EML - Earnings call 3 2023 | The Eastern Company

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Operator

Greetings, and welcome to the Eastern Company's Third Quarter Fiscal Year 2023 Earnings Call.

[Operator Instructions]

Please note this conference is being recorded.

I will now turn the conference over to your host, Ernie Hawkins, Corporate Controller at the Eastern Company.

You may begin.

Ernie Hawkins

you, of joining Third Eastern's XXXX. thank for this Quarter and review a results morning, everyone, us for morning of Good for the me and Eastern's Eastern With Nicholas call Hernandez; CFO, Mark and President Vlahos. the on CEO, are after earnings yesterday market closed. We issued release the an press section will has anyone find under News. Investors the seen company's website, please visit the release If the release, www.easterncompany.com, yet the not of where you Financial

forward-looking some of including, call the information about hear financial will future today's of regarding without revenue, prospects, that you will gross expenses, during performance consist taxes expenses, margin, outlook. These to differ from in note and subject We and statements no circumstances forward-looking to statements business projected forward-looking company's the operating Please to undertake call. and significantly income business other statements. and after these or events are statements to that any could forward-looking risks occur update trends the review cause reflect or obligation that those statements or uncertainties actual results limitation,

more XX-K Form to in SEC including year for and risk fiscal filings, uncertainties, with our filed XXXX. SEC SEC regarding factors Form please refer the these on For with March XX, November discussed the XXXX on XXXX, risks the X, XX-Q filed and information

measures the to release. non-GAAP measure most In isolation non-GAAP are GAAP should call, measures from a be useful earnings to discussed directly in or A in addition, financial call in not of Eastern's we believe be of for results. the found as These press during can measures substitute reconciliation considered each today's during today's GAAP the that comparable as of we will non-GAAP discuss performance. supplemental and measures addition

call With over the to turn that introduction, Mark. I'll

Mark Hernandez

phone who morning have web. Good and to by Ernie. you, participating via Thank the those us joined those

to will over conditions of turn with the call Nick, going update enhance review that, quarter. detailed made who come about performance observations transform more our the today's back results. some on value. is additional shareholder provide during After to then the and Eastern's begin and I'm various I'll call market to with high-level quarter's practice, a past we've financial our you As activities progress I'll and the operations

I've on disciplined earlier in build operations, and X effective allocation these you focus acquisitions. basic strong utilization, commercial pillars of described capital to All calls, and value-adding business a

improvement improved reduction Today, to with implementation the of ahead I'm the these margin efforts. second year in cost operations. earnings moving operational increasingly with been quarter improvements as continuing working as financial and pleased consecutive we became And share progressed. per quickly a plan announce and from expected, the capital, We've our of performance evident results

late we've and products ground-up All are quarters. as initiatives I'm in our in been after apparent will markets confident review improvement based more I of January. shortly became making of the important, CEO that much that I on delighted team's work changes coming hard making become are Eastern's just so undertook, And that we our a businesses, progress. remain

a developments. some key take Let's at look quick

almost $XX by For compared period XXXX. increased XX, in million from months the September the cash ending flow to XXXX, X operations same

actions per XX% basis, more X in down pay during sequential Nick share continues another debt to well sheet future year's $X better $X.XX our quarter enabling in reaching detail, As create discuss in our to us positioning bigger, from margins continuing of XXXX, this operational will strengthen continue our second quarter us improvements, gross the to to the operations. achieve for to in rise, and earnings and us of helping third million more profitable due company. On from balance a XX% and quarter

disciplined focus this operations to commercial drove Our business unwavering commitment and result.

the in mutually systematically X earnings the we beneficial. those our commercial are -- now for third our relationships products. We that structure resetting foundation Over and growth our a to believe fully transitioned this in establishing worked and legacy on past future. growth sound months, We for quarter commercial new to initiative the have completed earnings

call, in saw our a headwinds the launches in from expected mentioned and we new orders also factors in automotive quarter macroeconomic industry. QX third some pause to related the I As product in

