PLOW - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to the Douglas Dynamics Third Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Officer. Financial Chief Lauber, Sarah

Sarah Lauber

Thank you. on for us thank everyone call. and today's you joining Welcome

press Before like during begin, constitute comments including we I'd to actual with forward-looking subject others, that of that have we matters answers cause statements will be release in different. filings results yesterday's our the and to statements. SEC. some These risks that be Those are materially the questions, that described to could made your risks this forward-looking among in include, call, to conference will remind you

Joining turning your McCormick, I'll In then, me Chief questions. back final for it for overview on that, a the President Officer. performance; before call our review today to open Bob our an are Executive the After provide call of our comments. Bob financial moment, results we'll will Bob guidance and and

hand With that, over I'll to Bob. the call

Bob McCormick

morning, Sarah. Thanks, everyone. Good

commitment we to in to strong the Dynamics, Douglas and results. momentum continued large third entire part at produced quarter and Due were our execution positive here from the sustain able team

we making same higher of compared XXXX, demand record achieved. our of DDMS have adjusted seeing the we of the the and sales of considerably quarter been million, across are three net $XX.X accomplishments are that the trends progress quarters we with and last quarter EBITDA segments strong that million tangible initiatives. positive both These financial impressed segments progress both and first with Our Throughout team results have both net delivered million improved the third and to year. ongoing $XXX $XX.X income when reflect

shipments net previous and favorable end-user in tone approximate Despite preseason products our The Attachment and We XXXX. year, segment. This to less quarters, line ice effectively preseason include XX% control generally between users. right our an well First, sales I'll that ended the shape, cautiously to are our optimistic are second when you highlight snowfall third Work increased truck Attachments. compared starts being well we with from to in end to of and past confirmed that the experienced for line and resilient expectations. both this split with is winter fly. and XX% commercial Truck positioned are When good the we execute in fact and the demand hearing X% inventory the levels snow in sales matches dealers snow

is at a ice to continued and It expanded noting years lower sales and parts improvements control offering worth and in And small and accessories base I'm margins. off ahead. the snow albeit grow, that our incremental excited non-truck equipment to see

work continue we to material we tariffs to solutions result Transitioning costs to tariff are dollar-for-dollar our impact global for the quarter. generated covering where and inflation, possible. sourcing cost performance record office While continue mitigate to in the where the utilize truck

Our were of X strong operational pricing, material top increased costs higher greater Class driven by a combination performance, chassis price and bottom-line on growth and of supply. and recovery predictability improved volumes

our will expansion. journey. improvement impressed lead initiatives continuous into be significantly costs, ownership translate world-class and and floor improvements developed that optimize times to and these They've space by the velocity commitment team's quality Not of very confident and lead continue solutions We these will margin but throughput. solutions to decreased only their reduce I'm that for improve customers, long-term

expect we times lead to slowly on chassis improve. the continue Just to to touch situation,

X to the demand and should Class be seeing are for work with more off capacity, need. aligning falling We means we allocated chassis over-the-road which available production chassis

of We next the anticipate continue chassis over X normalize the that to lead to Class begin will course year. times

At in component supply believe less will although, less this shortages as point, a X. line volatility unpredictable continues major categorize chassis supply result we X through constrained overall, six front, and situation do Class OEMs. see We January as of somewhat overall. slightly XXXX, On improving on chassis I'd not still that immediately again, issues be to at the the all starting

But we began also about I are in want talk are So conversation that's Investor ago we where New a about to going, where a our at York. we today. event month

long-term We win only we how in advantages is marketplace. often we about how our continue today to team possible in I demonstrable remind meaningful, competitive the delivering through talked and win will future. growth the that profitable

solutions growth times business custom to have our lead and core quality driven advantages provider, our and delivering world-class profitable date. centerpieces of being competitive Our a been total the model industry-leading have

that improvement through to commitment fuel competitive Our advantages. DDMS the these is continuous drives long-term

For example, to being customer-specific of products allows flexible in down to drive quality end-use requirements. our empowering is and throughput result basis. customize and improvement floor to improvements product us and Constant times our floor nimble on a make velocity daily the shop lead a processes world-class associates shop on to all meet and

are Douglas employees both all important in of where competitive very labor we a and today create And at to people, committed our Dynamics, advantages. truly our culture people growing and this is professionally, us which creating critical Our we more apart an competitive driving market. are personally part set where even

industry. In employer down do the for competitive talent an with. commitment leveraging we It's our Douglas program choice making the DDMS, of truck of development do it the equipment through in we top the long-term past it Dynamics people growing who what just we've building but do by how doubled organizational not in on or advantages investing objective our level to we year, with and

