Hammond Power Solutions Inc. (“HPS”) (TSX: HPS.A) a leading
manufacturer of dry-type transformers, power quality products and
related magnetics, today announced its financial results for the
first quarter 2024.
HIGHLIGHTS
- Record sales of $190 million in the quarter, a 11.4%
increase versus 2023.
- Adjusted EBITDA of $30,972 in the quarter, or 16% of
sales. Adjusted EBITDA is 6% higher than the first quarter of
2023.
- Gross margin of 31.7% for the quarter.
- Net Earnings of $7.9 million in the quarter.
Earnings per share of $0.67 for the quarter, significantly impacted
by share-based compensation.
“We begin 2024 at a strong pace as we continued
to grow our quarterly sales volumes. Higher bookings versus
2023 maintained the backlog even with higher shipments, and we are
now seeing bookings and shipments somewhat evenly matched.
The distribution network stood out again as a source of strength as
more projects continued to flow through this channel. Canada
was also a standout as we shipped several key projects in
commercial construction, electric vehicle (“EV”) charging, data
centres, public infrastructure, oil & gas, mining, and
utilities,” said Adrian Thomas, CEO of Hammond Power Solutions.
“With the strong project demand, we have made further commitments
to equipment spending as we forecast demand from emerging market
segments to continue. We also implemented a price increase that
will take effect in the second quarter of 2024, after having not
done so since 2022. The increase was in consideration of persistent
inflation and resilient demand. Regarding the Mesta and Power
Quality business, a large customer project delay impacted our
shipments for the quarter, but we still expect full year shipments
to remain close to expectations. We are gaining recognition within
the technical community and among our customers, as demonstrated by
receiving the Rockwell Automation Technology Partner Innovation
award for our Active Harmonic Filter.”
Geography |
Q1 2024 |
Q1 2023 |
|
$ Change |
|
% Change |
|
U.S. & Mexico |
$ |
130,732 |
$ |
118,804 |
$ |
11,928 |
|
10.0% |
|
Canada |
|
48,296 |
|
36,414 |
|
11,882 |
|
32.6% |
|
India |
|
11,652 |
|
15,916 |
|
(4,264) |
|
(26.8%) |
|
Total |
$ |
190,680 |
$ |
171,134 |
$ |
19,546 |
|
11.4% |
|
|
The United States (“U.S.”) market experienced
its strongest growth in the distributor channel as the Company
continued to grow sales with existing and new distributors. The
Original Equipment Manufacturer (“OEM”) channel also grew in the
quarter, with strong sales to motor control, mining, and data
centres. The Canadian market experienced increases in both
distribution and direct sales in commercial construction, EV
charging, data centre projects, public infrastructure, oil &
gas, mining, and utilities.
The Company’s Quarter 1, 2024 backlog increased
by 11.1% as compared to Quarter 1, 2023. Strong demand in the back
half of 2023 contributed to the high backlog increase from prior
year. The Company’s backlog has decreased 1.1% from the Quarter 4,
2023 value as our quarterly shipments reached record levels.
“We began the year continuing with the strong
momentum that we were experiencing at the end of 2023. We were able
to maintain margins of 31.7% in the quarter despite lower power
quality, Induction Heating Inverter (“IHI”), and India sales, which
all had very favourable margins in Quarter 1, 2023. Additionally,
we are incurring costs in getting our new factory set up in Mexico,
which had a slight negative impact on margins. Offsetting this,
margins are being positively affected by a higher proportion of
custom projects in the quarter,” said Richard Vollering, CFO of
HPS. “Notably, share-based compensation was $16.8 million in the
quarter, which was $12.2 million higher than in Quarter 1, 2023,
reflecting the higher share price in 2024, resulting in the
decrease in net earnings and EBITDA. A normalized metric for
the quarter is adjusted EBITDA, which was was 16% in Quarter 1,
2024. Net cash generation was slightly negative as we invested
almost $7.5 million in capex in the quarter, consistent with our
capital expansion plans for 2024, and incurred higher working
capital requirements as a result of higher sales and significant
seasonal payments in the first quarter for bonuses and
rebates.”
The Company saw a slight decrease in its gross
margin rate for Quarter 1, 2024 which was 31.7% compared to Quarter
1, 2023 margin rate of 31.8%, a decrease of 0.1% of sales. The
stability in gross margin is the result of better operating
leverage due to high factory throughput, price maintenance in the
market, and stabilizing cost inputs. Higher gross margins were
achieved in all channels and are supported by high demand for the
Company’s products. Margin rates can be sensitive to selling price
pressures, volatility in commodity costs, customer mix and
geographic blend.
Total selling and distribution expenses were
$21,067 in Quarter 1, 2024 or 11.0% of sales versus $17,489 in
Quarter 1, 2023 or 10.2% of sales, an increase of $3,578 or 0.8% of
sales. The year-over-year increase in selling and distribution
expenses is a result of higher variable freight and commission
expenses attributed to the large increase in sales.
General and administrative expenses were $29,139
or 15.3% of sales for Quarter 1, 2024 compared to Quarter 1, 2023
expenses of $14,335 or 8.4% of sales, an increase of $14,804 or
6.9% of sales. The increase is mainly due to higher share-based
compensation costs, but also due to our ongoing strategic
investments in people and resources to support our growth
strategies as well as supporting higher levels of general business
activity.
Net earnings for Quarter 1, 2024 finished at
$7,952 compared to net earnings of $15,726 in Quarter 1, 2023, a
decrease of $7,774. The decrease in the quarterly earnings from
operations is primarily a result of higher selling, distribution,
general and administrative expenses, offset by an increase in sales
and gross margin dollars, and lower income tax expense.
