Prepared remarks
Good afternoon, and thank you for attending today's Alta Equipment Group's Second Quarter 2026 Earnings Conference Call. My name is Melissa, and I will be your moderator for today's call. I will now turn the call over to Jason Dammeyer, Vice President of Accounting and Reporting. Please proceed.
Thank you, Melissa. Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta's second quarter 2026 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; Anthony Colucci, our Chief Financial Officer. For today's call, management will first provide a review of our second quarter 2026 financial results. We will begin with some prepared remarks before we open the call for your questions. Please proceed to Slide 2. 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 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 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, Jason, and good afternoon, everyone. I appreciate you joining us to review Alta Equipment Group's second quarter 2026 results. My comments will focus on our markets, booking and delivery trends and progress on our strategic initiatives. Tony will then cover the financials, capital structure, and our updated guidance. The central takeaway is that the momentum we discussed in Q1 became more visible in the second quarter. Revenue improved by approximately $65 million from the first quarter with sequential growth across all three segments. Order activity is improving, deliveries are recovering, dealer inventory pressures are receding and our operating initiatives are gaining traction. We believe improving industry indicators and stronger activity in our own markets represent a positive inflection point for Alta. The broader backdrop is becoming more supportive. Industrial spending remains elevated. Federal infrastructure funding continues to flow into state and local project pipelines, and transportation budgets in our largest Construction Equipment markets remain strong. U.S. manufacturing PMI stayed in expansion territory through the quarter and strengthened further in July, a constructive leading signal for lift truck demand. Nonresidential demand from energy infrastructure and onshoring continues to build, and Volvo recently raised its 2026 North American market forecast by 5%. Tariff-related disruption has stabilized, benefiting Master Distribution and overall pricing. Material Handling remains the clearest leading indicator of improving demand. As shown on Slide 7, industry bookings in our areas of responsibility increased 12.3% in the first half versus a year ago and second quarter bookings held near the strong first quarter pace, up 4.9% from the prior year quarter. This is not a one-month spike. The improvement has been sustained across the first half, a trend Hyster-Yale also noted on their earnings call this week. The recovery is broad-based across regions and verticals, including food and beverage, manufacturing, building materials, energy, defense, distribution and logistics. Those bookings are building backlog and backlog is what gives us confidence in the second half. Our Material Handling backlog now stands at approximately $143 million, its highest level since 2023. In this business, bookings convert to backlog and backlog converts to revenue over the following quarters. So today's order book provides meaningful visibility into second half invoicing. And as Slide 8 shows, our current booking pace points to a meaningful recovery in 2026 with volumes moving toward long-term regional norms. Few structural drivers support the trend. First, fleet age. Many operators deferred replacement over the last two years, and as four- and five-year-old fleets become more costly to maintain, quoting activity increases, driving both equipment sales and the recurring parts and service revenues that follow each unit. Second, product breadth. Our OEM partners are introducing modular value-oriented configurations for lighter-duty applications, allowing us to serve cost-conscious customers with fit-for-purpose equipment while preserving our premium offering where uptime and life cycle support matter most. Our Material Handling share gains are being driven by three factors: stronger participation in the fast-growing warehousing segment, new products that allow us to recapture business previously lost to value-oriented brands and PeakLogix's integration capabilities, which enable us to advise customers on and execute larger and more complex projects. Construction Equipment entered the quarter with the delayed seasonal start, but activity accelerated through the quarter, carrying the segment past its first quarter low point. Market deliveries in our areas of responsibility increased 20.1% in the second quarter versus the prior year and were up 7.5% for the first half. Florida was a notable area of strength, particularly in articulated haulers, and quoting activity is benefiting from road and bridge work, municipal projects, energy infrastructure and manufacturing investment. The competitive environment is healthier than a year ago. Dealer inventories have declined, OEM discounting has moderated and used equipment values have improved from their 2025 lows, all supporting better equipment margins. Our rental fleet initiatives continue to progress. The goal is matching fleet investment to local demand, improving utilization and returns and avoiding underproductive assets. Tony will detail the results. Product support remains one of the most important differentiators in Alta's dealership model with 85 locations, approximately 1,100 factory-trained technicians and more than 1,000 field service vehicles creating recurring revenue streams that pure-play rental models do not replicate. Through our customer value mapping initiative, we are aligning capacity with customers who value uptime and life cycle support while improving rate realization and service productivity. Our strategic vision for 2028 focuses on generating more value from the platform we have built. Since our IPO, we have completed 17 acquisitions and grown from 43 to 85 locations. The next phase centers on organic growth, operating consistency and disciplined capital allocation, gaining share in attractive markets, scaling PeakLogix and Ecoverse, improving product support productivity, increasing inventory and fleet returns and using technology to drive efficiency and accountability. As we enter the second half, demand indicators remain constructive, led by Material Handling bookings and backlog, Construction Equipment project activity and healthier channel conditions. We are maintaining a measured outlook, and Tony will discuss our revised guidance. The second quarter does not complete the recovery, but it provides clear evidence that one is underway and that our operating model is responding as expected. I want to thank our approximately 2,600 employees for their commitment to our customers. Their expertise is the foundation of Alta's value proposition. With that, I'll turn the call over to Tony.
