Kennametal (KMT) 3 Nov 202021 Q1 Earnings call transcript

Good morning. I would like to welcome everyone to Kennametal's First Quarter Fiscal 2021 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Kelly Boyer, Vice President of Investor Relations. Please go ahead.

operator. you, Thank thank first and joining to us Welcome fiscal you XXXX Kennametal's quarter results. review everyone for Yesterday evening, we our issued our earnings press on website. presentation release our slides and posted

call. that We referring of slide I'm Kelly deck Investor will Relations. Boyer, to throughout be President Vice today's

comments and the Officer. Officer, time, materially risks After will and Damon's detailed remarks, Audia, as me and from Chris or implied Chief those on contains or Rossi, statements. Company's such, open assumptions, and and to could constitute filings. that performance direct of the our like to statement. expressed risk we for are cause would this today and I in number discussion call uncertainties forward-looking such factors and uncertainties Joining Vice questions. actual the Chris in by President that differ involve are These President attention Executive Damon SEC Financial to statements At disclosure line Chief Kennametal's results, prepared a your forward-looking achievements Today's

of on will GAAP on that, be to on slide website. call found measures the discussing can are now the financial I'll and X-K the And directly non-GAAP Reconciliations be at back we to turn we deck Chris. comparable measures today. most our that financial over Form addition, believe with the our In call

financial typical QX. and more then everyone, currently general and us over review joining end are are detail, for on Damon, due of for for Good before sequentially levels quarter, seasonal and X% briefly the transportation some General finally, today. today's XX% you activity by Kelly. in quarterly increasing to FX. opening showing X the on go recovery. strategic the comments X%, some QX markets the and Sales this thank the I'll level call then will highest in initiatives the comments quarter start you, with morning, of expectations results QX Thank summary of seeing, and to our questions. engineering outpaced Beginning decline, call presentation we I'll industrial deck. which Slide the make was

reminder, by organic total top XX% the two on On XX% of than basis, declined year-over-year sales a sales. end prior those As year-over-year XX% decline a an more quarter. of year markets in our

Improvement from by through under-absorption. improved EBITDA However, execution costs, by on were was percentage points despite EBITDA lower effective able double-digit maintain and to as operating increased increasing leverage a Adjusted disciplined to well, XX.X% due sales driven margin quarter, actions. several lower cost Operating sales. basis effectively material declines associated volume margin in was expense in of raw XX% XX.X% we XX strong fronts, in benefits versus prior and as profitability. year simplification/modernization our to and control continued the to

dollar terms in year-over-year. However, decreased XX% total

for effective as was reflecting $X.XX compared higher target a in at adjusted expense named, as the quarter, well just to Our operating $X.XX year factors I tax remains XX%. the Adjusted rate. prior EPS

difficult extremely this cases. contemplated visibility COVID-XX, some markets remains as in regions as to end course, our well environment in affected, our due is be limited so forecast due with to of spikes to ahead, still it in being shutdowns especially how COVID-XX recent additional Looking customers will

We will not full-year 'XX. be fiscal providing outlook for a year

the growth the economic we X%. of it difficult still as pattern lockdowns to predict of sales, gaining the some trajectory. I Feels additional expect sales digit October our our provide COVID-XX be early indications single above results However, second normal second the may we monthly to the QX, said, Based see on that to there like in be color in to growth like QX would I low-to-mid momentum, would in is which recovery what sequential X% quarter, wave pace on sequentially, is quarter. might assuming expect no from and

as control the operational So economic excellence things can cycle. the gain and executing throughout our we commercial improve on to we share focus and results continue operating such excellence strategies,

the million in at $XX original we XX% which That XXXX to increase savings despite within operational are volumes December to side, simplification/modernization in million, the of on lower that of initiatives deliver bring target time. last excellence the track than much On will year, were set envisioned inception benefits from approximately total $XXX this is cumulative over year. the program

reminder, the the Essen, end capital to the Germany year. closure the with complete activities of expect of this fiscal the our is million. levels with we to approximately including be by is this This CapEx complete. forward, $XXX will reduced original fiscal substantially associated footprint simplification/modernization in plant plant, City, a year, of Also, As CapEx Johnson downsizing rationalization Tennessee spending million result by going XX% $XXX to lower program total be expected and where significantly

initiatives, excellence. are we In driving focused addition focus excellence on commercial operational on equally these to our transformational

products you combination last as of we X, of announced share more Slide direct resources, us to our segments the expertise technical our wallet. toward recall, effectively business larger cutting and a metal commercial two Turning to quarter, enabling capturing

in tracking on application In apply our clear tool options brand to in our to which tooling we channel as not market have the has partners while to space have sell. pleased with major am from new reaction brand initiative positive, new focused strategy within builder opens with brand discussed portfolio strategy service, a positioning. new we wins offering to Also, and This the multi-billion increase this including fit to especially Progress and is broadly to XX% the opportunity WIDIA dollar expectations and I at been a we addition, on machines that they able served purpose market standard several win for customers, existing with for already fit previously be customers machine better recent metal a our operate our customers. the reposition and on. purpose cutting, tooling

