Q1 2022 Manitex International Inc Earnings Call
Greetings and welcome to Manitex International Inc. Fourth quarter 2022 result conference call.
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A question and answer session will follow the formal presentation.
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I would now like to turn the conference over to your host Mr. Mike Coffee Chief Executive Officer. Please go ahead, Sir Thank you operator.
Good afternoon, ladies and gentlemen, and thank you for your interest in Manitex International.
We appreciate you taking the time to join our call.
Name is Mike coffee and with me today is Joe <unk>, our CFO , Joe will take you through the financial details of the first quarter, which we announced earlier today.
Following our prepared remarks as is our custom we'll.
We'll be happy to open the line for questions.
Please see our website for their release and other information, including a brief presentation for this call.
A telephone replay will be available for seven days in the 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 just described in our SEC filings.
But you can refer to for further details on the many risk factors associated with our company.
So let's get started.
On today's call, we will focus on our financial results from the first quarter of 2022.
Key business highlights.
Both during the period and activities.
And longer term trends and opportunities for the business.
We would also like to provide some additional insight around our April 11th 2022 announcement.
Regarding the acquisition of Rayford rentals, which we believe directly supports our strategy for improving operating margins.
And overall value for our shareholders.
Acquisition and refinancing.
Before we go any further.
I'd like to take a moment to fully or more fully introduce myself as I was appointed CEO three weeks ago following a consulting engagement.
And which I helped the team identified.
Yes and.
And successfully acquire Rayburn rentals.
We believe this acquisition will facilitate and improve margins, while creating new opportunities to capitalize on the growing construction equipment rental industry.
My role is to increase profitability through improved operational efficiency.
Directing the company's focus on process and leveraging both Manitex has unique array of product innovations as well as its strong brand position.
And market position.
This company is well known for product quality and.
It is well positioned to penetrate desirable end markets with in demand product offerings.
Okay.
I have more than 25 years industry experience with a focus on operations strategic integration and manufacturing.
These experiences have helped me establish a track record for growth and improved operating margins.
I've also had the fortune of building multinational businesses that successfully competed against companies.
10 times their size.
This has been achieved through leveraging the strengths of those organizations.
To serve the largest and most successful construction and mining companies in the world.
Manitex has a great history and can trace its roots back over 75 years.
Company has an impressive product offering and agile culture.
In an admirable reputation.
Manitex offers a robust portfolio of mobile lifting solutions founded on its flagship Manitex boom truck line and.
Now complemented by an impressive array of articulated truck mounted cranes branded as P M and Mac.
To further complement our portfolio our aerial work platforms offer ingenious zero emissions electric solutions.
These products branded Orleans steel and <unk>.
Are gaining a strong position in the market.
As a former customer of Manitex I have long been impressed with its product capabilities.
But even more so impressed by its people.
For this reason, perhaps above all others.
I'm very happy to be here at Manitex and look forward to working with this very motivated team.
The value we bring to our customers is underscored by a healthy gain and sales and backlog.
First quarter sales were up 28% year over year.
And we closed the quarter with a growing backlog valued at $206 million.
Our improvement in backlog was equally driven by new orders from internationally based customers as well as north American based customers.
Product demand was strong in most categories.
Despite this progress made to.
To build our backlog.
We continue to face headwinds in attaining gross margin and our overall EBIT performance.
For the first quarter gross profit margin was 16, 8%.
<unk> EBITDA margin was.
Four 5% of sales.
Improvements to gross margin had been hindered by the dynamics facing all manufacturers regardless of industry.
Including slowed supplier logistics inflationary pressures and overall increases to marginal production costs.
However.
During the past two decades passed to the core.
Orders.
We have.
Taken action to retain and improve margins, which are beginning to show results.
Encouraged with these results.
We will be accelerating our efforts to attain our stated goal of double digit EBIT outperformance.
First we will continue short term efforts to improve production output deficiencies.
We are also working to better leverage our supply chain.
And add qualified suppliers to lessen the impact of logistics delays.
More importantly.
We will be embracing improved processes.
Proven to streamline scheduling reduce cost and improve output.
I look forward to speaking with you about these initiatives and their outcomes in the future.
More importantly, the board and executive management team have committed to identifying and pursuing paths to revenues.
With higher margins.
We've discussed this previously and the addition of Rayburn rentals is a direct reflection of this commitment.
We are pleased with the addition, located in West Texas.
And the organic expansion efforts that are underway there.
While we did not own rayburn during the first quarter, we thought it might provide some context of how the businesses.
Could it performed together.
