SYNL - Earnings call transcript Q1 2021

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Operator

Good afternoon, everyone and thank you for participating in today's conference call to discuss Synalloy's Financial Results for the First Quarter Ended March 31, 2021.

Joining us today are Synalloy's Interim President and CEO, Chris Hutter; CFO, Sally Cunningham; and the companies outside Investor Relations Advisor, Cody Cree.

Following their remarks, we'll open the call for your questions.

Before we go further, I would like to turn the call over to Mr. Cree as he reads the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. ahead. go please Cody,

Cody Cree

Good call thank quarter to results. Alexander. joining XXXX all our conference discuss afternoon you, you and for financial Thank Synalloy's first

Interim note, is and accordance of has today With Chris? via for the the the is based call in measures. on webcast may website link G, can we be earlier press differ President In XX-K CEO Laws. pursuant materially. to and non-GAAP like to the a to subject Investor Hutter. to to to Further, all advises a I'd Section it's that, that Safe Harbor all review Investors the back of the currently posted to listening today Before Chris could results Regulation these uncertainties. available company's amounts found cause over the for us those that contain Please Synalloy this are the available would the earnings undertake to Federal based statements. not the company call the www.synalloy.com. also of at discussion and responsibility the of information Securities release actual to the this may on include website. statements closest Synalloy, risks posted are website does that uncertainties statements of replay Section summary latest posted various These to to these reconciliations issued with Synalloy discussion forward-looking remind forward-looking certain call update XX-Q Company's the provisions we continue, and These measurement. today the turn and and participants of risks GAAP on reconciled like any on

Christopher Hutter

well today's to the I of the is Thank by you team here I start hope what reiterating hope all Synalloy. what Good COVID-XX stay everyone be joining it for pandemic. call. an want afternoon, at the be leading latter and have you, part continued safe during honor you to we and thank Cody. to off to

exciting an succeed during while the I'm us, the and in ability to of long progress have quarter, We of reinforcing haul. the journey my we've our incremental over ahead confidence made first proud

to sales came in all respect of our sequential expectations business QX, increases with with Specifically above net Synalloy's modestly segments. across

more also that only significant, in however, quarter adjusted was since to to the as our income demand has company's adjusted certainly EBITDA most We inefficiencies to improvements quarter operating helped recognized on XXXX. EBITDA controls, due a basis We our continued effective fourth are reporting I'm in but be and implement continues to we metal our and products improvement and begun, robust, year-over-year representing for the operating efforts to in cost The quarter, profitability profitable margin. pleased to first model. Perhaps substantial surcharges of are reduce customer were work GAAP positive by contributing strong net first environment Synalloy's just the profitability.

of and the to QX to improve revolving refinancing will revolving to operational we put do the manage earnings in credit will did diligently are in January. work our improvements access the the to be beginning the the saw our be Company's company additional volatility favorable only facility, in very successfully proud we've given available we costs Company's apply should to through I'm essential fluctuations covenants. use to hard to segments and achieve walk over but elect we financial we liquidity I'd to more the all to a financial those detail. to are the efforts also in We seen secured restrictive our you. Sally, we to only moment. a processes Both not meaningful the throughput financial credit positioning. year of credit that quarter - to facility deeper costs. call working continue input minimize order the less each and over But our like Not more refine profitable increasing by meet our first costs, can in starting reduced first, in will so growth. position we Cunningham, long-term in since caused terms, demand, of and it, turn in our you who results and I'll into our of dive CFO, available Sally

Sally Cunningham

afternoon, you, Thank good Chris, and everyone.

decline and impact year shipments, net XXXX in of noting able shipments increase prior delays to across primarily grow as were due quarter the both $XX.X segments million Palmer pipe in the sequentially The our and challenges to attributable is driven mostly quarter were year-over-year business. associated was orders to lower production tube deliveries consolidated quarter sales curtailment by operations, second with COVID-XX. compared lingering well an of period. both, at of of XX% level that It million, in and with by macroeconomic the the the fourth First the as to over XXXX we $XX.X worth sales XXXX net

cost sales corporate Adjusted per of loss or chain XX.X% previously realizing Lower with QX a diluted net which mentioned considerable for $X.XX First X.X% some also margin within continued margin by first segments. operational to X%, from adjusted the both million or driven million XXX of income to in XXX EBITDA year the basis expenses was loss increased as improvement prior or to the across our $X.X primarily and the for increase EBITDA compared from supply both $X.XX $X.X a our commitment in a QX improved margin into share $X.X enhancements points is along million basis net period. of diluted This period. points, increased management percentage resulted per XX% of prior quarter and share XXXX. earnings to efficiencies of the year

