Alta Equipment Group Inc. Q2 FY2023 Earnings Call

Good afternoon, and thank you for attending the Alta Equipment Group Second Quarter 2023 Earnings Conference Call. My name is Matt, and I'll be your moderator for today's call. I will now turn the call over to Jason Dammeyer, Director, SEC Reporting and Technical Accounting with Alta Equipment Group.

Thank you, Matt. Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta's second quarter 2023 financial results was issued this afternoon and is posted on our website along with the presentation designed to assist you in understanding the company's results. On the call with me today are Ryan Greenawalt, our Chairman and CEO; and Tony Colucci, our Chief Financial Officer. For today's call, the management will first provide a review of our second quarter 2023 financial results. We will begin with some prepared remarks before we open the call for your questions. Please proceed to Slide 2. Before we get started, I'd like to remind everyone that this conference call may contain certain forward-looking statements including statements about future financial results, our business strategy and financial outlook, achievements of the company, and other non-historical statements as described in our press release. These forward-looking statements are subject to both known and unknown risks, uncertainties, and assumptions, including those related to Alta's growth, market opportunities, and general economic and business conditions. We update these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from the forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release and can be found on our website at investors.altaequipment.com. I will now turn the call over to Ryan.

Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. First, I will discuss our second quarter financial highlights and current business conditions, and will then provide an update on our growth strategy and current M&A pipeline. But before I begin, I want to recognize our employees, because without their hard work and dedication, our continued strong performance would not be possible. I will begin with a quick review of our second quarter financial highlights. Total revenue increased 15.2% to $468.4 million, a record for our business. The increase was attributable to Construction revenue of $281.5 million and Material Handling revenue of $169.1 million. We also benefited from our newest segment, Master Distribution, which contributed $21.4 million in revenue. Our e-Mobility business is gaining traction, generating $3.1 million in revenue for the quarter, which represents our first significant sales of Nikola's TRE BEV tractors, and we expect additional orders throughout the balance of this year. Lastly, we achieved organic revenue growth of 11.2% year-to-date as well as significant contributions from our acquisitions. As a result, adjusted EBITDA grew 20.5% to $49.9 million compared to a year ago. Before I discuss business conditions and forward trends, let me provide a few brief comments on our business model and segment trends. As a reminder, our business model is versatile and resilient, and we are unique in the breadth of our product offerings, the scale of our addressable market, and the defensiveness of our market position. Our focus is on driving and sustaining long-term equipment field population and driving aftermarket support penetration to an increasingly diversified customer base. At the end of the second quarter, we had approximately 1,300 factory-trained and certified revenue-producing technicians. Trends in our Material Handling segment remained positive throughout all our major end-user markets, including manufacturing, biotech, government, food and beverage, automotive manufacturing, and others. Our exclusive Hyster-Yale territory, which now includes Eastern Canada, covers the densest population region in North America and provides access to a diverse group of industries and end markets for our products. We continue to benefit from the sales synergies with the PeakLogix business and have the capabilities in-house to solve our customers' most complex material handling needs. One important aspect of our strategy in the Material Handling segment is to bring our full suite of products and services from the most mature markets into our new regions. This includes integrating in-house capabilities, such as industrial tire distribution, industrial battery distribution and maintenance, engineered products, and safety and operator training, to name a few. We also assembled a portfolio of allied and specialty equipment lines that are appropriate for the specific end markets within each region. Our Construction Equipment segment continues to benefit from both high non-residential demand as well as infrastructure and other federal and state governmental legislation in all our operating regions. In the Northeast, specifically, we are seeing positive