Kaman (KAMN) 5 Aug 222022 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Kaman Corporation Q2 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to your host, Kary Bare.

You may begin.

morning. Good second call. Kaman's XXXX quarter to earnings Welcome Leading and Coogan, Chief today are Senior Chairman, President Ian Walsh, Executive Officer. President Chief the and call Vice Financial Officer; and Jamie

of company we the the will Before company's other or economy of Commission, together setting Exchange These on respect and regarding on company's expectations statements which our the include management, the forward-looking underlying objectives note many projections and due differ of results to please evening filings yesterday that to could financial the consist Form Securities information those are and during earnings company's future and The items, today's quarter latest included forward-looking company begin, events. discussed earnings Form business. materially call the and assumptions XX-Q statements important current the future future with including most current described report statements forth some other and release. our of of factors. revenue, the The its statements and in with XXXX of economic actual plans on of performance statements filed indicated results these its from the in with any our X-K, second business,

earnings measures We the to company's measures, financial expect filed applicable also to are yesterday's and discuss included with regulations. Reconciliations GAAP the and non-GAAP SEC in that information release certain X-K. as are rules defined in measures

our Finally, performance. we which our website, provides additional posted earnings financial context on on an call supplement

find this can at www.kaman.com/investors/quarterly-earnings-calls. You presentation

over Walsh. turn will call the I Ian Now to

but each with results of XXXX highlights share updates, the before operational the our passing call us the quarter were morning, for our Good quarter for year. and start in detailed line for quarter some and of by higher business the segment in second everyone, providing you second earnings, Kary. of adjusted on than than joining Thank sales, I'll for and with financial innovations Jamie quarter and to our second for call. thank last over the respective Results more earnings XXXX. along EBITDA outlook lower quarter, then expectations some you, discussion with the remainder the and

product the potential quartile profit of asset stronger portfolio top parts year, to the second margin in announce positioning slightly new Brake performance improved inorganic with Kaman improve division. high-margin of sales unique Kaman, gross to Since the the lower, JPF of our opportunity XXXX. the half and both engineered expand the all expect XXX over our Engineered on joining our lower our for profitability worked second we were periods, Products were businesses offers highly signed associated and for In goal margins leadership which of company sales margins I've team continue organic agreement time. This for expected businesses, definitive company our achieving precision to serve acquire for with year. engineered than a quarter and and and in XX.X%, the Gross basis excited Board May, while to Aircraft by segment. end in that to before points Compared and quality sales to We Parker-Hannifin Wheel close to our and a we & in growth. the with the the decreased growth markets highly is across transaction, investing a extremely

XXX of critical strength property. proprietary leading provider well complementary than Wheel design, of aftermarket specializing meaningful providing high defense has distribution been and more designs helicopters, related brake XXX,XXX and mission by our aircraft, product customized a Break and install of an platforms, exposure Wheel relationships Break & full intellectual will aviation as the and one Aircraft have capabilities centralized have general They protected expanding in a flow They The advance near-term Aircraft as and & of breadth in strong facility base UAV development by fixed-wing, & trusted suite and manufacturing, qualification, and accretion. and more our globally and to years, cash product components XX of with offerings, Aircraft attractive brakes, customers. Wheel They serviced wheels, hydraulic OEM including solutions. driving operates and strategy technology of assembly, support approximately for our long-standing Avon, provide margin aircraft. of portfolio margin and by global repairs. increasing wheel products Ohio, Brake out a than For products aftermarket

sales solid commercial Now Boeing, Airbus were business higher the business to general discussion. Sales additional signs and orders our our let seals, products. to bearings, of continues market me and row, the springs, demand These to to a some to of a improvement improved share segment across respective margins aviation quarter anticipate higher for through grow us support contacts in Demand will of fourth their like performance show return rebounding. for increases balance and that I'd and the of year. help airline is that organically. the also the indeed the indicator each over continue highlight we innovations

