Albany International (AIN) 31 Oct 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Albany International Third Quarter 2024 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today. JC Chetnani, VP, Investor Relations and Treasurer. ahead. go Please

and Third Verdin, everyone. to Welcome Thank XXXX good Earnings International's Quarter Conference Albany you, morning, Call.

our issued As a refer night release please the on results. detailing last reminder for to those our listening quarterly financial call, press

release GAAP. Contained a our use certain notice the and measures is non-GAAP in and of financial statements their regarding text of the the forward-looking reconciliation to

verbal conference purposes those same our of to this call, remarks the morning. For apply this statements

number or a risks that to are forward-looking which we cause and Today, make could contain uncertainties will statements differ and from implied. of actual results those expressed

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

over CEO, President Kleveland, Gunnar? call to opening remarks. Now Gunnar who provide I and turn our will will the

morning, our results our joining provide Thank detail. welcome, you, third an our performance. healthy. I our the pleased flow JC. with results Machine excellence business at overview we by discuss as ability Rob call. evidenced quarter Good you is of sheet year-to-date. quarter focus results everyone. later operational and final will Thank million Furthermore, generate $XX on for free of I'm and earnings strong of our in will to cash balance very Clothing overall the

facility. stabilize Lake and advance Salt the to Turning to the the operational at EAC adjustments announced our earlier production addressing issues ramp-up this month, we to are programs of

Our team is making support other progress, good our leveraging from sites.

Fabrics pulp. the trends place grew globally Engineered delivered packaging the packaging, acquisition, remain offset grade partially $XXX quarter, and growth. growth at tissue Heimbach for secular Overall, million In by Europe. revenues year-over-year, and in driven year-over-year Clothing our by industry's Machine in publication third

Asia remains a In terms Europe experiencing Overall, continues for contributor, strong to stable, geographies, some except China, softness. weakness. is demonstrate North which is while of America

stable. backlog order global remains Our

to Heimbach. Turning

impact our closing quarter this which the Europe, Our with on progress weakness South Revenue U.K. facilities the quarter. functional integration has from integration an the track. fourth on remains Rochdale and organizational some Korea is in complete. of the implementation, delayed plan past into sales and seen overall SAP largely We made combined has

In of programs. adjustments. impacted by our we million, have was commercial previously announced our while recorded profitability revenues $XXX our we segment, Engineered our our in and seen weakness In Boeing other Composites EAC markets, LEAP near-term

business on the expect defense CH-XXK JASSM grow, Our Joint in some seen reduction beyond. in Fighter we and this Strike to primarily we Though XXXX platforms. near-term and year, program continues have the recovery

And to well backlog space longer billion. continue $X commercial in term, see other Our we is over growth our and programs.

With we month, we're our when our production as it We're is situation the of program, have call at second But XXXX announced earnings XXXX guidance. on share Safran as with production plan, with working at overall finalized our our and LEAP and we'll quarter plan. twice previously Boeing. earlier part lowered the monitoring that XXXX this you

segment. the in peer long-term which It's operating the future margin profile our group. important we business of of business remain strong new well gives the confidence and note for ahead of strong, updated fundamentals place, leadership of have Our the to remains that me in the all

and remain I my Overall, place. team have solid, fundamentals in our business

will strategic growth leader We Composites. at strong agility support projection. as and and Chris experience strong brings Stone discipline the new our to have a Albany Engineered which Chris segments,

into development several Stein of role, leadership took Merle of after and strong our the Machine shaping his segment. years groomed business over Clothing, capability Machine to will Clothing future the industry experience Albany take In and being

our CTO overall Rob is R&D. businesses. leading to science As and common disclosed Hansen earlier, material appointed due and the our innovation of was

experience lead our our process from investment for [ Boeing new Paul Paul In Textron has to will gated Watts and significant recently we business R&D, businesses. our to to in addition and our order capitalize ] products hired ventures. take on through new

also in plan an our next change the hear give the analysts to momentum, Day management X-year Investor this showcase new all for on period With and of in hosting and plans investors the we XXXX directly opportunity the to from team. spring

With I'll over more Rob to to quarter. the that, provide it Rob? details hand on

the Thank in you, of our sales results third our million, at everyone. Gunnar, the then third net $XXX good I balance and morning, will X.X% came year. Consolidated provide for up and the quarter review from quarter American year-over-year Machine the strength quarter higher that year. last million $XXX prior the net by in sales of of third market. comparable North Clothing versus increased and of were reflect X.X% sales driven Heimbach. the year, outlook

impacted negatively and continued in were markets we weakness Asia. mixed Europe However, by in

