Snapshot
Enpro Inc. reported $303M of revenue in Q1 2026, up 10.9% year over year, with diluted EPS of $1.29 and an operating margin of 14.4%.
- Revenue
- $303M
- YoY growth
- +10.9%
- Diluted EPS
- $1.29
- Operating margin
- 14.4%
What management said
- •A friendly reminder that we will be making statements on this call, including our current perspectives for full year 2026 guidance that are not historical facts and that are considered forward-looking in nature.
- •After my update, I will turn the call over to Joe for a more detailed discussion of our results and drivers of our increased guidance for 2026.
- •Improving demand in semiconductor markets drove sales in the Advanced Surface Technologies segment up over 11%.
- •Additionally, the contributions from the two businesses that we acquired in the fourth quarter, AlpHa Measurement Solutions and Overlook Industries, drove Sealing Technologies sales up 10.8%.
- •Total company adjusted EBITDA increased nearly 13% to over $76 million at a margin over 25% for the first quarter.
- •We are pleased with these results, especially as we continue to invest in growth opportunities across the company at high margin return thresholds while accelerating investments in the development and growth of our colleagues.
- •In AST, positive trends across the segment's portfolio of products and solutions are translating into strong performance.
- •The slope of the demand curve has steepened with order patterns accelerating during the first quarter ahead of our expectations at the start of the year.
- •We expect these investments will position us well to capture opportunities from the acceleration of semiconductor capital equipment spending for the balance of the year and beyond.
- •We also believe that our vertical integration model is a key differentiator for Enpro in the next phase of the semiconductor industry growth.
- •In addition, hard work to qualify and earn processor of record designations solidifies our position in leading-edge precision cleaning solutions, a business that is currently strong and accelerating.
- •Commercial vehicle sales were down year-over-year below our expectations as demand remained slow, although we're cautiously optimistic that we are nearing the bottom in commercial vehicle markets.
What went well
- •First quarter reported sales rose nearly 11% year-over-year to $303 million, with strong growth in both operating segments.
- •Advanced Surface Technologies sales grew over 11% as semiconductor demand improved, and orders hit a clear inflection point during the quarter with precision cleaning solutions accelerating.
- •Sealing Technologies sales increased 10.8% to $199 million, driven by the first full-quarter contribution from the AlpHa and Overlook acquisitions, recovering nuclear solution sales, strategic pricing, and currency tailwinds.
- •Total company adjusted EBITDA increased nearly 13% to $76.4 million, with adjusted EBITDA margin of 25.2% expanding 40 basis points year-over-year.
- •Adjusted diluted earnings per share rose 13% to $2.14, and free cash flow more than doubled to $26.5 million while the company repaid $50 million in revolving debt, bringing net leverage to 1.9x.
- •AST adjusted segment EBITDA grew 18.5% with margin expanding 140 basis points to 23.3%, and Sealing segment EBITDA margin remained strong at 32.5%, above 30% for the ninth consecutive quarter.
What went wrong
- •Commercial vehicle sales were down year-over-year and came in below expectations as demand remained slow.
- •General industrial demand was soft internationally, with weakness noted in Europe and Asia.
- •Aerospace sales in Sealing were flat year-over-year due to a difficult comparison in commercial aerospace.
