SYNL - Earnings call transcript Q3 2021

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Operator

00:04 Good afternoon, everyone, and thank you for participating in today's conference call to discuss Synalloy’s Financial Results for the Third Quarter Ended September thirty twenty twenty one.

Joining us today are Synalloy’s Chairman of the Board, Ben Rosenzweig; Interim President and CEO, Chris Hutter; CFO, Aaron Tam, at the company's outside Investor Relations Adviser, Cody Cree.

Following their remarks, we'll open the call for your questions. 00:38 Before we go further, I would like to turn the call over to Mr. Cree as he reads the company's Safe Harbor statements within the meaning of the Private Securities Litigation Reform Act of nineteen ninety five that provides important cautions regarding forward looking statements. ahead. go please Cody,

Cody Cree

Good call thank quarter to results. one Jeff. joining twenty all our financial conference discuss afternoon, Thanks, you and for twenty XX:XX Synalloy’s third

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

Ben Rosenzweig

XX:XX Thank Good Cody. afternoon. you,

the to that and few XX:XX enabled of return platform. had I conviction of our characteristics growth on offering It It the position create pause date executive Synalloy We business to team XX:XX our attractive us in backdrop Chris to last Since amount to ideal profitable market tremendous past jump to and beginning to will will always selling that to a take processes over desire in past as us that conditions industry with across extended core favorable we've improve it's of capabilities in firmly discuss our believe of new changing term acquired help talent. we've entire few changes as we and on just multiple we've do hustle with one strides against XX:XX quarters. I'd and and willing profitable goals. we but platforms us been our make it's This us size ahead continue get the on for linear XX:XX to more to expertise. be of afford thing continued chemicals credit our won't The of additional actions businesses I leaders I leadership know could bolster full relevant to value DanChem, accomplished leading the over of change beginning which stakeholders. our time. Chemicals the bringing is the our of to company from manufacturer important the implement this Chemicals, said stagnant with economic dramatically think a growth. moment short like long opportunities journey able taken self-congratulations, the highlight our is investment solidifying to cross a the course of from to we've you'll to great need has we're never well. order strategic DanChem the organization quite but of easy, oversight detail. have can't the compliment a the capture is a business all months, Over And recent see specialty produced we're our the XX:XX see be example that examine ensure ago, opportunities, an amount our period quickly in acquisition year to been quarters and is make we to and consecutive for I growth appointed across an innovate. we experience a has liquidity facility, new and of to believe

capabilities environment, our term estimated entirely demonstrated one DanChem long team a EBITDA Additionally, of production times for an knowledge DanChem large all brings. is in is times U.S combination, especially three credit for We of state chemicals in net DanChem’s created LTM form The the was this EBITDA, track approximately market purchase manufacturers Virginia. brings we’ve expansion. six with XX:XX of over pro combination twenty one additional record twenty the Southern I specialty employees, twenty valuation to on funded the management the one largest in that existing purchased two our campus and the contract a art on earnings. bringing XX:XX inclusive facility, continued primed over this which now growth leverage of a hundred basis, this and With and plants considering through compelling believe just

to excited feel thresholds, efficiencies in and developing we drive look in remain As in and that ability to continue production out initiatives by team's us invigorated I continue to to through our positioning. processes, move capital and year, the full be I our acquisition. deploying organically commercial growth we'll our both forward, while XX:XX confident in opportunity sits to finish strategic internal November Going our expanding that our and front through first of very today. meet opportunistic return

XX:XX the I'll to do established and I'd later to success, be Chris, I Although accomplish. goals, over for we've strong we'll Now, Aaron, forward to take order to believe in look to on and we questions. what any still pass and available to foundation to our long reach Chris you. have more firmly over much a like ambitious term I call

