David Langevin – Chairman and Chief Executive Officer Steve Kiefer – President and Chief Operating Officer Laura Yu – Chief Financial Officer.

Roger Rama – Cortina.

Good day, everyone, and welcome to the Manitex International, Incorporated Third Quarter 2018 Results Conference Call. Today’s call is being recorded. And at this time, I’d like to turn the conference over to David Langevin. Please go ahead..

Thank you, Vicky. Good afternoon, ladies and gentlemen, and thank you for your interest at Manitex International. On the call with me today is Steve Kiefer, our President and Chief Operating Officer; as well as our new CFO, Laura Yu. Please see our website or our release for replay instructions for this call, which are available until November 8, 2018.

Now please refer to the 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. I will begin with a brief overview.

Laura will present a financial overview, followed by an operating commentary from Steve, after which, we will welcome any questions. Now please return – turn to Slide number 3. First, I would like to again welcome Laura to our company. As many of you may recall, Laura joined us in May of this year.

She came to us with excellent financial experience and credentials, which were a perfect background for the needs of our company. I’m sure you’d join me in welcoming her and in wishing her much success at her new capacity.

Now as we exit 2018 and enter 2019, I’m happy to report that our company is in the best financial condition that we have experienced in many years. We reported today a steady advancement in sales over a year ago, a significant improvement in gross margins from the similar period in 2017 and our first reported quarterly GAAP profit in some time.

Looking now at the end of the year to date, we’ve achieved an adjusted net income of $4.8 million, which is double what it was for the comparable period of a year ago, translating to $0.27 a share.

We reported today that our dealer quoting activity picked up after the summer, which was reflected in the very significant expansion of our backlog in October. We are a market leader in mounting straight boom cranes on commercial chassis.

And with the investment by Tadano in the second quarter of this year, we now have a world-class partner in Tadano to enhance our growth in our second main product category, the manufacturing of knuckle cranes mounted on commercial chassis.

Further, we’ve never had a balance sheet as strong as we do now with net debt of $49 million and very comfortable leverage ratios. This is a far cry from the days of not too long ago where we experienced net debt-to-EBITDA ratios in excess of 10.

We’ve accomplished a lot in the last couple of years to improve our balance sheet and to be able to function well in any market environment.

With a very positive replacement cycle underway, strength in our end markets, best-in-class products and the strongest financial position ever for our company, we should end the year with performance nicely ahead of last year’s.

We believe we will end the year with annual sales growth in the mid-teens compared to a year ago, a backlog near recent peaks, much lower debt and the opportunity to penetrate a global market that was never available to us until we partnered with Tadano.

PM, while known as a quality and reliable branded product in Europe and South America, is relatively unknown in Asia. As our new partner, we are positioned to participate in these growing markets where knuckle boom cranes are widely used and known.

This is the strongest overall position that this company’s ever been, and we have great optimism as we finish this year and look forward to the next. With those brief comments, I would like to turn over to Laura for a financial review and finish with Steve discussing operations.

Laura?.

Thanks, Dave. Good afternoon. Thanks for joining the call today. I’m glad to be here. Let me direct you to – your attention to Slide 4, which is Q3 operating results. Overall, our financial performance in the third quarter was strong as indicated in the results.

Revenue was up 7.9% at $60.9 million compared to the third quarter last year and down 4.6% sequentially compared to the second quarter. The increase in the third quarter was primarily due to higher straight mast crane sales, thanks to continued improvement in the industrial equipment markets we serve.

Consistent with our expectation, we delivered another quarter of improved gross margin at 19.7%, up 220 basis points versus the third quarter last year and up 20 basis points compared to last quarter.

Our Q3 2018 adjusted net income was $2.1 million or $0.11 per share, and adjusted EBITDA was over $5 million for the second consecutive quarter, up 21% compared to the third quarter of 2017 but down slightly compared to last quarter.

As Dave mentioned earlier, we have managed to maintain our margin and eke out even some slight margin gains as a result of diligent sourcing action and productivity gains that have enabled us to keep up with the rising component prices that have impacted all participants in our industry.

Backlog declined moderately to $60 million at the end of third quarter from $76 million in the prior quarter, up 20.3% compared to the third quarter last year. Subsequent to the quarter-end, backlog has improved to $79.2 million as of October 31. And this too is a healthy number, reflecting demand in the marketplace for our products.

Turning to Slide 5, net debt update. This slide provides a breakout of the net debt by quarter. We reduced net debt further in the third quarter by $1.7 million to $49.4 million, the lowest level we have seen in many years. Compared to year-end 2017, we have reduced our net debt by $41.1 million. With that, let me turn it to Steve..

Okay. Thank you, Laura, and welcome aboard..

Thank you..

I’m looking forward to a bright future for Manitex and having you here as a part of the team..

Thank you..

Hello, and thanks to all of you on the call. Thank you again, Laura. Hello, and thanks to all of you on the call for taking time from your schedules to join us today. We know it’s a very crowded day with earnings reports and conference calls.

