Alamo (ALG) 9 May 212021 Q1 Earnings call transcript

Good day, and welcome to the Alamo Group First Quarter 2021 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Edward Rizzuti, Vice President, General Counsel and Secretary. Please go ahead.

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

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

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

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

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

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

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

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

Thanks, CFO, we the to of I all will want the and more financial a of on Malone, joining first thank begin our you call will our and with results. provide for few Dan comments a for XXXX, of Ed, our results quarter us today. then review

following we look forward and formal your our - questions. Following taking remarks, to

Dan, ahead. go So please

Thank basis per Record an our you, share takeaways quarter Ron. The from adjusted quarter quarter from first first and results key X% XX% nearly the over and up income on a XXXX basis. prior GAAP earnings up on are. net first

quarter. First quarter sales first down year X% prior from the

income prior quarter year the essentially flat adjusted First operating result. to

to trailing quarter XX-month prior also First performance. EBITDA flat and period the comparable adjusted

reflected the over First record nearly by since needs high quarter prior $XXX a order cash and of XXXX. year-end order and million, flows backlog XX% year backlog driven up quarter working capital up XX%

the net million XXXX sales First than quarter lower were year of first X% prior quarter. $XXX.X

some disruptions While supply we net prior impact the first and XXXX from the quarter, backlog, first were the million COVID-XX of $XX.X supply order demand delaying to sales pandemic first Agricultural year from decrease first during XX.X% X.X% impact inbound due continue and chain prior million customer quarter division negatively see to a sales to on to division a represented and quarter the up and year operations. pandemic-related chain our quarter. manufacturing rates efficiencies strong our shipments. XXXX in $XXX.X quarter continued Industrial rise

from year share, $X.XX over efficiencies, chain $XX.X up supply and inbound on first XX% was prior negative the impact growth strong this the line across previously mentioned. of quarter or During top per The quarter, income by customer Net the somewhat demand as we for manufacturing immediate surge XXXX of the continued first organic to the pandemic was constrained diluted sales division. the million see benefit quarter. in

enough quarter first inventory lower operating up income prior and income million sales million Morbark the inventory for adjustments flat excludes was nonrecurrence result, year that provision $XX.X this of result. up expenses or to or margin net of was year million sales, than net adjusted quarter. for prior year quarter margin step-up net favorable the expenses interest comparison. sales of prior prior X.X% from essentially of tax expense. compared of income produce million first quarter the the year Lower Excluding or year Gross step-up but Lower expense, X.X% the XXXX $X $XX.X Morbark more result $XX.X or in expense $XX.X first first adjusted period gross over unfavorable disposition from the in the foreign prior offset XXXX net operating the million to year of gains prior the X.X% were an XX.X% the sales currency to XX.X% of and was net which Operating result. property is offset to

positive disruptions, our XX.X% Excluding mix higher fully and the well pricing as of been to discussed. of growth first order quarter was saw as uneven a first XXXX, that operating impact supply units has the of and previously favorable new operational by limited somewhat actions. margins demand Morbark In business timing inventory gross offset sales. million on prior $XX.X leverage chain or of distribution margin due COVID-XX net across and material Also, costs not from customer by expenses, an were compression step-up the product quarter year expected the rising as we gross

million, XX-month year was Trailing the first XXXX EBITDA adjusted million First flat quarter quarter slightly was XXXX EBITDA. from adjusted was prior $XXX essentially to EBITDA down $XX.X EBITDA.

negative to adjusted is Favorable and other quarter pricing mix, material actions of XX.X% first the product XXXX results. offset cost net containment measures cost pandemic inflation the and quarter which First EBITDA flat sales, also year prior impacts. was

