Q3 2021 Manitex International Inc Earnings Call

Thank you for standing by this is the conference operator.

Welcome to the Manitex International Inc. Third quarter 2021 results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation there'll be an opportunity to ask questions.

During the question queue. You May Press Star then one on your telephone keypad should you need assistance. During this conference call you may signal, an operator by pressing star in there.

Now I'd like to turn the conference room to Mr. Steve Nicola Chief Executive Officer.

Please go ahead.

Thank you operator.

Afternoon, ladies and gentlemen, and thank you for your continued interest in Manitex International I.

I hope everyone is safe and healthy and we appreciate you taking the time to listen to our call.

You flip of CEO of Manitex and with me today is Joe <unk>, our CFO, who will take you through the financial details of the third quarter, which we announced earlier today.

Following our prepared remarks as is our custom we will open up the line for Q&A.

Please see our website for our release for replay instructions for this call a.

A telephone replay will be available for seven days and the slides we cover with audio broadcast or webcast will be available for a year.

Slide two is our safe Harbor statement, which reminds you that everything we discuss is subject to change as described in our SEC filings, which you can refer to for further details on the many risk factors associated with our company.

So please now let's turn to slide three for a review of our operating results.

Let me start by providing some color on the current business environment and the impact it's having on Manitex. It's clear that we are in an uncommon period of time with robust customer demand for our products, while facing one of the most challenging global supply chain environments and period workforce constraints that have seen the cage.

These factors are negatively impacting production and also contributing to manufacturing labor inefficiencies for us as well as the entire industry as I'm sure our listeners are aware.

At the same time, we've seen significant material cost inflation since the beginning of 2021.

So you might ask what are we doing about it let me assure you that we are taking tackling these problems head on.

We've implemented multiple price increases and surcharges across all product lines.

We are working with our customers to be transparent about why and where are these increases coming from.

We are adjusting workflow within our facilities to mitigate production inefficiencies and helping our supply chain partners identify issues and engage new suppliers to meet demand.

We are taking all steps available to reduce margin pressure and increased product throughput to meet the demands of our customers.

While we view these challenges as temporary we do not take them lightly and ongoing and the ongoing uncertainty they've caused worldwide.

We're taking the right actions to position our company for success and we will emerge from the current environment, a stronger more resilient business.

The global Manitex team was able to mitigate many of the production constraints this quarter with year over year revenue rising almost 40% to nearly $51 million.

Joe will take you through a deeper look at our financials, but our gross profit also increased 20% to $8 million and adjusted EBITDA was $1.6 million for the quarter.

At the same time, we've been working hard to continue to improve our balance sheet and our net debt is $26 $5 million, which gets our leverage ratio to less than three times trailing adjusted EBITDA.

Our backlog continues to grow and remains at a five year record high of $113 $6 million with our European business is leading the growth and good improvement from our street mass business in North America.

Now please turn to slide four for some additional color on our operational performance in Q3.

As I mentioned earlier business is robust and demand is high but we are working daily to manage our supply chain constraints and a volatile pricing environment.

Let me start with our PM knuckle boom business, which continues to be robust with orders up over 100% since the end of last year.

Our revenue here rose, 22% versus Q3, 2020, and global demand is up with our key markets in Europe, North America, and Latin America.

We continue to bring new and innovative products to the market and have launched three small and medium sized cranes at a recent trade show in Italy.

Our plan is to continue to accelerate new product launches in 2020, two and 'twenty twenty-three with further developments in the higher capacity cranes.

The European supply chain team works across P M oil and steel and valid products to leverage volume and is working on a daily basis to mitigate shortages, but more importantly to find additional suppliers to meet ongoing demand.

I've personally met some of these new suppliers and I'm impressed by such high quality professional companies that will help us grow in 2022.

Our leadership in our straight mast market continues to stroke show strong demand within a more difficult supply chain environment.

Revenue rose, 43% versus last year, even as I ramp up has been more challenging.

Here than in Europe.

We have brought on new steel suppliers, which has helped US helped availability in the past couple of quarters the prices remain high.

In order to offset these costs, we've implemented a steel surcharge on all of our products effective 2021, which will remain in place until we see prices start to come back down.

We do not expect to happen until sometime in 2022.

As we discussed during our Q2 call truck chassis supply continues to be a significant challenge semi.

Semiconductor shortages have been a major issue for our truck suppliers and while there seems to be some improvement in deliveries remain cautious about the next couple of quarters.

Switching over to oil and steel aerials business. The team has been doing a stellar job growing our share in Europe and revenue rose 32% year over year.

2021 will most likely be a record revenue for this business.

We are very excited about our new track mounted self propelled aerial work platform.

Oil and steel has been a leader in this business for years and we have designed a new range of 55 to 68 foot platforms from the ground up.

Well, having just launched these products at a recent trade show in Italy, we've already seen orders come in.

And recently launch them at a tree care show in the U S.

We see demand from our aerials continued to be strong in the utility construction rental and infrastructure projects, mainly in Europe, but expanding into North America as we develop dedicated distribution.

Turning to our Valla zero emission electric cranes revenue rose more than 70% versus Q3 2020 and backlog is also growing.

There's an excellent demand for electric cranes, and our team has done a great job in launching new products to meet customer demand in this space.

Our biggest challenge continues to be our supply chain and although we will more than double this business in 2021 versus 'twenty 'twenty, we have more work to do and margin improvement and integrating the operations within our other European businesses to leverage resources and improve supply chain inefficiencies.

Let me now turn it over to Joe to discuss our financial performance joke.

