Q4 2023 Miller Industries Inc Earnings Call
Participants
Mike Gaudreau; Director; FTI Consulting
Will Miller; President, CEO & Director; Miller Industries, Inc.
Debbie Whitmire; Executive VP, CFO & Treasurer; Miller Industries, Inc.
Presentation
Operator
Good day, ladies and gentlemen, and welcome to the Miller Industries Fourth Quarter and Full Year 2023 Results Conference Call. Please note, this event is being recorded.
And now at this time, I'd like to turn the call over to Mike Gaudreau at FTI Consulting. Please go ahead, sir.
Mike Gaudreau
Thank you and good morning, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2023 fourth quarter and full year results, which were released after the close of the market yesterday. With us from the management team today are Bill Miller, Chairman of the Board; Will Miller, President, CEO; Debbie Whitmire, Executive Vice President and CFO; and Frank Madonia, Dona Executive Vice President, Secretary and General Counsel.
Today's call will begin with formal remarks from management followed by a question and answer session. Please note in this morning's conference call, management may make forward-looking statements in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. I'd like to call to your attention the risks related to these statements, which are more fully described in the Company's annual report filed on Form 10 K and other filings with the Securities and Exchange Commission.
At this time, I'd like to turn the call over to Will. Please go ahead Will.
Will Miller
Thank you, and good morning, everyone. I'd like to start off by saying thank you to our team and our amazing employees for an exceptional year. It's with great pride that I am here with you today having concluded our fiscal year 2023 on a tremendous high note, the fourth quarter marked the culmination of a record-breaking year as we surpassed the annual expectations we set a year ago by a wide margin.
When stepping into this role, I had a clear vision of what Miller Industries could become, and I am proud that we are now realizing the potential of our capital investments and long term strategy. During my tenure as CEO. Miller Industries has undergone a transformation investing over $100 million in projects since 2014, focused on increasing our capacity, improving our productivity and enhancing our supply chain, most recently with the acquisition of Southern hydraulic cylinder as well as investment investing in and attracting the best talent in our sector.
These efforts intensified over the last two years, in particular, as I became sole CEO during a period of global market volatility and macro economic and uncertainty instead of cutting back, as we saw many of our peers do, we doubled down and continue to invest in our business. Regardless of the headwinds we knew that with the right investments in our business and the right team in place. Once macroeconomic factors normalize, Miller Industries would emerge stronger than ever.
Our financial results this year are proof that our strategy is bearing fruit. Additionally, we focused on improving productivity by reinvesting in automation and productivity initiatives. One such example is the acquisition of Southern cylinder R or SHC., we'd like to again reiterate that SAIC is integrating seamlessly into our broader business and has immensely improved production efficiency as custom hydraulic components have historically had long lead times. Our ability to in-source this production is a significant advantage for us.
Finally, we placed significant emphasis on investing in our talent. We not only dedicate resources to training and retaining a highly skilled workforce, but also prioritize safety and sustainability in our facilities. These efforts aim to enhance the health and safety of our employees while optimizing operations. And thus far, they have been working evidenced by our turnover rate, which is 10.4% below the industry average. With the improvements to our supply chain and ability to meet the significant demand we have seen for our products over the last three years. Our financial results are starting to reflect the underlying strength of our company and our end markets resulting from these initiatives was a fourth quarter, where we generated revenues of $296.2 million, an increase of 31.2% year over year. Strong execution throughout the year on our backlog drove 2023 revenues to approximately $1.15 billion, well ahead of the target we set at the end of last year for over $1 billion in annual revenues.
Gross profit for the fourth quarter was $38.6 million, an increase of 51.4% compared to the prior year quarter. Again, well ahead of even our own expectations for significant improvements in year-over-year profitability.
Lastly, I want to also touch on capital return to shareholders. Our dividend has always been a big part of our identity as a company, and we are extremely proud to have paid the dividend for the [53] straight quarters, even during or during some challenging moments in our business today, we are pleased to announce that the Board has approved an increase in our quarterly dividend to $0.19 per share, a 5.6% increase, underscoring the confidence we have in our long-term outlook. Debbie will get into our capital allocation priorities in more specifics.
However, as our results improve, we believe it is only right that returns to our shareholders grow as well. We talked about our efforts to improve liquidity and took these steps to increase the dividend. But I want our shareholders to know that as the core business continues to grow, we're spending more time looking at optimizing capital return.
Now I'd like to turn the call over to Debbie, who will review the fourth quarter and full year financial results in more detail. Following her remarks, I'll provide a market outlook and some closing comments. Debbie?
Debbie Whitmire
Thanks, Will, and good morning, everyone. net sales for the fourth quarter 2023 for $296.2 million compared to $225.9 million in the fourth quarter of 2022 at 31.2% year-over-year. Increase, driven largely by continued strong demand for our products across all our geographies.
