Good morning. I want to welcome everyone to Kennametal's First Quarter and Fiscal 2026 Earnings Conference Call. Please note this event is being recorded. I will now hand the conference over to Michael Pici, Vice President of Investor Relations. Please proceed.

Thank you, operator. Welcome, everyone, and thank you for joining us to review Kennametal's First Quarter Fiscal 2026 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: Sanjay Chowbey, President and Chief Executive Officer; and Pat Watson, Vice President and Chief Financial Officer. After Sanjay and Pat's prepared remarks, we will open the line for questions. At this time, I would 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 Sanjay.

Thank you, Mike. Good morning, and thank you for joining us. I'll begin the call today with a brief overview of the quarter, including some end market commentary, followed by a spotlight on one of our growth focus areas, Power Generation. From there, Pat will cover the quarterly financial results as well as the fiscal year '26 outlook. Finally, I'll make some summary comments, and then we will open the line for questions. Turning to Slide 3. Let me begin by addressing some of the highlights from our strong first quarter. Our global commercial teams continue to advance our strategic growth initiatives. In the quarter, infrastructure secured 2 large project wins within our Earthworks end market. Both wins were a direct result of our team's efforts with those customers to deliver high-quality technical support and superior product performance. That combination has and will continue to be a winning formula for us. In Metal Cutting, we won projects in Energy, Aerospace and Defense and Transportation. For example, we increased our share of wallet with an aerospace customer to provide high precision tooling solutions for machining military components. As you know, we continue to prioritize above-market growth, and these wins position us well in markets that are benefiting from long-term secular growth trends. We also continue to respond to the evolving tariff landscape, and we remain committed to fully offsetting the impact of tariffs through various actions, including product moves, supply chain optimization and surcharges as appropriate. Separately, we have implemented pricing actions in response to the continuing rise in tungsten costs, which have increased since August and are at historically high levels. We remain confident in our ability to price to offset the rising tungsten costs. On the cost improvement front, we realized $8 million in restructuring savings this quarter, and we continue to execute our plans to lower structural cost by reducing employment costs and consolidating manufacturing operations. Now let's move to our quarterly results, which exceeded the sales and EPS outlook we provided last quarter. Compared to the outlook, sales were primarily driven by better-than-expected volume across all end markets. EPS benefited from the additional volume and a lower-than-anticipated tax rate. Year-over-year, sales increased 3% organically. That's our first quarter of organic growth in 2 years and reflects modest relief from the broad market weakness that has impacted our end markets for the past 8 quarters. As you may recall, historically, down cycles tend to last 4 to 8 quarters. Adjusted EPS increased to $0.34 compared to $0.29 in the prior year quarter. In terms of profitability, adjusted EBITDA margin was 15.3% compared to 14.3% in the prior year quarter. Cash from operating activities year-to-date was $17 million compared to $46 million in the prior year period. Free operating cash flow year-to-date was negative $5 million compared to $21 million in the prior year. And finally, we returned $25 million to shareholders through share repurchases of $10 million and dividends of $15 million. Today, we are raising our sales and EPS outlook for fiscal '26. This update reflects the modestly improved market conditions, additional price and tariff surcharges and our favorable performance in the first quarter. Pat will provide more details on our updated outlook shortly. In summary, we are pleased with this quarter's results, and we continue to focus on delivering our commitments throughout fiscal '26. Turning to Slide 4 and our end market update. As a reminder, our full year outlook reflects forecasts of specific market drivers and general market conditions. I will focus on the bottom half of the slide and address the 2 markets that have changed since our last call. First, IHS estimates for Transportation slightly improved from the previous estimate, while still being in the negative low single-digit range. Volumes in the Americas have improved from the prior estimate, partially offset by pressure that continues to impact EMEA. And secondly, for Aerospace and Defense, expectations are improving as the aerospace industry has recovered from supply chain challenges and will benefit from the recent approval that will increase OEM production. Market factors remain mostly unchanged within the other end markets. Turning to Slide 5. We are seeing emerging opportunities in Power Generation, driven by rising demand for both renewable and traditional energy sources to support the expansion of AI data centers. This is an expanding opportunity for Kennametal across both of our segments, and we are capitalizing on this trend. As we shared last quarter, we secured a key win in Metal Cutting connected to the backup generators that are providing energy security to those data centers. And it's our deep expertise in application engineering and machining complex engine components that is positioning us particularly well to support customers as they manufacture backup power generation systems and utility scale gas turbines. With respect to the gas turbines, these applications require the same capabilities that we have long applied in Aerospace and Defense. So this is also an area that we know very well. While this slide focused on Metal Cutting, the opportunity extends across both segments. In Infrastructure, our wear-resistant solutions and a strong position in oil and gas extraction aligns with the growing need for natural gas as a reliable fuel source for uninterrupted power. So while our recent wins are in backup power systems, the opportunity is much broader, and we are well positioned to capitalize on that as the trend continues. Now let me turn the call over to Pat, who will review the first quarter financial performance and the outlook.