As previously reported on April 11th Rayburn rentals achieved approximately 20 million in sales.
And 8 million in EBITDA in 2021.
Concurrently Manitex finished 2021 with approximately 200 million in sales.
An $8 million in EBIT.
Albeit a theoretical pro forma.
The combined businesses effectively.
<unk> doubled EBITDA contribution.
In 2021.
For this reason we are confident in our ability of the combined businesses to deliver improvements to our margins.
We have begun to integrate rayburn rentals onto Manitex systems going forward, we will support organic growth initiatives underway.
While increasing our focus on manufacturing processes.
Efficiency.
And operational excellence designed to generate the kind of margins and returns that we've been targeting for quite some time.
And the board and our shareholders require.
I'll have some more comments on this later, but for now I'd like to turn it over to Joe to discuss our financial performance.
Joe.
Thanks, Mike Good morning, everyone and thank you for joining the call today.
Please turn to slide six in the presentation.
The comparison, so I'm going to give we will consider only the manitex business for the quarter that is to say they do not include any labor numbers is that acquisition occurred after the quarter end.
Revenue for the first quarter was $60 4 million, an increase of 28% versus the prior year period.
<unk>, which was also up sequentially from $53 4 million in the fourth quarter was driven mainly by sales of larger tonnage cranes and the manitex business and aerial platforms in the oil and steel business.
Gross margin of 16, 8% represented a 200 basis point improvement sequentially as adjusted.
And it was nearly 200 basis points lower than it was a year ago.
<unk> by higher raw material costs and increased logistics expense.
Adjusted EBITDA increased $2 7 million or four 5% of sales for the quarter versus adjusted EBITDA of $1 9 million or three 9% of sales in the first quarter of last year.
And also represented a sequential improvement of 390 basis points from Q4.
The improvement was largely due to increased profit from the sales of Manitex cranes and aerial platforms.
We expect the EBITDA to continue to improve going forward from the disproportionate contribution from the Rayburn rentals.
As well as from strategic pricing and cost initiatives that are being implemented.
The improvement may be offset by rising material prices that remain in the marketplace.
Our backlog was a record 206 million as of March 31, 20 to.
145% higher than it was at the end of March 2021.
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.
While knuckle crane and aerial platforms have more than doubled since Q1 of 2021.
Our book to Bill ratio was one three to one for the quarter.
Which is indicative of continued strength in our order flow.
Operating expenses were $9 5 million for the quarter compared to $8 5 million in last year's first quarter.
The increase is driven mainly by higher professional fees related to the rayburn acquisition and increased legal fees.
Adjusted operating expenses were $8 6 million compared to $8 1 million in Q1 of last year and were 14, 2% as a percentage of sales in Q1, compared with 17, 2% in 2021.
We continue to be prudent with regard to managing expenses and remain focused on this going forward.
Net income for the quarter was 0.2 million, which is a significant improvement from the loss of <unk> 8 million in last year's first quarter.
The net income for the quarter was driven by higher sales of straight mast cranes in the manitex business and aerial platforms from the oil and steel business.
Were impacted by material cost increases, which continue to rise and put pressure on our operating margins. Despite price increases that we were able to implement.
Yeah.
Now moving to slide eight.
Net debt was $31 5 million as of March 31, 2022.
And our leverage ratio was three five times trailing 12 month adjusted EBITDA and we anticipate this to increase slightly as we refinanced the U S that along with the Rayburn acquisition.
And we anticipate generating increased adjusted EBITDA and cash flows in Q2 and beyond.
The company has available liquidity of approximately $35 million to $40 million, consisting of cash and availability on the U S and PM working capital facilities.
We are confident that the company will have the necessary liquidity through cash and other credit lines open to meet our obligations that are scheduled over the coming 12 months and we remain in compliance with all debt covenants.
With that I will now turn the call back over to Mike.
Okay.
Thanks, Joe.
Please turn to slide nine I, just wanted to take a moment to summarize where things stand before we begin questions and answers.
We are pleased with the share growth and increased sales of the company has enjoyed.
This is reflected in the strength of our global backlog.
And the confidence our customers have placed in manitex.
Efforts to counteract the headwinds of global supply delays and rising cost pressures are working but we must increase our focus on these initiatives improving overall efficiency.
And the marginal cost of production.
Lastly, we are committed to improving our overall performance as reflected.
In the Rayburn acquisition.
We began we have begun integrating the business in April .
And I look forward to sharing our progress with you in the coming quarters.
With that operator could you. Please open up the lines for questions and answers.
