Q3 2022 Manitex International Inc Earnings Call
Weddings, and while can chose concur.
Internationally third quarter 2022.
During this call.
At this time, all participants I know, we can only mode.
A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call at this time zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Michael Colby, Let me circle you may begin.
Thank you operator.
Good afternoon, ladies and gentlemen.
Thank you for your interest in Manitex International.
We appreciate you taking time to join our call.
My name is Mike coffee and with me today is Joe Javan.
CFO .
Joe will take you through the financial details of our third quarter, which we announced earlier today.
Following our prepared remarks as is our custom we will be happy to open the line for questions.
Please see our website for beliefs and other information, including a brief presentation for this call.
A phone replay will be available for seven days and the slides. We cover we will also be available for the next year.
On today's call, we will focus on our third quarter 2022 results covering financial highlights.
Our business performance.
Margin trends and key drivers being leveraged for stakeholders.
I'm going to provide some opening remarks in tandem.
With the deck of slides we've provided.
And then I will turn the call over to Joe <unk> our CFO .
And then we will have a Q&A session.
This marks my third quarterly call as CEO .
Like to take a moment to express my appreciation to the board.
And to our shareholders through the faith placed in me.
I am excited to report positive results and progress made during the past three quarters.
Your management team is delivering on improved margins.
To remind you that everything we discuss the subject to change.
Described in our SEC filings.
Which you can refer to further details on the menu risks associated with our company.
Now, let's move straight to slide three.
Third quarter revenues.
Fighting a historically slow quarter due to two weeks of summer downtime that our European operations with 65 million.
Just slightly below Q2 sales.
And representing a 27% year over year increase.
We had a 320 basis point increase to gross margin.
At 19%.
And we elevated are adjusted EBITDA significantly as compared to historical averages.
Our backlog kept pace with sales growth and stood at 207 million a corner and.
During our first quarterly call. We highlighted the newest addition to the <unk> Rayburn rentals.
Rayburn continues to perform above expectations with robust sales and.
<unk> contributions.
Our plan to Lubbock expansion is on track.
I'm pleased to report new customer sales are occurring.
With a lubbock based customer base.
This is happening in advance of our scheduled opening.
Early 2023.
We achieved third quarter, adjusted EBITDA 5.2 million or 8% of sales.
Our annualized adjusted EBITDA for the past two quarters now exceeds 20 Megan.
And as compared to for your results in 2021 8 million and adjusted EBITDA.
Our balance sheet grew in the quarter.
Increasing our total net debt.
During the third quarter, we completed a longterm growth in manufacturing based inventory.
This growth is directly associated with a tripling and our historic backlog.
We also completed the acquisition of expansion rental fleet, which.
Which will be used for Lubbock.
Lubbock expansion as well as our Amarillo mental businesses.
With these investments we are now well situated to meet a short term growth objectives.
And anticipate a reduction in deaths during the fourth quarter moving toward.
We remain well positioned with 32 million in total cash and credit availability.
Finishing up slide three I want to talk about some operational highlights.
Last quarter.
We discussed higher international shipping costs and other supply chain inefficiencies.
Anything headwinds to the business.
The management team is proactively addressing these challenges.
And we have expanded listed qualified suppliers to consolidate global purchasing where possible.
We also spoke about price increases made to recover costs during the past year.
We are now seeing favorable price to cost trends as we work few backlogs which was booked.
And hire more favorable pricing.
During the second quarter, we announced a reorganization.
Of our Italian operations.
This was the first step to reorganizing RPM crane.
<unk> steel invalid manufacturing companies.
Levered share resources and improve the velocity velocity about production.
Earlier this month we.
We named Richard Mills head of our North American manufacturing companies.
We also announced a new distribution channel for <unk>.
And oil and steel product lines in North America.
Allowing more meaningful market penetration.
And higher levels of customer services.
A global manufacturing businesses are now better line.
And organized to attain improve market share.
Lowered costs.
And increased throughput.
We look forward to sharing additional plans in preparation for fiscal year 2023.
That will better position the company for growth.
Improve profitability.
Let's move to slide four.
We've provided a short summary of our performance.
Each of the company's product groups.
We already touched on the exceptional performance of a rental division.
Articulated or knuckle boom Crane division closed another improved quarter, increasing both sales and order backlog.
Backlog increase to 51% over the prior year.
Our European and U S based backlog as evenly split.
And we are fortunate to groan are straight mass product sales again and a quarter.
Sales were up 38% year over year and production is focused on larger tonnage frames.
The backlog in a matter of text screen line is at about 100 ma'am.
S for aerial work platforms, we are ramping up production and seeing orders come in at a very healthy level with backlog double what it was a year ago.
At this point I'd like to turn it over to Joe to discuss our financial performance for the third quarter.
Joe.
Thank you Mike Please turn to slide five in the presentation.
You can note that this is our second financial report in which we reported consolidated results that include Rayburn rentals performance the acquisition having closed in early April as you may recall.
Revenue for that.
