- Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Park-Ohio Third Quarter 2022 Results Conference Call. [Operator Instructions] Today's conference is also being recorded.

If you have any objections, you may disconnect at this time.

Before we get started, I want to remind everyone that certain statements made on today's call may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. on risks release may the as XX-K, was relevant the found company's of with which press XXXX, earnings well filed list and be uncertainties in XXXX the A SEC. XX, March as in

and Principles. may and Adjusted defined not EPS as under performance as measures defined. Additionally, the of adjusted Generally EBITDA company are discuss EPS EBITDA Accepted Accounting

defined, net shareholders to the reconciliation EPS Matthew and will as of of to CEO. reconciliation and common Park-Ohio EPS I adjusted Chairman, proceed, refer Crawford, company's income a conference the to Mr. For a attributable release. Mr. to recent Crawford. please EBITDA for Please President over earnings to turn now

Matthew Crawford

any last of the leverage, pleased investments to with results quarter increasing results and across resized several now and to strong in some we most end momentum. the respond, cycle thank see strong which and restructuring, continuing closed our the continue ongoing completed all our driven of in as business increase XX% namely demand you, a and oil rail, earnings across sale during increasing which which the consolidated operating you was customer markets activity and demand we're or by and new been our gas. but trailed call have global The show business activity joining as during operating Thank Generally, for this costs, improvement slower price significant markets, aerospace morning. without adjustments, customer Earnings result have years, lower locations key the largely attrition. XX

our Fed in time, risk buoyed demand will weakness tightening cycle several we notable our demand continue this, Despite no introduce ongoing this see factors. to by forecast. are forecast the we at While into

production we production restocking these their supply many at First, end demand, of and/or customer Regardless by had freight, of our customers sites. some chain anticipate amount labor have issues. constrained of many of

our in we see in Second, or from record trends investments we Engineered backlogs infrastructure benefit as Products continue to group reshoring.

the will the investments growth we Third, more we slowing us anticipate to that and even performance capitalize business. value in provide to opportunity have drive made in our any on

while will last to effects our toward pivot and to to to couple additional focus years on continues we supply of Pat the labor to valued cover With customers. the and I'll investments Lastly, chains over balance we of begin the the linger, COVID turn sheet some the made significant cash it quarter. harvesting protect our during that, of of

Patrick Fogarty

you, Matt. Thank

reflect our results most business. of continued in Our improvement parts third quarter

record First XX% million, across Assembly compared demand in to sales of the we ago. year each XX% Engineered strong Supply our again levels market grew $XXX sales the Technologies and quarter XX%, record at our segment quarter third were all, achieved and in during consolidated segments. and Products totaling an year-over-year. business a of segment of Sales Components was increase End respectively,

implemented efforts the increased restructuring the adjusted operating our as and improved market year-over-year demand, During of sequentially both result a businesses. pricing impact throughout the income EBITDA strong customer and and quarter, end of

a As year. continued of and during cash positive in result, improvement quarter, flows cash remainder the for generated operating the we the flow we free expect

aspect in an basis gross our current quarter, in compared points the increase XX.X% in were environment operating every margins impacted the has to margins last our XX caused has raw our and material, inflationary On margins gross labor current costs quarter year-over-year. Our gross XX.X% The XX.X% year. of basis, business. and were an higher adjusted of

actively these pursue our price to a million $XX We products, ago. expenses million customers have continue obtaining SG&A successful been our offset costs. with compared pricing to new year and we'll on were in $XX many higher of increases to

year ago driven to in rates driven $X.X ago, during as a the sales, quarter net needed facility the of acquisitions Interest the totaled percentage million on borrowings well interest year by quarter. current a we higher year As the to expenses with our a expense significantly compared higher from revolving XX% XX.X% million SG&A increase down $X.X credit capital by the levels. year ago and compared working a completed to average higher to support sales were as

