NPO - Earnings call transcript Q1 2024

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Operator

Hello, and welcome to the Enpro Q1 2024 Earnings Conference Call.[Operator Instructions] 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. Please go ahead, sir.

James Gentile

Thanks, Kevin, and good morning, everyone. Welcome to Enpro's first quarter 2024 earnings conference call.I will remind you that our call is being webcast at enpro.com, where you can find the presentation that accompanies this call. President.During Eric Executive President Financial non-GAAP Vice Milt Executive is Officer; Chief Officer; financial today will Childress, Bruderek, we Joe President Vice measures. me Vaillancourt, number and our Executive and reference With a call, of today's and Chief facts included a statements Tables the historical friendly forward-looking are we be making are reminder this considered measures appendix call to not comparable GAAP to that that reconciling the the the on in that non-GAAP measures historical are in and presentation materials.Also will nature. of involve a and statements described These those in filings number SEC. risks the uncertainties, with including our that during note impacts providing excludes will be unforeseen full year from these Also uncertainties. call, guidance, and which this XXXX risks we statements.It over pleasure turn Officer. We do not Eric undertake to any and forward-looking now the to is obligation Chief call our these to President Vaillancourt, Executive my update Eric?

Eric Vaillancourt

morning, James, our few begin, as results like a review moments our today and service you an to for to Milt I Thanks, to that his us first provide good for XXXX.Before Enpro. Childress joining take we we outlook and for update the everyone. for would Thank thank quarter current includes

be like wisdom the importantly, throughout will will of heart, a into and future.Milt, I worked at I on on organization, all our retiring words? culture Today month. six-fold has that incredible company's the the has positive say be EnPro us at XXth and company for far strength this would and team Milt's our Enpro marks the influence when for of most know and, the call, I impacts be During value you few he have conference will entire tenure passion greatly our his as financial EnPro, strategy, remarkable. his end business to increased Milt and alive speak missed, say been earnings together way final his

Milt Childress

sum it after tough paraphrase To up doing A the I'll XX it's this I'm a [indiscernible] nearly Eric. years. words, few pretty and way. Thanks, ask Yeah. liberally. this

as of bit So give here a little grace state I this. me

and start, have fully had the trees describes life this and shade. collectively, And not us be shade will feel how but we stakeholders the couldn't only colleagues, work here, come. never other the when The that the I've team, start of the more done Over-time, and more our a understanding about about purpose I I prouder We precisely work of is excited at watching of I'm of work way we yet we you. plant sit. best under team. the tree talking our investors or more who a our future of what of to grow. enjoy about will Enpro Thank

Eric Vaillancourt

performance. to our you hard will day Technology outlook performance. the Sealing will to our you the operating and call of with turn retirement, over everything, results quarter Thank and we every well you for on my Joe started for work After more first current detailed proud.Now our for We a XXXX. in discussion Milt. wish year make I strong to review,

excellent factors softness and from pricing performed to also quarter commercial well pharma. mix and actions which XX%. adjusted semiconductor results. Sealing we nuclear weakness low Enpro, joining the softness contributions will as and the for controls in margins expected, AMI, declines demand well conditions markets, very current noted, segment food point previously continued has EBITDA to partial AST AST expect aerospace segment quarter and despite Strength Strong were vehicle favorable offset mark the as strategic the in market. As results. in first in cost that as in has since certain due in volume In persisted we exceeded contributing the And Technologies, and

the segment. of in profitability underlying and momentum positive continued Technologies Our strength the Sealing reflect

differentiation, Our investments opportunities growth. organic created aftermarket and for on growth incremental applied profitable focus a compelling foundation improvement engineered have in continuous characteristics,

strategic adjacent to build we closed Additionally, despite decline Advanced demonstrated Surface revenue opportunities our a AMI upon in as EBITDA maintained pursue the markets purchase.In we Technologies adjusted safeguarding core that the with segment, recently continue segment margin. critical of the competencies environments XX%, XX% in

to and are strategic long-term continuing We make operational improvement to for investments growth. position growth initiatives advance AST

in strategy are to executing focused on attractive markets. We our AST's multiyear drive growth

resumes product its We as as margins are well-positioned profitability of balance signs of market stabilizes future key excellent beginning to XX.X% our is remains markets EBITDA Enpro semiconductor sheet quarter, this forward. component segment in growth certain is for adjusted vision overall this a in of our confident AST shape. lines drive were and key growth to and improve.Total recovery are see trajectory we and the the and

in We for continue deliver our Enpro.Joe? for work them world-class upon fashion.I purpose and a work. safety, solutions on teams our to no The is continued across be Enpro strong their is to offer customers like at empower another a there one our their and teams of and day, in time our to foundation core would powered values Every excellence critical thank respect. and focus hard, built find better company

