Enpro Inc. (NPO) Earnings Call Transcript & Summary

What a terrific way to start the day. Good morning. Welcome to EnPro's 2021 Investor Day. I'm James Gentile, Vice President of Investor Relations. It is my great pleasure to welcome all of you today as we invite you to take a deeper dive into our incredibly unique company. Before we get started, I'd like to refer you all to our forward-looking disclaimers on Slide 3. On Slide 4 is our agenda. There will be a break as well as 2 Q&A sessions. While I'm a new face to some of you in this capacity, I'm no stranger to EnPro. I've studied this company for the better part of my 20-year career as a research analyst and investment manager and was even once the company's largest shareholder. The attractiveness of the businesses at EnPro was the foundation of the analytical framework with their consistent aftermarket exposure, diversity of end markets, solid cash generation and the disciplined reinvestment of it. But then there's the magic that may not necessarily be clear to some of you on the outside. There's a dynamic culture here at EnPro, one that cares greatly about the development of talent, transparency of decision-making, diversity of people and ideas, all with a clear focus on growth and our forward-looking awareness-based culture. There is now a crisp strategic direction at our company, largely free of the legacy challenges in the past and a dedicated global team that is executing tirelessly, charging confidently into the future. This teamwork has shown through in our results with material improvements in profitability, capital efficiency, a flexible balance sheet and sustainably improved returns. Today, it's my pleasure to introduce a diverse group of thought leaders that represent our 4,400 employees around the world. We hope you enjoy our presentations today and a glimpse into the future of EnPro. It is my pleasure now to introduce our President and CEO, Marvin Riley.

Good morning, and welcome to our Investor Day. My name is Marvin Riley, President and CEO of EnPro. I'm extremely excited to have the opportunity to discuss the great story of transformation we have unfolding here at EnPro. This July will mark my 14th year with the company and my second full year as CEO. During this extensive time with EnPro, I developed a deep understanding of the material science depth within the company and our ability to use material science to push boundaries. Our culture actually encourages breakthrough thinking and solving significant problems, which is why we conceptualized and developed the Capability Center as a value creator for EnPro while I was COO. There is much more breakthrough work taking place as this ethos is wired into the fabric of the company. We intend to share that with you today. We take great pride in our successes, and we speak openly about our failures as we believe this provides the humility and discipline needed to be value creators. It's fairly easy for me to say that I am beyond committed to the work here at EnPro, and I have never felt more optimistic than I am today. Now I'd like to share a few highlights that you'll receive from today's presentation. We have a clear strategy and the talent necessary to execute on this strategy. We are building a world-class industrial technology company comprised of high-margin material science-related businesses with high cash flows. We are focused on profitable growth and not growth for the sake of growth. We have a forward-thinking awareness-based culture whose focus is on talent development, collaboration and sustainability. Our cycle-tested leadership team believes in delayed gratification, therefore, we have the discipline and patience necessary to complete this transformation. Let's now take a high-level look at EnPro. EnPro is headquartered in Charlotte, North Carolina, with 22 primary manufacturing locations and roughly 4,400 employees. 58% of our $1.1 billion in sales originates from North America, 24% from Europe and 15% from Asia. Our business is roughly 50% OE and 50% aftermarket. Our top 3 end markets are general industrial, semiconductor and heavy-duty truck. We have 3 operating segments called Sealing Technologies, Engineered Materials and Advanced Surface Technologies. Let's now double-click on our 3 business segments. Our Sealing Technologies segment is comprised of 3 businesses: Garlock, STEMCO and Technetics. The segment's mission is to safeguard critical environments using hydrodynamic seals, metal seals, acoustic materials, gaskets and hygienic components. Our Advanced Surface Technologies segment is also comprised of 3 segments -- 3 businesses: there is the Technetics semiconductor business, there's LeanTeq and Alluxa. The mission of this segment is advancing precision services and solutions using specialty optical filters, thin-film coatings and precision cleaning. Our Engineered Materials segment is comprised of 2 businesses: GGB and CPI. The mission of this segment is to enable high-performance polymer applications using polymer-based plain bearings, sealing components and lubrication. All of our businesses leverage a high degree of material science application expertise, extensive proprietary knowledge, deep customer relationships and unique processes to compete with a competitive advantage. Our businesses have led us to achieve a very compelling financial profile. You know, over the years, we've created meaningful shareholder value, while positioning EnPro for long-term growth. We have a company-wide commitment to drive revenue growth and expand margins through our portfolio reshaping efforts and our Capability Center activities. Year-over-year, our gross margin has improved 270 basis points to 36.4% and our adjusted EBITDA margin has expanded 200 basis points to 16.8%. Both metrics will improve meaningfully in the near term as we execute our strategy. We utilize a process called business plan deployment to manage execution across the firm as well as maintaining the appropriate level of focus on cash flow. We conduct business unit reviews every month where the focus is on growth, margins and cash flow, and our net debt-to-EBITDA is 1.4x. Milt and I are very committed to always having a strong balance sheet. We have a global presence with manufacturing sites located around the world. We have great strategic locations. Our current footprint provides access to key markets and the best talent. We have amazing business leaders in each of these geographies, seeking to move product from 1 geography to the next to drive growth. When we acquire a business, for example, we immediately look to exploit geographic expansion opportunities through this network. Behind our entire global organization, our core values are ingrained in our DNA. Every day, we come to work, we thrive to unleash material science to move humanity forward. We coat optical surfaces to enhance the ability to see harmful cells in the body. We seal pipelines to keep toxic chemicals and toxic fumes away from people in critical environments. We increase the number of chips available in the semiconductor industry by providing precision cleaning, which improves first pass yield. These are just a few examples of what we do, but it gives you a sense of why our work is so meaningful. This is more than a job to me, and this is more than just a simple mission. This is our purpose and the reason why sustainability is wired into our DNA. Let's talk about our values. Our values are safety, excellence and respect. Safety means creating safe spaces in all places. This is both physical safety and psychological safety. Excellence means doing great work because it matters. We play to win and we expect the best of ourselves and others. Respect means embracing everyone's worth, protecting the environment and acting transparently. These values are nonnegotiable at our company. Now let's talk about how material science is behind everything we do. We possess deep material science expertise through our multiple R&D centers throughout the world. Our PhDs and engineers have studied the properties of materials and how the properties are determined by the structure of the materials and the components making up the material. You will commonly see our PTFE seals used, for example, to keep oil and grease lubrication in a system, while preventing dirt from entering the system. Take a high-speed motor application, for example, where the seal is protecting the motor and the shaft from external debris, while maintaining lubrication. In this example, the seal is designed very specifically to lower the surface tension between the surfaces, yet strong enough not to break apart when exposed to high temperatures and movement on its surface. In our newly acquired business, Alluxa, they deposit many layers of material on a surface to allow specific wavelengths of light to pass through the filter. This is a great business for EnPro. You know why? They use the understanding of materials to drive a wide wedge between willingness to pay and cost. In every business, we utilize our material science expertise to capture growth in a large addressable market with many growth drivers. There are just so many growth opportunities across EnPro. We have a total addressable market of $23 billion. It's growing at roughly 5% to 7% in aggregate. Our Advanced Surface Technologies has the fastest-growing end market driven by increased semiconductor production to support things like cloud, AI, electrification. We also see the need for advanced precision optics to support autonomous driving, PCR, flow cytometry. In Sealing Technologies and Engineered Materials, we have a very strong tailwind coming from increased environmental and safety regulations as well as the reopening of the world. Heavy-duty truck, automotive and general industrials have rebounded well beyond our expectations, and this will continue in the future, driven by increased logistical demands and enhanced mobility. As I stated before, we have the talent and a dedicated leadership team. Today, these leaders will share their unique contribution to EnPro and thoughts about the future of the company. We have Milt, our CFO; Susan, our CHRO; Anthony Webb, our Vice President of the Capability Center; Eric, the President of Sealing Technologies segment; Gilles, the President of Advanced Surface Technologies; Steve, our President of Semiconductor business; and Mike, the Founder, CEO and CTO of Alluxa. Looking forward to hearing from them today. We also have an engaged and experienced Board of Directors. This Board has the CEO experience, the business transformation experience, the M&A experience and the end market experience to be great thought leaders and great thought partners, as well as the discipline to hold my team accountable to the plan that we've developed. I want to briefly touch on our unique way of working and cultural strengths. Our way of working is based on ego-free leadership and creates a strong culture to drive both financial results and human flourishing. The pursuit of financial performance and human development are equivalent and inextricably linked in EnPro. Why? Because we strive to achieve personal mastery. This is not an up or out culture, but it is a grow or go culture. We expect everyone, including myself, to manage their ego and always make decisions that are in the best interest of the company versus our self-interest. We strive very hard to adopt an owner's mentality. We spend money as if it's our own, and we have the primary objective of always creating value and nothing else. In our culture, the best idea always wins, regardless of hierarchy or experience. We embrace respectful candor and push the boundaries of human development to ensure we're always in the learning zone. We believe that we are leading the industry in talent development. Susan will go into this in much more detail, but it's important to know that our culture is comprehensive and deals with whole person development. We have a model that creates leaders in scaffolds development according to each person's zone of proximal development. The practices and behaviors that shape our culture spans the globe and works everywhere we conduct business. We have a deep commitment to people, which is why we even launched the foundation to support education, equality and human dignity. We even extend our diversity, equity and inclusion practices to our supply base. Our supplier diversity sub-council has set a goal to expand our diverse business enterprise spend to 10% from its current 3%. Why? Because we recognize that we must be a force for change in every way and in all areas. We constantly challenge our mental models, and we have a strong commitment to all people. Our teams believe in sustainability and have made significant progress over the years. We recently published a detailed sustainability report that demonstrates our commitment to caring for our people and our planet. We've reduced our VOC emissions by 77%, our hazardous waste by 42% and our wastewater by 42%. 11 of our facilities produce less waste than a typical family household and are landfill-free. We have a commitment to contribute 0 waste to landfills globally throughout EnPro. We're currently developing a plan to be a net carbon-neutral company. We enjoy taking care of all stakeholders while we continue to innovate across our businesses. We're exploring key emerging markets and technology trends while maintaining a customer-centric approach to innovation. All our products, processes and systems are designed to meet specific and evolving customer needs, however, developed with our own patents and joint patents. We have a robust patent management process and KPIs to drive innovation. We have design thinking expertise and look at human-centered solutions in everything that we do. For example, recently, our semiconductor team developed a coating to meet the specific needs of a customer, who wanted a longer-lasting coating in their application. The customer wanted our expertise to strip the existing coating, clean the substrate to an acceptable condition for recoating then apply our coating. We worked to meet this customer's specific needs and delivered samples to this customer here recently. This is the kind of work we do every day to solve our customers' problems. In addition to innovation, the EnPro operating system enabled by the Capability Center is a true differentiator for us. The operating system is key to what we do. It starts with our shared desire to enable the full release of human possibility. Our DNA is at the core of our values, and it defines the way we show up. We've worked to build capabilities and strategy, innovation, commercial excellence, operational excellence and talent. Each area of capability in the company is a highly talented leader who is responsible for creating value through that vector. As a matter of fact, they must generate enough ideas to pay for themselves and their fellow team members in our model. That's a great way to create tension for growth and idea generation. We believe we have built a system that creates an intersection between the world-class standard, our culture and the appropriate management system, which consists of the processes, systems, methods and tools to drive success. This system routinely creates margin expansion and cash flow opportunities. Let's now look at the competitive differentiators beyond the operating system. We have a sustainable competitive advantage in material science expertise, the Capability Center, our speed and agility, operational excellence and our culture. One of the primary reasons why Mike Scobey, whom you'll hear from later today, chose to trust EnPro with his business is because of our talent, our culture, our capabilities and our agility. This is also why we're able to deliver the cost savings program we executed last year that drove $30 million in cost savings. We have launched another cost savings program in Sealing Technologies, that continues to pull in our ability to do lean manufacturing, Six Sigma and optimization. Eric and the team are working hard to deliver on these goals. You will see this reflected in our 2025 plan that I'll talk about later. We are executing a clear value-enhancing strategy. For us, strategy is an integrated set of choices that positions a firm in an industry so as to generate superior financial returns over the long run. With that said, we are pursuing attractive businesses. We want to be in businesses that are competing and winning in faster growth end markets. We're utilizing the Capability Center to increase margins and cash flow. We are laser-focused on maximizing long-term shareholder value. This is fundamentally different than the approach we were using before. And it places a lot of weight on thoughtful decision-making and a focus on cash flow. We like businesses that demonstrate their competitive advantage by the margins they can capture in the market. We want to grow great businesses faster than trying to fix structurally unattractive businesses. Our industry and end market focus are built on the understanding that industry structure is more important than management expertise. We've spent many years swimming upstream in difficult industries fighting for share and making slim margins. We think there's a better way. That's why we're rebuilding the company, and we're building a world-class industrial technology company, built with the right strategy and the desire to win over the long term. Let's go deeper into our strategic execution so far. In 2019, we developed our new strategy. We studied the top quartile diversified industrials. We held discussions with C-suite executives from these firms. We conducted an outside-in objective look at our historical financial performance. This work led to 4 priorities: first, reshape the portfolio by divesting dilutive businesses; second, invest capital into high-growth, high CFROI platforms; the third thing was to develop new capabilities aligned with our new growth trajectory; and lastly, drive shareholder value via aggressive execution. Over the past 2 years, we've successfully executed on these priorities and have resegmented to realign management and create transparency for you, our shareholders. We've taken these portfolio reshaping actions in a very disciplined and thoughtful manner. Immediately following the acquisitions of The Aseptic Group and LeanTeq, we closed the divestitures that were started earlier in the year. This time line shows the volume of execution that has taken place since 2019. We've been very busy, and we'll continue this work into the future. As it relates to M&A, we have been building a strong deal pipeline through outreach to the deal community. There's also been a tremendous effort placed on standardizing our approach to screening deals. We're seeing a lot of deals. However, we are remaining disciplined by not expressing interest unless the deal meets our criteria. We believe we are positioning EnPro as a preferred acquirer. We do extensive work to underwrite the revenues of these new businesses by speaking with customers and conducting deep market analysis before we close a deal. Our integration effort starts immediately when we begin to pursue a target because we want integration embedded very early in the process. As Milt will share a little later, we've been open about this, too. We're willing to go up to 3x net debt-to-EBITDA for the right deal. This is a self-imposed limit that's below our credit limit because we want to remain disciplined. Our M&A approach comprises very thoughtful strategic filters and financial criteria. Our first criteria is market fit. We look for addressable market growth of greater than 7%. We're attracted to secular growth trends. We want high barriers to entry such as IP or very high switching costs. We also like recurring revenue or an aftermarket element in these businesses. As it relates to the organizational profile, we want the business to come with an experienced management team, just as Alluxa did, just as LeanTeq did. Our financial criteria is straightforward. We want EBITDA margins greater than 20% and cash flow return on investment greater than 20%. I'll now share how our M&A criteria worked on our recent deals. You'll notice that our recent deals have met most of the criteria we developed from our target businesses -- for our target businesses. We likely would not have done some of the prior deals using this new screen that we use today. This doesn't mean that those are bad deals. It just means that we've continued to learn. We've continued to improve our process. We've continued to use our discipline. It's not always good to centralize things in a diversified company, but M&A is one of those areas where we've developed a real discipline. It's been centralized, and we benefited a lot from the centralization. As you've heard on our calls and will hear later today, these recent deals are off to a great start. Just a great start. Our transition to higher growth, higher margin businesses has meaningfully changed our end market exposure. As you can see from this chart, we have grown in general industrial and semiconductor, while reducing our exposure to the cyclicality of heavy-duty truck. Our plan going forward is to continue investing in high-growth, high-margin adjacent businesses in Advanced Surface Technologies. We'd also love to fill in the portfolio of Sealing Technologies with enduring high cash flow return on investment businesses that extend our current offering. Our Q1 results demonstrate that this strategy is really improving our profitability, accelerating our growth and expanding our addressable market. Our portfolio characteristics are building a stronger and more durable business model to reach our 2025 financial targets. In 2025, we expect revenue growth of 9% to 10%, gross margins above 45% and EBITDA margins between 22% and 24%. This equates to an adjusted EPS growth compounded annual growth rate of 16% to 22%. We are ready to compete for shareholders by building a stronger and more durable business model. In summary, we have a clear strategy, focused on niche, high-margin material science-related businesses with strong cash flow. We pride ourselves on our ability to execute while pursuing profitable growth. We have an ego-free forward-thinking culture where everyone acts as an owner. We are an experienced, cycle-tested team with the discipline to follow through on what we started. We are very excited to share our story with you today. Thank you very much. [Presentation]

