Albany International (AIN) 27 Feb 242023 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to Albany International Fourth Quarter 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

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

good and Lisa, you, morning, everyone. Thank Albany to International's Fourth Call. Conference Earnings Quarter Welcome

for the and their our 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 GAAP. call, use night, reconciliation financial detailing statements to quarterly our in text the press refer please non-GAAP

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

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

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

welcome, earnings joining Good for everyone. Thank you morning, you, call. and John. Thank quarter fourth our

wish we begin long at this retirement, leading our Before role. the and and to who's and his Relations, We to the John X take his to he X responsibilities the in career the story functions for communicating is JC instrumental wife best and will After and John Relations next years. decades his level. function our has Hobbs, a call, Chetnani. JC retiring past moment nearly the with in Investor welcome transition new his community in to we IR to has John Investor Albany been acknowledge I investment want John taken a

of strengths growth our businesses focused remain be with innovation, for execution, our impressed provide science execution success resulting potential. testament Composites confident us XXXX, on XX% know-how, overview in satisfaction discipline billion, company continue team delivered ahead and our and Moving of performance. business will Albany to year with about line our the with to on our are long-term consolidated financial capital allowed $X.XX a have Rob quarter is outstanding financial our in to long-term of operations the XX%, remain fourth XXXX. In who top up and closed our performance. later and growth XXXX from Technological an excellent customer Albany. I'll outlook discuss operational the a driven revenue provide financial This products macroeconomic material deliver our stayed XXXX's to Heimbach results I and of at key all the XX% recent detail that performance. line step with our our high-quality in acquisition. Clothing, primarily revenue largely time strong results. We Engineered along Machine of issues by to growth top global management operational

year. in Importantly, over margin was prior we Heimbach. to X% Adjusted EBITDA just the year and up primarily million, versus EBITDA growth XX% adjusted by margins came acquisition of Composites sales XX.X%. the at the The compression in Engineered driven prior over $XXX grew of

driven per the the in $X.XX $XX from million. million $X.XX from GAAP net prior year. $XX increased XXXX, acquisition million Heimbach Diluted after or cash share. XXXX per year was adjustments $X.XX flow Free share, versus EPS or related income million last by to to up for $XXX $X.XX adjusted was for expenses $XX the primarily for year

Turning segments. our the focus to

was be to Our Machine no This consistent Clothing business, a excluding year different. strong, performer. Heimbach, continues

and very posting segment million, $XXX current business, had orders in again EBITDA up North up was was prior especially we reported completing million strong, Clothing margin better on a adjusted Asia. EBITDA $XXX backlog basis. at America excluding than finished anticipated, X% on Heimbach, Machine Our currency-neutral versus and currency-neutral X%, a year revenue, -- XX%. The basis. Adjusted XXXX results in The

top Clothing's line Heimbach XXXX The Machine acquisition was final earnings. dilutive for million X GAAP months and to of the $XX modestly added to

European in accretive to presence on pleased basis markets. the in and XXXX. a and GAAP Heimbach on we be be continue of expanded addition with We Integration Asian that will and remains expect both it track,

Machine globally business Our fabrics line the saw we packaging Europe. on customers to an increased of all results Clothing tissue serving is with engineered bottom weaker basis. Machine from Overall, well geographic share our by This global which on positioned to us and somewhat both growing world-class our was global and of markets. continued execution demonstrate positive across demand, mix. impact for in grow Clothing a continues product markets, secularly offset its a particularly

executing guidance. Growth Composites expanded million, of was XXXX. segment driven our margins and XX approximately programs, commercial while $XXX XX% programs Boeing LEAP versus late was kicked $XXX to up including XXX million in strategy. million, revenues the recent by points XXXX. XX% up that revenue new ASC long-term The year, year-over-year, growth with in off its most adjusted to EBITDA line basis $XX on is Engineered Our compared segment reported prior

