Douglas Dynamics, Inc. (PLOW) Earnings Call Transcript & Summary

Good morning, and welcome to the Douglas Dynamics Virtual Investor Event. My name is Nathan Elwell, and I handle Investor Relations for the company. Today, we are focusing on how evolving demand is creating opportunities of Work Truck Attachments. Leading the event today are Bob McCormick, President and CEO; Sarah Lauber, our CFO; and Mark Van Genderen, President of Commercial Snow and Ice Control. Today's event will include videos and brief presentations, followed by a Q&A session. If you would like to ask a question, please submit it via the chat feature at any time during the event. The event is expected to last approximately 45 minutes in total. We're going to try and answer as many questions as possible, so please send them in as soon as you think of them. Before we begin, it is worth noting that today's presentation may include forward-looking statements, which are noted here. This presentation is also available on our website at douglasdynamics.com. With that out of the way, let's kick things off with a quick introduction to Work Truck Attachments. [Presentation]

Good morning. Thank you for joining the call today. What a great way to start with that video. And we are very excited about talking more exclusively about our Work Truck Attachments segment. We will cover some of the changes we're seeing in the market and then the improvements we are making in this segment. Before I turn the call over to Bob and Mark, I have 2 slides that should help frame the 2022 financial -- basically our guidance and then also our long-term financial targets. So first, for 2022, for those who listened to our earnings call, you heard that we concluded that our first quarter was as anticipated and that we reiterated our guidance. The key to reiterating our full year guidance for 2022 is twofold. One, in the Attachment segment, we're off to a solid start. We're hearing very positive dealer sentiment and our dealers entered the preseason with low inventories. Second, a big point is that in solutions, we are not seeing a slowing of demand. So our backlog remains at record levels. Beyond our expectations for 2022, I did talk about further evidence of Douglas' commitment to deploying capital to our shareholders. With the strength of our balance sheet and free cash flow generation, we both increased our dividend, again, for the 12th year. And we started to execute share buybacks as part of our $50 million share repurchase authorization. That leads me to the next topic, talking about our long-term financial targets for 2025. We are targeting at least $3 earnings per share for 2025, and this is a compilation of our sales and earnings targets earnings targets for both of our segments. But let's look more specifically today at the Work Truck Attachments side of the slide. Many of you have heard us talk for years about low single-digit or GDP level growth in attachments. This is because we enjoy excellent market share. And with that, top line growth can be harder to come by. Well, now we see a path for more organic growth. Today, you'll see that I have Work Trucks Attachments, aspirations of growth in the low to mid-single digits and an EBITDA profile in the mid- to high 20s. Expanding up to mid-single-digit growth is an outcome of us expanding the potential growth avenues through our commercial snow and ice business in recent years. We now have more paths to support our journey to $3 earnings per share in 2025. I am pleased to pass the call over to Bob and Mark, so you can hear more about how we're addressing these growth opportunities. With that, Bob?

Thanks, Sarah. Welcome, everyone, and again, thank you for joining us today. As Sarah mentioned, we're focused on Work Truck Attachments, but more specifically, today, we're going to talk about our commercial snow and ice control business, a business we affectionately refer to as The Mothership. A quick primer, this is the world's largest snow and ice control manufacturer with 60% market share, brand loyalty second to none, EBITDA in the mid- to high 20s and generates enough free cash flow for us to be able to maintain and grow the dividend. That's pretty impressive. But even more impressive is that while the Work Truck industry over the past 3 years has been navigating the pandemic-generated economic headwinds, our commercial snow and ice control business, continues to move forward, expanding their leadership position and delivering long-term profitable growth. When we look at the Work Truck Attachment long-term strategy, we typically don't spend much time talking about organic growth. Sarah already mentioned this. When you've got 60% market share, organic growth is hard to come by. But quite frankly, that's why we're here today because we want to talk about a really cool organic growth story that is developing here. We're very excited about it and think you will be, too. Let's take a closer look. Snowfall influences performance. Listen, this is not a news flash, right? We've been talking about that forever. Snowfall history, normally between 2,500 and 3,500 inches, the 10-year average stays pretty constant. There is a correlation. There has been, for a long time, a very clear, direct correlation between snowfall and earnings. Snowfall trends up, earnings trend up, snowfall trends down, earnings trend down. Nothing new there as well. But I share all that historical perspective with you because there is something changing here. I do have some breaking news to share. And that breaking news is this: We've delivered strong performance despite near average snowfall. Over the past 5 years, the relationship between snowfall and earnings is changing. So despite snowfall being at or below the 10-year average, not only have we mitigated the downside impact on earnings, but we've posted double-digit EBITDA growth in that period of time. How can that be? Where is the growth coming from if it's not weather-driven? Something's going on here, ladies and gentlemen, something very positive for Douglas Dynamics, and something we're excited to talk about. But you don't want to hear it from me, you want to hear it from the person who is leading our commercial snow and ice control division through these exciting times. I'd like to introduce you to Mark Van Genderen. Mark's been with Douglas Dynamics for 2 years now, after 21 years at Harley-Davidson, where he had a very diverse experience across multiple functional disciplines. Additionally, Mark has a long track record of growing business segments and his hands-on e-commerce experience will allow him to play a pivotal role as Douglas develops our future digital transformation strategy. More to come on that over the coming years. Additionally, and for those of you who know me, most important to me is he is a terrific cultural fit for Douglas. Mark is a servant leader. He puts his customers and his employees ahead of himself. So bottom line Mark's the ideal leader in this opportune time for our commercial snow and ice division, helping it reach another level of performance. So let me turn it over to Mark at this point, who will walk you through the changing market environment and how they plan on capitalizing on this opportunity.

