Albany International Reports Second-Quarter 2023 Results

Albany International Corp. (NYSE:AIN) today reported operating results for its second quarter of 2023, which ended June 30, 2023.

“We are reporting another strong quarter of operational results,” said Albany International President and Chief Executive Officer, Bill Higgins. "Our revenue of $274 million was up $13 million or approximately 5% year-over-year with growth across both business segments. I'm particularly pleased that revenue growth and operational execution in our businesses allows us to increase our guidance for 2023.

“We continue to advance our strategies for long-term value creation. During the quarter we announced our agreement to acquire Heimbach Group, a European producer of paper machine clothing which we expect to close in the second half of this year. With Heimbach, our broadened footprint will allow us to better serve customers in Europe and Asia. It's an exciting opportunity to create significant value for our shareholders as well as for our customers.

“Our Albany Engineered Composites team is on track to meeting short term growth and value deliverables. Longer term we are engaged with customers, demonstrating the capabilities of our proprietary 3D woven composites technology for applications in next-generation airframe, wing, and engine designs. We are investing our time and effort today to position for these long-term program opportunities,” concluded Higgins.

For the second quarter ended June 30, 2023:

• Net revenues were $274.1 million, up 4.9%, or 4.8% after adjusting for currency translation, when compared to the prior year, due to year-over-year growth in revenues related to commercial programs within the Engineered Composites segment and revenue growth in all paper machine clothing grades within the Machine Clothing segment.
• Gross profit of $102.7 million was 2.1% higher than the $100.6 million reported for the same period of 2022; overall gross margin declined by 100 basis points, primarily due to higher contribution from the lower-margin Engineered Composites segment.
• Selling, Technical, General, and Research (STG&R) expenses were $57.1 million, compared to $49.9 million in the same period of 2022; the increase was driven by executive transition costs and professional service fees.
• Operating income was $45.5 million, compared to $50.7 million in the prior year, a decrease of 10.3%.
• Effective tax rate for the quarter was 42.8%, compared to 26.9% for the second quarter of 2022. The year-over-year increase was mainly due to unfavorable discrete tax adjustments recognized in the second quarter of 2023.
• Net income attributable to the Company was $26.7 million ($0.86 per share), compared to $39.2 million ($1.25 per share) in the second quarter of 2022; Adjusted earnings per share (or Adjusted EPS, a non-GAAP measure) was $0.90 per share, compared to $1.06 per share for the same period last year.
• Adjusted EBITDA (a non-GAAP measure) was $65.0 million, compared to $66.0 million in the second quarter of 2022, a decrease of 1.5%.

Please see the tables below for a reconciliation of non-GAAP measures to their comparable GAAP measures.

Outlook for Full-Year 2023

The Company has updated its guidance for the full year of 2023 as follows:

• Total company revenue between $1.040 and $1.070 billion, up $30 million on the low end and $20 million on the high end of the range;
• Effective income tax rate, including tax adjustments, between 32% and 33%, implying an effective tax rate between 28% and 30% in the second half of 2023;
• Total company depreciation and amortization between $72 and $74 million;
• Capital expenditures in the range of $85 to $95 million, $5 million lower;
• GAAP earnings per share between $3.07 and $3.67, up $0.02 on the low end and $0.12 on the high end of the range;
• Adjusted earnings per share between $3.15 and $3.75, raised by $0.05 on the low end and $0.15 on the high end of the range;
• Total company Adjusted EBITDA between $232 and $257 million, up $7 million on the low end of the range and $2 million on the top end of the range;
• Machine Clothing revenue between $610 and $620 million, increasing $20 million on the low end and $10 million on the high end of the range;
• Machine Clothing Adjusted EBITDA between $210 and $225 million, up $5 million on the low end of the range;
• Albany Engineered Composites (AEC) revenue between $430 and $450 million, up $10 million; and
• Albany Engineered Composites Adjusted EBITDA between $82 and $92 million, up $2 million.

The following table presents the reconciliation of Net revenues to net revenues excluding the effect of changes in currency translation rates, a non-GAAP measure:

The following table presents Gross profit and Gross profit margin:

A reconciliation from Net income/(loss) (GAAP) to Adjusted EBITDA (non-GAAP) for the current-year and comparable prior-year periods has been calculated as follows:

Per share impact of the adjustments to earnings per share are as follows:

The following table provides a reconciliation of Earnings per share to Adjusted Earnings per share:

The calculations of net debt are as follows:

The calculation of net leverage ratio as of June 30, 2023 is as follows:

The tables below provide a reconciliation of forecasted full-year 2023 Adjusted EBITDA and Adjusted EPS (non-GAAP measures) to the comparable GAAP measures.

