Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by. Welcome to the Albany International Corporate Earnings Conference Call [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, John Hobbs, Director of Investor Relations. Please go ahead.

John Hobbs

good and Jacinda, you, morning everyone. Thank Albany to International’s second 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

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

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

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

Bill Higgins

was compared $XXX period Thanks, up and of everyone. EPS for and welcome results Thank strong We're cover. second revenues will Adjusted last GAAP report earnings our execution last $XX call. with year impacted of joining solid morning quarter pleased X% quarter across same down John. in nearly items our and to million that you Rob to Good the EPS another million, EBITDA of from by adjusted was $X.XX nearly operations. the year $X.XX non-operational to quarter. $X.XX was

in The Clothing on growth of exceeding with and XX% we're adjusted healthy margins XX%. deliver the of first segment margins the shape continues result, and excess basis, a revenue raising full good we to for a As the currency gross X.X% in half finished our EBITDA constant of Machine guidance year. results year

the impressive Clothing's operating effects has the all XXXX, posed in Ukraine. in our and now to of challenges adjusted and our the Since of our team in and by and mission EBITDA outstanding the of results job reputation end well are exceed of and Machine model, Europe revenues, Our Machine China, Machine profit done performance. clothing a reliability consumable headwinds earned prepandemic to have disciplined paper Clothing's effectiveness macroeconomic products and value nature operating inflation critical war Clothing with products supplier our an of the These customers. machine navigating exceptional positive the testament been trends as

our as long shareholders. manufacturer in our our Asian is we to Heimbach with and have for month, Northern to well. Central each legacies Heimbach Asia Germany. faster operations based Last announced more and companies Albany even the Heimbach’s in will and grow our proud team in of add value both of the great look to European Europe, which addition best machine and forward working in fit strong a agreement leveraging of customers Heimbach Heimbach acquire clothing to customers is presence and augment Heimbach provide Geographically, machine we clothing a The value. opportunities Group, the with presence. our compliments creates

to from the transaction the proceed morning, We to going with in deal, both approved ownership. we've have good and we of been earnings to closure expect be towards we're just move second news our cash and year in closing. we flow And heard the that regulatory of accretive this authorities the

we on the closing we've we’re news pretty be said before, received the year So half in as we the morning. excited this to of second and expect

past the we've X% compared quarter XXXX. programs from to XX Composites higher the that commercial over smaller and The Growth top by up achieved Engineered growth driven in some of from the of in programs line quarter, was second revenues approximately segment months. $X million QX brought nearly on

satisfaction, our in of and continues team last supply quarter supply customers our delivery, its delays on for content ramp operational platforms continues still and was on chain challenges. with through or the more do year. that's line Adjusted AEC up business to an other take and relatively new our delays programs. and job notable second on-time customers to to job a EBITDA gives flat in $XX great doing segment supporting CH-XXK great strong customers. it's managing the hampered aerospace is quality Our this confidence and and customer industry by either new a performances, chain about It production existing in ability million,

at had a job the new a our Farnborough. year on meetings our many great slate to of and business Show Our In opportunities development momentum team growth. teams, aerospace built for last full at achieved the Paris we ways, Air teams did it engineering discuss

We choice our composites continue to as reputation build premier partner the of manufacturing. in

as I'm executing our team of and the report succession, is for let Finally, management have our Board and customers underway. continue that you and on doing Directors we as is announcement the we'll great the committed an Board with working a smooth a I to process soon can know transition, shareholders, well strategy and working CEO search make. diligently job to to my

that, So Rob. the with call hand over I'll to

Rob Starr

been Heimbach quarter for opportunity We and and My The and a on everyone. very and team. including be in the grateful both very quarter execute Europe with the Thank strategies, the visible impressed people great our excellence on to another recently visited our full businesses. of growth culture I'm continued to are and had first I'm and with locations inspiring announced I acquisition. number the has operational across you, tremendous. Bill, good our both US the morning, Albany

cash. is transaction, earlier, our overseas available opportunities remain times creation real transaction shareholders for net for significant to mentioned slightly time. above As modest, the and X we fit for plan creates EBITDA excellent value very for forma the Heimbach our an will us leverage Bill Pro financial over leverage as with with fund Heimbach

