Earnings call transcript Q4 2022

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Operator

Good morning. My name is Glen, and I'll be your conference operator today. At this time, I would like to welcome everyone to Timken's Fourth Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

may conference. you begin Frohnapple, your Mr.

Neil Frohnapple

appreciate Thanks, XXXX Neil earnings welcome everyone Company. Frohnapple, today. fourth quarter to our We Timken conference The of Relations Glen, joining Investor us and Director for you call. This is

this our of materials out as presentation I want the part will the reference company's Web of Before that remarks to have review we quarterly we results. morning, begin we today's posted on point site that

feature on this access can download webcast through You earnings material link. the the also call

today are Kyle; me Chief The With and Timken CEO, and Financial Company's Rich our President Phil Fracassa, Officer.

have up from both the will Rich open your comments for we questions. before We this call opening and morning Phil

and a Q&A, to ask During I one to limit chance that at would your a allow please time one everyone the you follow-up participate. question questions to

call, future our During related hear operations. financial results, may today's statements and business forward-looking to you plans

from a detail which or may with Our projected Web implied are those the results press SEC, today's in describe to due our we the and which release differ reports actual site. timken.com on in filed factors, of in materially available variety greater

We have its release equivalent is the use, any and of presentation portion financial included transmission non-GAAP any press without call Timken the of copyrighted call. consent, reconciliations materials. Today's The Company, we prohibit information and by in and GAAP written between expressed recording or

and Timken would I will Rich. Company, The that, like turn With I in the for to you over interest now thank to call your

Richard Kyle

the revenue fourth revenue for a was share continued strong, prior Asia our which double-digits. driver. year, quarter, America an and the another also being with quarter both points and XXX demand was improved outgrowth morning $X.XX improved basis gain, Good concluded the from to contributed was call. for to to record up with of Fourth and quarter Organic largest Timken Earnings year. from North added per Neil. meaningfully prior our thank EBITDA XX% the delivered XX%, Price results. quarter be and price-cost margins joining fourth Thanks, you up up outstanding initiatives excellent quarter in the fourth year.

closed And purchased flow Bearings quarter at GGB cash the in divestiture, shares. was the XXX,XXX also acquisition $XXX Aero Drives free and very the Systems We on million. strong and

through we EBITDA For the organic around Organic at total year of the and and start year, which organic consecutive the delivered all four we full-year, 'XX, quarters growth. XX%, good XXX X% growth, XX% and of second were growth, were least of more growth very double-digit the was was margins, consistent up from of with course the momentum. basis points year. 'XX XX%

we improved X% price realization price that sequentially second the beginning straight of the guided year. exceeded Our year, each at the the for quarter and to

mid-year, Internal improved level. increased. up $X.XX, of They was per eased prior and off were environment. XX% pieces been There 'XX, labor course energy, of than cost better moving from supply last through we inefficiencies inflationary all SG&A other material, off increases over Earnings share, early and logistics The million, cash year prior were from the costs and each year's pressures. the costs. in Steel elevated. remained of labor, and record $XXX flow, we remain chain but the challenges up year around have Free on but year. leveled and a of were over have rate of quarter, costs but peak, an both inflationary lot

growth in to CapEx about X% addition initiatives. for of we to sales M&A, the continue cost and invest In

through products, We expanded our improved productivity, and our footprint, digital capacity these advanced invested our advanced our platform, in investments. our

Newsweek, of during we for America's strong balance also a the Companies, our were sheet. about X% ended the of outstanding one purchased by We with We serve, shares year named and row. year year, Most commitment We're make, also our being sustainability industries recognition excellent products third an we operations. our in we across the through the This the citizen. a driving and to corporate global underscores Responsible

our safety the of development across people, our diversity We workforce and enterprise. also invest the the in of

a summary, outstanding year good industrial capitalized In shareholders. had And again lot also on opportunities and but both the a unexpected once very for our to challenges XXXX we and our through navigating the to while was for of customers challenges. demand, deliver responding results

This deck. our updated for to Investor per from X% turn revenue delivered Day, of I an Through XXX recent and adjusted earnings five highlight and 'XX in with basis slide EPS only our I definition. our period, results, the 'XX, an margin want the XX Before margin slide our to of XX% new through quarterly is is CAGR, CAGR, variation XX.X% an five-year years. share we EBITDA average points and

our inflation, business, products our of reflect When on the commitment and and through diversity that through five-year pandemics, the chain capability supply value results you for and demand demonstrate technology, and from the to back cycles. macroeconomic challenges volatility the period, resiliency of these drive our tariffs, economic more,

continue is evolving in remains while and well-positioned today, technologies. So, elevated the to industrial years through value uncertainty cycles, to create to Timken come through

that will 'XX five better years. larger the trajectory performance will a XXXX, be this and in to able come. we a in version to enters good years and we expect confident of we be that are the Timken 'XX that of start to And company the were the we continue next

announced Turning our to recently I with XXXX, start acquisitions. will

are they value base and large a through Roller channels well, the sell U.S. and family-owned we American and primarily for ARB the markets and have knows U.S. engineered of Timken operated and a has ARB; bearings position have ARB States fragmented been can portfolio. base very generations, they the in a bearing through that end are throughout integrating distributors that for users. industries OEMs shareholders confident and through we customers These Timken's the in create install products three Bearing, United in long-standing of or First, process markets;

to get product linear our our bearings, deliver industrial the positions. market synergies compliments ball combination strong business. platform, ARB portfolio, scales our expect, existing also to we expand level the motion the to a but and Rollon market is add will new motion our actuators. and product portfolio Nadella Aurora, linear brings market rod Process with screws, margins, XXXX line products will we margins. position. The Nadella EBITDA Timken modest enters of of largest ends product time, rod and acquisition adding needle and rod also The with at Nadella lines roller end will and Industries' portfolio. end entered over and globalize it the to

