Hillenbrand Inc

Greetings. Welcome to the Hillenbrand Third Quarter Fiscal Year 24 Earnings Call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone today should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. I'll now turn the conference over to Sam Minesburg, Vice President, Investor Relations. Mr. Minesburg, you may now begin your presentations.

Thank you, Operator, and good morning, everyone. Welcome to Hill & Brand's earnings call for our third quarter of fiscal year 2024. I'm joined by our President and CEO, Kim Ryan, and our Senior Vice President and CFO, Bob VanHembergen. I'd like to direct your attention to the supplemental slides posted on our IR website that will be referenced on today's call. Turning to slide three, a reminder that our comments may contain certain forward-looking statements that are subject to the safe harbor provisions of the securities laws. These statements are not guarantees of future performance, and our actual results could differ materially. Also, during the course of this call, we will be discussing our results on a continuing operations basis, which excludes any impact from the discontinued operations of Batesville, as well as certain non-GAAP operating performance measures, including organic comparisons for our segments, which exclude the impacts from acquisitions, divestitures, and foreign currency exchange rates. I encourage you to review the appendix in slide three of the presentation, as well as our 10-Q, which can be found on our website, for a deeper discussion of non-depth information, forward-looking statements, and the risk factors that could impact our actual results. Finally, as of August 1st, Schenck Process Suit and Performance Materials has been rebranded under our existing Propyrion brand, but will be referred to as FPM throughout today's call. With that, I'll turn the call over to Kim.