in opportunities. under inorganic and in continue have to considerable will our covenants invest to credit We organic the facility financial room revolving

turn and now quarter second results year. updated our to outlook will the our for then provide I

net X.X% For currency X.X% the adjusting were also period. Clothing, In second to company XXXX across basis, currency increase period levels. returned prior with year-over-year. the higher an Machine increased sales same clothing constant has grew compared of the X.X% net Composite translation pre-pandemic paper in million, sales year net for effects, contraction a lines, fabrics engineered quarter, sales total sales compared lower by On $XXX in machine all recent nonwoven Engineered to offset transition demand translation the XXXX. more product we temporary to its than somewhat year $XX quarter to from quarter over program recurring including growth CH-XXK LEAP revenue $X decline as after year. currency This during production nonrecurring approximately million, offset in sales million ASC about second effects, net grew XXXX, last adjusting than a wins. of driven in generated growth second higher X.X% the the of by of to development period programs, last efforts some the same for The compared by number as

the first timing we While XXXX. generally year, LEAP our above to expect be when mostly is revenues our LEAP and that prior flat compared half were year revenues full to

the net declined XX.X% million, period contracts last This lower AEC. gross about was for comparable from and estimated change sales. a profit XXX profitability The higher gross the term margin $XXX of in by of quarter year. overall Clothing $X.X increase primarily impacts the Machine an points and the Second company basis X% in mix input caused million long of within combined costs program unfavorable was absorption with to

a There technical, quarter. $XX general million a Clothing. at were quarter million current factors the FX from negative in approximately selling, of Machine increased year quarter Second of expenses in and year-over-year driving $X.X the We to impact research saw $XX the increase. prior million number

expenses business to activities, well the to transitions, Heimbach acquisition. expenses related executive as We services also incurred related higher corporate to as related development professional

to $X.X We unusually growth planning items, security. also spend revaluation to last Other as in income as to this income for compared in quarter million of taxes discrete audits. lower same due million income $X tax provision tax of and quarter support expense had well withholding resulting to by enhance increased rate from a to the of XX.X% exchange year foreign effective The high due IT period tax the netted international gains. was to income driven international tax and our

year, XX% of As to expect we our back XX%. between half look to the and normalize historical rate levels we tax the at the

for range forecasting long For current operations, same apply unusual effective our we absent tax purposes, items. rates tax believe that these

the second Adjusted in $XX last year. this of expenses, was $X.XX to approximately Net million XX.X% restructuring the $X $X.XX period $XX million quarter reported was share Machine acquisition XXXX. income million EBITDA XXXX. the reported quarter in of gains impact quarter, currency $XX share of second earnings integration net company earnings $XX compared to million the same or Clothing revaluation EBITDA to million After adjusting adjusted in for from of or $X.XX the with attributable the and flat declined in of adjusted XX.X% EBITDA per $XX year. and losses, expenses, in from foreign of down adjusted the million year AEC sales, or for sales, prior quarter. approximately the was compared quarter $XX sales the GAAP of million year. quarter up last was net net XX.X% this $X.XX million was $XX from last per

the During provided million. which as free quarter flow, capital by company for cash million of defined the activities, the $XX.X less quarter, net operating generated $XX.X cash expenditures, totaled

in some performance the investment year. flow that half, experienced During the working the unwind second we leading to half quarter, in cash to we second expect of the improved capital

quarter. clothing demand currency we noted lower and turn growth Machine levels conditions for in the experienced another last experienced pleased a with Clothing performance return half all to Overall, like guide full Overall first to we in we are our exceptional paper the our and the quarter. business. similar Engineered I year. lines, Fabrics quarter, now constant those to for were On machine basis, a pre-pandemic first raising our would we are outlook the year. product as to in business full delivered

to account we for million are on strong our to $XX Clothing's in high $XXX revenue first modestly than $XXX and to million by Given of the in end million end the into low with typical increasing revenue the the impacts softer holiday year, Asia, Europe XXXX expect second half, second in we range year a year. vacation combined this half. Machine half and $XX first half on of Taking the and markets winter the be lower the million of guide

