PARK OHIO HOLDINGS CORP Q2 FY2025 earnings call

• Refinanced senior notes and revolving credit facility: Completed a private offering of $350 million of senior secured notes due in 2030, used proceeds to redeem existing notes, extended revolving credit facility maturity by 5 years, and received upgraded ratings. - Capital equipment orders: Second quarter capital equipment orders were approximately $85 million, an all-time quarterly record, including a $47 million order from a major steel producer. - Second quarter results: Revenue totaled $400 million; adjusted EPS increased 14% to $0.75 per diluted share; EBITDA was $35 million, with a gross margin of 17% and EBITDA margin of 8.8%. - Cost containment: SG&A expenses were $46.8 million, down from prior periods; interest costs were lower due to lower average interest rates and debt balances; expected strong operating and free cash flow in the second half of 2025.

Supply Technologies: Second quarter net sales were $187 million, down year-over-year due to lower demand in certain end markets; adjusted operating income was $17 million, with a margin of 8.9%. Year-to-date sales were $375 million, and operating margin was 9.1%. Assembly Components: Sales in the quarter were $95 million, down year-over-year; segment adjusted operating income was $6.1 million, with over $50 million of incremental business set to launch in the second half of 2025 and 2026. Engineered Products: Sales were $118 million, down year-over-year; adjusted operating income was $6.4 million. New equipment bookings in the second quarter were $85 million, an all-time quarterly high, and backlog totaled $172 million, a 19% increase from the end of last year.

• 2025 adjusted EPS is expected to be in the range of $2.90 to $3.20 per diluted share. - Net sales are expected to be in the range of $1.62 billion to $1.65 billion. - Free cash flow is expected to be $20 million to $30 million in 2025, with significant improvement in the second half. - Refinancing will result in a reduction of approximately $0.20 in adjusted EPS in the second half of 2025. - Expect continued margin improvement through value driver initiatives in each business segment.

• Impact of tariffs on direct imported raw materials and lower end market demand. - Execution challenges in underperforming assets such as the Forge Group, which has been underperforming and requires work to improve its margin profile.

Q: Do you have any other lines of business that are earning less than acceptable returns right now? And what's the plan for that?

A: Yes, the Forge Group has been underperforming. We believe it will be a big step forward over the next 12 months in terms of earnings, and it is still a good long-term part of Park-Ohio with work needed to get it back to previous performance levels.

Q: What are your operating margin targets?

A: Supply Technologies is expected to continue improving and is now approaching a 10% operating income margin. Assembly Components has an opportunity to improve margin profile by at least 200 basis points. Engineered Products, particularly the Industrial Equipment Group, is expected to have operating income margins exceeding double-digit percentages.

Q: What are the drivers of the EP backlog?

A: Regional investment cycles in manufacturing, defense, aerospace, energy; reshoring trends; and investments in unique steels and manufacturing processes for sectors like battery technology.

Q: What is the timeline for reshoring trends?

A: It is early innings, dependent on clarity around tariffs and customers being able to plan their business decisions regarding reshoring.

Q: How are the new customers for Supply Tech characterized?

A: They are current or former customers seeking to solve supply chain challenges, whether related to tariffs or other issues.