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spk04: Greetings and welcome to the Manatex International fourth quarter and full year 2021 results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Philippos, Chief Executive Officer. Thank you, Steve. You may begin.
spk03: 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 we appreciate you taking the time to listen to our call. I'm Steve Filippov, and with me today is Joe Doolin, our CFO, who will take you through the financial details of the fourth quarter, which we announced earlier today. Following our prepared remarks, as is our custom, we will open up the line for Q&A. Please see our website for our release and other information, including a brief presentation for this call. A telephone replay will be available for seven days, and the slides we cover will be available for a year. Slide two is our Safe Harbor Statement, which reminds you that everything we discuss is subject to change, as described in our SEC filings, which you can refer to for further details on the many risk factors associated with our company. So please, now let's turn to slide three for a review of our operating results. Let me start by providing some color on the current business environment and the evolving economic conditions impacting Manatex. As I mentioned in the last quarter, the company's been facing certain challenges that impact our ability to meet otherwise robust demand for Manatex products across the globe. Most notably, among these have been the ongoing supply chain constraints, which continue to exist. Such conditions impact our ability to manufacture and ship equipment to customers in a timely manner and at the same time reduce margins by increasing the cost we pay for material, freight, and other logistics-related expenses. While I cannot state the situation has significantly improved, What I can say is demand for our products remains strong, that our customers understand the reasons for longer wait times, and we are successfully starting to pass along higher prices to offset the elevated expense environment. So, while margins have been clearly under pressure, we do not anticipate this being the case for 2022 as a whole. In fact, we are optimistic about the current trends and our ability to show solid performance improvement going forward. As I said last quarter, we are taking all the steps available to us to reduce margin pressure and increase product throughput to meet the needs of our customers. Now let me take a step back for a minute and just go over a few highlights for the quarter, which Joe will review in greater detail momentarily. Fourth quarter sales rose 18% year over year to $53.4 million. And 2021 revenue in total increased to $211.5 million from $167.5 million in 2020. For the full year, adjusted EBITDA rose to $8 million from $5.7 million. And most importantly, our backlog grew to $189 million a record for the company and up 66% from where it stood at the end of Q3. The diversity of our business, both in terms of products and geography, is strong, as is our balance sheet, positioning us well for the year ahead. We also took steps this quarter to streamline operations and increase capacity utilization, closing our Badger facility in Winona, Minnesota, and moving production of straight mass boom cranes and aerial platforms to Georgetown, Texas. As Jewel will discuss in a moment, we booked $6.4 million of one-time after-tax charges related to Badger and other initiatives that negatively impacted margins and our overall performance. However, by taking such steps, we will save on operating expenses and logistics costs going forward, expanding margins and paving the way for improved bottom line results. These measures, combined with our price increases, lead us to be positive about the quarters to come. Let me add that we are currently not materially impacted by the ongoing events in Ukraine or Europe in general. It goes without saying that we are hoping for a positive outcome in Ukraine and will let our investors know of any issues as new developments arise. Now please turn to slide four for some additional color on our operational performance. First and foremost, I would like to thank our teams across the globe for all the hard work they've been doing to ensure we continue to grow Manatex into a larger, more global, and more profitable business. We are working closely with our suppliers to manage supply constraints and doing our best to communicate pricing dynamics to our customers as we continue to ramp up production at all manufacturing facilities. Our PM knuckle boom business was lower in Q4 versus the prior year period, primarily due to logistic and supply constraints, with the comparison also reflecting a large order shift in Q4 of 2020. However, for the full year, we delivered double-digit revenue growth versus 2020, In fact, 2021 was one of the best years in terms of both revenue and profitability for this business. Growth in Western Europe, North America, and our operations in Chile saw the most significant growth, and order intake continues to be strong as we move into 2022. We are looking at additional opportunities to expand and have signed up new dealers in Asia and the Middle East to diversify our network. Our new product development pipeline is solid, and we have several new items planned for 2022. We're very excited about our brand-new 70-ton meter crane, for example, which will launch in Q2 of this year. Moving to our straight mass business in North America, we are very excited to see the pickup in demand in 2021 versus 2020. And industry volumes are back to pre-pandemic levels. We have an excellent network of dedicated Mammoth X dealers, and they are doing an excellent job in growing our share and accessing new markets and new customers. Our biggest constraint here continues to be the sporadic supply of truck chassis, but we are doing our best to manage the situation and have not experienced any significant shutdowns to our Georgetown operations. As I previously mentioned, the decision to close our Winona facility was not an easy one, but we must continue to find ways to save costs and improve productivity, and we should see positive cash benefit in 2022. Our oil and steel aerials business posted a record year in 2021, and we are very excited about the outlook for 2022. We have signed an $18 million order for one major utility customer in Italy, and we will start delivering this order in Q2 and continue into 2023. Our new self-propelled aerial product has been a true success and we have already booked significant orders in North America and throughout Europe. We're now implementing a dedicated production line in Italy to further ramp up to meet this demand. Our zero-emission valid business is doing well and posted excellent growth in 2021. We are now moving into our next phase of operational and cost savings initiatives and have started to integrate several functions into the Oil & Seal organization to leverage common functions, such as production, purchasing, sales, and service. The team continues to expand distribution and access new customers interested in developing their zero-emission rental fleets, and we have a solid backlog into 2022. Let me now turn it over to Joe to discuss our financial performance. Joe?
