Park-Ohio - Earnings Call - Q4 2024

Executive Summary

• PKOH delivered steady Q4 results: net sales of $388.4M (flat YoY), GAAP diluted EPS from continuing ops of $0.41 (down YoY on non-recurring items), and adjusted EPS of $0.67 (+24% YoY). EBITDA, as defined, rose 27% YoY to $37.0M (9.5% margin).
• Mix and execution drove outperformance at Supply Technologies, while Engineered Products improved on an adjusted basis; Assembly Components was pressured by OEM plant shutdowns and legacy program pricing. A $5.0M litigation charge and restructuring were called out as non-recurring items in Q4.
• 2025 outlook: revenue growth of 2%–4% with YoY improvement in adjusted operating income, adjusted net income, EBITDA, and free cash flow; management guided to a 21%–23% tax rate and ~14.7M fully diluted shares on higher share count post-ATM issuance.
• Liquidity improved to $198.2M; net debt leverage fell to 3.8x (from 4.4x). New equipment backlog stood at $145M (vs $162M) and bookings were $164M (vs $175M) at year-end. Dividend maintained at $0.125 per share (paid Feb 21, 2025).

What Went Well and What Went Wrong

• What Went Well

  • Supply Technologies set the pace: segment sales +2% YoY to $181.8M; operating income $15.9M with 80 bps margin expansion, driven by higher-margin mix (fasteners) and strong execution; aerospace/defense sales +21% YoY in Q4.
  • Adjusted earnings quality: adjusted EPS rose 24% YoY to $0.67; EBITDA up 27% to $37.0M (9.5% margin), reflecting margin initiatives and tax benefits (R&D credits and valuation allowance reversals).
  • Cash and leverage improved: Q4 operating cash flow $26M; FCF $29M; year-end liquidity $198.2M; net debt leverage improved to 3.8x (vs 4.4x) aided by ~$30M equity proceeds used for debt reduction.
  • Quote: “We concluded 2024 by continuing to demonstrate improved metrics around margin, cash flow and leverage… enter 2025 with a faster growing, more profitable, less capital intensive and more predictable business model” — CEO Matthew Crawford.

• What Went Wrong

  • Assembly Components under pressure: Q4 sales fell to $89.7M (from $97.0M); operating income declined to $3.9M (adjusted $4.5M), impacted by OEM December shutdowns, lower pricing on legacy programs, and lower volumes on end-of-life programs.
  • Engineered Products mixed: Q4 sales +2% to $116.9M, but operating income down to $3.1M; adjusted operating income improved to $5.0M, offset by higher costs and weaker forged/machined products; backlog eased to $145M (from $162M).
  • Non-recurring items weighed on GAAP EPS: $5.0M litigation charge in Other Expense and $2.5M restructuring/special charges; without these, adjusted EPS improved, highlighting the gap between GAAP and non-GAAP.
  • Analyst concerns: tariff exposure and share dilution (ATM program to delever) featured in Q&A; management expects to mitigate tariff cost impacts and emphasized the strategic rationale for share issuance and family participation.

Transcript

Operator (participant)

Greetings and welcome to the Park-Ohio Holdings Corp. Q4 and Full Year 2024 Results Conference Call and Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question-and-answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your CFO and Vice President, Pat Fogarty. Please go ahead.

Matt Crawford (Chairman, CEO and Director)

Kevin, actually, it's Matt Crawford going to start. Thank you for the introduction, and thank all of you for joining us on our Q4 and Year End 2024 Conference Call. We're proud of our 2024 results and the momentum we gained in three areas of strategic value. First, improved and record levels of gross margin. Second, while short of our internal goals, solid cash flow performance, and finally, improving leverage metrics and liquidity. We achieve these goals through strong execution by our management team, but also through the ongoing reshaping of our business portfolio. Over the last several years, we have worked to exit businesses which we do not find meet our long-term goals and focus more attention and capital on our best brands, customers, products, and services. We have completed this effort while still maintaining record or near-record revenue across the company.

