Kennametal (KMT) 8 Feb 222022 Q2 Earnings call transcript

00:04 Good morning. I would like to welcome everyone to Kennametal's Second Quarter Fiscal 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session [Operator Instructions]. Please note, this event is being recorded. like President the of now Kelly over would Vice Boyer, Investor I to conference turn to XX:XX Relations.

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

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

believe from or we call will detailed to non-GAAP those over at to directly X-K file. Chris. Reconciliations slide call are that and Damon Joining Damon's the addition, in can Officer be website. and comparable In today Chief Financial Chris Chief are XX:XX prepared achievements found our will on GAAP are I to measures open on and and President results, Vice me performance XX:XX measures Today's the involve cause financial questions. expressed Kennametal's uncertainties and on such differ as Rossi, Audia, like forward-looking such actual Officer. time, implied statements. direct line comments be uncertainties risk and financial in our the on today. number I'll call that, this we company's Chris and materially statements. to the SEC the turn President disclosure discussion we assumptions, the for Executive After factors At XX:XX These of that And would a of statement. the could Form risks back most deck your our And that by to or attention with contains discussing constitute forward-looking remarks,

thanks morning us. Thanks, and everyone, Good for X:XX joining Kelly.

And We by outlook I'm will some QX results full and financial and on Damon to in the year. results detail. comments going continuing comments results slide make followed this our questions. transportation. initiatives. all I'll then recent and by call some general quarter continued in Beginning quarter summary call, posted the excellence exception improve finally, go to strong strong opening comments strategic before the commercial for X:XX for expectations of and end the more with this wins presentation. with again today's QX For markets operational our demand Underlying and on highlight some our start over the of X our executing

general with sales performance our transportation discussed expectations, trend, last in our organically the call, sequential energy, year-over-year challenges expected. China. seasonal we XX% at within of increasing line performance range on Our our XX:XX XX% both strongest was was which and despite growth quarterly decreased aerospace year-over-year was and XX% as normal in in followed XX%. By market Transportation than end in worse the by by engineering year-over-year, at

EMEA due And regions, we still continue through balance issue, While On availability XX:XX we X%. the and transportation, remains mainly basis, at at fiscal supply chain it's saw year. strong believe all is led that in in the expectation shortages of year-over-year a to chip an chip our shortages. by regional demand underlying of growth Americas our will XX% likely our

Adjusted at end prior in but well of XX:XX compared performed rest to reflecting percentage grew, the a also of year turbines. wind operating China, Despite X%, Operating during commercial Asia-Pacific slower quarter. at expense to The points XXX drove Asia-Pacific transportation to challenges, strong of excellence pace XX.X%. operational leverage these related in energy and weakness was again effectively basis EBITDA by margin programs year-over-year and XX%. improved the a isolated regional our once mainly flat and this quarter. sales as as market

up from in XX:XX ahead, and million XX:XX to quarter, million markets. cash and growth XX%. improvement in we free in at million. initiatives this year back Looking We $X.XX operating all confidence flow have cash quarter, was improved free quarter. EPS previous reflecting remains $X.XX the $XX is Adjusted to significantly our flow expense $XX margin And prior generation. believe $XX we shares the operating compared end in demand of strong also for target market bought Our the

relative and of other in in-region/for-region expect X% to X%, we manufacturers. underlying of the likely supply than local continue highlights we remain extent be some believe own production our of bottlenecks, believe far our lesser uncertainties but effect while In X% operations, outside markets of XX:XX customers other demand setup. transportation. overall, X% by to continues to of majority year. to our However above our end and XX:XX transportation, vehicles year-over-year, some and supply be to our we which strength balance Inflation, to fiscal up the customers the for QX this for to sales degrees challenges Nevertheless, regard, present chain sequential and of normal we benefit affected varying our growth our from bottlenecks, a strong, the pattern chain is is that chain to supply

our addition, inflationary effect the approach In dampen proactive to of pressures. continues pricing

