Q4 2023 Manitex International Inc Earnings Call
Operator: BF-WATCH TV 2021 Greetings. Welcome to Manitex International's fourth quarter and full year 2023 results conference. At this time, all participants are on a listen-only basis. A 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.
Greetings and welcome to the Manitex International fourth quarter and full year 2023 results conference call. At this time, all participants on a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad announcement of conflict over to your host ballpark life, There's investor Relations you may begin.
Operator: I'll now turn the conference over to All Bartolai of Investor Relations. You may begin. Thank you.
Thank you.
Paul Bartolai: Welcome to Manitex International's fourth quarter and full year 2023 results conference call. CEO Michael Coffey and CFO Joseph Doolan will be leaving the call today. We issued a press release earlier today detailing our fourth quarter and full year 2023 operational and financial results. This release, together with the accompanying presentation materials, is publicly available in the Investor Relations section of our corporate website at www.manitexinternational.com. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which by their nature are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factor section of our latest filings with the SEC.
Welcome to Manitex International's fourth quarter and full year 2023 results conference call.
Leading the call today are CEO, Michael coffee and CFO Joseph doing.
We issued a press release earlier today detailing our fourth quarter and full year 2023 operational and financial results.
This release together with the accompanying presentation materials are publicly available in the Investor Relations section of our corporate website at Www Dot Manitex International Dotcom.
I would like to remind you that management's commentary and responses to questions. On today's conference call May include forward looking statements, which by their nature are uncertain and outside of the company's control.
Although these forward looking statements are based on management's current expectations and beliefs.
Actual results could differ materially.
For a discussion of some of the factors that could cause actual results to differ please refer to the risk factors section of our latest filings with the SEC.
Paul Bartolai: Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the press release issued earlier today and in the appendix of this presentation. Today's call will begin with prepared remarks from CEO Michael Coffey, who will provide a review of our recent business performance, including an update on the progress we have made on our new Elevating Excellence Initiative, as well as our key priorities for 2024. This will be followed by a financial update and outlook from our CFO, Joseph Doolan. At the conclusion of these prepared remarks, we will open the line for your questions. With that, I'll turn the call over to Mike.
Additionally, please note that you can find reconciliations of historical non-GAAP financial measures.
The release issued earlier today and in the Pea.
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Today's call will begin with prepared remarks from CEO, Michael Coffey, who will provide a review of our recent business performance, including an update on the progress we have made on our new elevating excellence initiatives.
As well as our key priorities for 2024.
Followed by a financial update and outlook from our CFO Joseph do it.
At the conclusion of these prepared remarks, we will open the line for your questions with that I'll turn the call over to Mike.
Michael David Zabran: Thank you, Paul, and good morning, everyone, who is joining us on the call today. Our fourth-quarter results were a strong finish to a transformative year at Manitex. One year ago, we introduced Elevating Excellence, a strategy focused on growth, operational efficiency, and a Disciplined Approach to Capital Allocation.
Thank you Paul and good morning, everyone, who is joining us on the call today.
Our fourth quarter results were a strong finish to a transformative year at Manitex.
One year ago, we introduced elevating excellence.
Our strategy focused on growth.
Operational efficiency.
And a disciplined approach to capital allocation.
In one year, although elevating excellence, we delivered 40% year over year growth in adjusted EBITDA.
Michael David Zabran: In one year of elevated excellence, we delivered 40% year-over-year growth in adjusted EBITDA, nearly 240 basis points of adjusted EBITDA growth margin expansion, and a significant reduction in our net leverage profile. In a relatively short period of time, we've created a more competitive, more efficient, and more profitable organization. And we're just getting started.
Nearly 240 basis points of adjusted EBITDA gross margin expansion.
And a significant reduction in our net leverage profile.
In a relatively short period of time.
Created a more competitive.
More efficient.
And more profitable organization.
And we're just getting started.
Yeah.
Michael David Zabran: In a few minutes, I will discuss in more detail our accomplishments under our Elevating Excellence Strategy during 2023, as well as our key priorities for 2024. But suffice it to say, I'm very excited about our progress, which enabled us to drive strong results in 2023 and position us for continued success in 2024 and beyond. With that, please turn your attention to page 3 of our presentation. We will begin with a discussion of our fourth quarter highlights.
In a few minutes I will discuss in more detail our accomplishments under our elevating excellent strategy during 2023.
As well.
There are key priorities for 2024.
But suffice it to say I'm very excited about our progress.
Which enabled us to drive strong results in 2023.
And position us for continued success.
In 2024 and beyond.
With that please turn your attention to page three of our presentation.
We will begin with a discussion on our fourth quarter highlights.
Michael David Zabran: Our fourth quarter performance reflects the second highest quarterly revenue run rate in at least five years, driven by continued strength in our core lifting segment. While revenue was flat versus the prior year, given an elevated prior year comparison, gross margin increased more than 160 basis points to 20.9% in the fourth quarter. We had another solid quarter in our rental segment as well, with revenues up 7% in the fourth quarter as compared to the prior year period. Construction activity and demand trends in our North Texas markets remain favorable.
Our fourth quarter performance reflects the second highest quarterly revenue run rate and at least five years.
Driven by continued strength in our core lifting segment.
While revenue was flat versus the prior year, given an elevated prior year comparison.
Margin increased more than 160 basis points to 29% in the fourth quarter.
We had another solid quarter in our rental fleet minutes, well with revenues up 7% in the fourth quarter as compared to the prior year period.
Construction activity and demand trends in our north Texas markets remain favorable.
Michael David Zabran: In addition... Our recently opened branch in Lubbock, Texas, continues to ramp up ahead of schedule. Our team in Lubbock is quickly building a strong position in that market. At a consolidated level, our fourth quarter adjusted EBITDA margin remained flat versus the prior year at 10.2%, but well above the low single-digit percentage we delivered pre-pandemic.
In addition.
Our recently opened branches in Lubbock, Texas continues to ramp up ahead of plan.
Our team in Lubbock is quickly building a strong position in that market.
At a consolidated level, our fourth quarter adjusted EBITA margin remained flat versus the prior year at 10, 2%.
But well above the low single digit percentage, we delivered pre pandemic.
We believe the strategic actions taken over the last year resulted in a structural pago.
Michael David Zabran: We believe the strategic actions taken over the last year have resulted in a structural, positive step change and a Margin Profile for the business. As outlined within Elevating Excellence, we continue to focus on developing a higher value mix of backlog, one that prioritizes higher margin products and geography, as we've implemented this approach across the organization, combined with our increased manufacturing velocity. Our backlog has declined, but this is expected.
Positive step change.
<unk> profile for the business.
As outlined within elevating excellence.
We continue to focus on developing a higher value mix of backlog.
One that prioritizes.
Margin products.
And geographies.
As we've implemented this approach across the organization can.
Combined with our increased manufacturing velocity.
Our backlog has declined.
But this is expected.
We have discontinued certain products.
Michael David Zabran: We have discontinued certain products that do not meet minimum margin hurdles. This has strengthened the quality of our backlog, something that we will continue to focus on. Our current backlog remains three times that of pre-pandemic levels and represents nine months of lifting equipment sales. We are pleased with the visibility that we have entering 2024 and our outlook. Entering 2024, demand conditions remain strong, and we have been encouraged by early order confirmations across our core infrastructure, energy, and mining market segments. This is supported by healthy indications of interest from various customers, as many of our larger dealers are still operating with very limited inventory levels. Looking at some of our key and market trends The outlook for the North American infrastructure market is strengthening due in large part to the stimulus dollars from the Infrastructure Investment and Jobs Act.
