Albany International (AIN)

John Hobbs Director of Investor Relations
Bill Higgins President and Chief Executive Officer
Stephen Nolan CFO and Treasurer
Steve Tusa JP Morgan
Gautam Khanna Cowen
Ron Epstein Bank of America
Pete Skibitski Alembic Global
Michael Ciarmoli Truist Securities
Call transcript
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Ladies and gentlemen, thank you for standing by. Welcome to the Albany International Fourth Quarter 2021 Earnings Call. At this time, your telephone lines are in a listen-only mode [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to our host, Director of Investor Relations, John Hobbs. Go ahead, please.

John Hobbs

good and Alan, you, morning, everyone. Thank Albany to International's fourth call. conference XXXX quarter Welcome

for please non-GAAP financial listening press a the to notice those As reminder, GAAP. statements forward-looking today, and the is last and their detailing regarding reconciliation our in of release night refer measures, our Contained quarterly certain results. use release a financial issued our to associated

make apply statements of which this of are and Today, conference to statements our serve our on purposes same morning. risks verbal COVID-XX the the the contain For we are that markets and these will that forward-looking of effects a we this remarks financial call, our pandemic operations, the number potential among uncertainties, results.

reconciliation in upcoming may a well comparable XXXX measures For as our their to most XX, SEC discussion, of this our measures, to release filings, a use XX-K. please refer earnings as our GAAP both including we call February non-GAAP of full including

call the Higgins, remarks. turn will President Bill? I'll opening Officer Executive over provide Now Chief and Bill to

Bill Higgins

morning, you year our XXXX. call. quarter earnings on report for pleased quarter in welcome Thank to Good fourth We're great another joining strong everyone. and capping

the Our well remarkably throughout employees performed year.

customers, to than $XXX supply and million in won We job cash to more of challenges. free flow and business, great do We products continued COVID navigated brought new a chain new through for market successfully generated record XXXX.

also segment at company $XXX to end, quality on than cash continued delivery, quarter class XX% to EBITDA growth deliver expected of prior Machine financial of At Clothing performance level Machine customer with world exceptional be the results highest in an as a able XX% great it's and do history mix Clothing’s safety. board. with operational the XX% be perform sales fourth Commercial underway body stages over operational year of nearly and sales EBITDA gross was aviation margins. and have adjusted the support fourth and the Our recovery volumes execution will better ramp year recovery solid to composites demand the margins, margins program production flow in and the demand. initial gross our over a million aircraft Engineer XX% margins, in line performance quarter across XXXX, shift lead at with flow as XX% back up to and narrow well is through quarter, bottom in seen

expected programs, as begins. and the anticipated is recovery progresses to we demand lead as body XXXX, Beyond for and are CH-XXK recovery our excited growth the continue wide

foundation on provide new of expect layer wins growth to also business a that term top beyond will We solid for XXXX. longer

packaging continues printing perhaps short even in rebound slight digital still than better and last as areas. publication XXXX. Americas term As pulp media term trend in the end in markets the publication downward a as Europe, expected Machine paper. enjoyed in healthy few yet we been have fabrics strong, especially engineered and ended all robust Clothing our year, Packaging, and growth recovering was demand will or longer to appears demand in a expect entering was to revert writing replace XXXX we

composites frames The expected manufacturing the hand Neo, on We is to from demand for aerospace our Machine XXXX, wide recovery inventory the belts as come and Max commercial Airbus body longer. chain composite to as in the disruptions. Consequently, leading back. the production of gradually in international XXXX, have expect Boeing Clothing is narrow to do While and meet for improving production has XXX to for demand airline picked in still slow already is some it'll outlook built of and specifically our demand ramping Aircraft. customers Clothing our recovers is somewhat remain travel up the mitigate domestic may up we’re logistics and supply pandemic, body AXXX Machine cautious we're travel healthy risk way while Boeing lead take not XXX needs engineer

On JAASM us. remain that see the healthy Strike this we the service, In some longevity. we overbuilt. program have CH-XXK, for and attractive Strike headwinds been production term, Joint temporary however, missile we defense aircraft programs Longer as term, short Fighter Joint have and side, the a on plateaus do have inventories as enter expect Fighter more to

Now, comments make strategy. me let few our about a

for in invest development growth. Our first and R&D strategic organic priority is to product

As R&D added XXXX. talent investment teams. and to pursuit design in increased planned, We by customer we our XX% engineering

and design next collaborate customers to materials continued products the with to advanced generation new of We bring to key market.

