Slide 1: FY24 Third Quarter Earnings Call Presentation
FY24 Third Quarter Earnings Call Presentation May 8, 2024
Slide 2: Safe Harbor Statement
Q 3 F Y 2 4 E AR N I N G S Safe Harbor Statement Certain statements in this release may be forward-looking in nature, or “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are
Slide 3: Sales reflect soft market conditions; strong cash generation continues
Q 3 F Y 2 4 E AR N I N G S Sales reflect soft market conditions; strong cash generation continues Earnings per share: Reported $0.24; Adjusted $0.30 (vs. $0.39 prior year) Sales Growth Sales of $516M, (2)% organic decline year-over-year Sales Growth by Region Sales Growth • Metal Cutting flat and In
Slide 4: Expanding new product releases enabled by Modernization
I N N O VAT I N G T O D R I V E G R O W T H Expanding new product releases enabled by Modernization Universal Turning Grade with KENGold PVD Coating delivers: Longer tool life = lasts 30% longer Faster cutting speeds = greater productivity Improved Quality Consistency = produces more even cuts
Slide 5: Higher cash flow; soft macro environment continues
C O N S O L I D AT E D Q 3 F I N AN C I AL O V E R V I E W Higher cash flow; soft macro environment continues Adjusted Reported Quarter Ended ($ in millions) Change from PY March 31, 2024 March 31, 2024 March 31, 2023 Sales (4)% $516 $516 $536 Organic (2)% (2)% 8% FX (1)% (1)% (4)% Business Days (1)
Slide 6: Lower volumes drive Adjusted EPS decline
Q 3 F Y 2 4 AD J U S T E D E P S B R I D G E Lower volumes drive Adjusted EPS decline • Lower sales and production volume • Higher wages and general inflation • Unfavorable timing of pricing vs. raw material costs in Infrastructure Partially offset by: • Higher price in Metal Cutting • Restructuring
Slide 7: Aerospace & Defense growth continues to offset other markets
M E TAL C U T T I N G B U S I N E S S S E G M E N T Q 3 F Y 2 4 S U M M ARY Aerospace & Defense growth continues to offset other markets Flat EMEA and slight declines in Americas and Asia Pacific Sales Growth by Region Adjusted Sales Growth Flat Organic sales • EMEA Transportation and Aerospace &
Slide 8: Sales remain soft; margin improving as expected
I N F R AS T R U C T U R E B U S I N E S S S E G M E N T Q 3 F Y 2 4 S U M M ARY Sales remain soft; margin improving as expected Organic sales Regional Sales Sales Growth by Region Adjusted • EMEA – growth in General Engineering decline 5% Sales Growth (in constant currency) Operating • Asia Pacif
Slide 9: Strong cash flow generation continues
B AL AN C E S H E E T AN D C AS H F L O W S TAT E M E N T H I G H L I G H T S Strong cash flow generation continues Share Repurchases & Debt Profile Total Debt Net Debt $800 $200M 3-year share repurchase program - ending June 2024 $659 $610 $622 $608 • Q3: $15M purchased; 609K shares $566 $600 • S
Slide 10: FY24 Outlook
F U L L Y E AR O U T L O O K FY24 Outlook OUTLOOK CONSIDERS THE FY24 TOTAL YEAR OUTLOOK FOLLOWING ASSUMPTIONS Sales • Inflationary environment continues to moderate $2.03 - $2.05B Neutral FY ~(4) – (3)% ~2% ~1% in Q4 Revenue Assumptions Year over Year Volume growth Price realization • Foreign exchan
Slide 11: A compelling investment opportunity
S U M M ARY A compelling investment opportunity Sustainable • Deep customer insight and application expertise in core markets Competitive • Materials Science and engineering expertise Advantages • Advanced product development and innovative product portfolio • Market-leading products serving diversi
Slide 12: Appendix
Appendix 12
Slide 13: End markets focused on future strategic growth initiatives
E N D M AR K E T R E AL I G N M E N T F Y 2 3 End markets focused on future strategic growth initiatives Metal Cutting Q3 FY23 Infrastructure Q3 FY23 Prior End Market Alignment New End Market Alignment Prior End Market Alignment New End Market Alignment 7% 7% 11% 12% 26% 33% 32% 33% 56% 55% $334M $3
Slide 14: Flat sales as end markets remain challenging
Q 3 F Y 2 4 S E G M E N T R E S U LT S Flat sales as end markets remain challenging Metal Cutting Infrastructure Energy 7% AsiaPac 17% AsiaPac 22% Energy 24% Aero & Def 13% Gen Eng 33% Americas 44% Gen Eng 54% Aero & Def 8% EMEA 20% Transp 26% Americas 58% Earthworks 35% EMEA 39% Period Ending March
Slide 15: Strong balance sheet fuels cash flow generation
