Alta Equipment Group Inc. (NYSE:ALTG) Q1 2024 Earnings Call Transcript

Alta Equipment Group Inc. (NYSE:ALTG) Q1 2024 Earnings Call Transcript May 11, 2024

Alta Equipment Group Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

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

Jason Dammeyer: Thank you, Bethany. Good afternoon, everyone, and thank you for joining us today. A press release detailing Alta’s first quarter 2024 financial results was issued this afternoon and is posted on our website along with a presentation designed to assist you in understanding the company’s results. On the call with me today are Ryan Greenawalt, our Chairman and CEO; and Tony Colucci, our Chief Financial Officer. For today’s call, management will first provide a review of our first quarter 2024 financial results. We will begin with some prepared remarks before we open the call for your questions. Please proceed to Slide 2. Before we get started, I’d like to remind everyone that this conference call may contain certain forward-looking statements, including statements about future financial results, our business strategy and financial outlook, achievements of the company and other non-historical statements as described in our press release.

These forward-looking statements are subject to both known and unknown risks, uncertainties and assumptions, including those related to Alta’s growth, market opportunities and general economic and business conditions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although, we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of these and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in our reports filed with the SEC, including our press release that was issued today.

During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today’s press release and can be found on our website at investors.altaequipment.com. I will now turn the call over to Ryan.

Ryan Greenawalt: Thank you, Jason. Good afternoon, everyone, and thank you for joining us today. I will begin with a quick overview of our first quarter results, then provide a current assessment of the business conditions in our end user markets. Tony Colucci will then walk through a detailed analysis regarding our financial and operating performance for the quarter and our outlook for the balance of 2024. There is an earnings presentation available for today’s call that both Tony and I will be referencing. Our results for the quarter, consistent with historical patterns were impacted by seasonal factors, particularly winter weather affecting our Construction Equipment segment in Northern regions. Despite this, we achieved $441.6 million in revenue, up $20.9 million year-over-year, driven by continued strength in our markets.

Our combined product support and rental revenues grew organically by $6.3 million, reflecting the sustained high levels of activity and equipment utilization in our regions. Notably, our equipment sales margins were impacted by a shift in revenue mix, which Tony will further explain in his prepared remarks. While new equipment sales and margins may face challenges from market dynamics, we remain focused on leveraging our dealership capabilities and value proposition to capture market share. Slides 5 through 7 of today’s investor presentation highlight the strength of the product support and rental businesses within the core dealership platform for both construction and material handling, highlighting the resilience of the business model. Looking forward, we are optimistic about the construction end markets, the backlog of work and activity levels that our customers indicate continued strength for our product support and rental business lines.

Industry indicators are favorable for our end market demand, nonresidential starts are forecast to increase in 2024 and state transportation budgets are up double-digits in our Midwest and Florida markets year-over-year. Federal infrastructure and mega projects are still accelerating, providing long-term opportunities across our geographic footprint. In our Material Handling business, we have solid visibility based on our current customer backlog. Our diverse end markets offer opportunities across numerous verticals. Full year 2024 global lift truck market unit volumes are projected to remain strong compared to pre-pandemic levels, but decrease moderately from a year ago. We are very excited about the commitment Hyster-Yale is making to driving innovation in the product portfolio and market leadership with regards to technological innovation.

We are working closely with them on initiatives like advancing fuel cell vehicles at major ports and zero emission battery-powered terminal tractors for use in our mineral transportation hubs. We are also collaborating along with the Hyster-Yale dealer network and implementing wide-scale technology enhancements such as operators assist systems and vehicle automation for improved safety and efficiency. We believe we are positioned to drive additional market share in our markets given our strategic footprint and the strength of the Hyster-Yale product portfolio. Our M&A activity since our public offering underscores the success of our growth strategy with 16 strategic acquisitions at accretive valuation multiples. We remain committed to pursuing accretive transactions that complement our core business and enhance long-term shareholder value.

We continue to expand our geographic reach and product portfolio within existing business segments by leveraging strong OEM relationships and forging partnerships with new OEMs that meet our criteria. Furthermore, we are exploring new business segments in tangential or complementary equipment markets. The opportunity to electrify the medium-duty over-the-road truck fleet over the next decade is substantial, driven by the convergence of market demand and legislative mandates for zero tailpipe emissions. We are actively exploring ways to position ourselves at the forefront of this transformative trend, leveraging our expertise and resources. The transition to electric vehicles for medium-duty commercial vehicles drives a compelling parallel to the evolution of the electric forklifts over the last 50 years.

