Q1 2025 The Eastern Co Earnings Call
Speaker Change: Good morning everyone and welcome to the Eastern Company's first quarter fiscal year, 2025, Earning School.
Speaker Change: At this time all participants have been placed on a listen only mode and the floor will be open for questions following the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone. Keep at please note this conference is being recorded.
Speaker Change: I will now turn the conference over to your host, Marianne Barr, Investor Relations, Marianne the floor issues.
Maryanne Barr: Good morning, and thank you everyone for joining us this morning for a review of the Eastern Company's results for the first quarter of 2025. With me on the call are Ryan Schroeder, Chief Executive Officer, and Nicholas Vlahos, Chief Financial Officer.
Maryanne Barr: The company issued an earnings press release yesterday after the market closed. If anyone has not yet seen the release, please visit the Investors section of the company's website www.easterncompany.com where you will find the release under financial news.
Maryanne Barr: 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.
Maryanne Barr: including without limitation, statements regarding revenue, growth margin, operating expenses, other income and expenses, taxes and business outlook.
Maryanne Barr: 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.
Maryanne Barr: We undertake no obligation to review or update any forward-looking statements to reflect events or circumstances that occur after the call.
Maryanne Barr: For more information regarding these risks and uncertainties, please refer to risk factors discussed in our SEC filings, including form 10K filed with the SEC on March 11, 2025 for the
Maryanne Barr: In addition, during today's call, we will discuss non-GAAP financial measures that we believe are useful as supplemental measures of these terms performance.
Maryanne Barr: These non-GAT measures should be considered in addition to, and not as a substitute for, or in isolation from GAT results.
Maryanne Barr: a reconciliation of each of the non-GAAP measures discussed during today's call to the most directly comparable GAP measure can be found in the earnings press release. With that, I'll turn the call over to Ryan.
Ryan Schroeder: Thank you, Marianne, and thank you everyone for joining us today. At the highest level I'll say this, the first quarter met our earnings expectations, get still with plenty of challenges in the marketplace.
Speaker Change: Rubin News came in at $63.3 million down slightly from Q1 of 2024. EBITDA came in at $4.8 million and earnings per share at $31 per share.
Speaker Change: very close to where we expected it to come in for the year or for the quarter. A few high level updates before I turn it over to Nick, I'm more detailed from from the quarter. These updates are from really the last time that we spoke.
Speaker Change: We've made meaningful structural changes in big three precision. We've been able to sell the ISBM Blowmold business, also known as Centrelia mold. Furthermore, within big three, we've been able to close the Dearborn facility and improve our structural competitiveness within our racking business.
Speaker Change: Additionally, we've been able to complete a share buyback program of 200,000 shares. I'm also happy to report that the board approved an additional share buyback program of additional 400,000 shares.
Speaker Change: Also, throughout the quarter and the first part of the year, we've been able to complete our leadership team transition plans and I'm very happy about the leadership team. I'll touch on that within each of the portfolio businesses a bit more as we get further into things.
Speaker Change: and then lastly, I'd like to say I'm extremely pleased to have Chan Delbato join us on our board of directors. Previously, Chan was the CEO of Cerberus Operations and Advisory Company.
Speaker Change: There, he was on a number of different boards, probably most notably as co-chairman of Albertson.
Speaker Change: Jones. Most recently, Chan was the chairman of New Flyer Industries. I'm super excited to have chairman join the board.
Speaker Change: 2025 will be a year of enhancing our strategic growth plans, eliminating bureaucracy and optimizing our cash flow. So with that, I'd like to turn it over to Nick on additional details for the quarter.
Nick: Thanks, Ryan. I'll focus my review today on the company's financial results from continuing operations for the first quarter of 2025.
Nick: Net Sales in the first quarter 2025 decreased 2% to 63.2 million from 64.6 million in last year's first quarter.
Nick: The decline was primarily due to decreased sales of truck mirror assemblies and truck accessories, offset by increased sales of returnable transport packaging products.
Nick: Our backlog, as of March 29, 2025, decreased 9% to 85.9 million compared to 94.0 million, as of March 30, 2024. The decrease was primarily driven by decreased orders for returnable transport packaging products, truck mirror assemblies, and latch and handle assemblies.