spk01: Thanks, Steve. Good afternoon, everyone, and thank you for joining the call today. Please turn to slide five in the presentation. As Steve mentioned, revenue for the fourth quarter was $53.4 million, an increase of 18% versus the prior year period. The improvement, which was also up sequentially from the third quarter, was driven mainly by higher sales of straight mass cranes in our Manatex business and aerial platforms in our oil and steel business, even as we've continued to face supply chain constraints impacting our ability to get product to market. Gross profit was likewise negatively impacted by higher raw material costs and increased logistics expense, as well as approximately $3.2 million in inventory write-downs related to the closure of our Badger facility, as Steve addressed. Inclusive of such charges, gross profit declined to $4.7 million versus 8.4 million in the fourth quarter of 2020. However, excluding one-time expenses, gross margin was 14.8% in the 2021 quarter compared to 18.7% last year. As previously noted, this margin compression primarily reflects increased material costs and steel surcharges as well as product mix. We anticipate margins expanding in fiscal 2022 as price increases take effect with or without significant improvement in the supply chain, which remains uncertain to predict. Adjusted EBITDA was 0.3 million, or 0.6% of sales for the quarter, versus adjusted EBITDA of 1.5 million, or 3.3% of sales in the prior year period. The decline versus 2020 was largely due to the cost increases that I just mentioned and increased SG&A costs. We expect the EBITDA to improve going forward as our strategic pricing initiatives take hold. Our backlog was a record 189 million as of December 31st, 2021, nearly triple what it was just a year ago. This reflects continued strong orders within the straight mass crane, knuckle cranes, and aerial platforms businesses. Our straight mass crane backlog has more than tripled year over year, while knuckle crane and aerial work platforms have also nearly tripled since the end of 2020. Our book-to-bill ratio was 2.4 to 1 for the quarter and was 1.57 to 1 for the year in total, an incredible achievement which speaks to the value of our products and enduring demand. Please turn to slide 6. Slide 6 shows sales and adjusted EBITDA for the full-year periods, illustrating the larger trends even given the short-term impact of recent supply chain challenges. Revenue rose 26% in 2021, while adjusted EBITDA climbed 40%. Please turn to slide 7 for some additional financial insights for the quarter. Adjusted operating expenses, net of one-time charges, were $8.6 million for the quarter, up year-over-year primarily due to trade show costs, higher professional fees, and incentive compensation. Adjusted operating expenses is percentage of sales, with 16.2% in Q4 compared with 17.2% in 2020, reflecting operating leverage. We continue to be prudent with regard to managing expenses and remain focused on this going forward. Net loss for the quarter was $8.1 million, while our adjusted net loss was roughly $1.7 million. This is a slight increase from the adjusted net loss in Q4 of 2020, again driven by material cost increases. As previously mentioned, we made an announcement regarding the closure of our Badger facility in Winona, Minnesota, and we expect savings from the closure impacting both cost of sales and SG&A expenses. Now moving to slide eight, net debt was $23.8 million at year end, representing a $6 million improvement from the start of 2021. Our leverage ratio remains at three times trailing EBITDA, and we anticipate further net debt reduction in 2022. As of December 31st, the company had available liquidity of approximately $37.6 million, consisting of $21.6 million of cash, $11.2 million of availability on the U.S. revolver, and $4.8 million in working capital facilities. The team is confident that the company will have the necessary liquidity through cash and other credit lines open to meet our obligations that are scheduled over the coming 12 months. We remain in compliance with all debt covenants. With that, I will now turn the call back to Steve Philippoff.
