The Eastern Company

Greetings and welcome to the Eastern Company's first quarter fiscal year 2023 earnings call. At this time all participants are in listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Ernie Hawkins. Sir, you may begin.

Good morning, and thank you, everyone, for joining us this morning for a review of Eastern's results for the first quarter of 2023. With me on the call are Eastern's president and CEO, Mark Hernandez, and CFO, Nicholas Flejos. We issued an earnings press release yesterday after the market closed. If anyone has not yet seen the release, I invite you to visit the investors section of the company's website, www.easterncompany.com, where you will find the release under financial news. Please note that some of the information you will hear today here during today's call will consist of forward-looking statements about the company's future financial performance and business prospects, including without limitation statements regarding revenue, gross margin, operating expenses, other income and expenses, taxes, and business outlook. These forward-looking statements are subject to risks and uncertainties that could cause actual results or trends to differ significantly from those projected in these forward-looking statements. We undertake no obligation to review or update any forward-looking statements to reflect events or circumstances that occur after the call. For more information regarding these risks and uncertainties, please refer to risk factors discussed in our SEC filings, including Form 10-K filed with the SEC on March 14, 2023, for the fiscal year 2022, and Form 10-Q filed with the SEC on May 9, 2023. In addition, during today's call, we will discuss non-GAAP financial measures that we believe are useful as supplemental measures of Eastern's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. A reconciliation of each of the non-GAAP measures discussed during today's call to the most directly comparable GAAP measure can be found in the earnings press release. With that, I'll turn the call over to Mark.

Thank you, Ernie, and good morning to those who have joined us by phone or participating via the web. It's a pleasure to speak with all of you today. I'm going to begin the call today with some high-level observations about our first quarter performance. Then I'll turn the call over to Nick, who will take you through the detailed review of our financial results. After that, I will come back and share with you many of the initiatives we have underway to improve our operational performance and enhance our return to our shareholders. and the goals of this management team intends to achieve in 2023. When I accepted the appointment as Eastern CEO four months ago, I saw a company with capable people and three promising businesses, each which faced a very challenging market environment. As you know, frequent supply chain disruptions and increases in freight and material costs were the order of the day in 2022. As a result of these severe headwinds, our businesses did not perform to their full potential, and our 2022 financial results suffered. Clearly, we needed to immediately change the way we were running our business. To that end, during the quarter, we undertook thorough review of our businesses, products, and began to implement an action plan consisting of several operational initiatives. We've set quantitative goals for these initiatives and are tracking performance to completion. I'm pleased to report that we began to see initial benefits of these operational improvement initiatives during the first quarter. Inventory declined 11% from the end of the fourth quarter, particularly at ValVac and working capital as percentage of sales declined to 22.1% from 26.1% for the fourth quarter as we flushed out a portion of our lower margin orders from our backlog. Supply chain bottlenecks are easy, and raw material and freight costs are moderated. Our backlog at the quarter end was $72 million compared with $85.8 million as April 1st of 2022 when backlog was artificially inflated because of supply chain constraints that delayed shipments. We continue to see pricing improvements at Velbec, which are resulting in addition of higher margin orders to our backlog. At Velvac, demand remains strong, and we're receiving orders for new products introduced last year to serve several new truck mirror programs and orders on existing programs as commercial vehicle customers get closer to producing at planned capacity. Eberhardt's electromechanical business is gaining momentum and has won sizable orders. Big Three Precision Products is generating increased quote activity and winning awards for returnable transport packaging solutions designed for new automotive model launches, primarily in the electric vehicle space. With that, I'll now turn the call over to Nick.