saw $XX increase in raw positive year-over-year later. material million more in we versus costs, approximately the which quarter, details example, price on For maintain Damon will a but still provide

to gaining despite the Now ability year. we for at leverage in we uncertainties, strong confident we slide always, aimed focused an XX:XX on excellence X operating control, share. are to on market As can turn what drive initiatives our commercial underlying for full update remain let's the our and

service. space, further posted continuing large in auto on our by the are our XX:XX innovations results manufacturer strengthening EV underscoring this product slide, of initiatives are major recent wins our application We a improved engineering another with expertise, position. our leadership Some that leveraging to win deliver shown and customer

product to and saw with aerospace leveraging support convert innovations an excellent performance also supplier, our We Solutions. customers technical to Kennametal

space increasing Infrastructure, continue innovative our on And productivity. large share in We focused a in win in industries. process renewable wind we XX:XX due see finally energy, the to products gains customer to in posted

strong confident will manufacturing XX:XX examples of innovations to our will design financial few gains. continue a and product are the our the project. and die operating pelletizing that, technique supporting Those large and and are are commercial turn proprietary just share second growth, drive driving competition margins. expansion Together how excellence initiatives, excellence the initiatives review performance beat I'll Our with who in more improve Damon, we detail. the we to And with quarter operational over call leverage customers

XX:XX Thank on basis. good I everyone. begin adjusted slide will results QX you, and operating with review Chris, the and of reported morning X both on

prior X. cutting the performance $XX on to the temporary currency factors XXX We approximately X%. continue as performance drive drivers increases. with effect increased Adjusted As of Factors days the by no XX:XX business XX:XX material conditions despite including the material $X.XX due sales this performance increased carryover taken results X%, negative we points this strong basis, $X.XX rate quarter. a sales this XX% of the footprint points our as quarter per carryover expected, strong XX% highlighted adjusted year. the The were improvement in strong from X into temporary tax reviewed. raw manufacturing simplification I in GAAP earnings P&L there XX:XX mainly year. a EPS XXX by respectively. sequential to basis Adjusted quarter XX.X% and flat $X.XX as the partially year-over-year significantly organically merit in approximately basis, of X business higher X% QX EPS currency margins taken same adjusted at to $X.XX are in was higher and and leverage These modernization affected organic On quarterly bridge performance $XX mix, the China. negative operations period. was an cost slide a a modernized to profit of versus for increased quarter. year and from year. There year. in actions of basis in quarter our drivers year XX.X% sequential some effect the remaining on margin Taxes by million increased points EPS amounted of XX:XX QX gross control control On negative XX:XX line year-over-year. year-over-year EBITDA EMEA quarter. more as our basis, actions a gross with year-over-year quarter adjusted to relatively $X.XX the of on associated $X.XX versus in improved of in that contributing offsetting due no normal XX% as Metal challenging by increased Sales year-over-year XX:XX to was sales were due and of Slide than was raw benefits XXX in Chris strong are adjusted the absorption, was Regionally, increases, EPS cost mentioned, due profit margin year-over-year the percent effective the detail this $X.XX The by to decline by segments effect sales modernization prior period. costs simplification up versus the negative benefits. price Americas XX.X%. basis performance, transportation and offset XX% of to an margin prior prior were removal decreased with trend share operating at followed main substantial the last The operating more in year-over-year to margin prior and to just compared led basis On basis our X%. the $X.XX this million to to The XX% in effect the expense of days XXX to the X%. flowing contributing growth volume including XX:XX points, timing Adjusted and and well year-over-year second reported

in general posted a last the to of of in aerospace markets year-over-year. end X%. a and renewable mainly incentives gains with engineering energy excluding degree and of This XX:XX at X%. elimination by this government declined leading transportation posted lesser Year-over-year, energy wind was concentrated reflecting XX%, Asia-Pacific quarter XX%, shortages of transportation due XX% to chip Transportation decline decline the reduced all at and effect energy China, sales at year.

