Q3 2023 Albany International Corp Earnings Call
Speaker 1: Good day and thank you for standing by. Welcome to Albany International's third quarter 2023 earnings conference call.
Good day and thank you for standing by welcome to Albany Internationals third quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear it.
Speaker 1: At this time, all participants are in a listen only mode. At Physiospheacist presentation, there will be a question and answers session to ask a question during the session. You'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Do it, draw your question. Please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to you. Speak today, Mr. John Hobbs, director of investor relations. Please go ahead.
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Your question. Please press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Mr. John Hobbs Director of Investor Relations. Please go ahead Sir.
Speaker 2: Well, thank you, Norma. And good morning, everyone. Welcome to Albany International's third quarter 2023 conference call is a reminder for those of you listening on the call. Please refer to our press release issued yesterday afternoon, detailing our quarterly financial results.
Well, thank you Darla and good morning, everyone welcome to Albany Internationals third quarter 2023 conference call.
As a reminder for those of you listening on the call. Please refer to our press release issued yesterday afternoon detailing our quarterly financial results.
Speaker 2: contained in the text of the release is a notice regarding our forward-looking statements and the issue in the use of certain non-GAAP financial measures in their associated reconciliation to GAAP.
Painted in the text of the release is a notice regarding our forward looking statements and the issue and the use of certain non-GAAP financial measures and their associated reconciliation to GAAP.
For the purposes of this conference call those same statements apply to our verbal remarks. This morning.
Speaker 2: Today we will make statements that are forward-looking, that contain the number of risks and uncertainties, which could cause actual results to differ from those expressed or implied.
Today, we will make statements that are forward looking that contained a number of risks and uncertainties, which could cause actual results to differ from those expressed or implied.
Speaker 2: For a full discussion of these risks and uncertainties, please refer to both our earnings release of November 6th, 2023, as well as our SEC filings, including our 10Q.
For a full discussion of these risks and uncertainties. Please refer to both our earnings release of November six 2023, as well as our SEC filings.
Including our 10-Q.
Speaker 2: Now I'll turn the call over to Gunnar Cleveland, our President and Chief Executive Officer, who will provide opening remarks. Gunnar?
Now I'll turn the call over to Cleveland.
Cleveland, our President and Chief Executive Officer, who will provide opening remarks qunar.
Thank you John.
Speaker 2: Good morning and welcome everyone. Thank you for joining our third quarter earnings.
Good morning, and welcome everyone. Thank you for joining our third quarter earnings call I'm pleased to be here today on my first call as president and CEO of Albany International.
Speaker 2: I'm pleased to be here today on my first call as President and CEO of Albany International.
Speaker 2: The company has again produced very good results in the third quarter, with excellent operational execution and positive free cash flow for both the quarter and on a year-to-day basis.
The company has again produced very good results in the third quarter with excellent operational execution and positive free cash flow for both the quarter and on a year to date basis.
Speaker 2: Before we get into the details, I'd like to take a moment to acknowledge Bill Higgins steadfast leadership of Albany as president and CEO through the past several years. While he has retired from his role, he continues to provide guidance and counsel as a member of the company's board of directors.
Before we get into the details I'd like to take a moment to acknowledge bill Higgins steadfast leadership as president and CEO through the past several years. While he has retired from his role it continues to provide guidance and counsel as a member of the company's board of directors.
Speaker 2: My transition has proceeded smoothly and Bill leaves a legacy of a great company with innovative proprietary technologies, businesses that are performing well and a healthy balance.
My transition has proceeded smoothly and bill leaves a legacy of a great company with innovative proprietary technologies.
Is that are performing well and our healthy balance sheet.
Speaker 2: The business fragments each have impressive product quality and exceptional customer service.
The business segments, each have impressive product quality and exceptional customer service.
Speaker 2: And from experience, these elements are the foundation of excellent customer relationships.
I know from experience. These elements are the foundation of excellent customer relationships.
Speaker 2: Continued business opportunities and a sustainable competitive advantage. These factors weighed...
Continued business opportunities and a sustainable competitive advantage.
These factors weighed on my decision to join <unk>.
Speaker 2: I spent my first few weeks getting more familiar with operations, traveling to numerous sites across the business, meeting with our team and having meaningful conversations at all levels of the company from the shop floor to the C-suite. Really spending my time focusing on the technology, operations and getting more familiar with the culture, introducing myself as well as gathering impressions from our customers and the investment community.
I spent my first few weeks getting more familiar with operations traveling to numerous sites across the business meeting with our team and having meaningful conversations at all levels of the company from the shop floor to the C suite.
Really spending my time, focusing on the technology operations and getting more familiar with the culture, introducing myself as well as gathering impressions from our customers and the investment community.
Speaker 2: The company's technologies and track record of innovations really strike me as strategic assets. The same underlying weaving technology is fundamental to the company's businesses and driver of ongoing technical collaboration and industry.
The Companys technologies and track record of innovation really strike me as strategic assets. The same underlying of weaving technology is fundamental to the company's businesses and driver of ongoing technical collaboration that interchange.
Speaker 2: Within aerospace, the push towards lighter weight, more environmentally friendly designs is the number one challenge to be solved for the next generation of commercial aircraft.
Within aerospace the push towards lighter weight more environmentally friendly designs is the number one challenge to be solved for the next generation of commercial aircraft.
Speaker 2: Avones proprietary composite technologies, such as our 3D woven composites, are well positioned to play a role there.
The niche proprietary composite technologies, such as our three D. Woven composites are well positioned to play a role there.
Speaker 2: In machine clothing, it's clear from my conversations with customers value, albony's industry leading product technology and technical experts.
