Kennametal Inc.

Good morning. I would like to welcome everyone to Kenna Metals first quarter fiscal 2024 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 would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star then the number two. Please note that this event is being recorded. I would now like to turn the conference over to Michael Pisi, Vice President of Investor Relations.

Thank you, Operator. Welcome, everyone, and thank you for joining us to review CannaMetal's first quarter fiscal 2024 results. This morning, we issued our earnings press release and posted our presentation slides on our website. We will be referring to that slide deck during today's call. I'm Michael Pisi, Vice President of Investor Relations. Joining me on the call today are Christopher Rossi, President and Chief Executive Officer, Pat Watson, Vice President and Chief Financial Officer, Sanjay Chaubey, Vice President and President of Metal Cutting, and Franklin Cardenas, Vice President and President of Infrastructure. After Chris and Pat's prepared remarks, we will open the line for questions. At this time, I'd 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 statements. These risk factors and uncertainties are detailed in Kenna Metal's SEC filings. In addition, we will be discussing non-GAAP financial measures on the call today. Reconciliations to Gap 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 turn the call over to you, Chris.

Thanks, Mike. Good morning, and thank you for joining us. I'll start the call today with a review of the quarter and some end-market commentary, as well as an example of the industry-leading innovation we're bringing to market. Then Pat will cover the quarterly financial results and the fiscal year 24 outlook. Finally, I'll make some summary comments at the end, then open the call for questions. Beginning on slide three. For the quarter, sales were flat year over year with flat organic growth and no meaningful effect from the net of negative workdays and positive foreign currency. Price realization was offset by anticipated seasonal volume declines At the segment level, metal cutting grew 2% organically and infrastructure declined 3%. On a constant currency basis, EMEA posted 8% growth, driven primarily by aerospace and defense, general engineering, and transportation. America's declined 3%, mainly driven by energy and general engineering. Asia Pacific declined 8%, driven by general engineering, transportation, and energy. and reflects year-over-year and sequential declines in China. By end market, aerospace and defense reported 17% growth, energy declined 12%, general engineering declined 1%, transportation declined 1%, and earthworks was flat. This performance was largely as expected, with declines in general engineering, oil and gas, and in the latter part of the quarter, China. Sequentially, as expected, Q1 sales declined 10%, which is below our historical average of approximately 8%, but generally in line with a 10% decline from the midpoint of our outlook. However, China was lower than anticipated. Now let me take a moment to provide some color on the end market conditions that led to the year-over-year decline in sales. In aerospace and defense, we once again reported strong year-over-year growth of 17%. Metal cutting benefited from continued execution of our growth initiatives and continued strength in aerospace. And infrastructure growth was driven by defense order timing. General engineering declined 1% versus prior year with metal cutting growth in the Americas and EMEA offset by declines in infrastructure. Asia Pacific declined in both segments due to China. Transportation declined 1% this quarter with a decline in Asia Pacific due to lower demand in China and a slight decline in the Americas partially offset by strong EMEA performance, which was driven by continued supply chain easing and new EV project wins, further improving our position in the hybrid and electric vehicle market. Our transportation results this quarter were not affected by the labor dispute between the UAW and the big three U.S. automakers. Energy declined 12%, driven by the lower year-over-year U.S. land-based rig counts and continued customer inventory adjustments. And Earthworks was flat during the quarter. Turning now to profitability. As mentioned earlier, price was offset by volume and product mix, and the pricing actions taken in both business segments substantially covered all forms of inflation on a dollar basis. Metal cuttings adjusted operating margins increased to 170 basis points year-over-year, driven by improved price realization, operational excellence productivity initiatives, and restructuring savings. As anticipated, infrastructure's operating margins were a headwind in the quarter. The year-over-year operating margin decline was driven by unfavorable price-raw material cost timing and product mix, offset by restructuring benefits and operational excellence productivity improvements. Adjusted EPS increased to 41 cents compared to 34 cents in the prior year quarter. Cash from operating activities increased significantly to 26 million from negative 11 million in the prior year quarter driven mainly by lower inventory levels. And finally, we continued to repurchase shares this quarter with 14 million dollars of shares bought back bringing the total amount of repurchase since the beginning of the program to 148 million dollars. Our share repurchase program reflects the confidence we have in executing our strategic initiatives for long-term value creation, despite quarterly macroeconomic headwinds and uncertainties. Turning to slide four, I want to take a moment to provide some additional commentary on our end markets for the full year. As we talked about on our last call, there were several drivers for our expected second half growth acceleration. And despite continued uncertainty, these drivers remain intact. Overall, U.S. land-based rig counts are still forecasted to increase slightly during the second half of the year. In addition, public commentary from oilfield service customers indicate that they expect their North American revenues to grow in calendar year 24. General engineering is expected to improve in the second half of fiscal year 24, as ISI's EMEA IPI forecast indicates gradual improvements starting in calendar year 24. And in the U.S., according to the National Association of Manufacturers survey, manufacturing production is expected to grow 2% through September of 2024. Additionally, we're also encouraged by the latest S&P Global Flash U.S. PMI data, which shows an improvement from 47 in August to 50 in October. Earthworks is anticipated to improve during the second half of the year in line with normal seasonality. and we continue to make progress on our growth initiatives to expand into underserved applications. For example, I want to highlight a win in infrastructure that demonstrates our focus on gaining share in underserved mining applications, which we discussed at our last Investor Day. Recently, the team secured an order for our 10-cast wear protection solution, which typically is applied to coal mining applications to reduce maintenance downtimes. This particular win, however, was for a gold mining customer in Brazil. This demonstrates our ability to leverage our existing solution portfolio to expand into new applications. In transportation, per IHS, light vehicle production is projected to grow globally low single digits in the second half of fiscal year 24. And we anticipate aerospace and defense to continue its strong performance in both segments during the second half. Aircraft build rates still remain below pre-pandemic levels, and major OEMs are continuing to project second half build rates to increase over the first half of our fiscal year. And our strategic focus continues in this end market to drive share gain. As it relates to China, we're optimistic that we'll experience improvement as the PMI indices are approaching 50. So that's a bottom-up view of the drivers for an improving end market environment in the second half. We know, of course, that there are an increasing number of risk factors that could affect our end markets. And as always, we'll be monitoring the end market conditions and we'll adjust if conditions differ from our expectations. Now on slide five, I'd like to highlight an example of our innovation advantage. This slide shows our latest Harvey IV end mill for metal cutting. Notably, this end mill is used in applications with difficult to machine materials such as titanium, high-temperature alloys, and stainless steel. These applications cross all end markets, including engine and suspension parts and aerospace and surgical cutting guides for use in medical applications. The value proposition for customers is a lower cost of ownership, including 400% longer tool life and 40% higher metal removal rates. Now let me turn the call over to Pat, who will review the first quarter financial performance and the outlook.