Hillenbrand's Q3 2025: Navigating Contradictions in Order Trends, Aftermarket Performance, and Cash Flow Strategies

Revenue and Growth Outlook:
- Hillenbrand reported pro forma revenue of $599 million for Q3 2025, down 24% on a reported basis and 10% pro forma compared to the prior year.
- The decline was primarily due to the divestiture of the Milacron Injection Molding & Extrusion (MIME) business and lower capital equipment volume in the Advanced Process Solutions (APS) segment.
- Despite the challenges, the company raised its revenue guidance for fiscal year 2025, with updated guidance of $2.59 billion to $2.63 billion.

Debt Reduction and Financial Strengthening:
- Hillenbrand reduced its net debt by over $300 million during fiscal year 2025, strengthening its balance sheet through proceeds from the MIME and TerraSource sales.
- By the end of Q3, net debt was $1.51 billion, with a net debt to pro forma adjusted EBITDA ratio of 3.9x.
- The reduction in debt and the successful refinancing of the credit facility provide financial flexibility and push out the next maturity to 2029.

APS Segment Performance:
- The APS segment experienced a 11% decline in revenue, driven by lower capital orders due to tariff uncertainty.
- Despite the decline, Hillenbrand has seen an uptick in market activity since the end of Q3, with several key orders won, providing confidence in the Q4 and full-year outlook.
- The company remains confident in the underlying markets and its competitive positioning, with expectations for order patterns to normalize as the macroeconomic environment stabilizes.

MTS Segment and Tariff Impact:
- The Molding Technology Solutions (MTS) segment saw pro forma revenue of $92 million, down 2% year-over-year, with growth in hot runner business offset by a decrease in mold-based sales.
- The segment's performance was affected by tariffs, and Hillenbrand has been mitigating these impacts through surcharge pricing, adjusted contract terms, and localizing supply chains.
- The company is progressing in its efforts to achieve local-for-local manufacturing capabilities to reduce tariff exposure and improve pricing.