MYE - NYSE

Ladies and gentlemen, welcome to the Myers Industries, Q2 2024 Earnings Call. My name is Kenneth, and I'll be coordinating your call today. [Operator Instructions]. I would now hand you over to host Meghan Beringer to begin. Please go ahead.

Thank you, Kenneth. Good morning, everyone and thank for you joining Myer’s conference call to review 2024 second quarter results. I'm Meghan Beringer, Senior Director of Investor Relations at Myers Industries. Joining me today is Mike McGaugh, our President and Chief Executive Officer; and Grant Fitz, Executive Vice President and Chief Financial Officer. Earlier this morning, we issued a press release outlining our financial results for the second quarter of 2024. We have also posted a presentation to accompany today's prepared remarks, which is available under the Investor Relations tab at www.myersindustries.com. This call is also being webcasted on our website and will be archived along with the transcript and script of the call shortly after this event. After the prepared remarks, we will host a question-and-answer session. Please turn to Slide 2 of the presentation for our Safe Harbor disclosures. I would like to remind you that we may make some forward-looking statements during this call. These comments are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements. Also, please be advised that certain non-GAAP financial measures, such as adjusted gross profit, adjusted operating income, adjusted EBITDA, and adjusted EPS may be discussed on this call. Further information concerning these risks, uncertainties and other factors are set forth in the Company's periodic SEC filings and may be found in the Company's 10-Q filings. Now please turn to Slide 3 of our presentation. I am pleased to turn the call over to Mike McGaugh.

