Good morning, everyone and welcome to The Manitowoc conference call to review the company’s second quarter 2022 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 Presentation. 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 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 statement, whether as a 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. Our financial results in the second quarter were relatively in line with our expectations. The team made monumental efforts to deliver just shy of $500 million in revenue and over $36 million of adjusted EBITDA. These results reflect the team’s hard work to find solutions to our part shortages, implement price increases, and manage costs. I am very proud of our team’s resilience in an extremely difficult operating environment. Day-to-day execution in our business remains challenging and the team continues to face a multitude of logistical and supply chain constraints. I would like to take the opportunity to thank The Manitowoc team for going above and beyond to achieve these results. On the demand front, although markets such as the Middle East are continuing to gain strength, the overall global crane market is clearly slowing. When surveying our customers, our anecdotal signs of crane activity are strong and rental rates are inching higher. However, inflation and rising interest rates have significantly tempered the momentum that had been building the previous 18 months for new equipment. Price elasticity for new machines has reached an inflection point, but I will save my detailed comments for my closing statements. As mentioned in the last earnings call, orders softened in the second quarter, reflecting the wait-and-see approach customers are taking as they react to the tension between inflation and extended lead times. Our backlog remains healthy, although this quarter represents the first decline in two years. Turning to Cranes+50, I am very pleased with our progress. For the quarter, we grew our aftermarket business by 21% versus the same period a year ago. This growth was mainly driven by the acquisitions of the H&E crane business in Aspen. With the integration phase behind us, we are turning our attention to growing these businesses, which includes proactively engaging key accounts, expanding our service tech population, growing service contracts for crane repairs and penetrating underserved territories. For example, we are in the process of expanding Aspen into Missouri with a new location in Kansas City. Lastly, before I hand it over to Brian, I would like to highlight our continuous improvement efforts. I am incredibly proud of how our team continues to embody The Manitowoc way. I recently visited our facilities in Porto, Portugal, and Niella, Italy. When I first joined Manitowoc, we had two pretty disappointing factories in Porto that were reminiscent of the 1970s. There was virtually no real fixturing for welding, and every machine that we owned was older than me. Fast forward to today and we have a world-class factory with dynamic manipulators for fixturing, robotic welding, a new paint system and a team culture that would make any CEO envious. The organization embodies The Manitowoc way. Additionally, to reduce natural gas consumption, the team recently retrofitted the paint booth and reduced the size of the room that is used to dry parts with an immediate payback. As part of their efforts to reduce landfill waste, the team found a nearby foundry to repurpose our shop waste, again, an immediate payback. This resulted in a 15% reduction in cycle time and changeover time dropped from 90 minutes to 30 minutes. Our forklifts are well-maintained and have a digital safety log system to track who is using them and how they are using them. I was equally pleased with our team’s work in Niella, Italy. Demand for self-erecting cranes has been strong, which has significantly reduced our tech time at the factory. In accordance with Murphy’s Law, this is also where we have the most part shortages within the tower crane business. Nevertheless, the team has worked diligently to improve flow throughout the factory to meet the lower tech time. During my visit, I was most impressed with their prototype data logging system for managing and controlling manual welding machines. Although still in the test phase, by using a low-cost black box and some smart programming, the machines can be automatically put to sleep when they aren’t in use. We have more than 50 welding machines on-site, so reducing their power consumption has a meaningful cost and environmental impact. A big thank you to the team and best of luck to Alessandro Dutto and Diego this month with their line moves. With that, I will turn the call over to Brian to take us through the financials.

