00:03 Good day everyone, and welcome to Manitowoc Fourth Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ion Warner, Vice President, Marketing and Investor Relations. Please go ahead.

00:29 Good morning, everyone, and welcome to the Manitowoc conference call to review the company's fourth quarter 2021 financial performance and business update, as outlined in last evening's press release. Participating on the call today are Aaron Ravenscroft, President and Chief Executive Officer; and Dave Antoniuk, Executive Vice President and Chief Financial Officer. 00:52 Today's webcast includes a slide presentation, which can be found in the Investor Relations section of our website under Events and Presentations. We will reserve time for questions-and-answers after our prepared remarks. I would like to request that you limit your questions to one and a follow-up and return to the queue to ensure everyone has an opportunity to ask their questions. 01:14 Please turn to Slide 2. Please note our Safe Harbor statement in the material provided for this call. During today's call, forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business. 01:33 However, actual results could differ materially from any implied or actual projections due to one or more of the factors, among others, described in the company's latest SEC filings. The Manitowoc Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or other circumstances. 01:54 And with that, I will now turn the call over to Aaron.

01:58 Thank you, Ion, and good morning, everyone. Please turn to Slide 3. A year ago on this call, I shared my concerns regarding the unintended consequences of the aggressive fiscal policies being used by governments around the world to accelerate the COVID recovery, which we expected to create inflation and lead to a choppy recovery. 02:18 Clearly, in retrospect, the economic dislocations created by our return to normal were far greater than anyone anticipated. That being said, 2021 was a year of transition for Manitowoc on multiple fronts. While we bounced back operationally from the COVID shutdowns, we also made significant changes in our strategic orientation. 02:38 As we laid out a year ago, we continued to build out our tower crane business and the Belt and Road regions, launching two locally designed cranes. We accelerated our all-terrain new product development, which will bear fruit at the upcoming BAUMA trade show this October. 02:53 We invested $15 million in our tower crane rental fleet in Europe, which helped us increase our market share in Germany and win some strategic orders with key accounts. And finally, we completed two acquisitions in North America, which lays the groundwork for us to grow our aftermarket presence in the local mobile cranes market. 03:13 And currently, we continue to make progress on our ESG journey and more traditional safety terms. The team doubled our hazard observations that we call SLAMS, and our recordable injury rate, excluding acquisitions was 1.39 for the year. 03:30 While our RIR was up slightly year-over-year, it is still well below the industry benchmark, and I am very pleased with our performance in the face of a precious year. On the sustainability front, we implemented [Accuvio] [ph], a tracking system to help us account for our environmental footprint, and…

09:11 Thanks, Aaron. It's been an honor and a privilege to work with you over the past six years. I also want to thank the global Manitowoc team for their tremendous support to me over the years. Without their relentless efforts, we would not be where we are today. Lastly, I would like to thank the investment community and analysts with whom I have interacted with over the years. The many thought-provoking questions and comments surely challenged my thinking for the betterment of Manitowoc. A big thank you to everyone. 09:40 Now, moving to our results for the quarter, which ended the year on a considerable high note. Please move to Slide 4. Our fourth quarter orders totaled $ 615 million of book-to-bill of 1.24 and an increase of 21%, compared to $509 million of orders last year. The increase in orders were primarily due to higher global demand. Orders were unfavorably impacted by approximately $13 million from changes in foreign currency exchange rates. 10:13 Our 2021 ending backlog of $1 billion was up 86% over the prior year and is at its highest level in over 10 years. The increase in backlog was across all segments and primarily due to higher global demand and lower than expected shipments in the fourth quarter due to supply chain challenges and logistic constraints. Backlog was unfavorably impacted by approximately $40 million from changes in foreign currency exchange rates. 10:41 Net sales in the fourth quarter of $498 million increased $68 million, or 16% from a year ago. The incremental net sales from acquisitions in the quarter was $24 million, slightly below the $30 million we communicated in the prior quarter. Net sales were unfavorably impacted by approximately $9 million from changes in foreign currency exchange rates. 11:04 SG&A costs are up $24…

