The Manitowoc Company, Inc. (MTW) Earnings Call Transcript & Summary

Hi, everybody, and welcome. Thank you for joining us this afternoon. My name is Ann Duignan, JPMorgan machinery analyst, obviously, for any of you who don't know me. Delighted this afternoon to welcome Aaron Ravenscroft, the President and CEO of Manitowoc. We also have the CFO, and we have Ion online too. So Aaron, I think you're going to lead us through some slides as a way of introduction, some background on Manitowoc, and then we'll open it up for Q&A. If anybody has questions, you can put them into your system, and I will be checking here on my website to see if there are any ongoing questions. So with that, I'll turn it over to you, Aaron.

Thank you very much, Ann. Good afternoon, everyone. If we would just start on Slide 2, just point to the direction of our safe harbor statement. If you have a look at that and read that, we'll cover off our legal issues relative to the presentation. Moving to Slide 3. I wanted to introduce everybody to the purpose and values of Manitowoc. This is something where you recently launched internally at the start of the year to talk more, well, not just our internal customers, but also external folks about what is our core, what's our mission, what's our vision for the business. So one of the things that we get lots of questions about is, where will we go long term? Are we going to remain focused on mobile and tower cranes? Or will we expand beyond that? So we've drawn a line of sand, put a stake in the ground and said, look, this is our core of our business. Our mission is to continuously develop reliable innovative lifting solutions back to buy expert service and support. But the real vision of the business, I think what gets people excited at Manitowoc is the application of our cranes. It's very motivating and inspiring for our organization when we travel around the world and we're able to see how we're changing our local communities, whether it be rebuilding something like Notre-Dame in Paris or building Burj Khalifa in Dubai or an airport in Kuwait or a stadium in Texas. So this is really what is the vision for our business. We play an integral role in building the physical communities of future generations. And that's really what drives the innovations that we want to build out for lift solutions. But then on top of that, how do we support those technologies? So that is the purpose and values to the business. If you flip to the next slide, we've outlined our core values, what really is the basis and the foundation of the Manitowoc way and what we value as an organization. So we have 4 core values that drive everything that we do in the business. First is, I do what is right. Second is we work as a team. Third, we deliver results. And then lastly, I'm a role model. So within the context of that, we've also identified some of the behaviors that we value as an organization. And to me, I really believe in the simple theory that values drive behaviors and behaviors drive culture. And for a long time, we've driven -- talked a lot about the Manitowoc way, and now we're trying to go deeper in terms of what does that mean and how do we behave. So I think that's a core part of what we're doing to build our organization in the forthcoming years. If you would slip -- if you would move to Slide 5, this is just a quick touch point on what are the aspirations of the business. First, in the crane business, very high risk in terms of the intensity of injuries that we can have. I mean, cranes are very large, and they're using very complicated applications and one used incorrectly, unfortunately, the risks are humongous. So as a company, we're striving to have 0 injuries in our business. And one of the things that we use to do this is safety observations. We call it SLAM, which is stop, look, assess and manage. And this is something that we track very closely as a proactive measure on how we're managing our safety throughout the business. So last year, as I'll show on the next slide here, we set a record for lowest RIR, recordable injury rate, in the history of our company. So made some good progress, but we still have a long way to go. Second bullet point here, our long-term vision is that we can get back to $2.5 billion in revenue. Lots changed since the peak in 2007, 2008 time frame, but we still believe that there's plenty of opportunity for us to grow. And of course, our market is very cyclical. But I think between what can happen within the market and the things that we can do with acquisitions and our organic growth initiatives, we can get back up in that space, which is a big driver to the bullet below relative to our double-digit EBITDA margins at the peak. And then within this framework, we're going to use acquisitions to help us accelerate our initiatives. And our real focus as we go forward is how do we add more aftermarket, more non -- more recurring revenue streams and reduce our cyclicality. So with that, when we click to Slide 