Q1 2024 TriMas Corp Earnings Call
Operator: Greetings and welcome to TriMas' first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Greetings and welcome to try must first quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Operator: If anyone should have quiet operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being of the quadrant. It is now my pleasure to introduce your host Ms. Sherry Lauderback, VP Investor Relations and communications. Thank you Mr. Backus you might be.
Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Sherry Lauderback, VP, Investor Relations and Communications. Thank you, Ms. Lauderback. You may begin.
Okay.
Sherry Lauderback: Thank you, and welcome to TriMas Corporation's first quarter earnings call. Participating on the call today are Thomas Amato, TriMas' President and CEO, and Scott Mell, our Chief Financial Officer.
Sherry Lauderback: Thank you and welcome to <unk> Corporation's first quarter earnings call participating on the call today are Thomas Amato, Trimas, as president and CEO and Scott <unk>, Our Chief Financial Officer, We will provide our prepared remarks on our first quarter results and then we will open up the call for your questions.
Sherry Lauderback: We will provide a prepared remarks on our first quarter results and then we will open up the call for your questions. In order to assist with the review of our results, we have included today's press release and presentation on our company website at TriMas.com under the Investor section. In addition, a replay of this call will be available later today by calling 877-660-6853 with a meeting ID of 13745821.
Sherry Lauderback: In order to assist with the review of our results. We have included today's press release and presentation on our company website at <unk> Dot com under the investors section. In addition, a replay of this call will be available later today by calling 8776606853 with the meeting.
Sherry Lauderback: I see 137458 to one.
Sherry Lauderback: Before we get started, I would like to remind everyone that our comments today may contain forward-looking statements that are inherently subject to a number of risks and uncertainties. Please refer to our Form 10-K and our first quarter Form 10-Q, to be filed later today, for a list of factors that could cause our results to differ from those anticipated in any forward-looking statement. Also, we undertake no obligation to publicly update or revise any forward-looking statement except as required by law.
Sherry Lauderback: Before we get started I would like to remind everyone that our comments today may contain forward looking statements that are inherently subject to a number of risks and uncertainties. Please refer to our Form 10-K, and our first quarter Form 10-Q to be filed later today for a list of factors that could cause our results to differ from those in pet.
Sherry Lauderback: Any forward looking statement also we undertake no obligation to publicly update or revise any forward looking statement, except as required by law.
Sherry Lauderback: We would also like to direct your attention to our website, where considerably more information may be found. In addition, we would like to refer you to the appendix in our press release or in our presentation for the reconciliations between GAAP and non-GAAP financial measures used during this call. Today, the discussion on the call regarding our financial results will be on an adjusted basis, excluding the impact of special items. With that, I'll turn the call over to Tom Amato, TriMas' President and CEO. Tom? Thank you.
Sherry Lauderback: We would also direct your attention to our website where considerably more information may be found.
In addition, we would like to refer you to the appendix in our press release or presentation for the reconciliations between GAAP and non-GAAP financial measures used during this call.
Sherry Lauderback: Today, the discussion on the call regarding our financial results will be on an adjusted basis, excluding the impact of special items with that I'll turn the call over to Tom Amato, <unk>, President and CEO Tom.
Thomas A. Amato: Thank you Sherry good morning, and welcome to our first quarter earnings call, let's turn to slide three.
Sherry Lauderback: Thank you, Sherry. Good morning, and welcome to our first quarter earnings call. Now, let's turn to slide three.
Thomas A. Amato: First, let me say that we're off to a great start. The positive momentum we began to observe at the end of 2023 in certain of our end markets and performance in TriMas' two largest segments has continued as we begin the year. Within our TriMas packaging group, virtually all of the end markets that were depressed in a cyclical demand drop in 2023 are now up organically and displaying signs of strengthening. Additionally, on a year-to-date basis, only products used in certain beverage applications softened as compared to the prior year quarter, driven primarily by lower sales into certain dairy applications and delays in orders related to European-based customers converting to tethered
Thomas A. Amato: First let me say that we're off to a great start.
Thomas A. Amato: Positive momentum, we began to observe at the end of 2023 and certain of our end markets and performance in <unk>. Two largest segments has continued as we begin the year.
Thomas A. Amato: Within our <unk> packaging group virtually all of the end markets that were depressed in it and in a cyclical demand trough in 2023 are now up organically and displaying signs of strengthening.
Thomas A. Amato: Additionally, on a year to date basis only products used in certain beverage application softened as compared to the prior year quarter, driven primarily by lower sales into certain dairy applications and delays in orders related to European based customers converting to tethered cats.
Thomas A. Amato: For our TriMas packaging group overall, organic sales were up 6.1%, with total sales for the group up 9.3%. Sales and order intake within TriMas packaging are important foundational indicators reinforcing our confidence that we are executing the right strategies to deliver our 2024 financial target. Within our TriMas Aerospace Group, organic sales were up 11.8%, with total sales up 34.7%, driven by higher aerospace fastener throughput and our acquisition of WeldMac manufacturing. Our backlog and order intake within TriMas Aerospace remains robust, which we believe supports our continued recovery efforts given the dislocation in market demand and subsupply and labor availability which we had been working on through most of the prior year.
Thomas A. Amato: For our <unk> packaging group overall.
Thomas A. Amato: Organic sales were up six 1% with total sales for the group up nine 3%.
Thomas A. Amato: Sales and order intake within <unk> packaging are important foundational indicators reinforcing our confidence that we are executing the right strategies to deliver our 2024 financial targets.
