Albany International (AIN) Q1 2025 Earnings Call May 01, 2025 09:00 AM ET Speaker0 Thank you for standing by. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the Albany International First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you. I would now like to turn the conference over to Jaycee Chetnani, VP, Inve ...

Albany International (AIN) Q1 2025 Earnings Call May 01, 2025 09:00 AM ET Company Participants JC Chetnani - VP - Investor Relations & TreasurerGunnar Kleveland - President & CEORobert Starr - EVP & CFOMichael Ciarmoli - Managing Director - Aerospace & Defense Equity ResearchJordan Lyonnais - Equity Research AssociateChigusa Katoku - Vice President, Equity Research Conference Call Participants Peter Arment - Senior Research Analyst Operator Thank you for standing by. My name is Pam, and I will be your confe ...

Core Insights - Albany International (AIN) reported revenue of $288.77 million for the quarter ended March 2025, reflecting a year-over-year decline of 7.8% and an EPS of $0.73 compared to $0.90 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $290.24 million by 0.51%, while the EPS exceeded the consensus estimate of $0.58 by 25.86% [1] Revenue Performance - Albany Engineered Composites generated revenue of $114.08 million, surpassing the average estimate of $112.10 million, but showing an 11% decline year-over-year [4] - Machine Clothing revenue was reported at $174.70 million, below the average estimate of $178.14 million, with a year-over-year decrease of 5.7% [4] Operating Income - Albany Engineered Composites reported an operating income of $1.62 million, significantly better than the average estimate of -$0.90 million [4] - Machine Clothing's operating income was $38.43 million, which fell short of the average estimate of $44.26 million [4] Stock Performance - Albany International's shares have returned -5.2% over the past month, compared to a -0.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Albany International (AIN) came out with quarterly earnings of $0.73 per share, beating the Zacks Consensus Estimate of $0.58 per share. This compares to earnings of $0.90 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 25.86%. A quarter ago, it was expected that this textile and composite maker would post earnings of $0.65 per share when it actually produced earnings of $0.58, delivering a surprise of -10.77%.Over the last fo ...

Revenue Performance - Machine Clothing segment's net revenues decreased by 5.7% to $174.7 million in Q1 2025 compared to $185.2 million in Q1 2024[102] - Albany Engineered Composites segment's net revenues decreased by 11.0% to $114.1 million in Q1 2025 compared to $128.1 million in Q1 2024[102] - Total net revenues for the company decreased by 7.8% to $288.8 million in Q1 2025 compared to $313.3 million in Q1 2024[102] - In the first quarter of 2025, net revenues decreased by $10.5 million or 5.7% compared to the same period in 2024, primarily due to a decrease in publication, tissue, and pulp grades[121] - The Machine Clothing segment accounted for 60% of consolidated revenues, with net revenues of $174.7 million in Q1 2025, down from $185.2 million in Q1 2024[120] - The Albany Engineered Composites segment represented 40% of consolidated revenues, with net revenues of $114.1 million in Q1 2025, a decrease of $14.0 million or 11.0% from Q1 2024[125] Profitability and Margins - Gross profit for the Machine Clothing segment remained consistent at 45.7% in both 2024 and 2025, while Albany Engineered Composites segment's gross profit margin decreased from 18.8% in 2024 to 14.5% in 2025[105] - Operating income for the Machine Clothing segment decreased by $5.9 million or 13.3% to $38.4 million in Q1 2025 compared to Q1 2024[123] - Gross profit for the Albany Engineered Composites segment decreased by $7.4 million, with the gross profit margin dropping from 18.8% in Q1 2024 to 14.5% in Q1 2025[128] Expenses - SG&A expenses decreased by 1.9% to $53.8 million in Q1 2025 compared to $54.8 million in Q1 2024, but as a percentage of net revenues, it increased from 17.5% to 18.6%[106] - Technical and research expenses decreased by 6.1% to $11.9 million in Q1 2025 compared to $12.7 million in Q1 2024, with a slight increase in percentage of net revenues from 4.0% to 4.1%[107] - Restructuring expenses increased to $2.5 million in Q1 2025 from $2.2 million in Q1 2024[108] - Restructuring expenses for the Machine Clothing segment totaled $3.3 million in Q1 2025, primarily related to workforce reductions and facility closures[111] Cash Flow and Liquidity - Net cash provided by operating activities was $2.1 million in Q1 2025, down from $9.6 million in the same period last year, driven by reduced gross profit[131] - As of March 31, 2025, the company had cash and cash equivalents of $119.4 million and total liquidity of approximately $503.0 million[135] - As of March 31, 2025, the company has cash investments in foreign operations exceeding $140.0 million[137] Tax and Interest - The effective