ALAMO GROUP ANNOUNCES FINANCIAL RESULTS FOR THE FIRST QUARTER OF 2024

Rhea-AI Summary

Alamo Group Inc. reported financial results for the first quarter of 2024, with record net sales of $425.6 million. Industrial Equipment net sales increased by 29.9%, while Vegetation Management net sales decreased by 12.7%. The company achieved income from operations of $47.0 million and net income of $32.1 million. Earnings per share (EPS) for the quarter were $2.67. Alamo Group's trailing twelve-month EBITDA was stable at $246.2 million compared to the previous year. Total debt net of cash improved by $62.2 million or 23.8% from the first quarter of 2023. The backlog stood at $831.3 million at the end of the quarter.

In terms of results, net sales increased by 3.4% compared to the first quarter of 2023, with a gross margin of 26.2% of net sales. Net income was $32.1 million or $2.67 per diluted share. The company's backlog remained elevated at $831.3 million. Alamo Group experienced challenges in the Vegetation Management Division due to market headwinds, while the Industrial Equipment Division had a strong quarter with higher sales and improved efficiencies.

Alamo Group's outlook for the remainder of 2024 is somewhat cautious due to uncertain interest rates, especially impacting the Vegetation Management Division. The company remains focused on executing its long-term strategy and is optimistic about its future prospects.

Positive

• Record net sales of $425.6 million for the first quarter of 2024.

• Industrial Equipment net sales increased by 29.9%, with improved efficiencies.

• Income from operations reached $47.0 million, 11.0% of net sales.

• Trailing twelve-month EBITDA remained stable at $246.2 million.

• Total debt net of cash improved by $62.2 million or 23.8% compared to the first quarter of 2023.

Negative

• Vegetation Management net sales decreased by 12.7%, facing market headwinds.

• Gross margin softened by 0.8% due to mix issues and lower efficiencies.

• Net income decreased to $32.1 million, with EPS of $2.67 per diluted share.

• Vegetation Management Division's operating margin declined by 450 basis points.

• Challenges in certain areas of the supply chain persisted during the quarter.

Insights

Financial Analyst

Alamo Group Inc.'s first-quarter financials of 2024 show a mixed performance with record net sales of $425.6 million, reflecting a 3.4% growth year-over-year. However, net income has seen a slight dip to $32.1 million from $33.3 million, with EPS dropping from $2.79 to $2.67. The contrasting fortunes of its Industrial Equipment and Vegetation Management divisions are noteworthy. The former experienced substantial growth in sales of 29.9%, with improved efficiencies contributing to a significant 440 basis-point expansion in operating margin. The backlog for Industrial Equipment stands solid at $560 million, indicating potential for sustained performance. On the flip side, Vegetation Management faced headwinds, with sales down 12.7% and operating margin declining by 450 basis points, partly due to production inefficiencies. While the division's actions to reduce capacity may protect margins short-term, the outlook remains cautious. Alamo's debt improvement by 23.8% is a positive sign of financial health. For an investor, the resilience of Alamo's Industrial Equipment division and the overall sales growth are positives, but the challenges in Vegetation Management and the slight decrease in net income might raise concerns about the company's ability to maintain profitability if the headwinds persist.

Market Research Analyst

The report highlights Alamo Group's performance amid volatile market conditions. The governmental and industrial sectors continue to be strong for the company, particularly in North America, which could be indicative of robust infrastructure spending. This is evidenced by the brisk quoting and increased ordering activity. However, the interest rate environment poses risks, especially to the Vegetation Management division, where high rates negatively impact dealer retail sales. Alamo's strategic response, including operational adjustments and potential discontinuation of certain facility operations, points to proactive management during economic fluctuations. For the retail investor, it's important to understand that while diversified portfolios such as Alamo's offer resilience, specific sector performance must be closely monitored for signs of prolonged weakness. Furthermore, the supply chain improvements and the stabilization of purchased component prices could help mitigate cost pressures moving forward, but the situation warrants close observation for any investor considering the company's stock.

SEGUIN, Texas, May 2, 2024 /PRNewswire/ -- Alamo Group Inc. (NYSE: ALG) today reported results for the first quarter ended March 31, 2024.

Highlights for the Quarter

• Record net sales of $425.6 million, up 3.4%
  • Industrial Equipment net sales of $201.8 million, up 29.9%
  • Vegetation Management net sales of $223.7 million, down 12.7%
• Income from operations of $47.0 million, 11.0% of net sales
• Net income of $32.1 million
• First quarter EPS of $2.67 per share
• Trailing twelve-month EBITDA of $246.2 million, stable versus record year-end 2023⁽¹⁾
• Total debt net of cash improved $62.2 million or 23.8% compared to first quarter 2023⁽¹⁾
• Backlog remained elevated at $831.3 million at the end of the first quarter 2024

Results for the Quarter

Record first quarter 2024 net sales of $425.6 million increased 3.4% compared to $411.8 million in the first quarter of 2023. Gross margin of $111.6 million or 26.2% of net sales softened by $0.9 million or 0.8% versus the first quarter of 2023. The reduction in gross margin was driven by a less favorable mix on higher new equipment sales in Industrial Equipment and lower efficiencies in Vegetation Management. 

