Myers Industries, Inc. (NYSE: NYSE:MYE) held their First Quarter 2024 Earnings Call, revealing a mixed financial performance with a decrease in net sales and adjusted earnings per share. The company discussed its strategies to counteract these challenges, including the integration of the recently acquired Signature Systems and cost reduction initiatives.
Despite the sales decline in certain segments, Myers Industries is maintaining its full-year earnings guidance, albeit at the lower end of the previously communicated range.
Key Takeaways
- Myers Industries reported a decrease in net sales and adjusted earnings per share in Q1 2024, attributing the decline to lower volume in the Distribution segment and pricing pressures in the Material Handling segment.
- The acquisition of Signature Systems contributed $19.3 million in revenue for the quarter.
- The company is focused on cost reduction, expecting $15 million to $17 million in annual savings from efficiency improvements and integration synergies.
- Myers Industries is maintaining its full-year earnings guidance of $1.30 to $1.45 per share, expecting to be at the lower end of the range.
- Growth strategies include new product development, such as the Flo N' Go power fuel station, and expanding the Scepter business in military containers.
Company Outlook
- Myers Industries is taking immediate actions to reduce costs and improve performance across both operating models: the Grove model and the maximized value model.
- They plan to focus on growth through new product development and acquisitions, with a successful example being the acquisition of Signature Systems.
- The company remains confident in its strategic direction and the potential of Signature Systems to drive growth.
Bearish Highlights
- Sales declines in parts of the Material Handling segment were due to weakened demand in certain end markets.
- The company experienced a significant agricultural order pushed to later in the year, affecting first-quarter results.
- A slowdown in RV and marine sales was noted.
Bullish Highlights
- Myers Industries highlighted the growth potential of their Scepter business in military containers.
- Strong e-commerce demand continues, with resolved pricing issues with Amazon (NASDAQ:AMZN).
- The potential for a robust hurricane season may lead to increased demand in relevant sectors.
Misses
- The company acknowledged a first-quarter miss and guided towards the lower end of their earnings range.
- Net sales and adjusted earnings per share decreased compared to the previous year.
Q&A Highlights
- Executives expressed confidence in maintaining their current guidance range due to shifts in high-profit businesses and upticks in consumer and military sectors.
- The ramp-up of military orders in the second and third quarters was discussed as a positive factor.
- Plans for footprint reduction activities aim to decrease fixed costs without affecting service levels.
In summary, Myers Industries is navigating through a challenging quarter with strategic initiatives aimed at cost reduction and efficiency improvements. The company is leveraging its recent acquisition and focusing on high-margin businesses to maintain its financial outlook for the year.
They are preparing to announce further initiatives to streamline operations and reduce costs, with a pipeline of actions to support these goals. The company's executives invite stakeholders to follow up with additional questions or schedule meetings for more detailed discussions.
InvestingPro Insights
Myers Industries, Inc. (NYSE: MYE) has shown resilience despite the challenges presented in the first quarter of 2024. The company's commitment to shareholder value is evident in its high shareholder yield, which is a positive sign for investors looking for returns in the form of dividends and share repurchases.
InvestingPro Tips indicate that the stock is currently in oversold territory according to the Relative Strength Index (RSI), suggesting that the recent significant price decline over the last week may present a buying opportunity for value investors. Additionally, the company's valuation implies a strong free cash flow yield, which could attract investors who focus on cash generation as a measure of financial health.
From the InvestingPro Data, we can see that Myers Industries has a market capitalization of $847.59 million and a Price/Earnings (P/E) ratio of 13.83, which is below the adjusted P/E ratio for the last twelve months as of Q4 2023 of 20.56. This discrepancy may indicate that the stock is currently undervalued. The company's revenue for the last twelve months stands at $813.07 million, with a gross profit margin of 31.87%, underscoring its ability to maintain profitability in a challenging environment.
Investors should note that Myers Industries has maintained dividend payments for an impressive 53 consecutive years, which speaks to its financial stability and commitment to returning value to shareholders. With analysts predicting profitability for the current year and a track record of profitability over the last twelve months, the company appears to be on a solid footing.
