HZN - Earnings call transcript Q4 2021

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Operator

Good morning, everyone and welcome to Horizon Global's Fourth Quarter and Full Year 2021 Conference Call. My name is Jamie and I will be your operator for today's conference. All participants are currently in a listen-only mode until we reach the question-and-answer session of the conference call. This call is being recorded at the request of Horizon Global. If anyone has any objections, you may disconnect at any time. would introduce I time, this like Mr. to At Horizon Relations firm. Tryka with Investor IR, Lambert Jeff Global's Mr. Tryka, proceed. you may

Jeff Tryka

Thank you, call operator. Global's fourth Good morning and and year welcome full XXXX conference and quarter webcast. to Horizon

and the we on today results. are on The year well Relations Financial Horizon Executive Global's On the many fourth of as our Dennis this quarter as Terry Horizon morning, call Richardville, Earlier XXXX available news our section Global's sites release Gohl, at Investor Chief is Officer; announced horizonglobal.com. Officer. full Chief and website

Turning section to of GAAP both non-GAAP are our horizonglobal.com. of press Slide in X, These to presentation, Relations includes and which today's website at are quarterly presentation reconciled our release disclosures. also available the on to appendices Investor disclosures the

like statements could uncertainties risks Slide Form Global's in and the risk Commission. uncertainties Executive about views to turn all disclosures the to Global's annual Terry to you include and on that over presentation materially described differ report filings constitute subject Horizon These Horizon forward-looking and and actual are to to in other on that today's Chief statements. our Officer, Form from other X, these said, that forward-looking remind Securities We've reports statements quarterly will Terry? and most I'd like cause company's with in XX-K, the factors Turning Exchange our being recent With statements. results our to XX-Q, the which future performance, I'd risks call Gohl.

Terrence G. Gohl

quarter as participating all we who XXXX results. today in call and and Jeff Thank year welcome are to you full you review our fourth our of

greatly Thank your Global long-term welcome call appreciate initiatives. the the your have and all focus both effort We these on many short execution unwavering for always you who continued our challenging the employees times. of and during we exceptional As Horizon joined dedication today.

those XXXX year of XXXX and today full results numbers at year The first Horizon with our We results aware, with disclosed turnaround. final Global's we back with full you on preliminary we released are time. will consistent the the in that As you QX momentum share February. of tremendous are entered

we did half profitable both first of disappoint XXXX segments. demand as posted not against operating growth and strong delivered in The

The completely was half second of a story. different XXXX

much the all been council with unfold the events Relative primarily was in actions and concert following the news to it and business, and flex applicable production we partners and horrific immediate wrenching. watching that forward. as the contact to in supplier works chain Europe customers took Africa and our to facing to production with remain conflict. sudden response changes in react OEM resulting planning While from in and supply in on conflict the market Ukraine The macroeconomic impacting Relative of costs. throttled and well year and business also chain, Today importantly, results we challenges -- drastically opportunities challenges our been provide have impact logistics QX input was We'll the that headwinds our expectations. demand and our in and QX global XXXX of supply the to today. overview remained was full constraints levels performance. sales ahead below high, present possible We we as disruptions to their look material gut and will schedules the our going the will focus to increased an resulted performance we profound due and Russia are

sales with representing by ability PPV XX.X QX semiconductor driven pushed XX.X order a to ability that in impact to sales as OEM XX.X to compared XX impeded and lower are Input increase year booked associated Europe, up but production while million components full million book negatively the page shortages compared for driven partially Africa highlights. compared of adjusted pricing was was on which to not offset against associated the by Volumes constraints approximately X. to million of costs roughly Adjusted input million compared costs growth XXXX. flex This Inventory in primarily to and and overall America's million you X.X impacted million by releases a in XXXX Now strong of XXXX. inventory EBITDA QX of the sales XXXX XXXX to conversion compared available recoveries. by applied as XX% freight while this up negatively and XX.X were compared delayed but million Africa and were costs Sales of QX were in Europe being in driven against goods were X.X the QX inventories year performance full down costs. by impacted finished consume to was by in let's global XX in million was roughly impact impacted XXX.X convert were EBITDA XX.X impact XXXX. by timing million to A impact lot changes up only seen were turn levels. up orders. their XX sales million Page XXXX impacted of by few million steel down down period response. the to to to