I’m pleased to add some additional color to our third quarter results, which were highlighted by increasing year-over-year revenue, increasing gross margin on track of our – with our goal of exceeding 20%, increasing backlog, increasing EBITDA, reducing our net debt levels and exceptional overall operational and commercial discipline.

Regarding operational details, significant progress was achieved towards improving production efficiencies and reducing supply chain’s shortages and over time at some of our facilities that we discussed in previous quarters.

At the same time, I can tell all of you there is much more work to be done, and our teams are hard at work executing the plans we have developed. We finished the quarter a little short of our goal of 20%-plus gross margins but I’m confident we remain on the correct path.

As with many companies reporting so far this quarter, tariff costs also affected our results. And in our view, we continue to manage a shifting mix of supply chain and global trade dynamics effectively. Total costs that were associated with tariffs totaled less than $250,000 in the quarter.

We have passed these costs on to our customers in a responsible way, dollar for dollar. From a gross margin perspective, tariff costs reduced our third quarter gross margin 8 basis points or less than 0.10%. As we have reported in previous quarters, our U.S.-based subsidiaries primarily buy steel and aluminum from U.S.

suppliers, and our European-based subsidiaries primarily buy steel and aluminum from European suppliers. So the impact of tariffs had been minimal to Manitex and we expect that minimal impact to continue. Surcharges, freight and other increases are also a part of our total costs.

Fortunately, and as you would expect of us, the aggregate effect of these costs was anticipated, and we have worked to manage and offset these costs effectively.

As we have reported over the past several quarters, we believe we are taking the appropriate actions to manage our supply chain, global trade and material price issues responsibly, and that we are passing these costs to our customers responsibly.

And overall, we believe that in total, we continue to manage our operations and commercial activities in a disciplined and responsible manner. These efforts should contribute towards ongoing gross margin and EBITDA expansion, with continued organic growth in new products also being significant drivers of top and bottom line growth.

Shifting to an update on market and commercial activity. The positive market metrics that we have discussed in recent calls throughout 2018 continues. As some of you may have seen two weeks ago, The Conference Board reported that the leading economic indicators increased for the 12th straight month in September.

We are pleased that we also see continued momentum in our business. Our internal channel checks, combined with data from outside sources, show continued robust improvement in rental fleet utilization for the various mobile cranes within our product offering. This is driving a robust increase in rental rates.

Industry orders for various types of mobile cranes are also rising. Taking straight mast cranes as an example, industry order rates for the first three quarters of 2018 are up a little over 30% versus the first three quarters of last year.

As many of you know, we watch this statistic closely as it is an important indicator, combined with our backlog, of how we meet to manage our production plan for our Manitex-branded straight mast crane business over the coming quarters.

A final note regarding straight mast crane activity is that orders continue a healthy pattern of diversification across the various weight classes, with 60% of the total orders biased towards the heavier 30-ton-and-higher weight classes, which drives positive mix for Manitex.

Furthermore, commercial activity and outlook is improving for a diverse offering of PM knuckle boom, O&S truck-mounted aerial work platform, Valla electric cranes, Sabre environmental and energy product and Badger industrial and rail product lines.

Our operational and commercial teams are performing increasingly well in developing and executing plans for these businesses. As you all know, our largest opportunity is PM knuckle booms. We have expanded our North American distribution network over the past 12 months, and I anticipate two or more PM announcements before year-end.

Our team continues diligent efforts with the Tadano organization to develop and implement our commercial plans to establish a significant presence in Asia and grow the PM knuckle boom crane sales globally. Our teams are preparing initial orders, and activity will continue increasing as we enter and move through 2019.

As I’ve previously mentioned, each point of market share in a knuckle boom crane market from our low global base translates to approximately $20 million of growth revenue. So this is a significant growth opportunity for our company, and again, one that we’re pursuing diligently.

Commercial and production activity of the Manitex-branded A62 truck-mounted aerial work platform in North America continues ramping up, and sales of the Manitex brand, Trolley Boom Loader are performing well.

As mentioned in the press release, we introduced additional configurations of the Trolley Boom Loader in the third quarter, and we rolled out a new carry deck industrial crane during the third quarter.

This product has a capacity rating of 11 tons and offers a number of differentiating features that will deliver compelling performance advantages and value to the marketplace.

In total, it is satisfying to see every subsidiary within Manitex International moving towards the end of the year with important commercial wins, operational execution and a consolidated outlook that gives us great optimism as we move into 2019.

In closing, executing to meet higher levels of demand is our single most important objective as we move through the rest of 2018 and enter 2019.

We are confident our internal actions of investing during the down cycle in a competitive product portfolio, optimizing our manufacturing footprint and expanding the distribution networks for all of our product lines finds us well positioned for increased strength in shareholder returns.

We remain focused on operational execution, new product development and overall top and bottom line expansion. We are working hard to increase value for our customers, shareholders, employees and other stakeholders. Thank you for your time today and your ongoing interest in Manitex International.

