Barnes (US:B)2024-04-27 01:19Financial Data and Key Metrics Changes - For Q1 2024, revenue was $431 million, an increase of 28% reported and 4% organic [7][17] - Adjusted EBITDA grew 38% to $80 million, with an adjusted EBITDA margin up 130 basis points [7][17] - Adjusted operating income was $51 million, up 37%, with an adjusted operating margin of 11.9%, an increase of 80 basis points [17] - Interest expense rose to $25 million from $5 million a year ago, primarily due to higher borrowings and interest rates [17] - Adjusted net income per share was $0.38, down from $0.47 a year ago [17] Business Line Data and Key Metrics Changes Aerospace - Aerospace sales were $221 million, up 89% reported and 19% organic [18] - Adjusted operating profit for Aerospace was $35 million, up 69% [18] - Aerospace adjusted EBITDA was $53 million, up 75%, with an adjusted EBITDA margin of 24.2% [19] Industrial - Industrial sales were $209 million, down 4% reported and organic [20] - Adjusted operating profit for Industrial was $16 million, down 1% [21] - Adjusted EBITDA for Industrial was $27 million, down 6%, with an adjusted EBITDA margin of 13% [21] Market Data and Key Metrics Changes - Aerospace OEM backlog increased 19% sequentially to $1.46 billion [19] - MRO sales in Aerospace were up 136% reported and 19% organic [11] - Industrial orders improved 7% sequentially, with contributions from Molding Solutions, Automation, and Motion Control [22] Company Strategy and Development Direction - The company is focused on three strategic pillars: core business execution, scaling aerospace, and integrating, consolidating, and rationalizing industrial operations [6][15] - The divestiture of Associated Spring and Hanggi reduces exposure to automotive components, aligning with the strategy to optimize the industrial portfolio [12][15] - The company aims to achieve $1 billion in annual aerospace revenue by 2025, emphasizing a shift towards higher growth and profitability in aerospace [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the aerospace market's robust growth and the company's positioning to capitalize on it [6][11] - The company anticipates a stronger second half of 2024 for the industrial segment, supported by improved operational performance and execution [31][60] - Management highlighted ongoing efforts to address productivity issues in aerospace facilities and expects improvements throughout 2024 [44] Other Important Information - The company expects total sales growth for 2024 to be between 13% and 16%, with aerospace sales growth projected at approximately 60% [25][26] - The divestiture of Associated Spring and Hanggi is expected to reduce year-over-year EPS by $0.28, while the MB Aerospace acquisition will be approximately $0.20 dilutive in the year but neutral to accretive exiting 2024 [27] Q&A Session Summary Question: What underpins the second half better outlook for Industrial? - Management indicated a stronger foundation due to the implementation of transformation strategies and improved operational performance [30][31] Question: How much of the $38 million run rate savings will be realized in 2024? - Management expects about $16 million of in-year savings, with $6 million to $7 million realized in Q1 [32][35] Question: Can you provide details on lower productivity in Aerospace facilities? - Management noted supply chain challenges and labor productivity issues but expects improvements in the second half of the year [44] Question: What is the sales trajectory for MB Aerospace moving forward? - Management anticipates a robust environment for MB Aerospace, particularly in the aftermarket, despite some supply chain constraints [47] Question: Can you discuss the moving pieces of the latest 2024 sales outlook for OE, aftermarket, and RSP? - Management expects stronger aftermarket growth, with a balanced approach across OEM and aftermarket segments [51][62]