we ARB serve targeted cash the markets like across further margins packaging, adding our customer ratios. flow, with capital will completion, and opportunities they growth markets our and Nadella base accelerate Nadella margin portfolio. opportunistic in be to food synergies, a And position excited allocation scale fragmented the continue Upon will of will several average. both beverage, and with both profile to Nadella remain logistics, above company automation, year. within through we global to Timken our leverage and our be expand rate. a slightly join our we targeted as comfortably can medical. with will We're 'XX with And the

in we are Turning in in the increase total. to guiding organic markets, revenue to our seven deck, X% a slide

outlook. over so organic for price over the to of X% We be comprises year, price expect revenue half the

full-year. in the the we're right, at from driven confident in wind, expecting the strong, customers This order is achieving a market full-year and by on book demand backlog in price. and both visibility tactics. as well the where quarters are our out. into X% are a Starting good up are renewals, to strong as The have least outgrowth we step for for market several a We Asia revenue committed from

of moderate the mid-single from X% the but about markets level, the moment, tougher view partly where I'll talk to but not a above visibility. first markets our do for year comps, then we have guide taking start range of well primarily planning from the quarter extended in and the rest from more flattish the this We're assumes of second-half to cautious year will digits. up we a the

and to be as excellent to pullback a are inventory standpoint, flat guiding return If outlook situation. low, we roughly for supply to anticipating chains second-half will this improve capitalize be precision. also are inventory in From higher margins some our We position the margin for managing the channel the on proves outlook we customers in with year.

As of 'XX. pieces there lot I the a and cost moving have into margin front my been comments, said in 'XX on that continues and

price expecting cost be are full We positive the for year. to modestly

'XX expect supply improvements, CapEx and better operational help chain logistics steel and our cost. footprint investments, and lower also We margin from execution,

And headwinds expected year. cost anticipate remain do other SG&A, to Currency the and we in we an margin materials. in labor, inflationary increases However, for and mix are also environment. purchase be further

through will for situation cost confident We dealing years. the have dynamics and I we in of volatile again with navigate And price that 'XX. am rising a cost couple been a successful

be at X% Earnings the up per about would mid-point. share

much 'XX We and expect cash growth primarily stronger flow moderating capital well lower both due requirements execution. as from as to supply working higher rate in chain improved earnings

cautious taking we view the second-half, the on a While starting we strong. are are year

visibility quarter the into first the quarter. good second have for We well and

And the high first up we expect in quarter. organic revenue single be digits to

are backlog, to of strategically our excellent summary, expect in delivered healthy margins both in to an off sequential an the good a start price the In XXXX normal fourth another improvement. input, financially, first. and benefit to the we 'XX. quarter and order also We have from would We and step-up we sequential excellent year

performance. We are to extend in our a great position strong

for in and a we leader. to continue diversified value shareholder in We we Timken our the a to advance of as front opportunities are continue create long-term as about ability us, confident excited feel industrial

Philip Fracassa

thanks, morning, Okay, everyone. Rich, good and

presentation capped am We per financial for XX the a record strong revenue slide with quarter the of posted to on start close $X.X a fourth to results XX% our I and Timken. summary best material year billion which We EBITDA year. XX% an the up quarter, For of year-over-year adjusted last of in we going review, off in record share delivered from than And next achieved X% quarter our fourth margin earnings quarter. year fourth strong $X.XX, up over with from expansion. XX.X% over adjusted last of margin

sales let's from sectors, closer contributions up markets XX, year most look at last strong our slide across pricing. growth end sales from healthy with volume Organically, and performance. fourth and to driven and XX.X% were both take Turning quarter a by

in top U.S. block, the Looking a driven of and of to at a the net headwind quarter contributed against by sizeable was stronger currency acquisitions And the modestly dollar the the of currencies. other revenue key the divestitures line. euro impact rest translation foreign

currency On of the you both growth organic region, by the excludes acquisitions. which and slide, right-hand side see can

touch driven sector strongest the across gains. Asia-Pacific, we XX% with briefly on me and Let general region North America, and XX% by distribution region, we region. In up up distribution. strong the our posting and up growth X% by renewable were each up In growth mainly led with energy were by distribution, industrial. driven were In year-over-year sectors heavy Latin largest most off-highway, in America, we

down lost up modestly the finally, as sectors. we quarter. And energy slightly renewable been And for were would sales were exclude other Russia mostly growth lower revenue you we have in and offset in if the by Russia, notably in region EMEA,

the of sales last Turning compared XX.X% adjusted EBITDA to sales slide million million quarter in to year. $XXX or of XX.X% fourth $XXX XX, was or

in Looking quarter, increase SG&A unfavorable at which higher and expense. of strong performance and benefited more impact adjusted EBITDA from offset volume higher than dollars, net the price manufacturing we other the the in mix

incremental sales by quarter basis the enabled sizeable driven XXX versus see headwinds were on performance, relatively us our of a expand the the positive delivered Overall, price which year-on-year, logistics we several margin points, an costs As of we've fourth you past cost by the year. walk, margins the over improvement EBITDA higher last XX% on significant material flat experienced can to from and quarters.

