UFAB - Earnings call transcript Q3 2019 | Unique Fabricating, Inc.

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Operator

Good day, ladies and gentlemen. And welcome to the Unique Fabricating Q3 2019 Earnings Conference Call. All lines have been placed in the listen-only mode. And the floor will be open for your questions and comments following the presentation [Operator Instructions].

At this time, it is my pleasure to turn the floor over to Rob Fink of FNK, IR. yours. is floor the Sir,

Rob Fink

President Thank you, Unique Hosting everyone, the Fabricating's to call Officer. I'd Third Quarter like new Unique Fabricating Cain, Call. is welcome, Chief XXXX Executive today to Doug Operator. and Earnings the Conference

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

relate unknown and statements the known made expressed achievements that of future materially of events financial performance to by from on implied be Forward-looking today's or call. to levels cause different to levels or activities, risks activities, any future performance and may achievements results, statements performance company's results, or involve other and actual uncertainties or and factors future

management's discussed to statements to and cause to to, in the report has forward-looking not performance based XX, but certain section are These such filed from risks and Risk factors, statements. such actual uncertainties risk subject which uncertainties All expectation may on include, SEC period differ ended expressed in for and, those that those on and the December XXXX, company's limited been the Factors. with Form Rule are XXX(b) XX-K by pursuant are outcome annual materially the results, present titled particular,

this are law. morning's on by this not release unless as update in statements today, and Fabricating press information including and does to All intend this call of made Unique required

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

I'd Doug, said, to call the is that turn call all over like Doug now to the With Cain. yours.

Doug Cain

This CEO, hiring to Rob. background XX. where and similar joined September In a call first is me Fabricating became I President CFO beliefs my I my significant process serve a Thanks, be. many COO, and much Unique weeks, Combined cultural have am driving performance, I have company have in earnings to X Unique that as exactly I and on change during experiences my meant after experience and and will the confirmed these improved ways for as as CEO continue having leader served with with at Fabricating. business. successful my a Unique larger passionate well Fabricating very to that

levels and the all our Since and identify the with discussions and underway opportunities. joining in nine personnel. of cultural, the share well locations improvement management site seven teams held our made locations and floor We and held visits company, with of shop the I location meetings as and to to position to our organizational operational organization of current direction review background as changes

opportunities basis the as will the teams support visits the actions key meetings purpose achieve of expressed financial and instilled assessment a and the site held service to the staffs of what the serves to with operational complete focused am of with ahead. forward. Board and confidence have that rapid company-wide for and These This the and employee clarity have by sense and energized comprehensive optimism a management business. of strong the as realize as stakeholders by I are improvements a renewed very for meetings their providers take urgency. I going company the and prioritized well required encouraged to alignment

an been has exciting This few weeks.

team back on management our Our and track. Board boldly Fabricating that is have theme new embraced corporate Unique

cascading in consistent and organization a this clear message throughout are We the way.

sharing are our with external of We I and in stakeholders. instill in the this places organization of is work. This not are theme reinvigorated the slogan. an all the overall culture just words all do and we what These a challenge to we the made part pride improve empty to

necessary to underway. momentum and This the enable builds changes a forward dramatic

of very of and value organizational organization, advantage executive to across opportunities, increased the and new cost I identified clear taking to key current and profitably market on provide and ensuring flatten the reduction the recently successful eliminate targets, drive command, utilization to grow of chains business capability. operational improvements capacity the while the redundancies, opportunities. organizational develop business, position the is assessing accountability, We optimize organization, identifying simplify the many aspects financial share, critical to talent turnaround, focused realign resources meet level As structure while aligned including

ensure am of teams to focused they an The X company. very In direction our week, previous obvious the doing is what serving in are the necessary our President experience Operations. roles extensive Vice as the all areas I simultaneously accountability. success in my by resignations in by accepted the and I talented responses from and clear commitment of company. empowered encouraged Senior to employees my with our have are experienced first I of of CFO

operations remains currently role I my VP the continue provide To replace do serve While improved where Senior of in for and to CFO, sight line I will Operations. permanent greater of of we CPA to a plan license active search an not asset. that the leadership, mentoring

and are the are trends they future and offerings line our the markets other positioned strong, in as are with shaping industry end product well Our automotive of sectors.

