AIN - Earnings call 3 2023 | Albany International Corp.

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Operator

Good day, and thank you for standing by. Welcome to Albany International Third Quarter 2023 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, Mr. John Hobbs, Director of Investor Relations. sir. ahead, go Please

John Hobbs

Norma, Quarter morning, XXXX you, Albany Welcome International's Third Conference and thank everyone. good to Well, Call.

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

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

discussion to these please SEC November of release of filings uncertainties, and both XXXX, XX-Q. earnings full as as refer X, risks including For well our our a our

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

Gunnar Kleveland

free Good John. call. I'm you, earnings Thank my today be here of the and joining to first with quarter basis. again morning, International. on the flow quarter for CEO Albany everyone. Thank good and excellent cash quarter both positive results operational has very for and third as on third pleased execution President year-to-date our and welcome, in The call you produced company a

like take Albany moment a years. to I'd to Higgins' details, past the and President as of into CEO steadfast Bill get leadership we through Before several acknowledge the

Directors. has smoothly, segments a a exceptional proprietary each to business member that product with and the counsel great a technologies, leaves retired balance The has of transition legacy performing provide customer he and from proceeded of guidance Board company sheet. he well his a impressive and Bill service. are have of innovative continues quality healthy While role, businesses and company's as My

and weeks meaningful These business competitive and of the know elements excellent a the technology, customer on traveling from continued the of more advantage. operations, are I the factors with my spending across spent sites join more levels our decision C-suite, my company operations conversations numerous as these foundation to weighed first having relationships, at familiar opportunities focusing time familiar Albany. I really with to and getting few floor experience, business, and well community. the to the our on meeting from sustainable the team myself shop introducing customers gathering as getting investment from impressions all my

me strategic technologies designs push underlying technologies, Albany's composite to such The Machine it's be commercial is weight, driver and to company's strike our as next positioned are of of and [indiscernible]. a same Albany's woven to clear company's generation for the environmentally more assets. aircraft. conversations proprietary lighter technical composites my the as product technology value -- there. industry-leading, that well In towards Clothing, the with customers weaving technical really technology from play The expertise. XD is of and Aerospace, innovation to solved fundamental challenge role Within and track record ongoing collaboration #X friendly businesses

operational materials, to service the metrics are believe on reputation, well-earned a raw places customer use are belts the most helping In our value and well-developed to make discipline. tailor indicate a efficient safety, that an operational custom and I key their consumable and operating people and industry energy clothings, and culture company's machine a high me quality customer our labor. operational in efficiency, reliability of Albany's success.

continuous I of lifestyle, think see Albany's operations. across improvement a I also as which

you great a we are performance long-term all relationship is execution as technology to customers, want and customer, have manufacturing profitable profitable a that And our just to the When more International offer of my foundation kind easy supplier think that and and well, delivery you I From innovation That I business a important how the for add an Finding International is pick. operations to growth. with our them hard. is business. know on-time leadership Albany makes quality Albany of experience, very to operations. give and

to is discipline losing challenge is success. deliberately strategically manage the Our to while foundational and execution operational growth and our of sight long-term capital not that business

last XX results at Now let's completed of third on August Heimbach this look acquisition the company year. quarter Group announced we night. the of The

operations remarks. Heimbach with nearly his the $XXX,XXX. by in segment's operating So the million included transaction. GAAP more and the segment added associated details detail $XX these press month include of in expenses our X release. are reduced Heimbach results The and, will operations in course, MC income review in of of Rob revenue the

We are driven sales million, Heimbach up GAAP month results and growth by X.X% AEC at reporting of MC. $XXX revenue X of year-over-year, in

share, the net from up $XX or GAAP per was or quarter income results per which last settlement pension million $XX million million incorporated GAAP share, of $X.XX year charges. third of $XX $X.XX of

expected, dilutive EPS GAAP for share. quarter, about per As $X.XX slightly Heimbach the was to

