The Manitowoc Company, Inc. 17th Annual Midwest IDEAS Conference

Thank you, Dave. Good morning, everyone. I'm Aaron Ravenscroft. I'm the CEO of Manitowoc. With me is Brian Regan, our CFO, and Ion Warner, who runs our investor relations. Moving to slide 2. Slide 3. Just to kick us off here to get level set. I mean, Manitowoc has been around for well over 100 years, but we've really been transforming the business over the last six years. I joined the business in 2016 when we spun off our food services business, and then I took over as CEO in 2000 amidst COVID. That's really, we spent the first three or four years reducing our costs.

We took $150 million out of the business and really changing relative to not just the spin off the business, but also get ourselves at a much more sustainable standpoint, get to a spot where we could do some acquisitions. In 2000, when I took over, and this is really when we started our aftermarket strategy and shift the business. We know at some point we'll have a cycle, and we'll see a lot of volume increases. When that comes, I don't know. Ten years ago, I would've tried to guess, but at this point, I've given up on trying to guess that.

But we're controlling what we can control, and my tagline to everyone is, we spent 100 years focused on the most volatile, cyclical, lowest margin portion of the crane industry, and the aftermarket, the lifting solutions element of our business is really, we're the nice stable piece of the businesses. And that's really been the emphasis of our business, what I'm going to take you through today. Slide 4 here is just a summary of our business. So well over $2 billion in revenue. We've got a very global footprint, 9 manufacturing locations. As I'll go through the slides, we've increased our locations significantly over the last 5 years with not only acquisitions, but through organic growth. Very focused on growing our field service network as well as our aftermarket sales folks. So I would say historically, we sold big toys for big boys, million-dollar machines. We were whale hunters. We loved to go chase the big order.

Whereas today, we're really shifting to be focused on the jewelry of the business and chasing those onesie, twosie type orders, supporting our customers, and quite frankly, serving our customers. So I would've told you 5 years ago, the majority of my time was spent with the owners of many of these businesses of our customers. Where today, I'm happy to say that we're spending a lot more time with the folks who actually run the service centers. If you can imagine someone who's running a service center, not only are they responsible for some very expensive kit, they're trying to drive their utilization, but folks who run cranes is a tough business.

So they're a cast of characters, and we've got to find ways to help those service managers really drive their business and take things off their hands and make their lives easier. I view that as just as similar as when I was a supervisor on a shop floor working with Fastenal. So there's a lot of activities that are out there that can be done to make your lives easier so you can focus on the real core of your business, and that's how I see Manitowoc as we move forward. As you can see, we've sold over 100,000 machines in the last 20 years that are out in the field, so lots of opportunity for us. I think that's probably the blessing of the big boom in 2008 and 2009, was all of the machines that went out into the field.

And as we'll go through in a couple slides, there's an opportunity for a refresh, but until that comes, we see that as an opportunity to continuously grow, not just our parts, but also our service. So slide 5 is just The Manitowoc Way. This has been a big part of how we've driven the culture since I joined the company in 2016. Very focused on the implementation of the Toyota Production System, a real culture of continuous improvement. And to me, this example really signifies everything that we're about at Manitowoc. So we recently had a Kaizen at our Wilhelmshaven facility. So firstly, the picture of the crane in the back is an 8-axle crane that will sell for several million dollars. We started to engineer that a couple years ago. It's got hundreds of thousands of engineering hours behind it.

It'll lift 700 tons, and it drives down the road. There's a lot of rigging associated with it and safety. Number one at Manitowoc is how do we improve our safety? Initially, we designed this Kaizen to improve how we actually do the lifts on the jibs and the mega wings at our actual locations where we're going to be testing the machine because we're in a business where any accident could be a fatality given the nature of the size of weights and the heights that we deal with. We were going to run a Kaizen to make sure that we really knew how to deal with this piece of equipment at our own location, and then that quickly evolved into how do we do it more productively. We ended up inviting customers to work with us as well as some suppliers.

We had this real cross-functional team of doing a Kaizen to say, okay, when we start to sell the eight-axle crane, how do we tell folks to actually rig up the piece of equipment to do it, number one, in a safe way, but then number two, in a productive way. We had a big group of people giving us insights on, hey, when this unit's out in the field, because time is money. When you're rigging, no one's paying you to rig up the machine, but it could take an eight-hour shift. At the conclusion of it, I think we had well over 100 action items, and we had several new products we designed. We actually have come out with a kit that we'll sell. We've never sold a kit before to actually rig our own equipment.

If you think about just like lifting the counterweights off, we've just left that to folks who've been in the crane business for 100 years. We never actually engineered how we do those lifts. A lot more emphasis on safety around the world, and we're trying to take advantage of that and do it upfront and create some aftermarket products at the same time. Big thank you to the customers that attended this Kaizen Event. Slide 6 is what we call the crane cycle. This is our sales. I think it's directionally correct relative to what you've seen and how the business has cycled through the last 20-some years.

The first thing I'd say, it's not inflation adjusted, so when you look at our more recent revenue, what looks like growth, I mean, a good bit of that is the tariffs and the inflation we've had. It's been about 10 years where the market has been pretty depressed. If you look at the rental fleets around the world, they're typically in that sort of 15-year average age fleet, which means you've got a lot of machines that are 25 and 30 years old. The maintenance would be eating you alive. We see this as a huge opportunity at some point where they're going to refresh the fleet. When that comes, you never can tell. Definitely our orders have been great the last three quarters and feel really good about where the business is going with just the nature of construction around the world these days.

In the meantime, we're very focused on how do we break that cycle. For us to break the cycle, number one, it's how do we grow our aftermarket, which we'll go through some slides. We're well over $700 million in aftermarket. When we started, I think we were $375 million six years ago. That'll flatten out the curve for us and be much more predictable for us. The other element of this is us buying our dealers. A lot of folks don't realize that just the nature of the crane business and the build schedules, we actually will create these booms and busts as folks try to get on our build schedules. A good example is if you look back to 2009, we had $1 billion of cancellations in the first quarter as entirely driven by dealer cancellations.

This is a situation where when lead times start to get long, dealers are chasing to get on the build schedule, and you're taking orders that are a few years out. Today, Manitowoc, we typically try to keep that within a 12-month window. It protects us against inflation and some of the other tariffs that we've seen in the last few years. The other element of that is trying to avoid these massive booms and busts, because typically what happens is when the market gets really hot, which you would have seen in sort of 2006 and 2007, dealers again, are sort of a run on a bank to get on the build schedule to make sure they're able to get units. Then all of a sudden they wake up one day and their balance sheets are full, and they turn the faucet off and you see the drop.