In machine clothing, it's clear from my conversations with the customers.
Customers.
Alban is industry, leading product technology and technical expertise in an industry that places a high value on operational reliability and operating efficiency machine clothing custom tailored and consumable belt.
Speaker 2: In an industry that places a high value on operational reliability and operating efficiency, machine clothing's custom tailoring and consumable belts are a well-earned reputation, helping our customer make the most efficient use of their raw materials, energy, and labor.
Our well earned reputation helping our customer make the most efficient use of their raw materials energy and labor.
Speaker 2: I believe a company's culture and people are the key to success.
I believe our company's culture and people are the key to success.
Speaker 2: Albinase Operational Metrics in Safety Quality and Customer Service indicates to me a well-developed operational discipline. I think of continuous improvement as a lifestyle, which I also see across Albinase Operations.
Albany's operational metrics in safety quality and customer service indicate to me well developed operational discipline I think of continuous improvement as a lifestyle, which I also see across <unk> operations.
Speaker 2: From my operations leadership experience, I know how important on time delivery and quality are to manufacturing operations.
For my operations leadership experience I know how important on time delivery and quality are two manufacturing operations.
Speaker 2: Finding a supplier with the performance of Albany International is very hard.
Finding a supplier with the performance of Albany International is very hard and.
Speaker 2: Well, as a customer, that just makes you want to give them more business. That kind of execution is a great foundation for a long-term and profitable business relationship and profitable growth.
Well, that's a customer that just makes you want to give them more business that kind of execution is a great foundation for our long term and profitable business relationship and profitable growth.
Speaker 2: When you add the technology and innovation that we have to offer to all our customers, I think Albany International is an easy pick.
When you add the technology and innovation that we have to offer to all our customers I think Albany International is an easy pick.
Speaker 2: Our challenge is to deliberately and strategically manage our growth, while not losing sight of operational execution and capital discipline that is foundational to the business long-term success.
Our challenge is to deliberately and strategically manage our growth, while not losing sight of operational execution and capital discipline that is foundational to the business long term success.
Speaker 2: Now let's look at third quarter results we announced last night.
Now, let's look at third quarter results, we announced last night.
Speaker 2: The company completed the acquisition of the Heimbach Group on August 31st of this year. So the GAAP results include one month of Heimbach operations and, of course, expenses associated with the transaction. The details are included in our press release. Rob will review these in more detail in his remarks. Heimbach operations added nearly $16 million of revenue in the MC segment and reduced the segment's operating income by $500,000.
The company completed the acquisition of the Heinbach group.
August 31 of this year. So the GAAP results include one month of <unk> operations.
And of course expenses associated with the transaction. The details are included in our press release robbed will review this in more detail in his remarks.
I'm back operations added nearly $600 million of revenue in the Mcs segment and reduced the segment's operating income by 500000.
Speaker 2: We're reporting gap revenue of 281 million up 7.9% year over year driven by sales growth at AEC and one month of Heimbach results in a...
We are reporting GAAP revenue of 281 million up seven 9% year over year, driven by sales growth at AUC and one month of Heimbach results in M C.
Speaker 2: Gap net income was $0.27 million or $0.87 per share, up from the gap results of third quarter last year of $11 million or $0.34 per share, which incorporated $49 million of pension settlement charges. As expected, Heimbach was slightly diluted to Gap EPS for the quarter, about a penny per share.
GAAP net income was $27 million or <unk> 87 per share up from the GAAP results of third quarter last year of $11 million or 34 cents per share, which incorporate at $49 million of potential pension settlement charges as expected I'm back was slightly dilutive.
GAAP EPS for the quarter about a penny per share.
Speaker 2: Excluding the impact of the Heimberg acquisition, revenue of $266 million was about $5 million or 2% higher than the third quarter of last year, driven by higher revenue at AEC.
Excluding the impact of the <unk> acquisition revenue of $266 million was about $5 million or 2% higher than the third quarter of last year driven by higher revenue at AUC.
Speaker 2: Adjusted EPS was $1.02 per share compared to $1.15 per share reported in third quarter of last year.
Adjusted EPS was $1 <unk> per share compared to $1 15 per share reported in third quarter of last year.
Speaker 2: Adjusted EBITDA excluding Heimbach impact was 63 million or about 24% of sales right on the company's stated long-term target.
Adjusted EBITDA, excluding heinbach impact was $63 million or about 24% of sales right on the company's stated long term target.
Speaker 2: The machine clothing business continues to perform very well, particularly in light up challenging macroeconomic conditions in Europe and China. Excluding the effect of the Hainback acquisition, machine clothing, revenue of 151 million was about 2% lower on the currency neutral basis, while it just did EBITDA, again, excluding the effect of the acquisition on this measure was 56 million. This translates to 37.
The machine clothing business continues to perform very well, particularly in light of challenging macroeconomic conditions in Europe, and China, excluding the effect of behind back acquisition machine clothing revenue of 151 million. It was about 2% lower on a currency neutral basis wallet just did EBITDA again, excluding the effect of the acquisition.
This measure was 56 million this translates.
237% margin.
Speaker 2: North American markets continue to report sales growth year over year while sales decline in other regions of the globe.
North American markets continued to report sales growth year over year, while sales declined in other regions of the globe.
Speaker 2: The Heimbach integration is underway and proceeding as planned. Our segment president, Daniel Heftenmaier, and his expanded team have been focusing on workforce engagement, ensuring operational stability and financial integration in these first few weeks. We have a clear line of sight into the cost savings and efficiency opportunities that the company previously announced and expect acquisition will become accretive to earnings and cash flow in 2025.
