Greetings, and welcome to the TriMas Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sherry Lauderback, Vice President of Investor Relations. Thank you. You may begin.

Thank you, and welcome to TriMas Corporation's second quarter 2024 earnings call. Participating on the call today are Thomas Amato, TriMas' President and CEO; and Scott Mell, our Chief Financial Officer. We will provide our prepared remarks on our second quarter results and outlook, and then we will open up the call for questions. In order to assist with the review of our results, we have included today's press release and presentation on our company website at trimas.com, under the Investors section. In addition, a replay of this call will be available later today by calling 877-660-6853 with a meeting ID of 13747794. Before we get started, I would like to remind everyone that our comments today may contain forward-looking statements that are inherently subject to a number of risks and uncertainties. Please refer to our Form 10-K and our Form 10-Q to be filed later today for a list of factors that could cause our results to differ from those anticipated in any forward-looking statements. Also, we undertake no obligation to publicly update or revise any forward-looking statements except as required by law. We would also direct your attention to our website where considerably more information may be found. In addition, we would like to refer you to the appendix in our press release or our presentation for the reconciliations between GAAP and non-GAAP financial measures used during this call. Today, the discussion on the call regarding our financial results will be on an adjusted basis, excluding the impact of special items. With that, I will turn the call over to Tom Amato, TriMas' President and CEO. Tom?