Turning to team ahead of delivery the year second of industry. AEC exemplary and timely was We their article deliver made was noted by U.S. the first the the in The as program schedule. CH-XXK programs. the quarter on operations this transition ability government of to of execution

line. of of on was aggregate transition nonrecurring the half revenues programs by standup growth in first as nonrecurring year-over-year. in were associated XXXX XXXX. This with revenues the masked production defense largely the These completed production CH-XXK efforts Recurring lower up were

growth product on programs which consistent deliver ability robust have revenues a XXXX, the is in a XXXX, in when to time quality significant We in for won have competing in advantage development other and business significant competitive business short space AEC's had term. and platforms. Notably, customers to our business. a new new in will emerging result pipeline we significant

The strategy. excellent and integration Turning generates on Machine value. that business from flows an customers to year Heimbach performs and of capital. is our International Clothing long-standing business reliability, year Successful benefits a will out. for leadership Albany technological and business that Composites be come. Engineered aftermarket return business our reputation consumable a with consistently of cash the by strong will Clothing in a Machine efficiency drive customer focus flow The important we capital to to source integration program of provides system-wide is cash growth building selection disciplined our generate years growth, and efficiency. partners on on focus strategic service. out continue and to designed enhanced earnings as in an

and From deliver perspective, requirements. meet to our will an customers' to operations continue execution we delivery world-class and quality

Our us business reputation opportunities the medium over pipeline marketplace will provide to our term. with grow, in and development growth the continues

over into continued Our investment proprietary growth meaningful the term. in technologies will translate long differentiated and

provide very our shareholders. to those risk-adjusted that sheet Our returns balance remains the pursue highest strong, us allowing to investments

shareholders. the During organic disciplined on capital to in XXXX, company continue invested of our continue executed in invest increase significantly the will management Heimbach, to to dividends AEC, our to acquisition growth and business inform approach This R&D decisions. at

our Rob With quarter provide to on and Rob? that, I over details it more for to hand the outlook XXXX. will

you, XXXX. good will and Thank XXXX review outlook then results our I and morning, Gunnar, quarter for everyone. provide our fourth of

a number backlog in Machine the a to well delivering our quarter, more levels. number a Clothing, earlier orders, drawing expectations. us consumer executed resulted of in on resulting down At successfully factors of our During result we normalized of ahead

our savings a procurement optimize accelerated Heimbach also supply ] of to chain, win team's We ancillary a our as integration. the [ efforts saw from result

as the expenses Additionally, than we Heimbach came stand-alone controllable expected expenses. managing results lower quarter. than for were Corporate were in expected better

due quarter for of impact rate items. tax effective few the favorable the discreet Our is to a

a excluding XX.X% fourth neutral year Machine versus we by driven Fourth basis. the prior sales, Heimbach, For sales fourth contraction partially up notably a last currency the most packaging sales in year Heimbach. currency quarter net $XXX XX.X% fabrics. markets, fourth basis the of on quarter quarter versus period the quarter, tissue industries reported million, growth from and neutral of year. of primarily our other The Higher was the offset and engineered net by X.X% Clothing the on increased were prior end to

In the the markets positive, Americas X.X% $XXX increased basis are net year-over-year, in to sales stronger on are Asian a while of remained compared Engineered million fourth markets slightly terms XXXX. quarter of markets geography, Composites currency-neutral soft. European of

recurring our strength and our sales programs. I programs commercial increased programs, driven offset by our CH-XXK defense year-over-year, was partially like JASSM. by revenues the growth would Our that production driven and defense to both highlight across by on

fourth company period was the significant the generated transition revenue onetime the up at standup last profit by million, gross last of quarter CH-XXK of million was for the the quarter $XXX year, or same there production During from $XX line. Fourth XX.X% year.