Which do not meet the minimum margin hurdles.
This is strengthen the quality of our backlog something that will continue to focus on.
Yeah.
Our current backlog remains three times that of pre pandemic levels and represents nine months lifting equipment sales.
We are pleased with the visibility that we have entering 2024 and our outlook.
Entering 2024.
Man conditions remained strong.
And we have been encouraged why only order combinations across our core infrastructure.
Energy and mining market segments.
This is supported by healthy indications of interest from various customers.
As many of our larger dealers are still operating with very limited inventory levels.
Looking at some of our key end market trends the outlook in North American infrastructure market is strengthening due in large part to the stimulus dollars from infrastructure investment and jobs Act.
Michael David Zabran: This program added over half a trillion dollars in new funding, and while the act was signed in late 2021, we are just beginning to see the majority of these funds benefit our market, outside of the traditional infrastructure, electrical transmission, and distribution, which continues to be strong growth for us. The U.S. electrical grid is aged, and growing energy demands are putting significant pressure on the system. A recent Department of Energy report found that over 70 percent of transmission lines in the United States were more than halfway through their 50-year useful lifespan, while the average age of large transformers exceeded 40 years. Manitex is well positioned to benefit from the growing investments being made by utilities, and we believe much of the infrastructure spending in the coming years will benefit the business, Traditional energy markets and mining activity remain robust.
This program added over half the children and new funding and while the act was signed in late 2021. We are just beginning to see the majority of these funds benefit in our markets.
Outside of the traditional infrastructure electrical transmission and distribution.
It used to be.
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U S electrical grid is aged.
And growing energy demands are putting significant pressure on the system.
Our recent department of Energy report.
<unk> got over 70% of transmission lines in the United States, we're more than halfway through their 50 year useful life span.
While the average age of large transformers exceeded 40 years.
Manitex is well positioned to benefit from the growing investments being made by utilities.
And we believe much.
The infrastructure spending in the coming years will benefit the business.
As well as the investment cycle.
That will continue to drive spending by our customers.
Traditional and energy markets in mining activity remains robust.
Michael David Zabran: There is still a significant need to invest capital in traditional fossil fuel development, and Manitex is benefiting from this trend. Our mining customers have a strong appetite for production and maintenance equipment. This is most visible in Chile, where we closed a record year in 2023.
There's still a significant need to invest capital from traditional fossil fuel development.
And mono, Texas benefiting from this trend.
Our mining customers have a strong appetite for production and maintenance equipment.
She was most visible in Chile, where we closed a record year in 2023.
Michael David Zabran: The global demand for copper is expected to continue to drive this growth, and we are optimistic with our prospects in Chile, Mexico, and the southwestern United States. European markets have similar demands for infrastructure spending to that that we are seeing in the U.S. We are expecting stable demand in 2024 with increased growth opportunities for European products from certain Mideast countries and also the Americas. Turning now to a progress update on our Elevating Excellence strategy and how we are using this framework to guide our business in 2024 and beyond, in 2023 from a high level, we executed on our commercial growth priorities, resulting in share gains within our North-South American market, together with a continued strengthening of our dealership network. From an operational perspective, the progress made in 2023 included new foundations for growth, improved business analytics, and an ability to scale the newly implemented and modern systems.
The global demand for popular is expected to continue.
To drive this growth and we are optimistic with our prospects in Chile.
Mexico and southwestern United States.
European markets have similar demands for infrastructure spending.
So that what we're seeing in the U S.
We are expecting stable demand in 2024 with increased growth opportunities.
Our European products from certain mid east countries and also the miracles.
Turning now to our progress update on our all elevating excellence strategy.
How we are using this framework to guide our business in 2024 and beyond.
In 2023 from a high level.
We executed on our commercial growth priorities, resulting in share gains within our north.
South American markets.
Together with the continued strengthening of our dealer net dealership network.
From an operational perspective, the progress made in 2023 included new foundations for growth.
Improved business analytics.
And then an ability to scale.
We implemented and modern systems.
We now have a meaningful runway to continue our improvements and scale the business.
Michael David Zabran: We now have a meaningful runway to continue our improvements and scale the business. 2024 and 2025 should be growth years for the company, something that is easier now that we have newer systems to operate with and improve processes. I would like to take a few minutes to update you on our progress with Elevating Excellence. But first...
2024, and 2025 should be growth years for the company.
That is easier now, but we have newer systems to operate with an improved processes.
I would like to take a few minutes updating you on our progress with all of them being excellence.
First I want to recognize the talented team at Manitex.
Michael David Zabran: I want to recognize the talented team at Manitex. We are very fortunate to have these dedicated professionals who are realizing these improvements and bringing creativity and new ideas to the job every day. Please turn your attention to page 5 of our presentation. Let's begin with a few updates on our commercial expansion strategy. During 2023, we repositioned our organization for long-term growth, which included the restructuring of our sales organization and strengthening of our dealer network, which made notable progress growing their share in the Americas. This is most notable in Chile, where we opened a new branch and laid the groundwork for further crane sales expansion. Our Lubbock branch had been delayed earlier in the year but far exceeded its first-year sales expectations.
We are very fortunate to have these dedicated professionals.
Realizing these improvements and bringing creativity and new ideas to the job every day.
Please turn your attention to page five of our presentation.
Let's begin with a few updates on our commercial expansion strategy.
During 2023, we repositioned our organization for long term growth, which included the restructuring of our sales organization.
And strengthening of our dealer network.
We made notable progress growing share in the Americas.
This is most notable in Chile, where we opened a new branch and laid the groundwork for further crane sales expansion.
Our Lubbock branch had been delayed earlier in the year.
With far out ceded which pushed yourselves expectations.
Michael David Zabran: The team in Lubbock is now performing at 100%, and we are very pleased with our progress there, which successfully launched new products in 2023. Innovations were introduced within every product group at Manitex, and we look forward to updating the market on further product developments in the coming months. We made good progress on our commercial growth initiatives during 2023, but much of what we accomplished was laying the groundwork for future growth opportunities, and commercial growth objectives. We're always more rated toward 2024 and 2025 in terms of elevating excellence, and we are excited about the growth opportunities as we look forward. Let's turn our attention to Operational Excellence, the second pillar of Elevating Excellence, which is highlighted on page 6. As you've heard me say on prior calls, 2023 was a year of the process at Manitex, and it was a good year. In 2023, we replaced two of our operating systems and updated a third system.
The team in Lubbock is now performing at 100%.
And we are very pleased with our progress there.
We successfully launched new products in 2023.
Innovations were introduced within every product group at Manitex, and we look forward to updating the market on Thursday.
Developments in the coming months.
We made good progress on our commercial growth initiatives during 2023.
But much of what we accomplished was laying the groundwork for future growth opportunities.
Our commercial growth objectives.
We're always more weighted towards 2024, and 2020 saw an olive garden was excellent.
And we are excited about the growth opportunities as we look forward.
Let's turn our attention to operational excellence the second pillar of elevating excellence, which is highlighted on page six.
As you've heard me say on prior calls 2023 was a year of a process at mono clubs.
And it was a good year.
In 2023, we replaced two of our operating systems and upgraded our food system.
