Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Albany International First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, your call today is being recorded.

I'll now turn the conference call over to your host, John Hobbs, Director, Investor Relations. Go ahead, sir.

John Hobbs

good and Alan you, morning, everyone. Thank Albany to International's first call. conference XXXX quarter Welcome

for the and their our GAAP. listening to a regarding measures of those As reminder, and a is on of contained the release notice certain last the financial release results forward-looking our issued to call, use night associated financial detailing statements reconciliation quarterly our in text the press refer please non-GAAP

remarks this the a apply verbal those For uncertainties of to that actual statements from call, this number cause or to results and contain Today, statements those morning. are purposes conference risks which that make could implied. expected differ we'll our forward-looking of

may GAAP risks of their full of these as use uncertainties, measures, a our this we discussion filings, and most XXXX, to XX, call our release please to earnings our SEC both the including reconciliation refer comparable including well For as in April to measures non-GAAP XX-K.

call Higgins, Bill? I'll over remarks. Now, to opening Chief the President Executive who provide Bill turn will Officer, and

Bill Higgins

from John. Good morning quarter a you first start to with were growth our pleased we're margins Both first you, call. year. Engineered segments executed XX% and everyone. business in welcome, company this EBITDA We're Composites. quarter quarter nearly line joining our margins report and earnings for to by good sales Thank off well another our adjusted organic Total Gross and than strong relative of Thank driven to plan. grew more strong last XX% XX%. year, were

margins context, are excellent put exceeding year-over-year. Machine profitability quarter this adjusted EBITDA To averages. Machine delivered margins segment our in effectively over in level, were and first unchanged At segment historical X-year with margins Clothing's XX% the again line these with gross XX%. Clothing sales

chain execute to continue teams and supply lingering levels despite these operating attractive and well Clothing Machine challenges. of profitability deliver inflation Our

program, to XX% quarter, the EBITDA smaller to segment from approximately The in quarter QX the growth is million, about first million $XX XXXX's of in the in helicopter nearly Engineered up achieved Composites The up million results. segment of primarily from addition by compared lead Adjusted this top first $XX was XXXX. CH-XXK $X program programs. driven growth line contributions Sikorsky

past, remain goal the of leader the the choice strategic of is choice. both I've machine In it's we're discussed in the Clothing, firmly our paper the our as In customers our become business positioned partner and job partner clothing to to for of our space Machine segments. in

products, foundational to technical our is teams. sales well-earned our performance, This strategy superior reputation and service product Our customer invest service. reliability, production the generation of quality processes next and and is in to our for

we're AEC, brand. In to our continuing build

becoming been Our supplier, existing has customers, our such a on-time customers. and new as business with as the world Albany certain class. quality securing recognized business coupled our delivery of high-performance recognition app to Sikorsky new key as and with product transition customer program, expertise material composite more This are CH-XXK with

reputation, pipeline. increased team bid our Building significantly our and on proposal growing our commercialization has

the most convert growth of the next for This on track. organic opportunities strategy for business. is confidence Our to growth attractive our our working organic engineering of few our opportunities are teams enhances operations that these and years hard to pipeline

on our in growth discussed As by XXXX investments AEC. we consists organic last driven our CapEx program call, of

production within operational gains drive excellence, we're as capabilities investment productivity AC a addition, In part continued and NMC as well. to making significant of our

development support applications. technology to and of award a have utilizing hypersonic Turning hypersonic proprietary award activities. structural U.S. visible We shape that the a of contract high-temperature significant composite solution of develop for protection demanding the will announced carbon AEC Army environment. hypersonic recently our its business the thermal net indication is be in in systems to near a XD what benefit development. play This potential from could XD in it technology

compared competing performance AEC's advantages and XD technologies scalability. with unique structural solution superior thermal provides technology -- to When affordability and

So we're good to off start the a year. to

and executing performing on long-term we're are strategy. our operations well Our

to moment for to a and this review, wishes Before extend financial Stephen I company. success to continued wanted International the contributions success to on his our Albany his moving for take Nolan new of best the thank of

and in joined Rob Starr, experience. to depth knows leading industries his comes He on a to CFO like Albany I'd both as private have him and to Financial Now finance organization our as formally serve Officer. our the with grateful we we're Albany be welcome who and of instrumental Rob will recently public seasoned Chief company experience board.

you know introducing community from prior investment of him weeks. in to many look likely roles, to the coming the we his Rob While forward

hand that, wrap I'll with be call to to over Now I'll back Rob the and up.