Thanks, Bob. I appreciate the warm introduction and welcome, not just today, but really over the last couple of years since the first day I joined Douglas. And actually, if you think about it, you and I were even talking about it before that. So -- yes, I was pretty discerning and wanting to find a market-leading company that really emphasized the importance of customers and employees through a strong culture and really had a strong professional leadership team that was going to guide the company into the future. And after a couple of years here, I can certainly say that all those things are true in spades. One of the things I really worked on with my team is coming up to speed on the business, having spent so many years at one company and now coming to another one. And they've been great. So I have a good handle, a strong handle on where we are as a company and where we're looking at going into the future. And as Bob talked about, we really focus on how we think about our customers, how they're using our equipment, what they're doing with it. And when we talk about customers, just for clarification, I think our customers for dealers and then also our end users. So the contractors and professionals who are using our products. So as we've dug into the data with our customers and really thinking about the future, there are some key takeaways that have risen to the surface. And one of the primary drivers why I wanted to spend some time with you today. And I'd like to kind of walk through those. The first one, and Bob touched on this, I'll dig into it a little bit more, but he and the team and I have really spent a lot of time together digging into who's being impacted by winter weather, what's changing, and most importantly, how are we as the market leader really staying ahead of it. And a key takeaway is that we're tracking more significant storm events, primarily ICE events further south. We're selling therefore, more attachments in these areas, and we're certainly seeing more ice mitigation sales and equipment in general. If you look at the chart here, you can kind of see in the blue where we've -- kind of our traditional markets, and in the green, where we're really seeing a higher level of expansion as it relates to snow and ice equipment and ice storms in particular. This is a trend that, as we look to the future, we expect this to continue, and it's certainly something as you'll see in later slides kind of how we're thinking about our product plan. A second trend that we're seeing is this societal change of litigation in our industry. So more than ever before, snow professionals are really focusing on responsiveness and then documentation of that work. So we refer to it as slip, trip and fall litigation, but it's really making sure that they are attacking and have the equipment to attack snow events quickly and with all the equipment at their disposal. Their usage of this equipment and the data that we get from them has really provided some deep insights into what we're doing in our products in the future. Along the same lines, there's really an increased awareness and legislation on the volume and types of materials that our end users or professional contractors are using, any application of brine and salt and sand, before, during and after storms. So as the market leader and as we look at this going forward, we know that there's a win-win opportunity here to help our professional customer base and increase our business as our industry follows society in general and becoming more focused on the environment. Okay. But if we look past those 3 or we take those 3 and then say in addition to those, so we've got weather that we're seeing changing. We see some societal shifts. The big one that we're really following, and it shouldn't be any surprise is that the seismic shift in heightened expectations from society during snow and ice events, which is really following what we'd say, emerging customer trends in general. They want snow and ice gone immediately. And our professional end users understand this and have become much more efficient and, frankly, more focused and faster on the removal of snow and ice. The home base, it's really interesting. The home base of a snow and ice contractor in action during a snow event, looks like command central. There's a flurry of activity and precision. They're sending vehicles in and out and people. And really making sure that they have a goal of snow and ice events being what we'd call, maybe at worst, minor inconvenience for customers, not the shutdown event that it was 15 or maybe even 10 years ago. And at the same time, as they're really laser-focused on making sure that snow and ice are gone immediately, many personal and commercial accounts are willing to pay a premium for what we refer to as guaranteed expeditious removal of snow and ice. So our end users, these professional contractors are investing in their businesses like never before, buying equipment to meet these increasing fix-it-now expectations. And as they've invested in their business, we've invested in ours now to support their businesses. It's a driver, I think, as to why I really learned and appreciate since coming on board. And Bob mentioned this, we're the undisputed market leader in commercial snow and ice mitigation. Okay. So this slide is kind of a fun one, right? So in 2010, we pretty much focused on pickup trucks. And this maybe oversimplifies it a bit, but you get the idea, right? It was plows in the front, hoppers and tailgate spreaders in the back. And we were great at it, right? This matched the needs of the professional end users who would use a fleet of pickups, and then they combined that with a manual labor team for sidewalks in the places the trucks couldn't go and they take the time they needed to clear the snow and ice. Often, they would prioritize their prized and profitable customers first, which meant the smaller commercial clients or homeowners might get pushed to the end of what probably felt like at sometimes a very long line. Okay. So jump forward to today in the current state, right? And I love this slide because we're still great at trucks, right? That's our bread and butter. But we're also including attachments for UTVs and front-end loaders and skid steerers and tractors and more. In fact, in that time period from 2010 to now, we've pretty much are -- basically quadrupled the number of SKUs that we offer during that time. So it allows for them for our end users, our contractors, a significant level of flexibility to purchase equipment they need to customize their businesses. And I know that Bob and Sarah have shared this in the past, we're selling these products through an ever-expanding channel as well, all right? So these proactive customer-focused strategies are the reasons why we're seeing significant year-over-year growth in our non-truck sales, which then augments the growth of our traditional products. We made the decision to continue investing with precision during the pandemic, and now we're seeing the payoff of those investments. All right. So here's the kicker. For everything that we've done already, and this is why it's just so cool to join this company at this time, we're really just getting started, all right? So we're taking these learnings and trends, and we've developed a product plan that's building off of the great work that's already been done. So this 4-square matrix that you're looking at here, this is -- it's really our internal rallying cry, right? Every strategy that you see here is an element of our product plan for the next several years. and we're already putting resources towards everything that you see on this slide today. All right. So more ice, talked about that. Well, we've got that covered with innovative, customer-focused hopper and liquid product strategies. More flexibilities for end users and contractors. While we're building on our emerging strengths in the non-truck space with partnerships with the best truck, tractor and UTV OEMs in the business. More snow, well, we're looking at our traditional products in new ways and adding product lines to enhance our long-standing best-in-class product offerings. In fact, I know that Bob and Sarah have previously discussed with you how we're investing in vertical integration, and we expect to publicly share some pretty big product news as a result of those efforts in the near future. So the bottom line to all this is that we're investing like never before to not only be a provider of truck-mounted snow and ice mitigation attachments but a total solutions provider in the snow and ice space for our dealers and professional end users. And that customer-focused business model, well, it drives growth yesterday, today and tomorrow. So I think these charts are pretty cool, right? So if you look at these, they're really focused on our truck-mounted equipment and then select major new product projects that we've got in play right now. They show how our business is changing over time to meet the needs of the market, while providing us as a company and you as investors long-term high-quality growth. So again, short overview, very impactful, but I hope it gives you an idea of how we're looking at an ever-changing snow and ice landscape, and proactively investing where we see the industry headed. Bob, Sarah and I, along with the entire team here, couldn't be more excited about the future of the commercial snow and ice division and Douglas Dynamics as a company. All right. So I'll end with where I started today, by discussing the importance of our customers. We couldn't have the performance we do without the insights and relationships with the best dealers and professional end users in the industry. It truly is a unique differentiating factor for us and one that I was able to experience in-depth firsthand at the annual NTEA show a couple of months ago in Indianapolis. They're professional, dedicated partners in every sense of the word. And don't take it from me, let's hear from some of our dealers in their own words. [Presentation]