Michael David Zabran: The business is now operating on integrated contemporary business processes. By design, this will help us reduce costs, increase production, and standardize our process. These investments were a critical part of our strategy to enable our ability to scale the business and help us attain the margin improvements we are targeting. Manitex is now operating on these new systems.
The business is now operating on integrated contemporary business processes.
By design this will help us reduce cost.
Increase our production.
And standardize our processes.
These investments were a critical part of our strategy to enable our ability to scale the business.
Help us attain the margin improvements we were targeting.
Maine, and Texas now operating on these new systems.
Michael David Zabran: We are positioned for scale, improved responsiveness, and Better Global Cooperation. We are pleased that the supply chain pressures that have plagued the industry have continued to ease across our business. We have seen more progress in Europe in 2023, while conditions in the United States have lagged. We fully expect to realize continued global supply chain efficiencies gained in 2024, resulting in reduced cost and additional margin improvement. We've also made tremendous progress on our objective to improve manufacturing velocity. We improved unit production and production capacity at our facilities, enabling us to drive growth and improve order fulfillment. In 2024, we expect further improvements to our manufacturing velocity. It is important to understand that up until now, all of the increased manufacturing velocity has been accomplished with no additional square footage addition, and minimal Capital Expenditures.
We are positioned for scale.
Improved responsiveness.
And better global cooperation.
We are pleased that the supply chain pressures that have plagued the industry.
Continued to ease across our business.
You have seen more progress in Europe in 2023, while conditions in the United States right.
We fully expect to realize continued global supply chain efficiencies gained in 2024.
<unk> and reduce cost.
Additional margin improvements.
We have also made tremendous progress on our objective to improve manufacturing velocity.
We improved key to production and production capacity at our facilities, enabling us to drive growth.
And improve order fulfillment.
In 2024, we expect further improvements to our manufacturing velocity.
It is important to understand that up till now all of the increase manufacturing velocity has been accomplished with no additional square footage additions.
And minimal capital expenditures.
We are developing future plans or facility expansions.
Michael David Zabran: We are developing future plans for facility expansion that will propel growth in the future. But for now, we are focused on a CapEx Lite model that is well-equipped to support in-district customer demand. In combination, these actions positioned us to deliver more than 310 basis points of gross margin expansion, enabling us to exceed 10% adjusted EBITDA margins for the first time. Our third and final pillar of Elevating Excellence is Disciplined Capital Allocation. We highlight this on slide 7, as we discussed in 2023. Our capital allocation strategy prioritizes debt reduction.
That will propel the growth in the future.
But for now.
Focusing on our Capex light model that is well equipped to support an existing customer demand.
In combination these actions position us to deliver more than 310 basis points of gross margin expansion.
Enable is enabling us to exceed 10% adjusted EBITDA margins for the first time.
Our third and final pillar of elevating excellence disciplined capital allocation.
We highlight this on slide seven.
As we have discussed in 2023.
Our capital allocation strategy prioritize debt reduction.
Michael David Zabran: Select Investments in Organic Growth and Maintenance Capital to support our existing operations. Our short-term goal was to lower our net leverage ratio below three times. We are very pleased that we exited the year with a net leverage ratio of 2.9 times, down from 3.9 times at the end of 2022. We were able to accomplish this despite the need to maintain higher than normal working capital. This is directly related to supply chain headwear.
Select investments in organic growth.
And maintenance capital to support our existing operations.
Our short term goal was to lower our net leverage ratio.
Below three times.
So we are very pleased that we exited the year with a net leverage ratio of two nine times down from three nine times at the end of.
2022.
We were able to accomplish this despite the need to maintain higher than normal working capital.
This is directly related to supply chain headwinds.
Michael David Zabran: We are now seeing opportunities to safely lower these inventory stocks, as Joe will discuss in more detail. We expect this will result in our ability to unlock much of the elevated working capital that we are operating under in 2023, resulting in further debt reduction in the coming quarters. As part of elevating excellence in our strategy, we introduced a three-year financial target that we detail on slide 8 of the deck. These goals reflect our confidence in the underlying strength of our end market and the benefits we expect from the improvements in our operation. Our targets include 25% revenue growth and nearly doubling our EBITDA, and an EBITDA margin expansion of 300 to 500 basis points, resulting in an 11 to 13% adjusted EBITDA. On slide 9, we highlight our progress against these targets.
We are now seeing opportunities to safely lower these inventory stocks.
As Joe will discuss in more detail.
We expect this will result in our ability to unlock merchant elevated working capital that we are operating under in 2023.
The resulting in further debt reduction in the coming quarters.
As part of elevating excellence in our strategy, we introduced three year financial targets.
We detail on slide eight of the duck.
These goals reflect our confidence in the underlying strength of our end markets.
And the benefits, we expect from the improvements in our operation.
Our targets include 25% revenue growth.
And nearly doubling our EBITDA.
And EBITDA margin expansion of 300 to 500 basis points range.
Resulting in an 11% to 13% adjusted EBITDA.
On slide nine we highlight our progress against these targets.
Michael David Zabran: And as you can see, we are trending nicely relative to our goal, as a result of our strong execution during 2023. We came in ahead of our year in Target, putting us well on track to achieve these long-term goals. Joe will cover our 2024 financial targets, but we are excited by the continued progress against our goals and are confident that we are on track for another solid year in 2024. We are grateful for the progress made in 2023. These early successes are fueling our resolve and validating that elevating excellence is the right direction for our company. The results in 2023 were strong. But we are really just getting started.
And as you can see we're trending nicely relative to our goals.
As a result of our strong execution during 2023 weeks.
We came in ahead.
Our year end targets.
Putting us well on track to achieve these long term goals.
I will cover our 2024 financial targets, but we are excited by the continued progress against our goals.
And are confident that we are on track for another solid year in 2024.
We are grateful for the progress made in 2023.
These early successes are fueling our resolve and validating that elevating excellence is the right direction for our company.
The results in 2023 were strong.
But we are really just getting started many of these initiatives launched in the past year will have multiple your inbox drug performance your forward.
Michael David Zabran: Many of these initiatives launched in the past year will have multiple-year impacts on our performance year forward. We are also grateful for our customers and dealers and expect another year of solid growth as we continue with our margin expansion. With that, I'll turn it over to Joe. Thank you, Mike. And good morning, everyone.
We're also grateful for our customers and dealers and expect another year of solid growth as we continue with our margin expansion.
With that I'll turn it over to John.
Thank you, Mike and good morning, everyone I will provide some additional details on the quarter give an update on our liquidity and balance sheet and conclude with commentary around our outlook for 2024.
Joseph R. Doolan: I will provide some additional details on the quarter, give an update on our liquidity and balance sheet, and conclude with commentary around our outlook for 2025. Turning to slide 11. Net revenue for the fourth quarter of 23 was $78.7 million, essentially flat from the very strong fourth quarter results we generated last year. Fourth quarter revenue growth was negatively impacted by a decline of 1.6 million, or approximately 2%, from lower truck chassis sales, which are largely pass-through revenue items. At this point, the contribution of chassis sales to our overall revenue has stabilized at a more normalized level, and we don't expect a meaningful comparison issue as we move into 2024. Lifting equipment segment revenue was $70.8 million during the fourth quarter, a decrease of 1% versus the prior year period.
Turning to slide 11 net.
Net revenue for the fourth quarter of 'twenty, three was $78 7 million essentially flat from the very strong fourth quarter results, we generated last year.