$X.X operations provision During prior the we a from first quarter to cash activities $X.X million first of the quarter. operating compared net cash use an saw XXXX, of million in year net for

units, our first growth. year investment nearly and high quarter quarter current first working support of ended year a capital XX% a to million working since year-end increase to the in is top higher capital with than continue business will order many While order seasonal the quarter build backlogs an record $XXX drive first higher backlog, line in XXXX. the of XX% for We prior

net To prior up quarter, products. of backlogs an on the earnings basis recap nearly first industrial our from XXXX an and saw and first results, customer first a finished above income all share, our across record up GAAP prior per quarter the over of first range X% quarter the well XX% business on We units. quarter adjusted order in agricultural acceleration basis. quarter and of of our with for entire demand we levels and the During quarter year both divisions XXXX

First the down prior from quarter sales X% year quarter.

income prior the flat operating essentially quarter adjusted result. First to year

prior comparable the First quarter EBITDA XX-month trailing period flat also performance. and to adjusted

First reflected by turn and call up first to prior I XX% over driven Ron. working XX% million, like flows the year-end backlog. capital quarter order And a quarter up high $XXX back cash over of record year backlog XXXX. to since the needs nearly now order would

challenges showed, this are you, in through the quarter for sales that record strong so the that But most issue our COVID we I these many are where think which results earnings. and these financial But unresolved affecting is from much we the actually the There's an are Chinese supply facing, and we of And way Alamo general. I'm living our nicely our times. as repercussions Dan. extensions in other had Group, our there managing are glad in very including first I are mean, - of of certainly I you Thank update. says company, are workforce live old issues pressures, Many appreciate we inflationary is almost times." "may and certainly interesting pandemic, interesting curse that many and still ongoing the ongoing. an that the chain are pandemic. And world logistical disruptions economy challenges, basically

steady this shipped And several half we're at And impact suppliers. levels up higher of these farm many a and the market levels. record in in we market into strongest the the of and good our markets pressure, above-average not subsidies aided some only aren't for We backlog, sales industrial issues, commodity sector record X%. equipment have market a are pleased are continue finished returned most and continue in division down solid strength environment, But only going and has pre-pandemic market record products managing showed pent-up quarter in our from supply of years our problems see cases, further and these have this and glad and issues, well quarter XXXX, low us to than the record are ongoing bookings backlogs. less we backlog. despite been current next performed first on second the quarter, same prices U.S. I have the we fundamentals that in even And challenges, and are mostly company still limited the steady, remains results they for demand benefited with year, manufacturing these chain have farming in would even supply will these as would more for the We're last weak though issues and of the getting also in that COVID farm The quite time but issues be our throughout is inflationary as very first This in even with has this were our still but to year that these based little as better. agricultural year has remain conditions as result deliver actually of promising. even instead we companies are of nearly would rest first And several - diligent we sector from with our ag agricultural distractions, of sort results for could of Like impact as years said, lower we as though didn't the the chain as strong results. think if even strong well today, our which have holding quarter first the most should even of issues. remained have in XXXX not to has this the evident us of some we're subsidies all to for certainly if quite with levels being this if not But good. by logistical dealer all the incomes. with and input way pricing situation in demand to quarter in that, our very we know the this alone and I been for us our the inventories think facing Certainly, not look market finished and a this

is improving. outlook the that So pleased we're

pleased We as while Brazilian also ag that and performing is very units strongest, operations. Australian our all are the are are North American to are certainly as it European that reassuring showing our note units well our improvement

market, with same record So industrial is backlogs, the division. good can for Alamo's outlook The a said actually be positive. agricultural for Alamo's very division

quite is quarter budget ag single in good basis, built of While it the still are as very maintenance as a and biggest on March XXXX with second the not momentum started on in our constrain weak quarter, as results division's during solid well. equipment. market for which entities, first to relative that It infrastructure as strong division quarter. XXXX January quarter we our issues a our continued results governmental into But continuing were of off ended in this the was

as reflect to fundamentals with the at results. of our We governmental backlog by our these better-than-anticipated health continuing which levels, to city, basically county bookings budgets and all budgets with sector improved And of and and state showing revenues be improved in this customers. governmental are benefit financial seem