EBITDA, on to Heimbach million $XX year, about of target. million revenue of than impact stated by per XX% the the share or million about reported driven compared right company's quarter sales of revenue long-term third acquisition, in Excluding the higher of the at share Adjusted AEC. impact, third higher $X was X% quarter per last Adjusted or $XXX $X.XX the excluding $X.XX EPS year. Heimbach was of was last

well, conditions in of Machine in Clothing to and Europe particularly continues challenging perform China. light very macroeconomic The business

year-over-year, effect again underway of this the North adjusted of to globe. declined the $XXX million excluding Clothing markets planned. basis, effect This the while of sales the regions to other Excluding was revenue on is was lower as American of continue acquisition measure margin. in acquisition, report XX% Machine the Heimbach X% while million. about currency-neutral of Heimbach EBITDA, proceeding sales a The integration $XX translates growth and

integration and these few Daniel team stability been President, have weeks. segment his first ensuring financial Our in and engagement, workforce on operational Halftermeyer, expanded focusing

and company previously the in that efficiency cost expect clear announced line We acquisition have flow into and and earnings to become a accretive of opportunities sight will XXXX. the savings cash

Revenues and unique very both X% The executing commercial Aerospace financial across it $XXX from positioned business customers. continues Composites were year-over-year EBITDA and business basis. $XX collectively positioned of in million quarter. existing currency on and million coming the new great long-term to of defense is It The This AEC's businesses. and win The the will new X%. is had up over is well well know-how health, growth programs, constant is with technologies third about Adjusted a and good to up was company contribute years. a well.

enviable an We are in position.

across of our continuous improvement We operations. pursuing all will continue

into to integration technology next wisely excited planned. position benefits development Heimbach the the profitably deliver opportunities. We're expect of to will the We about investing I'm grow well that as company decade. today the the in

And more results I hand detail the for call to with that, provide will in our guidance updated year. to review the over and the Rob Rob?

Robert Starr

everyone. then Gunnar, turn provide updated and good to our now you, the Thank I outlook quarter year. results morning, will and for our third

mentioned earlier, from of the million, sales we Gunnar year. net of reporting GAAP are third last As $XXX quarter up X.X%

Heimbach, Heimbach month X% period. the Clothing for Excluding sales, year declined currency excluding X.X%. the Albany versus sales, translation growth revenue Machine prior and was net of X effects

driven space of a modest our North Engineered to XXXX, year on product was by net Higher while the contraction growth partially clearly market of sales year The growth most well period. and European Asian tissue CH-XXK mixed. the were X.X% perform across quarter markets continues notably and compared sales This softer, lines, are lines prior million basis programs. offset in ago, other packaging over third a Compared been various year-over-year offset to LEAP, on the principally with have lower pulp engineered revenues. in product and currency markets American to Composites by grew $XXX fabrics. XXX constant by

from benefited nonrecurring us the results CH-XXK prior transition Our provided revenue for difficult as year helicopters of comparison program. a from the year significant the last as for amounts

The CH-XXK items concluded nonrecurring year. this in second quarter of largely

will we next the through see comparisons to year. So continue half first tough of

to AEC third CH-XXK $X revenue than quarter, production. program program grow LEAP year the we period compared the same expect as higher previously generated nearly will the full $XX million moves be as year. program rate production toward than of had We sales we year the on up to in guided LEAP last manage approximately XXXX higher efficiencies full ASC now are Our program. revenues full XXXX. million revenues The the $XX LEAP million

long-term million revenue of LEAP for Our $XXX target XXXX intact. remains

was the Third X.X% quarter company profit last the or year. million $XXX gross million, for same up $X.X period from

gross absorption overhead offset input were incremental the from by higher costs Heimbach. margin and MC, Within lower

or X.X%. basis. to gross Excluding and was first down margin this points Heimbach, on profit XX.X%, year-over-year the quarters about a basis XXX XX.X% reported Clothing Machine AEC, very million year of the $X.X gross expanded At in X similar we

contracts During a to of favorable estimated on the profitability of last quarter, compared quarter million we in third $X.X a change recognized of favorable change $XXX,XXX year. in net the the long-term

margin gross XX.X%, AEC's period last same year. to was the similar

Third sales. year. quarter largely spend of Heimbach X.X% of the excluding $XX R&D prior was And unchanged from represented million revenues, approximately about the

our principally as expenses transition were was the last factors driven Clothing AEC SG&A as $XX up personnel-related CMMC million, requirements. Heimbach $X.X comp in drove and expenses, number the due $XX expenses SG&A SG&A year. to quarter by million $X.X increased incentive A million, from Corporate support Third currency million increased higher SG&A million, quarter principally million from investments translation IT increased compensation $X.X $X.X of CEO effects. third year-over-year expenses, of costs. Machine well expenses on and acquisition-related incentive increase.