Wow, that's all I can say, that is such a cool video. I can't tell you how many times I've watched it. It's one thing to hear from Mark or myself. It's another thing to hear directly from our customers. The thing to me that just jumps off the page when I listen to that video is the strength of the long-term partnerships. We're talking 50-year partnerships with some of our most critical customers. You take that strength and you combine it with the brand loyalty of our end users and the fact that we're delivering the most reliable, durable total solution product offerings in the industry, it shouldn't surprise anybody why we've been the clear market leader for decades and will be for decades to come. Quite frankly, ladies and gentlemen, this is how winning is done at Douglas Dynamics. So let me bring it home. It's all about long-term value creation. If you remember, back in 2019, for the first time ever Douglas laid out some long-term financial targets. That's where the $3 of earnings per share came from. The target at that point was 2023. In that first year of that journey in 2019, we had record earnings per share of $2.42. We were well on our way. I don't have to speak much about what the last 2.5 years have brought to us and the challenges that we've had to overcome in that period of time. But I want you to know that while we've navigated through those unprecedented times, we have never, never wavered from our commitment to reach earnings per share of $3. While battling those headwinds, we've continued to invest in the important few initiatives, the ones that would position us to drive towards our long-term financial targets. Today, we've given you an inside look into one of those key long-term profit opportunities. It's an exciting time to be at Douglas Dynamics, and there's no question the future is bright. At this point, I'd like to turn it back to Nathan Elwell to begin the Q&A session.