capture the China a of major full to product space in well, in continue machine we our win to gain with wind gain manufacturing to and tooling of in share. builder's And manufacturer solutions tool innovation leveraging to projects developed successfully customers are the and course, share for committed We better we share proven of as remain facility, serve share solution a application in similar turbine India. one

improvement. and example, more flexibility For milling the times during space two within general XX, the cutter, than quarter in solid products, introduced HPX by are to range in which repositioning, on to user-friendly and Based competing and CNC to solution of delivers deliver highly ability full-solution positive continued brand we reaction offers customers are X the our drill engineering, ability and cost-effective even machinists. valued face the our drive which more application X a best-in-class we a to our broad products, share products greater KCFM for productivity carbide that gain top-line confident

undertaking. is downturn, Recession. the on to magnitude you the also right. In Please margin focused on the last XX-month adjusted Great earlier sales improving positioning include simplification/modernization, full not profitability stronger and benefits day X. operating numbers the we cycle. know, over improvement By was the to Damon, performance modernization are a our rate bottom quarter strategies turn operational turn line. corresponding cost during left the yet experienced is that, With numbers effect the economic we Seeing are the who time of in compared and illustrating shown Trailing do the review run The shown of excellence Company control Slide I'll to the for the throughout on in Company decline actions more The improved will detail. this call first executing the the addition, remember present are as activities the of commercial and currently sales we excellence

review and both on basis. QX operating with a I'll everyone. Chris, on morning, you, Slide reported and good results, X Thank begin of the adjusted

mentioned, seasonal in and the Chris throughout improved low off QX. As levels experience the trends decline sequential we demand XX% outpaced quarter normally

On the basis, sales sales organic For year-over-year. declined year-over-year. XX% were down XX% quarter, an

currency the X% quarter. divestiture negative Foreign in of had business each the and a effect

the X% sequential primarily temporary actions. EBITDA due Adjusted XX.X% simplification/modernization of under-absorption, year-over-year. year-over-year. X.X% points, contributed low materials, of by X% higher to the effect XX the However, raw quarter $XX was continued million mix was US XX.X%, or the of Adjusted margin and was XX were year-over-year control currency. Year-over-year up volumes margin basis on margin to combined points to of which a and Adjusted the effect of Adjusted previous-year of effects associated basis and XX% operating gross rate down from points year-over-year. expenses points and incremental foreign taxable XXX basis, XX% income. GILTI level the geographical XXX effective basis of increase tax offset $XX due with effect basis down in operating performance million, partially approximately attributed Adjusted was quarter. did down of the was sales benefits cost profit positive lower approximately of

bridge quarter effective remain reduced both in main factors on range volumes in brings positive of to versus higher in the prior fiscal in quarter Although in performance significantly partially raw million. of return to from year to we levels tax negative was and benefits On EPS benefit reported increased was highlighted inception control to expect low-to-mid $X.XX still $X.XX year. offset temporary levels materials the control $X.XX the our of GAAP lower $X.XX benefits partially by loss and $X.XX of modernization our tax volumes $X.XX are offset adjusted since drivers negative rate raw This actions. adjusted earnings the period EPS effect rate, profitability. QX actions. on of to of $X.XX effective an higher XXXX. negative versus The the again total $X.XX cost rate largest share period, per the earnings amounted per in of lower The prior and X. prior basis, totaling by operations to adjusted to The elevated year compares Slide in and XX% $XXX strong this reflecting year. with associated this We simplification $X.XX. the our of positively low-to-mid XX% materials cost contributing This a the $X.XX earnings, when year be the we expect and $X.XX on of Simplification/modernization simplification/modernization we range these the top the tax the share per under-absorption, prior share the

be contributed end the $XX cumulative simplification/modernization top for already benefits on expected $X.XX restructuring year detail that XX%, a by XXXX. in actions to decline in $XX the largest X from organically X at announced followed savings and mentioned quarter. this savings year simplification/modernization decline Remember the of the continue year-over-year performance of Chris will prior taken our million savings of regions of the actions cutting million restructuring to EMEA fiscal by or period. this fiscal quarter in our in at XX% approximately Metal sales All and $XXX the our an be the XXXX, million of expectations sales is year with driven total As bringing by subset the program. XX%. segments declined Americas negative our posted first Slides simplification/modernization quarter. Incremental XX% decreases,

demand Relatively at declines year-over-year, of a partially energy. engineering other best offsetting on reflects Asia with positive chain. and down and the in smallest Asia sequentially by the with end still in although Pacific significant declines the wind we basis experienced aerospace of end and renewable in was market India. also associated positive in activity as year-over-year growth sequentially, posted cutting XX% experienced was general the region, decline weakness the X%. performing improving in year-over-year more Pacific such market Performance China in supply on approximately metal energy COVID-XX and XX% speaking, year-over-year countries driven more economic From in XX%. effects transportation trends an perspective, year-over-year in Sales

operating was it raw oil cost Adjusted the prior and that portion materials significantly basis. to by continues X.X% X% in temporary is volume contributed year and control The simplification/modernization by in that came quarter. driven gas mix, end primarily However, incremental compared the be benefits, decrease XXX actions offset in decline partially and energy margin at to markets noting worth the of challenged.

