Hello everyone, and thank you for joining Myers Industries Second Quarter 2022 Earnings Call. My name is [Derek], and I'll be moderating your call today. [Operator Instructions] I now have the pleasure of handing you over to your host Monica Vinay. Please go ahead.

Thank you. Good morning. And thank you for joining us. I'm Monica Vinay, Interim-Chief Financial Officer and Vice President of Investor Relations and Treasurer at Myers Industries. Joining me today are Mike McGaugh, President and Chief Executive Officer. Earlier this morning, we issued a news release outlining the financial results for the second quarter of 2022. We have also posted a slide presentation to accompany today's prepared remarks. If you have not yet received a copy of either the release or the presentation, you can access them on our website at www.myersindustries.com under the Investor Relations tab. This call is also being webcast on our website and will be archived along with the transcript of the call shortly after this event. Please turn to Slide 2 of the slide presentation for our Safe Harbor disclosures. I would like to remind you that we may make some forward-looking statements during this call. These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements. Also, please be advised that certain non-GAAP financial measures, such as adjusted operating income, adjusted EBITDA and adjusted EPS, may be discussed on this call. Further information concerning these risks, uncertainties and other factors is set forth in the company's periodic SEC filings and may be found in the company's 10-K and 10-Q filings. Please turn to Slide 3 of our presentation, and I'm now pleased to turn the call over to Mike McGaugh.

Thank you, Monica. Good morning, everyone, and welcome to our second quarter 2022 earnings call. I'm pleased to report another quarter of exceptionally strong results from Myers Industries. Our transformation is underway. Our strategy is working. Our teams are aligned and working well together, and as a result we're driving record results for both sales and earnings. Our second quarter performance reflects consistent and meaningful progress against our three horizons strategy and provides additional proof points, demonstrating our ability to execute and drive the transformation of Myers Industries. As the second quarter evolved, we're able to see results from our self-help initiatives. These initiatives have driven our second quarter performance in an outstanding first half of 2022. For the quarter, Myers delivered a 24% increase in net sales compared to the same period last year. This marks the 7th sequential quarter of double digit top line growth. This performance is remarkable. It would not have been possible without the changes we've made over the past couple of years. The strong top line momentum flowed through the income statement delivering a 55% increase in our adjusted EPS and a 41% increase in our adjusted EBITDA. I'm pleased with our performance in both the top and bottom line as it demonstrates that our strategy is translating into consistent company-wide growth quarter-after-quarter. As a result of this performance, we are raising our fiscal 2022 outlook for both revenue and earnings and Monica will outline that later in her talk. Please turn to Slide 4, where we show a more detailed summary of our second quarter results. Our sales growth was the driver of strong results across both the material handling and distribution segments with net sales of $233 million up 24% versus the same period last year. Just as we did in first…

Thank you, Mike. As Mike highlighted, we were very pleased to deliver a record second quarter on both the top and bottom lines. As you can see on Slide 4, sales were up $46 million, or a little over 24% compared to the prior year. Sales were up 16% organically excluding our prior acquisitions. Our organic sales growth was driven by the continued benefits of our strategic pricing actions, and continued solid demand across most of our key end markets in both the material handling and distribution segments. Adjusted gross profit increased 36% or $20 million, primarily driven by pricing actions and benefits from the Trilogy Plastics and Mohawk Rubber acquisitions. Although we continue to experience cost inflation, which partially offset our gross, gross margin still increased 260 basis points to 32% compared with 29.4% for the second quarter of 2021. Adjusted operating income increased $8.5 million or over 56% driven by higher gross profit, partially offset by increased SG&A expenses. The higher SG&A expenses were due to the acquisition of Trilogy Plastics and Mohawk Rubber, higher salaries and incentive compensation costs, increased freight and other variable selling expenses and higher facility costs. Adjusted SG&A as a percentage of sales increased to 22% in the second quarter, compared to 21.3% in the prior year, primarily as a result of inflationary impacts. Adjusted EBITDA was $28.9 million, an increase of $8 million or 41%. compared to the prior year. Adjusted EBITDA margin expanded 150 basis points to 12.4% for the second quarter, compared with 10.9% in the prior year. Lastly, adjusted EPS was $0.45, an increase of $0.16 or 55%. Please turn to Slide 5, for an overview of our segment performance for the quarter. Beginning with material handling net sales increased $36 million or 26%, including the Trilogy acquisition, which…

