ALG Alamo Group Inc

SEGUIN, Texas, Oct. 31, 2024 /PRNewswire/ -- Alamo Group Inc. (NYSE: ALG) today reported results for the third quarter ended September 30, 2024.

Highlights for the Quarter

• Net Sales of $401.3 million, down 4.4% versus prior year
  • Industrial Equipment Division net sales of $211.2 million, up 22.3%
  • Vegetation Management Division net sales of $190.1 million, down 23.0%
• Income from operations of $40.1 million, 10.0% of net sales
• Net income of $27.4 million
• Fully diluted EPS of $2.28 per share, including $0.10 of expense associated with workforce reductions; EPS of $2.38 per share excluding such expense ⁽¹⁾
• Total debt net of cash of $84.1 million improved by $126.2 million or 60.0% compared to third quarter 2023 ⁽¹⁾
• Backlog at the end of the third quarter was $728.8 million
• Trailing twelve-month EBITDA of $228.2 million holds at 13.7% of Net Sales ⁽¹⁾
• The Company is implementing cost saving actions targeting annualized savings of $25 to $30 million
  • Workforce reduction expenses for the third quarter and first nine months were approximately $1.6 and $3.2 million, respectively

Third Quarter Results

Third quarter 2024 net sales of $401.3 million decreased 4.4% compared to $419.6 million in the third quarter of 2023. Gross margin of $100.9 million or 25.1% of net sales declined by $13.3 million and 206 basis points, impacted by sustained weakness in the forestry and agricultural markets. Continued growth in the Industrial Equipment Division partially offset weaker results in the Vegetation Management Division.

Net income was $27.4 million or $2.28 per diluted share, compared to $34.9 million or $2.91 per diluted share in the third quarter of 2023.  The Company's backlog at the end of the third quarter was $728.8 million.  While Vegetation Management Division backlog declined by 52%, Industrial Equipment Division backlog continues to grow and is 8.5% higher versus prior year at this time. 

Year-to-Date Results

For the first nine months of 2024, net sales of $1.2 billion were 2.3% below the prior year's first nine months. Gross margin of $320.7 million or 25.8% of net sales compared to $344.7 million or 27.1% of net sales in the prior year. Industrial Equipment Division net sales of $617.8 million grew 21.8%, offsetting lower Vegetation Management Division net sales of $625.4 million, which declined by 18.2% year over year.

Net income for the first nine months was $87.8 million or $7.30 per diluted share, compared to $104.6 million or $8.73 per diluted share in the same period last year.

As part of our commitment to optimize operations and enhance shareholder value, we are diligently executing cost saving initiatives inclusive of plant consolidations and workforce reductions. In the first nine months of 2024, we incurred approximately $3.2 million in employee separation costs and expect the total cost to be between $4.0 million to $4.5 million.  Through these ongoing actions, we anticipate achieving annualized cost savings in the range of $25 to $30 million. We have already begun to see some of these savings in the third quarter, with further savings expected to accelerate over the next 12 months.

Comments on Results

Jeff Leonard, Alamo Group's President, and Chief Executive Officer commented, "Our financial results for the third quarter were largely in line with our expectations given the conditions prevalent in our markets. As we experienced in the second quarter, market activity across our two segments continued to diverge.

"Demand for products and services offered by the Industrial Equipment Division remained historically strong in all areas during the third quarter. Spending by governmental agencies to upgrade and modernize maintenance fleets continued at a good pace. In addition, demand from industrial contractors remained strong, and rental fleet utilization was at a healthy level. We were pleased that demand for snow removal equipment remained strong in the third quarter. This Division reported solid sales growth and excellent profitability in the third quarter and its backlog remained elevated.

"The softness in markets for Vegetation Management equipment continued during the quarter as elevated interest rates and a challenging macro economy constrained demand. Sales for agricultural mowers and related equipment were muted as farm incomes remained under pressure. Farm equipment dealer inventory, despite coming down most of this year, remained elevated. Weakness in the US housing sector continued to suppress demand for our forestry and tree care products during the quarter. Governmental mowing was once again a bright spot for this Division, and we were pleased to see that our new Mantis prime mover continued to gain acceptance among state and municipal agencies. With difficulties in forestry and agriculture, the Division's net sales declined 23% compared to the third quarter of 2023. The Division's operating margin declined under pressure from costs associated with inventory reduction actions, excess capacity, lower efficiency and separation costs.

"To address the weakness in our Vegetation Management Division, during the third quarter we initiated additional efficiency improvement measures aimed at further reducing excess manufacturing capacity. These measures include the sale of our Herschel Parts business to F.P. Bourgalt Tillage Tools Ltd., consolidation of manufacturing of the rotary mowers and other agricultural products, and consolidation of manufacturing of forestry and tree care products. These consolidations will improve the efficiency and utilization of our larger facilities while reducing longer-term capital requirements. 

