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DD

DOUGLAS DYNAMICS, INC (PLOW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered year-over-year growth with Net Sales $143.5M (+6.9% y/y), Gross Margin 24.9% (+290 bps y/y), Adjusted EBITDA $18.8M (+26% y/y), and Adjusted EPS $0.39 (vs. $0.19), driven by record Solutions performance and improved Attachments margins .
  • Sequentially, GAAP EPS fell vs. Q3 due to the Q3 sale-leaseback gain (Q3 diluted EPS $1.36 vs. Q4 $0.33); on an adjusted basis, EPS rose to $0.39 vs. $0.24 in Q3 .
  • 2025 guidance introduced: Revenue $610–$650M, Adjusted EBITDA $75–$95M, Adjusted EPS $1.30–$2.10, tax rate ~24–25%; assumes average snowfall and stable supply chains .
  • Backlog at the start of 2025 was near-record $348M, supporting visibility into municipal demand; leverage improved to 2.4x aided by voluntary debt prepayment and stronger cash generation .
  • Dividend maintained at $0.295/share; Q4 dividend paid Dec 31, 2024 and Q1 2025 declared for Mar 31, 2025, reinforcing capital return priority .

What Went Well and What Went Wrong

  • What Went Well

    • Solutions segment posted a record year: Q4 Net Sales +13.8% y/y to $89.8M and Adjusted EBITDA +11.9% y/y to $9.8M; FY24 Solutions Adjusted EBITDA +75.6% to $30.9M (9.9% margin, +350 bps) .
    • Attachments margins improved despite soft demand: Q4 Attachments Adjusted EBITDA rose 45.7% y/y to $9.0M (16.7% margin), supported by the 2024 Cost Savings Program (> $10M savings in 2024) .
    • Management emphasized operational streamlining and execution: “We are pleased with the ongoing improvements… returned us to near double-digit margins… enter 2025 with a strong backlog” – Jim Janik .

  • What Went Wrong

    • Attachments Net Sales fell to $53.8M (vs. $55.4M y/y), with two low-snow winters elongating equipment replacement cycles and suppressing demand .
    • Weather remains regional and below average in key metros; management flagged lingering elevated dealer inventories and a gradual normalization path .
    • GAAP comparability noise: Q3’s $42.3M sale-leaseback gain distorted sequential GAAP EPS; Q4 EPS of $0.33 is down sequentially despite healthier operations, masking underlying momentum .

Financial Results

Consolidated performance vs prior year and prior quarter

MetricQ4 2023Q3 2024Q4 2024
Net Sales ($M)$134.2 $129.4 $143.5
Gross Profit Margin %22.0% 23.9% 24.9%
Income from Operations ($M)$12.6 $45.9 $13.0
Net Income ($M)$7.1 $32.3 $7.9
Diluted EPS ($)$0.29 $1.36 $0.33
Adjusted EBITDA ($M)$14.9 $15.3 $18.8
Adjusted EBITDA Margin %11.1% 11.8% 13.1%
Adjusted Diluted EPS ($)$0.19 $0.24 $0.39

Segment performance

Segment MetricQ4 2023Q3 2024Q4 2024
Attachments Net Sales ($M)$55.4 $60.2 $53.8
Attachments Adjusted EBITDA ($M)$6.2 $8.1 $9.0
Attachments Adjusted EBITDA Margin %11.1% 13.5% 16.7%
Solutions Net Sales ($M)$78.9 $69.1 $89.8
Solutions Adjusted EBITDA ($M)$8.8 $7.2 $9.8
Solutions Adjusted EBITDA Margin %11.1% 10.4% 10.9%

Key cash and balance sheet KPIs

KPIQ3 2024Q4 2024
Free Cash Flow ($M, quarter)$(15.4) $70.6
Net Cash from Operations ($M, quarter)$(14.2) $74.4
Cash & Equivalents ($M)$8.4 $5.1
Borrowing Availability ($M)$82.5 ~$150.0
Leverage Ratio (x)2.6x 2.4x

Additional context

  • Backlog entering 2025: ~$348M, near record; tax rate FY24: 24% .
  • FY24 free cash flow: $33.3M (vs. $1.9M in 2023), improved on higher operating cash and lower capex .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025n/a$610M–$650M New
Adjusted EBITDAFY 2025n/a$75M–$95M New
Adjusted EPSFY 2025n/a$1.30–$2.10 New
Effective Tax RateFY 2025n/a~24%–25% New
Dividend per ShareQ1 2025$0.295 (run-rate)$0.295 declared for Mar 31, 2025 Maintained