GAAP near-term at top sales our the negative million SAP EAC implementation net of provided a AEC to XXXX to year-over-year, Clothing from Organic basis, SAP for implementation. a largely we versus period due new headwind declined $XX of from the sales sales Heimbach has were line the for X% of transition also a $XXX the on as flat third delays adjustments the largely in inclusive quarter quarter. million Machine systems. The impact

We meet our platforms, experienced cumulative as offset we I needs. impact, sales underlying our excluding LEAP growth production program CH-XXK. that in customers' our towards to want our sales CH-XXK catch-up in and to the work on ramping by space lower highlight and emerging increased

driven down of million, million the from the by was casual million. in $XX $XX year, prior profit cumulative gross EAC Consolidated adjustment $XXX

the million, XX%, would approximately increased the with EAC gross last margin a quarter our to profit year's of results. have line for with $XXX in Excluding adjustment,

first sorry, acquisition. The driven by to the to in XX% since Machine Clothing I'm XXXX, of XX.X% primarily marking costs. XX.X% Heimbach input the in year-over-year increased increase margin gross from XXXX quarter the improvement margin in was third quarter reduced third the increased compared --

continued Clothing XXX points excellent gross Excluding Heimbach, reflecting Machine execution. margins approximately basis to XX.X%, increased

We continue integration to synergy on progress make Heimbach our our long-term to targets. are track meet and on

gross that quarter would were by detailed AEC the from margin adjustments reduction in AEC's third previously. the a EAC to gross EAC million margin the XX.X%, decreased $XX from XXXX basis X.X%, Absent point for of the year. be XX.X% cumulative adjustment, XXX prior quarter driven

X% the year, flat. for remaining the prior at expenses were $X SG&A essentially quarter quarter R&D third Net approximately of the increased million revenue. versus expenses in

as from $XX.X expenses of XX.X% percent SG&A the to Corporate versus million. decreased to prior XX.X%. year $X.X decreased However, a has revenue, million

for indicating rate was valuation a the jurisdiction the in of tax prior to valuation true-up prior XX.X% a benefit tax effective X.X% allowance taxes the adjustments. full tax a required. estimated longer is discrete of versus to The and discrete release year that allowance positive evidence no to quarter due the favorable in mainly the mostly non-U.S. attributable the This year, was

for $XX year. $XX million $XX million the same was per the reduction $X.XX the to GAAP year. period EPS was largely impacted The this which in versus attributable to compared income to adjustments the net net share company in diluted by million. EAC quarter income last $X.XX negatively last GAAP due quarter

acquisition period adjustments as in the Heimbach and restructuring to year. last EPS in the related $X.XX other reconciliation, versus detailed the After our $X.XX non-GAAP primarily diluted same activities was adjusted

of Our expenses, to also share. the third our EPS benefited quarter occur negatively impacted operating we our EAC EPS per cumulative adjustments fourth in timing expect from diluted Please quarter. quarter that by the certain third which note $X.XX

of the prior Machine $XX was margins in Adjusted with million prior the business. XX% EBITDA was improved the adjusted period. the third in reflecting EBITDA, million year EBITDA Clothing versus increase versus year. operations adjusted versus for quarter were $XX an XX.X% Heimbach, across $XX Consolidated including prior the XX.X% year, increase million, the

EAC versus of $X AEC million sales adjustments, of or at cumulative EBITDA Adjusted to was was adjusted adjusted X.X% been the prior XX.X% EBITDA as AEC million have the prior in AEC's the $XX sales. $XX XX.X% margin compared year. period. excluding would year EBITDA, million in

flow quarter, by capital prior This $XX million, operating $XX in brings expenditures was flow cash cash versus year-to-date to million During the with $XX of $XX third offset year. million positive the our free free $XX million flow of cash million.

a cash turn. $XXX Our balance remains and of million credit million committed of $XXX below facility. under is leverage strong sheet X borrowing over capacity Net our balance with

of the to our outlook for XXXX. Turning balance

month. the are earlier for year of We our to balance guidance relative provided tightening in the guidance the the

for segments, narrowed effectively our we revenue to month. have guidance the similar our We leaving guide both provided this earlier midpoint

and higher prior guidance EBITDA Our guide narrowed. been consolidated also is adjusted slightly has than our

results. pointed out on the fourth translates the adjusted reflective underlying guidance EPS high-teen quarter, of strength $X.XX, for the of announce increase year the providing when guide AEC is EBITDA our margins full of XXXX be $X.XX to We a our should It plan from year year-end our guide. business. guidance that we The midpoint prior full

our provide also we guidance spring. longer-term will host Day Investor when We next

I'd call to the open Now turn for like questions.