The <unk> integration is underway and proceeding as planned our segment precedent Danielle have to Meir and has expanded team.
Had been focusing on workforce engagement and sharing operational stability and financial integration. In these first few weeks, we have a clear line of sight into the cost savings and efficiency opportunities that the company previously announced and expect the acquisition will become accretive to earnings and cash flow in 2025.
Speaker 2: The aerospace composites business had a very good third quarter. Revenues of 115 million were up 6% year-over-year on the constant currency base.
The aerospace composites business had a very good third quarter revenues of $115 million were up 6% year over year on a constant currency basis.
Speaker 2: Adjusted EBITDA of 22 million was up about 3%.
Adjusted EBITDA of $22 million was up about 3%.
Speaker 2: The business is well positioned and continues to win new programs, both commercial and defense, from existing and new customers.
<unk> is well positioned and continues to win new programs, both commercial and defense from existing and new customers.
Speaker 2: This will collectively contribute to AEC's long-term growth over the coming years.
This will collectively contribute to ASE as a long term growth over the coming years.
Speaker 2: The company is executing well. It is in great financial help, and it is well-positioned with unique technologies and know-how across the businesses. We are in an...
The company is executing well it is in great financial health and it is well positioned with unique technologies and know how across the businesses. We are in an enviable position.
Speaker 2: We will continue pursuing continuous improvement across all of our operations. We expect to deliver the benefits of the Humbark integration as planned. We're investing wisely today in technology development that will position the company to properly grow well into the next decade. I'm excited. I'm excited.
We will continue pursuing continuous improvement across all of our operations, we expect to deliver the benefits of the heimbach integration as planned.
We're investing wisely today in technology development that will position the company to profitably grow well into the next decade.
I am excited about the opportunities.
Speaker 2: And with that, I will hand the call over to Rob to review the results in more detail and provide our updated guidance for the year.
And with that I will hand, the call over to Rob to review the results in more detail and provide our updated guidance for the year.
Speaker 3: Thank you and good morning. Everyone I will now turn to our 3rd quarter results and then provide our updated outlook for the year.
Rob.
And good morning, everyone.
I'll now turn to our third quarter results and then provide our updated outlook for the year.
Speaker 3: As Gunnar mentioned earlier, we are reporting gap net sales of 281 million. Up 7.9% from the third quarter of last year.
As <unk> mentioned earlier, we are reporting GAAP net sales of $281 million up.
Seven 9% from.
From the third quarter of last year.
Speaker 3: Excluding currency translation effects and the one month of Heimbach sales, Revenue growth for Albany was 2% versus the prior year period.
Excluding currency translation effects and the one month of <unk> sales revenue growth for Albany was 2% versus the prior year period.
Speaker 3: Machine clothing net sales, including high-box decline 1.5%, higher sales and packaging and tissue product lines were offset by contraction across our other product lines, most notably in pulp and engineered fabrics.
Machine clothing that sales, excluding heimbach declined one 5% higher sales in packaging and tissue product lines were offset by contraction across our other product lines, most notably in pulp and engineered fabrics.
Speaker 3: Compared to a year ago, European markets were clearly softer, while Asian markets have been mixed.
<unk> two a year ago European markets are clearly softer while Asian markets have been mixed.
Speaker 3: The North American market continues to perform well with modest growth over the prior year period.
The North American market continues to perform well with modest growth over the prior year period.
Speaker 3: Engineer composite net sales of 115 million grew 5.7% on a constant currency basis compared to the third quarter of 2022. Driven principally by year over year growth on the LEAP, 787 and various space programs.
Engineered composites net sales of 115 million grew five 7% on a constant currency basis compared to the third quarter of 2022.
Driven principally by year over year growth on the leap 787, and various space programs.
Speaker 3: This was partially offset by a lower CH53K Revan.
This was partially offset by lower CH 50, <unk> revenues.
Speaker 3: Our CHF3D3K results from the prior year provide a difficult comparison for us as the last year benefited from significant amounts of non-recognitive revenue for the helicopter's AF transition program.
Our CHP <unk> results from the prior year provide a difficult comparison for us as the last year benefited from significant amounts of nonrecurring revenue for the helicopters as transition program.
Speaker 3: The CA 53K non-repearing items largely concluded in second quarter of this year. So we will continue to see tough comparisons through the first half of next year.
The CH 53, K nonrecurring items largely concluded in second quarter of this year. So we will continue to see a tough comparison to the first half of next year.
Speaker 3: Our CH53K program sales will grow as the program moves toward full-rate production.
Our CH 50, <unk> program sales will grow as the program moves towards full rate production.
Speaker 3: The AAC Elite Program generated 45 million of revenue in the third quarter, nearly 5 million higher than the same period last year. We now expect full year AAC Elite revenues to be up approximately 15 million compared to the full year 2022.
The ACL lead program generated $45 million of revenue in the third quarter nearly $5 million higher than the same period last year. We now expect full year <unk> revenues to be up approximately $15 million compared to the full year 2022.
Speaker 3: 2023 Elite revenues are higher than we had previously guided as we manage production efficiencies on the program. Our long-term Elite Revenue target of 200 million for 2026 remains intact.
2023, <unk> revenues are higher than we had previously guided as we managed products production efficiencies on the program. Our long term revenue target of $200 million for 2026 remains intact.
Speaker 3: Third quarter gross profit for the company was 102 million, up 1.4 million or 1.3% from the same period last year.
Third quarter gross profit for the company was $102 million up $1 4 million or one 3% from the same period last year.
Speaker 3: with an MC higher input cost and lower overhead absorption. We're offset by the incremental gross margin from high box.