6, take you through some of our safety vision. As I mentioned last year, we did reach a record for our business of a recordable injury rate of 1.34. One injury could result in fatality, and that's how we try to approach it at Manitowoc. Our goal is 0. However, it's constantly improving. And in order to do that, we continue to set higher and higher expectations for our SLAMS and interactive observations as you see in the bottom right-hand corner. So this is our safety division that is continuously communicated throughout our business. And it's something that we're doing on a regular daily, hourly standpoint from -- with respect to our SLAMS initiative. Moving to Slide 7. Talked a little bit in past presentations about what our strategies are. So 4 key strategies to drive the business. One is expand the European tower crane rental fleet. This is something that we've just started to invest in, and we'll invest $10 million to $15 million in. But this is a perfect example of something that we can do more of that will generate recurring revenue streams, whether the business is up or down, it's a very different cycle than the OE, and it comes with more attractive returns and margins. So great opportunity for us as well as to grow our OE business. Sometimes you do rental in order to sell something 2 years out. The second bullet point here is scale up our Chinese tower crane business. So historically, we had used our Chinese operations more of a manufacturing plant than really a business. But this is really our platform to grow our tower crane business in the belt and road regions. So we continue to add engineers as well as salespeople and launch new products. Third bullet point here is accelerate new product development in our altering cranes. The last few years, we spent a lot of our efforts on the engineering side in all-terrains to meet the new Tier 5 regulations. So as we come out of that and we head towards the next Bauma, we're very focused on launching a few new cranes, and we'll keep those in hiding until next year at the Bauma Show, but there's a couple of different things that we look forward to sharing with everyone. But this is a good opportunity for us to grow one of our core businesses. And then lastly, we're actively pursuing acquisitions that really help us catapult all these initiatives to the next level. So as I say, our long-term targets are when the market gets back to more exciting times that we get in that $2.5 billion region for sales and double-digit EBITDA margins. Moving to Slide 8. This is just a quick summary of what is the Manitowoc way. I really see this in 3 buckets. Whether it be Kaizens in terms of what we're doing on in the shop floor in our offices to get more productive; improve our quality and delivery; or whether that be innovations, and that may be, in my mind, not just new product development, but also the things that we do to try in our factories to be more innovative to service our customers. But all of that comes down to employee engagement. So these are the 3 buttons that we're really pushing to get closer and closer to our customers and do a better job of providing value to our customers. But this is the heart and soul of our business, and it's our business system. Moving to Slide 9. This is just a quick summary of our revenue and adjusted EBITDA results over the last 5 years. Of course, 2016 was a down market. And I really point to the fact that we reduced our cost by over $100 million over the last 5 years. And if you look at the results that we had in '16 versus '20, that's a good indication of the sort of improvements we made while we increased our EBITDA quite drastically on significantly lower revenue stream. So the initiatives that we had over the last 5 years to reduce our costs were successful. Unfortunately, the global pandemic gives us the opportunity to prove that we can do this and be profitable at a much lower level. And 2020 was a great year for us. And as we look forward -- it's continuing that, but really starting to focus on growth and figuring out how we grow our top line to help take our margins and our profitability to the next level. And then lastly, moving to Slide 10. This is just a summary of our capital structure and liquidity. So in 2019, we renegotiated our debt, gave us over $6 million of savings and interest costs. We've got no debt maturities until 2026. And unlike our 2016 debt, this new debt gives us a lot more flexibility and will allow us to do some acquisitions and invest in organic growth more aggressively than we could have before. And that's especially important since our total liquidity is in excess of $400 million at the end of the year last year. So those are our major slides here. I just wanted to give everyone a quick summary of the things that are going on at Manitowoc and how we've evolved since we spun off the foodservice business and how we see the future as we come out of the current downturn. So with that, Ann, I'll turn it over to you for questions.