Thanks, Monica. Please turn to Slide 8. Our long term vision is clear and compelling. It's our game plan. It's deliberate, it's consistent. Our associates and our investors understand it. They support our roadmap and what we expect Myers Industries to become. We continue to make progress against our 3-Horizon strategy. And I'm pleased with the pace at which we are approaching our Horizon 1 goals and preparing for Horizon's 2 and 3. As a reminder, the elements are building blocks of Horizon 1 remain self-help, organic growth and bolt on M&A and I'll speak a bit to our progress on each. In the first element self-help, our internal pricing excellence group and commercial teams have continued working together to build capability, bringing in an analytical approach to pricing combining to our customers the value our products bring, and pricing those products accordingly. As I mentioned last quarter, we have focused on making sales and operations planning or S&OP, a core competence at our company. We're rolling out robust S&OP processes across all of Myers completing this work over the next 12 to 24 months. With improved S&OP, we're able to make more product more efficiently. We move faster with less stress on our capital equipment and on our people. Last quarter, I spoke about being in a successful rowing crew, flowing less, things smoother, more graceful and moving faster with less effort. That analogy still applies very well to our progress here. In the second element, organic growth, Myers had the seventh sequential quarter of double digit organic growth, driven by resilient or improving customer demand levels in ag and industrial, which outshine the impact of some pullback in demand and consumer in RV. Organic growth remains a key area of focus for us and we continue to drive…

Thank you. [Operator Instructions] Our first question comes from Lance Vitanza from Cowen and Company. Please go ahead.

Thanks and good morning, Mike and Monica, and congratulations on a great quarter. I guess I wanted to start in the Material's Handling segment you didn't mention anything in the release about slowing demand or recession or pullback. Although I did hear you on the - remarks a minute ago talk about some uncertainty, macro uncertainty and so forth. How would you describe the business environment as you are seeing it today? And if possible, could you just sort of walk me through the major end market categories and discuss where things stand - and Monica sounds like consumer was the weakest category. But if you could perhaps flush that out a little bit more for us. That would be great? Thanks.

Yes, so Lance well, I'll add some color. And I'll ask Monica to build on that. In general, we're seeing resilience in our demand across the majority of segments, the exception being consumer discretionary, and RV. In the areas where RV consumer, which will be our over fuel containers, as well as some of the high end highly engineered product that, we got through the Trilogy acquisition. We're seeing some softening of consumer demand at the - high priced, high quality items, similar to what you hear from a number of other companies out there who are reporting, but for the base business, the core business, we're seeing resilient demand, particularly an Ag that's actually continuing to be strong and also in industrials continuing to be strong. On the distribution side and auto aftermarket side, we continue to see resilient demand. So we're not seeing pullback other than a bit on the premium price goods and consumer, and also a bit of uncertainty on demand and RV demand. Monica?

Yes I think - I agree with Mike in the quarter. I commented in the script that the decline in volume mix was driven by consumer and that was, all other markets or most other markets were up in the quarter from a volume mix perspective. So it's definitely consumer that's driving the decline.

Yes Lance, we flagged that, to last quarter call the portable fuel containers being a little soft, we're continuing to see that - that's a high priced item in the retail space. And just consumers are spending money, filling up the shopping cart with necessities. So we're seeing some of that what has emerged a bit more is some softening an RV. And again, it's a bit early to tell how extensive that trend will be. But that's caused us to have a little bit of caution in our outlook.

Okay, that's helpful. Thank you now, so consumer maybe is the culprit there. On the other hand, Myers is indeed making a margin on the price increases that you're putting through which is, which is what you said would happen when we spoke last. It's somewhat unique, at least in my coverage universe, most of the people that are - putting price increases through - or just trying to cover their incremental costs? Now with Myers in fact, I modeled over a 40% incremental gross margin on the incremental revenue. So and that's despite higher labor costs negative mix shift, can we expect this net margin benefit to continue in the back half or - does this reverse at some point?

Yes, Lance that margin should hold. As we've discussed on these calls before, it is different than what I think a number of others are reporting, we brought in a lot of focus on getting our costs down and pricing our products to the value they create for our customers, and we're getting good traction in the market. What I'd say in general, is what's different about Myers is we really were coming from a low starting point over the last years, and for what we're seeing the results now on a quarter versus quarter basis. And really, for the next years, our results should continue to be impressive, because of where our starting point was.

