Dave Langevin - Chairman and CEO Michael Schneider - SVP, Financial Operations and Administration.

Matt Koranda - ROTH Capital Partners Mike Sulewski - Sea Port Global Jeff Morrison - Evercore ISI Andy Cassis - Wells Fargo Jeffrey Long - Tuxedo Road Associates Fl Kirby - Morgan Stanley.

Good day and welcome to the Manitex International First Quarter 2017 Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to David Langevin, Chairman and Chief Executive Officer. Please go ahead, sir..

Thank you, Lisa. Good afternoon, ladies and gentlemen and thank you for your interest in Manitex International. On the call with me today is Michael Schneider, Senior VP of Financial Operations and Administration at Manitex. This is Michael's second quarterly call with us replacing Andrew who has moved on to the ASV joint venture.

As I mentioned on our last call, Michael has been with us for over a year. Now please refer to our first slide regarding our Safe Harbor Statement. We ask that you review this statement and also refer to our SEC filings for further guidance on the many risk factors associated with our Company.

Also please see our company website or our release for replay instructions for this call which will be available until May 11, 2017. I will begin with a brief overview, and Michael will comment on our financials. Afterwards, we will open it up for questions. Let’s begin with Slide 3.

As I’ve stated on several occasions, and hope everyone on this call is aware, we’re coming off of several years of declining business in our major product categories for many reasons, and especially slow period during most of the second half of 2016.

But I also hope everyone has seen several of our recent releases which announced that our backlog was moving up, our book-to-bill was silently over one which converts to over $90 million order taken for the quarter, which are the best in the year, and it is exciting for us to be talking about increasing production rates and visibility for our major straight mast cranes which extends for several quarters.

I would like to caution that a down cycle take several years to reach the bottom, and the positive cycle takes several years to recover. We believe we are at the beginning of a multiyear gradual recovery in our industry. And is as always the case during the early phase of recovery, some of our suppliers are very cautious in slow to expand capacity.

Thus the speed of our increase in production is dictated by the leave by of certain suppliers. Globally we now see our suppliers have expanded their capacity as the market improves. Now we are seeing progress in the second quarter in this regard. So we are experiencing an increase on our production for the second quarter.

With this increase, we believe we will see improvement in our margins even after reporting the best adjusted gross margins in this quarter for us for some time. We reported today a small operating loss which is not acceptable.

Although we adjust for the one-time cost associated with our recent very successful Con Expo show which occurs once every three years, plus the cost of producing orders which we booked early in the fourth quarter, and loan margins incurred during the bottom of the cycle, we reported a reasonable EPS for the first quarter.

And with production levels increasing, along with the strategic moves we’ve made over the last several years to simplify our company and concentrate in our higher margin areas, we believe we are very well positioned for better results in the near-term and success of improvements on a quarterly basis.

Our expectations for this year are that we will continue to reduce our overall debt levels primarily utilizing proceeds from our previously announced decision to explore strategic alternatives on our ASV joint venture and the potential effects of the deconsolidation of ASV from our balance sheet.

This will have a significant impact on our debt levels, on our balance sheet, and our debt to EBITDA ratios. Upon completion of this event and with a steady improvement in EBITDA throughout the year, we will return to levels of debt to EBITDA ratios which are more consistent with historical ratios for our company.

Also our growth for this year do not include expansion through acquisitions. We’d rather reenter this market expansion with an excellent product position, we anticipate to continue growing our market share and mobile cranes on a worldwide basis.

We entered the last market expansion with a product mix of approximately 50% material handling and 50% mobile crane products.

We had divestiture of material handling companies during the last year and a half, we have now the opportunity to regain the substantial earnings power of peak sales in our current group of crane businesses which we believe will eventually reach 250 million worldwide sales.

We believe that the execution of this plan will provide a significant benefit for our shareholders. With that opening overview, I’d like to turn over to Michael to summarize our financials after which we would welcome any questions.

Michael?.

Thanks, David, and good afternoon. Moving to financial results. Today we reported a Q1 2017 GAAP net loss from continuing operations attributable to Manitex of $3.4 million or $0.21 a share compared to a GAAP net loss of $1 million or $0.06 a share in the first quarter of 2016.