Our vision here is to build a diverse set of complementary industrial businesses which have important and lasting competitive moats and demonstrate above-average growth characteristics. The businesses we are focused on demonstrate varying strengths, including strong global brand recognition, excellent economies of scale and data management, intellectually protected products, and a good balance of aftermarket exposure. In addition, we have created a less asset-intensive model which should lower our capital expense through the business cycle and free up opportunities to invest in those items which will lower our cost to serve and increase our overall competitiveness and margin profile. Additionally, these investments should be the bedrock of a model focused on organic growth, complemented by some acquisitions through the business cycle. Thank you to all of our Park-Ohio associates globally. Our team has never been stronger. Thank you. Now I'll turn it over to Pat to cover the numbers.

Pat Fogarty (CFO and VP)

Thanks, Matt. Good morning. Overall, we are pleased with our 2024 Q4 and full year results, which exceeded our expectations in many financial categories, including gross margins, operating income margins, earnings per share, EBITDA as defined, and net debt leverage. Also, our supply chain management, proprietary fastener manufacturing, and industrial equipment businesses achieved all-time highs in terms of sales and profitability. Before I comment on our guidance for 2025, I'll review our full year and Q4 results in detail. Consolidated net sales in 2024 were approximately $1.7 billion, consistent with 2023 record revenues. Two out of our three business segments experienced year-over-year sales growth, which was driven by several end markets and a broad range of customers. Our supply chain management business achieved record sales during the year despite demand volatility in several end markets.

Year-over-year growth occurred primarily in aerospace and defense, heavy-duty truck, consumer electronics, and electrical distribution markets, offset by weaker demand from power sports, industrial and agricultural equipment, and lawn and garden markets. In our proprietary fastener manufacturing business, full year sales were at record levels as increased demand relating to new applications utilizing our proprietary self-piercing and clinch products contributed to the greater than 10% growth year-over-year in this business. The sales growth in our Engineered Products segment was in line with our expectations, considering the strong new equipment backlogs at the end of 2023 and new equipment bookings throughout the year. The booking trends continue to be robust throughout the year in both North America and Europe and in all major induction, heating, and melting brands.

In our Assembly Components segment, full year sales declined 7% year-over-year, which was a result of lower unit volumes on auto platforms currently in production and end-of-life programs and lower pricing on certain fuel products. Replacement sales on the programs that ended during 2024 launched in the second half of the year and were not at full-volume production rates. This also affected our 2024 sales in this segment. Our GAAP earnings per share from continuing operations increased 18% to $3.19 per diluted share, compared to $2.72 last year. Adjusted earnings per share, which excludes one-time non-recurring items, improved to $3.59 a share, compared to $3.07 per share in 2023, an increase of 17% year-over-year. Full year gross margins in 2024 improved 60 basis points to 17% of net sales.

The gross margin improvement was most evident in our Supply Technologies segment, resulting from lower product costs, favorable sales mix, and improved absorption in many locations throughout North America and Europe. Gross margin improvement continues to be a key initiative, and we expect continued improvement in the current year. SG&A expenses were higher in 2024, primarily due to the impact of the acquisition of EMA Induction, higher employee-related costs, and general inflationary increases. As a percentage of net sales, SG&A was 11.3% of sales, compared to 10.9% of sales in 2023. Our adjusted operating income was $94 million, compared to $90 million a year ago, an increase of 4% year-over-year. Record operating profit margins in our Supply Technologies segment and in our industrial equipment business accounted for the increase year-over-year. Interest expense was $47 million, compared to $45 million in 2023. The increase was primarily due to higher interest rates.

Our full year income tax expense was $4.9 million on pre-tax income of $44.4 million, representing an effective income tax rate of 11%. Our effective global tax rate benefited from the recognition of research and development tax credits and the reversal of certain tax valuation allowances during the year. We expect a more normalized tax rate in 2025, ranging from 21%-23%. Our EBITDA as defined was $152 million in 2024, an increase of 13%, compared to $134 million in 2023. Operating cash flow generated during the year was $35 million, and free cash flow was $15 million. Additionally, we sold approximately 1 million shares of common stock for $30 million and used the proceeds to pay down debt. As a result of our improved EBITDA and lower debt levels at year-end, our net debt leverage improved to 3.8 times.