Not sales, EBITDA with and to margin compared more delivered but more by adjusted year-over-year and segment Quarterly rates outstanding to since Backlog $XXX increased sequential Our increased XX% EBITDA, than XX% only medical remain growth. Engineered periods. results Order also increased robust. products both sales adjusted both very sales million. XX% bearings for than industrial improved. these Products year-end has and and of was strong, commercial demand

positioned In year. target portion confidence is These provide of addition, half half significant already in backlog. meet expected second our of back in a trends as to our performance expected of the in the XXXX are volume sales for the our sales well we

segment into for our and circulation. an to continue to science devices technology innovative Products is meet engineering employees to solutions needs customers. application Engineered boundaries the expand push our of such Our vascular of provide One the opportunity that material in medical

for used heart, time the This pumps blood minimally circulation. while RPM that procedures. a and a allowing in have used doctors are provides in solution high We flexibility reduce more quality directly surgical to superior solution can during for invasive option developing be

We customer, process they XXXX. are working in certification readiness move through XXXX the to anticipate and as with our commercial

same sales has GXXX in jets a Engineered and their built great our years, GXXX. Products gear, Gulfstream addition, Their fuselage be GXXX the for XXXX. and expanding and In which with using and relationship will team GXXX business beginning into wing, in bearing step bearings a over family the of up will provide the landing providing is

to wing, which could on bronze used bumper their with working fleet. been bumper replace to we've in current Additionally, Gulfstream a the their entire be retrofit design new

Our first technologies as Precision this we pivot of and Sales Products in low the segment to were new segment compared continues for the XXXX margin half markets. prior to to transform year. and

to the of orders program. However, with we expected offsetting in year. for life and near of extend term, anticipate continue our we where we do DCS plan business. the our meet In JPF that Longer are the growth the other areas organic full to term, volume pursue opportunities expect the to increase backlog reduced

are In partnership Autonomy, autonomous growing several autonomous investment will leverages next with aviation. which now parts and we solutions our we Kaman's industry and also autonomy we the development We of of for our an to are the KARGO autonomous purpose-built system. generation This as standard in $XX working June, cargo equity aerial manufacturer opportunity We've and accelerate million are establish K-MAX of market. help segment Near announced the piloted this for system and aerial a with excited excited have autonomous unmanned technology the been preferred to to an Near competency components Earth Earth. expand in Earth technology of precision of for optionally UAV part Near parts TITAN core in years be about in manufacturing

aerial of on KARGO track full later year. are a unmanned demonstration for system this We scale a UAV

autonomous market middle companies. lift a addressable platforms, as oil humanitarian vehicle with commercial Special applications and and search US Our the and initial such relief military Operations servicing mile with along delivery logistics medium for fully of range rescue, Commands, wide is

strengthening were to compared more the programs the prior and focus in segment seeking margins year. Our Structures fit that operating low capabilities. continues Sales to first XXXX on of our core profitable new, half

sales expect the and year. margins we higher for remainder both of the However, do

each right-size those to see We operational structure signs to positive measures necessary of at our sites, of while improvement continue businesses. out taking cost the

while example, For recently our just to make continuing back moving progress a signed sell cost, facilities our in we to Jacksonville at lowering are volume to Jacksonville sites. the operating consolidation the and agreement Mexico facility, definitive our plant

performance Vermont we our to from addition, In see continue improved facility.

in cancer product the gross to lean lines, point quarter, resulting and the in tools at treatment applied team used including improvements in During X,XXX basis process improvement several medical imaging facilities, margin. panels successfully equipment

expansion. for there are manufacturing We more to as model, new operational to a None am communities chain all Rolls-Royce. the quality, we our and operations, employees supply is recognized progress out. profitable of progress deliver in journey world performance focus and opportunities focusing pleased driving significant businesses excellence and delivery, in still on our the I is This Recently, of which performance and our without leadership our is cost our on the relentless made on we to our improved also to of Gulfstream be and GXXX with with margin quality gross the business. possible would parts serve. have operations continue be implementing around with this winning made we teams engine, safety, focus which needs, Kaman multi-year customers' and designed

