Alta Equipment Group Inc.: Form 10-Q for the period ended Mar 31, 2025

The following discussion and analysis should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. This discussion contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 reflecting Alta’s current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or 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 Quarterly Report on Form 10-Q, 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.

Business Description

We own and operate one of the largest integrated equipment dealership platforms in North America. Through our branch network, we sell, rent, and provide parts and service support for several categories of specialized equipment, including lift trucks and other material handling equipment, heavy and compact earthmoving equipment, crushing and screening equipment, environmental processing equipment, cranes and aerial work platforms, paving and asphalt equipment, other construction equipment and related products. We engage in five principal business activities in these equipment categories:

(i) new and used equipment sales;

(ii) parts sales;

(iii) repair and maintenance services;

(iv) equipment rentals; and

(v) rental equipment sales.

We have operated as an equipment dealership for 41 years and have developed a branch network that includes over 85 total locations in Michigan, Illinois, Indiana, Ohio, Pennsylvania, Massachusetts, Maine, Connecticut, New Hampshire, Vermont, Rhode Island, New York, Virginia, Nevada and Florida and the Canadian provinces of Ontario and Quebec. We offer our customers end-to-end solutions for their equipment needs by providing sales, parts, service and rental offerings. Additionally, we provide warehouse design and build services related to automated equipment installation and warehouse management system integration solutions within our Material Handling segment.

Within our territories, we are primarily the exclusive distributor of new equipment and replacement parts on behalf of our OEM partners. We and our regional subsidiaries enjoy long-standing relationships with leading material handling and construction equipment OEMs including Hyster-Yale, Volvo, JCB, CNH, Takeuchi, McCloskey, and Kubota, among many others, as well as master dealer rights throughout North America for environmental processing equipment with Doppstadt and Backers, among others. We are consistently recognized by OEMs as a top dealership partner and have been identified as an internationally recognized Hyster-Yale dealer and are a multi-year recipient of the Volvo Dealer of the Year award. More recently, given the Company’s successful history with electrified forklifts, battery charging, and power generation, we are pursuing a synergistic, asset-light strategy focused on the distribution and powering of commercial electric vehicles in the over-the-road vehicle segment. While our electromobility (“e-mobility”) business, and the industry in general, is in its early stages of development, we believe that our expertise in this emerging market represents a future growth opportunity.

We are committed to providing our customers with a best-in-class equipment dealership experience. Our customers are principally focused on equipment reliability and uptime, and our teams of skilled technicians and commitment to service are key to establishing and maintaining long-term customer relationships, representing a critical competitive advantage for the Company. Parts and service are also our most predictable and profitable businesses, with the dealership model structured to drive aftermarket parts and service revenues. Through our new and used equipment sales and our sale of lightly used rental fleet, we populate our exclusive territories with serviceable equipment. As the field population ages, we capitalize on aftermarket parts and service sales through the equipment maintenance cycle.

Growth Strategy

Our growth strategy is multifaceted and historically has been primarily predicated on making strategic acquisitions that expand our geographic reach, broaden our capabilities and service offerings, and diversify our customer and supplier bases. We believe these acquisitions, both immediately and over the long term, will be accretive to our financial performance.

In addition to strategic acquisitions, we intend to leverage our platform, deep roster of existing customers, and decades of equipment dealership experience to grow organically, and potentially geographically, by establishing new relationships with equipment OEMs that are synergistic to our existing business.

Business Segments

For a detailed description of our business segments, refer to Note 16, Segments.

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. 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 $579.0 million as of March 31, 2025. The original acquisition cost of our rental fleet excludes $5.1 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 equipment 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.

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 primarily consists of the total acquisition costs of the new equipment we purchase from third parties and costs to inspect, prepare and deliver to the customer.

Used equipment sales. Cost of used equipment sold primarily 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 combined with our inspection, preparation and delivery costs to sell to the customer.

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, of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024 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, information technology, 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.

Results of Operations

The three months ended March 31, 2025 and 2024

Consolidated Results

27

Non-GAAP Financial Measures:

Adjusted EBITDA

Organic Revenues

28

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 in the most directly comparable measure calculated and presented in accordance with GAAP in the condensed 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 (loss), revenues, or any other operating performance measures calculated in accordance with U.S. GAAP.

