Ladies and gentlemen, thank you for standing by and welcome to the Myers Industries 2021 First Quarter Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Ms. Monica Vinay, Vice President of Investor Relations and Treasurer. Please go ahead.

Thank you. Good morning and welcome to Myers Industries first quarter 2021 earnings call. Joining me today are Mike McGaugh, President and Chief Executive Officer and Sonal Robinson, Executive Vice President and Chief Financial Officer. Earlier this morning, we issued a news release outlining the financial results for the first quarter of 2021. If you have not yet received a copy of the release, you can access it on our website at www.myersindustries.com. It’s under the Investor Relations tab. This call is also being webcast on our website and will be archived along with the transcript of this call shortly after the event. Before I turn the call over to Mike, I would like to remind you that we may make some forward-looking statements during this call. These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations and involve risks, uncertainties and other factors which may cause results to differ materially from those expressed or implied in these statements. Further information concerning these risks, uncertainties and other factors are set forth in the company’s periodic SEC filings and may be found in the company’s 10-K and 10-Q filings. I am now pleased to turn the call over to Mike McGaugh.

Thank you, Monica. Good morning. Today, I am excited to report strong volume growth resulting from robust end-market demand. Sales were up 43% year-over-year and this is the strongest growth Myers has obtained in over a decade. This demand appears to be sustainable. Strong end markets, a reengineered commercial organization and a new go-to-market model are delivering results. Our new strategy, combined with successful execution of our self-help initiatives, set the stage for a solid 2021 and beyond. I’m entering my second year at Myers, and I continue to see significant opportunities in our functions, businesses and end markets. It continues to be the most exciting opportunity I have seen in my career. Without further delay, let’s get into the details. Please turn to Slide 3. As I mentioned, sales were up 43% year-over-year, driven by strong growth in both the Material Handling and Distribution Segments and a meaningful contribution from the Elkhart acquisition. All end markets experienced healthy growth. Specifically, sales were up significantly in our vehicle end market as a result of continued momentum in the RV and marine markets. Wholesale RV shipments were up 79% in March and are projected to reach a record high in 2021. We also saw increased demand and double-digit growth in the auto aftermarket, food and beverage, consumer and industrial end markets. On an organic basis, sales were up 21%. Despite strong volume growth in – volume and revenue growth, gross margins were impacted by higher raw material costs in the quarter. In response to the significant increases in raw material costs, partly due to Winter Storm Uri, we announced an 8% price increase across a broad portfolio of our products effective March 1. Then in response to continued raw material pressure and a tight supply chain, we announced a second price increase of 9% to 12% effective April 1. With these increases, we aim to protect, and in some cases, enhance our margins. Due to the top line momentum we are seeing and robust demand and the additional pricing actions we announced since our last call, we continue to be optimistic in our ability to manage through this dynamic environment. As a result, we are raising our full year sales guidance and now expect to be at the higher end of our previously provided earnings guidance. Sonal will provide the details during our financial summary. And after our comments, I will provide an update on the actions we have taken to execute our strategy. With that, I will turn it over to Sonal.

Thank you, Mike and good morning everyone. Starting with the first quarter financial summary on Slide 4, net sales were up $52 million, an increase of 43%. Excluding the impact of the Elkhart acquisition, organic net sales increased 21% due to volume mix. Sales increased in both material handling and distribution segments as well as all key end markets and contributed to the strong organic growth. Price and FX accounted for 1% of the net sales growth. Adjusted gross profit was up $7.9 million, while gross margin decreased from 34.8% in the prior year to 28.9% in the quarter. Margin was negatively impacted by an unfavorable price-to-cost relationship, unfavorable sales mix and higher manufacturing costs during the quarter. The addition of Elkhart benefited profit but contributed to the unfavorable sales mix impacting gross margin. As a reminder, we are targeting $4 million to $6 million in annual cost synergies over the course of the upcoming 2 years. Additionally, we are encouraged by the growth synergies we have started to realize as we operate as One Myers. Adjusted operating income increased slightly to $11.9 million. The increase in gross profit was mostly offset by higher SG&A expenses, driven by the addition of Elkhart and higher incentive compensation costs, legal and professional fees and selling expenses. Adjusted EBITDA was $17 million, a decline of $400,000 compared to the prior year. Adjusted EBITDA margin was 9.8%. And lastly, adjusted EPS was $0.22 flat compared to the prior year. Turning now to Slide 5 for an overview of segment performance, beginning with Material Handling, net sales increased $46 million or 55%, including the Elkhart acquisition. On an organic basis, sales were up 22%, driven by strong volume mix. Price and FX accounted for 1% of the growth. Excluding Elkhart, sales were up double-digits in…