Initially, electric forklifts faced skepticism and challenges similar to those now encountered by medium-duty EVs, such as concerns over performance, run time and upfront costs. However, advancements in technology and growing environmental awareness gradually transformed the forklift industry. Over time, electric forklifts gained acceptance due to their efficiency, lower operating costs, reduced emissions and improved battery technology. As technology continues to advance the infrastructure develops, we anticipate a parallel trajectory for medium-duty EVs, ultimately leading to widespread adoption and integration into the transportation ecosystem. In summary, while the first quarter was challenging, we are extremely optimistic that our business is poised for a successful 2024, especially with better visibility into the year.

Thank you for your continued support and confidence in our company’s strategy. Now I’ll turn it over to Tony for a detailed analysis of our financial and operating performance.

Tony Colucci: Thanks, Ryan. Good evening, everyone, and thank you for your interest in Alta Equipment Group and our first quarter 2024 financial results. I trust that you and your families are looking forward to summer as we all are here at Alta. Before I begin, I want to thank my 3,000 Alta teammates for their hard work in the first quarter, which, given weather and operating conditions, took focus, perseverance and commitment to our customers and to one another to navigate. Thank you. My remarks today will focus on two primary areas. First, I’ll be presenting our first quarter results, which were naturally affected by the seasonal impact of winter weather on the construction business in our northern regions, but nevertheless, saw continued revenue growth and strengthened our product support and our rental offerings.

I will also provide details on the equipment revenue mix shift year-over-year, which impacted our equipment gross margins in Q1 on a consolidated basis. I’ll also discuss specifics of how our core business segments performed well in the quarter. And our headwinds experienced at Ecoverse and Peaklogix, two of our subsidiaries impacted the quarter on a comparative basis. Second, I’ll discuss our outlook for the remainder of the year, including current insights into some of our activity-based KPIs as we turned the seasonality corner in April. Before I get to my talking points, it should be noted that I will be referencing slides from our investor presentation throughout the call today. I’d encourage everyone on today’s call to review our presentation and our 10-Q, which is available on our Investor Relations website at altg.com.

Before I get into the first quarter performance, again, as I mentioned, the construction segment in our northern geographies is subject to weather constraints in Q1, which makes the sequential comparison of Q4 2023 difficult to Q1 2024. With that said, for the first portion of my prepared remarks and in line with Slides 10 through 19 in the earnings deck, first quarter performance. For the quarter, the company achieved record Q1 revenue of $441.6 million, up $21 million or 5% versus Q1 of last year. Embedded in the $441.6 million of revenue is a $14.7 million or 6% organic sales increase in our core material handling and construction segments, making for a comparatively strong quarter in our core business against a record level comparative.

Specifically, rental revenue increased 7.1% organically for the quarter in our core business segments. Our product support businesses once again grew $3.2 million organically in the quarter amidst the difficult operating environment. To fully understand the quarter, it’s necessary to break down the business segment by segment. First, our Material Handling segment, excluding Peaklogix and more on Peak in a minute, had strong organic revenue growth of 11.8% in the quarter. Specifically, new and used equipment sales were up an impressive 23% versus last year as new lift truck equipment availability, specifically from Hyster-Yale was improved year-over-year. Additionally, rental revenue was up 5% — a notable 5% year over-year. Our product support business lines were relatively flat versus Q1 of 2023 as more prep in delivery of the increased level of new equipment led to more non-billable time in Q1 2024 when compared to Q1 2023.

From a gross margin perspective in the Material Handling segment, again, ex-Peaklogix, equipment parts and service gross margins were all improved or stable versus last year. Notably, when you take Peaklogix out of the equation, new equipment sales gross margins were stable despite an increase of the equipment supply in the market, making for an overall more competitive pricing environment year-over-year. To focus briefly on Peaklogix, first, recall that Peaklogix is a subsidiary company in our Material Handling segment that designs, builds and implements automated warehouse solutions for end markets up and down the material handling spectrum. Strategically, Peak provides our sales force and our material handling customer base with high-end automation solutions that our core lift truck business does not.

