Enpro Inc.

Greetings and welcome to the NPRO third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, James Gentile, Vice President, Investor Relations. Thank you. You may begin.

Thanks, Melissa, and good morning, everyone. Welcome to NPRO's third quarter 2025 earnings conference call. I 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, and Joe Bruderich, Executive Vice President and Chief Financial Officer. During this morning's call, we will reference a number of non-GAAP financial measures. Tables reconciling historical non-GAP measures to comparable GAP measures are included in the appendix to the presentation materials. Also, a friendly reminder that we will be making statements on this call, including our perspectives for full year 2025 guidance, that are not historical facts and considered forward-looking in nature. These statements involve a number of risks and uncertainties, including those described in our filings with the SEC. 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 third quarter financial results and provide an update on our strategic progress. We greatly appreciate your support. It certainly is an exciting time to use Power Club Enpro. After a brief discussion of our quarterly performance and acknowledgement of the hard work ongoing across organizations, I will turn the call over to Joe for more detailed discussion of our third quarter results and current guidance perspectives for the balance of the year. Now on to our third quarter performance. Enpro reported organic sales growth of nearly 10% during the third quarter, with mid-single-digit revenue growth year-over-year in ceiling technologies and more than 17% top-line growth at AST. The strength of our business model was demonstrated again during the quarter with total Enpro adjusted EBITDA margin above 24%. which included increased operating expenses supporting both growth initiatives in both segments. Complementing this strong quarterly performance, we continue to advance ENPRO 3.0 strategy with Overlook Industries' acquisition in our agreement to acquire Alpha Measurement Solutions, which we announced on October 13th. Both of these acquisitions will expand our capabilities in critical growth areas of the portfolio without the use of excess leverage. We closed our acquisition of Overlook on October 8 and expect the acquisition of Alpha to close during the fourth quarter of 2025. Once required regulatory approvals are received and other customary closing conditions are satisfied. Alpha and Overlook are great examples of our ability to identify businesses that fit our strategic growth characteristics while meeting our stringent financial criteria. Both businesses have significant technical competence, customer intimacy, and competitive differentiation, while bringing strong business leadership, all characteristics reflective of an EnPro business. Alpha's portfolio of liquid sensing capabilities complements our existing gas stream solutions acquired with AMI, broadening our portfolio of sensing technologies and instrumentation for compositional analysis into key end markets, such as industrial process control, water and wastewater, laboratory, and environmental monitoring. The sensing and measurement parameters brought together to further our compositional analysis strategy enable us to detect unwanted, oftentimes trace compounds in a variety of processes, which in turn enable us to solve our customers' critical problems. Overlook specializes in engineering, design, and fabrication of single-use technologies and other critical componentry that expands our position in biopharmaceutical manufacturing. Oralix capabilities expand in liquid-dose biologics, a secular growth area that continues to expand as liquid. Single-use medicines are increasingly replacing those taken worldly. These medicines target a number of evolving areas in oncology, immunology, and dermatology, amongst many others, as the market is poised to accelerate over the next decade. Within our Garlag Hygienic Technologies business, Overlook furthers our technology expertise and customer intimacy by answering the industry's accelerating need for tailored, single-use consumables as more stringent, receptive processing is essential to prevent contamination. Our business teams are continuing to identify acquisition targets that broaden our leading-edge capabilities and bring them into EnPro as we strategically expand our portfolio of critical products and solutions. I would like to thank those involved in the preparation and execution of these transactions, as we are excited to begin integrating these bright new colleagues and successful teams into our organization. Turning to our segment results for the quarter, in Sealing Technology, sales increased 5.7%, highlighted by strength in aerospace and food and biopharma demand, firm aftermarket performance in general industrial and commercial vehicle markets, and strategic pricing initiatives. Solid performance in these areas more than offset persistent weakness in commercial vehicle OEM market and soft overall industrial demand in Asia and Europe. Sealing segment profitability remained above 32%. In advanced surface technology segment, sales increased more than 17% led by growth in leading edge precision cleaning solutions and improved demand for certain semiconductor tools and assemblies. AST segment profit increased double digits over the last year though operating leverage was impacted by continued growth investments, such as preparation for advanced chip production domestically and accelerating qualification work on new platforms and next-node development. A slightly unfavorable mix was also a headwind, which Joe will discuss in greater detail in a moment. Across Enpro, we continue to pursue targeted incremental capacity expansions in areas where we are winning, preparing to solve critical problems for our customers and investing in and expanding our differentiated capabilities. Our aim is to unlock the compounding features of our business model and drive value creation into the second year of our 3.0 phase and beyond. In fueling technologies, for example, we are currently expanding capacity and investing resources to support future growth in compositional analysis, aerospace, and commercial space applications. In commercial vehicle, we are making investments to support incremental market share gains with new products and expanding partnerships with key customers. We are readying our manufacturing processes to be well positioned for the inevitable recovery of the current trough and trailer builds. Across the ceiling segment, our teams are making strides to identify new market opportunities and specify our process solutions for critical positions in higher growth markets, including life sciences, space, hydrogen, semiconductor, nuclear, energy storage, and digital infrastructure applications. Our teams are excited about these efforts as we expand our capabilities and reinvest in growth opportunities to drive long-term, profitable growth in ceiling technologies. AST is busy, and we'd like to acknowledge our colleagues for their hard work. In AST, we offer critical products and solutions, and our customers come to us to solve exacting problems that enable contamination control, efficient in-chamber environments, process and equipment protection, and economic yield optimization for semiconductor fabs. During the quarter, we experienced strong demand for our leading-edge precision solutions and some recovery in semiconductor tools and assemblies, while pursuing stringent qualifications for next-generation platforms. As we have said in recent quarters, we have been making disciplined investments in key areas of the business that will serve as growth platforms to support our long-term expectations for the segment. We continue to implement certain continuous improvement and optimization actions that can drive incremental margin expansion into a more robust overall semiconductor market recovery. As our pipeline continues to expand, we are well positioned to deliver. The ENPRO 3.0 strategy is proceeding as planned as we approach our second year, and we are excited about the many opportunities ahead. The business is positioned to drive mid-single-digit revenue and growth in the C1 technology segment. high single digit low double digit growth in ast over time our programmatic m a strategy is an additive to these organic growth perspectives over our 3.0 planning horizon we are pleased with the ceiling segment's ability to consistently generate profitability toward the high end of our targeted ranges over the past three years and expect this level of impressive performance to continue for ast the segment has demonstrated its ability to generate profitability in the high 20 low 30% range in the past and are taking steps to unlock value inherent within the segment and deliver more consistent performance at these levels. As we continue to invest in areas where we are strongest while implementing our playbooks to continuously optimize performance over time. Before I pass the call over to Joe to discuss our results in more detail, I want to thank everyone at Enpro for your valuable contributions to our company and I encourage each of you to continue investing in your personal and professional growth as we work toward to deliver the critically important solutions to our customers.

