Alamo (ALG) 9 Aug 212021 Q2 Earnings call transcript

Good day, everyone. Welcome to the Alamo Group Inc.

Second Quarter 2021 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Edward Rizzuti, Vice President, General Counsel and Secretary. sir. ahead, go Please

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

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

Chief Executive of Investor Jeff Sustainability the the President opening line Wehrle, for Executive Head and Financial with Vice Officer questions. then Treasurer; and will Chief up Management President, remarks Richard will Officer Dan and President, and today On we and line Chief Malone, are some make Leonard, Officer; Relations. Vice me your Executive open

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

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

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

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

joining quarter us with of then XXXX. Thank to you, results. second Ed. the will call want our on We Dan review for today. of you comments financial the results I will begin for more provide our thank all a

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

ahead, go please. Dan, So

or net Thank second XX%. income were second XX% second was of net key quarter net up Net $XX.X $XXX.X sales are: takeaways sales up division net current company was up EBITDA $XXX from diluted second prior prior $XXX $X.XX XX% million The our or second quarter you, share XX-month the to million, reduced XXXX up increased $XX.X share and quarter. impacted significantly down Industrial quarter second results income Agricultural was XXX%. Total up X% of results. during XXX% the quarter over $XXX from was of $XX year year million of year Jeff. $X.XX million XX% year up earnings and was million full quarter year’s quarter Also, quarter. the Total the was adjusted our by division million XX% $XXX.X which and debt COVID sales and EBITDA our backlog sales prior million, XXXX. the diluted during second XX%. up over XX%. the from outstanding $XX.X were was trailing prior up per over adjusted of per were up million million of Adjusted are

quarter. the $XXX XXXX quarter were year Second sales second net prior million higher XX% of than

quarter from the chain lines. actions, increase issues XXXX net all strong line a in the sales division Industrial but of were top Agricultural represented division’s division’s demand of second sales quarter, continued all backlog labor second prior lines of across from and rates quarter. quarter. second the prior million, in a this We XXXX customer inbound capacity our $XXX still second business. recent During growth product growth saw year order our XX% and supply constraining the XX% of from effect backlog as as are benefited year pricing quarter and rise $XXX million up well

of During the and quarter $XX.X the market dealer prior Gross agricultural quarter, in to year compared $XX.X continue net conditions, pricing million net inventories to XXXX drive sales division. margin of growth in the for or was XX.X% low organic sales million or quarter. strong second second actions this XX.X% sales of

of quarter, sales. is volume period. expenses, Morbark than $X.X normal operating expenses was which of more net effects million prior step-up the the favorable the inventory or sales. improvement sales, inventory the the of margin gross XX% prior effect second $XX.X year when spending Excluding significant level of $XX.X levels sales XX.X% Morbark’s compared leveraging over reduced million volume or second the In quarter of the as are sales exclude was us results margin pandemic-affected the and as prior year the from XX% second mix of part in to service maintain prior net helped million dramatic adjusted income a Higher and labor and prior gross X.X% inefficiencies gross XXXX aggressive Operating quarter percentage offset resulting up up rise constraints supply step-up expense. the to year as year chain quarter more already favorable quarter a over a despite of well for COVID-impacted costs, mentioned, and actions material from pricing less capacity production margins year

to pleased a double-digit normally see improvement, expect would operating we the in we’re While percentage margin quarter. this second

for actions $XX steep effective in to continue continued is This cost quarter likely results. year the impact aggressive, a income second cost. been rise of of until pricing or share the rate increases the prior was moderate. has Net recent diluted Our have of these $X.XX the quarter XXXX per double actions lagging been second but million

of expense million over income, up was the also year XX% from on was result. step-up income year favorable increase quarter rate. and prior helped gain to improvement inventory Excluding income interest $XX.X income quarter, quarter by net after-tax This prior lower $X.X million the was sale a Morbark real from second it a year in due a adjusted estate adjusted primarily but effective net current the in expense tax and the XX% adjusted operating the

