Participants

Ion Warner; Senior Vice President-Marketing, Investor Relations; Manitowoc Company Inc.

Aaron Ravenscroft; President, Chief Executive Officer, Director; Manitowoc Company Inc.

Brian Regan; Chief Financial Officer, Executive Vice President; Manitowoc Company Inc.

Presentation

Operator

Good day and welcome to the Manitowoc fourth-quarter and full-year 2024 earnings conference call. All participants will be on listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, event is being recorded.
I would now like to turn the conference over to Ion Warner, Senior Vice President of Marketing and Investor Relations. Please go ahead.

Ion Warner

Good morning, everyone, and welcome to our earnings call to review the company's fourth-quarter and full-year 2024 financial performance and business update as outlined in last evening's press release. Joining me this morning with prepared remarks are Aaron Ravenscroft, our President and Chief Executive Officer; and Brian Regan, Executive Vice President and Chief Financial Officer. Earlier this morning, we posted our slide presentation on the Investor Relations section on our website, manitowoc.com, which you can use to follow along with our prepared remarks.
Please turn to slide 2. Before we start, please note our Safe Harbor statement in a 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'll now turn the call over to Aaron.

Aaron Ravenscroft

Thank you, Ion. And good morning, everyone. Please turn to slide 3. In the wise words of Winston Churchill, A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. As you can draw from our financial results, we faced plenty of difficulties during 2024. I'm proud to say that the Manitowoc team pursued every potential opportunity with great enthusiasm and optimism. It's inspiring to see the level of motivation and passion throughout the country.
For example, during the year, we set a new record of $629 million in non-new machine sales. We grew our field service technician count by 7% to over 460 team members. We launched 13 new cranes, including the next-generation EV self-erecting tower crane, and the MCT 2205, which is the largest tower crane that we've designed and built out of our China operations. And we renegotiated our debt to improve our liquidity and extend our tender. I'd like to express my sincerest gratitude to the Manitowoc team for a hard-fought 2024.
For the full year, we reported $2.2 billion in sales sales of $128 million in adjusted EBITDA. We generated $100 million of free cash flow during the fourth quarter and ended the year with $321 million in liquidity.
Please turn to slide 4. Turning our focus to The Manitowoc Way, I am extremely proud of the team's achievements. First and foremost, in terms of safety, we ended the year with an RIR or recordable incident rate of 1.19%. This is the second best result in the company's history following a phenomenal year in 2023. In addition, we reduced our first aid incidents 25% year over year and saw a significant reduction in the severity of our lost time injuries. 2024 was arguably the safest year in our 120-year history. Nevertheless, our goal still remains zero injuries and the team continues to find ways to improve.
We also continue to forge ahead with our environmental-related Kaizens. In addition to the benefits for the planet, these initiatives have been pretty darn good for our pocket book. During the year, we reduced our greenhouse gas intensity 6%, which equates to roughly $100,000 in savings. Since 2019, when we set our baseline for this metric, we've reduced our intensity by 36%.
Lastly, I'd like to recognize our maintenance team in Portugal through our Annual Manitowoc Way Lessons Learned Award. Thanks to their ingenuity, the team built an automated tester for welding torches that only cost EUR50. Previously, we fixed upon failure which could cause serious quality problems and significant loss of time. In addition to this invention, over the past two years, the team has done an excellent job integrating different IoT tools to track TPMs on our machine centers, modifying our paint booths to reduce our emissions and gas consumption, and applying 5S to our maintenance area of the plant. Obrigado to the team and congratulations.
Please move to slide 5. Turning our attention to the market, we generated orders of $516 million during the fourth quarter. Our backlog ended the year at $650 million. Regionally, the Americas rebounded in the fourth quarter following the U.S. election. Customer sentiment has significantly improved post election. Dealer inventory levels remain reasonable, utilization rates at crane operators have been strong, and rental rates have held steady. There's optimism about the future demand.
In Europe, the situation remains complicated, but there are a few positive indicators that suggest the European tower crane market is gradually recovering. For the second quarter in a row, our orders for tower cranes grew modestly year over year. While the French market remains weak, this has been offset by growth in Germany, Italy, and the UK. In Italy, a new incentive plan called Transizione 5.0 has recently announced. And of course, we are keen to see the impact of the upcoming German elections. Regarding France, I visited our two largest dealers and four major construction companies in December. Overall sentiment has yet to improve. All said, uncertainty still exists, but I'm hopeful that there are some recovery in 2025.
For EU mobiles, in spite of the difficult economic environment in the region, demand for all-terrain cranes has been relatively stable. We continue to benefit from recent product introductions and our significant improvements in quality and service. As a reminder, the Munich bauma event is just around the corner. We're excited to showcase our new products as well as the variety of our new aftermarket offerings. This show is always a good barometer for how Europe will shape up over the next couple of years. If you plan to attend the show, we'd be happy to host you.
Turning to the Middle East, the overall market remains robust. Fourth quarter orders were up over 44% year over year. I visited the region in December and the situation remains the same in Saudi. While funding is tightening, numerous projects in the kinghom need to be completed to host the 2029 Asian Winter Games, the World Expo in 2030, and the World Cup in 2034. To put this into perspective, a total of 780,000 hotel rooms will be needed for the World Cup alone. Three stadium projects have been awarded with another seven due to be granted. As for Neom, one of these stadiums will be integrated into the line. Although it may take some time before the 170-kilometer vision for the line has completed, the airport project is already underway and the initial modules are in progress.
The Asia Pacific market is a mixed bag. There are no signs of construction recovery in China. And overall, competition with Chinese exporters has never been more intense. The biggest surprise during the quarter, however, came from South Korea. Due to the recent political upheaval, we had a couple of cancellations and a few hot deals have dried up, worth roughly $8 million in sales.
Lastly, Australia continues to be steady. The mobile business continues to be stable and demand for tower cranes is gaining steam with new product deliveries and a robust aftermarket.
With that, I'll pass it to Brian to walk you through the financials before I close with an update on our strategy.

