Hillenbrand Reports Fiscal Fourth Quarter and Full Year 2022 Results

Posted by: Hillenbrand  | Nov 16, 2022

Fiscal Fourth Quarter 2022 Highlights:

  • Revenue of $750 million decreased 1% vs. prior year, but increased 1% on a pro forma basis, and 7% excluding the impact of foreign currency exchange
  • GAAP EPS of $0.81 increased 9% vs. prior year; adjusted EPS of $1.05 increased 5%
  • Record backlog of $1.76 billion increased 5% vs. prior year on a pro forma basis, or 18% excluding the impact of foreign currency exchange, driven by strong order intake in Advanced Process Solutions

Fiscal Year 2022 and Outlook Highlights:

  • Revenue of $2.94 billion increased 3% vs. prior year; on a pro forma basis, revenue increased 5%, and 9% excluding the impact of foreign currency exchange
  • GAAP EPS of $2.89 decreased 13% vs. prior year; adjusted EPS of $3.93 increased 4%
  • Completed the previously announced acquisitions of Herbold Meckesheim and Linxis Group; signed agreement to acquire Peerless, a premier supplier of industrial food processing equipment, on November 3, 2022
  • Hosting Investor Day on December 15, 2022 in New York City
  • Fiscal 2023 guidance: Full Year adjusted EPS of $4.10 - $4.50

BATESVILLE, Ind., Nov. 16, 2022 /PRNewswire/ -- Hillenbrand, Inc. (NYSE: HI) reported results for the fourth quarter and full fiscal year, which ended September 30, 2022.

"I am very pleased with our performance in fiscal 2022. We built upon our track record of execution as we delivered top-line growth and margin expansion in our industrial segments despite unprecedented macro headwinds from inflation, supply chain disruption, and foreign currency," said Kim Ryan, President and Chief Executive Officer of Hillenbrand. "Guided by our Purpose to Shape What Matters for Tomorrow, we made great strides in executing our strategy to further position Hillenbrand as a world-class, global industrial company through several strategic acquisitions that accelerate our ability to deliver exceptional products, solutions, and service to our customers in the end markets of food and recycling. We look forward to sharing more about our vision for Hillenbrand's future at our Investor Day in New York City on December 15th."

"We enter fiscal 2023 with high levels of backlog in Molding Technology Solutions, though we have seen a slow down in customer decision timing for product lines in that segment due to the increase in global macroeconomic uncertainty. In Advanced Process Solutions, however, demand remains robust with solid order pipelines and record backlog heading into the new fiscal year. We remain confident in our ability to successfully manage through this period of macro uncertainty as we deploy the Hillenbrand Operating Model to drive improved efficiency in our base businesses, effectively integrate our acquisitions, and make the necessary adjustments to respond to the dynamic operating environment."

Fourth Quarter 2022 Results

Revenue of $750 million decreased 1% compared to the prior year, but increased 5% excluding the impact of foreign currency exchange. On a pro forma basis, which excludes the divested TerraSource Global business, revenue increased 1% year over year, or 7% excluding the impact of foreign currency exchange, due to favorable pricing and higher volume of aftermarket parts and service and injection molding equipment.

Net income of $57 million, or $0.81 per share, increased $0.07, or 9% compared to the prior year. Adjusted net income of $74 million resulted in adjusted EPS of $1.05, an increase of $0.05, or 5%, primarily due to pricing and productivity improvements, higher industrial volume, and lower shares outstanding, partially offset by inflation and unfavorable foreign currency translation. The adjusted effective tax rate for the quarter was 27.9%.

Adjusted EBITDA of $135 million decreased 4% year over year, but increased 3% excluding the impact of foreign currency exchange. On a pro forma basis, adjusted EBITDA decreased 3%, but increased 3% excluding the impact of foreign currency exchange, as pricing and productivity improvements and higher industrial volume were partially offset by inflation and an increase in strategic investments. Adjusted EBITDA margin of 18.0% decreased 80 basis points on a pro forma basis, primarily due to the dilutive effect of price-cost coverage.

Advanced Process Solutions (APS)

Revenue of $328 million decreased 4% compared to the prior year, but increased 6% excluding the impact of foreign currency exchange. On a pro forma basis, revenue was flat, or up 11% excluding the impact of foreign currency, primarily driven by pricing and an increase in aftermarket parts and service.

Adjusted EBITDA of $69 million decreased 1% year over year. On a pro forma basis, adjusted EBITDA decreased 1%, but increased 9% excluding the impact of foreign currency exchange, as pricing and productivity improvements and operating leverage from higher volume were partially offset by inflation and an increase in strategic investments. Adjusted EBITDA margin of 20.9% was essentially flat primarily due to the dilutive effect of price-cost coverage.

Record backlog of $1.4 billion increased 6% on a pro forma basis compared to the prior year, or 22% excluding the impact of foreign currency exchange, primarily driven by increased demand for large plastics projects and aftermarket parts and service, and the acquisition of Herbold. Sequentially, backlog increased 14% from the quarter ended June 30, 2022, primarily driven by an increase in orders for large plastics systems and the acquisition of Herbold.

