Manitowoc Company, Inc. (The)

Good day, everyone, and welcome to the Mantle Walk First Quarter 2022 Earnings Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ion Warner, Senior Vice President, Marketing and Investor Relations.

Please go ahead.

Good morning, everyone, and welcome to the Manitowoc conference call to review the company's first quarter 2022 financial performance and business update as outlined in last evening's press release. Participating on the call today are Aaron Ravenscroft, President and Chief Executive Officer, and Brian Regan, Executive Vice President and Chief Financial Officer. Today's webcast includes a slide presentation which can be found in the investment relations section of our website under events and presentations. We will reserve time for questions and answers after our prepared remarks. I would like to request that you limit your questions to one and a follow-up and return to the queue to ensure everyone has an opportunity to ask their questions. Please turn to slide two. Please note our safe harbor statement in the material provided for this call. During today's call, forward-looking statements as defined in the Private Security Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied or actual projections due to one or more of the factors, among others, described in the company's latest SEC filings. The Manitowoc company does not undertake any obligation to update or revise any forward-looking statement whether the result of new information, future events, or other circumstances.

And with that, I will now turn the call over to Aaron. Thank you, Ion, and good morning, everyone. Please turn to slide three. To start, I would like to thank the Manitowoc team for an outstanding performance in the first quarter, despite another challenging period. I'll provide an update on our outlook during my closing comments, but it's fair to say that the crisis in Ukraine has intensified both park shortages and inflation. Additionally, labor markets and the logistics environment remain extremely tight. We reported healthy orders and backlog for the first quarter. However, it's clear that there are cracks are beginning to appear in the crane market. Nevertheless, in true Manitowoc fashion, our team rose to the challenge and delivered a strong first quarter. Our net orders for the first quarter were just north of $480 million. In the quarter, we reversed roughly $20 million of orders in the backlog destined to Russia in reaction to the Ukrainian crisis. Excluding these orders, the first quarter would have been slightly better than $500 million, which I always use as a good measuring stick for a bull market. Our sales for the quarter were just shy of $460 million. This was a $100 million improvement year over year, but unfortunately, it was approximately $35 million short of our internal forecasts. Our backlog is strong, remaining above $1 billion. Operationally, the team did a great job of battling part shortages while maintaining productivity, managing rising prices for purchased materials, and dealing with higher shipping costs to deliver $31 million in adjusted EBITDA. While the year-over-year adjusted EBITDA margin was significantly lower than our normal expectations, 6.8% was a very respectable performance considering all the headwinds. As it relates to our progress on Cranes Plus 50, We grew non-new machine sales by approximately 20% year-over-year. Our recent acquisitions, combined with our four strategic initiatives, have given us good momentum in the early stages of our journey to grow our non-new machine sales by 50% over the next five years. Concurrently, we continue to make progress on our sustainability commitments, fueled by the Mammoth Walkway. Recently, our team deployed a new methodology that leverages value stream mapping to help us identify Kaizen opportunities to reduce our energy consumption. In addition, the team has used TPM to improve our energy efficiency. For example, at one factory, the team is performing regular gamble walks to identify and eliminate air leaks. Compressed air is one of the biggest energy consumers in a factory. Another one of our opportunities to improve sustainability is to eliminate landfill waste. In the first quarter, we made considerable improvements against our internal targets, by implementing line-side recycling in our factories, working with suppliers to reduce packaging material, and partnering with waste contractors to improve recycling programs. This is a good example of the old adage, what gets measured gets improved, and it is exactly the type of behaviors that embody the Manitowoc Way culture. Turning to our acquisitions, I'm extremely pleased with where we stand over the first six months. Our integration plans are completed, the financial performance has been in line with our expectations, and the leaders have started to participate in our regular operational review process. While they haven't fully adopted priority deployment, we are well down the path of identifying priorities and finding new ways to grow our non-new machine sales while tracking KPIs. With that, I would like to introduce our new CFO, Brian Regan. Brian, would you please walk us through the details of our first quarter financial results?