Thank you, Meghan. Good morning, everyone, and welcome to our second quarter 2024 earnings call. I will begin today with the review of the performance highlights from the second quarter. I will discuss the progress we're making in executing our strategy. And I will then hand the call to Grant to review in detail our financial results and outlook for the remainder of the year. Our second quarter results were bolstered by the solid performance of our recently acquired Signature Systems business. These results reflect the company’s first full quarter with Signature Systems . This business is benefiting from worldwide investments in infrastructure and enabled Myers to outpace the demand headwinds in the recreational vehicle, marine and automotive aftermarket end-markets. Combined with our cost reduction and operational improvement initiatives across the company, Signature helped us drive and expansion in gross margin, operating margin and adjusted even EBITDA margin, sequentially and year-over-year. Myers’ second quarter adjusted EBITDA of $38.9 million and an adjusted EBITDA margin of 17.7% is a strong quarter in terms of performance. Adjusted diluted earnings per share also improved year-over-year. As I highlighted at our Investor Day earlier this spring, we anticipated demand to be choppy through this year. As I said then, we're not out of the woods yet. Indeed, we are seeing continued soft demand in our sales to the recreational vehicle, marine and automotive aftermarket end-markets. In our food and beverage end-market, we know that the seed box businesses is also cyclical. Following years of seed box sales - following strong years of seed box sales in 2022 and ’23, 2024 is showing signs of cooling demand. We are growing our industrial box business to help mitigate the volume decline of seed going forward. In lot of the softer demand, we continue to take actions to reduce costs and increase productivity across the company. These actions include the consolidation of three distribution centers in our Myers Tire Supply business, as well as today's announcement of the consolidation of our Atlantic Iowa Rotational Molding facility into our other rotational molding facilities in Indiana. We're able to reduce our footprint and reduce our cost due to the productivity gains that I've spoken about in past calls. We expect these closures to be completed in 2025 in the resulting annual cost savings of approximately $5 million to be fully realized in 2025, as well. With these actions, we are on track to deliver the $7mln to $9 million in annualized cost savings we've committed. These savings will impact the income statement in 2025. In addition, we are also on track to deliver the $8 million in annualized cost synergies in 2025, in connection with our acquisition of Signature Systems . Grant we'll speak to our cost savings and synergy progress in more detail in his segment. I'm confident that our productivity improvement and cost reduction initiatives will help us navigate the cyclical demand conditions, some of our end-markets are experiencing, while also positioning the company favorably for when these conditions revert to stronger levels of demand. As a result of the continued soft demand conditions in the referenced end-markets, we felt it was prudent to lower our full year adjusted earnings per share guidance to a range of $1.05 to $1.20. Grant will provide a more detailed discussion of our outlook momentarily. But before I hand the call over to Grant, I'd like to speak a few moments reviewing our strategy that continues to Guide our decisions and actions as we transform Myers Industries. Please turn to Slide 4, which provides a remind of the three Horizon strategy roadmap that we have followed for the last four years. In Horizon 1, we built the strong foundation of operational and commercial excellence. We gained experience and scale through smaller bolt-on acquisitions and as a result, we were well-positioned to announce our acquisition of Signature Systems , largely accomplishing our Horizon 1 goals by our 2023 target date. As we enter the second horizon of our journey, we are building on the fundamentals established in Horizon 1 to transfer Myers – transform Myers into a stronger, simpler, high margin growth-oriented company. We believe this strategy and our approach to acquiring and building businesses than branded products, higher barriers to entry, clear long-term growth tailwinds, and significant commonalities with our four power brands will unlock meaningful value creation for Myers Industries long term. Slide 5 and 6 of today's presentation are a reminder of our Horizon 2 strategic imperatives in the resulting strategic lens. This includes the focus on growing the storage handling and protection portfolio, as well as a focus on maximizing the value of our Engineered Solutions and Automotive aftermarket portfolios. On Side 7, we summarize the progress we've made since our first quarter earnings call. Notably, we are continuing to benefit from strong growth at Signature Systems , as well we are realizing gains and productivity and taking cost reduction actions in our Engineered Solutions and Automotive aftermarket portfolios. Within the Storage Handling and Protection portfolio, we have a long runway for growth in the infrastructure and military end-markets and we continue to invest capital and innovation in this portfolio. In the Engineered Solutions and Automotive aftermarket portfolios, we are focused on maximizing values by driving further improvements in efficiency, reducing our cost, maximizing cash flow, while delivering excellent value to our customers These ongoing initiatives, combined with improved growth and profitability across the portfolio and contained continued contribution from our four power brands listed on Slide 8 will help us maximize cash flow and delever appropriately, an important priority for us following the acquisition of Signature Systems . In summary, we believe our second quarter actions and results demonstrate meaningful progress on our path to transform our company. And we are confident that the strategy we're implementing will drive long-term shareholder value creation. Now I will turn the call over to Grant for a detailed review of our second quarter financial results and updates to our outlook.

