NPO - Earnings call transcript Q4 2021

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Operator

Hello, and welcome to the EnPro Fourth Quarter and Full Year 2021 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to James Gentile, Vice President, Investor Relations. James. ahead, go Please

James Gentile

where welcome Eric conference fourth Financial Vice that call. -- Executive With Milt at is and that and the end this Officer; our accompanies our and and President XXXX President Officer. being call. enproindustries.com, webcast being earnings I'll today also Executive can to morning, Chief find quarter presentation is EnPro's me year call you Vaillancourt, Good Childress, remind Chief you and

we to a discussion, forward-looking a today's in well on impact begin governmental as are our in during reminder recent call over that XX-K outstanding, I'll quarter, inflation, are are the including making we the tensions the economy the way, and be Before the shares and other and Form further incremental we out statements of our differing undertake of costs, measures general facts litigation the guidance, these number rate any changes market environmental obligation the variants forward-looking foreign quarter, and We comparable related of geopolitical to measures Tables from this the the transaction filings appendix statements. be outlined end will to subsequent reconciling With providing call friendly and related changes and spread in Eric. in fourth with variables call, reference trade that uncertainties, subsequent fourth dispositions and full responses, are impacts from statements do end to Also most rate and that impacts to risks presentation and SEC, numbers including will non-GAAP involve exchange COVID-XX we year materials. financial the risks restructuring nature. turn as These Also considered of this update of Form call, other will not impact from the GAAP costs these demand forward-looking their future excludes described on assumptions XX-Q. to from of measures. the costs, or and and charges. the increases the guidance, included a impact number uncertainties not historical in during of that pandemic on of the acquisitions, which the interest that of impacts

Eric Vaillancourt

the delivered again Milt financial year Thanks good challenges meet rise objectives. another Thanks, everyone. once to to It year year on our strategic fourth to a highlights share for full EnPro occasion details that to then James our morning, was EnPro. will and incredible successful at the across as strategic teams, XXXX our months. we past the XX arisen over we To and opportunities and financial will have transformational on the and quarter results. I begin, represented provide and continue

successfully portfolio growth and our higher our with margins cash command to continue products and We reshape that markets services returns. and flow shift toward

business December CPI for NxEdge in reshaping our the the future. strides very in the is well as of of the a With components promising the quarter, company acquisition divestiture our meaningful of polymer which in and achieved positioning third we divestiture strategy, as portfolio

momentum recovered lows, across XXXX volumes saw pandemic we As the positive organization. from the

logistics margin Adjusted markets For & petrochemical, saw including We $X.XX increased $XXX.X and and the truck, completed aerospace. strategic supply well XX.X% by inflation and demand offset both as XXXX. of EBITDA points of net food industrial, grew in to XX.X% organic material driven strong year, to EBITDA sales XX.X%. heavy-duty grew million sales compared Organic pharma semiconductor, billion. X.X% Adjusted general by most as in primarily XXXX XXXX the increased chain basis of portfolio actions Select sales increases. product, price by and XXX labor partially select reshaping raw benefit constraints.

As see supply we in we and chain and to challenges the expect volatility material continue. will last And XXXX. quarter, we said uncertainty enter we raw macro inflation still environment as

all to customers supply in opportunities mitigate to needs and teams the of evaluate demand our while these commercial meeting Our circumstances the current environment. chain continue strong

We our our reshaping further cost us incremental the close agile realizing enabled while already expansion to which actions are have substantial capture eye of on benefits margin a XXXX, in organization. and portfolio keeping simplifying

particular, strong markets. we and based from our across truck, and semiconductor, trends aerospace, encouraged and in we are see XXXX broad customers solid demand. order quarter during the are fourth strength food our continue are what continued particularly Our businesses beginning with heavy-duty nuclear, hearing to by pharma we In &

look we Technologies Sealing our Materials both in to and cost and Advanced Surface forward, the and we invest segments, Technologies Engineered in segment. organically improvements continue As driving return while inorganically

with XX% build approaching flow and cash recurring upon Further, company foundation revenue. aftermarket our will across technology industrial our core margins We returns. place, expect in maintaining of streams, focus this now to businesses maintain revenue strong on our total revenue we

we the cash also marks, financial our disciplined and and Finally, supported diversity. our EnPro at more and now our year public XXth through focused as future stakeholders. our marvel long-term company, far shareholder for of the quarter. be come into first my will year over as could Milt? steady deeper Milt, hold flows the results capital not by for will all on commitment for enter returns excited I our how remain a for fourth allocation, XXXX as dive call a to hand I to I through an driving sustainability CEO, independent approach what have to we