Peak, as we’ve mentioned previously, was incredibly active and highly profitable post-pandemic as customers took advantage of financing what our larger long-term CapEx projects at attractive interest rates. And given employment levels in the work-from-home movement, automation at customer sites became more of a necessity versus a choice. As we moved further away from the pandemic as interest rates rose, Peak’s customers have been more reluctant to take on large automation projects. From a comparative perspective, in Q1 of 2023, Peak was still working off of 2021 and 2022 backlog related to the aforementioned tailwinds, tailwinds that have dissipated in the current climate. In terms of impact, Peak was down approximately $9 million of revenue year-over-year and at roughly 30% gross margins, one can do the math on the impact to EBITDA for the quarter.

To summarize the Material Handling segment, our core lift truck business, which makes up 93% of the revenues in our Material Handling segment is off to a positive start for the year while Peak underperformed, impacting the segment overall on a comparative basis. On to the Construction segment. From a revenue perspective, against a difficult comp, especially as it relates to equipment sales, the segment was up $6.6 million of revenue and experienced organic growth on each revenue line as equipment sales, parts, service and rental, all contributed to the growth in the quarter. Notably, rental revenue was up nearly 8%. And our product support lines increased approximately 6% organically despite a challenging weather environment. From a gross margin perspective, the Construction segment saw a year-over-year reduction in margin as we navigate a competitive new equipment environment driven by the increased supply in the market compared to last year.

Nonetheless and notably, our rental disposal margins held strong at nearly 28% for the quarter. On to the Master Distribution segment which houses our Ecoverse subsidiary. To understand Ecoverse’s performance for the quarter, it’s important to understand its business model. First, recall that Ecoverse has master distribution rights for the United States and Canada through exclusive agreements with several European OEMs that manufacture high-end environmental processing equipment. As a master distributor, Ecoverse sells equipment and purchases from the OEMs to a sub-dealer network that it manages through contractual agreements for various designated territories throughout North America. Ecoverse’s OEMs were no different than equipment OEMs around the world in terms of the supply chain challenges that afflicted the delivery of new equipment to dealers since the pandemic.

As I’ve noted previously and as it relates to our core business, 2023 was the great replenishment when it comes to equipment dealers restocking their inventories to normal pre-pandemic levels. In particular, the first quarter of 2023 spoke for a big portion of the great replenishment and Ecoverse’s sub-dealers were no different as they restocked their yards with Ecoverse’s equipment in Q1 of ’23, leading to an unprecedented level of sales and EBITDA for Ecoverse. With Q1 of 2023 as context, the same restocking dynamic was not apparent in the first quarter of ’24 as Ecoverse’s sub-dealers were sitting on a normalized level of equipment. All told, Ecoverse’s revenues were down $13.9 million for the quarter and given its 25% equipment margin profile, its year-over-year performance led to a headwind for the enterprise of approximately $4 million of EBITDA versus Q1 of ’23.

More on why we think this quarter is not indicative of the future for Ecoverse in a moment. With the segment performance in mind and I would refer participants to the adjusted EBITDA bridge on Slide 13 of our presentation, on a consolidated basis, we realized $34.1 million of adjusted EBITDA for the quarter, which is down $6.7 million from the adjusted level in 2023. As discussed and as presented in Slide 13 of our presentation, our core businesses outperformed Q1 2023, while the aforementioned dynamics around the Ecoverse and Peak served as the primary tailwind — headwinds for our business in the first quarter. That said we expect each of the impacting factors listed on Slide 13, which challenged Q1 performance to become less impactful on a relative basis for the remainder of the year, which is a good segue into guidance and a discussion on our outlook for the remainder of the year.

First, I would reiterate Slide 7, which is a window into our daily activity, specifically as it relates to rental utilization and labor productivity. As you will see on Slide 7, our rental fleet is experiencing its natural seasonality as we head further into the construction season and labor productivity has held stable at high levels. Simply put, these KPIs provide technical support to the anecdotal conversations that we are having with our customers daily, which is that they are busy. This customer activity should bode well for our product support and rental revenue lines for the foreseeable future. When it comes to Ecoverse, which was the biggest driver of the EBITDA variance for the quarter, we believe that Q1’s performance is isolated and timing-related and not a signal for the future.