impacts due to onshoring projects like chip and EV-related battery and other facilities. Our Florida operations remained particularly strong, with phosphate mining as a significant business, and there, we are heavily embedded with the largest producer in the state. Projects related to DOT spending and wetlands restoration are also strong markets for us and will continue for years to come. As a result, demand for our heavy Volvo earthmoving equipment, both new and used, specifically articulated hauler trucks and excavators is particularly high. Both of these equipment categories have seen double-digit growth in unit volume in the Florida market year-over-year. We remain excited about growth opportunities for the Ecoverse business, which reports within our newly created Master Distribution segment. The recycling equipment market will continue to experience significant growth, driven by several factors, including increased focus on sustainable waste management practices, regulatory mandates, and resource scarcity. Advancements in recycling technology have significantly enhanced the efficiency and effectiveness of reclamation efforts. State-of-the-art sorting and separation technologies facilitate the reclamation of a broader array of materials, intensifying the need for specialized recycling equipment. While still in its infancy, forecasts indicate this could be a multibillion-dollar industry in the future. Lastly, our e-Mobility business is beginning to gain some traction, as noted by the Nikola orders and revenue contribution during the second quarter. The Illinois-based customer purchased a fleet of battery electric semi-trucks and the network of chargers to support the fleet. The customer is a food producer and invested in the fleet to distribute to their customers using zero tailpipe emissions vehicles. We are already hearing enthusiastic demand for the hydrogen fuel cell-powered Nikola semi, which will be available late this year. Importantly, our exclusive Nikola territory mirrors our footprint within the U.S., allowing us to market the product to Alta's existing customers throughout the country. We are excited about the prospect of putting our nearly 40 years of experience helping customers convert their fleets away from fossil fuels and internal combustion engines to work in the vast market for heavy-duty and long-haul commercial vehicles. Now let me provide a few brief comments on current and forward-looking business conditions. One of the most important indicators is feedback from customers and their sentiment is strong for the balance of this year and into next year. We're also pleased that supply chain constraints have eased, allowing inventory levels to return to more normalized levels, resulting in higher new and used equipment sales, which will yield high-margin parts and service business over time. Federal initiatives will also extend the cycle with approximately $1 trillion estimated over the next decade. Many state DOT budgets where we operate are forecasting significant increases in fiscal year 2024. For example, Florida recently released its fiscal 2024 Moving Forward project to address more than 20 congestion-related infrastructure projects across the state with total spending of over $7 billion over the next four years. In terms of our growth strategy, the pipeline remains strong for accretive acquisitions. We have added $446 million in total revenue and $53.3 million in adjusted EBITDA since we went public in 2020. We have expanded our dealership network as well as entering into new end-user markets, and we'll continue to follow this strategic path. We have a unique platform to grow and consolidate in adjacent markets with significant barriers to entry and long-term growth prospects. We have a disciplined approach to M&A and fertile prospecting conditions, and we have a proven and repeatable execution and integration process, led by a seasoned team of industry veterans. And as we have demonstrated, we are executing these transactions at attractive multiples. Lastly, I'd like to again touch on Alta's corporate culture. As a company, we strive every day to foster a culture of empowerment, accountability, and opportunity, and we rally around the shared purpose, delivering trust that makes a difference. I want to again thank our employees for delivering trust to our customers, our business partners, and to our valued shareholders. Our shared purpose is the foundation of our commitment to these key areas: our commitment to environmental sustainability, including a focused strategy to drive customer adoption and commercial viability of various electromobility solutions; the safety of our employees and technicians; and the dedicated and inclusive culture that we continue to develop with each day. In closing, I'd like to thank the Alta team for all your hard work in delivering another solid quarter. I'll now turn the call over to Tony, our CFO.