Milt Childress

solid Thanks, publicized Eric. many despite and quarter others headwinds we faced. had the well another We

pressures, XX.X% fourth well NxEdge, by in general strong demand of million aerospace, quarter the to X.X% fourth the of year We pharma the of acquisitions in our period. heavy-duty compared the compared XXXX. semiconductor, primarily EBITDA incentive prior performance. reported, share by markets, prior, increased freight associated share transaction, by driven materials, and of Adjusted truck, were expenses XXXX As quarter benefit year prior labor increased mainly NxEdge saw and reshaping largely in flat fourth $XXX.X Corporate $XX.X was and and from the quarter SG&A as were price X.X% in the pricing the up weakness diluted period. the Adjusted completed million EBITDA in food offsetting fourth and Alluxa from which the quarter to due the inflationary the as and sales of XXXX. industrial, million initiatives for as to increased costs, quarter and $XX.X XXXX offset of earnings in than year reduction contributions year-over-year. to as acquisition-related expenses, compared sales raw actions higher sales decreased a Organic was impacted $XX.X of market. more million with the expenses compensation of by the essentially and divestitures driven automotive per well $X.XX, Adjusted fourth affecting

adjusted the calls, the amortization, previous measure period, changed XXXX, intangible of in prior-year after Alluxa amortization. the and tax intangible from that our EPS prior during reflecting of was additions of during quarter presentation quarter amortization the this of NxEdge. non-GAAP acquisition-related in million Such compared to acquisition-related we $XX.X million, assets fourth noted As the to one excludes $XX.X fourth

performance prior the year. of Now, for let's million move to fourth Sealing impact the divestitures, sales last year. versus discussion Technology segment $XXX.X decreased Due a of the quarter of of to X%

the increased strong versus driven impact adjusted versus XX% Excluding of translation, due and exchange EBITDA divested by decreased XXXX prior nuclear primarily year period. in aerospace, pharma heavy-duty segment foreign XXXX, and the XX.X% sales businesses divested prior food markets. the period in demand and Also, businesses truck, to and year

volume segment. compared X% quarter pressures the and affecting with EBITDA in Excluding of on period. concentrated These the were such impact increase in the were year by trucking foreign exchange and divestitures business. increased our Results to impacted inflationary adjusted pressures, freight the leverage in and translation, costs pricing offset prior initiatives also by materials labor costs, segment raw the organic

Turning Fourth Surface the quarter acquisitions market the NxEdge. sales in $XX.X Technologies. the of of XX.X%, million, Alluxa prior semiconductor driven strong and increased versus now period Advanced demand and by year to

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

increased segment period, by the adjusted growth. quarter, prior versus fourth the acquisitions the XX.X% organic For sales EBITDA and strong driven year

increased acquisitions was the impacted growth segment and to impact of partially the translation, compared the Excluding exchange EBITDA year EBITDA launch in strong delays The timing the while and period. by adjusted prior chips. foreign of XX.X% node advanced

with the prior decreased the X.X% bushing gives confidence Moving customers the and forward, us semi work production our businesses. In driven semiconductor by block Materials, year year GGB both the of organic and and Engineered growth and profitability CPI in the the business, qualification sales long term. versus our divestitures in profile for period, coming over

fourth particularly shortages quarter in the the the market automotive For first to auto market in XXXX auto of sales the a were XXXX. continued to affecting that to strong half comparison production, in chip weak of quarter, due

decreased and divestitures versus the were well foreign and the States. inflation of the flat. automotive and translation, segment Fourth impact as material in year United exchange in quarter as EBITDA headwinds, sales XX.X% the raw period, by chain Europe Excluding production decline driven supply prior adjusted