For those interested in exploring further InvestingPro Tips, there are 9 additional tips available on the platform, which could provide deeper insights into Myers Industries' performance and potential investment opportunities. To access these tips and more detailed metrics, visit https://www.investing.com/pro/MYE and use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Myers Industries Inc (MYE) Q1 2024:
Operator: Hello, and welcome to the Myers Industries First Quarter 2024 Earnings Call. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions]. I would now like to hand over to Meghan Beringer, the floor is yours. Please go ahead.
Meghan Beringer: Thank you, Elliot. Good morning, everyone and thank for you joining Myer’s conference call to review 2024 first 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 first 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 being webcasted on our website and will be archived along with the transcript 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. With that, I'm now pleased to turn the call over to Mike McGaugh.
Michael McGaugh: Thank you, Meghan. Good morning, everyone, and welcome to our first quarter 2024 earnings call. Before I begin, I'd like to thank everyone who joined us either in person or virtually for our Investor Day event in New York City on March 19. At this event, we rolled out our plans and strategy for the next 5 years, and we're able to have a great discussion with several current and prospective investors. If you have not already, I'd encourage you to view the webcast in the materials from this event as it provides great context and clarity on where we're headed. In today's call, I'll spend a few minutes discussing our progress over the first quarter, and then I'll pass the call to Grant for his detailed review of our first quarter financials and our outlook. Please turn to Slide 3. Pre-Horizon strategy has served as an effective road map for the company over the last 4 years. At our Investor Day, we described how we've used Horizon 1 to strengthen our fundamentals to learn and grow and improve the quality of our company. In Horizon 1, we built a strong foundation of operational and commercial excellence. We gained experience and scale through small bolt-on acquisitions. And as a result, we are well positioned to announce our acquisition of Signature Systems largely accomplishing our Horizon 1 goals by our 2023 target date. We're now shifting into Horizon 2 of our strategy and accelerating our transformation into a new Myers Industries. While our road map remains the same, the targets for Horizons 2 and 3 have now shifted from revenue targets to earnings per share targets. We feel that using EPS is more reflective of our focus on improving the quality of the company as we grow it. Turning to Slide 4. As we enter Horizon 2 of our strategy, we're also shifting how we think about our company. Keeping it simple, we have 2 operating models. In the Grove model, our focus is to invest and expand our portfolio of branded differentiated products, both organically and through acquisitions. In the maximized value model, our focus is on driving efficiency and reducing costs while we maximize the value of these businesses. Aligned with these 2 operating models, we have a strategic lens through which we see 3 portfolios: storage, handling and protection, engineered solutions and automotive aftermarket. We continue to report our financial results as material handling and distribution. However, as we transition to Horizon 2 and accelerate the transformation of Myers Industries, we believe this simple framework provides a clear road map with regard to how we will treat these different parts of the company. Turning to Slide 5. I'll walk through this framework in a bit more detail, just as I did at Investor Day. The portfolio that focuses on storage, handling and protection contains branded differentiated, high-performance products that move, store and protect. This is an area where we will seek to grow the company. We believe we have a lot of runway to build and grow the company in this direction. This portfolio includes what we are calling our 4 power brands, Buckhorn, Akro-Mils, Scepter and our recently acquired Signature Systems. As I highlighted at Investor Day, the current markets for storage handling and protection include agriculture and food, consumer, industrial, infrastructure and military. Moving to the right, we also have a portfolio of engineered solutions in which products are designed and tailored to meet our customers' unique needs. As we have discussed, this portfolio consists of some branded products, but mostly it's a contract manufacturing business. And as a result, the focus is to be lean in low cost, hence its placement in the maximized value operating model. This portfolio has exposure to RV and marine as well as outdoor and leisure end markets, most of which are experiencing softer demand at this time. What we currently refer to as our distribution business, strategically, we now think of as our automotive aftermarket portfolio. This portfolio includes high-quality repair and replacement parts for passenger cars, for commercial vehicles and for heavy equipment. Similar to Engineered Solutions, this business must also be operated for efficiency and low cost. As of the past few quarters, this business has faced some growing pains related to our recent acquisition and