Good afternoon and thank you for attending the Alta Equipment Group Second Quarter 2024 Earnings Conference Call. My name is Joel and I'll be your moderator for today's call. I will now turn the call over to Jason Dammeyer, Director of SEC Reporting and Technical Accounting with Alta Equipment Group. Jason, you may proceed.

Thank you, Joel. Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta's second quarter 2024 financial results was issued this afternoon and is posted on our website along with a 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, management will first provide a review of our second quarter 2024 financial results. We will begin with some prepared remarks before we open the call for your questions. Please proceed to Slide 2. Before we get started, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including statements about future financial results, our business strategy and financial outlook, achievements of the company and other non-historical statements as described in our press release. These forward-looking statements are subject to both known and unknown risks, uncertainties and assumptions, including those related to Alta's growth, market opportunities and general economic and business conditions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release and can be found on our website at investors.altaequipment.com. I will now turn the call over to Ryan.

Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. I will begin with a quick overview of our second quarter results, then provide a current assessment of the business conditions in our end user markets. Tony Colucci will then present a more detailed analysis of our financial and operating performance for the quarter and our outlook for the balance of 2024. Overall, our business rebounded well this quarter from the seasonally challenged first quarter and in the face of a moderating market environment for new equipment sales. For the quarter, total revenues increased by $46.5 million sequentially to $488.1 million in Q2 from $441.6 million in Q1. For the second quarter, the business achieved adjusted EBITDA of $50.3 million, which is up $16.2 million versus Q1. Notably, our product support business performed well in this moderating environment, as we continued to achieve organic growth on increased field population with revenues increasing to a record of $144.2 million, an increase of $13.2 million from a year ago. Additionally, our Material Handling segment also continued on its steady path of profitable growth as we progressively execute on a solid sales backlog and gain market share in strategic regions and product categories throughout our footprint. We also saw a rebound in our Master Distribution segment as revenue in the quarter was $16.7 million versus $12.8 million in the first quarter. While we benefited from a return to normal seasonality and a strong quarter from our Material Handling segment and our product support business lines, market unit volumes in our Construction Equipment segment remain under pressure due to uncertainty regarding interest rates and the election outcome, especially affecting small to mid-sized contractors. Let me now discuss our business in greater detail by operating segment revenues for our Construction Equipment segment increased to $294.9 million from $281.5 million a year ago, but were offset by lower new equipment sales and compressed equipment gross margins. There is an oversupply of equipment in the market, both in dealer inventory across the entire channel and in excess supply from the OEMs, given the significant market volume declines relative to previous years. The increased supply of machinery is resulting in price degradation, especially with heavier earth-moving machines in the most competitive markets like Florida. Across our geographic footprint, the market is down nearly 9% year-over-year on a unit volume basis, with the Great Lakes region experiencing even steeper declines. We are seeing some benefit of our geographic diversity as certain markets like New York State and Florida benefit from their greater mix of large-scale projects that have allowed larger contractors to stay more insulated from economic volatility and keep those markets relatively buoyant, propping up steady demand for the higher end of Alta's product offering. The higher capacity equipment categories are where we see the most acute pricing pressure and also the steepest volume declines. Despite the industry returning to a more normalized environment after years of significant growth, we continue to remain positive about our position in the marketplace. We are focused on optimizing our fleet and continuing