Hillenbrand Reports Fiscal Third Quarter 2023 Results
Q3 Highlights:
- Revenue from continuing operations of
increased$717 million 24% compared to prior year; organic revenue from continuing operations increased5% - GAAP EPS from continuing operations of
compared to$0.60 in the prior year; adjusted EPS from continuing operations of$0.42 increased$0.95 36% compared to prior year - Operating cash flow of
increased$89 million compared to prior year;$104 million 112% free cash flow conversion in the quarter - Entered into agreement to acquire Schenck Food and Performance Materials business, significantly expanding Hillenbrand's presence in food end market; transaction expected to close in fiscal Q4
FY23 Outlook:
- Updating FY23 adjusted EPS from continuing operations to
-$3.40 from$3.50 -$3.30 $3.50
"We delivered double-digit organic growth in our Advanced Process Solutions segment, saw strong demand for our leading food processing solutions, and generated solid operating cash flow in the quarter. Despite the ongoing macroeconomic uncertainty, I'm proud of the continued execution by our global teams in managing costs and driving productivity. While we are seeing customer delays continue in our Molding Technology Solutions segment and an increase in customer delays of orders for large plastics projects in our Advanced Process Solutions segment, we remain focused on executing our strong backlog and deploying the Hillenbrand Operating Model to drive operating efficiencies across the enterprise," said Kim Ryan, President and Chief Executive Officer of Hillenbrand.
"During the quarter, we announced that we entered into a definitive agreement to acquire the Schenck Food and Performance Materials business, which will further position us as a global leader of highly-engineered, mission-critical processing equipment and solutions in the attractive end markets of food, durable plastics, and chemicals, which are supported by long-term secular growth trends. I'm excited about the opportunity this acquisition creates in allowing us to offer greater value to our customers, our associates, and our shareholders."
Third Quarter 2023 Results of Continuing Operations1
Revenue from continuing operations of
Net income from continuing operations of
Adjusted EBITDA of
Advanced Process Solutions (APS)
Revenue of
Adjusted EBITDA of
Backlog of
Molding Technology Solutions (MTS)
Revenue of
Adjusted EBITDA of
Backlog of
Balance Sheet, Cash Flow and Capital Allocation
The Company generated operating cash flow from continuing operations of
As of June 30, 2023, net debt was approximately
As previously announced, the Company entered into a definitive agreement to acquire the Schenck Food and Performance Materials business ("FPM") from Blackstone for an enterprise value of approximately
Updated Fiscal 2023 Outlook - Continuing Operations
Hillenbrand is narrowing its annual guidance for fiscal year 2023 based on year-to-date performance and its outlook for the fiscal fourth quarter. Revenue estimates have been lowered modestly due to ongoing customer order delays within the MTS segment, particularly in
Revenue Outlook ($M) | Updated Range | YOY % | Previous Range |
Advanced Process Solutions | |||
Molding Technology Solutions | ( | ||
Hillenbrand | |||
Adj. EBITDA Outlook | Updated Range | YOY bps / % | Previous Range |
Advanced Process Solutions | (50) bps - (40) bps | ||
Molding Technology Solutions | (200) bps - (170) bps | ||
Hillenbrand | |||
Adj. EPS Outlook | Updated Range | YOY % | Previous Range |
Full Year |
Note: Year-over-Year ("YOY") growth figures presented in the guidance table above are on a continuing operations basis, which exclude the discontinued operations of
1
Conference Call Information
Date/Time: Thursday, August 3, 2023, 8:00 a.m. ET
Dial-In for
Dial-In for International: +1-862-298-0702
Conference call ID number: 13740206
Webcast link: http://ir.hillenbrand.com under the News & Events tab (archived through Thursday, August 31, 2023)
Replay - Conference Call
Date/Time: Available until midnight ET, Thursday, August 17, 2023
Replay ID number: 13740206
Dial-In for
Dial-In for International: +1-201-612-7415
Hillenbrand's financial statements on Form 10-Q are expected to be filed jointly with this release and will be made available on the company's website (https://ir.hillenbrand.com).
