Hammond Power Solutions (HPS) Q2 2024 earnings summary

Executive summary

• Achieved record all-time shipments for the sixth consecutive quarter, with Q2 sales of $197 million, up 14.4% from Q2 2023, and $388 million year-to-date, a 12.9% increase year-over-year.

• Opened a new factory in Monterrey, Mexico, on time and on budget, supporting capacity expansion and contributing to record shipments.

• Net income for Q2 2024 was $23.6 million, with EPS of $1.98; year-to-date net income reached $31.5 million, EPS $2.65.

• Strong bookings in Q2, with April marking the second highest month of new orders ever.

Financial highlights

• Sales increased 14% compared to Q2 2023 and 3.4% over Q1 2024, driven by project work through distributors, especially in Canada.

• Adjusted EBITDA margin improved to 16.5% in Q2 from 16.2% in Q1, with year-to-date Adjusted EBITDA margin at 16.4%.

• Gross margin improved to 32.8% in Q2 2024 from 30.9% in Q2 2023.

• Cash flow from operations was $24.9 million year-to-date; capital expenditures totaled $17.4 million.

• Pre-tax profit benefited by CAD 6 million from share-based compensation changes.

Outlook and guidance

• Standard product market expected to remain stable for the rest of 2024, with no significant commercial market growth anticipated.

• Continued strong activity expected in custom equipment, especially in data center and emerging sectors.

• Capacity constraints will limit top-line growth until additional capacity comes online in early 2025.

• Margins may face minor headwinds from new facility ramp-up, but these are expected to diminish by early 2025.