ALTA EQUIPMENT GROUP INC. (ALTG)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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, 2025 (“Annual Report on Form 10-K”). 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 and our Annual Report on Form 10-K, 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 allied 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 42 years and have developed a branch network that includes over 80 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, Quebec, and New Brunswick (serving the Maritimes). We offer our customers end-to-end solutions for their equipment needs by providing sales, parts, service, and rental offerings. Additionally, we provide 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 high-performing Hyster-Yale dealer and are a multi-year recipient of the Volvo Dealer of the Year award.

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.

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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 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 43% 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 $522.1 million as of March 31, 2026. The original acquisition cost of our rental fleet excludes $2.5 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.

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Principal Costs and Expenses

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

New equipment sales. Cost of new equipment sold 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

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

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

Equipment Industry Overview 2025

The North American construction equipment market continued to face cyclical softness throughout 2025, although signs of stabilization began to emerge late in the year. Dealer retail sales were subdued year over year, pressured by prolonged interest rate uncertainty, cautious customer sentiment, permitting delays, and pricing instability associated with tariffs across the dealer channel. Privately funded non-residential activity remained weak, particularly among small and mid-sized contractors, while publicly funded infrastructure programs, supported by elevated levels of state-based DOT spending and the Infrastructure Investment and Jobs Act ("IIJA"), continued to provide a meaningful counterbalance against challenged privately funded non-residential activity. The operating environment was further pressured by continued tariff volatility, which contributed to higher material costs and delayed purchasing decisions across several end-market channels. Competitive pricing dynamics and margin compression persisted as OEMs and dealers worked through excess channel inventories, though late-year improvements in dealer purchasing intentions indicate emerging restocking behavior and a healthier demand backdrop heading into 2026. Major construction equipment OEMs have noted expectations for the 2026 North American construction equipment market ranging from a modest contraction to 7% growth.

The North American lift truck market entered a normalization phase in 2025 as the industry continued to work through the elevated backlogs accumulated during the 2021-2022 supply-chain dislocation. Industry bookings softened through the year as customers delayed fleet replacements in response to macroeconomic uncertainty, tariff-driven cost pressures, and reduced equipment utilization in certain manufacturing sectors. As backlogs declined, manufacturers adjusted production schedules accordingly. Despite these near-term headwinds, underlying fundamentals in core material‑handling sectors like food and beverage, retail distribution, and logistics remained constructive. Further, adoption of advanced power solutions, particularly lithium-ion platforms and early-stage automation technologies, also continued to expand across customer fleets. As excess channel inventories continue to be absorbed and customer engagement improving, the lift truck industry expects bookings to strengthen in the latter half of 2026, supporting a more constructive long-term outlook for this segment.

Equipment Inventory Availability, Rental Fleet Investment, and Product Support Trends

Following global supply-chain constraints that characterized 2021 and 2022, equipment availability improved meaningfully during 2023 and 2024, resulting in elevated dealer stock levels industrywide, particularly in the construction equipment segment. This trend continued into early 2025 as channel inventories remained above historical norms in several categories, a dynamic compounded by muted demand from privately funded non-residential contractors and cautious purchasing behavior stemming from tariff volatility and higher financing costs. Despite these broader market pressures and aggressive competitive discounting, we maintained disciplined inventory management and reduced new equipment inventory by $51.5 million year over year, improving asset efficiency and positioning us well entering 2026. Industry survey data indicates that while new equipment inventory levels remained elevated at the beginning of 2025, they trended down modestly throughout the year as OEMs adjusted production schedules and end-market demand began to stabilize.

With equipment availability improving during 2023, we strategically replenished and expanded our rental fleet at a time when utilization and pricing remained strong. During 2024 and into 2025, however, North American rental utilization rates moderated as supply increased across the rental channel and end-market activity softened in several construction-related sectors. In recognition of this trend, we undertook a targeted optimization initiative beginning in mid-2024, aimed at reducing identified excess primarily within our rent-to-sell categories and asset classes with substandard rental return characteristics. This action resulted in a $84.3 million reduction in rental fleet gross cost from June 30, 2024 through December 31, 2025, which included a sizeable divestiture of aerial rental fleet in our Illinois region resulting in a $4.3 million gain on sale. Aligning our rental fleet investment decisions with market demand, focusing on optimizing mix, improving turns, and prioritizing categories with the strongest utilization, margin, and resale performance has enhanced the overall quality of earnings and strengthened the asset efficiency profile of the Company. Rental rates remained stable to slightly positive in 2025, supported by a more rational competitive environment and improving visibility into 2026 project pipelines.

