Kennametal Inc. · NYSE:KMT
Kennametal — Q1 2024 Earnings Presentation
32 slides from Kennametal's earnings presentation, Nov 1, 2023
Slide 1: FY24 First Quarter Earnings Call Presentation
FY24 First Quarter Earnings Call Presentation November 1, 2023
Slide 2: Safe Harbor Statement
Q 1 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 in line with expectations; solid execution of operational excellence
Q 1 F Y 2 4 E AR N I N G S Sales in line with expectations; solid execution of operational excellence Earnings per share: Reported $0.37; Adjusted $0.41 (vs. $0.34 prior year) Sales Growth Sales Growth Sales of $492M, flat year over year by Region Sales Growth by End Market • Organic growth in Metal
Slide 4: Fiscal year end-market factors unchanged from prior outlook
E N D M AR K E T O U T L O O K Fiscal year end-market factors unchanged from prior outlook General Engineering Transportation Energy Earthworks Aerospace & Defense FY Sales YoY FY Sales YoY FY Sales YoY FY Sales YoY FY Sales YoY Flat Up Slightly Flat Up Slightly Up Strong 2H Market Factors 2H Market
Slide 5: Maximizing productivity for Aerospace & Medical customers
I N N O VAT I N G T O D R I V E G R O W T H Maximizing productivity for Aerospace & Medical customers Total Cost of Ownership • 400% longer tool life than benchmark* • Up to 40% higher metal removal rates in high strength steel ** • Covers wide range of applications allowing customer to: • Reduce in
Slide 6: Operating in a challenging macro environment
C O N S O L I D AT E D Q 1 F I N AN C I AL O V E R V I E W Operating in a challenging macro environment Adjusted Reported Quarter Ended ($ in millions) Change from PY Sept 30, 2023 Sept 30, 2023 Sept 30, 2022* Sales 0% $492 $492 $495 Organic 0% 0% 9% FX 0% 0% (7)% Business Days 0% 0% 0% Gross Profit
Slide 7: Profitability improvement offset by raw material increases
Q 1 F Y 2 4 AD J U S T E D E P S B R I D G E Profitability improvement offset by raw material increases Lower share count Change in tax reserves offset by tax settlement* • Lower volumes; offset by operational excellence initiatives & restructuring savings • Pricing actions mitigates raw material, w
Slide 8: Margin improvement of 170 BPS despite mixed market conditions
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 1 F Y 2 4 S U M M ARY Margin improvement of 170 BPS despite mixed market conditions Growth in EMEA and the Americas Sales Growth by Region Adjusted 2% Organic sales Sales Growth (in constant currency) Operating • EMEA strength across most end m
Slide 9: Sales and margin pressure due to end market conditions
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 1 F Y 2 4 S U M M ARY Sales and margin pressure due to end market conditions Organic sales Regional Sales Sales Growth Sales Growth by Region Adjusted decline 3% • EMEA – growth driven by Aerospace and Defense (5)% (in constant currency) O
Slide 10: Strong cash flow generation from improved inventory levels
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 from improved inventory levels Total Debt Net Debt $800 Share Repurchases & Debt Profile $680 $640 $593 $615 $627 $200M 3-year share repurchase program $600 $ Millions $541 $531 $486 • Q1: $14
Slide 11: Q2 FY24 Outlook
N E X T Q U AR T E R O U T L O O K Q2 FY24 Outlook OUTLOOK CONSIDERS THE FY24 SECOND QUARTER OUTLOOK FOLLOWING ASSUMPTIONS Sales • Inflationary environment continues to moderate $490 - $515M ~(5)% - Flat ~3% ~1% Year over Year sales growth reflects: Volume growth Price realization Foreign exchange •
Slide 12: 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 $2.1 - $2.2B ~(2) - 3% ~3% Neutral Revenue Assumptions: Volume growth Price realization Foreign exchange • Transportation: Gen Engineer
Slide 13: 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 14: Appendix
Appendix 14
Slide 15: 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 2 End markets focused on future strategic growth initiatives Metal Cutting Q1 FY23 Infrastructure Q1 FY23 Prior End Market Alignment New End Market Alignment Prior End Market Alignment New End Market Alignment 7% 7% 10% 11% 25% 32% 32% 35% 56% 55% $300M $3
Slide 16: Flat year over year sales; EMEA growth offset by Asia Pacific decline
Q 1 F Y 2 4 S E G M E N T R E S U LT S Flat year over year sales; EMEA growth offset by Asia Pacific decline Metal Cutting Infrastructure Energy 7% Energy 22% AsiaPac 18% AsiaPac 22% Aero & Def 12% Gen Eng 34% Americas 45% Gen Eng 54% Aero & Def 6% EMEA 19% Transp 27% Americas 59% Earthworks 38% EME
