Alamo (ALG) 1 Nov 202020 Q3 Earnings call transcript

Good day and welcome to the Alamo Group Inc.

Third Quarter 2020 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Ed Rizzuti, Vice President, General Counsel and Secretary. Please go ahead, sir.

you. Thank should a you press of all release. have now, copy received the By

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

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

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

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

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

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

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

today. Dan us the for third provide Ed which begin may will we any the following Malone, call, review to look you our we quarter, your for all forward a I our on questions taking call results here to want then of thank financial and comments with results, will CFO, more and you, so Thank joining you our would few a of have.

go please Dan, So ahead.

XX.X% EBITDA, of Ron. XX.X% X-month from up down compared takeaways over you, quarter from adjusted organically. key and compared acquisitions, but XXXX to and up XX.X% EBITDA, X.X% third prior with year the third of Thank are quarter XX.X% X-month period sales net quarter quarter at The sales at XX% the third record XXXX year. the prior XX.X% Record to the and net prior adjusted our from organically, XXXX up year up acquisitions, X-month XX.X% X.X% but X.X% prior with year. down sales results sales,

earnings income and accretive net both share results. XX% acquisition prior quarter and from included Third up the per year quarter

the quarter end since June end up ending second operating $XX million, loan million, million of availability backlog of hand end quarter. $XXX.X the XX% the XX% quarter. cash million, $XX since up Third was quarter. by third $XXX increased on and plus year almost of the during nearly to quarter nearly prior debt up XX.X% Outstanding over the cash Quarter reduced over flow,

acquisitions, due net sales was organic to Industrial and COVID-XX $XXX.X of without to effect year of sales dollars favorable due year unfavorable were translation. quarter XX.X%. organic sales of year third prior X% In prior up a organic XX.X%. of of $XX.X quarter, a currency currency sales COVID-XX division’s to translation, in third year plus XX.X% quarter unfavorable and sales third Chopper growth million quarter. quarter were U.S. the year Without Agricultural $X.XX third Without income effect was prior million per Without third some down XXXX million share $X.XX quarter the were primarily prior net sales net or share. this XXXX X-month net X.X% results demand. the third quarter. record sales down Dixie Europe. acquisitions. acquisitions, were The a of XXXX organic quarter were down of higher higher per impact the the million, from of X.X% operations sales organic organic sales and we Third diluted $XX the currency with customer $XXX.X effects sales impact. sales Without translation, XXXX for Without million, XXXX record offset continue incremental organic increase the down was our compared than weaker see to contribution American by of of company the the sales million down from $XX.X XX.X% operations the partially was or diluted in quarter and income up were decline North represented X.X%. division disruptions X.X%. than the company in $XXX.X division the X.X% third acquisitions, third prior Net to

bearing Third cost diluted GAAP step-up $X.XX amortization the inventory by quarter was expense, net incremental share. interest, and per income full of accretive from acquisitions,

of $X.XX acquisitions from inventory year X diluted to compared X-month about $X.XX about amortization – the per would including net income for by income prior share, inventory EPS for expenses. would or diluted income the interest, of $X.XX period. GAAP was full per same diluted step was expense, be step-up net accretive or first share and per $XX.X Net million acquisitions quarter Excluding XXXX $XX.X burden incremental the $X.XX up be of third per diluted share. share million months $X.XX from months X accretion and

about per and inventory X-month from would would about $X.XX accretion step-up expense, the acquisitions be Excluding share. $X.XX EPS be diluted

inventory XX% quarter $XX up about year the EBITDA, step-up Third or excludes Morbark charges, prior $XX.X adjusted third was the XXXX million which over million, quarter.

was than favorable higher to mix, XX.X% adjusted the net COVID-XX third of benefits the net period. of X-month in XX.X% Higher year margin facility million, from measures other compared realized percentage as containment of cost adjusted the EBITDA quarter consolidations Morbark was was a in compared sales adjusted more prior offset than XX.X% prior EBITDA Our of net was X-month sales XXXX and $XXX.X year product which margins, the EBITDA to the X-month The results. sales prior the XX.X% year the XX.X% impact for for quarter. quarter.

