# ALTA EQUIPMENT GROUP INC. (ALTG) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ALTA EQUIPMENT GROUP INC.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1759824/000095017025033669/altg-20241231.htm
Accession: 0000950170-25-033669
Filing date: 2025-03-05
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/ALTG/
All MD&A years: /company/ALTG/mda/
Previous year: /company/ALTG/mda/fy2023/ (FY 2023)
Next year: /company/ALTG/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the financial statements and related notes included elsewhere in this annual report. This discussion contains “forward-looking statements” reflecting Alta’s current expectations, estimates, and assumptions concerning events and financial trends that may affect our future operating results and financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this annual report, particularly in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed may not occur. Alta assumes no obligation to update any of these forward-looking statements.

Equipment Industry Overview 2024

The North American construction equipment market experienced a downturn in 2024, with overall sales declining by approximately 10%, while some of the regions we operate in experienced reductions of up to 20%. This decline aligns with the cyclical nature of the industry. Notably, construction equipment manufacturers like Caterpillar and John Deere reported reduced sales in North America, attributed to slowing end-user demand and elevated inventory levels at machinery dealers throughout North America. Similarly, Volvo Construction Equipment reported a 20% decline in North American sales. Elevated interest rates and volatile sentiment in the marketplace underpinned by the U.S. presidential election contributed to a decrease in equipment orders. Market participants have noted that specifically, smaller to mid-sized local contractors focused on privately funded non-residential projects, were negatively impacted by the aforementioned factors and thus hesitant to committing capital to new equipment in 2024. This softening amongst local contractors and small privately funded projects was offset by continued growth amongst larger contractors working on multi-year publicly funded projects (e.g. state or federal funded infrastructure projects). Lastly, with construction equipment supply in the OEM dealer channel at historically high levels in the face of weakening demand, competitive pricing, discounting and compressed margins were all thematic across the construction equipment industry in 2024.

In contrast, the North American lift truck market exhibited growth in 2024, in terms of shipments to end users, as the industry continued to deliver off of record levels of bookings in the 2021-2022 post-COVID timeframe. Robust manufacturing sectors and expanding logistics operations are driving investments in advanced material handling solutions, including trends toward lithium battery and fuel cell-powered lift trucks and autonomous solutions. Given the sales backlog overhang that the industry continued to navigate in 2024, bookings for future lift trucks declined in 2024 when compared to previous years, as lead times and production schedules at industry OEMs continued to normalize. As backlogs reduced, lift truck manufacturing volumes are projected to be down in 2025 as supply and demand factors find their level with industry bookings expected to rebound in the second half of 2025. Although the North American lift truck industry faces production headwinds entering 2025, we remain generally optimistic about this segment. This confidence stems from the resilience of our material handling end markets - key pillars of the U.S. economy such as food production, retail, and logistics - as well as our ability to continue gaining market share.

Equipment Inventory Availability, Rental Fleet Investment and Product Support Trends

Throughout 2021 and 2022, our industry was unfavorably impacted by equipment supply chain constraints leading to shortages across construction and material handling equipment categories and limiting our ability to meet customer demand and potentially increase our market share. Throughout 2023, equipment supply chain constraints gradually subsided, resulting in an increase in our new equipment inventories relative to prior periods. This theme continued into early 2024 as dealer stock levels continued to rise industrywide, especially in the Construction Equipment segment, exasperated by demand contraction at the end user level. This dynamic led to intense pressure on equipment sales pricing in 2024, which impacted our sales and our equipment sales gross margins. Despite the difficult competitive environment and the challenging supply and demand dynamics that existed throughout 2024, we were pleased to have kept new inventory levels essentially flat, year over year.

As it pertains to rental fleet, with the increase in equipment availability, in 2023 we were able to replenish and strategically grow our rental fleet in a period where utilization and pricing remained strong. In 2024, North American rental utilization rates began to recede as supply of rental fleet was robust, and rental rates moderated. Accordingly, and in-line with foreseeable demand, in mid-2024 we strategically optimized our fleet by reducing identified excess, primarily in our rent-to-sell product categories. This initiative led to a $46.0 million reduction in rental fleet gross cost from June 30, 2024, bringing the total to $571.2 million as of December 31, 2024.

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In terms of product support, as our customers focus on the “up-time” of their equipment, we continued to see strong demand for skilled technicians' labor and replacement parts in 2024, as evidenced by our growing organic product support revenues, despite certain industry indicators pointing to a reduction in equipment utilization (e.g. the amount of hours equipment was utilized) year over year. With the level of new equipment deliveries over the previous two years, parts sales growth has moderated as the newer age field population consumes fewer parts in the earlier stages of the equipment life cycle. Additionally, as the material handling industry continues the trend toward electric forklifts, versus gas-powered, parts yields on equipment field population will continue to be pressured. Given our history, the reduction in parts consumption on electric trucks, over time, will be offset by skilled technician labor as software diagnostics and the complexity of new electrified, and potentially autonomous, equipment will demand high-end, closed-network service solutions from OEM dealers to keep customer equipment operational. Additionally, electric trucks present ancillary revenue opportunities related to batteries, chargers and charging infrastructure when compared to gas-powered trucks.

Business Description and Segments

For detailed description of our business and segments, refer to Part I, Item 1, Business, and Note 17, Segments, respectively.

Financial Statement Overview

Our revenues are primarily derived from the sale or rental of equipment and product support (e.g., parts and service) related activities, and consist of:

New equipment sales. We sell new heavy construction, material handling and environmental processing equipment and are a leading regional distributor for nationally recognized equipment manufacturers. Our new equipment sales operation is a primary source of new customers for our rental, parts and service business. The majority of our new equipment sales are predicated on exclusive distribution agreements we have with best-in-class OEMs. The sale of new equipment to customers, while profitable from a gross margin perspective, acts as a means of generating equipment field population and activity for our higher-margin aftermarket revenue streams, specifically service and parts. We also sell tangential products and services related to our material handling equipment offerings which include, but are not limited to, automated equipment installation and warehouse management systems integration.

Used equipment sales. We sell used equipment which is typically equipment that has been taken in on trade from a customer that is purchasing new equipment, equipment coming off a third-party lease arrangement where we purchase the equipment from the finance company or used equipment that is sourced for our customers in the open market by our used equipment specialists. Used equipment sales in our territories, like new equipment sales, generate parts and service business for the Company.

Parts sales. We sell replacement parts to customers and supply parts to our own rental fleet. Our in-house parts inventory is extensive such that we are able to provide timely service support to our customers. The majority of our parts inventory is made up of OEM replacement parts for those OEMs with which we have exclusive agreements to sell new equipment.

Service revenues. We provide maintenance and repair services for customer-owned equipment and maintain our own rental fleet. In addition to repair and maintenance on an as needed or scheduled basis, we provide ongoing preventative maintenance services and warranty repairs for our customers. We have committed substantial resources to training our technical service employees and have a full-scale service infrastructure that we believe differentiates us from our competitors. Approximately 44% of our employees are skilled service technicians.

Rental revenues. We rent heavy construction, compact, aerial, material handling, and a variety of other types of equipment to our customers on a daily, weekly and monthly basis. Our rental fleet, which is well-maintained, has an original acquisition cost (which we define as the cost originally paid to manufacturers plus any capitalized costs) of $565.5 million as of December 31, 2024. The original acquisition cost of our rental fleet excludes $5.7 million of assets associated with our guaranteed purchase obligations, which are assets that are not in our day-to-day operational control. In addition to being a core business, our rental business also creates cross-selling opportunities for us in our sales and product support activities.

