Q3 2025 Enpro Inc Earnings Call
Greetings and welcome to the npro third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
I'd now like to turn the conference over to your host.
James Gentile, Vice President, Investor Relations. Thank you. You may begin.
Thanks, Melissa, and good morning, everyone. Welcome to nro's third quarter 2025 earnings conference. Call I remind you that our call is being webcast at mro.com where you can find the presentation that a company is this call.
With me today is Eric, Vaillancourt our president and chief executive officer and Joe Broderick Executive Vice President and Chief Financial Officer.
During this morning's call, we will reference a number of non-gaap financial measures cables reconciling historical. Non-gaap measures to comparable gaap measures or included in the appendix to the presentation materials.
Also a friendly reminder that we will be making statements on this call including our prospectives for full year 2025 guidance. That are not historical facts and considered forward-looking in nature. These statements involve a number of risks and uncertainties, including those described in our filings with the SEC. We do not undertake any obligation to update these forward-looking statements.
It is now my pleasure to turn the call over to Eric Vaillancourt, our president and chief executive officer. Eric, Thanks James and good morning everyone. Thank you for joining us today as we review our third quarter, Financial results and provide an update on our strategic progress, we greatly appreciate your support, it certainly is an exciting time to use our of andro.
After a brief discussion of our quarterly performance and acknowledgement of the hard work ongoing across organization, I will turn the call over to Joe for more detailed discussion of our third quarter results in current guidance perspectives for the balance of the year.
now, on to our third quarter performance,
and for reported organic sales growth of nearly 10% during the third quarter with mid single digit, Revenue growth year-over-year, in sealing Technologies and more than 17% Top Line growth at as
The strength of our business model was demonstrated again during the quarterly total and pro adjusted even emerging above 24%.
Which included increased operating expenses. Supporting both growth initiatives and both segments.
Complementing the strong quarterly performance, we continue to advance our NPRO 3.0 strategy with the Overlook Industries acquisition and our agreement to acquire Alpha Measurement Solutions, which we announced on October 13th.
Both of these Acquisitions will expand our capabilities. Incredible growth areas of the portfolio, without the use of excess Leverage.
We closed our acquisition of overlooked on October 8th and expect the acquisition of alpha to close during the fourth quarter of 2025.
Once required regulatory approvals are received and other customary closing conditions are satisfied.
Alpha and overlooked are great examples of our ability to identify businesses. That fit our strategic growth characteristics. While meeting our stringent Financial criteria.
Reflective of an Enduro business.
Alpha's portfolio of liquid, sensing capabilities, complements our existing gas stream Solutions, acquired with AMI,
Reuting airport portfolio of sensing technologies and instrumentation for compositional analysis and the key markets such as industrial process control, water and wastewater laboratory, and environmental monitoring.
The sensing and measurement parameters brought together to further our compositional analysis, strategy, and enable us to detect unwinded, oftentimes Trace.
Compounds in a variety of processes which in turn enable us to solve our customers critical problems.
Overlook specializes in engineering design.
And Fabrication of single-use Technologies and other critical componentry that expands our position in BIO pharmaceutical Manufacturing.
Or looks capabilities expand. In liquid dose biologics, a secular growth area that continues to expand as liquid single use medicines are an increasingly replacing, those taken worldly.
These medicines Target, a number of evolving areas in in arcology immunology, and dermatology amongst many others as the market is deployed to accelerate over the next decade.
Within our guideline Garlock hygienic Technologies business Overlook furthers, our technology expertise and customer intimacy by answering the industry's accelerating need for tailored single-use consumables. As more stringent septic processing is essential to prevent contamination.
Our business teams are continuing to identify acquisition targets, that broaden our Leading Edge capabilities, and bring them into enro. As we strategically expand our portfolio of critical products and solutions.
I would like to thank those involved in the preparation and execution of these transactions, as we are excited to begin integrating these bright new colleagues and successful teams into our organization.
Turning to our segment results for the quarter and sealing technology sales increased 5.7%, highlighted by strength, and Aerospace and food. And biofarma demand firm, aftermarket performance in general Industrial and Commercial Vehicle markets, and strategic pricing initiatives.
Salad performance in these areas more than offset persistent weakness in the Commercial Vehicle market and soft overall industrial demand in Asia and Europe.