Within EMC higher input costs, and lower overhead absorption were offset by the incremental gross margin from heimbach.
Speaker 3: Excluding Heimbach, Machine Clothing's gross margin was 50.7%, very similar to the 50.8% we reported in the first two quarters of this year, and down about 100 basis points on a year-over-year basis.
Excluding heinbach machine clothing gross margin was 57% very similar to the 58% we reported in the first two quarters of this year and down about 100 basis points on a year over year basis.
Speaker 3: At AEC, gross profit expended 1.3 million or 6.2%. During the quarter, we recognize a net favorable change in the estimated profitability on long-term contracts of 900,000 compared to a favorable change of 2.6 million in the third quarter of last year.
At AUC gross profit expanded $1 3 million or six 2% during the quarter. We recognized a net favorable change in the estimated profitability on long term contracts of 900000 compared to a favorable change of $2 6 million in the third quarter of last year.
Speaker 3: AEC's gross margin was 19.7 percent, similar to the same period last year.
<unk> gross margin was 19, 7% similar to the same period last year.
Speaker 3: Third quarter R&D spend of approximately 10 million was largely unchanged from the prior year and excluding the Heimbacher revenues represented about 3.5% of sales.
Third quarter R&D spend of approximately $10 million was largely unchanged from the prior year and excluding the heimbach revenues represented about three 5% of sales.
Speaker 3: Third quarter SDNA expenses were 52 million, up 15 million from the third quarter last year. A number of factors for the...
Third quarter SG&A expenses were $52 million up 15 million from the third quarter last year.
A number of factors drove the year over year increase.
Speaker 3: Machine clothing SGNA increased 6.5 million, principally driven by Heinbach SGNA expenses, and 2.3 million from currency translation effects.
Machine clothing, SG&A increased $6 5 million, principally driven by Heimbach, SG&A expenses and $2 3 million from currency translation effects.
Speaker 3: AEC SG&A was 1.9 million higher on increased incentive comp and personnel related costs.
AUC SG&A was $1 9 million higher on increased incentive comp and personnel related costs.
Speaker 3: Corporate expenses increased 6.4 million, principally due to acquisition related expenses, CEO transition expenses, incentive compensation, as well as IT investments in support of our CMMC requirements.
Corporate expenses increased $6 4 million, principally due to acquisition related expenses CEO transition expenses incentive compensation as well as investments in support of our CMC requirements.
Speaker 3: Gap net income attributable to the company for the quarter was $27 million compared to nearly $11 million last year. As indicated earlier, Heimbach reduced net income by approximately $500,000.
GAAP net income attributable to the company for the quarter was $27 million compared to nearly $11 million last year.
As indicated earlier <unk> reduced net income by approximately 500000.
Speaker 3: Gap earnings per share was 87 cents in this quarter compared to 34 cents in the same period last year. After adjusting for the impact of CEO transition costs, acquisition and integration costs, purchase accounting adjustments on this quarter's result and other adjustments detailed in our non-gap reconciliation. Adjusted EPS was a dollar to this quarter compared to a dollar 15 last year.
GAAP earnings per share was <unk> 87 in this quarter compared to 34 cents in the same period last year.
After adjusting for the impact of CEO transition costs acquisition and integration costs purchase accounting adjustments on this quarter as a result, and other adjustments detailed in our non-GAAP reconciliations.
Adjusted EPS was $1 two this quarter compared to $1 15 last year.
Speaker 3: Adjusted evid dial of 64.7 million declined 3.4 million from the third quarter of 22. Machine clothing adjusted evid dial was 67.5 million or 34.5% of net sales.
Adjusted EBITDA of $64 7 million declined $2 4 million from the third quarter of 'twenty two.
<unk> clothing, adjusted EBITDA was $57 5 million or 34, 5% of net sales.
Speaker 3: That is down about 1.5 million from 59 million in the prior year quarter.
That is down about $1 5 million from $59 million in the prior year quarter.
Speaker 3: AEC adjusted EBITDA was 22.1 million or 19.3% of net sales, up about 600,000 from last year's results.
AUC adjusted EBITDA was $22 1 million or 19, 3% of net sales.
Up about 600000 from last year's result.
Speaker 3: During the quarter, the company generated 45 million of free cash flow. Cash flow from operating activities was 59 million and capital expenditures totaled 14 million.
During the quarter the company generated $45 million of free cash flow cash flow from operating activities was $59 million and capital expenditures totaled $14 million.
Speaker 3: Net cash consideration from High Lock was 133 million.
Net cash consideration from <unk> was $133 million.
Speaker 3: We remain in a strong financial position with a cash balance of $172 million and well over $300 million of additional liquidity under our committed credit facility.
We remain in a strong financial position with a cash balance of $172 million and well over $300 million of additional liquidity under our committed credit facility, we closed the quarter, having refinanced our credit facility for another five years with a maturity into 2028, and we upsized the facility to $800 million.
Speaker 3: We close the quarter having refinance our credit facility for another 5 years with a maturity into 2028. And we upside the facility to 800 million.
Speaker 3: Our net leverage at the end of the quarter was a modest 1.3 times, providing us the flexibility to continue pursuing our long-term growth strategy.
Our net leverage at the end of the quarter was a modest one three times, providing us the flexibility to continue pursuing our long term growth strategy.
Speaker 3: I would like to now turn to our outlook for the full year.
I would like to now turn to our outlook for the full year.
Speaker 3: Please note that our full year guidance for the machine clothing segment includes four months of Heinbach operation.
Please note that our full year guidance for the machine clothing segment includes four months of Heimbach operations.
