Chase Corporation Announces Fiscal Third Quarter 2023 Results
- Chase Corporation reports a 20.3% increase in quarterly revenue and a reduction in inventory.
- Adhesives, Sealants and Additives segment revenue increased by 50% due to inorganic growth from NuCera.
- Industrial Tapes segment revenue increased by 7% due to sales price increases and increased demand.
- Gross margin declined due to lower margins from the NuCera business and inventory reduction initiatives.
- Corrosion Protection and Waterproofing segment revenue decreased by 21% due to lower sales volume.
Quarterly Revenue Increased
Company-Wide Inventory Reduction Plan Well Underway
Disciplined Capital Allocation Drove Further Debt Payments
Fiscal Third Quarter and Year-to-Date Financial and Recent Operational Highlights
-
Total Revenue grew
20.3% to , and$106.6 million 27.9% to , in the third quarter and first nine-months of fiscal 2023, respectively$303.8 million -
Gross Margin of
37.7% (40.2% excluding NuCera) in the third quarter of fiscal 2023, compared to38.6% in the third quarter of fiscal 2022; Gross Margin of36.5% (39.6% excluding NuCera) in the first nine-months of fiscal 2023, compared to37.4% in the first-nine months of fiscal 2022 -
Net Income was
, or$12.1 million per diluted share, compared to$1.27 , or$15.5 million per diluted share in the third quarter of fiscal 2022, with the reduction primarily due to additional$1.64 ($3.1 million per diluted share) incremental amortization expense related to the NuCera business$0.24 -
Free Cash Flow was
and$21.4 million in the third quarter and first-nine months of fiscal 2023, respectively, compared to Free Cash Flow of$36.1 million and$10.2 million in the third quarter and first-nine months of fiscal 2022, respectively$17.2 million -
Adjusted EBITDA grew
15.2% to and$26.3 million 28.2% to in the third quarter and first-nine months of fiscal 2023, respectively, compared to Adjusted EBITDA of$73.5 million and$22.8 million in the third quarter and first-nine months of fiscal 2022, respectively$57.3 million
Adam P. Chase, President and Chief Executive Officer of Chase Corporation, said, “We are pleased by Chase’s continued operational excellence in the fiscal third quarter, including continued progress against our key growth initiatives and inventory reduction efforts. Increased inorganic growth from our NuCera business, coupled with tailwinds from our now fully realized price increases, drove much of our year-over-year revenue improvement. Our Adhesives, Sealants and Additives, and Industrial Tapes segments led sales in the quarter, predominately due to continued inorganic revenue from our NuCera business and increased demand seen in our electronic and industrial coatings product lines, as well as our specialty products and pulling and detection product lines. Conversely, our Corrosion Protection and Waterproofing segment experienced a moderate decline due to lower sales volume and customer destocking over the comparative period, tempering the quarter’s results.”
Mr. Chase added, “Although we enjoyed revenue strength in the period, there was a slight decline in gross margin in the third fiscal quarter and year-to-date period. This stepdown can be attributed to lower than historical gross margin from the NuCera business, as well as some impact from customer destocking and inventory reduction initiatives. As we continue integrating NuCera, our focus remains on establishing further operational efficiencies. However, excluding NuCera, Chase’s margin profile surpassed the prior year’s margins, demonstrating the Company’s continued commitment to financial discipline.”
Mr. Chase continued, “We are actively executing our previously announced inventory reduction plan, thus enhancing our cash flow and positioning the business to make additional payments toward our Long-Term Debt. Additionally, the Company made strides toward its ongoing consolidation and optimization initiative, having moved out of NuCera’s Woodlands, TX facility and subleasing the office in the third quarter. Chase continues to prioritize its proven growth strategy of maintaining financial flexibility, cost management, and minimizing its corporate footprint. We continue to evaluate additional opportunities to improve our profitability profile and further integrate the NuCera business.”
Mr. Chase concluded, “Our team is excited for the remainder of fiscal year 2023 and is prepared to continue growing our Company both organically and inorganically, as well as continued synergies. We would like to thank our Chase employees for their continued dedication to our business, customers, and operational excellence.”
