Good day, ladies and gentlemen, and welcome to the Miller Industries Third Quarter 2025 Results Conference Call. Please note, this event is being recorded. And now at this time, I would like to turn the call over to Mike Gaudreau at FTI Consulting. Please go ahead, sir.

Thank you, and good morning, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2025 third quarter results, which were released after close of the market yesterday. With us from the management team today are Bill Miller, Chairman of the Board; Will Miller, President and CEO; Debbie Whitmire, Executive Vice President and CFO; and Frank Madonia, Executive Vice President, Secretary and General Counsel. Today's call will begin with formal remarks from management, followed by a question-and-answer session. Please note in this morning's conference call, management may make forward-looking statements in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. I'd like to call your attention to the risks related to these statements, which are more fully described in the company's annual report filed on Form 10-K and other filings with the Securities and Exchange Commission. At this time, I'd like to turn the call over to Will. Please go ahead, Will.

Thank you, Mike. Good morning, everyone, and thank you for joining us today. I would like to start with a brief statement before I hand the call over to Debbie to discuss our results in more detail. Third quarter results were in line with our expectations as we continue to navigate industry-wide demand headwinds. The retail channel continues to delay purchases of new equipment due to macroeconomic uncertainty, which has left field inventory in our distribution channel elevated. Despite this, we continue to focus on the aspects of our business that we can control. In the third quarter, we took proactive steps to support our bottom line, including prudently decreasing production to reduce field inventory, rightsizing our cost for the current environment and securing our supply chain to mitigate the effects of tariffs. We are confident that we will enter into 2026 from a position of strength, and we are excited about the opportunities ahead of us, particularly the strong interest we are seeing for our global military business. Now I'll turn the call over to Debbie to review the quarter in more detail, and I'll return later to provide some comments on the current market environment and our outlook.

Thanks, Will, and good morning, everyone. Net sales for the third quarter of 2025 were $178.7 million, representing a 43.1% year-over-year decrease, driven primarily by a drop in chassis shipments after volumes were significantly elevated in the prior year period. Gross profit was $25.3 million or 14.2% of net sales for the third quarter of 2025 compared to $42 million or 13.4% of net sales for the prior year period. The margin improvement was driven mainly by product mix with a higher percentage of unit deliveries compared to chassis shipments. SG&A expenses were $21.2 million in the third quarter of 2025 compared to $22.3 million in the third quarter of 2024. As a percentage of net sales, SG&A was 11.9%, 480 basis points higher than the prior year period. The year-over-year decrease in overall SG&A expenses was driven primarily by our cost savings efforts and lower executive compensation expenses. This was partially offset by a $900,000 one-time cost for retirement packages offered to all U.S. employees aged 65 and above. The total cost of the program was $2.7 million, and we expect to recognize the remainder of this one-time expense in the fourth quarter. Interest expense for the quarter was $93,000 compared to $251,000 in the prior year period, a decline of around 63%, driven primarily by a reduction in debt levels and to a lesser extent, a reduction in customer floor plan financing costs. Other income for the third quarter was $312,000 compared to other income of $321,000 for the third quarter of 2024, attributable to the gain on the sale of assets and currency exchange rate fluctuations. As a result of all the factors above, net income for the third quarter of 2025 was $3.1 million or $0.27 per diluted share compared to net income of $15.4 million or $1.33 per diluted share in the prior year period. Now I'd like to shift to a discussion on our balance sheet. At the end of the third quarter, we had a cash balance of $38.4 million, up $6.6 million sequentially and up $14.1 million as of the end of last year. In addition to growing our cash balance in the quarter, we also reduced our debt balance by $10 million down to $45 million during the third quarter. We have since paid down another $10 million, bringing the current debt balance down to $35 million. We continue to see our receivables convert into cash at a faster rate as inventory at our distributors returns to more normalized levels. As a result, accounts receivable as of September 30, 2025, was $232.6 million compared to $270.4 million as of the end of last quarter and $313.4 million as of the end of last year. Inventories as of the end of Q3 were $180.7 million compared to $165.5 million in Q2 and $186.2 million as of December 31, 2024. The sequential increase in inventories is due to our decision to prepurchase some materials to mitigate the effects of tariffs and slower chassis demand. Lastly, accounts payable as of September 30, 2025, was $82.2 million compared to $98 million as of June 30, 2025, and $145.9 million as of December 31, 2024. Now I'll turn the call back to Will to discuss our markets and our outlook for the remainder of 2025 and early 2026.