Chris Hutter

call. joining year and quarter spent Synalloy made progress and thank of strong today's the I we've another XX:XX results. all to CEO, President Thanks, one with joined I Ben, and including date, I'm Interim as pleased first for about you since

we just our in only momentum segments scratch experienced have third out. beginning of its this with down. During and pricing execute environment As strong believe quarter, we're continue half the our miss want surface maintained strategies to capable with operational While, committed our ongoing Customer XX:XX the the our us the last demand. XX:XX aligned of schedule to efficiencies. to of continuing is teams from thank strength first that still not customer we success, laid the on year on throughputs business refinement the across the to while organization across both slowing profitable ensure is drive involved I point reach I remain of. call, growth everyone our we organization discussed this demand to to helping production

our a the metrics to and to margin Chief served expectations of level experience high to timely the as this having Before as Aerospace Northstar functional across of our and throughout positive EBITDA was culture assemblies we relationships CFO fashion of And establishing as August, year leading processes based our discipline, Now the quarter, instrumental over recently, where twenty of work significant and all substantial wanted and year. global had change and that or meet impact appointed Getting a exceeds net XX:XX environment was in started of is out increases We review Aaron deep I technical components Financial corporate margin. analysis, this believe door our market. led Aaron we roles brings his capital to accounting, cash from product on We and Aaron segment, into quarter, of knowledge out processes. the organizational a dive well Starting experience independent XX:XX we improving income, in adjusted firmly the development EBITDA valuable in metals, Tam the financial Most to manufacturer executive XX:XX adjusted in experienced to executive an of sequential finance, to enhancement conversion provide strategy. on made segment. the already of in industry, In he work a and finance I'm reputation to And going quality CFO pricing a industries. Aerospace, which critical continue operational variety to the we call component across over our important that as year each meets has making each to will this our team. segment of in a in years our to asset customer Synalloy. a Officer. demand with an aspects benefit impact organization. be we planning half he continued first

our engaged solution operations As improving in financial heavily we our to employees order be efficiency on premier value the objectives vision to high for quality and stated provider while our have been how members and the creating quarter, this to we time last optimize supported. team on need and through experience, our products, for focused be is further produce are like stakeholders. while customer best safely class and to following they achieve feel delivery, performance. In all quality mission, In segment XX:XX safety, to

next an habits our with to from been delivering safety that only a working stay along is taking with that level we with the Making delivered increased alert keep amazing culture keeping employees further by flagship this safety around Safestart acceptance a are free. more knowledge on One building damage to is training visible program not delivering deliveries The to an to mention injuries team late are need their backlog. unmatched item we techniques embarked of is customers statistic with positioned being XX:XX inherited I We're To that we practical demand to are remains We strong people commitment on job the team. on at world in leading we justified forward, that there's company and Safestar, program throughout our our tough. workday. the I'm workplaces approach of Looking second foremost, results well improve spec XX:XX of we Nice also we culture position. a that and and proud to that capitalize First and navigated, a the employees of has an journey, XX:XX engaging share. delivery the to believe commitment teams the Not and our greater was acceptable currently useful eighty team truly our each supply already safety constraints, safety safety at for September This is to safety year. this other employees. reinforcing you chain product our enhance time is and but percent stick we've built between organizations help provides have safe. is has When them on When partnership January the our and leading by safe. end, an four already our one has fewer to productivity. the time, the product to plant. this factor hundred engagement, demand. phase and by But in

mitigate opportunities on control commodity one competitive flex to we pricing protect For and margins. or building could particular, Section-XXX operational we focused our could headwinds be are lifted, in next could levels. that be year, down to any are markets. remain our if XX:XX us In end competing of pillars in laser influx products impact are and large from tariffs efficiency term a of capital. it pricing emerge will ability the are is to our control, our suppliers international areas current our that allow Though our longer there affecting tightly XX:XX to experience micro All events monitoring up both power that levers that environment, demonstrate we Provided also Congress businesses. constraints XX:XX there that and To our achieve will horizon we critical on being in help supply positive are customers. have businesses we across infrastructure world, issues, to about and can the passed. including we build to be on a optimistic continue that that just operational chain excellence that managing the growth, believe profitable labor the our while working impact could said, One being these

could expand plant We meaningful and lot pipe their and looking to customers businesses. their are our build have it operations next bill, uptick infrastructure the or of a a to with be that tube

footprint the and XX:XX excellent predict has impact, or to position a our commercial an expanding in it its not certainly I'm something team spending While, try demonstrating quantify proposition. strategy of business of Overall, are the development is we closely timing our on our front to monitoring. value

our and growth end presence believe being but chemicals. to in this not of for remain the users, this strongly overall going with segment, are with confident laid the have in too. part exceptional for business. as only we I'm Our We prospects customer turn growth we term foundation base is and XX:XX noticed distributor seeing our to opportunities, Now, over longer

