Good day, and welcome to the Manitowoc Company's second quarter of 2025 earnings conference call. Please note that today's event is being recorded, and all participants will be in a listen-only mode. Should you need any assistance today, please sign on a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad, and to withdraw a question, please press star, then 2. I would now like to turn the call over to Ion Warner, Vice President of Marketing and Investor Relations. Please go ahead.

Good morning, everyone, and welcome to our earnings call to review the company's second quarter 2025 financial performance and business update, as outlined in last evening's press Joining me this morning with prepared remarks are Aaron Ravenscroft, our President and Chief Executive Officer, and Brian Regan, our Executive Vice President and Chief Financial Officer. Earlier this morning, we posted our slide presentation on the investor relations section on our website, anathawak.com, which you can use to follow along with our prepared remarks. Please turn to slide two. Before we start, please note our safe harbor statement and 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 the 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. Please turn to slide three. To start, I'd like to express my deep appreciation for the hard work of the Manitowoc team. While the great trade reset continues, I'm really proud of how our team continuously reacts to the ever-changing tariff landscape and focuses on finding solutions to service our customers. During the second quarter, we generated $540 million in revenue and $26 million in adjusted EBITDA. Orders were $454 million and backlog ended the period at $729 million. Our non-new machine sales were $162 million, up 10% year-over-year. In terms of tariffs, during our first quarter call, we were modeling $60 million in incremental tariffs for the year with plans to mitigate 80% to 90% of these costs. Today, we believe the full-year gross impact of tariffs is $35 million. The change in our assumption is due to a combination of lower purchases and a different mix of various tariffs. We expect to mitigate 90% of these costs. Given the fluid nature of the situation and the price elasticity of cranes in the short term, we see a drag on demand in the United States. Moving to the Manitowoc Way, we recently held our annual corporate Kaizen in Niela, Italy. For this Kaizen, we organized four dedicated teams to focus on enhancing the information and material flow essential to building rough terrain cranes. As always, a good Kaizen is a humbling experience. It reminds us that running a production line smoothie is only possible if all of the necessary parts are available exactly when needed and sometimes that's a big if. Team walked away with a year's worth of action items but what stood out most was the continued growth in collaboration and teamwork across the organization. It's inspiring to see how we keep getting better together. Also I'd like to thank Ransom Research and Front Street Capital Management for their valuable participation in the event. Quickly touching on safety I'd like to recognize our team's steadfast efforts to improve our working environment. For the first half of the year we achieved recordable injury rate, or RIR, of 0.67, which is another new safety record. Our goal is zero, but I'm proud that we continue to make progress towards it. Please move to slide four for my market update. Starting with Europe, we're seeing two distinct market dynamics, depending on the country. In the UK, Netherlands, and France, demand has been slow. In contrast, customers in Spain, Italy, and Germany are showing signs of optimism, and we sense that business is starting to rebound. Across Europe, we've recently seen three encouraging data points. Number one, the UK launched a 39 billion pound housing program for the next 10 years with a goal of building 300,000 homes. Number two, last month in Germany, the government passed a new accelerated depreciation scheme, which complements the 500 billion euro infrastructure fund that was recently created. And number three, in France, we saw May housing permits turn favorable, up 20% year over year. On a product line basis, despite great excitement following the April Obama trade show, momentum in the mobile crane market moderated during the quarter. At this point, we need to wait until after the summer holiday to get a clearer picture on demand. Conversely, however, the tower crane market has continued to be positive. While the market hasn't fully recovered, we still have easy comparisons, which is always the birth of a rebound. During the quarter, our new tower crane orders were up 104% versus the same period a year ago. This is the fourth quarter in a row that we have seen orders improve on a year-over-year basis. Turning to the Middle East, the market continues its dynamic growth with especially strong activity in Saudi Arabia and UAE. During my recent visit to the Middle East, I was struck by the remarkable pace at which infrastructure projects move in this region. Major luxury residential developers like Soba and Benghadi are reshaping the skylines of Dubai. In addition, the Stargate UAE Data Center project was kicked off outside of Abu Dhabi. starting with a 200-megawatt data center, where we won an order for 16 large-capacity tower cranes. Upon completion, the campus will span 10 square miles and is expected to host 5 gigawatts of capacity. Likewise, Saudi remains highly active, with our local partner playing a key role in several major stadium projects. The overall pipeline remains very strong. Shifting our focus to Asia, China continues to face economic headwinds, and we don't anticipate a meaningful rebound in the near term. Elsewhere, however, sentiment is improving. During my recent visit to Korea, coinciding with the national election, a common view prevailed. Regardless of political preference, the new president is seen as pragmatic and supportive of pro-business initiatives. In addition, renewed interest in the Samsung Fab 5 semiconductor project has boosted confidence. We anticipate the Korean market could regain traction within the next six months. In Vietnam, we secured crane orders for multiple projects this quarter, an encouraging signal of the market reawakening. Meanwhile, in Australia, conditions remain mixed. The Australian dollar has been hovering at 0.56 to the euro, which has hindered the market, but crane activity has been strong with early signs of activity emerging in preparation for the 2032 Brisbane Olympics. Finally, in North America, the market remains in a hole in a pattern. With significant uncertainty around how various tariffs may unfold, both dealers and Crane rental houses are delaying purchasing decisions until there is more stability around tariffs and pricing. Overall, Crane rental houses remain busy, and we've seen success at some of the bigger players to reduce the age of their fleets. This is encouraging for the health of the overall industry, and I remain cautiously optimistic about long-term demand in the region. Looking at the next 12 months, however, I have two views around U.S. demand depending on the time horizon. For the next six months, it's hard to see a scenario where demand accelerates. Crane buyers can afford to wait, and at the moment, they prefer to buy units that are sitting on the ground at pre-tariff prices. If I consider the European reciprocal tariffs, lots of buyers had been hoping that the tariff would drop below 10%. So we'll have to see how customers react to the 15% tariff. On a $2 million all-terrain crane, that's real money, and rental rates would need to increase to financially justify a buying decision. Moreover, dealers are reluctant to place new orders, and dealer inventory has been declining. Looking beyond the next six months, dealer inventory in the U.S. could reach all-time lows if current trends continue. As a result of the one big, beautiful bill, 100% accelerated depreciation has been reenacted. The previous program stimulated demand in December, and this could drive dealer inventories even lower. Point being, dealer inventory could be exceptionally low, which is a classic signal for the market to accelerate at the beginning of next year. Unfortunately, we cannot turn our manufacturing on a dime, and we have to align our build schedules with current demand. This adjustment will impact our financial performance in the second half of the year, which is why we are guiding to the low end of our EBITDA range. With that, I'll pass it on to Brian to walk you through the financials before I close with our strategy update.