I hope you all enjoyed that video. Hi. I'm Susan Sweeney, and I'm the Chief Human Resource Officer at EnPro, and I'm excited to be here today with you to talk about our forward-thinking, awareness-based culture. Our culture and how we play to win is our competitive advantage. But before I launch into today's material, I'll give you a bit of my background. I've been part of EnPro for 11 years. I led GGB as President for 8 of those years, giving me extensive global operational and business experience. I have also extensive manufacturing experience and a passion for learning and development. I have been in the role of CHRO for the past year, accepting the position a month before the pandemic hit. Timing is everything. My unique background of understanding our businesses at an operational level, connecting with our global workforce and sharing a clear vision of EnPro's future makes my role quite exciting. Next, I'd like to share some key messages from today's presentation. At EnPro, we maximize human potential with a forward-thinking awareness-based culture. I can summarize this with 4 key messages. First, we place equal value on human development and financial results. One doesn't win over the other. Our core values of safety, excellence and respect are clear and enable our colleagues to excel in a productive and collaborative work environment. We're hyper focused on talent development. The key is to get the right talent in the right spots, and we work on talent and being deliberate in our people development constantly. If we can get the right people right, the productivity and the performance is a natural result. EnPro's structure fosters an ownership mindset. Our environment encourages leadership development and effective decision-making. EnPro's culture is unique. Our success is built on these beliefs, which I'll outline here in more detail. Our unique and progressive culture is a competitive advantage. At EnPro, human development and financial results are intertwined. We don't emphasize one at the expense of the other. They go together, and they're given equal value. Placing equal value on human development and financial results enables the full release of human possibility. We celebrate diversity, not just diversity of appearance, but also of thought. We want employees to bring their whole selves to work, the whole package. Sometimes that can be a bit messy. It's definitely real, but mostly it's pretty beautiful. Our culture is awareness-based and individuals and teams are empowered through a culture of authenticity and self-awareness. This takes a lot of daily work, but it does foster superior decision-making and outcomes. Personal development, growth and learning are built through our work and the pursuit of excellence. I believe we are change leaders in human capital management, and we work hard at being progressive in this area. Our culture at EnPro relies on 3 core values. These values are: safety, excellence and respect. Safety at EnPro is our most important obligation. For us, safety is both physical and psychological safety. We make products. We bend metal. We drill holes, things like that. And our man-machine interface makes our focus on physical safety an overriding priority. We work equally hard at creating an environment of psychological safety where every person feels welcome and safe to be themselves. Showing up feeling safe means our colleagues can spend their energy and their resources focused on doing great work. Excellence at EnPro means that the best ideas win, not simply ideas generated by hierarchical leaders. We often present an idea and then invite others to make it better. We continuously strive for world-class performance. Our value of respect is a cornerstone of how we behave. Every person is fully worthy of growth, development and the opportunity to achieve their full potential. Unlocking that potential and helping it flourish is what we do best. Underlying everything we do, including our learning opportunities, is our most important core value, safety. Safety is important because every employee must return home in the same condition or maybe even better than how they arrived at work. Safety is our overriding priority. It's not an option. We have a framework for safety embedded in every business, and this framework is focused on 4 key areas. We are intentional. Leaders receive feedback and ratings on their behaviors and their approach to safety based on our Safety 360 feedback tool. We look at behaviors. We use a systemic approach of safety-first training that develops and ingrains important safety habits. The framework is systemic and uses data for both self and peer assessments. And overall, it's cultural. We use daily reminders embedded in our processes included in our safety pledge, our safety action teams and interactive safety reviews, just to name a few. We're the only public company recognized by EHS Today as America's Safest Company, 3 times. 2020 was our safest year ever, and 2021 is shaping up to be even better. I believe our focus on safety is tied to our performance. In addition to keeping safety as a top priority, let me share how we think about being deliberate in creating a diverse, inclusive and engaged workplace. 4D is our way of being intentional and deliberate in our way of working. It is unique to EnPro. Being deliberate reinforces our team's focus and results in a healthy company where people thrive. The 4Ds are intertwined, and let me touch on each one of them briefly. Deliberately diverse is core. We want diversity of thought so that many perspectives are considered and the best solutions emerge. We are proud that our leadership team across EnPro is comprised of 37% diverse leaders. The best talent wins, and we are constantly looking for top talent. Deliberately developmental means that we push our employees' learning edge. Being a little uncomfortable is where you learn and grow. This approach expands the capacity of our team and the contribution to the success of the business. Deliberately dual bottom line is the attention to both human development and financial results. And deliberately doubling is our intention to double the value of the company through our strategy, not growth for growth's sake, but quality growth. As we grow the business, we create more opportunities for our talent. Being intentional and deliberate promotes human development. Our way of working promotes human development, community engagement, charity, diversity and equity throughout the organization. We have created and are continuing to create a framework for guidance, not control. We embrace practices that guide our behaviors and how we work. We have relaxed some traditional expectations like Working Together from Anywhere. We call it WTFA. It allows us to attract top talent. We can pull from a much broader pool geographically. We focus on outcomes, and we have proven that we can thrive using virtual tools. I want to highlight 2 items from this page. The first is our EnPro Foundation and Charitable Giving. Through the foundation, we are supporting education, equity, diversity and preserving human dignity. We are pretty excited about the impact the foundation is having in our communities. The second is our weekly Zoom gathering called Courageous Conversations. This highly interactive call is led by Marvin and is a place where we can discuss relevant, tough social topics. Some of these include race, religion, mental health, just to name a few. And the forum is open to everyone and held consistently week after week. It's a pretty amazing experience and provides a safe form for our colleagues to connect, learn and to be their authentic selves with each other. Let me share more on how we view learning and our commitment to providing learning opportunities. At EnPro, we view learning differently. We encourage experiential learning. It's how adults learn. They learn best by applying new knowledge to real work. We continue to evolve to meet the needs of people in the business. COVID did not disrupt our learning processes. We pivoted to online and virtual, and we continued to offer rich learning content opportunities. One example of this is our Materials Science University. This was created to educate our colleagues of our strategic priorities. It's all virtual, integrating subject matter experts from top universities. We continue to offer this course in local languages and time zones through Zoom. Another example is one of our leadership development courses called Transformational Change Workshop. This workshop was traditionally in person, but we now offer it online or virtual. It's one of our key leadership workshops. Online, it's just as intense, just as impactful, and it focuses on self-limiting behaviors and development. And again, it's led by our CEO, Marvin, and a small support group. We've found that one of the benefits of being virtual is more accessibility and it happens also to be at a lower cost. A great example of the importance of safety at EnPro comes from what we did in 2020 during the pandemic to make our workplaces safe for all employees. Our COVID-19 response made us stronger. And I'm really proud of the response. We were early to take action. We are paying attention and we pulled together protocols ahead of regulatory guidance to ensure the safety of our employees. We enacted protocols to work safely, and we continue to monitor and modify these as needed. We provided PPE, personal protective equipment, to employees and their families globally and shared PPE with hospitals and medical staff during shortages. We adjusted work environments, reducing the density of people working together. We moved as many people off-site as possible through our Working Together from Anywhere initiative. And we've created distance between those whose work function kept them on site. We provided virtual resources, created a website to provide up-to-date information, tracking status for all the sites, answering questions and communicated actions. We want to keep our employees safe. The results were a more connected organization. We increased productivity and realized cost savings. We had a new level of access to global talent. The most impactful comments that I received were when colleagues told me that they actually felt safer at work than they did at home due to our protocols. That type of comment stays with you. Our learnings from COVID experience are still with us. Our response and culture and the way of connecting has made us stronger. Our culture and talent development strategy is producing tangible results. Let me summarize a few of the key points from my comments today. We place equal value on human development and financial results. Our core values are safety, excellence and respect. Living these values creates a healthy and productive environment where our people flourish. We are hyper focused on talent development, and our way of working fosters the ownership mindset by providing structure and the freedom to thrive. We place high emphasis on our people and their development, and we are a stronger company because of it. Thank you for joining us today. The next presenter will be Anthony Webb, who'll be talking about the EnPro Operating System.

