Albany International Corporation

Good day, and thank you for standing by. Welcome to Albany International's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, John Hobbs, Director of Investor Relations. Please go ahead.

Thank you, Lisa, and good morning, everyone. Welcome to Albany International's Fourth Quarter Earnings 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. Contained in the text of the release is a notice regarding our forward-looking statements and the use of certain non-GAAP financial measures and their reconciliation to GAAP. For the purposes of the conference call, those same statements apply to our verbal remarks this morning. Today, we will make statements that are forward-looking and contain a number of risks and uncertainties, which could cause actual results to differ from those expressed or implied. For a full discussion of these risks and uncertainties, please refer to both our earnings release of February 26th, as well as our SEC filings, including our 10-K. Now, I turn the call over to Gunnar Cleveland, President and Chief Executive Officer, who will provide opening remarks. Gunnar? Thank you, John.

Good morning, and welcome, everyone. Thank you for joining our fourth quarter earnings call. Before we begin this call, I want to take a moment and acknowledge John Hobbs, who's been leading our investor relations functions for the past five years. John has been instrumental in communicating our story to the investment community and has taken the IR function at Albany to the next level. After a long career with nearly three decades in investor relations, John is retiring and they will transition his responsibilities to J.C. Shetnani. We wish John and his wife the best in his retirement, and we welcome Casey to his new role. Moving to our 2023 performance. I continue to be impressed with our operations and remain confident about the strengths of our company and our long-term growth potential. Technological innovation, material science know-how, operational execution, customer satisfaction, and capital discipline are all key to the long-term success of Albany. I'll provide an overview of 2023's financial performance. Rob will later discuss our fourth quarter results in detail and provide our outlook for 2024. In 2023, our businesses remain focused on operational execution and delivered outstanding financial performance. This is a testament to the strong management team at Albany who have stayed a step ahead of global microeconomic issues and allowed us to deliver our high-quality products on time with excellent financial results. We closed the year with consolidated revenue of $1.15 billion, up 11%, primarily driven by 12% top-line growth in our engineered composites business, along with 10% top-line revenue growth in machine clothing, largely resulting from our recent Heimbach acquisition. Importantly, we grew adjusted EBITDA to $265 million, up 5% over the prior year. Adjusted EBITDA margins came in just over 23% versus the prior year of 24.5%. The margin compression was primarily driven by growth in sales at Engineered Composites and the acquisition of Heimbach. The ad net income for 2023 was $111 million, or $3.55 per share, up from $96 million last year, or $3.04 per share. Diluted adjusted EPS for 2023 after adjustments primarily driven by expenses related to the Heimbach acquisition was $4.06 versus $3.87 in the prior year. Free cash flow for the year increased to $64 million from $32 million. Turning our focus to the segments, our machine clothing business, excluding Heimbach, continues to be a strong, consistent performer. This year was no different. Our machine clothing business, excluding Heimbach, reported $620 million in revenue, up 2% versus prior year, on a currency-neutral basis. Adjusted EBITDA was $229 million, up 3%, again, on a currency-neutral basis. The adjusted EBITDA margin was 37%. The segment finished 2023 very strong, completing backlog orders and posting better results than we had anticipated, especially in North America and Asia. The Heimbach acquisition added $51 million to machine clothing's top line for the final four months of 2023 and was modestly diluted to GAAP earnings. We continue to be pleased with the addition of Heimbach and the expanded presence in both European and Asian markets. Integration remains on track, and we expect that it will be accretive on a GAAP basis in 2025. Our machine clothing business is well positioned globally with an increased share of our customers serving the secularly growing packaging and tissue markets, both of which continued to grow for us on a global basis. This was offset somewhat by weaker engineered fabrics demand, particularly in Europe. Overall, we saw a positive impact on our bottom line results from both product and geographic mix. Machine clothing continues to demonstrate world-class execution across its global markets. Our engineered composite segment is executing on this long-term growth strategy. The segment reported revenue of $477 million, up 12% versus the prior year, while adjusted EBITDA margins expanded 60 basis points to 19% compared to 2022. Growth was driven by commercial programs, including Boeing 787 and new programs that kicked off in late 2022. ASC leaked revenues was $175 million, up approximately $15 million year-over-year, in line with our most recent guidance. Turning to U.S. government programs, we made first article delivery of the CH-53K app transition in the second quarter of the year, ahead of schedule. The execution of the AEC operations team was exemplary, and their ability to timely deliver on this program was noted by the industry. Recurring production revenues on defense programs were up in aggregate year over year. This growth was masked by lower 2023 non-recurring revenues associated with the stand-up of the CH53K after-concession production line. These non-recurring efforts were largely completed in the first half of 2023. We have a robust business development pipeline and have won significant new business in 2023, which will result in revenues in the short term. Notably, in 2023, we have significant growth in space programs and other emerging platforms. AEC's consistent ability to deliver a quality product on time to our customers is a significant competitive advantage when competing for new business. Turning to our business strategy. Machine clothing is a consumable aftermarket business that performs consistently year in and year out. Albany International Machine Clothing benefits from a longstanding reputation for viability, technological leadership that our customers value. The business generates strong cash flows and provides an excellent return on capital. Successful integration or comeback will generate system-wide efficiency and enhanced customer service. The integration is designed to drive earnings and cash flow growth in the years to come. Engineering composites will continue to be an important source of growth as we focus on building out our business by disciplined selection of strategic partners and programs with a focus on capital efficiency. From an operations perspective, we will continue to deliver world-class execution and to meet our customers' quality and delivery requirements. Our reputation in the marketplace continues to grow, and our business development pipeline will provide us with growth opportunities over the medium term. Our continued investment in proprietary and differentiated technologies will translate into meaningful growth over the long term. Our balance sheet remains very strong, allowing us to pursue those investments that provide the highest risk-adjusted returns to our shareholders. During 2023, the company executed on the acquisition of Heimbach. invested in organic growth at AEC, continue to invest significantly in R&D, and increase our dividends to shareholders. This disciplined approach to capital management will continue to inform our business decisions. With that, I will hand it over to Rob to provide more details on the quarter and our outlook for 2024. Rob?