Fourth quarter revenue growth was negatively impacted by a decline of $1 6 million or approximately 2% from lower truck chassis sales, which are largely pass through revenue items.
At this point the contribution of chassis sales to our overall revenue has stabilized at a more normalized levels and we don't expect a meaningful comparison issue as we move into 2024.
Lifting equipment segment revenue was $70 8 million during the fourth quarter, a decrease of 1% versus the prior year period and as I just discussed lower truck chassis sales impacted fourth quarter results.
Joseph R. Doolan: And as I just discussed, lower truck chassis sales impacted fourth quarter results, and Lifting Equipment Segment revenue would have increased about 2% excluding the chassis, while the difficult comparison impacted the reported growth. However, our lifting equipment business continued to benefit from end market strength, as well as improved throughput in manufacturing. Rental equipment segment revenue was $7.9 million in the fourth quarter of 2023, supported by strong end market demand in key North Texas markets, including contributions from our Lubbock, Texas location, which opened in March of 2023.
And lifting equipment segment revenue would have increased about 2% excluding the chassis sales.
While the difficult comparison impacted the reported growth are lifting equipment business continued to benefit from end market strength.
As well as improved throughput and manufacturing facilities.
Rental equipment segment revenue was $7 9 million in the fourth quarter 'twenty three supported by strong end market demand in north, Texas markets, including contributions from our Lubbock, Texas location, which opened in March of 'twenty three.
Joseph R. Doolan: We continue to see activity in our Lubbock facility grow, and volumes have remained strong in recent years. While we took a bit of a pause related to fleet expansion in 2023, we expect to put capital towards new fleet expenditures in 2024, and expect to see continued strength in our rental business owing to the favorable demand trends in our key markets and strong exports. As of December 31st, total backlog was $170 million, down from $230 million a year ago, driven by increased production velocity, a shift in focus to higher-margin products and geographies that Mike discussed, and some modest weakness in certain verticals that are more exposed to the elevated interior. Our backlog ended the quarter with North America representing approximately 60% of the total, and international, the remaining.
We continue to see the activity in our Lubbock facility grow and volumes have remained strong in recent months.
While we took a bit of a pause related to fleet expansion in 2023.
We expect to put capital towards new fleet expenditures in 2024.
And expect to see continued strength in our rental business, owing to the favorable demand trends in our key markets and strong execution.
As of December 31.
Total backlog was 170 million.
Down from $230 million, a year ago, driven by increased production velocity the shift in focus to higher margin products and geographies that Mike discussed.
And some modest weakness in certain verticals that are more exposed to the elevated interest rates.
Our backlog ended the quarter with North America, representing approximately 60% of the total and international the remaining 40%.
As Mike discussed, while our backlog is down from last year. Our overall business momentum remained strong and our current backlog remains at roughly nine months of sales, which is a very healthy level and gives us good visibility into 2024.
Joseph R. Doolan: As Mike discussed, while our backlog is down from last year, our overall business momentum remains strong, and our current backlog remains at roughly nine months of sales, which is a very healthy level and gives us good visibility into 2025. Growth profit was $16.4 million during the fourth quarter of 2023, up from $15.2 million during the prior-year period, or an increase of $8.3 million. The increase in gross profit was a result of increased manufacturing throughput, pricing benefits, and more favorable conditions. As a result of these factors, the gross profit margin increased 160 basis points to 20.9% during the 4th quarter. SG&A expense for the fourth quarter was $10.8 million, up modestly from $10.1 million for the same period last year. R&D expense was $0.9 million during the fourth quarter, flat from the prior year.
Okay.
Gross profit was $16 4 million during the fourth quarter of 23 up from $15 2 million during the prior year period or an increase of 8%.
The increase in gross profit was a result of increased manufacturing throughput.
Pricing benefits and more favorable mix.
As a result of these factors gross profit margin increased 160 basis points to 29% during the fourth quarter.
SG&A expense for the fourth quarter was $10 8 million up modestly from $10 1 million for the same period last year.
R&D expense was <unk> 9 million during the fourth quarter.
<unk> from the prior year period.
Joseph R. Doolan: We are pleased to be able to maintain our operating expense levels despite the revenue growth and investments that we are making in the future. Operating income was $4.8 million during the quarter compared to $4.2 million for the same period last year, or an increase of 14%. Operating margin in the fourth quarter was 6.1%, up 80 basis points from last year. The year-over-year improvement in operating income was driven by improved gross margin performance in operating leverage. Adjusted EBITDA was $8 million for the fourth quarter, or 10.2% of sales, which is essentially flat from the same period last year. Net income was $5.2 million, or $0.26 per diluted share, for the fourth quarter, compared to net income of $500,000 or $0.02 per share for the same period last year.
We are pleased to be able to maintain our operating expense levels. Despite the revenue growth and investments that we're making in the business.
Operating income was $4 8 million during the quarter compared to $4 2 million for the same period last year or an increase of 14%.
Operating margin in the fourth quarter was six 1% up 80 basis points from last year.
The year over year improvement in operating income was driven by the improved gross margin performance and operating leverage.
Adjusted EBITDA was 8 million for the fourth quarter or 10, 2% of sales.
Which is essentially flat from the same period last year.
Net income was $5 2 million or <unk> 26 cents per diluted share for the fourth quarter.
Compared to net income of 500000 or <unk> <unk> per share for the same period last year.
Joseph R. Doolan: Net income for the fourth quarter of 23 includes a benefit related to the reversal of an income tax valuation. Adjusted net income was $6.3 million or $0.31 per diluted share in the fourth quarter of 2023, up from adjusted net income of 1.8 million or nine cents per diluted share for the same period last year. Adjusted net income for the fourth quarter of 23 excludes half a million of stock compensation expense and 0.7 million of other non-recurring expenses. Now, turning to our balance sheet on slide 13. As of December 31st, net debt was $85.5 million, which is a decline of roughly $1 million from the end of the third quarter. As a result of the strong operating results, net leverage improved to 2.9 times at the end of the fourth quarter of 23 compared to 3.9 times at the end of the fourth quarter of 22. We expect to begin to see our working capital usage normalize in the coming quarters, which could result in a reduction of inventory levels leading to improved free cash flow conversion and even further reduced leverage levels. As of December 31st, their total cash and available liquidity was approximately $31 million.
Net income for the fourth quarter of 23 includes a benefit related to the reversal of an income tax valuation allowance.
Adjusted net income was $6 3 million or <unk> 31 per diluted share in the fourth quarter of 'twenty three.
Up from adjusted net income of $1 8 million or <unk> <unk> per diluted share for the same period last year.
Adjusted net income for the fourth quarter of 'twenty three excludes.
Half a million of stock compensation expense and <unk> 7 million of other nonrecurring expenses.
Now turning to our balance sheet on slide 13.
As of December 31, net debt was $85 5 million, which is a decline of roughly $1 million from the end of the third quarter.
And as a result of the strong operating results.
Net leverage improved to two nine times at the end of the fourth quarter of 23 compared to three nine times at the end of the fourth quarter of 'twenty two.
We expect to begin to see our working capital usage normalize in the coming quarters.
Which could result in a reduction of inventory levels, leading to improved free cash flow conversion and Ivar even further reduced leverage levels.
As of December 31, total cash and available liquidity was approximately $31 million.
