Q1 2024 Hillenbrand Inc Earnings Call
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Operator: Hello, and welcome to the Hillenbrand Q1 Fiscal Year 2024 Earnings Call. If anyone should require operator assistance, please press star zero on your telephone keypad.
Hello, and welcome to the Hillenbrand Q1 fiscal year 'twenty 'twenty four earnings call and say you want you require operator assistance. Please press star zero on your telephone keypad.
Operator: A question and answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Sam Minesburg, Vice President, Investor Relations. Please go ahead, Sam.
Question and answer session will follow the formal presentation.
Could you may be placed into the question queue at any time by pressing star one on your telephone keypad.
As a reminder, this conference is being recorded its now my pleasure to turn the call over to Sam Iceberg, Vice President of Investor Relations. Please go ahead Sir.
Thank you operator, and good morning, everyone and welcome to Hillenbrand's earnings call for our first quarter of fiscal year 2024.
Sam Minesburg: Thank you, Operator. Good morning, everyone. Welcome to Hillenbrand's earnings call for our first quarter of fiscal year 2024. I'm joined by our President and CEO, Kim Ryan, and our Senior Vice President and CFO, Bob Van Hembert. 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 certain non-GAAP operating performance measures, including organic comparisons for our segments, which exclude the impacts of acquisitions, divestitures, and foreign currency exchange.
And by our President and CEO, Kim Ryan and our senior Vice President and CFO Bobbing Hamburger.
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 I'll remind you 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, including organic comparisons for our segments, which exclude the impacts from acquisitions divestitures and foreign currency exchange.
Sam Minesburg: Also, we will be discussing our results on a continuing operations basis, which excludes the discontinued operations of Batesville, which we divested in February of last year. I encourage you to review the appendix and slide three of the presentation, as well as our 10-Q, 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. With that, I'll now turn the call over to Kim. Thank you, Sam, and good morning, everyone.
Also we'll be discussing our results on a continuing operations basis, which excludes the discontinued operations of Batesville, which we divested in February of last year.
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-GAAP information forward looking statements and the risk factors that could impact our actual results with that I'll now turn the call over to Kim.
Thank you Sam and good morning, everyone. Thanks for joining us on today's call. Our first quarter performance reflects the dynamic environment, we continue to experience in certain parts of our business.
Kim Ryan: Thanks for joining us on today's call. Our first quarter performance reflects the dynamic environment we continue to experience in certain parts of our business. Total revenue growth of 18% and adjusted earnings per share of $0.69 were in line with our expectations, led by strong performance from our recent FPM acquisition and our continued success in driving aftermarket expansion. We saw sequential and year-over-year order improvement within our APS segment with solid demand for our leading technologies and systems serving the plastics and food processing industries. However, we experienced weaker-than-expected performance in our MTF segment with continued demand softness across most regions and end markets. Additionally, our cash flow was lower than expected due in part to softer orders within MTS and the continued push out of large project orders within APS and the corresponding customer advances, which contributed to our leverage being slightly higher than expected while exiting the quarter. We're not pleased with this current level of performance.
Total revenue growth of 18% and adjusted earnings per share of 69 cents were in line with our expectations led by strong performance from our recent F. P. M acquisition and our continued success in driving aftermarket expansion.
We saw sequential and year over year order improvement within our Aps segment with solid demand for our leading technologies and systems, serving the plastics and food processing industries.
However, we experienced weaker than expected performance in our MTS segment with continued demand softness across most regions and end markets.
Our cash flow was lower than expected due in part to softer orders within M. P. S and the continued push out of large project orders within Aps and the corresponding customer advances, which contributed to our leverage being slightly higher than expected.
Sitting in the quarter.
We're not pleased with this current level of performance so as we announced in our press release yesterday, we're responding by executing significant cost actions to optimize our M. T S cost structure, including head count reductions and footprint rationalization.
Kim Ryan: As we announced in our press release yesterday, we're responding by executing significant cost actions to optimize our MTF cost structure, including headcount reductions and footprint rationalization. We're confident these actions will not only strengthen our position within the current environment but also ensure we're able to respond with higher levels of growth and profitability when demand recovers. We expect these actions will deliver annual run rate cost savings of $15 million, with approximately 50% of that to be realized within the current fiscal year, which will help mitigate the demand headwinds within the MTS sector.
We're confident these actions will not only strengthen our position within the current environment, but also ensure we're able to respond with higher levels of growth and profitability once demand recovers.
We expect these actions will deliver annual run rate cost savings of $15 million approximately 50% of that to be realized within the current fiscal year.
Which will help mitigate the demand headwinds within the MTS segment.
Bob will discuss this further in a moment when he gives an update on our financial performance and outlook.
Kim Ryan: Bob will discuss this further in a moment when he gives an update on our financial performance and outlook. But I'll now provide a little more color on the end market dynamics we're seeing across both segments. Starting with MTS, as I mentioned, we continued to see a challenging demand environment in the quarter, with overall orders down both year-over-year and sequentially on the back of broad-based softness, led by weakness in consumer goods and electronics. While we anticipated volumes to be down due to the lower starting backlog, performance came in below what we expected, particularly for orders and margins.
I'll now provide a little more color on the end market dynamics, we're seeing across both segments.
Starting with M. T S. As I mentioned, we continued to see a challenging demand environment in the quarter with overall orders down both year over year and sequentially on the back of broad based softness led by weakness in consumer goods and electronics.
We anticipate volumes to be down due to the lower starting backlog performance came in below what we expected, particularly for orders and margin. We did close a few larger projects in January but we've yet to see a meaningful improvement in the overall trajectory of market demand as customer investments remain pressured by elevated interest rates low.
Kim Ryan: We did close a few larger projects in January, but we've yet to see a meaningful improvement in the overall trajectory of market demand as customer investments remain pressured by elevated interest rates, low machine utilization, and uncertainty in consumer consumption patterns. We continue to focus on controllable factors inside the business as we navigate this difficult external environment, as evidenced by the meaningful cost actions we're taking. Now, turning to APS, starting with durable plastic.
Sheen utilization and uncertainty in consumer consumption patterns, we continue to focus on controllable factors inside the business as we navigate this difficult external environment.
As evidenced by the meaningful cost actions, we're taking.
