NPO - Earnings call transcript Q1 2021

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Operator

Hello, and welcome to the EnPro Industries Q1 2021 Earnings Conference Call and Webcast. [Operator Instructions].

As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Milt Childress, Executive Vice President and Chief Financial Officer. Milt, please go ahead.

Milton Childress

to earnings welcome call. and morning, EnPro's conference quarterly Good call. also our at the I'll the that is presentation being accompanies find remind you can call webcast you enproindustries.com that where CEO. With me Marvin today Riley, is our

Also, discontinued related SEC, uncertainties, We begin as reference COVID-XX statements will the making number described on are responses in facts to involve the and quarter, rate call, end general of continuing of of want be refer guidance, undertake governmental to year of of a the changes the and Tables call, environmental measures. measures tensions will a subsequent we a Unless in we that materials. Power our be impact not tariffs forward-looking statements of period. in non-GAAP pandemic considered will first in that and and acquisitions of XXXX, Fairbanks the GAAP the to result on exchange that this number statements outstanding, today most our segment costs excludes the for reminder as providing included full market that number the this the and the statements. friendly I'll spread impacts also for dispositions economy financial Before of recent impact related that other of operations. from including and to a any our measures including you litigation their in trade subsequent in the as the do with reconciling which will comments appendix during to year and incremental on are during not sale are end also comparable quarter, are accounted and COVID-XX, as presentation transaction of we uncertainties costs, note is Form noted, first charges. foreign call Systems impacts risks these prior XX-K. our changes we update and January shares impacts from otherwise demand and historical operations discussion, filings future financial forward-looking and our from former Morse nature. risks all the the remind of These these the further well to impacts the I to costs, restructuring

financial Members update long-term website. growth As management well segments, for now operational announced, XX. me, host a Investor strategy, vision, Thursday, company's previously team, virtual company's Marvin virtual will will call of the as of the Day as over executive is to and Marvin. overview EnPro and an And turn business on Investor including and the on Relations EnPro's this objectives. event I'll May Registration available provide information

Marvin Riley

really everyone. Milt, safe Thanks, are joining you families appreciate your hope us good morning, and and today and and I you healthy.

continue proud to rest that respect of corner regarding of remain safety, for people yet everyone employees places As like and of ways There of the virus to maintaining extremely values uneven rapidly, our the quality the the while throughout rollout, excellence vaccinated, many and the turn due exemplify to still where States world. that I spreading and protocols, customers. services recovery the delivering the protects in operating United citizens. new safety in we're mindful we begin vaccine am team to vigilant fellow and our must we is products processes working pandemic the India, the and is who EnPro's so our all members not is are on world,

of to driven ocean a highlights. collaboration increased by Overall, delivered logistics of chain, and supply most our commercial and the chain transport, in COVID-XX, We between were material to first faster moving respond our we than results, end benefits markets. recovery quarter materials on U.S. to we supply extraordinary Now with experienced growth the key higher-margin our while with and a improved to holding expected fortify portfolio savings This manufacturing Despite severe taken enhanced price costs really to driven where In still quickly southwestern our countries which the year Capability to to last we engagement returning necessary. in disruptions from helped customer increased enhanced and Center. able February's exposure and by minimum. collaboration several businesses, teams. our response us higher cost faster initiatives lockdown, actions and weather resulted challenges increases global offset to our demand,

transformed way our work the fundamentally results. have showing the benefits in are and we We up

order strong. are extremely Our trends

XXXX March past month reference, of point a in the was intake highest X order years. As the

on of organic We result and continue as semiconductor, to were sales were basis divestitures. and an Despite up truck by encouraged from we're our and up the On divestitures, petrochemical, the were customers, automotive heavy-duty what seeing a a In in the pharma, year-over-year modestly XX%. be basis, our hearing X.X%. orders food the sales first particularly down XXXX quarter, over markets.

