ParkOhio(PKOH) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter consolidated net sales were $360 million, compared to $366 million in the first quarter last year, and equal to fourth quarter 2020 revenues [11] - Consolidated gross margins in the quarter were 14.5%, compared to 14.7% a year ago [11] - First quarter GAAP earnings per share were $0.45, and on an adjusted basis, earnings per share was $0.53 compared to $0.13 a year ago [13] - EBITDA as defined was $27.2 million during the first quarter, compared to $25.5 million a year ago, an increase of 7% [13] - Liquidity improved to $264 million as of March 31, up 5% compared to a year ago [13] Business Line Data and Key Metrics Changes - In Supply Technologies, net sales were $158 million, up 12% from $141 million a year ago, with operating income increasing to $12.2 million and operating income margin at 7.7% [15][16] - Assembly Components segment sales were $126 million compared to $128 million last year, with operating income at $6.4 million and segment operating margins at 5.1% [17] - Engineered Products segment sales in the first quarter were $76 million compared to $97 million a year ago, with an operating loss of $1.3 million [19] Market Data and Key Metrics Changes - Sales in Supply Technologies were driven by heavy-duty truck, power sports, medical, and defense markets [15] - The semiconductor chip shortage negatively impacted sales in the Assembly Components segment, estimated to reduce first quarter sales by $5 million [17] - New equipment orders in Engineered Products increased 38% compared to fourth quarter levels, indicating a potential recovery [19] Company Strategy and Development Direction - The company aims for revenue growth of 8% to 12% over 2020 levels and improving adjusted EBITDA margins by 150 to 200 basis points year-over-year [21] - The acquisition of NYK Component Solutions is expected to enhance the company's product offerings and customer base, with annual sales expected to exceed $10 million [22] - The company is focused on capital allocation to businesses that can outperform and is looking to grow through both acquisitions and organic means [24][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the industrial recovery and the strong performance in Supply Technologies, despite challenges in logistics and supply chain [5][10] - The company anticipates continued strength in key markets, although some segments, like commercial aerospace, are still lagging [28][41] - Management acknowledged the challenges posed by labor shortages and is actively working on strategies to attract and retain talent [57][58] Other Important Information - The company generated $10 million of operating cash flows compared to a use of operating cash of $3.9 million a year ago, driven by higher net income and improved working capital management [14] - Capital expenditures during the quarter were $6.6 million, primarily in the Assembly Components segment [14] Q&A Session Summary Question: Is the revenue level in Supply Technologies sustainable in Q2 and the second half? - Management expects the strength to continue, citing robust environments in most end markets, although commercial aerospace continues to lag [28] Question: Will Q1 be the low watermark for margins in Supply Technologies? - Management indicated that while there are opportunities for margin improvement, visibility is not entirely clear due to ongoing supply chain issues [29] Question: What are the expectations for the acquisition of NYK Component Solutions? - The acquisition is expected to provide additional product lines and new customers, enhancing growth opportunities and synergies [30][32] Question: How is the company addressing labor challenges? - Management is focused on improving the work environment and attracting talent through better onboarding processes and competitive compensation [57][58] Question: What is the outlook for the Engineered Products segment? - Management noted that while the segment is recovering, it still faces challenges, particularly in oil and gas markets, but is seeing positive trends in new orders [65][66]