Now turning to a P S. Starting with durable plastics, we were pleased with the healthy order demand for large extrusion and material handling systems in Asia, and the middle East, but the timing of customer decisions continues to be lumpy.
Kim Ryan: We were pleased with the healthy order demand for our large extrusion and material handling systems in Asia and the Middle East, though the timing of customer decisions continues to be lumpy. While global macroeconomic factors are a contributing factor to these delays, we've also seen the size of projects in both virgin plastics and recycling increase significantly, which in turn requires a longer relative quoting process. However, we also believe this trend is a competitive advantage for us, as our equipment systems are optimal solutions for high output requirements. Lastly, as we expected, coming into the year, we're starting to see improved lead times, both from our suppliers and as a result of HOM initiatives, which should allow us to convert our high backlog more efficiently going forward.
While global macroeconomic factors are contributing factor to these delays. We've also seen the size of projects in both Virgin plastics and recycling increased significantly which in turn requires a longer relative quoting process. However, we also believe this trend is a competitive advantage for us as our equipment and systems are optimal salute.
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Lastly, as we expected coming into the year.
We're starting to see improved lead times, both from our suppliers and as a result of H O M initiatives, which should allow us to convert our high backlog more efficiently going forward.
Kim Ryan: Turning to food, we're excited to have FPM in the portfolio for a full quarter as our teams remain energized as they execute integration plans and go to market as a leading global provider of food processing technologies and integrated solutions. The breadth of our geographic footprint and the technology offering enables us to be a world-class solutions provider across the applications we serve, including baked goods, pet foods, snacks, and cereals, and many more.
Turning to food, we're excited to have F. P M in the portfolio for a full quarter as our teams remain energized as they execute integration plans and go to market as a leading global provider of food processing technologies and integrated solutions.
The breadth of our geographic footprint and the technology offering enables us to be a world class solutions provider across the applications, we serve including baked goods pet food snacks, and cereals, and many more we continue to see solid order patterns and customer quote activity across most key applications and we remain excited.
Bob Van Hembert: We continue to see solid order patterns and customer quote activity across most key applications, and we remain excited by the growing pipeline of opportunities we see as a result of our enhanced portfolio. Our integration activities, focused on both cost and commercial opportunities, continue to progress as expected. While we certainly face a dynamic and often challenging macro environment, I remain confident in our ability to execute our objectives through the remainder of the year as we deploy the Hillenbrand operating model to drive synergy realization, productivity, and working capital initiatives across the enterprise. With that, I'll now turn the call over to Bob to provide more details on financial performance and outlook. Thanks, Kim, and good morning, everyone.
The growing pipeline of opportunities, we see as a result of our enhanced portfolio our integration activities focused on both cost and commercial opportunities continues to progress as expected.
Well, we certainly face a dynamic and often challenging macro environment I remain confident in our ability to execute our objectives through the remainder of the year as we deploy the hillenbrand operating model to drive synergy realization productivity and working capital initiatives across the enterprise with that I'll now turn the call over to Bob to provide more details.
On financial performance and outlook.
Thanks, Kim and good morning, everyone.
Bob Van Hembert: Turning to our consolidated performance on slide five, we delivered revenue of $773 million, an increase of 18% compared to the prior year, primarily due to the acquisition of FPL. On an organic basis, revenues decreased 7% year-over-year, primarily driven by lower volume in MTS, which we largely anticipated due to the lower starting backlog coming into the year. Adjusted EBITDA of $114 million increased 13%, but decreased 14% organically, as lower volume and cost inflation more than offset favorable pricing, productivity, and product. We delivered an adjusted EBITDA margin of 14.8%, a decrease of 60 basis points over We reported gaps in income of $18 million, down from $25 million in the prior year, as the impact of the FPM acquisition was offset by lower organic volume, cost inflation, higher interest expense, a pension settlement charge, and a higher effective tax rate.
Turning to our consolidated performance on slide five.
We delivered revenue of $773 million, an increase of 18% compared to the prior year, primarily due to the acquisition of S. P M.
On an organic basis revenues decreased 7% year over year, primarily driven by lower volume of MTS, which we largely anticipated due to the lower starting backlog coming into the year.
Adjusted EBITDA of $114 million increased 13%, but decreased 14% organically as lower volume and cost inflation more than offset favorable pricing productivity and product mix we.
We delivered adjusted EBITDA margin of 14, 8% a decrease of 60 basis points over the prior year.
We reported GAAP net income of $18 million down from $25 million in the prior year as the impact of the F. P. M acquisition was offset by lower organic volume cost inflation and higher interest expense, a pension settlement charge and a higher effective tax rate.
Adjusted earnings per share of 69 cents.
Bob Van Hembert: Adjusted earnings per share of $0.69 decreased $0.01, or 1%. Our adjusted effective tax rate in the quarter was 28.6%, in line with expectations, but up 360 basis points compared to the prior year, primarily due to the non-repeat of the China Technology Tax Incentive we received in Q1 last year. Our cash flow from operations represented a use of $24 million in the quarter, which was $18 million unfavorable compared to the prior year, primarily due to lower earnings and the timing of working capital requirements.
Decreased one cent or 1%.
Our adjusted effective tax rate in the quarter was 28, 6% inline with expectations, but up 360 basis points compared to the prior year, primarily due to the non repeat of the China technology tax incentives. We received in Q1 last year.
Our cash flow from operations represented a use of $24 million in the quarter, which was $18 million unfavorable compared to the prior year, primarily due to lower earnings and the timing of working capital requirements.
Bob Van Hembert: Capital expenditures were $12 million in the quarter, and we returned approximately $16 million to shareholders through our quarterly debit. Historically, Q1 is a lower-relative cash flow quarter for Hillenbrand, but cash performance was below our expectations this quarter, in part due to softer order... However, we maintain our expectation that cash conversion will be approximately 90% for fiscal 2024, which includes the impacts of restructuring and integration-related cash benefits that we expect to realize in the year. Our longer-term goal remains 100% free cash flow conversion. Now moving to segment performance, starting on slide six, revenue of $568 million increased 38% compared to the prior year, primarily driven by FPL. Organic revenue modestly decreased by 2% year-over-year, as lower capital volume was partially offset by higher aftermarket parts and service revenue.
