Q4 2024 The Eastern Co Earnings Call
James Mitarotonda,
Good morning, everyone and welcome to the Eastern company fourth quarter fiscal year 'twenty to 'twenty four earnings call.
At this time all participants are in a listen only mode. If anyone should require operator assistance. During this conference. Please press star zero on your phone keypad. Please note. This conference is being recorded.
Mary Anne: I will now turn the conference over to your host Mary Anne <unk> Treasurer of Eastern company Ma'am the floor is yours.
Mary Anne: Good morning, and thank you everyone for joining us this morning for a review of the eastern company's results for the fourth quarter and full year 2024.
With me on the call are Ryan Schroeder, Chief Executive Officer, and Nicholasville, Ahus Chief Financial Officer.
The company issued an earnings press release yesterday after the market closed.
Mary Anne: Anyone who has not yet seen the release. Please visit the investors section of the company's website Www Dot Eastern company Dot Com, where you will find the release under financial news.
Mary Anne: Please note that some of the information you will hear during today's call will consist of forward looking statements about the company's future financial performance and business prospects.
Mary Anne: Including without limitation statements regarding revenue gross margin operating expenses other income and expenses taxes and business outlook.
Mary Anne: These forward looking statements are subject to risks and uncertainties that could cause actual results or trends to differ significantly from those projected in these forward looking statements.
Mary Anne: We undertake no obligation to review or update any forward looking statements to reflect events or circumstances that occur after the call.
Mary Anne: For more information regarding these risks and uncertainties. Please refer to risk factors discussed in our SEC filings, including Form 10-K filed with the SEC on March 11, 2025 for the fiscal year 2024.
Mary Anne: In addition, during today's call we will discuss non-GAAP financial measures that we believe are useful as supplemental measures of eastern's performance.
Mary Anne: These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.
Mary Anne: A reconciliation of each of the non-GAAP measures discussed during today's call to the most directly comparable GAAP measure can be found in the earnings press release.
Ryan: With that introduction I'll turn the call over to Ryan.
Mary Anne: Yeah.
Ryan: Thank you Mariana and good morning to both of them.
Ryan: Jamie by phone as well as those participating via the world. It is truly a pleasure to be here today I'd.
Speaker Change: I'd like to Kate I'd like to begin by first of all Jim CEO by briefly introducing myself to our shareholders and the investment community.
Speaker Change: As many of you know I joined eastern.
Speaker Change: November of 2024, with a 25 year track record of industrial manufacturing.
Speaker Change: Experience includes leadership positions in place like a global leader in Detroit and polycarbonate sheet products.
IMI Morgan: IMI Morgan, a leading manufacturer of motion control products and part of that has been a world leader in motion that people dogs most.
IMI Morgan: Most recently at Plaza like myself CEO of my responsibilities compass more than 120 product lines.
IMI Morgan: 2000 employees worldwide.
Speaker Change: I'd like coal.
IMI Morgan: Sure a few early observations.
IMI Morgan: Eastern time.
Speaker Change: When I joined it was Jim I visited facilities and Hell of a series of in depth conversations with both customers and employees.
Speaker Change: Based on those international saw promising a promising population with very talented and committed employees.
Speaker Change: <unk> core businesses.
Speaker Change: I was also impressed with our strong brands and first class products, each based on sales, which clearly resonated with customers.
Speaker Change: In addition, I saw a company that overall, while making progress on improving operating efficiencies reducing costs and strengthening its gross margins.
Speaker Change: So a ways to go.
Speaker Change: At the same time I saw a compelling opportunity to strengthen eastern's business model drive revenue and take the company to a higher level simply put my mandate my mandate is to grow.
Faster and harder I strongly believe that by creating a leadership team that combines strong entrepreneurial spirit with an action oriented approach.
Speaker Change: Laser focus on real time results, we will be able to improve eastern's results dramatically.
Speaker Change: I'll share the initial steps in my playbook for optimizing results operations, achieving long term growth and increasing shareholder value.
After Nick reviews, Eastern most recent financial results Nick over to you.
Nick: Thanks Ryan.
Speaker Change: I'll focus my review today on the company's financial results from continuing operations for the fourth quarter and full year 2024.