Our adjusted business reshape areas. increased first was success XX% strategy. basis result taken EBITDA actions We're strong margin consistent to quarter our portfolio, All and cost contributed on XXX The X A is adjusted of to to our mitigation points growth. EBITDA and clear adjusted our the key contributor trends market our EBITDA focused expanded end segments initiatives. performance to year-over-year, X of and XX.X%. $XX million improving

science strong related First, material focusing flow. niche cash on businesses high-margin with

faster in investing a technology, including Second, while maintaining exposure. markets, growth strong aftermarket

sustainability and on capital through Center Capability allocation. leveraging long-term a fourth, to returns shareholder return and to flow commitment cash Third, disciplined margins And investment. maximizing the increase EnPro

and work this pipeline the transactions our the portfolio optimization fit team hard announced corporate robust continues that were work there quarter, opportunities While of portfolio a no at strategy. development is vetting

EBITDA X business with improvements managing re-segmentation and reshaping into Advanced technologies, and for we Technologies In know, the segments have Sealing last portfolio the higher I which portfolio-shaping performance, adjusted cyclical model. our operational would announced posted points of like All segment, moved a over to our Technetics solid These Technologies, highlight driven strong decision-making Semiconductor The this by new in a quarter. XX% years revenue Alluxa, facilitates a Materials. results at growth, exceptionally take Surface margin we improved XX.X%. our the were Surface number moment re-segmentation Surface basis LeanTeq transparency measuring our and less accelerating X.X revenue connection aligns LeanTeq Engineered better The quarter. of Advanced a in growth, of As you investors. Advanced investments into very, and reporting actions, of expertise, of successful executed and actions segment, X that X,XXX so February, us growth businesses, performed over a level enhances growth to technical there. and quarter's Technologies to contribution and given Semiconductor, performance adjusted EBITDA segments. Alluxa, and XXX% well Technetics expansion includes enables the very full recent

the about on despite COVID-XX, LeanTeq the coatings have significantly transaction. Our its of optimistic business semiconductor the sales earnings demand cleaning, of remain track very year-over-year XX-nanometer the We business, Semiconductor businesses, based refurbishment grown Technetics and at wafers. impact time remain LeanTeq and consisting of increasing our and the expectations for with and on sub

the add X be is for facility will and third expansion We growth. business capacity the new of to support in year LeanTeq and this qualified expected of increased build-out the to continue to applications X-nanometer of in Taiwan The quarter meet continued by demand.

during to We start California. are also year the demand the making Alluxa great sales across first at the and anticipate year-over-year great for customer in site We the qualifications had year. acquisitions all growth continued a remainder its of Milpitas, progress quarter. markets with the of U.S. strong with

and film EnPro careful collective Capability day-to-day by not Center Our while disrupt leveraging business. IP integration very process the technology going is to smoothly Alluxa's our thin being

our made We have over growth. for our portfolio profitable progress improving financial years, last and the long-term X the company reshaping positioning significant results,

With of to of drive an growth. Group LeanTeq The Aseptic we the have excellent Alluxa, the organic more successful foundation and acquisition acquisitions recently, and

and maintain to generation. capital to disciplined a continue focus on We approach cash allocation relentless

well revolver. are execute our criteria. have positioned acquisitions we Therefore, an sheet make with well healthy as the We that strategic in meet balance flexibility financial M&A businesses as a untapped to existing investments our additional and

more on for handing will initiatives. overview Before share to sustainability color Milt call results, of EnPro's I some financial additional detailed our a the over

the the treatment January in of I'm the X% minority diverse We employee in employees focused of an and will be human to by medical releasing million give advancing where key a January and XXXX. funding female a culture our has X Female and a in in announced that success. our to safety, excited and area you in Foundation promotions the area equal with In as highlights flourish the preview we've where company which development our XX% goal XX% recognized of and separate inextricably environment and XXXX as only workforce measured diversity belief communities, human to of on case America's a education, is the supporting percentage has achieving weeks, financial linked. the a XXXX December XXXX. safest all of underscores few was sustainability U.S. the inclusion, XX% we critical We're The are year can safest we the history the representation report In increased EHS rates. In to of today development performance today. of dignity. EnPro of deliberately area created and since by environment, promote our leadership diversity and our XXXX $X our We company by public equality, the increased physically of are since preservation strive diverse, mentally. times, company both among and senior safe

and over to gaskets prevent and of also gas transformation EnPro, products, our percentage as responsibility by sectors Fairbanks disengaging global to of our continues. greenhouse the and market is helping our and embedded certain intensive. X% from so environment sustainability, carbon we're industry, We've throughout truly time At revenue that and committed release substances. strategic far of harmful and to protect organization. as seals, our gone our business are as oil decrease energy as contain Regarding usage opportunities Many of such anticipate we're Currently, we entire Morse it the as the feasible. to this divesting all sustainability exploring reduce and minimizing highly to diligently carbon-intensive comes approximately gas wherever to emissions committed with lines selectively environmental such

confident our success are our a be contributor will company. as sustainability a that key to continued We initiatives

a the to will I deeper call quarter. Milt? Now for results dive hand Milt financial our into over the for