As we trucking in product segment our help thirty was discussed constraints, prior period. growth across increases full sales shipment call, two implemented delays of The shortages. challenges we to board year related labor offset this be compared of price these operational and on last can net the price to percent experiencing, including effect seen increases the segment's the

realize and contract have development has Virginia, We chemicals and our segment product new expectations our enough industry. EBITDA not the capabilities continuing margin, of still approach production one was which the adjusted in the largest XX:XX our our within despite our -- chemicals was manufacturer a it chemical was and ability to horizontal our applications, the makes However, for five better it overcome to EBITDA caused embedded forward contract specialty challenges of quarter chemical the reactors manufacturers One will larger are fifty Synalloy acre fleet the end service we these take subsequent XX:XX made three customers. full to in while growing in in leading adjusted the Chemicals. This of campus DanChem, to U.S. boards acquisition to is value step a the Synalloy proactive higher acquisition last dollars. deepening impact facilities serve we into and entrants markets existing a accelerate With specialty believe that provide major

close our approximately the recurring as chemicals chemical process chip for exceptional strategic stable eighteen notable DanChem look perspective, entire industry's As record term our dollars which that a of and twenty segment to some We of of expect stable one, XX:XX at DanChem from brings sales to revenue. high in long this we rapidly developing margin what acquisition excellence. brings EBITDA blue and percent rate a is companies XX:XX our be proven and capabilities leading we development operational million could track of twenty commercialization. believe of with profile adjusted margin an improve thirty base generate consists our acquisition team we Additionally, with a a business products approximate engineering in net customer an of

sealants much best for applications access that [indiscernible], industrial exposure the previously investment and long and inherit in have production plants additives much to. a broader spectrum DanChem, for the relationships assets, and institutional and case, segment, I be markets a current comprised across Additionally, our industries site continued will target and acquisition, chemistries. agricultural reactors to household, adhesive of didn't XX:XX acreage providing meaningful with mentioned Combining drastically we'll rail additional larger customers of customer earlier that now to horizontal able accelerate have the expansion. coatings, term plans and offer class this we'll we this and including we differentiated products presence in end had With we HII,

Synalloy have look large of believe still As to already along begun from our DanChem to I in we customers our we and Aaron, XX:XX XX:XX We now our support shareholder our has thanking close hardworking with making this XX:XX we're we're of of a our all floor I'd we over it that establishing. company combined the chemistries the far growth. forward look engineering organization, profitable being the the journey. dedicated progress for by foundation to firmly stakeholders and the critical platform at picture, partners with CFO, be. while team Tam. from want to working continued believe onboarding in I and broader like But recognizing I the and pleased driving continue employees is manufacturing performing to as turn the are very leader potential all leveraging to new Aaron the am yours. and

Aaron Tam

my into you, call for joining been earnings By term the in to a read months, Having Now I've Chris, to today strengths the jump organization our results. value. be few an weaknesses. let's margin been leadership drive the situations I on entire first in forward in get company's good understand the similar I you the career, our Thank as absolute good build able throughout all in have and past It's utmost XX:XX our and seat serving and confidence better plans everyone. long helping to to roles sales my pleasure growth and CFO. in to XX:XX consistent look

eighty sales The both two Gross million period. four to across, dollars dollars and nine compared strong one volumes. point million loss ago forty one year of year million per diluted point to to a five in seven fifty six earnings twenty two point loss diluted million five dollars or quarter eighteen dollars to eight for dollars the compared driving gross period. share than twenty. efficiencies three The both and attributable that twenty percent as third demand, increased customer outsized robust twenty XX:XX was margin doubled year operational considerably attributable the Third pricing customer margin to achieved profit accompany improvement to prior was quarter, a the along in pricing in dollars point quarter increased with nine the or ten share the commodity percent to of result point to dollars net power gross point Net eight quarter dollars metals profit zero million third of the point the twenty from growth and elevated profit per percent prior demand income one XX:XX more while five six compared chemical segments. increase gross million the to increased significantly in eight in order point

