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EI

Enpro Inc. (NPO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered resilient top-line and strong profitability: revenue $258.4M (+3.7% YoY), adjusted EBITDA $58.2M (+24.1% YoY) and adjusted EPS $1.57 (+31.9% YoY), driven by excellent Sealing Technologies performance and sequential improvement in AST .
  • Segment mix was pivotal: Sealing sales +10.9% YoY with adjusted segment EBITDA margin at 31.0%; AST sales -6.4% YoY but margins held above 22% and improved sequentially, aided by positive mix and continuous improvement .
  • 2025 guidance introduced: revenue growth low-to-mid single digits; adjusted EBITDA $262–$277M; adjusted diluted EPS $7.00–$7.70; CapEx ~$50M (~4.5% of sales), underscoring investment in growth (Arizona facility, leading-edge nodes) .
  • Capital allocation remains balanced: dividend raised to $0.31 (+3.3%), cash $236.3M, net leverage ~1.6x, and $390M revolver availability support organic and selective M&A catalysts .

What Went Well and What Went Wrong

What Went Well

  • Sealing Technologies executed at a high level: sales +10.9% YoY to $163.0M; adjusted segment EBITDA +31.8% YoY to $50.6M; margin expanded to 31.0%, supported by aerospace, nuclear, pricing, and recovering food/pharma demand .
  • Company-level margin expansion: adjusted EBITDA up 24.1% YoY to $58.2M; adjusted EBITDA margin +370 bps YoY to 22.5% on positive mix, cost mitigation, and lower corporate expense; CEO highlighted “excellent performance in Sealing… and sequential improvement… at AST” .
  • Management tone confident on “Enpro 3.0” growth phase: targeting mid-single-digit Sealing growth and high-single-digit AST growth over time, both capable of ~30% segment EBITDA margins; “positioned to generate mid- to high single-digit top line growth over the long term” .

What Went Wrong

  • AST remains a drag YoY: sales fell 6.4% to $95.6M on continued weakness in semiconductor capital equipment; adjusted segment EBITDA -7.0% YoY; management expects 2025 to remain “choppy” and WFE muted .
  • Commercial vehicle OEM weakness persisted, offset only partially by aftermarket mix; management reiterated steep declines earlier and expects flat-to-slightly up in 2025, limiting top-line in Sealing despite strong margins .
  • Higher growth investments ahead of demand (Arizona qualification) press near-term AST margins; guidance implies AST margins >20% (not yet at the long-term ~30% target) as spending continues in 2025 .

Financial Results

Consolidated Trends (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$271.9 $260.9 $258.4
YoY Revenue Growth %(1.8)% +4.1% +3.7%
GAAP Diluted EPS (Continuing Ops)$1.27 $0.94 $0.66
Adjusted Diluted EPS$2.08 $1.74 $1.57
Adjusted EBITDA ($USD Millions)$74.0 $64.1 $58.2
Adjusted EBITDA Margin %27.2% 24.6% 22.5%
Corporate Expense ($USD Millions)$10.5 $10.3 $13.4
Cash & Equivalents ($USD Millions, period-end)$175.9 $206.9 $236.3
Net Leverage Ratio (x)~2.0x 1.8x ~1.6x

Segment Breakdown

Segment MetricQ2 2024Q3 2024Q4 2024
Sealing Sales ($M)$184.0 $168.6 $163.0
Sealing Adj. Segment EBITDA ($M)$65.4 $55.1 $50.6
Sealing Adj. Segment EBITDA Margin %35.5% 32.7% 31.0%
AST Sales ($M)$88.1 $92.5 $95.6
AST Adj. Segment EBITDA ($M)$19.1 $19.2 $21.1
AST Adj. Segment EBITDA Margin %21.7% 20.8% 22.1%

Estimates vs Actuals

PeriodRevenue ActualRevenue Consensus (S&P Global)EPS ActualEPS Consensus (S&P Global)
Q4 2024$258.4M Unavailable (S&P Global request-limit)$0.66 GAAP; $1.57 Adjusted Unavailable (S&P Global request-limit)