Thanks, Aaron, and good morning, everyone. Please move to slide five. During the period, we had orders of $454 million, an increase of 6% from a year ago. resulting in Q2 ending backlogs of $729 million. The higher order intake was driven primarily by our European tower crane business, where new machine orders were up 104% year over year. In addition, we saw an increase in our non-new machine orders. As Aaron mentioned, our third-party dealers in the U.S. are reluctant to commit to orders at this time due to the uncertainty around tariffs. For the quarter, this slowdown in demand was more than offset by higher orders in MGX, our wholly owned distribution business, as end customers place orders to lock-in pricing on in-stock units. Net sales in the quarter were $540 million, a decrease of 4% from a year ago. We missed several deliveries due to supply chain constraints and last-minute commercial delays. Our non-new machine sales were $162 million during the quarter, up 10% year-over-year, demonstrating the momentum we continue to build around our Cranes Plus 50 strategy. On a trailing 12-month basis, non-new machine sales were $659 million, another record. SG&A was $87 million in the quarter, up $4 million year over year. On an adjusted basis, SG&A was up $9 million year over year. Foreign currency accounted for $2 million, with the balance driven by the Obama trade show and other employee-related costs. Our adjusted EBITDA was $26 million, down $10 million year over year. This was primarily driven by the lower sales and the higher SG&A. The net headwinds from tariffs in the quarter was approximately $1 million. Our gap diluted income per share in the quarter was $0.04. On an adjusted basis, diluted income per share was $0.08, a decrease of $0.17 year-over-year. Please turn to slide 6. Networking capital ended the quarter at $580 million, up $63 million year-over-year, of which $43 million was due to the payment of the EPA matter in April. Additionally, foreign currency accounted for $14 million of the increase. Moving to cash flows, we used $68 million of cash in operating activities during the quarter, which includes the $43 million payment to resolve the EPA matter. Capital expenditures were $6 million, of which $3 million was for our rental fleet. Our cash balance was $33 million, and total liquidity was $238 million at the end of the quarter. As anticipated, our net leverage ratio increased to approximately four times. we are focused on bringing our leverage back below our targeted three times by year end. Looking to the full year between the tariffs and the bill plan reductions mentioned by Aaron, we have line of sight to achieve in the low end of our previously issued adjusted EBITDA guidance of $120 million to $145 million. With that, I'll now turn the call back to Aaron.