was primarily X%, on decline the XX% of of factors Other Turning sales by affecting benefit Infrastructure. the then at X%. by the in X%, EMEA partially to business Slide X% a decline of period. declined energy, was again, the X divestiture were By in top driven largest at a XX% Asia Americas offset Pacific. end total time in for this Infrastructure Organic sales prior count. down XX% of growth in was XX%, Adjusted land-only XX%, reflecting which from down of year Regionally, X,XXX days followed by market, This results production were in but the was materials, decline under-absorption. Appalachian increase points decline volumes simplification/modernization earthworks margin rig by up which of offset XXX down US raw year-over-year, operating effect reflecting coal. temporary driven benefits XX%, and the actions, General continued by cost the favorable the engineering significant lower points, basis was and partially contributed was mainly control X.X% year-over-year. associated basis the

X to Slide sheet our cash free flow. turning to Now operating balance and review

We has strategy. liquidity as to current as conservative ample continue the execute ensure continue remain environment, that our to well Company to to weather

million of current Our up profile draw At quarter-end we revolver US combined availability and as XXXX, $XXX approximately million maturing million quarter. $XXX million debt revolver $XXX largely maturity XXXX, from of made that notes June repaid had $XXX and in February two matures cash is XXXX. a of last the revolver well June as and in

offset also given we we within quarter, economic was At expected. the sequentially $XX continued from Primary but to of quarter in approximately were basis, sales more uncertainty primary the covenants. accounts continued working year-over-year million in was in the inventory agreement sales. as decrease a credit $XXX our our were an a of these the payable. to well million, decrease accounts by year working to of the capital increased decline On receivable improve up XX.X%, Capital increase decreased end, flexibility reflection in amended $XX percentage prior recovery. and capital financial During Expenditures million, a than as

be in 'XX first to million, capital half. to will between the continue $XXX majority expect We fiscal the million with $XXX year expenditures

Our free of the negative in million improvement operating a was flow quarter and $XX year-over-year expenditures. decline million, $XX largely first cash reflecting represents capital

sheet on Slide of in be we balance million paid can addition, In the $XX dividend the in XX appendix. found Full the quarter.

Before quarter laid year a I to over we fiscal I out operating turn Slide moment reviewing last cash spend drivers want our EPS the to XX. and free call Chris, flow on 'XX back

basis reduced simplification/modernization the on the range, quarter. the year-over-year we headwind are tailwind With a be $XXX benefit tungsten year first prices basis. free expectations As at a certain to in half our our we in quarter factors materials changed less although cost second-half second expectations neutral $XX quarter in in cost of both continue of key a rate actions resulting increase in play I've second Sequentially, and increasing for to year-over-year from since continue reminder, of quarter, expected to year-over-year raw last significantly will this result last second year benefits and expect million as as a be remaining our Temporary the in tailwind a $XXX in are on and a already tailwind second the affecting be and actions to Discontinuation in EPS than to each a out increasing 'XX year-over-year flow mentioned range year. customer in the $X how visits not to cash and during control this discussed slide half will quarter. fiscal details the a of a operating the half in first quarter, we these for will costs back although second million. of temporary rolling the year-over-year actions. the have

comes starting amortization quarter in it first million year higher be full quarter, in Although expect the million equipment to $XX depreciation for the online. the was new we as and flat to our $XX year-over-year still second

restructuring second cash be In down terms will already I of cash higher the half. and the capital flow, as and halves year, mentioned, in in we programs. execute tailwind restructuring be a Year-over-year, will this Chris as both both first spending significantly

the offsetting cash capital, payable use with receivable inventory market accounts of recovery terms upon the a year, working likely be the dependent timing accounts of both in and we of will In reductions. planned

our capital a remains for target As working XX%. reminder,

turn that, Chris as despite I in over to with mentioned, digits Finally, expect And back sequentially will Chris. call the be up as it working low-to-mid relates QX, QX to QX. single sales versus to fewer we days

Thank you, Damon.

let a progress continued XX, take our significant pleased I'm Slide on few to to to me that we minutes make initiatives. Turning have summarize.

focus commercial for customer fit excellence, a on advancing including growth gain. purpose market applications, We drive share and are

As operational made excellence earlier also the the significant in rationalization. our presentation, margin graphs on demonstrated with simplification/modernization program, including in we've footprint progress

cash even further balance in our position be and We million allow by at will simplification/modernization $XXX service the of recovery. commercial this a the the us profitability target economic on and to well year of the well savings fiscal will to us sheet cycle. improving throughout despite allocation volumes. of excellence program our much expect Timing focus optimize of serve for while of the capital end customer program as lower renewed completion Strength as