Slide 17: Strong balance sheet fuels seasonally strong cash flow generation
B AL AN C E S H E E T Strong balance sheet fuels seasonally strong cash flow generation 1042+969+362+189 ASSETS ($ in millions) Sept 2023 June 2023 Cash and cash equivalents $95 $106 Accounts receivable, net 289 307 Inventories 570 558 Other current assets 56 56 Total current assets 1,010 1,027 Prop
Slide 18: Non-GAAP Reconciliations
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations The information presented by the Company contains certain non-GAAP financial measures. Kennametal management believes that presentation of these non-GAAP financial measures provides useful information about the results of operations of the Company
Slide 19: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Constant Currency End Market Sales Growth (Decline) Constant currency end market sales growth (decline) is a non-GAAP financial measure of sales growth (decline) (which is the most directly comparable GAAP measure) by end market excluding
Slide 20: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Operating Operating Effective Tax ($ in millions, except percents and per share data) Sales Gross Profit Expense Income Net Income(5) Diluted EPS Rate Q1 FY24 Reported Results $ 492.5 $ 162.9 $ 111.6 $ 45.1 $ 30.1 $ 0.37 21.0 % Reported Ma
Slide 21: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Three Months Ended September 30, ($ in millions, except percents) 2023 2022 Net income attributable to Kennametal, reported $ 30.1 $ 28.2 Add back: Interest expense 6.6 6.6 Interest income (0.3) (0.2) Provision for income taxes 8.1 11.2 De
Slide 22: Non-GAAP Reconciliations (cont'd)
Q 1 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 Q1 FY24 Reported Results $ 308.2 $ 32.1 $ 184.2 $ 13.6 Reported Operating Margin 10.4 % 7.4 % Restruct
Slide 23: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Three Months Ended September 30, 2023 Metal Cutting Infrastructure Kennametal Organic sales growth (decline) 2% (3)% —% Foreign currency exchange effect 1 (1) — Business days effect — (1) — Sales growth (decline) 3 % (5) % — % Three Months
Slide 24: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended September 30, 2023 Americas EMEA Asia Pacific Constant currency regional sales growth (decline) 3 % 8 % (13) % Foreign currency exchange effect 1 6 (3) Regional sales growth (decline) 4 % 14 % (16) % Infras
Slide 25: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting Three Months Ended September 30, 2022 Americas EMEA Asia Pacific Constant currency regional sales growth 13 % 5 % 6 % Foreign currency exchange effect (1) (16) (7) Regional sales growth (decline) 12 % (11) % (1) % Infrastruct
Slide 26: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting General Aerospace & Three Months Ended September 30, 2023 Engineering Transportation Defense Energy Constant currency end market sales growth (decline) 1 % (1) % 7 % (3) % Foreign currency exchange effect 2 2 2 1 End market s
Slide 27: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Metal Cutting General Aerospace & Three Months Ended September 30, 2022 Engineering Transportation Defense Energy Constant currency end market sales growth 7 % 6 % 27 % 4 % Foreign currency exchange effect (7) (9) (7) (7) End market sales
Slide 28: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) Net Debt Three Months Ended (in millions) 9/30/2023 9/30/2022 9/30/2021 9/30/2020 Total debt (gross) $ 626.6 $ 679.8 $ 592.9 $ 639.7 Less: cash and cash equivalents 95.1 64.6 107.3 98.3 Net debt $ 531.5 $ 615.2 $ 485.6 $ 541.4 Three Months
Slide 29: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Average Current assets $ 1,010,555 $ 1,026,789 $ 1,079,035 $ 1,048,303 $ 1,011,486 Current liabilities 419,846 433,975 488,729 494,334 497,488 Working capit
Slide 30: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Average Current assets $ 1,011,486 $ 1,024,708 $ 1,043,241 $ 984,201 $ 966,948 Current liabilities 497,488 485,610 460,365 410,983 389,223 Working capital,
Slide 31: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Average Current assets $ 966,948 $ 1,004,807 $ 966,916 $ 948,686 $ 935,721 Current liabilities 389,223 437,394 425,553 402,641 415,573 Working capital, GAAP
Slide 32: Non-GAAP Reconciliations (cont'd)
Q 1 F Y 2 4 E AR N I N G S Non-GAAP Reconciliations (cont’d) (in thousands, except percents) 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Average Current assets $ 935,721 $ 1,440,812 $ 966,723 $ 1,035,912 $ 1,065,389 Current liabilities 415,573 898,080 383,131 409,110 418,719 Working capital,