Greetings, and welcome to the Enpro Q4 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]. It's now my pleasure to turn the call over to your host, James Gentile, Vice President, Investor Relations for Enpro. Please go ahead, James.

Thanks, Kevin, and good morning, everyone. Thank you for joining us today as we review Enpro's fourth quarter year 2025 earnings results and introduce our outlook for 2026. I will remind you that this conference call is being webcast at enpro.com, where you can find the presentation that accompanies this call. With me today is Eric Vaillancourt, our President and Chief Executive Officer; and Joe Bruderek, Executive Vice President and Chief Financial Officer. During this morning's call, we will reference a number of non-GAAP financial measures. Tables reconciling these historical non-GAAP measures to the comparable GAAP measures are included in the appendix to the presentation materials. Also, a friendly reminder that we'll 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. 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?

Yes. Good morning. Since launching this next phase of our value-creating strategy last year, there's been tremendous pride, motivation and focus throughout Enpro. The inherent balance and quality of our portfolio shined once again in 2025. Our teams have made considerable progress aligning the organization to our long-term strategic goals by leveraging our core capabilities and engineering expertise to expand new commercial opportunities while steadily finding ways to optimize our foundation. We advanced our strategic goals in the first year of Enpro by growing organically at 7.6%, holding or expanding margins despite increases in operating expenses supporting growth initiatives, deploying 2/3 of our capital expenditures towards growth and efficiency projects, allocating $280 million toward value-creating M&A with the acquisitions of AlpHa and Overlook, delivering total shareholder returns above premium peers, achieving and maintaining premium valuation reflective of a differentiated industrial technology franchise. And as a learning organization, each of our colleagues completed a minimum of 16 hours of training and personal development this year. We have clear line of sight in areas of the business where we can accelerate the growth and profit performance and are excited to work on these value-creating levers again in 2026. Our growth priorities underpinning Enpro 3.0 strategy remain unchanged and will guide our performance through 2030. Over the long term, we are positioned to generate mid- to high single-digit organic top line growth at strong profitability and return levels. We are targeting mid-single-digit organic growth in Sealing Technologies. While at AST, we are targeting at least high single-digit organic growth with both segments capable of generating 30% adjusted segment EBITDA margins plus or minus 250 basis points. Now on to our full year 2025 performance. Enpro performed well in 2025 with sales up 9% to $1.14 billion, strength in aerospace, food and biopharma, firm…

Thank you, Eric, and good morning, everyone. Turning to our results for the quarter. Enpro performed well in the fourth quarter, reflecting momentum across the portfolio and continued progress executing our Enpro 3.0 strategy. In the fourth quarter, sales increased 14.3% to $295.4 million. We saw strong sales performance in aerospace and food and biopharma within Sealing Technologies, as well as improvement in overall AST sales led by continued strength in precision cleaning solutions supporting leading-edge semiconductor production. In addition to strategic pricing initiatives, the partial quarter contributions from AlpHa and Overlook and firm domestic general industrial performance helped offset slow commercial vehicle OEM sales and slow industrial sales internationally. Organic sales increased approximately 10%. Fourth quarter adjusted EBITDA of $69.4 million was up 19.2% and adjusted EBITDA margin of 23.5% was up 100 basis points. Continued robust performance in the Sealing Technologies segment and the partial quarter contribution from the acquisitions completed during the quarter, were partially offset by increased operating expenses ahead of growth programs largely in AST. Corporate expenses of $14.2 million were up $800,000 from a year ago, primarily due to increased medical costs. Adjusted diluted earnings per share of $1.99 increased nearly 27% compared to the prior year period, largely driven by the factors increasing adjusted EBITDA and lower interest expense tied to lower net borrowings. Moving to a discussion of segment performance. Sealing Technologies sales of $187.1 million in the fourth quarter increased almost 15% versus last year. Healthy demand in aerospace and food and biopharma markets, strategic pricing actions, firm domestic general industrial sales and the partial quarter contribution from acquisitions completed during the fourth quarter offset continued weakness in commercial vehicle OEM demand and slow industrial markets internationally. Nuclear sales remained temporarily choppy during the quarter in Europe as well. Organic sales…