Robert Starr

for and Bill its attracted time all the company known financial have some for morning, as the both which be the with attributes found of I strength, as closely Albany was you, stakeholders. Thank and Great. segments I'm view creation technologies. team I clear value excited our evident good of market. a for continue to working leading-edge and everyone. and discipline in to execute in strategy at our Ablany operational these to I differentiator we

for expertise team with foundation organization, and have The their is passion. the build a and Across which there culture help has a I'm success upon. to collaborative impressed been demonstrated excited

visiting coming the team number I sites getting our and know will be weeks, organization. the a Over of throughout to

will for quarter talk outlook for and Turning the the provide then results quarter, about year. first our I rest the of the to the

$XXX.X quarter. year. the XX.X% increased and principally in compared the yuan Chinese For the company were for the the effects, the Adjusting in dollar, decline quarter U.S. increase to sales quarter, year-over-year $XXX.X XX.X% relative last first currency total sales delivered in net same the translation million, an the euro net million of to by

by nonrevolving waned clothing compared the in also Clothing, same the has paper for offset contraction period post-pandemic higher Machine fabrics currency XXXX sales slightly environment. grades, sales net as effects, higher were all In in with adjusting across in engineered translation to machine demand

after grew again, and in sales, translation currency growth effects, net programs. CH-XXK Composites XX.X%, for adjusting primarily by driven by Engineered LEAP the

the million, while generated $XX the million to of CHXXK from compared same $XX During generated last revenue program in year, million million up $XX over year. about LEAD ASC $XX last the revenues quarter quarter,

First net from quarter X.X% contribution million, an the increase comparable from the $XX.X The AEC was XX.X% for company period of profit gross the margin segment. of year. by from modestly declined gross primarily to overall XX.X% higher sales the caused last

to gross margin of to from from Within XX.X% material program. absence Within higher absorption raw the in by to XX.X% XX.X% sales of margin new caused partially due recorded the sales net QX write-offs XXXX, on costs. XX.X% segment, increased MC the of gross input by net declined in losses AEC, offset improved primarily the

of net unfavorable contracts, in the profitability we magnitude During an $XXX,XXX similar on to that in quarter, on quarter. recognized estimated year the change prior

million quarter XX% technical, expenses First prior increased from in $XX.X $XX.X general of was in year the net and and research the million at to quarter flat sales. about current quarter selling, essentially

expenses prior rate $XX.X AEC note QX are due onetime of was and MC corporate $XX.X a year $X.X Please was from run operating income from million quarter. Total up the approximately expenses discrete corporate company somewhat in operating for included income operating higher modestly costs by offset million, million personnel-related fees basis, from Higher nature. income. items that lower and to the higher professional in

the quarter $X.X less compared the The the period to Other income of $X.X revaluation The income of to quarter year the the quarter million last decline netted same dollar XXXX. quarter. primarily driven strengthened effective income million experienced current rate first in an during year. by the this than U.S. relative expense in income unchanged the due of from was XX.X% quarter losses this largely during to euro tax rate to of was

income. to offset $XX.X to million company year, last by other was quarter for income, Net in the higher compared $X.X $XX.X by a partially the income million million reduction caused operating attributable

compared GAAP the from earnings restructuring $X.XX this in share adjusted adjusting of After in impact was per this and acquisition foreign earnings gains first quarter revaluation the last expenses, integration last losses, year. and of period was for unchanged expenses, share $X.XX $X.XX currency quarter per quarter, the year. same to

most XX.X% sales $XX.X Adjusted EBITDA EBITDA in $XX slightly in to net QX from adjusted from this quarter. year, down or Clothing was $XX.X the recent million declined million of million 'XX Machine $XX.X year's $XX.X last in was prior EBITDA the million adjusted quarter. up sales. sales of or net sales, XX.X% $XX million AEC XX.X% from year net million net of or or XX.X% of

year. It free in activities the about and first compensation During in seasonality flow due the had defined for cash payments $XX expenditures typical company the performance in of cash is as quarter, flow the the incentive have in receipts company for negative used negative million. less cash past to net capital to quarter operating

largely financial the prior of year the like would of changed. the towards now as I anticipated short, place and quarter our our first balance remains and In for fundamentally we balance year for haven't expectations turn the developed had confirm in to the XXXX. guidance