Ceiling segment profitability remained above 32%.
In advanced surface technology, sales increased more than 17%, led by growth in Leading Edge Precision, Cleaning Solutions, and improved demand for certain semiconductor tools and assemblies.
ASC segment crop and increased double digits over the last year, though operating leverage was impacted by continued growth investments such as preparation for advanced chip production domestically and accelerating qualification work on new platforms and next node development.
Slightly unfavorable mix was also a headwind. Which Joe will discuss in Greater detail in a moment?
Across nro, we continue to pursue targeted incremental capacity, expansions in areas where we are winning preparing to solve critical problems, for our customers and investing in and expanding our differentiated capabilities.
Our aim is to unlock the compounding features of our business model and drive value creation into the second year of our 3.0 phase and Beyond.
In sealing Technologies. For example, we are currently expanding capacity and investing resources to support future growth and compositional, Analysis, Aerospace and commercial space applications.
And Commercial Vehicle. We are making Investments to support incremental market. Share gains with new products and expanding Partnerships with key customers.
We are ready, we are readying our manufacturing processes to be well positioned for the inevitable, recovery of the current draw and trailer builds.
Across the ceiling segment. Our teams are making strides to identify New Market opportunities and specify our process solutions for critical positions and higher growth markets including Life Sciences space, hydrogen semiconductor nuclear energy storage and digital infrastructure applications.
Our teams are excited about these efforts as we expand our capabilities and reinvest in growth opportunities to drive long-term profitable growth consuming Technologies.
As is busy and we'd like to acknowledge our colleagues for their hard work and as we offer critical products and solutions and our customers come to us to solve the exacting problems, that enable contamination, control efficient in chamber, environments process, and equipment, protection and economic yield optimization for Semiconductor Fabs.
During the quarter.
Opportunity, stringent qualifications for Next Generation platforms.
As we have said in recent quarters, we have been making disciplined investments in key areas of the business that will serve as growth platforms to support our long-term expectations for the segment. We continue to implement certain continuous Improvement and optimization actions that can drive incremental margin expansion into a more robust overall semiconductor Market recovery.
As our pipeline continues to expand, we are well, positioned to deliver.
The npro 3.0 strategy is perceiving as planned as we approach our second year and we are excited about the money opportunities ahead.
The position business business, is positioned to drive mid single digit revenue and growth in the 2 and Technology, segment and high single digit low double-digit growth in ASP over time.
Our programmatic m&a, strategy has added up to these organic growth perspectives over our 3.0 planning Horizon.
We are pleased with the ceiling, segments ability to to consistently generate profitability towards the high end of our targeted. Ranges over the past 3 years and expect this level of impressive performance to continue.
For as the second has demonstrated its ability to generate profitability, in the high 20 to low, 30% range in the past, and you're taking steps to unlock value, inherent within the segment and deliver more consistent performance of these levels.
as we continue to invest in areas where we are strongest, while implementing our playbooks to continuously optimize performance over time,
To deliver the critically important solutions to our customers.
Joe.
Now, let's get into the details of our third, quarter results.
In the third quarter, sales of 286.6 million increase, nearly 10%.
We saw continued strong ceiling, technology performance overall, and more than 17% year-over-year sales growth at as even as some of our markets, remain choppy.
Third quarter, adjusted IBA, 69.3 million, increased 8% compared to the prior year.
Adjusted Evita margin of 24.2% was down slightly from last year.
Ongoing investments in people and processes across the company and to support future growth.
As well as unfavorable mix and AST absorb the benefits from operating leverage during the quarter.
Our corporate expense of 10.2 million in the third quarter of 2025 was essentially flat compared to last year.
Adjusted diluted earnings per share of $1.99, increased more than 14% largely driven by the factors that drove the adjusted ibaa Improvement year on year in lower net. Interest expense.
Moving to a discussion of segment performance, sealing technology sales increased 5.7% to $178.2 million.
Strengthened Aerospace and food and bioer applications firm, aftermarket demand and domestic General Industrial and Commercial Vehicle markets, and strategic pricing more than offset persistent weakness in commercial vehicle, OEM markets.
Nuclear or orders were impacted by political uncertainty in France, which influence funding and procurement and is expected to be temporary.