was mentioned, due Chris supply chip more affecting customers. than other continuing transportation our expected challenges to shortages As chain and down

general energy a to believe year chip outperforming the general We're underlying to continuing pressures will again continue XX% cover at increases in the Sequentially, and and XX% posted increases sequential by for track, we volume by inflationary XX:XX to on and due increase, also Infrastructure. basis effect and at absorption, with benefits pricing Adjusted fit no with in by Asia-Pacific points engineering this and was Turning slide X.X%. All a to current Organic at Americas increase offset decline facilities. and We prior XX%. XXX higher a sales including strong, material X% including actions simplification/modernization X%. leverage to decline. is productivity business for days environment. benefit were a foreign X% Our purpose initiatives partially taken in expect Transportation the year-over-year recovery track our the continue of XX:XX remain increase, of leading remain our that period. X% cost increased as currency increased temporary margin follow pricing on modernized favorable at positive of resolution carryover versus quarter. control such There excellence actions was Operational The operating X was shortage. XX% regions X%. a driven drive sequential year. to as year-over-year EMEA transportation the versus aerospace prior and XX:XX XX%, engineering demand mix, the performance, growth raw and manufacturing associated from we

quarter, markets US sequentially. As in in rig seen as by only XX% count. mainly last driven temporary strength absorption, basis. was general XX:XX was By sequential margins engineering land increase control year-over-year a the market, oil continued the improvement and in partially was up material gas and basis improved taken to material of expected, earthworks by XX.X%. and as All offset Adjusted QX, up higher points was energy volume end increases Price XX%. increase year. were Americas US increased up the XX% on actions this XXX cost the and neutral cost in as driven market, by by This was up effectively year-over-year, the raw mix operating associated performance, end in were manufacturing

XX:XX Metal in excellence review on balance and our case commercial slide initiatives. the cash to to remain As free operating turning flow. and with operational sheet we our with X track Now Cutting,

increased sheet by year-over-year primary of million year-over-year We decrease On due capital range and strong continue now were sequentially. basis, At capital to sales year. a expenditures but on an Primary decreased million, a balance $XX cash inventory. maintain $X have of Net quarter of sequential significant expect be we million healthy working fiscal basis approximately profile. XX:XX XX.X%, combined position, to was prior increase in $XX to million million, within a to $XXX to liquidity and the a from and $XXX percentage availability well our basis XX-basis revolver maturity of an ‘XX million expenditures debt million. we're covenants. financial mainly $XXX end, a $XXX improvement and capital point working capital a decrease the We in year on

Our in reflecting operating increase offset strong free the million second this in flow sales $XX working operating versus performance capital. cash million quarter and prior quarter, was by year quarter, $XX an

quarter in since the XX finally, announced as appendix. review under on in and we purchased. million the Chris paid $XX noted, turn The inception Program of total the dividend program at previously of X our shares million million also We let's of sheet $XX during be the repurchased $XX slide XX:XX XX:XX shares outlook. Repurchase quarter. the in to to full the we balance QX found are slide Now can And

the assumed be China. continuing worsen sales midpoint, This range in the We to transportation but chain the to flat. implies range will This $XXX our X% relatively to our $XXX at in sequential also of X%. supply disruptions expect to not of in of in expect X% outlook trend around sales versus the million. and to X% strength year-over-year, sales underlying also challenges do have belief the growth be transportation approximately reflects X% economy, We seasonal X% normal in and up to million

raw we be implying operating earnings is as Sequentially a meaningful previous are year-over-year. to income million, year-over-year, we behavior. Lastly, strong of the believe calls, cautious continue flowing up Adjusted expected continued restocking minimum aren't since costs forecasting on will P&L material expected. their XX% higher customers discussed operating $XX maintain through to leverage as XX:XX

