# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_PLOW_2022/NYSE_PLOW_2022.mmd` · pages 1-7_

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Dear Fellow Shareholders,

As I reflect, 2022 was a good year for Douglas Dynamics, and we delivered significantly improved full-year results. I am continually amazed at our teams' ability to focus on the factors within our control, adapt to the challenges, and find creative ways to address the external headwinds we face, thereby allowing us to make progress towards our goal of producing $3.00 of diluted earnings per share in 2025. We were able to drive 2022 Net sales approximately 14% higher compared to 2021, and to increase net income by approximately 26% - with both the Work Truck Attachments and Work Truck Solutions segments producing improved year-over-year results.

Demand remained strong during 2022, and our teams were able to find ways to deliver for our customers while implementing profit improvement initiatives across both segments. The demanding work accomplished in recent years to address inflation and manage through supply chain issues helped set the stage for our improved performance in 2022. And, those improvements will continue to provide benefits in the years ahead as we continue to get better every day! Our continuous improvement mindset is now ingrained across all facets of our business and we believe will be the guiding force behind our success for many years to come. Our teams have diligently pursued new business and strengthened relationships with our customers by going the extra mile, all while our industry tackles the ongoing macroeconomic headwinds.

Our Work Truck Attachments segment had a tremendous year overall, introducing innovative new products and taking advantage of changing industry dynamics. Attachments full-year net sales increased by 17%, primarily due to pricing actions and strong preseason order demand and volumes. This is especially encouraging given the below-average snowfall both in the season ended in March 2022, and in our core markets in the fourth quarter of 2022.

As always, it is the timing and location of snowfall, not just the amounts, that impact our business. As I write this in early March, we have seen below-average snowfall in many of our core markets along the East Coast, particularly cities with larger populations where more people are inconvenienced by three or more inches of snow. It always snows somewhere, though. Secondary markets such as Buffalo, Denver, and Salt Lake City are seeing significant snowfall this winter, and the Twin Cities of Minnesota are experiencing one of the snowiest winters on record!
While snowfall has not been ideal this season for our business, we have seen a continuation of the positive demand trends that we started to highlight last spring. Once again, snow and ice events caused disruption in the South, helping to confirm the gradual expansion of the snowbelt. We believe the growing demand for non-truck snow and ice control equipment will continue in the years ahead. Over the past decade, we have significantly expanded our product offering, strengthening our position as the industry leader in quality and innovation. We are continuing to invest in the development of our non-truck equipment, as evidenced by our recent introduction of an upgraded pusher plow. When combined with consumers' increasing requirements for snow and ice to be removed immediately, plus concerns about liability and lawsuits, the long-term trends in the industry remain positive.

In our Solutions segment, 2022 net sales increased 8%, primarily based on price increase realization and more stable and predictable Class 7-8 chassis supply. Adjusted EBITDA increased significantly due to price increase realization, favorable sales mix, and profit improvement initiatives. Of course, we continued to battle the inflationary pressures and supply chain constraints that led to manufacturing and uplift inefficiencies. The demand trends at Dejana and Henderson remain positive, and we started the year with a record backlog again.

Those who track and predict chassis supply indicate that 2023 will look similar to 2022, and the timeline for a return to pre-pandemic supply levels remains unpredictable. While we are not expecting significant near-term improvements in chassis supply, the fact is that work trucks continue to be used, and many are overdue to be replaced. Thanks to our team in Solutions, we believe that we are best positioned in the industry to meet that demand.

As we look to the future, we remain committed to investing in the business, and our vertical integration strategy continues to drive opportunities for growth. Our focus in 2023 will be on extending the product lines we launched last year. For Attachments, the pusher plow we introduced last year has been very well received to date, and we will be launching additional models to round out the product line. For Solutions, the Dynapro dump body line is expanding to include a landscape body. Ramping up and expanding our production capabilities will keep our vertical integration team remarkably busy this year.

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One thing that has been true about our company since the day we went public is our commitment to returning capital to our shareholders. During 2022, we paid a dividend of $1.16 per diluted share for the year. In addition, our Board of Directors has approved another increase to the quarterly dividend to $0.295 per diluted share for the first quarter of 2023.

Going forward, we will continue to prioritize the dividend and invest in our growth initiatives, pursue strategic acquisitions in a thoughtful and disciplined manner, and repurchase shares when our free cash flow allows. We believe that we are well-positioned to execute on the acquisition front should any of our blue-chip targets become available. Our near-term acquisition focus will be on the Attachments segment, focusing our search on companies with complex products that are uplift onto trucks for work purposes.

Our teams continue to see opportunities to grow and improve our operations, and we maintain a positive long-term outlook on both segments. It is worth remembering that demand for our Work Truck Attachments products is more influenced by snowfall than general economic activity. While our Work Truck Solutions segment is influenced by economic activity, we believe the potential for a mild to moderate recession will be more than offset by the record backlog. This growing need to replace aging trucks and equipment gives us a long runway of orders to work through in the years ahead. We are assuming that chassis supply in 2023 will be similar or slightly better than last year.

We believe the hard work undertaken to improve our internal operations means we are in a stronger position than we have ever been. We enter 2023 with optimism, and will continue to invest in the business to drive sustainable growth and implement the changes necessary to ensure we are optimally positioned for long-term success.

We are also increasing our focus on Environment, Social, and Governance (ESG) issues. Our cross-functional team has made significant progress enhancing our disclosures on ESG initiatives. In 2022, we completed our first ESG materiality assessment, which included analysis of topics of interest identified by key external stakeholders and input from our leadership team, which helped us identify our company's fifteen most material topics. I encourage you to review our latest ESG IMPACT Report on our website to learn more about how we are embracing these material topics as part of our strategy.

Our commitment to ESG includes building a culture that ensures our employees' health and safety while valuing their growth, development, and engagement. We are also committed to fostering diversity and inclusion in our workforce and contributing to the positive development of the communities where we live and work. In 2022, we were once again recognized by the Milwaukee Journal Sentinel as a Top Workplace in Southeast Wisconsin. This is our 13th consecutive year receiving this award, which only nine other companies have achieved.
In the past, we have talked about one of the major secrets to our success – the Douglas Dynamics Management System (DDMS), which is an integrated system centered on lean principles and continuous improvement philosophies. The system encompasses best-in-class processes and includes a collection of practical tools to solve problems and deliver greater value to our customers by eliminating waste and improving the way we work. The system has helped us to operate our business with the highest standards for safety and quality in our manufacturing and uplift environments. We are proud of having zero product safety recalls in our more than 75 years in business.

In summary, there are many positives to take from 2022. While the headwinds we have been facing did not dissipate last year, we did not see new headwinds appear as we had in the previous two years. That meant we were able to learn and adapt to the existing challenges and deliver improved performance. I remain truly grateful for the dedication and resilience of our team. Across the board, we have seen our people produce creative solutions to the challenges we have faced, improving our operations over the long-term, and using our continuous improvement mentality across the company.

One silver lining to the pandemic is that it has brought our people closer together in many ways. Technology improvements allow easier collaboration across geographies and a shared sense of spreading our best practices and culture across all teams. While the series of challenges we have faced over the past few years remain with us longer than anyone could have predicted, we are confident we have the right strategy in place to deliver sustainable long-term growth.

Finally, we continue to strive towards our goal of producing $3.00 of diluted earnings per share in 2025, which remains on track based on our organic growth projections.

Thank you for your ongoing support of Douglas Dynamics!

Sincerely,

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Bob McCormick, President and CEO

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