Good afternoon, and thank you for attending the Alta Equipment Group’s Second Quarter 2022 Earnings Conference Call. My name is Kelly, and I’ll be your moderator for today's call. I would now like to turn the conference over to Jason Dammeyer, Director of SEC Reporting and Technical Accounting with Alta Equipment Group. Please go ahead sir.

Thank you, Kelly, and good afternoon, everyone. And thank you for joining us today. A press release detailing Alta's second quarter 2022 financial results was issued this afternoon and is posted on our website along with the presentation designed to assist you in understanding the company's results. On the call with me today, 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 second quarter financial results. We will begin with some prepared remarks before we open the call for your questions. 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, achievements 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 opportunity and general economic and business conditions. We have based these forward-looking statements loosely 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. Description 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, and can be found on our website @investors.alta equipment.com. I will now turn the call over to Ryan.

Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. I will discuss our record second quarter financial highlights, the continuing momentum in our business, and favorable market conditions. And lastly, I will provide an update regarding the solid execution upon our growth strategy, including our recent transaction with YIT in Canada, the M&A environment going forward and our recent changes to our capital allocation policy. Tony Colucci will then provide a more in-depth review of our second quarter results. Beginning with the top line, we reported record total net revenues of $406.5 million, an increase of 38.9% or $113.8 million, compared with $292.7 million in the second quarter of last year. The increase was driven by both organic and acquisition related growth and the ongoing strong demand in our end user markets, which I will address shortly. All our business segments delivered better results from the year ago quarter. We are especially pleased that we reported positive net income for the quarter, and we are increasing our adjusted EBITDA expectations for the year, as Tony will discuss in his comments. Despite the headline news, concerns over a possible recession in the economy in general, all our end-user markets remain solid. Our visibility through the end of the year is positive. And while we monitor all the key industry indicators, which remain favorable, we believe the best measure is customer sentiment. Our team stays in close touch with our customers and their feedback implies demand is healthy and broad-based throughout all our operating regions and business segments. Demand for both new and used equipment continues to be at high levels and sales backlogs remain at record levels. Our organic physical rental fleet utilization and rates on rental equipment continue to improve and tightness of supply continues to…

Thanks, Ryan. Good evening, everyone, and thank you for your interest in Alta Equipment Group and our second quarter 2022 financial results. I trust that you and your families are safe and healthy and enjoying summer, as we all are here at Alta. Before I begin, I want to welcome our new team members from YIT in Ontario and Quebec to the Alta family. The senior leadership team is committed to building upon the legacy that the YIT team in Canada has established, as we are excited to bring our full suite of product offerings and solutions in the material handling segment to you and your customers. We look forward to earning your trust. My remarks today will focus on four areas. First, I'll be presenting our second quarter results, which were strong across the board. Our business is performing well in the current climate, as we continue to experience high levels of demand for our products and services across our business landscape. Second, I'll provide -- I will profile the YIT acquisition from a financial perspective, which will include an update related to the amendment we recently made to our credit facilities. Third, I'll provide further perspective on the annual dividend and share repurchase program, which we announced last month. And lastly, I'll be providing commentary related to the increase we made to our 2022 adjusted EBITDA guidance. Before I get to my talking points, it should be noted that I will be referencing slides from our investor presentation throughout the call today. Investors will notice that we have revamped the format and updated our investor presentation from its previous iteration. The updated deck provides a refreshed view of our business and presents a few new metrics, which we believe will be helpful for investors. I'd encourage everyone on…

Thank you. [Operator instructions] We'll hear first today from Alex Rygiel with B. Riley.

Thank you. Fantastic quarter, gentlemen, and thank you for the detail on your slide deck, it's fantastic. A couple of questions here. First, you talked a little bit about the supply and demand imbalance, helping your new equipment sales line item, but then talked a little bit about maybe some cautious comments about the second half as it relates to that as well. In your view, how do you think about the net positive or negative from the global supply chain imbalance issues and how that's affecting your business? And how long might that last?