Thank you, Sherry. Good morning, and thank you for joining us on our second quarter earnings call. Let's turn to Slide 3. As you may have seen from our earnings release this morning, the resiliency of TriMas's Packaging and Aerospace businesses has become more apparent, while our Specialty Products industrial markets have not yet experienced the demand recovery we expected by this time in the year. However, reflecting on the quarter and the first half of the year, we observed several positive developments that we believe will lead to long-term opportunities for value creation, despite some specific challenges. For instance, in TriMas Packaging, when demand decreased last year, we were tempted to make significant cost cuts. While we adjusted some variable costs, we chose instead to enhance our commercial strategy to foster long-term growth. We invested in a new customer relationship management application and reorganized our commercial model following an 80-20 approach. Although these initiatives are still in their initial stages of integration, we believe these internal changes, alongside a natural market recovery, are now contributing to the strong core growth rates we are seeing in our Packaging group. Given the positive revenue growth foundation, I am very optimistic about TriMas Packaging's potential and confident that we will improve conversion rates moving forward. Next, I would like to highlight our TriMas Aerospace group. Comparing the second quarter of last year to the most recent quarter reveals vastly different dynamics. Last year, in the second quarter, we faced a surge in demand from our aerospace customers, compounded by supply and labor constraints, and several voluntary leadership changes. The broad-based actions and leadership upgrades we implemented over the past year are too numerous to detail in this call, but we have successfully improved TriMas Aerospace's prospects. Assuming no additional shocks in the Aerospace and Defense market, we anticipate exiting 2024 with a conversion rate close to pre-COVID levels, but more importantly, at about 50% higher sales rate. I am also very excited about the long-term prospects for TriMas Aerospace. While we have shared a few positive examples, our Specialty Product segment encountered a different set of market dynamics compared to the same quarter last year, and even since the first quarter of 2024. We had anticipated demand to start recovering in the second quarter, mainly within our Norris Cylinder business. However, total bookings and demand softened further, leading us to lower our sales forecast for Specialty Products in the latter half of the year. The change in volume within our Norris Cylinder business has been the primary negative factor affecting our first half and annual outlook. Both Scott and I will discuss this situation in more detail throughout the call. Given this context, our consolidated sales for the quarter increased by 3.1%, with our Packaging and Aerospace groups rising by 12.5% and 30%, respectively. As noted, our Specialty Products segment saw a sales reduction of approximately 45% driven by previous year overstocking and other factors. Despite Specialty Products representing around 15% of TriMas' overall sales, the significant change had a profound impact on performance this quarter. Now, I would like to address share repurchases for the first half of the year. To date, including actions taken in the second quarter, we have repurchased approximately 672,000 shares, resulting in a net reduction of around 1.3% of shares outstanding. This repurchase rate is higher than last year, and we continue to view reducing shares outstanding as a tax-efficient method of returning long-term value to our shareholders. I would also like to point out that we have substantial room within our share buyback authorization and will prioritize opportunistic repurchases as we evaluate value-dislocating events in the market. Let's now turn to Slide 4. Given the complexities of this quarter, we thought it would be valuable to briefly review sequential quarterly performance, which we believe will provide investors with a clearer understanding of our current situation. Starting with TriMas Packaging, we recorded 3.9% organic growth compared to the first quarter of 2024. We believe customer demand is beginning to return as they replenish pipelines after depleting inventory stocks in key channels last year. Additionally, commercial conditions have significantly improved from last year based on our in-booking rates and new business quoting activity. Conversion rates were essentially similar between the first and second quarters of 2024, though our pull-through rate continues to be affected by off-standard production and expedited freight costs due to high demand on certain product lines. We expect conversion rates to improve as sales increase through the year and into 2025. Regarding our TriMas Aerospace group, compared to the first quarter, we continue to see positive outcomes from the operational and commercial initiatives we've been focused on over the last year. While we still believe there is potential to enhance conversion back to pre-COVID levels, we are now operating at a significantly higher sales rate, which helps grow our overall EBITDA. This improvement reflects the collaboration between the TriMas Aerospace team and our supplier partners, as well as our commitment to operational and commercial excellence. In our Specialty Products segment, compared to the first quarter of the year, revenue decreased by 5.8%. This sales rate is quite low for our Specialty Products group, but we believe we are beginning to emerge from this cyclical demand trough. However, we have moderated our expectations for sales in the second half, particularly for our Norris Cylinder business, given the demand rate experienced in the second quarter. As a result, we have taken additional measures, now implementing deeper structural cost reductions within our Norris Cylinder business to enhance performance even at a lower sales base, which we know is achievable based on our historical performance at similar sales rates. Now, let's move to Slide 5 where I will briefly outline our consolidated results for the quarter. We are reporting sales of $240.5 million, an increase of 3.1% compared to the same quarter last year due to the reasons previously discussed. Adjusted operating profit was $20.8 million, lower than the previous year due to demand challenges in our Specialty Products businesses, as well as certain favorable factors that positively influenced TriMas in the second quarter of 2023 that did not repeat this year. Adjusted EPS was $0.43, falling short of our expectations for this quarter due to the previously mentioned factors and lower compared to the prior year. Adjusted EBITDA was $36.6 million, or 15.2% of sales, which is lower than the prior year, with most of the decrease driven by demand changes and related conversion issues in our Specialty Products businesses. As we've mentioned in previous calls, our balance sheet remains strong, and our low-interest senior notes do not mature until 2029. It's also noteworthy that we generated $11.4 million in free cash flow this quarter, consistent with last year despite a lower absolute EBITDA, as we continuously focus on improving cash flow for TriMas. Finally, we concluded the quarter with a leverage ratio of 2.6 times, slightly higher than the same quarter last year, but in line with the first quarter of 2024. I will now turn the call over to Scott, who will take us through TriMas' segment results.