Machine by somewhat nonwoven lower driven exceptional we business, basis growth declining in In Clothing by constant demand machine market offset all the for experienced delivered currency demand aggregate, to engineered on was in another a grades. our we clothing fabrics supply manufacturers. This quarter. belts paper the

time The weakened entered books the last when in in to markets. Asia order Overall, tissue QX last stable with somewhat market geographic in largely markets Europe our Americas, that XXXX markets. in we similar in noted we year softer as this grades have to conditions growth place at packaging and with Looking are markets compared remain strength offsetting year.

about we're a XXXX. optimistic cautiously As result,

year. do euro Overall, in rate of the foreign $XXX this average exchange the are full the full and exchange see with to year XXXX, for not current We we headwinds above U.S. our dollar guide continuation level. segment, maintaining of million of we that is million. for $XXX finished XXXX exchange to rate Unlike revenue an for a $X.XX to currently expect

of last As improved pricing. moderate pressures more logistics mentioned with easing and and cost inflationary quarter, availability energy are

some a remain challenge. However, chains supply material raw

efforts of to offset input and ongoing impact improvement management. We continue our the through cost continuous inflationary some efforts

We maintaining million margins Accordingly, EBITDA Clothing expectations to adjusted deliver line still Machine the expect adjusted $XXX in million. our guidance are XXXX year. mid-XXs long-term of for full our with for the in margins $XXX EBITDA for to we

to Turning Engineered Composites.

the outlook changed. Our year not has for

AEC to As in first the I close elite mentioned, program quarter. $XX the generated million

expect XXXX again with to before be in will LEAP roughly revenue stable XXXX continue levels We XXXX. growing

with XXXX, flat to CH-XX program fully in an We also offset a production expect increase from recurring revenue by overall nonrecurring in revenue. be to compared decline the

a In XXXX, see to programs. also smaller growth expect we in few

million to we level, $XXX tax of $XXX depreciation capital between GAAP share $XXX rate expenditures $XXX $XX XX% guidance are revenue $X.XX million. $XX of and of and reiterating company At to income revenue follows: of the $X.X adjusted $XX guidance million $X.XX, result, are per XXXX total we of and $X.XX earnings amortization adjusted a million As reiterating our to per between billion and XX%, adjusted as the million, EBITDA and million; million. of effective $X.XX our to billion, EBITDA and earnings and million to $XX between $XXX between in $X.XX range of share million between million $XX

I'll turn call final back prepared the for his Bill to With that, comments.

Bill Higgins

company the heard, you've great As shape. is in

Our a and competitive differentiated in technology, expertise relationships customer gives marketplace. real us solid the innovation edge

track success. have business have the who defined goals strategy operational across depth our it's records and and leaders of the expertise and We long-term continent to continued help clearly our teams the company assure experienced and of outstanding

sheet Rob is is financial already an be our going footing. to deep on obviously sound into CFO. and financial balance outstanding strategy and Our we're strong is

Board of the As intention my informed retire. you to I've know,

my for underway long as search and to is effort I I'm the transition the in pursuing fully place a committed the for a have thoroughness. and knows that remain smooth I'll as ensuring Board successor with know We takes. board

future we the with to always, as forward, Our team in and has progress you. sharing look our confidence

be happy Now, we'll Alan? your questions. to take

Operator

first question will Khanna Instructions] Cowen. the from of line [Operator Our with Gautam come

Gautam Khanna

quarter EAC? were positive EACs at Wondering there any Yes. the in negative positive or

Bill Higgins

There actually that... negative positive a EACs mix and was and of then Yes.

Robert Starr

That was $XXX,XXX.

Bill Higgins

$XXX,XXX which is year, last about as same correct? the

Robert Starr

it year, $XXX,XXX. Last was Yes. think I

Gautam Khanna

Got it. for XXX? where right you producing you Can you update Are now? guys the actually guys on are us on

Bill Higgins

year, last we line. keeping question. The we a it had XXX, been the idled we very rate at low through the went warm good it as production as Yes, level Prior at we to a that, year of described running production.

