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ALBANY INTERNATIONAL CORP /DE/ (AIN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $311.4M, down 6.2% YoY but above S&P Global consensus ($305.1M), while GAAP diluted EPS of $0.31 and adjusted EPS of $0.57 missed consensus ($0.734), driven by AEC EAC adjustments and FX losses [GetEstimates:Q2 2025]*.
  • Machine Clothing (MC) margin improved to 46.3% despite volume and Asia demand headwinds; AEC gross margin fell to 10.5% on $7.2M cumulative EAC charges (primarily CH‑53K) .
  • Free cash flow improved sequentially to $17.8M (from -$13.5M in Q1), net debt rose to $338.0M (share repurchases $120.4M YTD), and net leverage ratio ended at 1.60x .
  • Management reaffirmed full‑year 2025 guidance (revenue $1.165–$1.265B; adj. EBITDA $240–$260M; adj. EPS $3.00–$3.40), citing stronger H2 from AEC ramp and MC shipment recovery; CFO transition announced (Willard Station appointed, effective Sep 1) .
  • Narrative catalysts: reaffirmed guide despite margin pressure, sequential AEC revenue growth, CH‑53K ramp toward ~2/month by year‑end, S/4HANA upgrade, and 3D woven titanium‑replacement opportunities highlighted at Paris Air Show .

What Went Well and What Went Wrong

  • What Went Well
    • MC margin resilience and sequential growth: MC gross margin rose to 46.3% (+40 bps YoY) despite lower volume; CEO: “MC…delivered expected returns… and showed growth from the first quarter” .
    • AEC sequential revenue growth (+14% QoQ) on key programs; planning and supply chain “aligned with the rapid growth” of CH‑53K .
    • Cash generation improved QoQ: Q2 free cash flow $17.8M versus Q1 -$13.5M; TTM net leverage manageable at 1.60x .
  • What Went Wrong
    • EPS miss and margin compression: Adjusted EPS $0.57 vs $0.734 consensus; consolidated gross margin fell 260 bps YoY to 31.3% on AEC EAC charges [GetEstimates:Q2 2025]*.
    • AEC profitability below expectations: Q2 gross margin 10.5% (17.0% LY) with $7.2M negative EAC, mainly CH‑53K; management acknowledged underestimated overhead rates .
    • Operational disruptions at MC and Asia softness: unplanned equipment downtime delayed shipments; reduced Asia demand pressured MC revenue (-6.5% YoY) .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$331.994 $288.774 $311.399
GAAP Diluted EPS ($)$0.79 $0.56 $0.31
Adjusted Diluted EPS ($)$0.89 $0.73 $0.57
Gross Margin %33.9% 33.4% 31.3%
Operating Income ($USD Millions)$42.905 $28.263 $22.270
Adjusted EBITDA ($USD Millions)$63.082 $55.718 $51.882
Free Cash Flow ($USD Millions)$63.616 -$13.478 $17.780
SegmentQ2 2024Q1 2025Q2 2025
MC Revenue ($USD Millions)$193.578 $174.697 $180.926
MC Gross Margin %45.9% 45.7% 46.3%
AEC Revenue ($USD Millions)$138.416 $114.077 $130.473
AEC Gross Margin %17.0% 14.5% 10.5%
KPIJun 30 2024Dec 31 2024Jun 30 2025
Net Debt ($USD Millions)$260.618 $203.248 $337.997
KPITTM Jun 30 2025
Net Leverage Ratio (Net Debt / TTM Adj. EBITDA)1.60

Estimates vs Actuals (S&P Global consensus):

MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD Millions)305.1*311.4
Adjusted EBITDA ($USD Millions)60.0*51.9
Primary EPS ($)0.734*0.57
# EPS / Revenue Estimates4*—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Total Company RevenueFY 2025$1.165B–$1.265B $1.165B–$1.265B Maintained
Effective Tax RateFY 2025~31% ~31% Maintained
Capital ExpendituresFY 2025$85M–$95M $85M–$95M Maintained
Adjusted Diluted EPSFY 2025$3.00–$3.40 $3.00–$3.40 Maintained
Adjusted EBITDA (Total Co.)FY 2025$240M–$260M $240M–$260M Maintained
MC RevenueFY 2025$705M–$755M $705M–$755M Maintained
MC Adjusted EBITDAFY 2025$220M–$240M $220M–$240M Maintained
AEC RevenueFY 2025$460M–$510M $460M–$510M Maintained
AEC Adjusted EBITDAFY 2025$60M–$70M $60M–$70M Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AEC margins & EAC adjustmentsQ4: significant EAC on CH‑53K and Gulfstream; outlook for mid‑to‑high teens margins over time . Q1: “lower EAC adjustments” versus prior quarters .$7.2M negative EAC (CH‑53K $8.1M; offset Gulfstream +$1.6M); management underestimated overhead, investing in labor/training .Improving processes, but near‑term margin pressure persists.
LEAP ramp & inventoryQ4: cautious on Boeing; LEAP ~ $150M for 2025; destocking expected .Contractual inventory reached; aligned with Safran; capacity to meet upside .Gradual recovery; cautious optimism.
CH‑53K rampQ4: large, profitable long‑term program; EAC reset . Q1: process improvements underway .Controlled ramp; target ~2 per month by year‑end; tooling in place .Ramping with disciplined execution.
MC footprint & HeimbachQ4: integration; consolidations; divest noncore Italy . Q1: integration benefits expected to accelerate in H2 .Two additional facility closures; transfer ramp lag caused temporary shortfalls; Asia demand soft .Ongoing optimization; near‑term operational impacts.
Tariffs/macroQ4: uncertainty; China exposure de minimis . Q1: not materially affected; regional setup insulates .Monitoring; mostly insulated; expect growth as tariff environment stabilizes .Manageable risk.
3D woven titanium replacementQ4: proprietary materials science advantage .Paris Air Show example (A350 brake brace); certification ~18 months; active dev with Airbus/Safran .Building pipeline and validation.
Advanced Air Mobility & hypersonicsQ4: growth opportunities; investments . Q1: new wins; process improvement .Sequential growth; Beta demand in 2025; hypersonics milestones .Positive momentum.
Systems upgrade—S/4HANA completed; analytics to improve agility .Capability uplift.

