UFAB - Earnings call transcript Q1 2019 | Unique Fabricating, Inc.

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Operator

Greetings, and welcome to the Unique Fabricating’s First Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Rob Fink of Hayden IR. Please go ahead.

Rob Fink

operator. you, Thank welcome Earnings to Unique First Fabricating’s I’d Call. everyone XXXX Conference Quarter like to Hosting are Officer. call Tekiele, the today Unique and Fabricating’s Fabricating’s Tom Chairman; Chief Financial Richard Baum, Unique

management, risks Before the that Act that discussed the statements this I on of Private and are forward-looking to call include defined call to XXXX matters will turn conference uncertainties. as remind I’d over Securities everyone to like subject in Reform Litigation

did intend company’s this and or cause any All Reference to Forward-looking by achievements are and of of or and in involve results, report release. unless of information All XXX(b) which results, and from expectation statements made management’s performance XX, future different pursuant SEC, an are other Form and to future this of may are other outcomes known may December and annual things, statements release filed events information. such the risks, present incorporation uncertainties not that in XX-K update activities, Rule statements timing not expressed press to discussed factors, levels press to uncertainties results, ended those include, website law. particular, statements future statements including and not be the relate for this levels by been period cause Fabricating XXXX, the EBITDA forward-looking -- constitute on and to including limited and uncertainties share. revenue, related performance that factors. these to events, subject on in implied differ today the statements. with performance company’s or outlook achievements, to including section materially as unknown Unique earnings regarding, the but by actual financial morning’s this of different to to the include expressed materially or does any These per company’s call actual of risks titled, morning’s has to, statements risk required expectation the among certain forward-looking risk factors activities, company’s Such on performance those this based about from

it will call. measures company’s In by for this decisions, issued investors during in forecast stated, the any turn yours. should addition, non-GAAP to of be believes be that of ongoing assumed be to discussed These results Rich, over and discussed non-GAAP a release performance. the earlier all useful press these Bam. otherwise like are is non-GAAP measures core make said, financial the are With management call GAAP company’s today. that prospects I’d basis. this was Management financial the financial non-GAAP now it that future assessing used included in call and presentation to evaluate reconciliations the on that are Unless non-GAAP Rich future. to and the the certain in measures current call Full strategic understanding will operations to is

Richard Baum

personal for for morning. you resignation. John we his has that Weinhardt health us. tendered good and Rob, all related reasons, Yesterday, Thanks, announced Thank to joining issues,

past the stepped smooth transition. over for employees, industry As time on and and as John Directors Executive during his him past thank remain leadership of has of wish role and I’d he CEO Directors John to the Board the many was ensure dedication of appointed of you to and President the health a as XXXX will a a Unique good into of and Board of John the decade. President of appeal. for Unique’s in and know, directors in like served officer board John to the all behalf XXXX, our years. Chief On XX

served diversifying that for and Unique production to sure, most company is was role dramatic wake those XXXX Fabricating the automotive and a in rapid it the been As stabilizing clients. played remember, year in in the business, challenging a the of into especially John in involving today. you the sector. And I’m companies years companies, instrumental vital he’s for since

experienced some performance over has it’s electric the supported these to automotive CapEx pace year, vehicle base, low and enjoys Unique last segment for important to Fabricating and that is Unique This from passenger market product business outside While challenges the will obscured the of sector term are model, these diversified scale accelerating. wind quickly certain improve customer service level vehicles and significant, We by in challenges. demand. of help launches that to by term. adjust or a segments but Unique’s vulnerability the on growing focus contributions the near-term segments the industry remember market, these continued and current like that to have made strengths unexpected recent these scale has are has believe longer reduce -- new expenses our In electrical declining, to quarters, up challenges energies to cars. back. mix short our even staffing short-term ability Unique our debt issues down the SUVs, been and more at is her the revenue

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companies and He mid-market privately than group, of CEO and and of vehicle industries. XX more held privately that in in equity, and company, Kim shareholder. also commercial specialized corporate a capital finance President an group is currently experience the management. and of plastic Xth private of fund technology operations serve the is held bbX, as expert currently works TECHNIPLAS, for years of serves in founder As a infrastructure primarily Avenue acquisitions, CEO Capital a equity manager, James automotive, previously sustainability was development who largest Kim she companies. improving product our mergers mezzanine has manufacturing of Peninsula Partners,

