Q2 2023 Myers Industries Inc Earnings Call

Please go ahead.

Thank you Jordan good morning, and thank you for joining us I'm Grant fits Chief Financial Officer at Myers Industries.

Joining me today is Mike Mcgaugh, our President and Chief Executive Officer earlier. This morning, we issued a press release outlining the financial results for the second quarter of 2023, we have also posted a presentation to accompany today's prepared remarks.

We have not yet received a copy of either of the release or the Powerpoint you can access them on our website at Www Dot Myers industries Dot com under the Investor Relations Tab. This call is also being webcast on our website and will be archived along with the transcript transcript of the call. Shortly after this event.

Please turn to slide two of the Powerpoint for our Safe Harbor disclosures I would like to remind you that we make some forward looking statements. During this call. These comments are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095, such statements are based on management's current expectations and involve risks uncertainties and.

Such as adjusted gross profit adjusted operating income adjusted EBITDA and adjusted EPS may be discussed on this call and are reconciled to the nearest GAAP metric and the exhibits to today's press release and to our presentation.

Information concerning these risks uncertainties and other factors is set forth in the company's periodic SEC filings and may be found in the company's 10-K, and 10-Q filings. Please turn to slide three of our presentation I am now pleased to turn the call over to Mike Mcgaugh.

Thank you grant good morning, everyone and welcome to our second quarter 2023 earnings call.

Before we discuss our quarterly performance I want to take a moment to say how delighted we are to welcome our new CFO , great fits to our organization greatest considerable experience across the industrial automotive and technology sectors.

His financial acumen experience and leadership will deliver meaningful contribution to Myers industries and help us execute our three horizons strategy welcome Greg we're glad you're here.

As I prepared my remarks for this quarter many of my comments Directionally echoes the past few quarters.

We continue to face demand headwinds in certain end markets, primarily in recreational vehicles and marine tanks and in high dollar consumer discretionary items, such as gas cans and decorative planners and home goods.

Just as in past quarters, we continue to offset the impact of these demand headwinds through our operational excellence and commercial excellence initiatives, what we call our self help initiatives to drive performance improvements at Myers.

We still have a long multi year runway of profit improvement opportunities due to our self help initiatives.

These improvements are largely within our control and we will continue to execute them through this year and beyond.

One concrete example on the operational excellence side are the gains we've made in productivity, allowing us to streamline our asset footprint and take cost out of the company.

Due to running our plants at a more optimal fashion, we continued on our new capacity, what we call the hidden factory this enhanced.

Productivity and newfound capacity has allowed us to optimize our footprint and take cost out of the company.

An example of this is our recent move to consolidate two rotational molding facilities in northern Indiana into a single facility.

This move improves our efficiency and saves cost.

Across the board, we're using our operational excellence focus to drive a more variable cost structure, reducing costs when demand is soft, but ensuring we are well positioned to meet the demand when markets recover.

While we are serious about cutting costs. We're also serious about investing and building critical capabilities that we need to improve our profit margins in horizon, one and execute our growth plans in horizon, two and three.

And one example, we are investing to standardized.

Institutionalize, our best practices by building out the <unk> business system, which will allow the company to scale faster with fewer pinch points.

In another example, we invested over $1 billion this past quarter towards other building out our best in class M&A frameworks tools and capabilities to help us acquire and integrate larger and more complicated companies.

Both of these new capabilities, the business system, and M&A will serve us well as we pursue meaningful acquisition opportunities.

We are focused and disciplined in our approach to acquisitions, we have a world class team a strong balance sheet and are ready to act decisively on the right targets as we've said before we won't get deal fever, we won't overpay, we are and we will continue to be disciplined in our M&A approach.

Now, let's get to our results.

Second quarter 2023 was challenging given the softness of some mid market, but this quarter also demonstrated the resilience in our earnings and cash generation capabilities driven in part by our focus on our self help actions and our disciplined execution in general and our consistent pursuit of our three horizons strategy.

Fourth quarter, we had 8% growth in our distribution segment, largely driven by the Mohawk acquisition.

In our material handling segment, we experienced the softening demand across multiple end markets, partially countered by the strategic actions, we took allowing us to expand our adjusted gross margin for the quarter by 90 basis points to 32, 9%.

While many of the end markets in our material handling segment experienced lower demand due to the current macro environment. We continue to see many meaningful bright spots for the future.