Thank you, Susan. Greetings. I am Anthony Webb, and it is my pleasure to provide more color on the EnPro Operating System and the Capability Center. Prior to my recent promotion as the VP, Capability Center, I held numerous leadership roles throughout EnPro in corporate development, human resources and general management. Over the past 2 years, I've played a key role in executing many of EnPro's divestitures and in refreshing EnPro's integration playbook. If we look at my first slide, you see EnPro's Operating System is a key input for the company to achieve excellence and create value for our investors, employees and customers. There are 4 key points that I would like to share with you about EnPro's Operating System and the Capability Center. Number one, the EnPro Operating System is a value-creation model, focused on deploying capabilities across the company to improve productivity, efficiency and innovation. The Capability Center is an enabler of the EnPro Operating System, providing deep knowledge and agile problem-solving in critical functional areas such as supply chain, commercial excellence and operational excellence. Point three. Data science and analytics is an additional core competency of the Capability Center, supporting faster and more reliable decision-making for our organization. Finally, the Capability Center's goal is to enable the maintenance of world-class operational management standards such as lean practices and Lean Six Sigma as well as promote the continued development of our culture throughout the organization. The EnPro Operating System components are woven deeply into EnPro's DNA, as Marvin shared earlier. The Capability Center is a vehicle that delivers many of the competencies of the EnPro Operating System, especially operations, commercial excellence and innovation. Designed and built as an interdependent learning system, the Capability Center delivers value by infusing a learning-based mentality and an ownership-based leadership development focus, points to which both Marvin and Susan have alluded. Ultimately, the goal of these activities is to drive key financial performance metrics such as margin expansion and cash flow return on investment. Diving a bit deeper into how the Capability Center enables the EnPro Operating System and creates value. The Capability Center was launched in the spring of 2019 as a collaborative experiential learning organization with a focus on problem solving and continuous improvement in operations, supply chain and commercial excellence. Some of the Capability Center core offerings include operational excellence workshops, Six Sigma Black Belt certification programs and the application of lean manufacturing tools and processes. Further, capability building content is also offered in supply chain and commercial excellence. In addition to its core offerings, the Capability Center responds to business needs by adopting and developing dynamic capabilities such as acquisition integration, design thinking to support innovation and customer-centric problem solving. These dynamic capabilities are a unique differentiator for EnPro. Taking into account all of these inputs, the Capability Center is charged with creating and facilitating at least 5x the value of the investment in the center. Now let's explore an example of the Capability Center in action. The premise. A STEMCO facility was underperforming from a cost perspective. The Capability Center was deployed to identify operational labor and material opportunities. This engagement was considered a push scenario, whereby corporate leadership and the division president directed the Capability Center to assist in improving the facility's performance as a complement to STEMCO's overall transformation. Using the EMLS discovery process, the Capability Center worked alongside site leadership and production colleagues to develop and execute an integrated solution, utilizing both lean manufacturing tools and culture assessments. As a result, the engagement identified $5 million of savings and improvement opportunities as well as a value creation road map to actually realize those opportunities. This project supported EnPro's overall strategy by ensuring that the company's remaining exposure to the heavy-duty truck market met our financial performance expectations. When we consider the Capability Center's approach, it is worth noting that such approach is rooted in specific pillars. Number one, we focus on being data driven and human centered. Our goal is to engage with the most relevant data and build employees' problem-solving acumen and leadership capabilities. Number two, we infuse rigor and discipline through the business plan deployment process, whereby key aspects of business performance are reviewed and assessed on a monthly basis. This approach aligns site, business unit, divisional and corporate strategic business objectives. The BPD process extends deep into the organization all the way to the shop floor through daily ROPE walks, with ROPE standing for Removing Obstacles and Promoting Engagement, lean daily management processes and manufacturing scorecard reviews. Number three, we have developed and deployed detailed playbooks in our core disciplines, which help to implement and sustain world-class standards, while promoting a forward-thinking and awareness-based culture. Number four, we set our priorities in a manner consistent with EnPro's and its businesses' strategic objectives. This approach facilitates our transition to a pull model, whereby divisions and business units are clear on the Capability Center's priorities and how to define value-add projects. As shown in the diagram, the Capability Center is ingrained across EnPro's culture, management and operational systems. This integrated approach is driven by EnPro's forward-thinking awareness-based culture, as Susan mentioned earlier. I referenced the data-driven nature of the Capability Center. Here are some examples of how the Capability Center uses data to actually enable decision-making. In operations, real-time decision-making and resource allocation through the EMLS scorecard. This scorecard allows us to explore areas of opportunity in an effort to consistently strive for peak performance. In commercial, focusing on business performance and market trends as an input to predictive market information. This approach allows our business units to share insights in and across markets, so that we are all best positioned to serve our customers. In supply chain, providing consistent visibility to material cost trends to enable agile net working capital decision-making. On this particular side, you can see a reference to the pricing for bronze powder in this bronze powder dashboard. Now let's explore the Capability Center's impact on our various businesses. Through the EnPro Operating System, the Capability Center has created value in each of EnPro's segments. Some highlights are as follows. For Sealing Technologies, executing a supply chain should-cost analysis, identified a lower-cost source, reducing expenses by approximately 30% for a key product line. In Engineered Materials, supporting the development of manufacturing process controls that improved on-time delivery from less than 60% to approximately 95%, delivering true value for customers. In Advanced Surface Technologies, executing our deal archetype-specific cross-functional integration playbook, which has supported maximum value capture for our 2 newest acquisitions, LeanTeq and Alluxa. One quantifiable example is the harmonization of shipping cost structure at Alluxa using EnPro's scale to cut shipping costs by 50%, as well as the relatively high rate of retention of key employees in both business units. In 2020, the EnPro Operating System and Capability Center yielded measurable results in savings, equal to 1.8% of COGS, due to operational improvements and a little over 2% of COGS due to supply chain net savings for direct and indirect materials. Let's look at some of the other dimensions of the EnPro Operating System and how it drives performance. When we talk about analytics-based decisions, an example is we created the EnPro business challenge. It's a space to cultivate and pressure-test significant decisions for a business unit. In this process, the Capability Center is able to facilitate data gathering and assessment as well as idea generation. We support the scaling up of business unit leaders with respect to assessing their businesses and pressure-testing important ideas and operational excellence and really across all our functions. The project management office serves as a vehicle for value capture. All projects require organized management so that said project is clear in its objectives, tasks and metrics for quantifying value in the commercial realm, utilizing the challenger sales model methodology for teaching how to carefully tailor and facilitate productive customer conversations. Our ability to combine data analysis with a focused sales model positions our sales reps to increase their win rate in various markets. These examples represent how continuous improvement is baked into EnPro's DNA. With the goal of increasing shareholder value through our work, here are some examples of current initiatives and emerging opportunities that will help the Capability Center drive continuous improvement. Some current initiatives. Standardizing the use of Net Promoter Score to better understand our customers' buying journey and commitment to our brand; implementing e-commerce solutions to reduce the friction in the customer-buying process; searching for value-add ways to leverage scale for geographic expansion, particularly in Asia; supporting the establishment of a premium branding strategy to increase visibility and differentiation, resulting in enhanced pricing power. Some of our emerging opportunities include expanding predictive analytics capabilities to drive performance and improve ease of doing business; further implementation of lean operating philosophies and technology and starting to include cutting age things such as virtual reality and automation; to leverage and expand market synergies across geographies and portfolio companies; and the expansion of design thinking and innovation methodologies, so that we are creating a strong foundation to push EnPro and its products and services into the future. In summary, I want to leave you with 4 key messages related to the EnPro Operating System. The EOS is a value-creation model, focused on improving productivity, efficiency and innovation. Number two, the Capability Center is a key vehicle used to disseminate the EnPro Operating System throughout our company. Number three, leveraging data science and analytics for faster and more reliable decision-making. And finally, maintaining cutting-edge operational standards, ensuring we harmonize our technical and strategic business objectives and support the professional and personal development of our employees. I'd like to end with this. This is a truly exciting time for EnPro as it evolves from a traditional industrial company steeped in legacy businesses and practices to a material science-focused industrial technology company, pushing boundaries in our market solutions as well as human development. The EnPro Operating System and the Capability Center are catalysts that will help EnPro reach these new heights. Thank you for your time. I will now turn the presentation over to James Gentile, who will moderate the Q&A session.

Thank you, Marvin, Susan and Anthony, for providing a great foundation for our time together. We'll take a few minutes for Q&A now. Our first question is coming in from Jeff Hammond at KeyBanc. Jeff asks, there's a lot of demand for businesses with the characteristics you were looking for. How do you think about finding these assets versus overpaying for them?

So first of all, thank you, Jeff. Really good question. As we think, first of all, about finding the asset, we want to ideally land proprietary deals, right? So proprietary, be it sourced by one of our internal leaders, if it's sourced by our M&A group directly by outreach. So that would be the ideal way for us to source deals. Obviously, we're open to any inflow of deals. But in terms of overpaying and ensuring that we are sort of sticking to our discipline. For us, it's really about making sure that we're attractive to the seller. It's making sure that they see a great fit with EnPro as well because we will likely not be the highest price that they see presented to them. And there's got to be a reason above and beyond price why they find EnPro attractive. It's got to be something that they see synergistically for their business. It has to be some expansion opportunities that they see that EnPro can bring or they just feel like this company is a great company for their employees to flourish in. That would be my answer. Anything you want add, Milt?

The only thing I would add, Jeff, is that we're looking for really good companies, and we're looking for companies that are growing. And so our discipline does include making sure that we see the opportunity in the future to generate outstanding returns.

Terrific. Thank you for that. The next question is coming in from Steve Ferazani from Sidoti & Company. Steve is asking how often do you walk away from potential deals? And what are some of the common reasons?

A very good question. So we walk away with deals every week, right? So we meet weekly -- I meet weekly with the head of our M&A group weekly, and we look at active deals that are in the pipeline. We look at deals that are being cultivated that will come to fruition. In terms of active deals, there's sort of an initial phase where we take a deal through a deal screen first. And then there is a secondary phase. So in the initial deal screen phase, that's every week, they're walking away from deals. It could be because we see no synergy, it could be ESG reasons, could be that the management team would not be willing to join the company in the way that we would like. It could be price. It could be a whole host of issues. Obviously, our financial characteristics are key in terms of not what we expect to transact at, but our CFROI requirements and things of that nature. So it's pretty routine that we would walk away from a deal on a weekly basis. And then there's sort of the secondary phase where we bring in the broader management team for a deal that's passed the initial screen, which means we've gone a little deeper, and we're right at the point where we're now thinking about submitting an indication in the broader team ways then. And we look for the broader team to give us some insight on something that they may see that could be a red flag or something of concern. So it's a pretty robust process. And something that's key to our culture is we always let the junior person speak first, right? So our biases, for example, don't come in the way. Someone who's might be just purely analytical that says, "Hey, I see something that doesn't fit." And they get an opportunity to express themselves. So if they see something else that doesn't fit, and they get an opportunity to express itself. So I don't know if you want to add anything else there, Milt.

No, I think that covers it. We are very disciplined, and we're very selective. We're not going to move forward, we're not going to play to win, unless it's really in the sweet spot.

Thank you for that. The next question is coming in from Justin Bergner at G. Research. More than $10 million of EBITDA implies larger deals. Does that mean bolt-on deals are no longer a focus?

Another good question, Justin. I'll let Milt answer that.

Yes. Justin, thanks for the question. When we look at the $10 million threshold, we think about that in terms of adjacent moves. You can take LeanTeq as an example or you can take Alluxa as an example. LeanTeq was an extension of our strategy for sure, but it was branching out into a different service and product offering. And the same is true for Alluxa. So I would describe those as adjacent moves. And when it comes to those types of acquisitions, we do want something that's upsized. Does not mean that we won't consider smaller opportunities that are direct fold-ins with one of our existing businesses. Anything else, Marvin?

No, that's excellent.

Terrific. We actually have several questions coming in from the buy-side community around acquisition metrics and certain return hurdles. So Marvin and Milt, could you speak to the return on invested capital analysis that goes into our M&A process and also other metrics that would be a determinant of a successful deal?

Yes. Yes, that's a good question, and I'm glad to have an opportunity to talk a little bit more about how we use return on invested capital. We -- the metrics around margins, return on invested capital, inherent growth rate in the business, these are part of our screening criteria to assess the financial and underlying attractiveness of the business. And we use return on invested capital as part of that screening mechanism. So our definition of return on invested capital is the return, it's an after-tax EBITDA after working capital changes relative to the operating assets of the business. So once again, it's a screening mechanism for us to look at the underlying financial attractiveness of a business. In terms of looking at the success and measuring our success with an acquisition, we look at longer-term measures. We have internal rate of return, fundamental cash flow, discounted cash flow, which includes our assessment of our ability to underwrite revenue growth in the future. And a key metric for us is achieving an after-tax internal rate of return of 15%, against the weighted average cost of capital that would be in the high single digits at the current time.

Yes. The only thing I would add to that is we obviously are very disciplined, and we use the same structured methodologies, as you would find in the best-of-the-best companies. We're doing a DCF. We're doing a leveraged buyout analysis. We're looking at select company comparables. We're making sure that we circle the wagons on all the analytical tools that are available to make sure that we're absolutely clear on what price we need to pay and absolutely clear that we'll be able to get the return that we'd like to have. We underwrite the revenue, right? So when we talk about return, obviously, the revenue is very, very key. We spend a lot of time in energy upfront, making sure that we can underwrite the revenue and be very confident that from a customer perspective, the forecasts are solid. And from a market perspective, we feel comfortable as well. So that's the only thing I would add to that.