XX:XX tax QX, in XX. sales despite XX% sequential rate second from still to the expect positive. of cash cost and normal effective the outlook to the full-year the strong Regarding adjusted we flow half year. patterns year-over-year We leverage slide for the XX% temporary to Lastly in exceed to control free annual on headwinds and operating range prior expect be be operating

full underlying that to half in looking longer time the raw in normalize at the variables. Moving first significant In full year raw strong leverage This onto year-over-year half over the operating also frame for year, will the a terms The operating quarter the begin of that based be are of sequential the comparisons such leverage recognizing we leverage leverage price measure on the fourth a material a timing performance saw the we as business. believe experienced by XX:XX while fourth we will normal benefits. of drive cadence for better of in year, quarter why leverage versus unevenness we above quarter. the committed affected to the increases. to quarter to XX:XX in the second full the last the material Nevertheless, other can year, is net occur is related from operating

over of call long-term And year-end. These net annual that, XXX% XX:XX fiscal our to expect increasing as depreciation the flow and of by to year-over-year. sales with be $XX trend million, $XXX $XXX Chris. adjusted capital back We to Capital $XXX goal working translate in XX% approximately to operating primary approximately to with I'll to million of be a assumptions million approximately free cash line target. generation in towards together amortization turn and income, the of expenditures percentage range million our

XX:XX Thanks Damon.

minutes XX, strong demonstrated take We to me excellent as another our posted leverage. just by quarter a summarize. few to operating Turning let slide

Our are continue product commercial excellence gains markets and innovations and further recover. initiatives drive us and share operational improve positioning well as to to margins

strong upside markets us demand XX:XX chain end in have supply we challenging improvement. underlying although and restocking significant and not we other affect the transportation forecast, is believe bottlenecks for the strong of yet to seen are is remains other end the continue Although and showing uncertainties restocking, market our China to future. Furthermore, signs

We all continue to half and our when the XX% of XX% XXXX strategic the allocation sequential capital sheet operating exceed will operator, the for in and fully initiatives adjusted profitability to $X.X billion to EBITDA strong reach year strong meet patterns full-year sales in quarterly confident flow driving please balance growth questions. with expect of of to range and fiscal balanced XX:XX I optimize second have leverage. XX:XX open cash flexibility our operating target the strategy. And $X.X allow that, free remain the normal confident in Our are investing billion. both to continue us line to we

question you. comes The XX:XX from go Jefferies. Instructions] [Operator Thank Steve with ahead. Please today first Volkmann

Thanks good guys. to for transportation start taking was morning of I Since kind Hi, the apologize, XX:XX question. going standout, the there. I'm

You talked we various about we're I about not of X%. from at. decline, And hearing I'm just markets that's what look really transportation sequential the curious believe

But wondering of some sure door going see I'm actually the that been therefore there product where transportation companies out an somewhat don't something it Although previous do temporary, I much I'm produced these this you is situation are maybe kind or now or and is don't may everything. they need of kind you on quarters inventory of so and right if here? have is in as something more getting think

the your right. lag see their probably always is assessment. will of but consumables, little bit XX:XX that's is And terms lag think we'll a bit They think Yeah, pretty also see we in -- I of we assessment of little start when start know a production. probably good there a to I when they

something about there are that of really kind we talking else there might or is And in XX:XX be? transportation, automotive, you when say

light really It's vehicles. XX:XX

final the it And is I'll Are there, a one fairly of from share confident market perspective? you that on going there XX:XX here pass on. nothing and sort

in mind absolutely question about confident. no it. XX:XX my There's We're

XX:XX Okay, thanks. I'll pass it on.