Thanks, Aaron and good morning everyone. Our second quarter orders totaled $434 million, a decrease of 19% from a year ago. The year-over-year decrease was driven by lower demand in all of our segments. Additionally, foreign currency impacted orders unfavorably by approximately $23 million. As mentioned earlier, the global crane market is clearly slowing, which is reflected in our orders for the quarter. Our June 30 backlog was down $86 million sequentially to $948 million and was unfavorably impacted by approximately $24 million from changes in foreign currency exchange rates. Backlog remains healthy; however, this was buoyed by delays in our shipments. Net sales in the second quarter of $497 million increased 7% from a year ago. The year-over-year increase was driven by the stronger shippable backlog entering the quarter, primarily in the Americas and U.S. regions, and incremental sales from our acquisitions. However, revenue continues to be negatively impacted by supply chain constraints, resulting in shipments shifting to the right. We estimate the revenue impact from this to be approximately $40 million. Net sales were also unfavorably impacted by $28 million from changes in foreign currency exchange rates. SG&A expenses increased by approximately $6 million year-over-year, primarily related to our acquisitions and partially offset by favorable foreign currency exchange rates. Our adjusted EBITDA for the second quarter was $36 million, a decrease of 11% year-over-year. As a percentage of sales, adjusted EBITDA margin was 7.3%, a decline of approximately 150 basis points over the prior year. This decline was primarily due to the price cost dynamic discussed in previous calls. Second quarter depreciation and amortization of $17 million increased $7 million compared to the prior year, mostly driven by the acquisitions. Moving to income taxes. On a GAAP basis, we actually had a benefit in the quarter of $7 million due to the release of a tax reserve in the U.S. On an adjusted basis, our income tax expense was $3 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 income per share in the quarter was $0.42. On an adjusted basis, diluted income per share was $0.21, a decline of $0.39 from the prior year. Net foreign currency exchange losses contributed $0.16 to the year-over-year decline. Our net working capital increased year-over-year by $92 million, primarily due to the acquisitions, increased volume, supply chain disruptions, and inflation. This increase is net of $22 million from favorable changes in foreign currency exchange rates. Moving to cash flow, we broke even on cash from operating activities in the quarter in spite of the working capital challenges. Capital spending was $8 million, of which $3 million was for the rental fleet. As a result, our free cash flow in the quarter was a use of $8 million. During the quarter, we repurchased 150,000 shares for $2 million to offset our share creep. The remaining balance under our authorization is just shy of $9 million. We ended the quarter with a cash balance of $43 million, a decrease of $9 million from last quarter. Total outstanding borrowings under the ABL was $80 million and total liquidity remained strong at $268 million. Looking at the full year, we expect adjusted EBITDA to be at the low end of the guidance range. Additionally, we anticipate interest expense to be higher at approximately $33 million, mainly from the higher interest rate from our ABL borrowing. As it relates to free cash flow, we expect to be breakeven to slightly positive for the year. From a timing standpoint, we estimate working capital will peak in the third quarter and begin to trend down in the fourth quarter.

