Kennametal Inc.

Good morning. I would like to welcome everyone to Kenna Metals Q3 Fiscal 2026 Earnings Conference Call. Today, all lines have been placed on mute to prevent any background noise. After today's speaker 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 your question has been addressed and you would like to withdraw it, please press star, then the number two. Please note that today's event is being recorded. I would now like to turn the conference over to Michael Pese, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Welcome, everyone, and thank you for joining us to review Kenna Metals' third quarter fiscal 2026 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 throughout today's call. I'm Michael Pisi, Vice President of Investor Relations. Joining me on the call today are Sanjay Chaubey, President and Chief Executive Officer, and Pat Watson, Vice President and Chief Financial Officer. After Sanjay 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 Sanjay.

Thank you, Mike. Good morning, and thank you for joining us. I will begin with an overview of the quarter, including end market commentary, followed by a discussion on unit volume trends. From there, Pat will cover the quarterly financial results and the fiscal year 26 outlook, along with an early look at fiscal 27. Finally, I'll make some summary comments, and then we'll open the line for questions. Turning to slide three, let me begin by addressing some of the highlights from our strong third quarter. Our global commercial teams continued to advance our strategic growth initiatives. The infrastructure team delivered solid growth. In construction, we saw volume growth from strong product performance and the advantage we have as a secure source of tungsten in a tight supply environment. Additionally, we received large orders in our defense business, further securing ongoing growth in this market as we head into fiscal 27. In metal cutting, we continue to increase our share of wallet with key accounts, especially in aerospace and defense, and build upon our momentum in energy from AI power generation initiatives. In general engineering, we have been winning new customers through targeted promotional campaigns and improvements to our digital customer experience, especially for our small to medium-sized customers. As you know, We continue to prioritize above-market growth as a strategic imperative, and these wins position us well in our key end markets. Turning now to the broader tungsten environment, prices continued their unprecedented increase throughout the quarter, rising from approximately $900 per metric ton to $3,000 as the supply of material continued to be constrained. This tungsten price and supply environment have created both challenges and opportunities. On the challenges front, we have seen a highly competitive market for material, but our supply chain has held up relatively well. We have and will continue to implement pricing actions in response to these rising tungsten costs and remain confident in our ability to secure that price. We are also focused on managing the working capital and balance sheet implications of higher tungsten costs. In terms of opportunities, our vertical integration has been a real strength in this market, providing us better supply chain control and flexibility compared to some competitors. For example, as competitors are turning away orders or extending lead times, we are well positioned to capture business that is aligned with our strategic priorities. During the quarter, we capitalized on these opportunities in each of our business segments, specifically earthworks within infrastructure and aerospace and defense in metal cutting. These new opportunities also facilitate shaping our product portfolio away from lower margin to higher margin solutions. As such, we are seeing a unique combination of three factors that are opening the door to sales opportunities. First, continued market recovery. Second, solid execution on our strategic growth initiatives. And third, a window of opportunity from the current tungsten market, which is likely to persist in the near term. Given those dynamics, we are prioritizing our time and attention on growth opportunities. over restructuring initiatives in the near term. And we are shifting the timeline for facility closure actions we had previously planned to complete in fiscal 27. We will provide additional detail on the restructuring timeline as appropriate. Even with that shift, we are still targeting approximately $110 million in savings from cost takeout actions by the end of fiscal 27, which is $10 million above what we outlined at investor day. Now let's move to our quarterly results, which once again exceeded our sales and EPS outlook. Compared to outlook, sales were mostly driven by increased price realization and better than expected volume in both segments. EPS benefited from the additional price timing of $0.09, positive volume and lower than anticipated tax rate. Year over year, sales increased 19% organically. Please note, this was our third consecutive quarter of organic growth, driven by additional price realization, strategic growth initiatives, and continued recovery in several end markets. Adjusted EPS increased to 77 cents compared to 47 cents in the prior year quarter. An adjusted EBITDA margin was 20.8% compared to 17.9% in the prior year quarter. Cash from operating activities year to date was $70 million compared to $130 million in the prior year period. Pre-operating cash flow year to date was $18 million compared to $63 million in the prior year. Free cash flow was adversely impacted by increased working capital requirements related to tungsten prices. Finally, we returned $15 million to shareholders through dividends. As it relates to our outlook, today we are raising our sales and EPS outlook for fiscal 26. This update reflects the additional price due to the continued rise in tungsten and additional volume. Pat will provide more details on our updated outlook shortly. In summary, we are pleased with this quarter's results and how the team is navigating these unique business conditions. As I mentioned, there are opportunities and challenges in this market, and we remain focused on delivering on our commitments through our fiscal 26 and setting ourselves up for a successful fiscal 27. Now let's turn to slide four for an end market update. As a reminder, our full year outlook reflects forecasts of specific market drivers and general market conditions. The top half of this slide reflects our sales outlook at the midpoint and includes price, volume, and market factors. My comments will focus on the bottom half of the slide and address transportation and energy. which are the only end markets that changed since our last call. IHS estimates for transportation slightly improved from the previous estimate, up in the low single-digit range, mostly driven by improvements in Asia Pacific market. Energy improved slightly relative to our prior outlook as customer sentiment improved. The tone is now cautiously optimistic, which is an improved stance compared to what customers were previously signaling. Turning to slide five, as we have talked about over the last several years, customer activity rates and our sales volumes have been below the pre-COVID peak. I want to take some time to provide insight into unit volume and how those trends have improved over the last few quarters. This chart uses units sold volume and excludes the impact of price and foreign exchange. It also excludes infrastructure defense sales, as these are lumpy and not tied to industrial production metrics. Now, let me spend a moment on what is driving the volume recovery, and just as importantly, why we believe it's sustainable. As the callout indicates, we are now experiencing the second consecutive quarter of year-over-year trailing 12-month unit volume growth. Despite a macro backdrop that has been uneven, volumes are strengthening in the Americas and Asia Pacific, but EMEA continues to lag, and that is consistent with what we are seeing in PMI and industrial production data. A key driver continues to be aerospace and defense, which remains strong across both metal cutting and infrastructure. Importantly, this strength isn't simply tied to OEM build rates, which are still roughly 20% below pre-COVID levels, but rather to share gains and deeper penetration with tier suppliers. That gives us confidence there is still additional runway as production rates normalize over time. We're also starting to see early signs of stabilization in general engineering and energy. even while headline indicators remain soft. In energy, power generation continues to see meaningful momentum. And while U.S. land rate counts are still about 30% below pre-COVID levels, we are seeing enough stabilization to suggest we are past the trough. In infrastructure, Earthworks has delivered volume gains for two consecutive quarters driven by share gains. Stepping back, If you look at the chart, global volumes are now up approximately 3% from the Q1 fiscal 26 trough, following 36 months of stagnant industrial production. Our performance is not just the result of a market recovery. It's shaped by where we compete, how we allocate resources, and where we are winning share. We know we operate in cyclical end markets. but we are quite confident in the long-term growth potential of these markets and our ability to capture share within them. Now, let me turn the call over to Pat, who will review the third quarter financial performance and the outlook.