Q2 2025 Miller Industries Inc Earnings Call

With us from the management team today are William Miller, Chairman of the Board; Bill Miller, President and CEO; Deborah Whitmire, Executive Vice President and CFO; and Frank Madonia, Executive Vice President, Secretary, and General Counsel.

Today's call Will begin with formal remarks for management followed by a question and answer session.

Please note in this morning's conference call management. May make forward-looking statements in accordance with the Safe Harbor, provisions of the private Securities. Litigation Reform, Act of 1995.

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 filed on form, 10K and other filings with the Securities and Exchange Commission.

At this time, I'd like to turn the call over to will. Please go ahead will.

Good morning, everyone. And thank you for joining us today.

I would like to start with a brief statement before I hand the call over to Debbie to discuss our results in more detail.

in the second quarter, we continued to face challenges in the market predominantly related to industry-wide demand headwinds

Retail sales activity was down 20% quarter over quarter resulting in a 30% decrease in order intake from our distributors.

We attribute the decrease demand largely to lower consumer confidence, and elevated cost of ownership, which takes into account interest rates, insurance cost, and tear of related, price increases.

We continue to see elevated field inventory in our distribution Channel, impacting demand, which has persisted. Since the end of last year, we are closely monitoring and adjusting production levels to meet current demand and accelerate, the reduction of Channel inventory, taking significant steps to improve our costs and securing our supply chain to mitigate the long-term risks of tariffs, myself and our management. Team have navigated significant uncertainties in the past. And we'll take necessary action to overcome the current challenges to ensure the company is stronger and better positioned to capitalize on opportunities as our Market improves.

Now, I'll turn the call over to Debbie to review the second quarter Financial results.

Following her remarks, I'll provide some comments on the current market environment and an update on our Outlook with a proactive steps. We are taking at this time.

Thanks, Will, and good morning, everyone.

Net sales for the second quarter for 2025 for 214 million versus 371.5 million. For the second quarter of 2024 for 424 year-over-year. Decrease driven largely by a drop in chassis volumes after volumes were significantly elevated in the prior year period.

Your periods.

The margin Improvement was driven mainly by product mix with a higher percentage of body deliveries compared to chassis volumes.

Sgna expenses were 23.4 million and the second quarter of 2025 compared to 22.8 million in the second quarter of 2024.

As a percentage of net sales sgna was 10.9% 480 basis points, higher than the prior year period. The year-over-year increase was driven primarily by higher stock-based compensation, expense, and an employee compensation in the current period.

We are actively reviewing our sgna structure to ensure that our soft spaces base remains aligned with our strategy and the current market environment.

Interest expense for the quarter was 249,000 compared to 2 million in the prior year. Period, a decline of around 85.6% driven primarily by lower customer floor, plan expense. And to a lesser extent, a reduction in debt levels

other expenses for the second quarter for 479,000 compared to other income of 13,000, for the second quarter of 2024 that's reviewable largely through currency exchange, rate fluctuations

As a result of all these factors above net income. For this second quarter of 2025 was 8.5 million for 73 cents per diluted share compared to net income of 20.5 million or 1.78 cents per share per diluted share in a prior year period.

I'd like to now shift to discussion on our balance sheet.

As we predicted last quarter, our receivables are converting into cash at a faster rate as inventory levels normalize, where our business and our Distributors continue to normalize.

At the end of the second quarter, we had a cash balance of 31.8 million.

Up, 4.4 million sequentially and up 7.5 million. As of the end of last year.

Not only were, we able to grow our cash balance this quarter, but we also reduced our debt balance by 20 million down to 55 million during the second quarter and has since baked out another 5 million dollars, bringing expert balance to $50 million.

Consequently, the accounts receivable as of June 30, 2025, was $270.4 million, compared to $292.6 million as of the end of last quarter and $313.4 million as of the end of last year.

To continue conversion of accounts, receivable to cash is a trend. We expect will continue into the second half of the year.

In inventories, as of the end of Q2 for 165.5 million, compared to 164.9 million in q1 and 186.2 million dollars as of December, 31st 2024.

Lastly accounts payable as of June 30th 2025 with 98 million, compared to 1, 1 3. 5, 3 4.

Now, I'll turn the call back to will to discuss our outlook on the second half of 2025.

Thank you, Debbie.

I would like to provide some insight into what we see moving forward in the second half of 2025.

Overall, we are currently seeing industrywide demand headwinds while we expect demand to rebound at what we expected demand to Rebound in the second half of this year, we have seen continued pressure on the retail customer delaying purchases of new equipment.

As stated before these pressures include interest rates, Insurance costs and tariff related price increases.

As a result, inventory in the distribution channel has not returned to Optimal levels as quickly as we had anticipated.