In fact, Ecoverse produced almost $7 million of revenue in April versus $12.8 million for the entirety of Q1. We remain excited about Ecoverse, its business model and its prospects going forward. Relative to Peaklogix, we believe that that business unit will remain challenged as long as the current interest rate environment holds. But similar to Ecoverse, believe in the long-term synergies between Peak and our core lift truck business. Lastly, investors should keep in mind that the two businesses acquired in Q4 of 2023, Burris and Ault are both seasonal businesses housed in our Construction segment. And EBITDA from both of those businesses will be heavily weighted to the remainder of the year versus Q1. In summary, we remain bullish about our prospects for the fiscal year 2024.

With that commentary as context, given Q1 performance and the current competitive new equipment environment, we are adjusting the top end of our adjusted EBITDA guidance for the year from $217.5 million to $212.5 million while keeping the $207.5 million floor of the range in place for 2024. In closing, I want to once again thank my Alta teammates for again rising to the operating challenges that Q1 presented our business. Your teamwork, dedication is infectious. And it is the core of what makes Alta Equipment Group special. Thank you for your time and attention. And I will turn it back over to the operator for Q&A.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Matt Summerville with D.A. Davidson. Please go ahead.

Matt Summerville: Thanks. A couple of questions. First, if you were to put together a chart similar to Chart 13 with respect to the top end walk down on guidance, what would be — what would the green bars look like that are maybe doing better? And then, I guess, can you kind of bucket where the downside ends up coming from between Peak, between Ecoverse, some of the other items you talked about? Just help understand or help us understand kind of order of magnitude, the impact puts and takes on the full year EBITDA guide?

Tony Colucci: Matt, it’s Tony. I think what we were trying to — what I was trying to address is that as I mentioned, Ecoverse, right, which was the biggest driver of the variance in the quarter. And we have the impact for the first quarter on Slide 13, $4.3 million. We think that the comps for Ecoverse get easier, number one, for the rest of the year. And as I mentioned, they did $7 million, give or take, in April. So off to a relatively good start here for Q2. Similarly, Peaklogix would have the same sort of sentiment, I guess, or dynamics surrounding it as they became more impacted by the elements of having a customer base sensitive to interest rates, again, large CapEx projects, et cetera. They would have started to feel that impact in Q2 of last year.

So I think one is the comps get easier, which means the headwind that impacted Q1 in our mind won’t be there in the quarters going forward. Relative to the last thing on Slide 13, as you know, we always burdened EBITDA with interest on floor plan new showroom-ready floor plan. Obviously, that became more of an issue towards the latter half of 2023 and the comp there gets easier as well. Relative to the core businesses, we feel good about Material Handling. We had a strong quarter, as I mentioned, something 23% year-over-year equipment sales on an organic basis in the core Material Handling business. So we feel like that’s on trend. Construction, we didn’t necessarily, that the acquisition sort of if you’re looking at on a pro forma basis, Ault and Burris, their EBITDA will really start to kick in now kind of thing, Q2 through Q4, while we were absorbing their fixed costs in kind of the first quarter.

What I will say is if there is a headwind we have our eye on and that impacted Q1 a little bit relative to expectations, it’s construction equipment sales. And I think a lot of the comps that have been out discussing the pricing dynamics in the market, dealer channels being stocked up and — but also while end markets are still strong fundamentally. So if we’ve got our eye on anything relative to the guidance, it’s construction equipment sales that provides the variable. But we feel really good about rental parts and service over the remainder of the year in our core businesses.

Matt Summerville: Thank you for that detail. Maybe just a quick follow-up on parts and service. Growth there organically decelerated a bit. I know you called out maybe a little bit of some weather-related challenges. But what’s your full year expectation for organic growth in parts and service? And then maybe can you comment on what you’re seeing in terms of rental rates as well as utilization levels versus a year ago? Thank you.

Tony Colucci: Sure. Matt, I think what we saw in rental rates is probably low single-digits maybe to mid-single-digits in the first quarter here. Utilization on a — and we provided that, by the way, in terms of just equipment on rent. And you can back into kind of physical utilization or dollar utilization based on the size of our fleet. But I think that held up pretty well year-over-year. The fleet was bigger. But in terms of dollars on rent, we held up pretty well year-over-year rental revenue. Just all told was up more than that sort of low-single-digits rate, which means we just have more dollars on rent because we — I think the number was 8% and our construction business rent-to-rent business was up. So that’s rental.

