Douglas Dynamics, Inc. · NYSE:PLOW
Douglas Dynamics — Investor Day (October 2019)
80 slides from Douglas Dynamics's investor day presentation, Oct 4, 2019
Slide 1: Investor Event October 2019
Investor Event October 2019 Bob McCormick – President & CEO
Slide 2: Forward-looking statements
2 2 The following presentation contains certain forward - looking statements within the meaning of Section 21 E of the Securities Exchange Act of 1934 , as amended . These statements include information relating to future events, future financial performance, strategies, expectations, competitive en
Slide 3: Our Team & Agenda Today
3 3 Our Team & Agenda Today • 8:00 AM : Breakfast and discussions with management • 8:30 AM: DD: How We Win. How We Grow. - Bob McCormick, President and CEO • 9:00 AM: Work Truck Attachments Growth Strategy - Keith Hagelin, President, WTA • 9:30 AM: Work Truck Solutions Growth Strategy - Jon Sievert
Slide 4: Focus for Today: How We Win, How We Grow
4 4 Focus for Today If you make it about everybody else… they will make it about you! - Bob McCormick How We WIN How We GROW
Slide 5: Work Truck Industry Structure
5 5 Work Truck Industry Structure Ford, Chevy, Mack, GM, Freightliner, Navistar Bodies, Lifts, Cranes, Snowplows, Storage, Spreaders, Hoists Attachment Manufacturer Upfitter Task specific work vehicle configurations Truck OEMs Vocational End User • Landscapes • Contractors • Utilities • Hauling • Fi
Slide 6: Douglas Dynamics - Two Market Leading Segments
6 6 WORK TRUCK ATTACHMENTS Douglas Dynamics - Two Market Leading Segments • Leading commercial snow and ice control brands • Track record of innovation and defendable IP • Superior service and quality driving established market presence • Exceptional margin profile • Best in class continuous improve
Slide 7: Capabilities Across the Work Truck Market
7 7 Capabilities Across the Work Truck Market CLASS 1 - 3 CLASS 4 - 6 CLASS 7 - 8 Light Duty Trucks Ford F - 150 Chevy 2500 Up to 10,000 lbs GVW Heavy Duty Freightliner International > 40,000 lbs GVW Medium Duty Ford F - 450 Chevy Topkick 10 - 40,000 lbs GVW WTA DTE WTA
Slide 8: The Early Years May 2010 – December 2014
8 8 The Early Years May 2010 – December 2014 May 2010 Dec 2014 25 20 15 10 • Focused solely on Commercial Snow & Ice Control • Leading brands with significant market share • Significant influence of weather • Dividend Play – 5% Yield • Small acquisition to enhance salt and sand spreader offering - T
Slide 9: The Second Chapter January 2015 – September 2019
9 9 The Second Chapter • Continued market leading position in Commercial snow and ice control • Embarked on strategic acquisition strategy – Henderson Products 2014 – Dejana Truck & Utility Equipment 2016 • Diversified operations to include municipal snow and ice control market and work truck upfitt
Slide 10: Focused on Creating Value: The P's
10 10 Focused on Creating Value THE 3 P’s Products People Customers & Employees Profits
Slide 11: Total Solutions Provider: How We Win
11 11 Total Solutions Provider Industry Leading Lead Times World Class Quality Competitive Advantages … How We Win
Slide 12: How We Do It
12 12 How We Do It • Empowers employees at all levels to deliver customer - focused improvements • DDMS is the fuel that drives everything we do Knowledge transfer Operational flexibility DDMS principles Waste elimination Simplification Continuous Improvement We Get Better Every Day!
