Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record revenue of $275 million, a 12% increase from the previous year.
- Record adjusted EBITDA of $62 million, representing 22.5% of revenue.
- Strong performance in aftermarket parts, contributing to solid margin expansion.
- Successful integration of recent acquisitions, contributing positively to financial results.
- Healthy backlog and stable demand expected for the second half of 2024.
Negative Points
- Sluggish industrial demand in Europe and Asia, impacting overall performance.
- SG&A expenses increased to 25.5% of revenue due to non-recurring acquisition-related costs.
- Higher interest expenses due to acquisition borrowings, impacting net earnings.
- Gross margins expected to decline slightly in the second half of the year.
- Organic bookings growth was modest at 5%, indicating potential challenges in sustaining high growth rates.
Q & A Highlights
Q: Given the recent M&A, what was the organic growth for price consumables in the first and second quarter?
A: I don't have it parsed by parts and consumables. I have an aggregate, so I'll have to come back to you on that.
Q: Are we to think that the first half of the year was more normalized for bookings, or is there anything else to read into that may have affected the current standing?
A: The first half of the year has performed better than expected, particularly in North America. We think things are going to be fairly flat for the rest of the year, with strong parts demand and uncertain timing for capital projects.
Q: If we're taking $25 million of acquisitions bookings every quarter, does that imply a 5% organic decline for the year for bookings?
A: Yes, that's about right.
Q: Can you talk about the organic performance assumed for Q3 and the impact of the DSTI acquisition?
A: We expect very low single-digit organic declines this year, partly due to unfavorable foreign currency translation impacts.
Q: How would you describe the 2Q performance relative to your expectations, especially regarding capital shipments and sales?
A: Parts were stronger than expected, while capital was a bit weaker due to project timing. Smaller capital projects booked in Q3 should still hit the revenue line this year.
Q: Can you explain the better-than-expected gross margins on the capital side?
A: Both compared to last year and against forecast, our gross margins on capital performed better due to a mix of project sizes and segments.
Q: Is it possible to maintain the 22% adjusted EBITDA margin in the back half of the year?
A: No, with gross margins expected to come down modestly, the EBITDA margins will also decrease accordingly.
Q: Can you break out the organic orders trend on parts versus capital projects?
A: It was split between the two, with parts being the stronger component.
Q: How do you see the geographic regions performing across the three segments?
A: North America has held up better than expected, China continues to struggle, and Europe is mixed with some countries in recession. We expect North America to remain the strongest.
Q: Can you provide more details on the strength in North America and the situation in China?
A: All segments in North America are performing well. In China, market share is holding up, but the economy is struggling due to overbuilding and structural issues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
