10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 6, 2022, there were 32,454,025 shares of Common Stock, $0.0001 par value, and 1,200 shares of Preferred Stock, $0.0001 par value, which Preferred Stock is evidenced by 1,200,000 depositary shares, outstanding.

The accompanying notes are an integral part of these consolidated financial statements.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include the consolidated accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All significant intercompany transactions and balances have been eliminated in the preparation of the consolidated financial statements. Certain amounts in the prior year have been reclassified to conform with the presentation in the current year.

The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. Operating results for the three months ended March 31, 2022 is not necessarily indicative of the results that may be expected for the year ending December 31, 2022, and therefore, the results and trends in these interim consolidated financial statements may not be the same for the entire year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s 2021 Annual Report on Form 10-K.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are based on assumptions that we believe are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

Impairment of Long-lived Assets

The Company evaluates long-lived assets, such as property and equipment and intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying value of any asset group may not be recoverable.

If the estimated future cash flow (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. When reviewing long-lived assets for impairment, the Company groups long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. After evaluating and weighing all relevant events and circumstances, the Company did not identify any indications necessary to perform an interim impairment test for the long-lived assets as of and for the period ended March 31, 2022.

Goodwill

Pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 350, Intangibles-Goodwill and Other (“ASC 350”), goodwill is recorded as the excess of the consideration transferred plus the fair value of any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired.

The Company evaluates goodwill for impairment at least annually, or more frequently if triggering events occur or other impairment indicators arise which might impair recoverability. Impairment of goodwill is evaluated at the reporting unit level. A reporting unit is defined as an operating segment (i.e. before aggregation or combination), or one level below an operating segment (i.e. a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component.

After evaluating and weighing all relevant events and circumstances, the Company concluded there was no triggering event that constitutes the need to perform a goodwill impairment test for the period ended March 31, 2022.

Revenue Recognition

Revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration the business expects to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain the benefits from the goods or services. The majority of our sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer. For agreements with multiple performance obligations, which are infrequent, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements, we generally allocate sales price to each distinct performance obligation based on the observable selling price.

We enter into various equipment sale transactions with certain customers, whereby customers purchase equipment from us and then lease the equipment to a third party. In some cases, we provide a guarantee to repurchase the equipment back at the end of the lease term between the customer and third-party lessee at a set residual amount set forth in the initial sales contract or pay the customer for the deficiency, if any, between the sale proceeds received for the equipment and the guaranteed minimum resale value. We are precluded from recognizing a sale of equipment if we guarantee to repurchase the sold equipment back or guarantee the resale value of the equipment. Rather, these transactions are accounted for in accordance with ASC 842, Leases (“ASC 842”).

The deferred revenue, with respect to the aforementioned sale transactions, represents the net proceeds upon the equipment’s initial transfer. These amounts, excluding the guaranteed residual value, are recognized into rental revenue on a pro-rata basis over the lease contract period up to the first exercise date of the guarantee. At March 31, 2022 and December 31, 2021, the total deferred revenue relating to these various equipment sale transactions amounted to $2.6 million and $2.9 million, respectively. The Company also recognized a liability for its guarantee to repurchase the equipment at the residual amounts of $6.9 million and $7.2 million as of March 31, 2022 and December 31, 2021, respectively.

The Company also enters into various rental agreements whereby owned equipment is leased to customers. Revenue from the majority of rental agreements is recognized over the term of the agreement in accordance with ASC 842. A rental contract includes rates for daily, weekly or monthly use, and rental revenues are earned on a daily basis as rental contracts remain outstanding. Because the rental contracts can extend across multiple reporting periods, the Company records unbilled rental revenues and deferred rental revenues at the end of each reporting period. Unbilled rental revenues are included as a component of “Accounts receivable” on the Consolidated Balance Sheets. Rental equipment is also purchased outright (“rental conversions”). Rental revenue and revenue attributable to rental conversions, are recognized in “Rental revenue” and “Rental equipment sales” on the Consolidated Statements of Operations, respectively.

The Company also enters into contracts with customers where it provides design and build solutions, automated equipment installation and system integration and software services, referred to herein as project-based revenues. These project-based revenues are recognized over time as the performance obligation is satisfied, determined using the cost-to-cost input method, based on contract costs incurred to date to total estimated contract costs. Revenue from recurring support services is recognized ratably over the contract period.

The Company recognizes deferred revenue with respect to project-based revenues, service sales, and rental agreements. Deferred revenue with respect to service sales represents the unearned portion of fees related to guaranteed maintenance contracts for customers covering equipment they have previously purchased. These amounts are recognized based on an estimated rate at which the services are provided over the life of the contract. The Company also recognizes deferred revenue related to rental agreements. Total deferred revenue relating to project-based revenues, service sales agreements and rental agreements as of March 31, 2022 and December 31, 2021 was $18.8 million and $16.5 million, respectively.