Thank you, Sonal. Please turn to Slide 8. Every time I talk about Myers, I highlight two documents: our long-term roadmap for the company and the execution plan to make it a reality and today is no exception. On our long-term roadmap, we are currently in Horizon 1, which is based on three elements: self-help, organic growth and bolt-on M&A. These three elements go well together. I’ve used this approach many times over the past 20 years to kick-start and deliver business transformations. Self-help consists of meaningful improvements in purchasing, pricing and SG&A optimization. Self-help is important because it typically has a sizable financial impact, and I like it because it’s largely within our control. Self-help generates the cash and the returns that will be used to fund the two growth components, organic and M&A. In terms of organic growth at Myers, we are driving change and delivering results. We are strengthening our commercial processes, talent and capabilities. We are investing in e-commerce. We’re changing how we go to market. Under the One Myers approach, we now go to market as a single company instead of several disconnected independent businesses. This scale brings strength. We are one of the only companies that has expertise in the four major plastic molding technologies: rotational molding, injection molding, blow molding and thermoforming. We now bring all of these solutions to our customers. The approach delivers value to our customers and growth for Myers. Our third element, bolt-on M&A, is focused on growing our businesses by acquiring companies that build out our current technologies, build on our competitive strengths or shore up our gaps. We believe significant shareholder value can be unlocked when consolidating fragmented industries, like plastics molding and auto aftermarket distribution. Myers will be a consolidator in these fragmented industries. Consolidation should…

[Operator Instructions] The first question comes from Steve Barger with KeyBanc Capital Markets.

Hey, good morning everybody.

Hey, Steve.

Hey, Steve.

It’s great to see you being so proactive on price increases to offset input costs, just obviously a robust demand environment can you talk about what customers are saying or any effects that you are seeing on demand relative to price?

Yes, Steve. Sure. Really, the questions that were in the discussions we are having are more along the lines of obtaining supply. It’s less of a discussion around what’s your price. We are seeing a lot of traction in the end-markets from a volume and demand standpoint. The March increase was successful. The April increase is in process, but appears to be successful, but we are just seeing a lot of traction on the demand side and that gives us the confidence to move forward on our price, particularly on the products and segment, Steve, that are value-added.

Yes. Well, I guess to that point you cited unfavorable mix in both segments, what’s going on there with the mix and is there anything you can do to influence that?

Yes. A good bit of that is the acquisition of Elkhart. Remember our model is we’re acquiring a lot of these founder-owned, employee – founder-owned businesses that have a lower EBITDA profile. And our objective is, through cost synergies and growth synergies, to bring those EBITDA profiles up. Elkhart moved a lot of revenue and a lot of product, and – but ultimately had a dilutive effect overall in our EBITDA percent for the company. But all that is – it’s in process of being addressed, and it was all part of the game plan. So Elkhart had a lot of volume. Unfortunately, it wasn’t at the same margin as gas cans.

Got it. Well – and you talked about preserving and ultimately expanding margins. So I think that was more in relation to price. I guess, first, do you need more price actions? And what’s the timing of getting on the positive side of price, cost?

Yes. I’ll give my insight, and then I’ll turn it over to Sonal for some of hers. Really, it’s – in the first half of the year, you’re going to have some compression. I think that’s no different than any other converter out there. We do believe the second half, it will turn. It will have some easing of our raw material costs. And at the same time, our pricing will be, I’d say, fully implemented, largely implemented, and we should see that margin expansion on the back half of the year. Additional pricing actions, we don’t see any at this point. However, a lot of it is involved in let’s make sure the April increase counts, and we are seeing receptivity from our customers on exactly that happening, but Sonal, any additional color from you?

No, no. I think, Mike, that’s entirely correct. So as we think about the – it’s a front-half, back-half story. Cost and price turning in the back half is a story for us. And just keep in mind once again that pricing generally takes a quarter or so in terms of a lag in terms of when we’re going to see that flow through our income statements.

Yes. What’s most encouraging, Steve is just the underlying demand. I mean that’s definitely a bright spot.

So I guess, to the volume versus price versus cost, is price realization enough right now to get gross margin back into the low 30% range in 2Q or is that more back half?