Kevin -- sorry, Alex, our view of the second quarter is that we didn't pull forward demand. These were sales coming out of backlog for the most part. So, it's almost as if the demand was existing and we recorded sales in Q2 2022 that frankly, could have occurred had we had the supply earlier whether it’d be earlier in 2022 or even 2021. So we -- number one is we don't feel like this is a pull forward of demand by any means. We think this is finally -- at least in this quarter, again, with the caveat of variability that in this quarter, our supply matched that demand for the first time. So -- we continue -- I guess our view hasn't changed in terms of the global issues or the issues really that are impacting, primarily our major OEMs, Volvo, Hyster, Yale, JCB in that. The backlog is there for new equipment. And if we can get supply, we can deliver it and generate a really solid margin. So thematically, again, everything still is intact for the second half of the year. If we believe that we can get supply that we'll be able to convert that into sales quickly.

And then secondly, you've always talked about the success of selling new equipment into your existing markets to then provide parts and services over time. Can you talk a little bit about your access to labor these days in such a tight labor market and labor inflation and how you're managing through that?

Alex, this is Ryan. I'll take that one. So, one of the themes that we've had on every call is that labor tightness is not a new thing for our industry. So we don't feel it as starkly on the skilled trade side as we are experiencing it maybe in the rest of the business. Recruiting of trades is part of our lifeblood. So it remains a focus. We haven't fallen behind our recruiting efforts or kind of our budget for adding headcount. What I will say though, in terms of the tightness, we're having a harder time with retention and with recruiting on more just general administrative type positions. So we are feeling that, and we've put a big focus on our culture and on retention, especially as it relates to onboarding and integrating new businesses through the M&A strategy.

And lastly, if I can get one more question in. Your M&A program over last couple of years has been very successful, and you've done a really good job of keeping the purchase multiples at an accretive level. The economy has been pretty good for the last couple of years. Are you finding sellers push you harder these days on sale multiples here. Do you think there's a reason why you may have to start to pay out for acquisitions? And what does the broader pipeline of M&A look like right now?

I'll speak to the purchase multiples, Alex, and it's a good question. Some of the tailwinds that we're benefiting from, a lot of the target companies that we're looking at are benefiting from as well in terms of their earnings profile. When it comes to the multiple, I would say that nothing really has changed. We are seeing that some of the – the more, I would say, asset-light where you're looking for intellectual property in terms of design and build and more of that service offering, we're seeing multiples go up. And so to the extent that we want to add complementary services that -- to the more kind of traditional dealerships that we've seen multiples maybe elevate. But when it comes to the down the middle of the fairway dealership multiples or rental multiples that we've seen, we have -- there have been some deals that we – that have gotten away from us, and that's okay because we've got such a robust pipeline that we can maybe pass on deals that we think get too expensive. So we're really selected that way. But by and large, the trading through Alta pipeline, the multiples, I think that’s been intact. I don't know, Brian, if you want to say what's the pipeline in June?

The themes around the pipeline also remain intact. There's a demographic tailwind to our strategy, where there are more family business is in need of succession than there are buyers like Alta. So as Tony said, we're being very selective on where we go, but we see what we continue to call a robust pipeline for our industry.

Thank you very much.

Thanks a lot.

[Operator Instructions] And we’ll hear next from Bryan Fast with Raymond James.

Yes, good afternoon. Just following on Alex's question there. Just given the shifting macro backdrop, could you provide some comments just on the strength of the backlog? And have you done, I guess, stress testing on that strength?

Are you speaking to the backlog of our new equipment?

Yes.

So that item it remains tight. So backlogs or lead times rather remain at record levels for a lot of the categories of product. And we believe that demand has not been eroded. And it's a pretty level playing field across the competitive landscape. The other manufacturers are challenged with some of the same constraints of their materials. So we think that this is going to create an environment where the demand is there longer, but there's not really enough supply to take care of surge demand per se. We think we have healthy demand and we – the receiving of the equipment will be variable, and I think there was evidence of that this past quarter. That could be lumpy. But in terms of our budget, how we look at the business in terms of the product support and hitting our numbers, we – we have visibility where we think that we're -- the trend is intact.