Moving now to our Q4 results, net sales from continuing operations of $388 million were consistent with 2023 Q4 revenues. Quarterly revenues in our Supply Technologies and Engineered Products segments increased 2% year-over-year. Revenues in our Assembly Components segment declined in the Q4 due to customer plant shutdown schedules during the month of December, which affected several of our plants in this segment. GAAP earnings per share in the quarter were $0.41 per diluted share, which was affected by the impact of one-time non-recurring items totaling $5 million relating to facility exit costs, litigation expenses relating to a 2016 dispute in our Assembly Components segment, and gains on sale of assets. Our adjusted earnings per share of $0.67 in the quarter compared to $0.54 in the quarter last year, an increase of 24%.

In the quarter, adjusted operating income totaled $19.4 million, compared to $17.7 million in the 2023 quarter, and margins improved 45 basis points compared to 2023. We generated significant operating cash flows of $26 million and free cash flow of $29 million, and EBITDA as defined increased 27% to $37 million in the quarter. Turning now to our segment results in Supply Technologies, net sales for the full year were a record $779 million, up 2% compared to $766 million in 2023. The increase was driven by higher customer demand across certain key end markets in our supply chain business, with the biggest increases in aerospace and defense, heavy-duty truck, consumer electronics, and electrical distribution, which was offset by softer year-over-year demand in the power sports, industrial and agricultural equipment, and lawn and garden end markets.

During the year, we continued to see strong demand from commercial and military aerospace customers, which was up 21% over the prior year. Sales in this segment were also favorably impacted by increased demand for our proprietary fastener products, as sales in that part of the segment were up 11% year-over-year. Operating income in this segment achieved an all-time high and totaled $75 million in 2024, up 27% compared to $59 million in the prior year, and operating margins were 200 basis points higher at 9.7%. These increases were driven by the higher sales levels, favorable mix of higher margin products, and the impact of profit improvement initiatives. In the Q4, net sales were up 2% to $182 million compared to $176 million in the Q4 of 2023. Adjusted operating income totaled $16 million compared to $14 million in the prior year quarter, an increase of 14%.

The Q4 results were a strong end to an outstanding year's performance by this segment of our business. In our Assembly Components segment, sales were $399 million for the year, down 7% compared to $428 million in 2023, resulting from lower unit sales caused by lower OEM production, lower pricing on certain programs, and end-of-life programs. Adjusted operating income was $26.5 million in 2024, compared to $34.9 million in 2023. In the Q4, net sales of $90 million were down 7% compared to $97 million in the Q4 of last year, and adjusted operating income totaled $4.5 million compared to $6.5 million in the Q4 of 2023. Our Q4 sales levels were affected by OEM plant shutdown schedules, which exceeded holiday scheduling in the prior year.

In our Engineered Products segment, full year net sales were a record $482 million, up 3% compared to $469 million in 2023, driven by strong customer demand in our industrial equipment business. New equipment bookings for the full year were $164 million, and new equipment backlog as of December 31st totaled $145 million. Record revenues in this business grew 6%, with significant growth in sales of aftermarket parts and services, which grew 12% year-over-year. In our Forged and Machined Products business, full year sales decreased 4%, driven by lower rail forging sales, which more than offset strong demand for aerospace forgings in our Canton, Ohio facility. We continue to quote new projects in support of the defense industry, including aerospace forging products and new equipment builds. Excluding special charges, our adjusted operating income for the year was $21.3 million, compared to $24 million a year ago in this segment.

The lower operating income levels were driven by a year-over-year decline in the production of rail forging products, which significantly affected margins in this segment. We have implemented operational improvements in our plant in Arkansas and expect the benefits to be realized throughout 2025. In the Q4, net sales of $117 million increased slightly over sales of $115 million in the 2023 quarter, and adjusted operating income was $5 million in the quarter, compared to $3.8 million. Despite the improvement in adjusted operating income, we continue to make operational changes to certain plants to improve future performance, most notably in our forging business. Finally, corporate expenses were $29 million in 2024, compared to $28 million in 2023, with the increase driven primarily by higher employee-related costs. Now I'll make a few comments relating to our guidance for 2025.