Yes. Thank you for that. It was a good recap of the business. Coming into this year, your guidance was quite cautious, I would say, with not huge visibility, couple of large orders into the end of the year. Can you talk a little bit about where we stand today and walk us through the various regions of the world and water utilization rates like in North America, I think tower cranes in Europe were doing okay, Middle East was a bit better, Asia was okay, but talk us through where we are today and how much visibility you really have by region or by end market, please?

Yes. So not a whole lot has changed since the fourth quarter, to be honest with you. And part of the challenge that we have is that January, February are the slow periods of the crane business. I mean, people really want their cranes come March, April, May, as construction sites get active. So we still have very little visibility into the business. But I would say that for the most part, the trends that we talked about on our earnings call have continued in place. Europe, the vaccine continues to roll out extremely slow. The mobile business has been pretty soft or remains where it sort of was at the end of last year, and the tower crane business still looks good. So that's, I would say, holds up. In the U.S., this is the period where utilization rates are just naturally lower. That being said, I think that we feel better that our dealer inventories are in line where they need to be. But we still haven't seen any major change. I know there's a lot of discussions about infrastructure in the United States. But I mean, that's a long time. That's something that they just talk about I think on the news at this stage, but we're months and months and months before that would come to fruition. And then Asia Pac, it's a real mixed bag. I mean, China has been very strong. Korea has been extremely strong as they're headed into their own presidential election. You see a lot of different activities that governments put forward that benefits the tower crane business. And Australia has been a strong market for us. So -- and the markets I haven't mentioned such as Singapore and Hong Kong, they've been pretty soft, I would say. But not a whole lot of change. I think it's still going to be a couple of months as we get into the spring, and we see the vaccines roll out, and things start to get back to normal before we'd really see a change in direction.

Yes. Is there any risk in the U.S. that things could get worse before they get better? I mean, if I look around and this may not be representative having nothing outside of Manhattan for a year. But I see a lot of projects being completed and not a lot of -- purely to your point, it's not spring yet, but I don't anticipate a whole lot of new projects starting up. And so I can envision a lot of nonresidential construction activity just coming to completion and then a lot of equipment coming off those jobs and going back into the rental channel. So utilization rates take a bigger hit before they get better. Any risk of that happening in the U.S.? And then where are the bright spots if there were any bright spots?

Yes, that's a great question, Ann. And I think that's really reflective of the position we took on the last earnings call. Everyone's asked why we were so conservative on it, but a lot of it has to do with the uncertainty what happens in the United States. A lot of the large crane rental houses, they've been focused on managing their balance sheet through 2021. There's not a whole lot of confidence out there relative to the infrastructure projects. I mean, there's a lot to talk. And until we start to see confidence, you don't really see a lot of action. And I think that on the backdrop of just where commodity prices have gone and the discussions around inflation, makes folks pretty conservative around how they spend their dollars. So I think that's a fair point, Ann, and something that keeps Dave and I up at night is how this will truly reopen. But you know the crane business, that can turn off extremely fast and turn on just as equally fast. So hopefully, it comes back quickly. You asked about some bright spots about -- around the United States. So the one bright spot we saw really in the fourth quarter that we had mentioned is the wind business. So once the Biden administration -- and this is, I think, really a good example of the confidence play you see in the crane business. Once the Biden administration, it appeared that they were going to win and come on. You saw this buildup in the wind industry where everyone is expecting that there will be more investment in wind, and we saw some nice sized crawler orders for that space in the fourth quarter. So to me, I'd say that's the one big bright spot. I mean, the low sides are still Oil & Gas market, even with oil prices up, there's still no new projects and utilizations way down. So we'll have to just see how that plays out as the year moves along.

Okay. And correct me if I'm wrong, but your callers come out of Germany, if I'm correct?

No, actually, our crawlers come out of Shady Grove.

Okay. The crawlers come out of Shady Grove.

It's the ATs. Yes.

