The Timken Company (TKR) 3 May 232023 Q1 Earnings call transcript

Good morning. My name is Emily, and I'll be your conference operator today. At this time, I would like to welcome everyone to Timken's First Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

may conference. you begin Frohnapple, your Mr.

appreciate Thanks, XXXX Neil earnings welcome, everyone, Company. Frohnapple, today. first quarter to our We Timken conference The of Relations Emily, joining Investor us and Director for you call. This is

this our the materials out part presentation I want the of reference quarterly as Company's website today's Before that remarks to have of we results. we morning, begin will review posted on point that we

the through You webcast earnings can on this download call material the also link. feature access

With are Rich Timken Officer. President Kyle; Company's and Financial me Chief The today and Phil CEO, Fracassa, our

We up will comments the from morning open your and for both questions. Rich have opening call we Phil before this

and a Q&A, to ask During I one to limit chance that at would your a allow please time one everyone the you follow-up participate. question questions to

call, future our During related hear operations. financial results, may today's statements and business forward-looking to you plans

from a detail which or may with Our projected website. implied are those the results press SEC, today's in describe to due our we the and which release differ reports actual timken.com on in filed factors, of in materially available variety greater

is release We its GAAP press the use, any information of have portion financial materials. transmission Company, any and without The by and of presentation call. consent, reconciliations Today's the in included we prohibit Timken equivalent between call and copyrighted written non-GAAP expressed recording or

and Timken would I will Rich. Company, The that, like turn With I in the for to you over interest now thank to call your

for from year XX% performance. consecutive strong growth. achieved expanding is Organic fourth per our our eighth the it our a quarter, the and in quarter puts an record quarter acceleration operating slight in first our up organic of margins. share of quarter. and rate morning, This the Good which XX%, record momentum call. for and is was of quarter revenue track while Timken double-digit on revenue Neil. thank delivered maintained and earnings joining Thanks, you We us excellent another

demand renewable from remained with broad-based, of the total, offsetting China drivers and growth included acquisitions the in and divestitures organic XX%, energy sales up In of strength impact benefit in growth than strong more over was India. the While currency. strong revenue price realization, and

up which of margins manufacturing from the by more was points offset were benefits inflation, XX% mix, improved and Margin XXX of last than basis lower EBITDA currency driven year. price, costs, logistics efficiencies headwinds SG&A. the volume, and of improvement

from cost an over supply demonstrated have peak operating and While we've high we as up levels the with as we of either challenges efficiently macroeconomic some last a low a more last a wide environment advance can inflationary operate company in and through variety chain environment year. over declined or years, in remain conditions. we costs have several But effectively are and eased, the inflationary

was of for share from XX% year a per $X.XX and Timken. Earnings last was up new record

the growth $XX share capital management. working the working a chain and of level as supply both of of The result and execution. improved as improved of well both Free in greater record primarily as to addition million acquisitions EBITDA improvements result contributed year, quarter In capital last benefit the our and a buyback to flow was are than earnings. better cash margin expansion, stabilizing

South quarter, and and and year. completed were facility evident expanding manufacturing in announced previously capabilities. the the We in through ramp Bearings the actions invest year of end The in and our of Industrial Carolina. Engineered to Motion continue will benefits these manufacturing announced closure We we the the closure quarter of of improving our in facility up Indianapolis footprint an first

this to and to support renewable energy sector. to our will in up investments continuing to continues results Our this Mexico online each growth are facility and ramp quarter year, come positively contribute our continued bearings

in paid our Roller of on and outstanding quarter, acquisition under Additionally, the shares. dividend, XXXrd X% we purchased the closed just American consecutive Bearing quarterly of the

recognized be corporate of by Best innovative one Timken Companies to outstanding Large the Fortune, Companies Most one continue Employers Most Innovative America's also Forbes quarter, of for named citizenship culture. our We and was and one Ethical In products the by Ethisphere. America's World's and by of

Timken Our the and products back to team committed responsibility and across global in advancing our our we industries our social serve. corporate as to and communities sustainability operations is give programming we drive

and the industrial company And diversified Motion, completed a previously-communicated the advancement finally, we Bearings Timken's reflecting Industrial to of global resegmentation Engineered leader. as

the two far market the mix X Slide mix company XXXX the segments how in over evolved down the each highlights has last market breaks for the the of and deck IR automation, quarter its with for renewable the largest track markets XXXX excellent to was another It two excellent end being an energy year. decade and and be is segments. distribution on industrial

outlook. the to Turning

earnings We margin, revenue, are for increasing our share full-year outlook per cash for flow. the free and

midpoint the demand, For guide. contributing. most acquisition revenue, the Market Nadella outlook we've our X% and price of to of are from all increased outgrowth, X.X% recent the at revenue