As indicated in our press release, we expect revenue growth to be in the range of 2%-4% year-over-year, driven by stable demand in most end markets compared to 2024 demand levels. We also expect year-over-year improvement in adjusted operating income, adjusted net income, EBITDA as defined, and free cash flow. In addition, fully diluted shares outstanding will approximate 14.7 million shares versus 13.2 million shares in 2024, and we expect an effective tax rate of 21%-23%, compared to 11% in 2024. As a result of recent actions with respect to tariffs on goods manufactured abroad, costs for certain goods which we import into the United States, including certain raw materials and components, are expected to increase. We are working with our supply chains and customers to mitigate the impact of such tariffs.

Conversely, our U.S. manufacturing plants may realize a benefit from tariffs as a result of higher production and localized sourcing back into the U.S. Now I'll turn the call back over to Matt.

Matt Crawford (Chairman, CEO and Director)

Great. Thank you, Pat. We'll now open the floor for questions.

Operator (participant)

Thank you. I will be conducting a question-and-answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. One moment, please, while we pull for questions. Our first question is coming from Dave Storms from Stonegate. Your line is now live.

Dave Storms (Director of Equity Research)

Good morning.

Matt Crawford (Chairman, CEO and Director)

Morning, Dave.

Dave Storms (Director of Equity Research)

Just wanted to start with some of the guidance and see kind of what your expectations are for cadence. Should we expect 2025 to be kind of a normal year, or do you think tariffs or anything else might throw that seasonality off?

Matt Crawford (Chairman, CEO and Director)

Let me—Dave, this is Matt. Before Pat answers that, let me comment on tariffs because it took to the first question to talk about them, so let's just kind of jump in. I think Pat's last point in his prepared comments is really important. Most of our business, a majority of our business, will not be impacted meaningfully or at all by tariffs. Also, our balance of business allows us to have exposure, particularly in the forging group and in the equipment group, which could benefit from these things. In the forge group, we are largely sourced domestically for steel in the U.S., so that would be tariff-free. In the equipment business, we would benefit from reinvesting in the steel business and in other related businesses and in American manufacturing generally.

As you know, we've seen huge backlogs in that business as that investment's been happening over a series of years in multiple industries. We got a lot of bites at the apple in our portfolio to be successful here. The majority of our—well, 65%-70% of our business is in North America. Most of it will not be impacted. We do have some areas. Pat mentioned it, and perhaps he can comment on it.

Pat Fogarty (CFO and VP)

Yeah. Yeah, Dave, when you think about our business in the Supply Technologies segment where we source product all around the world, we do have tariffs that we expect to impact that business as it stands today. We're working with our supply chains to localize some of that supply, but also working with our customers to be able to pass that cost along to them. It's going to take time to work a lot of that out, but clearly, our belief is that through our ability to work with our supply chains and work with our customers, we'll mitigate a large portion of these tariffs as they impact 2025. In our auto segment, the same holds true there. As you know, we have significant production plants in Mexico that bring product into the States, but also ship product in the country.

Depending on how that plays out and how tariffs impact that, we will work with our customers to absorb that cost. As it stands today, every day is a new day, and we're hearing new news by the hour. Right now, it's an all-out effort to work with our customers and our supply chains to mitigate these.

Matt Crawford (Chairman, CEO and Director)

Dave, I would add one other thing. I think, as Pat mentioned, in the context of our business plan, this is something we will manage, and we have opportunity as well, as I mentioned. Having said that, this chaos does cause us, our customers, the whole supply chain to be concerned about demand. I mean, this chaos, clearly, we have not seen it yet, but I do get concerned that whether there is inflation or just chaos, it could affect overall demand in 2025 in multiple markets. We are certainly not seeing that now.