So Steve, I think the way I’d leave that is Q2, we’re going to expect some nice volume growth, as we indicated, due to the year-over-year comp that we experienced last year. We will continue in the front half of the year to still be unfavorable from a price-cost relationship standpoint. We’re not guiding to, obviously, quarterly gross margin numbers, but what we would expect is over the long-term, as we continue throughout the year, that we would see those gross margins continue to increase over time.

Got it. I do have more questions. I will get back in queue, but I will give someone else a chance too.

Thanks, Steve.

[Operator Instructions] Next question comes from Lance Vitanza with Cowen and Company.

Hey, good morning. This is Jonathan filling in for Lance. First, just want to say congratulations on the quarter. And my question – I have two. The first one is regarding the M&A. From your perspective, how are you seeing the current environment regarding access to capital, just suitable potential targets and your realistic price objectives, also the ability to integrate. How are you looking at that at the moment?

Yes, that’s a good question. We continue to want to be, and we’re shaping ourselves to be the acquirer of choice for many of these founder-owned businesses, largely on the plastics side, but I’d even include on the distribution side. And as I talked about, there is a lot of shareholder value to be created in consolidation of these fragmented industries. We are seeing interest. I believe the Elkhart acquisition was a catalyst in that. We’re seeing increased inbound calls from smaller companies and founder-owned businesses, founder-owned companies they want to sell. There is concern about potential tax law changes, and how would that impact these founder-owned businesses. And so I believe there is ample opportunities. I believe that there is some sense of urgency, even on the part of the sellers, to conclude transactions more in the near-term. From a valuation standpoint, clearly, there is some capital in the market from a private equity – on the private equity side that we bump into. But generally speaking, the businesses that we seek to acquire that have a strategic fit and even more importantly, a cultural fit. A lot of those businesses want to stay with the strategic. A lot of those businesses prefer to align with our vision for what we’re trying to create. And I continue to believe that we will be able to acquire companies at the stated multiples we’ve discussed in the past.

Got it. And just the last question for me before I get back to the queue. So I understand on the EPS guidance – where you’re guiding towards the higher end now. It just goes right on. But my question is, what are the factors that are most at play when you’re determining the range, if you will? Like is it perhaps additional cost pressure, the ability to price – to pass on the price increase or perhaps other determinants?

It’s a good question. I’ll ask Sonal to add some color to that question.

Yes. Good morning, Jonathan. Thank you for that question. So just clearly, we have not changed the overall range that we provided guidance on. We’ve guided to the higher end of that range, if you look at that compared to where we were compared to the mid of the range an increase of anywhere from 6% to 8% there. So the factors impacting that, we took our top line guidance up clearly. So previously, we were guiding to that mid to high 20% in sales. With that 30% or so increase in sales, the way you should think about that breakout is 19% or 20% or so related to the acquisition, which then leaves probably a low double-digit volume growth in our – included in our estimate, which is increased from where we were as we started the year and then the balance on price so we have got a benefit of some volume actions going in there. Obviously, pricing that’s giving us a little more confidence as we’re recovering some of the increased commodity inflation that we’ve seen. And so those factors are coming into play there.

Understood. Thank you so much and again congratulations.

Thank you, Jonathan,

Thanks, Jonathan.

[Operator Instructions] Next question comes from Steve Barger with KeyBanc Capital Markets.

Thanks. Just going to some of the pillars, for the commercial excellence program, is this training done? And can you talk about any specific wins to give us an example of how the cross-selling is going?

Yes, for sure, Steve. The training is in process. We’ve got approximately 60 salespeople. We’re about third through with that training. It’s actually – it’s not a 1 day training. It’s actually a month-long process. It’s very robust. I used it at a prior company. It was very effective. So I’d say, Steve, we’re probably 30% complete, give or take, on the training and development. But part of it also is we just launched what we call Myers University, which is an in-house employee development tool designed to, really, to attract and retain all functions in all of our employees, both labor-oriented and professional. And so this will fold into – the commercial excellence piece will ultimately fold into Myers University. A lot of it is the standardizations of roles, moving away from the OpCo approach that we’ve had for the last 5 years and moving into a consolidated approach, where we have standardized roles on market management, product management, asset management, sales, sales management for Myers, particularly separating material handling from distribution. There is probably I’d say 8 to 10 meaningful cross-selling opportunities. I don’t know if I specifically want to mention the names. But there are several accounts where often, we’re seeing it that they are rotational molding account that also purchases blow molded or thermoformed product. And because of supply issues, we’re actually seeing some of our competitors in the market, some of the smaller converters having supply interruptions from the resin side. And we’ve been able to step in – or they have supply interruptions because of labor. And we’ve been able to step in and pick up business with a high quality from a product standpoint and a high service level and we are not having to buy the business. And those customers are indicating they are going to stay with us, particularly after we’ve gotten them through a tough spot. There is probably 8 to 10 of those examples, totaling $10 million to $15 million on an annualized basis. That’s part of what we’re seeing on the positive outlook. This cross-selling is playing a big role there. The other piece is just having senior managers and sales directors that have a very regimented approach to how they go-to-market. That’s a big change. We’re seeing that on the injection molding side, particularly with Buckhorn, also with Akro. That’s where a lot of the demand is coming back. And it’s because of a more concerted, I’d say, professional and regimented approach to sales.