Thank you, Mike. I would like to begin on Slide 9 to go over the full summary of the second quarter 2024 financial results. Net sales were $220.2 million, which increased $11.8 million or 5.7%, compared to the second quarter of 2023, with the increase primarily driven by the Signature Systems acquisition, which contributed 15.2% of inorganic sales growth as compared to Q2 of last year, partially offset by a 9.6% organic sales decline related to lower pricing in volumes in both the Material Handling and Distribution segment legacy businesses. Our quarterly adjusted gross profit was $79.6 million, an increase of $11 million or 16%, compared to $68.6 million in Q2 of last year, largely driven by the Signature Systems acquisition and partially offset by an adjusted gross profit decline in our legacy business. Adjusted gross margin was 36.1% compared to 32.9% in 2023. The variance in adjusted gross margin was driven by the acquisition of Signature Systems , favorable product mix and lower material cost, partially offset by lower pricing and volume. Selling, general and administrative expenses decreased $1.8 million sequentially or 3.4% and $0.7 million year-over-year or 1.3% to $51.7 million. SG&A as a percentage of sales decreased to 23.5%, compared with 25.8% in the first quarter of 2024 and 25.1% in the same period last year. Excluding contributions from Signature Systems , SG&A expenses declined 18% year-over-year and SG&A as a percentage of sales would have been 22.8%, driven in part by lower incentive compensation accruals reflecting Myers’ full year outlook and other cost savings initiatives. Adjusted operating income in the second quarter increased 51.5% year-over-year to $28.8 million as compared to $19 million in Q2 of 2023. Second quarter adjusted EBITDA was $38.9 million, which increased 57.4% compared to the prior year quarter again, largely driven with the addition of Signature Systems . Adjusted EBITDA margin increased 580 basis points to 17.7% from 11.9% in the second quarter of last year and as Mike mentioned, this is one of our strongest quarters of adjusted EBITDA margin - adjusted EBITDA performance in recent history. Adjusted earnings per share was $0.39 compared to $0.35 in Q2 of 2023 with the variance compared to the second quarter of last year driven by the improvement in sales and operating margins, offset by increased interest expense related to the term loan, which was used to finance our acquisition of Signature Systems . For an overview of each segment’s performance, please turn to Slide 10. For the Material Handling segment, net sales increased $22.7 million or 15.9%, compared to the prior year. The increase was driven by 22.1% inorganic sales increase related to the Signature Systems acquisition partially offset by a 6.3% organic sales decline resulting from lower volumes and pricing. Material Handling’s adjusted EBITDA increased $11.6 million or 39% to $41.5 million and adjusted EBITDA margin increased to 25% or an improvement of 420 basis points, compared to the second quarter of 2023. These positive deltas were primarily driven by Signature’s contribution, which was partially offset by a decrease in sales volume and pricing in our other businesses. Net sales for the Distribution segment decreased $10.9 million or 16.7% year-over-year to $54.3 million, driven by lower sales volumes and pricing. The segment’s adjusted EBITDA increased - decreased $0.9 million or 20.1% to $3.8 million resulting in adjusted EBITDA margin decreasing 30 basis points to 6.9% as compared to 7.2% in the prior year quarter. The variances in EBITDA and margin performance as compared to Q2 of last year were primarily driven by the decline in sales volumes and pricing, partially offset by a favorable sales mix in material costs. Slide 11 and 12 of today's presentation provide updates on our progress to achieve our $7 million to $9 million in annualized cost reduction targets and $8 million in synergies with the Signature acquisition. As prefaced earlier, we are on our way to achieve these initiatives with the recent cost reductions and the efficiency improvements as well as the rationalization of our manufacturing footprint. These actions include the consolidation of three distribution centers in our Meyers Tire Supply business and the consolidation of our Atlantic Iowa roto molding facility into our other rotational molding plants. We are able to reduce our footprint and reduce our cost structure due to the productivity gains we've achieved. We expect these closures to be computed in 2025 and will deliver approximately $5 million in annualized cost savings. On Slide 12, you will see that we are on plan with our Signature integration and we'll continue to benefit from productivity and operational improvements, material savings and other initiatives. Through these combined initiatives, we will continue our dedicated efforts to self help the business, which in turn will create a new simplified