Enpro Reports Fourth Quarter and Full Year 2023 Results, Introduces 2024 Guidance Fourth Quarter Results Full Year 2023 Highlights

(All results reflect comparisons to the respective prior-year period unless otherwise noted)

• Sales of $249.1 million decreased 8.4% and organic sales decreased 9.0%
• GAAP loss from continuing operations attributable to Enpro Inc. improved to $4.9 million, compared to a GAAP loss of $57.5 million last year
• Adjusted EBITDA* decreased 12.2% to $46.9 million
• Diluted loss per share from continuing operations attributable to Enpro Inc. improved to $0.23, compared to a diluted loss per share of $2.76
• Adjusted diluted earnings per share* decreased 8.5% to $1.19 versus $1.30 last year

Full Year 2023 Results

• Sales of $1.06 billion decreased 3.6% and organic sales decreased 3.3%
• GAAP income from continuing operations attributable to Enpro Inc. increased $10.8 million, compared to income of $6.7 million last year
• Adjusted EBITDA* decreased 7.5% to $238.0 million
• Diluted earnings per share from continuing operations attributable to Enpro Inc. increased to $0.51, compared to diluted earnings per share of $0.32 last year
• Adjusted diluted earnings per share* decreased 3.7% to $6.54 versus $6.79 last year

2024 Guidance and Update

• Introducing guidance for 2024: revenue growth in the low to mid-single-digit range, adjusted EBITDA* in the range of $260 million to $280 million and adjusted diluted earnings per share* of $7.00 to $7.80
• Subsequent to quarter end, in late January Enpro completed the previously announced acquisition of Advanced Micro Instruments, Inc. ("AMI") for $210 million
• Entering 2024 with a net leverage ratio of 2.0x, inclusive of the recently completed AMI transaction
• Strong balance sheet and robust free cash flow provide significant financial flexibility to further organic growth initiatives and strategic acquisitions

Enpro Inc. (NYSE: NPO) today announced its financial results for the three months and year ended December 31, 2023.

"We are pleased with Enpro’s strong performance and execution in 2023. Sealing Technologies delivered record profitability that largely offset softness in Advanced Surface Technologies due to continued weakness in the global semiconductor industry.” said Eric Vaillancourt, President and Chief Executive Officer. “Enpro delivered full year adjusted EBITDA* margin of 22.5% while generating outstanding operating cash flow. Despite significant semiconductor headwinds, AST segment margin approached 24% in 2023, demonstrating the segment’s value-added capabilities. Sealing Technologies 2023 segment margin exceeded 29%, despite a slowdown in the fourth quarter.”

Mr. Vaillancourt continued, “We are well positioned to build on the progress achieved in 2023 by continuing to execute on our strategic growth initiatives in both Sealing Technologies and AST. While the timing of a broader semiconductor capital equipment recovery remains uncertain, the industry is showing early signs of an uptick, and we remain focused on driving growth and value in our semiconductor business over a multi-year period. Our ability to navigate through any market environment with our solid execution and disciplined cost mitigation efforts underscores the resiliency of our business. We have a strong balance sheet to drive our strategy and deliver top and bottom-line growth, while continuing to provide a safe and vibrant working environment for our colleagues.”

Fourth Quarter 2023 Consolidated Results of Continuing Operations

Sales of $249.1 million decreased 8.4% in the fourth quarter of 2023. Continued softness in the global semiconductor market, a sharp decline in demand in commercial vehicle OEM, and tepid general industrial, commercial aerospace and pharma demand during the quarter were partially offset by strategic pricing actions across markets and continued strength in nuclear energy. Excluding the impact of a divested business and foreign currency exchange translation, organic sales for the quarter declined 9.0% compared to last year.

Corporate expenses of $14.4 million in the fourth quarter of 2023 were down from $15.6 million a year ago primarily due to lower total compensation expense.

Loss from continuing operations attributable to Enpro Inc. was $4.9 million, compared to a loss of $57.5 million, impacted by a goodwill impairment charge. Adjusted income from continuing operations attributable to Enpro Inc. of $25.0 million decreased 7.7% compared to the fourth quarter of 2022. Diluted loss per share attributable to Enpro Inc. continuing operations was $0.23, compared to a diluted loss per share of $2.76 in the prior-year period, and adjusted diluted earnings per share* of $1.19 decreased 8.5%.

Adjusted EBITDA* of $46.9 million decreased 12.2% from $53.4 million last year. During the fourth quarter of 2023, strong share price performance increased long-term incentive compensation expense by $6.4 million, compared to an increase of $4.8 million last year.

The incremental $6.4 million in long-term compensation expense during the fourth quarter of 2023 was not considered when providing prior 2023 guidance commentary. Enpro does not contemplate compensation expenses related to share price changes when determining guidance. Modifications made during 2023 to the long-term incentive compensation program will lessen this impact in 2024 and eliminate the impact in years thereafter.