comes question of first the Our Baird. from Instructions] with Arment Peter line [Operator

and revenue this of what's you month, thoughts we can you on, one, think how for the progresses from latest? next that kind give here about latest year? of your how Gulfstream talked And updated kind about just earlier do us the contract that Gunnar,

our performance engineering working ago. no Yes, right Peter, a is hours and real since effort the on we with call or there, with there's the deliver a do part change month to We're less that Gulfstream on than program to and the team with the get putting contract today.

the to effort an our there's for So there, program really but next is don't really expect revenues I year. the impact update. anything no not --

How beyond? of classified of what That's know Okay. does business terms that I guess, work world going probably can we in the a helpful. in next -- look know then when Investor defense or guys? say opportunity revenue kind what's spring about I and on give lot winning. about been your And don't you'll detail you I year your that you've for you of but the Day, in next think a at classified

quarter. we're the I last work. I with deals details on we're The of think, into going for I'm also get quarters a active there's side over our very in X this going commercial great announcing We're forward. not specific buildup to backlog doing. the and But lot not a what opportunity any is Yes. to see opportunities. us defense indicative, and there some

of one, the step-up you it. the of parts there confidence EBITDA a Can On kind I quick little EBITDA? Rob. for level appreciate AEC's about Okay. some just guidance that the the fourth year nice one moving and implies bit a your quarter. And in talk obviously around for

in more that a Sure. in year. we have the What Yes. seen our fairly a see increase higher-margin fourth continued in out from X good to really some Peter, as months the of finishing considering we we're in confidence quarter. level guide, growth well our areas expect high is volume we've especially

needed. We are controlling expenses as

at with range, AEC on things the guide. profile. good the So board I guide. And That's team's margin mean our XX.X% good is feel fourth Chris on about focus I'm feel did implied we as the and overall, it's sure you turning business, so the a quarter. Salt Lake, math, the we for of certainly the midpoint about good the

with Ciarmoli Michael Securities. of line the from Truist comes question next Our

last mean, to Peter's to but these Just are you're is think doing about trending margins longer-term And defense or which are down. first-of-a-kind I good, work, mean stay inevitably we on development, XX.X% question. classified more presumably, products risks. going trajectory? that's the design, engineering should I carry structures, always How

on So margins these you be a in go-forward how can confident basis?

Yes.

course, confidence is of higher-margin what where platforms announce of programs, should when of mean, give us of Air space. give kind we're I Advanced levels a Investor especially and a the the planning lot growth the Mobility guide we're on of year-end Mike, and emerging on 'XX -- in seeing So our we think or once lot and areas Day. commercial are we But results we will I good

for areas good us. very are those So

a a have really you're contract opportunity work, on definitely And visibility. right. and does absolutely which margin the some We good setting, right in focus provide, defense

really So to like. And profile feel our it's good visibility margin given have backlog we mean blend. should looking come going definitely to I we're down strong about on look the what the to execution.

feeling to On need and we're your to where situated forward. programs, point, definitely And good the we're other think right? Mike, space and going commercial execute. about I we

them Are the would if Are a that you these did be through kind Or they first? anything price firm Or think plus, go as plus fixed it's classified? more because dilutive of little you I cost at development? would in high-risk cost initially? bid --

Mike, mean, we're development of looking programs, I Yes. careful our we're going about very these share customers. with amount I risk to when mean, at we're the

will We for typically protection. look some of level

putting we're significant very think these on programs don't a like some I risk at development others. So ourselves

So...

least ramp I LEAP. has to XX%. the third time. shifting Okay. mean revised provisions then what kind on mean, I the Safran at I might now, Can going like trajectory? it give gears tracking been any not you just you're there mean I of the sense give shipsets if And many you you inventory based down this the to how in to planned. to of I And down kind on have? it of like based channel output mean be there overall going can than might I that's were talk 'XX lower ramp us but be XXX with guidance, maybe you is mean seems and seems year. tightly Fair. the know

program So LEAP any color you the us? can on give

with tight and there with We're at relationship. on a continue Yes. reductions comfortable with is Our And for Safran balance to we're year, where plan. we that. do XXXX working are and there, where Safran is, the It's a we'll our have fit right?