last income to million compared million $XX the attributable year. GAAP to $XX was nearly for net quarter the company

on was and to integration costs, $XXX,XXX. As compared adjusted last $X.XX results this indicated the approximately in last this share non-GAAP detailed GAAP costs, was reconciliations, to of transition $X.XX reduced $X.XX income accounting after per adjustments year. CEO period our and in same the quarter's EPS in purchase acquisition adjusting impact for earlier, other by earnings quarter year adjustments this net compared Heimbach $X.XX quarter

quarter about year AEC Adjusted the sales. or million up $X.X EBITDA million 'XX. was of $XX.X EBITDA $XX.X of $XX.X about Clothing net declined in of result. down from million from adjusted is XX.X% net XX.X% $X.X $XXX,XXX or EBITDA year's million from $XX adjusted Machine third That million sales, the of was prior quarter. million last

of million refinanced and under having $XXX another balance was $XXX facility. During $XXX flow closed was activities consideration capital well from cash a the additional cash million million credit million. a with XXXX flow, in We cash our of the $XX committed years for upsized to into the position and we a from Net over [indiscernible] million. operating free generated with We facility strong the liquidity cash $XX totaled remain expenditures our maturity financial quarter, million. facility credit $XX of quarter $XXX and company million X

our long-term the X.Xx, Our strategy. providing modest was the end to leverage pursuing a growth quarter net at of continue us flexibility the

turn note would of now year. that I modestly. full Heimbach the markets Orders Clothing $XX demand conditions past growing lines operations. last segment forward. a other $X.X year for growth soft be conditions business somewhat our they softened product while XXXX X lower basis, of including G&A, incur Europe the also of guidance than million experienced will inventory in Clothing we were Please the Heimbach's the full we were quarter to for outlook year-end. like approximately Machine the year. to the for lines, to note in Please [indiscernible] at clearly million the will time the months purpose, transaction. and Asian with of accounting relating at years, includes to few packaging same million The quarter. the constant while annual year the to currency tissue are our during complete product are $XX inventory relative impact Business purchase by end third step-up be estimated Americas for the will going the mixed Machine lower. were step-up full On

operations We a Heimbach in fourth revenues to as and expect will have a quarter, full the quarter and result, year-over-year. increase sequentially of

contribution to million, Machine are Clothings We $XXX from million, $XX the including guide raising approximately estimated range of to a Heimbach. revenue increasing $XXX million

management. cost inflationary our efforts continuous to efforts and improvement continue through offset ongoing We input impacts

of are $XXX to to revising Machine EBITDA for a As acquisition, we Clothing guidance range the our Heimbach result million. adjusted $XXX million

the As is quarter prior than Clothing lower fourth and typically be EBITDA Machine quarters. results revenues the case, will modestly

Turning Composites. to Engineered

in $XX earlier, program generate mentioned than ASC to we expect guided. XXXX more approximately million the had As we revenue LEAP originally $XX million to

our to million. stepped up revenue programs, quarter, along expect on Based are growth be with $XXX third $XXX raising in we the and this, between XXX now smaller During guidance production. million we revenue and AEC

XXXX total up to At We $X.XX year million. company full $X.XX level, the updating revenue full to are between billion year EBITDA $XX million. we narrowing are billion, our and adjusted our guidance $XX follows; guidance AEC million $XX as

and million between the of top effective an of includes implying in $XXX XX%, approximately XX% from tax the EBITDA fourth year. effective tax XX% Heimbach, rate adjusted an million, XX% guidance million income to line contribution of $XX Our rate to approximately quarter $XXX

accounting. Depreciation into the from $XX and and dilution Heimbach the acquisition, negative result in call for the Adjusted amortization, account $X.XX balance expenditures $X.XX of questions. approximately the range $X.XX. of of is of anticipated to per million. between of GAAP open including Heimbach earnings in largely year. to million; of $X.XX, taking capital $XX purchase per Operator? the $XX let's that, $X.XX The between million With earnings share the impact share of $X.XX to be and $X.XX Heimbach approximately

