Q3 2020 Manitex International Inc Earnings Call

Three orders for straight mast cranes were up sequentially, 45% versus the second quarter.

However year to date order levels remain at Lowe's, we have not seen in a decade.

As such we continue to expect industry shipments for this year to be down 25% to 30% versus 2019.

Going forward, our straight mast Crane business is the leader in this space and is well positioned for the eventual economic recovery.

Various utility and infrastructure applications.

Furthermore, even through this downturn, we continue new product development investment and our straight mast crane business and other businesses to support our 2021 product plans.

As we move through the rest of 2020 are top priorities are maintaining a sharp focus on our health and safety measures meeting.

I get to three.

$300000 in Q2.

Our backlog was approximately $51 million as of September 32020, and as you'll note in the press release, we saw orders in October and took our backlog to $56 million.

28% increase compared to June thirtyth.

Actions will strengthen our gross margins and reduce SGN a expenses even further.

Now moving to slide seven.

For a discussion of net debt for Q3.

Our net debt was approximately $35 million at quarter end was consistent with Q2.

In July the company paid down the PM Italian debt by approximately $5.5 million at a 15% discount to its face value. This.

This results in annualized savings on the interest expense of approximately $200000.

At the end of the third quarter the company had available liquidity of approximately $41 million incur.

Including approximately 24 million of cash.

Revolver availability at September Thirtyth, 2020 was $17 million with an outstanding balance of 5 million.

The outstanding revolver balance is three and a half million dollars lower than Q2 as cash was used to reduce outstanding draws on the revolver.

The company has two convertible notes of which seven and a half million will mature on December 19th this year.

And the remaining 8 billion will mature on January 2020.

We have 2 million dollar annual repayment on our Italian term debt at the end of this year as well.

The team is confident that the company will have the liquidity through cash and other credit lines open to meet each of these obligations in any others that are scheduled over the next 12 months.

We remain in compliance with all debt covenants.

With that I will now turn the call back over to Steve.

Thank you Steven joke.

Please turn to slide eight to discuss our outlook for the next quarter.

We all realize the importance of safety that we need to make sure every team member comes to work in a safe environment and returns to their families safely.

Although weve been fortunate to have had only a few team members infected by the virus. It only takes one case to shut down the facility, which is why we are continuing to find new ways to keep our teens safe.

In a similar effort to keep moving forward and grow our business, we must continue to invest in new product development as our pipeline to new customers and new markets.

I would also like to thank the many loyal customers we have for their efforts to help us improve and grow our business as partners for the long term.

We have a great future ahead of us and we will continue to make progress by executing our strategy as a specialized lifting and access solutions business.

I will stop there and thank you for your time and attention today and I'll ask the operator that please start the Q&A session of the call.

Thank you.

He would like to ask a question or register please press the one followed by the four on your telephone.

You saw some of that in Q through in Q3, right. We showed you know the 340 basis points of gross margin increase.

You know some of that was driven by cost reductions that we've taken out in North America.

But obviously the portfolio now represents a higher.

Knuckleball business and you're seeing some of that so I think yeah short answer. Your question is yes, you should see improved margins overtime.

Thank you for that I wanted to turn to the restructuring.

Born and raised from a revenue perspective, so I I I think that's.

That's a positive sign that.

The knuckle boom boom business has been pretty resilient, even through a difficult a difficult time and then.

On the North American restructuring the only thing I would mention is.

Remember that we executed that in late July so.

You know the effects that we've gotten so far are really only a couple of a couple of months and obviously, we didn't spend a lot of money to do that so I think the returns are are definitely good in North America with the restructuring that we did but Steve you Wanna answer a Joe.

Just chime in on all the restructuring and maybe the run rate.

And you see going for sure.

Sure, Steve Hi, Mike So the.

The the restructuring work in North America.

Didn't affect their manufacturing footprint. So as you know with Manitex, Mike our operations in North America are barely scalable and we're primarily primarily focus on assembly. So most of the headcount reductions were in.

The and the direct and indirect labor areas and I do want to emphasize.

That it was focused on the the man attacks straight Mad screens.

That you know due to the growing activity that we've experience for the Mac brand in North America. We've added some people this year in North America for assembling those products and we did not make any reductions there because we we've got all our our.

[noise] slots Ah were filled up in the in the third quarter and going into the fourth quarter for Mac.

And.

And the.

And and and and the Winona, Minnesota facility.

We do both industrial Ah or some smaller rough terrain cranes.

And we do the man attacks some of the Manitex boom trucks, and and there again, we did make some reductions Mike.

That we affected by the end of July in the straight mass Crane area at the same time. We've we've you know if you look in in the financials and in the queue. We've got a nice increase your over a year for a rough terrain cranes that we're building Winona. So we we did not make any any changes.

Is there. So you know the cost reductions have are clearly now flowing through their financials as you see in the in in the gross margin and you know.

Due to the nature of our of our operations and being flexible where we're prepared for the eventual upturn in the in the straight mass crane market when it comes.

[laughter].

S T a catch that and I appreciate that color kind of just pick up to their comments on Europe Ah stiffly off first.

To change that we're done during the shutdown or the improvements that were made it is there any margin and packed with 60 expecting in there that that was a really crushed with the question.

Yeah. So yeah really the improvements we've done there like are more on the slow somewhat efficiency related and and I imagined quality. So to give you. An example, you know what we do the testing for the high for the hydraulic fill the knuckle blooms on the hydraulic sir.

