ALTA EQUIPMENT GROUP INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q) –

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, 2021. 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 its future
operating results or financial position. Actual results and the timing of events
may differ materially from those contained in these forward- looking statements
due to a number of factors. Factors that could cause or contribute to such
differences include, but are not limited to, economic and competitive
conditions, regulatory changes and other uncertainties, as well as those factors
discussed below and elsewhere in this Quarterly Report on Form 10-Q,
particularly in "Risk Factors" and "Cautionary Note Regarding Forward-Looking
Statements," all of which are difficult to predict. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed may not
occur. Alta assumes no obligation to update any of these forward-looking

Recent Developments

Strategic Acquisitions – Since 2020

 Our growth strategy is 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. Since the Company's initial public offering, we successfully
completed 13 strategic acquisitions which added over $440.0 million of revenue
on an annualized basis, including Ecoverse announced in Note 20, Subsequent
Events. The acquisitions, both individually and in the aggregate, strengthened
our business from a financial and operational perspective. We are adept at
efficiently and effectively integrating acquisition targets on to our enterprise
resource platform, which allows for managerial and operational synergies across
business segments and our large branch network. To that end, in the current
year, we successfully integrated the Vantage, Gibson, and Ambrose acquisitions
onto our enterprise resource platform. See Note 20, Business Combinations, in
the 2021 Form 10-K for information on our acquisitions in 2021 and Note 17,
Business Combinations, herein for the acquisition of YIT in the third quarter of
2022. E-Mobility With our existing expertise in sales and service of electrified equipment in our
existing business segments, in particular material handling, we have elected to
pursue the strategic opportunity to leverage our knowledge to meet the growing
demand for commercial electric vehicles and deliver world-class service to
commercial electric vehicle customers within our existing territories.
Accordingly, in August 2021, the Company entered into a dealer agreement with
Nikola Corporation to become the authorized dealer to sell and service Nikola
medium and long-haul class 8 electric vehicle trucks in the New York, New
Jersey, eastern Pennsylvania, and New England markets. More recently, we were
named the authorized dealer for Nikola in Arizona as well. We view this
opportunity as an accretive way to enter the class 8 truck market by leveraging
our existing intellectual property, customer base and physical infrastructure.
In the third quarter of 2022 we have taken delivery of several Nikola Tre Bev
units that are available for sale in each of our Nikola territories. 


 While there were no material adverse impacts on the Company's results of
operations for the three and nine months ended September 30, 2022 and 2021 from
COVID-19, the potential future emergence of additional variant strains of
COVID-19 remains and how those variant strains would impact the macroeconomic
environment and our business is uncertain. 

Supply-Chain Constraints and Inflation

 Currently, our business is experiencing supply-chain constraints that have
affected some of our OEM equipment suppliers. Specifically, lead times from OEMs
for new equipment have been pushed beyond historic norms. Importantly, our OEMs
have prioritized the supply of replacement parts to dealers, which has allowed
us to continue to maintain and fix existing customer equipment field population
and our own rental fleet while customers await the delivery of new equipment.
Additionally, over the past two years we have experienced inflationary impacts
to a variety of input costs in our business, including the cost of equipment and
replacement parts, freight, fuel and the cost of labor, amongst others. While we
believe our diversified cash flow streams, the breadth of our product portfolio,
geographic reach and our ability to pass along the majority of the increase in
input costs to the end users of our equipment will help mitigate the impact of
the current supply-chain disruptions and inflation we are facing, an extended
period or worsening of the supply chain issues our OEM equipment providers are
experiencing or an inability to continue to pass along cost increases to end
users could impact our financial results adversely. 24

Business Description

 The Company owns and operates 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 aerial work platforms, earthmoving
equipment, cranes, paving and asphalt equipment, and other material handling and
construction equipment. We engage in five principal business activities in these
equipment categories: (i)
new equipment sales; (ii)
used equipment sales; (iii)
parts sales; (iv)

repair and maintenance services; and


equipment rentals.

