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HI

Hillenbrand, Inc. (HI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered better-than-expected top and bottom line on an adjusted basis: Revenue $715.9M (-9% y/y) and adjusted EPS $0.60 (-21% y/y) beat S&P Global consensus of $691.0M revenue and $0.538 EPS, driven by stable aftermarket and resilience in MTS; GAAP EPS was $(0.58), reflecting a divestiture loss on Milacron . Consensus figures marked with an asterisk are from S&P Global and lack document citations; see note below.*
  • Management cut FY25 guidance to reflect tariff headwinds and softer orders: adj. EPS to $2.10–$2.45 (from $2.45–$2.80 prior), adj. EBITDA to $363–$395M (from $411–$447M), and revenue to $2.555–$2.620B (from $2.625–$2.790B); Q3 guide set at revenue $569–$583M and adj. EPS $0.46–$0.53 .
  • Tariffs are the near-term overhang: company embeds ~$15M EBITDA headwind for the remainder of FY25 and cites customer pauses on large capital projects; focus is on mitigation (dual sourcing, surcharge pricing, re-shoring “in-region-for-region”) .
  • Balance sheet optionality improving: net debt fell to $1.458B and leverage held at 3.4x in Q2; TerraSource sale expected to provide ~$100M after-tax proceeds and reduce leverage by ~0.2x upon closing (late Q3/early Q4) .
  • Potential stock reaction catalysts: tariff clarity and order inflection (particularly APS large systems), deleveraging upon TerraSource close, and FHN (Food/Health/Nutrition) solution wins sustaining mix/margin quality .

Note: Asterisked estimate values are from S&P Global; see “Estimates Context.” Values retrieved from S&P Global.*

What Went Well and What Went Wrong

  • What Went Well

    • Beat on revenue and adjusted EPS: $715.9M vs $691.0M consensus* and $0.60 vs $0.538*; management said results were “ahead of expectations” and cited favorable interest and corporate items . Values retrieved from S&P Global.*
    • FHN and separation saw y/y order growth; APS aftermarket held stable, and MTS remained relatively steady, underscoring portfolio resilience in a volatile macro .
    • Portfolio actions support focus and deleveraging: closed majority sale of Milacron (net proceeds $265M) and signed deal to sell TerraSource ($100M to HI; ~0.2x leverage reduction) .

  • What Went Wrong

    • APS volume weakness weighed on growth and profitability: consolidated adjusted EBITDA fell 19% y/y to $98.8M; APS revenue -12% y/y and APS adj. EBITDA -22% y/y on operating deleverage and inflation .
    • Guidance reduced across revenue, adj. EBITDA, and adj. EPS to reflect tariff headwinds and softer orders; management assumes order levels do not improve in H2 and could decline further .
    • Macro/tariffs creating customer delays: management referenced paused large FHN and polymer orders tied to tariff considerations (e.g., US–Canada and China dynamics) and a “hard pause” in China in MTS hot runners .

Financial Results

Overall P&L — sequential and y/y trend

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$837.6 $706.9 $715.9
GAAP Diluted EPS ($)$0.17 $0.09 $(0.58)
Adjusted Diluted EPS ($)$1.01 $0.56 $0.60
Adjusted EBITDA ($USD Millions)$143.8 $97.1 $98.8

Actual vs S&P Global Consensus — Q2 and Q3 setup

MetricQ2 2025 ConsensusQ2 2025 ActualSurpriseQ3 2025 Company GuidanceQ3 2025 Consensus
Revenue ($USD Millions)$691.0*$715.9 +$24.9 (+3.6%)*$569–$583 $572.5*
Adjusted EPS ($)$0.538*$0.60 +$0.062 (+11.5%)*$0.46–$0.53 $0.495*

Note: Asterisked estimate values are from S&P Global; values retrieved from S&P Global.*

Segment performance

SegmentMetricQ4 2024Q1 2025Q2 2025
APSRevenue ($M)$591.1 $511.1 $494.0
APSAdjusted EBITDA ($M)$117.1 $82.8 $78.9
APSAdjusted EBITDA Margin (%)19.8% 16.2% 16.0%
MTSRevenue ($M)$246.5 $195.8 $221.9
MTSAdjusted EBITDA ($M)$42.0 $27.4 $32.2
MTSAdjusted EBITDA Margin (%)17.0% 14.0% 14.5%

KPIs and balance sheet

KPIQ4 2024Q1 2025Q2 2025
APS Backlog ($M)$1,681.4 ~$1,580.0 $1,594.9
MTS Backlog ($M)$231.1 ~$233.0 $54.7 (post-Milacron)
MTS Organic Backlog ($M)——$56.6
Net Debt ($M)$1,693.7 $1,697.9 $1,458.3
Net Leverage (x)3.3x 3.4x 3.4x
Liquidity ($M)~$799 ~$632 ~$770
Cash From Ops ($M, quarterly)$166.5 $(11.3) $1.3

Additional notes:

