Kennametal Inc.

Good morning. I would like to welcome everyone to Kenna Metal's first quarter fiscal 2022 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, this event is being recorded. And I'd like to turn the conference over to Kelly Boyer, Vice President of Investor Relations.

Thank you, Operator. Welcome, everyone, and thank you for joining us to review CannaMetal's first quarter fiscal 2022 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 statements. 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 statements. Risk factors and uncertainties are detailed in Ken Amedo's SEC filing. In addition, we will be discussing non-GAAP financial measures on the call 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, aka on our website. And with that, I'll now turn the call over to Chris.

Good morning, and thank you for joining us today. I'll start today's call with some general comments on our strong results this quarter and some recent strategic wins, as well as our expectations for Q2 and the full year. Damon will then go over the quarterly financial results and the outlook in more detail. And finally, I'll make some summary comments before opening the call for questions. Beginning on slide two of the presentation deck, we posted strong results this quarter by successfully executing our commercial and operational excellence initiatives as underlying demand continued to improve. Our sales performance was in line with our expectations, increasing 19% organically year-over-year and outpacing our normal quarter-over-quarter seasonal trend. Year-over-year, we experienced growth in all regions and end markets due to our strategic initiatives and improvement in underlying demand. Within our end markets, the strongest performance was in general engineering, energy, and aerospace, with Arrow returning to growth this quarter after eight quarters of decline. Transportation increased as well, with 14% growth year-over-year and outpaced the normal sequential decline. That said, increasing production cuts due to chip shortages and other supply chain challenges limited transportation customer demand in the quarter. Our strong operating leverage resulted in adjusted EBITDA margin improving significantly by 730 basis points to 18.6%, demonstrating the benefit years. Operating expense as a percentage of sales decreased year-over-year to 21% and sequentially was flat on lower sales. Our target for operating expense remains at 20%. Adjusted EPS improved significantly to $0.44 compared to $0.03 in the prior year quarter. Free cash flow was approximately break-even, which is significantly better than our typical Q1 use of cash. As a reminder, cash flow in the first quarter of the fiscal year is affected by the payment of performance-based compensation. We also began our recently announced share repurchase program, buying back $13 million of shares in the quarter, reflecting the high level of confidence we have in our growth and margin improvement initiatives and free cash flow generation. Looking ahead, we believe the underlying market demand is strong. However, some customers' production levels in the near term are being affected to varying degrees by supply chain bottlenecks and other uncertainties. For example, there's not yet been a notable improvement in the supply of semiconductor chips, which affects the metal-cutting operations of our transportation and associated general engineering customers. And although we do not expect the situation to get worse, we believe it is likely to continue to constrain customer production levels in Q2. However, public comments from auto companies suggest the situation may start to improve in the second half of fiscal year 22. So, we expect revenue growth in transportation and associated general engineering to improve when our customers are able to increase production to meet the pent-up demand. Another source of uncertainty is related to potential power disruptions in certain regions like China, where they are rationing power to varying degrees in some provinces, which could affect customer production levels. Thus far, we've not seen a material effect on customer demand, but it is a source of uncertainty going forward. Nevertheless, despite the production slowdowns, related to the chip shortages and other uncertainties, we expect Q2 sales to be up 9% to 14% year-over-year and in line with the normal sequential growth pattern of 1% to 2%, which highlights the relative strength of our other end markets outside of transportation. Now, as it relates to our own operations, and other uncertainties are presenting some challenges, but we believe to a far lesser extent than some of our customers and other manufacturers. We're benefiting from our in-region, for-region local supply chain setup and inventory planning geared toward increasing on-time performance and availability levels. In our proactive pricing approach, we believe we'll continue to be effective at dealing with inflationary pressures. So, as always, we'll continue to focus on what we can control, and despite the existing market and supply chain uncertainties, we remain confident in driving strong underlying operating leverage for the full year. Now let's turn to slide three for an update on our commercial excellence initiatives aimed at gaining share. We've always had world-class application engineering expertise and product innovation, and we continue to leverage these core strengths to win with customers. In addition, the investments we've made over the last few years have improved quality and delivery performance, resulting in higher levels of customer service. As you can see from the slide, our commercial excellence initiatives continue to deliver. Through our innovation and leadership in machining electric vehicle components, we continue to win business with auto manufacturers as they add more hybrid and electric vehicles to their product portfolios. With our focus on channel access and fit-for-purpose VIDIA brand tooling, we have seen success in displacing competitors and arrow-tier suppliers in Asia Pacific. We continue to deliver innovative solutions for machining components and renewable energy equipment like wind turbines, where we provided a new drilling solution improving productivity by 200% and extending to life by 700%. Finally, we continue to drive share gain to our focus on expanding our wear-resistant solutions to mining adjacencies like surface mining. So, collectively, our product innovations and commercial and operational excellence are a winning value proposition, driving share gain and strong operating leverage. And with that, I'll turn the call over to Damon, who will review the first quarter financial performance in more detail.