Thomas A. Amato: Within our Prime Minister Aerospace group.
Thomas A. Amato: Organic sales were up 11, 8% with total sales up 34, 7% driven by higher aerospace fastener throughput and our acquisition of <unk> manufacturing.
Thomas A. Amato: Our backlog and order intake within <unk> aerospace remains robust, which we believe supports our continued recovery efforts given the dislocation in market demand and sub supply and labor availability for which we had been working on through most of the prior year.
Thomas A. Amato: While our packaging and aerospace segments represent over 80% of our sales in the quarter, sales in our specialty product segment weakened significantly in the first quarter as compared to an exceptional sales rate in the first quarter of last year. Two main factors drove this rate of change, which Scott will cover in more detail later. First, while lower cylinder sales were anticipated, the rate of change was higher than planned due to overstocking of cylinders in 2023 as customers sought to mitigate logistics and lead time challenges from prior years. Additionally, we had no meaningful sales of compressors to one of our customers in the oil and gas market.
Thomas A. Amato: While our packaging and aerospace segments represent over 80% of our sales in the quarter sales in our specialty products segment weakened significantly in the first quarter as compared to an exceptional sales rate in the first quarter of last year. Two main factors drove this rate of change, which Scott will cover in more detail later.
Thomas A. Amato: First while lower cylinder sales were anticipated the rate of change was higher than planned due to overstocking of cylinders in 2023 as customers sought to mitigate logistics and lead time challenges from prior years.
Thomas A. Amato: Additionally, we had no meaningful sales of compressors to one of our customers in the oil and gas market.
Thomas A. Amato: Our specialty products businesses continue to flex costs and right-size, where practical, to current demand levels while also preserving the ability to meet anticipated higher demand in the second half of 2024. We have experienced demand volatility within our specialty products businesses in the past, and we remain confident that volumes will begin to recover as we move through the year. On a consolidated basis, TriMas sales for the first quarter were up 5.4%, slightly ahead of expectations. I would also like to turn our attention to share repurchases to start the year. We repurchased approximately 540,000 shares for a net reduction in shares outstanding of approximately 1%.
Thomas A. Amato: Our specialty products businesses continue to flex cost and right size, where practical to current demand levels. While also preserving the ability to meet anticipated higher demand in the second half of 2024.
Thomas A. Amato: We have experienced demand volatility within our specialty products businesses in the past and we remain confident that volumes will begin to recover as we move through the year.
Thomas A. Amato: On a consolidated basis <unk> sales for the first quarter were up five 4% slightly ahead of expectations.
Thomas A. Amato: I would also like to turn our attention to share repurchases to start the year, we repurchased approximately 540000 shares for a net reduction of shares outstanding of approximately 1%.
Thomas A. Amato: And as of today's call, we have increased this total to just over 600,000 shares on a year-to-date basis, further adding to our return of capital metrics. This rate of share repurchase is higher than the first quarter of last year as reducing shares outstanding is a tax-efficient way to provide long-term value to our shareholders, particularly when we believe there are valuation-dislocating events in the market. Finally, as noted in today's press release, we achieved adjusted earnings per share of $0.37, an increase of 5.7% as compared to the prior year quarter.
Thomas A. Amato: And as of today's call. We have increased this total to just over 600000 shares on a year to date basis further adding to our return of capital metrics.
Thomas A. Amato: This rate of share repurchase is higher than the first quarter of last year as reducing shares outstanding as a tax efficient way to provide long term value to our shareholders, particularly when we believe there are valuation dislocating event in the market.
Thomas A. Amato: Finally as noted in today's press release, we achieved adjusted earnings per share of $3 <unk>.
Thomas A. Amato: An increase of five 7% as compared to the prior year quarter.
Thomas A. Amato: In light of a solid start to the year, trends we are seeing in certain of our end markets, and even when considering, in some cases, continued demand volatility, we are reaffirming our sales and adjusted EPS guidance for the year. Now, let's turn to slide four, and I will briefly go through our first quarter results in more detail. We are reporting sales of $227 million, up 5.4% as compared to the prior year quarter, due to the factors previously discussed. Adjusted operating profit was $16.2 million and was up by 4.7% as compared to the prior year quarter last year.
Thomas A. Amato: In light of a solid start to the year trends, we are seeing in certain of our end markets and even when considering in some cases continued demand volatility we are reaffirming our sales and adjusted EPS guidance for the year.
Thomas A. Amato: Let's turn to slide four and I will briefly go through our first quarter results in more detail.
Thomas A. Amato: We are reporting sales of $227 million up five 4% as compared to the prior year quarter due to the factors previously discussed.
Thomas A. Amato: Adjusted operating profit was $16 2 million it was up by four 7% as compared to the prior year quarter last year.
Thomas A. Amato: This performance was driven by improved conversion rates within TriMas Aerospace and the beginning of operating leverage gains in TriMas packaging, more than offsetting lower earnings in specialty products and the treatment of non-cast stock compensation, which slightly burdened the quarter. As previously noted, adjusted EPS was $0.37 as compared to the prior year quarter of $0.35. And finally, adjusted EBITDA for the quarter was $35 million, up 10.2% as compared to the prior year quarter.
Thomas A. Amato: This performance was driven by improved conversion rates within <unk> aerospace and the beginning of operating leverage gains of <unk> packaging more than offsetting lower earnings in specialty products in the treatment of non cash stock compensation, which slightly burned in the quarter.
Thomas A. Amato: As previously noted adjusted EPS was <unk> 37, as compared to the prior year quarter of 35 cents.