In addition to the financial measures prepared in accordance with
- business acquisition, disposition, and integration costs;
- restructuring and restructuring-related charges;
- intangible asset amortization;
- inventory step-up charges;
- gains and losses on divestitures;
- other individually immaterial one-time costs;
- the related income tax impact for all of these items; and
- certain tax items related to acquisitions and divestitures, the revaluation of deferred tax balances resulting from fluctuations in currency exchange rates and non-routine changes in tax rates for certain foreign jurisdictions, and the impact that the Molding Technology Solutions reportable operating segment's loss carryforward attributes have on tax provisions related to the imposition of tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries, the Foreign Derived Intangible Income Deduction (FDII), and the Base Erosion and Anti-Abuse Tax (BEAT).
Refer to the Reconciliation of Non-GAAP Measures for further information on these adjustments. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.
Hillenbrand uses this non-GAAP information internally to measure operating segment performance and make operating decisions and believes it is helpful to investors because it allows more meaningful period-to-period comparisons of ongoing operating results. The information can also be used to perform trend analysis and to better identify operating trends that may otherwise be masked or distorted by items such as the above excluded items. Hillenbrand believes this information provides a higher degree of transparency.
One important non-GAAP measure Hillenbrand uses is adjusted earnings before interest, income tax, depreciation, and amortization ("adjusted EBITDA"). A part of our strategy is to pursue acquisitions that strengthen or establish leadership positions in key markets. Given that strategy, it is a natural consequence to incur related expenses, such as amortization from acquired intangible assets and additional interest expense from debt-funded acquisitions. Accordingly, we use adjusted EBITDA, among other measures, to monitor our business performance. We also use "adjusted net income" and "adjusted diluted earnings per share (EPS)," which are defined as net income and earnings per share, respectively, each excluding items described in connection with adjusted EBITDA. Adjusted EBITDA, adjusted net income, and adjusted diluted EPS are not recognized terms under GAAP and therefore do not purport to be alternatives to net income or to diluted EPS, as applicable. Further, Hillenbrand's measures of adjusted EBITDA, adjusted net income, and adjusted diluted EPS may not be comparable to similarly titled measures of other companies.
Organic revenue and organic adjusted EBITDA are defined respectively as net revenue and adjusted EBITDA excluding net revenue and adjusted EBITDA directly attributable to TerraSource, which was divested on October 22, 2021, as well as recent acquisitions, including Linxis, Herbold Meckesheim, Peerless Food Equipment, and Gabler Engineering, and adjusting for the effects of foreign currency exchange. In addition, the ratio of net debt to pro forma adjusted EBITDA is a key financial measure that is used by management to assess Hillenbrand's borrowing capacity (and is calculated as the ratio of total debt less cash and cash equivalents to the trailing twelve months pro forma adjusted EBITDA). Hillenbrand uses organic and pro forma measures to assess performance of its reportable operating segments and the Company in total without the impact of recent acquisitions and divestitures.
Hillenbrand calculates the foreign currency impact on net revenue, adjusted EBITDA, and backlog in order to better measure the comparability of results between periods. We calculate the foreign currency impact by translating current year results at prior year foreign exchange rates. This information is provided because exchange rates can distort the underlying change in sales, either positively or negatively.