Joe Bruderek

softness organization, first that XX%, sales to driven almost organic the the team months, Eric, semiconductor. about $XXX.X good thank I'm and decreased to succeed and by CFO. place every the of guidance lie and level as It the I that we partnership of primarily and million and ahead.Diving like I segment quarter, clear tremendous results you, in for great in lower a morning, sales at declined Thank due to in everyone. him X% am have Milt the excited would his ongoing is in in recent opportunities results honored into AST significant

$XX the prioritize EBITDA the investments certain continuing revenue mitigation drive to in of improvement face Corporate and growth. margins the first $XX.X future company showed XXX offset in million strategic of The million decreased industrial and demand pricing decreased aerospace a commercial in $XXX Technologies and prior strategic by ago. compensation vehicle offset price-related of expenses largely while commercial from discussion Adjusted roughly the of diluted compared in strength declines X%. year year decremental million of per margin of AMI, and Adjusted incentive These softness of by the and partially adjusted initiatives. ongoing to markets, Again, quarter up decreased million. almost to segment in of impacting driven $XX.X Asia. in semiconductor in reductions period. EBITDA.Moving quarter's EBITDA benefited from share earnings $X.X of XXXX were sales management $X.XX accruals basis markets from expense year, quarter XX% contribution were share pricing, solid First Last performance. in general and a adjusted by year-over-year. corporate resilient decreased last points XX% Sealing strength continuous XX.X% cost nuclear actions factors pharma softness million food vehicle, partial to year,

critical for Our exceeding segment and us. a in applications leading-edge markets. number innovative EBITDA despite demand structurally aftermarket some XX% first positions is The solutions quarter for enduring in of clearly strong this our and stability margins the headwinds segment offer differentiate adjusted with

criticality declines margin essential the through focus to volume our sourcing our For first to continuous contribution the maintain the improved decline applications. performance initiatives AMI, and reflects sales overall a and quarter, X.X%. of drive robust of technology the discipline and strong market offset Sealing's increased segment XX/XX EBITDA in mix, result. the from Strategic strength the improvement throughout aftermarket and work on ability positioning actions, adjusted quarter partial segment pricing

backlog-driven for are as continued cycle such sustainable encouraged second product to segment solutions in that exploration generation expect longer improved in nicely aerospace, moving performance by Demand our Sealing us solid in the order Technologies lines Technologies. growing space now in forward.We Advanced the is positive turn shorter-cycle gives and confidence to performance power and We Service momentum quarter. we certain in drive into

saw and year-over-year performance. financial we sequential expected, As a in decline

segment First quarter million are $XX spending. coming in recovery, inventory sales persist secular Portions capital driven certain headwinds destocking months. and lines continued growth of decreased while XX.X%, in showing we primarily in experiencing continued semiconductor equipment could where of are by product weakness the

node future advanced encouraging. platforms technological in process on platforms space is our and ability our the know-how positioning semi advantages for to Our utilize and

to and with these strategic We markets. in are our invest in critically important continue AST pleased positioning

adjusted remained for segment year-over-year decline segment Adjusted driver the the EBITDA XX% decreased period. the margin primary year quarter, XX%. the profitability. was in volume prior For reduction The EBITDA above first versus

balanced market upturn in have the positioned volume short-term cash investing of and flow. realities AMI cash. XX, available the where $XXX We levels future million opportunities.Turning for utilizing remaining well our to the We growth purchase are sheet in goals and on January completed balance the

acquired we February $XX.X for addition, non-controlling million. Alluxa in the In in interest remaining

capital, flow million of in working of to to million turned inclusive at million $X ago ratio, prior tax transactions XX-month flow $X.X refund the quarter of year incentive slightly in compensation $XX year leverage transaction in trailing with these purchase million associated of long-term received the reduction AMI in the $X EBITDA. compared cash in periods, payments net free fees adjusted times of payouts the timing cash and to positive cash higher X.X approximately of year-over-year about stands We quarter. the quarter first Free negative a incremental tax prior EBITDA, due the related Our quarter.

cash focused we expect efficiency the the majority in year, on to expenditures which and $XXX will to million free growth the and $XX be flow capital continue of exceed range, For projects. million

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

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

capital generation issued we sheet these quarter, $X.X balance to return into share investments totaling the provide our the in us total guidance consideration to quarterly this to while that a XXXX $X.XX guidance. know cash factors liquidity ample year flow shareholders. time, our February. to In maintain per continuing strong dividend make we we at first Our paid all Taking and million.Moving XXXX now with

fully segment, approximately low outstanding improvement adjusted between $XX at $X.XX. We in $XXX the adjusted range, The calculate to diluted to sales range sequential to normalized adjusted diluted and diluted in are $X million we a expect from Technologies to and expect Advanced growth million. second share total In the million mid-single-digit EPS $XXX rate used and be slight per shares Enpro tax to remains quarter. the earnings XX% Surface EBITDA

are in firm continue in seeing We Chamber stabilizing, Overall, can recovery and in tool demand our drive and improved signals advanced order node be positive mix coming growth to backlog expect we certain OEM. see appears offset patterns vehicle In shorter-cycle coatings product performance an business and Technologies, the Sealing in market periods. signs commercial semiconductor demand our of results to cleaning business. should improved we that positive weaker lines, in

sealing is seasonal than second the the We exhibit where to stronger patterns the first slightly half typical expect half.

