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PARK OHIO HOLDINGS CORP (PKOH)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered sequential margin and earnings improvement despite softer demand, with adjusted EPS $0.75 (+14% q/q) and gross margin 17.0% (vs 16.8% in Q1), while revenue declined to $400.1M (vs $405.4M in Q1 and $432.6M y/y) .
  • Versus S&P Global consensus, PKOH posted an EPS beat (Adj. EPS $0.75 vs $0.715*) and revenue miss ($400.1M vs $405.4M*); “EBITDA as defined” exceeded consensus ($35.2M vs $33.9M*), driven by gross margin expansion and cost containment .
  • Management narrowed FY25 sales guidance to $1.620–$1.650B (from $1.60–$1.70B) and reduced FY25 adjusted EPS to $2.90–$3.20 (from $3.00–$3.50) due to higher interest from refinancing ($0.20 EPS headwind), while reaffirming strong H2 free cash flow ($65M) .
  • Record capital equipment bookings ($85M) and backlog growth ($172M, +19% vs year-end) in Engineered Products are key positive catalysts; tariff costs ($25–$35M) expected to be recovered via customer pass-throughs .

Note: Asterisked values are from S&P Global consensus estimates.

What Went Well and What Went Wrong

What Went Well

  • Sequential profitability improved: Adjusted EPS rose 14% q/q to $0.75; EBITDA (as defined) increased to $35.2M; gross margin expanded to 17.0% on operating leverage and SG&A control .
  • Engineered Products secured record $85M in capital equipment bookings, including a $47M induction heating order utilizing patent-pending technology; backlog reached $172M (+19% vs year-end), boosting multi-quarter visibility .
  • Management tone confident: “We have delivered two straight quarters of margin expansion and earnings growth… late innings of a portfolio transformation… exit as a higher quality, more profitable, de-leveraged business,” CEO Matthew V. Crawford .

What Went Wrong

  • Top-line softness across segments: Q2 net sales fell to $400.1M (Q1: $405.4M; Q2’24: $432.6M), with Supply Technologies (-8% y/y) and Assembly Components (-8% y/y) impacted by North American industrial demand softness, OEM launch delays, and pricing normalization .
  • EPS guidance lowered on financing costs: Senior notes refinancing (8.5% due 2030) increased H2 interest expense, reducing FY25 adjusted EPS by ~$0.20; FY25 EPS now $2.90–$3.20 .
  • Working capital drag: First-half operating cash flow from continuing ops was -$23.7M; free cash flow -$40.6M, reflecting receivables growth and CapEx, though management guides to ~$65M FCF in H2 .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$432.6 $405.4 $400.1
GAAP Diluted EPS – Continuing ($USD)$0.95 $0.61 $0.67
Adjusted EPS ($USD)$1.02 $0.66 $0.75
Gross Margin %16.9% 16.8% 17.0%
Operating Income ($USD Millions)$24.6 $18.9 $20.1
EBITDA (as defined) ($USD Millions)$39.4 $33.9 $35.2

Q2 2025 vs S&P Global Consensus

MetricConsensusActualSurprise
Adjusted EPS ($USD)$0.715*$0.75 +$0.035*
Revenue ($USD Millions)$405.4*$400.1 -$5.3*
EBITDA (as defined) ($USD Millions)$33.9*$35.2 +$1.3*

Values with asterisk are from S&P Global.

Segment Breakdown – Net Sales and Operating Income

SegmentQ2 2024 Net Sales ($M)Q1 2025 Net Sales ($M)Q2 2025 Net Sales ($M)Q2 2024 OI ($M)Q1 2025 OI ($M)Q2 2025 OI ($M)
Supply Technologies$202.6 $187.8 $187.1 $19.0 $17.8 $16.3
Assembly Components$103.1 $96.9 $95.1 $6.9 $5.3 $5.6
Engineered Products$126.9 $120.7 $117.9 $6.3 $3.8 $6.0
Corporate———($7.6) ($8.0) ($7.8)
Total$432.6 $405.4 $400.1 $24.6 $18.9 $20.1