Slide 13: Who We Do It With
Who We Do It With Collaborate & Care Internally and externally Develop Self & Others Organizational Development and training PEOPLE
Slide 14: Douglas Dynamics – The Next Five Years
14 14 Douglas Dynamics – The Next Five Years Strengthen Market Position Execute Effectively Invest Strategically Premier North American manufacturer and upfitter of work truck attachments Drive further improvements via DDMS and evolving talent strategy Disciplined deployment of capital to fund growt
Slide 15: WTA Growth Strategy
WTA Growth Strategy October 2019 Keith Hagelin – President, Work Truck Attachments
Slide 16: Work Truck Attachments Growth Strategy
16 16 Work Truck Attachments Growth Strategy
Slide 17: Work Truck Attachments Today
17 17 Work Truck Attachments Today PLOWS SPREADERS Premier Manufacturer of Commercial Snow & Ice Control Products Three Leading Brands 100 Models 350 Variations Established Market Presence
Slide 18: WTA Today: Defend & Grow
18 18 Product • Non - Truck • P&A Channel • Private Label • MRO / Direct • Lawn & Garden WTA Today: Defend & Grow Protect • Share • Profitability Compete • Quality/Service • Solutions Develop • Bench Deploy • Improvement • Succession • Growth MARGIN TALENT GROWTH
Slide 19: WTA Today: Profitable & Growing
19 19 Increasing contribution margin per unit CAGR = 4.5% WTA Today: Profitable & Growing PL / MRO Channel Growth CAGR = 34% Margin Improvement Revenue Growth • DDMS • Pricing • Private Labels • P & A • Non - Truck 2012 2013 2014 2015 2016 2017 2018 2017 2018 Projected 2019
Slide 20: WTA Today: Continued DDMS Success
20 20 WTA Today: Continued DDMS Success Industry Leading Lead - time 60% 95% 2 - 4 WEEKS 3 - 5 DAYS Supplier Rationalization 600 240 PARTNER S World Class Quality 4% .75% WARRANTY SALES Engineering Manufacturing Sourcing .65% 97% 220 NEW PRODUCTS 1.9 DAYS GLOBAL
Slide 21: WTA: Leveraging Core Competencies
21 21 WTA: Leveraging Core Competencies Operational Excellence Talent Level Channel Strength Long Term Profitable Growth
Slide 22: WTA: Long Term Growth Strategy
22 22 WTA: Long Term Growth Strategy Product Portfolio Expansion Product Development Strategic Acquisitions Truck Attachment Market Premier Manufacturer of Work Truck Products Snow & Ice Control Incremental Growth
Slide 23: Product Portfolio Expansion Opportunities
23 23 Product Portfolio Expansion Opportunities Requires professional installation • Highly engineered • Complex manufacturing • Intricate electrical • Intellectual property • Regulatory barriers • Mission critical performance • Complex certification • Professional user • Decreased price sensitivity
Slide 24: Product Portfolio Expansion: Strategic Acquisitions
24 24 Product Portfolio Expansion: Strategic Acquisitions Base Criteria Acquisition Target Criteria • Manufacturing • Professionally Upfit • Existing Channels • Leading Brand • Intellectual Property • Segment Regulatory Knowledge • Highly Complex Designs
Slide 25: Product Portfolio Expansion: Internal Product Development
25 25 Product Portfolio Expansion: Internal Product Development Leveraging Core Competencies for New Products + Design for Upfit + Integrated Portfolio + Manufacturing Expertise + Operational Excellence
Slide 26: Total Solutions Provider: Product Portfolio Expansion
26 26 Total Solutions Provider Industry Leading Lead Times World Class Quality Product Portfolio Expansion Competitive Advantages … How We Win
Slide 27: Work Truck Solutions
Work Truck Solutions October 2019 Jon Sievert – President, Work Truck Solutions
Slide 28: Growth Strategy
28 28 Growth Strategy
Slide 29: Work Truck Solutions Today
29 29 Upfit Task specific work vehicle configurations Work Truck Solutions Today Custom Manufacture Solutions based product manufacturing
Slide 30: WTS: Two Market Leading Brands
30 30 WTS: Two Market Leading Brands • Commercial Focus • Primarily Class 4 - 6 • 10 Locations • Municipal Focus • Primarily Class 7 - 8 • 7 Locations 1. Recognized brands 2. Strong customer relationships 3. Invaluable knowledge base
Slide 31: WTS: Significant Geographic Reach Today
31 31 WTS: Significant Geographic Reach Today
Slide 32: WTS: Strong Relationships with Chassis Providers
32 32 Dejana: #1 Ford Pool in North America for 13 of past 15 years! WTS: Strong Relationships with Chassis Providers Class 7 - 8 Class 4 - 6 Henderson: Established market presence in fragmented space