EBITDA of year impact exchange by divestitures the prior translation, Excluding amount to XX.X% a around and foreign period. decreased segment adjusted comparable compared the

cash We of flow. States. quarter of the fourth Turning $XXX outside which and with is located sheet the balance $XXX.X the ended million, to cash United million

in $XX.X from capital resolution, cash million tax by operating stronger million, partially refund was At XX, use so of reduction, initiated driven up from December debt a tax flow XXXX perspective. credit for borrowing available demand. year, million have do tax $XXX.X cash where income prior we to lower audit repatriate a portions profits federal it We to in taxes, this with in the $XXX.X under investments, facility. for sense cash and revolving supporting a associated resulting higher by our had efforts makes offset from efficiency working Free

quarter, During the dividend. quarterly a $X.XX per fourth share we paid

For the totaled million. $XX.X dividend payments year,

voted our we consecutive Directors March our quarterly share our in the to quarterly since payment, with dividend, to paying per dividends representing XXXX. increase of in Board annual effective began Our $X.XX dividend increase Xth

low guidance. XXXX The $XXX $X.XX rate continuing to reduction range XX%. be in year. in higher rate, growth per we the we to portion adjusted from to Taking the we XX% XXXX diluted range margins using to reported earnings we completed results in know be portfolio adjusted adjusted last in now from revenue of operations of factors XXXX, to normalized north consideration $X.XX tilt time, expect this a actions that sales which XX% normalized assumption States. implying all in double-digit to EBITDA XXXX, share portfolio tax tax of United earnings our over expect $X.XX, for Further, EBITDA and $XXX million the our expect of Moving reduced a of late into at million, billion the from the

to million excluding $XX million. and intangible to and of of expense, amortization interest Our of depreciation amortization million acquisition-related million assets $XX guidance $XX net assumes expense $XX

in borrowing Our factors net rate in XXXX XXXX. increases trends remain progresses. as as enter Underlying interest expense our estimate, order variable basis XXX we strong, and point demand

the availability as of year inflationary variant impact Omicron pressure chain supply Even margins. early and and that the on and material put labor logistics cost, growth constraints on raw

the additional as inflationary response We company actions will year the be progresses pricing in implementing across to headwinds.

want colleagues resilience who have continue the to COVID to and the monitor years. of conditions challenging attentive I to face well-being two the we safety demonstrated remain past great current the note our Finally, will in and the that very over situation of

for turn back Eric I'll comments. Now closing call to the

Eric Vaillancourt

to on proud and I higher perceive higher execute businesses, in our technology accomplishments we said Thanks, and our EnPro leaning year. many investing multi-year what flow best markets as had of faster and cash into remarkable leading doing margins would a am we with while our company, strategy team growth into do, returns. a industrial Milt. our transform we EnPro

the results and the enabling purpose our adjusted around from implies and outstanding up the first our communities supporting of operate. strategy. financial we margins delivering we while began EBITDA remaining in guidance reshaping of our XXXX which development colleagues XXXX All XX% steadfast XX% in when Our in portfolio dual and

us I today. Our time of there never you a to to interest your Thank better has journey part appreciate along is We just be our company. for appreciate support beginning. in a your come EnPro. as been and joining you welcome

line you. Thank open questions. to the I'll Now

Operator

you. Thank

now question question-and-answer is today coming a will We Our be session. [Operator from conducting Steve Instructions] Ferazani first Sidoti. from

now line Your live. is

Steve Ferazani

on information the all Appreciate everyone. morning, call. the Good

and the about you're throughout In obviously, year. guidance, the had When probably XXXX a up automotive of first know half XXXX. you terms XXXX thinking ramps in we stronger

the have cadence raw material earlier. are quarters You in guidance? issues about you probably cost and chain the constraints of the thinking supply How for terms