(ph) Next XX:XX [Tami JP comes from with ahead. Morgan. Zakaria] Please question go

XX:XX taking Thank Hi, questions. morning. my you for good

across share question this measure gains you you first you to market is, the opportunities? gains regions. said environment? biggest share my drive in do So how are expect And Where

question. XX:XX Good

on tooling. say, opportunities confident particular way engineering of we we aerospace. and traction reward you're XX:XX our last in redirected So those for I low history of had our high high-performance think biggest aerospace on we would a was, focused following think share are that I to they we require feel getting to process the few Tami, resources lot target reasonably had end, the customers, and we new actually the example, we share since people customers. we're increase wallet customers, Kennametal, of by over we that but which years part in that automotive the I sales is, there, have and a we of measure based our

metrics and is the So we is to account increase have market. we then due last year, is year, with we say business normal also what how to have customer much for this it just this any this

sequentially much in can look growing than just quarter, we market. purpose. rebranding call overall and say, measured that's fit are, tools in cutting is, in basis. the high example, case, project-by-project at general had XX:XX that And particular much that fit what of and look what purpose for the applications, take the almost purpose, for we engineering basically our more a measure which that We we they're XX:XX like fit a works doing for broader and project-by-project sort larger is success customized then they of how basis, was on are real the would not it's but broader video say moving we're general way engineering that metal our last that for it's of sort aerospace, specialized is for portfolio So product you at into based. number a I our the growth general broader, and also fit And then we the we I someone for purpose engineering and if like end have -- that for well metrics are So tooling

we that then incentive the And business. so sales the that's then, of So infrastructure report we distributors. cutting also it'd report, our Many And that whether sales be moving into in actually their those many some to also feedback they metal we're them. written direction. them gives or agreements our associations with around versus XX:XX have areas share we people type in of of have we good were kind us so -- get wallet and that increase confidence track. right our world, and measure do something from They

that kind So that with only that share. we've of it's this last one good Tami, it's because that the believe we're It's we're the -- is markets with but poised simplification/modernization on done positioned of a a company really not we really over question, growth complex it's modern accordance focused we take recovering, question. for the years not the well in few believe to foundation

and something it's that holding absolutely we're for. ourselves So measuring accountable

XX:XX Great. much. from you me. That's Thank so all

Mitchell with question ahead. The Julian from XX:XX comes Barclays. Please next go

good Hi, morning. XX:XX

start -- to maybe question I guidance. revenue a wanted around just with Just hey, your out

quarter So digit for single the was into that organic guidance sort implies mid it of high range. down slow growth the March

guess context we're think but re-acceleration like lot down, PMIs the what coming sort are trend other sharp pattern later how that, the XX:XX mid-single you help of growth Cutting, then Any is further you're there metal So quarters about in companies at talking you're now there cutting growth maybe of And versus what assuming thinking saw the no, of So should a are some cycle differences higher us Metal seeing you infrastructure is short year. the understand growth ago. or a in that the either you out what in sort from current December? about very pieces you Maybe look for is lower? quarter? push rate, of right a think that Or a couple digits? I in slowdown of in the sort we in versus as that

perspectives? about wondered just So your

XX:XX Yeah.

I -- buy of know speaking, Julian, think cars. trying talked car obviously a about say don't plenty is is for the on -- phone broadly -- we so to there anyone but Just demand transportation, here if I I'd lately,

And caught so, required going replenish the up that to think pent-up situation, take with it that we and cars demand. to a demand that is is time get

forward general positively So And most that also engineering. many so in come affect will going growth PMIs that's cases certainly in XX:XX it's an of of even China. and opportunity sort in for the though with interesting, they're the down countries, exception still the territory us have

that And so, we think of that and had the say Cutting growth Cutting place a nice at more is going of would we and a definitely to XX:XX then -- in also And about continue, think recovery would infrastructure, Metal I if I be to Metal the we about sequential. and and sort business. of the to question increase higher to where part sort come. infrastructure X% course, say sequential would a you X% to be will in think rebound aerospace that how about You Infrastructure, the talked growth. is still between -- the lower that definitely of asked what that? happening closer there

