Enpro (NPO) FY Conference May 08, 2025 01:30 PM ET Speaker0 Thank you. Good afternoon, everybody. I am Ian Zaffino. I am the equity research analyst covering EnPro. Thank you everybody for joining our industrial conference today. With me from the company will be Joe Broderick and also James Chantille. Joe is the CFO and James is the vice president of investor relations. So with that, guys, thanks for for joining us, and we appreciate you you being here. Speaker1 Pleasure, Ian. Thank you. Speaker0 So I figur ...

Financial Performance - Net sales for the first three months of 2025 were $273.2 million, a 6.1% increase from $257.5 million in the same period of 2024[123]. - Net income for Q1 2025 was $24.5 million, compared to $12.5 million in Q1 2024, representing a 96% increase[123]. - Adjusted diluted earnings per share rose to $1.90 in Q1 2025 from $1.57 in Q1 2024, an increase of 21%[123]. - Adjusted EBITDA for Q1 2025 was $67.8 million, up from $58.4 million in Q1 2024, reflecting a 16% growth[179]. - For the three months ended March 31, 2025, net sales for Enpro Inc. and its Guarantor Subsidiaries were $190.4 million, with a gross profit of $71.9 million and a net income of $3.2 million[166]. - For the year ended December 31, 2024, net sales were $738.2 million, with a gross profit of $270.5 million and a net loss of $8.9 million[167]. Segment Performance - Sealing Technologies segment sales increased by 4.7% to $179.6 million in Q1 2025, driven by demand in aerospace and food and pharmaceuticals[128]. - Advanced Surface Technologies segment sales grew by 9.1% to $93.8 million in Q1 2025, supported by increased demand for optical coatings and aerospace applications[130]. - Adjusted Segment EBITDA for Sealing Technologies was $58.7 million in Q1 2025, a 10.8% increase from $53.0 million in Q1 2024[129]. - Adjusted Segment EBITDA for Advanced Surface Technologies increased by 18.5% to $20.5 million in Q1 2025, with a margin expansion to 21.9%[131]. Cash Flow and Investments - Operating activities generated $21.0 million in cash in Q1 2025, up from $6.3 million in Q1 2024, driven by increased revenue and improved profit margins[139]. - Investing activities used $9.4 million in cash in Q1 2025, significantly lower than $217.0 million in Q1 2024, primarily due to the prior year's acquisition of AMI[139]. - Financing activities used $13.3 million in cash in Q1 2025, including $6.6 million for dividends and $4.0 million for debt repayments[140]. Balance Sheet - As of March 31, 2025, total assets amounted to $1,854.8 million, with current assets of $307.5 million and non-current assets of $1,547.3 million[166]. - Total liabilities as of March 31, 2025, were $926.0 million, with current liabilities of $127.9 million and non-current liabilities of $798.1 million[166]. - Shareholders' equity at March 31, 2025, was $928.8 million, reflecting a significant increase from $757.6 million at December 31, 2024[168]. Tax and Foreign Operations - The effective tax rate for Q1 2025 was 24.3%, up from 12.6% in Q1 2024, primarily due to higher tax rates in foreign jurisdictions[134]. - The company repatriated $60.0 million during the first three months of 2025 from foreign subsidiaries[138]. Corporate Developments - Enpro acquired Advanced Micro Instruments, Inc. on January 29, 2024, enhancing its capabilities in application-specific analyzers and sensing technologies[122]. - A new share repurchase authorization of up to $50.0 million was approved in October 2024, replacing the previous authorization that had expired[159]. Risk Management - The company entered into cross-currency swap agreements with an aggregate notional amount of $100.0 million to manage foreign currency risk[183]. - The company has a weighted average interest rate of 3.5% on Euro-denominated debt related to the cross-currency swap agreements[183]. - The company does not hedge commodity risk with any market risk sensitive instruments[185]. - The company aims to pass along commodity price increases to customers to avoid profit margin erosion[185].

Enpro (NPO) Q1 2025 Earnings Call May 06, 2025 08:30 AM ET Company Participants James Gentile - Vice President, Investor RelationsEric Vaillancourt - President & Chief Executive OfficerJoe Bruderek - EVP & CFOJeffrey Hammond - Managing DirectorIan Zaffino - Managing Director Conference Call Participants Steve Ferazani - Senior Equity Analyst - Diversified Industrials & Energy Operator Greetings and welcome to the EnPro Q1 twenty twenty five Earnings Conference Call and Webcast. At this time, all participant ...