And Bryan, maybe you mentioned kind of stress testing was the first thought that I had was Ryan and I have made it a point to say that we don't lose sleep over the next new equipment sale. Our business -- the vast majority of our cash flows are based on parts, service and rental. When you have a big quarter like we just did with new equipment sales, though, you can have a quarter like we just did and kind of exceed expectations. But when we think about stress testing the backlog I just keep coming back to the business model that new equipment sales line can be volatile, one way or the other. And -- but the rest of the business, the product support and the rental is really what we focus on in terms of continuing to generate organic growth and have to be steady and less variable.

Okay. Thanks. Yes, that's great color. And then just maybe some more details here. It looked like service revenue margins for material handling and construction trended in opposite directions. Is there anything to read into there?

No. We made special note in the queue to talk about. We had part of the ERP cutover that we did for our New York businesses in 2021. Caused a little bit of disvariability in how we reported gross margin. Overall, the only thing that I would note is that we are seeing a higher level of warranty write-offs where previously, an OEM would refund us, if you will or reimburse us for warranty claims. And they're getting a little bit more less lenient, I would say, on some warranty claims. So we have experienced some write-offs that way. The other thing to mention, Brian, is that the overall mix of our service revenue is continually higher mixing higher towards the construction segment, which in pockets has a little bit of a different gross margin profile. So nothing other than those two items, nothing certainly significant to read into there.

Okay. That's it for me. Thanks for the color.

[Operator Instructions] We'll hear next from Matt Summerville with D.A. Davidson.

Hey. Good evening. A couple of questions. First, just on YIT, how are you thinking about the go-forward organic growth profile of that business? Help me understand a little bit kind of what are the major end markets outside of maybe e-commerce logistics being addressed by the company? And what makes their EBITDA profile structurally quite a bit higher than yours on the material handling side of the business.

I'll start off with the first part of that question. So in my earlier comments, I referenced the unit deliveries for the industry. So what I'm referencing there is ITA figures -- Industrial Truck Association. And entering the Southeastern Canadian market, which is heavily concentrated around Toronto and Montreal, it's adding about 40% to our addressable market in terms of our exclusive territory with Yale specifically for Canada. So it's a 70,000 unit market. We -- part of what our organic opportunity is to take Yale to the national share in Ontario, and there's -- Ontario and Quebec, which it lags today. And then there's the opportunity to build out a portfolio of ancillary products, where in our mature markets, the Yale branded and Aster branded forklifts are the core of our strategy, but they may only represent three-fourth of our machine sales where we're doing a lot of Allied equipment sales, both vehicles and also non-vehicular allied equipment. So we'll be -- we have basically now a playing field in Canada that's completely untapped for us, where we can bring in PeakLogix and the material handling piece, ScottTech and the software, the PickPro software. I highlighted an account in New York where we sold the full suite of products, everything from the forklifts to the warehousing product, and that's the type of offering we'll be able to now take to those Canadian customers. In terms of the end markets, it is a very dense warehousing and logistics market. It would look a lot like our Chicago business, just the density of warehousing around the Toronto in particular market. And then the other thing around about Ontario is it looks an awful lot like our Northern Midwest footprint list of auto manufacturing and other types of manufacturing. So really, in terms of end market coverage right in our warehouse and legacy accounts on the Yale side heavily in automotive, which is -- we'll hit the ground running in that regard as well. So, very excited about it. We also think of it as kind of a geographic bridge across our territory on a map now we can drive across our territory from the headquarters to Buffalo. So -- and then, Tony, I'll let you take the back half of that question.

Sure, Matt. The -- on the EBITDA profile, the cash flow -- sorry, the revenue mix is going to be more heavily weighted to rental for YIT relative to the rest of our material or Legacy Material Handling segment. And so you're going to have higher EBITDA margins just by virtue of the depreciation in rental. What we found through due diligence is that the Canadian market is a little bit more akin to rental versus just sales. So that's what you're seeing there. But to Ryan's point, we view this as absolutely a big -- probably our biggest market that we operate in from a material handling perspective. It's important to note that we just have the Yale line Hyster, Yale there with this opportunity. But nonetheless, $47 million of revenue, we plan to absolutely grow that figure.

