Douglas Dynamics Inc
NYSE:PLOW
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Douglas Dynamics Inc
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Hello, and welcome to the Douglas Dynamics Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I'd now like to turn the conference over to Nathan Elwell, Vice President of Investor Relations. Please go ahead.
Thank you. Welcome, everyone, and thank you for joining us on today's call. Before we begin, I would like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will all constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release, ending in our filings with the SEC.
Joining me on the call today is Bob McCormick, President and CEO; and Sarah Lauber, EVP and CFO. Bob will provide an overview of our performance, followed by Sarah reviewing our financial results and guidance. After that, we'll open the call for questions. With that said, I'll hand the call over to Bob. Please go ahead.
Thanks, Nathan. Good morning, everyone. We are pleased with our results for the second quarter. Our teams delivered improved year-over-year results in both segments and across virtually every metric. The Attachments segment delivered stronger-than-expected results following a difficult snow season and our Solutions team delivered noteworthy improvements as well. Consolidated second quarter 2023 net sales increased by 11% to a record $207.3 million mainly driven by increased volumes and pricing adjustments in both segments.
The impact of higher volumes and pricing adjustments continue to flow through to the bottom line as net income increased 35% to $24 million. Adjusted EBITDA increased 27% to $43.3 million compared to the same period last year. Overall, the numbers are improving, but there is still a long way to go before we are back to normal operating conditions and normal results.
Right now, our tasks are more straightforward than they have been in recent years. We are heads down working hard and chipping away at the challenges in front of us preparing for improved external business conditions, we believe will be here in 2024.
With that said, let me provide an update on the headwinds we've been facing recently. Chassis supply while still inconsistent, is showing some initial signs of improvement. To be clear, OEMs remain cautious and aren't making any bold statements about the timing of a return to pre-pandemic supply levels. Having said that, we are hopeful that chassis supply will continue to gradually improve during the second half of the year leading to a more consistent improved supply in 2024.
For components, while the situation is improving, some products are still in short supply. We have also seen a notable improvement in labor markets with our teams reporting generally high retention rates plus more and higher-quality candidates are applying for crucial open positions. Overall, while significant uncertainty still exists, the situation is starting to look brighter over the medium to long term. And in the meantime, we'll continue to find creative solutions to ongoing macroeconomic challenges.
Okay. Let's turn to the segment's results. Beginning with Work Truck Attachments, where we delivered a strong quarter, especially under the circumstances. As expected, preseason order demand for our products was softer than normal, following the snow season that was below average overall and extremely below average in our core markets along the Eastern Seaboard from Baltimore to Boston. As you know, our preseason orders are shipped in Q2 and Q3 with a historical shipment mix of approximately 55-45.
This year, due to outstanding execution from our team, we shipped more orders in Q2 and expect the preseason shipment mix to be closer to 60-40. Attachments produced record net sales based on these higher volumes, pricing and improved production efficiencies. Adding in the impressive profitability, delivering 30% EBITDA margins, the team has exceeded even the excellent results we produced last year.
I'm glad to say that after 3 years of unprecedented headwinds, it's great to see the Attachments segment firing on all cylinders again from an operational standpoint. I'm also pleased to say that both dealer sentiment and financial health remain positive. Like us, our dealers have dealt with low snowfall before and know the number of plows they need going into the snow season.
And while their preseason orders did reflect their desire to reduce inventory levels after last snow season, we believe there may be some level of retail inventory corrections still to come. The question of how much of a correction is needed and whether it will come in late third quarter reorders or in the fourth quarter? As a reminder, our team quickly implemented our lower snowfall playbook during the first quarter to mitigate the financial impact of the poor snow season.
Teams have been successful in controlling and delaying spending and managing costs while still making the really necessary investments to fuel long-term growth. Based on our leading market position and the changing demand dynamics we've talked about previously, the medium- to long-term outlook for our Attachments business remains strong.