Thomas A. Amato: And finally adjusted EBITDA for the quarter was 35 million up by 10, 2% as compared to the prior year quarter.
Thomas A. Amato: We are continuing to make gains in our LTM EBITDA, which is now at approximately $160 million as compared to the last quarter of $156 4 million.
Thomas A. Amato: We are continuing to make gains in our LTM EBITDA, which is now at approximately $160 million as compared to the last quarter of $156.4 million. This is an important performance trend we like to see as it demonstrates momentum in recovering NMERC. In turning to slide five, we continue to manage a strong balance sheet. And as a reminder, the vast majority of our debt is at a low interest rate and is not terming out until 2029.
Thomas A. Amato: This is an important performance trend, we'd like to see as it demonstrates momentum in recovering end markets.
Thomas A. Amato: Turning to slide five we continue to manage a strong balance sheet and as a reminder, the vast majority of our debt is at a low interest rate and not terming out until 2029.
Thomas A. Amato: We finished the quarter with net debt of $394 5 million and a leverage ratio of two five times, we did spend just over $13 billion in the quarter on share repurchases, which as discussed we believe was an appropriate trade off given dislocation in our share price.
Thomas A. Amato: We finished the quarter with net debt of $394.5 million and a leverage ratio of 2.5 times. We did spend just over $13 million in the quarter on share repurchases, which, as discussed, we believe was an appropriate tradeoff given the dislocation in our share price. Additionally, we did have a use of cash in the quarter driven by seasonal timing, higher sales activity, and strategic inventory build. While not the same rate as last year, this use of cash rate is historically the norm for TriMas as we move from Q4 to Q1. At this point, I will now turn the call over to Scott, who will take us through TriMAS' segment results. Okay, Scott? Thank you.
Scott: Additionally, we did have a use of cash in the quarter driven by seasonal timing.
Scott: Higher sales activity and strategic inventory builds while not at the same rate as last year. This use of cash rate is historically the norm for <unk> as we move from Q4 to Q1.
Thomas A. Amato: At this point I will now turn the call over to Scott, who will take us through trying to ask this segment results Scott.
Scott: Thanks, Tom let's.
Scott: Let's turn to slide six and I will begin my review of our segment results starting with drive mass packaging.
Scott: Net sales in the quarter were $127 million as compared to $116 million for the prior year quarter, an increase of more than 9%.
Scott: Acquisitions contributed $2 8 million of sales, while the favorable impact of foreign currency translation contributed another 900000 of sales during the quarter.
Scott A. Mell: Let's turn to slide six, and I will begin my review of our segment results, starting with TriMas packages. Net sales in the quarter were $127 million as compared to $116 million for the prior year quarter, an increase of more than 9%. Acquisitions contributed $2.8 million of sales, while the favorable impact of foreign currency translation contributed another $900,000 of sales during the quarter. Operating profit for the quarter was $18 million, an increase of more than 18% on a year-over-year basis, primarily on account of higher sales and the benefits of our previous Structural Cost Savings Act.
Scott A. Mell: Operating profit for the quarter was $18 million, an increase of more than 18% on a year over year basis, primarily on account of higher sales and the benefits of our previous structural cost savings actions.
Scott A. Mell: Adjusted EBITDA was $26 2 million or 27% of net sales, a 130 basis point improvement year over year.
Scott A. Mell: I do want to highlight an item that impacted the year over year comparison for <unk> packaging.
Scott A. Mell: As highlighted during our fourth quarter 2023 earnings call now that we have completed the centralization of our global functions into a shared service model, we are allocating certain costs to our businesses in 2024, which was not the case in 2023.
Scott A. Mell: These cost for China packaging in the first quarter were approximately $1 1 million or about 90 basis points.
Scott A. Mell: Additionally, as global CPG customers order rates picked up to start the year, we did incur some off standard input and expedited freight costs to meet higher demand rates well. This was an undercurrent in the quarter, which approximated another 80 basis points of margin or.
Scott A. Mell: Adjusted EBITDA was $26.2 million, or 20.7% of net sales, a 130 basis point improvement year over year. However, I do want to highlight an item that impacted the year-over-year comparison for TriMas packages. As highlighted during our fourth quarter 2023 earnings call, now that we have completed the centralization of our global IT function into a shared service model, we are allocating certain IT costs to our businesses in 2024, which was not the case in 2023. These costs for TriMas packaging in the first quarter were approximately $1.1 million, or about 90 bases.
Scott A. Mell: <unk> much of the off standard costs are now behind us and we view the overall or the dynamic as a positive.
Scott A. Mell: So overall <unk> packaging is off to a great start in 2024, which supports our confidence in achieving our full year sales and earnings guidance for the segment.
Scott A. Mell: Turning to slide seven I will now provide an update on our <unk> aerospace segment.
Scott A. Mell: Net sales for the core the increased by more than 17 million or 34, 7% when compared to the same period a year ago. As we continued to see strong order intake and general aerospace volumes continue to recover.
Scott A. Mell: Acquisitions contributed $11 4 million of sales during the quarter, while organic sales increased by $5 9 million or 11, 8% when compared to the previous year period.
Scott A. Mell: Additionally, as global CPG customers' order rates picked up to start the year, we did incur some off-standard input and expedited freight costs to meet higher demand rates. While this was an undercurrent in the quarter, which approximated another 80 basis points of margin erosion, much of the off-standard costs are now behind us, and we view the overall order dynamic as a positive. So overall, TriMas packaging is off to a great start in 2024, which supports our confidence in achieving our full year sales and earnings guidance for the segment.