Thanks, Joe. I got so excited to talk about our results in the future. I jumped over our world-class safety performance. So I want to take a minute to recognize our teams across the company for their excellent safety performance in 2025. Safety is our first core value at Enpro and we begin every meeting with our safety pledge, striving to achieve an injury-free and psychologically safe workplace. Every day, we look after each other and we make sure we return home safely to our loved ones. In 2025, we recorded our best safety statistics ever with a total recordable incident rate of 0.64 and a lost time case rate of 0.09. Our world-class safety results reflect the day-to-day commitment of our active and engaged environmental health and safety communities of practice, we steadfast leadership and development of strong repeatable processes enable us to achieve these terrific outcomes. I'd like to celebrate these milestones as we continue to strive towards an injury-free workplace. Our value-creating strategy remains unchanged, and we are energized to deliver another year of strong performance and execution for our customers and shareholders in 2026. We continue to invest in areas where we are strongest, while pursuing strategic acquisitions to build upon our leading edge capabilities at attractive growth and margin levels. I want to again recognize our dedicated colleagues across the company or the driving force beyond our success. Thanks to their contributions, we have a clear path to achieve our vision for Enpro 3.0. Thank you for joining us today. Life is good as Enpro and our best days are ahead. We now welcome your questions.

[Operator Instructions] Our first question today is coming from Jeff Hammond from KeyBanc.

You hit a lot of bull's eyes in that Enpro 3.0. Maybe just starting on AST, a little more color on how you're thinking about first half, second half kind of margins. I think you mentioned margins being substantially higher in the second half. So just flush that out a little bit more? And then just expand on the order activity you talked about and where you're seeing it and just how broad-based?

Yes. Sure, Jeff. I'll talk about the cadence first half, second half and a little bit about our margin expectations and then turn it over to Eric to talk about kind of current order demand and patterns of what we're seeing with our customers. So as we've been talking about, there's clear signs that the second half is going to be considerably stronger than the first half. I think you've seen that in a lot of expectations for market conditions across the semiconductor capital equipment guys. We're no exception. We're going to see moderate growth in the first half. I would think low to mid-single digits, something like $100 million-ish sales for the first quarter, and margins similar to what we've experienced over the last couple of quarters. Things will accelerate through the year, and we expect some recovery starting in the second quarter, and then materially into the third and fourth quarter. So there's no doubt we're going to be on significant -- significantly higher growth rates as we move through the year, and we expect the second half to be stronger. At the same time, some of our key growth programs that we've been investing behind are set to start to materially contribute in the second half as well. So that's what we talked about margins in the second half being considerably stronger than the current run rate.

Yes, Jeff, we're seeing our order patterns continue to accelerate. So our order booking is getting stronger and stronger as the year goes on. In addition, we're having some customers that are starting to get more -- let's say, get more excited or placing orders and their order patterns increasing differently than it has been in the past. And so we're seeing the return to kind of what used to be in some cases. So we're more excited about the second half of this year. We also have 2 new platforms coming online, some of our growth investments that will start to get some legs probably in the late second half of this year.

Okay. Great. And then just on Sealing, a lot of discussion about short-cycle trends, PMI kind of bumping above 50. Just wondering what you're hearing from customers around that inflection domestically and just -- maybe a little more on how long you think this nuclear choppiness lasts.

Nuclear choppiness, I think, is going to last for a little bit, although we did have a little better order rate right now, but I expect that the second half will still be choppy. But in general, our industrial business throughout Enpro is very, very strong. There hasn't been any let up. We're not seeing any reduction in orders or anything that would indicate that it's slowing at this point, still very strong and still our book-to-bill is higher than 100%. So still strong right now.

And I'd say, overall, we're seeing clear continued strength in space and aerospace, food and biopharma being strong. Industrial being just firm, as Eric mentioned, right. Good order demand, customers feeling relatively confident and stable as we move into 2026. The areas where we're clearly seeing some offset to that is commercial vehicle OEM, which is expected to be flat to slightly down. And on top of that, we continue to win many different applications. We're seeing strong earned growth across new platforms in space, aerospace, food and biopharma, even in some of our traditional general industrial markets. So if you blend all that together from a market perspective, the market is probably low single to low mid single-digit growth and where we expect our Sealing Technologies segment to outperform that and grow at least in mid-single digits this year.

Even the commercial vehicle segment being down, it was down so much before 25%, 26%, whatever it was being projected to be down another 9%. It's still not that many units. So I expect that business to recover as the year goes on.

Your next question is coming from Steve Ferazani from Sidoti & Company.

Just wanted to walk through how things played out the last couple of months of the year versus your November guide, looks like revenue ended up running a little ahead of the guide, particularly on Sealing on organic growth, but margins may be a little bit softer. Can you walk through what you saw both on top line and on margins. It looks like either AST costs, you are continuing to make those ads in the last couple of months or perhaps it was on slightly higher corporate expense. Could you just walk through the revenue versus the margins the last couple of months of the year?

