Alamo (ALG) 1 Nov 172017 Q3 Earnings call transcript

Good day, ladies and gentlemen. Welcome to the Alamo Group Third Quarter 2017 Earnings Conference Call.

During today’s presentation all parties will be in a listen-only mode.

Following the presentation the conference will be open for questions. [Operator Instructions] This conference is being recorded today, Wednesday, November 01, 2017. the to turn now will conference Mr. over I Alamo George, Vice of President Bob Group. Mr. go Please ahead, George.

and you all the copy have By received of release. Thank press morning. a good now you should

can and if after list. would contact However, at we make release and one of be send XXX-XXX-XXXX call, which missing the sure is a replay hour you're us like a receive on week. one, anyone to X for please run replay you XXXXXXX. and will copy company's the accessed XXXX-XXX-XXXX the will dialing and There begin call passcode by with be The will the distribution

the be Additionally, website will available company's for the XX webcast is call days. on replay at www.alamo-group.com and being

Executive and President; Vice your General make Corporate President On remarks the Executive Counsel. Financial Malone, Chief Controller; for Officer Vice will and up the Vice the me and Robinson, line with President President Dan and line Management questions. Richard today and open Officer; Wehrle, are Rizzuti, and then we’ll opening Ed Chief some Ron

our today, release. the included non-GAAP remarks. their in in numbers non-GAAP reference attachments applicable of may these the to During numbers Reconciliation results are certain to management call GAAP earnings

I'd Before comments turning call like over statements. to Ron, the make few forward-looking a to about

Act will We of Reform to the XXXX. be the made Securities that are Private statements today safe Litigation making pursuant forward-looking of harbor provisions

results now Company reports. only to company's market any information obligation herein, please could update seasonality, differ Among not known this would to from Forward-looking future results. competition, cause the currency-related like speaks actual time-to-time issues listed the undertake involve to risk and introduce to and statements Ron, in in does go of are following; Ron. I which ahead. Company's contained results date. cause the SEC differ uncertainties unknown as other The materially actual and which from weather, may periods risks factors those forecasted demand, materially which factors

the our want formal provide the today. quarter thank for the results begin of review to joining results the a look following we remarks, Bob. questions. you, with will all on of us forward we then more you comments and to few here for will financial I Malone call Dan And Thank taking quarter's and your of XXXX, third our

Dan, So please ahead. go

you, Group's operating months and periods. quarter records for sales set third earnings Alamo Thank Ron. quarter third and XXXX nine and results nine the company month

for In company's addition trailing the EBITDA the Alamo's exceeded million time XX history. months in $XXX first

sales of million up million. $XXX.X sales XXXX up quarter quarter $XXX.X were XXXX Third over XX.X% third

acquisitions prior up months grew quarter to sales nine month were over X.X% million than XXXX sales attributable XXXX X.X% Nine higher the $XXX.X million. XXXX sales third of Excluding year sales quarter. $XXX.X

exceeded Excluding months XXXX acquisitions, nine nine month XXXX X.X%. sales sales by

nine period comparable XXXX year Our third across XXXX sales. and quarter to sales divisions XXXX XXXX $XXX.X over excluding nine including business month increased the third sales quarter sales the million the and compared sales $XXX.X prior and year third a over favorably prior X.X% Industrial attributed quarter division represented of increase of to nine all million month both X.X% month acquisitions.

Excluding sales the respectively. and division in acquisitions, year contributed prior X.X% this quarter periods nine by sales increased business month and X.X% third over

million third nine the shipments nine period. sales by quarter quarter month sales sweepers were quarter offset third of division to prior month million of XXXX X.X% XX% equipment. trucks year above $XXX.X of and removal partially vacuum Agricultural sales up higher snow and XXXX For third or excavators lower and $XX.X compared the mowers, XXXX were

