EML - Earnings call transcript Q4 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to The Eastern Company's Fourth Quarter Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Ernie Hawkins. Sir, you may begin.

Ernie Hawkins

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

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

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

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

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

Mark Hernandez

with those focused which all of speaking Thank you, joining on pleasure today and operations core of for us improvement, realignment web. who those by during shareholder after we long-term via continuous growth and Good to year the It's be creation. phone absolute you a and the morning an participating are value Ernie. our to

in XXXX, key Disciplined operations, those X One to effective a the CEO many our fundamental To became value-adding we I help overlying since we recently January know, pillars, acquisitions. been following call X component X that business added Eastern we've you of synergies focused and exist business capital us commercial utilization, operations. capture As strategies: between

strategies During Eastern produced as increasingly results progressed. XXXX, 'XX our application determined strong of

chain XX% Earnings continuously We For per supply troubled year's XX.X% full from pricing hadn't boosted of our fourth margins each been of $X.XX experienced to global basis improved period. supply their the XXXX $X.XX in through the dealing gross inventory increases in to finally we from with with reducing culminating in several inflation operations pre-pandemic by its achieved for quarter, levels in to quarter actions. returned the in recovery compared year, state, and cost as lingering XXX chains results XXXX while of decades. last onshoring, earnings customers with high XXXX points and impacts these that share

past improved down cash the compared $X.X $XX million. generating reducing of working last brought improving XXXX flow compared to in quality $XX.X than of capital working down Cash XX.X% with we we balance our to strengthened past a consistency requirements commensurately. continuing In to debt XXXX. By our brought deliveries as we more year, order and due sales -- ended of and backlog, in addition capital million and to operations percentage by and with flow XX.X% and earnings, due from million sheet operations, year from

returning and these in While investing continued capital we achieving shareholders. results, company our to

production America, consolidating assets example Velvac bought capabilities. of we Sureflex to operations, on certain focus our and Eastern Incorporated an North streamlined expand integration, in of we XXXX, During vertical

XX,XXX shares repurchased We stock. program also maintained X.X% or Eastern's of the company's approximately and dividend long-standing

transformation a grow drive have help We to margin operational We further In improvements initiatives support integration now need in foundation. delivered early and XXXX, vertical will XXXX. expect will our acquisitions strong that Eastern solid gross that we and to improvements. results, strategy consider revenue-enhancing

outline Before for year, approach call financial to fourth the the review a turn over quick for our quarter I this I'll XXXX Nick? results. of Nick

Nicholas Vlahos

Thank you, morning, everyone. good Mark, and

As fourth Mark XXXX. for our financial the of said, I'll results run through quarter

returnable X% For from the XXXX million in to truck period, net primarily chain. accessories $XX products to demand the period, global due supply normalization amidst the of million and sales $XX.X transport for packaging lower the decreased

our the fourth the due at In we time, backlog. a reducing past while, whole, same strengthened quarter, as our backlog

XXXX, Our returnable of December and packaging from XX, increase related Class Velvac. increase million on at the reflecting an an XXXX, trucks to at increased from a X mirror $XX XX.X% services and old XX, to December backlog of new launch for X program as $XX.X million Big

margin combined sales percentage favorable quarter XX.X% the The in pricing Gross compared of in fourth improved to XXXX in LIFO the with primarily freight costs, material margin lower quarter and reserve other in period. inventory write-offs period. reflects fourth as a and XXXX increase was the the XXXX a of adjustment XX.X% to in the

sales, a compared expenses were X% As net quarter. fourth product to last year's development of X.X% percentage for

payroll of higher The costs. due professional and administrative primarily increased the payroll-related and or $X.X to legal XX.X% quarter increase Selling expenses million and for expenses, selling XXXX. and fourth was

expense decrease quarter adjustment pension items. to in compared decreased various and XXXX a the $X.X of reflected million and primarily Other million $X.X period. other income XXXX favorable the fourth The

period. fourth to negatively the warehouse consolidation the net per by $X.X income for costs of restructuring related tax XXXX, In increased a was to quarter share Eberhard. $X.X $X.XX $X.XX of $X.X XXXX income share impacted million Net diluted of or from of net quarter in or diluted into the million million fourth XXXX per