Michael J. Bourque, Chase Corporation’s Treasurer and Chief Financial Officer, stated, “We are keenly focused on the integration of NuCera, and are pleased with continued demand for our Adhesives, Sealants and Additives and Industrial Tapes segments in the fiscal third quarter. Our inventory reduction initiative coupled with a moderated macro environment created an attractive opportunity for Chase to execute
Segment Results
Adhesives, Sealants and Additives
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Three Months Ended May 31, |
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Nine Months Ended May 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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$ |
55,083 |
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$ |
36,771 |
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$ |
159,370 |
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$ |
99,600 |
Cost of products and services sold |
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33,620 |
|
|
21,073 |
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|
100,621 |
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|
59,828 |
Gross Margin |
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$ |
21,463 |
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$ |
15,698 |
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$ |
58,749 |
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$ |
39,772 |
Gross Margin % |
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Revenue for our Adhesives, Sealants and Additives segment increased in the third quarter and year-to-date period against the comparable prior year periods. The segment revenue increased
Industrial Tapes
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Three Months Ended May 31, |
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Nine Months Ended May 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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$ |
40,927 |
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$ |
38,329 |
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$ |
116,987 |
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$ |
104,420 |
Cost of products and services sold |
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26,609 |
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|
25,836 |
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75,805 |
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69,845 |
Gross Margin |
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$ |
14,318 |
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$ |
12,493 |
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$ |
41,182 |
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$ |
34,575 |
Gross Margin % |
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Revenue for our Industrial Tapes segment increased in the third quarter and year-to-date period over the comparable prior year periods. The segment revenue increased
Corrosion Protection and Waterproofing
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Three Months Ended May 31, |
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Nine Months Ended May 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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$ |
10,635 |
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$ |
13,519 |
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$ |
27,461 |
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$ |
33,562 |
Cost of products and services sold |
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6,208 |
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7,529 |
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16,632 |
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|
18,957 |
Gross Margin |
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$ |
4,427 |
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$ |
5,990 |
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$ |
10,829 |
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$ |
14,605 |
Gross Margin % |
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Revenue in the Company’s Corrosion Protection and Waterproofing segment decreased in the third quarter and year-to-date period over the comparable prior year periods. The segment revenue decreased
About Chase Corporation
Chase Corporation, a global specialty chemicals company that was founded in 1946, is a leading manufacturer of protective materials for high-reliability applications throughout the world. More information can be found on our website https://chasecorp.com/
Use of Non-GAAP Financial Measures
The Company has used non-GAAP financial measures in this press release. Adjusted net income, Adjusted diluted EPS, EBITDA, Adjusted EBITDA and Free cash flow are non-GAAP financial measures. The Company believes that Adjusted net income, Adjusted diluted EPS, EBITDA, Adjusted EBITDA and Free cash flow are useful performance measures as they are used by its executive management team to measure operating performance, to allocate resources to enhance the financial performance of its business, to evaluate the effectiveness of its business strategies and to communicate with its board of directors and investors concerning its financial performance. The Company believes Adjusted net income, Adjusted diluted EPS, EBITDA, Adjusted EBITDA and Free cash flow are commonly used by financial analysts and others in the industries in which the Company operates, and thus provide useful information to investors. However, Chase’s calculation of Adjusted net income, Adjusted diluted EPS, EBITDA, Adjusted EBITDA and Free cash flow may not be comparable to similarly-titled measures published by others. Non-GAAP financial measures should be considered in addition to, and not as an alternative to, the Company’s reported results prepared in accordance with GAAP. This press release provides reconciliations from the most directly comparable financial measure presented in accordance with
Cautionary Note Concerning Forward-Looking Statements
Certain statements in this press release are forward-looking. These may be identified by the use of forward-looking words or phrases including, but not limited to, “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated” and “potential.” These forward-looking statements are based on Chase Corporation’s current expectations. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for such forward-looking statements. To comply with the terms of the safe harbor, the Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties which may affect the operations, performance, development and results of the Company's business include, but are not limited to, the following: uncertainties relating to economic conditions; uncertainties relating to customer plans and commitments; the pricing and availability of equipment, materials and inventories; technological developments; performance issues with suppliers and subcontractors; economic growth; delays in testing of new products; the Company’s ability to successfully integrate acquired operations; the effectiveness of cost-reduction plans; rapid technology changes; the highly competitive environment in which the Company operates; as well as expected impact of the coronavirus disease (COVID-19) pandemic on the Company's businesses. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company does not assume any obligation to update or revise any forward-looking statement made in this release or that may from time to time be made by or on behalf of the Company. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in the Company’s filings with the Securities and Exchange Commission, including the risks and uncertainties identified in Part I, Item 1A - Risk Factors of the Company’s Annual Report on Form 10-K for the year ended August 31, 2022.
The following table summarizes the Company’s unaudited financial results for the three and first nine months ended May 31, 2023 and 2022.