at was debt XX, total million $XX.X Lastly, as XXXX; million looking to of position compared $XX.X liquidity XXXX. at XX, our March December

of the revolving million the $XX.X XXXX million of remaining had at As XXXX. under capacity XX, facility, borrowing XX, December credit to $XX compared March company

revolving a facility provides Harris XXXX. progress includes with facility has build into Overall, new credit reminder, flexibility that capacity. made good past now less million on agreement borrowing up some a have a restrictive us agreement financial BMO an revolving us over few XX, credit upon. As larger, new $XXX to we of increased a January facility The through the four-year we for with financial foundation entered quarters. strong revolving And credit having to Bank given

have growth, on a it lot that, still our expanding cash profitability focused cycle, do remain our and margins. Chris. With further turn we over improving However, to our company return work of back I'll net sales and to to

Christopher Hutter

of on our Thanks, team's Synalloy and and wealth accountability, as Interim of results Sally. CEO, by that to was of continuously more teamwork businesses. knowledge collective fostered efficient When And new growth. impressed I starts it develop am our and and the a joined openness culture people. with I promote to running And important ways

maximize knowledge underdeveloped are to has and the efforts also employees inefficient only in begin that identify a results existing performers recognition will the that better willingness to more our culture critical to Not results enable drive allocate processes, we believe to our and change team's this inefficiencies invaluable We efforts. across for identify understand those business. can proven are and but and leveraging positive a improve our Our embrace we structure of their incentive spend top our or foster achieve to operational transparency implementing targeted to areas accountability in protocols.

in the presents for only foundation procedures can quickly main we itself and but and beginning. work tangible for focus for our also considerable our throughput, future our operational across business our segment the progress improvements improvements. demonstrate laid future, the metal which company's groundwork is segment, during have quarter. which opportunities were the This present just I towards what areas improve While our seen In believe reality during the meaningful very level results, quarter, we establishing our

with US his addition drive such of to setting industry Metals, a we and Tim to transformation proud us with roles drive of Lynch product the in the Vice team unrelenting value management, accelerating served veteran and best-in-class the companies on and ability at for our as over within of Tim's relevant sales, are process in experience, across core I'm Tim while in Outokumpu, the His alignment has confident With Steel, our accountability, is with steel years' TMS as along have experience steel leader. Synalloy win and to inspirational the stakeholder President leadership International. April, XX Segment's Executive tone Tim an having our manufacturing, as side.

during we incredibly our this are pricing, worth able the as I metals remarks, of businesses, helpful have material business external Though in a environment these from and and to effect on opening robust to have it improved fluctuations. noting minimize to strong we factors demand, benefit absolutely that backdrop in As my being initiatives is to surcharges pricing for operating targeting midst through attributable controls conditions mentioned pass and inventory processes our the operational to it's a certainly of quarter. variability market the we're that continue internal

towards foundation operations process still tuning our in metal margin we're have of the as we Although the the illustrated fine chemical our segment, in segment, first establishing made by and early target the levels our the in quarter. profile productivity progress below for of future

long-term the Company's are portion deliver to opportunities total by meaningful macroeconomic this we and the Although remains segment's a of smaller environment, strong sales operating today, value. encouraged

this can advance You in we periods, chemicals to roadmap priority in coming value toward refine a an work a making meaningful our and be medium-term. creator strategic to expect the eye the as with

emphasize cost-cutting business we call, I As way in last to prosperity. want are not again I to of both mindset the our said that in across our units

can lower the some made uses service towards of to areas, administrative have targeted funds levels reallocate in that achieve cuts these better with belief certain we productive spend. more with We

also As of vendor our customer are deepening importantly, focusing and initiatives, we relationships. concurrent on our with many critical internal

