LDL - Earnings call transcript Q4 2020

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Operator

Good day, and welcome to the Lydall's Fourth Quarter 2020 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Brendan Moynihan, Vice President-Investor Relations. Please go ahead.

Brendan Moynihan

Hi, good morning. Elisa. you, Thank and Conference everyone, Lydall's Quarter Fourth Good welcome Earnings Call. XXXX morning, to

on key Sara financial a positioned the world our and by President Filtration. performance Joining Chief line our of business call review of end as questions. the the conclude today's me are with a high-level a drivers are for to and Sara Officer. discuss will will call overview Gonzales, current Randy a the solidfy call Financial the At brief for position of then will with well Executive quarter Greenstein, with growth. how Specialty Randy Executive taken we Chief leader Vice priorities including in segment. and remarks, the Sara and their follow-up open on begin long-term actions Officer; outlook, the immediate discussion and President we'll Lydall’s

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

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

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

Sara Greenstein

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

strategy. time was early For the our Lydall’s we communicated long-term you December many Day, where in at spoke of we last Investor

engagement Lydall in Specialty enabled is Filtration your of strong targets. organically the took year, you Materials by performance earnings solid joined $XX we to up our while of We balance will management strategy and financial on across For ending With today's ended deliver those our XXXX. X% you invest thank and targeted actions fourth growing EBITDA release, adjusted a positioning the continued event. Thanks million cash following growth and markets the almost our us to positive portfolio. Advanced fourth from to financial with $XXX continued million the end delivered sales quarter a to XX%. Solutions. Lydall our year the led who sales unprecedented Strong the our year completely for decisive cash up and momentum us through At in up ambitious quarter feedback how see agility to

began mid-January Turning filtration I just line X, pleased three to in and New as installation on-time before full meltblown Materials, am on on and to completed fine running has we that fiber on-budget. Slide new capacity. Performance to first lines and of sales. continue at the see been Year construction Production late strong the that of specialty December report

foreseeable the you for sold out contracts to from is future. Day, long-term As line this customer Investor recall may the satisfy

production ready are Center Specialty third Excellence, than investment by the the of Filtration Our Lydall’s to and St. be second fiber France be New and Rivalain, third schedule line investment our Combined with capacity. for Hampshire both will on collective in triples production $XX of million Rochester, full this in They our more fine meltblown installed meltblown quarter. respectively. additional beginning

performance be of filtration a continue to solutions position we fine high largest indoor innovate actively of that one media Solidifies and address our to outdoor global in air and as quality. that the suppliers ensures Lydall meltblown fiber global and leader position

an Our quarter, Technical third our OEMs robust in above in medical markets with offset truck for and sales demands continue quarter and lines operational deliver where the North quarter largely increasing to experienced year. our further Nonwovens or already Solutions increase continued platform. Strong fourth well helped climb fourth demand customer and Thermal continue Acoustical we business, aggressively orders was in driven SUV geosynthetic light of end expenses Industrial product In Filtration efficiencies. TAS sales from America, what reported manage strong softness and to last business strong This auto in the by

successfully at reality we Our third strong shared North impact Carolina action COVID to sales is bridge quarter, and facility. plan, in bridging fourth staffing safe our employees and TAS continued to a In while we plan bit, the our increased Hamptonville, that but anticipated our call, our were meeting ensuring the tempered labor gaps quarter customer the in shortages. our healthy that demand. activated remain In

We sustained to across continue Hamptonville operation. the see improvement

our on With I of and cover Filtration Advanced quarter fourth results. to cornerstone Lydall. to profitable, focus Material long-term that, continues that the Solutions, Our path strategy the be now the call turn right the growth Randy our fourth to demonstrate One across Specialty quarter will for results sustainable over

Randy Gonzales

Thank to you, everyone. Sara. pleasure It's And morning, be with good today. you a

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

consolidated favorable adjusted and or Materials comparable by revenue points, EBITDA reminder, to we'll quarter TAS, XXXX reconciliation was Performance was margin including The quarter Fourth by was metrics, a XXX by million at is A EBITDA numbers margin XXXX. by in Nonwovens. from or offset basis at X%, the sales, $XX.X grew almost X.X% last led points. partially a $X.X our declined quarter percentage labor percentage from of was from points million filtration points volume by XX.X%, mix Materials X.X% led decline of margin continued in by was Solutions X.X dollar increasing which costs year foreign financial was Consolidated tailwind last very period Adjusted or interest Technical last strong incremental which of offset sales Acoustical XX% of GAAP complete XX.X% from XX.X%, $X.X a Thermal net million partially segment. the $X.X up margin by Adjusted consolidated year particularly from million. year. sales segment. in strength lower basis of sales, was in balance. $X for over up but $XXX.X a EBITDA and fourth adjusted discussing release by TAS partially press offset gross X.X% As X.X% presentation. X.X weaker Performance offset or EBITDA TAS. adjusted the products on and and increased million $XX debt increase expense of strong in on million grew million year an XXX in earnings provided increased be same adjusted prior tooling, tooling FX down Fourth in Net compression growth