17:49 Thank you, Dave. Let's move to Slide 6. As we begin in 2022, our strategy remains unchanged and underpinned by our four strategic initiatives. We will continue to look for attractive acquisitions to help accelerate these initiatives, and we will opportunistically evaluate our capital and debt structure to help ensure that we have the necessary flexibility as the U.S. economy faces increasing interest rates. 18:14 Adding a little more clarity and focus to our strategy, I am pleased to announce our vision for aftermarket, which we call Cranes+50. Our goal is to increase our aftermarket or non-new machine sales by 50% over the next five years. Historically, our business model has been highly product focus. 18:33 Our objective is to grow beyond machines and products and to sell more aftermarket parts, field service, lifting solutions, RPOs, rentals for fleet management, used sales, remanufactured cranes, and digital solutions that provide greater customer connectivity. As a jumping-off point, we ended 2021 with $449 million in non-new machine sales, which will be outlined in our 10-K filing. 19:03 In closing, Manitowoc continues to strive to get closer to our customers and to grow our less cyclical and higher-margin revenue streams. We continue to reposition the company for long-term growth, while we weather the near-term economic storm. We are confident that our investment in our four growth initiatives will allow us to deliver on our Cranes+50 strategy and increase our non-new machine sales by 50% over the next five years, which we believe will fuel greater long-term returns for our shareholders. 19:33 With that, operator, please open the lines for questions.

19:39 Thank you. [Operator Instructions] We'll take our first question from Tami Zakaria with J.P. Morgan.

20:05 Hi, good morning. Thank you so much for taking my questions. So my first question is…

20:09 Good morning, Tami.

20:12 Good morning. How are you? So, my first question is, I think you mentioned about $75 million of shortfall in orders in October and November. Did you recover all of that in December or do you expect all of it to come back in the first quarter? I'm trying to understand, like when does this shortfall sort of getting delivered – [both delivered] [ph], and whether you're going to recoup the entirety of it. Is there's some lost demand there?

20:45 Okay. So, yeah, there were 75 million that we missed in October and November, where we’re making our shipments, but we’re able to [flaw back] [ph] $25 million of that during December. So, there's a $50 million miss. I think that's off the high point of our range that we gave back in December. I think the better way of looking at it is, we will recover those shipments in January and maybe some in February if we if they went out that far. But the reality is, everything continues to shift right as we continue to fight through all these shortages. 21:14 So, I wouldn't say, it's lost in demand. We've not had any demand cancelations or cancelations anything like that. It's just the business right now remains very fluid in terms of shipments because of part shortages.

21:26 Understood, that's helpful. And then, one quick follow-up, on the backlog, can you remind us whether the backlog represents everything you expect to ship within the next 12 months? And are these backlogs price-protected?

21:42 So, the backlog will – the majority of the backlog is scheduled to ship in 2022 and all the pricing is fixed in the backlog.

21:53 Understood. All right. Thank you so much.

21:59 And we will take our next question from Stanley Elliott with Stifel.

22:05 Good morning, Stanley.

22:07 Good morning, everyone. Nice way to finish up the quarter in a tough environment and Dave, best of luck to you. We will certainly miss out you on the call.

22:16 Thanks, Stanley.

22:19 Can you talk a little bit more about the Plus 50, increasing that by 50%? Is this all organic? What level of M&A or acquisitions will be needed for you to hit those targets?

22:36 Yeah, so it'll come through a combination of the acquisitions, as well as some organic. And I'd remind you that whenever we close the books on H&E, we had a lot of the – we had to eliminate the intercompany transactions. So that sort of sometimes outweighs what you see in terms of the organic, just in terms of the mathematics of it. But we definitely will rely on acquisitions to get there. But even from our recent acquisitions, we've got good synergies and there are more opportunities. 23:04 One of the things I'd like to just talk about on this subject is used. So, if you look at the business, typically there's a lot of used business that's generated through trade-ins in Europe with all-terrain cranes. Historically, we haven't really done that proactively or I'd say strategically, we did it reactively in terms of what our customer wants and the order we would like to get. 23:24 So, now that the acquisitions and owning H&E and their crane business in Aspen, it create a real strategic opportunity where we can go chase business that we wouldn't otherwise chase back in Europe. So, we would do a trade-in Europe, bring the crane to the United States and sell it into the U.S. market. So, that's just one example of the, sort of organic opportunities we have.