Dave Storms (Director of Equity Research)

Understood. That's great color. Thank you. As we're looking into 2025, aerospace and defense has been a real standout for you guys recently. You just mentioned the tailwind from the backlogs. Are there any other end markets to highlight or keep an eye on as potential standouts going into 2025?

Pat Fogarty (CFO and VP)

I think you hit on the one end market that we continue to see growth in. When we look into our capital equipment business, Dave, we continue to see strong backlogs. We continue to see booking levels and quoting levels at a high level. That is positive for 2025. Within Supply Technologies, we continue to see, because of the diversification of that particular business, many end markets are expecting to have increased demand, heavy-duty truck being one of them. When our range of 2%-4% is not largely due to aerospace and defense, there are other end markets that we expect growth in.

Matt Crawford (Chairman, CEO and Director)

David, I would also add, from a margin perspective, and we spent a lot of time talking about increasing margins, the big opportunity for 2025 is in our Engineered Products group. If you look historically, and I know you have, that business is still substantially underperforming despite the strong backlogs. As we continue, I think, to be effective in turning around those businesses and improving our execution, I think that's the big opportunity at the margin line.

Dave Storms (Director of Equity Research)

That actually ties in real nicely to my next question here. Just on consolidated margins, Supply Technologies has been pretty much buoying consolidated margins. I know your business is set up to take advantage of that diversification. Does 2024 look like a baseline for margins for you with potential sweetener from Engineered Products, or is there anything else we should maybe keep in mind there?

Matt Crawford (Chairman, CEO and Director)

Yeah. I mean, I would say in the aggregate, the opportunity is, or the consolidated results, the opportunity is in the Engineered Products group. We have been so impressed by the leadership of Supply Technologies. Certainly not suggesting that story is over, those guys have executed at a very high level, both on the supply chain side and the specialty fastener manufacturing business. They have done a great job, and they will continue to. Our opportunity is to get the Engineered Products group back to where it's been historically.

Dave Storms (Director of Equity Research)

That's perfect.

Pat Fogarty (CFO and VP)

Dave, couldn't agree more. I think, as we say here, money is made in buying, and Supply Technologies had some real success in terms of their product costs during the year, which helped our margins. The opportunity not only is in our Engineered Products to improve margins, but also in the Assembly Components area where we continue to implement new value drivers to improve our margins.

Matt Crawford (Chairman, CEO and Director)

Dave, this will give me a chance to highlight what I said in my opening comments. As we've exited some of the forge business and General Aluminum, which were high capital cost businesses, we will reallocate that into places like Supply Technologies where we see opportunities not just to work a little harder, but to be a little smarter. You'll see us investing in technology tools just to be a little smarter, lower our cost to serve, and create a sustainable competitive advantage. I think that the story on margin in that group is going to be strategic as well as good execution on buying and so forth.

Dave Storms (Director of Equity Research)

That's great, Crawford. Thank you. One more for me, if I could. I know you guys had a fairly active 2024 from an M&A side with the divestiture. Just curious as to what you're seeing in the M&A market with just the general economic outlook.

Pat Fogarty (CFO and VP)

Yeah. The volume of deals that we see, Dave, I would say is good and has always been pretty good, but at a pretty level state. I do not think it is any more or less than what we have seen in the past. We continue to look for strategic-type acquisitions that could complement our most profitable businesses, whether that be in Supply Technologies or whether that be in our aftermarket parts and services business on the equipment side. I think we are very careful with where we are going to bolt on to which companies, and the activity is pretty good right now.

Dave Storms (Director of Equity Research)

That's great. Thank you for taking my questions, and good luck in 2025.

Pat Fogarty (CFO and VP)

All right. Thanks, Dave.

Matt Crawford (Chairman, CEO and Director)

Thank you.

Operator (participant)

Thank you. Next question is coming from Brian Sponheimer from Gabelli Funds line. He's now live.

Matt Crawford (Chairman, CEO and Director)

Brian, how are you?

