Hillenbrand(US:HI)2021-08-07 18:56Financial Data and Key Metrics Changes - The company reported total revenue of $695 million, an increase of 14% on an as-reported basis and 18% on a pro forma basis, driven by strong volume growth within MTS and APS [29][30] - Adjusted EBITDA was $126 million, a 4% increase, with an adjusted EBITDA margin of 18.2%, which decreased by 170 basis points due to cost inflation and strategic investments [30][31] - GAAP net income was $40 million or $0.53 per share, a 66% increase compared to the prior year, while adjusted net income was $65 million or $0.85 per share, a 5% increase [33] Business Line Data and Key Metrics Changes - Advanced Process Solutions (APS) revenue was $313 million, an 11% increase, with a record order backlog of $1.4 billion, up 52% year-over-year [39][41] - Molding Technology Solutions (MTS) revenue increased by 31% to $244 million, with strong demand across various end markets [43] - Batesville revenue was $138 million, a 1% decrease, attributed to lower death rates associated with COVID-19, but performed better than expected [48][49] Market Data and Key Metrics Changes - Total company backlog reached a record of $1.8 billion, a 62% increase year-over-year, indicating strong demand for engineered solutions [28] - The company experienced approximately $17 million of inflation in the quarter, with 60% offset through pricing actions [31] - The ongoing chip shortage is expected to impact revenue by approximately $10 million in the fourth quarter [66] Company Strategy and Development Direction - The company focuses on four strategic pillars: strengthening business platforms, managing Batesville for cash, building a scalable foundation for growth, and effectively deploying free cash flow [14][22] - The integration of Milacron is proceeding well, with a target of achieving $75 million in synergies over three years [22][38] - The company is actively developing its M&A pipeline, targeting strategic acquisitions in food and recycling markets [70][71] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from COVID-19, global supply chain disruptions, and rising inflation but expressed confidence in the company's ability to navigate these issues [7][25] - The company expects fourth quarter revenue growth in the range of 6% to 9%, driven by industrial segments, while Batesville is anticipated to decline [53][58] - Management remains focused on maintaining a flexible balance sheet and investing in growth opportunities [62] Other Important Information - The company plans to issue its second sustainability report at the end of August, highlighting progress in sustainability initiatives [23] - Two new directors were added to the Board to enhance governance and support the company's strategy [24] Q&A Session Summary Question: Impact of unabsorbed inflationary costs and chip shortage - The company forecasts approximately $25 million of inflation in Q4, with half covered by pricing, leading to a $12.5 million unabsorbed hit to the P&L, and anticipates a $10 million revenue impact from the chip shortage [66][67] Question: Restructuring in Germany and M&A outlook - The restructuring in Germany is part of the $75 million synergy target, and the M&A pipeline is active with a focus on strategic bolt-on acquisitions in processed food and recycling [68][70] Question: Batesville segment performance and mortality rates - The company noted that while death rates are currently low, there may be some upside in the short term, and they are monitoring the impact of COVID-19 variants [77][78] Question: Price/cost lag in injection molding business - The price/cost lag is due to backlog orders set before the inflationary environment, leading to margin compression as inflation pressures arise [99]