LDL - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to the Lydall Second Quarter 2020 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After towards presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Brendan Moynihan, Vice President Investor Relations. ahead. go Please

Brendan Moynihan

Good quarter Elisa. and to welcome Thank earnings morning, conference second XXXX call. Lydall's you, everyone,

Randy in Joining a me we how President solidified on Chief today's segment. positioned of of remainder pandemic, growth. the At discuss call for the of are the Sara and high-level will for long-term with our a financial their impacts world and Officer. the key will position on with Specialty overview Gonzales, its of a the well call line for follow review then of Financial COVID-XX with call Executive quarter, performance XXXX Filtration. business Sara the Greenstein, discussion further Randy Executive the end Chief open outlook Lydall Vice how leader and questions. has drivers and the the Sara as we'll conclude begin and weathered brief by Officer; how a current President remarks, are will we and the

earnings along earnings quarterly which lydall.com used quarterly with on be the available are website, issued release QX, the the today's Investor in along presentation, Relations our Relations Both XX-Q. for call referenced and our Investor can Form as ir.lydall.com conference filing be at call with XXXX of was can Our found section.

for within available also XX-Q on As Lydall's of statements refer made presentation, the call to cautionary conference this further note made securities may information. Harbor noted laws. that in X concerning forward-looking provision comments to the Please Slide are pursuant on any as Form Safe constitute statements this forward-looking the defined

I'll in measures be the be conference call to referring this to A appendix With I the Sara. over In addition, presentation found of GAAP that, call. referenced. during just financials will non-GAAP turn reconciliation to financial can the we

Sara Greenstein

thanks Brendan. us. for everyone, you, joining Thank morning, and Good

filtration in our historic structure second Our business. to We position. the managed this declines liquidity earnings meet the our while surging resources and simultaneously performance of redeploying automotive for aggressively strengthened cost to reflects applications critical quarter industry, address potential demand

filtration, has call, the As specialty Lydall for in against meet in capability pivot fight and the it COVID-XX. products to demand. required the most a the has the to global responded some leader proven producing world to highly of agility we sought-after quickly market's the

Slide to Turning X.

public to Control or While demand for demand the is equipment Indoor the capture the is filtration life-saving building emerging viruses. equipment buildings for fine York the media, filters spaces. New With of these experience State large filtration and government is decades high-performance across recently buildings installed. are New not malls in York should Center owners quality coronavirus. commercial indoor XX announced and manufacturing until protective also or developing Lydall healthy the fiber of stage reopen The for recommending next of in unique PPE, immediate to airborne exceptional the submicron-size pre-filter filtration personal guidance rated released well U.S. assurance against to existing the The assets positioned this air which for submicron is products of need upgrading high-efficiency and level. portfolio. its defense ongoing to evolution recently higher, media through at HVAC Disease the significant product provide performance filters production high-efficiency MERV The requires address of

which these production energy fiber air quality officials. security end-user capital systems, their that national facility. state a and media we New two consumption. localization for critical improve to of investment indoor groundbreaking meltblown materials, superior higher supply are With federal partners for Hampshire new these essential and the public Lydall our produce while health. announced employees, chains strategic structural for customers with performance and our to celebrated be in the local, located lines at meltblown to reducing all of will our to and ability These fine assets ceremony at products, provide demand Lydall, investments allowing investments Rochester, HVAC combination Last shift recently minimize while long-term in Friday, the fine-fiber the

these of other this of which from end second critical $XX.X will Also, investments. U.S. of quarter these lines and underwrite be commitment secured production we operational the two full Defense, the by first in of of June, helps The in the the million end the XXXX. before year Department a

PPE, for site addressing to hospitals, to in domestic opportunity, Lydall's manufacturing growth, expansion and our of by United schools, production remain Rochester homes. ability, filtration quality. to Excellence by well a indoor Specialty us year. With restaurants, facility buildings, States, high-performance our solutions offices, also each air Center places of the specialty Rochester supporting or protect air approximately nursing beyond solutions the for including be will X.X forward. the facility these billion of malls for enhance reaffirm homes, that and filtration of X.X indoor investments be tremendous quality and These completion will go lines, providing filtration fine-fiber masks a our and surgical innovative, is our spaces, NXX, moving The will respirators largest the cornerstone improving meltblown strategy home billion the

