Good morning. My name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to the Manitowoc Earnings Conference Call. I will now turn the call to Ion Warner, senior Vice President, Marketing and Investor Relations. You may begin your conference. Please proceed.

Good morning, everyone and welcome to The Manitowoc conference call to review the company's fourth quarter and full-year 2023 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 Brian Regan, Executive Vice President and Chief Financial Officer. 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. 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. 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 the result of new information, future events or other circumstances. and with that, I will now turn the call over to Aaron.

Thank you, Ion and good morning, everyone. Please turn to slide 3. As I look back over the last 12 months, I'm very pleased with the performance delivered by The Manitowoc team. While the specific challenges seem to ebb and flow without a doubt, 2023 was just as tough as the previous few years, although inflation seems to be mostly behind us at this point. The team worked diligently throughout the year to mitigate cost increases from our suppliers while continuing to push for the appropriate price increases. From a demand perspective, the European tower crane market was even softer than we anticipated. And fortunately, the mobile crane market, particularly in the U.S. proved to be far more resilient, considering the interest rate increases that we've seen. Consequently, our team had their work cut out for them. Their hard work in achieving these results often goes unnoticed on these calls, but without their willingness to go above and beyond our performance would not be possible. Thank you to the team. For the full year, we generated slightly above $2.2 billion in sales, $175 million in adjusted EBITDA, a 23% increase year-over-year, and our adjusted EBITDA margins expanded 90 basis points to 7.9%, which is a great result when you take into account the unfavorable mix that we faced. Non-new machine sales for 2023 were $613 million, a 12% increase. Please turn to slide 4. turning our attention to The Manitowoc way, I am extremely proud of the team's results. First and foremost, in terms of safety, we ended the year with an RIR or recordable incident rate of 1.01. Our goal remains zero injuries, but nevertheless, it is worth noting that this is our best result in the company's history. I attribute these results to an increased focus on interactive…

Thanks, Aaron and good morning, everyone. Please move to slide 8. As a reminder, we entered the fourth quarter with difficult year-over-year comparables and expected unfavorable mix due to the softness in the European tower crane market. This held true and the fourth quarter results were in line with our expectations. turning to orders. During the fourth quarter, we had orders of $476 million, a decrease of 33% from a year ago. Foreign currency favorably impacted orders by $9 million. Our December 31st backlog was $917 million, a year-over-year decrease of 13% and was favorably impacted by $9 million from changes in foreign currency exchange rates. Net sales in the fourth quarter were $596 million and decreased 4% from a year ago. The year-over-year decrease was primarily driven by softness in our European tower crane business. This impact was partially offset by global pricing efforts and product mix in the Americas. Net sales were favorably impacted $9 million from changes in foreign currency. SG&A expenses were $88 million, which included a $10 million charge related to a legal matter with the U.S. Environmental Protection Agency. Excluding the impact of this charge, SG&A expenses as a percentage of sales were 13% relatively flat year-over-year. Foreign currency unfavorably impacted SG&A expenses by $2 million year-over-year. Our adjusted EBITDA for the fourth quarter was $37 million, a decrease of 29% year-over-year. The adjusted EBITDA margin was 6.1%, a decrease of 220 basis points over the prior year, primarily due to the unfavorable product mix. Our provision for income taxes in the quarter was $6 million. As a reminder, we have tax valuation allowances established for certain countries and therefore losses in those countries are not available to offset income tax expense in profitable jurisdictions. Our GAAP diluted loss per share in the quarter…

Thank you, Brian. Entering 2023, we expect [indiscernible] to look a lot like 2022 and overall it was much better. As we enter 2024, we anticipate global demand for mobile cranes to be strong. Unfortunately, however, we'll face difficult comparisons in the first half of ongoing softness in the European tower crane business. This dynamic is reflected in our 2024 expectations. Please turn to slide 11. the Rocky Road Recovery since the COVID pandemic continues and we await demand from the U.S. infrastructure bill. in the meantime, we remain committed to our CRANES+50 journey to reduce our cyclicality and increase our margins by growing our aftermarket. We recently refreshed our strategy with a few tweaks and I thought it was appropriate to provide an update on our four breakthrough initiatives. starting with our European tower crane business, although we have not landed any acquisitions, we continue to grow our rental fleet as an avenue in generating rental income, building our used sales efforts and increasing our service work. During 2023, we increased our fleet from 124 units to 149 units. In terms of acquisitions, we've been inactive in this space; but unfortunately, the dynamic nature of the market has made it difficult to land the deal. Moving to the next breakthrough. we adjusted our Belt and Road initiative to emphasize our efforts in the Middle East. During 2023, we launched two tower crane models to support this rapidly-growing region, the first of which can be found at the Six Flags construction site in Saudi. In addition, we are investing approximately $3 million in our China factory to improve our capability and throughput to manufacture large tower cranes. Concurrently, we are developing three large capacity models that will serve the Middle East and will also be a good fit for Hong…