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Demand for product support remained resilient in 2025 as customers continued to prioritize equipment uptime amid a more cautious capital investment environment. While overall product support revenues were essentially flat year over year, declining modestly by $0.5 million, from $548.2 million to $547.7 million, growth was tempered by lower equipment utilization across several key end markets, including automotive and manufacturing sectors, which influenced material handling product support activity. Despite this, demand for skilled technician labor continues to underpin a growth-oriented outlook. Elevated deliveries of new equipment in 2022 and 2023 helped to expand the installed base which will soon be entering mid-life service cycles, contributing to an expected lift in parts and service activity. At the same time, the material handling industry’s ongoing transition toward electric lift trucks, while reducing mechanical parts consumption per unit, has continued to shift the revenue mix toward labor-intensive service work based on software diagnostics. We expect this trend to persist as electrified and increasingly autonomous equipment requires advanced diagnostics, firmware management, and OEM-certified service capabilities. Additionally, electric lift trucks create incremental revenue opportunities in batteries, chargers and charging infrastructure, and power management solutions, partially mitigating the long-term decline in traditional parts intensity.

Business Description and Segments

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

Financial Statement Overview

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

New equipment sales. We sell new heavy construction, material handling, and environmental processing equipment and are a leading regional distributor for nationally recognized equipment manufacturers. Our new equipment sales operation is a primary source of new customers for our rental, parts, and service business. The majority of our new equipment sales are predicated on exclusive distribution agreements we have with best-in-class OEMs. The sale of new equipment to customers, while profitable from a gross margin perspective, acts as a means of generating equipment field population and activity for our higher-margin aftermarket revenue streams, specifically service and parts. We also sell tangential products and services related to our 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 43% 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 $529.8 million as of December 31, 2025. The original acquisition cost of our rental fleet excludes $3.1 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.

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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 the type and usage of equipment. See Note 2, Summary of Significant Accounting Policies, for information on our rental equipment depreciation methods.

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

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

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

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Results of Operations

Years ended December 31, 2025 and 2024

Consolidated Results

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Non-GAAP Financial Measures:

Adjusted EBITDA

Organic Revenues

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The above tables contain non-GAAP financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance that excludes or includes amounts in the most directly comparable measure calculated and presented in accordance with GAAP in the consolidated statements of operations, balance sheets or statements of cash flows of the company. We disclose non-GAAP financial measures, including Adjusted EBITDA and organic revenues and growth rates associated with organic revenues because we believe they are useful performance measures that assist in an effective evaluation of our operating performance. We believe such measures are useful for investors and others in understanding and evaluating our operating results in the same manner as our management. However, such measures are not financial measures calculated in accordance with U.S. GAAP and should not be considered as a substitute for, or in isolation from, net income (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 or divestitures 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 across reported 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 tables in management's discussion and analysis of our Material Handling and Construction Equipment segments. These measures are supplemental to, and should be used in conjunction with, the most comparable U.S. GAAP measures. Management uses these non-GAAP financial measures to monitor and evaluate financial results and trends.

Revenues: Consolidated revenues decreased by $40.7 million to $1,835.9 million for the year ended December 31, 2025 as compared to 2024 as modest gains in new and used equipment sales and service revenues were more than offset by declines experienced within the rental departments of the business. Rental revenues and rental equipment sales declined organically by 10.2% and 21.0%, respectively, representative of a smaller average rental fleet consistent with the Company's ongoing fleet optimization initiatives and lower utilization levels. Across the equipment sales portfolio, performance varied by segment. The Construction Equipment segment delivered year-to-date growth in new and used equipment sales, supported by improved deliveries, competitive OEM programs, and steady demand across key end markets, particularly publicly-funded infrastructure, road building, and aggregate mining. In contrast, the Material Handling segment experienced lower equipment sales, driven by reduced unit deliveries and a modest contraction in market size and share in select geographies as customers continued to delay fleet replacements amid macro uncertainty and tariff-driven cost pressures. Product support revenues remained comparatively stable at the consolidated level. The Material Handling segment experienced declines amid softer parts and service activity due to lower customer fleet utilization, reduced billable headcount, and weaker demand in automotive and general manufacturing end markets. By comparison, the Construction Equipment segment maintained steady product support activity, supported by consistent customer demand and strong field execution. Importantly, technician productivity remained high across the enterprise throughout the period and effective headcount management ensured that our workforce remained aligned with service demand.