We're produce. running that the to running effectively. And production need the And to line. So run moved we we maintain up. talent have enough this the business to ability the year, could the but other line that parts the started slow idled line, employees we we assured a to we're keep of it that so when it run we at back pace

we talked. compared as started think, so last the new be back which And would we to, have up time I

So more ready. expecting back year, getting bit we're we'll We're a production. that of half the see the in little

Gautam Khanna

units still in expecting are revenue? the terms LEAP year-over-year be relatively flat in program, on of it to And you produced

Bill Higgins

we are to plan, the We level do as -- program plan the -- LEAP the manufacturing the for load we we when plan year we plan did. plan we

flat if we coming of that Boeing in last latter the meeting, flat. and news to XXX out holding described the be we first We're right a year. part pace. production we're We about looking excited this our had at to up Max We're the of of year. As now, see plan for we're the is still to sort it running picks the But plan that in good did quarter.

Operator

next line We'll go the Truist Securities. to Michael Ciarmoli with of

Michael Ciarmoli

ago, think good weeks would to of with that when there? has up too. and run or the have XX%. just I do disconnect next Safran? to LEAP, inventory want Gautam's Or can that But you Safran, year? you is out I with meet pretty on news little question production And a into to you sight line and here XX% give more which couple at the mean XX I flat that stay be the start ramp into bit They this down a of obviously, the burn color it's or planned of to come if deliveries. even guess, us I out XX% Just year guess, Boeing later

Bill Higgins

Sure, Michael.

ongoing Safran. regular with have We discussions

close very them. are We with

our the the same As in X know, world. we're you co-located around plants in facilities

ramp need to ramping months start talking a to would have -- to We few constantly. we up. We capacity would we're up. them the So

on little have the ability our our delivery produce the place. if ahead years, think look We bit you is to engine I in machinery couple testament a of produce which to the rate probably last And of and at got production time. a

the we ramp months So we plan discussions. up, the do typically We're And it. as to get -- to full we're a need efficiency having the go. to But and ready for if earlier, optimize few ahead. production year we described I of

second of up. we going the if ramp were would the we So half adding year, in people be to

Michael Ciarmoli

we in Is inventory of And as enough to should Got significantly fiber? sort Or perspective, the an when labor start to that material pulling get how and you think would inventory with and the sequential you raw But of months I up of it. would sort on few have was basis. about from a ready? materials well? on inventory kind all contemplated raw think

Bill Higgins

Yes.

plans. side, on I aren't think a material we're fine. We're any those There working shortages.

Michael Ciarmoli

low I think that high the on know it's it. economic the I But reaffirm here, low it's down early end on had got Rob, lot maybe you end? the obviously got easy from earlier to QX here, year a to nice but end in the flat what year for I step just basis Okay, in major guidance. the end? broad-based us implies then, low to earnings the significantly really a you But end rate unknowns. the an of run obviously mean here. board -- high And in $X.XX, I pretty of trajectory. obviously the puts of the that just down of there's what know take on takes get a sort range contemplated and earnings to mean sort trajectory are a the I

Robert Starr

the look have drop-through Yes. to to I of expectations I Clothing And Any of degradation Michael, it's the you mean relates like the there. broadly a then there production we from see some that in would handful relative it a real in markets AEC really the overall very given our programs in think any needle. could market. very large assumption fair what change in expected change what's at question. a what Machine move have mean, as would I rates is

So changes of make any captures of low level want kind there end to but unforeseen macro be may that conservatism we little range environment. a sure the there the of in our

Bill Higgins

out not they're -- not XXX. would forecast. Again risky I much the I we've mean in area taken basically add the there's

is I So downside, than there. upside think, there more

Michael Ciarmoli

it. Got

on topic that thinking maybe of Is the should you one it for of that a know we shipping stable that the last at there are and Machine saw of Clothing. there? I cargo would some trends UPS the about packaging lot that tied looking sounded degrade is or be overall erosion revenue how and clues the packaging? tissue to on the sort business. was watching and we of e-commerce pretty more side On should specifically what of like but Just we be -- degradation, retail

Bill Higgins

-- correlation. mix well. but markets has have slower. packaging, interesting there's -- a a done covered of there's Europe. now, bit has have stronger direct been down right It's slowed Americas has a publication The It's little the a little softness No. little an Europe bit tissue than we where in not been bit

good. pretty been has Asia

So in it's the world. a of real aggregate, in mix nonwovens, out we're pandemic. the But coming around

a in of small reversion slowed buildings more then we're stable with a mean has nonwovens. very pretty bit. like in bit it's little overall, the kind a a a And little of little But down to pretty the look growth. Things positive. industry. That So there's business

Operator

the line go We'll of to America. Lane Bank of Jordan with next

Jordan Lane

a question. just quick I So had

gave Machine impacting you else Is in just the anything Clothing. there that's guys the For now? happening around business broader details right economy

Bill Higgins

economy? I'm something understand there in sorry, I Is the didn't the broader question.

