The Manitowoc Company (MTW) FY Conference August 27, 2025 08:15 AM ET Speaker0Happy to have the Manitowoc company here, trades on New York and NYSE. They've been a client of ours for about a year and a half, maybe two years now, and really enjoyed working with them. You know, this is a name that, we think is an opportune time to be looking at it. The crane cycle has been really rough this last decade or so, but we think we're either at or near the bottom of the cycle. The stock's trading 25%, 30% below tang ...

Summary of Conference Call Company Overview - **Company**: Finia, a spinoff from BorgWarner, specializes in light vehicle fuel injection systems and has a strong presence in commercial and aftermarket businesses. [1][2] Key Industry Insights - **Market Growth**: The fuel injection market is experiencing content growth due to higher adoption of direct injection technologies. The company anticipates mid to high single-digit growth through the decade, particularly in natural gas and alternative fuels for commercial vehicles. [4][5] Financial Performance - **Cash Flow**: Finia targets over 90% free cash flow conversion, highlighting its strong cash flow generation capabilities. [2] M&A Strategy - **Acquisition Focus**: The company recently made a small acquisition aimed at enhancing its commercial vehicle and aftermarket exposure. The acquisition is expected to complement its existing product lines and leverage its engineering capabilities. [3][4][6] - **Valuation Metrics**: The acquisition was made at a multiple of 4.7, compared to Finia's own trading multiple of 5 to 5.5. [5] - **Future M&A Plans**: Finia is open to further acquisitions, particularly those that align with its existing portfolio and provide shareholder value. The company is cautious about pursuing aftermarket assets that do not have manufacturing capabilities. [7][10] Market Position - **Competitive Landscape**: Finia sees itself as one of the two major players in the light vehicle fuel injection market, alongside Bosch. Smaller competitors are exiting the market, which may provide opportunities for Finia to gain market share. [13][19][21] - **Revenue Goals**: The company aims to maintain its light passenger vehicle revenue between $900 million and $1 billion, while growing its aftermarket and commercial vehicle segments. [16] Sales and Revenue Guidance - **Q1 Performance**: The company reported Q1 revenue in line with expectations, despite a typical seasonal softness. The impact of foreign exchange (FX) was noted, with an estimated $80 million effect on revenue. [24][27] - **Commercial Vehicle Outlook**: The commercial vehicle segment is expected to remain flat to slightly up, with year-over-year declines anticipated in Europe and the Americas. [31][32] Tariff Exposure - **Impact of Tariffs**: Finia has experienced a $4 million impact from tariffs in Q1, with plans to pass through costs to customers. Approximately 60% of its revenue from Mexico is USMCA compliant, mitigating some tariff impacts. [36][39] Aftermarket Strategy - **Aftermarket Growth**: The company aims to increase its aftermarket revenue, currently at 34%, to over 40%. It has a billion-dollar aftermarket distribution network that supports this growth. [9][11] Technological Developments - **Powertrain ECU Development**: Finia is developing its own powertrain ECUs to provide a complete system offering to customers, with a focus on nonrecurring engineering support. [75][76] - **Aerospace and Defense Opportunities**: The company is entering the aerospace sector, supplying fuel injection components, with aspirations to grow this segment significantly by 2030. [78][79] Market Trends - **GDI Penetration**: Gasoline Direct Injection (GDI) penetration is currently around 65-70%, with expectations for continued growth in various global markets, including South America and India. [56][57] - **Battery Electric Vehicles (BEVs)**: The company anticipates that BEV penetration will plateau at around 25-35%, indicating a sustained demand for combustion engines. [60][64] Conclusion - **Long-term Vision**: Finia is focused on maintaining a balanced portfolio with a strong emphasis on aftermarket and commercial vehicle segments, while strategically navigating market challenges and opportunities for growth. [70][73]

Financial Data and Key Metrics Changes - Net sales increased by 8% to $229 million, driven by a 3% increase in both price and organic volume, along with a 3% contribution from the Core King acquisition [7][19] - Gross profit margins rose to 49.5%, an increase of 30 basis points, marking the ninth consecutive quarter of year-over-year gross margin expansion [5][10] - Adjusted EBITDA increased by 9% to $49 million, with adjusted EBITDA margins also increasing by 30 basis points to 21.5% [10][19] - Adjusted diluted EPS increased by 25% to $0.10 [11] Business Line Data and Key Metrics Changes - North American net sales increased by 8% to $187 million, driven by 3% net price realization and 2% higher volume [20] - In Europe and Rest of World, net sales increased by 7% to $42 million, benefiting from 1% favorable net pricing and 8% higher volume [22] Market Data and Key Metrics Changes - Sales growth was consistent across both segments, with North America net sales increasing by 8% and Europe and Rest of World by 7% [8] - Trends improved in March, aligning with normal seasonal demand as the peak pool season approached [9] Company Strategy and Development Direction - The company is focused on mitigating tariff impacts while supporting margins and positioning for growth, with over 80% of sales aligned with aftermarket needs [6] - The recent launch of the Omni X platform aims to provide wireless IoT connectivity and control for non-automated pools, representing a significant growth opportunity [5][16] - The company confirmed its guidance for 2025, expecting net sales to increase approximately 1% to 5% and adjusted EBITDA of $280 million to $290 million [7][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the increasing economic uncertainty but expressed confidence in the resilience of the business model, particularly in the aftermarket segment [9][28] - The company anticipates pressure on discretionary elements of the market, such as new construction and remodels, due to economic conditions and higher interest rates [9][28] - Management remains optimistic about long-term growth in the pool industry, especially in the aftermarket segment [29] Other Important Information - The company is taking proactive measures to reduce reliance on China for sourcing, aiming to decrease direct sourcing from approximately 10% to 3% by year-end [12][13] - Total liquidity at the end of the first quarter was $398 million, with no near-term debt maturities [23] Q&A Session Summary Question: Clarification on tariffs and mitigation actions - Management discussed the estimated annualized tariff impact of approximately $85 million, primarily from China, and outlined steps to increase domestic manufacturing to mitigate this impact [34][35] Question: Channel inventory levels and demand impact - Management expressed confidence in current channel inventory levels, stating they are appropriate for the season and have been recalibrated in prior periods [49][51] Question: Trends in consumer behavior and pricing actions - Management noted that while there has been some deferral in discretionary spending, the maintenance side of the business remains resilient [53][72] Question: Insights on OmniX sales and automation adoption - Early trends with OmniX have been encouraging, and the platform is expected to provide a cost-effective solution for homeowners looking to automate their pools [75][76] Question: Manufacturing utilization and cost levers - Management indicated that bringing more manufacturing to the U.S. will increase utilization rates and provide opportunities for margin improvement through automation [80][83]