Miller Industries, Inc. (MLR) Q2 2026 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Miller Industries' Second Quarter 2026 Results Conference Call. Please note this event is being recorded. And now at this time, I would like to turn the call over to Will Miller at Miller Industries. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us for our second quarter 2026 earnings call. I want to start by recognizing the hard work of our employees around the world. Our second quarter results and our continued progress in strengthening our business reflects the dedication and passion of our team, our suppliers, our customers, and our shareholders. As always, our remarks today will include forward-looking statements. Actual results may differ materially. Please refer to our SEC filings and the safe harbor statement included in today's presentation. Before I hand the call over to Debbie to discuss our results in greater detail, I would like to start with a brief overview of the quarter. We delivered strong sequential and year-over-year revenue growth in the second quarter while navigating an inconsistent macroeconomic environment. We also achieved continued improvement in profitability, reflecting the production efficiencies our operations team has implemented. These production efficiencies have also enhanced our already strong cash generation, enabling us to further improve our balance sheet and reduce our debt balance. This provides us with greater financial flexibility to invest in our business, focusing on the areas where we see the greatest opportunities to create long-term value. Together, we believe these actions position us well for a strong second half of the year. Our core philosophy remains exactly as it has been since the start of the company. Miller Industries has the best people, the best products, and the best distribution network in the towing and recovery industry. That philosophy is the backbone of Miller Industries' 35-plus year history and will continue to be our philosophy moving forward. Our 1,500-plus employees across Tennessee, Pennsylvania, France, the United Kingdom, and Italy, combined with our widespread distribution footprint, give us unmatched reach, capability, and reliability that continues to position the company for sustained, profitable growth. I want to express my gratitude for all of our team members across the U.S., Europe, and the U.K. for their continued dedication to the company. Their commitment allows us to execute with discipline today while continuing to build the foundation for longer-term growth and value creation. I'll now turn the call over to Debbie, who will provide an update on our financial results in more detail, before returning with some more specific thoughts on our markets, capital allocation priorities, and guidance.

Thank you, Will. For the second quarter, revenue was $240 million, up 12.1% year-over-year and 32.7% sequentially. This growth was driven by steady production rates to meet retail activity and order intake levels. Gross profit was $35.9 million, or 15% of sales, and net income was $7.3 million. Our improved profitability was driven by operational efficiency and disciplined labor cost management, which was made possible by the outstanding execution of our operations team across the globe. Gross profit was impacted by product mix as it returns to a more normalized balance of chassis and body after periods of significantly elevated inventory in our distribution channel. Additionally, diluted EPS was $0.63 per share, up from $0.05 in the first quarter. As expected, EPS during the quarter continued to reflect transaction-related expenses from the Omars acquisition, which impacted EPS by $0.11 in the quarter. We have now recognized the majority of expenses related to the transaction, and we believe that any further impact will be far less material to our financial results. Our integration of Omars continues to progress smoothly, and we remain confident that the acquisition will be accretive in the first year after recognizing these expenses. I'd like to now shift to a discussion of our balance sheet. At the end of the second quarter, we had a cash balance of $55.6 million, up $2.6 million from last quarter. We also reduced our debt by an additional $20 million since the end of Q1. This combination of strong cash generation and a robust balance sheet provides us with greater financial flexibility to invest in our business, pursue strategic opportunities, and allocate capital to maximize value for the company and our investors. During this quarter, we were pleased to return $4.9 million directly to our shareholders in the form of share repurchases and dividends. Now I'll turn the call back to Will to discuss our markets and our outlook.

Thank you, Debbie. In the domestic market, despite the ongoing geopolitical tensions and elevated fuel prices, we are pleased to see stable retail demand, order entry and distributor inventory levels, which remain at historical averages. We currently anticipate that retail activity and production volumes will remain steady and in line with current levels as the product mix returns to an optimal ratio between bodies and chassis. We remain confident in the strength of our business and our ability to execute against our long-term strategy. In our international and export business, backlog levels remain consistent, and our international facilities are operating at a steady production pace to meet sustained customer demand. The acquisition of Omars and our EUR 8 million expansion in Jige in France, which remains on track to be completed mid-2027, will both be significant drivers of the success of our global initiatives. Meanwhile, we continue to communicate with various domestic and international government agencies, building our confidence that our success in our military business will continue to grow in the second half of the year. We are pleased to report that our military commitments have now surpassed $200 million and production is scheduled to begin in 2027. We anticipate that the majority of revenue will be recognized in 2028 and 2029. We expect our diligent work with militaries around the globe and our industry-leading defense-grade recovery vehicles will be an important driver for our financial results in years ahead. As it relates to our manufacturing capacity expansion in Ooltewah, we are still aiming to be production ready by late 2027. We're beginning to wrap up site preparation this month and are on schedule to begin construction of the new facility by Q4 of 2026. The new 200,000-plus square foot manufacturing facility will be instrumental to producing global high-volume defense-grade recovery vehicles and meeting increased demand for our global export markets while maintaining the ability to service our North American customer base. This project will also incorporate the latest manufacturing technology, helping streamline heavy-duty workflows and enhance our manufacturing efficiency. We believe our strong cash flow generation positions us well to fund most of the expansion organically over the next several years. Our strengthened balance sheet now provides us with even more flexibility to allocate capital to our 5 key priorities. Industry-leading quarterly dividend currently at $0.21 per share; $2.5 million of share repurchases in the second quarter and approximately $11.5 million remaining under the current share repurchase authorization; strategic optimization of working capital; selective M&A opportunities; and ongoing investment in capacity expansion, automation and innovation. We're extremely proud that we've paid our dividend for 63 consecutive quarters. As Debbie mentioned, in the second quarter, we continued to prioritize distributing capital by returning approximately $4.9 million to shareholders between our share repurchase program and dividends. This balanced approach allows us to continue investing in the company while also returning value directly to shareholders. We believe our cash generation capabilities will allow us to execute on each one of these priorities without expanding our credit facility. Given our steady levels of production, we anticipate to attain similar quarterly results of approximately $250 million in revenue for the remainder of the year. We remain confident that we are on track to achieve our previously stated guidance, generating between $850 million to $900 million in revenue for the full year 2026. We anticipate that our earnings per share will be in line with full year 2025 results and gross margins to return to historical levels in the mid-13% range for the full year 2026. We look forward to meeting with investors to speak about exciting developments at Miller Industries in the coming months at the D.A. Davidson Small Cap Conference on August 11; Midwest IDEAS Conference on August 26; the D.A. Davidson Diversified Industrials and Services Conference on September 23; Southwest IDEAS Conference on November 18; and additional non-deal roadshows to be scheduled. We always welcome continued dialogue with our shareholders. 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. We are well positioned to execute on our priorities in the near term while continuing to drive long-term global growth. Thank you again for joining us. Operator, please open the line for questions.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Michael Shlisky of D.A. Davidson. Please go ahead.

