Enpro Reports First Quarter 2024 Results

First Quarter 2024 Highlights

(All results reflect comparisons to prior-year period, from continuing operations, unless otherwise noted)

(*Non-GAAP measure. See the attached schedules for adjustments and reconciliations of historical measures to GAAP measures)

• Sales of $257.5 million down 8.9%; organic sales down 11.6%
• GAAP income from continuing operations of $12.5 million compared to $26.0 million
• Strong performance in Sealing Technologies offset by softness in Advanced Surface Technologies
• Adjusted EBITDA* down 14.9% to $58.4 million; adjusted EBITDA margin* down 160 bps to 22.7%
• GAAP diluted earnings per share from continuing operations of $0.59, compared to diluted earnings per share of $1.24
• Adjusted diluted earnings per share* from continuing operations down 19.5% to $1.57 versus $1.95
• Completed the acquisition of Advanced Micro Instruments, Inc. ("AMI") on January 29, 2024
• Maintain full year 2024 guidance for revenue growth of low-to-mid single digits, adjusted EBITDA guidance of $260-$280 million and adjusted diluted earnings per share guidance in the range of $7.00 to $7.80

Enpro Inc. (NYSE: NPO) today announced its financial results for the three months ended March 31, 2024.

“We began the year with strong profitability in Sealing Technologies, and, as expected, continued softness in Advanced Surface Technologies resulting from semiconductor market conditions,” said Eric Vaillancourt, President and Chief Executive Officer. "Our disciplined and focused execution across our business continues to deliver outstanding results in a choppy demand environment, demonstrating the resilience of the Enpro portfolio.”

Mr. Vaillancourt added, “We’re excited about the addition of the AMI business, which closed in late January. Our balance sheet remains healthy, and we have ample flexibility to invest in organic growth opportunities and value-added projects throughout the enterprise, while building our acquisition pipeline of attractive businesses that meet our strategic and financial criteria. We are well-positioned to continue executing on our long-term value creating strategy while delivering critical solutions to our customers.”

First Quarter 2024 Consolidated Results

Sales of $257.5 million decreased 8.9% compared to last year. Excluding the impacts of the AMI acquisition and foreign exchange translation, sales declined 11.6% year-over-year. Slower semiconductor markets, as well as weaker demand in commercial vehicle and food and pharmaceutical, more than offset the contribution from pricing actions and strength in nuclear and aerospace markets.

Corporate expenses of $12.2 million in the first quarter of 2024 increased from $11.0 million in the first quarter of 2023. Last year, corporate expense benefited by a favorable $1.9 million mark-to-market valuation of long-term equity incentive plans.

Income from continuing operations was $12.5 million, compared to $26.0 million in the prior-year period. Diluted earnings per share was $0.59, compared to $1.24 in the prior year. The year-over-year change was driven primarily by weakness in the Advanced Surface Technologies (or “AST”) segment and an increase in the valuation reserve on a long-term promissory note received in partial consideration for the sale of a non-strategic business in 2020.

Adjusted net income from continuing operations of $33.1 million decreased 18.7% compared to the first quarter of 2023 and adjusted diluted earnings per share from continuing operations decreased 19.5% to $1.57, compared to $1.95 in the prior-year period.

Adjusted EBITDA* of $58.4 million, or 22.7% of total sales, decreased 14.9% compared to the prior-year period driven primarily by results in the AST segment.

First Quarter 2024 Segment Highlights

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

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

Garlock, STEMCO, and Technetics Group

• Sales decreased 1.0% versus the prior-year period. Excluding the addition of AMI and foreign exchange translation, sales decreased 5.4% as weaker demand in commercial vehicle, general industrial in Asia and food and pharmaceutical was offset in part by pricing gains and strength in nuclear and aerospace.
• Adjusted segment EBITDA of $53.0 million was up 6.6% year-over-year, with adjusted EBITDA margins expanding approximately 220 basis points. Excluding the impacts of the acquisition and foreign exchange translation, adjusted segment EBITDA decreased 2.0% compared to the prior-year period. The decrease was driven mainly by lower volume, offset in part by pricing gains, favorable mix and effective cost management.

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

• Sales decreased 21.4% versus the prior-year period driven primarily by the current slowdown in semiconductor capital equipment spending and, to a lesser extent, lower sales of optical filter solutions.
• Adjusted segment EBITDA decreased 41.2% versus the prior-year period and segment EBITDA margins declined by 680 basis points, driven primarily by the decline in volume.

Balance Sheet, Cash Flow and Capital Allocation

The company generated $6.3 million of cash flow from operating activities of continuing operations during the three months ended March 31, 2024 and $(1.9) million of free cash flow, net of $8.2 million in capital expenditures. This compares to $26.4 million of cash flow from operating activities of continuing operations, or $21.4 million of free cash flow, net of $5.0 million in capital expenditures in the prior year. During the first quarter, the company paid a regular quarterly dividend of $0.30 per share, with dividend payments totaling $6.4 million for the three months ended March 31, 2024.

Enpro ended the first quarter with total debt of $680.1 million and cash of $163.9 million.

Quarterly Dividend

Enpro declared a regular quarterly dividend of $0.30 per share on May 2, 2024. The dividend is payable on June 20, 2024 to shareholders of record as of the close of business on June 5, 2024.

2024 Guidance

Enpro continues to expect 2024 revenue growth in the low-to-mid single digit range compared to 2023. Expected adjusted EBITDA and adjusted diluted earnings per share for 2024 remain at $260 million to $280 million and $7.00-$7.80, respectively.

Conference Call, Webcast Information, and Presentations

Enpro will hold a conference call today, May 7, at 8:30 a.m. Eastern Time to discuss first quarter 2024 financial 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 access code 13735650. 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. Segment non-operating expenses and income, corporate expenses, net interest expense, 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 net income, adjusted diluted earnings per share, 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 2024 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 in the Middle East region 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 report, 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, and the impact of changes in foreign exchange rates, in each case subsequent to March 31, 2024.

About Enpro Inc.

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. Enpro is listed on the New York Stock Exchange under the symbol “NPO”. For more information, visit the company’s website at http://www.enpro.com.

APPENDICES

Consolidated Financial Information and Reconciliations

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