Horizon Global (HZN) 7 May 222022 Q1 Earnings call transcript

Good morning, and welcome to the Horizon Global First Quarter 2022 Earnings Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jeff Tryka of Investor Relations. Please go ahead.

Thank you, operator. to First welcome Call XXXX and Webcast. and morning, Horizon Quarter Global's Conference Good

today Gohl, news of Financial horizonglobal.com. are Executive call is Relations first the On Terry section The results. well Dennis morning, announced release Horizon as quarter this Investor XXXX Officer; on Horizon at Richardville, Global's as Earlier our Chief many website Officer. available we our sites and Chief Global's the

reconciled to to presentation, disclosures. are at Turning available X. These our Relations to website also Today's both Investor of section are and in non-GAAP includes GAAP quarterly Slide presentation which in release appendices the horizonglobal.com. our the disclosures press of

to uncertainties call These report that on Global's could and to to these future Horizon differ risks statements and you uncertainties Global's that presentation statements risks the which and in actual all said, views describe our to Turning annual materially like XX-Q statements. quarterly Commission. on reports in the and most XX-K Executive and Gohl. forward-looking the Horizon Exchange I'd constitute other the are Form company's from Terry being about Securities X. forward-looking performance, Slide subject statements. our remind turn Terry? to results will I'd With cause disclosures today's include filings Form our over recent with in to that risk other Chief like factors Officer, We

our and are review on of all focus XXXX. impacting who our XXXX we for to participating results as QX the quarter Today, welcome and our challenges you performance. Jeff, you, results first call in Thank today we the will

opportunities an presented provide and challenges today. our We will in also look and overview business of ahead the

performance, quarter, disappointed the have we results better. we should controlled some the performance our couldn't many were in as during our factors and control we extremely influencing far some As quarter. There and are

on focused going forward. improving is team Our performance

aggressively are tied at flexed, effectively Europe, haven't the the global unavoidable. seeing the supply impact recovery issues improve. for the assembly not negative Operations enough. the sudden North and X.X%. chain were the both and projecting increased continued Our in supply IHS changes are year inflation America, shortages forecast across volume was operating levels in across from the and Europe but America semiconductor any resulting and year-over-year schedules year during we Currently, levels America. war. QX in it of business production model by Russia-Ukraine managed a disruptions to OEM were improvement of production full throughout was remainder North and impact production performance plant challenged production or the we quarter for OEM forecast did severe Horizon note, for overcoming Europe, This period. impacted by Africa North XX% step negatively will Of and

to correct and seasonality for and early were there these for that We systems shift historical from steps ourselves quarter, both procedures did patterns that. in significant in materialize. taking improve enough XXXX, channels We radically are patterns. to the XXXX also QX a XXXX to North America in those it XXXX. In and planned conditions During ordering and identify back non-OE in not shifted markets higher-margin positioned and we seen didn't XXXX

implementation the to planning aforementioned in optimize record to year. few. customers, recognition albeit with second including in adjusted, capital to recovery base working needs half with continue demand, [indiscernible] place timing, to On OEM the positive action to continue our took we volumes. seasonal a production the the in in and continue retime positioned of impact a name to lead the flow While into of possible, predominantly of support actions RV transit coupled volumes. flex items lower our sales, note, market support Leading inventory increasing cost lag overarching forecast will operations, purchases initial Material where our trailer is while long tied levels at throughout to seasonally and

be actions and benefit softening fully our positively throughout recognized favorability performance the our expected in to and should volumes together freight XXXX. expect with We recovery, in impact XXXX. in This average inflation, of pricing steel cost