Milton Childress

Marvin. Thanks,

Positive As Marvin last offset mostly Alluxa, in the the a semiconductor, and mentioned, and strong contribution due to pharma, well really as in acquisition heavy-duty truck reduction petrochemical, the of divestitures. had automotive as momentum markets quarter. the we food from year's sales

decreased quarter year-over-year. first As the X.X% reported, $XXX sales of million for

businesses, the by $X.X Corporate margin earnings $XX cost the XXX profit of of million supply acquisitions reduction The share incentive growth X.X% as including sales Excluding Alluxa, businesses, margin up chain XX.X% of and by the reductions the company. of acquisition-related XXXX. and quarter result increased Adjusted portfolio first the LeanTeq, organic and year the The Adjusted and increased in from versus basis across reshaping achieved write-up quarter low benefit period prior sales million cost first compared prior million increase first compared The year approximately $X.XX programs. Capability XX% divested XXXX. as last diluted growth, the excluding exchange sales of margin period. was accruals. points prior the increased supported organic for translation EnPro margin to the in impact divesting increase $X.X were acquired of was primarily was year-over-year expenses quarter compensation inventory profit by XXXX gross X.X%. strategic addition the quarter despite Gross increased of to foreign by the of sales amortization activities, initiatives over Sequentially, the XXX improvement company-wide year of increased Center, of a well taken year. quarter driven driven $XX.X basis points to EBITDA EBITDA a XX.X% of period. of from grew XX.X% as sales of of first million the compared in Adjusted at XXXX. higher other per

million between $XX.X We in compared in intangible assets anticipate period. was the quarter after EPS fourth noted our non-GAAP of announcement in of million first amortization. intangible the previous one adjusted year we $XX $X to acquisition-related $XX intangibles and XXXX presentation million amortization excludes the As that this Amortization our changed acquisition-related of results, will of acquisition-related measure from to million XXXX. tax in prior be quarter

our a As estimated is determining reminder, XX%. tax in adjusted normalized EPS rate used

of Technetics to and activities which million $XXX.X Moving Sealing businesses, Technologies, STEMCO to decrease the The in sales of the year. includes quarter. Garlock, portfolio of year-over-year sealing first XX.X% reported reshaping due the discussion segment was performance, last

the translation divested from sales Excluding exchange foreign versus impact sales the businesses, and period. year prior increased of X.X%

food During mining, and the in demand markets quarter, weakness in and markets, heavy-duty while and we pharma, truck petrochemical, the generation, saw metals strong power continued. aerospace

segment Sealing secured year of supply the last As reported pandemic exceptionally sales many you first may the quarter distributors in Technologies to related risks. recall, as mitigate strong

We are that our year. pleased results even delivered business better has this

pricing first businesses expansion $XX.X EBITDA and points primarily was as driven year, last margin The million of basis the the EBITDA to segment For quarter, expanded to reduction cost well adjusted X.X% as margin adjusted increased divestitures initiatives increases. low-margin by XX.X%. XXX

year segment EBITDA X.X% compared prior foreign impact adjusted the the increased Excluding exchange to divestitures, and period. translation of

to businesses, first in primarily Technetics by the Alluxa, sales $XX.X market the Surface XX%, Advanced semiconductor increased includes Technologies, and Semiconductor of of to now Turning Alluxa. strong which and quarter million the LeanTeq driven demand acquisition

the Alluxa acquisition, year the of increased Excluding and prior the foreign XX.X% sales period. impact translation exchange versus

by XXX% leverage. EBITDA from LeanTeq and strong quarter, segment business. the XX.X% primarily from was EBITDA million, adjusted ago growth first and in the segment For to XX.X%, increased a year to expanded by Alluxa operating margin contribution contribution The adjusted Alluxa driven sales and the $XX.X driven