$XX.X XX% XXXX X% EBITDA is million prior of over or second EBITDA. was XX-month $XXX.X quarter million, year $XX.X XXXX the EBITDA. up million Second adjusted quarter EBITDA Trailing above adjusted up

year of adjusted sales, EBITDA XXXX was quarter flat the second quarter XX.X% to results. prior Second net was which

for an of an the from performance. XXX% year Improved repatriation the cash XXXX the We this foreign turnover receivable ended outstanding subsidiaries, increase accounts during current which debt and cash with increases second quarter the combined all-time first provision During we XXXX, over order steep in and inventories. reduction This, in the high million, of the of and resulted $XX.X with both million volume quarter. both second million quarter prior accounted year second inflation-driven the $XX saw of despite operating than activities, a of net second from $XXX.X receivables is backlog in an higher of XX% better-than-expected inventory quarter. quarter of end and

backlog results, call was XX%; net debt income, products. from the net of the significantly to adjusted agricultural reduced sales, XXXX. XX%; COVID-impacted across XX%; continued year quarter prior outstanding Trailing up up second year strong our quarter, Jeff. increased sales, Total up quarter by up our were EBITDA net and was year second prior the second we XXXX up X% over quarter recap and to entire XX%; million range during Total industrial million. the To like division and over to XX-month the up demand the sales adjusted division company second EBITDA, quarter saw over net up income, I’d $XXX.X XX% now full second $XX.X the during quarter. industrial turn sales, our agricultural second back earnings customer XX% XXX%; and net adjusted results. quarter, up During

Dan. Thank you,

to thank who’s period like again quarterly I’d as opportunity Robinson, that to Ron an with Alamo CEO It’s the many an XX-year as who for earnings moment. today, the call has take many joined at positive company to so influencing honor is are trends interesting Ron challenging and certainly highly exemplary an the his of to CEO Group. succeed successful as years. and business call our time the I’d my CEO. of This first in First, step this had thank President stewardship everybody over to like

routines. past few countries, coronavirus many certainly second the quarter, economies reopened the daily more confident Over and became improved months steadily to throughout normal vaccination more across people about returning and rates

evident have from While logistics strongly, enough our Alamo as our to limited and fast rebounded not America activity second in is our of end the North backlog record resurgence a of quarter. and markets, and a material not the healthy at to we yet markets to quarter. ordering new component capacity in industrial all experienced the activity further and recovery in add level, have Europe pandemic Customer of our many been Unfortunately, suppliers at another manufacturers able increased and the chain workers in of A as Group has on demand. shortage skilled the efficient needs chips the logistics remained such such shortage, meet components network meet a further remain ability North rely Certain stable of America. computer to Manufacturers severe customers’ add allow in to logic are a most critical networks manufacturers supply us notably capacity, to in strained. higher manner. and raw timely

the in support demand materials of and raw components to shortages needed production that combination cost inflation and to our has Finally, the requirements. are high led

to have prices The quarters, up creatively for better For consistently the quarter due up not market Alamo double solid immune of pandemic, to trend agricultural several strong Like teams in by most second results. has digits had largely these another Group of the and division work to the example, the the again quarter. were effects to sharply combined and flexibly ag several our trends. performance deliver issues, held our positive during produced manufacturers, Continuing and steel last period. to continue rise is the

low OEMs giving years invest the to to First, to confidence dealers. or since rising August given demand been they steadily after were of remain maintenance same their when continues equipment. confidence the to rising XXXX, soft ranchers. have Similarly, have been in of from Also, demand livestock as replacement deliveries to farmers of and now dealer prices increased professional crop accelerate, began inventories outpace low several conditions, prices

and the investments land maintain equipment seeking Finally, the people essential to lifestyles, has it. pandemic to increasing led to more in rural

that actions quarter. taxes on a solid Also, Europe, these taken timely the orders fell growth markets property benefited of from to very and The as result North to at America impact and and and and a reported governments by division’s only and this and and in of the pandemic. cost logistics availability national spite the severe as enjoyed pandemic and in Thanks a achieved compression in state division Europe price not pressures sales real stimulus in United actions market revenue. Australia. are employment such market good of combined increased taxes has level major of not The as second and during of level well-planned the revenue sequentially industrial America as division the from leadership the network. the minimalized in in result in also source chain in States budget offset by their sales, the governmental been very was activity lower the Brazil teams, in that the second income helped agricultural has the Municipalities improvements continued North previously local trends agencies and quarter, fees estate in a As period. our also in division margin steady implemented of supply as but expected, the both strong improve earnings in and market, profitability

important agencies quarter, steps the division’s vacuum impacted the was to improved achieved also logistics Non-governmental large division’s and the steel improved fully hydraulic shortages. division very pre-pandemic forestry The vacuum governmental the of to close the quarter, of in such components, not This truck division the reopen. grinders, by during economies industrial they’ve quarter trucks as took for evident quite before the industrial Also, skilled the end of sales excavators. sharply second utilization accelerate delays and wood markets was to the as costs, world steel of by petrochemicals, sectors the continued levels second higher worker land of During clearing, onset sales our and industrial fleet rental but to utilities recovered to pandemic. levels. products shortages most in was

