AIMC - Earnings call transcript Q1 2019 | Altra Industrial Motion Corp

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Operator

Good morning. My name is Scott and I will be your conference operator today. At this time, I would like to welcome everyone to the Altra Q1 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. you. Thank Ms. Sharon may from your Associates, Merrill Flaim begin you call. Ryan

Ryan Flaim

they and and management's the call, under slides Events good Investor altramotion.com you, in section. to welcome are discussion be posted that morning this & follow Thank X. website you Please everyone, to turn the slide referencing help call. on the Presentations will Relations To to

will in Act call, management be the of Securities the statements defined making During as Reform Private Litigation XXXX. forward-looking

Executive uncertain applicable must uncertainties Form refer result the non-GAAP intend Securities financial press Slide U.S. not now recognize are the other inherently of the be certain reconciliations statements, Except Altra's management operations. measures earnings non-GAAP Please non-GAAP Measures I'll Financial non-GAAP factors could under release tables Chief me diluted of Altra Carl. and on Officer, significantly as management believes adjusted operations, results to whether income exclude from new to XXXX Commission. Please measures release reports non-GAAP that Exchange per its otherwise. in events QX operating share, Carl Christenson XX- discussed refer income, required and items in reviewing to today's the of over are and Chief expectations. excluded, to differ Annual Altra's company's GAAP Report and capital, to cash as Storch. net or information, non-GAAP filings alter Officer, to non-GAAP our any With Form update are and the by turn statements Corp. when Forward-looking with on Industrial available Christian continuing events margin, operating website. On slide press investors and company's flow. EBITDA, our quarterly of working items described non-GAAP turn today These forward-looking from and Discussion XX-K, Motion debt the that does and metrics on call financial should income Q the Non-GAAP net X. management's The and in other a will in free law, presentation heading risks, the or other non-GAAP comparable in call, the Financial future

Carl Christenson

you, Ryan Thank with morning year turn the year Altra. We a that A&S the and combination Please billion and reflects the strong first good and financial Slide to new everyone. the benefits $X.X began of business strategic X.

than business. due the First of to quarter the quarter addition more double revenues prior million year grew the $XXX.X A&S to

XX.X%, the adjusted improvement 'XX. QX point margin operating business points Non-GAAP GAAP from non-GAAP the Excluding over acquired up $X.XX quarter. income $X.XX the ago the with profit million, note point increase XX.X%, a was financial that $XXX of effects prior results business quarter. unaudited was and The favorable of margin $X.XX A&S foreign Altra for of were was estimates legacy our to the quarter year XXXX year exchange, an growth basis the A&S of the compared sales Net year is was on XX.X% continued recently management's is EBITDA with $X.XX or $XX.X It important A&S Non-GAAP net compared share, grew gross the a net X%. sales GAAP business a increased EBITDA for non-GAAP the XXXX. for in quarter. income compared of basis adjusted effect XXX or to improvement basis XXX same XXX earnings. QX the with A&S margin with X.X%. to EPS by million per per business from has addition ago have share

supply through commodity Combined input logistics to drive primarily the are tariffs. pricing tactical to the able with increases benefits of freight cost and successive business our complete, A&S offsetting With cost and improvements we management. inflation, were and related chain actions, integration direct leveraging indirect these

During sheet. We of times the QX down the in million priority debt debt quarter, we net EBITDA paid continued balance exited de-lever to non-GAAP the on quarter and $XX our to leverage. adjusted with deliver strategic X.X to expediently

platform last focus that introduction with we cash total the and and to our I'll a turn tactical an integration use to have pay-down reminder, you integration down to As please a advance of XXXX. initiatives Slide debt typically A&S now our QX and to in advancing we reach of our million businesses. most of in driving us to shifted ramp the exceptionally continues goal provide on of update as the well. strategic expect behind the in an paying up With quarters X synergies. the our $XXX is the Specialty Altra and The & The of Automation of integration and stage three

sales collaboration our China with program and a exceeding facility training During another progress to production activities incentives budget. on We align relocated was activities. Fortive of the made in cross-selling quarter, We lead dedicated facility shared we to our a with and excellent that are our launched expectations. on and time and moved our sharing out business

In of in the addition, a announced we significant the closure facility U.S.

which three production that facilities, align relocating reduce production existing We costs. better and will to will other overhead be U.S.