While we do expect a recovery in the commercial Towing Market in the near term. We are making decisions based on the current market environment, the health of our distribution is Key to Our Success. So we will adjust production levels to accelerate the reduction of field inventory and hopes that we will return to a normalized flow of product in the coming months.

Alongside these actions. We are also implementing targeted cost reduction initiatives in the second half of the year to better. Align, our operational structure with current demand levels.

These actions are intended to rightsize the business. Preserve margins and create operating leverage as demands normalized.

Earlier this year, we implemented tariffs, s charges on all new orders of manufactured product along with additional price increases on parts and accessories.

We will continue to monitor the situation and adjust as needed.

Finally, a quick update on the California Air Resource Board or card. The only remaining State and forcing car. Regulations is California. We will continue to advocate for our dealers and their customers with hopes of resolution in the future. But for now our sales into the state of California will remain limited until further action is taken by the federal government.

Next, I'd like to show an updated graph of body and Chassis inventory.

As you can see chassis inventory has now crossed below body inventory which is ideal. As historically, chassis inventory has always been lower than body inventory. Despite the Improvement we are seeing inventory is still elevated compared to Optimal levels.

But with the production plan, we are implementing. We now anticipate field. Inventory, normalizing over the next few quarters.

Moving forward.

Despite the current challenges in the market. All fundamental drivers for our long-term business performance, such as miles driven, average age of vehicles on the road and accidents. Per mile are steadily climbing as expected. The business is generating, significant free cash flow at this time, which we are using to pay down debt and strategically position ourselves for future success.

With the proactive steps we are taking to reduce Channel inventory and right-sized costs. We are confident. We will be well positioned as the market environment improved, and we will enter 2026 from a position of strength.

for the remainder of the year, we will prioritize operational efficiency and capital allocation as we position the company for sustained, long-term growth,

We believe strongly in the fundamentals of our business and anticipate a meaningful recovery in the commercial Market, as well as potential upside for pending military contracts. Providing us with revenue and earnings growth in 2026 and years to come

to continue on Capital allocation despite near-term uncertainty. We remain committed to investing in our business and creating long-term shareholder value.

As always, our top priority will be returning Capital to shareholders through our industry-leading dividend which will be paid for the 59th consecutive quarter.

Along with this, we will continue to repurchase shares as we believe strongly in our position in the market and strongly for the long-term growth.

We believe our shares represent a fantastic investment in our competent. This sends a strong message to our to our for our belief, in long-term value of our company.

Lastly, we will invest in our business prioritizing Innovation Automation and human capital.

As we've said in Prior quarters, we are evaluating and making initial plans for capacity, expansion part, particularly related to the steady military, RFQ activity, we are experiencing. If, and when we make decisions on this topic, we will provide further updates

due to the heightened uncertainty and near-term challenges. We've discussed we were advising our previously issued guidance for the 2025 fiscal year

We now expect Revenue.

In the range of 750 to 800 million. And at this time, we are suspending guidance on earnings per, share the organization. Operational initiatives we are evaluating could have a material impact on our cost structure, potentially resulting in extraordinary, expenses and potential losses, in the second, half of the year.

We expect to provide updates as we make decisions. And gather more information, it is important to note that our revised Revenue guidance anticipates, no, changes in the current regulations or unknown effects of rapidly evolving tariff situation.

In closing, there is uncertainty in the market. At this time, we feel well equipped to navigate these challenges and position ourselves for future growth. We remain committed to our long-term strategy and the core values this company was built on. Miller Industries will continue to have the best people, products, and distribution network in the towing and recovery industry. We are confident in our continued growth and success in the years to come.

In closing, the entire management team would like to thank all of our employees, suppliers, customers, and shareholders for their continued support. At this time, we would like to open the line for any questions.

Ladies and gentlemen, we will now begin the question and answer session.

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Your first question comes from the line of Mike silski from da Davidson. Please go ahead.

Uh yes hi, good morning. This is taking my question.

Um, good morning, Mike. Good morning, maybe. I start off. Can we talk about um,

Just a little bit deeper, dive into what the actions are. That you might be taking to reduce your cost structure. And I guess I I, you know, if the, if the uh, Top Line of chances are hopefully somewhat temporary.

Uh, only a few more quarters here. You know, I understand there's a need to preserve the capacity to keep people when things do come back to more normalized levels.

So, I just kind of wondering what can be done.

In the near term.

Uh, currently we are analyzing uh, all potentials aspects of the business, both sgna, uh, expenses temporary expenses, long-term expenses, uh,

Current. Um,

Uh, projects that are underway, uh, both from an IT perspective, uh, or any other potential activities. We're doing inside the Business Marketing sales, um, and on top of that, yes, you know, we believe this is a short term, so we certainly want to make sure that the decisions that we make in the short term, don't affect the long-term success of the organization. And we're paying close attention to, uh, making sure that whatever changes that we make, or cuts that we make along the way. Uh, don't affect our long-term success.