and became an and I I yield that its cultivated customer's our our an note, company of did nimble investor and working because superb spirit". opportunity up because that the have a time, the team quarters. in tagline operating a Pennsylvania lot to new towards potential. we can whiteboard There of just with our best-in-class entrepreneurial work a established becoming with leaders in organization, few been exceeds growth I are have The "Safely partnership that here could best deliver goals. responsive quality joining we play see over returns both, the is sitting our first Synalloy of a here, to progress to to shown reputation expectations and some no with period With my by I these more come short its to want And After a everyone, our address economic a on Board, has great customers. excellence the adapting a said, volunteered at outsized initial confident role the businesses foundation these involved an customers' to an with I'm that and depth a early months. accomplished will on the of side by brought walk quarter. excellent model job and assumptions everyone in just with operational coming metal lead Synalloy lot was as in about had signs doubt and experiences coupled team management the value past in of new very that relationships proud team needs during achieve confirmed, the in and coming at segment I'm ambitious the of our on that reputation pivotal our Munhall, business that believe a and I of That we that. up and true creation the progress. congrats accelerating superior have us to here ahead that lead We're currently, the I We share of

advance of We we our strategic our drive and growth. initiatives our to strength the will continue leverage as people

one company. for questions. been work Synalloy. to their improve up getting thank taking like forward we'll minded you. to we Before of employees together I'd our look Q&A. to I know open it incredibly every open dedication again and now Operator, to as for to each welcoming, We've our and engaging

Operator

have from Mike We your Instructions] Capital. [Operator first Hughes with question SGS

Your lines open.

Mike Hughes

are Hey, my Thanks for you? how taking questions.

changed to that surcharge probably company seems one soon? first the The past. start It up; quarters the accounting just is to gains. few built versus and through The just related is inventory will that the flow the like last its

Christopher Hutter

in reported obviously, question, mean, very that's the based we I relevant especially a how past. on

don't price I and and is think like our in slave can margins Certainly inventory faulty we're and business looking - clear the the money it real-time, important And that that excuses. in pricing be is make input our those truly will begins up this and a made the a but end-use surcharges at manage up the don't with lined way at are of losses. That I pass We this my through cycles, premise looking we gains make want and with P&L really with view absolutely will demand said, that I and truly to to inventory the a customers business need prices. is in pricing any to we through look production and back-to-back. more layering environment which pricing higher. environment we really having it to

Mike Hughes

of the seems saying But far I cost flow would economic that kind at would third of some what just some like lower consistency, fourth it and appreciate start as tens point, millions at standpoint, cost an to like what and quarter, as point. it seems of have, at just it you're from dollars of you what flow you're some inventory like through seems it but through. a

Christopher Hutter

from you'll fast to as I through can't flow pricing lagging effects think and the to pricing our customers. see as coming QX some QX indicator Yes, again changing. continue you is market when some a is a changes There arrangements maintain with with of

will So under ultimately that this quarters year. to agreements, in you further some contractual flow through see start

Mike Hughes

Okay.

in the the June versus So improvement march shall expect for in margins metals we incremental quarter segment?

Christopher Hutter

given want I but don't QX, expect to tailwinds can anything that I flow you backlog, through and from guarantee QX. to think our

Mike Hughes

is mentioned missed that margin And target? you business what that the internal think chemicals so, if target, I that then right? is And Okay. on

Christopher Hutter

have a think and our line below profit on we that net here. I obviously, hit don't of internal internal our that is an want all But we it Well, we give metrics basis expectations. margin until guidance, in gross to have we target do -

we direct a it's addressing manufacturers. respect versus on So the growth side, there business the that is are the chemical of And currently. to in with to obviously, mix tolling definitely market

Mike Hughes

Okay, okay.

- primarily was issue So in it's primarily first quarter? mix the a

Christopher Hutter

mix, attributable It's to primarily.

Mike Hughes

price I last then which said up. And up metals me think was you that down Okay. segment. question the know, moving you the costs metal But selling and is average to Q base the surcharge that to mix. going back then for year-over-year, surprising to was The due given, was XX

I think management business, think would I would prior the So that drive team ASP. talk project about which

in give happen what's next just us bit for So little that of the quarters can you color segment? to a few going mix over

Christopher Hutter

when per an specialty I XXX-XXX of say there to mean, obviously, in any we be base, well projects, business, specific be But if items. it would global alloy. that has specialty project specialty looking a macro you overall you're are other of going one-off look that is the that it changed. price terms or But galvanized I a other our mix encountered, pound, environment a than one-off it at at lower Yes, to project requires whether pipeline offshore project are [ph], grade those project or or material