those and there. of steady also growth for also a we higher and level, in growth we going that's be have off are we continue we see of we to energy, continuous still recovered there that coal that sort expanding a so -- met look to nicely but mining more and forward And and very rebounded. example, gas, is demand of that's should adjacencies, there, expect and XX:XX going So it's expand, terms kind to believe much good to oil

the and cash. you. And wanted of XX:XX sort generation just flow then, That's of helpful. back Thank cash to uses on circle

of weighing now. increase cash the the about talked you capital just So side on flow inventory working

pace about down. the think ratio at Just you which come can to sales inventory wondered that

the I can think of it's now XX:XX right sales. in share sort on the as trailing liquidate you quickly cash. of XX-month And How the that? high of XXs a uses

the You of buyback do program. have sort the

portfolio, look money sort global software tooling, acquisitions the into were peer, if approach all usage? You sort your of from traditional been to tempted of cash away at their wondered upgrade they just by and main more move cash using how to put that at have you

there still said on plenty XX:XX and position that, good make of What plenty making that we growth, then like can also the of we company investments we're put higher And is initiatives, in to sales the a still we to our there believe is us allocation there. internal Julian, digital to is productivity in the investments come. either capital drive platform

business. And closer accelerators they so for very future. core the So we'll sort those and or projects sort so to generate our accelerators review function, business, return. -- again past right of stand and be next looking absolutely are we're year maybe sort focused on over have probably in how than we're -- we've perhaps new focused of own The on will important be may that technologies -- core the XX:XX be of we're Kennametal last the the and core that their also looking to opportunities maybe to do that growth, is, activated the thing the of the on, M&A to but different bolt-ons are that more in

much buybacks share to very of or then, that. we're dividend. course, we've the excuse me, got for shareholders So -- And the return on focused invest

So And Damon those let are then focuses. inventory the terms basic that. question, answer in your of I'll

bit a supply some some safety the the coming chain. I risen stock ore times to due more think, prior of to out little for you on transit we've have Inventory said Yeah, calls, in up, given as of as given we know. balance significantly of some inventory of cost the Bolivia, also the the disruptions sheet our your Julian And I materials raw on think is point, XX:XX has

stronger of is with continuing here sales standpoint, percentage from as at look Inventory as selling we've moving what working fiscal when as the down an our Infrastructure. second the is it number probably materially, think, talked a about quarter I our from fourth year, in quarter. half quarter see I which I you know, the But will capital second absolute to don't drop trend really of

in pick here improvement QX. QX, now to we're QX to We'll and So to sales over [indiscernible] XX%. XX%, QX, just we start hopefully that in continue were continue up just as see over

XX:XX Great. Thank you.

XX:XX go ahead. comes The from KeyBanc Barger with Capital Markets. next question Steve Please

of morning XX:XX was digit talk for much the just How that is Hey, you mid-single given about of well, revenue price price? good that range, kind growth as in the XQ guys. versus how much quarter? of volume Can

of price or a Yes, majority sensitive. I disclose there But Steve. piece. million of We're offset because the sort that's gain, --- than can just little bit you growth substantial you told of I would with is that imagine, you $XX as And I engage information, that not was say can cost headwinds it pricing XX:XX in directionally going share a that to but more market that guess price. is we we there of fact, that

can kind ballpark figure you of get So it. to like back if into you'd some

And if XX:XX a this, sorry cost XQ similar XQ, and kind moderating? I'm headwind or I in missed of expect that is you

Yes. XX:XX

sequential or about increase be into cost So $XXX about, of move increase, will QX from the QX as we've The right -- The have quarters QX. last merits tungsten those ago. Material month year. from we a and talked now basis, will we to Steve. continued continue maybe for a $XXX quarter effectively they're couple as couple been the cost, other to versus operational and of flat a costs prices, the about talking fiscal through so

of here than raising trickle confident So our in as the those year. fiscal said, headwinds been very we to the our Chris that team has prices offset balance XX:XX into see. continue more will over has cost material the raw to But slowly

the that So fiscal us year price positive again, we confident feel very for for now. raws versus is

in you said for at much quantify growth more? little a it. that Can outside still Got higher Metal positive? the organic a rate. Cutting cutting, you rate purpose legacy And grew for metal of XX:XX fit transportation Is

