EnPro Industries(NPO) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Enpro reported strong Q2 2025 sales, raising full-year guidance for revenue, adjusted EBITDA, and EPS, driven by AST and Sealing Technologies, and enhanced financial flexibility Second Quarter 2025 Highlights Enpro reported strong Q2 2025 sales, raising full-year guidance for revenue, adjusted EBITDA, and EPS, despite operating leverage impacts Second Quarter 2025 Highlights | Metric | 2025 Q2 | Change YoY | | :-------------------------------- | :------ | :--------- | | Sales | $288.1M | +6.0% | | Organic Sales | - | +5.6% | | AST Sales | - | +14.5% | | Sealing Technologies Sales | - | +1.9% | | Operating Income | $45.7M | -4.8% | | Adjusted EBITDA* | $71.1M | -3.9% | | GAAP Diluted EPS | $1.25 | -1.6% | | Adjusted Diluted EPS* | $2.03 | -2.4% | - Increased full-year 2025 guidance: Revenue growth of 5%-7%, adjusted EBITDA* in the range of $270 million to $280 million, and adjusted diluted earnings per share* in the range of $7.60 to $8.10 per share[4] - Debt refinancing and strong free cash flow generation provide ample financial flexibility to execute on Enpro 3.0 growth strategy[4] CEO Commentary CEO highlighted strong Q2 sales growth in AST and Sealing Technologies, noting investment and FX impacts, but affirmed a positive H2 2025 outlook and enhanced financial flexibility - Enpro delivered strong Q2 sales growth, driven by double-digit revenue increase in AST and continued momentum in Sealing Technologies[2] - Investments in high-return growth initiatives and foreign exchange headwinds impacted operating leverage, particularly in AST[2] - Full-year guidance increased due to strength in aerospace, general industrial, food and pharma orders, and a positive sales outlook for AST in H2 2025[2] Financial Performance - Second Quarter 2025 Enpro's Q2 2025 saw consolidated sales growth, but profitability declined due to increased operating expenses and foreign exchange impacts across segments Consolidated Results Enpro's consolidated sales grew 6.0% organically, but net income and adjusted EBITDA declined due to increased operating expenses and FX headwinds Second Quarter 2025 Consolidated Financial Highlights (Millions) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------- | :------ | :------ | :----- | | Net sales | $288.1M | $271.9M | 6.0% | | Net income | $26.4M | $26.7M | (1.1)% | | Diluted earnings per share | $1.25 | $1.27 | (1.6)% | | Adjusted net income* | $43.1M | $43.9M | (1.8)% | | Adjusted diluted EPS* | $2.03 | $2.08 | (2.4)% | | Adjusted EBITDA* | $71.1M | $74.0M | (3.9)% | | Adjusted EBITDA margin* | 24.7% | 27.2% | -2.5 pp | - Sales growth of 6.0% (5.6% organic) was driven by aerospace, food and pharma, precision cleaning, optical coatings, and general industrial demand, partially offset by soft commercial vehicle OEM demand and nuclear order timing[7] - Corporate expense increased to $12.1 million from $10.5 million, mainly due to higher incentive compensation accruals and increased health insurance costs[8] Segment Performance Enpro's segments showed mixed Q2 2025 performance: Sealing Technologies had modest sales growth but declining EBITDA, while AST achieved strong sales growth with slight EBITDA increase Sealing Technologies Sealing Technologies reported modest sales growth, but adjusted EBITDA and margin declined due to FX headwinds and strong prior-year comparisons Sealing Technologies Q2 2025 Performance (Millions) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------- | :------ | :------ | :----- | | Sales | $187.5M | $184.0M | 1.9% | | Adjusted segment EBITDA | $63.3M | $65.4M | (3.2)% | | Adjusted segment EBITDA margin | 33.8% | 35.5% | -1.7 pp | - Sales increased 1.9% (1.5% excluding FX) driven by aerospace, food and pharma demand, general industrial performance, and strategic pricing, partially offset by softness in commercial vehicle OEM and timing of nuclear deliveries[11] - Adjusted segment EBITDA decreased 3.2% (3.4% excluding FX), with margin narrowing