is also facing some demand headwinds. I'll talk later about the actions we're taking to improve the performance of the businesses in the maximized value operating model. Before we turn to a review of our first quarter highlights, Slide 6 illustrates an additional key message that I want to share from our Investor Day. The 4 power brands I mentioned above in the storage, handling and protection portfolio represent approximately 80% of our pro forma profits. Within this portfolio and across these power brands, we see a number of attractive platforms for future growth. In particular, the Signature acquisition represents an important pivot point in our growth story and will help accelerate our transformation into a faster-growing, higher-margin company. Now please turn to Slide 7 for a summary of our first quarter highlights. Our acquisition of Signature Systems closed on February 8 and has delivered strong results. We had roughly 9 weeks of Signature's contributions in our reported results for the quarter, which equated to $19.3 million in revenue. We were pleased to see Signature's business drive strong gross margin and EBITDA margin expansion during the first quarter due to tailwinds in the infrastructure end market. The high-quality results from Signature helped offset first quarter sales declines in other parts of our Material Handling segment. At Investor Day, we discussed anticipated near-term challenges in key end markets. We discussed that we are seeing trough levels of demand in some of our end markets, particularly in RV, marine and in consumer discretionary. And as I said, where the consumer can defer the purchase of a product or a discretionary item, they are indeed deferring that purchases. As quarter 1 wound to a close, we are also seeing some slowing in the automotive aftermarket as well. Weakened demand in these end markets resulted in sales declines in both material handling and distribution. In total, our first quarter performance was below our expectations, and we are taking immediate actions with additional self-help initiatives to further reduce costs and improve performance. Although we started the year slow, we are maintaining guidance for the full year of $1.30 to $1.45 adjusted earnings per share, but we are guiding to the lower end of the range. With 3 quarters remaining in the year, we plan to take additional actions in the near term to improve EBITDA, while executing our 5-year road map as outlined at Investor Day. I'll now speak to our action plans in progress using the lens of our 2 operating models to maximize value model and the grow model. Turning to Slide 8. I'll start with the portfolios under the maximized value model, where our focus is on efficiency improvement and cost reduction. In our automotive aftermarket portfolio, we continue to integrate the Mohawk acquisition into Myers Tire Supply as communicated that this integration has been tougher than anticipated. In our fourth quarter call as well as at our Investor Day, I described these challenges, and I shared the actions we are taking to improve such as merging the ERP systems into a single system to provide better data and visibility. I've also talked about the work we are doing with key personnel and with customers to regain our sales momentum that declined during the transition. We are making progress, but this work is still underway. As you recall, a key part of our Horizon with one strategy was a deliberate effort to make small bolt-on acquisitions so that while we build scale and create value, we also learn and build our capabilities before advancing to larger, more impactful acquisitions. The Mohawk acquisition was one of those small bolt-ons. When we acquired Mohawk, the business had approximately $60 million in revenue and $3 million in EBITDA. We bought the business for approximately $25 million. It was a small tuck-in acquisition designed to give our distribution business scale. Over the past 2 years, we've experienced many of the challenges that often occur when acquiring a lower performing business and rapidly attempting to convert it into a higher performing one. We're still confident that the acquisition will bear fruit is just taking longer and requiring more work than we had expected. We have an experienced team deployed into the business, and they are making the right improvements as we speak. This journey will continue throughout the year, and we expect continued improvement in EBITDA margins. Unfortunately, compounded the challenges of bringing together Mohawk into Myers Tire Supply, we are also now seeing a slowdown in spending in the automotive aftermarket. Please turm to Slide 9. With inflation, the consumer has less disposable income, purchases across the board that can be deferred are indeed being deferred. This is also true for tires and tire supply products, both at the retail level as well as at the commercial level, I expect this slower pace of consumption to continue through the year. Please turn to Slide 10. We are taking action. At Myers, we say managers must manage. We operate our businesses with efficiency. We are improving year-over-year and quarter-over-quarter. These gains in efficiency allow us to reduce cost while we maintain our service level. We believe we can achieve an additional $7 million to $9 million of annualized cost reduction as a result of our efficiency improvements. In the coming months, I'll have more to