EnPro Industries(NPO) - 2024 Q4 - Earnings Call Transcript

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]