23:46 Interesting. Could you comment a little bit about your outlook from a regional perspective? You mentioned all the markets doing fairly well with the exception of China. Just see, kind of what the puts and takes might be as we're thinking about the 2022 guide?

24:01 Yeah, I mean, across the board, it's pretty strong, almost in all regions, I'm just thinking even in Russia, with all of the uncertainty there, the business continues to remain robust. So, I don't really see a change. Europe has been in good shape for us. It continues strong, whether it would be towers or all-terrain, U.S. still is robust. Asia-Pac, I mean there's – throughout Asia-Pac as certain markets reopen again, things look good, but yeah, I generally say, just take China out of it, all regions look pretty solid.

24:37 Great guys. Thank you very much, and best of luck.

24:43 And we'll go to our next question from Jamie Cook with Credit Suisse.

24:47 Good morning, Jamie.

24:50 Hi, this is Chigusa Katoku on for Jamie, thanks for taking my questions. So, we were wondering so for your – you’ve guided sales up 22% at the midpoint for 2022, and I was wondering if you could help us understand how much is M&A versus price versus volume?

25:08 Yeah, so I would say that when we look at the incremental impact, we said that between 100 million and 120 million will be M&A related on a net basis on a year-over-year basis. And then, generally speaking, there is going to be price included in there because we've raised our prices to more or less cover our increase in costs, but we haven't spoken about a $1 impact on that at this time yet.

25:34 Okay, thanks. And then you're 2022 incremental is implied below your typical 25% range, but we are wondering what you're assuming for price cost for the first half versus the second half?

25:47 Yeah, so I mean, if you look at the full-year combination of where the volume is set, but the biggest issue really comes back to this dislocation between our pricing and our costs. And as if things shift right, so for instance, the $50 million that moved out of the fourth quarter and into the first quarter, you know in the first half, we've got some headwinds in terms of where our pricing sits relative to where our costing is.

26:12 Okay. Thank you.

26:12 So, that's the majority of the issue with the contribution margins. It'll start to sort out as we get towards the end of the year.

26:19 Okay, thanks.

26:23 Thank you.

26:24 And we'll go to our next question from Cliff Ransom with Ransom Research.

26:29 Good morning, guys.

26:33 Good morning, Cliff.

26:34 Because I'm a big fan of Stanley, I will just say that Dave, we won't miss you on the calls, but we'll miss you in the office. You really add value.

26:47 Thank you very much, Cliff.

26:51 As a quick comment before two very quick questions. Aaron, the real test of a CEO is ensuring orderly successions, and thank you for handling your first big test so well. This is obviously very well organized, thank you. Do you believe that the recouping of shipment effectiveness in the fourth quarter was an individual event or was it – do you believe the [indiscernible] of something to come?

27:29 Yeah, I have to admit now that we're through January, I'd definitely say it was a one-time event in December. In December, we had some pull back and things went our way in terms of, I think, everybody trying to get their shipments out at the end of the year, but in January we sort of went back to where we were in October and November in terms of shortages and the logistical issues.

27:48 Got it. And then the last question is, in my mind, this lean transformation that you have undertaken in Manitowoc is the most important thing that Manitowoc has done since it was founded, can you give us one or two or three examples of stuff that you're really proud of? And then maybe one or two examples of stuff that didn't work out as well as you had hoped and what you're going to do about it?

28:17 Yeah. I mean, I think one of the coolest examples we have this year is the heat exchangers we've got in [indiscernible]. So as part of our ESG program, our maintenance team there started to implement heat exchanges around our paint booth. And in fact, now all the men's and gals' showers in the facility are heated by the water that comes after the paint booth. 28:36 So, I thought that was a great opportunity. And it started to move around the company. So, yeah, I think there's plenty of those sort of I call small, but they're big at a local level of ideas that keep going. But I mean, in terms of our mistakes, we make mistakes – I hope we make mistakes every single day because we're not making mistakes and we're not making progress. 28:57 So, we still have a lot of progress to go on. I think we made some good gains on TPM in the last 18 months. We started to really push hard on understanding the work, which is a never-ending journey. So, yeah, I think there's still a lot of opportunity for us.