Let's turn to the Work Truck Solutions segment, where net sales increased approximately 16% based on pricing adjustments, higher volumes and a slight improvement in chassis supply of certain types of work trucks. While adjusted EBITDA improved compared to second quarter 2022, performance continues to be impacted by supply chain inefficiencies, and we clearly still have much work ahead of us. As we said last quarter, progress will not be linear.
After 3 years of limited supply, as we begin to see more chassis moving through fewer upfit facilities, this has created some bottlenecks as our teams ramp up and flex upfit muscles they haven't had to use in some time. Minor improvements in profitability are expected in the second half of 2023, heavily weighted toward their seasonally strong fourth quarter. The goal of delivering improved mid-single-digit EBITDA margins for the full year remains intact.
And while chassis and supply chain constraints continue, there are 3 positive trends that bode well for the long term. One, demand for our products and services remains positive. Two, we are still maintaining a near-record backlog. And three, we continue to focus on baseline profit improvements which will drive improved EBITDA percentages when chassis flow returns to historical levels.
Today, we are a long way from what we consider normal conditions, but we are hopeful that the situation is now more stable and will slowly improve as we work through the balance of 2023 and into 2024. When chassis supply does return to historical levels, much like the Attachments group, we believe the Solutions team will start firing on all cylinders again from an operational perspective.
It's been a while since I've given the DDMS update, and I have an exciting project that I'd like to highlight today. We've recently talked more about our desire to identify revenue stream solutions that are not dependent on chassis. The project I want to outline today is from our Henderson team, that will not only drive incremental revenue but will be very well received by our DOT customers.
In addition to manufacturing and upfitting snow and ice control equipment, Henderson also provides parts and accessories to the DOTs during the snow season and that's where the opportunity lies. There are literally thousands of state county and local municipalities in the snowbelt, all needing in-season parts and accessories to keep their equipment running and the road is clear.
Historically, it has been a real challenge for the entire industry to have the right P&A products at the right location throughout the snow season. Henderson team sees an opportunity to improve its parts availability during this snow season, driving additional revenue in a high-margin product category while improving our in-season customer experience for our DOT customers.
A team was assembled and input was sought from a broad group of stakeholders, from customers to sales and marketing, product management and tech service, our parts team, customer support, global sourcing operations and finance. DDMS principles were used to define, measure and analyze the current state and to build the future state to meet our objectives. The result is what we call the dependable parts program, or DPP.
The team conducted research, identifying the top 100 parts, the items most critical to keeping DOT trucks up and running during the snowstorm. Once identified, we used our DDMS principles to simplify the process, which resulted in faster times from order to delivery, create a plan for every part that standardized our warehousing and reduced inventories of excess material. We're utilizing visual management on the shop floor to ensure that parts are kept at targeted inventory levels, and we're implementing a scorecard to track performance and measure improvements.
I'm pleased to say the team has created a future state that improves our already industry-leading lead times for critical service parts, while reducing inventories and growing a higher-margin segment of our business. Great work Henderson team, a real team effort.
To conclude, we are encouraged with the positioning of both segments today and are reiterating our guidance. Demand signals remain positive over the medium to long term. And while the lack of snowfall this past season caused us to use the low snowfall playbook and curtail some investments, this is a temporary issue that we are used to dealing with. We continue to drive operational improvements that we believe will provide long-term benefits and explore opportunities to help drive sustainable organic top and bottom line growth.
We plan to continue to invest and innovate going forward to take full advantage of the opportunities in front of us. Our customers know and trust us and our brands can be dependent on to deliver for our customers. As supply chains start to consistently improve, we are focused on being ready to ramp up and fulfill our considerable potential. We are still driving towards our 2025 targets and we know what we need to do and the path we need to take to get there. With that, I'd like to pass the call to Sarah to walk through our financials. Sarah?