the precise depend within that now growth land guidance to comments. investments turn magnitude semiconductor. for will continue range are to and will we we in value.I the our future of well timing, We of timing call anticipate where recovery drive appropriate to the primarily back closing making are Regardless the and Eric positioned on and

Eric Vaillancourt

in Joe. Overall, portfolio the evident XXXX. inherent Thanks, Enpro's again balance was in

Our conditions. discipline under enabled well diverse rigor us to perform set of market and

value-creating margins our for questions. appreciate your Our in you us and cash best-in-class now interest strategy We'll returns portfolio attractive remains your unchanged.Thank welcome and We generates flow today. again Enpro. joining

Operator

you. Thank

will We be question from coming first from Capital Our conducting now today Instructions] KeyBanc a Jeff Hammond [Operator Markets. question-and-answer is session.

Jeffrey Hammond

Milt, that you've thanks us. for time all We everything. spent your appreciate again with

Milt Childress

Thank Jeff. you, it. Appreciate

Jeffrey Hammond

in just Maybe like talk and parts still where destocking seems getting through sounds to the you're be guess, really better. seeing it want cleaning on dig nodes semiconductor. the then line to are leading-edge I in around And more weakness. second of less ramp confident if or just seeing AST? kind feeling snap of we half we still as kind of and I today,

Eric Vaillancourt

in Eric. start, It's jump and I'll Jeff.

our all in those segments, off, first backlogs grew. So

as goes So we're feeling better half second time on. about the

later that momentum shoots We're a happen it still We business have getting hasn't where I hopefully I green momentum, taken of bit the destocking and Our just is it. business, say would coating say, but kind ready it's and seeing on. little cleaning year. call sometime, this wouldn't of haven't there. certainly to would had our And off, for just better is I some there, rest we're here choppy. getting going and

Operator

today question Company. from & coming Next Stephen Sidoti is from Ferazani

Steve Ferazani

guys up would lag that to into terms by in you follow start quarters. seeing couple you began, last that but it The want that When a recovery lagged semi fits into of I concern your even 'XX. recovery, of we how the question be really guidance. semiconductor the decline

coating, trying outside your you're you And indeed, I'm out that in guess half? figure the hearing confidence customers. level that recovery from cleaning to I and even specific So second of to that's what your get

Joe Bruderek

entire of were node half our the mean and Throughout positioning with not cleaning pretty in steady, I some we if down around other firm first, saw certain advanced factors this Steve, backlogs. first period, segment. areas affecting the mix as actually growing XXXX, strength business drivers advanced in definitely positive this given in secular

there's on of certain half but kind that you slow that and seeing a our of little there periods confidence back, up improvement. intermittent kind step we're take of flow, And inventory destocking kind positioning order still us coming of If some capital significant drivers are loosen some in the period, giving should back the equipment platforms, are show of periods. will a

Steve Ferazani

in If you And on give ask update non-controlling on what's I Can interest explain there change Alluxa? could a purchase? general going that can about resulting Alluxa. was us that with you leadership a

Joe Bruderek

and and provision they put-call Alluxa that now a to was That we subsidiary kind of become the that XXXX, wholly acquisition a completed has exercise when initiated was a put-call in owned decided Enpro. just arrangement small of

Eric Vaillancourt

expected That there. surprise plan. No to was according all

Steve Ferazani

side, had little commercial a market you aftermarket. the that Sealing in towards a more about directly your bit fourth of the talked some quarter. you the the of sales weakened. On time, Obviously, At vehicle bump transitioning

was and nuclear I at success would it guess there very strong? other Looking aerospace in was numbers, just or being there the the markets, was a that?

Eric Vaillancourt

of Yeah. be expected seen in what side coming And commercial we Steve, out things to the far. the market. down XX% as of trucking about talked was OEM heavy-duty right, so about fourth that's the quarter, we've and

mix the been we're that's coming been on led successful mix first and of of quite being the aftermarket quarter. offsetting some the that's OEM favorable focused improved business there. and because business commercial down, to successful, aftermarket the that, So the OEM and seen range aftermarket. really into we've versus to positioning That's We've in what's approaching XX%

margins. and and the the quite done results So STEMCO you've Sealing seen improved overall team the well, and has

Steve Ferazani

within that's you business how and it more One and how you far AMI, look how so that of in going, to fits about integration it felt for think what ahead Sealing?

