Q2 2025 Myers Industries Inc Earnings Call

Makiya: Good morning. Thank you for joining today's Myers Industries 2025 second quarter earnings results call. My name is Makiya, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for your questions and answers at the end. At this time, I would like to pass the call over to our host, Meghan Beringer. Meghan, you may begin today's call.

Good morning, thank you for joining today's Meyers 2025 second quarter earnings results, call my name is Micaiah and I'll be the moderator for today's call all lines. Will be muted during the presentation portion of the call with an opportunity, for your questions and answers at the end.

Meghan Beringer: Thank you. Good morning, everyone, and welcome to Myers Industries' second quarter 2025 earnings review. Joining me today are Aaron Schapper, President and Chief Executive Officer, and Daniel Hoehn, Vice President, Corporate Controller, and Interim Chief Financial Officer. After the prepared remarks, we will host a question and answer session. Earlier this morning, we issued a press release outlining our second quarter financial results. In addition, a presentation to accompany today's prepared remarks has been posted. Those documents are available on the investor relations section of our website at MyersIndustries.com. This call is being webcast live on our website and will be archived along with the transcript of the call shortly after this event. Please turn to slide three of the presentation for our Safe Harbor disclosures. I would like to remind you that we make some forward-looking statements during this call.

At this time, I'll let the pastor call over to our host. Megan Binger Megan. You may begin today's call. Thank you. Good morning everyone. And welcome to my second quarter 2025 earnings review. Joining me today are Aaron Shopper president and chief executive officer and Dan Hill and vice, president, corporate controller and interim Chief Financial Officer.

After the prepared remarks, we will host a question and answer session earlier this morning, we issued a press release outlining our second quarter Financial results.

In addition, a presentation to a company, today's prepared remarks have been posted.

Best documents are available on the investor relations section of our website. At Meijer industries.com.

This call is being webcast live on our website and we'll be archived along with the transcript of the call. Shortly after this event, please turn to slide 3 of the presentation for our Safe Harbor disclosures.

Meghan Beringer: These comments are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties, and other factors which may cause results to differ materially from those expressed or implied in these statements. Further information concerning these risks, uncertainties, and other factors are set forth in the company's periodic SEC filings. Also, please be advised that certain non-GAAP financial measures, such as adjusted gross profit, adjusted operating income, adjusted EBITDA, and adjusted earnings per share, may be discussed on this call. Please turn to slide five of our presentation, as I will now turn the call over to Aaron.

I would like to remind you that we make make some forward-looking statements during this call. These comments are made pursuant to the safe harbor, provisions of the private Securities. Litigation Reform, Act of 1995.

Such statements are based on Management's, current expectations, and involve risks, uncertainties, and other factors which may cause results to differ materially from those expressed or implied in these statements.

Further information, concerning these risks on certainties and other factors are set forth in the company's periodic SEC filings.

Also, please be advised that there are ngap Financial measures.

Such as adjusted gross profits, adjusted operating income adjusted evos and adjusted earnings for share may be discussed on this call.

Aaron Schapper: Thank you, Meghan. Good morning, everyone, and thank you for joining us. I will begin today's call with a review of our second quarter. Then I will provide an update on our focus transformation, including the announcements to accelerate our progress that we published this morning in our press release. Following my comments, Dan will provide a detailed review of second quarter financials and our outlook for the year. Second quarter revenue was lower year over year. We achieved strong growth in certain applications, notably in industrial, where demand for our military products remained healthy. However, we did encounter demand headwinds in most other end markets, primarily in vehicle and automotive aftermarket, resulting in lower sales across both segments. As Dan will detail in a few moments, we believe some of the softness is timing related.

Please turn to Slide 5 of our presentation as I will. Now, I will turn the call over to Aaron.

Thank you, Megan. Good morning everyone and thank you for joining us.

I will begin today's call with a review of our second quarter. Then I will provide an update on our Focus transformation, including the announcements to accelerate our progress that we published this morning in our press release.

Review of second quarter financials and our outlook for the year. Second quarter revenue was lower year-over-year.

We achieved strong growth in certain applications notably in industrial where demand for our military products. Remain healthy. However, we did encounter demand, headwinds, and most other end markets, primarily in vehicle and automotive, aftermarket resulting in lower sales across both segments.

Aaron Schapper: Our outlook for the second half of the year is positive, backed by our substantial backlog, primarily in industrial markets, especially military, as well as infrastructure projects. We remain encouraged by the longer-term trends within our markets. We demonstrated progress against our goal to reduce SG&A, bringing those expenses down year over year and keeping us on pace to achieve our targeted $20 million cost reduction, primarily SG&A, by the end of this year. For the quarter, we earned $0.26 per share. Adjusted EPS was $0.31. I am pleased with the way our team has navigated challenging end market environments and remain confident that we are on track to improve performance. Turning to slide six, I would like to provide an update on our focus transformation program. We introduced this initiative earlier this year to improve our performance and deliver more consistent and reliable results.

As Dan will detail in a few moments. We believe some of the softness is timing related.

Our outlook for the second half of the year is positive. Backed by our substantial backlog primarily in industrial markets, especially military as well as infrastructure projects. We remain encouraged by the longer term Trends within our markets.

We demonstrated progress against our goal to reduce sgna.

Bringing those expenses down year-over-year and keeping us on Pace to achieve our targeted, 20 million dollar cost reduction primarily, sgna by the end of this year.

For the quarter we earned 26 cents. Per share, adjusted EPS was 31 cents. I am pleased with the way our team has navigated challenging and Market environments and remain confident. They we are on track to improve performance.