Thanks, Ryan. Good evening, everyone, and thank you for your interest in Alta Equipment Group and our second quarter 2026 financial results. Before getting into the quarter, I'd like to thank our employees, customers, OEM partners and shareholders for their continued support. We entered 2026 facing a number of challenges, including the pull-forward buying activity that benefited late 2025, difficult winter conditions and softer equipment markets. While Q1 was challenging, our second quarter performance and the trending KPIs suggest all of those headwinds are behind us as the second quarter reflected a return to more normalized operating conditions and showcased the fundamental earnings power of our dealership model. My remarks today will focus on three areas. First, I'll report our second quarter financial performance and discuss the significant improvement we saw versus the first quarter, along with the key drivers behind our results. Second, I'll discuss capital efficiency, which remains an important priority as we continue to optimize inventory levels, rental fleet investment and improve returns on capital. Lastly, I'll provide perspective on our outlook for the balance of the year and discuss the indicators that continue to give us confidence in our ability to deliver within our previously communicated guidance. As always, I'll be referencing slides from our earnings presentation throughout today's call. I encourage investors to review our earnings presentation as well as our 10-Q, both of which are available on our Investor Relations website at altg.com. With that, let me begin with our financial performance for the quarter, which corresponds with Slides 12 through 22 of the earnings presentation. For the quarter, Alta generated revenue of $475.5 million and adjusted EBITDA of $48.6 million. Nominal gross profit increased year-over-year and total gross margins expanded approximately 70 basis points to 26.1%, while EBITDA margins increased to 10.2%. While revenue remained modestly below prior year levels, the more important takeaway is the sequential improvement versus Q1, and the results were encouraging. Revenue increased by approximately $65 million compared to the first quarter, while adjusted EBITDA increased by approximately $20.5 million from $28.1 million in Q1 to $48.6 million in Q2. EBITDA margins expanded 340 basis points sequentially. While some of that increase reflects normal seasonality as construction and rental activity improve entering the summer months, it also reflects strengthening equipment market conditions, improved equipment margins and solid execution across our operating businesses. One area I'd specifically highlight is equipment margin performance. Company-wide new and used equipment gross margins increased to 15.3% during the quarter, representing a meaningful improvement both year-over-year and sequentially. We believe this is an important indicator of a more balanced supply and demand dynamics across the competitive landscape. From a segment perspective, first, Material Handling, which we were particularly pleased with, generated $19 million of adjusted EBITDA in the quarter, an increase of approximately 13% from the prior year despite lower revenue. Strong service execution, sustained booking momentum and improved operating efficiency all contributed to the segment's performance. Construction Equipment generated $30.6 million of adjusted EBITDA, a notable $16.7 million sequential improvement. Equipment margins improved, utilization trends strengthened throughout the quarter and the business benefited from the expected seasonal recovery following a slow start to the year. Within Master Distribution, Ecoverse delivered one of its strongest quarters since acquisition. Revenue increased from $20.9 million to $22.8 million year-over-year, while adjusted EBITDA increased from $1.1 million to $2.8 million. Importantly, much of the tariff-related margin pressure that negatively impacted the business over the last year has now subsided. Revised OEM pricing arrangements and a more stable tariff environment both contributed to materially improved profitability. As a result, Ecoverse returned to the economic profile that underpinned our original acquisition thesis. Taken together, these results support what we discussed last quarter, namely that many of the factors impacting first quarter performance were temporary in nature and that the underlying business remains fundamentally healthy. Moving on to the second portion of my prepared remarks, I'd like to spend a few moments discussing capital efficiency. One of the most encouraging developments during the quarter continues to be the progress we've made on improving capital efficiency across the organization. I direct investors to Slide 16 of the earnings presentation, which highlights the tangible results of our inventory optimization and fleet rationalization initiatives. In Material Handling, average assets declined by approximately $52 million or 11%, while the business maintained relatively consistent earnings performance. As a result, trailing 12-month adjusted EBITDA as a percentage of average assets improved 120 basis points from 14.8% to 16%. In the Construction segment, average assets declined by approximately $77 million year-over-year or 8%, while profitability remained resilient despite operating in a market that's still below historic levels. That resulted