I'm difficulty]. EBITDA questions. our operator, X.X for recover confident that to open range profitability target With target the markets fully [technical adjusted XX% of to we that, So will the when sales reach XX% achieve sales of such please line

Instructions] Volkmann [Operator comes from first The of Jefferies. question Please go Stephen ahead. today

Guess, couple days? themes if of guess, trying guess the guess could can and understand, just end and think you what these I And low the quarter? through there a Thank the related, that kind just destocking outlook the on probably end your we what's in little bit you markets for bit color still going mining, little is gas oil you. I trend forward? I would or your across as move the around specifically, are kick of trends is provide maybe And of of see then quarter but market of end, sort that on and kind more the do a of comments part industrial at Chris, universe the the of made to October. you mean a I off through I we I'm sales into

would below pattern we engineering, effect it we at sort regions. to month-to-month Transportation, again, levels. markets may that all seems sort in got we have improvement of think regions. weaker QX bottomed really well still looks course, the Aerospace, across suggest actually with general also out of all difficulty] talked but across a Knock-on like about. sequential October is I in it that QX, pre-COVID-XX Steve, really thought starting all recover see that the Yes [technical to be regions of aerospace little across we look if that

energy low have was And and may this one right at see. selling said, as be that we now, wait down. but you So to still level and

continue and look start kind have governments in and stepping for pause react. at Europe, look the as when we've COVID-XX I this of if to give of seen, in But and best of gave to to see total is we to seasonal So equals you - in maybe positive that think kind Steve. little difficulty], about own some me we digits. trends our its government actions, we you [technical some low a probably talk making should the to to our of think quarter pattern. short the at you example, what everybody as devices, estimate will that mid-single is these recovery normal cases And things sort then increasing, of I left This other

Any else distributor commentary might on the anywhere be or seeing inventory you maybe in destocking channel it?

big there. And the happening question more but think and We do the the not could that little a for may see there behind leveled is largely follow-up. part but the business us, there, of we some levels the we could Yes, think thanks be in aerospace lower we're QX, that's the Japan in destocking anyway. end and with and that as destocking of of there's be at In gas. our bit Americas, QX. additional oil off a destocking it. kind exception probably Korea no Yes, of I think of But just has think I

Okay.

much customers see still oil destocking So difficulty] and still attention accordingly very and to so pass are their I [technical think [technical the paying inventory and gas could some difficulty].

be And year-end, - calendar it year-end? all do will by think you done

that suppose us by guess, to my I sense, behind of sense calendar now, right That's should if my largely had year difficulty] the [technical I beyond would Steve. it be end it end.

go ahead. Mitchell comes Julian Barclays. question next of The Please from

a Maybe around margins. question just first

in margins down though looking both. sequentially cutting metal just sequentially, in infrastructure, flat revenue So and you up had in

help understand maybe think good So that's and us just and despite modernization. - I on execution simplification

the move tailwind. mix kind there some is say on going sequential So of in or something the tungsten with

that Just trying drivers there step understand on down? sequentially to margin the

to It's [technical of everyone a I'd walk you do and Lot what if sequentially can through of I miss Damon good of from drivers, kind one them, moving it conclusion. think wrong question like and especially difficulty]. you to pieces is drive

matter, actions. could [technical Damon we from with to the We're largely our different cost and without factor actually through that the the of maybe walk it the and material going on happy have difficulty]? we right margins for temporary happen pretty So think what But in you them was decrementals view decrementals and elements seeing. once

seeing we So driver change did quarter. I remember, in articulate I and the effects temporary you good cost fourth as was the comp to on the given fourth profitability and think quarter, if the reverse our COVID-XX think the that were quarter what in were of that we fourth going lot third biggest a in place of position fourth we quarter. control the that had quarter the all actions fiscal last tried into our in - call variable the a And in were cost on and the the we actions in

variable what that as with we saw reversal discretionary there we could. cost a lot much were so comp, of as spending was was large curtailing travel any you coupled - pretty no And a down locked

in And And that what $XX around moved range told was the into the quarter $XX year so full not $XX repeat. that you million almost the quarter, effect at those sequentially and first last versus again, to million of look the this which be in $XX we you quarter cost to in million as going quarter, when you range were was fourth we reversal those comp temporary actions to into million. we variable of say changes a told did

said, with of the quarter, this those raw that's would timing of just decrementals you and about big driver. aligned actions what back a when we the at you're versus flowing And as quarter So temporary the materials of million out because $XX expected. Chris have this the some through, headwind looking in

Thank balance that's December temporary that at of year. say the and And looking, the helpful. reversal very as cost are I How quarter should three be will suppose Do you, Damon months? we let's the nine in next you I mid that? moving or sequentially sequentially single-digit with margins for revenue I mean months the up think we assume December. mentioned sizable up low

- Julian here we'll so think have the I we in still what said, So, temporary second cost place actions in quarter.