Speaker Change: For the fourth quarter net sales increased four 5% to $66 7 million from $63 8 million in the 'twenty to 'twenty three period.
Speaker Change: Primarily due to higher truck demand for our returnable transport packaging products, partially offset by lower demand for truck accessories and truck mirror assemblies.
Speaker Change: For the full year 2024, net sales rose, 5% to $272 8 million from $258 9 million in 2023.
Speaker Change: Our backlog as of December 28, 2024, Rose 15, 7% to $89 2 million compared to $77 1 million as of December 32023.
Speaker Change: The increase was primarily driven by increased orders related to the launch of new mirror programs for the class eight truck.
Speaker Change: Bell back partially offset by a decrease in backlog for our returnable packaging products at big three.
Speaker Change: Gross margin as a percentage of sales for the fourth quarter of 2024 was 23% compared to 26, 8% in the 'twenty eight 'twenty three period.
Speaker Change: The decrease primarily reflected higher material costs in the fourth quarter of 2024, and a favorable adjustment in our LIFO reserve in the 'twenty to 'twenty three period.
Speaker Change: Not reoccur in the 2024 period.
Speaker Change: And the full year 2020 for gross margin as a percentage of sales was 24, 7% compared to 23, 9% in 2023.
Speaker Change: As a percentage of net sales product development costs were one 7% in the fourth quarter of 2024 compared to two 1% in the 2020 three period.
Speaker Change: For the full year, 2024, and 2023 product development costs as a percentage of net sales were one 8% and two 2% respectively.
Speaker Change: Selling and administrative expense increased $1 1 million or 11% in the fourth quarter of 2024 compared to last year's period.
Speaker Change: The increase was primarily due to higher payroll related expenses legal and professional expenses and selling expenses.
Speaker Change: For the full year, selling and administrative expenses increased $3 1 million or seven 9% to $42 2 million from $39 1 million in 2020 three.
Speaker Change: With the increase primarily due to higher payroll related expenses legal and professional expenses and travel related expenses.
Speaker Change: Other income and expense for the fourth quarter of 2024 was relatively flat when compared to the 2020 three period.
Speaker Change: For the full year other income and expense decreased $1 2 million.
Speaker Change: Due to a $1 6 million favorable adjustment for the finding work.
Speaker Change: Final settlement of our swap agreements at Santana there in 2023 that did not reoccur in 2024.
Speaker Change: Partially offset by <unk> 4 million unfavorable working capital adjustment in 2020 three related to the sale of the Greenwald business.
Speaker Change: Mhm.
Speaker Change: Net income for the fourth quarter of 2024 was $1 6 million or <unk> 26 per diluted share compared to net income of $3 9 million or <unk> 63 per diluted share for the 'twenty to 'twenty three period.
Speaker Change: For the full year 2024, net income increased 12% to $13 2 million or $2 13 per diluted share compared to $11 8 million or $1 88 per diluted share in 2023.
Speaker Change: Adjusted net income from continuing operations, a non-GAAP measure for the fourth quarter of 2024 was $2 6 million or <unk> 42 per diluted share compared to adjusted net income from continuing operations of $3 9 million or <unk> 63 per diluted share for the prior year period.
Speaker Change: Yeah.
Speaker Change: For the full year 2024, adjusted net income from continuing operations was $14 2 million or $2 29 per diluted share compared to $13 4 million or $2.14 per diluted share for 2023.
Speaker Change: At the end of 2000 at the end of Q4 2024 hour senior net leverage ratio was one.
Speaker Change: 0.23 to one compared to 1.36 to one at the end of the third quarter and 1.41 to one at the end of 2023.
Speaker Change: In addition, we invested $9 7 million in capital expenditures and paid dividends of $2 7 million in fiscal 2024.
Speaker Change: Okay.
Speaker Change: As of December 28, 2020 for inventories totaled.
Speaker Change: $55 2 million down $3 2 million from the end of fiscal 2023.
Speaker Change: During the fourth quarter of 2024, we repurchased 39000 shares of common stock under the share repurchase program Easter and sport authorized in August 2023.
Speaker Change: Bringing us to a total of approximately 150000 shares repurchased under the buyback program.
Ryan: That completes my financial review I'll now turn the call back to Ryan.