Ukraine. to by negatively to or $XX.X non-OEM OEM recognition to Now and by were This semiconductor which let's to resulting due growth in QX down $XX completion in down turn global channels, $XX.X aftermarket and pricing sales shift, to lower in X, driven XXXX driven compared compared metrics in Inventory was quarter. supply continued seasonal million customer Africa, lag chain costs the compared component mix due coming lost OEM earlier. delayed primarily of $XX seasonal material volumes, QX Key EBITDA supply to missed as the to Europe on adjusted the our production and/or delayed for the quarter shortages roughly XXXX. booked constraints to by Adjusted of volumes including increased orders chain Americas, impacted million interruptions. sales Americas and and of was in shortages, timing critical to of in from million Page as volume described primarily constraints, due X. Sales retime the was EBITDA were XXXX profit million. shortages by out and returning part patterns Gross $XX.X million

remainder levels be position earlier, year. Again, flex will inventory we and do possible, us we where can the we throughout mentioned while reduced to As will meet seasonal demand. of inventory better. the and monetized our This

or the increased Net channels. $X through million one, the mix EBITDA periods. or decline sales return sales and of due X.X%. deterioration impacted non-OEM approximately a volume macroeconomic of XXXX to adjusted recovery the adjusted ordering impact associated to QX The were: you as QX decline sudden points reflected our recognition. it to feel Two, contributing we QX Now three, to reduced XXXX $X.X let's million OEM material we negative our EBITDA and We'll business EBITDA million versus described of today in as impact approximately these their performance earlier. from comparison attributable to adjusted factors and QX pre-pandemic of On by to X.X%, move well And results. chain while lag and seasonal constraints supply drivers were Three $XX.X on important the each this to also customer interruptions this this approximately costs Page present that the patterns net later for of is to recognized. pricing continued a X. our view of present as and page, we XXXX million hit call. $XX And quarter in XXXX

shortage plant customer significantly accelerated operating Europe-Africa customer are to Horizon. period, They The in assembly industry Throughout was X. These our Russia-Ukraine throughout impacted and disruption issue. OE by exacerbating not were disruptions, was to quarter primarily this due Page to turn the we'll supply war constraints. Now segment. disruptions the tied the larger quarter caused chain initially semiconductor a by

As a in some plants impact you assembly level significant in to that XX supply experienced our can March, see business. at Europe, we we of disruption customer

impact an impacted down these in peak was by are sales we $X performance. million. adjusted to While EBITDA QX million negatively from This $X approximately today, approximately net the EBITDA largely attributable our by operational adjusted and disruption customer performance XXXX levels interruptions

A Africa shutdowns, XXXX. furloughs are primarily where immediate the we with majority call, possible, production to last delaying took plants and forecasted the OEM on and back purchases customer discussed remainder Europe in of possible. including assembly actions production increase flex to of as As our throughout online as much

Moving to Page X.

is A to As expected peaks. performance from of of material couple implemented OE relative a our to process soften costs business steel here. second XXXX from our non-OEM generally points pricing customers. half in actions XXXX X- to cost mentioned recovering recognized last and QX The X-quarter lag. across impact operational We call, on we in costs see recovery of our in the steel are important fully our

recognition have year. in While full largely our actions rate pricing not until will successful, later been the occur run

steel to expect North be peak costs We half second a below stabilized cost at in values. the level America

to in to softening to Moving steel expect and we America. freight the trends market, X. Similar to North rates began in see in Page

are XXXX second XXXX average below down peak half Our rates. in cost container QX

in We in of XXXX, the this lag generally quarter QX, expect past. we reflecting the recognition positive discussed performance X

and We costly times led rebalancing significant in diversions. as already as well continued decrease strategy and cost reduced container execution of transit our has to port

XXXX, products to our to continue rebalancing optimize we our our and of will We throughout freight strategy as customers. costs, execute delivery transit ultimately, times

We of half expect cost during XXXX favorability XXXX, which and second freight peaks. average versus and transit the the included times

to Moving Page XX.

