Good morning, and welcome to Timkin's second quarter earnings release conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Neil Fronapple. Please go ahead.

Thank you, Operator. and welcome everyone to our second quarter 2026 earnings conference call this is neil fronapple vice president of investor relations for the timkin company we appreciate you joining us today before we begin our remarks this morning i want to point out that we have posted presentation materials on the company's website that we will reference as part of today's review of the quarterly results you can also access this material through the download feature on the Earnings Call webcast link. With me today are the Timken Company's President and CEO, Lucian Valdea, and Mike DeCenza, our Chief Financial Officer. We will have opening comments this morning from both Lucian and Mike before we open up the call for your questions. During the Q&A, I would ask that you please limit your questions to one question and one follow-up at a time to allow everyone a chance to participate during today's call you may hear forward-looking statements related to our future financial results plans and business operations our actual results may differ materially from those projected or implied due to a variety of factors which we describe in greater detail in today's press release and in our reports filed with the FCC which are available on the Timken.com website. We have included reconciliations between non-GAAP financial information and its GAAP equivalent in the press release and presentation materials. Today's call is copyrighted by the Timken Company and without express written consent, we prohibit any use, recording, or transmission of any portion of the call. With that, I would like to thank you for your interest in the Timken Company and I will now turn the call over to Lucien.

Thanks, Neil, and good morning, everyone. We appreciate you joining us today to discuss our second quarter results. It was great seeing many of you at our recent Investor Day, where we launched our new Elevate Outperform strategy, as well as our 2028 financial targets. We're making good progress on our plans for creating value as an advanced motion technology leader and leveraging megatrends in strategic protocols. Work is well underway in advancing our strategic priorities as we deploy 80-20 in our disciplined execution framework across the entire enterprise. Our focus on Elevate to Outperform is reflected in our second quarter results, and I would like to thank our Tinkin team for delivering another strong quarter. Our performance during the first half of the year and continued momentum gives us the confidence to raise our full-year guidance again. Our outlook now implies 16% adjusted ETS growth at the midpoint of our range, up from 13% we previously guided. Mike will take you through the details of our outlook later in the call. This morning, I'll discuss the key elements of our second quarter performance and provide more specifics on how we are executing our strategy. In the quarter, total sales were up 7.5% from last year, and organic revenue grew more than 4%, driven by higher pricing and volume growth across both segments as we capitalized on improving customer demand. We expanded EBITDA margins to 19.6% in the quarter, and adjusted earnings per share increased nearly 30% year-over-year to $1.83, while also generating solid cash flow. With respect to capital allocation, we raised our quarterly dividend by 3% and repurchased approximately 155,000 shares. We ended the quarter with a strong balance sheet and net leverage of two times, giving us continued flexibility to pursue our balanced approach to capital allocation. The company is successfully navigating continued geopolitical volatility and we're operating with urgency to finish the year strong and execute against our Elevate to Outperform strategy. As we discussed at Investor Day, Elevate to Outperform is focused on three pillars. Optimizing our portfolio, investing decisively in our strategic verticals and customers, and better leveraging our multinational footprint as we operate as one pension. In the second quarter, we made progress against all three of our strategic pillars. Within pillar one, optimizing the portfolio, we remain on track to complete a Bell's divestiture in the third quarter. This divestiture is expected to structurally improve industrial motion EBITDA margins by more than 200 basis points on a pro forma basis. The automotive OE exit is also progressing as planned and is expecting to start benefiting engineer bearings margins in 2027. Another example of portfolio shaping is our recent Bijou Delamont acquisition. The integration of this business as part of our lubrication systems platform is going very well and ahead of schedule. It is clear that Bijou Delamont is a natural fit and scales our lubrication systems platforms to about $400 million in revenue. Turning to pillar two, it's easier to win where you are already winning and have positive market momentum. them, so we're allocating more resources to drive growth within the key strategic verticals we revealed during Investor Day. The impact of increased organizational focus and investment is already delivering with high single-digit organic growth in these verticals in the second quarter. Automation and robotics is worthy of a call-out, which increased mid-teens versus last year. We're also making strategic investments to improve our aerospace and defense operations and drive future profitable growth. As part of our transformation, our teams implemented 80-20 actions during the quarter across regions and across businesses. To create any inactive project work streams, 60% of our enterprise is now engaged in 80-20 when you look at it by total company revenue. By the third quarter, we're on target to achieve 75%. We still expect 8020 to benefit the bottom line in 2027, and we're confident in the growth opportunities ahead as we redeploy resources to better serve our strategic customers. To further support the acceleration of technology-led growth in our strategic verticals, our R&D teams across businesses are partnering more closely. We look forward to hosting our first annual One Timken Technology Summit this fall, where we will gather technology leaders across the entire company along with customers and external partners to further accelerate our innovation pipeline. For Pillar 3, we're more effectively taking advantage of our multinational footprint to leverage technology and better serve our customers by operating as one team can. We're also generating synergies through the global expansion of our acquired regional businesses. Our expansion of ROLON is a good example of what this looks like in practice. Garing Roland's strong European position into the U.S. contributed to a second consecutive quarter of double-digit organic growth in our linear motions platform. Roland's expansion is driving outperformance in the rapidly developing factory automation end market, demonstrating the potential in taking our current portfolio into under-penetrated regions. To further advance one thinking across our businesses and regions, we recently announced two leadership appointments. We're pleased to name Tim Graham to the new position of Chief Commercial Officer and to have Steve Roboto join Timken as our new Chief Operating Officer. As Chief Commercial Officer, Tim will lead our enterprise-wide commercial strategy, marketing, sales excellence, and our regional leaders. Tim has a proven track record with more than 20 years at Timken across both of our segments. As Chief Operating Officer, Steve will oversee enterprise-wide operations, supply chain and procurement, as well as our P&L leaders. Steve has an impressive background with deep global operations and industrial leadership experience, most recently at Carrier, having also spent time at Collins Aerospace and United Technologies. These appointments have no impact on our financial reporting segments and build on our organizational announcements from earlier this year where we elevated technology, marketing, and regional leadership. We're excited for this new structure, which is designed to enhance execution, speed, and accountability across the enterprise. In summary, our Elevate to Outperform strategy was a positive contributor to our results and gives us confidence to raise our 2026 outlook again. We're operating with discipline and moving with urgency to accelerate growth, structurally increase margins, and drive shareholder value. With that, let me turn the call over to Mike for a more detailed review of the results and outlook.