Rental equipment sales. We also sell rental equipment from our rental fleet. Rental equipment sales may occur at various stages in an equipment’s lifecycle, depending on customer demand and original purchase intentions of the equipment. Rental equipment purchased directly into the rental fleet tends to be rented for the majority of its useful life before being sold (which we refer as rent-to-rent equipment), and rental equipment purchased as new inventory then later transferred into the rental fleet tends to be rented until a retail opportunity presents itself (which we refer as rent-to-sell equipment). In our Material Handling segment, our rental equipment sales are primarily of rent-to-rent equipment and in our Construction Equipment segment, our rental equipment sales are primarily of rent-to-sell equipment. Selling lightly used construction equipment from our rental fleet allows us to meet customer demand for specific model years of equipment at various price points versus only offering brand new equipment to the market. Customers often have options to purchase equipment after or before rental agreements have matured. Rental equipment sales, like new and used equipment sales, generate customer-owned equipment field population within our territories that ultimately yield high-margin parts and service revenues for us.

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Principal Costs and Expenses

Our cost of revenues are primarily related to the costs associated with the sale or rental of equipment and product support activities, which include direct labor costs for our skilled technicians. Our operating expenses consist principally of selling, general and administrative expenses, which primarily include personnel costs associated with our sales and administrative staff and expenses associated with the deployment of our service vehicle fleet and occupancy expenses. In addition, we have interest expense related to our floor plan payables, finance leases, line of credit, and senior secured second lien notes. These principal costs and expenses are described further below:

New equipment sales. Cost of new equipment sold consists of the total acquisition costs of the new equipment we purchase from third parties.

Used equipment sales. Cost of used equipment sold consists of the net book value, or cost, of used equipment we purchase from third parties or the trade-in value of used equipment that we obtain from customers in new equipment sales transactions.

Parts sales. Cost of parts sales represents the average cost of parts used in the maintenance and repair of customer-owned equipment we service or parts sold directly to customers for their owned equipment (e.g., over-the-counter parts sales).

Services revenues. Cost of service revenues primarily represents the labor costs attributable to services provided for the maintenance and repair of customer-owned equipment. Training, paid time off, and other non-billable costs of maintaining our expert technicians are recorded in this line item in addition to the costs of direct customer-billable labor.

Rental revenues. Rental expense represents the costs associated with rental equipment, including, among other things, the cost of repairing and maintaining our rental equipment and other miscellaneous costs of owning rental equipment. Other rental expenses consist primarily of equipment support activities that we provide our customers in connection with renting equipment, such as freight services and damage waiver policies.

Rental depreciation. Depreciation of rental equipment represents the depreciation costs attributable to rental equipment. Estimated useful lives vary based upon type of equipment. See Note 2, Summary of Significant Accounting Policies, for information on our rental equipment depreciation methods.

Rental equipment sales. Cost of previously rented equipment sold consists of the net book value (e.g., net of accumulated depreciation) of rental equipment sold from our rental fleet.

Operating expenses. These costs are comprised of three main components: personnel, operational, and occupancy costs. Personnel costs are comprised of hourly and salaried wages for administrative employees, including incentive compensation, sale commissions, and employee benefits, such as medical benefits. Operational costs include marketing activities, costs associated with deploying and leasing our service vehicle fleet, insurance, IT, office and shop supplies, general corporate costs, depreciation on non-sales and rental related assets, and intangible amortization. Occupancy costs are comprised of all expenses related to our facility infrastructure, including rent, utilities, property taxes, and building insurance.

Other expense, net. This section of the Consolidated Statements of Operations is mostly comprised of interest expense and other miscellaneous items that result in income or expense. Interest expense is driven by our floor plan facilities, line of credit, senior secured second lien notes, and finance lease arrangements.

25

Results of Operations

Years ended December 31, 2024 and 2023

Consolidated Results

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Revenues:"],["New and used equipment sales","$","987.0","","","$","1,025.9","","","$","(38.9",")","","","(3.8",")%"],["Parts sales","","294.4","","","","278.3","","","","16.1","","","","5.8","%"],["Service revenues","","253.8","","","","241.3","","","","12.5","","","","5.2","%"],["Rental revenues","","203.4","","","","202.4","","","","1.0","","","","0.5","%"],["Rental equipment sales","","138.0","","","","128.9","","","","9.1","","","","7.1","%"],["Total revenues","","1,876.6","","","","1,876.8","","","","(0.2",")","","","\u2014"],["Cost of revenues:"],["New and used equipment sales","","837.9","","","","853.6","","","","(15.7",")","","","(1.8",")%"],["Parts sales","","196.2","","","","183.2","","","","13.0","","","","7.1","%"],["Service revenues","","105.8","","","","103.4","","","","2.4","","","","2.3","%"],["Rental revenues","","22.5","","","","24.8","","","","(2.3",")","","","(9.3",")%"],["Rental depreciation","","115.9","","","","110.1","","","","5.8","","","","5.3","%"],["Rental equipment sales","","104.6","","","","94.5","","","","10.1","","","","10.7","%"],["Total cost of revenues","","1,382.9","","","","1,369.6","","","","13.3","","","","1.0","%"],["Gross profit","","493.7","","","","507.2","","","","(13.5",")","","","(2.7",")%"],["Selling, general and administrative expenses","","446.5","","","","430.3","","","","16.2","","","","3.8","%"],["Non-rental depreciation and amortization","","28.6","","","","22.5","","","","6.1","","","","27.1","%"],["Total operating expenses","","475.1","","","","452.8","","","","22.3","","","","4.9","%"],["Income from operations","","18.6","","","","54.4","","","","(35.8",")","","","(65.8",")%"],["Other (expense) income:"],["Interest expense, floor plan payable \u2013 new equipment","","(12.1",")","","","(8.4",")","","","(3.7",")","","","44.0","%"],["Interest expense \u2013 other","","(69.2",")","","","(48.6",")","","","(20.6",")","","","42.4","%"],["Other income","","3.1","","","","5.1","","","","(2.0",")","","","(39.2",")%"],["Loss on extinguishment of debt","","(6.7",")","","","\u2014","","","","(6.7",")","","NM"],["Total other expense, net","","(84.9",")","","","(51.9",")","","","(33.0",")","","","63.6","%"],["(Loss) income before taxes","","(66.3",")","","","2.5","","","","(68.8",")","","NM"],["Income tax benefit","","(4.2",")","","","(6.4",")","","","2.2","","","NM"],["Net (loss) income","","(62.1",")","","","8.9","","","","(71.0",")","","NM"],["Preferred stock dividends","","(3.0",")","","","(3.0",")","","","\u2014","","","","\u2014"],["Net (loss) income available to common stockholders","$","(65.1",")","","$","5.9","","","$","(71.0",")","","NM"],["Adjusted EBITDA(1)","$","168.3","","","$","191.4","","","$","(23.1",")","","","(12.1",")%"],["NM - calculated change not meaningful"],["(1) Adjusted EBITDA is a non-GAAP measure. Refer to \u201cNon-GAAP Financial Measures\u201d for a definition of Adjusted EBITDA and below for a reconciliation of our Adjusted EBITDA to net (loss) income, the most comparable U.S. GAAP measure."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Percent of Revenues"],["","Year Ended December 31,"],["","2024","","","2023"],["Revenues:"],["New and used equipment sales","","52.6","%","","","54.6","%"],["Parts sales","","15.7","%","","","14.8","%"],["Service revenues","","13.5","%","","","12.9","%"],["Rental revenues","","10.8","%","","","10.8","%"],["Rental equipment sales","","7.4","%","","","6.9","%"],["Total revenues","","100.0","%","","","100.0","%"],["Cost of revenues:"],["New and used equipment sales","","44.6","%","","","45.5","%"],["Parts sales","","10.5","%","","","9.8","%"],["Service revenues","","5.6","%","","","5.5","%"],["Rental revenues","","1.2","%","","","1.3","%"],["Rental depreciation","","6.2","%","","","5.9","%"],["Rental equipment sales","","5.6","%","","","5.0","%"],["Total cost of revenues","","73.7","%","","","73.0","%"],["Gross profit","","26.3","%","","","27.0","%"]]
[[/GREPCENT_TABLE]]