So think in third as those walk of if to at portion you a what sequential as in we to some a into would said QX the costs a range. sort I we large these be we then, expect those another again QX, cost be to roll of then, perspective, will $X from temporary year-over-year we quarter. range going from and from us. QX. of QX had but visit institute variable what we call look still our as start in salespeople here headwind in actions. And we've tailwind, you from to a million these and customers it And then back very first of sequential all are start that started earlier. some see we again, sequential then to the behind expect start year-over-year, more to cost would the again, back $XX actions is, of remember, quarter, be the because about as to hopefully that to in incremental you QX move temporary that here, we if monetized made to see going headwind fourth that you'll QX the QX year-over-year or would quarter million what comment of And We the see things some And similar saved to the in challenges, we QX we as

and the year-over-year, as - so, going it start look third a see to go at And we as be in we fourth bigger those quarter. you're to headwind

a and that. follow-up Thanks just Damon on

on sequentially $XX looking So you're million with margins the stable million that when at quarter on $X does sequentially to the headwind the probably second operating basis? mean costs, are extra an

low-to-mid are look single saying million we're $XX what at the the to million sequential in $X revenue if Yes, for increase digit costs, you coupled you of increase, right ballpark. with

question from Duignan Ann JPMorgan. comes Please of next ahead. The go

Sean of how little is there McMullen a to on Can higher discuss This volume-dependent? bit much simplification/modernization $XX incremental you scope million continue recover? savings And if for Ann. the is a is savings volumes for

and have we that's these better an see also the million, we'll end volumes improvement. $XXX we're factories, dependent. Yes Sean, said be of obviously think terms [technical is million simplification/modernization said what you'll at the of that as - largely restructuring drive question that's we actually program, why was through in There volume of we associated million. non on volume-dependent. $XX last to it volumes There because structural, particular is $XX largely call your the a I which inception that dependency higher - the of action, with volume total, amount that is in this is going structural the difficulty] a fair of by on year But do modernization since higher really will

to Have you service if when And aerospace. to you second signs with expect expecting the and is improvement? demand question seen my XXX any some of to see not, related to improved would MAX return

hearing mentioned, I still that we're Boeing slightly running to the from And was XXX phone, production as QX they are from MAX, they are when saw next as than calendar running low what to they is levels now, Steve expect of relates it actually to it start on start decline Aerospace, to QX. but at lower year XX MAX, the up per XXX do the month. of on to at ramp we that. Right

based was earnings the on that Boeing's So call.

they probably difficulty] that's think that the year. information, up [technical start that calendar think should the is I start So of best they ramping

question from next Cleveland of The Adam Research. comes Uhlman

March from shot the quarter, to getting have high-level sales have to easy a Just really Do Company do quarter? you get comparisons the start perspective, that organic for or best-case to year-over-year in June growth? is to at what scenario until in the think wait we return a we the do the

the Yes. to clearly But That's hard year. as through we say. easier go comps the get

love So didn't provide we to there general, comps much the obviously one I outlook But to is easier. but do reluctant am get of the something. that able to so I'd say Adam, clarity be around I think uncertainty, in is, reasons that have question,

hopeful that's when there this really certainly happen. exactly is that continues going be but to it's to recovery we're So to that that difficult possible, if predict

have was revamped just and I strategy, hoping distributors? secondly, talk the and what's the be distributors brand, to way between great. commercial provide bring the the some some on WIDIA Kennametal then, thoughts around, happening that, if then, the And Thanks. believe that about be works of could could in didn't in you your other Kennametal WIDIA thoughts would you could expand I on some that know more ability may on channel I if areas you but maybe

customers from cost really better the to we up for product sell if WIDIA, product these they getting Yeah. the had tooling, we're partners in to but getting fact the distribution that modified will haven't now maintain actually benefit fit which channel the very out you already really what are ourselves a other in their before. They're portfolio change and also been Generally, I about And actually need than the to is purpose portfolio, channel has think especially that clarity set there reaction and from They the WIDIA in that of Kennametal serving that's positioning. effectively more the slightly And distributors than product positive. WIDIA they as brand many then, terms provide like that the now. doing tooling product them, that - can positioned distributors price of are with we margins. much take not access they they think are of the

So I prowess they of very that's capability my opportunity an the partners to experience positive cutting opening broadly it's why comments channel their been in said see that customers. really as bring to Kennametal's for this full the because existing a metal

a a it's have everyone. you follow, Adam? operator. So Go net-net positive been Do ahead, for

Markets. comes operator of ahead. Joel Please Tiss go Capital next The from BMO

challenges or end weakness? internally more some this feeling still just market you about is Are operational, all like kind disruption of

Yes.

there's the some of a talked think the of year, restructuring financials. did are the given But Clearly, you last couple and we're ramping we going and plant up of, Joel, plants driver as know weakness. closures in That's we year-over-year is Damon things still production as market biggest the closing facilities. on. I end there about, new the

system. So difficulty]. I at the And look know last there were are are it but than significant as year, if any of I not more those you - they those with in now, don't [technical previous know, they go but in those the costs in I'm first If the inefficiencies of this some end will we they stop will still is are that. at than But in were are right any the sure they still quarter associated system activities year-over-year, year, once they still they away. higher

like transition year of for the given sure. year kind externally still internally this and But And... a for all uncertainty

of think it. to way the That's Yeah.

if were terms highlight you some like you you gauge thinking areas to maybe Is be what positive different there guys in of more might you a way feel and are where just little that? gaining than any share

Yeah.