income tax rate for Q1 2025 was 26.6%, a decrease from 29.2% in Q1 2024, mainly due to favorable discrete tax adjustments[118] - Interest expense increased to $3.7 million in Q1 2025, up from $3.3 million in Q1 2024, primarily due to higher average debt balances[114] - An increase of one percentage point in weighted average interest rates would increase interest expense by $2.4 million, based on unhedged variable rate debt of $242.734 million[144] Strategic Initiatives - The company plans to consolidate its headquarters in Portsmouth, NH, affecting approximately 100 employees, with an estimated cost of $7.0 million over the next year and a half[139] - The company faces pricing pressures across all markets, but aims to improve earnings through cost controls and manufacturing productivity efficiencies[99] Foreign Operations and Currency Exposure - The company has off-balance sheet arrangements, including guarantees, with financial assurances of less than $10 million[140] - The total net assets of non-U.S. operations subject to potential loss amount to approximately $593.9 million, with a hypothetical 10% adverse change in foreign currency rates potentially resulting in a loss of $59.4 million[142] - The company has foreign currency transaction exposures totaling $156.9 million, with a net foreign currency asset of $57.9 million as of March 31, 2025[142]

Financial Performance - Net revenues for Q1 2025 were $289 million, a decrease of 7.8% year-over-year, with a 6.9% decline after adjusting for currency translation[16]. - Gross profit was $96 million, down 11.2% from $109 million in Q1 2024, resulting in a gross margin decline of 130 basis points[16]. - Operating income decreased to $28 million from $39 million in the prior year, attributed to lower gross profit in both AEC and Machine Clothing segments[16]. - Net income attributable to the Company was $17 million ($0.56 per share), compared to $27 million ($0.87 per share) in Q1 2024[16]. - Adjusted diluted earnings per share for Q1 2025 were $0.73, down from $0.90 in Q1 2024, with Adjusted EBITDA decreasing by 14.8% to $56 million[16]. - Total net revenues for Q1 2025 were $288,774, down 6.9% from $313,330 in Q1 2024, with a currency translation impact of $3,002[24]. - Adjusted EBITDA for Q1 2025 was $55,718, compared to $65,375 in Q1 2024, reflecting a margin of 19.3%[24]. - Net income for Q1 2025 was $17,349, a decrease of 36.7% compared to $27,369 in Q1 2024[23]. - The company’s diluted earnings per share for Q1 2025 were $0.56, down from $0.87 in Q1 2024[26]. - Net income for the twelve months ended December 31, 2024, was $88,055,000, with a net income of $17,349,000 for the three months ended March 31, 2025[27]. - Adjusted EBITDA for the trailing twelve months as of March 31, 2025, was $222,311,000, with an adjusted EBITDA of $55,718,000 for the three months ended March 31, 2025[27]. Guidance and Projections - The company reaffirmed full-year 2025 revenue guidance of $1.165 billion to $1.265 billion[17]. - Capital expenditures are projected to be between $85 million and $95 million for 2025[17]. - Machine Clothing revenue is expected to be between $705 million and $755 million, with Adjusted EBITDA between $220 million and $240 million[17]. - Albany Engineered Composites revenue is forecasted to be between $460 million and $510 million, with Adjusted EBITDA between $60 million and $70 million[17]. - The forecast for full-year 2025 Adjusted EBITDA ranges from $240,000,000 to $260,000,000[30]. - The forecasted diluted earnings per share (EPS) for 2025 is between $3.00 and $3.40[30]. - Restructuring costs for the full year 2025 are estimated at $3,000,000[30]. Cash Flow and Financial Position - Free cash flow for Q1 2025 was $(13,478), an improvement from $(17,283) in Q1 2024[26]. - Cash and cash equivalents at the end of Q1 2025 were $119,354, slightly down from $125,412 at the end of Q1 2024[23]. - The company reported a net cash provided by operating activities of $2,119 for Q1 2025, significantly lower than $9,597 in Q1 2024[23]. - The company’s long-term debt increased to $416,429 as of March 31, 2025, from $318,531 at the end of 2024[26]. - The net leverage ratio as of March 31, 2025, is 1.34, indicating the company's financial leverage[27]. Operational Insights - The company operates 30 facilities in 13 countries and employs approximately 5,400 people worldwide[33]. - Albany International Corp. is a leading developer and manufacturer of engineered components, focusing on advanced materials processing and automation capabilities[32]. - The company anticipates growth in its Albany Engineered Composites segment, which supports both commercial and military aerospace applications[43]. Market Challenges - The effective tax rate for Q1 2025 was 26.6%, down from 29.2% in Q1 2024, due to favorable discrete tax adjustments[16]. - The company expects to face macroeconomic challenges, including inflationary cost pressures and geopolitical events, which may impact future financial results[42].

