Timken Company (The)

My name is Emily and I will be your conference operator today. At this time, I would like to welcome everyone to Timken's second quarter earnings release 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, press star, then the number two on your telephone keypad. Thank you. Mr. Frontapple, you may begin your conference.

Thank you, operator, and welcome everyone to our second quarter 2025 earnings conference call. This is Neil Frontapple, Vice President of Investor Relations for the Timken Company. We appreciate you joining us today. Before we begin our remarks this morning, I want to point out that we have posted presentation materials on the company's website that we will reference as part of today's review of the quarterly results. You can also access this material through the download feature on the Earnings Call webcast link. With me today are the Timken Company's President and CEO, Rich Kyle, and Phil Fracasa, our Chief Financial Officer. We will have opening comments this morning from both Rich and Phil before we open up the call for your questions. During the Q&A, I would ask that you please limit your questions to one question and one follow-up at a time to allow everyone a chance to participate. During today's call, you may hear forward-looking statements related to our future financial results, plans, and business operations. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in today's press release and in our reports filed with the SEC, which are available on the Timken.com website. We have included reconciliations between non-GAAP financial information and its GAAP equivalent in the press release and presentation materials. Today's call is copyrighted by the Timken Company, and without express written consent, we prohibit any use, recording, or transmission of any portion of the call. With that, I would like to thank you for your interest in the Timken Company, and I will now turn the call over to Rich.

Thanks, Neil. Good morning, and thank you for joining our call. Overall, second quarter results were in line with our expectations as the team is managing well through this period of uncertainty and continued soft market environment. Total sales in the quarter were down less than 1% from last year, and organic sales were down 2.5%, driven by lower demand in both segments, partially offset by higher pricing. Our total backlog at the end of June was up mid-single digits compared to the first quarter, which is a positive indicator for 2026. Adjusted EBITDA margins came in at 17.7%, and adjusted EPS was $1.42, both below prior year driven by lower volumes, higher tariff costs, and unfavorable currency. In the quarter, we generated $78 million of free cash flow, raised our quarterly dividend by 3%, and purchased 340,000 shares of stock. Temkin continues to create shareholder value through the compounding impact of our disciplined capital allocation actions. Turning to the outlook, we are focused on finishing the year strong while positioning the company for industrial expansion in 26. Phil will take you through the updated 2025 outlook and assumptions in detail, but we expect the operating environment to remain challenging over the rest of the year, primarily due to the uncertainty surrounding trade and its impact on costs, demand, and other macros. Customer demand has been relatively stable year to date at low levels. However, we are reducing the high end of our full year earnings outlook to reflect a more cautious view second half primarily due to the volatile trade situation. The team remains focused on managing our costs to the current market demand as well as driving structural cost actions that will contribute to margin expansion over time. The Mexico plant will continue to ramp up and productivity will improve through the end of the year. We were also on track to complete three plant closures in the second half of the year. These actions will mitigate the planned volume declines in the second half and positively impact margins in 26. The tariff situation remains volatile, but our large U.S. manufacturing footprint will serve us well to adapt to the changes, and we remain confident in our ability to mitigate the direct impact from tariffs. We continue to actively pass the costs into the market through repricing the portfolio albeit with some expected lag in timing. Pricing was up sequentially compared to the first quarter, and we expect further price realization as we move through the second half. While still early, we are optimistic on the outlook for 26. Backlog has inflected despite the trade situation, and as trade stabilizes and end-user confidence improves, we expect industrial markets to expand. Additionally, Timken will benefit next year from wins in the marketplace, as well as the carryover of pricing and cost savings. Both our portfolio and our operating capabilities are better positioned to capitalize on industrial strength. We also expect a positive impact in 26 from portfolio moves, including the automotive OE business we highlighted last quarter. Discussions with affected customers are ongoing, and we expect the outcome to have a positive impact on our margins in 26 and beyond. We also continue to invest in the parts of our portfolio with the highest returns and best growth potential. An example of this is Timken's position in the automation sector. We're focused on scaling and high growth applications that include industrial robotics, factory automation, medical robotics, and humanoids. With Rolon, Cone Drive, Spinaea, and CGI added to the Timken branded products, we have built a broad product offering to serve these applications and we will continue to invest to support future growth. The company's customer-focused innovation, application engineering expertise, and advanced manufacturing capabilities are competitive strengths as the automation megatrend accelerates. With respect to the CEO search, the board is working diligently to advance the process and bring it to a successful closure. Interest in the role is strong, and members of the search committee are confident that we will soon identify the next leader take Timken to new levels of performance. In the meantime, we continue to advance the company along the same strategic path. The Timken management team is strong, experienced, and focused on executing our strategy. We're confident in the company's ability to deliver higher levels of performance and create shareholder value as we advance Timken as a global technology leader across diverse industrial markets. With that, let me turn over the call to Phil for a more detailed review of the numbers and outlook.