We define Adjusted EBITDA as net income (loss) before interest expense (not including floor plan interest paid on new equipment), income taxes, depreciation and amortization, adjustments for certain one-time, non-recurring or non-cash items, and items not necessarily indicative of our underlying operating performance. We exclude these items from net income (loss) in arriving at Adjusted EBITDA because these amounts are either non-cash, 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 the subsequent table in management's discussion and analysis of our Material Handling segment. 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: In the three months ended March 31, 2025, organic new and used equipment revenues decreased 3.0% against the three months ended March 31, 2024 due primarily to reduced customer deliveries of new lift trucks in the first quarter when compared to the same period last year, as industry deliveries of lift trucks has normalized off of peak post-Covid levels. This led to a $16.4 million, or 9.4%, reduction in revenues in our Material Handling segment for the three months ended March 31, 2025. First quarter sales volumes were further impacted by elevated sales activity in the fourth quarter of 2024, which pulled some demand forward, especially as it related to rental equipment sales in our Construction Equipment segment. Despite slowed new and used equipment revenues, our product support departments (parts and service) continued to exhibit resiliency and grew 0.9% organically for the three months ended March 31, 2025. Rental revenues for the three months ended March 31, 2025 declined 12.8% organically due to lower nominal fleet levels and decreased fleet on rent when compared to the same period last year. Rental equipment sales organically decreased 24.3% for the three months ended March 31, 2025 as compared to the same period last year. As mentioned, this reduction was predominantly evident in our rent-to-sell product categories in our Construction Equipment segment as increased demand in the fourth quarter of 2024 pulled forward rental equipment sales activities, resulting in a lower rent-to-sell equipment fleet level relative to the prior year and thus fewer rental equipment sales opportunities.

Gross profit (GP):

29

The consolidated gross profit margin for the three months ended March 31, 2025 was 27.2%, a 10 basis point decrease from 27.3% for the same period in 2024. New and used equipment sales margins decreased 60 basis points to 15.2%, a reflection of a competitive but stabilizing, pricing environment and overall sales mix influences. For sales of our rental equipment, gross margin was also compressed on a softened pricing environment for used equipment when compared to the same period last year, posting a 590 basis point decrease when comparing the year-over-year periods. Parts gross margins improved 20 basis points year to date when compared to the same time last year primarily due to mix but aligned to expectations overall. Service gross margins improved by 230 basis points. The improvement in year-to-date service gross margins was largely attributable to improved rate realization on customer service work, improved efficiency measures, and improved margins on OEM warranty and fleet work. We realized a 100 basis point decrease in rental revenues gross margin for the three months ended March 31, 2025, primarily due to a greater proportion of rental revenues coming from the Construction Equipment segment.

Operating expenses: Consolidated operating expenses decreased by $7.3 million to $114.2 million for the three months ended March 31, 2025 compared to the same period last year. The decrease is primarily due to cost savings initiatives implemented during the second half of 2024, primarily impacting the Company's personnel expense, with an overall headcount reduction of over 6.0%.

Other expense, net: Consolidated other expense, net for the three months ended March 31, 2025 was $21.0 million compared to $15.2 million for the same period in 2024. The increase is primarily due to the refinance of debt in the second quarter of 2024, resulting in an increased amount of interest expense from the higher interest rate affixed to the refinanced debt.

Income tax provision (benefit): The Company recorded income tax expense of $0.7 million and benefit of $4.2 million for the three months ended March 31, 2025 and 2024, respectively. The income tax expense for the three months ended March 31, 2025 was primarily a result of a change in valuation allowance recorded against a portion of the deferred tax asset relating to the U.S. disallowed interest expense carryforwards partially offset by the benefit attributable to the net loss for the period and the benefit in 2024 was due to net tax losses during the quarter.

Material Handling Results

30

Non-GAAP Financial Measure: Organic Revenues

Revenues: Material Handling segment revenues decreased by $16.4 million, or 9.4%, to $157.9 million for the three months ended March 31, 2025 as compared to the same period last year. Organic sales of new and used equipment fell by 16.7% year over year, primarily due to industry deliveries of lift trucks normalizing off of peak post-Covid levels. On an organic basis, product support revenues, made up of the combined parts and service departments, remained relatively flat, reflecting stable performance despite lower relative volume particularly experienced in parts sales during the quarter. Rental revenues decreased $1.4 million organically for the three months ended March 31, 2025 as compared to the same period last year driven by a lower average volume of fleet on rent. In contrast, rental equipment sales rose by $1.0 million organically, or 40.0%, on low volume driven by the strategic disposal of primarily underutilized equipment nearing the end of its useful life.