Thanks, Lucien, and good morning, everyone. For the financial review, I'm going to start on slide 7 of the materials with a summary of our strong second quarter results. Overall, total revenue for the quarter was $1.26 billion, which was up 7.5% from last year. Adjusted EBITDA margins increased to 19.6%, and adjusted earnings per share for the quarter was $1.83, up significantly versus last year. Note that our adjusted results include a net benefit for IEPA tariff refunds of $8 million, or $0.08 per share. Turning to slide 8, let's take a closer look at our second quarter sales. Organically, sales were up 4.4% from last year. The increase was driven by higher volumes and pricing across both segments. Looking at the rest of the revenue walk, the acquisition of Fijer Delamond added 1.8% to sales in the quarter, and foreign currency translation contributed 1.3% growth to the top line. On the right, you can see second quarter performance in terms of organic growth by region. In the Americas, our largest region, we were up 3%, driven by growth across both segments in North America, while Latin America was modestly lower. In EMEA, we were up 5% from last year, driven by solid gains across both segments. And finally, we were up 6% in Asia Pacific, driven primarily by strong growth in India. Turning to slide 9, adjusted EBITDA was $247 million, or 19.6% of sales in the second quarter, compared to 17.7% of sales last year. Organically, incremental margins were more than 40%, even without the benefit of the pair of refunds, so strong execution from the team again during the quarter. Let me comment a little further on a few of the different drivers on the EBITDA bridge you can see on this slide. Starting with the impact from MIX, it was a notable year-on-year benefit driven by relatively stronger performance by several of our most profitable platforms within industrial motion. With respect to pricing in the quarter, it was positive $14 million and added more than 1% to the top line as we continued to benefit from pricing actions over the last year. And as you can see on the slide, tariffs had a $6 million net favorable impact versus last year, as the benefit of refunds more than offset higher tariff costs compared to the prior year. Looking at material and logistics, costs were modestly higher versus last year, driven by logistics. In addition, costs were increased sequentially. With respect to the manufacturing cost line, the increase from last year primarily reflects labor and other cost inflation. Moving to the SG&A and other line, expenses were up from last year, as expected, driven primarily by higher incentive compensation and spending on strategic initiatives. And finally, our Bezier-Delamon acquisition contributed $4 million to adjusted EBITDA in the quarter, with a high teens margin. Now let's move to our business segment results, starting with engineered bearings on slide 10. Engineered bearing sales were $807 million in the quarter, up nearly 4% from last year. Organic sales were up 2.5%, driven by higher volumes and pricing, while currency translation added a little more than 1%. Among market sectors, aerospace and defense and infrastructure achieved the strongest gains versus last year. We also posted growth across the power and electrification and automation and industrial solution sectors, while revenue in industrial transportation and mobility was relatively flat versus last year. Engineered bearings adjusted EBITDA was $161 million, or 20% of sales in the second quarter, compared to 19.7% of sales last year. However, margins in the quarter benefited from favorable price mix, barric refunds, and the impact from higher volumes. However, margins were negatively impacted by higher operating costs compared to last year, including higher labor costs as we have been selectively adding operative headcounts to support additional growth. Now let's turn to industrial motion on slide 11. Industrial motion sales were $454 million in the quarter, an all-time quarterly record for the segment, and up 14.6% from last year. Organically, sales increased 8%, driven by higher demand across all regions and higher pricing. The Bezier-Delmont acquisition added approximately 5%, while currency translation was a benefit of more than 1% to the top line. Among market sectors, automation and industrial solutions, infrastructure, and industrial transportation and mobility were all up double digits versus the prior year. We also generated growth in the aerospace and defense sector, while power and electrification was lowered driven by a sizable decline in solar sales. the segment saw growth in the quarter across most product platforms and was led by double digit gains in linear motion systems and lubrication systems industrial motions adjusted EBITDA margins came in at 23.3 percent of sales in the second quarter up 500 basis points from last year the increase in segment margins reflect strong operational execution by the team as well as the impact of higher volumes favorable price mix and the net benefit of pair of refunds moving to slide 12 you can see that we generated operating cash flow of 107 million dollars in the second quarter and after capex free cash flow was more than 80 million up slightly from the prior year from a capital allocation standpoint we returned 45 million dollars of cash to shareholders through share buybacks and dividends in the second quarter looking at the balance sheet we ended the second quarter with net debt to adjusted EBITDA at two times which is in the middle of our targeted range turn to the current outlook for full year of 2026 with a summary on slide 14. we are increasing our outlook again across the board starting with net sales we're raising our full-year outlook to an increase of 5% to 6% in total, up from the prior range of 4% to 6%. Organically, we now expect revenue to be up 3.5% at the midpoint, a 1.5% increase from the prior guide. The Bezier-Delamon acquisition is expected to add 1% to our revenue for the year, and currency is estimated to contribute around 1%, both unchanged from our prior outlook. Note that our guidance still includes the company's health business. On the bottom line, we expect adjusted earnings per share in the range of $6.05 to $6.35, up $0.20 at the midpoint versus the prior outlook. We expect adjusted earnings per share to increase year-on-year in both the third and fourth quarters, with the growth rate relatively higher in the fourth quarter. The current earnings outlook implies that our 2026 consolidated adjusted EBITDA margin will be in the low 18% range at the midpoint, up from 17.4% in 2025 and slightly higher than the prior guidance. Note that the midpoint of the ranges implies an incremental margin of more than 30% for the full year. Moving to free cash flow, we expect to generate $375 to $400 million in 2026. Up $25 million from the prior outlook to mostly reflect the higher adjusted earnings expected for the full year. On slide 15, we provide a view on our 2026 organic sales outlook by end market sector, which includes the impact of both volumes and pricing. Note that these are the new end market sectors we provided at our recent investor day, and we include a slide in the appendix that maps the previous end market sectors to the five you see here. Other, which is not included on this slide, is expected to be flat to slightly down for the full year. Moving to slide 16, here we provide a bridge of the $0.20 per share increase in our 2026 adjusted EPS outlook at the midpoint. First, you can see a $0.20 to $0.25 positive impact from the organic sales change and our outperformance in the second quarter. Next, we're adding the $0.08 per share tailwind we realized in the second quarter for tariff refunds. Note that the second half outlook does not include any additional benefits for IEPA tariff refunds as the timing and amounts, if any, are difficult to predict. And finally, we're factoring a $0.10 headwind into guidance to account for incremental cost inflation over the rest of the year, which includes higher logistics costs as well as strategic investments we are making that are expected to impact margins in the second half. More specifically, we are making investments to strengthen our aerospace and defense operations. We have identified how we can drive faster growth and better performance in this strategic vertical. As a result, we are taking action, and this includes efforts to increase our operative headcount and improve employee retention to support future growth and deliver better performance. In summary, Timken delivered above expectations again in the second quarter, and the team is committed to making progress on our strategy while finishing the year strong. Let me turn it back over to Lucien for some final remarks before we open the line for questions. Lucien?