Joe? Thank you, Eric, and good morning, everyone. We are very pleased with our performance so far this year. Now let's get into the details of our third quarter results. In the third quarter, sales of $286.6 million increased nearly 10%. We saw continued strong ceiling technology performance overall and more than 17% year-over-year sales growth at AST. even as some of our markets remain choppy. Third quarter adjusted EBITDA of $69.3 million increased 8% compared to the prior year. Adjusted EBITDA margin of 24.2% was down slightly from last year. Ongoing investments in people and processes across the company to support future growth, as well as unfavorable mix in AST, absorbed the benefits from operating leverage during the quarter. Our corporate expense of $10.2 million in the third quarter of 2025 was essentially flat compared to last year. Adjusted diluted earnings per share of $1.99 increased more than 14%, largely driven by the factors that drove the adjusted EBITDA improvement year on year and lower net interest expense. Moving to a discussion of segment performance, ceiling technology sales increased 5.7% to $178.2 million. Strength in aerospace and food and biopharma applications, firm aftermarket demand in domestic general, industrial, and commercial vehicle markets, and strategic pricing more than offset persistent weakness in commercial vehicle OEM markets. Nuclear orders were impacted by political uncertainty in France. which influenced funding and procurement and is expected to be temporary. Industrial demand in Europe and Asia was also tepid during the third quarter. Aftermarket sales comprised 65% of total segment revenue year to date. For the third quarter, adjusted segment EBITDA margin remained strong at over 32%, despite growth investments mentioned previously. Segment profitability remains at the high end of our targeted range. We are excited about the number of drivers of long-term growth and value creation in ceiling technologies, as we focus on expanding opportunities through growth investments and strategic acquisitions. On the topic of strategic execution in ceiling, we are delighted to have found two great businesses in our recently announced transactions. We welcome the Overlook team into NPRO and are excited to begin working with our new alpha colleagues once that deal closes, which we expect to occur in the fourth quarter of 2025. As Eric talked about in detail earlier, these two organizations advance our capabilities in key growth areas of the NPRO portfolio and have all the hallmarks of an NPRO business. On a combined basis, we expect both businesses to achieve high single to low double-digit revenue growth rates at margins that meet or exceed our core. As well, we are excited to assist these talented teams to expand their reach and execute their respective growth strategies as they become part of our team to contribute to our value creation trajectory. Turning now to the advanced surface technology segment, third quarter sales of $108.5 million were up 17.3% year over year. We saw an acceleration in certain areas of AST, including in precision cleaning solutions tied to advanced node chip production, supporting applications such as artificial intelligence and high bandwidth memory. However, demand for capital equipment remains choppy. with pockets of strength observed for certain lower-margin semiconductor tools and assemblies during the quarter. For the third quarter, adjusted segment EBITDA increased more than 13%, and adjusted segment EBITDA margin was 20.1%. Operating leverage on sales growth was offset primarily by increased operating expenses supporting growth initiatives and the mixed impact of increased sales for certain semiconductor tools and assemblies. There are several factors underlying AST performance currently that we expect to continue into 2026. We see momentum in our advanced node facing precision cleaning solutions business. Consistent with that, we are seeing accelerated timelines for leading edge node production, which have caused the need for increased labor investment in both Taiwan and the United States to meet the qualification demands for our customers. well ahead of time as demand for advanced node chips accelerates. These accidents position us very well for growth into 2026 and beyond. At the same time, we are making considerable progress on new platforms and technological advancements for leading edge processes in our pipeline, which is leading to additional qualification activities ahead of revenue generation and necessary to answer the exacting requirements of our customers. Semiconductor industry dynamics continue to evolve and regionalization of supply chains proceeds. In partnership with our customers, demand is shifting for certain legacy product lines from the United States to Southeast Asia. As we have mentioned before, we have expanded our capacity in that region over the past two years to support our customers on a