Good morning. I would like to welcome everyone to Kennametal's Fourth Quarter Fiscal 2023 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Michael Pici, Vice President of Investor Relations..

Thank you, operator. Welcome, everyone and thank you for joining us to review Kennametal's fourth quarter and fiscal 2023 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 Pici, Vice President of Investor Relations.

Joining me on the call today are Christopher Rossi, President and Chief Executive Officer; and Pat Watson, Vice President and Chief Financial Officer. 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 Kennametal's SEC filings. 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 8-K on our website.

And with that, I'll turn the call over to Chris..

Thank you, Mike and good morning and thanks for joining us. I'll start the call today with a review of the year, then the quarter and a few recent customer wins as well as an example of the industry-leading innovation we're bringing to market. Then Pat will cover the quarterly financial results as well as the fiscal year '24 outlook.

Finally, I'll make some summary comments and then open the call for questions. Beginning on Slide 3. Fiscal year '23 presented us with several macroeconomic headwinds that the team successfully navigated to deliver results in line with our full year expectations.

Sales increased year-over-year at 9% organically, offset by negative foreign exchange of 5% and unfavorable business days of 1%. At the segment level, Metal Cutting reported 10% and Infrastructure reported 7% organic growth. Price continued to be a significant part of the sales increase and is one of the strategic levers we use to offset inflation.

On a constant currency basis, all regions grew with EMEA leading at 11% and Americas at 9%, both driven by growth in all end markets. And Asia-Pacific grew at 3%, which continues to be affected by a slower China recovery. Moving to our end market results.

You may have noticed that we have reclassified some of our end market sales in the press release and slides. Beginning this quarter to better align with the Company's strategic goals and growth initiatives, certain end markets that we report externally had been redefined. The changes include the following.

We've created a new aerospace and defense end market, which includes defense sales mainly powder sales and ammunition cores within our Infrastructure segment and certain metal cutting tooling sales to defense contractors.

This change results in certain defense sales being reclassified from general engineering in both segments to the new aerospace and defense end market. This aerospace and defense end market also includes the sales previously classified at aerospace for metal cutting.

Finally, Infrastructure's ceramic sales, which includes wear parts and evaporator boats for food packaging production have been reclassified from energy to the general engineering end market. We will discuss these end markets and how they connect to our growth initiatives in our upcoming Investor Day on September 8.

Refer to Slide 18 in the appendix for additional information and a reconciliation of these changes. By end market for fiscal year '23 aerospace and defense reported 14% growth, energy grew 11%, transportation grew 8%, general engineering grew 7% and earthworks grew 5%. Shifting to profitability.

For the full year adjusted operating margin was 9.6% compared with 11.1% in the prior year. The pricing actions taken in both business segments substantially covered all forms of inflation on a dollar basis.

The Metal Cutting segments volume came through at the expected operating leverage and operating margins increased year-over-year, despite the negative effects of foreign exchange.

In the Infrastructure segment, our intentional extension of the shutdown of powder production into January resulted in under-absorption within this segment, which negatively affected margins. This action, however, had the intended effect of lowering safety stocks as supply chain lead times and reliability improved.

Across both segments in early June, we announced the initiation of an action to streamline our cost structure, while optimizing investments in commercial and operational excellence initiatives. This action is currently expected to deliver annualized pre-tax savings of approximately $20 million by the end of fiscal year 2024.

We expect a pre-tax charge of approximately $20 million in connection with the execution of this initiative, which is primarily severance related cash expenditures. Approximately $7 million of that charge was recognized during the quarter and has been excluded from our adjusted results. Pat will have more details on this when he discusses the outlook.

Free operating cash flow for the year was $169 million, the highest level in over eight years, driven primarily by working capital changes, including improved inventory levels. Inventory reduction is a key area of focus and I am pleased with our team's efforts to deliver on this commitment.

In summary, we managed through many challenges in fiscal year '23, while continuing to advance our strategic initiatives to position the company for improved performance. Let's turn to Slide 4 for a review of the quarter. Sales increased year-over-year at 7% organically, offset by foreign exchange of 2% and unfavorable business days of 1%.

At the segment level, Metal Cutting grew 10% organically, which once again this quarter significantly outperformed our largest competitor and Infrastructure grew 3%. As expected, price continues to be a significant part of the sales increase and it largely offset inflation.

