NPO - Earnings call 4 2023 | EnPro Industries, Inc.

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Operator

Greetings. Welcome to the EnPro Q4 2023 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to James Gentile, Vice President, Investor Relations. Thank you.

begin. may You

James Gentile

webcast presentation President call. With ], that Fourth Executive Darrell Call. morning, Welcome Officer; Joe is and Vaillancourt, Chief is me Milt Officer; Vice everyone. will you this Chief Thanks, Broderick, and and and Full EnPro's Financial being call President our Executive Quarter you accompanies President, Conference Childress, enpro.com, Year the to where remind can [ that good at today Eric XXXX find I our Executive Finance. Vice and Earnings

filings full in risks providing XX-K. this be will with this non-GAAP recent we and which statements uncertainties, historical measures. are these reminder unforeseen measures call, During and we impacts reference that Form measures our that call appendix Also friendly excludes risks number today's call, from note now to most will XXXX comparable during the our our presentation we guidance year do SEC, that any that undertake We It including the nature. These considered will to facts forward-looking reconciling a Chief Executive are involve non-GAAP number in a historical these those described and call and President the pleasure obligation uncertainties. statements. of of forward-looking in is over not to Vaillancourt, my the turn a on update to not Eric including financial the Officer. included GAAP be the are Tables statements materials. Also to making

Eric Vaillancourt

business that quarter and our XXXX. for good we for includes results the James, our and joining fourth update morning, a outlook and us review you XXXX Thank year provide full as Thanks, for everyone. today

transition Joe X. May be the like Milt our Childress smooth Financial Chief Before of to be ensure recently will Vice April Executive as staying Milt to Broderick, we end joined get Officer succeeding of President, Finance Finance. will Joe leadership. through started, who I'd a as on team introduce

and This delighted XX have an glad in Joe experience. look history, join time opportunities operational Joe's we Please to exciting team, join his partnership as I'm senior Joe to company's are us our capitalize following the is ahead. welcoming on and almost have to our We EnPro. financial years of to in

We record and Sealing quarter communicated segment are in quarter strong in pleased delivered EnPro's year-over-year XX% saw sequential call. with from offsetting in a performance, performance soft XXXX. the with year third decline for largely AST. In Technologies fourth we execution Sealing impact market profitability semiconductor Technologies, despite on exceeding strong the our margins and anticipated we segment a adjusted EBITDA the negative that

year how semiconductor the driven was We the XX%, global capabilities the underlying strength segment team by are the the ended roughly adjusted with segment, future and very in the drop year while continuous the industry. approximately maintaining profitability with improvement. AST for the value-added business revenue our positioning demonstrating disciplined the Despite in clearly our of margins resilience. and for on focus pleased is segment's volume, growth weakness down EBITDA XX%

EBITDA growth price-driven drive incentive expense. compensation which in unchanged. long-term in $X.X remains attractive in to strategy reported this million share $XXX for million multiyear Our adjusted market inclusive of We is XXXX,

analysis. are this Instruments Micro progress on pleased Given year, meaningful long-term year, made acquisition the into margins Advanced market compositional of in or the total broadens AMI, Sealing which initiatives Technologies completed experienced semiconductor segment recently downturn including throughout EnPro XX.X%. We the the we the capabilities at several our with strategic

designing our variety Gas leverage AMI's competitive Analyzer technologies the in insight across segments, to differentiated advantage a critical will our multiple unique seals in solutions. processes customers' industry expect will of into expand We gain

of our continue to and Arizona phased in technological colleagues, build-out AST differentiation, expanding making during multi-faceted are integration strategy our regional the the vertical new EnPro. to on colleagues facility We our we AMI of capabilities and on excited welcome year significant Asia. In our expansion to progress execute

as record decade. I'd moment which XXXX, We and additional anticipate near in to across of latest to this Statistics. critical to this averages customers. key industry by team end are terrific Safety in to results. to psychological an investments Labor in our our a results and reduction our like what's we a comment the of case are on safety lost semiconductor the injury-free our doubling and products below by executing total #X And expansion Bureau business includes expected strive physical rate are a celebrating support and create and core company already semiconductor accomplishments. XXXX, solutions In these well take our market-leading colleagues world-class our built incident to the rate. These our safety time our in widely upon collaboration for positioning recordable XX% environmental, We as we safety presented to as around recognize want market safety be is value. I strategic reduction with a the XX% deliver outstanding our well workplace both and we of for health leadership customers.