The ATs come out of Germany. And I think you had commented on the fact that, that facility was way underutilized. And maybe for investors, you could give us some perspective, like how many terrains did that facility manufacture? How many did it manufacturer last year? Any sense of how to quantify where we are in the cycle? I know for competitive reasons, you're probably not -- I don't want to say, but any little snippet that would help us?

Yes. So I think 2 good points is we've roughly 1,000 employees in that facility. And in Germany, you'll use things such as Kurzarbeit where folks aren't laid off, but they only work, say, 3 days a week instead of 5 days a week. So there's a lot of flexibility within the social framework of Germany's labor markets. That gives you some idea how to scale the facility. If you go back sort of to the hay days in the '07/'08 time frame, we're probably half of where we were then. So in terms of a capacity standpoint, I think there's a lot of spring capacity, just the way we managed through COVID with the social plans. But I mean, we've made some investments to improve productivity. And I think the real kicker there in terms of how many units you could mail depends on, is it a 3-axle crane or is it a 6-axle crane because it's a big difference in terms of earned hours. But I think the real point though, Ann, is, yes, we've got a lot of capacity and a lot of opportunity. If the all-terrain business is to come back on strong, there'll be a nice lift for us.

And is there any specific end market or any specific region that could drive that or would drive that if you wish first?

Yes. It's interesting because each sort of region is very cyclical. Right now with the U.S. where it is at the oil prices where they are, the business softened. And some of that has to do with just how many units are in our dealer fleet too. But I can tell you that in the last upturn, we had a dramatic increase in our all-terrain business in the United States. And then again, it happens almost overnight. The thing that we're struggling with right now on that business is Europe is historically very, very stable. I mean, I say stable, it will go up and now maybe 10%, which in this current environment, it feels that it's been much stronger than that in terms of just the softness of it. So if we can get both of those markets to just come on modestly, that would be a big pickup for the business.

Okay. Because I think when I look at your model and I look at your targets, you're long-term targets, I don't struggle as much with getting you to your margin objective because of the costs you've taken out and because of the leverage in the business, to your point around where your capacity utilization is. I think what we all struggle with is how the hell we get back to or get to $2.5 billion?

Yes. So I always go back to when I was an analyst back in the early 2000s. I remember everyone thought that the JLGs and the Terexs and the Manitowocs, everyone used to ask me, are they going to survive? I think it was like 2001 or 2002. And then you could look at where they got in 2007 and 2008, I mean, Manitowoc got up to $3.8 million. I don't think that's going to repeat. But I think with what we're trying to do with new products as well as with some of the acquisitions that are out there, that a little market lift and a couple -- our ability to execute on a couple of those initiatives will get us close to $2.5 billion. And I want to put out a number out there that we fight for and makes us go try a little harder than you would if you just rode the market.

Good. Fair point. Thank you for the answer. Yes. And speaking of which, let's dig in a little bit more into M&A and where you might see opportunities? What would you do? What would you not do? And besides just large versus small, but what adjacencies might you look at on things like aftermarket, but no, I'll never get into [indiscernible] journal, something like that? But just put some frame of reference around what...

Yes. I mean, I hate to say never on anything.

Never say never on anything?

I know you're taking notes, Ann, and you'll get me in trouble. Because sometimes you do have to be opportunistic and look what's out there. But that -- all the joking aside, I mean, we're very focused that it will be in our core business, in businesses that we're already very familiar with. How do we grow our service, how do we grow bare rentals, how do we do RPOs. I think that the things that we're doing with the European tower fleet, that's a good example of what we'd like to do more of. We picked that market specifically in Germany because our market share has been historically pretty soft, and our dealers are excellent there for the small [indiscernible] cranes. But they're on the smaller side, don't always have the balance sheet and the ability to go after some of the bigger accounts. So we're trying to work hand-in-hand with those folks to use some of our balance sheet to get in accounts that we historically have been in. So there's some good parts that would help us grow our market share for the core OE business. But then it also comes with this nice revenue stream of the rentals, which always ties us in a more closer service work and parts work. So I think any acquisition sort of meets that framework is really what we're interested in. The reality of being the CEO of a crane business is it's fun and exciting to see your stock price go up like we've seen in the last couple of weeks. But you have to stay grounded and keep your head in the mindset that eventually the market will turn down. And when we see the next downturn, we want to make sure that our aftermarket and our recurring revenue streams are much higher than they are in this market. So helps us pat ourselves as we enter into the next down market. Now that's really when I think about acquisitions, what we're focused on, valuation is crucial. Personally, Dave and I like smaller deals. I know everyone argues all the bigger deal. This is much work to do, a small deal is a big deal. But typically, my experience is you get a lot more leverage off of the smaller deals and better valuations. So I think we've got to be smart. We've got some nice liquidity. We just got to be really smart about how we use it to get the best bang for our buck.

