Enpro Inc.

Hello, and welcome to the MPRO Q2 2024 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. 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, and good morning, everyone. Welcome to Enpro's second quarter 2024 earnings conference call. I will remind you that our call is being webcast at Enpro.com, where you can find the presentation that accompanies this call. With me today is Eric Valencourt, our President and Chief Executive Officer, and Joe Bruderick, Executive Vice President and Chief Financial Officer. 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. 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 second quarter and provide an update that includes a narrowing of our outlook for full-year 2024. We performed well in the second quarter with strong profitability in the ceiling technology segment and sequential improvement in both sales and adjusted segment EBITDA in advanced surface technologies. Consolidated adjusted EBITDA margins exceeded 27% for the first time. We are pleased with the team's agility this quarter as profitability shined, even as soft demand persists in certain areas of the business. Again this quarter, our people worked very hard to achieve these results. that demonstrate the compelling balance inherent in the ENTRO portfolio and our ability to execute well in a variety of macroeconomic scenarios. We would like to thank our 3,500 colleagues across the company for their outstanding contributions and commitment to the company's ongoing performance. Now on to the second quarter performance. After my review, I will turn the call over to Joe for a more detailed discussion of our results and our outlook for the balance of 2024. Operating performance in the ceiling technology segment was excellent during the second quarter. At AST, we delivered sequential improvement in both sales and adjusted segment EBITDA. While the semiconductor market remains soft, particularly for the semiconductor capital equipment, we have seen pockets of continued growth in the beginnings of recovery. We continue to believe the low point of AST segment performance is behind us. In ceiling technologies, adjusted segment EBITDA margin exceeded 35%, strengthened nuclear and aerospace, as well as strategic pricing actions in the contribution from AMI, more than offset weakness in commercial vehicle OEM and Asian industrial markets. Food and pharma sales increased during Q2, although demand remains choppy, particularly in Europe. Favorable mix, cost controls, supply chain effectiveness were also contributing factors to the record quarterly results in this segment. Our continued positive momentum in profitability and ceiling technologies reflects the underlying strength of this segment. Our focus on applied engineering differentiation, compelling aftermarket characteristics, incremental investments in organic growth, and continuous improvement opportunities has created a foundation for profitable growth. Additionally, we continue to pursue strategic opportunities in adjacent markets that build upon our core competencies in safeguarding critical environments. We are very pleased with the performance of the ceiling technology segment, and our outlook remains constructive. In the advanced surface technology segment, revenue declined 12% year over year. Adjusted segment EBITDA margins of 21.7% improved 160 basis points sequentially. Strategic growth investments and operational improvement initiatives proceed as we continue to position AST for long-term growth. Areas of continued growth, such as in our precision cleaning business and a brighter outlook for both our coating and refurbishment solutions and certain critical in-chamber tools gives us confidence that the AST segment will grow sequentially for the remainder of 2024. Long-term, We are focused on executing our multi-year strategy to drive growth in AST's attractive markets with key capacity expansions and efficiency improvements that showcase our technological and process advantages that provide our customers with essential value in the semiconductor supply chain. Our balance sheet remains in excellent shape as we continue to pursue a variety of growth opportunities, both organically and through strategic acquisition. We are pleased with our second quarter and our first half performances, despite well-understood macro headwinds. We expect strong execution and disciplined capital allocation to continue as we drive our value creating strategy forward.