All right. That's all for our first round of Q&A. We'll have a 5-minute break, and then we'll continue with the program. [Break]

Good morning. I'm Eric Vaillancourt. I started my career at Georgia-Pacific Corporation, which was later purchased by Cerberus and renamed BlueLinx. Together, I had a total of 23 years in those companies. I moved up quickly and had roles in increasing responsibility. My experience is in sales, operation and distribution. I was a Regional Vice President for the Northeast and MidWest Regions and the Vice President of OEM Sales before I left to join Garlock. I joined Garlock as the VP of Sales and Marketing. Garlock was a great company when I joined and is even greater now. My initial focus was on sales force effectiveness, pricing and customer segmentation. I was promoted to President of Garlock, and I initially focused on growth, customer satisfaction and margin expansion. Under my leadership, we made our first acquisition in the food and pharma space, Rubber Fab. We also started the conversation with The Aseptic Group, which we later acquired, although it wasn't completed until after I moved to STEMCO. We divested in a nonstrategic conveyor belt manufacturer called Garlock Rubber Technologies. I also created the Garlock Leadership System, which focuses on leadership development. I launched Project Delight, which was a sales and operations planning project focused on customer satisfaction, on-time delivery and optimizing the supply chain. The result of all of our efforts was that our EBITDA improved 560 basis points during my tenure. I was asked to take the role of President of STEMCO. The people and brand were great, and we had several strategic opportunities that needed to be sorted out. We optimized our portfolio, expanded our margins and improved operations. The result was moving our EBITDA in the -- from the low teens to over 20% today. I would like to share the key messages from the presentation next. In Sealing Technologies, we protect the most demanding environments by providing innovative material science technologies. We utilize our market-leading positions to enter adjacent markets with secular tailwinds. We expand our aftermarket presence by leveraging our strong brand recognition in applications engineering expertise. We are constantly looking for opportunities to optimize our portfolio. More importantly, we are constantly looking for opportunities to reduce costs, increase price or create operational efficiencies. I call it the air we breathe. We deserve to be rewarded for the value we create. Let me tell you a little bit about our businesses. We have over 100 years solving the most difficult customer challenges, and that contributes to our industry-leading position within the end markets we serve. We leverage our technical and applications expertise to create products that are used in extremely demanding environments. They are often characterized by high pressure, temperature and corrosive media. Our products are for critical applications where the consequences of failure are catastrophic in either cost or injury. We serve over 60 different industries where safety, reliability and performance are critical for environmental protection. In most cases, simply put, we keep the bad stuff in the pipe and out of the process in the environment, or we keep the environment from contaminating whatever is in the pipe. You will notice that our adjusted EBITDA margin improved from 16.9% to 20.6% in the last 3 years, due to our efforts at portfolio optimization and margin expansion. The segment consists of Garlock, a multinational provider of high-performance sealing solutions serving the food and pharma, chemical processing, primary metals and general industry markets, just to name a few. STEMCO provides high-quality wheel-end and suspension products in the medium-duty and heavy-duty truck and trailer markets, primarily in North America. Technetics is a multinational provider of innovative solutions to the most demanding applications, focused primarily on OEMs in the aerospace, energy and life science markets. The next slide showcases the collection of our products that enable our success. We have a wide variety of material science-based premium products that serve diverse end markets. Our products are almost exclusively in the top 15% of the product pyramid. We have over 25,000 customers and 200,000 SKUs. We have a lot of SKUs as we customize our solutions to customer-specific needs, while for many of the SKUs only differ in size, shape or material. For example, Garlock makes a seal that is used in processing tomatoes. It is difficult to seal because of an environment. The competitor's product failed in a cost of $1 million to steam clean the plant, including the lost production time. Trifecta, the unitized hub from STEMCO, allows customers to optimize installation time and reduces the number of installation errors. This product helps STEMCO keep the roadway safe for everyone. Technetics makes burst discs that are used in aerospace. In a nutshell, a burst disc is used to relieve pressure buildup, that keeps people in the vessel safe from explosion. Our products mirror our values of safety, excellence and respect. In all 3 examples, our products demonstrate safety, Garlock from contamination, STEMCO from mechanical failure and Technetics as a backstop. Our products all protect human life and meet the highest standards, hence, safety, excellence and respect. Our products work to make critical environments cleaner, safer and more efficient. We have a lot in common processes that increase our value proposition to our blue-chip customers. We are a preferred supplier to our blue-chip customers because of our common business processes and practices value levers that customers can trust. Our customers prioritize safety and reliability over cost and value our partnership. Our customer relationships last many years as we often design a solution together based on our shared capabilities. We have proven to have safe, reliable and high-performance products that work well in critical applications, and our customers demand them. Garlock created EPIX to solve low-load sealing issues for Dow Chemical. STEMCO designed Zip-Torq to eliminate the need for a keeper or a lock ring on a wheel end. That reduces installation errors that can result in wheel loss. Walmart demands all their vehicles use this product. Honeywell specifies Technetics hydrodynamic seals. Hydrodynamic seals are shaft seals that eliminate metal-to-metal contact in gearbox applications once an engine is running in the aerospace market. Our strong customer relationships, combined with exposure to favorable secular trends, make our businesses attractive. We expect our businesses to grow at GDP plus as a result of the favorable secular trends and innovation. Garlock Hygienic products is benefiting from the biopharm switch to small batches of product. The single-use nature of this business creates opportunities for both Rubber Fab and Aseptic. STEMCO is benefiting from the launch of Trifecta. Trifecta is a unitized hub that saves on labor and extends life by utilizing STEMCO wheel-end products. Technetics is performing extremely well in the military and space segments of aerospace. In addition, they will perform even better as the airline industry recovers. Our sustainable competitive advantages allow us to win and retain business and leverage future opportunities. Our Zip-Torq products prevents wheel-offs by eliminating installation errors. It's relied on by Great Dane, Walmart, waste management, amongst others. Our relationship with Dow Chemical led to the creation of EPIX for low-load sealing applications. Technetics designs and manufactures metal seals for Formula 1 racing, an extremely high temperature and pressure applications, and they do it in a very, very short time. Formula 1 racing is very demanding, winning or losing can be decided in a fraction of a second. Our customers such as Mercedes rely on us to create every advantage possible. Our products must perform flawlessly. Any product changes must be completed between seasons. Our customers have a very high switching cost as many of our products are highly engineered. We also own proprietary information and our own labs, which allow us to do rigorous testing. Our customers understand that changing suppliers will require reengineering, design and testing, what usually takes many months and oftentimes years. Our material science expertise allowed Garlock to create BIO-PRO for the food and pharma markets and Wave Pro for the antenna markets. We are constantly finding innovation applications in new markets to enable growth. Brand recognition is very high because of our flagship product line, such as GYLON, KLOZURE, STEMCO, HELICOFLEX, CEFIL'AIR and FELTMETAL. It's very difficult to enter our markets as you need the whole ecosystem. It's not enough to be great at any one thing, you must be great at everything. We are positioned to remain the industry leader by leveraging and further strengthening our competitive advantages. We expect to grow at 3% to 5% CAGR due to innovation and commercial excellence efforts. And now I would like to discuss our strategic initiatives. Driving commercial excellence, innovation and new product development, leveraging them for operating system to drive value. Now I'll go into more detail on each of these initiatives. Our commercial excellence efforts are focused on the digital customer journey, e-commerce and sales force effectiveness. As our customers evolve, they're moving to digital solutions. We're using tools such as LinkedIn Navigator to drive leads and increase our social media presence. We are making it easier for our customers to do business with us with more self-service options. We're in the process of creating our e-commerce platforms. We are currently using bots to automate routine cut order entry to reduce transaction costs and increase tracking information. Sales force effectiveness is focused on converting to an inside-out selling model versus an outside-in selling model. Utilizing an inside-out model enables us to be more efficient and prioritize opportunities that are more likely to close. Our outside salespeople are focused on highly differentiated, high-margin products. Our sales enablement team handles lead generation opportunity coordination, webinars and solution delivery. They work closely with our application engineering team. They handle more complex inquiries. We are constantly finding new technologies and different ways to serve our customers. In an example, STEMCO is currently using robots to do audits at OEMs. They look like little R2D2s with an iPad on top that can be controlled via the Internet. It eliminates the need for an outside salesman to travel to the OEM and their associated costs. Next, we continue to drive innovation and new product development. We are leveraging the 100-plus years of expertise to continuously innovate and expand to new industrial applications. We partner with our customers to understand their critical needs, and provide unmatched products and services that create relationships that span decades. We further leverage our proven technologies to expand into adjacent markets. BIO-PRO was created to solve a customer problem. It allowed us to utilize scrap from other customers or reduce the amount of material we send to a landfill. We are always conscious of our impact on the environment and continually look for ways to reduce it. Changing demanding requirements and government regulations lead to growth opportunities that we are positioned to capture such as space, pharma and clean meat technologies. Lastly, we used the EnPro Operating System and the Capability Center to drive value. We proactively look for operational excellence, opportunities with focus on cost management without compromising quality. We have identified many opportunities using the EMLS, EnPro manufacturing learning process of discovery. For example, STEMCO identified $5.4 million in possible savings over a multiyear period. We have captured $478,000 year-to-date against the target of $1.3 million. Garlock discovered an opportunity to automate the guideline manufacturing line. It's currently saving over $300,000 a year. We have identified footprint and business simplification opportunities to create value. We have moved 2 sales offices to distribution. We divested several businesses and combined 3 distribution centers as examples. We also consolidated our operations in China and Australia. A great example of our innovation was a recent partnership with a leading space company. Technetics has enabled space exploration and launch technologies for over 50 years. This demonstrates the trust our customers have with our products and us. To support mission-critical applications for space travel, we work closely with our customers to create custom joints, seals and other propulsion components. Space is one of the most challenging environments. We are proud to have contributed to our astronauts' exploration of space. We have accomplished a lot in 2020 and are focused on several strategic opportunities for 2021 and beyond. We have achieved significant milestones, including maintaining EBITDA dollars flat to 2019, while sales were down $125.7 million. In addition, our margins increased 320 basis points. We've divested several nonstrategic STEMCO businesses and 1 Technetics business. We also consolidated 3 distribution centers and moved 2 sales offices to distribution. We consolidated our operations in China and Australia. We are laser-focused on margin expansion, agility, ease of doing business, portfolio simplification and product line rationalization. We will use our shared services model to reduce cost, complexity and time in making decision. Our digital pivot will increase our presence in social media, improve our customer experience, increase our targeted lead generation and reduce our transaction costs. We also expect to reduce our time from inquiry to close. We will continue to simplify our portfolio and rationalize our product line offerings. We will reduce our cost, create operational efficiencies and create value for our customers while growing at an annual rate that exceeds GDP. We will produce outstanding results in ever-changing markets. As you can tell, by now, Sealing Technologies is an excellent business with strong profitability and returns. We provide innovative material science-based technologies for critical applications. We utilize our market-leading position to move into adjacent markets with secular tailwinds. We leverage our brand recognition and applications engineering expertise to create solutions to enter new markets to increase our exposure to aftermarkets. We will continue to optimize our portfolio to expand margins. Again, it's the air we breathe. Within Sealing Technologies, we have a collection of unique strengths and an industry-leading position with many opportunities ahead to drive value across the businesses. Thank you for your interest and attention in Sealing Technologies.