President executive has To Scott Development conjunction with part and a search a interim new operations the a As of the transition, on search until Board successor responsibilities an executive Vice Reed, specialized Operations; is firm. Brad identify regarded Hazen, the Vice highly CEO, engaged In meantime to oversee provide oversight take transition this in Chief Financial additional appointed. committee of the Officer; Business leadership, full for to Tom call and to and smoothly. review now and financial Tekiele, the update the will like Tom leadership President team keep the results direction quarter. first and provide to to leadership support of Tom I’d businesses has operation senior our rest team to Tom? that Brad together the Board. efforts operational will the And the over turn provide the support of needed I and confident the am Scott, running interim help and is and

Tom Tekiele

Thanks, Rich.

auto Heading during higher than projected production some navigate and turmoil, the sales the industry independent and bad preferences largest North changing a would first quarter, the Fabricating the an of industry During some usual disruptions vehicle declined on sector. consumer production continued be weather, in estimated declined Unique economic production new inventory industry and first into X.X% quarter corrections basis. and from American levels inventory a year and year-over-year X.X% that manufacturers, flat. of But the auto as sales the analyst result

this, during annualized reduce will accelerated which during fixed In Smith For end decision our of including vehicle impact we Unique, year, business of production on results those our an non-automotive of to an exacerbated efforts and a approximately loss to Ford facility the customers loss last the financial two quarter. that of certain reduction of of our the workforce close to all well our were business response platforms $XXX,XXX as as headwinds the compounded life a the basis. to at save quarter, on major result due unfavorable cost mix by

have expected production to than if addition, take sales In and identified operational our opportunities additional continue. lower we efficiency, action to trends improve

fix for We quickly a where of only a that important benefit large the highest amount opportunities found quarter, are, OEM product revenues to launches it new by platform to commence production a with create but of ceiling from we vehicle of an solution as new have need and previously however, begins. opportunities beginning new the launches our plan It’s production been OEMs subsequent vehicle SUV first end are a created that sales will offer the note automotive content. to some new providing were product to Historically, for issue. an to vehicle that issues noise not program significant us have we unplanned commonly when direct the margin that of awarded, on including

first failed results current in the be the the of anticipate joint year-over-year positioned XXXX positioning of in production that mitigate the the trend opportunities over revenues current the we the and we our we At the quarter quarter. number volatility potential in launch industry as not annual to recovering are new we course to well Based to during do are our created, now. the XXXX overall months scope visibility as next scheduled believe we grow we of engineering full the us again that with outperform and on to experienced to on awarded incrementally As customers, a first projects of basis. XX platforms the time, of programs over engaged a better will expect business new occur improve will the XX ramp in XXXX, do and

waiver it that As result of violation of first direct we the faced lenders to of related and challenges the impact credit the agreement. the our quarter the had temporary secured in we leverage our our on a financial covenant results, from ratio a

light weighting manufacturers engines waiver, of dividend from to forward. condition level, drives to options lines. that and our noise supports us our the which and of acoustical are and a number for to Most combustion giving for financial and suspending content enhance operational are be shift to electric automotive otherwise product priority more engine, enhanced turn in vehicles strategic the Vehicle specifically beneficial a masked the battery and macro a to which driving leverage, product going this our vehicles. notably, today, At program, greater voice the our trends combustion our the industry offering. strategic reduce As the would electric shift we lead demand need infotainment for dampen flexibility integration by