Thanks, Tom. Let's turn to Slide 6, and I will begin my review of our segment results starting with TriMas Packaging. Net sales in the quarter were $132 million as compared to $117 million for the prior-year quarter, an increase of more than 12%. This year-over-year increase was primarily driven by organic growth for our dispensing and closure products, which served the beauty and personal care and industrial end markets, which increased on an organic basis 24% and 19%, respectively. It is great to see demand recovery in these important end markets. On a sequential quarter-over-quarter basis, net sales increased by approximately 4%. Operating profit for the quarter was $18.5 million, or 14% of sales, which on a margin basis is essentially flat versus Q1 of 2024, but down 470 basis points versus the prior-year period. This year-over-year decline is primarily related to period-specific operating costs associated with increased demand for certain dispensing products, IT allocation costs of $1.1 million, which were accounted for within corporate costs in the prior-year period, and a $2.6 million commercial settlement in Q2 of 2023 which did not repeat. Considering the impact of these items, pro-forma Q2 adjusted operating profit would have been flat when compared to the prior-year period at approximately 15.5%. Adjusted EBITDA was $26.7 million, or 20.2% of net sales, a nominal increase of $500,000 when compared to Q1 of 2024. We remain very pleased with the sales momentum within TriMas Packaging with year-to-date organic sales up close to 10% and expect our conversion rates to improve as we move through the second half of 2024 as we work through operational pinch points created by significantly higher customer orders. Accordingly, we are increasing our full year sales guidance for TriMas Packaging to 9% to 10% and tightening our full year guidance for adjusted EBITDA margin to 21% to 23%. Looking forward, we expect future growth for TriMas Packaging to be driven by continuing improvement in both general consumer and industrial demand, further expansion of our presence in new and emerging geographical markets such as South America, and growth and demand for our innovative new products within all of the end markets we serve. Turning to Slide 7, I will now provide an update on our TriMas Aerospace segment. Net sales for the quarter increased by almost $18 million, or 30% when compared to the same period a year ago, as general aerospace volumes continue to recover and we benefit from improved operational efficiencies and commercial recoveries associated with higher input costs. Acquisitions contributed $1.4 million of sales during the quarter, while organic sales increased by $16.5 million, or 27.6%, when compared to the previous-year period. Operating profit for the quarter was $10.5 million, or 13.5% of net sales, which represents a 730 basis point improvement when compared to the previous-year period and a 290 basis point improvement when compared to Q1 of 2024. Adjusted EBITDA for the quarter was $15 million, or 19.4% of net sales. Expanding a bit on the recent performance improvement for TriMas Aerospace, LTM sales for the second quarter of 2024 were approximately 34% higher than the rate we were at, at the same point in 2023. In addition, LTM sales for TriMas Aerospace are now higher than the pre-COVID period of 2019 when we exclude the impact of post 2019 acquisitions. While we are very pleased with this full demand recovery, we do believe there is incremental margin opportunity within TriMas Aerospace as we continue to invest in manufacturing capacity and see further improvements in supply chain continuity. Accordingly, we are increasing our full year sales growth guidance to 18% to 22% and full year guidance for adjusted EBITDA margin to 18% to 19%. Now on Slide 8, let's review our Specialty Products segment. Net sales were $31 million as compared to $56 million for the prior-year quarter, which was the highest quarterly sales performance ever for Specialty Products. This high demand rate in the first half of 2023 was driven by supply chain concerns, which led to elevated rates of ordering and resulting customer stock builds. Sales in the quarter continued to be negatively impacted, largely by the overstocked position of industrial cylinders and, to a lesser extent, lower sales of compressors serving the oil and gas industry. In addition, sales of cylinders into defense-related applications have been deferred and are now not expected to run at a normalized rate until the start of 2025. While we continue to see some moderate improvement in our order book for steel cylinders and expect second half demand for steel cylinders to improve modestly over the first half run rate, we do not foresee at this point our previously expected second half demand recovery for these industrial businesses, and accordingly, we are revising our guidance for full year sales decline for Specialty Products to 25% to 30%. Operating profit in the quarter was $0.6 million, or 1.9% of net sales, while adjusted EBITDA for the quarter was $1.7 million, or 5.3% of net sales. I would like to mention that during the quarter, our Norris Cylinder business took advantage of the lower demand environment to complete two strategic initiatives which, while critical to driving future operational performance improvement, further burdened profitability during the quarter. First, they completed the process of pivoting to a pull inventory system in response to structural shifts in customer delivery time expectations. Second, they completed significant and necessary repairs and maintenance to key manufacturing assets. We estimate that these two initiatives alone negatively impacted the quarter by $0.06 per share. As mentioned earlier by Tom, given second quarter performance and our tempered view of second half 2024 demand, we have begun to execute additional structural cost reductions within Specialty Products while maintaining the necessary flexibility to respond to anticipated demand recoveries beginning in late 2024 or early 2025. In addition, we have recently engaged with the consultancy firm Strategex to assess and implement strategic growth and profit enhancement opportunities within Norris Cylinder based on the 80/20 Profit & Growth model originally developed by Illinois Tool Works. While we expect these efforts to meaningfully improve our current conversion rates, they will take time to implement and be realized in financial performance, and accordingly, at this time, we are reducing our full year guidance for adjusted EBITDA margin for Specialty Products to 10% to 14%.