On a constant currency basis EMEA posted 12% growth, driven primarily by general engineering and an improving customer supply chain in the transportation end market. The Americas grew 3%, mainly driven by aerospace and defense. Asia-Pacific reported 3% growth reflecting a slower China recovery.

By end market, aerospace and defense reported 12% growth, general engineering grew 7%, transportation grew 7%, energy grew 6% and earthworks declined 1%. In aerospace and defense, aircraft build rates are still well below pre-pandemic levels and our strategic focus continues to drive share gains.

Transportation growth in the fourth quarter was driven by strong EMEA performance as our customers supply chain conditions improve, while Asia-Pacific experienced lower demand due to a slower reopening in China.

We maintain a leading position in both traditional and emerging transportation applications and we continue to win tooling content to capitalize on this megatrend and enhance our position in the hybrid and electric vehicle market.

Let me take a moment to provide some additional color around the end market conditions we experienced as we exited fiscal year '23 and what we see moving forward in the near-term. Sequentially, Q4 sales grew 3%, which is slightly below our historical pattern. This was driven by the following factors.

Moderation of industrial production in general engineering within both segments, which we experienced in the latter part of the quarter, lower oil and gas within infrastructure and the continued slow recovery in China.

This moderation in growth is anticipated to continue into the first quarter of fiscal year 2024, steady with the levels we experienced exiting the fourth quarter and slightly below our historical sequential trend.

That said, we expect our end markets to moderately improve throughout fiscal year '24 and growth to accelerate as the year progresses with stronger performance in the second half of fiscal year '24. Pat will provide more detail on how these trends affect fiscal year '24 when he discusses our outlook. Turning now to profitability in the quarter.

As mentioned earlier, price was a significant portion of the year-over-year sales increase and the pricing actions taken in both business segments substantially covered all forms of inflation on a dollar basis. Metal Cutting's operating margins increased year-over-year as a result of commercial and operational excellence initiatives.

The Infrastructure segment accounts for the Company's operating margin decline year-over-year. Lower volumes and product mix drove this decline. As we noted last quarter, we expected and did experienced sequential margin improvement within the Infrastructure segment from the third quarter level.

Operating expense as a percentage of sales was slightly higher compared to prior year and 20% this quarter. Adjusted EPS declined to $0.51 compared to $0.53 in the prior year quarter with the decline largely driven by the factors I discussed.

Free operating cash flow this quarter increased significantly to $109 million from $52 million in the prior year quarter, driven mainly by improved inventory levels.

And finally, we continued the share repurchase program this quarter with $12 million of shares bought back, bringing the total amount of repurchase since the beginning of the program to $135 million.

Our share repurchase program reflects the confidence we have in our ability to execute our strategic initiatives for long-term value creation, despite quarterly macroeconomic headwinds and uncertainties. Now let's turn to Slide 5 to review some recent commercial wins that resulted from successful execution of our strategic growth initiatives.

First is a win in general engineering from our Metal Cutting business. We delivered a custom solution included both WIDIA and Kennametal Tooling Technologies. This mix of high performance and fit-for-purpose tools met the customer's very technical needs and reduced their costs by 15%.

Our tools outperformed the competition and producing a wide range of aluminum steel components for medical and general engineering customers. Next is an aerospace one. We secured an initial order providing tooling for the enclosure of aerospace sensors. We provided a solution that reduces the customer set-up time by 90%. Turning to EV.

We provided tooling for a new class of high performance engines for a European OEM. We won by demonstrating innovative machining applications, while collaborating with machine tool builders and the customers.

In our Infrastructure business, we leveraged our proprietary additive manufacturing capability to help an oil and gas customer with a complex shape solution for a critical flow control valve. We also developed a new material grade to meet the customer stringent wear-resistance specifications.

And finally, we provided an improved drum design for a mining application that reduced the fuel consumption of the customers' fleet and increased our share of wallet. These are just some examples of wins that demonstrate our ability to gain share with both existing and new customers.

Now on Slide 6, I'd like to highlight an example of how innovation as a competitive advantage continues to deliver enhanced product offerings to our customers. This slide shows our new Drill Fix PRO tool from our Metal Cutting product portfolio.

Notably, the Drill Fix PRO can be used with many different materials and drilling needs across several end markets and applications such as suspension parts for EV platforms and high temperature alloy applications within aerospace.

And the proprietary cooling design allows for superior finish, lower cost per hole and increase tool life over previous platforms. These enhanced features demonstrate our ability to provide robust versatile cost effective solutions to address the needs of our customers.