and As this. with the by reaching internally COVID-related results issues, levels, from ourselves division, they challenges were with chain preventing industrial and logistical our the could our been record have constrained operational agricultural supply without which

benefit should of be operations this to the should but However, these the the of completed results These getting our I that, - achieved results a to Power very level we're Dixie full of And really is Group. again but not back full combined we for And for acquisitions that in a about all and Chopper well, - their drive other we opportunities. were the for for anticipate. pre-pandemic issues good we to I things, we of big believe with see XXXX levels it's is at as normal business we're we half such year have acquisitions the the what at of XXXX, to Certainly, including Group. activity, really have levels the returning outlook. - Dutch general, to due things XXXX. definitely XX which performed industrial high acquisition record feel getting months. more key see in on mean, will This have actually Alamo potential. Alamo levels really optimistic of and optimistic full the - also curtailed starting second that evident be in last - basis, is division opportunities record look activities, mean that our very among and to Morbark, contributor most But really we of pandemic getting feel is less

it's strategy, So are our which of acquisitions to since I we're ongoing think definitely - part that. see key - glad

which need better focused that invest capabilities. debt, to the more evidenced allow And on operational we're initiatives. backlog, But us bookings demand year, to this pleased and increased mean, control I and our by and constrained backlogs. during with both more technologies successful we as paying efficient very be our starting as and manufacturing margins meet the improve record bookings - our were are last we very and to capital we will in really down grow also cost we our We strong spending

Alamo times. will to very of active we following as and the can whole community support we above-market strategy, over challenges outlook a over while replacement, good reacting vaccines, has in this company. Alamo we improvement, supply by resolved. to show continue certainly will monitor availability not We outlook ample the trip. outlook as the grow continue warrant. be hope are good I our the So about we us the evidence our staying are challenges, us at number been success conditions this that committed of see company. last Alamo the staying is always and affect for changes, COVID showing all and retiring really, the And than long And on ready times Group, the logistical Group. team feel COVID great operations the and investment remain term. we cases new nearly challenging CEO monitor responsiveness optimistic this the My about member through to we steady living Leonard, optimistic along continue are rates in to lastly, could fully while, And more we It growing most that I for XX improvement, markets remain of while to interesting in certainly you continue of and certainly focused are cognizant the Board quickly There the to situation and and bad, soon even are I upheaval capable concern. about a Directors. our and is for and feel is optimistic forward know, believe you that are affecting path we as of prosper But feel helped Group, respond are chain still is to and still are that is to periods pleased for well steady it to pandemic these will continued of we also want progress economic look still but unfortunately, And have our very the are thank as Jeff Alamo It's followed. other a to all. but markets or actually, years. navigate of of we And of your why their our as And I

that, might much, these many help I all floor and the now open very and would questions support to you appreciate thank any to With have. like you the years. So

[Operator Instructions].

Shlisky question first with comes Our Security. from Mike Collier

been just of shut So some anticipate do - much point, you kind there but is And touched into if get just the too wondering at dive you was of you've that it, really can't you're you big down and or can you one these having on been having part topic, was I to, looking Have if any companies availability. chassis I any mention that the a it, temporarily we mean for? of facing? chassis has about. been didn't curtail that challenges

I shutdowns. announced There's really manufacturers have Yes. have chassis times the some chassis is lead we're grown. The industry auto several chip certainly, hearing mean, temporary all they're deliveries. through the who availability, going affecting issue affecting that's about certainly

deliveries, Fortunately mean, certainly - missed some we missed I shipments. some

- And But even delayed large, to bit I little do, going all. mean to able discussions - more some quarter little supply closures. a think ongoing quite while second But suppliers. bit be like one, be, regular little sourcing a have resourceful they effectively. been in the channels, out, Yes, And of there down and we've we've said, chain successfully. were doing get I've we're they've as pretty and plant and number been by because issues. bad the I our outside chassis to of issues normal outlook going to some said tried they to like seems already be, - our and mean, to I better they than chassis with bit And as not with and we're some but have I deal seem though, will shipments it they implied. as having looking come Our in to said, a

