EML - Earnings call transcript Q1 2022

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Operator

Good day, ladies and gentlemen, and welcome to The Eastern Company First Quarter Fiscal Year 2022 Earnings Call. At this time, all participants have been placed on a listen-only mode. And the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Chris Moulton, Head of Corporate Development. Sir, the floor is yours.

Chris Moulton

you us thank and morning for today. joining Good

that These without operating President Gus taxes results prospects, After significantly hear including, could limitation, Vlak; today statements outlook. Please we'll will forward-looking expenses, our and during CEO, about these in Eastern's be note questions. will for O'Hara. Speaking income our business and discussion revenue, that margin, those statements. statements from information to and consist performance gross or subject and CFO, expense, the other and business the Company's uncertainties differ call risks forward-looking are of financial regarding projected forward-looking today some trends the open and to actual of we'll that, statements Peter future cause

more risks regarding discussed our uncertainties, recently to refer Form these in please risk XX-K. factors filed information For and

financial useful in performance. turn opening In discuss and over will GAAP addition, we call non-GAAP addition or in a measures of not With that, Eastern's results. for that from the today's to measures to as are remarks. substitute call, during These Gus be considered supplemental for measures isolation believe should non-GAAP I'll we as

Gus Vlak

afternoon. on morning who to yesterday Thanks, the Chris, and good and have the joined those We Eastern's those our first XX-Q on Form us released phone web. via participating quarter numbers

strong few of XX% XXX-year record minutes XXXX. for on revenue grew $XX over the increase strong, XX% in history. another were X% backlog reviews with since year-over-year businesses That's backlog underscores quarter core quarterly A first the like Eastern's year. Net of end That's solid our the customers quarters. at reflect of start sales demand the increase quarter Sales XXXX. quarter of well results operations you, execution benefit our markets. of take and first for detailed to our Before it's importantly, an the growth. trends million a of our the $XX to million. quarter. to and coming would favorable reached another continuing And with positions Peter of from This a from the Orders I first the quarter of in increase Eastern an us the effective strong from each was growth by sales to across

example, and project capabilities to For build in sales on vehicle automotive Precision capitalize electric the X our Big including launches, new team new several increase launches. management

that ramped as in the sales programs teams. returnable X trucks this approximately launches products XXXX, and market We year. of are beyond reach the XXX,XXX Research a new XXXX. and remain will to project builds increase Class through ACT And of returnable projects transfer truck Class of the new in packaging strengthen will X According an That's ACT to in XX% prior Research, expected our packaging XXX,XXX transfer that demand through same our grew over robust. end compared growing quarter truck in accelerates. our markets, sustained first the healthy quarter be year time, sales, launched XX% by and built builds our truck of will from pipeline, and As XXXX. with last quarter as execution At for for sales to We solid momentum pace result, and second into these the a strong the this remainder mirror new programs vehicle of momentum gained year the sales recently up. further

trends. benefit business from demand these Our and our aligned trends, expanding significant capabilities with portfolio to is we're

inventory materials which input temporarily to need guarantee best on quarter. during our our wins. our the balance customer inventory all ensure our generation the By also range improve levels, can increasing necessary competitive dedicated capital some did product Our we to fulfill score demands and of demand we broad free customer can impressive flow our sheet growth hand, across we We to reflects a that availability offerings. additional meet temporarily cash impact of

addition, costs certain in commodities. material quarter, for In experienced we raw key a in resurgence the

to while gross material each And to price shortages primarily our continue mitigate labor inflation and across of the rounds supply working see in quarter, chain also margin the are successive We through constraints. impacted adjustments we of impact first cost businesses. needed

actions and rounds effect coming months. recent into continue expect June, benefits have will from gone through see we most in these and May in significant to Our the

may Sullivan you is at retiring as Eastern joined a know, and career John XX-year has after us. Now, O'Hara Peter

to over the call financial to our of results. turn details over go to going the I'm Peter So

