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LH

LUXFER HOLDINGS PLC (LXFR)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 delivered sequential profitability improvement: Adjusted EBITDA rose to $10.5M (12.6% margin) and Adjusted EPS to $0.20, driven by Elektron margin recovery, cost efficiencies, and lower legal costs .
  • Revenue headwinds persisted YoY: GAAP net sales fell to $89.4M (-11.7% YoY) and adjusted net sales to $83.1M (-11.5% YoY), reflecting volume/mix pressure partially offset by pricing and FX .
  • Guidance raised: FY2024 Adjusted EBITDA to $44–$48M, Adjusted EPS to $0.75–$0.90, and Free Cash Flow to $21–$25M, supported by Q1 outperformance and $1.3M legal fee recovery in early Q2 .
  • Catalysts: Segment margin trajectory (Elektron rebound; Gas Cylinders SCBA contract pricing), alternative fuels momentum (CNG demand; hydrogen bulk gas modules), and the strategic review including the Graphic Arts sale by year-end .

What Went Well and What Went Wrong

  • What Went Well

    • Elektron profitability inflected: Adjusted EBITDA margin expanded to 17.0% from 4.4% in Q4 2023, driven by FRH volume/mix, manufacturing efficiencies, and lower legal expense; CEO: “a significant improvement over the last quarter of 2023, driven primarily by enhanced profitability in our Elektron segment” .
    • Gas Cylinders margin improvement: Gross margin +450 bps YoY to 17.0% and Adjusted EBITDA margin +300 bps to 9.0% on SCBA contract pricing and demand .
    • Cash generation and leverage: Cash from operations $3.6M and FCF $2.2M; net debt $71.6M with 1.7x net debt/Adj. EBITDA (ex-Graphic Arts) .

  • What Went Wrong

    • Top-line softness: GAAP net sales declined 11.7% YoY to $89.4M (volume/mix -$14.3M), with adjusted net sales down 11.5% to $83.1M .
    • Elektron YoY pressure: Segment net sales -28.1% to $37.7M; gross margin -140 bps YoY; Adjusted EBITDA -32.6% YoY .
    • General industrial headwinds persisted (broader macro softness and customer destocking) impacting volume and mix, particularly in military flare powders and auto catalysis materials .

Financial Results

  • Consolidated YoY Comparison (Q1 2024 vs Q1 2023)
MetricQ1 2023Q1 2024YoY Change
GAAP Net Sales ($USD Millions)$101.3 $89.4 -11.7%
Adjusted Net Sales ($USD Millions)$93.9 $83.1 -11.5%
GAAP Gross Profit ($USD Millions)$21.1 $18.4 -12.8%
Adjusted Gross Profit ($USD Millions)$20.9 $18.5 -11.5%
Adjusted Gross Margin (%)22.3% 22.3% flat
GAAP Net Income ($USD Millions)$0.5 $2.8 +460%
Adjusted EBITDA ($USD Millions)$12.0 $10.5 -12.5%
GAAP Diluted EPS ($)$0.02 $0.10 +400%
Adjusted Diluted EPS ($)$0.24 $0.20 -16.7%
  • Sequential Trend (Q3 2023 → Q4 2023 → Q1 2024)
MetricQ3 2023Q4 2023Q1 2024
Net Sales ($USD Millions)$97.4 $87.8 (Adjusted) $83.1 (Adjusted)
Adjusted EBITDA ($USD Millions)$6.0 $8.1 $10.5
Adjusted EBITDA Margin (%)—9.1% 12.6%
Adjusted Diluted EPS ($)$0.04 $0.13 $0.20
  • Segment Breakdown (Q1 2024 vs Q1 2023; amounts in $USD Millions)
SegmentMetricQ1 2023Q1 2024
Gas CylindersNet Sales$41.5 $45.4
Gas CylindersGross Profit$5.2 $7.7
Gas CylindersGross Margin (%)12.5% 17.0%
Gas CylindersAdjusted EBITDA$2.5 $4.1
Gas CylindersAdjusted EBITDA Margin (%)6.0% 9.0%
ElektronNet Sales$52.4 $37.7
ElektronGross Profit$15.7 $10.8
ElektronGross Margin (%)30.0% 28.6%
ElektronAdjusted EBITDA$9.5 $6.4
ElektronAdjusted EBITDA Margin (%)18.1% 17.0%
  • KPIs and Balance Sheet
KPIQ1 2024
Cash from Operations ($USD Millions)$3.6
Free Cash Flow ($USD Millions)$2.2
Net Debt ($USD Millions)$71.6
Net Debt / Adjusted EBITDA (ex-Graphic Arts) (x)1.7x
Share Repurchases (Shares / $USD)50,000 / ~$0.44M
Dividends Paid ($USD Millions)$3.5

Notes: Adjusted results exclude the Graphic Arts business per strategic review; see reconciliation tables in the 8-K .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Millions)FY2024$42–$46 $44–$48 Raised
Adjusted EPS ($)FY2024$0.70–$0.85 $0.75–$0.90 Raised
Free Cash Flow ($USD Millions)FY2024$20–$24 $21–$25 Raised

