Enpro Inc.

Greetings. Welcome to the ENPRO Q4 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If any of which require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to James Gentile, Vice President, Investor Relations. Thank you. You may begin.

Thanks, Daryl, and good morning, everyone. Welcome to NPRO's fourth quarter and full year 2023 earnings conference call. I will remind you that our call is being webcast at NPRO.com, where you can find the presentation that accompanies this call. With me today is Eric Valancourt, our President and Chief Executive Officer, Milt Childress, Executive Vice President and Chief Financial Officer, and Joe Broderick, Executive Vice President, Finance. 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. Also note that during this call, we will be providing full-year 2024 guidance. which excludes unforeseen impacts from these risks and uncertainties. We do not undertake any obligation to update these forward-looking statements. It is now my pleasure to turn the call over to Eric Valancourt, 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 2023 and provide a business update that includes our outlook for 2024. Before we get started, I'd like to introduce Joe Broderick, who recently joined our team as Executive Vice President, Finance. Joe will be succeeding Milt Childress as Chief Financial Officer on April 1st. Milt will be staying through the end of May to ensure a smooth transition of finance leadership. We are delighted to have Joe join our team following his almost 25 years of senior financial and operational experience. This is an exciting time in our company's history, and I'm glad to have Joe's partnership as we look to capitalize on the opportunities ahead. Please join us in welcoming Joe to Enpro. We are pleased with Enpro's strong performance and execution in 2023. Ceiling Technologies delivered strong performance, largely offsetting the negative year-over-year impact from a soft semiconductor market in AST. In Ceiling Technologies, we saw record segment profitability with adjusted segment EBITDA margins exceeding 29% for the year. despite a sequential decline in the fourth quarter that we anticipated and communicated on our third quarter call. We are very pleased with the underlying strength of the segment and how our team is positioning the business for future growth while maintaining our disciplined focus on profitability and continuous improvement. AST revenue ended the year down roughly 16%, driven by weakness in the global semiconductor industry. Despite the drop in volume, adjusted EBITDA margins for this segment was approximately 24% for the year, clearly demonstrating the segment's value-added capabilities and resilience. Our multi-year strategy to drive growth in this attractive market remains unchanged. We reported $238 million in adjusted EBITDA for 2023, which is inclusive of $7.1 million in share price-driven long-term incentive compensation expense. Given the downturn experienced in the semiconductor market throughout the year, we are pleased with the total EnPro margins at 22.5%. We made meaningful progress on several long-term strategic initiatives this year, including the recently completed acquisition of Advanced Micro Instruments, or AMI, which broadens our ceiling technology segment capabilities into compositional analysis. We expect to leverage AMI's differentiated gas analyzer technologies across multiple industry segments. The unique insight we'll gain into our customers' processes will expand our competitive advantage in designing seals in a variety of critical solutions. We are excited to welcome our new colleagues, AMI colleagues, DenPro. In AST during the year we execute we continue to execute on our multifaceted strategy of technological differentiation vertical integration and regional expansion. Making significant progress on the phase build out of our Arizona facility and expanding our capabilities in Asia. We are executing this expansion and strategic positioning in collaboration with key market leading customers. In 2024, we anticipate additional investments in our semiconductor business to support what's widely expected to be a near doubling of the semiconductor market by around the end of this decade. I'd like to take a moment to comment on our safety accomplishments. We strive to create an injury-free workplace as we deliver critical products and solutions to our customers. Safety, which includes both physical and psychological safety, is our number one core value. And for 2023, we are celebrating a 59% reduction in our total recordable incident rate, as well as a 47% reduction in our lost time case rate. These outstanding results build upon our already world-class safety record and are well below the latest industry averages presented by the Bureau of Labor Statistics. I want to recognize our environmental, health, and safety leadership team and our colleagues across the company for these terrific results. Before turning the call over to Milt to discuss our fourth quarter results and 2024 guidance, I want to reiterate what I've said on many occasions. There is no better time to be part of InPro. With our reshaped portfolio generating excellent margins and cash flow, with a strong balance sheet, we are well positioned to drive continued growth through focused execution as together we empower technology with purpose.