Myers Industries, Inc.

Hello and welcome to today's Myers Industries Inc Q2 2023 earnings call. My name is Jordan and I'll be coordinating your call today. If you'd like to register an audio question, you may do so by pressing star followed by one on your telephone keypad. We'd ask all participants to limit themselves to five questions each. I'm now going to hand over to Grant Fitz, Chief Financial Officer at Myers Industries to begin. Grant, please go ahead.

Thank you, Jordan. Good morning and thank you for joining us. I'm Grant Phipps, Chief Financial Officer at Meyers Industries. Joining me today is Mike McGaugh, our President and Chief Executive Officer. Earlier this morning, we issued a press release outlining the financial results for the second quarter of 2023. We've also posted a presentation to accompany today's prepared remarks. If you have not yet received a copy of either the release or the PowerPoint, you can access them on our website at www.myersindustries.com under the Investor Relations tab. This call is also being webcast on our website and will be archived along with the transcript of the call shortly after this event. Please turn to slide two of the PowerPoint for our safe harbor disclosures. I would like to remind you that we make some forward-looking statements during this call. These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties, and other factors, which may cause results to differ materially from those expressed or implied in these statements. Also, please be advised that certain non-GAAP financial measures such as adjusted gross profit, adjusted operating income, adjusted EBITDA, adjusted EPS may be discussed on this call and are reconciled to the nearest GAAP metric in the exhibits to today's press release and to our presentation. Further information concerning these risks, uncertainties, and other factors is set forth in the company's periodic SEC filings and may be found in the company's 10-K and 10-Q filings. Please turn to slide three of our presentation. I am now pleased to turn the call over to Mike McGough.

Thank you, Grant. Good morning, everyone, and welcome to our second quarter 2023 earnings call. Before we discuss our quarterly performance, I want to take a moment to say how delighted we are to welcome our new CFO, Grant Fitz, to our organization. Grant has considerable experience across the industrial, automotive, and technology sectors. His financial acumen, experience, and leadership will deliver meaningful contributions to Meijer's industries and help us execute our Three Horizons strategy. Welcome, Grant. We're glad you're here. As I prepared my remarks for this quarter, many of my comments directionally echo the past few quarters. We continue to face demand headwinds in certain end markets, primarily in recreational vehicles, in marine tanks, and in high-dollar consumer discretionary items such as gas cans and decorative planters and home goods. Just as in past quarters, we continue to offset the impact of these demand headwinds through our operational excellence and commercial excellence initiatives, what we call our self-help initiatives, to drive performance improvements at Meyers. We still have a long multi-year runway of profit improvement opportunities due to our self-help initiatives. These improvements are largely within our control, and we will continue to execute them through this year and beyond. One concrete example on the operational excellence side are the gains we've made in productivity, allowing us to streamline our asset footprint and take costs out of the company. Due to running our plants in a more optimal fashion, we continue to unearth new capacity, what we call the hidden factories. This enhanced productivity and newfound capacity has allowed us to optimize our footprint and take costs out of the company. An example of this is our recent move to consolidate two rotational molding facilities in northern Indiana into a single facility. This move improves our efficiency and saves cost. Across the board, we're using our operational excellence focus to drive a more variable cost structure, reducing costs when demand is soft, but ensuring we are well positioned to meet the demand when markets recover. While we're serious about cutting costs, we're also serious about investing in building critical capabilities that we need to improve our profit margins in Horizon 1 and execute our growth plans in Horizons 2 and 3. In one example, we're investing to standardize and institutionalize our best practices by building out the Myers business system, which will allow our company to scale faster with fewer pinch points. In another example, we invested over a million dollars this past quarter towards further building out our best-in-class M&A frameworks, tools, and capabilities to help us acquire and integrate larger and more complicated companies. Both of these new capabilities, the business system and M&A, will serve as well as we pursue meaningful acquisition opportunities. We are focused and disciplined in our approach to acquisitions. We have a world-class team, a strong balance sheet, and are ready to act decisively on the right targets. As we've said before, we won't get deal fever. We won't overpay. We are and we will continue to be disciplined in our M&A approach. Now, let's get to our results. Second quarter of 2023 was challenging given the softness of some end markets. But this quarter also demonstrated the resilience in our earnings and cash generation capabilities driven in part by our focus on our self-help actions and our discipline execution in general and the consistent pursuit of our three horizon strategy. For the quarter, we had 8% growth in our distribution segment, largely driven by the Mohawk acquisition. In our material handling segment, we experienced the softening demand across multiple end markets, partially countered by the strategic actions we took, allowing us to expand our adjusted gross margin for the quarter by 90 basis points to 32.9%. While many of the end markets in our material handling segment experience lower demand due to the current macro environment, we continue to see many meaningful bright spots for the future. One example is our focus on the agriculture market. Demand for our seed boxes continues to be strong and profitable. A second opportunity is our effort to develop what we believe will be a large and lasting opportunity for our scepter cases and military lightweighting projects around the world. A third example is our investment and focus to grow our e-commerce channel. We're investing in building this capability and anticipate that gross sales through this channel will approach $40 million in 2023, roughly doubling our e-commerce sales revenue from just three years ago. In our distribution segment, we made a change, leadership change, naming Jim Gurney, our Vice President of Sales, Marketing, and Commercial Excellence, to also lead the segment. Over the past three years, Jim has done an excellent job advancing Meijer's commercial capabilities. Jim's expertise, leadership, and ability to deliver on demonstrated results are precisely what's needed to take our distribution segment's performance to a higher level. Our recent EBITDA margins and distribution have been below my expectations, and I'm confident that under Jim's leadership, we will improve and expand our EBITDA margins in the near term. Just as with material handling, we also have bright spots for the future of the distribution segment. We have a bullish long-term view due to expected growth for the tire industry, in part driven by the growth of electric vehicles. I'm also bullish on the future of the distribution segment due to the new leadership and the resulting impact on our reinvigorated, aligned, and strong management team. Now, I'll pass the call to Grant to walk through our financial results for the quarter and expectations for a full year.