Drivers: Better-than-expected Q1 margin improvement and insurance recovery of ~$1.3M of historical legal fees early in Q2 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023)Previous Mentions (Q4 2023)Current Period (Q1 2024)Trend
Elektron margins and FRH demandMacro headwinds; legal costs elevated; FRH/defense supportive Elektron weak in Q4; expected recovery in 1H24 Sequential margin rebound; FRH award “at normal levels” drove mix gains Improving
Gas Cylinders SCBA contractsPricing actions building; productivity issues early-Q3 resolved New multiyear SCBA agreements; margin restoration Margins improved; continued demand in SCBA and medical cylinders Stable to improving
Alternative fuels (CNG)Footprint optimization; CNG outlook positive Facility build in Nottingham; long-term revenue capacity Type 4 CNG cylinders sales ~doubled to ~$8M; Cummins X15 CNG engine tailwind Improving
Hydrogen bulk gas modulesEarly-stage; regulatory tailwinds noted Nottingham facility construction underway First sales expected later 2024; potential rapid growth in 2025 Building
Legal fees and insuranceElevated legal costs impacting results Insurer confirmed coverage; forward elimination of ~$5M annual legal costs ~$1.3M recovery received early Q2; Q1 lower legal expense aided margins Improving
Strategic review & Graphic Arts divestitureAccelerated review; optionality explored Decision to sell Graphic Arts; held-for-sale classification Sale process underway with XMS; target close by year-end Advancing
Magnesium supply/pricingSupply disruption; higher-cost inputs; alternative sources qualified Additional source qualified; easing outside U.S.; cost relief expected Inventory cycling supports margin; demand recovery in flare powders Improving outside U.S.

Management Commentary

  • “Sales came in at $83.1 million… we achieved an adjusted EBITDA of $10.5 million and… adjusted earnings per share of $0.20… driven primarily by enhanced profitability in our Elektron segment.” — CEO Andy Butcher
  • “Our adjusted EBITDA margin… only slightly down from last year's 12.8% and confirming our prior projections of a Q1 rebound.” — CFO Steve Webster
  • “We… expect that we'll make the first sales from our Nottingham U.K. facility later this year, with the opportunity then for a rapid growth in 2025.” — CEO Andy Butcher (hydrogen bulk gas modules)
  • “Sales of our lightweight high capacity Type 4 cylinders doubled to almost $8 million in the quarter… upcoming tailwinds from the new X15 Cummins CNG engine.” — CEO Andy Butcher
  • “We have received an initial insurance recovery payment recouping approximately $1.3 million of our historical legal costs.” — CEO Andy Butcher

Q&A Highlights

  • Elektron margin drivers: Three buckets—volume/mix (FRH), manufacturing efficiencies/cost savings, and significantly lower legal costs—each roughly one-third of improvement .
  • Guidance sustainability: Management “cautiously optimistic” and raised FY guidance on improved performance and legal fee recovery; hesitancy to raise further given macro uncertainty .
  • Alternative fuels detail: First hydrogen bulk gas module sales expected later 2024; North American CNG demand strong, Type 4 cylinder sales ~doubled to ~$8M; Cummins X15 engine expected to add momentum through 2025 .

Estimates Context

  • Street consensus (S&P Global) comparisons were unavailable at the time of this analysis due to data access limits; therefore, beat/miss versus consensus cannot be determined. Management raised FY2024 guidance for Adjusted EBITDA, Adjusted EPS, and Free Cash Flow, which typically supports upward estimate revisions .
  • Note: Consensus estimates via S&P Global were unavailable at the time of request; comparisons not shown.

Key Takeaways for Investors

  • Sequential margin recovery is real and broad-based: Elektron margins sharply improved on better mix (FRH), efficiencies, and lower legal costs; Gas Cylinders margins strengthened on SCBA pricing and demand .
  • Guidance raise de-risks the year: FY2024 Adjusted EBITDA ($44–$48M), EPS ($0.75–$0.90), and FCF ($21–$25M) reflect stronger Q1 execution and insurance recovery; watch for continued margin expansion as magnesium cost tailwinds flow through inventory .
  • Alternative fuels is a visible growth vector: Near-term CNG demand acceleration and later-2024 hydrogen module revenue onset create optionality into 2025; track Nottingham facility ramp and Cummins X15 adoption .
  • Strategic review as a value unlock: Sale of Graphic Arts by year-end simplifies portfolio and focuses capital on higher-return segments; monitor timing and proceeds .
  • Cash discipline and balance sheet provide resilience: Positive FCF, low leverage (1.7x net debt/Adj. EBITDA ex-Graphic Arts), and ongoing capital returns (dividends, buybacks) support downside protection .
  • Near-term trading: Stock narrative likely pivots to margin durability and alternative fuels traction; any confirmation of hydrogen module orders or sustained FRH demand could be catalysts .
  • Medium-term thesis: Portfolio focus plus operational self-help and end-market tailwinds (defense/first response, CNG/hydrogen) support a return to sustainable earnings growth, with optionality to further restructure if strategic synergies remain limited .

Appendix: Non-GAAP/Adjustments

  • All “Adjusted” metrics exclude the Graphic Arts business; reconciliations provided in the 8-K press release .
  • Management notes inability to reconcile forward non-GAAP guidance to GAAP due to potential extraordinary items .