Albany Buries the CH-53K — and Reveals the 12.5% Business Underneath

A record $349.5M quarter, a $44M contract-settlement boost, an abandoned divestiture, and a segment margin analysts had to drag out of the CFO

AIN · Earnings Call · 2026-10-29

The Best Quarter in Company History, Minus the Accounting

Albany International posted the highest quarterly revenue it has ever recorded — $349.5 million, up 34% — and adjusted EBITDA of $100.1 million, a 28.6% margin. Adjusted diluted EPS of $1.68 came in above the high end of the revised outlook range management laid out when it closed its strategic review. On the surface, a clean beat. It took one analyst question to dismantle the surface. Chigusa Katoku of JPMorgan asked CFO Sean Valashinas to strip out the CH-53K contract adjustment, the tariff refund and the other one-timers and tell her what the Engineered Composites segment actually earned.

if you back away the all of the impacts that you laid out there, you are looking at about a margin profile of 12.5% EBITDA margin for the quarter in AEC excluding those charges.
Sean C. Valashinas, Chief Financial Officer · 2026-10-29

The headline number for that segment was 36.5%. The real one is 12.5%. The $65.6 million of segment EBITDA versus a $134.6 million loss a year ago is a story about a renegotiated CH 53 k contract — roughly $12 million of revenue, $44 million of adjusted EBITDA, $33.4 million of gross profit — plus a pull-forward of tooling for a next-generation defense prime contract that management concedes was ahead of plan. Strip it all and you have a segment that grew, but not by the 36% the tape saw. Here is the part that should sting: nine months ago, on the February call, Katoku asked almost the identical question about 13% underlying margins. Then-CFO Willard Station replied that “our goal is to get it to the mid to low teens.” — Willard Station, CFO or Financial Officer · 2026-02-24 In October, Valashinas set the same target on a later clock: “our goal as we exit 2027 is to be in the mid teens in this business.” — Sean C. Valashinas, Chief Financial Officer · 2026-10-29 Twelve-point-five today versus thirteen then. The destination did not move; the arrival date did — from an implied near-term aspiration to a date eighteen months out. That is the honest core of this report. Operating income of $59.4 million in the quarter (17% margin) compares to a $116.5 million loss last year; the reported Q2 figure was $32 million on $329 million of revenue.

The Divestiture That Quietly Became a Renegotiation

For roughly a year, Albany's central narrative was not growth — it was an exit. The strategic review of the Salt Lake City CH-53K site dominated the 2025 fourth quarter keyword list, and management fed it: in February there was interest “both from private equity as well as strategics” — Gunnar Kleveland, Likely CEO or Senior Executive · 2025-11-06; by August the field had been narrowed and Gunnar Kleveland told investors “We have down-selected to 8 final candidates that tells you the interest in the site.” — Gunnar Kleveland, Chief Executive Officer · 2026-08-04 What actually happened was not a sale. It was a contract amendment with Sikorsky, with the site retained. The keyword record is unambiguous about the pivot: "strategic review" ranked first in the 2025 fourth-quarter list and has vanished entirely from the current one, replaced by CH 53 economics language and a new entry for the tariff refund that padded the quarter. "Salt Lake City" slid from a top-five theme to the back of the table.

Through that process, we addressed the most significant legacy issue in our portfolio and reached an agreement with Sikorsky that improves the economics of the sales 3 k program and provides a more stable foundation for the Salt Lake City manufacturing site and our business going forward.
Gunnar Kleveland, Chief Executive Officer · 2026-10-29

Reading between the lines: eight bidders were marketed a loss-making autoclave asset and none produced a price that beat the value of a renegotiated long-term agreement. That is a defensible outcome — the EAC-charge vocabulary that polluted four straight calls ("cumulative catch," "EAC adjustment," "loss reserve") is gone from the current keyword set entirely. But it is a different company than the one investors were told they owned a year ago. A divestiture would have removed the drag; the renegotiation removed the loss instead. One unremarked artifact: the acting CFO prefix on Valashinas. Willard Station fielded the February and August calls. The role, like the site, has been resolved on an interim basis.

The One Genuinely New Thing: Hypersonics and Rochester

Where the call broke new ground was defense materials. A $21.2 million IBAS award funds the machining, inspection and densification steps Albany previously outsourced, giving Rochester a vertically integrated ceramics-matrix-composite line — the IBAS contract is a first-time keyword, as is capacity in Rochester. Add a teaming agreement with Lockheed Martin on hypersonic missile development, ramping JASSM/LRASM volumes, and participation on the Wing of Tomorrow demonstrator. And the timeline shortened, audibly: “this used to be medium to long term, then I said it was a medium. now I say it is medium to near term. now it is more near term. I think we will start seeing impact in 2027 and definitely in 2028 rather than 2030.” — Gunnar Kleveland, Chief Executive Officer · 2026-10-29 That is a rare thing on an industrial call — a CEO volunteering a pulled-forward schedule, and naming the accelerated schedule rather than the customary 24-to-36-month qualification path. In a market that spent the last two years bidding up defense demand broadly — the Golden Dome theme Albany itself invoked in late 2025 — this is the company-unique asset.

Machine Clothing, the Guide, and the Tape

Machine Clothing did what it has done for six quarters: $169.8 million of revenue, modestly below prior year, $46.3 million of EBITDA at a 27.2% margin, with trouble in the Americas from customer consolidation and papermaker capacity rationalization, stability in Europe and China, and the same softer demand language that has framed every call since the spring. Full-year revenue guided slightly down. Nothing here is new, and nothing here is broken. Consolidated Q4 guidance of $325–335 million is a sequential decline from $349.5 million, and $0.65–$0.75 of adjusted EPS is less than half of the reported quarter — the clearest statement that Q3 was an accounting event, not a run-rate. The balance sheet is improving: net debt of roughly $343 million against $457 million of available capital, capex down to $12.2 million from $18.3 million, free cash flow of $36.5 million versus $25.7 million. Effective net cash stood at -$373 million in the last filed quarter, a decade-deep hole that the renegotiation and a stronger cash quarter have only begun to address. Interest coverage of 8.9x, per the Q2 filing, is comfortable but not fortress-like. Yet the stock sits 9.7% lower over 90 days and 42.9% below its February 2023 peak. At 2.5x price-to-revenue, the market is not paying for a 36.5% margin segment — it is discounting exactly the 12.5% the CFO disclosed. The December Investor Day, with its 2030 outlook, is where management must argue that Rochester and missiles are worth more than the sum of the guide. Asked about capital deployment now that the structural overhang is gone, Kleveland was careful, not promotional: “I will take more seriously some of the inbounds that we have for potential acquisitions.” — Gunnar Kleveland, Chief Executive Officer · 2026-10-29 After a year spent extinguishing a legacy problem, the burden of proof has shifted from cleanup to compounding. The Q3 print bought credibility. The 12.5% is what has to move next.