Industrial demand in Europe and Asia was also tepid during the third quarter.
Aftermarket sales comprise 65% of total segment Revenue year to date.
For the third quarter. Adjusted segment, EBA margin remained, strong at over 32%.
Despite growth Investments mentioned previously.
Segment profitability remains at the high end of our targeted range.
We are excited about the number of drivers of long-term growth and value Creation in sealing Technologies as we focus on expanding opportunities through growth Investments, and strategic acquisitions.
On the topic of strategic execution in ceiling. We are delighted to have found 2. Great businesses. In our recently announced transactions,
We welcome The Overlook team into empro and are excited to begin working with our new Alpha colleagues. Once that deal closes, which we expect our in the fourth quarter of 2025
As Eric talked about in detail earlier these 2 organizations, Advance our capabilities and key growth areas of the in Port portfolio and have all the Hallmarks of an npro business.
Margins, that meet or exceed, our core.
As well. We are excited to assist these talented teams to expand their reach and execute their respective growth strategies. As they become part of our team to contribute to our value creation trajectory
Turning now to the advanced surface, technology segment, third quarter, sales of 108.5 million were up 17.3% year-over-year.
we saw an acceleration in certain areas of, as
Including in Precision Cleaning Solutions, tied to Advanced node chip production supporting applications such as artificial intelligence and high bandwidth memory.
However, demand for Capital Equipment remains choppy.
With pockets of strength observed for certain lower margins, and semiconductor tools and assemblies during the quarter.
For the third quarter, adjusted segment IBA increased more than 13% and adjusted segment. Eva down margin was 20.1%.
Operating leverage on sales growth was offset, primarily by increased operating expenses supporting growth initiatives and the mix impact of increased sales for certain semiconductor Tools in assemblies.
There are several factors underlying as performance currently that we expect to continue into 2026.
We see momentum in our Advanced node facing Precision Cleaning Solutions, business.
Consistent with that. We are seeing accelerated timelines for Leading Edge, node node production.
Which have caused the need for increased labor in investment in. Both Taiwan and the United States to meet the qualification demands for our customers. Well, ahead of time as demand for advanced node chips, accelerates
These accidents position us very well for growth into 2026 and Beyond.
At the same time we are making considerable progress on new platforms and technological. Advancements for Leading Edge. Processes in our pipeline.
Which is leading to additional qualification activities ahead of Revenue generation.
And necessary to answer the exacting requirements of our customers.
semiconductor industry, Dynamics, continue to evolve and regionalization of Supply chains proceeds,
In partnership with our customers demand is Shifting for certain Legacy product lines from the United States, to Southeast Asia.
As we have mentioned before we have expanded our capacity in that region over the past 2 years to support our customers on a number of platforms.
In connection with this demand shift, 12 million of equipment supporting Legacy platforms, or approximately 3% of total as Revenue was produced and sold year to date in 2025 ahead of these transitions.
Which we do not expect to recur in 2026.
Finally, near-term demand Dynamics, continue to be choppy in the third quarter.
Which will continue in fourth quarter and into the first half of 2026.
Although we are seeing signs of capital spending supporting Leading Edge, semiconductor capacity, expected to accelerate into the back half of next year.
These signals of a significantly improved demand. Environment are supported by secular technology, transitions.
Driving the need for more advanced logic, artificial intelligence and high bandwidth memory capacity.
Over the mid and long term. Our new platform pipeline remains robust
And underscores our high single to low double-digit, Revenue growth, expectations for the segment.
Again, we expect segment, margins can achieve 30% over time as new platforms, begin to season from the Investments. We have made over the last 2 years. The market resumes, a more consistent trajectory and continuous Improvement initiatives. Take hold.
Turning to the balance sheet and cash flow.
Our balance sheet remains strong.
at the end of the third quarter, our net leverage ratio stood, at 1.2 times trailing 12-month adjusted, EBA
Following the completion of the transactions announced in October, we expect to exit 2025 at a net leverage ratio of around 2 times.
We generated 105 million in free cash flow year to date versus 83 million last year.
Higher net income and lower interest payments are the primary drivers of the year-over-year increase. Also, we continue to expect capital expenditures to be around $50 million this year, as we invest in future growth opportunities across the company at a creed of margin and return thresholds.