with tested to XX% increase XXXX partnership the quickly York compared continue New material and Moving we used trend second the by York sales Technical Development personnel Nonwovens two second additional an to filtration created prior the new engineered, support that Slide New in Department you our adapted throughout with each Economic to footprint, order in responders and to a York. large saw is competitive X, the qualified improve of approach delivered a Lydall and and innovation, a City can in and to product fine-fiber we has nonwoven market, to rigorous gowns. City important medical first as see meltblown beyond the online. year, in New this assets our come to we We to in filtration Corporation, the of Health advantage. rapidly and expect global strong quarter quarter, In growing a the pandemic. of address challenges Specialty we segment, In medical

face felt for be has masks needle-punch also in PPE. used Our developed to other applications new and team

despite In in decisively, managed the North quickly mid-March, external pandemic, with margin customers online, demands. those on TAS across historic had EBITDA May, production production managed TNW, XX% impact Thermal production coming flat we Solutions and team our back The late at business. ceasing sales. aggressively saw immediately a our in customers' volumes and the responded a decline despite factories a America facilities. with material and OEMs Acoustical maintained commensurate Europe. in our OEM our COVID-XX headwinds from lower resulting Additionally, automotive With cost reducing

worked and to an that ensues. in as this extraordinary importantly, production in employees uncover been of world-class, securing facemasks I America, shutdowns. equipment, sowing contracts ever-changing medical environment. world investing we together and has to the to around even situation opportunity, has facilities manufacturers by am believe were continue of to this deliver tirelessly the the OEM the our proud long-term facemask I pandemic the every team at North our response gowns to contributing of Our our largest safely affected in new seven unprecedented Most results with incredibly that who came operate

these contributions. Randy to during over results. thank them Our and turn all employees that, second commitment their I the I have cover quarter of With shown to times, now want challenging for resilience incredible and will to call

Randall Gonzales

you, Thank Sara.

and provide results. some key overview operating our cover briefly highlights then for I'll second X, the Slide an to of Turning quarter segment

a presentation. adjusted in including A release EBITDA segment. earnings reconciliation metrics, press and GAAP be numbers adjusted we provided will As to reminder, discussing the by financial comparable complete is

points decreased million our Solutions XX.X% dollar and, $XXX.X impacted of X.X period sealing sales net $XX.X was related from revenue million primarily Performance and which, decreased XXXX businesses. COVID-XX as million headwind $XX quarter Acoustical or Nonwovens or $X Sara or Technical percentage down mentioned, lesser million million, a foreign $X.X same strong extent, the sales, Second Organically, and XX.X% tooling Materials by were Thermal business reducing X.X a XXXX. sales by points. our sales pandemic to or on percentage consolidated impacted shutdowns, The in

grew prior resources of EBITDA we to the year, segment structure and the driven against Within quarter, saw masks reduce $XX specialty compared products, by the driven strong Materials filtration and cost surging including for leveraging COVID-XX. exceptional NXX to discussed prior to fees. filtration $XX.X from last was support by Performance EBITDA, XX% filtration demand for Interest simultaneously expenses of $XX.X This sales fight as expense mitigated million our respirators quarter, in our XX.X%. media Despite for demand where on credit on million year, million flex of quarter a second results from lower sales surgical down rapidly able expanded very or Thermal or was and a our but were a sales, which Performance impact higher while by overhead significant by in of to sales. call in onetime to Materials Acoustical changes were substantially sales, for products. the X.X% EBITDA and almost was drop-through offset prior even compression decline on $XX.X in up year million margin margins and prior rate adjusted million interest $X.X headwinds Nonwovens, a We agreement to the quarterly Solutions. result Technical of by support

we year, $XX expect interest be full the to million. expense For about

rate valuation effective X.X% by tax was income foreign The second of allowances. and taxes quarter impacted

second of adjusted $X.XX per share XXXX. loss per share was $X.XX to the quarter, compared For adjusted the earnings in quarter

liquidity. to results, I'd segment discuss focus on continued highlight we Before like our

this flow Cash quarter operations working from from million million Aggressive X. last second of contributed over and management was Slide $XX.X cash $XX flows year. $XX.X the million to $XX.X has million Turning up year-to-date, in in year. capital

current of the with million We CapEx second levels the expanded the meltblown near hold Material $X in through credit also approximately $XX to and to our our fund term, projects, of key year-to-date, In management $XXX million mentioned under XXXX, second last disciplined total quarter. the this a million at expansion capital CARES to which the through call. trailing available quarter economic including to cash Sara period related provides Capital at quarter in enabling the and of payroll spending tax of Combined $XX On accomplished beginning Performance capacity $XX.X flow us basis, balance the meltblown for operations grow second million, to $XX.X $X.X $XX was cash cash ongoing was free to is This year. the the million million from expansion. such end same took million working we deferrals plan the sufficient us Act. and environment. to liquidity flexibility advantage as investments reductions, million, navigate of XX-month of the elevated

