Good day and thank you for standing by. And welcome to the Alta Equipment Group Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s remarks, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Andrew Rundle, Director of Finance. Please go ahead.

Thank you, Saline. Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta’s second quarter 2021 financial results was issued this afternoon and it’s posted on our website along with a presentation designed to assist you in understanding the company’s results. On the call with me today are Ryan Greenawalt, our Chairman and CEO; Tony Colucci, our Chief Financial Officer. For today’s call, management will first provide a review of the second quarter financial results. We will begin with some prepared remarks before we open the call for your question. 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, achievement of the company, and other non-historical statements as described in our press release. These forward-looking statements are subject to both known and unknown risks, uncertainties and assumptions, including those related to Alta’s 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. 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 -- it 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 and can be found on our website at investors.altaequipment.com. I will now turn the call over to Ryan

Thank you, Andrew. And welcome everyone to our second quarter 2021 conference call. I’ll provide highlights from the quarter and then turn the call over to Tony for a review of the financial results. The second short quarter showed the continuation of positive industry trends and a business environment favorable for both our material handling and construction equipment verticals. Our results for the first half of the year combined with record backlog in both our material handling and construction businesses strengthen our confidence in the growth opportunities ahead at our full year outlook. Customer demand increase each month throughout the second quarter, while new equipment supply constraints persisted and lead times extended for deliveries of new equipment, these market conditions are helping to drive increases in our rental fleet utilization, as well as demand for our replacement parts and services. The supply/demand imbalance is also driving price appreciation of new and used equipment, and increased rental rates. Also it’s utilizing the breadth of our equipment brand portfolio and extensive inventory and rental fleet to satisfy customer demand and win new customers. Equipment sales were higher than our internal plan for the third consecutive quarter, which supports our core growth strategy of populating our coverage area with equipment in order to provide parts and service over the intermediate and longer term. For those who have followed the Alta story, and as I said in the past, our growth strategy is built around populating the geographic regions we serve with equipment from an increasingly wider group of manufacturers and then providing quality service from our skilled technical workforce. This strategy drove our product support business up to 53% this quarter. Now turning to key financial highlights, revenue was $292.7 million and adjusted EBITDA came in at $28 million for the quarter. Our…

Thanks, Ryan. Good afternoon, everyone. And thank you for your interest in Alta Equipment Group and our second quarter 2021 financial results. I hope that you and your had a fun summer as we head into the back half of 2021. My remarks today will focus on four key areas. First, I’ll be presenting our second quarter results which we are pleased with, as we’ve now closed the COVID gap from 2020 entirely and look forward to growing our business in the second half of 2021 and beyond. As part of that commentary, I also briefly recap our April high yield bond rates and its positive impact on our balance sheet. Second, as much as been made of the supply chain constraints which have impacted many industries including ours, I’d like to highlight for investors management’s view of how the current supply chain situation is impacting Alta, and how we believe our business model is responding to the situation on a department-by-department basis. Third, given that it’s been a full year since the Flagler acquisition in Florida, which was the largest in the company’s history, I’ll present some important metrics that highlight our ability to improve targets value and realize expected synergies as we implement our strategic approach to the market. As part of that commentary, I also briefly touch on some integration wins, we had in Q2 from a business system perspective. Last, I want to provide some thoughts on Alta’s newly announced commercial EV opportunity from a financial viewpoint and how we are framing this opportunity in relation to capital deployment. Before I begin, it should be noted that there are several slides in our presentation, which was released prior to our call that presents our quarterly and year-to-date numbers in greater detail than what I will discuss…

Thank you. We have our first question coming from the line of Alex Rygiel with B. Riley Securities. Your line is open.

Hi. Good morning. This is actually Min Cho for Alex. Congratulations on a really strong quarter and thank you for all the detail you provided on the slides. Very helpful.

Thanks. Good evening, Min.

Are you there? Okay. Sorry.

We are there. Okay.

I just have a couple of questions, in terms of the legal agreement and I understand that still very early on. And I know, Tony, you talked about, tech success base investment going forward. But could you talk a little bit about thoughts on the capital requirements in terms of buying parts and just training of the technicians for that part of the business?

Sure, Min. It’s a good question. If you’ve heard me talk about our parts and service operations in the material handling side of the business and in the CE side of the business, I’ve almost referred to or I have referred to the cash flows from that business as free EBITDA, because the capital intensity of running a parts and service operation is just not very capital intensive. And so we view this in the same way that putting parts on the shelf that typically in a normal dealership world are going to turn 3 times to 5 times a year, very capital efficient. And then when you talk about the investment related to training techs, that’s something we’re doing on a regular basis, when new models come out for our OEMs and so training technicians is, frankly, already built into our cash flow. So we’d see this as no different, which is why we view this as, certainly, from a parts and service perspective as nothing different than we’ve done in the past, which is asset-light.

Got you. And could you talk about who maybe some of the initial customers could be in the Northeast. I know, Nikola had done some work with Budweiser and they probably have some distribution locations as well. Can you talk about any cross-selling of opportunities with your material handling business?