Another important operational measure used is backlog. Backlog is not a term recognized under GAAP; however, it is a common measurement used in industries with extended lead times for order fulfillment (long-term contracts), like those in which our reportable operating segments compete. Backlog represents the amount of consolidated net revenue that we expect to realize on contracts awarded to our reportable operating segments. For purposes of calculating backlog,
Hillenbrand expects that future net revenue associated with our reportable operating segments will be influenced by order backlog because of the lead time involved in fulfilling engineered-to-order equipment for customers. Although backlog can be an indicator of future net revenue, it does not include projects and parts orders that are booked and shipped within the same quarter. The timing of order placement, size, extent of customization, and customer delivery dates can create fluctuations in backlog and net revenue. Net revenue attributable to backlog may also be affected by foreign exchange fluctuations for orders denominated in currencies other than
See below for a reconciliation from GAAP operating performance measures to the most directly comparable non-GAAP (adjusted) performance measures. Given that backlog is an operational measure and that the Company's methodology for calculating backlog does not meet the definition of a non-GAAP measure, as that term is defined by the
Hillenbrand, Inc. Consolidated Statements of Operations (Unaudited) (in millions, except per share data) | |||||||
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net revenue | $ 716.6 | $ 579.8 | $ 2,063.2 | $ 1,711.4 | |||
Cost of goods sold | 469.7 | 388.8 | 1,382.5 | 1,149.9 | |||
Gross profit | 246.9 | 191.0 | 680.7 | 561.5 | |||
Operating expenses | 144.8 | 111.6 | 424.6 | 337.1 | |||
Amortization expense | 19.7 | 13.4 | 58.6 | 40.8 | |||
Loss on divestiture | — | — | — | 3.1 | |||
Interest expense | 18.6 | 17.5 | 63.0 | 52.7 | |||
Other income, net | (4.0) | (2.5) | (10.6) | (9.3) | |||
Income from continuing operations before income taxes | 67.8 | 51.0 | 145.1 | 137.1 | |||
Income tax expense | 23.8 | 19.9 | 50.2 | 54.4 | |||
Income from continuing operations | 44.0 | 31.1 | 94.9 | 82.7 | |||
Income from discontinued operations (net of income tax expense) | 0.6 | 19.0 | 20.1 | 73.3 | |||
Gain on divestiture of discontinued operations (net of income tax expense) | 0.4 | — | 441.3 | — | |||
Total income from discontinued operations | 1.0 | 19.0 | 461.4 | 73.3 | |||
Consolidated net income | 45.0 | 50.1 | 556.3 | 156.0 | |||
Less: Net income attributable to noncontrolling interests | 1.7 | 1.3 | 4.8 | 3.9 | |||
Net income attributable to Hillenbrand | $ 43.3 | $ 48.8 | $ 551.5 | $ 152.1 | |||
Earnings per share | |||||||
Basic earnings per share | |||||||
Income from continuing operations attributable to Hillenbrand | $ 0.60 | $ 0.42 | $ 1.29 | $ 1.09 | |||
Income from discontinued operations | 0.02 | 0.26 | 6.62 | 1.01 | |||
Net income attributable to Hillenbrand | $ 0.62 | $ 0.68 | $ 7.91 | $ 2.10 | |||
Diluted earnings per share | |||||||
Income from continuing operations attributable to Hillenbrand | $ 0.60 | $ 0.42 | $ 1.29 | $ 1.08 | |||
Income from discontinued operations | 0.02 | 0.26 | 6.59 | 1.00 | |||
Net income attributable to Hillenbrand | $ 0.62 | $ 0.68 | $ 7.88 | $ 2.08 | |||
Weighted average shares outstanding (basic) | 70.0 | 71.4 | 69.7 | 72.4 | |||
Weighted average shares outstanding (diluted) | 70.3 | 72.0 | 70.0 | 73.0 | |||
Cash dividends per share | $ 0.22 | $ 0.2175 | $ 0.66 | $ 0.6525 |
Condensed Consolidated Statements of Cash Flows (in millions) | |||
Nine Months Ended June 30, | |||
2023 | 2022 | ||
Cash flows provided by (used in): | |||
Operating activities from continuing operations | $ 133.6 | $ (9.9) | |
Investing activities from continuing operations | 25.0 | (40.3) | |
Financing activities from continuing operations | 21.4 | (201.3) | |
Total cash (used in) provided by discontinued operations | (117.0) | 96.3 | |