Got it. And then as a follow-up, as I'm sure you've seen everyone has seen it right. Amazon is slowing down their e-com and warehousing logistics related infrastructure build out. Have you seen any impact from that on your business? And can you talk specifically because I think you've done it in the past, around how backlog and revenue metrics look like for that specific end market grouping for Alta?

Matt, this is Tony. I'll take that one. It's a good question, and I'll answer it, I guess, our PeakLogix subsidiary, which, of course, is engaged in kind of the end market that you're referencing there with Amazon. Our business has not been impacted on an anecdotal level from any sort of pullback in building new warehouses. The majority of our work comes from automating existing facilities. I think last quarter, I made mention of the fact that still 80% of warehouses and manufacturing facilities in the US still don't have any form of automation. So we are still -- our backlog in that business is still very much heavily weighted on existing facilities rather than new build. And what we continue to hear from customers is that the automation is becoming not a nice to have, but a need to have because of the dearth of labor to kind of come full circle to Alex's first question, where the idea of not having labor on the line, if you will, at a new manufacturing facility or a distribution facility is posing a risk to revenue streams for some of our customers, where they're saying we need the robot rather than the robot makes sense from an ROI perspective, almost like it's becoming existential to their own businesses. So we're -- our backlog is more heavily weighted toward what I would call existing infrastructure versus new builds.

Got it. Maybe I'll just ask one more. How are you guys thinking from here on your ability to further push rental pricing and further capture new and used equipment pricing relative to where you're at today?

So Matt, that's a balance. We don't think about that in terms of opportunistically grabbing the next point of margin as much as we think about as participating in the market and making sure that we're taking care of our customers, but we're also using our scale to go after new business. So it's kind of like a -- it's a triage exercise. It's like do you take the deal, or do you save the rental assets to take care of customers and drive utilization. And it's something that we're constantly looking at, and it's not, it's just asset class by asset class. We just try to optimize and it's a continual process.

The other thing I would mention, Matt, is just on new equipment sales. We don't have much risk if at all, in the backlog. Our customers are ordering through us to Volvo or Hyster, Yale and they've agreed to pricing. We take very little kind of pricing risk in the backlog. And so, if there are price increases in the end, it becomes up to the customers to whether they want to accept it or not. And as Ryan alluded to, it's the market and all of the OEMs at this point are at some level of pricing increase over the last two years.

Got it. And then, I'll just ask one more. What do you think made this quarter from an inbound equipment supply chain. So, feeling about it that way. What do you think made this quarter so much better for you guys than you've been experiencing from your OEMs being able to deliver to you. And we're obviously sitting here in August. I mean, is that continuing so far into Q3, do you sense that maybe things have actually started to get better on one hand. But then on the other hand, you said you still have a record backlog. So maybe just kind of bring that full circle for me?

Yeah. Matt, it's a better question for the OEMs. But we – what I would say is, there was kind of this under-promise over-deliver from a lot of the OEMs, and our OEMs have been able to kind of over deliver in Q2. The other thing that, I would say about the first half of the year typically is – which we were concerned about is typically that is when we're taking inventory for the sales season. And kudos to our OEM for being able to hit and in some cases, actually exceed delivery schedule. So I would say, we are seeing Q2 is indicative of some sort of throughput through – in terms of new equipment deliveries, certainly better than what we've seen. But we would also say that, we're not out of the woods either. We – we continue to see delivery dates move one way or the other, again, lots of variability. And so I mentioned that, at the end of my remarks that, Q2 we were flowing, but that doesn't mean there maybe an ebb somewhere in the back half of the year.

Got it. Thanks, guys.

Thanks, Matt.

And with no other questions at this time, that will conclude today's conference. We do thank you all for your participation. And you may now disconnect.