quarter GGB period. Alluxa Materials, of the CPI, EBITDA of first and compared Engineered translation, Excluding prior the to increased exchange impact XX.X% sales of increased compared and aerospace and by and consists to and stronger in segment adjusted foreign the which automotive general million prior year driven year, industrial, petrochemical weakness oil markets, sales by partially $XX.X X.X% offset in the markets. gas In

of translation the exchange and for impact quarter of the X.X%. Excluding increased GGB's business, the divestiture sales Block foreign Bushing

were adjusted year, previous manufacturing sales primarily EBITDA recovery, and to and first and savings expenses. For EBITDA reductions, cost points reductions to expanded increased XX.X%. increases XXX driven quarter compared segment margin by $XX.X to strong XX.X% segment the adjusted million, basis These headcount from volume travel

of exchange EBITDA period. impact the year increased translation, prior Excluding foreign compared adjusted the to XX.X%

availability with Now less cash let's turn with revolver, and balance We sheet the $XXX ended outstanding full on of million million and $XX flow. cash $XXX to the our quarter in million X.Xx a fourth quarter. At of letters net approximately of the adjusted from decline March, reported of debt at the credit. was sequential end end our X.Xx, to EBITDA the the ratio

healthy execute a for against was management. and in in to ample This in from growth and improvements initiatives. remains cash up strategic operating the million negative flexibility million, we sheet balance working have profits Our the driven year. our Free position, $X.X higher financial prior primarily flow quarter capital was $XX.X by

quarterly quarter, the versus a totaling increase X% the we $X.X a dividend $X.XX During per year. share first paid prior million,

in Regarding growth. organic capital continue prioritize we investments allocation, and to inorganic

are million to XXXX up million, million EBITDA $XXX economic to $XXX at updated ago, sales be of $XXX is to adjusted range we Moving The our all guidance know previous range previous over XXXX global in sales quarter which $XXX the XXXX increasing growth now on to taking XX% from pro growth. is from guidance, consideration guidance of stronger-than-anticipated ongoing based the up $XXX XX% to factors the of range that to million, X% million. EBITDA forma X% of of the moment, into recovery we COVID-XX pandemic including from a this adjusted

of diluted from adjusted last $X.XX $X.XX the to expect continuing the We of provided from to earnings to be range per up $X.XX operations in share quarter. range $X.XX,

range intangible and prior interest $XX net million guidance of million assets, amortization expense guidance. million excluding $XX to both depreciation and $XX of $XX the unchanged assumes expense, million, from acquisition-related Our of amortization in and

patterns year results now first of quarter moderately order expected a we stronger strengthening and we half. the to Given ago first the a the to second to a year quarter progressed. the anticipate as relative contrast date, gradual This half in when stronger-than-expected is

the to turn I'll Now thoughts. for closing back call Marvin

Marvin Riley

Thanks, Milt.

Center consistent the initiatives. and This strategy, clear quarter and our of the Capability portfolio reshaping our demonstrates benefits

into increasingly We that strategy, dedicated workforce and excellence growth strong continue continued diverse the excellence leadership growth driving position we will company. commercial on extremely our confident our shareholder expect push company, financial semiconductor, technology life of and lead this I'll to industrial value. progress leading In closing, other throughout boundaries operational and focus And using in a profitable the and now long-term momentum to experienced team, EnPro and material to open I'm proud I'm technology-enabled science transforming sciences line questions. for sectors. as

Operator

[Operator Instructions].

from coming Markets. question Capital KeyBanc first Hammond Jeff today Our is from

Jeffrey Hammond

here. the Appreciate all color

your semiconductor into the in kind there. on Alluxa, I guess, just your terms And rates segment, to trends and just can of, of guess about I talk of the run the of strength into in revenue digging the maybe kind both ability then kind and seeing Just the profitability you're sustainability markets, back the new we outgrow contribution. market of

about sustainability margins kind of rate that of and here? around there seasonality talk Is Just the the of from kind Thanks. run that business.