I we're think deliveries. some certainly, some large, be But right challenges deliveries. than mean, will and be deliveries, I the good achieve but is still very lot we would affect a issue think missed in and of have better and I I - positive still an there thought meet now. and can our But so we shape it we And mean, it that will and results by

- just seen thoughts in company Alamo Just any anybody now? your actually come curious, have or customers companies? some any And of right the switched is cancellations any backlog? you of it. Or has about, to from give me the brands kind back other as with everyone same boat threatened Got

Yes.

boat. our in lost I orders. like I everybody - I not comments, pretty in - mean, it mean, our are. mean, product. I shows. mean, any same And my anybody's any I in well That's the is - As particular than mean, backlog yes, have we said don't is I yes, I customers we shape better But say, And I don't think we want

And losing that mean, cancellations we big backlog being I because like I is that's our almost or so lead competitors, I like I our anything our the why than worse I same orders - or or a - we concern. good, don't mean see But public or are. see especially see don't they you've mean I said, don't like their but very if too just following good growing times commented I lead think the been times of ours. are to like some ones,

Yes. more Yes. if have activity in environment and you And past? get service anticipate parts than seen Got you like QX, folks new it. an in this, especially do seeing, the then in can't equipment,

are to bit goods in yes, do yes, usually we're it. will continue Difficulty]. little and than it are a hold time But the bit supply following better, well and better and a they economic a we and seeing held little better. And expect a short downturns seeing parts holding is to a up Any they bit little better, better, tend term. they Yes. of have that sort year all whole I up and there's of But up [Technical

world going update heard demand for the tree public positives Okay. how at good us Morbark comments companies give product? that you an Any some other there are positive the that specifically? we've at or Can in challenges And things from on moment. care on are the then good,

demand, we largest very probably Morbark new, Yes. one and products, increases of - in are products holding of and the our much - well. those there's said, types of diverse backlog any The that. is tree units. are demand you growing care They of for experiencing has as up

and Morbark think have of for avenues So up pleased opened and things us to like new avenues I even growth part other yes, group. that new we're that. some for our very acquisitions for They've

that looks a the some almost and had tree I up backlog say, cases that. again, our too is for of Morbark, had pleased is strong. one issues good we ourselves. mean, care we're and couple well, had like we've So strong, internally, the - holding where outlook very that's some plants we've And COVID I

week shutdown so a for And department something. a or like that

the So - some more more outlook - about we're few internal disruptions. Morbark. But a there very for optimistic

not the Congrats a I for to last maybe and over Okay. best then bunch And appreciate to information great you the years. lastly, going go answers all of let big saying luck. without you. thank you it, and of Ron,

I much. appreciate very you it, Mike. Thank

with Our CJS comes Chris Moore from next question Securities.

Just consider much the And extended? how one million still extended that more you is that $XXX growing? portion on backlog, of would

spending And certainly Yes, like quarter's that. - I I I that's like normally, - bit CapEx quarters, to like worth we more plants. spending growing. our not - it's capabilities it's into bring I it's but to beyond R&D well mean, mean, two some a We're said, why a but still picking of - between mean, I little about we're backlog. it's going we're mean up

of than it to longer, it's things. causing efficiently. be year. would some a I think, not chain - can not bunch improved issues that are reasonable. little bit out say, that still to supply like still ship but of than do but But like or I So - but there's I we it meet not - this a like I'd should we're this long-term like out a And very will mean be, year it said, I like. little longer there's not There's everything only out meet ship some demand, and the longer we

