Q1 2024 The Manitowoc Company Inc Earnings Call
Good morning, Ladies and gentlemen, my name is Abby and I will be your conference operator today.
Operator: Good morning, ladies and gentlemen. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Manitowoc First Quarter 2024 Earnings Conference Call. And I would now like to turn the call over to Ion Warner, Senior Vice President, Marketing and Investor Relations. You may begin your conference.
Ion M. Warner: At this time I would like to welcome everyone to the Manitowoc first quarter 2024 earnings conference call.
Operator: I would now like to turn the call over to Ion Warner Senior Vice President marketing and Investor Relations you May begin your conference.
Ion M. Warner: Good morning, everyone and welcome to the Manitowoc Conference call to review the company's first quarter 2024 financial performance and business update as outlined in last evening's press release participating.
Ion M. Warner: Good morning, everyone, and welcome to the Manitowoc conference call to review the company's first quarter 2024 financial performance and business update, as outlined in last evening's press release. Participating on the call today are Aaron Ravenscroft, President and Chief Executive Officer, and Brian Regan, Executive Vice President and Chief Financial Officer. Today's webcast includes a slide presentation, which can be found in the investor relations section of our website under events and presentations. We will reserve time for questions and answers after our prepared remarks. I would like to request that you limit your questions to one and a follow-up and return to the queue to ensure everyone has an opportunity to ask their question. Please turn to slide 2.
Ion M. Warner: Participating on the call today are Aaron Ravenscroft, President and Chief Executive Officer, and Brian Regan Executive Vice President and Chief Financial Officer.
Ion M. Warner: Today's webcast includes a slide presentation, which can be found in the Investor Relations section of our website under events and presentations.
Ion M. Warner: We will reserve time for questions and answers after our prepared remarks.
Ion M. Warner: I would like to request that you limit your questions to one and a follow up and return to the queue to ensure everyone has an opportunity to ask their questions.
Ion M. Warner: Please note our safe harbor statement in the materials provided for this call. During today's call, forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied or actual projections due to one or more of the factors, among others, described in the company's latest SEC filings. The Manitowoc Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or other circumstances. And with that, I'll now turn the call over to Aaron.
Ion M. Warner: Please turn to slide two please note our safe Harbor statement in the material provided for this call. During today's call forward looking statements as defined in the private Securities Litigation Reform Act of 1095 are made based on the company's current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied or actual project.
Aaron: <unk> due to one or more of the factors among others described in the Companys latest SEC filings.
Aaron: The Manitowoc company does not undertake any obligation to update or revise any forward looking statement, whether the result of new information future events or other circumstances and with that I'll now turn the call over to Eric. Thank.
Aaron H. Ravenscroft: Thank you, Ion, and good morning, everyone. Please turn to slide 3.
Aaron: Thank you Ian and good morning, everyone. Please turn to slide three.
Aaron H. Ravenscroft: Today I'd like to start with my update on market conditions. Our orders for the first quarter were up 6% year over year. Overall, Black Dog ended the period at a strong $971 million.
Aaron: Today I'd like to start with my update on market conditions, our orders for the first quarter were up 6% year over year total backlog ended the period at a strong $971 million.
Aaron H. Ravenscroft: In the U.S., clean activity around the country remains strong, and utilization and rental rates continue to hold up. And although the short-term outlook is a bit mired in the election cycle, the overall outlook remains positive. With this in mind, I recently spent a day with the owner of a large crane rental house who's been in the business for more than 50 years. And he told me that he's seeing more work coming than he's ever seen.
Aaron: In the U S screen activity around the country remains strong utilization and rental rates continue to hold up and other short term is a bit mired by the election cycle. The overall outlook remains positive.
Aaron H. Ravenscroft: For some perspective I recently spent a day with the owner of a large crane rental house. He has been in the business for more than 50 years.
Aaron H. Ravenscroft: And he told me that he is seeing more work coming than he has ever seen.
Aaron H. Ravenscroft: Of course, we all see the announcements around new semiconductor projects, but this fellow indicated that data storage centers, rail, and power generation were driving his regional market. It'll be interesting to see how this plays into decision-making over the next couple of quarters.
Aaron H. Ravenscroft: Of course, we all see the announcements around new semiconductor projects, but this fellow indicated that data storage centers rail and power generation, we're driving his regional market.
Aaron H. Ravenscroft: It'll be interesting to see how this plays into decision making over the next couple of quarters, but I view, the medium and long term outlook in the U S favorably.
Aaron H. Ravenscroft: But I view the medium and long-term outlook in the U.S. favorably. Turning to Europe, the tower crane market remains very challenging. Our machine orders for tower cranes decreased 34% during the first quarter of 2024.
Aaron H. Ravenscroft: Turning to Europe, the powertrain market remains very challenging our machine orders for tower cranes decreased 34% during the first quarter of 2024, our data suggests that the tower Crane market is operating at 2009 levels. In spite of this difficult environment for machine orders, our aftermarket sales have held up relatively steady.
Aaron H. Ravenscroft: Our data suggests that the tower crane market is operating at 2009 levels. In spite of this difficult environment for machine orders, our aftermarket sales have held up relatively steady. The CECE, or Committee for European Construction Equipment, recently published its annual economic report.
Aaron H. Ravenscroft: The CE CE or committee for European construction equipment recently published our annual Economic report. The report suggests that the overall European construction market will stabilize in 2024 and start to recover in 2025, driven by government investment in renewable energies and industrial infrastructure.
Aaron H. Ravenscroft: The report suggests that the overall European construction market will stabilize in 2024 and start to recover in 2025, driven by government investment in renewable energies and industrial infrastructure. In addition, there is a huge housing shortage, and we have already seen some of the large crane rental houses start to sell off their older assets outside of the region. Finally, I would add that the comparables should start to get easier in the third quarter, which is normally the basis for recovery. There's no doubt that mortgage rates have been far more inelastic in Europe than they have been in the United States. The current mortgage rate in France is around 4%.