Thank you.
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One moment, please pull for questions.
Our first question is from the line of Matt Koranda with Roth Capital. Please go ahead.
Hey, guys, it's Mike Weber on for Matt.
Hey, Mike.
Thank you.
I just found rayburn trying to get a trying to get a sense for what type of growth to expect there. So and we did around $20 million in 2021, what is that growth rate than historically, what are expectations going forward for rayburn and maybe just speak to seasonality of the business since it is a rental.
So I'm just trying to get a sense of growth rate historically, and then just contribution by quarter.
Yeah, Thanks, Mike My coffee and I hope the call quality is good I'm, calling you from Italy at one of our factories today.
Yes, I can hear you.
Oh, great I. Appreciate the question, we are seeing a slightly over 20 points of year over year organic growth with the business.
Through the first few months of this year and that trend is expected to continue.
Plus or minus a few points through the remainder of the year the demand is strong.
And good and what we one of the things that we like about the Rayburn business is positioned.
In a small but growing market.
Theres some seasonality.
To the business, but it lasts for a month or two and.
In December January .
Through the holiday season, but.
Historically, the business performed nicely through the year.
Got it okay.
It makes sense.
And.
And.
I don't know I don't know if I missed at the beginning of the call, but maybe just what was the price volume in Q1.
I'm, sorry, Mike the price volume.
I'm not sure yeah, yeah yeah.
Yes, sorry.
Sorry, maybe it.
Cut out price volume I guess just contribution to to.
Two top line how much was from price so much maybe just speak damage from price how much from volume.
I'm trying to get a sense there.
Yeah Yeah.
I don't have the calculations in front of me of the price volume mix I know the majority of the increase that we have in the revenue is coming off of the sale of the 50 ton and larger tonnage crane units coming out of a man attacks.
Reising had oh, let's see I think pricing was a relatively small impact to it.
You know I think we had talked before that we had implemented a price increase at the beginning at the beginning of the fourth quarter.
We're starting to take effect into Q1.
The total impact of that was.
Maybe 2.5% the.
The rest of the increase is really coming through the.
The volume of the.
Cranes that we sold out of the Manitex business in and some of it from the aerial platforms.
Got it yeah that makes sense, okay, and yeah that was that was kind of my next question.
So there is some additional price action embedded in the backlog that still has yet to flow through the P&L correct.
Yes, Yeah, we have put a price increase I think we had announced a price increase at the end of <unk> at the end of October November time frame, we haven't gone back and repriced.
Historically, a lot of the backlog, but we expected that we would start seeing some of that pricing increases coming through in the first quarter with more of it really rolling through into.
Into Q2, we started to see some of the price increase in Q1.
We expect that we'll see a little bit more in Q2.
Okay got it yeah. So.
So we're still confident in sequential improvement throughout.
Throughout the year is that correct and I guess, maybe just following off of that.
Speak to key drivers for gross margin gross margin expansion throughout the rest of the year.
Yeah Yeah.
I think I think part of what's going to drive the increase in gross margin, we are expecting to see a slight uptick in the gross margin in the second quarter really primarily that's going to be driven by the addition of the rayburn business.
You know the margins that we get out of the Rayburn business.
On a gross profit and on an adjusted EBITDAR higher than what the Manitex business generates so we expect to have some pull through from that from that business.
We'll have two and a half months of Rayburn included in our Q2 results. So we expect to get a little bit a little bit of an uptick there.
In terms of the mix within man attacks, we had a lot of higher tonnage cranes that came through in Q1, I don't know that we're going to have that same volume of hundred higher tonnage cranes in Q2, so that'll have a little bit of a drag but net net overall, we expect the margins to increase in the second quarter.
As we look out the remainder of the year.
In the past we've talked about Q3 is generally a little bit more of a down quarter for us because of the shutdown of the European facility for holiday.
We would expect a little bit of an uptick in Q2, maybe flatten out to a slight decline in Q3, and then it'll come back in the fourth quarter. That's generally what we've seen.
Yeah.
Got it.
Oh, Thanks, guys I'll take the rest offline.
Okay.
Yeah.
Thank you.
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Okay.
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Yes.
Yeah.
As there are no further questions at this time I would now like to turn the call back to Michael coffee for closing remarks.
Thanks, operator, and thank you everyone for joining the call.
Really appreciate you taking the time and Moreover.
Moreover, I appreciate your interest in Manitex and our business.
Joe and I look forward to reporting our progress with these initiatives as the year progresses.
And talking to you soon.
Safety.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
Yeah.