Gross profit (GP):

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Consolidated gross profit decreased by 40 basis points to 25.9% in the year ended December 31, 2025 compared to 26.3% over the same period in 2024 as margin compression in new and used equipment and rental operations offset gains in parts and service. New and used equipment sales margins decreased 100 basis points to 14.1%, impacted by a less favorable sales mix, heightened competitive pricing conditions stemming from industry oversupply, and rising input costs, including tariff-related increases that were not fully recoverable through pricing actions. Parts gross profit margins increased by 120 basis points from the prior year, reflecting disciplined pricing execution, partially offset by the impact of broad-based tariff increases. Service gross profit margins improved in the year ended December 31, 2025 when compared to the prior year, increasing 110 basis points, supported by stronger labor rate realization, technician efficiency gains, and improved warranty labor recoveries, aligning with ongoing initiatives across both major segments to enhance billable time, reduce non-productive hours, and optimize service profitability. Rental revenues gross profit margin decreased 150 basis points for the year, primarily reflecting the influence of depreciation costs on a reduced revenues base following the Company's fleet optimization efforts, exacerbated by lower utilization levels across several markets. While rental operations experienced lower utilization, strategic disposals of underperforming assets contributed to a 60 basis point compression in rental equipment sales margins. These actions were designed to enhance asset efficiency and support a more disciplined and rationalized rental strategy heading into 2026.

Operating expenses: Consolidated operating expenses decreased by 5.0% to $451.4 million for the year ended December 31, 2025 compared to the prior year, primarily due to cost savings initiatives implemented in the second half of 2024 and early 2025. These initiatives included workforce optimization measures that resulted in improved efficiency and reduced personnel-related costs. Further savings were achieved through changes to the Company’s self-insured healthcare program. The sustained reduction in operating expenses reflects disciplined execution and ongoing focus on cost control across the enterprise.

Other expense, net: Consolidated other expense, net for the year ended December 31, 2025 was $82.0 million compared to $84.9 million for the year ended December 31, 2024. The decrease is attributed to the impact of one-time events, specifically the gain on divestitures in 2025 and debt extinguishment losses in 2024 related to refinancing activities, all of which were partially offset by changes in interest expense year over year.

Income tax expense (benefit): The Company recorded an income tax expense of $21.5 million and benefit of $4.2 million for the years ended December 31, 2025 and 2024, respectively. The income tax expense in the current year was primarily due to the One Big Beautiful Bill Act ("OBBBA") enacted into law during the third quarter. Before OBBBA was enacted, interest expense limitation rules positioned the Company in a taxable income situation prior to the application of its net operating losses (“NOLs”), the use of which were limited and unable to shield the entirety of the Company’s taxable income. This resulted in cash taxes paid in recent years which reduced available cash liquidity. As the Company was using its NOLs, there was no need to recognize a valuation allowance against the NOL deferred tax assets ("DTAs"). For the Company, the enactment of the OBBBA legislative changes resulted in a taxable loss position on a trailing 12-quarter recast basis, prior to the application of its NOLs, primarily as a result of the change to the interest expense limitation rules. Thus, future usage of the Company’s NOLs to shield taxable income was no longer more likely than not and a full valuation allowance against those NOL DTAs was deemed appropriate, leading to the significant increase in deferred income tax expense in 2025. Going forward, given the change to the interest expense limitation and the Company now being in a taxable loss situation, cash taxes paid by the Company will be reduced, a benefit to available cash liquidity in the future. The income tax benefit in 2024 was primarily due to pre-tax losses partially offset by the valuation allowance recorded against a portion of the DTA relating to the U.S. disallowed interest expense carryforwards created by the provisions of the Tax Cuts and Jobs Act of 2018 ("TCJA").