While moderating, growth. growth quarter's evidenced markets the organic is across first by and as demand strong, are XX% backlog

in end see to is weakness for flat strong. our you areas full-year. X, positive to total Slide we As the on across There significant are of markets are forecasting all portfolio and no be demand

reduction the our supply We course inventory chain outlook from through continued channel of into the have year. normalization factored

we into outlook concerns macroeconomic visibility half the the exist. that therefore, are, second have due relatively the of limited for and to year still a we maintaining half Additionally, cautious second

revenue quarters. we flattish second the guide than to on the If to position be proves in the will sequentials slightly then implies revenue The greater normal midpoint excellent of the too and capitalize for for situation. and seasonal low, declines expectation quarter organic the be third fourth

full-year The much first we move price we price due also our do for for not quarter the of primarily the expectation and the sequential modestly increased expect have price the XXXX. actuals, We of inflation. improvement is in further to persistence through majority as

show continue to results. and market outgrowth Our diversification efforts

Rail. and the handling. on in in now also Nadella full-year the positions Marine just is Automation Heavy such Renewables, addition medical in We automation, to Industries closed year six revenue markets, year The acquisition and Timken of XX% strong with that is material early Timken. outlook. a furthers expect in Nadella new the traditional We and revenue included April, and outlook in be diversification for out the fifth a the under of for high market our mark and last up would to midpoint as

from are of at forecasting mix, the than the five and a are Price for SG&A margins mark now offsetting levels. contributing midpoint operational with will share Earnings more XX% year setting headwinds would again, and be all of and of years XX.X%. from We $X.XX margin and the full-year improvement six volume performance per improved inflation, around last last new currency. up

buyback growth In addition is contribution to to from also the margin, contributing results. both the to M&A capital and allocation in

Nadella are half. in in finally, position moderating for And create XXXX. year the After through free year continue the accounting midpoint forecast allocation value disciplined below the cash the we to puts CapEx, from through remainder capital of an working to our flow of into conversion growth and which excellent this range, around to expecting end second us XXX% leverage we management and capital and improved of

be was another strong anticipate a start we In summary, to quarter the will Timken. excellent first year for what

the at our as and to to macroeconomic demonstrate company ability level We conditions improved leader. continue our strength of of diversified continue execute the portfolio as advance we industrial high wide through a to a variety a

to it turn and Phil now results more go on the I'll to the into over outlook. detail

Rich, morning, Thanks, and Okay. good everyone.

a performance with I'm For going record of record summary up followed on review, last and the year on see presentation financial to performance XX results the the of quarter, in this Slide once its start first Timken can the materials. you slide. again

revenue delivered all-time for that XX%, an of $X.XX Note per last up cost adjusted XX posted company. our And amortization adjusted We basis on achieved from share in all-time excludes capital. an year, the over invested past quarter, from and we almost EPS the of now acquisition We record well EBITDA XX% finally, expense. margin XX% earnings over of return months, and billion XXX our adjusted above the of points adjusted year an delivered capital we $X.XX. last record up of

Turning to Slide XX.

Let's Engineered Industrial in our the strong from benefit driven and sales XX% in platforms last closer volume look and were by growth gains up Motion take nearly during segments. to Organic quarter. the growth strong sales at and most pricing quarter first performance. both continued a sectors both Bearings from Organically, year, across

a Looking at contributed of divestitures, the the impact as headwind lock, percentage X to was of the the rest growth net GGB foreign revenue revenue expected. to translation acquisitions, currency of of topline, while points including

Pacific up way. On the regions which excludes region, see last can year, currency Most Asia right-hand acquisition you with slide, organic in net growth side the the quarter versus impact. both by leading were and this of

with Rail with North we XX% Rail. region, led segments up were across me and were briefly driven the and touch the the Industrial Motion Distribution sectors Bearings regions. broad-based largest region, sector up Pacific, We America, quarter, posting strongest on Energy, by Distribution and growth by were Most the In last gains. versus growth our also year. solid X%, few a posting up Asia Let Engineered in in both Renewable

driven And in growth automatic EMEA, industrial we to in platforms. by With in strongest Industrial by gain Motion lubrication sector, and with the distribution the leading the the systems respect posted double-digit segment motion our performance linear were way up X%, quarter.

XX% XX% of the in last sales to sales XX. year. of million Slide million first EBITDA compared $XXX Adjusted $XXX to or Turning was or quarter

Looking sizable SG&A offset positives performance, EBITDA of we higher and from more dollars, logistics at and material the headwind unfavorable costs. in currency. volume lower and benefited from a the impact These higher price/mix, change adjusted costs favorable other manufacturing than

and is of the margins, With positive XX%. Overall, by XX%, coming and price/cost on higher margin currency acquisitions, that we in solid driven delivered incremental performance excluding organic an sales. to incremental under our closer just execution

comment drivers pricing to saw meaningfully quarter. and price/mix, higher the pricing the to Bearings again little strong a Industrial compared step on fourth both Motion Mix also was key driven industrial year, a and me growth segments further With both profitability positive, few in like in sectors from quarter. Engineered last of respect by in was up Let attractive the distribution.

change logistics. year-over-year logistics was sequentially and positive material The note slightly the offset more costs. in logistics also I'd that net from down were and fourth than and quarter costs costs material higher quarter. as the to lower transportation a Moving material

costs production quarter like and input as last inventory as continued the of line, impacted in as energy of well first in were sizable a lower amount On manufacturing volume we the labor year. we built by negatively other inflation

the side, delivered the across execution we solid On positive operational enterprise.