expect to $XX U.S. announced previously range which government year million including on XXXX to of will portion full new by a be commitment. meltblown the $XX the spending in of capacity, million, capital offset We spend be

to XXXX. forecast We continue $XX debt in million of repayment

automotive TAS our Slide segment. to with solutions Moving I'll results, discuss our segment X. starting

were million Second business in quarter or sales compared in parts driven both by to XX% OEM shutdowns and a reduction part the resulted sales in America. down this global period, $XX.X million, $XX.X North Europe These in sales factory shutdowns automotive year with April. XX% in prior

June, total, drastic operations first $X.X This administrative in slowdowns volume TAS a As to and sales on due of year, ramped, factories and lost overhead and addressing major exchange impacted million quarter that of in FX manufacturers in of compared and Tooling $XX.X down declined by sales. our EBITDA drop-through to expenses $X million China approximately X% May, $XXX,XXX. by EBITDA were included in structure, in the were significantly up $XX.X net by XXXX. reduced our year million performance mid-to-late margin returned dropped the resulting end sales in the sales part million Notably, second to direct segment sales North the foreign quarter, reduction reducing to quickly of reaction of experiencing compared XX% by in prior American by production after In segment COVID-XX. prior production was volumes which resumed rates. achieved to labor, had European XX.X%. cost was our

in to Sales $X.X second filtration X. down engineered I or of or agricultural, and by media Advanced million Moving segment including Filtration decline sales end of million slower our markets. impacted cover XX.X% filtration were specialty and solutions sealing demand specialty led the quarter than includes grew was XX.X% surgical Sealing by subsegments. masks. This by of XX.X% to and sales million, XXXX. will $X.X in $XX.X which was Slide which for compared automotive Performance NXX respirators solutions, Materials construction Solutions, more and offset a

our industrial in margin EBITDA Filtration X did XXX XX%, down to and on of and forced declined points compared while Industrial segment of second million basis reduction quarter year. in million, last Materials year, of with Technical all cost to sequentially prior sales Slide Thermal or the Nonwovens Second actions. management $X.X were expanded $XX automotive-related of from million, from demand filtration increase China $X.X by lower year higher-margin down Advanced Solutions. mix prior quarter. adjusted benefits million first from favorable actions, announced XX.X% regions. $X.X products, material XXXX covers down from previously Acoustical softer note, Sales across were operational productivity quarter Of sales were XX.X% they sales sales intercompany including segment.

year, and lower In for terms cost productivity closing aided margin is flex EBITDA XXXX. up I'll That $X.X we administrative of by second comments. the volumes EBITDA with results. by onetime up a recorded segment summary, adjusted turn essentially from furloughs, all offset flood now filtration points to being to for expenses. XX.X%, positioning actions, second prior us Adjusted XXX was quarter reduction production, segment million economic for recover. and first to quarter the Sara of XX.X% ramping cost our including structure flat related of well demonstrated lower prior back the concludes her broad in margin year, volume quarter of ability it loss insurance as uncertainty, In future selling benefit, the in of profitability, recovery material our this while review from our basis midst

Sara Greenstein

Thank Randy. you,

and half shareholders employees. remains our of health our driving So as of of the on more for our value the into we our meeting well-being the the customers, move year, needs and second focus

to where markets advantage. We unique we will a provide applications have distinct and and technologies competitive prioritize continue

XX. Slide to Turning

systems continue see half surgical second $XX sales the demand anticipate contribute respirators, and strong Performance will filtration $XX of the We products to for in filtration incremental for of to million media and filtration Materials NXX year. meltblown air masks million

addressing around be North globe continued automotive which activity, in for are we to Materials localized need lower chains our applications. outlook at geosynthetics government investments end to continues anticipate partially the In uncertain. sales we forefront regarding PPE critical we In the automotive and markets. further as Filtration In China. strong and filtration capacity, Industrial addition, the discussions to leaders increase for of our high-quality, agencies to with Lydall remains the industrial and media Nonwovens, seeing demand and Technical demand supply seasonally softer similar for fashion offset products, anticipate Advanced American will be medical-related sales driving recover robust business, will by for experienced European markets construction what nonwoven the We in continue to

term. the region auto to most within This degree, the timing the and stabilize by will company focus Slide directly more business, impact enable the and we third Thermal lesser begin XX our will our in to half business uncertain, near-term which While the long us in the innovative of Acoustical volumes of will a over and XXXX. lower outlines sealing Performance stronger, albeit the same be healthier Solutions Materials. second a at areas, believe the production recovery XXXX than quarter, magnitude to remains in period

