Luxfer Holdings (LXFR) Q1 2025 Earnings Call April 30, 2025 08:30 AM ET Company Participants Kevin Grant - Vice President of Investor Relations & Business DevelopmentAndy Butcher - Chief Executive OfficerSteve Webster - CFO Conference Call Participants Steve Ferazani - Analyst Operator Good morning. My name is Madison, and I will be your conference operator today. Welcome to Luxfer's First Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute. After the speakers' prepared r ...

Financial Data and Key Metrics Changes - Adjusted earnings per share increased to $0.23 from $0.20 year-over-year, with net debt maintained at approximately $42 million, reflecting a leverage ratio of 0.7x [5][9] - Sales revenues grew by 8.9% year-over-year to $90.5 million, with adjusted EBITDA rising 9.7% to $11.3 million, resulting in a 12.5% margin [9][10] - Cash generated from operations was $5.1 million, an increase of $1.5 million compared to the previous year [10] Business Line Data and Key Metrics Changes - The Electron segment saw sales rise to $49.4 million, up 31% from $37.7 million a year ago, with adjusted EBITDA increasing to $8.7 million and an EBITDA margin of 17.6% [11][12] - Gas cylinders revenue decreased by 9% to $41.1 million, with adjusted EBITDA at $2.6 million, reflecting a margin of 6.3% [15][16] - Specialty Industrial posted a notable 25% increase in revenue, driven by electronic and calibration gas applications [16] Market Data and Key Metrics Changes - Overall order books increased by 12%, indicating strong demand across various sectors, particularly in defense and aerospace [6][8] - Demand for flameless ration heaters and meals ready to eat products remained elevated, contributing to the positive outlook for the defense sector [28] Company Strategy and Development Direction - The planned divestiture of the Graphic Arts business is on track to close by mid-2025, allowing the company to focus on higher-margin growth opportunities [6][22] - The company is expanding its international gas solutions portfolio, highlighted by securing an order for its first bulk gas transportation system in Europe [6][19] - The Luxfer business system emphasizes innovation and efficiency, with a focus on customer needs and profitable growth [20][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic risks, including potential tariffs and supply chain issues [8][19] - The company reaffirmed its full-year 2025 guidance, expecting flat revenue growth and adjusted diluted earnings per share in the range of $0.95 to $1.05 [17][18] - Management remains attentive to foreign exchange volatility, which could impact earnings, and is prepared to adjust strategies accordingly [18] Other Important Information - The company is maintaining a share repurchase program with authorization for up to $10 million for opportunistic buybacks [31][32] - Capital expenditures are expected to increase to a range of $12 million to $15 million for the year, reflecting growth opportunities [32] Q&A Session Summary Question: Any special factors in the quarter and guidance outlook - Management noted strong performance in the defense market, particularly in sales of flameless ration heaters and UGRE products, contributing to a positive outlook for 2025 [27][28] Question: Strength in Specialty Industrials - The increase in Specialty Industrial gas cylinders is attributed to long-term trends in high-purity gases for electronics applications, indicating a growing market [29][30] Question: Capital allocation and buybacks - The company is considering opportunistic buybacks and plans to increase capital expenditures this year, with a focus on growth opportunities [31][32][33] Question: Sustainability of strong defense business performance - Management highlighted that the strong performance is driven by both the ramp-up of UGRE and elevated military stocking levels, indicating a positive trend [34]

First Quarter 2025 A p r i l 3 0 , 2 0 2 5 FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Examples of such forward-looking statements include but are not limited to: (i) statements regarding the Company's results of operations and financial condition; (ii) statements of plans, objectives or goals of the Company or its mana ...

Luxfer (LXFR) came out with quarterly earnings of $0.23 per share, beating the Zacks Consensus Estimate of $0.17 per share. This compares to earnings of $0.20 per share a year ago. These figures are adjusted for non- recurring items. This quarterly report represents an earnings surprise of 35.29%. A quarter ago, it was expected that this materials technology company specializing in aluminum, magnesium and zirconium would post earnings of $0.22 per share when it actually produced earnings of $0.29, deliverin ...