$XX interest full-year, in prior the guidance. was expense For million with line

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

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

government of $XX.X quarter X.X million year. year, XXXX. million net Slide spending fourth year To-date, project pay-down $XX to capacity a flexibility to approximately spending was even provides XXXX of free compared We with of was million net fund million resulting net consistent year-end, improved $XXX.X ratio committed of and a organic this in of quarter. the down funding to debt fourth government by $XX $X million. capital Lydall $XXX for our a million ended in in $XX in funding the expansion. with to and growth of Capital million to $X debt debt $XX.X to $XX over improvement $X Turning net debt million in in million for million balance compared strategy. key the opportunistically global we the approximately million and $XX of cash our full government million of cash X.X after X, expansion investments of with pay have XXXX capital XXXX, This related of flow prior capital funding. our leverage turns allocation balance of $XX.X cash million of meltblown At net

million sales of with XX.X% Filtration Sales Sealing million were from million to one-time as XX% of of expanded with $X strong from continued were Slide associated masks Performance liquid cover growth specialty as driven filtration our X, Filtration, Liquid used which Solutions Advanced in both products. from facility. robust applications. purchases prior announced and prior or Sealing XX% of approximately Netherlands million Materials XXXX, by for in Sales I'll and fourth up up Advanced quarter well by shutdown of $X previously the $XX.X sharply higher year. sub-segments. year sales $XX.X demand includes air in NXX sealing and and and the filtration led Moving surgical increased or our sales segment, Solutions respirators

was million Sealing Netherlands facility. end to products products. to $X $X and the fourth planned idled fulfilling we $XX.X prior our sales sales of in were segment. partially demand X.X% our a fixing in last this focusing of fourth And basis was finally, primarily domestic benefited to segment filtration end quarter insulation purchases Technical activities agriculture, expect year continue expansion stronger EBITDA Slide down from $X X.X% one-time the by was of the due for sales from in be Charges line, lower low-efficiency and from X.X% mid-year X forward. at from up related quarter increased medical construction high represents year in and our aimed filtration cryogenic programs approximately our our German softness lines XXXX our our in margin high million product the specialty markets. is Adjusted industrial which orders by expensed declined volumes third The of Sealing restructuring and sequential on are industrial one Advanced Filtration offset announced in margin both exit with XX.X% temperature products. million these remaining the favorable geosynthetic quarter facilities thickness down portfolio and XXXX. with covers of Our time from quarter, transportation track. from points on in XXX third we facility. COVID sharply and saw in increased Advanced Nonwoven Of products. on recovery sales And the Netherlands to Solutions our markets. note, mix million in domestic our sales move fourth customers and Overall Materials We prior margin quarter driven Filtration

year In EBITDA prior flat profitability, remained XX.X%. relatively segment margin of terms from adjusted at

nonmedical including the cost Over XXXX, and has products, by and responders, margins capability production shipping this medical and while mix development for managing also productivity. to the of first PPE driving business product of course consistent delivered operational

EBITDA sales was while full segment year, XX.X% XX.X% only For XX declined, the points. down adjusted margin basis of

Thermal our prior robust, and Automotive Solutions in to results were up the especially fourth North $XX.X or in TAS in Acoustical sales quarter Segment. of year. Turning quarter from I'll Fourth X.X% was X. Slide discuss the demand million America Europe.

XXX largely concludes year. volumes earlier $X drove down X.X% Operational sustained year-over-year a cost decrease from productivity demand X.X% continue XXX customer to margins year. costs. That results. Hamptonville, the points increased prior parts In we point, in resulting temporary tooling labor improvement fourth combined across was sales down adjusted Sara's the material from of segment related reiterate with challenges offset basis of To see million, Hamptonville from from segment compared basis segment needs North last COVID to margins was review million sales year prior Excluding $X.X Carolina growing by workforce impacting meet by The quarter year. operation. facility, with our higher our the higher to EBITDA transitory increased raw prior of points

with for I'll her So back closing now comments. Sara to that, turn it

Sara Greenstein

Randy. Thanks

in on Filtration close out capital full-value growth, forward. have Reshaping in and high-return we employee XXXX and Materials to extracting opportunities greater our investments path focus the We into safety. remain on Specialty we as and strategically Solutions. Advanced So our health XXXX, our from our clarity portfolio laser-focused and sustaining move profitable and confidence drive deploying both and