One example is our focus on the agriculture market demand for our seed box is continues to be strong and profitable.

The second opportunity is our effort to develop what we believe will be a large and lasting opportunity for our scepter cases, and military light weighting projects around the world.

A third example is our investment and focus to grow our E. Commerce channel. We are investing in building this capability and anticipate the gross sales through this channel will approach $40 million in 2023, roughly doubling our ecommerce sales revenue from just three years ago.

In our distribution segment.

We made a leadership change naming Jim Gurnee, our vice President of sales marketing and commercial excellence to also lead the segment.

Over the past three years, Jim has done an excellent job advancing Myers commercial capabilities.

Jim's expertise leadership and ability to deliver on demonstrated results are precisely what's needed to take our distribution segment's performance to a higher level.

Our recent EBITDA margins in distribution have been below my expectations and I am confident that under Jim's leadership, we will improve and expand our EBITDA margins in the near term.

Just as with material handling we also have bright spots for the future of the distribution segment.

We have a bullish long term view due to expected growth for the tire industry in part driven by the growth of electric vehicles.

I'm also bullish on the future of the distributions segment due to the new leadership and the resulting impact on our reinvigorated aligned and strong management team.

Now I'll pass the call to grant to walk through our financial results for the quarter and expectations for full year. Thank.

Thank you Mike I wanted to take a moment to say how excited I am to be part of Myers industries.

Mike and his team have done a tremendous job positioning this business to reach new heights through the Myers business system, we have a strong.

<unk> platform here at Myers that is poised for growth across new end markets products and geographies over the coming years and I am honored to be part of that trajectory.

Please turn to slide four for a summary of our second quarter results.

Our second quarter net sales were down $24 7 million or 10, 6% compared to the second quarter of 2022, primarily from lower sales in the material handling segment, largely due to reduced demand for RV and marine products as well as softening in the consumer end markets and the timing of seed box sales in Q2, which.

Packaged food and beverage end market. However, this decline was partially offset by incremental sales of $9 3 million from the Mohawk. Moreover acquisition in our distribution segment on an organic basis contributions from higher pricing in the distribution segment were more than offset by lower volumes in both distribution and material handling.

Segments.

Currently adjusted profit decreased $6 1 million or eight 2% as the contributions from lower raw material costs, and then Mohock rubber acquisition were not enough to offset lower sales volumes.

<unk> gross profit gross margin for the quarter increased 90 basis points to 32, 9% compared with 32% in the second quarter of 2022.

Second quarter, adjusted operating income decreased $4 6 million or 19, 4% compared to the prior year as a result of lower gross profit.

After moving adjusting items SG&A expenses were down $1 $7 million year over year as a percentage of sale and as a percentage of sales increased to 23, 8% compared with 22% in the same period last year.

Included in the Q2 SG&A expense is $1 3 million of M&A consulting to strengthen Myers acquisition capabilities as we move into the larger potential acquisitions in horizon two adjusted.

Adjusted EBITDA was $24 7 million in the second quarter, a decrease of $4 2 million or 14, 4% compared to the prior period adjusted EBITDA margin decreased 50 basis points to 11, 9% for the second quarter compared with 12, 4% in the same period last year.

Lastly, adjusted EBITDA EPS was <unk> 35, compared to <unk> 45 in the same period last year EBITDA adjustments include environmental charge for remediation investigation acquisition integration costs and other restructuring cost actions.

Next please turn to slide five for an overview of our segment performance for the second quarter for.

The material handling segment net sales decreased $29 8 million or 17, 2% compared to the prior year. This decrease was the result of lower sales on the consumer vehicle and industrial end markets and timing of the food and beverage end market sales declines.

Declines in the RV and marine markets significantly impacted the material handling segment revenue as well as overall softening of consumer spending in our markets and timing of agricultural orders.

Material handling is adjusted EBITDA decreased $2 7 million or eight 2% to $29 9 million lower sales volume and unfavorable pricing more than offset lower raw material cost and favorable sales mix net.

Net sales for the distribution segment increased $5 1 million or eight 5% year over year, excluding the incremental $9 3 million of net sales from the Mohawk rubber acquisition organic net sales decreased six 9%.

Distributions adjusted EBITDA decreased.

Point 2 million or three 7% to $4 7 million, primarily due to an increase in product costs and higher SG&A expenses year over year.

