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spk00: Greetings and welcome to Manatex International Inc. first quarter 2022 results conference call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn the conference over to your host, Mr. Mike Coffey, Chief Executive Officer. Please go ahead, sir.
spk03: Thank you, operator. Good afternoon, ladies and gentlemen, and thank you for your interest in Manatex International. We appreciate you taking the time to join our call. My name is Mike Coffey, and with me today is Joe Doolin, our CFO. Joe will take you through the financial details of the first quarter, which we announced earlier today. Following our prepared remarks, as is our custom, we'll be happy to open the line for questions. Please see our website for the 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 discussed is subject to change, as is described in our SEC filings. which you can refer to for further details on the many risk factors associated with our company. So, let's get started. On today's call, we will focus on our financial results from the first quarter of 2022, key business highlights, both during the period and activities since, and longer-term trends and opportunities for the business. We would also like to provide some additional insight around our April 11th, 2022 announcement regarding the acquisition of Rayburn Rentals, which we believe directly supports our strategy for improving operating margins and overall value for our shareholders through acquisition and refinancing. Before we go any further, I'd like to take a moment to fully or more fully introduce myself as I was appointed CEO three weeks ago following a consulting engagement in which I helped the team identify, assess, and successfully acquire Rayburn Rentals. We believe this acquisition will facilitate improved margins while creating new opportunities to capitalize on the growing construction equipment rental industry. My role is to increase profitability through improved operational efficiency. directing the company's focus on process and leveraging both Manatex's unique array of product innovations as well as its strong brand position and market position. This company is well known for product quality and is well positioned to penetrate desirable end markets with in-demand product offerings. I have more than 25 years of industry experience with a focus on operations, strategic integration, and manufacturing. These experiences have helped me establish a track record for growth and improved operating margins. I've also had the fortune of building multinational businesses that successfully competed against companies 10 times their size. This has been achieved through leveraging the strengths of those organizations to serve the largest and most successful construction and mining companies in the world. Manatex has a great history and can trace its roots back over 75 years. The company has an impressive product offering, an agile culture, and an admirable reputation. Manatex offers a robust portfolio of mobile lifting solutions. Founded on its flagship Manatex boom truck line, and now complemented by an impressive array of articulated truck-mounted cranes branded as PM and MAC. To further complement our portfolio, our aerial work platforms offer ingenious zero-emissions electric solutions. These products, branded oil and steel and VALA, are gaining a strong position in the market. As a former customer of Manatex, I have long been impressed with its product capabilities, but even more so impressed by its people. For this reason, perhaps above all others, I am very happy to be here at Manatex and look forward to working with this very motivated team. The value we bring to our customers is underscored by a healthy gain in sales and backlog. First quarter sales were up 28% year over year, and we closed the quarter with a growing backlog valued at $206 million. Our improvement in backlog was equally driven by new orders from internationally-based customers as well as North American-based customers. Product demand was strong in most categories. Despite this progress made to build our backlog, we continue to face headwinds in attaining gross margin in our overall EBITDA performance. For the first quarter, gross profit margin was 16.8% and EBITDA margin was 4.5% of sales. Improvements to gross margin have been hindered by the dynamics facing all manufacturers, regardless of industry, including slowed supplier logistics, inflationary pressures, and overall increases to marginal production costs. However, during the past two quarters, we have taken action to retain and improve margins which are beginning to show results. Encouraged with these results, we will be accelerating our efforts to attain our stated goal of double-digit EBITDA performance. First, we will continue short-term efforts to improve production output and efficiencies. We are also working to better leverage our supply chain and add qualified suppliers to lessen the impact of logistics delays. More importantly, we will be embracing improved processes, proven to streamline scheduling, reduce cost, and improve output. I look forward to speaking with you about these initiatives and their outcomes in the future. More importantly, the board and executive management team have committed to identifying and pursuing paths to revenues with higher margins. We've discussed this previously, and the addition of Rayburn Reynolds is a direct reflection of this commitment. We are pleased with the addition located in West Texas, and the organic expansion efforts that are underway there. While we did not own Rayburn during the first quarter, we thought it might provide some context of how the businesses could have performed together. As previously reported on April 11th, Rayburn Rentals achieved approximately $20 million in sales and $8 million in EBITDA in 2021. Concurrently, Manatex finished 2021 with approximately $200 million in sales and $8 million in EBITDA. Albeit a theoretical pro forma, the combined businesses effectively would have doubled EBITDA contribution in 2021. For this reason, we are confident in our ability of the combined businesses to deliver improvements to our margins. We have begun to integrate Rayburn Rentals onto Manatech systems. Going forward, we will support organic growth initiatives underway while increasing our focus on manufacturing processes, efficiency, and operational excellence designed to generate the kind of margins and returns that we've been targeting for quite some time and the board and our shareholders require. I'll have some more comments on this later, but for now, I'd like to turn it over to Joe to discuss our financial performance. Joe?
