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ALBANY INTERNATIONAL CORP /DE/ (AIN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was dominated by a CH-53K loss reserve and program adjustments ($147.3M pre-tax) that drove a GAAP net loss of $97.8M (-$3.37 diluted EPS) and a revenue miss; underlying adjusted EPS of $0.71 was slightly below S&P Global consensus ($0.73) while adjusted EBITDA margin held at 18.3% .
  • Revenue was $261.4M vs $303.4M consensus and vs $311.4M in Q2 and $298.4M in Q3 2024; the miss was largely from a $46.0M unfavorable revenue impact tied to CH-53K, with Asia weakness in Machine Clothing (MC) offset by LEAP strength in Engineered Composites (AEC) .
  • Management initiated a strategic review of the structures assembly business (Salt Lake City), reached a definitive agreement to conclude the Gulfstream contract, and withdrew full-year 2025 guidance pending outcomes; they intend to reintroduce full-year 2026 guidance with Q4 results .
  • Capital allocation remained active: $50.5M in buybacks, $0.27 dividend declared, free cash flow of $25.7M; net debt rose to $372.3M as total debt reached $480.6M .
  • Stock reaction catalyst: the guidance withdrawal and strategic review (including potential asset sale) are key narrative pivots; de-risking AEC by exiting low-margin structures work while reaffirming competitive positioning in 3D-woven aerospace components should drive estimate revisions and sentiment shifts .

What Went Well and What Went Wrong

What Went Well

  • LEAP program strength: Excluding CH-53K impacts, AEC revenue increased to $132.5M from $128.7M YoY, driven by higher LEAP volumes; AEC adjusted EBITDA margin was 9.6% .
  • Resilient underlying profitability: Adjusted EBITDA of $56.2M and margin of 18.3% despite macro/program headwinds; adjusted EPS of $0.71 .
  • Shareholder returns and liquidity: $50.5M buybacks, $0.27 dividend, FCF $25.7M; ~$93.4M remained on repurchase authorization, ending cash of $108.3M .

Management quote highlights:

  • “We delivered adjusted EBITDA margin of 18.3% through operational discipline, coupled with strong free cash flow of $26 million.” — CEO Gunnar Kleveland .
  • “Our remaining Aerospace portfolio is becoming more strategically aligned…leverages our differentiated advanced technologies and delivers greater returns.” — CEO Gunnar Kleveland .

What Went Wrong

  • CH-53K impact: $147.3M pre-tax loss reserve and program adjustments; revenue was hit by $46.0M, leading to GAAP net loss of $97.8M .
  • MC softness in Asia: Segment revenues down to $175.0M (-4.4% YoY) with margin compression to 31.0% adjusted EBITDA due to further weakening in China .
  • Higher interest expense: $5.9M vs $2.4M prior-year quarter, reflecting increased borrowing costs; consolidated gross profit swung to a loss (-$49.9M) given program charges .

Analyst concerns:

  • Margin trajectory in MC given Asia and Heimbach exits; management cited footprint rationalization and eventual margin improvement as markets normalize .
  • LEAP ramp absorption and steady cost-plus margins; management expects significant ramp in 2026–2027 with steady margins .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$288.8 $311.4 $261.4
GAAP Diluted EPS ($)$0.56 $0.31 $-3.37
Adjusted Diluted EPS ($)$0.73 $0.57 $0.71
Adjusted EBITDA ($USD Millions)$55.7 $51.9 $56.2
Adjusted EBITDA Margin (%)19.3% 16.7% 18.3%
Gross Margin (%) (Adjusted where disclosed)33.4% 31.3% 31.7% (adj)

Actual vs S&P Global consensus:

MetricQ1 2025Q2 2025Q3 2025
Revenue Actual ($USD Millions)$288.8 $311.4 $261.4
Revenue Consensus Mean ($USD Millions)*$294.9$305.1$303.4
Surprise ($USD Millions)-$6.1+$6.3-$42.0
Adjusted Diluted EPS Actual ($)$0.73 $0.57 $0.71
Primary EPS Consensus Mean ($)*$0.622$0.734$0.729
Surprise ($)+$0.11-$0.16-$0.02

*Values retrieved from S&P Global.

