Manitex International, Inc.

Greetings and welcome to the Manatex International Incorporated First Quarter 2021 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to Steve Filipov, Chief Executive Officer. Please go ahead.

Thank you, Operator. Good afternoon, ladies and gentlemen, and thank you for your continued interest in Manatex International. I hope everyone is safe and healthy and appreciate everyone taking the time to listen to our call. Today on the call with me, I have Joe Doolin, our CFO, who will discuss in more detail our financial results. Please see our website or our release for replay instructions for this call, which will be available until May 13th, 2021. Moving past slide two, which is our safe harbor statement and reminds you that everything we discussed is subject to change and described in our SEC filings for further guidance on the many risk factors associated with our company. I will begin with a business update for our first quarter, followed by Joe, who will present a financial summary after which we will welcome your questions. Now let's begin on slide three. The Global Manatex team delivered another good quarter of improvement, and I want to thank our team for continuing to keep focused on the fundamentals of safety, quality, cost, and delivery. Our revenues trended in the right direction with a 4% improvement over the fourth quarter of 2020, and our third consecutive quarter of consistent EBITDA improvement. With over $100 million of backlog, we are seeing a healthy recovery in global markets, and all businesses are ramping up to meet this demand. Our transformation strategy to develop our growth businesses in knuckle booms, air to work platforms, and electric vehicles is starting to gain significant traction, and with our North American straight mass business, Now starting to turn around, we see a positive trend to growth in 2021 and beyond. From an operational perspective, we continue to strengthen our COVID-19 safety protocols and have seen minor periodic shutdowns, but overall, we are seeing the majority of our markets return to growth. We are ramping up to meet increased demand across all businesses, and as we ramp, we are dealing with the daily challenges of availability, and pricing of components. We have an experienced management team who has dealt with these challenges in the past, and we are confident we will mitigate them as best we can. Joe will comment further on our liquidity and balance sheet, but with $20 million in total cash and credit availability, we feel Manatex is on solid ground for our future growth plans. Please turn to slide four. All of our businesses experience improved performance in Q1, and most notably was the straight mass market, which was the main driver of sequential growth after several quarters of market deterioration. Many, if not all, of our dealers in North America are seeing improved quote activity, rental fleet utilization is improving, customer sentiment is at pre-pandemic highs, and all these are positive signs of an expected improvement in the North American crane market for 2021. Anecdotally, we know the utilization rates at some of our dealers have gone from the lows of 40% to north of 70%, which is a healthy indicator of activity in the markets our products serve. Our Manatex articulated crane sales team in North America, or MAC, is also gaining traction, starting with an additional order for a follow-on military customer, but most importantly, we are seeing the specialized lifting market growing in tree care, utilities, farming, and waste management. Our PM group management team continues to make the necessary improvements to grow our businesses globally. Demand from European markets and North America have led the backlog and sales growth at PM for the past few months, but with strong exposure to commodities, we're also seeing an increase in demand coming from Chile and Argentina, which are trending in the right direction for us. Each of our top 10 geographic markets show good growth this year. Demand for oil and steel aerial products is mainly driven by the sales and distribution plans we implemented in 2020, and we are now seeing these improvements taking hold in our top European markets with Italy, France, Spain, and the UK all showing positive growth for us. Last but not least, we remain very excited about our zero-emission VALA products. As demand for cleaner lifting technology is gaining traction, our team continues to deliver new products to the market with a new 3.6-ton crane launch this quarter. Our large European rental customers received their first units and are now placing them in the market. Our VALA team in the U.S., is making excellent inroads with new customers in the nuclear industry, industrial manufacturing facilities, and warehousing applications. We have much more upside with this business, and we'll be launching several new products later this year to meet these growing new market applications. Let me now turn it over to Joe to discuss our financial performance.

Joe? Thanks, Steve. Good afternoon, everyone, and thank you for joining the call today. Slides 5 and 6 reflect our financial performance for the quarter. Please turn to slide 5, and I'll address my comments from this slide. Our revenues for the quarter were $47.2 million, an increase of 4.4% compared to the $45.2 million for the fourth quarter of 2020. The increase was driven mainly by higher sales of our straight mass cranes in our Manatex business. Sales of knuckle boom cranes at our PM business in Q1 were consistent with sales in Q4. Our first quarter net loss was $0.8 million, a $1 million improvement from the fourth quarter net loss of $1.8 million. The improvement was driven by higher gross margin of $400,000 due to increased sales of $2 million, as I mentioned, and lower income tax expense of $600,000. The loss per share was $0.04 for Q1 compared to a loss of $0.09 per share in Q4. The adjusted net loss with $0.1 million or $0.01 loss per share for Q1 compared to an adjusted net loss of $1.3 million or $0.07 per share in Q4. Our gross margin was $8.8 million or $400,000 higher than Q4 driven by the increased sales in Q1. The increased gross margin is primarily due to the $2 million of higher sales of straight mass cranes in our Manatex business unit. The gross margin percentage was 18.7% of sales for the quarter, consistent with what we experienced in the fourth quarter. The higher gross margin from the international sales was offset by higher cost of materials in the U.S. for the quarter and the mix of U.S. sales that was skewed to lower tonnage units, which typically have a lower gross margin. As you can see from the chart, our gross margin continues to trend higher as PM sales represent a growing portion of our total revenue. As Steve mentioned and as has been noted throughout the industry, supply chain challenges such as increasing steel costs and chassis availability are situations that need to be monitored and we are doing that. Our global purchasing, sales, and manufacturing teams are all doing an excellent job of managing through this environment as capacity starts to build again. Operating expenses were $8.5 million for the quarter consistent with expenses recorded in Q4 2020. Operating expenses as a percentage of sales declined from 18.8% in Q4 to 18.1% in Q1 as we were able to leverage our existing expense base supporting the increased revenue for the quarter. Increased insurance and incentive compensation expense during the quarter were offset by lower consulting costs. We will continue to take action to maintain prudent expense control and are targeting lower SG&A as a percentage of sales in our operating model. Adjusted EBITDA was 1.9 million or 3.9% of sales. This is an increase of 24% or 0.4 million from the fourth quarter, which reported adjusted EBITDA of 1.5 million or 3.3% of sales. The increase was driven by increased sales in our straight mass crane business. Our backlog was approximately 84 million as of March 31st, and increased order activity in April took that backlog to 107 million. This represents more than a 57% increase compared to December 31st. This increase was driven by higher orders across most business units. Straight mass crane and articulating crane backlogs increased by nearly 70% from December. Backlog for aerial work platforms is increased by nearly 40% from December 31st. I'm moving to slide 7 for a net debt update for Q1 2021. Net debt was approximately $31 million at quarter end, representing a $1 million increase from year end, consisting of traditional bank debt and a revolver. The small increase was driven by an increase in short-term financing and foreign currency movements. The team is confident that the company will have the liquidity through cash and other credit lines open to meet each of these obligations and any others that are scheduled over the next 12 months. We remain in compliance with all debt covenants. At March 31st, the company had available liquidity of approximately $28 million, consisting of $16 million of cash, $10 million on the revolver and $2 million in working capital facilities. With that, I will now turn the call back to Steve.