Morning, everyone. Jeff Elliott with Three Part Advisors. Thank you all for attending. Next presenting company is Miller Industries, ticker is MLR. Miller is a client of ours, Three Part Advisors. If anyone would like a meeting or a follow-up, just let me know. Just reach out to me directly. With us here from the company, we have Will Miller, CEO, and Debbie Whitmire, CFO. And with that, I'll just turn it over to Will.
Thank you, Jeff. We appreciate everybody being here this morning. Fortunately, we're the first group to go, so we have a large group. It's great. We're gonna start out with. We've got a quick about a four-minute video. I think it puts some color around who we are, what we do, how we go to market. I think it's very helpful for everybody to understand, and then I'll run through our presentation and open it up for questions.
Miller Industries was founded in 1990. Since its inception, the company has provided innovative, high-quality towing and recovery equipment worldwide. Listed on the New York Stock Exchange, Miller Industries has a total of four manufacturing facilities in the United States, as well as one in England and one in France. Under the well-known brands of Century, Vulcan, Chevron, Holmes, Boniface, and Jige. As the industry leader, Miller Industries provides a complete line of quality equipment, including carriers up to 30 ft in length with deck capabilities up to 40,000 lbs, and towing recovery units with boom capabilities up to 100 tons. Like all great products, engineering and attention to detail are at the forefront. Our on-site fabrication facilities are key to our innovation and essential for rapid prototyping or part supplementation. Innovation is key to our product line.
Innovation in weight capacity, tow capacity, and most importantly, innovation in the safety of our trucks. So just what is a tow truck? For the purposes of this demonstration, a tow truck is a vehicle married to a wrecker body, and Miller Industries makes a whole range of various wrecker bodies. How do we build one? We start with a blank slate of a vehicle, otherwise known as a commercial chassis. The chassis has a cab on the front and nothing on the rear just yet, at least not until we put a wrecker body there. Prior to the wrecker being installed onto the chassis, the subframe is assembled in our weld shop. Subframe assembly can take up to fifty to sixty hours using both robotic and human welders. Once a unit leaves weld, it is taken to our blasting and painting facilities.
We blast the welded components prior to painting them with a primer before we top them off with a finish paint. Once all the components are painted inside and out, we move them over to our assembly area, where our wiring, wiring harnesses, valves, electric, and control stations for the wrecker are built and hand-assembled. At this point, the wrecker body is ready to move to distribution or over to our factory install area, where we will mount the PTO on the pump and attach the subframe to the mounting frame and onto the vehicle. After this, the toolboxes are wired in with their lights, power door locks, and wiring harnesses that were assembled earlier. At this point, the vehicle is starting to look a bit more like a tow truck. The wrecker body is attached to the vehicle, but it's still missing the toolboxes.
With the toolboxes still uninstalled, we take the unit back to paint, where the unit is stretched out and washed with a deionizing wash, where we eliminate any particulates or dust before taking the unit to final paint. Once the unit has its final paint, it's time to take the truck over to dress-out and see it come to life. This is the final stop before becoming a finished truck. In the dress-out bays, we take all of the components we were working with before, and we bring them all together. The toolboxes are installed, the final wiring for the lights, the electronics are attached to the hydraulic systems, we put the accessories in the toolboxes, and we finish the truck according to the exact specifications of each customer.
Once everything is installed and the truck is finished, we have a dedicated team that works through all of the features and the line items to make sure the truck checks all the boxes on quality and specifications before moving on to our worldwide distribution network. Miller Industries products are sold and serviced through the largest distribution network in the industry, and as the world leader in towing and recovery, we look forward to continued growth and success.
Make that to full screen. There we go. So as you can see from the video, we manufacture from the ground up, steel fabrication, welding, painting, and then, in a lot of cases, install that unit directly to the chassis before delivery to the end user. Quick safe harbor statement that you can see as you read through it. We'll start with a basic introduction to Miller Industries and an overview of the organization. We have six manufacturing facilities, world-class manufacturing facilities around the globe. Four of those are in the United States, one in England, one in France. We have the largest North American distribution network in the industry. We also export to approximately sixty countries globally. We have a significant presence in the global military industry.
