Albany International Corporation

Thank you for standing by. My name is Pam and I will be your conference operator today. At this time, I would like to welcome everyone to the Albany International First Quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to J.C. Shetnani, VP Investor Relations and Treasurer. You may begin.

Thank you, Pam, and good morning, everyone. Welcome to Albany International's first quarter 2025 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 this 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 April 30th, 2025, as well as our SEC filings, including a first quarter form 10Q and a 2024 form 10K. Now I will turn the call over to Gunnar Cleveland, our President and CEO, who will provide opening remarks. Gunnar?

Thank you, JC, and thank you for joining us as we review our first quarter 2025 results. Overall, I'm pleased to report that our businesses are executing to the plan that we laid out at the start of this transition year. Our new business segment leaders are performing well, and they restructure as they restructure and strengthen their respective operations. While we see uncertainty in the markets, we were not affected by tariffs or other disruptions in the first quarter. Due to our mostly regional setup for both suppliers and customers, the overall direct impact of tariffs as they currently stand is not expected to materially impact our financial or operational performance. Machine clothing continues to deliver consistent, strong results, and the integration of Heimbach is proceeding to plan. We expect to see the benefits of the Heimbach integration efforts accelerate into the second half of this year as our actions take effect. AEC is executing well on its current portfolio programs, and the segment continues to win new business. The team is making progress on process improvements on our CS53K and Gulfstream programs, and we had lower EAC adjustments in the quarter, which we will discuss in more detail later. For the quarter, we reported revenues of $289 million, an overall adjusted EBITDA margin of 19.3%, and an adjusted diluted EPS of 73 cents. Free cash flow was ahead of plan, and we expect 2025 to be another strong free cash flow year. We return capital to our shareholders with both a regular quarterly dividend and our re-initiated share repurchase program. In the first quarter, we repurchased 69 million worth of shares. We currently have $193 million of capacity remaining under our latest share repurchase authorization of $250 million. Turning to our individual businesses, for the quarter, machine clothing reported revenues of $175 million and an adjusted EBITDA margin of 28.4%. In terms of grades, secular trends in packaging remain strong. Tissue, pulp, and engineered fabrics remain stable. North America had a slight decline in deliveries in the first quarter, but strong order flow shows strength in the market. Europe is showing signs of recovery. with good deliveries and strong orders making us cautiously optimistic for the region. Finally, Asia is mixed with some weakness in China. Our global MC order backlog is strong, with order to sales ratio above one, giving us confidence in our outlook for the year. At Heimbach, we continue to make good progress on our integration plans, which is focused on footprint rationalization and operational efficiency. As a reminder, since the acquisition, we have closed two Albany facilities, sold one Heimbach business and closed two Heimbach facilities. We have also restructured operations at the remaining Heimbach facilities in Durham, Manchester, Burgos and Zojou. These consolidation activities are strengthening our operational and production efficiencies and enhancing the regionalization of our business. The synergy benefits of these actions occur over time. We expect the run rate on our synergies to be particularly strong as we exit 2025, and we remain confident of hitting our original synergy targets with a three and a half to four times effective purchase multiple. Turning to tariffs, we're monitoring and assessing the fluctuation in the tariff landscape as they occur. Our current fee is based on tariffs as they currently stand. The situation is dynamic, and our teams are vigilantly addressing both challenges and opportunities, and we continue to adapt as the situation develops. As it relates specifically to our MC business, it should be noted that most of our sales and sourcing is regional and therefore generally insulated from tariffs. For example, in North America, the transaction among our facilities in Mexico, U.S., and Canada are covered by the USMCA. With the acquisition of Heimbach, our EMEA sales and supply chain is strengthened regionally by local trade treaties. Finally, in Asia, we're also supplying our customers from within the region. However, we have some potential exposure to sole source supplied materials and certain highly engineered products manufactured by us only in the U.S. or the U.K., To mitigate any impact, we are assessing and using trade mechanisms, looking at cost controls as well as considering other actions. Turning to our engineered composite segment, revenues for the quarter were $114 million with an adjusted EBITDA margin of 13.5%. We keep making progress in our AEC operations, and we recorded a total of EAC adjustments of $7 million for the quarter. Half of this is driven by CH53K and Gulfstream, with a balance across a mix of programs. The frontline leader coaching, operator training, and progress in planning and supply chain are driving the expected improvements, as well as setting the sights up for the future growth. On LEAP, as you may recall, last quarter we took a conservative approach as we projected lower volumes both at LEAP as well as our other Boeing programs. The drop in revenue in the first quarter is in line with our forecast. We stand ready to meet Safran's production schedule as the demand at Boeing and Airbus recovers and have ample capacity to meet any upside to the demand. With respect to our other programs, we're seeing growth in advanced air mobility with expected ramp to build through the course of 2025. On new program wins, we recently announced a long-term agreement with Bell on the 525 program. For JASM, we added to our current backlog and are working on a new multi-year contract. As these awards translate into purchase orders, they will be added to our existing AEC backlog, which at quarter end was $1.3 billion. As a reminder, this is backlog that does not include LEAP volumes beyond the current calendar year and only relates to our other AEC platforms. This backlog provides us with visibility and confidence into our business performance in 2025 and beyond. Finally, as it relates to tariff for AEC, our sourcing and production in Mexico, Canada, and USA is again currently protected under the USMCA. The direct impact of our earnings from tariffs at AEC is currently expected to be negligible. We're tracking how second-order tariff impacts play out, particularly from suppliers as they may be impacted in their own value chain. Similarly, we are monitoring the impact of demand at our end customers. At this point, we are not aware of any changes from our customers or suppliers. If we begin to see impacts, we have assessed and prepared mitigating actions, and we will address these challenges as needed. In the current macro and geopolitical environment, we believe the ongoing titanium shortages and extended lead times will continue. This creates even more opportunity for our engineered materials, especially in 3D woven composite parts, which can be a superior alternative to titanium in terms of strength, weight, and cost. As our product offering gains more acceptance among our customers, our competitive advantage will be a catalyst for additional long-term growth. We have proven our industrialization of this technology with the LEAF fan blade and case, 7779X fan case, as well as parts for landing gears. Our solution can be delivered at a fraction of the lead time with readily available materials and a production capacity proven to deliver 100% on time. which is in stark contrast to the current and historical titanium supply issues. Finally, we continue to streamline our operations and are upgrading our SAP system with S4 HANA across the entire company with a go-live schedule for next week. This will improve our systems and operational efficiencies and deliver enhanced analytics to improve our business agility. With that, I will now hand it over to Rob to provide more details on the quarter. Rob?