Hillenbrand Reports Fiscal Third Quarter 2022 Results

Fiscal Third Quarter 2022 Highlights:

• Revenue of $721 million increased 4% compared to prior year or 5% on a pro forma basis
• GAAP EPS of $0.68 increased 28%; adjusted EPS of $0.92 increased 8% largely due to higher volume in Molding Technology Solutions and lower shares outstanding
• Completed approximately $300 million of share repurchases over the last 5 quarters
• Achieved $75 million annual run-rate synergy target for Milacron integration ahead of schedule
• Fiscal 2022 guidance: reaffirms midpoint of full year adj. EPS, narrowing range to $3.85 - $3.95

BATESVILLE, Ind., Aug. 3, 2022 /PRNewswire/ -- Hillenbrand, Inc. (NYSE: HI) reported results for the fiscal 2022 third quarter, which ended June 30, 2022.

"We made great strides in advancing our profitable growth strategy and strengthening our industrial segments during the third quarter," said Kim Ryan, President and Chief Executive Officer of Hillenbrand. "I am proud of our associates for their resiliency in navigating this challenging global operating environment and our continued success in driving operational efficiency through the consistent deployment of the Hillenbrand Operating Model, which contributed to revenue and adjusted EPS growth in the quarter. We continue to position Hillenbrand for profitable growth through accretive acquisitions like the pending Herbold Meckesheim and LINXIS Group transactions, which will expand our existing capabilities into the attractive growth end markets of recycling and food. I am excited about our future, and confident that Hillenbrand is well positioned to generate long-term value for our shareholders."

Third Quarter 2022 Results

Revenue of $721 million increased 4% compared to the prior year primarily driven by increased pricing and volume growth within the Molding Technology Solutions and Advanced Process Solutions segments, partially offset by foreign currency exchange and the divestiture of TerraSource Global. Excluding the impact of foreign currency exchange, revenue increased 8%. On a pro forma basis, which excludes the divested TerraSource business, revenue increased 5% year over year, or 10% excluding the impact of foreign currency exchange.

Net income of $49 million resulted in $0.68 per share, an increase of $0.15 per share, or 28% compared to the prior year. Adjusted net income of $66 million resulted in adjusted EPS of $0.92, an increase of $0.07, or 8%, as favorable pricing, higher volume in our industrial segments, and lower shares outstanding were partially offset by inflation and the impact of foreign currency exchange. The adjusted effective tax rate for the quarter was 29.7%, a decrease of 70 basis points from the prior year.

Adjusted EBITDA of $126 million was essentially flat year over year. On a pro forma basis, adjusted EBITDA decreased 1%, but excluding the impact of foreign currency exchange, increased 4%, while adjusted EBITDA margin of 17.4% decreased 120 basis points compared to a year ago primarily due to the dilutive effect of price-cost coverage and lower volume in Batesville, which more than offset operating leverage from higher volume in our industrial segments.

Advanced Process Solutions (APS)

Revenue of $310 million decreased 1% compared to the same period in the prior year, but increased 7% excluding the impact of foreign currency exchange. On a pro forma basis, revenue increased 2% year over year, or 10% excluding the impact of foreign currency exchange, primarily driven by favorable pricing and higher volume of large plastics systems and aftermarket parts and services.

Adjusted EBITDA of $61 million decreased 1% year over year. On a pro forma basis, adjusted EBITDA decreased 3%, but excluding the impact of foreign currency exchange, it increased 6%. Pro forma adjusted EBITDA margin of 19.5% was down 100 basis points primarily due to the dilutive effect of price-cost coverage.

Backlog of $1.2 billion decreased 9% on a pro forma basis compared to the prior year, but was flat excluding the impact of foreign currency exchange. Sequentially, backlog was down 4% compared to the quarter ended March 31, 2022, but was flat excluding the impact of foreign currency exchange.

Molding Technology Solutions (MTS)

Revenue of $270 million increased 11% year over year, or 14% excluding the impact of foreign currency exchange, as higher volume from the injection molding product line and favorable pricing were partially offset by a decline in volume from the hot runner product line, which was due to the COVID-19 related shutdowns in China.

Adjusted EBITDA of $55 million increased 11% compared to the prior year, or 15% excluding the impact of foreign currency exchange, while adjusted EBITDA margin of 20.2% was flat, as favorable pricing, operating leverage from higher volume and productivity improvements were offset by inflation and unfavorable mix.

Backlog of $420 million increased 8% year over year, or 10% excluding the impact of foreign currency exchange, primarily driven by an increase in injection molding and extrusion equipment orders. Sequentially, backlog was up approximately 1% compared to the quarter ended March 31, 2022.

Batesville

Revenue of $141 million was up 2% compared to the prior year primarily resulting from the price surcharges implemented this year to offset the significant increase in commodity costs. Burial casket volume was lower compared to the prior year primarily due to an estimated decrease in deaths associated with the COVID-19 pandemic and an estimated increase in the rate at which families opted for cremation.

Adjusted EBITDA of $25 million decreased 15% compared to the prior year, while adjusted EBITDA margin of 17.9% decreased 370 basis points primarily due to the dilutive effect of price-cost coverage and the impact of lower volume, which were partially offset by productivity improvements.

Balance Sheet, Cash Flow and Capital Allocation

Hillenbrand had cash flow from operations of $4 million in the quarter, a decrease of $180 million year-over-year, primarily due to the timing of working capital related to large plastics projects and an increase in inventory due to increased customer demand and supply chain disruptions. During the quarter, the Company repurchased approximately 2,646,000 shares for $111.5 million at an average share price of $42.14 and returned approximately $15 million to shareholders in the form of quarterly dividends. Subsequent to the quarter, the Company repurchased an additional 291,000 shares for $11.9 million at an average share price of $40.79.  The Company has $150 million remaining under its existing share repurchase authorization.

Net debt at the end of the quarter was $930 million, and the net debt to adjusted EBITDA ratio was 1.7x. Liquidity at the end of the quarter was approximately $1.2 billion, including $284 million in cash on hand and the remainder available under our revolving credit facility and delayed-draw term loan facility.

Fiscal 2022 Outlook

Hillenbrand is updating its annual guidance for fiscal year 2022. Revenue and EBITDA margin guidance is on a pro forma basis, excluding the divested Red Valve, ABEL, and TerraSource businesses. Fiscal year 2022 guidance does not include any impact from the pending acquisitions of Herbold Meckesheim and LINXIS Group.