Nick: Gross margin as a percentage in that sales for the first quarter of 2025 was 22.4% compared to 23.9% for the top prior year period. The decrease was due to higher raw material costs partially offset by price increases.
Nick: As a percentage in that sales, product development costs were 2% for both the first quarter of 2025 and 2024.
Nick: Selling General in the Ministry of Expenses decreased 0.8 million or 8% in the first quarter of 2025 compared to the last year's period.
Nick: The decrease was primarily due to lower payroll-related expenses of 0.5 million offset by higher sales commissions of 0.3 million.
Nick: Other income and expense increased 0.2 million in the first quarter of 2025 compared to the last year's period.
Nick: The decrease was primarily due to favorable gains on security transactions in 2024 that did not occur in 2025 and current year restructuring expenses.
Nick: Net income from continuing operations for the first quarter 2025 was 1.9 million or 31 cents per deluded share compared to 2.1 million or 34 cents per deluded share for the 2024 period.
Now turning to non-GAAP measure.
Nick: Adjusted net income from continuing operations for the first quarter of 2025 was 2.2 million or 32 cents per diluted share compared to adjusted net income of 2.1 million or 34 cents per diluted share for the prior year period.
Nick: At the end of the first quarter of 2025, our senior net leverage ratio was 1.45 compared to 1.23 at the end of 2024.
Nick: In addition, we invested .8 million in capital expenditures and paid dividends.
Nick: of 0.7 million in the first year's quarter. As of March 29, 2025, Inventory's totaled 56.1 million up 0.2 million from the end of fiscal year 2024.
Nick: During the first quarter of 2025, we repurchased 50,000 shares of Common Stock under the air repurchased program, Eastern Boards, Authorize in August 2023.
Nick: bringing us to the total of 200,000 shares repurchased and completed, completed in 2023 authorization.
Nick: On April 30, 2025, the Board of Directors authorized a new share repurchase program authorizing the company to repurchase up to 400,000 shares of its common stock. The program extends until May 23.
Ryan Schroeder: That completes my financial review. I'll now turn the call back to Ryan.
Ryan Schroeder: Thanks, Nick. Now I'll speak a bit more about each of the three portfolio companies.
Unknown Speaker
Speaker Change: I'll start with Zach Gourney. So Zach joined at the very end of last year as the president of Everhart to do a fantastic job and has done really nice work updating their strategy.
Speaker Change: Furthermore, in that work, they've reorganized the commercial team there and brought in a great leader named Scott Meldo who's leading the commercial team at Everhardt. Scott has worked with both Zach and I in the past, so we're very pleased with him joining.
Speaker Change: Del Sfar, they've been able to minimize the impact of tariffs. In some cases, that means passing some of those costs on and others. It's about being nimble with our supply chain and brokers.
Speaker Change: Certainly, there's been some softness in those unmarkets that I mentioned that they serve. That being said, Eberhard really benefits from being very well diversified, and at this point, it's still pointed towards growth for 2025.
Speaker Change: some of the key initiatives for Everhard. There's going to be continued focus and defined initiatives on the commercial front. We're also going to be doubling down on our efforts with new product development.
Speaker Change: Furthermore, we need to be very nimble with our supply chain. So I'm very pleased with the progress that's been made at Everhard and extremely encouraged about the future of that business.
Speaker Change: Next, let's turn to Velvack. Velvack designs, manufactures and supplies, vision systems, mirrors, and a broad range of components and accessories for the medium and heavy duty truck markets.
Speaker Change: The medium and heavy-duty truck markets for those that don't know have been fairly significantly impacted over the last handful of months.
Speaker Change: and the ACT which is most commonly used to track, uh, build rates have, uh, shown in additional softness for the remainder of the year.
Speaker Change: We shall see in terms of how those build rates, but as you may or may not know, Bellback from a mirror standpoint has a very significant market share, particularly on the class A truck
Speaker Change: So, we're having to be as flexible as we possibly can to be responsive to the changes in the volumes associated with our customers there.
Speaker Change: That being said, Dan McGrew and the team have been able to take market share and are extremely well positioned for growth in the future to those off-classy and markets.