Assumptions: relatively stable macro/supply chain; average snowfall in core markets .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Weather/snowfall and dealer inventoriesQ2: Two winters ~40% below 10-yr avg; preseason softer; dealers financially stable . Q3: Inventories elevated but falling; reorders softer; normalization into 2025 with average snowfall .Q4: More typical winter but regional; key metros still below avg; dealer inventories above avg but improving .Gradual normalization, weather risk persists
Cost Savings ProgramQ2: Annualized $11–$12M; ~$9M in 2024; margin support at Attachments . Q3: Savings sustaining Attachments margins near ~20% YTD .Q4: Exceeded expectations; >$10M realized in 2024; ongoing tailwind into 2025 .Positive, structural tailwind
Solutions backlog/municipal exposureQ2: Backlog strong, near peak levels; throughput improved; municipal healthy . Q3: Record margins; Henderson outperformance; backlog robust .Q4: Near-record total backlog $348M; multiyear municipal contracts underpin 2025–2026 .Strengthening visibility
Chassis and supply chainQ2: Chassis availability improved; no longer a major issue . Q3: Supply/labor aligned; operational efficiency gains .Q4: Outlook assumes stable supply; Solutions positioned to replicate/improve 2024 .Stable/constructive
M&A and capital allocationQ2: “Pencils down” for 2024; selective in 2025+ . Q3: Leverage stepping down; dividend priority .Q4: Dividend maintained; leverage 2.4x; could consider small/mid-size deals if fit, disciplined approach .Optionality improves
Leadership changesQ3: COO role elevated; CEO search targeted 1H25 .Q4: New President, Work Truck Attachments (Chris Bernauer) effective Feb 28, 2025; CEO search on track H1 2025 .Transition progressing
Free cash flow and capexQ2: FCF improved vs. 2023; capex at low end 2–3% . Q3: Strong Q4 cash expected; leverage to decline .Q4: 2024 FCF $33.3M; 2025 FCF expected ≥ 2024; capex closer to 3% of sales .Improving cash generation

Management Commentary

  • “The Solutions team exceeded our expectations in 2024… returned us to near double-digit margins, and we enter 2025 with a strong backlog and continued positive demand across the segment.” – Jim Janik, Chairman & Interim CEO .
  • “Based on the progress we have made in 2024… our guidance for 2025 reflects our positive outlook, and the mid-point of our ranges indicate our ability to deliver year-over-year growth.” – Sarah Lauber, EVP & CFO .
  • “The determination of our Attachments team… coupled with the implementation of the 2024 Cost Savings Program, led to improved margins in 2024.” – Jim Janik .
  • “We are maintaining the current dividend in 2025… our balance sheet is strong and provides us with additional options moving forward.” – Jim Janik .

Q&A Highlights

  • Weather and regional demand: Company saw activity in atypical southern markets via nimble distribution and contractors traveling south; impact supports equipment usage and eventual replacement, though not a direct inventory drawdown .
  • Solutions end markets: Municipal remains robust with multiyear contracts; commercial/fleet is softer but in focus; 2025 mid-point implies mid-single-digit Solutions growth .
  • 2025 free cash flow: Expected at or above 2024’s $33M; sale-leaseback headwind (~$17M) goes away but capex moves up toward ~3% of sales .
  • Attachments demand and markets: Core metros (Chicago/NY/Boston) below average; inventories above average but falling; lengthened replacement cycle still a factor .
  • Solutions margin trajectory: Targeting double-digit to low-teens over time; throughput is the biggest lever to reach ~13% range .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 and FY 2025 could not be retrieved at this time due to S&P Global request limits. As a result, we do not present consensus vs. actual/guide comparisons in this recap. Values were unavailable via S&P Global at the time of analysis.
  • Directionally, the company’s 2025 guidance midpoints (Revenue ~$630M, Adjusted EBITDA ~$85M, Adjusted EPS ~$1.70) imply year-over-year growth on stable to slightly improving segment margins and average snowfall assumptions .

Key Takeaways for Investors

  • Mix shift continues to favor Solutions: record FY, robust municipal backlog, and improved throughput support sustained margin recovery; watch cadence of deliveries and bid wins across 2025 .
  • Attachments profitability resilient despite demand softness: cost actions are visible in Q4 margin step-up (16.7%); watch snowfall outcomes and dealer inventory normalization during the 2025 preseason .
  • Cash flow inflecting: FCF improved to $33.3M in 2024, with 2025 expected at/above that level despite capex normalizing toward ~3% of sales; increased revolver availability ($150M) and 2.4x leverage add flexibility .
  • GAAP vs. non-GAAP: Q3’s one-time gain complicates sequential optics; focus on adjusted metrics and cash generation to gauge underlying trajectory .
  • Guidance is constructive but weather-sensitive: outlook embeds average snowfall; monitor regional snowfall in core metros and dealer reorder patterns from April preseason onward for Attachments .
  • Leadership and operations: appointment of new Attachments President and continued COO oversight aim to sustain execution; CEO hire targeted 1H 2025 .
  • Dividend intact: $0.295/share maintained, signaling confidence in cash profile through cyclical weather volatility .