We've provided military vehicles all around the world, including Australia, Singapore, New Zealand, Norway, Sweden. We are the primary supplier to the transportation, or for transportation equipment, in the rental and salvage industry. Companies like Sunbelt, Herc, United Rentals, Copart, in the salvage industry. We are considered the industry leader in innovation. We have approximately 45 engineers that work diligently on producing new products and solving new problems for the towing and recovery industry. A little bit of investment highlights. We are the world leader in the towing and recovery industry. We have consistent organic growth over the past 30 years, a global presence. We are the industry leader in innovation, best-in-class products, strong customer relationships, attractive financial metrics, and an experienced management team. A little bit about the towing industry.
It was founded industry was founded in 1916 in Chattanooga, Tennessee, which happens to be our corporate headquarters, by Ernest Holmes and the Holmes Corporation. Over the last 100-plus years, there's been a lot of innovation in the towing and recovery industry. We still own the Holmes brand and distribute through that brand, but today, the best-known brand globally is the Century brand that we carry. As you can see here in the bottom right, that's a 100-ton rotator. It's called the Century M100. So from the early days to today, there's been a lot of change in the towing and recovery industry and the needs to recover vehicles on the roadways. The towing and recovery market's a multibillion-dollar global industry.
Primary market segments are commercial towing, so those are owner-operators, that run small fleets, transportation fleets, the rental and salvage industries, government and municipal sales, and the military. Primary product types are light-duty towing and recovery vehicles, medium and heavy-duty recovery vehicles, and our carrier transport vehicles. Probably the biggest significant industry driver is miles driven and the age of the vehicle fleet. Today, we are seeing miles driven increase, both here in the United States as well as in Europe, the two largest markets in the globe. We also see an aging vehicle fleet around 12.8-13 years. So, as you see, the vehicle fleet, as long as it's been tracked, is now at its oldest age due to, rising cost of purchasing new vehicles, as well as interest rates.
Infrastructure construction, as you look at the government spending more money to redo roads and bridges, they start to change traffic patterns. As you start to change traffic patterns, you see more increased level of incidents on the highways, requiring more needs for towing and recovery equipment. Natural disasters, unfortunately, natural disasters are a good thing for the towing and recovery industry. As you see fires, earthquakes, as well as hurricanes and things of that nature, there's a need to recover vehicles in those areas after they've been destroyed. And then global conflict for the military. Future emission changes that we are seeing coming in early 2026 also is an accelerator for Miller Industries, looking at pre-purchases of commercial vehicles to beat the emission changes and the increased price of new chassis.
Military recovery vehicle upgrades. As the militaries have seen an increased use of armored vehicles, they have found that their current recovery vehicles are incapable of recovering and towing the larger, heavier vehicles, so looking to implement new technology into global militaries, and then a increased trade cycle or reduced trade cycle. As commercial chassis become more expensive and the engines are more inherent to have issues with all the emission controls, we've started to see a trade cycle be created in the towing and recovery industry, and quite frankly, in the medium-duty truck market, that's never existed, so we're seeing approximately about forty-two months on our medium and light-duty chassis and five to seven years on our Class 8s.
Our strategy is relatively simple: develop a world-class team that really promotes growth from within and looking at all of our employees and, having a great organization. Locating, developing, and maintaining a five-star distribution channel globally. Innovation and design of new products. Growth in our commercial market share, exploring new market potential, and developing innovative products to create new opportunities. Focus on our core competencies, reinvest in our infrastructure, and increase capacity and capabilities, and improve our quality of our finished product. Vertically integrate to control costs, reduce manufacturing disruption, and improve quality control. As you saw from the video, we have six manufacturing locations globally. Over the past thirty years, we've made a significant investment into our manufacturing facilities. The top left is Century Wrecker in 1990, was approximately 40,000 sq ft.
Today, that facility in the bottom right is 465,000 sq ft of state-of-the-art manufacturing capacity. Similar to that, our car carrier manufacturing facility, which is our second largest facility in Hermitage, Pennsylvania, was approximately 40,000 sq ft in 1990, and today it's just under 300,000 sq ft. Our primary revenue streams, North American distribution, accounts for about 90% of our annual revenue. Export, European operations, our national accounts, our fleet accounts with Sunbelt, Herc, United, Copart, and IAA, government sales, military, aftermarket parts, and our chassis sale program. We have about 54 distributor principals in North America, with 76 distributor locations with 300 salespeople. Those are retail salespeople dedicated to selling our equipment every day. A little different than most distribution networks, our distribution channel is 100% exclusive with Miller Industries.
