What Management Said
Read the full Q2 2026 transcript ↗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. Before I review our results, I would like to recognize our colleagues across the company who are accelerating their personal and professional growth in Enpro 3.0. The individual growth aspect of Enpro 3.0 is not a side program. Through accountability, hard work, encouragement, and feedback, our colleagues are achieving meaningful growth.
Strong demand across semiconductor markets drove sales in the Advanced Surface Technologies segment up 21.8%. Total company adjusted EBITDA increased more than 22% to $86.9 million at a margin of 25.6% for the second quarter. We are pleased with how our commercial vehicle business is positioned ahead of the eventual recovery in trailer demand. Sealing Technologies segment profitability remained strong at 33.2% with positive volume growth, pricing discipline, and excellent execution.
Aftermarket sales remained at 60% of the Sealing Technologies segment revenue in the quarter. Various market forecasts and indications from our customers suggest an acceleration of capital spending to support the need for more chip production as artificial intelligence, advanced computing, and communications infrastructure take a quantum leap. Demand is accelerating for precision cleaning solutions in all regions, prompting incremental investment in capacity. Demand is also very healthy for highly engineered critical in-chamber tools and our optical coatings capabilities.
What went well
- Enpro delivered strong second-quarter results with sales up 17.6% to $338.8 million and raised its full-year 2026 guidance across revenue, adjusted EBITDA and adjusted EPS.
- Advanced Surface Technologies (AST) sales grew 21.8% on strong semiconductor demand, with adjusted segment EBITDA up 48.5% and margin expanding 430 basis points to 23.9% on operating leverage and normalized FX.
- Total adjusted EBITDA rose more than 22% to $86.9 million at a 25.6% margin (up 90 basis points), and adjusted diluted EPS increased 23.2% to $2.50 (GAAP diluted EPS of $1.27).
- Sealing Technologies grew 15.3% to $216.2 million (5% organic) on the AlpHa and Overlook acquisitions, aerospace strength and double-digit domestic general-industrial growth, holding a 33.2% adjusted segment margin - above 30% for the 10th consecutive quarter.
- AST customer build plans and lead times now provide healthy visibility through 2027, with materially higher book-to-bill for capital equipment and coatings solutions supporting accelerating semiconductor capital-equipment spending.
- The balance sheet is strong at 1.6x net leverage after repaying $80 million of revolving debt year to date, with more than $60 million of first-half free cash flow supporting growth investment and capital returns.
What went wrong
- Commercial vehicle markets (over 70% trailer) remained soft/tepid, showing only early signs of stabilization, and management is not contemplating a significant commercial-vehicle recovery in its raised 2026 guidance.
- The company saw weakness in its smaller European general-industrial and food-and-biopharmaceutical positions during the quarter.
- Corporate expenses rose to $15.7 million from $12.1 million a year ago, driven by higher incentive-compensation accruals and $1.3 million of restructuring costs.
- Enpro increased environmental reserves (~$16 million) for legacy uranium-mine liabilities in Arizona dating to the 1950s, an issue that will require soil management over a roughly 10-year project.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Total sales growth | FY2026 | 14%-16% |
| Adjusted EBITDA | FY2026 | $330M-$340M |
| Adjusted diluted EPS | FY2026 | $9.30-$9.80 (25% normalized tax rate, ~21.4M diluted shares) |
| Capital expenditures | FY2026 | $60M-$65M (pulling forward AST capacity investments) |
| Sealing Technologies organic growth | H2 2026 | High single digit (ex AlpHa/Overlook, still ~$60M-$65M for the year) |
| AST revenue growth | H2 2026 | ~20% year over year, with growth and adjusted segment EBITDA margin both approaching 25% exiting the year |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total sales | +17.6% to $338.8M | 21.8% AST growth, 5% Sealing organic growth, and contributions from the AlpHa and Overlook acquisitions. |
| AST sales | +21.8% | Very strong precision-cleaning demand tied to advanced-node chip production plus rising equipment and coatings book-to-bill. |
| AST adjusted segment EBITDA margin | +430 bps to 23.9% | Operating leverage on higher sales and production volumes, plus normalization of the prior-year Taiwanese-FX headwind (~$2M). |