Speaker 3: Please also note for modeling purposes, we will incur 5.5 million of inventory step up for the full year 2023 relating to the transaction. The inventory step up will be.
Please also note for modeling purposes, we will incur $5 5 million of inventory step up for the full year of 2023 relating to the transaction.
The inventory step up will be complete by year end.
Speaker 3: Heimbach's estimated annual DNA, including the impact of purchase accounting, will be approximately 12 to 13 million going forward.
Hi, Inbox estimated annual G&A, including the impact of purchase accounting will be approximately 12% to $13 million going forward.
Speaker 3: Machine clothing business conditions soften somewhat during the third quarter. On a constant currency basis, we experienced demand growth in packaging and tissue product lines, while the other product lines were lower. Business conditions in Europe are clearly soft relative to the past few years, while Asian markets are mixed with the Americas growing modestly.
Machine clothing business conditions softened somewhat during the third quarter on a constant currency basis, we experienced demand growth in packaging and tissue product lines, while the other product lines were lower.
Business conditions in Europe are clearly soft relative to the past few years, while Asian markets are mixed with the Americas growing modestly.
Speaker 3: What are at the end of the quarter were lower than they were at the same time last year? We will have a full quarter of Heinbach operations in the fourth quarter and as a result, expect revenues to increase sequentially and year of year.
What are as at the end of the quarter were lower than they were at the same time last year, we will have a full quarter of heinbach operations in the fourth quarter and as a result expect revenues to increase sequentially and year over year.
Speaker 3: We are raising machine clothing's revenue guide to a range of 660 to 670 million. Increasing approximately 50 million, including the estimated contribution from high box.
We are raising machine clothing revenue guide to a range of $660 $670 million, increasing approximately $50 million, including the estimated contribution from Heinbach.
Speaker 3: We continue our efforts to offset inflationary impacts through ongoing continuous improvement efforts and input cost management.
We continue our efforts to offset inflationary impacts through ongoing continuous improvement efforts and input cost management.
Speaker 3: As a result of the Heimbach acquisition, we are revising our adjusted EBITDA guidance range for machine clothing to 215 to 225 million.
As a result of the <unk> acquisition, we are revising our adjusted EBITDA guidance range for machine clothing to $215 million to $225 million.
Speaker 3: As is typically the case, machine closings fourth quarter revenues and even DAW results will be modestly lower than the prior quarters.
As is typically the case machine clothing fourth quarter revenues and EBITDA results will be modestly lower than the prior quarters.
Speaker 3: Turning to engineer composites, as mentioned earlier, we expect the AAC LEAP program to generate approximately 10 to 15 million more revenue in 2023 than we had originally guided.
Turning to engineered composites as mentioned earlier, we expect the ASC elite program to generate approximately 10 to 15 million more revenue in 2023 than we had originally guided.
Speaker 3: During the third quarter we stepped up 787 production.
During the third quarter, we stepped up 787 production.
Speaker 3: Based on this, along with growth in smaller programs, we are raising our revenue guidance and now expect a revenue to be between 440 and 460Million.
Based on this along with growth in smaller programs that we are raising our revenue guidance and now expect AUC revenue to be between 440 and $460 million.
Speaker 3: We are now rearing our AEC four-year Adjusted EBITDA guidance to 85 to 90 million.
We are narrowing our AUC full year, adjusted EBITDA guidance to $85 million to $90 million.
Speaker 3: At the total company level, we are updating our 2023 full year guidance as follows.
At the total company level, we are updating our 2023 full year guidance as follows.
Speaker 3: Prevenue between 1.10 and 1.13 billion up 60 million. Our guide will include approximately 50 million top line contribution from four day plans for future
Revenue between $1, one zero and $1 3 billion up $60 million. Our guidance includes approximately $50 million topline contribution from heimbach.
Speaker 3: Adjust the divot dock between 238 and 254 million.
Adjusted EBITDA between 238 and $254 million.
Speaker 3: An effective income tax rate of 32% to 33%, implying an effective tax rate of approximately 28% to 30% in the fourth quarter of the year. Depreciation and amortization, including Heimbach of approximately $75 million.
And effective income tax rate of 32% to 33%, implying an effective tax rate of approximately 20% to 30% in the fourth quarter of the year, depreciation and amortization, including heimbach of approximately $75 million.
Speaker 3: capital expenditures in the range of 85 to 95 million.
Capital expenditures in the range of $85 million to $95 million.
Speaker 3: Gap earnings per share of between $3.02 and $3.37, taking into account approximately 16 cents of dilution from the Heimbach acquisition, largely the result of purchase accounting.
GAAP earnings per share of between $3 <unk> and $3 37.
Taking into account approximately <unk> 16 of dilution from the <unk> acquisition, largely the result of purchase accounting.
Speaker 3: Adjusted earnings for share between $3.35 and $3.70.
Adjusted earnings per share between $3 35, and $3 70.
Speaker 3: The impact of Heimbach is anticipated to be negative four to six cents in the balance of the year.
The impact of Heimbach is anticipated to be negative 4% to <unk>.
The balance of the year.
Speaker 3: With that, let's open the call for questions. Operator.
With that let's open the call for questions operator.
Thank you.
Speaker 1: As a reminder, to ask a question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Please wait for your name to be announced.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press star one again, please wait for your name to be announced.
One moment for your first question.
Speaker 1: Our first question comes from the line of Peter Ostenlund with True Security. Are you still on?
Our first question comes from the line of Peter <unk> with <unk> Securities. Your line is now open.
Speaker 4: Hey, good morning. I'm on for Mike Tromboli this morning. Thanks for taking our questions.