Aaron H. Ravenscroft: In addition, there is a huge housing shortage and we have already seen some of the large crane rental houses start to sell off their older assets outside of the region.
Aaron H. Ravenscroft: Finally, I would add that the comparables should start to get easier in the third quarter, which is normally the basis for a recovery.
Aaron H. Ravenscroft: There is no doubt that mortgage rates have been far more inelastic in Europe than they've been in the United States. The current mortgage rate in France is around 4% I believe that even a modest reduction in these rates would provide some relief and a basis for recovery in the residential end market.
Aaron H. Ravenscroft: I believe that even a modest reduction in these rates would provide some relief and a basis for recovery in the residential and construction markets. As it relates to mobile cranes, demand in Europe is stable. We have certainly seen a wide variety of behavior from customers across Europe, but on the whole, activity is positive. Italy and Poland have been particularly good for us, and we saw some green shoots in France during April.
Aaron H. Ravenscroft: As it relates to mobile cranes demand in Europe is stable, we are surely seen a wide variation of behaviors from customers across Europe, but on the whole activity as positive.
Aaron H. Ravenscroft: Italy, and Poland have been particularly good for us and we saw some green shoots in France during April.
Aaron H. Ravenscroft: Utilization remains good at the crane rental houses, and folks are actively managing their fleet. Heading into the next couple of quarters, we have a pretty strong order book, which is always a good sign. Moving to the Middle East, our orders for the first quarter increased more than 10% year-over-year.
Aaron H. Ravenscroft: Utilization remains good at the Crane rental houses and folks are actively managing their fleets.
Aaron H. Ravenscroft: Heading into the next couple of quarters, we have a pretty strong order book, which is always a good sign.
Aaron H. Ravenscroft: Moving to the Middle East our orders for the first quarter increased more than 10% year over year.
Aaron H. Ravenscroft: Coating activity remains at an all-time high, driven by investments in Saudi Vision 2030 and Qatar's Northfield Expansion Project for natural gas. Although the timing of big orders isn't always easy to forecast in this region, the strong demand is broad-based in nature, and we expect this to continue for the foreseeable future. Not surprisingly, however, Chinese competition in the Middle East has started to heat up, and we're starting to see pricing pressure. Lastly, Asia-Pacific remains dominated by the storm clouds over China's construction markets.
Aaron H. Ravenscroft: Coating activity remains at an all time high driven by investments in Saudi vision 2030, <unk> North field expansion project for natural gas.
Aaron H. Ravenscroft: Although the timing of big orders isn't always easy to forecast in this region with strong demand is broad based in nature and we expect this to continue for the foreseeable future.
Aaron H. Ravenscroft: Not surprisingly however, Chinese competition in the Middle East has started to heat up and we're starting to see pricing pressure.
Aaron H. Ravenscroft: Lastly, Asia Pacific remains dominated by the storm clouds over China's construction market.
Aaron H. Ravenscroft: We've seen some bright spots in Hong Kong and Singapore. In South Korea, the tower crane market has slowed, but it's been offset by good demand in the mobile crane market. And lastly, Australia continues to chug along. Please move to slide four.
Aaron H. Ravenscroft: Although we've seen some bright spots in Hong Kong, and Singapore, and South Korea. The tower Crane market has slowed but then offset by good demand in the mobile Crane market and lastly, Australia continues to chug along.
Aaron H. Ravenscroft: Please move to slide four.
Aaron H. Ravenscroft: Just to briefly touch on the Manitowoc way, I visited our French facilities a couple weeks ago, and they've never looked better. In spite of the volume reductions, the team remains extremely motivated, and I'm very proud of how they continue to manage the things that they can control in a very difficult environment. On this slide, I've shown three great achievements at our Shire Youth Factory. At Manitowoc, we always strive to eliminate forklifts from our plans to improve safety.
Aaron H. Ravenscroft: Just to briefly touch on the Manitowoc way I visited our French facilities, a couple of weeks ago, and they've never looked better in spite of the volume reductions the team remains extremely motivated and I'm very proud of how they continue to manage the things that they can control in a very difficult environment.
Aaron H. Ravenscroft: On this slide I've shown three great achievements at our <unk> factory.
Aaron H. Ravenscroft: Our Manitowoc, we always strive to eliminate forklifts at our plants to improve safety given the size of our parks there isn't always a good alternative as you can see in the fixed on the left however, the team is now using some very basic equipment to move large mass on the shop floor, which eliminates the hazards created by forklifts.
Aaron H. Ravenscroft: Given the size of our parts, there isn't always a good alternative. As you can see in the picture on the left, however, the team is now using some very basic equipment to move large masses from the shop floor, which eliminates the hazards created by forklifts. The center picture shows a drum that the team developed in three months. This will be the heart and soul of the large 64-meter-ton muffing crane that the team is developing to serve major Saudi projects and future European nuclear projects.
Aaron H. Ravenscroft: The center picture shows a drum that the team developed in three months. This will be the heart and soul of the large 64 meter ton morphine claim that the team is developing to serve major Saudi projects in future European nuclear projects.
Aaron H. Ravenscroft: And lastly, the picture on the right is a remanufactured mask with a large top-sewing crank. A key differentiating factor for POTON cranes is that we use a pin system to erect and assemble masks, which is significantly faster than the typical bolt system that our competitors use. These pinholes wear out over time. Since the team started on this initiative roughly 12 months ago, they've been able to reduce our cost for re-manufactured masks by 56%. This is quickly becoming a viable aftermarket product offering that we've dreamed about for more than 25 years. With that, I'll pass it over to Brian for a financial update.
Aaron H. Ravenscroft: And lastly, the picture on the right is a remanufactured mass where large top swing crane.
Brian: A key differentiating factor for proton cranes that we use a pen system to erect and assemble masks, which is significantly faster than the typical bolt system that our competitors use these pinholes wear out overtime.
Brian: The team started on this initiative roughly 12 months ago, they have been able to reduce our cost for remanufactured masked by 56%. This.
Aaron H. Ravenscroft: This is quickly becoming a viable aftermarket product offering that we have dreamed about for more than 25 years with that I'll pass it over to Brian for a financial update.