Thanks, Mike. Our results this quarter demonstrate our game's strong execution, strategic focus, and ability to capitalize on improving customer demand. We're excited about the earnings power of Tincant and the significant value we can create with our Elevate to Outperform strategy.

This concludes our formal remarks and will now open up the line for questions. Operator?

We will now begin the question and answer session. To ask a question, you may press star, the number one, on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star, then the number one again. At this time, we will pause momentarily to assemble our roster. Your first question comes from Brian Blair with Oppenheimer. Your line is open. Thank you. Good morning, guest.

Good morning, Brian. To start with your top-line guidance and what's now contemplated in the back half, we know that, you know, 2H organic growth is now implied, you know, 2.5%, give or take. A step down from the first half, but I was hoping you could offer a little more detail on that growth moderation amid what seems to be a pretty healthy demand backdrop. You know, have you seen any slowdown in your order book? Is the sequential change impact primarily by accelerating 80-20 rationalization, or are you simply leaning conservative given geopolitical or other uncertainties?

Yeah, good morning, Brian. So thanks for the question. Look, I think it's a little bit of both. Frankly speaking, I think when we – let me answer the first part of your question definitively, which is we don't see any signs today of slowdown. So I think that's certainly the case here. We continue to see a robust order pattern, but I would call it robust. I would not call it a bounce back that you would have seen in prior cycles. So it's still a steady increase. Our order booking Q2 performed pretty well. I think we covered it in the prepared remarks on what the segments were, but to remind you a little bit, so aerospace and defense was a very good performer. our automation and industrial solutions did very well, and then infrastructure kind of rounded up the top three, infrastructure really being driven by construction and heavy industries. So that's what pulled it in the right direction. On all three of these, we saw continued order book growth as well, so that would bode well for looking at the back half. But there's a combination of things when you look at the back half. One you already referred to, which is the uncertainty from the geopolitical situation that's in the Middle East. And the second one is just the normal seasonality that we've seen historically when you compare front half to back half of the year. So I think between those two, and then obviously with July now behind us, we feel like that's an appropriate guide for the back half of the year. But, you know, it remains to be seen whether there's upside to that or not.

