Park-Ohio Q1 Earnings Call Highlights

Key Points

• Park-Ohio reported Q1 sales of $421 million, up 4% year-over-year, with consolidated gross margin improving to 17.3% and adjusted EPS of $0.65 — results management said exceeded internal expectations and reaffirmed full-year guidance.
• Momentum was led by Engineered Products, where Q1 sales reached $126 million (the highest in recent years), new equipment bookings rose to ~$62 million (+15% YoY) and backlog climbed to $196 million, while adjusted operating income increased 35% year-over-year.
• Management has begun a formal strategic review of Southwest Steel that could result in a sale (excluding it would have raised adjusted EPS to $0.77), and emphasized reducing leverage with an intermediate target of 3x net debt to EBITDA while maintaining ~ $200 million in liquidity and ~ $35 million in planned FY capex.

Park-Ohio NASDAQ: PKOH reported first-quarter 2026 results that management said exceeded internal expectations, supported by year-over-year and sequential sales growth across all three operating segments. Chairman, President and CEO Matthew Crawford told investors he is “pleased with the momentum which is building across our business,” citing growth in both traditional and newer end markets and continued progress from multi-year efforts to improve margins and cash flow consistency.

Vice President and CFO Pat Fogarty said first-quarter sales totaled $421 million, up 4% from $405 million a year earlier. Fogarty attributed the increase to higher demand in several key end markets in Supply Technologies, new program launches and higher automotive platform demand in Assembly Components, and strong capital equipment and aftermarket demand in Engineered Products.

Profitability improved as sales rose

Fogarty said consolidated gross margin was 17.3%, up 50 basis points from the prior-year period, driven by “flow-through from the higher sales levels” and profit enhancement initiatives in several business units. Excluding roughly $1 million of restructuring and other special charges in both periods, consolidated operating income was $21 million, up 6% year over year. Adjusted operating income increased 4% sequentially versus the fourth quarter.

SG&A expenses were about $52 million, or 12.3% of sales, compared to 11.9% a year ago. Fogarty said the increase as a percentage of sales was “driven primarily by general inflation in increases in personnel costs.”

Interest expense increased by $1.3 million year over year, which Fogarty tied primarily to a higher interest rate on senior notes refinanced in the third quarter of last year, partially offset by lower rates on the revolving credit facility. The effective tax rate improved to 17% from 20% due to higher estimated federal R&D tax credits; Fogarty said the company expects a full-year effective tax rate of 17% to 20%.

Earnings per share from continuing operations were $0.58 per diluted share, and adjusted EPS was $0.65 per diluted share, which Fogarty said exceeded internal expectations due to higher segment operating income.

Cash flow, capital spending, and liquidity

Operating cash flow was a use of $8 million in the quarter, reflecting working capital investment “primarily to support sales growth during the current year,” according to Fogarty. Capital spending totaled $12.5 million, including investments in information systems, automation equipment, plant floor efficiencies, and growth capital. Fogarty said the company expects full-year capital expenditures of approximately $35 million.

Liquidity totaled about $200 million at quarter end, consisting of approximately $47 million of cash on hand and $153 million of unused borrowing capacity.

Segment performance highlights

• Supply Technologies: Sales rose 4% to $195 million, driven by customer demand in powersports, semiconductor, aerospace and defense, electrical, and agricultural end markets. Fogarty said semiconductor, technology, and data center-related demand increased 13% year over year, while aerospace and defense demand rose 15%. The segment’s adjusted operating margin was 9%, “slightly down compared to last year” due to sales mix and higher personnel costs.
• Assembly Components: Sales increased 3% to $100 million, supported by new product sales launched last year and higher demand across various automotive platforms. Adjusted operating income was $5.3 million versus $5.5 million a year ago. Fogarty said sequentially, sales increased about 10% and adjusted operating income rose 23%. Management discussed ongoing margin improvement efforts, including increased rubber mixing production and automation investments.
• Engineered Products: Sales reached $126 million, described by Fogarty as the highest quarterly level in recent years, up 4% year over year and 8% sequentially. The quarter benefited from strong backlogs and aftermarket demand, with capital equipment sales driven by defense, steel production, data center, oil and gas, and industrial cooling end markets. New equipment bookings were about $62 million compared to a $54 million quarterly average last year, up 15%, while backlog rose 9% sequentially to $196 million. Adjusted operating income increased 35% year over year to $6.2 million.

In response to questions about the backlog, Fogarty said the company is seeing a broader mix of capital equipment demand than historically, including continued aerospace and defense activity, data center-related work, and an “uptick in bookings” tied to oil and gas. Crawford added that while large projects can take time to complete, the company has also seen “a nice migration” toward a more diverse set of customers and smaller jobs that can be executed more easily, improving product mix.

Crawford said execution has improved compared to prior years, pointing to investments in people and processes at key locations. On backlog conversion, Crawford said some projects, including battery steel-related work, can take a couple of years, but added that average completion time is “nine months-ish.” Fogarty agreed, saying “nine to twelve months is a reasonable production timeline,” aided by the company’s ability to manage production across multiple sites in North America and Europe.

Southwest Steel review and leverage priorities

Fogarty said Park-Ohio commenced a formal review of strategic alternatives for its Southwest Steel Processing (SSP) business within the Engineered Products segment and has engaged an investment banking firm. He said the review “may result in an ultimate sale of this business.” Fogarty also quantified the impact, stating that adjusted earnings from continuing operations excluding Southwest Steel would have increased from $0.65 per diluted share to $0.77 per diluted share in the quarter.

Crawford emphasized the long-term value of the business, noting that for “the first 20 or 21” of the past 25 years it was “meaningfully accretive” and that the site includes “two fully automated forge lines.” He attributed recent pressure in part to the rail market being down for an extended period and said the business is “improving” operationally, though he declined to provide transaction specifics given the early stage of the review.

On capital allocation, Crawford reiterated that reducing leverage remains a priority, stating the company has an intermediate goal of 3x net debt to EBITDA. He added the company is also investing in key businesses and is “not going to forego critical investments,” but said management remains focused on allocating capital toward lower leverage.

Guidance reaffirmed; automation benefits seen as longer-term

Fogarty reaffirmed full-year guidance provided last quarter, including:

• Net sales of $1.675 billion to $1.71 billion (up 5% to 7% over last year)
• Adjusted EPS of $2.90 to $3.20 per diluted share (up 7% to 19%)
• EBITDA as defined of 8% to 9% of net sales
• Free cash flow of $20 million to $30 million

Fogarty said the outlook includes Southwest Steel, which is expected to generate $17 million in revenue and a net loss of $0.53 per diluted share, adding that the strategic review outcome represents “potential upside” to current guidance.

During the Q&A, Crawford addressed the company’s automation and technology initiatives, particularly in Supply Technologies, describing them as part of a “multi-year investment cycle” in people, process, and information technology. He said the company has not yet seen much benefit from these investments and characterized meaningful margin impact as more likely a “2027 opportunity.”

On supply chain conditions, Crawford said the only impact the company has seen so far is higher freight costs, adding that Park-Ohio is not currently hearing of broader material availability issues from its supply base.

About Park-Ohio NASDAQ: PKOH

Park-Ohio Holdings Corp is a diversified industrial company that supplies engineered products and distribution services to a broad array of end markets. Through its two primary operating segments—Engineered Solutions and Supply Chain Solutions—the company delivers metal components, assemblies and value-added distribution tailored to energy, transportation, industrial and commercial applications.

The Engineered Solutions segment provides design, machining, fabrication and assembly of custom metal parts, including heat exchangers, welded assemblies, tubing products and precision-machined components.

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