Slide is end markets to the Lydall we Turning and positioning within. given where XX, compete

COVID while continued further heightened momentum. positive, are highlighted Our The realities thankfully of the gaining XXXX is have the PPE. for rollout now vaccinations outlook demand and

just in the for New positioned that around products. transformation January, endure supply lengthening the to American three for put stricter both ongoing each well plans expansion demand for to address of expected iceberg global indoor meltblown the quality the capacity expanding chain world, stockpile expect PPE $XX and replenish the of driving tip but in not by for everywhere. people towards our market. COVID place sales. add Buy specialty million tail as Europe. and to million In filtration XXXX ever The regulations lines And policy. bolstered new remain for in need with approximately now variants new Biden accelerating than to our to medical just drive of longer sustained to mandate and demand really filtration filtration is the administration to annualized the next North national increased the production America standards efficiency air we this well higher will continued continues the community, new are we $XX PPE and better initially comes around We This indoor fine strategic The into fiber generation demand PPE products, and it implement air given structural the accelerate world quality. shift governments when

solutions industry-leading that innovative filtration market address customer stage build portfolio attractive ensures Excellence of needs and Center an at of Filtration this Specialty Lydall’s in transformation. expand performance we of upon to high investment every Our

our volumes recover, the remain China. President increase, to in will the than SAAR better we across electric TNW Demand optimistic continued China, half rate, in fleet. in be anticipate related segment shutdowns to overall business next to continues to by and As platform. any for and slightly Europe XXXX, regions. successfully experiencing production approximately automotive to new strong the for recently combustion of with markets OEM federal XXXX, NAV With in significant States, growth in hybrid customers particular expertise Globally, science in demand with popularity in early all from truck the the in and of XCXX, awarded to light activity this rebounded given unique a electric regional current XX% challenges. electrify with Lydall’s chain growth vehicles. year are for and continue and models. as to material industrial strong or fully supporting XXXX Biden's from support segment expect forecasted SUV order most we underpinned our hybrid focus internal generation transition Volvo recently at end-markets and supply TAS on policies vehicles plan grow up Lydall second XXXX XXXX United continue cautiously We with are SUV barring Global the in they

quieter, focuses gowns X filtration States Turning Lydall Partnered filtration the French to products, chains to mega supplied materials on with the innovative to to responder media for nonwoven the for nonwoven on face production make electrification. of the with Lydall United global delivered sustainability XX, portfolio ESG with vehicle medical greatly addressing driving we gains provided continue trends, our production I'm every Reflecting and front on expand Lydall, nearly a my the government how XXXX, billion masks. communities of cleaner, supply Slide year where on and In diversity throughout first a one proud sustain like XXXX. promote way company providing safer and will focus navigated innovative partners work live. the has efforts products of full driving and every and thrown our moment take challenge tireless at this each safety, inclusion and we the organization around to while to engagement throughout employees of incredibly world. that I'd employee world. and PPE product XXXX demand New York. customers Rapidly specialty designed first the and our in a our And that In for and and and acknowledge each localized

engagement to a emerged tremendous of moms our the challenges. stronger and resilient, and support, more most colleagues, in. we are the have on a pressing did customers, Lydall companies we applications focused who because your growing profitable, We of of And address specialty that and With world's went so support business designed we have investor XXXX than from disciplined, community. number select collaboration, become

squarely and We to questions. are shareholder get open are call confident focused target returns. in there. our higher that With on plan our ambitious let's And delivering we the for

Operator

ahead. Securities. [Operator Instructions] Chris with The from Please CJS Moore question first is go

Chris Moore

guys. morning good Hey,

Sara Greenstein

morning, Good Chris.

Brendan Moynihan

Good morning, Chris.