Later will to nature. we are temporary review will is are fully the it challenges. impossible predict in taking we these While unprecedented believe to subside, these when in call we headwinds mitigate actions macroeconomic they

for Page for year. On and for to comparisons sales full this EBITDA adjusted Let’s the net slide we present move both year and QX X. three

pre-pandemic we important present Given feel levels. our XXXX, with of the you also impacted period to today a view COVID it in is business versus

XXXX our left drivers the were XXXX XXXX costs approximately On XXXX. the experienced while QX both the adjusted compared the QX increase there increased his see decline sales XX during the XX% can XX but million to constraints X.X%. our results was of or financial comparison reflected the The in to remember million XX.X performance address transportation to the sales in period. were input period. booked on due deterioration in further not million roughly significant Dennis Net and that and but chart QX update results will EBITDA shipped supply in to of you XXXX or tied

the chart performance adjusted you performance experienced XXXX. XXXX the half versus first in our On year can prior XXXX with performance on a sales This improvement XXXX in significantly on period the and highlights the of impact and see costs right, of XXX% elevated input the momentum basis the the half net of seen full over year. the the versus impact second in XXXX when the volumes in EBITDA the XX% reviewing demonstrated increasing semiconductor year, to of the to

and of of year full across Notably, our customers compared to overall slide channels each to This to for to XXXX, on efforts the is distribution net our Turning and sales net offerings. add demonstrates net slide channels Page sales recapture to X. our sales to the XXXX XXXX. portfolio growth to e-commerce. addition reflects margin sales XXXX attributable and sales dependent higher including aftermarket ability this through increase aftermarket growth America’s and performance in

XXXX in we retail an while expansion and core successful and of Also underperforming the we the with regard customers product during in this in been XXXX, XXXX demonstrated noting added we with sales channel over new XX are growth customers. in strategically that with last net our our sales exited have strong We rebound pleased line business core a five quarters. products

Moving X. to Page

sales with by previously on the As in OES from quarter were constraints and mentioned see XXXX impact OEM which being this net disrupted the sales million you were slide levels XX%. by primary channels XX down can the or

global decline quarter These but sales which constraints. of sales These aftermarket the our the driver the book were channel. strong main at was non-OEM/OES were discussed, the includes and booked open order of XXXX. end million the previously primarily simply not As due of retimed of the delayed channels were to in sales in they lost, orders $XX represented delayed

X. Moving to Page

few While performance, impacting we table page provide words. impact examples the XXXX is the a The already of next throughout factors QX XXXX. this specific thousand slides on have referenced worth the

uncertainty actions is In expect we there bottom and further not a experienced due pricing one Steel the Americas in year XXXX, overstate lag prices to steel to the as region. channels and softening, we all some XXX%, steel, price or increased XXXX. Europe steel XX%. the prices of Africa steel commercial have the Americas recognition in ended, but From We to the with of they Africa new implemented any the in steel average XXXX. continue while hostilities To have two QX mentioned cautious. hard but remain the quarter offset faced throughout in before, at increases Europe there of in sales XXXX versus in it's Looking pricing began where surged the QX across soften some to line. to impact where actions this started a to rising been is prices in to date, economics, we prices staggering and recovery but

progress, be are to more remains While we progress are work Africa, primarily be negotiations, generally and pleased with pricing recovery there in done. in completed to Europe near-term. targeted are in and the Remaining our

Turning XX. to Page

container overall second XXXX. rise over experienced primarily cost the base QX increased chart half rates steep the cost which by in demonstrates freight in in QX XXXX. powerful America's the freight Another throughout year. of increases XXXX driven This XXX% was

ramp a multi-port in are focused cost implementation of controllable the phase constraints delivery Americas. Mexico up While yielding in are and these The during to reduction roughly costs a the to and cost timing. while container projected often our is XX-day accelerated and has strategy we rates in actions per with reduce a XX% XXXX, reduction on in Port implementation and XPL strategy been

these from expected utilization Beach. XXXX rate Port coupled of on Port sales with resulting our plan, is Our items our in inventory will converting in reduced actions imports drive reduction of prior Canadian costs XXXX. to reduce begin dependence of an XXXX. the throughout in XXXX These year-end will Both set singular support Long in the

XX. Moving to Page

we performance reflect first worth half mentioning charts XXXX. our and first As XXXX business achieve just again, and variance the the of can previously the between absent demonstrated factors and page half expectation through. The noted our on what exceeded the second uncontrollable this walked of half