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Material Handling Results

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Non-GAAP Financial Measure: Organic Revenues

Revenues: Material Handling segment revenues decreased by $33.1 million to $654.3 million for the year ended December 31, 2025 as compared to the same period last year. Organic revenues declined $34.4 million, or 5.0% for the year ended December 31, 2025, reflecting a demand environment consistent with the broader lift-truck industry's 2025 performance, in which customers delayed fleet replacements and reduced capital commitments amid macro uncertainty and tariff-related cost pressures. Organic new and used equipment sales decreased by 7.7% driven by softer industry bookings throughout 2025 as customers continued to defer capital expenditures, extended replacement cycles, and moderated utilization levels across several end markets, most prominently experienced in automotive and manufacturing sectors. The trends experienced in 2025 aligned with broader market behaviors, as the industry’s continued absorption of backlogs originating from the 2021-2022 supply-chain disruptions tempered quoting velocity and order intake overall. Product support revenues declined $8.8 million organically, with a $5.6 million reduction in parts sales and a $3.2 million decrease in service revenues. While overall product support held relatively resilient, softer activity in key customer verticals such as automotive and general manufacturing contributed to the business carrying a lower billable technician headcount year over year. Rental revenues decreased 9.1% organically for the year ended December 31, 2025 as compared to last year reflecting a lower average volume of fleet on rent in select markets, mainly in our Midwest and Canada regions. In contrast, rental equipment sales increased $9.3 million organically, or 88.6%, supported by targeted disposals of underutilized assets and matching customer demand for cost effective used equipment alternatives. The increase in rental equipment sales aligns with the Company's 2024-2025 fleet optimization initiatives aimed at reducing excess rental fleet and improving overall asset efficiency.

Gross profit (GP):

Material Handling gross profit for the year ended December 31, 2025 increased 60 basis points to 33.0% compared to the same period in 2024. New and used equipment gross margins improved partly due to the absence of the prior-year fourth-quarter auction disposition activity that had compressed used equipment margins, along with reduced pressure on used equipment pricing. Although used equipment margins improved, overall margin performance was tempered somewhat by sales-mix variances and tariff-related cost pressures concentrated in the new equipment category, where margins held relatively stable due to the ability to pass through much of these upstream costs. Parts gross margins improved slightly on disciplined pricing execution and are in line with expectations. Service margins aligned with expectations and improved by 50 basis points for the year ended December 31, 2025, supported by selective effective labor rate increases, though partially offset by modest unfavorable quote variances. Rental revenues gross margins declined 270 basis points primarily due to the influence of fixed depreciation costs on a lower revenues base, occurring most acutely in our Midwest region. Offsetting these impacts, rental equipment sales margins improved, supported by the strategic disposal of aging assets and strong demand for competitively priced used equipment.

Operating expenses: Operating expenses decreased by $3.9 million to $190.2 million for the year ended December 31, 2025 as compared to the prior year, primarily due to cost savings initiatives implemented in the second half of 2024 and early 2025. These initiatives included workforce optimization measures that resulted in reduced personnel-related costs, including expenses associated with the Company’s self-insured health plan. Further contributing to the year-over-year reduction was a decline in fuel costs, which provided meaningful benefit given the scale of our field-based technician workforce.

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Other expense, net: Other expenses increased by $0.7 million to $24.3 million for the year ended December 31, 2025 as compared to the same period last year mainly reflecting higher interest expense resulting from increased debt levels and a higher effective interest rate following our 2024 debt refinancing, partially offset by a gain on divestiture from the sale of the Dock and Door division of our business in the New York and Boston regions.