say about the specific actions we're currently evaluating. This targeted $7 million to $9 million in cost reduction is in addition to the $8 million of cost synergies we expect to deliver with the integration of Signature Systems. In total, we expect $15 million to $17 million in annual cost reduction and margin improvement from these combined initiatives. Now turning to Slide 11. Moving on to the storage handling and protection portfolio that aligns with our grow operating model. In this model, we also focused on efficiency and cost improvements. However, the overarching focus here is to grow through new product development and through acquisition. I have several recent and significant examples that I'd like to highlight. First, on Slide 12. On February 8, we closed on the acquisition of Signature Systems, a leading manufacturer of ground protection and turf protection solutions. This business has performed well. The integration into Myers has progressed smoothly, and we continue to be impressed with the quality and caliber of the people and the leadership team. Indeed, the learnings we made on our horizon 1 bolt-ons enabled us to successfully transition to more impactful deals, like the acquisition of Signature Systems, where we acquired strong companies with great growth potential, strong brands, differentiated technology and excellent leadership, all at an attractive price. We continue to believe that Signature will be a pivot point in an accelerator in Myer's transformation. And while we will continue to pursue growth through acquisitions, we also have a number of promising new product development innovations in our existing businesses. Today, I want to highlight 2 innovations under our Scepter business. Please advance to Slide 13. One example I've spoken of before is our anticipated growth in military containers for ammunition and propellers. The Scepter team continues to gain traction with the U.S. military and with militaries around the world. We believe that global rearmament will be a growth driver for the Scepter military cases. The Scepter cases are lighter and easier to use, and we believe that over the next 5 to 10 years, they will continue to gain traction as they replace wood and metal containers in militaries around the world. Please now turn to Slide 14. As you know, Scepter is a leading provider of portable fuel containers. Last month, we launched a product that we believe will be a success in the market. The Flo N' Go power fuel station is a 14 gallon container that gives the contractor or consumer the convenience of a gas pump on a job site, a construction site or at home. The Flo N' Go power fuel station is ideal for construction sites, landscape work or power sports. Based on our consumer and market research, we believe the product is a winner and will complement our current Duramax offering. I have many other examples of new product development across the company. Several of these were reviewed at our Investor Day in March. We will continue to grow organically as well as through acquisition with a focus on branded, differentiated products. Now I'll turn the call over to Grant for a detailed review of our first quarter financial results as well as our outlook.
Grant Fitz: Thank you, Mike. Please turn to Slide 15 for a complete summary of the first quarter 2024 financial results. Net sales were $207.1 million, which decreased $8.6 million or 4% compared to 2023, with the decline primarily driven by lower volume in the Distribution segment with the Material Handling segment basically flat to a slight decline year-over-year as the inorganic revenue from the Signature Systems acquisition was offset by declines in key end markets for RV and Marine, secular declines in consumer with gas cans as well as the timing of agriculture orders. Adjusted gross profit was $67.6 million and adjusted gross profit margin was 32.7% compared to $71.2 million and 33% in 2023. On a dollar basis, the gross margin decrease was a result of lower volume and mix and increased pricing pressures in the Material Handling segment, partially offset by lower material costs and the contributions from the signature acquisition. SG&A expenses were $53.5 million, which increased $1.4 million or 2.6% compared to 2023, primarily due to the addition of Signature, which included $3.2 million in higher acquisition and integration costs year-over-year and $1.7 million of intangible asset amortization. SG&A as a percentage of sales increased to 25.8% compared to 24.1%. First quarter adjusted operating income decreased to $16.6 million compared to $20.3 million in 2023. First quarter adjusted EBITDA was $25.1 million, which decreased 3% compared to the prior year quarter. Adjusted EBITDA margin increased 10 basis points to 12.1% from 12.6% in the first quarter of last year. Lastly, adjusted earnings per share was $0.21 compared to $0.38 in 2023. The variance compared to the first quarter of last year was driven by lower sales and operating margins as well as increased interest expenses related to our new term loan A, which was used to finance our acquisition of Signature Systems. Now on to Slide 16 for an overview of our segment's performance for the first quarter. For the Material Handling segment, net sales decreased by $0.3 million or 0.2% compared to the prior year. This slight decrease was the result of lower volumes in the vehicle end market due to continued trough