| Sealing Technologies sales | +15.3% to $216.2M (5% organic) | AlpHa/Overlook, aerospace, and double-digit domestic general-industrial growth, offset by soft commercial vehicle and weak European positions. |
| Sealing adjusted segment EBITDA margin | 33.2% | Strong operational performance, strategic pricing and FX tailwinds; above 30% for the 10th consecutive quarter. |
| Adjusted diluted EPS | +23.2% to $2.50 | Driven by the same factors behind adjusted EBITDA growth; GAAP diluted EPS $1.27 versus $1.25. |
| Net leverage | 1.6x | After Q4 2025 AlpHa/Overlook acquisitions and $80 million of revolving-debt repayment; net debt ~$500 million. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Semiconductor capital-equipment upcycle | Improving order patterns | AST demand accelerating with visibility through 2027; significant multi-year advanced-semiconductor infrastructure investment driving precision cleaning (all leading-edge), equipment and coatings, prompting capacity additions in Arizona, Milpitas and Taiwan. | — |
| Enpro 3.0 strategy | Portfolio around highly engineered products | Through-2030 framework targeting mid-to-high-single-digit organic growth (mid-single Sealing, high-single-to-low-double-digit AST) with both segments capable of ~30% (+/-250 bps) adjusted EBITDA margins; individual colleague growth is half the strategy. | — |
| Compositional analysis expansion | AMI natural-gas sensing | AlpHa and AMI expanding the TAM - the same moisture/oxygen/H2S sensing technology can move into biopharmaceutical and other applications and into Europe from a North American base, aided by natural-gas and data-center demand. | — |
| Acquisition integration | Closed AlpHa and Overlook in Q4 2025 | Integrations going well; AlpHa adds process/compositional analytics and Overlook adds fluid-path technology for liquid-dose biologics, both receiving capital and supply-chain support (~$60-65M combined revenue in 2026). | — |
| Commercial vehicle bottoming | Persistent trailer weakness | Management believes the market is at the bottom and improving, with FTR forecasting ~17-18% growth next year; Enpro added an aftermarket line and took share during the downturn to position for the recovery. | — |
| Capital allocation | Organic growth plus strategic M&A | Raised CapEx to $60-65M for AST capacity, maintained the $0.32 quarterly dividend, retains a $50M buyback authorization, and remains active on capability-expanding M&A within its financial criteria. | — |
Q&A Summary
Jeff Hammond (KeyBanc) asked whether the guidance raise is mostly AST and what underpins the Sealing acceleration, plus the reason for the CapEx increase and drivers of double-digit domestic general industrial.
Bruderek said the majority of the raise is AST but Sealing is improving to high-single-digit H2 organic growth on general industrial, aerospace and compositional analysis; Vaillancourt said the CapEx raise pulls forward AST cleaning capacity (Arizona phase 2, Milpitas, Taiwan), and the general-industrial strength is core U.S. industrial/chemical plus data-center build-out and natural-gas applications.
Tomo Sano (JPMorgan) asked how much of the 430 bps AST margin improvement is sustainable versus transient, and about the environmental reserve build.
Bruderek attributed the improvement to a prior-year ~$2M Taiwanese-FX item plus stronger volume, production leverage and inventory build for strong H2/2027 demand; the environmental reserve relates to decades-old Arizona uranium-mine liabilities now at a probable solution, a ~$16M reserve with first cash outflow ~3 years out over roughly a decade.
Steve Ferazani (Sidoti) asked about compositional analysis performance and TAM expansion, pricing opportunities, and any tariff refunds.
Vaillancourt said natural-gas growth was part of the thesis and the sensing technology can expand into new applications and geographies (growing the TAM), pricing remains value/strategic (a standard ~2% annual sealing increase plus opportunities at newer acquisitions), and tariff refunds were minimal and manageable.
Ian Zaffino (Oppenheimer) asked where AST strength is concentrated (cleaning vs components vs optical coatings) and about the commercial vehicle outlook.
Vaillancourt said AST strength is broad-based and mostly leading-edge (cleaning and precision machining strong, optical coatings a bit slower), and that commercial vehicle (>70% trailer) is at the bottom and improving, with optimism for next year given FTR's ~17-18% growth forecast and share gains and a new aftermarket line added during the downturn.
More on Enpro Inc.
Reported 2026-08-04 · figures from the Enpro Inc. Q2 2026 earnings call.
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