Albany International Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Albany International third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. Should you require assistance during the call, please press star then zero and an operator will assist you offline. I would now like to turn the conference over to your host, John Hobbs, Director of Investor Relations. Please go ahead.

Thank you Lois and good morning everyone. Welcome to Albany International's third quarter 2022 conference call. As a reminder for those listening on the call please refer to our press release issued last night detailing our quarterly financial results. Today we will make statements that are forward looking that contain risks and uncertainties. We will also reference certain non-GAAP measures on this call contained in the text of our press release is a notice regarding our forward-looking statements and the use of certain non-GAAP financial measures and their associated reconciliation to GAAP. For the purposes of this conference call, these same statements apply to our verbal remarks this morning. Additional details can be found in our SEC filings, including our 10-K. Now, I'll turn the call over to Bill Higgins, our President and Chief Executive Officer, who will provide opening remarks. Bill?

Thank you, John. Good morning, and welcome, everyone. Thank you for joining our third quarter earnings call. Today, I'll comment on our third quarter business performance with some perspective on our markets and our strategy, and then Steven will cover our financial results in more detail. We're pleased to report another strong quarter. Both of our business segments executed well. On the top line, we grew the total company third quarter sales by 12 percent, or nearly 17 percent on a constant currency basis. Engineer composites grew third-quarter sales nearly 37 percent compared to Q3 last year, driven by the ramp and leap engine and the CH53K helicopter programs. Machine clothing reported revenues that were relatively flat year over year on an as-reported basis, while underlying constant currency revenue grew at 4 percent. On the bottom line, both segments achieved strong operating income and profitability, working hard to overcome inflation, supply chain challenges, recessionary forces in Europe, and a COVID slowdown in China. GAAP EPS of 34 cents per share includes a significant pension settlement charge that Steven will cover in more detail. Adjusted EPS of $1.15 per share was significantly higher than the 83 cents per share adjusted EPS reported in Q3 of last year. Our machine clothing segment delivered another solid quarter. On a currency neutral basis, machine clothing grew third quarter sales just under 4% compared to Q3 of 2021. Through a combination of stable top line, disciplined cost control, supply chain management, and great factory execution, our machine clothing segment did a great job delivering gross margins of nearly 52% and adjusted EBITDA margins of 38%. We continue to meet our customer delivery commitments by managing supply chain shortages and long lead times and by balancing factory production to optimize output. We're starting to see some improvement in transportation and freight, a hopeful sign that supply chain disruptions are finally improving. On the customer front, global demand for paper machine clothing held up well in the third quarter. On a constant currency basis, sales were higher year over year in the Americas, Asia, and Europe. Our order bookings are healthy despite continued lockdowns for COVID in China, the effects of the war in Ukraine, and higher energy costs. Overall, machine clothing demand remained steady as we head into Q4. In aggregate, it was a solid quarter. Our backlog is filling in, setting us up for a good finish to the year. Our engineered composite segment delivered another excellent quarter as well. Demand growth and program wins have driven our top line higher this year. Principal contributors to our 37% year-over-year revenue growth are growth in LEAP engine revenues from our partnership with Safran and growth in revenues on the Sikorsky CH53K helicopter program. On the bottom line, AEC delivered third quarter adjusted EBITDA margins of 20%. As with MC, machine clothing, our supply chain and factory teams are doing a great job keeping materials and hardware flowing to feed operations and meet customer production needs. We continue to do a great job for customers. We have a number of new program pursuits underway and growing interest from new customers that recognize our composites expertise and our reliable delivery. We're taking advantage of our strong balance sheet to invest in new product development and organic growth. Looking to the fourth quarter, our defense program portfolio and our lead program are on good trajectories, setting us up for another solid quarter. So let me take a few minutes here to make some comments on our strategies in each business segment. We've demonstrated that our machine clothing business is resilient. Over the past three years, we've grown trailing 12-month adjusted EBITDA by $30 million, despite the pandemic, the strong dollar, and input cost pressures we've faced. Our machine clothing success is based on a well-executed long-term strategy. For the leader in machine clothing product technology, our technology and new product development is targeted at the higher growth and value-added markets of packaging and tissue, which sets us up for long-term growth. We serve Tier 1 customers strategically positioned on the most efficient machines. And these are the machines best positioned to sustain the production at a downturn. We operate at an optimum global manufacturing scale, providing superior service, reliability in all markets. Our customers consider us the partner of choice. Our belts help reduce the overall cost of production for our customers. Our products are mission critical and consumable. Belts get replaced regularly, resulting in less cyclical, repeatable demand. These leadership strengths serve us well during the challenging economic conditions, particularly the consumable and recurring demand for our products. Now turning to our engineered composites strategy. When the pandemic struck in 2020, coming on the heels of the Boeing 7-3 MAX groundings in 2019, our AEC team did a great job looking for new customers and more content with existing customers. We had demonstrated that 3D woven was a new and leading composite technology. successful on the most advanced jet engine, the LEAP engine. The slowdown in the pandemic in 2020 gave us time to take a breather and seek new areas to apply our composite expertise. We won new content with Boeing, Sikorsky, Lockheed Martin, and others, mostly on defense programs. Today, we're nearly 50% government and defense work. Between the government work and the cost-plus nature of our contract with Safran for LEAP, AEC is more resilient today, more diverse, and better insulated from the economic cycle. Longer term, we're pursuing new opportunities with various OEMs on hypersonics, wings, fuselage, space, in both commercial and defense applications, fixed wing, and rotorcraft. Our strategy is to continue to diversify our customer base and bring our composite leadership to the next generation aircraft development. Both of our business segments are operating well and have sound strategies in place. Our employees have done remarkably well, learning how to be nimble, productive, and continue to do a great job for customers. We've demonstrated resiliency as a company and an ability to perform at high levels through the ups and downs of the last few years. We have a rock-solid balance sheet, which we've prudently and successfully used and will continue to use to invest in our people and organic growth, winning new customers and developing new materials, and pursuing acquisitions that fit our strategy. So with that, I'll hand it over to Stephen.