Q4 2021 Manitex International Inc Earnings Call
Greetings and welcome to the Manitex International fourth quarter and full year 'twenty 'twenty. One results conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It's now my pleasure to introduce introduce your host Steve Philip Roth Chief Executive Officer. Thank you, Steve you may begin.
Thank you operator, good 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.
Steve Sleepover and with me today is Joe <unk>, our CFO , who will take you through the financial details of the fourth 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 a release and other information, including a brief presentation for this call.
The phone replay will be available for seven days and our slides we cover 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 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 evolving economic conditions impacting manitex.
As I mentioned in the last quarter. The company has been facing certain challenges that impact our ability to meet otherwise robust demand for manitex products across the globe.
Most notably among these have been the ongoing supply chain constraints, which which continue to exist.
So its conditions impacted our ability to manufacture and ship equipment to customers in a timely manner and at the same time reduced margins by increasing the cost we pay for a material material freight and other logistics related expenses.
Well I cannot state. This situation has significantly improved what I can see is demand for our products remains strong.
But our customers understand the reasons for longer wait times, and we are successfully starting to pass along higher prices to offset the elevated expense environment.
So while margins have been clearly under pressure.
I don't anticipate this being the case for 2022 as a whole.
In fact, we are optimistic about the current trends and our ability to show solid performance improvement going forward.
As I said last quarter, we're taking all the steps available to us to reduce margin pressure and increased product throughput to meet the needs of our customers.
Now, let me take a step back for a minute and just go over a few highlights for the quarter, which Joe will review in greater detail momentarily.
Fourth quarter sales rose, 18% year over year to $53 $4 million.
And 2021 revenue in total increased to $211 $5 million from $167 $5 million in 2020.
For the full year, adjusted EBITDA rose to $8 million from $5 7 million and most importantly, our backlog grew to $189 million a record for the company and up 66% from where it stood at the end of Q3.
The diversity of our business both in terms of products and geography is strong as is our balance sheet positioning us well for the year ahead.
We also took steps this quarter to streamline operations and increased capacity utilization closing, our badger facility in Winona, Minnesota, and moving production of straight mast boom cranes and aerial platforms to Georgetown, Texas.
As Joe will discuss in a moment, we booked $6 $4 million of one time after after tax charges related.
Badger and other initiatives that negatively impacted margins and our overall performance.
However by taking such steps.
We will save on operating expenses and logistics costs going forward expanding margins and paving the way for improved bottom line results.
These measures combined with our price increases lead us to be positive about the quarters to come.
Let me add that we are currently not materially impacted by the ongoing events in Ukraine or Europe in general.
It goes without saying that we were hoping for a positive outcome in Ukraine, and we'll let our investors know of any issues as new developments arise.
Now please turn to slide four for some additional color on our operational performance.
First and foremost I would like to thank our teams across the globe for all the hard work they've been doing to ensure we continue to grow manitex into a larger more global and more profitable business.
We are working closely with our suppliers to manage supply constraints and doing our best to communicate pricing dynamics to our customers as we continue to ramp up production at all manufacturing facilities.
Our PM knuckle boom business was lower in Q4 versus the prior year period, primarily due to logistic and supply constraints with.
With the comparison also reflecting the large order shipped in Q4 of 2020.
However for the full year, we delivered double digit revenue growth versus 2020.
In fact, 2021 was one of the best years in terms of both revenue and profitability for this business.
Growth in Western Europe , North America, and our operations in Chile.
So all the most significant growth in order intake continues to be strong as we move into 2022.
We're looking at additional opportunities to expand and have signed up new dealers in Asia, and the middle East to diversify our network.
Our new product development pipeline is solid and we have several new items planned for 2020 two.
We're very excited about our brand new 70 ton meter Crane for example, which will launch in Q2 of this year.
Moving to our street mass business in North America, we are very excited to see the pickup in demand in 2020 one versus 'twenty 'twenty.
And industry volumes are back to pre pandemic levels.
We have an excellent network of dedicated Manitex dealers and they are doing an excellent job in growing our sheer and accessing new markets and new customers.
Our biggest constraint here continues to be the sporadic supply of truck chassis, but we are doing our best to manage the situation and have not experienced any significant shutdowns.
Two our Georgetown operations.
As I previously mentioned the decision to close our Winona facility was not an easy one, but we must continue to find ways to save costs and improve productivity and we should see positive cash benefit in 2022.
Our oil and steel aerials business posted a record year in 2021 and we are very excited about the outlook for 2022.
