Miller Industries Inc. Q1 2023 Earnings Call

With them to maximize shareholder value.

We are also based on feedback from shareholders and with input from Pearl Meyer, a leader and executive compensation consulting adopted a new executive compensation plan.

Under this plan management compensation is more closely tied to the profitability and shareholder interests and also more closely align with our proxy peer group and relative executive compensation and structure.

We believe these changes to our governance will position Miller industries for long term success.

Now I will turn the call over to Debbie who will review the first quarter financial results in more detail.

Knowing her remarks, I'll provide some closing comments and update on our outlook Debbie.

Hello, and good morning, everyone.

Net sales for the first quarter with 23 with $282 3 million.

Versus $255 million for the first quarter of 2022, and 31% year over year increase driven by increased deliveries of finished goods and continued strong demand across all of our products.

Cost of operations increased 25, 8% to $251 9 million for the first quarter of <unk> compared to $202 million for the first quarter of two weeks.

The increase in our cost of operations due largely to a higher revenue levels cost of operations as a percentage of net sales decreased approximately 370 basis points from the prior year period to 89, 2%.

Gross profit was $34 million or 10, 8% of net sales for the first quarter 2020 period compared to $15 3 million or seven 1% of net sales for the prior year period.

The year over year improvement in gross margin was driven by our price increases.

Improved delivery and stabilization of inflation on the cost of some raw materials.

Gross margin declined 50 basis points sequentially due to a shift in sales mix, which fluctuates quarter to quarter.

Additionally, our fourth quarter has historically been a higher margin quarter than our first quarter.

We continue to expect strong year over year gross margin improvement.

SG&A expenses were $17 9 million.

In the first quarter 2023, compared to $12 4 million in the first quarter 2020 to.

The increase is due largely to approximately $1 1 million of nonrecurring costs associated with legal and professional fees as well as both as well as bonus accruals associated with our new executive compensation plan as a percentage of sales SG&A was six 3% 60 basis points higher than the.

The prior year period.

Moving forward, we would expect quarterly SG&A expenses to be consistent with levels in the first quarter. Excluding these nonrecurring costs.

Interest expense for the first quarter 2023, $1 million up from $418000 for the first quarter of 2018 related to higher debt levels increased interest rates and increases in our distributor floor plan financing costs, which as a reminder, flex up and down with revenue.

Other income for the first quarter was $318000 compared to an expense of $52000 in the first quarter of 2022 attributed largely to currency exchange fluctuation rate of the euro and the British pound.

Our effective tax rate for the quarter was 21, 9% increase.

Of 21, 9% increase compared to increased compared to our prior year data favorable tax adjustment in our foreign tax jurisdictions. During the first quarter last year. This quarter's effective tax rate was in line with our typical rate and are similar to what we would expect moving forward.

Net income for the first quarter 2023, with $92 million or 81 per diluted share compared to net income of $2 $1 million or <unk> 18 per diluted share in the first quarter of 2022.

Turning to the balance sheet cash and cash equivalents as of March 31, 2023 was $29 7 million compared.

Compared to $40 2 million as of December 31, 2022, and $29 $3 million as of March 31 2022.

Accounts receivable as of March 31, 2023, with $233 1 million compared to $177 7 million as of December 31, 2022, and $193 9 million as of March 31 2022.

Inventories were $164 4 million as of March 31, 2023, compared to $153 7 million as of December 31, 2022, and $124 4 million as of March 31 2022.

As will mentioned earlier, we are making a concerted effort to continue to invest in our inventory given our elevated backlog, we're starting to see more meaningful improvement in the delivery of finished goods and the match up a purchase component for us however, given the demand environment, we feel that it's still prudent to invest in inventory.

Accounts payable as of March 31, 2023, with $169 $5 million.

Compared to $125 5 million as of December 31, 2022, and $139 3 million as of March 31 2022.

During the quarter, our outstanding balance on our $100 million revolving credit line remained at $45 million. However, we signed the balance down by $5 million in April with a current balance of $40 million.

As it relates to capital allocation, we remain focused on returning capital to shareholders through our dividend. We are also continuing to invest in projects that improve productivity capacity and our health and safety of our employees as.

As well related to where feasible. We are also looking at potentially in sourcing some aspects of our supply chain. In addition to these investments in the business and returning capital to shareholders. We are also striving to further reduce our debt balance and the associated interest expense, especially as our accounts receivable to convert to cash as we have.

Stated in the past were debt averse company, however, when making capital allocation decisions. We're always focused on the long term return on investment for our shareholders.

Lastly, the board of directors approved our quarterly cash dividend of <unk> 18 per share payable June 12, 2023 to shareholders of record.

At the close of business on June 5th 2023.

Marking the 15th consecutive quarter that the company has paid the dividend.