Now let me turn the call over to Pat who will review the fourth quarter financial performance and the outlook..

Thank you, Chris and good morning, everyone. I will begin on Slide 7 with a review of Q4 operating results. The quarter's results demonstrate our ability to execute our initiatives in the face of continued headwinds from inflation, foreign exchange and the slower pace of recovery in China.

Sales increased by 4% year-over-year with 7% organic growth, partially offset by headwinds from foreign currency of 2% and unfavorable work days of 1%. As Chris pointed out, price remains a large portion of the sales increase.

On a sequential basis from Q3, sales growth of 3% was at the lower end of our normal Q3 to Q4 seasonal pattern of up 3.4%, driven by a lower-than-normal volume increase. Operating expense as a percentage of sales increased 70 basis points year-over-year to 20% driven by the effects of inflation.

Adjusted EBITDA and operating margins were 16.7% and 11.4% respectively, versus 19.1% and 12.3% in the prior year quarter. As in prior quarters, higher pricing substantially offset higher raw material, wage and general inflation in the quarter on a dollar basis. Lastly, foreign exchange headwinds from the strong U.S.

dollar were approximately $2 million. The adjusted effective tax rate decreased year-over-year to 19.7% primarily due to adjustments related to valuation allowances and reserves related to certain tax positions. Adjusted earnings per share was $0.51 in the quarter versus adjusted EPS of $0.53 in the prior year period.

The main drivers of our EPS performance are highlighted on the bridge on Slide 8. The year-over-year effect of operations this quarter was negative $0.03, due to lower volume and litigation settlement charge related to legacy operations. You can also clearly see the effects of the tax rate.

Foreign exchange, which improved slightly from last quarter and the reduction in pension income on EPS with taxes contributing positive $0.05 in currency and reduced pension income each contributing negative $0.02. Please note that our U.S. pension plan remains overfunded and the change in pension income is non-cash and is driven by market factors.

This change in assumptions has affected each quarter this fiscal year. Slides 9 and 10 detail the performance of our segments this quarter. Turning to Slide 9 for Metal Cutting. Reported metal cutting sales were up compared to the prior year quarter with 10% organic growth, partially offset by unfavorable foreign exchange and business days of 2% each.

We achieved growth in all regions and end markets on a constant currency basis. By region, EMEA led at 12% followed by the Americas at 8% and Asia-Pacific at 1%. EMEA's year-over-year performance reflects growth driven by supply chain improvements affecting OEM backlogs and transportation and volume in general engineering.

Americas year-over-year growth this quarter was driven by the execution of our growth initiatives in aerospace and defense and in the general engineering end market. Asia-Pacific's growth as Chris noted was primarily adversely affected by a slower recovery in China. Looking at sales by end market.

Aerospace and defense grew 19% year-over-year as our strategic initiatives continue to drive results in this end market. General engineering grew 7% year-over-year with the strongest growth in Americas and EMEA, partially offset by a slower China recovery. Energy, which experienced some demand moderation in the fourth quarter grew 3%.

And lastly, transportation grew 7% year-over-year benefiting from improved customer supply chains in EMEA, somewhat offset by weaker conditions in Asia-Pacific. Metal cutting adjusted operating margin of 12.6% increased 130 basis points year-over-year. Turning to Slide 10 for Infrastructure.

Organic sales increased by 3% year-over-year offset by unfavorable foreign exchange of 2% and business days of 1%. Regionally, EMEA grew 13% followed by Asia-Pacific at 4% and sales in the Americas declined 2%. Looking at sales by end market.

Energy grew 7%, mainly in EMEA from the delivery of a large order for pelletizing dyes used in plastics manufacturing but all regions saw growth. General engineering grew 5% due to improved demand in EMEA and Asia-Pacific partially offset by lower demand in the Americas.

Earthworks declined 1% with modest growth in the EMEA and Asia-Pacific regions, offset by lower construction volume in the Americas. And lastly, aerospace and defense declined 4% due to order timing when compared to the prior year. Adjusted operating margin declined year-over-year to 9.6% primarily due to two factors.

First, as discussed on prior calls, the favorability of price over material costs we had experienced is now negligible as raw material costs reflecting the current market costs are now flowing through the P&L.

The second significant factor affecting the margin this quarter was lower sales volume, primarily in the earthworks end market in America's road rehabilitation. We are seeing and hearing from our customers about fewer projects this construction season. Customers are telling us that there are two factors causing this.