Thanks, Aaron, and good morning, everyone. I'm excited to be here with you today. It's an honor to be named CFO of a company with such a long history in the lifting solutions business. Dave has been a great mentor since I joined the company three years ago, and I look forward to building on his accomplishments as we move forward. With that, let's move to slide four. Our first quarter orders totaled $482 million, an increase of 2%. The year-over-year increase was driven by growth in the Americas segment, inclusive of our acquisitions. This increase helped offset lower orders in our URF segment, which included both market softening and the canceled Russian orders previously mentioned by Aaron. Additionally, foreign currency impacted orders unfavorably by approximately $15 million. Our March 31st backlog was up $22 million sequentially and unfavorably impacted by approximately $14 million from changes in foreign currency exchange rates. Net sales in the first quarter of $459 million increased $105 million or 30% from a year ago. The year-over-year increase was driven by the strong backlog entering the year primarily in the Americas and URF regions. However, revenue continues to be negatively impacted by supply chain constraints resulting in shipments shifting to the right. The year-over-year benefit from incremental sales associated with our acquisitions amounted to $31 million in the quarter. Net sales were also unfavorably impacted by $16 million from changes in foreign currency exchange rates. SG&A expenses increased by approximately $9 million year over year, which included a $5 million benefit associated from the partial recovery of a note receivable balance in China. The gross increase in SG&A expenses of $14 million year over year is primarily related to our acquisitions. Our adjusted EBITDA for the first quarter was $31 million, an increase of approximately 47% year-over-year. As a percentage of sales, adjusted EBITDA margin was 6.8%, an improvement of approximately 80 basis points over the prior year, primarily due to leveraging of fixed costs on a higher volume. Flow-through of the incremental revenue for the quarter was approximately 10%, which is lower than our normalized rate mainly due to the price-cost dynamic. First quarter depreciation of $16 million increased $6 million compared to the prior year, which was driven by the acquisitions. Our provision for income taxes in the quarter was $7 million and associated with the tax on income in non-U.S. jurisdictions. As a reminder, the company has tax valuation allowances established for certain countries, and therefore, losses in those countries are not available to offset income tax expense in profitable jurisdictions. Our GAAP diluted income per share in the quarter was nine cents. On an adjusted basis, diluted income per share was three cents, an improvement of nine cents from the prior year. Our networking capital year over year increased $92 million, of which $70 million relates to the acquisitions. The remaining increase is attributable to higher throughput in our factories exacerbated by supply chain disruptions and inflation. Moving to cash flow, we generated $6 million of cash from operating activities in the quarter compared to $41 million in the prior year. The lower cash flow in the quarter was primarily due to an increase in net working capital, mostly related to an increase in accounts receivable. Capital spending in the quarter amounted to $9 million, of which $4 million was investment in the rental fleet. As a result, our free cash flow in the quarter was a use of $3 million. We ended the quarter with a cash balance of $52 million, a decrease of $24 million from year end, of which $20 million was used to pay down a portion of the outstanding borrowing under our ABL. Total outstanding borrowings under the ABL was $80 million at the end of the first quarter, and total liquidity was $267 million. As a reminder, we got into $85 million of CapEx for the year of which $25 million was related to growth in the rental fleet and $35 million related to the replacement of rental fleet expected to be sold during the year. We expect the replacement rental fleet CapEx to be more dynamic than traditional manufacturing CapEx due to the dependence on opportunistic sales transactions. We continue to assess our investment in CapEx, and based on current macroeconomic conditions, we anticipate that our spend will be lower than previously stated. With that, I will now turn the call back to Aaron.