Delayed another, freight headwinds one our or way financial While pricing will return will rates, and is by was business are the serve QX performance rapid second shortages. impacted much half then to long-term OEM increased tied a where recognition which also recognized availability cost they first the most tend few block to but into important our significantly XXXX note, our of discussed and we material supply performance A as to be only volumes and Ongoing to present not will recoveries impacted see that product lag It of production input towards chain run performance believe were note building our in negatively we relative costs. primarily commodity throughout inefficiencies goals. mix commercial sales half items we global other by costs. volumes and deterioration. resulted changes as impacted still and saw results part sales material by impacted to impacted

Our the was inability in to especially costs of half flex second the and Africa prevalent during year. Europe rapidly

Looking has levels in three primary inventory Inventory at we contributors. QX delayed we between sales by by was Page here the present linkage compared million. experienced build This and year-over-year $XX driven the XXXX. related in XXXX XX, America increased to increase

PPV inventory to primarily value due First, increased costs. and million steel freight by XX approximately and

million approximately Second, impact sales strategic line components SKUs included trapped seasonal XXXX. net on orders. this demands. also volume from of XXXX million to XX support The right missing were finished inhibited that through ability due that XX built booked our shows seasonal was our chart which QX to was XXXX in And ship the other QX production of trend third, against on the to high

material the due million in the sales reminder, constraints. delayed supply Americas experienced a and to chain quarter As XX of

$XX million And were our Africa's and over XXXX, Americas QX levels. million positioned earlier, by or to strong XXXX. QX is sales open discussed the has in inventory deliver Europe of XX% exceeded book OEM and sales Despite which pre-pandemic seasonal our reflected semiconductor production constraints factors, demand roughly impacted an material as approximately on increase elevated addition, other order In volumes. net from these greatly levels impacting $XX

the return the some of for in Dennis insights continue Now and XXXX. a review it few and I'll turn into Dennis. provide to actions as minutes to I'll financial over we our status

Dennis Richardville

us. joining you Thank for morning Terry. you Good everyone thank and

the the As result, headwinds adjusted with These commodity a constraints and driven with XXXX impacted we X.X%, segment. constraints, quarter, of and prerelease. to of XXXX. of in EBITDA Please the XX a loss an of margin quarter compared results Americas fourth Terry $XX.X an and profit to adjusted fourth costs. to compared decline primarily primarily million to combined fourth lower industry mentioned, Slide This operating decrease XXXX. including below to supply as compared for basis coupled fell $X of and fourth by chain sales points primarily $XXX.X previously was fourth a profit our pricing company's of million, chain quarter decreased fourth other wide the million decrease decreased a of Reported the to performance Gross XXX our the quarter operational related or as sales volumes expectations Africa and line the this X.X% EBITDA XXXX. to to the EBITDA financial $X.X financial turn impacted net increase supply logistics quarter segment, million commodity Europe continued to X.X% face but with during of pressures gross and for margin attributable during of for in negative by for quarter X.X% Consolidated partially margin offset XXXX a to global that rising were compared as to performance of due of consolidated semiconductors our negatively our lower positive logistics adjusted Company’s review margin the of XXXX, material fourth mentioned. availability and quarter was results headwinds segments. negatively fourth both quarter the XXXX

increase primarily XX million primarily volumes fourth Transitioning million other increase Adjusted decrease by of decrease $XXX.X retail driven Net in the Slide experienced to a higher in compared or $X.X adjusted pricing offset driven of OEM turn to Further, Americas of partially the by compared to was to decrease industrial the performance a segment, were by of the loss the to segment pricing OES decreased Let's segment than supply was was supply from to for $X quarter by semiconductor and the net volumes. pricing recoveries the sales to quarter volumes The commodity fourth million the channels. the higher XXXX. in quarter aftermarket million decrease was compared attributable increase offset sales. an chain Adjusted sales constraints, sales pricing margin the quarter. increase the unfavorable and and quarter as to fourth the review more X.X% partially chain was net for fourth automotive EBITDA $XX.X is for net EBITDA This driven Africa commodity XXXX. by sales sales the of sales and because of $X.X EBITDA which Net lower availability, costs, XX.X% million, in sales XXXX. as availability, XXXX. segment sales for for The and as XXXX. $X.X $XX.X pressures of coupled material fourth $XX.X recoveries. EBITDA an by constraints, quarter to million Adjusted of driven and million material sales OEM, operating than and pressures. decrease million, supply our with X.X% were for attributable channels Europe offset offs lower chain call the