Okay, understood. I appreciate the color. Would like to, I guess, level set a bit on industrial motion margin. That was, again, a highlight of the quarter. Kudos to your team on the execution. If we look at the first-half margin for industrial motion and accept that there's relatively limited first versus second-half seasonality with the recast of the segment, Is it fair at this point to assume, you know, the 22.4% layer on the 200 basis points are soon, an improvement from the adult divestiture and that you're jumping off point for 2027 margin is 24.5% or maybe a little bit higher, or am I overlooking something in that bridge?

Yeah, look, I'll let Mike answer that specific question on 2027, but maybe give you a little bit of color on industrial motion and why we're so excited about what's happening there. And I appreciate you recognizing that as the highlight. The business, first of all, as a segment overall, it's margin accretive to the company. So as we grow industrial motion, more than bearings, we mix up. What you don't see as well is there's a margin accretion inside industrial motion. So several of the segments that are driven by automation, medical, surgical, robotics, other areas like that mix up industrial motion. And then furthermore, these regional translations that we have of the businesses, we highlighted the roll-on, but also lubrication is another one. Those also offer growth above market. So you've got a segment that mixes the company up. There's an internal mix-up inside the segment, and then you've got some self-help available. So that's why we're so bullish about it, and that's why we're excited to continue to add to that portfolio of VIM and AS opportunities to make themselves available. So let me pass it to Mike to talk about 27 specifically.

Yeah, thanks, Brian. As you know, we don't comment this early on specifically on 27, but I would say that relative to margins, particularly in industrial motion, we expect to complete the belt's divestiture in the third quarter. And as we outlined at Investor Day, that's a pro forma 200 basis point improvement in industrial motion margins. So you can look for that certainly as accretive to those margins for next year. And then as our other strategic initiatives kick in, 80-20 improvements, strategic growth in the portfolio that Lucian outlined where we're growing in the higher margin platforms, you can expect those margins to continue to mix up, progressing towards our 28 targets that we laid out. All good. Thank you.

Your next question comes from Angel Castillo with Morgan Stanley. Your line is open.

Hi, good morning, congrats on the strong results and thanks for taking my question. Just wanted to, Lucien, you're doing well, thank you, just wanted to, I guess, ask for if you can provide a little bit more color on, you know, you talked about robust order books or order intakes so far in 3Q, just could you put a finer point or quantify that in any way, just particularly on the industrial motion business, I guess I'm curious, you You talked about double-digit growth in several of the kind of key end markets there. I'm curious if you're seeing those persist at kind of closer to double-digit levels. And, you know, from the power and electrification, I think you mentioned solar that persisting as well, or are you seeing that?

Yeah, thank you, Angel. So let me maybe take you back a little bit to Q2, and then we'll project that into Q3. So I think if you look at Q2, as I mentioned earlier, you know, aerospace and defense being a market that's up high single digits, I think when you look at commercial and defense, they were both up. On the marine defense side, that's a little more lumpy. It was flat in the quarter, but I don't know that you can call that down to a one-quarter. That's just inherently a little more lumpy. Automation, again, high single digits up, and really that was an industrial motion story. Robotics, automation, Mike highlighted in the prepared remarks, that was up mid-teens. Also, other markets like food and beverage automation also did quite well. Infrastructure carried that forward. So I think that all had good momentum. On the other side of the ledger, certainly solar really ended up impacting the power and electrification market where the growth in power generation was offset by solar and wind was modestly up higher than before, but more modest. And then, as we said, automotive OE was one that was a negative on us overall. So that's kind of the mix that we exited Q2 with. If you look at order rates and the order book, I would say it was mostly stable sequentially. So that's given seasonality. That's not a bad position in a historical context to be going with. And so as we look at Q3, we do expect the sales to be up in both segments year over year, a little more in industrial motion than in engineer bearings. And I think from a market standpoint, infrastructure and automation and industrial solutions are still going to be the ones that are going to lead the growth overall. So that's where we sit today. That's what we can see basically out in front of us. The other part to highlight in terms of orders, we continue to see strength not only in aerospace revenue, but continue to see strength on continuing to build yet more backlogs. So even our book to build there still stays solidly well north of one. So very strong growth up significantly year over year from an order book standpoint in aerospace. So that's why Mike mentioned investing in additional resources, additional labor, retaining people, so really taking advantage of that market opportunity and the customer demand that exists.

Well, thank you. And I was hoping to actually unpack that aerospace and defense strategic decision to invest more further. Is this market share gains? Is this specific to just a customer? Or just what are you seeing exactly that's driving, you know, the decision there to kind of double down on that growth? You know, the investment magnitude versus the potential for kind of incremental upside, both margin and top line.