Ryan: Thank you Nick as I mentioned earlier my primary my primary go after arriving to eastern wants to make sure that all of our businesses have leaders with a strong entrepreneurial spirit and action oriented methodology and a laser focus on the real time results to that end, we brought in new leadership at two of the company's III business.
Ryan: Yes.
Ryan: In December of 2024, we appointed that corneas president of Everhart manufacturing.
Ryan: <unk> mandate is to create a commercial and product development organization that will capitalize on upper hard strong brand in the industry and alignment which is operational excellence.
Ryan: Zach twice in the past at IMI, Darwin and Parker handset and have seen its capabilities firsthand. So I'm very pleased to have back onboard.
Ryan: In January of 2025, recognizing internal talent, we promoted Emilio Russell President of Big three precision products familiar was previously at Eberhard, where he served as senior director of global operations for several years now.
Capacity he helped drive the significant operational improvements at Eberhard enjoys today.
Ryan: That big three Emilio is now implementing a comprehensive plan to streamline process processes improved performance grow revenue and increased profitability throughout the business.
Ryan: At Eastern third business fell back we have been very pleased with the accomplishments of our existing President Dammit group.
Ryan: Dan has decades of experience with strategic planning planning and is a win expert he personally led a remarkable acceleration in production in 2024 that strengthened <unk> position with its core customers and significantly improved results. We look forward to the continuation of that stellar track record in the coming years.
Ryan: Looking into 2025 and beyond our focus will be on continuous improvement and commercial excellence within each of the eastern businesses. We have adopted a more decentralized approach under which eastern's operating businesses will all be driving their own agenda to meet their customers' needs receiving the tools and support they need for success from our executive team together.
Ryan: We are developing renewed strategies as well as focused.
Ryan: As well as focused and action oriented teams supported by the foundation of our high performance culture.
Ryan: Before finishing my prepared remarks today I want to emphasize that given todays business environment all of eastern businesses have been hard at work developing nimble supply chain.
Ryan: Sorry.
Ryan: Bernhard and bell back can each present their customers multiple sourcing options to address concerns such as past made in America lead times and tariffs operationally each business is headquartered in the United States with manufacturing in the U S, Mexico and China. All three leadership teams are well equipped.
Ryan: To manage tariffs and pricing fluctuations in the short term, while redirecting our supply chain and the long term as needed.
<unk> business is through COVID-19 previous rounds of tariffs on already with an experience playbook.
Speaker Change: At this point, let's start our Q&A session with a shareholder question. We received after yesterday's earnings announcement that I think will be of interest to everyone.
So the question list.
Speaker Change: Your earnings announcements I thought you'd like to enhanced eastern's product development activities and expand its businesses market share by selling more complete set of products can you give us some more specifics around those.
Speaker Change: So to that end I'll say this.
Speaker Change: Both at Val back and that ever hard we've we've seen some real opportunities for product expansion specific debelle back and there is certainly that our big three as well, but I'm going to focus on this answer on those two bell back we've seen a real significant opportunities with our aftermarket business, where we serve our customers and distributors better than <unk>.
Speaker Change: Anyone else in the marketplace. So the question really is what other products could we put through that same supply chain and serve those customers better than say the competition was so going through a comprehensive process a strategic plan, where we're identifying what products, we might be able to pick up and run through there as a key initiative for bell back out there.
Speaker Change: Undergoing actually today.
Speaker Change: So to be clear on that.
Speaker Change: Everhart side.
Speaker Change: Like I said in my remarks, it's clear that they have a really good brand and reputation in the markets that they serve.
Speaker Change: Some of their products.
Speaker Change: Need upgraded in other cases, they need maybe electrified and then there's some tangential opportunities that you have such a strong presence within the markets we serve.
Speaker Change: Understanding what we want to go and do there and having a robust and solid process to make sure what goes in once that comes off the other as a successful launch product is us.
Speaker Change: A really key initiatives from our rack back has a great track record of doing that in the past and that's why we're so happy to have them and brought them to do ever heard.
Speaker Change: So with that I'll turn it back over to the operator for additional questions.
Speaker Change: Thank you very much at this time, we'll be conducting a question and answer session. If you would like to ask a question via the webcast. Please click on the ask a question box on the left side of your screen typing. Your question and hit submit if you would like to ask a question via the phone lines. Please Chris.