Capital expenditures were $12 million in the quarter, and we returned approximately $60 million to shareholders through our quarterly dividend.
Historically Q1 is a lower relative cash flow quarter for hillenbrand, but cash performance was below our expectations. This quarter in part due to softer order performance.
However, we maintain our expectation that fast conversion will be approximately 90% for fiscal 'twenty 'twenty four which includes the impacts of restructuring and integration related cash benefits that we expect to realize in the year.
Our longer term goal remains at 100% free cash flow conversion.
Yeah.
Now moving to segment performance starting on slide six.
Revenue of $568 million increased 38% compared to the prior year, primarily driven by F. P M.
Organic revenue modestly decreased by 2% year over year as lower capital volume was partially offset by higher aftermarket parts and service revenue.
While revenue came in slightly below our initial expectations, primarily due to timing of some larger orders, we still see healthy levels of demand to support our full year organic growth.
Bob Van Hembert: While revenue came in slightly below our initial expectations, primarily due to the timing of some larger orders, we still see healthy levels of demand to support our full-year organic growth. Adjusted EBITDA of $96 million increased 35%, but decreased 3% organically. Volume and cost inflation more than offset favorable pricing, productivity, and product quality. We delivered an adjusted EBITDA margin of 16.9% in the quarter, which was down 40 basis points over the prior year, primarily due to cost inflation and the deliberative effect of the recent equity crisis.
Adjusted EBITDA of $96 million increased 35% year over year.
But decreased 3% organically.
Lower volume and cost inflation more than offset favorable pricing productivity and product mix.
We delivered adjusted EBITDA margin in the quarter of 16, 9%, which was down 40 basis points over the prior year, primarily due to cost inflation and the dilutive effect of the recent acquisitions.
As we've communicated we expect to improve the acquisition margins towards historical EPS segment levels over the next few years as we achieve synergies and deploy the hillenbrand operating model to drive continuous improvement.
Bob Van Hembert: As we've communicated, we expect to improve acquisition margins towards historical EPS segment levels over the next few years as we achieve synergies and deploy the Hillenbrand operating model to drive continuous improvement. Backlog of $1.9 billion increased 18% compared to the prior year, driven by FDM, but decreased 5% on an organic basis. sequentially, backlog was up three percent. Now, turning to MTS on slide 7. Revenue of $205 million decreased 16% year-over-year due to a lower volume of injection molding and hot runner equipment.
Backlog of $1 $9 billion increased 18% compared to the prior year driven by F. P M, but decreased 5% on an organic basis.
Sequentially backlog was up 3%.
Yeah.
Now turning to MTS on slide seven.
Revenue of $205 million decreased 16% year over year due to lower volume of injection molding and hot runner equipment.
Bob Van Hembert: This was largely anticipated, given the lower starting backlog entering the year, but we did see weaker than expected performance from our hot runner product line at the end of the quarter. The adjusted EBITDA of $32 million decreased 26% due to lower volume and cost inflation; adjusted even the margin of 15.7%, decreased 200 basis points compared to the prior year, largely driven by the impact of lower volumes, particularly within our higher-margin hot-runner product. As Kim highlighted, we're launching a restructuring program in our MTS segment in order to improve operational efficiency and optimize our cost structure for the current environment, while also ensuring we remain poised for growth once market conditions improve. We expect to incur a restructuring charge related to these actions of approximately $20 million in the year, and annualized run rate savings of approximately $15 million by 2025. We're estimating approximately 50% of the run rate savings to be achieved in the current year, which I'll cover a bit more when I discuss our outlook for the remainder of the year. Backlog of $232 million decreased 31% compared to the prior year, but it was flat sequentially.
This was largely anticipated given the lower starting backlog entering the year, but we did see weaker than expected performance from our hot runner product line at the end of the quarter.
Adjusted EBITDA of $32 million decreased 26% due to lower volume and cost inflation.
Adjusted EBITDA margin of 15, 7% decreased 200 basis points compared to the prior year, largely driven by the impact of lower volumes, particularly within our higher margin Hot runner product line.
Yeah.
As Tim highlighted we're launching restructuring program and our MTS segment in order to improve operational efficiency and optimize our cost structure for the current environment.
While also ensuring we remain poised for growth once market conditions improve.
We expect to incur a restructuring charge related to these actions of approximately $20 million in the year.
With annualized run rate savings of approximately $15 million by 2025.
We're estimating approximately 50% of the run rate savings to be achieved in the current year.
Which I'll cover a bit more when I discuss our outlook for the remainder of the year.
Yeah.
Backlog of $232 million decreased 31% compared to the prior year, but was flat sequentially.
Bob Van Hembert: While order volumes had been relatively flat throughout fiscal 23, we saw a further dip in injection molding orders in the quarter, beyond what we had anticipated. As Kim mentioned, we did see a few large projects come through in January, but we do not yet believe this is necessarily a sign of broader improvement in the underlying market conditions. Now turn to the balance sheet on slide 8. Net debt at the end of the first quarter was $1.8 billion, and the net debt to adjusted EBITDA ratio was 3.4.
Our order volumes had been relatively flat throughout fiscal 'twenty. Three we saw further dip in injection molding orders in the quarter beyond what we had anticipated.
Tim mentioned, we did see a few large projects come through in January.
We do not yet believe this is necessarily assigned a broader improvement in the underlying market conditions.
Now turning to the balance sheet on slide eight.
At the end of the first quarter was $1 $8 billion.
The net debt to adjusted EBITDA ratio was three point for.
Bob Van Hembert: At quarter end, we had liquidity of approximately $650 million, including about $200 million in cash on hand, and the remainder available under a revolving credit facility. While our ending leverage was up sequentially from 3.2, this was partially anticipated due to the regular seasonality of our cash flow. However, we did see additional unfavorability due to the lower than expected cash flow, as well as an unfavorable impact at the end of the quarter from foreign currency exchanges. Now, moving to our capital deployment priorities on slide 9. Our capital deployment priorities are unchanged, as debt reduction remains our top priority.
At quarter end, we had liquidity of approximately $650 million, including about $200 million in cash on hand, and the remainder available under our revolving credit facility.
While our ending leverage was up sequentially from three point too. This was partially anticipated due to the regular seasonality of our cash flows.