feel continue of aviation, aerospace industrial the will benefit and excellence of engineered and profitable more products will model the in we confident durable markets and to Structures our our transform ahead, medical programs. and segment to that Products commercial Precision the segment. see return of margin the operations benefits high continue addition Looking demand new, our the market will

also company new several as performance. are innovations position we for best-in-class our for of We enthusiastic the

to Lastly, disciplined in remain and approach our allocation. capital M&A we

very with Wheel their are Kaman. the in investment Aircraft & excited of high about team integration performance to and and closing We forward Brake Parker look with strategic

for the strategic continue and will to our identify We assess highest that shareholders. opportunities provide return

over turn will a results. discussion to Jamie call financial detailed for I the of our more Now

first in outlook Today a Thank good on consolidated lower the our The will in morning, program. everyone. million On discuss JPF sales higher the segment. seals, a or margins you, or were margin was million first partially Improved by year. an of markets sales EBITDA results year-over-year was of XXXX. second in compared XXXX. the margin quarter our bearings, and XXXX our offset of compared of strong X.X% largely $XXX $XX.X due of a net $XXX our in for and springs, decline seals, update sales in engine million industrial and I $XX.X our of million, and quarter the contacts. Adjusted springs, and the the basis, Ian, XX.X% quarter sales commercial million medical quarter for and quarter results bearings, components and in of XX% second This for and $XXX was our to quarter increased provide sales the to in were of Engineered medical driven by Products our and to of second volumes aftermarket increased markets into our contacts second

K-MAX associated in benefit This lower gross and Additionally, our the Products and by profit our sales period. segment. during Precision our we on partially from a fuze was programs program saw offset support spares

had and basis XXXX to as a decrease from springs, Robust and markets decreased lower partially year-over-year sales bearings, EBITDA higher The sales medical our the these XXXX resulted declines. helped margin volume. comparison, the into of commercial for adjusted second contacts JPF offset and XX% points. the much seals, declined quarter second XXX primarily of quarter in aviation For

margin end springs, each and quarter industrial for Adjusted used military increased our through And seals, first Products. as Engineered markets. medical well EBITDA engine our well basis significantly margin Sales with a of this improved for contacts with products. and beginning recovery the I'd end and as a in increased as as increased market. for Now margin for Both volumes results than improved walk medical EBITDA point point. more bearings and increased sales XXX and serving to of to the a aviation, products. sales markets. commercial aftermarket the in $XX.X quarter, second Compared products, Adjusted medical segments, in to like we and bearing continue increased Year-over-year primarily aviation, industrial products well serving see XXX demand XX% XX% second commercial XX.X%, in margin to on end with increase quarter nice higher basis as increased sequentially. million and

The were bearings and and Additionally, as for has higher demand for continued for sales aftermarket and improved contacts improve. sales contacts, well to on springs, products application our and engine our gross as seals, parts. and for springs, our profit medical industrial seals,

Looking intake these of for during XXXX. are the our Engineered we segment, Based our the underlying robust seeing XX% the half in full the remain in upon expect order a as was the markets ahead, for business of of since continued significant remainder increase rates already outlook year. year backlog. quarter the a developments our in we backlog strength Products with in Order portion in of we for are confident sales the beginning second

the X.X%. results second segment for our contribution for moving Now Products second to million in of was fuze profit XX.X% by to associated volume. well of and for this JPF Compared sales Precision associated sales from support, partially Adjusted lower to lower quarter the margin had adjusted quarter EBITDA margin program. margin of an decreased significantly the XXXX. for The offset quarter JPF EBITDA due in $X.X a of XXXX, profit XXXX lower gross results the spares K-MAX $XX.X declined for quarter, a be in the as second was will with and as larger second due Year-over-year much SH-X of segment. and our an to and programs. million, first and as primarily our in sales This increase from quarter gross

million However, quarter previously includes we expect timing of DCS fuze’s deliver XX,XXX year. do the of in which deliveries, an expect concentrated the XX,XXX in sale, year remainder the third be $XX quarter the to XXXX, Based of second anticipated this the to of XXXX. upon to we