Albany Our strategy with we segments partner development technology both means operational existing at performance win end and to must and good share market be markets. choice the is our This business to materials as new leader customers. position of expand advanced to in our and

years the address for in quality in for the strategy nearest the of on reputation product of improvement and a packaging secular of that continuous Clothing intimately sales, We of longstanding tissue writing technical printing to Machine value. while XX decline, assuring products customer Machine customers We've our quality over of efficiencies Machine establish we customers XX% significantly our and our deliver. ago. second global its grades redirected in Clothing’s their R&D best we produces and durability sales in to our revenue, technology, used pipeline none degrades business. for that Our competitors, exceptional the its and and business a our strategy paid-off. with our majority account operations paper sales only focused production recognized Clothing’s in management support can shifts has contribute improving position decade get product to new customers. About of XX% footprint, from to a earned successfully on This secular more emphasize technical our producers and than Furthermore, has and down to That sales results areas this work serving a paper a continues customers Today, of customers they with products the the investments paper design biggest pay-off. producing industry. industry challenges. ago, growth introductions solutions spend of leadership that team, to

As the I expansion XXX% in In record point Clothing previously decade, a solutions of execution. reinforcing our journey. earlier advanced nearly past with over adjusted EBITDA XX of margins were the percentage XXXX. in delivered material the great mentioned, Machine operational most That's engineer composites strategy providing

materials the energy takes strategy stronger the driven LEAP on aircraft. blades by achieved high to executing of cases. advanced We’re a of springboard sustainable efficiency of those and using components. to woven propagate we're composite future. fuel manufacturing durability XD to of the capability across fan excellence earning or bring and bar reputation and market The the as of engineering composites great any the experience builds volume production build strategy more of we woven the application of for of and for blade next a generation to contribute XD XD It a a other by materials woven blades, customer lighter The advantage the climate developed complement Safran service. the efficiency titanium structures woven and operational and exceeds performance composite demonstrated composites production and with long-term fan XD have we use demand raise trends, that and that collaborating secular We're change LEAP rates XD and feasibility of commercial a on composite design and consistent materials,

right lighter strategy and and of Our manufacturing be materials to We to will composite center include material the this range of the believe applications, is at shift for composite it job. process the aircraft. a

part goal We've wins, business to the aircraft. composite additional collaboration helicopter share we developing this XD delivery reflects customers. the last XXXX, the with products awarded strength that aircraft, of content composite collaborations is XX now of generation announced on solutions. advance narrow-body leading on Boeing engine power, and to numbers, revolutionary and the time the advanced of on over XX Lockheed Over winning CH-XXK months technical technologies so, more quality our existing new and important our composite In RISE including strategy our become partnerships extended supplier years and to operational components composite we've Sikorsky next Strike next-generation this Martin Fighter service, for or performance of for Safran Joint it with how XXX frames, the been and technology XXX woven the

GE-XX develop composite to working for Safran fan a are We aircraft. on the wide-body case also

with It It to half investment awarded XXXX, with and capabilities priority tail. for we award technology allocation strategic hypersonic on composites. foundation We engines, of carbon/carbon application with on also growth. addition Albany be win to CH-XXK while In adds in CH-XXK the and Effective we Wing in our long-term remains an essentially use a the positions driving woven program application major unparalleled defense growth. statement, to them program Tomorrow partner trust and expenditures we This consider develop and program. confidence manufacture benefits transition we over are temperature to the high are pleased already the to on Albany today, wings capital woven of the sponsons income as future starts a with And formed It the will are working And value to on also the we Spirit Airbus has vehicles, materials And relationship back our in about woven research a XD our program. composite announce transition for player continues success. durable we million. on This on building live app AeroSystems long-term composite that organic our And development. critical a another these vertical solidifies manufacture are $XXX structures. ability. we XD with Sikorsky excited helicopter. collaboration top with organic section, of focused of XD the in a composite Sikorsky app reflects manufacturing a as rotorcraft essential

capital focuses regular flexible capacity capital supplement only capabilities, but base efficiency our advancing method on grows. repurchases of dividend not a for return. current production as and our Our maintaining as our Share our expenditure capabilities business our growing and program

element Finally, us with leadership by course. long-term line be acquisitions in on global Historically, price, growth market have and targeted our disciplined right our of technology at a important strategy, strategic acquisitions to enabling will build role key played positions, our priorities. continue the an of to

a on robust cash generation, relentless our sheet, great As a XXXX segments. excellence balance of a Strong we in technologies focus both company, the operational and free ended leading in year flow shape.

promise invest believe position industry advance long-term favorable. secular as are long-term We for We an organic sustainable position new Albany continues resource, in of the more on business for light-weight to technology in Engineer the aircraft choice attractive is replaces as continues will material the that next trends generation leadership as becoming more Machine aviation. of Clothing of Composites continue a paper applications globally partner growth. sustainable to to to deliver plastic. advanced R&D win emerging that on composite its

with hand to that, it I'll So over Stephen.