Construction Equipment Results

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Non-GAAP Financial Measure: Organic Revenues

Revenues: Construction Equipment segment revenues decreased by 1.3% to $1,116.7 million for the year ended December 31, 2025 versus prior year. Organically, the segment revenues decreased 1.0% for the year ended December 31, 2025 as compared to the same period last year. Organic new and used equipment sales increased $36.1 million, or 6.3%, with most of the growth occurring in the second and fourth quarters. This performance was supported by competitive OEM promotional programs, increased customer purchasing activity tied to OBBBA legislation that enhanced bonus depreciation benefits on equipment acquisitions, and steady demand across key end markets, such as road building and aggregate mining. Product support revenues, consisting of parts and service, increased 1.2% organically, aided by improved pricing and continued technician efficiency improvements in several regions. Rental revenues decreased 10.1%, on an organic basis for the year ended December 31, 2025 as compared to the prior year driven by a lower average rental fleet size between the comparable periods and reduced fleet utilization in select markets. The year-over-year decline is a byproduct of the Company’s strategic repositioning of its rent-to-sell fleet to better align with current market conditions and focus on higher return asset categories. Rental equipment sales decreased for the year ended December 31, 2025 by $38.3 million due to the significant sales activity in late 2024 leading to lower levels of rent-to-sell fleet available for retail disposition during the current year, the aforementioned strategic repositioning of the segments rent-to-sell fleet, and reduced throughput of lightly used, rent-to-sell heavy equipment to our customer base in 2025.

Gross profit (GP):

Construction Equipment gross profit decreased by 70 basis points to 21.8% from 22.5% for the year ended December 31, 2025 as compared to 2024 driven primarily by lower margins on equipment sales. New and used equipment sales margins decreased by 120 basis points to 11.2%, reflecting a less favorable product mix and heightened pricing competitiveness across the industry as OEMs and dealers worked through elevated channel inventories for much of the year. These dynamics were consistent with broader market conditions as the industry sought to normalize inventory levels. Rental equipment sales gross margin for the year ended December 31, 2025 decreased by 230 basis points, reflecting the Company's deliberate reduction of underutilized rent-to-sell assets as part of its strategy to dispose of underperforming equipment, optimize fleet mix, and enhance long-term returns and asset efficiency. Parts sales margins improved by 170 basis points for the year ended December 31, 2025, remaining within expected ranges, supported by continued pricing discipline. Service gross margins increased by 200 basis points due to improved labor rate realization, technician efficiency gains, and improved warranty recovery, a result consistent with ongoing initiatives to increase billable hours, manage non‑productive time, and strengthen warranty recovery processes across the network. Rental revenues gross margin for the year ended December 31, 2025 decreased by 100 basis points compared to the same period last year a result of a reduced amount of fleet on rent.

Operating expenses: Construction Equipment operating expenses decreased by $17.5 million to $227.3 million for the year ended December 31, 2025 as compared to 2024, reflecting the full impact of cost savings initiatives implemented during the second half of 2024 and early 2025. These initiatives included workforce optimization measures that resulted in improved efficiency and reduced personnel-related costs, including expenses associated with the Company’s self-insured health plan. Additional expense savings were realized through more efficient advertising and promotional activities as well as greater discipline in managing customer relationship-related costs.

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Other expense, net: Construction Equipment other expense, net decreased by $1.5 million to $44.6 million for the year ended December 31, 2025 as compared to the same period in 2024. The variance was driven by the gain on the divestiture of substantially all our aerial fleet rental business in the greater Chicago area and was partially offset by increased interest expense due to higher nominal levels of debt and the increase in our effective interest rate associated with the debt refinancing in 2024.

Master Distribution Results

Revenues: Master Distribution segment revenues for the year ended December 31, 2025 were $67.3 million, an increase of $8.1 million from the prior year same period. The majority of this growth came from new and used equipment sales, which rose by $7.6 million, as normalized dealer inventories and a more seasonally-aligned delivery cadence improved purchasing behavior across the segments sub-dealer network in the first half of the year. Parts sales were improved for the year ended December 31, 2025 as pricing actions beginning in the second quarter offset tariff-driven cost increases. The business segment continues to actively pursue pricing and sourcing strategies to support long-term profitability given its direct exposure to European OEMs which are subject to U.S. tariffs.

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Gross profit (GP):

For the year ended December 31, 2025, gross profit margin on new and used equipment sales were 20.5%, down from the prior year and reflective of higher input costs generally related to the weakening of the U.S. dollar against the Euro and the influence of tariffs on imported goods. Parts sales gross profit margin were 41.9% for the year ended December 31, 2025, down 190 basis points compared to the same period last year, following broad-based increases in steel and aluminum tariffs partially offset by parts pricing actions and negotiations with major OEMs. These pricing actions, together with alternative sourcing initiatives, are expected to support margin stabilization in future periods.

