Douglas Dynamics, Inc.

Good day and welcome to the Douglas Dynamics first quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Nathan Elwell, VP of IR. Please go ahead.

Thank you. Welcome, everyone, and thank you for joining us on today's call. Before we begin, I would 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, President and CEO and Sarah Lauber, Executive Vice President and CFO. Bob will provide an overview of our performance, followed by Sarah reviewing our financial results and guidance. After that, we'll open up the call for questions. With that, I'll hand the call over to Bob. Please go ahead.

Thanks, Nathan. Our results for the first quarter of 2024 reflect a continuation of trends we saw last year. Work Truck Solutions continues to deliver improved results while work truck attachments is being hindered by unprecedented weather conditions. Having said that, we are pleased to report improved performance across the board this quarter compared to last year. The performance of our solutions segment was again the highlight. This is the seventh consecutive quarter of improved performance versus the prior year same quarter. I'd like to thank the solutions teams for their continued hard work. When chassis supply was at its worst, They stayed focused on what they could control and used DDMS to get better every day, knowing that when chassis supply improved, they'd exit stronger and more profitable. Great job. Now let me run through our performance in each segment. Despite experiencing the second winter in a row with significantly below average snowfall in all of our core markets, our work truck attachments team still managed to deliver improved results compared to last year. Snowfall in the first quarter this year was better than the fourth quarter of 2023. And on the East Coast, conditions were better than the previous winter. We were glad to break the record 700 plus day gap between measurable snowfalls in the important cities along the I-95 corridor. However, after a positive start to snowfall in the first quarter with above average snowfall in many markets during January and the first nor'easter in two years in early February, there was a lack of snowfall through the rest of February and March. So the season ended as poorly as it began. I should reiterate, we've never seen back-to-back seasons of this magnitude over the 75-plus years we've been in business, and we are in uncharted territory to some extent. While we already expected to finish the season with below-average snowfall, the final totals were at the low end of our expectations. and 40% below the 10-year average. Again, weather is the reason we are bringing down the top end of our guidance range, and Sarah will speak to that more later. Given the deterioration in winter weather late in the season, we have expanded the 2024 cost savings program with total annualized savings growing to $10-plus million, with $8-9 million coming in this year. teams are committed to making the right decisions that will allow us to manage through this situation without compromising our ability to operate and grow. One bright spot during the quarter was the NTEA Work Truck Show in Indianapolis. Our teams launched several innovative new products that were well-received by dealers, including a straight blade plow, a poly hopper spreader, and a hydraulic wing pusher plow. which is hitting every one of our major product categories. It's also worth remembering that we expect the emerging industry demand dynamics to continue. First, customers are more demanding and willing to pay more for faster snow and ice removal. Second, winter weather continues to expand further south. And third, the landscapers need more equipment to get their job done faster and more efficiently, and often with the same number of employees which means they're expanding their fleets to include non-truck equipment. These positive trends are creating opportunity that just didn't exist in our industry five years ago. Today, our broader product offering covers virtually every aspect of commercial snow and ice control with the leading brands and new products and opportunities on the horizon. Listen, there is no doubt it's been difficult recently for the attachments team, but as always, And just like our solutions team, with our focus on baseline profit improvements, new product development, and DDMS continued improvement initiatives, we will exit stronger from this environment. Knowing our team will be ready to drive profitable growth again when more normal weather conditions return. The future possibilities for the attachment segment remain incredibly exciting. Now let's talk about work truck solutions, where the recent results and outlook are very encouraging. After completing a strong finish to 2023, the solutions team continued to build upon that momentum, delivering another strong core to the start of 2024. Our Dijana and Henderson teams are increasing the velocity of trucks through their upfit centers, which is really key to us improving our baseline profitability. There are several positive trends we are seeing, which collectively are helped driving our improved results. Speaking about Dijana, it's clear that our OEM partners are more focused on fleet and dealer business today. Our teams are adjusting our focus and business mix to match the industry trends, driving improvements in the fleet business where chassis are easier to come by today. So both our fleet truck and cargo truck business are growing, which we expect to be a trend that lasts throughout 2024. At Henderson, I'm pleased to report that the low margin contracts we've been battling through in recent years are virtually complete and are no longer a drag on our profitability. Overall, chassis supply is stable, starting to show signs of improvement in certain areas. Additionally, the dependable parts program we launched last year has been well-received by our customer base and continues to gain traction. We continue our focus on internal profit drivers, as we do every year, including product redesigns, sourcing improvements, and DDMS initiatives. As you would expect, the improved results mean we are starting to eat into our backlog, but I'm pleased to say new order trends also remain positive. We still have a great backlog, significantly higher than historical averages, and if chassis supply improvements continue during the year, we're poised to move increased velocity through our output cells. Our recent performance bodes well for the coming year, especially as overall demand outlook and backlog remain positive. While the progress may not always be linear, things are clearly moving in the right direction. In short, it's great to see the solutions group going from strength to strength. In closing, we continue to navigate through external headwinds in a logical and effective manner. I'm so proud of how our teams work together to find solutions to challenges while making improvements to the factors that are within our control. Our culture of continuous improvement will not only see us through these tough times, but ensure we emerge in a better position, stronger and smarter than before. I think the combination of our team's creativity, collaboration, and CI mindset is a recipe for long-term success and will be a key factor in driving progress towards our long-term targets. With that, I'd like to pass the call to Sarah to walk through our financials. Sarah?