Stephen Nolan

about I Thank you, everyone. coming the first about morning then Good for outlook and will Bill. the our the quarter for in results our business to initial year. talk

programs compared LEAP by for For product. the translation translation dollar, adjusting and X.X% currency by increased $XXX.X in after composite’s million effects the Adjusting fourth million, growth an last sales Engineered In to in were currency by platforms. grew in net X.X% commercial XXX same euro sales X.X% of driven company principally the again, up U.S. year-over-year, on increase currency also adjusting and of quarter sales, decline the in year. $XXX.X FXX total quarter. other grades the effects, the all declines Machine net for by for on translation year-over-year net with X.X% Clothing, were offset sales quarter, growth effects, the net the to delivered

XX of delivered around last XXX of modestly finished million LEAP revenue with under the the we just destocking LEAP We first XB XB under each line the three XX less in goods same had generated our or as little sheet. year. XX program LEAP four was quarter, the sequentially also to of with in million of our units the contract our quarter the expect more to of quarter million revenue of quarters a LEAP During compared assets, XXXX. in be We up on now about completing engine XB in LEAP production balance finished largely deliveries. ship sets revenue

rate stocking and Although, point from to related chains in supply see XA that finished we time-to-time, periods expect still there demand destocking still uncertainty do Also is planned is our both and Boeing's out to we for subject LEAP LEAP production inventory considerable of goods, some XB revisions. to components. our should customers and

profit the declined production there increase always So last quarter from XX.X% production points year. by XX alignment will for basis million components. and overall an of of The gross of comparable period our Fourth full the gross net XX% between margin the from X.X% company not respective sales. $XX.X be aircraft to engine levels was

the net partially segment, improved volumes, MC certain and contracts. by gross margin favorable lower absorption Fourth and improved in production programs, of absence effect of grew, benefit to net costs. year from programs other margin in international the declined XX.X% the operate, quarter higher a margin net offset in sales by the quarter, logistics our government due by profitability declined improves higher net to and Xx Within prior offset reserve on sales to refunds due in XX.X%. slightly jurisdictions the revenues change where to general raw as margin million the a primarily a from XX.X% from while the XX.X% technical, million driven term a that of expenses price from to XX.X% prior quarter in mixed more research AEC, growth and changes Within material selling long $XX.X partially percentage declined decline by XX.X% of sales of we to from current $XX.X caused fixed and gross

million and Net quarter by quarter. this The by net made XXXX, year compared in income the provisions may was company the as higher normal for from Machine year same was quarter’s $XX earlier of true-up and in compared XX.X% foreign or million $XXX,XXX sales to quarter. sales operating rate Total in was rate. foreign income slightly expenses netted payment to a higher fourth was to QX effect million, than significantly adjusted to net this the EBITDA attributable the AEC impact EBITDA the profit the hire quarter year, little per year. recognized quarter. from $X.X than sales, the period income lower quarter $XX.X and for the beneficial million in offset restructuring largely $XX.X last $XX.X expense primarily prior company of all Earnings compared earnings expense, by year. company quarter share more was XXXX that these in million million, normal After last up Clothing recent revaluation with and by sales. X.X% was or last gains caused tax items, last from or year. CirComp expense. for $XX.X increased for XX.X% that driven fell in million XX.X% in million up lower higher tax employees. AEC per income were operating gross and $XX.X most profit share low STG&R quarter adjusted last to was income net in year income to income significant year. year's same Income period expectations, was $XX.X was The in quarter same You and last $X.X operating the rate special for a higher of XX.X% to due by recall million higher about associated adjusting $XX.X revaluation of EBITDA this Adjusted by of the discrete this $XX.X million non-executive bonus significantly XX.X% quarter $X.XX of to $X.XX quarter year Machine the the as the of $X.XX $XX.X our expense was Clothing by to currency income this losses, the million this Other STG&R operating while net driven adjusted XX.X% the driven the currency quarter. expenses, a or million improvement and quarter. period than compared abnormally the of prior increased quarter the in is acquisition prior down while integration, lower both of a rate was this gross

both generated provided year the cash company defined by our operating over capital program. cash million activities less the goods net free and free down driven the strong in During LEAP segments draw as of this very for flow operating finished free the The $XX of million. performance year, almost of cash quarter, on and was flow expenditures $XXX the both by flow, generated by strong inventory cash

previously LEAP revenues we profit As the on program assets. recognize and at discussed, we are components are recorded manufactured, as in point they contract which

LEAP As pattern revenue or we program were subsequently the had XXXX. This shift invoice then those collections than year components, seen revenue, associated reversing cash overall, the and in considerably on cash with collect we XXXX higher no and we profit.