Thanks, Bob. I am pleased to report year-over-year growth in both segments across virtually all metrics and slightly ahead of our internal expectations. Bottom line figures improved at a greater pace than top line growth due to pricing coming into line with inflation, higher preseason shipments than last year, overall cost management and the implementation of our low snowfall playbook.
Attachments produced a particularly good quarter, especially in light of the poor snow season with an improved top line despite the tough comparison to a strong second quarter in 2022 and achieving 30% EBITDA margin. The strength of these results really highlight the resilience of our Attachment segment.
Consolidated second quarter 2023 net sales increased by 10.5% and to $207.3 million compared to the previous record net sales in the same period last year. Gross profit grew 19.8% and gross profit margin increased 230 basis points. These increases were driven by increased volumes and pricing adjustments in both segments.
SG&A expenses increased just 5% to $24.2 million during the second quarter due to higher sales and benefits, which were partially offset by implementing cost control initiatives as part of the low snowfall playbook. Interest expense increased to $3.7 million, primarily due to higher interest on our revolver borrowings. The effective tax rate was 22% for the quarter compared to 23.2% for the same period last year. We still expect our 2023 tax rate to be in the range of 24% to 25%.
The impact of higher volumes and pricing adjustments continued to flow through to the bottom line as GAAP net income increased 35.2% to $24 million compared to second quarter 2022, which equates to $1.01 of GAAP diluted earnings per share. Adjusted EBITDA increased 26.9% to $43.3 million, compared to the same period last year. On an adjusted basis, we generated net income of $26.3 million or $1.11 per diluted share and approximate 31% increase compared to adjusted net income of $20.1 million or $0.85 per diluted share in the prior year period.
Now let's turn to the earnings information for the 2 segments. For the second quarter of 2023, Work Truck Attachments delivered net sales of $141.2 million, an 8% increase over the prior year of second quarter. Adjusted EBITDA increased by 25.9% to $42.3 million compared to the second quarter of 2022. The increases were mainly due to higher volumes and pricing adjustments with product mix, improved production efficiencies and cost savings from the low snowfall playbook also positively impacting margins.
Our higher than average inventory going into the quarter coupled with outstanding execution from our team allowed us to ship more orders in the second quarter this year. As we noted in the release, preseason shipments this year are likely to be more heavily weighted towards the second quarter, we anticipate an approximate 60-40 ratio between second and third quarters' preseason shipments compared to last year where the mix was closer to 55-45.
In addition, it's worth noting that we expect third quarter 2023 EBITDA margins to be closer to the third quarter of last year, which were in the low 20s. This is based primarily on the expected difference in volumes and product mix between 2Q and 3Q this year. Bear in mind that some of the strength in orders so far in preseason could partly relate to dealers pulling forward orders from the third and fourth quarters, which could impact our upcoming results in the second half of the year.
While we are seeing somewhat of a return to normal patterns in Attachments, it's still not business as usual, thanks in large part to the most recent snow season, which ended approximately 14% below the 10-year average. Possibly more importantly, our core East Coast market experienced the lowest snowfall season in decades with snowfall totals down more than 90% in some cities.
As we mentioned last quarter, we have fully implemented our low snowfall playbook to mitigate the impact wherever possible. We've curtailed discretionary spending, limited some hiring including some hiring freezes and have set a higher bar for spending approvals, and we put some certain investments temporarily on hold.
Taking a look at Work Truck Solutions, net sales increased 15.5% to $66 million compared to the second quarter of 2022 due to higher volumes based on a slight improvement in chassis supply for certain types of work trucks and pricing increases. Adjusted EBITDA improved slightly compared to second quarter 2022 due to improved volumes and price increase realization, but performance continues to be impacted by supply chain inefficiencies.
Looking at the second half of the year, we expect minor improvements in profitability and the goal of delivering improved mid-single EBITDA margins for the year remains intact. While still far from normal, we are starting to see signs of improvement in the supply chain and demand for our products and services remains positive. We are still maintaining a near-record backlog, and while we are a long way from normal conditions, we're hopeful that the situation is now more stable and will slowly improve as we work through 2024.
