ALAMO GROUP ANNOUNCES RECORD 2023 FOURTH QUARTER AND YEAR END RESULTS

Rhea-AI Summary

Alamo Group Inc. (ALG) reported impressive financial results for the fourth quarter and full year 2023, achieving record sales and earnings. The company saw a 12% increase in full-year net sales to $1.69 billion, with operating income up by 33% to $198.0 million. Net income for the year rose by 34% to $136.2 million, resulting in a diluted EPS of $11.36, up by 33%. The fourth quarter net sales reached $417.5 million, an 8% increase from the previous year, with net income up by 8% to $31.5 million. Alamo Group's backlog at the end of 2023 stood at $860 million, showcasing a strong performance across its divisions.

Positive

• Record sales and earnings for the ninth consecutive quarter.
• Full year net sales increased by 12% to $1.69 billion.
• Operating income rose by 33% to $198.0 million for the full year 2023.
• Net income improved by 34% to $136.2 million, with diluted EPS at $11.36, up by 33%.
• Fourth quarter net sales reached $417.5 million, an 8% increase from the previous year.
• Fourth quarter net income grew by 8% to $31.5 million.
• Backlog at the end of 2023 was at a strong $860 million.
• Industrial Equipment Division saw a 32% increase in sales in the fourth quarter.
• Vegetation Management Division faced challenges in certain markets but reported strong governmental mowing business.
• Company remains confident in its performance for 2024, with a healthy backlog and anticipated relief in market conditions.

Negative

• None.

Insights

Financial Analyst

The reported increase in Alamo Group Inc.'s net sales by 12% and net income by 34% for the full year, alongside a 33% improvement in EPS, indicates a robust financial performance that outpaces average industrial growth rates. This suggests effective cost management and operational efficiency, particularly noteworthy given the broader economic challenges of the past year. The record EBITDA growth of 26% further underscores the company's strong earnings before interest, taxes, depreciation and amortization, which is a key indicator of financial health and operational performance.

The substantial year-end backlog of $860 million provides visibility into future revenues, although it is essential to monitor the execution and conversion of this backlog into sales to ensure sustained growth. The company's performance, particularly in the Industrial Equipment Division, highlights a strong market position and demand for its products, which investors might view as a sign of resilience and potential for continued growth.

Market Research Analyst

Alamo Group's performance in the Vegetation Management Division reflects broader market trends, with pressures on domestic wood pellets and land clearing equipment sales and a soft farm and ranch market. The decline in agricultural exports and elevated interest rates have impacted dealer demand, leading to higher channel inventories. However, the strong governmental mowing business counters some of these negative trends, demonstrating the importance of a diversified product portfolio in mitigating sector-specific risks.

Anticipated relief from modestly lower interest rates later in the year could improve the division's prospects. This analysis provides context to the challenges and opportunities within specific market segments, which is critical for stakeholders to understand the nuances of the company's performance and potential future growth areas.

Economist

Alamo Group's results can be partially attributed to macroeconomic factors such as labor availability and supply chain performance improvements, which have contributed to increased operating efficiency. However, the company's caution regarding softness in the Vegetation Management Division due to macroeconomic headwinds—including housing market slowdown and commodity price volatility—highlights the sensitivity of Alamo's operations to economic cycles. The company's anticipation of lower interest rates suggests a strategic outlook that considers monetary policy impacts on inventory levels and dealer demand.

The Industrial Equipment Division's strong performance, driven by governmental demand, may reflect public sector investment stability compared to the private sector. This could be an indication of how government spending can provide a buffer against economic downturns for companies with government contracts.

SEGUIN, Texas, Feb. 22, 2024 /PRNewswire/ -- Alamo Group Inc. (NYSE: ALG) today reported results for the fourth quarter and year ended December 31, 2023.

Highlights

• Ninth consecutive quarterly record for sales and earnings
• Fourth quarter net sales of $417.5 million, up 8%
• Fourth quarter operating income of $44.8 million, up 5%
• Fourth quarter net income of $31.5 million, or $2.63 per diluted share, up 8%
• Full year net sales of $1.69 billion, up 12%
• Full year operating income of $198.0 million, up 33%
• Full year net income of $136.2 million, up 34%
• Full year diluted EPS was $11.36, up 33%
• Record EBITDA of $246.6 million, up 26%
• Year-end 2023 backlog at $860 million

Fourth Quarter Results

Fourth quarter 2023 net sales were $417.5 million compared to $386.6 million in the fourth quarter of 2022, an increase of 8%. Gross margin improved in the quarter versus the fourth quarter of 2022 by $11.1 million or 11%. Fourth quarter net income improved 8% to $31.5 million, or $2.63 per diluted share, compared to net income of $29.2 million, or $2.44 per diluted share in the fourth quarter of 2022. The Company's backlog at the end of 2023 was $860 million.