Operator

Securities. the question Peter line comes Osterland Truist with first Our [Operator Instructions] of from

Peter Osterland

Mike Ciarmoli this for morning. I'm on

guidance about of I for So to imply assumed Heimbach seems the first, ask year wanted $X X%. the of just margin a the EBITDA acquisition. around With to million around

are So you or elevated pressures early just call here? stages is impacting in any that was the I out wondering, cost any there the margins seasonality there

Robert Starr

on Sure. to the call. Yes. Yes, see is Peter, Rob. this Good you

acquisition, to relates running Heimbach, published we year 'XX, seeing the as are of some margin. X% level right, full it as EBITDA were they when we our in definitely And seasonality. the materials for So about we announced

profile the just business. and we're roughly of of have team with to see range as efficiencies to the number So a in And the not fourth X% really the margin unexpected. the the actions quarter and of improve is working anticipated,

Peter Osterland

Great. And had the just year. for follow-up I then Makes the EPS on sense. a guidance

fourth implied this which year. seems at $X.XX, just the would $X.XX quarter range be a wide pretty in to So range like the point

wondering of are areas towards just was risk where biggest might the the or range? of I business uncertainty end the lower drive that So the

Robert Starr

math. good question. really that's range a function Peter, just the a $X.XX Yes. is The of

really at exactly what right, Heimbach, Machine Clothing, deliver. just for for bought our million guide right? so We have which then hard spread. by also EBITDA you know If about it's it's a segment, is look range million to we $XX business, the they'll $X accounting And

which you a million $X.XX. those if $XX got you X, translates really to add what is So spread,

segments towards. us not be would perform order to which the end lower to So while is for certainly in what the both have we're possibility of at at range, low end, working -- the the

We team. the operating have confidence in

midrange, pretty the at impact more guide. look I you look relevant and at think $X.XX, to what's here $X.XX, last right what we're we is you in And if the quarter, year. the midrange if the at on top we're $X.XX of much of adjust delivered Heimbach of roughly the

Operator

question of line Bank next the America. of Ron comes Epstein from Our with

Unknown Analyst

[indiscernible] Jordan Ron. for is This on

demand year, any looking guys you AEC? out have towards uptick next Safran from to So see started for

Gunnar Kleveland

for So we're XXXX. not guide to ready

where to we We revenue a year are we looking have expect at and level. LEAP at higher generation, that continue

Unknown Analyst

year? a have the through they've they've inventory earlier of the then Okay. much do you And excess sense burned had through how

Gunnar Kleveland

-- will a inventory and have will be buffers it's inventory will be there at our there will don't GE. and there that. some Safran is each location, I facility, there -- details at the And and inventory So at at be on be inventory

Robert Starr

customers aircraft. call. support with ultimate working product that very get demand in information that other entire Jordan, make for demand next they our I managed we thinking our is update We on need production as so typically not with And there. we're community just to through year, that. Yes. volumes don't mean an we that chain have the year-end about commercial annual go the for certainly and appropriately Safran one the get thing. to But we're sure as We'll we levels them closely the process certainly, end start

Operator

with of question Global. from the Skibitski next comes Our line Pete Alembic

Peter Skibitski

Machine start to Clothing. with Maybe one on

pull in out do You your any guys the kind the I the maybe the very is Do of in you bottom, a Or in the along demand were concern mentioned whether of global. of orders sense guys guys some or now the the are take Europe down. of if is a softness you wondering, recession I there, PMC way and in was mean will? -- right major of of next you just some you bouncing geographic there's you a harder things that markets PMC? year. are shaping up sense soft have for macro be pick I we'll you terms Do for that a deteriorating, think, X landing kind end have

Gunnar Kleveland

in to be of point. the short can be then kind -- the is the because we're product. Europe -- markets. seeing you would U.S., it if similar And X But seems now. into expect at we quarter look in China to something growth. this soft Where in is U.S., us at through should that and seeing say fourth growth takes that interesting And term I next shift but seeing up a definitely Asia, look is Europe China if down. And it's we're at picks right and in see that we mixed markets, maybe But of not predict should we in type we're also and the the up. now year in

Robert Starr

various Pete, our to if generate gross very of consistent it's -- overall and note think I have grades, demand really Machine clearly that those a I we've really publications important other demand and you Clothing different across level been look margin what is And some Yes. mean, successful. through business pretty really at distinguishes the to softened just scenarios. ability

job. and have his a team done think I Daniel good So

So where product in we'll actually is brand tough mean, advantage an manage quality the should us provide a and hopefully this the demand. one I market.