Yeah, so let me team up with Mike here. So I'll give you a bit of the strategic rationale and then I'll let Mike walk you through some of what we've done and what the plans are. But I think as you step back, you know, first of all, like the entire supply chain in aerospace and now, of course, in defense as well, especially given the conflict, we're sitting on a significant amount of backlog that we have to catch up on. So we have a lot of self-help that's really dependent on us and our suppliers being able to produce more and our customers being able to consume more. So it's an entire supply chain that has demand at the end of it that has to gear up. And anybody you talk to in the aerospace supply chain, I think, is experiencing the same thing. On top of that, it's very intertwined, the production capacity with commercial aerospace and defense. And the defense requirements are only increasing. And that's increasing as we speak. You hear numbers of multiples of what was needed historically that is being demanded in the future. So trying to gear up for that increased demand as well, all at the same time while trying to deplete the backlog. But as I said, book to bill is still more than one, so we're still building. So that's the rationale. That's the market opportunity. I would not call it share gain. I would really call it pent-up demand that's been there, that we're all catching up on, on, frankly, maybe the entire industry going too far during the pandemic. And it takes a long time to gear that supply chain up. It's so specialized, it's so regulated that we're still all, I think, as a collective paying for that period. But let me turn it over to Mike to talk about the actual investments.

Yeah, thanks, Lucien. So when we talk about aerospace, and I'll speak in general when we've talked in the past, we say it can take six to nine months to ramp up additional capacity as we bring people online. We've been making investments, call it capital investments, to increase capacity in aerospace. And now as those investments come online, we're hiring to staff those up. And as you can imagine, if it takes six to nine months on average, some of these products are our most difficult products. So that training curve is on the longer end. So that's an investment we've decided to make. And, of course, with the increasing order book and the pent-up demand, we see it as a long-term opportunity with some short-term cost. If you think about the bridge that we provided, the 10-cent headwind on the bridge, most of that really is related to the strategic investment. We do have some other inflation going on there, logistics in particular. But most of what you're seeing on that bridge is related to this Aero investment.

Thank you.

Your next question comes from Joe Ritchie with Goldman Sachs. Your line is open.

Hey, guys.

Good morning, Joe.

Can you just maybe unpack what you're expecting for pricing for the rest of the year? I know it added a little bit more than a point this quarter. And then also, as it relates to the tariff refunds, how much did the $8 million came in each segment?

Yeah, I can answer the second part first, and I can let Lucian comment a little bit more on pricing and what we're seeing in the market. So from a tariff refund standpoint, it was roughly a 50-50 split between the two segments. We did have, in that number, some contractual givebacks, and those affected the bearing business. But on a net basis, the split was roughly half and half. So I would not expect that same split going forward. It probably tilts a little more towards engineered bearings, as that's where we saw more of the tariffs come in. So I'd expect that to be a little tilted towards bearings going forward. But in the quarter, it was roughly half and half. Yeah, absolutely.

So I think when we look at price, we still continue to expect price to be up more than 1% in 2026 and really exceed the tariff cost year over year for the full year. We don't really expect a material impact from the recent announcement to replace this tariff, the 10% global tariff with Section 301. You know, in the end, it's kind of a wash. And then the question is, is this the beginning? Is this the end? Is this it? We, of course, don't know that. But here's what we do know. What we know is, you know, we've had a lot of inflationary shocks. We've had tariffs. We've had other things. And we've done a good job as a company. We've done a good job, frankly, as an industry, working collaboratively with our customers to be able to pass these increases through. So at this point for the year, we still expect pricing to be up more than 1%, and that includes the carryover pricing for 2025 and also the additional price for 2026. Obviously, because of the comps, the pricing year-over-year will be a little higher in the first half versus the second half, but that's more of a comp issue than anything else. Then, obviously, as you look at 80-20, that also starts creating some pricing opportunities as well, So we'll pursue those as necessary.

That's helpful. And then just my quick follow-up, maybe a higher-level question. It's interesting to me that you're adding, you know, operating headcount to support future growth at a time that you're also embarking on your 80-20 initiatives. Help me just kind of square those two aspects.

Yeah, absolutely. Look, I think when you look at aerospace, as Mike said, this is, first of all, it's isolated to a couple of facilities, and it's a very specialized workforce. So these are operations where it takes a while to train. It's not as fungible from one part of the company to another. It's a very skilled type of labor. So that's the investment. But what I also don't want to overlook because it sounds like, you know, we're betting on the come. We're not. It's actually quite the opposite. We're betting on backlog that's sitting in our hands, and number one. Number two, what I also don't want to overlook is we're up high single digits in aerospace and defense in Q2 of 2026. And this is not because we want additional businesses. This is because we are able to produce more. So we already today are generating a return from past investments into additional capacity, additional labor. it would be no different going forward from the investments that we make now. It's just that it's a bit of a you do have to invest, and there's really no way around the six to nine months of training to onboard somebody before they contribute. But the probability that they will contribute is as good as it gets because it's really not only backlogged that's in hand, but it's backlogged that's growing as we're adding the resources.

Very helpful. Thanks, guys.

Of course, thanks.

Your next question comes from Kyle Menges with Citigroup. Your line is open.

Thank you. I wanted to follow up on some of your earlier comments about the demand backdrop across your end markets, and I think you made a comment that you're seeing more of a gradual improvement in demand, but not necessarily a bounce back like you've had in previous cycles. So I'm curious just what you think you need to see to get more of a snapback in demand and maybe why you're not seeing that yet, just given, I mean, some pretty healthy PMI readings lately and kind of piggybacking on that. It doesn't quite seem like we've had any restocking, I should say, within industrial distribution.

