Key Points
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Record Q3 results:Revenue rose 34% year over year to $349.5 million, while adjusted EBITDA reached $100.1 million and adjusted EPS was $1.68, exceeding Albany International's revised outlook.
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CH-53K agreement reduced program risk:A renegotiated Sikorsky contract contributed approximately $12 million of revenue and $44 million of adjusted EBITDA, improving the long-term economics of the program and stabilizing the Salt Lake City facility.
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Growth opportunities remain concentrated in aerospace and defense:Engineered Composites posted record revenue, supported by LEAP, Boeing, missile and helicopter programs, while Albany expanded its missile and hypersonics pipeline through a $21.2 million IBAS award and a Lockheed Martin teaming agreement. The company maintained its Q4 revenue outlook of $325 million to $335 million.
Albany International (NYSE:AIN) reported record third-quarter revenue as growth in its Engineered Composites segment and a renegotiated CH-53K helicopter contract helped lift results above the company's revised outlook range.
Third-quarter revenue rose 34% year over year to $349.5 million, while adjusted EBITDA reached $100.1 million and adjusted diluted earnings per share were $1.68. President and CEO Gunnar Kleveland said the quarter marked a transition from resolving legacy issues toward pursuing growth opportunities across commercial aerospace, defense, missiles, hypersonics and next-generation aircraft programs.
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"Our major programs are continuing to ramp, our execution continues to improve, the portfolio contains materially less program risk, and we're winning new business," Kleveland said.
CH-53K Agreement Removes Legacy Uncertainty
A central development in the quarter was Albany's agreement with Sikorsky to revise the economics of the CH-53K program. The company said the agreement provides a more stable foundation for its Salt Lake City manufacturing facility and improves the program's long-term economics.
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Acting CFO Sean Valashinas said the renegotiated contract contributed approximately $12 million to third-quarter revenue and $44 million to adjusted EBITDA. It also added $33.4 million to gross profit. The company had recorded significant charges related to the program in the prior-year period, when the launch of its strategic review reduced revenue by about $46 million and operating profit by about $147 million.
Adjusted EBITDA for the company was 28.6% of sales, benefiting from the CH-53K reversal as well as tariff refunds and other discrete items. Gross profit was $140.4 million, or 40.2% of revenue, compared with a gross loss of $49.9 million in the prior-year quarter.
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Operating income was $59.4 million, compared with an operating loss of $116.5 million a year earlier. Free cash flow totaled $36.5 million, up from $25.7 million in the prior-year period, aided by the amended contract, tariff refunds and a vendor credit.
Engineered Composites Sets Revenue Record
Engineered Composites generated a segment-record $179.7 million in revenue during the quarter. Growth came from higher production activity on LEAP engine components, Boeing platforms, CH-53K and missile programs. The segment also benefited from tooling pulled forward for a next-generation contract with a defense prime contractor.
Segment adjusted EBITDA was $65.6 million, or 36.5% of sales, compared with a loss of $134.6 million in the prior-year period. Excluding the CH-53K-related impacts and other specified items, Valashinas said the underlying Engineered Composites EBITDA margin was approximately 12.5% for the quarter.
Management said that 12.5% margin is a reasonable starting point for the fourth quarter and early 2027, with margin improvement expected in subsequent quarters. Valashinas said the company aims to exit 2027 with Engineered Composites margins in the mid-teens, supported by pricing gains, higher production volumes, contract changes and the removal or renegotiation of contracts that had been in loss positions.
Kleveland said growth in the segment continues to be led by existing programs, including LEAP, Boeing one-piece frames, missile products and engine applications. The company expects newer programs to contribute more meaningfully during 2027.
Missile and Hypersonic Opportunities Expand
Albany highlighted increased activity in missile programs, including JASSM and LRASM, where it is already seeing demand growth and contract ramps. Kleveland said that program ramps historically can take 12 to 36 months after qualification, but current market demand could accelerate that timing.
The company received a $21.2 million Industrial Base Analysis and Sustainment, or IBAS, award to complement investments in ceramic matrix composites. Kleveland said the funding will help Albany build a more vertically integrated capability by adding machining, inspection and densification capacity. He said the company expects limited additional investment from its own capital for that build-out.
Albany also cited a teaming agreement with Lockheed Martin related to hypersonic missile development. Kleveland said the company has existing capabilities to serve opportunities in 2027 and 2028, while the full benefits of expanded capacity could emerge over a longer period.
Machine Clothing Maintains Margins Amid Mixed Demand
Machine Clothing revenue was $169.8 million, modestly below the prior-year level. Management attributed the decline primarily to customer consolidation and capacity rationalization in the Americas, as well as softer demand in South America.
Europe remained stable, while China showed signs of stabilization for a fourth consecutive quarter, though management said visibility in the region remains limited. Demand for tissue and packaging products remained favorable, particularly in Asia, partially offsetting declines in publication grades and softness in South America.
The segment produced adjusted EBITDA of $46.3 million and a 27.2% margin. Valashinas said margins contracted slightly from the prior year because of unfavorable regional mix and lower volume, but continued to reflect cost discipline, operational execution and efficiency initiatives.
Albany continues to expect full-year Machine Clothing revenue to be slightly lower than in 2025. Kleveland also said the company remains on track to recover volumes affected by an equipment failure by year-end, with a replacement machine expected to be operational by the end of 2026.
Fourth-Quarter Outlook
For the fourth quarter, Albany maintained its forecast for consolidated revenue of $325 million to $335 million. The company expects adjusted diluted EPS of $0.65 to $0.75 and an effective tax rate of approximately 29.5%.
Capital expenditures were $12.2 million in the third quarter, down from $18.3 million a year earlier, as facility optimization reduced spending. Albany ended the quarter with $79.1 million of cash and $422.1 million of total debt, for net debt of approximately $343 million. Including revolver availability, the company said it had roughly $457 million of available capital.
Management said it will provide updated long-term targets and a 2030 outlook at its Investor Day in New York City in December.
About Albany International (NYSE:AIN)
Albany International Corporation is an advanced materials and engineered products company serving the paper, aerospace and defense industries. Founded in 1895, the company develops and manufactures specialized textiles, composite materials and related process technologies for industrial applications.
Albany International operates through two primary businesses. Its Machine Clothing segment produces engineered fabrics and process belts used in paper manufacturing, including forming fabrics, press felts, dryer fabrics and other products that support papermaking efficiency and quality.
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The article " What Albany International (AIN) Said on Its Q3 Earnings Call " was originally published by MarketBeat.