Net income was $32.1 million, or $2.67 per diluted share, compared to $33.3 million or $2.79 per diluted share in the first quarter of 2023. The Company's backlog at the end of the first quarter remained elevated at $831.3 million, although down slightly from the end of 2023. 

Comments on Results

Jeff Leonard, Alamo Group's President, and Chief Executive Officer commented, "Our first quarter results were broadly in line with expectations as governmental and industrial markets continued to display significant strength. Ongoing investment in renewal of governmental maintenance equipment fleets resulted in brisk quoting and increased ordering activity during the quarter. Governmental markets for our Vegetation Management Division were also strong during the first quarter, especially in North America. Non-governmental markets for our Vegetation Management Division remained under pressure continuing the pattern we experienced in the fourth quarter of 2023.

"We were very pleased that our Industrial Equipment Division had another outstanding quarter marked by sharply higher sales and improved efficiencies. This Division's order bookings were 25% higher than the first quarter of 2023 and the increase was consistent across all the Division's product lines. Industrial Equipment order backlog increased by 17% to nearly $560 million. Higher sales, combined with further improvement in supply chain performance, drove the Division's operating efficiencies higher and produced a 440 basis-point expansion of operating margin. Given its strong momentum and record backlog, the outlook for this Division looks quite positive for the balance of this year at least.

"The Vegetation Management Division continued to confront market headwinds during the quarter. Reflecting the higher for longer rate environment in the U.S., sales declined in its North American Forestry/Tree Care and Hobby Farm/Ranch groups as elevated interest rates continued to negatively impact dealer retail sales and kept channel inventory stubbornly high. Notably, this Division's sales to governmental agencies increased solidly in Europe and the UK and increased even more strongly in North America compared to the same period of 2023. The Division's first quarter operating margin declined by 450 basis points primarily due to lower sales volume that slowed its production cadence and adversely impacted production efficiency. To protect operating margin, this Division initiated actions to reduce capacity at its largest facilities that produce forestry, tree care and agricultural equipment and announced its intention to discontinue operations at a facility that produces parts for classic agricultural products. The Division ended the quarter with a backlog of $271.8 million, still higher than pre-pandemic levels. 

"Supply chain performance broadly continued to improve during the quarter although challenges persisted in a few areas such as truck chassis frames, transmissions, other truck components and certain types of hydraulic equipment. More positively, prices for purchased components stabilized and purchased material cost variances moderated during the first quarter. Prices for some of the specialty steels we use to produce our products have returned to levels last recorded in the first quarter of 2021.

"Given the mixed market conditions we experienced in the first quarter, we were pleased with the results reported today. As we expected, substantially improved performance in Industrial Equipment largely offset the impact of the headwinds in Vegetation Management. Our outlook for the balance of 2024 is, however, somewhat more cautious than it was when we reported results for the fourth quarter of 2023, given the uncertain interest rate environment.  While this is not expected to impact the positive momentum and favorable results from our Industrial Equipment Division, it will likely prolong the current headwinds in Vegetation Management for the balance of the year and delay the anticipated correction in channel inventory. We will therefore continue to take determined actions to defend operating margin for the balance of 2024. We also believe that the Company's results for the first quarter nicely highlight the strength of our brands, the resilience of our broad product portfolio and the diverse markets we serve. We remain focused on efficiently executing our long-term strategy, and therefore remain optimistic about the Company's future prospects."

Earnings Conference Call

The Company will host a conference call to discuss the results on Friday, May 3, 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 (877) 317-6789 (domestic) or (412) 317-6789 (international). For interested individuals unable to join the call, a replay will be available until Friday, May 10, 2024, by dialing (877) 344-7529 (domestic) or (412) 317-0088 (internationally), passcode 9093220.

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, May 3, 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 4,250 employees and operates 29 plants in North America, Europe, Australia and Brazil as of March 31, 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)

^{(1) This is a non-GAAP financial measure or other information relating to our GAAP financial measures that we have provided to investors in order to allow greater transparency and a deeper understanding of our financial condition and operating results. For a reconciliation of the non-GAAP financial measure or for a more detailed explanation of financial results, refer to "Non-GAAP Financial Measure Reconciliation" below and the Attachments thereto.}

 

Alamo Group Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands) (Unaudited)
	March 31, 2024			March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents		$  121,802			$   109,320
Accounts receivable, net		392,940			363,525
Inventories		384,488			362,593
Other current assets		16,301			9,978
Total current assets		915,531			845,416
Rental equipment, net		43,102			36,125
Property, plant and equipment		164,810			158,388
Goodwill		205,452			196,533
Intangible assets		163,909			167,832
Other non-current assets		26,616			24,918
Total assets		$  1,519,420			$  1,429,212
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable		$  103,409			$   101,549
Income taxes payable		17,596			14,801
Accrued liabilities		77,349			72,890
Current maturities of long-term debt and finance lease obligations		15,008			15,008
Total current liabilities		213,362			204,248
Long-term debt, net of current maturities		306,525			356,259
Long-term tax liability		2,633			3,781
Other long-term liabilities		24,335			23,628
Deferred income taxes		16,009			18,948
Total stockholders' equity		956,556			822,348
Total liabilities and stockholders' equity		$  1,519,420			$  1,429,212

