Barnes Group (B) Q4 2023 earnings summary

Executive summary

• FY 2023 sales were $1,450.9M, up 15% reported and 5% organically; Adjusted EBITDA was $270.2M, up 16%, with an 18.6% margin.

• Priorities include profitable growth, margin expansion, cash generation and debt reduction; the Associated Spring and Hänggi divestiture advances a shift toward higher-growth, higher-margin businesses.

• FY free cash flow rose 40% to $56.7M, while adjusted EPS declined 17% to $1.65, reflecting higher interest expense and tax rate associated with the MB Aerospace acquisition.

Financial highlights

• Q4 sales were $415.5M, up 33% reported and 2% organically; adjusted operating income was $47.7M, up 36%, at an 11.5% margin.

• Q4 Adjusted EBITDA was $78.2M, up 36%, at an 18.8% margin; adjusted EPS was $0.41, down 21%. GAAP net income was $7.2M, or $0.14/share, versus $15.6M, or $0.30/share.

• FY adjusted operating income was $167.3M, up 15%, at an 11.5% margin; GAAP operating income was $89.0M and net income was $16.0M, or $0.31/share.

• FY operating cash flow was $112.4M versus $75.6M; capital expenditures were $55.7M and free cash flow was $56.7M versus $40.5M.

Outlook and guidance

• FY 2024 sales growth guidance is 12%–16% total and 4%–8% organic; Adjusted Operating Margin is 12%–14% and Adjusted EBITDA Margin is 20%–22%.

• FY 2024 adjusted EPS guidance is $1.55–$1.80; free cash flow guidance is $75M–$90M, with ~140% conversion.

• FY 2024 guidance includes CapEx of $60M–$70M, D&A of $130M–$140M, interest expense of $84M–$86M, adjusted tax rate of 30%–32%, and diluted share count of ~51M.

• Adjusted EPS guidance excludes $0.17 for restructuring and transformation, $0.38 for divestiture items, and $0.06 for short-term purchase accounting adjustments; outlook assumes the divestiture closes at end-Q1 and includes three months of those businesses’ results.

• Q1 2024 guidance: reported sales growth of 25%–27%, Adjusted Operating Margin of 11%–12%, Adjusted EBITDA Margin of 19%–20%, and adjusted EPS of $0.32–$0.37.