• Revenue: Fourth quarter sales of $258.4 million, a 3.7% increase; full-year revenue for AST down roughly 10%.
• Adjusted EBITDA: Approximately $255 million for 2024, up 7% year over year; fourth quarter adjusted EBITDA of $58.2 million, a 24% increase.
• Adjusted EBITDA Margin: 24.3% for 2024, up 180 basis points; fourth quarter margin of 22.5%, expanded 370 basis points year over year.
• Ceiling Technology Segment: Fourth quarter sales of $163 million, an 11% increase; adjusted segment EBITDA margin expanded almost 500 basis points to 31%.
• Advanced Surface Technologies (AST) Segment: Fourth quarter sales of $95.6 million, a 6.4% decrease; adjusted segment EBITDA margin of 22.1%, flat year over year.
• Free Cash Flow: $130 million generated in 2024, net of $33 million in capital expenditures.
• Net Leverage Ratio: Ended 2024 with a net leverage ratio of 1.6 times.
• Dividend: $0.30 per share quarterly dividend in 2024, totaling $25.3 million; increased to $0.31 per share in February 2025.
• 2025 Guidance: Total sales growth in the low to mid-single digit range; adjusted EBITDA between $262 million to $277 million; adjusted diluted EPS between $7 to $7.70.

• Warning! GuruFocus has detected 5 Warning Sign with NPO.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Enpro Inc (NYSE:NPO) reported a 7% year-over-year increase in adjusted EBITDA for 2024, reaching approximately $255 million.
• The company achieved an adjusted segment EBITDA margin of over 32% in the ceiling technology segment, reflecting strong operational efficiency.
• Enpro Inc (NYSE:NPO) ended 2024 with a net leverage ratio of 1.6 times, indicating a strong balance sheet and financial flexibility.
• The company successfully executed strategic pricing initiatives and cost mitigation actions, contributing to a 24% increase in adjusted EBITDA in Q4 2024.
• Enpro Inc (NYSE:NPO) announced a 10th consecutive annual dividend increase, demonstrating a commitment to returning capital to shareholders.

Negative Points

• The semiconductor capital equipment demand remained weak, impacting the advanced surface technologies (AST) segment's revenue, which ended the year down roughly 10%.
• There was a sharp decline in commercial vehicle OEM sales, affecting overall demand.
• The company anticipates continued weakness in semiconductor capital equipment spending throughout 2025, which could impact future growth.
• Despite improvements, the AST segment's adjusted segment EBITDA margin was flat year over year, indicating challenges in achieving higher profitability.
• Enpro Inc (NYSE:NPO) expects choppy market conditions in the semiconductor sector to persist, creating uncertainty in revenue projections.

Q & A Highlights

Q: Can you provide more details on the expected growth for the Advanced Surface Technologies (AST) segment, particularly regarding semiconductor capital equipment? A: Eric Vaillancourt, President and CEO, explained that the growth is primarily driven by outgrowth in leading-edge applications and some market share gains. The market is expected to remain choppy, with low growth in wafer fab equipment (WFE) overall for 2025. Investments and growth initiatives, especially in leading-edge applications, are expected to outperform and drive the forecast for 2025.

Q: How should we think about the sequential performance of AST throughout 2025? A: Joseph Bruderek, CFO, noted that the first half of 2025 might be slightly flat to slightly down, with the second half expected to be stronger. The segment will experience some choppiness quarter to quarter, but no material step-down is anticipated. Growth investments, particularly in Arizona, will continue, with significant production volume expected in 2026 and beyond.

Q: How are you addressing potential tariff risks, and what pricing actions are you considering? A: Eric Vaillancourt stated that most sourcing is done regionally, with a significant portion directed by customers. Exposure to tariffs is minimal, with small volumes from Mexico, Canada, and China. Price plans and surcharges are in place to capture any tariff impacts, ensuring they are not material to the company.

Q: Can you explain the sequential increase in AST margins despite the certification process in Arizona? A: Joseph Bruderek explained that the positive mix, particularly in leading-edge work in Taiwan and the US, drove favorable margins. The volume was strong in the latter part of the quarter, leading to better-than-expected margins despite higher costs associated with the certification process.

Q: What are the main drivers to achieve 30% EBITDA margins for AST, and how do you plan to reach this target? A: Eric Vaillancourt highlighted that investments in leading-edge technology will start paying off, with market share gains and operational improvements contributing. The approach mirrors the successful strategy used in the sealing technology segment, focusing on customer mix, share gain, and higher-margin technologies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.