Turning the slide 6. I would like to provide an update on our Focus transformation program.

Aaron Schapper: Today, we announce three actions that we believe will accelerate our transformation and bring us closer to obtaining our goals. I would like to discuss each of these. First, our board of directors has approved launching a strategic review of our Myers Tire Supply business that serves automotive aftermarket. The history of our company cannot be told without Myers Tire Supply business. MTS is where the company began, here in Akron, where we are headquartered. It is a business with a strong market position, a leading brand with loyal customers, and great people.

We introduced this initiative earlier this year to improve our performance and deliver more consistent and reliable results.

Today, we announced 3 actions that, we believe will accelerate our transformation and bring us closer to obtaining our goals. I would like to discuss each of these.

First.

Our board of directors has approved launching a strategic review of our Myers tire supply business, that serves automotive aftermarket.

The history of our company cannot be told without Myers tire supply business.

MTS is where the company began here in Akran, where we are headquartered. It is a business with a strong market position, a leading brand with loyal customers, and great people.

Aaron Schapper: However, as we move forward with our focus transformation and create a portfolio of businesses that align with our mission of protecting assets from the ground up and provide us with the opportunity to apply our competitive advantages for high-return applications, we have determined that this business may achieve greater success under different ownership, where it can benefit from focused investment. One of our focus transformation objectives is to create clear strategies to improve the profitability of our overall portfolio. The strategic review process we are launching will enable us to achieve this, as well as simplify and focus our portfolio on core businesses that align with our mission. The second update we are providing today is the consolidation of our rotational molding production capacity. We have reviewed our operating footprint and decided that we will idle two of our nine rotational molding facilities, better utilizing our operating assets.

However, as we move forward with our Focus transformation and create a portfolio of businesses that align with our mission of protecting assets from the ground up and provide us with the opportunity to apply our competitive advantages for high return applications. We have determined that this business May achieve greater success under different ownership where it can benefit from focused Investments.

1 of our Focus transformation objectives is to create clear strategies to improve the profitability of our overall portfolio.

The Strategic review process. We are launching will enable us to achieve this as well as simplify and focus. Our portfolio on core businesses that align with our mission.

The second update, we are providing today is the consolidation of our rotational molding production capacity.

Aaron Schapper: These actions will result in annual savings of at least $3 million. Production from these facilities will be consolidated into other facilities as needed. Lastly, we are on track to deliver $20 million in cost savings, primarily SG&A, by the end of 2025. With the manufacturing consolidation, we have line of sight to $18 million, well on our way to our $20 million goal. With six months left, we feel confident in achieving this full-year target. With those three announcements as a backdrop, let us turn to slide seven and review the four objectives of our focus transformation program and summarize our progress. We start with establishing a culture of execution and accountability to drive performance. Across the organization, we are emphasizing lean principles to drive clear, efficient processes.

We have reviewed our operating footprint and decided that we will idle 2 of our 9 rotating facilities. Better utilizing our operating assets.

These actions will result in annual savings of at least $3 million in production. From these facilities, we will be consolidated into other facilities as needed.

Lastly, we are on track to deliver $20 million in cost savings, primarily in SG&A, by the end of 2025.

But the manufacturing consolidation we have line of sight to 18 million. Well, on our way to our 20 million goals with 6 months left, we feel confident in this full year targets

With those three announcements as a backdrop, let us turn to slide 7 and review the four objectives of our Focus transformation program and summarize our progress.

Aaron Schapper: We are already seeing positive impacts from this focus as the team creates and rallies behind action plans that get us back on track to prioritize work that adds profit. This leads us to our second objective: to create clear strategies with action plans and specific KPIs to improve the profitability of our entire portfolio. A significant step in meeting this objective is the Meijer Tire Supply strategic review. Completing this will enable us to devote more resources and effort to driving performance in the remaining businesses and target our investments to high-growth markets aligned with our competitive advantages. Our third objective is to deliver consistent and reliable results by effectively controlling what we can control. I already discussed our path to achieving the $20 million target, with the majority of savings driven by organizational and footprint consolidation, followed by a reduction in outside services.

We start with establishing a culture of execution and accountability to drive performance across the organization. We are emphasizing lean principles to drive clear efficient processes.

We are already seeing positive impacts from this Focus as the team creates and rallies behind action. Plans that get us back on track to prioritize work that adds profits.

This leads us to our second objective to create clear strategies with action plans and specific kpis to improve the profitability of our entire portfolio.

A significant step in meeting this objective, is the MTS strategic review.

Completing this will enable us to devote more resources and effort to driving performance in the remaining businesses and Target our investments to high growth markets aligned with our competitive advantages.

Our third objective is to deliver consistent and reliable results by effectively, controlling what we can control.

Aaron Schapper: The team is doing a great job of controlling costs, and I am confident it will help us significantly improve our margin profile. Our fourth and final objective is to optimize cash flow and support disciplined capital allocation deployment. We are proud to report strong free cash flow generation of $25 million in the quarter. This allows us to continue investing in organic growth with CapEx of around 3% of sales and focusing on high-growth opportunities that deliver superior returns. We also continue to ensure our balance sheet is strong with repayment of debt. We have established a good foundation with our disciplined and balanced capital allocation approach that we can build on to enhance shareholder value into the future.

I already discussed our path to achieving the 20 million dollar Target with the majority of savings, driven by organizational and footprint, consolidations followed by a reduction in outside services.

The team is doing a great job of controlling costs and I'm confident we'll help us significantly improve our margin profile.

Is to optimize cash flow and support disciplined Capital allocation deployment.

