The Eastern Company

Greetings and welcome to the Eastern Company's fourth quarter fiscal year 2023 earnings conference call. At this time, all participants are on a 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.

Thank you. Good morning, and thank you, everyone, for joining us this morning for a review of Eastern's results for the fourth quarter and full year 2023. With me on the call are Eastern's President and CEO, Mark Hernandez, and Eastern's CFO, Nicholas Vallejos. We issued an earnings press release yesterday after the market closed. If anyone has not yet seen the release, please 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 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 12, 2024, for the fiscal year 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 introduction, I'll turn the call over to Mark.

Thank you, Ernie. Good morning to both those who are joining us by the phone and those participating via the web. It's an absolute pleasure to be speaking with you today. after a year of realignment and continuous improvement during which we focused on our core operations for long-term growth and shareholder value creation. As you know, since I became CEO in January of 2023, we've been following four fundamental strategies. Discipline operations, effective capital utilization, focused commercial business, and value-adding acquisitions. To those four pillars, we recently added a key overlying component we call One Eastern to help us capture the many synergies that exist between our three business operations. During 2023, our determined application of Eastern strategies produced increasingly strong results as 23 progressed. For the full year, we boosted our gross margins by 280 basis points from 21 percent in 2022 to 23.8 percent in 2023 through on-shoring, pricing increases, and cost recovery actions. Earnings from operations improved continuously each quarter, culminating in earnings per share of 57 cents in the fourth quarter of 2023 compared to 3 cents in last year's period. We achieved these results while dealing with the lingering impacts of troubled supply chains with customers reducing their inventory levels as global supply chain finally returned to its pre-pandemic state and with high inflation that hadn't been experienced for several decades. In addition to improving quality and consistency of our earnings, we brought down past due deliveries and past due order backlogs. and we ended the year with working capital as a percentage of sales of 25.6% compared to 26.1% in 2022. By reducing working capital requirements and generating cash flow from continued operations, we brought down debt by more than $20 million. Cash flow from operations improved to 26.5 million in 2023 compared to 7.4 million last year, and our balance sheet strengthened tremendously. While achieving these results, we continued investing in our company and returning capital to the shareholders. During 2023, we streamlined Eastern operations, consolidating our focus on North America, and in an example of vertical integration, we bought certain assets of SureFlex Incorporated to expand Velvac production capabilities. We also maintained Eastern's longstanding dividend program and repurchased 40,000 shares or approximately 0.6% of the company stock. In 2023, our transformation strategy delivered strong early results, and we expect to drive further improvements in 2024. We now have a solid operational foundation. We need to consider revenue-enhancing acquisitions that will help Eastern grow and vertical integration initiatives that will support gross margin improvement. Before I outline our approach for this year, I'll turn the call over to Nick for a quick review of the fourth quarter 2023 financial results. Nick? Thank you, Mark, and good morning, everyone.