Douglas Dynamics, Inc.

Good morning, ladies and gentlemen, and welcome to the Douglas Dynamics second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. Later, we will conduct a question and answer session, and instructions will be given at that time. Please note this event is being recorded. I would now like to turn the conference over to Ms. Sarah Lauber, Chief Financial Officer of Douglas Dynamics. Please go ahead, ma'am.

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. As we noted in the press release, we are pleased with our results for the second quarter. We see continued strength and overall demand across our businesses. Our team is using its considerable ingenuity to address and work around the various industry-wide challenges we continue to face. The attachment segment reported strong results with record net sales and strong preseason orders. The solution segment continues to see strong demand but is still facing macroeconomic headwinds from chassis supply and inflationary pressures. The strong demand outlook in both segments means we are well positioned for long-term success. The headwinds we outlined last quarter remain our biggest challenges today. First, we continue to see inflationary pressures, which are negatively impacting margins. Second, labor market constraints, where our teams have found creative ways to attract and retain talent, and the situation is stable to slightly improve. Lastly, supply chain disruption and chassis availability. I'll speak more to chassis in just a minute. We continue to improve how we operate most effectively under these conditions, and while the macroeconomic constraints are not easing significantly, the situation is more stable and changing less rapidly today than it was last year. Despite these limitations, we remain on track to deliver our full year guidance, which we have narrowed towards the center, of our original ranges. Now let's walk through each segment. Beginning with work truck attachments, where we had another strong quarter. We produced record net sales of $130.4 million, more than 25% higher than second quarter of last year, plus $33.6 million of adjusted EBITDA, also above last year's number. So a great start to preseason orders, between second and third quarters this year. We do believe there is some pre-season order pull ahead from Q4 as dealers want to build inventory in advance of the snow season. Having said that, both dealer inventories and dealer sentiment remain positive. Overall, Attachments continues to lead the industry and manage through the supply challenges effectively. Turning to our work truck solution segment, where we delivered $57.2 million of net sales and $500,000 of adjusted EBITDA for the quarter. Let's talk a bit more about what we're seeing from a chassis perspective. In the class seven through eight chassis for our municipal business, supply is now more predictable and consistent. And while this is a positive sign, lead times are still long. From a class three through six perspective, which is our bread and butter chassis for DeJana, We aren't yet seeing notable across the board improvements in supply today. Where we are seeing some improvements is in the supply of work bands for final mile, which is a small but growing portion of our business. This is a positive sign that chips are starting to free up and gives us confidence that the overall supply of chassis will start to improve in the near future. The main takeaway on the chassis discussion, ladies and gentlemen, is that while we are starting to see signs of improvement, the positive impact will not show itself until later in the year and into 2023. We maintain excellent backlogs at our solution segment and are well positioned for long-term success. So in summary, we are pleased with our performance overall, especially under the circumstances, and remain confident about the rest of 2022. which is why we've narrowed guidance toward the middle of our original ranges. The demand trends remain very positive and we are managing through industry-wide headwinds as well as can be expected. New product introductions for both attachments and solutions are gaining traction and we expect we'll have a positive impact on revenue and earnings in 2023. In the longer term, we are confident in our ability to expand our value proposition enhancing our industry-leading position while providing the highest level of value to our customers. Our laser focus on continuous improvement at all of our divisions will put us in a position to drive towards our long-term financial targets in 2023 and beyond. With that, I'd like to pass the call back to Sarah to discuss our financial results in more detail. Sarah?