Our results are still being impacted by inefficiencies due to chassis supply issues that hinder our upfitting operations in particular this quarter. We are seeing some signs that the situation is starting to improve, and we are working to ramp up throughput at our upfit facilities. Our teams are fully focused on improving the velocity in the coming quarters.
Turning to the balance sheet and liquidity figures. Net cash used in operating activities for the first 6 months of 2023 increased to $8 million to negative $66.2 million from negative $58.2 million in the same period of 2022. The increase in cash used was due to a decrease in net income as well as unfavorable changes in working capital, mainly due to a decrease in accounts payable, which is attributable to the timing of supplier payments.
Free cash flow for the first 6 months of 2023 decreased $7.7 million to negative $71.5 million from negative $63.8 million for the same period in 2022. The changes were driven by a decrease in trade payables and higher inventories in Attachments due to low snowfall earlier this year and in Solutions due to supply chain disruptions.
At the end of the second quarter, we maintained $78.9 million of total liquidity, comprised of $3.4 million in cash and $75.5 million of capacity on the revolver, compared to $120.2 million in total liquidity at the end of 2022. This change is primarily due to the seasonality of our business, as well as an increase of the $50 million in the borrowing capacity of our revolving credit facility as a result of the January 5, 2023, amendment.
Inventories were $148.9 million at the end of the quarter, higher than the $131.5 million in the second quarter of 2022, but considerably lower than the $14.6 million at the end of the first quarter of 2023. As we noted last quarter, all our teams have implemented inventory reduction plans that will continue to have a positive impact in the coming quarters.
Accounts receivable at the end of the quarter were $139.4 million, compared to $127.9 million at the end of the second quarter 2022. Capital expenditures so far this year were $5.3 million, just slightly lower than the $5.6 million in the same period last year and in line with our expectations. CapEx was lower than we originally planned this year, primarily due to delaying and deferring some investments as part of our income protection plan. As you know, we implemented our low snowfall playbook earlier this year and expect total CapEx for the year to be on the lower end of our typical range of 2% to 3% of net sales.
Turning to capital allocation. The dividend remains our top priority, and after announcing the 15th increase in February, we paid our quarterly cash dividend of $0.295 per share as usual at the end of June. At the end of the second quarter, we had a net debt leverage ratio of 3x, higher than 2.6x at the end of 2022, but lower than the 3.4x last quarter.
Over the medium term, we expect the leverage ratio to return to our goal ratio of 1.5x to 3x by the end of the year as planned. We have the share buyback program in place which we have not utilized so far this year as our capital has been prioritized elsewhere, but we will continue to assess our options based on available cash throughout the second half of the year and execute purchases as and when it makes sense. Finally, we will continue to monitor the competitive landscape for potential M&A opportunities. We expect our focus to remain on our current operations for at least the rest of 2023.
Finally, I'll walk through the guidance we issued in April that we are reiterating today. Attachments has performed well operationally this quarter, and we are hopeful that the segment continue its recovery from its difficult first quarter, which was driven by a lack of snowfall in key markets. We are confident in our ability to manage the temporary impacts of low snowfall on the Attachments business, which is starting to hit its stride again following all the unusual headwinds we've faced in recent years while focusing and delivering on our profit improvement initiatives.
The Solutions segment is showing improvements this year and remains on track to show margin growth in 2023 versus a year ago. As we look at the rest of the year, the ongoing positive demand dynamics we see, the near-record backlog plus the stable to slightly improving outlook for chassis and component supply means we feel comfortable reiterating our guidance. As always, our outlook assumes economic conditions remain relatively stable and that we experience average snowfall levels in our core markets in the fourth quarter of this year.
Our 2023 financial outlook is as follows: Net sales are expected to be between $620 million and $650 million. Adjusted EBITDA is predicted to range from $85 million to $100 million. Adjusted earnings per share are expected to be in the range of $1.55 per share to $2 per share. The effective tax rate is expected to be approximately 24% to 25%.