Slide 33: WTS: Class 4-6 Chassis Availability
33 33 • Situation slightly Improving • Month by month at this point • Supplier issues for OEMs • Seeing gradual balance into 2020 WTS: Class 4 - 6 Chassis Availability
Slide 34: WTS: Class 7-8 Chassis Availability
34 34 • Situation Improving Slowly • Over the road demand softening • Demand more in line with available capacity • Gradual return to normal in 2020 WTS: Class 7 - 8: Chassis Availability
Slide 35: WTS: Extensive Combinations of Total Solutions
35 35 WTS: Extensive Combinations of Total Solutions Commercial End User SERVICE LANDSCAPE CONTRACTER SNOWPLOWS CRANES SERVICE BODIES LIFTGATES HOISTS HIGHWAY ICE CONTROL CITY STREET Municipal End User UTILITY CARGO MAINTENANCE Fleet End User
Slide 36: WTS: Long-Term Growth Strategy
36 36 WTS: Long - Term Growth Strategy Margin Improvement Organic Growth Synergies Geographic Expansion Acquisition Custom Up - fit DDMS Best Cost Structure Market Leadership Solution Offerings Customer Base Upfit Knowledge Branch Expansion Pool Grant Opportunity Market Leaders Pool Designations Nea
Slide 37: Ongoing Margin Improvement
37 37 Ongoing Margin Improvement Best Cost Structure DDMS — Custom Upfit • Maximize resources • Optimizing price • Strategic sourcing • Value stream flow • Truck integration • Core process standards
Slide 38: Revenue Expansion Opportunities
38 38 Revenue Expansion Opportunities Organic Growth • Current location reach • Market share gain Synergy • Core competency • Channel strength
Slide 39: Long-Term Geographic Reach Development
39 39 Long - Term Geographic Reach Development Greenfield Locations • Truck Pool Available • Underserved Areas • Linked Coverage Acquisition Targets • Recognized Brands • Leverage Competitive Advantages • Pool Ownership
Slide 40: World Class Competitive Advantage
40 40 Independent Suppliers Independent Dealers World Class Supplier! World Class Upfitter! World Class Competitive Advantage! Product Portfolio Expansion + Leverage Powerful Channel
Slide 41: World Class Competitive Advantage!
41 41 World Class Competitive Advantage! Industry leading lead times Industry fastest chassis turns Integrated products Total Solutions Expanding Vertical Integration
Slide 42: Total Solutions Provider: How We Win
42 42 Total Solutions Provider Industry Leading Lead Times World Class Quality Competitive Advantages … How We Win Expanding Vertical Integration Product Portfolio
Slide 43: The Importance of DDMS
Shannan Vlieger – Director of Operational Excellence The Importance of DDMS October 2019
Slide 44: Douglas Dynamics Management System (DDMS)
44 44 Douglas Dynamics Management System (DDMS) • Long - term vision and commitment to instill a continuous improvement mindset across the organization • Empowers employees at all levels to deliver customer - focused improvements • Effective resource management and systematic problem solving to cont
Slide 45: DDMS: Unique Approach
45 45 DDMS: Unique Approach Goal: Provide customers with world class quality products and service while delivering at industry leading lead times APPROACH Empowering employees Systematic problem solving Waste elimination Increased throughput and flexibility RESULTS World class quality & service Indu
Slide 46: DDMS Approach at Work Truck Solutions
46 46 DDMS Approach at Work Truck Solutions • Velocity • Core process standardization Process Flexibility • Custom requirements • Truck integration • Responsive supply chain Product Flexibility • On time delivery • Increased efficiency Volume Flexibility
Slide 47: Continuous Improvement in a Custom Environment
47 47 Continuous Improvement in a Custom Environment Improving Business Processes Process Improvement / Kaizen Supply Chain Optimization Quality of Information Creating Continuous Flow Consistent Quality Across Sites Increase Velocity & Throughput Standard Work Within Value Streams
Slide 48: Major Wins During Henderson's DDMS Journey
48 48 Major Wins During Henderson’s DDMS Journey 55% Increase 47% Decrease 48% Increase 52% Decrease On Time Delivery Lead Time Quote vs. Actual Trucks in Process Note: Data represents pre - DDMS to current; exclusive to upfit
Slide 49: Creating a Winning Plan at Dejana
49 49 Creating a Winning Plan at Dejana Work as a Team, Win as a Team Educate and Motivate Leadership Use Data to Develop the Improvement Plan Collect Facts and Validate the Plan Execute Plan and Measure Attack Opportunities Improve Original Plan Understand Customers Seek Out Data Be Creative & Curi