Eric Vaillancourt

home-run. AMI been team very well. executing business. just very, very, proud have to a has very continue been operate that We're about is the and excited really We've to well. incredibly They them

to we about be business. So excited very that continue

Operator

is Your Oppenheimer. from coming Zaffino from next Ian question

Isaac Sellhausen

as a Ian. look the will Sellhausen on these and sentiment. well. This on retirement. I calls Joe is Isaac missed for previous welcome be Certainly Milt, career on great proud earnings congrats and

Milt Childress

you. Thank

Isaac Sellhausen

quarter? and were that some big speak about The how the a could growth is end on Maybe remind long-term Sealing. drivers question you you if is the Could nuclear us bit of to nuclear market there. businesses aerospace stronger this and the near

Eric Vaillancourt

Sure.

France and With the in EDF Nuclear Fusion project ITER?

Isaac Sellhausen

Yes.

Eric Vaillancourt

driving that Well, as project for results well participate elsewhere. there we us. Okay. as but certainly, is some It's early,

I Europe resurgence across, France. would across So or especially renaissance and the it nuclear of call

had continue. part trends very We those to and with are located to We've in capacity, I reduction countries. well there, solution businesses, those small given a think nuclear be very, and but of the Technologies. continue power are going our meaningful Sealing baseload meaningful basically to generation build positioning It's fuels in And nuclear of very doing a strong as strong very years. could kind Western you for fossil in needing the forward, kind look many and of

Joe Bruderek

space, the as launch we're to drives the you more regards on launches, well. is every of as there virtually In in business see course, U.S., our that space

Eric Vaillancourt

space, generation. We're power certainly areas in in delighted positioning our and with aerospace sustainable certain

Isaac Sellhausen

but guess I in you've had just guess, just that's higher mix a of Sealing. here? then if helped price to embedded guidance on could I volume And speak sort what's maybe just versus and pricing the quarter level, bit, you some

Joe Bruderek

Yeah.

market broad well in environment surgical seen The continues last team the pricing the not rate the this been far seen so pricing. to that in years, So pricing surgical successful quite Isaac, post-COVID we've to but in few the execute that's is we've conducive year.

in for side to low when that side called seeing mid-single-digit businesses seeing food by technological you're there. pharma offset quite certain headwinds -- and and volumes and being execution, offset definitely activity and well pricing So and some positioned down But out the really favorable general the margin mid-single-digit of at on we're by mix X largely have of you industrial pricing year, position. impacts. We spaces. advantage pricing those and largely that Volume, our in beginning the are value-based look being a range

Eric Vaillancourt

point commercial another very a to to and a want our had launch Auto-Torq vehicle product market, We thing. out doing of continue I in extremely well, successful will called grow over-time. is that

year the you're other spending are out artificially seeing XXXX expensive builds thing point the trailer to The What coming model in I this is want CapEx year. put being be requirements towards in truck to low. is

into and So 'XX. rebound year continue grow well the next to trailer will as

in we're business still the that So excited future. about

Operator

Next a follow-up from Capital Hammond from KeyBanc Markets. Jeff question is

Jeffrey Hammond

Just on, much to sounds the of sort at of of just baseline. how the the at or that I'm AST is step-up trying into second -- a sequentially, how It the like get up of half kind just I you of do of guidance slightly maybe need midpoint guess, like hit guidance, the midpoint? to shape midpoint but the

Joe Bruderek

Yeah.

in we So is fourth the sequential quarter the second improvement Jeff, over talked quarter. We we're we in quarter see see should first to believe second right, into today then improvement again that the quarter. and reiterated bottom said, sequential a AST last we the the quarter as going and

half the air, timing versus about includes so but improvement the half the the We're of we've up included in half. far, in seeing but guide still sort what AST of the that's is which a second The double-digit first low in of the second second that for signs half. in

Jeffrey Hammond

from coming NxEdge ramp, then kicking half, market that and your you're the of is LeanTeq or is synergies And some that together? second of more kind recovery that in, Okay. making investments

Joe Bruderek

you the Jeff, as of described. all above, It's

Jeffrey Hammond

organic best of I some flat of got then is half first kind guess, growth? you the as tough is get comps about in to and second think Okay. kind And the negative and Sealing, way then the half, just on

Joe Bruderek

of There guidance course, included we AMI. you of addition in just is range our definitely the time, probably is period would a said, softer QX, so of correct. And what of then, QX reflective

Eric Vaillancourt

businesses of all news first good in X is those grew The all in the backlog the well as quarter.

seeing we well. momentum some there So as are

Operator

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

Eric Vaillancourt

Thank you look pleasure. We Bye. for to time was It the conversations a the later. today. forward

Operator

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

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

EnPro Industries (NPO) 7 May 242024 Q1 Earnings call transcript