Effect of exchange rates on cash and cash equivalents | (9.3) | (10.2) | |
Net cash flows | 53.7 | (165.4) | |
Cash, cash equivalents, restricted cash, and cash and cash equivalents held for sale: | |||
At beginning of period | 237.6 | 450.9 | |
At end of period | $ 291.3 | $ 285.5 |
Reconciliation of Non-GAAP Measures (in millions, except per share data) | |||||||
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Income from continuing operations | $ 44.0 | $ 31.1 | $ 94.9 | $ 82.7 | |||
Less: Net income attributable to noncontrolling interests | 1.7 | 1.3 | 4.8 | 3.9 | |||
Income from continuing operations attributable to Hillenbrand | 42.3 | 29.8 | 90.1 | 78.8 | |||
Business acquisition, disposition, and integration costs (1) | 10.6 | 9.1 | 28.5 | 20.6 | |||
Restructuring and restructuring-related charges (2) | 0.8 | 0.2 | 2.3 | 3.5 | |||
Inventory step-up charges (3) | — | — | 11.1 | — | |||
Intangible asset amortization (4) | 19.7 | 13.4 | 58.6 | 40.8 | |||
Loss on divestiture (5) | — | — | — | 3.1 | |||
Other (6) | — | 0.1 | — | 3.2 | |||
Tax adjustments (7) | 0.6 | 3.0 | 2.2 | 5.4 | |||
Tax effect of adjustments (8) | (7.1) | (5.2) | (25.7) | (15.8) | |||
Adjusted net income from continuing operations attributable to Hillenbrand | $ 66.9 | $ 50.4 | $ 167.1 | $ 139.6 | |||
Diluted EPS from continuing operations | $ 0.60 | $ 0.42 | $ 1.29 | $ 1.08 | |||
Business acquisition, disposition, and integration costs (1) | 0.15 | 0.12 | 0.41 | 0.28 | |||
Restructuring and restructuring-related charges (2) | 0.01 | 0.01 | 0.03 | 0.05 | |||
Inventory step-up charges (3) | — | — | 0.16 | — | |||
Intangible asset amortization (4) | 0.28 | 0.19 | 0.84 | 0.56 | |||
Loss on divestiture (5) | — | — | — | 0.04 | |||
Other (6) | — | — | — | 0.04 | |||
Tax adjustments (7) | 0.01 | 0.04 | 0.03 | 0.07 | |||
Tax effect of adjustments (8) | (0.10) | (0.08) | (0.37) | (0.21) | |||
Adjusted Diluted EPS from continuing operations | $ 0.95 | $ 0.70 | $ 2.39 | $ 1.91 |
(1) | Business acquisition, disposition, and integration costs during the three and nine months ended June 30, 2023, primarily included professional fees related to acquisitions and costs associated with the integration of recent acquisitions. Business acquisition, disposition, and integration costs during the three and nine months ended June 30, 2022, primarily included professional fees and employee-related costs attributable to the integration of Milacron and the divestiture of TerraSource. |
(2) | Restructuring and restructuring-related charges primarily included severance costs during the three and nine months ended June 30, 2023 and 2022. |
(3) | The amount during the three and nine months ended June 30, 2023, represents the non-cash charges related to the fair value adjustment of inventories acquired in connection with the acquisitions of Herbold, Linxis, and Peerless. |
(4) | Intangible assets relate to our acquisition activities and are amortized over their useful lives. The amortization of acquired intangible assets is reported separately in our Consolidated Statements of Operations as amortization expense. The amortization of acquired intangible assets does not impact the core performance of our business operations since this amortization does not directly relate to the sale of our products or services. |
(5) | The amount during the nine months ended June 30, 2022 represents the loss on the divestiture of TerraSource. |
(6) | Includes other individually immaterial one-time costs, including reserves against certain receivables during the three and nine months ended June 30, 2022. |
(7) | For three and nine months ended June 30, 2023 and 2022, this primarily represents the net impact from certain non-recurring tax items, including items related to acquisitions and divestitures. |
(8) | Represents the tax effect of the adjustments previously identified above. |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Adjusted EBITDA: | |||||||
