Park-Ohio Holdings Corp. (PKOH) Earnings

Management highlights

• Mr. Crawford mentioned momentum building across the business with growth in end markets and durable/innovative products. They've been transforming the business to achieve faster growth, higher margins, and consistent cash flow. • Pat reported first quarter results exceeded expectations with sales growth across all three segments. Sales totaled $421 million, up 4% year-over-year. Consolidated gross margin was 17.3%, up 50 basis points. Excluding charges, consolidated operating income was $21 million, up 6% year-over-year. SG&A expenses increased due to inflation and personnel costs. Interest costs were higher due to refinanced senior notes but partially offset by lower revolving credit facility rates. Effective tax rate improved to 17% due to higher R&D tax credits. • Supply technologies had net sales increase driven by various end markets, with new North American distribution center on track to be operational in Q3. Fastener manufacturing business performed well with expected growth in proprietary products. • Assembly component segment saw sales growth from new product launches and automotive demand, with initiatives to improve operating margins. • Engineered product segment had highest quarterly sales, driven by industrial equipment group, strong backlogs, and demand from multiple sectors. Commenced strategic review of Southwest Steel Processing.

Guidance

• Reaffirming outlook from last quarter: net sales 1.675 to 1.710 billion, increase of 5% to 7% over last year. • Adjusted EPS $2.90 to $3.20 per diluted share, increase of 7% to 19% over last year. • EBITDA 8% to 9% of net sales. • Free cash flow $20 to $30 million. • Outlook includes impact of Southwest Steel expected to generate $17 million in revenue and net loss of 53 cents per diluted share, with strategic review outcome potentially providing upside to current guidance.

Segment performance

In supply technologies, net sales totaled $195 million in the quarter, up from $180 million a year ago, an increase of 4%. Higher sales were driven by strong customer demand in power sports, semiconductor, aerospace, defense, electrical, and agricultural end markets. The supply chain business benefited from increased demand from semiconductor, technology, and data center sectors (up 13% year-over-year), and aerospace and defense demand increased 15% year-over-year. The fastener manufacturing business had net sales growing 18% sequentially but slightly down year-over-year, with adjusted operating margins at 9% (slightly down due to product sales mix and higher personnel costs). In the assembly component segment, sales totaled $100 million, up 3% year-over-year, driven by new product sales launched last year and higher customer demand from automotive platforms. Adjusted operating income was $5.3 million, down slightly from a year ago but up 23% from the fourth quarter. In the engineered product segment, sales were $126 million, up 4% year-over-year and 8% sequentially. Sales were driven by the industrial equipment group with strong backlogs. Adjusted operating income improved 35% year-over-year to $6.2 million and 100% from the fourth quarter. The segment is experiencing strong demand from aerospace and defense, power generation, steel production, and data center sectors. Southwest Steel Processing is under strategic review, and adjusted earnings from continuing operations excluding it would have increased from $0.65 to $0.77 per diluted share.

Risks & headwinds

• Forward-looking statements subject to risks and uncertainties that may cause actual results to differ from projections, as detailed in earnings press release and 2025 10-K. • Southwest Steel Processing strategic review involves uncertainty regarding potential sale and its impact on financials. • Supply chain issues could impact material availability and increase freight costs, though currently only seeing freight cost impacts. • Challenges in navigating industry ups and downs, such as Novellus Fire affecting product lines and EV conversion shifts in Europe and China.

Analyst Q&A

• Q: On backlog, any end markets standing out?

  A: Pat said all end markets are contributing, including defense, electrical infrastructure, aerospace, with uptick in oil and gas bookings. Matt added about speed of execution and diversity of brands.

• Q: Expected conversion timeline of backlog?

  A: Matt said speed of execution is better, average completion time is nine months-ish. Pat added about diversity of brands allowing quicker turnover.

• Q: Vision for middle and late innings of electrical infrastructure spending?

  A: Pat said revenue base in electrical side starts at about $150 million and grows over 10% per year, with demand in supply tech and industrial equipment for power management.

• Q: Timeline for supply tech automation initiatives impact on consolidated margin?

  A: Matt said they're in multi-year investment cycle, impact likely in 2027.

• Q: Business acquisition environment in remainder of 2026 for assembly component segment?

  A: Pat said no business acquisition activity expected within that segment due to organic growth and margin enhancement initiatives.

• Q: Supply chain impact from conflicts?

  A: Broadly, only seen freight cost impacts so far, with potential for more material impacts if conflict continues.

• Q: Thoughts on Southwest Steel transacting at $45 million asset value and plan B?

  A: Matt said they're at beginning of strategic review journey, Southwest Steel is a good business with good model and equipment, business is improving, but reluctant to give specific answers on transaction and plan B.