Thank you, Brian. Let's move to slide five. The first quarter reminded me of an old Don Rickles quote, struggling is hard because you never know what's at the end of the tunnel. Three months ago, it looked like the economy was on the mend after two years of COVID. Unfortunately, as we've approached the end of the tunnel, we've encountered a new set of challenges. First, as a consequence of the humanitarian crisis in Ukraine, Commodity and energy prices have soared and supply chains have become more strained, causing a significant disruption to Europe's economy and our local businesses. Second, the U.S. economy is clearly overheated and the Federal Reserve is playing catch up with interest rate increases. And lastly, the severe COVID lockdowns in China are taking its toll on the already stressed global supply chain. As I previously mentioned, we have begun to see cracks in what has been a very strong crane market. While our orders were good in the first quarter and construction activity was strong, confidence is subsiding. On construction sites, contractors are experiencing severe difficulty obtaining raw materials and labor, causing projects to be delayed. At crane rental houses, they are having difficulty finding operators and skilled technicians. And of course, crane manufacturers are struggling to hit delivery dates and continue to extend lead times. For example, we lost six days of production in China and two weeks in Italy in April. Throw in double-digit price increases by manufacturers in a growing inter-train environment, and I fear that confidence is beginning to wane, particularly in Europe and North America. Spring purchasing is normally a good indicator of crane orders for the year, and March and April orders trended down at the same time that we implemented our last round of price increases. Looking at the traditional Western markets, we see some pockets of strength in North America and Europe, but generally these markets appear to be losing steam. In places like Florida, where construction is booming, and in Italy, where the market is supported by strong tax benefits, the crane business is robust. However, in spite of strong oil prices, the oil patch in the U.S. Gulf region remains completely muted. In North America and Europe, where everyone has been raising prices for the last 12 months, crane rental rates have been stagnant. The situation is further exacerbated by the fact that production slots in 2022 are close to being sold out, leaving everyone wondering how high interest rates and prices will be in 2023. Finally, with regard to our dealer inventories, we're closely tracking the speed at which these cranes will be retailed over the next six months. Dealer inventories are currently okay, but based on our backlog, they're going to be replenished at a pretty good clip over the next couple of quarters. This is traditionally where we see the first signs of a downturn. Taking a look at other markets, there is quite a hodgepodge. The traditional mining markets like South America and Australia are performing well, and our outlook for the Middle East is significantly improved. I recently visited Saudi Arabia, and I was very encouraged by the level of investment activity. The recovery is quickly building in Saudi, and all indications suggest that Qatar and Kuwait will likely follow in the coming quarters. In Asia-Pac, the story remains unchanged. China's construction market is still dormant and the recent hard COVID lockdowns across the country have only contributed to the problem. South Korea, however, remains a bright spot and we are beginning to see green shoots in Vietnam and Singapore. Lastly, regarding Russia, let me be clear. Manitowoc vehemently opposes Russia's aggression against Ukraine and we are deeply saddened by the tragic events that continue to occur. We have approximately 20 employees, which includes Russians and non-Russians. Our primary focus is to support our Manitowoc family, and we will continue to do so. We've contributed funds to support the urgent and long-term needs of Ukraine. From a business standpoint, shortly after the conflict began, we stopped accepting new business. We've subsequently canceled all orders not in transit, and we continue to evaluate the potential financial implications related to this entity. Looking at our 2022 outlook, given our backlog and the dynamic nature of the current environment, We are not changing our guidance at this time. However, make no mistake, we will see significant downward pressure on our margins during the second half relative to our original expectations. The spike in commodity and energy costs resulting from Russia's aggressions in Europe will cause our second half to look more like our first half. That being said, we have continuously taken aggressive actions to adjust to these inflationary pressures with price increases, and our team continues to battle the park shortages. In short, we are presently targeting the low end of our guidance until we have a clearer picture of how the second half will play out. If the theme of Manitowoc's journey was transition in 2021, the theme for 2022 is endurance. Endurance is the ability to resist, withstand, and recover. We remain resolute in pursuing our four breakthrough initiatives, and we are laser-focused on our crane's plus-50 target for non-new machine sales growth. In the crane industry, it's always a matter of time before the next cycle occurs. Unfortunately, since our last conference call, I have noticed a significant change in buyer confidence, and it appears that this cycle may be quickly peaking as a result of ongoing inflation and rising interest rates. Given these market conditions, we will continue to be judicious in our management of working capital and liquidity. There is, however, a silver lining. The installed base of cranes continues to age. At some point in the not-so-distant future, our industry will require a refresh. In addition, after years of patience, we have a U.S. infrastructure bill percolating in the halls of government. While we await the inevitable crane renaissance, Manitowoc will continue to strengthen its product offering and aftermarket focus, both of which will fuel our long-term growth and drive shareholder value. With that, operator, please open the lines for questions.

Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star 1 if you would like to signal with questions. Our first question will come from Meg Daubery with Baird.

Good morning, Meg. Good morning. Hi, Meg. Good morning, and Brian, welcome to you. Aaron, I really appreciate all the color that you have given. There's sort of a lot to think through from your prepared remarks. But obviously, the main takeaway here is that there are cracks that you note in the crane market. And I'm wondering if we can go back to your comments on Europe and North America and maybe Maybe flesh that out a bit here. I'm curious, in Europe, is this simply a function of what's happening in Ukraine, sapping buyer confidence? And as you look at the North American market, what is it that is driving this incremental softness? You talked about orders in March and April. Maybe you can kind of give us a little more context on that. post-year price increases that you talked about?

Okay, so let's start with respect to the comments on guidance. That's purely driven by the European situation. So when we look at 2022, really from a tactical level in the next three quarters, I mean, our challenges are cost-driven in Europe. If you're looking sort of at general demand and overall customer confidence, it's really two different stories there. With respect to the situation in Europe, I mean, on the tower crane side, we're virtually sold out. So, you know, given the uncertainty of what pricing and interest rates are going to be in 2023, even just generally with the European environment, I think people are being conservative and pulling in their purse strings. Mobile business is pretty similar, same sort of situation. In the U.S., I think it's more granular where you can really look at it and say, we see that the RT business has not improved at all from where oil prices are, which normally that would be super strong. Rental rates are very soft in that space. In the boom truck world, no one can get class A trucks. So it's just a real backup. And, you know, again, it's how if you can't guarantee a lead time, you can't effectively give a price and you know interest rates are going up. It's tough for folks to get really aggressive in terms of what they're looking at. The other thing I would say, Meg, is in the U.S. because the dealer network that we have, Right now, dealer inventories are in good shape. We feel good about them. But again, part of our backlog is filling out the dealer channel in the next nine months. So I think some of that, you sort of have the combination of it. You've got dealers looking at it saying, hey, we've got our orders in place. We're set for 2022. Not ready to make real changes yet for 2023. And we've been limiting relative to what orders we're willing to take for 2023.

Yeah, so that's kind of what I'm trying to get at. How much of what you're talking about is a function of maybe you limiting the order intake that you're willing to accept given all the uncertainty as opposed to other dynamics, right? I mean, you talked about the fact that pricing has gone up quite a bit, and that is posing a bit of an issue for customers. Are we getting to the point where these price increases are – detrimental to additional demand.

Yeah, so there's so many things, so many variables sort of crashing at the same time into one another. It's hard to pick one of them and say that that's the root cause of it. But if I look at order rates through the first quarter, and we did some price increases in the middle of the quarter to deal with the latest round of cost increases coming out of Europe, that January we had really good orders, and then all of a sudden it really started to fall off February, March, and April, and they've been pretty consistent, lower than the level we've been So I do think that they're starting to see an impact of all the price increases have an effect. And that's really what I anticipate for the remainder of the year is that orders will be lower and we've got difficult comparisons. We look year over year in the second, third and fourth quarter. And I think we'll just start to eat some of our backlog away until we get more visibility on what 2023 is gonna really look like.