Advanced Process Solutions | $ 93.6 | $ 60.6 | $ 238.1 | $ 180.6 | |||
Molding Technology Solutions | 50.8 | 54.5 | 141.4 | 156.7 | |||
Corporate | (18.3) | (14.3) | (43.5) | (46.7) | |||
Add: | |||||||
Total income from discontinued operations | 1.0 | 19.0 | 461.4 | 73.3 | |||
Less: | |||||||
Interest income | (2.8) | (1.3) | (7.1) | (4.0) | |||
Interest expense | 18.6 | 17.5 | 63.0 | 52.7 | |||
Income tax expense | 23.8 | 19.9 | 50.2 | 54.4 | |||
Depreciation and amortization | 31.1 | 24.2 | 93.1 | 74.4 | |||
Business acquisition, disposition, and integration costs | 10.6 | 9.1 | 28.5 | 20.6 | |||
Inventory step-up charges | — | — | 11.1 | — | |||
Restructuring and restructuring-related charges | 0.8 | 0.2 | 2.3 | 3.5 | |||
Loss on divestiture | — | — | — | 3.1 | |||
Other | — | 0.1 | — | 3.2 | |||
Consolidated net income | $ 45.0 | $ 50.1 | $ 556.3 | $ 156.0 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Consolidated net income | $ 45.0 | $ 50.1 | $ 556.3 | $ 156.0 | |||
Interest income | (2.8) | (1.3) | (7.1) | (4.0) | |||
Interest expense | 18.6 | 17.5 | 63.0 | 52.7 | |||
Income tax expense | 23.8 | 19.9 | 50.2 | 54.4 | |||
Depreciation and amortization | 31.1 | 24.2 | 93.1 | 74.4 | |||
EBITDA | 115.7 | 110.4 | 755.5 | 333.5 | |||
Total income from discontinued operations | (1.0) | (19.0) | (461.4) | (73.3) | |||
Business acquisition, disposition, and integration costs | 10.6 | 9.1 | 28.5 | 20.6 | |||
Inventory step-up charges | — | — | 11.1 | — | |||
Restructuring and restructuring-related charges | 0.8 | 0.2 | 2.3 | 3.5 | |||
Loss on divestiture | — | — | — | 3.1 | |||
Other | — | 0.1 | — | 3.2 | |||
Adjusted EBITDA | 126.1 | 100.8 | 336.0 | 290.6 | |||
Less: Acquisitions adjusted EBITDA(1) | (19.1) | — | (43.9) | — | |||
Foreign currency impact | 1.0 | — | 12.0 | — | |||
Organic adjusted EBITDA | $ 108.0 | $ 100.8 | $ 304.1 | $ 290.6 | |||
Advanced Process Solutions adjusted EBITDA | $ 93.6 | $ 60.6 | $ 238.1 | $ 180.6 | |||
Less: Acquisitions adjusted EBITDA(1) | (19.1) | — | (43.9) | — | |||
Foreign currency impact | (0.2) | — | 6.4 | — | |||
Advanced Process Solutions organic adjusted EBITDA | $ 74.3 | $ 60.6 | $ 200.6 | $ 180.6 | |||
Molding Technology Solutions adjusted EBITDA | $ 50.8 | $ 54.5 | $ 141.4 | $ 156.7 | |||
Foreign currency impact | 1.2 | — | 5.9 | — | |||
Molding Technology Solutions organic adjusted EBITDA | $ 52.0 | $ 54.5 | $ 147.3 | $ 156.7 |
(1) The impact of the acquisitions of Gabler, Herbold, Linxis, and Peerless. |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Advanced Process Solutions net revenue | $ 464.7 | $ 310.3 | $ 1,308.0 | $ 942.0 | |||
Less: TerraSource Global net revenue(1) | — | — | — | (2.4) | |||
Less: Acquisitions(2) | (110.5) | — | (308.1) | — | |||
Foreign currency impact | (2.3) | — | 32.1 | — | |||
Advanced Process Solutions organic net revenue | 351.9 | 310.3 | 1,032.0 | 939.6 | |||
Molding Technology Solutions net revenue | 251.9 | 269.5 | 755.2 | 769.4 | |||
Foreign currency impact | 2.8 | — | 21.1 | — | |||
Molding Technology Solutions organic net revenue | 254.7 | 269.5 | 776.3 | 769.4 | |||
Consolidated organic net revenue | $ 606.6 | $ 579.8 | $ 1,808.3 | $ 1,709.0 |
(1) | The TerraSource business, which was included within the Advanced Process Solutions reportable operating segment, was divested on October 22, 2021. |
(2) | The impact of the acquisitions of Gabler, Herbold, Linxis, and Peerless. |
June 30, | June 30, | ||
2023 | 2022 | ||
Advanced Process Solutions backlog | $ 1,604.0 | $ 1,228.6 | |
Less: Acquisitions(1) | (267.2) | — | |
Foreign currency impact | (26.6) | — | |
Advanced Process Solutions organic backlog | 1,310.2 | 1,228.6 | |
Molding Technology Solutions backlog | 266.4 | 420.2 | |
Foreign currency impact | 0.6 | — | |
Molding Technology Solutions organic backlog | 267.0 | 420.2 | |
Consolidated organic backlog | $ 1,577.2 | $ 1,648.8 |
(1) The impact of the acquisitions of Gabler, Herbold, Linxis, and Peerless. |
June 30, | |
2023 | |
Current portion of long-term debt | $ 10.0 |
Long-term debt | 1,329.3 |
