Alta Equipment: End Market Cyclicality, OEM Relationship & Fleet Utilization

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You spent a lot of time at Caterpillar and then got recruited to Alta. I'm curious, when you first got to Alta, was there anything that really stuck out to you as being very different business-wise or culture-wise compared to your time at Caterpillar? And then, maybe we can compare that to your experience at JCB.

Culturally, it was very diverse and different, with high energy and fast growth. I'll say it was chaotic—not necessarily good or bad chaos—but really an aggressive path to growing market share when I first got to Alta. The first couple of years were marked by excessive growth. As we got the business established, things normalized, although we continued to grow. By the third year, growth had flattened out to a more stable or normalized rate.

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You mentioned it generates a lot of cash. Maybe you could dig into that deeper because it seems like it's kind of capital intensive, right? You have to buy a lot of equipment. Yes, you're renting it out, but you probably have a lot of debt on the equipment. Can you walk through the economics of that? How is it very cash-generative? How would you think about it?

When I left Alta, they were somewhere in the low thirties. If you're at 33.3% financial utilization annualized, you're generating enough cash in three years to cover the cost of that asset. The financial utilization metric is extremely important and varies by category. If you're in the low to mid-thirties, you're in a good spot. If you get into the forties, that's the sweet spot for knowing you're “paying off” that inventory very quickly. The rest, as they say, is gravy.

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