Peter O'Hara

Thank and the very to remarks It's who's much, and building an to shareholders join The today. this and our forward My call look Company, focus the for first on Gus, Eastern with time everyone you thank analysts. results I to will relationships of customers, on you XXXX. Eastern's morning exciting quarter

a million primarily For Sales packaging distributors. for accessories net million increased automotive $XX from increased demand to increased to as year the and returnable quarter, transport sales due products from truck as earlier. $XX.X well XX%

an new X points. packaging effect products vehicle Our automotive volume increases in contributed existing on sales of benefited launches, by percentage including upcoming The sales from increase an launches. increased products X% returnable price new in while electric product year-over-year, additional transport net several

prices. first material gross the quarter in in material as prior D-rings rapid various to efforts and in The recover increases quarter primarily compared reflected mirror included ongoing to sales year. costs. XXXX accessories, the percent freight our a reflected mirror raw in XX% decline increases launches, of Gross of in of in the the products impact margins cams. and truck New rotary raw Price XX% margin commodity was increases

future in making increases price XXXX the Product to million first in this process of on XXXX. latest to or of currently impact earnings. mitigate costs compared round $X.X are the of of increased quarter development the first We quarter the XX%

to $X.X for increased the engineering 'XX. sales, did programs. that as quarter costs, is in and not or The a of to in in OEMs net samples period expenses were quarter primarily prior truck from other As X.X% The increase XXXX or per the the costs. investments selling commissions operations diluted $X.XX million as the as share year development million to we continuing year-over-year, cost to first repeat made capabilities. travel compared new per product expenses operations $X.X percent share prior and quarter administrative sales of of $X.X due or to the for costs current X.X% items, million increase of were the reimbursements Net one-time diluted the in compared million increased for EBITDA both was one-time XX% from in impact and expenses to from result net $X.XX share in increased strategic primarily sales product $X.XX the Notably, well into $X.X for our have payroll-related for in selling diluted of relating first first year. mirror $X.X of a reflected and first first quarter Selling the quarter from adjusted continuing million compared for per $X.XX the the income was XXXX. Adjusted income earnings quarter compared prior year.

our The pandemic the during capital. quarter effect terms supply flow of continuing the approximately the in the COVID-XX cash the million by related In working of and generating increase Cash from chain. compared Company approximately was quarter prior 'XX of $X.X million consumed an in in to $X.X cash shutdowns to first operations China during flow, year. recent impacted of impact operating continue

increases. inventories price result, a likely congestion, and raw of as to and to so and payable impact have shipping And selective the increased of accounts inflationary future ensure time, due availability mitigate both increased pre-buying port materials to

turn X, the of As cash for cash April $X.X XXXX, questions. over and that, call Chris to approximately equivalents With we of I'll held million.

Chris Moulton

Thanks to open Peter. Operator, line like for questions. we'd the

Operator

Ladies is and gentlemen, open for now the [Operator Instructions] floor questions.

Chris Moulton

several via the And come webcast. questions we have do have in that

first. them tackle we'll So

is view an is on and impact on The Eastern? what question our first likelihood economic downturn the of

Gus Vlak

end we some the And what way in softening do were our are respond have So prepare we very markets. our solid, some demand of for for COVID-XX customers, is pandemic. take if for we of demand demand to our just plans and that we and quickly but products. the begun any demand during now not customers' confidence respond while to closely might in drivers the we see very remains strong our able backlog by also our onset monitoring to we the right And products

Chris Moulton

Okay.

We have interest impact the increasing rates question. direct of What another on is the Company?

John Sullivan

will of means Sure. most I'll that that by payments our be term take muted. in our rate interest relatively debt impact on rates the an fortunate simply is covered floating increases which interest enough We're one. rate monthly swap, of interest

Chris Moulton

Argo? do have do we expect another same to questions -- Okay. expect we remaining question, noncore two It's We do business. on topic our only the to When when here. sell actually,

Gus Vlak

Argo. for Well, we continue to evaluate options

first good really for current the circuit and market dynamics quarter. With sales business Argo in a earnings and strong reported printed assembly, the board the is the in very asset

proceed So path. this value to for of down the we Argo we're committed maximizing shareholders our as

Chris Moulton

one we X? -- And from that think, of comes have, Big question revenue does management disclose I the other to percent

Gus Vlak

told investors size, size. same. same roughly three the is exactly but the we same not continuing businesses What directionally core our each of that within is have our operations, the our They're they're

Operator

Okay.