Uh, great. You know, potentially postponing some of those expenses in the future quarters.

Does that make sense as well? Thank you for that. Um,

I just want to ask about um what you can, what you can or argue on the on the on the sales side to try and get both come up the sidelines here. Um my anal my impression of Miller is that you're not really a big On promotional activity making you know deals and things of that nature. The product delivers a very good value at the price that is that it's at

Uh, I was wondering if you are doing anything though. Um,

at your level, as opposed to, at a dealer level to, um,

Help push. Um, the folks maybe off the sidelines.

Yeah, certainly over the last 6 months or so, we've worked strategically with our, uh, chassis Partners, uh, to create incentives and programs along with ourselves, uh, for our distribution channel, to to move product. Um, we can continue to focus on that, um, you know, we are working diligently in all manners to, uh, help, uh, market and move the product. Um, you know, particularly more in the, the class 5 model chassis then, uh, in the class 6 and class a product,

Got it. Um,

so if we do see an interest rate cut maybe a half point in the fall, let's say, do you think that's going to unlock some orders? Um, and there's a rate cut currently included in your guidance. Or would that just be a

Potential piece of, of upside.

It would be potential upside. So currently what we're looking at is no, you know, sort of no change in the environment is what we're, you know, basing our predictions off of or our future. Uh, for the next few quarters is no change in the environment. I believe that, uh, any cut in the the rate along with uh, you know, the accelerated depreciation that was just passed in the tax.

Uh, along with, uh, you know, potential need for product, you're in or or um, need for, you know.

Spending Capital by the year end, could all be, uh, advantages for our distribution moving and, uh, reducing their inventory levels between now, and the year end, you know, ultimately resulting in increased, uh, order intake and need to increase production levels again at our facilities.

Got it.

Um,

And I don't know, I, I didn't know if I called it Debbie, but can you just share how much is left on the buyback? And, uh, what's the tone of the board towards asking for more stock is basically, you know, has been this low and

almost 2 years, I'd be curious to what the tone is in the, in the Border.

We currently bought 5 million so there's 20 million left on that.

Um, you know, the board evaluates that every quarter but um, obviously with the future of the business, um, and the activity that we're seeing, um, on the military side, you know, we do believe investing back in the company. Um, at the current price is, um,

Advantageous for all shareholders. So we we will um aggressively look at that in the coming quarters.

Great, maybe 1 last 1 for me. Um well you mentioned as you always do um, potential military work.

I'd be curious if you just update us just a little bit deeper on the number of of rfqs or rfps that you're working on right now, I'm going to compare it to what it was this time last year or last quarter.

Um, you know, I I think, uh, we've been, you know, continued to be successful on small uh, projects on a quarterly basis. Uh, the contract with the Canadian military was finally, you know, uh, signed over the past quarter uh that was announced last November. So that's uh been fully secured uh for business in the future. Um, at this time we're still working on multiple uh larger rfqs but none of those have gotten to uh the crop contract.

After being have been awarded at this time. Um, but we're still uh,

Actively pursuing quite a few large ones. Uh, and the small ones continue to come in, uh, on a quarterly basis, uh, our monthly basis. So, um, we're still seeing quite a bit of activity, um, you know, even activity beyond what we saw preco levels and 2018 and 19 for future potential military business.

Great. Oh you know what? I very I very squeezed 1 more and if you don't uh mind um know a little bit about. Yeah. Okay. I appreciate this great. Um can you share a little bit about the back end of the year your expectations on the mix between uh chassis invoices and Chassis plus body. I mean sorry body invoices in the chassis plus body invoices and the gross margin in path that we might be looking at you at all time. Record, gross margin in the quarter here and I just finished but I'm curious kind of how things might stand in the background.

yeah, I mean in, uh,

In the back half. As as uh as you saw the chassis inventory, dropping on the chart, um we anticipate that you know chassis will start. The mix will start to normalize over the next 2 quarters and in the next year. Certainly normalize, uh, a back to historical levels. We Believe margins will settle back in the mid 13s. Uh,

As we move forwards.

I can't predict the exact timing of when it's going to move back to historical levels. However, we anticipate that at some time in the future, it'll sort of, you know, move back into the mid-$13s.

Okay. Okay great. Uh, I appreciate the call. I think it's there's a chance. So thank you so much, I'll pass it along.

Absolutely. Thank you. Bye. Have a great day. Thanks. Mike.

There are no further questions at this time. I'd like to turn the call over. To will Miller for closing comments, sir. Please go ahead.

Uh, thank you. 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. If you'd like information on how to participate and ask questions on the call, please visit our investor relations website. Miller indeed.com investors or email investors. Relations at Miller indy.com. Thank you and may God bless you all.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.