On Slide 4, I will concentrate on discussing the adjusted results for the quarter as compared to Q1 2016 which adjusts for normalizing point absorption levels, tri-annual tradeshow expenses, restructuring fees and other expenses. Our adjusted results for Q1 2017 for net income from continuing operations is 0.5 million or $0.03 per share.

Net revenues for the first three months ended March 31, 2017 decreased $17.5 million or 25.8% year-over-year. However, compared to the fourth quarter of 2016, net revenues were up $2.2 million or 3.3% reflecting a growing order book that occurred during Q1 2017.

Many of these orders originated later in the quarter after our successful Con Expo show in Las Vegas that occur every three years. These orders were unable to be converted into revenues during the quarter.

Although production began to ramp up during the first quarter of 2017, constraint on the supply chain specifically the availability of chassis units prevented higher revenues from being recognized in the current quarter. The order increase was primarily related to straight mast cranes from our Georgetown facility.

ASV segment revenues were down slightly 1.6% year-over-year as ASV we continue to focus on higher capacity machines which offset lower sales of under carriages to Caterpillar.

The equipment distribution segment sales were down $2.4 million or 43.2% year-over-year due to less sales of used equipment which was a result of the push to reduce used inventory that occurred throughout 2016.

Adjusted gross profit for the first quarter of 2017 was $14 million or 20.6% of sales compared to $14.8 million or 17.4% of sales on a year-over-year basis, and $13.6 million or 20.7% of sales on a quarter over quarter basis.

Adjusted net income for the quarter was $0.5 million or $0.03 a share compared to adjusted net loss of $0.2 million or $0.01 a share in Q1 2016, and net income of $0.3 million or $0.02 per share in Q4 2016.

Adjusted EBITDA for the first quarter of 2017 was $5 million or 7.4% of sales compared to $5.4 million or 6.3% of sales in the first quarter of 2016, and $4.4 million or 5.5% of sales in the fourth quarter of 2016. Slide 5 is a bit stable.

Showing movement in sales and adjusted net income for the first quarter of 2017 compared with the first quarter of 2016. The principle items on this reconciliation are lower sales of $17.5 million from volume.

We had a net gross margin reduction of $0.9 million, a result of $3.1 million in margin impact due to reduced volume offset by $2.2 million in improvement of margin related to normalized absorptions. We saw $0.8 million pick up related to reduced operating expenses. The interest savings of $0.9 million was due to lower borrowings.

These savings were offset by an increase in ForEx and minority interest costs of $0.1 million. Slide 6 shows that our working capital remained flat at $54.5 million for both March and December. Our current ratio remains at 1.6 times, and is consistent with December 2016.

Adjusting for PM working capital facilities, that are reported in current liabilities, the current ratio would have been 2.1 times in March versus 2.0 times at December. Operating working capital increased by $3.8 million at March 31, as production ramped up to meet the demand generated by higher backlog.

Slide 7 provides a breakout of $142.9 million of total debt at March 31, 2017.Of the total debt, $93.6 million or 65.5% is non-recourse to Manitex. In total, $57.2 million is related to working capital financing with its highly transactional or collateral based, and a further $21.4 million is in the form of convertible notes.

Slide 8 shows our capitalization net debt and liquidity position. Net debt is down $19.3 million on a year-over-year basis. Adjusted EBITDA for the quarter was $5 million and $17.1 million on a trailing 12-month basis. And with that, I would like to turn it back to David for any final comments..

Thank you, Michael. Operator we would now like to open it up for questions..

[Operator Instructions] And we'll take our first question from Matt Koranda with ROTH Capital..

Hi, good afternoon guys. Just wanted to start off with a backlog question for you guys. So if I look at the backlog as it stood January 31, I think you guys had said 51.9 and if I try to kind of back in some order flow during the last couple of months, I'm getting to a level of around, call it $53.8 million or so in the orders.

Is that directionally correct and then could you kind of talk about is that a good monthly like I mean if we divide that by two should we consider that to be kind of the monthly cadence that you’re currently at and may you could also talk about April as well and how things turned there?.

Sure, of course thanks Matt. So our backlog as we've commented on just recently from the end of the year, what happened was that the end of the fourth quarter we started to see a lot more inquiries.