Yes. Thanks, Steve. Yes, I think things finished up pretty much as we expected through the end of the year. The sales were at the higher end of our range, but in -- relatively in line, margin was clearly right in the bull's eye of what we expected from an EBITDA perspective. We did, as you mentioned, see a little bit higher corporate expenses as we move through the year, really 2 drivers. Medical costs continued to increase and we saw a spike in just claims and overall medical expenses. And again, with our strong performance this year, we did have a little bit of higher short-term incentive costs associated with that outperformance, especially on our ECFRI metric, which is really driven by really good working capital management and strong free cash flow as we ended the year. So in general, I think fourth quarter, pretty strong and as expected.

Okay. As far as the 2026 guide and how that will turn into cash conversion. Given the higher CapEx expected second straight year, it's going to go up a bit. But when I look at 2026, your free cash flow basically around 100% of adjusted EPS, do you expect, even with the higher CapEx next year, but still in line given the top line growth? Do you expect cash conversion to remain somewhat around 100%. And then how you would use that cash given your balance sheet remains in great shape even after the couple of M&A activity in 4Q.

The short answer, Steve, is yes. We expect strong free cash flow conversion as a percent of adjusted net income. The one thing we will see a little bit higher interest expense in 2026 as we included in our EPS guidance because we had periods of 2025, where we really had no draw on our revolver. And with the late year acquisitions, right, we expect to be materially drawn on the revolver for the most of this year. So that will require a little bit higher interest expense, but our balance sheet is in really good shape, right? At 2x strong free cash flow expected again this year. We're well positioned to continue to allocate $250 million to $300 million or more, if needed, for strategic M&A. Our pipeline continues to be strong. We have multiple targets that we've been working for a number of periods that meet our financial and strategic criteria, and it's just an element of the timing and availability of those assets. We are getting a lot of early looks, which is a good sign, right? We're having discussions with a number of assets that haven't even gone to market yet, cultivating those relationships and being ready for when they're actionable. So we feel really good about our balance sheet. As you mentioned, we're stepping up for the last couple of years into our CapEx investments. The majority of that, 2/3 or more are going to growth investments, both in AST and in Sealing. And that's probably the right appropriate level for us to continue compounding growth as we move forward.

If I could just add one on -- in response to your answer. M&A focus, has that shifted at all what you're looking at?

No. No. We continue to look very aggressive looking. We probably look at an asset once or twice a week, but we're very, very disciplined about what we approach, and it will be both strategic and appropriate in terms of value we pay.

And again, Steve, we feel really good about the pipeline. We have a number of growth nodes where we have good, strong organic positions, and we're looking to add additional capabilities and technology in some of those spaces to continue to round our portfolio, have good growth characteristics and strategically allow us to continue to grow in those markets like compositional analysis that we talked about on the last call and food and biopharma right in the wheelhouse of what we did with Overlook and AlpHa and more assets like that in AMI where we're focused.

[Operator Instructions] Our next question is coming from Ian Zaffino from Oppenheimer.

This is Isaac Sellhausen on for Ian. I just had one on AST kind of the margin expectations and ramp through the year. Should we expect any higher OpEx associated with the qualification work in 2025? And should that continue this year? Or any additional color you can provide on the ramp through the year?

Isaac, I think materially, we're at the run rate for those additional operating expenses, right? We've been at that for a number of quarters where we have a number of qualifications and additional growth opportunities kind of layering on top of each other. We talked about that last call, and we're at the run rate of about $2 million a quarter right now of operating expenses ahead of demand. And with all of those, we're kind of at the point now where we're progressing well, and we'll start to see revenue come in and leverage against those costs really throughout 2026, right? We always have growth programs going on. We always have investments ahead of revenue. We just have a lot of them going on at the same time in multiple places, both for additional growth opportunities geographically, customer expansions, platform expansions. So we don't expect any incremental spending on those specific programs in the near term. We're just kind of at that similar run rate and then as those programs deliver revenue as we move through 2026, they'll leverage against that. And that's why we said we're confident that the second half, not just because of demand improving, from general capital equipment spending increase, but also from those growth programs, delivering revenue and leveraging against those expenses, we'll see some margin expansion as we move through the year and more predominantly in the second half.

Okay. Understood. And then just as a quick follow-up on Sealings with the addition of AlpHa and Overlook this year, if you could just touch on how you anticipate those businesses perform maybe compared to the mid-single-digit growth rate that you gave for the segment?

The businesses both have very good backlogs and very good order rates. And so they're -- right now, they're exceeding our expectations and it's really full speed ahead. No concerns and integration has been very seamless at this point.

Yes, in both of those businesses, the inherent market drivers and strong secular growth characteristics should grow at least high single digits combined, as we move forward. So we expect them to be accretive from a growth rate perspective over time and in the short term to the Sealing Technologies segment.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to James for any further closing comments.

Thank you for your interest today. We look forward to updating you in May when we report Q1, and we're available to answer any questions that you may have as you review our results. Thank you again for your interest.

Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.