to build the annuitized revenue streams coming through the repair of our continuously expanding field population. Revenue for our Material Handling segment increased to $175.6 million from $169.1 million a year ago and was primarily driven by an increase in service revenue. The North American lift truck market saw a significant decline in Q2 2024, with factory bookings down sharply from peak levels. What we are observing is the continued normalization of the North American forklift industry from the extreme market dislocation brought on by the pandemic. Despite the reduction in bookings, we continue to benefit from the market positioning of our product portfolio from a lead time and product differentiation perspective and have been capturing market share despite the declines in industry bookings. We expect shipments to remain strong through 2024 extending into 2025, and we continue to focus on making market share gains, especially in the electrified product classes where we maintain a lead time advantage relative to the competition. As part of our growth strategy, we are actively exploring new business segments in tangential or complementary equipment markets that align well with our expertise and resources embedded in the dealership model. While we have previously discussed this significant opportunity to provide and support an electrified medium-duty over-the-road truck fleet, this initiative is gaining momentum as we enter the back half of this year. To that end, I'm pleased to report that Alta eMobility has entered into an agreement to represent Harbinger as an authorized dealer in support of the launch of their new electric medium-duty truck lineup. The territory assignment includes dense urban markets, including Southern California, and overlaps significantly with our existing footprint in the population-dense Great Lakes, Northeast, and Florida regions, where we intend to leverage our existing branch infrastructure. Our initial focus will be on the medium-duty, electrified Class 4 through 6 commercial vehicle segment. The market opportunity bears strong resemblance to the evolution of our electric forklift market over the last 50 years. Like lift trucks, medium-duty fleets are geographically contained, easing the rollout of charging infrastructure. As technology continues to advance and the necessary infrastructure develops, we anticipate widespread adoption and integration into the transportation ecosystem. In May, we signed an agreement with Mail Management Services, a top 15 carrier, providing dedicated service transportation for the United States Postal Service, to source 20 Harbinger Class 6 electric box trucks to update their fleet. Updating their fleet with the new electric powertrain technology will enable Mail Management Services to directly assist the US Postal Service in achieving its carbon footprint goals. Alta is handling all aspects of the vehicle transaction, specifying and installing the charging platform, as well as providing a web-based fleet management system. Mail Management Services partnered with Alta because of our proven approach to assess, define, execute and maintain electrified fleets. With the inclusion of Harbinger to the portfolio and the traction gained with new customers in the quarter, we now have approximately $25 million in sales backlog in the eMobility business, and we expect the majority of that backlog to convert to revenue in the second half of 2024. In summary, despite what we believe to be temporary demand headwinds, our long-term outlook remains positive as we believe the next few years will represent an extended cycle for non-residential construction. Project pipelines are significant and federal infrastructure spending continues to accelerate. Further, many of these projects are multi-year endeavors and fall into our geographic footprint. State DOT spending also remains elevated. Overall, we believe growth opportunities will persist as our dealership model has distinct advantages through a variety of market conditions. To close, we remain focused on selling our industry-leading dealership capabilities to expand our market share and grow our product support business. Cost optimization is a high priority and includes assessing SG&A spending, rationalizing the size of our rental fleet and other initiatives to streamline our business. I sincerely want to thank all our dedicated employees for their commitment to the success of our business. I also want to thank our customers, OEMs and shareholders for your continued support and confidence in our company's strategy. Now I'll turn it over to Tony for a detailed analysis of our financial and operating performance.

