Good day, and thank you for standing by. Welcome to the Douglas Dynamics First Quarter 2022 Earnings Conference Call. I would now like to hand the conference over to Sarah Lauber, Chief Financial Officer.

Thank you. Welcome, everyone, and thank you for joining us on today's call. Before we begin, I'd like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC. Joining me on the call today is Bob McCormick, our President and Chief Executive Officer. In a moment, Bob will provide an overview of our performance, then I'll review our financial results and guidance. After that, we'll open the call for your questions. With that, I'll hand the call to Bob.

Thanks, Sarah. Good morning, everyone. Our first-quarter performance is in line with expectations as we continue to navigate through the challenges we've faced in recent quarters. While external conditions aren't improving yet, and we haven't seen any new curveballs recently, net sales were essentially flat compared to the record results for the same period last year, with higher pricing in both segments offset by lower volumes. We had a more typical first quarter in attachments versus the tremendously profitable first quarter we delivered last year, driven by concentrated snowfall in February 2021. We did not expect to repeat this snowfall-driven performance. We've experienced lower production volumes in the Solutions Segment this quarter due to chassis and component shortages, which did not impact us in the first quarter of 2021. Pandemic-related absenteeism is generally in line with the country and local markets. Omicron had an impact in the first quarter, but we have learned to manage through such surges as well. I'm very proud of our team for maintaining their focus on pandemic safety for over two years now. We continue to demonstrate flexibility and creativity as we strive to deliver for our customers every day. We're very pleased with the demand outlook in both segments, setting us up for long-term success. Our headwinds remain the same and don't seem to be getting any worse. First, supply chain disruptions and component shortages. We expect the situation to stabilize in the coming months and slowly start to improve later this year. We are carefully monitoring the latest pandemic disruptions in China. The majority of our supply partners are in provinces outside of those experiencing lockdowns, so we're not overly concerned at this point. Second, material price inflation remains a factor. We are now recapturing price in attachments as promised, and we still have work to do in solutions, which is a much more complex situation. Lastly, we continue to navigate a tight labor market. We're seeing the benefits of initiatives put in place last year, and kudos to our HR team for being creative in addressing the challenges every employer is facing. While uncertainty still exists, it's somewhat expected given the past few years. We've always been better than most at adapting. The ability to pivot, adjust, and find solutions rapidly is just how we're built. We are comfortable maintaining our guidance, which Sarah will discuss later. Now let's discuss the latest developments in each of our segments. Beginning with work truck attachments, we generated $45.8 million in net sales and $3 million in adjusted EBITDA. First quarter 2022 volumes met our expectations despite slightly below-average snowfall. Net sales increased 9% due to higher pricing on increased input costs, offsetting lower volumes compared to the robust first quarter of 2021. Profitability was impacted by lower volumes and product mix as well as a return to more normal spending levels, particularly the in-person NTEA Work Truck Show in March. Our pre-season is off to a strong start, seeing significant interest in our non-truck products. Dealer inventories are in good shape, and dealer sentiment is positive. We're pleased with the continued execution and outlook for the attachments group. That brings us to Work Truck Solutions where we experienced a continuation of recent trends. We delivered $56.8 million in net sales and $1.6 million in adjusted EBITDA. Performance was down compared to last year and continued to be impacted by a restricted flow of chassis and other supply chain constraints. Supply and chassis headwinds are more robust now than in the first quarter of 2021. Looking ahead, demand remains strong as does our backlog. When supply chain disruptions start to subside, we are well-positioned to exceed our expectations, driving revenue and earnings growth. Our teams work tirelessly to alleviate the issues wherever possible, and we expect the situation to slowly start to improve in the second half of 2022. Overall, we are encouraged with where both segments stand today. In conclusion, Q1 results were in line with expectations. Attachments pre-season is off to a strong start, and in our Solutions group, demand and backlog remain strong. We continue to believe supply chain difficulties will gradually improve in the second half of the year, and we are reiterating our full-year guidance. Despite the challenging backdrop, demand signals remain strong across the board. We continue to invest and innovate to ensure that we are ready to deliver when supply chains improve and are well-positioned to drive towards our long-term financial targets. With that, I'd like to pass the call to Sarah to walk through our financials.