Thank you, Bob. With the presentation portion of our event complete, we're now going to turn to the Q&A session. [Operator Instructions] Let's go to the team now where we'll have our first question for Sarah. Sarah, do you think mid-single-digit top line growth in attachments is sustainable?

Absolutely. But this is the CFO talking, I think it's probably more important for you to hear from the President of that division. But let me just give you my way of thinking about it from a financial perspective. We always talked about attachments being low single digits. And we gave you the reasons with the large market share that we enjoy. We have expanded into new channels and new products. There's many new avenues. So call low single digits, [ 2 ] to [ 3 ], going low to mid, call [ 4 ] to [ 6 ]. So doubling the opportunity for growing on what last year was a $325 million segment. So not insignificant and in large part due to Mark's team here. So...

Yes. I would just add to what Sarah shared. When we think about the future, it's kind of these -- the 2 areas, if you will. One is the -- we refer to it as the defend, right? It's where we have the market share on the 60% plus on clouds and hoppers and spreaders. It's where we have played for not just years but decades. We augment that with some of what we've introduced over the last couple of years. The UTV equipment, other areas that we're focused on. So really moving away from true attachments provider of specific attachments and really saying, again, the idea is this holistic solutions provider for commercial snow and ice mitigation. And when we see some of those open areas, we really believe that we can continue this growth pattern for the long term.

Thank you. The next question is also for Sarah. This is from Tim Wojs with Robert W. Baird. Margins look a little lower versus prior long-term outlook in both segments. Is that inflation oriented? Does the EBIT dollar target change? Curious why stronger growth in attachments but margins tweaked lower.

Okay, you caught a lot there, Tim. Yes, certainly, I think you answered your own question on the margin profile. So we, previously in 2019, had attachments with an EBITDA profile in the high 20s. You'll now see today we presented mid- to high 20s. And then on the solutions side, we had low -- or we had single to mid-teens, low to mid-teens and now we're in the low teens. The primary reason for both of those changes is the significant inflation that we have experienced in the last couple of years. And as many of you know that follow us, we've been extremely successful in covering inflation dollar for dollar and does have an impact on margins. We will be working to recuperate that over time. The unknown piece from this perspective in setting targets really is us navigating the future cost environment, which, as everyone knows, is pretty volatile right now. So that was the big reason for the shift, but I do want to also point out, when we look at attachments and all these great avenues that Mark presented today for growth, those also take on a different profile than our traditional core snow and ice margins have had. So I would say they range probably from half of a traditional truck mounted plow, half of the margins up to the traditional truck margin mounted plow margins. So there's a range, and that's going to be very dependent on our success in these different growth avenues and what our mix ends up being.

Yes, I would just add to that, Tim, I wouldn't thread too much over a little bit of product mix impacting the margin profile because the incremental EBITDA that comes along with that is going to be well worth of it.