- that I new there's issues that. purchasing today. we issues. stuff top the is much We taking trucks taking ports even hard our chain supply expensive, to are ships, But term. the hard particularly it's get chain Certainly, It's not a we what inbound in - but and to know it of will as are - very I tomorrow. chain to is tied certainly hope supply problem. mean are to on getting the issues of as just out only mean short have of stuff people certainly be ones get outbound. not get logistics Some is really items logistics getting supply get

all I but don't - out like like think say, too don't our far backlog - said, in all I I think I there. our yes, So is

it. Got

That's Okay. helpful.

and So logistics and get industrial COVID QX. sense demand between hand piece X.X% lower down revenue like and weather much to was a from from of I'm break versus funding governments to and things of trying quarantine. in out state but that would easy on chain if supply not look that of the government's muni one Probably issues. kind you do, it just demand from and lower to muni state, and local local how the the was

let our who one. Group, I'll Alamo industrial guy Jeff will Yes. answer runs the Leonard, division soon all of that and run

it until which to the U.S. react they bit Governmental than probably organizations have sit and mind. winds mean, in should question. settled it settle argue, good on the are know things it. that they last and the And you January, a not election year I keep a really national until There in this year. election was that little several to quarter that's took one, sidelines really blow. kind a going should going very in are Yes, some way on the strongly, of might to longer was

storms mowing one United factor the which businesses of start number Typically, the number two businesses, Factor early the in States. was our February Southern that's states late is in mowing in January Southern already So our and one. February. bellwether

our So specific to those affected lines, those in bit little business also we adversely lines. had which that, start a a delayed parts product product

lead move stretching are we Ron's times forward, to out, point. As

albeit If you times very yet. times. bit have have us much been at longer supply been - We've stretched little not our kind keep lead dealers lead of out, crisis a fortunate, who with industrial in a truck trucks to any to our businesses, but our pretty we're with demand, look with able for chassis

as fairly February So and I of off strong was was well. March as the think the business. very has backlog does the soft, started said, April was that reflect January better, strengthening Ron strong

an think improving we'll see So situation. I

that even moment. containers All is is and right of of is holding as to problem such export which And supply up products getting that's our by tempered now a at shipments. chain, wobbly the some the

QX, is cautious So believe plenty demand not no, demand. the we there, a we I think we're because don't of little on have bit

really is it and build components in all supply to parts our the - I just need we and and think ability I product. up our those think to winter clear as of are in will issues those those storm, of think ramp that so related some wrong to QX. shortages on. the through But get suppliers we containers progressively to plastics, the the meet I And from and place move start out

bit will And more, ease. good. I we move pressures start these some I little a of QX be forward as will think So think to

in he in - those - chain sales we had record chain many division So supply the we issues, the quarter. if have I would the first said, supply have mean, as and didn't industrial

reasons were a for little still some of everything soft ongoing year pandemic mean but budget I the bookings mean, else. mentioned, I the customers and the into going and he the just I So constraints - and - mean, elections

things So as quarter the second momentum even started is started the a off but the built getting - slow, as developing. developed and little quarter year nicely

Got it. All right.

all And bookings has across of industrial. that strength gone our product in lines in

all help over say, Got congratulations few and it. I'll But last it. for to your there. Ron, the thanks Appreciate at years. leave want it helpful. also I That's

Well, thank you, support your appreciate I Chris. too. all these years,

Instructions]. [Operator

& Greg Your Company. Burns with next Sidoti question comes from

I other than there impacted But more supply that constraints, the crisis chassis on product the issue? chain like supply. being more terms others? mode particular are In you specific any of are parts there components are that know mentioned of And or lines an a any is

like fairly things. No. of those kind But manufactured ones far I more interesting, factories as affected the by those transportation of part we're mean other mean pretty seeing probably and materials. broad-based and well not - the But in things the thing. flying I but pretty which in cents no as I and We're there. more softening may problems is the mean, all. I couple from now, mean there's like like chassis well bit dropped getting raw that I - are the or it's yes, the source stuff, right even month the was last issues, kinds I ports it's like can But and go. actually the doubled well, China I drivelines, probably we like like world, it's spending so our like available It's and a are one gearboxes, things so. actually around of steel price, components the a or you, of working, logistical chassis is almost tell say, very it being pretty little components in are gearboxes from that variances steel, those are efficient. said, - have while backup like