Thanks, Bob. Overall, our performance this quarter was in line with our expectations. To provide some context, it's important to remember that the first quarter is our seasonal level. It typically accounts for only 10% of annual net sales in attachments. As we level set our costs across the year, it often results in not turning a profit in the quarter, as is the case this year. Our results also face a tough comparison to the record consolidated results in the first quarter of 2021. However, it was really the first quarter of 2021 that was the anomaly. As a reminder, our business has rebounded as we exited the first phase of the pandemic, combined with robust snowfall in February '21 that created massive demand for parts and accessories, plus the supply chain constraints that had not yet taken hold. These factors combined for unusually strong performance in both segments, producing record first quarter results that we did not expect to repeat this year. With that said, let me walk through the numbers for the first quarter of 2022. On a consolidated basis, we delivered net sales of $102.6 million and gross profit of $21.1 million compared to net sales of $103.3 million and gross profit of $26.3 million during last year. Net sales were essentially flat due to higher pricing in both segments offsetting lower volumes. SG&A expenses, including amortization expense, were $24 million compared to $22.6 million during the first quarter of 2021. The increase was largely due to higher labor costs and a return to more normalized marketing spending. We recorded a GAAP net loss of $3.9 million or negative $0.18 per diluted share compared to a GAAP net income of $742,000 or $0.03 per diluted share in 2021. On an adjusted basis, we generated a net loss of $2.3 million or $0.11 per diluted share compared to an adjusted net income of $1.2 million or $0.04 per diluted share. Similarly, we generated consolidated adjusted EBITDA of $4.6 million compared to $10.7 million in the corresponding period of the prior year. Profitability was impacted by lower sales volumes in both segments and unfavorable product mix comparisons within attachments. Interest expense was $2.1 million for the quarter, lower than the $3 million incurred in the same period last year as we benefited from the refinancing we completed in June of 2021. Now let's turn to the earnings information for the two segments. Our Work Truck Attachments Segment generated net sales of $45.8 million compared to $42 million for the first quarter of 2021. The 9% increase was due to higher pricing on increased input costs, offsetting lower volumes. Adjusted EBITDA was $3 million during the first quarter, lower compared to the record adjusted EBITDA of $8.2 million recorded in the prior year. The decrease was based on lower volumes and product mix impacting profitability as well as outsourcing costs and a return to more normalized marketing spending. As I mentioned earlier, we have a tough comparison this quarter given the results last year when we saw tremendous snowfall in February of 2021, which created huge demand for parts and accessories, boosting both revenue and profitability. If you go back and compare the first quarter of 2022 to our last normal first quarter in 2019, you'll see our performance this quarter was positive. The snow season ended slightly below the 10-year average, which we don't anticipate will have a significant negative impact on demand during our pre-season order period, which is off to a strong start this year. Turning to Work Truck Solutions where we reported net sales of $56.8 million and adjusted EBITDA of $1.6 million compared to net sales of $61.4 million and adjusted EBITDA of $2.4 million in the same period last year. Our results this quarter were impacted by lower volumes and inefficiencies stemming from chassis and component shortages that hinder production plus inflationary pressures. As Bob mentioned, we're seeing a continuation of recent trends. Demand remains strong, and backlog continues to grow at both Henderson and Dejana. With that said, I'll turn to the Balance Sheet and Liquidity figures. Net cash used in operating activities during the first three months of 2022 was $26 million compared to cash provided of $24.1 million for the same period last year. Free cash flow for the first three months of 2022 was negative $28.2 million compared to positive $22 million during the same period last year. The changes were driven by less favorable operating results as well as an increase in inventory in anticipation of inflationary price increases and supply chain disruptions, plus the timing of supplier payments. Inventory increased to $143.8 million at the end of the quarter compared to $99.9 million at the end of the first quarter of last year as we strategically built inventory and bought forward in areas that will allow us to optimally deliver on customer demand in 2022. Accounts receivable at the end of the quarter were $43.1 million, in line with the $45.1 million at the end of the first quarter last year as expected. Capital expenditures for the first three months of 2022 totaled $2.2 million, consistent with the $2.2 million incurred last year. We continue to make the necessary investments to fuel our long-term growth projects. We are enthusiastic about our vertical integration plan and look forward to sharing more updates with you later this year. After announcing another increase on our last call, we paid our quarterly cash dividend of $0.29 per share at the end of March as planned. We have been able to consistently generate significant free cash flow in recent years despite difficult operating conditions. Therefore, in addition to increasing the dividend, we also initiated a $50 million share buyback program earlier this year, further demonstrating our commitment to deploy excess capital. During the first quarter, we repurchased approximately 82,000 shares at a cost of approximately $3 million. The effective tax benefit was 20.6% and 11.6% for the first quarter of 2022 and '21, respectively. The rate was higher in the first quarter of 2022 due to discrete items related to stock-based compensation. At the end of the first quarter, our net debt leverage ratio was 3.1x higher than 2.5x at the end of 2021. We plan to maintain our goal of keeping the ratio between 1.5 and 3x this year and expect it to drop back below 3x later this year. Finally, we are reiterating the guidance established last quarter. For 2022, we expect net sales of between $570 million and $630 million. Adjusted EBITDA is predicted to range from $70 million to $100 million. Adjusted earnings per share are expected to be in the range of $1.25 to $2.15 per share. Our effective tax rate is expected to be approximately 25% to 26%. This outlook assumes economic conditions remain relatively stable and that we experience close to average snowfall levels in our core markets in the fourth quarter of this year. While the global economic implications of the war in Ukraine continue to unfold, we have not seen any supply impact to date, and we don't have any direct customers or suppliers located in that region. While our guidance assumes the same level of inflation contemplated in our February call, there are many moving pieces that we will continue to monitor and update throughout the year. We feel comfortable reiterating guidance given the first quarter results met our expectations, and the pre-season is off to a strong start in attachments. Demand remains strong in solutions, and as we noted last quarter, 2022 is expected to mirror 2021. Supply chain difficulties in the first half of this year are expected to gradually subside and improve as the second half of the year unfolds. Data coming now from the work truck industry indicates that 2023 should produce similar conditions to 2019, which was a record year for Douglas. Therefore, we remain confident in both our 2022 annual guidance and our long-term targets. Demand signals remain strong across the board. We continue to invest in our operations so we are primed and ready to deliver when supply chains improve, which will subsequently drive long-term growth. With that, we'd like to open the call for questions.