sectors in on growth me was strong key and significant the driven respect Mix a pricing process a mobile to With actions comment by pricing of drivers industries past higher price industrial little Let like the both attractive distribution. was our further quarter. over few in mix, reflecting year. in our the positive, meaningfully also

and was quarter are material mostly and the lower mentioned, the were material price costs. the increases down would logistics impact to sequentially costs offset from out point as higher Moving quarter. material neutral also I supplier year-over-year costs as largely by from and continued transportation that I third logistics logistics, in

had lower continued including higher negatively we line, been were impacted well manufacturing energy that also cost XXXX. This the continue headwind in On as periods. and And impacted to inflation, inventory will as were by prior labor, production volume. by to a be capitalized costs in we

the spending ease. I supply SG&A from in our footprint On side, line were self-help out should our sales by and initiatives. other SG&A line, increased We levels. other the constraints the world improved finally, expectations, chain higher compensation costs and And around in seeing continue as up the execution in third support driven But on was to other rate. organically up XXXX and from the positive also other we're the actions, manufacturing from fourth more to slightly teams expense, expense and with point our quarter that would quarter run only benefit

income XX% XX, share million for the record posted or income $X.XX you that last up includes for on we GAAP an $XX fourth and items. special we can see slide diluted the On basis, from $X.XX On $X.XX net per quarter. basis, quarter a of per of net year, share a adjusted which from earned

lastly, we've count the And are higher with interest our adjusted quarter, completed activity share expectations. in we expense the note buyback and tax You'll rate lower a line that in significant year. the over reflecting the past benefited XX.X% from

to let's starting business our Process Industries slide move with Now results segment XX. on

heavy fourth quarter. and sales XX.X% the the gains growth with $XXX all driven million, up by were the distribution, general sectors, industries across Industries For sales posting from industrial, year. Process Organically, in up were strongest quarter, last XX.X%

the once growth or SG&A the reducing sizable a currency by positive positive that in But and again of was Process last in the and The XX.X% higher to quarter, acquisition reflects price or higher growth nearly the margins $XXX XX% segment sales of X%. sales which manufacturing the EBITDA the of offset line. in $XXX million, costs of three top points impact was contributed in than quarter was Process benefit Pricing percentage over adjusted fourth Industries compared increase translation volume, and headwind of million, more year. quarter. costs to

contributed year, Industries to million Now sales Mobile with on increased In Mobile sales organically Industries up fourth XX. in were largest gains. heavy and X.X% Pricing the slide were off We $XXX automotive acquisitions and quarter, let's last once turn up X.X% also our revenue the modestly. rail flat. are aerospace again, from highway sectors while relatively the positive posting was net truck

Mobile quarter driven offset of X%. a over and and reducing by or the of last was positive And headwind which growth sales the a margins year. benefit up compared quarter, impact the costs. of in margins to quarter, the fourth sequentially from was costs past EBITDA Industries given the $XX is increase in XX.X% segment were million manufacturing of notably, translation X.X% price adjusted Mobile reflects than more Currency million sales of $XX third was SG&A few by months. nearly or costs in unusual higher the mobile which seasonality our The moderation

CapEx, that can year. was of you quarter. cash what tripled flow $XXX XX, slide to see delivered Turning than in after flow or And last generated $XXX we the million cash more million, free we operating

was free the growth full-year, as working flow million million, cash higher fund free to and the higher more to excellence $XXX higher $XXX record flow initiatives. earnings The growth, impact which as XXXX. capital than Looking the at levels, mainly cash of driven CapEx support sales offset up in operational was well from our by

the paid During per higher consecutive share. dividends, in dividends making year, million or per the XXXX share, year $XX Timken of $X.XX annual ninth

authorization. have we million remaining outstanding, addition, the of In X% our stock X over during on shares nearly year and about or total shares million we shares of repurchased X current

take just And the capital maintaining and acquisitions, When also our while CapEx, over the we a buybacks, into Timken where straight acquisitions million dividends, of did $XXX acquisition. made and strong has net completed with least it We acquisitions one Spinea Timken in share deployed XXXX. those at account year and balance marks XXth XXXX sheet. of GGB you

sheet, ended balance targeted within the the debt-to-adjusted to while net at Turning year we range. with EBITDA our times X.X

an rate. the we with addition, financings of million In March flexibility, additional the provide in bonds during attractive completed several year at $XXX including us fixed back to debt issuance XX year financial

revolver extending to maturities value ARB continue strong to to we December, With off We also their cash and and great Nadella. refinanced great shareholder in both to a start position term drive our XXXX. capital a in we're and XXXX in with and creation remain structure upsized our U.S. loan flow, and

with turn summary outlook a slide let's XX. to Now on the

As cautiousness flow for given in pricing XXXX. in we're performance volume sales bottom or large and top Rich growth, driven cash by highlighted, with to total second-half, in versus generation. X% for planning line X% X% Starting step revenue, again be above midpoint reflecting expect assumptions, outlook, our up another a to Organically, visibility. positive the record limited modest prudent we the year of strong free some X% sales XXXX up up at on with the we're volume around and with at revenue our midpoint, the planning

X.X% ARB We the not contribute our include around net revenue of expect acquisition, acquisitions includes to does This full-year. divestitures for the recent to the Nadella. but