Thanks, Ryan. Good evening, everyone, and thank you for your interest in Alta Equipment Group and our second quarter 2023 financial results. I want to recognize our new team members from M&G Materials Handling and Battery Shop of New England, who joined us through two acquisitions in the first half. Our senior leadership team is focused on continuing the legacy of these companies, and we aim to earn your trust. Today, I will discuss four main areas. First, I will present our second quarter results, which we are pleased with due to increased equipment availability and ongoing organic growth in our product support business. Second, I will elaborate on our rent-to-sell approach in the Construction segment and share a detailed case study to illustrate how this model helps increase equipment field population and future product support revenues. Third, I will provide an update on our balance sheet as of June 30, highlighting the improvements we made to our credit facilities in Q2. Lastly, I will briefly discuss the secondary common stock offering that closed in late July and share our thoughts on that transaction. Throughout the call, I will reference slides from our investor presentation, and I encourage everyone to review our presentation and our 10-Q available on our Investor Relations website at altg.com. For the first part of my remarks, as highlighted in Slides 10 to 13 of the earnings deck, our second quarter performance showed that the company generated $468 million in revenue, an increase of $61 million compared to last year’s Q2 and $47 million from last quarter. This revenue includes a $29 million organic growth compared to Q2 2022, marking a strong quarter. Equipment sales rose by $35 million to $288 million, which is expected to contribute positively to future product support revenues. Year-to-date, we have placed about $90 million more equipment in the field than in the first half of 2022. In terms of our product support business, despite facing tougher quarterly comparisons, we still achieved organic growth in our parts and service segments, increasing by 12% in Material Handling and 10% in Construction year-over-year. Regarding our rental business, we experienced the anticipated seasonal uptick, with rental revenues reaching $50 million this quarter, up $6.5 million from the last quarter. Additionally, consolidated rental revenues increased by 6% organically, mainly due to a favorable rate environment. For our EBITDA, we recorded $49.9 million in adjusted EBITDA for the quarter, up $8.5 million from the second quarter of 2022. On a trailing 12-month basis, we achieved $177 million in adjusted EBITDA, translating to $129 million in economic EBIT, which reflects our unlevered free cash flow before growth CapEx. Based on our strong performance in Q2, we are reaffirming our guidance of $180 million to $188 million in adjusted EBITDA for the fiscal year 2023. Two additional metrics to note for the quarter: on a pro forma basis, we are generating over $75 million in annualized levered free cash flow to common equity. Additionally, we continue to see financial operating leverage on a cash basis, with each incremental dollar of cash gross profits in 2023 year-to-date generating $0.30 of adjusted operating income, compared to $0.21 in the first half of 2022. Now, moving on to the second part of my remarks, I want to present a unit-level economics view of our rent-to-sell approach in the Construction segment. I want to remind investors that Alta’s goal is to establish best-in-class equipment dealerships by increasing market share for our products and expanding customer-owned equipment in the field. As we discussed last quarter, placing more equipment in the field positions us to generate higher-margin customer support revenues in the future. Customers have a strong demand for lightly used equipment, and various metrics show that up to 70% of purchases in certain heavy equipment categories come from dealer-owned rental fleets. Our rent-to-sell model allows us to meet this customer demand by setting different price points for lightly used equipment in our rental fleet. To illustrate this, you can refer to Slide 14, which summarizes a specific example: we purchased a unit for $400,000 on January 1, 2021, rented it out for $14,000 a month for 11 months, then sold it for $340,000 on September 30, 2022. Over this 18-month period, the unit generated a 17% return on invested capital, not accounting for additional aftermarket parts and service opportunities post-sale. This is just one example of how the rent-to-sell model can work, with many variations depending on product type, holding period, OEM, and geography. Overall, this flexible model has resulted in an additional $60 million of equipment sold year-to-date in the Construction segment. The rent-to-sell model underscores the importance of our focus on economic EBIT, which excludes gains on sale and depreciation. Now, for the third part of my remarks, I'd like to highlight key aspects of the upsizing of our credit facilities that were completed at the end of Q2 and provide an update on our balance sheet as of June 30. On June 28, we amended our credit agreements, which included four main components: First, we exercised a $55 million expansion option on our ABL facility, increasing it from $430 million to $485 million. Second, the amendment provides an additional $65 million expansion option for the ABL facility, potentially increasing it to $550 million for future capacity needs. Third, we increased the floor plan facility by $10 million to fund new equipment from OEMs without captive finance partners, which also includes an incremental $20 million expansion option for future growth. Fourth, the amendment raised the limit on OEM captive floor plan financing allowed on the balance sheet, which has become crucial as supply chains normalize to ensure we have sufficient financing for readily available equipment. We view this amendment positively for the company and shareholders, as it allows us to access previously suppressed availability on our line of credit, with our borrowing base collateral growing with the business. This expansion reflects our lending partners' confidence in our business plan, our team, and our markets. Regarding our balance sheet, due to the upsizing, we ended the quarter with approximately $200 million in availability on our revolving line of credit, with only $15 million being suppressed. Our total leverage is about 3.8 times 2023 adjusted EBITDA, as used inventory and rental fleet levels have risen due to seasonality and the normal supply of equipment. Lastly, I'd like to provide some thoughts on the secondary offering that closed in July involving one of our large shareholders. To recap, B. Riley has been a significant shareholder since our IPO in early 2020 and facilitated our transition to a public company. Last month, we supported a secondary common stock offering for about a third of B. Riley's holdings in Alta. We believe this transaction benefits shareholders by distributing shares to a diverse group of mainly new investors, ultimately increasing ALTG's float and liquidity. In closing, I want to express my gratitude to my colleagues at Alta for a solid first half of 2023, appreciate our customers and OEMs for their trust in our team, and thank our shareholders for their support and confidence. Thank you for your time, and I will now turn the call over to the operator for Q&A.

