provides real-time data and business levels in our various geographies and business segments. In the middle of March, starting with the automotive shutdown in Southeast Michigan, we incurred what effectively was an abrupt 30% reduction in demand for labor hours across our service operation. As we mentioned on the Q1 call, we believe at the time that we have seen the floor on this metric in mid-April. Thankfully, that belief held true through the end of Q2 as large forces of the economy began to reopen in mid-May. Currently, labor hours have returned to approximately 95% to 100% of pre-COVID levels. This reversion to the mean bodes well for the most profitable segments of our business and allows us to reunite with our furloughed skilled labor force. Important to note, we held labor efficiency and therefore, gross margin percentage in our service departments constant throughout Q2, which is a testament to our manager's ability to match supply of labor with demand on a real-time basis. Now for the second M in the acronym, mitigation. As I mentioned on our Q1 call, our seasoned management team reacted quickly to COVID from a cost mitigation perspective. And we highlighted the dealership model's ability to flex in a downside scenario. We believe our Q2 performance demonstrates that flexibility. Specifically, and as an example of the flex in our capital structure -- cost structure in a downmarket, organic revenue in our parts and service departments was down $8.5 million in Q2 2020 versus Q1 2020 and down $5.2 million in gross profit Q2 versus Q1. That $5.2 million loss in gross profit in Q2 was met with an offsetting $6 million reduction in G&A costs for the quarter as cost mitigation efforts in the form of employee furloughs, fringe benefit cuts, executive comp reductions and natural reductions in variable costs in the dealership model took hold. In fact, despite our industrial segment being the hardest hit by the COVID pandemic, we managed a profitable quarter, achieving $3.6 million of net income within that segment. While our dealership model showed its ability to mitigate the organic revenue declines COVID brought us in Q2, mitigation in our rental business, consistent with the rental industry in general, was more challenging. Our utilization metrics declined to a trough in mid-April and slowly recovered as economies and construction contractors reopened for business in the middle of May. While the sequential decline in rental utilization in the second quarter was the ultimate driver of us losing ground on our trailing 12 adjusted pro forma EBITDA figure, which reduced to $92 million, it is important to point out that our rental business represents only half of our EBITDA and highlights the diversity of our cash flow streams versus the publicly traded rental competition. We are also cognizant that the uncertainty in the macroeconomic climate is likely to push customers away from committing long term to their fleets and purchasing equipment outright and towards a more flexible rental option. We will be prepared for either. Now for the last part of the acronym, recovery. As revenues and operating metrics began to recover, we slowly waned ourselves off of cost mitigation measures with the executive comp reductions and nonessential travel and marketing measures remaining in place. We believe we fully entered the recovery phase in the beginning of June as confidence amongst our major customers and suppliers begin to stabilize. While we are seeing clear signs of recovery from COVID's initial punch, uncertainty is still in the air. And we are prepared to reinstate some of these cost measures that helped us navigate the storm in Q2 if the recovery stalls. So what does all this mean in terms of impact on Q2 performance? Let's dig into the results as we move to the second area of my comments for this afternoon. In our Q1 investor deck and on our previous earnings call, I presented both an unmitigated and fully mitigated scenario or best and worst case, if you will, based on an illustrative run rate month. In the worst-case scenario where revenue impacts were most acute and absent any cost mitigation efforts, EBITDA margins were 4.1%. In the best case scenario, where revenue impacts were most acute and costs on the loss revenue were assumed to be 100% variable, EBITDA margins were 11.2% and $19.9 million of adjusted EBITDA for the quarter and $192 million of revenue or 10.4% EBITDA margins, I'm happy to report we finished Q2 much closer to the best case than the worst. We were able to accomplish this on the backs of the aforementioned revenue recoveries in May and June versus April's trough and our cost mitigation efforts throughout the quarter. Speaking organically for a moment, as on an inorganic basis, many of our year-over-year metrics are still up considerably, given all of the M&A activity. Revenue-wise, organic Q2 2020 revenue was off just 3% from Q2 2019, a relative win given the COVID business environment. And I want to drill into that 3% number for just a moment, and this shows the dexterity of the dealer model. Even in the draconian situation our parts and service organization was presented with from COVID, parts and sales -- parts and service sales were down less than 10% quarter-over-quarter on an organic basis. However, if you break this down further, our construction segment parts and service sales actually experienced a net increase by nearly 9% organically in Q2 2020 versus Q2 2019, showing the power of a larger field population and increased technician headcount versus last year. Also in equipment sales, we actually saw a 13% year-over-year organic growth in new and used equipment in our construction segment in Q2. To round out the revenue streams, rental, not surprisingly and in line with our expectation in May, was down 14% year-over-year on an organic basis. All in all, we reported total revenue of $192 million for Q2, which included a full quarter for both Flagler and Liftech. Turning to gross margin percentage, and I'll focus on sequential quarter-over-quarter performance versus Q1 2020. We saw a slight increase in gross margin