In a year-over-year finally addition, increased orders the chain measure. as quarter customers reduced our precautionary to backlog of global placed previously of supply pre-pandemic X% number our they returned excess end. state, the have Nonetheless, as

rest, on of flow, our fears a deep order automotive for with In recently XXXX company. strengthened to addition, we note more to solid end has market the recession with Eastern's the put and along expect

the With I'll to Nick. over call turn backdrop, that

Nicholas Vlahos

latches, provide Mark, and sales demand D accessories products products. quarter's you, X% new financial rings $XX.X camps. X%, of from increases quarter from lower mirror to Thank for due continuing returnable the rotary contributed assemblies, of transport the million primarily and $XX.X truck mirror products of declined packaging a sales and and included good operations in Net truck Price in I'll review morning, XXXX, various to quick million third new everyone. results.

alignment, in increases quarter-over-quarter to was costs. third and reflected percentage in costs. in improved respect reflect quarter Price XX% our as recover Gross material the to in increase XX% the increases with second quarter of raw to and compared XXXX. material margin particularly from price year's program in a raw primarily last up increases cost XX% freight The period, sales of

XXXX. the period pension $XXX,XXX. quarter in to primarily on of X.X% gain cost adjustment $XX.X in of the for and while a XXXX and compared sale third or quarter, $X.X the had professional, to to corporate decrease sales, reflected corresponding selling decreased $XXX,XXX XXXX. third income decrease and office administrative percentage million to prior the were negative million compared quarter our the legal, product of to of quarter for As period, year's expenses this third for development expenses. Other $X.X $X.X expenses of $XXX,XXX in payroll-related the of a costs $X.X in year were million due lower million favorable unfavorable the This million a primarily Selling, company X%, compared of a cost pension building third general XXXX, net of X.X%

of continuing to the for for XXXX. quarter continuing XXXX $X.X million third per period $X.X non-GAAP $X from quarter or $X.XX operations XXXX the from of share million for of third the Adjusted million share EBITDA $X.X diluted income a comparable third operations, to Net XXXX. per measure, was compared or in compared quarter $X.XX diluted the was for million

During flow the first million operations period when XXXX, to by we XXXX. X cash in the increased of our compared from $XX.X same months

was during With the the of availability cash more to last paid primarily support light quarter the than The of down demand meet million, improvement we Eastern. reflects supply this in $XX of chain than a million year-to-date, to to used for a level million inventory. year decrease used and $X cash third customer flow, ensure inventory cash of record paydown reduction capital, constraints. a in working more $X By debt debt in comparison,

At down the the of ratio X.XX was quarter. end the our at leverage X.XX:X, end of the senior third second from quarter, net

million invested paid months in In XXXX. we addition, the $X.X $X.X and of million in capital dividends X first expenditures of

$X.X from third for cash the year's last flow $X.X to million For operating quarter. million activities was compared third quarter,

improved period. review. my turnover call Mark. X.X That a to turn the financial now result, I'll inventory completes compared back X.X last As for to year's

Mark Hernandez

our like to more Thanks, business. to everyone bring on Nick. to I'd date There are a up few points

action First, to taking taking tough more performance, aspect at making operations we've and also as Where a steps. mentioned been X divisions. look of this I've become of and year decisions close calls efficient every earlier our optimize on we've our been needed,

For and X's fuller example, we mold recently have to returnable brought managers division custom and in and lead take the new President its General Manager Big blow manufacturing in performance Precision business of right and tools. in of X mix Big packaging existing strengthen new advantage to new experience The efficiencies products. opportunities driving

cables manufacturer the electric of we assets assemblies. June. has proceeded tractor, of in -- company since Second, smoothly connection proceeded Sureflex, integration smoothly the We last and acquired trailer a the table

to expand capabilities. we trailer and our Velvac's business a vertically hose As these reminder, assets production integrate acquired

additional to efficiencies We are producing now positioned by in-house. achieve products cost

big to not the itself, and Although acquisition of strategy needle, move future by it's enough our approach. good a Sureflex the indicator was

open One the additional floor of to information before we point questions.