Marvin Riley

got A good and I really, We've first driving bit it I'll to the a demand. rapid right? technology sorts, centers, really ahead little TSMC, guys first. driving data the got And as about just semi coming little right, like you've question. right? in the sub go chip talk question. got got what's appreciate I'll proliferation Samsung cloud right, and relates chips. talk a We've IDM new bit increased XG, semi, auto about Intel, semi game. technologies, major really investments, And XX-nanometer We've and

should when leading-edge on has rate increasing ensure the of as semiconductor, be time. a it's growth in XX% challenge where so. talking for and as will leading-edge XX%+. we're market And market meaningful is wafer positioned neighborhood be the in period couple of annual a a think the be are the we we're on you nodes. from a time. capacity about semiconductor end years, drivers So going And period or how that sort strong line participate to robustness XX% of to compounded to starts, and semiconductor And with in we when at there to you right? to the at But that sustainable past, of relates participate going anywhere information macro So perspective, where for in I communicated of the the XX%+ look And we've demand. a specifically, side it last nodes, we're in our of of the look for

So about our really, execute about online ability to I further And really, United good semiconductor. good terms in in I also enhancements Milpitas, capacity bringing the and in feel in really feel maybe really of new Taiwan, States.

So I it a Alluxa, to industrial But couldn't primary actually in sciences, expectations, life a billion, got it's a more it's participates, a of on there. be where well, side. and right? TAM of as of exceptionally X% that's I feel the And Alluxa you And year, relates and about is on growing margin think semiconductor is technologies. bullish - it our outperformed Alluxa, thrust performing got billion, how $XX particularly at $X.X SAM if there, areas some

underlying there the are So conditions the same.

Alluxa expect they our continue had to years grow and would done to we So as record ownership, at quarter. to record a prior another it's pace

it. don't is want I and home here of Milt, participate I add? really recently, that color robust, are the board. really good the And continuing and reason not I interesting know, wins you about on So in all taken will you pretty they no their to have to they're sort to have do any continue. robust, projects that believe pretty they've end I meaningful so get mean markets backlog feel of additional some

Milton Childress

It's covered growth, certainly I continued for and - year think in we're both it this well. segment expecting you beyond. that

Jeffrey Hammond

color. Okay, great

half? Thanks. through something pieces stronger rates or order the guide, what what momentum that second reopening, moving about? the economies, kind it improving, if I'm building this like a for I understand half seems just seeing we kind to want informs going of on and seasonally maybe or and the there's first not what informs, say, couple, of be are just wondering should just Because thinking vaccination Just is versus are and

Milton Childress

do in want to on me Marvin, jump that you one?

Marvin Riley

Yes.

Milton Childress

good Jeff. question, another Yes, that's

If at increase there at in our a look versus you sales you our or guidance. if that our look guidance you'll thinking, notice larger percentage was our guidance, earnings

but part than off is so stronger to of shift that a start. anticipated us, we determined just we've to we're a the And much general, ago. the recovery start Not quarter a much in off stronger

where and other is assumption, about there year of we're seeing expect we're as Advanced particularly snapback the the patterns. that we're at Alluxa, seeing of a lot the of how larger businesses second half cautious year, of our second all than cautious second be those is we're Technologies, in so year continuing LeanTeq pessimistic of Obviously, sealing the order current from recognize half. we that the year, given advances. than from that but in and we of snapback, it about the the first to half a a year for the And just businesses second the our half of possibility just the And we're percentage seeing us that more the snapback engineered, half our that the of we're more of and too, the growth not optimistic being starting the year first being half Surface may year

some of be of changing, as businesses a some some in element first half. would my element with half than have that response. dynamics that changing, half as do but We second though, first stronger well. there's That's of the So still portfolio second half our is versus our

conducting took I with significant that we how on still The protocols to And other we're our careful with discussed. would we $XX had had back that of year, of the costs we very last year be we as $XX that, expect being million We is some business. last thing to about we're of pretty into we permanent, note, savings $XX Jeff, million out system. indicated expect come million cost internally

year returns as some as of we'll more that out, see back thought far We opens the of the keeping costs have year up as coming successful happening economy volume but we been the this would so progresses. be in undoubtedly, that

So that's thinking part of side. on the the earnings

Operator

Steve Next question Ferazani today Sidoti. coming from is from

Stephen Ferazani

recovery, If sort strength on because through walk stronger, guidance your out the came the the clearly, quarter could you of a of lot timing the changed.

quickly saw that you how wave. Just

talked the the and it I think in that of about sealing you fairly was sort broad-based. engineered

