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Operator: Good day, ladies and gentlemen, and welcome to the Miller Industries Fourth Quarter and Full Year 2022 Results Conference Call. Please note this event is being recorded. And now at this time, I would like to turn the call over to Mike Gaudreau at FTI Consulting. Please go ahead sir.

Mike Gaudreau: Thank you, and good morning, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the company’s 2022 fourth quarter and full year results, which were released after the close of the market yesterday. With us from the management team today are Bill Miller, Chairman of the Board; Will Miller, President and CEO; Jeff Badgley, President of International and Military; Debbie Whitmire, Executive Vice President and CFO; Frank Madonia, Executive Vice President, Secretary and General Counsel; Vince Tiano, Chief Revenue Officer; and Jamison Linden, Chief Manufacturing Officer. Today’s call will begin with formal remarks from management, followed by a question-and-answer session.

Please note in this morning’s conference call, management may make forward-looking statements in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. I’d like to call your attention to the risks related to these statements, which are more formally described in the company’s annual report filed on Form 10-K and other filings with the Securities and Exchange Commission. I would also like to inform you that Miller Industries intends to file a proxy statement and related proxy materials with the SEC in connection with the company’s upcoming 2023 Annual Meeting of Shareholders and in connection with this annual meeting, the company, its directors and certain of its executive officers are participants in the solicitation of proxies from its shareholders.

Shareholders of Miller Industries are strongly encouraged to read the definitive proxy statement and all other related materials filed with the SEC carefully and in their entirety when they become available as they will contain important information about the 2023 Annual Meeting. On today’s call, we will be limiting our discussion to quarterly results. At this time, I’d like to turn the call over to Will. Please go ahead Will.

Will Miller: Thank you and good morning everyone. I’d like to start off by saying that we’ve recognized particularly over the last few quarters that the performance of the business is not very well understood by the Street. In an effort to remedy this, we are committed to continuing to maximize shareholder value and help investors better understand the underlying dynamics of our business, so they can better assess our financial performance and outlook. That said, we were very pleased with our fourth quarter results that were ahead of internal expectations closing out 2022 on a strong note despite a year of persistent supply chain challenges. Sales in the quarter increased 12% year-over-year and 9.9% sequentially to $225.9 million due to improved deliveries on our strong backlog and a large order from a new customer, which we began recognizing revenue on in the back half of the year.

We expect to continue to recognize revenue from this as well as other new customer orders as we progress through 2023. Gross profit in the fourth quarter was $25.5 million, an increase of 63.6% compared to the prior year quarter, while gross margin of 11.3% improved 360 basis points year-over-year. Sequentially gross profit improved 10.1%, while gross margins remained flat. Our probability continued to trend in the right direction, due to moderating input costs and the full benefit of our 2022 price increases. These factors, combined with steps we’ve made to improve our supply chain and our normally scheduled 2023 price increases, which just began to roll out into the marketplace, give us confidence in improving profitability in 2023. While we continue to accumulate inventory in the form of goods near completion, we have taken a number of steps over the past year to ensure stability and flexibility of our supply chain to maximize our deliveries.

For example, since the start of 2022, we’ve contracted with several new suppliers, supplementing the availability of hard-to-find parts. Additionally, we’ve taken steps to improve the nimbleness of our manufacturing processes by improving our engineering redesign capabilities, enabling us to modify existing parts and/or retrofitting them to meet specific needs, instead of waiting for parts that are not available or with extended lead times. In an effort to provide more context as to why we feel it is prudent to accumulate inventory, at the end of the year, we have a record backlog that positions us to generate revenues in excess of $1 billion in the fiscal 2023, subject to no further deterioration in the supply chain and general economic conditions.

Historically, our backlog has been resilient in recessionary times and we have a minimal amount of order cancellations. Therefore, we continue to believe that the best investment we can make in our business is fulfilling our backlog and continuing to grow our business. Though there continue to be some challenges delivering finished goods, with such a strong backlog, we feel that investing in our inventory is still the most prudent use of capital in order to service our customers and recognize revenue, as quickly as possible. In our international business, we are encouraged by the levels of demand we continue to see. Backlog remains strong. However, we are seeing slightly greater inflationary impacts compared to our domestic operations, such as unprecedented increases in energy costs.

Because a large percentage of our sales in our international business are direct sales to end user, it has been more difficult to pass through price increases, compared to our North American business, where we work largely through distributors. That said, we are confident, that we will recognize the full benefit of these price increases over the course of the coming year. As a reminder, our international business makes up a mid to high single-digit percentage of our sales. Now, I’d like to turn the call over to Debbie, who will review the fourth quarter financial results in more detail. Following her remarks, I’ll provide a market outlook and some closing comments. Debbie?

Debbie Whitmire: Thanks, Will. Good morning everyone. Net sales for the fourth quarter 2022 were $225.9 million versus $201.7 million for the fourth quarter of 2021, a 12% year-over-year increase, driven largely by the robust demand across all of our products and the benefit of our 2022 price increases as Will mentioned earlier. Cost of operations increased 9.8% to $200.3 million for the fourth quarter of 2022, compared to $182.4 million for the fourth quarter 2021. The increase in our cost of operations is due largely to parts scarcity and high prices for our components, compared to the prior year period. Cost of operations, as a percentage of net sales, decreased approximately 360 basis points from the prior year period to 88.7%.