Non-GAAP Financial Measures:

Adjusted EBITDA

[[GREPCENT_TABLE]]
[["","Adjusted EBITDA"],["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Net (loss) income available to common stockholders","$","(65.1",")","","$","5.9","","","$","(71.0",")","","NM"],["Depreciation and amortization","","144.5","","","","132.6","","","","11.9","","","","9.0","%"],["Interest expense","","81.3","","","","57.0","","","24.3","","","","42.6","%"],["Income tax benefit","","(4.2",")","","","(6.4",")","","","2.2","","","NM"],["Transaction and consulting costs","","2.3","","","","1.6","","","","0.7","","","NM"],["Non-cash adjustments","","\u2014","","","","(1.5",")","","","1.5","","","NM"],["Loss on debt extinguishment","","6.7","","","","\u2014","","","","6.7","","","","\u2014"],["Share-based incentives","","4.8","","","","4.3","","","","0.5","","","","11.6","%"],["Other expenses","","4.3","","","","3.3","","","","1.0","","","NM"],["Preferred stock dividend","","3.0","","","","3.0","","","","\u2014","","","","\u2014"],["Loss on auction sale","","2.8","","","","\u2014","","","","2.8","","","","\u2014"],["Showroom-ready equipment interest expense","","(12.1",")","","","(8.4",")","","","(3.7",")","","","44.0","%"],["Adjusted EBITDA","$","168.3","","","$","191.4","","","$","(23.1",")","","","(12.1",")%"],["NM - calculated change not meaningful"]]
[[/GREPCENT_TABLE]]

Organic Revenues

[[GREPCENT_TABLE]]
[["","Organic Revenues"],["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Total revenues","$","1,876.6","","","$","1,876.8","","","$","(0.2",")","","","\u2014"],["Acquisitions revenues","","65.7","","","","\u2014"],["Organic revenues:"],["New and used equipment sales","","949.3","","","","1,025.9","","","","(76.6",")","","","(7.5",")%"],["Parts sales","","281.1","","","","278.3","","","","2.8","","","","1.0","%"],["Service revenues","","250.6","","","","241.3","","","","9.3","","","","3.9","%"],["Rental revenues","","193.9","","","","202.4","","","","(8.5",")","","","(4.2",")%"],["Rental equipment sales","","136.0","","","","128.9","","","","7.1","","","","5.5","%"],["Total organic revenues","$","1,810.9","","","$","1,876.8","","","$","(65.9",")","","","(3.5",")%"]]
[[/GREPCENT_TABLE]]

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The above tables contain non-GAAP financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the consolidated statements of operations, balance sheets or statements of cash flows of the company. We disclose non-GAAP financial measures, including Adjusted EBITDA and organic revenues and growth rates associated with organic revenues because we believe they are useful performance measures that assist in an effective evaluation of our operating performance. We believe such measures are useful for investors and others in understanding and evaluating our operating results in the same manner as our management. However, such measures are not financial measures calculated in accordance with U.S. GAAP and should not be considered as a substitute for, or in isolation from, net income, revenues, or any other operating performance measures calculated in accordance with U.S. GAAP.

We define Adjusted EBITDA as net income before interest expense (not including floor plan interest paid on new equipment), income taxes, depreciation and amortization, adjustments for certain one-time or non-recurring items, other items not necessarily indicative of our underlying operating performance and other items. We exclude these items from net income in arriving at Adjusted EBITDA because these amounts are either non-recurring or can vary substantially within the industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.

We define organic revenue growth as revenue growth excluding the impact of acquisitions that do not appear fully in both periods in the current and prior years. We believe organic revenue growth is a meaningful metric to investors as it provides a more consistent comparison of our revenues to prior periods as well as to industry peers.

Pursuant to the requirements of Regulation G, we have provided a reconciliation of Adjusted EBITDA and organic revenues to the most directly comparable U.S. GAAP financial measure in the tables above and organic revenues in subsequent tables in management's discussion and analysis of our individual business segments. This measure is supplemental to, and should be used in conjunction with, the most comparable U.S. GAAP measures. Management uses these non-GAAP financial measures to monitor and evaluate financial results and trends.

Revenues: Consolidated revenues decreased by $0.2 million to $1,876.6 million for the year ended December 31, 2024 as compared to 2023. The increases in product support, rental revenues and rental equipment sales were substantially offset by the decrease in new and used equipment sales due to weakened market demand for heavy equipment. The decline in new and used equipment sales was most significant in our Master Distribution segment, which primarily supplies equipment to sub-dealers, with revenues for the year ended December 31, 2024, decreasing by $24.5 million compared to the prior year. This was followed by our Construction Equipment segment, which saw a $23.5 million decline in new and used equipment sales. While new and used equipment revenues stagnated on weaker demand versus last year, our product support departments (parts and service) grew 2.3% organically for the year ended December 31, 2024. Rental revenues exhibited a 4.2% organic decrease, as rates moderated and utilization decreased from the prior year. Rental equipment sales increased organically by 5.5% for the year ended December 31, 2024 as we looked to sell rental equipment to help bolster field population for our aftermarket departments, however some of the increase was processed through auction sale channels impacting gross profit margins.

Gross profit (GP):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Consolidated","GP%","","","GP%","","","GP%"],["New and used equipment sales","","15.1","%","","","16.8","%","","","(1.7",")%"],["Parts sales","","33.4","%","","","34.2","%","","","(0.8",")%"],["Service revenues","","58.3","%","","","57.1","%","","","1.2","%"],["Rental revenues","","32.0","%","","","33.3","%","","","(1.3",")%"],["Rental equipment sales","","24.2","%","","","26.7","%","","","(2.5",")%"],["Consolidated gross profit","","26.3","%","","","27.0","%","","","(0.7",")%"]]
[[/GREPCENT_TABLE]]

Consolidated gross profit decreased by 70 basis points from 27.0% in the year ended December 31, 2023 to 26.3% over the same period in 2024. New and used equipment sales margins decreased 170 basis points to 15.1%, a reflection of a comparably softened pricing environment, which was primarily observed in both our Material Handling and Construction Equipment segments, and due to our use of the auction sales channel in the fourth quarter for a number of aged used and rental units in the Material Handling fleet. Primarily, the impact of an over-supplied construction equipment market and historically competitive pricing led to a 250 basis point gross profit margin decrease when compared to the prior year. Parts gross profit margins decreased by 80 basis points from the prior year, isolated primarily within the Master Distribution segment but remained within our range of expectation overall. Service gross profit margins improved in the year ended December 31, 2024 when compared to the prior year increasing 120 basis points, primarily due to an improved rate realization on service labor. We realized a 130 basis point decrease in rental revenues gross profit margin for the year ended December 31, 2024, largely a result of moderating rental rates and fleet utilization as well as higher rental depreciation expense.