We will currency finally, the the for the December based the our be include the after deal on quarter. to in closes, point first which will expect basis around of headwind line translation end XX a we spot full-year Nadella XXst top And to be rates. outlook

excludes share. I'll the range the $X.XX my that represents in of later new share this record midpoint at to On $X.XX earnings a share, the line, comparable Note our in we basis. versus amortization which back roughly range guidance on last bottom acquisition remarks. around definition per X% expense $X.XX adjusted year which to growth of come per expect reflects adjusted for intangible EPS, per the

off higher price the adjusted XXXX production volume in margin margin and improved our will operational should from roughly execution lower positive sizeable we reflects XXXX. currency unfavorable our impact and should that of earnings midpoint The SG&A Note incrementals be than outlook costs, last assumption our that from strong we as line EBITDA costs with year. implies and headwind consolidated mix. favorable offset headwinds more see manufacturing, saw momentum, Organically, a

to estimating the anticipate million full-year expense, $XXX We're continuing of And operational long-term adjusted fuel reflects improved the our Moving XXXX expect and higher to interest performance. than for our we spend XX.X%. to we earnings free at CapEx XXXX approximately expect million X% midpoint. around This of the to of initiatives. finally, for growth net cash the we impact and around working income and approximately over flow, higher year, remain with is excellence $XXX the sales rate tax generate conversion at on capital XX% and

comment EPS slide let to me revision further on to XX, Turning the our adjusted calculation.

our this excludes for earnings which a we've of I better mentioned, years recent core performance improved As with made. and our amount Overall, of adjusted believe new operating change will provide definition of grown versus expense, earnings we has intangible representation acquisition acquisitions amortization the peers. in cumulative our comparability

summarize, So, to strong results to again delivered company in another year. the the fourth quarter record finish

our drive continues to We're team a scale in in Our and any through to strong the XXXX, we're and leader win growth strategy. environment. start profitable industrial as to well-positioned off marketplace, to a diversified continue

our formal concludes remarks. the now line open for Operator? And This questions. we'll

Operator

Steve our from [Operator question, from KeyBanc now With you. Instructions] your open. Barger first Thank is comes CM. line Steve,

Steve Barger

Thanks. Good morning.

Richard Kyle

Good morning.

Philip Fracassa

Steve. Morning,

Steve Barger

sectors most year? growth think of case this any, are is the you Rich, the growth. talk organic markets, the Can and if negative X% seven, going of of are have to the four as better. flat, have about which end worst go you slide I back volume or for to said you single-digit sectors price mid you the X% If

Richard Kyle

we little don't volume But at they if the specifically be their split year on and over up out have end them, all markets a so last bit. the zero if down middle price. realized price those would volume versus Yes, the certainly

Steve Barger

a do on you whether in like, sounds pretty guess to like this approach most for think get is looks idea positive trying me positive conservative slide it I'm But based what you expect to just I since taking your of price-cost. volume the to you're end really negative markets? or XXXX of

Richard Kyle

aerospace, start slide slide this this, to marine. look year. visibility on, on And the negative energy, we and second-half four you at well into markets not renewable industries, certainly have if heavy seven, it's that have the we Well,

organically good full-year. be as have up for So, visibility or projecting as said, well the into were the for the we're mid four second-half volume more looking overall, markets And price up I to all quarter. as looking, in the to high be singles single where first them we digits

to advanced, to moderating, single have these a get digits from in certainly the the high down So, you'd to year for digits single as numbers low total. full-year,

Steve Barger

back-half expect So, or as you you model, you or do negative back-half? in in show internal positive look specifically XQ that your the at goes that growth do the in

Richard Kyle

we'd price, modestly still positive. be With

Steve Barger

Great, the time. thanks for

Richard Kyle

emphasize there, again, cautious part fourth want but as that. again have up. the it. We're the -- high into up again, -- single. and to starting just also finished as starting quarter Steve, a into the But we taking And we I'd outlook don't up you XX, visibility year year We we're

Steve Barger

Thanks. Understood.

Operator

Evercore. line next you, now is your Thank comes David David, from our Steve. from With question, Raso open.

David Raso

only mean, Hi, I thank gives you. really bigger did would growth Process been the missed there been within miss of something calls, jumping mix toward is general, unique right, But the 'XX something why that out be in is of Mobile about be obviously, year-over-year. just earlier, where the better mix? up to more? margins. guide flattish you I trying I but there And is comment this, mix I margin I'm process down? particular I figure already so some part skewed mix something between end sort miss was why Did Mobile, versus if you to or the have the of would said Process?

Richard Kyle

we think at Process. with within a mix made comment. But singles seven, high you slide up renewable flattish, and distribution within Process, that's don't if negative I look

expect So, we actually --

David Raso

that's little that a sort distribution, -- little the of bit? a deflator a That's destock and

Richard Kyle

you of little statements couple again, U.S. manage of a a within down also to as little distributors and the a that a sell-through. And But more bit, just say looking -- then, bit currency for to I'd moderating a they're within up made expect, little this margins a have our of be have be across inventory little said, both destock guide, Phil this would Process Yes, we margins impact tighter And to that, bit. Mobile year.

Philip Fracassa

Yes, going just distribution mean of markets said, which mix year. sort process in of a we of process to renewables aftermarket I digits-plus, really And as distribution or we the high I is a of comment, little up. up bit for across OEM the and bit OEM as Rich the mix mix was but that the dynamic, have the services significantly, company, a the sectors, the you -- got obviously, headwind growth Mobile. as OEM, up And growth. driven other David, neutral not both just by was producing distribution will, But lot single versus well more a our the compared would to XXXX, where than affect little is if

the of neutral of feeling little lot with about margins the we've year Process a of year-over-year least as in improve headwind. Mobile, self-help should guide. said, the the talking and roughly consolidations, Rich assumed course a Mobile, then and net-net, we've year-over-year, bit around been a And footprint like, it at over the But help as

David Raso

more to guide. No, that a little the adds Okay. legitimacy

more to it Is business, year services, distribution, they're division, distribution is just a distribution think is, slow I'm of little destock, know, including powerful on the bit over you've XX%-XX% you had? the such them? quarters, a the of really course or speak conversations Just to if just that, you insight in grind it when can those in first something is I a the of destock a give you go. ready like if the is then How and the remember correctly? force of down long was -- us it that but the not what, I

Richard Kyle

down, more It's right? the is increase a comps, a times is tougher reduction have wouldn't off which what so transit And inventory, building a two over-ordering they've anticipating an the inventory, we've comp. say big it. lead or times you in a have years, over. I last improved, destocking, And to from sell-through overplay I we're as in of had that. at come but little a look even there going leveling is again, the wouldn't it's bit rate is headwind just not -- So,

a in already of headwind little little with in a I next bit a more the think expect we And grew we organically. fourth quarter, the had XX% bit couple still quarters. that

David Raso

that's helpful. right, All

can't as much of was we 'XX, quite [indiscernible]? more destock, absolute an not So, benefit just little a in that a

Philip Fracassa

Exactly.