However, we did see additional unfavorable city due to the lower than expected cash flow.
As well as an unfavorable impact at the end of the quarter from foreign currency exchange.
Now moving to our capital deployment priorities on slide nine.
Our capital deployment priorities are unchanged as debt reduction remains our top priority.
Bob Van Hembert: Given the Q1 performance and uncertainty in the pattern of orders and working capital requirements, we now expect to return to our preferred net leverage range of 1.7 to 2.7 by Q2 of fiscal 2025, although slightly delayed from our previous goal of Q1 2025. We are aggressively pursuing additional costs and cash energies to accelerate our progress towards this time. I'll wrap up with our outlook for the remainder of 2024 on slide 10. We are maintaining our total company guidance range for the fiscal year but expect it to be towards the lower end due to weaker MTS performance, partially offset by approximately $8 million in restructuring savings expected to be realized in the year. As a reminder, our guidance ranges for total Hillenbrand are $3.28 to $3.44 billion in revenue.
Given the Q1 performance and uncertainty in the pattern of orders and working capital requirements. We now expect to return to our preferred net leverage range of one seven to 2.7 by Q2 of fiscal 2025 slightly delayed from our previous goal of Q1 2025.
We are aggressively pursuing additional cost and cash synergies to accelerate our progress towards this timeframe.
Okay.
I'll wrap up with our outlook for the remainder of 'twenty 'twenty four on slide 10.
We are maintaining our total company guidance range for the fiscal year, but expect to be towards the lower end due to weaker MTS performance, partially offset by approximately $8 million and restructuring savings expected to be realized in the year.
As a reminder, our guidance ranges for total hillenbrand, our 3.28 to $3 four $4 billion for revenue.
$530 million to $588 million for adjusted EBITDA, and $3 60 to $3 95 for adjusted EPS, reflecting solid organic growth in our Aps segment and significant inorganic contribution from the F. P M acquisition.
Bob Van Hembert: $530 to $588 million for adjusted EBITDA and $3.60 to $3.95 for adjusted EPS, reflecting solid organic growth in our APS segment and significant inorganic contribution from the FPM acquisition. For Q2, we are targeting to adjust our earnings per share in the range of 71 cents to 76 cents, which is relatively consistent with the prior year as a contribution of FPM and modest organic growth in APS is largely offset by a significant decline in MTS, as the prior year was a record quarter for MTS.
For Q2, we are targeting adjusted earnings per share in the range of 71 to 76 cents, which is relatively consistent with the prior year as the contribution of F. P M and modest organic growth in EPS is largely offset by a significant decline in MTS as the prior year was a record quarter for MTS.
Please review slide 10 for additional guidance assumptions.
In summary, as we look forward to the balance of the year, we continue to see a solid pipeline of demand and our Aps segment and we're confident the cost actions, we're taking will help mitigate the market challenges within our MTS segment.
Kim Ryan: Please review slide 10 for additional guidance. In summary, as we look forward to the balance of the year, we continue to see a solid pipeline of demand in our APS segment, and we're confident the cost actions we're taking will help mitigate the market challenges within our MPS segment. With that, I'll turn the call back over to Kim.
With that I'll turn the call back over to Kim.
Thanks, Bob before taking questions I'll end our presentation. This morning with a few final remarks, we remain laser focused on deploying the hillenbrand operating model to execute our integration and synergy plans capitalize on innovation and other organic growth opportunities improve our working capital metrics to drive cash flow and debt reduction.
Kim Ryan: Thanks, Bob. Before taking questions, I'll end our presentation this morning with a few final remarks. We remain laser-focused on deploying the Hillenbrand operating model to execute our integration and synergy plans, capitalize on innovation and other organic growth opportunities, improve our working capital metrics to drive cash flow and debt reduction, and take the appropriate actions to protect our margins. As we navigate this dynamic macro environment, I'm all the more convinced of the strategic actions we've taken over the last two years in transforming Hillenbrand to leverage our technological capabilities by expanding into We're well positioned for the future, as our teams are energized to serve our customers with world-class solutions as a global leader of highly engineered process technologies and systems, united by our purpose to shape what matters for tomorrow. We'll now open the line for questions. We will now be conducting a question and answer session. Please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star-q if you'd like to remove...
And take the appropriate actions to protect our margins as we navigate this dynamic macro environment I'm all the more convinced in the strategic actions we've taken over the last two years in transforming hillenbrand to leverage our technological capabilities by expanding into higher growth less cyclical end markets and are supported by long term secular growth.
Trends, we're well positioned for the future as our teams are energized to serve our customers with world class solutions as a global leader of highly engineered process technologies and systems, United by our purpose to shaped what matters for Tomorrow, We'll now open your line for questions.
Thank you well now be conducting a question answer session, if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue you.
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First question today is coming from Matt Summerville from D. A Davidson your line is now live.
Thanks.
Operator: If you are using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question today is from Matt Summerville from D.A. Davidson.
Couple of questions, maybe just starting with with Aps can you put a little bit more context around the funnel within that business. Some of the key metrics, you're tracking and how they look maybe versus a year or two ago and if the order activity level you saw in Q1.
Matt J. Summerville: Your line is now live. Thanks. A couple of questions, maybe just starting with APS.
Kim Ryan: Can you put a little bit more context around the funnel within that business? Some of the key metrics you're tracking and how they look maybe versus a year or two ago? And if the order activity level you saw in Q1 is maybe an early indication of some of that logjam, if you will, moving in the right direction. Yeah, so I would say in the APS business. We have a very detailed funnel process that we have for each of the businesses. And especially given the duration of some of those quote processes, it's really critical that we have different milestones to make sure that we understand whether or not those are progressing. Everything from, you know, what types of resources are we putting in?
Be an early indication that some of that logjam. If you will maybe moving in the right direction and then I have a call.
Yeah. So I just thought I would say in the Aps business. We have a very detailed final process that we have for each of the businesses and especially given the duration of some of those quote processes. It's really critical that we have different milestones to make sure that we understand whether or not those are progressing everything from you know what types of resources or we put.
And what types of resources at the customers putting in to to move. These quotes that had what I would say is that we continue to see a.