a execution to said strong portfolio positioned the Milt flow, over no well with better and be guidance, we we on to to growth purpose. Milt? part continued together, balance many results call XXXX to with turning EnPro our as I technology want Reshape drive reiterate empower are through discuss quarter to sheet, Before generating what time occasions. There fourth our with cash excellent and of margins I've focused is

Milt Childress

million lower and due we General market in to lower by decreased and also Thanks, saw Pharma Sealing Eric. segment, Industrial, primarily markets. a declined the sales the the decline good fourth driven X% in in the Aerospace AST commercial And reflects where semiconductor. everyone. segment X.X% results of sharp ongoing In in softness The in Commercial, and morning, results organic sales quarter, to Technologies decrease demand OEM lower vehicle $XXX.X

quarter year-over-year. of in year. by initiatives. results very basis $XX.X the prior in mitigation decreased Volume the EBITDA XX.X% to Sealing points year period, million cost of last noted margin compared affected strong the declines long-term to also by million guidance. of roughly quarter million. price XX% EBITDA we We and partially strong expenses compensation just compensation quarter strategic were offset of quarter reminder, and decreased related improvement when adjusted performance the pricing, continuous As adjusted fourth during posted and fourth a to share XX not in Fourth price-driven incremental expense adversely changes was for tied fourth Results comparison, do price expense were contemplate incentive share determining $X.X share compensation our of the $X.X XXXX long-term incentive quarter. By

diluted incremental million $X.XX incentive share. XX% of of eliminate quarter XXXX debt prior total providing balances. The net compensation the long-term ago, and of lower share considered XXXX to not in reduction largely earnings compensation $X.X the Adjusted previously interest compensation of repayment million compared primarily prior by during cash the the long-term around per driven higher price-driven $X.X As XXXX because equates thereafter. Corporate of on guidance income partially adjusted to in impact made to period, by decreased expense fourth program Modifications was share million such, XXXX the compensation during X.X% expense noted in impact incentive year in $XX.X expense. the offset to interest in when a $XX.X this million QX years fourth due quarter the a from year the expenses $X.XX down lessen EBITDA will were year during of and expense in per XXXX and commentary. decline

Moving Sealing discussion Technologies million decreased to of X.X%. segment a performance. $XXX sales of

vehicle OEM commercial we as the and vehicle commercial sharp sales a saw industrial, in softness as quarter, decline During demand. general aftermarket in our aerospace, pharma well

Softness and in offset markets partially continued in by strategic pricing was these nuclear actions strength energy.

in of quarter. decreased and translation impact divested currency the business, foreign sales Excluding our the X.X%

segment resulting fourth with in last in X.X%, the segment decreased EBITDA quarter, adjusted margin decline, adjusted being line year. flat the For EBITDA with sales

EBITDA divestitures, decreased segment. reflects of sales cost foreign through strategic margin mitigation the ongoing benefits the across and X.X%. Sealings a and XX/XX the Excluding decline pruning exchange actions, performance impact pricing segment of efforts adjusted

years continue earlier, and and opportunities to past the rationalizing As cost with maintaining growth the invest improvement. are over Sealing targeted progress pleased and Eric the made segment, continuous we will we discipline noted Technologies few while in

to Advanced Surface Technologies. Turning

sales the capital over spending. by Fourth XX.X% semiconductor sequential equipment a improvement quarter decreased million saw in $XXX.X we prior weakness continued driven While from year, of the third quarter,

Our Cleaning a chip advanced ] was We [ the year. stabilization bright the business throughout during and node optical profitability production tied also with in Solutions quarter. quarter improved spot to business in saw the filter the

EBITDA efforts mitigation For sequentially, to decreased year-over-year earlier, operating pricing decline quarter, by adjusted primary the in expenses year XX% Eric cost profitability, drivers offset part of and volume the Adjusted cost in year to growth and increases mix, supporting margin the close actions. EBITDA were XX.X% investments, improved period. mentioned the the increased addition XX%. in versus finished fourth reduction of material The prior approximately as segment and