Brian P. Regan: Thanks, Aaron. And good morning, everyone. Please move to slide five. From an overall perspective, the first quarter results were in line with our expectations. During the period, we had orders of $554 million, an increase of 6% from a year ago, bringing our March 31st backlog to $971 million. Higher order intake was primarily driven by the European mobile.
Brian: Thanks, Aaron and good morning, everyone. Please move to slide five.
Brian P. Regan: From an overall perspective, our first quarter results were in line with our expectations.
Brian P. Regan: During the period, we had orders of $554 million, an increase of 6% from a year ago, bringing our March 31 backlog to $971 million.
Brian P. Regan: The higher order intake was primarily driven by the European mobile business.
Brian P. Regan: Net sales in the quarter were $495 million, a decrease of 3% from a year ago. The year-over-year decrease was primarily driven by continued softness in our European tower crane business. This impact was partially offset by the Americas and the European mobile currency. Our non-new machine sales were $145 million, relatively flat year-over-year. MGX, our in-house distribution business, continues to grow its aftermarket.
Brian P. Regan: Net sales in the quarter were $495 million, a decrease of 3% from a year ago. The year over year decrease was primarily driven by continued softness in our European tower Crane business.
Brian P. Regan: This impact was partially offset by the Americas and the European mobile Crane business.
Brian P. Regan: Our non new machine sales were $145 million relatively flat year over year <unk>. Our in house distribution business continues to grow its aftermarket however, <unk> sales in our traditional OE business were down modestly.
Brian P. Regan: However, new sales in our traditional OE business were down modestly. SG&A expenses were $76 million, or 15% as a percentage of sales, and relatively flat year-over-year. Our adjusted EBITDA for the first quarter was $31 million, a decrease of 31% year-over-year. The adjusted EBITDA margin was 6.3%, a decrease of 260 basis points over the prior year due to unfavorable product... The European tower crane market continues to be a headwind with a year-over-year impact to adjust to EBITDA of approximately $20 million.
Brian P. Regan: SG&A expenses were $76 million or 15% as a percentage of sales and relatively flat year over year.
Brian P. Regan: Our adjusted EBITDA for the first quarter was $31 million.
Brian P. Regan: A decrease of 31% year over year.
Brian P. Regan: The adjusted EBITDA margin was six 3% a decrease of 260 basis points over the prior year due to unfavorable product mix.
Brian P. Regan: European Tower Crane market continues to be a headwind with a year over year impact to adjusted EBITDA of approximately $20 million.
Brian P. Regan: This was partially offset by incremental shipments from the rest of the business. As we have stated in previous calls, power cranes sold into Europe represent our highest-margin product, and unfortunately, our European factories also have the least flexible overhead structure, resulting in weak absorption of fixed costs as volumes decline. Our GAAP diluted income per share in the quarter was $0.12. On an adjusted basis, diluted income per share was $0.14, a decrease of $0.32 from the prior year. Please turn to slide six.
Brian P. Regan: This was partially offset by incremental shipments from the rest of the business as we have stated in previous calls powertrain sold into Europe represent our highest margin product and unfortunately, our European factories also have the least flexible overhead structures, resulting in weak absorption of fixed costs as volumes decline.
Brian P. Regan: Our GAAP diluted income per share in the quarter was <unk> 12 on.
Brian P. Regan: On an adjusted basis diluted income per share was <unk> 14.
Brian P. Regan: A decrease of 32 from the prior year.
Brian P. Regan: Please turn to slide six.
Brian P. Regan: Net working capital ended the quarter at $509 million, although our accounts receivable ended higher than we anticipated due to the timing of the Easter holiday.
Brian P. Regan: Networking capital ended the quarter at $509 million, and our accounts receivable ended higher than we anticipated due to the timing of the Easter holiday. The main driver for our increase in working capital is inventory. While we have our normal seasonality with line starts relative to our build schedule, the single largest growth in inventory, whether it be year-over-year or versus year-end, is in our internal distribution channels. Our build schedule for these businesses was more heavily weighted in the first half, giving us more flexibility to ship products in the second half.
Brian P. Regan: The main driver for our increase in working capital as inventory.
Brian P. Regan: We have our normal seasonality was one starts relative to our build schedule the single largest growth in inventory, whether it be year over year versus year end within our internal distribution channel.
Brian P. Regan: Our build schedule for these businesses was more heavily weighted in the first half, giving us more flexibility to ship products in the second half we expect to work our inventory down significantly by the end of the year.
Brian P. Regan: We expect to work our inventory down significantly by the end of the year. Moving to cash flows, we used $31 million of cash for operating activities during the quarter. Capital expenditures were $12 million, of which $6 million was for our rental. We ended the quarter with a cash balance of $32 million. Total outstanding borrowings under the ABL increased by $14 million during the quarter, leaving $74 million outstanding.
Brian P. Regan: Moving to cash flows we used $31 million of cash for operating activities during the quarter.
Brian P. Regan: Capital expenditures were $12 million.
Brian P. Regan: Of which $6 million was for our rental fleet.
Brian P. Regan: We ended the quarter with a cash balance of $32 million.
Brian P. Regan: Total outstanding borrowings under the ABL increased $14 million during the quarter, leaving $74 million outstanding.
Brian P. Regan: Our net leverage ratio was 2.4 times, well under the targeted three times, and total liquidity was $233 million. With that, I will now turn the call back to Aaron. Thank you, Brian. Please move to slide 7. Next week, Manitowoc is
Brian P. Regan: Our net leverage ratio was two four times well under the targeted three times and total liquidity was $233 million with that I will now turn the call back to Aaron. Thank you Brian Please move to slide seven.
Aaron H. Ravenscroft: Thank you, Brian. Please move to slide 7. Next week, Manitowoc is holding a Train Days event at our Shady Grove factory, where we expect to host more than 1,000 visitors. This is always a great opportunity to showcase our new technology, our latest aftermarket initiatives, and, of course, new cranes. We'll display 34 machines at the event, of which five will be new unveilings. Over the last couple of quarters, we've been very focused on integrating our dealer acquisitions and growing our aftermarket.