- •Corporate expenses rose to $13.7 million from $11.3 million a year ago, driven by higher incentive compensation accruals and $1.2 million in restructuring costs.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Total Enpro sales growth | FY2026 | 8%-12% | 10%-14% | raised |
| Adjusted EBITDA | FY2026 | $305M-$320M | $315M-$330M | raised |
| Adjusted diluted EPS | FY2026 | $8.50-$9.20 | $8.85-$9.50 | raised |
| Capital expenditures | FY2026 | — | around $50 million | unchanged |
| Normalized tax rate | FY2026 | — | 25% | unchanged |
| Sealing Technologies revenue growth (ex-AlpHa/Overlook) | FY2026 | — | mid-single-digit | — |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Total company sales | +~11% to $303M | Strong AST revenue growth, recent acquisition contributions, and steady Sealing Technologies performance. |
| Advanced Surface Technologies sales | +over 11% | Improving semiconductor demand and accelerating precision cleaning solutions tied to advanced node chip production. |
| Sealing Technologies sales | +10.8% to $199M | First full-quarter contribution from AlpHa and Overlook acquisitions, recovering nuclear solution sales, compositional analysis strength, strategic pricing, and currency tailwinds, partly offset by soft commercial vehicle and international general industrial demand. |
| Total adjusted EBITDA | +~13% to $76.4M | Consistent Sealing Technologies performance and a nearly 20% increase in AST segment EBITDA. |
| AST adjusted segment EBITDA | +18.5% | Operating leverage on higher sales and production volumes plus favorable mix, partly offset by $2 million of increased growth-initiative expenses. |
| Adjusted diluted EPS | +13% to $2.14 | Driven by the same factors behind adjusted EBITDA growth. |
| Free cash flow | more than doubled to $26.5M | Strong cash generation, with capital expenditures up nearly 40% to $13.1 million supporting growth and efficiency projects. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Semiconductor demand recovery / AST inflection | — | Order patterns accelerated ahead of expectations, hitting a clear inflection point; demand inflecting sooner and higher than expected, driving the guidance raise. | rising |
| Enpro 3.0 strategy execution | — | Second year of the multi-year value creation strategy, targeting mid-to-high single-digit organic growth and 30% segment EBITDA margins through 2030. | steady |
| Acquisition integration (AlpHa, Overlook, AMI) | — | Integrations going well, contributing to Sealing growth; AMI continues to perform above plan; active acquisition pipeline in compositional analysis. | rising |
| Commercial vehicle weakness | — | Demand remained slow and below expectations, with management cautiously optimistic the market is nearing the bottom; no CV recovery factored into guidance. | declining |
| Capacity expansion and advanced-node qualification | — | Expansions in Taiwan, California, and Arizona; Arizona getting fully qualified, with ongoing qualification work for 2nm and 1.4nm nodes. | rising |
Q&A summary
How did the inventory investment affect AST margins, and what is the margin trajectory through the rest of the year?
The inventory build contributed about 150 basis points to the Q1 AST margin increase; strong precision cleaning in Taiwan and the U.S. plus revenue leverage also helped. Inventory build may be slightly less in Q2 with margins relatively similar, then building incrementally through the second half toward a roughly 25% run-rate exiting the year.
Can you expand on the double-digit Sealing order activity and your confidence in Sealing picking up through the year?
Management is very confident; order rates were strong and building through the quarter, especially in North America, space, aerospace, and U.S. general industrial. The only weakness was general industrial in Europe and Asia, which has no meaningful impact on overall results.
With stronger Class 8 truck orders, is any commercial vehicle recovery built into the second-half outlook?
No CV recovery is built into guidance, though management is cautiously optimistic it picks up in the second half. Current truck order strength is driven by buyers avoiding added pollution-control costs, prioritizing trucks over trailers; demand should normalize toward roughly 250,000 units a year over time, with momentum expected at year-end or early next year. Aftermarket business remains very strong.
How do you feel about the AlpHa and Overlook acquisitions after one quarter, and do they require significant investment to grow?
Both are performing very strongly and do not require significant investment; Overlook's new building move was already underway before close. Backlog and performance are impressive. Integrations are going well, with supply chain opportunities emerging and smaller investments being made in their commercial organizations to expand into new markets and customers.
What changed in the AST outlook in the updated guidance, and how do demand drivers break down?
Order momentum and lead times increased, with demand inflecting significantly sooner and higher than expected; the guidance raise is essentially all driven by AST, coming from both precision cleaning and semiconductor capital equipment across all geographies. The second half is firming up with a double-digit increase versus the first half, and management expects to participate and outperform market expectations into 2027.
Is there anything to call out on the cost side regarding inflationary pressures such as fuel or equipment?
Nothing meaningful from the supply or cost side is expected; the company does a good job managing those costs in general.