We are confident that the changes implemented in recent years will start to pay off an improved earnings power over the medium to long term. We remain committed to our goal of delivering $3 of earnings per share in 2025. With that, we'd like to open up the call for questions.
[Operator Instructions]. And the first question comes from Michael Shlisky with D.A. Davidson.
In the Solutions business, how far out do you think your backlog stretches right now? And can we have a little bit more detail on the margin that you think is in that backlog? Is there a potential for Solutions to become a more material [indiscernible] to the EBITDA, maybe next year?
Yes, Mike, I will jump in on that. So our backlog has not changed substantially. We're still at 12 to 18 months of backlog in solutions. It's down slightly from the end of the year, but we've not taken any meaningful bite out of it at this point. I would say the margins in the backlog will continue to improve. That is a key piece of the improvement for solutions to get back to the double-digit EBITDA margin.
And as far as timing goes, I think quarter-by-quarter, we're going to see continued improvement. I wouldn't say it's necessarily linear. But I think we're just going to see a gradual improvement as those prices start to come through.
And just to clarify, have you seen any major cancellations recently out of that backlog or it's still being strong there?
Yes, Mike, no, we haven't seen any major cancellations at all. We're -- in the summer is when the OEMs go through their model change. And so there's a period of time where you're canceling orders that are on models that you're not going to have access to when you're reentering those orders on the new models that are coming out next year. So it's a left pocket, right pocket thing. But in terms of permanent cancellations, we still have seen very little.
Great. And then shifting to Attachments. You've talked in the past about taking every winter every year as very much a separate occurrence. So with regards to the inventory deal changes between third quarter and fourth quarter, do you expect dealers at this point to exit this year or this winter with an appropriate level of inventory, so you'll be starting fresh in 2024?
Yes. I think -- and thanks for asking about that. When you've been in the snow business long enough, right, the dealers want to start the fourth quarter with a very targeted level of inventory that they'll use for that season that is ahead of them at that point. And so when the snow season ends in March, that's their opportunity in that preseason order to -- if they're low on inventory, they'll increase the preseason order and vice versa this year, right? If they're high in retail inventory, they will submit lower preseason orders that by the time they get to September, October, they're back where they need to be.
We saw and expected a lower preseason order book because of higher retail inventories, especially in the I-95 corridor that we've been talking about. And we clearly saw that. If I go back and look at the last 3, 4 years, that increase in retail inventory at the end of the season, we haven't seen something like that in quite some time.
So do we think they got it all back to a level set with their preseason orders? Possible. I think we're wise to still be planning for a little bit of correction that needs to take place yet. And as I said earlier, whether we see that taking place in late Q3 orders or we see it in reorders in Q4, time will tell. I am confident most of the retail inventory reduction has occurred in the preseason order book. But given the elevated inventory levels on some of those East Coast dealers, we're still likely to see a little bit of an adjustment ahead of us.
Great. And maybe one last one for me. The dependent parts program that you spoke about in your prepared comments. Could you maybe bracket that for us, give us a sense as to the potential sizing of that? It sounds important. But I do wonder, is it going to make a material impact on organic growth, maybe let's say in '24 here at all if it's more of a multiyear program for Douglas at this point?
Yes, that's, again, excellent question. These are more singles than they are home runs or grand slams. Again, Henderson has always served those markets with their P&A. But we recognize an opportunity to put a small layer of growth on top of that and just become more important to our customers. I might suggest that while that's the example that I gave, their focus on becoming a little less chassis dependent, that falls in that category, but so does brine and Henderson has got a strong brine product offering.
You know we've spoken before about the snow belt moving farther and farther south. More ice events occurring in the South. I would suggest that in '24 and more '25, there's larger brine revenue opportunities for us, and that's something we're excited about and will be paying attention to. But this will still be -- I mean Henderson and Dejana will still be largely driven by their upfit chassis movement from a revenue standpoint, but some of these nonchassis opportunities are just nice adders for us.