sales increased and were line, we other levels. as higher addition expected, up about, business the seeing in gains other talked SG&A on dynamics and and In to from by benefits the in finally, actions supply chain efficiency And other quarter costs our first to plants. expense support driven footprint improved Rich the activity the we compensation spending are

On special $X.XX basis. income Slide net or that goodwill of XX, $XXX resegmentation. a share per related net This posted can for million items of $X.XX charge expense quarter includes from the see first the we GAAP you primarily impairment to driven by a diluted on

last earned from for On new quarter. XX% per an year up adjusted we and a $X.XX basis, share, record any

You'll capital year we've higher as XX finally, our with completed versus levels in resulting share the our of last higher last in flat line note benefited was our reflecting from quarter primarily XX.X% of expense that lower allocation significant rate was in the adjusted expected, tax debt initiatives. driven expectations. And count by first past and Interest versus buybacks from year, a amount months. we the share

business our Engineered Now reflecting structure, to Bearings starting let's results, new move Slide with XX. on segment reporting our

growth Distribution, were across first growth by last the acquisitions the Bearing Heavy year. Engineered most topline, X divestitures in up sectors sales the Pricing and X% $XXX impact the quarter, Industries For while nearly Energy, percentage positive, and posting by points growth strongest XX%, to Rail translation nearly from gains. with reduced currency was XX.X% million, added quarter. of were of up Renewable net driven about sales of Organically, the

segment price/mix, or compared of lower year, a Bearings sales the margins costs by and up sales adjusted headwind Bearings reflect from $XXX currency. sizable EBITDA higher logistics slightly. higher margins of XX.X% million and last and Engineered sales in partially volumes or XX.X% million was favorable to the with of costs, $XXX manufacturing and offset quarter material first impact Engineered SG&A

of above organic impact Bearings Engineered XX%. the in and Excluding were currency incremental margins acquisitions,

Motion Industrial XX. Slide to turn let's Now on

around headwind in X%, up the For million, year. quarter, currency all as $XXX and of with of sales X.X% quarter the automatic were largest as sales up Industrial impact Organically, X% divestitures revenue pricing were a last from the first gain was systems posting was of was increased segment in positive. quarter, net translation. Motion The acquisitions platforms the lubrication foreign

XX.X% million in EBITDA adjusted A sales Motion costs. of was $XX offset execution, positive the XX% which year. manufacturing impact Industrial driven was benefit segment increase to Motion sizable than sales margins of or more Industrial compared and last operational quarter or improved and in of the by higher $XX of million the first SG&A price/cost

Turning was earnings driven to operating $XX mainly and to and shareholders through From improvement we quarter generated to capital last dividends $XX million of by $XX XX, cash we significant shares. first the Slide flow you flow see higher compared after working the year XXX,XXX of million quarter. can allocation performance. repurchase better capital standpoint, during that cash cash a the in CapEx, a free And million, of returned

the also January. the ARB of completed acquisition at We end

grow organically unchanged closed quarter our and with all the our With remain continuing outlook, of forward, through to strong the to the our business from Nadella X.Xx, April, in the debt while Looking at underway. cash adjusted and on range. at the early with and targeted position flow company well we net acquisition Rollon power shareholders. and moving increased we the ended EBITDA In balance within a great we earnings year-end is to well balance cash both sheet, integration to M&A, return sheet

turn summary a outlook, on XX. with Now let's Slide to the

XX% XXXX for total up we cash sales now versus highlighted, our lines raising are or the Starting to in be outlook X% at our we and flow. on X.X% outlook for both the the Rich outlook, top to as As as midpoint planning well are sales XXXX. for bottom free

at expect versus Organically, our revenue impact of well outlook. X% midpoint the as prior The in be X% Nadella was at the we X% slightly will a midpoint. guide. reflects Our organic guide increase the the acquisition up prior as growth now higher

all to market continue the still assumptions some uncertainty volume the there. our cautiousness that given prudent second out around Note reflect half,

to from now expect We full-year the net revenue translation spot prior nine for results. expect for the guide. based full-year, to of the be acquisitions topline includes roughly divestitures we our neutral This on rates. up around in Nadella of finally, contribute X.X% months X.X% currency to current And to

that versus per outlook points be raising XXXX EBITDA and line, On will around high guide up our for also about record in Engineered share XX.X%, and for expand outlook margins The the and both XXXX. Bearings our range $X.XX, the are growth bottom of which our midpoint XXXX XX earnings It from both of Motion the last prior to the the expect basis the now is we our midpoint implies to expect which would and earnings note margin represents segments now year. $X new mark we XX% adjusted adjusted full-year. a at company, Industrial that consolidated

build. the manufacturing execution, impact impact Our as sales favorable higher price/cost, favorable inventory also margin we a improved assumption that headwind line of operational impact offset reflects reflects from the and terms bottom the costs, sizable than organic well last currency as in less our of would year. and higher volumes volume more of SG&A off which lower Note assumption saw production margin

performance, generate flow, working expect year, impact offset Moving now to for around reported earnings million on cash be higher $XXX free of improved net XXXX $XXX over by income. capital conversion we the the spending. last This and above full-year or over higher would CapEx million reflecting our XXX% to partially

with around X% adjusted finally, debt at acquisition, and XX.X%. anticipate the rate to we CapEx continue we higher the $XX interest expense expect We which of our And reflects net tax to remain now full-year, Nadella for around million estimate of roughly sales. associated

year, the the are XXXX and our So we delivered the start company board. results at of across raising outlook to the record summarize,

and Timken ability dynamic team hard our Our through as higher advance to a confident global levels deliver industrial working is to leader, are economic performance we in environments. of

formal questions. our and the for concludes line open This now remarks, we'll Operator?