Thanks, Sam, and hello, everyone. Thank you for joining us on this morning's call. We were pleased with the progress made in executing our strategy during this quarter in light of tougher than expected macro environment as our FPM integration continued to progress well and exceeded our expectations for synergy achievement. However, the quarter was also characterized by heightened demand pressures across our mid and long cycle product line as ongoing uncertainty in the macroeconomic environment resulted in significantly lower than expected orders and revenue within our advanced process solution segment. In our molding technology solution segment, demand remained relatively stable, but we've yet to see a rebound in overall order patterns as macro industry trends and machine utilization deteriorated as we progressed through the quarter. We continue to see pressure to the recovery timeline in MTS, which necessitated the non-cash impairment charge taken in the quarter as we announced in yesterday's press release. From a performance standpoint, total revenue grew 10% over prior year, primarily driven by the acquisition of FPM, but decreased 8% organically. We continued to see higher aftermarket revenue across both segments. However, this was offset by a decline in capital equipment volume stemming from the ongoing order pressures that we've been facing throughout the year. Adjusted EBITDA margins also improved sequentially in both segments. as we continue to heavy focus on executing our previously announced restructuring actions and accelerating additional cost initiatives. In order to speed these cost-out initiatives along, we're utilizing temporary additional resources to help us execute our plans as quickly and effectively as possible, given the intensified volume challenges. We've delivered adjusted earnings per share of 85 cents, which was at the high end of our guidance. due in part to the success of these cost initiatives, which helped mitigate the softer-than-expected volumes. However, we continue to see pressure to our previous performance expectations, given the magnitude of the order shortfall in APS and the increasing uncertainty around the world, which has dampened our outlook. Bob will discuss this further in a moment. I'll now provide some additional color on what we're seeing across key end markets. As I mentioned, orders in APS were materially impacted by continuing delays in customer decision timing. While we've been experiencing customer delays throughout the year, they became more pronounced during the quarter, as customers remain highly sensitive to several different factors, the elevated interest rate environment, ongoing inflation, geopolitical uncertainty, and other global macroeconomic concerns. As a result, we're seeing customers conserve cash by postponing CapEx investment decisions beyond their current budget cycle, and we've seen this behavior across most of our key end markets globally. I'll start my comments with polymers and advanced materials in APS. As we discussed last quarter, we believe we won a majority of the projects awarded for large polyolefin systems so far this year. We expected to see decisions made for incremental investment projects in India and the Middle East in the back half of the year, which have not yet been awarded on our originally anticipated timeline. While the timing of final project decisions have slowed significantly, the level of customer quote activity remains high across these regions. In addition to growing project pipelines for polyolefin investments in other parts of Asia and Africa, We believe the strength of our global footprint and our best-in-class technologies and solutions keep us well-positioned in these regions for when decision timing begins to normalize. For midsize equipment systems serving the areas of engineered plastics, recycling, and battery, we continue to see customers pausing their CapEx projects with a number of decisions we expected over the summer now delayed outside of the current fiscal year. However, the breadth of our products and systems offering for these markets, which was greatly enhanced through the acquisitions of FPM and Herbal, has provided significant opportunity to compete more effectively than we could before. Our teams remain very energized for our ability to access new customers, increase share of wallet with existing customers, and partner with customers in developing innovative solutions for these highly technical processes. Turning to food, health, and nutrition, orders in the quarter improved by double digits sequentially, but did not achieve the levels we expected coming into the year. While these end markets have historically been less cyclical, right now we're seeing elevated CapEx sensitivity from customers. That said, the pipeline of projects across our key customer segments of baked goods, pet foods, snacks, and cereals remains robust as customers evaluate investments for both capacity expansion and optimizing their existing operations through automation and equipment upgrades. We have not seen customers cancel projects in the pipeline, but we have seen a similar trend of delayed investment decisions as customers balance new investments with inflationary pressures, higher interest rates, and softening consumer trends. Finally, for our aftermarket parts and services in APS, we continue to see solid growth in this highly profitable part of the business. as our large and growing install base pays dividends in the legacy business. In addition, we're driving strong performance within our recent acquisitions through the execution of integration initiatives, including dedicated aftermarket resources, better visibility into install base opportunities, and improved pricing realization. As discussed previously, this is a key focus area of our integration, and I'm pleased with the traction that we're making. However, the delay in larger polyolefin project orders has put pressure on our ability to achieve even higher levels of aftermarket growth, as many of those large projects would have included upfront spare parts packages. Now turning to our molding technology solution segment. In the quarter, we saw improved demand for automotive and packaging applications, primarily in India and Asia, as hot runner demand saw its first quarter of year-over-year growth in China since early 2022. Overall, for this segment, orders were up slightly year-over-year, but essentially flat on a sequential basis, as we've yet to see signs of broader demand recovery. Key macro indicators showed positive signs in April, but then trended negatively through the remainder of the quarter, reflecting a challenging and uncertain environment for machine utilization and mold-making activity in North America. While investments in new capital equipment remain subdued, we continue to focus on driving aftermarket parts and services revenue, achieving a record level in the quarter. In summary, we've experienced greater than expected challenges across our end markets as macro factors have weighed heavily on our near to midterm growth opportunities and expectations. In light of this, we continue to focus and execute on controllable factors within our four walls. pursue targeted growth initiatives, and exercise discipline regarding discretionary costs. In addition, we remain on track with previously announced restructuring actions, and we continue to evaluate further actions to ensure that we're optimizing our cost structure across the organization. I remain confident in our strategy and the long-term catalyst for our business as the growing global middle class and a drive for increased sustainability supports long-term demands for durable plastics, processed foods, and more sustainably focused solutions, including recycling and battery. I'm confident that we're well positioned to meet those demands through our leading brands and our differentiated and highly engineered processing solutions. Now, before turning the call over to Bob to discuss our financials in more detail, I want to highlight the progress of our integration as well as touch on our most recent sustainability report. As we approach the one year anniversary of our FPM acquisition, I'm tremendously pleased with the fit of the business within our portfolio, the people, the culture, the technologies and capabilities of the combined companies. We are stronger as we come together as one team. Through the deployment of our Hillenbrand operating model and the utilization of temporary external resources, We've been able to accelerate operational efficiencies and cost synergies, resulting in EBITDA margins over 300 basis points ahead of what we had originally planned by this time within the FPM business. While the team and I are disappointed that the broader demand environment has limited the speed in which we can capitalize on more commercial opportunities, I'm very proud of how we've executed our integration plans to create a winning organization for the future. Most importantly, I'm highly confident in our team and our portfolio of leading process technologies for ingredient automation, mixing, extruding, portioning, as well as full systems integration that will allow us to deliver best-in-class solutions to customers in the years ahead. Finally, as you saw in May, we published our fifth sustainability report, which focused on product innovation supply chain, and increased transparency around our key environmental metrics like waste, water, and scope one, two, and three emissions. We're pleased with the continued progress we're making in this regard, and as a result, have received top quartile scores amongst industrial companies by third-party reporting agencies. With that, I'll now turn the call over to Bob.