spk01: Thanks, Mike.
spk02: Good morning, everyone, and thank you for joining the call today. Please turn to slide six in the presentation. The comparisons I'm going to give will consider only the Manatex business for the quarter. That is to say, they do not include any Rayburn numbers as that acquisition occurred after the quarter end. Revenue for the first quarter was $60.4 million, an increase of 28% versus the prior year period. The improvement, which was also up sequentially from $53.4 million in the fourth quarter, was driven mainly by sales of larger tonnage cranes in the Manatex business and aerial platforms in the oil and steel business. Gross margin of 16.8% represented a 200 basis point improvement sequentially as adjusted, and was nearly 200 basis points lower than it was a year ago, impacted by higher raw material costs and increased logistics expense. Adjusted EBITDA increased to 2.7 million or 4.5% of sales for the quarter versus adjusted EBITDA of 1.9 million or 3.9% of sales in the first quarter last year and also represented sequential improvement of 390 basis points from Q4. The improvement was largely due to increased profit from the sales of manatex cranes and aerial platforms. We expect the EBITDA to continue to improve going forward from the disproportionate contribution from the Rayburn rentals, as well as from strategic pricing and cost initiatives that are being implemented. The improvement may be offset by rising material prices that remain in the marketplace. Our backlog was a record 206 million as of March 31st, 22, 145% higher than it was at the end of March 2021. 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 platforms have more than doubled since Q1 of 2021. Our book to bill ratio was 1.3 to 1 for the quarter, which is indicative of continued strength in our order flow. Operating expenses were $9.5 million for the quarter compared to $8.5 million in last year's first quarter. The increase is driven mainly by higher professional fees related to the Rayburn acquisition and increased legal fees. Adjusted operating expenses were $8.6 million compared to $8.1 million in Q1 of last year, and were 14.2% as a percentage of sales in Q1, compared with 17.2% in 2021. We continue to be prudent with regard to managing expenses and remain focused on this going forward. Net income for the quarter was $0.2 million, which is a significant improvement from the loss of $0.8 million in last year's first quarter. The net income for the quarter was driven by higher sales of straight mass cranes in the Manatex business and aerial platforms from the oil and steel business, and were impacted by material cost increases, which continue to rise and put pressure on our operating margins, despite price increases that we were able to implement. Now moving to slide eight. Net debt was 31.5 million as of March 31st, 2022. and our leverage ratio was 3.5 times trailing 12-month adjusted EBITDA, and we anticipate this to increase slightly as we refinanced the U.S. debt along with the Rayburn acquisition, and we anticipate generating increased adjusted EBITDA and cash flows in Q2 and beyond. The company has available liquidity of approximately $35 to $40 million, consisting of cash and availability, on the U.S. and PM working capital facility. We are 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, and we remain in compliance with all debt covenants. With that, I will now turn the call back over to Mike.
spk03: Thanks, Joe. Please turn to slide 9. I just wanted to take a moment to summarize where things stand before we begin questions and answers. We are pleased with the share growth and increased sales that the company has enjoyed. This is reflected in the strength of our global backlog and the confidence our customers have placed in Manatex. Efforts to counteract the headwinds of the global supply delays and rising cost pressures are working, but we must increase our focus on these initiatives improving overall efficiency, and the marginal cost of production. Lastly, we are committed to improving our overall performance as reflected in the Rayburn acquisition. We have begun integrating the business in April, and I look forward to sharing our progress with you in the coming quarters. With that, operator, would you please open up the lines for questions and answers?
spk00: Thank you. At this time, we will 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 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. Our first question is from the line of Matt Coranda with Roth Capital. Please go ahead.
spk05: Hey, guys. It's Mike Zabern on for Matt. Hey, Mike.