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

open. is line Your

Great. Thank you. Good morning, everybody.

Good morning.

sort you quarter. both But think sort sort that all the potentially surprised you as which conservative, of your given more of performance makes the the of given of was revenue there. your uncertainties margin actually a didn't guys forecast little I bit guidance first I sense out characterize raise of

want see first is – could quarter? be what incrementals also I would that what guess you margin relative more be in conservative? to as just performance think I the headwinds, the Phil, whether kind the saw So the directly, limit And characterized going forward of we would to

Yes. Steve. It's a question, great

we not affecting for benefit all-in And ago. quarter would we The about the our we currency. that's is situation. think talked I about guidance took seeing out, does mean mid-XXs up look if so the last there unusual the price a incrementals year. we would to generating would that strip at year. as We out what XX%, that's be call strip talked little that's But year in positive the thing we a would XX.X% margins actually repeating, do think it, I last That we're reflect the incrementals a in so outlook, it cost. improved have it at north year-on-year the margin – comps the large a midpoint, had the we're the imply incremental organic improved of I acquisitions, of think imply, for biggest bit We're currency execution. I which

I to amount we like we fair improve think there's in. a opportunities baked improvement to there, have continue of feel but do

potentially when pretty that – we've on be obviously, the the unusual us solid But strip as cost well. like the in to have have baked it good volume volumes year. got improvement we of feel that headwind especially ability current in, out a will will weigh if you do generate input currency Certainly, take and opportunity I to situation give some we'll And higher an – the are better, advantage that margins.

would to the add and still I as well seasonal Yes, we expect QX I points that margin basis of year, QX impact. was last just element difference, to seasonality XXX about think that

So second the first half certainly, than the margins expect to half. we higher be

at customers be has Is was mentioned Rich, than your And Any or Has Thanks. factors would ago? color changed? it destocking forecast some Understood. view more that months now or that that there then, – in some of your great. you three distributors something. that

Yes.

last the talk bit a I for normalization much and we again would the from on of quarter supply we supply did of as that up come destocking, term lot as fourth – of challenges a first was And quarter the I up We us headwind would think, indication we that out. a build build in quarter. maybe in over I chains I inefficiencies well, is the the of thought of think better the couple the destocking we're quarterly us chain usually were us think inventory – an we the first from example. And and didn't own was that call our that be modest about and the the seeing then years. think XX% chain than that, is in revenue inventory a I and much inventory. that chain would that inventory happening in had in and as last supply use

demand. is a lead destocking. down, times times reduction of us. and And normal distributor more much not that inventory amount So of out not are the say pretty particularly it's significant from coming fairly supply logistics lead back necessarily coming I seeing in chains would we're alone for seeing a We're normal.

guys. Great. Thank you,

Thanks, Steve.

Steve. Thanks,

Rob. comes go with ahead, from Research. Our Wertheimer next Melius Please question Robert

you, Thank morning, good everybody. and

morning. Good

risen, active? it's is diminishing would whether of is pipeline whether the going rates one – question thoughts just your my it. M&A. on buyers you if market my your sellers then or to Wonder as more on be the changing, whether general are characterize Just changing interest the otherwise within number and have So environment, overall first

I'd say M&A markets remain slow.

for some I been think slow they've time.

buyer-seller it's Cost process. that But And factor was year. the that, acquired you out was done. one That slow capital, being activity the I last we potentially as in look certainly of a mean so traditional four, gaps value seller well publicized over been well. at pretty the think slow then be down. it's of a four time, slow because said, uncertainty only can't it has deal doesn't it maybe and expectation during those those businesses, when there, four

pursuing of The slow. other businesses, were is which indication the three us think I an

but think slow, has do the remains doesn't can't that it I mean inbound get done. and been we So that

was last that say also do Engineered we Industrial the to I'd was that position done be do a the resegmentation, Bearings management the been quarters of our businesses acquired reorganization, position highly and That's well a is to intent as more, decade and which we've the is in what to that both over as improve Motion and behind with effective, I couple in are of think in. more. the

the management We're have we standpoint to and forward. pipeline, a we and from we'll have as to to both see financial overcome well think our a working look capital active. from as bandwidth slowness be managed perspective I the more we've again, as

a talk Thank couple is of? And the been? I Is move called your build? out I Perfect. Okay. you. Thank Is and you will dynamic as just may, strong. outlook so starts, about into any be then should it know better Or the we multiyear renewables? funding, I just quick aware we being stop on if wind flow you could as and other there. general, end does there's project how railcar et but ones. in there? market there And outlook Rail, just for of any that multiyear it cetera, And forth, has ebb IRA than look you.