Douglas Dynamics. So when win are combined how three these factors to we continue at

as that commitment ago, days supply collaborate This Jim of Award, Sourcing, programs. well chain Year risk realized Program Global involved succeed, XXXX manage great highlights improvements. Speaking Vice our ago help the foster of of our everyone Senior winning, success our President with We and as to to partners Klotz, sourcing turn partners the we Management the a work and long the DDMS partners. recognizes truly supply of time with so which and few helps our award Supply Risk Douglas us them received our Chain of a in our global

as awards, that above these Douglas and our weight at includes to General expertise business. If who approach its punch such shows comes companies which industry-leading received the to when to continues it it you else Dynamics, look

leveraging first in exploring broaden look of competitive we next years, to position creating as operations five the our for One new our market. priority strengthen the and attachments to vertical Now leveraging difference group advantages is our opportunity its offering. expertise our such points market of by product possibilities to integration, the includes the

focus finally, will advantage Of take investing effectively course, execute we we growth the on strategically. and will of DDMS, opportunities we see. through And

will approach value we custom lead will not We will best we shortest you the to at the and maintain create available dividend, continue that follow. all firmly across sake. being that the product we're Ultimately, on the When growth keeping to investment future strategy success. the support what our and right do times, will a when try to grow we By for in best at give you long I this believe segments shareholder do, growth's Balancing laser-focused is everything term. high-quality to high-performance, know believe to yet win. over the and initiatives, growth is the the acquisitions said our both you to key customer our pursue want strategic growing capital being considerable done, the

we're the our the encouraged year, through backlog to near with favorably DDMS, year-to-date conclude, driving I'm trends positive end will I'm and XXXX. on improvements strong so far in term. the robust trend positive visibility with through demand the sustain pleased our performance team's coupled the the to in Based achieved confident that in To continue I'm ability and momentum our of

Now the results financial our hand guidance. call discuss to I'll to Sarah and

Sarah Lauber

Thanks, Bob.

followed a each routine, for segment on look at the beginning liquidity consolidated and lastly, our quarter, guidance. the balance follow and by for the our I'll usual sheet, comment earnings with results

are quarter in pleased opening As continued large our higher positive part across Bob trends with in discussed both during performance his segments. from the due comments, sales to demand we

see solutions addition, operating our segment. improved in the performance In to continuing are year-over-year we

year, last increase to gross same We of million, with $XX.X million quarter achieved XX% in quarter year. increasing $XX.X profit million compared third sales record same a the period net to over last the $XXX.X when

muted performance, were of margins improved gross inflation. due impact Our material they year-over-year cost solutions are to up the by but

when were third the results. operating expenses of to related $XX.X higher increase slightly The compared to by performance XXXX. improved quarter SG&A million, compensation driven higher stock based

SG&A expenses percentage X% declined a approximately as sales However, to of by year. XX.X% this

year. for and margins adjusted to The for mentioned income strength last and to of businesses also demand Both quarter, the million approximately increased $XX.X year. the third to last over already compared net XX% the income adjusted this increased third Adjusted prior net year. compared quarter EBITDA XX.X% year, I've our and to improved XX.X% across million EBITDA performance that up drove $XX.X

third share, generated of million increase, $X.XX share per same million diluted approximate period an or the in $X.X $XX.X diluted income or of XXXX, of For to the we compared quarter XX% year. $X.XX per last net income net

third On was to of year. or the credit. reduction adjusted diluted higher XX.X% of higher for was million lower million or of $X.XX of for of period was tax per XXXX net compared in the which The current million for effective release rate the basis, reserves XXXX. quarter, income tax positions incurred due to loan period slightly quarter effective last an of our last than the per diluted term third expense principal XX%, The year, was income $XX.X for of the balance $X.XX rate $X.X $XX.X due in Interest quarter net compared to a same the adjusted $XXX,XXX. same for share $X.X the share, decrease was the uncertain to the tax primarily million

funding income the of third made rate pension of quarter in $X tax benefit XXXX funding company in XXXX. turn that resulted pension tax the for million of the of reduced year. decreasing $XXX,XXX, that further deduction the third Additionally, payment taxable quarter during a increased voluntary for That a