We growth ongoing. as continue in far capacity upfit Arizona in facility AST this in Eric outweighed the is to our Asia. phased invest recent we market opportunities noted, of headwinds. The expanding And our long-term the in are as segment

a well for are see positioned to segment. We ahead future bright this

the cash and sheet to balance Turning flow.

remains to $XXX cash. AMI January, acquisition the of we Our million strong. end, using closed balance Subsequent very sheet quarter late in

drivers inclusive the flow to to lower over about flow cash of our cash during EBITDA. With million ratio, in portfolio, compared in capital Xx $XX company in were Our stellar across substantial cash reshaped was to million addition in Working the the at the net cash. XXXX of taxes prior continued Technologies. stands Sealing key adjusted Free XXXX acquisition year. leverage results we generate $XXX management and approximately XXXX

through that broaden flexibility to and We strong financial our have acquisitions strategic both our strategic initiatives, organically capabilities. execute

drivers critical applications our is to lives in secular safeguard day. environments markets goal with every Our our touch growth edge that and leading build upon positions that

per $X.XX approved a the quarterly the increase dividend a On in dividend totaling increase we dividend per our February XXXX. since consecutive XXXX, another we million quarterly for representing year. to XX, quarterly share, Board During share $X.XX annual initiated dividend, to ninth paid $XX.X the

EnPro our XXXX mid-single-digit to to that expect guidance. the in XXXX. we now growth to the into we currently, factors low consideration sales be in total Moving Taking know range all

expected $XX with of to business, of a the EBITDA adjusted XXXX we our company. opportunities to last after are excuse about me, seeing million. Capital trough in are weakness in continued around million spending first the backlog the diluted in to below spending expect segment. this $XX share $XXX -- we half bottom and of and per remaining of support $X.XX our semiconductor earnings order approximately for $X quarter the as sequential quarter approximately sales in semi half first earnings wafer X/X Advanced improvement range in unit or future with first on we compelling expect the million XXXX. Capital diluted We lags share. expect continue sequentially adjusted for X% the sales ] are outstanding growth the per leading-edge AST, normalized the quarter to demand remains to in diluted builds After expenditures equipment we per to on capital rate year, EBITDA [ current fourth X/X to to of continued million year. fully of represent the share in last driven X/X growth adjusted of In in adjusted of year. We believe investments used XX% from $XXX of will be to of patterns, at decline anticipate demand platforms tied results this decline Technologies be focused invest calculate and Surface will the tax be shares QX to X% AST in first range The typically production. by in XX% based in across growth approximately the XXXX, of

improves to The this second. half North production positioned anticipate revenue capital the utilization year are largest of when and compared to the vehicle commercial and year spending Sealing resulting incrementally segment, seasonality of stronger segment in portion well We return American follows Technologies trends in capacity industrial we recovers. In normal global first the production.

and and as Although pharma. we generation to aerospace markets, such sustainable faster-growing power space, exposure growing have

is According XXXX. year and both builds will aftermarket in [ by the As to results, and forecasts improved in decline vehicle expected coming anticipated noted, it's year industry to acquisition sharp trailer longer OEM new of XX% offset the progresses. the product expected mix decline Commercial term. In to be the accretive are soon commercial vehicle, year AMI advancements to in this Eric be demand ] partially as

XXXX. vehicle strategic the a As our business from a segment, the to we the compared with X/X our tied balance OEM trailer market expect reminder, impact commercial of to initiatives pricing vehicle serving aftermarket. Also of note commercial approximately -- for in smaller builds is XXXX, Sealing

to growth over while moves the the in progress to the the of significant currently, and trailer widely and timing, future decline are over while happening the made half expected the will be the profitability uptick business with in reflects positioned semiconductor repositioning making recovery semiconductor industrial appropriate our positioned global and have to production Sealing magnitude reflects and the invest of are segment. organic the end investments We're we'll end the growth segment, the precise Technologies of past in our later. Regardless to on broadening lesser upturn, we high composition value. several in builds possibility degree, We various lower swing as of the in well of well of a years for capabilities XXXX. trends pockets the selecting drive we The upturn and driving the as optimizing business guidance in believe factors segment's well improvements the mid- a robust focusing in our resulting the vehicle in commercial our second primary and time. We timing continue performance of range