Scott A. Mell: Operating profit for the quarter was $7 1 million or 10, 6% of net sales, which represents a 770 basis point improvement when compared to the previous year periods adjusted.
Scott A. Mell: Adjusted EBITDA for the quarter was $11 8 million or 17, 4% of net sales.
Scott A. Mell: We've now experienced seven consecutive quarters of increasing LTM sales for Tri mass aerospace.
Scott A. Mell: And LTM sales for this quarter are approximately 40% higher than the rate we're at in the second half of 2022.
Scott A. Mell: Turning to slide 7, I will now provide an update on our TriMas aerospace segment. Net sales for the TriMas Corridor increased by more than 17 million, or 34.7%, compared to the same period a year ago. As we continue to see strong order intake, and general aerospace volumes continue to recover, acquisitions contributed $11.4 million of sales during the quarter, while organic sales increased by $5.9 million, or 11.8% when compared to the previous year period.
Scott A. Mell: Likewise, our LTM adjusted EBITDA margin of 17% is approximately 400 basis points higher than the same period, a year ago and.
Scott A. Mell: And we remain confident that our full year operating margin will be at or exceed the high end of our guidance.
Scott A. Mell: Now on slide eight let's review our specialty products segment.
Scott A. Mell: Net sales were $32 7 million as compared to $49 3 million for the prior year quarter as general industrial cylinder demand continues to be soft due to a very high sales rate and subsequent overstocking in 2023.
Scott A. Mell: And to a lesser extent no compressor sales in the quarter to one of our larger oil and gas customers.
Scott A. Mell: Operating profit for the quarter was $7.1 million, or 10.6% of net sales, which represents a 770 basis point improvement when compared to the previous year period. Adjusted EBITDA for the quarter was $11.8 million, or 17.4% of net sales. We've now experienced seven consecutive quarters of increasing LTM sales for TriMas Aerospace, and LTM sales for this quarter are approximately 40% higher than the rate we're at in the second half of 2022. Likewise, our LTM adjusted EBITDA margin of 17% is approximately 400 basis points higher than the same period a year ago, and we remain confident that our full year operating margin will be at or exceed the high end of our guidance. Now, on slide 8, let's review our specialty product segment.
Scott A. Mell: We anticipate that this soft demand environment for industrial cylinders will continue through the second quarter and as a result specialty projects will likely be challenged to meet our previously provided full year sales guidance.
Scott A. Mell: While we believe our primary customers for steel cylinders will continue to see business growth in 2024 <unk>.
Scott A. Mell: <unk> started to see some recent improvements in our order book.
Scott A. Mell: And I have already received compressor orders for deliveries in the second half.
Scott A. Mell: At this point, we now expect year over year sales declines of 5% to 10% for specialty products.
Scott A. Mell: Of course, we continue to closely monitor our order intake and will continuing we'll continue taking appropriate flexing actions as necessary.
Scott A. Mell: Operating profit in the quarter was $2 6 million or 8% of net sales adjusted.
Scott A. Mell: Adjusted EBITDA for the quarter was $3 6 million or 11% of net sales.
Scott A. Mell: Despite the lower than expected sales performance for the specialty products business at this point, we believe the progress being made in our two largest segments <unk> packaging and <unk> aerospace will allow us to achieve our full year sales and earnings guidance.
Scott A. Mell: Net sales were $32.7 million as compared to $49.3 million for the prior year quarter as general industrial cylinder demand continues to be soft due to a very high sales rate and subsequent overstocking in 2023, and to a lesser extent, no compressor sales in the quarter to one of our larger oil and gas customers. We anticipate that this soft-demand environment for industrial cylinders will continue through the second quarter, and as a result, specialty products will likely be challenged to meet our previously provided full-year sales guidance.
Scott A. Mell: In addition, we expect Q2 year over year sales improvements to be in line with Q1 performance. While Q2, adjusted EPS is expected to be comparable to the prior year as higher interest and tax expenses offset incremental operating profit.
Scott A. Mell: At this point I'd like to turn the call back to Tom for some closing remarks Tom.
Speaker Change: Thank you Scott, let's turn to slide nine.
Scott A. Mell: I will conclude our prepared remarks by providing just a few examples of why we remain excited about the near and long term shareholder value creation prospects for dry mills.
Scott A. Mell: First after a demand challenge 2023.
Scott A. Mell: We are beginning to see order intake increases within <unk> packaging.
Scott A. Mell: While we believe our primary customers for steel cylinders will continue to see business growth in 2024, we have started to see some recent improvements in our order book, and we have already received compressor orders for deliveries in the second half. At this point, we now expect year-over-year sales declines of 5-10% for specialty products. Of course, we continue to closely monitor our order intake, and we'll continue taking appropriate flexing actions as necessary. Operating profit in the quarter was $2.6 million, or 8% of net sales.
Scott A. Mell: While we are cautiously optimistic about 2020 for revenue growth, we are positioned to make even further operating leverage gains in 2024 should we experienced higher than planned growth.
Scott A. Mell: We would also expect to enhance conversion rates into 2025.
Scott A. Mell: Finally, we continue to invest in innovation in 2023, despite the challenges in the year to allow for sustained long term growth.
Scott A. Mell: We are also confident in the actions, we have taken to improve supply and skilled labor constraints within our <unk> Aerospace group, we have top graded our leadership talent and expect to take advantage of further operating leverage gains as we continue to bring our production planning into better synchronization with customer demand.
