CEO and Debbie Whitmire, the CFO. Miller Industries is a Three Part Advisors client, so if anyone would like a follow-up meeting or call, please just reach out to me directly. I'm Jeff Elliott with Three Part Advisors. And with that, I'll just turn it over to Will.
He'll start it without me, huh?
No, that's all right. We'll take a pause.
Well, hang on, we may not be able to.
There's audio right there, right?
There it is. Hey, Stephen, check channel four for the audio.
Miller.
Good job. Thank you. Appreciate it. Sorry about that quick delay. Will Miller with Miller Industries, CEO. Like Jeff said, here with our CFO, Debbie Whitmire. We'll start out with a quick video introduction of the company. Gives you a little bit of historical information, as well as shows you how we manufacture our product and what products we manufacture and distribute around the world. Then we have a nice presentation of an overview of the industry, and then Debbie will finish up with some financials before we 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 feet in length with deck capabilities up to 40,000 pounds, 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 50-60 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 toolbox is 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 away. 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 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 in 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
just a little quick overview of our manufacturing process and what it actually takes to build a tow truck. I'll get this to full view. Our safe harbor statement, which can be seen in all of our SEC filings for your review, and a quick introduction to Miller Industries. So investment highlights, we are the world leader in the towing and recovery equipment manufacturing space. We have consistent organic growth, a global presence. We are the industry leader in innovation. We have best-in-class products and distribution, strong customer relationships through our distribution network and the end users, attractive financial metrics, and an experienced management team that has over 200 years with the company.
We have six world-class manufacturing facilities, both in the United States and in Europe. We have the largest North American distribution network in the industry. We export to over 60 countries. Significant global presence in the military recovery vehicle sector. We also provide transportation equipment to the rental industry and the salvage industry, predominantly players like United Rentals, Sunbelt, EquipmentShare, and have more than 45 engineers working diligently every day, designing new product to meet our customers' strict demands. We have a simple philosophy at Miller Industries. We have the best people, the best products, and the best distribution network in the towing and recovery industry. This is what we have focused on for the last 30 years and what's driven the growth of the company. As I said, we have an experienced management team. Most of us have more than 20 years at the company.
Our strategy is simple: develop a world-class team from the top down. We really look to promote employees from within the organization and bring them through the ranks at Miller Industries. We innovate, design, and produce the highest quality products, locate, develop, and maintain five-star distribution for not only sale, but after the sale, service and support of our products. We invest in our business and our infrastructure to increase capacity, capabilities, and to improve quality of our manufacturing processes, and to grow the commercial market share, to explore new market potential, and develop innovative products to create new market opportunities. A little history of the towing and recovery industry. The first tow truck was built in 1916 in Chattanooga, Tennessee. So our corporate headquarters is the birthplace of the tow truck. We still own the Ernest Holmes Company. Ernest Holmes was the first person to build a tow truck.
The towing industry has come a long way in over 100 years. Currently, you can see the largest product that we manufacture, which is the largest tow truck in the world. It has capacities of 100 tons, so it's come a long way since the Model T. The towing and recovery market is a global market worth over a little north of $2 billion annually. Primary market segments: commercial towing, transportation fleets, rental and salvage, government and municipal sales, and military business. Primary product types are light-duty recovery vehicles, medium and heavy-duty recovery vehicles, and carrier transport vehicles. Our industry drivers are relatively simple: miles driven, accidents per miles driven, what we call the last-mile deliveries. That's the process of delivering goods purchased on the World Wide Web to your homes, aging vehicle fleet, general infrastructure and construction, natural disasters, and global conflict.
Some accelerators that we've seen in the last few years: a trade cycle, a shortened trade cycle on our vehicles due to emission controls and our consumers wanting to operate their vehicles inside the warranty period, future emission changes. We have another emission change coming up for 2027, and military recovery vehicle upgrades. As global militaries have realized that their antiquated equipment isn't fast enough on the battlefield or protects the troops well enough, being unarmored, and lacks the capability to recover larger, heavier vehicles on the battlefield. You saw in the video and we spoke earlier, manufacturing facilities, both in the U.S. and in Europe. Over the years, we continue to invest in our facilities. The picture in the top left is our corporate headquarters when it was purchased in 1990, and the bottom right is the headquarters today with a little over 465,000 sq ft of manufacturing space.