 

Alamo Group Inc. and Subsidiaries  Condensed Consolidated Statements of Income (in thousands, except per share amounts) (Unaudited)
		Three Months Ended
		3/31/2024		3/31/2023
Net sales:
Vegetation Management		$        223,747		$        256,435
Industrial Equipment		201,839		155,336
Total net sales		425,586		411,771
Cost of sales		313,954		299,264
Gross margin		111,632		112,507
		26.2 %		27.3 %
Selling, general and administration expense		60,594		59,668
Amortization expense		4,059		3,815
Income from operations		46,979		49,024
		11.0 %		11.9 %
Interest expense		(6,091)		(5,940)
Interest income		801		383
Other income (expense)		98		1,002
Income before income taxes		41,787		44,469
Provision for income taxes		9,667		11,120
Net Income		$          32,120		$          33,349
Net income per common share:
Basic		$              2.69		$              2.80
Diluted		$              2.67		$              2.79
Average common shares:
Basic		11,944		11,899
Diluted		12,020		11,962

 

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 a non-GAAP financial presentation related to the impact of currency translation on net sales by division. Attachment 2 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 3 reflects Division performance inclusive of non-GAAP financial measures such as backlog and earnings before interest, tax, depreciation and amortization ("EBITDA").

Attachment 1   Alamo Group Inc. Non-GAAP Financial Reconciliation (in thousands) (Unaudited)
Impact of Currency Translation on Net Sales by Division
	Three Months Ended March 31,						Change due to currency translation
	2024		2023		% change from 2023		$		%
Vegetation Management	$           223,747		$           256,435		(12.7) %		$                2,200		0.9 %
Industrial Equipment	201,839		155,336		29.9 %		269		0.2 %
Total net sales	$           425,586		$           411,771		3.4 %		$                2,469		0.6 %

 

Attachment 2   Alamo Group Inc. Non-GAAP Financial Reconciliation (in thousands) (Unaudited)
Consolidated Net Change of Total Debt, Net of Cash
		March 31, 2024		March 31, 2023		Net Change
Current maturities		$             15,008		$             15,008
Long-term debt,net of current		306,525		356,259
Total debt		$           321,533		$           371,267
Total cash		121,802		109,320
Total Debt Net of Cash		$           199,731		$           261,947		$          (62,216)

 

EBITDA
		Three Months Ended				Trailing Twelve Months Ended
		March 31, 2024		March 31, 2023		March 31, 2024		December 31, 2023
Income from operations		$             46,979		$             49,024		$           195,922		$           197,967
Depreciation		8,935		7,626		33,763		32,454
Amortization		4,235		3,991		16,466		16,222
EBITDA		$             60,149		$             60,641		$           246,151		$           246,643

 

Attachment 3   Alamo Group Inc. Non-GAAP Financial Reconciliation (in thousands) (Unaudited)
Vegetation Management Division Performance
			Three Months Ended  March 31,
			2024		2023
Backlog			$     271,805		$      517,958
Net Sales			223,747		256,435
Income from Operations			21,679		36,508
			9.7 %		14.2 %
Depreciation			4,333		3,591
Amortization			3,043		3,039
EBITDA			29,055		43,138
			13.0 %		16.8 %

 

Industrial Equipment Division Performance
			Three Months Ended  March 31,
			2024		2023
Backlog			$      559,497		$      476,832
Net Sales			201,839		155,336
Income from Operations			25,300		12,516
			12.5 %		8.1 %
Depreciation			4,602		4,035
Amortization			1,192		952
EBITDA			31,094		17,503
			15.4 %		11.3 %

 

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SOURCE Alamo Group Inc.

FAQ

What were Alamo Group's record net sales for the first quarter of 2024?

Alamo Group reported record net sales of $425.6 million for the first quarter of 2024.

How did the Industrial Equipment net sales perform in the first quarter of 2024?

Industrial Equipment net sales increased by 29.9% in the first quarter of 2024, with improved efficiencies.

What was the net income for Alamo Group in the first quarter of 2024?

Alamo Group's net income for the first quarter of 2024 was $32.1 million, with earnings per share (EPS) of $2.67.

What was the total debt net of cash improvement compared to the first quarter of 2023?

Total debt net of cash improved by $62.2 million or 23.8% compared to the first quarter of 2023.

What challenges did the Vegetation Management Division face during the first quarter of 2024?

The Vegetation Management Division faced market headwinds, leading to a 12.7% decrease in net sales and a 450 basis points decline in operating margin.