margins Within and favorable period basis Machine product increase drove the XX.X%, procurement excluding gross to in XXX up points costs same year. Clothing, last mix versus an lower Heimbach,

the our long-term of finished net to in quarter, margin in line largely on XX%, represent gross of of the year. fourth growth a quarter versus is year. a million we change $X.X The last AEC, Note with points with of million unfavorable for same a our to last the change at profitability the basis the $X.X Heimbach. prior in estimated on were XXX up net total quarter unfavorable strong expenses year-over-year year that of the the for period in recognized compared year. Net contracts and business approximately SG&A While fourth base R&D due SG&A the unchanged prior the expenses revenues. from X% were addition

related AEC million, point period. of adjusted in was a the $X.XX of was largely Please an EPS this acquisition excluding Actual XX% million. basis. Adjusted EPS quarter Heimbach same improvement for EPS reduced $XX and going GAAP year. integration as sales, the from Segment in $X.XX $XX.X $XX.X improvement AEC EBITDA margins quarter XX.X%, detailed point the EBITDA diluted income improvement step-up XX.X% XX% $X.XX from increased was by year. to the the on Clothing adjusted per attributable from $XX.X GAAP results to period. the Margins year quarter of over the Heimbach, a non-GAAP the XX GAAP on for results period same initial adjusted this company prior the adjusted in diluted call forward, $XX.X inventory adjusted million net a prior the operations last of year. the compared last net that to compared XXX in was adjustments basis million, be diluted to Heimbach basis year. Heimbach to versus EBITDA Machine $X year. last were at EBITDA. million income $X.XX expenses. the added prior note million million basis increased year result were a fourth reconciliation, over reported share $X period primarily approximately XX% prior will EBITDA, our

generated with $XX the During at company operating million expenditures capital from activities $XX $XX free and quarter, cash flow million. the million fourth of flow at cash

quarter, Over of paid the million. over we debt down $XX fourth

balance strong facility. our under Our capacity with sheet borrowing of million million of remains committed $XXX a cash over $XXX balance credit and

to flexibility Our our in at execute financial the came Xx, net leverage year us at the giving end of plans. approximately the

upon line Finally, I our for touch quarter with million our their GAAP and the I impressed and was top to added want to to $XX Heimbach. technology. people am earnings. dilutive Heimbach modestly

confidence Our are announcement. meet targets the efforts our outlined on track and have in the time ability financial integration of acquisition the at to

on to XX. Slide Turning our outlook

We line top continued are double-digit growth margins. strong year EBITDA with and forecasting another attractive

Machine Moving Clothing to outlook. our

in We remain in expect perform to will business anticipate historic coming well soft We markets Europe the by the year. standards.

of remain patch showing first in healthy. from However, indications in Americas Markets they the the saw Asian of early are half soft markets XXXX. the improvement

top and Americas, XXXX, our revenue assumes assumes improvement dilutive Clothing corresponding end weaker-than-expected low be continued conditions meaningfully of results. the expected, and in Asia absorption. The will in to global market our as to For Machine in markets acquisition, and GAAP Europe. robust lower guide the add our our range Heimbach recovery of The end will outlook

EBITDA revenues adjusted and million We $XXX $XXX of to of to million expect million. $XXX million $XXX

AEC. Turning to

and ramp high-demand production on to programs are to continuing levels. are We most sustain

to Going expect long-term commercial, driven production continue our increasing programs. forward, and defense space be by we growth across to

results a for We second through XXXX. had development set of expect continued from to and continue the strong business into us ongoing will backlog, efforts. that new one we add the up growth revenues half business We positive we see have and our year

to of than the and account programs about normal on low takes the end or the our new like a for the on think account some EPS. lower positive range reflected an our LEAP you end of of our million. From planned delays variability from perspective, XXXX expect be headwinds product customer we takes at providing for attention are in a LEAP into start As $XXX your wins earlier-than-anticipated higher-than-expected improvement of mix The in plan. the a demand component our production. initial potential award into guide, segment, potential in EBITDA guide the we $XX revenue high new are margins. would Overall see in Accordingly, we guiding modest to impacting million. I a profitability to bring our guide million adjusted to adjusted for $XXX shift and our

