Barnes Group (B) Q1 2024 earnings summary

Executive summary

• Q1 net sales were $430.6M, up 28.4% reported and 3.8% organically; adjusted EBITDA was $80.4M at an 18.7% margin.

• Aerospace demand drove growth and order momentum; Industrial sales declined 4.1% as expected.

• Portfolio strategy is shifting toward Aerospace; the Associated Spring and Hänggi sale closed in April, while a strategic review continues.

Financial highlights

• Adjusted operating income rose 37% to $51.1M, with an 11.9% margin; adjusted EPS fell 19% to $0.38.

• GAAP operating income rose 70.4% to $39.7M and operating margin improved to 9.2% from 6.9%; gross margin declined to 30.3% from 32.5%.

• GAAP net income was $1.9M versus $13.2M; diluted EPS was $0.04 versus $0.26. Interest expense rose to $24.8M from $5.3M.

• Operating cash flow was negative $2.3M versus positive $32.2M; capital expenditures were $12.8M and free cash flow was negative $15.2M.

Outlook and guidance

• FY24 sales growth guidance is 13%-16% total and 5%-8% organic; Aerospace growth is ~60% total with mid-teens organic growth, and Industrial organic growth is expected in the low single digits.

• FY24 adjusted operating margin guidance is 12%-14%, adjusted EBITDA margin 20%-22%, adjusted EPS $1.62-$1.82, and free cash flow $75M-$85M with ~140% conversion.

• FY24 modeling includes CapEx of $60M-$70M, D&A of ~$130M, interest expense of $81M-$84M, adjusted tax rate of 31%-33%, and diluted share count of ~51M.

• Cost-savings run-rate targets are $38M by end-2024 and $42M by 2025; targets exclude $11M forecast for divested businesses.