Joseph R. Doolan: Now turning to our out... We continue to make tremendous progress on our strategic initiatives, and we remain on target to achieve our 2025 Elevating Excellence financial target, based on the continued momentum in our end markets and our expectation for ongoing execution against our strategic goals. We are providing a full year 2024 outlook as follows, which we detail on slide. We expect 2024 revenue to be in a range of $300 million to $310 million, and Adjusted EBITDA in a range of $30 million to $34 million. That completes our prepared remarks. Operator, we are now ready for the question and answer portion of our call, gang. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in the question. You may press star two if you would like to remove your question, for participants using speaker equipment. It may be necessary to pick up your handset before pressing the start button.
Now turning to our outlook, we continue to make tremendous progress on our strategic initiatives and we remain on target to achieve our 2025 elevating excellence financial targets.
Based on the continued momentum in our end markets and our expectation for ongoing execution against our strategic goals we.
We are providing full year 2024 outlook as follows which we detail on slide 14.
We expect 2020 for revenue to be in a range of 300 million to $310 million and adjusted EBITDA in a range of $30 million to $34 million.
That completes our prepared remarks, operator, we are now ready for the question and answer portion of our call.
Thank you at this time, we'll 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 your line is and the questions you.
You May press Star two if you would like to remove your question from Nicky participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Matt Koranda with Roth Capital Partners. Please proceed with your question.
Okay.
Good morning, guys since <unk> gone for Matt.
Maybe just starting right.
Operator: Our first question comes from the line of Matt Koranda with Ross Capital Partners. Please proceed with your question. Morning guys, it's Mike gone for Matt.
On the 305 million midpoint revenue guide.
We've talked about our appetite for Rayburn site expansion in 2024, I guess, just how should we think about rayburn revenue growth versus core Manitex revenue bright spot is embedded in the guide.
Unidentified Speaker: Maybe just starting on the $305 million midpoint revenue guide, we talked about the appetite for Rayburn fleet expansion in 2024. I guess just how should we think about Rayburn revenue growth versus core Manitex revenue growth that is embedded in the guide? Yeah. So appreciate the question and good early morning to you.
Yeah.
So I appreciate the question and good early morning to you.
So rayburn's fleet expansion is partially replacement a retirement of fleet and partially a growth so that the majority of the growth is favoring the traditional.
Michael David Zabran: So Rayburn's fleet expansion is partially a replacement, retirement of fleet, and partially a growth. So the majority of the growth is favoring the traditional, the traditional manufactured lifting product segment, over the rental segment. And that's been consistent thus far with our trend over the last two years.
The traditional manufactured lifting product segment.
Over at the rental segment.
And that's been consistent thus far with their trend over the last few years, where.
The Crane segment will continue to grow and obviously the other thing that we're heavily focused on is margin improvement.
Michael David Zabran: The crane segment will continue to grow, and obviously, the other thing that we're heavily focused on is margin improvement. Got it, helpful. And the press release talks about 2024's focus on adding two to three new dealer agreements and a focus on new products. I guess just to what degree are these initiatives factored into the guide? Or would these just be upside to 2024?
Okay.
Got it.
Helpful and the press release talks about a 2024, our focus on adding.
<unk> new deal of agreements and a focus on new products I guess just to what degree these initiatives factored into the guide or what is just the upside to 2024.
Well there let me let me talk about a couple of things strategically.
Michael David Zabran: Well, there, um, let me talk about a couple of strategic things. Um, there is a marked trend in, an understandable, um, temptation in our industry to go direct, and we're taking an opposite view. Our products require localized upfitting, and the tailoring of solutions that are fit for the purpose for the market that is being served. And, you know, we feel like we're a really good manufacturer and a really good partner, but we need the voice of the dealer in that equation. And so part of what we're saying is that's a strategic output that we're focused on this year that will help us grow long-term. The dealers, you know, are not necessary for that level of growth, but they're necessary for our long-term growth, if that makes sense.
There is a there's a market trend in an understandable.
Temptation in our industry to go direct and we're taking an opposite view our products require localized got foot outfit tailoring our.
Solutions that are fit for the purpose of a market that's being served.
And you know, we we feel like we're really good manufacturer in a really good partner, but we need the voice of the dealer in that equation and so.
Part of what we're seeing is that's that's a strategic.
Output.
That we're focused on this year that will help us grow long term.
Dealers.
You know are not necessary for that level of growth.
But they're necessary for our long term growth if that makes sense and we're not prepared to announce which dealers that were working with but as soon as we have.
Joseph R. Doolan: We're not prepared to announce which dealers that we're working with, but as soon as we have, um, all the P's crossed and all the I's dotted, we'll be eager to announce that because that's just part of our long-term strategy, specifically for European products that require that level of expertise and upskilling. Maybe just on gross margins, we took a little step down quarter over quarter but still remain up year over year and looks like we're structurally higher, so that's great. Joe, maybe you could help us understand how large of a drag the steel prices were to gross margins in the quarter. It looks like we implemented some additional price increases in 4Q as well. I guess just when do these fully filter through the backlog?
All the t's crossed and all the i's dotted won't be eager to announce that because that's just part of our long term strategy, specifically for the European products that require that level of expertise and upset.
Got it that's helpful. Mike.
Maybe just on.
Gross margins are.
So I guess little step down quarter over quarter, but still remain up year over year and it looks like restructure the higher so that's great.
Joe maybe just help us understand.
How large of a drag if steel prices were to gross margins in the quarter and it looks like we have implemented some additional price increases in <unk> as well I guess, just when do these fully filtered through the backlog.
Joseph R. Doolan: Yeah, so the steel prices primarily really affected the U.S. We were able to offset much of that in Europe, and we started increasing some prices in the U.S. We put in some, I'm blanking on the term. So we put in some additional surcharges, so they offset some of the price, but we had a fairly sizable purchase price variance that really affected us throughout 2023 in the U.S. We're trying to offset that in 2024. But that was that was a pretty significant, you know, a couple million, three million plus impact to the overall P&L out of the United States. So we're trying to offset that in 2024 with some additional surcharges and the price increases that I mentioned that were put in place late in 2023. Got it. And a couple of million dollars of impact in the quarter or the year? For the year, I got it.
Yes, so the steel prices, primarily really affected the U S.
We were able to offset much of that in Europe, we started increasing some prices in the United States, we put in some.
I'm blanking on the term.
Certain additional surcharges. So we put in some additional surcharges so they offset some of the price but but.
But we had a fairly sizable purchase price variance that really affected us throughout 2023 in.
In the U S. A we're trying to offset that in 2024.
But that was that was it was a pretty significant couple million 3 million plus impact to the overall P&L out of the United States. So.
We're trying to offset that 2024 with some additional surcharges and the price increases that I mentioned that were put in place in late in 2023.
<unk>.
Got it and a couple of million of impact in the quarter or the year for the year.
Okay.
Got it okay.
Unidentified Speaker: Okay. Thanks for that. Last last one for me, guys.
Thanks for that last last one for me guys.
Unidentified Speaker: The press release talks about opportunities to deploy capital beyond debt reduction. Sounds like we'd prioritize organically investing back into the business, or we could go out and be acquisitive. Maybe just provide some more color on where we see opportunity to reinvest back into the business. And then you know, which, you know, what type of bolt-on acquisitions would make the most sense if that's the route we choose to go.
Press release talks about our opportunities to deploy capital beyond debt reduction.
It sounds like we can prioritize organically investing back into the business or we can go out and be acquisitive, maybe just provide some more color on where we see opportunity to reinvest back into the business and then.
You know, which you know what.
