NPO - Earnings call transcript Q2 2022

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Operator

Greetings, and welcome to EnPro Industries Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host James Gentile, Vice President, Investor Relations. Thank you.

James Gentile

Good morning and welcome to EnPro's Second Quarter 2022 Earnings Conference Call. that can is accompanies find you enproindustries.com webcast this remind you where the will our being call at call. I presentation that Chief Childress, today Officer; Chief me is Vaillancourt President With Eric Financial Officer. and Vice Executive and Milt President and our Executive

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

Eric Vaillancourt

Good everyone. we I our environment. quarter update the outstanding like are outlook opportunity to an for second of and results provide a to balance and on pleasure an the geopolitical reporting It's hard would colleagues their our macroeconomic challenging to morning, as work my XXXX. quarter in take for thank

segments. delivered quarter half all Now about by on across to We increased our second growth sales operating quarter price. XX.X% sales $XXX.X continued of leverage highlights. X half quarter In business driven another volume was X.X%, strong and with other growth of the and second organic which organic year-over-year of million

from excellence and thank environment. teams the execution which initiatives this the reported divestitures markets, year. completed our your inflation Hats off benefits we highs, commercial our and by supply second in hard of nimble at cases, in you rising Our solid to of quarter. pricing the XX-year for most strategic was NxEdge wage actions last end With costs more have difficult our material which addition pricing raw revenue demand growth in been driven our for during work. than offset We inflation chain offset most terrific in

of Our prior from a XX.X%, achieved million quarter improvement adjusted the XXX and $XX record second EBITDA we point adjusted year-over-year XX.X% year. basis increased of a margin EBITDA

EBITDA initiatives. in including margins strategic was of on history. pricing organic at our expansion margin driven XX% This divestiture operating addition lower-margin second NxEdge, the Our have quarter and first in exceeded the row growth is primarily a businesses of we leverage by adjusted

of to past several the years. testament a our is momentum transformation over strong the Our success initiatives

our of range XXXX. margin. X finished XX% margin may you EBITDA implies of we adjusted with an a XXXX for As the years midpoint XX% guidance adjusted increased in remember, later, EBITDA short excess

achieved are of our position while of portfolio industrial our as solidifying we a businesses have in technology reshaping what company. We proud leading edge

operating portfolio challenging this environment. continue In strategic is even to expectations. allowing the to our constant transformation Our update recent agile meeting drive NxEdge, growth has in us a early than acquisition. going, A model on most been in quick our more our NxEdge

advanced seamlessly teams the surface are As integrating into segment. the technology

technological very our had the to process brought organization. and our pleased and customers are to with NxEdge know-how We capabilities

strategy the we while sustainable opportunities into reflect lead strong best cost throughout results Our benefits maintaining efficiency our growth EnPro. our as continue purpose to of and

in and strategic recurring have where invest maintaining to streams revenue advantages M&A continue both and will we across while organically competitive markets We our faster-growing aftermarket through robust portfolio.

into Our to confident significant translating we momentum. well for capital value positioned are build approach on disciplined and stakeholders performance we this is that to allocation are EnPro's and

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

Milton Childress

headwinds As was others robust face. we noted and second performance continue many persistent Eric our to despite the quarter

and year rising the including addition $XX both EBITDA million growth, of XXXX Partially initiatives. expenses. the quarter XX.X% Positive to initiatives. volume $XXX.X raw quarter second organic increased primarily automotive XX.X% by due offset momentum sales reported XXXX Organic NxEdge second well increased as NxEdge driven to year's result of the in last completed of the reduction pharma divestitures increases quarter prior food in of and impact as from aerospace contribution than of sales of market. over X.X% markets and and in more pricing softness by year-over-year. generation, divestitures Adjusted power semiconductor, period sales impact for costs the as As European inflationary the the compared of a the and travel million in increased and labor pricing offset and the material

second price-related to revaluation equaled on in $X gains second foreign a from from EBITDA million the million incentive In $X.X to $X.X reduction addition Year-to-date share by primarily benefit in experienced a quarter. and due mainly exchange $X.X the balances was strengthening incentive positively adjusted quarter totaled reversals revaluation during dollar dollar due a compensation accruals cash gains impacted share stronger compensation decline price million. U.S. million and the the foreign