Similarly, in 1990, we built our first carrier manufacturing facility in Hermitage, Pennsylvania. It was 20,000 sq ft. Today, it's currently housing just under 300,000 sq ft. Primary revenue streams: North American distribution. 90% of our revenue comes out of the North American market, with about 85% of that running through our North American distribution network. Exporting equipment outside of the United States, it's manufactured here in the US. European operations, our national accounts, government sales, military, aftermarket parts, and our chassis sale program. We have 54 distributor principals here in the United States with 76 locations. They employ just over 300 retail salespeople. Interestingly enough, about our distribution, 100% of them are exclusive to Miller Industries. 97% of them only sell towing and recovery equipment. So they are very focused on moving our product on a daily basis.
Commercial towing operators are generally entrepreneurs with an average fleet size of 10-15 trucks. They focus on the vehicle life cycle, the warranty offering, depreciation, trade cycle, as their need to replace their product on a consistent basis. We have approximately 30 distributors in foreign markets. Our largest distributor outside of the United States is in Japan. Direct sales to foreign government militaries, and we export to over 60 countries. As we continue to reinvest in our business, we focus on robotics, capacity expansion, implementing over the past few years a new ERP software system, continued focus on cybersecurity, research development, vertical integration, and employee health and safety. As we spoke earlier, we really focus on our people and investment in human capital. I won't touch on all of these. They're in the book for you to look at.
But we certainly focus on tuition reimbursement and providing education to our employees. We have created an in-house educational fund for not only our employees, but their children or grandchildren to provide scholarships for educational purposes. And we have an internal weld academy where we take high school students that have vocational capability or outside of a trade school, two-year trade schools, to bring them into our welding school, as well as retired military veterans. Growth opportunities that we see in the towing and recovery industry, the global military contracts that are active today, continuing to grow market share in the rental industry, expansion of our global presence, consolidation of the European market as it's significantly less consolidated than the U.S. market at this time, and continuing to explore potential M&A opportunities.
I'll turn it over to Debbie to run through the financials real quick, and then we'll open it up for questions.
Thanks, Will. Good morning. This is just a quick overview of the last five years' history on our financials. Like most industrials, in 2021, we suffered through the supply chain disruption caused by the pandemic. In 2022, we were recovering from that. And our 2023 revenue was $1.15 billion, which was up 35.9% over the prior year. That resulted in $151 million in gross margin and a 13.2% margin. That's up 84.2% over the prior year. And net income of $58.3 million or $5.07 per share, which was up 286% over the prior year. So as you can see, revenue has grown significantly since the company was founded in 1990. Most of the dips or the cyclicality of it was based on macroeconomic conditions, such as the crisis in 2007 and 2008, and then again, the pandemic. If you look at our 30-year CAGR, it's 13.6%.
We have projected that we'll be in that same growth range this year for 2024. Take a look at our peer group analysis. This was based on Q2 because some of the companies hadn't reported yet. As of Q2 or trailing 12 months, as of Q2, we were at a trailing 12 months EPS of $6.22, which puts us second in the category. Total shareholder return, including our $0.19 quarterly dividend, put us second in the category for total shareholder return as well. Our earnings yield was 11.3%, which is also second in the category. Debt to equity ratio, we were number one at 0.19. Our EBITDA was 6.35, which is second in the category. Again, just some market information. Ticker is MLR on the New York Stock Exchange.
As of November the 8th, just after the election, the share price was $75.14, which put us at a market cap of $871 million. We do pay a quarterly dividend, which is currently $0.19 per share, and our debt to total cap ratio is 14.24%. Can you cover that?
Thank you, Debbie. That's fine.
So our Q4 IR schedule, we just attended a Raymond James Small Cap Conference in Sonoma Monday. Of course, we're here today, and we plan on doing another roadshow in Q1 in California. So with that, we'll open it up for questions.
Thank you, Debbie. Yes, sir.
Two or three, you have lots of industry drivers, and you have lots of different markets, and some are more important than others. So what's the top two or three revenue segments? And then what's going to drive growth in the future to those top two or three revenue segments?