As we our QX I to activities. started Relations Investor our have expand call, mentioned in

you hope for conference, just Sidoti in the our Next can focused companies so Conference, listen and you that webcast their XX. on at website which I in soon our and invest securities. in IR the details about on the is X. micro-cap specifically November look the day Wednesday, We'll week, to or announcement advisory the on small institutions conference in a participating we'll an issue

business Eastern buy our one-on-one hold virtual can is and of also them We'll meetings strategy side inform so new improve financial results we generating. with

have joined to question? the questions. give to proceed the to call instructions the who please on can enter Now you let's investors conference Operator, a how via

Operator

[Operator Instructions]

Mark Hernandez

questions. the address via Thank now and you. the then the first return telephone questions web We'll to

Ernie Hawkins

your the certainly First expect has web, question you debt approximately year. this continue what at forward that going from rate? and to Do been paydown strong

Mark Hernandez

yes, of What and answer. we continuous anticipate part Nick, on can take So, operations. is I'll first of you the then this, flow working

consistent should debt. continue that down to meaning that So pay our quarter-over-quarter, our performance that is yield to ability

have on focused just we that so operations going disciplined a in Our quarter-over-quarter don't that is forward. performance variation

have debt how on the will anything going forward. this we're that -- continue or rate anticipate performing we add? paydown you our do based higher So at Nick, to

Nicholas Vlahos

Mark. well, summed you think I up it

Ernie Hawkins

are deployment remind Mark on pillars and Please question. Next X which us based. those Eastern elements strategy most principles and the mentioned are? important what

Mark Hernandez

trying disciplined are X. So in and at businesses our return company. pillar to our high everything is fashion. Eastern. rates this X return selling every it projects to that our to secondly more earlier capital efficient we and is that run every And we're every the That's day is X allocation capturing businesses operations, and utilization dollar have of our in to capital dollar, spend mentioned call, investing our we do within reduce sure how a looking timely CapEx at become a I pillars making Pillar all value products in and looking

business we beneficial. is the don't said working We of take earlier, our people pillar customers I Our anybody, with take don't us. want and to we have customers to but of with that advantage third commercial that's advantage is want focus. where like This we're also mutually strong so a relationships

we're to and good appropriately, to forward. going business going of going we're be our price So stewards

have us businesses move allow X been, if can our vertically first lastly, in we make us sense value-added on integrate And the we and cost will our then forward to do is that reduce XXXX, correctly, further things value-added and acquisitions, that acquisitions we for structures.

With intention growing of the the the we further with of business future. not acquisition business, larger add on the growing so can in hopes a that the hopes, the

Ernie Hawkins

gross beyond? Thanks, and Mark. QX in Do you expect further margin growth in

Mark Hernandez

said, the I third the Like pricing and the Yes. in initiative complete was quarter. resetting customer

stuff this implemented keep flow quarter been the that that mind and our of gross those from fully new business I by just However, through we're and significant the quoting margins new next on that products, the in impacts all that's -- beginning that are our of in purely the are a that a today quoting generate the we businesses increase to that products programs forward. we're into want at of to year, going different haven't has work legacy year. we the next which and going standard

Ernie Hawkins

How margin the a actions a prices and of taking pricing program. new in been improvement supply much environment of chain material normalizing as from that versus lower we've the came result the raw gross

Mark Hernandez

was our put logistics say commercial going I of on, and I material with the would a cost fixing XX% number -- -- XX% the dealing costs resetting raw forward. would from came relationships, and to the

Thank transitioned not a Operator, macroeconomic conditions on are call? better not much we've the there get -- questions customers Ernie. position with to forward. forward you, on we're our going stumble in ourselves So conference and any going

Operator

[Operator Instructions]

And that Ross is have coming Banneton we queue Capital. our in Davidson from from question

Ross Davisson

just I level or the clearly see that there this be Is your more onetime figure, gross gross continue and of that gross quarter's changes happening? on there any should margin of benefit level, might is just which notwithstanding or theme was had anything strategy anything about margin shows maybe kind margin, to of great of that, effect. high we unsustainable, make anything sort of other a like this sort like would interpret catch-up that it a having about