million quarter, of little of we million are purchases. an far, of fourth additional over flow about regular in $XX free about over repurchased $XX.XX. investors, During fourth to have we a price share in $X.X $XX at dividends average quarter Repurchases million comprised shares. during QX our and XXX,XXX XXX,XXX the roughly the We returned shares repurchased cash in continuing, so

will repurchase We our update activity next during earnings full call. on QX a provide

we share XXXX, Thanks ratio This X.XX. $XX million bill and returned acquisition strong significant million in dividends. cash explore to explore and referenced is continue to our in $XX opportunities. both to almost shareholders as net full-year provides free to flow, to about our $XX the million For return leverage cash leverage shareholders, now ratio headroom opportunities. almost purchases acquisition

X.X a our capital deployment strategy, comfortable we execute As sustained with be basis leverage we would in the ratios range. on

XXXX, be assuming range. have returning which a as for leverage is strong turn and segments. see to normal like year could provide coming to now the provided to done guidance our path comfort I higher would in initial towards another year we Although we a for past, the time-to-time consider both we financial from ratio, expected our to

segment. is Fundamental year results to performance of are paper Clothing another in year to the healthy and our deliver older year and strong, for culture improvement deliver demand excellent products the segment's expect books Machine continuous continues of We out. in

solid enter we XXXX. as in are a We position

began the in which of risk to the our customers fourth revenues not would finished that segment. segment some inventory de-stocking customers’ in our cycle, quarter, obviously top-line seen quarter our time, several of At of fourth goods, materialize we revenue. for the resulting raised at growing As been products above had we of we impact XXXX, and risk both our This in an risk performance strong saw the which the our expectations. and inventory did

not these the cases, and de-stocking XXXX. to grown have of enter risk reversed levels in We as our itself revenue. However, remains. inventory when course, not manifest we cycle some of that will have impacts in terms Therefore, risk know do

for impact outlook. in we accounted XXXX from some However, have our it

is euros. X% in on expect Our takes generated revenues segment guidance our to euro $XXX in past revenue XXXX. for an lower over million compared X% significant This also the segment roughly creates outlook. over of the We months. several to that to rate sales our the XXXX now taken account the $XX has weakening We average million exchange place headwind into XXXX XXXX that in of of

Machine expect next in an a of Finally, to to months. the million adjusted rebound net portion indicated, exceptional million. a market net variability Clothing all Clothing the initial year the expect factors, of to $XXX profitability have of in XXXX, secular XX.X% equivalent had these that will we demand that XX sales. we of result for lived other almost segment for products, to decline in fabric as typical EBITDA, the delivering record we XX guidance million over of $XXX Bill with return Combining and be sales $XXX engineered perspective, Machine From overall do and to publication short seen in grades the

segment higher the material, During the the the of see quarter, including hitting to logistics, we impact input labor P&L. on costs, and fourth raw began

sales be be inflation net to cost able of offset in absorption in to it by the bottom-line cost However, continuous these a our and a to impact we of benefits, current XXXX, to of our of amount offset than compared input prevalence million million I to of our that more therefore significant were customers, due XXXX In euros. some $X expect improvement. and offset segment’s XXXX. by Omicron and modest impact continuing to through a do is globally through low global more do by non-recurring over continued course higher to able final Overall, of through to fixed about XXXX know portion variant. the pricing travel level the of XXX were inflation denominated profitability, the but expenses We earlier on outlook also not euros. discussed assumes significant we

dollar we impact about the the Euro bottom our $X relative the weaker net basis, to On will line U.S. million. by expect

the We generated million XXXX. for from the $XX will also XXXX On see revenues our in than guidance a about to currency neutral profit basis, compared in lower range hit lower a XXXX. of XXXX modestly midpoint is we

expected are no costs while margins detrimental lower profitability. well is high our million sold, resulting to digit in reduction significant fixed reduction lower million volume to have aware, in XX%. to As you in typically gross our We are in XX%. doubt margins in good Therefore, single slightly result this do of $XX cost

Finally, above EBITDA been XXXX expected compared expected expect XXXX. it Notwithstanding instance the in to normalcy to Machine those close see Clothing $X travel now we delayed continued travel, has and EBITDA XXXX. variants and the by in us, deliver delivered to likely the to are excellent expect segment margins million to guidance return those performance the we consistent COVID the largely providing restrictions and our to for year Clothing behind million this will before hope segment the adjusted of to to rise XXXX with ability has repeatedly as or million travel we Machine to now, $XXX we another $XXX and slightly are concerns, R&D travel. level to occur normal year, return are our of have of while We that constrain long

the composites, engineered to Turning term future long bright. is very

the track aerospace ballpark now milestone delivered app in on with AEC on program XXXX CH-XXK the market, deliver a revenue before in par in pandemic, significant transition recovery in AEC which program the app impact for would put pursuit the that is $XXX XXXX, the to the grounding, of of many program years With of global the the and XXX terrific revenue up successful the Max XX% and XXXX. COVID is The over which be million for XXXX, the AEC come. delivered $XXX for for be million in will segment. be will very expected I to from ongoing transition

is However, as the general, be revenue AEC in on revenue incurs impact programs, it to XXXX [six] recognizes expected In most insignificant. costs.

