Hillenbrand Reports Fiscal First Quarter 2024 Results
Date 2024-02-06 | About Hillenbrand
First Quarter Continuing Operations Highlights1:
- Revenue of $773 million increased 18% compared to prior year; organic revenue decreased 7%
- GAAP EPS of $0.25 decreased from $0.35 in the prior year; adjusted EPS of $0.69 decreased 1% compared to prior year
- Backlog of $2.15 billion increased 10% over prior year and 2% sequentially
- Announcing cost savings and restructuring program in Molding Technology Solutions segment
Fiscal 2024 Outlook: - Maintaining FY24 adjusted EPS of $3.60 - $3.95; Q2 adjusted EPS of $0.71 to $0.76
BATESVILLE, Ind., February 5, 2024 --/PRNewswire/ -- Hillenbrand, Inc. (NYSE: HI), a leading global provider of highly-engineered processing equipment and solutions, reported results for the fiscal first quarter, which ended December 31, 2023.
“We delivered revenue and adjusted earnings per share in the quarter in line with our expectations, led by strong performance from our recent Schenck Process Food and Performance Materials (“FPM”) acquisition and solid aftermarket growth. The integration of FPM and Linxis continues to build excitement throughout the organization as we drive collaboration across our world-class product portfolio,” said Kim Ryan, President and Chief Executive Officer of Hillenbrand. “During the quarter, order demand in our Advanced Process Solutions segment remained solid and our project pipeline is robust, despite extended customer decision timing. Our Molding Technology Solutions segment faced greater than expected softness as we continued to see low customer demand amid the uncertain global macroeconomic environment.”
“Given the sustained demand softness within the Molding Technologies Solutions segment, we’re executing additional cost savings actions, including structural changes. We expect this restructuring program to deliver annual run-rate cost savings of approximately $15 million, with roughly 50% to be realized within the current fiscal year. We’re not satisfied with the current performance, and we’re confident these actions will help optimize our cost structure as we manage through the current demand environment, while also ensuring we’re well positioned to return to higher levels of growth and profitability once the market recovers.”
First Quarter 2024 Results of Continuing Operations1
Revenue of $773 million increased 18% compared to the prior year, primarily due to acquisitions. On an organic basis, which excludes the impacts of acquisitions and foreign currency exchange, revenue decreased 7%, as favorable pricing and higher aftermarket parts and service revenue was more than offset by lower capital volume.
Net income of $18 million, or $0.25 per share, decreased $0.10 compared to the prior year as the impact of the FPM acquisition was more than offset by lower organic volume, cost inflation, higher interest expense, a pension settlement charge, and an increase in the effective tax rate. Adjusted net income of $49 million resulted in adjusted EPS of $0.69, a decrease of $0.01, or 1%. The adjusted effective tax rate for the quarter was 28.6%, an increase of 360 basis points compared to the prior year primarily due to a discrete tax benefit in the prior year that did not repeat.
Adjusted EBITDA of $114 million increased 13% year over year. On an organic basis, adjusted EBITDA decreased 14% as lower volume and cost inflation more than offset favorable pricing, productivity, and product mix. Adjusted EBITDA margin of 14.8% decreased 60 basis points, primarily due to cost inflation.
Advanced Process Solutions (APS)
Revenue of $568 million increased 38% compared to the prior year, primarily due to acquisitions. On an organic basis, revenue decreased 2% year over year, primarily due to lower capital equipment volume, partially offset by favorable pricing and higher aftermarket parts and service revenue.
Adjusted EBITDA of $96 million increased 35% year over year, but decreased 3% organically, as lower volume and cost inflation more than offset favorable pricing, productivity, and product mix. Adjusted EBITDA margin of 16.9% decreased 40 basis points, primarily due to cost inflation and the dilutive effect of the recent acquisitions. As previously highlighted, the recently acquired businesses have lower relative margins but are expected to be brought in line with the historical APS segment margins over the next few years through the achievement of synergies and the deployment of the Hillenbrand Operating Model.
Backlog of $1.9 billion increased 18% compared to the prior year primarily due to the FPM acquisition. On an organic basis, backlog decreased 5%. Sequentially, backlog increased 3%.
Molding Technology Solutions (MTS)
Revenue of $205 million decreased 16% year over year primarily due to lower volume for injection molding and hot runner equipment.
Adjusted EBITDA of $32 million decreased 26%, primarily due to lower volume and cost inflation. Adjusted EBITDA margin of 15.7% decreased 200 basis points from the prior year.
Backlog of $232 million decreased 31% compared to the prior year and was flat on a sequential basis.
Cost Savings & Restructuring Program
As a result of the weaker than expected order patterns and continued market demand softness within the MTS segment, the Company has announced a cost savings and restructuring program to reduce costs and improve operational efficiency. The program is expected to generate annual run-rate savings of $15 million, with approximately 50% realized within fiscal year 2024. The Company expects to incur a charge related to this program of approximately $20 million in fiscal year 2024.
Balance Sheet, Cash Flow and Capital Allocation1
The Company’s operating cash flow represented a use of cash of $24 million in the quarter, an increase of $18 million compared to prior year, primarily due to lower earnings and timing of working capital requirements. Capital expenditures were approximately $12 million in the quarter. During the quarter, the Company paid approximately $16 million in quarterly dividends.
As of December 31, 2023, net debt was approximately $1,843 million, and the net debt to pro forma adjusted EBITDA ratio was 3.4x. Liquidity was approximately $647 million, including $198 million in cash on hand and the remainder available under the Company’s revolving credit facility.
“Our cash flow was lower than anticipated due in part to order softness in the quarter and weaker MTS performance, but we’re confident the cost actions we’re taking will strengthen our position moving forward. We’re also focused on continuing to drive working capital improvement initiatives across the enterprise, particularly within the recently acquired businesses, as we aggressively pursue our 90% free cash flow conversion target for the year. We remain highly focused on debt reduction and returning to our preferred net leverage range of 1.7x to 2.7x, though we now expect to achieve this by Q2 fiscal 2025 compared to our previous goal of Q1 fiscal 2025,” said Bob VanHimbergen, SVP and Chief Financial Officer of Hillenbrand.
Fiscal 2024 Outlook
Hillenbrand is maintaining its annual guidance range for fiscal year 2024 and providing a fiscal Q2 outlook for adjusted earnings per share. The Company expects MTS performance to now be at the lower end of the range due to softer than expected Q1 performance and order volume, partially offset by the announced cost savings actions.