Q4 2024 Miller Industries Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Miller Industries.
4th quarter and full year 2024 Revolts Conference Call. Please note this event is being recorded. And now, at this time, I would like to turn the call over to Michael Gaudreau at FTI Consulting. Please go ahead.
Speaker Change: Thank you and good morning everyone. I would like to welcome you to the Miller Industries Conference call. We are here to discuss the company's 2024 fourth quarter and full year results which were released after the close of market yesterday.
Speaker Change: With us from the management team, today are Bill Miller, Chairman of the Board, Will Miller, President and CEO , Debbie Whitmire, Executive Vice President and CFO , and Frank Modonia, Executive Vice President, Secretary and General Counsel.
Speaker Change: Today's call will begin with formal remarks from management followed by a question answer session.
Please note, in this morning's conference call, [inaudible]
Speaker Change: Management may make forward-looking statements in accordance with the safe harbor provisions of the Private Security's litigation reform act of 1995.
Speaker Change: I'd like to call your attention to the risks related to these statements which are more fully described in the company's annual report, File Bond Form 10K, and other filings with the Securities and Exchange Commission.
Will: At this time, I'd like to turn the call over to Will. Please go ahead, Will.
Hello, and good morning.
Thank you all for joining us today.
Will: Before we begin as a reminder, and for anyone new to our story, Miller Industries is the world's largest manufacturer of telling and recovery equipment.
Will: Our products range from light, medium and heavy duty recovery to car carriers, specialty transport, rotators, and military recovery vehicles.
Will: We have ten manufacturing facilities located in the United States, France, and the United Kingdom.
Will: We firmly believe our success is rooted in having the best people, product, and distribution network in the tele and recovery industry.
Will: Moving on to our results, we are extremely proud of our 2024 performance, which was another record year for Miller Industries.
Will: Our record revenue, gross profit, net income, and EPS for fiscal year 2024 are a testament to the efforts of our employees, suppliers, customers, and shareholders.
Will: I'd like to thank our incredible team for their dedication and hard work, their commitment has been instrumental in making this another outstanding year.
Will: Now I'd like to turn the call over to Debbie, who will review our fourth quarter and four-year financial results in more detail.
Will: Following her remarks, I'll come back with some key thoughts on our markets in 2025.
Will: A discussion on opportunities that lie ahead and finished by addressing our capital allocation strategy in guidance.
Will: Thanks Will, and good morning everyone. I'll start by walking through our results for the full year and move on to our quarterly financials.
Will: Met sales for the full year for $1.26 billion compared to $1.15 billion in the prior year period, an increase of 9% driven by continued strong demand for all of our products.
Will: For us profit for the full year was $170.8 million for 13.6% of sales, compared to $151.9 million for 13.2% of sales in 2023.
Will: The year-over-year improvement in gross margin was driven by an improvement in our overall product mix, which I will touch on in a few slides, and to a lesser extent improvements in our supply chain.
Will: Lastly, in that income for the full year 2024 with $63.5 million or $5.40 cents per
Will: Compared to net income for 2023, a $58.3 million or $5.7 cents per eluded share, with increases at 8.9% and 7.9% respectively.
Will: We are also incredibly proud of the fact that in 2024, we return $11.6 million to share our owners through our industry leading Devon in and share repurchases.
Will: Returning capital to our shareholders has always been a core part of our identity and will continue to be a key area focused as we move forward.
Will: For the fourth quarter of 2024, we generated $221.9 million in sales compared to $296.2 million in the fourth quarter of 2023, a decrease of 25.1%.
Will: The year-over-year decrease was primarily driven by a decline in chassis shipments.
Will: For additional context, strategy shipments in the fourth quarter of 2023 were significantly elevated due to the inconsistent delivery schedule from the OEMs as they recover from the previous supply chain disruptions.
Will: Gross Crossfit for the fourth quarter was $33.5 million or 15.1% of sales compared to $38.6 million or 13% of sales for the same period in 2023.