Gross profit was $25.5 million or 11.3% of net sales for the fourth quarter of 2022 compared to $15.6 million or 7.7% of net sales for the prior year period. The year-over-year improvement in gross margin was driven by higher deliveries and increasing benefit from our 2022 price increases and stabilization of raw materials input costs. SG&A expenses were $13.1 million in the fourth quarter 2022 compared to $11.2 million in the fourth quarter of 2021 due to investments in human capital and increases in employee benefit costs. As a percentage of sales, SG&A was 5.8%, 30 basis points higher than the prior year period. Interest expense for the fourth quarter 2022 was $1.3 million up from $454,000 for the fourth quarter 2021, primarily related to an increase in our debt levels to find higher working capital needs along with the increases in our distributor floor plan financing costs, which flags up and down with revenue.

Other income for the fourth quarter was $512,000 compared to an expense of $64,000 for the fourth quarter 2021 attributed largely to currency exchange rate fluctuations and the strength of the British pound. Notably, our effective tax rate for the quarter was slightly lower year-over-year on a sequential basis and on a sequential basis primarily due to tax credits and favorable adjustments in our foreign tax expense. Net income for the fourth quarter 2022 was $9.3 million or $0.81 per diluted share compared to net income of $2.7 million or $0.24 per diluted share in the fourth quarter of 2021. Before moving to the balance sheet, I’d like to quickly recap our results for the full year of 2022. Net sales for the full year were $848.5 million compared to $717.5 million in the prior year period, an increase of 18.3%.

Gross profit for the full year was $82.4 million or 9.7% of sales compared to $69.9 million or 9.7% of sales in 2019 and 2021. Net income for the full year of 2022 was $20.3 million or $1.78 per share compared to net income for 2021 of $16.3 million or $1.42 per share increases of 25.2% and 25.4%, respectively. Turning to the balance sheet, cash and cash equivalents as of December 31, 2022 was $40.2 million compared to $33.2 million as of September 30, 2022 and $54.3 million as of December 31, 2021. Accounts receivable as of December 31, 2022 was $177.7 million compared to $167.9 million as of September 30, 2022 and $154 million as of December 31, 2021. Inventories were $153.7 million as of December 31, 2022 compared to $144.4 million as of September 30, 2022 and $114.9 million as of December 31, 2021.

As Will mentioned earlier, we view inventory as the best possible investment we can make in our business given our record backlog. While it is difficult to determine when deliveries for all of our components will match up, we are hopeful this dynamic will continue to improve over the course of the year. Accounts payable as of December 31, 2022 was $125.5 million, compared to $107.5 million as of September 30, 2022 and $121.7 million as of December 31, 2021. As it relates to capital allocation, our focus over the past few years has been returning capital to shareholders through an industry-leading dividend and investing in three core areas of the business; productivity improvements, capacity expansion and the health and safety of our employees.

Since 2016, we have returned roughly $55 million to our shareholders in the form of dividends. During that same time, we have reinvested approximately $136 million in CapEx, approximately 15% of which has gone towards automation and productivity improvements, such as our new fabrication facility in Greenville, which produces steel parts to complement our existing supply chain, 60% have gone to capacity expansion projects, such as the purchase of a small facility in Ooltewah, Tennessee, which was used to improve production of our small carrier units and 12% has gone to projects related to the health and safety of our employees, including closing our shipping docks to eliminate employee exposure to extreme weather conditions. We’ve also invested over $10 million in technology solutions, such as our recent ERP software implementation.

Moving forward, we expect capital expenditures at dollar levels comparable to our five-year average and we’ll continue to focus on investing in the core areas that I mentioned earlier. Lastly, Board of Directors approved our quarterly cash dividend of $0.18 per share payable on March 27, 2022 to shareholders of record at the close of business on March 20, 2022 marking the 49th consecutive quarter that the company has paid a dividend. Now I’ll turn the call back over to Will for some closing remarks.

Will Miller: Thank you, Debbie. Our results over the last two quarters of fiscal 2022 have given us increased confidence in our business and our strategy, as top line growth has continued to improve, we are encouraged by the sequential and year-over-year margin improvements in the back half of the year. As I alluded to earlier, subject to no substantial changes in the supply chain environment and the general economic conditions, we are confident that the profitability will improve in 2023. Demand for our products is as high as it has ever been evidenced by our record backlog and significant customer wins. We remain poised to quickly execute against our backlog, as parts are increasingly available over the coming year due to the capacity expansions and capital equipment expenditures we have previously made in preparation for our increasing demand.

While some headwinds remain, including the consistency of the supply chain for various component parts and rising interest rates, making it difficult to predict when a fully normal environment will return we are committed to doing everything in our power to deliver on our commitments to our customers, partners and suppliers in as timely manner as possible. Despite these headwinds, we are confident that given the dynamics in our business and the strength of our backlog that we will be able to generate over $1 billion in revenue for fiscal 2023. In closing, the entire management team and I would like to thank all of our employees, suppliers, customers and shareholders for their continued support of Miller Industries. At this time, we’d like to open the line for any questions.

Operator:

Will Miller: Thank you. I’d like to thank you all again for joining us on the call today and we look forward to speaking with you on our first quarter conference call. Thank you again.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.