Okay. Thank you. We have a follow-up question from Tim with Baird. How prevalent are the legislation changes, material use? Is this a few states or municipalities? Wondering what the opportunity for additional regulations are?

I'll take that one, and Mark maybe can add some color to it. It's interesting because this legislative push from a climate perspective and from an environmental perspective, really started more on the West Coast, probably close to a decade ago and is moving farther and farther east. We now see more states in the Midwest and in the East that are trying to regulate or minimize the amount of salt that ends up dropping into water table. So the whole concept of the pre-wetting which you saw in the video, the staff to solve from bouncing all over the place, so it stays on the road and the concept of brine which is putting down liquid ahead of the storm, so you don't need to use the same amount of salt. We think the link to the regulatory environment is going to drive nice growth opportunities in those product lines.

And I think Bob is spot on. And if you look across the landscape, I'd say it's a higher level of awareness right now, that it is specific legislation, which is why it's good. We're kind of looking at it now and getting ahead of it because it hasn't been enacted into specific laws at this point, but certainly, again, higher level of awareness, which is where we really want to make sure that we're staying on top of it.

Thank you. The next question is from Chris McGinnis with Sidoti. And this question is for Mark. Can you discuss the sales channels for the UTV snow and ice removal products? Is it traditional dealers and then other types of locations? If so, how do you expand that reach?

Yes, that's a great question. And I would say, starting a couple of years ago, we looked at a strategy where we said, "Hey, we've got this traditional dealer base that's fantastic." And we don't want to do anything to upset or upend that partnership. But we also know that some of our traditional dealers are more focused on the truck-mounted space than they are in the UTV space. So really went out to them and gave them rights of first refusal and said, "Hey, in your market, would you like to continue to be the truck mounted and UTV," kind of giving them a little bit of a preview of where we were going. And if they were going to be both truck and UTV, then saying, "Hey, what can we do together, right? What does that look like? What does the growth look like in your areas?" A number of our dealers said, "Hey, sounds great. We'll do that." There are others who said, "Yes, you know what, we really -- we're just -- we're focused on trucks." So we would then go in that same market area and find a nontruck or a UTV dealer who had the characteristics of our partners, again, strong team, profitable growth and partner with them. So it's been a combination of those 2 that's worked really well. And then there's an element, I would say -- and I touched on this, you probably heard about it before with Bob and Sarah, of our relationships with OEMs. So John Deere is probably the one that is the one we've talked about the most. There are others in the works. But that becomes a sales channel as well because all John Deere dealers, they think about their gator sales and what they're doing, they become our dealers, too. So all 3 of those now kind of are in our sales channel, are small, if you will, for continued growth and then having a sales -- a professional sales team that's managing and working with them accordingly.

Thank you. We have a follow-up question from Chris McGinnis with Sidoti, and this question is again for Mark. In regards to the newer markets in the South, do you have the same market share in those regions? And can you talk a little about how you're helping those dealers?

Yes, Chris, thanks. As we think about the kind of emergence of what we're seeing in the South is it probably not as advanced as you might imagine, as what we've seen in our traditional markets. So in some cases, we're proactively going and reaching out to dealers. In many cases, truck equipment dealers are reaching out to us and saying, "Hey, this is something that we'd like to get more involved with." So from a market share perspective, I'd say it's probably a little hard to tell right now and to put a specific figure on that. And I don't know -- maybe I'll toss it over to Bob, and he can jump in if he wants to add anything. I was going to say, we'll tell you this though, how we're supporting them is we've got just a dedicated sales team of professionals who understand all of our products that we're offering from the truck-mounted equipment to nontruck snow and ice. So as we have dealer leads or referrals as we move into different territories, we're making sure that we're assigning our sales teams to new dealers to really help them come up to speed and kind of develop the best business model for their market in terms of what equipment they need and what would be best for the types of storms that they see. So...

I think that's spot on. I think one interesting story, if I can call it that, is historically, when there was an occasional ICE event, south of our traditional snowbelt, what you would get is you would get the landscapers who plow north of the Mason-Dixon line with some regularity would drive their equipment south into those states and would charge an arm and a leg, right? It was an opportunity to make money because they didn't have the equipment to do it. And that's how it historically was done. Now with the -- as Mark pointed out, the societal expectations changing, Chris, just -- they're not waiting for those traditional plowers to plow their contracts, then hop in the truck and drive 5 hours south to plow some more contracts. And that, quite frankly, is then is the genesis of being able to set up some more dealerships and some more direct relationships with the end users in that space.