Cost of operations increased 28.6% to $257.6 million for the fourth quarter 2023 compared to $200.3 million for the fourth quarter 2022. The increase in our cost of operations is largely a function of our higher revenue levels as a percentage of net sales, cost of operations decreased approximately 200 basis points from the prior year period to 87%.
Gross profit was $38.6 million or 13% of net sales for the fourth quarter of 2023 versus $25.5 million or 11.3% of net sales for the prior year period. Year-over-year improvement in gross margin was driven by favorable product mix and enhanced productivity and the stabilization of raw material costs. Although we consistently emphasize that our gross margins may vary quarter to quarter due to product mix.
We are highly encouraged by the significantly improved outcomes from our strategic initiatives compared to the previous year. SG&A expenses were $16.4 million in the fourth quarter 2023 compared to $13.1 million in the fourth quarter of 2022 due to increases in bonus accruals and greater investment in our workforce. As a percentage of sales, SG&A was 5.5%, 30 basis points lower than the prior year. Interest expense for the fourth quarter 2023 was $1.5 million from $1.3 million for the full fourth quarter of 2022, driven by the increases in our debt levels and to a lesser extent, an increase in our distributor floor plan financing costs, which as a reminder, flex up and down with volume.
Other income for the fourth quarter was $149,000 compared to an expense of $512,000 for the fourth quarter 2022, attributable to foreign currency exchange rate shifts. Our effective tax rate for the quarter increased slightly compared to the previous year, primarily due to reduced domestic tax credits. Net income for the fourth quarter 2023 was $16.7 million or $1.45 per diluted share compared to net income of 9.3 million or $0.81 per diluted share in the fourth quarter of 2022.
Before moving to the balance sheet, I'd like to quickly recap our results for the full year of 2023. Net sales for the full year were $1.15 billion compared to $848.5 million in the prior year period, an increase of 35.9%. Gross profit for the full year was at $151.9 million or 13.2% of sales compared to $82.4 million. Our 9.7% of sales in 2022 net income for the full year of 2023 with $68.3 million or $5.7 per diluted share compared to net income for 2022 of $20.3 million or $1.78 per share, increases of 186.5% and 184.8% respectively.
Turning to the balance sheet and cash and cash equivalents as of December 31, 2023, or$ 29.9 million compared to $26.8 million as of September 30, 2023, and $40.2 million as of December 31, 2022. Accounts receivable as of December 31, 2023 with $286.1 million compared to $240.6 million as of September 30, 2023 and $177.7 million as of December 31, 2022.
Inventories were $189.8 million as of December 31, 2023 compared to $176 million as of September 30, 2023, and $153.7 million as of December 31, 2022 we made investments in inventory throughout 2023 to meet increasing demand levels. However, we expect that our working capital to decrease throughout the balance of the year, predominantly in the form of reduction in our inventory balance.
Accounts payable as of December 31, 2023 was $191.8 million compared to $146.8 million as of December 30, 2023, and $125.5 million as of December 31, 2022.
Lastly, before I turn the call back to Will as it relates to capital allocation, we think about four main buckets investing in the bit business to increase capacity and improve productivity, returning of capital to our shareholders, accretive M&A and reduction of our debt. As Lou mentioned, we increased the dividend by 5.6% and during the first quarter of 2024 we also paid down $5 million on our debt balance, resulting in the current balance of $55 million.
Now I'll turn the call back over to Will for some closing remarks.
Will Miller
Thank you, Debbie. Our results over the last two quarters of fiscal year 2023 have given us increased confidence in our business strategy as top-line growth has continued to improve we are encouraged that our strategy has also yielded improved productivity and profitability. We continue to see no slowdown in the demand of our products across any of our geographies, giving us further encouragement that 2023 is only the very beginning of what this company can achieve.
While our North American business has remained strong as evidenced by our backlog approaching $1 billion. Our international business is seeing signs of further improvement due to potential cleanup efforts as a result of continuing continuing geopolitical strife.
This time last year, we provided annual guidance for the first time with expectations for at least $1 billion of revenue in fiscal year 2023, with significant improvements in our year-over-year profitability. Today, we provide that to be true through our diligent execution for fiscal year 2024.
Our plan is to build upon the momentum gained in 2023 with expectations for high single digit revenue growth and continued productivity enhancements, driving flow through to the bottom line, culminating in another year of record revenue and net income in closing the entire management team and I would like to thank all of our employees, suppliers, customers and shareholders for their continued support of Miller Industries.
At this time, we'd like to open the line for any questions.
Question and Answer Session
Operator
(Operator Instructions) There are no questions at this time.
I'd like to turn the call back over to Will Miller for closing comments.
Will Miller
Thank you. I'd like to thank you all again for joining us on the call today, and we look forward to speaking with you on our first quarter conference call. If you'd like information on how to participate and ask questions on the call, please visit our Investor Relations website, millerind.com, forward slash Investors or e-mail investors dot relations at millerind.com. Thank you all.
Operator
This concludes today's conference. You may disconnect your lines at this time. Thanks and we thank you for your participation.
