Park-Ohio Holdings Corp. (NASDAQ:PKOH) Q3 2023 Earnings Call Transcript

Park-Ohio Holdings Corp. (NASDAQ:PKOH) Q3 2023 Earnings Call Transcript November 4, 2023

Operator: Good morning, and welcome to the Park-Ohio Third Quarter 2023 Results Conference Call. [Operator Instructions] Today's conference is also recorded [Operator Instructions] Before we get started, I want to remind everyone that certain statements made on today's call may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. The list of relevant risks and uncertainties may be found in the earnings press release as well as in the company's 2022 10-K, which was filed on March 16, 2023, with the SEC. Additionally, the company may discuss adjusted EPS, adjusted operating income and EBITDA as defined on a continuing operations or consolidated basis.

These metrics are not measures of performance under generally accepted accounting principles. For a reconciliation of EPS to adjusted EPS, operating income to adjusted operating income and net income attributable to Park-Ohio common shareholders to EBITDA as defined, please refer to the company's earnings recent release. I will now turn the conference over to Mr. Matthew Crawford, Chairman, President and CEO. Please proceed, Mr. Crawford.

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Matthew Crawford: Thank you very much. And good morning to everybody. Let me start by going off script here a little bit and discuss how we view our results as compared to prior periods. As I've stated before, despite how demand volatility, supply change challenges, inflation and labor have challenged our results over the last couple of years, our business model and our value proposition remain unchanged. This is why we often choose to compare ourselves to the financial record setting of 2018 and not 2022 as we do in this report. On that note, we're pleased to have achieved an all-time record revenue year-to-date in 2023 and expect, based on our forecast, to have a record-setting year for revenue in 2023. While we've not achieved the same in profitability metrics, it's important to note that third quarter EBITDA was nearing the record also set in 2018.

Turning to the results. The third quarter showed strong revenue growth of 9% as well as solid operating leverage in our gross margins and other profit results. Additionally, we're pleased to see significant free cash flow during the quarter, which we anticipate will extend through the end of the year and will continue to strengthen our balance sheet and strong liquidity position. Again in this quarter, diversity in end markets continues to be our strength. While revenue growth overall moderated from a blistering rate of 17% in the first half, all 3 business segments contributed to our improved performance during the third quarter. While the demand continues to be stable across the business, it's worth noting that aerospace and defense has become an increasing part of our growth profile.

We also continue to benefit from commercial and pricing adjustments, which have been our priority this year as we grapple with inflation, especially as it relates to labor. In addition, as we conclude our restructuring of our operations during the last several years, we're now pursuing a more focused operating model, which aims to increase productivity by allocating capital to our best products, services and centers of excellence. While the UAW strike at some of our truck and auto customers will provide a headwind to our fourth quarter results, I am certain that we will end the year a much stronger, more focused and disciplined company than we began the year and well positioned to take advantage of important macro trends around industrial policy, infrastructure spending and reshoring.

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