Thank you, Sanjay, and good morning, everyone. I will begin on Slide 6 with a review of the first quarter operating results. Sales were up 3% year-over-year on both a reported and organic basis. At the segment level, Metal Cutting and Infrastructure both increased 3% organically and by end market. On a constant currency basis, Aerospace and Defense grew 20%; Earthworks grew 5%; Energy increased 1%; General Engineering was flat and Transportation declined 1%. Regionally, on a constant currency basis, sales in the Americas increased 7%, EMEA was flat and sales decreased 1% in Asia Pacific. The sales performance this quarter exceeded the outlook we provided last quarter. Relative to those expectations, share gains in Earthworks, better-than-expected auto build rates and overall modest volume improvements were the catalysts for the outperformance. I will provide more color when reviewing the segment performance in a moment. Adjusted EBITDA and operating margins were 15.3% and 8.2%, respectively, versus 14.3% and 7.6% in the prior year quarter. The improved margin was driven by price and tariff surcharges and incremental year-over-year restructuring savings of $8 million, partially offset by higher compensation costs, tariffs and general inflation and a prior year benefit from net insurance proceeds of $4 million that did not repeat in the current year. Adjusted EPS was $0.34 in the quarter versus $0.29 in the prior year period. The main drivers of our EPS performance are highlighted on the bridge on Slide 7. The year-over-year effect of operations this quarter was positive $0.05. This reflects incremental restructuring benefits, favorable timing of price/raw material costs, tariff surcharges and the advanced manufacturing tax credit, partially offset by higher compensation costs, tariffs and general inflation. The headwind of $0.04 from the net insurance benefits received in the prior year due to the tornado that damaged our Rogers facility. You can also see $0.04 of transactional gains related to preferential Bolivia exchange rates. Slides 8 and 9 detail the performance of our segments this quarter. Reported Metal Cutting sales were up 5% compared to the prior year quarter with 3% organic growth and favorable foreign currency exchange of 2%. Regionally, excluding the effects of currency, the Americas increased 6%, EMEA increased 1% and Asia Pacific declined 1%. Looking at sales by end market, Aerospace and Defense increased 16% year-over-year from improved build rates in the Americas and easing supply chain pressures in EMEA. Energy grew 12% this quarter due to data center power generation wins. General Engineering was flat year-over-year from lower production activity, primarily in EMEA. And lastly, Transportation declined 1% year-over-year due to project timing in Asia Pacific and an overall slowdown in EMEA and the Americas. Metal Cutting adjusted operating margin of 8% decreased 20 basis points year-over-year, primarily from higher compensation costs, tariffs and general inflation. These factors are partially offset by higher prices and surcharges and incremental year-over-year restructuring savings of approximately $6 million. Turning to Slide 9 for Infrastructure. Infrastructure sales increased 3% organically with reported sales growth of 1%, which was negatively affected 3 points from the divestiture, which closed in June. Regionally, on a constant currency basis, Americas sales increased 7%, Asia Pacific was flat and EMEA sales decreased by 3%. Looking at sales by end market on a constant currency basis, Aerospace and Defense increased 28% from defense orders driven by continued execution on our growth initiatives in both EMEA and the Americas. Earthworks increased 5% due to mining share gains in the Americas and higher global construction demand, partially offset by Asia Pacific mining market softness. General Engineering