29:12 Thank you very much for that comment on [indiscernible]. I appreciate it. Good day.

29:17 Thanks, Cliff.

29:22 And we'll take our next question from Jerry Revich with Goldman Sachs.

29:28 Good morning, Jerry.

29:29 Hi, good morning, everyone.

29:31 Good morning.

29:32 Dave, congratulations.

29:34 Thank you very much, Jerry.

29:37 I’m wondering if we could just talk about the margin bridge in the fourth quarter, really impressive margin performance, sequentially in year-over-year in the challenging environment. Can you just quantify for us, Dave, what was the price cost in the quarter? And maybe just to quantify some of the qualitative factors that you spoke about, Aaron, in terms of getting parts, etcetera? What impact did that have sequentially on improving absorption because the results really stood out versus what we're seeing from other manufacturers? Thanks.

30:15 Yeah, so, Jerry, I would – I'd have to say that the biggest item in there is pure product mix, right? I mean, we obviously focused on products that delivered, what I’ll say is the best returns for us. And we were able to get those out the door. So that was without a doubt the number one driver in that. In addition to that, I have to give credit to all the manufacturing facilities around the world. 30:37 I mean, we really did well in execution in Q4, and it came out much better than what we anticipated, and those were probably the two main drivers that generated the biggest gains for us in Q4.

30:52 Got it. And, obviously a strong bookings year for you folks in 2021, as you look at the prospect list, maybe through the first six months of 2022 or however far visibility you have. Can you talk about which regions do you expect to drive growth in backlog for you folks over the course of this year based on the visibility we have now?

31:15 Yeah, I think regionally, it probably remains pretty even across the businesses relative to their size. When I look out at 2022, I mean, the first thing I'd say is, 1Q still looks good, not a strong fourth quarter, but fourth quarter typically is pretty strong for us and we had a great fourth quarter this year. The other thing I’d add is, we've been working really, really hard at getting the pricing that we need to offset the inflation. 31:39 And so, we've definitely lost some orders here in the first quarter, just being super disciplined relative to pricing. But I think that the general outlook looks good. The other thing I'd add too is because of the pricing situation, we're pretty concerned about taking orders in 2023. I mean, we want to manage our backlog as closely as we can, so don't get too far ahead of ourselves.

32:03 Appreciate the discussion, thanks.

32:06 Thank you.

32:08 Thank you, Jerry.

32:10 [Operator Instructions] We'll take a follow-up from Cliff Ransom.

32:23 Thanks again, gentlemen. One last question. Very important in this equation is, new product development and satisfying end-users. Can you talk a little bit about how you've used lean thinking to enhance that process?

32:41 Yeah, I mean, we've used it on multiple fronts. One is, just around the toll gate process we use for product development and how we move cranes. I mean, I tell you outright we've got a [6,400-1] [ph] that we've been looking to launch now. It's been delayed six months in total. So, I mean, we go through all the toll gates and everyone stands in a room and says, not ready to go and we say, okay, keep working on it. 33:05 So, I mean, I think that shows the level of discipline that we have. And then the other side of this is just the voice of the customer and the field follows what we do to really make sure that the way we design in the cranes is what the customers want. We have a lot of dialog with folks around what are the real needs and the true specifications of the cranes we need to develop.

33:25 Thank you, again. Good day.

33:29 Thanks, Cliff.

33:31 And it appears there are no further questions at this time. Mr. Warner, I'll turn the conference back to you for any additional or closing remarks.

33:38 Thank you. Before we conclude today's call, please note that a replay of our fourth quarter 2021 conference call will be available later this morning by accessing the Investor Relations section of our website at www.manitowoc.com. Thank you, everyone, for joining us today and for your continuing interest in The Manitowoc Company. We look forward to speaking with you again next quarter. Good day.

34:01 This concludes today's call. Thank you for your participation. You may now disconnect.