spk03: Thanks, Joe. Please turn to slide nine. I just wanted to take a moment to summarize where things stand before we begin Q&A. The outlook for Manatex even during uncertain times remains bright. Nothing could underscore this more than our record backlog of $189 million, putting us on solid footing for our best year ever, including double digit top line growth. We have a great team in place and they are doing their utmost to execute everyday improvements and meet the demands of our customers globally. At the same time, as I said earlier, we're taking all the steps necessary to improve margins and the company's underlying performance going forward. By cutting costs where appropriate, including moving production of straight-mass boom cranes and aerial platforms to Texas and raising prices when necessary, we are positioning the company for higher returns in 2022, even as supply chain pressures persist. We have an active pipeline of opportunities and enduring demand for our products. while never taking an eye off of the underlying fundamentals of the business, using cash generation to pay down debt and strengthening the balance sheet in tandem. Overall, even as the company faces headwinds due to tight markets worldwide, we are optimistic about achieving greater operating performance in the quarters to come. With that, operator, could you please open the lines for the Q&A session?
spk04: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
spk06: Thank you. Our first question is from Matt Karanda with Roth Capital.
spk04: Please proceed with your question.
spk02: Hey, guys. It's Mike Zabrin on for Matt. Hey, guys. So implied order flow accelerated in the quarter, which makes a lot of sense given the current backdrops of your end markets. Can you talk about maybe some of the end markets that drove demand in the quarter and speak to any more recent observations on year-to-date bookings now that we're a couple months into 2022?
spk03: Yeah, sure. So, you know, I would say, remember, you know, our portfolio is mainly driven by commercial construction, so that part of the business continues to be very strong. In the quarter, Really where we saw accelerated growth is in the utility space, mainly in North America, but also in Europe with obviously the order that we took from an Italian utility company. And I would say in general, mining is very strong right now. You see all the commodities that are obviously going crazy right now. And our business in Chile is which is mainly commodity-driven business in Argentina, again, commodity-driven. And Canada was actually one of the highest growth markets that we had really in 2021. So I expect those in 2022 to continue to be very strong.
spk02: Got it. Okay. That's helpful. And in regards to the energy end market, At the prior oil cycle peak in around 2012, you guys did around $200 million, $250 million in revenue, and that was without PM. So assuming the energy and market demand strengthens, can you speak to the capacity in straight mass to potentially fulfill levels of demand that were reached in the prior cycle? Sure. Sure.
spk03: Yeah, so right now, oil and gas is about 10% to 15% of the portfolio. And I expect that, obviously, to grow with, obviously, the recent announcements that are going on around oil and gas. So I expect us to be able to expand into those markets. Now, Back at the last peak, it was a much larger part of, to your point, part of Manatex because we didn't have PM. So I think, again, it'll continue to be in the 15% to 20% range of our portfolio. But I see, again, growth in other areas also, as I mentioned, mining utilities and obviously oil and gas. So we feel... Well, we feel pretty good about those markets and the growth potential in 2022.
spk02: Okay. Are you guys hearing anything from dealers in terms of energy and market demand and order flow?
spk03: Yeah. I mean, for sure, Canada, right? I mean, if you looked at our revenue growth in Canada, that's basically driven by with what's going on, you know, up in, uh, the oil sands up in Edmonton, Fort McMurray, I think, uh, places, uh, places like that. Um, and, uh, like I said, Chile being a mining market, obviously that continues to be, to be very strong. So, uh, that's going to be a big growth for us in 22. Got it.
spk02: Okay. And last one for me, um, Do you guys have the PM knuckle boom composition of total backlog number? And maybe you could just speak to where you see that number trending in 2022, higher given the strong demand backdrop, or maybe lower as you begin delivering on those orders? Thanks. Sure.
spk03: Yeah, so PM backlog, again, as we mentioned, is about 60% of of the total backlog at the company today. So, you know, it continues to be very strong. I would say, you know, at the same time, we're trying to ramp up a lot quicker in Europe given the lead times. So I think you'll continue to see the PM backlog be in the 60, 70% range. The one thing I'll mention is, is that the straight mass crane backlog has significantly increased from Q4 last year, which was basically a very poor year in 2020 for straight mass crane markets. So if you look at the order intake in the straight mass business, coming off of kind of a 700-unit market, The rolling 12-month order rate puts us at about 1,400 units for the next 12 months or so. So I think that's going to be obviously a big pickup in our backlog as we continue to push forward into 2022.
spk06: That's helpful. Thanks, guys. Sure.
spk04: As a reminder, if you would like to ask your question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. Our next question comes from Matt Reiner with Adirondack Funds. Please proceed with your question.