$XX.X markets. or general in benefit a the This month and third products our demand continued XXXX from prior $XXX.X product European continues for in truck sales Excluding quarter above division business acquisitions, of quarter improved nine sales or contributed first mowing by to of from third division and XXXX despite month equipment XX% nine periods maintenance equipment year third agricultural while prior and time the were XXXX increased this X.X% the for sales both million about introductions year sales the division new over currency vegetation vacuum of sales benefited respectively. and quarter This the and headwind. the X.X% growth division and XX.X% than nine million higher absence month period. in weakness

third gross XXXX XX.X% million XXXX over $XX.X of million. quarter Third profit quarter by $XX.X grew of gross profit

gross grew profit million. million month net for compares gross which XXXX to Our profit nine sales third XXXX of XXXX net the profit gross favorably sales XX.X% of Nine XX.X% year month was over of $XXX.X quarter prior $XXX.X XX% quarter. of

nine XXXX purchasing in sales efficiencies, favorably to held of favorable was month nine net to XX.X% pricing profit comparisons sales gross XX% the actions, and initiatives. of continue compares be net production These Our introductions new month year by period. improved product prior which

Third month XXXX quarter year XX.X% about than the of was XX.X% nine period. million XXXX operating month income quarter. the third Nine of income operating was prior-year $XX.X higher prior million $XX.X about higher than

over of or million. of the unadjusted for of -- per million is than XXXX full was month prior-year income increase month nine-month Third the period X.X% net income the compares diluted net third favorably net operating about $XX.X $XX.X of net per million XX.X% XX.X% favorably EBITDA Net was prior XXXX year an period. the X.X% for for which $X.XX quarter million operating XXXX income $X.XX of diluted of XX% to third EBITDA income compares $XX.X income which trailing quarter year sales XX of net of sales quarter in to was nine-month to sales third XXXX sales XX.X% $XXX.X share quarter. Net higher the Nine share of XXXX. over or the for

ahead related million. million Excluding adjusted to XXXX EBITDA full pension of non-cash month XX year of EBITDA a charge $XX.X fourth of termination is adjusted XX.X% quarter trailing trending about $XXX.X XXXX

quarters. our levels very fleet rental meaningful rates past during XX for paying past month and million Our These have capital dividends. us position to our acquisitions flows now and operating growth working have $XX after outlays vacuum on remains is utilization to two million as truck however, of high strong improve higher the strong by cash cash for flow cause of top growth over debt even allowed flattened interest its the us cash has net add investments, to sales capital $XX.X driving about

sales order since third Our primarily XXXX million business order is backlog XXXX. quarter the third $XXX turn higher ended nine excluding third and for XXXX would acquisitions the to which call now XXXX and third the and XX.X% all at In back backlog flow our records increased of million. quarter period, continued quarter like quarter is third operating This cash earnings XX of quarter the the over backlog sales to increased XX.X% new our recent third $XXX record $XXX.X I and by Ron. build across than highlighted summary were divisions, and month results significantly net higher strong has exceeding new quarter million, company levels earnings trailing to due backlogs. EBITDA backlog month XXXX growth orders

been show ongoing Throughout both Thank to Alamo the you, focus made but Dan. just able as the good have a this of improvement operations, growth our press very for in in a for attest as result Dan exceeded very steady and in company the comments by even Group was earnings XX% expectations improvement achieve were which margins third the our resulted current sales able our on year top-line modest, we the together with too. for improvement the the first obviously and finally, release had half quarter. limited. quarter And of margin sales that was and very we the third over to in year record our the quarter

with are removal agricultural global successive of trucks. of top-line included headwinds and market, Declines due to have of headwinds a you in products have conditions number equipment We aware of snow North of market for are XXXX. sales These industrial that first all division growth XXXX users limited improvement particularly have of doubt the a mainly end been half sales in our we as this certain America. in of in for winter sales our reasons pleased several mild softness facing no non-governmental vacuum week

showed in following effect and Soft market our some sales and of international our got and to see in achieved as in starting European well sales second due backlog the sales in year's off strong the second the quarter these to provide into also third the bookings for conditions dollar. the quarter dollars negative support in translation should softer last our strengthening. base in finally soft, the U.S. of last which in improvement year's good the particularly the fourth And areas we several This vote continued quarter in to on were XXXX. we earnings growth in comments experienced to second were and quarter noted in improvement definite led compared our bookings while fourth U.K. We U.S. as some growing our growth a the quarter that of and starting of markets we Brexit backlog still results concern. of quarter