positions on market couple the have down little years some few is Rail, – than for peak And other did build. and the the that other It's the markets. a didn't longer our say world. that's of that. little a for market our space us one answer a lead in railcar global But primarily it's a that in it's so around And we years, have time reminder yes. of later many also build would that's build railcar as relatively last we a a new OEM as I hit good strong markets of a been

think I through in So at space, least backlog. our with quarter, orders we fourth good look third into and quarter and the that the really

more and a the it energy, us, not to for for On that would do Asian tends European. say huge was and renewable market I us. – I believe be

largely are we're the going, mostly manufacturing. itself. so of of secondarily turbine for We be when in takes install regardless and tend the the in place turbine system supply Asia revenue Those is the generally our in chains Europe where to then drive and that's where our and

year we're in be more bullish think without the But on the we ability to mentioned that. comments and continue The win to market, ability participate, multiyear grow I that we on in more five-plus that. coming would additive for to a it. outlook bullish ability outlook, and and in be We that and profitably investments our the making of our very spot. have that in our certainly participate online, to even build very with good investments space, my that, U.S. again, globally in remain part taxes to the pretty infrastructure I

ahead. with comes Our Blair question from next Please Bryan Oppenheimer. go

Thank you. Good everyone. morning,

Good Bryan. morning,

net GGB, books should accretion now about think I on efforts and integration the earlier how ARB a across was can color more QX with for And the you stage. we year? little offer hoping in Spinea, Nadella closed,

Yes.

backwards in Let talk let I'll about Phil talk go integration. order. accretion about maybe I'll me piece, the the and

over our significantly of business parts with surprises. pretty some under month ownership, that There that are our So little overlap Nadella, no Rollon a a business.

fairly months. into there's and it cetera, et Rollon. integrating integration. From to day good profitability, with the are some we'll capture burning integration long-term, We to on moving in the some forward comes so But like parts there. No surprises with be business, sales that synergies no one things us in heavy be platform there the will those the coming forces, certainly,

Bearing, very a a of well Engineered a of upper, one overlap our but fixer Bearings business. we market and Roller American lot know more that with has that

product a and similar to See our we'll that I came in in and converting products, some a But business, markets, the that us infrastructure improvement we're it again, to of integrated really significant quarter-to-quarter, similar North achieve margin spaces. from see at expect heavy sequential in and take We've American into private improvement U.S. would force, in the business So integration that within levels of bearing operations. a there. process very will sales up but stand-alone more we time. potential that move that modest very the we us profitability as similar line profitability

just but it GGB, the of was now a most And bearing of couple ownership, that of to first approach end business. those Agreement in of from say there quarters I our into two more between focused April. is and the at integrated more where two quarters, EnPro a Services we're work expired carve-out would – and work a of the the and that and of business Transition the – integration, about looking a synergistic than at as opportunities kind of cross-selling

of within we the and the bearings pretty we've synergies standup in market both work, on So focused cost It's what the much the business. finished now forward good like the us for lot product and a more expected and the outgrowth line, synergies applications like going we're business. exactly

a business, which Spinea, stand-alone then step-out more us. much was And a product of for

growth – there's capital – a product in the position European the do So small globalization goods really it's looking leverage But also business. some great. The is really we're standpoint. and it's to American It's a sector. what was to organizations, and going our of well technology really The of from really sales more great. is Asian North accelerate

switch design the very, – the long-term design, And turn potential just on, and something of when flip so you I'll aspect. you're evolution about to winning bullish talk to not grow Neil financial next a So very next the the business there the it's that you about but by feel that. of

is Phil. this Bryan, Sure. Yes.

to attractive. $X.XX accretion, coming $X.XX XXXX as that expand margins we the it, to Rich On XX-ish call in would opportunity guide range EBITDA with in accretion the our said, the company kind very for average, near beyond. And great of XXXX and in what's expect Nadella, in be, percent. would

forward, which there. to All going increase regard helpful Rollon, accretion kind alongside color Okay. with profitable. of the opportunity to you're uniquely integrating And is

time? and integration structural quite continue achievable your over getting business margins would As are there prevent Rollon-type that Are efforts has to level? that you grown, limitations from that

probably case there's the would probably I enters would limitations halfway – our sits where to some Nadella somewhere would margins that between Rollon say get within and that we be today. where mix

Thank again. you fair. That’s

Thanks, Bryan.

Our ISI. Raso David David. with Evercore question ahead, go next from comes Please

this, quarter? you. but I missed did give the expectation Thank for second I apologize Hi. if sales you organic the

be sequentially flattish. So it'd

I'll mid-singles which imply year-on-year organic. Yes, it, would call year-over-year, David,

Okay.