97% of them only sell towing and recovery equipment on a daily basis. When you look at who they are selling products to, generally, they're selling to commercial towing operators. They're entrepreneurs, small family-owned businesses, second or third generation owners, average fleet size, 10 to 15 vehicles, and really today, they're focused on, you know, vehicle life cycle. Warranty offerings that they can-- that we can provide to them, so they can understand their cost of ownership, which has created a trade cycle, as well as looking at, you know, tax and depreciation, so they're changing the way that they buy vehicles and maintain their fleets. Our foreign markets, we have 30-plus distributors globally. We have direct sales to foreign governments and militaries, and we export to approximately 60 countries.
Our philosophy is very simple: We have the best people, the best products, and the best distribution network in the towing and recovery industry. That was a quote by our founder in 1990. We continue to focus and make sure that we follow through it on those footsteps. We continue to invest in human capital. I'm not gonna read through all of these, but we look at the health and safety and well-being of our employees. Employee engagement, being there for our employees, and making sure that we listen to what they need, and then employee development.
Providing frontline leadership training, tuition reimbursement, so they can further their education. We have our own internal weld academy to produce approximately 12 welders every quarter, and external training as needed. We have an experienced management team. We have over two hundred years at the company with our management team. They've been very helpful in our success over the years. I'll turn it over to Debbie to run through the financials, and then we'll open it up for questions.
Thanks, Will, and good morning, everyone. Just a quick overview of our financial situation for the last five years. So last year, we surpassed $1 billion in revenue for the first time ever in the history of the company. With that, our blended gross margin, which includes both the pass-through of the chassis, as well as the manufactured equipment that Will mentioned, was 13.2%, which was up 84% over the prior year. That resulted in net income of $58.3 million, or 5.1% of revenue, which was up 286% over the prior year, and we had $5.07 in EPS for the year.
From nineteen ninety, when the company was founded, through today, we've gone from about $20 million in revenue to last year, $1.15 billion, and this year, we expect to have low double-digit growth, which is consistent with our 20- or 30-year CAGR, 'cause this goes back from the beginning in nineteen ninety. So now just a quick look at some comparisons to the companies in our peer group. So second quarter, our EPS was $1.78. Trailing twelve months was $6.22, and that puts us number two in the category with our peers. Total shareholder return included our $0.19 quarterly dividend, which put us at 11.2% for the quarter, or 57.3% for the trailing twelve months, which again puts us in position number two. Earnings yield was 11.3%.
Again, puts us in the second position. And our debt to equity, we're actually first with only 0.19. We are a debt-averse company, so we like to have flexibility as opportunities come along. And our EV to EBITDA ratio is 6.35, which again puts it at number two in the category. So just a snapshot. This was as of August sixteenth. Again, we're MLR on the New York Stock Exchange. The stock price that day was $59.47, with a market cap of $681 million. I believe it was $61.70 yesterday, so it was a market cap of $706 million. Book value is $33.17 per share, and our debt to total cap ratio is 15.68.
Just a quick update for our IR schedule for the rest of the year. As Will mentioned, we'll be at the D.A. Davidson conference in September. We'll be at the Raymond James Small Cap Conference in November, and we'll also be at the Southwest IDEAS Conference in November. And we have a couple of NDRs scheduled throughout the rest of the year to California and New York. So turn it back over to Will.
Thank you, Debbie. Once again, we appreciate everybody joining us today. We've moved through that pretty quick, which has left us quite a bit of time for questions and answers, so I'll open it up to the floor. In the back.
How do you think Miller's bucking the trend that's kind of hurting other industrial equipment manufacturers? Is it niche? Is it your quality of products?
So the question is, how are we bucking the trend of other industrial manufacturing companies? So I guess you're talking about our success in our industry versus other industries. I think it's a little bit of all. So it is a niche industry. It's, you know, relatively small. We really focus on relationships and making sure that when it comes time to purchase a new vehicle, that our customer base is looking to purchase that through our distribution network. A lot of that from our historical growth, the last time that Miller Industries we did a small acquisition last year, that was vertical integration. Prior to that was nineteen ninety-seven. So our compound annual growth rate is really organic, and we really focus on innovative products, innovating new products, and giving our customers a new reason to purchase equipment.
