Neptune Insurance Holdings, Inc. Q2 FY2021 earnings call

• Safety: Achieved a new safety milestone for recordable incidents, with more than half of facilities over 100 days incident-free. • Operating Performance: Strong top-line momentum with near-record quarterly revenue; Technical Products had an all-time record quarter; completed ITASA acquisition, restarted an idled asset, and closed Appleton facility. • ESG: Recognized for energy efficiency, welcomed new board member Shruti Singhal. • Growth Platforms: Focus on four growth platforms (filtration media, specialty coatings, engineered materials, imaging and packaging); examples include NeenahPure air filtration portfolio launch, ITASA integration progress, DISPERSA product line expansion, and premium packaging rebound. • Neenah Operating System: Implementing lean manufacturing methods, delivering results ahead of plan and expanding to additional facilities.

Technical Products: In Q2 2021, Technical Products sales were a record $180 million, up 79% from Q2 2020 and 24% sequentially from Q1. Adjusted earnings were $14.7 million. Fine Paper and Packaging: Sales were $90 million for the quarter, up 48% from Q2 2020 and 10% sequentially from Q1. Adjusted earnings were $10 million.

• Input costs expected to peak in Q3 and stabilize in Q4. • Aim to offset raw material cost increases by end of 2021 through pricing, volume, and efficiency initiatives. • Adjusted net leverage expected to drop to approximately 3x by end of the year. • CapEx expected to pick up in H2, reaching low to mid-$30 million range.

• Supply chain disruptions and rapidly increasing input costs impacting margins in the short term.

Q: Asked about trends in the paper segment and if there's more upside to recovery.

A: Julie Schertell said the paper segment is expected to recover to around 90% of pre-COVID levels, with some fluctuation, and the restarted asset supports demand.

Q: Asked about catching up to cost inflation by Q4.

A: Julie Schertell and Paul DeSantis said they expect to recover about half of the $7-8 million incremental inflationary costs in Q3, and start narrowing the gap in Q4.

Q: Asked about how much the Appleton facility contributes until it winds down.

A: Julie Schertell said about a quarter of the revenue reduction and benefit per quarter.

Q: Asked about quantification of Neenah operating system improvements.

A: Julie Schertell said it's a mix of acceleration to additional plants and savings higher than originally estimated.

Q: Asked about inflationary environment impacting demand.

A: Julie Schertell said demand is very strong across categories, with margins compressed in short term but expected to recover over time.

Q: Asked about market share gains in Technical Products.

A: Julie Schertell said share gains are driven by providing substitute solutions due to supply chain disruptions and innovation.

Q: Asked about ITASA investment and market growth.

A: Julie Schertell said the $13 million investment supports growth in release liners and ITASA is performing well with strong demand.

Q: Asked about trends in July and expectations for August.

A: Paul DeSantis said demand has been robust despite raw material and pricing timing issues.