Just a quick follow-up on that one. What kind of leverage are you comfortable with where -- how far would you be willing to stretch the balance sheet? I know it depends on where we are in the site?

Yes. That's what -- I mean, that's always so hard to answer the question.

Yes.

Our standard answer is maximum, say, 3.5x, but 3.5x is totally different if we're at the top and when we are at the bottom. And I think that's why it's so important that we're buying businesses that have more stable revenue streams than the normal OE, not so cyclical. And of course, in the aftermarket, you get better margins than you typically do with OE business.

Okay. I have 2 follow-ups on that. First one is this whole strategy of rental in Europe. I guess, I'm curious why haven't Manitowoc done this before? I mean, what are the risks to doing this? Is it the fact that you may have to take the equipment back on your balance sheet in the bad times and write it down and have some write-offs? Is that the biggest risk? Is that what prohibited your predecessors from doing something like this?

Yes. I mean, I think some of it too is that the business has evolved over the years. I mean, historically, especially when you looked at Europe, dealers were dealers. But over the last 10 years, you've seen dealers evolve into rental houses where they're doing this sort of work. So I mean, I would say that's sort of in our big core business. And we're not looking to compete with those dealers. But when you start to look at other markets where we're weaker, I actually would argue that's sort of where we're losing some market share against some of our competitors. So it's become a natural part of the business. So I think that's probably one of the driving factors that we wouldn't really consider, say, 10 years ago because the business has changed. Yes, the risk of it is just what do you do when you're in the next downturn and the utilization. But frankly speaking, especially from what I've observed in the last year, most of those businesses were much more stable than what we were in terms of the revenue stream.

Okay. And so you talked about aftermarket and growing the aftermarket, but I don't naturally think of terrains as having great aftermarket. And the joke in the industry, I think, with Caterpillar, I would say, why don't buy crane business and settle up specialty steel in a row? There is no...

We have benchmarked several big players out there throughout cap goods. And I'd say our 18% to 20% in a good market as a percentage of revenue is not that much different. I mean, it's how do you tack on? And of course, we don't make engines like Caterpillar, right? So I think that's the part that makes it tough for us to really generate revenue. And I think that's why we got to start increasing our view of the world in terms of what we can do to capture it.

Okay. Fair point. And talking about engines and the whole trend towards electrification, I'm assuming for somebody like Manitowoc, it's just assembling the pain, after all you're not producing the engine. It's kind of like you're indifferent as to what the drivetrain is, give me battery pack, give me ICE, whatever the customer needs and whatever the customer is willing to pay for. But how quickly are you seeing the trends change in Europe. I mean, we're seeing more and more cities than, diesel, et cetera, et cetera, is a bit coming. Will it become more of a replacement cycle issue because you can't win a contract in Paris because your equipment has a diesel engine?