Myers that is advantageously positioned for growth in the coming years. Turning to Slide 13. Free cash flow for the second quarter of 2024 was $9.9 million compared to $16.7 million for the second quarter of 2023. Working capital as a percentage of net sales was up roughly 400 basis points, compared to the second quarter of 2023, which reflects an increase from historical trends as a result of the acquisition of Signatures Systems, because we have the full amount of working capital, but not yet a full 12 months of Signature sales. Thinking on that is necessary to grow through our acquisitions, however you as you will see later in the deck, we are well positioned to pay down the debt with a goal to decrease our net leverage ratio under the credit agreement to below two times within two years of the closing of Signature. Capital expenditures for the second quarter of 2024 were $4.4 million and cash on hand at quarter end totaled $37.3 million. And finally, our leverage ratio under the credit agreement was 2.6 times. On Slide 14, I want to discuss Myers’ capital allocation priorities. As noted, we are focused on creating a simplified Myers through the cost cutting initiatives and increasing revenue and volumes through the strength of our four power brands. We are focused on reducing our debt through following the recent - following the recent Signature Systems acquisition and we are targeting to reach a leverage ratio of under two times within two years of the closing the Signature Systems . We also want to make maintain a strong balance sheet and ample liquidity for our business. At the end of June, Myers had $37.3 million of cash on hand and over $230 million of a large undrawn credit facility. We will continue to fund maintenance and other CapEx requirements, although as you can see we reduced our expected CapEx spend with the revisions to our outlook this morning. We also plan to continue with our existing practices for dividends. Finally, we will evaluate the most beneficial uses of cash to create value through additional acquisitions with targets similar to Signature with clear commonalities to our four power brands or potentially through share buybacks, the timing of potential acquisition opportunities and when debt has been paid down to more historic levels. Now please turn to Slide 15 for an update on our outlook for the fiscal year 2024. We are revising our four-year guidance to reflect the slower demand and challenges within certain end-markets and the broader macroeconomic conditions which we discussed earlier today. Our new guidance ranges are, our net sales growth of 5% to 10%, net income per diluted share in the range of $0.76 to $0.91, adjusted earnings per diluted share in the range of $1.05 five to $1.20, capital expenditures in the range of $30 million to $35 million, effective tax rate to approximately 26%. Turning to Slide 16, I want to highlight some of the near-term growth opportunities that we foresee during the second half of the year that we are quite excited about. Signature Systems will continue to benefit from long term infrastructure improvement projects. To meet this increased demand, we are ramping up our production capacity. Additionally, we have recently launched the new - the exciting new Diamond Track product which is a product that removes tire sediment and mud on site at construction and infrastructure projects. The Diamond Track allows this removal a more economical and efficient manner versus traditional gravel. This is another example of Myers’ ability to convert market from traditional materials to reusable composite that are more economical and environmentally friendly. On Slide 17, Scepter also appears poised for growth with increased- increasing sales of military products. Our military products serve as lightweight alternatives to most existing animal casings and we have successfully aligned our operational capabilities to realize this opportunity. We are pleased that these Scepter products meet virtually - meet all virtual qualifications - for vital qualifications including NATO and the US Department of Defense and we secured recent contract wins in the United States and we are also engaged in award processes for additional potential contract wins in Europe. We are estimating that the Scepter military business will grow to approximately $40 million in revenue through 2025, compared to only $10 million of revenue - military revenue in 2023. Lastly, and just a note on the status of the current storm season, as questions start to come up at this time of year, particularly given the recent hurricane Beryl, we are seeing an uptick in our five gallon gas can sales from an early start to the hurricane season, which resulted in significant power outages in Houston in July. We will continue to monitor the potential impacts from what is expected to be a strong storm season this year. Now I will turn the call back to Mike for some closing comments.