This presentation contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Examples of such forward-looking statements include but are not limited to: (i) statements regarding the Company's results of operations and financial condition; (ii) statements of plans, objectives or goals of the Company or its management, including those related to financing, products, or services; ( ...

Financial Data and Key Metrics Changes - In Q4 2024, sales were $96 million with a gross profit of $22.5 million, yielding a gross margin of 23.4% [14][76] - Adjusted EBITDA for Q4 was $13.8 million, representing a margin of 14.4%, and adjusted EPS rose to $0.29, up 61% year over year [14][76] - For the full year 2024, sales totaled $362.3 million with adjusted EBITDA of $49.8 million at a 13.7% margin [16][78] - Free cash flow reached $47.7 million, benefiting from lower cash tax and working capital management [16][78] Business Line Data and Key Metrics Changes - The Electron segment saw sales rise 31.6% year over year to $47.5 million, driven by strong defense demand [17][79] - Adjusted EBITDA for Electron increased to $9.4 million, representing a 19.8% margin, marking the fourth consecutive quarter of margin expansion [19][81] - Gas Cylinders reported sales of $48.5 million, down about 6% year over year but up 14% from Q3, with adjusted EBITDA at $4.4 million [21][83] Market Data and Key Metrics Changes - Defense demand in Electron was a significant driver of revenue growth, while alternative fuel volumes in gas cylinders faced headwinds [15][76] - The Class eight truck market is expected to decline in 2025, impacting CNG cylinder sales, which are projected to be light in early 2025 [106][108] Company Strategy and Development Direction - The company is focused on selling its graphic arts business to streamline its portfolio and concentrate on higher margin opportunities, with completion expected in the first half of 2025 [8][71] - Investments in R&D and operational efficiencies are prioritized to address potential market headwinds and maintain long-term success [12][73] - The company is advancing clean energy innovation, particularly in hydrogen transportation solutions, with new products gaining certifications for commercialization [34][94] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic uncertainties while maintaining a focus on operational efficiency and innovation [11][88] - The outlook for 2025 anticipates relatively unchanged business performance with some near-term headwinds, particularly in clean energy [28][90] - Despite challenges, core business areas such as defense applications and SCBA remain strong contributors to growth [30][91] Other Important Information - The company reduced net debt to $41 million, marking a reduction of $28.9 million in 2024 [14][76] - The company expects free cash flow of $20 million to $25 million in 2025, reflecting the absence of one-time benefits from 2024 [87][86] Q&A Session Summary Question: Financial impact of the pull forward in Q4 - The quantified pull forwards in Q4 amounted to $3.4 million, primarily from defense-related orders [44][104] Question: Development of the CNG market - The CNG market in North America is expected to be competitive and lumpy, with initial trials by fleet operators [106][108] Question: Update on the graphic arts sale - The sale is on track for completion in the first half of 2025, with an exclusive agreement with Avaya [52][111] Question: Tariff impact on guidance - The impact of tariffs is expected to be minimal, with potential sales fluctuations of $20 to $25 million [54][114] Question: Details on elevated CapEx in 2025 - CapEx is projected to be 30% to 40% higher in 2025, focusing on growth, cost reduction, and infrastructure projects [56][116]

Core Viewpoint - Luxfer (LXFR) reported quarterly earnings of $0.29 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, and showing significant growth from $0.09 per share a year ago [1][2]. Financial Performance - The earnings surprise for the quarter was 31.82%, with the company previously expected to earn $0.18 per share but actually earning $0.28, resulting in a surprise of 55.56% [2]. - Luxfer's revenues for the quarter ended December 2024 were $103.4 million, surpassing the Zacks Consensus Estimate by 15.53%, compared to $95.9 million in the same quarter last year [3]. - Over the last four quarters, Luxfer has exceeded consensus EPS estimates three times and has also topped consensus revenue estimates three times [2][3]. Stock Performance - Since the beginning of the year, Luxfer shares have increased by approximately 6.6%, outperforming the S&P 500, which gained 1.7% [4]. - The immediate price movement of the stock will largely depend on management's commentary during the earnings call [4]. Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.21 on revenues of $93 million, and for the current fiscal year, it is $1.05 on revenues of $391 million [8]. - The estimate revisions trend for Luxfer is mixed, resulting in a Zacks Rank 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [7]. Industry Context - The Manufacturing - General Industrial industry, to which Luxfer belongs, is currently ranked in the bottom 45% of over 250 Zacks industries, suggesting potential challenges ahead [9]. - The performance of Luxfer's stock may be influenced by the overall outlook for the industry [9].