Full Year Results

Full year 2023 net sales increased to almost $1.7 billion, up 12% compared to $1.5 billion for the full year 2022. Gross margin for 2023 increased $77.1 million or 20% versus the full year 2022. Net income for 2023 was $136.2 million, or $11.36 per diluted share, compared to net income of $101.9 million, or $8.54 per diluted share in 2022, a year-over-year EPS improvement of 33%.

Comments on Results

Jeff Leonard, Alamo Group's President, and Chief Executive Officer, commented, "We are pleased that our fourth quarter results established new records for sales and earnings for the ninth consecutive quarter. The fourth quarter is normally seasonally softer for us, and this year was no exception as sales growth moderated relative to the pace set in the third quarter.

"It was great to see that our fourth quarter gross margin expanded by 80 basis points reflecting the durable quality of our backlog. Improvements in supply chain performance and labor availability drove operating efficiency higher and contributed to the favorable gross margin. The combined benefits of the higher gross margin and better operating efficiency were partially offset by higher employee-related administrative expenses during the quarter. Fourth quarter operating income of $44.8 million was five percent higher than the comparison period of 2022.

"The Industrial Equipment Division had a very strong fourth quarter with sales that were 32% higher than the fourth quarter of 2022. Governmental and industrial demand for this Division's products remained robust although order bookings were 9% lower due to a challenging comparable caused by an unusually large snow-removal equipment order that we received in the fourth quarter of 2022. Year-end backlog increased by 18% compared to 2022.

"The Vegetation Management Division faced challenging conditions in several of its markets in the fourth quarter. Forestry and Tree Care activity remained constrained by the combined effects of price pressure for domestic wood pellets, slowing demand for land clearing equipment and sluggish housing starts. The farm and ranch market also remained soft due to lower cattle prices, less favorable commodity prices and declining agricultural exports. Channel inventories remained above optimal levels in the fourth quarter and dealers were reluctant to place new stock orders while interest rates remained elevated. The bright spot in the Vegetation Management Division was its governmental mowing business which enjoyed very strong, historically high sales in the fourth quarter and for all of 2023. Vegetation Management Division fourth quarter order bookings declined 34% and year-end backlog was 39% lower compared to 2022. The Division's backlog has now returned to a more normal level from a historical perspective.

"The Company's solid performance in the fourth quarter capped a very strong performance in 2023. Full-year sales were up 12% and net income improved by 34% versus the prior year. As we expected, recent softness in several of the Vegetation Management Division's markets was largely offset by increasing demand for the Company's Industrial Equipment from governmental agencies and contractors. We continue to like the way the Company is positioned as we enter 2024. At nearly $860 million, the Company's backlog remains at a very healthy level and we believe that the quality of the backlog remains excellent. Although the noted softness in Vegetation Management may persist through the first quarter, anticipated relief in the form of modestly lower interest rates later in the year should help clear the inventory overhang and invigorate dealer demand. We expect that the Industrial Equipment Division will continue to display strength in 2024 driven by its sales to governmental agencies. Taken together, we remain confident regarding the Company's performance in 2024 and believe it will be another excellent year for us.

Earnings Conference Call

The Company will host a conference call to discuss fourth quarter and year end 2023 financial results on Friday, February 23, 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, March 01, 2024 by dialing 877-344-7529 (domestic) or 412-317-0088 (internationally), passcode 8022529.

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, February 23, 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 4,350 employees and operates 29 plants in North America, Europe, Australia and Brazil as of December 31, 2023. 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)
	December 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents		$         51,919			$         47,016
Accounts receivable, net		362,007			317,581
Inventories		377,480			352,553
Other current assets		12,551			10,060
Total current assets		803,957			727,210
Rental equipment, net		39,264			33,723
Property, plant and equipment		166,660			155,007
Goodwill		206,536			195,858
Intangible assets		168,296			171,341
Other non-current assets		24,673			25,369
Total assets		$    1,409,386			$    1,308,508
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable		$         99,678			$         97,537
Income taxes payable		12,529			6,592
Accrued liabilities		86,711			71,368
Current maturities of long-term debt and finance lease obligations		15,008			15,009
Total current liabilities		213,926			190,506
Long-term debt, net of current maturities		220,269			286,943
Long term tax payable		2,634			3,781
Other long-term liabilities		23,694			23,668
Deferred income taxes		16,100			18,250
Total stockholders' equity		932,763			785,360
Total liabilities and stockholders' equity		$    1,409,386			$    1,308,508

 