Will: The margin improvement was driven largely by product mix and a relatively higher percentage of manufacturer bodies compared to chassis.
Will: As we say each quarter, our gross margin is very due to product mix particularly in this quarter.
Will: I will get into further detail on those dynamics in the next slide.
Will: Ned Endtown for the fourth quarter of 2024 was $10.5 million or 91 cents per diluted share compared to Ned Endtown of $16.7 million or $1.45 cents per diluted share in the fourth quarter of 2023.
Will: Shifting to the balance sheet, we had a cash balance of $24.3 million as of December 31, 2024, compared to $40.6 million as of September 30, 2024. A significant portion of the cash used this quarter was related to the reduction in our accounts payable, which dropped by nearly $90 million.
Will: The Council is available as of December 31, 2024, with $313.4 million, compared to $374 million as of September 30, 2024, a reduction of over $60 million.
Will: We expect our receivables to continue to decrease over the balance of the year as inventory levels for both Miller Industries and our distributors normalize.
Will: Inventories were $186.2 million as of December 31st, 2024, compared to $190.3 million as of September 30th, 2024.
Will: Slowly, but surely, our inventory balance has begun decreasing as a result of our strategic investments in inventory throughout 2024 to meet the increased demand levels we were seeing.
Will: As we move into 2025, with more of a normalized market, we anticipate an increase in our free cash flow generation.
Will: Our debt balance was $65 million at the end of the year. We feel comfortable about our current leverage position. However, we'd like to remind you that we are a debt-averse company, and reducing debt levels will be one of our focuses as cash conversion improves in 2025.
Will: We are also continuing our history of returning cash to shareholders with the board recently approving a quarterly cash dividend of 20 cents per share, payable March 24, 2025 to shareholders of record at the close of business on March 17, 2025, the 57th consecutive quarter that the company has paid the dividend.
Will: Moving to a discussion on margins, as previously stated, our blended margin was correlated directly to our product mix.
Will: On slide 8, you'll see that we've illustrated this dynamic visually to provide a clearer explanation.
Will: The four COVID spread between peaks and valleys of margins and chassis deliveries was much narrower than what we've seen post COVID. A more narrow spread made it much easier to predict our revenues and margins quarter to quarter.
Will: Because of the increased volatility in the chassis supply chain, you can see that chassis deliveries have become much more sporadic, creating significant fluctuations in our quarterly revenues and margins since 2022.
Will: As we look into the second half of 2025, we expect this volatility to subside, bringing fluctuations closer to pre-coded levels with fewer quarter to quarter spikes and dips and chassis remnants.
Will: Based on everything we've seen today, chassis ONs now are operating on a much more predictable schedule with reduced league times helping to save loads of the market.
Will: I'd like to emphasize that this graph is intended to clearly illustrate the supply chain fluctuation and is not indicative of business difficulty.
Will: The issue hasn't been the lack of demand for chassis but rather the cadence and quantity of chassis delivered in one given period. As I said earlier, we're confident that in the second half of 2025, that timing of chassis delivered will normalize.
Speaker Change: We'll turn the call back to Will to discuss our markets and our outlook for 2025 and beyond.
Will: As we head into 2025, we wanted to detail the key considerations that will likely affect our results.
Will: First, Debbie just mentioned all the dynamics that play with chassis shibbons. Those sporadic deliveries cause inventory to build up in our distribution channel.
Speaker Change: It's a complicated relationship that I will get into on the next slide. But overall, inventory reduction is a double edged sword for us, and the short term it decreases sales.
Speaker Change: However, in the long term, it helps to ensure the health of our distribution network, stabilize the flow of product, and give us greater ability to manage our working capital and cash flow generation.
Speaker Change: Second, the rising cost of equipment ownership is a significant challenge for end-market
Insurance premiums on their trust have increased.
Speaker Change: Interest rates for new trucks have risen, and the value of used trucks has fluctuated.