There's been a couple of cranes that have been out there driving around, but I haven't seen some massive change in trend or want now that can change fast. I think that being said, one of the complicated parts you have with -- especially like an all-terrain is you're managing axle loads. And that's what makes it so hard even when you change from Tier 3 to Tier 4 to Tier 5. I mean, battery is big counterweight, I guess, but how you would manage those axle loads, I think, makes it pretty darn hard to use an all-terrain crane as a taxi crane, which I think it would fundamentally change the way the crane business is done if you went that route. So I think there's going to be pressure from crane operators who have all the current cranes and that's the game that they play to get as many jobs in a day that they can't to make money. So I think it's more than just the technology play. There's going to be some big economic changes and application change how you run the cranes. So I'm not sure when that will come. I mean, I think the other thing that we struggle with the crane business is we're not making hundreds or thousands of cranes. So our footprint is pretty small relative to, say, an automotive company or even an excavator company with respect to how many units are out there. The other thing I would add is that when we went to Tier 4, you saw a lot of us move from 2 engines on an all-terrain crane to single engine. So we're continuously making some gains too.

Okay. That makes sense. And talking about the workload of a crane, I'm assuming a lithium-ion battery will go very far. And so you've been lead acid or 1,000 lithium-ion batteries hanging out at the back of crane. And switching a little bit more to the near-term again. Let's talk inflation. Let's talk in 2 contexts: number one, steel inflation; and number two, just shortages and logistics issues. And any update to either of those from you today?

Yes. So starting with steel shortages, we haven't seen any steel shortages yet. I mean, we've seen some other products that are having problems but not steel. So that would suggest that the steel mills are -- they have capacity. Now we fully expect like everybody else that they'll come online with more capacity, given that prices are way up, and that will help stabilize it. And so steel prices will be a challenge. We have some coverage in different areas of the business. We have started the push on pricing. At this stage, I'd say it's more -- every big deal is negotiated. So we're putting stronger and stronger context around steel work and pricing relative to our sales guys and deals that are negotiated, but we've also communicated to some of our dealers we've done price increases. So we're hopeful that this levels off and it doesn't get totally out of control. In the second quarter, we should know what the status of that is. But we're pretty comfortable right now that if we saw what we saw a couple of years ago where sort of peaked out after 3 or 4 months and that started to drift back down, we would be okay. And then you asked about logistics. So there's still -- are the big logistical -- well there's 2. One is in China with the containers. It's hard to get containers to stay and it's caused prices to go bonkers. We still see some of those challenges. It feels like it's -- and I'm going completely just from hearing internal team members yelling that the pain isn't what it was, say, 4, 5 weeks ago, but it hasn't gone totally away. In the United States, I think just this change of COVID and the things that Amazon is doing because they're doing so much more shipment that now they've got priority on lanes where that's become a little more logistically challenging for all of us. Nobody has the volumes that Amazon does. So I mean, sort of get in line and start to manage what it's like in the new world.

Interesting. A couple of follow-on questions. First, maybe switching a little gears towards working capital and the cadence of your cash this year versus normal years. I think you said this year would be a bit more weighted towards front half versus back half versus other years, it would be vice versa. So what should we expect?

Yes. Again, COVID has sort of thrown off our normal cycle. Normally, we would consume cash in the first half and generate cash in the second half. And that's really just around inventory management and receivables. Now we're in this environment where we feel really good about where our inventory is and where we'll be in the first half. I'm somewhat hopeful that we start to see a pickup in the second half. And as we get a pickup in orders, we need to bring in inventory, ship more cranes and start to produce more receivables. So as I say, it's sort of tailed to halves in 1/2. I'm hopeful that we have this issue because it's a good indication that the business has gotten to be really robust in the second half. But I do expect that we will be okay. We won't see that normal build in inventory that we see in the first half this year, but it may come in the second half of business picks up as it appears it could.

Okay. And just talking about inventory and working capital, at any given point or any given year, how much of your inventories actually used equipment? Because I know you take trades and now you've got the rental business, and those all come back on the books. And so inventory depletion last year, I think it was more used, not new. So can you just talk about that more?