Understood. And if I may squeeze on final one, going back to supply chains, right? Certainly some things seem to have gotten a little more challenging on the input cost specifically. But I'm curious in terms of availability, where is it that you're still seeing part shortages? And really, has anything changed from a couple months ago when we had this discussion last time?

Yeah, I mean, the challenging part is it's still a game of whack-a-mole every day. It's something different. I do think that the shortages have gotten more challenging during the first quarter than they were at the end last year. You know, the one thing that I'd add is that it's important to keep in mind that 35% of all the heavy plate steel in Europe was produced in Ukraine and Russia before this crisis. So I would say that's the area that concerns me the most is whether it be the steel that's coming from that region into Europe or whether it be the steel fabrication, because there's I mean, there's a large Ukrainian population in Europe that was doing the welding in places like Poland and then Czech Republic, and they've gone back to Ukraine. And then, of course, on the back of that, you also have the energy issues. So steel fabrication and steel itself in Europe is what's my biggest concern. And, of course, in China, we've just got the backup at the ports that isn't helping the situation. So, yeah, I don't think that the situation gets any easier. But we've always, even going back to last quarter, we anticipated that the shortages would be pretty darn tough.

Understood. Thanks. Good luck, guys. Thanks. Thank you.

Thank you. And our next question will come from Jamie Cook with Credit Suisse.

Hi. Good morning. Hi, Jamie. Hello. I guess a couple questions. You did, again, say January orders were strong and then they fell off a cliff, I think, in February, March, April. Can you put some, I guess, numbers around it, like how big was January relative to the other three months? You know, so that would be helpful. What to what was sort of price cost in the quarter, which would and what are you expecting now, given some of the price increases that you put through, you know, you know, during the quarter? And then last, can you just give me an update? I know there were some shipments that were delayed last quarter. It was 50 million that was supposed to get shipped, I think, in January and February. Just where are we on that, and are there incremental delays there? Thanks.

You want to take the last question first, Brian?

Yeah. Looking at Q1, so yes, the stuff that fell from Q4 to Q1 got shipped, but we had another shifting of the right. You know, you look at our working capital and you see that it's elevated, and some of that was due to things shifting to the right. So AR was elevated because revenue got recognized later in the quarter, and then inventory was up, say, about $35 million fell out of the quarter to Q2, and we're continuing to see that slide, as Aaron mentioned. the sourcing issues that we've been having.

Yeah, so with respect to the order rates, I wouldn't necessarily say it fell off a cliff. I mean, January was as strong as what we've seen. I mean, when you're clocking $500 million a quarter, that's a good clip for us when you think about what our deliveries have been the last five, six years. I'd say if I looked at it on a quarterly basis to try to take out some of the bumpiness of it, I mean, if you look at a run rate, we're probably down 10%, 20%, just depending on the product line. So as I say, it's not as if it fell off a cliff, and sometimes we do have these slow months. My concern is just the normal springtime orders. Normally March and April is a good indication what the full year is. So when April is slow, you know, May might be weak, and then all of a sudden you start to get into summer months, and you know they're going to be weak. With respect to your question on pricing, it's really tough to say when the pricing lands, especially because we have the part shortage challenges, which is moving when actual deliveries happen all over the map. I think the easiest way to answer that question, Jamie, is when we look at the full year, we've taken our guidance down from, you know, we were 130 to 160, say that the midpoint is in that 145-ish range. We're targeting the low end of the range. We're looking at headwinds of more costs of 15 to 20 million in the second half. But a lot of it is still we're sort of trying to guess at what it's going to be and what's going to come to us in the third and fourth quarter. But, yeah, I mean, I think we were in good shape until the Ukrainian crisis hit, and now it's really hit the reset button, particularly in Europe.

Okay. Thank you. I appreciate the color.

Thanks, Jamie.

And our next question will come from Seth Weber with Wells Fargo.

Morning, Seth. Hey, Seth.

