CIRCOR International, Inc.

First-quarter revenue was $203 million, up 9% year over year, or 13% on an organic basis. Organic orders increased 13%, backlog rose 22% year over year to a record $584 million, adjusted operating income increased 173%, and adjusted operating margin expanded 840 basis points. Adjusted EPS was $0.53, up 960%, adjusted EBITDA increased 103% to $31.8 million, and adjusted free cash flow was negative $16.6 million, an improvement of $2.9 million. For 2023, the company expects second-quarter adjusted operating income of $22.6 million to $24.6 million and full-year AOI of $105 million to $118 million, up from prior guidance of $90 million to $105 million. Full-year adjusted EPS was raised to $1.74 to $2.23, interest expense is expected to be about $58 million, and management now expects full-year orders to be up low single digits with book-to-bill above 1.

Tony Najjar said the quarter showed strong execution across both segments despite macro headwinds, with pricing, backlog growth, and supply chain easing driving better results. He emphasized customer wins in commercial aerospace, naval defense, batteries, and new product development, including the Airbus A321XLR hydraulic rate fuse and new brushless DC motor capability in Morocco. He also reiterated that the strategic review is ongoing and that the board is in dialogue with interested parties for all or parts of the company.

A.J. Sharma highlighted the transformation benefits showing up in the numbers: organic orders up 13%, adjusted operating income up 173%, adjusted operating margin up 840 basis points, and adjusted EPS of $0.53. He noted adjusted EBITDA of $31.8 million, net leverage of 3.8 turns at quarter end, and said the company expects to exit 2023 with net leverage in the low to mid-3s excluding divestitures. On cash, he said first-quarter adjusted free cash flow was negative $16.6 million as expected seasonally, but full-year free cash flow should be positive, with mid-single-digit free cash flow performance in dollar terms for the year while maintaining elevated CapEx. He also said full-year interest expense is expected to be about $58 million, roughly $16 million higher than prior year due to higher rates.

Analysts focused on value-based pricing, industrial orders momentum, the timeline for downstream oil and gas opportunities, margin progression in Industrial, and the strategic review. Management said pricing is coming from long-term contract renewals, aftermarket and spot orders, and that full-year pricing should look similar to last year after a stronger-than-expected Q1. On the strategic review, Tony Najjar declined to give a timeline, saying it is too hard to predict and the board is committed to completing the process. A.J. Sharma also said cash flow should improve through the year as working capital grows with sales and the first half remains seasonally negative.