Slide 50: Accomplishing the Plan
50 50 Accomplishing the Plan Smithfield, Rhode Island • Recruitment Challenges • Optimize Production Floor Space • Reduce Upfit Lead Time • Increase Margin Baltimore, Maryland • Sales Growth Potential – Service Body • Reduce Upfit Lead Time • Increase Velocity • Increase Margin Drive Narrow and Deep
Slide 51: Sustaining the Results; Coaching to Improve
51 51 Sustaining the Results; Coaching to Improve Truck Upfit Value Stream – Smithfield, RI Metric Before After Upfit per Employee 0.35 0.50 Time to Complete (Days) 7 1.5 Space Utilization (Bays) 17 10 Truck Upfit Value Stream – Baltimore, MD Metric Before After Upfit per Employee 0.2 0.7 Time to Co
Slide 52: Winning with Teamwork
Winning with Teamwork BNAEES
Slide 53: Creating Change Agents
53 53 “I didn’t believe it was going to work due to time restraints and our staff being limited. It was hard to visualize the process without seeing it work first hand.” Creating Change Agents “I was skeptical at first that the line would work, but we have proven it works…” “Every job that we do we
Slide 54: DDMS is the Fuel
54 54 DDMS is the Fuel • Customer focused improvements • Sustained leadership commitment • DDMS Principles drive CI culture • Systematic approach to the journey • Extends through entire value chain • Earn the right to grow • Employee empowerment
Slide 55: Total Solutions Provider: How We Win
55 55 Total Solutions Provider Industry Leading Lead Times World Class Quality Expanding Vertical Integration Competitive Advantages … How We Win
Slide 56: Evolving Talent Strategy
Evolving Talent Strategy October 2019 Linda Evans – Vice President of HR Jesse Pilachowski – Director of Organizational Development
Slide 57: Douglas Dynamics Continues to Grow
57 57 Douglas Dynamics Continues to Grow “We do not care how much you know , until we know how much you care !” 2012 • 2 Manufacturing Facilities & Douglas Sourcing Office (DSO) • ~450 employees Today • 6 Manufacturing Facilities, DSO, & 14 Installation & Dist. Centers (IDC) • ~1,700 employees
Slide 58: Successfully Managing Generational Shift
58 58 Successfully Managing Generational Shift 40% 35% 24% 0.30% 0.30% Millennials Generation X Baby Boomers Post Millennials Pre Baby Boomers With shifting in generational mix, employee development is critical, Particularly generational knowledge transfer
Slide 59: Winning the Talent War in a Tight Labor Market
59 59 Winning the Talent War in a Tight Labor Market According to a 2018 SHRM study, four of the top six concerns in our current labor market connect to performance and talent development. 43% 36% 35% 33% 32% 30% Competition from other employers Candidates do not have the work experience Candidates
Slide 60: Evolving People Strategy
60 60 Evolving People Strategy • Evolving DD Business Strategy requires evolving People Strategy – Accelerate talent development efforts • Improved technology • More opportunities • World - class solutions – Win with our people • How we get better every day • Major competitive advantage • Identified
Slide 61: How We Win Through Talent
61 61 How We Win Through Talent
Slide 62: Aligning Winning Behaviors with Talent Functions
62 62 Aligning Winning Behaviors with Talent Functions Interview & Talent Selection Performance Development Process Learning & Development Employee Engagement Survey Talent & Succession Planning
Slide 63: Evolving Development Opportunities
63 63 Evolving Development Opportunities • Adult learner attention spans are dwindling • How people interact with the world is changing ; so too must the approach to learning • Traditional classroom lecture is shown to have little to no impact Shorter and focused learning experiences Frequent intera
Slide 64: Delivering World Class Programs
64 64 Delivering World Class Programs 400 Course participants 250 Unique participants 5 Sessions delivered per month 60 Learners per month NPS – Would recommend program Feel programs are a good investment Feel facilitators were effective 80% 98% 100% Embracing continuous improvement culture; Collect
Slide 65: Total Solutions Provider: How We Win
65 65 Total Solutions Provider Industry Leading Lead Times World Class Quality Expanding Vertical Integration Competitive Advantages … How We Win