Yes. I mean, we don't normally disclose sort of what our used inventory is. What I would say is that there's from time to time, depending on the timing of trade-ins, we can see our use go up, say, $20 million or $25 million, and then we manage it back down. But some of that is just how we're doing trade-ins. And then as it gets -- as it appears because you've got 2 things happening. One is the trades coming in and then the market's falling off, then we get tighter on that. So at the end of last year, we generated a fair amount from use, but actually not as much as wanted to. In fact, to me, the surprise was that it came lot more out of the manufacturing plant. So we've seen little more progress on that in the first quarter. So that's why I say it's in total of our total inventory it's something that we track and needs to be managed, but it does have some give or take and I feel that, that's really good under control now.

Okay. Good. And then the follow-up question, something said earlier and that's around your whole China strategy and are we....

Here we go.

Are we a day late in the dollar shorts. We've been going to China for many, many, many years and cranes would help commodities maybe 15 years ago in China. But where are we? And can you really be successful there being this late to market?

Yes. So a couple of things. That's a big question and answer. Let me think where to start. So first of all, the market is massive. There can be as many as 30,000, 40,000 tower cranes a year. We do believe that there will be a bit of a renaissance because a lot of those cranes were of lower quality and they need the crane. So there is a refleeting. And from our standpoint, if we only refleet 20,000 cranes, that's 20,000 cranes. That's a lot more than any other market in the world by humongous magnitude. So I think that the business is there. Photon has been in China since the 1980s. We had some royalty contracts with some folks. So the brand is extremely well-known and appreciated. So I think that bodes well for us. And if I just look at the success that we've had in the last 2 or 3 years, it's been pretty dramatic. I mean, when I first took over the tower crane business 4 or 5 years ago -- I guess it was 3 or 4 years ago, mean, basically, we were nonexistent. This year, we'll sell a couple of hundred cranes in China. So I don't see it as we've got to sell 10,000 cranes, but it's still a big opportunity for us to tap into that we haven't tapped into in the past. And what also is important, that is also not just serving China, but those products end up servicing all of the peripheral regions, which is also a good opportunity for us. So I think that we're not too late, and we're pretty fortunate on the power crane side because of the brand equity that we have in China.

What do you think -- not look back, and this doesn't -- I don't mean cascade any blame or anything, but what were some of the mistakes that the business may have made initially? And what are some of the things that you were doing specifically to create success as opposed to 10 years or 15 years ago?

Yes. I don't think it's an issue of blame. I think it's an issue of just where China was. I mean, if you go back in the '80s, Photon had cut agreements, I think, 3 different companies where we had shared technology. And then typical 1980s in China, the technology went everywhere. So by the time you get to the '90s, we're extremely conservative. And so when we set up the manufacturing facility, they were basically building legacy products and we weren't developing cranes in Asia Pac, in China with a Chinese specification. And I think that's the real -- that's one big change. And then the other change has just been around financing. It went that long ago, 10 years ago, that most of the deals that were done in the crane business, not many people got paid for all those orders. So a lot of dynamics have changed I think that make it more favorable for us today to feel comfortable to go into the space.

Okay. And then I'd be remiss if I didn't ask what about location from the Chinese in other markets? We generally think about the Japanese as being -- and the Europeans, obviously, being your biggest competitors, but more and more of the Chinese are moving out. Initially, it was emerging markets. But it's funny when I open any of my trade magazines now 90% of the ads in the trade magazines are Chinese companies with their equipment being advertised. So can you talk about that a little bit? And do you -- are you concerned that that's going to get more aggressive as we go forward?

Yes. I mean, I have a lot of respect for what the Chinese companies have done. They have huge product lines and our products continuously get better. So I think we'd be shortsighted to say that they're not competition. They make better and better products every year. That being said, there are different regulations that make it awfully difficult for them to enter into markets like North America and Europe, whether it be Tier 5 or the new EN regulations or just all the different axle loading regulations in the United States. So there are some barriers to entry that make it more and more difficult for them to enter markets like that. But definitely see them on a regular basis in the Middle East and Asia Pac, and we have to respect them and get more and more competitive every day. So we can compete with them and win a few orders.

