Enpro Inc.

Hello, and welcome to the MPRO Q4 2022 earnings conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to James Gentile, Vice President, Investor Relations. Please go ahead, James.

Thank you, Kevin, and good morning, everyone. Welcome to EnPro's fourth quarter and full year 2022 earnings conference call. I will 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 Valancourt, our President and Chief Executive Officer, and Milt Childress, Executive Vice President and Chief Financial Officer. An important reminder that the fourth quarter and full year 2022 results we will be discussing today reflect the continuing operations of EnPro. In the third quarter, we determined our former engineer materials segment to be a discontinued operation, and we completed the divestiture of its remaining components, GGB and GPT, in November of last year and in January 2023, respectively. All financial data has been recast to reflect our go-forward portfolio comprised of the ceiling technologies and advanced surface technology segments. During today's call, we will reference a number of non-GAAP financial measures. Tables reconciling the historical non-GAAP measures to the comparable GAAP measures are included in the appendix to the presentation materials. Also, a friendly reminder that we will be making statements on this call that are not historical facts and that are considered forward-looking in nature. 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 note that during this call, we will be providing full year 2023 guidance, which excludes unforeseen impacts from these risks and uncertainties, as well as changes in the number of shares outstanding, impacts from future acquisitions, dispositions, and related transaction costs, restructuring costs, incremental impacts of inflation, geopolitical variable, and trade tensions on market demand, and costs subsequent to the end of the fourth quarter. The impact of the foreign exchange rate changes subsequent to the end of the fourth quarter and interest rate increases differing from assumptions outlined in guidance. We do not undertake any obligation to update these forward-looking statements. It is now my pleasure to turn the call over to Eric Valencourt, our President and Chief Executive Officer. Eric.

Thanks, James, and good morning, everyone. Thank you for joining us today as we review our results for the fourth quarter and full year 2022 and provide a business update that includes our outlook for 2023. Before I get started this morning, I would like to celebrate Bernard Burns on his retirement from our Board of Directors. His service over the past 11 years has been invaluable to our company, our people, and our go-forward strategy. We wish Bernard the absolute best. We are also pleased to announce that Ron Keating will be joining our Board of Directors and look forward to his future contributions to our company. 2022 is an outstanding year as we continue down the path of driving EnPro forward and delivering on our commitments to shareholders, customers, and our people. We further optimized our portfolio by exiting the engineering materials segment, which we officially completed last month. We now have a streamlined portfolio of high margin businesses that compete in diverse markets where we have technological and applied engineering advantages. In 2022, our optimized portfolio focused portfolio resulted in robust organic sales growth and adjusted EBITDA margin expansion of more than 400 basis points. We achieved these results despite the many challenges that we and others continue to face. such as inflationary pressures, supply chain constraints, macroeconomic and geopolitical variability, a tight labor market, and increasing interest rates. We are proud of how our teams continue to demonstrate resilience by advancing our strategic pillars to differentiate ENPRO as a leading industrial technology company. We will now build on our momentum as we empower technology with purpose and grow profitably and responsibly well into the future. I'll now turn to the highlights for InPro's full year 2022, and then Milt will jump in to share more details on our fourth quarter results and our outlook for 2023. Our optimized portfolio drove strong results this year. On an organic basis, sales grew 14%. Higher volume across most markets and strategic pricing initiatives each contributed significantly to our organic sales growth. Adjusted EBITDA of 257.4 million increased more than 58% compared to 2021. Adjusted EBITDA margin of 23.4% increased over 400 basis points, driven primarily by the 14% organic sales increase, pricing actions, incremental operational efficiencies, and the sustained benefits of our portfolio reshaping strategy. These were partially offset by inflationary pressures, including material, wage, and freight costs, as well as higher operating costs associated with ongoing integration of NextEdge and investment support and growth opportunities. Our team remained nimble with swift execution as we navigated through inflationary pressures and supply chain constraints. Our supply chain and commercial excellence teams, as well as our environmental, health, and safety personnel across the company, continued to support safety, discipline, supply chain, procurement, and operational efficiencies throughout the company. For the year, Sealing Technologies segment adjusted EBITDA margins exceeded 25%. Three years earlier than the target of 2025 set forth during our 2021 investor day. Volume growth, strategic pricing, and operational efficiencies drove profitability in each of our Sealing Technologies businesses. We entered 2023 in a strong position. Our advanced surface technology segment ended the year with an adjusted segment EBITDA margin of around 30% despite weakening in demand in the semiconductor market seen late in the fourth quarter and while continuing to invest in long-term growth opportunities. Our suite of technological capabilities and process know-how will benefit us as we build out our vertical integration strategy and capitalize on opportunities created by the development of regional supply chains for advanced node semiconductor production. We remain excited about the many opportunities ahead for AST and are confident in our ability to weather the weaker semiconductor market expected this year. We just wrapped up our 20th year as an independent public company, and with our optimized portfolio now in place, we have never been in a better position to grow. Enpro has a strong balance sheet with a current leverage ratio of 1.7 times. We will continue to invest in and enhance our leading edge capabilities and applied engineering expertise as we evaluate both organic and inorganic opportunities to build our portfolio and expanding key growth applications across many of our markets. Our culture drives the way we work daily, and we will continue to focus on developing our people and sustainably improving the communities within which we operate. We have already made great strides in the environmental, social, and governance priorities we outlined last year. ENPRO has established baselines for each of our facilities, measuring electricity, natural gas, and water usage. We plan to continue improving our resource utilization and efficiency moving forward. Additionally, we advanced our diversity, equity, and inclusion initiatives, and more than 40% of our talented colleagues, three senior levels into the organization, are diverse by gender and or ethnicity. Our culture of learning and development empowers our employees, providing them with resources and opportunities to become future leaders in ENPRO. We plan on publishing our next sustainability report later this spring, where we will highlight the great work that has been ongoing throughout the company to limit our environmental impacts, improve the lives of our colleagues, their families, and our communities, all with government processes that are responsible and repeatable. Internally, we have been hard at work defining our efforts as an organization around our central mission of empowering technology with purpose. Each of our products and solutions solve critical problems for our customers in applications that touch each of our lives every day, and our colleagues find purpose in their work to drive both our organization and the world forward. I'll now turn the call over to Milt for a thorough look into our fourth quarter results.