Note: SPGI consensus estimates were not retrievable due to a request-limit error; therefore, estimate comparisons are unavailable.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 2024~Flat YoY (Q2 update) Low-single-digit decline (implied by FY actual -1.0%) Lowered (actual below flat)
Adjusted EBITDA ($M)FY 2024$260–$270 (Q2) $250–$255 (Q3 update) Lowered
Adjusted Diluted EPSFY 2024$7.00–$7.60 (Q2) $6.75–$7.00 (Q3 update) Lowered
Revenue GrowthFY 2025N/ALow-to-mid single digits Introduced
Adjusted EBITDA ($M)FY 2025N/A$262–$277 Introduced
Adjusted Diluted EPSFY 2025N/A$7.00–$7.70 Introduced
CapEx ($M)FY 2025N/A~$50 (~4.5% of sales) Introduced
Dividend per ShareQuarterly$0.30 (prior) $0.31 (+3.3%) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Semiconductor/WFE demandRecovery “pushed to the right”; sequential AST improvement expected; leading-edge cleaning strong; capacity utilization low 2025 expected “choppy”; mid-to-high-single-digit AST growth driven by leading-edge; WFE muted Cautious; gradual vs “hockey stick”
Arizona facility (AST)“About ready” to come online; early revenue possible; qualification pulled into 2024 Initial revenue generated in Q4; continued testing/qualification in 2025; material production in 2026+ Executing; long ramp timeline
Sealing segment momentumRecord margins; aftermarket mix strength; mid-30s margins sustainable; nuclear/aerospace strength Margin >30% expected again in 2025; commercial vehicle OEM flat-to-slightly up; firm food/pharma; Europe general industrial recovery Strong and stable
Tariffs/macro/geopoliticsExposure discussed in risk factors; sourcing and end-markets diversified Minimal tariff impact expected; in-region sourcing; price plans and surcharges mitigate; customer-directed sourcing passes through costs Managed risk posture
Optical filters/AlluxaWeakness noted; diversified end-markets (free-space communications, new space, life sciences) Demand for optical filters expected to improve in 2025 Improving outlook
CHIPS Act/industry supportUncertain timing of Arizona completion and support referenced in risk language Continued investment and qualification; long-term customer ramps tied to advanced nodes Long-term oriented

Management Commentary

  • CEO: “Our strong finish to 2024 was driven by excellent performance in Sealing Technologies and sequential improvement in sales and segment profitability at AST” .
  • CEO on Enpro 3.0: “Positioned to generate mid- to high single-digit top line growth over the long term… both segments capable of generating 30% adjusted segment EBITDA margins, plus or minus 250 basis points” .
  • CFO on Q4 drivers: “Positive mix in both segments, the addition of AMI, the benefits of cost mitigation actions and lower corporate expense were the primary drivers of this year-over-year improvement” .
  • CFO on 2025 guide: “Adjusted EBITDA to be in the range of $262 million to $277 million and adjusted diluted EPS to range from $7 to $7.70 per share… CapEx ~ $50 million” .

Q&A Highlights

  • AST trajectory: Management expects AST to be “flat to slightly down” in 1H25 with a modestly stronger 2H; growth primarily from leading-edge solutions as WFE remains muted .
  • Arizona qualification costs: Accelerated qualification raised Q4 costs but margins benefited from favorable mix; material production volumes expected in 2026 .
  • Tariff risk: Minimal impact anticipated due to in-region sourcing and customer-direction; price actions/surcharges planned to offset .
  • Sealing demand resilience: No slowdown observed despite macro uncertainty; margins expected >30% again in 2025 .
  • CapEx and projects: Higher 2025 CapEx reflects projects paced from 2024 and increased confidence in execution capacity (~$40–$50M normal capacity) .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 (EPS and revenue) were unavailable due to a request-limit error during retrieval; as a result, we cannot formally assess beat/miss versus Wall Street consensus for the quarter. Where estimates may adjust: durable Sealing margins and cautious AST outlook could lead to upward revisions in Sealing profitability assumptions and tempered AST recovery trajectories for 2025 .

Key Takeaways for Investors

  • Sealing Technologies remains the profit engine: mid-30s margin capability demonstrated, with >30% expected in 2025; focus exposure to aerospace, nuclear, food/pharma, and aftermarket mix should sustain profitability even amid OEM volatility .
  • AST is stabilizing with sequential improvements, but 2025 remains choppy; strongest growth tied to leading-edge nodes, advanced chip architectures, and optical filters recovery; expect investment ahead of demand (Arizona) to constrain near-term margins before ramping in 2026 .
  • 2025 guide is prudent: low-to-mid single-digit revenue growth with adjusted EBITDA $262–$277M and adjusted EPS $7.00–$7.70 suggests a balanced plan amid WFE uncertainty—watch execution on qualification and mix to support margins .
  • Balance sheet optionality intact: $236.3M cash, ~1.6x net leverage, and $390M of revolver capacity support ongoing organic investments and disciplined M&A; dividend increase signals confidence and shareholder-friendly posture .
  • Near-term trading lens: resilience in Sealing and margin discipline are likely supportive; AST headlines (Arizona milestones, leading-edge wins) and any industry WFE inflection cadence will be key narrative drivers through 2025 .
  • Medium-term thesis: Enpro 3.0 targets mid/high-single-digit top-line growth with best-in-class margins across both segments; sustained continuous improvement and mix upgrades remain central to achieving the ~30% segment EBITDA margin target over time .