XXX a business in of went business bit, significantly. and fact little product, more picked our change our down mix that's went the our a up, up business XXX galvanized So expensive the

an of - not it's playing product, it level the So is overall mix a field. just

Mike Hughes

And just question. deliveries. in In press I release, Okay. and in you can sneak production delays last if talk the about one

the on So or that held quantify results can quarter that to how attempt both? much on back principally first the and side, metal you is just maybe the

Christopher Hutter

business. our washer which think trying on a find with raw chip whether sides. I shortage input every a both material to right is buying delaying, can't it's it's that impacting dryer It's - you're with dishwasher, Again, now; I a find car side or

can will QX So plug into to number QX. our say can don't that attributing What is QX, that. backlog, we probably through that we in increase an flow it's which exact have we and

an So it it our issue of component be to terms of is finding was in of our companies outside trucking a but product. significant to too control. Logistics able deliver

Mike Hughes

quarter end the versus Right. of at And the higher backlog it March year-end? was a

Christopher Hutter

speak [ph]. it guess firm. Yes. was want I to at don't can Sally, a

Sally Cunningham

Yes, yes.

back to over the in increases metals continue see month backlog to We month August. dating

Mike Hughes

including rise on we're nickel? basis, the pound And Okay. in not a right, just per talking

Christopher Hutter

Exactly.

Sally Cunningham

exactly. Correct. Yes,

Mike Hughes

Thank much. Okay. it. you I appreciate very

Christopher Hutter

Thanks, Mike.

Operator

question Instructions] [indiscernible]. have We your [Operator next from

Unidentified Analyst

Sally on that nice. a Chris profitable Congratulations, quarter, was and

Christopher Hutter

you. Thank

Unidentified Analyst

about Capital still be projected expenditures to gears for that $X is XXXX; million?

Christopher Hutter

it now Right is.

may think I in lower. slightly come

are in and the expansion You here specific need that's here because business. really project but the if a reduction". dollar it's funds internally, building CapEx and incremental we potential don't spent; assessing this move significant to to does approved growth it a which every budgeted we not means going just was spent, mean CapEx know, to around, together facility, of move the be - being are gets was I'm today, there actually "Well, we has we team this we're it's to A the Munhall; that says, was expand and walking be

being So that utilize know, the producing revenue three, not two, to it's actually the then ways you with team a four existing we're really - have, it pressed times is at look think of we going assets one, you investment, forward, before if we move can

Unidentified Analyst

Good, makes sense.

expense quarter, corporate noticed of that in came about already XXXX sales. I this Now under is that. X%

do years of So in meaningful the expense according we percentage a over expect sales? corporate decrease to

Christopher Hutter

grow reductions hopefully rapidly. - corporate Yes. again, continue I the to are expense is obviously, manage But you're every expense mean, obviously, seeing, going - we through interest. sales our to

pretty some savings and airplane significant agreement. we did get that had rid we've think I terminated the insurance and of

every the see quarters and will of and is through - again, XXXX. at. to into start cost looked But, that flow So you the rest

Unidentified Analyst

you. liability. ended I the [indiscernible] believe quarter, quarter. Thank at I end first the that of the noticed here earnout first

correct? not having bottom-line through meaningful going that on should liability, XXXX, and forward that XXXX a that is the impact So have

Christopher Hutter

If back I amount keep we not, don't to Sally, don't can the I detail. circle handy. exact that have you.

Sally Cunningham

only [ph] is earn amount. ASTI years the it's - But $XXX,XXX the the the roughly better than right, to we be have don't it should and past. a exact which you're impact have and out, I Yes, significantly bottom-line, galvanized about

Unidentified Analyst

Okay. Good.

with the VP, the mentioned execution. PR that immediate in new in So Tim would there it improvement Lynch, operational be was

adjustments of quarter to streamlined? going to bottom-line? this start up is in things be add second to that some are process something would these for to showing the they beyond? Or a So quickly would be Are procedures; and that operational

Christopher Hutter

to Tim business there from efficiency; he's us bring as that's on within for Well, Tim. And come significant in came that call make as the sales grow position that's in improvement I'll individual contributions for a and streamline throughput changes success, what got has group long-term our new process. side and already we a want. to here, for We've we a incentivize a definitely side, equipment profile some margin continuous on truly us background, sales team kind the started our in position individual it's an metals business generation support of board. development has best-in-class been side, to the for we SOP well to truly personnel and then implementing from to from want, have right our and revenue truly background,