Randy Gonzales

morning Good

Chris Moore

Just trying filtration. what is, market developing? opportunities specialty the is the I that, ramp looking indoor just out PPE. meltblown hoping really this that understand understand I the or is I'm to near-term now understand focus to you're the missing on guess a still squarely if on on of you're for better capacity that's

Sara Greenstein

I'll is on current answer and that. not to with working the next we work allowed development Chris, higher efficiency not missing The was throughout specialty has sustained portfolio, for Sure, also that take us The And customers PPE serving and continue our serve to be. And out. are reality market product additional is bring pre-COVID continued filtration market the to. focused to our continue products filtration will specialty the it as but we we obviously capacity, develop IAQ COVID only heightened has supply demand, specialty generation the use. the what filtration on

Chris Moore

additional helpful. you to out? you how orders With online have That's that those lines in it. Do the Got work? Or coming meltblown respect two on have QX, does yet? started any contracting

Sara Greenstein

would XX% estimate We two and this capacity of about I that do a spoken that at fair for say is across those lines. Chris time is

Chris Moore

And a aggressive? be for trying XXXX. just range? reasonable last Is they that operating range to margins in X% I'm I Is there? reasonable? for X% get me, mean, to thoughts could any Just one that that TAS in

Sara Greenstein

growth and across guess we look significant would Chris is expect we So expansion what line across margins in an in perspective enterprise XXXX EBITDA say see it margin we the TAS way, top from a said at in different well. digit as in anticipate to I XXXX. three segments, our I improvement in all in enterprise I expect XXXX when double

Chris Moore

All line. back it. right. appreciate I it. jump Got in I'll

Sara Greenstein

Thanks, Chris.

Operator

with go Franzreb & John from ahead. Company. The next Sidoti is question Please

John Franzreb

Randy. and Sara morning, good Hi,

Sara Greenstein

Good morning, John.

John Franzreb

in how you any talk much demand into it start sustainable how like pent certainly was that is quarter. the demand continue up Because demand you about some sealing of had Can with this product you year? sense, XXXX? expect the suggest that you to that you into saw I'd strong and if

Sara Greenstein

have Sure. out back strong in We've demand can got a I expect to agriculture you of to demand John, I balanced. those earth construction seeing Asia would as lot fully and or is there. What the remained frankly and the start coming really is moving as come the demand those and we're say I tell of general. sustain And in that markets XXXX. healthier demand significant markets

the restocking, – So, been and demand is geographically. see QX, might've the we the market significant in balanced frankly it what but and that ongoing

John Franzreb

Excellent. previous two new And capacity maybe and long said you XX%, is come just on about when how board, the the on question visible that to? XX% lines

Sara Greenstein

Multiple years.

John Franzreb

that? can cost we just side and to and cutting savings update cost timeline the And on out core some the of realize of Can of the the some switch us here? maybe to on equation of you the you in just some Okay. us update XQ put efforts

Sara Greenstein

Sure. Randy, you'll I'm it modify sure maybe.

we that I think, pretty tried what announced last actions three to the clearly restructuring we is state year.

complete. is first The

have we the would. line We said idled that we

that facility well of we expect of first kind customers finished The of within have half we And XXXX. as is and Netherlands producing in that and we fully the time the Germany needed be second to have have the first last site underway the and will in complete XXXX. be as soon that complete the expect is half the to finally the buys

and made and the opportunities. that, that the know yet as footprint pure site exit from cost to of just business retained we you optimization consolidation a All it decision from

Randy Gonzales

Yes.

John, me little a let bit more detail. give So

So we announced restructuring several million program that $XX actions in QX. which a the total over those regarding on investment in quarters, was specifics charge million took on said just We we mentioned. Sara that three of QX, $XX the what

million has QX the million right. to QX are million that we $X in is now and restructuring in associated that annualized XXXX which $X so said QX million to in in and going costs of remainder with $X $XX was to million pushed The The actions $X the was is in actually the be some restructuring half. most of about the So savings the range. first therefore

John Franzreb

one-time otherwise I into purchases Sara we of just, the $X just the the you XXXX, that they back that quarter. the bit you a same be first Are would've something in fourth saw And less? said significantly said, in jumped queue. Okay. million to persists little going The magnitude half

Sara Greenstein

Significantly less John.

John Franzreb

I'll taking for Thanks. the jump All you Thank back Okay. right. my in queue. questions.

Randy Gonzales

Thanks, John.

Operator

from with The Capital. Arvind go ahead. Instructions] Geosphere Sanger [Operator is next question Please

Arvind Sanger

morning cash cash and Sara, free Good building your pretty you. quarter. is flow to be Thank year. fast, this should strong nice continue

debt So of neutral it's possible, end this year. by you'll be close net the to

follow-up to done is balance So in review are of looking price that you're from sheet? reasonably kind strengthened you've deploy the December the now strategic opportunities my – question, obviously your at well. presentation The stock are what

about that currency can How type the XXXX of thinking that's be to? opportunities? you're strategic terms used So M&A in of

Sara Greenstein

Sure. Arvind.