Scott A. Mell: Adjusted EBITDA for the quarter was $3.6 million, or 11% of net sales. Despite the lower-than-expected sales performance for the specialty products business, at this point, we believe the progress being made in our two largest segments, TriMas Packaging and TriMas Aerospace, will allow us to achieve our full-year sales and earnings guidance. In addition, we expect Q2 year-over-year sales improvements to be in line with Q1 performance, while Q2 adjusted EPS is expected to be comparable to the prior year as higher interest and tax expenses offset incremental operating profits.
Scott A. Mell: Additionally, we continue to take steps to focus and improve our portfolio of businesses.
Scott A. Mell: First we place a priority on building out our <unk> packaging platform through M&A with the focus on the life Sciences beauty and food and beverage end markets.
Scott A. Mell: Next we continue to take steps to shift certain of our industrial businesses in a better position to make operating leverage gains from anticipated demand recovery in the midterm.
Scott A. Mell: And finally, we have already announced the planned divestiture of our Arrow engine business, which would facilitate <unk> exit of our presence in the oil and gas end market.
Scott A. Mell: At this point, I'd like to turn the call back to Tom for some closing remarks. Tom? Thank you.
Tom: Given our relentless commitment to cash flow generation, we will continue to reinvest in our businesses for long term growth. While also returning capital to our shareholders both through share buybacks and dividends.
Thomas A. Amato: Thank you, Scott. Now, let's turn to slide 9.
Thomas A. Amato: I will conclude our prepared remarks by providing just a few examples of why we remain excited about the near and long-term shareholder value creation prospects for TriMas. First, after a demand challenge in 2023. We are beginning to see order intake increases within TriMas packages. While we are cautiously optimistic about 2024 revenue growth, we are positioned to make even further operating leverage gains in 2024 should we experience higher-than-planned growth. We would also expect to enhance conversion rates into 2025.
Thomas A. Amato: In addition, our leadership team remains committed to operating <unk> in a responsible and sustainable way to contribute to society, particularly in the communities, where we live and work.
Thomas A. Amato: As I mentioned at the beginning of the call. We are off to a great start and we are reaffirming our 2024 outlook at this time.
Speaker Change: I would like to again, thank our investors for their support we continue to believe <unk> is an exciting company to invest in and with that I'll turn the call back to Sherry Sherry.
Speaker Change: Thanks, Tom at this point, we would like to open the call up to your questions.
Thomas A. Amato: Finally, we continue to invest in innovation in 2023, despite the challenges in the year, to allow for sustained long-term growth. We are also confident in the actions we have taken to improve supply and skilled labor constraints within our TriMas Aerospace Group.
Speaker Change: Thank you.
Speaker Change: Ill be conducting a question and answer session.
Thomas A. Amato: If you would like to ask a question. Please press star one on your telephone keypad.
Thomas A. Amato: Transformation tone will indicate your line is in the question queue.
Speaker Change: I stopped to if you would like to move your questions from the queue.
Thomas A. Amato: We have rated our leadership talent and expect to take advantage of further operating leverage gains as we continue to bring our production planning into better synchronization with customer demand. Additionally, we continue to take steps to focus and improve our portfolio of businesses. First, we place a priority on building out our TriMas packaging platform through M&A, with a focus on the life sciences, beauty, and food and beverage markets. Next, we continue to take steps to shift certain of our industrial businesses into a better position to make operating leverage gains from anticipated demand recovery in the mid-2020s.
Thomas A. Amato: For participants using speaker equipment, it may be necessary to pick up.
Speaker Change: Please for questions to start.
Speaker Change: One moment please poll for questions.
Thomas A. Amato: The first question comes from the line of Ken Newman with Keybanc capital markets. Please go ahead.
Speaker Change: Hey, good morning, guys.
Speaker Change: Morning, Ken.
Speaker Change: Good morning.
Speaker Change: Scott I just wanted to clarify on the reaffirmed guidance for this year.
Speaker Change: Sounds like you are there are some minor changes to the segment sales and margin guidance provided from last quarter by caught it all correctly, you're at or above the high end of the margin guide for aerospace. This year now you're expecting specialty sales down 5% to 10% is there anything else within that.
Thomas A. Amato: And finally... We have already announced a planned divestment of our aero engine business, which would facilitate TriMas' exit from the oil and gas end market. Given our relentless commitment to cash flow generation, we will continue to reinvest in our businesses for long-term growth, while also returning capital to our shareholders, both through share buybacks and dividends. In addition, our leadership team remains committed to operating TriMas in a responsible and sustainable way to contribute to society, particularly in the communities where we live and work.
Thomas A. Amato: Segment guidance that we should kind of be aware of.
Speaker Change: No you picked up on the on the two key items there everything else is.
Thomas A. Amato: As we guided to in the last earnings call.
Thomas A. Amato: Okay.
Thomas A. Amato: And then I appreciate the help on.
Thomas A. Amato: Maybe the consolidated sequential expectation for Q2 on revenue and earnings.
Speaker Change: Curious if there's any help in how to think about the sequential moves and revenue across the three segments.
Thomas A. Amato: As I mentioned at the beginning of the call, we are off to a great start, and we are reaffirming our 2024 outlook at this time. I would like to again thank our investors for their support. We continue to believe TriMas is an exciting company to invest in. And with that, I'll turn the call back to Sherry. Sherry? Thanks, Tom.
Thomas A. Amato: The first quarter.
Thomas A. Amato: Yeah.
Thomas A. Amato: Sure.
Sherry Lauderback: Well look I think I spoke to the expected growth year over year.
Sherry Lauderback: For Q2 is going to be very similar to what we saw for Q1 on a year over year basis.
