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EI

Enpro Inc. (NPO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue rose 6.0% year-over-year to $288.1M ($0.288B), beating S&P Global consensus; adjusted diluted EPS was $2.03, a slight miss versus consensus; adjusted EBITDA was $71.1M, down 3.9% YoY and below consensus . Revenue estimate: $282.6M*, EPS estimate: $2.10*, EBITDA estimate: $73.9M* (S&P Global) — actuals: $288.1M, $2.03, $71.1M .
  • Segment mix: AST sales up 14.5% with margin pressure from FX and growth investments; Sealing Technologies sales up 1.9% with margin at 33.8% (down 170 bps YoY but up 110 bps sequentially) .
  • Guidance raised: FY25 revenue growth to 5–7%, adjusted EBITDA to $270–$280M, adjusted EPS to $7.60–$8.10 (from low/mid-single-digit revenue, $262–$277M EBITDA, $7.00–$7.70 EPS) .
  • Balance sheet and liquidity improved post-refinancing: $450M notes due 2033 issued; revolver increased to $800M; net leverage at 1.4x; strong FCF ($52.8M in H1) supports Enpro 3.0 investments and potential M&A .

What Went Well and What Went Wrong

What Went Well

  • Broad-based demand strength: aerospace, food & pharma, precision cleaning, and optical coatings drove growth; AST up 14.5% and Sealing modestly higher despite tough comps .
  • Liquidity and capital structure upgraded: $800M revolver and $450M 6.125% notes extend maturities and reduce interest expense outlook; net leverage 1.4x TTM adjusted EBITDA .
  • Raised FY25 guidance on stronger orders and visibility, with specific drivers in aerospace, general industrial, food & biopharma, and an incrementally positive AST outlook; “ample financial flexibility” to execute Enpro 3.0 .

What Went Wrong

  • Margin headwinds from transactional FX and growth investments: company-wide adjusted EBITDA margin fell to 24.7% (−250 bps YoY); AST margin 19.6% (−210 bps YoY) and Sealing margin 33.8% (−170 bps YoY) .
  • Sealing Technologies faced continued weakness in commercial vehicle OEM and timing of nuclear orders; corporate expense rose to $12.1M (vs $10.5M) on incentive comp and health costs .
  • Q2 non-GAAP EPS and adjusted EBITDA modestly missed S&P Global consensus despite top-line beat, reflecting operating expense investments and FX headwinds (details below) .

Financial Results

Consolidated Performance vs Prior Periods and Estimates

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$258.4 $273.2 $288.1
Adjusted EBITDA ($USD Millions)$58.2 $67.8 $71.1
Adjusted EBITDA Margin (%)22.5% 24.8% 24.7%
Adjusted Diluted EPS ($USD)$1.57 $1.90 $2.03
MetricQ1 2025 Consensus*Q1 2025 ActualQ2 2025 Consensus*Q2 2025 Actual
Revenue ($USD Millions)$266.23*$273.2 $282.60*$288.1
Adjusted Diluted EPS ($USD)$1.667*$1.90 $2.097*$2.03
Adjusted EBITDA ($USD Millions)$61.97*$67.8 $73.90*$71.1

Values marked with * are consensus estimates retrieved from S&P Global.

Segment Breakdown (Q2 2025 vs Q2 2024)

SegmentSales Q2 2024 ($M)Sales Q2 2025 ($M)YoY %Adj. Segment EBITDA Q2 2024 ($M)Adj. Segment EBITDA Q2 2025 ($M)Margin Q2 2024Margin Q2 2025
Sealing Technologies$184.0 $187.5 1.9% $65.4 $63.3 35.5% 33.8%
Advanced Surface Technologies (AST)$88.1 $100.9 14.5% $19.1 $19.8 21.7% 19.6%

KPIs and Cash Flow

KPIQ2 2025Note
Operating Income ($M)$45.7 Down vs $48.0 YoY
Corporate Expense ($M)$12.1 Up from $10.5 YoY
Net Leverage (TTM Adj. EBITDA)1.4x Post-refinancing
Total Debt ($M)$465.1 At 6/30/25
Cash & Equivalents ($M)$107.1 At 6/30/25
Cash from Ops (H1) ($M)$73.2 Up from $49.5 YoY
Free Cash Flow (H1) ($M)$52.8 Up from $35.5 YoY
Capex (H1) ($M)$20.4 PP&E + software
Dividend (per share)$0.31 Q3 payment announced