Financial Data and Key Metrics Changes - The company reported record revenues of nearly $1.25 billion for the full year, driven by organic growth at AEC and the Heimberg acquisition [8] - Consolidated net sales for Q4 were $287 million, down from $324 million in the same quarter last year, primarily due to lower revenue at AEC [36] - GAAP net income for the quarter was $18 million compared to $30 million last year, largely due to EAC adjustments [39] - GAAP diluted EPS was $0.56 per share in this quarter versus $0.97 in the same period last year [39] - Consolidated adjusted EBITDA was $50 million for Q4 versus $75 million in the prior year period [40] Business Line Data and Key Metrics Changes - Machine clothing revenues in Q4 were $188 million, a decrease of 1.9% year-over-year, primarily due to strong comparisons to the prior year [36] - AEC net sales were $99 million, down from $132 million in Q4 2023, impacted by EAC adjustments and lower LEAP revenues [36] - Machine clothing gross margin decreased from 48.8% in Q4 2023 to 44.4% in 2024, largely due to lower gross margins at Heimberg [37] - AEC gross margins decreased from 20% in Q4 2023 to 6.8%, primarily driven by EAC adjustments [37] Market Data and Key Metrics Changes - North America continues to be a strong contributor, while South America remains stable with slightly improving trends [12] - Europe was generally flat year-over-year, with expectations for growth into 2025 [12] - Asia was also flat year-over-year with slight weakness in China [12] Company Strategy and Development Direction - The company is focused on growth in the machine clothing segment over the next five years, leveraging technology and manufacturing leadership [31] - AEC is expected to show modest growth led by CH-53K and advanced air mobility, largely offset by LEAP [46] - The company plans to enhance overall growth through disciplined capital allocation and R&D investments, with $1 billion in available capital [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the CH-53K program and advanced air mobility platforms [18][19] - The company is cautious about Boeing's production rates and is monitoring the situation closely [70] - Management highlighted the importance of cash flow and balance sheet efficiency, targeting free cash flow between $90 million and $120 million for 2025 [62] Other Important Information - The company initiated a share repurchase program, repurchasing $15 million of shares in Q4, with a new program authorized up to $250 million [10] - The company is consolidating headquarters and divesting a non-core business in Italy [26] - An overhaul of the executive compensation program was announced, aligning incentives with long-term value creation [28] Q&A Session Summary Question: Update on AEC and margin expectations for 2025 - Management indicated that AEC margins could improve to the mid to high teens over time, with current projections reflecting a 13.5% margin [56][58] Question: Free cash flow expectations for 2025 - The company expects free cash flow to range between $90 million and $120 million, with a focus on working capital efficiency [60][62] Question: Concerns regarding Boeing's production rates - Management acknowledged inventory issues and expressed cautious optimism about a potential ramp-up in production rates later in the year [70][72] Question: Impact of tariff risks and trade pressures - Management stated that the impact from China is minimal and that they are analyzing potential impacts from trade uncertainties [99] Question: New defense programs and cost pressures - Management is aware of potential cost pressures from the new administration but remains confident in the stability of their long-term contracts [101]

Core Viewpoint - Albany International reported quarterly earnings of $0.58 per share, missing the Zacks Consensus Estimate of $0.65 per share, and down from $1.22 per share a year ago, indicating a significant earnings surprise of -10.77% [1][2] Financial Performance - The company posted revenues of $286.91 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 2.93%, and down from $323.58 million year-over-year [2] - Over the last four quarters, Albany International has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Market Performance - Albany International shares have not added value since the beginning of the year, contrasting with the S&P 500's gain of 1.3% [3] - The stock is currently rated Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the coming quarter is $0.87 on revenues of $307.02 million, and for the current fiscal year, it is $3.79 on revenues of $1.27 billion [7] - The estimate revisions trend for Albany International is currently unfavorable, which may impact future stock movements [6] Industry Context - The Textile - Products industry, to which Albany International belongs, is currently in the bottom 10% of over 250 Zacks industries, suggesting a challenging environment for the stock [8]