number of platforms. In connection with this demand shift, $12 million of equipment supporting legacy platforms or approximately 3% of total AST revenue was produced and sold year-to-date in 2025 ahead of these transitions, which we do not expect to recur in 2026. Finally, near-term demand dynamics continue to be choppy in the third quarter, which will continue in fourth quarter and into the first half of 2026. Although we are seeing signs of capital spending supporting leading edge semiconductor capacity expected to accelerate into the back half of next year. These signals of a significantly improved demand environment are supported by secular technology transitions, driving the need for more advanced logic, artificial intelligence, and high bandwidth memory capacity. Over the mid and long term, our new platform pipeline remains robust. and underscores our high single to low double-digit revenue growth expectations for the segment. Again, we expect segment margins can achieve 30% over time as new platforms begin to season from the investments we have made over the last two years. The market resumes a more consistent trajectory and continuous improvement initiatives take hold. Turning to the balance sheet and cash flow. Our balance sheet remains strong. At the end of the third quarter, our net leverage ratio stood at 1.2 times trailing 12 month adjusted EBITDA. Following the completion of the transactions announced in October, we expect to exit 2025 at a net leverage ratio of around two times. We generated $105 million in free cash flow year to date versus $83 million last year. Higher net income and lower interest payments were the primary drivers of the year over year increase. Also, we continue to expect capital expenditures to be around $50 million this year as we invest in future growth opportunities across the company at a creative margin and return thresholds. Finally, our strong balance sheet and cash generation provide us with ample liquidity to make these investments while continuing to return capital to shareholders. In the third quarter, we paid a $0.31 per share quarterly dividend with year-to-date payments totaling $19.7 million. We also have an outstanding $50 million share repurchase authorization expiring in October, 2026. We are pleased with the consistent free cashflow generation and look to reinvest in organic growth opportunities across the business while continuing to pursue strategic acquisitions that fit our rigorous financial objectives and expand our leading edge capabilities. Moving now to guidance. We are updating our previous full-year 2025 guidance ranges to the high end and now expect total INPRO revenue growth of 7 to 8 percent, adjusted EBITDA in the range of $275 million to $280 million, and adjusted diluted earnings per share to be in the range of $7.75 to $8.05 per share. The anticipated partial quarter contribution from the two acquisitions announced in October is included in this range. We previously expected revenue growth of 5% to 7%, adjusted EBITDA in the range of $270 million to $280 million, and adjusted diluted earnings per share in the range of $7.60 to $8.10. The normalized tax rate used to calculate adjusted diluted earnings per share remains at 25%, and fully diluted shares outstanding are currently $21.3 million. As we shared in our October announcement, the contribution from the acquisitions of Alpha and Overlook should contribute more than $60 million in revenue and $17 million to $18 million in adjusted EBITDA in 2026, all included in the ceiling technology segment. In ceiling, we continue to expect strong performance year over year in the fourth quarter. The end market drivers underlying our guidance ranges remain largely the same. We expect continued strength in aerospace and food and pharma markets and a firm domestic aftermarket in general industrial and commercial vehicle. The commercial vehicle OEM markets are expected to remain at a low point for the balance of the year. We also expect slight variability in nuclear orders to continue based on near-term political uncertainty in France compared to our previous delivery schedules for the fourth quarter. In AST, we expect a sequential deceleration in sales growth for the fourth quarter, given the continued choppiness in overall semiconductor equipment spending, the previously mentioned regional transitions underway, as well as the accelerating qualification work on new platforms ahead of revenue. Overall, for the year, we still expect ceiling segment profitability at the high end of our range of 30% plus or minus 250 basis points. while AST segment profitability should finish slightly above 20%. Total and pro adjusted EBITDA margin is expected to finish 2025 above 24%. We are excited to continue executing our value creating strategy into 2026 and beyond, and look forward to our discussions with you all in future quarters. I will now turn the call back to Eric for closing comments.