Thank you, Brian. Roughly 18 months ago, commodity prices, steel in particular, exploded and began the runaway inflation train, which we’ve been chasing with numerous price increases ever since. Interestingly, commodity prices have finally started to stabilize. However, my concerns for inflation have concurrently shifted to wages, energy prices, and component pricing. The fact is that labor and part shortages have disrupted the supply and demand equilibrium. When demand outstrips supply, prices go up. With respect to energy, particularly in the EU, this has been complicated by Russia’s aggression towards Ukraine, and there is no predicting when the situation will improve. All of that being said, I am less concerned with inflation than the potential impact price elasticity and foreign exchange rates have on demand. For sure, we haven’t seen the end of inflation, but the current nature of inflation is far more manageable than when we had steel prices tripling overnight. Strangely, inflation has become more predictable, which makes it more manageable. Moving to price elasticity. We have implemented price increases in the range of 20% over the last 18 months. The Fed has made meaningful increases to interest rates to curb inflation. It’s unfortunate, however, that the combination of higher prices and higher interest rates makes financing an expensive asset like a crane more difficult. Just consider the math; if you finance 25 100-ton rough-terrain cranes 18 months ago, today that same buying power would only get you 18 cranes. It’s tough to beat the math. Demand for cranes will be inhibited by this dynamic. The second shoe to drop is foreign exchange. While I expect further interest rate increases to slow inflation, this has also significantly strengthened the dollar, creating a disadvantage for U.S. manufacturers to compete with imports. Fortunately, we have a few levers to pull given our strong manufacturing base in the EU. Nevertheless, we are closely monitoring how some of our foreign competitors are behaving relative to the strong dollar. So far, everyone has been rational. Looking at the major geographic regions, Europe is my biggest concern. There is simply no way around it. Europe is on edge. Everyone is nervously speculating on how the Russian gas situation will evolve. In response, we have accelerated solar panel investments in Portugal and Italy to help mitigate our risks around electricity availability and costs. With respect to the German tower crane market, which is normally the most stable market in our portfolio, it showed signs of an inflection point during the second quarter. Several factors are delaying construction projects due to intense renegotiations throughout the value chain. Likewise, the French tower crane market is facing its own challenges. Paris has been under construction for the last several years as the city prepares for the 2024 Olympics, which has benefited the tower crane business for the last couple of years. Unfortunately, however, projects are beginning to wind down and many top-line tower cranes are coming off rent. The European mobile crane market is currently rather muted. Despite reasonable utilization and talks of rising rental rates, the market may remain quiet in the coming quarters. Moving to the U.S., the market is filled with conflicting good news and bad news. On one hand, fleet utilization is favorable as usual during the summer months, and there is chatter about rental rate increases. On the other hand, oil patch activity, though improved, is nowhere near the expected levels considering current oil prices. Moreover, residential construction is cooling. As for our dealer inventories, I would describe our channel inventory levels as reasonable. The actual level of inventory at dealers today is on the low end, but this is largely a reflection of supply chain challenges and related delays in shipping backlog. When I overlay open orders with dealer inventory, I believe that our dealers are in good shape for the next six months. As I always say, the crane business is built on confidence, and there is a lot of uncertainty at the moment in the EU and the United States. Looking at some of the other markets, I remain positive on the Middle East, led by Saudi Arabia. The Chinese construction market remains sluggish due to zero COVID policies and persistent lockdowns. South Korea continues to hold up, and we see encouraging activity levels in Southeast Asia. Australia remains in good shape. As I pointed out last quarter, endurance is key for 2022. Although some of our backlog isn’t ideally priced, we have enough to cover the remainder of the year. With the global economy struggling to find its footing, the team at Manitowoc remains laser-focused on what we can control, namely executing on our four breakthrough initiatives while delivering on our Cranes+50 goals. With bauma just around the corner, I would like to highlight our progress on our breakthrough initiative for altering cranes. Due to the delay of the show, we’ve launched a few cranes ahead of the big event, but we still have a couple of surprises. Last quarter, we began shipping the 5150 XL, which is a 5-axle crane with an extra-long boom as well as the GMK6400-1. The 6400 was originally launched in 2011. On paper, it was one of the best cranes that we’ve ever launched with outstanding lifting power on 6 axles. Unfortunately, this crane has become infamous for its long list of quality problems rather than its lifting capabilities. Since then, we’ve adopted The Manitowoc Way and applied a strict tollgate system to our new product development process that ensures successful product launches. In addition to implementing lessons learned from the legacy model, we’ve incorporated our new MAXbase variable outrigger positioning system for improved load charts, increased speeds on the hydraulic system and integrated CCS in the refreshed GMK6400-1. This crane is the strongest and most versatile in its class, and the initial feedback has been outstanding. In the third quarter, we will begin shipping the GMK5120L, a light 5-axle crane designed to increase customer productivity for taxi work and improve roadability. Heading into bauma, we have one additional new all-terrain model to unveil, which will feature our new Grove Connect telematics solution. We look forward to another strong reception for this model, and we hope to see you at the show. In closing, The Manitowoc team continues to tackle inflation and supply chain shortages, both of which are expected to persist into 2023. However, there is optimism about the long-term outlook. Over the coming years, customers will begin to refresh their aging fleets, many of which were purchased during the market boom from 2004 to 2008. I expect this coming replacement cycle to be a crane renaissance, providing a significant multi-year tailwind for our business. While this inevitable crane renaissance is on the horizon, Manitowoc will continue to strengthen its product offering and aftermarket focus, fueling long-term growth and driving shareholder value. With that, operator, please open the lines for questions.