  • Q2 consolidated adjusted EBITDA margin was 13.8% (operating deleverage on lower volume) .
  • Q2 operating cash flow reflected typical seasonality and inventory/customer advance dynamics .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY2025$2.625–$2.790 $2.555–$2.620 Lowered
Adjusted EBITDA ($M)FY2025$411–$447 $363–$395 Lowered
Adjusted EPS ($)FY2025$2.45–$2.80 $2.10–$2.45 Lowered
Free Cash Flow ($M)FY2025~105 ~80 (implied by CFO) Lowered
Operating Cash Flow ($M)FY2025—~120 —
CapEx ($M)FY2025—~40 —
APS Margin (%)FY202518.0–18.5 17.0–17.5 Lowered
MTS Margin (%)FY202517.0–18.0 13.6–15.5 Lowered
APS Revenue ($B)FY2025$2.050–$2.175 $1.980–$2.030 Lowered
MTS Revenue ($M)FY2025$575–$615 $575–$614 Slightly Lowered (upper bound)
Q3 Revenue ($M)Q3 2025—$569–$583 —
Q3 Adjusted EPS ($)Q3 2025—$0.46–$0.53 —

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Tariffs/MacroCautious outlook; guidance did not assume material tariff impact; monitoring FX and macro .Tariffs escalated; ~$15M direct EBITDA headwind embedded; customers pausing large capex; assuming no H2 order improvement .Worsening
Supply ChainCost savings, working capital discipline .“In-region-for-region,” dual sourcing, surcharge pricing, contract terms to mitigate tariffs .Accelerated mitigation
Product Performance (FHN, Separation)Integration momentum; cross-selling synergies .Y/y order growth in FHN and separation; APS aftermarket stable .Improving in select areas
Regional Trends (China/India)—China hot runner orders “hard pause”; quotes shifting to India; early “in-country-for-country” orders in China .Mixed; China weaker, India opportunity
PricingMTS pricing pressure persisted .Targeted surcharges; stronger pricing power in APS; MTS remains competitive .Stable to slightly better in APS
Portfolio/DeleveragingFY24 net leverage 3.3x; FY25 priority to delever .Milacron proceeds ($265M), TerraSource ($100M) reducing leverage ~0.2x; leverage to hold ~3.4x near-term .Progressing but challenged by macro

Management Commentary

  • CEO on macro and execution: “Global macroeconomic conditions worsened as uncertainty around tariffs escalated… We experienced solid year-over-year order growth in our food, health, and nutrition portfolio… [but] customers [will] remain cautious… prompting us to adjust our outlook… [We’re] executing strategies to… mitigate increased costs, including surcharge pricing, alternative sourcing, and shifting production” .
  • CEO on portfolio strategy: “The completion of this divestiture now allows Hillenbrand to focus on our core strength of highly engineered… processing technologies… serving… less cyclical… end markets” .
  • CFO on profitability/adjusted margin: “Adjusted EBITDA of $99M decreased 19%… We delivered consolidated adjusted EBITDA margin of 13.8%, a decrease of 180 bps largely due to lower volume” .
  • CFO on deleveraging: “Net debt… was $1.46B and net debt to pro forma adjusted EBITDA 3.4x… TerraSource… expected net proceeds to Hillenbrand of approximately $100M… favorable impact to net leverage of roughly 0.2x” .

Q&A Highlights

  • Order cadence and tariffs: Orders held through February, then larger deals paused due to tariff considerations (not lost, but delayed), including FHN and polymer projects; some “in-country-for-country” China orders emerging post-quarter .
  • China-to-India shift: Multinationals paused China hot runner orders; rising quotes for India as alternative production hub .
  • Tariff mitigation levers: Near-term impact led by dual sourcing; targeted surcharges where pricing power exists; centralized pricing desk to respond to market/cost dynamics .
  • TerraSource cash flow mechanics: ~$34M note receivable + ~46% share of net proceeds after debt paydown → ~$100M to HI; closing targeted late Q3/early Q4; all proceeds to debt reduction .
  • Macro assumption in guide: Planning for “mild recession” scenario with order declines vs 2024; tight cost control and capex prioritization .

Estimates Context

  • Q2 beat vs S&P Global: Revenue $715.9M vs $691.0M*; adjusted EPS $0.60 vs $0.538*; indicative of better-than-feared operating execution despite APS volume pressure . Values retrieved from S&P Global.*
  • Q3 setup: Company guides revenue $569–$583M and adjusted EPS $0.46–$0.53 vs S&P Global consensus $572.5M* and $0.495* near midpoints, suggesting broadly in-line expectations with tariff headwinds embedded . Values retrieved from S&P Global.*
  • FY25 estimate implications: Lowered company guide (adj. EPS to $2.10–$2.45) likely requires downward revisions where sell-side models were anchored closer to prior $2.45–$2.80 range . Values retrieved from S&P Global.*

Note: Asterisked estimate values are from S&P Global; values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term: Adjusted EPS and revenue beats suggest resilient execution, but tariff uncertainty and APS order softness cap multiple expansion; trading likely to key off incoming order commentary and tariff headlines .
  • Medium-term thesis: Portfolio now more aligned to less-cyclical, higher-margin end markets (FHN, separation); expect better conversion when macro/tariff clarity returns .
  • Watch backlog/order inflection: APS backlog sequentially stable and still sizable ($1.595B), but y/y lower; a turn in large systems order intake is the pivotal signal for FY26 trajectory .
  • Deleveraging catalyst: TerraSource proceeds (~$100M) and reduced net debt provide flexibility; any additional portfolio moves could accelerate path back to guardrails .
  • Pricing/mix: APS contract structures and surcharge pricing can offset cost/tariff pressures; MTS pricing remains competitive but could benefit from demand recovery and regional re-sourcing .
  • Guidance realism: Management embedding ~$15M EBITDA tariff hit and assuming no H2 order improvement; sets a bar that could be beat if macro stabilizes sooner .
  • Risk skew: Tariff escalation, China exposure in MTS, and broader macro softness remain the core risks; mitigation is active but not immediate .