XXX expanded EBITDA points Second margin basis year-over-year. XX.X% quarter of adjusted

increased in higher part diluted exchange the translation expenses interest prior of driven ago in reduction to periods. Adjusted by growth revaluation year the year compared expenses million of the $XX.X over are the period year. incentive XX% compared to of primarily discovered. year. driven compensation both share accruals million per $X.X incentive by offset EBITDA price that share basis in quarter Corporate $X.XX in balances and earnings share price foreign prior by Excluding earnings, operating cash related margin driven the points foreign currency-related from Adjusted last decreased expanded accrual impact changes of and XXX in second a

power Adjusted and our the the was second grew EBITDA of period technology performance year-over-year. demand flat components the result food of of divestiture of discussion the segment aerospace polymer Strategic year of to the last X.X% Organic the strong decreased September X.X% quarterly prior pricing primary sealing Moving in of the million $XX.X to pharma in XXXX. as generation, divestiture due $XXX.X the a in million polymer initiatives sales of part segment. and and performance segment markets business. of to components were drivers essentially completed compared sales year business versus

leverage XX.X% foreign EBITDA pressures more including adjusted impact and raw material expanded driven and XX%. margin the organic offset by exchange that segment strategic divestiture and on divestiture Adjusted points segment by labor on increased pricing XXX EBITDA translation, than growth the to Excluding basis costs. inflationary

advanced to now Turning surface technologies.

continued segment Adjusted driven demand by growth. Second the $XX.X the of acquisition more driven EBITDA period. increased increased year quarter to the NxEdge strong acquisition strong of NxEdge million organic more by and XXX% to second primarily in million from compared than and year of prior last market. semiconductor than sales versus doubled quarter sales $XXX.X sales Organic the prior the year XX.X% the

compared Excluding a leverage and exchange increased translation, XX.X%, the and improved impact reflecting operating year of NxEdge an mix adjusted EBITDA segment ago. foreign to strong

Our supporting in semiconductor development chain continue. growth United the investments States supply

XX.X% completed which the in As calls surface compared domestic are In we've decreased by in advanced year we materials, in $XX.X gas, growth million from by the our European divestiture to related the December sales weakness the Covid in previous Organic driven XXXX. and second strength X.X% markets picture offset segment. quarter oil China. technologies and on engineered resulting CPI and long-term for of lie prior discussed encouraged downs in than the market increased quarter more automotive automotive sales and aerospace,

quarter EBITDA segment decreased prior result period Second divestiture. a as adjusted XX.X% year CPI of over the the

to divestiture the translation impact the prior adjusted increased Excluding foreign and pricing growth, organic management. compared initiatives XX.X% reflecting including year sales the of cost EBITDA and exchange

million. the debt million sheet first borrowings Turning flow. quarter the and of second by half $XXX finishing $XXX million the year, reduced total In in the of balance cash cash $XXX with to we and

to a repatriated year-to-date we quarter, cash $XX in repatriation second of the million. total our million During total bringing $XXX

million borrowing $XXX XX, by another At we for had revolving facility. under repatriate our to credit year-end. $XXX June expect million We available

balance in Our prior position capital XXXX of in and profits growth a $XX financial we and up strategic flexibility cash execute from our $XX sheet flow X higher to expenditures. against months Free ample the remains year million operating lower was initiatives. have by first for healthy million driven the primarily

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

year, For payments for million. the dividend cash months first $XX.X of the X totaled

over patterns expect to factors demand into know to low we now billion. reported XXXX our now underlying growth at mid-double-digit current guidance. Taking this Moving XXXX consideration that sales the including all $X.XX order of revenue our time and we

the We million XX% outlook expect of to Further, EBITDA the are to to earnings reflecting our a $X.XX our in raising continuing $X.XX million of share in $XXX adjusted using be previous to now of $XXX diluted adjusted up $XXX range a operations $XXX million to from rate. guidance per tax our from range normalized guidance million. we adjusted EBITDA increase

As revaluation the noted price adjusted to decline. balances related half foreign benefited in currency-related cash of first remarks our EBITDA and from accrual strong share reductions my earlier

supply second we currency with remain businesses to headwinds. first outlook and Excluding uncertain seasonality in performance modestly European Overall, lower the patterns chain half exposed in than pleased compared the half this by be adjusted encouraged ongoing we to normal these largely our impacts the and quarter order reflecting as and environment third backlog are translation our forecast constraints, EBITDA very constructive.