Brian Regan

Thanks, Aaron. And good morning, everyone. Please move to slide 6. Despite entering the fourth quarter with a lot of uncertainty around the U.S. election, our results were generally in line with our expectations in the guidance previously provided. To summarize, total revenue for the quarter were $596 million, and we achieved trailing 12-month non-new machine sales of $629 million, a record high. Furthermore, we made significant improvements in reducing our inventory, generating $100 million of free cash flows to bring our leverage back below our targeted 3 times. We had customer payments that slid into 2025, impacting our ability to achieve the cash flow guidance.
Specific to Q4 results, orders were $516 million, an increase of 8% from a year ago. Notably, European tower crane orders were up year over year for the second quarter in a row. It is encouraging to see some early signs of a potential recovery. December 31 backlog was $650 million, a year over year decrease of 29%. Net sales in the fourth quarter were $596 million, flat versus a year ago. A year over year decrease in the Americas was offset by stronger non-new machine sales.
SG&A expenses were $77 million, which included a $1 million charge related to a legal matter with the U.S. Environmental Protection Agency. Excluding the impact of this charge, SG&A expenses as a percentage of sales were 13%, flat year over year.
Our adjusted EBITDA for the fourth quarter was $35 million, a decrease of 4% year over year. Adjusted EBITDA margin was 5.9%, a decrease of 20 basis points. Our GAAP diluted income per share in the quarter was $1.59. On an adjusted basis, diluted income per share was $0.10, an increase of a penny from the prior year.
Please turn to slide 7. Looking at the full-year, our 2024 orders totaled $1.9 billion to $3 billion, an 8% decrease year over year. Net sales for the full year were $2.178 million, a 2% decrease over the prior year. Our non-new machine sales were $629 million. Reflecting back to 2020, the year prior to embarking on our CRANES+50 strategy, non-new machine sales were $376 million. Since then, we have grown our non-new machine sales by over $250 million or 67%. This reflects great progress in executing our strategy to grow the less cyclical higher margin aftermarket business.
Adjusted EBITDA for the year was $128 million, a decrease of 27% year over year. Adjusted EBITDA margin decreased 200 basis points over the prior year to 5.9%, primarily due to product mix and under-absorption of fixed costs. The year over year adjusted EBITDA headwind of the European tower crane business was $32 million.
On a GAAP basis, our benefit for income taxes in the year was $44 million. This includes a non-cash benefit of $56 million related to the release of evaluation allowance. On an adjusted basis, our provision for income taxes was $12 million. This includes $4 million or $0.10 per share of nonoperational discrete items, which were not considered in our guidance. Our adjusted diluted earnings per share was $0.41.
Turning to slide 8. During the year, we generated $49 million of cash flows from operations and had capital expenditures of $45 million, of which, $5 million was related to strategic rental fleet growth. This resulted in free cash flows of $4 million and an ending cash balance of $48 million. The lower than guided free cash flows were the result of the timing of shipments at the end of the year which resulted in a delay in cash collections for 2025.
Net working capital as a percentage of sales at the end of the year was 21%, flat compared to prior year. Our build plan adjustments were effective in getting our net leverage to 2.66 times below our targeted 3 times. Total outstanding borrowings under the ABL increased $19 million during the year with $79 million outstanding at year end. With the successful refinancing of our debt during the year and the related incremental availability under our ABL, total liquidity was a healthy $321 million.
Please turn to slide 9. As we look ahead to 2025, one consistency is that uncertainty persists. For the U.S. market, the positive sentiment we heard in May at our Crane Days event is coming back. There's still questions as to what will happen to interest rates in the effect of any tariffs. While there is some optimism in Europe for the first time in awhile, any improvement is expected to be slight. Asia continues to be a challenge. And the competition in the Middle East remains fierce. As you can see on this slide, the midpoint of our 2025 guidance reflects a marginally better year with net sales of $2.175 billion to $2.275 billion, adjusted EBITDA of $120 million to $145 million. In addition, we expect to generate between $55 million and $85 million of operational free cash flows, excluding the impact of any potential payment to settle the EPA matter.
While we do not provide quarterly guidance, we do want to note that the first quarter of 2025 is expected to be extremely light, more so than usual as a result of the builds scheduled reductions we made in 2024. While historically, Q1 has provided approximately 20% to 25% of our full-year adjusted EBITDA, this Q1 is expected to contribute approximately half that amount.
With that, I will now turn the call back to Aaron.