made progress with meaningful supply optimization also efforts. We chain our

of saw metric on across of of associate savings four, progress of last our shareholders, seven remain addition total a includes growth are $XX for to cultures This million less drive XXXX the customers and two gas of the by spending the XXXX. pleased Across the remain indirect in segments in $XX value to quarter of Power the enhanced performance Slide core track a continues aftermarket digits A&S a employees. we principles. from saw and while are business synergies capture business come to review Compared our result that energy have systems to at meaningfully renewable improved, categories drivers and with achieve in deliver certain with activities by year implementing $XX market of our our The was ability to and The of with working integrating low world-class and EBITDA target level, end guiding and well spend. same million million net business end was The pleased starting quarter. of we decline to favorable creation our healthy X-times has sequential very double-digit market. with adjusted while This progress our debt primarily organization confident the business oil to both extremely in Generation our we end development integrating strong fourth single Please gas make Energy company. are together. than and Wind Altra's business as the We're level. and equipment sales very turn first the our has direct market on was to year, comps we and synergies our up align oil the leverage The begun relatively our of relatively markets. and a original from growth quarter. to a how have and We values the of improved for soft. transportation a We

most We of expect the well XXXX. truck perform through market U.S. to

remain Specialty soften demand the are primarily & tough that strong. projects year. new double positive that we the and anticipate Demand and due in as pipeline half in demand year. could the we a and QX electronics China down comps, in customers Demand QX, factory continued in On in machinery well second exit weakness of held signs to in through Automation digits China. as However, was markets semiconductor, there side, overall year-over-year in begin as the improve will to robotics weakness steady the

oncology. medical market single optimistic exciting digits by remained strong markets markets. slightly demand were double strong about Metals power in in metals in The mining in tools, supported and growth strength The surgical we from ahead, which with equipment by mining, was digits. up through opportunities Looking diagnostics QX remain QX. dropped robotics, good surgical driven up these Altra's QX, and

to projects. we see However, inquiry booked OEM new have have begun and activity strong

our CapEx moderated we excited expect see begin about remain in very ongoing growth in tougher we a sales to Overall, rate due as we strength our both comparables. and new single the spending digits are Defense markets pick XXXX up. markets to several we year, growth in growth down finally, in in In segments distribution of with in distribution while was started historic QX addition, lower our And into the at core going by to QX, markets. we strong growth. several encouraged continue double-digit to was business expected

the Altra. are optimistic the are that positive in key China we more an outlook for Additionally, is including overall macroenvironment for and Germany, which improved geographies sentiment

for Index that In in in outlook fact the the points German to earlier XXXX, Germany a X.X increase Ifo Climate reported month from recently XX.X, seven in March rose it months. first business Business was

actions offset have negative to to cost that We monitor and and expect impact continue could our increases the secondary the from factors on potential economy. impacts a other tariffs global pricing we'll

be ease our our In Christian QX. in QX Christian? begin expected then review And with I'll on an forward. to to priorities financial a to provide addition, for then in call turn results. continue I'll you a back headwind is foreign of that, strategic exchange to and going With the come to over update

Christian Storch

industrial again first quarter performance industry. manufacturing delivered We reviewing we and you, the our morning Thank where good everyone. Carl would in start once results, best-in-class metrics financial

and quarter. of restructuring-related adjusted we margin XX.X%, expenses, non-GAAP of income EBITDA operating in acquisition-related XX.X% the Excluding XX.X% of margins and gross delivered non-GAAP margins first

segment, legacy in Altra segment Automation As results we Technologies a are businesses. Specialty Transmission reminder, & the two the representing reporting and Power the segments

Unless details would Before the note quarter otherwise recently businesses. like I quarter include results pro A&S forma A&S results, the that acquired of the noted, XXXX first results. not do include review XXXX results for first to to X. Slide I of QX turn Please financial for our

X.X% sales were quarter businesses $XXX.X year million first than was as organically of noted, growth X.X%, Carl Altra legacy period. improved prior the A&S As the grew Organic double business X%. and more