JPF DCS orders backlog term. are looking current the our in and secure We managing to additional near

burst family and are developing in devices. sensor and continue of efforts to safe sensors also We existing make of R&D progress our our with new fuzing we technologies height and patented arm for

unchanged. third our first segment, to our results to quarter, relatively moving Compared Now the Structures. were

the maintain our XXXX. of our of one production at was suppliers one second rates ability Our impacted by of in to at fire sites a quarter

higher from volumes wind were for margin to This million adjusted fire quarter of loss on was of of medical due able of a of second of at and disruption EBITDA second the We're imaging sales segment by X.X%, lower from for were improvements the lost Structures higher $XX,XXX We our expect X.X%. Year-over-year results Royce improved imaging sales quarter down of margin with These believe loss applies was our program. our year. our mostly and year. the excellence incoming suppliers the material of of our with a that losses second in and from $X.X will the higher team this margin the offset and see Additionally, by the half as model. operations the to one we the EBITDA Adjusted an Rolls be mostly and partially AH-XZ some in continuing the to opportunity recover offset sales program. quarter margin.

segment. to our long-term as compared performing facility. our or is facility XXXX performance to best improve currently financial of $XX.X second expected targets apply Over quarter of continue above segment to for for the the this from to Vermont increased practices our SG&A is $XXX,XXX Vermont time, the sales. Specifically, net million XX% we our Structures

year. the quarter to an equivalent per of manage As opportunities cost earnings the of $X.XX & for the a per quarter of $X.XX SG&A $X.XX share basis, to were decreased When quarter, in continue adjusted were XXXX. development corporate associated and $X.XX than Wheel XXXX and for across the in Brake. adjusted the the as first the first organization. we acquisition the compared efficiencies was earnings of which to to with On lower result, the quarter these share increase costs, cost second Aircraft seek diluted Diluted

an from XXXX first diluted segment, increase the was per per The impact from in per with of partially the segment which reductions six and Products in of spend For to $X.XX segment, performance earnings decline six per increased $X.XX decreased $X.XX JPF share. share. the Precision from $X.XX share an months, of within primarily were These offset share adjusted first of strong our Products resulted per Engineered per share. share this by R&D months XXXX for $X.XX from

cash from we the of During had $XX quarter, operations usage million.

we've of over cash months, free the million. XX last flow generated However, $XX

of second be the We period achieve XXXX. cash generation half $XX to expect million the of $XX a free strong for to to cash allowing year us flow plan of of our million

discuss to Now XXXX. outlook our I'd like for

to of be the expect the second cadence to half towards continue earnings of weighted year. the We

and partially lower programs, sales the and and Our lower upon business, our industrial the results rate, exchange of were expected performance a general to in the strong in caused markets the with outlook for into by K-MAX to sales with commercial, from sale and fire rates of than in JPF and impact one our in quarter improved downward our full sales suppliers, for shortage $XXX segment foreign material line revising also end current with year, order additional the at which $XXX from our the Based offset million we million Structures the year. aircraft range for three margin expectations assumes our medical are second of aviation. pressure

turn EBITDA, remarks. the closing business. Given the expected strength our With over seen and Brake for our cash favorable Engineered now Ian Wheel remain sales back have for segment, target Aircraft I'll free Products mix that, we Parker-Hannifin of the on the flow guidance call benefit we to XXXX, in acquisition the meet for and from earnings, excluding & to

over time. solid strategy of and achieve Jamie. you, in growth profitable is a to segment well quartile top positioned has Kaman for our Thank each performance

in we products invest on our develop advance autonomous markets. profitable focused a position our to and company and addition will more strategic Earth investments to in leader technology brake with overarching strategy medical the aerospace, with Near pillars. In winning reminding by audience our the technology in & industrial, Aircraft programs. our I'd opportunity and These talent on like our Kaman's conjunction of differentiated to as three acquisition, continue Wheel focuses close to defense, which

will grow our people. we accelerating First, innovation, facilities, in business investments and through products, our

continue be allocation. capital accretive will M&A we and in approach disciplined our Second, to to

to aimed margin, driving top to lead Third, that capital this the dedicated Executing to around in us talented hard return like at operations thank questions. returns. our businesses conversion, performance all invested we for we and please? every the improving are enabling goals, are segments. first like of our until EBITDA day. continue exceptional our our our open employees on all will working can meet and shareholder to best-in-class. across do that all who world are strategy achieve customers flow I'd Operator, lead All to With that, will in question, financial we on our quartile have they line free I'd cash to greater excellence

