SPX FLOW, Inc.

Good day and welcome to the SPX Flow Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Scott Gaffner, Vice President of Investor Relations and Strategic Insights. Please go ahead.

Thanks, Betsy, and good morning, everyone. Thanks for joining us for discussion of our third quarter 2021 financial results. This morning we issued a news release detailing our financial performance for the three months ending October 2, 2021. The news release, along with a presentation to be used during today's webcast, can be accessed on our website at sbxflow.com. A replay will also be available on our website later today. Joining me on the call are Mark Michael, President and CEO, and Jamie Easley, Vice President and Chief Financial Officer. Following their prepared remarks, we'll open the call for questions. Before we begin, a brief reminder that elements of this presentation contain forward-looking statements that are based on our current view of our business and markets. Those elements are subject to change, and we ask that you view them in that light. Principal risk factors that may impact our performance are identified in our most recent SEC filings. In the appendix of today's presentation, we have provided reconciliations for all non-GAAP and adjusted measures presented. With that, I'll turn it over to Mark.

Thanks, Scott, for the introduction. Good morning, everyone, and thank you for joining us on the call. Third quarter performance improved as markets continued to recover and our strategic plans based on 80-20 principles accelerate. Organic orders were up 9% with continuing momentum in demand for our short cycle product categories. We also see a trend in better demand for our original equipment CapEx related businesses where pipeline activity is accelerating. Organic revenue was up 3% as we executed well in a challenging environment on higher shippable backlog to start the quarter and on short cycle book and turn orders. During the quarter, our operations team effectively managed supply chain disruption. We anticipate input material deliveries may be inconsistent in Q4 as supply chains recover and our teams actively manage in this changing environment. Operating margins reached a record 12.9% in the quarter and improved significantly by 160 basis points. The expansion in margins was the result of effectively leveraging structural cost reduction, positive price costs coming from a combination of our pricing and supply chain savings initiatives, and a higher quality of revenue. We continue to meaningfully increase our organic investments as part of our balanced capital allocation philosophy. CapEx is up 35% year-to-date with an emphasis on increased productivity to support current and future growth. And R&D spending year-to-date is up about 30% with disproportionate investment in our high-growth and high-margin product categories. So far in 2021, we have launched 11 new products in these key areas, which represent almost $35 million of future potential revenue. Our programmatic M&A process is leading to a robust pipeline of opportunities with more than 10 targets currently under review. We've identified M&A opportunities using a disciplined approach with an objective of high returns aligned to our strategic priorities. I'm also pleased that we've been able to return excess cash to our shareholders in the form of a dividend and share repurchases. Third quarter organic revenue was up 3% led by significant growth in North America in both the nutrition and health and precision solution segments. Our nutrition and health business continues to see broad-based geographic growth. Business in North America remains strong with revenue up over 20% in the quarter. Global growth was led by an increase in systems revenue and resilient equipment shipments. Precision solutions to achieve significant growth in North America driven by strong short cycle product demand and higher shipments of original equipment CapEx related products. Customer capex spend for long cycle precision solution product categories in EMEA and Asia Pacific were depressed exiting 2020 and slow to develop at the beginning of 2021. As a result, backlogs were down at the start of Q3 in these regions, and as expected, revenues were lower. Encouragingly, order demand for long cycle product lines in both regions is accelerating, leading to improving backlog that supports future revenue growth. As we've been highlighting throughout this year, the deployment of 8020 provides a framework to create focus on an outstanding customer experience and provides clarity on how and where we want to grow profitably. In the first nine months of 2021, we've made significant progress in shifting the mix of our revenues to our highest growth and margin product categories, evidenced by a 17% increase in our grow category product lines. Of note, our highest quality revenue streams represented in the grow category have increased to 40% of revenue from 36% at the start of the year, propelled by our organic initiatives and two completed acquisitions and mixers. The create category was up 16% of revenue and largely comprises our systems business with key accounts. This growth creates significant future aftermarket and service opportunities. As we continue to leverage 80-20 principles, we fully expect to generate a higher quality mix of orders to support both top line growth and margin expansion. Looking at orders, we continue to see recovery in demand and the benefits of our efforts to win with key customers. In the quarter, orders were mostly in line with expectations, supporting our outlook for continued improvement in the fourth quarter. The sequential decline was primarily related to normal seasonal trends and the impact of customer timing. In the precision solutions segment, we've seen steady sequential improvement in market trends over the course of this year. OEE project pipelines tied to customer CapEx remain active with accelerating development and opportunities converting to orders. The sequential decline in precision solutions orders was primarily due to seasonal trends consistent with prior years in EMEA and timing related to CapEx projects for mixers in North America. We believe longer cycle industrial related CapEx projects are still in a recovery stage and anticipate demand will continue to develop. Orders in our nutrition and health business have been resilient, resulting in a strong first half of the year. The sequential moderation in orders was primarily due to seasonal trends consistent with prior years in EMEA and customer timing for equipment orders. We see an attractive pipeline of opportunities in our nutrition and health equipment and remain excited about this part of the business. Demand in nutrition and health systems business remained healthy and orders were up modestly versus the second quarter. And we have a strong pipeline of opportunities with key accounts. Jamie will provide an assessment of Q3 year-over-year orders during his prepared remarks. Through the first nine months of the year, we've significantly surpassed performance expectations that we established at the beginning of 2021. We now anticipate full-year revenue to grow high single digits organically versus our original expectations of low to mid single-digit growth based on the continued economic recovery and improving order intake during the year. Earnings continue to improve, supported by both our 80-20 initiatives, emphasizing high-quality revenue streams and our productivity programs, which are progressing to expectations. Full-year operating margins is now anticipated to be approximately 12.5%, up 350 basis points versus 2020, and more than halfway to our original 2023 objective of mid-teens margins. And the business continues to generate strong free cash flow supporting investments for future growth and high returns. Following a meaningful increase in operating margins in the third quarter, we anticipate continued acceleration in operating results in the fourth quarter. These improvements will be driven by favorable mix, price realization, and leveraging our structural cost reduction. We expect operating margins to increase approximately 450 basis points year-over-year to about 14.5%, setting a strong foundation for objective to significantly expand operating margins. In the fourth quarter, organic revenue is expected to be modestly lower versus prior year due to certain specific items that we highlighted in previous updates. which consists of timing concentrated in nutrition and health systems and selectivity in certain categories in the precision solutions segment, emphasizing higher margin opportunities. Other than these two areas, low single-digit organic growth is expected for the remainder of the business. Also of note, there are six fewer shipping days year over year due to our calendar convention, which will impact our book and ship revenue in the quarter. Completed acquisitions are expected to add 5% to top line in Q4. And with that, I'll turn it over to Jamie to cover the financial review of the third quarter.