Thanks, Ryan. Good evening, everyone, and thank you for your interest in Alta Equipment Group and our second quarter 2024 financial results. Before I begin, I want to thank my Alta colleagues for their commitment and hard work during the quarter as we transition the business from the difficult operating conditions of the winter season to our busy summer months. You lead with our guiding principles daily, providing our customers with best-in-class products and service capabilities which ultimately keep their businesses in motion, thank you. My remarks today will focus on four key areas. First, I'll be presenting our second quarter results as our performance ramped as expected from the seasonally impacted Q1 and continues to transition in a moderating macro environment. Second, I'll briefly recap the refinancing that occurred in Q2 and update investors on our current balance sheet position. Third, I'd like to present two new slides that we've added to our investor deck on our customer end market exposure. And lastly, I'll discuss the updated adjusted EBITDA guidance range for 2024, which was noted in the press release today. Before I get to my talking points, it should be noted that I will be referencing slides from our investor presentation throughout the call today. I'd encourage everyone on today's call to review our presentation and our 10-Q, which is available on our investor relations website at altg.com. With that said, for the first portion of my prepared remarks and as presented in slides 11 to 13 in the earnings deck, second quarter performance. For the quarter, the company recorded revenue of $488.1 million, which is up $19.7 million versus Q2 of last year and up $46.5 million sequentially against Q1. Embedded in the $488.1 million of revenue for the quarter is a record amount of product support revenue as parts of service combined for $144.2 million in the quarter. Despite challenges in the new equipment sales line, we continue to realize organic growth in our Parts and Service departments with that figure increasing by 6.2% year-over-year. To close out the revenue lines as it relates to our rental business, we saw the natural and expected seasonal increase versus Q1 as rental revenues hit $53.7 million for the quarter, up $5.2 million from last quarter. Breaking down the segments briefly, once again, we saw a strong performance from our Material Handling segment, as equipment sales margins have held up relative to last year and we continue to push the pace on parts service and rental lines year-over-year, as those three line items were up a combined $4.3 million on an organic basis for the quarter. Notably, segment level income before tax improved in the second quarter, beating last year's quarter by $1.8 million. On to Construction, despite continued organic growth in parts service and rental revenue and increased gross margins in product support, we continue to lag our prior year numbers on new and used equipment sales as those sales were down $14.7 million versus last year on an organic basis and gross margins on new and used equipment sales while flat versus Q1 were down 270 basis points year-over-year. We specifically noted moderating or delayed demand from our small-to-mid-sized contractor customer base and the impact of an oversupplied competitive equipment market, which once again impacted new and used equipment performance in the quarter. Additionally, as it relates to the Construction rental fleet, despite the increase in rental revenue versus last year, we were expecting better physical utilization in the quarter and will be focused on optimizing the fleet in the coming quarters as we position the balance sheet and the fleet for success heading into 2025. In the Master Distribution segment, as expected, while Q2 outperformed a disappointing Q1 by $3.9 million in revenue and $800,000 in gross margin, the segment continues to lag last year's pace, as the interest rate environment and a stocked-up dealer channel continues to impact throughput to end users in the environmental processing markets. All told, on a consolidated basis we realized $50.3 million in adjusted EBITDA for the quarter, which is up $400,000 from the adjusted level of the second quarter 2023. On a trailing 12 basis, adjusted pro forma EBITDA is now $188.8 million, which converted into $105.2 million of economic EBIT as the gap between sales proceeds from rental fleet sales and the original cost of equipment widens and is impacting cash on cash returns in our rent to sell product categories. In summary, for the second quarter, we are proud of the way the business bounced back from a difficult Q1, and while we continue to see growth and stability in our product support business lines, our new and used equipment sales have been impacted, we think temporarily, when compared to last year, as small-to-mid-sized customers in the spot equipment market are taking a wait-and-see approach to making additional capital investments in their businesses. Additionally, the glut of new equipment supply on the market has led to, in our opinion, a lack of discipline in certain product categories and regions on Construction Equipment pricing which has impacted our gross margins and volumes in the quarter. Important to note, and this gets to the diversity of our revenue streams, that while some customers take a wait-and-see approach to the next purchase, this dynamic will help boost our product support department as ours continue to accrue on aging customer equipment. Lastly, it should be noted that we were able to manage new and used inventories appropriately for the quarter as that line item on the balance sheet was reduced by $7.1 million versus Q1, indicative of our focus to stick to our equipment inventory turnover KPIs in the face of a transitioning demand backdrop and oversupplied OEMs. Now for the second portion of my prepared remarks, I wanted to briefly comment on the refinance of our first and second lien credit facilities that occurred mid-second quarter. First, we were able to amend and extend our first lien ABL facility from $485 million to $520 million and importantly, extend the facility's maturity from 2025 to 2029. Additionally, we were able to increase the size of our floor plan financing facility by $20 million and make other necessary enhancements to our first lien credit agreement given the growth in our business over the past few years. Second, we sold $500 million in 9% second lien senior secured notes maturing in 2029, proceeds of which were used to pay off the $315 million in notes that were effectively set to mature at 12/31/25 and to enhance liquidity on the balance sheet. Importantly, investors should note that the new notes, similar to the old, have no current restrictive financial covenants on the business, allowing for maximum operating flexibility. Effectively, this refinance of the first and second lien positions on our balance