So in of how meeting We're pockets terms spring. labor got issues hearing chain? the supply challenging of demand was just and labor the on how for strong in that recovery

Marvin Riley

Well, as industrial we little in really, bit pretty a really saw our strength pretty aggressively. said, We I life semi. automotive, about, sciences. really business a strength snapback. saw Milt really, We And saw we in talked mean talked as in strength just and strength as aggressive saw about, tech. we did snapback petrochem. see we We saw I in

to not of relates and a able overcome. number that challenges, chain, supply we the have we're supply challenges but supporting it As to how chain did were we no the

then doing that price a commodities most is of steel in recall, quite is terms And have chain by the for some we supply with commodity is you companies, broad-based, in for what vessels that had shipment and that PTFE, we're well we're prices that commodity were impacted affected actually down our copper. well. our looks close If issue PTFE. business there Texas. having obviously, the we challenges by over our and chain to attention from responded container to with to closest paying we're PTFE perspective attention thing far. bronze contracts time. largest what's It's team supply tracking weather do the paying a just just that and really like happening But are The number of - The bronze. of

in back a If we we XX look for find only paid PTFE years, for and paying than pay the XX the we're less where year. work years expect the to you now did you'll go back, and past I'd past what little say X over right what

So We're business. in STEMCO the in there. biggest divested of steel, good some frankly. steel out increases seeing sharp steel, in quite pretty our increases we're shape Luckily, consumer we pretty

labor same some are commodity terms in bronze. increases. the so job steel, terms great labor of even to how shortages business. increases of also pricing price tightness in in ahead though doing impacting of We're expect right? seeing the it market. So that And if those, the very, of to be Milt? it paying issues temp those fronts by try that are we're add being of don't we boosting but we're all of very address all are for we additional whether see. aggressive any working be in color, a above, for you know want employees real, The we it's that to aggressively some won't the We we're our on to to wages those and then offset And get seeing I dramatic goes

Milton Childress

the I the would month reasons that magnitude the guidance increase And particularly of it's only one add thing pivotal made I was cadence - decision why think we is was year our in a terms that the the by of we the for I March in us guess, the March. did. through last to month the strong. quarter,

question in Steve, color little that a we're and earlier. response, of your both additional and bit just on So momentum seeing cadence question Jeff's to

Stephen Ferazani

thanks. Great,

comp. one you the S Is more lot I the &A, there? there up is incentive travel there modeling. a biggest more we Just left imagine SG&A quick else comes expenses, what noted, or on, is as that bump? a - back on have into but seen

Marvin Riley

we it's that would question. taken in back earlier in No, Steve, that as come volume about had out to improved. we anticipated response Jeff's $XX I good in XXXX of million XXXX a question, mentioned Yes. costs

and last to some first incentive and host accruals quarter compensation There's in shows. on those the travel, were marketing whole are items expenses it the was that variable versus this in to most What saw a of volume. some you so of related of of addition in fell that things was year, SG&A trade And primarily category. in differences the year

see year other could we the associated with some some costs as see in robust progresses, We travel economic conditions. costs. coming back So could higher

Stephen Ferazani

to I just business there the higher last just capacity gradual? think standpoint, general California, get a Taiwan, do modeling the one is Or it snap could Is adding how with If like in, we revenue? revenue? on or a from about one standpoint a a coming in, additional capacity additional

Marvin Riley

Because a you go permitting, definitely online. go right? come have qualifications, and it's It's through to to slow then ramp a gradual, customer through

think more do way, little new even see our a into about though it it that aggressively our fronts, forecast I would and So I tried but our best to gradual. we've bake that to would on we're bit working outlook. as And all

Operator

Instructions]. [Operator

Our Oppenheimer. Ian next is coming question today from Zaffino from

Ian Zaffino

you much. thank Great, very

an quarter? Just details you kind so the performed region? on in us Can - you be I would that the each of momentum. imagine And one from first the are question. give sort idea what more yes, of like question maybe of the currently of each region seeing how