Operating expenses: Master Distribution segment operating expenses were $11.8 million for the year ended December 31, 2025, down $4.7 million from 2024. The decrease primarily reflects non-recurring costs incurred in the prior year for non-cash contingent consideration expense associated with the earnout component of the acquisition of Ecoverse. Removing the impact of earn-out related expenses, operating expenses were relatively flat despite higher revenues in the current year.

Other expense, net: Master Distribution other expense was $6.5 million for the year ended December 31, 2025, an increase of $1.7 million over the prior year primarily attributed to higher interest costs on larger inventory balances and a higher effective interest rate given the debt refinance in 2024.

Liquidity and Capital Resources

Years ended December 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 year ended December 31, 2025, operating activities resulted in net cash provided by operations of $33.0 million. Our reported net loss of $80.3 million, when adjusted for non-cash income and expense items, primarily depreciation and amortization, the gain on sale of property and rental equipment, inventory and bad debt reserves, gain on divestitures, deferred income taxes, and stock-based compensation, provided net cash inflows of $57.3 million. Changes in working capital included $48.9 million of inventory purchased ($100.0 million of inventory was transferred into our rental fleet for replenishment purposes), and an $11.2 million decrease in accounts receivable. Cash flows from operating activities were favorably impacted by $98.2 million due to proceeds from the sale of rent-to-sell equipment and unfavorably impacted by $55.4 million in net outflows related to manufacturer floor plans, a $18.4 million decrease in accounts payable, accrued expenses, leases, and other operating liabilities, and an $11.0 million net change in prepaid expenses and other assets.

For the year ended December 31, 2024, operating activities resulted in net cash provided by operations of $57.0 million. Our reported net loss of $62.1 million, when adjusted for non-cash income and expense items, primarily depreciation and amortization, the gain on sale of property and rental equipment, inventory and bad debt reserves, loss on debt extinguishment, deferred income taxes, and stock-based compensation, provided net cash inflows of $63.5 million. Changes in working capital included $145.3 million of inventory purchased ($120.6 million was transferred into our rental fleet for replenishment purposes), and a $42.7 million decrease in accounts receivable. Cash flows from operating activities were favorably impacted by $126.1 million due to proceeds from the sale of rent-to-sell equipment and a $4.3 million net change in prepaid expenses and other assets and unfavorably impacted by a $26.5 million decrease in accounts payable, accrued expenses, leases, and other operating liabilities, and $7.8 million in net outflows related to manufacturer floor plans.

Cash Flow from Investing Activities. For the year ended December 31, 2025, our cash used in investing activities was $22.7 million. This was mainly due to $55.0 million purchases of rental equipment and non-rental property and equipment and intangibles, the acquisition of CEQ as discussed in Note 15, Business Combinations and Divestitures, and other investing activities partially offset by $20.9 million proceeds from the two divestitures discussed in Note 15, and $11.4 million proceeds from the sale of rent-to-rent equipment and non-rental property and equipment.

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

Cash Flow from Financing Activities. For the year ended December 31, 2025, cash used in financing activities was $5.3 million. This cash outflow was due to payments of $6.9 million for preferred and common stock dividends, net payments of $7.0 million related to non-manufacturer floor plans, $7.5 million for common stock repurchases, and $2.9 million related to other financing activities partially offset by $19.0 million of net proceeds from our line of credit, long-term borrowings, and finance lease obligations.

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

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 $18.6 million in cash as of December 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, the state of our industry and the markets we serve, and our growth prospects. Our gross rental fleet capital expenditures for the period ended December 31, 2025 were approximately $141.8 million, including $100.0 million of transfers from new and used inventory to rent-to-sell rental fleet. This gross rental fleet capital expenditure was offset by sales proceeds of rental equipment of approximately $109.1 million for the period ended December 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 liquidity needs for the foreseeable future. As of December 31, 2025, we had $424.4 million of available borrowings under the revolving line of credit and floor plans.

Critical Accounting Policies and Estimates

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

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Revenue Recognition

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

Impairment of Goodwill and Long-lived Assets

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

Useful Lives of Property and Equipment and Rental Fleet

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

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

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

Income Taxes

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

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

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Allowance for Credit Losses

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