Aaron H. Ravenscroft: Next week Manitowoc is holding our crane days event at our Shady Grove factory, where we expect to host more than 1000 visitors.
Aaron H. Ravenscroft: As always a great opportunity to showcase our new technology, our latest aftermarket initiatives and of course, new cranes will display 34 machines at the events of which five will be new unveilings.
Aaron H. Ravenscroft: Over the last couple of quarters, we've been very focused on integrating our dealer acquisitions and growing our aftermarket and I think this is an appropriate time to remind everyone. Just how much we've done in terms of innovation without much fanfare.
Aaron H. Ravenscroft: And I think this is an appropriate time to remind everyone just how much we've done in terms of innovation without much fanfare. Since 2021, we've launched 29 new or refreshed crane models, and here are a few highlights. Firstly, we developed RopeConnect and PotonConnect telematic solutions with a suite of remote diagnostic and troubleshooting capabilities.
Aaron H. Ravenscroft: Since 2021, we've launched 29, new or refreshed crane models and here's a few highlights.
Aaron H. Ravenscroft: Firstly, we developed growth connect in proton connect telematics solutions with a suite of remote diagnostic and troubleshooting capabilities.
Aaron H. Ravenscroft: To date, over 2,500 cranes have been equipped with this capability. Next, we launch two new truck-mounted cranes and a new boom truck that specifically serve the U.S. taxi market. Aligned with our breakthrough initiative to drive new product development for all terrain cranes, we've launched nine new or refreshed models. We continue to push forward to commercialize models with our hybrid technology. With respect to our breakthrough initiative to grow cells in the Belt and Road region, our team in China has launched eight new tower-connected models in record time.
Aaron H. Ravenscroft: To date over 2500 trains have been equipped with this capability.
Aaron H. Ravenscroft: Next we launched two new truck mounted cranes, and a new boom truck that specifically serve the U S taxi market.
Aaron H. Ravenscroft: Aligned with our breakthrough initiatives to drive new product development for all three trains we've launched nine new or refreshed models, we continue to push forward to commercialize models with our hybrid technology.
Aaron H. Ravenscroft: With respect to our breakthrough initiatives to grow sales in the belt and road region. Our team in China has launched eight new tower Crane and models in record time.
Aaron H. Ravenscroft: Most recently, we launched the MCR-325 and MCR-625, which are key luffing cranes to serve the Belton Road region. Lastly, for European Power Cranes, we launched seven new models. Most notably, we started to incorporate CCS, our crane control system, into our Proton Luffing Cranes, which provides a better load chart and simplified operation. In addition, we've begun to introduce our EV crane. This is our next generation of self-erecting cranes, which meet the new European safety standards and come with added features like POTON Connect, providing extensive heat management functionality and remote or local troubleshooting capabilities with a smart.
Aaron H. Ravenscroft: Most recently, we launched the <unk> hundred 25, an NCR 65, which are key laughing cranes to serve the belt and road region.
Aaron H. Ravenscroft: Lastly, our European Tower cranes, we launched seven new models, most notably we started to incorporate Ccs our crane control system into our proton muffin cranes, which provides a better load charts and simplified operations and.
Aaron H. Ravenscroft: In addition, we began to introduce our EV Crane. This is our next generation of self erecting cranes, which meet the new European safety standards and come with added features like proton connect providing extensive management functionalities and remote or local troubleshooting capabilities with a smartphone.
Aaron H. Ravenscroft: In closing as we expected the slowdown in the European Tower Crane businesses is dampening our profitability in the short term and we will continue to battle the situation for the balance of the year.
Aaron H. Ravenscroft: In closing, as we expected, the slowdown in the European tower crane business is dampening our profitability in the short term, and we will continue to battle this situation for the balance of the year. Fortunately, although it's difficult to see in our results, the early gains from our Crane Plus 50 initiative to grow our aftermarket are helping us manage through the cycle. On the one hand, our aftermarket business in the European tower crane market is proving to be far more resilient in spite of the depressed market for new machines.
Aaron H. Ravenscroft: Fortunately, although it's difficult to see in our results. The early gains from our <unk> initiatives to grow our aftermarket is helping us manage through the cycle.
Aaron H. Ravenscroft: On the one hand, our aftermarket business in the European Tower Crane market is proving to be far more resilient in spite of the depressed market for new machines.
Aaron H. Ravenscroft: On the other hand, our dealer acquisitions from a few years ago continue to grow and exceed our expectations. We didn't expect to break the impact of the crane cycle in three years, but our crane subsistence strategy is bearing fruit. Overall, orders remain very strong, and we see good signs of pent-up demand around the globe. We're already seeing projects move in Saudi Arabia, and we are slowly but surely starting to see signs that the U.S. infrastructure and semiconductor bills are moving.
Aaron H. Ravenscroft: On the other hand, our dealer acquisitions for a few years ago continue to grow and exceed our expectations.
Aaron H. Ravenscroft: We didn't expect to break the impact of the crane cycle in three years, where our <unk> strategy is bearing fruit.
Aaron H. Ravenscroft: Overall orders remained very strong and we see good signs of pent up demand around the globe.
Aaron H. Ravenscroft: We're already seeing projects move in Saudi Arabia, and we're slowly, but surely starting to see signs that the U S infrastructure and semiconductor builds are moving.
Aaron H. Ravenscroft: Concurrently, many of the large crane rental houses around the world have been very focused on reducing the age of their fleets for the first time in my eight-year tenure. In the meantime, we remain focused on controlling the things that we can control, which include, number one, leaning into the Manitowoc way to reduce our inventory and generate cash. Number two, executing our Clean Specificity Strategy to get closer to our customers and increase our aftermarket.
Aaron H. Ravenscroft: Concurrently many of the large crane rental houses around the world have been very focused on reducing the age of their fleets for the first time in my eight year tenure.
Aaron H. Ravenscroft: In the meantime, we remain focused on controlling the things that we can control which include <unk>.