 We have operated as an equipment dealership for over 38 years and have developed
a branch network that includes over 65 total locations in Michigan, Illinois,
Indiana, Ohio, Massachusetts, Maine, Connecticut, New Hampshire, Vermont, New
York, Virginia, Florida, Ontario and Quebec. We offer our customers end-to-end
solutions for their equipment needs by providing sales, parts, service, and
rental functions. With the acquisitions of PeakLogix in June 2020 and ScottTech
in March 2021, we have entered the automated equipment installation and system
integration sector, which we believe has natural synergies with our material
handling business and positions us to take advantage of the macroeconomic trends
in automation, e-commerce and logistics. Within our territories, we are the exclusive distributor of new equipment and
replacement parts on behalf of our OEM partners. We enjoy long-standing
relationships with leading material handling and construction equipment OEMs,
including Hyster-Yale, Volvo, Kubota, and JCB, among more than 30 others. We are
consistently recognized by OEMs as a top dealership partner and have been
identified as a nationally recognized Hyster-Yale dealer and multi-year
recipient of the Volvo Dealer of the Year award. In August 2021 the Company
entered into a dealer agreement with Nikola Corporation to become the authorized
dealer to sell and service Nikola medium and long-haul class 8 electric vehicle
trucks in the New York, New Jersey, eastern Pennsylvania, and New England
markets. More recently, the Company has added Arizona to its dealer agreement
with Nikola. Business Segments We have two reportable segments: Material Handling and Construction Equipment.
Our "Material Handling" segment has been previously reported as our "Industrial"
segment. Our segments are determined based on management structure, which is
organized based on types of products sold and customer end markets, as described
in the following paragraph. The operating results for each segment are reported
separately to our Chief Executive Officer (our chief operating decision maker)
to make decisions regarding the allocation of resources, to assess our operating
performance and to make strategic decisions. The Material Handling segment is principally engaged in operations related to
the sale, service, and rental of lift trucks in Michigan, Illinois, Indiana, New
York, Virginia and throughout the New England states along with the Canadian
provinces of Ontario and Quebec. 

The Construction Equipment segment is principally engaged in operations related
to the sale, service, and rental of construction equipment in Michigan,
Illinois, Indiana, Ohio, New York, Florida and throughout the New England

 Alta Equipment Group Inc., Alta Equipment Holdings, Inc. and Alta Enterprises,
LLC (individually or as sometimes collectively referred to as "Corporate") are
the holding companies for the legal operating entities noted above that make up
each segment. In addition to being holding companies, the transactions in our
Corporate entities include compensation (including share-based compensation) of
our directors, corporate officers and certain members of our shared-services
leadership team, consulting and legal fees related to acquisitions and capital
raising activities, corporate governance and compliance related matters, certain
corporate development related expenses, interest expense associated with
original issue discounts and deferred financing cost related to previous capital
raises, and the Company's income tax provision. 

Financial Statement Overview

Our revenues are primarily derived from 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 and material handling
equipment and are a leading regional distributor for over 30 nationally
recognized equipment manufacturers. Our new equipment sales operation is a
primary source of new customers for the rental, parts and services business. The
majority of our new equipment sales is 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 related to our material handling equipment
offerings and, with the acquisition of PeakLogix and ScottTech, we provide
warehouse design, automated equipment installation, system integration and
warehouse controls software.

 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 made in our territories, like new equipment sales, generate parts and
services business for the Company, as well. 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 OEM's with which we have
exclusive dealership agreements to sell new equipment. Service Support. We provide maintenance and repair services for customer-owned
equipment and we maintain our own rental fleet. In addition to repair and
maintenance on an as needed or scheduled basis, we provide ongoing preventative
maintenance services and warranty repairs for our customers. We have committed
substantial resources to training our technical service employees and have a
full-scale service infrastructure that we believe differentiates us from our
competitors. Approximately half of our employees are skilled service
technicians. Training, paid time off, and other non-billable costs of
maintaining our expert technicians flow through this department in addition to
the direct customer-billable labor. Equipment Rentals. 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 $492.4 million as of September 30,
2022. The original acquisition cost of our rental fleet excludes the $10.1
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 sales and product support activities. Rental Equipment Sales. We also sell rental equipment from our rental fleet.
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-based equipment field population within our territories
and ultimately yield high-margin parts and services revenue for us. 

Principal Costs and Expenses

 Our cost of revenues are primarily related to the cost associated with the sale
or rental of equipment and product support activities, which includes direct
labor costs for our skilled technicians. Our operating expenses consist
principally of G&A expenses, which primarily includes 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 floorplan payables, finance leases, line of
credit and 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
equipment cost of the new equipment that is sold, net of any amount of credit
given to the customer from trade-ins of used equipment.

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

Parts Sales. Cost of parts sales represents the net book value, or 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).

Services Revenue. Cost of services revenues represents, primarily, the labor
costs attributable to services provided for the maintenance and repair of
customer-owned equipment.

 Rental Revenue. 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, damage waiver policies, environmental fees and other recovery fees. Rental Depreciation. Depreciation of rental equipment represents the
depreciation costs attributable to rental equipment. Estimated useful lives vary
based upon type of equipment. See Note 2 to the audited consolidated financial
statements contained in the Company's 2021 Annual Report on Form 10-K, for
information on our rental equipment depreciation methods. Rental Equipment Sales. Cost of previously rented equipment sold consists of the
net book value (i.e. net of accumulated depreciation) of rental equipment sold
from our rental fleet. 26
-------------------------------------------------------------------------------- General and Administrative Expenses. These costs are comprised of three main
components: personnel costs, operational costs, and occupancy costs. Personnel
costs are comprised of hourly and salaried wages for administrative employees,
including incentive compensation, and employee benefits, including medical
benefits. Operational costs include marketing activities, costs associated with
deploying and leasing our service vehicle fleet, insurance, information
technology, office and shop supplies, general corporate costs, depreciation on
non-sales and rental related assets, and intangible amortization. Occupancy
costs are comprised of all expenses related to our facility infrastructure,
including rent, utilities, property taxes, and building insurance. Other Income (Expense). This section of the income statement is mostly comprised
of interest expense and other miscellaneous items that result in income or
expense. Interest expense is mostly driven by our OEM floorplan financing
arrangements, a working capital line of credit, our second lien secured notes,
and our finance lease arrangements. Also included in this section of the
financials are non-recurring costs, in particular expenses associated with the
extinguishment of debt in 2021. 27