So or the second second it's the if idea five the we quarter, for use six half. of basically

just it's year-over-year? the flat general You're assuming cadence. That's

That would obviously, organically. the in. conservatism be midpoint we've guide. low end the the end and the Correct, the growth Obviously, built be off that, of would of high

that Yes. Expand bit. a on little

down QX, better you would pretty normal guide, think seasonality X% to end up would from the of off quarter X%, to at that. the or for down the do another or QX, look I it X% X%. Our to X%. And call X% and high than QX then second We flat to first be, then close of be that. the or if And it, certainly

what a lower that and I We in market I did did in But when a that think year. timeframe then softening we to the be the we would fairly And do lower that. is we truck XXXX, heavy than and little sequentially, we in than saw in It some I think, market, in better that, down than that's you et destocking cetera. little a better than end. second half, did the which and low could go inventory softening XXXX better last probably than think normal-ish.

fence posts, I And be of kind end. lower the top think, end low would a a the normal-ish softening fairly of end the of are those two revenue the high the guide. end So on significant and the on

theoretical? have moment are to would that August the July, in that out patterns And a I I second means days think I you starting first is given suggest still order long-cycle business. at that. flat, [indiscernible]. see you week already know of being half by the some Or level But XX no a are bit slowdown? May, you appreciate of the idea that the it's

no. I that, would say To

on right quarter. We seeing with basis, first slowdown. the level that April, are not a line was in daily of

number that those market aerospace industries, books, rail If along the you the bullish longest be five marine, there, Slide those, the renewable – markets chart would biggest a visibility on. this and three don't the would on slide, times. order – look and most I markets the with to, the have X. at – The we energy, most heavy which long lead have slide

of moved mid-singles positive. from and – we all So those, to two up

the four in first So those the space of orders year. strong months were first quarter, in

orders You in, Automotive, move the have would out and markets. of the come on probably aftermarket, the OEM in weeks we those far be that have in side left, truck. XX orders most backlog, to the eight, little that heavy lot is the thing for the a Distribution, same the are Same bit in of of that and same we week. out. coming go but a thing, the

get pace you we is midpoint number if quoted they that that. just the the been of the middle there'd orders again, the And upside more have through I think to the stay that be guide. at to it's April, So

numbers If you higher end there. go the be of the optimistic out put just to than it'd more up the a little think I you guide,

when comment, that organic great. XX%, I you a that's That's or mean, sequential I XX% year-over-year year-over-year? April with quarter, assume, first And or said a in flat? clarification, line the sequential

in Sequentially softening. no line,

be in sequentially with flattish outlook basis. it's So line a on daily our to

further expecting we're not pricing follow-up. price after correctly, A or the quick pricing The further no heard quarter I year-over-year comment, hikes? first if any

Sequential. No, no.

years, where QX step pricing amount of fair quarter, that were So more we unlike got so our two I sequential just a then quarter first think up But QX, from pricing. tenth it's we our every putting fairly consecutive of in biggest to sequential we had typical. the last quarter the marked

the are comps harder year. much the the nominal been of get quarter We it's said, it a on. from will were then pricing to positive, last because course be the had positive. through them that of sequential rate probably raising be first not And phenomenon expecting It we but still going

down number come a So be up it comp the from modestly. year-over-year perspective, to very will would sequentially, just flat but

would What Yes. I say, David…

Year-over-year… right. carryover, Those

But positive comps. the moderate we will was move year-over-year will on QX. pricing just be all it in positive the be as year It positive difficult year, the just year-on-year through year. quarter through It should every

so for still… year get then, that? a it organic the to too sense of like the something And price X.X% is is it, Just of X%

price more of Yes, volume. it'd We're but a not more anymore, getting and be volume. a more definitely – of contribution price on from and contribution too specific of from it

expect positive still less well. than X%. So as volume to yes, do than be We more X%,

Appreciate Terrific. Thank you. it.

Dave. Thanks,

Steve KeyBanc Please next Markets. Steve. with Our from comes go Barger question ahead, Capital

process. focus Thanks. was the your M&A on With segments, previous

So with you that focus in verticals out be do this of the specific target? lean structure, in might other – the on more new will or portfolio? direction the one you targets specific Or terms building reporting

would certainly remain that focus would on I market say the end process. Well,

be some part Roller percent GGB but would Nadella So – certainly but is industries than more of markets, probably the it XX%. little American good and XX-plus industries process mobile, have they aerospace. more really Bearing almost the be exciting maybe a process positions in more markets, still

I be then so would us. Spinea – think also for And process and

continue mobile a of would focus automation, beverage haven't that the you being focus think Marine said, Industries certainly rail we've What and focus. about, then has the talked mix within been much a that of case. some and of And and remain something remains do us markets the truck automotive, comes that So for seen to a be will I with and on that that, us. off-highway. food is Process

lubrication be systems, services, chain, we Motion systems, lie forward. a And Steve, to platforms add, us continue on automatic we'll those talk beneath just think segment, grow then sectors cetera. the to linear Industrial look the conservative as Rich most motion, to you're et going the and that I And side, lot drive only would platforms would belt hear wanting which said. I to in scale about Yes. the move as attractive

drives area. motion in an Nadella the the linear was to robotic and in obviously, area, Spinea So opportunity scale

those to scale platforms – continuing sectors. attractive really the So most then while as targeting we move we're and forward

really So approach how change how resegmentation you'll M&A about market? the think doesn't you

Yes. Really, no.

Those okay. process-oriented businesses,

correct. Right,

expect one and leverage manufacturing with on you operating have to ability expansion how last higher mix, you forward respect Engineered year. And potential And price, going what to has than margins other? that more footprint? the based see Is incrementals the more does just broadly, margin better

we range, expansion to the I as through expansion look Industrial target Yes. opposed say our that would Bearings. at would long-range when basis over we of margin points look multiyears of Motion at margin coming targets of most of XXX the

and potential, to in Bearings, more Motion. Industrial but always the working see we expand that have not So don't we're margins in potential definitely we

so so On the of on mixing flip businesses potential side there time modest some some more get definitely see you us does to down. margins to take some to start, of But there up come yourself these that, it at time have the them relatively expansion.