Effecting trade and values, and new equipment purchased this.
These right-of-ing costs continue to pressure our customers.
Speaker Change: Third, tariffs are a significant discussion for nearly every industrial company across the globe today. We recognize that there is an ongoing significant uncertainty.
Speaker Change: That said, over the past few years we have made extensive efforts to enforce many parts of our supply chain, diversify our suppliers, and keep as much of our supply chain in the United States as possible.
Speaker Change: We believe our diversity and strength of our supply chain leaves us well positioned to navigate these uncertainties.
Speaker Change: And lastly, what perhaps is the most uncertain is the advanced clean truck regulation, which limits our ability to supply our products to customers in six large stages, which I will touch on some more specifics in a few slides.
Speaker Change: I'd like to spend some time going over the inventory picture in our distribution channel.
Speaker Change: How it has evolved over time and what it means for us.
Speaker Change: I talked a bit about the impacts at a high-level, but the chart on slide 10 really illustrates what has happened in the market.
Speaker Change: As you can see and as Debbie alluded to, we and in turn our distribution partners were inundated with chassis deliveries earlier than anticipated last year.
Leading to a significant build-up in the distribution channel inventory.
Speaker Change: As we saw this happening through the second quarter, we made the decision to delay some deliveries in the second half of the year to allow our distributors to work through what was currently in the channel.
Speaker Change: We anticipated this would impact the third and fourth-quartered equally. However, due to the nature of chassis deliveries being out of our control, this slowdown did not take place until
Speaker Change: Our decision to delay chassis shipments was not due to a lack of demand, but because maintaining a strong dealer network is essential to our success.
Speaker Change: The levels of inventory that they were dealing with through the majority of last year were unsustainable from both an operational and a financial perspective.
Speaker Change: While this will decrease our sales in the near term, you can see that both chassis and body inventory are reducing and moving closer to optimal levels.
Speaker Change: This should not only put our distributors in a healthy financial position, but also reduce the inventory on our books and allow us to convert receivables into cash at a faster rate.
Speaker Change: We expect a return to a synchronized flow of manufactured equipment and chassis deliveries during the second half of 2025.
Speaker Change: Moving on to CARB in the Advanced Clean Truck Initiative, as of January 1st of this year, new regulations with near-zero emission standards have been adopted by certain states, which limit the amount of diesel-powered commercial vehicles that can be registered.
Speaker Change: As a result, it limits the number of vehicles we can sell in these states.
Speaker Change: We have spent significant hours in lobbying dollars working to repeal these standards.
Speaker Change: which we feel unnecessarily impact our customers downstream, who have significant demand for our products, but are unable to meet these needs due to the lack of availability of products that meet the requirements of the new regulations.
Speaker Change: We have already seen some positive momentum in our favor as states like Connecticut, Colorado and Pennsylvania have moved away from carbon and the ACT standards.
Speaker Change: and recently the Trump administration and the EPA have taken actions to repeal this regulation.
Speaker Change: At this point, the situation remains dynamic, making it difficult for us to forecast if and when we may be able to resume normal operations and satisfy the continued build-up of demand we have from customers in these states.
Speaker Change: That said, we are preparing for nothing to change and to work within the limits of that.
Let's bet these new standards create.
Speaker Change: Our chassis suppliers are working diligently with Cummins Engine Company to design new trucks that meet these requirements.
Speaker Change: We expect that one of our largest suppliers will begin production of a carb-compliant chassis by the second half of the year, and the majority of class six chassis suppliers plan to have carb-compliant chassis by January of 2026.
Speaker Change: As a result, the majority of our suppliers' products should have carved compliant powertrains by the start of 2026.
Speaker Change: This gives us confidence that as our suppliers roll out carb compliant chassis, we will be well positioned to meet customer demand in the second half of 2025, 2026, and beyond, even with no change in the current regulatory landscape.