of technologies. secured forefront the a filtration chemical and of producers of and specialty continue remains to are New with of At to for are to the media one world's a will drive materials, with world's jointly applications. partnerships personnel, Hampshire we to manufacturing center ensure environmentally establishing we excellence while the companies critical we specialty sustainable To innovation, that As first-responder of demand engineering our of facility, high-performance solutions. continuing to innovative at filtration that Lydall new, wave supplies next meet wide leading develop Rochester, frontline top variety advance filtration of some the and have

air that producing quality. last economies investments Lydall to fully address to matters, at fine surgical is solutions, critical us, our the masks PPE after air inside new, applications of will pandemic media and these expect filtration the as strong indoor behind leader emphasis even the performance, on comes for media demand XXXX. us domestic world what's product allow the In to is applications. And fiber remain. the meltblown to inside will we high-performance NXX expect expand it respirators We clean portfolio When through and our filtration higher reopen, for well-established around manufacturers parallel,

unprecedented our so I past market and to navigate products will shifts. Over two demonstrated to change. full we the to adapt pandemic this as ability have COVID-XX quarters, do economic fight to confidence that we And have continue quickly evolves the and conditions required

our As that were I strategic specialty shared sharpening underway during in call, our value-added and at previous filtration changes products. on focus many engineered Lydall, COVID-XX has ways, materials accelerated earnings already

and Lydall strong a customer in a Our and positions these relationships, ingrained with along deeply win. experience decades world-class of supplier of innovation, heritage areas, to team

Although ability With the world, our shareholder value Lydall's I remain, and am to open COVID-XX and through believe best I call are that, safer quieter on deliver focus questions. creating days to our related in cleaner, many very unknowns that confident ahead. a let's for long-term

Operator

Instructions] Thank The ahead. today first CJS. Moore of Chris comes you go [Operator Please from question

Stefanos Crist

in this Chris. Good Crist is morning, calling Stefanos for

Randall Gonzales

Good morning, Stefanos.

Stefanos Crist

morning. Good

reasonable than it puts be the to to QX better important when And forward? margins takes most that and assume about is consider we think are question, modestly First margins could going what QX?

Randall Gonzales

So, very automotive I in of QX, we QX recovery versus that a the think Stefanos. difficult expect with

consolidated a can that. on basis, think I you expect

think be QX that PM actions aggressive I just both the of and in because able saw those we extremely kind if in into strong cost did that the TNW I we'll maintaining to don't we QX, of margins margins maintain take. know

the quickly of we have we the variable across very QX. to took will board, some cost back volumes in that As add recover out

you on see basis, improvement, across by not board maybe yes, short, consolidated the in some a but So should segment.

Stefanos Crist

COVID-related for biggest shutdowns, the And of XXXX? what that wildcards makes then second half it, than the are other Got sense. the

Sara Greenstein

country as going you mean to as it then the the globe to ensuing seeing we Yes, as about. relates strong. what's I to around come happen uncertainty and local shutdowns, know, the and/or well We're really I I depends that both COVID it are across mean, regional just is decisions stable the China pretty would and say, upon talking and economy the that back

might well, is think I think I quite day. there done, therefore, imagine, to do able Europe, in of continuing, fully to in us needs you just do What tumult each customers' to a in it's continue the as able flex be very U.S., to to expect in I our production supply-chain, we've order managing be our is bit and have and to stable and a to that. place,

And that which so, am to regardless confidence in ability to the predict, wildcards to of smart enough is certainly come, have them. might I where not our I respond

Stefanos Crist

make much. And That queue. very in sense, you jump I’ll thank back

Operator

next from of ahead. Gabelli today The Kim Instructions] [Operator question Shawn Please comes go Funds.