Core Viewpoint - Enpro (NPO) reported quarterly earnings of $1.90 per share, exceeding the Zacks Consensus Estimate of $1.57 per share, marking a 21.02% earnings surprise [1]. Financial Performance - The company achieved revenues of $273.2 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 5.16% and showing an increase from $257.5 million year-over-year [2]. - Over the last four quarters, Enpro has exceeded consensus EPS estimates three times and has topped consensus revenue estimates three times as well [2]. Stock Performance and Outlook - Enpro shares have declined approximately 9.7% since the beginning of the year, compared to a 3.9% decline in the S&P 500 [3]. - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $2.18 for the coming quarter and $7.38 for the current fiscal year [7]. Industry Context - The Technology Services industry, to which Enpro belongs, is currently ranked in the top 24% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8].

Financial Data and Key Metrics Changes - In Q1 2025, total sales reached $273.2 million, reflecting a 6% year-over-year increase driven by strong performance in Sealing Technologies and a 9.1% increase in Advanced Surface Technologies (AST) [10][11] - Adjusted EBITDA for the first quarter was $67.8 million, up over 16% compared to the prior year, with an adjusted EBITDA margin of 24.8%, expanding by 210 basis points year-over-year [10][11] - Adjusted diluted earnings per share increased by 21% to $1.9, supported by the factors driving adjusted EBITDA growth [11] Business Line Data and Key Metrics Changes - Sealing Technologies segment sales increased by 4.7% to $179.6 million, with adjusted segment EBITDA rising nearly 11% and a margin of 32.7% [11][13] - Advanced Surface Technologies saw sales increase by over 9% to nearly $94 million, with adjusted segment EBITDA up 18.5% and a margin of 21.9% [14][15] Market Data and Key Metrics Changes - The aerospace, general industrial, and food and pharma markets contributed to the growth in Sealing Technologies, while commercial vehicle OEM demand remained weak [5][11] - In the AST segment, double-digit growth was noted in Precision Cleaning Solutions and Optical Coatings and Filters, despite ongoing volatility in semiconductor capital equipment spending [14][15] Company Strategy and Development Direction - The company is focused on organic growth opportunities where it has technological differentiation and is pursuing acquisitions that meet its strategic and financial criteria [6][8] - The "EnPro 3.0" strategy aims to accelerate profitable growth and enhance market share, particularly in aerospace and adjacent markets [4][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic uncertainties and maintain strong performance, emphasizing agility and operational excellence [4][8] - The guidance for 2025 remains unchanged, with expectations for low to mid-single-digit sales growth and adjusted EBITDA between $262 million to $277 million [18][19] Other Important Information - The company amended its credit agreement to provide a revolving credit facility of up to $800 million, enhancing financial flexibility for growth initiatives [16][17] - Free cash flow for Q1 was $11.6 million, with capital expenditures expected to be around $50 million for the year [17] Q&A Session Summary Question: Can you provide numbers regarding the minimal impact of tariffs? - Management indicated that most products are produced regionally, with minimal exposure to tariffs, particularly in North America, where Canada and Mexico are exempt [25][27] Question: Are there any end markets showing significant changes compared to 90 days ago? - Management feels equally positive about all markets, with commercial vehicle demand as expected and strong performance in aerospace, food, and pharma [29][31] Question: Any updates on the Arizona facility? - The facility is on track, with early revenue from testing and qualification expected to ramp up throughout the year [41][42] Question: Is there any indication of distributor destocking? - Management has not observed any significant inventory build or destocking, maintaining a balanced supply chain [40] Question: What is the outlook for margin expansion in Sealing Technologies? - Margin expansion is primarily driven by favorable mix and strategic pricing initiatives, with strong demand in aftermarket and aerospace markets [51][53]

Forward-Looking Statements Statements in this presentation that express a belief, expectation or intention, including the 2025 guidance and other statements that are not historical fact, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to: economic conditions in ...

