Hillenbrand Reports Fiscal Second Quarter 2024 Results

Revenue of $785 million increased 14% compared to prior year; organic revenue decreased 5% primarily due to lower volume in the Molding Technology Solutions (MTS) segment

GAAP EPS of $0.09 decreased from $0.33 in the prior year; adjusted EPS of $0.76 increased 3% compared to prior year

Expanded previously announced MTS restructuring program and implementing additional cost actions across enterprise

Updating outlook for FY24 adjusted EPS to $3.30 – $3.50, previously $3.60 – $3.95; Q3 adjusted EPS of $0.80 to $0.85

Hillenbrand, Inc., a leading global provider of highly-engineered processing equipment and solutions, reported results for the fiscal second quarter ended March 31, 2024.

Summary of Second Quarter 2024 Results of Continuing Operations¹

“We continued to experience a dynamic demand environment across key end markets in our second quarter. Orders improved sequentially in both segments, however, demand for mid-size capital equipment projects in APS and short-cycle hot runner equipment in MTS remained below our expectations. We continue to focus on executing our integration to achieve synergies, and we were pleased with the margin expansion in our APS segment in the quarter, despite lower volumes. Across the enterprise, we’re driving cost savings initiatives, including expanding the MTS restructuring we announced last quarter, and implementing additional cost actions within our APS segment in response to the top line headwinds we expect through the remainder of fiscal year 2024. As we navigate this uncertain macro environment, we’re confident in the strength of our leading brands, and we remain well positioned to capitalize on long-term opportunities for growth and margin expansion across our portfolio of highly-engineered processing equipment and solutions,” said Kim Ryan, President and Chief Executive Officer of Hillenbrand.

Second Quarter 2024 Results of Continuing Operations¹

Revenue of $785 million increased 14% compared to the prior year primarily due to the FPM acquisition. On an organic basis, which excludes the impacts of acquisitions and foreign currency exchange rates, revenue decreased 5%, as higher aftermarket parts and service revenue and pricing were more than offset by lower capital equipment volume.

Net income of $6 million, or $0.09 per share, decreased $0.24 compared to the prior year as the impact of the Schenck Process Food and Performance Materials (“FPM”) acquisition, lower tax expense, pricing, and cost containment were more than offset by an increase in restructuring costs, cost inflation, lower organic volume, and higher interest expense. Adjusted net income of $54 million resulted in adjusted EPS of $0.76, an increase of $0.02, or 3%. The adjusted effective tax rate for the quarter was 28.1%, a decrease of 540 basis points compared to the prior year primarily due to discrete items.

Adjusted EBITDA of $123 million increased 13% year over year. On an organic basis, adjusted EBITDA decreased 7% as cost inflation and lower MTS volume more than offset favorable pricing, cost containment, and favorable product mix. Adjusted EBITDA margin of 15.6% was essentially flat.

Advanced Process Solutions (APS)

Revenue of $559 million increased 30% compared to the prior year primarily due to the FPM acquisition. On an organic basis, revenue was flat, as higher aftermarket parts and service revenue and pricing were offset by lower capital equipment volume.

Adjusted EBITDA of $101 million increased 38% year over year primarily due to the FPM acquisition. Organically, adjusted EBITDA increased 7%, primarily driven by pricing and cost actions, partially offset by cost inflation and lower volume. Adjusted EBITDA margin of 18.0% increased 100 basis points.

Backlog of $1.9 billion increased 12% compared to the prior year primarily due to the FPM acquisition. On an organic basis, backlog decreased 5%. Sequentially, backlog decreased 2% due to foreign currency exchange rates.

Molding Technology Solutions (MTS)

Revenue of $226 million decreased 13% year over year primarily due to lower volume for injection molding equipment.

Adjusted EBITDA of $34 million decreased 29%, primarily due to lower volume and cost inflation, partially offset by cost actions. Adjusted EBITDA margin of 14.9% decreased 330 basis points from the prior year.

Backlog of $230 million decreased 23% compared to the prior year and was essentially flat on a sequential basis.

Restructuring Program

The Company previously announced a restructuring program to reduce costs and improve operational efficiency within the MTS segment. The program was initially expected to incur approximately $20 million in charges, with annual run-rate savings of $15 million. The Company took additional actions during the quarter, including the consolidation of an additional facility in March, and incurred approximately $25 million in restructuring costs in the quarter. This program is now expected to generate annual run-rate savings of approximately $20 million, with approximately $8 million expected to be realized within fiscal year 2024.

Balance Sheet, Cash Flow and Capital Allocation¹

The Company’s operating cash flow was $3 million in the quarter, down $47 million compared to prior year, primarily due to timing of working capital requirements and lower customer advances on large plastics projects. Capital expenditures were approximately $13 million in the quarter. During the quarter, the Company paid approximately $16 million in quarterly dividends.

As of March 31, 2024, net debt was approximately $1.88 billion, and the net debt to pro forma adjusted EBITDA ratio was 3.5x. Liquidity was approximately $725 million, including $224 million in cash on hand and the remainder available under the Company’s revolving credit facility.

“We’re making progress on driving efficiency improvements across inventory and payables, but we continue to see pressure to our cash flow and leverage due to lower order intake and timing of working capital requirements on large projects,” said Bob VanHimbergen, SVP and Chief Financial Officer of Hillenbrand. “We remain committed to debt reduction as our top priority for capital deployment and we’re launching additional cost actions to help mitigate the headwinds we’re facing, but we’ll face pressure on our deleveraging timeline until order patterns normalize.”

Fiscal 2024 Outlook

Hillenbrand is updating its annual guidance range for fiscal year 2024 and is providing a fiscal Q3 outlook for adjusted earnings per share. These changes reflect reduced volumes stemming from lower than expected orders, unfavorable product mix in MTS, and pricing pressure in MTS, partially offset by approximately $8 million of in-year MTS restructuring benefits, cost actions throughout APS and corporate, and accelerated margin enhancement within the recent acquisitions. Free cash flow is now expected to be approximately $130 million to $150 million for the year, down from our previous expectation of approximately $230 million.

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About Hillenbrand

Hillenbrand (NYSE: HI) is a global industrial company operating in over 40 countries with over 10,000 associates serving a wide variety of industries around the world. Guided by our Purpose — Shape What Matters For Tomorrow™ — we pursue excellence, collaboration, and innovation to consistently shape solutions that best serve our associates, customers, communities, and other stakeholders. Hillenbrand’s portfolio includes brands such as Coperion, Milacron Injection Molding & Extrusion, and Mold-Masters, in addition to Batesville. To learn more, visit: www.Hillenbrand.com.

Source: Hillenbrand, Inc.