was flat due to higher powder demand in the Americas and higher demand in Asia, partially offset by lower industrial activity in EMEA. And lastly, Energy declined 5%, mainly in EMEA, driven by project timing and from a lower U.S. land rig count. Adjusted operating margin increased 190 basis points year-over-year to 8.8%. Adjusted operating income of $17 million increased primarily due to the favorable timing of pricing compared to raw material costs, partially offset by prior year net insurance proceeds of $4 million and higher compensation costs and general inflation. Additionally, we recognized year-over-year restructuring savings of approximately $2 million. Now turning to Slide 10 to review our free operating cash flow and balance sheet. Our first quarter net cash flow from operating activities was $17 million compared to $46 million in the prior year period. The change in net cash flow from operating activities was driven by working capital changes, including a higher investment in inventory, primarily from rising tungsten prices. Because sales volumes declined less than normal from the fourth quarter of FY '25 and pricing and tungsten value was up, working capital was a more challenging comparison this quarter. Our first quarter free operating cash flow decreased to negative $5 million from positive $21 million in the prior year, primarily from the lower cash flow from operations. On a dollar basis, year-over-year, primary working capital increased to $660 million and on a percentage of sales basis, it increased to 32%. Net capital expenditures of $23 million declined modestly from $25 million in the prior year quarter. In total, we returned $25 million to shareholders through our share repurchase and dividend programs. We repurchased 475,000 shares or $10 million in Q1 under our $200 million authorization. And as we have every quarter since becoming a public company over 50 years ago, we paid a dividend to our shareholders. We remain committed to returning cash to shareholders while executing our strategy to drive growth and margin improvement. We continue to maintain a healthy balance sheet and debt maturity profile with no near-term refunding requirements. At quarter end, we had combined cash and revolver availability of approximately $800 million, and we're well within our financial covenants. The full balance sheet can be found on Slide 17 in the appendix. Now on Slide 11 regarding the full year outlook. We now expect FY '26 sales to be between $2.1 billion and $2.17 billion, with volume ranging from negative 1% to positive 3%, net price and tariff surcharge combined of approximately 7%, and we anticipate approximately 2% tailwind from foreign exchange. We now expect adjusted EPS to be in the range of $1.35 to $1.65. The increased outlook reflects additional pricing actions related to the rising cost of tungsten and additional surcharges in place to address the changes in policy since our August call. The adjusted tax rate for the year is now 27%. And as a result of the additional cash that we need to invest in inventory due to higher tungsten costs, free operating cash flow as a percent of adjusted net income is now 100%. All of the other elements of our outlook remain unchanged. Turning to Slide 12 regarding our second quarter outlook. We expect Q2 sales to be between $500 million and $520 million, with volume ranging from negative 4% to flat, price and tariff surcharge realization of approximately 7% and a 2% positive impact from foreign exchange. One comment regarding the adjusted effective tax rate this quarter. The rate of approximately 30% assumes a discrete item that is driving the rate higher in Q1 than our full year outlook. We expect adjusted EPS in the range of $0.30 to $0.40. The other key assumptions for the quarter are all noted on the slide. And with that, I'll turn it back over to Sanjay.