I you better one. if could sales this guess, And ask the product more or or force to are require change quick it. X line? structure Does sell headwinds to benefits this any Got there to the organizationally? realign I new retrain Or

more do combination cetera. dedicated are But that's that the benefits, share up big there's one cases, specialty we've beneath management have But synergy big platform, got some like level, on side, we're businesses certainly down a big we GGB Motion that bearing sub business then set largely like and some as the forces some of a aerospace run globally. At possibilities business that. then global businesses other over and like digital And and group. there's areas et in one there, and Industrial it sales higher pockets being that, of our

I across think scale to to platforms. and better from bandwidth a much positioned it we're drive synergies the the management standpoint

force I change been already has say sales would happening. the

essentially In We have and of some range market, cases, that combination. relatively geography cases In those. small some market go end wide covering by some we products. continue are to some go salespeople a have combination that cover – customer. geographies, it's a to We we salespeople and of product, one

a an cross-selling ever-evolving opportunities definitely situation think it, on together. and from side that the it's we've good So put we're have at I we sales the of portfolio and lot

you. Thank Great.

Thanks, Steve.

Thanks Steve.

ahead. next comes question from Thein Citigroup. Our Please Tim go with

Good Thanks. morning.

Tim. Hi,

about We to talked earlier. through the we think go pricing. we Hey, year. the discussed on morning. how But So, as good curious just mix I'm through pricing

the great. in So rail, historically first if probably, does that distribution guy tailwind pricing Any I not is have? to that is good the markets to still contribution behave does offset was just pronounced? be like the a half second. if would on to assume second, enough tailwind from that kind it end first from the the don't But think the we up – trade-off, quarter, a of how a mix But obviously best standpoint. in here switch help kind is I a Or of would being you renewables

one. to did I'm take I make going let want comment. Phil that to one

fine It's just we the a process far renewable company. On not renewable mix perspective. energy, down it's segment, company about talked industries but from our off

company would not I negative that's perspective. So big say a from a

on I thinking mix, about do I think you're right. on But Tim. Yes, think it overall

the baked were the as again, middle moderate So of along you first of quarter, moderate, we've the for conservatism into you industrial at look in in market chart, that got would think distribution second was sort I if half. to and mix it. have the we with sort But see strong our year. quite It do

mean, in cetera. very distribution. for mix the in guide be was implied year, Our being would expect, strong some would year, the tend performance to still with mix strong what QX. cost one be moderation again, the biggest price et would margin some positive the of still I more would for attractive industrial track I of the markets, But mix.

Yes.

the question areas be of are on gets margins, I on going it as one back where to from Steve conservative standpoint. as we outlook our expecting the I good probably opening a the to mix first do quarter think from mix think is

Yes.

public distribution. that piece material off, of sound I overall and distributors, a your they're the so. obviously, from handful But Okay. small fall a industrial expecting commentary – of they're mean doesn't the like

Not all. No. at

– And Yes. sorry. then

manufacturing the for Phil. on you, piece, Just and maybe

to of what that see better through impacts that you it as still does enough come – you go is those based Just on had – – as you a does some the through, do that the got for coming that footprint year? the you've those get push? Do of, these and are headwind so that Or been you've kind – headwind manufacturing these that or some expect first effectively, we've quarter, the on telegraphing we in the realignment, today, worse inflationary absorption time.

of inflation, net-net, comps would say get better – the I the components, sort the think easier the consolidation of the side said, of obviously last actions well the the some chain of and execution operational taking as in through is which the be And that manufacturing you're for on delta other we the we as would we easier which got would will continued are as way, inventory cash the there year, on some going as flow they implies the ramping, plant our headwinds of offset of costs. slightly get inflation got free move significant Mexico year. thinking components about actually sort that capitalized plants move the guide kind down I year. an with way that then the little improve the so hit creates business Offsetting a we're a the year, delta continue as to the big year. right working inventories The terms through. Obviously, inventory bit that. get I in the comps with of to to as last through be is we But Yes. just of a build its actually terms

best So close manufacturing the mix, being about the maybe earlier is the on probably comment the first to to see Rich's worst that I we'll line. first think quarter for quarter

ten that's increasing definitely it's but tight were environment remain supply add own sequentially. And really costs And close where been cost internal chain the But nine, a off decline. that certainly Logistics then it's pre-pandemic. issue. quarters, we've don't for leveling challenges. so see definitely other going are off also off. are costs from comp they the to to And some this that leveled sequential markets labor leveled back, seen those to our I'd back things and costs thing efficiencies that in as we've point, Again,

embedded nice some expect would that. I from improvement year-over-year, in So those manufacturing numbers

say by say productivity supply pressures. I chain in issues. I there inflationary in the The of nice from some changes more the it highlighted were changes of footprint, also be the improvements I'd the quarter, things some first comments. and we you in was have But would Although overwhelmed my now that wouldn't step but mentioned step

Great.

Very good.

Okay. Thanks a lot.

Thanks Tim.