Hey, good morning, I'm on for Mike Trimboli. This morning, Thanks for taking our questions.
So first I just wanted to ask about the guidance around behind block acquisition with 2 million of EBITDA for the year seems to imply a margin of around 4%. So I was just wondering are there any elevated cost pressures there you'd call out or any seasonality that is impacting the margins in the early stages here.
Speaker 4: with 2 million of EBITDA students for the year, seems to imply about margin of around 4%. So I was just wondering, are there any elevated cost pressures there you'd call out or any seasonality that is impacting the margins in the early stages?
Sure Yes, Peter this is Rob.
Good to see you on the call, yes, so as it relates to the high <unk>, we definitely are seeing some level of seasonality.
Speaker 3: And as we published in our materials, when we announced the acquisition, right, for the full year or 22, they were running about 9% EBITDA margins. So to see the fourth quarter, roughly in the range of 5% is not unexpected.
And as we published in our materials, when we announced the acquisition for the full year 'twenty two they were running about 9% EBITDA margin. So you'll see the fourth quarter roughly in the range of 5% is not unexpected and as anticipated we're working with the team.
Speaker 3: And, you know, as anticipated, you know, we're working with the theme and, you know, have a number of actions to really just improve the efficiencies and the margin profile of this.
A number of actions to really just improve the efficiencies and the margin profile of the business.
Speaker 4: Great, makes sense. And then just to follow up I had on the EPS guidance for the year. So the implied fourth quarter range would be 52 to 87%, so it's just seemed like a pretty wide range at this point in the year. So it's just wondering where are the biggest areas of uncertainty or risk that might drive a bit just towards the lower end.
Great makes sense and then just a follow up I had on the EPS guidance for the year. So the implied fourth quarter range would be 52% to 87, SaaS, which just seems like a pretty wide range at this point in the year. So I was just wondering where are the biggest areas of uncertainty or risk that might drive the business towards the lower.
Speaker 3: Yeah, Peter, you know, that's a good question. The 35 cent range is really just a function of the math. If you look at our EBITDA guides, you know, by segment, right? We have about a 10 million dollar range for machine clothing, which is really also accounted for Heimbach, right? You know, we just bought the business, so it's hard to know exactly what they'll deliver. And then it's, you know, five million dollars spread. So if you add those two, you got a 15 million dollar spread, which is really what translates to 35 cents.
The end of the range.
Yeah.
Peter.
Good question.
The 35% range is really just a function of the math if you look at our EBITDA guidance by segment right, we have about a $10 million.
Range for machine clothing, which is really also accounted for heinbach right.
Just.
Bought the business. So it's hard to know exactly what they'll deliver and then $5 million spread. So if you add those two you got a $15 million spread which is really what translates to <unk> 35.
Speaker 3: So in order for us to be below and, you know, both segments would have to perform at the lower end of the range, which, you know, while possibility is certainly not what we're working towards, you know, we have confidence in the operating team. I think what's more relevant here is to look at the mid-range of the guide and if you look at the mid-range where it's 70 cents and if you adjust the hindbock impact of roughly four or five cents in the quarter, we're pretty much right on top of what we delivered last year.
So in order for us to be at the low end.
Both segments would have to perform.
At the lower end of the range, which.
While a possibility it's certainly not what we're working towards we have confidence in the operating team I think that's more relevant here is to look at the mid range of the <unk>.
And if you look at the mid range, we're at 70 cents.
And if you adjust the heinbach impact of roughly 45 in the quarter were pretty much right on top of what we delivered last year.
Alright, I appreciate the color I'll jump back in the queue.
Thank you.
One moment for our next question please.
Speaker 1: Our next question comes from the line of Ron Epstein with Bank of America. Your line is now open.
Our next question comes from the line of Ron Epstein with Bank of America. Your line is now open.
Hi, Good morning. This is Jordan lineup on for Ron.
Hi, Jordan.
Speaker 5: So, looking out towards next year, have you guys started to see any demand uptick from Safran for AEC?
So.
Looking out towards next year have you guys started to see any demand uptick from severance or AUC.
Speaker 2: So we're not ready to guide for 2024. We are looking at a year where we have higher leap.
So we're.
We're not ready to guide for 'twenty to 'twenty four.
We are looking at.
A year, where we have higher leap.
Speaker 2: revenue generation and we expect to continue at that level.
Revenue generation and we expect to continue at that level.
Speaker 5: And then do you have a sense of how much they've burned through the excess inventory they've had earlier through the year?
Okay, and then do you have a sense of.
How much they burn through the excess inventory they've had earlier through the year.
Speaker 2: So inventory is a, there will be inventory at our facility, and there will be inventory at Safran, and there will be inventory at GE.
So inventory is.
As a.
There will be inventory at our facility and there will be inventory at.
So from no inventory at GE.
It's.
Speaker 2: There will be some buffers at each location and I don't have the details on that.
There will be some buffers at each location.
I don't have the details on that yes.
Speaker 3: Yeah, Jordan is 1 of the thing I mean, we, we typically go through an annual process with the friend. Um, you know, as as we start thinking about production volumes and demand levels for next year, we're not we're not there. We don't have information for that. We'll certainly. Update the community as we get on our call.
Yes, George just one other thing I mean, we typically go through an annual process with subprime.
As we start thinking about production volumes and demand levels for next year. We're not we're not there we don't have information for that we'll certainly update the community as we get on our year end call.
Speaker 3: But certainly, we're working very closely with them to make sure that the entire chain is managed appropriately. So that our ultimate and customers get the product that they need to support the demand and commercial aircraft. Thank you guys.