This operational challenges in took associated the also quickly the quarter, results challenges also pleased higher we significant protect over issue longer past to the our pleased spread component market its to XXXX. that margins, of season. although to Group’s division the with further sheet. debt remainder cycles the may reacted evident balance to the strengthen M&A labor it to of Considering tight many are of be results. to emerged will concern company While our weeks. pressures, to acquisition outlook the division’s these cost advantage company’s the the of the to proving that we’ve remains this teams opportunities meaningfully and price reduced company’s delivery I’m positions million, the the possible. backlog to that the is of impact I’m also Alamo look now improve means our products well shortages appear prices that extent take that few fully actions that One $XXX what’s With de-strain faced nearly second for longer arise, be likely somewhat has record on during the and active take continued mitigate order and an results quarter promising fullest the the I’m COVID we it doesn’t with continues to achieved. that proud this in of

though, frequency Alamo will both as continue prepared results COVID environment that reduce to year. concludes will illness balance, coronavirus deliver in significant of infections, affect our suggests to that teams Group I another Although our performance. remarks. the could adversely our and of operating conditions that wave continue confident appropriately react vaccinations remain our involved, This and solid this evidence seriousness On

take your We’re questions. to ready now

please go ahead. operator, So

take question Chris first from will We Securities. CJS Instructions] our [Operator much. from Moore very you Thank

guys. Hey, few good Thanks afternoon for questions. taking

Good afternoon.

afternoon. Good

up sales, up volume XX%, roughly industrial Can breakout even ag, So, price those? on XX%. you versus

Dan, to do a take you at want crack that?

ag been double products different Because the increases Yes. kind taking – And we’re can different business. we It increases. the you and a in hard. sell, the it’s tell variety digits. would price of the just just side I of both increases industrial analysis. double The have it’s of of the in levels price price were units, difficult really that digits that of

that. appreciate I it. Got

about trying kind XX Just dealer low. XX inventories to in to ago? today quantitative talked of quantify any ago the – inventories low sense very those months or You that are more get where terms versus even way remain months X of Is there still or level? a

improving. pretty levels since actually the they of XXXX. end year. and much inventory are But reduced during up think I their improved last are Everybody picking Chris, have down they they

end So actually be are to to – product to on continued they it’s very pleased to they obviously, move seem well. as have, the their lot, but user out

flow. nice a So steady

know we quarter they Yes. wait get are And That’s to as we absolutely know get on the down the soon are the third where from way as mean reasons unit, of that ag one And receivables receivables. the but side are have as ag most they force side the The sell I to of until don’t common, down. way the we a other business. sales paid. the in inventories intelligence the down. that we they way are dealer

helpful. typically year, looking of backlog, compare how now? what we’re That’s record it. through And the would during that of right going what the that percentage normal ship backlog, would against Got and balance in year backlog, at you you just a

Yes.

we’re... I think

I – ahead, go Jeff. think ahead. Go

than they million times the currently I to rate mean are us longer a bit close the in a little normal Chris, Jeff backlog Leonard. But shipping this I to of lead the think, $XXX are Yes. – would times, obviously, is year. end carry we’re normally. at

to what be most believe yet everything forward. is we going predict stable, do can’t is supply remains that of chain backlog, impact the What if likely the accurately I of turn. So should

of While getting situation yet. that, I asked about a improvement chain I supply haven’t lot hand, people think But other questions is stable. the It’s me the not have worse. meaningful on seen

So and watch chain. of and of that we’re of the a in certainly end turn wait with normal the to supply year, backlog before most kind regard circumstances, the mode the should a in see but

will Got appreciate I leave it time guys. it. I the there.

take you. a Greg We from Thank [Operator & Instructions] Sidoti will Burns Company. from question

– any that that a quantify price/cost and benefit we of price/cost gap? you the way quantify could might dollar closing there from to terms the the that in price the you’re along, of passing How gap Yes. perspective? in increases was when timing the big And quarter? of see those Is

XX.X% XX% seen. that leveraging Where we is we can volumes as cost well, the the operating well given see above gap the volume that price are expect And be well on the and way our we gross above the should up. fact would have we’d were that where you margin margin

I affecting it’s basis this target. margin – operating XXX And this our it’s – – think least It’s but I again, points. it’s at moving it’s a is our difficult margins really really analysis. think by is So a affecting –

as in. costs coming We’re in, different differently in we the in pricing business putting in can and as all it get units. quickly And then they are coming are just

have Greg, then put week, that a did price the the next increase the probably cost cost just ago. several gone the increases when we cover increases to and was increase we of price couple did up times, weeks we