Slide 66: Financial Strength & Flexibility
Financial Strength & Flexibility – October 2019 Sarah Lauber – CFO
Slide 67: Disciplined, Consistent Capital Allocation Strategy
67 Disciplined, Consistent Capital Allocation Strategy • Current Yield = ~ 2.5% • Sustainable Dividend • Dividend Payout Ratio of ~50% • Target Leverage Ratio Of 1.5X - 3.0X • Continue Organic Investments To Drive Sales And Margin Growth and Boost Productivity • Increase Investments For Vertical Int
Slide 68: Returning Cash Via Robust Dividend
68 Returning Cash Via Robust Dividend On track to return ~$200M Since IPO Maintain and Grow Dividend Remains #1 Priority $0.73 $0.80 $0.82 $0.83 $0.85 $0.87 $0.89 $0.94 $0.96 $1.06 $0.60 $0.65 $0.70 $0.75 $0.80 $0.85 $0.90 $0.95 $1.00 $1.05 $1.10 @ IPO 2010 2011 2012 2013 2014 2015 2016 2017 2018 An
Slide 69: Ongoing Debt Reduction Provides Financial Flexibility
69 Ongoing Debt Reduction Provides Financial Flexibility Maintain long term leverage target range of ~ 1.5x – 3.0x Provides financial flexibility for potential investment $115 $196 $193 $305 $302 $273 $263 2.6 2.2 2.0 3.3 3.3 2.8 2.6 2013 2014 2015 2016 2017 2018 6/30/19 Debt and Leverage trends ($M
Slide 70: Ongoing Revenue Growth & Diversification
70 $177 $209 $140 $194 $304 $400 $416 $475 $524 $0 $100 $200 $300 $400 $500 $600 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* Revenue ($ In Millions) Revenue growth driven by strategic acquisitions May 2013 December 2014 July 2016 Ongoing Revenue Growth & Diversification Reduced influence of w
Slide 71: Intrinsic Earnings Power Through All Cycles
71 $47 $53 $30 $45 $88 $97 $92 $91 $96 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 $0 $20 $40 $60 $80 $100 $120 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* Adj. EBITDA Snowfall Adjusted EBITDA Adj. EBITDA Snowfall Inches ($ In Millions) *2019 Estimated Based On Current Guidanc
Slide 72: Focused On Adjusted EPS Expansion
72 $0.09 $0.85 $0.26 $0.51 $1.77 $2.13 $1.58 $1.45 $2.04 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 *GAAP EPS for 2010 - 2014, Adjusted EPS for 2015 - 2019 **2019 Estimated Based On Current Guidance Adjusted EPS* Focused On Adjusted EPS Expansion ~12% CAGR
Slide 73: PLOW Outperforms Russell 2000 Index
73 PLOW Outperforms Russell 2000 Index -10% 40% 90% 140% 190% 240% 290% 340% 390% 440% Stock Price Return Total Shareholder Return Russell 2000 *The Total Shareholder Return assumes that dividends were not reinvested *Present dates includes data from IPO May 5, 2010 through September 18, 2019 367% 2
Slide 74: How We Win
74 How We Win Price Leadership Best Cost Free Cash Flow World Class Quality Industry Leading Lead Times DDMS Global Sourcing Ability To Invest Back Into Businesses Work Truck Solutions Work Truck Attachments DDMS
Slide 75: Significant Free Cash Flow Supports Growth Strategy
75 Significant Free Cash Flow Supports Growth Strategy Average Over Past Five Years: • Free Cash Flow of ~$52 Million • Free Cash Flow as a % of Net Income of 120% • Capital Expenditures at 2% of Sales Strong Balance Sheet Growing Free Cash Flow Expected to Support Growth Plans Through 2023
Slide 76: Announcing 2023 Goals
76 Announcing 2023 Goals Low Single Digits Mid To High Single Digits High 20’s Low To Mid Teens Targeted Range = ~10%+ Increase To EPS Annually to Achieve 2023 Targeted Adjusted EPS of $3.00 to $3.40 Assumptions: Average snowfall, Consistent chassis delivery, No transformative acquisitions Sales Gro
Slide 77: On Track for 2019: Reaffirming Guidance
77 On Track for 2019: Reaffirming Guidance Net Sales: $520 million to $560 million Adjusted EBITDA: $95 million to $115 million Adjusted Earnings Per Share: $2.00 to $2.40 per share (In Millions) $96 $95 - $115 2018 Sales Growth Price WTS Margin Improvements Invest Into Businesses 2019 Guidance Proj
Slide 78: Financial Strategy Summary
78 Financial Strategy Summary • Discipled Approach • Sustainable Dividend • Financial flexibility • Target Leverage Ratio Of 1.5X - 3.0X • Strong FCF generation • Provides support for long - term growth plans • Ability to grow EPS by ~10% per year • Reaffirming 2019 Guidance Capital Allocation Cash
Slide 79: Total Solutions Provider: How We Win
79 Total Solutions Provider Industry Leading Lead Times World Class Quality Expanding Vertical Integration Competitive Advantages … How We Win
Slide 80: Investor Event
Investor Event | October 2019