tax discrete we totaling benefits future. per to federal benefit we share million, income and related credits, $X.XX in quarter, tax the $X For to an expect realize million research tax or recorded of $X.X which development increased the which included

share of during which loss in per diluted for EPS flows the Currency related a quarter. year closure GAAP $X was million positive first to which to $X improved quarter the our EPS, $X.XX were million primarily positive The during ago. quarter quarter. share per in required driven of levels impacted profitability the quarter the per $XX share a Adjusted cash costs, fluctuations $X.XX compared negatively the charges plant million flow results use per working and months quarter. of excludes by and $X.XX compares the Operating of to the to by in Our consolidation the in diluted $X.XX cash share, a year. was third of capital improved third six a onetime reduced

estimate next demand, capital capital chain with returns As challenges, the previous levels. to stated in compared XX the as we investments working levels. over to additional normalized in working to additional have XX will convert approximate working We to resulted capital historical in million, cash months strong market on investments has coupled supply $XX calls, end which

bank $XX quarter. to fourth increasing $XX from in and quarter. focus ago the in $X $XX $XX the million defined to improving and to by units cash million million during a than $XX year business million as $XX more last Our CapEx our totaled almost EBITDA free million, doubled million year-over-year, on each flows million year-to-date respectively. reduce quarter and of expected is debt

to continue approximate $XX year million. million $XX our expect We full to CapEx to

used million cash million, to $XX consisted quarter, $XXX banking Charter of arrangements, borrowing of cash of various of Automotive. In quarter the we which included unused acquisitions availability. third borrowings suppressed our and was capacity of under $XXX and at $XX Southern the increased which complete million totaling million liquidity $XX the the million Fasteners Our and hand end of third on

to chain record million, our In quarter in this impacted year's last Technologies, quarter across in consecutive sales power of results. now by with our set approximately a aerospace. up sales $X million were across truck over supply This particular our business sales headwinds of currency spite XX% that year-over-year, and record America. million. segment driving were most of sales $XXX markets the compared previous in with Sales the in largest record segment Average is sports, X% XX% to Turning heavy-duty sales Supply in increases net of quarter daily third geographies strong overall up in Sales last sales segment all the end strength third increased quarter. North $XXX civilian increased record. the the and semiconductor,

In addition, automotive sales business well, and world. quarter quarterly in proprietary clinch manufacturing third demand OEMs fastener our our increase fastening continues for self-piercing delivering around technology the to as with the perform the to record continues

the Automotive Southern Fasteners acquisitions quarter. completed well during performed Charter of recently and Our

income margins we Our to and to totaled both and operating $XX.X in expect accretive in by the was freight acquisitions an share. sailings this integration partially flow-through from implemented, million Adjusted higher well current freight are sales profit higher as levels increase efforts our segment quarter, of million offset our costs. including product almost the and higher $X earnings as per being be ocean blank costs, year-over-year as

the $XXX the from year, increase remainder year-over-year. are impact continue of the produced Segment the We million million rate business of current at the Assembly were at of record launch realized from $X year income a nearly income levels were to adjusted in last $X a the quarter for customer to in of in to pricing in $X.X run expect prior a average operating sales year quarter. which year. being to now year the be markets. current loss compared for basis, compared in the to loss ago, of in our increased volumes volumes a an In segment, On year the $XXX improved to quarter million daily prior most of the million quarter million an quarter. operating current was Sales breakeven end loss and demand increased due primarily higher XX% in Components

be Although, to by our higher labor performance third results material quarter and pricing segment, negatively improved year-over-year continues affected sequentially in and costs. overhead this raw and

operating products as facilities in We our margin segment, and sequential the in result aluminum of of continue in to improvements. and see in one customer of new including losses in quarter rubber Mexico. operational products extruded our and plant start-up were pricing and impact improved of isolated our fuel-related in the this Segment a costs improvement molded many

operating increases offset programs price increased category pursue segment. in costs the on this material aggressively raw continue We every product to and across to several