Please with go Our next question comes America. from of Feniger Bank ahead. Michael

for Hey in. me guys. Thanks squeezing

Just on half? production. guidance. recognize your maybe a trajectory is I Do to the going to on QX? margin QX, accelerate inventories the you slowing more take that down in the in that end and are year going second kind talking basis. about building slightly you of Interesting, said year you're the into production, The out

curious out that Just how year? kind of plays through the

Yes.

lot if inventory. year-over-year, the did year-over-year. in the at year quarter, First, pretty delta I absorption issue a in a when quarter big quarter, not in We would first say, there – in it's you cost the look in quarter first large look a was you built the first year, so of the first this last

second think and inventory down because And year-over-year some it flattish fully I the gets. again, when at got you And look our as that into we've in to little Phil's quarter half, but baked the financial as it numbers, was first probably of growth But the moderated. models. we'd quarter, then will be bad probably that second in the comments, bit inventory moderate expect a of some

understand year, Great. on year-ago? us you by were pre-pandemic? channel the do you like, the the distribution slightly And with concern of like help in And inventories to potentially channel be down distribution how inventories, do end the all feel the look will relative of just inventories that, versus representative that's where you to a

improving probably it. I where as so turns a would to say they're you the low, have sales the little I actually or we so of as in put they're turns, a percentage it, think visibility –

mean, happening that and big are we naturally only looking just not a now, phenomenon small change had is coming a so grew organically We're quarter happening last So total inventory But and and out. of inventory managing cadence of would we're really the that inefficiencies for managing in I are say think a the is good really again, I to waste the there. the things inventories, everybody But I now so when the we XX% inventory. at piece and distribution one quarters. on schedule time couple

Yes, importantly, because days, trying of in obviously, to second of moved as around get which our two our But last slightly through more were the guide, inventory, were half. comments sort with it volume we we're they they would have is of days, aligns right. is elevated back kind manage midpoint Mike, more do down as the where And our inventory efforts our we really. what year. with One

forward trying really days our healthy we anything to it's to more moving So with in environment get be else. about a versus where aligned need

Typically, would and a improve where last declined organic year turns our we're double-digit they in year. inventory delivering

opportunity, in of So we've do good got line as to a they were. turns – got our with we a many their just customers, where just back get

just of this kind seeing moved exposed, the one months recovery just renewable bit the for I But specific China year? Like wind little bit that's how sneak China. a know four Thanks. or verticals side we've to I'll Great. to is in curious more as it QX in through there. on China seems starting focus. – like last play to first you're the little a your of out obviously, you're

running cost there. best a they when of positive since year, – the and say, of shut real see along. you us standpoint, the period And and look look down a week revenue last early our – have The plants the clipping they're in some plants for from standpoint now at it's think a periods year running I now almost where two then first you there's in from you was XXXX. Well, four months our China both over are that

comps. backlog quarter growth the in was is little low mixed, very industrial markets And of think for full-year. And but there. other deck, – big some a the I We're looking bullish good the more the at organic. I mentioned the the got driver renewables, pretty double-digit have So on and a been then it through our XX% third of market part we've

in generally think that about pretty bullish XXXX. market I

today comes question with Please Goldman Sachs. Joe final Our from go Ritchie ahead.

Good thanks. Hey, morning guys.

real Just quickly…

Joe. Hey,

an potentially of some On within the the by Do there like resegmentation there's look some subtraction segments? opposite – of lot Is way like around questions M&A. hey, you guys. I'm addition for opportunity the the and divesting too? at businesses a curious two

XX not be would either the next – somewhere piece business, we divest I'm we we to $XX in so million looking divest. in it segment of anything could I nothing relatively $XX change, at certainly of that size be to portfolio. and to did We that we of similar XX a say the would I ADS, anything Drives million, size the portfolio of Aero looking have to but did would small a if revenue. between expect always the and months,

And then Cool. Okay. last me. for one

where across on like Just like there's going seems specifically? the strong positive guys. was Asia seems you pretty China, bit was of little really coverage disconnect of what was reopening it for it I'm it seems a it like some China quarter. slower this bit probably for folks, And kind curious, a a

So seeing in your kind strength in where are China? you of guys business

Definitely in space. renewable the

And but India years well. the be for in were some side, the bullish it not results just renewable was and would renewable was – energy. put the quite say energy we're I with we're for And the following would on the year, as by driven I reopening, up the China then several driven us, they strong but significantly So seeing going And for India same renewable by the numbers in market overall add XXXX, mixed are to seeing positive. thing. But that energy.

Joe, of rest rest and But and India XX% all we range. India those, of is up sort were China, great of And Asia, in that then split Asia was it, in What of all Yes. double-digit about solidly the sort the three were of the we region. up the region. China,

landscape. broad-based. the China clearly momentum So but as driver, industrial in big it was there renewables the is was building And across said, Rich

guys. Thanks, Great. Okay.

Thanks, Joe.

comments There Sir, have this no at any time. do final remarks? remaining or questions you are

Yes. everyone, for us you, Thanks, and joining thank Emily, today.

questions If contact our any please concludes Thank after this have me. further today's you, call. and you call,

today's participating for in quarter call. conference first you Thank earnings release Timken's

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