We are proud to report, strong free, cash flow generation of 25 million in the quarter.

This allows us to continue investing in organic growth with capex of around, 3%, of sales, and focusing on high growth opportunities that deliver Superior returns.

Aaron Schapper: I am pleased with the progress we are making against our focus transformation objectives and confident in our team's ability to deliver improved financial results from the changes we are making. Turning to slide eight, we have made significant progress over the first six months of 2025. It is clear that 2025 is a year of focused transformation, one that began with building a strong foundation of corporate culture that drives high performance through execution and accountability. On top of this, we added financial discipline with $20 million in cost savings and a $10 million share buyback program. With today's announcements, we have made a large, significant step to simplify and focus our portfolio with the Meijer Tire Supply strategic review. We are also rationalizing our operations with the consolidation of rotational molding production.

We also continue to ensure our balance sheet is strong with repayment of debt. We've established a good foundation with our disciplined and balanced Capital. Allocation approach that we can build on to enhance, shareholder value into the future.

I am pleased with the progress. We are making against our Focus transformation objectives and confident in our team's ability to deliver improved Financial results from the changes. We are making

Turning to slide 8, we have made significant progress over the first 6 months of 2025. It is clear that 2025 is a year of focus transformation.

1 that began with building a strong Foundation of corporate culture that drives high performance through execution and accountability.

On top of this, we added Financial discipline with 20 million in cost savings and 10 million share buyback programs.

With today's announcements, we have made a large, significant step to simplify and focus our portfolio with the MTS strategic review. We are also rationalizing our operations with the consolidation of rotational molding production.

Aaron Schapper: Looking forward, we anticipate sharing more details with you before the end of 2025 on our updated strategy, including our platforms for growth, competitive advantages to differentiate Myers, strengths aligned to our high-performing assets, and value creation for our shareholders. This is an exciting time to be associated with Myers, and I am excited to see what we will be able to accomplish. With that, I will turn the call over to Dan to discuss our second quarter results and updated market outlook. Dan?

Looking forward, we anticipate sharing more details with you before the end of 2025, honor updated strategy including our platforms for growth competitive advantages to differentiate Meyers strengths, align to our high performing assets and value creation for our shareholders.

This is an exciting time to be associated with Meyers and I'm excited to see what will be able to accomplish.

Daniel Hoehn: Thank you, Aaron Schapper, and good morning, everyone. Turning to our financial results on slide 10, second quarter net sales were $209.6 million, down 4.8% from last year. Revenue was lower in both segments. Strong sales of our military products in our industrial end market were offset by lower sales in vehicle and automotive aftermarket. We remain confident in second-half growth based on our strong backlogs for both military products in the industrial end market and for infrastructure products, along with continuing positive customer bookings. Adjusted gross margins fell 220 basis points to 33.9% due to the lower volume, product sales mix, and lower pricing, primarily in the distribution segment. Adjusted operating income decreased to $22.8 million, with margin compressing 220 basis points to 10.9% of sales.

with that, I will turn the call over to Dan to discuss our second quarter results and updated Market Outlook Dan

Thank you, Aaron and good morning, everyone.

Turning to our financial results on slide 10 second quarter. Net sales were 209.6 million down 4.8% from last year. Revenue was lower in the segments.

strong sales of our military products and our industrial and Market were offset by lower sales and vehicle and automotive aftermarket

We remain confident. The second half growth based on our strong backlogs for both military products and the industrial, and markets. And for infrastructure products, along with continuing positive customer booking

Daniel Hoehn: We reduced adjusted SG&A expenses 5%, keeping them essentially flat as a percentage of sales, as we are beginning to see results from our focus transformation initiatives. As these actions continue to be completed, plus the expected benefit from the strategic moves that Aaron Schapper mentioned earlier, SG&A will continue to decrease through the balance of the year. When 2024 is normalized for incentive compensation and to include a full year of signature results, we have taken actions to achieve $15 million of run rate savings as of June. The production consolidation we announced today will bring us to $18 million, and we have a pipeline of opportunities to achieve the full $20 million of run rate savings by the end of the year.

Adjusted gross margin sell, 220 basis points to 33.9% due to the lower volume product sales, mix and lower pricing primarily in the distribution segment. Adjusted operating income decreased. The 22.8 million with margin compressing 220 basis points to 10.9% of sales, we reduced the adjusted sgna expenses, 5%, keeping them, essentially flat.

As a percentage of sales, as we are beginning to see results from our Focus transformation initiatives.

As these actions continue to be completed. Plus the expected benefit from the Strategic moves that Aaron mentioned earlier. Sgna will continue to decrease through the balance of the year.

Daniel Hoehn: To date, savings have primarily come from reduced workforce, most of which was implemented at the end of the second quarter, reductions in spend on outside services, and reduced operating footprint. In connection with idling two of our nine rotational molding operating facilities, we expect costs of up to $14 million, including approximately $1 million of cash costs, approximately $4 million of non-cash write-downs, and additional expected costs related to long-term facility leases. Adjusted EBITDA margin was 15.7%, and diluted adjusted earnings per share were $0.31. Turning to slide 11, material handling net sales were down 4.4%, as strong sales of military products in our industrial end market were offset by lower volume in vehicle and other end markets. Within vehicle, we saw lower demand from heavy truck and auto manufacturers, while RV and marine remained flat.

When 2024 is normalized for incentive compensation and to include a full year of signature results, we have taken actions to achieve 15 million of run rate savings as of June. The production consolidation we announced today will bring us to 18 million and we have a pipeline of opportunities, to achieve a full, 20 million of run rate savings by the end of the year.