We have signed an $18 million order for one major utility customer in Italy, and we will start delivering this order in Q2 and continue into 2023.
Our new self propelled aerial product has been a true success.
Already booked significant orders in North America and throughout Europe .
Were now implementing a dedicated production line in Italy to further ramp up to meet this demand.
Our zero emission valla business is doing well and posted excellent growth in 2021.
We're now moving into our next phase of operational and cost savings initiatives and have started to integrate several functions into the oil and steel organization to leverage common functions, such as production purchasing sales and service.
The team continues to expand distribution and access new customers interested in developing their zero emission rental fleets and we have a solid backlog into 2022.
Let me now turn it over to Joe to discuss our financial performance Joe.
Thanks, Steve Good afternoon, everyone and thank you for joining the call today.
Please turn to slide five in the presentation.
As Steve mentioned revenue for the fourth quarter was $53 4 million, an increase of 18% versus the prior year period.
The improvement, which was also up sequentially from the third quarter was driven mainly by higher sales of straight mast cranes and our manitex business in.
And the aerial platforms in our oil and steel business.
Even as we've continued to face supply chain constraints impacting our ability to get product to market.
Gross profit was likewise negatively impacted by higher raw material costs and increased logistics expense as well as approximately $3 2 million in inventory write downs related to the closure of our Badger facility that Steve addressed.
Inclusive of such charges gross profit declined to $4 7 million versus $8 4 million in the fourth quarter of 2020.
However, excluding one time expenses gross margin was 14, 8% in the 2021 quarter.
Paired to 18, 7% last year.
As previously noted this margin compression primarily reflects increased material costs and steel surcharges as well as product mix.
We anticipate margins expanding in fiscal 2022 it's price increases take effect.
With or without significant improvement in the supply chain, which remains uncertain to predict.
Adjusted EBITDA was <unk> 3 million or 6% of sales for the quarter versus adjusted EBITDA of $1 5 million or three 3% of sales in the prior year period.
The decline versus 'twenty 'twenty was largely due to the cost increases that I just mentioned.
The increased SG&A costs.
We expect the EBITDA to improve going forward as our strategic pricing initiatives take hold.
Our backlog was a record 189 million as of December 31, 2021, nearly triple what it was just a year ago.
This reflects continued strong orders within the straight mast crane knuckle cranes and aerial platforms businesses.
Our straight mast crane backlog has more than tripled year over year.
Knuckle Crane in aerial work platforms have also nearly tripled since the end of 2020.
Our book to Bill ratio was 2.4 to one for the quarter.
And was 1.57 to one for the year in total.
An incredible achievement, which speaks to the value of our products and enduring demand.
Please turn to slide six.
Slide six shows sales and adjusted EBITDA for the full year periods illustrating the larger trends, even given the short term impact of recent supply chain challenges.
Revenue rose, 26% in 2021 while.
While adjusted EBITDA climbed 40%.
Please turn to slide seven for some additional financial insights for the quarter.
Adjusted operating expenses net of one time charges were $8 6 million for the quarter.
Year over year, primarily due to trade show costs higher professional fees and incentive compensation.
Adjusted operating expenses as a percentage of sales was 16.2% Q4 comp.
Compared with 17, 2% in 2020, reflecting operating leverage.
We continue to be prudent with regard to managing expenses and remain focused on this going forward.
Net loss for the quarter was $8 1 million, while our adjusted net loss was roughly 1.7 million. This is a slight increase from the adjusted net loss in Q4 of 2020.
Driven by material cost increases.
As previously mentioned, we made an announcement regarding the closure of our Badger facility in Winona, Minnesota and.
And we expect savings from the closure impacting both cost of sales and SG&A expenses.
Now moving to slide eight.
Net debt was $23 8 million at year end, representing a 6 million dollar improvement from the start of 2021.
Our leverage ratio remains at three times trailing EBITDA and we anticipate further net debt reduction in 2022.
As of December 31st the company had available liquidity of approximately 37 6 million.
Consisting of $21 6 million of cash.
$11.2 million of availability on the U S revolver and.
And $4 8 million and working capital facilities.
The team is confident that the company will have the necessary liquidity through caching 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 for leap off.
Thanks, Joe Please turn to slide nine I.
I just wanted to take a moment to summarize where things stand before we begin Q&A.
The outlook for Manitex, even during uncertain times remains bright.
Nothing could underscore this more than a record backlog of $189 million, putting us on solid footing for our best year ever including double digit topline growth.