[Operator Instructions] Your first question comes from the line of Jay Revich from Goldman Sachs. Your line is open.

Good morning, Jay.

Hey Jay.

Hi, this is Adam on for Jerry. Thanks for taking my question.

Yes.

Yes.

I was wondering if you could just talk about where labor hours per unit stand today compared to the levels you were seeing pre-COVID. and if they do normalize to historical levels, how much of a margin tailing could that mean for your business?

I'm not sure I understand your question, Adam. Is it cost of labor?

or is it efficiency what…

Yes. just labor hours today, compared to pre-COVID levels. Where are they versus historical levels?

I don't think it's -- I don't think it's applicable, because there's so many, so much mix of hours depending on the machines that we're making.

Yes. we're, I mean -- we're always looking to improve our efficiency throughout the plant and -- but I'm not sure we've ever given that level of granularity from an hours per unit perspective.

Got it. And then can you just update us on your aftermarket performance? Any signs of destocking and parts of the business, where you sell through dealers?

No, I mean, the aftermarket business has been good. We've got some strong goals for this year. Some of it, I think, will start to flatten out, because we had such strong growth the last couple years. but as we said on the call, those service techs we've added and we view those as a path to continue to grow the revenue. but I haven't -- we haven't seen any major destocking.

And then last one from me, with supply chain performance continuing to normalize, could decremental margins be relatively muted as improved productivity offsets lower volumes?

I think, in the mobile business, yes, in the Americas. But when you look at what's hitting us in the faces, the -- and what we've been talking about is the tower crane business in Europe. So, that's a pretty significant impact to us in '24 and that's what's reflected in our guidance.

Great. Thanks so much.

Your next question comes from the line of Mig Dobre from Baird. Please go ahead.

Good morning, Mig.

Hey, good morning. Good morning, guys. Hey, it's actually Joe on for Mig this morning. Good morning.

Good morning, Joe.

How are you doing, Joe?

Hey, good morning. Doing well, thanks. I had a couple of questions around guidance. At the midpoint, your guidance assumes net sales of 4%, but EBITDA margin down 80 basis points. I know you mentioned unfavorable mix, but can you talk about any other year-over-year margin headwinds in the guidance?

The biggest piece of it all is the decline in the EU tower crane business. So, it's not just mix in terms of standard margin, but it's also under absorption at those factories.

Yes. and you saw it really in Q4, I mean, our margin in Q4 was 6.1%. The implied midpoint is at 7.1%, so obviously better than what we saw in Q4, so -- but as Aaron mentioned, it's really that tower crane mix.

Yes, okay. Makes sense. And then any thoughts on quarterly cadence for sales and EBITDA through the year?

Yes. I mean, we generally see Q3 as our lowest quarter. Q1 from a comparable perspective, the first half in particular was stronger for tower cranes last year. And we're not -- that headwind is really impacting us in the first half Q1 in particular. So, Q1 and Q2 from a comp standpoint will definitely be worse. And then Q3-Q4 should normalize.

Got it. Okay. And then maybe, one more any assumptions around crane sales versus non-crane sales in the guidance?

We don't give that level of granularity. but as Aaron mentioned, we do have an expectation that we'll continue to grow the non-new machine sales.

Okay. All right. Good luck, guys. Thanks.

Thanks, Joe.

Your next question comes from the line of Seth Weber from Wells Fargo. Please go ahead.

Good morning, Seth.

Hi guys. This is -- good morning. This is Larry on for Seth this morning. How are you, guys?

Hey, Larry. How are you doing?