And then the orders come in we made an announcement, we put out a release that we were converting inquiries to orders and then we obviously had the opportunity during the quarter because of the continuation once the Con Expo orders and another time which is they continued expansion in our orders to where we reach the level at the end of the quarter of 60 million.

And most of those two thirds of them really relate to our straight mast cranes businesses which is really the primary business that we had that’s backlog related. ASV and PM are much tighter smaller backlogs. They deal much more in short-term turnarounds of their units.

The PM one which is the crane piece that's associated with our knuckles is one where they received an order in a couple of weeks the order goes out well as we know on straight cranes the order requires a significant amount of materials that has to come in.

We typically almost exclusively mount on - almost exclusively amount on either our chassis or customer chassis. So it just a very long process but most of those relate to the straight mast crane business which again they are most profitable.

And as I said on my remarks is going out now into the third quarter and it consistently grew as we went through the first quarter. So it's a good time for us because it’s been years since we've had this experience..

Okay.

Any comment on April and sort of how things are trended since?.

Yes, the orders are continuing to come. We will probably do some further announcement I like to keep the information that we have fluid in the market and be transparent to the market. So as we see events that occur either new dealers or new products and new orders, you should expect for us to continue to make that information known..

Okay, got it. And then, it sound like I mean you talked about a little bit in your prepared remarks that Q1 revenues were constrained by the supply of truck chassis.

So could you help us understand maybe just you quantify the impact of that on your revenue run rate during Q1?.

Sure. The lead time on chassis started to expand and that went out into beyond a three month period. So orders that we received at the end - and again, chassis come from several different sources. It’s not just us ordering the chassis. Primarily it’s our customers ordering the chassis.

So to a certain extent, we're obviously - and chassis, I mean, there’re other long lead time items that we received from suppliers from around the world. And again as we know, primarily a variable cost model company. So we don’t fabricate ourselves. We get all our fabrications from outside, we get all the components from outside.

And that helps us survive during down years that we had in the last few years. So we are able reflect well to make sure that we enjoy the up years. But I suppose it’s starting to correct itself. So you had modest increases. If you look at our increases were 60 million sales in the third quarter, 64 or 65 million in the fourth quarter, 67 in the first.

And obviously now, we’ll get into apples-to-apples, I’m sure we’ll get into 70s in the second just because we are starting to increase production as we go into the second quarter..

Okay.

So is chassis no longer a constraining factor?.

Well, it’s still longer than normal lead count, but it’s coming down. The delivery dates are coming down..

Okay.

Maybe could you put some numbers on that maybe if you could, Dave?.

We’re getting them a week or two sooner than we could at the beginning of the year, rather than being 13, 14 weeks, 11, 12 weeks. And as I said, this is common, it happened every single time, you go back to 2010, this was a big issue. We had four years of up years, '10, '11, '12, '13 where we each year grew and of course that same thing happens.

You look at the chassis manufacturer and other ones as well. I don’t want to just be pointing out one. There’s other ones as well. But that was a major one that we could point out..

Okay. And that seems like probably the main gating item for you guys.

So just maybe could you talk about how that sort of impacts the lead time? So for a customer ordering a straight mast boom truck today, what will be the lead time that you would be quoting?.

Well, right now, what we're quoting is August-September..

So you fill through August-September essentially..

And you say we’re filled. We’re filled at gradual and consistent increases. We’re not anywhere close to where we were in our peak years. And so we’re just moving up. So you’ll see an increase in the second, you’ll see increase in the third. But they are gradual progress of increases, not spikes. And the PM business is very consistent.

So that hasn't seen the volatility that we saw on the straight mast cranes obviously. So we believe we’re well positioned between the straight mass and the knuckles now to consistently expand our business..

Okay, very helpful. I’ll jump back in queue..

And we’ll go next to Mike Sulewski, Sea Port Global..

Hi, good afternoon guys. I guess I want to start up by going to chassis question. So this is something that’s been affecting the entire industry and not just Manitex..

Of course, that’s right..

And it’s not just one major truck or one OEM. It's something that….

It’s across, yes. It’s across all the lines, all the different brands that you can think of. So it’s not just one person, no. Or one company..

