UFAB - Earnings call transcript Q2 2019 | Unique Fabricating, Inc.

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Operator

Greetings! And welcome to the Unique Fabricating’s Second Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to Rob Fink of FNK IR. Please go ahead.

Ron Fink

Thank you, operator. everyone Fabricating’s welcome earnings quarter to call. conference like to second Unique XXXX I’d today Tekiele, is Officer. call the Hosting Tom UFAB’s Financial Chief

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

or and Forward-looking and to morning’s factors to statements achievements events future known the uncertainties future future or and or Press achievements, cause level unknown by performance may to including risks, results, or statements be expressed implied to results, from of other materially outlook performance financial that any involve of actual levels related this performance relate company’s company’s different Release. the activities, activities,

statements revenue, about actual factors, forward-looking present of Such differ event, certain subject things, regarding, All EBITDA such an results, are to and statements materially expectations based to forward-looking and other such cause statements. per timing expressed these on that management’s by may those share. are statements among expectations from performance outcomes include and uncertainties earnings risk

are company’s Factors. These XX, XX-K XXX(b) Risk in include, to, uncertainties SEC to but in the has titled pursuant been the which particular section limited Rule XXXX, and, risks the discussed period annual and those Form on December the report not for ended filed with

any law. information. Fabricating the made this not this this website update call, Reference of intend including on in by Unique incorporation not morning’s constitute company’s unless Release All included does required to information of does as statements of this Press today, and and are to

results this non-GAAP will evaluate by addition, and be are measures future the strategic make discussed financial used In decisions, current company’s call. forecast non-GAAP performance. These during management to measures certain

the future. operations non-GAAP are for to Management of an ongoing the company’s core presentation investors believes and and assessing useful in measures the financial prospects these understanding

is discussed basis. it in that will earlier otherwise any financials to a Unless be reconciliations that Press the non-GAAP non-GAAP issued included should was Full GAAP call assumed this on in today. of stated, Release it be are

With yours. the like I’d the Tom. is call said, all call to Tom, to over that turn

Tom Tekiele

Thanks, Rob. automotive and expected softer industry challenging vehicle second continued quarter, the production the In macroeconomic than conditions volumes. new with

faced Unique, challenges For two business the Smith at loss a exacerbated to the Ft. our nonautomotive year. as industry decision the customers, environment impact again we of facility by were of last major our close result of

decision helped along improved strategic actions streamlined with our $XXX,XXX. and we The by annualized more other to our operations, this close than operating our the efficiency took, plant, to reduce costs

than had slower lower major hoped new revenues been loss by but production the would these anticipated. of margins, launches the margin these have ramp-up programs of several higher offset with be We

with working We that watching closely align so industry plans, are production product and better our to our we optimally customers anticipate operations. and their trends strategies can

of half ramp delay second shortfall We optimistic year. and made begin this are initial will sales soon that the that be in this up to as caused will cautiously forecasted production by the

efforts discussed improve to order have As financial have to efficiency, operational to and we our we last position in our in continue costs calls, few our improve fixed further accelerated and the flexibility. reduce

the the an basis, in September made to we action to On this annualized year. XXXX. half plant quarter, close of plans overhead our more second than the first our Indiana $XXX,XXX will During this reduce during Evansville, strategic decision per of by accelerate year

structure, our improving our better geographic evaluate opportunities additional while can to overall reduce organization to our footprint, take simultaneously there addition, we and to we cost continue leverage additional several believe streamline are In our steps further performance. to

visibility by of be market the steps are top-line underlying XXXX. to proactive focused we secure, awarded rate second of longer will and objective confidence to programs to to back gaining growth currently we working the term we Unique the current are excess get half continue our automotive of back of business that a new on help to take growth. We Based in

with currently to a should and in taking reduce actions yield we This, our the are structure combination profitability. improvement cost steady

return are effort organization, identify our a new levels looking as programs continuing historic new of ramping-up team In as is performance. well to We focused the streamline leadership actively that progressing better CEO positive Unique to will planned. the on position as that and is meantime, to our to

XXXX successful the company, that lay are challenging has we moves for are been the for year the very making a XXXX. foundation a to necessary but believe we

decline In for sales the compared of to for declines in XXXX, quarter-over-quarter. on at content business million in The North quarter production to major of platforms, second significant decrease of vehicle by in period driven of primarily modest were two a our corresponding American million net results: production Turning and customers highest $XX.X decrease loss financial some the that I the the earlier, XXXX vehicle mentioned was the second a XX.X%. nonautomotive $XX.X quarter,

on Of in anticipate content and return $XX.X second in was industrial other sales for automotive net half the represented the the to normalized vehicle production million was of programs high We XX.X% total, X.X% our a the second levels of X.X%. quarter, the year.