Brian Sponheimer (Portfolio Manager and Research Analyst)

Hey, Matt. Hey, Pat. Thank you very much for getting me on here. We were talking a little bit this morning about the release, and you guys did a great job on the tariff side, kind of explaining what some opportunities are. We had a question specifically on fasteners and maybe some exposure there, particularly as it relates to China that you might need to work on potentially down the road here. Any comments there?

Pat Fogarty (CFO and VP)

Yeah. Yeah, Brian, Supply Technologies does import product from China, but it is a small amount. A few years ago, when tariffs were first implemented, we localized supply and moved supply out of China to other countries and back into the US. Our exposure there is pretty small. The other products that we may source from Asia would come out of primarily Taiwan. That is where we are obviously working with our customers and our suppliers, including our Taiwanese suppliers, to keep those cost increases to a minimum.

Brian Sponheimer (Portfolio Manager and Research Analyst)

Yeah. Yeah. Okay. Terrific. Thanks for the clarification, and best of luck with this current environment.

Matt Crawford (Chairman, CEO and Director)

All right. Thanks.

Pat Fogarty (CFO and VP)

Thanks.

Operator (participant)

Thank you. Next question is coming from Jamie Wilen from Wilen Management. Your line is now live.

Jamie Wilen (President and Portfolio Manager)

I fell a few different areas. One, you mentioned that the shares outstanding you expect for next year to be 14.7 versus 13.2. Where did we end the year of 2024, and why the major increase in shares?

Pat Fogarty (CFO and VP)

Yeah. Jamie, as I mentioned in the script, we sold a million shares through an ATM program. That took the shares to north of 14.2. It's a weighted average calculation, the fully dilution of the shares. For next year, we're expecting it to be 14.7. The other increase is a small amount of shares that typically get distributed as part of our restricted stock program within the employee base.

Jamie Wilen (President and Portfolio Manager)

Okay. So you're not expecting to sell any additional shares within that forecast?

Pat Fogarty (CFO and VP)

Not in that forecast.

Jamie Wilen (President and Portfolio Manager)

Okay. Dave.

Matt Crawford (Chairman, CEO and Director)

Dave, this is Matt. The first time we've issued shares, again, we're just trying to show our commitment to deleveraging and positioning ourselves for refinancing of the bonds and give us a little flexibility. We wouldn't take that off the table permanently, but to be clear, it's an arrow that we want in our quiver. I would kind of, since you brought it up, I would definitely want to remind everyone that of those million shares, our family not only participated but led that round with about $5 million of investment at $30. So we're very committed.

Jamie Wilen (President and Portfolio Manager)

Gotcha. In Supply Technologies, you mentioned that proprietary products were up 11%. I assume proprietary products have gross margins well above your corporate average. What are the types of products we are supplying in proprietary products, and what is the outlook for the future on that?

Pat Fogarty (CFO and VP)

Yeah. Jamie, those proprietary products are included in our fastener manufacturing part of the business, which when you look at the 10-K, you'll see what historic revenues have been. The opportunity there is we have several products that are used and attached to lightweight materials, which, as you know, on the automotive front, that is a big initiative to increase or decrease the weight of the vehicle by using lightweight metals. Our products attach to those products, such as battery cradles and different parts of the frame of the car. A great product has been growing at north of 10% for the last five years, growing all around the world. We opened up an operation in Germany. We acquired in 2019 a business in Asia. The product has gained wide acceptance amongst OEMs throughout the world. We expect that to continue.

Jamie Wilen (President and Portfolio Manager)

Okay. The growth rate in the past could be achieved in the future as well.

Pat Fogarty (CFO and VP)

We fully expect that.

Matt Crawford (Chairman, CEO and Director)

Yeah. I mean, Jamie, as they convert also in aerospace to different materials, lightweight, other kinds of things you can't weld to, composites, this kind of technology, which is self-piercing and adheres after insertion, is important for these kind of unique designs and hard-to-access areas, not just in auto, although certainly auto has led in the usage of this product. It's a pretty exciting place to be.

Jamie Wilen (President and Portfolio Manager)

On the acquisition front, are you targeting one division more over the other, and what type of EBITDA multiples are you looking to pay?