Sure, Min. This is Ryan and I’ll take that. We think that the cross-selling opportunities will be some of the same early adopter of the hydrogen fuel cells for material handling. There aren’t any specific names that we would point to in the Northeast. But these are going to be target accounts at are large retailers and distributors. So the likes of Amazon, Walmart and Anheuser-Busch is a great example.

And also just given your liquidity now and that -- you’ve made so much progress integrating your acquisition, can you talk a little bit about M&A pipeline and potential timing and maybe size of anything that could occur in the year?

Min, we will probably stay away from any specifics, but what we can say is that, the pipeline is still there and we are having active conversations across each of the segments really. And we -- M&A is part of Alta’s DNA. It has been for over 10 years. And we expect it to be going forward as well. But I guess the long and the short of it is we still see opportunity M&A wise in both segments of our existing business.

This is Ryan. Min, I would just add that the structural themes of consolidation remain very much alive, so that -- we still see continued runway for our strategy.

Right. Thank you. I’ll hop back into the queue.

We have our next question coming from the line of Bryan Fast with Raymond James. Your line is open.

Thanks. Good afternoon, guys. Just the first question here, when we think about, I guess, the Northeastern and the Midwest business relative to the Florida business. Can you just talk about what kind of synergies you get between the North and the South, just trying to get a sense of how easy it is to move equipment freely or parts between the two regions, if demand warranted?

Sure. I’ll take that. This is Ryan. That is a -- that synergy is a significant part of our excitement around the Florida deal and we’re seeing it play out in reality. It’s a four season market. It’s also a large and growing market. So, examples of the synergies are equipment coming off lease or off rent at the end of the season in the North, where we’re going to go into frost and not have a lot of earthmoving going on, those assets are easily transferable to the South where they can be put in the rental fleets and utilized or sold into the market and become part of our field population. And then conversely, Florida is a -- it’s a large market. We’re very active in it. And because it’s large and we’re making a market, we’re taking in trades, we’re bringing in lease returns, we have a constant supply of lightly used machinery that we can move to the North to meet demand. So that there’s definitely for us a theme right now and using our scale, using the breadth of our portfolio to win business, because today, the supply chain constraints are making it very difficult to operate for our customers, but a good environment for us to show our capabilities and try to win share.

Okay. Good color. And then just could you speak to the extent of whether I guess like restrictions are still a limiting factor here or if I guess hiring and retaining techs is more of a limiting issue going forward. I guess I’m just trying to get a sense of maybe what are the challenges going forward, given that the recovery is just strong here?

Sure. So we are in an industry where technical talent has been in short supply since pretty -- far before the pandemic. So the pressures remain there. Our industry is -- it’s highly skilled. It’s high wages and so we are not having a problem attracting talent but some of the -- and other industries are experiencing. So we’re meeting the demands of the market in terms of recruiting.

Bryan, I was going to jump in, I think the first part of your question was site restrictions and the way I took that was maybe related to COVID.

Yeah.

And we’re not seeing any…

Yeah.

Yeah. We’re not seeing any impact that way at the moment in terms of our technicians being able to get out like to fix equipment.

Okay. That’s it for me.

Just a little more math here I was just going to add that there’s some regional pockets of where supply chain related to COVID is more of a factor and keeping the market tempered versus actual infection rates, just wanted to clarify that.

Okay. Thanks.

We have our next question coming from the line of Matt Summerville with D.A. Davidson. Your line is open.

Good afternoon, Ryan and Tony.

Good afternoon.

This is Will Jellison on for Matt Summerville today. I’d like to start by asking you about what kind of trends you saw in your end markets throughout the quarter from April to June and then starting into July, what was relatively strong and what might have been relatively soft?

This is Ryan. I’ll take that. So I think the way for us to think about that is that all of the markets were strong. All were recovering incrementally quarter-over-quarter. Where we still see some and it’s what I referenced on the previous question, we’re seeing in areas related to manufacturing stops and starts and it’s happening in a slower pace because of the supply chain constraints. So we sit here in the Metro Detroit area where the demand is obviously there for automobiles. We’ve got supply chain shortages, so that they can manufacture that through our output.

Well, from a demand perspective, as Ryan and I have our regional meetings and segment meetings quarterly. We asked the same question about end markets and in each of the regional meetings, everybody had to think long and hard about an end market that was where activity wasn’t high. There were very few, if any, that we were able to point to, if that gives you more.

Yeah. That’s useful. Thank you. And then follow up, where do you expect selling, general and administrative, how that might trend for the rest of this 2021 from around $72 million level, you just recorded.

Yeah. Will, we -- when we talk about SG&A, the -- it really comes in three different buckets, it’s personnel, which is or in our case the personnel. It does include some level of variable costs, especially as it relates to salesmen and saleswomen commissions. So there are some variability there. But the vast majority of that level is fixed. So long as new equipment and new used and rental equipment sales stay at the levels they were in Q2. I would expect that number not fluctuate a whole lot over the remainder of the year.

Okay. Great. Thank you.

Thank you. This concludes today’s Q&A session. Thank you for participating. You may now disconnect.