business first GAAP was an and restated impact as valuation gross primarily first diluted swap increase in sales we of as debt. recent of the first of to of our that dollars quarter senior the the X.X% with in nonautomotive CEO to eliminate and the we earnings of we're to compared to X.X% environment highest for due of this Of and In results $XX.X the basic in net to of life year-over-year decline approximately of trends vehicle period period tax our on than XXXX was close million or primarily net the visibility floating And decrease for gross XXXX. improve first our decline quarter share year share Arkansas, major of mark-to-market or the quarter guidance swap quarter-over-quarter the Gross I XX.X%. income the quarter as for of in the production $X.X launch unfavorable first $XX.X swap. last of the on and for second of $XXX,XXX Board amended in of revenues. over administrative year. and compared compared Net that first industrial in of the million income embarking for year. identify American vehicle basis $XXX,XXX as had significant to sales first did in the in compared EBITDA of That Income has result financial period our loss is net in decline $XX,XXX XXXX, represented higher sales appointed. customers quarter, the interest our X.X% expense of current the rates was a business on The and to the results mark-to-market XX to to for the the well how $XXX,XXX for were the for into Selling, the the due June quarter to $X.X $X.XX this lower for quarter-over-quarter, $X quarter these million were EPS the the to certain net of the sales our be and sales year. expense the interest Again, year, due was period. lower decrease profit half in diluted given year. EPS higher decrease programs Interest was The a year. interest sales $XXX,XXX corresponding a or a of months increase new quarter due tax scheduled resulting of to net $XX.X unfavorable first was last decrease Operating the was declines primarily market XXXX. the compared decrease general per was With $X.X compared on next $X.XX higher rate or million was decision well non-cash secured to first in the loss has is in million ago credit to due sales million corresponding net and decline, $X.XX but XX.X% net cognizant X.X% production million due percentage for XXXX mentioned, $X.X negative expenses prudent lower of or in made enter some corresponding accordance to November, to basic $X.XX half. North on we to long-term first and loss was sales income per the quarter facility or vehicle expense awarded diluted impacted quarter we portion or of the income over -- per The a to our course outlook do Adjusted well compared that rates a Smith, net the XX Fort compared the million of last The of for in platforms. the of interest volatility said, first our recognizing as was of for to interest on expect facility XX.X% the a that XXXX per million of are first decision adjusted are The net sales of Despite of the $X.X diluted and driven sales content earnings of as primarily platforms, penny million in first quarter rate was the ago. previously are last XXXX of XX% profit new stronger net the XX.X% XXXX new XXXX the by $XX.X the sales CEO, to to end two that incrementally for to $X first share. gross annual until transition year related at share the in XXXX profit total, terms automotive compared the required Adjusted in million quarter a XXXX. X.X%. was to an other $X.X SG&A into for the was quarter in again the of XX.X% as of first primarily XXXX quarter expense XXXX million production our or of strong. impact

of had million, revolving restrictions XX, outstanding of our borrowings million the XXXX. of approximately had credit as company a XX, of of facility Credit cash debt term as Turning $XX.X equivalents available Letters of as lender bank $XX.X total company had net and debt the includes of of XXXX. March $XX.X borrowing million which unused of XX and million credit subject The sheet March cash and balance to with base under March revolving bank issuance costs. by the $XX.X debt $X.X further million Also the primary of in credit to company line

we covenant the the the As secured related mentioned waiver subsequent quarter violation first the I earlier leverage of credit our to from lender to of ratio agreement. end our [ph] of a

waiver call financial Operator? dividend suspending for our options are enhanced As this our we of which With to open leverage strategic giving a our condition greater supports strategic we reduce flexibility the now and program and priority going forward. us will questions. operational that,

Operator

be line will for Koranda line with of time questions. proceed Please At opening Instructions] the Roth first this from you. question-and-answer the Matt your comes Our Capital session. question of Thank we Partners. [Operator

Unidentified Analyst

Matt. morning. Good for This is Hey. on Mike [ph]

Tom Tekiele

Hi, Mike. How are you?

Unidentified Analyst

And just John our to right well hope we wanted all doing end. Hey, his at wishes all first and is well. of to everything

Tom Tekiele

Thank I’ll you. to. him pass on

Unidentified Analyst

great. Okay, Thanks.

in I it jump decline I’ll – like two some And for right so decline XX% in of was headwind lost calculate closure. we the auto GM X.X% the versus and the customers Fort think into the questions. headlines about And knew quarter revenue I the that industry from production. roughly Smith

So with where on if you can your possible? in in that decline I plan so, wondering and just there or this And those some quantify additional occurred? are them unexpected touch if of level was headwinds

Tom Tekiele

Yes.

they that or used some our originally was -- largest to eight production and LMC's our quarter-over-quarter. as Some platforms platforms IHS but for was less was platforms be of some light down that plan, have actual obviously. mentioned the down. to were production content in production according what forecasted trucks of that, about that platforms, then was would that thought not to of headwinds The high significantly quarter which and the on addition forecast significantly you It we we include large some such nine down SUVs those be the in

Unidentified Analyst

switching bit. then And little helpful. That’s gears Thank. Okay.

last the waiver And expect of long covenant when syndicate? you proposed violation approval the from the other members how Regarding do for? the would

Tom Tekiele

approved has members by waiver The other been the syndicate. of

point. have through the basis. June meeting plan here shortly the covenants So this and do on is banks it's to agreement go at to after an the approved The as amend for amendment credit to a a earnings forward the XX out meet necessary

Unidentified Analyst

Okay.

