Q2 2024 Miller Industries Inc Earnings Call
During the course of half of the year, we are focused on assisting distribution and delivering retail products to ensure that the revenue we generate translates into cash, which will fund our continued growth and enhance the strength of our balance sheet.
Lastly, before I turn the call over to Debbie, I want to touch on the production capacity expansion plans we mentioned last quarter.
Debbie: We continue to analyze future production needs at all of our facilities around the globe and work diligently to invest our capital to maximize shareholder returns through continued investment in the business, quarterly dividends, and our share repurchase program.
Debbie: Now I'll turn the call over to Debbie, who will review the second quarter financial results in more detail. Following her remarks, I will provide some closing comments and an update on our outlook. Debbie?
Debbie: Thanks, Will. Good morning, everyone. Net sales for the second quarter of 2024 were $371.5 million.
Debbie: versus $300.3 million for the second quarter of 2023. A 23.7% year-over-year increase driven by increases in both production and deliveries.
Debbie: Cost of operations increased 23.1% to $320.4 million for the second quarter 2024 compared to $260.3 million for the second quarter 2023.
Debbie: The increase in our cost of operations is due largely to our higher revenue levels. Cost of operations, as a percentage of net sales, decreased approximately 50 basis points from the prior year period to 86.2%.
Gross profit was $51.1 million, or 13.8% of net sales for the second quarter of 2024, compared to $39.9 million, or 13.3% of net sales for the prior year period.
The year-over-year improvement was driven largely by volume increases across both production and deliveries.
Speaker Change: Sequentially, gross margin improved 120 basis points, largely driven by the same volume increases, and to a lesser extent, sales mix.
Speaker Change: As a reminder, our gross margins are subject to some quarter-to-quarter fluctuation based on mix. However, in a quarter like this one, where we saw increased OEM chassis deliveries, we were glad to see an increase in gross margins as a direct result of our cost control efforts.
Debbie: SG&A expenses were $22.8 million in the second quarter of 2024.
Debbie: compared to $19.5 million in the second quarter 2023. As a percentage of net sales, SG&A was 6.1%, 40 basis points lower than the prior year period.
Debbie: This figure falls within our consistently expected SG&A as a percentage of sales range of 6 to 6.5%.
Debbie: Interest expense for the second quarter 2024 was $2 million, up from $1.7 million for the second quarter 2023, primarily related to an increase in our debt levels to fund our working capital.
Debbie: Additionally, interest expense was impacted by our distributor foreclosed financing costs, which shift up and down with revenue.
Debbie: Their income for the second quarter was $13,000 compared to an expense of $229,000 for the second quarter 2023 attributable largely to currency exchange rates fluctuations.
Debbie: Our effective tax rate for the quarter was 21.8% and slightly higher year-over-year, primarily due to unfavorable adjustments to pre-tax income.
Debbie: Net income for the second quarter of 2024 was $20.5 million, or $1.78 per diluted share, compared to net income of $14.9 million, or $1.29 per diluted share, in the second quarter of 2023.
Debbie: Turning to the balance sheet, cash and cash equivalents as of June 30, 2024 was $23.8 million compared to $26.8 million
Speaker Change: as of March 31st, 2024, and $29.99 million as of December 31st, 2023.
Debbie: Account hours receivable as of June 30, 2024 with $300 value $1.8 million compared to $338.9 million as of March 31st, 2024 and $286.1 million as of December 31st, 2023.
Speaker Change: As well noted, a key focus of ours is ensuring that dealers pass along product to our end users and collecting our receivables to improve our cash conversion, which we anticipate to improve significantly in the second half of 2024.
Speaker Change: inventories
Debbie: for $187.3 million as of June 30, 2024 compared to $184.3 million as of March 31, 2024 and $189.8 million as of December 31, 2021.
Debbie: Our inventory levels have remained relatively consistent, and we will keep investing in our inventory as appropriate to ensure we have essential parts readily available to turn work-in-process inventory into finished goods and finally to our customers as quickly as possible.
Debbie: Accountable as of June 30, 2024 with $243.1 million compared to $229 million as of March 1, 31st, 2024 and $191.8 million as of December 31, 2023.