Our first question comes from Timothy Wojs with Baird.

Hey, everybody, good morning. My name is Ben Butcher before, but that's definitely the first. So maybe just to start off on the solutions business; it doesn't seem like anything's really changed in terms of your view on the year and chassis supply and things like that. Just, I guess I wanted to confirm that. And I know you're not really kind of fully controlled the supply, but kind of any update on what you've heard by various classes?

Yes, I think it's a fair conclusion, Tim, that we're not seeing any significant change. As Sarah mentioned, when we entered 2022, the OEMs were sending signals to expect the full year '22 chassis supply to be pretty equal to 2021, but almost kind of flipped a little bit, right? In 2021, we didn't really see some of the chip issues surface until the second half of the year. So deliveries were stronger in the front half, got a little softer in the back half. We're seeing a little softness in the front half of '22 with projections to slowly start to improve in the second half of 2022. So that's still the thesis that we have. We haven't heard anything plus or minus to that statement from the OEMs at this point.

That's good. I know the numbers are small, so there may be some variations. However, the profitability in Solutions this quarter was the highest it has been in the last three or four quarters. Is this simply due to adjusting the business to fit the current volume environment, or is there a mix factor at play? Any insights on this would be appreciated.

I would say there are probably two significant items that have shown sequential improvement in Q1. One is, as you know, it's more difficult to get price into the market in our Solutions businesses. Now here we are after a full year of steadily increasing prices; we're delivering on some of those. So we're seeing more of that come through. The second item, which we're really pleased with is the hard work of the Solutions team in getting variable costs out, continuing to work on our DDMS initiative. We have the two IDC closures that we talked about on the last call at Henderson. There are some cost structure initiatives that are taking hold, and we expect to continue to show improvement throughout the year.

And then I guess on the Attachments business, is there any way to think about the pricing contribution versus the volume contribution in the quarter? And I noticed you didn't mention anything about inflation impacting margins there. So should we infer that you're in a good spot on price-cost in the attachment business going forward?

Yes, when it comes to price and attachments, Q1, we covered the inflation. We were really pleased last year when we closed out the year. As a company, we covered the inflation in total. That trend continued into the first quarter, which is great. What I can say about the magnitude of the price is we've had double-digit pricing going into the market. That's all in, in the first quarter. So certainly well above double digits related to price.

And then I've got one more. Just on the back I know it's kind of a small amount, $3 million, but it's obviously one of your weaker free cash flow quarters. And so I'm just trying to think about how you're thinking about the buyback, especially with the stock sitting here at $30 this morning.

