Myers Industries(US:MYE)2023-08-06 13:00Financial Data and Key Metrics Changes - In Q2 2023, net sales decreased by $24.7 million or 10.6% compared to Q2 2022, primarily due to lower sales in the Material Handling segment and softening consumer end-markets [53][56] - Adjusted gross profit margin increased by 90 basis points to 32.9% compared to 32% in Q2 2022 [54] - Adjusted EBITDA was $24.7 million, a decrease of $4.2 million or 14.4% compared to the prior period, with an adjusted EBITDA margin of 11.9% [55] Business Line Data and Key Metrics Changes - Material Handling segment net sales decreased by $29.8 million or 17.2% due to lower sales in consumer vehicle and industrial end-markets [56] - Distribution segment net sales increased by $5.1 million or 8.5% year-over-year, but organic net sales decreased by 6.9% [57] - Adjusted EBITDA for the Material Handling segment decreased by $2.7 million or 8.2% to $29.9 million [56] Market Data and Key Metrics Changes - The company observed softness in the RV and marine markets, impacting the Material Handling segment significantly [56] - Continued strong sales in the food and beverage end market, particularly for seed boxes, were noted [26] - The company expects a mid-single digit decline in top-line guidance for the fiscal year 2023 due to macro challenges [60] Company Strategy and Development Direction - The company is focused on a three-horizon strategy, with Horizon 1 establishing a solid foundation and Horizon 2 aiming for transformation [34][36] - Investments are being made in commercial capabilities and M&A processes to prepare for larger acquisition opportunities [37][41] - The company is pursuing innovative growth projects, particularly in military lightweighting and e-commerce channels [74] Management Comments on Operating Environment and Future Outlook - Management noted a mixed outlook for end markets, with some areas showing weakness while others, like military and e-commerce, are expected to grow [26][60] - The company remains committed to operational excellence and cost management to navigate current market conditions [41][63] - Management expressed confidence in the long-term growth trajectory of the tire industry, particularly due to the rise of electric vehicles [46][92] Other Important Information - Free cash flow for Q2 2023 was $16.7 million, down from $21.1 million in Q2 2022, primarily due to lower earnings [58] - The company has a strong balance sheet with a debt-to-adjusted EBITDA ratio of 0.9 times [59] - The company is actively working on procurement savings and standardizing processes to enhance operational efficiency [63][67] Q&A Session All Questions and Answers Question: Can you discuss the opportunity in electric vehicles? - Management highlighted that electric vehicles tend to wear out tires faster, presenting a growth opportunity for the tire industry as it is expected to grow by 3% to 5% [46] Question: Can you talk about the contribution from volume and price in the quarter? - Management noted that product costs rose, and while some price increases were captured, further price increases are being considered to manage costs [48] Question: Can you elaborate on new business wins? - Management confirmed winning a significant nationwide customer in the distribution segment, which is expected to bring substantial revenue [50]