Okay. Very difficult to pick out one metric that we might watch for as a leading indicator for your business, obviously, so many different end markets, so many different regions. But used equipment values is usually a good leading indicator for most businesses. From what -- again I've been seeing in some of the trade magazines, used equipment values have been quite depressed in the U.S., in particular, and we have seen some consolidation amongst the dealers. So can you talk about both of those as challenges for growth as you go forward?

Yes. I mean, we track all of the these pricing. Of course, everyone goes to Richie Brothers, and we read the reports. But from my experience, most of the used deals aren't happening in that sort of trade environment. Normally, when they go to that market, people -- I always say they're dumping them, but they've made a decision that they want rid of the asset, and then the price isn't nearly as important as it would be if you were not in such a liquid market, right? So I don't necessarily think that tracking Ritchie Brothers used equipment prices as the best indicator because normally when people get in that space, they're just looking to move it off their balance sheet at any cost to collect as much cash as they can. So I've sort of seen that over the last 5 years as I've tracked it because at first I thought well, that's a great indicator. But in fact, more of it comes through the trade-ins where you really understand what the values are. In terms of a single indicator, yes, I don't -- I tell everyone it's confidence, which means you've got to go talk to the crane guys and gals, if you want to get a good feel, but that's what drives our business. It's confidence, whether it be the dealers ready to make investments into their inventories for the preparation of the market to come back or the crane operators just in preparation for business to pick up. So to me, that's what I sort of track is all my interactions with those folks and how confident they are in the business. And where they see it going in the next couple of years and their comfort level of starting to invest. And your last question was on consolidation of our dealers. So we haven't seen so much consolidation in the dealers in the last couple of years. There is continued consolidation on the crane operators. I think that's sort of normal course of business. Sometimes that favors us, sometimes it doesn't. We have good relationships with all the major crane operators. And we also appreciate their goals of getting scale and being more efficient. Sometimes that actually makes it a little bit easier for us to do business. So I think there's pluses and minuses, but there's nothing there that actually scares me or worries me or anything like that.

Okay. I think we're almost out of time. But if I can squeeze one last one in maybe. I think you talked about $15 million coming back in costs, discretionary costs coming back. Just as a CEO, are there costs that won't come back, like travel, trade shows, a lot of discretionary costs that you're having serious discussions internally about -- around well we're never going back to what we spent in 2019 or '18 or whatever. Just curious what CEOs talk about around...

Yes. I mean, I think that's changed some. I think if you look back 6 months ago, we all said no one was going to travel again, and I've been stuck in my basement since I moved home from France in June. So I'm ready to travel. I'm ready to get our sales guys out and gals out in front of our customers. So I don't think that we necessarily need to make every single trip that we used to in the old days. I do think that some of that will pull back. But I don't think that's a huge number. I think that's -- there's some level of it, but I can't wait to have Bauma. And I hope Bauma is going to be an awesome show, and we're investing in it as we would any other year. So there will be some that doesn't come back. But I think some of that will probably leak out over time and the door will start to open when people get more and more comfortable with traveling. But I think the days of traveling 6 hours to have one meeting are probably -- those are probably gone, which we would have had some of those to chase an order. But I don't know if it has a meaningful impact on our financials.

Right. Right. But I agree with you on Bauma. So Bauma should be spring of next year or?

Yes, almost 12 months. We count the days.

Oh my God. And I think CONEXPO last year was like the last event of pre-COVID. So yes, sure would be nice reback in Germany and walking through a trade show and not feel few.

Yes. Absolutely. We're looking forward to it. That's for sure.

For sure, as well. Okay. Well, I think we're out of time. And so I appreciate it, and thank you for being with us this afternoon. And good luck. I think you have some more meetings with investors, and we'll talk to you soon.

Thank you very much, Ann. Have a good afternoon.

Yes. Take care.

Take care. Bye-bye.