We not in far be the to we able can't growth the pull that is too and also there And know future. do ramp-up. back

imagine there maintaining capability can well. to as minimizing as So year, We're that's not balance the of between there guidance give well next as for and you a the ramp-up the is the going but part that inventory. balance

Mike, one the we to XX% us for modest. that's Boeing was of in When And situation at the that our unfolded year. flat, the to those kind much LEAP mind. those beginning down impact as holding has year. backdrop expected to year, the more and thing the increase the we relative And other been But -- keep just a relative of and provided of of ratcheted during against were expecting Yes. XX% a increases, was guide obviously,

their not which is estimates very in the if program of The want excellent damage at very long-term supply supply down, backlog there. most chain, that. important part state a -- our careful of look They to is you they recent shape. taken to chain. not to have are be the We understand but release, The we and they balance that earnings were very clear Safran's of

Okay.

in from $XXX Okay. Fair. good? 'XX revenues Is AEC still the million

providing be out long-term we our Investor we'll with Mike, when Yes, come guidance Day.

then. Fair until question. Good So question wait let's

the Our question next from comes America. Jordan Lyonnais with of line Bank of

on given engines we've term, on an delayed. got NX, the it have and won't thinking you just appreciate and And also guidance the on XXX, those give impact. XXXX long Again, will guys programs I the the presumably, you GEXX are looking XXX the now, but how seen about softness

growth. expect we XXX, So

is So demand not they're by the affected there strike there. and

development impact. think impact next So that's that, year. we a development good on And this the year. delay minimal next and a as is believe is year, There into engine, going a is program There I no XX. for this of continued

question comes Chigusa next of JPMorgan. from the Katoku with Our line

a cash free This business? conversion But improved My in flow Steve is have Chigusa to Year-to-date, conversion by any about cash Katoku cash on Does year. for be over generator? it on should do XXXX? of flow. Tusa. think free pretty color you is good first question we a how AEC is last versus has on continue user the And how

No, question. Sure. great

bit ratio probably So than yes, a a is very higher certainly long-term which the would conversion year-to-date is we expect over XXX%, cycle. about

I drive it. a future critical for us very our cash because to focal area focused that's we flow are but on going -- mean become growth. So has

it Clothing. AEC seeing year relates to of cash Machine at business, do they as the managing significant So users year. free flow we balances capital are that of inventory, come also expect capital that as our at working better were We're some this off last we but business,

be programs up to are the volatile of So tend that a in cash. types will early-stage flow for user aerospace I because cash going a think -- depending side, forward on typically the of sign more bit programs we

-- that's balance working a on. we're So but that

cash Albany you consolidated what should future. continued as out think the go strong flow into generation from we is I expect

operational right about it shifting stronger expected, had the we on and MC, elaborate you into Great. we attributed think than what's But can to to margins And XXXX? you that? runway And then the execution. were Okay. head as

I with that. start can

at business. bit doing and I excellent not uncertain it that -- getting think little but the in the cost only that integration. Heimbach, see we're a just the times. reflects management also the by you also we're execution improvements It's core at the team it's efforts from that And with affecting of

at level. So team just that to performing the for kudos

Khanna comes question next Our of from TD Instructions] Cowen. [Operator Gautam with

down This clear, just Ayers down maybe just I 'XX. guys to GE or quarter, guys Gautam XX% LEAP think update? want back I Because the for now. you clear called to incrementally for is to -- update. last your you modestly be more be last did guys But I you from hate since Jack today. But Rob, for production take it for go on it just down XX/X took to it.

Yes.

And second, projected GE. it took So plan than took the the down Xrd down a the we -- and lower Safran and it from year we had then of what we both on for again was for quarter October. in

changed not since have it We then.

you guys around willing would to quantify quarter. And it I be think step you maybe the change? put sort some last of numbers Okay.

Yes. It dollars, maybe from Jack, was very second to the the a minimal. call, pretty talking quarter I nominal. X mean October we're few million

All Okay. right.

guys you might you $XX And from in F-XX, you that? last Lockheed restart, of I the your how talked far script, the the there, delivery does of Investor about But you then discussed forward, target at cadence are -- get I just softness I year. have moving know kind like maybe guess wanted this think Day, away called growth sort that expectations And to does I you all? out some Okay. trajectory there. million help guess of guys just

starting how in Joint seen pretty that here. chain next and we the out this But softness we're for Strike back to far expect through come supply into year, -- the We've a year middle of Fighter.

next Fighter numbers Strike that I maybe to the lesser be to us affect a does but into steady Joint year. expect So degree,

XXXX The X the potential The again remain we're right update term. Investor Lockheed, the for and now believe we was program, the we in view what long seeing in Day. now that provided package they all of on that at Jack, signs But That's positive F-XX a tech and up we'll And the fundamentals the certainly that program intact. F-XX. running. and got kind on

to now questions no remarks. Kleveland showing time. would further closing like turn I'm I to at this Gunnar back it for

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

Thank you the does conclude for participation conference. today's This your in program.

may You disconnect. now