And are ability I market of think, good the traded have also be seem we other is have share on, that the kind roughly we gain quarters. pretty business over how intelligence kind publicly that then, of as to much multiple to all to with such to And or versus are doing sort it demand. have you competitors internally you track as volumes same at decline what's look in the our experiencing happened companies we end of measure need customers. as we know, we thing our

of excellence are buying. great understand tools customers We to the what a commercial sort really have

these in renewable be look we adding And segment, a and our couple focused decision areas that manufacturing that had goes And give at a business with say of fit examples actually of losing we and know confident individually there's customers low very I on. purpose the of mentioned business talked on so turbines that difficulty] we space, energy, in But in and we a business. made wind they've literally tool new now also share of this to flows general can adding also machine a lot particular never we're just them those major [technical that we a know builder in of there. directly I to we about us And attributable form where new through for also type we of know not spaces. customers engineering any but the we're that OEMs, we're it's in things. and it these our in because bearings the solutions had

and definition sort we areas time, in customer-by-customer we them think feel we watch the picking because I mean we're over something like tracking we by So I have wins share. to have we're up but of that on focusing that are it's

of The of next ahead. Ross Please question Bank go from Gilardi America. comes

rate, level low - that it's I just mid do the level of XX%s? was return revenue profitability, of of to kind wondering, just color but and tax geographically low need and just XX% to I any and the profitability can driving more to to to what's tied you on realize rate you what the back actually on get

So level is the that my sort the our and rate which Ross, the GILTI, to, triggering, in with US is, profitability foreign with you of as here is deductions dealing is there low referred in income. of alternative certain opening some sort get we minimum the of me I can remarks, that of US, the exclude in heard which tax it we're that elevating here

tax see XX%s. back a billion that XX%s, that go to closer we - I low the guess would getting so into to I we $X.X we if guiding in back to you plus I and when driver. think that's low revenues when the would fiscal the big started year rate range, were you thought think we And about 'XX you

It's year grow into we So or I without would back up got do geographic got we were back where but in not nature, to of of clarity again come a I that on linear, we to into. things be that's profitability going that as expect down. we up think get mix necessarily will lack ago. we or where probably year I to two get you tell

are And or two on up I'm Pete I but to over metal and I wondering on? the has that if division Dragich couple how different and direction, then cutting others, at had just the Chris. are of do this been you comment years tied sure know some you you Chris, done sustain bit? the think long everything had not that you guess with just left new mean the one a a in journey And is my the all could obviously of that you've just because last managed changes. of for I a has little pivoting folks kind I management how Company reorg continuity follow if you that?

with And experience a basically is Ross. that person made call question, next X.X the of we at talent [technical The Pete, things the we've that the had to look is in terrific way at make modernization. personal I would a has Pete to Everyone is, that, good point the team own difficulty] have investment but for what that time It's leadership decisions table of good particular in with and Pete's sure of the mentioned the made Yes. do their that kind any you the the Industry us leveraging lot he place. And sitting take done has person and has to we one level. situation, simplification our and I Company. taking around job hand-off about

added and one with leverage replace As way connect has equipment those in all your Naeem you train your in, talent in the guy got and think put customers of and also factories a way in raise schedule a I to a that Pete the to way game operate And but everyone. different different you've you we've fully plants in to thing know, different the investment, and experiences. the the Ross, got to Rahman it's that

so look able the qualified him us and performance. we as at to take take And to very well being us of next to level

has with behind Pete of leader a in situation we of us, him. got the right is, and So leader things wish us terrific for done a where a a has one he good a mark coming job terrific left well that's he that but is we've

Longbow from comes question go next Chris of Research. Dankert The ahead. Please

yet some Just heading there, it's calling the back you first was for more really highly fit between portion thinking engineered for out worth of, quarter, we're seeing traction, still the to early purpose that's fourth Anything too in hey, there of I guess going nice the really growth in versus the quarter any terms days? wins to the sequentially fit portfolio? from had divergence Chris. measurable purpose,

things. to starting trying the your When closer it's think I to difficulty] And ramp those customers that you tooling up. still asking days. were [technical full-solutions and starting engineers are with was I our in requires area early on. Well, type originally what are too to customers and focused interactions think clearly, of question, they And test more that

customers. had ramping - purpose is is little fit easier that activity kind for and so during that slowed up. a a So is for switch the The little maybe pandemic, of down transition

but be could sure. it could not So little that, I'm - they on be a faster going

early I think still to too it's tell.