Results of Operations (amounts in millions unless otherwise noted)

Three and nine months ended September 30, 2022 compared to three and nine months
ended September 30, 2021

Consolidated Results

 Three Months Ended Nine Months Ended September 30, Increase (Decrease) September 30, Increase (Decrease) 2022 2021 2022 versus 2021 2022 2021 2022 versus 2021
New and used
equipment sales $ 210.1 $ 136.8 $ 73.3 53.6 % 

$ 579.0 $ 392.6 $ 186.4 47.5 %
Parts sales

 61.8 44.8 17.0 37.9 % 173.5 130.3 43.2 33.2 %
Service revenue 54.3 41.9 12.4 29.6 % 154.2 123.0 31.2 25.4 %
Rental revenue 50.2 41.7 8.5 20.4 % 131.5 113.0 18.5 16.4 %
Rental equipment
sales 28.6 29.8 (1.2 ) (4.0 )% 105.0 97.6 7.4 7.6 %
Total revenues $ 405.0 $ 295.0 $ 110.0 37.3 % $ 1,143.2 $ 856.5 $ 286.7 33.5 % Cost of revenues:
New and used
equipment sales $ 176.5 $ 114.3 $ 62.2 54.4 % 

$ 482.6 $ 333.3 $ 149.3 44.8 %
Parts sales

 40.0 30.5 9.5 31.1 % 116.7 89.8 26.9 30.0 %
Service revenue 24.3 17.3 7.0 40.5 % 66.3 48.2 18.1 37.6 %
Rental revenue 5.9 4.6 1.3 28.3 % 16.7 15.3 1.4 9.2 %


depreciation 25.9 22.2 3.7 16.7 % 69.5 62.9 6.6 10.5 %
Rental equipment
sales 20.8 25.0 (4.2 ) (16.8 )% 82.6 81.7 0.9 1.1 %

Cost of revenues $ 293.4 $ 213.9 $ 79.5 37.2 %

 $ 834.4 $ 631.2 $ 203.2 32.2 % Gross profit $ 111.6 $ 81.1 $ 30.5 37.6 % $ 308.8 $ 225.3 $ 83.5 37.1 % General and
expenses $ 94.2 $ 72.4 $ 21.8 30.1 % $ 265.9 $ 208.3 $ 57.6 27.7 %
Depreciation and
expense 3.7 2.7 1.0 37.0 % 11.6 7.3 4.3 58.9 %
Total general and
expenses $ 97.9 $ 75.1 $ 22.8 30.4 % $ 277.5 $ 215.6 $ 61.9 28.7 % Income from
operations $ 13.7 $ 6.0 $ 7.7 128.3 % $ 31.3 $ 9.7 $ 21.6 222.7 % Other (expense)
Interest expense,
floor plan payable
- new equipment $ (0.8 ) $ (0.4 ) $ (0.4 ) 100.0 % 

$ (1.6 ) $ (1.4 ) $ (0.2 ) 14.3 %
Interest expense –

 (7.7 ) (5.7 ) (2.0 ) 35.1 % (19.8 ) (16.5 ) (3.3 ) 20.0 %
Other income 0.2 0.2 - - 0.9 0.3 0.6 200.0 %
Loss on
extinguishment of
debt - - - NA - (11.9 ) 11.9 (100.0 )%
Total other
expense $ (8.3 ) $ (5.9 ) $ (2.4 ) 40.7 % $ (20.5 ) $ (29.5 ) $ 9.0 (30.5 )% Income (loss)
before taxes $ 5.4 $ 0.1 $ 5.3 5300.0 % $ 10.8 $ (19.8 ) $ 30.6 (154.5 )% Income tax
provision 0.3 - 0.3 100.0 % 0.8 0.5 0.3 60.0 %

Net income (loss) $ 5.1 $ 0.1 $ 5.0 5000.0 %

 $ 10.0 $ (20.3 ) $ 30.3 (149.3 )% Preferred stock
dividends (0.7 ) (0.7 ) - - (2.2 ) (1.8 ) (0.4 ) 22.2 %
Net income (loss)
available to
shareholders $ 4.4 $ (0.6 ) $ 5.0 (833.3 )% $ 7.8 $ (22.1 ) $ 29.9 (135.3 )% 28


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