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Operating expenses: Consolidated operating expenses increased by 4.9% to $475.1 million for the year ended December 31, 2024 compared to the prior year, primarily driven by the full period impact from our 2023 acquisitions and additional expenses to support our organic growth including new branches with associated one-time costs, such as grand openings and initial stocking costs.

Other expense, net: Consolidated other expense, net for the year ended December 31, 2024 was $84.9 million compared to $51.9 million for the year ended December 31, 2023. The increase is primarily due to an increase in interest expense, namely a result of the refinance of our Senior Secured Second Lien Notes during the second quarter of 2024.

Income tax benefit: The Company recorded an income tax benefit of $4.2 million and $6.4 million for the years ended December 31, 2024 and 2023, respectively. The income tax benefit in the current year was primarily due to pre-tax losses partially offset by the valuation allowance recorded against a portion of the deferred tax asset relating to the U.S. disallowed interest expense carryforwards created by the provisions of the TCJA while the prior year benefit was due to the release of the valuation allowance on certain U.S. federal and state deferred tax assets.

Material Handling Results

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Revenues:"],["New and used equipment sales","$","365.2","","","$","367.6","","","","(2.4",")","","","(0.7",")%"],["Parts sales","","99.6","","","","99.5","","","","0.1","","","","0.1","%"],["Service revenues","","135.9","","","","132.8","","","","3.1","","","","2.3","%"],["Rental revenues","","76.2","","","","76.4","","","","(0.2",")","","","(0.3",")%"],["Rental equipment sales","","10.5","","","","5.2","","","","5.3","","","","101.9","%"],["Total revenues","","687.4","","","","681.5","","","","5.9","","","","0.9","%"],["Cost of revenues:"],["New and used equipment sales","","300.2","","","","294.3","","","","5.9","","","","2.0","%"],["Parts sales","","62.6","","","","61.8","","","","0.8","","","","1.3","%"],["Service revenues","","56.2","","","","57.3","","","","(1.1",")","","","(1.9",")%"],["Rental revenues","","6.5","","","","9.7","","","","(3.2",")","","","(33.0",")%"],["Rental depreciation","","31.6","","","","26.8","","","","4.8","","","","17.9","%"],["Rental equipment sales","","7.6","","","","3.4","","","","4.2","","","","123.5","%"],["Total cost of revenues","","464.7","","","","453.3","","","","11.4","","","","2.5","%"],["Gross profit","","222.7","","","","228.2","","","","(5.5",")","","","(2.4",")%"],["Selling, general and administrative expenses","","184.7","","","","187.8","","","","(3.1",")","","","(1.7",")%"],["Non-rental depreciation and amortization","","9.4","","","","8.1","","","","1.3","","","","16.0","%"],["Total operating expenses","","194.1","","","","195.9","","","","(1.8",")","","","(0.9",")%"],["Income from operations","","28.6","","","","32.3","","","","(3.7",")","","","(11.5",")%"],["Other (expense) income:"],["Interest expense, floor plan payable \u2013 new equipment","","(3.6",")","","","(2.7",")","","","(0.9",")","","","33.3","%"],["Interest expense \u2013 other","","(20.6",")","","","(15.4",")","","","(5.2",")","","","33.8","%"],["Other income","","0.6","","","","0.5","","","","0.1","","","","20.0","%"],["Total other expense, net","","(23.6",")","","","(17.6",")","","","(6.0",")","","","34.1","%"],["Income before taxes","$","5.0","","","$","14.7","","","$","(9.7",")","","","(66.0",")%"],["Segment adjusted EBITDA","$","70.1","","","$","65.7","","","$","4.4","","","","6.7","%"]]
[[/GREPCENT_TABLE]]

29

[[GREPCENT_TABLE]]
[["","Percent of Revenues"],["","Year Ended December 31,"],["","2024","","","2023"],["Revenues:"],["New and used equipment sales","","53.1","%","","","53.9","%"],["Parts sales","","14.5","%","","","14.6","%"],["Service revenues","","19.8","%","","","19.5","%"],["Rental revenues","","11.1","%","","","11.2","%"],["Rental equipment sales","","1.5","%","","","0.8","%"],["Total revenues","","100.0","%","","","100.0","%"],["Cost of revenues:"],["New and used equipment sales","","43.7","%","","","43.2","%"],["Parts sales","","9.1","%","","","9.1","%"],["Service revenues","","8.2","%","","","8.4","%"],["Rental revenues","","0.9","%","","","1.4","%"],["Rental depreciation","","4.6","%","","","3.9","%"],["Rental equipment sales","","1.1","%","","","0.5","%"],["Total cost of revenues","","67.6","%","","","66.5","%"],["Gross profit","","32.4","%","","","33.5","%"]]
[[/GREPCENT_TABLE]]

Non-GAAP Financial Measure: Organic Revenues

[[GREPCENT_TABLE]]
[["","Organic Revenues"],["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Total revenues","$","687.4","","","$","681.5","","","$","5.9","","","","0.9","%"],["Acquisitions revenues","","1.8","","","","\u2014"],["Organic revenues:"],["New and used equipment sales","","364.7","","","","367.6","","","","(2.9",")","","","(0.8",")%"],["Parts sales","","99.0","","","","99.5","","","","(0.5",")","","","(0.5",")%"],["Service revenues","","135.3","","","","132.8","","","","2.5","","","","1.9","%"],["Rental revenues","","76.1","","","","76.4","","","","(0.3",")","","","(0.4",")%"],["Rental equipment sales","","10.5","","","","5.2","","","","5.3","","","","101.9","%"],["Total organic revenues","$","685.6","","","$","681.5","","","$","4.1","","","","0.6","%"]]
[[/GREPCENT_TABLE]]

Revenues: Material Handling segment revenues increased by $5.9 million to $687.4 million for the year ended December 31, 2024 as compared to the same period last year. Organically, the segment revenues increased $4.1 million, or 0.6% for the year ended December 31, 2024. New and used equipment sales were relatively flat over last year as we worked through a notable new equipment sales backlog to begin 2024 that helped stabilize results despite a depressed demand environment in the equipment spot market. New equipment sales for lift trucks improved in 2024 due to our strong backlog and equipment availability during the year, but used equipment pricing and demand suffered along with fewer opportunities for our automated equipment installation and warehouse management systems integration offerings. Product support revenues improved by 0.9%, with service revenues increasing 1.9% for the year ended December 31, 2024 as compared to prior year reflecting our ability to pass along inflationary-based pricing increases to our customers to support their fleets. Rental revenues decreased 0.4% for the year ended December 31, 2024 as compared to last year primarily due to reduced physical utilization of our fleet. Rental equipment sales increased $5.3 million organically, or 101.9%, on low volume as we have strategically targeted and disposed of underperforming rental units or rental units that have reached the end of their useful life in our fleet. In the fourth quarter of 2024, we specifically leveraged auction channels to offload an atypical volume of aged used equipment, primarily from our rental department, as a strategic measure to adjust our fleet size.

