Hillenbrand(HI) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the fiscal third quarter was $599 million, down 24% year-over-year, or 10% on a pro forma basis, primarily due to the divestiture of the MIME business and lower capital equipment volume in APS [14][15] - Pro forma adjusted EBITDA decreased 28% to $84 million, with an adjusted EBITDA margin of 14.1%, down 360 basis points, largely due to lower volume impacting operating leverage [15] - GAAP net income was $2 million, a significant improvement from a loss of $249 million in the prior year, attributed to a non-cash impairment charge recorded in the previous fiscal year [15] - Adjusted earnings per share decreased 40% to $0.51, in line with expectations, primarily due to the divestiture of the MIME business and lower APS volumes [15][16] Business Line Data and Key Metrics Changes - In the Advanced Process Solutions (APS) segment, revenue decreased 11% to $507 million, driven by lower volume, partially offset by favorable pricing [17] - The Molding Technology Solutions (MTS) segment saw pro forma revenue of $92 million, a decrease of 2% year-over-year, with growth in the hot runner business offset by a decline in mold-based sales [19] - Backlog for APS decreased 10% year-over-year to $1.57 billion, while MTS backlog increased 7% year-over-year to $55 million [18][19] Market Data and Key Metrics Changes - The food, health, and nutrition market now represents over 25% of global revenue, with significant progress in achieving $30 million in run-rate cost synergies from recent acquisitions [6][7] - Strong quoting and test facility activity were noted, indicating potential future order growth despite current delays in decision-making due to macroeconomic uncertainties [8][10] Company Strategy and Development Direction - The company is focused on simplifying its portfolio, reducing debt, and advancing integration and commercial synergies within its Food, Health, and Nutrition businesses [5] - Recent divestitures generated approximately $380 million in net proceeds, which were used to reduce debt by over $300 million, strengthening the balance sheet [5] - The company aims to leverage its global network and systems integration capabilities to enhance customer value across various end markets [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying markets served by the APS segment, anticipating a return to normalized order patterns as the macroeconomic environment stabilizes [10] - The company is optimistic about future order activity, citing recent key orders placed since the end of the third quarter as encouraging signs [19][22] - Management emphasized the importance of maintaining close relationships with customers to facilitate timely order decisions and project execution [31][32] Other Important Information - The company is actively engaged in a search for a permanent CFO, with the interim CFO bringing significant experience to the role [13] - The company has implemented surcharge pricing and adjusted contract terms to mitigate the impact of tariffs, while also localizing supply chains [12] Q&A Session Summary Question: Can you elaborate on the uptick in orders post-quarter? - Management noted that the uptick in orders is primarily from the plastics side, particularly in polyolefins and engineering plastics, with orders coming from various geographies including the U.S. and Asia [30][31] Question: What is the outlook for MTS demand and quoting activity? - Management indicated that quoting activity has improved, particularly in India and China, with new product launches driving demand [35][36] Question: How is the company addressing cash flow challenges? - Management highlighted that cash flow is expected to improve as new orders come in, with a focus on negotiating favorable contract terms to ensure progress payments [40][41] Question: Is there any discussion regarding the dividend given the current leverage? - Management stated that the dividend is regularly reviewed with the Board of Directors, but no specific announcements were made regarding changes at this time [53]