$X.X of for the quarter EBITDA compared quarter non-GAAP continuing fourth Adjusted to $X.X was a operations, million million from measure, for of the XXXX. XXXX fourth

decrease in reflects used support we cash $XX million primarily million from cash reduction in working In The to to inventory. when a our increased XXXX. capital, XXXX, flow by operations a $X.X compared improvement

receivable chain ensure inventory of our reduced days XX in to accounts primarily demand year, meet XX we days customer By availability of to XXXX. last days comparison, the from used in XXXX, light cash was constraints. In flow, to fourth million record year. supply With and million of a the paydown quarter the for paid the This cash $XX is debt we of full level down during debt for $X Eastern. this

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

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

turn financial to completes review. my I'll That call Mark. the back now

Mark Hernandez

turn our beyond. At Nick. I'll to our Thanks, plans for point, XXXX XXXX plans and -- turn this and for

continuing between to we delivering proven acquisitions, on utilization, going of foremost, and business continue are the consistent markets, umbrella sales integration from as value-added earnings build acquisitions. difference fourth and to through I disciplined and an our flow, our foundation goals operating opportunities focus performance our continue First -- under as to through while by products on activities last paying to considering important of market demand expect to our today new and effective vehicle and and be we organic us and strategy foundation capital it's objectives One mentioned of strong M&A to accelerate quarter is commercial as activities continue that one, well reliable operations, XXXX, in earlier, cash solid going positions continued growth commercial year, aided a share all the and Eastern. debt, call on. we automotive increases. In aligned, improvement that drive have earnings down focus focused we our The driving seriously margin vertical now The and to to pursuing

even due increase in million $X.X our chain and by past reduced million. supported the we back as $XX.X excess normalized, to XXXX backlog cut took is place confidence increase customers our Our on of supply year-end backlog. global as inventory, This

indication services generating, launch including orders mirror new for Big we're is new X's It for of returnable Velvac's X of and Class mold strong the a trucks and program packaging. a

enhance spending to product underway reductions and through gross strategies efforts. our total our rationalization concentrating make initiatives integration many through costs, versus have in further buy cost margins even landed on vertical We

steps greatest addition, ] synergies drive properly enable cross-functional day. than we're what our forward rewards strengthening our any the despairing more X resource achieve we to businesses, capable. who X achievable taken ensure company division to and opportunities to teammates to the changed right and [ We've our efforts, are have working structure of In each for the our Eastern's in system place plans we've it created across culture so to these collaboration. Through incentive realize companies every is

Eastern's X we're At excellence we focusing taking and efficiency. focusing Eastern's to repositioning global to We to sum on optimize are for business. government are quality, all safety. delivery our of our for our sectors, including will solutions our are example, how up, and products, augment relationships. new our reviewing existing portfolio At X, performance. To that analyzing by metal in machining improve we're costs, of can ways At expanding to geographies employee Big operating enhancing our our we and on-time and committed where leverage especially assets expand also electromechanical Eberhard, aftermarket capabilities achieving operational increase Velvac, businesses we on fabrication in steps footprint,

by per will play increased role mobility, or improvement result and increased closely accessories, through questions. to internal the -- market, electric. the company And per that sustainable rejuvenation With floor electrification, move sustainable combustion our it gallon returnable in and expect We let's of overview, to engine wind are the reducing resistance. a that open combustion to aligned engine autonomous. continue capabilities believe packaging digitization miles internal commercial our unique miles vehicle We to in gallon the be as whether embraces industry with

Ernie Hawkins

from questions few take have we and a We'll web the first, do questions.

margin in XXXX? grew XXX-basis-point in about we points expansion gross XXX you How possible? question, think another expansion First margin should by basis Is XXXX.