Thanks. I have a couple of questions. First, could you discuss the current rental utilization rates compared to a year ago or a quarter ago? Additionally, what do rental rate prices look like now versus a year ago? As a follow-up, it seems like rental rates are strong. At what utilization rate would you expect to see a decline in rental rates from your current levels? I have another follow-up after this.

Sure, Matt. This is Tony. I'll take that. We have expanded our fleet, similar to other rental companies, as supply chains have improved and addressed the shortage of equipment we faced in the past couple of years. It seems like everyone is beginning to stabilize and adjust their fleets. Mathematically, if you're unable to deploy additional fleet, your physical utilization—which we define as dollar utilization—would decrease. This doesn't indicate that you have less fleet in rental; rather, your physical utilization as a percentage of the total fleet would decline. We are not alone in this observation, and indeed, we have noticed that percentage decrease. The volume of equipment on rent has started to level off as well. Part of this is due to our fleet growth, which takes time before it becomes accessible to customers and goes out on rent. It can take several months to a year before realizing the full impact of new equipment. Regarding our physical utilization, we remain confident about the latter half of the year and overall customer sentiment. Additionally, as Ryan mentioned, we are experiencing record levels of new and used equipment moving out. It's important to consider the market as a whole. I noted our rent-to-sell model, which is effectively moving new equipment onto customer balance sheets. From a rate perspective, we've observed a 6% increase compared to last year, which aligns with trends in the broader rental market. We anticipate this growth rate to moderate; while a 6% increase is lower than the double-digit growth rates we experienced in 2021 and 2022, we expect this trend to either stabilize or continue to moderate as we approach the latter half of the year.

I’d like to follow up on your comments, Ryan, regarding Yale Industrial and Ecoverse. Although you’ve owned those businesses for less than a year, could you share what kind of pro forma organic growth you're observing from them? There’s a notable market share opportunity in Eastern Canada that you've mentioned before, as well as a broader market play with Ecoverse. Additionally, could you provide some insights on the revenue run rate for PeakLogix and the current state of your backlog in warehousing and logistics projects? Thank you.

I'm going to take the back end of that, Alex, and then maybe I'll turn it over to Ryan to sort of form up the opportunity for us at YIT and Ecoverse. I would say that Ecoverse we're still in the beginning stages. They had a great first quarter. We mentioned the seasonality there last quarter, but there's no reason to not expect organic growth from either of those companies. But Ryan has kind of the YIT thing more top of mind in terms of share or opportunity. What I would say on the PeakLogix side is, there was a theory of activity coming out of COVID for automation and logistics and e-commerce, warehousing, so on and so forth. We have seen that moderate a bit as COVID has gotten further and further in the rearview. Our backlog is coming down in that business. And I think the other thing to think about relative to the PeakLogix business is, these are large CapEx projects for customers. And what we have heard is that the sales cycle taking a little bit longer, given interest rates from customers in that business, maybe taking a pause on CapEx spending for a large retrofit of a warehouse. So, anyway, we are seeing a little bit of moderation kind of in the end markets there. Do you want to talk to YIT?

Sure. You asked about the organic growth for both YIT and Ecoverse. Let’s start with YIT to provide some context on our growth strategy in that market. As stated previously, we are focusing on an acquisition. We're particularly enthusiastic about deals where there is already an established market, a field population, that allows us to tap into the aftermarket opportunities. Significant growth often arises from deals that take longer to develop because they allow for expanding market share within a region. In Eastern Canada, we see potential for organic revenue growth to double over the next few years. To achieve the goals set by Hyster-Yale for that market, we need to double our market share in that area. This involves integrating the rest of our product offerings. I highlighted areas where we will incorporate our tire and battery businesses alongside YIT to enhance our portfolio. The timeline for reaching these goals may vary, but I estimate that we could double revenues there within three years. While there may be an opportunity for mergers and acquisitions, we also see potential for organic growth. For Ecoverse, organic growth will stem from two main areas. First, the recycling market is still developing, and we anticipate substantial growth in this sector over the next decade. Our core product, the Doppstadt brand, is well-positioned to benefit from this growth due to increased demand for their machines in recycling applications. Second, we are looking to establish new partnerships with OEMs to expand our distribution networks within the Ecoverse model. Although this process may take some time, we recognize the need for Master Distribution in advanced, specialized niches that represent smaller, addressable markets. We are already engaging with several specialty line manufacturers to broaden the Ecoverse offerings. Additionally, we believe that there are other end markets that could benefit from a Master Distribution approach, which may not fit directly into Ecoverse but align well with the Alta platform. This would enable us to leverage our distribution strengths. It's still early to provide specific figures, but we are optimistic about our progress and the start we've had this year, even though it's too soon to specify an organic growth rate.