OEMs comprised CapEx customer operating concentration diversified has with a corresponding model top-tier and a When beneficial limited ROI. effectively, requirements have We and efficiently relatively customer risk. manufacturers base, operating of our low with

and suppliers markets in opportunities grow the largest we through serve of both significant have one We the acquisitions. and are organically to

to practice complexity, decreased have synergies available fully acquisitions, thereby As improved costs. plans lowering recent from capitalize overall are and yet we executable the outlining sharing on efficiency, we to achieve our best

realigned Our existing and capability expectations positive. relationships to and on the customer ensure front increased end remain clear responsibilities. organization focus We

that our selling are us We this communicate into points existing will aerospace. confident unique while in expanding markets and create help to and medical

teams Our a number market talented, value grow and experienced our utilize and profitably open capacity commercial, engineering of are manufacturing where products. identifying can solution-oriented we share areas to

we business show the the already comprehensive my prior passionate leadership we of performance. have a steps do improve are emphasis and acknowledge to results sense undertaking my of reporting today benefits and on not results. are I Hallmarks focus keen are financial taken and ownership of are start the the that to financial understanding,

not With to the the management acceptable the the Board we going-forward deliver organization, and the future. results to of these to expectations and now are shareholders, in team performance are expect not the clearly communicated the indicative

the these filed and in have the earnings today. with results earlier We SEC them issued release detailed

While and improve I our will improved call, the have fully resulting stakeholders. my not its with during helping shareholders read to based for all other questions and am will all to Unique dramatically business. I conference committed results upon any through company the answer aspects financial performance and the you this I best of my employees passionately the do reviews of

is take already the well the While it clear full work and acknowledging underway. impact will for to the that time is path be realized,

plan, to the detailed are substantial independent impact income a organizational next developing are comprehensive the cost reduction quarters. and expected generate largely operating rationalization of closure savings. These We over improvements plant

to while Bryan, debt activities close As levels, reduce identified $X.X cost our with have another plant improving customer million demand our finalized improving January in annual will We align of to condition. savings. Ohio the manner end several by approximately operational in of our a with expected to our more key lever high-cost the performance, overall action achieve closure This XXXX. financial capacity we cost-effective decision

this of expect as $X.X record We of charges to restructuring. million approximately part

of activity our follows announced closing Indiana the plants. This Evansville, previously

to save the expect one approximately this in million firm We to own annually We manner. of sell and engaged cost-effective property from most this buildings closure. a have our $X.X

an other of XXXX, the lease obligation we $X.X and November XX, payments future million. on for expires As lease we our have building,

have We mid-December all remaining the XXXX. conclude assist this Evansville November of cease minimizing firm All end production us future at to engaged transfers will in and impact. third-party a will this by

am great and us talents needs and shareholder opportunity I to all are there organization, see confident fully with of to prior which of address that firmly aligned develop I of maximize is we significant proud. profitable to the suited can I places at where and experiences tremendous to God by meant summary, create are be, I growth the are opportunity those am my something perfectly the that create and believe company. be we My shareholders. a interests In the energized Fabricating. the value here, unique value Unique

I know over look coming quarters. forward to getting of you many to the

in very binary learn communication. believe will direct You I'm that and

the I to will of greater outline with able already magnitude Soon, be identified and the opportunities. specificity, timing

have clearly great we ahead, track. boldly Fabricating Unique of Inc. While a back work on is deal

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

Operator

Thank Please first you. ahead. our question Taglich from [Operator And with take The now go John is for floor we'll questions. Instructions] open Brothers. Nobile

John Nobile

Hi, of I just good I morning, to a your have wanted Doug, welcome comments. aboard. couple And back one up to of questions.

was What in you're said plant? it Say name closing in that just the You city of Ohio. Ohio again?

Doug Cain

Ohio. B-R-Y-A-N, Bryan, Bryan, It's

John Nobile

to savings, charge And a was of in annual what, it $X.X and take going million? you're million $X.X

Doug Cain

Yes.

John Nobile

or sure. make January be started just closed 'XX? FY And to to want I scheduled that's in fully

DougCain

production all latest January January -- complete No, we XXXX. by expect to XX,

John Nobile

there. So be done production will

Doug Cain

Yes.

John Nobile

And let get of questions couple me here. just to a

$X.X You third in inventory million the allowance quarter. took a

that gross last significant about do the really math, the when Now I I which months, a it's XX%, get margin look I a of if very over I improvement. XX and exclude

that in improvement I to the help there gross mean a there inventory just Obviously, was XX%, the I that But if helped find in that, you without margin to out didn't considering just at anomaly wanted revenue? had moment in may an it. So what really I significant a decline it. wanted caused have anything see was

Doug Cain

which, opportunities labor in Well, included several, rationalizations my that plants were as comment, again, shift I is were tell made were based which there improvement already you the say, that done. that upon limited, my schedule review begun in I date, I somewhat to would and some rationalization previously,

material We improvements side on the in have our a utilization made some of plants. couple