And the next question comes from Tim Wojs with Baird.
Maybe just on the preseason, just kind of in total, Bob, I mean, is it kind of tracking kind of overall to be kind of in line with your expectations and really kind of the -- there's just more of a timing shift, I guess, right now between kind of Q2 and Q3, but kind of overall kind of preseason orders. Are they kind of similar to what you would have thought 3 months ago?
Yes. Tim. And one of the things that our commercial snow ice control group does very well is when that season is over, we're in our key dealers and asking about their inventory levels. We're taking a look at that. We're getting a gauge for how we think their preseason orders will be adjusted, and then we put an internal projection together. And I'm going to suggest that by the time the preseason order book filled, it was a fairly accurate projection.
So we feel comfortable about that. I think we're wise to play a little bit of a conservative -- or have a little bit of a conservative posture on maybe there's another 10 degrees left or right coming. But I was pleased with how the team's anticipated and that the order book in total, to your point, came in where we thought it would. Strong in Q2, you can essentially take that out of Q3 kind of thing.
Okay. And have you seen any change mix wise in terms of the dealers and distributors kind of taking a cash discount or the longer terms with the preseason?
Yes, Tim. No, we have not. We've been very pleased with the health of the dealers, and that's a key indication for us, is if we see more terms versus cash, and that was not the case this year. So from a free cash flow perspective and the fact that we had a slightly better inventory entering Q2, we were able to prioritize those cash shipments to help the free cash flow for the year.
Okay. Good. And then I guess from a -- within attachments on a year-over-year basis, the margin improvement there? I guess how would you kind of bucket that between kind of just the price cost normalization within that business with pricing up and you're starting to see maybe some more normalized steel prices? And then just maybe some higher volumes due to the preseason timing?
Yes. When you look at the year-over-year increment for that business, very good in the second quarter. And I would say it's due to these 3 things in order: price and then volume and mix and then lastly, the low snowfall playbook that we started earlier in the year. From a mix perspective, we did have the higher-margin products that we shipped out, prioritize those in the second quarter.
Okay. Good. And then maybe just the last one on the Solutions business. Just -- could you add a little bit of color on just the bottlenecks that you're seeing as you're kind of ramping up some of the throughput in those facilities. And maybe just some of the adjustments that you think you'll have to kind of make to make sure that you're getting the appropriate kind of throughput margin on chassis?
Sure. It's -- 2019 was the last time we were moving pretty high velocities through these fixed cost upfit models. Obviously, since the pandemic started, you clearly try and ratchet down some of the labor where you can, knowing you have to protect a certain level of expertise in terms of people that do those jobs. And now that we're starting to see some signs of chassis improvement, we're just having to -- we're having to move more velocity through those models. and it just takes some time. I'll be more specific, something -- well, we haven't talked about this for a while.
In the fall of '21 or late summer '21, Henderson, which had 6 upfit locations, made an appropriate cost adjustment in that environment and closed 2 of those upfit centers. They went from 6 to 4. We knew that was the right move to make longer term. We also knew that when it came ramp-up time trying to move the same velocity through 4 open centers versus 6, was going to present a ramp-up situation for us.
So I would expect Henderson's journey to be a little longer. But I'm also going to suggest to you -- let's go back to the comment I made about our Attachments group firing on all cylinders, right? Just think about this for a minute. They're very different business models. The Attachments group is a stock product model, fewer components to source and are not relying on chassis to get the job down. So they're naturally going to be first to get back to some level of historical performance. And that's what we saw in Q2, and we're thrilled. It is good to see the operation run again like it used to run.
We would expect the Solutions group to lag behind that a little bit because of chassis and the custom nature of the myriad of components that they source to build a work truck. So this to us just feels like a logical progression. Tim and the solutions teams are all over it. We're seeing signs of improvement every day.