Mark Hernandez

gross by As on goals extend is normally lower through always position our Eastern, other our cost them. as vertical we previous strengthen in-house that -- purchasing to pay One as we're our increase stuff One where have bringing And aspirational can to as integration would this Eastern to I services supplemented utilizing well we calls, companies. far we activities as our improvement mentioned outside for efforts margins

to yes, margins. continue So I this that can believe effort gross we grow

Ernie Hawkins

Okay.

question. Next

in more the what business active attractive are your most criteria As profitability? of terms size get opportunities? offers Which in you and M&A,

Mark Hernandez

and -- but the today We're exist improve Eastern want strategy the currently on space going revenue-enhancing gross Both, leverage looking them acquisition we're likely into that help looking nature, for vertical One capabilities in our for to smaller add always started take that as acquisitions fold as things, well first, as with strategy company. the can we are the that margins Sureflex, operations we to Eastern forward. can our and currently our crawl-walk-run

Ernie Hawkins

learnings implement to in you've like Next for the share CEO question. year. any year? nearly from that you the been Can you'd coming year Eastern of a Mark, past

Mark Hernandez

the pull made have half learning easier launch Well, continue me personally. strategy on It's for we And putting Eastern. Eastern is put effort. of getting and of to progress, and it's I actually What's to learning significant that's page everybody that been just the strategies a what towards paper. the a seen on on strategy. the One same to are story. led year challenge the But I've that One paper We've the half

companies to all themselves, not to looking only for Eastern. our win Now of are but for looking win

Ernie Hawkins

and prior Revenue you year, quarter was year forward? How down do strengthened. earnings this when while see have compared to going the prior

Mark Hernandez

supply in look buying is, against customers I at a inventory to breaking -- X our just-in-case were call unreliable chains reduction X was themselves -- this normalize, extra protect levels supply pieces. there the inventory I as up Well, in where into chains. One just

so levels we also commercial see enhance see suppliers know robust orders. previous that revenue struggle on it that in side can of to in the normal. that they production their be that So as we years. increase industry as solutions to some to are And was back happening I the happen the with headwinds packaging not consumer as vehicle the OEMs projects as coupled chain resulted at cut their that some supply then in the our packaging as

Ernie Hawkins

our question QX there any and And final from selling administrative in expenses? Were the onetime items web.

Nicholas Vlahos

that you. Ernie. question, take I'll So Thank

fees, consulting expenses a was yes, there administrative due a well, were there comparing then and to removal for the for recruiting expenses adjustment so selling onetime accrual. on and And prior prior year as year the basis and of in positive bonus

Ernie Hawkins

turn we'll for you operator, questions other the that, to audience. With any back from Okay. it

Operator

[Operator Davisson We Ross Capital. a question Banneton Instructions] from with have

Ross Davisson

the the that improved are you've on question up more margin like, takes LIFO that there's quarter clearly and provided, ongoing, and there're some earlier freight or adjustment. like less things the like the worked to hard in pricing and also gross you sounds it the some on Just things always, puts as costs material negative. information margin change and picking with gross But favorable getting

what margin? short this for As like reiterated expectation our know, takes, as we the be those is that long-term to a Or you XXXX? up. gross you always like is some through from more things term, that the think just step I you goal LIFO? of XX.X% you because But keep and attaining the target think quarter a unusually and should those look in puts high ahead to can temporary

Mark Hernandez

our control. I of stated margins, to. are are -- in operational of calls target hold gross kind the a and that outside to of I earnings to is them aspirational we that things ground that in earlier is adjustments ourselves what get stake The LIFO XX% call

