Hillenbrand(US:HI)2021-05-09 16:52Financial Data and Key Metrics Changes - Total revenue for the quarter was $722 million, an increase of 11% year-over-year, with an 8% increase excluding foreign exchange impact [26] - Adjusted EBITDA was $134 million, up 21%, with an adjusted EBITDA margin of 18.6%, an increase of 160 basis points [26] - GAAP net income was $78 million or $1.03 per share, compared to a loss of $0.99 in the prior year [27] - Cash flow from operations was $193 million, an increase of $165 million compared to the prior year [28] - Net leverage ratio improved to 1.7 times net debt to EBITDA, down over half a turn sequentially [19][37] Business Line Data and Key Metrics Changes - Batesville segment revenue was $166 million, a 20% increase year-over-year, driven by increased demand for burial caskets due to COVID-19 [30] - Molding Technology Solutions (MTS) revenue was $255 million, a 28% increase, with adjusted EBITDA of $51 million, up 59% [32][34] - Advanced Process Solutions (APS) revenue decreased 3% to $301 million, with adjusted EBITDA margin flat at 18.5% [35][36] Market Data and Key Metrics Changes - Total company backlog increased over 30% year-over-year to a record $1.5 billion, indicating strong demand across segments [25] - Record order backlog for MTS reached $362 million, a 93% increase year-over-year [34] - APS order backlog reached a new record high of $1.2 billion, up 22% year-over-year [36] Company Strategy and Development Direction - The company is focused on four strategic pillars: strengthening business platforms, managing Batesville for cash, building a scalable foundation for growth, and effectively deploying free cash flow [11][12][16] - The Milacron acquisition is a key part of the strategy, with ongoing integration and expected synergies of $75 million over three years [12][51] - The company is increasing investments in recycling solutions and expects significant growth in this market [13][58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate robust free cash flow and maintain a strong balance sheet despite inflationary pressures and ongoing pandemic challenges [16][22] - The company anticipates revenue growth in the third quarter of 13% to 17%, with adjusted EBITDA expected in the range of $110 million to $120 million [42] - Management highlighted the importance of supply chain resiliency and the ongoing impact of COVID-19 in international markets, particularly India [41][97] Other Important Information - The company completed the sale of ABEL and is on track to divest TerraSource Global [19][51] - A new Chief Sustainability Officer has been appointed to enhance the company's sustainability efforts [21] - The company plans to issue its second sustainability report later in the year [21] Q&A Session Summary Question: What is the expected full year unabsorbed cost pressure for Batesville in fiscal 2021? - Management expects inflation of $13 million to $15 million, with pricing expected to cover about a third to half of that [55] Question: Can you discuss the traction with recycling and eco-friendly materials? - Management noted strong growth in the quote pipeline for recycling materials and bio-based plastics, particularly in Europe [56][58] Question: What is the competitive positioning in the emerging recycling areas? - Management believes the market is moving towards their capabilities in continuous processing for recycling, with significant long-term growth expected [63][68] Question: How do you see the incremental margins in MTS with the shift towards injection molding? - Management indicated that while the overall segment margin may be pressured due to increased injection molding sales, margins within injection molding are expected to improve [69][72] Question: Will the focus shift back towards M&A or stock buybacks? - Management plans to focus on organic growth initiatives while considering bolt-on acquisitions, particularly in the APS segment [76][80] Question: Can you discuss the exposure to India and its impact? - Management highlighted that injection molding represents about 25% of total revenue in India, which poses a risk due to the current COVID-19 situation [94][97]