During had the prior cash Strong of XXXX, due $XX.X generated of quarter increase flows cash quarter million to million almost maintaining the management’s emphasis million on operating third under existing continued we end, an $XX.X of cash on credit in compared during facility, to of availability quarter XX.X%. asset million. controlling third of expenses. $XX.X the quarter, we flow and At $XXX.X $XXX liquidity million and of year efficiencies the operating hand

reduced backlog, of by end leverage since third reduced higher $XX.X we quarter, of an second ratio. During prior XX.X% and the third ended million debt million significantly the of the our increase quarter. $XXX.X and We order quarter XX.X% year outstanding quarter debt-to-EBITDA the the with than

acquisitions, Excluding the prior quarter. down was from year only X.X% backlog

sales, quarter During but XXXX quarter with products. to acquisitions our growth X.X% demand order To in sales, the modest but X-month record down organic down organically. saw agricultural due we quarter, with up third third recap XX.X% X-month new up higher acquisitions, our American bookings X.X% organically, and for record results, X.X% North primarily

XXXX Third year the to X-month year. compared at XX.X% EBITDA, of prior XX% net XX.X% quarter to compared and quarter sales at the XXXX up net adjusted period XX.X% XX.X% year the prior EBITDA, up XX.X% from and of prior year. adjusted the over from prior sales

prior from per and Third both quarter income the results. acquisition accretive XX% share earnings year up and included net quarter

now loan over prior nearly increased million, almost quarter since operating Third $XXX call of plus of year during $XX the June Quarter-end to reduced cash over like end on XX% second up to ending quarter quarter. million, debt XX% cash over the XX.X% flow end I nearly was since the up to the hand Outstanding the turn quarter. Ron. third up $XX of and quarter. back million, million the $XXX.X backlog availability would by

you, Dan. Thank Alright.

by ongoing Dan, are challenges results, we given As look, pleased we quarter particularly Group’s facing. Alamo are the numbers very certainly, many XXXX reported third with

the sales last by the continued year. from completed sales, conditions certainly the of improve And to levels quarter. Our experienced quarter record we soft we acquisitions helped third we in finished the second at

rebounded we accretive our also much sales, and more the in both than along from with sales acquisitions. earnings. by where, earnings contributions the improving benefited quarter was the so Our just nicely there again, recent But

in Our the nearly $XX last cash quarter flow – quarters. nearly million in paid was down in very the We two strong. year doubled the that in debt and

and – cash of over yet a the million. still we ended While quarter strong with $XX of level still

Our strengthened in continues to further healthy very and balance sheet third quarter. the be also was

most improving and quarter we markets near-normal our in financial impacts second pleased to measure showed performance. COVID the showed economy the of third to strong improvement allowed every conditions. results in company the on So, the general, operational despite of in issues the Also that return quarter continued and and us operating of our in the almost situation faced

third some economic have so continue in to our And are economy. furlough skilled or all of and of quarter. of on supply, conditions, as improve are constrained by a All back to and we good we experiencing plants workers called some operating, and markets And throughout be employees operations open in saw had shortages layoff. bookings it’s of be manufacturing once nearly the probably adverse again, few the our our current little backlog are fact, short temporary the getting while for we our the a

pace particularly has is that quarter, general running near year’s pre-COVID last is sector levels. at pleased as We a ahead broad-based third in of the agricultural improvement division are and in actually, operating shown our agricultural

made certainly, remains very other like commodity and cultivation incomes this certainly soft I that versus at acreage the farm well are the incomes farm the fact a – bodes lot this government And due for still which high sides has many of are year and operational from overall agricultural had are up the weak other think And and industries. benefiting sector previous they from year. COVID under level, higher fewer than it the has prices, overall be outlook. challenges agricultural to support While a

better Our in division below this basis. some quarter, products others. have also though more the industrial third they in showed not a are year on still improving division performance uniform And little than a previous been improved an lumpy, It’s on the basis. organic the