Thank you, Debbie. I'd like to provide some insight into how the steps we've taken will impact our fourth quarter. First, as part of our comprehensive cost reduction, in August, we made the decision to reduce headcount by approximately 150 positions across 3 of our U.S. manufacturing facilities. While this was an extremely difficult decision to make, we made it with the long-term health of the business in mind, and we thank all of those employees for their valued contributions. Next, while the tariff landscape continues to evolve, we continue to take proactive measures to mitigate potential impacts. Earlier this year, we implemented a tariff surcharge on all new orders of manufactured product, along with additional price increases on accessories and parts. We are also strategically accumulating some key materials from low tariff geographies to maintain our margins and keep our costs for raw materials as low as possible. Lastly, we are encouraged that inventory in our distribution channel continues to decrease. Despite the macroeconomic environment, we have preemptively adjusted production levels during the year to accelerate the reduction of field inventory. As we said in the second quarter, we expect to see a more normalized level of field inventory in 2026, which should position us well for when the demand environment improves. Next, I'd like to provide a bit more color on the body and chassis inventory dynamic. As you can see on Slide 7 of our presentation, chassis inventory has now crossed below body inventory, which is ideal as historically, this has allowed for the best dynamic for maximum flexibility at the distribution level. Additionally, we believe that inventory is beginning to reach more optimal levels, which positions us well for the year ahead. Turning to 2026. We remain incredibly confident in our outlook for a strong year. We are entering the year with a strong balance sheet, and the inventory dynamic I just spoke about gives us confidence that the commercial market will begin to recover. Further, we're seeing greater demand in Europe as well as a notable increase in Request For Quote or RFQ activity for our military vehicles. We expect that interest will continue into 2026 as we begin to prepare for production of military orders in 2027. We believe military recovery vehicles could be a substantial tailwind for us in future years, and we are taking the steps needed to position the company to capitalize on the rising demand. In the midst of all of the proactive steps we have taken to position the business for a strong 2026, we have continued our long-standing commitment to returning capital to our shareholders. We're extremely proud that we've paid a dividend for 59 consecutive quarters, and our Board just approved a dividend payable on December 9, 2025. During the third quarter, we also repurchased approximately $1.2 million of stock, bringing our total quarterly returns to shareholders to $3.5 million. We believe that repurchasing our shares represents one of the most attractive investments we can make with our capital, which demonstrates our confidence in the company's long-term prospects. At the same time, we continue to invest in our business, prioritizing innovation, automation, and human capital. We are closely monitoring our capacity of heavy-duty recovery vehicles to ensure we are prepared to capitalize on exciting future growth opportunities. Despite current demand headwinds, we remain confident in our business and our outlook, reaffirming our previously issued 2025 fiscal year guidance for revenue in the range of $750 million to $800 million. As always, we expect the fourth quarter will be impacted by the holidays and planned maintenance and downtime at our facilities, which we have factored into our guidance. Our revenue guidance also anticipates no change in the current regulations or unknown effects of the evolving tariff situation. While there continues to be uncertainty in the market, we are confident that the proactive steps we are taking position us well for a strong 2026. We are encouraged that field inventory continues to trend in the right direction. And as we look to next year, we're very excited about the opportunities ahead of us. In closing, the entire management team and I would like to thank all of our employees, suppliers, customers, and shareholders for their continued support. We will be on the road later this month at the Southwest IDEAS Conference and look forward to seeing some of you in person. At this time, we'd like to open the line for any questions.

It is now time for Q&A. Our first question comes from Mike Shlisky with D.A. Davidson.

Your inventory chart that Will referred to indicates that levels are either below or very close to normalized levels right now. Can you explain what that implies? I'm trying to understand if 2025 has primarily seen sales without the chassis included on the invoices, and whether 2026 will feature a significantly different mix. Even if you don't sell any more tow trucks, will there still be a greater number of chassis sold with higher invoices? Is there a mix issue or possibly a mix benefit in 2026 just based on that?

Yes. What you’re seeing is a bit of a mixed benefit from a margin perspective in 2025 due to lower chassis revenue. Moving into 2026, I think things will stabilize back to more historic levels as the chassis and body mix returns to normal. Regarding inventory, we're slightly below the projected line we put out earlier this year. We are closely monitoring field inventory as well as weekly retail activity and order entry. Currently, order entry is still slightly below the weekly average of retail activity. We're waiting for these to align before planning to increase production to meet current demand. However, we believe this will come together probably late this quarter or early in Q1.

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...

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.

Okay, great. Lastly, I was curious about the individuals who retired during the quarter. Were they senior level, or did they belong to production or SG&A? I'm looking for insight into the SG&A run rate moving forward. Will the fourth quarter have a clean SG&A? It seems there are still some severance costs, but what can we expect for the clean SG&A quarterly run rate?

You will start to see clean SG&A likely in Q1 as the retirements are staggered throughout the rest of this year. The retirements involved a roughly even distribution of salaried and hourly employees. The offer was extended to all employees over the age of 65, which included some senior individuals from both our sales offices and our manufacturing facilities.

Okay. Great. 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 cellphone 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?

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.

That appears to be our last question. I will now turn the conference back to William Miller for any additional remarks.

Thank you. I'd like to thank you all again for joining us on the call today, and we look forward to speaking with you on the fourth quarter conference call. If you would like information on how to participate and ask questions on the call, please visit our Investor Relations website, millerind.com/investors or email [email protected]. Thank you, and may God bless you all.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.