percentage in Q2 on equipment sales versus Q1. Our gross profit margin in parts was down slightly, coming in at 31% for the quarter. And the gross margin in service was 61.3% compared to 62.3% in Q1 2020, another relative win given the tough landscape and the volatility within the quarter inside the service department. Let's move on to the balance sheet and our capital profile at the end of Q2. Two key factors to focus on here, leverage and liquidity. First, leverage. We are up a few tenths to 3.3x on total leverage versus Q1 2020. There were 2 primary drivers for this increase in leverage in Q2: One, COVID's negative impact on our pro forma trailing 12-month EBITDA was approximately $1.3 million; and two, the aforementioned increase in our rental fleet. I want to specifically make mention of the rental fleet investment for a moment. First, it's important to remember that rental fleet CapEx precedes utilization and EBITDA, which timing-wise is a net negative on the company's leverage profile. Said differently, we need to invest in order to capture the rental market. We believe this was a good investment, especially since the majority of the investment was related to our new Florida market. Second, recall our rent-to-sell model, where we are selling lightly used 2- to 3-year-old heavy equipment out of our fleet to drive field population, which, in turn, drive parts and service revenue over the long term. I mentioned this because a large portion of this investment into the rental fleet was into our rent-to-sell product categories, which we know will ultimately yield parts and service revenues in the future. Finally and importantly, we are seeing roughly 60% physical utilization on our heavy equipment fleet, meaning this investment is already driving incremental EBITDA for the enterprise. However, until that EBITDA fully impacts the trailing 12 metric, leverage will be temporarily inflated, all things equal. Lastly here, a quick note on enterprise value. Using the June 30 leverage and the pre-earnings market cap, enterprise value 5.9x our pro forma EBITDA of approximately $92 million. Focusing on liquidity. Recall that we left Q1 post-IPO with roughly $150 million in cash and revolver liquidity. During Q2, we were able to service the cash cost of our debt without any subsidies or deferrals from major lenders, acquire PeakLogix using existing revolver liquidity and fund growth CapEx in our rental fleet, specifically in Florida as we invest in what we believe to be an exciting growth market for the company. Importantly, we were able to accomplish all 3 of these items while holding liquidity at approximately $150 million in Q2. Effectively, we were able to use organic cash flows to fund these 3 important items without impacting the company's liquidity position. All told, we believe the company's ability to hold liquidity, given the top line impacts of COVID while making strategic investments for the future is a testament to our business model and how we thoughtfully positioned our capital structure. A quick item of note. As we move through Q3, we fully expect our liquidity position to be modestly impacted by the Hilo and Martin transactions and it's updated appraisal results will reset our borrowing base in Q3. So having discuss the details of Q2 at this point, I'd like to turn your attention to some of our enterprise-wide pro forma trailing 12-month numbers, which are inclusive of the acquisitions of NITCO, Flagler, Liftech and now PeakLogix and Hilo Equipment. As a reminder, our acquisition of Hilo in New York City is technically a Q3 deal as it closed on July 1. Thus Hilo's numbers are not presented in our SEC filings or our Q2 investor deck. Nonetheless, including Hilo, Alta now has pro forma trailing 12 revenue of approximately $905 million and approximately $95 million in adjusted pro forma annual EBITDA. When we include the recently announced Martin acquisition, which we expect to close in Q3, we believe the business will approach $950 million in revenue and $100 million of pro forma EBITDA over the short term, assuming a stable macro business climate. Finally, for the last piece of my prepared remarks, I'd like to discuss briefly the PeakLogix, Hilo and Martin acquisitions from both a financial and strategic perspectives. First, on a combined weighted average basis, excluding synergies, we paid roughly 4.5x EBITDA, consistent with the valuation range we have historically purchased that and with what Ryan and I mentioned on our IPO roadshow. While we have yet to disclose the financial details surrounding the Martin deal, investors can expect another accretive transaction. Second, and assuming Martin closes, we would have purchased roughly $9 million in trailing 12 EBITDA in the first 8 months as a public filer, again consistent with our messaging and expectations pre-IPO. Lastly, each of these deals present an opportunity for synergies, albeit each in their own individual way. Hilo, a great example of Alta continued to expand into a dense population center within the Hyster-Yale network; PeakLogix, an investment into the e-commerce and logistics macro tailwind as well as adding a new product and service category that's leverageable across our entire enterprise; Martin implement represents the opportunity to work with new OEMs and add new product categories in Illinois, while simultaneously adding important branch infrastructure. In total, we believe all 3 of these deals to be right down the fairway for Alta M&A-wise as we expand both vertically and horizontally with our customers and suppliers. And importantly, these investments give our management team the opportunity to drive synergies throughout the organization. In closing, coming out of the challenges that Q2 presented, we are more than -- more comfortable than ever in our business model and our strategy. And we believe our Q2 results justify our confidence. We look forward to continuing to execute on our growth path in the coming quarters. Thank you, everyone, for your attention. I hope you are all well and healthy. And at this point, I will open the call back up to the operator for Q&A.