Alamo Group Inc. and Subsidiaries  Condensed Consolidated Statements of Income (in thousands, except per share amounts) (Unaudited)
	Fourth Quarter Ended				Year Ended
	12/31/2023		12/31/2022		12/31/2023		12/31/2022
Net sales:
Vegetation Management	$            214,357		$            232,545		$            979,040		$            937,065
Industrial Equipment	203,185		154,059		710,611		576,551
Total Net Sales	417,542		386,604		1,689,651		1,513,616
Cost of Sales	308,622		288,809		1,236,007		1,137,098
Gross Margin	108,920		97,795		453,644		376,518
	26.1 %		25.3 %		26.8 %		24.9 %
Selling, general and administration expense	60,068		51,282		240,158		212,649
Amortization Expense	4,054		3,796		15,519		15,277
Income from Operations	44,798		42,717		197,967		148,592
	10.7 %		11.0 %		11.7 %		9.8 %
Interest Expense	(6,587)		(4,791)		(26,093)		(14,361)
Interest Income	360		530		1,485		752
Other Income	1,667		(200)		1,761		(673)
Income before income taxes	40,238		38,256		175,120		134,310
Provision for income taxes	8,715		9,091		38,959		32,382
Net Income	$              31,523		$              29,165		$            136,161		$            101,928
Net Income per common share:
Basic	$                   2.64		$                   2.45		$                 11.42		$                   8.58
Diluted	$                   2.63		$                   2.44		$                 11.36		$                   8.54
Average common shares:
Basic	11,930		11,884		11,920		11,877
Diluted	12,000		11,940		11,987		11,934

 

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 December 31,						Change due to currency translation
	2023		2022		% change from 2022		$		%
Vegetation Management	$           214,357		$          232,545		(7.8) %		$                2,384		1.0 %
Industrial Equipment	203,185		154,059		31.9 %		861		0.6 %
Total Net Sales	$           417,542		$          386,604		8.0 %		$                3,245		0.8 %
	Twelve Months Ended December 31,						Change due to currency translation
	2023		2022		% change from 2022		$		%
Vegetation Management	$           979,040		$          937,065		4.5 %		$                1,663		0.2 %
Industrial Equipment	710,611		576,551		23.3 %		(1,961)		(0.3) %
Total Net Sales	$        1,689,651		$       1,513,616		11.6 %		$                 (298)		— %

 

Attachment 2
Alamo Group Inc. Non-GAAP Financial Reconciliation (in thousands) (Unaudited)
Consolidated Net Change of Total Debt, Net of Cash
		December 31, 2023		December 31, 2022		Net Change
Current maturities		$                   15,008		$                   15,009
Long-term debt, net of current		220,269		286,943
Total Debt		$                235,277		$                301,952
Total Cash		51,919		47,016
Total Debt Net of Cash		$                183,358		$                254,936		$           71,578

 

EBITDA
			Twelve Months Ended
			December 31, 2023		December 31, 2022
Income from operations			$              197,967		$              148,592
Depreciation			32,454		31,412
Amortization			16,222		15,944
EBITDA			$              246,643		$              195,948

 

Attachment 3
Alamo Group Inc. Non-GAAP Financial Reconciliation (in thousands) (Unaudited)
Vegetation Management Division Performance
		Three Months Ended December 31,				Twelve Months Ended    December 31,
		2023		2022		2023		2022
Backlog						$     352,080		$      577,050
Net Sales		214,357		232,545		979,040		937,065
Income from Operations		19,764		30,247		122,084		108,508
		9.2 %		13.0 %		12.5 %		11.6 %
Depreciation		4,246		4,470		15,581		15,188
Amortization		3,031		3,005		12,155		12,193
EBITDA		27,041		37,722		149,820		135,889
		12.6 %		16.2 %		15.3 %		14.5 %
Industrial Equipment Division Performance
		Three Months Ended December 31,				Twelve Months Ended    December 31,
		2023		2022		2023		2022
Backlog						$      507,715		$      429,439
Net Sales		203,185		154,059		710,611		576,551
Income from Operations		25,034		12,470		75,883		40,084
		12.3 %		8.1 %		10.7 %		7.0 %
Depreciation		4,534		4,970		16,873		16,224
Amortization		1,199		958		4,067		3,751
EBITDA		30,767		18,398		96,823		60,059
		15.1 %		11.9 %		13.6 %		10.4 %

 

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SOURCE Alamo Group Inc.

FAQ

What was Alamo Group Inc.'s (ALG) net income for the full year 2023?

Alamo Group Inc.'s net income for the full year 2023 was $136.2 million.

How much did Alamo Group Inc.'s (ALG) diluted EPS increase by for the full year 2023?

Alamo Group Inc.'s diluted EPS for the full year 2023 was $11.36, up by 33%.

What was the percentage increase in Alamo Group Inc.'s (ALG) full year operating income for 2023?

Alamo Group Inc.'s full year operating income for 2023 increased by 33%.

How did Alamo Group Inc.'s (ALG) fourth quarter net sales compare to the previous year?

Alamo Group Inc.'s fourth quarter net sales in 2023 were $417.5 million, an 8% increase from the previous year.

What was the backlog amount for Alamo Group Inc. (ALG) at the end of 2023?

Alamo Group Inc.'s backlog at the end of 2023 was $860 million.