EBITDA for Quarter 1, 2024 was $14,999 versus
$24,145 in Quarter 1, 2023, a decrease of $9,146 or 37.9%. Adjusted
for foreign exchange loss/gain and share based compensation
expenses adjusted EBITDA for Quarter 1, 2024 was $30,972 versus
$29,121 in Quarter 1, 2023, an increase of $1,851 or 6.4%.
Basic earnings per share were $0.67 for Quarter
1, 2024 versus $1.32 in Quarter 1, 2023.
The Board of Directors of HPS declared a
quarterly cash dividend of fifteen cents ($0.15) per Class A
Subordinate Voting Share of HPS and a quarterly cash dividend of
fifteen cents ($0.15) per Class B Common Share of HPS paid on March
28, 2024.
The Board of Directors of HPS also declared a
quarterly cash dividend of twenty-seven and half cents ($0.275) per
Class A subordinate voting shares of HPS and a quarterly cash
dividend of twenty-seven and half cents ($0.275) per Class B common
shares of HPS payable on June 25, 2024.
THREE MONTHS ENDED: (dollars in
thousands)
|
March 30, 2024 |
|
April 1, 2023 |
|
Change |
|
Sales |
$ |
190,680 |
|
$ |
171,134 |
|
$ |
19,546 |
|
Earnings from operations |
$ |
10,299 |
|
$ |
22,623 |
|
$ |
(12,324) |
|
Exchange (gain) loss |
$ |
(698) |
|
$ |
498 |
|
$ |
(1,196) |
|
Net earnings |
$ |
7,952 |
|
$ |
15,726 |
|
$ |
(7,774) |
|
Earnings per share |
|
|
|
|
|
|
|
|
Basic |
$ |
0.67 |
|
$ |
1.32 |
|
$ |
(0.65) |
|
Diluted |
$ |
0.67 |
|
$ |
1.32 |
|
$ |
(0.65) |
|
|
|
|
|
|
|
|
|
|
|
Cash generated by (used in) operations |
$ |
6,285 |
|
$ |
(10,466) |
|
$ |
16,751 |
|
EBITDA |
$ |
14,999 |
|
$ |
24,145 |
|
$ |
(9,146) |
|
Adjusted EBITDA* |
$ |
30,972 |
|
$ |
29,121 |
|
$ |
1,851 |
|
Capital Spending |
$ |
7,487 |
|
$ |
2,010 |
|
$ |
5,477 |
|
|
* EBITDA adjusted for foreign
exchange gain or loss and share based compensation |
|
Caution Regarding Forward-Looking
Information
This press release contains forward-looking
statements that involve a number of risks and uncertainties,
including statements that relate to among other things, Hammond
Power Solutions Inc.’s (the “Corporation” or
“HPS”) strategies, intentions, plans, beliefs,
expectations and estimates, in connection with general economic and
business outlook, prospects and trends of the industry, expected
demand for products and services, product development and the
Corporation’s competitive position. Forward-looking statements can
generally be identified, but not limited to, the use of words such
as “may”, “will”, “could”, “should”, “would”, “likely”, “expect”,
“intend”, “estimate”, “anticipate”, “believe”, “plan”, “objective”
and “continue” and words and expressions of similar import.
Although the Corporation believes that the expectations reflected
in such forward-looking statements are reasonable, such statements
involve risks and uncertainties, and undue reliance should not be
placed on such statements. Certain material factors or assumptions
are applied in making forward-looking statements, and actual
results may differ materially from those expressed or implied in
such statements. Important factors that could cause actual results
to differ materially from expectations include but are not limited
to: general business and economic conditions (including but not
limited to risks related to foreign currency fluctuations and
changing interest rates); risks associated with the Corporation’s
business environment (such as risks associated with the financial
condition of the oil and gas, mining and infrastructure project
business); geopolitical risks; climate related risks; changes in
laws and regulations; operational risks (such as risks related to
existing and developing new products and services; doing business
with partners and suppliers; product sales and performance; legal
and regulatory proceedings; dependence on certain customers and
suppliers; costs associated with raw materials, products and
services; human resources; and the ability to execute strategic
plans). The Corporation does not undertake any obligation to update
publicly or to revise any of the forward-looking statements
contained in this document, whether as a result of new information,
future events or otherwise, except as required by law.
This forward-looking information represents our
views as of the date of this press release and such information
should not be relied upon as representing our views as of any date
subsequent to the date of this press release. We have attempted to
identify important factors that could cause actual results,
performance or achievements to vary from those current expectations
or estimated, expressed or implied by the forward-looking
information. However, there may be other factors that cause
results, performance or achievements not to be as expected or
estimated and that could cause actual results, performance or
achievements to differ materially from current expectations.
There can be no assurance that
forward-looking information will prove to be accurate, as actual
results and future events could differ materially from those
expected or estimated in such statements. Accordingly, readers
should not place undue reliance on forward-looking
information. ABOUT HAMMOND POWER SOLUTIONS
INC.
Hammond Power Solutions Inc. (“HPS” or the
“Company”) enables electrification through its broad range of
dry-type transformers, power quality products and related
magnetics. HPS’ standard and custom-designed products are essential
and ubiquitous in electrical distribution networks through an
extensive range of end-user applications. The Company has
manufacturing plants in Canada, the United States (U.S.), Mexico
and India and sells its products around the globe. HPS shares are
listed on the Toronto Stock Exchange and trade under the symbol
HPS.A.
Hammond Power Solutions – Energizing Our
World
For further information, please contact:
David Feick Investor Relations 519-822-2441 x453
ir@hammondpowersolutions.com