Total debt | 1,339.3 |
Less: Cash and cash equivalents | (290.5) |
Net debt | $ 1,048.8 |
Pro forma adjusted EBITDA for the trailing twelve months ended | $ 461.9 |
Ratio of net debt to pro forma adjusted EBITDA | 2.3 |
Forward-Looking Statements
Throughout this earnings release, we make a number of "forward-looking statements," including statements regarding the proposed acquisition (the "Proposed Transaction") by the Company of the Schenck Process Food and Performance Materials ("FPM") business, such as statements about the timing and other anticipated benefits of the Proposed Transaction that are within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and that are intended to be covered by the safe harbor provided under these sections. As the words imply, these are statements about future sales, earnings, cash flow, results of operations, uses of cash, financings, ability to meet deleveraging goals, and other measures of financial performance or potential future plans or events, strategies, objectives, beliefs, prospects, assumptions, expectations, and projected costs or savings or transactions of the Company that might or might not happen in the future, as contrasted with historical information. Forward-looking statements are based on assumptions that we believe are reasonable, but by their very nature are subject to a wide range of risks. If our assumptions prove inaccurate or unknown risks and uncertainties materialize, actual results could vary materially from Hillenbrand's expectations and projections.
Words that could indicate that we are making forward-looking statements include the following:
intend | believe | plan | expect | may | goal | would | project | position |
become | pursue | estimate | will | forecast | continue | could | anticipate | remain |
target | encourage | promise | improve | progress | potential | should | impact |
This is not an exhaustive list, but is intended to give you an idea of how we try to identify forward-looking statements. The absence of any of these words, however, does not mean that the statement is not forward-looking.
Here is the key point: Forward-looking statements are not guarantees of future performance or events, and actual results or events could differ materially from those set forth in any forward-looking statements. Any number of factors, many of which are beyond our control, could cause our performance to differ significantly from what is described in the forward-looking statements. These factors include, but are not limited to: global market and economic conditions, including those related to the financial markets; the impact of contagious diseases, such as the outbreak of the novel strain of coronavirus ("COVID-19") and the escalation thereof due to variant strains of the virus and the societal, governmental, and individual responses thereto, including supply chain disruptions, loss of contracts and/or customers, erosion of some customers' credit quality, downgrades of the Company's credit quality, closure or temporary interruption of the Company's or its suppliers' manufacturing facilities, travel, shipping and logistical disruptions, domestic and international general economic conditions, such as inflation, exchange rates and interest rates, loss of human capital or personnel, and general economic calamities; risks related to the
About Hillenbrand
Hillenbrand (NYSE: HI) is a global industrial company that provides highly-engineered, mission-critical processing equipment and solutions to customers in over 100 countries around the world. Our portfolio is composed of leading industrial brands that serve large, attractive end markets, including durable plastics, food, and recycling. Guided by our Purpose — Shape What Matters For Tomorrow™ — we pursue excellence, collaboration, and innovation to consistently shape solutions that best serve our associates, customers, communities, and other stakeholders. To learn more, visit: www.Hillenbrand.com.
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