We have a great team in place and they are doing their utmost to execute everyday improvements and meet the demands of our customers globally.
At the same time as I said earlier, we're taking all the steps necessary to improve margins and the company's underlying performance going forward.
By cutting costs, where appropriate including moving production of straight mast boom cranes, and aerial platforms, Texas and raising prices when necessary we.
We are positioning the company for higher returns in 2022, even as supply chain pressures persist.
We have an active pipeline of opportunities and enduring demand for our products, while never taking an eye off of the underlying fundamentals of the business using cash generation to pay down debt and strengthening the balance sheet in tandem.
Overall, even as a company faces headwinds due to tight markets worldwide. We are optimistic about achieving greater operating performance in the quarters to come.
With that operator could you. Please open the lines for the Q&A session.
Yeah.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the sarkies one moment. Please while we poll for questions.
Thank you. Our first question is from Matt Koranda with Roth Capital. Please proceed with your question.
Hey, guys, it's Mike <unk> on for Matt.
Hey, So you guys. So is.
So implied order flow accelerated in the quarter, which makes a lot of sense given the current backdrops of your end markets can you talk about maybe some of the end markets that drove demand in the quarter and speak to any more recent observations on year to date bookings now that we're a couple of months into 2022.
Yeah sure so.
You know I would say remember you know our portfolio is mainly driven by commercial construction. So that part of the business continues to be to be very strong.
In the quarter really where we saw accelerated growth is in the utility space and mainly in North America, but also in Europe with.
Obviously, the order that we took from a an Italian utility company.
And I would say in general our mining is very strong right now you see all the commodities.
That are obviously are going crazy right now and you know our business in Chile.
Which is mainly commodity driven our business in Argentina, again commodity driven and Canada was actually a one of the highest growth markets that we had really in <unk> and 'twenty 'twenty. One so those I expect goes in 2022 to continue.
You are to be to be very strong.
Yeah.
Got it Okay. That's helpful and in regards to the energy end market.
Pryor oil cycle, peaking around 2012, you guys did around 202 hundred $50 million in revenue and that was without P. M. So assuming the energy end market demand strengthens can you speak to the capacity in straight mast potentially fulfill levels of demand that were reached in the prior cycle.
Sure.
Yeah, So right now our oil and gas is about 10% to 15%.
<unk> of the portfolio and.
No I expect that obviously to grow with obviously the recent announcements are you know that are that are going on around oil and gas. So I expect us to be able to expand into a into those markets now back at the last peak it was a much larger part of our.
To your point are part of Manitex, because we didn't.
Have a P. M. So I think you know again it'll continue to be in the 15% to 20% range of our of our portfolio, but but I see again growth in other areas also as I mentioned mining utilities, and obviously oil and gas so we feel.
But we feel pretty good about about those markets and the growth potential in 'twenty two.
Okay.
Are you are you guys hearing anything from dealers in terms of energy end market demand and order flow.
Yeah, I mean for sure Canada, right I mean.
If you looked at our revenue.
Revenue growth in Canada.
You know basically driven.
What's going on you know up in the oil sands up in Edmonton Park with Marie I think places are places like that and like I said.
Chile being a binding market, obviously that continues to be to be very strong. So.
That's gonna be a big growth for us in 'twenty two.
Got it Okay and last one for me.
Have the PM knuckle boom composition until a backlog number and.
Maybe you could just speak to where you see that number trending in 2022 are higher given the strong demand backdrop or maybe lower as we began delivering on those orders. Thanks.
Sure Yeah. So P M backlog again as we as we mentioned is about 60% of the total backlog.
At the company today so.
You know it.
<unk> to be very strong I would say you know at the same time, we're trying to ramp up a lot quicker than in Europe , given the lead times. So I think you'll continue to see the P. M backlog be in 60, 70% range. The one thing I'll mention.
Is is that you.
You know the straight mast crane.
Backlog has significantly increased from Q4 last year, which was.
Basically a very poor your 'twenty 'twenty four for straight mast crane market. So.
If you look at the order intake in the straight mast business, you know coming off of kind of a 700 unit.
Market the rolling 12 months, our order rate puts us at about 1400 units for the next 12 12 months or so so I think that's gonna be obviously, a big pick up in our in our backlog as we continue to push forward and into 'twenty two.
Yeah.
That's helpful. Thanks, guys.
Sure.
Yeah.
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Our next question comes from Matt Reiner with Adirondack funds. Please proceed with your question.