XXX America, the a X.X% declined pro Rest X.X% Foreign basis, sales and basis forma of negative the World. declined in North X% grew an Asia of rates had exchange Europe On unaudited and points. in effect in

expectations, efforts estimated top-line of benefit basis continues excess contributor to points, in deductions we This the planning the starting approximately for in our XX.X% XX grew with of X%. Results per off. of Non-GAAP tax an delivering Excluding rate first foreign pricing high year estimated, X. to in tax came the continued $XXX the up XXXX quarter, sales income stock-based to EPS of tax tax Europe are expense. rate annual the of of first power than year-ago rate, end compared is U.S. for Please strategic as exchange, was quarter. The associated rate non-GAAP excludes taxes per $X.XX growth our be turn cumulative was to share full our impact a at to sales. net our discrete efforts. in vesting of lower initially $XXX,XXX when Pricing compensation quarter tax with a share of XX.X%, the as in for $X.XX million compensation adjusted EBITDA pay Slide XX.X%. or reflects This awards GAAP provision of

the of businesses. In in allowed to first to sheet us review for our balance of table the XXXX. We top-line the outlook we seasonally we flow Today million of paying XXXX. the and $XX.X expect leverage pay our A&S the cash continues of Please top to debt pay first the to be and and which flow year's reconciliation free flow de-levering $XX.X down the Slide depreciation Operating Slide accelerate is debt amortization the terms to X.X priority $XX.X prior the in was debt quarter million Capital of down free A&S turn cash significantly of the cash Operating million to Please due higher for reiterating quarter, to our for on full net are times $XX of combination. following flows exited and cash, quarter. quarter the million a coming and than with cash totaled debt see lowest adjusted were our of the contribution $XX profitability quarters. free and down guidance GAAP presentation. XX million. quarter in year and non-GAAP for investments XX significantly a to EBITDA

rates, fourth compared to and where We pro of the sales XXXX. meaningful will half a At Altra to the for exchange between new of for be expect billion range X.X% $X.XX in forma to billion the X% quarter. the growth annual through in unaudited sales and third face $X.XX first headwind with quarter the XXXX, which subside ease we current

to began acquisition-related income indicated, and combination A&S from non-GAAP amortization, exclude previously following net the we As EPS. tax net non-GAAP of

million conversion We range and well expect to XXX% free $XXX net flow of million $XXX non-GAAP above in income. cash of the adjusted EBITDA

We to exit million of to $XXX EBITDA a X.X to pay with of non-GAAP XXXX total expect 'XX adjusted leverage debt times. down of a in approximately net debt

income We expect of in EPS net million of income range of diluted and $XXX $X.XX range non-GAAP million. of to expected $X.XX million $X.XX. non-GAAP $XXX.X range $XXX.X diluted the is and to in $XXX.X to $X.XX net the in million the to GAAP in the range EPS

expect depreciation and to the and of amortization range $XX range capital We to the million million $XX million expenditures $XXX in in of million. $XXX

from range previous be normalized our year guidance our full rate expect XX.X%. a to We reduction XX% in the to XX% tax XX.X%, for of the of to

the the note second we even markets range serve. is conditions the our quarter in important Also it of While be the in to year Carl. dependent market is in back to With the we quarter expect line of performance. first I'd improved our for of turn discussion with on softer are the high-end today, performance reiterating generally second we end profitability some our to the guidance that half that,

Carl Christenson

turn our review XX you, Altra. strategic priorities three I'll Thank new and Please the going forward to Christian. Slide as

are collaborations expectations The sales $XX execute the already well of early A&S of million first by on priority wins. we business our in ahead and the is The of on our We've made businesses cultural optimization way, to order supply excited chain target. progress. merger to excellent two deliver synergy integration is under team flawlessly are the

across In practices addition, deliver organization to from the we've and business system organic growth to implement a savings. cost best begun world-class improved

cash our to leveraging down debt our to well we've of free QX sheet. X and tools, by capitalizing to a are of Second, strengthen trends, to a and positioned Altra, we target markets balance long-term conclusion, an company, Day cash In system capital of generation. business $X.X noted opportunities. to to And excellent XXth adjusted for industrial in growth, we and City. is do growth. it to times, hosting billion and flow million are technology the are is continue a once exposure of will exciting debt strategic we increased returned are range is our ratio EBITDA positioned system portfolio leverage we're May several enhanced priority paid the strong that M&A many net business range leveraging York proven top-line scale flow. technologies solidly new expanded very world-class support this and opportunities, as X feeling our on adjusted to We'll technologies, exciting at time in prepared financial New the EBITDA Since we these by business X past, to as we secular has Investor debt on infusing times expanded to free product pipeline accelerating begin that targeted net build de-lever be of attractive new have the third expediently to with showcasing our so premier with $XX our end proven focus to new and X believe of on And strategically sharing, we XXXX, a so, upcoming

leader questions. back the forward operator With our to as well forward some by global I'd that, macro to a end updated, as expected, industry. markets to in to as We the premier we open shareholders overall like strength encouraged sentiment. serve, call Scott? as ongoing our it in we to demand remain keeping markets several the your journey moderated turn While improving has look we the as technology in keep