First, from [Teverson] you have a question [indiscernible] Ross Capital. from

Unidentified Analyst

clearly it. at series I just I have least question impression. or some even you least depending looking a a And maybe Material my over commodities have sequentially, year-over-year. taken that's margin. price guys how steel, Peter. at a looking gross we in the improvement had costs look at more or prices know last in lot didn't it you year, see And in of I whole down Great. guess, of increased actions sequentially. margins have gross seems about quite the key past like sequentially, on But welcome, like a But been stable bit

increases you an impact like maybe had just relative more in implemented, has you've year margins price relative the quarter comparing X% to to increases that that from from QX. these price So not to of all about at a talk why already sequential guys ago? QX? you referenced restoring Why impact Can

Gus Vlak

to happy address I'd that. be Yes,

impact and the with So of the price the those cost And or that we -- of some the raw we year. we of use helped in more products. recent increase delayed with throughout cost customers on primarily price zinc, lot and we a rates of us increases of the of shipping the last of were price material increases we aluminum. and nature in a increases experienced through zinc those quite These when the pass to a the that serve year increases, that latest kinds for some us have based we took zinc, bit

continue where other stay in a catching still us as So would cause parts is some it it those of price been started structural has There is than more prepare us But they are to get prices today, the delayed commodity as that to track those nothing but we are for with believe taking And some to business increases. result, business. to time our up. customers we back impact our increase, our that is on our here. in there margins

Unidentified Analyst

Gus. helpful, delay, really look have, quoted you the That's prices that is that that backlog, And do at off that still enough. does fair that costs? which work you why very within backlog I you the material When maybe in Fair also terms understand I totally that don't to reflect to large there's guess, raw -- that you that amount current delay. of there point to imply a where

Gus Vlak

be they no, that's increases And as yet backlog If working would increases now take the has for the price effect, shipped. on case. we're the not in right as programs. are price -- ongoing that also -- anything soon that's the Actually, the effective not that

Operator

Sorry Instructions] [Operator sir...

Chris Moulton

do we we the appear had us please any on or the let provide that know, more have and question. have one on want the line? we more. other we us But previous on doesn't question insight, the questions believe No, we have It I that on but can you addressed Operator, us, webcast. did if do more as call though e-mail any with webcast, you

Operator

queue. are no closing more more like have There [Operator Do you'd the on any in questions There sir. Okay, the to are no questions comments you Instructions] currently [indiscernible]. line, sir.

Chris Moulton

remarks. closing for Gus to over call the turn I'll Yes.

Gus Vlak

Thanks, morning. during businesses. products services our We're quarter our demand backlog the in everyone, us The joining us year able our in this chain for continued remainder acceleration for great pleased and growth inflation-related thanks, all provides comfort of strength by and we'll across growth first the long-term sustain the in and our coming with this future. optimistic Supply and the be a we are about that aside, and deal pressures across of businesses quarters. our the of confidence to of

and pressures, our material costs, we've that the better year, last increasingly the teams Over driven at dramatically become have effective throughput. supply managing volatile raw chain

for us. prepared what great you. and resilient to urgency all committed, share capable capture the and is challenges we of deal show the team ahead, in We well of Our truly are optimism a to positioned of Thank opportunities and front are we delivering. you

Chris Moulton

to turn With I'll Gus. Thanks, that, the the call back operator.

Operator

this and conference today's call. gentlemen, Ladies conclude does

disconnect You and participation. have wonderful your lines for your at may time, you a day. this thank We

Chris Moulton	Head, Corporate Development
Gus Vlak	Chief Executive Officer
Peter O'Hara	Chief Financial Officer
John Sullivan	VP & Retiring CFO

The Eastern Company (EML) 14 May 222022 Q1 Earnings call transcript