Sherry Lauderback: I think we continue to expect aerospace.
Sherry Lauderback: Thanks, Tom. At this point, we would like to open the call to your questions.
Sherry Lauderback: To continue to grow at a nice rate.
Sherry Lauderback: I think packaging again, I think I would point you towards last year's Q2.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star 2 if you would like to remove your questions from the list. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. The first question comes from the line of Ken Newman with KeyBank Capital Markets.
Kenneth H. Newman: And we expect to see a very similar growth rate in.
Kenneth H. Newman: In Q2 of this year as we experienced for Q1.
Kenneth H. Newman: Okay got it.
Kenneth H. Newman: And maybe just a couple more for me then I'll jump back in line, but.
Kenneth H. Newman: Didn't hear whether or not there was an update.
Kenneth H. Newman: On your expectations of folding nor in the packaging segment is there was there a timing update there that you'd like to provide.
Kenneth H. Newman: Scott, I just wanted to clarify on the reaffirmed guide for this year. It sounds like you are. There are some minor changes to the segment sales and margin guide that you provided from last quarter. If I've caught it all correctly, you're at or above the high end of the margin guide for aerospace this year, and now you're expecting specialty sales down 5 to 10 percent. Is there anything else within that segment guidance that we should kind of be aware of?
Kenneth H. Newman: Yes, Thanks, Ken for the question yes.
Scott: Yes, we mentioned on our last call that this is something that we're interested in moving trying at the two segments.
Speaker Change: I think at this point.
Kenneth H. Newman: Sure.
Kenneth H. Newman: Tracking against our <unk>.
Kenneth H. Newman: Process with our Arrow engine business, which is underway.
Speaker Change: And sort of update further as we get into the second half on what we might do there with Doris.
Speaker Change: Got it.
Kenneth H. Newman: Maybe one more for me and I'll jump back in aerospace we are obviously seeing some headlines about maybe some production cuts out of Boeing on the 737 Max.
Scott A. Mell: No, you picked up on the two key items there. Everything else is the same as we guided to in the last earnings call, and then
Scott A. Mell: And then I appreciate the help on maybe the consolidated sequential expectations for 2Q on revenue and earnings. Just curious if there's any help on how to think about the sequential moves in revenue across the three segments as it relates to the first quarter.
Scott: As it relates to the visibility in your business are you seeing or expecting any impact from that this year or.
Scott A. Mell: Any color there.
Scott A. Mell: So we're not expecting any impact from that this year actually.
Scott A. Mell: Well, I think I spoke to you about the expected growth year over year. For Q2, it's going to be very similar to what we saw for Q1 on a year-over-year basis. We continue to expect aerospace to continue to grow at a nice rate. You know, I think packaging, again, I think I would point you toward last year's Q2. You know, and we expect to see a very similar growth rate in Q2 of this year as we experienced in Q1.
Scott A. Mell: Within aerospace our bookings are at this point in the year almost going into 2025 anyway.
Scott A. Mell: So we're pretty pretty much fully booked.
Scott A. Mell: So we're not seeing any any near term 2024 impact from that at all.
Speaker Change: Understood I'll jump back in line. Thanks.
Scott A. Mell: Thanks.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of how much closer and with BW <unk> financials. Please go ahead.
Kenneth H. Newman: Okay, got it. Maybe just a couple more from me and then I'll jump back in line, but I didn't hear whether or not there was an update on your expectations to fold in North America into the packaging segment. Is there a timing update there that you'd like to provide? Yeah, thanks, Kev.
Speaker Change: Good morning, So first off on the packaging side.
Kenneth H. Newman: Could you just talk about.
Kenneth H. Newman: The conversations you're having now with customers and how that differs with what you were seeing last year.
Scott A. Mell: Yeah, thanks, Ken, for the question. Yeah, we mentioned on our last call that this is something that we're interested in moving TriMas to two segments. I think at this point, we're tracking against our process with our aero engine business, which is underway, and we'll sort of update further as we get into the second half on what we might do there with Norris.
Speaker Change: Good morning, and thank you for the question.
Scott A. Mell: If you could see me right now I'd have a smile on my face because the conversations we had last year were were very difficult rate. There was an overstock position there wasn't a need.
Scott A. Mell: And.
Scott A. Mell: As we sort of look back and we plot against.
Kenneth H. Newman: Maybe one more from me and then I'll jump back. In aerospace, you know, we are obviously seeing some headlines about maybe some production cuts by Boeing on the 737 MAX. You know, as it relates to the visibility in your business, are you seeing or expecting any impacts from that this year, or any color there?
Scott A. Mell: Order intakes and other kpis that we look at throughout the year.
Kenneth H. Newman: Can conclude that we were in a very strange trough.
Kenneth H. Newman: Last year, and we're certainly out of it today our conversations today.
Kenneth H. Newman: In some cases are how can we get more product quicker.
Kenneth H. Newman: What what a change from the prior year start all cases, but in some cases in some product lines.
Scott A. Mell: So, not expecting any impact from that this year. Actually, within aerospace, our bookings are, at this point in the year, almost going into 2025 anyway. So, we're pretty much fully booked. So, we're not seeing any near-term 2024 impact from that at all.
Scott A. Mell: We're seeing accelerated.
Scott A. Mell: Sure.
Scott A. Mell: Supply needs and we have the capacity we are working hard in some cases.
Scott A. Mell: This works against optimal performance, because we have over time or we might even have cases, where we have to expedite shipped to satisfy some of our most key customers.
