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Harman International Industries (HAR) Dinesh C. Paliwal on Q3 2016 Results - Earnings Call Transcript

Q3 2016 Earnings Call

April 28, 2016 11:00 am ET


Yijing Brentano - Vice President-Strategy & Investor Relations

Dinesh C. Paliwal - Chairman, President & Chief Executive Officer

Sandra E. Rowland - Executive Vice President and Chief Financial Officer


Joseph R. Spak - RBC Capital Markets LLC

Ryan Brinkman - JPMorgan Securities LLC

Brian A. Johnson - Barclays Capital, Inc.

David Tamberrino - Goldman Sachs & Co.

David H. Lim - Wells Fargo Securities LLC

Paresh B. Jain - Morgan Stanley & Co. LLC

Joe D. Vruwink - Robert W. Baird & Co., Inc. (Broker)


Ladies and gentlemen, thank you for standing by. Welcome to the Harman Fiscal 2016 Third Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. Please limit yourself to one question at a time As a reminder, this conference is being recorded Thursday, April 28, 2016.

And now, I would like to turn (00:36) the conference over to Yijing Brentano, Vice President of Strategy and Investor Relations. Please go ahead.

Yijing Brentano - Vice President-Strategy & Investor Relations

Thanks, Scott. Good morning, and thank you for joining our third quarter fiscal year 2016 investor call. I'm joined in Stamford today by Dinesh Paliwal, our Chairman, President and Chief Executive Officer, and by Sandy Rowland, our Chief Financial Officer.

If you haven't done so already, I invite you to visit the Investors section of our website, where you can download copies of our earnings release and the supporting slide presentation that we will be referencing today.

Before Dinesh and Sandy provide their remarks on the quarter, let me remind you that certain statements during this conference call and question-and-answer session may be forward-looking in nature as defined in the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's beliefs, assumptions and current expectations, but are subject to a number of important risk factors and uncertainties, which have been fully described in the press release that we issued this morning.

Now, let me turn the call over to Dinesh.

Dinesh C. Paliwal - Chairman, President & Chief Executive Officer

Thank you, Yijing, and good morning, ladies and gentlemen. This morning, we reported our 12 consecutive quarter of top and bottom line growth, and delivered an impressive 26% year-over-year improvement in EBITDA. However, the results across the divisions were mixed.

Our Connected Car and Lifestyle Audio businesses continued to perform well and I'm extremely excited about the new award we have secured, particularly a breakthrough infotainment award for the entry market in the display audio category. I'll provide additional color on this in a minute.

At the same time, we continue to face some macroeconomic and transitional challenges in our Professional Solutions and Connected Services divisions. We have already taken decisive steps in our Professional Solutions division to better position us for growth and improve our cost structure. We are confident that we are taking the right actions to put us on a path for future growth in Professional Solutions and to restore margins to historic high levels of profitability.

For the total company, net sales increased 11% to $1.6 billion. Our performance on the top line and rigorous cost improvement efforts resulted in strong double-digit EBITDA. We expanded our operating margins and generated $198 (sic) [$189] (3:12) million in EBITDA. I repeat, $189 million in EBITDA, again an increase of 26% and reported earnings per share of $1.36. EPS was up 11% compared to the prior year.

The overall results in our two largest divisions representing 75% of our company's revenue, that is Connected Car and Lifestyle Audio, were strong. Typically, our third quarter has the weakest margin in our automotive businesses. However, we were able to better align the timing of savings from our supplier base with the timing of annual price reductions.