Molding Technology Solutions (MTS)

Revenue of $276 million increased 6% year over year, or 11% excluding the impact of foreign currency exchange, with higher sales across all product lines.

Adjusted EBITDA of $60 million increased 11%, or 16% excluding the impact of foreign currency exchange, while adjusted EBITDA margin of 21.6% increased 100 basis points, as pricing, operating leverage from higher volume, and productivity improvements more than offset inflation.

Backlog of $364 million was essentially flat compared to the prior year, or up 3% excluding the impact of foreign currency exchange. Sequentially, backlog decreased 13% from the quarter ended June 30, 2022, due to a decline in orders for injection molding, extrusion, and hot runner equipment.

Batesville

Revenue of $146 million decreased 6% year over year due to lower burial casket volume resulting from an estimated decrease in deaths associated with the declining effects of the COVID-19 pandemic and an estimated increase in the rate at which families opted for cremation. This decrease was partially offset by price surcharges implemented earlier in the year to offset the significant increase in commodity costs.

Adjusted EBITDA of $24 million decreased 28% year over year, and adjusted EBITDA margin of 16.6% decreased 500 basis points, primarily due to the impact of lower volume and the dilutive effect of price-cost coverage.

Fiscal Year 2022 Results

Hillenbrand's full year revenue of $2.94 billion increased 3% compared to the prior year, or 5% on a pro forma basis, which excludes the divested Red Valve, ABEL, and TerraSource Global businesses. Excluding the impact of foreign currency exchange, revenue increased 6%, or 9% on a pro forma basis, led by pro forma growth in Advanced Process Solutions of 14% and Molding Technology Solutions growth of 8%.

Net income of $209 million, or $2.89 per share, decreased from $3.31 in the prior year, primarily due to a gain on the sale of ABEL in the prior year that did not repeat. Adjusted net income of $284 million resulted in adjusted EPS of $3.93, an increase of $0.14, or 4%, as pricing and productivity improvements, higher industrial volume, and lower shares outstanding were partially offset by inflation, lower Batesville volume, unfavorable foreign currency exchange, and an increase in strategic investments. The adjusted effective tax rate for the year was 29.1%.

Adjusted EBITDA of $527 million decreased 2%, or 1% on a pro forma basis. Excluding the impact of foreign currency exchange, adjusted EBITDA increased 3% on a pro forma basis as pricing and productivity improvements and operating leverage from higher industrial volume were partially offset by inflation, lower Batesville volume, and an increase in strategic investments. Adjusted EBITDA margin of 17.9% decreased 110 basis points on a pro forma basis, primarily due to the dilutive effect of price-cost coverage and unfavorable mix. Adjusted EBITDA margin for Advanced Process Solutions of 19.6% increased 10 basis points on a pro forma basis, and adjusted EBITDA margin for Molding Technology Solutions of 20.7% increased 40 basis points. Batesville's adjusted EBITDA margin of 20.3% decreased 540 basis points due to the dilutive effect of price-cost coverage and lower volume.

Balance Sheet, Cash Flow and Capital Allocation

Hillenbrand generated cash flow from operations of $191 million in the year, a decrease of $337 million year-over-year, primarily due to the unfavorable timing of working capital related to large plastics projects, and an increase in inventory due to higher customer demand and supply chain disruptions. During the year, the Company repurchased approximately 4.8 million shares for $204 million at an average share price of $42.77, and returned $62 million to shareholders in the form of quarterly dividends.

As of September 30, 2022, net debt was $988 million, and the net debt to adjusted EBITDA ratio was 1.8x. We had liquidity of approximately $1.1 billion, including $234 million in cash on hand and the remainder available under our revolving credit facility and delayed-draw term loan facility. Including the debt incurred for acquiring Linxis shortly after year-end, liquidity would be approximately $555 million.

Acquisitions Update

As previously announced, we completed the acquisitions of Herbold Meckesheim and Linxis Group on August 31, 2022, and October 6, 2022, respectively. On November 3, 2022, we signed a definitive agreement to acquire the Peerless Food Equipment division of Illinois Tool Works Inc. for a purchase price of $59 million, subject to customary post-closing adjustments. Peerless, a premier supplier of industrial food processing equipment, is highly complementary to certain Linxis brands and has expected CY2022 revenue of approximately $30 million, with adjusted EBITDA margin in line with that of our Advanced Process Solutions segment. The transaction is expected to close prior to the end of calendar year 2022. Upon closing, and including the debt incurred for the acquisition of Linxis, the Company expects pro forma net leverage to be approximately 2.8x.

Fiscal 2023 Outlook

Hillenbrand is providing annual guidance for fiscal year 2023 and quarterly guidance for fiscal Q1 2023. Our guidance range is wide to reflect the potential impacts from the uncertain global macroeconomic environment and continued headwinds from supply chain disruption, inflation, and foreign currency exchange. We are not assuming any impact from potential shutdowns related to China's zero-COVID policy, but this could have a negative impact on our results. While we have not yet closed the Peerless transaction, we do not anticipate it to have a material impact on our guidance.

(Read the full release on our IR website.)