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

Eric Vaillancourt

Milt. Thanks,

team's commercial financial, our operational strategic, Our to ability on performance execute our successfully and demonstrates objectives.

culture any on in focused building differentiated to results high-performance are environment. upon deliver and We our

health mission-critical, a They fostering and supports workplace solutions and a environments leading-edge they to of do secular team. markets. of and growth best, committed offer are products can in do mental both safety what that safeguard physical processes critical and We and improve our variety customers

professional rooted sustainability how respect our I am diversity. and including personal our and and they customers of performance By EnPro. cultures for culture development. prioritize our our interest only not embrace business across and proud that in alongside and EnPro model organization appreciate safety, and to your our our value around of greatly We revolves our stakeholders creating our team's operating is doing values values but shareholders, so performance in Our are excellence, in commitment colleagues communities.

is in even company an well Our to positioned uncertain execute market.

I'll to Now the line questions. open

Operator

[Operator Instructions].

KeyBanc comes with Our Hammond line the Capital. Jeff from first question of

Jeffrey Hammond

sealing Just any just Is coming elaborate. aberrations through truck the maybe Or the just really that very there? pricing in good margin? Obviously, timing performance. and

Milton Childress

a significant [Indiscernible] Jeff, driver the has we and had and That trucking. cylinders. aerospace in power turn technologies. there quarter results was the part us our tied of We talk been in on growth, saw growth. about that's all metallic for in business sealing volume bit generation a little organic sealing big

But I mean segment when of driver. the were been it. there So drivers. part we look of has primary expansion the at other that that margin was

Eric Vaillancourt

flow price. good in It's think in in And we've I more some seeing and some segment. trucking, so system. got impact And shipped of well to about place leverage talked now also of for pricing you're the seeing throughout so headwinds the [indiscernible] performance had catch And has there. the the backlog that that past old the up been whole through overall in right the we you're

Jeffrey Hammond

results good pockets slowing. very just of advanced surface worries semiconductor clearly then in on about And technology. But

more exposure your to either more key Just the seems maybe us be from customers? just or compute And any your consumer timing auto industrial sense maybe give risk seems electronics which and high-performance to better versus of kind then a customers with at of which kind resilient. CapEx of impact

Eric Vaillancourt

more general, not to memory In Jeff. side exposed the side, to the them we're logic but

aftermarket that to Also, We computer our as or portfolio have in exposure it's it is don't the personal coating you we mind from important of recurring business the if cleaning, keep So business. will to basically XX% revenue. and part. refurbishment service call much

it's capital way. tied expenditure a So not to in direct the

continue We expect to our be results okay. to

Milton Childress

big from is our quarter-to-quarter us to other chain are well. customers of still timing [indiscernible] There customers with companies chain getting affect lot a from overall differences the than supply based suppliers generally other as we're always feedback The city constructive. because supply on

Eric Vaillancourt

supply In aren't haven't general out [indiscernible] bit chain because many little but they a just cancellations. the move of things There canceled.

are still and backlogs strong really Our growing. still

Jeffrey Hammond

again just and you're crack what's maybe that Any results? mean, the picture. then see the And I performance businesses macro becoming maybe we a can't great seeing mixed more in across overall

Eric Vaillancourt

have us. a I'm more out good still later refineries because do as we've will. if it's they're happen if quarter. But at our when not year The in the as do to were bad crack, a scenario sure running But The Jeff. still seen first news, the for [indiscernible]. year you they the know I postponed call would is that's expensive good in in is and full I There it thing news don't speed seeing not many turnarounds. they'll they full We're later they're that maintenance that running news are several turnarounds it. doing one

don't maintenance you planned If expensive you the later. maintenance do more do

And will don't of quarter first see get in next into it also year. so expect into our third maintenance but that quarter. material already I having forecast We've the any the I moved impact. of That's some

Milton Childress

the to anything events. I I don't that rush really how We're have gas European watching come than impacts add other on economy. macro supply

had We companies. have we those that factors other

Operator

of Oppenheimer. Our next Ian Zaffino from question the comes with line

Ian Zaffino

what On rate you tell the Or your us be? guys currency FX the for impact? constant growth assumptions the guidance, just might can maybe what are