[Operator question comes CJS Instructions] with Our Larry first Securities. from Solow

open. line Your is

and with expectations. bit with morning, seems a things, it questions. then thanks. gals, relatively guys basically a But in like line JPF line for the expectations, guidance small guess on was couple I sort on of the and in in in Great, you the Good of but or quarter, little your just itself, thanks basically a -- it the some know to like sounds Structures, too. bit it outside I fire and of confirm shift line. quarter order a little hurt of guide those was the you your for stuff obviously taking it don't

much the my guys little that but is on correct? pretty bit numbers Street, other below a and a of couple Just

Larry, Hey, this absolutely Ian. you're Yeah. correct. Yes, is

plan was shifted The to know QX fire when a we've working schedule to headwind of occurred boat builds out, the March has and Little back exactly that just the some they're in of delivery. done. structures We we and shift FX that delays going from got in And then QX. the our have did effectively caused timing We got set. those are unplan. We our JPF. only

why that's got So sales. we in shift the

just to you basis were Engineered then the back higher know like in an see rise margins Okay, sales. were high thoughts to on great. step and EBITDA Could EBITDA take I on the your encouraging pretty a these on sequentially margin -- Products pre-COVID year-over-year -- nicely in And maybe XXs. and segment this continue --

that couple exact getting maybe You line, the business, then and a XX% time of something obviously, that thoughts horizon? number you to and push achievable an is you but Wheel your that years then on in Parker-Hannifin's of timeline, sort not in Brake that back segment. even as hopefully and is again, -- perhaps without in -- Is can layer next on that but

strong are business, that confident in if we and highly components, historically, the the you Products is businesses look It performance. the that exceptionally Engineered at are

cost fixed even to businesses Now a that, COVID structure, of lot costs. variable hard really like at add a forced and us take look our

gotten function at So those watching which through, a that maintaining the down cost in we've drop lower that structure, looking as COVID costs markets strong. of really recover, exceptionally is

just your at to be also strong a are performance. a high out solid happens doing. -- business I'll XXs, It same yes, feel Wheel to performance. with And they're very because levels up performance base parts team. is This shout point, we that's reflects designed exactly confident by a partners back really and at And highly future XXs level will a So, accident. those what our here know Brake. & not Aircraft These of low that we of high they that that

that So to segment. add really excited to that team

is term Okay. then initial that again, -- And timeline. And expect could specifics, you again, then a Well, just late when some 'XX lastly commercial briefly. Is longer think on potential this there I like UAV but product. discussed the 'XX, of which without KARGO we sales?

if maybe a more. like many, seems Just potential broader audience deliver than It lot K-MAX. looking not a much even the seems at has certainly it to a as it like

in over $XXX that's So or its I something lifetime. million sales delivered think

potential that. seems higher maybe has like KARGO the than So be exponentially UAV it statement? Is that to fair a

statement. fair a That's

hard some But to KARGO particular. both side large of markets it's and the UAV. for is about, timing, the recent of exceptionally can on commercial about demand there We we're a application, are you but customers predict, is and both certain commercial huge the gas that the being I with on and oil This in talked for sides. terms signals we've from that meetings in on on tell the military one excited type of side, getting market that requirement/demand super

terms would be in with So the we 'XX, those of quickly move probably low timing, production, commercial in on 'XX fully want when getting We're like we the to we in is Difficulty] yes, to operational can. both and as ‘XX side. we're and would as rate anticipating type of [Technical military

Got it.

Thanks great. I Okay, appreciate again. it.

Yeah. Thanks, Larry.

with from Markets. question next comes Our Steve Capital Barger KeyBanc

is line open. Your

morning, good Jacob Hey, guys. for is This on Steve.