Gross profit (GP):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["","GP%","","","GP%","","","GP%"],["New and used equipment sales","","17.8","%","","","19.9","%","","","(2.1",")%"],["Parts sales","","37.1","%","","","37.9","%","","","(0.8",")%"],["Service revenues","","58.6","%","","","56.9","%","","","1.7","%"],["Rental revenues","","50.0","%","","","52.2","%","","","(2.2",")%"],["Rental equipment sales","","27.6","%","","","34.6","%","","","(7.0",")%"],["Segment gross profit","","32.4","%","","","33.5","%","","","(1.1",")%"]]
[[/GREPCENT_TABLE]]

30

Material Handling gross profit for the year ended December 31, 2024 decreased 110 basis points to 32.4% compared to the same period in 2023. New and used equipment gross margins compressed in part from the used equipment auction related losses experienced in the fourth quarter, but also due to sales mix variances, with reduced sales coming from Peaklogix, our higher margin warehousing solutions platform and increased pressure on used equipment pricing throughout 2024. Parts gross margins have remained relatively consistent year over year and in line with expectations. The 170 basis point service margin increase for the year ended December 31, 2024 can be attributed to margin improvements in major service categories, including customer and OEM warranty and fleet work, and on better pricing realization and technician productivity measures. Rental revenues gross margins declined 220 basis points primarily due to replenishing our rental fleet and the associated increase in depreciation expense as well as lower utilization levels. Rental equipment sales margins decreased on low volumes amid pricing pressures from greater availability of equipment in the marketplace relative to the prior year and disposal of underperforming units through the auction channel in the fourth quarter.

Operating expenses: Operating expenses decreased by $1.8 million to $194.1 million for the year ended December 31, 2024 as compared to the prior year, primarily due to a change in the intercompany allocation of costs and cost savings initiatives implemented during 2024 which primarily impacted personnel related expenses.

Other (expense) income, net: Other expenses increased by $6.0 million to $23.6 million for the year ended December 31, 2024 as compared to the same period last year. The increase is mainly related to the aforementioned cumulative change in intercompany expense allocation for shared service functions and increased interest expense due to higher effective interest rates, inventory, and rental fleet levels realized in 2024 when compared to 2023.

Construction Equipment Results

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Revenues:"],["New and used equipment sales","$","574.4","","","$","597.9","","","$","(23.5",")","","","(3.9",")%"],["Parts sales","","186.7","","","","170.1","","","","16.6","","","","9.8","%"],["Service revenues","","117.1","","","","108.2","","","","8.9","","","","8.2","%"],["Rental revenues","","125.7","","","","124.8","","","","0.9","","","","0.7","%"],["Rental equipment sales","","127.5","","","","123.7","","","","3.8","","","","3.1","%"],["Total revenues","","1,131.4","","","","1,124.7","","","","6.7","","","","0.6","%"],["Cost of revenues:"],["New and used equipment sales","","503.3","","","","515.5","","","","(12.2",")","","","(2.4",")%"],["Parts sales","","129.5","","","","117.5","","","","12.0","","","","10.2","%"],["Service revenues","","48.8","","","","45.9","","","","2.9","","","","6.3","%"],["Rental revenues","","16.0","","","","15.1","","","","0.9","","","","6.0","%"],["Rental depreciation","","82.7","","","","81.8","","","","0.9","","","","1.1","%"],["Rental equipment sales","","97.0","","","","91.1","","","","5.9","","","","6.5","%"],["Total cost of revenues","","877.3","","","","866.9","","","","10.4","","","","1.2","%"],["Gross profit","","254.1","","","","257.8","","","","(3.7",")","","","(1.4",")%"],["Selling, general and administrative expenses","","229.6","","","","211.6","","","","18.0","","","","8.5","%"],["Non-rental depreciation and amortization","","15.2","","","","10.7","","","","4.5","","","","42.1","%"],["Total operating expenses","","244.8","","","","222.3","","","","22.5","","","","10.1","%"],["Income from operations","","9.3","","","","35.5","","","","(26.2",")","","","(73.8",")%"],["Other (expense) income:"],["Interest expense, floor plan payable \u2013 new equipment","","(7.3",")","","","(4.8",")","","","(2.5",")","","","52.1","%"],["Interest expense \u2013 other","","(41.2",")","","","(28.3",")","","","(12.9",")","","","45.6","%"],["Other income","","2.4","","","","4.6","","","","(2.2",")","","","(47.8",")%"],["Total other expense, net","","(46.1",")","","","(28.5",")","","","(17.6",")","","","61.8","%"],["(Loss) income before taxes","$","(36.8",")","","$","7.0","","","$","(43.8",")","","","(625.7",")%"],["Segment adjusted EBITDA","$","104.2","","","$","128.6","","","$","(24.4",")","","","(19.0",")%"]]
[[/GREPCENT_TABLE]]

31

[[GREPCENT_TABLE]]
[["","Percent of Revenues"],["","Year Ended December 31,"],["","2024","","","2023"],["Revenues:"],["New and used equipment sales","","50.7","%","","","53.2","%"],["Parts sales","","16.5","%","","","15.1","%"],["Service revenues","","10.4","%","","","9.6","%"],["Rental revenues","","11.1","%","","","11.1","%"],["Rental equipment sales","","11.3","%","","","11.0","%"],["Total revenues","","100.0","%","","","100.0","%"],["Cost of revenues:"],["New and used equipment sales","","44.5","%","","","45.9","%"],["Parts sales","","11.4","%","","","10.4","%"],["Service revenues","","4.3","%","","","4.1","%"],["Rental revenues","","1.4","%","","","1.3","%"],["Rental depreciation and amortization","","7.3","%","","","7.3","%"],["Rental equipment sales","","8.6","%","","","8.1","%"],["Total cost of revenues","","77.5","%","","","77.1","%"],["Gross profit","","22.5","%","","","22.9","%"]]
[[/GREPCENT_TABLE]]

Non-GAAP Financial Measure: Organic Revenues

[[GREPCENT_TABLE]]
[["","Organic Revenues"],["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Total revenues","$","1,131.4","","","$","1,124.7","","","$","6.7","","","","0.6","%"],["Acquisitions revenues","","63.9","","","","\u2014"],["Organic revenues:"],["New and used equipment sales","","537.2","","","","597.9","","","","(60.7",")","","","(10.2",")%"],["Parts sales","","174.0","","","","170.1","","","","3.9","","","","2.3","%"],["Service revenues","","114.5","","","","108.2","","","","6.3","","","","5.8","%"],["Rental revenues","","116.3","","","","124.8","","","","(8.5",")","","","(6.8",")%"],["Rental equipment sales","","125.5","","","","123.7","","","","1.8","","","","1.5","%"],["Total organic revenues","$","1,067.5","","","$","1,124.7","","","$","(57.2",")","","","(5.1",")%"]]
[[/GREPCENT_TABLE]]

Revenues: Construction Equipment segment revenues increased by 0.6% to $1,131.4 million for the year ended December 31, 2024 as compared to the same period last year, primarily related to the full-period impact from the Burris and Ault acquisitions made in the fourth quarter of 2023. Organically, the segment revenues decreased 5.1% for the year ended December 31, 2024 as compared to the same period last year. Organic new and used equipment sales decreased by $60.7 million, or 10.2%, amidst an overall decline in demand for heavy equipment in 2024, with certain of our markets (defined as volume of new heavy construction units sold into a region) declining by approximately 20%. Market demand for equipment from small and medium sized contractors declined as uncertainty surrounding the U.S. presidential election created apprehension amongst contractors and as elevated interest rates made new project funding more challenging than previous years. Further, heightened new equipment availability and dealer stock levels throughout the industry resulted in an increased competitive environment compared to the prior year making holding market share in certain regions and product categories more difficult. Despite a challenging environment for equipment sales, product support revenues, consisting of parts and service revenues, increased 3.7% organically as we have been able to increase skilled technician headcount and improve rate realization on service labor. Rental revenues decreased 6.8%, on an organic basis for the year ended December 31, 2024 as compared to the prior year on a reduced average fleet size, while rental equipment sales increased for the year ended December 31, 2024 by $1.8 million due to strategic sales of rental equipment to generate field population and right-sizing fleet levels to match realized levels of rental equipment demand.