review the to segments. for two let's Now transition results

cost quarter. was impacts business increased of costs. lower million which in EBITDA compared increase Attachments net For the respectively. the segment's the third XXXX control Attachments were shipments typically $XX.X in of flat strong quarter, sales adjusted material we negatively price this expanded inflation, and mix product revenue $XX.X Adjusted to to third is sell the revenue conclusion million, recovery investments margins due EBITDA the were adjusted and million year, and snow impacted attributable of in non-truck products In last the a on a of of our the and year; preseason our relatively to ice material quarter the for million. and period than at and however, $XX.X as truck-mounted EBITDA higher of products, same shift recorded The sales in mainly prior $XX.X margins

on third quarter. solutions, and Turning the last adjusted relate million million, $XX ongoing of recovery lower which price of and success we sales margin EBITDA spending. EBITDA volumes, more million Class higher respectively. same a work The the period material $XX.X of In growth efficiently. higher net is sales and and segment's initiatives improved to to the adjusted solutions primarily greater demand, $X.X costs supply, adjusted truck in resulting global reported for operations helping result the strength the in results DDMS chassis is EBITDA sourcing of and efforts $X.X year, were predictability to and million continued The net operate X our of and

in $XX.X million, to this same was the the nine receivables balance as preseason increase year. year. the cash higher I'll of prior Net robust to liquidity. The activities $XX.X results million first in sheet cash direct result relates said, during that a compared our used XXXX period the balance used to now of turn during and months With of operating

of basis full seasonal our As at was the driven Similarly, end capital in $XX $XXX.X is year. $XX.X million, the first change quarter, X similar in million highly quarter compared the a indicative not negative compared of XXXX. correlated is receivable, decrease cash $XXX.X year. which of the cash of invested flow of a third Free were XXXX. of flow same necessarily to business the to accounts at XXXX, XXXX for in the for months the at the million of the million cash period during by end the quarterly cash reminder, in last period quarter generation working and same at million the of was $XX.X negative on free end $XX.X to million Inventory to timing third the is the

inventory chain. we to to levels timely to While relatively flat in year, our higher light last experiencing ensure customers historically still tightening of are of than delivery supply

at under $XX.X working liquidity borrowing million timing last In end our year. the accounts revolver capacity $XX.X quarter, of is in lower turn, of to third again to comprised $X.X $XX.X in compared of was total around end approximately quarter the This liquidity, of million million cash third of which of increased liquidity at relates the the and million the receivable. the capital

Although cash we I'll just our usage extensively reiterate this recent priorities. investor topic covered day, at our

dividend our you from ratio past million As debt/leverage declined to know, increased debt. we Today, quarter, XXth an also last year. nine additional years for already and X.Xx, the during the payment this on our time has the $XX down in made net our X.Xx point at first

addition to our in look and we our acquisitions. debt, projects In growth at we paying potential dividends investing to strategic plan methodically and continue focused growing down businesses on are to

months first months mentioned investments XXXX of focus, are first this compared higher XXXX of due With nine the business. to the the for $X.X capital in expenditures nine when the ongoing to $X.X during of million million

Based both for our segments, again reaffirming performance, positive are on operational combined year-to-date trends year. of strong outlook our with ongoing our we in demand the

given While Investor early did at really event walk through quickly. October, me isn't this in new, so already we the details let our

to adjusted share the items $X.XX, between tax the per anticipate of no range We XX%. pension $XX $XXX GAAP million by effective to termination between expense and $X.XX. first, adjusted second, other And net EBITDA share. per impact This million. on earnings have fourth impact $XXX expect in million per we incur $XXX $X.XX Adjusted million plans. will and A sales earnings process for we our expect approximately in earnings rate to will related be and to couple to consider, the approximately to share but quarter, one-time our continue

The wide snowfall. the a notably of for in this wildcard in will cash not material quarter, our because the At flow this a finalization range year, have activity of have impact point on we year. the free fourth the still

will average we on it's ranges. above-average upper to year of believe fair our However, deteriorate, high-end the and experience core in that our end markets of not if at we or middle guidance chassis we end does to and say snowfall earnings availability guidance sales the the