SG&A expenses were higher year over year, primarily as a result of the Mohawk rubber acquisition. The distribution segment continues to integrate mohock rubber and we are implementing new cost initiatives and further strategic pricing actions to counter cost inflation and drive margin expansion.

Turning to slide six free cash flow for the second quarter of 2023 was $16 7 million compared to $21 1 million for the second quarter of 2022.

The decrease in cash flow versus the prior year was primarily the result of lower earnings.

Working capital as a percentage of net sales decreased 70 basis points compared to the same period last year due to a continued focus by the team and working capital improvements.

The sequential basis working capital as a percent of net sales were flat capital expenditures for the second quarter of 2023 were $6 1 million and cash on hand at quarter end totaled $30 7 million our balance sheet remains strong and continues to support our growth runway with a debt to adjusted EBITDA of <unk> nine times.

Now please turn to slide seven for an update on our outlook for the fiscal year 2023.

Given the macro challenges that we've seen across our various end markets, we elected to lower our topline guidance to a decline in the mid single digit range. However, with a proven ability to mitigate the impact of unfavorable market conditions, our profitability guidance for the year of net income per diluted share is in the range of $1 41.

$1 73, and we are reiterating our adjusted earnings per diluted share in the range of $1 55 to $1 85, if current market conditions continue it's more likely that we will be closer to the lower end of the adjusted EPS range.

We continue to retain a strong balance sheet, which is supported by consistent free cash generation for the full year, we expect capital expenditures to be in the range of $25 million to $30 million.

<unk> tax rate of approximately 25%.

Before I turn the call over to Mike for an update on our strategy I'd like to extend my gratitude to the entire Myers team for their warm welcome and continued hard work during the quarter I am very excited about where Myers is headed and I am pleased to be part of the effort to transform this company into a world class organization Mike.

Thank you grant please turn to slide eight.

We have consistency in our direction and in our purpose I outlined our long term vision three years ago.

Multiyear roadmap is simple clear and consistent and we continue to execute against it.

Our confidence in our direction and our company and the shareholder value that this strategy delivers.

Through horizon, one we have built a solid foundation of talent.

Operational capability and commercial excellence and in Horizon, two we will build on that foundation as we transform transform Myers.

Please turn to slide nine which outlines the four strategic pillars that provide the framework of our strategy. We use these four pillars to guard the tactics and work plan to drive the transformation of our company.

I'll spend a few minutes walking through our progress of each pillar on slide 10.

First organic growth remains a crucial element <unk> transformation into a high performing high growth company.

We continue to make investments to further strengthen our commercial capabilities preparing myers for an accelerated return to stronger organic growth.

End market demand recovers.

Specific investments include continued third party assessments and training for our sales team.

As well as training and education on target account planning market planning and value based pricing for our commercial and marketing teams.

We can sustain our investment in these critical capabilities due to the fact that our end markets and products are relatively diversified providing us consistent cash flow and an ability to invest in ourselves.

As I mentioned earlier, we're capitalizing on favorable trends in both our material handling and distribution segments that we believe will stimulate future organic growth.

As an example in our material handling segment, we are pursuing innovative growth projects like our light weighting efforts for the military.

We also expect positive impact in our distribution segment as a result of electric vehicle mandates because heavier evs, we're tires down at an accelerated pace compared to traditional internal combustion vehicles.

We expect both of these trends to be meaningful medium to longer term tailwind for Myers.

Before I leave organic growth I do want to highlight that we are celebrating our recent significant target account win in the distribution segment.

<unk>, a new nationwide customer that will bring significant revenue to the segment.

Now moving on to the strategic M&A pillar and.

In second quarter, we worked with outside advisers to strengthen myers processes and capabilities and targeted counters target assessment due diligence and integration planning, we spent significant time and effort in Oregon building and organizing our capabilities. So that as we identify and pursue larger acquisition opportunities we are well positioned to.

Capture those opportunities and deliver meaningful cost and growth synergies.

Our M&A playbook has been sufficient for previous horizon, one bolt on deals and we are now well prepared to tackle larger horizon, two and three acquisitions.

One word on M&A, we've seen strong deal flow over the past several months and many opportunities had been well aligned with our strategic screens we've.

<unk> been disciplined in our assessment of potential synergies and valuation.

In general we see that financial performance of many businesses has been impacted by the recent economic environment.

However, sellers projections of future performance are still quite optimistic creating a disconnect in valuation expectations.