to 33.8%, primarily due to transactional foreign exchange headwinds and timing of deliveries, against a strong prior-year comparison[12][13] Advanced Surface Technologies Advanced Surface Technologies achieved strong sales growth from precision cleaning and optical coatings, with slight EBITDA increase, though margin narrowed due to growth investments and FX Advanced Surface Technologies Q2 2025 Performance (Millions) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------- | :------ | :------ | :----- | | Sales | $100.9M | $88.1M | 14.5% | | Adjusted segment EBITDA | $19.8M | $19.1M | 3.7% | | Adjusted segment EBITDA margin | 19.6% | 21.7% | -2.1 pp | - Sales increased 14.5%, driven by growth in leading-edge precision cleaning solutions, optical coatings, and improved demand for certain in-chamber semiconductor tools and assemblies[22] - Adjusted segment EBITDA increased 3.7%, but operating leverage on sales growth was offset by transactional foreign currency headwinds and increased operating expenses supporting growth initiatives[22] Financial Position & Capital Allocation Enpro significantly improved H1 2025 cash flow, maintaining a healthy balance sheet and low net leverage after successful debt refinancing Balance Sheet and Cash Flow Enpro improved H1 2025 operating cash flow by 47.9%, driven by higher net income and effective working capital management Six Months Ended June 30, 2025 Cash Flow Summary (Millions) | Metric | 2025 (6 months) | 2024 (6 months) | Change | | :-------------------------------- | :-------------- | :-------------- | :----- | | Cash flow from operating activities | $73.2M | $49.5M | +47.9% | | Capital expenditures | $20.4M | $14.0M | +45.7% | | Free cash flow | $52.8M | $35.5M | +48.7% | - Higher net income and working capital management were the primary drivers of the year-over-year improvement in cash flow[14] Debt Refinancing and Capital Structure Enpro refinanced debt with a new $800 million revolving credit facility and $450 million senior notes, achieving a 1.4x net leverage ratio and enhanced financial flexibility - Amended existing credit agreement with a new $800 million revolving credit facility maturing in 2030; revolver capacity was $770 million at June 30, 2025[16] - Completed an offering of $450 million of 6.125% senior notes due 2033, using proceeds to redeem $350 million of 5.75% senior notes due 2026[17] - Ended Q2 with total debt of $465.1 million and cash of $107.1 million, resulting in a net leverage ratio of 1.4x to trailing twelve-month adjusted EBITDA[18] Quarterly Dividend Enpro declared a regular quarterly dividend of $0.31 per share, payable September 17, 2025, with $13.2 million paid in H1 2025 - Declared a regular quarterly dividend of $0.31 per share on July 31, 2025[19] - Dividend is payable on September 17, 2025, to shareholders of record as of September 3, 2025[19] - Total dividend payments for the six months ended June 30, 2025, amounted to $13.2 million[15] Full-Year 2025 Guidance Enpro increased full-year 2025 guidance for revenue growth, adjusted EBITDA, and adjusted diluted EPS, reflecting confidence in market performance Updated Guidance Enpro increased full-year 2025 guidance for revenue growth, adjusted EBITDA, and adjusted diluted EPS, reflecting improved market outlook and strong Q2 Updated Full-Year 2025 Guidance | Metric | Updated Guidance | | :-------------------------- | :--------------- | | Revenue growth | 5%-7% | | Adjusted EBITDA* | $270M - $280M | | Adjusted diluted EPS* | $7.60 - $8.10 | Previous Guidance Previous full-year 2025 guidance was lower across all key metrics, indicating a more conservative outlook before strong Q2 performance Previous Full-Year 2025 Guidance | Metric | Previous Guidance | | :-------------------------- | :-------------------- | | Revenue growth | Low to mid-single-digit range | | Adjusted EBITDA* | $262M - $277M | | Adjusted diluted EPS* | $7.00 - $7.70 | Additional Information This section details the conference call, non-GAAP financial measures, forward-looking