While over production, this in will also the be true Instead, once be that expect on to for recurring the recurring non-recurring work amortized for we recognized expected the AEC the app in production. it case as the over subsequent to will transition as inventory performed begins the of be $XX will represent revenue million program for not be XXXX. do of program non-recurring recorded we phase XXXX, the the equivalent anticipate and revenue of years phase

we the demand. significant a program, to LEAP in in volumes see and destocking portion expect of get produce program on the engine Boeing's with as the we XB us to line components begin LEAP inventory ASE do that more for the variant found On behind phase

volume. We with to costs production volumes. also not I ramp our to note robust Airbus the on does of actual up XA as irrespective LEAP due its that volume remain meaningful the scale from program continues LEAP fixed expect will our the the recovery revenue linearly in customer of volume

volumes in the the revenue. this our XXXX XXXX, on impact and effect mitigated of declined volumes As reduced

program somewhat revenue the it impact We on do return of that line. to will XXX any mute growth, we volume expect in the our XXXX. not recovery on as Now, gain

In in levels saw fact, volumes be from low likely we already are to XXXX. the down

will any XXXX finished program with the AECs total impact the in given program the revenue million than we modest reduction results year. of less $XX the on further Although, in be for

deliveries, would destocking year, only that stretched On parts and time told out, finished revenues, finished the Due impacted from and reduced were consumption that which and XXXX. customer our last customers F-XX inventory impacts only program, drive lower goods depot timing program. at on F-XX of the orders our you to down revenues of we those this program XXXX partially modestly spare

dip when million the not composite XXXX. However, Overall, for guidance has revenues segment, to close net down are we XXXX, to expect sales of gone expected engineered previously and that away from $XX $XXX F-XX shifted we demand has million. into $XXX and for to instead providing million initial be

profitability. with XX% Turning segment expectations $XX.X line finished or sales. adjusted EBITDA full-year with We largely of in to the of XXXX million net engineered of composite

As higher we our segment, average price a make-up segment meaningful implying to mix net reduction forward the our to total revenue. on look The exceed of lead margin This growth to see LEAP continue margins. XXXX, to gross the we'll of expected on effects is growth program the revenue on a fixed gross the remainder that programs the of in will our margin. decline full-year negative

from cost Beyond the some growth. mix effects, we impact seeing are

all input segment, of costs. the First, MC are we impacting inflation our seeing similar to

from of logistics. we of true and raw materials true labor is consume, contractually nor is While not we increases all of insulated many that materials cost our it are on typically the

increases a in As both result, SG&A. and we'll good driven sold inflation cost see of

to travel. to return we predominantly marketing, and third, R&D near-term we invest support continue and to in sales And identified normal Second, both expect to pursuits.

roughly million million; believe million. tax $XXX justify are $XX EBITDA While these guidance we item. million of income be effective adjusted $XXX of $XX pressed benefits some profitability, that the the of share but rate of to are million and a as million between providing to revenue guidance between XXXX engineered providing to and to of million; the XX% the $XXX year XXXX per follows: XXX depreciation clarifying will composite’s for for at At in investments $XX with like total between XX%; of $X.XX $XX GAAP range amortization we EBITDA level, initial long-term of would I this and flat and more adjusted guidance near-term initial $XX million; and level expense. explanations company the we capital million. than add expenditures $X.XX; Overall, few company adjusted earnings and

Most of we up year. little items, guidance by this positive expected cash in withholding First, return certain the we our forecast jurisdictions than higher ended and taxes, higher fact from which last that being a not XXXX. finished increase overseas rate discrete tax is driven is as we can

portion significant is the a craft of CH-XXK of Second, the transition capital increase in in expenditures program. support

how around balance not repurchase the we EPS of additional such in the year, uncertainties shares our any assumed many given activity we have might guidance. Third, and the in when

in our on company of guidance share So years. the count which prior of the compared already million corporate level implies guidance repurchase only shares, a is fourth, EBITDA higher in adjusted completed EPS the about the activity includes wide impact based spending, latest And first to XX.X quarter.