B AL AN C E S H E E T Strong balance sheet fuels cash flow generation 1042+969+362+189 ASSETS ($ in millions) March 2024 June 2023 Cash and cash equivalents $92 $106 Accounts receivable, net 303 307 Inventories 548 558 Other current assets 57 56 Total current assets 1,000 1,027 Property, plant and e
Slide 16: Non-GAAP Reconciliations
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations The information presented by the Company contains certain non-GAAP financial measures. Kennametal management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company
Slide 17: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Constant Currency End Market Sales Growth (Decline) Constant currency end market sales growth (decline) is a non-GAAP financial measure of sales growth (decline) (which is the most directly comparable GAAP measure) by end market excluding
Slide 18: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Operating Operating Effective Tax ($ in millions, except percents and per share data) Sales Gross Profit Expense Income Net Income(5) Diluted EPS Rate Q3 FY24 Reported Results $ 515.8 $ 153.3 $ 108.7 $ 35.2 $ 19.0 $ 0.24 27.4 % Reported Ma
Slide 19: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Three Months Ended March 31, ($ in millions, except percents) 2024 2023 Net income attributable to Kennametal, reported $ 19.0 $ 31.9 Add back: Interest expense 6.8 7.7 Interest income (0.4) (0.3) Provision for income taxes 7.8 10.7 Deprec
Slide 20: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting Metal Cutting Infrastructure Infrastructure ($ in millions, except percents) Sales Operating Income Sales Operating Income Q3 FY24 Reported Results $ 326.6 $ 30.8 $ 189.2 $ 5.1 Reported Operating Margin 9.4 % 2.7 % Restructur
Slide 21: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Three Months Ended March 31, 2024 Metal Cutting Infrastructure Kennametal Organic sales decline —% (5)% (2)% Foreign currency exchange effect (1) (1) (1) Business days effect (1) (1) (1) Sales decline (2) % (7) % (4) % Three Months Ended M
Slide 22: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended March 31, 2024 Americas EMEA Asia Pacific Constant currency regional sales decline (1) % — % (1) % Foreign currency exchange effect (2) — (2) Regional sales decline (3) % — % (3) % Infrastructure Three Mont
Slide 23: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended March 31, 2023 Americas EMEA Asia Pacific Constant currency regional sales growth (decline) 16 % 11 % (3) % Foreign currency exchange effect — (6) (7) Regional sales growth (decline) 16 % 5 % (10) % Infrast
Slide 24: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting General Aerospace & Three Months Ended March 31, 2024 Engineering Transportation Defense Energy Constant currency end market sales (decline) growth (2) % — % 9 % (8) % Foreign currency exchange effect (2) — (1) — End market s
Slide 25: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting General Aerospace & Three Months Ended March 31, 2023 Engineering Transportation Defense Energy Constant currency end market sales growth 11 % 5 % 25 % 7 % Foreign currency exchange effect (4) (5) (4) (4) End market sales gro
Slide 26: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Net Debt Three Months Ended (in millions) 3/31/2024 3/31/2023 3/31/2022 3/31/2021 Total debt (gross) $ 608.1 $ 659.0 $ 621.9 $ 610.4 Less: cash and cash equivalents 92.1 93.5 100.0 114.3 Net debt $ 516.0 $ 565.5 $ 521.9 $ 496.1 Nine Months
Slide 27: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 Average Current assets $ 999,937 $ 1,009,820 $ 1,010,555 $ 1,026,789 $ 1,079,035 Current liabilities 413,245 414,108 419,846 433,975 488,729 Working capital
Slide 28: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Average Current assets $ 1,079,035 $ 1,048,303 $ 1,011,486 $ 1,024,708 $ 1,043,241 Current liabilities 488,729 494,334 497,488 485,610 460,365 Working capit
Slide 29: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Average Current assets $ 1,043,241 $ 984,210 $ 966,948 $ 1,004,807 $ 966,916 Current liabilities 460,365 410,983 389,223 437,394 425,553 Working capital, GA
Slide 30: Non-GAAP Reconciliations (cont'd)
Q 3 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Average Current assets $ 966,916 $ 948,686 $ 935,721 $ 1,440,812 $ 966,723 Current liabilities 425,553 402,641 415,573 898,080 383,131 Working capital, GAAP