Hi, guys. This is Larry Stubitsky on for Seth. Thanks for taking the question. You maintain your revenue assumptions for 2022, but, you know, you're at the lower end. You said that kind of implies 16% growth. Can you kind of elaborate on what your expectations for price versus volume are for the year?

I'm not sure I understand. What's your question relative specifically around price versus volume?

You know, what are your volume assumptions for that 16% growth? In terms of units?

Yeah, that's not a number that we would share just because of the complexity of the different number of units.

Okay. And then, you know, do you have your $2.5 billion revenue goal? Is that still a reasonable long-term target? Or are you kind of internally tempering that given, you know, where we are in the operating environment? Or is that still a long-term aspirational goal?

Yeah, I mean, that goal doesn't change. I mean, if you want my honest opinion, the longer we are slower, that just means the eventual rebound is going to be even bigger. So I think that's still very doable when you look at the overall crane market over the long term. It's just a question of when we get back into a more normalized basis, whether it be the inflation issues or the interest rate issues. But there's definitely a continuing to build up of a refresh that's going to need to happen at some point on cranes.

Right. Okay. Thank you, guys. Appreciate it.

Thank you.

And our next question will come from Stephen Fisher with UBS.

Good morning, Steve. Hi, Steve. Good morning, guys. So, obviously, a lot of talk about the cracks in the confidence on the crane market, and I get that that's maybe starting to flow through your orders. I'm curious if that's flowing through the inquiries as well, because It does seem like there are a number of larger projects in the works, particularly in the United States, be it reshoring, manufacturing, or infrastructure, or even on the energy front. And so while maybe your customers are a little bit hesitant to put in the orders now for 2023, I'm wondering how does that flow through the discussions on what they might need should all this activity start to really happen?

Yeah, inquiries have definitely dropped. I mean, I think the biggest remark that I have on your comments, Steve, are the fact that what we hear from a lot of customers is concerns around project delays. So, I mean, there's been these talk of projects, but folks are really struggling to get projects started, whether it be because of getting raw materials or the raw material increases that they've seen and even getting the labor shortages. I mean, one of the biggest challenges we see specifically in the crane market, in the crane operator world, is folks are struggling to get trained, skilled crane operators to run their cranes. So that's my way of saying I think that, you know, it's great that there's an infrastructure bill out there, but we haven't really seen any movement off it. And I think some of that is because folks can't get going, whether it be on the raw material side or the people side.

So it could still be a timing factor, but in the meantime, it's actually having a real impact of not generating orders, it sounds like. Yeah. Okay. I think that's fair. And why do you think crane rental rates are stagnant? I mean, we're seeing a lot of pricing in a lot of different, across both equipment rental and manufacturing. So I guess to what extent is that competition or is it just loose supply demand? Why do you think the rental rates aren't, or are they stagnant?

Well, for sure. I mean, we always look at the RT market as sort of an indicator for rental rates and there's, there's no, there's very, very, I say there's no activity. There's no activity in oil patch like you would expect in the last 20 years relative to where the oil prices are. So I think that has a big effect over it. And that's what we mostly talk about. I'm sure boom trucks are drifting up, but you know, I think people just struggle to understand some of it is that we've been locked into the projects that are out there. So yeah, I mean, I'm not sure what's going to finally turn the tide on the rental rates, but that's a never-ending complaint that we hear from our customers.

Okay. And just lastly, in terms of the margins in the second half of the year, I think you were answering an earlier question to something about $15 to $20 million of additional costs in the second half. Should we just assume basically kind of take a 1% or so off of your kind of 6.8% margin in the first quarter. And that might be what you're kind of running at for the second half.

I was going to say, I'll let Brian, well, before Brian answers, my comment is I've just been staring at it from a dollar standpoint because we look at the, you know, the issues we have and how we offset it with price. So that, I mean, if that's what the math says, it probably doesn't make sense. Yeah.

I'd say remember that Q3 tends to be our worst quarter because of the shutdowns and the normal shutdowns in Europe. So second half, Q4, we've generally been pretty strong. So I think it's probably a little bit less than the numbers you're talking about versus the 6.8. Got it.

