Douglas Dynamics(US:PLOW)2025-05-06 20:02Financial Performance - Net sales for the three months ended March 31, 2025, were $115.1 million, an increase of $19.4 million or 20.3% compared to $95.7 million in the same period of 2024[113] - The Work Truck Attachments segment reported net sales of $36.5 million for the three months ended March 31, 2025, up from $23.8 million in 2024, reflecting an increase of $12.7 million due to improved snowfall[114] - The Work Truck Solutions segment achieved net sales of $78.6 million for the three months ended March 31, 2025, compared to $71.8 million in 2024, an increase of $6.8 million driven by improved municipal volumes[115] - Gross profit rose to $28.1 million for the three months ended March 31, 2025, an increase of $9.2 million or 48.7% compared to $18.9 million in 2024, with gross profit as a percentage of net sales increasing to 24.5%[117] - Net income for the three months ended March 31, 2025 was $0.1 million, an increase of $8.5 million compared to a net loss of $8.4 million for the same period in 2024, representing a change from (8.7%) to 0.1% of net sales[124] - Adjusted net income for the three months ended March 31, 2025, was $2.2 million compared to a loss of $6.5 million in the same period of 2024[149] - Adjusted diluted earnings per share for the three months ended March 31, 2025, was $0.09, compared to a loss of $0.29 in the same period of 2024[149] Cost and Expenses - Cost of sales increased to $86.9 million for the three months ended March 31, 2025, up $10.2 million or 13.3% from $76.7 million in 2024, with cost of sales as a percentage of sales decreasing to 75.5% from 80.2%[116] - Selling, general, and administrative expenses were $24.9 million for the three months ended March 31, 2025, an increase of $0.8 million or 3.3% from $24.1 million in 2024, primarily due to higher stock-based compensation[118] - Free cash flow for the three months ended March 31, 2025 was ($3.5) million, an improvement of $19.4 million compared to ($22.9) million in the same period in 2024[135] Liquidity and Financing - Total liquidity as of March 31, 2025 was $119.7 million, consisting of $7.2 million in cash and cash equivalents and $112.5 million in borrowing availability, down from $154.6 million as of December 31, 2024[128] - Interest expense decreased to $2.4 million for the three months ended March 31, 2025, down from $3.5 million in the same period of 2024, attributed to lower interest on revolver and term loan[122] - The company executed a sale leaseback transaction for gross proceeds of $64.2 million in 2024, using a portion to pay down $42.0 million on its term loan[108] - Net cash provided by financing activities increased by $4.8 million for the three months ended March 31, 2025, related to $12.0 million in revolver borrowings outstanding[134] Operational Efficiency - Adjusted EBITDA for the three months ended March 31, 2025 was $9.4 million, compared to $1.5 million for the same period in 2024, driven by improved performance in the Work Truck Solutions segment[142] - Adjusted EBITDA for the Work Truck Solutions segment was $9.1 million for the three months ended March 31, 2025, an increase of $3.1 million from $6.0 million in the same period of 2024[146] - The Work Truck Attachments segment reported Adjusted EBITDA of $0.3 million for the three months ended March 31, 2025, a significant increase of $4.8 million from ($4.5) million in the same period in 2024, attributed to better snowfall conditions[145] - Net cash used in operating activities decreased by $20.3 million from the three months ended March 31, 2024 to March 31, 2025, primarily due to an increase in net income and favorable changes in working capital[132] Tax and Regulatory - The effective tax rate for the three months ended March 31, 2025 was 69.8%, significantly higher than 16.0% for the same period in 2024, impacted by discrete tax expenses related to stock compensation[123] Market and Economic Conditions - Inflation in materials and labor had a material impact on profitability, with ongoing inflationary pressures expected to continue affecting costs in 2025[154] - The company anticipates that cash on hand and generated from operations will provide adequate funds for the foreseeable future despite market volatility and inflationary pressures[108] - The company is exposed to interest rate risk due to variable rates on borrowings, with $12.0 million outstanding under the revolving credit facility as of March 31, 2025[167] - A hypothetical 1% increase in interest rates would have resulted in an additional interest expense of $0.1 million for the term loan for the three months ended March 31, 2025[164] Strategic Initiatives - The company implemented a 2024 Cost Savings Program in January 2024, involving restructuring charges for salaried headcount reductions to preserve liquidity[108] - The company implemented a 2024 Cost Savings Program aimed at restructuring and reducing discretionary spending to preserve liquidity[128] - The company anticipates managing seasonal impacts through a pre-season sales program, which has historically generated over two-thirds of sales in the second and third quarters[158] Commodity and Risk Management - The company entered into a steel hedging agreement on December 17, 2024, to mitigate exposure to commodity price fluctuations[169] - The notional quantity of the steel hedging instrument is 3,000 short tons, effective from August 1, 2025, to December 31, 2025[169] - The company expects the hedge to cover slightly less than half of its exposure during the effective period[169] - Fixed payments under the steel hedge agreement are set at $819 per short ton for Steel Hot Rolled Coil (HRC) commodity[169] - The steel hedging instrument is classified as a cash flow hedge[169] - The fair value of the steel hedging instrument was positive $0.0 million as of March 31, 2025, and negative $0.1 million as of December 31, 2024[169] - The fair value changes are reflected in Prepaid and other current assets and Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheet[169] Supply Chain Management - Steel purchases as a percentage of revenue decreased to 8.5% for the three months ended March 31, 2025, from 12.5% in the same period of 2024[168] - The company employs a highly variable cost structure, allowing adjustments in response to changing demand, which is critical for managing profitability amid market fluctuations[166]