So those we'll continue to take as they come. adjustments

have up not believe products there going to a commercial we gross pricing, we side, that that us is margin from opportunity However, that to position yields we're as come operations with business deserve. strategy we obviously, market, giving that We're grow significant is to new but do to acceptable us margins. our on and focused the

And piece, products then second companies we to achieve. through or material whole on produce significant acquisition are is or to first allocation and trying that that in that now. active we that towards through the right producing acquisitions ability side. outside capital XX%, see very opportunity mergers And the that on the investment and get space able to a hurdle vertical we're there's that our that vertical paying which capable to or of direct We're improves acquisitions of services point instead CapEx our companies ourselves pulls

Ross Davisson

when Great. a piece point of And just like big a to I like on step mean, finer surprised that guess get allowed I'm magnitude be just not? if down? don't it That the QX, follow-up to we presumably, pretty Is of not that. in what hit a makes -- I have to quick LIFO adjustment just XX.X%, sense. it. put or a we that trying sense Like this a you on meaningful quarter is in should it there's

Nicholas Vlahos

the It in future. won't be as a impact meaningful

Ross Davisson

then on And backlog... Okay. the

go ahead. Sorry, Go Mark. ahead,

Mark Hernandez

Yes. to are as gross pursuing. I just significant that not a margin, going as we're opportunities percentage was as it's add, these of

Ross Davisson

it. Got

Okay.

the is and was up that year-over-year, of just that backlog, remember see. past something from sequentially, it want seasonal? it should patterns On the the to the QX, down? understand about it seasonality I just else? but backlog if ticking from was don't talked check Like that or going you Is few you anything that I the like past I few that there's usually the down double backlog Is Is sort decline backlog else QX. from I take down away

Mark Hernandez

recognize production then the factories in a on commercial our to and off units units quarter lot of fourth strong have I quarter the And line, of out assembly experience revenue. commercial tends of the getting focus they to vehicles most the QX be customers. on get vehicle of those focus and to for they

quarter. working less there's and sense, days make would in it So the fourth

up their earnings. not XXXX try for order to improve their -- expenses companies to need start as So parts to to rationalize in there's a

of So as but as it, it had has a a little cycle career. it in significant I in been my it bit didn't past the to see

Ross Davisson

Okay.

just XXXX headwind XXXX, about OEMs sort the sense now if just also persisting sounds customers you a you a you like of was is So of trying are on at of Or headwinds quarterly sense? you some a kind you things into. make that normalized not mean, basis point revenue, will, you if we inventory, in headwind some orders a And what those having yes, nothing worked curious, through as where as kind if are in all of sort able with -- the the are get into very through like of Or I sort of we the have think stocking, stopped then a you truck of your buffer anniversarying I'm go out said to XXXX, to -- in timing? in still it you -- I'm obviously because normalization are normal on that? necessarily do of it and you gone? as that just here, close it XXXX. grow, of read to just to about like that sounds I and

Mark Hernandez

I Ross, stable, that would interest of kind answer actually headwinds They're is and increasing. it primarily this the way, driven by aren't that's rates.

to With we will their consumers the see because able will falling the position commercial smaller to commercial interest rates, that, better headwinds vehicles, vehicle of that trucks. drop significantly replace be

macroeconomic increasing. through So think -- will and XXXX positive now, that steady, to I we headwinds and it not it's are would right signs XXXX. continue factors I what through say it's see The

Operator

As it any Hernandez no further have back Instructions] comments. for to closing hand currently we will questions, [Operator I Mr.

Mark Hernandez

Okay. joining like I'd us today. for you say to thank

strategy, confident our which in brought XXXX, in an for results provides are consistently the We improved foundation excellent future.

giving We to us. In again information, if today. reach thanks meantime, our an for you to forward additional the QX. joining And please you after out update are looking need on progress us

Operator

conference concludes for your We lines This thank your participation. today's at may you time. you. this Thank disconnect you call, and

The Eastern Company (EML) 13 Mar 242023 Q4 Earnings call transcript