net to $X.X in of period sales last related corresponding or sales XXXX in second the or primarily The was profit to net XX% the XX.X% gross quarter compared decline the for $XX.X revenues. was million for profit of year. Gross million of decrease

net to the administrative year during of general XXXX million XX.X% sales lower both expenses were XXXX. net the sales due quarters but of $X.X and second Selling, last quarter the XXXX sales XX.X% of and for XXXX to of were second in compared

of $X.X fair quarter due for recognized to capitalization, second of XXXX, decline value our company impairment the book the resulted the goodwill exceeding million market value. the of charge During its a market we a in in which

last year. we quarter period also corresponding of of restructuring charges XXXX the in In approximately $XXX,XXX $XXX,XXX to during the addition, compared recognized second

expenses, to operating million charge compared XXXX $X.X quarter of of last year. the inclusive the period corresponding goodwill income the was restructuring second loss, million for Operating of and for the impairment $X.X

that the $XXX,XXX was impact for on quarter mark-to-market XXXX unfavorable recognizing Interest the expense the senior primarily interest year. accordance of rates for terms of into of quarter an the we in which increase interest were last to second required was debt. rate portion credit with million to second due an swap November year-over-year amended as XXXX, $X.X our of compared to floating in The of of facility, secured as our enter restated higher we on the and well

quarter in $XXX,XXX expense compared in primarily EPS share. year. the period. earnings diluted the this decrease in The of of resulted the XXXX to valuation adjusted a The year negative due to approximately the Income of $X.XX $XXX,XXX was to tax tax expense of was per benefit EPS for lower second and swap GAAP income impact ago tax

impairment Net charges loss million goodwill the related $X.XX $X.X $X.X diluted to to approximately or basic in income second and restructuring per for XXXX. second compared $X.XX of of including gain basic the share net XXXX quarter extraordinary share or and per million the expenses $X.X was million, and of quarter a diluted in

mark-to-market was a lower restructuring impairment interest decrease due charges primarily the higher rate profit on in as to unfavorable the incurred, sales the well expenses net the due as The expense interest swap, the resulting for gross and to goodwill decline. in income

was Adjusted compared of XXXX. share of in in for the million XXXX second Adjusted to $X.X EBITDA quarter million for the ago the to the compared $X.X earnings second quarter second was $X.XX year XXXX per $X.XX diluted of quarter period.

$XX.X the down XXXX profit now from year of months to for XXXX six to our XX.X% for year-to-date corresponding of for the months XXXX Total decreased last $XX.X six or revenue of Shifting same total was first of Restructuring the was results. compared million $X period year. Gross expense million last in million, compared period $XX.X $XX.X a the first to or in XX.X% the six revenue months total for year. $XXX,XXX to revenues the same million period million of ago.

the loss Net $X.X last six share per net and of and due year. share the was compared was in period in on million year lower during discussed, interest higher $X.XX non-cash to decline months interest The per for the higher to $X.XX for a and expenses income restructuring or sales as well diluted well rate swap impairment rates. resulted to an loss diluted profit the million period have of interest mark-to-market corresponding unfavorable gross goodwill basic we or due primarily and that as a net expense $X.X XXXX as the first as the basic

first in lower as sales of same the result The and the to the compared in EBITDA GAAP previously of million discussed. six Adjusted primarily a Adjusted was Please period period diluted XXXX million percentage a earnings XXXX to for of same compared of to gross first had year. last decrease was share tables margins a the for as to the sales last per for I of financial non-GAAP results. year. months $XX.X $X.XX is six $X.X the $X.XX refer months reconciliation

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

an financial outlook our To quarter with well we secure to covenant we end as leverage credit our further going position, with financial of amendment quarter, revised were which current included levels the the for second first our able our to our waiver forward. consistent are a as the permanent enhance the agreement believe which of of lenders, subsequent covenant violation end as to

current working the of expect are we growth take our half term incrementally as we work profitability. Based our and mitigate face summary, to objectives we improve XXXX. programs restoring the awarded second challenges secure, of towards to our that help longer new In we proactive over visibility to and of currently results business on continue we steps will

to to reduce our We for and improve grow efficiencies will revenues. our our overall opportunities costs, continue look operational

the we the making the Again, XXXX necessary are been but believe for first difficult profitability. has to a we half sustained Unique, period very company to moves of returning

for that, call Operator? With questions. will open we the

Operator

Please question first John comes Taglich our question. And Instructions] Brothers. Nobile your from of state [Operator

John Nobile

taking Hello! questions. And good morning. for my Thanks

Tom Tekiele

Good John. morning

John Nobile

Good morning.

first them? could I’m just so made this be cost planned, are the structure expect was cost reductions there reduction in your in if and level wondering significant structure you you if if to at current quantify to remain You’ve further half. a I going cost curious the or

talked $XXX,XXX, reductions. was about, other you at Evansville, you’re looking $XXX,XXX, know and closure cost it there, the about I Indiana, the but

talk just for particular could what and the you in we this about If expand about a second should little bit what maybe look monetize they year? just in of are that, actually half