Now I will turn the call back over to will for some closing remarks.

Thank you Debbie.

2023 is off to a strong start and we remain confident in our strategy.

Given our strong backlog and the demand for our products in the marketplace.

We are well positioned to deliver on this backlog as we continue to accumulate inventory in the form of near finished goods.

Would expect further cash availability as deliveries improved and inventories come down.

We are encouraged by the significant increase in year over year profitability and believe we will be able to sustain improved margins.

Based on our strong start and current market dynamics, we are confident in our ability to generate over $1 billion in annual revenue with significantly improved year over year profitability.

As always the entire management team and I would like to thank all of our employees suppliers customers and shareholders for their continued support of Miller industries. At this time, we'd like to open the line for any questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Youre using a speakerphone please pick up your handset before pressing the keys to.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question comes from USADA from alternate family Office. Please go ahead.

Hi, Good morning. Thank you for taking my questions I had a couple Mike My first one relates to the Q4 to Q1 gross margin.

In your prepared remarks, you mentioned a mix was an issue, but I have I guess one question I have is the number of days. Your plants are closed in Q4 versus Q1, I would've thought just from seasonality.

You would have much better gross margin, especially coupled with the price increases you put in in January So could you comment a little on the factors impacting gross margin, but more importantly, how we should think about it on the balance of the year.

Well I think if you look historically and certainly this year there were a year and favorable adjustments in Q4, and if you look historically at the company over the past 10 to 12 years generally Q1.

Is a lower margin quarter.

In Q4.

Okay, except this year you put in pretty dramatic price increases that should have had a direct impact on gross margin.

Those price increases as we've mentioned in previous.

Conference calls in previous quarters.

Were implemented but did not take effect until March.

Q1, so we did see some benefit of those price increases, but only for March.

So that's different than your previous calls where you said they were going 8% was going into effective January one so thats the change is that correct.

I believe.

Originally we stated that and then I think in a further statement, we said that we delayed them until March.

So originally anticipated a January one.

Price increase and then we later.

Delayed that to March for <unk>.

For customers.

Okay will.

Since you answered that call I may ask one of you.

In public statements have said you hope to enhance shareholder engagement in the upcoming year and obviously the board refresh is a step in that direction direction.

Could you speak to likely Investor conferences, you are planning to attend or how you plan to actually get in front of investors in the next several months.

Yes, we are currently working with our board of directors.

To pick out some conferences to attend.

Have not.

Pinpointed those at this time, but.

Certainly looking forward to the input that they have on what they believe is the best.

Conferences for this company to attend with diverse audience.

And.

We're also we refresh our.

Investor Relations website, so trying to make it easier for investors that are interested in joining the call.

We've added the.

They can.

Visit <unk> dot com forward slash investors or email investor relations at <unk> Dot com to request access to the call as well.

Okay. Another kind of an important question for investors you mentioned.

You might in source more products internally could you comment a little more in detail on whether you do this through investment in engineering, which you mentioned or would it be just as easier more likely you might add some of that through acquisition of specific product areas.

While we continue to work diligently on our engineering side.

We're still evaluating potentials for this at this time.

But I believe that at this time.

Clearly focused on doing everything that we can too.

Increased supply of raw materials or component parts more importantly to all of our facilities.

Okay.

A question for Debbie if I may on your SG&A you commented in your prepared remarks that ex one time items.

Should expect similar levels for the remaining quarters of the year.

Not sure I understand the accounting treatment of the April .

Compensation changes, obviously, there had to be some retroactively.

Into Q1, so can you separate out the onetime items and maybe give us a run rate SG&A, we should expect for the next several quarters.

Yes, the one time expenses were around $1 $1 million that we don't expect to recur.

But the additional increase largely retroactive accrual for those compensation changes so the run rate going forward for the year would be similar to Q1 ex those nonrecurring items of $1 1 million.

Okay, and the new compensation plan, though is quite significant cliffs at various levels and is retroactive. So will you be accruing <unk>.

At the higher levels through all of 2023.

Based on your April 11th press release.

We will be annualized results and thats, what the accrual will be based on each quarter.

Okay.

So for me so I'll, let others. Thank you.

Thank you. Thank you.

This concludes our question and answer session I would now like to turn the conference back over to the management for any closing remarks.

Okay.

I'd like to thank you all again for joining us on the call today, and we look forward to speaking with you on our second quarter Conference call as I. Previously stated, we appreciate and value input from our shareholders and we welcome our investors to join the quarterly earnings call if you'd like information on how to participate and ask questions. On this call. Please visit our updated investor.

<unk> website Miller R&D dot com forward slash investors, our email investors relations at Miller indie Dot com.

Yes.

Ladies and gentlemen, the conference is now over thank you for taking your chorus call and thank you for participating in the conference you May now disconnect your lines Goodbye.

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