Thank you very much. Today’s first question is from Mr. Jamie Cook from Credit Suisse. Please go ahead, your line is open.

Hi, good morning.

Good morning, Jamie.

I guess I missed it now, but anyway, question, understanding you guys kept your guidance the same in terms of using the low end of EBITDA. I’m wondering if the puts and takes to get there are different? Because I guess I was encouraged that the aftermarket business was up 21%. Perhaps you’re assuming lower sales with the weakening in orders? And then just what are your expectations now on price cost in the back half of the year, if they have changed with the price increases and with commodity costs coming down to some degree? Thank you.

Hi, Jamie, so looking at the second half in particular, around the price/cost there is still a decent amount of headwind coming from costs in the back half. We’re estimating that the full year is close to $60 million of inflation impacting us negatively. Q2, we did see a better mix, as you mentioned, related to non-new machine sales and just the new equipment mix as well. So the 7.3% margin is a bit favorable. And remember, Q3, we have shutdowns in Europe, which impact our margin as well. So thinking about the full year, we’re still kind of – we are pretty comfortable about the $130 million at the low end of the guidance, and there is opportunity just based on the volume.

And I’d add, Jamie, commodity prices are down, but the issue we have is that energy, particularly in Europe, is up. Components continue to show inflation. A lot of the steel that comes in actually consists of fabrications that we get from Eastern Europe, which contributes to ongoing inflation due to the Russia-Ukraine situation.

Okay. And then could you just talk to I guess, Aaron, how do you think about – assuming we are going into a downturn, is there any change in the resilience of Manitowoc’s earnings given the focus with help from some of the M&A and focus on growing the aftermarket business?

Yes. I mean I think the difficulty to answer your question is just we still sit at this crossroads; we’re not through all the inflation. If you think about what we’ve gone through the last 18 months, we had two big waves that we’ve been battling. But my hope is that we get through this issue of rinsing the backlog that’s in there and get to a more normalized basis. I feel good in terms of our ability to manage costs. The team has really done a good job along the way. So yes, I think I’m hopeful that we get to – even if it’s predictable inflation, which we’re seeing now rather than the crazy spikes on steel and the impact from the Russian invasion. We’ll get back to a more normalized business. But we’re still battling this into the first half of next year, I think.

Yes. And the supply chain constraints are pushing revenue to the right.

Yes.

Okay, thank you. I will get back in queue.

Thanks, Jamie.

Thank you. The next question is coming from Stephen Volkmann calling from Jefferies. Please go ahead.

Good morning, Stephen.

Hi, good morning, guys. I’m pleased to follow Mr. Cook. If we are going to have some sort of a downturn in ‘23, I can see a lot of cross currents. My guess is price cost for the year should probably be a little bit better. You should catch up on that. Supply chain probably gets a little bit easier, which helps with some productivity issues. The mix might even be a little better because of the work you’re doing on service. So I’m just trying to figure out, is it even possible in your mind that we could actually have margins sort of flat or up in a modest downturn?

I think it’s too early to predict that. Keep in mind that in a normal supply chain situation, we’d be eating through our backlog significantly faster than we are at the moment. So I think that serves to soften the challenges we may see in ‘23.

Okay. And then just sort of on end-market demand, are there any areas that are still feeling pretty robust to you? I know you sort of called out Europe on the downside, but anything to call out on the upside?

Yes. I mean Saudi Arabia is experiencing significant growth right now with all the infrastructure projects, particularly their investments in the Red Sea. That looks great for all the businesses and is a nice turnaround from where we’ve been in the last six years.

Great. Thank you.

Thanks, Stephen.

Thank you, sir. We will now go to Tami Zakaria, calling from JPMorgan. Please go ahead.

Good morning, Tami.

Good morning, how are you? Thanks for taking my question. So I have a couple of quick ones. The first one – you said price increases have hit an inflection point. Can you remind us what has been the cumulative price increase over the last three years? The math that I’m doing – you said 25 cranes now cost the same as 18 cranes a few years ago. That’s about a 40% inflation on cranes. Is that math directionally correct?