Speaker Change: Furthermore, it's a bright spot within the business, but there are efforts on their aftermarket business to have a continue to pay off. The team there has been able to grow that business even in the challenging environment associated with terrorists and everything else that organizations are going through. [inaudible]
So key initiatives for Vellback in 2025 on Beyond.
Speaker Change: is centered around vertical integration. They've done a lot of work on that already, bringing in some plastic injection molding parts.
Speaker Change: They're going to continue to work on that. Furthermore, we have big plans for expanding our aftermarket business. They do a fantastic job serving their customers there and I think have a strategic advantage going forward.
Speaker Change: and then like Aberhardt, they need to continue to have a nimble supply chain. So.
Speaker Change: like Eberhard. Vellback had a solid year last year and like Eberhard I think they are very well positioned for success going through the future. In the near term they're obviously going to have to work through some of the challenges associated with I market demand and supply chain uncertainty.
Speaker Change: Movin' on to Big Three. So Big Three designs, manufactures and delivers turnkey, innovative and sustainable packaging of material handling solutions, as well as blowmode tooling.
Speaker Change: So like I mentioned earlier, we've completed the sale of the ISBM business also known as Centralia Moles. We're happy to have completed that in very speedy order.
Speaker Change: and furthermore, we've been able to become very close. We're not quite done yet, but within the quarter we're going to be completing our strategic review of the mold business, and we have a GoFord plan with that.
Speaker Change: on the racking side, which is significant part from a revenue standpoint for big three precision. We've been able to improve significantly the cost, input cost associated with that business. As I mentioned earlier, we've completed the closure of the
Speaker Change: A portion of that business is rolled into the Centralia Rack business and then the other portion is moved to a new small purpose focused facility in Sterling Heights, Michigan board the design of racks and prototyping them.
with all of this said and all the efforts that.
Speaker Change: Emilio, our president there, has and his whole team have been doing. We began to see.
Speaker Change: Incremental, significant improvement in the results of that business. We still have a ways to go, but I'm really encouraged with what that business has been able to do thus far.
So, going forward.
Speaker Change: We're going to finish those rationalization efforts, which are all about complete. We're going to shift years to operational efficiency efforts within the companies that we're operating in. And we've already shifted to improving and bolstering our commercial growth plans.
Speaker Change: So, with all that said, I'm very encouraged with the work that the teams have done at Big 3, at Velvet and at Everhart, and I'm encouraged about the future of this business.
Speaker Change: So with that, I would like to open it up for any questions anyone might have. We'll pause for questions and then I'll move on to my final comments before closing the call.
Okay.
Speaker Change: Thank you very much. We are now opening the floor for questions if you would like to ask a question.
Speaker Change: You can press star one on your phone keypad now. A confirmation tone will indicate that your line is in the key. You may press star two if you would like to remove your question from the key. For any participant using speaker equipment, it might be necessary to pick up your handset before you press the keys.
Speaker Change: So that's star one, if you would like to ask a question, please wait a moment or briefly, Paul, for any questions.
Speaker Change: I'm not seeing any questions come into the queue at this moment, just a reminder to anyone it's star one if you would like to ask a question. We do have a question in.
Speaker Change: and your question is coming from Ross Davisson of Baniton Cap.
Russell, Ross, your line is life.
Speaker Change: Hi, Ryan Heynakes, thanks for taking the question. On returnable packaging, I was curious if you just give us kind of a way to think about.
Speaker Change: Goat, the outlook for that business. It's specifically I'm wondering if there's a lot of change in the supply chain and there's a lot of uncertainty. Is there a potential tail in there if there's production moved around, you know, would your customers need more of your help in any of those scenarios?
Thank you very much for the question, Rossite.
Speaker Change: I'd say this has been a quite quiet market in the returnable packaging, particularly in the automotive segment.
Speaker Change: So we've certainly seen that from a volume standpoint. That being said, you know, when you think about tariffs and you think about all the supply chain uncertainty, the big three precision business is almost completely on.
Insolated from that, being that we're...
Made in America, the ARV.
Speaker Change: Our supply chain is for the vast majority of it on American supply chain, so we are really uniquely positioned. We think there is a some demand that's being pent up and if and when it does break loose, we are well positioned to jump on it.