Good. I'm doing great. Thanks for taking the questions. I just wanted to ask about orders in January after the light fourth quarter, what you guys are seeing. obviously, orders were down 33%. You did have a comp issue, but I was just wondering how they're trending in January so far?

Yes. January was a good month, so we were just shy of $200 million. So, I think we're continuing on the same path that we've been on for the last several quarters.

Okay, great. Now obviously, you guys have been calling out the EU tower, headwinds from the tower market. What are you guys looking for to kind of look for a bottom or maybe, any kinds of -- any kinds of firming up there?

Yes. I mean the first thing we're looking at is just the regulatory environment and what we're seeing from the governments and stimulus. So, Germany made some moves a couple of months back, but it really hasn't hit the construction market. So, we continue to track the permits, although that's lagging data. And then of course, within the business, we track everyone's utilization. So, I think when we look at all those pieces right now, there's not a whole lot of visibility for the first half. I mean, a lot of projects do start in sort of march, April, may timeframe. I'd say that all of the major players have what they need for those projects for the most part. And then -- so the next, I mean, to me, the next big sign's really going to come into probably September-ish timeframe. Because the summer always slows down. There's not a whole lot of activity in France and Germany in particular in August. So, September is when things start to come back on and we've got our normal winter campaign.

And I'd just say, just adding to that from a longer-term standpoint, I mean, I think we're excited that there are housing shortages all across Europe. So, from a long-term standpoint, I think the business is good for us. It's just when it's going to come back.

Got it. Thanks a lot for your time, guys.

Thank you.

Your next question comes from the line of Tami Zakaria from Manitowoc. Please go ahead. Your line is open.

Good morning, Tami.

Hi, this is Alex.

Good morning, Alex.

Hi, this is Alex on for Tami. Thank you for taking the question. Hey, I was wondering if you could provide further color on sort of price and cost for 2024, given current conditions and power demand I'm assuming continued added pressure from Chinese competition in the Middle East. The Japanese yen remains the week at 1.50 and the cost side, so do you expect labor and elevated high strength yield prices to remain a challenge for 2024?

Okay. So, talking about price to cost, I'd say we've -- the answer is yes and no, in terms of normalization, we've sort of gone back to normal, let's say. but I think you pointed out many of the key points there. So, in the United States, when you've got competitors shipping in, when the Yen's 1.50, there's going to put competitive pressure out there, as well as steel prices. I mean, the reality is the current tariffs on steel are not favorable for U.S. manufacturers. You got steel in Europe is one third less than it is in the United States. So yes, I'd say that within the U.S., there's some, there's still pretty competitive as competitive it's been. And so until the strong dollar starts to turn the other way, I think we'll continue to have that pressure. In Europe, it's more just about demand, given that demand is so low for tower cranes. But I wouldn't say there's anything irrational there. And in terms of Chinese competition, that's I'd say mostly in the, in the Middle East and Asia-Pac for us. And it's been tough, but in most instances, either folks are willing to take Chinese or they're not. And if they're not, then it's our normal sort of competitive advantage. There are competitive situations. in terms of headwinds, so I think labor has flattened out. I mean we took a lot of actions last year relative to what our labor rates were. And in terms of steel, I don't think much really changes. I mean, we still have this dynamic, where the U.S. with the current tariff situation is at a disadvantage to all the other major regions for manufacturers.

I'd say the labor inflation normalizes, there's still some, but…

Yes.

It's normal going into '24.

Okay, thanks. that's super helpful. And just a quick follow-up, I'm just curious, just sort of when we look at back at 2023, were there any share shifts in your view, either geographically or product wise that would be noteworthy?

No, not dramatic. I mean, team's done a great job with the mobile cranes in Europe with some of the new product launches we had, nothing dramatic. but we had some gains there in the United States, I'd say it's all pretty steady.

Okay, understood. Thank you so much. I'll pass it on.

Thank you.

[Operator Instructions] And there are no further questions at this time. Mr. Warner, I'd turn the call back over to you.

Thank you. Before we conclude today's call, please note that a replay of our fourth quarter 2023 conference call will be available later this morning by accessing the Investor Relations section of our website at 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.

This concludes today's conference call. Thank you for your participation and you may now disconnect.