spk06: Hey. Just on Rayburn, trying to get a sense for what type of growth to expect there. So... And we did around 20 million in 2021. What is that growth rate been like historically? What are expectations going forward for Rayburn? And maybe just speak to seasonality of the business since it is a rental. Just trying to get a sense of growth rate historically and then just contribution by quarter.
spk03: Yeah, thanks, Mike. My coffee and I hope the call quality is good. I'm calling you from Italy at one of our factories today.
spk00: Yep, I can hear you.
spk03: Great. I appreciate the question. We are seeing slightly over 20 points of year-over-year organic growth with the business through the first few months of this year, and that trend is expected to continue plus or minus a few points through the remainder of the year. The demand is strong and good. One of the things that we like about the Rayburn business is it's positioned in a small but growing market. There's some seasonality to the business, but it lasts for a month or two in December, January, through the holiday season.
spk05: Historically, the business performs nicely through the year. Got it. Okay. Makes sense. I don't know if I missed it at the beginning of the call, but maybe just – what was the price volume in Q1? I'm sorry, Mike. The price volume – I'm not sure what that is.
spk06: Yeah, yeah. Yeah, sorry. Sorry, maybe it cut out. But price volume, I guess just contribution to – to top line, how much was from price, how much, maybe just speak to how much from price, how much from volume, trying to get a sense there.
spk01: Yeah, I don't have the calculations in front of me of the price-volume mix.
spk02: I know the majority of the increase that we have in the revenue is coming off of the sale of the 50-ton and larger tonnage crane units coming out of Manatex. Pricing had, let's see, I think pricing was a relatively small impact to it. I think we had talked before that we had implemented a price increase at the beginning of the fourth quarter that was starting to take effect into Q1. The total impact of that was maybe 2.5%. The rest of the increase is really coming through the volume of the cranes that we sold out of the Manatex business and some of it from the aerial platforms.
spk06: Got it. Yeah, that makes sense. Okay. And, yeah, that was kind of my next question. So there is some additional price action embedded in the backlog that still has yet to flow through the P&L, correct?
spk02: Yes. Yeah, we had put a price increase. I think we had announced a price increase at the end of October, November timeframe. We hadn't gone back and repriced historically a lot of the backlog, but we expected that we would start seeing some of that pricing increases coming through in the first quarter with more of it really rolling through into Q2. We started to see some of the price increase in Q1, and we expect that we'll see a little bit more in Q2.
spk06: Okay, got it. Yeah, so we're still confident in sequential improvements throughout the year. Is that correct? And I guess maybe just following off of that, just speak to key drivers for gross margin expansion throughout the rest of the year.
spk02: I think part of what's going to drive the increase in gross margin, we are expecting to see a slight uptick in the gross margin in the second quarter. Really, primarily, that's going to be driven by the addition of the Rayburn businessman. You know, the margins that we get out of the Rayburn business on a gross profit and on an adjusted EBITDA are higher than what the Manatex business generates, so we expect to have some pull-through from that business. We'll have two and a half months of Rayburn included in our Q2 results, so we expect to get a little bit of an uptick there. In terms of the mix within Manatex, we had a lot of higher tonnage cranes that came through in Q1. I don't know that we're going to have that same volume of higher tonnage cranes in Q2, so that'll have a little bit of a drag, but net-net, overall, we expect the margins to increase in the second quarter. As we look out the remainder of the year, I think in the past we've talked about Q3 is generally a little bit more of a down quarter for us because of the shutdown of the European facility for holiday. We would expect a little bit of an uptick in Q2, maybe flatten out to a slight decline in Q3, and then it'll come back in the fourth quarter. That's generally what we've seen.
spk05: Got it. Super helpful. Thanks, guys. I'll take the rest offline. Okay. Thank you.
spk00: Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad.
spk05: If you would like to ask a question, please press star 1 on your telephone keypad.
spk00: As there are no further questions at this time, I would now like to turn the call back to Michael Coffey for closing remarks.
spk03: Thanks, Operator, and thank you, everyone, for joining the call. We really appreciate you taking the time and, moreover, appreciate your interest in Manatex and our business. Joe and I look forward to reporting our progress with these initiatives as the year progresses and talking to you soon.
spk05: Have a safe day. Thank you. This concludes today's conference.
spk00: You may disconnect your lines at this time. Thank you for your participation.
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