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

Eric Vaillancourt

Thanks, Milt.

that balance and demonstrate best-in-class of variety returns margins cash to flow We portfolio economic environments. generates a in our continue attractive

where open value-creating capabilities. I upon like build recognize we remains and Our leading interest for as invest that today. line across EnPro. we in our your unchanged, to We'll hard strategy of edge strategic to considering the and while us colleagues would ourselves to Thank fashion. consistent a work questions. strongest, continue differentiate acquisitions our all disciplined the of the company in are to appreciate the continue we We you joining

Operator

from Capital Our Hammond [Operator the come with Markets. Jeff questions first Instructions] of line KeyBanc

Jeffrey Hammond

we one more Congrats might welcome aboard Joe, from and hear congrats, you like time. Milt sounds It

Milt Childress

Yes, quarter. that the next think I I'll the be in will room case. be

Jeffrey Hammond

Great. Great.

like Just AMI in the maybe included. It want guide. looks dig to organic is

growth getting I'm the kind I'm of in to the one the think trying embedded segments of clarify of just for one. to that. about up then down organic how So And to kind maybe guide. each

Milt Childress

and Yes. question back then and bit Jeff, I'll forth the take a go segments. the little AMI can we on

AMI, indicated a earnings the the gives price. XXx [indiscernible] rate of at So deal, with been that the paid has idea we had announced the That for prior approximately general EBITDA we you acquisition. we the what -- when or business of run time

some a but have of through which most partial is to you year, full million into account guide. $XXX give it's and will when work way million take indication short a EBITDA onetime this not what of That that the so $XXX And year, for a we've integration we'll it included the you order. their general costs year, year in fairly will in

of So in the contribution that for year. EBITDA low- brackets to mid-teens puts capital the

James Gentile

kind little of sharp your growth the terms a you persist in half but recovery, half and organic first still of minus softness some a and in remarks, AMI OEM Advanced to expect bit, in second excluding vehicle through commercial decline side, of prepared in XXXX. said of the the expecting the expect with we market, is can Surface kind Technologies AAnd we the the balance plus as brisk Sealing more or flat

Jeffrey Hammond

Okay.

ahead. go So

Milt Childress

with more what in you'd like terms hear Jeff. a segments on to guidance, little about Weigh in the of clarification

Jeffrey Hammond

So okay.

then, slower I you So for so lower midpoint James, guess, second recovery. AST. the maybe says that the And that's think, yes, half. in end I XQ, fair to just inflection then the contemplates brisk of And bottom said the soft the say? a guide Is

Milt Childress

then of economy, to be swing starting pickup the business it. green we for see year just for you semiconductor. kind obviously. the We're in factor vehicle -- a see big Yes, in the But lesser our degree, got And to going already the what is big to overall shoots. of commercial pace markets the then and

and from You've -- other through heard for We're depends business. you're positioned us. industry, it it happen in play companies, you our just will where and cycle this it on it for come where will the working

Eric Vaillancourt

tour trough through ago. of making or I and and making seeing a parts say we're the Joe it a as then West Jeff, like were during facilities we're example. the we optimism XX peak, that XX Coast typically, and we're seems week now some making a XX Hi XX took And our week an I'd

seeing seeing haven't that customers time. in and a you're momentum purchased So long

we're to come where So chain think supply into destocking they've the see starting balance I before. back been

a optimism little at, we're of bit see to while seeing So full before facility in basically recovery. going we're every it's still be but a we a

Jeffrey Hammond

in about should just decline? how just then maybe to That's or the if OE commercial think I start of Great. we piece. XQ. decline pretty don't into of the of if Sealing, kind know helpful. that year, organic first part just that that's Okay. But here you some And the saw kind persisting destocking revenue

Eric Vaillancourt

actually trailer the we industrial And starting then were commercial I where to we the Mostly slowness expected. in by production fourth to and just November in see But than see commercial would driven October started builds really industrial the other then fall a vehicle some OEM say, significant we off. nothing general saw quarter. and that And December. started production we December, decline. in

James Gentile

variance vehicle clear this OEM commercial was decline the But quarter-over-quarter.