the the demand compared year, year million third in robust. our quarter to X% up initiatives. capital improved to were equipment a year were million, capital segment, equipment ago operating XX% continues ago, In both products For of Forged as for Machine to quarter our $XX of our result and up increased remainder sales compared a and by our be our customer business. driven $XX customer expect Products strong Engineered we performance second to continued sales a the customer compared business, demand equipment and as demand In

million of the year at million, to of aerospace, year their the as the highest end end Machine $XXX in products September markets, an continue $XX year. the a XX%. key compared the In and two improve backlogs and end increase months Forged last oil rail of New $XXX ago, and sales of Equipment million $XXX our is quarter equipment totaled in quarter bookings totaled first including to level from of to which gas compared our previous the were since nine business, the at XXXX $XXX years. first million million

improvement less this quarter, year nearly levels implemented $X operating than a product year-over-year compared During profit flow-through higher $X the the ago. million improvements the in income profitability million and driven to operational pricing sales from segment The by in was initiatives. was

quarters, the operations. reduction crop We in continue to of facility forge cost taken prior our Drop benefits consolidation see into Forge the our from including Canton actions

large demand defense of includes quarter of completed We next forging The increasing first production support with to to substantially by will capacity meet installation aerospace expect which the the the customers. the production be a and hammer our equipment, additional forgings year. XX,XXX-pound

For with the equipment expenses and continued sales as convert products And strong expect this and Machine with year continuing guidance, backlog the Forged the current markets respect our to business. Corporate year-over-year in million consolidated year revenue And sales ago. recovery approximately approximately year-over-year remainder full to key our we XX%. of operating quarter end with income estimated million of levels revenues currently we $X.X at a from in segment year line at growth in we the $X.X in to in be our continue improvement record in were year, in finally, expect

improvement profitability turn the back operating year, In also fourth last sequentially addition, the expect to year quarter. quarter compared improve to to for I'll significant the expect full we third adjusted to and our Matt. compared in we call over results

Matthew Crawford

you the for Thank Pat. very I will open line Great. much, questions.

Operator

[Operator question. first your with is line Instructions] with come proceed of the from Dave Our question Storms Stonegate. Please

Dave Storms

Good second congrats record quarter. the morning, and on

wondering just about a timing start Engineered you're into the going those more Just you that if backlogs the could sales? the by, of Products turning seeing and little in in

Patrick Fogarty

orders six six through the Pat. from the is revenues. months, orders, this being We've Dave, improvement and the record we've timing those backlogs nine in months continued seen last given equipment ordered. record seen nine those of production to ranges to pushing Throughout

chain We front. the your some over is we've the facility six line. of on capital months, in in seen through hurdles last getting ability Key being And equipment push to expect to that supply that production continue. the challenges able

expect We continued improvement.

we would through backlogs, the push XXXX. half of through of the kind So production first expect

Dave Storms

I the that headaches? that are cause on front, know been you Mississippi you mentioned things of kind freight to like has starting abate? water Are just then to levels continuing a And chain challenge. seeing in Or that the supply

Matthew Crawford

come of and in to we were timeliness down I has in considerably. This would say of is lengthened lead a ocean has stabilized. which has out constrained some certainly, both is the freight, come terms pricing times Certainly, better bit I Also, had part and as I the mean, think, most has I our of where -- year. blank availability well. sailings Matt. that mean, pricing No,

and pricing, So continue we're shipments, think do seeing I better the we're going predictable that more new and I year. into significantly to we'll think seeing see

Dave Storms

to users That's are pick helpful. as continue sounds from very that into it end well? to then remain starting like resupplying And see Is there, next you're expected as shelves. strong up demand and year

Matthew Crawford

question. not I customer that the in will demand. I hard succeed diminishing Yes. I suggest think to There's Fed mean no opening comments, in my end referenced