Speaker Change: You know, and that's why a lot of our heavy work.
Speaker Change: Executive, as we mentioned about with Dear Born and some of their improvements we made within the business from a cost structure standpoint. It's going to allow us to be competitive but also a very responsive that there is a significant breakthrough historically speaking these markets.
Speaker Change: Do tend to be a bit lumpy. And we've certainly seen a more soft pattern here recently, with all the uncertainty in the marketplace. So we encourage that.
Speaker Change: You know, in many cases, we believe we're in the trough and we believe many of our customers are sort of in a wait and see mode with regard to
Speaker Change: Trade Talks and Terrify ramifications, but at some point in time...
Speaker Change: Regardless of if those deals get done or don't get done, they're going to have to break some programs loose and we'll be we'll be we are very well positioned regardless. So yeah, I would that's how I dream it up. I don't know if you have anything else to add.
Nick: Yeah, I would say, you know, as more productions brought back into the United States, big three is in a good position to take advantage of that due to their focus of their locations in North America.
Nick: And already having the experience of producing the returnable packaging that a lot of companies will be able to utilize more because more their supply chain is local compared to overseas which you do not get typically have returnable packaging.
Nick: That's great. That makes sense. Thanks for that. And then just on Chris Margin.
Nick: You know, it's lower than it had been sort of the last year and a half. He referenced higher raw material costs, some price increases.
Nick: should we expect sort of the levels you're at sort of where we're going to be for a while? Are there near-term opportunities to sort of raise that gross margin? Any help they're thinking about it would be appreciated.
Yeah.
Ryan Schroeder: So, Ryan, I'll jump in on this question. So, part of this also was sales mix as well.
Ryan Schroeder: and with that we do expect with some of our higher margin products to start getting a better velocity in the market, start selling more, and therefore that will also help to support the margin as well, but we are always focused on
taking out as much cost as possible from our...
Cost a good soul this one.
Okay, great. Thank you. Thanks for the answers.
Yep.
Speaker Change: Thank you very much. Just a reminder of there are any further questions you can join the key by pressing star one on your keypad.
Speaker Change: Okay, I'm not seeing any further questions, so I will now hand back over to Ryan for any closing comments.
Ryan Schroeder: Thank you, Jenny. Yeah, so in closing here, you're going to see with with the Eastern Company a relentless execution for top decile performance that's going to be really the central theme of everything that we're doing.
Ryan Schroeder: We're going to be looking at strategic growth and operational focus going into the remainder of the year where we've been very active as we've been touching on here today in the call on the big three transformation.
Ryan Schroeder: I don't believe it's completely finished yet but we're approaching the end of that.
Ryan Schroeder: We're going to have cough discipline. This is obviously very uncertain times. You know, we're going to control the things that are within our control and we've done much of that in the first quarter. That's going to be a continued focus going on through the second quarter and the remainder of the year.
Ryan Schroeder: and from a tariff standpoint, it's obviously front and center to virtually every company and business in North America and maybe around the world. We have an organization that
Ryan Schroeder: Very aggressive on tariff management. This is mainly within the VELVAC and Everhard business.
Ryan Schroeder: But I've been very impressed with the team's ability to manage that on an hour by hour and day by day business.
Ryan Schroeder: I'm happy that through the first quarter they've been able to more or less neutralize the tariffs that we have seen comes through.
Ryan Schroeder: I'm not suggesting that that's going to completely be the case going forward but the plan.
The SPAR have supported doing exactly that.
Adjusting our supply chain for our best stuff.
That's the use of success in the long run.
Ryan Schroeder: and then I'd like to close out with our balance sheet is in quite good shape. And with that, MMA is now a priority again. We're going to be extremely disciplined, but we're excited to start looking at deals come through here the remainder of the year and even into 2026.
Ryan Schroeder: So with that said, we look forward to giving you an update in Q2. If you have any additional questions or need any additional information, please don't hesitate to reach out. And with that, I'll close the call and hand it back to Jenny our operator.
Jenny: Thank you so much, Ryan. That does conclude today's conference. You may disconnect your phone line at this time and have a wonderful day. We thank you for your participation.