in a 60 basis point increase in return on assets from 10.8% to 11.4%. We believe this demonstrates that Alta is becoming a more capital-efficient organization, generating comparable earnings while deploying less capital and ultimately improving returns. Briefly on the balance sheet for the quarter. As of June 30, total liquidity remained strong at approximately $225 million and net leverage remained stable at roughly 4.7x. Importantly, our capital structure continues to provide flexibility as we have no meaningful debt maturities until 2029, a largely fixed rate debt profile and ample liquidity to support the business going forward. Moving on to the final portion of my prepared remarks, I'd like to discuss our outlook for the remainder of 2026. We continue to believe that the assumptions underlying our previously communicated guidance remain intact. As shown on Slide 19, we are narrowing our adjusted EBITDA guidance range from $167.5 million to $177.5 million, reducing the upper end of the range by $5 million, while reaffirming our free cash flow before rent-to-sell decisioning range of $100 million to $110 million for the year. Importantly, the adjustment to the upper bound is not being driven by a change in our view of underlying demand, as bookings trends remain supportive and backlog levels have materially increased year-over-year. Rather, the revised range reflects increased visibility into the timing of equipment deliveries and the conversion of the backlog into revenue during the second half of the year. Overall, there are several pillars supporting our confidence in the back half of 2026 when compared to 2025. First, Material Handling fundamentals continuing to improve. As Ryan mentioned, backlog has increased substantially year-over-year, providing for improved confidence into second half equipment deliveries. Second, Construction Equipment demand is growing across our core markets. Customer activity remains healthy, and infrastructure-related project activity continues to support equipment utilization and demand. Third, equipment margins continue to trend favorably. The margin improvements we've discussed today are consistent with reduced competitive discounting, healthier used equipment market dynamics and more balanced dealer inventories. Fourth, Ecoverse's tariff-related challenges appear to be behind us. The business returned to a more normalized profitability level during the quarter, and we believe those improvements are sustainable moving forward. Lastly, the organization continues to execute on productivity and operational efficiency initiatives across multiple departments. Our product support organizations remain focused on tech utilization, labor efficiency, pricing discipline and customer profitability. While these initiatives may not always maximize revenue growth, they do improve overall dealership profitability and support stronger long-term returns. Taken together, supportive demand indicators, growing backlog, improving equipment margins and continued operating discipline support our confidence in the business in the second half of 2026. In closing, the second quarter represented a step forward. The business benefited from both the expected seasonal ramp and improving conditions across our end markets. Perhaps most importantly, we demonstrated that Alta can generate stable or improving profitability metrics on a significantly smaller asset base, which will translate into better returns on capital over the long run. Thank you for your time and continued interest in Alta Equipment Group. I'll now turn the call back over to the operator, and we'll be happy to take your questions.
Questions and answers
The operator provided instructions for the question-and-answer session. Your first question comes from the line of Michael Shlisky with D.A. Davidson. Your line is now open.
I wanted to go back to the comment you made earlier about some of the Material Handling modular products. I really appreciate that this is a growing area, but is there an offsetting service revenue headwind when you sell more modular compared to some of the original models?
Mike, I'll take that. No, we don't perceive it as a headwind. If anything, it's a positive because there'd be more commonality across the product lineup and that would potentially enhance parts turns.
Okay. And then turning to construction, I do appreciate that Volvo increased their outlook. Other large OEMs may increase their outlook a bit more than perhaps Volvo did. And I'd just be curious, in Florida and your main markets, where it's been strong all along, do you feel like your share has been holding in the first half, and anything that could be changing here in the second half as far as construction market share?
I'll take that one. We have a slide in the deck that shows what our markets did from a delivery perspective in Q2 relative to 2025. Those markets were up 20.1% in the quarter. So we definitely saw that improvement. They were down a little bit in Q1, but the long and short of it is the number that Ryan mentioned and what Volvo's focused on, I believe, is North America. The one that we're focused on is our APR areas, and they seem to be in alignment with one another, perhaps ours being up a little bit in Q2. In terms of share, we don't call out market share specifically publicly, but I would think of us as holding share in the current marketplace over the first half.