32

Gross profit (GP):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["","GP%","","","GP%","","","GP%"],["New and used equipment sales","","12.4","%","","","13.8","%","","","(1.4",")%"],["Parts sales","","30.6","%","","","30.9","%","","","(0.3",")%"],["Service revenues","","58.3","%","","","57.6","%","","","0.7","%"],["Rental revenues","","21.5","%","","","22.4","%","","","(0.9",")%"],["Rental equipment sales","","23.9","%","","","26.4","%","","","(2.5",")%"],["Segment gross profit","","22.5","%","","","22.9","%","","","(0.4",")%"]]
[[/GREPCENT_TABLE]]

Construction Equipment gross profit decreased by 40 basis points to 22.5% from 22.9% for the year ended December 31, 2024 as compared to 2023, with lower margins on equipment sales reflective of elevated new inventory levels at heavy machinery dealers throughout the industry combined with softening demand, both of which led to a highly competitive pricing environment and lower margins realized in 2024 when compared to history. Specifically, new and used equipment sales margins decreased by 140 basis points to 12.4%, given the aforementioned market dynamics, leading to new and used gross profit decreasing to $71.1 million from $82.4 million in the same period last year. Despite higher rental equipment sales, the softened and highly competitive used equipment pricing environment in 2024 led to a 250 basis point decrease in rental equipment sales margin when comparing the year-over-year periods (equating to rental equipment gross profits of $30.5 million compared to $32.6 million from the same period last year). Parts sales margins for the year ended December 31, 2024 remained consistent when compared to the same time last year, decreasing by 30 basis points but within our expected range. Service gross margins increased by 70 basis points from 2023 primarily related to improved rate realization. Rental revenues gross margin for the year ended December 31, 2024 decreased by 90 basis points compared to the same period last year as depreciation increased despite a lower level of average fleet size.

Operating expenses: Construction Equipment operating expenses increased by $22.5 million to $244.8 million for the year ended December 31, 2024 as compared to 2023. The overall increase is mainly due to the full-period impact from the Burris and Ault acquisitions made in the fourth quarter of 2023 but is also influenced by relatively higher facility-related expenses from new branch openings. Sequentially across quarters, organic operating expenses decreased in both of the last two quarters of 2024, as cost-saving measures were successfully implemented, primarily impacting personnel related expenses. Additionally, and similar to the Material Handling segment, a year-to-date cumulative change in the allocation of intercompany expenses for shared service functions from Other income to General and administrative expenses was made during the third quarter of 2023, partially offsetting the aforementioned increases from acquisitions.

Other (expense) income, net: Construction Equipment other expense, net increased by $17.6 million to $46.1 million for the year ended December 31, 2024 as compared to the same period in 2023. The variance was mainly due to increased floor plan interest expense related to a combination of higher effective interest rates on higher levels of new inventory that were no longer within the subsidized period of our OEMs, higher effective interest rates on operating debt borrowings and increased debt from financed acquisitions within the segment (Ault and Burris purchased Q4 2023).

33

Master Distribution Results

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["Revenues:"],["New and used equipment sales","$","48.0","","","$","72.5","","","$","(24.5",")","","","(33.8",")%"],["Parts sales","","8.9","","","","9.8","","","","(0.9",")","","","(9.2",")%"],["Service revenues","","0.8","","","","0.3","","","","0.5","","","","166.7","%"],["Rental revenues","","1.5","","","","1.2","","","","0.3","","","","25.0","%"],["Total revenues","","59.2","","","","83.8","","","","(24.6",")","","","(29.4",")%"],["Cost of revenues:"],["New and used equipment sales","","35.9","","","","54.4","","","","(18.5",")","","","(34.0",")%"],["Parts sales","","5.0","","","","5.0","","","","\u2014","","","","\u2014"],["Service revenues","","0.9","","","","0.2","","","","0.7","","","","350.0","%"],["Rental depreciation","","1.1","","","","0.8","","","","0.3","","","","37.5","%"],["Total cost of revenues","","42.9","","","","60.4","","","","(17.5",")","","","(29.0",")%"],["Gross profit","","16.3","","","","23.4","","","","(7.1",")","","","(30.3",")%"],["Selling, general and administrative expenses","","13.0","","","","12.3","","","","0.7","","","","5.7","%"],["Non-rental depreciation and amortization","","3.5","","","","3.6","","","","(0.1",")","","","(2.8",")%"],["Total operating expenses","","16.5","","","","15.9","","","","0.6","","","","3.8","%"],["(Loss) income from operations","","(0.2",")","","","7.5","","","","(7.7",")","","","(102.7",")%"],["Other (expense) income:"],["Interest expense, floor plan payable \u2013 new equipment","","(1.4",")","","","(0.7",")","","","(0.7",")","","","100.0","%"],["Interest expense \u2013 other","","(3.1",")","","","(2.7",")","","","(0.4",")","","","14.8","%"],["Other expense","","(0.3",")","","","\u2014","","","","(0.3",")","","","\u2014"],["Total other expense, net","","(4.8",")","","","(3.4",")","","","(1.4",")","","","41.2","%"],["(Loss) income before taxes","$","(5.0",")","","$","4.1","","","$","(9.1",")","","","(222.0",")%"],["Segment adjusted EBITDA","$","4.7","","","$","12.5","","","$","(7.8",")","","","(62.4",")%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Percent of Revenues"],["","Year Ended December 31,"],["","2024","","","2023"],["Revenues:"],["New and used equipment sales","","81.1","%","","","86.5","%"],["Parts sales","","15.0","%","","","11.7","%"],["Service revenues","","1.4","%","","","0.4","%"],["Rental revenues","","2.5","%","","","1.4","%"],["Total revenues","","100.0","%","","","100.0","%"],["Cost of revenues:"],["New and used equipment sales","","60.6","%","","","64.9","%"],["Parts sales","","8.5","%","","","6.0","%"],["Service revenues","","1.5","%","","","0.2","%"],["Rental depreciation and amortization","","1.9","%","","","1.0","%"],["Total cost of revenues","","72.5","%","","","72.1","%"],["Gross profit","","27.5","%","","","27.9","%"]]
[[/GREPCENT_TABLE]]

34

Revenues: Master Distribution segment revenues for the year ended December 31, 2024 were $59.2 million, a decrease of $24.6 million from the prior year same period. Our Master Distribution segment has established a distinct position in the marketplace for sales of specialized equipment designed for customers in environmental processing and waste management throughout North America. The Master Distribution segment has two primary sales channels for which it sells equipment: (1) through its dealer channel whereby contractual relationships are established with sub-dealers that hold stock inventory and ultimately sell to end users and (2) through direct sale relationships whereby end customers source specific types of equipment directly. As dealer channel sales depend on sub-dealer stocking levels, in 2023 the supply of new equipment was in the initial phase of meeting high levels of pent-up post-pandemic demand and our Master Distribution sub-dealers fulfilled stocking needs. With sub-dealer stocking levels full in 2024, by contrast, sales volumes reduced for our Master Distribution segment. Further, a challenging equipment demand environment due in part to an elevated interest rate environment contributed to volume and revenues declines in 2024. On a positive note, despite being a smaller portion of the total sales mix, the Master Distribution segment's direct sale business, primarily consisting of compost turning and bulk commercial food waste processing machinery, gained traction in 2024. Segment-level parts sales were down for the year ended December 31, 2024 as we sold multiple large component parts in 2023 when compared to 2024 and we observed increased competition from parts "Will-Fitters" (non-OEM manufacturers) on high-volume wear parts, all coupled with an overall depressed demand environment.

