Myers Industries(MYE)2023-05-04 20:04Financial Data and Key Metrics Changes - Quarterly adjusted gross profit decreased by $1.2 million or 1.6%, despite contributions from pricing actions and lower raw material costs, with adjusted gross margin increasing by 90 basis points to 33% compared to 32.1% in the first quarter of 2022 [1][3] - Adjusted operating income decreased by $5.5 million or 21.4% year-over-year due to lower gross profit and higher SG&A expenses, which increased by $4.1 million or 8.5% to $52.1 million [2] - Adjusted EBITDA was $25.9 million, a decrease of $5.1 million or 16.5% compared to the prior year, with adjusted EBITDA margin decreasing by 180 basis points to 12% [3] Business Line Data and Key Metrics Changes - Material Handling segment net sales decreased by $24 million or 13.6% year-over-year, with lower sales volume and a change in sales mix impacting performance [4][5] - Distribution segment net sales increased by $14.3 million or 29.3% year-over-year, with organic net sales increasing by 0.9% when excluding the Mohawk Rubber acquisition [5][6] - Material Handling adjusted EBITDA decreased by $6 million or 16.5% to $30.4 million, while Distribution's adjusted EBITDA decreased by $0.5 million or 11.9% to $3.4 million [5][6] Market Data and Key Metrics Changes - The company experienced strong demand in the food and beverage end market, while mixed demand was noted in the industrial end market, with reduced demand in recreational vehicle, marine, and consumer end markets [59][41] - The company anticipates mid to high single-digit growth in both Q3 and Q4, driven by price increases and new business wins [29][9] Company Strategy and Development Direction - The company is focused on four strategic pillars: organic growth, strategic M&A, operational excellence, and a high-performing culture, aiming to accelerate growth in future horizons [13][16] - The Mohawk Rubber acquisition is expected to enhance channel power and customer service, with ongoing integration efforts anticipated to improve EBITDA margins [16][18] - The company is pursuing growth in higher-end markets, including food and beverage, industrial, and military applications, with a focus on customer-driven innovation [45][83] Management's Comments on Operating Environment and Future Outlook - Management noted that while the first quarter faced economic challenges, self-help initiatives and operational excellence efforts are yielding positive results [44][47] - The company expects sales to be sequentially higher in Q2 but lower year-over-year due to continued soft demand, with an optimistic outlook for organic growth in the back half of the year [9][38] - Management expressed confidence in the strategic progress and future direction of the company, highlighting the importance of maintaining a strong balance sheet for future acquisitions [65][86] Other Important Information - Free cash flow for Q1 2023 was $16.7 million, significantly higher than $2.2 million in Q1 2022, primarily due to a decrease in working capital [7][8] - Capital expenditures for Q1 2023 were $9.1 million, with cash on hand totaling $28.2 million, indicating a strong balance sheet [8] Q&A Session Summary Question: Trends in April and May - Management noted continued strength in food and beverage, with RV and consumer markets remaining weak, but expectations for lawn and garden season are being met [26][28] Question: Impact of Food and Beverage on Other Markets - Management indicated that food and beverage growth, driven by seed box sales, is expected to help offset weaknesses in other markets, with an upward trend anticipated [27][29] Question: Capital Expenditures and Acquisitions - Management explained that higher CapEx is partly due to catch-up capital from previous years and growth capital for food and beverage and industrial markets [32] Question: Readiness for Larger Acquisitions - Management confirmed readiness for larger acquisitions, emphasizing the importance of finding the right deals with favorable economics [77][86] Question: Military Program Details - Management discussed ongoing military projects related to munitions, highlighting favorable testing results and increased demand for plastic solutions [82][83]