Alta Equipment Group Inc. (ALTG) is a leading provider of premium material handling, construction, and environmental processing equipment and related services. With a robust network of over 85 dealerships across North America, the company has established itself as a dominant player in the equipment distribution market through strategic partnerships with renowned original equipment manufacturers (OEMs) such as Hyster-Yale, Volvo, and Kubota.
Business Overview and History
Alta Equipment Group has been a leading provider of premium material handling, construction and environmental processing equipment and related services for over 40 years. The company was founded in the early 1980s as a regional equipment dealership, primarily serving the state of Michigan. Over the following decades, Alta steadily expanded its geographic footprint, establishing new branch locations across the Midwest and Northeast United States.
A key milestone in the company’s history was the acquisition of Ault Industries in 2023, which significantly expanded Alta’s material handling equipment offerings and customer base. This acquisition strengthened Alta’s position as one of the largest integrated equipment dealership platforms in North America, with over 85 branch locations across the U.S. and Canada.
Another significant challenge the company has faced in recent years is navigating supply chain disruptions and inflationary pressures impacting the equipment industry. Alta has had to carefully manage its inventory levels and costs to maintain profitability during these market conditions. Despite these headwinds, the company has continued to invest in its product support capabilities, ensuring customers receive high-quality service and maintenance for their equipment.
Throughout its history, Alta has focused on building long-term relationships with leading original equipment manufacturers (OEMs) such as Hyster-Yale, Volvo, and Kubota. These strategic partnerships have provided Alta with access to in-demand equipment and allowed the company to offer customers a diverse portfolio of specialized machinery and tools. The company’s strong OEM relationships, combined with its extensive branch network and skilled technician workforce, have been key competitive advantages that have supported Alta’s growth over the decades.
Today, Alta operates through three reportable segments: Material Handling, Construction Equipment, and Master Distribution. The Material Handling segment is focused on the sale, service, and rental of lift trucks and other material handling equipment, primarily in the Midwest and Northeast regions of the United States and the Canadian provinces of Ontario and Quebec. The Construction Equipment segment specializes in the sale, service, and rental of heavy construction, compact, and aerial equipment, with a focus on the Midwest, Northeast, and Southeast regions of the United States and Canada. The Master Distribution segment is engaged in large-scale equipment distribution with sub-dealers throughout North America, primarily related to environmental processing equipment.
Financial and Operational Highlights
Alta’s financial performance has demonstrated resilience amidst the challenges faced by the broader equipment industry. As of the latest reported quarter (Q3 2024), the company’s total revenues stood at $448.8 million, a modest decline of 3.7% year-over-year. This decrease was primarily driven by a 13.3% decline in new and used equipment sales, particularly in the Construction Equipment segment, as customers remained cautious in their capital expenditures amid macroeconomic uncertainties.
However, the company’s high-margin product support business, comprising parts sales and service revenues, continued to perform well, with a 7.8% year-over-year increase to $140.2 million. This diversified revenue stream has helped mitigate the impact of fluctuations in the equipment sales market, highlighting the strength of Alta’s business model.
Notably, the company’s adjusted EBITDA for the third quarter of 2024 stood at $43.2 million, down from $51.0 million in the same period last year. This decline was largely attributable to the aforementioned challenges in the equipment sales market, as well as a discrete tax expense of $14.0 million stemming from an increase in the valuation allowance on the company’s deferred tax assets.
Financials
Looking at the balance sheet, Alta has maintained a strong financial position, with $320 million in available liquidity as of September 30, 2024. The company has been proactive in managing its capital structure, reducing its rental fleet and working capital during the quarter, which enabled it to pay down $39 million in funded debt. This strategic focus on balance sheet optimization has been a key priority for the management team in navigating the current industry headwinds.
For the fiscal year 2023, Alta reported total revenue of $1.88 billion, with a net income of $8.9 million. Operating cash flow for the year was $63.8 million, while free cash flow was negative at -$10.8 million. In the most recent quarter (Q3 2024), the company reported a net loss of $27.7 million, primarily due to the challenging market conditions and the aforementioned discrete tax expense.
