CIRCOR International, Inc.

Greetings, and welcome to the CIRCOR International First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I will now turn the conference over to Mr. Scott Solomon, Senior Vice President of the company's investor relations firm, Sharon Merrill Associates. Thank you, sir. You may begin.

Thank you, and good morning, everyone. Before we begin, let me remind you that our earnings release and presentation are available on SERCOR's website at investors.sercor.com. If you'd like to receive copies of these materials, please email CIR at investorrelations.com, and our IR team will provide them for you. Turning to slide two, today's discussion will contain forward-looking statements as they are defined under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements represent the company's views only as of today, May 11, 2023. These expectations are subject to known and unknown risks, uncertainties, and other factors, and actual results could differ materially from those anticipated or implied by today's remarks. While SIRCOR may choose to update these forward-looking statements at a later date, the company specifically disclaims any duty to do so. You can find a full discussion of these factors in SIRCOR's Form 10-K, 10-Qs, and other filings also located on our website. As referenced on Slide 3, on today's call, management will refer to GAAP and non-GAAP financial measures. The reconciliation of the non-GAAP measures to the comparable GAAP measures are available in our earnings press release. please turn to slide four. Joining me on today's call are Tony Najjar, SIRCOR's President and Chief Executive Officer, and A.J. Sharma, Chief Financial Officer and Senior Vice President of Business Development. Tony will begin with a strategic overview and the highlights of our first quarter 2023 results. A.J. will review the financials and discuss our guidance for the second quarter and full year 2023. Tony will provide our market outlook, and then management will be happy to take your questions. Now, please turn to slide five as I hand the call over to Tony.

Thank you, Scott. Good morning, everyone, and thank you for joining us to discuss our first quarter 2023 financial results. Before we review our results, I want to thank our teams across the globe for their continued focus on execution and for delivering another solid quarter despite the ongoing macroeconomic challenges. Since our year-end earnings call, I have spent most of my time with our teams and customers in Europe and North America, including having the opportunity to participate in a supplier conference with one of our top U.S. defense customers to discuss the expected ramp-up of a new key defense program that we are supporting. Recently, I also had the opportunity to visit our manufacturing site in Tangier, Morocco, There, our dedicated team of more than 150 members continues to optimize lean manufacturing processes to support the growth and demand for our hydraulic and electromechanical products from our commercial aerospace customers. Our team in Morocco, supported by our A&D team from Corona, California, has also recently established advanced manufacturing capabilities for Brussels DC Motors. This added capability is geared to supporting the expected growth from new programs and applications we recently captured. I continue to be delighted by the level of customer intimacy and innovation that our teams are driving and by the strength of the SOCOR family of brands throughout the industries we serve. Our team performed exceptionally well in the first quarter, delivering excellent results supported by both segments. We delivered 13% organic orders growth, 9% revenue growth, or 13% on an organic basis, as well as 840 basis points of margin expansion. The margin expansion was supported by our value pricing initiative with the benefit from pricing more than offsetting the impact of inflation. Turning to slide six, our Q1 performance underscores our team's continued focus and success in executing on our strategic priorities. These include, first, margin expansion, which includes value pricing, simplification, best-cost country sourcing and manufacturing, and factory modernization. Second, organic growth through new product development and leverage of our strong aftermarket position. And third, reducing our leverage, which we accomplished in Q1 through solid adjusted EBITDA growth. AJ will provide more details on our improved leverage and outlook in his prepared remarks. Turning to our first quarter highlights on slide seven, organic orders increased 13% versus prior year, driven by growth in both segments. Orders in A&D were up 12% organically. The strength in A&D was driven by the continued recovery of the commercial aerospace market, strength in our naval defense programs, and value pricing in both the foremarket and aftermarket. Industrial orders were up 14% organically, supported by strength in our aftermarket pricing and downstream oil and gas, primarily in the aftermarket. Pricing was strong in both segments, which is indicative of the power of our brands and our team's focus on maximizing value from the products and services we provide. Backlog at the end of Q1 was up 22% from the same period last year to a record $584 million, positioning us well for the remainder of the year. On the top line, revenues increased 9% to $203 million, supported by our strong orders and backlog and easing of supply chain pressures. Our 173% increase in adjusted operating income was also supported by margin expansion across both segments, with industrial delivering another quarter of step change performance compared to prior year. In addition to value pricing, the margin expansion was driven by the cost controls our teams continue to execute in the businesses and at corporate. AJ will provide additional color on the margin drivers in the quarter during his prepared remarks. The demand environment for our products continues to be healthy as evidenced by sustained order strength and our growing backlog. We are positive about our business as we move through the second quarter of 2023 and look ahead for the rest of the year. Moving to slide A, each quarter I like to highlight specific growth areas that our teams are driving. Today I'll discuss one growth area from each of our segments that showcase the focus on growth that our teams are driving across the company. The first growth area we are highlighting is from our industrial control valve business in Germany. Our team was able to capture control valve applications with two different OEMs for the lithium ion battery manufacturing process. Lithium ion battery production requires precise temperature and humidity control to avoid moisture contamination. Our control valves are used in the battery electrode manufacturing equipment to support overall process efficiency. The lithium ion battery market is expected to grow at a CAGR of over 18% between 2023 and 2032. This growth is mainly driven by renewable energy storage infrastructure and e-mobility, we expect to continue to leverage our control valve and pump technology to support our industrial growth strategy from this fast-growing market. The second growth area we're highlighting is a recent product launch our A&D team in Corona, California, completed for the new Airbus A321XLR. The A321XLR is a single aircraft with a range of 4,700 nautical miles and 30% lower fuel burn per seat than previous generation aircraft. CIRCOR's hydraulic rate fuse is part of the aircraft braking system and is intended to protect the hydraulic circuit in the event of tire failure. We leverage our core technology and hydraulic valve design and high pressure control and sealing to capture this critical application with Airbus. This new product supports our A&D growth strategy with this important family of aircraft. Before I turn the call over to AJ, I would like to provide you with a quick update on our strategic review process. As we mentioned in mid-March and reiterated in this morning's earnings release, Our board, supported by our external advisors and the management team, continues to progress with the review. Dialogue is underway with a number of parties that have expressed interest in acquiring all or parts of the company. Now, let me turn the call over to AJ to cover the financial results in more detail.