What type of bolt on acquisitions would make the most sense. If that's the route we choose to go.
Michael David Zabran: Well, the first part, I appreciate the question. So we see production growth opportunities for our European product line that require additional fabrication and assembly production space over the next two or three years in Europe, largely in support of North America. North America will largely be a final assembly, finished assembly, and mounting operation where Europe would be a manufacturing operation.
Well the first part I appreciate the question. So we see production growth opportunity for our European product line that requires additional.
Fabrication and assembly production.
Production space over the next two to three years in Europe, largely in support of North America, and North America will largely be a final Assembly finished assembly.
And mounting operation, where Europe would be a manufacturing operation. So we're working on redeploying capital to meet those growth curves that are going to be.
Michael David Zabran: So we're working on redeploying capital to meet those growth curves that are going to be. They're necessitated just because many of our operations are closing in on Maximum Output Capacity. Want to rewind the clock about a year. The focus of 2023 was to get the processes in place to feed system growth. And at that time,
They're necessitated just because many of our operations are closing in on maximum output output capacity.
Brian the rewind the clock about a year.
The focus of 2023 was to get the processes in place to feed system growth and at that time.
We saw an opportunity to improve our production through better process, better scheduling and better systems and that's what's happening in the first three years, but we have to prepare for the future growth and so the first segment is organic.
Michael David Zabran: We saw an opportunity to improve our production through better processes, better scheduling, and better systems, and that's what happened in the first three years. But we have to prepare for future growth. And so the first segment is organic, and we see that as a really interesting opportunity to grow organic production capacity to meet the demand for our products, mainly in North America and also in South America. On the second one, I hate ducking questions, but this is a business that will get prepared for acquisitional growth. We're just not prepared to talk about that publicly right now.
And we.
We see that as a really interesting opportunity to grow.
Organic production capacity to meet the demand for our products largely in North America and also in South America.
And the second one.
I hate ducking questions, but.
This is a this is a business that will get prepared for.
Acquisition growth, we're just not prepared to talk about that publicly right now.
Michael David Zabran: But that's something, you may recall my commitment and Joe's commitment was, to get the business on a solid footing, take care of our investment, our investors, and show them that these returns on this initiative are working. And at that point, we'll be ready to acquire. And we're not at that point yet, but our eyes are focused. Very clear. Sounds good.
But that's something you may recall, my commitment and Joe's commitment was to get the business on a solid footing.
Take care of our investment our investors and show them that these returns and this initiative is working.
And at that point, we'll be ready to acquire.
And we're not at that point, yet, but our eyes are focused on that.
Very clear sounds good that's all for me guys. Thank you.
Unidentified Speaker: That's all from you guys. Thank you. Okay, I appreciate that. Good talking with you.
Okay I appreciate that that's good talking with you.
Operator: Thank you. Our next question comes from the line of Ted Jackson with Northland Securities. Please proceed with your question. Thanks. Good morning and congratulations on a great quarter and a great year. Good morning, Ted. So most of my questions, believe it or not, just got kind of knocked off by just some color around a few of them.
Thank you. Our next question comes from the line of Tien Jackson with Northland Securities. Please proceed with your question.
Thanks, Good morning, and congratulations on a great quarter and a great year.
Good morning.
Alright.
So.
Most of actually my questions, but if they're not just got kind of knocked off but just some color around a few of them. One of the initial questions for me was to ask about milestones with regards to <unk> P. M being brought into North America. It sounds like from the previous discussion that it has to do with growth of the dealer network is that a fair assumption. So if we were to kind of.
Edward Randolph Jackson: One of the initial questions for me was to ask about milestones with regard to PM being brought into North America. It sounds from the previous discussion that it has to do with the growth of the dealer network. Is that a fair assumption?
Sit here on the sidelines and watch you guys play on the field in 2020 for one of the things that we want to look for is some.
Kind of a new dealer announcements and that those dealer announcements will be tied to your endeavor to bring.
Michael David Zabran: So if we were to kind of sit here on the sidelines and watch you guys play on the field in 2024, one of the things that we want to look for is some, you know, kind of new dealer announcements and that those dealer announcements will be tied to your endeavor to bring an articulated product into the North American market. Yeah, I appreciate the way you phrased that. You're correct.
Particularly product into the North American market.
Yeah I appreciate the way you phrased that Youre correct. So local markets have different D O T regulations and they have different configurations.
You know that product line.
<unk> prides itself with the ability to tailor a solution to a customer need.
Or a series of solutions and so we want.
Michael David Zabran: So, local markets have different DOT regulations, and they have different configurations. And, you know, that product line prides itself on the ability to tailor a solution to a customer need or a series of solutions. And so, we want to attract and maintain dealers that look at this product segment as strategic to their growth and have strong product support capabilities within the market that they're serving. And that's absolutely fundamental.
We want to attract and maintain.
Dealers that look at this product segment is strategic to their growth.
And have strong product support capabilities within the markets that they're serving and that's absolutely fundamental. So you can expect those announcements as the year actually as the next two years progress.
And we are vetting and looking for new dealers and also.
Strengthening.
Michael David Zabran: So you can expect those announcements as the year, actually, the next two years progress, and we are vetting and looking for new dealers and also strengthening the product portfolio of our current dealers by adding European products to the mix. So that's part of the strategy. I do want to remind everyone that we also have international accounts. If you were to look today on our LinkedIn account, you'll see a government military contract delivery that's in process that was finished yesterday. And so our Texas factory is fully equipped to outfit PM products and sell them to international and corporate national accounts. But the strength of our offering in North America will be predicated on a combination of both.
The product portfolio or our current dealers by adding European products to the mix.
So that's part of the strategy I do want to remind everyone that we also do have international accounts and sales.
If you were to look today, and our Linkedin account, you'll see a government military contract delivery. That's in process that was finished yesterday.
And so our Texas factory is fully equipped to outfit a pm products and sell them to our international and corporate are national accounts.
But the strength of our offering in North America will be predicated on a combination of both of those.
Okay.
Sticking sticking with regards to.
Kind of the the whole P M thing and the capacity. So I understood I thought it was nice clarity with regards to capacity for kind of core of the manufacturing the product being into Europe being done in Europe, and then that's where you'll be really spanning.
Michael David Zabran: OK, hum sticking with regard to kind of the whole PM thing and the capacity. So I understood, I thought it was nice clarity with regard to capacity for, you know, kind of the core of the manufacturing of the product being in Europe, being done in Europe, and then that's where you'll be really expanding your base, but am I correct with regard to your answer there that this is something that you're evaluating with the idea that you will put that capacity in place in 25, not in 24? Well, actually, we put some of it in place in 2023. So we expanded our Romanian, a fabrication plant in 2023 to feed growth. And so, year over year, our units produced increased about 7% in Italy and finished products that were delivered to the market. Now remember, Italy was operating in systems that were originally designed decades ago, so they were really handicapped by the operating systems that they were using, and we updated them, giving them contemporary technology and a modern ERP with regard to schedule output, and that happened earlier in 2023.
Expanding your base, but am I correct with regards to your answer there that this is something that you're evaluating with the idea that you all put that capacity in place in 25 not in 'twenty four.
Well you.
Actually we put some of it in place in 2023, so we expanded our Romanian.
Fabrication plant in 2023 to fee growth and so our year over year, our units produced increased about 7%.
In Italy and <unk>.