Aaron H. Ravenscroft: Number one leaning into the Manitowoc way to reduce our inventory and generate cash number two executing our haynesville city strategy to get closer to our customers and increase our aftermarket.
Aaron H. Ravenscroft: And number three, doing what we've always done, engineering, manufacturing, and selling the best cranes in the industry, which we'll showcase at Crane Days next week. Before we hand this over to the operator, I would like to thank the Manitowoc team. Over the last couple of years, it seems like we've drifted from one crisis to the next. Whether it be COVID, inflation, an unexpected geopolitical calamity, or a bridge accident that shuts down our main port of entry into the U.S., the team always steps up and tackles the problems head-on. I would just like to express my heartfelt gratitude to our employees for their endless commitment and dedication to the company. Thank you. With that, Operator, please open the lines for questions.
Aaron H. Ravenscroft: And number three doing what we've always done engineering manufacturing and selling the best screens in the industry, which will showcase at Crane days next week.
Aaron H. Ravenscroft: Before we hand, it over to the operator I would like to thank the Manitowoc team.
Aaron H. Ravenscroft: Over the last couple of years it seems like we've drifted from one crisis to the next.
Aaron H. Ravenscroft: Whether it be COVID-19 inflation, and unexpected geopolitical calamity or a bridge accident that shutdown our more main port of entry into the U S. The team always steps up and tackles, the problems head on.
Aaron H. Ravenscroft: I would just like to express my heartfelt gratitude to our employees for their endless commitment and dedication to the company. Thank you.
Aaron H. Ravenscroft: With that operator, please open the lines for questions.
Speaker Change: Thank you.
Speaker Change: We will now.
Operator: start the Q&A session. If you would like to ask a question, please press star and then the number one on your telephone keypad. If you would like to remove yourself from the queue, press star 1 a second time. And we'll pause for just a moment to compile the Q&A roster. And your first question comes from Jerry Revich with Goldman Sachs. Your line is open.
Speaker Change: Start the Q&A session.
Jerry Revich: I would like to ask a question. Please press Star then the number one on your telephone keypad.
Speaker Change: If you would like to remove yourself from Q Crestar, one a second time.
Operator: We'll pause for just a moment to compile the Q&A roster.
Operator: And your first question comes from Jerry Revich with Goldman Sachs. Your line is open.
Clay Nelson: Morning, Gary, and Clayon. Hey, this is Clayon for Jerry.
Operator: Good morning, Gerry Gerry Hey, this is clay on for Jerry.
Clayon: With supply chain performance seems to be normalizing moving forward could decremental margins be relatively muted given us improved productivity offset the lower volumes in the cycle.
Clay Nelson: Just quickly, with supply chain performance seeming to be normalizing moving forward, could decremental margins be relatively muted given as improved productivity offsets the lower volumes from the cycle? Thanks.
Brian P. Regan: Yeah, I think I'm definitely seeing a tailwind related to supply chain, but the bigger impact, as we talked about in the prepared remarks, is the tower crane business, and we'll see that from a comp perspective in the second quarter as well as it starts to normalize in the second half, so I think that's the bigger kind of issue that we're working through right now.
Clayon: Yes, I think definitely seeing a tailwind related to supply chain, but the bigger impact is as we talked about in the prepared remarks is that the tower crane business and we will see that from a comp perspective in the second quarter as well it starts to normalize in the second half. So I think that's the bigger kind of issue that we're working through right now.
Speaker Change: Thanks, and then as a follow up just can you update us on the call.
Brian P. Regan: Thanks. And then, as a follow-up, can you update us on the strategic priorities over the next 12 to 18 months, particularly around capital deployment?
Brian P. Regan: Our strategic priorities over the next 12 to 18 months, no, particularly just around capital deployment.
Brian P. Regan: Yes, I think again as we've talked about in the prepared remarks inventory management over the next nine months is going to be really important.
Brian P. Regan: Yeah, I think, again, as we've talked about in the prepared remarks, inventory management over the next nine months is going to be really important. We did see the normal seasonality, spiking Q1, but, you know, trying to get through some of that inventory, in particular in the distribution business, over the next nine months is really the priority. And our CapEx remains $16,000.
Brian P. Regan: We did see the normal seasonality.
Brian P. Regan: Spike in Q1.
Brian P. Regan: But.
Brian P. Regan: Trying to get through some of that inventory in particular in the distribution business over the next nine months is really the priority.
Brian P. Regan: And our CapEx remains at $60 million. Yes.
Brian P. Regan: And our Capex remains 60 million Bucks.
Speaker Change: Thanks, I'll pass it on.
Speaker Change: Thanks, Greg.
Operator: And your next question comes from the line of Mig Dobre with Baird. Your line is open.
Brian P. Regan: Your next question comes from the line of Mcdonald <unk> with Baird. Your line is open.
Mircea Dobre: Good morning. Good night.
Mircea Dobre: Good morning Mig.
Mircea Dobre: Good morning.
Mircea Dobre: Can you maybe recalibrate our expectations relative to your prior guidance and, you know, maybe help us understand how we need to think about Q2 relative to Q1 as well? Thank you.
Mircea Dobre: Can you maybe recalibrate our expectations relative to your prior guidance.
Mircea Dobre: Maybe help us.
Mircea Dobre: All we need to think about Q2 relative to Q1 as well. Thank you.
Speaker Change: Yes, as we said Q1 was in line with expectations.
Brian P. Regan: Yeah, as we said, Q1 was in line with expectations. You know, we didn't update our guidance intentionally because we think our guidance is still the right range at this point in time. The sensitivity around the tower crane as we don't have much of a backlog and we're really living hand to mouth right now makes that wide range still appropriate.
Brian P. Regan: We didn't update our guidance.
Brian P. Regan: <unk>, because we think our guidance is still the right range at this point in time.
Brian P. Regan: The sensitivity around the tower Crane as we don't have much of a backlog and were really living.
Brian P. Regan: And in the house right now makes that wide range still appropriate.