Aaron Ravenscroft

Thank you, Brian. Please turn to slide 10. 2024 was definitely a challenging year. European tower crane market reached what we believe is the bottom of its cycle. Chinese competition intensified globally, depressing prices in emerging markets. And the Americas experienced a significant slowdown leading up to the election. Nevertheless, the team continue to push our strategy forward finding pockets of opportunity for growth. Even in the weak European tower crane market, we were able to grow our non-new machine sales year over year. To stay ahead of Chinese competition, we continued to introduce new tower cranes, specifically designed for the Middle East projects. For mobile cranes, we continued to aggressively service our customers with billable service support, remanufacturing, and used cranes. And in the Americas, we continued to expand our service locations to support our CRANES+50 strategy. In addition to upgrading our locations in Phoenix and Baton Rouge, we recently announced the acquisition of certain crane assets and territories in North Carolina, South Carolina, and Georgia.
We continue to transform Manitowoc through the execution of our CRANES+50 strategy. Just consider the progress that we made since 2020. First, non-new machine sales in 2024 were $629 million, a 67% increase compared to 2020. Second, we increased our field service tech population to 467 techs in 2024, an increase of over 100% since 2020. Third, in the U.S., we added 16 service locations compared to just one location in 2020. In addition, we added service shops in Lima, Peru; Barnsley, UK, and (inaudible), France. And fourth, gross profits from non-new machine sales in 2024 were $208 million, a 64% increase since 2020.
While we can't control the ebbs and flows of the crane cycle, Manitowoc has a strong reputation for managing it utilizing The Manitowoc Way. I'm convinced more than ever that our CRANES+50 strategy is the key to breaking the (inaudible) on our business. As a reminder, non-new machien sales are significantly less volatile than new crane market and have average gross profits of roughly 35%. Our goal is to consistently generate stable and substantial returns on our invested capital regardless of the crane cycle. CRANES+50 provides us a blueprint to achieve this.
With that, operator, please open the line for questions.

Question and Answer Session

Operator

We will now begin the question-and-answer session. (Operator Instructions)
Jerry Revich, Goldman Sachs.

Hey. (inaudible) for Jerry. To start off here, Guidance implies sales up a little bit here at the midpoint. Can you just talk about where that embeds things staying the same or getting better just regionally? I'm just curious what guidance advancing on a regional basis.

Aaron Ravenscroft

Yeah. I think it's marginally better, I'd say, year over year from a revenue standpoint. We've got to a wide range because there's a handful of possibilities all happened during the year. But I mentioned that we expect Europe to be slightly better particularly on the tower crane side. U.S. slightly better. But Asia continues to be uncertain, in particular, South Korea. I'd say it's a mixed bag, hence, why we've got the large range in the guidance.

Thanks. And then separately, on the non-new machine sales, can you talk about how used values for cranes have trended throughout the quarter and now as we head into 2025? Thanks.

Aaron Ravenscroft

Yeah. In terms of values of used cranes, it always depends on the age and the model of the crane. I mean, from my perspective, there's not been much change. Of course, sometimes whenever you go through some of these surveys, Neil at the Ritchie Brothers, usually, those are cranes that are last resort. We're typically doing the deals directly and those are cranes, I think, that have more interesting value or more interesting models to the marketplace. So from my perspective, used prices haven't gone down or up.

Thanks. (inaudible)

Operator

(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Ion Warner for any closing remarks.

Ion Warner

Thank you. Please note that a replay of our fourth-quarter 2024 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 continuing interest in the Manitowoc Company. We look forward to speaking with you again next quarter.

Operator

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