Finally, our strong balance sheet and cash generation provide us with ample liquidity, to make these Investments while continuing to return Capital to shareholders.
30-day payments, totaling 19.7 million.
We also have an outstanding share repurchase authorization expiring in October 2026.
We are pleased with the consistent free cash flow generation and look to reinvest in organic growth opportunities across the business. While continuing to pursue strategic Acquisitions that fit our rigorous Financial objectives and expand our Leading Edge capabilities.
Moving now to guidance.
We are updating our previous full year 2025 guidance ranges to the high end.
And now expect total in Pro Revenue growth of 7 to 8% adjusted Ava in the range of 275 million to 280 million and adjusted diluted earnings per share to be in the range of $7.75 to $8.05 per share.
The anticipated partial quarter contribution from the 2 acquisition announced in October is included in this range.
We previously expected Revenue growth of 5 to 7%.
Adjusted ebit on the range of 270 million to 280 million and adjusted diluted earnings per share in the range of $7.60 to $8.10.
The normalized tax rate used to calculate adjusted diluted earnings per share remains at 25% and fully diluted shares. Outstanding are currently 21.3 million
as we shared in our, in our October announcement, the contribution from the Acquisitions of Alpha and Overlook should contribute more than dollars in revenue and 17 million to 18 million in adjusted evaa in 2026.
All included in the sealing technology segment.
In sealing, we continue to expect strong performance year-over-year in the fourth quarter.
The End Market drivers. Underlying our guidance ranges remain largely the same.
We expect continued strength in Aerospace and food and farmer markets, and a firm domestic aftermarket in general Industrial and Commercial Vehicle.
The commercial vehicle OEM markets are expected to remain at a low point for the balance of the year.
We also expect slight variability in nuclear orders to continue based on near-term political uncertainty, in France, compared to our previous delivery. Schedules for the fourth quarter.
In as we expect to sequential deceleration, in sales growth for the fourth quarter, given the continued choppiness, and overall semiconductor equipment spending the previously mentioned Regional transitions underway as well as it as the accelerating qualification work, on new platforms ahead of Revenue.
Overall, for the year, we still expect ceiling segment profitability at the high end of our range of 30% plus or minus 250 basis points.
While segment profitability should finish slightly above 20%.
Total and pro adjusted ebit down margin is expected to finish 2025 above 24%.
We are excited to continue executing our value creating strategy into 2026 and Beyond. And look forward to our discussions with you all in future quarters.
I will now turn the call back to Eric for closing comments.
Thanks Joe.
We are also excited to welcome our new colleagues from elephant Overlook to the organization.
We are pleased with our performance so far in 2025 and our continent that we are taking the right steps. Great steps to build on our endro 3.0 momentum
We are delivering on our growth targets from the first year of our strategy, while empowering our teams personal and professional development in creating differentiated value for our customers and shareholders. Thank you for your interest in Pro. We now, welcome your questions.
Thank you. If you'd like to ask a question. Please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2. If you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing, the star keys to allow for
As many questions as possible. We ask that you each keep to 1 question and 1, follow-up. Thank you.
Our first question comes from the line of Jeff Hammond with keybanc capital markets, please proceed with your question.
Hey guys. Good morning.
Jeff morning, Jeff.
Uh, maybe we start with the Acquisitions, I don't know if you can give us a sense of, you know, relative size of each. And
Hey, Jeff. Um, yeah, as you as you asked, right, the combined nature of both of them are about Cillian dollars of Revenue in 2026 and
And, uh, you know, are expected to grow High, single digit, low, double digit, you know, over the next 4 foreseeable future. So we're really excited about both Acquisitions. Um, they're both going to be combined, accretive to, you know, and prose core. Um, they're not too far from each other as far as profitability goes. Um, and growth rate expectations. Um, and Eric could talk a little bit more about some of the capabilities they bring. Actually, I'm going to introduce Mike fauler. Mike faul leads our sealing segment and Mike was instrumental in both um, finding and acquiring these Acquisitions. Spent a lot of time with them and he can speak about the adjacency and more about the strategy. We like does an excellent job leading, our ceiling Technologies segment and be better to hear from him directly.
So Mike, can you jump in?
Absolutely good morning. Can you guys hear me, okay?