Thanks, Joe. We'd like to thank our colleagues across EnPro for their inspiring work and dedication. We are also excited to welcome our new colleagues from Alpha and Overlook to the organization. We are pleased with our performance so far in 2025 and are confident that we are taking the right steps to build on our EnPro 3.0 momentum. We are delivering on our growth targets from the first year of our strategy while empowering our team's personal and professional development and creating differentiated value for our customers and shareholders. Thank you for your interest, and we now welcome your questions.

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. To allow for as many questions as possible, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Jeff Hammond with KeyBank Capital Markets. Please proceed with your question.

Hey, guys. Good morning. Good morning, Jeff. Good morning, Jeff. Maybe start with the acquisitions. I don't know if you can give us a sense of relative size of each. And I think you said margin and growth profiles are comparable, but just a little bit of breakdown. And then just on Overlook, seems like a little bit of an adjacency just –

um you know what what gives you a right to win there what do you see in terms of you know bolt-ons to kind of build scale around that business yeah hey jeff um yeah as you as you asked right the combined nature of both of them are about 60 million dollars of revenue in 2026 and and are expected to grow high single-digit, low double-digit over the next foreseeable future. So we're really excited about both acquisitions. They're both going to be combined, accretive to EnPro's core. They're not too far from each other as far as profitability goes and growth rate expectations. And Eric can talk a little bit more about some of the capabilities they bring.