Debbie: As it relates to capital allocation, in addition to returning capital to our shareholders, we remain focused on investing in three core areas of the business.
Debbie: Productivity Improvement
Debbie: Capacity Expansion, and the Health and Safety of our Employees. We'll mention that the Capacity Expansion is where the bulk of our efforts will be focused in the near to mid-term, and while we are still in the early stages, we look forward to sharing further updates on our efforts as appropriate.
Debbie: During the quarter, we borrowed an additional $15 million against our revolver in order to continue to fund our growth. As you all know, we are a debt-averse company, but believe that the best use of cash is investing in the future and in the growth of our business.
Debbie: Lastly, as it relates to return of capital to our shareholders.
Speaker Change: The Board of Directors approved our quarterly cash dividend of $0.19 per share, payable September 16, 2024, to shareholders of record at the close of business on September 9, 2024, marking the 55th consecutive quarter that the company has paid the dividend.
Will: We also bought back 35,000 shares, representing $2 million of the outstanding $25 million share repurchase program our board authorized in April of this year. Now I'll turn the call back over to Will for some closing remarks.
Will: Thank you, Debbie.
Will: Another record first half of the year has clearly demonstrated the continued success of our operations and markets.
Will: As we ended fiscal year 2023 with record revenue, we anticipated high single-digit growth for 2024.
Will: Given the performance to date, we are now adjusting our initial revenue guidance of high single-digit growth for the year.
Debbie: We expect to achieve low double-digit growth for the full year 2024, in line with our historical compounded annual growth rate.
Debbie: As a reminder to all investors, our fourth quarter is historically a lower revenue quarter due to holidays, annual inventory audits, and planned maintenance at our facilities. Our backlog and current trends provide us with visibility into a solid second half of 2024.
Speaker Change: As always, the entire management team and I would like to thank all of our employees, suppliers, customers, and shareholders for their continued support of Miller Industries. At this time, we'd like to open the line for any questions.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Debbie: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions.
Speaker Change: First question comes from Mike Shlisky with D.A. Davidson. Please go ahead.
Speaker Change: to
Mike Schliske: Yes, hi, good morning, and thank you for calling.
Mike Schliske: Morning. Hey, I wanted to ask about another thing.
Mike Schliske: to raise your outlook for the revenues for the year. I was wondering if you could give us some thoughts about margins for the rest of the year. I know you don't have to give actual pinpoint guidance, but given the increased tax supply, potential for pricing,
Speaker Change: I would imagine some improved supply chains. Do you think you can get more of a larger year-over-year expansion being larger in the backpack than you've been seeing for the last couple of quarters?
Speaker Change: Yeah, I think I caught you're a little broken up, but no, we believe that as we continue through the remainder of the year that margins will maintain and we expect that our margins for the year 2024 will be in the
Speaker Change: mid to upper 13 range.
Speaker Change: oh
Speaker Change: Great. Outstanding. And then as far as maybe some long-term outlook here...
Speaker Change: There's been some emissions changes that are taking place in 2027 on the larger end of the engine spectrum and we're starting to hear about people who use larger trucks for their vehicles in the Class A, for example, and some of your heavier carriers.
Speaker Change: try to buy ahead in advance of price increases from the OEMs in 2027. I kind of wonder if you've started to hear some chatter about people buying early in 2025 or 2026 in advance of that, or most of them are going to buy something a little bit later.
Speaker Change: At this point in time, there is quite a bit of chatter in the truck market as far as pre-buy, things of that nature. I don't believe that our customer base has really started discussing it.
Mike Schliske: significant volume.
Mike Schliske: as far as truck revives, but I think as we get closer to the emission change.
Mike Schliske: that outlook could potentially change from our customer base and we're watching the OEM market, the chassis market, very closely as we move closer and closer to that date.
Mike Schliske: Thank you.
Mike Schliske: Thank you. I would like to turn the floor over to William Miller for closing remarks.
William Miller: Thank you.
William Miller: I'd like to thank you all again for joining us on the call today, and we look forward to speaking with you on our third quarter conference call.
Speaker Change: If you'd like information on how to participate and ask questions on the call, please visit our updated Investor Relations website, millerind.com forward slash investors, or email investors.relations at millerind.com. Thank you so much, have a great day.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.