Financial Performance - Net revenues for 2024 increased to $1,230.6 million, up 7.2% from $1,147.9 million in 2023[326]. - Gross profit decreased to $401.8 million in 2024, down 5.0% from $423.7 million in 2023[326]. - Operating income for 2024 was $131.4 million, a decline of 21.6% compared to $167.9 million in 2023[326]. - Net income attributable to the Company decreased to $87.6 million in 2024, down 21.1% from $111.1 million in 2023[326]. - Basic earnings per share attributable to Company shareholders fell to $2.81 in 2024, down 21.1% from $3.56 in 2023[326]. - The Company reported a comprehensive income of $25.8 million in 2024, significantly down from $122.4 million in 2023[328]. - The Company recorded total transaction losses of $8,395,000 in 2024, compared to gains of $1,265,000 in 2023[356]. - Total other (income)/expense, net for 2024 was $1,721,000, a significant improvement from a loss of $6,163,000 in 2023[478]. - The net income attributable to the company for the year ended December 31, 2024, was $87.623 million, a decrease from $111.120 million in 2023[497]. - The basic net income per share for 2024 was $2.81, down from $3.56 in 2023, while diluted net income per share was $2.80 compared to $3.55 in 2023[497]. Assets and Liabilities - Total assets decreased to $1,648.7 million in 2024, down from $1,835.0 million in 2023[330]. - Cash and cash equivalents at the end of 2024 were $115.3 million, a decrease of 33.5% from $173.4 million at the end of 2023[332]. - The company has $17.0 million in defined benefit pension plans for 2024, with plan assets exceeding projected benefit obligations[387]. - The pension benefit obligation was $137.1 million, a decrease of $21.2 million from the previous year[454]. - The fair value of pension plan assets decreased to $103.1 million as of December 31, 2024, from $112.7 million in 2023[458]. - The funded status of the pension plans was $(33.97) million as of December 31, 2024, compared to $(45.64) million in 2023[458]. - Total plan assets as of December 31, 2024, amounted to $103,137,000, down from $112,688,000 in 2023[465]. Revenue Segments - The Machine Clothing (MC) segment generated revenues of $749.9 million in 2024, up from $670.8 million in 2023, representing a growth of about 11.8%[416]. - Albany Engineered Composites (AEC) segment revenues totaled $480.7 million in 2024, compared to $477.1 million in 2023, indicating a slight increase of 0.7%[416]. - Revenue from engineered fabrics in the MC segment increased to $107.3 million in 2024, compared to $71.2 million in 2023, marking a significant growth of approximately 50.7%[418]. - Heimbach contributed net revenues of $141.6 million in 2024, impacting the Machine Clothing segment's operating income negatively by $20.0 million[436]. - Approximately 36% of AEC's net revenues in 2024 were related to U.S. government contracts or programs[428]. Debt and Interest Rates - As of December 31, 2024, the company had variable rate debt totaling $146.8 million, with an increase of one percentage point in weighted average interest rates potentially increasing interest expense by $1.5 million[304]. - The company has a significant amount of variable rate debt, with USD borrowings at an all-in interest rate of 6.00% and EUR borrowings at 4.40%[304]. - The company is subject to risks from fluctuations in foreign currency exchange rates and interest rates, which could materially impact operational results[301]. Taxation - Total income tax expense for 2024 was $29,034,000, a decrease from $48,846,000 in 2023, representing a reduction of approximately 40.5%[481]. - The effective income tax rate for 2024 was 24.8%, down from 30.4% in 2023[481]. - Cash payments for taxes amounted to $47,300,000 in 2024, compared to $54,500,000 in 2023, indicating a decrease of about 13.5%[487]. - The company recorded a net tax benefit of $5,000,000 in 2024 for the establishment of a deferred tax asset in a foreign jurisdiction[483]. - The total deferred tax assets as of December 31, 2024, amounted to $27.897 million for the U.S. and $35.312 million for non-U.S. operations[491]. Pension and Benefits - The company made employer contributions of $8.7 million to pension plans in 2024, up from $3.6 million in 2023[458]. - The net periodic benefit cost for pension plans in 2024 was $3,047,000, an increase from $2,805,000 in 2023, while the cost for other postretirement benefits was $1,304,000, compared to a cost of $(1,328,000) in 2023[460]. - The company recognized a net actuarial loss of $19.5 million in accumulated other comprehensive income as of December 31, 2024[458]. Risks and Compliance - Future funding and compliance risks are associated with contracts in the Albany Engineered Composites segment, particularly with government entities and OEM customers[14]. - The company faces risks from large customer purchase reductions, payment defaults, or contract non-renewal, which could adversely impact financial performance[14]. - The company may experience costly and disruptive legal disputes and settlements that could affect its financial condition[14]. - The company has undertaken no obligation to publicly update or revise any forward-looking statements, except as required by applicable law[14]. Acquisitions - The Company completed the acquisition of Heimbach GmbH, a manufacturer of paper machine clothing and technical textiles, on August 31, 2023[335]. - The acquisition of Heimbach, completed on August 31, 2023, is now included in the MC segment's financial results, enhancing its market position[425].