For our very have vacuum been will Morbark and this situation lines, sales affected budgets continue recovery. spending well more forestry as part sector markets Also, to shortfalls governmental negative products improving maintenance, certainly, certainly experienced negatively governmental challenges for products, like We little large have nicely, XXXX. well ahead the well a believe that be experienced difficulties of to more of their lagged of this a economic other whereas are and in operational behind industrial few instance, bit some to a and revenue markets our the truck our and curve, these since continue our infrastructure impact into for entities by be to XXXX remainder – constraints. have

hold economic are being rate. challenges, However, as employed, should during on out worn our these and even need somewhat adverse since up operations used at repair to our little they prior regular business replacing and during maintenance steady be more economic bit and times, in basis, a continues a and have fairly a better equipment downturns

be and Our by the overall to XXXX positive have two in our These earnings the and additions helped to year made sales been and Dutch of company’s also provided we Industrial Power operations. proven contributions division to consistently current Alamo’s Morbark. have has good throughout acquisitions

achieve Although though them our remain still challenges time into are way, to synergies, by related company little confident COVID, than intended fully and envisioned. have originally bit been operational it of under our our we hindered efforts may will a take these some integrate we initiatives to more

first pleased places quarter Alamo quarter seasonally fourth quarter a and are actually of be on in bit also issues remain more little utilized related the weak the of and reinstituting will is us, ongoing they COVID in less in fourth our having we broad – we about believe challenged and since a issues And it the particularly, COVID, in bit performance we for Group’s While third as a to equipment XXXX, economies. is our where concerned resurgence Europe the are some with a almost quarter. general, are little restrictions

we U.S. see, also with is a it’s would negative disconcerting in mean, concerned than or and I seen. So the that seeing more to I’m be areas which to there’s where we’re issues like COVID –

markets pandemic our – is with some optimistic our markets. foster and so So will are company we’ve until general. outlook path situation our – there this there – to continue in is being momentum positive recovery, well atmosphere the is whole the the far we we COVID a to an resolved, a uncertainty really as of in seen Still, proven until as economy for in about from

a backlog. have We healthy

very a challenges, the we other changing that recent have ongoing responding to kind been We has and have solid a And operational acquisitions. management from market of in financial very issues. and conditions contributions team stability proactive

So any you not but I times customers, financial with appreciative had With questions we operating. prosper now and are to these this be required challenging our the to have. positive commitment and this are which our very that, we’re and would for – our are momentum, we effort, despite the other has and all employees our well stakeholders support. believe from might only in team Certainly, like a have ongoing call we of environment to the poised successful we uncertain open to dedication grateful vendors during

first [Operator you. Securities. Shlisky, Mike Our question comes Colliers from Instructions] Thank

get Hey, might the crop Is row guys. Can ag, good color or large Can farmer? some your some currently? of Ron? of products on or be of kind large as driving bit a us it I sense comments is afternoon upside about of acreage that’s most areas? you to a rancher the what more the it the little give the stronger Is stronger it

I say the are financial fairly the the would big receiving are been to farmers. broad-based. hobby they farmers, – go Certainly, subsidies not – farmers don’t that it’s to

sales been that’s – broad-based. in sector, think are been I ranching I the U.S. sales the horsepower that fairly some – hobby but there’s of nicely, it’s farmer – it’s of sectors, so double-digit up that But which sort like in the certainly, even means some. increases So been been crop think small good in the seen I tractor, But that. mean, row farm, there, so we’ve

holding I were. from, And quarter and payments than early one and small as cultivation COVID sector. like like say, a quarter and single-spindle there at during like in type bump – Certainly, home said, was farmers, no And at so third typically little levels. actually our under there more think, implements, landowners is was is big up acreage I in were tractors who record related bump the second probably good. they mowers. we subsidy horsepower I to a But some The