out the opportunistic we high decades specialty in And repurchases ensuring then have applications tuck-in found a materials, with investments noted, afforded all would further cash. long-term it what capital are that ratio quarter, did we laid worked advanced and the share sure in is, target around proud say what strategy. deployment that what we saw We us also hard as leverage we So capital we where put results best our consistent organic helped we staying did bit of I'm quarter And aspect I'm really investments unique we of acquisitions around organic that in to the thereafter. up December, today. our actively an capital the to is position balance deployment additional also true our of in are ability to as make you strategy looking that filtration after the the to critical very and debt in deployment solidify level. with for And position us and the fourth shore are and communicated efficiency really of Day. part working you that duly the practices the get we prioritizing ourselves cash And we to Investor And repay to December in our in against. of place, XXXX of work. I in

Arvind Sanger

is just you the kind sheet sort of to to the want the from path very my sheet of understanding, is, of balance where summarize So a glide much balance on be.

year assume strategic will tuck-in be months? So where of there should should or type be be company and the – would the from it we that some be could stuff for look bigger it we would M&A a XXXX

Sara Greenstein

Sure.

said what Day, longer in would Investor reiterating order just could So we it at the that consideration, again, more be term that we tuck-in be a prioritized, but acquisitions.

Arvind Sanger

Okay. Thank you.

Randy Gonzales

you, Thank Arvind.

Operator

is question & from next ahead. The follow-up with go a Company. Please Franzreb Sidoti John

John Franzreb

Similar thoughts have question Arvind’s. excess cash do need about your you are to What facilities? accelerated you debt repurchase that the much with new how for cash two the and

Sara Greenstein

Sure.

we it. use in want as pay that focused in done targeted is And reality the there, we throughout of cash still repurchases the having liquidity we've healthy COVID priority, to And you X.X balance demonstrated, make the we've we're and long-term because so. or we do question. we've prudent along have is when believe sure good and So, and defined if all IR think that we've that, And in opportunistic times, share also a I ratio in and pay it's debt tuck-in down, thereafter get we to organic cash to December we've Admittedly, acquisitions. to certainly opportunistically just at got we down we'll Day order make growth, the stayed said then the here, want will close XXXX. John, to to that we've leverage very as investments ourselves will which ability

John Franzreb

your that the – like quarter quarter. an I be was seems is build that the Anything in it inventory was contributed cash there flow, inventory around? operating was fourth What build And December specific? think let’s say in to neutral Okay.

Randy Gonzales

No.

our coming business. build TAS primarily John it increased inventory the So was, into

faced drained in goods had levels inventory both So with in the that the we finished and progress the work on operational we issues QX, inventory.

So a normalizing stabilized QX normal level. to as more the that's has operation

it's but a yes, a from at historically now. it's QX, are level we So QX for normal at build where

John Franzreb

all disruptive into the related quarter? bleed the TAS, behind this And they first to they point operating you are or at Okay. expenses

Sara Greenstein

sustainable way what we're that. very working yet, our to through way that So be behind I should we business to say business They're by margin. the fixes that largely are would back of and purposeful gets so TAS into put us it in being it

And what for and there necessary so to that do I with be be taking the should the to us have able time it to that. the restoring business and actions new committed leadership to required

John Franzreb

Okay. just. I And sneak question, may last I'll one if

the whole bit in the that would and can the portfolio your in material expect cost talk raw on And about come you across of thoughts impact XXXX to margin this you costs little a defer year? about profile Just XXXX? potential back also

Sara Greenstein

Sure.

So, double-digit expect top and We EBITDA reiterate growth XXXX. fully in the what said. again line I I'll across on expanded margins enterprise the

it think the and we run know, I at the within mitigating So navigating very in in as other level both or global disruption, logistics. have the supply is say and we with answer every helps I raw increases your some COVID weeks the hope got the chain thing as is, efforts yet in eight mean, weather are supply I working certainly that, at we day and the the in the seven is good of XXXX XXXX. certainly have The become that encountered exist has all seeing the organization pass-throughs highest are or part that place. bad whether ongoing price businesses. news chains hard there parcel turmoil we or because of we've so actually I And continued that right value which would or how are we the We that place operate. well the material question. of encountered well, to in mitigate and/or that ensure good you chain

we're navigating but also, are that, experiencing we yes it, So, John. think at I skilled

John Franzreb

taking Great. questions. I appreciate my Thanks, for it. Sara. Thanks

Sara Greenstein

you. us. Thanks Thank asking for

Operator

That concludes is also our question conference concluded. you and presentation. answer for This attending now today's session. Thank

disconnect. now may You

Lydall (LDL) 24 Feb 212020 Q4 Earnings call transcript