Horizon Global (NYSE:HZN) reported its first-quarter results on May 3. The provider of branded towing and trailering equipment had already warned investors that it was going through tough times but promised that it would take action to fix its problems. Let's dig into the company's results to see if those actions are starting to pay off.
Horizon Global Q1: The raw results
|Metric||Q1 2018||Q1 2017||Year-Over-Year Change|
|Revenue||$216.8 million||$203.2 million||6.6%|
|Adjusted operating profit||($2.9 million)||$3.6 million||N/A|
|Adjusted net income||($8.1 million)||($4.0 million)||N/A|
|Adjusted earnings per share||($0.32)||($0.17)||N/A|
What happened this quarter?
- Sales growth of nearly 7% sounds quite good until you learn that it was mostly driven by foreign exchange movements. On a currency-neutral basis, revenue was basically flat year over year.
- Sales in the Americas continue to struggle and fell 1.6% to $96.2 million.
- Horizon's divisions in Europe and Africa reported sales growth of 11%, but that was mostly due to currency fluctuations.
- Management decided to record a non-cash goodwill impairment charge of $43.4 million related to its Europe-Africa segment.
- Sales in Asia-Pacific grew 25% to $33.5 million. However, this big uptick was mostly credited to an acquisition.
- Margins declined across the board because of higher input costs.
- Cash used in operations in the first quarter was $30.2 million.
What management had to say
CEO Mark Zeffiro did his best to remain positive, stating that "Our consolidated results for the first quarter were consistent with our expectations." He also reaffirmed that the company is focused on implementing its recently announced action plan to get itself back on track: "We continue to advance our action plan and are focused on implementing our initiatives with a sense of urgency as we head into the important second and third quarters."
The action plan calls for $3 million to $5 million in cost savings this year and $10 million to $12 million in future years. Getting there will require plant consolidation, workforce reductions, distribution center consolidation, and increased production in low-cost countries.
Zeffiro stated that the company remains "on track" to deliver on its guidance that was laid out during its last earnings call. That guidance calls for revenue growth in 2018 to land between 3% and 5%. Adjusted operating profits and adjusted earnings per share are both expected to grow faster than revenue when adjusting for currency movements.
With the company's financial statements mostly heading in the wrong direction, Zeffiro ended his prepared remarks on the company's conference call with analysts by reminding investors that management is committed to turning the ship around:
We understand the challenges in the business and we're working our action plan to continue the growth path the company has been on for the past couple of years. We are staying focused on delivering near-term results that are measurable and that will position the company to meet its 2018 financial goals. While there is more work to do, we look forward to making progress and sharing our future results as we continue to deliver long-term shareholder value.