conditions in the marine and RV markets, secular decline in gas can sales and order timing of agriculture, largely offset by $19.3 million in infrastructure sales for the recent Signature Systems acquisition. Material Handling's adjusted EBITDA increased $2.2 million or 7.1% to $32.5 million and adjusted EBITDA margin increased to 21.4% or 150 basis points compared to the year ago period. The positive deltas were primarily driven by Signature's contribution that was partially dampened by a decrease in sales volume and pricing in the other business units. Net sales for the Distribution segment decreased $8.3 million or 13.1% year-over-year, driven by lower sales volumes, partially offset by higher pricing. Distribution's adjusted EBITDA decreased $2 million or 59.4% to $1.4 million. Distribution segment adjusted EBITDA margin was 2.5% as compared to the 5.4% in the prior year quarter. The variances in EBITDA margin performance as compared to Q1 of last year were driven by the decline in sales volumes. Turning to Slide 17. Free cash flow for the first quarter of 2024 was $14.6 million compared to $16.7 million for the first quarter of 2023. Working capital as a percentage of net sales was up 360 basis points compared to the first quarter of 2023 due to the acquisition of Signature System. Capital expenditures for the first quarter of 2024 were $5.7 million and cash on hand at the quarter end totaled $32.7 million. We ended the first quarter with a debt to adjusted EBITDA ratio of 4.2x due largely to the debt we took on to finance our Signature Systems acquisition with our new term loan A. Under the terms of our loan agreement, net leverage is 2.6x, which is in line with our previously communicated acquisition strategy of having a net debt leverage ratio of approximately 3x at the time of a major acquisition with a target to be under 2x within 2 years of acquisition, assuming no new acquisitions. Now please turn to Slide 18 where we've provided our outlook for the fiscal year 2024. For the full year 2024 guidance, we are maintaining our current outlook while also adding that the outlook for net sales growth, earnings per share and adjusted earnings per diluted share are likely to be at the low end of the previously communicated ranges as we incorporate the first quarter results into the full year guidance. Additionally, as Mike had previously mentioned, given the continued headwinds in some of our key end markets, in the near term, we are identifying additional annualized cost actions of $7 million to $9 million to help mitigate some of these headwinds as part of our self-help initiatives, driven by our DNA to increase efficiency and to maximize value. We are also working to implement the $8 million of annualized signature cost synergies. These 2 initiatives, when combined are anticipated to improve the Myers cost structure by $15 million to $17 million on an annualized basis from the current run rate. As was discussed at our Investor Day, we are very positive about the future at Myers and the strategic direction that we are taking to drive continued profitable growth. Now I will turn the call back over to Mike for some closing comments. Mike?
Michael McGaugh: Thank you, Grant. I'd like to close with the summary slide that I used at our Investor Day a few weeks ago. Please turn to Slide 19. Without a doubt, our first quarter results were disappointing. We continue to face trough and trough light conditions in a few of our end markets. As I said at Investor Day, I expect that these conditions will persist in the near term and that we're not out of the woods yet. That being said, we are taking more aggressive action on cost reduction. We can tap into the efficiency gains we've made over the past years. I've spoken to the concept of unearthing a hidden factory and we can take cost out without impacting capacity or service level. We're going to do that. I don't want to speak to the specifics or the specific sites at this point. We will communicate that later. We are addressing in the short term, and that's why we are maintaining our guidance, though guiding to the lower end of the range based upon our first quarter results. I'd ask you to keep focus on the next years while we manage through the next quarters. The company has built a strong foundation over the past 4 years during Horizon 1. We have the capability now and the levers of self-help to block the impact when a few of our cyclical end markets turn against us. With our foundation in place, we are accelerating into Horizon 2, driving the transformation of Myers Industries. We believe and are seeing early proof points that Signature Systems will be a meaningful catalyst for our company. We also believe that the storage handling and protection portfolio represents an important part of the future direction of Myers and will be a cornerstone of our company. We are also confident in the engineered solutions in the automotive aftermarket portfolios. Both of these have sustainable competitive advantages, excellent products and services and excellent people. I continue to be enthusiastic and positive about the opportunities for our company to create value for our customers, our employees, our communities and our shareholders. And with that, I'd like to turn the call over to the operator for questions. Operator?
Operator: [Operator instructions] Our first question comes from Christian Zyla with KeyBanc.