[Operator Instructions] Your first question comes from the line of Alex Rygiel from B. Riley.

A couple of questions here. First, I love the slide on your labor productivity hours. And happy to see that you're in that 95% to 100% range. Does it feel like you're going to be kind of right back to that full 100% by the end of the third quarter? And how should we think about that as it proceeds into the fourth quarter of the year? Could we possibly be achieving levels above, kind of the run rate that you had been at pre-COVID?

Alex, this is Ryan. I'll take that one. So as we sit here today, we are basically at 100%. We've got our furloughed done, mechanics back on board. We have them back to full productivity, and we are right now continuing to look for new technicians. So one of the things we shared at the Q1 update was that we had hit the ground running in our Florida market. It added about 20% to the headcount of technicians there. And I'm happy to report that, that trajectory continues. We're up nearly 40% since we took over Flagler in February. So as we approach the rest of the year, we expect that we'll have organic growth and start actually hiring mechanics on.

And you're not seeing any supply issues with regards to finding those available techs are you?

Right now, the tightness in the labor market has opened up a little bit. We're actually seeing great success in onboarding new talent.

And can you talk a little bit about the M&A pipeline? In the past, you've had a number of opportunities. It sounds like subsequent to the IPO, those opportunities expanded some, then we had COVID, which may have accelerated some sellers' interest. Where do we stand today on the M&A pipeline and the prospects for additional acquisitions this year?

The pipeline remains robust. One thing that we -- as we entered COVID, we thought that it may change the landscape a little bit in terms of our -- what was actionable. We continue to pursue on both fronts, both regional expansion with our major OEM partners and then infill opportunities. And we expect that we would have an opportunity further M&A even before this -- the end of this year.

Your cost control in the quarter was fantastic. I suspect you're probably bringing back in, though, some of those costs. Can you talk about some of the ones that might be coming back into the system as productivity and labor gets back to that 100% level?

Yes, Alex, this is Tony. The -- thank you for bringing that up. The cost structure really kind of unveiled itself here in COVID and in particular, kind of the dealership model itself. I mentioned, in particular, our industrial segment, which quarter-over-quarter didn't lose a lot of steam and still printed a $3.6 million net income number. As we come out of it, those variable costs come back. It's, obviously, the definition of a variable cost. So as one kind of example, fuel cost, for instance, with our service vans being sidelined for a little bit, we are able to have natural reductions in those costs. As we put technicians back on the road, fuel costs obviously go up. The same thing happened with employee benefits. As we saw a really -- I think a lot of businesses saw this, people not using their benefits as much through the pandemic. So we had some costs there that were saved that will eventually come back. So for the most part, as revenue scales, there will be variable costs that match it, but that's okay. There are a few things as you go through when you start -- when you go through something like this, you start to rationalize different areas and see certain things that hopefully benefit you in the long run. And we do have some of those items that have come up here. I wouldn't be able to point anything super material. I think we are running pretty tightly prior to, but there have been a few things that have come up that will kind of be long-term benefits of this cost-wise.

And lastly, as it relates to new equipment, have you witnessed or experienced any supply logistical challenges? In other words, do you have access to the new equipment as you need it? And then some of your OEMs have been working down the path of new product introductions that sounded like they could create some interest in organic growth opportunities for you all. How have those OEMs altered their plans for release of this new piece of equipment?