Hey, guys.
But the one question I had was on your on your backlog how do you guys deal with you know the double ordering issue and whatnot like can you.
Can you describe to us how much of your backlog is firm orders versus you are I'm I'm not sure. How you you know.
Characterize backlog when you report it but you know what.
Well I have seen this in the past, especially in this tight supply environment that we're in that.
Sometimes people double order stuff just to make sure they get something.
Yeah.
It's a good question that you know in and having been in the crane industry back in the the last peak in 2007 and 2008, there was a lot of that going on so I've had that experience and what I would tell you is is that that's really not.
The case today really because of a couple of things. The first one is in.
North America due to the chassis constraints.
Constrains, you know, it's really hard for dealers or customers to double to double order because you know the chassis aren't there. So I think it's a much cleaner backlog. We also talk a very often to our dealers about what's sold what's not sold.
And there's really not a lot of ordering going on again in North America on.
You know stock orders I mean, the most of the stuff that we have in the backlog is sold and if you look at P. M, which is the other bigger piece of the backlog again.
We feel pretty confident that there's not a lot of you know double counting or double ordering going on in and in the P. M orders because again.
You know one of our dealers are that we talk to very often mostly cranes. He has or sold because he has you know chassis that are ordered that are gonna go under those cranes. So I think we feel pretty good about it and it really hasn't been.
You know a lot of cancellations are in our you know our orders or change your borders you know shifting to.
Different cranes I mean, it's been again, I think its pretty clean and and I feel pretty confident about the backlog that we have.
Okay great.
Well they are competitively are you seeing anything unique or different out there.
No I think look I. Thank all of our competitors are in the same place I think you know everyone's are trying to deal with the price cost dynamics. So you know, we're all out there increasing prices as we see as we see the need to with wood supply chain.
Constraints I think everyone's dealing obviously with a you know a demand issues with.
Getting better forecasting out there and making sure that we can deliver to our customers on time.
So I think our competitors are but you know in the same place we are in and we're all trying to.
To deliver as quickly as we can the backlog that we have and you know again, our backlog you know back to your first question I mean that backlog is basically deliverable in 12 months.
You know our sooner if we can do that but.
I think everyone's in the same place to be honest with you.
So Steven My last question is just on the as far as like the supply constraints that where we're getting mixed messages from from different people in different industries, obviously, but you know.
Some are saying, it's starting to ease some are saying it could last a while.
You seem to be in the camp that it might last a while it did I hear that correctly you are or you know you kind of describe to us what it looks like today versus six or nine months ago or as you know.
Yeah never kind of color you can give us on that.
Sure Matt Yeah, you know look I would say from six to nine months ago are the constraints have gotten better in some areas and they've gotten a lot worse at some other areas right chassis supply. We talk about you know a lot and you know if you listen to some of the.
Actors that are out there I mean, they continue to ramp up.
So I would say you know, it's getting better but it's still a constrained are you know we can obviously go to deliver our cranes a lot quicker. So there's a bit of a lag I think their when you look at steel.
That that has leveled out a bit there's less.
No constraints on steel you know at this point I think it's also because we forecasted a bit better with our.
With our suppliers, but there's you know there's things that pop up every day I mean, we were on a call.
Joe This week on a production call then you know hydraulics.
You know I've been popping up sporadically as as constraints so.
It's a bit of a moving target that but but I think we're dealing with it a lot better than we were nine months ago. So again it. It feels like you know, we're getting a bit better we're getting a bit better and better at it but you know I think we just wanted to be conservative because like I said things.
Tend to pop up sporadically that we need to we need to deal with so you know we'll continue to work through it.
And hopefully things continue to level out throughout the year at least that's our that's our forecast as you know to continue to ramp up.
Sequentially our production.
Over the next you know over the next few quarters to continue to deliver on the backlog.
Yeah, well, alright, well nice job on the backlog and look forward to next call legacy.
Thank you Matt.
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Thank you there appear to be no further questions in the queue I'd like to turn the call back over to Steve Phillippe Hough for any closing comments.
Great. Thanks, Paul for your help thank you everyone for taking the time to listen to our call again.
Here, we feel pretty good about where van in Texas today, We've got a record backlog to deliver on the pricing cost dynamic we feel is getting back into the season, we feel like we're gonna have a very good year in 2022. So thank you all very much I appreciate your time and feel free to follow up with myself or Joe If you have it.
Any additional questions. Thank you everyone.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Okay.
Yeah.
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Yeah.
Yes.