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• Consolidated Net Sales: $425.6 million, up 3% from $411.8 million in Q1 2023.

• Gross Margin: Decreased by 110 basis points; gross margin dollars down by approximately $900,000.

• Operating Margin: $47 million, down 4% from $49 million in Q1 2023.

• Net Income: $32.1 million, down 4% from $33.3 million in Q1 2023.

• Earnings Per Share: $2.67 per diluted share, down from $2.79 in Q1 2023.

• Vegetation Management Division Sales: $223.7 million, down 13% from $256.4 million in Q1 2023.

• Industrial Equipment Division Sales: $201.8 million, up 30% from $155.3 million in Q1 2023.

• Company Backlog: $831 million, down 16% from end of Q1 2023.

• Working Capital: Increased by $61 million from end of Q1 2023.

• Bank Leverage Ratio: 1.31, improved from 1.7 at end of Q1 2023.

• Trailing 12 Months EBITDA: Approximately $246 million, flat compared to year-end 2023.

• Quarterly Dividend: $0.26 per share, up 15% from $0.22 in Q1 2023.

• Warning! GuruFocus has detected 6 Warning Signs with UMH.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Alamo Group Inc reported record net sales in the first quarter of 2024, indicating strong demand for their products.

• The Industrial Equipment division saw a significant increase in net sales, up 30% compared to the first quarter of 2023, driven by solid performance across all product lines.

• Operating margin in the Industrial Equipment division improved substantially, with a 102% increase in operating income.

• The company's balance sheet remains strong, with a decrease in the bank leverage ratio and an increase in working capital.

• Alamo Group Inc's backlog, although lower than the previous year, remains at a healthy level, supporting future revenue.

Negative Points

• The Vegetation Management division experienced a decrease in net sales by 13% and a significant drop in operating income by 40% compared to the first quarter of 2023.

• Overall gross margin percentage and gross margin dollars decreased due to underabsorption and productivity inefficiencies.

• The company faces ongoing challenges with supply chain disruptions, particularly affecting the delivery of truck chassis and other components.

• Higher interest rates and inflation continue to impact the market, particularly affecting the Vegetation Management equipment market.

• The company anticipates that the challenging market conditions observed in the first quarter will persist, potentially impacting future performance.

Q & A Highlights

Q: Can you maintain a 10% EBIT margin for the balance of 2024 in the vegetation management division? A: Jeffery Leonard, President and CEO of Alamo Group, expressed confidence in maintaining a 10% EBIT margin, citing significant actions taken and planned to protect the bottom line regardless of market conditions.