Thank you, Pat. Turning to Slide 13. Let me take a few minutes to summarize. We delivered a solid first quarter, thanks to modest improvements in a couple of end markets, project wins on the commercial side and cost improvement actions. We continue to make steady progress on our strategic growth initiatives, lean transformation and a structural cost improvement while also exploring ways to strengthen our portfolio over time. In parallel, we are monitoring external drivers such as trade and monetary policies and raw material prices and taking timely and necessary actions. We remain confident in our plan for long-term value creation for our shareholders. And with that, operator, please open the line for questions.

Today's first question comes from Angel Castillo with Morgan Stanley.

Congrats on a strong quarter here. I just wanted to touch base a little bit more on the end market outlook. I think, you noted a little bit on the kind of prepared remarks about what you're seeing across end markets. But I think it kind of stood out to me that some of the changes on Slide 4 for each end market were quite notable in terms of going from down to up or materially kind of more into the double digits, all the while some of the kind of market factors that are listed below seemed a lot more muted to unchanged. Can you just clarify, I guess, within each of these, what specifically is kind of driving the material kind of uplift? And in particular, maybe also from a regional standpoint, how should we think about the mix of which regions are driving kind of the improved outlook for each of these?

Thank you, Angel. That's a good question. Let me explain the information on Slide 4. The top section shows our sales trend, while the bottom section highlights the external market factors. There are three main components in these end markets: first, APT-related price increases and surcharges; second, the performance of the market, whether it has improved or remained stable; and third, project wins and market share gains. As mentioned in our prepared remarks, there were certain markets where we benefited significantly from project wins, particularly in Aerospace and Energy, especially in Power Generation. Now, regarding the other factors, APT and surcharge-related pricing impacts all end markets. Specifically, we noticed that Transportation and Aerospace had the most significant changes. In Transportation, we observed a stronger performance in the Americas during Q1, with positive expectations for the full year based on IHS data. Although it's still in the low single digits in negative territory, the current IHS forecast for Transportation has improved compared to three months ago. In Aerospace, we're seeing better customer build rates and easing supply chain constraints, particularly from a Defense standpoint, which indicates a stronger market. For Earthworks, the upward arrow at the top of the page is primarily due to market share gains. In Energy, conditions are relatively flat regarding oil and gas, with rig counts aligning with our previous expectations from three months ago. However, we have secured positive project wins in Power Generation, which has contributed positively to Energy. In General Engineering, we’ve seen some improvements in Q1. Overall, looking at the full year and excluding China, we anticipate slight improvements or a stable situation in General Engineering regarding IPI. So, to summarize, APT and surcharges, along with share gains, are contributing positively, along with modest improvements in a few end markets.

That's very helpful. As a follow-up, could you provide more insight into the market share dynamics? Is the increase in wins indicative of an acceleration in certain end markets? Is it related to the product resonating well with customers or due to competitive advantages of being a domestic producer? Also, regarding the price dynamics, are there any concerns about tungsten prices or the potential for customers to switch to non-tungsten equipment if prices continue to rise? What can you share about customer elasticity and their willingness to accept higher prices?

Sure. First of all, our share gain is driven by three main factors: innovative solutions, commercial excellence which includes customer engagement and application support, and operational excellence. Our overall operational performance, including safety, quality, and on-time delivery, has been very good, and we are making solid progress in these areas. All these factors are contributing to our share gain. Now, to confirm, your second question was about...?

Moving away from.

Okay. Yes. Sorry, yes.

Yes, so specific to the customers for the price increases in tungsten?

We have examined the situation regarding tungsten. From our viewpoint, the innovative solutions we offer provide significant value to our customers. Even with the rise in tungsten prices, it makes more sense for them to continue using our solutions instead of switching to stainless steel or other alternatives, as the performance benefits will outweigh the higher costs associated with tungsten. Therefore, we don't perceive a major risk from this. However, to address your broader question, some end markets are still uncertain. Yes, conditions could worsen due to monetary and trade policies. Nevertheless, we are adopting a balanced approach in assessing the market and price trends while also focusing on our share gain initiatives.

And our next question today comes from Tami Zakaria with JPMorgan.

Very nice quarter. I wanted to ask you about the $250 million TAM from engines, large engines, which I thought was very interesting. How much of this $250 million is simply volume? Or does it also include pricing? And I may have missed it, but what share of that $250 million do you realistically expect to gain over the next 3 years?

Yes, Tami, that's a great question. First, let me clarify that the $250 million we are highlighting as the total addressable market for Power Generation used to be part of either Energy or Transportation. We have now separated it to better focus on that segment and understand its growth potential. Over the past few years, this market has grown in the high single-digit range, and we expect it to continue growing at a rate of 10% for the next few years. The $250 million figure incorporates the latest pricing trends, and when we look at the historical trend, it aligns well. Regarding market share, we are not providing specific details on that at the moment. However, we are very confident that our solutions, value proposition, application support, and custom offerings position us strongly to succeed in this area.

