Douglas Dynamics, Inc.

Good morning, and ladies and gentlemen, welcome to the Douglas Dynamics First Quarter 2021 Earnings. At this time, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Sarah Lover, CFO. Thank you. Ma'am, please go ahead.

Thank you. Welcome, everyone, and thank you for joining us on today's call. Before we begin, I'd like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC. Joining me on the call today is Bob McCormick, our President and Chief Executive Officer. In a moment, Bob will provide an overview of our performance. Then I will review our financial results and guidance. After that, we'll open the call for your questions. With that, I'll hand the call over to Bob.

Thanks, Sarah. Good morning, everyone. We're off to a fantastic start in 2021 with record first quarter results. I will keep my comments fairly brief today for two reasons. Number one, this is about as straightforward a quarter as we've experienced recently or could have hoped for. Number two, the near-term challenges we face will be very familiar to you, same as every other manufacturing and auto-related company that you follow. Both of our segments turned in strong results. attachments buoyed by the heavy snowfall during February in many key markets, and solutions improved as more normalized levels of business activity returned. Our teams put forth tremendous effort to produce such strong results this quarter, given the pandemic was still in full force across the country for most of Q1. And while things have gotten much better today than a year ago, and we've learned to operate effectively within the pandemic, we are not completely out of the woods. we are still seeing COVID-related absenteeism in a number of our locations. But we are proud of our team for their resolve, flexibility, and creativity as we strive to exceed our customers' expectations while placing a high priority on the safety of employees. Generally very happy with the demand outlook in both segments, which sets us up for long-term success. The biggest headwinds that we face today are similar to many other industrial-oriented companies. Number one, supply chain disruption and component shortages. We're in the early stages of this challenge, and much uncertainty exists. We do expect performance will be impacted through the balance of the year. Material price inflation is also a factor. And our margins will be impacted in the near term as our pricing typically lags actual cost inflation. But we will recapture it over the long run. And number three, we continue to navigate a tight labor market. This is a common challenge across the U.S. Skilled workers are simply hard to find. We have a great HR team finding creative ways to attract and to retain quality employees. Remember, our business model is built to deal with adversity. Our management team is meeting these challenges head-on. And while the exact impacts are difficult to judge at this juncture, we're comfortable maintaining guidance. Now let's discuss the latest developments at each of our segments. Beginning with work truck attachments, where we had a strong start to the year. We generated $42 million of net sales and $8.2 million of adjusted EBITDA. Impressive increases compared to the first quarter of last year. It was a very unusual winter season, well below average in the key months of December and January, but rebounded with significant snowfall in February. Then nothing in March, which led to a slightly below average season in total. This is the third consecutive below average snowfall season, but this year did see better snow totals on the east coast than the previous winter. Timing and severity of the storms in February drove not only P&A sales, but pushed end users who had been delaying purchases to buy new plows. So our strong Q1 results likely included some orders pulled forward, which may impact second and third quarter revenues. The preseason order period has just started. So far so good, nothing out of the ordinary. Dealer inventories are in good shape, and dealer sentiment is positive. Importantly, no dealer credit concerns heading into the preseason period. We're pleased with what we're seeing within the attachments group. The team has a long history of strong execution, and Q1's performance is proof of that. When we finally get back to an average snowfall season, the results will be even more impressive. That brings us to our work truck solution segment. strong all-around performance, encouraging progress, which bodes well for the future. We delivered $61.4 million of net sales and $2.4 million of adjusted EBITDA. At Henderson, delays in order intake mentioned last quarter are improving now, as the municipalities have more visibility on their budgets. That's good news for the long term, but it did create an expected gap in production schedules based on the delays. Our teams are pulling appropriate levers, including utilizing rolling plant shutdowns to right-size our labor force with the production gap. And this will impact Q2 and Q3 financial performance. Dejana, the team, is doing a great job. Overall, demand is strong as the economy continues to stabilize. As at Henderson, supply-side challenges will impact Dejana's performance in the near term. and the team will stay flexible in staffing our up-fit locations to meet customer expectations. With backlogs in the solutions segment approaching record levels, we're well positioned for long-term success. Overall, we're very encouraged with where both segments stand today. Moving on to capital allocation, we continue to make necessary investments to fund our growth initiatives. As previously mentioned, we are on track to launch the medium-duty municipal first responder product this summer. The end-user response is positive, and we expect to gain significant traction in 2022. As our vertical integration strategy proceeds, a number of projects are already in the on-deck circle. Many of these projects will be singles and doubles, but all will help drive long-term organic growth. Despite the challenges over the past year, we remain committed to our dividend and that commitment is not wavered. We've increased the dividend for the 13th time over the past 11 years in February. Moving forward, we remain committed to returning cash to our shareholders. Additionally, we use our strong free cash flow to pay down debt. Maintaining a healthy balance sheet is always top of mind. It allows flexibility to Deploy capital for both internal and external growth initiatives. On that topic, we continue to actively monitor the competitive landscape for potential M&A opportunities. Still not many deals available, and valuations remain high. So we'll have to weigh that against the growth potential and the strategic fit. So all in all, very pleased with our overall performance. We continue to prioritize the health and safety of our number one asset, our people. Relays are focused on providing the highest level of value to our customers, continually outperforming our competitors. The pandemic will impact performance throughout 2021, there's no question about that. But despite this challenging backdrop, we continue to innovate, driving continuous improvement initiatives across the company. And although supply related headwinds will impact short term results, We're well positioned to exit the pandemic stronger than we entered, driving towards our long-term financial targets. With that, I'd like to pass the call to Sarah to discuss our financial results in more detail. Sarah?