Enpro Inc.

Greetings and welcome to the NPRO Industries 3rd Quarter 2022 Earnings Review Conference. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, James Gentile, Vice President, Investor Relations. Thank you. Please go ahead.

Thank you, Donna, and good morning, everyone. Welcome to EnPro's third quarter 2022 earnings conference call. I'll remind you that our call is being webcast at EnProIndustries.com, where you can find the presentation that accompanies this call. With me today is Eric Valencourt, our President and Chief Executive Officer, and Milt Childress, Executive Vice President and Chief Financial Officer. Please note, that in the third quarter of 2022, the engineer materials segment has been classified as a discontinued operation following the early September announcement to defest the remaining engineer materials businesses, GGB and GPT, both of which are expected to close this month. All financial information discussed in this conference call is based on the continuing operations of NPRO, which exclude the engineer materials segment. Included in the press release are schedules showing quarterly recasted financial data based on continuing operations since the first quarter of 2021. Before we continue today's discussion, a friendly reminder that we will be making forward-looking statements on this call that are not historical facts. These statements involve a number of risks and uncertainties, including those described in our filings with the SEC, including our most recent Form 10-K and Form 10-Q. Also, during the call, we will reference a number of non-GAAP financial measures. Tables reconciling these measures to the comparable GAAP measures are included in the appendix in the presentation materials. Also note that during this call, we will be providing full year guidance, which excludes changes in the numbers of shares outstanding, impact from future acquisitions, dispositions and related transaction costs, restructuring costs, incremental impacts of inflation, geopolitical variables and trade tensions on market demand, and costs subsequent to the end of the third quarter. The impact of foreign exchange rate changes subsequent to the end of the third quarter, interest rate increases differing from assumptions outlined in guidance, impacts from further spread of COVID-19 or other variants, and environmental and litigation charges. We do not undertake any obligation to update these forward-looking statements. And now, it is my pleasure to turn the call over to Eric.

Thanks, James, and good morning, everyone. Thank you for your time today as we review our third quarter. The organization is energized and firing on all cylinders, focused on building upon our foundational ceiling technologies and advanced surface technologies businesses, following the expected exit of the engineer materials segment announced in early September. Now on to our third quarter highlights. We delivered another strong quarter, driven by exceptional performance across both the ceiling technologies and advanced surface technologies segments. The differentiated value of our innovative solutions and vast capabilities of our teams across the company continue to shine. We are pleased to report outstanding quarterly results, highlighted by double-digit organic revenue growth and strong margin expansion that reflects the resilience of our business model. In the third quarter, sales of $280 million increased 34% year over year, with organic sales increasing 16%. Our order trends remained firm in the third quarter, despite a volatile macroeconomic and geopolitical backdrop. Our top line growth was driven by volume increases in many of our served markets, effective pricing initiatives, and the addition of NextEdge. Our third quarter adjusted EBITDA of $71.3 million increased 70% year over year, and adjusted EBITDA margin expanded 550 basis points to 25.5%. driven primarily by the addition of NextEdge, strong organic sales growth, and effective pricing strategies in response to inflationary pressures. The portfolio reshaping efforts we initiated in 2019, along with the tireless work of the teams across Enpro, have helped us build a streamlined portfolio of market-leading businesses meeting critical needs of customers. Our go-forward businesses operate in attractive end markets where we are well-positioned for growth throughout our enduring technological advantages. Our portfolio transformation has also created a foundation for continued profitable growth. Our optimized portfolio of businesses generates higher margin in cash flows and enhanced return on invested capital, reflecting value provided to our customers through proprietary technology, applied engineering expertise, and process know-how. Additionally, a growing proportion of our revenue mix is derived from the recurring or aftermarket portions of our businesses, providing us with enhanced stability through market cycles. We have also made substantial progress on gross margin improvement over time. For context, our report to gross margin just before we began our transformation efforts was 31%. Today, our portfolio of technology-driven products and solutions shows a gross margin approximating 40%. Following the completion of the interior materials divestitures, we will have reduced our European exposure, eliminated our sales to the automotive market, and significantly reduced our remaining oil and gas exposure. Our revenue generated in North America will account for approximately 70% of our total revenue, and our aftermarket and recurring revenue will exceed 50% of total sales. We will continue to pursue selective, strategic acquisitions that fit our criteria of both broadening our already strong reach with technology, enabled products and solutions, and offering opportunities for strong, recurring revenue. Speaking of acquisitions, it has been nearly one year since we added NextEdge to our family. We are pleased with the leading edge capabilities that NextEdge has brought to our semiconductor business. We are seeing the benefits of NextEdge combination with our advanced surface technologies businesses and our newly welcomed colleagues are integrating well into our broader organization and culture. The success of NextEdge and the opportunities it has created for our business demonstrate the merits of our M&A strategy, bringing in leading businesses and applying our platform to accelerate growth. With that, I will now turn the call over to Milt for a thorough look into our financial results for the quarter. Milt.