Tom Tekiele

Well, million. make quarter annualized have an we will of second some John headcount in did late reductions impact that $X.X the

Now of didn’t until that third quarter, in again that and we’ll fourth happen some start quarters. the benefit during seeing late so the

John Nobile

basis that $X.X what annual was? That’s is on million an

Tom Tekiele

we like can That’s more to annualized be to minimum than leasing if plant. depends you warehouse, close It that. more savings correct. will just the basis. what able on $XXX,XXX from trying the and that sublet today; some warehouse Indiana a generate that do It should that will Evansville, are we’re do Then an we with that than we’re savings planning on even be are mentioned, space be The $XXX,XXX. we it, we to could

also There’s I opportunity some additional cost for reductions. said like

You can another opportunity probably do during starting another wouldn’t cost be whatnot. for something we XXXX. to looking annualized further do reduce reductions but at – till say sometime basis and $X.X sometime that like geographic our XXXX, there’s things we million an on footprint it I’d we’re know If in

John Nobile

to programs of XXXX? about programs how into hoping recently the benefit if this And a new I these been have and second about you could you was launch or the could your half year quantify will little launched, that and talk that in you’re sales

Tom Tekiele

trouble actually of this has Yes, largest full programs OEM so launch hoped, that starting production of and to it’s having the in done, was that some gone we not were than year, had the production but a is to June we levels. up guess there ramping little slower I one anything that planning that because of is Unique

little than a lighter large due was new we in us. basically that to are sales that to platform QX, anticipated So bit

that annual on make that at to an for hoping anticipate June do to are production some they lost we’re We will on up during that large full and impact that going and $XX million our It’s they a nice up a they’ll third basis. speed the shortly, platform get have time about revenues. production quarter during here us. the and That’s

forward. good that impact our have going on revenues So will a

John Nobile

and is progress a July was platform? Any Okay, that in the June. you slow in books. it said in start

Tom Tekiele

It’s and for whatnot that make starting so and up normalized from still a this get very to SUV, is what little big lost. are going levels, now slow, they but work weekends OEM, understand I very we think to popular platform loss. a to they’ve it’s up what we’re a try important anticipating to This it’s make to back they’ll a

John Nobile

Okay. just the the And you which I in to year? end-of-life going vehicles this in expect adversely further certain half, that issues second know your there’s end-of-life have impacted of half the results. be not but quarter, this of you first Do any

Tom Tekiele

that the impact anticipate it’s seen the year. in to their come There first but half don’t you’ve end that to of are that I of any the going life, have programs will

that that or be offset have launched. some by platforms we’ll that we’re more new will recently of think that be on, than the I launching

revenues So these of the the faced with the anticipate to of But some up in don’t marginally platforms. be we challenges first first what new I they I in were half. the on anticipate better the of in second depending half happens the half, than second year ramp recurring the in that half

John Nobile

mentioned the improvement the first improvement you’re last and incremental talking to year’s. or over compared when basically you second half Okay, half, in sequential

Tom Tekiele

yeah. Yeah,

John Nobile

to compared get is usually we’re half, to QX last idea into your from Only the half, I an second at wanted looking year. have a pretty because comparing improvements to so that you just first because first not half second necessarily your seasonality strong half of QX

Tom Tekiele

That is correct.

that into and right, QX. And second should but and than some our is typically and QX QX, and and in even You seasonality sequential year. lighter the some see half QX you’re QX see are from revenues of QX we QX with improvement business sequential QX the improvement in during there

John Nobile

But – just Well, I’ll it half, it that’s may hurt again excuse in you I questions. second others hear. for mentioned you first reduction question. the content this you platforms. good hurt that second me, open one the further have to year the quarter. high vehicle some up in That quarter, have the

look, So year. high content for the right the – platforms as your over half that next in you have outlook does your second visibility as the these now involvement are for the how this far these year, it of vehicles

Tom Tekiele

to be look levels. back to They normalized

these half think year in levels the there I can some at we the happened they inventory tell, back the the will in the had might cases. some inventory they issues there So half they of year. of have were that second of reductions vehicles to a the some that trying on normalized during first first to popular correct From what in SUVs half and were the from lot and get OEMs year of on. these are But of

John Nobile

Thank you hear. for good again questions. Okay, to that’s taking my

Tom Tekiele

John. you, Thank

Operator

Ladies We participation. appear gentlemen, conclude sir, questions today’s for your no thank does you be time. this And at further this teleconference. and to there

this You great a may disconnect time your lines and day! at have

Tom Tekiele

Thank you.

Unique Fabricating (UFABQ) 10 Aug 192019 Q2 Earnings call transcript