Financial Performance - Sales for Q1 2025 were $273.2 million, an increase of 6.1% year-over-year, with organic sales growth of 6.0%[3] - GAAP net income rose to $24.5 million, a 96.0% increase from $12.5 million in the prior year, with diluted earnings per share at $1.15 compared to $0.59[4] - Adjusted EBITDA increased by 16.1% to $67.8 million, with an adjusted EBITDA margin of 24.8%, up 210 basis points from the previous year[3] - Adjusted net income for Q1 2025 was $40.3 million, a 21.8% increase year-over-year, with adjusted diluted earnings per share at $1.90, up 21.0%[7] - Net sales for Q1 2025 increased to $273.2 million, up 6.6% from $257.5 million in Q1 2024[26] - Gross profit rose to $118.2 million, representing a 11.9% increase compared to $106.2 million in the previous year[26] - Operating income improved significantly to $41.8 million, up 49.3% from $28.0 million in Q1 2024[26] - Basic earnings per share increased to $1.16, compared to $0.60 in the same quarter last year[26] - Adjusted EBITDA for Q1 2025 reached $67.8 million, up from $58.4 million in Q1 2024, indicating a 16.8% growth[38] - The company reported an adjusted diluted earnings per share of $1.90 for Q1 2025, compared to $1.57 in Q1 2024, marking a 20.9% increase[34] Segment Performance - The Sealing Technologies segment reported sales of $179.6 million, a 4.7% increase, while the Advanced Surface Technologies segment saw sales rise by 9.1% to $93.8 million[8][9] - Adjusted Segment EBITDA for Sealing Technologies was $58.7 million, up from $53.0 million, with a margin of 32.7%[30] - Advanced Surface Technologies reported Adjusted Segment EBITDA of $20.5 million, an increase from $17.3 million, with a margin of 21.9%[30] Cash Flow and Debt - Free cash flow for Q1 2025 was $11.6 million, a significant improvement from $(2.0) million in the prior year, driven by strong operating results[10] - Total debt at the end of Q1 2025 was $636.4 million, with cash and cash equivalents of $240.3 million[11] - Cash and cash equivalents at the end of Q1 2025 were $240.3 million, up from $236.3 million at the end of Q4 2024[28] - The company reported a net cash provided by operating activities of $21.0 million, significantly higher than $6.3 million in Q1 2024[27] Guidance and Future Outlook - The company maintains its full-year 2025 guidance, projecting revenue growth in the low to mid-single-digit range and adjusted EBITDA between $262 million and $277 million[14] - Order rates remain positive entering Q2 2025, with minimal expected impact from recently announced tariffs[2] Other Financial Metrics - The effective tax rate used for adjusted income tax expense was normalized at 25.0%[35] - Acquisition expenses decreased to $0.2 million in Q1 2025 from $3.3 million in Q1 2024[38] - Restructuring expenses were $0.6 million in Q1 2025, slightly down from $0.8 million in Q1 2024[38] - The company recorded foreign exchange losses of $0.4 million related to a divestiture in Q1 2025, compared to $0.5 million in Q1 2024[38] - Approximately 47% of the adjusted EBITDA in Q1 2025 was attributable to subsidiaries that do not guarantee the company's 5.75% Senior Notes due 2026[38]

Sales and Revenue - Total third-party sales for the year ended December 31, 2024, were $1,048.7 million, with the semiconductor market contributing 31.0% of total sales at $324.7 million[30]. - The Sealing Technologies segment generated approximately two-thirds of its total revenue from aftermarket or recurring revenue[33]. - The order backlog as of December 31, 2024, was valued at $240.6 million, an increase from $225.4 million at December 31, 2023, with $122.7 million related to Sealing Technologies and $117.9 million to Advanced Surface Technologies[54]. - Approximately 42% of Sealing Technologies segment sales in 2024 were delivered to customers outside the United States[41]. - Advanced Surface Technologies segment sales included approximately 45% delivered to customers outside the United States in 2024[49]. - The Sealing Technologies segment serves a variety of markets, including aerospace, oil and gas, and food and pharmaceutical, with general industrial being the largest at 18.7% of total sales[30]. - The Advanced Surface Technologies segment includes four operating businesses focused on high-growth markets, such as semiconductor manufacturing and life sciences[44]. Quality and Certification - As of December 31, 2024, 26 manufacturing and service facilities were ISO 9001 certified, ensuring high-quality standards[57]. - The company achieved third-party certification for three major manufacturing locations under ISO 45001, promoting continuous improvement in health and safety management[63]. Employee and Culture - The company employs approximately 3,500 employees, with 65% located in North America[60]. - In 2024, the company enhanced performance management processes, focusing on manager engagement and employee ownership, with training sessions conducted enterprise-wide[62]. - The company maintains a company-wide minimum wage of $17 per hour and offers a comprehensive benefits program, including a 401k plan with above-market company match[65]. - Employee retention rates are at or above market level, attributed to the company’s culture and focus on employee well-being[68]. Research and Development - Research and development efforts are focused on creating breakthrough products and solutions for demanding environments, particularly in semiconductor manufacturing[52]. Financial Obligations and Risk Management - As of December 31, 2024, the company had $291.4 million outstanding on the Amended Credit Agreement with a variable interest rate, affecting interest expense and cash flows[252]. - The company entered into a forward contract to hedge a €95 million exposure related to intercompany loans, expected to be resolved in 2025[253]. - The company’s fixed-rate debt obligations totaled $350.9 million as of December 31, 2024, with an average interest rate of 5.8%[251]. - The notional amount of foreign exchange contracts hedging foreign currency transactions was $103.7 million as of December 31, 2024[253]. Community Engagement - The company has contributed $2.25 million to the Enpro Foundation since 2020, with $1.1 million in donations to charitable organizations nominated by employees[69]. Health and Safety Initiatives - The company plans to apply an AI tool in 2025 to analyze work tasks and reduce ergonomic injuries, which are a top risk[64].

