Manitowoc Company, Inc. (The)

Good morning. My name is David and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Manitowoc Company first quarter 2023 earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one once again. Thank you. Ion Warner, you may begin your conference.

Good morning, everyone, and welcome to the Manitowoc conference call to review the company's first quarter 2023 financial performance and business update as outlined in last evening's press release. Today, I'm joined by Aaron Ravenscroft, President and Chief Executive Officer, and Brian Regan, Executive Vice President and Chief Financial Officer. Our call includes a slide presentation, which can be found in the investor 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 ask 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 move 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 Securities 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, Ian, and good morning, everyone. Please turn to slide three. Manitowoc ended 2022 on a strong note, and this momentum carried into the first quarter of 2023. For the quarter, we generated sales of $508 million and adjusted EBITDA of $45 million. Adjusted EBITDA margin was 8.9%, a 210 basis point improvement year over year. I would like to recognize our team's Herculean efforts to expedite parts, complete cranes, and get them all shipped, all in the face of continuing supply chain, labor, and logistics challenges. Thank you to everyone in the Manitowoc organization for delivering this strong performance. In addition, non-new machine sales for the quarter increased 17% year-over-year. I'm pleased how our team is embracing the Cranes Plus 50 strategy and achieving organic growth both in our traditional aftermarket business as well as in the acquired businesses. With these efforts, we continue to build momentum to grow our higher margin, less cyclical revenue streams. Please turn to slide four. The mission of Manitowoc is to build the physical communities of tomorrow. We often talk about this mission in the context of famous construction sites, new cranes, lean activities, and our sustainability efforts. Today, I would like to highlight Manitowoc's relationship with Brooks House, a partnership that is strengthening our role in the communities of Central Pennsylvania and Maryland. Founded in 2019, Brooks House provides a community-based, safe, stable, and emotionally supportive living environment for adult women in the early stages of substance abuse recovery. The center was founded by Kevin Simmers shortly after his daughter, Brooke, sadly succumbed to drug addiction. Manitowoc's relationship with Brooks House started with simple monetary donations. But as time progressed, Kevin and Dave Hall, our general manager of North America, realized that Manitowoc could have an even greater impact. Their idea was for Manitowoc to provide job training and employment opportunities to women who have graduated from the in-treatment portion of the Brooks House program. Today, nine of these graduates are employed in our welding and assembly operations at our Shady Grove facility. Next month, we will host 15 additional participants in the program with aspirations to have them join the team. I urge you to check out the video link in our presentation as words cannot do the program justice. I cannot tell you how proud I am of Dave Hall and his team at Shady Grove for their efforts to partner with Brooks House. I'd like to give a shout out to our new team members from the Brooks House. Keep up the good work. And a big thank you to Kevin for his incredible dedication and commitment to a noble cause. Please turn to slide five. Before moving on from the topic of Shady Grove, I'd like to recognize our crawler team. Manitowoc has been making lattice boom sections since 1925. Even so, the team continues to improve how we make these parts. When I recently toured the facility, they were in the process of reconfiguring how we weld the boom butts and tops. This is the large part of the lattice that physically attaches to the main structure of the crane. We've been welding these parts the same way for over 10 years, but the team is taking a new approach to improve safety, quality, and productivity by moving certain elements offline and treating the process almost like a sub-assembly. This process involves some of the most complicated welling that I've seen in my career, and the skill of our welders is second to none. I'd like to thank Ron Wolford and his team for their dedication to continuous improvement using the Manitowoc Way. Please move to slide six. Turning our attention to the crane market, our orders for the first quarter totaled $525 million, leaving our backlog still well above $1 billion. Although order intake was better than expected for the first quarter, Market dynamics vary widely around the globe, and current signals from the markets are mixed. Geographically, our backlog is skewed toward the Americas, reflecting this dichotomy. Starting with the U.S., we heard a spectrum of feedback from customers at ConExpo in March. Although we haven't seen significant money allocated to the infrastructure and semiconductor programs yet, there's still plenty of crane work around the U.S. With that said, the chickens are coming home to roost with respect to financing. Higher interest rates are weighing heavily on the minds of our customers, and the recent banking crisis certainly caught the attention of our market. Order intake remains good, but our internal sentiment is cautious. While we still have a good backlog, the crane market can change overnight, and the U.S. presidential election cycle typically seems to slow customer demand. As a final comment, dealer inventory levels are okay to load depending on the product category, but when this is combined with the orders that we have on hand, We can foresee a potential buildup of inventory coming if retail activity shows any signs of a slowdown. Turning to Europe, the environment remains very challenging as interest rates continue to rise and the Ukraine crisis drags on. As we previously indicated, the tower crane business is slowing down across Europe. This slowdown was definitely reflected in the first quarter machine orders, which were down approximately 20% versus the same period one year ago. I expect the overall tower crane business in Europe to be very challenging for the remainder of the year. The mobile business is more of a paradox. Cranes are busy and rental rates have inched up, but customers have entered a wait and see mode. Keep in mind that our build schedule for these products is relatively sold out for 2023, and we're mostly quoting units for 2024. Considering the current geopolitical and banking dynamics in Europe, I believe the purchasing behaviors are not surprising for long lead time items. Generally, I feel more positive on the European mobile crane business versus the tower crane business due to the recent new product launches or significant improvement in our quality over the last couple years and our Cranes Plus 50 strategy, which is driving us to be closer to our customers. Moving to the Middle East, Saudi Vision 2030 continues to drive the entire region, and I remain very optimistic about the long-term potential. At the moment, these projects are primarily involved in earth-moving activities and road-building projects as they continue to evaluate the best engineering solutions for vertical construction. With respect to NEOM, our local dealer partner has recently won their first project using photon tower cranes for the construction of the island resort Sandala. I'll be in Saudi Arabia in July to get a better feeling for how we can expect this booming construction to materialize. Outside of Saudi, we've also seen a significant spike in tower crane activity in Turkey, as the country revealed from the terrible earthquake that hit in February. Although the Middle East is one of our smaller regions, our orders for the quarter were up 40% versus the prior year. And last but not least, I would say it's more of the same in Asia Pacific. China still hasn't rebounded, although key markets such as South Korea, Hong Kong, and Australia have been strong. Although we've had some meaningful tower crane orders for Singapore, Southeast Asia is still very quiet. With that, I'll pass it over to Brian for a financial update.