A very very positive demand for quotes and for work to be done and in the regions that we had previously mentioned to you that as being in the middle East and China, and India and have you been continued to see some progression in other markets as we look forward to the remainder of the year.
Kim Ryan: What types of resources are customers putting in to move these quotes ahead? What I would say is that we continue to see very, very positive demand for quotes and for work to be done in the regions that we had previously mentioned to you, those being in the Middle East and China and India, and have even continued to see some progression in other markets as we look forward to the remainder of the year in Europe and Africa and even some specific projects in North America. So we remain very encouraged about the quoting pipeline that we have. You know, we have seen a couple of orders cross over in early January. We kind of have a saying here: is it a dot, is it a line, is it a trend? At this point, I'd say it's a dot progressing to a line.
And Europe, and Africa, and even some specific projects and in North America. So we remain very encouraged about the or the quoting pipeline that we have well you know we have seen a couple of orders crossover in.
In early January we we kind of have a saying here is it a is it a dot is it a line is that the trend at this point I'd say, it's that adopt progressing to align so I think we are we are encouraged that we continue to see things moving ahead and moving through that pipeline in terms of how we assess the orders and the hour.
Kim Ryan: So I think we are encouraged that we continue to see things moving ahead and moving through that pipeline in terms of how we assess orders and the outlook that we have for, generally, most of the geographies we're doing business in. We continue to be very excited about what we see, both on the plastic side as well as on the food side. Because remember, although we've been very focused on cost energy for food, we're also very focused on creating commercial opportunities across these businesses as well. So hopefully that addresses your questions, Matt. Yeah, thanks.
Look that we have for generally most of the geographies, we're doing business and we continue to be very excited about what we see so it was on the plastic side as well as on the food side, because remember, although we've been very focused on cost synergies on food. We're also very focused on creating commercial opportunities across these businesses is.
Well.
So hopefully that addresses your question it's Matt.
Yeah. Thanks, and then just as a follow up you mentioned or Bob mentioned that MTS experienced a little bit of an incremental dip in orders following.
Kim Ryan: And then just as a follow-up, you mentioned, or Bob mentioned that MTS experienced a little bit of an incremental dip in order, following, you know, a couple quarters of stability. What end market geography kind of is driving that incremental dip? And then can you elaborate on the magnitude of the headcount reduction you're looking at, as well as how you are rationalizing the. Yeah, I would say that we had anticipated, you know, we had seen several quarters of where we were; we were pretty flat in terms of order demand. So while we were hoping for an uptick, or at least seen stability, we saw a little bit of a dip in the last quarter, specifically in the areas of consumer goods, electronics, some of those areas, which have typically been strong, and we have not seen the bounce back in China or in North America that we might have anticipated.
A couple of quarters I thought of stability, what end market geography, Kevin you know, what's driving that incremental dip and then can you elaborate on the magnitude of headcount.
Duction Youre looking at as well as how you are rationalizing the footprint within MTS. Thank you.
Yeah, I would say that we had anticipated.
We had seen several quarters of where we were we were pretty flat.
In terms of the order demand so while we were hoping for an uptick we had at least seen stability, we saw little bit of a depth in in the last quarter are specifically in the areas of consumer goods electronics some of those areas, which have typically been strong and we have not seen the bounce back in China and North America.
Might have anticipated at this point you know there continues to be a lot of fighting for volume in that space. Both in the injection molding and hot runner side of the business. So that is a that's one of the areas that tap that has given us a little concern and has caused us to move ahead with some of the things that we needed to do from a.
Kim Ryan: At this point, you know, there continues to be a lot of fighting for volume in that space, both in the injection molding and the hot runner side of the business. So that is one of the areas that has given us a little concern and has, you know, caused us to move ahead with some of the things that we needed to do from a cost standpoint.
From a cost standpoint.
Keep in mind that as we go through this we are always planning for the future and so I would say that we are making decisions that are appropriately sized for the demand trends that we've seen and we are that are also taking into consideration and where we expect the demand to <unk>.
Kim Ryan: Keep in mind that as we go through this, we are always planning for the future, and so I would say that we are making decisions that are appropriately sized for the demand trends that we've seen and that are also taking into consideration where we expect the demand to return, so that we can be prepared for that. This allows us to, you know, look at everything from creating flexibility in the way we manufacture our goods, leveraging partners, and leveraging some of our suppliers to help with volume, as we would want that to return. So the magnitude of that ends up being in kind of the 5% workforce type size, and then we anticipate there are a couple of opportunities for cost rationalization and simplification from a site perspective that we will also be engaging in.
Return so that we can be prepared for that and this allows us to you know look at everything from creating flexibility in the way, we manufacture our goods leveraging leveraging partners leveraging some of our suppliers to help with volume as we would want that to return so the magnitude of that ends up being in kind.
About 5% of.
Workforce type.
<unk> type size and then we anticipate there are a couple of opportunities for cost rationalization and simplification from a site perspective are.
That we will also be engaging in and keep in mind. We've got we've got new eyes on that business I think that we've got a lot of work that has been done over the last four months in collaboration with the leaders in that business and all our agreed that these are appropriate actions.
Kim Ryan: And keep in mind, you know, we've got new eyes on that business. I think that we've done a lot of work over the last four months in collaboration with the leaders in that business, and they are all agreed that these are appropriate actions to take that create an appropriate return, even though we've got some one-time charges associated with that. And that they will not hamper our flexibility to address volume as it comes back into this market, which it has always historically done. Thanks, Kim.
To take with that create an appropriate return even though we've got some one time charges associated with that and that they will not hamper our flexibility to address volume as it comes back in this market, which is it has always historically done.
Thanks, Kim of those helpful. I appreciate it alright, thanks, Matt.
Daniel Moore: All right, thanks, Matt. Thank you. The next question today is coming from Daniel Moore from CGS Securities. Your line is now live. And as a reminder, that's star number one to be placed. Thanks. Good morning, Ken. Good morning, Bob.
Thank you. Your next question today is coming from Daniel Moore from CJS Securities. Your line is now live and as a reminder, that star one to be placed in the question queue.
Yeah.
Good morning, Ken morning, Bob.
Daniel Moore: Let's dig a little deeper into the trends in APS. First, you mentioned some of the opportunities, and Plastics are on the large, you know, or very large or larger side of those primarily Middle-Eastern.