The vast majority of our revenue currently and over the last couple of years, as military has been a very insignificant part of our revenue, is the commercial industry. So as you've seen our growth, that's predominantly U.S.-driven commercial towing segment. So that's definitely the vast majority of our revenue. Where we have potential in the future, as you continue to see those industry drivers and the trade cycle continue, as the commercial truck traffic picks back up, as they've been in a lull for the last two years, as commercial truck traffic starts to rise once again, we'll get a benefit from that in the towing and recovery industry as our consumers will have more business to take care of. I think probably one of our biggest growth opportunities is in the military segment.
As it was consistent business through 2017, 2018, and 2019, it ceased to exist due to financial cuts or government cuts spending over 2021 and 2022. So those quotes have been coming out since late 2022, and we're actively working multiple opportunities around the globe. Yes, sir.
Say more about the competitive environment and the company's advantages.
Yes, absolutely. And I forgot. I'm supposed to repeat the questions. It says that it was the competitive landscape and absolutely. So in the North American market, there's approximately 13 OEMs that manufacture towing and recovery equipment. We sort of break them into two groups. So the tier ones would be ourselves, Miller Industries, a company that goes under the brand of Jerr-Dan, J-E-R-R-D-A-N. It's a subsidiary of Oshkosh Corporation. And a second-generation family-owned business out of Quebec, Canada called NRC Industries. The reason why we break those three apart is they go to market in the same manner. So we all have a relatively mature distribution market. We provide after-sales service and support for the recovery equipment to the professional towers in the North American market. You have 11, what we'll call tier two suppliers.
They're more mom-and-pops, direct-to-consumer, really selling on price, not necessarily quality or after-sales support and service or the trade value and the total cost of ownership over the lifecycle of the vehicle. So we sort of focus on the top three in North America. And then the other ones, they always seem to be there. They've never left, but they continue on in the marketplace. In Europe, it's a little bit more fragmented. There's about 49 manufacturers in Eastern and Western Europe, which is the second largest market in the globe. That's where we see a potential for some more consolidation in the industry, although we do have the two largest manufacturing companies in the European market with the biggest brand names. One more thing. And the other thing is, what's our moat? The moat, we believe, is pretty simple. It's people, product, and distribution.
We truly have the best distribution network in the towing and recovery industry. There's not a distributor that Miller Industries has to say that we would trade for one of our competitors, distributors in any market throughout North America. We have the best relationships with the end users and the innovation and the best products. Yes, sir. Was there ever a time that we looked at being in different parts of the towing industry other than manufacturing? The answer is yes. In the late 1990s, we did take it upon ourselves to get into the towing industry itself. It did not work out that well. We underestimated the consumer and their thought process of becoming their competitor and the pressure that would put on the manufacturing operations. So we exited the actual towing business.
We also, at that time, tried to become our own distributors and own our own distributor network with a lot of owner entrepreneurs out there in our distribution network. That one failed as well. So we've exited all of that as of 2002 and went back to focus on what we're good at, which is manufacturing an innovative product. Yes, sir.
Different challenge with towing. So, I asked you for that impact. And then also, how are your sales affected by the credit cycle? Separate, maybe, from just macroeconomically.
Absolutely. The question was, how do electric vehicles impact the towing industry as well as credit markets from a sales perspective? Electric vehicles don't really impact us all that much. So as of when you went from the 1980s to the 1990s and you went from chassis-on-frame vehicles to monobody construction, you saw a shift in what we manufactured to more what we call car carriers, where we actually take the disabled vehicle and put it on top of the tow truck instead of towing it behind it. That has furthered on with all-wheel-drive vehicles, things of that nature. And it just so happens that electric vehicles have to be towed on those exact same products. So it really hasn't changed our product mix much because that product mix was already going to that car carrier product. And electric vehicles have to be transported in the same manner.