So a it's in quarter. see force reduction that made along with third we of the a in began that fact a impact full had things combination the to these

that, $X.X mitigated of I'll activities a write-off. say, these it's the combination million impact substantial of So

John Nobile

So at level was is of to able in should basically, there margin anomalies we gross onetime of kind going this have, obviously, be no excluding there. see revenue, a This items. with what you this -- forward,

Doug Cain

be cautious in coached say. the Yes, that certain of been yes. I've I But, to things

John Nobile

was a made mention only amount the you that, But you obviously, press was margin. an strike to just correct make I the of October And in the almost sure impacted impact minimal was was quarter, had in I wanted the UAW of excluding in it basically, strike. that that third which XX% the think all gross had I -- days. by release, UAW

on So to kind might quantify I'm hit you business? an how it, get see going can take take have quarter know get curious of fourth hurt to what Can on don't impact results. much actually I your the that? your the with if of this I you're a

Doug Cain

Yes, absolutely.

business, So the ask customer and the of those things. one of of concentration our overview get things all review to an a in doing I'd

tiers, business. Our our of GM including represents the less XX% business, than overall

third quarter, of a the the others would impact, it be sales and the noted which impact So third only million in investors because quarter. we of was to in $X.X involved interest the

have sales. we That's For relative an this time, the October of period impact in and of all. to October million reviewed $X.X see

plant based I've And they communicated opened has are weekends that plants, GM the and catch quite up planning visits confirmed working this has and of various what and as upon production. overtime in we to a our bit different my see working to then on spigots

with So a already September. $X.X impact total, maybe million of it we're $X.X reflected in sales estimating, in in million

John Nobile

not the as of an imagine, great looking as might full So at month. one impact being,

But million rate that there impact up which over. I run weren't last on program that's million obviously, you brought And the I call, was quarter. And, later than strike the which launched was So the was rate, annual on think a about for June. run I $XX October obviously, is think expected. $X.X in it. I mean,

to program on as I going? curious we as are yet? production So is we up full just mean that speak, to that I'm how

Doug Cain

program one Explorer the we've delayed my some impacts that are the In company, prior Ford launch. the seen from also mentioning. you So is

not I'm is Ford on. having comment well-documented that issues some going to

impact We have our previously perhaps of the But some communicated. been that has of than own as less issues. maybe

negative see impact But So they are forward. we're still that don't It's from a going really, slightly ramping this up. behind. we

John Nobile

the into quarter, or in but are maybe fourth So the full we QX? be kicking slightly at rate behind, going to definitely run

Doug Cain

of an on then messaging that And, communicated previously, we guidance. just, whatever not have we're expecting I say some anything no But that are and we certainly material been that providing the check follow since could. that up was know communication, we that would specifically. in not seeing we're been can't way have that. kind question, I'll less I'll longer, I John, overall is than follow-on being and increase be forward-looking anything I

John Nobile

brought first that as on will quarter. up the first of Correct? Ohio closing, I And the you I charges $X.X question, plan with be guess million in Bryan,

Doug Cain

is. that Yes,

John Nobile

we far some just the restructuring as more $XXX,XXX Now third So how the quarter? had wanted quarter? to charges showing that restructuring. have in third fourth see What I going in fourth do in quarter. quarter. to what you the anticipate fourth as you're should I see up go much I to quarter expect in more the

Doug Cain

anticipating think more. we're million I $X.X approximately

John Nobile

a So last year's one $X.X up quarter-over-quarter. in even million. Significant others may final just your expenses, question, over open $X.X about and I'm million looking have more, and drop sequentially it for SG&A that I'll questions.

and we mention made to of area. reductions that Or get are margins. SG&A that in gross quarter. in off big definite There it's mean to $X.X cost expenses? even looking were came $X should forward? had you further idea going we drop. this I'm you a it SG&A, down million trying the In almost in reductions what cost was going at second is anticipate another a So quarter, this in we're million, in see I improvement an level because now

can I if going So on take your SG&A take forward?

Doug Cain

I review. be and opening fixed that I my greater communicate just savings organizational much can initial granularity, that position has with the comments simplifying say organizational to comments say my about downward I cost Yes, there cost are very I my noted would forward also, a substantial relative trend believe, that and key to been the continue. of I'll as in a rationalizing, additional that will eliminating And going flattening, focus be the but structure. in in will redundancies

John Nobile

questions. at out a when the it, around cost, not Doug, factor looked look results when for thanks the there brackets taking have onetime didn't bottom been I but I stellar the actually, would Obviously, believe, I line, already million. the out Thank Anyway, like positive and net structure. the in if to I the starting the income, take least at but it, that's what cost $XXX,XXX looked you. I wanted $X.X It turnaround is say.