To date savings have primarily come from reduced Workforce, most of which was implemented at the end of the second quarter reductions in spend on outside services and reduced operating footprints.

In connection with idling 2 of our 9. Rott molding operating facilities, we expect costs of up to 14 million including approximately 1 million of cash costs, approximately 4 million of non-cash, write downs, and additional expected costs related to long-term facility. Leases

Adjusted. Even at the margin was 15.7% and deleted adjusted to earnings per. Share were 31 cents.

Daniel Hoehn: Within food and beverage, the cyclically low seed box demand continued, but we expect that demand to improve in the second half. In addition, project timing and tariff-driven order delays impacted the infrastructure end market during the quarter. Material handling adjusted EBITDA margin was 23.9%, slightly lower than last year, primarily due to lower volumes and, to a lesser extent, pricing. Distribution net sales decreased 6% on lower pricing and also lower volume from our Patch Rubber business. Adjusted EBITDA margin was 4.8%. We are beginning to see market stabilization and the positive impact of actions we took in 2024 to reduce expense and improve margins, including distribution center consolidation. As a reminder, our distribution segment includes Myers Tire Supply, which had trailing 12-month sales of $189 million as of June, and Patch Rubber, which had trailing 12-month sales of $26 million, including intercompany sales.

Turning the slide 11 Material Handling, net, sales were down 4.4% as strong sales of military products in our industrial and Market were offset by lower volume and vehicle. And other end markets within vehicle. We saw lower demand from heavy truck and auto manufacturers while RV and Marine remained flat.

Within food, and beverage, the cyclically low seedbox demand continued, but we expect that demand to improve in the second half in addition project timing and tariff driven order delays impacted the infrastructure and market during the quarter.

Distribution, net sales, decreased 6% on Lower pricing and also lower volume from our patch rubber business.

Adjusted. Even with the margin was 4.8%. We are beginning to see Market stabilization, and the positive impact of actions we took in 2024 to reduce expense and improve margins, including Distribution Center consolidation,

as a reminder, our distribution segment includes Meyers tire supply, which had trailing 12 months sales of 189 million, as of June and pass Robert, which had trailing 12 months, sales of 26 million including intercompany sales

Daniel Hoehn: Turning to slide 12, operating cash flow was $28.3 million. This is an improvement of $18.2 million sequentially and $14 million from the prior year on improved cash generation from working capital. CapEx was $3.6 million, which was slightly lower than the prior year. This resulted in free cash flow of $24.7 million in the quarter, up $22.7 million sequentially, and up $14.8 million from the prior year. At June 30, we had $239.7 million of availability under our revolving credit facility and cash on hand of $41.3 million, providing us with additional flexibility to support our capital allocation priorities. Please turn to slide 13. We reduced debt by $13 million in the second quarter, bringing total debt to $379 million. Our net leverage ratio was 2.8x. We remain committed to achieving our target ratio of 1.5 to 2.5x.

Turning to slide 12 operating cash flow was 28.3 million. This is an improvement of 18.2 million sequentially, and 14 million from the prior year on improved cash generation from working. Capital capex was 3.6 million which was slightly lower than the prior year.

This resulted in free cash flow of 24.7 million in the quarter up 22.7 million sequentially and up. 14.8 million from the prior year.

At June 30th, we had $239.7 million of availability under our revolving credit facility and cash on hand of $41.3 million.

Providing us with additional flexibility to support our capital allocation priorities.

Please turn to slide 13.

We reduced debt by 13 million in the second quarter, bringing total debt to 379 million.

Daniel Hoehn: We repurchased a half a million dollars in shares during the quarter, bringing total year-to-date repurchases to $1.5 million. This leaves $8.5 million available under our current authorization. We plan to continue making opportunistic share repurchases to complement our ongoing dividends as part of our capital allocation strategy to return cash to shareholders. Turning to slide 14, we are reconfirming our market outlook for 2025 that was provided during our first quarter earnings call. We still see both risks and opportunities for the businesses and will continue to monitor end market conditions for impacts from tariffs or other factors that may influence demand trends. Let me review our expectations by market. Industrial should continue with moderate growth driven by demand for military products as militaries around the world replenish their inventories, as evidenced by a strong backlog.

Our net leverage ratio was 2.8x. We remain committed to achieving our Target ratio of 1.5 to 2.5.

we were purchased a half a million dollars in shares during the quarter bringing total year-to-date repurchases to 1.5 million this leaves 8.5 million available, under our current authorization,

We plan to continue making opportunistic, share repurchases to complement our ongoing dividends as part of our Capital allocation strategy to return cash to shareholders.

Turning the slide 14. We are reconfirming our Market Outlook for 2025 that was provided during our first quarter earnings call.

We still see both risks and opportunities for the businesses and will continue to Monitor and market conditions, for impacts from tariffs or other factors. That may influence demand trends.

Let me review your expectations by market.

Daniel Hoehn: We now expect sales of our military products to exceed $40 million for the full year of 2025. We expect sales growth to be partially offset by lower sales of bulk container and organizational products. In infrastructure, ongoing strong project spending supported by material conversion from wood matting should continue to support strong growth. This is reinforced by our strong backlog for these infrastructure products, along with an expanding customer base, with new customers contributing over 20% of revenue so far this year, a pace ahead of what we saw in 2024. We expect the vehicle end market to be down as a result of economic uncertainty driven by developing tariff impacts. This end market includes RV, marine, heavy truck, and automotive manufacturing customers. In consumer, we anticipate stable sales of fuel containers and an expected return to a more normalized storm season.