Yes. I mean the way we're thinking about the buyback is one tool in the toolbox that we thought was great to bring into the fold. And we really wanted from a minimum buyback perspective on an annual basis to cover the equity that we have in our compensation plan. So you can call that $6 million; that's kind of the low that we would like to do. Then we're going to be looking at our free cash flow generation and what we expect in the back half of the year to make any decisions on further buybacks. So essentially, we just are starting down that path with what we bought back in the first quarter.

And we have our second question. Our next question comes from Mike Shlisky of D.A. Davidson.

Sarah, your last comment in your prepared statement about 2023 was interesting. It sounded like what you've been hearing so far is mostly from an industry volume top-line perspective for 2023. I was wondering if you could give me a little bit more commentary about how Douglas is positioned for 2023. Do you feel like you're on the right path to additional share gains next year in the non-truck attachment business? And from a margin perspective as well?

I'm trying to dissect all of that question. It was a little choppy, Mike. The comment of 2023 compared to 2019 was really a supply chain comment, which is getting back to what we expect for chassis flow, which then should give us the opportunity to address the backlog that has continually grown, which should translate pretty well to the fall-through to EBITDA. I think you went somewhere on attachments with non-truck. Could you repeat that if you do?

Yes, I was curious about your overall view on EBITDA and earnings compared to 2019 as we enter 2023, considering factors like attachments, non-truck solutions, and the potential for margin performance.

I would love to say that we're getting back to 2019 record year performance. There are just too many moving pieces and headwinds between now and the start of '23 for me to make that statement. There's nothing structurally in the business that I could say would prevent us from getting there. It really is going to be dependent on supply and the many other things we're navigating through.

Yes, I would add that Sarah's point is spot on. When chassis flow returns to what it was in 2019, that performance is clearly within our sights. We've made many improvements to the business over the past two years, including new product development initiatives that have launched or will be launched, productivity enhancements through the DDMS initiative, adjustments to our fixed cost structure, and cost reduction programs to lower variable costs. All these efforts are part of our strategy for 2023, aimed at achieving the performance we saw in 2019. So, once the chassis situation returns to historical levels, we feel very optimistic about our future prospects.

Can we maybe just come back to the present day? Can you compare and contrast for us the chassis supply differences today between Henderson, Dejana, and attachments? Who's in the lead currently, and who's behind? Are there any nuances between each of those areas?

Specific to supply chain?

Yes, for chassis supply. Of the heavy trucks or the media with the light duties, which ones doing the best, and which ones doing the worst currently?

I think I would give kudos to all of our sourcing teams for how they're navigating through these challenging times. If you just think about it logically, Mike, on the Work Truck Solutions side, where you are sourcing multiple components to build a work truck, it's a more complex situation compared to the Attachment side, where you're building more of a stack product. You still face challenges on the Attachment side, but not to the same magnitude. We are feeling the impact of supply chain constraints more so on the Solutions side, and the Attachment side has nothing to do with the performance of the teams; it has everything to do with the business model and the complexity of the products we have to source.

Okay. That makes sense. And maybe one last one for me. Could you comment, Bob, on how did NTEA go for you in general for both segments? Any large new order leads or interesting learnings from the show you could share with us?

Yes, I think there was excitement in the air to be face-to-face again after two years of shutdown. We showcased some new products, particularly on the Attachment side where we discussed our non-truck offerings, which represent a significant growth opportunity for us and were well received. On the Solutions side, the key takeaway was engaging with dealers and customers, who reinforced that they expect strong demand to persist moving forward. This confirmed our confidence in our long-term prospects. That was probably the most important point for me.

There are no further questions at this time. I will now turn the call over to Bob McCormick, President and CEO.

I'd like to thank you for your time today and would love to leave you with a couple of thoughts. We're encouraged with where both segments stand today and certainly encouraged about Douglas' long-term prospects. Our Q1 results were in line with expectations, and demand trends remain very positive. While we look forward to the macroeconomic headwinds subsiding, we are constantly working to improve our operations so we will be better positioned and more efficient as the situation improves. We are reiterating our guidance and continue to manage through the short term while maintaining focus on achieving our long-term strategic objectives. We thank you for your time today and look forward to seeing you in person in the coming months.

This concludes today's conference call. Thank you all for joining. You may now disconnect.