Speaker Change: Despite the challenges impacting our business at the start of 2025, we see positive trends that support our outlook for a solid second half and beyond.
Speaker Change: A normalized backlog will allow us to more easily manage working capital, add flexibility to our distribution network, and reduce lead times, resulting in a normalized flow of products to the end customer.
Speaker Change: This will improve our balance sheet and cash flow generation that I alluded to earlier.
Speaker Change: A normalized supply chain environment allows us to accelerate our inventory reduction, reduce service working capital and convert account receivables to cash.
Speaker Change: Lastly, we plan to launch multiple new products across all product categories, which will enhance our offerings, providing better solutions to our customers and position us for continued innovation and growth in the years ahead.
Speaker Change: Despite any anticipated near-term dip in our results, all market fundamentals give us significant confidence for the second half of 2025 and the years to come.
Speaker Change: As we have mentioned, our distribution network is strong and in a healthy position as we start 2025.
Speaker Change: They're foundational to our success, and we will continue to work strategically with them to enhance their position in the market.
Speaker Change: We also expect some macro factors, such as miles driven, average age of vehicles on the road, and others to be favorable to us.
Speaker Change: There is still strong demand for our talent recovery products across end markets. Not only have retail delivery numbers been consistently strong, but there are also several states that will have an increased demand for our products. Do you import to the impacts of the ACT regulations mentioned earlier?
Speaker Change: Additionally, as we stated previously, stabilized chassis deliveries will improve our supply chain, our distribution channel, and the predictability of our quarter to quarter revenues and gross margins.
Speaker Change: Lastly, we are seeing a significant pickup in requests for quotes or RFQs for our military products globally.
Michael Shlisky, Deborah Whitmire, Michael Gaudreau,
Speaker Change: We were recently chosen as the supplier to rhyme a talk Canada to supply the Canadian military with 85 recovery vehicles.
Speaker Change: While the total $230 million contract value is not solely ascribable to Miller Industries.
Speaker Change: When you combine this contract with more that may be on the horizon, military recovery vehicles could be a substantial tailwind for us in the future years.
Speaker Change: Shifting gears, I want to mention a bit about our capital allocation strategy.
Speaker Change: We mentioned earlier that there were a number of factors giving us confidence that cashflow conversion will improve this year. So we'd like to touch on what our priorities with that cash will be.
Speaker Change: We've always been acutely focused on returning capital to our shareholders, either through our dividend, which the board has just increased to 20 cents per share, or are recently enacted to the Shoot-A-Reparture Program.
Speaker Change: Additionally, we will continue to prioritize reducing our debt balance and interest expense, maintaining our focus on being debt adverse.
Speaker Change: We've also mentioned in the past that capacity expansion both domestically and in Europe is something we are currently monitoring closely. Our board has recently authorized us to move forward with an 8 million euro expansion at one of our facilities and brains.
Speaker Change: Even despite a near-term slowdown, our outlook for 2026 and beyond is very strong, so we will continue to evaluate our capacity needs to ensure we are well positioned to meet future demand.
Speaker Change: and of course, innovation, automation, and investing in our people is key to what we do in Miller Industries.
Speaker Change: It is what keeps us the number one producer of talent and recovery of women in the world.
We remain highly confident in the business and our outlook.
Speaker Change: We are on track to achieve $950 million to $1 billion in revenue this year, marking our third highest performance on record and expected an EPS range from $2.90 to $3.20
Speaker Change: is important to note that our guidance anticipates no change in current regulations or unknown effects of the rapidly changing tariff situation.
Speaker Change: As we have mentioned, we expect a strong balance sheet as a result of reductions in our accounts receivables and inventory, along with an anticipated increase in free cash flow.
Speaker Change: Overall, we are extremely confident in our prospects for 2026 and beyond due to the strength of demand for our products, growth opportunities with product innovation in new markets, and the increase in military activity.
Speaker Change: As we move forward, we will continue to focus on the core philosophy that has made Miller Industries what it is today, our people, our products, and our distribution.