Dan.
A little deeper into the trends in Aps first you mentioned some of the opportunities you're seeing in and Petro Chem.
And plastics or are on the large you know we're very larger larger side are those primarily middle east just talking about sort of geography as well as the time frame and you know what.
Kim Ryan: Um, margin profile, slightly larger. On the polyolefin side, I mean, there is some buyout associated with those projects, but those projects are in places that we've indicated before. They're the Middle East, they're China, they're India, in terms of the really large polyolefin projects.
Ultimate kind of margin profile of those slightly larger are typically larger projects look like for you.
On the polyolefin side I mean, there is some buyout associated with those projects, but those.
But those projects are in places that we've indicated before there are middle East there China there India in terms of the really large polyolefin projects and that's that's those are the places where we've been strong quoting activity, we've been kind of waiting on order decisions. We expect over the next 12 months for those to continue to be strong.
Kim Ryan: And that's, those are the places where we've been strong in quoting activity. We've been kind of waiting on order decisions, but we expect over the next 12 months those to continue to be strong. The margin profiles, you know, those are, we feel very good about our ability to create value in those, especially as we're able to create more than just individual pieces of equipment offerings. We're able to create full systems.
Are the margin profiles you know those are we feel very good about our ability to create value in those especially as we're able to create a more than just individual pieces of equipment offerings. We're able to create full systems, we are able to create value for customers and for ourselves as we're able to optimize those systems in it.
Kim Ryan: We are able to create value for customers and for ourselves as we're able to optimize those systems along those lines. And given that a lot of the folks developing in those areas are multinational customers, those are relationships that we feel very confident about in terms of being able to provide full solutions. So those are some of the areas that we're seeing on the big polyolefin job, very helpful, and on the food and pharma put, you know, all of it. Thanks.
Those are into those lines and given that a lot of the folks developing in those areas are our our multinational customers are those are relationships that we feel very confident about in terms of in terms of being able to provide full solutions. So those are some of the areas that are that we're seeing on the big on the big.
Polyolefin jobs.
Very helpful and on the food and pharma side, when you put all of the businesses together as you integrate them.
Bob Van Hembert: Think about sort of a pro forma, you know, order rate, pipeline or funnel, time, you know, relative. Where would you say we are? For all of us.
If we think about sort of a pro forma are you know order rates in the pipeline or funnel. This time, you know relative to maybe 12 months ago, where would you say kind of we are overall year over year on a pro forma basis.
Kim Ryan: Yeah, Dan, obviously, we didn't have FPM in our portfolio a year ago, but when you look back at what they have performed under that ownership and then obviously with our legacy food health and nutrition business and then Linksys, orders actually on a year-over-year basis came in pretty strong, specifically within food. And so, you know, we feel good about, you know, long-term investments that, you know, take the long-term view of that business. We feel great about the short-term and, you know, that growth, again, in that business as we invested in that food end market. We see that growing at GDP plus, and everything we've seen here so far indicates that, you know, we made the right decision on those investments.
Oh yeah.
Obviously, you know we didn't have F. P M in our.
In our portfolio a year ago, but when you look back at what May performed under that ownership and then obviously with our legacy food health and nutrition business and that links us orders actually on a year over year basis came in pretty strong a specific or even food and so we feel good about no long term investments.
You know the long term view of that business, we feel great about the short term.
And you know.
That growth again in that business as we invested you know that food end market, we see that growing at GDP, plus and everything we've seen here so far indicates that.
We made the right decision and no on those investments.
Yeah, we feel we need do you feel very I mean, I had an opportunity to meet with the commercial teams on this two weeks ago. I guess it was you know it feels like forever, but we had an opportunity to listen to our report out from the it seems two weeks ago on all of the opportunities they're seeing across the portfolio and really when you.
Kim Ryan: Yeah, we feel we we do feel very, I mean, I had an opportunity to meet with the commercial teams on this two weeks ago, I guess it was, it feels like forever. But we had an opportunity to listen to a report from these teams two weeks ago on all the opportunities they're seeing across the portfolio. And really, when you think about what we've brought together here, the feeding, the additive ingredient handling, the pneumatic conveying, the multiple conversion steps, whether it's mixed, mixing, whether it's extrusion, whether it's very high-end extrusion or, or less complex extrusion, the material handling, again, and the end of the line processing, and the storage capabilities that we have through all of the assets that we acquired. This is really going to be an exciting portfolio to be able to offer to the marketplace.
Think about what we brought together here the feeding the additive ingredient handling the pneumatic conveying the the multiple conversion steps, whether it's mixing whether it's extrusion, whether it's very high and extrusion or or less complex extrusion and material handling again in that and the end of the line.
Assessing them and and the storage capabilities that we have through our all of the assets that we acquired it and this is really going to be an exciting portfolio to be able to offer into the marketplace and we've got the addition of having the Shang team join US which has a lot of experience in.
Kim Ryan: And we've got the addition of having the shank team join us, which has a lot of experience in managing larger projects. So as we're able to work these projects into the market, we've got a ready and experienced team that can work hand in hand with us to be able to take these projects to fruition. And I can tell you the team is really thrilled about the opportunities they're seeing. And, frankly, they are running as fast as we will let them find ways to collaborate together. And it's, it's really invigorating to see. Just shifting gears to MTS, I have two questions. First, do you have much visibility or line of sight?
Managing the larger projects so as we're able to work these projects into the market. We've got a ready and experienced team that can work hand in hand with us to be able to take these projects to fruition and I can tell you. The team is really thrilled about the opportunities, they're seeing and and frankly they.
We're running as fast as we will let them on finding ways to collaborate together and it's it's really invigorating to see.
Excellent just shifting gears to MTS I guess two questions first do you have much visibility or line of sight as to when you may see kind of a bottom in terms of orders I know that's a challenge given hot runner business has traditionally short cycle.