into it. read So much wouldn't too I

to some travel. said, to more one going opportunities return with reasons some why both customers normal, we're now as are and expenses interact higher as think they're online that's I the more and back that's starting more and Damon of to something the come people as customers our doing have

what running they productivity, So or activity, fit still the purpose you with from whether more driving ways that's full-solutions. and for say would away now equals whatever if new be business positive will, getting but their of now I factories normal, all it to on are that the

cost model guess into fair. that to point here. on of very No. the the Thanks. return That's some I

through how of for we some these force purpose sales cross training, the any as internal additional business the run guess through we some the the fit I incremental year? incremental pushing hires, particular just - through costs are does move all With now the investment of this through

Yes.

is good or we the about we on, news for - of focused it fit different the just weren't knowledge. body purpose - of of not a those doesn't that terms the that but require it's - one skill things set In

of question a just a sure people salespeople positioning product place. have our for that portfolio the already our It's right and capability. So in technical

we largely So We're the investment major analysis, it doing margins. right have engineering I make purpose portfolio. making the sell already product that and fit to can proper some with still the any for see we at to transition sure point don't associated the value make price because value

a to none lots of of the turns if investment, cost force, you the but out it to will. as take training material the got are opportunity things, require including of out, sales of going You've product those

Sorry.

additional changes any Just rolling on up follow you out? includes guess that that. that are commercialization I to guys

in just in. a We where purpose, sure making reassessing but commercial proper we not channels, that broad strategy - for are have we coverage region we're that the fit whatever have a excellence around our general

that so continues. And work

We and using those continue to advance made, just at our better are commercial get excellence investments tools every them we tools, but already those being year.

or don't what substantial I the investment lines see really along continuous any anyway. just on and that's we spirit changes So and more and improvement, those drive of

of Barger Steve ahead. Next KeyBanc Please Capital Markets. question comes from go

margin, to similar will is back drivers? the it to small XQ increase primary like go 'XX. like am EPS the minus down Slide EPS or revenue Can going second we the want make just and that slide, half, If versus FY sure, looks look I I right? to and be I just XX, with at XQ, then plus reading look in the challenges

FY 'XX?

be to Well, already I right. revenue talked plus be low-to-mid with XQ, saying margin single you stable, saying, said but no, think you would the going growth, minus it's digit about earlier or I'm XQ

can the your to 'XX. and here is about thinking EPS that me year it, I down second looks FY what full for then means we half good a the walk like. going pretty be just So Slide that versus it makes then, at half And think look XX, on have look first at

the guess view I what Well, your to comment upon going depend was line top is. the Yes. of

revenues visibility lot where of as think have on are. we I the said, we've don't a

some year-over-year to what decision actions tried make will you where have will a I we've margin, you the is, revenues or those think be. those of show the where you'll to headwinds cost think of affect

and the As see about earlier we - hopefully, and QX see the will - if we growth, organic of Chris the that offset earlier, these headwinds significantly recover - one in than questions QX. year-over-year to profitability heavily would when influence to incremental see markets alluded had the will question more in start the we

or growth be from do year-over-year revenue Yes. to would half organic standpoint mean the some up to able where in, like look sequential growth? think would have half a show to one have to step come what two you I from earnings

we I guess low tell of here, but a around cost of again, the I you can't what if million on you the equivalent do the is think $X.XX. math about, phone guys dollars is that every you as XX% leverage absorption sort can the tell given right now average, a we you When levels we at cost profitability, on fixed of plus so revenue of use some proxy.

up phone back math I call And now. do on, the on don't but trying tie I want that later you to that want, think into right can so to we if the

is And revenue, you with be of the fair? again mostly operating cash, pretty burn to million significant really have cash cash year, affect which of which Is a flow. a is $XXX unless that restructuring, going up and this in significant would $XX million step CapEx

Yes.

flow million to taxes recovers. and year I cash can million of year. that be this would off pulled and that market $XX generation things $XXX bit think in I down strong is $XXX then think lower, that an little is, significantly our positioning elevated do year have dropping a commercial million of as the we this said hopefully but if We control, restructuring as Cash we've excellence for higher we're at are we've some this year-over-year. CapEx what look we We're next in to $XX range. level ourselves million forward

I And if just more. can one in squeeze then,

is Infrastructure On X,XXX X, itself by the that just reading from the was contribution raw material favorable Slide points, through number that, basis correct?

Correct.

on that So meaning, X.X% understand negative else would sure all equal before I the just to items make want magnitude. I the have line? margin been other

from of Morgan Stanley. The Dillon next question is Cumming

holding inventory bit it about a being the kind Steve's feels sequential you go to companies of strong like and uncertainty of the revenue capital all given talking Chris, wanted supply more on in inventory kind the production and channel kind on just of been concerns general original about guidance your seasonality levels. goods question market in have I the chain. talked some above related normal just

So just pull even forward, the is have that seeing might spikes? maybe here restock all I concern some case you given any of there guess kind revenue some been

No. I don't think so, Dillon.

