Snapshot
Enpro Inc. reported $288M of revenue in Q2 2025, up 6.0% year over year, with diluted EPS of $1.25 and an operating margin of 15.9%.
- Revenue
- $288M
- YoY growth
- +6.0%
- Diluted EPS
- $1.25
- Operating margin
- 15.9%
What management said
- •Also note that during this call, we will be providing full-year 2025 guidance, which excludes unforeseen impacts from these risks and uncertainties.
- •We appreciate your interest in Enpro as we discuss second quarter financial results and our improved sales and earnings outlook for the full year 2025.
- •After my overview, Joe will provide a more detailed discussion of our quarterly results and perspectives driving our improved outlook for the balance of 2025.
- •Enpro delivered another strong quarter, demonstrating the resilience of our business while continuing to invest in growth with discipline.
- •We continue to identify opportunities for incremental growth throughout the sealing technologies segment and are focused on expanding our market reach by leveraging our differentiated technological capabilities and applied engineering expertise.
- •We are focused on capturing opportunities in key markets such as aerospace, sustainable power generation, including nuclear, food and pharma, and compositional analysis, where our differentiated capabilities can drive long-term profitable growth.
- •We continue to invest in incremental capacity expansion, supporting new platforms and enhanced strategic marketing and engineering capabilities to position the segment to deliver on our targeted mid-single-digit organic revenue growth rate.
- •More than 60% of the segment's revenue is tied to the aftermarket, with specified positions providing critical process and safety functions for our customers.
- •We continue to be delighted with the best-in-class performance of the sealing technologies segment, which we expect to perform well in a variety of macroeconomic environments.
- •In the advanced surface technologies segment, sales increased more than 14%, led by growth in leading-edge precision cleaning solutions, optical coatings, and improved demand for in-chamber semiconductor tools and assemblies.
- •Operating expenses supporting growth in new platforms and transactional foreign exchange headwinds crimped operating leverage during Q2, which Joe will discuss later.
- •We continue to make targeted organic investments at AST and expect execution of our growth and optimization plans to drive high single to low double-digit revenue growth with improved profitability over time.
What went well
- •Enpro grew organic sales 6% in the second quarter, with total sales of $288.1 million, driven by 14.5% revenue growth in Advanced Surface Technologies (AST) and continued top-line growth in Sealing Technologies despite a difficult prior-year comparison.
- •Sealing Technologies delivered its second-best quarter ever, with sales up 1.9% to $187.5 million and adjusted segment EBITDA margin near 34%, helped by strength in aerospace and food and pharma markets, firm general industrial demand, and strategic pricing.
- •AST sales rose 14.5% to $100.9 million, led by leading-edge precision cleaning solutions, optical coatings, and improved demand for in-chamber semiconductor tools and assemblies.
- •The balance sheet remained strong, with net leverage at 1.4x trailing-12-month adjusted EBITDA and first-half free cash flow of $52.8 million versus $35.5 million a year ago.
- •Refinancing actions, including a $450 million 6.8% senior notes offering and a doubling of the revolving credit facility to $800 million, lowered expected 2025 net interest expense to $26-$28 million from $34-$36 million.
- •Management raised full-year 2025 guidance for sales growth, adjusted EBITDA, and adjusted EPS on the back of stronger aerospace, food and biopharma, and general industrial outlooks.
What went wrong
- •Total company adjusted EBITDA declined 3.9% year over year to $71.1 million, with margin of 24.7%, as increased growth-supporting operating expenses, transactional foreign exchange headwinds, and higher incentive compensation accruals weighed on results.
- •Adjusted diluted EPS slipped to $2.03 from $2.08 a year earlier.
- •Sealing Technologies adjusted segment EBITDA margin fell to 33.8% from last year's high watermark of 35.5%, hurt by continued weak commercial vehicle OEM demand, timing of nuclear orders versus a very strong prior-year quarter, and $1.9 million of transactional FX headwinds.
