LUXFER HOLDINGS PLC (LXFR)·Q2 2024 Earnings Summary

Executive Summary

• Sequentially better quarter with adjusted net sales $91.8M (+10.5% QoQ; -9.6% YoY), adjusted EBITDA $17.3M (18.8% margin), and adjusted diluted EPS $0.39; GAAP diluted EPS was $(0.01) .
• Guidance raised to reflect $5.1M legal expense recovery: FY24 adjusted EBITDA $47–$50M, adjusted EPS $0.90–$1.00, FCF $24–$27M (excludes Graphic Arts) .
• Cylinder strength (SCBA, medical) and early defense recovery offset softness in general industrial and hydrogen alternative fuels; operating cash flow $8.9M, FCF $6.2M, net debt $69.9M (~1.6x) .
• Strategic review progressing: working with an exclusive buyer for Graphic Arts, targeting Q3 close; price likely slightly lower than prior expectations given 2023 losses, approaching breakeven now .
• Stock reaction catalysts: guidance raise tied to legal recovery; tangible 2025 growth drivers in CNG (Cummins X15N), bulk gas modules (U.K. facility, $40M capacity) with initial 2024 sales planned .

What Went Well and What Went Wrong

• What Went Well

  • Sequential improvement across sales, profitability, and cash flow: “We achieved sequential improvement in sales, 2 consecutive quarters of sequential profitability and… delivered solid cash flow” .
  • Gas Cylinders resilience: SCBA and medical cylinders drove YoY sales growth (+2.7%) and sequential EBITDA improvement (+19.5%); margin profile stabilizing under long-term contracts .
  • Legal cost recovery exceeded expectations ($5.1M), adding ~$0.15 to EPS and lifting FY24 guidance .

• What Went Wrong

  • General industrial demand and hydrogen alternative fuel transportation remained soft; Elektron margin excluding legal recovery (~17.4%) below prior-year (~20%) on lower volumes/mix .
  • Consolidated YoY declines: adjusted net sales -9.6% and adjusted gross profit -12.0% versus Q2 2023 .
  • Q2 GAAP diluted EPS was a slight loss ($(0.01)) on acquisition/disposal charges and tax; EBIT benefitted from other income (legal recovery) .

Financial Results

Notes:

• Q2 2024 YoY comps: Adjusted net sales -9.6%, Adjusted EBITDA +20.1%, Adjusted diluted EPS +34.5% (to $0.39) .
• Q2 2024 ex-legal: Adjusted EBITDA $13.4M; Adjusted diluted EPS $0.24 .
• S&P Global consensus for Q2 2024 was not retrievable at this time due to provider limits; estimate comparisons are therefore unavailable.

Segment performance

KPIs and balance sheet

Guidance Changes

Drivers: higher-than-anticipated legal cost recovery ($5.1M) and sequential operational improvement; guidance excludes Graphic Arts .

Earnings Call Themes & Trends

Management Commentary

• “We achieved sequential improvement in sales, 2 consecutive quarters of sequential profitability and… delivered solid cash flow throughout the first half of 2024” (CEO) .
• “Adjusted EBITDA… reached $17.3 million with margin at 18.8%… adjusted EPS rose to $0.39… [with] approximately $0.15 per share” contribution from legal cost recovery (CFO) .
• On 2025 growth drivers: “Deploy[ing] our high-pressure tank technology with a market-leading global engine manufacturer… expected to drive significant growth… beginning early in 2025” and first bulk gas modules in 2024 with $40M capacity (CEO) .
• Guidance philosophy: “We have raised our financial guidance to reflect the recent recovery of historical legal costs… adjusted EBITDA $47–$50M, adjusted diluted EPS $0.90–$1.00” (CFO) .

Q&A Highlights

• Guidance dynamics: After excluding legal recovery, EPS high end eased slightly; management emphasized H1 execution uplift and legal recovery driving midpoint +$0.125 vs initial guide .
• CNG engine ramp: Cummins X15N expected to drive notable 2025 demand; ~$6M YTD cylinder sales uplift vs 2023, with potential Q4’24 upside if early adoption accelerates .
• Bulk gas modules: U.K. facility built; first modules in 2024 and first sale targeted late 2024; meaningful 2025 contributor; capacity ~$40M .
• Graphic Arts sale: Exclusive buyer; targeting Q3 close; valuation adjusted lower given 2023 losses and Q1’24 weakness, though nearing breakeven now .

Estimates Context

• We attempted to retrieve S&P Global consensus for Q2 2024 (revenue, EPS) but were rate-limited; therefore, estimate comparisons are unavailable at this time. We will update vs-consensus on request once access is restored.

Key Takeaways for Investors

• Sequential momentum is clear: adjusted net sales +10.5% QoQ and EBITDA margin expanded to 18.8%, supported by SCBA strength and Elektron efficiency gains .
• FY24 guidance raised on legal recovery; underlying demand still mixed, but 2H setup benefits from defense/SCBA and potential CNG pre-buys .
• 2025 visibility improving via CNG (Cummins X15N) and bulk gas modules (initial 2024 sales; $40M capacity), offering credible top-line optionality beyond current macro .
• Non-GAAP adjustments matter: ex-legal Q2 EBITDA/EPS were $13.4M/$0.24, underscoring that end-market demand normalization remains an important lever for further margin expansion .
• Balance sheet/liquidity position remains supportive for investment and returns: net debt ~$70M, leverage ~1.6x; continued dividends ($0.13) and modest buybacks .
• Near-term catalysts: formal Graphic Arts sale announcement/close, incremental legal recoveries, early orders for bulk gas modules or CNG systems .
• Watch risks: general industrial softness and hydrogen AFV demand remain headwinds; Elektron margin ex-legal below prior-year; tax rate ~24% on adjusted basis .

Appendix: Additional Q2 Press Releases

• Dividend: $0.13 per share declared; payable August 7, 2024 to holders of record July 19, 2024 .