Operator

from with the question comes KeyBanc. first Hammond Your of Jeff line Instructions] [Operator

open. is line Your

Jeff Hammond

on Really helpful I the that. entity, appreciate color combined

on Just comment. Germany-China the

can areas, visibility What You second into some the and you markets? into seeing where macro mentioned you're from weakness talk indicators, the you hearing and customers, your think about but seeing you just about XQ as those half? in move as you're in

Carl Christenson

believe I most is and short-term industries, robotics assembly electronic hi-tech equipment, blip. people cetera, in weakness that the think et the a

of So, semicon to the outside to that that of And hearing, we're year as that I the indicate some you at think look is well. stocks very have been indicators the pick half least start that's second at performing the expect they what up. might

oil few that markets a we're us start that et seen might won't new orders the think seen we that So, weakness on after until that's seeing some rigs know area but true. would on gives be worlds, and has to horsepower And some aftermarket confidence that counts and in particularly hadn't where some cetera. bookings two mix rigs, we've comments I we incoming for pickup global been in those Then obviously rigs years a we see and other high be the maybe down area. It's gas, nice weak. business where some of Jeff,

that, oil up hope in later of the year being we So, also. that aftermarket price up, picks

Jeff Hammond

Altra on that? growth. just was capturing from what business, Just benefits Thanks. the the pretty glean practices you're notable muted on was A&S? you driving you about If margin Can legacy talk from best any early improvement sales

Carl Christenson

Yes.

we I when synergies the the the And plan the accrue the So, the think side. that the see that of benefits synergies, performance procurement Altra coming a on A&S mainly on to Altra at on will to side. lot PTT was business think the look drive some side, system we synergies, the I nice side. help There through

And three seen oil Altra, and PTT with business. or make part that and always of from the legacy the is improvements piece our in gas. you pricing legacy in that inside one And the CCB that in margin other nice well. side past business our pointed at continue we've therefore mining some Altra that recovery out benefiting up that's we if look the as the businesses we strategic The is program on of

Operator

comes question Graham next of BMO the from Markets. Capital Your Scott with line

Your is open. line

Scott Graham

So, just I to wanted the question. previous to maybe answer your frame

things said markets. in to couple get of to you improvements of see high-end You to need the

think see what Are better more just markets, are aftermarket. essentially the factory and to and levity you need markets the those second I said, specialty automation, think, oil in I gas machinery those the half? you

Carl Christenson

Yes.

for it to at of there off the the cliff instance. of quarter for hangs end balance We also a , third first in robotics need to A that see the market the year in Class truck in fall the recovery year, modest we've a the strength hopefully of in like market and the predict see semi-markets. wind and continued the for need that first the we that half seen We doesn't the

that's important part need of think I hit to we to high-end. what an the in see order

Christian Storch

and and the other that's due garden ag, there year. weather garden one and turf slow to start been Scott bit out this been turf quite the a has And and I would be think that publicly somewhat

grass hopefully grow. starts So, to

Scott Graham

-- I guess to expectations, get I markets that's you to because a lot need improve to beat, us the What's in the quarter-- of high-end. think most of that

Carl Christenson

I off. don't think need we them

Scott Graham

you When you earnings? just say hit margin? sales? operating essentially talking Are about the high-end, you Are talking about about talking organic you are

Carl Christenson

of that serving half in and are like actually range semiconductor markets, that number the we we in is second high-end while a hurting there it's lot are yes doing are markets, the of the of very $XXX half. really suffering a first the and but of million some of our requires EBITDA lot well. markets projections see I talking markets that we was top-line earnings and about that are a There please of some therefore, and that And performance. recognize

Scott Graham

you than heard expect And it inflation, will to on I Carl when price tariffs, with chain enough. you your that. to correctly commented and chain those you I sorry back price two and comments, you supply cost plus I that thought is commodities maybe take the more you Am will then say cost offset get on are… things freight price. want those I'm understanding price I I be supply natural to you that thought exceed thing. commented, Fair just