Fourth Quarter 2023 Segment Highlights of Continuing Operations

Sealing Technologies - Safeguarding environments with critical applications in diverse end markets

Garlock, STEMCO, and Technetics Group

• Sales decreased 6.3% versus the prior-year period. Excluding the impact of foreign exchange translation and a divested business, sales decreased 7.5%, driven by a sharp decline in commercial vehicle OEM and softness in general industrial, commercial aerospace, pharma and commercial vehicle aftermarket, partially offset by strategic pricing initiatives and continued strength in nuclear energy.
• Adjusted segment EBITDA decreased 6.3% versus the prior-year period. A decline in volume was the main driver of the decrease, offset in part by strategic pricing initiatives and cost mitigation activities. Excluding the impact of foreign exchange translation the divestiture, adjusted segment EBITDA decreased 7.9% compared to the prior-year period.

Advanced Surface Technologies - Leading edge precision manufacturing, coatings, innovative optical solutions and cleaning and refurbishment solutions - NxEdge, Technetics Semi, LeanTeq, and Alluxa

• Sales decreased 11.5% versus the prior-year period driven primarily by continued weakness in semiconductor capital equipment spending. Excluding the impact of foreign exchange translation, sales decreased 11.3% versus the prior-year period.
• Adjusted segment EBITDA decreased 20.8% versus the prior-year period. Excluding the impact of foreign exchange translation, adjusted segment EBITDA decreased 20.4%, driven primarily by the volume decline, mix, material cost increases and operating costs related to growth investments, offset in part by cost mitigation activities and pricing actions.

Full Year 2023 Consolidated Results

Sales of $1.06 billion decreased 3.6% compared to 2022. On an organic basis, sales declined 3.3% year-over-year driven primarily by the continued slowdown in the global semiconductor market, mostly offset by the contribution from strategic pricing actions and strength in the nuclear energy and aerospace markets.

Corporate expenses for 2023 of $49.5 million increased $2.5 million compared to 2022 due to an increase in total compensation expense.

Income from continuing operations attributable to Enpro Inc. increased to $10.8 million, compared to $6.7 million in the prior year. Adjusted income from continuing operations attributable to Enpro Inc. of $137.0 million decreased 3.4% compared to 2022. Diluted earnings per share attributable to Enpro Inc. continuing operations increased to $0.51, compared to diluted earnings per share of $0.32 in the prior year. Adjusted diluted earnings per share* decreased to $6.54, compared to $6.79 in the prior year.

Adjusted EBITDA* of $238.0 million decreased 7.5% compared to 2022. Adjusted EBITDA margin* of 22.5% decreased 90 basis points compared to last year driven primarily by the impact of the overall volume decline and a share-price-related increase in long-term incentive compensation expense, offset in part by the impact of strategic pricing actions and cost mitigation activities. Share price performance during 2023 resulted in a $7.1 million increase in long-term incentive compensation expense compared to an increase of $2.2 million last year.

Balance Sheet, Cash Flow and Capital Allocation

The company generated $208.4 million of cash flow from continuing operations during the year ended December 31, 2023 and $174.5 million of free cash flow, net of $33.9 million in capital expenditures. This compares to $106.1 million of cash flow from continuing operations and $76.7 million of free cash flow, net of $29.4 million in capital expenditures in 2022. During the fourth quarter, the company paid a regular quarterly dividend of $0.29 per share, with dividends totaling $24.3 million for the year ended December 31, 2023.

Enpro ended the fourth quarter with cash of $369.8 million and full availability under its revolving credit facility. The company exited 2023 with a net leverage ratio of 1.3x.

On January 29, 2024, Enpro completed the acquisition of AMI, a leading provider of highly engineered, application-specific analyzers and sensing technologies that monitor critical parameters to maintain infrastructure integrity, enable process efficiency, enhance safety, and facilitate the clean energy transition, for $210 million. Giving effect to the use of cash to fund this acquisition, the company’s net leverage ratio at year-end would have been approximately 2.0x.

Quarterly Dividend

On February 15, 2024, Enpro Inc. increased its quarterly dividend by 3.4% to $0.30 per share, from $0.29 per share previously. The dividend is payable on March 20, 2024, to shareholders of record as of the close of business on March 6, 2024. The company has increased its quarterly dividend for nine consecutive years since initiating a dividend in 2015.

2024 Guidance

The company expects 2024 revenue growth to be in the low to mid-single digit range, adjusted EBITDA* to be in the range of $260 million to $280 million and adjusted diluted earnings per share* from continuing operations to be in the range of $7.00 to $7.80.

Conference Call, Webcast Information, and Presentations

Enpro will hold a conference call today, February 20, 2024, at 8:30 a.m. Eastern Time to discuss fourth quarter and full year 2023 results. Investors who wish to participate in the call should dial 1-877-407-0832 approximately 10 minutes before the call begins and provide conference ID number 13735649. A live audio webcast of the call and accompanying slide presentation will be accessible from the company’s website, https://www.enpro.com. To access the earnings presentation, log on to the webcast by clicking the link on the company’s home page.