Actually, I'm going to introduce Mike Faulkner. Mike Faulkner leads our ceiling segment, and Mike was instrumental in both finding and acquiring these acquisitions. He spent a lot of time with them, and he can speak about the adjacency and more about the strategy. Mike does an excellent job leading our ceiling technology segment, and you better hear from him directly. So, Mike, can you jump in?

Absolutely. Good morning. Can you guys hear me okay? Yes. Yeah. Okay. So, Jeff, Like other ENPRO businesses, these are models in both that we know really well. Both Overlook and Alpha have a high degree of recurring revenue that comes from strong, long-lasting customer relationships that are built on a track record of performance and critical applications. Overlook in particular, we are solving a problem that's worth solving in that large molecule liquid biologics pose a unique processing problems for pharmaceutical manufacturers. And much like our other critical components, Overlook's design directly solves these problems in the fill-finish area and supports the growth and development of life-saving medicines. We see these as businesses that have the same characteristics of other winning businesses that we have within the segment.

Okay, and then just real quick, 4Q revenue contribution that you put into guidance from the acquisitions?

Yeah, so depending on the final timing for alpha closing, which we expect should be by the end of November, we included just under $10 million in revenue for the fourth quarter from both acquisitions and approximately $3 million in EBITDA.

Okay, great. And then Shifting gears to AST, you guys gave a lot of color around some of the moving pieces, but I guess my main question is when do we start to see better incrementals in that business and some of the investments start to normalize? And then just where is that $12 million? Is that cleaning? Is that tools and assembly or something else? Thanks.

I'll start and give just a little bit of color to things. It's really dynamic in that industry. You have three major things happening, one being tariffs, two being AI and data center demand, and then third being export restrictions. So everything is really dynamic and things are moving around very, very quickly. So some of the things are happening, and you can read the paper as well as we do, but the adoption of three nanometer production in the U.S. is being greatly accelerated as much as a year ahead of plan. So at the same time, things that we were expecting to generate revenue this year are being pushed off in terms of qualification because they're prioritizing other things. So we're not getting the revenue from some of the stuff that was anticipated while also spending more on others. But both are great projects and you want us to do it. It's just a question of when demand starts happening. And as you've heard from others as well, the first half of next year appears to be pretty choppy. But the second half looks to be more robust. And we start to see some of that rolling in around there.

Yeah, so we're excited about, you know, all of that work that we're doing, right? We're making good progress on both the cleaning side and our semiconductor capital equipment side. And we're accelerating qualification work on both, right? And so that's why you're seeing a little bit of an outsized impact right now. It impacted us about $3 million overall in the quarter for growth investments ahead of revenue. You know, those are expected to, you know, kind of start contributing in the middle to late part of next year, as Eric talked about. but positions us very well to capitalize on all of that advanced note work. Specific to your question on the 12 million, Jeff, that's in the tools and assemblies part of the business. And that really is to support our customers in the shifting movement of that business from US to Asia. And so that's for them to build some inventory and get ahead of that. So that's 12 million that's pulling out of 2026 into 2025 on mostly legacy kind of equipment areas. It was most pronounced in the third quarter, but it impacted in pull-ahead demand really in the second quarter and the third quarter of this year.

Yeah, some of that, Jeff, is the in-region, four-region sourcing that's going on and the legacy stuff. Some of that's being moved to Asia to be more competitive.

Okay, just back on incrementals. So, you know, as we get into 26 and you see some of these, you know, investments may be normalized or the programs come online. What should we think of as incrementals in that business into 26?

Yeah, I mean, we're not ready to talk and give specific guidance yet for 26, but just the broader theme question, right? I mean, we've seen, as I just mentioned, roughly $3 million, and you can do the math on kind of what we would be without that. But as we start to move forward and, you know, leverage some of those costs, right, we would expect to build on top of that. So historically, our, you know, our incrementals for this business are somewhere in the 40% range. And as we start to grow into these investments that we make, I mean, that's what we should expect going forward.

Okay, thanks a lot.

Thank you. Our next question comes from the line of Steve Ferrazani with Sidoti & Company. Please proceed with your question.