of during quarter divisions, the such of third U.S. where slight dollar from compared quarter improvement see further several in all the third Euro, to all the year's stronger good Canadian being also as and sales as area was years pleased to the British sales than was and some that currencies mainly is went when below Alamo the across headwind being that actually the which Pound, our of major grows are spread currency in effects international conducts actually the it especially a We three translation still the in tailwind was operating ago it improvement last them business dollar. to a show

remain the of the while improvement with markets have So we about few our lingering the years. backlog, during constrained bookings that still issues we the effects pleased last and in are concerned

signs bottoming quarter it incomes example, market in itself though and will rebound. to uncertain still when it start farm while had improvement is third the nice For remains there market the of we are agricultural overall weak the out,

of can pace is X% XXXX. far the sales yet could mean, continue been nine net is about XX%. we I at know margins have but up to We with income pleased months with showing we thus the have have the it even of are XXXX improvement. Ag, market while our we have the in to over we regards done for starts for in with unrealistic continued when levels better do think up And improvement well first achieved example, the achieved, also improvement

and So it continue do feel this will that while this is two not earnings the between spread growth of growth, is but sales sustainable. gratifying kind to we will growth we feel very outpace rates

completed we the continue results our to summer from in pleased seem good Lastly be acquisitions total this should off were three they start been start and the to all accretive grow. are a small this while we have that to they to and

we right while improve structured challenging is to a they So, for our market We to feel well better like perform where today. continue do we Alamo even now. as as and are to as doing conditions start are a result we’ve said positioned as in economic

We improving some we as results of experienced have positive. the efficiencies, a go we strengthening rate strong forward, to the remains we led Group in And exhibited still outlook of backlog, growing and cash record level the XXXX. feel of the Alamo this flow while we quarter has third and the quarter all in moderate third for a improvement operational will

like So any we you thank questions to your now will support we for have. floor open for the may you and

Instruction] Shlisky with Global. first Mike from our will take we question [Operator Seaport today And

is line Your open.

morning. Mike morning Good John its this guys, for Bendron

from touched maybe can the on individual guys I be you that's driving categories backlogs lagging and categories was might that's growth coming that that You growth? any strength wondering and point it. if

Hog agricultural I products Generally nice industrial based, well broad like things in we that things was mowers well. certain in did it did North both as mean, fairly I mowers, vacuum agricultural excavators, we pleased Bush like saw Europe products. trucks, in know well products America as pickup were [indiscernible]

conditions some certainly the more things winter of a it was coming mild result winters. said, did last than I some So momentum, anticipation the as and but in broad like showed than of rather better others two the the even positive based snow like fairly product removal

So fairly we it are broad that based. pleased was

were quantifiable in there quarter? the like the maybe were highways the the Alamo from any any higher know I the locating there in impacts during like then but cost on quarter? Huston that does the disruptions And show Okay. hurricanes itself

no and short mean, the I will that excavators few modest that we effect results. next we so effect we in trucks I from like stuff, in modest year. next mean will we I our years term, this to effects in short-term can see really from products couple some believe Certainly the type some the tell everything see the vacuum believe in and no. of you But those

in there demand with supply short all will there the more now? out right components I here, in are any and Okay one get

think that we pressure Not pricing able are really, but been pretty more little we think have well. seeing I maybe, I a to contain

lengthen. well no control times as good backlog, mean concern because particular times times too in lead I think it us grow, a But lack a itself but want to don't that so input materials there our get are don't backlogs are causing little far lead I lead are very to want impediments ahead our have we time. we to any would and and and/or our of our are at strengthening just this like we far

I jump Alright, am to guys. going in queue. Thanks back

Thank you.

next go Joe Mondillo will & with Company. Sidoti to we Instruction] [Operator you. Thank

open. line Your is

Hi guys good morning.