Financial Performance - Consolidated net sales for 2024 were $391.9 million, a decrease of 3.2% from $405.0 million in 2023[179]. - Gross profit increased to $85.7 million in 2024, representing a gross margin of 21.9%, up from 18.9% in 2023, primarily due to contract renegotiation and manufacturing efficiencies[179][181]. - SG&A expenses were $48.1 million in 2024, slightly down by 1.2% from $48.7 million in 2023, with SG&A as a percentage of sales increasing by 0.3 percentage points[179][182]. - Research and development costs remained flat at $4.4 million in 2024, maintaining a 1.1% share of net sales[179][183]. - Restructuring charges in 2024 totaled $4.7 million, influenced by decreased demand in several product lines, including zirconium products and chemical response kits[179][184]. - Net income from continuing operations was $18.3 million in 2024, a significant recovery from a loss of $2.6 million in 2023[179]. - The effective tax rate for 2024 was 30.9%, a decrease from 73.2% in 2023[179]. - Acquisition and disposal costs in 2024 amounted to $12.2 million related to the divestiture of the Graphic Arts segment[179][188]. - Other income of $7.7 million in 2024 was primarily from the recovery of legal costs related to a previous case, with no such income reported in 2023[179][189]. - Adjusted net income from continuing operations for 2024 was $30.9 million, significantly up from $16.4 million in 2023, representing an increase of 88.4%[198]. - The adjusted EBITDA for 2024 was $54.6 million, compared to $38.8 million in 2023, reflecting a growth of 40.7%[198]. - Adjusted diluted earnings per share for 2024 was $1.14, compared to $0.61 in 2023, marking an increase of 86.9%[197]. - The adjusted EBITA for 2024 was $45.2 million, up from $26.9 million in 2023, indicating a growth of 67.5%[198]. Segment Performance - Gas Cylinders segment net sales for 2024 were $186.3 million, a slight decrease of 0.1% from $186.4 million in 2023, but an increase of 1.5% from $183.7 million in 2022[202][203]. - The segment adjusted EBITDA for Gas Cylinders in 2024 was $18.0 million, compared to $12.8 million in 2023, showing an increase of 40.6%[198]. - Adjusted EBITA for Gas Cylinders increased by 15.9% to $14.6 million in 2024, compared to $12.6 million in 2023, and up 57.5% from $8.0 million in 2022[202]. - Elektron segment net sales decreased by 5.9% to $176.0 million in 2024 from $187.1 million in 2023, and down 6.9% from $201.0 million in 2022[205]. - Adjusted EBITA for Elektron increased by 61.1% to $33.5 million in 2024, compared to $20.8 million in 2023, but decreased by 43.2% from $36.6 million in 2022[205]. - Adjusted EBITDA for Elektron rose by 48.5% to $39.5 million in 2024, compared to $26.6 million in 2023, and decreased by 37.4% from $42.5 million in 2022[205]. - Graphic Arts segment net sales fell by 6.0% to $29.6 million in 2024 from $31.5 million in 2023, and down 18.6% from $38.7 million in 2022[208]. Cash Flow and Financing - Cash provided by operating activities was $51.1 million in 2024, significantly up from $26.2 million in 2023, including $5.0 million spent on restructuring activities[217]. - Capital expenditures in 2024 were $10.3 million, an increase from $9.4 million in 2023, with anticipated expenditures for 2025 projected between $12 million and $15 million[219]. - Net cash used for financing activities in 2024 was $44.0 million, compared to $27.5 million in 2023, including $14.0 million in dividend payments[221]. - The company paid dividends of $14.0 million in 2024, maintaining the same amount as in 2023, equating to $0.52 per ordinary share[234]. - As of December 31, 2024, the company had drawn down $17.2 million under the Revolving Credit Facility (RCF), a decrease from $43.1 million as of December 31, 2023[240]. - The company is required to maintain a minimum interest coverage ratio of 4.0:1 and a leverage ratio of