Morning, everyone. I did want to follow up on the acquisitions. When we think about the initial year one revs and margin guidance, does that imply much efforts in terms of your usual integration process continuous improvement, cost out, synergies, et cetera. I mean, long-term, how do you think about the margins in those two businesses versus ceiling overall?

Margins of the businesses are healthy already. We expect we'll be able to get a little bit out of our playbook, as we always do. And so we'll be a little bit more efficient. But there aren't a huge amount of synergies. It's more about growth. When we focus on Enpro 3.0, it's accelerating personal and profitable growth. And these are growth investments. It'll help the segment grow faster, essentially, with margin profile that'll be about the same as ceiling overall.

Yeah. So, Steve, we didn't contemplate, you know, any margin expansion from any in-pro related, you know, activities we'd be able to bring in that first 2026 full year as they become part of the company. But as we just said, right, there are opportunities there, right? There's margin expansion opportunities. that we see not only from the growth, but also from continuous improvement, strategic pricing, et cetera, things that we've been so successful at in the past.

Talk to me how you view the compositional analysis market. You made that AMI deal. Was it going now back maybe two years? How that's played out and whether that gets you more intrigued with compositional analysis and what the opportunities are in that market?

Hey, Mike, why don't you weigh in again since you've identified the space and spent a lot of time there? Yeah, absolutely. I'm happy to.

Yeah, I'm happy to. We're tremendously excited about the compositional analysis space. AMI has been a fantastic entry point for us. And with Alpha, we're adding 800. liquid parameters to go along with the four gas analytes that we have with AMI. And what we really see it doing is a couple things. For our customers, it's helping to accelerate the process of Industry 4.0 so that they can know something more about what's going on in their systems and in their processes that helps them operate at the peak of efficiency and reliability without sacrificing process safety. The other thing it does for us, because we're in a lot of these spaces already with different products and critical components that are going in to safeguard those processes, the information that comes off of this, the more we can understand and our customers can understand what's going through the process, the better we are at designing containment solutions to go along with it. And it kind of sounds simple, but Whatever makes us better engineers makes us more invaluable to our customers. So we see the compositional analysis space as really being a great entryway into innovation for our critical component solutions.

Do you think there's more M&A opportunities in that area?

We definitely believe there's more M&A opportunities in this area, yes.

Great. The only thing we're getting is two outstanding leadership teams. We picked up Sahara at Overlook and also Drew and their team at Alpha. And those are outstanding leadership teams that will add to our talent as well. We're really excited about adding those folks to our team.

Excellent. That's great. We think about this was a slightly elevated CapEx year for you. You've talked about all the investments you were making. We know the growth opportunities with AST. Are you starting to think about CapEx for next year, or are we too early? Are there continued investments that are going to be made into 2026 on the CapEx side? What we think is really strong growth over the next five years.

Yeah, I mean, Steve, we're not ready to give a specific number yet for 2026. I mean, we'll do that when we talk in February, but I think we're going to be in this range for a couple of years now in this kind of three and a half to four and a half percent of sales. I mean, we continue to have good, strong areas of organic growth opportunity, and we're excited to invest behind them in both businesses. I mean, Eric talked about a few of them in ceiling, in aerospace space, commercial vehicle for new platform innovation. These are all areas that are continuing to add to our ceiling growth algorithm. And then in AST, right, they're playful with what we're doing in Singapore, Taiwan, the U.S., continued build out of next phases of Arizona. So we expect this to continue to be in this range as long as we have, you know, a consistent pipeline of organic growth areas to invest in.

Can you talk about your outlook now for, I know nuclear and commercial space were big contributors this year, nuclear not so much this quarter, but that sounds like a timing issue. Can you talk about your positioning in those two markets?

Yeah, we're still really excited about it. I can give you a little bit of a specific example. Brad Lodge leads our technetics group and they launched what they call Mission One. That's a couple of space companies that are doing some exciting work and recently challenged us with getting some new parts and new production up and out as quick as possible. And speed is very, very important because they're moving so fast. We actually were able to purchase equipment, getting in place, and produce new parts in nine weeks, which is crazy quick. Crazy quick. Usually that thing is 26 weeks just to get material. But to be producing good parts in nine weeks and ramping up production in that part of time is crazy fast. That team is doing outstanding, and those days are going to get better and better. So we're excited about our nuclear business and our space business.