Morning.

in the it a on I question I wanted ask backlog way. and wanted ask to different just to a

growth If which have segments XX% the you all would in segments three rates others? you versus each higher give all the But the for any breach other us segments, to of there around don't the it around of growth is there segments growth were of right of three of or to the be do. backlog

because been think Yes, all least going had Europe growth had bit just to our them I because that said did this the well. is to had they was I of was fair a came been for so our is growth think so three most. good couple three distributed. they it sales but would levels they I quarters the had have why but was industrial strongest had and even backlog they lowest growth of from probably growth we like probably fairly growth period from the just I sector of the would our backlog yes, backlog the that then, industrial two mean, least kind like certainly in But all said industrial as level, they lowest even there that bookings that's the so and and improvements strongest saying into actually [indiscernible] acquisitions added had were well Europe course in Europe like of have the But the last the I said in they I a and because healthy was the I

this quarters, pretty driving I mean you in they street you in XX.X%. been off probably breakdown sort couple has wanted to saw been I think organic where growth were, of was obviously seeing X% on because margins street Could the the is. this I off, And I modest ask of quarter think the it quarter the margin model and industrial third the operating are I X.X% has that of you the biggest least year in are are my now and but mean, last is at buckets last

coming So this you are of seeing XXXX see see the operating that. out of of huge we we recession didn't amounts leverage that didn't even even out coming

of this operating that buckets to the you breakdown are drivers sort leverage? try maybe So could of driving

remember in those fleet quarter some we truck governmental, to the particularly the we off I in over and utilization but heard what all majority to and but saw I of trucks is and that's what off, non-governmental that's activities the business in oil margins know utilization in so vacuum going our where particularly and keep on lowered on, said that's do off activity industrial had products growing had where then well field last area nice one even year. total this petrochem of industrial highest were was pretty rental our in of construction, XXXX and XXXX like the actually margins our business to our we in the good. fairly was and some to margin and helped in actually things was that to so the the vacuum third non-governmental because that's industrial XXXX, fourth and quarter we but the the had industrial actually got good so And good rental we rental rental has stay like is third have sales the Again year users our achieved you we of broad-based soft end that where the like own sales Yes. compared like business

bookings still little the were margin was the I said I saw mowers, quarter. have there excavators soft think and a some for all the third there, good I also like saw little quarter said, industrial still, sales great a we Snow because and just mowers, some like trucks, think so quarter. in bit the up down I improvement biggest little. excavators decent things were vacuum there actually in quarter a while products were third like just backlog margins But picked pickup down were

still kind And so I now period differences prior kind accelerating in we of of year in are the were actually think vacuum trucks that just margins. the decelerating, that's magnifies

still fourth and third nothing one comp, you sort say the given rate little nature comps difficult. Is in do have fair the And XXXX another a quarter expansion comp because that I quarter more the good and assume there margin that regarding in obviously fourth fourth would this of I in of quarter pretty sort would you time just get then of quarter? should have slow easy is the to think a

the but last as mean, for little I pretty you fourth is always was a say. quarter fourth to even fair said That's year's Yes. quarter us softer soft.

improvement into things do I this was whereas in easy like good right compared went to in was last better yes, have we feel no are year last so fourth levels it's XXXX what yes, have the good where and went a earlier margins, was comps to be really said and this said, definitely nice that's quarter going the but achieving be feel improvement as in the year's I the than our few fourth than growth. growth saying go than So But I while it I harder that quarter we think you its a There But I what onetime it keep we wrong. we quarter. quite still have that and XX% year's quarter. the think certainly comps – was year are think in earnings. events as to pace fourth decent will backlog we the backlog. top-line going can quarter be will it and we about I XXXX a can think higher fourth less bottom-line got we of exactly it the much at a with nice this certainly third I that enter and quarter year in should But not much And should

customers And Is with were smaller that Ag XX% organic revenue of margins lingering up just products? that smaller buying you in are where issue a saw tractors mix but down. just sort smaller it's product then,

were slightly which Ag I of it sales but good maybe, level. so strong, one margins I I good very they had result growth bit the average margins, we like bit still mean, slightly good I margins. year. very said, that A but below it where with said, last better like margins but mean even they was year's very one just a the This yes, good mix really Ag product a is were of last little was had had But

and of thoughts a wondering could that mean, if for cash you cash flow going if free sort I and year? in your then maybe CapEx think you wondering the Okay on flow, months forward I provide $X.XX flow on the of negative comment of your of thoughts you that first cash just nine year saw share on terms your and could the the just

we are sales and so when to sales the be were period now in capital. as in somewhere in growth acceleration flat some translated a free Yes terms accelerating in of would build flat, are million we we were flow. the I that growth we if a and we working What’s felt cash scenario period XXs during we mean, were neighborhood in EBITDA of $XX this and generating not we of going happening though like