Gross profit (GP):

31

Material Handling gross profit for the three months ended March 31, 2025 increased 210 basis points to 34.6% compared to the same period in 2024. Despite lower volumes, new and used equipment gross margins increased slightly due to sales mix variances but align within the range of historical expectations. Parts gross margins have remained relatively consistent year over year and in line with expectations. The 270 basis point service margin increase for the three months ended March 31, 2025 compared to the prior year period can be attributed to margin improvements in major service categories, customer and OEM warranty and fleet work, on better pricing, and technician productivity measures. Rental revenues gross margins have increased 200 basis points primarily due to fewer subrental costs and improved repair and maintenance costs. Rental equipment sales margins decreased on low volume of sales driven by the strategic disposal of primarily underutilized equipment nearing the end of its useful life.

Operating expenses: Material Handling operating expenses decreased by $2.1 million to $49.0 million for the three months ended March 31, 2025 as compared to the same period last year, mainly due to cost saving initiatives implemented during the second half of 2024 which primarily impacted personnel expenses, resulting in a reduction in average headcount of nearly 6.0% compared to the same quarter in the prior year.

Other expense, net: Material Handling other expense, net increased by $1.2 million to $6.2 million for the three months ended March 31, 2025 as compared to the same period last year. The increase is mainly related to increased interest expense due to higher nominal levels of debt and the increase in our effective interest rate after our debt refinancing in 2024.

Construction Equipment Results

32

Revenues: Construction Equipment segment revenues decreased by $9.8 million, or 3.8%, to $245.8 million for the three months ended March 31, 2025 as compared to the same period last year. New and used equipment sales remained consistent with the prior year quarter, with new sales volumes improved but used sales volumes reduced. Rental equipment sales decreased for the three months ended March 31, 2025 by $7.0 million as demand in the fourth quarter of 2024 pulled forward sales activities, resulting in a lowered rent-to-sell equipment fleet level relative to the prior year quarter and therefore fewer rental equipment sales opportunities in the first quarter. Product support revenues increased 1.4% due to improved rates and utilization on service labor. Rental revenues decreased $4.5 million for the three months ended March 31, 2025 compared to the same period last year, primarily the result of a purposely lower level of rent-to-sell fleet available for rent. Average rental fleet available throughout the three months ended March 31, 2025 was nearly $40.0 million less than the same period last year, as the Company’s rent-to-sell fleet (and rental revenue related thereto) flexes with customer demand for light used heavy construction equipment.

Gross profit (GP):

Construction Equipment gross profit decreased by 90 basis points to 22.7% in the three months ended March 31, 2025 from 23.6% in the same period in 2024. New and used equipment sales margins decreased 140 basis points to 11.4%. Although new equipment volumes were higher compared to the prior year, competitive pricing and the higher cost of new equipment led to lower margin realization. Conversely, despite a challenged used equipment market year-over-year and lower sales volumes, used equipment margins improved year over year on retail sales within the dealership. Parts sales margins for the three months ended March 31, 2025 increased 90 basis points when compared to the same time last year on pricing realization on over the counter sales and as freight cost recovery showed improvement. Service gross margins increased by 290 basis points year over year mainly from improved rate realization and efficiency measures along with improved warranty recovery. Rental revenues gross margin for the three months ended March 31, 2025 decreased 400 basis points from a year ago, a result of the lowered amount of fleet on rent and the relative impact of repair and maintenance charges contained within cost of revenues, as our technicians prepare our fleet for the seasonal increase in demand for rental equipment in our northern regions in the upcoming quarters. Gross margins on rental equipment sales for the three months ended March 31, 2025 were reduced from a year ago amid higher relative costs of equipment in our rental fleet and reduced market prices on used equipment year over year.

Operating expenses: Construction Equipment operating expenses decreased by $2.3 million to $58.6 million for the three months ended March 31, 2025 as compared to the same period in 2024. The decrease was primarily attributable to cost-saving measures implemented in the second half of 2024, including a reduction in average headcount of nearly 7.0% compared to the same quarter in the prior year, which significantly lowered personnel expenses. In addition, enhanced controls on, and consolidation of, certain operating expenses contributed to approximately another $0.5 million in savings during the quarter beyond the personnel cost reduction.

Other expense, net: Construction Equipment other expense, net increased by $3.0 million to $12.4 million for the three months ended March 31, 2025 as compared to the same period in 2024. The variance was driven by increased interest expense primarily due to the increase in our effective interest rate after our debt refinancing in 2024.

Master Distribution Results

34

Revenues: Master Distribution segment revenues for the three months ended March 31, 2025 were $17.4 million, an increase of $4.6 million from the prior year same period. As sub-dealer inventory levels normalized from the oversupply experienced in 2024, a greater number of sub-dealers were both willing and able to restock compared to the prior year. Seasonal deliveries in the first quarter aligned more closely with the long-term historical patterns of the segment. In contrast, the unusually low sales in the first quarter of 2024 were primarily driven by widespread dealer oversupply across all equipment classes, not just the products sold through our Master Distribution channel, which reduced dealer acceptance rates on a broader scale. Parts sales, on the other hand, were consistent when compared to the same period last year.

