MYERS INDUSTRIES INC Q2 FY2025 earnings call

• Launched a strategic review of Myers Tire Supply business serving the automotive aftermarket as part of Focused Transformation to simplify and focus portfolio on core businesses.
• Consolidated rotational molding production capacity by idling 2 of 9 facilities, resulting in annual savings of at least $3 million.
• On track to achieve $20 million in cost savings, primarily SG&A, with manufacturing consolidation bringing line of sight to $18 million by end of 2025.
• Established culture of execution and accountability, created clear strategies with action plans and KPIs, and is optimizing cash flow and capital allocation.

Material Handling net sales were down 4.4% with strong sales of military products in the industrial end market offset by lower volume in vehicle and other end markets; adjusted EBITDA margin was 23.9%. Distribution net sales decreased 6% on lower pricing and volume from the Patch Rubber business; adjusted EBITDA margin was 4.8%. Trailing 12-month sales for Myers Tire Supply were $189 million as of June and for Patch Rubber were $26 million, including intercompany sales.

• Second half growth expected based on strong backlog in military, industrial, and infrastructure markets.
• Reaffirmed 2025 market outlook with industrial expected to have moderate growth, infrastructure with strong project spending, vehicle end market expected down, etc.
• Anticipates financial results to improve with progress on Focused Transformation.

• Tariff-driven order delays impacted infrastructure end market during the quarter.
• Uncertainty around tariff impacts on export sales, though some resolution seen.
• Operational risks related to idling rotational molding facilities, including costs associated with facility leases.

Q: Was there a final straw that led to the strategic review of Myers Tire Supply or was it a culmination of business and market factors?

A: The MTS piece had been an internal topic of discussion for some time, with gathering data, meeting with customers, stakeholders, and Board to evaluate and make the decision for the strategic review.

Q: How big is the backlog relative to sales and what does it indicate?

A: Backlog is strong in infrastructure and military areas, giving confidence for the back half, with large backlog orders in infrastructure tending to ship in large chunks.

Q: What drove strong free cash flow in the quarter and what does it indicate for annual potential?

A: Strong cash flow was due to improved cash generation from working capital, with similar trends expected in the back half, and EBITDA mix between segments giving an idea of cash flow potential with and without MTS.

Q: What gives confidence in the rebound of seed boxes in the second half?

A: Feedback from customers on seed box needs, normal seasonality for seed boxes in the back half, and work on replacement parts.

Q: Commentary on Signature acquisition integration and progress?

A: Signature brings unique operational talents, synergies with Myers' operations, and growth opportunity in infrastructure, with plans to discuss updated strategy later in 2025.

Q: Tariff impact on Signature and mechanics of how it happened?

A: Tariffs affected export sales with customers delaying purchases due to uncertainty, but some resolution seen with Europe, hoping for less disconnects in future.

Q: Anticipation for idled rotational molding lines if volume increases and ownership/leasing of the plants?

A: Options kept open for idled rotational molding plants, which are leased, and capacity not needed currently as aligning with customers' needs for efficient operational structure.