First, our customers do not have enough labor to support the available work. And secondly, higher cost per mile have left municipalities with fixed budgets, no option, but to rehabilitate fewer miles of road. Sequentially, as we noted on our last call, we did see margin improve 480 basis points over the prior quarter.

This improvement was primarily driven by increased sales volume and the abatement of the unfavorable absorption effects from power plant shutdowns earlier in the fiscal year. Now turning to Slide 11 to review our free operating cash flow and balance sheet.

Our full year free operating cash flow was $169 million, nearly double the $85 million reported in the prior year. We are very pleased with the team's effort to deliver the best free operating cash flow since 2015.

The primary driver for the increase in cash flow was improved working capital, specifically from a lower inventory level as the benefit of our focus on reducing inventory levels was realized. On a dollar basis, year-over-year primary working capital increased to $662 million. On a percentage of sales basis, primary working capital increased to 32.4%.

Net capital expenditures were $89 million compared to $96 million in the prior year. In total for the year, we returned approximately $114 million to shareholders through our share repurchase and dividend programs. We repurchased $12 million of shares in Q4.

Inception to date, we have repurchased $135 million or 4.7 million shares representing approximately 6% of outstanding shares. And as we have every quarter since becoming a public company over 50 years ago paid a dividend to our shareholders.

Our commitment to returning cash to shareholders reflects our confidence in our ability to execute our strategy to drive growth and margin improvement. We continue to maintain a healthy balance sheet and debt maturity profile.

At quarter end, we had combined cash and revolver availability of approximately $806 million and we were well within our financial covenants. Additionally, our revolver was fully paid down at the end of the quarter. The full balance sheet can be found on Slide 23 in the appendix. Turning to Slide 12.

I want to take a moment to talk about our full year EBITDA margin, so everyone can see how macro forces we faced affected EBITDA margin. As you can see on the slide, our FY '22 full year EBITDA margin was 18.1% and that declined to 15.5% in FY '23. For the full year volume was a positive factor that added 40 basis points to margin.

However, we also had approximately 70 basis points of margin dilution from unfavorable absorption in infrastructure due to lowering safety stock and from supply chain disruptions in Q1 in both segments. As we have been discussing this year in this high inflation environment, we have been covering cost inflation with price on a dollar basis.

The net effect of this is a 120 basis points of margin dilution for the full year. Additionally, lower pension income and a stronger dollar were 60 basis points and 10 basis points dilutive respectively.

In total, the macro forces of price over inflation, foreign exchange and lower pension income accounted for approximately 190 basis points of margin dilution in FY '23. Looking ahead to FY '24, we expect the headwinds from pension income, unfavorable foreign exchange and cost inflation to moderate.

Additionally, we do not expect supply chain initiatives to be as disruptive going forward, and we will continue to execute on our commercial and operational excellence initiatives to grow the business and increase profitability. So let's turn to Slide 13 to review our FY '24 outlook.

We are providing an outlook for both full year and the first quarter. Beginning with the first quarter. We expect first quarter sales to be between $485 million and $510 million with volume ranging from negative 5% to flat. Price realization of approximately 3% and with neutral foreign exchange effects.

Let me share some detail on the sales assumptions underlying the Q1 outlook. Our Q1 range reflects a seasonal decline that is slightly greater than our historical average. On top of a seasonal decline last year that was better than our historical average.

The decline reflects our expectation that the energy and general engineering markets will continue to perform at the lower level we saw in Q4 and that the recovery in China remains slow. We expect the current inflationary environment to persist, but at a moderating pace.

We expect a raw material headwind of $8 million due to pricing ahead of raw materials in Q1 of the prior year. Foreign exchange and non-cash pension income are expected to be neutral to earnings per share.

Interest expense is assumed to be approximately $7 million and an effective tax rate of approximately 5%, which includes a one-time discrete items which is driving the lower first quarter rate. We expect adjusted EPS in the range of $0.30 to $0.40. Turning to Slide 14 regarding our full year outlook.

We expect FY '24 sales to be between $2.1 billion and $2.2 billion, with volume ranging from down 2% to up 3%. I want to spend a moment to review the volume assumptions in this outlook in more detail.

For the full year, as I just mentioned, the moderation in growth we experienced exiting FY '23 is anticipated to continue at that level into the first quarter of FY '24.

We expect growth to accelerate as the year progresses with second half growth outpacing the first half driven by improving conditions in the energy, general engineering and transportation end markets and an improvement in China. For the full year we expect aerospace and defense volume to remain strong.