About Albany International Corp.

Albany International is a leading developer and manufacturer of engineered components, using advanced materials processing and automation capabilities, with two core businesses. Machine Clothing is the world’s leading producer of custom-designed, consumable belts essential for the manufacture of all grades of paper products. Albany Engineered Composites is a growing designer and manufacturer of advanced materials-based engineered components for demanding aerospace applications, supporting both commercial and military platforms. Albany International is headquartered in Rochester, New Hampshire, operates 23 facilities in 11 countries, employs more than 4,200 people worldwide, and is listed on the New York Stock Exchange (Symbol AIN). Additional information about the Company and its products and services can be found at www.albint.com.

Non-GAAP Measures

This release, including the conference call commentary associated with this release, contains certain non-GAAP measures, that should not be considered in isolation or as a substitute for the related GAAP measures. Such non-GAAP measures include net revenues and percent change in net revenues, excluding the impact of currency translation effects ; EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin; Net debt; Net leverage ratio; and Adjusted earnings per share (or Adjusted EPS). Management believes that these non-GAAP measures provide additional useful information to investors regarding the Company’s operational performance.

Presenting Net revenues and change in Net revenues, after currency effects are excluded, provides management and investors insight into underlying revenues trends. Net revenues, or percent changes in net revenues, excluding currency rate effects, are calculated by converting amounts reported in local currencies into U.S. dollars at the exchange rate of a prior period. These amounts are then compared to the U.S. dollar amount as reported in the current period.

EBITDA (calculated as net income excluding interest, income taxes, depreciation and amortization), Adjusted EBITDA, and Adjusted EPS are performance measures that relate to the Company’s continuing operations. The Company defines Adjusted EBITDA as EBITDA excluding costs or benefits that are not reflective of the Company’s ongoing or expected future operational performance. Such excluded costs or benefits do not consist of normal, recurring cash items necessary to generate revenues or operate our business. Adjusted EBITDA margin represents Adjusted EBITDA expressed as a percentage of net revenues.

The Company defines Adjusted EPS as basic earnings per share (GAAP), adjusted by the after tax per share amount of costs or benefits not reflective of the Company’s ongoing or expected future operational performance. The income tax effects are calculated using the applicable statutory income tax rate of the jurisdictions where such costs or benefits were incurred or the effective tax rate applicable to total company results.

The Company’s Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted EPS may not be comparable to similarly titled measures of other companies.

Net debt aids investors in understanding the Company’s debt position if all available cash were applied to pay down indebtedness.

Net leverage ratio informs the investors of the Company's financial leverage at the end of the reporting period, providing an indicator of the Company's ability to repay its debt.

We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Forward-Looking Statements

This press release may contain statements, estimates, guidance or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “should,” “look for,” “guidance,” “guide,” and similar expressions identify forward-looking statements, which generally are not historical in nature. Because forward-looking statements are subject to certain risks and uncertainties (including, without limitation, those set forth in the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q), actual results may differ materially from those expressed or implied by such forward-looking statements.

Forward-looking statements in this release or in the webcast include, without limitation, statements about macroeconomic conditions, including inflationary cost pressures, as well as global events, which include but are not limited to, the ongoing COVID-19 pandemic and the Russia-Ukraine military conflicts; paper-industry trends and conditions during 2023 and in future years; expectations in 2023 and in future periods of revenues, EBITDA, Adjusted EBITDA (both in dollars and as a percentage of net revenues), Adjusted EPS, income, gross profit, gross margin, cash flows and other financial items in each of the Company’s businesses, and for the Company as a whole; the timing and impact of production and development programs in the Company’s AEC business segment and the revenues growth potential of key AEC programs, as well as AEC as a whole; the amount and timing of capital expenditures, future tax rates and cash paid for taxes, depreciation and amortization; future debt and net debt levels and debt covenant ratios; and changes in currency rates and their impact on future revaluation gains and losses. Furthermore, a change in any one or more of the foregoing factors could have a material effect on the Company’s financial results in any period. Such statements are based on current expectations, and the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Statements expressing management’s assessments of the growth potential of its businesses, or referring to earlier assessments of such potential, are not intended as forecasts of actual future growth, and should not be relied on as such. While management believes such assessments to have a reasonable basis, such assessments are, by their nature, inherently uncertain. This release and earlier releases set forth a number of assumptions regarding these assessments, including historical results, independent forecasts regarding the markets in which these businesses operate, and the timing and magnitude of orders for our customers’ products. Historical growth rates are no guarantee of future growth, and such independent forecasts and assumptions could prove materially incorrect in some cases.

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