<unk> finished products that were delivered to the market I remember, Italy was operating in systems that were originally designed decades ago. So they were really handicapped with the operating system that they were using and we updated them, giving them contemporary technology.
And a modern ERP with regard to schedule output and that happened earlier in.
In 2023.
Those benefits are in place from a process standpoint, we increased a little bit of production capacity in Romania will continue with that production capacity in 2024, and 25, but there'll be a step gross.
That will be announcing sometime after 2024, we can look at with regard to expansion.
And forgive all the words that I, what I don't want to make sure we're clear on this.
When we evaluated our strategy we looked at most of our products in general are footprint allowed for as much as 30% growth in our current factories.
Michael David Zabran: So those benefits are in place from a process standpoint. We increased a little bit of production capacity in Romania. We'll continue with that production capacity in 2024 and 2025, but there will be step growth that we'll be announcing sometime after 2024 with regard to expansion. Forgive all the words, but I want to make sure we're clear on this.
What needed to happen as we needed to have a production systems that would facilitate that growth with better scheduling and of course, those things were offset with the headwinds of the supply chain dramas.
Post pandemic issues that all manufacturers are dealing with.
We're moving through that process in a really good pace now.
And we've moved our attention toward our longer term growth, including.
Michael David Zabran: When we evaluated our strategy, we looked at most of our products. In general, our footprint allowed for as much as 30% growth in our current value. What needed to happen is production systems that would facilitate that growth with better scheduling. And, of course, those things were offset by the headwinds of supply chain dramas and post-pandemic issues that all manufacturers are dealing with. We're moving through that process at a really good pace now, and we've moved our attention toward longer-term growth, including factory expansion to facilitate that. Did that help, Ted? I hope that clarifies it better. It does.
Factory expansion to consolidate that.
That helps and I hope that clarifies it better.
It does and honestly, it's a great segue into it.
It's a little bit of.
Sloppy question, a very simple question, but it does actually have some relevance to me.
We've talked you talked about it in the presentation of adding into the rental fleet. So.
And then as you know I pay a lot of attention to free cash flow. So Joe it's really more to you and maybe to you too Mike, but I'm curious as to what the.
Target is for 2020 for Capex.
And then given the fact that you're looking to.
<unk> increased.
Increased production capacity in 2025.
Joseph R. Doolan: And, you know, honestly, it's a great segue into, you know, it's a little bit of a sloppy question or a simple question, but it does actually have some relevance to me. You know, we've talked, you talked about in the presentation about adding vehicles to the rental fleet. So, and then, as you know, I pay a lot of attention to free cash flow. So, Joe, it's really more to you and maybe to you too, Mike. But I'm curious as to what the, and then, given the fact that you're looking to, you know, increase production capacity in 2025, I know it's a long way out, but it is important maybe some color on how you're thinking about 2025 CAPEX with, you know, kind of that in the backdrop. Yeah, so, so I'll start with it, Mike. And if you want to add something, that's fine.
It's a long way out but it is important maybe some color on how youre thinking about 2025, capex with the kind of that in the backdrop.
Yeah. So.
I'll start with it Mike and if you want to add Thats fine Ted Ted we've talked about the Capex and as we said you know we took a little bit of a pause on rayburn in 2023.
But we're seeing a lot of growth coming out of the Lubbock facility as well as out of Amarillo. So we're looking at probably total capex in 2024, roughly $10 million most of that was going to be allocated to build.
Building up the rental fleet for the Rayburn business.
We'll deploy a little bit of Capex.
And the other two businesses and PM and Manitex in 2024.
But then we will evaluate what that means in 2025 based on what our growth needs would be at that point in time.
Joseph R. Doolan: You know, Ted, Ted, we've talked about the CapEx. And as we said, we took a little bit of a pause on Rayburn in 2023, but we're seeing a lot of growth coming out of the Lubbock facility as well as out of Amarillo.
And then but I mean.
Go ahead Ted.
Just to say you know I guess, what im asking really that 25 is more that you know I assume if youre going to be increasing your manufacturing capacity that theres. Good that's going to cost some amount of money. So.
I mean, it may be your check we're not prepared to talk about but you understand why im asking.
Joseph R. Doolan: So we're looking at probably total CapEx in 2024, roughly 10 million; most of that is going to be allocated to building up the rental fleet for the Rayburn business. We'll deploy a little bit of cat back in the other two businesses, in PM and in Manitex, in 2024. But then we'll evaluate what that means in 2025 based on what our growth needs will be at that point in time. And then, but I mean... Quiet, Ed.
Well we're not.
I appreciate your question and I think that's really fair.
The honest truth is.
We don't have the footprint expansion.
To a position where we're prepared to talk about those accurately.
We are expecting expansion through equipment and production. So you know.
And the last two years, we have made some modest capex improvements with regard to robotic tooling.
And robotic tooling directly correlates to throughput from an efficiency standpoint, and a timing standpoint.
Michael David Zabran: Oh, I was just going to say, you know, I guess what I'm asking really about 25 is more about, you know, I assume if you're going to be, you know, increasing your manufacturing capacity, that there's going to be, that's going to cost some amount of money. So, you know, I mean, and maybe it's like we're not prepared to talk about it, but you understand why I'm asking. Well, we're not, um, I appreciate the question, and I think it's really fair. Uh, the honest truth is, um. We don't have the footprint expansions to a position where we're prepared to talk about those accurately, but we are expecting expansion through equipment and production. So, you know, in the last two years, we've made some modest CapEx improvements with regard to robotic tooling. Robotic tooling directly correlates to throughput from an efficiency standpoint and a timing standpoint.
And we have more of those planned scheduled in 2000 late 2024 late in.
In 2025.
We are so we have Oh this is gonna sound about as firm as jello, So I apologize about that.
We have some very interesting ideas, we just haven't tested them fully and I'm reluctant to release them until we.
We have the full understanding of the plan.
But the beauty of our manufacturing business.
By design is it's Capex light and it's one of the things that we like about it.
And it's not working capital light, we saw that last year, where their inventory.
Thankfully is coming down and that's going to have a direct correlation to.
Debt repayment and making the business, even further efficient along those lines, but capital improvement the business model is attractive because it.
It is lighter than others, and certainly lighter than the rental segment.
Yeah.
Okay.
Michael David Zabran: And we have more of those plans scheduled in late 2024 and late 2035, in 2025. Um, we have, and this is going to sound about as firm as Jell-O, so I apologize about that. We have some very interesting ideas; we just haven't tested them fully, and I'm reluctant to release them until we have the full understanding of the plan, but the beauty of our manufacturing business, by design, is that it has a low capex. And it's one of the things that we like about it. And it's not working capital light.
Just two more questions and I'll get out of the way.
The simple one is you know in the past take this quarter aside we've kind of been looking at a 28%.
Tax rate within the model and so it's simpler question is does that hold as we think about 2024.
Yes.
I think it does Ted you know this year was was incredibly corky because of the releasing the valuation allowance that we had but I think that that's probably our best estimate at this point.
Because of the impact of the foreign income on the U S tax.
It gets a little dicey, but I would use 28% return.
I think thats the best estimate we can come up.
Michael David Zabran: We saw that last year with our inventory, which thankfully is coming down, and that's going to have a direct correlation to debt repayment and making the business even more efficient along those lines. But capital improvement, the business model is attractive because it is lighter than others and certainly lighter than the rental segment. Okay, I've got two more questions, and I'll get out of the way. The simple one is, you know, in the past, take this quarter aside, we've kind of been looking at a 28% tax rate within the model. And so the simpler question is, does that hold as we think about 2024? I think it does, Ted.