Kenneth H. Newman: Understood. I'll jump back in line. Thanks.
Operator: The next question comes from the line of Hamed Khorsand with BWS Financials; please go ahead.
Speaker Change: But it's a very different environment.
Hamed Khorsand: One quarter does not make a year, we're not setting the flag and saying this is behind us forever, but certainly we feel much much more pleased today with our outlook and our packaging group not only for 2020.
Hamed Khorsand: Good morning. So, first off, on the packaging side, could you just talk about the conversations you're having now with customers and how that differs from what you were seeing last year?
Hamed Khorsand: 2020 for him it, but but we see the ability to make sequential gains into 2025.
Thomas A. Amato: Hamed, good morning and thank you for the question. If you could see me right now, I'd have a smile on my face because the conversations we had last year were very difficult, right? There was an overstock position, there wasn't a need, and as we sort of look back and plot against order intakes and other KPIs that we look at throughout the year, we can conclude that we were in a very strange trough last year, and we're certainly out of it today.
Hamed Khorsand: As order rates start to pick up through the year.
Hamed Khorsand: Okay and then my question on that is if youre seeing that kind of activity.
Hamed Khorsand: Why are you hesitant as far as guidance and so forth what what's holding you back.
Speaker Change: Great another great question.
Thomas A. Amato: So the industry still is in a short cycle business short cycle nature. So.
Thomas A. Amato: Our conversations today, in some cases, are about how we can get more product quicker. What a change from the prior year. It's not all cases, but in some cases, in some product lines, we're seeing accelerated supply needs, and we have the capacity, we're working hard. In some cases, this works against optimal performance because we have overtime, or we might even have cases where we have to expedite ship to satisfy some of our most key customers, but it's a very different environment.
Thomas A. Amato: Unlike aerospace where I mentioned with Ken's question that today, if an order comes in depending on the order we could be quoting a 2025 delivery date in packaging. That's not the case, we still are in a very short cycle nature of that business.
Thomas A. Amato: And until I see the lead times elongate.
Thomas A. Amato: Then.
Thomas A. Amato: Don't have full confidence that that we're at a point, where we can say okay. We know the book is going to be strong through date acts.
Thomas A. Amato: One quarter does not make a year; we're not setting the flag and saying this is behind us forever, but certainly, we feel much more pleased today with our outlook in our packaging group, not only for 2024, Hamid, but we see the ability to make sequential gains into 2025 as order rates start to pick up through the year.
Thomas A. Amato: So.
Thomas A. Amato: We'll know a little bit more at the end of this quarter and then and then we'll we'll update you further.
Speaker Change: Okay, and then one question on the aerospace as well.
Thomas A. Amato: What gives you confidence in aerospace that you don't have some sort of hiccup.
Thomas A. Amato: That you had in specialty.
Hamed Khorsand: Okay, and then my question on that is, if you're seeing that kind of activity... Why are you hesitant as far as guidance and so forth? What's holding you back?
Thomas A. Amato: Specialty.
Thomas A. Amato: <unk> right or specialty products.
Hamed Khorsand: All of a sudden.
Hamed Khorsand: You're seeing a sequential decline of 30% what prevents that both happening in aerospace.
Thomas A. Amato: Great, another great question. So, the industry still is in a short cycle of business, a short cycle nature. So, unlike aerospace, where I mentioned with Ken's question that today, if an order comes in, depending on the order, you know, we could be quoting a 2025 delivery date. In packaging, that's not the case.
Speaker Change: Okay well.
Thomas A. Amato: Sure.
Thomas A. Amato: First of all.
Thomas A. Amato: We're sitting today with an order backlog that is is historically strong.
Thomas A. Amato: And that gives us confidence because.
Thomas A. Amato: We can look out more than through 2024 into.
Thomas A. Amato: Uh huh.
Thomas A. Amato: Revenue that will start to satisfy our foundation for 2025, that's one point. The second point is that we do see when we look at overall production build rates for commercial.
Hamed Khorsand: We still are in a very short cycle nature in that business, and until I see the lead times elongate, then, you know, I'm not, I don't have full confidence that, you know, that we're at a point where we could say, okay, we know the book is going to be strong through date X. So, you know, we'll know a little bit more at the end of this quarter. And then, and then we'll, you know, we'll update you further.
Hamed Khorsand: Airliners and military equipment, we still see an increase versus where we are today that.
Hamed Khorsand: I know, there's some discussion around Boeing but theres still our increase is forecast in the future and Airbus continues to be strong and then theres embraer and others.
Thomas A. Amato: Okay, and then one question on aerospace is, you know, what gives you confidence in aerospace that you don't have some sort of hiccup, you know, that you experienced with specialty packaging, right? Or especially products that all of a sudden, you're seeing a sequential decline of 30%. What prevents that from happening in aerospace? Okay, well, um, first
Speaker Change: The only thing that I, the only thing that I would say is.
Thomas A. Amato: We had <unk>.
Thomas A. Amato: Certain instances in the past that were strange dislocating event, but.
Thomas A. Amato: But we don't see anything like that now airline travel is up again.
Thomas A. Amato: So it just it has all the metrics around it that.
Thomas A. Amato: Has us with high confidence not only for 2024, but as we go into 2025.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Thomas A. Amato: A reminder to all the participants touching my sodden one to ask a question.
Thomas A. Amato: Okay, well, um... So, first of all, we're sitting today with an order backlog that is historically strong, and that gives us confidence because we can look out more than through 2024 into revenue that will start to satisfy a foundation for 2025. That's one point.