spk06: Hey, guys.
spk05: The one question I have is on your backlog. How do you guys deal with the double ordering issue and whatnot? Can you can you describe to us how much of your backlog is firm orders versus your, I'm not sure how you, you know, you characterize backlog when you report it, but you know, that, you know, we have seen this in the past, especially in the tight supply environment that we're in that sometimes people double order stuff just to make sure they get something.
spk03: Yeah. That's a, that's a good question, Matt. You know, and having been in the crane industry back in the, The last peak in 2007, 2008, there was a lot of that going on, so I've had that experience. What I would tell you is that that's really not the case today, really because of a couple of things. The first one is in North America, due to the chassis constraints, it's really hard for dealers or customers to double order because the chassis aren't there. I think it's a much cleaner backlog. We also talk very often to our dealers about what's sold, what's not sold. There's really not a lot of ordering going on, again, in North America on stock orders. Most of the stuff that we have in the backlog is sold. If you look at PM, which has the other bigger piece of the backlog, again, we feel pretty confident that there's not a lot of double counting or double ordering going on in the PM orders because, again, one of our dealers that we talk to very often, most of the cranes he has are sold because he has chassis that are ordered that are going to go under those cranes. I think we feel pretty good about it, and there really hasn't been you know, a lot of cancellations in our orders or change of orders, you know, shifting to different cranes. I mean, it's been, again, I think it's pretty clean and I feel pretty confident about the backlog that we have.
spk05: Okay, great. Competitively, are you seeing anything unique or different out there?
spk03: No, I think, look, I think all of our competitors are in the same place. I think, you know, everyone's trying to deal with the price-cost dynamic. So, you know, we're all out there increasing prices as we see the need to with supply chain constraints. I think everyone's dealing, obviously, with, you know, demand issues with uh, getting better forecasting out there and making sure that we can deliver to our customers on time. Um, so I think our competitors are, you know, in the same place we are and we're all trying to, you know, to deliver, uh, as quickly as we can, um, the backlog that we have. And, you know, again, our backlog, you know, back to your first question, I mean, that backlog is basically deliverable in 12 months, um, you know, or sooner if we can do that. But, uh, I think everyone's in the same place, to be honest with you.
spk05: Yeah. So, Steve, my last question is just, as far as, like, the supply constraints, we're getting, like, mixed messages from different people in different, you know, industries, obviously. But, you know, some are saying it's starting to ease. Some are saying it could last a while. You seem to be in the camp that it might last a while. Did I hear that correctly? Or, you know... Can you kind of describe to us what it looks like today versus, you know, six or nine months ago or, you know, whatever kind of color you could give us on that?
spk03: Sure, Matt. Yeah, you know, look, I would say from six to nine months ago, the constraints have gotten better in some areas and they've gotten worse in some other areas, right? chassis supply we talked about you know a lot and you know if you listen to some of the manufacturers that are out there i mean they continue to ramp up um so i would say you know it's getting better but it's still a constraint you know we can obviously deliver our cranes a lot quicker so there's a bit of a lag i think there um when you look at steel i think that that has uh leveled out a bit there's less constraints on steel at this point. I think it's also because we forecasted a bit better with our suppliers, but there's things that pop up every day. We were on a call with Joe this week on a production call, and hydraulics have been popping up sporadically as constraints. It's a bit of a moving target, Matt, but I think we're dealing with it a lot better than we were nine months ago. Again, it feels like we're getting a bit better at it, but I think we just want to be conservative because, like I said, things tend to pop up sporadically that we need to deal with. We'll continue to work through it. and hopefully things continue to level out throughout the year. At least, you know, that's our forecast is, you know, to continue to ramp up sequentially our production over the next, you know, over the next few quarters to continue to deliver on the backlog.
spk05: Yeah. Well, all right. Well, nice job on the backlog and look forward to the next call. Thank you, Steve.
spk04: Thank you, Matt. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. Thank you. There appear to be no further questions in the queue. I'd like to turn the call back over to Steve Filipov for any closing comments.
spk03: Great. Thanks, Paul, for your help. Thank you, everyone, for taking the time to listen to our call. Again, I think you hear we feel pretty good about where Manatex is today. We've got a record backlog to deliver on. The pricing cost dynamic we feel is getting back into sync, and we feel like we're going to have a very good year in 2022. So thank you all very much. Appreciate your time, and feel free to follow up with myself or Joe if you have any additional questions. Thank you, everyone.
spk04: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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