PARK OHIO HOLDINGS CORP Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Themes: January started slowly but rebounded; Engineered Products group showed year-over-year improvement and improved profitability; business reshaping efforts included closing nonstrategic locations and focusing on best products/services.
• Tariff Uncertainty: Presence in over 20 countries with in-region manufacturing/distribution; predominantly U.S.-based (2/3 revenue domestic) with USMCA compliant imports; well-positioned for re-shoring, expecting incremental business in 2026 and beyond;受益于基础设施、国防和钢铁技术投资 for Engineered Products.
• Q1 Performance: Mixed results; Supply Technologies and Assembly Components had sales weakness; Engineered Products had growth. Consolidated gross margin 16.8% (vs. 17.1% prior year); operating income $19 million (vs. $24 million prior year); GAAP EPS $0.61 (vs. $0.83 prior year); adjusted EPS $0.66 (vs. $0.85 prior year).

Segment Performance

• Supply Technologies: Net sales for the quarter were $188 million, down from $197 million in Q1 2024. Demand was lower in certain North American end markets but higher in heavy-duty truck, semiconductor, consumer electronics, and electrical distribution. Operating income totaled $17.8 million (vs. $19.5 million prior year) with an operating margin of 9.5% (vs. 9.9% prior year).
• Assembly Components: Sales for the quarter were $97 million, down from $107 million in Q1 2024. Lower unit volumes, pricing on fuel rail products, and delayed new business launches impacted sales. Segment operating income was $5.3 million (vs. $8.6 million prior year) with a margin of 5.5% (vs. 8% prior year).
• Engineered Products: First quarter sales were $121 million, up from $114 million in Q1 2024. Strong demand across most product brands and geographies. Adjusted operating income improved to $4.6 million (vs. $3.8 million prior year). Backlog as of March 31 totaled $136 million.

Guidance

• 2025 net sales expected to range $1.6 billion to $1.7 billion; adjusted earnings per share expected in range of $3 to $3.50.
• Full year effective tax rate expected to range between 20% and 23%.
• Full year capital expenditures expected to range between $30 million and $35 million.

Risks

• Tariff uncertainties impacting supply chains and customer demand.
• Volatility in end markets, particularly for consumer-facing customers.
• Uncertainty in global industrial market conditions affecting sales and margins.

Question and Answer

• **Q: Break down what parts of the business are driving the change in guidance?

A: The change in guidance is mostly driven by Supply Technologies and Assembly Components; however, the Engineered Products segment ended the quarter strong with year-over-year improvement.**

• **Q: How much of the cost base comes from China or other countries with potential tariffs?

A: Asia accounts for roughly 8% of the total business, which is relatively small in terms of the overall cost base.**

• **Q: Is there demand pull forward or a wait-and-see attitude?

A: There is no sizable evidence of pull forward; mitigating tariffs by optimizing supply chains and seeking customer support for costs related to highly engineered products.**

• **Q: Can the Q1 shortfall be made up in subsequent quarters?

A: Yes, expect to make up ground as momentum picked up in February and March, with businesses strengthening throughout the quarter.**

• **Q: Outlook on the M&A market?

A: There is a decline in M&A activity due to macro uncertainties, with acquirers and sellers taking a wait-and-see attitude.