Segment breakdown:

SegmentQ1 2025Q2 2025Q3 2025
Machine Clothing Revenue ($USD Millions)$174.7 $180.9 $175.0
Machine Clothing Adjusted EBITDA Margin (%)28.4% 28.9% 31.0%
AEC Revenue ($USD Millions, GAAP)$114.1 $130.5 $86.5
AEC Adjusted Net Revenue ($USD Millions)——$132.5
AEC Adjusted EBITDA Margin (%)13.5% 8.5% 9.6%

KPIs and balance sheet:

KPIQ1 2025Q2 2025Q3 2025
Free Cash Flow ($USD Millions)-$13.5 $17.8 $25.7
Capital Expenditures ($USD Millions)$15.6 $13.9 $18.0
R&D Expense ($USD Millions)$11.9 $12.6 $11.5
Interest Expense, net ($USD Millions)$3.7 $5.2 $5.9
Cash & Equivalents ($USD Millions)$119.4 $106.7 $108.3
Total Debt ($USD Millions)$416.4 $444.7 $480.6
Net Debt ($USD Millions)$297.1 $338.0 $372.3

Guidance Changes

MetricPeriodPrevious Guidance (as of Q2)Current Guidance (Q3)Change
Total Company RevenueFY 2025$1.165B–$1.265B Withdrawn Withdrawn
Adjusted EBITDAFY 2025$240M–$260M Withdrawn Withdrawn
Adjusted Diluted EPSFY 2025$3.00–$3.40 Withdrawn Withdrawn
CapexFY 2025$85M–$95M Withdrawn Withdrawn
Effective Tax RateFY 2025~31% Withdrawn Withdrawn
MC RevenueFY 2025$705M–$755M Withdrawn Withdrawn
MC Adjusted EBITDAFY 2025$220M–$240M Withdrawn Withdrawn
AEC RevenueFY 2025$460M–$510M Withdrawn Withdrawn
AEC Adjusted EBITDAFY 2025$60M–$70M Withdrawn Withdrawn

Management intends to reintroduce full-year 2026 guidance with Q4 results .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
CH-53K programLower EAC adjustments; ramp and process improvements underway Continued investment; EAC adj $7.2M; aiming for ~2/month rate by year-end Full-loss recognition ($147M) and strategic review of structures assembly; exploring exit Strategic de-risking
LEAP programCapacity ready; expecting back-half upside; inventory alignment with Safran Contractual inventory levels; growth expected in H2 Ex-CH-53K, AEC revenue up YoY; stronger LEAP volumes; 2026–2027 ramp Improving
Tariffs/macroMostly insulated; negligible direct impact; regional setups Monitoring; no direct headwinds; defense/hypersonics tailwinds Asia demand weaker (China overcapacity); Europe flattening; Americas stable Mixed
MC footprint & Heimbach integrationFacility rationalization; synergies expected to accelerate into H2 Additional closures; temporary operational disruptions; recovering in H2 Adjusted EBITDA margin 31.0%; Asia weaker; continued optimization Stabilizing with actions
3D-woven & titanium replacementHighlighted as strategic advantage; program wins (Bell 525, JASSM/LRASM) Strong Paris Air Show reception; certification next ~18 months Reinforced as core focus; tech-led growth in defense/hypersonics Positive trajectory
R&D executionR&D ~4% of revenue; material science strategy Elevated R&D; systems upgrade (S/4HANA) R&D $11.5M; advancing next-gen capabilities Sustained investment
Regulatory/legal——Investor alerts in Sep 2025 (multiple law firm investigations) Heightened scrutiny