- •AST adjusted segment EBITDA margin declined to 19.6% from 21.7%, as $2.5 million of higher growth-investment operating expenses and $2.8 million of transactional FX headwinds absorbed operating leverage.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Sales growth | FY2025 | Low to mid-single-digit | 5% to 7% | Raised |
| Adjusted EBITDA | FY2025 | $262M-$277M | $270M-$280M | Raised |
| Adjusted diluted EPS | FY2025 | $7.00-$7.70 | $7.60-$8.10 | Raised |
| Net interest expense | FY2025 | $34M-$36M | $26M-$28M | Lowered |
| Capital expenditures | FY2025 | — | ~$50M | Reaffirmed |
| Sealing Technologies top-line growth | FY2025 | — | Mid-single-digit range | — |
| AST sales growth | FY2025 | — | High single to low double-digit range | — |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total sales | +6% to $288.1M | Strong Sealing Technologies performance and a 14.5% increase in AST |
| Adjusted EBITDA | -3.9% to $71.1M | Increased growth-supporting operating expenses, transactional FX headwinds, and higher incentive compensation accruals |
| Adjusted diluted EPS | -$0.05 to $2.03 | Same factors driving the adjusted EBITDA decline |
| Sealing Technologies sales | +1.9% to $187.5M | Aerospace, food and pharma, firm general industrial, and strategic pricing more than offset weak commercial vehicle OEM demand and nuclear order timing |
| Sealing Technologies adjusted segment EBITDA margin | 33.8% vs 35.5% | Weak commercial vehicle OEM demand, nuclear order timing versus a strong prior year, and $1.9M of transactional FX headwinds |
| AST sales | +14.5% to $100.9M | Growth in leading-edge precision cleaning solutions, optical coatings, and improved in-chamber semiconductor tool and assembly demand |
| AST adjusted segment EBITDA margin | 19.6% vs 21.7% | $2.5M of higher growth-investment OpEx and $2.8M of transactional FX headwinds absorbed operating leverage |
| Free cash flow (six months) | $52.8M vs $35.5M | Higher net income, working capital management, and lower cash interest expense |
| Corporate expenses | $12.1M vs $10.5M | Higher incentive compensation accruals and increased health insurance costs |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Enpro 3.0 multi-year strategy | — | First year underway, emphasizing both personal employee development and profitable growth | New |
| Transactional FX headwinds | — | Weakening U.S. dollar drove ~$2.6-$2.8M of headwinds in AST and $1.9M in Sealing; not expected to continue at the same magnitude | Emerging |
| Commercial vehicle OEM demand | Weak | Continued weakness expected for the remainder of 2025 | Stable/weak |
| Nuclear order timing | Very strong prior-year Q2 | Q1 strong, Q2 softer due to timing between quarters; underlying demand very strong | Stable |
| AST growth investments | — | Investments in Arizona, Milpitas, Taiwan, and Singapore expected to leverage well into the second half and beyond | Building |
| M&A pipeline | Active | Very active and proactive; opportunities freeing up in growth nodes like compositional analysis, food/biopharma, space/aerospace, and surface coating | Up |
Q&A summary
What was the FX transaction headwind in Sealing, and was the nuclear impact prior-year strength or timing between quarters this year?
Sealing FX headwind was $1.9 million; AST was $2.6 million, mostly in Taiwan where the company is U.S.-dollar functional but has local-currency salary, lease, and tax expenses. Nuclear was both: a very strong prior-year Q2 plus this year's timing where Q1 was strong and orders shifted between Q1 and Q3; underlying nuclear demand is very strong.
How should we think about AST incremental margins into the second half? Are the FX headwinds one-time?
The FX headwinds stemmed from the significant Q2 weakening of the U.S. dollar and are not expected to continue at that magnitude. Excluding the ~$2.8 million FX impact, AST margins would be in the mid-22% range, and the segment should leverage well in the second half as revenue from growth investments materializes.
What is driving the better growth rate in Sealing into the second half?
New programs and customer wins, including the AutoTorque product in OEM commercial trucks that will transition to aftermarket, plus significant new space customer wins. General industrial markets remain strong with a strong book-to-bill and backlog.
Is the raised AST outlook (low double-digit growth) an extension of Q2 trends or driven by something second-half specific?
It reflects past investments in Arizona, Milpitas, Taiwan, and Singapore starting to come on and accelerate over time, plus modest market recovery, though semiconductor capital equipment spending remains choppy.
Where are you in the Arizona certification process and is it generating material revenue?
Arizona is still in the testing and qualification phase, which is going well, and is not yet generating material revenue; early Arizona customer demand is being qualified there and supplemented from Milpitas.
How is the compositional analysis business from the AMI acquisition developing?
It has been outstanding, exceeding growth expectations with both new and existing customers; the company is investing in additional capacity and new capabilities, and the business has outgrown its space and will move to a new building later this year.
With expanded credit availability, should we expect M&A, and how does the market look?
Enpro remains very active and proactive on its pipeline, with opportunities starting to free up, focused on growth nodes like compositional analysis, food/biopharma, space/aerospace, and surface coating, subject to meeting financial and strategic criteria without excess leverage.