Excluding non sixty of over a twenty increased seven period. third in million year to the margin one charge adjusted EBITDA million thirty eight million our Lastly, fifty ten XX:XX dollars increased cash one, thirty total dollars our prior point Q&A. million to dollars forty to zero the seventeen dollars at in quarter two the third and point eight with one twenty twenty facility of prior compared twenty as fourteen percent, compared that, period. twenty. goodwill twenty, twenty impairment also nine the December million XX:XX dollars I'll twenty was six December to both borrowing quarter million capacity credit over to for September income point With points of Jeff? XX:XX net one [indiscernible] twenty basis third under one and in to ten-fold operator the eleven Adjusted point nearly point position EBITDA fourteen thirty twenty revolving point quarter compared four dollars it now million the dollars hundred debt improved back turn forty at year one

Operator

[Sigfreud] XX:XX question Instructions] Thank the first comes [Operator line Your you, sir. from (ph). of David

line Your open. is

Unidentified Analyst

Hey. fantastic Ben quarter. a XX:XX was Congratulations [indiscernible] for

Ben Rosenzweig

XX:XX David. Thanks,

Unidentified Analyst

acquisition happens by that So, the chemical Is expectation the company. the you that third. that plan increased thinking? to as of you've in the kind become able revenue stable with more the a XX:XX the to allow Is segment will be earnings entire

Ben Rosenzweig

tends be within we less the see and commodity significant XX:XX I think ability pricing growth environments. to segment driven from chemical margin that

portfolio. as growth we balance chemical I the in longer our out So, segment see projection a term

Unidentified Analyst

XX:XX Got it.

percent the DanChem eighteen that mentioned margin. was results, EBITDA it operating adjusted So

eleven percent. So this chemicals Synalloy -- was quarter, about chemicals

for their that of percent happen can it to would for that's to work couple get to something a eighteen long that and integrate quarters? together along level, margins as up take of kind how EBITDA So them

Ben Rosenzweig

opportunities on uncovered accelerated to be through margin businesses investment chemicals that's and think is we're we capabilities leverage at happen have, I on I we that our XX:XX have for to to DanChem seen down share and there some to say make flows we're engineering earnings? knowledge. going and would and have resources How working to existing the and going P&L but enhancement. have already that it

I a it greenfield, ramp So margin a you'll versus achievement trying us from accelerated to pickup. of in do think some see

Unidentified Analyst

acres to something can that able fifty that sales The be by hear. developed? of Good owned is too? pull leaseback that that a going XX:XX out to cash Or Synalloy, now that's you're some like be five where is to

Ben Rosenzweig

you a the held not you versus of you I I'm have expanding the where -- landlord. and asset assets leasebacks. being sale XX:XX gives operational much fan flexibility a have needed significant owning owning investments hostage as say, more capital would to flexibility

gives believe I own will capital the So, own you we it that out DanChem a balance stack, business asset. if down Obviously, the flexibility you but road model to continue to has the capital third forward. to parties with unique OEMs partnering infrastructure to model and have the been in certain very to had plan invested their going has we capital the with replicate facility from create asset

Unidentified Analyst

Okay. Good XX:XX to hear.

in at steel point and some begin to compress. margins the to to begin alluded may maybe You fall comments may that prices

what you've you to to create? in mitigate mind risk have So the able been that operational that beyond do efficiencies