Now I'd like to talk about our Engineered Materials segment. This segment is built with market leaders and cash generators. In the Engineered Materials segment, our businesses enable high-performance polymer applications. We're leveraging our great brands and leadership position to drive commercial excellence and operational excellence. We're taking full advantage of the improved macro trends across our end markets to take share and improve the mix of profitable businesses that we pursue. The products in this segment have material signs at the core, and there's been many engineering hours devoted to custom solutions necessary to solve our customers' problems. We're also taking full advantage of our team's ability to improve margins and cash flow within these businesses. Here's a high-level overview of this segment. As I stated before, in this segment, we are enabling high-performance polymer applications. We have 2 businesses: GGB and CPI, who make up this segment. The GGB business, which represents 60% of the revenues in this segment, designs, manufactures and sells composite and polymer coated products. The CPI business, which represents 40% of the revenues, designs, manufactures and sells compressor parts, services and solutions. As you can see from this chart on the bottom left, 46% of the sales originate in Europe, 34% of the sales are from North America and 14% is in Asia. Looking at the chart in the upper right-hand corner, you will see the sales and margin declined in 2020. This was due to the COVID-19 pandemic, and we have already seen a strong recovery in most of our end markets. Many of the products and solutions from this segment help in very sustainable ways. The GGB product portfolio is primarily rooted in tribology. Tribology is the science of interacting surfaces in relative motion. They are one of the best in the world at nonlubricated metal polymer bearings. The CPI portfolio is all about the integration of best-in-class wear products with best-in-class speed and customer responsiveness. They have an absolutely amazing aftermarket service footprint and the customer intimacy to win in almost all cases where the customer needs an urgent solution for a compressor. Both businesses are globally recognized industry leaders with excellent brands and a broad geographic footprint. Our products decrease emissions, improve efficiency and extends the useful life of the systems they support, therefore, providing a positive environmental impact. Our strong market position is further supported by many favorable secular trends across our businesses. In GGB, we have a strong automotive recovery and outlook driving demand for our products well into the future. We also have a high-margin general industrial business that we absolutely should talk about more, as being driven by population growth and increases in construction and agriculture. In CPI, we are supported by increased natural gas and petrochemical demand. The energy future will be a blend of natural gas and renewables. The geographic footprint of these businesses gives us the ability to pivot quickly to support different growth drivers in multiple end markets. Engineered Materials has several competitive advantages that will enable us to win in the marketplace. Our brands have an unmatched history of providing materials, science-based solutions. Specifically, we have deep expertise in developing and selecting the right materials for each customer's critical application. We leverage our global labs, engineering communities and footprint to support our customers in each geography where they do business. We leverage speed and agility in these businesses every day. As a matter of fact, that's how we win. In GGB, it's first on test with the right material that works. And in CPI, it's first to the customer with the right solution. We are focused on 3 strategic initiatives for Engineered Materials. The first is innovation and product development. Second is to drive commercial excellence. And the third is leveraging the EnPro Operating System to drive value. Here are some recent innovations and new initiatives in product development. In GGB, we are expanding the addressable market with polymer coatings designed to significantly reduce friction between surfaces. In these applications, we are coating the surface that interfaces with the metal polymer bearing to create an essentially frictionless environment. These applications provide additional revenue streams with increased exposure to higher margins through innovation in high-temp materials, we are outperforming competitive solutions and providing improved performance in applications we had not competed in before. In CPI, we are focused on extending life through proper lubrication and proper sealing. Our EOS system, referenced here, replaces the manual adjustment of a pump's lubrication system and in turn, increases compressor reliability. We're also leveraging the EOS system for real-time wireless monitoring. Our commercial excellence efforts are also driving meaningful results. We are transforming our sales effort to leverage our new digital world and have successfully reduced travel by 50%. This is a permanent reduction of travel by 50% using digital tools and embracing the new world. We are empowering teams on the ground everywhere in the world and encouraging team selling where possible. We've experienced a 26% increase in China due to some of these team selling strategies. Our sales force effectiveness playbook has delivered 90% customer retention and has meaningfully reduced our customer acquisition costs. Another way we're driving value is through our relentless focus on operational excellence. We identified an opportunity to get better alignment and reduce costs associated with our global organization. So we shifted our organization model to a regional model and away from our global model, which was driving unnecessary costs. We are always careful to pay attention to the spans and layers when thinking about organizational structure. We also successfully divested our French Bushing Block business. This was no small undertaken, given we were in a pandemic and divesting a business in France in an effort to improve profitability. Our commitment to being human-centric and value-oriented provides the capability to execute -- provided the capability to execute this transaction. Anthony Webb, our new leader of the Capability Center, personally led this effort for us, and it's already showing tremendous results. We have accomplished a lot in 2020, yet we have raised the bar to do more this year in 2021. In 2020, we optimized our cost structure, divested an underperforming asset, we optimized our global footprint and expanded into Korea at CPI. Our plan for 2021 is ambitious, and it's to expand market share, increase our presence in aerospace, continue to reduce our costs and increase our innovation efforts focused on emission solutions. These businesses are experiencing a very nice recovery, and these efforts provide the momentum to accelerate sales and improve margins. As I indicated before, Engineered Materials is a market leader and a cash generator, supporting our growth. We're leveraging our brand recognition and industry leadership. We are well positioned to benefit from the macro trends. We have an excellent basket of innovative new products. And we are applying the EnPro Operating System to improve profitability and cash generation. GGB and CPI are well positioned and are experiencing improvement based on hard work and improving macro trends across our diverse end markets. Our innovative products and custom solutions provide us with an advantage that we intend to exploit. Now I'll turn the presentation over to Gilles.

Thank you, Marvin, and good morning. My name is Gilles Hudon, and I'm the President of our newly created segment, Advanced Surface Technologies. In terms of background, I joined EnPro in 2005 as the Vice President and General Manager of Garlock Canada. Two years later, in 2007, I was asked to move to the U.S. to lead another Garlock company with tremendous growth prospects. Over the next 4 years, through organic growth and successful acquisitions focused on the semiconductor and aerospace markets, we have created enough scale and differentiation to justify the formation of a new stand-alone division within the EnPro portfolio called Technetics Group. While leading the Technetics Group, I also took on a 3-year expat assignment in Europe, working with our European leaders across divisions to create additional value for EnPro. That experience in dealing with different cultures and bringing diverse perspectives together, coupled with my natural ability to empower teams and people, were instrumental in seamlessly integrating acquisitions and creating the Technetics Group into a successful growth platform. I now look forward to leveraging those same experiences and abilities to profitably grow our new segment, Advanced Surface Technologies. Needless to say, I'm very excited with the opportunity to participate in the creation of a new growth engine for EnPro, one that brings together a collection of niche, high-growth businesses providing mission-critical solutions in markets with favorable long-term secular trends. Those businesses enjoy leading positions through their technical knowledge and expertise translated into significant organic and inorganic growth opportunities while delivering outstanding financial results. As a reminder, the creation of Advanced Surface Technologies, or AST, was announced in early February. It serves to better align our technical and operational expertise, enable improvement in measuring and managing performance, facilitate improved decision-making and enhance transparency for investors. Now moving on to a more granular look. Advanced Surface Technologies is comprised of LeanTeq, Alluxa and Technetics semi businesses. These businesses leverage proprietary technologies, processes and capabilities with highly differentiated services and products that serve the most challenging applications for semiconductor equipment, specialized optical filters and thin film coatings. We empower leading-edge technologies by providing mission-critical solutions. We're seeing numerous opportunities for growth, further increasing our aftermarket presence in our primary end markets. Our strategic entry in the semiconductor industry was well thought out and has evolved positively over the past 10 years. With the acquisitions of LeanTeq and, to a lesser extent, Alluxa, we have significantly increased our exposure to semiconductor, which we're very excited about. As highlighted on the previous slide, the semiconductor market is the largest of our segment. Our deeper penetration of the semi market dates back to the successful acquisition in 2011 of Tara Technologies, now known as Technetics Semi. From there on, We developed a strategy focused on technology differentiation, established a semiconductor engineering center and have more than doubled our Technetics Semi sales. As part of this strategy, we were very diligent and disciplined in building our semiconductor capabilities and expertise, while also considering multiple acquisition opportunities. On that front, our disciplined approach, anchored in very specific criteria, shared earlier by Marvin, really paid off as we acquired LeanTeq in 2019, which has proven to be a very successful acquisition to this point. Since then, we have continued to expand LeanTeq's capabilities and solidified its leadership position. Leveraging the same thoughtful approach, we acquired Alluxa in Q4 of last year, which better positions AST for accelerated growth while diversifying our customer base and expanding our end-market reach. Our disciplined approach had led to 3 businesses collectively providing an array of products and services in critical niche markets of the respected value chains. Our 3 business units share characteristics of strong aftermarket presence, significant service exposure, market leadership positions while competing in industries with attractive structures, valuing IP and translating into eye-switching costs and significant barriers to entry to customer qualifications. LeanTeq offers cleaning, coding and failure analysis of the most-critical advanced nodes processed kits. Alluxa specializes on optical filters and precision thin-film coatings, leveraging its proprietary series deposition process, while Technetics Semi does wafer processing, subsystems, including e-chuck refurbishment and assembly -- integrated assemblies and lift assemblies. Together, these businesses possess strong financial characteristics and have exposure to the largest technology trends. As a segment, it is important to reemphasize that we are exposed to rapid technology proliferation. The megatrends we are witnessing are enabling opportunities across key industries. We are building capabilities and developing technologies to benefit from these megatrends by collaborating and innovating to be a key supplier to technology leaders. Material science innovations are fundamental to creating the EnPro of the future. In aggregate, Advanced Surface Technologies has exposures to key favorable technology trends in our various end markets. Those favorable secular trends translate into high-projected compounded annual growth rates for the next few years in our core markets. Our technologies are used in sophisticated applications to solve the most-challenging problems of our industry-leading customers. In the upcoming presentations from Steve Hill and Mike Scobey, you will see that our products and services are used to support new technologies such as AI, LiDAR, autonomous vehicles, 5G, supercomputing and data centers to mention a few. Within our end markets, we are expecting robust profitable growth as we are well positioned to benefit from positive industry dynamics. As you can see from this slide, we have exposure to large addressable markets totaling $11 billion and expected growth rates of 8% to 10% over the next 3 to 5 years. Through advanced processes and analytics, precision optical coatings and chamber components and assemblies, we have multiple avenues to gain market share. We are very well positioned to benefit from positive industry dynamics and in some cases, significantly outpace industry growth rates, as you will see in presentations from Mike and Steve. We are able to grow faster than our industries because we have, in all of our businesses, a well-developed set of competitive advantages. Comment across all our segments. We have strong leadership teams with 20-plus years of experience and deep industry knowledge, a track record of innovation in products and processes, deep customer relationship and strong brand recognitions. More specifically, at LeanTeq, we are process of record to support critical cleaning of the most advanced nodes. At Alluxa, we are a leader in providing highly customized thin-film coating solutions. And in Technetics Semi, we are a recognized leader in electrostatic chucks. Our proprietary technical expertise allows us to outperform competition and gain market share. In our segment, we are focused on 3 strategic initiatives in order to drive profitable growth. They are materials and process innovation, technology differentiation and end-market expansion. First, I will provide further details on innovation and how it increases the value of our current offering while expanding our proprietary technical expertise, allowing us to outperform our competition and gain market share. Specific to materials and process innovation, we will leverage our design expertise and proprietary processes. We will achieve and maintain market-leading positions by being process of record on the most advanced technologies with the most stringent specifications and benefit from the data-centric wave, which is creating unparalleled demand in our key growth segments. Our most recent acquisitions have proven to be tremendous additions in terms of materials and process innovation, demonstrating differentiated technical expertise. Some of the technology differentiation examples highlighted on this slide will be further discussed during the LeanTeq and Alluxa presentations. However, it is worth mentioning that between LeanTeq's industry-leading process of record qualifications, Alluxa's innovation in proprietary processes and Technetics Semi vertically integrated platform for high-value critical chamber components, we are building an unmatched portfolio to further strengthen our market positioning. In addition to our highly differentiated technical service offering, we're also working on expanding our end markets. Here again, we have developed a disciplined and strategic approach to entering new markets or further penetrating existing ones, which is based on our analysis of how markets align with EnPro's financial and growth requirements. With this systematic approach, we plan to expand our addressable markets where we will be able to successfully leverage our material science expertise and the EnPro Operating System. We have many recent accomplishments to be proud of and a clear strategic focus for 2021 and beyond. 2020 was a year of great accomplishments despite the global pandemic. We were able to expand our LeanTeq capabilities in Taiwan and Milpitas, California, and we completed the acquisition of Alluxa, which was the catalyst for the creation of our Advanced Surface Technologies segment. In 2021 and beyond, we will maintain a razor-sharp focus on our strategic initiatives by expanding our footprint in key growth markets and by partnering with technology leaders to expand market share while further enhancing our expertise and intellectual property portfolio. To summarize, we are building Advanced Surface Technologies into a profitable growth engine. To do so, we are focused on high-growth businesses, providing mission-critical solution within the semiconductor and optical filter value chains. We also leverage our technical knowledge and expertise to maintain leading positions within markets served while having a continued focus on markets with favorable long-term secular trends that provides significant organic and inorganic opportunities, all of this translating into outstanding financial characteristics and a high degree of recurring revenue. To conclude, I would like to share that I've had the privilege of being part of EnPro since 2005, and I could not be more thrilled about our promising future as an industrial technology company. These are, in my view, the most exciting times in our company history. As I stated in my introduction, I look forward to leveraging positive past experiences and empowering our seasoned leadership team in making advanced surface technologies a growth engine for the EnPro of the future. I would now like to turn it over to Steve Hill from our Semiconductor business unit and Mike Scobey from Alluxa, who will take you through deeper dives within EnPro's 2 most recent acquisitions, giving you much greater insight into our exciting prospects. Thank you.