Really, focusing in on bringing them back through our distribution channel. Our chassis program helps do that. We've worked strategically with Cummins Engine Company and all the OEMs here in North America to create proprietary warranty offerings for our clientele. So with our medium-duty trucks, we provide them, at no charge, a five-year, three hundred thousand mile warranty that comes with the—it's for the engine, the after-treatment system, as well as a seven-year unlimited mileage warranty on the transmission, really creating a trade cycle. Educating our customers that you really want to buy a new vehicle and sell that vehicle for the most value.
You can do that by selling it before it comes outside of that warranty offering period, so really creating that forty-two-month trade cycle on our medium-duty trucks, and getting them to understand that that's the best way for them to provide or put equity into the new purchase, is getting the most out of that resale. So I think a little bit of all of that has helped to push us ahead of other industrial manufacturing companies in the small midcap. I think we had a couple other questions. I know there was one other in the back as well. No? Yes, sir.
Yeah, just talk about the trade cycle. Do you participate in the trade cycle? Do you do anything with the used vehicles?
So the question was, do we participate in the trade cycle? We do not specifically, as Miller Industries. Our distribution channel generally handles taking the trades and selling them into the secondary markets. Some of the customers, as of late, have started to use social media and things of that nature to sell them directly. That's slowed down a little bit and sort of trending back now to utilizing distributions, marketing capabilities to resale, take the trade, and provide them with the new equipment. Yes, sir?
What about, new vertical, like trucks and cranes? You've got a pretty good market share-
So the question was, how about new verticals and looking at other markets? We look at other market segments, so other types of manufacturing, you know, chassis-mounted product. We're very specific. We wanna make sure that if we enter into another market, that it has a similar sales path. So, you know, really where we shine is in our relationship building and dealing with second and third-generation owner-operators and entrepreneurs.
So making sure, there are certainly some industries that are similar to that, but we wanna make sure that if we move into another market segment, that we will be the market leader, and that we can continue to use the relationships that we've built and through our distribution channel to be successful. So, it makes it a little bit more difficult, because a lot of them sell direct to government, municipalities mostly, things of that nature, and that's not, it's not the strongest segment of our business. But we are always looking for opportunities.
So that means, vertically integrated becoming your supplier?
Yeah, vertically integrating, we did recently last year purchase a cylinder hydraulic cylinder manufacturing company. You know, it gets a little bit more difficult. We watch all the other markets out there. Certainly ones that interest us would be things like winches, valve bodies. Unfortunately, most of those markets have been consolidated by larger parent organizations. Not gonna say they're not ever going to spin off or sell some of those, but it's less likely that that would happen in the future. We do have the opportunity to continue to expand our fabrication capabilities. Today, our fabrication facility processes about 25% of the steel that we use on a daily basis, so we can continue to improve that and bring more of that in-house. Yes, sir.
Yeah, in the video, it looked like a lot of the assembly was hand welding or hand assembly. Is there a way to automate more of the manufacturing process?
So the question is, can we automate more of the process? We have worked diligently to automate as much of the welding process as we can. Welding was the first time that we integrated robots was in 2005. Today, we run about 30 welding robotic cells. Our next effort, starting in next year, will be paint automation, which is that next, you know, learning a new technology. Technology progresses quickly, so, you know, with the wide variety of product that we build, finding automation is difficult that has the flexibility to paint, or to weld all the different, models that we manufacture. When it comes to the assembly side, with the relatively low volume of product that we manufacture on the assembly side, it's very difficult. I'll come back to you. Yes, sir.
What happens as California and other states require all trucks to be electric?
You know, we have, we're working with some of the chassis OEMs on electric vehicles. The question was- sorry, I'm supposed to repeat the question. The question was, there's a sign up there that says, "Repeat the question." The question was, what happens when California and other states start to require electric vehicles for commercial vehicles? We've worked, we're currently working with, quite a few of the OEMs here in North America to develop, electric alternatives. It does get a little difficult in the electric space. So when you look at a medium-duty one of our car carriers, which is the largest volume product that we manufacture, those products have about an 8,000-pound payload.
