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ALBANY INTERNATIONAL CORP /DE/ (AIN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue fell 11.3% year over year to $286.9M, with GAAP diluted EPS of $0.56 and Adjusted EPS of $0.58; softness was driven by AEC program EAC adjustments and lower LEAP volumes, while MC remained resilient .
  • Adjusted EBITDA declined to $50.0M (17.4% margin) from $75.0M (23.2%) a year ago, with MC margin compression from Heimbach mix and AEC impacted by CH‑53K and Gulfstream EAC resets .
  • Strong cash generation remained a highlight: Q4 free cash flow was $59.3M; net debt ended at $203.2M (0.88x net leverage) .
  • Capital allocation: AIN repurchased $15M of shares in Q4 and authorized a new $250M buyback program; the Board also declared a $0.27 quarterly dividend payable April 7, 2025 .
  • 2025 initial guidance calls for total revenue of $1.165–$1.265B, Adjusted EBITDA of $240–$260M, diluted EPS of $3.00–$3.40, and a ~31% tax rate; management flagged interest expense and tax headwinds and expects earnings to be 60% H2‑weighted .

What Went Well and What Went Wrong

  • What Went Well

    • Cash discipline: Q4 free cash flow of $59M and $137M for FY24, underpinned by working capital improvements; “We exited 2024 with one of our best years on record for cash generation” .
    • MC performance and integration: MC gross margin remained robust at 44.4% despite mix; integration actions at Heimbach are on track with footprint streamlining and synergy run‑rate progress .
    • Capital returns: $15M repurchased in Q4 and new $250M buyback authorization signal confidence in cash generation and balance sheet strength .

  • What Went Wrong

    • AEC resets: Additional EAC adjustments (cumulative catch‑ups) on CH‑53K and Gulfstream pressured AEC margins to 6.8% GP and 6.1% Adjusted EBITDA; consolidated GP fell to 31.5% .
    • Top‑line softness: Consolidated revenue declined 11.3% YoY, with AEC down 25% primarily from LEAP destocking and the CH‑53K/Gulfstream adjustments; MC also saw modest declines in packaging/publication .
    • EPS headwinds: Effective tax rate rose to 28% in Q4 and management guided 2025 to ~31%, alongside ~$5M higher interest expense with swaps expiring, constraining EPS despite EBITDA growth .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$323.6 $298.4 $286.9
Gross Profit ($USD Millions)$119.9 $90.4 $90.3
Gross Margin %37.0% 30.3% 31.5%
Operating Income ($USD Millions)$41.8 $25.2 $24.3
GAAP Diluted EPS ($)$0.97 $0.57 $0.56
Adjusted Diluted EPS ($)$1.22 $0.80 $0.58
Adjusted EBITDA ($USD Millions)$75.0 $53.5 $50.0
Adjusted EBITDA Margin %23.2% 17.9% 17.4%

Segment revenue and margins:

SegmentQ4 2023 Revenue ($M)Q3 2024 Revenue ($M)Q4 2024 Revenue ($M)Q4 2023 Adj. EBITDA Margin %Q3 2024 Adj. EBITDA Margin %Q4 2024 Adj. EBITDA Margin %
Machine Clothing (MC)$191.7 $183.0 $188.1 30.6% 35.2% 28.5%
Albany Engineered Composites (AEC)$131.8 $115.4 $98.8 18.0% 3.1% 6.1%

KPIs and balance sheet:

KPIQ4 2023Q3 2024Q4 2024
Free Cash Flow ($USD Millions)$38.9 $32.0 $59.3
Net Debt ($USD Millions)$283.5 $235.0 $203.2
Net Leverage (x)1.00+ (TTM) 0.91 0.88

Narrative drivers:

  • Q4 revenue down YoY primarily from AEC (LEAP destocking and CH‑53K/Gulfstream EAC resets); MC down modestly on packaging/publication .
  • Q4 gross margin compressed on AEC EAC impacts and lower Heimbach margins at MC .
  • GIS costs allocation changed in Q4, impacting reported segment Adjusted EBITDA margins (no EPS impact) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($B)FY 2025—$1.165–$1.265 Introduced
Adjusted EBITDA ($M)FY 2025—$240–$260 Introduced
Diluted EPS ($)FY 2025—$3.00–$3.40 Introduced
Effective Tax Rate (%)FY 2025—~31% Introduced
Capex ($M)FY 2025—$85–$95 Introduced
MC Revenue ($M)FY 2025—$705–$755 Introduced
MC Adjusted EBITDA ($M)FY 2025—$220–$240 Introduced
AEC Revenue ($M)FY 2025—$460–$510 Introduced
AEC Adjusted EBITDA ($M)FY 2025—$60–$70 Introduced
Diluted EPS cadenceFY 2025—~60% of net earnings in H2; Q2 > Q1 Introduced
Interest expenseFY 2025—+~$5M YoY headwind Introduced
DividendQ1 2025—$0.27 declared; payable Apr 7, 2025 Maintained/Updated cadence
FY 2024 Adjusted EBITDA ($M)FY 2024$230–$250 (Oct 3) $237–$247 (Oct 30) Narrowed (midpoint raised)

Notes:

  • Management highlighted GIS cost allocation effect on reported segment margins starting Q4 2024 and going forward .