And to your knowledge, Dave, in the quarter [C&I] customers cancelled because they just couldn’t wait no longer and were hoping to get - couldn't make it instead or everyone - until you can deliver them..

No, I’m not aware of anyone. Again, as you know, it’s not just us. Again, as you know we’ve a small niche and a very big arena. And our market share is very strong. So we kind of put it like stick to what we know and what we’re doing. But I don’t believe it's being different for anybody else.

I just don’t want to for anybody else, but I don't think it's any different in this particular area, in mobile cranes..

And following up on that market share question. You haven’t seen very strong orders.

Do you have a sense that you are on the verge delivery of crane start getting share additionally in 2017 after having a good 2016?.

Well, we believe in market share, we reported entities to the manufacturing association that gives us this information, that we are continuing to build market share, again, in our own niche world..

And then on the margin side, I generally try and ask about year-over-year operating leverage.

But perhaps maybe because you’re having your revenues potentially ramp up quarter over quarter, could you have a sense if you were to see actual dollar in revenues quarter over quarter, what might be operating profit pull through be going forward in your estimation?.

If you look quarter over quarter, and again the bottom of the third quarter, so you had a very significant amount of operating losses, third quarter, fourth quarter. And insignificant, now still losses. So it’s not something that you start to say, okay, well that's good. No, it’s not good.

And that 1.5 million operating loss for our crane segment in the first quarter was over a $1 million in costs associated with Con Expo. So you wipe that out, you add some reasonable margin for some of the orders that we took, and as you know, the margin differential between the peak and the valley are huge.

And each quarter over quarter, you’ll see a point or two increase in our gross margins as we start to quall back some of the margins that we give off. We’re discounting more and more during the bottom of the cycle.

So you’d think that we would enter into the low single digits from an adjusted basis in the near term going back up into the 10% to 12% range which is where even with on the handling businesses, we’ve been on a consistent basis during last cycle in our crane segment..

Just to clear out, that 10 to 12 might not be in '17..

No. It’s not going be - this is eventually, this isn’t '17 because we’re not going to see those kind of levels in this year. Thanks for correcting myself, my comments, Mike..

I guess, no problem. I want to squeeze one more in here about PM.

Has there been any issues with manufacturing and disruptions as you slot those into your Georgetown facility or is that running pretty smoothly at this point?.

Well, it’s running better. We had 15 starts over the start of the process. We had drawing that were in Italian. And again, this is not anybody’s fault, that’s where the drawings were done. We’ve had conversions of those drawings, we’ve had obviously learning cycles, but it’s getting better and better.

And I think our position in the US is growing on a percentage basis dramatically on a real term basis modestly. When you have 2% market share and you go to 4% market share, I mean it’s not very much yet, but it’s a good start and we’re making good progress.

And I expect as we’re now less diversified with less companies, we’ll have a lot more concentration on the implementation and execution of that program because that’s critical for us going forward..

Thanks for the color, Dave. I’ll pass over..

And we’ll go next to Seth Weber with RBC Capital Markets..

Hi, this is Brendan on for Seth. Thanks for taking my question.

Just kind of looking at the overall market, what do you think in terms of pricing? Are they been trending up and down and somewhat stable and then also then also what are you seeing related to just used crane inventories right now?.

So just on the areas that we deal so cranes in the market that we serve because that’s how we know we have been seeing prices improve but remember we run off of discounts so we just have less discounts as you gain market share and as you gain market power and pricing power and as the recovery improves.

So we are seeing that come true and we will see that – and are seeing in our backlog and in the production in the future as we stated.

On the used side clearly all this is indicating to us that we’re still as used market there always been a used market that is back to a more of a normalized used market and that the abrasion that we saw during the bloom and bust of the energy world where you had a great number of cranes some started to use and not use but they’re all import into energy market during 2015 and 2016 that seems to have now run it course..

Okay, thanks. And then looking at the U.S.

market versus some of the international market that you operate in any specific areas of strength or is that kind of broad based do you think?.

It’s certainly and presently it must have a broad base with those points as we heard we say before we had a 2004 to 2008 real estate boom, we had a 2010 to 2013 energy boom and now what I would really hope for is mix and a broader gradual increased and not so much of boom and bust.