Matt Crawford (Chairman, CEO and Director)

I'll let Pat handle the EBITDA one. Again, I think that our capital allocation model right now is extremely focused on what I call our best products and services. Now, what we have left in the portfolio are our best products and services. We would be open to acquiring something strategic, typically smaller, that opens one of our current management teams and businesses perhaps into an adjacent market, an adjacent customer, an adjacent product line, whatever it may be. EMA last year is a great example where we found something that was an induction heating business, solid customers, solid backlog, and an important market, Germany, which everyone was down on. Remember, German customers put equipment all around the world. That has been a very good small acquisition for us.

I think, so again, any of our business, I think we'd be open to that kind of 1 plus 1 equals 3 acquisition or bolt-on, as we call it. Having said that, Pat mentioned earlier, I mean, certainly Supply Technologies bringing more in our suite of services and products to our customers, very important, particularly in these chaotic supply chain times. I would also say on the induction heating side, the aftermarket piece, which again is above average margins, these are great opportunities for us and probably lead the pack. Again, in the business we're remaining, we actually did a nice acquisition in the fastener manufacturing business we talked about a few minutes ago, two years ago. Where we are in our portfolio, these businesses all have opportunities for those kinds of bolt-ons.

Of course, we're going to put the most accretive to the front of the line.

Jamie Wilen (President and Portfolio Manager)

Lastly, a bit of commentary. I mean, when you look at your businesses, you're really tightly controlled, and the outlook for sales and margins is kind of wonderful, yet you have no visibility or relatively little on Wall Street. No one knows what a Park-Ohio really is. It may be time, you're doing such a good job of managing the businesses. It may be a great time to reintroduce the company to Wall Street so they know what a Park-Ohio is, or most people have a name for the company that kind of reflects what their businesses are, not where they're located and where they put their car. I would hope in the future you would think about that, just so more people in the world can know what you're doing and how well you're doing it.

Matt Crawford (Chairman, CEO and Director)

Yeah. Jamie, believe me, we do think about what you said. We're very proud of the Park-Ohio heritage. It stems back 130, 140 years from Park Drop Forge and Ohio Crankshaft, which were incredibly important names historically in the manufacturing business globally, particularly nationally for defense and shipbuilding and rails and so forth. We sort of caught into it because of that history, but we think it says a lot about us. It is not lost on us that most people do not know that history. I will say, again, in terms of really thinking about it and any ideas you have offline would obviously be helpful. We do think that we have repositioned this business both in terms of how we think about our growth opportunities and our growth strategy and also the businesses that we're in and why we like them.

This business was largely built by acquisition. We will still do our share, but I think our strategy is much tighter. And so perhaps your idea is welcome and timely.

Jamie Wilen (President and Portfolio Manager)

Done a wonderful job of running these businesses and look forward to the future. Thanks.

Matt Crawford (Chairman, CEO and Director)

Thanks, Jamie.

Operator (participant)

Thank you. Next question is coming from Steve Barger from KeyBanc Capital Markets. Your line is now live.

Matt Crawford (Chairman, CEO and Director)

Hey, Steve.

Pat Fogarty (CFO and VP)

Good morning. This is actually Christian Dillon for Steve Barger. Thank you, guys, for taking the questions.

Good morning.

Matt Crawford (Chairman, CEO and Director)

Good morning. Thank you.

Christian Dillon (Analyst)

Just in the press release commentary, you said you expect year-over-year improvement in operating income. Can you just walk us through the specific steps you are taking to drive that sustainable margin expansion? I heard your previous comments on engineered, but does Supply Tech still have some juice to squeeze along with assembly?

Pat Fogarty (CFO and VP)

Yeah. I think, and Matt addressed the Supply Tech side of the business, but if you look at the trends that we've established in our operating income, we continue to implement value drivers in each of the business, whether that's focused on vertically integrating rubber mixing, for example, or automation on the plant floor, or initiatives around resourcing raw materials from different suppliers to reduce our costs. Each business has a number of value drivers that they implement each year. Based on those that we've established in our business plans for 2025, we'll continue to drive operating margins. That's across the board. Matt mentioned the real opportunity around Engineered Products. We've had some challenges in our Forged and Machined Products business that we believe have been solved, which will add to the improvement in the operating income margins.