Thank you, Brian. Please turn to slide seven. While we anxiously wait to see how the global trade reset plays out, we remain steadfast in our Cranesville 50 strategy. During the quarter, we continued executing our strategy to strengthen our aftermarket business. We opened a new service branch near Warsaw, Poland. We expanded locations in Sydney, Australia, Nance, France, and Nashville. Our culture continues to evolve from being product-focused to customer-oriented. A good example of this is in Australia, where we started to offer aftermarket tires, outrigger pads, and rigging hardware to our customers providing more of a one-stop shop every day we get better at servicing our customers in terms of improving our effectiveness as an aftermarket organization we recently went live with service max this system replaces over a dozen different legacy systems it enhances technician productivity significantly upgrades our ability to manage service contracts and reduces administrative overhead my favorite part of the tool is that it provides us global asset management so we can track every machine we manufacture from cradle to grave it's a great repository for all of the maintenance and service work on any crane we sell and it will keep us more closely connected to the iron when it gets traded or sold into the secondary market needless to say service max is a big leap forward from the legacy ad hoc excel based systems our teams previously used our cranes plus 50 strategy is driving growth in higher margin recurring revenue streams and creating long-term value for our business. While the turbulent second quarter was hard on the ROE business, our MGX business in the U.S. posted great results. This is proof that our strategy is working. In closing, while the global political and economic situation remains unpredictable, our focus stays squarely on servicing our customers. The better we serve them, the stronger our partnerships become. When conditions improve, we'll be ready. In the meantime, we remain committed to executing our Cranes Plus 50 strategy and creating long-term shareholder value. With that, we'll open the line for questions. We will now begin the question and

answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw a question, you may press star, then two. At this time, we will pause just momentarily to assemble our roster. And our first question here will come from Stephen Fisher with

UBS. Please go ahead. Morning, Steve. Thanks. Good morning. And it sounds like a very challenging overall backdrop, but just wanted to ask you about the backlog and the cadence of EBITDA for the next couple of quarters. Within the context of that $730 million roughly in backlog, what's the duration of that is all is that all expected to be shipped kind of within this year uh just here's how much coverage you have on your plan for for q3 and then q4 and then if there's a cadence of the roughly 70 million dollars of EBITDA that you still expect for for q3 versus

for q4 yeah it's brian um you know we we always have seasonality with q3 and q4 with q4 being the better of the two quarters. From a backlog standpoint, I'd say most of that backlog is expected to ship this year. That's pretty normal when you look at our backlog with the vast majority of it being for Q3, and then we've got some good coverage in Q4 as well.

Okay, that's helpful. And then just want to understand maybe a little bit more about the the regional dynamics on the, the orders, you know, it sounds like obviously pretty strong orders in, in, in Europe just kind of curious how to think about the, the book to bill here in the various regions, you know, within your kind of overall 0.8 ish 0.9 times, like was us like an under 0.5 and Europe was kind of a North of a, of one time, how do we think about, you know, sort of that regional dynamics on orders?

Yeah, so with respect to the orders, and to me, the main area to focus on right now is the Americas, and we sort of live in two worlds because we have the MGX distribution business, which of course they had inventory sitting on the ground that's pre-tariff, so demand there was really good and business was good. On the other side, I'll call it legacy, America's portion of the business, which is much more dealer oriented. That's where we're closing, tracking what our orders are and what the challenge is.

And then just on the tariffs, right? It sounds like a lower overall impact, but I guess lower units, because can you talk a little bit about the sort of the per unit tariff impact and kind of price versus cost dynamics you're expecting for both Q3 and Q4?

Yeah, so we can't speak. We're not going to speak about every single model, but literally every single model varies depending on where the crane's coming from and where the parts are coming from. So that's quite the mix. And likewise, most of our competitors are either in Japan or Germany. So there's a lot to shake out in terms of the way that the tariffs flow through and then actually hit the customer in the end.