Industrial should continue with moderate growth driven by demand for military products as militaries around the world, replenish their inventories as evidenced by a strong backlog. We now expect sales of our military products to exceed 40 million, for the full year of 2025.

We expect sales growth to be partially offset by lower sales of bulk container and organizational products.

In infrastructure. Ongoing strong project spending supported by material conversion from wood, matting should continue to support strong growth.

This is reinforced by our strong backlog for these infrastructure products.

Along with an expanding customer base, new customers are contributing over 20% of revenue. So far this year, we are on a pace ahead of what we saw in 2024.

We expect the vehicle and Market to be down as a result of economic uncertainty driven by developing tariff impacts.

This end market includes RV, marine, heavy truck, and automotive manufacturing customers.

In consumer, we anticipate stable sales at fuel containers, in an expected return to a more normalized storm season.

Daniel Hoehn: As a reminder, hurricane-driven sales are largely dependent on the location and preparation time for approaching storms. Our food and beverage end market, which includes agriculture, is projected to be stable for the full year. While there have been headwinds with some of our food processing customers, we are currently expecting second-half improvement with our agricultural customers led by seed boxes. Automotive aftermarket distribution is expected to be slightly down. We are working to stabilize this business as we improve our cost structure, pricing, sales territory alignment, and digital sales strategy. We will continue to look for opportunities to expand our market presence and deliver solutions to our customers. At the same time, we expect financial results to improve as we make progress on our focus transformation. I would now like to turn the call back to Aaron for some closing comments before we take your questions. Aaron?

As a reminder, hurricane driven sales, are largely dependent on the location and preparation time for approaching storms.

Our food and beverage and Market which includes agriculture is projected to be stable for the full year. While there have been headwinds with some of our food processing customers. We are currently expecting second half improvement with our agricultural, customers led by seed boxes.

Automotive, aftermarket distribution is expected to be slightly down. We are working to stabilize this business as we improve our cost. Structure pricing sales territory alignment, and digital sales strategy.

We will continue to look for opportunities to expand our market presence and deliver solutions to our customers. At the same time, we expect financial results to improve as we make progress on our Focus transformation.

I would now like to turn the call back to Aaron for some closing comments before we take your questions. Aaron.

Aaron Schapper: Thank you, Dan. We have made significant progress over the first six months of our focus transformation journey. The pace of our progress accelerated with today's announcements regarding the strategic review of MTS, rotational molding production capacity consolidation, and confirmation of achieving our cost reduction goal. While these actions will not complete our transformation, they bring us much closer to our goal. With strong support and leadership from our Board of Directors, we are clarifying our mission and laying a solid foundation upon which we are building our long-term strategy. I'm very pleased with our progress and more confident on our journey to success. With that, I'd like to turn the call over to the operator for questions.

Thank you Dan. We've made significant progress over the first 6 months of our Focus transformation Journey.

While these actions will not complete our transformation, they bring us much closer to our goals.

With strong support and Leadership from our board of directors, we are clarifying our mission and laying a solid foundation upon which we are building our long-term strategy. I'm very pleased with our progress and more confident on our journey to a success. With that, I'd like to turn the call over to the operator for questions.

Speaker 5: Thank you. We will now begin today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove your question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your headset before asking a question. We will pause briefly while your questions are registered. The first question is from the line of Christian Zyla with Q Corp. You may begin.

Thank you. We would not begin. Today's Q&A session. If you would like to ask a question, please press star. Followed by 1 on your telephone keypad. If for any reason you would like to remove your question, please, press star followed by 2 again to ask a question, press star, 1 as a reminder, if you are using a speaker-phone, please remember to pick up your headset before asking a question will possibly while your questions are registered.

The first question is from the line of krystian Bala with key Corp, you may begin.

Christian Zyla: Good morning, everyone. Very exciting news in your PR today. Aaron Schapper, you lost your focus transformation a couple of quarters ago, and it is clear you really meant it. Just first question, was there a final straw that broke the camel's back that got you to this point, or was it a culmination of what you are seeing in your business and the market? Just any overall thoughts of the process of how you got here?

Good morning, everyone.

Very exciting news in your are today.

Aaron. You lost Focus transformation, a couple of quarters ago and and clear. It's clear. You really meant it. Just first question, was there, a final straw that broke the camel's back that got you to this point? Or was it a culmination of what you're seeing in your business and the market just any overall thoughts of the process of how you got here?

Aaron Schapper: Yeah, so you know this, you know the Meijer Tire Supply piece has been an internal topic of discussion for some time. Coming in here, I grew up in manufacturing, manufacturing in my background, but I really knew kind of the agriculture and more of the infrastructure businesses. With my move to Myers Industries, I really felt the need to take some time to learn the auto industry, and that primarily meant gathering data, gathering input and opinions from people that knew the business, knew it better than I did, and to make sure that I spent time meeting with customers, meeting with stakeholders, and meeting with our board and just gathering all the data needed for the decision to do the strategic review for Meijer Tire Supply. The first six months was really just to take the proper time to do the evaluation, Christian Zyla.

Yeah, so, you know, this, you know, the MTS piece is has been a, uh, it's been an internal topic of discussion for some time. Um, you know, so coming in here, you know, I grew up in manufacturing, Manufacturing in my background, um, but I really knew kind of the the Agriculture and more of the infrastructure businesses. And so, with my move to Meyers, I really felt the need to take some time to learn the Auto industry and, uh, that primarily meant Gathering data, Gathering inputs, and opinions from, uh, people that knew the business knew it better than I did. And so, make sure that I, I spent time meeting with customers meeting with, uh, stakeholders and meeting with our board and just Gathering all the data needed for, um, the decision to, uh, you know, do the Strategic review for MCs

and so, you know,

you know, the first 6 months was really just to take the proper time to do the evaluation Christian.