Brian P. Regan: Okay, so year over year Iterating guidance.
Brian P. Regan: Okay, so you're reiterating guidance, but it sounds like the tower crane headwind is still there. So as we're thinking about Q2 specifically, I mean, normally we have a seasonal ramp, and revenue margins are also a little bit better. Is that still to be expected? Or is this more of a back half story?
Brian P. Regan: But SaaS correctly.
Brian P. Regan: It sounds like the tower Crane headwind is still there so as we're thinking about Q2 specifically.
Brian P. Regan: I mean normally we have a seasonal ramp in revenue.
Brian P. Regan: Margins also a little bit better is that still to be expected or is this more of a back half story at this point.
Brian P. Regan: Yeah, I think, you know, the Q2 impact related to towers is going to be, from a comp standpoint, similar, maybe a little bit less, but it'll be similar to what we saw in Q1 and then the second half.
Brian P. Regan: Yes, I think the key to impact related to towers is going to be from a comp standpoint is going to be similar maybe a little bit less but it will be similar to what we saw in Q1 and then the second half normalizes.
Speaker Change: Great My follow up.
Mircea Dobre: Great My follow-up.
Aaron H. Ravenscroft: On this tower crane discussion. And I recognize that the... Industry-wide data here can be a little fuzzy, but one of your Japanese competitors put out some data in this regard. What they're pointing out is that the tower crane market has actually been really, really robust in 2008. I'm kind of curious about your perspective here, you know, have we sort of seen such an investment cycle in tower cranes to where maybe this downdraft is more than just a year; it could be multiple years in nature, or is this, or are you frankly seeing something completely different for your business? Yeah, I don't know of any Japanese tower crane companies.
Mircea Dobre: On the powertrain discussion.
Aaron H. Ravenscroft: And I recognize that.
Aaron H. Ravenscroft: Industry wide data here it can be a little a little fuzzy.
Aaron H. Ravenscroft: But one of your Japanese competitors put out some data in this regard.
Aaron H. Ravenscroft: What they're pointing out is that the tower crane market has actually been really really robust in 2023, probably some of the some of the best demand we've seen since 2008.
Aaron H. Ravenscroft: I'm kind of curious your perspective here have we sort of seen a.
Aaron H. Ravenscroft: Such as such an investment cycle and powertrains to where maybe this.
Aaron H. Ravenscroft: <unk> is more than just a year it could be multiple years in nature or is this.
Aaron H. Ravenscroft: Or are you frankly, seeing something completely different for your business.
Aaron H. Ravenscroft: Yeah, I don't know of any Japanese tower crane companies, so I'm not sure who you're referring to. With respect to the European market, it's broad-based; everyone we speak to has seen the same thing. If you dig into that CEC report, there's some more data in terms of the downturn last year. Given that we're at 2009 levels, you know, we'd like to believe we're at the bottom and feel that we're at the bottom.
Speaker Change: Yes, I don't know of any Japanese tower Crane company, So I'm, not sure who you're referring to with.
Aaron H. Ravenscroft: With respect to the European market, it's broad based everyone. We speak to is seeing the same thing you're.
Aaron H. Ravenscroft: Can you dig into that CE CE report Theres, some more data in terms of the downturn last year.
Aaron H. Ravenscroft: Given that we're at <unk> nine levels, we'd like to believe we're at the bottom and feel that we're at the bottom, but there is a bit of normal seasonality of the tower crane business to I mean folks like to take the cranes in the beginning of the first quarter and really sell them or rent them sort of March and April. So we're already through sort of through that cycle and of course everything is slow in the third quarter in Europe. So.
Aaron H. Ravenscroft: But there is a bit of normal seasonality to the tower crane business, too. I mean, folks like to take their cranes at the beginning of the first quarter and really sell them or rent them, sort of, in March and April. So we're already sort of through that cycle. And, of course, everything is slow in the third quarter in Europe. So I think from a seasonality standpoint, we're really looking to the fourth quarter before we get a good view. And that's normally when we have our winter campaign, and we start to see orders for folks for the next fall.
Aaron H. Ravenscroft: I think from a seasonality standpoint were really welcome to the fourth quarter before we get a good view and that's normally when we have our winter campaign and we start to see orders for folks for the next fall.
Speaker Change: Thanks for the color.
Speaker Change: Thanks Meg.
Aaron H. Ravenscroft: And your next question comes from the line of Stephen Volkmann with Jefferies. Your line is open.
Operator: And your next question comes from the line of Stephen Volkman with Jeff Rees. Your line is open.
Stephen Volkman: Good morning, guys. Thanks for taking the question. I'm going to stay on tower cranes if it's okay. It sounds like, I think you've said a couple of times, that the comps sort of get easier in the second half. Could towers be flat in the second half? Is that the right way to think about it, or we just don't know?
Stephen Edward Volkmann: Hi, Good evening guys. Thanks for taking the question I'm going to stay on tower cranes. If it's okay. It sounds like I think you've said a couple of times that the comps get easier in the second half.
Stephen Volkman: Towers be flat in the second half is that the right way to think about it or are we just don't know.
Stephen Volkman: Well, we're sort of hand to mouth since we don't have much backlog, but thats generally sort of how we view the second half of the year.
Aaron H. Ravenscroft: Well, we're sort of hand-to-mouth since we don't have much of a backlog, but that's generally sort of how we view the second half of the year. But that's why.
Aaron H. Ravenscroft: But that's why the broader range is there, because if you get a big order, it could change it or, you know, so that's it.
Aaron H. Ravenscroft: But thats why the broader ranges because if you get a big order that could change it or so thats.
Aaron H. Ravenscroft: We are hopeful but.
Aaron H. Ravenscroft: That's where we're sitting.
Aaron H. Ravenscroft: And if towers are flat, maybe my words, not yours, but that should sort of reduce a bunch of kind of your margin headwind because of the margin mix issue. That's correct. Okay, great. And then Crane Days, Aaron, is that like a catalyst for orders, do you think? Or is this just sort of getting the word out?