Understood. That is very helpful. I wanted to ask you about the Energy end market outlook a bit. I think it improved to mid-single digits from flat, if I'm reading it correctly. What's really driving this improved outlook for Energy? Rig counts is still down. Is it well? So could you just elaborate on that a little bit?

Yes. As you look at that, again, Slide 4, in the bottom half of the page, we are clearly telling you that oil and gas stays about the same, right? It's not getting worse. That's good news. But overall sales, which is in the top half of the page, we are saying it's improving because we have definitely impact of APT-related price increase and also surcharges if applicable. And as you know, a lot of products that is used in oil and gas does have very heavy content or greater content of the raw material.

And just to tack on to that, Tami, keep in mind that across our Energy portfolio between both businesses, it's pretty diversified. So beyond having the exposure in oil and gas, which we think of primarily in Infrastructure, Metal Cutting has some exposure there as well. Obviously, we've been talking about the opportunities we have in reciprocating Power Gen and more traditional power gen sources. And as you followed us over the last couple of years, the great position we have in wind power as well.

And our next question today comes from Steven Fisher at UBS.

Congrats on the quarter. Just to come back to the share gain dynamics a little bit. I know this is something you obviously embedded in your multiyear outlook since 2023. So it's nice to see it coming through. I guess just now that we're starting to see this a little bit more visibly and you started to talk about it more, what visibility do you have to anything else in kind of lined up that could materialize in some program wins over the next couple of quarters?

Yes. Again, good question, Steven. Let me start by first addressing some of the higher growth end markets that we see right now from Aerospace and Defense, we have had success in that for the last 2, 3 years. Actually, we have talked about it all the way back in the Investor Day. And we have a good pipeline of projects that we continue to work on. Then when it comes to Power Generation, we already talked about a little bit. So that also has good pipeline. When it comes to Transportation, we will position ourselves very well as the transportation industry was going through quite a bit of dynamic shift in terms of the powertrain. And we have solutions which will support whether a customer launches new internal combustion engine or hybrid or plug-in hybrid or battery-only electric vehicle, we have good solutions, and we have very good strong application support for that. So well positioned on that. And in parallel, we continue to work on Earthworks, as you saw some of the project wins we reported in Q1. And finally, coming to General Engineering, our strong relationships with our channel partner and really working together to do what's best for our end customers have also bode well for us, and we'll continue to work on all of these 5 end markets.

That's really helpful. Can you discuss how much of the benefit to the top line and margin dynamics from tungsten price you experienced in Q1 and what may still happen in Q2? Also, do you expect to see a balance between what you're passing along and what you're experiencing by Q3?

Yes. In the first quarter, we experienced a modest tailwind, and as we move into the second quarter, we should see some ramp-up. Prices will increase, which will contribute to that tailwind. There was a small amount of advanced buying in the first quarter that could affect the volume between Q1 and Q2. This is part of our volume outlook for the second quarter. Looking ahead to the third quarter, we expect a significant increase in prices for raw materials. If tungsten prices remain at their current levels, we could see our strongest earnings per share quarter in Q3. As we approach Q4, we anticipate reaching a state of price/raw neutrality. Historically, our profit and loss statements tend to lag behind market changes by about two quarters. If tungsten prices rise during this quarter, it would indicate that favorable pricing conditions might continue into the fourth quarter. Conversely, if tungsten prices decrease, we would see the effects in Q4. However, for now, our outlook assumes stable tungsten pricing for the remainder of the year.

And our next question today comes from Steve Barger at KeyBanc Capital Markets.

Going back to data center, you said some of that TAM used to sit in Energy or Transportation. So what is the incremental machining opportunity you see from data center? And can you frame up, does it add single-digit millions of revenue, double-digit millions? How are you thinking about that?