Doug Cain

I can confirm that.

Operator

Management. we'll And MKH question Melas go next our [Operator Instructions] take from George with ahead. Please

George Melas

Doug, Yes, It you are to good want the also hit to say running. morning. welcome -- I like seems you the ground company.

on adjusted correct? So I inventory $X.XX want included numbers in million allowance. congratulations on $X.X provided, John's you to that. that follow the is in up on just EBITDA not that Is That the million. the

Doug Cain

Yes.

impact is income is the it no in So I'm the not There I that. all is included in sure operating would how say discussing. What $X.X levels. you're phrasing million for

impact is... negative So

George Melas

I number say EBITDA In $X.XX million, number adding the not million, adjusted provided in or $X.X you're the EBITDA that back release, should you the are right? of the

Doug Cain

No, sir.

George Melas

as is same significant have that seems items, So we of a the It have -- I a out significantly. the already John. numbers, improved mean I if number like strip reaction onetime

Doug Cain

But the June. our than you of we going we're and heard the Yes. better the business that never are a structure results improve, and of. been margins lever to back And of position the activities up front work ourselves in that I that put comments, company to I'm following begun on several know, there again underway as are cost the more already company have. the John, many And before had I my as you've end to seeing also. to call, more fixed there further in were

George Melas

with your have you point? And meet a CFO, capacity in lenders this had as to chance at your

Doug Cain

I Absolutely, have.

George Melas-Kyriazi

I'm it's most constituency. glad your Yes, hear probably to that. important

in drops down expectations to Your, I those are, comfortable this of X.XX, meeting December, covenant it point? understand of your with March at covenants leverage XXXX. in Are is X.XX ratio sort you the

Doug Cain

the you question. thank So for

X can started from key You I of a focus minus imagine actually. been day before activities my that's

debt as occurs. that that be says We at would And confident debt, we factors where will I I is key certain able this the ensure not So focusing forward. say, so. have the that, And point that that's everything reason in balance an opening to can reducing the issue yes. understand going do part my can that in mentioned know and I covenants financial we with of the I clearly performance and on be, the areas answer to comments, as time sheet

George Melas

as sort then other revenue break big auto the and more And dramatic the guys. first customers not your the all big that customers, OEs a down auto was from there then year, of one drop contribution And half about in three the in of are the sort of question three.

maybe what I'm But that and various first the understand had to I'm, there So the you just X programs with maybe half? the to on non-big there. is And customers? relationship specifically you were that some have the because, just end-of-life trying drop in trying understand

Doug Cain

that if split X that's things, into possible. I'll Well,

So end-of-life revenue represent if have close it What drop. $XX I to programs million we look honestly, we year-to-date QX $XX okay? is do that year-over-year, the of million have automotive dropped our

I'll to having We plant related have to with more business. the appliance to of closure the $X say, and close the, industry million impacts, the do side

a fully we that don't plant we of I There anticipated when than that believe, closures more these were retain belief done. were the think business I would was, did.

So million The production automotive to the X.X%. that declined in covers overall market, of only has year-over-year okay, shortfall. close with $XX you

a appliance that's had about on we've So lost that relative customers, million. impact. the ends $X.X $X that we've million about competition sign few up And to then being primarily

that one that relationships, has customer getting When single been the we the and here. about out a, talk it's of is all factor not occurred customers. I'm doing So just a things meeting

to prior got with of is very a customer of lot and reduced have and this fixed those capacity and focus groups, nontraditional of are clearly those we really and the focus those strong take mine on to market need relationships the relationships be experience of to the I've a finding be share upper and that that we from OEMs, to now just my But I'll advantage date, I have doing all including, going and will open of in gaining going some continue say, jobs strong, much levels the of forward. to opportunities structure. cost are businesses

George Melas

And one your maybe new impacted that by $XX follow-up on quick of end-of-life year-to-date probably Is just programs or revenue sort that net the million. not? of

Doug Cain

not, where earlier, the new I've reduction, cost the I'm say its revenue not did What on we've not say exception That front gaining on that and John it and in at the our that program would broken solutions anything. to one tried with year we've in Ford was much And certain that first was netting but work is to I business that's really Explorer new our clearly programs a just conquest can but and won. have back-end substantial that half I not on grow of mentioning I to renewed way using all. a have we end. get the indicated targeted this would to focus the out got of ramp phase was the in

Operator

have no further time. this appears it [Operator at Instructions] we questions And

We you conclude you participation, at your thank that time great So teleconference our for and and will may a day. our and your for lines today. disconnect this Q&A have session

Unique Fabricating (UFABQ) 9 Nov 192019 Q3 Earnings call transcript