Thank you. Our next question is from Mike Shlisky with D.A. Davidson. This question is for Sarah. Is M&A a part of the $3 per share EPS expectation? Would that instead be above and beyond the outlook?

The answer to that is there are no acquisitions assumed in our target for $3 of earnings per share. It's essentially the margin improvement and sales and growth improvement of our existing businesses.

Thank you. A follow-up question from Mike Shlisky. This one is for Mark. Are there any snow and ice categories where Douglas Dynamics is underpenetrated?

I would say, yes. And when we looked at the slide that had the defend and grow on snow and ice, we got a couple of boxes in there that maybe were a little more ambiguous than what you'd like.

On purpose.

On purpose. But we're certainly looking at those, and that's really been the task that I've had with the team as we look at our product plan over the last year or so and say, hey, where are we? Are we great? Where are we market leading? Where are spaces that maybe we have some opportunity? And then those are the spaces that as you think about that next 3- to 5-year product plan that we're really focused on. I mentioned one, kind of gave a teaser that as we look over in the near future, our partnership with -- our vertical integration with the DBX, that's one that will be coming to fruition. We've got some other things next year that I think will be game changing in the market. But it's a great question because, yes, certainly, we're trying to look at it and say, "Hey, where aren't we where we could be?" Because that's where we get the win-win. It helps us to grow. And it gives -- my goal is to have every contractor out there be able to walk into their dealer partner and say, what anything that I need for my business, I can get through you and I can get through Douglas. That's kind of the way we're looking at it.

Yes, I would just add, since we have an opportunity here to talk about the vertical integration strategy that we've embarked on. What's amazing to me is that every project this group touches, whether they're designing product for Work Truck Solutions or they're designing product for Work Truck Attachments, not only do they give us the opportunity to make in-house something we used to buy but they redesigned the product better than anything in the industry. So not only do we have a product to compete with, we have a better product to compete with. And that's exciting as heck because at the end of the day, as Mark pointed out, right, productivity, reliability, durability, all those things matter when you get such a short window to remove snow and ice.

Thank you. One more question from Mike Shlisky. Does increased passenger car autonomy require more frequent snow removal work properly? Could increased autonomy contribute to organic growth through 2025 and even further out? That question is for Mark or Bob.

I'll take that one, and I'll give [indiscernible], right? That's a terrific question, and I'm not sure I have an answer to. I'm going to have to think about that, Mark, anything come front of mind for you?

No, there are certain technologies, future technologies that we're looking at. You can imagine, as we've seen electric vehicles and how might that apply and work with our business. Technology is another one where we're thinking about, okay, what -- where can we go as it relates to the technology with our equipment and to make the business relationship more efficient with our dealers and with our contractors. But -- no, from a purely autonomous vehicle, that's something we can think about a little more.

I think -- now that I've had 38 seconds to think about it, one thing does come to mind that we've talked about if you think about the technology behind autonomous vehicles, right? It's going to be GPS focused and have rails. You need to know where the road ends, the road starts and stops. And one of the interesting things will be, will there be an increased requirement for roads to be clear of snow and ice, which may get in the way of accurate readings as to where roads stop and start. That -- we've had that conversation many times. That could present a very interesting long-term growth opportunity, Mike, if it is determined that you really have to -- not just to satisfy consumers' expectations they have their driveway clear at 2 in the morning versus 2 in the afternoon, but to be able to have the autonomous vehicle even move down the road. So that will be something that we're paying close attention to.

Thank you. We have a question from Josh Chan of Robert W. Baird. And this one is for Bob. Over time, how do you think about your truck-related addressable market? To what extent can you or do you want to move beyond snow and ice?