expense While growth expected due higher some increase of wage inflation is conditions, is by portion investments. labor cybersecurity significant of market the driven current that

explicit XXXX app company the how not do very be guidance, we more the $XXX in are to no in new program. cash programs, flow expect overall. the XXXX flow significant investment transition to performed than and due million pleased in cash capital rise to we While present, free CH-XXK the provide we with most notably in expenditures Returning the

for I strong performance segments also to XXXX. excited the and forward would look in positioning open both year With are of about to that, long-term the call We questions. like Alan? of delivering another


[Operator Instructions]. you Thank

from the come please. will question ahead JP Tusa of Morgan. with line Go Steve first Our

Steve Tusa

you the perspective? what for about leaves and kind from just talk related basis a just you, the from a of unit Can expect business volume XXX

Bill Higgins

it. can at sit, a are customers to And low run are our very bit, keep little where up to level. rate low running From we gonna at a Maybe work levels right front. running where us actually at just the line and run continue a Steve, with we we we

capability have we in technical So that we process. we about manufacturing lose as low to not it the run as the can

Stephen Nolan

at level in that anticipate of we do the doing single low are per terms the has mentioned, completely may units very we those production periods we can We year load We month. during digit where running to to an plant. rate on there pause be are Bill everything have

like would our if going average On about So in meaningful I I'm us say the half talking but happen the single try what's now. doesn't LEAP I that of not back sure dollars digit to right revenue is year, the just low units. very customer forecast and and

month generally the of XX% in more say those rate and So units look production the equipped roughly which to what the level with and we're number rate from that's producing. we driving geared per seeing balance which Boeing, disclose we XX from we in let of seeing per typically volume LEAPs that we're is turbofan, that month a But we're the is is expecting XX XX% demand what with that expect. are Airbus, don't recognizing are the actual

Steve Tusa

guys you on then working this there anything the on around anything see front. side that business on engine And that year, out capital moving for that the

but CapEx, You mentioned talk maybe just capital about capital. working

Stephen Nolan

program. the to unwind of it app mentioned, not up CH-XXK we to on lot a there's on XXXX. where close that As We're in less capital going value program XXXX, down work frankly and XA but this a to big normal levels more year. The change inventory XB, both or transition LEAP expect goes additional asset on finish bit, quite and contract be LEAP is our little we working to quarter-to-quarter,

I As of XX structure. be on inventory we equivalent revenue of the revenue million the in based will putting that on over anticipated based the recognition contract mentioned, approach on

So the biggest year that on working be of this growth will AEC capital side. the


Our Gautam Khanna next from will question with come Cowen.

Gautam Khanna

this sort customer. ahead you put the think and But mentioned do have assumption aligned back it? on what point sort you with of inventory when run XXX into point about more back X,XXX what to guys to ahead given I'm look wondering get shipments need ‘XX, guys your at was track At just that Safran’s channel? LEAP you the if we've just into of Max that the X,XXX system, inventory with you curious talked I total will at you do you're the all, in of of -- year. get how deliveries the forecast,

Stephen Nolan

Boeing our and within continue do for now, future to Right Airbus close of ramp In a inventory, in We're in XXXX, level to both additional distance XXXX. it. come up, desired that's forecast current not years of anticipate need our spitting could significant we if but build we're not inventory. to that

Bill Higgins

say year. in of stock see changing normal we'll don't this a as we're inventories in at dramatically anything sort buffer, a would channel. a level the always carry more just We buffer I of some and inventory as

Gautam Khanna

catch any assumed to is ups, be on assuming AEC, just And Favorable right? guidance. the not you're clear that At adjustments… profit

Bill Higgins

of terms a assumed not normal our in anticipating ones through understood outsized XXXX. cost of level significant, reference, profit planning -- there in built that there's any of Gautham. I no, be savings no the would But increases, all We're assumptions. out material period are

Gautam Khanna

-- headwind could guys what you of of do point dollar headwind, the me, ships think you that? a then and is do I for year And just if you At and what this value the it'd you that can't recover happens thought in But ‘XX, last the quantify $XX all one one ‘XX? we maybe then million the Do what be F-XX. impact or then ‘XX what remember. on

Bill Higgins

in slightly were from down we So XXXX. XXXX,

out order we OEM the I in would we materialize that but replenish. into stocks reduction. F-XX be the one level, think to million don’t we our number level expect. sustainment rebound to have we largely customer's a both insight so reduction law for expect assuming of down Depot and we $XX primary clear yet XXXX slightly the believe But the driver now then this as $XX expect and start we we as put inventory is that would million XXXX XXXX, that this would don't the at certainly and the in XXXX, in level time about externally million on that in see XXXX also at $XX destocking We