Third quarter was $65 million, an increase of $14.1 million or 27.7% versus the prior year period.
The improvement was driven mainly by revenue from Rayburn rentals and an increase in sales are are straight mass trains in the United States.
Increased sales of our articulate cranes from our European operations were offset by foreign currency charges, a $4.6 million.
Our backlog of $207 million remains strong.
And represents an 82% increase from September of 21.
This reflects continued strong orders within the straight mass cranes articulated cranes and aerial platforms businesses.
Are straight mass craned backlog has increased 130% year over year.
Aerial work platforms have more than doubled year over year, while articulated cranes are up 44% since the prior year period.
Our book to Bill ratio was point 91 for the quarter indicative of continued strength in our orders.
Gross profit of $12.3 million is up $4.3 million from the prior year period of $8 million.
Gross margin of 19% in the third quarter represents an increase of 320 basis points over the prior year.
In a sequential increase from 17.8% in Q2.
The gross margin percentages at the highest level, we've had in over a year and is trending as we had anticipated.
We anticipate gross margins will continue to tick higher as we look ahead.
Adjusted EBITDA increased to $5.2 million or 8% of sales for the third quarter of twenty-two versus adjusted EBITDA of $1.6 million or 3.1% of sales in the third quarter last year.
Improvement was largely due to Raven rentals contribution to the results in higher profitability Manitex brains.
We anticipate improved margins for manufacturing as well as the positive contributions of Rayburn rentals.
Now please turn to slide six for a comparison of our operating results to the prior quarter and prior year.
I've already addressed sales and gross margin, but I wanted to speak to operating expenses and other expenses.
Operating expenses as reported were 11.1 million for the quarter.
<unk> of approximately $1.3 million of stock compensation and severance costs.
Adjusting for these and other one time items or.
non-GAAP adjusted operating expenses were $9.8 million or 15.1% of sales.
Compared to $7.6 million or 14.8% in the last year similar period.
Raven rentals contributed approximately 1.3 million to operating expenses for the quarter.
Other expenses were for $1 million comprised of interest expense, an illegal settlement charge of $2.9 million related to the sale of a business in 2015.
This charge will be paid in monthly installments over 10 quarters.
Net loss for the quarter was $3.1 million or 15 cents per share compared with a net loss of $1.1 million or six cents per share in last year's third quarter.
Adjusted net income was $1 million or five per share compared to a loss of 219000 or one cents per share last year.
There were several one time items in the results, including the legal settlement that I mentioned, which significantly impacted our earnings.
Now moving to slide service.
Net debt at the end of the quarter was $85.6 million up from the prior period due to rental fleet acquisitions related to the rayburn expansion and funding of material orders to meet our current demand.
$32 million of credit availability, we are well positioned to meet current funding requirements.
We anticipate utilizing our cash flow in the fourth quarter to begin to reduce debt and we're striving to continue to lower our debt level throughout 2023.
With that I will now turn the call back to Mike Coffee Mike.
Thank you Joe.
As it pertains to our financial goals.
Eight indicates how close we are to reaching our milestones with.
$300 million in sales.
And 10% adjusted EBITDA margins.
This slide outlines how our longterm financial goals have now become shorter term targets.
And this is just a status check.
But we are closing in on $300 million in sales and.
And presently operating in an annualized adjusted EBITDA run rate of $21 million.
As I said in the past I believe that we have the products.
The brand strength.
Resources to sustain this momentum transforming manitex into a much larger company.
Well, we aren't giving guidance, we are setting our sights on much larger numbers.
The short term target to the right and that the slide is now well within reach.
While we are improving our short term performance you can expect us to work on steady.
Liable planned and coordinated improvements to our operations.
And the quarter, we returned gross margins to 19%.
Which was a pre COVID-19 normal for our manufacturing businesses.
The margin improvement is reflective of gains made within our manufacturing processes.
But also due to the positive influence a break Burt Reynolds.
As we continue to realize cost and margin improvement to our manufacturing businesses, we will see margins excel beyond 20% future quarters.
Please turn to slide nine.
I'd like to summarize spoke to progress made by our management team.
This year and why we are optimistic about the future of meditates internationally.
As a company we are fortunate to have our current dealer network or.
Customers and dealers are great partners for the business.
This is best reflected in our backlog, which was to remain strong and kept pace with our increase sales.
The Rayburn rentals investment has proven a great success.
Joseph grown to record levels and rental sales are approximately 40 per cent higher year over year.
This will accelerate again in 2023 and 2024 as we expand operations in North Texas.
Man at Texas, a company with great products and a very dedicated people.
The story of our transformation to a high performance company is a story about operational excellence and process improvements.
This is reflected in the progress made to a manufacturing operations improve.
Improvements, which are now just beginning to produce results.
We completed reorganization with relative ease and our employees are motivated and engaged to making manitex, a thriving and profitable enterprise.
The results can be seen in this year's improved gross margins, which are cracking to exceed 20 per cent in the near term.
And will be further bolstered by more favorable pricing.