And then just lastly for me on the U.S. market, can you just talk about some of the puts and takes? I mean, it seems like a general message from the broad value chain we're hearing is the public sector is still pretty good in terms of demand. On the private side, still lots of structural investment in terms of data centers and various other projects. Are you seeing those areas of strength? And is that what's sort of just causing people to buy the units that are pre-tariff? but there's just not enough confidence in that demand going forward to kind of put new orders in without knowing really what kind of the pricing dynamics are going to be? Is that how to think about it?

The other element you have to consider is people managing their fleets, and so they can choose to wait and see where pricing ends up, and that's what we're really seeing is folks managing their day-to-day. In terms of actual activity, criminal houses are busy and positive, and that all looks good. It's just there's so much uncertainty around what the price of a crane is going to be. And as I said on a call, if you've got a machine, it's $2 million or $3 million. And all of a sudden, it's 15%, and you were hoping it's going to be $5 million. That's a pretty dramatic change in terms of expectation. And then, likewise, in order to financially justify it, you're going to have to have rental rates go up. So the market needs to play out in the next six months before we really get a good feel for where we land.

Okay. Thanks very much for the time.

Thanks, Steve.

And, again, if you have a question, you may press star, then one, to join the queue. Our next question will come from Meg Dobre with Baird. Please go ahead.

Morning, Meg. Yeah, good morning. Thank you for the time. So just to pick up where Steve sort of left it here with his questions, what's interesting to me is that in the U.S. market, right, I mean, if you're talking about this uncertainty around pricing that is impacting customers, wouldn't that create an incentive for customers to actually order ahead of these price increases and try to be a little more proactive at securing whatever units they have at pre-tariff levels? To me, it would have seemed like Q2 would have been a quarter in which a bunch of that activity could have occurred so that people can actually lock in prices before you really kind of start making your adjustments as the year progresses.

Well, if you're shipping from Germany, I mean, in an instance of like all-terrain cranes, everyone is, from my point of view, I think customers were hoping that we wouldn't end up with even the 10% tariff, and now it's turned out to be 15%. So people were holding off there. And, you know, anytime you're shipping something from that far away, that creates more reluctance concern because you didn't really lock yourself into a price whenever you cut the deal.

Yeah, and for the vast majority of our orders, you know, they're going to include the price adjustment because we knew during the quarter that there was going to be some level of tariff.

Okay, so now we have 15% tariffs. What does that do for demand? Is that – because your commentary is obviously more and more cautious than it was three months ago are these tariffs and within the framework that you provided you're saying 35 million as opposed to something that was much larger previously you know in terms of these offsets first I guess how are you offsetting the tariffs and then second as the customers now know that there's a 15 percent tariff does does that imply that demand here is is going to be curtailed for a prolonged period of time or do you think this is just a function of we need a near-term adjustment and you know eventually they're going to digest that and we're back to the races in 26 yeah well i think there's two

dynamics here one is relative to dealer inventory and then one is relative to what the crane rental house is going to buy so in terms of our dealers i mean they've they've hit the pause button and And at a certain point, they're not going to have any inventory and they're going to have to make some decisions. So from my point of view, this is probably, I mean, I think it's six months to sort of sort it out. I mean, even if I look at July, July was roughly the same as the previous three months. So folks are making the purchases that they need to make or have to make. And if they have any more flexibility in terms of timing, which most crane rental houses do, given the nature of cranes, they're being a little more cautious. But don't forget, from a pricing standpoint, when you've got the yen at $150,000, there's room for folks to eat, potentially, their tariffs. We don't know exactly how that's going to play out in the long run.

But how are you offsetting these tariffs, the $35 million? You say you're going to mitigate at 90%. How are you doing that? Price increases. You're doing that with price increases. You know, just mathematically, if I'm looking at your America's revenue and I'm looking at, you know, call it $30 million of incremental tariff headwind, that does not appear to be very significant. We're only talking like 2.5%. So I recognize that I'm basically spreading it across the entire business while only certain products are impacted here. But my question to you would be, does it make sense to spread the tariff impact across all your products and try to sort of like minimize the drag on demand? Or are you being sort of very targeted and saying, hey, you know, this model is coming from Europe. We're going to put the full boat tariff pricing on this one as opposed to something that's manufactured domestically.

We're very targeted. You have to remember, we have to go through piles of HTS codes for every component that goes on to the local unit. So we have to go unit by unit.