The throughout price impact without our higher market per in to implementing the earnings EBITDA is success inflationary driving significant or sales of year share. this

this throughout which supports have We XXXX, in sustained guidance. a momentum positive point our fully

will on factors to our our and long-term We strategy. within continue control focus the on executing

the back to turn call I'll Bob. that, With

Bob McCormick

Thanks, Sarah.

positioned be well and XXXX. couldn't more our In with year-to-date out summary, I results, are pleased we to close

Our rest on Douglas be continuous continue the to and focus about bright. consistent I'm throughout both XXXX, organization. years is the teams execute segments in the improvement and the the next Dynamics, At of five to future continues beyond. excited

our Operator? prepared the open now like for complete, we call to remarks With questions. would

Operator

Steve [Operator question line from from your Steve, is instructions] Craig-Hallum Group. Dyer the first line open. of Your comes now Capital

Ryan Sigdahl

on Good for morning on quarter. congrats Ryan and Steve the here.

Bob McCormick

Ryan. Thanks,

Sarah Lauber

Ryan. Thanks,

Ryan Sigdahl

that but some I little uncertainty, of everything range with I like So the seeing comments go made worse And decline is it sounds incrementally you expect bit getting Chassis snowfall on supply implied besides you guidance given then uncertainty decline QX going snowfall, you and QX basically you Sarah, the are guess, anything guide, down. But is well. the a is the better. the as to for high-end else, uncertainty? the in getting that's X% besides sales very sales the at caution mean

Sarah Lauber

which year, bit fourth question news, a in But the caution for I more us. segments. always expect and Ryan, the chassis strikes of there other is one are things But those a quarter. when news for looking growth types just to around of the OEM in full that we mean general no. Actually, made both really just the of our honestly important was snowfall, little

a high wouldn't end I into from anything expectation, I perspective. volume of not year. said, like the -- the read for the would guidance changing the be So

Ryan Sigdahl

elaborate Great. margins, That's much to I Can margin focus of investments next And bit, the the there revenue on a over the standpoint? how you maybe then Analyst new And and as attachments. spend this how looks any business. helpful. some you so of well I the to quarters development guess, as to Then truck contribution several at mentioned related were this little cadence a future spent on we then over product your as non-snow expectation, in from prior in guess, that kind was move headwinds that quarter on Day, how quarters? increased like compares

Sarah Lauber

Sure, we're But margins, about. that EBITDA, XX% sure. almost Attachments I profile they awesome focus although this positive. all to earnings three mean were let the me mean mean just still lowered set quarter so talk I there. I overall. on the let's There that Attachments. I stage we were to things talked they essentially, for happened the the business. at want

being covering fact the inflation. that One, price is

from the the products. growing investments long-term. products, third there, which margin in in business. just carry year, still the it's the impacting is fourth expect mathematical quarter the up increased so the It compared Two, fact fourth-quarter standpoint, did margins third, for not then, truck-mounted somewhat sales although a a profile just that to will for in improve. quarter And to the margins that However, positive non-truck show margins. dollar-for-dollar it's that same also is our our business, of I we're in last attachments the going high the

have of material quarter. fourth equilibrium the happening and the more in pricing We will

going So I will forward expect those improve.

Bob McCormick

Yes.

is control on product of line couple profit the on me nothing this business, Let I profitable portion there's snow that, about be base comments margin are concerned laser-focused year profile to want core highly this deteriorating, grows not to there. and focused on of We that that, business okay? every add ice The be to extra a on truck-mounted that. of clear. and

you with expanding got thrilled share focus comment, normal This for revenue opportunities also I'm death top-line business non-truck growth. in that So parts a have XX% continues is is in category, new and be margins, a the right that place market when there XX% to our only the protect the area and with these absolutely high-fiving we should challenged grow not top-line we to to in the at And areas, worthy market be. you've business which is hallway. core and in to industry is more growth grow find but bottom-line. the product other accessories the if and that are opportunities I of comes that the to on, think in great

Ryan Sigdahl

follow-up, quick expecting one just basis then a a improve, QX? mentioned And on to that basis on year-over-year is or Attachments on margins you QX Sarah, what sequential versus

Sarah Lauber

and Year-over-year sequential.

Ryan Sigdahl

Great. for Last I'll and then me, it one turn over.