Got it.
Yeah. Okay, um so so Jeff. Uh like like other npro businesses. These are models in both that we know really well. Both overlooked and Alpha have a high degree of recurring Revenue that comes from
Strong, long-lasting customer relationships that are built on a track record of performance and critical applications.
um,
Overlook in particular. Uh, we we, we are solving a problem that's worth solving and that large molecule liquid biologics pose unique processing problems for pharmaceutical manufacturers.
and,
Much like our other critical components, we overlook design, directly solve these problems in the fill-finish area, and support the growth and development of life-saving medicines. We see these as businesses that have the same characteristics as other winning businesses that we have within the segment.
Okay, and then just real quick.
Um,
4Q revenue contribution that you put into guidance from the acquisitions.
Yeah, so depending on the final timing for Alpha closing, which we expect should be by the end of November, we included just under $10 million in revenue.
Uh, for the fourth quarter, from both Acquisitions and approximately 3 million dollars in in Evita.
Okay, great. And then shifting gears to ASI. You guys gave a lot of color around, you know, some of the moving pieces. But
I guess my main question is, when do we start to see? You know, better incremental is in that business and um, you know, some of the Investments start to normalize and then just where
is that 12 million is that cleaning? Is that tools and assembly or or something else? Thanks.
I'll start and give just a little bit of color because things really dynamic in that industry. You have 3, major things happening, 1 being tariffs 2 being Ai and data center demand and then third being an export restrictions. So everything is really Dynamic and things are moving around very, very quickly.
So some of the things that are happening and and you you can read the paper as well as we do, but the adoption of 3 nanometer and production. In the US is being greatly accelerated um as much as a year ahead of plan. So at the same time things that we were expecting to generate Revenue this year being pushed off in terms of qualification because they're prioritizing other things. So we're not getting the revenue from some of the stuff that was anticipated while also spending more on others. Um, but both are great projects and you want us to do it. It's just a question of when demand starts happening.
And as you've heard from others as well, the first half of next year, appears to be pretty choppy, but the second half looks to be more robust and we can start to see some of that growing in around there.
Yeah. So we're excited about, you know, all of that work that we're doing, right? We're making good progress on both the cleaning side and our semiconductor Capital Equipment side, um, and we're accelerating qualification work on both, right? And so, that's why you're seeing in a little bit of an outsized impact right now. It impacted us about 3 million dollars, overall in the quarter for growth Investments ahead of Revenue. You know, those are expected to you know kind of start contributing in the the middle to late part of next year, as Eric talked about. Um, but you know, positions us very well to capitalize on all of that that advanced note work.
That's pulling out of 2026 into 2025 on mostly Legacy, kind of equipment areas. Um, it was most pronounced in the third quarter but it impacted uh, in pull ahead demand really in the second quarter and the third quarter of this year. Yeah, some of that job is the in Region 4 region sourcing that's going on and the Legacy stuff some of that's being moved with Asia being more competitive.
an incremental so, you know, as we get into 26 and you see some of these, you know, Investments maybe normalize or or the, you know, the programs come online like what should we think of as, you know, incremental and that business, you know, into into 26
Yeah, I mean we're not ready to talk and give specific guidance yet for 2026, but just the broader theme question, right? I mean, we've seen, as I just mentioned, roughly $3 million, and you can do the math on kind of what we would be without that. But as we start to move forward and, you know, leverage some of those costs, right? We would expect to build on top of that. So historically, our...
You know, are uh, incremental for this business or somewhere in the 40% range.
Um and as we start to grow into these Investments, that we make, I mean, that's what we should expect going forward.
Okay, thanks a lot.
Thank you. Our next question, comes from line of Steve forzani with sidonian company. Please proceed with your question.
Morning everyone. Um, I I did want to follow up on on the acquisitions
when we think about the initial year 1 revs and and and margin guidance.
Um does that imply much efforts in terms of your usual integration process? Continuous Improvement, cost doubts, synergies Etc. I mean long term. How do you think about the margins and those 2 businesses versus sealing overall
Margins, is the businesses are healthy already. We expect, we'll be able to get a little bit out of our Playbook as we always do. And so we'll be a little bit more efficient, but there aren't a huge amount of synergies. It's more about growth when we focus on on growth 3.0, it's accelerating and personal and profitable growth. And these are growth Investments that will help the segment grow faster essentially with margin profile. That'll be about the same as seen when overall
Mhm. Yeah, so Steve we didn't contemplate. You know, any margin expansion from any inpro related, you know?