sheet pushed out an $870 million maturity wall from 12/31/25 to mid-2029 and generated approximately $150 million of liquidity for the business. As it relates to credit metrics for the quarter, given the fees and OID associated with the refinance and the updated reduced EBITDA guidance, our leverage ratio was 4.4 times 2024 forward EBITDA as of June 30, a level that we expect is temporary and manageable as we focus to pare down on underutilized inventory and reduce rent-to-self fleet categories in the second half. From a liquidity perspective, given the refinance, the business now has approximately $300 million in liquidity on the ABL revolver as of June 30, providing for plenty of flexibility to continue executing in any macro environment that lies ahead. For the third portion of my prepared remarks, I'd like to point investors to slides 26 and 27 of our investor deck, which present an analytical estimate of the breakdown of Alta's revenues by end market segment. A couple of notes on the slides; first, our end market diversification is something we have always been proud of and have spoken to in the past, and I'm now pleased to be able to provide investors with more specifics on that diversity. As you will see in the slides, the overall theme is that despite the names of our segments, Material Handling and Construction, which relate to the type of products sold in those verticals, our vast customer base and product offerings take us to an enviable position on the diversification of our end markets. As an example, on slide 26 in the Material Handling segment, investors will note that one of the largest end markets for the segment is the defensive Food & Beverage category, which accounts for an estimated 15% of the segment's revenue. Two, beyond Food & Beverage, the next 70% of our Material Handling revenue comes from 16 distinct zip code categories that each have multiple subcategories and range from automotive manufacturing to medical supplies distribution, to municipalities and education, to chemical and paper manufacturing, to wholesale and retail distribution and logistics, to name a few. On the Construction segment on slide 27, a couple of notes here. One, road builders and contractors tied to infrastructure spending represent a healthy cross-section of our customer base and should help provide stability for years to come, considering all the factors at play in that arena. Two, our industrial roots in the Midwest are evident and reflected in the categories such as manufacturing, scrap and demolition. Three, note that a combined 18% of the Construction segment revenue is coming from what are effectively municipalities and utilities, and four, a combined 14% of our business is related to agricultural and forestry and aggregates and mining, with the bulk of that exposure coming from our latest acquisition of Ault in Canada. In summary, we believe our end market diversification is an advantage for us both from a risk mitigation and commercial perspective, as our teams are constantly gaining insights, sharing ideas, and ultimately cross-selling our product and solution offerings across a wide spectrum of end markets. Now, for the last portion of my prepared remarks, I want to present our insights on our updated EBITDA guidance for 2024. In terms of the number, we now expect to report $190 to $200 million of adjusted EBITDA for the full year 2024. A few observations; first, headwinds. As many industry participants have noted, deliveries of new construction equipment to customers in North America are down meaningfully in the first half of 2024, which runs counter to expectations of a flat to modest growth year in equipment sales when we entered 2024. As mentioned, we've seen this impact most acutely with our small-and-midsized contractor customers, as the references to higher interest rates and uncertainties surrounding the election have gotten more pronounced as the year has gone on. The dip in the market has impacted the new-use equipment line in the Construction segment and at Ecoverse more than our internal risk-adjusted models expected, and we suspect pressure will continue to be evident in the second half of 2024. Additionally, the oversupply of equipment in the construction markets has led to compressed gross margins on new equipment. As mentioned previously, we have observed undisciplined competitive pricing in certain product categories and regions. It follows that to compete and hold the valuable share that we've earned over the years, we've had to accept skinnier than historic margins on equipment deals. Again, this margin compression has outpaced our risk-adjusted internal models and we suspect the pressure will continue so long as the overhang and supply in the industry persists. Lastly, the two above factors have led to less than anticipated utilization of our rental fleet and despite the seasonal ramp in Q2, while notable, it wasn't as steep as we expected and is out of line with the size fleet we're carrying. That said, given our rent-to-sell business model, specifically in the Construction segment, we expect to quickly right-size the fleet in the coming quarters and to get back in line with our utilization targets and the demand for rental fleet in our markets. Now some tailwinds as we head to the second half. First, our Material Handling segment has had a good first half of 2024, and we expect to have a strong second half as we continue to sell out of a solid backlog and take market share in key geographies and product classes. Additionally, we expect the Peaklogix business to ramp as interest rates decrease. In fact, recent activity at Peak supports this thesis. Second, as Ryan mentioned, we're expecting notable revenue from the eMobility segment in the second half of 2024 as the work associated with credentialing ourselves and developing relationships with commercial EV and charging OEMs in the over-the-road space starts to bear fruit. Lastly, given some of the challenges we faced on the revenue and gross margin lines in the first half of 2024, we've taken proactive measures to manage down our overhead costs and are actively looking for ways to automate and drive costs out of the business, which will help the business in the second half of the year and over the long term. In closing, I would say that we remain bullish about our long-term prospects at Alta and that we believe some of the current dynamics in the market today could prove to be transitory. In the meantime, Ryan and I, along with our 3000 teammates, look forward to the challenge in front of us, striving for market share gains to help offset a potentially weaker macro environment, creating new revenue streams in emerging business lines like eMobility and optimizing costs and fleet to position the business for further success as we look forward to a strong 2025. Thanks for your time and attention and I'll turn it back over to the operator for Q&A.

