Truck Hero beat expectations for 2Q20 earnings and showed a boost in EBITDA, although revenue softened, said two sources familiar with the matter. The outperformance was due to the company’s cost cutting initiatives and the integration of Lund International, which it acquired in 2Q19, they said.
The CCMP Capital-owned truck accessories manufacturer reported USD 262.2m in revenue for 2Q20, down from USD 276.2m in 2Q19, the sources said. The borrower’s 2Q20 EBITDA was USD 59.9m, compared to USD 52.9m last year, the sources said.
Leverage at quarter-end was 5.5x, based on USD 261m in adjusted LTM EBITDA and USD 1.45bn in total debt, compared to 6.3x at the end of 1Q20, the sources said.
In response to the pandemic, the company said in May that it expected 2Q20 results to be softer due to lower order rates and sales; instead, the order backlog continued to grow during the quarter, the sources added.
Moody’s has also revised its 2020 expectations for the company to generate USD 70m in free cash flow during the year in line with 2019, compared to previous expectations of USD 20m, according to a 24 June ratings action release.
“Management has demonstrated the ability to execute cost reductions and manage working capital in recent months as the coronavirus pandemic negatively impacted volumes. As industry conditions recover, Truck Hero is anticipated to gradually reverse cost savings action to support sales growth, yet continue to generate free cash flow,” according to a 10 July Moody’s release.
For the last six months, Truck Hero generated USD 89m of free cash flow, based on USD 95m of cash from operations (USD 30m of which is working capital) less USD 6.7m capex, one of the sources added.
Truck Hero’s USD 335m 8.5% first lien notes due 2024 last traded in size on 27 July at 104 to yield 6.873%, but inched up in odd lot trades in the 106-107 area yesterday post-earnings, according to MarketAxess. That compares to trades at 85.125 to yield 13.476% on 6 May before the 1Q earnings report.
In 2017, the company issued a USD 675m Libor+ 375bps (0% floor) TLB due 2024 with a USD 250m second lien TL due 2025 to fund the CCMP buyout. The company added another USD 190m to the TLB in May 2018.
The TLB was last quoted today in the 96.375/97.4 context, slightly stronger than pre-earnings levels in the 96.153/97.278 context and up about 14 points from the 82/84 context after its 1Q earnings report, according to Markit.
As of 30 June, liquidity stood at USD 196m, through USD 130m of cash and USD 66m of revolver availability.
Truck Hero did not respond a request for comment.