David Raso

That's helpful. much. you Okay. Thank so really

Philip Fracassa

extended a supply chains. lot and think stranded extended is had inventory the supply I in that chain have coming mean, Yes, the out. chains of supply I the

David Raso

terrific. right, All Thank you.

Richard Kyle

Thank you, David.

Operator

you, Thank David.

our from Rob, Research. have next now is comes We Rob Wertheimer open. line your from question, Melius

Rob Wertheimer

clarify. Thank just to you. And

would in guide? had inflow guess assuming I more there, channel as just went I out that drawdown call So, into more taking the others this there calling be and from a the years inventory, large you're you're the inventory fact drawdown and distributors prior an and not a getting

Richard Kyle

a large not but no, say drawdown. a drawdown, large drawdown, would one. There's not a there's large I A

Rob Wertheimer

on then. quick pricing a just Okay, question

lot. So, you've a captured obviously

contracts tumultuous though? couple a picture COVID it's for for in things outlook years are you still to the in on wonder or catch-up general, embedded last of overall and with Are that's for reflected working two you. go next the Your out you as back Thank back or capturing catch-up comment getting margins roll there structural you're to have and your that kind other been in X% And if of how the and on quarters neutral-ish Is pricing, price? the especially. just just step couple you inflation pricing I initiatives, still year? more could

Richard Kyle

behind, X-XX our bit two -- maybe neutral, in inflation, look in with you walks, volume. you slightly if years maybe started into two our really offset to ago, we quarters of of if think would a added I Yes, be over we years -- quarter a close little because

question, cetera, roughly good better But close think we're issues, about more prices -- volatility we then, feel than supply neutral. to to capture is than The X% that. latter very our we're we've commodity your just feel neutral. to in modest and about expected And respond at I ability good be demonstrated ability price. chain your to expected the et neutral. We slightly looking So, is -- to X% to

in got month got a button now. to as it got comes complexity adjust which quarter. price, complicated before, And able week course or of to or customers good than the and these We've of We've and things a tends when about more to and raising processes. happen But we've talked pushing also it and our being there a make matter systems our sticky good of of a way and we're thousands to 'XX. feel a whatever tends in make just lot -- a in little a

Rob Wertheimer

you. Thank

Operator

Thank you, Rob.

Philip Fracassa

Thanks, Rob.

Operator

We have is Jefferies. your from now question, from comes Stephen, Volkmann another Stephen open. line

Stephen Volkmann

guys. morning, Good Thank Great. you.

Richard Kyle

Morning.

Stephen Volkmann

my question forecast single-digit. surprised kind chief that's mid for your was sort way two-points that. I'm than well. And a around competitor I your obviously, pricing coming because, think quarter And I 'XX bigger off at you're a of guess as just fourth of said

we Why even another why I have follow-on think Rich, said price So, pricing that 'XX? about kind think, year And actions wouldn't for increase. something you 'XX? about in the in done wouldn't during recent stronger of effect a

us that is are you why customer parts of that your and wouldn't higher? to other I already think is So, offset? guess, certain the ask way the be of seeing Just sort help declines, this, base through in

Richard Kyle

we, stand Yes, behind if But as not we're ours close neutral, catch-up current, that add on pretty on they that to back to said, would looking go I up go to build to would up, to on play comment, under not. I'm would normal the competitor you sure expect build and see costs and would than then, be improving that or as where modestly. the or chief any back goes cost going X% greater on pandemic more the again, than cost year dynamic through that X% go more. just that And we'd of how a moderating the We probably scenario. the how And much expect up bit little is. if we'll they to

steel X% to we coverage need But, the walks, net show there gone currency, the good we the of -- we've be as So, the got total. our in is clauses we'll some have any feel I and or -- X%, we where indexed X%. total, index have in get give-back think no our to There's not about happening. expectation. down there there. We could costs good And pricing

Philip Fracassa

maybe clarification, favorable include the fourth would walk quarter. was mix Yes, quarter fourth and a also just the in Steve, --

as So, into looking X% targeting well. 'XX. there good two, beat the feel there really would to heading both said, mix the year, Rich outlook be we're the and the as for favorable for But in about price-cost -- for

Stephen Volkmann

implies it feels we've that exit on start significantly is would quarter I the flat And first guess price. that that on be higher, seen about based And we Okay. like recently. year, going the negative think, to it? what going you're Is or year the to just like think I to way

Richard Kyle

no. Well,

we been will the I But price improving be XX sequentially in think fourth quarters. quarter. price have nine still up for are

pretty our for And gets expect you was challenging year-over-year in. lower be quarter would comp the pricing your as the fourth what it comp to point, quarter sizable, the than in some sequential still And but just the to be rolled pretty just first it's becomes a quarter every positive. So, so on good harder. would fourth highlight, we comp us number was. that more quarter fourth because quarter, a that But

Philip Fracassa

of for said, conservative the we as purposes setting a on view we've guide. second-half the And taken

to robust I needed, the couple mean, ability translates price in are environment, shown to more we cost to as as move if robust we over continue last we've a which environment, a So, years. the of have more

where and do in pull So, enter need have the on space year. the those levers we of them; we're back-half I depend time if to think we all we at it'll as

Stephen Volkmann

it, appreciate I right, All thanks.