Absolutely. We will now begin the Q&A session. The first question is from the line of Matt Summerville with D.A. Davidson. Your line is now open.

Hi there, you've got Canyon Hayes on from Matt Summerville today.

Hi. How are you?

I was wondering if we could get some more detail on the reduction in the EBITDA guidance. Could you provide a breakdown to the new midpoint and rank the main drivers included in the commentary?

Yeah, I mean, you could almost directly correlate the reduction to the commentary. The vast majority of the reduction, I should say, to the commentary on new and used equipment in the Construction segment, primarily. This is primarily in the spot market that we participate in against large other OEMs like Caterpillar, John Deere, Komatsu, et cetera. And the reduction in sales overall, just demand going down in that small-to-mid-sized contractor base and then the margins related to that equipment is the primary driver. Beyond that, I think it would be two, a and b, would be Ecoverse performance in the second quarter. We had a nice April, then we saw a pullback kind of in the back half of the quarter, if you will, and also just our rental fleet utilization and expecting to do a little bit more there. So, that's kind of how I would rank the items that caused the guidance to come down.

Great, thanks.

Good afternoon, everyone. I hope you're all doing well. I wanted to revisit the question about the guidance. Are there specific product categories where you're seeing the most pressure? It seems like small to medium-sized contractors are your main customers. Is it shovels, or something else? Is the pressure widespread across your entire territory, or is it concentrated in certain states?

Steve, I'll take that one. I think Ryan mentioned in his remarks where the Midwest states have been impacted just from a broad demand perspective versus, let's say, Florida. As you know, Florida is a massive equipment market, so that being down has been probably the biggest impact for us. I would just say Florida and Michigan, primarily the most impacted here from the demand side. In terms of what categories impacted, I would say that from a margin perspective, in a pricing perspective, it would be the big heavy stuff, so articulated dump trucks, 40-ton articulated dump trucks down in Florida, where we're seeing some of this pricing discipline erode on those larger product categories. We have seen a slight pullback in year-over-year and maybe more of the compact lines, but that's much more muted than what I would say is going on in the heavy categories with that. Hopefully that helps.

Yeah, that's very helpful. And are you seeing the OEs respond then from sort of a financing and incentive program, I presume? Is that part of it? And just a related point is, how do the inventory stack look for you guys, as it stands today? How much do you need to lean down, if at all?

Yeah, I'll take that one, Steve, and maybe allow Ryan to talk about the OEs and their participation, pricing wise, and how that's impactful. In terms of the fleet size, we're very close to our turns, as I mentioned, on new and used equipment; we were able to reduce in the quarter. And I think that's a really strong kind of statement for the team here, as we really try to stick to our two turns on new inventory, used inventory, et cetera. So, actually, down on new and used, the rental fleet is where I would say we've got the most opportunity. I think that's probably $30 million to $50 million where we'd like to maybe pare back on a $600 million fleet here in the next several quarters, let's say. And there's probably a little bit more than that in the used department; we've got some aged fleet. And if you think about turning out of the rental fleet, I think the number was something like $60 million year-to-date that we were able to kind of reduce. So the key is just matching supply and demand, being mindful of what we're ordering and taking from the OEs, and we'll snap right back into where we want to be with the fleet and on the balance sheet in the next several quarters, so long as demand stays buoyed or at least to the levels that it is. Ryan, do you want to talk about pricing?

Sure. So the relationship between the dealer and the OEMs as it relates to pricing has never been more important than times like this. You've got an overstocked dealer channel, and every deal is competitive. So it's an active dialogue with the various manufacturers we represent and it plays into one of the comments Tony made about some of the lack of discipline that we're seeing in the market. We see some opportunistic and undisciplined pricing happening, where we might see some erratic swings in the near term on share as OEMs do some kind of crazy things to try to get their product into the marketplace.

That's helpful, guys. Thanks. I appreciate it.

Hi. Good evening. I wanted to discuss the moderation in construction demand, yet noted that revenue from aftermarket support in the construction equipment segment grew significantly, about 15%, which is well above the company's overall results. I have a couple of questions regarding this. First, what was the organic change in construction equipment, parts, and services? Secondly, if the market remains weak in the second half and the installed base ages, potentially offsetting the lower utilization of existing equipment, do you anticipate that the parts and service business will remain exceptionally strong under these circumstances?