Kim Ryan: bottom. I know that's a challenge, and second, you know, in the past, they were often rebounding sharply. Transcribed by https://otter.ai, spread, and Permanently Shifted Lower, or. Well, I think I'll just hit some macro trends in the market that I think are noteworthy. So as it pertains to kind of that demand bouncing back, I think that China has always been a very leading indicator of that, and that market has been a bit slower and has not bounced back as quickly as we would have anticipated. Parts of that are, I think, some uncertainty in the geopolitical environment. Part of that is some customers, some manufacturers making choices about, hey, do I want to have my entire footprint sitting in China, or should I diversify my footprint into areas like India? As you know, we have locations in India that are offering the same types of capabilities and turnaround time, lead times, and engineering capabilities to the customers that we serve in China.
You know in the past, it's been quite cyclical with hot runners in particular, often rebounding sharply do you anticipate that could be the case again this time around or has anything fundamentally changed that might make it a little bit more gradual I guess, what I'm trying to ask is you know as demand permanently shifted lower or.
The reason to believe that eventually we'll get back to the levels that we saw a couple of years ago.
Well I think I'll just hit some macro trends in the market that I think I I think I will I think are noteworthy so as it pertains to kind of that demand bouncing back I think that China has always been a very leading indicator of that and that has been that market has been a bit slower and has not been.
Alex back as quickly as we would have anticipated parts of that are I think some uncertainty in the geopolitical environment parts of that are some customers. Some manufacturers, making choices about hey, do I want to have my entire footprints sitting in China or should I diversify my footprint into areas like India as you.
No we have locations in India, which are which are offering the same types of capabilities and turnaround time lead times engineering capabilities to the customers that we serve in China. So we believe that we are well positioned to be able to catch that to catch that business as it moves into other geographies.
Kim Ryan: So we believe that we are well positioned to be able to catch that business as it moves into other geographies in Asia. We do feel prepared for that, but I would say that there is some slowness in the final decisions being made about where that footprint will reside. And I would also say that, you know, given some of the slowness that has characterized this industry for, or this end market for, the last period of time, I think there is a lot of, you know, volume that's trying to find a home. And so I think that does create a lot of pricing pressure, and margin pressure at this time as people work to, you know, maintain coverage for their own fixed costs in an environment where the market I'll turn it to Bob to hit some of the other points. Yeah, I think he actually summarized it well, Cam. Um, you know Dan, um...
Asia. So we do feel prepared for that but I would say that there are there is some slowness in in the final decisions being made about where that footprint will reside.
And I would also say that you know given some of the slowness that has that has characterized this industry for ore. This end market for the last period of time I think there is a lot of you know there is a lot of volume that's trying to find a home and so I think that does create a lot of pricing pressure.
Margin pressure at this time as people work to.
Maintained coverage for their own fixed costs and in an environment, where the market is kind of undersized for the competitive footprint that sits there right now.
Now I'll turn it to Bob to to hit some of the other points.
I think you actually summarized it well count.
You know Dan.
Bob Van Hembert: If you think about the MTS market overall, in our view of the first quarter, things were actually pretty on par for the first couple of months, and then December is where we saw a bit deeper dip than what we anticipated. Now, January, we actually had a little bit of upside compared to what we thought, right? Now we've been here before, and as Kim said, those are dots, not a line or a trend yet. So, you know, if you think about past cycles, the MTS cycles have been down, you know, call it five, six quarters. That cycle looks like. And, you know, we've projected about eight in our guidance, and, you know, it is a short cycle business. So, you know, I think, you know, we're, we're doing the right thing with the restructuring. When the market does return, we feel confident that we can take advantage of our position, you know, even in the light of, you know, a reduced workforce, left, guidance being a little lighter, say the FEMA.gov, enough to kind of balance it.
Do you think about the MTS market overall, and our view of the first quarters things were actually pretty on par for the first couple of months and then December is where we saw a bit deeper depth than what we anticipated now January we actually had a little bit a little bit of upside compared to what we thought right now we've been here before and as Ken said you know those are dots.
Not not a line or a trend yet.
So you know you think about past cycles. The MTS cycles has been down you know call. It five six quarters is what that cycle looks like and you know if we've projected about eight and our guidance and you know it is a short cycle.
Business. So I think we're doing the right thing with the restructuring you know when the market does return we feel confident that we can take advantage of our position.
Even in light of a reduced workforce.
Helpful last one and I'll jump out just you know obviously given whats the kind of lingering softness in M. T S.
And in Q2 guide being a little lighter than at least we had expected.
Would you say the lower end of the full year guidance range as more likely from an EBITDA and adjusted EPS perspective or are the cost reduction actions, you're taking enough to kind of balance it out and make the full year picture more balanced relative to where you thought coming into the year. Thanks again.
Daniel Moore: Thank you for your time. Have a great day! Yeah, sure, yeah. So we feel good about where APS sits within our guidance range at that midpoint, Dan. And on the MTS side, you know, probably on the lower end. And as you recall, when we gave guidance a couple months ago, we did have a wider range, just in case we didn't see that snapback. You know, we were thinking of a modest recovery in MTS. I still think that's on the table.
Yeah sure Yeah. So we feel good about where Aps sets within our guidance range at that midpoint down and the MTR side, you know probably on the lower end and as you recall when we gave guidance a couple of months ago. We didn't have a wider range just in case, we didnt see that snap back.
We were thinking a modest recovery in MTS.
You know like do you still think that's on the table, but again Q1 is little bit lower than what we anticipated. So we're at work we're expecting the lower end of the guide on the MTS piece and obviously you know the average of Aps and MTS would put us at the lower end of the on the overall guidance.
Bob Van Hembert: But again, Q1 is a little bit lower than what we anticipated, so we're expecting the lower end of the guide on the MTS piece. And obviously, you know, the average of APS and MTS would put us at the lower end of the overall guidance.
And then on the restructuring you know that doesn't bad the savings from the restructuring actions. So nothing that we're going to be at the lower end on MTS.
Bob Van Hembert: And then on the restructuring, you know, that does embed the savings from the restructuring action. So, net-net, we're going to be at the lower end on MTS. Great. Thanks, Dan.
Understood. Thank you. Thank you again.
Great. Thanks, Dan.
John E. Franzreb: Thank you. The next question is coming from John Franzreb from Sidonian Company. Your line is now live. Good morning, everyone.
Thank you. Our next question is coming from John <unk> from Sidoti and company. Your line is now live.
Good morning, Good morning, John I'm, taking the question.