Management Commentary

  • “Our second quarter financial results lagged our expectations, but the performance was largely impacted by certain timing and operational issues and we are confident in our recovery” — Gunnar Kleveland, CEO .
  • “In Machine Clothing… the business delivered expected returns on the lower volume and showed growth from the first quarter. AEC delivered strong sequential quarter growth” .
  • Tariffs: “Our mostly regional setup… largely insulate our operations from direct impact of tariffs” .
  • CH‑53K: “We’re… working towards that two per month rate… towards the end of this year” .
  • Technology: 3D woven composites as titanium alternative showcased at Paris Air Show; certification ~18 months .
  • Operations: S/4HANA upgrade completed in May to enhance analytics and agility .

Q&A Highlights

  • Guidance reaffirmation: Management expects better H2 on AEC ramp, MC shipment recovery, and operational efficiencies; holding full‑year guide despite Q2 margin pressure .
  • AEC margin bridge: Additional EAC driven by underestimated overhead for CH‑53K; investments in coaching/training improving output and quality .
  • Program cadence: Growth in Bell 525, JASSM/LRASM, and engine programs at Boerne/Carré as Airbus/Boeing ramp; JSF flat near term .
  • LEAP dynamics: Channel destocking weighed in first half; alignment with Safran and capacity to flex with demand .
  • 3D woven roadmap: Validation examples with Airbus/Safran; certification timeline and focus on new programs with material science differentiation .

Estimates Context

  • Q2 2025: Revenue beat ($311.4M vs $305.1M*), but adjusted EPS missed ($0.57 vs $0.734*); adjusted EBITDA below ($51.9M vs $60.0M*) amid EAC charges and FX losses [GetEstimates:Q2 2025]*.
  • Forward view: Consensus implies modest sequential improvement in H2 (Q3 2025 EPS ~$0.729*, revenue ~$303.4M*), consistent with management’s stronger H2 narrative [GetEstimates:Q3 2025]* .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mix of beat/miss: Revenue beat but EPS/EBITDA miss tied to AEC EAC adjustments and FX revaluation; watch AEC execution and EAC normalization trajectory .
  • MC durability: Margin strength and backlog support into H2 despite Asia softness and temporary downtime; footprint optimization should lift profitability longer‑term .
  • H2 catalyst path: CH‑53K ramp toward ~2/month, LEAP destocking abating, defense/commercial program growth (Bell, JASSM/LRASM, engines) underpin improved H2 performance .
  • Cash and capital allocation: Sequential FCF improvement; net leverage at 1.60x provides flexibility, though net debt stepped up with $120.4M repurchases YTD .
  • Guidance confidence: Reaffirmed 2025 ranges despite Q2 margin headwinds; operational improvements and integration synergies are key to delivering midpoints .
  • Strategic tech optionality: 3D woven composites and hypersonics offer medium‑term growth drivers; certification and adoption milestones to watch .
  • Governance/leadership: New CFO (effective Sep 1) adds OEM and finance depth; continuity supported by interim CFO JC Chetnani .

Additional Notes and Disclosures

  • Non‑GAAP adjustments impacted Q2 EPS: FX revaluation +$0.20, restructuring +$0.06 per share; adjusted EPS $0.57 reconciled from GAAP .
  • Segment EAC detail: Q2 cumulative change in profitability reduced AEC operating income by $7.2M (CH‑53K $8.1M; F‑35 $0.8M; Gulfstream +$1.6M) .
  • Q2 earnings materials: 8‑K 2.02 furnished press release and financials; 10‑Q provides detailed segment and program disclosures; earnings call held July 31, 2025 .

Relevant Q2 2025 Press Releases:

  • “Albany International Reports Second‑Quarter 2025 Results” .
  • “Albany International Corp. Appoints Willard Station as Executive Vice President – Chief Financial Officer” .