Steve, I believe we observed some of that. Our product support business faced challenges, particularly in the Construction segment, which, according to our 10-Q, saw an organic decline of $14.7 million, or 10%, in the new and used equipment line. We managed to mitigate some of this with an additional $4 million in sales from the rental fleet, which brings us to about $10 million down year-over-year on an organic basis, equating to high-single digits in equipment sales. Looking ahead, as the fleet ages, we might experience a trend similar to what occurred with the significant replenishment last year. Previously, we benefitted from supply chain disruptions and product support. However, with last year’s replenishment, a lot of new equipment is now in the field, and it hasn’t yet encountered major issues, as it’s still in the early stages of use. Overall, your point regarding utilization is valid; our customer equipment usage seems to be relatively stable or slightly down in low single digits, according to some industry data, which is beneficial for us and will keep our Parts and Service operations active. I may have overlooked part of your question, so feel free to ask me to clarify, Steve.

No, that was helpful commentary. Maybe an add-on question to that topic. With good utilization in the Parts and Service department for the Construction Equipment segment, how does that work pricing wise? Is this a favorable pricing environment for the Parts and Service revenue line?

Steve, what I would say is that the labor situation in the country is more structural, particularly the shortage of skilled labor. We've been able to increase pricing year-over-year. Some of the gains you're seeing related to activity are due to our ability to implement price increases for our customers. I wouldn't tie the pricing of the service directly to utilization; it is more closely linked to the lack of skilled labor available.

Okay, that's helpful. To better understand the Construction customer sentiment, there seems to be a reduced willingness to purchase new and used equipment. Are customers allowing their fleets to age in anticipation of better demand, or are they selling some of that fleet? Additionally, what is the willingness of customers to purchase your lightly used rental fleet in this environment?

I think it's still strong. We sold $36.3 million out of our fleet, which is up versus last year. And I probably don't have it in front of me, but I think up versus Q1. And so they're still buying the lightly used fleet. We're still getting good margins on the lightly used fleet, and that's just part of our business model from a field population perspective. I think what I would say sentiment-wise, Steve, is the customers appear to be busy on projects, they have backlog, and we can't keep getting the same refrain. And as I mentioned, it's like that refrain has gotten more pronounced as we've gone through the back half of the second quarter, specifically where customers are just saying, look, I'm going to grind it out here until I see lower interest rates. I'm going to keep maybe my older piece of equipment until after the election when I know more about tax, future tax ramifications of buying capital equipment. I think it's those two primary factors that are driving customer sentiment in the non-residential, if you will, the smaller end of non-res space.

Great. That's all from me. Appreciate it.

Thank you, gentlemen. A couple quick questions here. We spent a good amount of time here talking about the small and medium-sized contractors that are soft right now, but kind of in the aggregate, I think that's probably a smaller percentage of your total company revenue, maybe we could talk a little bit about some of the stronger end markets that you're seeing. Tony, thank you for these great slides on 27 and 28, but maybe you can run through a couple of those end markets and talk to some of the stronger ones.

Sure. I think that regarding the buying segment, the Food & Beverage distribution remains consistently strong. Warehousing and logistics are performing well, with a significant amount of medical supplies still in demand and no observed pullback or facility shutdowns. The automotive sector appears somewhat sluggish, mainly due to a decrease in car production. However, as long as facilities are operational, we continue to integrate our services into our customers' spending on Material Handling, which has not shown any notable decline. Overall, this segment remains stable and steady. In the Construction Equipment sector, the aggregate and mining markets in Canada, particularly the Ault deal, are performing well. While landscaping and compact equipment in that market also show strength, there are some weaknesses in mid-sized commercial site development projects. Our major road customers are busy, albeit cautious about purchasing, but overall are strong. The ongoing infrastructure spending indicates activity, but there are hesitations in equipment purchases due to various factors, such as pricing, interest rates, and other considerations. Aside from the mid-sized site development contractors, most customers are active but not investing in equipment at historical levels.

That's helpful. And then as you think about, right, sizing your rental fleet, how might you redeploy that capital?

I think what we would do, Alex, is throw it right at the revolving debt, and that's the first priority here. We like to think that our rental fleet is sort of directly correlated with the debt load and it's in our minds a little bit temporary, right. We're turning out of that rental fleet in a significant way in our Construction business, and so long way, to answer your question. But we would want to put that right against the debt.

