Miller Industries, Inc. Q3 FY2025 earnings call

Key Points

• Third quarter results were in line with expectations amidst industry-wide demand headwinds. Retail channel delayed new equipment purchases due to macroeconomic uncertainty, leaving distribution channel inventory elevated.
• Took proactive steps in third quarter: prudently decreased production to reduce field inventory, rightsized costs, and secured supply chain to mitigate tariff effects.
• Confident in entering 2026 from a position of strength, especially excited about strong interest in global military business.
• On balance sheet: cash balance increased, debt reduced, receivables converting to cash faster, inventories adjusted due to tariff mitigation and slower chassis demand, accounts payable changed.
• In fourth quarter: reduced headcount by ~150 positions, implemented tariff surcharges and price increases, inventory in distribution channel continuing to decrease, and expect normalized field inventory in 2026.
• Returning capital to shareholders with dividend paid and stock repurchases, and investing in innovation, automation, and human capital.

Net sales for the third quarter of 2025 were $178.7 million, a 43.1% year-over-year decrease. Gross profit was $25.3 million or 14.2% of net sales, compared to $42 million or 13.4% of net sales in the prior year. SG&A expenses were $21.2 million in the third quarter of 2025, 11.9% of net sales. Net income for the third quarter of 2025 was $3.1 million or $0.27 per diluted share, compared to $15.4 million or $1.33 per diluted share in the prior year. Cash balance at the end of the third quarter was $38.4 million, debt was reduced to $35 million, accounts receivable was $232.6 million, inventories were $180.7 million, and accounts payable was $82.2 million.

• Reaffirmed 2025 fiscal year revenue guidance in the range of $750 million to $800 million.
• Fourth quarter impacted by holidays and planned maintenance/downtime at facilities, factored into guidance.
• Anticipates 2026 commercial market will begin to recover, sees greater demand in Europe and increased RFQ activity for military vehicles, expecting interest to continue into 2026 as preparing for military production in 2027.
• Mix of sales expected to stabilize back to historical levels in 2026, with chassis revenue contributing to higher top line.

• Macro-economic uncertainty leading to retail channel delaying new equipment purchases, keeping distribution channel inventory elevated.
• Tariff landscape evolution posing supply chain risks, although proactive measures are in place to mitigate impacts.

Q: Your inventory chart you just referred to, Will, it looks like things are actually below a normalized level or very, very close to normalized level at this point. I'm not sure, can you just explain to us what that means? I'm trying to figure out if 2025 has been dominated by most of your sales being without the chassis attached to them on the invoice, whether at least at 2026, there will be just a much different mix at the very least if you sell no more tow trucks in general, there will still be a higher number of attached chassis with the higher invoice. Just a sense as to if there's a mix issue -- there's a mix benefit in '26 just from that alone?

A: Yes. I think what you're seeing is a little bit of a mix benefit from a margin perspective in 2025 with the lower chassis revenue. I think -- or sorry, in 2025. Moving into 2026, I think you're going to see that stabilize back to more historic levels with the chassis and body mix returning to normal. The inventory, yes, the projected line that we put out there earlier this year, we're slightly below that. We are closely monitoring field inventory as well as retail -- weekly retail activity and order entry. At this time, order entry is still slightly below the weekly average of retail activity. So we're waiting to see those get a little bit more in sync before we start planning to increase production. to meet current demand. But we believe we're close probably sometime late this quarter or early in Q1. We believe that all those factors will come together.

Q: Great. And just to clarify again, if you sell the same number of tow trucks in 2026, you would expect to see higher top line just on...

A: Yes. That is correct. You'll see a higher top line with the chassis revenue being a part of that, and you'll see margins go back more to historical levels with the mix.

Q: Okay. Great. And to follow up on that comment there, Will. In the fourth quarter, it sounds like it'll still be with the older mix -- with the current mix you're at or roughly the same. But is that 14% range the right space to look at for 4Q and then again, back to the 13% for 2026?

A: Yes. I mean I think the mix will remain the same. Don't forget that Q4 is always our shortest quarter with the holidays as well as plant shutdowns in every facility for inventory as well as maintenance. So it could have a little bit of slightly downward pressure on those margins, although the mix probably stays similar.

Q: Okay. Great. And then maybe lastly, I wasn't sure you can go into exactly the folks that were -- took a retirement during the quarter. I wasn't sure if those were very senior folks or if they were production or they were SG&A. But just a sense of the SG&A run rate going forward. Will the fourth quarter be a clean SG&A? It sounds like there's still some severance here, but what is the clean SG&A kind of quarterly run rate here?

A: That will -- you'll start to see clean SG&A probably in Q1 as the retirements are taking -- they're staggered throughout the remainder of this year. It was about a 50-50 split on salaried and hourly employees. So it was offered to all employees over the age 65. It was a split between the two. So there were some senior individuals in the sales offices that took part in it as well as some senior people in our manufacturing facilities as well.

Q: If I could just also maybe ask one last one to kind of sum it up because I think I mentioned in your comments as well, but all the factors that have driven increased record demand over the last bunch of years, older vehicles, more time on the road, more cell phone use behind the wheel, unfortunately, et cetera. Are all those factors still intact at this time and into 2026? Has anything changed as to the reason to buy a tow truck 12 months ago versus today?

A: No, I don't believe so. I think all of those factors that drive the demand at the retail level for the use of the equipment are all still intact.