Manitex International, Inc.

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.

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?

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.