We feel we're in a good position as it relates to M&A, we have a strong balance sheet, a clear and consistent strategy in screening criteria and we are prepared to act decisively. Once we are confident that a transaction will create significant value for Myers shareholders.

Now moving on to the operational excellence pillar, we continue to focus on deploying better processes, and purchasing and supply chain and in product and asset management.

In past calls Ive spoken to the improvements we are realizing through a more centralized structured approach to purchasing.

The supply chain and asset management side I've spoken about the hidden factory of new and uncovered capacity that we are realizing by better operating and scheduling our plants.

All of these are lowering our cost.

Recent streamlining of our asset footprint that I highlighted earlier on this call as an example of obtaining lower cost through operational excellence.

In spite of inconsistent end market demand, we're confident that we continue to have these significant multi year runway to deliver earnings per share gains through productivity and operational excellence.

What's exciting is that these gains are largely within our control and we'll continue to provide EBITDA improvements year over year.

As I mentioned in the past two quarterly earnings calls we continue to use the years 2023, and 2024 to institutionalize. The progress we've made at Myers, we're doing this by creating a business system.

The <unk> business system is driving standard work and standard processes to ensure that our gains over the past three years are lasting and a part of Myers DNA.

In the second quarter, we invested time and financial resources to further build the MBS.

We believe the Myers business system is critical to transforming our company and ensuring that the improvements we've made in horizon, one are sustainable and scalable in horizon, two and three.

Turning to the fourth pillar of our high performing culture in the second quarter, we strengthened our executive team with the hiring of grant as well as the decision to have Jim gardening leave the distribution segment.

With these two moves I am convinced we now have the strongest and most streamlined leadership team in my tenure at Myers.

With this team we are very well prepared to create significant shareholder value as we drive myers into the future.

Our strategy of targeting a recruiting large cap talent from strong industrial firms continues to be in place. This model has been a key ingredient of Myers transformation and progress so far and we plan to stick with it.

While our ability to recruit talent to our company as a key strength. It's also important to note that we are building our bench strength by developing our next generation of leaders internally through new assignments stretch assignments in new roles.

This type and level of talent development, we are doing at Myers is more akin to the programs found in much larger companies.

Yes, there's a cost to this investment and we're making it because the development of our bench is critical in order for us to deliver our growth aspirations over the next five years to six years.

To conclude I am excited for Myers, and our future I'm proud of the results of our self help initiatives and the progress on our long term strategy.

Confident in the structure and capabilities, we are building both in M&A and in the Myers business system.

I remain committed to the disciplined approach in which we are investigating vetting and evaluating prospective acquisitions.

I continue to believe that for our team being a part of Myers is the opportunity of a lifetime and I continue to believe this opportunity will translate into attractive shareholder returns.

Thank you for your continued interest and support at Myers industries.

It's been a little bit of time in this space, what we see overall is that with the entire industry right now that that's expected to grow you know anywhere from three to four to five per cent and on which outlook you look at embedded within that is the electric goes for vehicle or vehicle <unk>.

Vehicle growth excuse me.

Part of that as as as Mike mentioned is electric vehicles. They tend to we're out the tire as much faster the.

Essentially we're out about 20 per cent faster than what conventional uhm.

<unk> combustion engine vehicles do it's really driven by two things. One is just the heavier weight of the vehicles causes more aware and additionally, there tends to be more towards the electric vehicles have particularly <unk>, which can also drive down.

Kris where the vehicles, so we see that as a real talent is.

Electric vehicles continue to have to be expanded in the overall vehicle market and so with that you know I would say that this bodes very well for a distribution business because it does yes vehicles were out there certainly will be more and more focus on what they can do to repair replace and replenish tires in the industry.

<unk> and as far as far as additional opportunities, we really see it as an overall trend for the entire market will basically be able to benefit from and so from that standpoint, we feel.

Feel very good about our distribution segment, and just where it's going from a market and our ability to capture that with some of the additional you know discipline. The gym goodness brought in as the new leader for the for operations.

Thank you.

<unk> T M markets, obviously need a second quarter. There was there was some soft network some key areas and I'm wondering.

What you're asking so far in <unk> in a month in the third quarter right have you seen operating conditions are improving any particularly and market and do you see a trend where some of the sauce market in the in the second quarter of going to to pick ups, perhaps sometime during the middle of the third quarter or into the fourth quarter.

Yes. This is Mike.