Thanks, Grant. Please turn to Slide 18. As I conclude my remarks, I'd like to reinforce how we are moving forward in Horizon 2 of our strategy. First, throughout the quarter, we took action to improve costs and efficiency to maximize value in the Engineered Solutions and Automotive aftermarket portfolios. I outlined approximately $5 million of annual cost reductions that will impact our results in 2025 and beyond. This is a component of the $9 million of total annual cost reductions highlighted by Grant in his talk. Second, we are growing the branded products in the Storage Handling and Protection portfolio. We have highlighted growth projects, all largely plays where our sustainable plastic products replace another material. This is being driven across all four of our power brands Buckhorn, Akro-Mils, Scepter and Signature Systems . Third, our continued work to institutionalize our commercial excellence and operational excellence gains from Horizon 1 continues to provide benefit in terms of our EBITDA margin and dollars. As a reminder, we are making these gains permanent through the establishment of our Myers business system I've discussed in prior calls. And last, we continue to position the company, so that it can capitalize on long-term growth trends. Two good examples are Scepter’s growth runway in military applications and Signature’s growth runway in infrastructure. We anticipate that these long-term trends will help drive the company's growth over the next several years. With that, I'd like to turn the call over to the operator for questions.

[Operator Instructions] We have our first questions from Jacob Mal from KeyBanc.

Hey, good morning. This is Jacob Mal filling in for Christian today. Thanks for taking the questions.

Thank you Jacob. Thanks.

First one for me. I’d like to ask about the sustainability of Material Handling margins following the Signature deal. Should we think that this quarter is a new is a normalized level for the segment given the mixed bag of Signature relative to ongoing pressures in your core Material Handling markets? Or was there some variable mix benefit in 2Q?

Yeah, thanks, Jacob. We did have - we certainly had some improvement in the margin from the Signature Systems acquisition. So that was something that we look at as a very you know positive thing for the business and really gets to the hydraulics of why we thought that this was such a good acquisition for Myers as it really effectively starts to create the value that our power brands can contribute. So, I would say, in general, we continue to see strong margins. As a normalized basis, we will have some ups and downs with mix. We did had some favorable next this quarter. But also we had some offset with some pricing and volume which impacted the margins, as well. And so, I would say the way we see it and we're probably a little bit more conservative on this, we would see some slight decline in gross margin in the second half of the year is what we're projecting. But that's really driven by, just in general, what I would say is some conservativeness that I think we've taken as we start to look at some of these trends in the in the - some of these key end-markets that seem to be creating some headwinds for us right now.

Yeah, Jacob, just I appreciate that question if you - on that slide 10, where we break out the results by segments and you have Material Handling going from 21% basically up to 25%. That should be a good metric. We believe this Storage Handling and Protection portfolio was we've talked it’s 80% of the of the profit runway of the company. Those are all differentiated brands, leading brands. There's good competitive modes. There's good growth runway. And so directionally, I think that your question was a good one. And that directionally, the quality of the business should sustain there. Remember, also in the Material Handling piece, you've got the Engineered Solutions business, which is largely a contract manufacturing business that has EBITDA margins as we've discussed before 10%, 12%. So it diluted a bit. And really, that's why we are focused on driving the Storage Handling and Protection portfolio is the quality of the margins. And again, I think that that should be noted going forward as where our watermarks will be.

Understood. That's - thank you for that. That's good color and I think it leads well into my next one which is same question, for distribution segment. Can you provide any latest thoughts on that segment and what you're seeing in that business? Are mid-single-digit percent margins in Distribution sustainable given the volatility we've seen in the past few quarters?

Yeah, so we reported in that Distribution segment of 7% EBITDA margin. As we've discussed before, we have we have had aspirations for higher margins in that business either high-single-digits or even low double-digits. What we found over the last couple quarters is, the retail tire business and the resulting tire supply business which is where we are is off directionally 10% year-over-year. When that happens. you lose some operating leverage and so you're going to unwind a few hundred basis points on EBITDA ex delivery versus your expectations. That 7% give or take is directionally a good number going forward. And again, like I said, as you've got in that space tire repair, right now anything that's impacted by high interest rates, demand is impacted by high interest rates or demand that's impacted by inflation. And so right now your consumer is not buying tires at the same replacement rate as we if we would have expected or hoped a year ago. As a result, the wheel weight tire valve, tire pressure sensors that we sell are also down. And so what you see in that 7% is just that an unwinding of operating leverage when you're revenues are off 15% year-over-year which is the case with that Myers Tire Supply business. So, we're trying to combat it by streamlining and we talked about the ERP work we've done over the last six to nine months, because we got on the same ERP system, we were actually able to reduce three distribution centers going from eight down to five. That simplifies the business allows them to take cost out and ultimately think that will be reflected in the margins. But 7%, Jacob is probably a fair number going forward. Grant, what would you say?

Yeah, I would say so. I think the other important part of these consolidation distribution centers it really is more of an efficiency play, as well too because we don't see a significant deterioration in terms of any service quality levels or anything else like that. So on time delivery we'll continue to perform well to the standards that Myers had set in the past. But I do think that we - as Mike said, we were thinking that this business might be able to improve the overall margin. We just see with some of the headwinds right now that's probably not likely. And so I do think that that range of 7% margin is a pretty good one for the future looking out the next couple of quarters.