Operator

questions the of next Sidoti. Ferazani Our come with from Steve line

Steve Ferazani

previous wanted follow I guess bit a little on the to I up question.

been had for XXXX. relatively would the to sales XQ, Just XXXX guidance flat be

your sales there disappointed out point internally. it other you specifically Can have had Were XQ you disappointed. primarily was to were places So commercial obviously, where vehicle,

Milt Childress

vehicle Well, And in it really OEM. softness and semiconductor then the AST. is continued commercial

our And into in And we've take improvement, $X.X you anticipate around we previously stated is QX at the that sequential anticipated of... that that range. time which did account commentary our of would of million we the we guidance the Although being we when the in quarter. low see the made see QX some did call, end guidance at fourth

Steve Ferazani

sales. to referring referring sales, just to just Milt, I'm I'm

Milt Childress

Okay. Yes, stop then. I'll

Steve Ferazani

I to -- earlier else if potential -- to relatively in an again, AMI, the point 'XX out some purely take 'XX. back where benefits do where or the so you're of on then looking at recovery you previous the upside questions, do or I see some guess, semi you see flat And

Eric Vaillancourt

space. upside We see some in

that course, growth. would that's, semiconductor rebound from as slow be Of It optimism by some recovering be be thing some see it's the will seems in well pharma. the but we biggest I bottom biggest the like to of will the But thing going say, far.

Milt Childress

the of business AST last relatively quarter some 'XX. cadence year demonstrable And Steve, at in is first have of a is look way so the in QX reason the starting part which sales. and QX just what a the saw flattish We part it's working you is remember you're decline, seeing before did more second of for things turned trough, down through you in now will the be notwithstanding weakness of that going if year, to we of the on quarter, in year, that's strong the of year-over-year what a

Steve Ferazani

Any for worse reason in why Okay. QX is QX? AST

Milt Childress

It's particular... just nothing in the order patterns and

Steve Ferazani

on much QX as Because QX, just Did in was your was AST that anything order than it was or specifically pattern? better you hit the AST. noted

Eric Vaillancourt

Just specific. the There's order nothing pattern.

Steve Ferazani

Okay.

would a I guidance higher expected. Could specific CapEx was The point investment in have little 'XX. Okay. where than you to coming is just

Eric Vaillancourt

Yes.

projects. Small want We well. We them, several have name to

Milt Childress

Yes. Well,

Eric Vaillancourt

at when It's basically geographic you expansion it. look

investment see You Asia. our in

week. facility. I to continue upfit also and We our Joe there were Arizona last

see 'XX customers so testing We of and capabilities soon and to continue are then expect to and be make Asia. as second ready geographic we some expansion year investments for half in start and in as revenue our to somewhere you'll this the there,

Milt Childress

And X of proms, are the technology It's and Steve, you -- the part of diversification our the of a pillars. X differentiation strategy X geographic of decade. better in for X place been that's semiconductor pillars look of key at

industry. and capabilities then leading investments both and differentiate expansion its keeping us are ourselves we're side really those whether both machining of these or give the us business just geographic on edge, capability expansion cleaning so others our from supporting on what And in doing it's the of that that

Steve Ferazani

in. could Okay. one get just If more I

James Gentile

efficiency areas development still in and Probably et support modernization, is projects, investing we're new kind of to cetera. product

Steve Ferazani

can or Given provide of the that? cash kind in cash conversion thoughts or you flow CapEx around on 'XX guidance, expectations for in anything 'XX the and higher overall any

Milt Childress

would in we the I Well, range is would $XXX million say what the for expect. roughly year

Steve Ferazani

And anything changing on your...

Milt Childress

That's cash flow. free

Steve Ferazani

the your allocation any Yes. in your CapEx? capital And of Right. beyond plans [indiscernible] changes

Milt Childress

of the AST. No, to the advantage in that before growth are growth that's sealing, in markets And faster organic in continued it's investing then economy. it's growing take overall to us of in invest than pockets

So strategy remains same. the

Operator

questions come from the with Our of next Oppenheimer. Zaffino line Ian

Unknown Analyst

This is on Isaac ] [ Hasan for Ian.

then guess of in I portion the you'll outside remain year? on And OEM maintain The we expect year? as business you've Could you touch as or to how the vehicle. side some first maybe for And move do commercial pricing on the through maybe aftermarket you performance what to power -- expect weakness, far seen there? you pricing and that the pricing some the Sealings. of see as