Matt Crawford (Chairman, CEO and Director)

Yeah. I do not want to—I guess we are not trying to suggest that we do not think there is opportunity at Supply Technologies. We just want to say they have operated at a very high level, executed at a high level. Now, I think we are on a journey of some investment to improve the business processes so we could be better, faster, smarter. That will show up in the margin, but it will not show up quarter over quarter. It will be a year if you will, or a year and a half, or two years. I mean, we are in the middle of that process. Again, I said some capital freed up when we let go of some of the forging and casting assets, and that is where it is going to go, improving the business process at places like Supply Technologies.

Christian Dillon (Analyst)

Great. That's helpful. I guess that kind of flows into my next question. Just as we got into the middle of 2024, you kind of tempered your sales outlook a couple of times. Just how much of that was market-driven versus maybe some deliberate plan to walk away from less profitable business? And then for your 2025 outlook, do you think this is a conservative approach or realistic, just given the mixed messages in the market right now?

Matt Crawford (Chairman, CEO and Director)

That did happen. We said on the Q3 call, we expected to grow in the Q4. A little egg on our face there. I don't know. I would characterize that as walking away from business. I do think, for what it's worth, at the margin, we almost did grow. The end of the year was kind of wonky in the industrial sector with the holidays and plant shutdowns. Auto is a lower and lower % of our overall mix, but really, the chaos at Stellantis, I think, hurt us a bit relative to our forecast. I wouldn't describe any of that as walking away from business. We like our product portfolio right now of customers.

Pat Fogarty (CFO and VP)

Yeah. Yeah. I would say, Christian, in the normal course of a year, we're always challenging low-margin business. That occurs throughout the year, but nothing significant occurred in 2024. Both our Supply Tech and our Engineered Products grew at exactly where we thought they would grow at the beginning of the year. Where we saw the decline in sales was primarily in the Assembly Component segment. That was a result of OEM production schedules and lower volumes than we originally expected. That clearly, as Matt mentioned, affected the Q4 as holiday schedules and Stellantis shutdown schedules as they repositioned their own production lines did affect our sales.

Christian Dillon (Analyst)

Got it. Understood. Just last one from me. Maybe I might have missed this, but what is making the fastener business so strong? Can you just remind us, is there an end-market mix, or is it more of a mix between OEM versus aftermarket? Out of those buckets, where do you see the most strength in 2025? Thank you so much.

Matt Crawford (Chairman, CEO and Director)

Our Supply Technologies, which represents both the fastener manufacturing and the supply chain business, are really diverse. The mix, I think, under the hood, so to speak, of what's up and what's down, it's a difficult business to really predict at this point. Now, we're really diverse enough. We can get a good sense of where we'll end up. It's a little bit hard sometimes to figure out what's going to happen by market. There's a lot of volatility. I mean, we were very fortunate, I think, to position ourselves over the last four or five years strongly in aerospace and defense. To some extent, that saved our bacon a little bit last year. You're definitely seeing some consumer-facing things and ag and some other areas that are extremely weak. Absolutely, I think there's a lot going on.

I would just say that in the aggregate, our business increasingly beats to the drum of what you see across sort of industrial America. I think because of that, our really global industrial, when you have as varied a customer list as furniture to semiconductor tools to trucks to snowmobiles, you're bound to track, I think, in general, in aggregate, sort of what's going on in the economy generally.

Christian Dillon (Analyst)

Great. Thank you, guys.

Pat Fogarty (CFO and VP)

Thank you.

Operator (participant)

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.

Matt Crawford (Chairman, CEO and Director)

Great. Thank you for your great questions today. We are hard at work here. Again, I want to end with where I ended my initial comments. I want to thank all of the Park-Ohio Associates and reiterate our team has never been stronger. Thank you to all of you.

Operator (participant)

Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.