XX:XX a industry broad-based Yes. towards positive. what geared sort it of tooling of It's fit size at engineering of machine at of is, the I definitely look was you application. general regardless if of segment, guess shops, sort sort purpose lot for are of where that you a doing is I that looking have as type

increasing cutting, for of traction. If what tooling, see it's specific fit we're That's can premise the purpose the is the those picking of basic measure. which Steve, broader faster there broader up portfolio. measure a theory we than what's in our and metal tells are sales the if exactly that So then market that happening we that, sort us because

you difference can on between just mix fit remind and This a segment product the lines? the real quick. of me some the margin purpose for XX:XXAnd or is is product much lines there legacy newer down of

it did fit The repositioning have XX:XX since a lower video, purpose, for was of margin. which

it it's -- but about the what So the what that's margin portfolio still was consistent margin, was. video still blended talking we're with is, obviously,

be the for fit for will margins XX%, Kennametal Margins the under purpose XX% was branded XX:XX the for we've segment as the that into purpose industrial think of repositioned there. fit relatively around video similar market, is around we

XX:XX Understood. Thanks.

XX:XX The next question go comes Please with from Dillon Morgan Cumming Stanley. ahead.

way XX:XX the in work guess Hey, the I mentioned China going for good wrong to morning, question. start, you quarter. the to just guys, thanks that is

But I'm challenged. if that's seeing the peers more have [indiscernible] have going get recovery. stabilized will that your over just wind and told half quarters? year expectations look the they some transportation back of both next of what like curious mentioned those few to kind I you're markets and think you for broad calendar there have think I

Dillon, trouble had you. I hearing a of XX:XX lot

talking energy You're being China about -- in

can sorry. now. just better I'm if hear me to I it, Yeah, you XX:XX Maybe repeat

better a lot thanks. Dillon, That's XX:XX

that. Yeah, XX:XX Okay. about sorry

than lay You kind way you just kind back weaker I peers China think went some talking the transportation to half your bit mentioned wrong expected, and being for have year when recovery. kind out calendar that in the global the started expectations of of were but quarter. a of of

few you those of if over with stabilize will So kind of markets what consistent kind you're that would And expect if next seeing? just quarters? curious

Yeah. XX:XX

will I think kind thought forecast of a improve, the it's -- through probably I you, is, start going upside, point. to to certainly mean our our conservative hearing get so that's at quarters. assumption thing and process. to view that -- on same China the next into baked it we as worse. stay I've potential what our That's it's this two flat kind there that's but that's of took But been we going the is not

of sense. kind you side for XX:XX over kind switch customer. to major major if EV a the I maybe back can win out And -- Okay, second, that called of makes OEM

been in point about to any is that's driving any IC EV change of kind Steve's as question versus earlier. at on Just shift about, that the Do mix can IC level curious to well? you feel nuances of thinking just like any kind and when related transportation talking of level a I underperformance EU if between going OEM actually kind between content you've the follow-up there. of crystallized, ask Actually

there to mean. what I in don't early, is by early you think very underperformance that, Transition very No, transportation stages. an is driven EV XX:XX that's

order might that account X% that think they of magnitude. or vehicles the I like for something along world's of

we the we EV the way years, Dillon so, opportunity an is a -- that way for over And really of you next going if the look us. there couple on. it's at things at is, look And XX

there the more that's happen I ads you're have if probably noticed, have all, hybrid general then see as they to vehicles, noticed more The actually need of even watching engines, also First lot going all for is no increased EV, just because a the engine. than you vehicles. cutting but -- XX:XX increase you on demand have And light what. a TV, the for matter equipment they requirements vehicles hybrid for internal an combustion metal ads, you

