DOUGLAS DYNAMICS, INC Q4 FY2024 earnings call

• Jim Janik: Highlighted the positive fourth quarter results with improved metrics across all segments, praised Solutions segment's record annual performance and Attachments segment's margin improvement via cost savings, mentioned dividend remains a priority and will be maintained in 2025, discussed M&A approach focusing on specific criteria but not actively pursuing deals, and provided update on leadership transitions.
• Mark Van Genderen: Announced Chris Bernauer's appointment as President of Work Truck Attachments, discussed Work Truck Attachments' weather impact (regional snowfall, dealer sentiment positive but inventory still above average), highlighted cost savings program success, and noted Work Truck Solutions' record year with strong municipal performance and focus on fleet business opportunities.
• Sarah Lauber: Reviewed financial results (net sales flat, gross profit up 9%, adjusted EBITDA up 16%), discussed SG&A expenses increase, net income and adjusted EPS growth, strong backlog at year-end, balance sheet strength, capital allocation including dividend maintenance, and 2025 guidance assumptions.

Attachments: Sales were down 12% to $256 million, while adjusted EBITDA only declined 4% to $48.5 million. The adjusted EBITDA margin improved 160 basis points to 18.9% due to the 2024 cost savings program. Solutions: Net sales grew 13% to $312.5 million, and adjusted EBITDA increased 76% to $30.9 million with margins of 9.9%, a 350 basis point improvement. In terms of revenue contribution, Attachments accounted for approximately 45% of the total net sales of $568.5 million, and Solutions accounted for approximately 55%.

• 2025 net sales expected to be between $610 million and $650 million.
• Adjusted EBITDA predicted to range from $75 million to $95 million.
• Adjusted earnings per share expected to be in the range of $1.3 to $2.1 per share.
• Effective tax rate expected to be approximately 24% to 25%.
• Assumes relatively stable economic and supply chain conditions and average snowfall in core markets, with attachment demand in 2025 approximating 2023 levels depending on snow season and equipment wear.

• Weather-related risks: Regional snowfall patterns impacting sales in key markets like Chicago, New York, and Boston.
• Operational challenges: Prolonged low snowfall leading to a lengthened equipment replacement cycle affecting Attachments segment.
• Economic and supply chain risks: Potential impact on guidance if economic conditions or supply chains deviate from assumptions.

Q: Good morning and thanks for taking my questions. So let's start off with some weather headlines. So there's a bit of winter weather in the South and Southeast U.S. Last month, not areas that we normally see snow. I was wondering if you were able to ship at least a couple of units to those areas and maybe help some of your dealers reduce their channel inventories at least just on a one time basis for the big snow we saw earlier this year?

A: Yes, Mike, this is Mark. I'll certainly be happy to answer that question. I would say in general to your point, we don't have a strong dealer presence in the Deep South. That being said, I'd point to a couple of things. I think one is, if you look at our SnowEx line of products, we use a distribution model for that and it remains a bit more nimble. So our distributors can sell to independent dealers. I think it's fair to say we certainly saw products being sold in markets where we traditionally wouldn't see them being sold based on that snowfall. The other thing that we'll see and have experienced is opportunistic and very smart contractors in the North will actually head down to the South and they will head down during these snowstorms and help to remove equipment or excuse me, help to remove snow with their equipment. So, it may not be a direct impact on dealer inventory, but it certainly helps the usage of the equipment for eventual replacement.

Q: You mentioned I guess snowfall has been market or regional focus. Can you just remind us where like your most important markets are? Like you did mention the big cities, but when we think about the regional distribution of where snow is falling?

A: Yeah, I can. Greg, it's Mark, I'd be happy to take that. With our three brands, we have a nice national footprint basically anywhere that it snows. But to your point exactly I mean it's really, we look at kind of where the major population centers are. So as we think about it, and this is very rough, it's kind of anything East of the Mississippi and kind of north of, if you want to call it kind of Tennessee, Virginia, that's really the sweet spot. So anywhere in the upper Midwest, Ohio Valley, the Mid-Atlantic, New York, New Jersey, up into Maine and then certainly we have a strong presence in Canada as well. So with some of the storms that we've seen recently, Ottawa, Toronto, getting hit with some major snow, that certainly is very beneficial for, for us.