Neptune Insurance Holdings, Inc. Q1 FY2021 earnings call

• Financial results for the first quarter outpaced plan with strong momentum in both business segments. Adjusted operating income was up significantly from the fourth quarter. - Both segments delivered sequential improvement in sales, earnings, and margins. - Closed on ITASA acquisition in early April, financed with Term Loan B. Restructured Technical Products category alignment with ITASA. - Focus on four target growth platforms: Filtration, Specialty Coating, Engineered Materials, and Premium Packaging. Recent acquisition of ITASA as an example of building growth platforms. - Innovation as a key catalyst for growth, along with the Neenah operating system for margin improvement. - Strong cash generation with liquidity of just under $200 million at the end of the quarter.

Technical Products: Sales were $145 million, up 10% from Q1 last year. Filtration within Technical Products had record sales and profit, growing over 20%. Filtration represents over 40% of segments sales. Release liner and digital transfer including ITASA form a new specialty coatings sub-segment, and Industrial Solutions is another segment, each expected to represent about 30% of Technical Products sales. Fine Paper and Packaging: Revenues grew 8% versus the fourth quarter and have grown sequentially in the last three quarters, on track to achieve or exceed 2021 revenue target.

• Targeting average top line growth of around 5% annually with faster bottom line growth as margins expand. - Expect both segments to ultimately achieve sustainable mid-teen EBIT margins. - Anticipate $4 million in synergies from ITASA integration starting in the latter part of the year and reaching run rate by the back half of next year. - Accelerate organic growth rate with an improving portfolio mix by focusing on core growth platforms.

• Inflationary headwinds are a concern, but actions are being taken to overcome them. - Timing differences in pricing, especially in Filtration due to annual agreements, pose a potential risk.

Q: How is demand trending in April and May?

A: Continuing recovery varies by segment. Tech Products continue strong demand. Fine Paper and Packaging are recovering as expected, with Consumer Products and Packaging showing more recovery than Commercial Print.

Q: Can Filtration pricing be pulled forward?

A: Working closely with customers, focusing on pricing, incremental volume, improved mix in growth platforms, cost reduction efforts, and the Neenah operating system to close the gap besides pricing.

Q: Status of Filtration capacity in Appleton?

A: Filtration business is strong across categories, but North American Transportation Filtration is not yet at expected levels and remains a drag on financials.

Q: Demand trends and COVID impact on Filtration?

A: Macro trends in Water and Air Filtration escalated post-COVID. Transportation Filtration is recovering, and the facemask business (about $4 million a quarter) helps in Indoor Air Quality but is small in total.

Q: ITASA integration and go-to-market benefits?

A: Early integration of ITASA is going well. Expecting ~$4M synergies, with technology overlap, customer overlap, and supply chain overlap strengthening the go-to-market strategy.