MYERS INDUSTRIES INC Q3 FY2024 earnings call

• The addition of Signature Systems and Scepter's strong performance contributed to sales, gross margin, and adjusted EBITDA growth. Signature drove gross margin expansion, and Scepter's sales grew ~60% year-over-year.
• Faced demand headwinds in RV, marine, automotive aftermarket, and food and beverage end-markets; increasing sales activity in affected markets and introducing $15M in annualized cost-cutting initiatives.
• Paid down $5M of Term A loan amortization and $8M of revolver, totaling $13M in debt paydown; committed to reducing leverage ratio to ~2x by end of next year.
• Scepter responded to hurricane demand for portable fuel containers and worked on military contracts; Signature's MegaDeck had strong sales momentum; e-commerce channel growing faster than industry average; new leadership team appointed for distribution business to improve performance.

Material Handling Segment: Net sales increased to $18.2 million, a 13.8% rise compared to the prior year. Adjusted EBITDA increased $8.3 million to $33.5 million, with an adjusted EBITDA margin of 22.2%. Distribution Segment: Net sales decreased $11 million, a 16.8% year-over-year drop to $54.4 million. Adjusted EBITDA decreased $3.4 million to $3.2 million, with an adjusted EBITDA margin of 5.8%.

• Reduced full-year adjusted earnings per diluted share guidance to the range of $0.92 to $1.02.
• New full-year guidance: net sales growth 0% to 5%; net income per diluted share $0.11 to $0.21; capital expenditures $28 million to $32 million; effective tax rate remaining at approximately 26%.

• Demand headwinds in several end-markets including recreational vehicles, marine, automotive aftermarket, and food and beverage.
• Macroeconomic conditions leading to cautious customer spending behavior.
• Goodwill impairment of $22 million related to rotational molding business in Material Handling Segment due to continued market headwinds.

Q: What have you been focused on as Interim CEO and where can you make the biggest impact?

A: Focused on two areas - growing power brands and optimizing costs for engineered products businesses. These are the primary areas where the biggest impact can be made.

Q: Where have you been surprised with power brands' performance and where do you see upside?

A: Surprised by additional headwinds in the food and beverage end-market, particularly in seed containers and IBC paste containers. Upside seen in military sales of Scepter (projected to grow to $40M next year) and demand for Signature's infrastructure products.

Q: What is the timeline for cost savings initiatives and their reflection in results?

A: The $15M cost-cutting initiatives are incremental. Tranche 1 initiatives were mostly implemented in Q3, with impact seen in Q4 and full effect expected in 2025.

Q: What is the strategic rationale for keeping the distribution business?

A: Distribution is an important part of Myers' heritage. The company is focused on improving the distribution business to return it to past profitability levels and grow from there.