Ben Rosenzweig

transform XX:XX inventory mill The structure are really throughput is and can inventory. product being primarily based we site built distribute XX:XX to a welded long to business margin impact a a you is customer what see from inventory the in of producing your either create the the business and orders. to on from mill tube you where position. goal business on you create mill The have primarily short Historically, think on and was true position caused our metals or pipe

to Our goal is the commodity risk. eliminate order price to to produce

our have you margins. in if take out, consistent back margins, gross If relatively look gross you time, we the fluctuations

a the business of stocking to going significant the commodity the versus transforming effect producer pricing we're environment. as to it's a distributor, in lessen So swings

Unidentified Analyst

or – Got is Is XX:XX the backs be [indiscernible] determined sense. European It recent of -- make something affect roll that aluminum it. how that to will so Synalloy? The

Ben Rosenzweig

you material, nothing don't from related and tons see meaningful really end impact really tariffs and wasn't when and our directly of not million material in markets. wall it's a in, material any XX:XX we much look there's coming stainless heavy it amount to coming think Yes, at I those -- three

Unidentified Analyst

it. Got XX:XX

Okay. One last question.

the off. think close outs two of of idea four up I you'll math the be I earn going freeing January if million be liability Any did is that to third one to doing And a with drops correctly, you're cash? dollars extra about So, twenty quarter. twenty your what

Ben Rosenzweig

XX:XX I Aaron, would pay down I you concur. debt. would think

Aaron Tam

XX:XX Yes. That's plan. the

Unidentified Analyst

the And Very good. Okay. excellent quarter. [indiscernible] XX:XX way, by last

job good Thank So guys. you.

Ben Rosenzweig

David. Thanks, hear to XX:XX Good from you.

Operator

line from question Mike Your SGF [Operator Hughes XX:XX from Capital. comes the next of Instructions]

is line open. Your

Mike Hughes

XX:XX Thanks DanChem entity taking on the for correct? corporate my that Couple the One, questions. acquisition. the you assets. Is not acquired

Ben Rosenzweig

XX:XX We acquired the the with along correct? entity, assets

Mike Hughes

Okay. XX:XX

So think business are there any liabilities legacy assumed? about for that you've environmental that to

Ben Rosenzweig

XX:XX up. had full and Yes, unexpected we came diligence done on the environmental liabilities side

Mike Hughes

XX:XX business Okay. this performing And then it seems is well year. very like that

wondering Just is. how that sustainable

of what So margins years? the twenty for at the of was And twenty? nineteen at and like kind look revenue those did level DanChem in what twenty

Ben Rosenzweig

know. don't I XX:XX

Chris Hutter

XX:XX I in been acquisition has It's equity been DanChem growth business private mean, it's leadership turn to as around been owned growing. I expect. the and would firm by think story. I a you brought No, they mean, that post

that sustainable feel it's growth so the it believe margin processes business. that three do has is it we investments sustainable. has over from So that in but we and made story growing a both past perspective, a years, been And with line they've a confident top XX:XX from been the it the

Mike Hughes

about down and to then caller you last generating the had debt. cash be the Okay. that you’ll excess paying flow can XX:XX asked be And indicated

appetite the an the for side? you do -- have still chemical or metal M&A, either side on what additional So

Chris Hutter

Yes, XX:XX we do.

Ben Rosenzweig

XX:XX absolutely. Yes,

Mike Hughes

market pretty side? have good XX:XX us think I on And metal share there the preference, you one

Chris Hutter

We're XX:XX optimistic? to be going

Ben Rosenzweig

the I same XX:XX thing. say just

Mike Hughes

Is pipeline? active there XX:XX an Okay.

Ben Rosenzweig

Yes. XX:XX

Mike Hughes

quarter. leverage? take this would And leverage by then how to? XX:XX you mean how exceptional think that, And is. what I do I'm And an where not seems like Okay. sure about sustainable it you

the leverage or you you the this along profile, about leverage current of maybe quarter just with speak the to haircut quarter So would the question? when think sustainability