Speaker Change: In closing, the entire management team and I would like to thank all of our employees, suppliers, customers, and shareholders for their continued support. 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 key pass.
Speaker Change: A confirmation tone will indicate your mind in the question to you. You may press star two to remove your question from the queue. For participants using speaker equipment and may be necessary to pick up your hands that before pressing the star key.
Speaker Change: The first question comes from Michael Shlisky with DA Davidson. Please go ahead.
Good morning. This is Linda Wally on for Mike. Thank you for letting us ask questions. So my first question is on the 2017.
Michael Jelitsky: Yes, thanks Phil. My first question is on the 2025 utmost that you provided.
Speaker Change: Both your outlook for 25 includes financial effects of the military, the developments that you anticipate taking place.
Speaker Change: include the Assource of Upside Club Gardens, or will we mainly see announcements in 2025 and the revenue and earnings impact taking place in 2020 or 2017?
Lord, Lord, Lord, Lord,
Amber Healey: Yeah, most of, at least the contract that we have to date at this moment time is a production date beginning in late 26 in the vast majority of production in 27 and 28 for the current contract and the other ones that are on the horizon have similar dates in 26, 27 and 28.
You got it.
Amber Healey: and my next question. Can you give us a sense of the first half of 25 compared to the second half this year? Do you think the first and second quarters could be more like what we just saw in 4Q, and then back half of 2025 is more like the run rate so to most of 2022 to 2024? Any color there will be helpful.
Amber Healey: I think you're right on track there. I think that Q1 and Q2 will be similar to Q4 that we just finished with chassis shipments still being a little lower than normal. And then what we anticipate is to continue to build an upward momentum through the back half of the year into 26 and beyond.
Amber Healey: And can we expect margin levels to be the same since the mix is going to be quite similar to BORQ?
Amber Healey: Yeah, over for the year we anticipate margins to be relatively equal to last year.
Speaker Change: And then lastly, I would like to touch on inventory. So you give us a good detail on the other inventories, but I wanted to double click on that. So we saw inventories where I was relatively flat year over year. Would the anticipated decline in sales? Do you see Miller recreating a lot of work in capital in 2025? So yeah, if you could touch on that end, I would like to touch on that end.
us through how you're managing working capital. I'll be helpful.
Speaker Change: Yeah, our plan has been, you know, throughout last year as our inventory speaks.
is to continue to reduce inventory to historical levels.
Speaker Change: Obviously doing that strategically and slowly, so we do not put ourselves into any type of constraint situation inside our factories, but our goal is to continue to reduce working capital to historical levels.
20% of revenue pre-COVID.
Speaker Change: I appreciate that, and get one more. Can I ask you to do one more?
Yeah, sure. Absolutely.
Speaker Change: Yeah, so on the dealer inventories, so most of the dealers are exclusives to you guys. Are you doing anything to help them navigate the next few quarters?
Speaker Change: No, at this time they are all extremely healthy and working through their build-up of chassis inventory they received in the beginning of last year.
Speaker Change: making sure that they get chassis and bodies upfitted and sold and retail delivered. As you can see from the chart starting in about November or December , they've had a rapid reduction in their inventory levels, and we anticipate in the next...
Speaker Change: 2 to 4 months that we should see those back at optimal levels.
Speaker Change: I see. Well, thank you so much for your time today.
Absolutely. Thank you for the questions, Linda.
Will: There are no further questions. I would like to turn this floor over to Will for closing remarks.
Michael Shlisky, Deborah Whitmire, Michael Gaudreau,
Thank you.
Speaker Change: I'd like to thank you all again for joining us on the call today.
Will: and we look forward to speaking with you on our first quarter conference call.
Will: If you would like information on how to participate and ask questions on the call, please visit our Investor Relations website at millerind.com forward slash investors or email investors.relations at millerindustries.com Thank you all and God bless.
Will: This concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day.