Thomas A. Amato: Next question comes from the line of Ken Newman with Keybanc capital markets. Please go ahead.
Speaker Change: Hey, guys. Thanks for the follow up here.
Thomas A. Amato: Can you just give a little bit more color on what the softness in the beverage related issues were.
Thomas A. Amato: What were those driven by in the packaging segment.
Thomas A. Amato: Is that just contained to a few specific customers.
Thomas A. Amato: The second point is that when we look at the overall production build rate, for commercial airliners and military equipment, we still see an increase versus where we are today. I know there's some discussion around Boeing, but there are still increases forecast in the future, and Airbus continues to be strong. And then there's Embraer and others. The only thing that I would say is that we had certain instances in the past that were strange dislocating events, but we don't see anything like that now. Airline travel is up again, so it has all the metrics around it that give us high confidence not only for 2024 but as we go into 2025.
Thomas A. Amato: It really it really is contained to a few specific customers and in our region.
Thomas A. Amato: And it is on a relative basis, a pretty low change, but it's the only end market that was slightly.
Thomas A. Amato: Slightly down from the first quarter of last year and it was not a not a big number.
Thomas A. Amato: But our sales to our particular dairy customer was off we expect those volumes to come back later in the year and that we are seeing some innovation cutover in the European beverage market I mentioned.
Thomas A. Amato: There are customers of ours that are that are changing too are tethered cap line, so theyre working through old inventory.
Thomas A. Amato: Which is which is our prior technology, which was not a tethered gap so.
Operator: A reminder to all the participants that you may press star and 1 to ask a question. The next question comes from the line of Ken Newman with KeyBank Capital Markets.
Kenneth H. Newman: Pretty pretty discrete and not a big number.
Operator: Okay.
Kenneth H. Newman: And then just maybe one more for me.
Kenneth H. Newman: I think about the eventual folded up north.
Kenneth H. Newman: Yes, thanks for the follow-up here. Can you just give a little bit more color on what the softness and the beverage-related issues were, what those were driven by in the packaging segment, and is that just contained within a few specific customers?
Kenneth H. Newman: And some of the weakness out of the steel cylinder.
Kenneth H. Newman: This quarter is there any way you could help us think about.
Kenneth H. Newman: The the margin profile of north relative to specialty and how we think about that business go forward.
Thomas A. Amato: It really is contained to a few specific customers and in a region, and it is, on a relative basis, a pretty low change, but it's the only end market that was.., you know slightly down from the first quarter of last year and it was not a not a big number but but our sales to our particular dairy customer was off we expect those volumes to come back later in the year and then we are seeing some innovation cut over in the European beverage market I mentioned there are customers of ours that are that are changing to our tethered cap line so they're working through old inventory which is a which is our prior technology which was not a tethered cap so pretty pretty discreet and not a big number
Thomas A. Amato: Combined with packaging.
Speaker Change: Yeah, I mean, it's really a tough a tough quarter to look at.
Thomas A. Amato: And I would say that the margins comparably between north and Aero are pretty close.
Thomas A. Amato: But I think this quarter is not really a representative quarter given the low volume.
Thomas A. Amato: I would look back over time to sort of.
Thomas A. Amato: Roughly.
Thomas A. Amato: 15% operating profit, maybe 18% EBITDA and Thats more normalized for Norris overall.
Speaker Change: That's helpful. I appreciate that Tom.
Speaker Change: Thank you.
Thomas A. Amato: A reminder to all the participants that do my best Star one to ask a question.
Kenneth H. Newman: And then, you know, just maybe one more for me, as I think about the eventual folding of Norris and some of the weakness in the steel cylinder business this quarter, is there any way you can help us think about, you know, the margin profile of Norris relative to specialty and how we think about that business going forward, you know, combined with packaging?
Kenneth H. Newman: Yeah.
Kenneth H. Newman: Yes.
Speaker Change: There are no further questions at this time.
Kenneth H. Newman: I'd now like to turn the floor over to Tom Amato for closing comments.
Speaker Change: Okay again, I would like to thank you for joining us on our earnings call I appreciate the questions and commentary and we look forward to updating you again next quarter.
Thomas A. Amato: Yeah, I mean, it's really a tough quarter to look at, and I would say that the margins comparably between Norris and Arrow are pretty close, but I think this quarter is not really a representative quarter given the low volume. I would look back over time to sort of a roughly 15% operating profit, maybe 18% EBITDA, and that's more normalized for Norris overall. That's helpful. I appreciate that.
Speaker Change: Thank you. Thank you.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time, thank you very much.
Thomas A. Amato: [music].
Thomas A. Amato: Okay.
Thomas A. Amato: Okay.
Thomas A. Amato: Yes.
Thomas A. Amato: Okay.
Thomas A. Amato: Yeah.
Thomas A. Amato: Yes.
Thomas A. Amato: Okay.
Thomas A. Amato: Yes.
Kenneth H. Newman: That's helpful. I appreciate that, Tom.
Operator: A reminder to all the participants that you may press star and 1 to ask a question. There are no further questions at this time. I would now like to turn the floor over to Thomas Amato for closing remarks. Okay, again.
Operator: Okay.
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Operator: Okay.
Thomas A. Amato: Okay, again, I would like to thank you for joining us on our earnings call. I appreciate the questions and commentary, and we look forward to updating you again next quarter.
Thomas A. Amato: [music].
Thomas A. Amato: Okay.
Thomas A. Amato: Yes.
Thomas A. Amato: Yes.
Thomas A. Amato: Yes.
Thomas A. Amato: [music].
Operator: Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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