I'll take the first -- Alex, this is Ryan. I'll take the first question first. So in terms of supply constraints, we were preparing for that, and we -- it hasn't really materialized. I think the most that we expect is maybe some stretched out delivery times, which could impact some of our Q4 invoicing. But as we've remarked in the past, we don't get too fixated on short-term variability of our equipment deliveries. It's more as long as there's no secular trend taking field population out of our markets, those are things that snap back pretty quickly. So nothing that we're concerned about at this point. In terms of the product portfolio, we are -- we're really excited about what's coming down the pipe with Hyster-Yale. And it plays right into our strategy to deepen our expertise in the warehousing market. So the timing of our entry into more of the sophisticated end of the warehousing market with our PeakLogix acquisition is going to marry up very well with some new product coming to market with Hyster-Yale.

And actually one last question. Has there been any shift in the offshore market or the resale value of equipment that you're selling through your used equipment business?

Alex, this is Tony. I'll take that one. We were paying very close attention with some of the third-party appraisal people that we work with on our equipment and appraisals of our equipment. And what we saw kind of in the trough was something like high single digits, low teens maybe of drops in used equipment. I haven't seen anything more recently to give you real-time data. That snapped back up a little bit. What we do know is that aerial fleet, in particular, has taken a little bit of a hit just as vertical construction has become more difficult here just in the pandemic, while earthmoving equipment has been a little bit more resilient from an appraisal perspective as those infrastructure and dirt jobs have been able to continue. And our fleet is a little more heavily weighted to the dirt equipment anyway. So yes, that's kind of how that's played out.

And actually, a follow-up to that. A good portion of your rental fleet is rent-to-sell. Have you seen any rental customers try to back out of those agreements of any sort?

No. We haven't had any of that, Alex. I made mention of kind of the model going forward here, the environment going forward. And part of our kind of go-to-market strategy of being flexible and being able to rent a piece of equipment or sell a piece of equipment we feel like bodes well for us because we can offer both. In an environment that becomes uncertain, as I mentioned in my prepared remarks, we feel like the rental option might be something that customers want as they kind of pare back CapEx spend and want to be a little more nimble.

[Operator Instructions] Your next question comes from the line of Mike Shlisky from Dougherty Colliers.

So I want to get a feel for -- you put out some pro forma numbers trailing 12-month pro forma, but I kind of want to contrast the pro forma with the go-forward numbers. So I'm trying to get a feel as to what is in and what is not in those pro forma numbers and how we can translate those going forward. So for example, what's in the slide, you've put in about $92 million of pro forma trailing 12-month EBITDA. But if I'm not mistaken, you mentioned that does not include Martin and does not include Hilo. And then -- but that number also was impacted, at least for the last 2 quarters, by some COVID impact. So it sounds like what you put out there in the slides, and I think you mentioned the full boat was $100 million trailing. That also wasn't probably the correct number either, I think around a sort of normalized run rate here. Can you give us some normalized 12-month run rate we should be thinking about here?

Yes, Mike, good to hear from you. So the $92 million includes NITCO, Flagler, Liftech, Peak on a -- as if we own them, right, over the trailing 12-month period adjusted. If I take the $92 million and then I add Hilo on, I get to 95-ish. Once Martin closes, I get to 98-ish. And we've made some investments here, and we would expect growth in some of our markets, including Florida, on the rental side. So the $100 million isn't trailing 12, it's a little bit more aspirational. But we think we can get to that number run rate-wise over the short-term horizon.

Okay. So that would include the effect of the 15% growth you had in the first quarter organically and, I guess, negatively in the second quarter. So it's kind of an all-encompassing number?

Yes. That's right.

And then turning to PeakLogix. I've done a lot of channel checks recently, and everyone is telling me that the warehouse construction market is kind of doubling over the prior year this year. I'm kind of wondering if that's happening at PeakLogix? Any kind of ballpark number you can give us there as far as the growth rate and whether the trailing numbers that you've got when you bought people is -- are really the appropriate go-forward numbers that we're seeing some pretty strong growth in that sector.

So Mike, I'll take that one. This is Ryan Greenawalt. We expect that the growth of Peak would be double-digit growth based on sales synergies with our existing customer base and then the fact that we've got dozens of salespeople on boots on the ground for that business now.

Okay. But the actual warehouse construction market itself appears to be up triple digits. Are you seeing any kind of increase in the activity in that market in general? And is it showing up on PeakLogix' numbers at the current time? Or is it sort of still too early to tell?