That's great. Thanks, everyone.

Thanks, Steve.

Thank you. As a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of Ian Zafina with Oppenheimer and Company. Please proceed with your question.

Hi, thank you. I just kind of want to understand AST a little bit better here. Can you maybe tell us what the mix of leading edge is, and where is it currently versus, let's just say, a year ago? as far as maybe the growth rates, where do you actually see it eventually going? And when you look at the margins of each, I guess call it at ramp or at maturity or whatever word you kind of choose to use, what do you think margins can be on leading edge versus non-leading edge? Thanks. Thanks.

Yeah, good question. I think historically we've been about 50-50 when you think leading edge and legacy platforms. Obviously, the legacy side of that is where you've seen the most depression of capital equipment spending over the last few years. At the same time, our precision cleaning business has been growing nicely, and we continue to make inroads both in Taiwan and qualification work. on new leading edge nodes as well as ramping up manufacturing in both Taiwan and in our Milpitas California facility. So now we're a little bit lean towards advanced node exposure overall. Although recently the last couple of quarters for some of the supply chain transitions I talked about that even so you're starting to see a little bit of increased semiconductor tools and assembly that's eating into that a little bit. There is a differentiated amount of margin. So what we're now seeing is leading edge as that continues to grow, right, that mixes us up a little bit. But it is currently being offset by the semiconductor legacy tools and equipment that's been stronger in the last two quarters, right, which is still very choppy. I mean, we've seen demand drop. you know, kind of choppy for the last few quarters. We expect that in 4Q. We expect that at least through the first half of next year. As I mentioned before, there are signs and signals of a much stronger WFE picture for the second half of next year. And then longer term, you know, as we talked about, right, this segment has the ability to demonstrate sustainably high 20s, low 30% EBITDA margins, right? And we're focused on the actions necessary to do that. It will be some of that WFE-related capital equipment spending driving a more sustained growth of that part of the segment. It will be continued growth on precision cleaning that helps us get there, as well as our continuous improvement initiatives, you know, and strategic pricing and all the rest of our playbook.

Also, the new stuff coming online is vertically integrated. The legacy stuff is not. So it's just precision machining, and that doesn't have the same margin profile as the stuff coming. So the stuff that's coming has still any qualification before revenue, but that will also help as we go forward.

Okay. And then, you know, on nuclear, how are we thinking about the non-French business? You know, where are you kind of seeing maybe potentials pockets of strength or of, of future strength. And I guess what I'm asking is, you know, you mentioned data centers, you know, nuclear is kind of, they've been floating around, you know, things like small, you know, modular reactors. I know there's, there's talk about an AP 1000, you know, coming online. Um, maybe talk about your, your view of that, that market in general, um, And where would you be on that value chain, and where would you be as a player in that space? Thanks.

We're excited about the market as it develops. Of course, it's still a ways away. When it comes, we're very well positioned to participate. Of course, as you know, we seal the reactor presser vessels and the plants, and we'll continue to do that. We work with all the leading companies that do that work, and I'd just say we're well positioned as soon as it takes off. There isn't anything that we need to do differently. We just need the market to develop and we'll develop along with it.

At the margin, when we see certain containment solutions on small modular reactors or new capacity, there's the general trend for those customers to come to us for certain containment solutions over time.

Okay, and just as a follow-up, does it matter if it's like an SMR or, you know, a larger, like an AP1000 or anything like that? Does that matter, you know, how that market kind of forms as it relates to MPRO in general?

Not really. The difference is, of course, the size of the seals is a little smaller, so it's not as large of a volume, but there's also more of them. So, not really. I wouldn't say it has any significant impact. Just as the industry grows, we'll grow with it. Okay. Thank you very much.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Gentile for any final comments.

As you heard, I mean, it's such a pleasure to, again, report solid results. The energy around the organization is exciting. We're investing in a number of growth opportunities across the company, and we're excited to update you in February when we report Q4 and our perspectives for 2026.