Speaker Change: Star one on your phone keypad, a confirmation tone will indicate that Youll Linus and Nicky you May press star two if you would like to remove your question from Nicky.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the keys.
Wait a minute it must be poll for any questions and then I can hand to Nick to have a look at the the Q&A on the webcast if there's any.
Speaker Change: Yes, sure we have a question coming in on the web and the question is are you able to pass through.
Cost increases to your customers.
And for US, we want to work with our customers and partner with our customers. So we are able to pass down those cost increases, but we are sensitive to our customers' needs as well and we will continue to work with them for what solution is best for their individual environment.
Speaker Change: And no further questions are coming in on the web.
Speaker Change: Okay.
Speaker Change: Check to see if we've got anyone in the queue at the moment on the phone lines I can't see anyone.
Speaker Change: Just at the moment just to remind you that just in case you can press star one on your phone keypad Oh, Yeah. We have a question just coming from Ross Davidson of Bastogne capital Ross Your line is life.
Ross: Ross can yes.
Ross: I apologize I was on.
All right Hey, Nick Thanks for taking the question.
Speaker Change: I was curious if you could just comment on sort of the overall market.
Speaker Change: I guess, specifically maybe for class eight for for a lot of your business. You know what are you seeing and I guess as you think about the future maybe the next year, obviously nobody has a crystal ball, but you know maybe you could highlight if any reasons why.
Speaker Change: You would expect eastern.
Speaker Change: You know opportunities in 'twenty 'twenty five to differ from the market in other words, like where you might see opportunities to gain share as an example.
Speaker Change: Sure.
Speaker Change: So yes, so in terms of the class eight market primarily that served.
Speaker Change: Eastern companies through Bell back and mainly through mirrors.
Speaker Change: Well, what we have a very significant market share I'm I'm happy to report on that on the beer market. So.
Speaker Change: On the OE side, our business will track very closely to.
Speaker Change: What production looks like with the exception of places, where we've taken market share with new products I'm happy to report the team has done that this year. So we're just launching a new mirror platform that the data is very significant for us that we've taken in.
Speaker Change: Transitioning into production as we speak so that one will be an incremental improvement compared to the market I'm happy to say and then you know I touched on our aftermarket side of the business that saw that tends not to track the classic build market and actually at times. It can.
Speaker Change: Track the opposite so that's been that's been we've taken we've seen growth in that market ourselves, but the market itself as a whole has been has been fairly flat. We're forecasting on that aftermarket side of things to continue to grow that business.
Speaker Change: Significantly faster than the market overall is growing and then on the <unk> side of things, we do supply products that go into about Libre cab, mainly on the class eight truck market.
Speaker Change: Those build rates tend to fluctuate significantly and over this last year those were down fairly significantly and had been compressed for I'd say, maybe the last year and a half so.
Speaker Change: We're forecasting some improvement there we think there is a demand that's built up there that could break loose and then also you know where we are we watch very very closely the admissions requirements and changes that are coming out in a couple of years now and often there's a buildup.
Speaker Change: Our class eight market ahead of those emissions change it.
We still want to see if there's something that the administration changes there.
Speaker Change: If they pulled back on that is it simply just more of a level loading up the up the build rate, which is probably good for most manufacturers overall.
Speaker Change: Thank you thanks for the question.
Speaker Change: Yeah, Yeah, so versus the pre buy if they change that you just wouldn't see that but you'd see a more steady steady build is what you'd expect.
Speaker Change: Yes exactly.
Speaker Change: Got it okay. Thanks very much.
Speaker Change: Thank you very much just a quick check to see if anyone else has any further questions on the phone line and you can join the queue by pressing star one on your.
Speaker Change: Keep that.
Speaker Change: Okay. We seem to have reached the end of our question and answer session. I will now turn the call back over to Ryan for any closing remarks.
Ryan: Thanks again for joining us this morning, as you've heard we've taken many steps to strengthen eastern's leadership team reset and enhance our strategic growth plans for our businesses are prepared to execute faster and more effectively.
Ryan: Look forward to giving you an update on our progress over the first quarter. If you need any additional information in the meantime, please reach out to us. Thank you.
Ryan: Thank you very much everyone.
That does conclude today's conference you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.