As we've are materials, inflationary the even reductions. quarters, some for mentioned price pressures past seeing of and are for easing raw we couple

levels. general, However, pre-pandemic material results through Despite prices few our a through raw materials see prior quarters as raw it work flow the this above in we price in periods. pressure, the easing remain acquired take to will

our Logistics both input and normalized better efforts efforts offset continuous improvement and management. continue ongoing impact with cost through largely to better We pricing the inflationary have availability.

margins to the our long EBITDA adjusted mid full of Clothing's year. expectations be in XX% Machine for line expect We with term

are by for the a As Machine end Machine result XXXX, million Clothing the We now EBITDA $XXX $XXX to Clothing we $X EBITDA million. guidance be for guide to adjusted expect of pulling between narrowing bottom million. up our

Composites. Engineered to Turning

improved wins. Our with outlook recent for some business new the year

our CH-XXK year programs, this full expecting year to relatively still be LEAP are revenues We stable to for two XXXX. and largest compared

app For our complete with NRE are tooling transition. we largely CH-XXK, the and work on

on raising million. be will as we by $XXX the rate this million. production the the revenue $XX AEC performance are that So into full the million over between revenues and Taking program now years. guidance so $XXX next to ramps grow far expect account revenue few We towards year,

half $X.XX; second depreciation to million; end; of company $X.XX, on guidance million XX% million guidance of are the previous into in million, is program some margin XX%, second we operational on excellence $XX EBITDA in year million expenditures end. to half million the year effective $XX the our strong $X.XX rate continued Our $XX of half. up in and as $X the share level, XX% second in adjusted At million implies expansion mix earnings $X.XX million improved to see income and AEC an the tax the end to guidance; we between effective $XX total tax of share investment and XXXX and the per the the our of and high guidance $X high million, rate between of billion from XX% year; adjusted implying earnings $XX approximately amortization range the share between and to million $XXX $XX million and prior billion, end low and full $X.XX end between range we EBITDA $XX and low of $XX GAAP million capital year; high $XXX the move $X.XX million end $X.XX between follows: updating on up as $X and $X.XX this Revenue the is p on the on per than expect adjusted $X and per full low up million lower next as the on

open let's call that, With questions. Operator? the for

Operator

Thank you.

conduct now session the will We Instructions]. question-and-answer [Operator

from Cowen. is TD Khanna of Our first question Gautam

Gautam Khanna

I on visibility and was this any? I also you the curious your on next year know if any if have you year, could and program were But LEAP perhaps for a on this next both into update year, your early relatively CH-XXK? flat into the what's expectations if reacceleration us year. view

Bill Higgins

We're about is just pretty good How itself, to we wait see the XXX know. manifests going as on longer term, in that AXXX the excited be, have and some there's production there news all -- rates out place narrow-body year. the to forward, next we'll

a the plan a to overachieved real quick. through. really is which little in inventories moving reported, of the ability Operations are up of our bit are well and ramp to for we LEAP year As first testament kind half the our versus year, running we

year, encouraged don't now. then a right see at we're that And the yet. year, for we're anything next but level have on numbers this any look this flattish but maintaining any on rate we growth really on don't have different it point still this better So at to to as year kind year. expect next That's program. of we We're than updates LEAP although run a we

and as the we've Rob successful. development tooling and we've into where On I stages CH-XXK, the one We've gone production the line think up stage running and got from mentioned, very -- to, the production bringing second Sikorsky and months. CH-XXK of this the automated is which and we're to shipped an line line online, continue next on in product couple production the

So good term expect the half longer shipping demand are in the be off well. line on of year, second so again, to news really And we and production that things second well this going in as CH-XXK there.

that. about excited So

Gautam Khanna

with the if your on didn't to And I up have could five to XXX month also are four starting XX. likewise manufacturers pick know the on in way to you if F-XX, the you if XXX F-XX. view way on an at look a Boeing the finally us Boeing then you on ship update? they're just you -- update subcontract guys and and says see to demand that