Yes. So the math is 100% correct, as it incorporates our price increases, but it also includes the financing we offer through financing. In terms of our overall price increases, we’ve implemented somewhere between 15% and 20% over the last 18 months, depending on the product line. Looking forward, we’ve been trying to be restrictive in terms of how long it takes to take an order with us and we use provisional pricing to help folks get onto the build schedules.

Got it. So just to clarify, the 40% is split between actual price increase and the increased financing costs from the customer perspective?

That’s correct.

Got it. And so along the same lines of that 15% to 20% pricing you took, how much of that is raw material inflation-driven versus labor-driven versus just demand outpacing supply?

I would say the majority of it would have been driven by input costs of raw materials. The wages, that’s the big challenge that we’re going to battle over the next 12 months.

Yes. I think wages and inflation on other components, whether it be related to energy or overall labor inflation is another component.

Got it. If I can squeeze one more, orders were down 19%. I think excluding foreign exchange down 15%. So are you able to quantify how much orders were down by product and by region?

We generally don’t provide that level of detail. If you look overall, we mentioned that it was down throughout our regions.

Yes, all three regions we report on saw declines. What’s been interesting is that we typically see monthly seasonality, with ups and downs throughout the year. However, over the last six months, we’ve been fairly consistent without the usual fluctuations, still at around $140 million to $150 million, which is low compared to our average per month in 2021.

Okay, got it. Thank you so much.

Thanks, Tami.

Thanks, Tami.

Thank you, madam. We will now go to Mig Dobre coming from RW Baird. Please go ahead.

Hey, good morning, guys. It’s Joe Grabowski on for Mig this morning.

Hi, Joe. How are you doing?

Doing well. Thanks for taking my question. The delay in shipments in the second quarter, $40 million, I guess that was slightly worse than the first quarter, better than the fourth quarter, but a pretty constant amount of orders getting moved to the right. Maybe just talk about the supply chain issues and part shortages you saw in the quarter; are they similar to the issues from the prior two quarters or have the headaches moved around a little?

Yes, the headaches continue to shift. I would argue the supply chain situation was worse during this quarter than the past two quarters. Looking at it by line item standpoint, it’s definitely not improving.

Yes. The $40 million revenue miss is based on our reforecasts. Some shifts had already been expected as the shippable backlog was already moving to the right. So, the $40 million is based on our expectations heading into the quarter.

Got it. Thanks for that color. I guess my follow-up question, when you talked about different end markets, you didn’t mention U.S. infrastructure. We are nine months past the signing of the infrastructure bill. Have you heard any discussions about infrastructure projects that are starting to gain traction? Additionally, Caterpillar mentioned this week about an infrastructure program in Europe. Are you hearing anything about that?

Yes. There are discussions, but nothing significant has started yet. It’s still too early to make any substantial comments regarding infrastructure projects coming from stimulus programs.

Got it. Okay, thanks, guys. Thanks for taking my questions.

Thanks, Joe.

Thanks, sir. We will now go to Seth Weber calling from Wells Fargo Securities. Please go ahead.

Hi, guys. Good morning. Thanks for taking the question. I wanted to ask about the 20% growth in the non-new sales. Can you break out how much of that is organic backing out the acquisitions? And how much of that is from used crane sales? Trying to assess underlying parts and service revenue after additional aftermarket revenue growth, thanks.

Yes, it’s primarily driven by the acquisitions, and we don’t break out the different components of that number.

Okay. Alright. Can you comment on your CapEx expectation for the year? Sorry if I missed it, but I think previously it was $85 million, including $25 million for the European tower business. Are you maintaining that $25 million number? Also, could you talk about your CapEx expectation for the year? Thanks.

Yes. Right now, we’re thinking about $65 million in CapEx, but we can adjust that based on how the year plays out. The $65 million targets about $20 million to $25 million related to the rental fleet.

Okay, thank you. And then if I could squeeze one last one in. Are you actually seeing cancellations of orders or is it just that new orders aren’t coming in at this point?

Yes, there is nothing material; it’s all new orders coming in.

Okay, alright, guys. I appreciate it. Thank you.

