Park-Ohio Holdings Corp.

Good morning, and welcome to the Park, Ohio, first quarter 2025 results conference call. At this time, all participants are in listen-only mode. After the presentation, the company will conduct a question-and-answer session. Today's conference is also being recorded. If you have any objections, you may disconnect at this time. Before we get started, I want to remind everyone that certain statements made on today's call may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those rejected. A list of relevant risks and uncertainties may be found in the earnings press release, as well as in the company's 2024 10-K, which was filed on March 6, 2025, with the SEC. Additionally, the company may discuss adjusted EPS, adjusted operating income, and EBITDA as defined on a continuing operations or consolidated basis. These metrics are not measures of performance under generally accepted accounting principles. For reconciliation of EPS to adjusted EPS, operating income to adjusted operating income, and net income attributable to Park Ohio common shareholders to EBITDA, as defined, please refer to the company's recent earnings release. I will now turn the conference over to Mr. Matthew Crawford, Chairman, President, and CEO. Please proceed, Mr. Crawford.

Thank you, and good morning to everyone. While our first quarter results were a little behind our internal expectations, We're happy with how we performed given the volatility we saw in some of our end markets. Specifically, I'd like to call out three main themes. First, January started off surprisingly slowly. A number of customers confirmed a similar start to the year. But fortunately, things rebounded quickly, and February and March improved steadily and became more consistent with our expectations. Secondly, our engineer products group turned the corner. and we saw year-over-year improvement and strong quarter-end execution. As we mention often, Engineer Products Group historically has led FARC Ohio in both margin profile and backlog visibility. While we continue to see solid order entry and backlog stability in this segment, we are now beginning to see improved profitability. We anticipate this will continue through 2025 and beyond. Lastly, we have discussed in every recent results conference call our effort to reshape our business by focusing our investment on our best products and services. This also required a culling of the herd a bit in terms of closing some non-strategic locations, discontinuing some customer relationships, and in some cases, the sale of assets. Fortunately, during this period, we also saw record growth in our remaining businesses and in particular, supply technologies. Financially, we believe this will improve our cash flows, reduce earnings volatility, and improve our overall margins through the business cycle. While our work is not complete, we saw evidence of these efforts in the first quarter as we navigated end market volatility and some unusual product mix. With increasing uncertainty in the global industrial markets, our products Our strategy has been timely and will lead to more stable and improved results. Turning to tariff uncertainty, there are several important points to make regarding our company. We have presence in more than 20 countries and, for the most part, focus on an in-region strategy for manufacturing, distribution, and the end customer. This does not mean that we will not see some tariff costs. It means that we are an experienced operator in the global industrial space and will seek to understand optimal supply chains. Also, the vast majority of what we sell are highly engineered products, and where changing the supply chain is difficult or too time-consuming, we will seek customer support for these costs. Second, we are predominantly a U.S.-based business with about two-thirds of our revenue coming from domestic customers. Where we do rely on Mexican or Canadian suppliers, Our imports are predominantly USMCA compliant. Lastly, we are well positioned in our US-based businesses to benefit from reshoring. We have seen multiple early examples of customer inquiries or new orders which relate to our customers seeking to secure their supply chains in the US. Given the highly engineered nature of these products, we anticipate little impact during 2025 but expect incremental business in 2026 and beyond. We also have seen an increase in investment in infrastructure, defense, and specifically key steel technologies, which will benefit our engineer product segment as the Trump administration drives reinvestment in these end markets. Given all this uncertainty, we have widened our 2025 earnings forecast to account for these questions and for the potential for lower sales as consumers and customers hit the pause button waiting for some clarity. Thank you to our entire Park Ohio team. We have a wonderful opportunity to demonstrate the strength of our team and our business model during these very interesting times. With that, I'll turn it over to Pat to cover the quarter results.