pretty big a row which branches. big situation. I so it’s so And it’s fairly that’s been – which the very mean – has helped But welcome – crop farmers, – a broad-based, been the been been has

your impacts Great. that Thanks. weather you’ve curious first, year I on wanted secondly, good see for guess, to been oftentimes, said this for hurricane In active year, the the I orders. plow order to I’m snow season, very orders, met then heavy been – that’s snow always the turn is patterns. a this next whether you snow, pretty have some snow if And a has expectations? season. happened

is and on yesterday, of vacuum year. sounds hurricanes think your the will effect be southeast government you start equipment we really forestry hurricane saying, Do or season have the just more more like with I your year’s storms the for hit once U.S. any ahead think to next over? plan it for next the XX trucks some prepared Could equipment? one year the should

quarter. all, on us first of starting quite impacts snow off good Weather this for Yes. snow is removal, actually

have certainly, products as mean, yes, seeing have we areas. some think in remediation I those clean-up we so forestry there. – of been on needed fires that are mean an I some I certainly, the of So think benefits impact type well. And that our had actually, and us

are start. to products off a So good snow

fires. as more somewhat be little of related bad, there been to to good products off quite a a don’t mean, like think start, Forestry yes, while the I have not I this only kind seems bit like activity. I to Hurricanes, stuff. said, or Katrina’s are – severe it’s been

earlier, business, as I So – seen softer. really vacuum is truck and one we been have I that actually has our stated mean not been –

it’s where some – I because of trucks of rent lot vacuum customers. non-governmental especially a is the we to think

mining, so like construction type have some some of those and soft, and oilfield things. areas And of been these

So been a they soft. little have

I influx that. offset hurricanes, So a from that seen big not have has

a So gradually Like – little. one one to little of soft us yesterday. improving still, It’s of I’m not kind most yes, help saying have the benefit throughout soft sectors. I we so say, haven’t bit. this little softer that’s remained the I that it’s will a been But benefited mean a but, from vacuum are trucks early and period. of

ratio, And leverage balance debt sheet, low. your turning looking Okay. then gotten your at has to it relatively and the

debt, Xx for around this good-sized since out I on correct. is comfortable deal? then right this And in your levered Dan, time net probably look secondly, area my first, go for and to next kind are it now you? range, now if guess you’re You’re is calculations of M&A

I think marketplace a down. we’d – feeling really the – in like like start debt got is not been if now. I like brought the certainty certain we But a in We’d we more let would a It’s issue before little right of Ron. we’re will it lot an level motivated. we’d powder. dry market, were

you’re is Yes. No, there as balance I said, I mean, think right. sheet-wise, Dan –

We’re much us that’s there not from mean, There us back is back say, of a things very lot And – on would comfortable. we There hasn’t I holding holding acquisitions. acquisitions. activity. are yes, yes, been other some

think get M&A it’s It’s our little looking hard we because know recovery, in more market. they have industrial-type ��� still of to of the for industrial of still still it’s to all I seen – some the suspect. high-tech lag going – to of as little which think physically think going people Until valuations bit. hard, think acquisitions the opposed will think a industrial been value assets. we healthcare, we is to couple to opposed space visit – I industrial-type to on a starting while timing I some companies. or COVID to be but sort it a very think products, bringing think lines is a to And are things lows, it’s activity clear as we prospects are don’t people quarters. have I side I maybe maybe – more of the and to at But It’s to harder path hard have recover last lot of be the a interested hard little from got on, would

but But our open the look, starting – up I So coming still us yes, But environment. think this challenging and there. – the yes, for our acquisitions it’s to we’re take but And we’re like part I circumstances starting little are it’s balance sheet. definitely are we’re of to comfortable with ahead our eyes – that time. more strategy still move right to things at right to bit a say,

debt to goal diligent Like be as our is we to move continue to forward. down pay

that’s as are like what continue environment correct, doing. with it we’re us that we said, the So moves at, to do to Ron

thanks got again. appreciate guys Okay, I Well, it. as always.