Periodic and ad-hoc maintenance service revenue is recognized upon completion of the service and the agreement of terms with the customer. Revenue from guaranteed maintenance contracts is recognized over the contract period in proportion to the costs expected to be incurred in performing services under the contract, typically three to five years.

Payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized, and payment is due is not significant. The Company does not evaluate whether the selling price includes a financing interest component for contracts that are less than a year, or if payment is expected to be received less than a year after the

good or service has been provided. Sales and other taxes collected from customers and remitted to government authorities are accounted for on a net basis and, therefore, excluded from revenue. Shipping and handling costs are treated as fulfillment costs and are included in cost of revenues.

Costs to obtain contracts, such as sales commissions, are expensed as incurred given that the terms of the contracts are generally less than one year.

Under bill-and-hold arrangements, revenue is recognized when all configuration work is complete and the equipment has been set aside for final shipment, at which point the Company has determined control has been transferred.

Income Taxes

The Company was formed in 2020 for income tax purposes. Alta Enterprises, LLC was historically and remains a partnership for federal income tax purposes, with each partner being separately taxed on its share of taxable income (loss). There is no federal income tax expense (benefit) reflected in the Company’s financial statements for any period prior to the reverse recapitalization on February 14, 2020. As the activity resides in Alta Enterprises, LLC, the income tax impact to the Company represents the current income tax calculated at the Consolidated Return level (“Alta Equipment Group Inc and Subsidiaries”), and the deferred impact of the interest in the lower tier partnership.

We use the guidance in FASB ASC Topic 740-270, Income Taxes Interim Reporting, where tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are considered in the relevant period. At the end of each interim reporting period, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected income (loss) before income taxes for the year, projections of the proportion of income (and/or loss) earned and taxed, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. The estimates used to compute the provision or benefit for income taxes may change as new events occur, additional information is obtained or the Company’s tax environment changes. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or to the extent that the expected annual effective income tax rate changes, the effect of the change on prior interim periods is included in the income tax provision in the period in which the change in estimate occurs. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not likely to allow for the use of the deduction or credit.

Share Based Compensation

The Board of Directors approved the Company’s 2020 Omnibus Incentive Plan, which enables the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance stock units ("PSUs"), unrestricted stock, other share based awards and cash awards to directors, employees and consultants to improve the ability of the Company to attract, retain, and motivate individuals upon whom the Company’s sustained growth and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest in the Company.

We measure the employee stock-based awards at grant-date fair value using provisions of ASC 718 – Stock Compensation and record compensation expense over the vesting period of the award. The number of PSUs granted depends on the Company's achievement of target performance goals, which may range from 0% to 200% of the target award amount. The PSUs vest ratably over two years after the one-year performance period. The Company made an accounting election to recognize forfeitures when they occur. The Company treats equity awards granted to non-employee directors similarly to the equity awards to employees.

New Accounting Pronouncements

Pronouncements Not Yet Adopted

Financial Instruments — Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard prescribes an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in the timely recognition of losses. Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of the financial instrument.

Measurement of expected credit losses is to be based on relevant forecasts that affect collectability. The scope of financial assets within the CECL methodology is broad and includes trade receivables from certain revenue transactions and certain off-balance sheet credit exposures. Different components of the guidance require modified retrospective or prospective adoption. As amended by ASU 2019-10, the ASU 2016-13 is effective for the annual reporting period beginning January 1, 2023. The Company believes ASU 2016-13 will only have applicability to the Company’s receivables from revenue transactions, or trade receivables, except those arising from

rental revenues as ASU 2016-13 does not apply to receivables arising from operating leases. The Company is currently evaluating whether the new guidance, while limited to our non-operating lease trade receivables, will have an impact on the consolidated financial statements or existing internal controls.