But so far seeing a broadly base including energy but other categories as well..

Okay, prefect right. That’s it from me. Thank you very much..

And we’ll go next to Jeff Morrison with Evercore ISI..

Hi, this is Jeff Morrison on for David Ross so just I guess - just another question back on the backlog and pricing so I guess what you’re saying is you're getting having to offer fewer discounts but are you getting any pricing and may be of the areas the country that are little bit stronger may be some of the recent oil patch activity or is it merged still just a question of less discounts?.

It’s full broad what happens and again Jeff it’s hard for some times guys who deal in thousands of units and very large markets to understand that we’re pretty small concentrated group and straight that cranes on trucks.

So if we give a discount to one dealer that seems to have - we also put and APB out because it seems like it has - it travels to market side pretty quickly and so that’s why we’re trying to be very disciplined in our pricing as we continue to gain strength in our backlog..

What about from the supplier side with steel ramping up and some of the other commodity more over the last several months and we've seen some price increases from the suppliers are you seeing that and is any reason for getting nervous going forward in terms of your margins?.

Yes so what we saw was at the beginning part of the year steel prices went up our material component of our cost of goods sold is 65%. And obviously the biggest material of that cost of goods sold component is steel.

So we saw prices going up but then the wonderful fuel market system that we operate in generally the commodity used to produce that started to increase until now what we’re seeing is prices are going down. So it seems like we’re okay we’ve been able to increase our prices or decrease our discounts sufficient to absorb the increases up to this point..

Okay, got it.

And just looking at the jump in backlog with the prices I guess maybe question first what happened today and oil coming down any cause for concern that there may be any cancellations in the backlog or is it how these – the orders locked?.

No, orders are ever locked in, we’ve a 100% of our backlog cancelled over the years it’s all their concern, but we’re also seeing we sell to dealers and we’re seeing dealers that had gotten their fleets down to such low levels that they now and it’s not just energy related of course that's other good thing it's much more of a broader market recovery in many different categories.

So to answer your question yes it’s a concern but not a great concern at this point..

Okay. That’s all for me. Thank you very much..

And we’ll go next to Andy Cassis with Wells Fargo..

Just to follow-on on that last question just kind of more broadly looking at investor concerns around sustainability of recent improvements including in your business. In the release you commented about how you felt this improvement had some legs.

Can you kind of give some context behind that given all the ups and downs in the commodity market and understanding what you just said about your dealer restock?.

Sure so I think Andy we saw from a lot of people on this call as much or better macro abilities to assess what’s happening from a macro standpoint as we go through the cycle. They were things to me that we don’t have a lot of bottles rapid expansion anything that would indicate that things are well overheated.

So if patient found that and as the markets seem to be stable to strike growth just if you look at GDP if you look at anything around the world just so those things we’re in complete bust we are bust environment right now.

So for all those reasons and also as I mentioned the situation with our individual and independent dealers gives me some copper that will be okay for a while who knows beyond what we have in visibility of orders..

Okay, thank you. And then I apologize if kind of asked or address I jumped on the call a little lateral flexion but the commentary about some constraints that are limiting your ability to raise production in line with backlog growth.

It sounds like that's coming from your chassis providers are they doing anything to address that or is that just something you got to live with for now?.

I have seen over the last 90 days the chassis delivery time periods.

Si I have to imagine that they are increasing their production over to meet some of the demand but again everybody is hesitant as we all know to put a lot of people and to try to but certainly there is a lot bandwidth to expand everybody is and our business is operating at very low levels compared to where they were during the peak periods..

Okay. Thank you very much..

And we’ll go to Jeffrey Long with Tuxedo Road Associates..

I believe that I heard you say that you anticipate in the next few quarters that gross margins would stay at current levels or potentially improve and historically correct me if I'm wrong these kind of margins were incurred at a timeframe when with King was going gangbusters, And you were the mix of orders in the backlog was oriented towards a higher tonnage cranes.

Can you give us a higher tonnage cranes can they gives a idea of what the composition of the backlog is relative to the type of crane market that that backlog is in i.e.

20 or 62?.