Aaron H. Ravenscroft: And as towers on our flat, maybe myeloid not yours, but that should sort of reduce a bunch of kind of year over year margin headwind because of the margin mix issue.
Aaron H. Ravenscroft: That's correct.
Aaron H. Ravenscroft: Okay great.
Aaron H. Ravenscroft: And then Crane days Aaron's is that like a catalyst for orders do you think or is this just sort of getting the word out.
Aaron H. Ravenscroft: Yeah.
Aaron H. Ravenscroft: Yeah, I mean, anytime we have that many customers, we're hopeful to get some orders. We, as you can see, have plenty of inventory. So we're eager to start pushing machines next week. Normally, there are some things that have been in the works, and folks bring those orders to the event. But, you know, the real intent is to get out and be communal with our customers.
Aaron: Yes, I mean anytime we have that many customers were hopeful to get some orders as you can see we've got plenty of inventory. So we're eager to start pushing machines.
Aaron H. Ravenscroft: Next week nor.
Aaron H. Ravenscroft: Normally there's always some things that have been in the works and folks bring those orders.
Aaron H. Ravenscroft: Event, but.
Aaron H. Ravenscroft: The real intent is ticket.
Aaron H. Ravenscroft: Just to get out and communicate better.
Aaron H. Ravenscroft: For our customers.
Stephen Volkman: Okay, great. Thank you, guys. I'll pass it on.
Speaker Change: Okay, great. Thank you guys I'll pass it on.
Speaker Change: Thanks, Dave.
Operator: And your final question comes from the line of Tammy Zakaria with J.P. Morgan. Your line is open.
Stephen Volkman: And your final question comes from the line of Tami Zakaria with Jpmorgan. Your line is open.
Tammy Zakaria: Hi, good morning. Morning, how are you?
Tami Zakaria: Good morning, Jamie good.
Tami Zakaria: Good morning, how are you.
Tammy Zakaria: So, I also have a follow-up question on tower cranes. That's been weak for a few quarters now. What KPIs are you watching to gauge any signs of inflection there? Basically, the reason for my question is, is there any catalyst you're looking forward to which would drive a stabilization in trends in the back half? What needs to happen in that market?
Tami Zakaria: So I also have a follow up question on tower cranes.
Tammy Zakaria: It's been weak for a few quarters now.
Tammy Zakaria: What kpis are you watching to gauge any signs of inflection that basically the reason for my question is is there any catalyst here looking forward to which would drive stabilization in trends in the back half what needs to happen in that market.
Aaron H. Ravenscroft: Yeah, so I think to get us going again, we need to see interest rates come down a little bit. So that's probably the first thing that I've been tracking. Secondly, you can look at residential permits in Germany and France.
Tammy Zakaria: Yes, so I think to get us going again, we need to see interest rates come down a little bit. So that's probably the first thing that I've been tracking.
Aaron H. Ravenscroft: Secondly, you can look at the residential permits in Germany in France, I think Thats. There is good data out there so we're tracking that as well.
Aaron H. Ravenscroft: I think that's good data out there, so we're tracking that as well. But, as always in the crane business, it's always built off of confidence. So, I think until you start to see those metrics move, it's going to be tough for folks to really get a lot of confidence to start spending CapEx again.
Aaron H. Ravenscroft: But as always in the Crane business, it's always built off of confidence. So I think until you start to see those metrics move can be tough for folks to really get a.
Aaron H. Ravenscroft: A lot of confidence to start spending capex again.
Speaker Change: Got it so a quick follow up.
Aaron H. Ravenscroft: Got it. So, a quick follow-up. When you look at residential permits in, let's say, Germany or France, how, if it inflects, let's say, tomorrow, does it, do your orders come in at a lag, like orders improve at a lag, or do you usually see orders improve in the same quarter?
Aaron H. Ravenscroft: When you look at residential permits and let's say, Germany, France.
Aaron H. Ravenscroft: If it inflect, let's say tomorrow. It does it does your orders come in at a lag like orders improve at a lag or do you easily see orders improve in the same quarter.
Aaron H. Ravenscroft: Yeah, there's a lag. There's always some timing to it. He definitely let me go back a couple years when it started to dip down, but we didn't actually go, so there's definitely some lag.
Speaker Change: Yes, there is a lag to it there's always some timing to it definitely can we go back a couple of years when it started to dip down we didn't actually go so there's definitely some legs to it.
Tammy Zakaria: Got it. If I can ask one more question,
Tammy Zakaria: Got it if I can ask one more question as Saudi Arabia, I think recent reports suggest.
Aaron H. Ravenscroft: Saudi Arabia, I think recent reports suggested that they scaled back some of the megaprojects. Can you comment on what you're seeing in the Middle East and whether your long-term outlook for the region has changed based on some of these reports? Yeah, our outlook hasn't changed.
Aaron H. Ravenscroft: After that date scaled back some of the Mega project Kenny.
Aaron H. Ravenscroft: Can you comment on what Youre seeing in the middle East and with a long term outlook for the region has changed based on some of the reports.
Aaron H. Ravenscroft: Yeah, our outlook hasn't changed. I know that they've changed the scope relative to the line, but I don't think that anyone really believed the full scope would happen. And you know, it wasn't going to happen by 2030. Even when I was there, the last time they were talking, it really would be more like 2040, 2045.
Aaron H. Ravenscroft: Yes, our outlook Hasnt changed I know that they've changed the scope relative to the line, but I don't think that anyone really believe the full scope would happen it wasn't going to happen by 2030, everyone. I was there last time they were talking about really we'd be more like $2040 45, so as a long term <unk>.
Aaron H. Ravenscroft: So it was a long-term investment, so there's no real surprise for us. That being said, all of the other projects are continuing to move forward. They've got a lot of different global or international events that rely on that. So our outlook still remains very strong relative to the Middle East.
Aaron H. Ravenscroft: <unk>.
Aaron H. Ravenscroft: So there is no real surprise for us that being said all of the other projects are continuing to move forward. They have done a lot of different global or international events that rely on that so our outlook still remains very strong relative to the middle East.