Hello. My name is Steve Hill. I'm the President of the EnPro Semiconductor business unit. I'm excited to share details regarding our LeanTeq business with you today. As far as background, I have over 30 years of leadership experience in high-tech markets, with the majority in semiconductor. I joined EnPro in 2015 and became the Semi GM in 2016, leading with a strong focus on margin improvement through technology differentiation. I also led our LeanTeq acquisition team with the transaction closing in 2019. In fact, our team had been doing a deep dive analysis of the global cleaning, coatings and refurbishment market to identify acquisition targets for several years prior to closing on LeanTeq. We strongly believe that LeanTeq is the very best company in this space. Now I'd like to review 4 characteristics of LeanTeq that are driving its rapid growth and leads us to be very optimistic about the future. LeanTeq is a highly differentiated service provider with industry-leading positions in serving higher growth advanced technology nodes. You will hear me talk about technology leadership throughout the discussion today and the differentiated services we offer that position LeanTeq to win process of record, POR, qualifications in the latest tech nodes. Our experienced management team has the capability to drive profitable growth by leveraging strategic relationships with industry-leading semiconductor companies and meeting customer expectations on leading-edge applications. Collectively, these factors drive compelling growth and margin profiles with strong cash generation at LeanTeq. I'd like to cover the key metrics on the next slide. LeanTeq was founded in 2011 and acquired by EnPro in mid-2019. And since then, we have grown to 4 facilities with over 350 employees in Taiwan and the U.S. 2/3 of our revenue comes from the aftermarket, refurbishing kits and parts and meeting customer expectations using our core cleaning, coating and testing capabilities. 1/3 of our revenue comes from new parts and kits to the industry-leading OEMs, before their use in new process tools. LeanTeq's business model is based on POR qualification at the leading-edge nodes. Building and maintaining the trust of our customers is critical to our success. Our focus on advanced nodes has driven revenue at a compounded annual growth rate of 43% since 2016, and 85% of our revenue is derived in the sub-7-nanometer nodes. Our largest served tool sets are PVD, physical vapor deposition, and etch. Driving LeanTeq forward is our talented and experienced leadership team. King Koo was formerly the Asia Regional Head for the Metron Group of Applied Materials before founding LeanTeq. Ken Loo is another strong leader with over 20 years of industry experience, originally with U.S. semiconductor firms. The LeanTeq leadership team actually strengthens EnPro's overall expertise within the semiconductor industry. Both King and Ken have deep technical knowledge in semiconductor cleaning, coatings and refurbishment. In addition, their experience in test and analytics is strong. The combination of their experience and know-how is a key enabler to win business on leading-edge applications. Also, their experience with U.S. and Western-based companies has made the integration into EnPro seamless. Now I would like to explain how critical cleaning and particle control is to advanced semi device manufacturing. As our industry has evolved, advanced devices are built using smaller line widths, which allows for higher density and more transistors on each chip. Today, only 3 semiconductor device manufacturers can make advanced chips with line widths below 10 nanometers: TSMC, Samsung and Intel. Particle control is essential, as one speck of dust will have a disastrous effect on yields. The advancements in semi technology has led to high-performance shifts for consumer products. As an example, NVIDIA's highest-end graphic card has 28.3 billion transistors. This chip is built on Samsung's 8-nanometer fab line. LeanTeq's long experience and expertise within semiconductor cleaning has led us to develop a robust quality and parts tracking system, which has had a positive impact on customer yields. I will share more details on the next slide. LeanTeq has expertise in cleaning processes, chemistry and recipes to match the specific part type. This, combined with very complex analytics and test capabilities, has led LeanTeq to being qualified as the process of record for the most advanced nodes. The number of process steps to make an advanced semiconductor device increases as both the device architecture becomes more complex and the line widths shrink with TSMC's 3-nanometer device capability best-in-class. As an example, the Apple M1 processor that was released late in 2020 and drew rave reviews is built using TSMC's 5-nanometer wafer fab. Detection levels and purity requirements are now measured in the parts per quadrillion. A 1% yield improvement for the average fab is estimated to contribute $150 million annually to the bottom line. Our ability to trace and resolve potential issues is a key competitive advantage because we can do it early in the process and on an individual component level. The result is we have built a leading position with the latest and fastest-growing advanced nodes, a market that has strong secular tailwinds. Details are on the next slide. As Gilles mentioned already, we are benefiting from positive secular tailwinds with increased demand for semiconductor logic and memory for applications such as AI, machine learning, autonomous vehicles and 5G. The sub 7-nanometer market is expected to grow the fastest, roughly 30% through 2024, outpacing industry growth of 7% annually. Also, advanced semiconductor manufacturing is returning to the U.S. and potentially Europe, and that will create additional opportunities. Specifically in the U.S., TSMC, Intel and Samsung have all announced major expansions focused on leading-edge chip nodes, sub 7-nanometer. We are currently developing a U.S. expansion strategy to support these planned fab expansions. The advanced semi device market is healthy, with strong growth expected for years to come. Now let's take a look at some more forecast information. LeanTeq's aftermarket service applications and focus on integrated circuit manufacturing make us less sensitive to capital equipment cycles. Most semiconductor devices are manufactured on silicon wafers, and wafer starts annually is a good indicator for predicting the volume level that semiconductor fabs are running at. Wafer starts have been stable since 2000 with only a couple of slow years, driven primarily by major global economic events. As LeanTeq's primary business, 67% is for services supporting wafer processing. That contributes to very stable recurring sales. The wafer fab equipment, WFE, market has become much more stable in recent years as semiconductor devices are used in many more applications as we noted in earlier slides. Further, the WFE forecast remains strong with 2021 forecasted at over 16% year-over-year growth. Along with exposure to industry growth drivers, we have multiple avenues to further accelerate growth, which I will share on the next slide. Our new state-of-the-art cleaning facility in Taiwan is now open. In fact, the grand opening event was held last week. This site will support increased capacity for new 5-nanometer and 3-nanometer POR qualifications. Customer qualifications are underway at present. We will strategically look to expand our capacity, both in existing locations and into new geographies where it makes sense from a market standpoint. Further, expansion in Taiwan and the U.S. is already in review, and Korea may be a future possibility. LeanTeq's current facility in Silicon Valley is ramping up volume through 2021, and we are focused on design-in wins on the highest technology wafer fab tools with leading OEMs. In addition, we are also expanding our capabilities, new services and special processes to support different semi tool sets for tools like lithography, CVD and thermal processing where we do not have a strong presence today. Next, I will discuss how the integration with EnPro is helping to accelerate growth. Since the acquisition in 2019, joining EnPro has enabled access to growth capital, integration with EnPro's resources and expertise while also facilitating collaboration with other AST business units on coating technologies. EnPro's nationally recognized safety program has improved our safety culture, and EnPro's EMLs is driving operational improvements. As I mentioned previously, we have opened a new building for expansion of 3- and 5-nanometer processing in Taiwan. And we have expanded capabilities and capacity in our current U.S. location. In addition, we have a project team reviewing the possibility of further expansion in the U.S. I mentioned earlier the announcements of leading semi companies expanding operations in the U.S. Further to that, the CHIPS for America bill passed in late 2020 as part of the National Defense Authorization Act with strong bipartisan support. President Biden is working to accelerate this through his proposed Infrastructure Bill, which includes $50 billion of investment in semiconductor manufacturing and leading technology for the U.S. to regain a stronger global position. In summary, we believe our offering of leading-edge technical services for advanced semiconductor devices will drive long-term, stable growth. LeanTeq has executed very well since our acquisition. We have a strong leadership team. There are significant market tailwinds driving the expansion of advanced semiconductor manufacturing. LeanTeq and EnPro have a winning strategy. And we are well positioned to take advantage of the growth opportunities in the market. I am very confident and highly optimistic about our future. With that, let me turn to Mike Scobey at Alluxa, where we'll learn more about optical filters and precision coating technology. Thank you.

Thank you, Steve. Hello, everyone. My name is Mike Scobey. I am the CEO and Founder of Alluxa. I am also the CTO. I'm an electrical engineer by training from UC Davis. I've been in optics my entire career in one form or another, spanning over 30 years. I'm delighted to be here to share the Alluxa story, of which I'm extremely proud, and to share my thoughts on why EnPro and Alluxa will make such a successful team going forward. Alluxa was founded with one thought in mind: to develop and build a new technology platform to manufacture the world's best thin-film filters. We also wanted to focus on new and challenging opportunities in diverse, high-growth markets. Along the way, we have built the strongest team in the industry, a key enabler for our history of profitable growth. Growth is in our DNA. Alluxa has never had a down year in revenue in over 14 -- in our 14-year history. We have, in fact, had very few down quarters. Joining with Alluxa will enable us to continue and accelerate our revenue growth for a variety of reasons I will talk about later. Now let's take a quick look at some of the details of Alluxa. As I mentioned, Alluxa was founded with the goal of creating technology leadership in the thin-film optics. We are located in Santa Rosa, California and the wine country of Sonoma County. Our facility is nearly 40,000 square feet and loaded at the moment with 21 copy exact deposition machines. We can fit about 30 into the building. Our machines are designed and built by Alluxa and use our proprietary SIRRUS deposition technology, which we are in the process of rolling out our third generation. Our third-generation of SIRRUS will have further improved film quality, thickness control, uniformity and cycle time. This relentless technology progress is another key reason we have been able to consistently grow at a 30% year-over-year pace, and I fully expect this history of strong revenue growth to continue. Our products are using a wide variety of high-growth applications, including industrial, life sciences, telecommunications, semiconductor, aerospace and defense. Some examples of these applications are filters using PCR machines for COVID detection or filters using LIDAR systems for autonomous vehicles or filters used for wavelength division multiplexing and fiber optic systems for new 5G systems. Our filters are used for look-down satellites or looking out to astronomical systems. They are used in DNA sequencing systems by drones for dropping crops -- for crop scanning and satellites for lightning detection and the new fusion systems being developed in order to monitor the plasma. And they're heavily used in the latest lithography systems used by the semiconductor industry. The list is nearly endless. Next, let's look at the time line for Alluxa. Alluxa was founded in 2007, 14 years ago, in a small part of the same building in Santa Rosa. After a year of development, we rolled out the prototype for the first generation of SIRRUS deposition platform, and it was an immediate success, primarily in the life sciences and fiber optic telecommunication markets. We have continued to develop the SIRRUS platform and have rolled out a new generation approximately every 5 years. Our prior generations are typically upgraded after the next one is perfected to maintain our copy exact goal. Just as important, we have built a world-class management team along the way with the additions of Peter Egerton as our Chief Commercial Officer; Jason Mulliner as our CFO; and Bill Kastanis, who has taken the task -- on the task of continuing to grow and optimize our operations as our VP of Operations. Of our 100 employees, we have roughly 40 people at bachelor level science degrees or greater among the workforce. In October 2020, we joined forces with EnPro, and we'll begin the next phase of our journey. About 40% of our revenue has historically been outside the U.S., and Alluxa is well positioned internationally in key strategic markets. After North America, Germany is our top market followed by China. We expect to further penetrate the 2 key markets of Germany and in particular, China going forward. China is a high-growth market and is forecasted to grow at an 8.5% CAGR in the optics field. I fully expect our growth to easily exceed this level, though, through increased share and new products. EnPro's presence in China will be very helpful for the sales and marketing process as well as to help us to develop lower cost and higher-quality suppliers, both of which has already started to happen. The bulk of our sales, about 3/4, comes from our Ultra precision and ultra-narrow filters. These filters have some aspect of the performance which makes them very difficult and in many cases, a sole source customer to us as the only capable supplier. Ultra performance aspects can be a number of things, but generally, are simply tighter wavelength tolerance, narrower bandwidth, higher transmission or deeper blocking or sharper spectral profiles. An ultra performance LIDAR filter, for example, will require the narrowest bandwidth in the highest transmission possible to only allow the laser wavelength to transmit and block out outside light. PCR filters generally require the sharpest and squarest possible filter profiles with the highest possible blocking between the excitation and emission bands. Free space communication or filters used in 5G systems are used to combine or separate many very closely spaced lasers to improve data transmission rates. Nearly every system we work on has these types of goals or trade-offs. We also have additional and growing capabilities infrared coatings, in particular, 3 to 12 microns. And we are creating value-added products and services such as assemblies. Infrared is a key technology for aerospace and defense, in particular, the 3- to 5-micron band and the 8- to 12-micron bands. For new value-added products, customers may ask us to provide an optic in an assembly, and this will then become another relatively simple way for us to add revenue and provide value-added services. Besides our product performance, Alluxa has been ranked on the top of our competitors in buying experience by a major independent study. We also have an advantage of manufacturing efficiency of our high-performance components as compared to our competitors. Manufacturing efficiency and lower cost is crucial to continue to expand our margins as well as to grow in new and adjacent markets. We have built a stellar reputation at Alluxa, which we have measured internally at a 99% customer retention rate. We have increased our customer base by over 400% in the last 6 years, with approximately 99% of OEM customers purchasing more than one product and approximately 95% purchasing at least 4x [ as I said ] a variety of materials and processes in collaboration with the customer, finalizing on a new material and a new process, which was very effective at solving the problem. The product is now sole source and in production for the past 5 years and growing quickly and is essential to the manufacture of the latest generation of semiconductor chips. We're able to react quickly to this new customer request because of our proprietary deposition technology and our willingness to work on new and challenging problems. We share the cultural characteristic of customer-driven innovation that helped us in this case study with the rest of EnPro. Regarding the integration, culturally, Alluxa and EnPro are a very good fit because of our customer-first mentality, our respect for our people, our focus on safety and our systems and processes to reward performance. We're also excited about the ability to leverage EnPro's technological and industrial capabilities as well as to leverage the expertise throughout the company. The Capability Center of EnPro has been immediately helpful, in particular. And we have also already leveraged EnPro's HR processes to provide new talent to support our growth. In sales and marketing, we plan to leverage EnPro's presence in certain markets to expand into different geographies as I previously mentioned. Overall, the integration has been going very smoothly and designed to minimize disruption for innovation. In summary, the key takeaways about Alluxa should be our technological innovations and our reliable and consistent growth of the top and bottom lines. Growth is part of our culture. Innovation is part of our culture. We love to be challenged. And the combination of Alluxa and EnPro will provide us the resources and structure to enhance and manage our growth. I'm happy to have the opportunity today to show you a glimpse of Alluxa and talk to you about how we will continue to operate and grow as part of EnPro. More great things are to come. Now I will turn the presentation over to Milt, who will walk you through the financial overview.