In terms of product support, we’ve messaged that we — especially in our construction business that there’s so much build population that’s a little bit more in its infancy in certain markets than our Material Handling business. We would be disappointed if we didn’t see low-double-digit, high-singles on that number in terms of product support combined, parts and service combined organic growth year-over-year. Material Handling will be a little bit more muted than that, just given kind of the — just the dynamic and the maturity around that business. So yes, it did — I think part of what we saw relative to the mild winter was less cold start issues, less repairs around snow removal kind of activity, right? Somebody maybe impairs a piece of equipment because of snow removal and so some of that impacted Q1.

But hopefully, that helps, Matt, in terms of just where we expect to be. We’d like to be high-single-digits kind of on a combined basis here.

Matt Summerville: Understood. Thanks, Tony.

Operator: Our next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.

Kathryn Thompson: Thank you for taking my questions today. This is more just on a broad market end market. Look, could you give a little bit more color just in terms of megaproject dynamics? And have you seen any notable change in the pace for going into mega projects? And importantly, any update on pricing on that particular end market? Thank you.

Ryan Greenawalt: This is Ryan. I’ll take that. I would say that relative to what we see megaprojects, it’s stable. We don’t see any big changes in pricing per se. I think the projects in general, as we’ve said, Kathryn, is kind of — it just — it creates longer term demand where our contractors who might be working on a megaproject, if you will, we’re always once removed. Our equipment is being used by customers, which then are using the equipment on a potential megaproject site. And we have anecdotal evidence that we know our customers are on some of these projects. But what it does is it gives them confidence that they’re going to be busy for longer. And we continue to hear that from customers that maybe are on this project that these are long-term multiyear projects that kind of create what Ryan has termed kind of adding innings to the game in terms of any sort of potential construction cycle.

What we keep saying is, there’s, only so much resources in the construction supply chain and you come back to the labor element of things. And there’s only so much labor that can actually get into some of the equipment that we sell our customers to execute on these projects. So anyway, hopefully, that’s helpful commentary.

Kathryn Thompson: Yes. Well, with that visibility and with your Construction Equipment segment, there has been a negative mix. But there is margin expansion opportunity for that segment. With that increased consistent visibility with megaprojects, I mean, presumably, that would help with better pricing and which would be supportive of margin growth. I mean is that something you are seeing in the market right now?

Ryan Greenawalt: I think when we think about margin growth in our construction business, it’s a mix toward product support, meaning parts and service revenue versus selling equipment to contractors that might be working on a megaproject. So to the extent one of our customer’s needs equipment to be on a megaproject, we love it, obviously. But it’s all in the end game of driving field population, whether that field population makes its way to a private non-res project or a large megaproject. Frankly, sometimes we’re not sure because contractors are working on both all kinds of things. And again, in the vein of just our Gillette model where we’re putting razors out in the field and we want to sell the blades.

Kathryn Thompson: And that was the point I was getting to exactly. Thank you very much.

Ryan Greenawalt: Thank you, Kathryn.

Operator: Thank you. Our next question comes from the line of Alex Rygiel with B. Riley. Please go ahead.

Alex Rygiel: Thank you and good evening, gentlemen. A couple of quick questions here. First, equipment sales in the quarter were stronger than I had expected. And this should be a positive trend kind of confirming the success of building that field population, just one of your core goals. But it doesn’t take into consideration pricing volume mix. So can you talk a bit about volume growth and directionally, how you think about volume growth through the remainder of the year?

Tony Colucci: Alex, this is Tony and thanks for the question. I think what you saw in Q1 and this is where I tried to provide as much detail on each segment. But to answer your question appropriately, you really got to go segment by segment. Volume growth in Q1 relative to our core Material Handling, core lift truck business, for sure was up 23% I think the number was year-over-year on a organic basis, mainly on the backs of just the new equipment and specifically Hyster-Yale. What we have mentioned historically is margins on forklift historically have been on the lower end if we look at our entire portfolio in terms of just gross margin selling equipment. Does it bode well down the road for additional product support? We’d like to think we’re taking share when our volumes are up in Material Handling, which again will bode well for the future.