I'm curious what needs to happen to start to drive that. yeah i mean look i think when i said what i said that's a if you look across the entire enterprise that matches i think we're starting to see you know if you look at construction if you look at heavy industries you know those are the type of markets where you see numbers that you can call more like a snapback but i think if you look across the entire revenue base of the company on average, then you don't see those kind of numbers. And I think part of it was just this geopolitical situation between tariffs, between everything else. I think the system equilibrated a little more slowly than it does normally. So you didn't really have the snapback, but you had the gradual increase. I think we saw that with our distribution that really did a very nice job of keeping their inventory kind of in line with demand. They didn't go too low when they depleted. They didn't go speculate and build a bunch on the other side, so it wasn't really the typical volatility. The OEMs did the same. I think the good news now is the channel in general is at a reasonable point of inventory. There might be pockets here and there where if there is a slowdown, you might see a little bit of this talking in the back half. But I think in general, the channel is set up with an appropriate amount of inventory, whether that's distribution, whether that's OEM, so that as some of this uncertainty hopefully gets resolved, you'll start seeing continuing increased demand. But I think overall, just the word is caution in general. I think it's hard to call it what's three months down the road, And I think that's reflected in the inventory positions that customers or channel partners are willing to take.

Yeah, that's helpful. And then you also highlighted some early wins from regional expansion initiatives, it sounds like particularly in industrial motion. So we'd just love to hear more about what you're seeing with those early wins and across which end markets and potential benefits going forward and what more you think you could do there.

Yeah, look, I think when you pull on the thread of automation in general and the skill shortage that we see in our workforce, that aligns pretty nicely with the number of markets in our industrial motion business. So you start with all on that business in motion, the portfolio in general, very applicable to areas like factory automation, warehouse automation, places like that. And so what we found is that bringing that entire solution ecosystem to a new region is the key ultimately to success. You can't just bring the product catalog. You can't bring a couple of salespeople. You have to bring the prototyping, you have to bring the engineering, and you have to, at the minimum, day one, have the final assembly on the ground. You can still, for a period of time, operate in a less-than-efficient economic way and import some parts. Over time, you want to do it all as much as possible locally as we do with most of our business. But I think that approach of bringing the ecosystem, you bring the engineers first, you bring the applications development first that is near the customer, and then you fix your most efficient and lowest cost possible supply chain later, that's been the approach. Automation has been a big one. If you look at other markets like heavy industries, construction, our lubrication platform has really been, you know, right place, right time here because if you think about the factory that has fewer workers, maybe even the dark factory, the factory that's autonomous, you know, the lubrication program that used to be a person doing the inspection now can be an automated lubrication system that's monitored, that's controlled, that's self-diagnosed, that is intelligent. And so those kind of solutions really resonate and allow us to create market because on lubrication what's also very attractive is that there's a retrofit business there that you can add a lubrication system to an existing install base so you're not just waiting for new builds on OEMs. You can generate your own growth. So that's another exciting factor for us. So there's a number of those, and then not to mention our platform on precision drives that has a lot of application in robotics. And that happens to be a European and U.S. platform kind of by coincidence. So you have Cone, that's a U.S. business. You have CGI, that's a U.S. business. And then you have Spinea, that's a European business. But some of these parts serve ultimately the same purpose. but they're somewhat interchangeable in the right circumstances. They offer different value propositions in terms of weight and torque and precision and so on. So offering that complement of solutions and really allowing the customer to select the best tool for the job has also given each one of those businesses growth in the opposite regions. So bringing Spinella to the U.S., bringing Cone to Europe has also made a difference. So, again, these are early innings. There's more to come here, but I am absolutely convinced that we're chasing something that's real here and that we will like what we will continue to find. We already like what we're finding as we speak. We already have results from this in Q2, but there is more to come here.

Great. Helpful caller, Lucien.

Thanks, Kyle. Once again, if you would like to ask a question at this time, please press star, then the number one, on your telephone keypad. Our next question comes from Tomo Sano with J.P. Morgan. Your line is open.

Hi, good morning, everyone.

Could you talk about the new CCO, COO roles? if you could give us like more color like what specific bottlenecks in the prayer prior structures let you to create the new structures and what are you are the most focused on a changing first thank you yeah thank you totally absolutely so look I think this this continues really the execution of that other ways the elevator outperform strategy and this was really based on advancing the one Timken model of going to the market and then also operating. So when you think about the COO, CCO role, you basically have one Timken storefront that is managed by a chief commercial officer. So this is the person that leads the commercial strategy, marketing, commercial sales excellence, sales execution, and then all the regents report to this person. So you really are empowering the regional people. So what are you solving for here? Well, you're kind of creating an internal marketplace for the P&Ls inside the regions. So the regions want to outperform. So that means that they will want to promote the most compelling value proposition to the customer where they can grow the fastest with pressure on the P&Ls to get their cost in line, to get their R&D pipeline in line, to get because they're competing for the attention of the sales team. So that's the chief commercial officer role. The chief operating officer really leads all the P&Ls, and we have 120 factories. Should we have 120, should we have 140, or should we have 100 or 80? That's the question, and it needs to be answered with one lens for the company. The operating model of really defining that, instrumenting that to where when you go from a smaller P&L to a big P&L, If you think of it as an airplane, the cockpit is the same. The only difference is how many seats are behind you as the pilot. So it all looks the same. So it allows us to really have metrics that are appropriate, allows us to really optimize for what creates value for the customer. Because ultimately, you can run a business optimized for many things. You can optimize for cash, for working capital, for your EBITDA, for your growth rate. But in the end, what creates value for your customer, what creates value for your shareholders, That's ultimately the question, and that's what the chief operating officer role allows you to do. So they would be really responsible for the multinational footprint, for the operations. They have procurement and supply chain. They have operational excellence in addition to the P&L. And so that's the intent. And then you couple that with the chief technology officer and the head of marketing that we announced previously, and you really start getting a picture of how we've operationalized the three pillars because now you can very easily see who's responsible for directing resources to the most productive markets, how do we deploy these technologies from one region to another, and it's really all structured that way. This is not some kind of revolutionary organizational structure that we've invented. This is tried and true that's worked in other companies that have outperformed. And so we're just adopting something that works here.