Gross profit (GP):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","","Increase (Decrease)"],["","2024","","","2023","","","2024 versus 2023"],["","GP%","","","GP%","","","GP%"],["New and used equipment sales","","25.2","%","","","25.0","%","","","0.2","%"],["Parts sales","","43.8","%","","","49.0","%","","","(5.2",")%"],["Service revenues","","(12.5",")%","","","33.3","%","","NM"],["Rental revenues","","26.7","%","","","33.3","%","","","(6.6",")%"],["Segment gross profit","","27.5","%","","","27.9","%","","","(0.4",")%"],["NM - calculated change not meaningful"]]
[[/GREPCENT_TABLE]]

For the year ended December 31, 2024, gross profit margin on new and used equipment sales were 25.2%, relatively flat from prior year and in line with expectations. Parts gross profit margin was 43.8% for the year ended December 31, 2024, down 520 basis points compared to the same period last year, related to the aforementioned large component parts sales in 2023 and pricing pressures from aftermarket competitors of high-volume wear parts.

Operating expenses: Master Distribution segment operating expenses were $16.5 million for the year ended December 31, 2024, up $0.6 million from 2023. The increase from the prior year is primarily related to non-cash adjustments for contingent consideration earn-outs associated with the acquisition of Ecoverse in November 2022. Removing the impact of earn-out related expenses, segment-level operating expenses were slightly down against 2023.

Other expense, net: Master Distribution other expense was $4.8 million for the year ended December 31, 2024, an increase of $1.4 million over the prior year primarily attributed to higher interest costs on larger inventory balances.

Liquidity and Capital Resources

Years ended December 31, 2024 and 2023 Cash Flows

Cash Flow from Operating Activities. Cash flows from operating activities include net income adjusted for non-cash items and the effects of changes in working capital. For the year ended December 31, 2024, operating activities resulted in net cash provided by operations of $57.0 million. Our reported net loss of $62.1 million, when adjusted for non-cash income and expense items, primarily depreciation and amortization, the gain on sale of rental equipment, inventory obsolescence and bad debt reserves, and stock-based compensation, provided net cash inflows of $63.5 million. Changes in working capital included $145.3 million of inventory purchased (of which $120.6 million was transferred into our rental fleet for replenishment purposes), and a $42.7 million decrease in accounts receivable. Cash flows from operating activities were favorably impacted by $126.1 million due to proceeds from the sale of rent-to-sell equipment, and a $4.7 million net change in prepaid expenses and other assets and leases, deferred revenue, and other liabilities and unfavorably impacted by a $26.9 million decrease in accounts payable, accrued expenses, customer deposits, and other current liabilities and $7.8 million in net outflows related to manufacturer floor plans.

35

For the year ended December 31, 2023, operating activities resulted in net cash provided by operations of $58.4 million. Our reported net income of $8.9 million, when adjusted for non-cash income and expense items, primarily depreciation and amortization, the gain on sale of rental equipment, inventory obsolescence and bad debt reserves, and stock-based compensation, provided net cash inflows of $111.8 million. Changes in working capital included $286.3 million of inventory purchased (of which $180.2 million was transferred into our rental fleet for replenishment and growth purposes), and a $16.6 million increase in accounts receivable. Cash flows from operating activities were favorably impacted by $123.5 million due to proceeds from the sale of rent-to-sell equipment, $122.5 million in net inflows related to manufacturer floor plans and by a $7.3 million increase in accounts payable, accrued expenses, customer deposits, and other current liabilities partially offset by a $3.8 million net change in prepaid expenses and other assets and leases, deferred revenue, and other liabilities.

Cash Flow from Investing Activities. For the year ended December 31, 2024, our cash used in investing activities was $56.2 million. This was mainly due to $73.4 million purchases of rent-to-rent equipment, non-rental property and equipment, and other investing activities partially offset by $17.2 million proceeds from the sale of rent-to-rent equipment and non-rental property and equipment.

For the year ended December 31, 2023, our cash used in investing activities was $117.4 million. This was mainly due to $123.3 million purchases of rent-to-rent equipment, non-rental property and equipment, Burris and Ault acquisition activity, and other investing activities partially offset by $5.4 million proceeds from the sale of rent-to-rent equipment and $0.5 million proceeds from the sale of non-rental property and equipment.

Cash Flow from Financing Activities. For the year ended December 31, 2024, cash used in financing activities was $17.9 million. This cash outflow was mainly due to the extinguishment of the Senior Secured Second Lien Notes due 2026 of $319.4 million combined with principal payments on long-term debt and finance lease obligations of $639.9 million and net payments related to non-manufacturer floor plans for the year of $12.8 million more than offsetting the $974.2 million of proceeds from long-term borrowings including the new $500.0 million Senior Secured Second Lien Notes due 2029. Additionally, there were cash outflows of $10.8 million for preferred and common stock dividends, $5.8 million for repurchases of common stock, and $1.5 million related to other financing activities.

For the year ended December 31, 2023, cash provided by financing activities was $87.3 million. This cash inflow was mainly due to $91.3 million of net borrowings under our line of credit, which funded the Burris and Ault acquisitions, and the increase in net working capital and rental fleet as previously noted. Additionally, there were net borrowings of $8.7 million related to non-manufacturer floor plans for the year. These cash inflows were partially offset by payments of $10.6 million for preferred and common stock dividends and $2.1 million related to other financing activities.

Sources of Liquidity

Our principal sources of liquidity have been from cash provided by our service, parts and rental operations and the sales of new, used, and rental fleet equipment, proceeds from the issuance of debt, and borrowings available under our line of credit and floor plans. The Company reported $13.4 million in cash as of December 31, 2024. For more information on our available borrowings under the revolving line of credit, senior secured second lien notes, and floor plans, please refer to Note 8, Floor Plans and Note 9, Long-term Debt. We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested as we do not anticipate the need to repatriate funds to the U.S. to satisfy domestic liquidity needs.

Cash Requirements Related to Operations

Our principal uses of cash have been to fund operating activities and working capital (including new and used equipment inventories), purchases of rental fleet equipment and property and equipment, fund payments due under line of credit and floor plans payable, fund acquisitions, meet debt service requirements, stock repurchases, and fund the preferred stock and common stock dividends. In the future, we may pursue additional strategic acquisitions and seek to open new start-up locations. We anticipate that the uses described above encompass the principal demands on our cash and availability under our line of credit and floor plans in the future.