So - particular. one I wouldn't and but fairly no in like no, it's said, broad-based I - it's - thing say

XXXX bit And acquisitions the then in were before my a little right. All time.

and that these those acquisitions. maybe year the this to we're at projected trying get to to relative and seeing we that contributions get revenue And get are sense Just a the acquisitions and revenue So those sense now? in maybe were this maybe were margin EBITDA I of a idea of time. trying What was of what benefit they the trying feel for doing yet just to what for a not upside for where 'XX. full the acquisitions

by But just first like our X I a margin give would don't took to top almost all, We you... XX-month I have just information usually of level, Well, if the sales Dan, they acquisitions don't you know, it. XX% line. mean, and added

closed disclose there disclosed we sales did the the we Morbark EBITDA, about we of million and acquisition, trailing. Well, at in - $XX the time over were in $XXX million adjusted

smaller So that We not on have then. did - that the disclosed we number we - did disclose acquisitions. back numbers not

when Okay. And go - then ahead. you sorry,

like Just Or you achieve might feel are maybe from maybe you the - a and look hope where much basis to benefit when year. you in the at this projects trying how might points process maybe what kind the Morbark many how potential get X, projects those? number then next integration efficiency year for have those? at you margin to incremental And and the get Okay. be around you the around of integration incremental what synergy leverage other have or and quantified of a from you or

we Again, profit than Yes. that and average internally targets like higher We certainly actually case, quantified their it in much and of we usually don't publicly. said have our even give had profit operating margins internally Though have operating Morbark were margin. goals.

that synergies doing they even prices. help at inventory our but their haven't well the until of we thought things we said, I them, also And synergies the pretty achieving mean, up like higher ones So level And in dollars procurement we should at Morbark, procurement. margins. had old And was really believe hadn't just in the we're improve down the the said I work two, producing now, that nothing, millions some we - same been not supply this, for of The instance. with for on - the we to - like anticipated. level. they overall at mean, synergies, we all of secondly, one I of pleased like purchasing and we're

we buying as much. been So haven't

the by year, getting the the not this we'll we level. at we half of So it start getting second synergies identified, the that level. more We were but at full full think

our things them got benefit on structure say, ERP integrated like our system. - them and we like we're our We've operating So other I into system, this. putting

to one try through full we've And very ocean. we American not same at we're of there going So just network, going so the our take - achieved anybody allowing one, not not to we're level we the more to still North we is little to do just most were the because certainly - other wanted have have. I the only - more, Morbark procurement level were them That internationally one, yet. The a travel mean internationally. the - across area the focused. we Probably we achieved synergies

in I developing. bit and synergies that So the taking a mean, little But one's large, by slower been are.

and in already very fourth plant X, We've will like year actually of We've mean, a to it sold from - we I have already second consolidation even which close. we're also already. sale in payback. here quarter good - X good Dutch quarter, announced closed the We actually this plants one in the to the proposing I Power, - a and plant, the on mean,

plant mean, there. for I consolidation margins whole mean, I let that payback, so And has a about X-year improving overall alone our

margin not anticipated. for we the But unit occurring. achieve of haven't though Group, this And pleased synergies So when wanted but we Alamo like should we all that each to detailed improvement this done, have dollars see yes, the due and they achieved even we're we we we'll sort we each at point we're COVID, opportunity. said, is to all that believe I overall definitely are - we believe still

are this closing time. back management remarks. I'd There for now it questions turn additional at to no like to

I I forward you Well, second Okay. good probably progress forward with you our look following And to Have a leadership. Jeff's and very company's call, quarter much. that though I today. under We August. won't much on joining for us personally day. call to at support you very again, look again, thank in Thank the be appreciate speaking your - even

and Ladies this you. today's gentlemen, concludes presentation. Thank

now disconnect. may You