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 2025Low to mid-single-digit 5%–7% Raised
Adjusted EBITDA ($M)FY 2025$262–$277 $270–$280 Raised
Adjusted Diluted EPS ($)FY 2025$7.00–$7.70 $7.60–$8.10 Raised
Normalized Tax RateFY 202525% (context, maintained) 25% (maintained) Maintained
Interest ExpenseFY 2025$34–$36M (prior view) $26–$28M Lowered (post-refi)
DividendOngoing$0.31/quarter $0.31/quarter Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Transactional FX headwindsNot prominent in PR; margins improved in Sealing, AST still soft Minimal direct tariffs; FX commentary limited Explicit FX headwinds: ~$1.9M Sealing, ~$2.8M AST; margin impact described Elevated in Q2, expected to abate
AST growth investmentsContinuous improvement; margin 22.1% Mid-to-high single-digit growth; qualifying AZ; strong precision cleaning Growth OpEx + FX compressed margin to 19.6%; investments in AZ/Milpitas/Taiwan Investment phase; leverage expected in H2
Sealing demand & mixStrong aerospace/nuclear; margin 31.0% Adjusted EBITDA margin 32.7%; pricing/mix helped 33.8% margin; continued CV OEM softness; nuclear timing impacts; sequential margin +110 bps Solid, resilient with aftermarket ballast
Tariffs & supply chainMonitoring; diversified sources “Minimal and manageable”; region-for-region production “Tariff exposures remain minimal and manageable” Stable, low direct exposure
Arizona facility (AST)Introduced; timing risk referenced In qualification; small late-year rev; California near capacity Qualification continuing; early test volumes; leveraging Milpitas Progressing; revenue ramp later
Compositional analysis (AMI)Acquisition in 2024 context Rolling into Sealing growth “Outstanding” performance; capacity expansion, new building Strong secular growth node
Capital allocation/M&ADividend increased; net leverage ~1.6x Active pipeline; patient, diligent Active pipeline; targeting growth nodes (space, biopharma, etc.) Ready with enhanced liquidity

Management Commentary

  • CEO: “Enpro delivered another strong quarter of sales growth driven by a double-digit revenue increase in AST and continued momentum in Sealing Technologies… We enter the second half of the year well positioned” .
  • CEO on guidance raise: “Strength we currently see in aerospace, general industrial and food and pharma orders, as well as an incrementally positive sales outlook for AST” .
  • CFO: “Adjusted segment EBITDA margin [Sealing]… down from last year's high watermark… Continued demand weakness in commercial vehicle OEM… timing of nuclear orders… $1.9M transactional FX headwinds” .
  • CFO on AST: “Operating leverage was absorbed… $2.5M higher operating expenses supporting future growth… transactional foreign exchange headwinds totaling $2.8M” .
  • CFO on interest outlook: “We now expect lower net interest expense of $26M to $28M for 2025 versus… $34M to $36M” .

Q&A Highlights

  • FX headwinds and margin math: Management quantified Q2 transactional FX impacts ($1.9M Sealing; ~$2.8M AST) and noted the magnitude tied to a weaker USD; expect less impact in H2 .
  • Nuclear timing: Q2 was softer after a very strong Q2 last year; underlying nuclear demand remains strong; timing between Q1 and Q3 .
  • AST margin path: Investments in AZ/Milpitas/Taiwan should leverage as revenue ramps; expect better leverage in H2 and into next year .
  • Sealing growth drivers: New OEM wins (auto torque product), space customer wins; strong backlog/book-to-bill in general industrial and food & pharma .
  • AMI (compositional analysis): “Outstanding” growth, capacity expansion and new building underway .
  • M&A pipeline: Active and focused on growth nodes (space, food & biopharma, surface protection/coatings), with disciplined criteria .

Estimates Context

  • Q2 2025: Revenue beat ($288.1M vs $282.6M*), adjusted EPS slight miss ($2.03 vs $2.10*), adjusted EBITDA miss ($71.1M vs $73.9M*) — driven by FX and growth OpEx despite strong top line . Values marked with * are consensus estimates retrieved from S&P Global.
  • Q1 2025: Broad beats (Revenue $273.2M vs $266.23M*; EPS $1.90 vs $1.667*; EBITDA $67.8M vs $61.97M*), reflecting favorable mix, cost control, and strong precision cleaning/Sealing execution .
MetricQ1 2025 Estimate*Q1 2025 ActualSurpriseQ2 2025 Estimate*Q2 2025 ActualSurprise
Revenue ($M)266.23*273.2 +$6.97M282.60*288.1 +$5.50M
Adj. Diluted EPS ($)1.667*1.90 +$0.2332.097*2.03 −$0.067
Adj. EBITDA ($M)61.97*67.8 +$5.83M73.90*71.1 −$2.80M

Values marked with * are consensus estimates retrieved from S&P Global.

Key Takeaways for Investors

  • Top-line resilience with mix improving in leading-edge exposure: Expect continued strength in aerospace, food & biopharma, precision cleaning, and optical coatings; AST growth likely leverages in H2 as investments ramp .
  • Near-term margin watch: FX volatility and growth OpEx compressed Q2 margins; management expects FX impact to moderate, and H2 incremental margins to improve as revenue scales .
  • Guidance credibility improved: Raised FY25 ranges and lowered interest expense outlook post-refinancing; liquidity ample with net leverage 1.4x and $770M revolver capacity .
  • Sealing durability: Aftermarket ballast and strategic pricing support high-30% margin profile within guidance; watch CV OEM weakness and nuclear delivery timing .
  • Strategic nodes (AMI, space, Arizona): Execution milestones in qualification and capacity expansions are medium-term catalysts for AST margin recovery toward longer-term 30% target over time .
  • Capital deployment optionality: Enhanced balance sheet supports organic investments and selective M&A in targeted growth nodes (space, biopharma, surface technologies) .
  • Trading lens: Expect stock to react favorably to top-line beats and guidance raise; monitor near-term margin trajectory and FX; H2 execution on AST leverage and Arizona qualification will be key narrative drivers .