"When completed, these measures will reduce the Company's worldwide total production capacity by approximately 8%. As a result of the large facility consolidations and associated personnel reductions, the Company's employee population has declined approximately 10% since January of this year. While the impact of these decisions to our employees is regrettable, ongoing Vegetation Management market weakness demanded that we take significant actions.

"As we look to the end of 2024, our outlook remains cautious as we are not expecting material changes in market conditions in the final weeks of 2024. We continue to anticipate that governmental demand for our products will be strong for the remainder of 2024 and well into the first half of 2025 at least. Our optimism in the strength of the governmental markets is only modestly tempered by the fact that National elections are imminent in the U.S., and the future direction of Federal fiscal policy is uncertain.

"As we look further, we are currently not anticipating significant improvement in the agricultural equipment market until late 2025.  The outlook in forestry and tree care is somewhat better. The significant damage caused by the recent storms in the Southeastern United States is beginning to drive demand for the Company's woodchippers, grinders, and land clearing equipment to support the huge cleanup effort. We are also optimistic that the housing market will gradually improve given the current outlook for additional interest rate reductions in 2025.  A turnaround in housing starts would provide a solid boost to demand for forestry and tree care equipment.

"Given this background, and with confidence in our ability to complete the consolidation activities now underway as well as the strength in our industrial and governmental businesses, we remain encouraged about the Company's prospects for 2025 and beyond."

Earnings Conference Call

The Company will host a conference call to discuss the results on Friday, November 1^st, 2024, at 10:00 a.m. ET. Hosting the call will be members of senior management.

Individuals wishing to participate in the conference call should dial (833) 816-1163 (domestic) or (412) 317-1898 (international). For interested individuals unable to join the call, a replay will be available until Friday, November 8, 2024, by dialing (877) 344-7529 (domestic) or (412) 317-0088 (internationally), passcode 6101611.

The live broadcast of Alamo Group Inc.'s quarterly conference call will be available online at the Company's website, www.alamo-group.com (under "Investor Relations/Events and Presentations") on Friday, November 1^st, 2024, beginning at 10:00 a.m. ET. The online replay will follow shortly after the call ends and will be archived on the Company's website for 60 days.

About Alamo Group

Alamo Group is a leader in the design, manufacture, distribution, and service of high-quality equipment for vegetation management, infrastructure maintenance and other applications. Our products include truck and tractor mounted mowing and other vegetation maintenance equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, other industrial equipment, agricultural implements, forestry equipment and related after-market parts and services. The Company, founded in 1969, has approximately 4,000 employees and operates 28 plants in North America, Europe, Australia, and Brazil as of September 30, 2024. The corporate offices of Alamo Group Inc. are located in Seguin, Texas.

 Forward Looking Statements

This release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following:  adverse economic conditions which could lead to a reduction in overall market demand, supply chain disruptions, labor constraints, increasing costs due to inflation, disease outbreaks, geopolitical risks, including effects of the war in the Ukraine and the Middle East, competition, weather, seasonality, currency-related issues, and other risk factors listed from time to time in the Company's SEC reports.  The Company does not undertake any obligation to update the information contained herein, which speaks only as of this date.

(Tables Follow)

Alamo Group Inc.

Non-GAAP Financial Measures Reconciliation

From time to time, Alamo Group Inc. may disclose certain "non-GAAP financial measures" in the course of its earnings releases, earnings conference calls, financial presentations and otherwise.  For these purposes, "GAAP" refers to generally accepted accounting principles in the United States.  The Securities and Exchange Commission (SEC) defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial position, or cash flows that is subject to adjustments that effectively exclude or include amounts from the most directly comparable measure calculated and presented in accordance with GAAP.  Non-GAAP financial measures disclosed by Alamo Group are provided as additional information to investors in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition and operating results.  These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.  Whenever we refer to a non-GAAP financial measure, we will also generally present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.

Attachment 1 discloses Operating Income, Adjusted Net Income and Adjusted Diluted EPS,  related to the impact of non-recurring items, of which are non-GAAP financial measures. Attachment 2 discloses a non-GAAP financial presentation related to the impact of currency translation on net sales by division. Attachment 3 shows the net change in our total debt net of cash and earnings before interest, taxes, depreciation and amortization ("EBITDA") which is a non-GAAP financial measure. The Company considers this information useful to investors to allow better comparability of period-to-period operating performance. Attachment 4 reflects Division performance inclusive of non-GAAP financial measures such as backlog and earnings before interest, tax, depreciation and amortization ("EBITDA").

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SOURCE Alamo Group Inc.