If I can squeeze in two more before I pass the reins here, on the SG&A front $52 million obviously reflects only a partial period for Mohawk, you know, would 55 million be kind of like a good run rate estimate for SG&A going forward or if it's easier, you know, in terms of percent of revenues SG&A was up 100 basis points, I think it was to 22.4%? And you call that inflation is the culprit. No surprise there. But do you see inflation continuing to put upward pressure on the percentage of revenues from here or do you think - or should we think that 22.4%? Is that sort of a good level for us to use going forward?

Hi Lance. Yes, we've guided to 22% - of SG&A at 22% as a percent of sales for the entire year. I would say in the second half, that's going to be the same case, even with the acquisition of Mohawk maybe slightly above that. But you can model for the both quarters around that same percent.

Yes Lance, we are going to invest in the company. We're investing in innovation. We're investing in our people. We're bringing new capabilities. We've done a lot of that over the last two years. And we're not going to retrench or pull back on that. But what I also say is we brought in a number of folks that are quite hawkish on how they manage us SG&A and SG&A budgets. And so as you would assume - we're preparing a number of different plans and scenarios on how we would need to treat our discretionary costs, if demand got a little bit weaker in the future. So I feel really good about that. I feel that we've got it under control and we know the right decisions to make, to not forfeit all that we built on growth, but at the same time to maintain discipline and how we spend our money, how we spend SG&A.

And Lance I would be a little lower than the 50 million that's --

Okay. So - I was just going to say it would seem like now is the time for you to be I mean, you're making some of these investments to allow for continued growth at a time when despite those investments, cash flow and earnings are way up. So, it seems like this will be the time to do it. And then lastly, for me just on the M&A front, I guess the first is progress integrating Mohawk. And then beyond Mohawk how does the pipeline look today in terms of viable targets? And then also, access to capital management bandwidth, you've been very active. Is there a sense that you might need to take a pause on the M&A front or could you move forward, you know, quickly, if another situation, attractive, were to present itself?

Yes Lance, so I'll take a shot at it and if Monica wants to follow-on behind, she's more than welcome to. So Mohawk acquisition in the last two of the last three weeks, I've been in the field with Mohawk teammates in at their DCs and talking with their commercial folks and operational people that that integration is going well, it is complementary to our business, there was not a lot of overlap in terms of geography and customer mix. And I'm really pleased with their culture they've got an outstanding culture. And that's really, what we're finding is definitely a nice feature when we're acquiring companies is that cultural fit. On our capacity now, we've said all along is we're going to do a few bolt-ons that are helpful in terms of acquiring capability or geographic coverage. I think we've been thoughtful and acquiring the right companies at the right prices that have created value. But what it's also done is it's helped us kind of find our track legs, or sea legs around integration, in which we are getting more and more proficient with integration and our processes in the efficiency with which we operate. Coupling that with a number of the people I've brought in, are very capable, very skilled at identifying negotiating deals, and then also integrating. And so you know, we're ready. That's where I really want to make a number of points is, we're still in the market, we're still active. I really think that if there's anything you would take away is, I think we're going to be hitting stride. Right when other potential companies are getting less expensive. And sometimes it's just serendipitous how things work out. But I really think we're going to be hitting stride in our capacity and our ability to transact right, when things get - things get softer and more affordable, Monica any additional points?

Yes, I would just reiterate what I said on the call that we have - our balance sheet remains strong, we have low leverage, we have plenty of flexibility. We have the capacity to know what to do additional bolt-on acquisitions, and the capacity or flexibility to do even larger ones down the road.

And I got the sense guys - I got the sense that perhaps the next acquisition well - that is the size and scale of these acquisitions is going to be biased to the upside from here. Is that a fair inference or am I reading too much into your comments?

That's fair, Lance. That's fair.

Thanks very much.

Yes, thank you Lance. Appreciate it.

Our next question comes from Steve Barger from KeyBanc Capital Markets. Please go ahead, Steve. Steve, your line is now open. You may begin your - to ask a question. [Operator Instructions] It appears we have no questions at this moment. We're going to hand it back to the management team for any final remarks.

Thank you. Thanks to everyone for joining us today. We appreciate your interest in Myers industries. Have a great day.

This concludes today's call. Thank you for joining, you may now disconnect your lines.