John E. Franzreb: Thanks for taking the questions. Um, Kim, in your response to the last question, you mentioned the pricing environment's gotten more challenging. I'm curious if that's limited to China, which has been the case, if I remember correctly, or has that spread to other geographies?
Jim in your response to the last question you mentioned that.
Rising environment has gotten more challenging I'm curious if that's limited to China, which had been the case, if I remember correctly or is that spread to other geographies.
Kim Ryan: No, I think the geographies are, I think we're seeing that in a number of regions. I'll let Bob comment a little bit further on some of the details of that. Yeah, I think that's right. Yeah, Kim and John, yeah, so we're seeing pricing pressure really across all regions, particularly in MTS, you know, so customers in North America are becoming certainly price sensitive, and therefore, you know, we need to react to really maintain our share. Same thing in China; we're seeing aggressive discounting in that region as well.
No I think the I think the geography is our I think we're seeing that in in a number of them in a number of regions I'll, let Bob comment a little bit further on some of the details of that yeah. I think that's right yeah, So Kevin and John Yeah. So we're seeing pricing pressure really across all regions, particularly in MTS so customers in.
North America, becoming certainly price sensitive and therefore, we need to react to really maintain our share same thing in China, we're seeing aggressive discounting in that region as well. So if you think about MTS were likely going to be less than 100% price cost covered however, aps, we're gonna be above 100% and so net net.
Bob Van Hembert: So when you think about MTS, you know, we're likely going to be less than 100% price cost covered. However, APS, we're going to be above 100%. And so net, net Hillenbrand, we will be, you know, still price cost favorable at the consolidated level. I think you said in your prepared remarks that APS had some delayed shipments in the quarter. I'm curious, what was the magnitude of those shipment delays, and had they been shipped in the first quarter?
Hillenbrand, we will be still price cost favorable.
At the consolidated level.
Yeah.
Got it understood.
And Bob I think.
You said in your prepared remarks that Aps had them some delayed shipments in the quarter.
I'm curious what was the magnitude of those shipment delays and have they been shipped in the first quarter.
I'm sorry, yes.
Bob Van Hembert: Yeah. Yeah, so we have just a little bit of timing on some parts, quite honestly, John, so we can ship those those larger orders. So there's about $5 million of an impact, you know, in the quarter. And yeah, those those will go out in Q2. Got it.
Yeah, So just a little bit just timing on some parts quite honestly John So we can ship those those larger orders that was about $5 million of an impact in the quarter any of those those will go out in Q2.
Got it.
Kim Ryan: And Kim, I'm curious about what your thoughts are on the APS backlog. It's kind of elevated still. Is it actually a hindrance at some point, or are you incurring over time you might not have needed, just maybe some thoughts on a higher level about the APS background?
Tim I'm curious about what your thoughts are on atheists backlog, it's kind of elevated so.
Is it actually a hindrance at some point so how are you.
And incurring all the time, you maybe might not have needed just maybe some thoughts at a high level, but the atheist backlog.
Kim Ryan: Yeah, I would, I would say that it's, it's, it's a bit, it's a bit elevated for what would be most optimal. You know, when you've got a lot of backlog, you have to touch and retouch things a couple more times than you would like. But, but at this point, Frankly, I'll, I'll take the orders, and we'll work through the backlog, and we'll continue to manage that. You know, the team has, I would say that this is, when you look historically at the level of backlog that we would typically operate this business on, we are at an exceptionally elevated level compared to what we used to, you know, years ago, sorry, I'm getting some feedback, what we used to do in terms of regular backlog levels. I would say we're in the neighborhood of, you know, 50 to 75% higher than what we would.
Yeah, I would say I would say that it's a it's a bit it's a bit elevated for what would be most optimal.
When you've got a lot of backlog, you've got a touch them retouch things that a couple more times than you would like.
But at this point frankly, I'll I'll take the orders and we'll work through the backlog.
Well continue to manage that you know the team has I would say that this is when you look historically at the level of backlog that we would typically operate this business on we're at an exceptionally elevated level of what we do.
Used to.
Oh, sorry, I'm getting some feedback what we used to do in terms of regular backlog level I would say we're in the neighborhood.
50% to 75% higher than than we would than what we used to operate at but you know lead times are longer from suppliers still there is that that's a factor and the amount of the amount of large orders in the backlog has continued to increase over time and I think that that's a direct reflection of the value prop.
Kim Ryan: But, you know, lead times are longer from suppliers still, so that's, that's a factor. And the amount of, the amount of large orders in the backlog has continued to increase over time. And I think that that's a direct reflection of the value proposition that we've been able to take into the marketplace, especially in the polyolefin arena. And I do think that the attractiveness of the portfolio and being able to be a systems provider in certain applications has a real appeal for customers in having one vendor that really understands how to optimize all of that and bring it together for best performance at their manufacturing locations. And so a bit of that is a reflection of the fact that we don't, you know, we don't just sell equipment.
Opposition that we've been able to take into the marketplace, especially in that polyolefin arena and I do think that the attractiveness of the portfolio and being able to be a systems provider in certain applications has a real attractiveness for customers are.
And having one vendor that really understands how to optimize all of that and bring it together for best performance in there in their manufacturing locations and so a bit of that is a reflection of the fact that we don't.
We don't just sell equipment, we do sell systems and that has increased over the last couple of years. So.
Kim Ryan: We do sell systems, and that has increased over time. And that number has increased over the last couple of years.
Kim Ryan: So a little higher than might be optimal, but again, I'll, I'll take it every day. Okay, manageable. Good to hear. Thank you for taking the time to answer my question. Thanks, John. Thank you; we have reached the end of our question and answer session. I'd like to turn the floor back over to Kim for any further closing remarks. Great, thanks again for joining us on the call today. We appreciate your ownership and interest in Hillenbrand and look forward to talking to you all again in May when we report our fiscal second quarter results. Have a great day. Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day.
A little higher than then it might be optimal but again I'll I'll take it every day.
Okay manageable good to hear thank you for taking my questions.
Thanks.
Thank you we reached end of our question and answer session I'd like to turn the floor back over to Kim for any further or closing comments.
Great. Thanks, again for joining us on the call today, we appreciate your ownership and interest in Hillenbrand and look forward to talking to you. All again in May when we report our fiscal second quarter results have a great day.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.
Yeah.