Shawn Kim

question. Hi, good morning, taking thanks for my

Just costs permanent? variable few be of over months to past the curious the how much out taken

Randall Gonzales

So portion million referenced out we certainly we so is in million of that, cost large - variable cost. of about Shawn. QX, costs overhead $XX took A of that $X of that

would So, of that of I that the the remains, of of piece some permanent. some say that course, SG&A fixed the overhead is overhead and

take Solutions Acoustical get cost So Thermal business cost in fixed volumes. our that with and the the both affected shutdown, we significant were facilities did to in action cost When, just line SG&A.

that So is permanent. certainly, some of

million of to to of estimate $XX a So cost $X million, would is out that $X permanent be going the reduction. I million

Shawn Kim

Okay, was question. great And I had really helpful. another then that

are have your you time look at the things - long-term and for great business? XX% goal you plus doing exposure guys for does you automotive segment spent the the all there. about PPE satisfied When TAS today? have currently entire with guys reducing media filtration talking a the you lot of You Or guys team your obviously exposure in a are

Sara Greenstein

Sure, question. good

end long-term out, be quite finalizing while the question. exposure of in our piece. of point So, at of we kind your that quick in specifics serve lot some will automotive of there are is, near more hold markets on And and I terms for answer been if a the - we But roll to have we think the that strategy. holding that broadening answer the to the on process you will, path our other time

that quarter taught business us we we that ability, think exciting that in thing and have the the have And of we portfolio. the in I the of of diversification is, what are our value that the making this is value that automotive improvements business addition, demonstrated creating. portfolio second -

the of win have we areas filtration. And like compete products So, in to if we that that I that are other look value can be we will will you pockets as automotive future, side, if identify we engineered expect extract have know we we there fully fair specialty it in. in And for. that the opportunities where in can highly we

its We will where need portfolio. certainly focus will strong We that to know to where win. - - we and power. Long-winded there. answer a earnings focus got can demonstrated It's focus, we've we we

Shawn Kim

for it. Terrific, thanks for remainder of the color, best the And year. luck of appreciate the

Sara Greenstein

you. Thank

Randall Gonzales

Thanks Shawn.

Operator

ahead. question next The Sanger Geosphere. of Arvind from go comes today Please

Arvind Sanger

wanted morning. you, strategies. Thank that to good understand Slide XX Sara, I in the of some about you're talking

One there is anticipate is, that, that How NXX talk investments things things but with admittedly How how if this generate on next you early happens the that bet do year? might year or of expect turn? you not end expected what about quickly government years? something the like do do the knowing to vaccine of couple by the next you of My you through how a the you're XXXX. demand over is NXX question returns money, making

Sara Greenstein

of Sure, a things. so couple

have and contracts long-term we that. the we're have that and capacity of online the sufficient First secured demand majority foremost, bringing to fill for additional

supply of right that So established there a every the the my demand sustainable cited are simultaneously market, for excellence will specialty And is is working the upgrades that, the being in postpandemic, countries air requirements filtration confidence of of creating around media. with now. And long-term. filtration NXX that and places surgical next-generation the that what Arvind. local on policy HVAC recommendations and which and that of changes and bit I, world applications establishing very be happens, like through that solutions of regardless is of for mask and air active I with as confidence in stating result XXXX critical applications spaces the regarding there would center have even is full because chains I ample the argue direct

Arvind Sanger

of especially I that from me think related So how a we pre-COVID So question, guess, met the is demand to guess China? current brings which is about should imported, I by market primarily more being demand? that post-COVID, to much How met in larger requirement. from given the imported likely a be was there make China locally by much is - U.S. much much being even

Randall Gonzales

me start. let Arvind,

according period the So demands, the for from data is have this the met to only. U.S. we respirators respirators prepandemic, the of NXX the of XXXX, outside baseline that majority NXX U.S. Of vast was

for probably at production XX% that demand. estimated U.S. less or U.S. So was

So now to the the pandemic going and post-pandemic flip-flop. that's period, during

so, from U.S. it's has be much going online. to of product And as as the - the the supply capacity

capacity that So then there's going not meet the the start of just to fact online, the U.S. when enough XX% because it's we demand. coming only be XX% U.S. outside of to probably to

Arvind Sanger

in bullet Slide organic kind or product market? that second opportunities XX Got the do air quality portfolio was indoor that that Is it. the applications. And you is see in of then the clean point your for expanding inorganic? What about

Sara Greenstein

And are make filters. are expertise because ULPA to - increase. existing And increase criteria for part we bodies, portfolio it so. air-grade HEPA, continue our as off which engaged regulatory who are the product the Arvind, do we And setting to product innovate to products setting of those is we actively and capacity as today organic. and capability our working of got with current standards we've criteria standard the the and we scientific the portfolio as MERV-rated

Arvind Sanger

you. thank Great,

Randall Gonzales

Arvind. you, Thank

Brendan Moynihan

Thanks, Arvind.

Operator

for this now Showing, question-and-answer questions, presentation. concludes further conference today's concluded. has also Thank The you session. [Operator our Instructions] no attending

disconnect. You may now

Lydall (LDL) 2 Aug 202020 Q2 Earnings call transcript