Bill Higgins

we're synced Boeing the XXX, demand. the On pretty much with

are We production the running line.

a and say We that, is up last it, how you sure had year, had level, that run know, really the I As would and demand looks low to we we like it's stopped cautious how far. so line -- the line up pretty we at in good running. was the were prior it make coming and started line to so

So go this four level going into ramp five next and to as to there. up year, we'll from rate in with from sync that year we we're continue

today demand, news the the beyond. it, that but year on heard excited looks term we're at so The So we're report I so good don't longer haven't to so look we pretty for to have to next there. we changes also waiting any production and F-XX, good far, as anything there demand see. about out demand

Operator

Our question Ciarmoli Truist Michael of from next comes Securities.

Michael Ciarmoli

the or early be Maybe thinking Obviously, Gautam's And with with from -- airlines Airbus still questioning on LEAP of here? are I get just how stick trajectory that & know to some held of could it's more Whitney there's platforms. about a production been chatter how line disclosure. platforms. too mean, early deliveries of some I you guys you the out there guys Pratt shift there or up LEAP are if to the in

Bill Higgins

Longer interest it's it so with lot program Engine and first the I to to watching I'm the Whitney competitive. LEAP was and a with share program on My look Group, in job be a term, think we're & just we great of our watching Turbine being full and Pratt interest. disclosure. it increasing at forward really

to going it how just and we're So goes. see it watch

Michael Ciarmoli

Was from maybe too trying how And the who the at figure I'm solid acquisition. Clothing then pulled intimately from I'm but standpoint, them? be Bill, side, be Rob, this strategically mean thing? Board the a of involved. the to kind did flipping strategic that -- to out. just about, I Daniel want new like really decision the on was way with don't trigger on the looks But I this were you to come acquire here you're deal assuming Heimbach question, to this Machine out a

Bill Higgins

period was It team, team real and of will very say. his myself, it highly strong a effort. a Daniel I Board, long we're and for all engaged worked time,

it. about very we're excited So

As long industry I a excited got said, in working about together with brand tradition, and has a it's Heimbach that. we're great the

excited work, collaborative to of forward get So but really here. lot it was we're a a approach, moving

Rob Starr

value And came picture. you in, view the to into the late create look obviously, know, independent giving all company. Mike, of the to When generates to out at business, and the an has in, it's build of company. lot strategic I'll across growth But flexibility Clothing really a pursue a deployment phenomenal we for of just of add. us and a I opportunities Machine the cash given the coming capital it ton which, as

Michael Ciarmoli

No, I it like mean EBITDA great I agree. sounds accretion path totally sure. earnings for a to and

be Machine you get headwind real even in mean seasonality it current just and And would pressures. this here about a to talked I a other and European had mean, tax to I you normal like seems for know get just I be I'll way the down last of second Just range? happen get to I of versus for guess, mean, the looking XX% here. guidance, has half at what low earnings one end to I me out the to the first struggle quarter. and big it Clothing the half pretty But there. down

us on guidance? the ranges you for the of out maybe mechanics some the there can give So

Bill Higgins

Machine AEC, question. and a at business, platform over look don't on, the look bottoms-up, as long distance. out a a out -- Machine a look we platform Clothing start we we at hand by all Rob. go we Clothing. to go we're fair know, I'll have in it do programs our me It's you We through marketplace period in we at And that of time, go they but the bookings Let

take market, doing because at perhaps a quite of slower are we sell what the So downtime they paper where doing, machine, look extended is now look machine and often, right we maintenance, they're the when even the if And there's at they we downtime maintenance. now. companies the demand right do lot

particular, is so a coming watching down. bit just closures down in in There's Europe, So quite more it. publication there, we're

would a So the to yes, get to of of it. end just at we're without through take all significant what it not having look trying way end that range year, lot but at And could the lower to bookends down go of the perturbations that bookings quantities, happen. put least the the we around

range, So go we that of to that's it's but it likely not the end kind going up. we're of how to teed