Sure, thanks Jeff, and you're absolutely right historically we only saw these type of margins when and you were exactly correct. When this came was doing a significant amount of military business. And again as I said many times it wasn’t that we were gauzing in the military but just had very, very strong specifics that they were ordering.

But now I have also said historically if you excluded the times when that occurred our material handling businesses if you crossed the line at 20% and said that's where you’re trying to go it’s 20% of gross margins all their crane businesses all that the ones that we have currently including upper war cranes which we didn’t have historically its relatively new to all are above that 20% gross margin level.

And all the material handling businesses generally speaking except for the exclusion that you mentioned were below 20%.

So now what of course what we're trying to and that I am sure someone on this call had looked at the filing that we did when we summarize the discontinued businesses and the businesses that we sold off all that became verified when we broke those businesses out.

So now we’re left with our highest margin businesses and what I am hoping is right now it’s fairly broad-based backlog between – because we have construction cranes some of them new that we've introduced in the last year so some of those are in the 20 to 30 ton range. But we still have a good mix of 40, 45, 50-ton cranes also in the mix.

So it’s a good mix backlog right now..

That's very helpful thank you..

We’ll now go to Fl Kirby with Morgan Stanley..

I missed the whole first-half of the call and I’ll catch you with you up with you later because the operators said you weren’t starting till 4 even though..

I apologize for that FL we generally we always begin at 3.30 our time but some reason someone wanted to do it at 4 hour time so here your I am glad you were able to catch up thanks.

And we can always talk as you know that?.

I mentioning since about 3.55 but I miss the only on tray you can either give me brief or..

Yes, what I’ll do when we’re finished over the next day or so we’ll reconnect because you missed the best part of I tell you just all the excitement the big summary is have orders and alleluia we got order again we have [indiscernible] years..

Got it well you Domineer is positive and I will catch up with you in a few days..

We’ll go back to Mike Sulewski with Seaport Global..

Nice taking my follow-up question to appreciate it I only have two one I want to touch on the SG&A run rate going forward the 12 million in this quarter included a little over 1 million and every three year tradeshow costs.

Are we looking at more like a little bit below 11 going forward or are there again it kind of ramps up as we go forward or something else [indiscernible]?.

Obviously the one aspect of that which does vary with production is essentially selling piece but that’s not a very large percentage of the total so if you want to slightly blunt it up as sales go up and by slightly I mean half point or something like that it’s not something that in the 4% or 5% range as it relates to selling as a total cost so generally speaking what we have is a number that you can use except for a slight adjustment due to the selling cost..

Perhaps we’re down a little less than a million, but still down from the first quarter here going forward..

That’s correct. We don’t need more G&A to get back to the peak levels and growing levels of where we are. So as you know, that percentage goes down as our sales go up dramatically compared to the total cost. And again, the only variable part of that is the selling piece..

And the other thing I was going to ask about was, you said that there was some truck chassis delays that cause infringement with delivery time. But you alluded to other components that were causing supply chain issues elsewhere.

Can you maybe kind of dive into a little bit color there? Are there any major areas that are also holding up things? And if you do get the truck schedules back on track, are there risk of other areas really holding you up in a material --?.

It was really very unique to the fact that we had a very, very low backlog as you know entering fourth quarter. So if you receive items from Asia or from Eastern Europe as part of your components, or fabrications from those areas, and now you’re putting an order for a much bigger number, that doesn’t happen in the day of course.

What has happened of course is they produce it, they put it on a container, it gets to the port, it gets shipped, it gets sent to Houston, I guess shipped from Houston to Georgetown. It just takes weeks.

And so those are not anything specific other than just a normalized ramp up what you have when you start ordering at higher levels as a result of the increasing backlog..

Those components, you’re pretty much caught up on that..

Yes, that’s what I am saying. We’ve been able to increase in anticipation of a build out over the next two quarters. So we know that they’re ordering today, and we know when they’re paying little late, so it’s much easier to hold out your production..

Perfect, thank you..

And that concludes our question and answer session for today. I’ll turn the call back to Mr. Langevin for any additional or closing remarks..

Okay. Thank you very much for your interest in Manitex. We look forward to future calls in the near future. Thanks again..

And ladies and gentlemen, that conclude today’s conference call. Thank you for your participation..