Christian Zyla: Got it. Understood. Again, exciting news. Regardless of what happens, it is good to see actual changes being talked about and coming to fruition. I guess the next question is just on the backlog. This is probably one of the first times we have heard you guys talking about a backlog, and it is very encouraging to see, you know, the soft guidance for Q3 sales. How big is the backlog relative to sales, and how much visibility does that give you? Is that backlog primarily signature related, or have you seen order patterns changing, or is there something different that is, you know, being changed with customer order patterns?

Got it, understood again, exciting, news, regardless of what happens, it's good to see actual changes, um, being talked about and and coming to fruition. Um, I guess. Next question is, is just on the backlog. This is probably 1 of the first times. We've heard you guys talking about a backlog and it's very encouraging to see, you know, the, the soft guidance for 3Q sales. How big is the backlog relative to sales and how much visibility does that give you?

Is that backlog primarily signature related or have you seen order patterns changing or is there something different? That's, you know, being changed with customer order patterns

Daniel Hoehn: When we think about our infrastructure sales, for the composite matting, those tend to be large projects. You get a little bit of visibility into how those are going to unfold. For that business, as we grow in military, we will see more backlog in those specific areas. I think for the other businesses, it depends, and we see a lot more kind of book and bill as we go. We are really encouraged by the large backlog that we are seeing in those two areas, and it does give us a lot of confidence as we go into the back half.

So when we think about our infrastructure sales, so for the, the composite matting, write those tend to be large projects. So you get a little bit of visibility into how those, how those are going to unfold. So for for that business and and as you know, as we grow in military, we'll see you know more backlog. Uh in those specific areas. I think for the other for the other businesses it it depends and we see a lot more kind of book and Bill uh you know as as we go. So

You know, we're really encouraged by the by the large backlog that we're seeing in those uh in in those 2 areas. And it does give us a lot of confidence as we go into the back half.

Christian Zyla: Got it. If I could just sneak in one more question. Free cash flow, $25 million in the quarter was exceptionally strong. What drove that? Is there some seasonality in there that we should be thinking of? Then just bigger picture, can you give us a sense of what you could or should do annually for free cash flow, assuming both scenarios of keeping or not keeping distribution within Myers Industries? How do we think about your annual potential? Thank you so much.

Got it and if I could just sneak in 1, more question um free cash flow. 25 million in the quarter was exceptionally strong.

What drove that is there some seasonality in there that we should be thinking of and then just bigger picture. Can you give us a sense of what you could or should do annually for free cash flow assuming both scenarios of keeping or not keeping distribution within Myers. Just how do we think about your annual potential? Thank you so much.

Daniel Hoehn: Yeah, so obviously I think the cash flow is indicative of what we can and should be doing, right? Remember we talked about timing in the last quarter. We clearly made that up and then some a little bit. Historically, we've had a little bit more cash flow in the back half. As you think about that, I expect similar trends this year. Now, there can be timing from quarter to quarter. As I mentioned, with some of these large backlog orders, they tend to ship in large chunks as well. Any one quarter might not be indicative. On a general trend, I think we're showing what the business can do. I think if you look at the EBITDA mix between our two segments, you can get an idea of what that does with our cash flow with and without Meijer Tire Supply.

Yeah, so obviously I think the cash flow is indicative of what of what we can and should be should be doing, right? Remember we talked about timing, uh, in the last quarter, we clearly made that up and then some a little bit and historically we've had a little bit more cash flow in the back half. Uh, so as you think about that, um, you know, I expect similar Trends this year. Um, now there can be timing from quarter to quarter, as I mentioned with some of these large backlog orders. They tend to ship in large, uh, in large chunks as well. So any 1 quarter might not be indicative, but on, on the general Trend I think we're I think we're uh, showing what the business can do. Um,

I think the, if you look at the ebit that makes between our 2 segments, you can get an idea of what that does with our with our cash flow with and without um MTS.

Christian Zyla: Got it. Thanks a lot. I am excited to see the new Myers.

Got it. Thanks a lot. I'm excited to see the new Myers.

Daniel Hoehn: Me too.

Aaron Schapper: Thanks, Christian.

Me too. Thanks Christian.

Speaker 5: Thank you. The next question is from the line of Anna C. Jolly with Gabelli & Company Incorporated. You may begin.

Thank you. The next question is from the line of MSC Jolly with Gabby and Company Incorporated. You may begin.

Carolina: Hi, great. Thanks for taking my question. It is Carolina. Just, I guess, the first one, what gives you confidence in the rebound in seed boxes in the second half of the year?

All great. Thanks for taking my question, it's Carolina. Um just I guess the first 1, what I get, what gives you confidence. I think in the rebound and Seed boxes in the second half of the year,

Aaron Schapper: Yeah, so, you know, really, it comes from our customers. Looking at what our customers demanded in the back half of the year, we will put in orders and give us an indication of kind of the seed box need that they are going to need. We have already been working on orders for replacement parts as well. So when we look at the replacement parts, it gives us a kind of a general idea that the back half of the year. The normal seasonality for those seed boxes is the back half of the year anyway. It is good to kind of, you know, get feedback from our customers, understand what they are seeing out there, and that is what gives us confidence the back half of the year will be better on the seed box side.