Christian Zyla: Were you guys seeing the slowdown at the time of -- Were you seeing a slowdown at the time of your Analyst Day? Or was that more pronounced? I know you price the low end of the range, but given 1Q's results. What gives you confidence to maintain the current range? And what are you seeing so far in 2Q?
Michael McGaugh: Yes. One of the bigger impacts, Christian, was that we had an -- a meaningful ag order that was pushed to later in the year and out of first quarter. And that occurred after the Investor Day or about, I think, largely after. On the distribution side, we saw the slowdown as the results come through. And again, that was more of a post-Investor Day. What gives us confidence is you have more of a shift in some of our high-profit businesses, namely ag, we also continue to see some upticks in the consumer business, the gas can business as well as military. That's why we're sticking to the range. But we also have to recognize the first quarter miss, and that's why we're guiding to the lower end. Grant, do you want to add to...
Grant Fitz: Yes. I mean I do think -- Mike answered the question about the Investor Day. The back half of the year is really where we start to see some of the ramp with the military orders that we've talked about. We are now in production with those orders, so that is starting to ramp up, and we should start to see that grow throughout the next 3 quarters. And then we continue to get a lot of inbounds on just other opportunities for that business. So we really think that, that could be, as Mike mentioned, a longer-term growth catalyst as we start to ramp up our production. The other thing is, just in general, we continue to see some strong e-commerce demand. We did have a little bit of a stumbling point in our first quarter where we had some of the demand was taken offline with Amazon due to some pricing issues that we had that has since been resolved, and we now see that continuing to pick up throughout the year as well. And then we don't have a significant storm activity in our current guidance range for hurricanes. As we've talked before, that can drive anywhere from $0.05 to $0.06 per share with a meaningful storm. So we do see that would typically be in the latter half of the year. Then lastly, as Mike said, this agriculture move from the first quarter into the latter part of the year was pretty significant for us and that -- we don't see any issue with that being something that would be delayed into 2025 as we do have firm orders. It's just more of a timing of when the customer wants to have delivered those problems.
Michael McGaugh: Christian, if I can add, it's really was a big push on the ag seed boxes for GMOC. That was delayed to later in the year. Some of those larger GMOC companies are also trying to control their CapEx. And so there was a deferred there. The other piece is on the military, we did have a significant project that is scaling up. And as a part of that scale up, the orders were pushed into second quarter and third quarter and out of first quarter. So those are really the 2 big chunks.
Christian Zyla: And just, I guess, a follow-up. Since you maintained the guide, do you have more visibility or just confidence in the double-digit revenue growth or in the EPS range?
Grant Fitz: I would say the -- it's very equal to confidence. I think the revenue obviously helps drive the EPS range for us. But we do have -- we do see -- quite frankly, we see an opportunity at the high end of the range of everything falls in play. But just given the first quarter, we wanted to be a little bit more conservative on guiding towards the lower end of the range. But I do think that we have opportunities here. Obviously, we talked a lot -- Mike talked a lot about the distribution business. That's one that we're really very focused on just improving the overall performance. But it has been helpful that we do see overall that, that automotive aftermarket does seem to be taking a little bit of a pause on the trends that we're seeing, although over the long term, we see the automotive market continue to have good tailwinds. So...
Christian Zyla: I guess what do you expect for organic growth in both material handling and distribution for the year? Is flat to down mid-single digits reasonable.
Grant Fitz: Yes, I mean, I think we have, in general, the distribution business, we are pushing the team to get back to growth in our material handling kind of our core business outside of Signature, we've been looking at probably low single-digit potential growth opportunities there. Signature, we continue to maintain will be a 10% to 15% growth on an annualized basis, and that really lines up with the guidance that we've provided. So...