That's a terrific question. When we look at the attachments businesses, okay, you look at any work truck that's rolling down the highway, and you can see there's a plethora of different components that need to be upfit onto a truck for work purposes. As we've said many times over the years, and we challenge ourselves with some regularity. Mark came on board a couple of years ago. We brought them into the fold on our attachments acquisition strategy. We still come down here, Josh. We still come down on -- if we're going to be in the attachments business, it's going to be what we call complex attachment, which means it needs to perform a work function. It's got to have a use that's critical to the end user success in that particular work truck application. Why is that important? Because if those conditions exist, as they do in our commercial snow and ice control business, then that end user is willing to pay for the quality and the performance of the engineered product that we bring to market. We've identified and spoken to some of those categories before, right? Cranes, lift gates, winches and hoists, those are all things that perform a work function that matter to the end user. There's a few other that are a ring or 2 next to those. But you're never going to see Douglas -- my favorite example, never going to see us get in the running board business, right? I don't want to be in a commodity business. I also don't want to be in something that the homeowner can install in their own garage with a YouTube video. That's of no interest to us. Again, you don't have the opportunity to provide the value-add component.

Thank you. We've got a follow-up question from Tim Wojs with Baird. And this question is for Sarah. On the growth outlook, I think the math implies $70 million of added revenue over the next 4 years and $40 million of this is new products. What is the makeup of that new product contribution? Is it all non-truck where you have product today? Or do you need new products and subsequent adoption to hit those numbers?

Yes. I think there's certainly a slide in there that had a pie chart that shows new products. The new products expand beyond the non-truck applications that we've already started to endeavor in. It's certainly a large piece of the growth within that piece of the pie, but there are other products and other channels that are also included in that. And certainly, many that we expect that you will hear a lot more about in the next 2 years as we navigate through between now and 2025.

Yes. I think it's also worth noting if you're looking to extrapolate from those charts, keep in mind, that, that is a subset of the entire -- of the revenue for the division. It's not the entire revenue. It's like -- parts and accessories, for example, isn't in there. We really wanted to say, "Hey, let's just look specifically for the purpose of the discussion today and where we're going, truck-mounted front of truck, back of truck and new." So it's not quite as easy as looking at that and saying, "Hey, here's what the revenue is going to..."

Right. I also don't want to -- what I don't want to get lost in this non-truck discussion is the ice control revenue growth opportunities that exist. Those would fall into what we call our traditional right front of truck, back of the truck. But for all the reasons that we've spoken about today, our commercial snow and ice control division has seen some nice growth in the hopper, spreader and tailgate space, and you guys expect that to continue as well.

Absolutely.

We have a follow-up question from Chris McGinnis with Sidoti. This question is for Sarah. Can you remind us in your original long-term targets when they were presented? What was the prior growth rate sort of attachments?

Yes. We originally had attachments at low single digits, and now we've moved low to mid.

Okay. Thank you. We have time for 1 more question that just came in. You mentioned expanding sales channels. How does distribution channel/mix look different now and going forward? And that question, I think, is for Mark or Bob.

Do you want to start, and I'll...

Sure. Sure. I think it's interesting, Mark, in an earlier question referenced our expanding dealer base into the ATV, UTV dealer market. We talked about the long-term relationships that we have with our traditional truck dealers, which is why, as Mark pointed out, we give them first right of refusal to a degree, right? But -- so we have expanded into some ATV, UTV houses. As Mark already talked about some of the tractor OEMs that we have partnerships with. I don't know that I didn't project what the I mean, certainly, the mix of locations won't match the mix of revenue. This is still going to be driven by pickup mounted front of the truck, back of the truck, right? I would think -- I don't know, 5%, 10% of revenue at some point may be coming from these alternate channels.

Yes. I think that's right. And we -- my team and I have had lots of conversations on filing with Bob and Sarah. We're keenly aware of the financial strength of the division. And as we look at and the margin of our products. And so as we look at the future, we're looking at an overall margin profile that we take pride in. And I think that Bob mentioned before, that some of the new product may not have the same margin profile that we're used to. Some may, but rest assured, that's something that is at the forefront of the work that we're doing in product development as well as looking at the channels that's going to be sold through.

Thank you. That's all the time we had for questions today. So I'd like to hand it back to Bob McCormick for closing comments.

Thank you, Nathan. Listen, as I said earlier, it's an exciting time to be at Douglas Dynamics, right? Those of you that have been around with us long enough, know how we think, know how I think, what we do matters, what we do matters big time. But how we do it and who we do it with, those are the things that separate us from everyone else. And I hope you get a feel for that every time you have an interaction with Douglas Dynamics. I will say, on behalf of myself, Sarah, Mark, and the rest of the Douglas team, we thank you for spending time with us today. And more importantly, thank you for your long-term support.