It's still too early to tell that. These are -- these sales cycles tend to be longer. So we're just getting them in the door on some of these larger projects from our existing customer base. But it's a robust market that's growing. So we think that this is going to be a bright spot for the business, a real growth area for us.

Excellent. That's great to hear. Turning to some of the products that -- I've been hearing that Hyster-Yale wants to go to a more modular approach in how it assembles and delivers its products. I'm kind of wondering, I guess, one, can you tell us, are there any opportunities there from a parts and service efficiency side if more common parts are shared among the various products that helps you in any way? But also in the near term, if there's any kind of investment that's in effect takes place in parts and service working capital if you have older parts from the older machines than the newer parts on the newer machines?

So I think that this is generally a positive for the dealer network with Hyster-Yale. I don't think that -- we manage our turns and our hit rate on different parts very closely. Slow-moving parts are not going to have the stocking levels that fast-moving parts do. And long term, this is going to actually help our parts term because there'll just be fewer -- there'll be fewer discrete part numbers, more commonality of components across the product portfolio. So we're -- as I said earlier, we're excited about Hyster-Yale's product portfolio that some of the advances coming on the warehousing market and just generally, very happy with that OEM relationship and what's coming down the road there.

Excellent. Also on to Martin Implement, a quick question there as well. Obviously, they don't sell Hyster-Yale or Volvo stuff. So I'm kind of curious, is this the beginning of either a more national presence with New Holland, Hyundai or Toro? I'm kind of curious as to which brands we can say, you have a target to kind of expand those across the multistate area must be dealing with Volvo over the last couple of years?

So Mike, we're still awaiting final approval from this -- from some of these OEMs at Martin. What -- the strategy is consistent with what we've messaged is that we want to fill in infrastructure in our existing markets. But when we can add a customer base and products that are synergistic with our core portfolio, that's a home run for us. So this will add key infrastructure in that important market. It's a market that we entered more as a greenfield. The previous dealer was not sold to us. We had to sort of start from scratch in Illinois. So we -- this will add branch locations that will add products that are complementary to Volvo. And we -- that will -- we're not exactly sure how that will all play out, but what we're committed to is making sure that any OEMs we add that there's a coherent strategy to continue to perform for all of our partners.

Okay. And maybe one last one for me. I kind of wanted to get into the organic growth numbers a little bit more. I'm trying to figure out between NITCO and Flagler and Liftech, those are the 3 bigger ones from earlier, can you give us a sense as to what part of the organic growth was from some of your efforts to expand either the new population or the parts and service? Because gains down 3% is actually obviously very, very strong in the quarter compared to everybody else out there that have been looking at, at least. So I'm kind of curious, was there like a much larger organic growth decline had you not have these M&A deals and your efforts to kind of get some synergies on them? I'm trying to figure out what did those 3 companies contribute, not from what you acquire, but from what you've done with them for growth since you acquired them if that makes any sense.

Mike, I'll take a shot at that. First, I want to point out that the -- if you include NITCO in the Flagler, Liftech, NITCO part of the question, NITCO absolutely had a big impact here in Q2 as their customer base is a little bit more defensive with human sustenance, medical, food and beverage versus the more manufacturing-centric Southeast Michigan. So I think that's one thing to point out. From an organic basis, meaning that the organic dip would have been worse without NITCO, I guess that's what I'm getting at. On an organic basis, we've talked a lot about our construction segment being in growth mode and not nearly as mature as our industrial segment, which held true again here in Q2. However, when you look at parts and service growth, in a pandemic situation, we were up 9% in the CE segment, and that doesn't include Flagler. So you're seeing the seedlings of field population that were planted last year and the year before in Illinois, for instance, are starting to come to fruition here. And the same thing with Michigan. Michigan continues to grow in parts and service. So the organic story continues on our construction segment. And what I would say is NITCO's performance here made the organic story less of an issue in Q2.

Got it. So just a follow-up. It's fair to say then from an organic growth perspective, the COVID disruption was pretty tough, but you're back on the right track starting here in Q3...

That's fair.

Or at least turned out positive? Okay, perfect.

There are no further questions at this time. I turn the call back over to Ryan Greenawalt, CEO, for closing remarks.

Okay. Well, I want to thank everyone for joining us tonight, and stay safe and healthy out there. And again, a last thank you to all the Alta employees, our OEM partners and all of our shareholders and investors for your confidence in us. Have a great evening. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.