Fortunately for us, it didn't change much of what we do on a daily basis. From a credit perspective, most of our trucks are financed at the retail level. We have not seen a major shift in purchases, as we put in our last quarter call. Retail deliveries are consistent with last year's with 2023 retail deliveries in the 2024 year. We haven't seen much of a shift that credits changed. Certainly, they seem to be okay with the street credit market being for AB credit around 8.5% at a lending rate. If you told me it was going to be 15% tomorrow, then we definitely have another problem. But currently, at where we see rates, it's not an issue in the industry. It's more important for them to keep their vehicles inside the trade cycle and keep low-mile vehicles in their fleet. Yes, sir.
Your stock has basically doubled this year. So I'm looking and you've got the huge increase in sales and earnings. What created that this year?
The question is, our stocks doubled, and we've had an increase in earnings. We invested in the industry or in our businesses in 2016 through 2018. We invested a little over $100 million in our operations. Those plants, all of the investments that we made started coming online late 2017 into 2018. And you just started to see the scalability of the business in 2019. That took a pause in 2021 and 2022 because of COVID and then supply chain. What you're seeing in 2023 and 2024, I think, is the continuation of all of the work that we put in in 2016, 2017, and 2018 and actually being able to utilize our facilities at the capacity that we had created. I think the stock price probably has a little bit to do with the success of the company.
Also, we took it upon ourselves last year in August when we hired Three Part Advisors for the first time, I think, really since our IPO that we had an IR firm. And we've been to five conferences, I think, five conferences and been on six different non-deal roadshows over the past year and really just creating awareness for the company of what Miller Industries is and who we are and what we do around the world. Yes, sir.
Are you likely to consider going to M&A? If so, would it be like bolt-on acquisitions or large acquisitions?
Yeah. The question is, what do we look at as potential M&A in the future? We're always open to opportunities. We've looked at them. Certainly, we're very lucky that in the towing industry, if a manufacturer is looking to sell somewhere in the globe, most likely we will get the first phone call because we're a clear target to be the acquirer. As we look around Europe, our strategy has been more greenfielding, additional manufacturing space due to most of the manufacturing companies are much smaller. They're $10-$20 million companies. And the expense to do the acquisition and fold them into our ERP system, our HR software system, and then comply with another country's requirements seems to be more expensive than just continuing to expand our own operations. So we look for M&A to have something more strategic in nature.
If there was a large manufacturer in Europe that said, "I've got 50% excess capacity and we want to sell," then that's sort of something that certainly interests us because we get more space to manufacture our current backlog and actually create product at a higher volume than we are today at much quicker levels. It's unfortunately a little slow in Europe to actually online new factories due to regulations. So it's a little slower than it is here in the United States. But we are open to mergers and acquisitions. Just we're careful not looking just to buy revenue, but something more strategic in nature. I got three. So go for it. I'll get D next.
The installed base of the replacement cycle, is there pent-up demand, or is that being exhausted in the current moment?
No, I think most of the pent-up demand that we have seen. I think we're more at a normalized state today. Chassis flow has been pretty lumpy, but the volume has been where we needed to be for the last two years. So I think we're pretty at a normalized state moving forwards, both from a chassis perspective and from our manufacturing process. Yes, sir.
Keeping to the point on my first question. Another question, just talking about the sentiment from your customers right now in the commercial space in the U.S. What are you hearing right now? How are they feeling? Or how has the mood shifted since the election?
The question is, what is customer sentiment and the mood shift since the election? We operate in a pretty conservative industry. Our second largest trade show in the industry starts tomorrow. We'll be traveling there to Baltimore. From what I've heard from our Chief Revenue Officer talking to distributors in the couple of conversations that I've had with them post-election, customer sentiment seems to be much more positive. And you had a question up here too.
[audio distortion]
Generally, what we're seeing from a life cycle perspective on our Class 4, 5, and 6 products or our lighter-duty products, we're looking at around 42 months average trade cycle. A lot of that depends on age or miles, so all of our chassis through our chassis program, we've worked with Cummins Engine Company and all the chassis OEMs in North America, and we have a proprietary five-year, 300,000-mile warranty on our Class 4, 5, and 6, and a five-year, 350,000-mile warranty on our Class 8 product, so we're seeing them want to trade that vehicle depending on miles or age before they get to the end of their warranty offering. Class 8 vehicles runs closer to five to seven years. Yes, sir, in the back.