Energy and transportation to moderately increase with general engineering and earthworks flattish. Based on current tungsten prices, we expect net price realization of 3% with our inflationary pricing actions, partially offset by lower prices for customers with index pricing due to higher material content. We expect foreign exchange to be neutral.

From a cost perspective, we expect the current inflationary environment to persist into FY '24, but it is assumed to moderate. We expect price to offset raw material, wage and general cost increases on a dollar basis.

As a result of pricing ahead of raw materials in Q1 of the prior year, we anticipate raw material cost to negatively affect Q1 by approximately $8 million. In addition, our FY '24 outlooks reflects the current pricing level for tungsten.

The Q2 effectiveness is an approximate $10 million headwind assuming this pricing level remains constant in the second half of FY '24, we will begin to benefit from lower material costs in Q4. Collectively, these headwinds are primarily affecting our Infrastructure segment.

Foreign exchange and non-cash pension income are expected to be neutral to earnings per share. Approximately $15 million of savings from our previously announced restructuring initiatives has been included, and we expect it to be realized more in the second half of the year.

We remain on target to achieve an annualized run rate of approximately $20 million at the end of FY '24. Depreciation and amortization is expected to be approximately $135 million and we expect interest expense of approximately $28 million and an effective tax rate for the full year of approximately 24%.

We expect adjusted EPS to be in the range of $1.75 to $2.15. On the cash side, the full year outlook for capital expenditures is $100 million to $110 million and the outlook for primary working capital is 30% to 32%.

Taken together, we continue to expect free operating cash flow at approximately 100% of adjusted net income in line with our long-term target. And with that, I'll turn it back over to Chris..

Thanks, Pat. Turning to Slide 15 let me take a few minutes to summarize. Overall, we're pleased with our strong free operating cash flow in the quarter and remain confident in our ability to continue to return cash to shareholders, while investing in our strategic initiatives for growth and profitability improvement.

We see additional opportunities to drive greater operational efficiencies from our modernized plants and drive share gain by optimizing our investments in commercial excellence and technology.

Looking ahead to fiscal year 2024, volumes associated with key end markets such as airline build rates and light vehicle production still remain below peak pre-COVID levels.

And our oil and gas customers expectation that spending will remain durable in a volatile commodity environment provides us with confidence that as the year progresses into the second half, we will see growth accelerate.

We are looking forward to providing more details on these end market conditions, as well as an update on the company's growth and innovation strategy and operational financial targets to fiscal year 2027 at our upcoming Investor Day. See Slide 16 for more specifics and a registration link to the event.

And with that operator, please open the line for questions..

[Operator Instructions] Our first question comes from Julian Mitchell from Barclays. Please go ahead..

This is Kiran Patel-O'Connor on for Julian. I just wanted to ask on your fiscal 2024 guidance. It looks like it implies an EBIT margin of around 11%. So the margins are up year-on-year more than 100 basis points on our math. I just wanted to check if that was roughly correct.

And just any differences to call out in terms of margin expansion by segment embedded within your guide?.

Yes. That sounds reasonable, Kiran. I think if we think about the margin in terms of the segments, just a couple of things to kind of think about as we talked about on the call. First off, start with Infrastructure.

Infrastructure will have some material headwinds here in the first half in Q1 as we talked about, price basically being ahead of raw material costs in the prior year and the additional APT headwind as we move into the second quarter. Those being the negative items, the positive items affecting the year for us is at the midpoint.

Volume will be up slightly. We will get the benefits of about $15 million from our restructuring initiative, as well as in predominantly within the Infrastructure segment, again, we had absorption issues in second quarter and third quarter in Infrastructure and in Q1 we had some supply chain disruptions that approximately $15 million.

We'll see come back and we'll also see some productivity come through our plants given our operational excellence initiatives. Overall, I think will have - both segments will be - margin will be up on a year-over-year basis at the midpoint..

Got it. That's helpful. Thank you. And then just my follow-up would be just kind of thinking about the EPS cadence through the year. It sounds like EPS is a little more 2H weighted this year than maybe it normally is.

And I know some of the factors you called out like restructuring, better topline growth as the year progresses, maybe narrower raw material headwinds in the second half. So I just wanted to check if you could give us any rough split on EPS in the first half versus the second half of fiscal 2024? Thanks..