Michael McGaugh: Yes, that's right. We -- it is early in the year and what we've learned with this business because we have so much exposure to so many different end markets. It is challenging to get our arms around it. Now as Grant mentioned, we could very well be at the high end of the range. But again, we wanted to be more conservative and guide to the lower end. But Christian, we've got a number of bright spots on volume. We've got a number of new product innovations that are delivering. We've talked about -- it looks like it's going to be a robust hurricane season. That's good for our Scepter business. The military continues to get qualified and get traction. That's a good thing. However, we're still dealing with RV sales. Marine sales have now followed RV and are off meaningfully. We make water tanks and fuel tanks for boats. And then also the consumer discretionary, as I've mentioned before, we make high-ticket discretionary items. I talked about mailbox sheets, flower pots, hardscape items. And what we're seeing is the consumer is slowing down their discretionary purchases where they can. That's a trend that we saw in '23 that just continued into '24. So it's a bit of a mixed bag. The numbers that Grant had given on overall revenue are good numbers and accurate numbers. We see a number of bright spots in green shoots. We also have some end market exposure that for the next 6 to 9 months, I think we're going to really have to focus on taking cost out, and that's why we spoke to that. Again, I don't want to talk about specific plans at this point. But we've got a lot of efficiency. We can get more units of output out of our plants. And it gives us the opportunity to reduce our footprint and reduce our fixed costs, and that's what we're going to do.
Grant Fitz: And just with that, Christian, that is a mitigating factor as well, too, on some of these end markets, we continue to have the headwinds that we're experiencing. We have not yet incorporated any of these additional cost initiatives into our -- into the guidance range that we have to a large extent yet. So we're still identifying those initiatives and getting ready to work on the timing of that. So...
Christian Zyla: And then it looks like Signature had about $16 million in free cash flow last year. I know you don't guide to free cash flow, but based on core Myers and the addition of Signature, is $80 million reasonable? Or is there something we should think about for free cash flow?
Grant Fitz: Let me just take a quick look here at a chart, Christian, just to make sure... I think that's probably reasonable. Let me take a look at this as if you have some other questions, just to kind of calibrate to make sure I'm comfortable with that number. So...
Michael McGaugh: Yes. I mean, Christian, just on that point, as Grant looks up the specific number. We are seeing really solid results from Signature. There's a lot of growth tailwind there. The infrastructure investment that's being put in place through the various government spending plans over the next decade, Signatures is -- will benefit, is benefiting and we'll continue to benefit from those programs. We just -- we continue to be very pleased with that acquisition. And as I said, look, our objective was to learn with some small ones get our processes in place. We know we're not going to about 1,000. The Mohawk acquisition, as I said, it has been a bit of a challenge culturally. We're working through that. We're bringing those businesses together. But a lot of the key learnings from the 3 or 4 prior acquisitions we did that were small and in the magnitude of $30 million, $25 million. They really allowed us to have excellent processes and to really improve our capability when we move into the intermediate size acquisitions like a Signature, where we spent $350 million. I think we've got a great company with a lot of growth, great margins. And quite frankly, I think we bought it at a very reasonable price.
Operator: We now turn to Anna Jolly with Gabelli.
Carolina Jolly: This is Carolina from Gabelli. So hopefully, this doesn't repeat the prior question too much, but can you just talk a little bit about what surprised you in the material handling side of the business outside of the ag order more this quarter than expected and some of that in the discretionary items? And then also secondly, can you talk about what your -- what you kind of learned from Mohawk and Trilogy Plastics that you're applying to Signature?
Michael McGaugh: Yes, Carolina, good question. A large part of it was the shift of the agricultural seed box order -- and another piece of it was in March, some of the gas can sales that we expected were more shifted to Q2. But the lion's share of it was the ag seed order, and that's why we stand by the guidance that's just shifted to later in the year. On distribution, the sales came through weaker in March than we anticipated. And the key learnings there is the need to integrate swiftly and effectively and the need to integrate the cultures fast. The other thing -- the other learning is, quite frankly, is what we said when -- in the Q&A session at Investor Day, buying some fixer uppers or some lower performing businesses and trying to convert them to a higher performing run rate and doing it in a very short period of time, it is a lot of work. And doing that with some smaller acquisitions, in particular, several of them concurrently, you have your hands full. I do believe we will bring the performance of Mohawk up to the level of Myers Tire Supply. Mohawk was running at about 1/2 the EBITDA margin percent as Myers Tire Supply. And our belief was we could bring it up to the level of Myers Tire and in fact, just the complexity and bringing in the distribution centers, the IT systems that work with that as well as the company cultures. We -- we ultimately bought a complicated small business. And we knew we would learn what to do and what not to do and what the capabilities are of Myers. And that's where our focus now is I'd much rather buy a quality company that has branded and differentiated products. We are being much more careful about low barriers to entry businesses. And we bought some low barrier to entry businesses to give scale to our rotational molding as well as the distribution. Those are the right things to do. Those businesses need scale. But as we said at Investor Day, we now have a larger business in contract manufacturing and a larger business in industrial distribution. They're fine businesses, but they're not going to have the EBITDA profile that we seek -- and that ultimately is more of the Buckhorn, Acro-- Akro-Mil, Scepter and Signature model where your EBITDAs are 30% plus. And that's why I say that's the cornerstone of the company, and that's where we're taking the company. So hopefully, that addresses the question. Grant, anything to add...