Good morning. It's exciting for me to be here today to talk about EnPro and the progress we're making against our strategy. I've been part of EnPro since its formation in 2002, a consultant for the first 3 years and over 15 years now as a full-time employee, and I've never been as enthused as I am today about our path forward. As you heard from Marvin, our team is laser-focused on building a great company, one that is composed of businesses that are competing in structurally advantaged ways. I and our team have learned a great deal about building corporate value through our own successes and our own failures as well as by studying best-in-class industrial technology companies. Since Marvin stepped into the role of CEO, we have been very intentional on driving margin and cash flow return improvements in our current businesses, while over time, reshaping our portfolio to one with both high operating margins and meaningful exposure to growth markets. You're starting to see the benefits of that now in our financial results. Warren Buffett has many great quotes, and one of my favorites is this one. The interesting thing about business, it's not like the Olympics. You don't get any extra points for the fact that something is very hard to do. So you might as well just step over 1-foot bars instead of trying to jump over 7-foot bars. He learned that lesson through his early struggles trying to save a structurally disadvantaged business. In his case, the Berkshire textile business. We've learned a similar lesson from our failures. In our case, believing we could acquire undifferentiated businesses serving low-growth markets and expect to drive financial results meaningfully different than periods before our ownership. As you've heard today already, we've been on a very different path over the past couple of years, transforming the company to one that honors our legacy material science distinctive competence, while shifting the portfolio over time to a larger percentage of our base and growing structurally attractive industrial technology sectors. In essence, a company where success is achieved by stepping over 1-foot bars rather than 7-foot bars. I'll start with a few key takeaways and points I'll cover this morning. Simply stated, our financial strategy is designed to underpin our corporate strategy that you've heard about today. We are transforming EnPro into a more profitable and higher-growth company. We are driving shareholder value through our focus on growth and earnings, margins and cash flow returns. With a strong balance sheet, we have the flexibility to continue to fuel growth, both organically and inorganically. And we are keenly focused on using our capital to maximize returns for our shareholders. Capital allocation is a top priority for Marvin and me. To provide some context, let's start with how we performed over the past couple of years. Looking at the top line, 2020 was a challenging year as we all know. And 2019 was also difficult for us and other companies serving global industrial markets, coming off a strong 2018. Our 2-year decline in sales is also attributable to strategic divestitures during this period. Despite the drop in sales, as you see on this slide, we have expanded EBITDA margins through both portfolio reshaping and operational excellence initiatives. EBITDA margins expanded from 14% 2018 to nearly 17% for the 12 months ended this March, an increase of 280 basis points during a period of time that has been difficult for much of the industrial economy. This achievement demonstrates clearly the impact of our operating model, as Anthony covered, and a portfolio reshaping as you've heard from Marvin. Our free cash flow has been strong through this period of time, exceeding 100% of adjusted net income. And the same is true for 2020 when excluding the impact of legacy environmental and litigation payments and a significant tax payment on the gain on sale of Fairbanks Morse. Adjusted EPS has expanded over this period, largely because of lower borrowings as well as benefits achieved from taking advantage synthetically of lower European interest rates. Now let's take a look, a closer look at 2020. In the early part of the second quarter of last year when COVID-19 uncertainty was near peak, we developed a number of planning scenarios. The best case scenario at that time included a full year sales decline of about 15%, accompanied by 13% adjusted EBITDA margin. We finished the year with a decline in sales of about 11%, and adjusted EBITDA margins were considerably higher compared to the best case scenario. I attribute our outstanding 2020 results in a year of great uncertainty to 3 factors. First, we responded quickly and effectively in the early stages of the COVID-19 pandemic, as Susan noted earlier. We kept our colleagues safe and our factories running. Second, our division teams, in collaboration with the Capability Center, took decisive action to cut unnecessary spending and enhanced productivity. Finally, we stayed the course on portfolio reshaping, successfully divesting several businesses and acquiring Alluxa, which, together with the 2019 acquisitions of Aseptic and LeanTeq, brought greater portfolio exposure to resilient technology businesses that grew despite the global slowdown. 2020, while in many respects a year we don't want to repeat, it did teach us new ways of working that we'll build upon going forward. We'll continue to drive margin and cash flow improvement and benefit from the tilt toward higher-growth businesses in the years ahead. Now I'd like to double-click on a few metrics to demonstrate some of the benefits of our Capability Center. Anthony provided several examples of benefits being realized through the collaborative work of our Capability Center and operating teams. In 2020, Capability Center initiatives resulted in a nearly 4% reduction in cost of sales through the work of the manufacturing and supply chain teams. These are real savings that help offset cost increases in other parts of our cost structure as well as contribute to margin improvement. You can see that we are driving for even higher manufacturing cost savings in 2021. And given the supply chain dynamics and the improving global economy, achieving breakeven procurement results this year will be a real win, as shown on this slide with a modest improvement year-over-year. The metrics shown here don't tell the whole story. Just to name a few, the work of the Capability Center is helping our teams improve on-time delivery, providing better data that leads to improved and also quicker decision-making and helping us develop future manufacturing and commercial leaders. One quick word on the flywheel effect of our focus on adding new material science technology businesses to EnPro. Today's inorganic additions will lead to higher organic sales and earnings growth in the future. This is akin to the power of compound investing in building personal wealth. Our investments today are enhancing our cash flow which, in turn, will be used to fuel organic growth of acquired businesses and to support other strategic initiatives. Take LeanTeq as a case in point. LeanTeq is growing at a double-digit clip while generating substantial cash flow for our company. As Steve covered, we're using a portion of its cash to double capacity in Taiwan which, in turn, will support continued growth in the business for years to come. This is a key criteria in our acquisition decision-making, our assessment of how a new business will enhance organic growth post-acquisition. As shown today, we're already seeing the benefit of the flywheel, and we're just getting started. Balance sheet strength is key to our strategy execution. So let's pivot to our balance sheet and expected use of capital. I'd like to start out by saying that maintaining a strong balance sheet and financial flexibility have been priorities of mine since becoming CFO and ones that Marvin also embraces without reservation. At March 31, our net debt-to-EBITDA was a very strong 1.4x. Our debt is composed of a term loan that matures in September 2024 and senior unsecured notes that mature in September 2026. Our weighted average cost of debt is about 2.75%, taking into account savings from our net investment hedges, which provides synthetic dollar-euro interest rate swaps. Approximately 30% of our cash is in U.S. accounts; another 30% in Europe; about 30% in Asia, a good portion of which is in Taiwan; and the balance of cash in other jurisdictions. We have ready access to a large portion of our cash, with strategies to minimize withholding taxes should that cash be needed. We also have full access to our $400 million credit facility less a nominal amount for outstanding letters of credit. We anticipate going forward maintaining leverage of around 2 to 2.5x on average, and are willing to move to 3x for the right investment or series of investments, knowing that we can bring down debt quickly through our strong cash flow generation. As a point of reference, the 2 to 2.5 targeted leverage range compares to our credit facility limit of 4x. One of the reasons we maintain a strong balance sheet is because of our disciplined approach to using our capital. So let's talk about that for just a moment. Over the next several years, we anticipate our use of capital to be roughly in line proportionally as spending over the past 3 years. Investments and acquisitions supporting our strategy will likely be the predominant use of capital, as has been the case in recent years with the acquisitions of Aseptic, LeanTeq and Alluxa. Over the past 18 months, we have reduced the capital intensity of our portfolio considerably, moving from roughly 4% of sales prior to divestitures to below 3% today. In certain years, we may invest above this level to support growth. This may be one of those with the investments that we're making to support LeanTeq's capacity expansion in Taiwan. We're also committed to supporting and growing our dividend, which was first initiated in 2015. We've grown the dividend at a 5% compounded annual growth rate since that time. And then finally, we have a $50 million authorization in place for share repurchases, the use of which will be determined by balance sheet and growth investment considerations. Let me share our 2021 guidance we issued earlier this month. In conjunction with our first quarter earnings release, we updated our guidance for the year. We now expect sales to increase in the range of 7% to 12% over pro forma 2020, EBITDA to increase 13% to 19% to a range of $190 million to $200 million and adjusted EPS to increase 16% to 25% over reported 2020. Our sales and adjusted EBITDA guidance equates to an EBITDA margin of about 18%, marking another year of meaningful improvement over what we achieved last year. And we are confident that 2021 will mark another year of progress toward building a world-class industrial technology company. Now let's take a look at the financial picture of our company with a longer-term view. We have an exciting road ahead, a clear strategy to create a world-class industrial technology company, one that is focused on high margin, high cash flow, material science-related businesses. The slide shown here provides a financial snapshot of where we expect to be by the end of 2025. Through executing the same strategy you've seen over the past couple of years, we believe we will drive compounded annual growth in sales of close to 10% per year from 2021 to 2025 while expanding adjusted EBITDA margins by about 400 to 600 basis points. All of this is relative to the midpoint of our current guidance for 2021. We expect this growth would translate to growth in adjusted EPS of approximately 16% to 22% compounded annually. For clarity on our long-term business plan, we're also including a future financial picture for our current portfolio of businesses. And I think as you'll see here, independent of strategic business additions, our current portfolio offers an attractive future as we continue to drive margin and cash flow improvement and benefit from strong growth in Aseptic, LeanTeq, Alluxa and our other businesses. As I mentioned at the start, I've never been more enthused about the future of EnPro. We have a very strong financial foundation and business deployment process upon which to continue to drive shareholder value through our focus on high-margin, high-growth material science, industrial technology businesses. And with that, I'll hand it back to Marvin for closing comments.

I'd like to deliver a few key messages today before we close out the session. We have a clear strategy and the talent necessary to execute on this strategy. We are building a world-class industrial technology company comprised of high-margin material science-related businesses with high cash flows. We are focused on profitable growth and not growth for the sake of growth. We have a forward-thinking awareness-based culture, whose talent development, collaboration and sustainability will drive change into the future. We are deliberately doubling the company to allow our talent to flourish. Our cycle-tested leadership team believes in delayed gratification. Therefore, we have the discipline and patience necessary to complete this transformation. Thank you so much for joining us today.

Thanks, team. We'll take a bit more time for Q&A. We'll leave about 25 or 30 minutes. The first question has been asked by various parties. How are businesses integrated into EnPro?

Okay. So why don't we start first with taking an opportunity to have Mike Scobey, who's new to EnPro, help to build on a question we had a little earlier about the competitive nature of high-quality businesses and what it takes for EnPro to buy a business of that type. We'll just have Mike explain why he chose to sell his company to EnPro, and then we'll go into a little bit about integration if we can. So let me ask Mike to do that.

Sure. Thanks, Marvin. So I get that question a lot. Why did we go down this path 6 months ago to join EnPro? In my mind, I had 2 key interests: shareholder value, of course, as a CEO and a large shareholder, but also our -- what's the best place to land the company in terms of employees? I felt like EnPro gave us both of those. Other options we had, had some issue with them that made me feel uncomfortable. I think, in particular, the culture and the culture of EnPro and the fit of Alluxa with EnPro in that regard as well as the openness that EnPro has to bolt-on inorganic companies to us -- inorganic [ way ] companies [ come ] to us as well as to further our growth aspirations were key selling points.

Mike, appreciate it. And in terms of how we integrate and using the operating system, I'll have Anthony Webb cover that.