Uh, yeah. So, you know, uh, really it comes from our customers. Um, you know, looking at what our customers demand is the back half of the year and, you know, we look, they, we'll put in orders and give us an indication of uh, kind of the the seed box need that they're going to need. And uh, we've already been working on orders for replacement, uh, Parts as well. So when we look at the replacement parts, um it it it gives us a kind of a, a general idea that that uh the the back half of the year, the normal seasonality for those feed boxes is uh the back half of the Year anyway. And so it's good to kind of, you know, get feedback from our customers, understand what they're seeing out there. And uh and and that's what gives us confidence in the back. Half of the year will be better on the feedback side.

Carolina: Perfect. Thanks. Also, I know the signature acquisition was back in the beginning of 2024, but I would still just be interested in any commentary on how the company is being integrated and the progress there.

Perfect thanks. And then also I know um the signature acquisition was back in the beginning of 2024 so it's still just be interested in um any commentary on how how the the companies being um integrated and the the progress there.

Aaron Schapper: Yeah, you know, the signature culture is a great add to Myers Industries in general. We are happy to have them on board. I think that they bring a unique set of operational talent that we are actually able to really utilize across more of our material handling footprint. So what you are going to see is, you know, the talented operations folks are, you know, working with our rest of the Myers Industries Operations Group to share best practices and do what they do best, and then Myers Industries teaches them what we do best. So I think between the two, it really is a good synergy of operations and looking at the operations side of the business. Additionally, having, you know, signature adds a real growth opportunity for us in the infrastructure side of the business.

Yeah, you know, let's get a signature. Uh, uh, culture is, is a great add to um, Meijer in general. We're, we're happy to have them on board. Um, I think that they bring a unique set of operational, uh, talents that we're actually able to really utilize across more of our Material, Handling footprint. So what you're going to see is, um, you know, the the the talent operations folks are, um, uh, you know, working with with our rest of the Meijer industry, operations group, to share best practices and do what they do best and then Meyers teaches them what we do best. So I think between the 2, it's it's really is a good Synergy of operations and looking at the operation side of the business.

Aaron Schapper: Obviously, you know, my background on the infrastructure side, you know, is complementary. So we are really excited to take signature and grow that business and look at other growth opportunities of the year. We are also excited to, you know, be talking about that. We talked about doing a strategic review later in November. So we are excited to come back and talk to you in the market about what we are doing in the infrastructure business and how we intend to grow and intend to grow our portfolio on that side of the business.

Additionally, having uh, you know, a signature adds a real uh, growth opportunity for us in the infrastructure side of the business. Um, obviously, you know, my background on the infrastructure side, uh, you know, is complimentary so we're really excited to, um, take signature and and, uh, grow that business and look at other growth opportunities in the year and, uh, we're also excited to, you know, be talking about that. I mean,

We talked about doing a strategic review later in November. So we're excited to come back and uh, talk to you in the market about what we're doing in the infrastructure business and how we intend to grow and, uh, intend to grow our, uh, portfolio on that side of the business.

Carolina: Great. Thank you.

Great. Thank you.

Speaker 5: The next question is from the line of William Dezellem with Titan Capital Management. You may begin.

The next question is from the line of William dellum with Titan Capital Management. You may begin.

William Dezellem: Thank you. That is William Dezellem. Let me switch to signatures and tariff impact. Did we hear correctly in the opening remarks that there was some weakness tied to tariffs? If so, would you help us understand the mechanics of how that impact happened?

Thank you. That's uh, uh, build these outline and uh, let me uh, switch to uh, uh signatures. Um, tariff impact. Did we hear correctly in the opening remarks, uh, that that there was some weakness tied to tariffs and if so, would you, would you help us understand? You know, the mechanics of of uh, how that impact uh uh happened.

Daniel Hoehn: Yeah, sure, Bill. I think when we think about the tariffs, it is a similar story to what we talked about in the past in that our input costs are largely unaffected. We have a small amount within the distribution business. We do have a small but growing part of export sales. What we have seen is some customers kind of delaying purchases as they just wait for some certainty or wait those additional tariff costs. There is still a lot of interest in our product for the applications that our customers are using. It can affect the timing of those sales or has affected the timing of those sales.

Yeah, sure bill. Um,

I, I think when we think about the, the tariffs, it's it's a similar story to what we talked about in the past and that our input costs are largely unaffected. We have uh a small amount within the within the distribution business but we do have a small but growing part of uh export sales and what we've seen is is some customers kind of delaying purchases uh as they as they just wait for some certainty or or ways that those additional tariff costs. So there's still a lot of interest in our product uh, for for the application.

That our customers are using and they're just, you know, it kind of affect the timing of those sales or has has affected the timing of those sales.

Aaron Schapper: Yeah, and Bill, as we expect some of these kind of tariff resolutions as we are kind of rolling through the summer, I mean, we are hoping that those are, you know, disconnections in the market on a short-term basis. But Signature does have an export business, and it was affected by kind of that uncertainty in the quarter.

By kind of that uncertainty in the quarter. So,

William Dezellem: Has that cleared up, or is there still enough uncertainty? Maybe I should ask, where are those sales going? I guess the clarity will be whether we have a final deal or not with those countries.

And his that, uh, has that cleared up or is there a still enough uncertainty? Uh, maybe I should ask? Where are those sales going? And I guess the clarity will be whether the we have a final deal or not with those countries.

Aaron Schapper: Specifically, there were really, that one was both Europe and Canada at the time. We do have some resolution, which is good, both with the latest Europe resolution. We do have some resolution. We hope to not have those kind of disconnects in the next quarter.