XXXX. supply million for $XX.X XXXX at input in were X% year. as Turning prior and initiatives to EBITDA X.X% or increase was compared the consolidated the over million, increased to recovery net $XX.X unfavorable sales as year consistent as Consolidated results. Adjusted was we sales adjusted for net sales $XXX.X manufacturing $XXX.X for Gross remained margin an XX, increased previously major XXXX full by offset chain, channels, XXXX. million margin increase compared XX.X%. were in prior as profit sales the our by Slide implemented increases pricing all net Consolidated in mentioned. to XXXX million material, The XX.X% to The year. costs of driven well other show to EBITDA

sales Adjusted all to turn Net in $XXX.X XXXX higher by let's Africa prior was sales for pricing Now, prior major to This $X.X the to $X.X increase increase year. the XXXX. year. margin of million included currency channels, for million to was Slide across as year $XX.X for year. XXXX than operating million, $XX.X as initiatives for favorable to $XX full were a million to was The segment compared to to also all major increased EBITDA well to performance. prior the the or volumes across the as mentioned. previously XX.X% X.X% to Adjusted as Americas $XX.X due The $XX.X compared sales from sales mentioned. channels, net XX.X% initiatives sales the Europe prior XX driven segment, million compared EBITDA year. previously as review Transitioning million EBITDA volumes prior our higher Adjusted million, margin recovery as the X.X% XX.X% million Adjusted year. compared higher decreased EBITDA increase decrease as of well increased primarily recovery the pricing for sales to increased translation.

Now liquidity, moving of of flow, compared to leverage free of quarter cash million compared XX. quarter working capital an to which the increase Slide on XXXX, third on of to $XX.X the our decrease working represented $XXX.X and capital, million, net a XXXX. was Freight ratio $XXX,XXX and fourth

to included supply Americas global constraints, approximately which previously due and was in segment and Specifically, well was prior inventory $X.X Terry decrease our of that receivables the Inventory days, $XXX.X as rising day year material the million by chain additional sales Day year-over-year commodity costs to year. compared the million to one factors over prior related a $XX.X to outstanding decreased $XX.X increased million macroeconomic the in of $XX.X million to year logistics as pricing prior driven million. XX logistics the mentioned.

million finished required the on components use hand addition, days, higher XX to million $XX.X inventory during year. These from experienced a rising inventory segments prior the was XXX is $X.X we million to and we Accounts missing compared was of $X.X the or the Free the facilities increase to liquidity year-end quarter reflected a source and to complete where of underperformance payable fourth days the which both drove our on year flow of increased outstanding of business million inventory comprised a of prior million which over a XXXX, year. availability an ship the factors XXXX. This $XXX.X flow of at under were In increased $XX.X million, reflected days, quarter compared $XX.X good. XXXX of $XX.X in related The days decrease primarily million payable to decrease to for for third the the decline quarter cash to one compared $XX million. use the hand lower the million prior compared XX cash a than a year. Days Cash fourth of availability to million million cash was a prior XXXX, of levels of the $XX.X day compared and This of totaled of XXXX $XX.X of prior year. decrease credit and the year-end and $XX.X XXXX. reflects million. to $XX.X

for and our $XX low senior cost million well balance press refinancing capital material to $XX.X debt borrowings an us gross agreement. the Slide of fund we amidst to support our as in our release Also, review $XXX.X to capital quarter during loan maturities. working increased address supply XXXX in loan XX rising attributable higher February by needs XXXX. to refinancing term allowed structure preliminary Eastern of expansion our current capital needs term to year-end the Total from with a ABL working credit our Europe, million additional Turning and cost, of constraints, increase announced the completed first as a was XXXX. and This of debt chain, million at primarily to

million comments. Terry Series maturity, corporate I'll with notes his as funds at the that, management $XX commitment of call repay partners access letter company's stock us to core closing for outstanding provides liquidity executed at as convertible back to With to needed, for general turn B our of additional the well certainty issue preferred option to Additionally, the solely if with the purposes.