Okay. Thanks, and then my last one is.
Backlog is elevated still even though it's trending down I mean do you see I mean, given you say nine months or more.
Sales and backlog that win.
We get to the back half of 'twenty for that we'll see kind of a stabilization.
<unk>, if you would with regards to back log relative to for lack of a better term kind of lift truck area of revenue.
Called makeup well go with kind of maybe one or a little above as we get to the back half of this year.
Yeah. So so we we think well first of all we're thrilled with the growth of the business our backlog.
Historically elevated if we look back and take the pandemic out of the equation and go back 10 years.
Joseph R. Doolan: You know, this year was incredibly quirky because of the release of the valuation allowance that we had, but I think that that's probably a best estimate at this point, you know, because of the impact of the foreign income on the U.S. tax. It gets a little dicey, but I would use a 28% return. I think that's the best estimate we can come up with. Okay, thanks. And then my last one is, you know, the backlog is elevated still, even though it's trending down. I mean, do you see, you know, given you say nine months of sales and backlog, that when we get to the back half of 24, we'll see kind of a stabilization, if you would, with regard to backlog relative to, for lack of a better term, you know, kind of lift truck aerial revenue. You know, call them like a push and build kind of maybe one or a little above as we get to the back half of this year.
This is a business that generally doesn't have.
Nine to 10 months worth of backlog at its disposal, let alone a year as we did.
Roughly a year ago, so what's happened with the backlog as we're becoming more efficient and addressing it faster.
Which is a good thing.
The second issue with our backlog as we become by design, we've become more selective so we have eliminated certain.
Segments of our products that had <unk>.
Marginal performance than what we wanted and we're selling into more of a selective market than we had in the past we were doing that to improve our overall margins.
And the EBITDA generated by our operations.
So those two things have changed the backlog a little a little bit.
Michael David Zabran: Yeah, so we think, well, first of all, we're thrilled with the growth of the business. Our backlog is historically elevated. You know, if we look back and take the pandemic out of the equation and go back 10 years.
The other thing quite frankly is something that's.
<unk> become a little cautious with regard to interest rates and other segments are moving ahead pretty boldly so the industrial segments.
Michael David Zabran: This is a business that generally doesn't have nine to 10 months worth of backlog at its disposal, let alone a year, as we did roughly a year ago. So what's happened with the backlog is we're becoming more efficient in addressing it faster, which is a good thing. The second issue with our backlog is that, by design, we've become more selective. So we have eliminated certain segments of our products that had lower marginal performance than what we wanted, and we're selling into more of a selective market than we have in the past. We're doing that to improve our overall margins and the EBITDA generated by our operation. So those two things have changed the backlog a little bit. I've become a little cautious with regard to interest rates, and other segments are moving ahead pretty boldly.
Government works highways power generation and we put this in our press release, I'm really really happy with how those are working.
I mentioned in the last call.
In mid year last year, it was uncomfortable for us to have.
The length of the backlog not the size, but the lengths because.
From the time you take the order and then you produced the order a lot of variables have changed and we're working hard to shorten the delivery time, which improves customer satisfaction and improves our margin profile.
So in summary for 2024, we feel very comfortable and confident.
In how we're looking at the year and we've got a really good line of sight for the business that's in hand.
We feel very comfortable with how our products are performing.
Michael David Zabran: So the industrial segments, government works, highways, power generation, and we put this in our press release. We're really, really happy with how those are working. I mentioned in the last call, in mid-year last year, it was uncomfortable for us to have the length of the backlog, not the size, but the length because, from the time you take the order and then you produce the order, a lot of variables have changed.
Our dealers are performing in the markets with regard to their demand for what we're doing.
And.
But I.
I would be.
I would be more comfortable with something that's closer to about six months worth it for our production capacity just because we can satisfy our customers quicker.
And the margin profiles are sustained.
Michael David Zabran: And we're working hard to shorten the delivery time, which improves customer satisfaction and improves our margin profile. So, in summary, for 2024, we feel very comfortable and confident in how we're looking at the year, and we've got a really good line of sight for the business that's in hand. We feel very comfortable with how our products are performing, and our dealers are performing in the markets with regard to their demand for what we're doing, but I would be more comfortable with something that's closer to about six months worth of our production capacity, just because we can satisfy our customers quicker, and the margin profiles are sustained. And so, again, I'm being very verbose here, but there are some manufacturers that are taking orders and then pricing them at delivery
So again I'm being very verbose here, but there are some manufacturers.
We're taking orders and then pricing them at delivery.
And we didn't do that we added some surcharges are painful discussion to have with your customers.
But pricing them that delivery is actually a point of pain for a lot of our competitors right now and we've been trying to be as fair with our customers as possible and the terrific set of markets and most of those challenges.
Have normalized.
In the last year.
Which positions us pretty well so I hope that answers your question Ted.
Where you know in talking to US is that we're always a little more conservative than some people want us to be in.
And we're cautious and careful in what we say.
But Joe and I and the management team are really looking forward to 2024, and what's happening within our markets and how this business is performing.
Michael David Zabran: And we didn't do that. We added some surcharges, and that's a painful discussion to have with your customers. But pricing them at delivery is actually a point of pain for a lot of our competitors right now. And we've been trying to be as fair with our customers as possible in a horrific set of markets. And most of those challenges have normalized in the last year, which positions us pretty well.
Okay, well again, congrats on the quarter. Thanks for answering all my questions.
Ill leave the questions to others now thank you.
Thanks, Ed.
Thank you and we have reached the end of the question and answer session I will now turn the call back over my.
My coffee for closing remarks.
Thanks, very much operator, and just a closing comment of thanks to our investors.
That put their faith in our business and have stayed with us for such a long time, we really appreciate that and want to thank you.
Edward Randolph Jackson: So, I hope that answers your question, Ted. You know, when talking to us, we're always a little more conservative than some people want us to be, and we're cautious and careful in what we say. But Joe and I and the management team are really looking forward to 2024 and what's happening within our markets and how this business is performing. Well, again, congratulations on the quarter. Thanks for answering all my questions, and I'll leave the questions to others now.
Some of you we look forward to visiting with it Ross in just a few weeks out in California, and Joe and I will be out there and we hope to see you all personally and with that we'd like to conclude our call and wish everyone. The best of year. Thank you.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
Yeah.
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Yeah.
Yeah.
Michael David Zabran: Take care. Thanks. Thank you. And we have reached the end of the question and answer session. I'll now turn the call back to Mike Coffey for the program. Thanks very much, operator, and just a closing comment of thanks to our investors who have put their faith in our business and have stayed with us for such a long time. We really appreciate that and want to thank you. Some of you, we look forward to visiting with at Roth in just a few weeks out in California. And Joe and I will be out there, and we hope to see you all personally.
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Operator: And with that, we'd like to conclude our call and wish everyone the best of the year. Thank you. This concludes today's conference, and you may disconnect your lines at this time.
Yeah.
Operator: Thank you for your participation. [inaudible] The Ultimate Parody Site! Copyright 2021 Mooji Media Ltd. All Rights Reserved. The Bulletproof Executive 2013, [inaudible] Bye! [inaudible] BF-WATCH TV 2021, The Ultimate Parody Site! BF-WATCH TV 2021,...... The Ultimate Parody Site! The Bulletproof Executive, 2013
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