Gross profit (GP):

For the three months ended March 31, 2025, gross profit margin decreased 3.8% from prior year primarily due to high-margin rental revenues and rental equipment sales in 2024 which were non-recurring. Gross profit margins on new and used equipment sales were 25.7%, up slightly from prior year and in line with expectations. Parts gross profit margin was 41.7% for the three months ended March 31, 2025, up 170 basis points compared to the same period last year but consistent with expectations overall.

Operating expenses: Master Distribution segment operating expenses were $3.4 million for the three months ended March 31, 2025, a decrease of $1.5 million for the prior year same period. The $1.5 million decrease is primarily reflective of costs incurred in the prior year for non-cash contingent consideration expense associated with the earnout component of the acquisition of Ecoverse in November 2022. Removing the recorded expense of the contingent consideration of $1.2 million provides for relatively flat operating expenses year over year despite a higher revenue base in the current operating period.

Other expense, net: Master Distribution other expense, net was $1.6 million for the three months ended March 31, 2025, an increase over prior year primarily attributed to higher interest costs on larger inventory balances and a greater effective interest rate given the debt refinance in 2024.

Liquidity and Capital Resources

The three months ended March 31, 2025 and 2024 Cash Flows

Cash Flow from Operating Activities. Cash flows from operating activities include net loss adjusted for non-cash items and the effects of changes in working capital. For the three months ended March 31, 2025, operating activities resulted in net cash used in operations of $17.5 million. Our reported net loss of $20.9 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, deferred income taxes, and stock-based compensation, provided net cash inflows of $9.3 million. Changes in working capital included $41.6 million of inventory purchased ($28.4 million of inventory was transferred into our rental fleet primarily for replenishment purposes) and a $9.1 million increase in accounts receivable. Cash flows from operating activities were favorably impacted by $18.6 million due to proceeds from the sale of rent-to-sell equipment and a $15.4 million increase in accounts payable, accrued expenses, customer deposits, and other current liabilities, partially offset by $6.0 million in net outflows related to manufacturer floor plans, and by a $4.1 million net change in prepaid expenses and other assets and leases, deferred revenue, and other liabilities.

For the three months ended March 31, 2024, operating activities resulted in net cash used in operations of $13.5 million. Our reported net loss of $11.9 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 $17.8 million. Changes in working capital included $66.3 million of inventory purchased ($38.8 million of inventory was transferred into our rental fleet for replenishment and growth purposes), and an $8.0 million decrease in accounts receivable. Cash flows from operating activities were favorably impacted by $26.0 million due to proceeds from the sale of rent-to-sell equipment, $0.4 million in net inflows related to manufacturer floor plans, and a $5.0 million net change in prepaid expenses and other assets and unfavorably impacted by a $4.4 million decrease in accounts payable, accrued expenses, customer deposits, and other current liabilities and leases, deferred revenue, net of current portion and other liabilities.

Cash Flow from Investing Activities. For the three months ended March 31, 2025, our cash used in investing activities was $14.3 million. This was mainly due to $16.8 million purchases of rental equipment and non-rental property and equipment, the acquisition of CEQ as discussed in Note 15, Business Combinations, and other investing activities, partially offset by $2.3 million proceeds from the sale of rent-to-rent equipment and $0.2 million proceeds from the sale of non-rental property and equipment.

For the three months ended March 31, 2024, our cash used in investing activities was $16.5 million. This was mainly due to $18.2 million purchases of rental equipment and non-rental property and equipment, and other investing activities partially offset by $1.6 million proceeds from the sale of rent-to-rent equipment and $0.1 million proceeds from the sale of non-rental property and equipment.

Cash Flow from Financing Activities. For the three months ended March 31, 2025, cash provided by financing activities was $29.5 million. This cash inflow was mainly due to the $34.5 million of net proceeds from our line of credit, long-term borrowings, and finance lease obligations, which funded the increase in net working capital previously noted. These cash inflows were partially offset by payments of $2.7 million for preferred and common stock dividends, net payments of $1.5 million related to non-manufacturer floor plans, and $0.8 million related to other financing activities.