So we expect to deliver more Material Handling equipment in 2024 than we did in ’23. And I think that we’re off to a good start. What that does though is it does put pressure on gross margin sort of on a relative basis. And then when we have what went on at Peak in the quarter, it further sort of impacts things. But that’s how I would kind of mention or answer the question on Material Handling. Construction volume, we still — as we see, we have a lot of — we know that equipment is being utilized. Our service call intake is stable or growing as we get into the season here. Rental equipment, remember, Alex, we’ve kind of got this rent-to-sell model. And so to the extent that volumes off of our balance sheet and onto a customer’s maybe weans a little bit, it could mean that customers are, for whatever reason, interest rates, election, choosing to rent versus buy.

I think we could see an element of that that might put pressure on new equipment volumes where maybe we’ll have to rent or grow our RPO fleet, if you will, rental purchase options. So — and the challenge there becomes — it really becomes a battle, a pricing battle to hold share. And that’s when the OEMs are so important in terms of supporting the dealer network and for us that’s Volvo, no surprise. And historically, they’ve been supportive in helping us hold margin. But nonetheless, I think we saw some of that pressure in Q1 and we would expect that to continue. But as Ryan mentioned in his remarks, we intend to hold share and sell value, which in the end of the day is uptime related to your service department. On the Master Distribution side, we think it’s a — we believe that it’s an anomaly.

I think Ecoverse has a lot of great things going on with its end markets and recycling and so forth. In terms of their volume, given the surge that was Q1 of ’23, I think it’s difficult to say that they’ll match the same level of volume in that segment. But we intend to kind of hold the EBITDA through pricing gains and things like this, increase part sales and hold the EBITDA in Master Distribution, hopefully, when we look back at the end of the year. So long answer, Alex, but three segments to kind of break that up to.

Alex Rygiel: That’s helpful. And then any chance you can comment on the P&L impact of the difficult weather and if this is recoverable in kind of the second quarter? Or is it just lost?

Tony Colucci: Yes, I think that’s probably — that’s part of the reason why, Alex, we adjusted our guidance down. We felt like the top end of the range probably wasn’t achievable given the Q1 performance. The weather is tough to calibrate. I think some of it, you could — our service margins and construction were down year-over-year. And some of it, I think, is related to weather. Just as we’ve had technicians in our Construction business that maybe were prepared for the snow season and cold starts and again, snow removal-related damage work that never really happened given the mild winter. And then, you just have just soft ground that also impacted. So that would be the first place I would go. But it’s really hard for us to kind of put a number on year-over-year weather sort of impacts.

Alex Rygiel: Thank you.

Tony Colucci: Thanks Alex.

Operator: Thank you. Our next question comes from the line of Ted Jackson with Northland Securities. Please go ahead.

Ted Jackson: Thanks very much. A lot of my stuff has been asked, but I’ve got a few more. I want to circle back, if you would, into the construction new and used equipment demand. There’s a couple of things I want unpack here. And one of them is, is if you listen to, say, like the Caterpillar call and CNH calls related to construction, both of those companies essentially look at the North American market or the Americas market, North American market to be flat to down in low-single-digits. And then, behind that, there’s another of smaller, more specialty equipment manufacturers that I’ve had discussions with. And they’ve definitely seen a little — an impact in terms of some of the booking stuff interest rates. But the fact of the matter according to them and everyone else I talk to is that the demand in terms of like projects is there.

I mean the government funding has been put in place. These projects have gotten the go ahead and the equipment is needed to be purchased. And the pause is just because there’s been a rapid change in terms of interest rates and the outlook for them. And it’s created some uncertainty, which you would think that the demand is there regardless at some point that that equipment has to be put into the field. So where I’m going with it is with that as a backdrop and kind of the — with regards to the commentary from CAT and CNH in particular, I mean, is it fair to assume that when we look at just the new and used equipment volume for Alta that we should see something at least similar, something essentially flat to down for ’24?

Tony Colucci: So Ted, I’ll take that one, and Ryan, if you’ve got any comments. I would say I’m going to let’s start off by just saying that we think that the demand part of the equation remains pretty stable for the balance of this year. But what we’re describing is basically, you’ve got all the dealer channel is full. And we aren’t competing with the OEMs. We’re competing with the other dealers, the CAT dealers, the tier dealers. And today, we’re all selling from full rental fleets, full inventory. And that’s going to impact how aggressive the marketplace is. So for us to hold share in this market, even with the demand backdrop, it’s going to potentially be hard for us to hold margins at the same time. I would just say that we…