Financial Data and Key Metrics Changes - EnPro reported second quarter sales of $288.1 million, a 6% increase year-over-year, with adjusted EBITDA of $71.1 million, down 3.9% from the previous year [11][12] - Adjusted diluted earnings per share decreased to $2.3 from $2.8 last year, primarily due to factors affecting adjusted EBITDA performance [12] - Total company adjusted EBITDA margin was 24.7%, reflecting increased operating expenses and transactional foreign exchange headwinds [12] Business Line Data and Key Metrics Changes - Sealing Technologies sales increased by 1.9% to $187.5 million, driven by strength in aerospace and food and pharma markets, while facing challenges in commercial vehicle OEM demand [13] - Advanced Surface Technologies (AST) saw a 14.5% increase in sales to $100.9 million, with growth in precision cleaning solutions and optical coatings [14] - Adjusted segment EBITDA margin for Sealing Technologies was 33.8%, down from 35.5% last year, while AST's margin was 19.6%, down from 21.7% [13][15] Market Data and Key Metrics Changes - The company expects mid single-digit growth in Sealing Technologies for the year, with strong performance anticipated in aerospace and food and biopharma markets [19] - AST is projected to achieve high single to low double-digit sales growth year-over-year, driven by improved demand for semiconductor tools and precision cleaning solutions [20] Company Strategy and Development Direction - EnPro is focused on its "EnPro 3.0" strategy, which emphasizes personal and profitable growth, empowering employees to pursue individual development plans [9][22] - The company is investing in capacity expansions and strategic marketing to enhance its market reach and drive long-term profitable growth [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business and the ability to navigate macroeconomic challenges, with a strong outlook for the second half of 2025 [4][19] - The company raised its full-year 2025 guidance, expecting sales growth between 5% to 7%, adjusted EBITDA in the range of $270 million to $280 million, and adjusted diluted earnings per share of $7.6 to $8.1 [19] Other Important Information - The balance sheet remains strong, with net debt of $364 million and a net leverage ratio of 1.4 times trailing twelve-month adjusted EBITDA [17] - Free cash flow for the first half of 2025 was $52.8 million, up from $35.5 million last year, driven by strong operating performance and working capital management [18] Q&A Session Summary Question: Impact of FX transaction headwind in Sealing and nuclear timing - Management indicated that the nuclear performance was affected by timing issues between quarters, with strong underlying demand [27][28] - Transactional FX impacts were noted, particularly in AST, with significant effects from local expenses in non-functional currencies [29][30] Question: Incremental margins in AST and FX headwinds - Management expects FX headwinds to be less significant moving forward, with AST positioned to leverage growth investments for improved margins [35][36] Question: Drivers of improved growth rate in Sealing - New programs and customer wins, particularly in the OEM commercial truck sector, are contributing to the improved growth outlook [37][39] Question: AST growth expectations for the second half - Management highlighted ongoing investments and a healthy business environment, with expectations for continued growth in AST [42][44] Question: Success of compositional analysis post-acquisition - The compositional analysis business has exceeded growth expectations, with strong leadership and plans for capacity expansion [47][48] Question: M&A activity outlook - The company remains active in pursuing M&A opportunities, focusing on growth nodes in key markets [51][52]

EnPro (NPO) FY Conference Summary Company Overview - EnPro is a company with a focus on industrial solutions, particularly in sealing technologies and advanced surface technologies, with a workforce of approximately 3,400 employees [4][5] - The company has undergone significant transformation, particularly through its mPro initiatives, aimed at value creation and margin expansion [5][6] Key Initiatives and Growth Strategies - **mPro 3.0 Introduction**: EnPro has launched mPro 3.0, focusing on accelerating profitable growth for both employees and the company [5][7] - **Historical Performance**: The previous phase, mPro 2.0, resulted in a margin expansion of about 1,000 basis points and a market cap increase of approximately 2.5 times [6][7] - **Portfolio Optimization**: The company divested lower growth and lower margin businesses to invest in higher growth sectors, particularly in the semiconductor industry [6][8] Business Segments Sealing Technologies - Sealing technologies account for about two-thirds of EnPro's revenue, with a focus on critical safety functions across various industries [7][9] - The company expects mid-single-digit organic growth in this segment, driven by strong positions in aerospace, food and pharma, and commercial vehicles [9][10] - Key brands include Garlock, Stemco, and Technetix, which have established market positions and strong cash flow profiles [8][9] Advanced Surface Technologies (AST) - AST, primarily focused on the semiconductor industry, is expected to grow at high single digits to low double digits [9][10] - EnPro has developed a vertically integrated portfolio in AST, providing critical in-chamber tools and aftermarket services [8][21] - The company is positioned to capitalize on the shift towards onshoring semiconductor manufacturing in the U.S. [21][34] Market Exposure and Economic Resilience - EnPro has minimal direct exposure to tariffs, with about 70% of its supply chain based in North America [13][14] - The company has a strong aftermarket component, with two-thirds of its sealing business and one-third of AST being aftermarket, which tends to perform well during economic downturns [15][16] Capital Allocation and M&A Strategy - EnPro has approximately $1.5 billion available for strategic acquisitions, maintaining a conservative leverage ratio of around 2 to 2.5 times [10][53] - Recent acquisitions include Advanced Micro Instruments (AMI) to enter the test and measurement space, aligning with the company's strategic themes [50][51] - The company has a disciplined approach to capital allocation, focusing on both organic growth and M&A opportunities [52][54] Growth Drivers and Market Trends - EnPro is well-positioned in sustainable power generation, particularly in the nuclear sector, which constitutes about 7% of its overall portfolio [44][45] - The commercial aerospace segment has seen a 20% year-over-year growth, driven by strong demand for seals in fuel injection systems and temperature control [46][48] - The company is actively participating in the space exploration market, with content on every satellite launch in the U.S. [48] Conclusion - EnPro is focused on delivering strong returns through its mPro initiatives, maintaining a robust balance sheet, and capitalizing on growth opportunities in both sealing technologies and advanced surface technologies [57][58] - The company emphasizes the development of agile leaders to navigate various market conditions and ensure continued success [56][57]