What's your supply chain? [audio distortion]
No. We do import products from around the world. We don't do much of any business with China, so from a Chinese perspective, we're okay. We do import a lot of steel from Italy and Spain, and so it did affect us in, I think, back in 2017 when they put a tariff on all steel, which we passed through a temporary price increase for that. Where the government looks to be going, if it's not focused at the import of high-dollar steel, but at cheap steel, we should be okay. We do quite a bit of business with imports from Taiwan on lighting, and then we get quite a few of our extremely complex valve bodies and remote control systems out of Italy, but although our structural steel comes outside of Europe, we still use a considerable amount of U.S. steel in our manufacturing process. Yes, sir.
Interestingly enough, that if you look at accidents per miles driven, they continue to increase. So miles driven is increasing. It seems that although no matter how much technology we put in the vehicles, our wonderful cell phones and drivers becoming, I hate to use the word lazier, but less aware of their surroundings, that accidents per mile driven actually continues to increase. You're also seeing a phenomenon where most of the manufacturers, to reduce weight in all of our smaller passenger cars, they stopped adding spare tires. So what used to be a quick service call on the side of the road and all electric vehicles lack a spare tire, that if they have a flat tire, a flat tire, what used to be a service call now becomes a tow.
So we've actually seen an opposite reaction from a lot of that, that it's actually increasing the number of passenger vehicle tows. Any other questions?
[audio distortion]
It really depends on the industry as a whole. From what there's not a lot of information out there on it. From talking with consumers, commercial businesses, a slightly higher percentage of total revenue than the passenger vehicle cars. I do get some statistics from AAA on an annual basis that shows us that breakdowns are about two-thirds of annual AAA calls versus accidents at one-third. Yes, sir.
We get labor to respond to a 2:00 A.M. call. Is that driving a consolidation of smaller towing by acquisition? And therefore, as you have larger entities buying, affects the revenue you can generate from those larger entities per truck?
We find it interesting, so yes, there is some acquisition. Usually, what we're seeing is a generational shift where if someone doesn't have another generation to pass that business to and doesn't have an exit strategy, you'll find that a larger tower in their market area may acquire them. The smaller ones, interestingly enough, usually don't trade their vehicles on the same trade cycle as the larger customers, being watching more closely at their cost per tow and the total cost of ownership of the vehicle, and generally speaking, the larger towers are predominantly our clients, so a lot of times, they're acquiring smaller companies that don't necessarily run our product, that we're buying less expensive product from another manufacturer, so we've seen in most cases that it's actually helped us as these acquisitions happen throughout the different marketplaces. Got about a minute left. Yes, sir. Oh, hey, Ben.
Just talk a little bit about you're on the cost side, on the margin side, how you're on the gross margin side. I know you're really looking for automation and things of that. How do you see that playing out over the next few years?
Yeah. I mean, we certainly focus on controlling cost and the input cost of our product on an annual basis. As we've had conversations past, obviously, it's very difficult for us to grow and predict our growth rate in gross margins. Biggest reason being is we have two major components to a tow truck. We have a low-margin chassis. It's not a pass-through, but it's a low-margin sale of a chassis to our distribution. And then we have our high-margin product that we manufacture. What we utilize that chassis program for is another reason to drive consumers through our distribution channel to buy our high-margin manufactured product by offering them extended warranties at no charge, a lower cost of acquisition for the chassis. So giving them another reason to utilize our distribution network.
As we do that, the more successful that our chassis program becomes, the more pressure it applies on our consolidated gross margin. So it's very difficult. We believe that we're in a good spot in the mid-13s, and we can continue there in the future. But projecting where that gross margin will go is relatively difficult. We can do it on an annual basis, but when we look out in the future, it really depends on how successful our chassis program becomes. The biggest driver for increased margin for us is military, as military drives a higher margin on the product itself. And we're usually selling that as a finished good to a chassis OEM who's prime in the contract. So it's almost a doubling effect on the margin because we get a higher margin product and there is no chassis sale associated with it. And I'm out of town.
Thank you all for joining us. We certainly appreciate it. If you have any additional questions, please reach out to Jeff at Three Part Advisors, and we'll be around through this evening. So thank you all for your time.