Milt Childress

Good Steve. Yes. morning,

that in in has and You're in some this continuing we've on our strong around given pressures early on right that say the year last backlogs starting some would that the seen Thanksgiving we impact of particular, have. of labor to -- part year on in I deliver ability had

across our have company. is backlogs news most really we good strong the So of

we so and supply with And what are chip the automotive. labor have responding also the been to past availability develops seeing shortage as getting appropriately headwinds the with pressures chain

as So the the big year affecting you've those are cadence noted. throughout drivers the

so got a accelerating than And first as expecting the off we're lower recall because strong we all first you as of the quarter have economy these seen you the of lows factors would where last a was year in to from XXXX. quarter

QX. So sequence be QX the and in will slower quarterly little then a building

Steve Ferazani

you. Thank Helpful.

segment the all Now on side? in range. US, completed. about How are given just the investment general given deal chip maybe spending that all that longer And into you have margin that's expected NxEdge, expected thinking that the the in XXXX with you the the but

Milt Childress

it I'll with and acquisition very that Eric that for over Well, what first there. all results on exactly but of pleased the to is fit acquisition we're The we've his the and color strategic we're turn expected. seeing early NxEdge,

So be we continue excited about that. to

benefit the customers expect US develop talked appropriate that and about that planning expansion. semiconductor But we we over big next three that we will as Regarding expansion these time maybe take in five continue to US the have to time NxEdge on call are support acquisition, planning the to in over we that obviously the expansion we years, our think follow investments. because our to in the we -- do last from we And so when that. are intimated are investments to the

Eric Vaillancourt

much our phased huge we margins We're going well. a on gets have go very as time add. I continue to because don't impact in think as really It's don't to will going well. it to goes go. I have on it

of monitored. is So the kind investment

will so is expands much forward. so think In going and much addition, I the has margins margins the coating refurbishment business of that it higher terms at it and cleaning and our pretty also a in wash rate, essentially as same be

Steve Ferazani

more in Thanks. in one interest your terms expense. And if I of get could net for guidance

when you the to are even uses and of you expecting year -- going you where cash given growing thinking -- this guidance, thinking repayments Are cash in -- I significant So we're year make probably flow. another think about how of you the not because about of debt is you're cash XXXX?

Milt Childress

Steve for cash guess expectations the I comments year comments general free just generally. So on the flow

the more if look and our interest, little expense we're some at one you carrying of we bit had our on So interest details our presentation, debt. slides a in

focus we So have indebtedness. down on year cash do using our free pay a to this flow

effectively levels year just as suggest and just our say don't have might full to are levered a historical debt results our a not we TTM -- EBITDA a obviously as relative of We NxEdge. look in because

year for our through So debt of it's availability shape a -- and availability, cash expect it facility. us to increase -- we in but we'll relative to this leverage, good our is or end that priority whether in pay under revolving to the credit very the be by the down year

Steve Ferazani

Thanks guys. Great.

Eric Vaillancourt

Thanks, Steve.

Operator

Thank you.

Your from coming from KeyBanc. next is Jeff Hammond question

Your is now line live.

Jeff Hammond

Hey, good morning, guys.

Eric Vaillancourt

Jeff. morning, Good

Milt Childress

morning. Good

Jeff Hammond

if segments? was and for just think the growth you said directionally [Technical are How Difficulty] any double-digit Difficulty]. you I Just guidance. growth just can that in wondering thinking [Technical about in color organic I

Milt Childress

NxEdge restate guidance double-digit me we little think that so Yeah, let with And your a from terms organic think how I then an the -- obviously pieces top about bit you line But happened breaking divestiture thinking sales having lower And like NxEdge Technetics, were just of has you moving Jeff. CPI, up said and standpoint? NxEdge impact growth, you in of low with there I acquisition. stronger have that businesses. overlay businesses question, are the the the relative margins other the carrying Houston to few because few are a

growth there But So roughly. strip look pieces. few at organic it's high mid if out organic, roughly single-digit moving to and probably are it you

