Enpro Inc.

Greetings, and welcome to the MPRO Q4 2025 Earnings Conference Hall and Webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad, and we ask that you please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It's now my pleasure to talk with Collaborative Chair host, James Gentile, Vice President of Investor Relations for Enpro. Please go ahead, James.

Thanks, Kevin, and good morning, everyone. Thank you for joining us today as we review Enpro's fourth quarter and full year 2025 earnings results and introduce our outlook for 2026. I will remind you that this conference call is being webcast at Enpro.com, where you can find the presentation that accompanies this call. With me today is Eric Ballencourt, our President and Chief Executive Officer, and Joe Broderick, Executive Vice President and Chief Financial Officer. During this morning's call, we will reference a number of non-GAAP financial measures. Tables reconciling these 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, including our current perspectives for full year 2026 guidance 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. 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?

Yeah, good morning. Since launching this next phase of our value trading strategy last year, there's been tremendous pride, motivation, and focus throughout Enpro. The inherent balance and quality of our portfolio shines once again in 2025. Our teams have made considerable progress aligning the organization to our long-term strategic goals by leveraging... by leveraging our core capabilities, engineering expertise to expand new commercial opportunities while steadily finding ways to optimize our foundation. We advanced our strategic goals in the first year of Enpro by growing organically at 7.6%, holding more expanding margins, despite increases in operating expenses supporting growth initiatives, deploying two-thirds of our capital expenditures towards growth and efficiency projects. allocating $280 million toward value-creating M&A with acquisitions, development, and overlook, delivering total shareholder returns above premium peers, achieving and maintaining premium valuation reflective of a differentiated industrial technology franchise. And as a learning organization, each of our colleagues completed a minimum of 16 hours of training and personal development this year. We have a clear line of sight in areas of the business where we can accelerate the growth and profit performance and are excited to work on these value-creating levers again in 2026. Our growth priorities underpinning the EnPro 3.0 strategy remain unchanged and will guide our performance through 2030. Over the long term, we are positioned to generate mid- to high-single-digit organic top-line growth that has strong profitability and return levels. We are targeting mid-single-digit organic growth in ceiling technologies, while at AST we are targeting at least high single-digit organic growth with both segments capable of generating 30% adjusted segment even on margins, plus or minus 250 basis points. Now on to our full year 2025 performance. ENCO performed well in 2025 with sales up 9% to $1.14 billion, strength in aerospace, food and biopharma, firm domestic general industrial performance, as well as improving performance in semiconductor markets for the primary drivers of the 7.6% increase in organic sales. Complementing our strong organic results were the powerful quarter contributions from the acquisitions of Alpha Measurement Solutions and Overlook Industries completed in the fourth quarter of 2025. In addition to the AMI acquisition completed in late 2024, The all-time overlooked teams are energized and are hitting the ground running, and we are delighted with their performance since they joined our in-pro family. We continue to be pleased with this best-in-class performance for our ceiling technology segment. As well, I'm encouraged by AST's steady performance during the choppiness we experienced in semiconductor capital equipment spending over the last few years. In all, we have been able to maintain premium profitability, free cash flow, and solid returns on invested capital despite the persistent weakness we experienced in areas of semiconductor and commercial vehicle OEM demand through 2025, while continuing to invest to support growth programs at AST and throughout the organization. In sealing technologies, disciplined execution and efficient operations drove an adjusted segment EBITDA margin of over 32% for the second year in a row. Our teams are positioning the businesses to drive above-market growth by leveraging our applied engineering capabilities, durable aftermarket characteristics, and specification positions to look for important solutions for our customers in areas where we have clear technology and process advantages. In addition, our pipeline of strategic acquisitions that can expand our capabilities in key growth areas throughout the segment remains robust. possessing premium characteristics that can enhance the growth profile of the segment over time. We will continue to be disciplined in pursuing these opportunities at the right time and at the right value for our business. At ASP, revenue increased nearly 14% with strengths and solutions serving leading edge applications and pockets of recovery in semiconductor capital equipment demand. We continue to proactively invest capital in operating resources throughout 2025. and preparation for new platforms in anticipation of a recovery in semiconductor capital equipment spending. We are encouraged by the recent improved order flow in AST that will begin to be realized in the second half of 2026. We remain well positioned to participate in a stronger semiconductor market in coming periods, while also seeking 80-20 improvements in cost realignment opportunities to drive incremental improvement in segment profitability over time. Thanks to the inherent balance and quality of ENCRO portfolio and the resilience of our business model, 2025 marks another year of robust free cash flow generation. Our cash flows allow us to maintain our strong balance sheet with a net leverage ratio of two times after taking into account the recently completed acquisitions of Alpha and Overlook purchased for $280 million in aggregates. Looking ahead to 2026 and beyond, we have ample financial flexibility to execute on our growth and optimization objectives and deliver premium results for all stakeholders. Under our NPRO 3.0 strategy, we are positioned to accelerate profitable growth through 2030. We are making considerable progress on our key growth priorities and will continue to pursue select strategic acquisitions that fit our strategic characteristics of an NPRO business. Drive incremental long-term growth We have complementary talent, technology and process expertise that expands Enpro's ability to answer critical needs of our customers. The foundation of this strategy is designed to extend our track record of strong shareholder returns and enterprise value growth while creating opportunities for our colleagues to develop and thrive. We have the right positioning and discipline to deliver on these targets. especially as we reinvest in growth nodes across the portfolio and direct continuous improvement to maintain and opportunistically improve profitability. At the same time, with our dual bottom line culture as a cornerstone, we encourage each of our nearly 4,000 colleagues to accelerate their personal growth again in 2026. Our colleagues have made commitments to themselves and their teams to work on leadership and communication skills, financial acumen, psychological safety, and awareness. Our team is ready to continue down this path of value creation as we empower technology with purpose. Joe?