driven a was of inventory increased Our factors. number by

patterns. has back we shifted our ordering seasonal to As previously industry have mentioned, seen

in place. remainder We expect accelerated, of will levels depletion our for progresses intake, as and see inventory of levels. of to as year and season tapering be purchasing the the the already our inventory inventory corresponding leverage the This throttle increased we order

capital We position half support could impact are positively in in second a demand, of strong XXXX. seasonal the to which working

levels. other in Additionally, significantly XXXX commodity input remain XXXX. progress pricing costs be that on recovered as through This and QX costs balance will has to our our as through resulted additional actions sheet elevated we inventory compared

XXXX page, comparison see sales XXXX. our QX side you right the from of segment net the through On by QX

As the higher-margin seasonal lag for the availability, return also sales recognition impacted levels customer patterns a and were in ordering for actions. previously to disruptions price impacted quarter mentioned, non-OE of were QX our net product. sales recovery unfavorably negatively net XXXX material by by

rate run expect XXXX. As benefit discussed, during the full we occur to

in to Dennis? a the comments. financial minutes over Now I'll Dennis return few it to provide turn final I'll review, and some for

Thank you, you Good Terry. joining us. morning, thank and for everyone,

were supply chain material Terry availability. quarter by impacted results mentioned, first continued and As constraints

of input XXXX, of on pricing during steel the XXXX Please Slide the XX headwinds, the in results working net We million especially $X.X of continue margin quarter gross to input were Americas a the X- and recoveries driven sales are $XXX.X decreased $XX.X due to on these primarily to for The margin to for recover compared focus increased XXXX to compared the of of We of timing to volumes, to offset Americas, first to costs first pricing quarter recognized implemented previously lower was XXXX. first million review to first XXXX. primarily opportunities segments. million, net by attributable decrease the to initiatives and for to turn Europe-Africa XXXX. quarter EBITDA above. This decrease profit XXXX. million impacts Gross relative of was mentioned. increased sales to Consolidated costs, mitigate the a lower the was adjusted profit decrease including loss company's sales X.X% in by price quarter consolidated both other the the the a reported X-quarter throughout The quarter and performance volumes operating of partially These material capital sales material $XX.X of the and compared primarily described lag. costs. an or first recoveries lower cost of XX.X%

sales Now Slide decrease by XXXX. segment EBITDA sales to by sales, Net recognition coupled with partially offset unfavorable in in partially was input the OEM let's XXXX. This first was segment due of $X.X net sales operational for pricing quarter. Adjusted initiatives. input $X.X to the EBITDA offset segment. Americas was quarter the X.X% was coupled million by X sales previously unfavorable primarily for loss a material inefficiencies lower were The sales mentioned, pricing first of by currency decrease than driven quarters. driven lower million rapid channels customer compared decrease segment million to decreased XX.X% first of net XXXX. Net XXXX. $XX.X as initiatives. performance. by recovery translation. This driven for quarter to for business manufacturing by non-OEM to million, with well unfavorable decrease material The recovery to The to or recoveries, decrease $XX.X aftermarket review partially costs, lower lower for by primarily our the costs, lag higher-margin automotive the just $XXX.X $X.X XX the the and impact Adjusted offset quarter decrease $XX.X and in X customer pricing million cost the or cost by of $X.X sales, driven the were operating turn lower of compared were disruptions. with the the to seasonal quarter as in impacting was volumes Transitioning the million shift This volumes Europe-Africa million, performance of million first of was net

XXXX. an our to and liquidity capital XX. quarter free in $X.X million flow million first Slide fourth $XX.X XXXX, of increase increase Trade working first the to working moving of $XXX.X of Now quarter the represented was which of on quarter million cash XXXX an compared and the on to capital of compared