Jordan Lane

Yes.

Bill Higgins

It's -- about don't I up. the demand I year. as we're same mean, last Machine Clothing so. think has held

and little stronger a the bit in it's said, in I Americas As Europe.

So and weakness I is of general solid. it's the overall, as slowdown there the the But driver. said, overall economic because Europe energy in pretty

Operator

Michael Ciarmoli of with question We have a line Truist follow-up the from Securities.

Michael Ciarmoli

terms out there? Is that the Army Anything hypersonic. and opportunities some now Flora of been and opportunities, can potential about, in longer-term have Just you decision in contract I release we called talk about a production you the of thinking awarded? that has press guess,

Bill Higgins

say term. there's has, prior programs because for is the don't we actually excited to won we've where number of let the disclose. adding which as team talk that can calls Michael, nothing customers I get wonderful specifically. I programs. our longer will been I've pretty about a list And And has that in mentioned I mentioned, us we've

that the opportunity. So customers disclose we're to we composites. can doing out most of long-term about play advanced a with but a specific in the don't have job the great excited the pretty And technology that comes anything future that having

have on. opportunity So I of we're think lot working a we

Michael Ciarmoli

been question. on on Last term? not but But the targets. was fair. you to here? those but Investor how had operating Okay, maybe the again, I out XXXX kind think Rob, thoughts guys drinking business longer-term it of of coming spot put firehose. short And Day, ago, a board board the you the on model maybe know you've time trajectory a some I the year and any the here the over looked you've from longer at kind on targets of put

Robert Starr

X% No, overall the expansion, think top I Sure. line to looking AEC's really see guide, growth. then mean, when about growth very earnings organic and particular in right, in meaningful Yes. you the

BD have I programs seeing in think in place, weeks we balance across have that my team couple the the are the BD I'm a is terrific businesses. super environment both of -- Everything that sets of we first a role sheet. strong in

deliver further Clothing packaging compared disciplined organic And And which we years If of -- centered we're and our you on course, that's accelerate very look just look few are in macro, that at other our we've tissue opportunities production then Machine way, and much is the we -- just and that. where you large especially at a kind inorganic especially and towards the about right? the to ago, the growth. So I track with to that sales, in trend when feel evaluating very side. of to on a think

Michael Ciarmoli

helpful. All right. Rob. it, Welcome aboard, Got

Operator

queue line with do [Operator me, Gabelli questions Bancroft Instructions] we Gentlemen, Tony a we in Funds. have no have of further or pardon

Tony Bancroft

sense just question Composites longer-term plans, Engineered a as rate, one last strategy had the sort gets maybe the of sort matures I picture run of sort Okay. separation? make we've and you longer-term outlook talked maybe for past of you maybe just business. business big sort that just of to see sort review the update of I now. but could Would know of about And the it ever with that? us in maybe

Bill Higgins

the technology got keep well really the business of for on the working businesses, question. across actually Thanks, the research lot working next we've AEC develop are a We are development grow the and the working generation Yes. value that. materials. Tony, to to to going -- We're organically. teams grow of opportunities teams together create our business, And

Tony Bancroft

work, see to your Bill and thanks Great. welcome name Thanks all aboard. your Rob, for there hard and Good gentlemen.

Bill Higgins

little you, hear Tony. a Good from Yes. while. It's to been

Tony Bancroft

Yes.

Operator

time. We have queue in this questions at no further

Bill Higgins

continued of right. All interest us appreciate you a of call any the Thank you today. day. in have joining for you, reach Thank Investor Hobbs, everybody, course, Director free and feel the out on We have international. questions, if good our to all your to John And Relations.

Operator

AT&T Ladies your will for Event that conclude today. using and conference participation gentlemen, for Thank Teleconferencing. and you for call your

may You disconnect. now

Albany International (AIN) 26 Apr 232023 Q1 Earnings call transcript