Philip Fracassa

you, Stephen. Thank

Operator

Thank you, Stephen.

our comes Bryan open. Bryan, your from is Blair have question, from now next Oppenheimer. line We

Bryan Blair

Thank morning, you. Good guys.

Richard Kyle

Morning.

Philip Fracassa

Bryan. Hi,

Bryan Blair

the side, relative aligns I'm we've transitioning certainly single-digit-plus to year? that wind growth is to And that space, weighted the the for how on specific to solar see the market seen on we going particularly team your outlook in curious, the And cadence? growth back It's mode, offshore. projections how are energy that with it about sector, projections that encouraging rates wind energy and high thinking renewable and think and and of the Again, for just should terms be to assuming about side? back-half your growth for

Richard Kyle

space; markets, stronger. more outgrowth wins we'd wins both a had then, there's On there, that have more solar, more for -- into capital little between good. the us, and split going technology, technology more rotating tactics split solar, well we there within between We've have And wind there's wind fixed channel. and in probably more is little as technology -- if out well, -- which a over then the solar also

with little we is, than in across across a it. good and whereas depending mix of drive gear that, growth there, a have we direct have content participate wind, higher on drive, but we different So, all rate which

the self-help. technology we more So, side, and neutral we're have on more

would the on the be growth higher winds, to expect I So, rate full-year.

to talk for want cadence the You the about year?

Philip Fracassa

I in renewable seen wind, Yes, the was the couple in particular, momentum we've say, think going Bryan, quarters. and to last -- I build

would the working we seen kind the or first even off of, the expect of last could we'd above in that just the momentum be slightly given as be we've building quarter first. -- as So, to the well comp even quarters, be in rate at into couple

Bryan Blair

And we carryover to there? And deal combine that in? baked contribution, factored color you then on an sources integration, little the and Yes, more time ARB heavy magnitude into GGB there if the not little accretion the of with you a so GGB being, and can and is guide, appreciate much Spinea do the there. could provide like a for Sounds the synergies? bit and offer the update ARB how potentially on understanding detail be of Spinea Nadella, have lifting

Richard Kyle

Yes, maybe take them order. I'll in reverse

some also, certainly lifting, again, generations. business for heavy is but ARB family-owned So, several

said, more will able the then power, that to that in Process would that business being et a -- before run to that; I certainly to manufacturing we be cetera, next us. in So, when Industries'-type year, level. the this 'XX purchasing presence, up bring synergies significant lot scale, to step we're expect think pretty our rate margins get that. improvement of quick our before up joins be we improvement I going from at margins by another get year EBITDA and going modest us would you That second-half to for U.S. our within the to look But of synergies probably

our bearing early and of The out from the into carve standing done. largely integrated up EnPro, priority business. that's been some it's was similar, GGB,

agreements And largely weaning and without off transition service there. so, them operating we're ourselves the

So, a have sales everything looks -- good And probably and so now that synergies I this good for year. on far really than lot in we a on the focused plan place integrating more that, emphasis operational but think there. side,

product a that about really a light Spinea, in growing Spinea, case then market. pretty new entering was And synergy technology for

not amount So, selling harmonic are technical synergies largely they and certainly synergies operational cycloidal product product. some of in there their different are different with there. our applications, existing an enormous along But for solutions

I'll the we all all, exciting, since comment. clarify in the guide have and at So, Phil accretion didn't particularly three, Nadella let

Philip Fracassa

likely would between $X.XX, depending timing, all north there. guide very, Nadella the $X.XX from would accretion specifically given ARB, around closes. as it way that to definition, with so Yes, to it we of under be on likely the been guide after -- sort would standpoint, revenue have And in -- as nickel, an accretive provided, both add will size. modestly somewhere so just the the very new a that well of be somewhere the it down the

Bryan Blair

appreciate it. guys. Thanks Okay, again

Richard Kyle

Thanks.

Operator

from Bank Brian. now With is open. comes Feniger from next Michael Thank line you, question America. your our Michael, of

Michael Feniger

year, see price when year, of, we we increases? the conservative think we Hey, where we into I of look remind you when front, pricing distribution, pricing we us normally last just between kind how an rolls so, much the outlook taking abnormal X% approach year like guys, I year, increases? a recognize a in think you're XXXX the the typical it's can of that different these know with in a do to on OE when price visibility increase? and was a just alone lack when of And normal just see

Richard Kyle

In in to steel a would couple from then sequential that seen sequential a up up the we've for I done further think we sequential then more factored outlook little last and but from year. there. the well, sequential last year, X% the gains biggest QX years of year from more would into step modest this couple normal moderate, from than this would years And QX to steady improvement if And expect had the netting, prices QX to be like there then QX. step again, which be the abnormal a we've QX, I biggest year we and that growth we've our years, pricing difference through see as the could QX,

sequential lower the think question, comp So, of because first I in to quarter. the earlier the

first quarter. So, we pretty realization in did the price expect good

Michael Feniger

more valuation shares to trading? How Is there slow out space your industrial acquisition EBITDA for Thank And times you're multiple, motion repurchasing down, just of you. motion fairly are XX, I announced market in big seeing the your And a today. stick where discount view few XX that a big to that shift where industrial portfolio and given the above acquisitions. trading of there's any now? integrate maybe to is know there right way we're you in what