Yes. I think if you think about that, you're right, it's going to be weighted towards that second half a bit more. We would normally think about 40% of the EPS will be coming through in the first half. I think it will be less than this year.

We'll get a bit more in the back, pick up the benefits from restructuring in the back half obviously get the relief on the raw material as we get out to the fourth quarter as well. Raw material should be a net positive for us..

Great. Thank you..

There are no more questions in the queue. This concludes the question-and-answer session. I would like to turn the conference back over to Chris Rossi for closing remarks..

Thanks, operator and thanks everyone for joining the call today. I hope that you will be able to join us next month at our Investor Day on September 8th at the New York Stock Exchange..

We have a call in the queue. A question in the queue..

We have a question from Steve Barger from KeyBanc Capital Markets. Please go ahead..

Thanks. Busy morning. Sorry, I forgot to punch into the queue. But --.

Good morning, Steve..

We've seen - good morning. We've seen the Metalworking Index declined for most of the year and year-over-year IP just printed negative for June.

Just given Kennametal's historical relationship to the cycle, how confident are you in the volume outlook, especially in the back half of the year? Can you just talk about how you see that?.

Yes. I think what we're seeing is maybe a few data points. As Pat said in his comments, we kind of see the first half progressing - certainly, the first quarter kind of progressing at the levels we saw in Q4, so not really deteriorating.

And then the second half of our year which of course is the first half of calendar year 2024, we see some improvements. And a couple of things are driving that. If you look at aircraft OEM build rates, according to Boeing and Airbus, first half versus second half, they're going to be up about 12%.

We also look at light vehicle production, that's going to increase globally about 2% from first half to second half. And then we think there'll be a gradual improvement in industrial production in Europe as the year progresses.

And also the China recovery has been slow, but we understand the Chinese government is looking some stimulus measures, which we think will help the acceleration of China. And then also on the oil and gas front, the rig count at its current level is pretty low and it's expected to increase by the time we get into Q4. And then I finally say on U.S.

manufacturing, as I said, it will stay about the Q4 levels in the first half, then it will improve from there and there's a couple of data points we've got. We look at the National Association of Manufacturers forecast of manufacturing production and that's expected to be about 1.2% year-over-year for calendar year 2024.

So we think that will accelerate some of the benefits in the second half of our year. And then we also look at the PMIs, I think the S&P U.S. manufacturing PMI in June was at 46.3% and it's - in July it's at 49%. So it's still in the contraction territory as you know.

But it's moving in the right direction and we think that once we get through the first half of our year that we see that the industrial production should start to ramp up overall. And we don't have a huge increase in volume year-over-year implied in these - in our forecast.

If you look at infrastructure it will probably be for the full year flat to slightly down and metal cutting be slightly up. So at the midpoint of our guidance, we're not assuming a huge amount of volume improvement. If you're more optimistic about the second half of the year that will take us to the high end of the range.

If you're a little more pessimistic that could be at the lower end of the range..

Yes. Thanks. That's great color. I appreciate that. In terms of the volume expectations, for a while now volumes has been kind of hard to come by in, in an environment where the end markets have been pretty resilient. And you make a good case for how you see the back half.

But are you expecting that your volume guidance is a function of the cycle itself? Or can we really start to expect commercialization to drive some outgrowth, because you often spend time talking about the new business wins. But something must be offsetting that on the other side..

Yes. This is a combination of - I would say that for the most part, we're not counting on the markets to give us very much. A lot of this is driven by the commercial excellence initiatives..

So you think the commercial excellence initiatives will drive more volume than the cycle itself, as you go through the year?.

As we go through the year, I think in Infrastructure, the commercial initiatives are going to drive a good portion of that and in Metal Cutting, it's probably a little bit of a 50-50 split, roughly..

Got it. And Pat, you expect - you talked about growth picking up as the year progresses. But you have that $10 million unfavorable impact from tungsten in 2Q.

Does that mean 2Q generally looks more like 1Q? Or can you kind of help us with the first half cadence, just given some of the puts and takes in 1Q and 2Q?.

Yes, I think you're right, Q2 is going to look much like Q1..

Got it. Okay. Thanks very much..

Thanks, Steve. Take care..

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Chris Rossi for closing remarks..

Okay. So just a reminder, we have our Investor Day on September 8th at New York Stock Exchange. Hopefully you all - we'll be able to see you all there. And if you have any questions, don't hesitate to call, Mike. And as usual, we certainly appreciate your interest and support. Thank you..

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