Got it. Thank you. Thank you. Just a couple more from me. Can you speak to any productivity gains that you've made in either segments that enabled the footprint consolidation? And then maybe a related question to that is with the defense business ramping, do you have available capacity should we see an accelerated ramp in orders from the new Scepter products?

Yeah, so hey, Jacob, yeah. This is something I've talked about since I've arrived and been here for the last four and a half years is all with the operational excellence, I talked about the sales and operations planning processes that we brought in. he sales and operations planning, software and systems and then all the personnel we've brought in from some of these large cap companies that really help us a schedule our plants better, operate out plants better. And as a result, I talked about the hidden factor. We actually are unleashing and finding 20%, 30% more capacity out of the given machine. And as a result of that it allows us to take our assets out, streamline our footprints, streamline the company, make the company simpler while we can continue to have the runway and volume to satisfy the market demand. So it's - what you're seeing in these consolidations is the proof point of all the S&OP and operational excellence work we've been doing in 2021, 2022, 2023. As it relates to the Military, same story there. We actually have added some capacity. But we are able to get more units out of each machine based upon how we schedule it, how we operate it and ultimately our OEs higher and the output of each plant is higher. And so we're able to do more with less. And so, that's actually going to continue to bear fruit over the coming quarters and years. So Grant?

Yeah, I just would added that some additional color. I mean, I come from a pretty strong operations background and it's been really impressive what the team has been able to do on just increasing the throughput of equipment and manufacturing processes. The other thing, Jacob that we want to be careful about is, is that we still maintain capacity because we are in the trough position. And so our thought process is that as markets might pick up again in the future, in some of these end-markets that we have the ability with adding some additional shifts and things of that nature to really maintain and meet that those demand requirements, as well too. So I think it's a good balance of efficiency improvements allowing the consolidation, while still maintaining capacity for future opportunities when the peaks happen in the future, so.

Thank you. That's helpful. I think doing more with less as a common theme in the military. So you're on the right track there. Last one for me, I'd like to ask about the capacity additions in Signature specifically. When do you think those additions will be fully operational? And how soon should we expect to see an associated revenue ramp as a result?

Yeah, so again, Jacob, I’ll tell you what I can tell you recognizing that it's it is confidential information. So we've announced that capacity addition in 2024. We have an additional capacity addition that will come on in 2025. The directional goal for this business when we acquired it and Jeff Condino, who is the CEO of this business and his team, their directional goal is to double the business. Double the business in terms of revenue and EBITDA over the next nominally three or four years. I believe things are set up to do that and I believe that these two capacity additions will allow that to happen. So, good business, good growth trends. One machine has been added this year. There's another one coming online that will be - be in place for 2025.

And I would just say, when we acquired Signature, we said we expected that business to grow at least 10% annually. I think we're on a good path for that. In general, and it's very similar to the question you asked about military, we like to ramp up our capacity as the demand is there. And so, so there is some timing element of this, but we certainly have opportunities to meet the objectives that Mike outlined, so.

All right, thank you, gentlemen. That's been good color and thanks for taking our questions.

Thank you. Thanks, Jacob.

Thank you. We have our next question from Anna C. Jolly from Gabelli & Company

Hi, thanks for taking my question. It’s Carolina from Gabelli. So just to start to end with the last question. Signature, can you just give an update on how you feel the integration is going to-date?

Yeah, Carolina. It's going well, cult on the soft side the qualitative side the cultures are meshing well. We really like the quality of the Signature team. And actually it's been a nice add. The talent in the signature team I believe will be added to the rest of Myers so as to win. On the quantitative piece, the financials of delivery are coming through as we as we had anticipated. The integration itself, the cost out initiatives are again on track as Grant had mentioned. So that we have $8 million of synergies in 2025. That number still holds. And so overall, Carolina, we’re quite pleased with the acquisition, it's performance qualitative and quantitative. Grant anything to add?