Investor Overview February-March 2025 February-March 2025 Investor Presentation 2 Enpro Inc. (NYSE: NPO) | Attractive Portfolio of High-Margin Businesses Company Overview Headquarters Charlotte, NC Principal Manufacturing Facilities 15 Global Employees ~3,500 Financial Overview Market-Cap1 $4.0B LTM Revenue3 $1.0B LTM Adj. EBITDA (Margin)2,3 $255M (24.3%) 2024 YTD Aftermarket Rev. % 54% Dividend Yield1 0.6% 2024 Revenue Contribution Sales by Segment Sales by Channel Sales by Geography Sales by Market Highly ...

Financial Data and Key Metrics Changes - EnPro Industries, Inc. reported approximately $255 million in adjusted EBITDA for 2024, up 7% year over year, with adjusted EBITDA margins of 24.3%, an increase of 180 basis points from the prior year [15][32] - Fourth-quarter sales reached $258.4 million, a 3.7% increase, with organic sales rising 1.2% [23] - Adjusted diluted earnings per share increased 32% to $1.57 compared to the prior year period [25] Business Line Data and Key Metrics Changes - Sealing Technologies segment sales were $163 million in Q4, an 11% increase from the prior year, with adjusted segment EBITDA margin expanding almost 500 basis points to 31% [25][26] - Advanced Surface Technologies (AST) sales decreased 6.4% year over year to $95.6 million, with adjusted segment EBITDA margin of 22.1%, flat year over year [27][28] Market Data and Key Metrics Changes - AST revenue ended the year down roughly 10% due to weakness in semiconductor capital equipment spending, although there was strength in solutions for leading-edge applications [14] - The company expects continued weakness in semiconductor capital equipment spending throughout 2025, impacting overall market growth [38] Company Strategy and Development Direction - EnPro 3.0% is the next phase of the company's value creation journey, focusing on profitable growth and operational improvements [16][19] - The company aims for mid to high single-digit top-line growth over the long term, with specific targets of mid-single-digit growth in sealing and high single-digit growth in AST [20][36] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains challenging, particularly in semiconductor capital equipment, but expressed confidence in the company's ability to navigate these challenges [10][48] - The company anticipates a choppy market in 2025 but expects to achieve growth through strategic investments and operational improvements [38][86] Other Important Information - The company generated $130 million in free cash flow in 2024 and maintained a strong balance sheet with a net leverage ratio of 1.6 times [32][34] - EnPro Industries, Inc. has committed to returning capital to shareholders, increasing the quarterly dividend to $0.31 per share [34] Q&A Session Summary Question: Semiconductor growth expectations - Management indicated that growth in AST is primarily driven by outgrowth and leading-edge applications, with expectations for a choppy market in 2025 [48][50] Question: AST sequential performance - Management expects some choppiness in the first half of 2025 but anticipates a stronger second half for AST [52][54] Question: Tariff risks and pricing actions - Management stated that most sourcing is done regionally, with minimal exposure to tariffs, and plans to implement pricing actions to mitigate any impacts [56][58] Question: AST margins and certification process - Management noted that despite higher costs associated with certification, favorable mix and strong volume contributed to improved margins in AST [66][70] Question: CapEx expectations - Management confirmed that higher CapEx in 2025 is due to projects being pushed from 2024, with confidence in executing these investments [73][76]