We basically cleaned out that whole system replace it with a with a new system. So that we could improve really the quality and the hydraulic assembly of it. So you know that's that's more of a you know I think a quality or efficiency improvement that our customers will definitely see and then over time, obviously from a warranty person.

Sector, well, we'll see how warnke Costco down, but I wouldn't I wouldn't factor in you know a bunch of improve improve margins at this point as soon as I get some time to kind of work through work through those efficiencies livable.

Okay I got got perfect.

And I also wanted to just touch scripturally on some of the some of the valour.

Nation that you are shared that sounds like us doing quite quite well, probably closer and trends two P. M. If not better than to the straight mass business cause you get a little bit more color on who's buying that and where and do you get the sense that the customers for that or are they are they buying valid for indoor use purposes, you know.

Cause that's the best tool for the job or are they buying it because they have to customers are.

Trying to be more green focused on having to use these outdoors, but just don't want the emissions.

Yeah, Yeah. So like you know what what I would see to start off with is you know remember that viola is a 70 year old company you know they produce thousands of industrial cranes, both diesel and electric you know from so it's a it's a very long time, so first of all.

All I think that we've been able to set a re-energized our customer base around the viola product and the improvements that we've made in some of the new products that we've lost we've launched.

For new products in the space all the way up to a 12 ton fully electric crane. So.

Basically you know we went in pretty aggressively and took some business away from that competitor and we're happy to have called a as you know kind of our premier customer in Europe, and they're going to start to push that through the rental channel, which will just get I think more product you know out there.

So we feel really good about about the product and that's in Europe. So you know shifting to North America. What we've done is you know we have a small rental fleet in our Chicago facility, where we have been putting out a lot of product to customers, a and it's getting a lot of traction.

Sky's the limit for for the product, but we're obviously building out we're doing a lot of things right. We're building out a new product portfolio.

We've got a new team that's in place we've got a new customer that's going to help us get out there and accelerate growth. So you know I'll I'll, probably talk more about that as as we get better clarity around 2021, and I can give you a better number but I I'd say, we've got to go.

So the basic seeking product in North America.

Sure the and number of the dealers Mike that we have announced this year. For example, one of them that we just announced that we signed in the third quarter. They are taking on that product line the age 62.

And at the same time, Mike the age 62, as a part of our revenue mix now every month every quarter.

The the dealers that we have in place a and and have been dealers for for say two quarters or more.

All of them have taken a repeat orders and we have customers that have taken repeat orders.

And to Steve's point now is as we move into.

2021.

We're looking at adding on to that product line with some additional reach capabilities to further grow in that area.

As far as the costs are the progress you've been kind of making there.

Yeah, let's see do you want to answer that you've been working on top of that project. Yeah for sure. So you know Mike there's.

You know along with the viola.

There is work underway with some of our industrial.

And rough terrain products to electrify those.

Regarding the actual commercial chassis the the the class five through a trucks our dealers Kevin.

Our our our suppliers the truck manufacturers have been providing is periodic updates.

And the work we're doing there and we're sharing.

That information with our our key dealers and as you know at the end of the day, our customer base or end users are gonna drive that.

And when our end users and and the crane rental companies and various contractors.

Ah Ah Ah Ah ready to adapt that that technology and and move forward, we will have a solution.

But it's it's it's still a work that that with the truck manufacturers and and vocational type trucks.

You know work trucks, rather than trucks that are doing pickup and delivery and freight distribution in urban areas. It's it's it's gonna be a little slower I would say on on work trucks than what you're seeing in some of the you know in the news for pick up and delivery categories.

Got it makes sense.

And then turning to Parsons service cause you have you have to be that somehow Parsons serviceman the quarter and anything you are doing in the near term to I have to keep that going or to improve that business further.

Yeah, like it's actually a positive for us and a quarter I think Joe. He can tell me if I if I missed by numbers, but I think it was about 20% of the revenue for the quarter, a little bit better than prior year quarter actually.

So you know I've been talking a lot about improvements that we're doing to increase like feel right to you know.

Put more parts on the shell.

Ooh you know some of our products to you know more dynamic.

Product or technical publications to to make sure our designers can access in order parts online. So we're doing we're doing all of that you know like because again, you know, it's 50% to 60% margins in that business and and I I think we still have you know more.

32.

Steve and I and Joe you know slice through the increases that we you know we you've seen in our backlog and obviously our backlog.

It'll be an up.

No.

27 ish percent, you know versus the end of the second quarter.

The rental fleets that focus on utilities, and the telecom and infrastructure.

Those are the folks that that have a high utilization rate and and are adding to their fleets. Both currently and frankly as we move into 2021.

Okay I can think.

Think of it this way the utility rental fleets haven't really slowed down I mean transmission and distribution.

I don't think that those guys if they slowed down at all you know enough to mention.

How that works four to 5000 hours a year so.

You you you could easily kick out replacement of a crane for a year or two and you know.

Look at parks, you know look at the refurbish it you know if it and still keep it in your fleet. So it's really not I I think a product where do you think of Ah a conventional replacement cycle like you would think about aerials right where people Wanna stay between 40, whatever it is 45 to 50 months you know feed age.

I think it's just a different dynamic and cranes.

Right now so I'm, a little tough to to to.

Tell ya.

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