Richard Kyle

I preclude in And acquisitions think would market say both. last active pretty years. answer. for eight And And mean, we or all did I purchased the the year, seven done been probably us we it's doing X% of the don't buyback that either think from answer we've will the outstanding I don't the is shares been, But both. and been we've or and we've doing we've that. last

Philip Fracassa

Yes, answer I question, would Industrial be the billion in $X.X just motion would Mike. revenues. roughly

And of and to opportunities a still, there that there's us part to we move and a our we of performance. portfolio, slide are what $X to So, continue while we've year showed acquisition are acquisition $X needle. five I portfolios for our contributed believe well over billion ample Rich as businesses with our big targeted the those that spending, our like out performance, billion, for Rich said, getting think the there now, significantly doing that and to

a continue build we're and we the and buy So, motion industrial move great I mentioned, fronts, but as us continue board disproportionate allocated And such stock. we $XXX in view our I still across all buyback, you'll with the done to doing condition. to in on a to toward position forward M&A, continue million CapEx. sheet have dividends to the that that. ability see XXXX, advance to out, of in across with think And systematically that balance capital all strong across back And we've as front, M&A

Michael Feniger

we've one encouragement, given of wrote out or right a addressed high just seen lack provide of some -- that last I'll there. concern, January you. visibility would level cause of now. signs in and early know have sneak Great, or you there's points already. data of observed question I in I anything you conversely that Have February, might this macro Thank

Philip Fracassa

Yes, I mean, year statement. my starting strong. on I think the we're in this very I commented

general, in one. in that here of operating is first in I the environment a positive very February week we're think So, the

Michael Feniger

Thank you.

Richard Kyle

Mike. Thanks,

Operator

you. Thank

Morgan Our next open. Stanley. comes from Cumming Dillon, your from question Dillon now line is

Dillon Cumming

morning. Thanks good question. Great, for the

so. bit, of over Sort have sequential of the last growth the think another in gotten from the versus a as positive skews industrial or rate China acceleration quarter, growth quickly revenue I probably channel in reads the more some of the on APAC around the quarter other

talk market now just being mix? growth seeing right by of growth we're much rest that other you the across the could of any So, is your there end about how renewables of versus kind driven

Richard Kyle

pretty, has certainly significant pretty business renewable mix energy. Asia our Yes, become to

for outlook us with as higher, our more continue market there, as a diversified give than mix would I more outlook mix. well industrial to think a more positive positive results market So, peers more

Philip Fracassa

up I mean, up XX%, I was Asia I say of look that the in was mean, it Rest broad. China up it we quarter, up were high you -- would Dillon, when at the high Yes, was India, teens, range. teens,

as by as well distribution positive was the right to growth across it, continue largest behind As sector, renewable sectors. Rich performance but said, was as other see far distribution we

last been there's been that's very quarters. particularly at the the has renewables, no few question broad biggest it's but least So, been China in driver growth,

Dillon Cumming

got great Okay, color. Thank it, you.

Richard Kyle

outlook, outlook results 'XX. and for is strong at pretty And the in the India

Dillon Cumming

talk XXXX? kind tailwind about baking then that talk one challenging in Could some the headwind with know, either the to about for regards you a side fourth from one have Okay, as you headwind Thank still year. it housekeeping But how last called margin headwind of And more maybe just that's out just well. into bridge you what the was quarter. for And impacts, to been into or a that perspective I in the comps you impactful on a XXXX? and are currency negative margins did as helpful. you. as expense next might your

Philip Fracassa

of which Yes, I it actually favorability of that and Dillon, in on margin and would was just was transaction currencies, the actually, XXXX -- line, those in some XXXX side, repeating in positive the really, non-recurrence going margins in a movements is say the the XXXX, with kind the transaction we with one margins, had gains our top on some in helped tailwind to just in will, from next. headwind significant year headwind not to coupled XXXX you of to by continued the of that, produce 'XX, if flip year-over-year, the pretty

cost And our in when incremental really implied -- getting headwind. back. work at bigger currency doing in would versus been big the organic move in organic a know, price to much the operational out, execution sort step be moderating comes of with M&A XX% really as sort favor. a then, in a margin, an cost it you percent closer I being pricing a of all XX% incrementals, our And plus I and taking guide the implies incrementals mean, the EBITDA we've guide, And you so, baked talking the lot maybe in last the speaks to back guide the that XX-ish of year and into and the that's that in think just year,

Dillon Cumming

Phil. Very you, helpful. Thank

Philip Fracassa

Dillon. Thanks,

Richard Kyle

Thanks.

Operator

Thank you, Dillon.

from Ritchie is line Goldman Joe your from now open. comes Sachs. Joe, question next Our

Joe Ritchie

morning, you. guys. Thank Good

Richard Kyle

morning. Good

Joe Ritchie

clarification my guess first So, a just question, question.

off high-single-digit growth. at then starting year kind the But your you're of X%. is with So, guidance midpoint of the

the expecting kind the just is for want I year? like it So, expectation turn of clear guide sounds mean to that second-half negative, be second-half your you're like that the to I of the into

Richard Kyle

year our higher single-digit starting the the probably price the, of end to we're say highest the at guide. Let's closer off

start there. I'd So,

to XX. not of that's yes, strong a to anything high-single-digits off off that up is but year coming the start, expecting would if go you So, we're

down you So, high end a down to of guidance. more of probably X we're quarter, the end to if got the or say midpoint strong, you to be as But get I to To of would go from the XX sort to X.X X or low fourth single-digits, to come would X. we're X the be starting high, guidance. of pretty to the year also higher said, probably towards number the starting the I