So higher or much interest covenant color you knowledge yet, you attend will And what any to expense maybe of a do how be? on covenant? the expect incremental

Tom Tekiele

waiver with I and on But at of higher agreement interest is that nothing what if amend to all. is indication costs. the higher interest some don't going have terms There will there any interest assuming to yet. of if rate regard we be the a have be rate. don't if that we answer I'm I credit just win sort higher for an in

Unidentified Analyst

I’ll Okay. back Thanks questions. step in for taking line. my

Tom Tekiele

Mike. Sure,

Operator

Our with of Taglich question. proceed next from the question Nobile line of your comes John Please Brothers.

John Nobile

was should regard I you appliance how thanks could again your call. facility were have my wondering Actually and insight the and some And questions particular that morning impacted a addressed, a talk if I’d we already get I about to this? a into, Good adversely Hi. couple, going closing expect forward to in of business? little for some just of like but this what

Tom Tekiele

the or have facility, were the of we to have They when our them that would another to of they closed production like by wanted moving closing close parts. to to The to we’d -- it, supply those they that be somebody we told customer facilities.

again They Smith, therefore ended they be somebody they to facility after from area to that could move plan and would move somebody their we the into us business us informed moved up find had facility. getting it. if there the find Fort if to took locate could would business somebody So Arkansas in a close that they

John Nobile

of trying idea revenue about yes, how And the – much business? just get that an I’m to

Tom Tekiele

million annually, It John. was $X $X to

John Nobile

and talking if good And the further regard some reduce strides if some we you quantify there. reductions. how made much wondering you an believe cost was cost, But I you of you reduction about could in could you could get kind XXXX? further idea to Okay. the

Tom Tekiele

take $X basis over annualized out on another annualized XXXX $X.X about We’re on then [ph] an basis also. in thinking that an million in can million And XXXX. we

So…

John Nobile

We the were top of X.X?

Tom Tekiele

Correct.

John Nobile

right. All Okay.

Tom Tekiele

at this the That strategy point. that following we’re is

John Nobile

vehicles. I how idea an that shed for And just quarter, you really in wanted these about sales If end talked did vehicles? get on press release the of life the in please? little that, to of of more you could light end-of-life impact certain much the

Tom Tekiele

the by in It $X.X impacted the sales about million, John. quarter

content, over Ontario that These was specifically certain where things that particular were version our So our to the did attached the parts die-cut side that things not body a London were made had there a platform of pickup on these by carried parts parts we truck. They in vehicle. adhesive were moldings a outside of new facility. like the the large new attached and not launch truck tape. And have were that pickup

John Nobile

-- surprised one had expense. have just I to that. interest that actually there you regard It adversely swap that million. an But affected was And in notice interest mentioned Okay. other $X.X was question rate me. the I that impact

I an So rate impact what get was what interest to that wondering if could swap actual quantify interest the from the idea was was? you of

Tom Tekiele

expense due was forward… going And additional interest about of $XXX,XXX to the It swap.

John Nobile

going forward… And

Tom Tekiele

obviously. Non-cash

John Nobile

non-cash. Yes. look I swaps, have mean, I forward But rate the should the so on know we we you – books, do I potential…? interest any should at mean, still going

Tom Tekiele

interest it and unfavorable going It will every the mark-to-market. rate if The we’re stay are its today swap down on continue multiples, to they the to obviously where if the better – interest quarter. And on won't obviously depends go book. get any mark-to-market worse, they is have obviously it get

John Nobile

I that. you. Okay. Thank appreciate

Tom Tekiele

John. problem, No right. All

Operator

no for there the today’s the are questions your time further this over conference. of participation. you does audio This portion At concludes conference. Thank

disconnect may of this a time. lines rest You day. your wonderful your Have at

Unique Fabricating (UFABQ) 12 May 192019 Q1 Earnings call transcript