statements, and an overview of Enpro Inc. Conference Call and Webcast Enpro held a conference call and webcast on August 5, 2025, to discuss Q2 financial results, providing investors access to detailed information - Conference call held on August 5, 2025, at 8:30 a.m. Eastern Time[24] - Live audio webcast and accompanying slide presentation accessible from the company's website, https://www.enpro.com[24](index=24&type=chunk) Non-GAAP Financial Measures This section details Enpro's non-GAAP financial measures, including adjusted income, EPS, EBITDA, and free cash flow, used by management to assess performance - Non-GAAP measures include adjusted income from continuing operations, adjusted diluted EPS, adjusted EBITDA, adjusted EBITDA margin, total adjusted segment EBITDA, and free cash flow[26] - Management uses these non-GAAP metrics to evaluate operating performance and believes they are useful for investors, acknowledging they are not comparable to all similarly titled measures by other companies[27] - Reconciliations of historical non-GAAP measures to GAAP are provided, but forward-looking non-GAAP guidance measures are not reconciled due to their nature[26] Forward-Looking Statements and Risks This section outlines Enpro's forward-looking statements and 2025 guidance, emphasizing inherent risks from economic conditions, geopolitical events, market growth, and foreign currency fluctuations - Forward-looking statements involve risks and uncertainties that may cause actual events and results to differ materially[28] - Key risks include economic conditions, geopolitical activity (Ukraine, Middle East, Taiwan), tariffs, raw material prices, growth in semiconductor/life sciences markets, foreign currency fluctuations, and acquisition integration[28][30] - Full-year guidance excludes changes in shares outstanding, future acquisitions/dispositions, restructuring costs, and impacts from foreign exchange rates or tariffs subsequent to June 30, 2025[31] About Enpro Inc. Enpro Inc. is a leading industrial technology company headquartered in Charlotte, NC, listed on the NYSE, specializing in critical applications across diverse end-markets - Enpro is a leading industrial technology company focused on critical applications across various end-markets[32] - Key end-markets include semiconductor, industrial process, commercial vehicle, sustainable power generation, aerospace, food and pharma, photonics, and life sciences[32] - Headquartered in Charlotte, North Carolina, and listed on the New York Stock Exchange (NYSE: NPO)[32] Appendices - Financial Statements & Reconciliations This section provides unaudited consolidated financial statements, including statements of operations, cash flows, and balance sheets, along with non-GAAP reconciliations Consolidated Statements of Operations This section presents unaudited consolidated statements of operations for Q2 and H1 2025 and 2024, detailing net sales, gross profit, operating income, net income, and diluted EPS Consolidated Statements of Operations (Unaudited) - Q2 2025 vs Q2 2024 (Millions) | Metric | Q2 2025 | Q2 2024 | | :------------------------ | :------ | :------ | | Net sales | $288.1M | $271.9M | | Gross profit | $124.8M | $119.0M | | Operating income | $45.7M | $48.0M | | Income before income taxes | $35.5M | $36.4M | | Net income | $26.4M | $26.7M | | Diluted earnings per share | $1.25 | $1.27 | Consolidated Statements of Cash Flows This section presents unaudited consolidated statements of cash flows for H1 2025 and 2024, outlining cash flows from operating, investing, and financing activities Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30 (Millions) | Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash provided by operating activities | $73.2M | $49.5M | | Net cash used in investing activities | $(19.6)M | $(223.1)M | | Net cash used in financing activities | $(194.9)M | $(19.0)M | | Net decrease in cash and cash equivalents | $(129.2)M | $(193.9)M | | Cash and cash equivalents at end of period | $107.1M | $175.9M | Consolidated Balance Sheets This section provides unaudited consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheets (Unaudited) - As of June 30, 2025 vs Dec 31, 2024 (Millions) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total current assets | $424.7M | $512.3M | | Total assets | $2,375.3M | $2,491.5M | | Total current liabilities | $170.4M | $198.0M | | Long-term debt | $464.9M | $624.1M | | Total liabilities | $879.2M | $1,062.9M | | Total shareholders' equity | $1,496.1M | $1,428.6M | Segment Information This section provides unaudited segment information for Sealing Technologies and AST, including sales, adjusted segment EBITDA, and margins for Q2 and H1 2025 and 2024 Segment Sales (Millions) - Q2 2025 vs Q2 2024 | Segment | Q2 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | | Sealing Technologies | $187.5M | $184.0M | | Advanced Surface Technologies | $100.9M | $88.1M | | Total Net Sales | $288.1M | $271.9M | Adjusted Segment EBITDA (Millions) - Q2 2025 vs Q2 2024 | Segment | Q2 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | | Sealing Technologies | $63.3M | $65.4M | | Advanced Surface Technologies | $19.8M | $19.1M | | Total Adjusted Segment EBITDA | $83.1M | $84.5M | Adjusted Segment EBITDA Margin - Q2 2025 vs Q2 2024 | Segment | Q2 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | | Sealing Technologies | 33.8% | 35.5% | | Advanced Surface Technologies | 19.6% | 21.7% | | Total | 28.8% | 31.1% | Reconciliation of Net Income to Adjusted Net Income and Adjusted Diluted EPS This section details the reconciliation of GAAP net income to adjusted net income and adjusted diluted EPS for Q2 and H1 2025 and 2024, outlining adjustments for non-recurring items Reconciliation of Net Income to Adjusted Net Income and Adjusted Diluted EPS (Unaudited) - Q2 2025 vs Q2 2024 (Millions, except per share) | Metric | Q2 2025 | Q2 2024 | | :---------------------------------- | :------ | :------ | | Net income | $26.4M | $26.7M | | Income before income taxes | $35.5M | $36.4M | | Adjusted income before income taxes | $57.5M | $58.5M | | Adjusted net income | $43.1M | $43.9M | | Adjusted diluted earnings per share | $2.03 | $2.08 | - Adjustments include acquisition expenses, amortization of acquisition-related intangibles, restructuring expense (income), environmental reserve adjustments, costs from previously disposed businesses, pension expense (non-service cost), loss on extinguishment of debt, and foreign exchange losses[55][57] Reconciliation of Net Income to Adjusted EBITDA This section provides unaudited reconciliation of net income to adjusted EBITDA for Q2 and H1 2025 and 2024, detailing adjustments for interest, income taxes, depreciation, and amortization Reconciliation of Net Income to Adjusted EBITDA (Unaudited) - Q2 2025 vs Q2 2024 (Millions) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :------ | :------ | | Net income | $26.4M | $26.7M | | Interest expense, net | $7.5M | $9.5M | | Income tax expense | $9.1M | $9.7M | | Depreciation and amortization expense | $25.2M | $25.2M | | Adjusted EBITDA | $71.1M | $74.0M | - Adjustments to net income to arrive at Adjusted EBITDA include interest expense, income tax expense, depreciation and amortization, restructuring expense (income), environmental reserve adjustments, costs associated with previously disposed businesses, acquisition expenses, pension expense (non-service cost), and loss on extinguishment of debt[61] Free Cash Flow Reconciliation This section provides the reconciliation of net cash provided by operating activities to free cash flow for H1 2025 and 2024, by deducting capital expenditures and capitalized software Free Cash Flow (Millions) - Six Months Ended June 30 | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash provided by operating activities | $73.2M | $49.5M | | Purchases of property, plant, and equipment | $(17.9)M | $(13.1)M | | Payments for capitalized internal-use software | $(2.5)M | $(0.9)M | | Free cash flow | $52.8M | $35.5M |