Thank you.

Thank you, Mike.

[Operator Moore Our Instructions] Chris Securities. CJS question comes from next with

guys. afternoon good Hey,

in side. than sense, the you quarter is I Morbark So a kind was just down bright – revenue one of or on down didn’t in the Morbark standpoint, any segment? industrial doing of of said year-over-year a overall last it the you better Morbark get industrial terms own XX.X%, revenue Organic meaningfully think just to the QX that’s sense year. spots was in trying like from there Roughly, of growth sounds

it last say, I as did in them, It given well in And out. here that QX. this information up they Chris, in yes, we’ve year, should both seeing compared quarter pick and But little not to nice a with picked and – orders QX. slow – as you slow but pickup from a we’re actually up were backlog. sales

of were bit like I were quarter, mean, Yes. quarter, actually early – some probably a above-average our really midway stores. of But they in one second in one Morbark, since by big-ticket the items, the quarter, I have the more the little in second they third said, off more average. than by they

running up quarter, year’s think but in behind are last quarter. I but picked slightly it they second weak still the third a nicely that pace, had

how might did quarter? Thank Alright. it, that a but I percentage you. and revenue Got and Dan, have have missed as it. impact of this big of services on an parts margins

than it higher mix mean, of margins. helps was product year, – impacts. it was but I it The our one mix parts of helped certainly, favorable last

Yes.

than the in As is been that a and typical better has downturn, whole here. up parts hold case certainly goods,

Yes, both quarter that way, third to second Chris. and

percentage the was that? Right. revenue And what roughly, of

that We don’t provide [indiscernible]

Got it.

over little a It’s XX.

have. don’t we Year-to-date,

– reasonable Yes. obviously low it. level that’s And today, over ag just is X% single-digits, from you that near are to doing pretty Ron, sitting Got Is growth, that organic – perspective, is the well. where X% the is that from term?

think I mean, I so. Yes.

The think of biggest strengthening I in our the you you can fact, well are, was I backlog. They ag. the saw strengthening ahead tell in strengthening our in the biggest in Ag. last ag, year. in was backlog

actually – reinstituting So shutdown Europe Europe follow just little lot the with is The word is to is will of said, as bit. seen that have France England is by weekend. deal And may suit lagging a you COVID. I measures a

that part, subsidies there’s continue little organically nicely. the think improving their that uncertainty. some and farm always actually, are good we Europe, sales But incomes more right – worried improving. has backlogs prices And be than But are England so still and a should so is little incomes France up and of couple – say, that weak, even rather commodity I from I a their the percent, more bit. see and are improving, good, like – would I are basic not U.S. it I That’s now outlook mean, in bit big but little been a the there. But good am ag and a so concerned

that’s always change. subject to So I mean,

where like we Chris, it’s going.

the of really back last couple has the market, ag tough. years, market go because really the you If it’s to been been decline, a

we have past. seen the going. it’s levels the So not before rebounded to It’s we in like where

made little buy they prices situation China Yes. – the commitments fulfilled at still And to. to been the from not were soft. U.S. the is China those they going commodities are certainly all said have still cultural Commodity a way

So that’s a bit still I mean, a there. wildcard of

it. appreciate guys. jump it, line. in I back Got will I

Thank you.

queue closing in time. further for like We to management questions no over would remarks. this have at turn call the to the I back

I Well, on being you us. today all appreciate the call again, Okay. joining

We are are out appreciate are your I said, – – with like but I making, we the we as still said, lot though challenges even and the pleased a of progress there, with pleased ongoing support.

So thank you Have we forward year for speaking good XXXX we our results. and you day. joining us to report end today, Thank when a look you with much.

Thank you. Ladies today’s and gentlemen, concludes teleconference. this

may You now disconnect.