Speaker Change: Got it.
Aaron H. Ravenscroft: Yes.
Speaker Change: Alright, Thanks, Tim Mchugh.
Tammy Zakaria: Perfect, thank you.
Operator: And we will take our next question from Clifford Ransom with Ransom Research. Your line is open.
Tammy Zakaria: We will take our next question from Clifford Ransom with Ransom Research. Your line is open.
Clifford Ransom: Morning, Cliff. Hey, Cliff. Good morning, gentlemen. I hate to say it, but you give me a lot of crap about being so old.
Clifford F. Ransom: <unk> class a cliff.
Clifford F. Ransom: Good morning, gentlemen.
Clifford F. Ransom: I hate to say it is you gave me a lot of crop or are being sold.
Clifford Ransom: This is now my 52nd year in the lifting company. We all know this is a cyclical business. You're doing things to reduce that cyclicality, and I commend you for what you've done on that balance sheet, and particularly new products. But what have you done recently? I saw enormous changes in France when we were there a month ago. What are you doing in the rest of the company or at the top of the company that's notable to promote the Manitowoc way?
Clifford F. Ransom: It is now my 52nd year around lifting companies.
Clifford Ransom: No no. This is a cyclical business you are going to reduce the cyclicality and I commend you for what you've done on <unk>.
Clifford Ransom: Our balance sheet, and particularly new products.
Clifford Ransom: But what have you done recently.
Clifford Ransom: Saw enormous changes in France, when we were there.
Clifford Ransom: [noise] ago, but what are you doing in the rest of the company are at the top of the company. It's notable to promote the Manitowoc way.
Speaker Change: Yes, so I would say that our real focus these days has been around our aftermarket business and trying to figure out how we can apply our lean tools to an aftermarket business, which has been great of course, having distribution, we're starting to learn more and more about our traditional business and what we can do better to be a better partner to.
Aaron H. Ravenscroft: Yeah, so I'd say that our real focus these days has been on our aftermarket business and trying to figure out how we can apply our lean tools to an aftermarket business, which has been great. Of course, with distribution, we started to learn more and more about our traditional business and what we can do better to be a better partner to our internal distributors as well as our existing distributors. So, I'd say that's our main focus is really just dragging it out of the manufacturing floor and into the service locations and to some of our other administrative offices and, of course, around the environment and some of the things we can do to reduce our costs relative to our gas uses and our paint booths.
Aaron H. Ravenscroft: Our internal distributors as well as our existing distributors. So I'd say, that's our main focus is really just dragging it out off the manufacturing floor and into the service locations and to some of our other administrative offices.
Aaron H. Ravenscroft: And of course around environmental and some of the things we can do to reduce our costs relative to our gas uses in our papers.
Aaron H. Ravenscroft: Have you, have, have you... adapted anything in the culture of the Manitowoc way to make that transition from the factory floor to what we call the Carpet Land World? Are there any particular success stories or learnings that you've made from things that didn't work well?
Aaron H. Ravenscroft: Our view.
Speaker Change: All of you.
Aaron H. Ravenscroft: Adapted anything in the culture of the Manitowoc way to make that transition from the factory floor too well.
Aaron H. Ravenscroft: We call them.
Aaron H. Ravenscroft: Carpet land world.
Aaron H. Ravenscroft: Our own particular success stories are loans that you've made from things that didn't work well.
Speaker Change: Yes, excuse me.
Aaron H. Ravenscroft: Yeah, excuse me.
Aaron H. Ravenscroft: When I looked at the distribution business and the finance organization, they conducted a value stream mapping session to really look at what impacts and what time they can take out of their processes to provide more value to the business and be more of a partner to the business, and that's really on the compliance side. So, they spent a few days together to look at their processes and try to identify ways to take out time from that process and really better utilize the system, the finance and back office system that they use. So, I think we had some good successes, but there is more to go with that. Yeah, I think in terms of challenges, anytime you're trying to
Aaron H. Ravenscroft: When I look at the distribution business in the finance organization. They conducted a value stream mapping session to really look at what impacts and what time. They can take out of their process to provide more value to the business and be more of a partner to the business and that's really on the compliance side. So they spend.
Aaron H. Ravenscroft: A few days together to look at their processes and trying to identify ways to take out time in that process and really better utilize the the.
Aaron H. Ravenscroft: The system, the finance in and back office system that they use so I think we had some good successes, but more to go with that yes, I think in terms of the challenges anytime you are trying to standardize.
Aaron H. Ravenscroft: Yeah, I think in terms of challenges, anytime you're trying to standardize quote-unquote fixing cranes, I mean, that's a tough deal. So I think there are a lot of different good ideas floating around the company. And in fact, I'm pretty optimistic that AI will give us some tools that will help us become more productive and just more efficient at doing that.
Aaron H. Ravenscroft: Fixing cranes, I mean, thats, a tough tough deal. So I think theres a lot of different good ideas floating around the company and in fact im pretty optimistic that AI will give us some tools that will help us become more productive and more effective at doing that.
Speaker Change: Thank you very much.
Speaker Change: Thanks, Chris and thanks Ross.
Aaron H. Ravenscroft: Okay.
Operator: There are no further questions at this time, so Mr. Warner, I will turn the call back over to you for any additional or closing remarks.
Moderator: And there are no further questions at this time so Mr. Warner I will turn the call back over to you for any additional or closing remarks.
Ion M. Warner: Okay, thank you. Before we conclude today's call, please note that a replay of our first quarter 2024 conference call will be available later this morning by accessing the investor relations section of our website at manitowoc.com. Thank you everyone for joining us today and for your continuing interest in the Manitowoc Company. We look forward to speaking with you again next quarter.
Warner: Okay. Thank you before we conclude today's call. Please note that a replay of our first quarter 2024 conference call will be available later this morning by accessing the Investor Relations section of our website at Manitowoc Dot com. Thank you everyone for joining us today and for your continued interest in the Manitowoc Company. We look forward to speaking with you again next quarter.
Operator: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Speaker Change: Thank you.
Operator: Okay.