Thank you, Scott. Let's turn to Slide 9. Given the results in the second quarter and modified expectations related to our Specialty Products segments for the second half, we are revising our sales and EPS outlook for 2024. We now expect sales to be in the 4% to 6% range, with the center point slightly lower than originally planned. We are also revising our EPS range to $1.70 to $1.90 as compared to $1.95 to $2.15 as we anticipated to begin the year. If we turn our attention to the summary bridge on the right of Slide 9, you can see the discrete drivers of the change in our outlook. We do not show TriMas Packaging on this bridge because we continue to estimate that this group will remain within our internal planning ranges for the year. With respect to TriMas Aerospace, this group is currently trending above our internal planning ranges for the year and we continue to anticipate it will remain on track for the second half. While we now believe higher interest rates will be an undercurrent to our EPS forecast for the year, the main driver to our revised outlook is a different demand and recovery profile for our Specialty Products businesses than we anticipated for 2024. Before moving to Q&A, I'll conclude our prepared remarks by refreshing the near- and long-term value-creating opportunity set for TriMas. First, our two largest operating groups, TriMas Packaging and TriMas Aerospace, which together represent nearly 85% of our LTM sales, are at different stages of performance recovery after a very challenged 2023. We anticipate that the positive momentum of these high-quality business lines will carry into 2025 and well beyond. Next, while our Specialty Products businesses have experienced significant challenges in this period, we have already completed many actions that are not yet financially benefiting the group, but which we expect to do so as we move through 2024 and into 2025. Moreover, as we expect to experience demand reversion, when it occurs, we should convert well in our Specialty Products businesses. Finally, we continue to take steps to focus and improve our portfolio of businesses. We have already announced the planned divestiture of our Arrow Engine business, which would facilitate TriMas' exit of our presence in the oil and gas end market. We also place a priority on building out our TriMas Packaging platform through M&A with a focus on the life sciences, beauty, and food and beverage end markets, and secondarily building out our TriMas Aerospace platform through strategic acquisitions to enhance its long-term value. I would like to again thank our investors for their continued interest and support, and will now turn the call back to Sherry.

Thanks, Tom. At this point, we would like to open the call up for questions.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from Ken Newman with KeyBanc Capital Markets. Please proceed with your question.

Hey, good morning, guys.

Good morning, Ken.

Good morning. So maybe just to start off, I mean, I think one of your investors has been a bit more vocal about trying to advocate for portfolio changes to improve the performance of the overall company. Obviously, the performance at Specialty this quarter was disappointing, but I'm curious if that performance this quarter has changed your way of thinking around what the ultimate portfolio could look like longer term.

Well, thank you for the question. We are very well aware of public statements made by Barrington and their investment in the company and certainly, we appreciate all constructive feedback from all of our investors. I wouldn't say it necessarily changed our thinking strategically related to this quarter specifically. What occurred this quarter has changed our actions and some of the focus that we placed within our Specialty Products businesses. But if you think about Specialty Products generally today one of the businesses in that group is already being marketed for sale and we're working through that process and that'll be one step in focusing our portfolio. But at this moment, our sort of what's moved up in terms of the priority list operationally is ensuring we turn around our Norris Cylinder business, which as I mentioned, we know at this base rate of sales we can perform much better.

Right. Just, I guess, as a clarification question, I think a quarter or two quarters ago you had mentioned this expectation to fold in Norris into the Packaging segment. Is that still your intention, or is that no longer the case, given how dilutive it would be?

Yeah, I would say that's on hold given the developments of Norris Cylinder this quarter.

Yeah. Okay. And then, for my follow-up here, just on Norris Cylinder, I understand the visibility is limited, but I'm just curious what your customers are saying from an inventory perspective. Where are days inventory? And just how do you view the visibility within that channel and get comfortable with the recovery in that market?

It's a good question. We've been focusing on this heavily in recent weeks. While we've seen similar trends across our businesses over the past few years, what's happening at Norris appears to be somewhat unique. Many of our largest customers currently have excess inventory, much of which stems from the buying behaviors in 2023 when it was challenging to source materials and steel goods, a situation also evident in our Aerospace sector. We worked diligently to secure as much raw material as possible. One of our larger customers operates in a government-related channel, and we believe their spending allocations may be delayed due to the election and other factors. We anticipate that demand will eventually return, but it may not materialize until later this year or into next year. We expect the demand to normalize. Another significant customer has been exploring different price point products; while they may not be completely overstocked, we are aiming to regain more market share with them. Given the nature of our long-term relationship, shifts in share for our Norris Cylinder business often relate to market pricing, reminiscent of trends observed in the chemical industry.

