Barnes (US:B)2024-07-26 16:43Financial Data and Key Metrics Changes - For Q2 2024, revenue was $382 million, an increase of 13% reported and 5% organic [9][18] - Adjusted EBITDA grew 14% to $76 million, with an adjusted EBITDA margin of 20%, up 20 basis points [9][18] - Adjusted net income per share was $0.37 compared to $0.58 a year ago [18] Business Line Data and Key Metrics Changes - Aerospace segment sales were $218 million, up 79% reported and 8% organic, with OEM organic sales increasing by 1% and aftermarket organic sales increasing by 19% [19][20] - Industrial segment sales were $164 million, down 24% reported due to the divestiture of Associated Spring and Hanggi, but organic sales were up 3% [22][23] Market Data and Key Metrics Changes - Aerospace now contributes two-thirds of adjusted EBITDA, reflecting the impact of the MB Aerospace acquisition [9][12] - The company anticipates continued strong growth in the aftermarket due to high air travel demand and extended aircraft utilization [14][15] Company Strategy and Development Direction - The company is executing a three-pillar strategy focusing on core business execution, scaling aerospace, and rationalizing industrial operations [7][11] - The divestiture of Associated Spring and Hanggi is part of the strategy to unlock enterprise value [9][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges in the OEM market due to supply chain bottlenecks and labor efficiency issues, leading to a more conservative outlook for 2024 [12][13][25] - Despite the challenges, the long-term demand in the aerospace sector remains strong, and the company is positioned to capture increased aftermarket activity [12][27] Other Important Information - The company is targeting annualized savings of $38 million by the end of 2024 and $42 million by the end of 2025 through cost mitigation actions [11] - The net debt-to-EBITDA ratio was 3.48 times at quarter end, with a goal to achieve a leverage ratio of 3 times or lower by the end of 2024 [24] Q&A Session Summary Question: Can you provide more detail on the Aerospace margins in Q2? - Management noted that while aftermarket sales were robust, productivity challenges on the OEM side impacted overall margins [30][31] Question: How do you view cash conversion for 2025? - Management indicated that the current cash flow issues are related to increased working capital and expect to return to normal cash conversion rates in the future [32][33] Question: What is the outlook for the Aerospace OEM side? - Management highlighted internal productivity issues and supply chain challenges as factors affecting the OEM outlook, but emphasized that they are not a rate-limiting step [35][36][46] Question: Can you elaborate on strategic options for the company? - Management confirmed they are actively evaluating strategic options and have made significant operational changes, including acquisitions and divestitures [38][39] Question: What gives confidence in maintaining the industrial guidance? - Management cited major investments in transforming the industrial portfolio and confidence in the new management teams to execute effectively [41][42]