Marvin Riley

- were first just was the in if if probably strong. because year. you last by look year-over-year Asia for growth world a in given look at you both a and to reasonably which of you the X, And Western There us growth., at as won't but As the then between America quarter North of Europe good differentiation not see. was how year-over-year it region COVID-XX just lot starting would surprise the impacted strongest in the be affected Asia, come this our was COVID-XX so

markets main for So that's geographically are the us. those -

Ian Zaffino

little of bit as, the of like production. you the telling staying has would a of them their guess, touch or of I Okay. And then recovering then chip far continuing the questions Thanks. as do anticipate and you guess sort far shortage I accelerating upon just And automotive other as be, momentum, as a couple crimped as how they're what business flat? also, demand sort

Milton Childress

to to just cases, and our Yes. have strengthen. way demand and in just to I business expect unfolding I recovery continue we can in I improve modest signals in things you is many jump point, some that see our expect oil to same At that this will to improve. continue would put gas The to tell here have aerospace forecast but right? that take not delivered and have you into the that and that These a goes we together consideration. thing of recovery really we lot business, results that does continue aerospace, for the

back sooner So come anticipated. than come at back likely online starts to will point, we that some have online,

right now. to add fuel So some expect what we seeing that really that would additional we're will

to future, as our now relates our we have business automotive, right describe that's demand automotive - is not particular our something of a auto cycle, order have this our on just the pretty some got but visibility automotive, we place having it year articulated we've with typically into up. how the shaped given future good as As taking unique patterns short business into ton is, strong, clarity customer fairly

the So this for It's terms next just the budgeted or so, quarter we've got at over really good of quarter. essentially point. as in look we coverage what covered out we've

good. impacted. be form, and take no issue of auto is feel we know point, the any or but see time our some believe coming only shape of We seeing, backlog, that improve all there's next really at any over going creating might strength time. to way, significant our coverage can the so to shortage this we improve, And we're what customers, impacting in that, it's of reason do have in It our chip and automotive, that in we that in But terms quarter of to the the not is business right? some

Operator

Justin G coming Research. Bergner Our question from next is from

Justin Bergner

the at guess start, time your that know tracking few the here. I Marvin, line to of is you mentioned call the of And be it beginning the A if semi that just acquisition. I the in so at with were questions expectations you didn't market, of the LeanTeq the seem, strength there ahead helpful. in clarity any tracking sort would that acquisition. expectations, be of would downplaying your would given of of success probably It sort

Marvin Riley

I well, than honest you. in is communication. better be am actually to be exceptionally very No, trying my with LeanTeq my modest to expectations, performing

my the of online. is of so bringing us to do future additional that lot LeanTeq mindful depends though a that capacity want communication on I in for And matter. be Alluxa

And do leading-edge nodes. so we to capacity the have surge to with online get in the we're experiencing that deal

Justin Bergner

this were That's modestly I XX%. guess And back if had infer November above look Great. for being of at I the around would were what and the quarter you mean, and sort Alluxa, of as were look the in about move hard that in quarter so gauge margins Or first they on X fourth it I Alluxa than way guess in months much figure bogey. of greater of the presentation fourth Alluxa representative? you the margins what then above think should to at average back margins your of I the I point? good business, I that to perspective. sort quarter-to-quarter? is sort this quarter, indicated quarter And they cause If in the

Milton Childress

at for consistent being I the last play reason. we think the year. to It too the in partial adjusted if think that business results, looking it's one we quarter have at growth I of going year, look you're out you much the throughout don't especially was And when sequential want to quarter fairly fourth a expect.

stable. growth most projects applications. carry quarters, the they're in We different business would sequential margins expect to affected expect to underlying the relatively There business. other than different margins based on We mix be projects. are Obviously, and the of higher to markets somewhat sales going see is some be that because growing, to

a to some fair and last amount of of and carried year margins. response business testing was that example, COVID-XX For there business lower in kits

So move going I but expect quarter-to-quarter. to little it's vary bit, much from it to around wouldn't a

think was in little I anomaly. an period the QX stub bit a of

Justin Bergner

helpful. here, question Okay. on more just Great, guide. One the that's

guidance, XXXX of even by much that basis or say like coming So of the that versus anticipated write absorbed million. that in was Advanced as guess pro And into if is inventory up, before the the took or would coming XXX guide midpoint half additional of guide? is looks second is at or Is part to headwind that half the you the I you new than up and more Surface just being that it us $XX amount that the revenue fair points that could absorbing maybe you're it like from about what question Technologies? is forma remind an be as