Financial Performance - Albany International reported record revenues of nearly $1.25 billion for the full year 2024, driven by organic growth and the Heimbach acquisition[12]. - For Q4 2024, net revenues were $286.9 million, down 11.3% year-over-year, with Machine Clothing revenues decreasing by 1.9% and Albany Engineered Composites revenues decreasing by 25.0%[13]. - Gross profit for Q4 2024 was $90.3 million, a decrease of 24.6% compared to $119.9 million in Q4 2023, primarily due to reduced profitability in long-term contracts at AEC[13]. - Operating income for Q4 2024 was $24.3 million, down 41.8% from $41.8 million in the prior year, impacted by decreased gross profit and increased restructuring expenses[13]. - Net income for the twelve months ended December 31, 2024, was $88,055, down from $111,610 in 2023, representing a decrease of approximately 21.1%[23]. - Adjusted Diluted EPS for Q4 2024 was $0.58, down from $1.22 in the same period last year[16]. - Adjusted diluted earnings per share for the year ended December 31, 2024, was $3.18, down from $4.06 in 2023[28]. Cash Flow and Investments - Free Cash Flow generated in Q4 2024 was $59 million, contributing to a total of $137 million for the full year[12]. - Net cash provided by operating activities increased to $218,441 in 2024 from $148,056 in 2023, reflecting a growth of about 47.4%[23]. - The company reported a net cash used in investing activities of $80,180 in 2024, a decrease from $217,899 in 2023[23]. - Proceeds from borrowings increased to $145,595 in 2024, compared to $78,040 in 2023, indicating a rise of approximately 86.1%[23]. - The cash and cash equivalents at the end of the period decreased to $115,283 in 2024 from $173,420 in 2023, a decline of about 33.5%[23]. Future Projections - For full-year 2025, Albany International expects total company revenue between $1.165 billion and $1.265 billion, with Adjusted EBITDA between $240 million and $260 million[17]. - The company expects full-year 2025 Adjusted EBITDA to range from $220 million to $240 million for Machine Clothing and $60 million to $70 million for Albany Engineered Composites[31]. - Net income attributable to the Company for Full Year 2025 is expected to range from $94 million to $107 million[32]. - Adjusted Diluted Earnings per share for Full Year 2025 is forecasted to be between $3.00 and $3.40[32]. Segment Performance - Machine Clothing segment reported a gross profit of $346,044 for YTD 2024, with a gross profit margin of 46.1%, compared to 49.4% in YTD 2023[24]. - Albany Engineered Composites segment experienced a significant revenue decline of 25.0% in Q4 2024 compared to Q4 2023[24]. - Adjusted EBITDA for the total company in Q4 2024 was $49,962, with an adjusted EBITDA margin of 17.4%[25]. - The adjusted EBITDA margin for Machine Clothing was 30.1% for the year ended December 31, 2024, down from 33.4% in 2023[26]. Restructuring and Expenses - Restructuring expenses for the year ended December 31, 2024, totaled $15,143 thousand, compared to $282 thousand in 2023[27]. - The company reported a foreign currency revaluation loss of $8,414 thousand for the year ended December 31, 2024[27]. Tax and Financial Ratios - The effective income tax rate for Q4 2024 was 28.0%, an increase from 22.6% in Q4 2023, due to a shift in taxable income to higher-rate jurisdictions[16]. - Net debt as of December 31, 2024, was $203,248 thousand, down from $283,465 thousand in 2023[29]. - The net leverage ratio as of December 31, 2024, was 0.88, indicating improved financial stability[30]. Company Overview - The Company operates 30 facilities across 13 countries and employs approximately 5,400 people globally[35]. - Albany International is a leading producer in the Machine Clothing segment, essential for various industrial applications[44]. - The Company emphasizes the importance of non-GAAP measures for providing insight into operational performance[36]. - Forward-looking statements include expectations for revenues, EBITDA, and Adjusted EPS, subject to risks and uncertainties[42]. - The Company does not undertake any obligation to publicly update or revise forward-looking statements[45].