Got it. Thanks, guys.

Thank you. Good evening, gentlemen. A few quick questions here. First, the M&A pipeline haven't been that active year-to-date. So, I guess my question to you is, are sellers asking unreasonable prices? Or is it really just kind of timing here as it relates to your success with M&A this year?

Alex, this is Ryan. I'll respond to that, and I appreciate your question. There is no change in the conditions for M&A opportunities. The reasons for consolidation remain strong. There are not enough consolidators, and OEMs have too many dealers that lack capital and management. The pipeline is very active. The absence of recent transactions does not indicate a decrease in opportunities. I wouldn't say there's been any change in our willingness to pay, our perspective on valuations, or market expectations. The supportive environment remains intact. We're actually receiving more inquiries than ever in areas where we typically focus our efforts on finding the right opportunities and strategies. We're spending considerable time exploring new opportunities that we might not have previously considered. Overall, I'm really enthusiastic about the ongoing execution of our strategy.

And then recently, Hyster-Yale talked about a very, very strong backlog that should extend their activity well into 2024. But they did reference a little bit of a softness in order activity. So, I was wondering if you could discuss your order activity and your order backlog?

I would say, Alex, one is just a follow-up on the previous question, we expect to be active this year regarding M&A. I would note that we completed two relatively small transactions, and sometimes those smaller deals can lead to bigger ones due to the relationships involved. But to answer your question, I'm sorry, Alex, could you please repeat the question? I apologize for that.

Yes. Order backlog and order activity?

Yes, I would say that we align with what Hyster-Yale mentioned. We currently have a very strong backlog that extends well into 2024. However, there are some product categories that remain challenging in terms of lead times. Hyster-Yale referred to bookings, and as Ryan has noted in recent quarters, this is similar to what I mentioned regarding PeakLogix. During COVID, there was a significant surge in bookings as companies sought to accelerate demand, believing that the entire world would be heavily focused on e-commerce. As a result, there were around 50% increases in bookings compared to historical averages. Now, we're simply seeing a moderation from those unprecedented peak levels.

Thank you very much. Congratulations on a very solid quarter.

Thanks, Ted.

I'm going to focus on a couple of things just focusing on kind of balance sheet and CapEx and free cash flow. I mean, you're building inventory, it makes sense. It's not like you haven't flagged it or not. But given where we are in terms of inventory in the current quarter, can I ask you kind of what do you think the peak for inventory will be when you're, let's call it, formally normalized? Like kind of what's the dollar amount on the balance sheet? And how long will it take for you to get there?

Yes, I would say we're pretty close here, Ted. We're currently in the middle of the season as we approach the end of Q2 from a construction perspective in the north. As I've mentioned before, as a public company, we started right in the midst of COVID, and the supply chain issues have made it difficult to present a typical ebb and flow of inventory to the public markets until now. Therefore, we expect to maintain these levels or potentially decrease as we move into the second half of the year. Instead of focusing solely on a specific nominal figure, we aim to capture more market share from OEMs as we continue to grow. To provide some numbers, Ted, regarding annual turnover, if we go back 12 to 18 months, we were at three turns for new and used equipment, and we have since normalized to about two turns. The same applies to parts inventory, where we initially had high turnover rates but have now also normalized to two turns. We prefer to maintain these benchmark levels and wouldn't want to drop significantly below them. If the nominal dollars increase, it's due to our growth, but we aim to stay within this two-turn range and not go any lower.

Okay. I have a similar question regarding rental equipment. You've added a net $370 million of rental equipment this quarter. Where is that equipment going? One thing that has emerged from various calls and conversations with others in the rental business is that as the cost of capital rises due to higher interest rates, this seems to be creating increased demand. Essentially, companies lacking the capital expenditure budget are opting to rent rather than purchase until they have the funds available. Given this context, are you observing this trend? Additionally, what direction do you see for your rental fleet moving forward?