no more than 3.0:1 under the Senior Facilities Agreement[232]. - Total contractual cash obligations amount to $69.7 million, with $10.5 million due within one year and $49.3 million due within 1-3 years[237]. - The company had capital expenditure commitments of $0.5 million as of December 31, 2024, down from $2.3 million in 2023[240]. Pension and Interest Rates - The weighted-average discount rate for the company's U.K. pension plans was 5.40% in 2024, up from 4.50% in 2023[249]. - The expected rate of return on plan assets for the U.K. plans was 5.80% in 2024, compared to 4.80% in 2023[257]. - The life expectancies for members aged 65 on December 31, 2024, are assumed to be 20.1 years for males and 22.7 years for females[255]. - As of December 31, 2024, the company had both fixed and variable rate debt, with no interest hedge agreements in place[267]. - The company may decide to hedge interest payable based on a combination of forward rate agreements, interest rate caps, and swaps due to exposure to variable interest rates[268]. Commodity Price Risks - The company is exposed to commodity price risks, particularly for magnesium, zirconium, and carbon fiber, with significant price volatility observed in 2022 and 2023, and a slow decline in 2024[265]. - Fixed-price supply contracts are in place for a portion of raw materials to mitigate price volatility, but the company remains exposed to rising prices over time[265]. - The price of high-grade aluminum, which is actively traded on the LME, has fluctuated significantly, impacting the costs of aluminum purchases for the Gas Cylinders Segment[266]. - The company has made additional physical purchases of magnesium and rare earth chemicals to delay the impact of higher prices, affecting cash flow and leading to greater utilization of revolving credit facilities[265]. - The company relies on the ability to pass on major price increases to customers to maintain profitability, especially for carbon fiber wrapped composite cylinders and magnesium-based products[265]. Hedging and Exchange Rates - As of December 31, 2024, the company had sales hedges totaling £36.5 million for Canadian dollars and £0.2 million for U.S. dollars, with maturity dates ranging from January 2025 to March 2025[263]. - The maturity dates for purchase hedges include various dates in early 2024, with contract totals for U.S. dollars, euros, and Australian dollars amounting to £0.4 million, £0.8 million, and £15.6 million respectively[263]. - The exchange rates for sales hedges as of December 31, 2024, ranged from $1.2511 to $1.2999 for Canadian dollars and $1.7969 for U.S. dollars[263].

Technical Analysis - Luxfer (LXFR) has reached an important support level and surpassed resistance at the 20-day moving average, indicating a potential short-term bullish trend [1] - The 20-day simple moving average is a popular tool among traders, providing insights into short-term price trends and trend reversals [1][2] Performance Metrics - Over the past four weeks, LXFR has gained 12.8%, suggesting positive momentum [2] - The company currently holds a Zacks Rank 3 (Hold), indicating potential for further upward movement [2] Earnings Estimates - There have been no downward revisions in earnings estimates for LXFR in the past two months, with one estimate increasing, and the consensus estimate has also risen [3] - The combination of positive earnings estimate revisions and technical indicators suggests that LXFR may continue to see gains in the near future [3]

THIRD QUARTER 2024 EARNINGS PRESENTATION October 30, 2024 CUSTOMER FIRST • INTEGRITY • ACCOUNTABILITY • INNOVATION • PERSONAL DEVELOPMENT • TEAMWORK 1 FORWARD-LOOKING STATEMENTS This release contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Examples of such forward-looking statements include but are not limited to: (i) statements regarding the Company's results of opera ...