For the three months ended March 31, 2024, cash provided by financing activities was $4.6 million. This cash inflow was mainly due to $10.9 million of net borrowings under our line of credit which funded the increase in net working capital previously noted. Additionally, there were net borrowings of $1.9 million related to non-manufacturer floor plans. These cash inflows were partially offset by payments of $2.7 million for preferred and common stock dividends and $5.5 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 related 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 also reported $11.1 million in cash as of March 31, 2025. 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 but not limited to new and used equipment inventories, purchases of rental fleet equipment and personal property, payments due under line of credit and floor plans, acquisitions, debt service requirements, stock repurchases, and 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 and our growth prospects. Our gross rental fleet capital expenditures for the three months ended March 31, 2025 was $40.4 million, including $28.4 million of transfers from new and used inventory to rental fleet. This gross rental fleet capital expenditure was offset by sales proceeds from rental equipment of $20.9 million for the three months ended March 31, 2025 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.

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 March 31, 2025, we had $401.6 million of available borrowings under the ABL Facility and Floor Plan Facilities.

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. See Note 2 to the consolidated financial statements contained in the Company’s 2024 Annual Report on Form 10-K for a summary of our significant accounting policies.

Our exposure to market risks primarily consists of interest rate risk associated with our variable and fixed rate debt, prices of certain commodities, and foreign currency exchange rate risks. From time to time, we employ financial instruments to manage the Company's exposure to changes in interest rates, diesel and unleaded fuel, and foreign currencies. See Note 14, Fair Value of Financial Instruments, for more information.

Interest rate risk: Our earnings may be affected by changes in interest rates on the ABL Facility and Floor Plan Facilities. The interest rates applicable to any loans under the ABL Facility are based, at the option of the borrowers, on (i) a floating rate based on the SOFR (for loans denominated in U.S. dollars) or Canadian Dollar Offered Rate (for loans denominated in Canadian dollars) plus an initial margin of 1.75% or (ii) CBFR (for loans denominated in U.S. dollars) or the Canadian Prime Rate (for loans denominated in Canadian dollars) less an initial margin of 0.75%, in each case, where margin is adjusted under the ABL Facility based on the quarterly average excess availability under the ABL Facility. The interest rates applicable to any loans under various Floor Plan Facilities ("Floor Plan Rates") are based on a wide range of benchmark rates (including SOFR, Prime, Bloomberg Short-Term Bank Yield Index, and the Canadian Bankers' Acceptance Rate) plus an applicable margin. As of March 31, 2025 the lowest Floor Plan Rate was SOFR plus an initial margin of 2.75%, and the highest was SOFR plus a margin of 5.1145% per annum.

At March 31, 2025 and December 31, 2024, we had $220.0 million and $182.9 million, respectively, outstanding borrowings under the ABL Facility. At March 31, 2025 and December 31, 2024, we had $367.7 million and $374.9 million, respectively, outstanding borrowings under the Floor Plan Facilities. As of March 31, 2025, based upon the amount of our variable rate debt outstanding, each one percentage point increase in the interest rates applicable to our variable rate debt, when including the hedge impact of our interest rate cap, would reduce our annual pre-tax earnings by $2.5 million. The amount of variable rate indebtedness outstanding may fluctuate significantly. See Note 8, Floor Plans, and Note 9, Long-Term Debt, in our condensed consolidated financial statements for additional information concerning the terms of our variable rate debt.

We have a fixed rate on the Notes of $500.0 million which are due in 2029. We do not have any exposure to changing interest rates as of March 31, 2025 on the fixed rate Notes. For additional information concerning the terms of our fixed rate debt, see Note 9, Long-Term Debt.

Commodity price risk: The market prices of diesel and unleaded fuels are unpredictable and can fluctuate significantly. Because of the volume of fuel we purchase each year, a significant increase in the price of fuel could adversely affect our business and reduce our operating margins. To manage a portion of this risk, we enter into fixed price swap contracts to purchase gasoline and diesel fuel related to forecasted fuel purchases. For the purchases of unleaded and diesel fuel that we expect to purchase at market prices in the next 12 months, each $0.10 per gallon increase in the price of diesel and unleaded fuel, holding other variables constant, would not have a material impact on our pre-tax income when including the fixed price swap contracts.

Foreign currency exchange rate risk: Due to our international operations, a portion of our revenues, cost of revenues, and operating expenses are subject to foreign currency exchange rate risk. Changes in the exchange rate of the U.S. dollar versus the Canadian dollar and European currencies affect the translated value and relative level of revenues and net income (loss) that we report from one period to the next. Based upon balances and exchange rates as of March 31, 2025, holding other variables constant, we believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates would not have a material impact on our results of operations or cash flows.

Management’s Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2025. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) of the Exchange Act) during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We face a number of uncertainties and risks that are difficult to predict and many of which are outside of our control. For a detailed discussion of the risks that affect our business, please refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.