Epstein of of Next we'll Bank America. go Ron to with the line

Ron Epstein

to there? What I to those just we year? go into rates for follow frames commentary are the the next want you do where And XXX. expect your year you go seeing up through on on as

Bill Higgins

a kind a in to it it's single to at that technology run be we hoping hard expect rate, at let's that We're where out, answer, going. pointed on channel going as our year, looks to to what low running Ron. it but at a periods, us Yes, year the a time after in how opine get with the just this keep Stephen would X But like. it at months our producing year working of taking question really we for customers is next for hard rate can digits to and is go. call We're kind here, the outlook of where

Stephen Nolan

in an decline ships -- if XX Look, and a back when the you before units Ron Boeing give was you the fact, idea, range. to go producing in month XX more

north revenue $XX Our was million. of

As was XXXX. an in to it of XXXX, you to we down million mentioned, give we're we idea, revenue X/X the than and To less expect be less than in $XX flat our revenue.

could do to we're in somewhere since you -- So on that shipsets get month. per the and math you price a fixed X program, average it's just indications could rough that a X

Ron Epstein

side. gears changing then here on And Clothing Machine the

people going the about recover, As I in that? lives thinking any that's and mean upward start fashion. to high expecting level, their very and again continues you Are Do have and you living sense business? how that on economy out pressure, a to normal at do maybe a downward get you just to what any pressure? more are

Bill Higgins

industry, the for to running last back going off 'XX that seen, then down of -- to mix grocery with high to year question. a interesting in take and such has will years to to think The business instance, year And tissue, had over the was couple probably -- it away-from-home is buy the growth store at if come a some flat was we've suffered tissue. 'XX going already it's everybody more. you an that's extra There's look because Yes, a we place. kind of in

will in line. So back that come

So of it the 'XX. I will of come think the slowness off of sort

going area forward, has going demand on -- is the there some So we're But look been inventory things cautious globally, good. I think up. solid One forward. pretty just built looks pretty

Ron Epstein

one, just I can. last if maybe one then And

your is aerospace passed raw that costs on that on input how to does customers? through work Your side, your Or the materials?

Stephen Nolan

varies, of aren't not are an in by program, we're a the contracts, therefore, materials don't contracts customer, -- enabled sorts the it's more certain gloves, that We are coverage of do a or And finished bags, have other are Ron. that of the to that program but negotiated is contract tight, not do XXX% we in raw be release a LEAP clear, that obviously, still pass-through But in like on and lot. either. obviously, or a There where other resin are price inflation do materials, typically it's really that pass-through. type our the non-end-item for even like. a the cost that use than or the and pass-through. but programs, product, X used labor cost there and is agents contract of be of product, have raw a buying materials, where since vacuum not fiber for It under whether a production coverage our on such those. are the LEAP it's on resin typically on materials There labor of those raw lot we And

fiber not The other input non-LEAP. resin it's mixed protected other costs bag. protected and So largely a


[Operator line the Instructions] Global. of with We'll Skibitski Alembic to go Pete

Pete Skibitski

where, I guess, through Stephen, to margin think I'm of at kind just trying EBITDA could AEC. go

standpoint we think could that. program on little likely go terms But niche given program. for You of through how kind most to a LEAP? your AEC meaningful I But the do there's the rate bit. be from cost-plus of talked about the that of some growth midterm contract margin type where know at guys positive just about LEAP, outlook

Stephen Nolan

let's great next growth in pressure And some that on the the to narrow put time it We're LEAP recovers. months body XX as will margins. frame, over, those seeing during say, XX downward

the on of price programs, back now to a Transition content, expect However, we certainly of F-XX. during the see the to beyond Aft that growth of lot months -- fixed particularly half XX months, addition with that CH-XXK, XX and XX

a within program. still on We XXX maybe platform. happy on Boeing even fantastic that within We're how not aircraft. do on that's a see rebound it's this calendar year the next does be year, and think While calendar depending not to still very expect we to

next impact will LEAP those rebound, of those XX XX over in some as growth So dilutive the of we're the to offset the months. seeing

the maybe middle those expect into So to year bit and I start to beyond half think this continues LEAP this dip margins, but you're increase next of year, of a see growth. particularly year to in again I as a seeing add margins do

So I get to think we'll start back.

gradually margins the has very And get back our well But of is north of in the we sustained been peaked in just and levels to to XX% always above XXXX. in that a goal those too much business. term, LEAP Our short that is XXXX goal well more growth north of Clearly, XX%. challenge.