Activities. We'd be able to bring in that first 2026 uh full year as they become part of the the company. But as we just said, right there are opportunities there. Right there, there's margin expansion opportunities that we see, not only from the growth, but also from continuous Improvement, strategic pricing, Etc, um, things that we've been so successful at in the past,
Talk to me how you view the compositional analysis Market. You made that Ami deal, um, was going now back. Maybe 2 years, how that's played out and whether that gets you more intrigued with compositional analysis and what the opportunities are in that market.
Hey, Mike. Why don't you weigh in again since you've identified the space and spent a lot of time there.
Yeah, absolutely. I'm happy to
oh yeah, I'm happy to um, work tremendously. Excited about the compositional analysis space. Ami has been a fantastic entry point for us.
And with Alpha, we're adding 8, liquid parameters to go along with the 4 that we we, we have with AMI.
And what we really see it doing is a couple things for our customers.
It's helping to accelerate the the process of Industry 4.0 so that they can know something more about what's going on in their, in their systems and in their processes.
That helps them operate at the peak of efficiency and reliability, without sacrificing process safety.
The other thing it does for us because we're, we're in a lot of these spaces already, um, with with different products and uh, critical components that are going into Safeguard those processes.
The information that comes off of this, the more we can understand and our customers can understand what's going through the process. The better we are at designing uh, containment solutions to go along with it and it's kind of sounds simple, but whatever makes us better, Engineers makes us more invaluable to our customers. So we, we see the compositional analysis. Space is really being
Great entryway into Innovation for our critical um Component Solutions.
Would you be do you think there's more m&a opportunities in that area?
Definitely, believe there's more m&a opportunities in this area. Yes.
Great.
Leadership teams.
We picked up Sahara at the Overlook and also Drew and their team at Alpha and those are outstanding leadership teams. We'll add to our calendar as well. We're really excited about adding those folks to our team.
Excellent. That's great. Um, we think about this was a slightly elevated capex year for you. You, you've talked about all the Investments, you are making. We know the growth opportunities with as
are you starting to think about capex for for next year? Or are we too early? Are there a continued Investments that are going to be made into 2026 on the capex side? I have what we think is very really strong growth over the next 5 years.
Yeah, I mean Steve we're not ready to give a specific number yet for 2026, I mean, we'll do that when we when we talk in February, but I think we're going to be in this range uh for a couple years now in this kind of 3 and a half to 4, 4 and a half percent of sales. I mean we continue to have good strong areas of organic growth opportunity and we're excited to invest behind them in both businesses. I mean Eric talked about a few of them in
Stealing, uh, in Aerospace space. Um, commercial vehicle for new platform Innovation. These are all areas that are continue to add to our ceiling growth algorithm. Um and then in as right, they're plentiful with with what we're doing in in Singapore, Taiwan the US continued to build out of next phases of Arizona. Um so we expect to continue to be in this range. Um as long as we have, you know, consistent pipeline of organic growth areas to invest in
Can you talk about your your outlook? Now for I know nuclear and commercial space. We're we're a big contributors this year nuclear. Not so much this quarter but that sounds like a timing issue. Can you talk about your positioning in those 2 markets?
Yeah, we're still really excited about it. I can give you a little bit of a specific example. Brad, Lodge leads, our technetics group and they launched what they call mission 1. That's a couple of space companies that are doing some exciting work. And recently challenged us with getting some new parts and new production, up and out in up and out. And as quick as possible, and speed is very, very important because they're moving so fast, we actually were able to purchase equipment getting in place and produce new parts in 9 weeks, which is crazy. But crazy quick, usually that thing is 26 weeks, just to get material, but to be producing 9, uh, producing good parts in 9 weeks and then ramping up production in that part of time is crazy fast. That thing is doing outstanding in the those days are going to get better and better. So we're excited.
Thanks Steve.
Thank you as a reminder. If you'd like to join the question. Can you please press star 1 on your telephone keypad?
Our next question comes from line of Ian zeina with Oppenheimer & Company. Please proceed with your question.