Okay. And then maybe just lastly on the rental fleet sizing, again, with some of the upticks we're seeing in large projects, infrastructure, and other areas, are you thinking about potentially upsizing your fleet just a little bit to match that demand? Or do you think what you've got now is pretty appropriate for the envelope of projects that your customers are facing?
Mike, the way that we think about the rental fleet is laser-focused on hitting our utilization KPIs. At the moment we're still not there. So to the extent we see demand staying where it is, specifically in the construction fleet, this commentary would be specific to our construction fleet. We intend to continue to pare it back a bit by year-end. The other point is that some of the data centers and projects that you are referencing are more akin to vertical construction, which would mean aerial equipment, where the larger rental houses compete and we do not. It's a much smaller piece of our portfolio in terms of the rental business. We are certainly participating from a land-clearing perspective. We know of jobs that our customers are on where they need dump trucks and excavators, but those projects are a little bit shorter relative to vertical construction of buildings. The short answer is no, we don't see investing in rental fleet in the short run here.
Your next question comes from the line of Steven Ramsey with Thompson Research Group.
I wanted to start with the color you shared around the marketplace being more balanced from a supply-demand standpoint and leading to reduced discounting. Would you say that the market is in a healthy and optimal spot at this point, or it could keep trending in a healthier way, potentially through the back half of the year?
Before I answer, I want to correct something I misspoke on earlier: equipment deliveries in our construction markets were up 20% in Q2, as noted on Slide 7; the 7% I referenced earlier is the year-to-date number. All signs point to more normal supply-demand dynamics, which should support more normal margins in construction. I think there's still a little bit more room to run. We've optimized inventories, and in doing so we've sometimes taken thinner deals to offload balance sheet assets. So we think we still have tailwinds in our own numbers through the back half from an equipment margin perspective. From a macro environment standpoint, we've found balance. Pricing-wise, there's room to improve as well. Some larger players in the construction space are showing price realization year-over-year of around 5% in the second quarter in terms of what OEMs are charging dealers. As their costs have risen and tariffs have been addressed, we're seeing less discounting out of some of the bigger houses. So I would expect continued improvement and more balanced dynamics than we've seen over the last two years.
Okay, that's great to hear. And then one thing I wanted to clarify in the guidance that the part of the caution around deliveries. Can you talk a bit more about where that caution or conservatism is coming from, if it's a certain product set or certain customer group?
It's primarily timing related. The Material Handling backlog is getting to record nominal dollar levels, but from a unit perspective we're still not where we would like to be. The caution is around Hyster-Yale's production capabilities and the ability to deliver. There's a possibility some volume could slip into 2027 versus 2026. It's not any specific customer or product line per se; it's more about timing and execution risk on the Material Handling side, particularly with Hyster-Yale. We're not pointing to a specific known risk, just being mindful that some volume could leak into 2027.
Your next question comes from the line of Liam Burke with B. Riley Securities. Your line is now open.
Tony, you were talking in your prepared comments about reducing the higher end of the guidance, basically because you have better visibility. I'm looking at the two major businesses. Material Handling with the order flow gives you a pretty good sense as to what the second half is. You talked about orders slipping into 2027. On the construction side, what are you seeing that gives you more visibility on the second half activity?
It's general momentum. For Material Handling, the purchase cycle is about six months from booking to invoicing as a rule of thumb, so we have great confidence there. The timing issue impacted the top end of the guide. On construction, Q2 2026 deliveries in our marketplace were 20% above Q2 2025. We still see a lot of quoting activity. DOT budgets are in and holding pretty flat against the peak levels seen in 2025, so there's lots of work to be done in the back half. Our construction rental fleet is out with no sign of returning, so that gives us confidence in the back half. We also executed some cost takeout toward the end of Q2 that we expect to benefit the second half.
Follow-up on the construction cost reduction. You had a step-up in gross margins on new and used equipment sales. Do you expect that momentum to continue in the second half as volumes improve?
We don't expect margins to retreat and we'd probably expect a little more improvement on gross margins in the second half.
Your next question comes from the line of Steve Hansen with Raymond James. Your line is now open.
I just wanted to ask one of the earlier questions a different way, just around the guidance. Any reason you didn't decide to take the lower end of the guidance up perhaps just given all the optimistic commentary here in the outlook so far?
I think it's building a little conservatism into the guide. The back half's EBITDA is heavily weighted; something like $90 million to $100 million is implied. We wanted to squeeze the range for the investor community and given potential variability in deliveries and timing, we opted to take the top end down. We have great confidence in the low end at the moment.