Marvin Riley

me first. let Well, Yes. last take the question

numbers the the of out of amortization impact the inventory EBITDA take adjusted write-up. Our

expect numbers adjusted going business would forward. those represent what for So the we

margin So back that do but of we gross cited, don't we gross adjust inventory amortization of numbers. the adjusted our from we margin acquisition it numbers the because affect does out the of impact

cleansed of clean. those your They've that So Justin? effect. that answer Does question, second are been

Justin Bergner

great. Yes, that's

Marvin Riley

the first again? And part

Justin Bergner

looks to it guess the safe XXX I forma The of that's Surface XXXX midpoint. from say mean, versus was, your points like or base million. of by coming businesses? basis revenue first revenue Advanced increasing about I half pro half that over you're at the mean, it $XX mix Technologies is is guide I part the within that increase

Milton Childress

a than spread to already we start we're the Advanced of faster really certainly We original pretty strong the Surface than track. Technologies it's and some doing year. with in across the had that for already Marvin the had pretty growth. a bit expectations we're it's that into as better segment, better-than-expected building which the segment, our our And No, guide, strong businesses, on and expected, even were said, we of embedded all that function growth we're

so relatively Sealing Materials we're And our stronger was and Technologies the bounce seen a that more seeing, versus guidance back in quarter and our Engineered speaking, outlook ago.

would So all to segments. spread say I be X across it's going

Justin Bergner

increasing by adjusted sort if Okay. just $XX million And EBITDA what's guide of XX%, getting Great. incremental. the margins? your guide that's a organic of incremental, or driver midpoint, question, XX% not just increasing and $XX $XX last in from assume you're your that million the expected sort revenue of you're reported primary on coming follow-up you're I not by higher at million the

the margin what's driver So guide? primary versus your prior

Milton Childress

we for there another leveraging X it. are really are And That's good is, reasons Yes. quite question. well. One

in in on in well Engineered we're costs. volume. at Sealing would look Technologies, be the The you thing true leveraged bearings particular, Materials managing same we business additional our quite If

last some volume with factor and some the well of the recovery, And stronger a And seeing to work pretty leverage the of is stronger all that did we year. this we're it line. bottom

factor. a is that So

is advantage work how together together in office customers. about our And we managing and learned we we what it's how working of interact way the our business practices factor it's just that not other can anywhere, a are we but with work, The from takes remotely. commercial

for into teams on system? of we can to some And we're thought have all - million, that be an of part it. back our working of that's $XX Obviously, there's costs that be that so not year. that are but intentional to million how able the and the to it's keep part So there, coming on going effort would we certainly $XX hold of we're of plan we

Marvin Riley

helping we operating from the those running us a time of before. levers The that could pretty We a its in shared an able all the so across particularly sealing lot We're in talk in for that is that now it benefit to Yes. out seeing that's take weren't about they're pulled all we're XXXX segment. Sealing a different, cost able leverage margin. are core XXXX. little in of areas way price business execute took We saving long on we're on higher business costs And of focused the perspective. execute to low-margin out, some able STEMCO, to of back on services we things of

it we The business, levers divested business GGB Engineer, Bushing the so volume. Good exceptionally You Blocks remember, high cost fixed divested a also is the business. we with just well additional

from the work is to we levers that we're more mentioned And got I - to right? opportunity costs many see during Day. reduced Milt levers a pulled in starting pull, on some the the So of So I bit travel. and these anywhere. have mean, in the still we expect Investor to we more together still now. a working mean, have to our talk we going sealing still. and benefit We've so there things that's the see of recovery We'll little in fair innings, we of continue. early Engineered, take And out that amount about

the year just market is conditions great driving from with really the improved and our team the all base employee with did or had what's think support and the improved heavy last I the we've we lifting leverage. causing So

Operator

you. Thank

comments. back closing to floor We the over have question-and-answer to I'd reached turn the our any for session. further end management like of

Milton Childress

all care. Thank a have you, to hope you and today. being of for I Take all day. Bye-bye. thanks you good Kevin, us with

Operator

line at Thank you. participation and may time, conclude thank your disconnect this you for teleconference, does day. and today's today. We have That you a wonderful your

EnPro Industries (NPO) 9 May 212021 Q1 Earnings call transcript