But certainly.
We're working very closely with them to make sure that the entire chain is managed appropriately so that our ultimate end customers get the product that they need to support the demand on commercial aircraft.
Got it thank you guys.
Thank you one moment for our next question. Please.
Speaker 1: Our next question comes from the line of Pete Skabisky with Olympic Global. Your line is open.
Our next question comes from the line of Pizza Kubacki with Alembic Global Your line is open.
Hey, good morning, guys.
Okay great.
Speaker 6: Maybe start with one machine clothing. You guys mentioned some of the softness in Europe and that orders were down. This was one, do you guys, you are very global. Do you have a sense right now with whether the demand of pull and PMC is kind of bouncing along the bottom, if you will, or there's some concern out there I think that the macro is deteriorating and that maybe we'll be in a...
Maybe just start with one on machine clothing, you guys mentioned some of the softness in Europe and that orders were down.
Wondering do you guys you are very global do you have a sense right now with weather.
The demand pull in PMC is kind of kind of bouncing.
Along the bottom if you will or.
There is some concern out there I think that the macro is deteriorating that maybe it will be in a.
Speaker 6: you know take your pick a soft landing or harder recession next year did you guys have any sense of kind of the way things are shaping up for you in terms of the three major you know geographic and market for PMC
Take your pick.
Planning or harder recession next year do you guys have any sense of kind of the way things are shaping up for you in terms of the three major geographic end markets for BMC.
Speaker 2: And it is, if you look at the three markets, it's kind of interesting because in the US, we're seeing growth. And in Asia, we're seeing mixed markets. China seems to be up right now. And then, but Europe is definitely down. Where that takes us through, you know, Fort Quarter and into next year is,
And.
It is.
If you look at the three markets, it's kind of interesting because in the U S.
Seeing growth.
And in Asia, we're seeing mixed markets, China is seems to be up right now.
And then but Europe is definitely.
So down.
Where that takes us through.
Fourth quarter and into next year.
Yes.
Speaker 2: not something we can predict at this point.
Not something we can predict that.
This point, but.
Speaker 2: We're seeing also a shift in the type of product, but I would say that we should expect in the short term now to be similar growth in the US.
We're seeing.
Also a shift in.
The type of.
Product.
But I would say that we should expect in.
In the short term now to basin similar growth in the U S.
Speaker 2: soft in Europe and maybe we should look at China and see if that picks up.
Soft in Europe and.
Maybe we should look at China, and see if that picks up.
Speaker 3: And just I think it's important to really to note that we've been very successful. I mean, if you look at overall demand across publications and some of the grades, those have clearly softened.
And pages I think it's important to really to note that we've been very successful I mean, if you look at overall demand across publications and some other grades those have clearly softened.
Speaker 3: And what really distinguishes our machine clothing business is the ability to generate a pretty consistent level of gross margin.
And what really distinguishes our machine clothing business has the ability to generate a pre.
Consistent level of gross margin.
Speaker 3: really through a various different demand scenarios. So I think Danielle and his team have done a good job. So we'll manage the demand. This is one where the brand and product quality actually should hopefully provide us an advantage in a tough market.
Really through a various different demand scenarios. So I think Danielle and his team have done a good job. So we'll manage the demand I mean, this is one where the brand and product quality actually should hopefully provide us an advantage in a tough market.
Speaker 6: Yeah, yeah, it is cloudy out there, that's for sure. Okay, maybe just one more for me, just switching gears to CH53K. Rob, I don't know if you can share with us, maybe I missed it, what your total revenue for the 53K was this quarter. And then I think, so you'll be at zero next year, I think you've said that before, in NRE for the 53. And I'm just wondering if we should expect.
Yeah, Yeah. It is cloudy out there that's for sure.
Okay, maybe just one more for me just switching gears.
CH 53 K.
Rob I don't know if you could share with us maybe I missed it what your total revenue for the 53 K was this quarter.
And then I think you'll be at zero next year, I think you've said it before and I'll re for the 53.
And I'm just wondering if we should expect.
Speaker 6: You know, because I know Lockheed got a pretty sizable, I think either L-RIP or production contract for CH-53K. So it seems like production volume should be up for you guys next year. I'm wondering if it'll all kind of equal out year over year if you're still determining that.
Because I know Mark you've got a pretty sizable I think either <unk> or production contract for CH 53, K. So it seems like production volume should be up for you guys next year I'm wondering if at all kind of equal out year over year, if we're still determining that.
Speaker 3: Yeah, yeah, no, good question and you're correct. I mean, the, the NRE is pretty much going to run off as we, as we, as we exit this year going forward. We're not expecting to see any. Notable NRE whatsoever and then on a kind of full run rate operational basis, even this year, if you strip out the NRE relative to last year, we expect sales to be up on the 3 K in the mid teens or so.
Yes.
Good question and you are correct.
It's pretty much going to run off as we.
Exit this year going forward, we are not expecting to see any.
Notable NRA whatsoever, and then on a kind of full run rate operational basis. Even this year. If you strip out the NRA relative to last year, we expect sales to be up on safely get through Kay in the mid teens or so so we feel really good about where the program is trending.
Speaker 3: So, we feel really good about where the program is trending. If you were to visit our Salt Lake facility, right? We got the next automation line. We just, we just actually had a ribbon cutting with Sikorsky on that line. So things are progressing really well for CHC to 3k. And as you said, the order book looks terrific. So, this will be a good long term program.
If you were to visit our Salt Lake facility right. We've got the Max the automation line. We just we just actually had a ribbon cutting.
Of course key on that line.
So things are progressing really well for <unk>.