Okay.

It's and inventories work adding more caution terms of back. in decline and things a down of

of Okay. That's of kind now. switching over Thanks been a then couple clearing for market wind. maybe been end you've And for up. calling quarters that out to

is seeing extent your just how been the have offset peers and more a oil level continue business sustained of to your kind there there you big as well. today strength of of of some Can set that to screen growth gas? and can Some in weakness what

to China there is in going business, renewable. - the necessarily right. we relates I you, can about When absolutely size oil is It talk good of in India. cutting, give not mostly is Yes. that is some by energy U.S. but we're and you're the the related, growing. tell energy, metal largely energy, especially We're Also, but growth it gas driven as to on seeing

market been that have the years. we we it's focusing - that a on last within have say I So few would a

fairly So share. have still a low we

grow to is quite substantially. us for opportunity the So

have wanted to-date, around you government impact your seen case of might customer Europe. mandates recent coming way some by just And in or then last here? tangible one. in that make sure, spikes Appreciate one maybe the and uncertainty outlined quarter you've just the of all COVID production kind of the Europe But over to shutdowns anything

No.

- I'm seen is much Germany, there how people We to down. to sure is yet. of shut appetite an not there in our just We haven't talk is anything an there things

are it that, do I but is really a trying to possibility. think not people still

The of ahead. Please Fisher UBS. next question go from is Steven

then QX just gave profitability basically understand margin previously the you sure and like with this want but moving I pieces the addressed us I commentary, year-over-year quarter. all the You make revenues for to last

say million costs. with would year-over-year as from and we And million year-over-year moving the something range, million think about to quarter maybe second other tailwind million if then temporary or year-over-year missed? simplification the the in that the assume we in Is like $XX there in in pieces somewhere a operating year, impact like $XX there that then to the which XX% start $X plus benefits way about the have modernization would the think profit $XX sounds the and would range? So and any last we leverage just was is benefit million of volume it to $XX there are things there that I

So $XX Steve, quarter I guess things. couple One of is, last simplification/modernization was million.

think be million. for we I going the around it's full-year, to $XX said

little change you're in things a but that new range, probably will I quarter-to-quarter that I So the bit second things inclined sort quarter. more million think $XX on, be give of think come rollover to take as and of in it or

order would be the what So is, And materials mid the second it, coupled in we year-over-year, of range year-over-year magnitude call that you cost comments Not temporary the actions $X.XX would a raw the year-over-year different. thing then still and will here in other positive but year-over-year benefit Does volume. help? the the, with first be a be other quarter. to saw quarter, in same made the that the on of

XX% decrementals in on range Yes. And organic of kind XX% that to the volume? the

you give specific what you mean, allow cost out, I to of the you to that give we figure Yes. try try normal line to lower to don't versus see given materials but And back materials, sort again, them raw we'll our difficulty]. give we you we - expect decrementals, think the to out they expect be are, given benefits decrementals. be in [technical raw to we but material them with we in the the raw temporary

some about temporary in of and at point? increased uncertainty the some lockdowns COVID, seeing of And this of extending Okay. given all are around then you the reductions thinking these cost increased some we're the Europe at

Yes.

basis. still We quarter-by-quarter We temporary ones [technical that's at back are of back a about the business. rolled right the QX. and monitor other for in considered here is The thing. difficulty]talking the do of thing because cost to end actions reasons confident the But need that to lot lot [technical we you sort the cost said. actions of difficulty] feel rolling basically out of control on a the of all place control There we uncertainty in there this are still largely a things

make we're the So to the considered. look only situation as are adjustments that, sure doing all we're to thing today necessary at we would going our margins month-by-month that I I we'll quarter-by-quarter, liquidity and is guess protect protecting the say our make continue things to and too

improvement Just extending sale those that, doesn't the now, the benefits? consider would if trajectory that temporary continue to seeing clarify you you're

was I of speaking think million we million that I roll about back. $X Damon $XX the talked talked rolling - to about the back in

Right.

Some of those that of things. travel with type customers is with engaging and

So tightened in related obviously improve portion are but we're normal are that stay reinstating to going and not then to and was going expenses, those for to to levels of if us year. volumes roll shutting back fiscal is not continuing that at travel and this - we've place customers that's out, also pay some

to closing turn session. question-and-answer over Chris Rossi the back would to for conference I the any concludes This remarks. like

your for and joining thanks appreciate Thank today. support. everyone We operator, us and the you, on interest call certainly

first that off, report we ESG to ever our our Before I we on posted would recently website. sign like mention

ESG is compiled area. this opportunities While related years, we've this progress our we've summary a the addressing comprehensive in been time and that first items many for outlining

please day. out to Have hesitate any a questions call, that on have you report questions reach or on follow-up you, Thank great don't any to Kelly. If today's everyone.

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