Jeff Hammond

where most…? terms Sealing what's in margin around supply the maybe some of And was just of about Okay. pressure worse talk better just chain, what's and Difficulty] model it's then getting [Technical the getting and in

Eric Vaillancourt

goes Eric. chain increases There sealing due trucking January now. And the in general challenges and that really any truck couple as and But the Yeah. it's effect there really accelerate the going and it's to price in it's are aren't to and mismatch now, they quarter between Jeff, all labor inefficiency and catching will as segments. as in been headwinds times so just work we of a in heavy-duty the January and now supply of other those limited the pricing. through -- is July and the segment that increases have Right we a biggest businesses. in up are usually here on, heavy-duty price It's business, will backlog.

other as I'll trucking are and little they we expected was the rate with The a than a than operate. of as it performing call lesser because those COVID. that -- traditional segments more heavy-duty level vaccine normal have most areas affected a The

Jeff Hammond

Okay.

[Technical to and So Difficulty]? normalize the margin event Difficulty] in [Technical XQ XQ starts starting

Milt Childress

Jeff, we to try question. one can can try more you're breaking Maybe time, you rephrase up. the

Jeff Hammond

Okay. That's [Technical Difficulty]

Operator

question next Bergner from coming is Gabelli from Our Funds. today Justin

line live. Your is now

Justin Bergner

morning Good Milt. Eric. James. morning Good Good morning

Eric Vaillancourt

Yes, Justin. good morning,

Justin Bergner

more clearly organic the hope just guide. follow-up I here. transmitting relate to my question on would And first I'm

contribution, mid or single-digit, pretty to I is within robust sort of there growth big is single-digit that So, there? mean, the high a price in still volumetric underlying

Milt Childress

some we're quarter we cost It up I company, catch were We the QX, of increases. hangover and effect. Eric as first in more a so -- and go have is -- as a fourth first us a of were a price year price, still ahead into material bit It's challenging. increases additional certainly little Yes. of then we'll year half There are expecting raw we'll up with mentioned. the as the bit, in They say, the the would some goes. that caught little and little of part the bit

little there growth. offset price, think a of on as supply price other chain wouldn't a is labor bit help lot increases words, the and in forth. count to I as us So In margin but so of price I relative well increases will headwinds

Justin Bergner

Great. two you the further over Are the divestitures on put more this appetite acquisitions there executing at portfolio How be portfolio in time? point together describe portfolio. relates focused you the your the really My coming? would could changes last in and question second you to on years or for

Eric Vaillancourt

we're would themselves. and to -- always looking take advantages they always we're -- present opportunities of looking I say, take as advantage

So I of would just do. what say, part It's it's always just continuing. we

Justin Bergner

And the lastly, out is ramifications then thinking US Okay. mean outside asked, implications there cash there? the about longer-term, short-term large and cash was EnPro, question ex-US amount if of are what but anything its the for

Milt Childress

Well, cash underway for and debt down tax have a the some and time being that's anticipate planning that repatriate back portion able been paying we otherwise. quite of purposes for US meaningful of to some to we

underway European We in divestiture. a the presence a with have couple We CPI. significant of initiatives CPI had

portion putting the and our with our entities place into is treasury So team those tax are plan. working of proceeds team in and a a repatriation

of we've enable bringing we have as So the very you cash way discussed before. repatriate quarter, second to a And LeanTeq, Taiwan, underway fair be expect from us will also then cash tax-efficient planning back some tax can estimate. would of that generate us at amount we in in to a that some I

year we progresses. cash that also as region back And anticipate so the bringing from

reason are us very tax-efficient bring we no need We're back cash. that for to way. in that is a the there steps it and take trying appropriate to particular just necessary that So

Justin Bergner

Thank taking questions. my you for Great.

Milt Childress

Justin. Thanks,

Operator

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

Eric Vaillancourt

great call a day. the for it today. Have That's

Operator

That Thank webcast. today's you. and conclude teleconference does

have wonderful your You you line day. for may time at disconnect and participation this We thank your a today.

EnPro Industries (NPO) 22 Feb 222021 Q4 Earnings call transcript