So it's a bit of a mixed bag a bit of a mixed bag.

We do see some weakness on the wholesale side of Rv's and that was a nice market for for our company.

We do see continued strong sales in the back half of the year for the sea boxes, which is in the food and beverage and market.

Industrial is still going to be soft there's gonna be some softness there.

And on the on the consumer side right now, we're tracking a bit behind on the sale of some of our consumer products, most notably Joe containers gas cans.

It's it's our current expectation that we'll have an average a year on on Hurricanes.

There may be some upside there given some recent forecasts that we may end up with an above average hurricane season from an activity standpoint.

But net net.

In the next six months.

You're going to continue to see a softer demand for the storage handling products that we make in material handling.

On average.

I would just add as well to Jonathan that you know, we do see as Mike mentioned, we do have a a larger industrial customer for our distribution business that we've been able to secure that contract. So that will provide some upside revenue for the for the distribution business.

That we've also reflected that in our our range and then overall the momentum that we continue to grow with the E. Commerce business is something that is very positive for us and certainly the the military that we talked about in the past provide some good opportunities and how quickly that will wrap is still a TVD, but we certainly.

<unk> see some upside opportunity there as well yeah that's true.

Got it okay.

And my last one is with the revenue guidance now going a little bit lower than than than before.

But you still have the ability to to maintain some keep profitability metrics right. So I'm wondering should the need arise what other key key cost levels that you will do does the company have that that they can coach should they need to in order to maintain this type of profitability.

Got it thank you.

Yeah, there's some opportunity to continue to drive procurement savings as we've seen a standardized that department and we've had some gains there. So on the raw materials side, we expect to continue to have some runway. We also on SG&A continued rationalization of SG&A in cost out to be sure we have.

The right size and structure given the demand that we face in the in the short to medium term so some SG&A savings.

And then ultimately there's some additional cost savings as we evaluate the opportunity to consolidate manufacturing facilities.

As I mentioned before the advantages and some of our businesses, we have actually quite a extensive grid and production locations, but we brought in a lot of training capability on sales and operations planning, we're scheduling an optimizing running our plants better we actually have more capacity I talk about the hidden factory, what that's allowing us to do is to keep our eye.

Put in capacity flat, but actually combine uhm select select assets and footprint to take cost out there. So there's probably going to be some additional cost on asset consolidation without meaningfully impacting our our capacity were really sensitive to that I mean, we believe all these markets will turn.

We're seeing some green shoots in selected markets and so we want to be sure that we don't throttle down our capacity too much in in overreact, because we believe we've got great products. We are great brands, we have leading positions in all of our niche in markets. So we wanted to be sure that we're ready to go when these when these things turned back.

Grant any any additional points.

No I think you've covered well one thing I would just add is you know from my side coming to new to Myers, certainly one of the things that really attracted me as a smyers business system and I think embedded in that is this this whole culture of continuous improvement and driving out waste and the organization.

And that's resonates very well with just kind of the the background that I have a really strong execution on uhm initiatives and so I would say that although we have certain ones were working on I would see us continue to work those for new initiatives and opportunities.

Yeah, I'm going basis is just part of our standard DNA for the company.

Our next question comes from Steve <unk>, Steve. Please go ahead.

Good morning, My <unk>. This is actually a Christian dialogue proceed Burger.

For taking my questions.

Alright first question can you just talk about the contribution from.

Good morning could you just talk about the contribution from volume in price in the quarter I know you've tried a couple of price increases this year and last year with the Ross coming down a bit despite labor and other costs staying elevated do seem more price increases in the near future.

So on the distribution side, our our product cost.

Rose now we capture some of that with price in select markets and and select products, we probably will need to go after him and he hit it again on the distribution side.

And then in select.

Some of our niche products, where we have the need and have the ability to.

To price our products for the value they create quite a price our products for the high surface levels. We provide as we have that opportunity for sure. That's an area of focus that I brought to the company.

It's a more aggressive approach to raising price and so yes, but the increases are on the table we're trying to.

Thread the needle what else we manage volume.

Great. Thank you and then last quarter, you talked about new business wins can you just elaborate on those business one's a little bit what part of the business, where those in and if that predominantly new customers or a larger wallet share of your existing customer.

Yeah. So what we'll do is we'll contact them. This here I'll I'll address it from my perspective, but I also would like branches to speak to it again, just given the you know he's a fresh set of eyes here on the distribution side. That's one that's really compelling in our space, where the largest by up by a factor of three or four and our ability to serve.