The outlook for revenues of $250 million a quarter in the back half of the year, that's a -- it's a slight increase from where you were in 2Q, it's certainly above where you were in the first quarter. And the gross margins in those two quarters were 14% and even 15% this past quarter, but you're still guiding for the mid-13s for the full year. And then you also mentioned that mix is getting back to normal again as well between the chassis and the body. Can you maybe just help us give us a little more granular detail as to why gross margins might not be as robust in the back half as in the first half, if that's the case?

Yes, I mean, our projections, Mike, right now -- thank you for the question. Our projections right now are sort of to continue the current pace with bodies and chassis, but we're seeing that product mix return back to historical levels. So as our distribution base demands more chassis to integrate with their bodies, we're going to see an uptick in that chassis revenue, which will probably affect margins slightly. So we're not exactly sure, but we think somewhere in that mid-13% range for the full year as it starts to get back down to historical averages. It might be a little bit higher than that, but we're close.

Okay, great. I also want to clarify, I think I did this last quarter on the call, Debbie, that the EPS outlook for roughly flat year-over-year. That includes what looks like in the first half so far is almost $0.25 of Omars kind of one-time items. I know you don't put out adjusted EPS, but had it not been for that, your EPS would be up double digits if you didn't have those one-time charges. Is that the right way to think about it?

Yes, that's correct. The outlook does include those additional expenses that were recorded in the first and second quarter.

Okay. And you said in your comments that those are the majority of the one-time items. Could you maybe just give us a sense as to how much more it might be left in just a small amount, what will the full year look like from a one-time Omars perspective?

So first quarter, I think we said it was $0.13 impact; second quarter is $0.11. I would say the remainder of the year is $0.04 to $0.05.

Okay, great. Thank you for that. Also want to ask about military. Well, it was $150 million last quarter, now you're at $200 million. Can you give us a sense of what broadly speaking has been added? Is it extremely heavy stuff? Is it with a European partner, and then just a sense as to what the pipeline is, what you might think you got your sights on for the rest of the year or just the overall pipeline size for military?

Yes. The addition that we saw moving us from north of $150 million in commitments to now over $200 million was -- probably there were some small items in there along throughout the quarter there was one more larger commitment. All of it was --- the vast majority of it was heavy-duty production, some -- a few industrial car carriers. The vast majority was heavy-duty production. Can't disclose as far as the customer or region that the latest larger contract was at this time, but we hope to have a little bit more light for investors as we move into Q3 and Q4 this year with regards to where some of these vehicles may be headed. You know, looking forward, there's still -- there has been a significant pipeline of potential opportunities with RFQs that we're actively working with the different governmental agencies globally. So we're excited and we're happy to see them starting to progress and move forward.

Great. Thanks for that. And then maybe turning to the core tow business, what -- can you share about your latest conversations with end users or with some dealers about how they feel about buying? I remember over the last, let's say, 12 months or so, political concerns, there's interest rate concerns. Things have gotten better at some points along the way here. Give us a sense, as you take the temperature of the customer base and dealer base, what they might be telling you about for the rest of this year and even the first part of '27?

Yes, I mean, right now what we're seeing is it's mostly consumer confidence and geopolitical and fuel pricing is what's on everybody's mind. So the confidence level isn't all that high. I mean, our production levels, retail activity levels, inventory levels, everything's really flat right now. So there's -- we're building at the proper rate. We're receiving orders to build at that rate. We're not having inventory shrink or grow at the distribution level. Our distributors are happy with the inventory levels that they have today. We seem to have pushed through all of the excess inventory for the most part at distribution. I think everybody's in a solid steady state. There's obviously room for improvement in the domestic market, but I don't think we're going to see any of that until we get some light at the end of the tunnel with the current issues in the Middle East and fuel prices settling back down.

Oh, yes. I just wanted to make sure that you were done. Yes, thanks for those answers. I appreciate it. I will pass them along.

Thank you, Mike. We appreciate it.

And there are no further questions at this time. I would now like to turn the call back over to Will Miller for closing comments.

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 third quarter conference call. If you'd like information on how to participate and ask questions on the call, please visit our investor relations website, millerind.com/investors, or email investor.relations@millerind.com. Thank you. May God bless you and may God bless our troops.

Ladies and gentlemen, this concludes today's conference. We thank you for participating and ask that you please disconnect your lines.