Reflected in our upcoming backlog.
Our outlook in the fourth quarter is very positive.
And we are looking forward to steady improvements.
Production throughput cost structure and operational efficiencies.
With that operator would you. Please open the lines for questions from our investors.
Thank you.
I'll be coming back to that question and answer session.
I would like to ask a question please.
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Oh, that's nice question <unk> capital. Please go ahead.
Hey, guys that's my <unk>.
Congrats on the quarter, maybe if we could just start with the breakdown of the revenue segments, specifically boom truck AWP part sales and other equipment.
Sure. Thanks, very much my coffee here, Joe can you touch the quarter revenue segments.
Perfect line Yeah.
Yeah, you're looking you're.
Looking like to understand the split out of the revenue by.
Each of the segments or are you looking for yeah, Yeah, correct just the Max.
Next revenue contribution per segment.
Oh, Okay per segment the majority of the revenue for the segments came from the from the manufacturing business the lift business.
With the.
Was the bulk of the was the bulk of their revenue I think the revenue from the from the rental segment was about.
Seven and a half million. So it's seven 6 million came from labor and the rest of it 57 seven came from the lifting segment.
So okay.
Third quarter I'm, just looking at third quarter results European operators is that what you were looking for Mike or you're trying to understand.
Platforms part correct in that kind of Ah.
Okay.
In terms of in terms of the segments, that's where it came from US was mostly lifting the rest of his rental on the boom trucks.
Wait about 33 32 million came from the boom boom trucks and knuckle cranes.
Aerial platforms was around 7 million.
So as I said the rental was was seven seven and a half was total rental including merchandise sales and then we had some other equipment was around $10 million.
Okay got it that's helpful. Thank you.
Okay.
So we will have a chart and the 10-Q, where you can you can see more of the details of the components of the revenue and that should be filed a little bit later this afternoon right. Okay.
Okay that sounds good I'll I'll look out for that so great to see the plan repurposing of the Italian business at the start of next year I think it makes a lotta sense maybe just.
Maybe just give us an update timeline for when we can expect to see <unk> products available in the U S and when we're expecting to see fulfilled orders.
Yeah, well, we're actually seen those today and we're developing plans for next year.
But there'll be a heavy increase with fall oil and steel NPM products next year in the U S market.
The pull through demand is is good we're actually attending to trade shows.
In the next few months.
They are actually heavily populated so we're we're looking favorably.
Toward growth in North America from the European product segment.
The vault product for example has been very.
Very very well received.
The heavy growth over the next few years is gonna come through PM.
Knuckle boom cranes.
Right that makes sense.
Some of that growth from ball can we would we expect to see that in Q1 kinda in unison with the roll out or is that gonna take a quarter or maybe two quarters.
There they've got I don't have the backlog specific for valour, but.
We you know we've we've been selling that product line all year in the U S and.
Pointing new dealers and it's been well received so.
Generally Q2, and three are bigger delivery.
Months, but there'll be sales and every quarter.
Okay got it.
Maybe maybe just if you could speak a little bit further to kind of.
State of backlog right now and specifically have we seen any order cancellations.
I appreciate that that's that's a question that we're asking ourselves all the time [laughter] great.
Great Great News to report actually the backlog is held up.
With our increase sales and so we've had almost four quarters of robust order increases and then we're increasing our production rate is.
As quickly as we can to meet those demands.
But the backlog is holding firm we closed at 207 million.
And actually as the fourth quarter started took another wave of orders and so a backlog is holding steady were not seen.
Any cancellations.
Whatsoever.
We've got a great customer base.
Okay.
Great.
Okay last one from you guys if I can.
In terms of the Martin improvement the sequential improvement.
John can you just help us maybe parse out how much of that improvement sequentially is from the higher margin rayburn business versus operational efficiencies that we called al versus just hire back on filtering through <unk> Robert had around what is really moving that margin higher yeah. So here's the way I.
To think about that.
So there's an Alaska city with manufacturing.
Margin gangs.
Follow the long production cycle, which is six to nine months when things are working well if the supply chain of slug, you down it's a little bit longer.
So I would look at the margin gains is roughly two thirds, one third coming from rayburn's influence and one third coming from mainly factoring.
But both are both are improving well and we're expecting that our manufacturing operations.
Will excel beyond that as manufacturing is addressing backlog that is priced more favorably.
And as the initiatives that we're putting in place to improve throughput.
And to improve margin.
Come into their own so manufacturing.
We're moving at a pretty good clip, but at a slower process than rentals.
We're really happy to see the margins improving it both segments and the way I broadly characterize it is about two thirds of the margins are coming from Rayburn.
Which is an instant gain an improvement.
They're coming from manufacturing.
But we're expecting manufacturing due to its size to have a larger impact it's quarters progress.
Got it Super helpful. Thanks, as I hope I can make it.
Okay. Thank you.
Yeah, No I got a question.
This concludes today's conference call you may disconnect Airlines at this time. Thank you for your participation and have a great day.
Okay.
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