Kennametal Inc.

Good morning. I would like to welcome everyone to Kenna Mitchell's fourth quarter fiscal 2021 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. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press star, then the number two. Please note that this event is being recorded, and I'd like to turn the conference over to Kelly Boyer, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Welcome, everyone, and thank you for joining us to review Canada Meadows' fourth quarter and fiscal 2021 results. Yesterday evening, we issued our earnings press release and posted our presentation slides on our website. We will be referring to that slide deck throughout today's call. I'm Kelly Boyer, Vice President of Investor Relations. Joining me on the call today are Chris Rossi, President and Chief Executive Officer, and Damon Audia, Vice President and Chief Financial Officer. After Chris and Damon's prepared remarks, we will open the line for questions. At this time, I would like to direct your attention to our forward-looking disclosure statement. Today's discussion contains comments that constitute forward-looking statements and as such involve a number of assumptions, risks, and uncertainties that could cause the company's actual results, performance, or achievements to differ materially from those expressed in or implied by such forward-looking statements. These risk factors and uncertainties are detailed in Kenna Metals SEC filings. In addition, we will be discussing non-GAAP financial measures today, reconciliations to GAAP financial measures that we believe are most directly comparable can be found at the back of the slide deck and on our form 8K on our website. And with that, I'll now turn the call over to Chris.

Thank you, Kelly. Good morning, everyone, and thanks for joining the call today. For today's call, I'll start with some general comments on the year, followed by an overview of the fourth quarter. From there, Damon will review the quarterly financial results and our outlook in more detail. And finally, I'll make some summary comments before opening the line for questions. Now turning to slide two. In fiscal year 21, despite the obvious COVID-19 challenges, we continue to operate safely to serve customers and invest in our commercial and operational excellence initiatives, including simplification and modernization. We ended the year on a particularly strong note with positive momentum heading into fiscal year 22, enabled by continued market recovery and advancement of our strategic initiatives that are transforming the company. The additional simplification modernization savings at fiscal year 21 brought the total savings achieved from the program to $186 million, in line with the target range we announced at our December 2017 investor day, despite lower volumes than we envisioned at that time. This is a notable achievement, and while fiscal year 21 may have marked the end of investment in our simplification modernization program, we will continue to derive benefits from this investment. In fact, the structural cost savings for the program are already contributing to strong underlying operating leverage as volumes recover, which we saw in Q3 and Q4 of fiscal year 21 and expect to continue in fiscal year 22 and beyond. In addition, our investment in modernized processes will drive future growth and share gain. These investments enable higher levels of customer service and new product innovations, some recent examples of which include the Harvey 1 TEN mill, which was a 2021 Golden Edge Award winner for Best Product Innovation at the China International Machine Tool Trade Show, and is helping us gain share in aerospace and general engineering. And our new indexable milling platform, Mill 415, designed to improve customer productivity to gain share, especially in general engineering. We also saw a major win in the electric vehicle space with our RIQ reamer, which was selected over top competitors motor casings. We would not have been able to make this tool without our investments in additive manufacturing as part of modernization. And finally, our fit-for-purpose products, which as a result of modernization, can now be produced at a price point and availability to win in a multi-billion dollar application space of metal cutting that we previously had not focused on. We are making excellent progress in this space with growth of our fit-for-purpose product portfolio outpacing the broader general engineering and market growth. We're also seeing success in renewable energy applications, such as the machining of components for wind turbines, and our infrastructure business segment is successfully leveraging their simplification modernization investments to improve global reach and expand into mining adjacencies. We're looking forward We are excited and confident to deliver additional returns on our simplification modernization investment as we leverage it for growth, share gain, and improved profitability throughout the economic cycle. Now let's review a summary of Q4 on slide three. We saw underlying momentum picking up across all our end markets, and in the fourth quarter, we posted 29% organic growth versus a decline of 33% in the prior year quarter. On a year-over-year basis, all regions and end markets posted positive growth, except aerospace. It's worth noting, however, that on a sequential growth basis, aerospace was one of the leading end markets. Our adjusted EBITDA margin increased to 19.2%, driven mainly by increasing volume and associated absorption. Incremental simplification modernization benefits, partially offset by the reversal of temporary cost control actions taken in the prior year. Free operating cash flow was $66 million for the quarter and $113 million for the full year. Adjusted EPS was $0.53 for the quarter. Please turn to slide 4 to compare our margin performance to prior downturns. The graph on the left shows the sales level on a rolling four-quarter basis through the downturn relative to our sales during the Great Recession, while the graph on the right shows the corresponding adjusted operating margin. The margins at the trough were 600 basis points higher through this downturn, illustrating our substantially improved cost structure. Also note that the current trend lines are showing an upswing in both revenue and margin. And we believe that these trends will continue in fiscal year 22, supported by the strong operating leverage from our simplification modernization investments, as demonstrated on slide 5. You can see from the slide that on a sequential basis, we increased operating income by 57% on a 6% increase in sales. This strong operating leverage is also evident on a year-over-year basis, and it's even more impressive when you consider the roughly $45 million of temporary cost actions we took in the prior year quarter. And with that, let me turn the call over to Damon.