Yeah. Specifically there were really that 1 was uh both Europe and and Canada at the time. And so we do have some resolution which is good both with uh, with the the latest Europe uh um resolution. So we do have some resolution. So we hope to not have those kind of disconnects in the next quarter.

William Dezellem: Is there a level of tariff that is currently being talked about with Canada in particular that would essentially eliminate those sales? That is a risk that you have to deal with, or is that not a factor here?

And then uh just taking this 1 step further. If uh, um,

Is there a level of tariff that's currently being talked about with Canada, uh, in particular that would essentially eliminate those sales. And so, uh, that's a, that's a, a risk that you have to deal with or or is that not a factor here?

Aaron Schapper: No, I do not believe that will be a big factor going forward. I think that when you were going through the different pieces and parts of the tariffs, I think more than anything else, people just want resolution one way or the other. Then I think the market stabilized. We are comfortable with our position in the market. We are comfortable with our pricing in the market. I think it is just, there is always caution and a little bit of uncertainty when you do not know what that next tariff rate is going to be or by the time you get, because these are, remember these are backlog orders. Then when you get to the final projects that are usually planned well in advance.

no, I don't believe that'll be a, a big factor going forward, you know, I, I think that

You know, when you were going through the different pieces and parts of the, of the tariffs, I think more than anything else. People just want resolution, 1, way or the other. And then I think the, the market stabilized, we're we're comfortable with our position in the market. We're comfortable with our pricing in the market. I think it's just, you know, there's always

Aaron Schapper: So when you finally get to the final shipping dates, you want to know that the policy is going to be the same as what you budgeted for. So when you look at it with that infrastructure lens and that kind of backlog, it makes a little more sense that you would like to have that uncertainty, that certainty of tariff rate out there. So as we kind of get to resolution, I think that that noise will go away.

um, you know, caution and a little bit of uncertainty when you don't know what that that next, uh, Carefree is going to be or by the time you get because these are look, remember these are backlog orders and then you know uh when you get to the final you know, projects that are usually planned well in advance. And so when you finally get to the final shipping uh dates you um you know you want to know that the policy is going to be the same as what you uh, budgeted for. So when you look at it with that infrastructure lens and that kind of um backward lines, it makes a little more sense that you'd like to have that concern that certainty of tariff rate out there and so as we kind of get to resolution, I think that that noise will go away.

William Dezellem: is very helpful. Thank you, Aaron Schapper. Relative to the two idled rotational molding lines, do you anticipate that if volume increases, those lines will be needed? Do you anticipate moving those lines to other locations? Fill us, fill out the big picture on that situation for us, please.

That's very helpful. Thank you Aaron. Uh, and and then relative to the, uh, to the 2, um, Idol rotational molding lines. Um, would do you anticipate that if volume increases that that those lines will be needed? Um, do you anticipate moving those lines, uh, to it to other locations?

I think Phyllis uh fill out the big picture on, on those uh uh on that situation for us, please.

Aaron Schapper: Yeah, there are two rotational molding plants, not just production lines that are going to be idled. The rotational molding kind of operational footprint was built during a really strong automotive, very strong RV backdrop in lands where there was pretty brisk market conditions at the time. Looking at the operational footprint, and especially looking at when we look at OEs and other operational metrics, we could do a lot more with the footprint that we currently have. Looking at efficiencies and looking at the side of those two plants, they are not needed at this time. Obviously, we have options, and we always like to keep our options open on the backside for those plants in the future. Right now, that capacity is not needed.

Yeah. So there are 2 um rotation known moding, plants uh not just production lines that are going to be idled. So um look the rotational molding kind of operational footprint was was built, you know, during a really strong Automotive, very strong RB backdrop in lens whether it's, um, pretty brisk, uh, market conditions at the time. And so, just looking at the operational footprint and especially looking at um, when we look at OES and other operational metrics, you know, we as we could do a lot more with the footprint that we currently have. So you know and and looking at efficiencies and looking at the side of those um 2 plants, we need that they're not needed at this time now. Um, obviously we have options

Aaron Schapper: Our customers have also been looking closely at capacity. We are just aligning with our customers' needs and making sure that we provide the most efficient operational structure to them.

And we always like to keep our options open on the, on the back side for those plants in the future. But right now, that that capacity is not needed and so, um, you know, our our, our customers have also been looking closely at capacity and we're just aligning with our customers needs and making sure that we provide the most efficient operational structure to them.

William Dezellem: Are those two plants owned or leased? You are trying to understand how you are thinking about the physical facilities with time.

And and those 2 plants are uh, are they owned or leased that you're trying to understand how you're how you're thinking about the physical facilities with time?

Aaron Schapper: Yeah, they are two leased facilities.

Yeah. There there are 2 lease facilities.

William Dezellem: Great. Thank you.

Great. Thank you.

Aaron Schapper: Thanks, Bill.

Thanks Bill.

Speaker 5: Thank you. There are currently no questions registered. As a reminder, it is star one to ask a question. There are currently no questions registered at this time. I would like to pass the call back over to Meghan Beringer for any further remarks.

Thank you uh currently no questions registered. So as a reminder, it is star 1 to ask a question.

That currently no questions registered. At this time, all at the past the call, back over to Megan for any further remarks

Meghan Beringer: Thank you for joining us today. If you would like to continue the conversation, my contact information can be found on the final slide of this presentation. We look forward to staying in touch. With that, we will conclude the call. Have a great day.

With that we'll conclude the call, have a great day.

Speaker 5: Thank you all. This now concludes today's call. We appreciate your participation, and you may now disconnect your line.

Thank you all. This is now concludes today's call. We appreciate your participation and you may now disconnect your line.