Hillenbrand Inc

Greetings, and welcome to the Hillenbrand Q2 Fiscal Year 2025 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Trent Schwartz, Executive Director, Investor Relations. Trent, please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Hillenbrand's conference call, where we will be discussing our fiscal second quarter performance. It's a pleasure to rejoin you all on today's call as my first quarter as Head of Investor Relations here at Hillenbrand. With me today is our President and CEO, Kim Ryan, and our Senior Vice President and CFO, I'd like to direct your attention to the supplemental slides posted on our IR website that will be referenced on today's call. Please note 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 certain non-GAAP operating performance measures. I encourage you to review the presentation, as well as our TimQ, which can be found on our website, for a deeper discussion of non-GAAP information, forward-looking statements, and the risk factors that could impact our actual results. Finally, the results we'll be discussing today for the fiscal second quarter still include the full performance of the Millicron injection molding and extrusion business, in both our consolidated results and in the molding technology solutions, or MTS, segment results. With that, I'm going to turn the call over to Kim.

Thanks, Trent, and good morning, everyone. Thank you for joining today's call. Before discussing our results, I would first like to provide an update on our portfolio following the completion of the divestiture of approximately 51% interest in the Millicron injection molding and extrusion business on March 31st, 2025. As a reminder, this is one of several companies acquired as part of the November 2019 transaction. The MTS segment going forward is now composed of the Moldmasters and DME brands, which round out the remaining assets from that deal. Over the past three years, we have transformed who Hillenbrand is, our portfolio, our purpose, and our operating model. The completion of this divestiture now allows Hillenbrand to focus on our core strengths of highly engineered, value-added processing technologies and systems, serving a diverse set of less cyclical global end markets. Our businesses are focused on performance materials, including plastics, and also food, health, and nutrition end markets that are underpinned by long-term secular growth trends. Our brands are industry leaders in the applications and geographies they serve. And while plastics and food may sound distinctly different, they share a common backbone of key processing steps and highly engineered equipment and a positive long-term demand outlook supported by a growing global middle class and a drive for more sustainable solutions. This allows us to leverage our most valuable assets, our people. Our expertise in systems design, process technology, engineering and service, as well as our strong global footprint is leveraged across all of our operating companies, brands and customers. I'm proud of our team's efforts in achieving this important strategic milestone, and we're excited for the long-term growth that we can achieve by leveraging this portfolio of products and capabilities for future growth. I'd now like to give a brief overview of our fiscal second quarter and then provide color on the current macro environment, as well as the actions we're taking to further strengthen the business. Bob will then give a more detailed review of our financials and updated outlook for the remainder of the year. Overall, demand in our second quarter continued to be heavily impacted by the ongoing global macroeconomic uncertainty, which escalated through the quarter, largely driven by tariffs. Despite this, our teams delivered revenue of $716 million and adjusted earnings per share of 60 cents per share ahead of our expectations coming into the quarter, but as expected, down versus the prior year due to lower starting backlog positions. Our teams continue to aggressively navigate this challenging environment with great discipline and collaboration across the enterprise. Now, turning to the market dynamics impacting our business. As we entered the calendar year, we were cautiously optimistic that our strong project pipeline would begin converting to orders at a more normalized pace. Since then, however, we've seen tariffs expand and escalate significantly. We've seen business and consumer confidence and sentiment fall. And finally, uncertainty on where or when geopolitical and macroeconomic factors will ultimately settle. This unpredictable environment has resulted in delays in our customers' investment plans, with many taking a wait-and-see approach at this time. We expect this elevated uncertainty to persist over the near term, and we've adjusted our outlook for what we know today, as Bob will cover a little later in the call. I'll now dive a little deeper into each segment specifically. Starting with our Advanced Process Solutions, or APS, segment, we saw year-over-year improvement in capital orders again this quarter for our food, health, and nutrition, or FHN, products. We also experienced strong demand in our separation business. Aftermarket and APS continue to provide a stable and profitable base in the quarter, as customers continue to steer investment towards parts, service, and refurbishment. However, The increased tariffs and risk of further tariffs has resulted in customers pausing to reevaluate many larger investments that we expected to close in the year in other end markets. Quote pipelines continue to be strong across key end markets and geographies, and we have not experienced cancellations, but the conversion of quotes to orders remains slow. We believe this slowness is macro-driven timing rather than a fundamental shift in the underlying market or our share position. which we're confident remains strong. We continue to be focused on executing cost-out initiatives, including cost controls, accelerated footprint consolidation in response to changing environments, but we are maintaining our focus on specific growth opportunities, particularly around our full solution capabilities in FHN and our service offerings. Moving on to MTS. Given the Millicron transaction, my commentary will be focused on the hot runner and mold-based businesses that make up MTS going forward. Orders in the quarter remain stable with improving hot runner demand for consumer goods and packaging, especially in APAC and the Americas, offsetting ongoing broad market sluggishness in Europe. External market indices were showing growth sentiment through the end of the quarter, though that has reversed as tariffs escalated in early April. particularly in China. So far through April, investments have slowed as larger multinational customers that export out of China have paused to assess the impacts of tariffs and evaluate sourcing and production alternatives outside of China, such as India, where we believe we are already well positioned with local resources in all of our businesses. In addition to the impact tariffs are having on customer sentiment across our segments, There are also higher costs of doing business that must be addressed. Before I turn the call over to Bob, I'll touch on what direct impacts we are seeing and how our teams are responding. Our teams have been assessing the potential impacts from rapidly evolving tariff policies all over the world and proactively managing our global supply chain. I'm grateful for their tireless efforts in this challenging endeavor. providing Bob and me with daily updates on the status of our exposure and ongoing and evolving mitigation plans. As we've discussed previously, our supply chain strategy has evolved significantly since COVID, with our manufacturing and supply chain footprint now primarily serving in region for region demand. This greatly reduces our direct exposure to tariffs, as we mentioned in the last earnings call. However, we do still have a portion of our domestic suppliers that are international due to their special capabilities, representing approximately 5% of our global cost of goods sold. Spend between China and the US specifically represents only about 1% of our global cost of goods sold. To help mitigate this impact, we have built a comprehensive multi-pronged strategy based on near, medium, and long-term opportunities, including alternative sourcing, strategically shifting inventories and manufacturing capabilities, implementing surcharge pricing, and adjusting contract terms to address higher costs and potential additional tariffs should they go into effect. Given the unpredictable nature of the situation, we have included roughly $15 million in direct tariff costs in our updated outlook for the remainder of this year, based on assumptions of the current policies in place as of April 29, 2025. and considering the degree to which we can offset the higher costs in the near term. While we're disappointed in the constrained customer demand we're experiencing in this environment, we remain positive and well positioned with our regional approach and in our leading competitive positions to benefit when demand returns. We believe the long-term demand drivers of our end markets remain firmly intact, and I'm proud of our team's resiliency and agility in responding to the challenges of the day. as we continue to be laser-focused on managing what's within our control and ensuring our portfolio of products and capabilities remains well-positioned for long-term success in serving our valued customers. With that, I'll turn the call over to Bob to discuss our financial performance and outlook.