Peter Skibitski

sure. out and it's there. Yes, for That's Yes. cloudy

me. for more one just Maybe Okay.

was you us, revenue at The -- think I year. so -- switching maybe your gears. in XXK I share it, be missed quarter? what And X next you'll know total with CH-XXK, for don't then the Just this Rob, if could I

I'm I a think Lockheed expect sizable, said before either because or XX. got wondering I we in you've that know LRIP the for pretty think, NRE should just And contract -- CH-XXK. for production if I

like up all it will guys determining that. year-over-year seems should kind still be you're year. if for next it production equal you So wondering I'm volume out of if

Robert Starr

Yes.

to I good much pretty the NRE you're run is yes, correct. And going off. question. So mean

if the notable on this up or basis, be to forward, a then you we see the expecting As last run on sales any year, strip whatsoever. rate full this out CH-XXK kind And exit in to operational year we to we're not year, going NRE expect of NRE so. relative even mid-teens

feel program the about we So really where good trending. is

If you right, Lake actually we next cutting the line. -- had with line. We were facility, to visit on our a Salt just rig that the Sikorsky on got automation

So CH-XXK. things well looks are progressing said, for book order you really as the And terrific.

So be program good us. for a this long-term will

Operator

Our line of question Instructions] Ayers TD with from comes the [Operator Jack next Cowen.

Jack Ayers

of helpful. of both with sales wide sort to on what's And the guess I going digit, Great and right, just excess? there down going So year-over-year? is single math hate guide margins pieces of digit like my and question, and thinking range, low conservatism QX with Gunnar. margins that the if year-over-year year-over-year double Just just sequentially, high to you. be LEAP welcome, sequentially. back moving AEC to QX and other and stepping just would mean, sort any of Quick the is color but is just there kind there sort implied inventory of up sort I of we be or have actually the up to are QX sequentially go implied sort here. I down like And specifically, in

Robert Starr

help. to happy Jack, No. Yes. Sure.

to of in being come are is And bit top are the would So see a we couple AEC, at conservative off. line volumes as we but programs' quarter expect. your math fourth on correct, going we probably a

that. as the So of we're the the it mix programs margin, account shift just for during to in really trying of we relates to expect that's And quarter. function a that

quarter cool right, off As kind our That imagine, running in can expectation. ahead. the is we're fourth you will of LEAP

up LEAP, are So we margin. There others, much see those in and programs seeing and than volumes pick we're higher margin some are the like fourth the expecting better a profile where employed quarter. to is XXX

Jack Ayers

Okay.

then -- of $XX appreciate like sales one Heimbach. about But if mean on we like run of of there. $XX that, forward QX sort to year. roll as we're just follow-up that million moving to hit the quick Rob? And million. into getting I I we million And the dynamics Okay. implied for think that on right is 'XX, sort looks like rate that sort way the the demand $XXX that going of What to

Robert Starr

No, Heimbach Yes. a it's in really Machine once spot Heimbach. QX Clothing fourth on, math sales for you bit probably rating no, again be seasonal think run and the is pronounced in But and shouldn't That at even more Jack. seasonally, I definitely yes, quarter. the more

we 'XX delivered to So what sales in the the stay about if working volumes you stay. make with was million. look at to where XXX we're EUR sure for Heimbach what team certainly need And delivered that they

Operator

I back would Kleveland, remarks. Mr. over to for turn Chief the now Executive Officer, conference President Gunnar to and closing like

Gunnar Kleveland

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

Operator

for This concludes you Thank participation. your conference today's call.

may disconnect. Everyone, You day. now have wonderful a

Albany International (AIN) 7 Nov 232023 Q3 Earnings call transcript