Management Commentary

  • “We are continuing the transformation… initiated a strategic review of our structures assembly business… Alongside this effort we took decisive action to de-risk our program assumptions which marks an important first step in resolving the issue.” — CEO Gunnar Kleveland .
  • “Exiting these programs would mean our remaining portfolio is substantially de-risked from future charges. All of our remaining programs are performing well and carry attractive margin profiles.” — CEO Gunnar Kleveland (call) .
  • “We delivered adjusted EBITDA margin of 18.3%… coupled with strong free cash flow of $26 million.” — CEO Gunnar Kleveland .
  • “We repurchased $50.5 million of common stock… At quarter end, approximately $93.4 million remained available under the existing share repurchase authorization.” — CFO Willard Station .
  • “Given the ongoing strategic review… we are withdrawing our full-year 2025 guidance… will include a comprehensive 2026 outlook.” — CFO Willard Station .

Q&A Highlights

  • CH-53K decision-making: Management determined “no path to profitability” under current fixed-price contract; took full loss reserve and launched strategic review including potential site sale .
  • 3D-woven opportunities: Strong inbounds across OEMs; near-net shape carbon-carbon parts at attractive cost; focus areas include hypersonics and titanium replacement in commercial/defense .
  • MC margins trajectory: Pressure from Asia and intentional exits; continued footprint rationalization expected to improve cost position once Asia demand normalizes .
  • LEAP ramp and margins: Significant ramp in 2026–2027; cost-plus nature implies steady margins as volume scales .
  • 2026 targets/guardrails: Portfolio sharpening around core technology; stricter contract guardrails for future programs to ensure returns .

Estimates Context

  • Q3 2025 revenue missed S&P Global consensus by ~$42.0M (Actual $261.4M vs $303.4M consensus)*, primarily due to a $46.0M revenue impact from CH-53K loss reserve/program adjustments .
  • Q3 adjusted EPS of $0.71 was slightly below S&P Global Primary EPS consensus ($0.73)*; GAAP EPS was -$3.37 due to the $147.3M pre-tax charge .
  • Trajectory: Q1 was a modest EPS beat with a small revenue miss; Q2 saw an EPS miss but revenue beat; Q3 concentrated charge drove a significant revenue miss with near-consensus adjusted EPS performance.*

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Strategic pivot: Withdrawing FY25 guidance and initiating a review of structures assembly (and Gulfstream exit) signal an accelerated de-risking of AEC; expect estimate resets and narrative shift toward high-return 3D-woven programs .
  • Underlying resilience: Despite program-specific headwinds, adjusted EBITDA margin remained ~18% and FCF improved sequentially; capital returns ($50.5M buybacks) underscore confidence and balance sheet flexibility .
  • AEC growth vectors: LEAP ramp into 2026–2027, missile/hypersonics momentum, and titanium replacement opportunities provide medium-term growth drivers with steadier margins (cost-plus) .
  • MC normalization: Asia weakness (China overcapacity) and Heimbach exits have weighed on margins; footprint optimization should support margin recovery as regional demand stabilizes .
  • Near-term trading setup: Guidance withdrawal and strategic review are likely the primary stock catalysts; watch for Q4 updates on asset review outcomes and reintroduced 2026 guidance .
  • Risk watch: Execution on CH-53K exit/contract modifications, Asia demand, and interest expense trajectory (higher debt load) remain key variables .
  • Action: Position for multi-year AEC mix improvement and MC margin recovery; monitor Q4 disclosure for strategic review conclusions and 2026 financial targets .

Sources

  • Q3 2025 8-K and earnings press release: .
  • Strategic alternatives (Oct 28, 2025): .
  • Q2 2025 8-K/press release and call: .
  • Q1 2025 press release/8-K and call: .
  • Estimates (S&P Global): GetEstimates for AIN (EPS and Revenue consensus for Q1–Q3 2025).