And remember, there's different tariffs. We talked about in Q1, you've got the reciprocal tariffs that are coming from whole goods that we produce in Europe that we're bringing to customers in the U.S. So there's that aspect of it. But then there's also tariffs like the steel tariffs that we're getting that is in our product. So how we're addressing it and the percentage of impact, obviously the ones that are the reciprocal tariff is on, it's going to be that 15% on those products. For the other stuff, you know, we're, you know, it's less of a direct offset of the tariff. It's a price increase.

Yeah, I guess lastly for me, and I don't know if this is a question, maybe it's a comment and you can comment back. When I'm looking at your updated tariff view, it's less bad than it was three months ago, yet your commentary is more cautious. There's a divergence here that I think is, at least to me personally, a little bit surprising. So I guess I'll leave it at that.

I said on the last call that I'm always nervous about price elasticity in the crane business. And that's what we're seeing right now is folks are hitting the brakes because the tariffs are 15% on the reciprocals. But, of course, we have all the 232 and 301s that are impacting our locally produced stuff. So, from my point of view, it's, yep, we're in the middle of the – we're in the eye of the storm, and we're seeing exactly how folks are behaving. And on the last call, it was more of a sort of guess at that point because we didn't have enough data to know exactly how they would respond.

And when we gave the information last quarter, we said, hey, this is our expectation based on current demand. We don't know what it's going to do to demand, and we've seen impact on demand during Q2, which is going to impact our full year.

Appreciate the time.

And our next question will come from Cliff Ransom with Ransom Research. Please go ahead. Morning, Chris.

Good morning, folks. Thank you again for the opportunity to work with your folks in Italy. It was very instructive. Look, after 50 years around the dammed lift business, the recovery from cycles and going into downstrokes is very difficult. Let me ask a 35,000-foot question. If you look back, say, three to five years at Manitowoc and the institution of the Manitowoc Way, what about lean thinking has enhanced your ability to respond to rapidly changing exterior events what do you think has happened to your culture

yeah i think a big a big part of what we've done if you look back historically we were very very vertically integrated and so we didn't have the flexibility to go up or go down quite frankly very easily or fast so we've done a lot of work on our supply chain in order to have more access to more parts to continue to move. So if we go up 10 or 20 percent, we can react way faster

than we could have, say, five years ago or 10 years ago. I was really thinking more about what happens internally. Maybe I'm asking a mindset question, which is too hard to answer. One of the things about lean thinking is that the whole, what's the right word, the whole review process is so disciplined you tend to discover trends faster than companies that don't exercise that methodology am i barking up the wrong tree here is that

something real no i think it's 100 real and what we talk about a lot of times is the feedback from our customers is almost instant we're in a lot of industry you know because we we talk to the owners of the people that own the crane rental houses or the ceos because everyone's so involved in their big purchases. So in terms of how we build our build schedules and start tack times and how to run the lines, I think getting that input, we get it pretty instantly. I mean, even this morning I was getting feedback from customers. So I think that makes a big difference in terms of how we look out the next six months and how we see the dynamics play out. Got it. And you talked

about um making adjustments in the second half of the year to um let's call it protect cash flow

um what specific things will you be doing yeah so we took down our build schedules at a couple different locations so it's shady grove and willemshaven specifically and it just depended on the product line relative. So what we do is we track our backlog, we track the orders, we track the trends and how much dealer inventory is out there and try to guess where we think demand will be six months from now. So based on where current rates are, we need to start to adjust our build schedules now to make sure that our supply chain doesn't get overwhelmed or overheated as we get into the back end of the year. And I got cut off the call twice,

but I got reconnected. When you talk about getting your net leverage down, did you at some point give us an estimate of free cash flow for the year?

Yeah, our free cash flow for the year is expected to be on the low end of our original range. So we're thinking that $10 million to $15 million for the full year.

Okay. And what was your best expectation in the year for free cash flow?

when we gave our plan i think it was 45. okay i got it that's fine i remember that number thanks

um i have one last question if i may i just have to find it um no that'll do it thanks guys

appreciate it thanks glad thanks go have a good day and this concludes our question and answer session i'd like to turn the conference back over to ion warner for any closing remarks

Thank you. Please note that a replay of our second quarter 2025 earnings call will be available later this morning by accessing the investor relations section of our website at Manitowoc.com. Thank you everyone for joining us today and for your continued interest in the Manitowoc company. We look forward to speaking with you again next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.