Thanks, Seth.

Thanks, Seth.

We will now go to Steven Fisher calling from UBS. Please go ahead, sir.

Hi, Steven.

Regarding your European concerns. To what extent do you separate demand concerns from energy costs of your own manufacturing? And how much of your energy bill can you mitigate with solar investments?

So, first, the demand is not driven by our ability to produce, but just the concerns about impacts. There have been many stories in Germany about energy conservation in preparation for the coming winter. In terms of the solar panels, we continue to advance projects in Portugal and Italy, but it’s not enough to offset the overall impact because it’s not just electricity; it’s also the gas that we use.

Okay. And then maybe just a follow-up on the earlier question about the U.S. market. I appreciate that there are some cross currents at the moment, and you may not see infrastructure yet, but why isn’t the outlook you have for industrial - with all the large industrial projects going on or starting? Clearly, there is infrastructure funding - why isn’t that enough to make the U.S. crane market more confident?

Yes. Some of that can be attributed to the low utilization rates of cranes. Currently, everyone is focused on getting their existing fleets utilized to an optimal level. While utilization is favorable, people remain cautious relative to price increases, lead times, and interest rates related to how they plan to grow their fleets. That’s where we see the concern.

Okay. Very good. Thanks a lot.

Thanks, Steve.

We will now move to Timothy Thein calling from Citigroup. Please go ahead.

Thanks. Good morning. First question regards the cycle. You alluded to earlier that you have all the assets that eventually will need replacing from the big years when we had the commodity super cycle. Mining equipment companies have been banking on a similar dynamic playing out, but it has lagged expectations because miners are extending their trade cycles. Curious if a similar dynamic is in play with your customers; what are you seeing? Is there a push-out of the historical replacement years?

Yes. I can speak anecdotally but to be sure, if you look at our tower cranes, the quality today versus where they were back in 2005 is drastically different. When reviewing warranty claims on new products we launch, we compare ourselves to prior models and competitors. Significant improvements have been made; this enables clients to extend their asset lifetimes by a couple of years.

Yes. And then regarding inflation on the new side; as you have had slower output from your factories, do those dynamics support used prices, helping to pull up overall values?

Yes. It depends on the models though. Certain models benefit from demand, and like the automotive industry, people are willing to pay more for them because they can’t access new machines. However, some older models don’t hold their value if they can’t keep up with the latest and greatest technology.

Got it. Alright. Thanks a lot.

Thank you.

We will now go to Larry DeMaria calling from William Blair. Please go ahead.

Good morning Larry.

Hi guys. Good morning. Just staying on the same line there. I am curious if this EU weakness implies risk for residual values and pricing. Wondering if that’s the next shoe to drop, and how that impacts pricing. High-level thoughts on the idea that new equipment pricing could inflect negatively with lower materials, lower demand, open supply chains, and lower residual value? What’s your view?

No, I don’t foresee that. I don’t anticipate prices dropping nor do I see residual values decreasing. I think companies are smartly managing through the present scenario and keeping an eye on what may happen in the next 6 to 12 months concerning the Russia-Ukraine situation regarding gas.

And with foreign exchange?

Utilization rates are strong here, probably more progress in Europe on increases in rental rates than we see in the U.S. So, I don’t think there is a risk to residual values, at least not in the foreseeable future.

Therefore, you don’t expect significant risk in negative pricing for new equipment?

No. We still face a lot of inflation pressures associated with wages. Our usual cycle in the first quarter saw negotiations proceeding in February and March. However, petrol prices remain high in Europe, so those factors will likely drive wage increases.

Alright. Fair enough and thanks for the color. Good luck.

Thanks Larry.

As we do not appear to have any further questions, I would like to turn the call back over to Mr. Warner for any additional or closing remarks. Thank you.

Thank you. Before we conclude today’s call, please note that a replay of our second quarter 2022 conference call will be available later this morning by accessing the Investor Relations section of our website at www.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.

Thank you, sir. Ladies and gentlemen that will conclude today’s conference. We thank you for your participation. You may now disconnect. Have a good day and goodbye.