Today, that electric variant weighs about 7,000 pounds more than the diesel counterpart. So that takes your payload to about 1,000 pounds, which isn't enough to legally tow vehicles up and down the road. You can then take that vehicle, up it to a 33,000 GVW, and you can get back your payload. Unfortunately, now it requires a commercial driver's license to operate it. So we've taken the driver pool to about 10%, and where normal operators are getting paid for light-duty towing around that $75,000-$80,000 a year, the operators with commercial driver's licenses are getting paid about $150,000 a year.
So the product goes up about three times for an electric vehicle, so the cost of acquisition, the mileage range is definitely an issue at about 150 miles, the cost of an operator to operate it, and then payload. So it does get challenging, but we are working on potentials to bring to the marketplace. We'll see how they are accepted from the end user standpoint. We are working with, and have been for the last year, with CARB in California, to work with for exemptions for towing and recovery. We are a first responder, although most of the first responders have already been exempt from CARB's regulations. The state exempted their own towing fleet, just not the commercial sector, so we are working with them as well. There was another question in the back. Yes, sir?
Yeah, I had two questions. The relationship with the OEMs looking forward, is there anything you're excited about, or is everything kind of status quo? I mean, we know obviously about the strikes and things previously. Could you tell us, you know, a little more about the future relationship with the OEMs? And then, Miller doesn't have a financing arm, do they, for the buyers, or does that fall on the distribution distributors as well?
I'll go to the first one first. So the first question was, our outlook with the chassis OEMs, with our relationships, do we see anything on the forefront? You know, meet regularly with all the chassis OEMs. Right now, there's approximately in the commercial truck business, over-road fleets, they're down about 30% over last year. Looking forward into next year, they believe they'll start to see a pre-buy in the second half of next year to beat the emission change in January of 2026. At this time, I was with them as early, or as late as yesterday, with PACCAR, and they don't see any issues with production, and they don't believe there'll be any allocation next year.
So I don't think we'll run into the issues we had in 2021 and 2022 from an allocation perspective. And I think they're sort of seeing that, you know, they'll continue to be a little slow in the first half of next year, but start picking up pace in the second half. Your second question was finance arm. We had a strategic partnership with Santander Bank from 2010, I think roughly 2010 to last year. We are currently working to find a new strategic partner. They were great partners. They started to look to go a different direction in the industry. We still, our distribution still finances quite a bit through Santander Bank. Most of the distribution will either work with a partner that we help select and market to the industry, utilize other avenues like Santander or local banks, whatever works best for the end user. Yes, sir?
Question on sort of, like, the global markets compared to, like, the U.S. Obviously, your business is mainly North American distribution and presence, but you kind of have plants in the U.K. and in France and export to, you know, 60-plus countries. Is there still enough, is there an ability to develop a global market, or, you know, 'cause there's the same needs around the world, and I'm just curious how that compares to the U.S.
Yeah, the sale-to-market process is a little different depending on where you are in the globe. In the United States, we run predominantly through a distribution network. Over in Europe, it's mostly direct to consumer, so it's a little different sales process. We have a great backlog of product sales in Europe, approximately running about 10% of total revenue. We are working to increase capacity and continue to expand Europe.
I also believe s o here in the US, we have about 13 total manufacturers of towing and recovery equipment. That number is just under 50 in Europe, so I still think there's some opportunity for consolidation in the European market as well. We are also currently working with a couple of the key chassis manufacturers to develop a chassis program in Europe, similar to the United States, to give us a opportunity to have a strategic advantage over the smaller OEMs that are manufacturing product in the European market. Yes, sir?
Two questions. One, can you talk about capital allocation? And then two, given your really high market share, the margins look kind of low to me. You mean that's the chassis guys?
So, first question was capital expenditures. From a CapEx perspective, we try to stay around levels of depreciation on an annual basis, which is right around Fourteen million $14 million. We are analyzing the needs for potential increased capacity at our facilities. Really analyzing what are the potential needs for future military contracts versus our commercial sector and where we're gonna be in that commercial sales. There is a lot of military activity around the globe. We feel confident that we can handle, you know, one or two tenders at the same time. If we were successful in winning multiple tenders beyond that, we'll definitely need to look at some potential capacity expansion to be able to augment our commercial business with the military as well and keep our market share and provide product to our customers. Second question was?