So better of terms of believe, no I this think looks with in like else's XXX% chance our what than visibility is anyone point. I that at recession,

news as are well a still So is fair one. that a of as would happen has there good amount to us industries restocking the for Aerospace that recovering. is that be some notable

with So than we're most. we customer the do end better believe whatever that positioned happens consumer that or

I positive. robust the that's business, a of think, also take in So would that given the to us, to business stabilization breath. say the cause some be would growth able I

labor, think is stabilized, think has stabilized, not I but availability still great. I it's

operations also and of our be think rate, margin line whatever think by we I again, that, to growth meaningfully. benefit our give So I in a I will think, be as to mitigated rebuild restocking we terms the seek think will I up,

Dave Storms

very can. Understood. if me, All for I more helpful. One

the continuing credits. development What's of one-off? your beyond? those and is into into that a federal on more research QX Or visibility and Just

Patrick Fogarty

that. is Yes. focus anywhere years international quarter benefits again. focused that our over this continue were three opportunity initiatives the we've tax last efforts Reform We not reoccurring rate since XX% been we our credits. We tax the slow really of we Dave, around effective and initiatives reducing were Tax us Pat seeing really expect type of Act and can. of is done one-off The and credits, opportunities, one the a planning development things there's for lot to R&D But XX% credits the our on feel research have and to we're to on down. our do current

example The was quarter third a now. good

Dave Storms

very rest great you all That's helpful. you a quarter. have Hope the great, Thanks. now. of Thank for both

Operator

you. Thank

next Please with of Jacob question. Our come proceed Markets. with KeyBanc questions your from Capital the Moore line

Jacob Moore

This guys. Steve. on morning, Good Jacob for is

Patrick Fogarty

Jacob. Good morning,

Jacob Moore

relatively on timing strengthen just free end maybe to able flow? even year, there? level they in why confidence to next into of confident markets, targeting and free wanted big stable I are a question first you that ask level be cash in your kind are drive cash what If the commentary. my improvement flow you And are and you'll

Patrick Fogarty

by is working supply customer in included receivables. constraints, Jacob, have out embedded capital Yes, that chain our pricing inefficiencies within dragged our caused being been

Matt in improvement Clearly, international freight lower around some So the of our there's plenty opportunity result chain of will for the comments eliminate that inventory get supply us to we and excess. levels. any that made and

reducing of is capital flow comments. most which free mentioned is my million, pandemic, of since referring to roughly what So start be the we're to have relative result that to in going cash going embedded working into as of $XX I year we a that the next

Jacob Moore

to 'XX all are little I follow the much to mean, I in need -- bit guess up markets how end a on capital you if maybe flattish you are think working business? and run just 'XX, the of

Patrick Fogarty

of the on to that the working comfortable we're And a that think we level is normalized I Yes. level by but is and with, feel that capital back dollar. We business, gets levels. typically us it varies -- typically historic $X.XX

goals have take established initiatives have of in to across every We some our and place working of out that that one to that excess capital been exists. reduce businesses

capital. So increased in $X.XX next if year you expect dollar can terms we to the we working the see over on on growth, count of which X, to

Jacob Moore

maybe on be goal you'd then maybe Do just 'XX the debt targets we where out 'XX? like And for to a color. look what a those and commentary. and good one guys That's to the like look balance a me put have to for point last sheet you reduction as quantitative

Matthew Crawford

Jacob. is This Matt, Yes.