Ben Rosenzweig

portions Well, leverage expect term, in the a maintaining XX:XX of -- prudent flow start now, near the earnings, have Chris it's term the its we'll prudent dynamic do near And we cost and predominantly then takes we debt what of does given expectations right a as well But with utilize that account XX:XX while because that still as to a that of as talk number rather be I you it target can't leverage. our the I'll I more cash the certain give take specific cyclicality -- into about level can sustainability. have, we're would of the to what longer term visibility do do. availability some level estimation. said, first we short and So, cyclical cash we feel place and continue nature the term to And not some earnings of going comment cash. confident into to earnings and we're quarter do ended a of on of that generate flow our our pretty business cash Aaron about you of might to down going We XX:XX projections the our to as pay we that's debt. good with, going know, that be Chris the use that is told

and be the meaningfully of confronted of in maintaining cost. should we that its be our will low level leverage, using a we we that zone, we confident larger use specific outside equity opportunities that of the when if with comfort exceeds pretty feel term leverage you capital utilizing consider debt will So, near our but determine

Mike Hughes

– then And Okay. XX:XX

Chris Hutter

on sustaining touch call, we you when to earnings there is your in look at quarter. the of And underperformance saw earnings chemicals, your a this what road that I'll a think question, of I XX:XX similar earnings, map Synalloy level to

Mike Hughes

XX:XX Okay, great.

roughly up couple that? by dollars of The hundred detailed a fifty was speak to Can you and corporate just sequentially. just questions expense six now. thousand So

Aaron Tam

biggest that variance. some Yes, executives, that Chris, can some the to driver had prior was We speak relating that. I expenses severance XX:XX

Mike Hughes

the flow provision large the why backed XX:XX that's assume was cash then And nine statement the that's And guess for million quarter one metals inventory losses you the this pretty for earnings Okay. look point on was for at dollars actually I meaningful? if deemed division so I but quarter. in quarter? it the

Ben Rosenzweig

based to that's anecdotally pipe inventory order. scrapping That's think produced to just speak on to pipe getting XX:XX pipe old a the said, customer methodology of I – that, I basically produce versus produce

Mike Hughes

Okay. with agree me. would [Multiple Speaker] XX:XX you Then

Ben Rosenzweig

floor on aged and weighed it did No, hearing sitting significantly earnings -- is unsalable. it XX:XX was material on which

Mike Hughes

Okay. XX:XX

everything So fourth Is that know should right that with repeat not fair now? quarter. the in you

Ben Rosenzweig

a statement. fair That's XX:XX

Mike Hughes

than I XX:XX your concept a sitting Okay. producer inventory, on but competitive distributor, what if of delivery a largely a a lot the you'd depends just the guess becoming then are versus disadvantage to of And a great stocking is going be idea, it competitors be I are they're do quicker lot to times right? Because think willing yours.

kind are my just competitive thoughts of just maybe the on dynamic speak So to wrong? and it

Ben Rosenzweig

dynamic that's compete distributors so happens large what to users the very OEMs you especially I want XX:XX be One other We is is and down stocking competitive stocking build with our or is in [indiscernible] and producing distributor up, users. a a pipe list. we stocking primarily and question. inventory The good two end No, competitive mean, a or the that Synalloy don't distributors. the -- -- to is when to sell Bristol, whether AFTI -- need, be to that's what an you supposed producing if tube, you're go general,

go to viewed is inventory your happens if to very of don't weak So, master be our our well, throughput start and stocking a need. And then is, customer want up, competitor of you built to their we pricing. off and basically as that give you XX:XX have what a We through poor plants distributors customer. inventory

Mike Hughes

sense. is almost interim year the makes this That been and Chris one the at Okay. now Ben. guess he's question. XX:XX has just a company last CEO. for And then still XX:XX I for

issue? that address just you can So

Ben Rosenzweig

XX:XX discussed with the mean, that frequently the I team the we think happy overall we're of very Obviously, at level. Board it's performance functioning. Yes. and how I length at something that's

time. that something the that's Board so is considering real And in

Mike Hughes

Thank you Okay. XX:XX very much.

Operator

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

Chris Hutter

listening Jeff. look we and again you, we'd thank for a today's and Have to results. Thank to with when call full XX:XX Again, one Thanks you everyone report to like again. great twenty we forward fourth twenty day. speaking our year quarter

Operator

does our XX:XX Ladies concludes and teleconference. this gentlemen,

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

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