Grant Fitz: Yes. You may have mentioned, I apologize if you did. But I think the ERP piece is also just a technical piece of just making sure that we can get good visibility across our businesses with ERP consolidation. That's going to continue to be something that provides an infrastructure for growth for us as well, too. And so it's not just the Mohawk integration issue. It's also within the business. It will help us clearly be [Indiscernible] to be more efficient and to run the business more effectively.
Michael McGaugh: Yes. That's -- Carolina, the low barrier-to-entry businesses as you would expect, have your lower margin profiles. And while they are easier for us to integrate and we can buy them for a lower price point, we've learned focusing on the differentiated branded businesses with a competitive moat is the right approach. And as a matter of fact, we were able to get all that with Signature still at an 8x multiple, which we feel really good about.
Operator: [Operator Instructions] We now turn to William Dezellem with Tieton Capital Management.
William Dezellem: I'd like to jump to the $7 million to $9 million of cost savings that you referenced here. Are those cost savings currently identified? Or is that a target? And do you have some general idea how you're going to get there?
Michael McGaugh: Bill, we do have a general idea because ultimately, it's going to be on some footprint reduction activities. And at this point, I want to be a little cautious because we've not yet locked those down and confirm those 2 employees. But we believe we can actually decrease our footprint, decrease fixed cost without impacting our service level because of all these things I've spoken over the last 3 years, the improved scheduling, the improved operating efficiency. We have more capability now per fixed assets. And it's the right thing to do is to streamline those assets. It makes our business and our company more simple. And then it also allows us to reduce some costs. So we think the efficiency gains, it's time to act on those, particularly in some of these areas where we have less differentiation, more on the maximized value side of the house, and we think there's some opportunities there. Grant, anything from your side?
Grant Fitz: Yes. I would just maybe provide my general philosophy on this, Bill, is that I think it's important when we're going for a number that we've provided that we have more initiatives than what essentially would be the information we've provided. So I typically have tried to make sure that we've got a pipeline of 125 percent of the numbers we might be discussing just because some will take longer, some will fall off of this. And so we truly are just identifying those and working on those. And so we -- I would say that just given the track record that we will be coming back with some further information on it, but I feel very comfortable that these are numbers that we are going to be able to achieve. We just don't have not fully identified yet. So...
Michael McGaugh: Yes, that's right. Bill, just -- this is Mike. We've not confirmed actions, lockdown actions. Once we do, clearly, we will be disclosing those and we'll disclose them soon.
William Dezellem: And then relative to Signature, continuing on the cost front, you're all referencing the $8 million of cost savings -- and is that new? Because I was thinking that Signature, there were not going to be a lot of cost savings just because there weren't any synergies, and that would be essentially a stand-alone business. Did I just not remember correctly? Or did something change there?
Michael McGaugh: No, Bill, nothing's changed. So we've said we believe we will have $8 million largely in cost synergies. And if you recall back to Investor Day, I think Carolina asked a question on clarifying those synergies, and there's really -- they're really only 3 or 4 buckets. We do have our arms around them. If you recall from that session as well, Jeff Condino who runs that business, affirmed his confidence in getting those synergies and having that as a run rate in 2025. So no, you've got $8 million there and then $7 million to $9 million outside of Signature, and we feel confident about that at $15 million to $17 million.
Operator: This concludes our Q&A. And I'll hand back to Meghan Beringer for closing remarks.
Meghan Beringer: Thank you, Elliot and thank you for everyone for attending our first quarter 2024 earnings call. We invite you to follow up with additional questions or meeting requests. To schedule time, please contact me using the information found on Slide 29. Thanks again, and have a great day.
Operator: Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
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