Philip Fracassa

sort of the back Joe, a second Yes, think half, as, great like outlook sort half we out opposed we beyond of of have in implies as I as flattening to year back the quarter. we're visibility seen decline said, the would say, a we the as to in don't the and it of

how how in. So, then, have months, moved to see develop next order we And we of is the assess how book that the the as fills accurate able kind be to will year. things of through couple over we'll

Joe Ritchie

Yes, some helpful. And issues, a the start fairly business, that's they short than know the year I more cycle had of I would. companies are guys but a because you supply at chain have normally of little bit visibility guess

also, I want whether the some So, visibility little could I to -- Rich, broader And what's year? your want ask around like that hear higher you than concern today? question more thoughts around concerns comment your to hear you bit then if well. your biggest on is just what I maybe normal as

Richard Kyle

normally greater significantly what visibility say would would. I we Well, than have we

in China have an there. operating had the as And still think out They are there other issues Everybody supply example. in chain problems reduced quarter issues is the I significantly. fourth there.

adjust and the a was is from year single from shipping our of peaks our you of And also is year up rate year. backlog ago. last the our where middle ago. modestly around run it digits was But, So, acquisitions where high divestures, up it for if organically again a backlog

we have So, liquidating been modestly. backlog

say And X was picture as walk, good demand the months. down the Phil visibility geographic out modestly to Europe So, good. show that quite would very have mentioned. for we next we our looks I X In

little But was that If up you adjust for Russia, would a price. bit. it include

a if -- from quarter you Europe the So, in fourth down. volume was

we want we good to And about the position to only would the be that geographic and in. your really really area question, soft. are come feel answer last back So, that's

on start. second-half. in are to The being we even really the too off good result. industrial softening on good are an is get and that's in I is will a capitalize cautious on a our going markets are And these midpoint guide not pretty task. cautious inflections to we think think based easy And of I that. again we But, a we position. And it, predicting an excellent

focus the through So, focus then, visibility. really earnings power And on cycle. where feel great the growing revenue have we the on the and about that. And of the I company

a good really position. in think I So, we are

Philip Fracassa

One at backlog other I year end point, of Joe, XXXX. than you ended we higher. all-in, the are We higher the actually mean when the look

sitting well are And I a visibility. backlog had that think than for here near-term we least we a the So, stronger with bodes year at ago.

Joe Ritchie

guys. Thanks, Great.

Richard Kyle

Joe. Thanks,

Operator

Joe. you, Thank

Our next is Chris line Dankert question comes Loop now Capital. Chris, your from from open.

Chris Dankert

margins of] in 'XX about flattish I you had now. [kind taking off, the Hey, we guys. mentioned guess the good Phil morning, when Thanks for first [Ph] were talking questions.

of New guide anything cetera. that I FX margin most nudge think I any The higher of last there in labor on kind there mind But out that part, the fourth and you hoping higher improved the for were bit stepping Year call, labor rates et the keep in kind investment able quarter, to are to versus material parts no? a we 'XX. called cost and in they in if I because are was be really moving mean up the assume

Philip Fracassa

support year. in that normal we like. on We it's aside through discount about you spending sizable are and probably talk When question, I and higher going move the year-on-year a levels. as mean but there's the the actually, investing, pension see a think we I the just for to higher headwind mean have rate overall with negative. expense the put to Yes, change year-on-year, example, the we about have are you labor great going Chris. the a we will walks with as be say about increases of to but -- SG&A, the And as currency will not I think some that because there, I would

talked that, mix distribution. like the with things the versus So, about little the OEM bit a

happened its the seeing is inflation execution, it's lot manufacturing line the we still Should inventory. operational but working is whether around You of other know, labor. through 'XX there that the some the got hit see dynamic way better inflation there -- within

'XX. think going I year, in a now 'XX. But in that are of earlier that's be some see come it to we planning might come in in Frankly the to 'XX. the thought cost will through through come we at we through

a temporary be it a headwind permanent not will certainly that a just headwind. comes through. while that'll So, But, be

are and other to volume of to the drivers down, those positive expect initiates kind and and self-help main being offsetting the we kind So, in the get, material logistics modest price the up. of addition this propping other

and organically, said, a M&A XX the than of just we expect currency depressing strong I incrementals bit. combination to It's it XX. a little just As are that would closer the the

Chris Dankert

how automation? that of of but flattish, in kind New any And into [Ph] kind you Year? then, that energy of think guess That's of process we kind other comments bucket, on to standout. [bulk] I moving fits Got outside that again, growth kind within have super helpful. just automation you. Do Kind when has of been process, of the

Philip Fracassa

And [indiscernible]. opportunity we to is I grow. expect expect see growth, some that that other mean Yes, market the to But, industrial, industrial the about would mean in trends. kind we forward. inside initiatives general piece there. general the particularly will a category good Spinea us automation in and for a strong factory talked of that market inorganic organic still the is a lot Rich automation, strong be have There we that It's going on continue see talked growth. but move both to and we as about that's we of automation I

Chris Dankert

Got best year thanks for guys. And of much. you. Well, so luck the

Richard Kyle

Thanks, Chris.

Operator

remaining at Thank are There you, this no questions time. Chris.

any have remarks? comments final you do or So,

Neil Frohnapple

us Glen, today. for and you everyone Thanks, Yes. thank joining

Thank any our please further call. concludes have questions me. you. today's you call, If And this after contact

Operator

Thank fourth earnings release you conference quarter for call. participating in Timken's today's

may You disconnect. now

The Timken Company (TKR) 6 Feb 232022 Q4 Earnings call transcript