Thank you, Matt. Our first quarter results were mixed across our various businesses. On a positive note, we saw sales growth in several parts of our supply technology business, including our locations in Europe and Asia, and in the commercial aerospace end market, which helped offset demand weakness in certain end markets in North America. Also, our industrial equipment business and our engineered product segment performed well as sales grew 13% and operating margins increased 110 basis points during the quarter, resulting from strong new equipment and aftermarket demand in all regions. In our assembly component segment, lower unit volumes and lower pricing on certain fuel rail products and delayed new business launches impacted sales in the quarter. Sales in the quarter totaled $405 million compared to $418 million a year ago. Sales in both our supply technologies and assembly component segments improved throughout the quarter, and consolidated March sales exceeded prior year levels. Also, first quarter revenues in our engine and product segment grew 6% compared to last year, resulting from strong sales in our industrial equipment business. Our consolidated gross margin was 16.8% per quarter compared to 17.1% in the first quarter of last year. Consolidated operating income totaled $19 million compared to $24 million in the first quarter of last year. The decline of both gross margin and operating income margin during the quarter were a result of the lower sales levels in supply technologies and assembly component segments. SG&A expenses were approximately $48 million compared to $47 million a year ago, with the increase driven primarily by general inflation and an increase in personnel costs. Interest costs were lower compared to last year, in total $11 million during the quarter, compared to $11.9 million last year, driven by lower average borrowings outstanding in the quarter and lower interest rates compared to a year ago. Our effective income tax rate was approximately 20% in the quarter as foreign tax credits and research and development credits offset the impact of higher foreign tax rates. We now expect our full year effective tax rate to range between 20% and 23%. Gap earnings per share from continued operations for the quarter was $0.61 per diluted share, compared to 83 cents last year. On an adjusted basis, our earnings per share was 66 cents per share compared to 85 cents per share a year ago. The year-over-year decrease in gap in adjusted earnings per share was driven by lower sales in the quarter, primarily in assembly components, and the increase in diluted shares outstanding resulting from the sale of common shares in the third and fourth quarter of last year. Increase in shares outstanding impacted the current quarter's earnings per share, by approximately $0.05 per share. Our EBITDA as defined totaled $34 million in the quarter, and on a trailing 12-month basis, our EBITDA as defined was $148 million compared to $152 million for the full year 2024. During the quarter, cash flow from operations was a use of $10 million to fund working capital, primarily accounts receivable due to the increase in sales in the second half of the quarter. Capital spending in the first quarter totaled $9.5 million, which included investments in information technology and to support new business activities during the quarter. We expect our full-year CapEx to range between $30 and $35 million. Our liquidity at the end of the first quarter was $210 million, which consisted of approximately $55 million of cash on hand and $155 million of unused borrowing capacity under our various banking arrangements, including suppressed availability. Turning now to our segment results in supply technologies, net sales totaled $188 million during the quarter compared to $197 million in the first quarter of last year. During the quarter, demand was lower year over year in certain end markets in North America, including power sports, industrial equipment, and in our industrial supplies product lines, which more than offset increased demand from the heavy duty trucks, semiconductor equipment, consumer electronics, and electrical distribution markets. Sales in our fastener manufacturing business were down 9% year over year due to a sluggish start to the year, despite strong sales in the second half of the first quarter. Operating income in this segment totaled $17.8 million compared to $19.5 million a year ago, and operating margins were 9.5% compared to 9.9% a year ago. The lower profitability in the quarter was driven by the lower sales levels. In our assembly component segment, sales for the quarter totaled $97 million, as compared to sales of $107 million a year ago, with the decline due to lower unit volumes in our fuel rail product line, customer delays and new business launches affecting our fuel filler, and extruded rubber products businesses, and favorable pricing on legacy programs that ended in 2024. Segment operating income totaled $5.3 million compared to $8.6 million a year ago. Segment operating margins were impacted by the lower sales levels and were 5.5% compared to 8% last year. In our engineered product segment, demand continued to be strong across most product brands and geographies. First quarter sales were $121 million compared to $114 million a year ago. The increase in sales was driven by sales of new equipment, primarily in Europe, and strong aftermarket sales in North America. During the quarter, our total aftermarket revenue increased 5% and margins in this part of our business increased 130 basis points year over year. New equipment bookings totaled approximately $39 million in the quarter, compared to quarterly average bookings of $43 million in 2024. Backlux as of March 31st, over $136 million compared to $145 million last quarter. We expect strong bookings in the second quarter based on increased quoting activity, especially with producers of lightweight steel who are actively looking to expand production capacity. The increase in sales in our industrial equipment business was offset by lower sales in our forage products business, resulting from lower demand for rail forgings and forging-related equipment. During the quarter, our adjusted operating income in this segment improved to $4.6 million compared to $3.8 million a year ago. Despite the strong performance in our industrial equipment business, our profitability in this segment continued to be impacted by the soft demand for rail forgings and forging-related equipment. We continue to see improved profitability in this segment resulting from ongoing initiatives to improve production efficiencies in several locations and equipment uptime in our forging facilities. And finally, corporate expenses total $8 million during the quarter compared to $7.6 million a year ago driven by higher personnel costs. Turning now to our outlook for the year as indicated in our press release, we continue to assess the impact of tariffs on certain imported raw materials and other components and softening of end market demand in each of our businesses. We are working with our customers and our various supply chains and expect to mitigate the effect of the added cost caused by tariffs. Conversely, we believe many of our businesses are well positioned to benefit in the long term from the current environment due to higher production activity and localized sourcing back into the United States. We are currently estimating that our 2025 net sales will range from $1.6 billion to $1.7 billion, and adjusted earnings will be in the range of $3 to $3.50 per share, which takes into account the known risks caused by tariffs and softening in market demand. We continue to expect our free cash flow to improve year over year. Now I'll turn the call back over to Matt.