I'll address that in a few parts. Regarding the $50 million in rent-to-rent revenue for the quarter, we are at approximately $95 million for the year. Our original equipment value stands at around $566 million. If you annualize the $95 million, you end up with approximately $190 million in rent-to-rent revenue based on that original equipment value, which indicates over 30% financial utilization, aligning with our expectations. We have indeed expanded the fleet, showing about a 10% increase in that original equipment value for the year, moving from $516 million to $566 million. Additionally, I discussed our rent-to-sell model, which differs from public rental companies like URI and H&E. They have specific capital expenditure plans that involve growing their fleet and maintaining that equipment for extended periods. In contrast, a significant portion of our fleet allows for quick defleeting through our rent-to-sell approach. Regarding the impact of interest rates on choosing between buying and renting equipment, I believe we remain neutral on this issue since we are bringing in a lot of new equipment. Clients are still investing in assets despite rising interest rates, showing there's strong demand for new equipment. Contractors discuss various market drivers and have been waiting for new equipment for over a year in some cases. Therefore, I don’t think we are significantly influenced by interest rates when it comes to rent versus buy decisions.

Yes, I asked these questions because it's a good problem to have. However, as you normalize your inventory and expand the rental fleet to meet demand, your free cash flow numbers are significantly declining. At some point, once you normalize that inventory and rental equipment, and demand stabilizes, the cash generation of the business will begin to reveal itself. I'm trying to understand when we can expect to see that happen, as it looks like 2024 could be a strong year for you in terms of cash generation.

Outside of mergers and acquisitions, I would agree that things will normalize. We have had to invest in the balance sheet and working capital equipment because we were lacking parts compared to our historical levels. I believe we can expect that to normalize over the next 12 to 18 months.

Great. Well, thanks. And I'm just going to throw in a shameless plug to say I look forward to seeing you all on September 19 in Minneapolis at the Northland Securities Investors Conference. And if anybody wants to see these guys in person, please come.

I appreciate it, Ted. We'll see you there.

Hi, guys. Thanks for the time. Just wanted to go back to the M&A environment a little bit here. You described a number of different opportunities. It sounds like the pipeline is still relatively rich. But is there focus areas that you're really looking at? How are you really trying to prioritize these different opportunities in terms of best capital allocation from the opportunity set? Just given that the platform is so diverse, how you're really targeting or prioritizing certain deals? Any commentary on that would be helpful.

Thank you for emphasizing capital allocation. We believe our best deals occur when we onboard technicians and establish a strong aftermarket recurring revenue stream. We find opportunities within our current footprint particularly appealing due to the potential synergies on both the cost and sales sides with our existing business. We refer to these as infill opportunities, and we are currently evaluating several. Another significant factor is our presence in a densely populated and economically strong region of North America, which we advantageously leverage. We are also mindful of the trend of activities moving southward. Our Florida construction business exemplifies this, and we are actively seeking additional opportunities in the southern region as we expand our footprint. Additionally, our recent investment in Canada offers substantial potential, especially in Ontario and Quebec, which are major population hubs in Eastern Canada. We have established infrastructure in Montreal and Toronto and are eager to explore infill acquisitions and other strategic segments in the Canadian market.

Yes. I think it's important to add that we always prioritize our existing relationships with OEMs when considering new territories. We favor exclusive rights because our main goal is to establish ourselves as a dealership first. Therefore, exclusive rights with OEMs we are familiar with and can grow alongside are our top priority, followed by new OEM partnerships that we believe we can cultivate.

That's helpful, guys, and I appreciate that. And just then as a follow-up, sorry, excuse me, just on the supply chain availability, you referenced it getting better. I was just trying to understand a bit more in terms of where you still have some constraints, and how you see those playing out from an inventory normalization standpoint. Because you've also referenced inventory high and coming back down. So, is there certain areas of the business where the OEM availability has really gotten that much better, or you're still seeing challenges small versus medium, large equipment, etc.

Yes. I would say, Steve, in our Construction segment where Volvo is a major OEM, and we have a host of others, just large sort of multinational names that we are seeing more progress there, we've seen more normalization there than we have maybe in some of the more niche areas of the Material Handling forklift segment. So, we're still seeing some longer lead times for certain classes of equipment. And I think Hyster-Yale has been fairly public with some of the issues that they've had. Things are normalizing for them. As Alex had pointed out, they've had a very strong last quarter. But what I would say is there's still certain product categories in the Material Handling space that are probably causing the most acute issues. But when we look at this overall, Steve, we're light years ahead of where we were last year or 18 months ago at this time. These are more kind of, I would classify as, nuisance things versus anything material from a supply chain perspective at this point.

Okay. Very helpful. Thanks.

Thank you for your question. There are no additional questions waiting at this time. That will conclude the conference call. Thank you for your participation. You may now disconnect your lines.