Thanks a lot. Thanks, Steve.

And moving on to Tammy Zakaria with JP Morgan.

Hi, good morning. Hi, how are you? Thanks for taking my question. Can you give us what are the top two or three challenge areas you see in the supply chain today? Is it freight? Is it specific parts shortages? Is it lockdown? You mentioned plate steel, but any specific examples that you could share with us?

I'd say all of the above. Yeah, I don't think it's so simple to say that it's one thing or the other. I mean, it just sort of depends on what the issue of the day is. I think China is going to be a bigger challenge even as we get into the second half because, I mean, don't forget there are a lot of boats on the water, so we haven't really seen the worst of the worst yet coming from China. I suspect as we look forward, that's going to be a real problem. I have to admit I cringe every time I turn on the TV because you see a lot of activity in Ukraine around some of the steel mills that are there. There's a lot more steel coming out of Ukraine than anyone, I think, realizes. Definitely, I realize. I mean, those are the two pieces that worry me the most.

And just from a cost standpoint, the energy costs are definitely increasing in the second half due to the Ukraine crisis. So that's another negative.

If you get us going, Tammy, we could go for a while. I think it's probably more than two or three that worry us.

Got it. Okay. So China, steel, energy, the top areas of concern right now. So on China, can you remind us what your manufacturing exposure is in China? Like what percent of your capacity is in China? And are you still able to run operations there amid the lockdowns?

Yeah. So in China, there's sort of the double whammy. One is what we produce and what we would ship out of China. I'd have to look at what it says in the 10K or some indication with our Asia-Pac businesses. But I wouldn't say it's significant relative to the overall. I think the bigger challenge it could hurt us is just the supply chains. And it's the parts coming out of China and going to the factories, whether it be in North America and Europe, that probably could create a lot more problems for us.

Got it. Understood. Thank you.

Thanks, Sammy.

And our next question will come from Stanley Elliott with Stiefel.

Good morning, Stanley. Good morning, everybody. Thank you all for taking the question. Quick question, Aaron. I thought I heard you say that you were talking about or thinking about shrinking the product offering. Let me know if that's correct, because in December we talked about or you all talked about kind of expanding the AT offering. I'm just trying to figure out exactly what's going on or where your head's at with that.

Yeah, we're continuing to invest in all of our new product development projects we've got in the pipeline, and we're definitely expanding the product line.

Okay. And in terms of Europe, how much, with things being certainly uncertain, as you're sitting here today, and stagnant order rates or rental rates, et cetera, at what point do you all start to think about restructuring over there? Are there opportunities? Is this something you think you can navigate with

of the mannitol walk away and some of the lean initiatives that you have i'm just curious kind of you know what level of concern that's bringing up yeah i mean while we have all these pricing and cost issues and we expect to have them addressed with respect to price increases i mean let's not forget we're at somewhat some version of capacity right now so uh even with the slowdown there's still more than enough work to go around so no we're not actively reviewing any restructuring projects at this point I mean, that'd be a real systematic change in terms of the business. I mean, we still have good units. When you think about our unit level, even throwing out a number, you know, 1.8 billion. I mean, we still, that's a lot of cranes we got to make in the footprint we have. I mean, we really took, we did a lot of work on this between 16 and 20. So I don't envision any, I mean, I think it had to be a real catastrophic situation on the demand side that we'd have to consider something like that. Great, guys. Thanks very much. Thanks, Stanley.

And that does conclude the question and answer session. Mr. Warner, I will go ahead and turn the conference back over to you for any additional or closing remarks.

Thank you. Before we conclude today's call, please note that a replay of our first quarter 2022 conference call will be available later this morning by accessing the investor relations section of our website at www.manitowoc.com. Thank you, everyone, for joining us today and for your continuing interest in the Manitowoc Company. We look forward to speaking with you again next quarter. Thank you.

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.