a reflects fourth unfavorable Inventory the the cash $XXX.X increase to of XXXX million comprised This hand to to of and on quarter fourth quarter for of compared cash fourth of patterns. Specifically, inventory by to to $X.X days, was $XX.X X quarter the compared availability Days payable hand to on totaled ordering a million $XX.X of use quarter Days XXXX. and fourth days receivables Free $XX.X increased the fourth the hand to compared quarter receivables, to an of seasonal XXX supply the flow by This first of our XXXX, facilities compared from an quarter the to was on the million prior the of was costs, year. first under of XXXX. outstanding related of over and the material liquidity day decrease Accounts and a quarter during of million and XXXX. increased the quarter million a million primarily X XXXX. during $XX.X days availability compared $XX to $XX.X offset XXXX. was inventory slightly of increased XX, increase days, compared accounts fourth $XX.X million or $XXX.X million of XX which components Cash increased payable quarter on million to of of over $XX decrease critical compared million million. first fourth was of first million quarter $XX.X XXXX. increased an $XX.X of of a Days payables sales credit the return driven was constraints million use XXXX increase the quarter of to X XXXX.

turn for Turning increased a of XX $XX end of quarter comments. $XXX.X fourth debt for debt Slide our XXXX debt back of structure closing by of $XX.X XXXX. borrowings at quarter incremental is million to view million at our current gross With I'll and primarily the it million This of to term to the loan. from to Terry maturities. capital first under approximately the $XXX.X of million the Total attributable that, end his

we In throughout have call. themes few closing, hit major on the a

to First, we in addition constraints, supply rapid chain disruptions customer Russia-Ukraine experienced the war. continued to relative

assembly customers of disruption the global during a While Europe-based of XXXX. many saw peak there plant levels online we outlook back customer OE for positive is remainder March, are of and our for production

over to year American XXXX XXXX. production mentioned IHS previously, full As projects North volumes increase XX%

shift back seasonal believe we for non-OE Secondly, ordering business. we are patterns seeing a to our

our favorable expect historically the we season, X X negatively impact non-OE QX. and While higher-margin quarter during business, during this quarter selling in and impacted weighted towards our performance shift

our spikes Third, of freight other our steel, viability and to critical business. to the response is costs in input

at this it's have repeating. We during worth this been through but call, length

And implemented customers. fully have discussions customers. OEM or actions our recovery we active pricing either our have non-OEM with We with remain in implemented

and XXXX. We like softening performance pricing in our during expect expected be job impact ever-changing cost we are do finally, pleased And serve to recognized we inflation, the results very a the with benefit the should in markets with of together to that fully not XXXX This in determined restate in QX actions dynamic and our better that average we globe. freight and recovery, steel positively XXXX. are addressing to around I'd

we are now the flexible being better We has still first contributed our quarter since with that generated to fill ever XXXX. quality been, processes with our holes initiatives capacities that than positioned we've the lean through results. And in performance had manufacturing to highest have

quarter, constraints. key orders. material with execution we components First, experienced constraints supply Throughout on limited on the

we initiated had strategic expanding initiatives. these are countermeasures accelerating actions, While and we sourcing

major shifts forecasting market predict dynamics. forward Second, in to better

procedures forecast these Further new XPL accuracy. be to be will our will industry of relative in included with year. organizational and be indicators to broader this done draw improve capabilities, a and QX processes gained We will the work to set in in introductions and processes have implemented upgraded ERP which

year. have supplement to are of remainder industry to highly we throughout capable and we planning team working and operational lastly, will to Third, the our levels sales capital addressing the monetize with continue align leaders. inventory efficiently And

[indiscernible] our successful new appointments segment. our with We continue as recent Europe-Africa the President, seen to with of for be objective this operations

present, there QX relative still indicators control speaking that again for I'll earnings. with some for it the While demand forward the at remainder of product turn we remain to outside leading you to strong XXXX of We when XXXX. Thank report you are factors remains look our for attention. your to our questions. back now operator

again, quarter. In Yes. summary, tough

view all you And forward got next our discuss results. the today. better. the business We’ve like We’re of second to going for we as quarter forward the Thank call much. thank to in the terms remainder you But look call for do the to outlook of we year. joining of our I’d good very

has Thank for conference This you today's concluded. now attending presentation.

may disconnect. You now