Mark Hernandez

we we pillar to we've going onetime is this, the through new undertook we're and side But commercial foundational forward launch. That on. we went reset that going of with on relationships. when pricing of that the our the programs that build a Ross, built kind do

our the inventory don't One think -- to precautionary a is that that bottlenecking orders to that I thing ability operations' return out it's company. a is to our of our supply levels were earnings with helped the us So gross onetime probably clearing onetime our the resetting thing. and chain, margin, reducing ability our

we'll comparison values. That's then to pricing onetime growth going aspects small the thing, how programs ourselves but commercial the a it's move future forward how and other we're we're that. we're other new So positioning and with add forward doing and that in will of

cost because costs the single expense. side, on material we're Now through expenditures largest item we the our are going all that

rapid And better do we and with material can our what Eastern our analysis so -- through seeing procurement of expenses. we're side if do and going a our the strategy for all direct is more indirect material one cost

Ross Davisson

Okay.

no of sustainable, to sounds be it of at, same I the get level reason nothing forever, I unusual. can stay is -- there's it the But mean, you're sort there's And the sounds summary? rate rate it fair can't of the so believe like super like like that. It clearly, change

Mark Hernandez

trying of XX% try, our know. internal We're pursuit forward have margin. with margin we gross though. move backslide hope I to always target, with And get mean We're I Will that not there? objective and forward. aspirational actions. an move we going always the gross ever to I don't to of

Ross Davisson

million. talked of And effect? that showing happening like seemed increase is a $XX is backlog, a a It about year-over-year. seasonal Can the Or rebound of potentially? a little even some sequentially, us sales increase is on then that of sort just me, bigger some -- you bit you that in remind the about

Mark Hernandez

that, dates. year to They it, of -- the cloud, did with and 'XX. the changed launches. that of coming changed rebound. the the we we're of orders orders it's backlog basically they softening or haven't quite the at look of was positive We -- their us saw the they're as I building lot they way in. of bit releasing is middle in because delayed our launches, a because see And demand, The going snowed We Ross now a end haven't dates what launch seeing program a these into a that's forward with program

Ross Davisson

it. Got

mean, mentioned to deep one towards of mean encouraging. else seemed your terms of sort sort manufacturing encouraging like going you challenged. more seeing -- fears be environment Okay. you truck you year. Well, can I the seem recession vehicle mean, an a the put I end up say about just rest that's little held really mentioned I sign and of the of well. with the Auto, customers? more of does you're Anything a it's in current motor bit what thing.

Mark Hernandez

Yes.

market X So Class the is ACT some analysis the who predicting of does the market. truck softening

However, that's made for the with up medium-duty segment. more than

commercial the So space by limited was at frame in we think year. equal least The rails. will commercial be what or strong it particularly going still vehicle vehicle been suppliers, this to on has space

'XX. more have through work OEMs that did of indications they supply, As than the that we in to they want produce bottleneck all 'XX in

automotive haven't their pause companies on they how But caused automotive On the move for We yes, with months automotive last going of they program take changed at higher side, the like to -- XXXX forward forward launches. their the program said, the launches in the they substantially turmoil has in than And few it the industry XXXX is sector. as the forecast a those I automotive in for XXXX. look indicators positive was for dates.

Operator

to remarks. like lines back were now hand the for would I at other time. from There no to this questions Mark Hernandez closing call the

Mark Hernandez

operator. Thanks Thanks, today. Okay. us again joining for

for and results have -- foundation on XXXX, the positive a in and You improved bringing our strategy heard focus establishing changes future. sound improvements

of our our appropriate, to committed when with quarter. more remain progress M&A objectives. fourth debt earnings, down to paying to look sharing after we We flow, cash forward, evidence forward the you accelerate drive pursuing Going opportunities and

information would please you. to like you us. out If meantime, the more Thank reach in

Operator

Thank you. conference. This concludes today's

You Thank may for disconnect you participation. time. your your lines at this

The Eastern Company (EML) 8 Nov 232023 Q3 Earnings call transcript