Albany International Corporation

Thank you for standing by. My name is Cass, and I will be your operator for today. At this time, I would like to welcome everyone to the first quarter 2026 Albany International Corp earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be question and answer session. If you would like to ask a question during that 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 call over to Karen Blomquist, Director of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Albany International's first quarter 2026 earnings call. As a reminder for those listening on the call, please refer to our press release issued this morning 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. Additionally, our remarks today may reference our earnings presentation, which is available on the industrial relations section of our website, albint.com. 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 30, 2026, as well as our FCC filings, including our 10Q and our 10K. Now I'll turn the call over to Gunnar Cleveland, our President and CEO, who will provide opening remarks. Gunnar?

Thank you, Karen. Good morning and welcome, everyone. Thank you for joining our first quarter earnings call. We entered 2026 as a more focused and disciplined organization with a clear strategy centered on our core strengths. Our culture begins with caring for our people, and it was an honor to recently have our engineered composite segment recognized as one of America's safest companies. Safety is a priority at Albany and is embedded in how we design processes and operate each day. And a strong safety culture translates to a strong quality culture. This operational philosophy is also manifested in our outstanding on-time delivery performance. Our focus on safety, quality, and operational excellence creates a solid foundation for our reliable operations while our value proposition remains grounded in our shared expertise in industrial weaving and material science, which connects our two businesses and differentiates us in the markets we serve. I'd like to take a minute to address the conflict in the Middle East. We're continuously monitoring and working closely with our suppliers and customers, and to date we have not seen any impact and have made only slight adjustments to delivery routes. Raw materials are generally protected by either long-term contracts or customer-directed contracts. We will continue to monitor and work to minimize any supply chain risk. At the same time, we're seeing increased demand on our weapons programs and are maximizing production on key programs. In machine clothing, the team did an outstanding job taking corrective actions to make up the downtime of a machine malfunction, and we expect death recovery to be completed in the back half of the year. More broadly, demand conditions across our end markets stabilized in the first quarter. In engineered composites, our focus remains on refining our operating model and prioritizing higher value-add applications, particularly within our advanced weaving technologies, including 3D weaving, braiding, winding, and resin transfer molding that serve end markets such as commercial and defense propulsion systems, missile production, and space exploration. We're seeing volume increase across key programs, reflecting both higher production rates and the benefit of the actions we have taken over the past 12 months. Importantly, we're winning new business with new and existing customers, and demand remains strong across defense platforms, and the lead production continues to increase. Our current pipeline of new business opportunities remains robust and continues to expand as we focus on new applications where our expertise and products offer greater strengths and lighter weight solutions. We believe the actions we have taken and the trends we see across both segments position us well to drive strong free cash generation and build on the baseline we established exiting 2025. This provides us with the flexibility to continue allocating capital in a balanced and disciplined manner, including reinvesting in the business to support long-term growth while also returning cash to shareholders. Turning to the quarter, we're off to a solid start to 2026 with revenue of $311 million, up 7.8% year-over-year, which translated to adjusted EBITDA of $48 million. In machine clothing, revenue for the quarter was $166 million and came in ahead of our expectations across all regions, including North America, Europe, and China. Despite the recent stabilization in China and improved order rates, which are positive developments, visibility beyond the near term remains limited. As we previously disclosed, at the start of the first quarter, we experienced an equipment failure at one of our facilities. and I'm pleased to report that we were able to recover more of the lost production related to the unplanned downtime than we initially anticipated in the first quarter. Assuming the equipment continues to operate as expected, we believe we are well positioned to recover the remaining lost volume by the end of the year. We are actively managing this situation and are relocating a machine from a closed facility to have a long-term solution in place by year end. Adjusted EBITDA margin for MC was 25.9%. On a constant currency, margins were stable, driven by a meaningful improvement across Europe as we continue to realize the benefits of integration activities. Turning to engineered composites. Revenue for a quarter was $145 million compared to $114 million in the prior year. The increase was driven by broad-based growth across our programs with incremental contribution from S35, Little Systems, LEAP, 787, and the CS33K. Segment-adjusted EBITDA was $17 million, or 11.7% of sales, compared to $15 million, or 13.5% of sales, in the prior year. The increase in EBITDA reflects higher overall volume, while the margins, in line with expectations, were driven by mixed, primarily the impact of TH63K-AFT program revenue, which is now booked at zero margin following the actions taken in the third quarter of 2025. In new business developments, we're excited to announce our new contract with Pratt & Whitney for composite engine components for their GEAR turbofan. The turbofan relies extensively on advanced composite materials to achieve its fuel efficiency, noise reduction, and weight target, which strongly leverages AEC's strengths in high-performance composite structures. For both JASM and LORASM missiles, we have been requested by our customer to increase production, bringing output to the highest level achievable within our current capabilities. including through the use of overtime. Turning to the strategic review of the Amelia Earhart facility in Salt Lake City, which houses the CSUC-PK program, we continue to make progress and have completed the standalone analysis with PWC. While it is still too early in the process for us to share any conclusions, we remain on schedule and look forward to providing an update as we move towards the resolutions. As we look ahead, our priorities remain clear. Discipline execution, continued progress across both segments, and driving improved profitability and cash generation. In machine clothing, we saw stabilization in key markets and remain focused on execution and margin recovery. In engineered composites, we're scaling the business, refining our operating model, and prioritizing higher value application to support long-term growth and margin expansion. We believe Albany is well-positioned to deliver sustainable value for our customers and shareholders, supported by our differentiated capabilities and a more focused discipline approach. I would like to thank our employees for their continued dedication, as well as our customers, partners, and shareholders for their ongoing support. With that, I will turn the call over to Will to review the financial results in more detail.