Rob Starr

have some including it's I of China. just macros I Michael, Asia, parts And mean, in the caution really Europe real a think around and that we

point that range, us of kind we have captured wanted don't but at that think it's to there. we're possibility. a bookend lot would of course wanted think for as raised to ensure a fair And the So end, I just to that, low it. you negatively said, happen to get going up We we a Bill just to probability the high wind if

Operator

Engelbrecht of Baird. from comes Our next Jan-Frans question

Jan-Frans Engelbrecht

and I'm Good morning, John, for on morning. Peter Rob Bill, this

Machine think we like probably how closed should just than quick little the it a Clothing expectations. question and margins a since So the about earlier on acquisition seems

year about XX.X% implies and half Machine at at year, you the in midpoint the guide if look XX.X%. margins Clothing first EBITDA the So the of first the

the the just should -- Heimbach year margin that about But a we MC assume half acquisition. how that's for So you talk about second from can the think obviously of perspective? I excludes

Rob Starr

at what in half right, Machine included in JF, Clothing. softer, guide aspect does and I anything little looking I that impact with second Heimbach. point, slightly with sales, absorption Yes, bit our the be I mean we any Heimbach we're there's at is our the to also lower not of your have year has to think nothing is, -- and tends mean, a in which

an to seasonality expect So very the to in you of has that -- were on of experience a year. a half. also if first we in second bit that we impact would look slight And level there's half half Machine the typically of I what mean, Clothing second

margin. is that impacting the what's So really

Bill Higgins

some from a work take experienced costs incurred we've higher quarter, flow inflation probably we the more There's higher fourth we the also It'll to material that months materials system. into those where costs that that through in through cost work before we P&L. to the brought the got few that had we've through

Jan-Frans Engelbrecht

this If let's understand and sort still have I Day then XXX comfortable that quick And XXXX follow-up. at the And if we're look a I the for are far off LEAP, annual for about but those I is targets? million if $XX just of with looked and revenues. think XXXX say, XXX, at could Investor CH-XXK, I at targets just doing, year just for you was million you $X target previous

can guess… you I three talk through just programs, If those

Rob Starr

I And think would point those on of We've on with our I comfortable XXX, pretty feel LEAP, that CH-XXK, XXX. think we I definitely comfortable we're outlook done correct backlog reported of at low production contracts a based we were seeing. to to in the there. our very we productions CH-XXK. F-XX And But feel and looking production. at growth in term those we you And everything are up certainly, look we're mean, with then relating then that. if is with lot for getting well feel numbers with where comfortable they Q, or at kind forecast levels now, if ramp to a terms Boeing's longer right in of the clearly, certainly

Operator

next of Epstein from Ron of comes Bank question Our America.

Unidentified Analyst

Ron. on This is for Jordan

guys would missiles you targets improving too, anything guys the hypersonics? be defense also term? spending, and seeing are you you interesting that are then all else with especially for the pipe spending for the also on European really think And So actually long to that restocking down and XXXX thinking targets, about the those

Bill Higgins

call, excited are get But term little technology discussions. about on usually I investments again, it's are longer you do. talk a that hypersonics longer bit didn't get making We term. this there. some about we when into excited we pretty and yes, But we

business back we've to XXXX a last frame. talked We've cover for about in as shorter some won the has of the where done XXX been the doing been the areas that multiple to thought, Regarding applications. great over still said little year, quite instance, and business we've AEC conference, The to we a as that go the we're a for job were, investor ramp we targets on and mix winning our that. to of But changed little We're up bit. we maybe a past, didn't has bit back that -- you double if business time the track going some have team quickly new than thought.

up adds that to So it.

beyond. So those we're get not pretty XXXX levels, confident if to we

Operator

for remarks. this further time. turn would Thank now conference you. back closing Bill like to Higgins no the at questions I to showing I'm

Bill Higgins

International. of Great. Investor Thank course, everyone, call our Hobbs, of you Albany for out free you, Thank interest to have Director feel you. us We reach appreciate on to John Relations. continued any if questions, in the today. your And joining

and a thank you, day. So have great

Operator

conference. you Thank for concludes This today's participating.

disconnect. now may You

Albany International (AIN) 27 Jul 232023 Q2 Earnings call transcript