Thank you very much. Good evening, guys. My first question is actually around Material Handling. Hyster-Yale reported yesterday and had their call today. And you know that they did actually offer a more subdued outlook with regards to the truck market for the second half of the year. Talking about that things were slowing down faster than they expected. And then as they got into that discussion, made some commentary with regards to 2025 that for them to be able to call it meet their longer-term goals, that they would need to see themselves take more market share than they currently would envision. So taking all that and applying it to the world as it relates to you, when you think about the Material Handling business in Hyster-Yale, I know it's probably the most important part of that business, but maybe can you scale it within regards to the aggregate of your Material Handling business and then kind of talk a bit about what you're seeing with regards to a pipeline of activities as you look into 2025? That's my first question.

I can expand on this, and I know Ryan might have some insights as well, but Hyster-Yale represents a significant part of our Material Handling business. Currently, it accounts for about $0.60 to $0.70 for every dollar when you consider it without Peaklogix. It’s an important relationship that we take great pride in. Ryan, would you like to discuss the market and our share in it?

The volatility you are noticing in industry bookings is not as intensely felt at the dealer level. The current field population is more stable than it appears. We are observing normalization and a return to more reasonable market levels. The fleets that are present are those up for renewal, primarily long-term legacy accounts that remain stable and follow replenishment cycles of three to five years, depending on usage. As a dealer, you don't experience the same level of volatility as manufacturers do with large order fluctuations. This aspect is critical to understand. Our flagship OEM in Material Handling and the revenue generated through the dealership model and allied lines is significant. We do not have any other leading brand in forklift trucks, and we believe we are well positioned to gain market share in this fluctuating environment. We are excited about some of our product features and the overall growth in the narrow aisle and electric segments of the forklift industry. Hyster-Yale is well-positioned for this, and it will continue to be a focus. We assess the business based on the stability of product support revenue and the number of our mechanics, and we anticipate ongoing organic growth across all regions.

I want to emphasize that we have gained market share this year despite a challenging bookings environment, which is a positive development. This success is closely linked to the product innovations that Hyster-Yale has introduced over the past couple of years, particularly in narrow aisle products relevant to the warehouse and logistics sectors. These innovations are proving helpful as we seek to secure new accounts in major markets like Chicago and Toronto, which continue to offer significant organic growth opportunities for us. We are optimistic about the increase in market share, and the bookings that we now have a larger share of are expected to ship next year due to existing backlogs. Consequently, while there has been some volatility in the bookings figures, particularly in the aftermath of COVID, our situation appears somewhat stable. This stability is influenced by our existing field population as we are in the latter stages of production.

My next question relates to an earlier point about the guidance. You mentioned that Ecoverse started the second quarter strong in April but then faded. Despite showing a significant revenue increase, totaling 16 million across the segment, I'm curious about the business trends as we move into the second half of the year. Do you expect to see year-over-year growth in that segment for the latter half of 2024, or has the decline observed towards the end of the second quarter continued and led you to anticipate an annual decrease in that business during the second half? I have one more question after this.

Ted, I think given the performance in Q2, I think it'll be very difficult for Ecoverse to kind of repeat what they did in 2023. Keep in mind, Ecoverse is selling to both Yellow Iron and then aggregate and mining sort of dealers, some of which handle competitive lines relative to Alta on the earth-moving side of the house, and they're stocked up. And so end markets are busy in terms of mulching material processors, or anybody that's selling or cultivating organic material; these people are busy, they're just not committing to assets. I would say, though, that there could be, and we saw this in 2016, a really strong November and December on capital equipment as the election sort of went past us. And so that, that absolutely, I could see maybe unlock some things for Ecoverse, but not something that we're expecting to happen.

I'll take those in reverse, Ted. If you've got to account for the non-cash transfers at the bottom of the cash flow statement to kind of tie back to the inventory lines. It's just the way that kind of GAAP accounting works. So you're right, inventories are down, but we account for the transfers that go into the rental fleet as a reduction to inventory, net-net, if you will, on the balance sheet versus the cash flow statement. Your first question on working capital, yeah, the first half is always more difficult in terms of working capital investment. If I look at last year, our working capital investment for the first half of the year was something like $43 million in the first half of the year, net working capital, and we ended the year something like $15 million, $16 million, and slide 14 of our investor presentation. So, yeah, we invested $15 million, and we ended through the first half of 2023, end of the year at $16 million of investment. We're kind of on the same pace, meaning we should be able to generate some gains here from a working capital perspective over the back half of the year. And Ted had mentioned that that's his last question, so turn it over to the operator to close the call.

Thank you. That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.