Given our warehouse footprint post Mohawk is.

It's very good at it exceeds our competitors.

So what we're finding is is the customer base for tire service centers consolidates a lot.

Independents are being acquired by some of the nationwide change those nationwide change want to deal with the supplier who can match their needs from a supply standpoint Myers is in a very good position with that so we actually just received confirmation.

In the <unk> first quarter moving into second quarter that we won.

One of the largest.

And even some of the equipment that we provide in the way that we can do it in the surface levels. We can we have uhm, it's valuable to these to our service centers and so we want a piece of business. There were excited about it and I think that that's part of a trend.

We continue with incremental line extensions.

For our our various containers and boxes.

The line extensions are more geared towards customer need and customer request I've said before it I wanted to do new new and just for the purpose of an demming, but if a customer comes to us with a product that they need we are actually pretty good at being able to invent those and deliver against it that's off you'll see that in a volume because that's.

Offsetting so much of the weakness an R V and marine and then even in consumer we continue to see where the <unk> the customer.

Because their their wallet is being used up to buy necessities, they have less ability to buy a discretionary even a gas can that's up in price.

Or planters mailbox, she's home goods that we sell.

Continuing to drive growth, it's masked right now because of the downturn in some of these other markets.

What we are excited about as you know we we've been active.

Conflict worldwide militaries are re arming and you know we we have a very good product redfin now approved and qualified for the U S.

And there's a significant need their on the artillery shell casing. So that's been discussed publicly we we believe that that will be a tailwind for us for for many years and we believe it will be a sizeable tailwind for us. So it's actually exciting it actually helps offset some of the.

Longterm weakness that you may have in and gas kids as electrification takes root we believe that military more than cover that and we're excited about it.

Yeah, nothing really quantitative this to add to what Mike said that there's one thing that really struck me as.

Learning the businesses, when we have customers and the distributions segment.

Basically said, we're coming back to Myers because of the fact that we try to do some of this work ourselves and it you just we just can't do it to the same level of quality and service that you provide and so I think that that's really bodes well for the opportunities that we have in the distribution segments and then just add as you know also the building momentum on the e-commerce, although it may not.

<unk> you want specific you know customer we continue to have good traction has spent a fair amount of time with that that team just really stress testing and it really been impressed with their strategy and approach on that and I think that really should provide you know future opportunities for us as well.

Great. Thanks for that answer very exciting business ones out there switching gears, a little bit if I take your first half sales and run rate them for the year I get about 850 million.

It seems to match your what your updated guidance indicated.

Connect that to your horizon morning upcoming horizon to plant how should we think about that 1 billion dollar Verizon one sales target that you guys played out I know that excludes M&A, but do you think that target is achievable in 24 or is that a 20 fiber somewhere down the line.

Yeah, I think we're basically let's say you're behind that's a fair question.

I laid out those targets in the summer of 2020 in the midst of Covid and they were directional but I felt like they were correct I still feel that they are correct. We've had some downturns the RV downturn and some of the marine tanks that downturn has has been meaningful in terms of revenue.

And then also some of the just the softness and consumer.

Now again, we are backfilling that with military backfilling with ecommerce backfilling with distribution, but you know I think directionally to look at it and say hey, it's it's it's a year behind schedule due to.

I think that's probably a reasonable way to to to think about it on the EBITDA percent in the EBITDA quality Ah those numbers are still obtainable again, when we lose some revenue we lose some volume at our scale. It it's a little harder to bridge that gap, but as far as the Ah directional number on where we bought what we believe the company can do.

On a quality standpoint it it it's still there again, maybe that's maybe that's delayed a year.

But but I'm still confident that this this company in these businesses.

Should be able to obtain that quality so grant.

Just looking at it right now and I've I've been in companies before that upset revenue targets and that became the al ultimatum to try and hit those revenue numbers I think what's different admirers as the team is very disciplined and that they're not going to deteriorate that the earnings capability or the cash generation capability within the business and so I feel.

You know the the building blocks are certainly there we strengthen our M&A process quite quite a bit with the second quarter work that we had with our consulting I'm really getting ready for horizon too and having spent a fair amount of time in the M&A space I really think that the team is you know is it good possession for this plan is Mike.