Margins.
Margins. Margins, yes. It's the selling the low-margin chassis along with the higher-margin manufactured product. So, a lot of people ask, "Well, why can't you get your margin up? What are your expected margins?" Our chassis program really drives customers to keep coming back to Miller Industries because we're providing them something that they can't get on their own. They can't get a five-year, 300,000-mile warranty at no charge. It's a $3,000-$5,000 upcharge to get that warranty offering. So it's bringing them back through our distribution channel. The more successful we are at selling chassis, the more it drives down our margins. Our margins at our plant level and through our products, our product types are very, they're very good, and they're very similar through product type, so car carriers and heavy duties.
Our margins from plant to plant are very consistent. But so from a quarter-to-quarter basis, what you'll see in our margin fluctuation is the number of chassis that get shipped to our distribution, to our factories and invoiced on a quarterly basis can drive that margin up or down. It was far more consistent prior to COVID. It was a much more consistent flow of chassis from a quarter to quarter. If you expected to get a hundred chassis from an OEM, you might get ninety-eight to a hundred and two.
It was very close. For the last couple of years, we've struggled with the chassis OEMs that you are planning on getting a hundred, one quarter they ship you fifty, the next quarter they ship you a hundred and fifty. That is stabilizing. We have in the last two quarters in our press releases put that we got a significant amount of chassis in the first two quarters of this year. We expect that to normalize through Q3 and Q4 to a more sustainable level, and a level that will follow out through the remainder of next year as well.
Sort of a split by revenue between chassis?
Depends on the product type. So with a lighter duty and a car carrier, your chassis is a higher percentage of that purchase part or the purchase price of the tow truck. Versus when you get into the heavy duty sector, it becomes a much smaller piece. So it really depends on what product you're looking at. Your products range from about $100,000 to $2.5 million at the retail. So, you know, your chassis are gonna range anywhere from $65,000 to about $225,000. So it's a big swing between light duty and heavy duty, on the percentage of the total product. Yes, sir?
What percentage of the business is military? Can that line be expanded to include other products beyond?
The question was, what percentage is military? In 2023, it was a minimal amount of military work running through our factories. In our current backlog, we have a very small percentage of military work. Military contracts are certainly, they're great when they're here, but we don't count on them for a consistent business year over year and for growth. We plan for them, and we anticipate getting some that are out there. Today, we have no major POs in-house from military contracts. We have had some requests in the past to look at other products to our chassis suppliers that we provide global military product to, and we are open if they need us to provide other, you know, whether it's troop carriers or things of that nature, we're open to being a part of that for all of them. Yes, sir.
I also have two questions. The first one is, you know, your growth has been amazing, you know, just amazing growth story, consistent growth for a very long period of time. Is it easier, harder, or the same to keep growing at that rate now that you're this big?
The question is, we've had an incredible growth history. Is it easier or harder to continue to grow at the same rate? I think, you know, it starts to become more difficult, but I think we've been consistent in our growth over the years. Continue to focus on what's brought the growth to the industry. Don't forget where you came from, which is continue to focus on innovation, other market segments, export around the globe, focus on our military partners. And I think if we don't lose sight of who we are and what we do, we continue to focus on those key pieces of our business, we'll continue that growth rate.
The other question just is, a lot of other companies have talked about how high interest rates have really been a headwind for them, with the thought that short-term rates are going to come down. Is there any of your markets where you feel there's pent-up demand that has been suppressed at all, or does that just not apply with the group?
Question is, have interest rates created some pent-up demand? We've seen a little bit of effect at the retail level. You'll hear, you know, different distributors talk about a deal here or a deal there, that interest rates caused a deal to get delayed. But overall, interest rates haven't played a major factor, due to the fact that really they're looking at a replacement cycle and it's time to replace that vehicle. They're not in love with the interest rates currently.
They'd love for them to see them back at the 5% level at the retail side, but, they're... It's not really affecting or changing the purchasing needs at this time. And I am officially out of time. So, thank you so much for joining us today. We appreciate it. If you have any questions, or if you want further information, please get with Jeff from Three Part, and he'd be glad to hook you up for a meeting. Thank you.