When most investors think of conglomerates, they think of giants of industry, with hundreds of billions of dollars in revenue and names known the whole world around. Yet even some tiny companies have multiple businesses that seem only loosely related. Jason Industries (NASDAQ:JASN) is just such a name, with a market cap of just $165 million but a diverse set of segments that include seating products, perforated metal, and acoustical padding. Coming into Tuesday morning's first-quarter earnings report, Jason Industries investors had seen the stock lose about a quarter of its value since the beginning of the year, raising worries about the company's potential growth. Jason's results, though, gave at least some assurance that the conglomerate is headed in the right direction. Let's look more closely at how Jason Industries did and what's ahead for the company in the future.
Jason Industries sees mixed success
The first-quarter results for Jason Industries were somewhat mixed. Revenue of $175.8 million was down 5.7% from the year-ago quarter, with the company citing negative pressure from foreign currency impacts and a measurable drop in sales of smart meters in its Components segment. Jason lost money on a GAAP basis, but after accounting for restructuring and transaction costs, adjusted net income of $2 million worked out to earnings of $0.07 per share, a penny better than most of those following the stock had expected.
Taking a closer look at Jason Industries, the company's major segments all saw declines in sales, but by widely disparate amounts. The seating segment, which produces seats for motorcycles, all-terrain vehicles, and lawn equipment, only saw a 2.5% drop in sales. Acoustics, which produces products to muffle noise in automobiles, had sales decline about 4%. But the Finishing and Components segments both experienced larger sales declines of 8% and 10% respectively. Foreign-currency issues had a major downward impact on all three of Jason's largest businesses, while the Components division took a big hit as its smart-meter customers chose to produce components in-house.
On an operating earnings basis, though, the picture looks a lot different. The Finishing and Acoustics segments both posted double-digit percentage organic growth in adjusted EBITDA, and even substantial negative currency impacts didn't pull the overall numbers into negative territory. Only the Components segment saw even worse declines of 21% in operating income, again with the loss of substantial amounts of smart-meter activity weighing on the business.
CEO David Westgate pointed to the company's bottom-line success. "Market share gains and operational execution drove adjusted EBITDA margin expansion year-over-year in Finishing, Acoustics, and Seating," Westgate said. In addition, the company's efforts to cut costs helped Jason avoid seeing an even larger impact from less favorable economic conditions.
What's ahead for Jason Industries?
Despite Westgate's optimism, Jason decided to reduce its guidance for 2015. The company now expects sales of $685 million to $700 million, down by $25 million from its previous revenue range. Adjusted EBITDA of $84 million to $88 million falls at the lower end of the range that Jason gave to investors earlier, and even after accounting for the impact of the strong dollar, Jason believes that currency-neutral revenue growth will only amount to 2% to 4%.
One big thing in Jason's favor, though, is that it has attracted the attention of some well-known investors. Well-known money manager Mario Gabelli recently boosted his position in the conglomerate and now owns more than 8% of the company's outstanding shares. Even with that revelation, though, Jason shares haven't soared back toward their levels from the beginning of the year.
Jason Industries shares performed reasonably well in the aftermath of the report, rising more than 1% for the day following the announcement. In the long run, though, Jason needs to demonstrate its ability to keep taking advantage of its corporate culture of sharing best practices in order to get the most out of all of its component businesses and maximize overall profits for the benefit of all.