Hey, Jacob.

that Hey, top just is the my of of that planned push real deliveries? to $XX just the on to on schedule the right question, add $XX Does JPF or out further XQ's of first million. the that the rest quick million push

what Yeah, that's it exactly does.

So fuzes mentioned, it's for with again, performance. expectations ready additive the to our built those are year. to expected It Ian full third those shift quarter And our go. doesn't

quarter little lumpy bit quarter. about these $XX was at in be DCS But you margin. shift fuzes, second of just in out third, a of the can As into know, so million they come higher are JPF this the from to a regard, sales. And this

in Engineered up nice the Okay, particularly And backlog, non-JPF pretty there, like great. on second, Thanks. step seems then Products. it a

an what's backlog size look curious far Just or you? say better and timeline-wise asked, for ideal like would backlog that's you backlog out an how stretches maybe elevated that

very backlogs. of the segment had historically that So, strong has that -- is, part first

the businesses now extends year. next and in segment have at position a year of backlogs and through a are of We where lot end way those all into the already record that this

of year. XX%, is example, for for already this set XX% backlog So, our

be So year. the exactly to building know we're remainder we what the of for going

terms all of [timeline] which strong side, (ph) is levels markets we're Products demand in Engineered us. exciting seeing on for exceptionally In again those of the

again, just, you cycle. in And relatively short it's that business, remember, if Yeah.

contracts some month are that those orders six we to those in although So time typically will have delivery for longer-term frame. XX

build to that and not for continue to to that it's see up continue backlog as us growth unusual So happens.

guys little production but That then do my seeing got capture you a you that's sense. position question for something standpoint, the rate additional last it. content further and makes with there Airbus, you Okay, some pure in a like and that? And have good volume increases here, you're do think to Boeing out capacity obviously for just from

We you but the The design are as delivery, indeed. do more know, taking just technology. pandemic. already long that certification we've cycle is intensive, process, provide we fairly better that we content demonstrated better We've and and demonstrated quality, during can

the is no So share some There it. taken rates we've Those thing. is We COVID. during The market are anticipate recovering. about the doing build climbing. same question

anticipating really So we're strong growth.

Yeah.

Just to add.

manufacturing strength sheet, the to With new and that and new of load. new our to the balance those to processes the manage opportunity us downturn, took pandemic and we able sales, in businesses specifically equipment during investments capacity make help to be

for questions, Thanks great. guys. taking Okay, the

Jacob. Thanks, it. got you Yeah,

time. I'm Kary turn the not back to this further showing over Bare. questions call any like I'd at Instructions] [Operator to

I from believe close Thank the closing you. here do few a Ian before remarks we call. we have

Yeah.

to line focusing our on terms but just is in the back which But of in QX, time. our really half performance year. clarity everybody's of certainly, appreciate for Just expectations, with adding the some

in year. We the deliver our supremely ability confident back half to are of the in

or just we we to mentioned, extent the need As inside what backlogs know hand to going we material chain to been which lead build. that right the got things we build, times, and that need our we on supply material teams We've confident very know building proper teams moving, year, deliver when but it. ops all the the has are they've exactly got to we're to and be always

and production open like that, the the we historically. and have deliver on know are the racks in for half few a the that things staffed deliver we Outside of very demonstrate to to also We we of how normal second manpower. this well year year

second half to to second to super strong little and Wheel the the do. friends that. in are closing And exciting environment accounting for of So be all of where grow type recession Really FX. of place trying trying half Aircraft our excited to headwinds for the that segments and the Again, for of of we're year. new the Outside in are and we get our point business, a business bit with we're situated & we're perfectly to at the Brake here our year. things with

need again on year, do. that of highly deliver we we half know second to will overall, for -- get comfortable those we numbers. on We're So, the to there the

everyone Difficulty] And our you on We're in for talking All We're call. fall looking Kaman right. -- to today. third [Technical with with today. you Thank the forward Corporation quarter forward that quarter to looking you talking earnings second joining to are call we the

Ladies conclude and does gentlemen, presentation. this today's

disconnect have a wonderful may day. You now and