Earnings Call Themes & Trends

TopicQ2 2024 (Aug)Q3 2024 (Oct)Q4 2024 (Feb)Trend
LEAP program volumesExpected slightly down in 2024; aligned with Safran; flexible to ramp; Boeing uncertainty Twice‑lowered 2024 plan; cautious on 2025; supply chain balance; maintaining capability Projecting ~$150M LEAP revenue in 2025; destocking in H1; cautious stance; potential H2 ramp Soft near term; potential recovery later
CH‑53K programGrowth driver; ramp inefficiencies affecting margins EAC cumulative catch‑up reduced Q3 margins; underlying sales excluding EAC increasing Further EAC adjustments; new leadership, supply chain and planning improvements to drive margin normalization Reset now; improving operations
Heimbach integration (MC)SAP implemented; footprint consolidation; margin expansion ex‑Heimbach On track; some sales delays from SAP; margin improvement YoY (ex‑Heimbach) Consolidations and divestiture actions; aim for +150 bps MC EBITDA margin in 2025 Progressing; synergy realization
Space/AAM pipelineStrong orders; long‑term agreements; backlog growth Growth in space and emerging platforms offsetting some AEC weakness Signed LTA; confident in medium/long‑term growth; AAM and 3D‑woven focus Building; margin‑accretive mix
Cash/working capital$64M Q2 FCF; net leverage <1x; focus on cash conversion YTD FCF $78M; continued working capital improvement Q4 FCF $59M; 2025 target 90%+ net income conversion; strong balance sheet Strengthening
Tariffs/China exposureNot a major focus in Q2—China exposure de minimis; monitoring tariff risk; no immediate changes Limited direct impact

Management Commentary

  • CEO Gunnar Kleveland emphasized balanced performance with strong MC and operational progress at AEC: “We continue to perform well in both our businesses… record revenues of nearly one and a quarter billion dollars… generated Free Cash Flow of $59 million in the fourth quarter, and $137 million for the full year” .
  • On capital returns: “We repurchased $15 million of shares… The Board has also authorized a new share repurchase program… up to $250 million” .
  • On AEC programs and outlook: conservative LEAP approach; CH‑53K learning curve and material challenges addressed with new leadership and supply chain/planning investments; space and AAM expected to contribute meaningfully .
  • CFO Robert Starr detailed GIS cost allocation to segments and highlighted 2025 headwinds: “Our consolidated EPS remains unchanged, but our Adjusted EBITDA margins for the individual segments will be impacted… interest cost projected to increase by approximately $5 million… tax rate… to 31% in 2025” .

Q&A Highlights

  • AEC margins and ramp: Management targets mid‑to‑high teens over time including GIS; 2025 outlook reflects best EAC estimates now (implied ~13.5%); actions underway to improve .
  • Free cash flow conversion: 2025 cash flow expected ~$90–$120M; internal target is >90% of net income; continued working capital focus .
  • LEAP destocking and cadence: Destocking across the channel in H1; cautious stance tied to Boeing/Airbus; flexibility to ramp quickly with Safran alignment .
  • CH‑53K execution: Added talent and leadership; focus on supply chain planning and frontline training to normalize margins .
  • Tariffs/defense cost focus: China impact de minimis; potential defense cost pressure mitigated by long‑term contracts and volume variability .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q4 2024 and prior quarters were unavailable due to request limits. As a result, we cannot quantify beats/misses versus Wall Street consensus for this recap at this time.
  • Given management’s disclosures, analysts may adjust AEC margin trajectories (reflecting EAC resets and GIS allocation), LEAP revenue cadence (~$150M in 2025), and consolidated EPS for interest/tax headwinds .

Key Takeaways for Investors

  • Cash generation and balance sheet strength are intact; continued working capital progress supports buybacks and dividend while funding AEC ramp investments .
  • Segment narrative bifurcation: MC steady with integration synergies and targeted footprint actions; AEC near‑term reset but building backlog and higher‑margin mix in space/AAM to support medium‑term recovery .
  • 2025 setup: EPS headwinds below the line (interest, tax) temper earnings despite expected Adjusted EBITDA growth; earnings cadence H2‑weighted invites potential intra‑year setup trades around program ramps .
  • LEAP/CH‑53K are key swing factors: cautious LEAP outlook and CH‑53K execution improvements will drive AEC margin progression; monitor Airbus/Boeing updates and Safran production plans .
  • Capital returns are a tangible catalyst: $250M buyback authorization alongside dividend signals confidence in cash flows; repurchase pace will be an important stock driver .
  • Reporting change matters: GIS allocation into segments lowers reported segment Adjusted EBITDA margins without affecting EPS, which may require investor model updates .
  • Corporate actions: Ongoing footprint consolidation (e.g., Italy) and HQ consolidation (Portsmouth, NH) likely deliver cost alignment over time; monitor one‑time charges and timing .

Supporting documents: Q4 2024 8‑K and press release ; Q4 2024 earnings call transcripts – –; Dividend and other press releases ; Q3 2024 8‑K/press release/call – –; Q2 2024 8‑K/call – –.