Eric Vaillancourt

they'll you sales end aftermarket and when more The are the continue you ] OEM build see to maintenance. be strong, strong. up serving [ Usually, go down,

but OEM market And very once piece. overall, is to don't we profitability well a of the drive need any also the we outstanding strong have volume on to certain aftermarket to continuing still does recovers us, there. do and so -- amount good. is and is really But the the change can the helpful and concerns mix business the mix

piece or pricing and In will over there back when hold, give time. much in terms the aftermarket not the we'll OEM of little pricing, a bit here

Milt Childress

pricing I not the year all for a it the XX environment it's for inflation. think is The you was because The won't this is ago currently just of same. companies. because months -- same backdrop moderating true surprise not for as pricing ago, as

we note as to it's XXXX. the see impact unlikely So from saw that, so same year-over-year you in pricing, just

Unknown Analyst

this as compared acquisition it at profile and we just the for of business year some algorithm as end growth maybe the could Sealings, a growth that longer-term then maybe you makes discuss of other follow-up, and AMI the markets. the that Yes, to sense. industrial And look

Milt Childress

focus -- and The new excited it the compositional we're mid-single-digit quite positions of maybe little growth, bit kind with at other more. of currently oil gas, segments, we analysis analysis capabilities to primary the AMI excitement about. is see sell us applications. and our But roughly, company of on We is that business and although a into into of composition part other midstream industry does take

Operator

questions next Markets. with the Hammond come KeyBanc of Jeff Our from Capital line

Jeffrey Hammond

here. a Just couple follow-ups of

metrics Just a just sense AMI, how about maybe talk business I of on lot -- make but within talk you financial just it. the fit about of know the and think

segment. rate it's in growing sealing -- thought last Milt, years. mid-single-digit then I was growth. growth you than has the the that. think AMI I X just, and X, higher historical been the But I think, said Maybe just what clarify at

Milt Childress

right, considerably then last first it the -- I'll a You're one bit company Eric than AMI. historically, to Jeff. grown But about take the the and talk turn that. more faster little has to

If growth. think had at mid-single-digit we'll at underlying maybe of to I the it's point, And growth, that, that obviously you market, the market better we aspire one than look kind indicated that. do

relatively company as of new ramped to incremental sales. with introductions, introduced -- than when basis of obviously, of the revenue we company as -- a size year exciting same so. in be to impact. or AMI some the have that market new have we And next percentage it introductions quite exciting in it's up products gets company the new the we a team historical some product was company's the function doesn't expect lot does adds on a have do little the But growth rate larger, Part the a product is small the the from new

Eric Vaillancourt

oxygen Technetics can and both variety you sealing general pharma, I it industrial. sensors put applications, Garlock, We use because including different both it moisture Yes. look and affect of food and in a sensors andHXS, we when think at

the applications throughout of spread that lots there's So work company.

Sealing. into nicely fits it So

Jeffrey Hammond

we phenomenal you just any just how we the kind should of in speak soft to year. if really And XQ And of the resiliency about long-term see Okay. be just thinking extend kind patch on of then a saw Sealing in margins, kind slowdown? margins? Maybe of the margins that

James Gentile

that of us previous I I to think XX% of successful gone forecast the in forward. I mean very segment and the give longer through through moving to reshaping enabled it have think our terms that I'll term, exceed cycle, a a drivers definitely of Eric long-term we

Eric Vaillancourt

were that before I at Well, in third a we've plus or depends on minus somewhere quarter And it It the still I really bit. be commented mix. we looking will in around that little think XX%, think back range.

And hold and But overall, depends to that's so biggest similar really of the volume. it they the I and to now. where margins mix, driver on expect are industry mix

Operator

you. Thank

reached end question-and-answer turn James Gentile floor to back any over the to have would We our I of session. remarks. the closing like now for

James Gentile

you Thank today. day. good joining for Have a us

Operator

Thank today's participation. you. conclude your teleconference. We appreciate This does

of your the at disconnect this may Enjoy lines You time. rest your day.

EnPro Industries (NPO) 20 Feb 242023 Q4 Earnings call transcript