We done will up little see inventories a pretty built inventories bit, inventories, have returns good have receivables. we kept on but we on more but in

building of cash will but should we add cash flow working as flows incrementally to the ratio will some are we that EBITDA probably capital. narrow So

acquisition trucks a of into We also need rental flow. cash. money the million of the $XX cash will had that row lot next fleet And put the a an acquisition in be up so used into the part offset big had to we put some more that obviously big we or to some the

sort any are or mean, you depreciation not year been of that? of to XXXX I looking what outlook, have know of like sort CapEx for comments the I running full you at below And looks what regarding sort

a I think little the depreciation. we below will finish running year

I a markets this year than like will seeing to going are our of depreciation take are some I are because next sales a on projects we bit think we we capital growing have I are few, year. we think said, above little probably a do probably couple more as expanding and

So see bit and little am and variations below I I like this be be talking next what probably Ag bit bit, it. minuses a little think above a small said year will pluses depreciation I but year will little but anyhow will

someone have a else will Thanks. Okay, let and great. a chance. lot I Thanks

Joe. you, Thank

next will Tyler We Instruction] go [Operator Piper to Etten Jaffray. from

open. is line Your

to Congrats operating Good really another margins break double-digit. on see great record and guys. the into the morning quarter

for there. We have and we to about while a talking been so that get are starting

my That's it. a last been have headwind questions you in this answered for couple years Do remarks the I the obviously got comment equipment mild of because business been prepared lot of snow of already. a the winters. have guess has about the we positive

from hearing business? that to out where little more might bit if dealers start a Just wondering this is see commentary year we and a the are what you of

given seen how I been. probably I like winters the and bookings are they two think I we would some backlog and Yes, increase last mean, said mild have both have we what thought I so, even

say, I to mean, business though year is and next off a better even little last more still activity winter. because things expectations and have some come I our start been winter. has products I But this particularly even received. a [ROSA] like it decent a bit it think see new think be out that off, are good good than with was well like was I there it could some to

are some we new ourselves think introductions. helping with I products So

I think we say, bit will normal like normal winter be I is I it's this that have see to winters, going got mean big be optimistic I are we winter so more don't to couple I little little a new goes. of we think I a how but say want to going to the But think last products. but some

We should coverage could much. have but we that a bit so will I backlog. say area not off it think got in I This we a starting year little we even was see, like and the a we out it be better because bit that better think reasonably with have better little are

I explanation just said explanation? industrial that weaker were Okay segment a different have that mix without really the and quarter. guess strength Ag there little bit it was of any the in you the in or the all quarter in we segment for mowers out mowers a Is in the then any that given

a market well it's of a there have bit is mean that but think of attractive a well don't we outperform there here, of part it's hard little say will more think we no, I I you big going I would market. the to market pretty part big are couple actually than is because of a the when timing so but But business. issues our very done like timing said, be some No, continue think to on I I we anything. that and of are little I so

to a of sometimes it order sort primarily when order bill so big a get business you That's dies.

those why Yes, like be deliver. of that's are be contracts a some orders of timing you bit at can of those and Dan big when am get some I time a when its some the lumpy is we can there too saying state out big and

And it. in Dan, European effects acquisitions breakout growth Got you segment FX? organic could terms then any the of excluding from with

put as we no it’s the the bottom-line because in Europe acquisitions well. effect really We acquisitions. there mainly it’s FX comparable have top-line the of since schedules on of don't of no is periods and translation Well, FX into in there any are the our -- proportionate

thanks. Okay,

the went to Yes, look of I it would release of from press currency, shows and our a attachment effects a three like headwind what yes tailwind. say it X% but because X% at the

So take and and for same the you Europe can the segment affect. earnings do affect

acquisitions. one in Follow in the Ag. were three was Two industrial of them and of them

alright. Okay, Thanks guys. Perfect.

you. Thank

Thank Joe from & follow-up we Mondillo question Sidoti will a you. Company. take And with

is line Your open.

Hi guys. my Thanks taking for follow-up.