And as you said the order book looks terrific.
This will be a good long term program for us.
Okay, great. Thanks, guys.
Speaker 1: As a reminder, to ask a question, you'll need to press star 11.
Thank you Andrew.
As a reminder to ask a question you will need to press star one.
Speaker 1: or your telephone, please wait for your name to be announced. Our next question comes from the line of Jack Ayers with TD Cowan. Your line is now...
On your telephone please wait for your name to be announced our next question comes from the line of Jack <unk> with TD Cowen. Your line is now open.
Speaker 7: Hey guys, good morning. Thanks for the question here and welcome Gunnar.
Hey, guys. Good morning, Thanks for the question here and welcome Gunnar.
Speaker 7: A quick question, and I hate to go back to the Q4 sort of implied guide here, and if my math is right, just AEC specifically, I mean, are we kind of thinking Q4 is going to be down sort of, you know, high single-digit, low double-digit sort of in the Q4 implied there with margins actually stepping up both sequentially and year-over-year? So sales...
Great. Thank you.
Quick question and I hate to go back to the Q4 sort of implied guide here.
And if my math is right just.
Specifically.
I mean are.
Are we kind of think in Q4 is going to be down sort of high single digit low double digit.
Sort of in the Q4 implied there with margin with margins actually stepping up both sequentially and year over year. So the sale.
Speaker 7: The fails down your over your sequentially, but margins up your over your sequentially. I guess like what's going on there and just the wide range is that
The sales down year over year and sequentially, but margins up year over year and sequentially I guess like what's going on there.
And just the <unk>.
Wide range is that.
Speaker 7: You know, conservatism or or just other moving pieces with sort of, you know, leap, leap. Inventory, like, sort of just just access just any any color there would be helpful. Thanks.
Conservatism or just other moving pieces with sort of.
Leap.
Inventory like sort of just just excess just any any color there would be helpful. Thanks.
Speaker 3: Sure, yeah, no, Jack happy to help. So your math is correct. As we would expect and we are probably being a bit conservative on top line at AC. But we are going to see.
Sure Yes.
Yeah, Jack happy to help so your math is correct.
As we would expect and.
We are probably being a bit conservative.
On top line at AUC.
We are going to see.
Speaker 3: A couple of programs, volumes and the fourth quarter come off, so we're just trying to account for that.
A couple of programs volumes in the fourth quarter come off so we're just trying to account for that.
Speaker 3: And as it relates to the margin, that's really a function of the shift and mix of programs that we expect are in the quarter. As you can imagine, right, leap, we're running ahead, that'll kind of cool off in the fourth quarter as our expectation. So we are expecting to see a higher implied margin. There are some programs like 787 and others where the margin profile is much better than leap. And we're seeing those filings pick up in the fourth quarter.
And as it relates to the margin that's really a function of the shift in mix of programs that we expect during the quarter as you can imagine right leap.
We're running ahead that'll kind of cool off in the fourth quarter is our expectation.
So we are expecting to see higher implied margin.
Programs like 707, and others, where the margin profile is much better than leap.
And we're seeing those filings pick up in the fourth quarter.
Speaker 7: Okay, okay, thank you. And then just one quick follow up on Heimbach. And I appreciate sort of the moving sort of demand dynamics going on there. But Q4 implied sales of like 35 million to hit the 50 million.
Okay. Okay. Thank you and then just one quick follow up on Heimbach.
And I appreciate sort of the moving sort of dynamic.
Demand dynamics going on there, but Q4 implied sales of like 35 $35 million to hit the $50 million for.
Speaker 7: For the year, I mean, if if we run right that that looks like we're getting to like 140M. what is is that the right way to think about that as we sort of, you know, roll that forward into 24 Rob.
For the year I mean, if we run rate that that looks like we're getting to like a $140 million.
Is that the right way to think about that as we sort of.
Roll that forward into 'twenty for Rob.
Speaker 3: Yeah, no, I, yes, so, you know, the math wants to get in spot on, Jack, but, um, no, you really shouldn't be run rating Q4 sales in machine clothing and that I'm going to talk about. Uh, that is definitely seasonally and I think it's probably even a bit more pronounced.
Yes.
Yes.
Once again spot on jackpot.
No you really shouldnt be run rating Q4 sales in machine clothing, and that high Mark that is definitely seasonally and I think it's probably even a bit more pronounced.
Speaker 3: for Heimbach, more seasonal in the fourth quarter. So if you look at what we delivered in 22 for Heimbach, you know, what Heimbach delivered was about 160 million euro.
Limbach more more seasonal in the fourth quarter. So if you look at what we delivered in.
<unk> 22 for Hot hand back delivered was about 160 million Euro.
Speaker 3: And we're certainly working with the team to make sure that the sales volume to stay where they need to stay.
And we're certainly working with the team to make sure that the sales volumes stay where they need to stay.
Okay. Thanks, guys I appreciate it.
Thank you.
Speaker 1: I would now like to turn the conference back over to Mr. Gunnar Cleveland, President and Chief Executive Officer for closing remarks.
I would now like to turn the conference back over to Mr. Qunar, Cleveland, President and Chief Executive Officer for closing remarks.
Alright, Thank you Norma.
Speaker 2: And thank you everyone for joining us on the call today. We appreciate your continued interest in Albany International. And of course, if you have any questions, feel free to reach out to John Hobbs, our Director of Investor Relations. Thank you.
And thank you everyone for joining us on the call today and we appreciate your continued interest in Albany International.
And of course, if you have any questions.
Feel free to reach out to John hubs, our director of Investor Relations.
Thank you and have a good day.
Speaker 1: This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
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