Thank you, Lucien. And if I may follow up on automation and commentary and strategies. Compared to the past few years for your automation customers, are you seeing increased urgency from customers to implement physical AI? If so, what's the most pronounced and what is actually evaluating this year-making environment?

Yeah, thank you. So, absolutely, we're seeing that. And I think what we're seeing is the comment I made earlier on aerospace. You know, we are – and this is a global comment. It's not a U.S. comment on it. There is a skill gap and a workforce shortage that's global in nature. And the short, quick answer to that and the only obvious answer to that is really automation and then next phase of automation being robotics. And so companies are realizing that as you onshore more capacity, especially in a world of more geopolitical tariffs barriers, onshoring creates more need for specialized labor, more need for skilled labor. And, again, you do that via automation. What we're seeing now is we have a pretty broad solution offering, whether you're talking about robots, whether you're talking about humanoids, robot transfer units, medical robots, or just in general factory automation. It's a pretty robust portfolio. And so for us, this demand is not new, but I think the implementation of it at scale is certainly ramping up. You hear other companies that are maybe on the electron side of the automation that also are talking about the same kind of phenomenon. And for us, this is no different being on what you call the physical AI, which is where we're – eventually, even though AI can do a lot of things, something has to move and has to move a good from point A to point B, has to affect an action, has to pick something up, has to assemble something, and that's where we come in.

Thank you, Lucien. Congrats on a quarter.

Thank you.

Thanks, Tomo.

Your next question comes from Steve Barger with KeyBank Capital Markets. Your line is open.

Thanks. Lucian, the stock's been selling off on a guidance increase, and as some of the questions have alluded to, maybe the back half guide looks conservative for conditions. But I'm going to frame this in a longer-term question. How much of the 500 basis points EBITDA margin expansion you talked about at Analyst Day is already visible through actions you've taken versus things that still require substantial execution?

Yes, thank you, Steve. So start with the part that we have already announced. So we've announced the belts, the vestiture, and the automotive OE exit. So I think those two are 200 basis points on belts on IM margins, so multiply that by a third, and you've got about 70, give or take, and then a similar amount on automotive on two-thirds of the revenues, so take two-thirds of that number. And so you've got better than a third of the 500 basis points that's already addressed reactions that are really not fully behind us yet, but well underway, so with reasonably low execution risk. And then you have the rest of it, and the rest of it comes in two different environments. So, one, you do have some impact from 80-20 from simplification, which, again, we're making great progress on. And so that's, again, I would put that in the more moderate, if any, execution risk because it's not, you know, not new territory that you do 80-20 and you improve your margins. And then there's volume. And the volume growth, I think, frankly, you're already seeing that. So if you look at where we were in 2025 on our EPS, where we're landing in 2026, and where we said we're going to be in 2028, you certainly could not use the word hockey stick to describe that trajectory. It's a pretty nice linear trajectory that we have very credible anchor points along the way. So volume, there's progress, and then last but not least is mixing up. And I mentioned this earlier, IM growing faster than EB, that's a mix-up. Inside IM, precision drives, automation, robotics growing faster than the segment, that's a mix-up. And so inside IM mixing up, IM growing faster than EB mixes up the company, so that helps as well. So those are the points that are in front of us. What I would say that beyond that, beyond that has to do with investing in these verticals, growing with them. Is humanoids going to happen in a big way? Is it not? But I would remind you that what we put out at Investor Day was also net of investment in growth. So that's also in our control. So obviously, we will not invest to the same extent if we not see the same growth opportunities. So there's a bit of a self-help internal hedge there if we need it. I can tell you from where I sit right now, I don't think we need it. If you look at the quarter, the organic growth, if you look at, you know, you alluded to this for the back half, you know, the only question we're being asked is are we being too conservative? We're not asked the opposite. And so we do feel good about what's ahead of us, but we also don't want to completely ignore the geopolitical reality that's around us and the market uncertainty that's around us. So it's a balance of maintaining that credibility, giving a forecast based on what we see today, but absolutely nothing that I see makes me think back at Investor Day with anything other than conviction to what we signed up to.

Understood.

