EnPro Industries(NPO) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Sales for Q2 2021 were $298.6 million, representing a 20.9% increase year-over-year, with organic sales up 27.1% [12][19] - Adjusted EBITDA for the quarter was $57.2 million, a 52.5% increase compared to the prior year, with an adjusted EBITDA margin of 19.2%, up 400 basis points [14][21] - Adjusted diluted earnings per share increased by 77.3% to $1.56 compared to the prior year [23] Business Segment Data and Key Metrics Changes - Sealing Technologies segment sales were $162.5 million, up 7.9% year-over-year, with adjusted segment EBITDA increasing 39% to $42.4 million [25][26] - Advanced Surface Technologies (AST) sales reached $59.2 million, a 48% increase, with adjusted segment EBITDA rising 41.8% to $15.6 million [27][28] - Engineered Materials segment sales were $80 million, a 36.5% increase, with adjusted segment EBITDA increasing 165% to $13 million [30][33] Market Data and Key Metrics Changes - Strong demand was noted in the general industrial, semiconductor, heavy-duty truck, food and pharma, automotive, and petrochemical markets [17] - Order trends were at the highest level in three years, indicating broad-based strength across businesses [17] Company Strategy and Development Direction - The company aims to continue investing in organic growth opportunities and maintain a clear and consistent strategy [41] - The management transition is not expected to impact the company's strategic direction or financial results [50][91] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenges posed by raw material inflation and supply chain disruptions [16][80] - The company raised its full-year guidance for adjusted EBITDA to a range of $200 million to $210 million, reflecting positive order patterns [37] Other Important Information - The company ended the quarter with cash of $262 million and a net debt to adjusted EBITDA ratio of approximately one times, indicating solid financial flexibility [35] - Free cash flow for the first six months of 2021 was $48 million, up from $25 million in the prior year [36] Q&A Session Summary Question: Impact of CEO Change on Strategy and M&A - The CEO change was a mutual agreement and does not affect the company's strategy or financial results, with a search for a permanent CEO underway [50][51] Question: AST Margins and Start-up Costs - Start-up costs and foreign exchange transaction costs impacted margins, totaling over $1 million for the quarter, but the outlook for the semiconductor market remains positive [53][59] Question: Automotive Sales and Chip Shortage - Automotive sales saw a sequential decline due to supply chain issues, but recovery is expected in the latter part of the year [70] Question: International Market Performance - European sales have shown growth, but a moderation in Q3 is expected due to holiday seasons [76] Question: Pricing vs. Cost Management - The company has successfully implemented pricing strategies to offset rising costs, particularly in the Engineered Materials segment [80][82] Question: M&A Opportunities - The company remains ready to pursue M&A opportunities, with support from the Board, regardless of the CEO transition [90][92]