The amount of our future capital expenditures will depend on a number of factors including general economic conditions, the state of our industry and the markets we serve and our growth prospects. Our gross rental fleet capital expenditures for the period ended December 31, 2024 were approximately $175.7 million, including $120.6 million of transfers from new and used inventory to rent-to-sell rental fleet. This gross rental fleet capital expenditure was offset by sales proceeds of rental equipment of approximately $138.0 million for the period ended December 31, 2024, of which $126.1 million came from rent-to-sell equipment categories, as our business model is to sell lightly used inventory to customers from our rental fleet to increase field population in our geographies. In response to changing economic conditions, we have the flexibility to modify our capital expenditures, especially as it relates to rental fleet.

36

To service our debt, we will require a significant amount of cash. Our ability to pay interest and principal on our indebtedness will depend upon our future operating performance and the availability of borrowings under the line of credit and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flows from operations, available cash, and available borrowings under the line of credit will be adequate to meet our future liquidity needs for the foreseeable future. As of December 31, 2024, we had $441.0 million of available borrowings under the revolving line of credit and floor plans.

Critical Accounting Policies and Estimates

In the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures. Our management reviews these estimates and assumptions on an ongoing basis. While we believe the estimates and judgments we use in preparing our consolidated financial statements are reasonable and appropriate, they are subject to future events and uncertainties regarding their outcome; therefore, actual results may materially differ from these estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts first become known. We consider the following items in the consolidated financial statements to require significant estimation or judgment. See Note 2 to our consolidated financial statements for a summary of our significant accounting policies.

Revenue Recognition

Refer to Note 2, Summary of Significant Accounting Policies, and Note 3, Revenue Recognition, herein for more information.

Impairment of Goodwill and Long-lived Assets

Refer to Note 2, Summary of Significant Accounting Policies, herein for more information.

Useful Lives of Property and Equipment

We depreciate rental equipment and property and equipment over their estimated useful lives. The useful life of rental equipment is determined based on our estimate of the period the asset will generate revenues. The principal methods of depreciation used are straight-line basis over the estimated useful lives or percentage of rental revenues based on the unit of activity method. We periodically review the assumptions used in calculating rates of depreciation. We may be required to change these estimates based on changes in our industry or changes in other circumstances. If these estimates change in the future, we may be required to recognize increased or decreased depreciation expense for these assets. The amount of depreciation expense we record is highly dependent upon the estimated useful lives assigned to each category of equipment and the utilization of equipment where the unit of activity method is applied.

Generally, we assign the following useful lives to the below categories of Property and Equipment and Rental Fleet:

[[GREPCENT_TABLE]]
[["","","Estimated Useful Life"],["Transportation equipment (autos and trucks)","","2 \u2013 5 years"],["Rental fleet","","5 - 10 years"],["Machinery and equipment excluding rental fleet","","3 \u2013 20 years"],["Office equipment","","5 \u2013 7 years"],["Computer equipment","","2 \u2013 5 years"],["Leasehold improvements","","3 \u2013 15 years"]]
[[/GREPCENT_TABLE]]

The useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively, if appropriate.

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Acquisition Accounting

We have made significant acquisitions in the past and we intend to make additional acquisitions in the future that meet our selection criteria with an objective of increasing our revenues, improving our profitability, diversifying our end market and geographic exposure and strengthening our competitive position. The assets acquired and liabilities assumed (including contingent purchase consideration) are recorded based on their respective fair values at the date of acquisition. Such fair value assessments require judgments and estimates that can be affected by various factors over time, which may cause final amounts to differ materially from original estimates. The significant judgments include the estimation of future cash flows, which are dependent on forecasts; the estimation of a long-term rate of growth; the estimation of the useful life over which cash flows will occur; and the determination of a risk-adjusted weighted average cost of capital. When appropriate, our estimates of the fair values of assets and liabilities acquired include assistance from independent third-party appraisal firms. The judgments made in determining the estimated fair value assigned to the assets acquired, as well as the estimated life of the assets, can materially impact net income in periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. As discussed below, we regularly review impairment indicators.

New and used equipment inventories, long-lived assets (primarily rental equipment), goodwill, and other intangible assets generally represent the largest component of our acquisitions. Equipment inventory and rental fleet acquired in the transaction are valued at fair value, which approximates a market participant’s estimated selling price adjusted for (1) costs to sell and (2) a reasonable profit allowance. In addition to long-lived assets, we also acquire other assets and assume liabilities. These other assets and liabilities typically include, but are not limited to, parts inventory, accounts receivable, accounts payable, floor plans payable and other working capital items. Because of their short-term nature, the fair values of these assets and liabilities generally approximate the carrying values reflected on the acquired entities' balance sheets. However, when appropriate, we adjust these carrying values for factors such as collectability, existence, and consistency with Company accounting policies.

For acquisitions involving additional consideration to be transferred to the selling parties in the event certain future events occur or conditions are met (“contingent consideration”), we recognize the acquisition date fair value of contingent consideration as part of the consideration transferred in exchange for the business combination. Contingent consideration meeting the criteria to be classified as equity is not remeasured and is recorded within "Additional paid-in capital" on the Consolidated Balance Sheets. Contingent consideration classified as a liability is remeasured to fair value at each reporting date until the contingency is resolved, with any changes in fair value recognized in our Consolidated Statements of Operations.

Pursuant to accounting standard Topic 350 - Intangibles - Goodwill and Other, we record as goodwill the excess of the consideration transferred over the fair values of the identifiable net assets acquired. The intangible assets that we have acquired consist of tradenames, non-compete agreements, supplier relationships, and customer relationships. A tradename has a fair value equal to the present value of the royalty income attributable to it. The royalty income attributable to a tradename represents the hypothetical cost savings that are derived from owning the tradename instead of paying royalties to license the tradename from another owner. The fair value of non-compete agreements is estimated based on an income approach since their values are representative of the current and future revenues and profit erosion protection they provide. Customer and supplier relationships are generally valued based on an excess earnings or income approach with consideration to projected cash flows.

Income Taxes

The Company operates in a number of geographic locations and is subject to foreign, U.S. federal, state, and local taxes applicable in each of the respective jurisdictions. These tax laws are complex and involve uncertainties in the application of our facts and circumstances that may be subject to interpretation. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

As a part of our income tax provision, we must also evaluate the likelihood we will be able to realize our deferred tax assets which is dependent on our ability to generate sufficient taxable income in future years. Our deferred tax calculation requires management to make certain estimates about future operations. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not (a likelihood of greater than 50%) to be realized. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. These estimates involve judgment. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. Refer to Note 2, Summary of Significant Accounting Policies, and Note 12, Income Taxes, herein for more information.

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Allowance for Credit Losses

The Company records trade accounts receivables at invoice amount less allowances for credit losses. These allowances reflect our estimate of the amount of our receivables we will be unable to collect based on historical write-off experience and, as applicable, current economic conditions and reasonable and supportable forecasts that affect collectability. Our estimate could change based on changing circumstances and qualitative factors not able to be fully captured in our loss forecast models, including changes in the economy or in the particular circumstances of individual customers. The aforementioned qualitative factors are subjective and require a degree of management judgment. Generally, the Company does not accrue interest on past due receivables. Certain accounts are turned over to collection agencies, while the Company places liens and pursues a variety of other collection strategies on others. The allowance for credit losses is charged with the write-off when deemed uncollectible by management. Write-offs of such receivables require management approval based on specified dollar thresholds.