James Gentile

exchange forecast is has our U.S. foreign dollar up on the about July. translation based until think the we when where So strengthened

probably there what would hold top rates the headwind in from we be $X our that expect constant will adjusted about perspective by And in July So is we million. perspective an a from assuming but a impacts forecast us included half. back translation forecast exclude currency in our generally overall line EBITDA hit then

Milton Childress

That's translation.

compared So million first headwind we're X on roughly to an hold half expecting year. roughly of the translation if incremental XXX reps the

a the the We first balance on assuming foreign year. year. tailwind we in also cash transaction neutral don't the highlighted of changes currency of us that for gave predict basically revaluation we're the that's side the of the that Since half

mentioned And was we half in so that a about first the benefit million. as $X.X by

about So when about to think think of those currency you you versus about have both HX think and HX, components. you

Ian Zaffino

what of In been can a better of international. more, you the on maybe given and just maybe give you're some maybe Ukraine landscape businesses kind there? there, the and seeing speaking some just then impacted businesses of then And Europe the kind us other flavor geopolitical Russian of of have that just

James Gentile

sealing Our biggest does some profitability in European GGB's have market half forecast. is we volatility in in Technetics auto largely GGB. a which technologies included European Other is seen quite And than resides contribute Garlock which our the by engineered remain European the and to bit in smaller materials strong. the in second exposure that the via exposure

Operator

Ferazani with of line the from Sidoti. comes Steve question next Our

Stephen Ferazani

engineered Wanted production even slower be ramp you and hasn't because the would been but and XXXX. had potentially a the aerospace materials And half European better significant to certainly the the on second hopefully, getting ask obviously expectation better. then automotive about lot impact performance getting from into into domestic a in

the headwinds you thinking how know are then second European half. half the you business, Given I are typically into first is the But how second despite have segment and thinking? about leverage in better beyond? that than that And you half

Milton Childress

helped domestic industry. saw have half seasonality, lot the smaller relatively because earlier. the in that than the has of the in European auto a weakness Steve. Europe do strong we some We of that automotive We [indiscernible] And auto offset year noted been our first

led results and half the is that. seeing auto starting loosen that It's of by to does encouraged issues seems engineer of the in segment. the to aerospace Particularly bit. are a more a some this the mostly segment growth in that are domestic significant we're license of Aerospace year. sealing strong up So first we it in small but our little seeing part It we're And it our in make under relatively business. difference.

have usually to European in businesses. typically third and it expense we this as our holidays we with again in So third heavy quarter. seasonality see a dip yes, do we being expect do We the quarter in year pretty but the European see

Stephen Ferazani

When then you're think in I and AST when strength seeing NxEdge about the talked about the you last year. acquisition

the are forward. see chip move You the much talked How big growth going U.S. And significant the we near the benefits we're After that in that market? about is translate for signs chip given over term saw investment expected the months, we how business not in chip to but to positive that U.S. clear you? that finally bill the term the going industry. in now longer investment get

Eric Vaillancourt

point supply And a to play at the time. some Not going to certainly and certainly hopeful chip years X.X certainly in chain. But U.S. we years is investment investments. year, us We continue set going over it's a couple the to piece immediate. help of that are dramatically get that make away, the a to with away. still in We're of

Stephen Ferazani

And acquisitions? No, what you're pipeline What's of look like? ton of working your I continuing what's course. right the improve, seeing now? Obviously, sheet NxEdge. is for generating are about cash. What's And appetite to through you When think your you're which balance the still appetite out a there?

Eric Vaillancourt

diligently value. we every We it have certainly a to add very ways at day are find active and hopeful pipeline working to and

strategic they we're we we at advantage will about. as where come But of so are. that time take opportunities comfortable are And same the

pressure our we'll to disciplined approach. don't in any we be So act,

Milton Childress

moves in significant our upside that our felt the highlight times just we've end. existing the in already portfolio think we on to segment particularly we've growth what several have we AST the with made, call that on And we said

Operator

to Mr. the back further like hand closing remarks. questions. are I'd over call Gentile There no for to

James Gentile

you your this great Thank morning for interest a have and day.

Operator

your does this today's gentlemen, and conclude Ladies Thank you for teleconference. participation.

EnPro Industries (NPO) 3 Aug 222022 Q2 Earnings call transcript