Delaware	001-38864	83-2583782
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value per share	ALTG	The New York Stock Exchange
Depositary Shares representing a 1/1000th fractional interest in a share of 10% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value per share	ALTG PRA	The New York Stock Exchange


			Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements		2
	Consolidated Balance Sheets (Unaudited)		2
	Consolidated Statements of Operations (Unaudited)		3
	Consolidated Statements of Stockholders Equity (Deficit) (Unaudited)		4
	Consolidated Statements of Cash Flows (Unaudited)		5
	Notes to Unaudited Consolidated Financial Statements		6
	Note 1.	Organization and Nature of Operations	6
	Note 2.	Summary of Significant Accounting Policies	6
	Note 3.	Revenue Recognition	9
	Note 4.	Related Party Transactions	11
	Note 5.	Inventories	11
	Note 6.	Property and Equipment	12
	Note 7.	Goodwill	12
	Note 8.	Intangible Assets	13
	Note 9.	Lines of Credit and Floor Plans	13
	Note 10.	Long-Term Debt	14
	Note 11.	Leases	15
	Note 12.	Contingencies	17
	Note 13.	Income Taxes	18
	Note 14.	Equity	19
	Note 15.	Share Based Compensation	19
	Note 16.	Fair Value Instruments	20
	Note 17.	Business Combinations	22
	Note 18.	Segments	23
	Note 19.	Earnings Per Share	25
	Note 20.	Subsequent Events	25
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 4.	Controls and Procedures		40
PART II
Item 1.	Legal Proceedings		42
Item 1A.	Risk Factors		42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		42
Item 3.	Defaults Upon Senior Securities		42
Item 4.	Mine Safety Disclosures		42
Item 5.	Other Information		42
Item 6.	Exhibits		42
Signature			43


(in millions, except share and per share amounts)	March 31, 2022			December 31, 2021
ASSETS
CURRENT ASSETS
Cash	$	1.6		$	2.3
Accounts receivable, net of allowances of $11.9 and $10.7 as of March 31, 2022 and December 31, 2021, respectively		189.3			182.7
Inventories, net		291.0			239.2
Prepaid expenses and other current assets		22.8			24.4
Total current assets	$	504.7		$	448.6

PROPERTY AND EQUIPMENT, NET		337.0			344.5
OPERATING LEASE RIGHT-OF-USE ASSETS, NET		101.9			102.6
OTHER ASSETS
Goodwill	$	43.5		$	41.9
Intangible assets, net		42.0			43.4
Other assets		1.5			1.6
Total other assets	$	87.0		$	86.9
TOTAL ASSETS	$	1,030.6		$	982.6

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Lines of credit, net	$	113.9		$	98.4
Floor plan payable – new equipment		147.5			114.2
Floor plan payable – used and rental equipment		39.5			40.6
Current portion of long-term debt		2.7			2.6
Accounts payable		63.6			73.5
Customer deposits		18.6			16.7
Accrued expenses		46.5			39.3
Current operating lease liabilities		16.4			16.2
Other current liabilities		22.0			19.1
Total current liabilities	$	470.7		$	420.6

LONG-TERM LIABILITIES
Long-term debt, net of current portion		310.2			310.0
Finance lease obligations, net of current portion		9.7			9.0
Deferred revenue, net of current portion		3.8			4.2
Guaranteed purchase obligations, net of current portion		4.7			5.2
Long-term operating lease liabilities, net of current portion		88.3			88.4
Deferred tax liability		6.9			6.9
Other liabilities		3.3			3.6
TOTAL LIABILITIES	$	897.6		$	847.9
CONTINGENCIES - NOTE 12
STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, 1,200,000 Depositary Shares representing a 1/1000th fractional interest in a share of 10% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value per share, issued and outstanding at March 31, 2022 and December 31, 2021, respectively	$	—		$	—
Common stock, $0.0001 par value, 200,000,000 shares authorized; 32,363,376 issued and outstanding at March 31, 2022 and December 31, 2021, respectively		—			—
Additional paid-in capital		217.7			217.4
Treasury stock		(5.9	)		(5.9	)
Accumulated deficit		(78.8	)		(76.8	)
TOTAL STOCKHOLDERS’ EQUITY	$	133.0		$	134.7
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,030.6		$	982.6


	Three Months Ended March 31,
(in millions, except share and per share amounts)	2022			2021
Revenues:
New and used equipment sales	$	151.6		$	123.8
Parts sales		53.4			41.4
Service revenue		48.2			38.7
Rental revenue		37.7			33.1
Rental equipment sales		40.8			31.8
Net revenues	$	331.7		$	268.8
Cost of revenues:
New and used equipment sales	$	123.9		$	106.5
Parts sales		36.7			28.7
Service revenue		20.1			14.5
Rental revenue		5.4			5.5
Rental depreciation		20.3			19.4
Rental equipment sales		33.9			26.9
Cost of revenues	$	240.3		$	201.5
Gross profit	$	91.4		$	67.3
General and administrative expenses	$	82.9		$	64.8
Depreciation and amortization expense		3.9			2.0
Total general and administrative expenses	$	86.8		$	66.8
Income from operations	$	4.6		$	0.5
Other (expense) income:
Interest expense, floor plan payable – new equipment	$	(0.3	)	$	(0.5	)
Interest expense – other		(5.8	)		(5.3	)
Other income		0.3			0.1
Total other expense	$	(5.8	)	$	(5.7	)
Loss before taxes	$	(1.2	)	$	(5.2	)
Income tax provision		—			0.5
Net loss	$	(1.2	)	$	(5.7	)
Preferred stock dividends		(0.8	)		—
Net loss available to common shareholders	$	(2.0	)	$	(5.7	)
Basic loss per share	$	(0.06	)	$	(0.19	)
Diluted loss per share	$	(0.06	)	$	(0.19	)
Basic weighted average common shares outstanding		32,363,376			30,018,502
Diluted weighted average common shares outstanding		32,363,376			30,018,502




