Myers Industries(MYE)2024-05-07 20:47Financial Data and Key Metrics Changes - Net sales for Q1 2024 were $207.1 million, a decrease of $8.6 million or 4% compared to 2023, primarily driven by lower volume in the Distribution segment [39][40] - Adjusted gross profit was $67.6 million with a margin of 32.7%, down from $71.2 million and 33% in 2023 [39] - Adjusted earnings per share decreased to $0.21 from $0.38 in 2023, attributed to lower sales and operating margins as well as increased interest expenses related to the new term loan [39][40] Business Line Data and Key Metrics Changes - Material Handling segment net sales decreased by $0.3 million or 0.2% year-over-year, with a slight decline in volumes due to trough conditions in the marine and RV markets [40] - Distribution segment net sales decreased by $8.3 million or 13.1% year-over-year, driven by lower sales volumes, partially offset by higher pricing [34] - Adjusted EBITDA for Material Handling increased by $2.2 million or 7.1% to $32.5 million, while Distribution's adjusted EBITDA decreased by $2 million or 59.4% to $1.4 million [34] Market Data and Key Metrics Changes - The company is experiencing trough levels of demand in key end markets, particularly in RV, marine, and consumer discretionary sectors [19][20] - There is a noted slowdown in the automotive aftermarket, impacting overall performance [20][36] - The agricultural seed box orders were significantly delayed, affecting first quarter results but expected to ramp up later in the year [50][53] Company Strategy and Development Direction - The company is transitioning into Horizon 2 of its strategy, focusing on efficiency and cost reduction while maximizing the value of its businesses [5][11] - The acquisition of Signature Systems is seen as a pivotal point in the company's growth story, expected to accelerate transformation into a higher-margin company [18][31] - The company aims to achieve $15 million to $17 million in annual cost reduction and margin improvement through various initiatives [22][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that the first quarter results were disappointing and anticipates continued challenges in certain end markets [47][48] - Despite the slow start, the company maintains its full-year guidance for adjusted earnings per share at $1.30 to $1.45, albeit at the lower end of the range [20][35] - Management expresses confidence in the growth potential of the Signature acquisition and the storage handling and protection portfolio as key components of future success [43][76] Other Important Information - SG&A expenses increased by $1.4 million or 2.6% compared to 2023, primarily due to the addition of Signature Systems [33] - The company ended Q1 with a debt to adjusted EBITDA ratio of 4.2x, largely due to the debt incurred for the Signature acquisition [35] Q&A Session Summary Question: Was there a slowdown at the time of the Analyst Day? - Management noted that a significant agricultural order was pushed to later in the year, which occurred after the Investor Day, impacting first quarter results [50][51] Question: What gives confidence to maintain the current guidance? - Confidence stems from expected shifts in high-profit businesses and some upticks in consumer business, despite recognizing the first quarter miss [45][46] Question: What surprised management in the material handling side of the business? - The primary surprise was the shift of agricultural seed box orders and weaker-than-expected gas can sales in March [78] Question: Can you elaborate on the $7 million to $9 million cost savings? - These cost savings are currently identified and are expected to be achieved through footprint reduction activities and improved operational efficiency [90][91] Question: What are the expectations for free cash flow? - Management indicated that $80 million in free cash flow is reasonable based on the performance of Signature and core Myers [75][76]