I think it's going really well. Team is a strong team. We've been able to supplement on both sides where we've had some good learnings on some of the operational processes to implement some performance improvements at Signature. But also Signature has had some areas where they've had some excellence, centers of excellence type of ideas that we've been able to implement in some of our other manufacturing processes. So it's been a good opportunity to share knowledge and really drive some of the synergies that we had identified we felt we could achieve with the acquisition.

Perfect. Thanks. And then, Grant can you just help me better understand on Page 13 kind of the difference in cash flow conversions year-over-year?

Okay. In terms of cash flow conversion, we actually - we see ourselves that especially a 60% cash flow conversion business continuing. We have. That's been kind of historically where we've been at. We don't. show a specific cash flow conversion chart in our in our earnings presentations. But it is a good cash flow conversion business. And so we do think that that may continue to improve as we get some of these improvements in place with some of the cost and things of that nature. But overall, we see that with the Signature acquisition, we have - you can see that the percent of working capital has gone up. But that's really driven by - as we said in the comments, where we don't yet have the full 12 months of sales with Signature. So we think that that will start to normalize over time. Additionally Signature does bring in on a little bit more inventory than what we have in some of our other operations, but their cash conversion is really quite good. So we think that essentially offsets that. And so we should over time I think Angelina, continue to or Carolina continue to move forward with what we seen traditionally on our cash conversion for Myers.

Okay. Perfect. And then last question, just in specific to the Distribution segment, it seems as if some of the overall industry or market commentary have just around cadence has been positive potentially, and sequentially improving in June and July. Do you have any thoughts on cadence for that segment?

And Carolina, the we're seeing - we're seeing the sales come back. So, remember we had a - we made a strategic move to reorient the sales force and we did that at the back half of last year. We took ourselves personnel. We focused them on end-market retail, separate from commercial, separate from retread et cetera. That change in have conducting that change with the hundred plus sales reps it did not deliver the gains as fast as I would have expected. And in fact, in some instances, it took up a little bit backwards. Longer term, I think those are the right calls as to have focused sales organization based on end-market. The market was also down 8% to 10% in our space, weight to tire valves, tire pressure sensors. We also Carolina in the midst of changing out the sales force. We raised price and tested our value proposition probably got a little aggressive on price. What we're doing now is we're going back and addressing all of that. We're gaining back business sometimes at a lower price, ourselves people are now getting more traction. And ultimately, I don't see that end-market itself recovering until 2025. That is part of why we changed our guidance. But I also see that Myers Tire Supply it has a great brand. It's got a great brand and a great ability to service. What we're seeing is we're coming back. We're coming back and gaining share and I’d expect that to happen over the next year. So that – I hope that answers your question.

Okay. Yeah, thanks so much.

Thank you. Thanks, Carolina.

Thanks, Carolina.

Thank you. We have our next question from William Dezellem from Tieton Capital Management.

Thank you. Two questions. First of all relative to the military Ammunition carrier business, do you see that ramp in the going for $10 million to $25 million to $40 million tapping rather evenly over the quarters of this year and next year? Or does it ended up being pretty lumpy depending on how order shipments go? Walk us through the dynamics of that revenue ramp if you would please.

Yeah, Bill, good to hear from you. So on that business, what we've seen is that the contracts that we get approved for coming chunks of $10 million to $15 million chunks. And what's changed since 2023 is we now have three of those chunks if I'll call them that. And so the revenue numbers of $25 million this year and directionally $40 million next year, I feel good about those numbers. The lumpiness, Bill, is when a contract is approved and we actually go to production with Aerospace or with Military, these things just always take longer than you expect. And so, the ramp of those can be a little bit lumpy. Once that contract is in place, once we're producing the product, we're running 24/7 and we are seeing the results of it. So, I’d say at the start up, Bill, little bit lumpy. But directionally if you look at this over the next, three, five, seven, ten years the trajectory that Grant had in this slide is correct.