So I a will just have few things.

the For in XXX,XXX middle acquisitions the because a of quarter was to operating to fourth can going quarter. one deals the saying closed income that of at mid, how next think the related year acquisition, of accretion for look I into that we at quarterly run-rate I know

you on to get or business at have of trying months. could the fourth double up in idea of I also operations and winter ramp a bought accretion? first run-rate imagine You Do snow sort just the you would that that think which quarter quarterly XXX least an on the

of don't forward mean, I that there guidance we give kind outlook.

to it start we move As though – you in like I off bit little from pleased an mode changes a a our putting so operating was in of the ahead said, stock. grow have better we the in I because in of said and we are just accretive still of as those weird other be there were to systems making should and comments mean types are then should decent some that we

like so you I mean there we a As that in partial will have one. it's one last you only full, month that a RMP the have it's of on said said I effect when the fairly a modest

systems be purchasing and yes, our we structure that as to running our initiatives add operating can get other and we our should better them. it So down and especially definitely on

So we like yes, of it should improve but out kind that don't give detail.

that's quarter non-cash starting there anything any amortization like or pull or in the going off to that or Is fourth anything no?

No.

regarding how over sort ask looking that the wondering last of? sort in Okay. in when just of of XXXX? done smaller out XXXX-XX, are margin you slow in or bucket of big have of productivity years they especially role a I guys opportunities how wanted good plays sort that at looking of years to down And then Are aspect job were in terms expansion improvement really sort of opportunities a as sort you there couple

I is pace in like I that of this on can and Certainly we pace Yes. we improvements to year we pace the can still are do do achieve at were this able as that did we there margin you the said, top have more year. we said we not already be they improvements can’t think won't

As I raw materials, little like bit we think said, also cost, I pressure steel, did things that. seeing input on a are

little we think at a bit wait We won't manage little we experienced. margin we of through I pace certainly that. continue and year deterioration we cost we we than can good that to but happening to mean, see have improve but have we the one any and certainly far so got margin things anyhow I we believe going think believe what's that's this have are operating our seeing with more there not improvement believe ahead have have we efficiencies. going can pressure still but just area a I some exactly probably I experienced think we can

pace have near quarter. we but just exceeding I have achieved as growth growth the said, bottom-line in at can we third I the top-line think still nowhere So

XXXX at to So that facilities CapEx a play significantly big are least of in at any your going productivity? terms of projects role in no

material usually or in like project have said news bad No, don't eggs one and the the news basket has is no diversified too means manufacturing one Yes. the the in the good bad result affect anything our up that of good in we a range we I down – many so and results products were or on so news operations have news. and

what extend or then of of about or backlog backlog generally have down in or then terms of the there you what in quarter and there the wondering just regarding backlog, any extend end so margins the just that? that than highlight to know was backlog. And last does to one sort don't so in XXXX think any I mix does I have Is less anything mix revenue if terms clear it question the is of is in up gross year

on I the of quarter a even in fourth Not into majority next mix I backlog the bit year. of through the and in some quarter second mean the does extend of next the maybe first mean quarter should it pull the the I little first of but No. certainly, quarter,

in piece XX% to like and I due so the quite is segment to quarter one and that about over business of things market being and of that. spare said ware through I but our mean, can out to third goes usually quarters most does that's is of also reasons profitable like have holidays, our little got just more much we’ve that's other little due as our like parts effect our second isn't equipment never winter, remember and as in You know field that's wider little than fourth an and and the because generally that backlog the utilized bit and of business you after of sales a it

usually But operating So above we other are parts spare natural and the particular help good that's effects but lower in there that's we part I go come that's spare the the over business that way are backlog margins than fourth said of of fourth than that said, bit are make and nothing in or like I quarter I quarter that next just on parts in going any material and that margins third cyclical hurt quarter so than softer in like into margins like margins. why our continue to us shape or usually our sort is the anticipated, little backlog little less in the year. in think say and little a will higher bit help still improvements of our quarter first little I to going that's

Okay. lot. Thanks a it. Appreciate

you. Thank

or further we the at I to time. any today. showing have this our am no you presenters I questions further back will for call turn closing remarks Thank and

much. year. call, thank first today March you the next joining should you very to of early which Okay. year look be Well our speaking all you on appreciate around forward We with us and end

your support have Thank appreciate So good a you. and day.

your you Thank for participation. today's This does conclude program.

disconnect may time. You at any