So if end market conditions continue to inflect in a generally positive way and we don't have geopolitical things that slow it down, nothing truly heroic to get you to those targets and then there's upside to that most likely yeah I would I would say it's they're all actions that are in our control they're all you know as I said at inventory if we don't do that we need a mirror for placing the blame nothing else so there's a lot of self-help in those numbers we you know the volume growth obviously has some relation to the market but emphasis on some because these regional translations are available somewhat independent of market conditions. So, yes, you're correct.

Great. And one quick follow-up. Slide 10 for EB calls out power and electrification, industrial solutions, and infrastructure. How much of that is directly tied to data center? And across the enterprise, is data center getting big enough to move the needle?

Yeah. So, let me try and answer that. We don't quantify how much of that is directly tied to data centers. It's, you know, it's obviously hard for us. You know, we have some content directly in data centers, but where data centers are really driving our growth is some of the, you know, construction, et cetera. So, it's harder to tie that directly to data centers, you know, but clearly as the economy strengthens, as reshoring continues, et cetera, and it's powered by the AI, the data economy, we're benefiting from that. But as far as direct data center impact, we don't quantify that specifically.

Understood. Thanks.

Sure. Your next question comes from Chris Dankert with DA Davidson. Your line is open.

Morning. Peter, I'm here. Morning. Thanks for taking the question. Going back to strategy, is there anything additional to point to in regard to facility consolidation at this point?

Yeah, nothing to point at this time.

What I would say is, you know, we've had a track record over many years of right-sizing our footprint with market demand, and that's not going to be different going forward. You know, if anything, with the establishment of this chief operating officer, I think we'll have a more holistic look across all of the IM business and EB businesses with one single lens, things like regional centers of excellence, where do you put those? Where do you put that center of gravity if you have a one face to the market? What factories have similar unit operations, similar operating models to where they can synergistically benefit from being co-located? You know, the beauty of of our industry is equipment is reasonably mobile and you can make changes to your footprint with a more sensible cost structure than a heavy industry that has a little harder time of moving. So I think that approach will always continue, but it's also recognizing that, you know, the factory footprint of the past, which would have been build the biggest, lowest cost factory somewhere in the world and then supply everybody else, that's not the future. We have been very fortunate to manufacture the majority of what we sell in the region in that region, and we don't want to change that because that allows you to navigate all these tariffs and geopolitical uncertainties that are here and probably here to stay. So it will be a balance, but I think the key will be how do you serve your customers most efficiently and how do you leverage that footprint then? But the short answer to your question is absolutely the footprint, whether it's R&D center footprint, whether it's factory footprint, whether it's sales offices that will continue to be looked at, and this one Timken lens will only enhance the synergies and the value we can get from that.

Thank you.

That's helpful, and I'll leave it out there this morning.

Thank you. your next question comes from david rasso with evercore your line is open hi thank you apologies coming in a little late on this call but i'm trying to understand the guide the three and a half percent organic have you discussed by business segment the composition of that three and a half of the full year yes david good morning yes absolutely so i think uh when we look at the guide for the year you know organic sales yeah three and a half percent so it's a half a half a point raises across both segments I would describe some cautious optimism in there and that's just because of the uncertainty in the Middle East slightly higher industrial motion growth rate and engineer bearings between between the two and then seasonally and also year over year, we expect a little more modest second half year over year versus first half, which is obviously implied in that math and in the guide. Part of it recognized there's a bit of difference in year over year pricing as well, and that's just the comps. So you had a higher year over year in the first half versus the second half. So that actually, that alone actually explains a lot of the difference between first half and second half overall growth right?

Yeah, I'm just trying to make sure, like, is it EB 3%, IM 5% gets you to 3.5? Just, I mean, the channel, we heard you had a 3.5% price increase for shipments after July 1. Now, I know that isn't to OEMs, not everything gets to 3.5, but just surprised the 50-bit improvement on the organic, given it seems like pricing is going up more than that year over year from the first half. You had a February price increase, you had the July 1 price increase, and I'm just trying to understand why. Yeah, hey David. We're just we're just making sure we understand. Are usually volumes fall down? Are the volumes notably slow or is it just comp changes?

Yeah, I think maybe a couple things. So we do expect higher growth, slightly higher growth in industrial motion in the second half and this is organic so all in industrial motion growing much faster you've got the benefit of of the acquisition there but on an organic basis as far as pricing goes I'm we've not announced a price increase for the July 1 this year we did last year so you have the comp issue year-on-year where while we have higher pricing you know if the comp gets a little bit tougher in the second half um and then we didn't say this yet but in our uh in our guide we've assumed the belt business is in but obviously as uh as that transaction gets closer the the business is ramping down and so a little bit of the the headwind if you will in the guide would be related to um just lower belt sales and obviously uh we'll talk more about that after the transaction is complete what that impact was but we did have to consider it uh for now in the guide as we're seeing uh a little bit slower sales in the third quarter just related to that ramp so so nothing structurally in there and and uh it's not a it's not a five two split between industrial motion and bearings it's much closer than that uh but industrial motion is certainly growing at a faster rate okay thank you for the color i appreciate it thank you this concludes our question and answer

session. I would like to turn the conference back over to Neil Fronaple for any closing remarks.

Thank you, operator, and thank you everyone for joining us today. If you have any further questions after today's call, please contact me. Thank you, and this concludes our call.

This concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.