That's very helpful. Thank you and you said you now have three contracts. And I think in the opening remarks, there was a reference to additional contracts that you thought were possible. Could you talk to those and how significant they could be?

Yeah, directionally, the same bucket as I said $10 million to $15 million of top line per contract. I can't, Bill, get too much of the specifics because there – we’re dealing with specific countries and their militaries and their sourcing. But you would stand to believe that some of this is in Europe, some of the countries that have publicly said the restocking their artilleries. Some of those that are a little bit more concerned about some of the instability and potential conflicts there. So again, we've got good positions in Eastern Europe, as well as in Western Europe and we're negotiating with some of those militaries on this artillery packaging.

Great. Thank you. I appreciate that. And then shifting to Signature, if we could please. Longer term there's this movement to convert from wood mats to composites. Did you have in the quarter or this year any meaningful or material kind of tangible evidence of that shift or transition taking place? Or is this literally just one small piece of business at a time?

I’ll address it. So remember, let's say 80% to 90% of the installed base is a wood product. 10% to 15% is a composite product in the United in the US. In Western Europe, the installed base is that aluminum product. To the same extend 80%, 90% and then 10% or 20% is the composite product. It's very similar to what we see with our Buckhorn product. And even quite frankly similar to what we see with our Akro-Mils product is over the course of several years or really even decades, the plastic composite, particularly if it's sustainable and recyclable continues to gain share from the primary substrate, which again is cardboard in the case of Buckhorn, in Akro-Mils and it's wood in the case of Signature. The drive and the conversions that we're having and the growth there over the last five years at Signature and what we're forecasting for the next five years is, yes, you've got a trillion dollars of infrastructure spending through the two acts that Grant sighted in the slide. That's a big lift. The other piece is just the conversion. And again, if you can move your conversion of composites from 10% to 15% or 20%, you're basically doubling the available market. On the tip of my tongue, I don't specifically know those numbers that have to go back and relook at what we disclosed at Investor Day. But that is a part of the Investor Day materials under Jeff Condino’s presentation for anyone to reference.

Great, thank you. And Mike, I'm actually going to take off on one of your comments relative to Akro-Mils and the replacing cardboard with the composite. What proportion of that business is cardboard or that industry is cardboard. So just really trying to get to my mind wrapped around how far along in the transition from cardboard to composites those bins are?

Yeah, the way I’d look at it is, we've consistently talked about Akro-Mils being a GDP business, GDP plus business. The bigger driver there would be in Buckhorn and in Signature. On Akro-Mils itself, if you think about the Kanban Bins and Organizational Bins in industrial settings, at restaurants, in medical, at nurses stations, as an example, supply stations, I would be over my skis, Bill, if I try to talk about how much is cardboard versus plastic. But directionally, the key thing to know is that Akro-Mils and there's one other competitor, Akro-Mils product, based upon how we manufacture it and the raw materials we use is a little bit more durable, a little bit more heavy-duty, typically priced a little bit higher and it had - does have a brand known for the highest quality. The specific conversion rate, again GDP to 2x GDP, but it's not going to be a conversion rate of 15% - 10% or 15% like what we expect with Signature.

Great. Thank you for the time.

Thank you.

Thanks, Bill.

Thank you. We currently no other questions. [Operator Instructions] Thank you.

Just, while we're waiting to see if there's any other questions Carolina, I had said one item about the cash conversion. I had used the term percentage. I was actually referring to days. We typically have about a 60 day cash conversion cycle when we look at our days sales outstanding. Plus the days on hand less our days payable outstanding. So just to clarify that.

Alright, well, thanks, Kenneth, and thank you all for joining Myers Industries second quarter earnings call. We invite you to follow up with additional questions or meeting requests. To schedule times just please contact, Megan Beringer using the information found on Slide 26. Thank you for joining and have a great day.