Understood. If you don't mind, maybe I could just squeeze one last one in here on Packaging.

Yes, please.

Obviously, the growth in the order rates sounds pretty positive here. Maybe if you could just help us think about, you've got a tough comp this next quarter and then maybe a seasonally easier quarter in the fourth quarter. Just help us think about the cadence there? And then longer term, how do you think about the longer-term EBIT margin potential for that segment, given all the moving pieces?

I'll address the second part of your question, and then Scott will cover the quarterly comparisons. We recognize that our current conversion rate is not reflecting our true potential, and we understand the underlying reasons. Notably, similar to trends observed in aerospace, we have certain areas in our Packaging business that are experiencing heightened demand from key customers exceeding our capacity. This leads to overtime and expedited freight, resulting in various off-standard costs affecting our operations. We anticipated this situation, and by the end of the year, we expect additional capacity to alleviate this pressure, likely allowing us to enhance our performance as we head into 2025 and the years following. When I review our business and potential, I see that in the near term, especially through 2025, we are operating at least 200 basis points below our optimal potential. Scott, feel free to address any quarterly inquiries.

Yeah, Ken, hi. Was that question on Aerospace or Packaging? I was...

Packaging.

Yeah. Look, I think we expect to see similar quarterly year-over-year growth for the second half of the year. I mean, if you look at the guidance for the full year, you can kind of back into what we're anticipating for the second half of the year. It's going to be in that same range, around 10% year-over-year sales growth is what we're anticipating for the second half of the year.

Yeah, that's helpful. I appreciate it.

Okay. Thank you, Ken.

Hi, good morning. So, the first question I have was related to Packaging. You guys last year emphasized capacity being taken off. Now you're saying that you're hitting capacity bottlenecks and issues. So, why did that happen? What's different from what you did last year to what's being ordered this year? And why are you now talking about bringing on capacity? It just seems like everything's going around.

That's a good question, Hamed. We did not reduce capacity last year; instead, we repositioned it. Specifically, the operational changes you mentioned were made in a low-demand market to concentrate our physical assets for our caps and closure product line. This situation is different from what we are facing now, as we are currently seeing bottlenecks in our dispenser product line. For most of 2023, we experienced a significant drop in demand for dispensers, mainly due to overstock situations, but now that demand is returning strongly, we are encountering these pinch points. Last year, we discussed the movement of assets when we closed a plant in California and shifted those resources to the Midwest for the closure product line, which involves different products.

That's helpful. Regarding the guidance for Packaging and its alignment with what has been reported, it seems that second half revenue or sales could be slightly lower compared to first half sales. I'm trying to understand the seasonality involved and why this doesn't align with the positive commentary about the performance in Packaging.

Yeah, I think that's primarily related just naturally to the cyclicality of our business, specifically as it relates to the fourth quarter of the year. We tend to see a bit lower order pattern as we get toward the holiday season. But back to my point to Ken, we still expect the second half of the year on a year-over-year basis to be up relative to the prior year. So nothing surprising there other than just the natural order pattern cyclicality of our business.

Got it. And my last question is on Aerospace. What's your exposure, if anything, to what's going on with Boeing and Airbus, and anything about inventory and production lines being delayed?

Both Boeing and Airbus are significant customers for us, both directly and through Tier 1 suppliers. Consequently, our performance is closely linked to their success. Regarding this year's announcements, we don't anticipate a substantial impact on our business because we are already booked for next year and are still managing our backlog. Therefore, our production schedule is unlikely to change significantly as we plan for the remainder of the year.

Great. I appreciate it. Thank you.

Thank you, Hamed.

It appears there are no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Okay, operator, is it turn back to us?

Yes, it appears that there are no further questions at this time.

Okay, great. Thank you for joining us on our earnings call. We look forward to updating you again next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.