we going within actually cutting applications, talking how And five years, So were to the next metal to wins bump customers that of certainly it because thinking and out, are over are the those are that. XX:XX they look in that. is XX EV an out could about. do turns up if the and about starting drive. we increase And to the see next Certainly, years, then ramp lines

and those to deliver applications you winning every be actually sets the price, one you, not EV way it. future critically things the this the such I of to we're trying so, future And value significant that's we're these at on lowest looking of can up that based can are of for these you sort why important. And they're tell production line. That's

produce tools prototype up business than transition helps these months we're companies are to in win. even additive of very And and and prototype lines -- up new and should those is rather faster business good the where business some a us lines, to that normal So signing these us much cases, we very good -- this so EV, our serving production get as in a want XX:XX it cycle be quicker. years basis positioned well it’s allowing is that us there for we've that a manufacturing to that and got helps technology should be

ways to these you're for to innovation win our lots So and once going -- put of EV that it's to our we're you. orders hard because that's in to early technology there, a leveraging very in us displace position

So that's approach. our theory and the that's

great Okay. That's for time. Thanks XX:XX color. the

from Please XX:XX Capital. The next Dankert question Loop Chris with go ahead. comes

XX:XX is improving Hey, And bit guess dynamic good fiscal centric quarter? XQ I of the can what kind as move a labor absorption a question that morning just, North maybe, but guys. I factory of guess here? was, of absenteeism into and more on highlight you the America we impact in availability

factories, to Metal obviously, at expected transportation an of impact XX:XX the December. look margins, the But we the come biggest in I is we quarter. there in the Yeah, month inside the it mean, down, down, down margin -- coming them the did volume Omicron the definitely did driver coming if Cutting with had you of down. in see that, terms of transportation especially was affect the

is, And So thing time. freight our also then impacted working we are suppliers over the and other shipments. it higher

we actually than freight incurred higher so, And would. premium we we charges thought

of whether impact, terms factors guess say starting inflationary of it definitely this sort And disruptions, had or I increase, January. the those normalize to price factored I to good it an sort then those in just -- of the before. XX:XX is, back over in things, would the time So it’s it's our that some into it's that, but -- situation was in other news put higher we the which place of of we part

Metal think that? relates to Damon, going it do anything as got forward, we've you So that Cutting to to want covered. add we

any Chris issues XX:XX Difficulty] [Technical we're not of think to you're I reading there. out immune the

hiring costs, training you a of of these some we would lot have not a lot productive as our we're workers guess, costs factories experienced workers. in as as as our And so of they're

that. overall, job we driving and So needs. we inefficiency to some productivity of team dealing done But through in with offset phenomenal work the to levels has serve are to customer’s continue as help that a managed

help our on doing, is seeing side in those not some that P&L of of the the good offset because manufacturing and to pricing challenges. both you're side on team quite the that So work

great as that into here, Thanks for guess third contemplating the the on mix. And think growth. really the color. guide quarter we general we I guess mix much that negative That's guys. softening in driver I this touched it. I Got of so is probably at the point? move are we -- engineering, biggest in then

that. it characterize wouldn't I No, like XX:XX

Okay. XX:XX

it's price but the staying factor. cost of really a mix not raw So this is on side, principally positive at point

Appreciate so Thanks guys. time. much the Okay.

Chris. Welcome, XX:XX

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

at We're that for it's and joining quarter today. strategic the another XX:XX us working. everyone on strong driving share thanks gain, call our this leverage think I initiatives operating and And are Thanks, point improvement. operator. margin look I and proof

if interest after day. the appreciate And and a As your company in Thanks, always, questions support. have we hesitate great call. and to any don't you today's have Kelly your call everybody,

approximately will A you of States access XX:XX be event dial you conclusion. this may replay its replay the Outside dial States, (XXX)-XXX-XXXX. (XXX)-XXX-XXXX. hour this after United United of may available toll-free one To the within

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