Yes, Steve, it's definitely built into that $250 million. At this point, over the last few years, we have seen that in the $100 million range, and then we're raising it to a 10% CAGR.

Got it. Okay. And then, Sanjay, going back to your comment on some higher expectations for General Engineering. I think everybody is looking for the turn there. So is your outlook based on expectations for improvement just due to how long this downturn has been? Or is it customers saying they want to restock? Or are they seeing actual demand pick up that they're either seeing it or they're planning for it? Can you just frame up that comment?

Yes, sure. Steve, when it comes to General Engineering, I think at this point, by region, I'll comment a little bit. In U.S. and Americas in general, we saw a slight improvement. And by the way, you'll hear the word slight quite a bit here just because we are on the fence. I can tell you that even if you look at our outlook, the way we have framed it, overall volume for the full year, we are saying at midpoint is 1%. So that gives you the idea that we're right on the fence, a slight bit of improvement in IPI will help us, and that's what we have built because that's what we have seen from external projection perspective. In recent months, we have seen some improvement in Americas. EMEA, in Q1, we saw, but the projection for the rest of the year is more flattish. And in China, we have seen positive projection, slight bit of positive projection.

And our next question today comes from Chris Dankert at Loop.

I guess just to circle back to the earlier question, can you kind of help frame for us what the assumed price/cost impact actually is in the guide? Are we assuming dollar neutrality for the year? Is it dollar positive margin? Can you just kind of walk us through what's actually assumed in your guide from a price/cost perspective here?

Yes. So I would say for the full year, there will be positive price/raw, right? And you just kind of have to look through where the volume is because, again, volume at this point in time on a full year basis, as Sanjay just talked about, it's up 1%, right, at the midpoint of the guide, right? In addition to that, I would just point out to you that think about some of the comments we had last quarter in terms of some of the tailwinds we had in the prior year that are just not repeating here this year. So when we just think about that overall profitability and EPS walk, yes, we're going to have a very modest amount of positive volume, not quite frankly, enough to write home about from a leverage perspective. We will have some benefits, obviously, from the restructuring coming through. We're going to have significant amounts of cost inflation here coming through in the business, whether that relates to tungsten tariff costs as well as, I would say, the normal salary inflation that comes about in addition to some of the headwinds that we've got in, in terms of $15 million that we talked about in the prior quarter in terms of net tornado benefits that occurred in the prior year and some additional tax credits that came through from a tungsten perspective as well as about a $5 million pension headwind. So we'll see that positive price raw here really in Q3. And as we just talked about previously, when we get out to Q4, we'll really get to a more neutral basis.

Okay. Okay. That's helpful. And then as we're thinking about those restructuring savings, any additional color either in terms of the ratability there or maybe just even how to think about what the key programs are inside that restructuring savings?

Yes, I'd say it's pretty ratable throughout the year, maybe with a little bit of a trail off in Q4 as we start lapping some stuff. In terms of what's in that program, we've done some shifting of resources that what's been able to unlock some cost as well as in the last year, talked about the closure of 2 facilities, one here in the U.S. and the consolidation of 2 locations in Spain that are driving that.

Yes, we are on track for the $35 million that we have projected for the year.

And our next question today comes from Julian Mitchell of Barclays.

I just wanted to try and dial in again a little bit on the sort of EPS guide change and the moving parts there. So I think the guide midpoint went up by sort of $0.40 or so. And maybe $0.05 of that is the lower tax rate. So are we right in thinking that sort of the price/cost part of that $0.40 is kind of more than half of it? So maybe, I don't know, $0.20, $0.30 tailwind from price/cost versus the prior guide? And then it sounds like a lot of that comes in the third fiscal quarter. And as we look ahead, simplistically, if the tungsten price stays where it is today, is it sort of neutral after this year? Or does it sort of flip to a kind of headwind as your COGS catch up? Just trying to understand that dynamic, please.