Primary Segment Operating Performance Measure

The primary metric used by management to allocate resources and assess segment performance is adjusted segment EBITDA, which is segment revenue reduced by operating expenses and other costs identifiable with the segment, excluding acquisition and divestiture expenses, restructuring costs, impairment charges, non-controlling interest compensation, amortization of the fair value adjustment to acquisition date inventory, and depreciation and amortization. Expenses not directly attributable to the segments, corporate expenses, net interest expense, gains/losses related to the sale of assets, and income taxes are not included in the computation of adjusted segment EBITDA. Under U.S. generally accepted accounting principles (“GAAP”), the primary metric used by management to allocate resources and assess segment performance is required to be disclosed in financial statement footnotes, and accordingly such metric as presented for each segment is not deemed to be a non-GAAP measure under applicable regulations of the Securities and Exchange Commission.

Non-GAAP Financial Information

This press release contains financial measures that have not been prepared in conformity with GAAP. They include adjusted income from continuing operations attributable to Enpro Inc., adjusted diluted earnings per share attributable to Enpro Inc., adjusted EBITDA, adjusted EBITDA margin, total adjusted segment EBITDA and free cash flow. Tables showing the reconciliation of these historical non-GAAP financial measures to the comparable GAAP measures are attached to the release. Adjusted EBITDA and adjusted diluted earnings per share anticipated for full year 2023 are calculated in a manner consistent with the historical presentation of these measures in the attached tables. Because of the forward-looking nature of these estimates, it is impractical to present quantitative reconciliations of such measures to comparable GAAP measures, and accordingly no such GAAP measures are being presented.

Management believes these non-GAAP metrics are commonly used financial measures for investors to evaluate the company’s operating performance and, when read in conjunction with the company’s consolidated financial statements, present a useful tool to evaluate the company’s ongoing operations and performance from period to period. In addition, these are some of the factors the company uses in internal evaluations of the overall performance of its businesses. Management acknowledges that there are many items that impact a company’s reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results. In addition, these non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies.

Forward-Looking Statements and Guidance

Statements in this press release that express a belief, expectation or intention, including the 2024 guidance and other statements that are not historical fact, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to: economic conditions in the markets served by the company’s businesses and the businesses of its customers, some of which are cyclical and experience periodic downturns; the impact of geopolitical activity on those markets, including instabilities associated with the armed conflicts in Ukraine and between Israel and Hamas and any conflict or threat of conflict that may affect Taiwan; uncertainties with respect to the imposition of government embargoes, tariffs and trade protection measures, such as “anti-dumping” duties applicable to classes of products, and import or export licensing requirements, as well as the imposition of trade sanctions against a class of products imported from or sold and exported to, or the loss of “normal trade relations” status with, countries in which the company conducts business, could significantly increase the company’s cost of products or otherwise reduce its sales and harm its business; uncertainties with respect to prices and availability of raw materials, including as a result of instabilities from geopolitical conflicts; uncertainties with respect to the company’s ability to achieve anticipated growth within the semiconductor, life sciences, and other technology-enabled markets, including uncertainties with respect to receipt of CHIPS Act support and the timing of completion of the new Arizona facility; the impact of fluctuations in relevant foreign currency exchange rates or unanticipated increases in applicable interest rates; unanticipated delays or problems in introducing new products; the impact of any labor disputes; announcements by competitors of new products, services or technological innovations; changes in the company’s pricing policies or the pricing policies of its competitors; risks related to the reliance of the AST segment on a small number of significant customers; uncertainties with respect to the company’s ability to identify and complete business acquisitions consistent with its strategy and to successfully integrate any businesses that it acquires; and uncertainties with respect to the amount of any payments required to satisfy contingent liabilities, including those related to discontinued operations, other divested businesses and discontinued operations of the company’s predecessors, including liabilities for certain products, environmental matters, employee benefit and statutory severance obligations and other matters. Enpro’s filings with the Securities and Exchange Commission, including its most recent Form 10-K and Form 10-Q reports, describe these and other risks and uncertainties in more detail. Enpro does not undertake to update any forward-looking statements made in this press release to reflect any change in management's expectations or any change in the assumptions or circumstances on which such statements are based.

Full-year guidance is subject to the risks and uncertainties discussed above and specifically excludes changes in the number of shares outstanding, changes in long-term compensation expense due to changes in the company’s common stock price, impacts from future and pending acquisitions, dispositions and related transaction costs, restructuring costs, incremental impacts of tariffs and trade tensions on market demand and costs subsequent to December 31, 2023, and the impact of changes in foreign exchange rates subsequent to that date.

About Enpro

Enpro is a leading industrial technology company focused on critical applications across many end-markets, including semiconductor, industrial process, commercial vehicle, sustainable power generation, aerospace, food and pharma, photonics and life sciences. Headquartered in Charlotte, North Carolina, Enpro is listed on the New York Stock Exchange under the symbol "NPO". For more information about Enpro Inc., visit the company’s website at http://www.enpro.com.

APPENDICES

Consolidated Financial Information and Reconciliations

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