By the time we get into 2024 and our margin towards those profit improvement objectives, you're going to see velocity increasing through those models. And as I said, they will get to the same point that our Attachments group is at where they're firing on all cylinders again. They just got a little longer road to travel.
And the next question comes from Greg Burns with Sidoti & Company.
I just wanted to touch on the preseason order patterns you saw this year in relation to the quarter you delivered because it looks like you had a record quarter on Attachments. So maybe I'm missing kind of the connect between the revenue in the quarter and the order patterns. Because it seems like the orders were relatively strong, considering the snow season that we just had. So I just wanted to kind of square that? And is there any risk that maybe it's not a 60-40 split, it's even more Q2 weighted, like 65, 70-30 this year?
Yes. So let me tackle your first question. When you think about preseason in total and the orders that we got, we were, as Bob said earlier, pleased that it came in close to what we expected. When you look at the year for Attachments and where our guidance is for the midpoint, we do expect volumes to be down for the full year.
So preseason in total, Q2 and Q3, from a volume perspective, still down. I think what you're looking at from a record Q2 that could be maybe skewing your analysis or thoughts is that we have price coming into play, which is moving the top line. So hopefully, that helps to clarify.
On your second question, 60-40, yes, sure. I mean that could shift a little bit either way. I would say there's probably less risk of that this year than there was last year because we have higher inventory levels, and we are getting our shipments out quicker than we were last year. So there shouldn't be a carryover into Q4 like we had in the prior year. So there could be some shifts. I wouldn't expect it to be meaningful from the 60-40.
I would just add, if we do still see in Q3 some retail inventory correction, in terms of -- now there aren't a lot of orders -- there aren't a lot of new orders that you got in Q3. But if we do see some additional retail inventory corrections late in the quarter, that could shift the mix a little bit, but not substantially, right? I mean 60-40 doesn't become 70-30. That, maybe, tweaks up a couple of points and down a couple of points.
Okay. And then the dependent parts program that you mentioned, is the incremental opportunity there to take share from maybe other component suppliers or just to offer more readily available components? Like where is the incremental opportunities for you there, if you've already been supplying that channel?
It absolutely takes share. If you're a local municipality, you get original equipment parts from the person who supplied you the truck whenever you can, but you also need to have other outlets of what we'll call knockoff parts or nonstandard parts that still get the job done and you, in essence, line up more local sources for that kind of thing. So yes, we see it as a market share growth opportunity for us.
The other thing, and this is seeing around corners, but there's another layer of long-term growth. I'll say, long term, this is more a '25-'26 proposition. Mechanics and skilled labor positions in DOTs across the country, they're harder and harder to replace. As the retirees are aging out, it's harder to find people to fill those slots. That means that some of the repair work they did themselves, they're going to need to find other people to do that for them.
So this opportunity for us starts with us being able to ship more parts when they need them. Ultimately, we could find ourselves partnering with them to do some of the repair work in our upfit centers to those vehicles that are close enough to those upfit centers as they continue to battle labor shortages on their rent. So it's a multi-stage play for us over a number of years.
[Operator Instructions]. And this does conclude our question-and-answer session. So I would like to return the floor to Bob McCormick for any closing comments.
Thanks. Thank you for your time today. Let me end with a few brief thoughts. As we've said many times before, we are pulling the right levers to minimize the impact of low snowfall in our Attachments business and still be ready to satisfy next season and long-term demand. At the same time, we continue to drive our Solutions business to maximize its opportunities and improve profitability, and we have the vision and determination to see our plans turn into reality.
We're encouraged by both-segment position in the market today and our long-term growth prospects remain intact. We continue to execute on our key initiatives focusing on factors within our control as we push towards our goal of $3 per share of adjusted EPS in 2025. Thank you for your support of Douglas Dynamics. We look forward to seeing you all soon. Have a great day.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.