Large accelerated filer	☐	Accelerated filer	☒	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐


Auditor Id: 1195	Auditor Name: UHY	Auditor Location: New York, New York, United States


	Three Months Ended March 31, 2022
	Preferred Stock				Common Stock
(amounts in millions, except share amounts)	Number of Shares		Amount		Number of Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Treasury Stock			Total Stockholders' Equity (Deficit)
Balance at December 31, 2021		1,200,000	$	—		32,363,376	$	—	$	217.4	$	(76.8	)	$	(5.9	)	$	134.7
Net loss		—		—		—		—		—		(1.2	)		—			(1.2	)
Dividends on preferred stock		—		—		—		—		—		(0.8	)		—			(0.8	)
Share based compensation		—		—		—		—		0.3		—			—			0.3
Balance at March 31, 2022		1,200,000	$	—		32,363,376	$	—	$	217.7	$	(78.8	)	$	(5.9	)	$	133.0

	Three Months Ended March 31, 2021
	Preferred Stock				Common Stock
(amounts in millions, except share amounts)	Number of Shares		Amount		Number of Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Treasury Stock			Total Stockholders' Equity (Deficit)
Balance at December 31, 2020		1,200,000	$	—		30,018,502	$	—	$	216.2	$	(53.4	)	$	(5.9	)	$	156.9
Net loss		—		—		—		—		—		(5.7	)		—			(5.7	)
Share based compensation		—		—		—		—		0.3		—			—			0.3
Balance at March 31, 2021		1,200,000	$	—		30,018,502	$	—	$	216.5	$	(59.1	)	$	(5.9	)	$	151.5


	Three Months Ended March 31,
(amounts in millions)	2022			2021
OPERATING ACTIVITIES
Net loss	$	(1.2	)	$	(5.7	)
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:
Depreciation and amortization		24.2			21.4
Amortization of debt discount and debt issuance costs		0.3			0.5
Imputed interest		0.1			0.1
Gain on sale of rental equipment		(6.8	)		(4.9	)
Inventory obsolescence		1.1			0.2
Provision for bad debt		1.2			0.6
Share based compensation		0.3			0.3
Changes in deferred taxes		—			0.5
Changes in:
Accounts receivable		(7.8	)		(5.9	)
Inventories		(82.6	)		(33.4	)
Proceeds from sale of rental equipment		40.8			31.8
Prepaid expenses and other assets		1.7			0.5
Proceeds from floor plans with manufacturers		127.1			84.8
Payments under floor plans with manufacturers		(105.4	)		(86.9	)
Accounts payable, accrued expenses, customer deposits, and other current liabilities		0.2			(3.8	)
Leases, deferred revenue, and other liabilities		0.1			0.5
Net cash (used in) provided by operating activities	$	(6.7	)	$	0.6
INVESTING ACTIVITIES
Proceeds from the sale of assets	$	0.1		$	0.7
Expenditures for rental equipment		(15.1	)		(6.2	)
Expenditures for property and equipment		(1.8	)		(1.5	)
Expenditures for guaranteed purchase obligations		(0.6	)		(0.9	)
Expenditures for acquisitions, net of cash acquired		(1.2	)		(1.9	)
Net cash used in investing activities	$	(18.6	)	$	(9.8	)
FINANCING ACTIVITIES
Proceeds from lines of credit	$	86.3		$	73.5
Payments under lines of credit		(70.9	)		(61.7	)
Proceeds from floor plans with unaffiliated source		30.2			24.2
Payments under floor plans with unaffiliated source		(19.5	)		(25.3	)
Preferred dividends paid		(0.8	)		—
Payments on long-term debt		—			(1.9	)
Payments on finance lease obligations		(0.7	)		(0.2	)
Net cash provided by financing activities	$	24.6		$	8.6

NET CHANGE IN CASH		(0.7	)		(0.6	)

Cash, Beginning of year		2.3			1.2
Cash, End of period	$	1.6		$	0.6
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	1.3		$	5.3