We of accounting to will expense due accounting and or depreciation costs. to $X.XX in at pension per will expiration interest relating XXXX. prior business or million And base of see prior treatment of service the This expense adjustments amortization in a share. Purchase mature noncash higher the of our the result from transaction by approximately end previously the amortization approximately $X.XX share. placed arrangement will October million our swap finally, increase $X.X Heimbach $X will per rate

the We are to exploring impact. minimize various alternatives

For share, current full interest impact to or $X.XX $X.X the rate million cost at purposes, we levels. per have net guidance estimated approximately our assuming interest

guidance are Adjusted XXXX between headwind noncash. is effective million. share. tax of to to $X.XX $XXX $X.XX amortization $XX $XX between to our range to of million. follows. in represent a a for $XX $X.XX $XX billion, and and Revenue $X.XX XX% billion excluding level, capital rate EPS million $X.XX per $XXX adjusted million expenditures the items income of to million as million and Depreciation between consolidated and These EPS guide our Together, At interest XXXX. these EBITDA impacts, XX%,

with balances year. coming see this a we to is the with guidance risks opportunities including goal and which provide investors Our forecast, in the

call Now Operator? the I would questions. to for like open

Our Instructions] Steve today from of [Operator question is coming JPMorgan. Tusa first

Congrats John, nice working on you. with retirement.

very much. Thank you

segment Just bit on on margins cadence the of sales for year and 'XX? for maybe a color little by quarterly the

Yes.

quarterly haven't Steve, So a guidance. provided we

we significant. a nature our little would really a seasonality be But tend I say of look lighter you historically, I when to there really bit that you QX. look if in at think just the that isn't is business,

significantly wouldn't another this over overweight quarter So point. I at X

aligning Okay. than and a your of seems volatile happening Boeing how their production, which And a kind ago? more color you expected then just what's guys maybe are at few latest months little on maybe with

high relationship they And there Yes. -- well. have Boeing. Obviously, But our succinctly year, Safran. earnings plan Steve. very from that it their we're that and call kind we'll on interest, are contract of are And as they with watching that said changes with coming a and is our until that's in the for continue they position

impact. have recognize plan. We have might revenue in that, some We that mostly a reduction a there will be but revenue impact,

with be the -- where quarter and the will to we'll wait the vote. will see. going LEAP It be So to first probably indicative year goes

quick And just one, then one more conversion cash 'XX. for just

I'm sorry, Steve? again, say that

Cash conversion.

expecting. Cash year. over conversion will be an improvement this That is what we're

haven't you prior of are long-term if that detail. materials, to level just Day net We we is provided income. conversion our your income net at like Investor -- get look our But goal

growth So we're in We're still there yet. mode. not

this of still So be number a we sure. it are programs, Steve, up than higher ramping but should year for in

coming be Baird. of will Jan-Frans question next Our from Engelbrecht

transition communication the term? attractive give see to near imagine I a this in I a from guess would with be can fixed fixed been you pricing any us structure? there's I'll your plus And price start would Safran just the with, sense profile. you that the price a quite for lead margin contract on could if cost

XD is the structure and same. of is that joint as Yes. that the go We cost And I I'm way market woven our you attractive the the other reduce some doing. goal that our the -- surprised this of to -- we're we forward, it cost-plus a to is goal tell remains coming becomes the And more in LEAP so contract products see projects that beyond into role, is that, program. constructed. that can It

ready. and we So update structure, when looking we're we're will at that

just quick a Perfect. follow-up. That's And helpful.

learned could vice of in business of you share in that On terms are us. lessons that existing you Heimbach, the any that additional you've incorporate or pricing versa, could the maybe there integration with just

Yes.

of always getting the there. learn a get detail. been I've you -- company. bit something the when spent into of X to details time sites quite You the a new to I've into of

is is Clothing this technology integration. describe what in complementing. a to very business Clothing that see doing They're What both from bonus Heimbach new way strong have We're best presence to do. very with should at we the Asia what a they we're is good is the the in you think getting Machine getting The expect and I business. stronger technology. and we Machine here that Europe are

we're very with So with we're seeing that. this where We're good going confident It's a very integration. acquisition.