Yes, good questions, Julian. The best way to think about the change in the outlook is that there are two main factors: volume and price. There is some additional volume contributing to the change, which you could quantify in EPS terms as around $0.20 to $0.30. The tax number might be slightly high, so it’s probably closer to about $0.03 when you calculate it. Additionally, there is some price/raw favorability this year, but it is somewhat offset by higher variable compensation. Regarding Q4, the outlook reflects neutrality, and unless there’s a change in tungsten, we expect to be price/raw neutral going forward into the next fiscal year. There will be some favorability on price/raw this year that won’t repeat next year, which will be seen as a headwind from a year-over-year perspective. However, if viewed sequentially, we will be on the same basis.

Yes. I think, Julian, keep that in mind, as Pat said, that volume, which, again, if you look at prior outlook versus this outlook, has improved by 350 basis points. Price improved by 300 basis points. Average was 4%, now it's 7%. So it gives you an idea that volume is playing a role in EPS. And within the volume, you've got project wins, you've got some improvement in market. And then also, I think those are the 2 main components of that.

That's helpful. So you've got a price/cost tailwind this year of approximately $0.20 to $0.30, is that correct?

Yes. I go back to the math I just kind of gave you there, Julian, so.

Yes. I think, Julian, keep that in mind, as Pat said, that volume, which, again, if you look at prior outlook versus this outlook, has improved by 350 basis points. Price improved by 300 basis points. Average was 4%, now it's 7%. So it gives you an idea that volume is playing a role in EPS. And within the volume, you've got project wins, you've got some improvement in market. And then also, I think those are the 2 main components of that. Yes. It's a 10% CAGR, as shown on the slide.

And our next question today comes from Joe Ritchie at Goldman Sachs.

Yes, it's great to see a strong start to the year. I have a couple of quick questions. We've discussed tungsten quite a bit. It’s interesting to note that tungsten prices increased significantly last quarter. Pat, you mentioned the dynamics earlier. I’m curious if there have been any changes regarding the timing of your ability to adjust prices sooner than in the past. It seems that the dynamics on that front may have improved slightly. Any insights on this would be appreciated.

Yes. I think 2 things to think about there as it relates to pricing. We've got 2 semi-unique circumstances going on simultaneously here. One is where tungsten is sitting at today is a historical high, right? And then secondly, I would say we've got the tariff surcharges that are in place, which are a unique event for us and many other companies in terms of how they've had to deal with some of the tariff costs. So I think the situation is pretty unique that we're in at the moment. I do credit the commercial teams. They have gotten out there and been aggressive where they can be and been smart about where we can make sure we're raising prices to cover the costs. And that's never an easy conversation with the client. No client ever really wants to have their price raised. But as Sanjay talked about previously, we remain very confident in our ability to go out there and get the cost and make sure we're covering for it. We've had a track record of doing so. And I think some of the commercial capabilities that as an organization that we've developed over the last couple of years, not only do they help us in terms of going out and winning market share, but they also help us in terms of making sure we're accurately pricing for the product that we have and the value we're creating for the customer.

Got it. That's helpful. And I guess just maybe following up on that tariff discussion. To the extent that you're putting surcharges through, how are you guys thinking about a situation in which tariffs are potentially rolled back? What does that ultimately mean for kind of like the price/cost equation that you have baked into the guide for the year?

Yes, sure. Joe, I think, first of all, tariff situation, as you guys know, has been very dynamic. And we have taken a very broad sets of actions, starting with like production move, supply chain optimization and where necessary, we did implement surcharges. And as things have changed, those surcharges also have been very dynamic from our side. For example, when the tariff for products going from U.S. to Canada, that was taken down, we took the surcharges out. So we are very quickly adopting and doing what we need to do to recoup the cost that we need to, but at the same time, being very, very competitive in the market. So we'll continue to do that. And in the long term, let's say, some of the tariffs that we get to a point where they become permanent, then we will make those changes in the permanent prices. So that's the way we are looking at it.

Thank you. This concludes the question-and-answer session. I'd like to turn the conference back over to Sanjay Chowbey for closing remarks.

Thank you, operator, and thank you, everyone, for joining the call today. As always, we appreciate your interest and support. Please don't hesitate to reach out to Mike if you have any questions. Have a great day. Thank you.

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