So as Is free is when you that flow moving be assume year-to-date some and for changes, is higher year parts but as cash luck. year-over-year done? the said well seasonality commented entire and on to burn, the free and capital reasonable it of and a lot cash the up implies. nicely all working EBITDA is there, guide of flow will Thanks year-over-year, good

Sarah Lauber

Yes.

Our looking right be expectation would EBITDA and to is up is approach. that it the the probably

Operator

Your from Chris, next from Sidoti. McGinnis question open. is line Chris your the of now comes line

Chris McGinnis

questions some just on were can for we than the of maybe Was Good reason they side. there stronger touch offhand? taking Thanks the and morning. any If others nice quarter. my growth Attachments on

Bob McCormick

trade trucks. we the one. front what go on plow our about revolutionary, to hoping I I headlights that point introduced this. would March, somebody of would our be industry industry-leading Yes. ask considered to was we show LED new in At

you the those in of orders none tremendous during that visibility, quarter. areas we've to the third and plowing, the of received cast they that first to the products are and introduction terms essentially, Second nothing shipped that terms but across of of response round product in profile

justifying largest competitors' again, in somebody we're marketplace. leadership the clearly, as thus that And whose out the outperform price position something about. continues our was to products, position products that So driver, excited business

Chris McGinnis

regions anywhere geographical And that. appreciate now? so I just is offhand else Or, a course stronger the or for was there it of basis, year? Great. normal on any far anything kind

Bob McCormick

pretty I would say course. its normal

doesn't but significant, what of on but parts but and place, and be that snowfall there's are this it psychological And people getting long, we are which contemplate say mean ready to the gives this a called this stock up early across point earlier. most is point. We snow, lot necessarily some, landscapers at some a to to really of equipment whether the not we get is at that's snowbelt chance going heavy season times plowing a taking leads getting

positive this So looking snow. momentum early from we are that forward to

Chris McGinnis

the Great. the a growth business, And solutions traditional to then the between there maybe versus there. performing way business moving Dejana parse any the of Henderson to kind just it Is offhand? just out lot better

Sarah Lauber

When at to much for in solutions for demand both line the you pretty growth Class were good growth businesses. way They all Yes. the very with both across strong X. quarter, X the Class look

Chris McGinnis

fuel growth? anything I special, guess strong growth anything special that terms Obviously, there just pretty helped number? of in a Was the there that to

Bob McCormick

be robust. into those order patterns seeing into the to I XXXX, quarter. add is a Class that third with delivery chassis. if time you the those six ago, times of nine were order impact will go the yet The pretty think to we start we a strong seeing expectations reason ago, up the Henderson with in for months might year at months just plenty because while OEM and is long X line and ago back year, that got lead fall systems orders intake continues And side trends chassis for the on are Henderson business we are still

revenue orders X So we long just can and remained because get side, system even ago. able times XX X, lead into we're Henderson on though the see the those months fairly increased to

So start the things start chassis down to to lead I'm once actually come XXXX. better in expecting even we see times

Chris McGinnis

Great.

Okay. And just last question.

you Can maybe think over go solutions you it maybe at within opportunity supplier referenced and where Analyst today at about and the on just Obviously, the rationalization. where it's you that the you've done Day, business business think highlighted time? Attachments what could talk I there. you

Bob McCormick

on Klotz, probably to by seven-year results businesses solutions path. that opportunity that now and was a seen five- that's our to would group is down that led most of state question. business these still front lead that initiative beginning I just an excellent the Jim lies both of Jim core us. ahead would you've The I in that Yes. excellent state of

to So strengthen some we I that importantly, suppliers we that Douglas' not on see with the as are for next as we years side. can't long-term but things partnerships meet the expect growth. right just positive over just scratching just would couple trimming the of suppliers more performance surface our expectations, on embark

Chris McGinnis

All Thank very luck right. Appreciate Thanks much in and QX. it. you again. good

Sarah Lauber

Chris. Thanks

Bob McCormick

Thank you.

Operator

[Operator back turn this instructions] showing like I to would conference President at I'm no questions the further Bob time. McCormick, Mr. now to and CEO.

Bob McCormick

Thank you for in ongoing in you your Dynamics. Thank of to some the your conference you. time today Douglas seeing at and Baird forward Chicago. interest look We tomorrow

Operator

Ladies and a participation gentlemen, call. you your this concludes wonderful have conference Thank day. today's for and

all disconnect. may You

Douglas Dynamics (PLOW) 9 Nov 192019 Q3 Earnings call transcript