Unidentified Analyst

was $X that I be there Would sense billion recently extension would anticipate to of of and make Now, trickle states; some That Drinking I billion was an $XX to a $X Synalloy? eventually, overtime, saw year. would billion like that given you Okay. down Act, to that the Water it think Safe that

Christopher Hutter

I thing on and aging overlapped Ecolab pipe Same heavily have am worked you lines at From side not to our America side, truly business there at put call, at that going and are what want along absolutely look well as in we I safe are has many water you even our R&D water a And a encapsulate the expand Nalco. market the water pipe or be those water with in one that I'll hopefully - people online to a at R&D the drinking you world, municipal when water. everyone I've treatment. opportunities and wants goes from side, pipe product our that levels. I side; chemical think believer and to is from think efforts. our side; municipal patented look that us I side opportunity in thing the think treatment to firm that for multiple infrastructure, share. is and fresh new maybe that facilities see treatment at produce chemicals known something looking should business, production

Unidentified Analyst

Okay, good. Makes sense.

customers a in a [ph] know that already noticed furniture a is be is participating And I I stainless-steel company; to developing Now, will in your one of ASTI supplier they growth? line. that

Christopher Hutter

have sell is. can as of that There as buy much Can or produce and equipment business, customer us? we is that we customer to sales it to the it's we deliver know it - any And, on I positive lack it to to We're a at wants margin but produce which cost Can do no tube that don't can specifically time? pipe it? delivers do going to stainless it. we opportunity we

team basics incentive let's us business have sales truly what So, and incentive actually to way, order, year again, SOPs the there, right, have is sure business product is can promised. for this - structured we identify and that going plus deliver out win. our right want time, let's make to just we in market is then we to The we the priced back on let's the sure get make product deliver our

Unidentified Analyst

Sure.

the tube noticed to could your Or want have a I Midwest, new operational solar guess? a is desire answer, to was in mid-XXXX. I last company building the I - produce? answered kind tube, like that big produce of Okay. and is that mill an does or torque by think Manufacturing steel has that galvanized in they Synalloy Kentucky anything

Christopher Hutter

our of and business. our tube and heavy side. to mean, specialty the we're we're side, - again, though, made - margin our our is going wall a galvanized think galvanized I majority of we tube focused very narrow our although produce it's I have stainless, business, a pipe On Yes. niche in

much be make? make And can is So where the fast make it? money? to we how going how do we focus we can most And the

Unidentified Analyst

Got it.

progressing? that strengthened mentioned be is call sales that the earnings in was chemicals. team Okay. How it would Last

Christopher Hutter

That's great question. a

business, well can believe I long-term I'm definitely tremendous I've chemicals know don't chemicals. a right metals do business. everybody, But in is mentioned think now strategic the As created in only the so effort there the involved as know, there be I also I can deeply as value after more aggressively the assess to it. the on tremendous plan brands, is find to not there; how a we'll way best And opportunity sales to but that we capitalize position opportunity. get

Unidentified Analyst

One last Good. question.

mentioned would investors, a that the So last half year? call be would the there be kind maybe earnings you perhaps during maybe something year roadshow put going that to of a plan Is second of to to that of reintroduce that's and out. Synalloy second this still strategic half happen,

Christopher Hutter

board need it the have stakeholders. we'll in with at long-term we where late we're - very mean, strategic half, before to as pretty right would we of think I that, operate sharing we're second focus I say don't we with laying feel to ensuring better everything team going be than be And and to we XXX% I Yes. half. have Again, out short I model. right growth the can it'd to running, comfortable efficiently start, mean, will - have then, is my our to now. management everyone we and the but and and feel be goals, all be as at back-to-basics that possible. now second And want I our once if in on execute we

Unidentified Analyst

for good. you thank Okay, the work. very good Well,

Christopher Hutter

it. Thank Thanks, Yes. David. Appreciate you.

Unidentified Analyst

Take care.

Christopher Hutter

too. You

Operator

Hutter like turn this I question-and-answer the now session. back our would to closing time, remarks. to for this concludes call Mr. At

Christopher Hutter

everyone, I night. Thank results interest great Yes. report Thank Again, the everyone in forward again when appreciate you, And time quarter Alexander. we in and our and to Synalloy. you. second your effort everyone, a speaking XXXX Look August. have with

Operator

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

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

Ascent Industries (ACNT) 11 May 212021 Q1 Earnings call transcript