Terrence G. Gohl

In XX. let's Page with start closing,

that our As of series XXXX. tailwinds see impact we headwinds business look in ahead, and we a

pricing. commercial We have talked our about actions around

channels We either in and initiatives XXXX. all costs our pricing cover implemented implementing organization. across process to the of impact or have actions the economic sales in we experienced input These recover commercial

project a quarters, throughout the softening our majority As lag throughout earlier, driven Relative recovery course reduced will one costs year. mentioned, general costs previously of year. the the to of of transportation pricing so the we CRU approximately the and a actions by recognize XXXX. representing transportation two see of impact to projections is throughout Highlighted average course the steel, by we we of softening

to a be that products steel. conflict, the would and daily production indicators to in Africa, inefficiencies basis issue. Europe headwinds of and acknowledge will to manufacturing same impact tied with maintain to steel on volatility potential materials expedited if show our support and schedules suppliers as the continue softening operations we costs, seen for constraints produce allocation customers. remiss Russia-Ukraine potential to our adjust have OEM on For planning the in initial we while we including didn't cause reviews an we caused with as the continued date reflect our we production has process This Semiconductor

flex and will operations allowed we extent the under these conditions. to However, accordingly

inventory, demands. Moving support with to well-positioned current our upcoming are to seasonal inventory we

inventory but is already instituted position, to reflect this heightened incremental We purchases address flexible we levels. beyond remain market will reduced to what have demand

converting the a as season. enter selling reflected the XXXX QX shortages and in volumes previously improvements, and This end being of XX% the in While XXXX, QX critical XXXX to to The tied relative XXX% QX of remains to material order order Demand order sales XX we've XXXX. impediments mentioned intake our million critical there's his to Americas will done. work at we transportation and book addressed a driving made aftermarket component be over high book lead rough open more supplier throughout year. the channels over

continue We'd actions release share improvement we of underperforming outdated to certifications our to XX. full and be achieved we to built Africa across of expect XXXX and address Page drive SKUs today. our at plan. our locations. meaningful operations this and costs. all third Relative areas XXXX Relative access XXXX. with of our the to removed Looking earnings we highlight portfolio format quarter another SKUs some with management of we the implementation updates in In Operationally into provided status like continue to you to which compliance integrate IATS efficiencies in We vertically performance in reduce our to categories. Europe to in sustainability and we production XXXX significant global practices practices ESG to advanced improved This ratings our resulting significantly business commitment social our environmental supporting across operations. is

continue efficiencies. production to by product the our focus we end best ultimately also customer. first we as hitch our and customer have concept demand We the on market aftermarket development going in value Americas In XX%. our ourselves reduced position particular, enhances to to be servicing pounding proposition to forward This

have primarily throughout in the supply the chain we For presentation we faced mentioned fourth this our quarter. issues

addressing planned. While early shortages. have material and in our optimize our actions shifted supplier supply objectives not our said, QX tied vertical changed being we initiated chain, relative to our as XXXX QX continued and onboarding integration new QX That focus long-term supply to of in to strategy to

logistics logistics about have the strategy it we we logistics tied of aspects adopted will It's logistics. and extensively to this throughout a inbound, spoken outbound Regarding our Americas associated intercompany, benefits worth and platform. costs XPL generate for distribution a is various additional efficiencies and presentation, noting new good which result. very This in

closing. in and the to last Turning page

half took impacted the headwinds gate significantly quickly the but out XXXX year. came and shape of strong We of our the second in on reflect half Let's first performance.

improvement capabilities early relatively the reflected of results the plan. half continuous even first in business, game our stages of Our the

deployed not The this be landscape customer call associated the During in and focused in continuous geopolitical efforts fully on controllables XXXX XXXX our believe performance. of ever first these controlling improvement and the we were improved evolving profitability described sales, our and reflected improvements. have to we momentum half subsided are performance, of actions mindful demonstrated leading will headwinds the we but remain as

wavering long-term While the set for we objectives with company. not are consumed we short-term were throughout the quarter our challenges, on largely

is seen XXXX. initiatives XXXX our we'll we of our started results, As show forward. and solid to with to plan have year-over-year late in first half to build remember we continued the since we quarter despite for the fourth thing moving profitability foundation a our business One continue improvements in that continue

deliver We have attention enter to our place. book and on on strong to in taken questions. Thank operator to inventories are we we positioned action and that's secure and back your address it now already will you recoveries cost I for to the as order for to convert XXXX turn

Terrence G. Gohl

Given call as QX all want forward you that look there's and next no we results. much our to questions thank today that of XXXX participated we to review you Thank very everyone. I

Operator

and attending. with do call. we today’s that Ladies We will conference for conclude gentlemen thank you

You lines. may now disconnect your

Horizon Global (HZN) 10 Mar 222021 Q4 Earnings call transcript