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Three Months Ended May 31, |
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Nine Months Ended May 31, |
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All figures in thousands, except per share figures |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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$ |
106,645 |
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$ |
88,619 |
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$ |
303,818 |
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$ |
237,582 |
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Costs and Expenses |
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Cost of products and services sold |
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|
66,437 |
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|
54,438 |
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|
193,058 |
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148,630 |
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Selling, general and administrative expenses |
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|
19,189 |
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|
13,807 |
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|
59,232 |
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|
40,307 |
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Research and product development costs |
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|
1,527 |
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|
1,186 |
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4,481 |
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3,274 |
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Operations optimization costs |
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215 |
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59 |
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1,506 |
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707 |
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Acquisition-related costs |
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— |
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— |
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29 |
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— |
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Loss on impairment/write-off of long-term assets |
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331 |
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— |
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1,193 |
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— |
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Loss (Gain) on contingent consideration |
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129 |
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(474 |
) |
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563 |
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(199 |
) |
Operating income |
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|
18,817 |
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|
19,603 |
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|
43,756 |
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|
44,863 |
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Interest expense |
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|
(2,361 |
) |
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|
(89 |
) |
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(6,886 |
) |
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(262 |
) |
Other (expense) income |
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(308 |
) |
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(166 |
) |
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(1,130 |
) |
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|
231 |
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Income before income taxes |
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16,148 |
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19,348 |
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35,740 |
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44,832 |
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Income taxes |
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4,056 |
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3,803 |
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8,421 |
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|
10,434 |
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Net income |
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$ |
12,092 |
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$ |
15,545 |
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$ |
27,319 |
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$ |
34,398 |
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Net income per diluted share |
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$ |
1.27 |
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$ |
1.64 |
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$ |
2.87 |
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$ |
3.62 |
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Weighted average diluted shares outstanding |
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|
9,463 |
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|
9,431 |
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|
9,451 |
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|
9,435 |
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Reconciliation of net income to EBITDA and adjusted EBITDA |
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Net income |
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$ |
12,092 |
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$ |
15,545 |
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$ |
27,319 |
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|
$ |
34,398 |
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Interest expense |
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|
2,361 |
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|
|
89 |
|
|
|
6,886 |
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|
|
262 |
|
Income taxes |
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|
4,056 |
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|
|
3,803 |
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|
|
8,421 |
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|
|
10,434 |
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Depreciation expense |
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|
2,172 |
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|
|
878 |
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|
6,708 |
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|
|
2,654 |
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Amortization expense |
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|
4,941 |
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|
2,925 |
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18,721 |
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|
9,092 |
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EBITDA |
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$ |
25,622 |
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$ |
23,240 |
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$ |
68,055 |
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$ |
56,840 |
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Loss (Gain) on contingent consideration |
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|
129 |
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(474 |
) |
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|
563 |
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|
(199 |
) |
Operations optimization costs |
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|
215 |
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|
59 |
|
|
|
1,506 |
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|
|
707 |
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Acquisition-related costs |
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|
— |
|
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|
— |
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|
29 |
|
|
|
— |
|
Purchase accounting adjustments |
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|
— |
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|
— |
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|
2,200 |
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— |
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Loss on impairment/write-off of long-term assets |
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|
331 |
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— |
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|
1,193 |
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— |
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Adjusted EBITDA |
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$ |
26,297 |
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$ |
22,825 |
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$ |
73,546 |
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$ |
57,348 |
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Three Months Ended May 31, |
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Nine Months Ended May 31, |
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|
2023 |
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2022 |
|
2023 |
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2022 |
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Reconciliation of net income to adjusted net income |
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Net income |
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$ |
12,092 |
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$ |
15,545 |
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$ |
27,319 |
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$ |
34,398 |
|
Stock based compensation excess tax loss (gain) |
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|
4 |
|
|
|
— |
|
|
|
(127 |
) |
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|
10 |
|
Loss on contingent consideration |
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|
129 |
|
|
|
(474 |
) |
|
|
563 |
|
|
|
(199 |
) |
Operations optimization costs |
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|
215 |
|
|
|
59 |
|
|
|
1,506 |
|
|
|
707 |
|
Acquisition-related costs |
|
|
— |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
Purchase accounting adjustments |
|
|
— |
|
|
|
— |
|
|
|
2,200 |
|
|
|
— |
|
Loss on impairment/write-off of long-term assets |
|
|
331 |
|
|
|
— |
|
|
|
1,193 |
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|
|
— |
|
Income taxes * |
|
|
(142 |
) |
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|
87 |
|
|
|
(1,153 |
) |
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|
(107 |
) |
Adjusted net income |
|
$ |
12,629 |
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$ |
15,217 |
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$ |
31,530 |
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$ |
34,809 |
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Adjusted net income per diluted share (Adjusted diluted EPS) |
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$ |
1.32 |
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$ |
1.60 |
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$ |
3.31 |
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$ |
3.66 |
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* For the three and first nine months ended May 31, 2023 and 2022, represents the aggregate tax effect assuming a |
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Three Months Ended May 31, |
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Nine Months Ended May 31, |
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|
2023 |
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2022 |
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2023 |
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2022 |
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Reconciliation of cash provided by operating activities to free cash flow |
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Net cash provided by operating activities |
|
$ |
22,624 |
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$ |
11,529 |
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$ |
41,815 |
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|
$ |
20,286 |
|
Purchases of property, plant and equipment |
|
|
(1,269 |
) |
|
|
(1,334 |
) |
|
|
(5,729 |
) |
|
|
(3,103 |
) |
Free cash flow |
|
$ |
21,355 |
|
|
$ |
10,195 |
|
|
$ |
36,086 |
|
|
$ |
17,183 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230706069030/en/
Investor & Media:
Jackie Marcus or Ashley Gruenberg
Alpha IR Group
Phone: (617) 466-9257
E-mail: CCF@alpha-ir.com
or
Shareholder & Investor Relations Department
Phone: (781) 332-0700
E-mail: investorrelations@chasecorp.com
Website: www.chasecorp.com
Source: Chase Corporation
FAQ
What was the increase in quarterly revenue for Chase Corporation?
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