KPIs

KPIQ2 2024Q1 2025Q2 2025
Gross Margin %16.9% 16.8% 17.0%
EBITDA Margin %——8.8%
Capital Equip. Bookings ($M)—$39 $85
Capital Equip. Backlog ($M)$145 (12/31/24) $136 (3/31/25) $172
Liquidity ($M)—$209.5 (3/31/25) $189.0 (6/30/25)
SG&A ($M)$47.4 $48.2 $46.8
Effective Tax Rate——~17%
Op. Cash Flow (YTD, $M)——($23.7)
Free Cash Flow (YTD, $M)——($40.6)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY 2025$1.60–$1.70B $1.620–$1.650B Narrowed/Refined range
Adjusted EPS ($USD)FY 2025$3.00–$3.50 $2.90–$3.20 Lowered (refinancing adds ~$0.20 interest headwind)
Free Cash Flow ($USD Millions)FY 2025“Improve y/y” (no range) ~$20–$30M; ~+$65M in H2 Added explicit range and H2 target
Effective Tax Rate (%)FY 2025—17–19% New detail (lowered expected rate)
Dividend ($/share)Next payable$0.125 (declared Jul 18, 2025) $0.125 (paid Aug 15, 2025) Maintained
Adjusted EPS Impact (Refinancing)H2 2025—~($0.20) per diluted share New headwind disclosed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 & Q1 2025)Current Period (Q2 2025)Trend
Portfolio transformation & margin focusConcluded 2024 with margin gains; entering 2025 with more profitable, less capital-intensive mix “Late innings” of transformation; two straight quarters of margin and EPS expansion Positive momentum
Segment margin targetsSupplyTech near 9.7% FY24; Q1 SupplyTech margin 9.5% Targets: SupplyTech ~10% OI; Assembly +200 bps; Engineered double-digit OI Ambitious but credible
Tariffs/macro & pass-through2025 growth 2–4%; mitigate tariff costs; reshoring tailwinds Tariff costs $25–$35M in 2025, expected full recovery; reshoring early innings Manageable, potential tailwind
Backlog & bookingsEP backlog $145M YE; Q1 bookings $39M Record $85M bookings; backlog $172M (+19% vs YE) Stronger visibility
Deleveraging & refinancingLiquidity improved; net debt leverage 3.8x YE 8.5% notes due 2030; extended revolver; higher interest reduces EPS by ~$0.20; H2 FCF ~$65M Near-term EPS drag; liquidity strengthened
Data center/AI infrastructure demandNot highlightedNew customer wins; serving Lenovo, IBM, Applied Materials, Schneider, Eaton; Europe growth Emerging growth vector
Tax rateR&D credits aided Q4 FY25 ETR lowered to 17–19% Beneficial tailwind

Management Commentary

  • CEO: “We have delivered two straight quarters of margin expansion and earnings growth… ParkOhio is in the late innings of a portfolio transformation that we plan to exit as a higher quality, more profitable, de-leveraged business.”
  • CFO: “Adjusted EPS increased 14% to $0.75… EBITDA margin was 8.8%… SG&A expenses were $46.8M… our effective income tax rate was 17%… lowered our expected full year effective tax rate to range between 17–19%.”
  • CFO on tariff mitigation: “We expect to fully recover our tariff costs, which we estimate to be $25–$35M in 2025, primarily in our Supply Technologies segment.”
  • CFO on segment margin targets: SupplyTech ~10% OI; Assembly Components +200 bps; Engineered Products to exceed double-digit OI .
  • Strategy: Record $47M induction slab heating order with patent-pending technology; shipments beginning in 2026 from Warren, Ohio .

Q&A Highlights

  • Margin trajectory and targets: Analysts probed sustainability; management set clear OI margin aspirations across segments and reiterated EBITDA ~10% target over time .
  • Capital allocation & deleveraging: Expect robust H2 cash flow (working capital release + EBITDA) to fund both deleveraging and targeted competitiveness investments; “chew gum and walk at the same time” .
  • EP backlog drivers: Demand driven by defense, infrastructure, electrical steel; unique processes and patented tech underpin order growth; Forge Group improvement expected over next 12 months .
  • Supply chain/reshoring: Early innings; customers rethinking supply chains amid tariff clarity; PKOH positioned to help solve complexity; growing data center-related demand with multiple blue-chip customers .

Estimates Context

  • Q2 2025: Adjusted EPS beat ($0.75 vs $0.715*), revenue miss ($400.1M vs $405.4M*), and “EBITDA as defined” beat ($35.2M vs $33.9M*), suggesting margin execution offset weaker volumes .
  • FY 2025: Street EPS stands at ~$2.80* vs management $2.90–$3.20; consensus revenue at ~$1.607B* vs guidance $1.620–$1.650B—implies upward revisions to sales and potentially EPS as H2 executes, despite ~$0.20 EPS refinancing headwind .

Values with asterisk are from S&P Global.

Key Takeaways for Investors

  • Margin resilience: Two consecutive quarters of gross margin and EPS expansion amid softer volumes; SG&A control and pricing/product mix initiatives are working .
  • Near-term EPS headwind from refinancing (~$0.20), but improved liquidity and extended maturities strengthen balance sheet; monitor interest expense run-rate in H2 .
  • Visibility improving: Record bookings and backlog in Engineered Products de-risk revenue trajectory into 2026; watch execution in Forge Group turnaround .
  • Tariff dynamic: $25–$35M costs expected to be recovered; potential reshoring and localized sourcing benefits over medium term; supply chain complexity favors PKOH’s platform .
  • H2 cash flow inflection: Management targets ~$65M H2 FCF; YTD working capital headwinds expected to reverse—catalyst for deleveraging .
  • Segment margin roadmap: SupplyTech ~10% OI near-term, Assembly +200 bps, Engineered double-digit OI—if achieved, supports FY26 EBITDA >10% target discussed on call .
  • Positioning in data center/AI infrastructure: Emerging demand channel with marquee customers could support Supply Technologies growth and mix over the next several quarters .