Okay, great. I just want to go back to your asset optimization comments earlier as well. How do you feel about the working capital build necessary to support some of this growing order momentum that you see out there? Do you need to build a lot of working capital in the back half here?
Most of the back half will be supported by equipment deliveries, and that is typically floor planned at near 100% payable-to-value for floor plan. There'll be a little bit of AR investment, but that's a quick turnaround when selling equipment. So we wouldn't expect significant working capital investment in the back half. As projects wrap up, collections typically come in, and we often get a working capital release in the back half, especially the fourth quarter. I'd expect to see the same this year.
And just one last one, around the support side with the broader backdrop improving, any desire to start to reinvest in product support or pursue technicians more aggressively? How do you feel about your support capabilities moving into the new cycle?
It's a tale of two segments. Over the last 12 to 18 months we've focused on technician retention, training, and improving technician efficiency rather than just adding heads. There are areas where we need more techs; Material Handling could be one such area in the Midwest as manufacturing ramps. We have recruiting channels for that region. On the construction side, it's more about getting labor utilization up; New England in the Northeast is an example where we'd look to add heads. It's spotty. We're always recruiting technical individuals, but we don't have plans for a large-scale hiring program right now.
Your next question comes from the line of Ted Jackson with Northland Securities. Your line is now open.
Looking forward to the second half, my first question is on Material Handling. If you listen to the Hyster-Yale call yesterday, they trimmed their second-half 2026 delivery outlook, not because of demand, bookings are very strong, but because of a change related to tariffs where they chose to delay some deliveries so they could shift manufacturing from Europe to the U.S. to avoid tariffs. Did you see any impact from that on your second-half outlook, i.e., might some deliveries you thought would be in 2026 get pushed into 2027?
Generally, the movement we were discussing around guidance and the back half for Material Handling is correlated to execution risk: the cadence of bookings, Hyster-Yale production, our shops' prep and delivery, and invoicing. I'm not specifically familiar with the tariff-related manufacturing repatriation you described, and that was not a specific element factored into our guidance. Our commentary was more about general execution risk when backlog jumps as it has.
You made some commentary on utilization rates and the rental fleet. Is there a target you would share in terms of where you want utilization to settle? I think currently it's around the mid-30s. Where would you like it to be a year from now or at steady state?
Trailing 12-month rental revenue is $175 million and we are carrying about $500 million of gross fleet at the end of Q2, so that's roughly 35% utilization. We'd like that to get into the high 30s and even touch 40% if we could. If we can reach that metric, it would be a meaningful improvement. We're improving and have made progress, but we're not where we want to be yet.
Third question: We don't talk much about Ecoverse, but you had a good quarter out of it. Terex, which has some comparable businesses, has expressed optimism for 2027. Can you provide an update on what you're seeing in the Ecoverse market and whether you agree that the business is on the mend and what the drivers are?
Terex is more into crushing and screening, and they may have an environmental line, but Ecoverse is focused on environmental processing equipment. We've seen tailwinds in North America for this type of product. Our challenge was cost and tariff-related margin pressure as a direct importer from Germany and Europe, which caused turmoil last year. We had to renegotiate pricing and reset margins. We believe the demand was always there and continues to be strong. The margin issues are largely behind us, and we now have costs better aligned with market pricing to earn appropriate margins.
Last question: PeakLogix and the Hyster-Yale product evolutions. You have a more competitive Hyster-Yale offering for the warehouse market and you have PeakLogix's warehouse automation solution. Does having both help you sell more of each? Are there synergies in sales between the better forklift product and PeakLogix solutions?
From a sales perspective, it's symbiotic. The same customers looking to increase throughput in their warehouses and using narrow-aisle equipment are the customers that leverage PeakLogix. The analogy we use is if we sell the vehicle, now we can design and sell the track that the vehicle runs on. Hyster-Yale is making more competitive vehicles for the warehousing segment and providing multiple price points of legacy products, so we can compete in both the high end where we've been successful and the value part of the market. This helps our ability to sell integrated solutions.
So the better product and the ability to sell more vehicles should help you sell more PeakLogix track. Is that a fair way to think about it?
Yes. There are two product evolutions at Hyster-Yale: one is more competitive vehicles for the fast-growing warehousing segment, and the other is multiple price points of the legacy product for rider forklifts so we can compete on the high end and the value parts of the market. Our warehouse product is full-featured, and the differentiated price points allow us to serve more customer needs.
There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.