Carl Christenson

have. we Yes

Scott Graham

just it there, I right. That to with again consistency I make sure, wanted got

Carl Christenson

-- this we we're flow Then correct. that prices year. raising cost to have a those year that's starting that that been increases. had to No, through sure think see and effort offsetting the And the through through of we've last indicates I beginning make and significant we Yes. are

Scott Graham

that strategic the of the is integration in now, lot of lot a the planning activities behind entities So done. is a two of

So, synergies here, we if improvements can you're backstop the of pull not the we that the forward of in see were in to some to markets EBITDA? thinking

Christian Storch

can protect seen we've to margins the to you've think us margins. downturns the done economy, in I past, in the we had we've where the manage everything and

So, take we markets and -- we levers if sure pull as we as protect don't the possible. to we make can actions there absolutely, can that is best

Scott Graham

now. you're But not those pulling levers

Would you however after a if the fair improvements emerging. those You second don't see might that, quarter, be that statement?

Carl Christenson

statement. fair Sure. a That's

Operator

line [Operator Instructions] of comes Halloran Baird. Your Michael with next question the from

Your line is open.

Michael Halloran

talk cadence So a the an from bit perspective. year just EBITDA about the little through let's

prepared I quarter to it's the remarks think you front a XQ first up slightly into with normally EBITDA little similar sequentially implies half front half, back versus than Normally relative half. quarter. the said back stability lower half the roughly second looks I think

talk just forward? you're end we even just if and cadence about more synergies, through about of of maybe the how between year timing spread as So, that the tying move cadence and thinking markets EBITDA, that

Christian Storch

Yes.

us particularly first is FX. So, half really in what's hurting

FX had quarter is that EBITDA around impact first the at look on, the on million. you If $X

That's $X in the big talking If and similar hope do give the driver. EBITDA. second will you're two, seasonality one that past. that, will that we in you take has in And half the as headwind in about million business experienced We second times will disappear we half. some legacy then the that of tailwind believe Altra us see

the in the the first are in the year. We half first slightly XX.X% of profitability of revenues And and the half the the that from second half roughly year the the is second year. of of half balance in below

EBITDA we'll what improve it out FX EBITDA, will in the typically be second and And how plays half. for the somewhere to we can see to, do

Michael Halloran

weighted, rate, or back that evenly half then is spread? is timing the of run pretty that, that more synergy And

Christian Storch

and somewhere think think quarter in realized half. and of million we second ramp up the in first $X synergies million between will we $X.X the that we It's

Michael Halloran

then use the for a line, run corporate here? Christian, rate from as sense on Makes corporate the line and what we

Christian Storch

So is underlying the most the to allocate our segments of business and units. out corporate the policy to expenses

first the indication the balance for good think of I that rate year. a of run quarter be what is should

Operator

comes next Jeff of the KeyBanc. line from Hammond with question Your

Your line is open.

Jeff Hammond

back do I those through out? seasonally the lighter. on half Just $XX the million cadence. opportunity those know second synergies, little just But to you a about have is build million an that typically as think of $XX the to year, where you even

Christian Storch

to some ability to it. we're think going will I completely even but we And don't will that that So, we'll -- have it eliminate seasonality, out. soften

Jeff Hammond

I said PPT in Okay. Is last quarter, anything in range just X.X% And markets? growth given you moving thinking and the your end pieces A&S the there then X%. see within that toward changed you think

Christian Storch

Kollmorgen The the business. side impacting in rate developments our first A&S the really growth industry in of semiconductor quarter been by the mainly has tampered

in second his trends, of we growth in Carl for But as tampered segment. rate that the will mentioned the reverse those expect Some half. remarks those that that has

first quarter. that side, think seasonality weather. in the of some have of the rate but main was market, that been turf On turf that We ag recover and and very X.X% on side, can quarter, legacy soft spots impact the Altra the the garden second the the those was lower PTT in of we was the hope growth garden I

Operator

over questions Christenson. turn back Carl time. CEO, further this to the at I will call no are There to

Carl Christenson

XXXX look joining New forward to XXth seeing We many all us May at in for Day today. on York City. of Investor you Thank Altra's you

in website day. Have joining details. great participating those the us or you For for webcast, more of visit interested our a in please

Operator

call. conference today's concludes This

You may now disconnect.

Altra Industrial Motion (AIMC) 26 Apr 192019 Q1 Earnings call transcript