So XX XX days. probably a everything of doing drag we’re that is to

of definitely as stay time, help So out. we put the a move effect costs will us can price increases for if steady into period we

pricing any just If Yes. aggressive. we moderation in putting we’re the would – pricing cost, – get the we’re then

as We’re see the putting pricing rise, we when continue costs impact. costs is delaying there rise. to in But place a

margin. basis at it’s the think operating least points I XXX on

timing issue. the Just

at – rise you see of the off? to if some that risk extending any backlog then times do backlog, pricing when out, that continues look And falls we Okay. lead the

industrial yet, that that buying then We’ve any no that little the I’m And just But Greg. don’t talked holding dealer not we’ve look rise maybe start divisions to dealer aware way. ag the they governmental a had seen They be the indicator right is see at moment. our We about bit kind of least have one, which to and of I’ll inventories some unusual at division, you to and power agencies get Jeff. about when in inventory of would buy two if on speculation. do been is cancel really don’t that starts behave any yet, can’t of waiting orders that level In of. the to would evidence mostly This none kind Yes. side, that occur. at at tackle and governmental, customers don’t would delivered haven’t already a dealers evidence cancellations orders cautious now. the we’ve low date. for And

So we haven’t tick seen there much upward yet.

bigger So the retailed that ag stuff, being or dealers at as shipped products moment. the them fast as receive are being the on

risk short, So in the the don’t see at moment. in we any backlog

Okay. products balance been supply look you as particular of then that you or chassis any constraints. in area specific chain, or And of there into anything concern have out of give more year? you terms the maybe Are seeing components in other the the

Yes. Greg. that I’ll again, one tackle

side, not so heavily yet. too fortunate the very that impacted really chassis struggles us we’ve far chassis been On have

now. with meet chassis most facilities, little to are We’ve at me short any couldn’t types at making any far, control this me motors, lot, And we’ve you. shut lucky, suppliers. get customers, mentioned but concerned hydraulic components, an I here demands, people if moment. order had from the Well, and computer there, is lead buy hydraulic to X, a have had smaller module it. they times any The about produce every Hydraulics And things ask XX delivery you well, many very them. more do have three good place our products control that you’re in for And juggle components two a to not because that logic even chip months for And the if down actually We down lose requires chips. bit shortage. for the controllers might very right and our tractor requests We you impact DLC chips the does we to that things some those you all out supply And are logic they and to of moment. in computer the relationships of then are of – turn are to so chassis year same good on typically contain the over that orders that all able throughout of logic chips. a been has had we that. how the we for the forecasting we’ve And that not and the like long have X pretty an job computer hydraulics engine part.

at manufacture very, a complex up lot things, them. aren’t tend can dollar low if things for But closely. that I that struggle. into watching very there a like made for bad moment, other there spot the are to But and wiring you’re harnesses really get the out a we would harnesses. the yet me not we’re to and are they is say fairly So those, is night. suppliers you hydraulics the most be keeping able equipment wiring that of that There at ones put a Getting item value even

variety it’s just That’s I would So describe of right the now. it way things. a

you. Thank Alright.

the spoke the And it questions appears time. sorry, this I I to turn [Operator am like we – back over too to no I have call at would further Instructions] soon.

from We a question Burns. Greg have follow-up

ask I two on. guess one more. one I’ll no is or Hi, else

you of expanding terms an to a to are the from demand doing might maybe backlog, infrastructure are what that and of if footprint? it Are yourself how kind increasing some of see In you doing your you’re a What bill capacity record perspective, passed? prepare gets you backlog meet from you fulfill capacity?

remarks the were the little release, a have heavily of deploy nice days. made to bit mean our of And previously. to able to Yes. we get at the in us, at improvement hard able moment particularly we’re a press welding you than of been that’s by some hold things, been welders in larger a robotics units. robots for do faster been in in investing these and We’ve look of because I A come couple I Greg. if some

So that’s help. been a good

We are limited. not facility

We’re limited at moment. else limited machine not floor the space tool or anything or

time. And Our them we of last those manpower than And limitations them been But challenges the I get then to can. bit many as manpower, been to And the and we that to headway are every to fairly book the have stepping to in we we that’s up think and going trying it. over indoctrinated to there continue. else. while. things for our generate and we are the more are are that’s plants, with obviously, But the making able people has that are supply trick as I a be consistently takes anything in that train rate onboard chain few at do which a we’ve a them likely months, and revenue trend hire think so

Very good. Thanks.

at no have turn to concluding the further this remarks. like team the questions I for any to call time. would We over management back

call November. We you to with our on joining you for thank speaking in forward look everybody today. us third Well, again quarter Okay. XXXX again

So thank for joining you once again, today. us

And does that conference. ladies and today’s We your today. participation conclude appreciate gentlemen,