Okay. Excuse me, I was muted. Thank you. With respect to how we approach integration, we can use the manner in which we approach Alluxa as a case in point, building off of what Mike shared. First, we have strong integration diligence during our confirmatory diligence, as Marvin stated earlier in his presentation. Next, we organized key hypotheses prior to closing so that we're able to hit the ground running as soon as we get to closing of the transaction. We also begin high-level socialization of our cross-functional plan with the target during a gap period, and in this particular case, with Alluxa, we make sure to be very respectful of the HSR period. But we try not to do things in a vacuum and make sure that we create a space for co-creation on our key priorities within integration. Lastly, we focus on respecting our 6-month stabilization period, where we introduce our EnPro Operating System tools. We work on integrating our cultures, and we prioritize the key integration inputs that are really going to be important to make sure that we drive success. So our main goals in integration are: number one, supporting the business, meeting its financial objectives; number two, creating a shared learning environment; and finally, really making sure we're aligned on broader integration priorities along with our target.

Yes. Thank you for that, Anthony. And Susan is here. Let's hear Susan talk a little bit about our culture. Maybe how do you integrate our culture with their culture? How do you respect their culture? Susan, do you have any points of view on that?

Yes. Thanks, Marvin. First of all, it's easy when you have someone like Mike and his team. They're super innovative. They're talented. They're just fun, frankly, to work with. And so, as Anthony mentioned, we talk about what's important. So for us, I mean, safety is not negotiable. So one of our first conversations after we acquired Alluxa was to talk about safety and what could we do to enhance what they were already doing because they focus on safety as well. As Mike implements his quality growth plan, he needs help finding more talent. So we're doing that. So it's really this conversation about what does he need, what does the team need and what can we provide. And so I would just say that whatever is needed, we're there to help. And once in a while, we might do some gentle prodding, but that diversity of ideas, as we mentioned, is part of our magic.

Thank you.

Terrific. Maybe a follow-on question from Jeff Hammond at KeyBanc in terms of the EnPro Operating System. How -- what inning are we in, in terms of permeating key tools and processes across the organization?

Yes. So I'll talk a little bit, and maybe, Anthony, you can chime in here as well. But I'll just say just the Marvin Riley perspective on innings, particularly as it relates to a system of continuous improvement is that we're not -- we don't operate in innings, okay? We want to make sure that all of our primary vectors have a solid playbook. And in that solid playbook, it sort of incorporates the world-class system, whatever world-class is at the time right, the best practices from in the world, we want a great management system overlaid with that. And then we want the right processes, systems, methods and tools, right? The 3 of those things coming together at all times, and that should always be improving. Every single year, my conversations with the team is what's the next level that we need to get to, right? There is no finish line. There is no time we're going to be over, but what's the next level? Now in terms of how far we've gotten, right, I would say our manufacturing system is probably the most mature or -- and that's in line with supply chain, right? Their playbooks are completely well documented. They have scorecards in every plant. They're doing [ rope ] meetings, which we call removing obstacles, people engagement. We're doing that on a regular basis. They're driving problem solving. They have standardized practical problem-solving tools that they use. They have global teams that come together and work on things. We have discovery processes, et cetera, et cetera, et cetera. Our commercial excellence engine is right behind that, aggressively catching up, quite frankly. And 2020 was a powerful time for us to really light a fire underneath what's happening there. And from an innovation perspective, that's the engine that we're really getting going right now. And data analytics is always -- I mean, they're just kind of doing their own thing. I mean, they're fueling everything, quite frankly. I mean, it's been amazing what they can do. And Anthony, I'll turn it over to you to talk a little bit more about what I might be missing. But this is a fun conversation we can talk about forever, Jeff.

It is. Thanks, Marvin, and thank you, Jeff, for that question. I think one of the things about which I've been most excited, and if I broke it down in the innings, I'd say we're past the seventh inning stretch. And since the Capability Center has been created and put in place and offering support, buy-in from the organization, our ability to communicate with each other and our willingness to collaborate is so far along. And to see that we've moved forward that quickly has been incredibly impressive. So I'm very thankful for the people throughout our organization who drive that. To complement what Marvin stated, I think I agree with everything in reiterating the need for that continuous improvement, always pushing the cutting-edge on being our best. And in our data analytics, thinking about how we continue to move more from -- to build off of our descriptive analytics to moving into that area that I shared in the presentation. That's the future areas of opportunity, more predictive analytics, more opportunities for machine learning. So it will be exciting to see how our technology and how our data develops over that time and how we continue to build up the collaboration that we have today.

That's terrific. Thanks, Anthony and team. The Capability Center is clearly a differentiator. The next question is from Steve Ferazani from Sidoti & Company. And it's for the Sealing Technologies business. What adjacent markets are you considering entering into? And how much portfolio rationalization is left?

Steve, why don't we have Eric take that? We have Eric here. So it's a good opportunity to have Eric take that directly.

Yes. Thanks for the question. I'll take the first part and let Chris O'Neal take the second. So we still have room to grow in biopharma with our new WavePro product for antenna markets, still room in space, also clean meat technologies and also looking for airline recovery. So we have lots of adjacent rates to grow, and we'll continue to expand as we go. Thanks. Chris, do you want to take the second part?

Sure. Good morning, everyone. By the way, I'm Chris O'Neal, the CFO of Sealing Technologies. I work very, very closely with Eric. So I want to first point out that we've been quite aggressive with our portfolio rationalization over the past couple of years. Literally in the past 2 years, we sold or exited STEMCO's brake friction business, the brake drums business, the air springs business and several noncore product lines. We also exited a small underperforming business in Technetics and consolidated a couple of DCs and sales offices. So we've been very, very active in cleaning up our portfolio. And if you look back at 2018, that collective group of businesses that I just referenced comprised about $220 million of our sales, but they only contributed a few million dollars of EBITDA. So we've been on a track of significantly improving our financial profile, and I think you're starting to see the benefits of those actions in our results. Regarding how much more we have to complete, Eric and I are working very closely together. And we regularly evaluate our portfolio based on each business' fundamental characteristics, their financial performance and the evolving trends in the markets. Our goal is to manage Sealing Technologies to maximize shareholder returns. So if we're using innings, I would estimate that we are probably in the seventh inning of our efforts. But once again, we're going to continue to regularly evaluate our portfolio to drive shareholder value.

Thank you for that, Chris. Sealing, it's such a good business and clearly, quite nicely optimized sustainably. The next question has been asked by several member -- parties that are present on the call. AST is 20% of sales today. Based on acquisition targeting and core growth rates, what should AST comprise as a percentage of sales over the next 5 years, AST representing our Advanced Surface Technologies segment?

Do you want to take that, Milt?

Yes, I'll be happy to. And Gilles, please feel free to jump in. I'm going to reference the slide that we had on the long-term financial picture of the company. And you may have noted in there that we had a note, that we baked in roughly $1 billion of investments over this period of time. So -- and we're assuming that much of that will be in the Advanced Surface Technologies segment. So if that's the case, if that's the way it plays out for us, then Advanced Surface Technologies would move for -- I think it was 18% on an LTM basis, on a pro forma basis, a little bit higher than that, pro forma 2020 to roughly double that to roughly 40% by 2025. And I think what's also of interest is that we would expect it with -- under that scenario, to be a pretty significant part of roughly 60% of our total EBITDA over the period.

Yes. Thank you, Milt. I really -- at the end of the day, I mean, if we use the inning analogy, even though I'm an ex hockey player and not an ex baseball player, we're definitely in the early innings as far as AST is concerned. We're well positioned to grow, both organically and I think we've looked -- we've developed with Alluxa a new platform that allows us to bolt-on potential acquisitions going forward specific to what they're doing, but it's giving us obviously a form of customer diversification and market expansion as I mentioned in my presentation. So there's plenty of avenues. The secular trends are there. They're, in most cases, in the early stages. What we're seeing influence our businesses within AST right now. There's nothing mature about it. The electrification is at the early stage. There's plenty of room as far as that's concerned. What I'd like to call super connectivity is at the early stage. Yes, we've had iPhones for a while, but where all this is going and the connectivity of the world is going, we're at the early stages. So plenty of room to grow. And I think the percentages that you mentioned, Milt, they are very realistic for the future of the organization. I do believe we are building a very profitable growth engine for the EnPro of the future. So I think we're in a good place. Thank you.

Thanks for that. The next question is from a member of the buy side community. Can you describe EnPro's general approach to product pricing and our ability to absorb raw material costs?

Yes. So I'll pass that around a little bit because the guys in the field, obviously, have a lot of experience in dealing with this. But let's just start with a basic tenet that we had a wonderful opportunity in 2020 to do something we could not have done under different circumstances. And it was the marriage of our supply chain teams with our commercial teams. We created a wonderful platform for the supply chain team and the commercial team to come together on a weekly basis, so that everyone has their finger on the pulse in terms of what's happening in the commodity market and how do we want to respond to it, right? So although the supply chain group is always beating back our suppliers and trying to make sure that we have alternative suppliers, and we're taking advantage of global sourcing, et cetera, et cetera, when we do have price increases, it's immediately visible to our sales team. And our sales team immediately can then figure out how to react from a pricing perspective. There's also things we do around pricing analytics. And what I'll do is I'll pass it over to Eric, who can talk a little bit about how they handle pricing in Sealing. Do you want to take that, Eric?

Yes, please. Thank you. And I like the question a lot. First off, I don't link material prices to our product prices. We value price our products for the value they create, not our raw material inputs. So there is a little bit of a disconnect between our raw material price and actually the prices we obtained in the field. Because we're solving, again, the most difficult problems and the risk is so high that, in many cases, our customers are paying for a little bit of insurance. Secondly, we're able to push through surcharges easily as freight as well. So we react immediately with a variety of different levers. And we've been able to push price through pretty consistently. I don't expect it to have any impact on our performance for the year or frankly, in the future. So our performance will be unaffected overall, I think, by material price increases.

Anthony, do you want to build on that at all or no? Are you good?

I would confirm everything that has been shared from a pricing perspective. I think thinking about it from an enterprise perspective and data perspective, focusing on increasing our internal visibility to our various pricing strategies and like Eric said, really thinking about the value pricing, the value of our products in the market and understanding the customer feedback related to the levers that we're pulling with respect to pricing. And from a supply chain perspective, just making sure that we stay close to understanding the changes in material costs. And from a customer perspective, as Eric referenced, it's not a huge driver in price. But it is important to make sure that we are respectful of our contractual obligations in the event we do need to pass along pricing or costs in that manner. So about open communication and making sure that we're positioning our customers well.

And the last thing I would add is if you go back and look at EnPro historically, we do really well in environments like this when commodity prices are going up. It just opens up the floodgates for us to really be aggressive on pricing.

Our next question is about additional capacity being added in LeanTeq as U.S. certification proceeds and capacity in Taiwan expands. Also, given major investments being talked about in the United States, is there further opportunity for LeanTeq?

I think Steve can take that. Milt can take that. What do you think? Steve, do you want to take that?

Sure. Thanks, Marvin. I'd be happy to get that one, and thanks for the question, Jeff. Milt mentioned that we -- we're well positioned to potentially double capacity in Taiwan. I'd like to share with you the level of excitement by the local team there. We set up the new building in less than a year. The grand opening was a week ago. And really, the marriage of EnPro and LeanTeq is just a tremendous enabler for that. King and Ken, the 2 leaders, were just super excited that we made the commitment to expand. And then they could execute so quickly to find a building and outfit the building for semiconductor cleaning and coatings and refurbishment. And Milpitas is similar. I think it's a smaller facility. There's plenty of room for growth. But in our industry, it's all based on customer qualifications and then the ramp-up of our customers. So our focus is winning new qualifications. And as far as U.S. expansion, I'll let Gilles take that one. But we're super excited about the opportunity that, that brings not only to EnPro, but to AST as a whole and LeanTeq specifically.

Yes. Thank you, Steve. I mean, we've all been reading the news. There's some significant investments that are going to be made in the U.S. by some of the largest global players. We've committed to stay in the forefront from a technology perspective, and the investments that are going to be made in the U.S. are being made on the most advanced nodes. So we're currently exploring different possibilities. We're leveraging the Capability Center with the project management office that we've got within the Capability Center. We've put together a team to evaluate different opportunities going forward. We actually had our first year call meeting this past Tuesday night that involved our leadership team in Taiwan. So we're exploring different opportunities. And as I mentioned earlier, we're going to -- we're very disciplined in our approach. We've established some very specific criteria that will make sure are met as we do so. And -- but we will be there to support our industry-leading customer as our market expands in the U.S. So it's all good news. We just need to be very disciplined about it. But we'll move quickly when it's time to move. So we're in a good place, and we're excited about it.

Thank you, Gilles. I mean, all the big players are doubling down in America, we're going to double down, too. It's that simple.

[ That's all the ] questions that we have time for right now. There are many more that haven't been answered. So our audience, feel free to reach out to us to answer any questions that you may have following Investor Day. Thank you so much for your time. I hope you enjoyed this deep dive into the future of EnPro. And myself and the team are available to any of you to answer any questions over time. Have a terrific rest of your day and a great long weekend.

Thanks, everyone.