Maybe it is off of here, but I don't think those are you know I would not view that as necessarily being a bad situation. I think it's really pointed the discipline that Myers Myers follows in that with that you know I think he's got a process that could continue to drive growth for the business. Yeah. If I could I'm sure you guys are seeing that says, it's a tough environment and M&A right now what.

Seeing targets that we like just the the value expectations are still too high versus.

We're gonna build our capability, we're going to refine our screens were gonna build our team, we're going to be ready to execute.

But it's just you know we're going to make a decision when it's the right decision for Meyer shareholders and so we're not gonna rush that and I think ultimately from the longterm those are the right decisions, whereas it relates to acquisition.

Red like the color.

I'm interested on supply chain can you just talk about the current supply chain landscape, and if and where you see ongoing pressures I know you guys have been active and really contributing on the self help initiatives and optimizing that supply chain of production.

What are some of the areas you guys are poking focusing on to continue driving some of those efficiencies.

Yeah, that's great I've talked about this in the past that's what we call the salt model S. A L T standardized aggregate leverage titrate and it's a model argues and many of our.

For you know two three decades, and it's it's a consistent and relentless focus to standardize the grades of the products that you use aggregate the buy into a single into a single contract.

Go to the market in qualify as many <unk>.

Fires as you can this sounds really simple but.

Okay. You aggregate you buy you really do and you can qualify additional suppliers most and most of our categories. We have dramatically increased the number of available suppliers. Most of the time, we doubled it may be more and so then you go out you leveraged the base you'll ever since supply bass and then you titrate. It you you you work for that last Penny.

And and ultimately you know all.

All those procurement savings just dropped to the bottom line, we think that on the on the polyethylene side, there's actually some loser looseness in the market to get some additional capacity in North America has come on and we think that that.

And translating into lower price now on all the other cats and dogs that we buy whether it's office supplies or software or fittings are closures are cats. It's the same thing standardized aggregate leverage titrate, we don't see any restrictions.

Restrictions on supply chain, there may be an otter in in there that's limited limited in the pandemic. If you recall, we actually were worried because we did have some some asians supply lines that we were concerned about so we loaded up on some inventory and R. M. T. S business that really isn't an issue anymore right now.

So again.

What we're doing right now on the distribution side effects.

Now that we're year ended that we're actually bleeding.

Such relentless focus on raw material procurement and then on the M. S specific ethanol P model.

We're bringing and that's at Big company expertise, we've got a lot of Big company bedroom and are planning rules and our scheduling roles and our asset management roles and that's where just running these plants better scheduling them better bringing in better software better solutions, we're able to increase our nameplate capacity.

NASA Directionally by a third with limited Capex and so that's why I'm bullish even in choppy in markets and bullish over the next year or two or three on the E. P. S that we can create EBITDA. We can create by just running the company better with with all of these components I've just mentioned.

Great. That's a great color. Thanks, so much for that last question for me I know you guys focus more on the aftermarket entire segment.

But one of the big tire Oem's came out very recently were pretty big commercial and replacement tire volume dropped but signaled inventory.

Stocking looks to be complete can you just help us connect your comments with those reported volume and just with your updated optimism on the entire market dynamics. Thank you so much for your time.

Yeah again, just come in from the auto industry.

You have to really separate it into what I would say are short term adjustments and inventories versus the longterm growth trajectories and so you can see with.

The pluses and minuses within the tire industry and certainly I think in general with the entire auto industry. There is some you know just some focus on some some companies are certainly building up more vehicle inventory I would suspect someone what Mike said on the supply chain issues that the tire industry.

Build up some additional inventory just for the managed to run and supply chain crises, but I don't think you know that really changes my point of view of seeing the tire industry on a longterm growth trajectory as we look at the the future and I think most analysts would support that and what they see what's overall <unk>.

<unk>, China girls that are both the national as well as global basis, and certainly without question at some point and it's more momentum comes into play with the electric vehicles and it was just will be a physics question that there's gonna be more use more wear and tear tires is gonna drive more tire volume. So so I think it's M I.

Do I think it's more of a some adjustments that are done in the short term versus a longer term view.

We have that we have no further questions for me.

The lines or <unk> for any closing remarks.

Thank you everyone. It's for my first call here, it's been very.

Good to meet all of you and look forward or any future calls coming up here and I think with that we can conclude our our queue to my name's call for Myers industries.

This concludes today's cool. Thank you for joining you may now disconnect your lines.

To her name's call for Myers.