Hi, thank you. Um,
On, um I just kind of want to understand ASC a little bit better here. Um, you know, can you maybe tell us what the mix of of leading edges? Um, you know, and where is it, where's it currently versus let's just say a year ago. Um, you know, as far as maybe the growth rates
Where do you actually see it? Eventually go. And when you look at the margins of each, um,
I guess call it at ramp, or at maturity or whatever word, you kind of, you know, choose to use. What do you think? Margins can be on on on Leading Edge versus, you know, non-leading Edge. Oh thanks.
Yeah, good question. You know, I think historically we've been um, about 5050 when you think Leading Edge and Legacy platforms, obviously the Legacy Legacy side of that is where you've seen the most depression of Capital Equipment spending over the last few years. Um, at the same time, our Precision cleaning business has been growing.
Um, nicely. And we continue to make inroads both in Taiwan and qualification work. Uh, on new Leading Edge nodes, as well as ramping up Manufacturing in both Taiwan and in our mil pedis. California facility. Um so now we're a little bit lean towards uh Advanced node.
Uh, exposure overall.
You're starting to see a little bit of increase, semiconductor tools and assembly. Um, that's eating into that a little bit. Uh, there is a differentiated amount of margin. So what we're now seeing is Leading Edge is as that continues to grow, right? That mixes up us up a little bit, but it is currently being offset by the semiconductor Legacy tools.
Um and Equipment that's been stronger in the last 2 quarters, right? Which is still very choppy. I mean, we've seen demand um you know kind of choppy for the last 2 few quarters. We expect that in 4 q. We expect that at least through the first half of next year, as I mentioned before there are signs and signals of a much stronger wfe picture for the second half of of next year.
Um and then longer term, you know, as we talked about right, the this segment has the ability to demonstrate um sustainably high 20s low 30% ibid that margins right? And we're focused on the actions necessary to do that. It will be some of that wfv related Capital Equipment spending driving a more sustained growth of that. Part of the segment will be continued to grow up on Precision cleaning that helps us get there um, as well as our continuous Improvement initiatives, um, you know, and strategic pricing and all the the rest of our Playbook. So also the new stuff coming online is vertically. Integrated, the Legacy stuff is not so it's just Precision Machining and that doesn't have the same margin profile as the stuff coming. So
The stuff that's coming has is still only qualification before Revenue but that'll also help as we go forward.
Okay. And then um, you know, on on nuclear, how are we thinking about the non-french business? Um, you know, where you kind of seeing maybe potential pockets of strength or of of future strength? And I guess what I'm asking is, you know, you mentioned data centers, you know, nuclear is kind of, they've been floating around, you know, things like small, you know, modular reactors, I know they're they're talking about an ap-1000, you know, coming online, um, you know, maybe talk about your, your view of that that market in, in general,
Um and and and where would you be, you know, on that value chain and and where would you be as a player in that? That space. Thanks.
We're excited about the market as it develops. Of course, it's still a ways away when it comes to very well. Positioned to participate, of course, is, you know, we feel the reactor pressle vessels and the plants and we'll continue to do that, we work with all the leading companies that do that work and I just say we're well positioned as soon as it takes off.
But there isn't anything, um, that we need to do differently. You just need the market to, um, develop, and we'll develop along with it at the margin when we see certain containment solutions on small modular reactors or new capacity. Um, there's a general trend for those customers to come to us for certain containment solutions over time.
Okay. And and just, as a follow up, that does it matter if it's like an SMR or, you know, a larger like an ap1000 or anything like that, that that does, that matter? Um, you know, and how that market kind of forms, as it relates to empro in general,
Not really. The difference is of course the size of a seals is a little smaller. So it's not as large of a volume but there's also more of them
So not not really, I wouldn't say it has any significant impact just as the industry growth will grow with it.
Okay, thank you very much.
Thank you, ladies and gentlemen that concludes our question and answer session, I'll turn the floor back to Mr. Denteley for any final comments,
As you heard. I mean, it's such a pleasure to again report solid results. Uh, the energy around the organization is exciting. Uh, we're investing in a number of growth opportunities across the company and we're excited to update you in February. When we report Q4 and our perspectives for 2026,
Thank you, this concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.