And our from coming Truist next Securities. question be Osterland will Pete of

I'm on for Mike morning. Ciarmoli this

any growth the legacy Machine XXXX? in between growth on relative Is difference for First, the Closing there to meaningful segment, Machine for outlook year you're for is business what business? expecting your your the Clothing there Heimbach

No.

growth business the business. I think GDP look whole as a at we

based expect in businesses, flat but Heimbach also Asia. of on relatively they We European have business to a the concentration be

with So year first will be that, the we flat. think

then there, to just capital And if guidance some future about growth? the your a to within Great. you year, how And could areas where AEC, acquisition? this and related year-over-year this of expenditures the you talk just capital you're year as are with the step-up provide for there is increase follow-up, drive any increased could detail targeting more much spending

is Sure, Rob. Pete. This

are capabilities. to in with They a as higher investing going and Heimbach. level their are addition see We just of capacity well the

So that's an impact. definitely

fundamental CapEx time year going mean for make AEC, we we've to plus we're As that I wins the that's added of see it some continue to elevated support relates in number other little level is be ramp some going here. we're a programs, growth. to bit this some growth, of investment really mode need to to in the With in to just of XX%

But some have really I top people growth this However, and software top level reflecting for line up that double-digit -- we're shows requirements. the other line. is say the investment it CMMC purchase just year and investing, reflects the do that overall, just we're would other we with

our [Operator question Bank of Instructions] America. coming of Lyonnais be from And next Jordan will

seeing know too, take changes ability I schedule inventory some you're on through CFM's anything Are to aligning you your also, you from excess that different you doing with excess said front-end Are that for their this the guys then And they avoid year. guide. any held XXXX? to inventory? production

with inventory been it the changes. year Our We've we but for year, the Safran higher through buildup slowly with the reduced. of There this inventory will us, year, of expected seen some set that be not because kept end plan flat was last consumption both year. has a with any Safran

plan relatively inventory. the program a which year, with our is flat will is the So impact for on lower

Okay. could one M&A, area too. little Got it. to right pipeline And increase now? just On then a about follow-up, bit looking guys you guys you talk any Is there exposure? the are specific

Yes. activity. We a lot -- of there's

I new think We weekly it's picked of get a on front up. in us opportunities basis.

multiple So assessing makes to right of sense. The us make pretty high. the And the want be sure that also capital we we sense with that us. that just now, multiples seen of that the good right sure make for to some everything we want fit make We've -- the acquisition. we a for makes are it's cost and

do at where spend. We're looking we internal also

we is As we'll have being high said, But market the very we look, returns the relatively active. with opportunities and last the that's see continue caller capital to there the expenditure, and because accretive.

Gautam from question The of coming TD next is Cowen. Khanna

Breitzke Khanna. and Gautam Spencer XXXX? on F-XX assumptions for for Could CH-XXK just you talk about is your for This

in line good the later City we'll lots program, grow Marines. Sikorsky the today with time actually We're the week and and plan Salt Sikorsky. to spending in work. Good from this growth, be Lake here during continues call, CH-XXK So with of

some build to below We're it will Lockheed expect know Fighter, saying XXX build. will we Joint in we I We We're But to support a remained they the growth is the support have numbers. Strike it year, and that flat. but around see what should relatively XXX, last XXX. Martin ready On rate. goes right hoping see to think above planned for rate that to build our that the

and Europe seeing you're regarding for about you what machine clothing could talk destocking? then demand And also

growth softer, Yes. becoming We've soft. eyes expectations our we're see there. GDP and being it don't seen Europe of Europe the on We but latest keeping

call you. remarks. for I go closing concludes Q&A ahead. will today's the back Thank Kleveland over session. Gunnar now to That turn Please

in thank Thank on us Thank All your joining right. you, Albany you, have interest day. and and We everyone, International. appreciate call a you, for good continued the today.

This concludes call. today's conference

You disconnect. may all