Alta’s debt-to-equity ratio stood at 11.31 as of the most recent quarter, reflecting the company’s leveraged position. The current ratio was 1.35, indicating adequate short-term liquidity, while the quick ratio of 0.43 suggests a relatively high reliance on inventory in meeting short-term obligations.
Liquidity
Alta’s liquidity position remains robust, with $320 million available as of the end of Q3 2024. This strong liquidity provides the company with flexibility to navigate market uncertainties and pursue strategic growth opportunities as they arise. Specifically, the company had $14.6 million in cash and $360.8 million in available borrowing capacity under its ABL Facility and Floor Plan Facilities as of September 30, 2024.
Segment Performance
The Material Handling segment generated $168.90 million in total revenues for Q3 2024, a slight 0.2% increase compared to the same period in the prior year. New and used equipment sales accounted for $87.20 million of the segment’s revenues, while parts sales, service revenues, rental revenues, and rental equipment sales made up the remaining $81.70 million. The segment’s gross profit margin was 33.6% for the quarter, down slightly from 34.7% a year earlier.
The Construction Equipment segment reported $262.30 million in total revenues for Q3 2024, a 7.0% decrease compared to the same period in the prior year. New and used equipment sales accounted for $118.00 million of the segment’s revenues, while parts sales, service revenues, rental revenues, and rental equipment sales made up the remaining $144.30 million. The segment’s gross profit margin improved to 23.6% for the quarter, up from 22.3% a year earlier.
The Master Distribution segment generated $18.20 million in total revenues for Q3 2024, a slight 0.6% increase compared to the same period in the prior year. New and used equipment sales accounted for $15.30 million of the segment’s revenues, while parts sales, service revenues, and rental revenues made up the remaining $2.90 million. The segment’s gross profit margin improved significantly to 30.8% for the quarter, up from 26.5% a year earlier.
Guidance
In light of the challenging market conditions, Alta has revised its full-year 2024 guidance. The company now expects to report adjusted EBITDA between $170 million to $175 million for the full year. This represents a reduction from previous expectations, as Q3 2024 performance came in below initial projections. For Q4 2024, Alta is guiding to $43 million to $48 million of adjusted EBITDA, which supports the full-year guidance range.
Outlook and Risks
As Alta looks ahead, the company remains cautiously optimistic about the long-term fundamentals of its end markets. The recent resolution of the U.S. presidential election and the anticipated easing of interest rates are expected to provide a more favorable backdrop for equipment demand, particularly in the construction sector.
Additionally, the company’s diversified business model, strong relationships with leading OEMs, and focus on high-margin product support services position Alta well to capitalize on the industry’s recovery. The company’s e-mobility initiatives, including the recent delivery of Nikola fuel cell electric vehicles to DHL, also represent a promising growth opportunity as the transition to sustainable transportation solutions gains momentum.
However, the company is not without its risks. The highly competitive nature of the equipment distribution industry, ongoing supply chain disruptions, and the potential for further macroeconomic volatility could continue to pose challenges for Alta. The company’s reliance on a limited number of OEM partners and the cyclical nature of the construction and material handling industries also introduce inherent risks to its business model.
The equipment dealership industry has seen steady growth, with a compound annual growth rate (CAGR) of around 5-7% over the past 5 years, driven by increasing infrastructure spending and construction activity. However, recent headwinds from macroeconomic uncertainty and supply chain disruptions have impacted the sector, as evidenced by Alta’s recent financial performance.
Conclusion
Alta Equipment Group has demonstrated its resilience and adaptability in the face of a challenging industry environment. The company’s diversified business model, strategic acquisitions, and focus on high-margin aftermarket services have enabled it to navigate the current headwinds and position itself for long-term success. Despite the recent setbacks in equipment sales, Alta’s strong liquidity position and growing product support business provide a solid foundation for future growth.
As the industry landscape evolves, Alta’s commitment to innovation, customer service, and operational excellence will be critical in driving continued growth and value creation for its shareholders. The company’s revised guidance reflects a realistic assessment of the current market conditions, and management’s focus on balance sheet optimization and operational efficiency should help Alta weather the ongoing challenges in the equipment distribution sector.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.