Got it. And that’s – I guess, for that $10 million to $15 million in conquest sales, is the – do you have the team in place from a purchasing standpoint to make sure there are no concerns about availability? Or why are you less prone to disruptions?

Yes, a lot of that. As you remember, we brought in Jeff Baker, who was a career Dow guy, who’s got a tremendous amount of connectivity in the industry on polyethylene, polypropylene. He since brought in two lieutenants who also have deep connections in that industry. And I think times like this, when you have high-season shortages, personal relationships are very beneficial. And so we’ve managed to secure supply when anecdotally, we hear some other competitors in the channel have struggled more.

And e-commerce – go ahead.

Yes. I’d say, Steve, that’s probably one of the areas that we’re most proud of is what we’ve been able to do in a very short amount of time on purchasing and ultimately, supply chain.

Right. E-commerce, with demand as strong as it is, is that becoming bigger, faster than you expected?

Yes, I mean, it’s good business. It’s good margin business. We’re trying to study it so that we sell the right products into the right end markets without exacerbating channel conflict with some of our industrial distributors. We’re trying to thread the needle there so that we are a good supplier and customer to our industrial distributors. But then also, we have a direct approach with some of our own product. I think we’re striking that right balance. We have – we are fortifying that team. We discussed that before. Chad Collins now leads that team. We’ve actually had two good adds on e-commerce leaders who have done this and developed this at other industrial companies. The answer there is we look at it as a flywheel. It is a high profit margin flywheel. And really, the constraint, Steve, is on having enough labor in our plants to make enough product get that product out the door, but there is plenty of demand on the e-commerce side and remarkably, it’s quality business. It’s good business.

Even with the kind of inflation-led increase in revenue that you’re currently seeing, are you still going to track to the 10% e-commerce by 2023? Any change to that?

No, no, no. So yes, we will track to that. And no, there is no change to it. There is a lot there.

Got it. Just a couple of modeling questions for Sonal.

Sure.

Do you – easy comps, obviously, for 2Q, do you expect sequential increases in revenue in both segments in 2Q from 1Q?

Yes.

And then do you expect the second half revenue will be above first half, just trying to get a sense for cadence for the year?

Well, so keep in mind, in the second half of the year, we had a couple of things going on in the prior year. One being Elkhart joined us with 1.5 months of results on the top line in Q4, so we will be comping some of those. And then also, we had some strong performance within our commercial business with some more gas cans and some of the business related to storms last year. So the first half obviously, seeing strong sales growth, will continue momentum, but be probably more front half.

Yes. One thing, Steve, to look at is if you look at our – well, we call it the consumer market, but a lot of that is the gas cans. If you look at how Polaris, as an example, is tracking on selling their powersports products, the side-by-sides, the dirt bikes, the quads, all that sort of stuff. With the push from COVID to go outdoors and go camping, you have a lot of those recreational products, companies, the pontoon boat companies, all that, they are up markedly. And I am optimistic – we are optimistic on that our gas cans will see some of that tailwind.

Yes. And previously, you had expected SG&A in the 24% range for the year. What happens to that now with the revenue increase?

Yes. So Steve, we’re guiding to 23% now on SG&A.

Okay, got it. Alright. Thanks for all the questions and time.

Thanks, Steve. Thank you.

Thanks, Steve. Appreciate it.

[Operator Instructions] And we do not have any telephone questions at this time. Ms. Vinay, I will turn the call over to you.

Thank you. Thank you for joining us today and for your interest in Myers Industries. As a reminder, a transcript of this call will be available on our website shortly after this event. Thanks, and have a great day.

This concludes today’s conference call. You may now disconnect.