And thank you to the entire Manitex team for solid gains, continued hard work, exceptional customer service, operational discipline and overall execution. Dave, Laura and I would now like to open the line and start our question-and-answer session.

Operator?.

[Operator Instructions] And we will take our first question today from Matt Koranda with Roth Capital. Please go ahead..

Hey, good afternoon. This is Mike on for Matt, and congrats on a nice quarter. First, can you talk a little bit about your book-to-bill and how it trended in the quarter from July to September? And then it looks like it’s picked up quite a bit since the end of the quarter.

Is there any reason why we shouldn’t be expecting flattish growth in Q4 still?.

Want to try that, Steve?.

Yes, sure. The book-to-bill trended modestly down during the course of the third quarter, which is somewhat typical with the normal summer seasonality. As you know, significant parts of Europe take a lot of time off so order rates are quite low. And likewise in the U.S., order rates typically taper off.

So book-to-bill ratio ended the – or during the second quarter was 0.81. It trended down to 0.75. We’re now – during the month of October and even today, transitioning into November, picking up the normal year-end order season and 2019 stacking activities. So now the backlog is trending and book-to-bill is trending back up..

Yes. I would imagine the month of October, book-to-bill would have been over one again..

Oh, absolutely. Correct, yes..

Okay, great. And then can you also talk a little bit about the mix in backlog? I know you said 60% towards higher weight.

And also maybe just the cadence of improvement going into Q4 and into 2019?.

Go ahead, Steve..

Sure, take that one. So the mix, as we enter Q4, maintains a similar bias, 60% or slightly higher towards the heavier cranes. Likewise, we see about 60% or so towards the Manitex cranes, about 40% towards PM knuckle boom cranes.

And overall, the industry’s orders are up over 30% year-to-date versus last year and ended the third quarter and industry order patterns with overall acceleration from the patterns of earlier in the year..

Okay, that’s helpful.

And then can you talk a little bit about Tadano? Have they made any volume commitments to you? And then maybe where will the units be produced? And what’s sort of the strategy for putting them through Tadano’s distribution network?.

I’ll work on that one, Steve. Mike, we’re working now on the plans for next year with Tadano so we don’t have final numbers yet. We’ll have more information as we finish the year. But it’s certainly going to be much more than this year because there’s nothing this year. So it will be a nice improvement for next year.

And they’ll be treated like a dealer so we’ll be selling them our branded product. Maybe in the future, we’ll be branding it Tadano where it’s applicable, but all those commercial activities are and the details are being ironed out now..

Okay, that’s helpful. And then lastly, it sounds like you’re doing a good job managing the supply chain.

But did you see any tightness in it, whether it’s from labor, freight or component availability? And if so, can you provide some more detail there?.

Won’t you go ahead, Steve?.

Want me to take that one, Dave? Or – sure. I would say the largest – okay, yes. I would – really, the largest single issue that we monitor the closest is due to orders for Class 8 trucks over the past 1.5 years, which I’m sure you’re aware of, are up dramatically. We spend the most time managing truck orders and deliveries.

And any other items that come and go are much lower in significance and haven’t affected our production in any way..

Okay, great. Thanks a lot. I’ll step back in queue..

And no one else is in the queue at this time, but I’d like to give everyone another opportunity. [Operator Instructions] And it appears there are no other questions so that will conclude our conference for today. I’d like to thank everyone for your participation, and you may now disconnect. Oh I’m sorry, sir, someone just popped in the queue..

Great..

And we’ll take a question from Roger Rama with Cortina..

Hey, guys. Thanks for letting me in. Maybe just talk about the cadence on gross margin. So a little shy of the 20% target for the quarter. Maybe just talk to how you see that playing out sequentially 4Q into next year, especially as you’re seemingly – seeming to be managing the tariffs pretty well..

Yes, Roger, thank you. I think the main issue has been that as we mentioned on other calls, tariff increases and all the activity has been another excuse for a lot of component increases and supplier increases.

So that has been the headwinds and we’ve been dealing with for the last nine months, which is not uncommon or is consistent with everybody else in the industry. But I think that a lot of that is behind us now. We have – we instituted a price increase in the middle of the year. We have another one coming in next year at the early part of the year.

So I think you’ll see that improving as we go..

Okay. And maybe just speak to the margins with the Tadano relationship.

Should those be pretty consistent with kind of the rest of the company average?.

That’s – Roger, that’s correct. All the crane margins are – depending on the tonnage, Steve mentioned in his prepared remarks, the tonnage have an impact because a larger tonnage obviously has a higher margin. But on an overall basis, all of the crane products should give us an advantage to get over that 20% threshold that we’re going for.

So the answer is it should also benefit us..

All right, great. Well, thanks guys. I appreciate it..

Thank you, Roger..

And there are no other questions so that will conclude our conference. I’d like to thank everyone for your participation and you may now disconnect..

Thank you, everybody. Bye-bye..