Thanks, Steve Good afternoon, everyone and thank you for joining the call today. Please.

Please turn to slide five in the presentation.

This reflects certain trends in our financial performance for the quarter and previous four quarters.

Steve mentioned revenue for the quarter was $50 9 million, an increase of $14 4 million or nearly 40% compared to $36 5 million for the prior year.

The improvement was driven mainly by higher sales of straight mast cranes, and our Manitex business.

Cranes and R. P M business and aerial platforms in our oil and steel business.

Gross profit was 8.1 million or $1 4 million higher than the prior year period.

By the increased revenue.

The gross margin percentage was 15, 8% of sales for the quarter down from 18, 3% for the prior year, driven mainly by increased material cost and steel surcharges as well as product mix.

As can be seen from the chart on gross margin our margin declined from Q2, 2021 to Q3, driven mainly by the increased material costs.

As well as an impact from product mix.

Adjusted EBITDA was $1 6 million or three 1% of sales for the quarter.

This is up from adjusted EBITDA of $1 million or two 6% of sales for the prior year.

The increase was driven by higher sales of straight mast cranes, and our Manitex business.

Luckily boom cranes and R. P M business, an aerial platforms in our oil and steel business.

The adjusted EBITDA percentage is higher than the prior year, but below our target due to the increased costs and product mix that I mentioned earlier.

Our backlog was $113 6 million as of September 30th which is a five year high and represents a 67% increase compared to the year end.

This reflects higher orders in the straight mast crane knuckle cranes and aerial platform businesses.

Straight mast Crane backlog has increased 71% since year end.

Knuckle Crane backlog has more than doubled since the beginning of the year and our backlog for aerial work platforms is up 33% from the year end.

Our book to Bill ratio was 1.15 to one for the quarter.

And there's 1.29 to one for the year, which is a significant improvement over the book to bill ratio of <unk>.

Eight eight to one in the comparable 2020 period.

Yeah.

Now please turn to slide six for additional financial results for the quarter.

Operating expenses were $8 2 million for the quarter, which is in line with our expectations and up 0.9 million from the prior year, mainly due to higher professional fees advertising costs and sales commissions.

Operating expenses as a percentage of sales declined significantly to 16, 1% in Q3.

Paired with 19, 9% in the prior year as.

As we were able to leverage our existing expense base supporting the increased revenue for the quarter.

We will continue to take actions to maintain prudent expense control and strive to lower SG&A as a percentage of sales and our operating model.

Net loss for the quarter was $1 1 million and there's 300000 and favorable to the prior year.

Adjusted net loss of 200000 for the third quarter is an 800000 dollar improvement over the prior year.

Please turn to slide seven our net debt was $26 5 million at quarter end, representing a $3.4 million improvement from the start of the year.

But it's a $1 1 million increase versus the second quarter. This.

This increase was driven by higher draws on our working capital facility to support increased inventory purchases to meet our backlog.

Our leverage ratio remains less than three times trailing EBITDA as of September 30th.

At September 30th the company had available liquidity of approximately $33 million.

Insisting of $17 5 million of cash $10 $6 million of availability on the U S revolver and $5 million in working capital facility.

The team is confident that the company will have the necessary liquidity to crack through cash and other credit lines open to meet our obligations that are scheduled over the coming 12 months.

We remain in compliance with all debt covenants.

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

Thanks, Joe Please turn to slide eight.

Want to take a moment to summarize where things stand before we begin Q&A.

The business continues to be in good shape underscored by our record backlog of $113 $6 million.

We have excellent visibility into expected robust demand over the coming quarters.

The pandemic was a bit of a factor in reducing Q3 activity due to new delta variant restrictions, but the larger issue as discussed involves current supply chain constraints hampering logistics and shipping worldwide.

We continue to aggressively work through this on both sides of the coin.

Managing costs on one hand, while when appropriate raising prices on the other.

We believe our approach and further steps to tighten the expense controls and pursue new suppliers is allowing us to ship product as quickly as possible, while mitigating margin compression.

But more work needs to be done as this issue is not over.

We have an active pipeline of solid opportunities ahead of us and I personally feel we're poised for further growth heading into 2022.

Our balance sheet is strong and our team is working seamlessly to grow the top line reduce working capital and enhance returns for our shareholders.

With that operator could you. Please open the lines for the Q&A session.

We will now begin the question answer session.

During the question.

You May press Star then one on your telephone keypad.

According knowledge of your request.

Speakerphone, please pick up your handset before pressing any keys.

Your question. Please press Star then two.

Close for a moment as callers join the queue.

Once again, if you have a question. Please press Star then one.

There are no call. It is currently in the queue.

I'd like to turn the conference back over to Mr. Steve Cutler for closing remarks.

Thank you operator, well I think the quarter was fairly straightforward and let me summarize again for everyone on the call I think.

The team feels positive about about our business our orders are robust and continue to be robust as we sit here halfway through the fourth quarter.

Obviously, the announcement of an infrastructure bill puts wins in our sale and we feel very good about the opportunity to participate later in 2022 and beyond with an infrastructure Bill.

And then obviously as we mentioned we're working all of our internal cost to make sure that we can neutralize obviously, the the input costs from our from our suppliers and we feel pretty good about our about the next couple of quarters with that I'll turn it back to the operator to please.

To close the call.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Yeah.

Yeah.

Yeah.

Yeah.

Yeah.

Yeah.

Yeah.

Yeah.

Okay.

Yeah.

Yeah.

Yeah.

Yeah.

Yeah.