Pete Skibitski

FARA]? would then do similar have a And Army color And new could on great. opportunities? relationship relationship now Sikorsky you programs, you do given as right [FLARA you have there And those any with provide just be with big and CH-XXK, with Lockheed them you the the view the guys

Bill Higgins

to we're interested Sikorsky certainly relationship so important something in, the that Pete. with And us. it's is Yes,

material of We're So composites benefits we're forward. very the then And great we to can that. as design bring XD the on with actual interested maximize in keep going composites, advantages. talk advanced woven is one working going the into from we benefits upfront, we get those programs the about can we really

Sikorsky with longer So our pretty we're yes, excited about relationship term.


of the Ciarmoli will The come from next Truist with question Michael line Securities.

Michael Ciarmoli

Thanks 'XX. 'XX. for of right But not here all to blow past on the detail

million? That get XX% you I'm back implies at $XXX of this guidance. can said with AEC a XXX growth wide-bodies 'XX. rate unknowns to wondering healthy very around just general manufacturers And you year's million here, from overbuilding revenues midpoint the think going confidence in and I the and in just to go in to rate. engine guys get that even you were up where Presumably, to that catch to the the back what to to narrow-body $XXX production gives is 'XX, support

what I'm rate into into out So figure of 'XX? to sight just have trying of you line that kind growth

Stephen Nolan

sit risk-adjusted $XXX Mike. million. now. of a line XXXX where for guidance months see But certainly, on basis, formal sight uncertainty, we're where we'll some providing from always good XX to not There's stage and we're It's see the we -- yet, we at

rates very XXXX. clearly, high to realize, side have referencing back You at engine in to were the if you're on XXXX, building we

not lot at look on that Transition, be other coming have or we expect we we programs As the see XXXX, we successful did successful in XXXX, the Aft in which new months. a business but have only been to not of

better-than-average sort we say market. obviously so have months looking -- I no out but think in this And of I would that certainty there's to have line XX XX we of sight,

will in be XXX but programs. projections built could have on programs, always we We in think those other some outlook what say, the XXX, of risk downside this there making at I on And happen are that stage. amount to we and on

Michael Ciarmoli

I certain rates milestones monthly program to programs. anything I rates to should up. to get know if start narrow-body get clearly, mean, XX the for we $XXX mean into next some and And really hold there year, to ramp mentioned new is track? example, GEXX you we million? else, XX get I if Are that MAX to we I see the mean, level. don't you're enough to assuming need see

Stephen Nolan

a near-term program somewhat. be We're certainly we GEXX, factored not some any program in to a revenue That's driver. a while that great not expecting rates rates on on cases, the above we primes have in expect have. Certainly published And future. program that what the like

a XXXX our even outlook stage. not this that's portion material of at So

we're any assumptions to rate range. to that not on So get making heroic

Bill Higgins

for aircraft existing number No, today. it's the already things that buildup even by by of number do aircraft, the of like growth a CHXXK, program the in we at program, looking work pretty conservative

Michael Ciarmoli

out with ramp just be of growth, CH-XXK think of in It good $XX 'XX? then really And margin as and the sounds overall clear it's you you're I more of on a up? you're top in plus I'm cost 'XX, beginning headwind assuming ramping up is in even compression. pressure line margin AEC to And dilutive that's -- getting called work going the then getting more sort But that nonrecurring. of F just of the program that pretty some this. your The like EBITDA and million you I'm significant year here -- there mix margin

Stephen Nolan

recognizing be any on in won't XXXX. we No, here profit revenue that or

obviously, that delivering we no higher level. the price think have fixed price not typically some it's longer way mix. the that's down And to decremental have But I that said a way about said which $XX and is margins gross fixed margin a average the before average which does. the absorbing think real Take but programs, F-XX. think only programs. margin, fixed-price that's million, it's than We growing. programs it fixed LEAP, the at about is costs, the is on The average to

margins you on range absorption incremental gross unusual programs. before decremental fixed it's price margins of that to the not the the for there programs So fixed factor we've the XX% gross decremental in cost in or be talked XX%, after

of significant it. of EBITDA revenue, that million with $XX that a loss losing goes So there's

that those the because gross its don't costs from all is the volume. flip the on -- equal effectively of gross volume, side, LEAP the incremental the of additional grows margin fixed On those margin as benefits on of recovers irrespective fact LEAP. economies get LEAP average to We LEAP

but margin, decremental And on driving a fixed far so on you're the higher revenue the price programs. gross at somewhat margin revenue. at that's the what's lack of losing average adding And revenue a growth gross EBITDA increased lower


And Higgins. back with no further questions I'll turn in queue, conference Bill the to

Bill Higgins

everyone, joining His Investor And any out International. you, Relations. have appreciate call if Thank the your is(XXX)XXX-XXXX. day. Thank good of our interest for reach course, We you, you number Director phone free questions, feel continued of Albany on today. have us Hobbs, to John a and to in please


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