XX-month XX-month goal debt-to-EBITDA. to an We had have Xx intermediate pre-pandemic, to be goal, meaning -- goal an we

stand time got peak got think portfolio We improvement. goal. focus at by need that continue that to we our by we inside couple can the -- we've businesses We levels. a areas on that some of performing to We've are

at we think the we and build into direction, going line next that year that harvest As the right going we going care to in we're earnings line, more take success of continue itself. think rebuild to business the I is and efficient we're of some it, -- and going become off the new earnings as to

post-COVID think more the efficient that, in I particularly get era. we as

So harvest of perspective, I -- think from and begin sheet. this think that that also that to I balance some

We're our bit balance So and of off sheet. the some we stand believe deflated believe to we've artificially higher Xx. by get a goal but now, the we earnings that are we got money

So goal. that's our still

Jacob Moore

one. candidates you that this But efficiencies. any one I worked guys could, working are I have think just if in-plant there on done at you then for on businesses quick are some know and point? restructuring, -- And divesting you

Matthew Crawford

that our predating over process on pandemic focusing was the of products we our best and part last, think -- the really I even businesses. around

really can on believe plan to that grow So businesses we we grow that invest margins. at in can been have capital allocation a focused only accretive very seeks not but

I that, we our been said well we've where think harvest businesses desire portfolio of But of had great see together. got having number in asset We've a sales. appropriate. work to So that unabashed we've it's a that that assets

we you disposing rigorous sales. in in full As with can and business how continue how to we portfolio but know, businesses. been we of seek we line has to asset high-growth, be our invest at not look in a business, continue It high-margin

wouldn't put that off the certainly So I table.

Jacob Moore

Okay. questions. Thanks for Got taking it. the

Operator

Thank you.

the Our of Please next questions question. line JPMorgan. with proceed Yilma Abebe your come with from

Yilma Abebe

current we recession remind in the a a next have the the how capital working Perhaps And Thank My and cyclicality be could if flows recession. you in of morning. you. is the your year? time that cash the Good different of do can cycles? was us around, cash prior cyclicality first regarding flows question given build this what

Patrick Fogarty

This is Pat. Yes.

which come business to previously, tend a mentioned working recessionary of in would we've period, I out capital, excess got quicker. As obviously, some the

In great businesses sales, have where but business supply be we've seen got as flow in addition, through our capital-intensive capital-intensive business, businesses, our reduced. big chain many cash -- part come when capital our of opposed affect in of working because we our will businesses. working primarily you've That's recessions a our to

So in flow. as cash very a well it recessionary period, our plays diversification affects

Yilma Abebe

helpful. other of is you the versus question allocating of buying purchasing How think investments? given specifically returns regarding more tradable bonds your back capital is my uses other the allocation. bonds capital And kind other versus capital about then That's for second that returns and do

Matthew Crawford

is This Matt.

by begin Pat's me Let echoing comments.

company the a around bit. been You've

that you our got extent causes enter we flow. in sheet. that a the despite to $XXX been to that recession I in about we've assets current of see mean the of the we base beneficiary So know have of us the cash large amounts restocking some balance decline, million revenue

the It's the scale cycles not and opportunity of the is looking course, do, and recession. but good is to So significant there. over pretty harvesting last of proven we're business what --

suggest we're to So sort of perspective. from recession-proof again, not that

So I to restructuring most those of we've exposed, got that less, but resized XX some I were are suggest gone of would locations just are think, manufacturing recessionary the locations, to some that through you also some businesses that environment. that the we that have the

So a Number X. we're trading. I priority, we're of in two, that spot number bonds if look, cognizant where are our the think happens, good

of to in is purchasing that's support us tell business as and I back. We at you you XX%. have had a right continue times excess in of our the now, to front is of growth some on know, to But the focus would instinct that history bonds which,

eye -- got priority is have, it on the business and the be the we ways to supporting business going our going well. in an be and we've but as So to

Yilma Abebe

all very much. I had. That's you Thank

Operator

further over There would you. the back no to Crawford Thank hand for comments. time. I like closing to Matthew are at any this questions call

Matthew Crawford

insightful all and your time your to We we improvements Thank you for very questions, you much. fourth morning. this support Great. appreciate look quarter. forward the Thank continued showing your and in

Operator

your This We does participation. conclude appreciate today's teleconference.

You this rest your Enjoy time. may day. at disconnect your of the lines

Park-Ohio (PKOH) 13 Nov 222022 Q3 Earnings call transcript